As filed with the Securities and Exchange Commission on March 27, 1998
Registration No. 333-42147
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 2 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LAS VEGAS SANDS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Nevada 7011 04-3010100
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
----------------------
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
(702) 733-5499
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
----------------------
VENETIAN CASINO RESORT, LLC
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Nevada 7011 86-0863398
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
----------------------
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
(702) 733-5499
(Name, address, including zip code, and telephone number, including area code,
of registrants' principal executive offices)
----------------------
David Friedman, Esq., Secretary
Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
(702) 733-5499
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------
With a copy to:
James L. Purcell, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
Approximate date of commencement of sale to the public: As soon as
practicable after this Registration Statement becomes effective.
----------------------
If the Securities registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. |_|
If this form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
registration statement for the same offering. |_| _____________________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. |_| ______________________
----------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
Table of Additional Registrants
<TABLE>
<CAPTION>
State or Other Primary Standard Address, Including Zip Code, and
Jurisdiction of Industrial IRS Employer Telephone Number, Including
Incorporation Classification Identification Area Code, of Registrants'
Name or Organization Code Number Number Principal Executive Offices
- ---------------------------- ----------------- ------------------ ---------------- ---------------------------------
<S> <C> <C> <C> <C>
Lido Intermediate Holding
Company, LLC .............. Delaware 7011 88-0377966 3355 Las Vegas Boulevard South
Room 1F
Las Vegas, Nevada 89109
(702) 733-5499
Mall Intermediate Holding
Company, LLC .............. Delaware 7011 88-0377968 3355 Las Vegas Boulevard South
Room 1H
Las Vegas, Nevada 89109
(702) 733-5499
Grand Canal Shops Mall
Construction, LLC ......... Delaware 7011 88-0377973 3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
(702) 733-5499
</TABLE>
<PAGE>
PROSPECTUS
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
[Venetian LOGO] Offer to Exchange their 12 1/4% Mortgage Notes
due 2004 and 14 1/4% Senior Subordinated Notes due 2005
which have been registered under the Securities Act
for any and all of their outstanding 12 1/4% Mortgage Notes due 2004
and 14 1/4% Senior Subordinated Notes due 2005.
--------------
This Exchange Offer will expire at 5:00 p.m. New York City time
on 1998, unless extended
--------------
Las Vegas Sands, Inc. ("LVSI" or the "Company") and Venetian Casino
Resort, LLC ("Venetian" and, together with LVSI, the "Issuers"), hereby jointly
and severally offer to exchange up to $425,000,000 aggregate principal amount
of their 12 1/4% Mortgage Notes due 2004 (the "New Mortgage Notes") and
$97,500,000 aggregate principal amount of their 14 1/4% Senior Subordinated
Notes due 2005 (the "New Senior Subordinated Notes" and together with the New
Mortgage Notes, the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is part, for a like principal
amount of their 12 1/4% Mortgage Notes due 2004 (the "Existing Mortgage Notes")
and 14 1/4% Senior Subordinated Notes due 2005 (the "Existing Senior
Subordinated Notes" and, together with the Existing Mortgage Notes, the
"Existing Notes") outstanding on the date hereof upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"). The terms of the
New Notes are identical in all material respects to those of the Existing
Notes, except for certain transfer restrictions and registration rights
relating to the Existing Notes. The New Notes will be issued pursuant to, and
entitled to the benefits of: (i) the indenture, dated as of November 14, 1997
(the "Mortgage Notes Indenture"), among LVSI and Venetian, as issuers, Mall
Intermediate Holding Company, LLC ("Mall Intermediate Holdings"), Grand Canal
Shops Mall Construction, LLC (the "Mall Construction Subsidiary") and Lido
Intermediate Holding Company, LLC ("Phase II Intermediate Holdings" and,
together with Mall Intermediate Holdings and Mall Construction Subsidiary, the
"Guarantors"), as Mortgage Note guarantors, and First Trust National
Association, as Mortgage Note trustee (the "Mortgage Note Trustee") and (ii)
the indenture, dated as of November 14, 1997 (the "Senior Subordinated Notes
Indenture" and, together with the Mortgage Notes Indenture, the "Indentures"),
among LVSI and Venetian, as issuers, Mall Intermediate Holdings, the Mall
Construction Subsidiary and Phase II Intermediate Holdings, as Senior
Subordinated Note guarantors and First Union National Bank, as Senior
Subordinated Note trustee (the "Senior Subordinated Note Trustee" and, together
with the Mortgage Note Trustee, the "Trustees") governing the Existing Notes.
The New Mortgage Notes and the Existing Mortgage Notes, the New Senior
Subordinated Notes and the Existing Senior Subordinated Notes and the Existing
Notes and the New Notes are referred to collectively as the "Mortgage Notes,"
the "Senior Subordinated Notes" and the "Notes," respectively. The offering of
the Existing Notes on November 14, 1997 (the "Offering") was part of the
financing that is being used to construct, develop, equip, and open the
Venetian Casino Resort, a Renaissance Venice-themed resort situated on the Las
Vegas Strip (the "Casino Resort").
Interest on the Mortgage Notes will be payable in cash at the rate of
12 1/4% per annum, semiannually on May 15 and November 15 of each year,
commencing May 15, 1998. Interest on the Senior Subordinated Notes will be
payable in cash at the rate of 10% per annum, semiannually on May 15 and
November 15 of each year, commencing May 15, 1998 through November 15, 1999,
and thereafter at the rate of 14 1/4% per annum. The Senior Subordinated Notes
were issued at a discount in order to yield 14 1/4% per annum to maturity and
will accrete to par by the second anniversary of the original date of issuance
in the Offering.
The Notes are redeemable, in whole or in part, at the option of the
Issuers at a redemption price equal to the sum of 100% of their principal
amount or Accreted Value (as defined), as the case may be, and an applicable
make-whole premium, if redeemed prior to November 15, 2001, or at the
redemption prices set forth herein, if redeemed thereafter, plus, in each case,
accrued and unpaid interest and Liquidated Damages (as defined), if any, to the
date of redemption. In addition, at any time prior to November 15, 2000, the
Issuers may, at their option, use the net cash proceeds of any (i) Redemption
Triggering Event (as defined) to redeem up to 35% of the aggregate principal
amount of the Mortgage Notes originally issued at a redemption price equal to
112.25% of the aggregate principal amount so redeemed and (ii) Public Equity
Offering (as defined) to redeem the Senior Subordinated Notes, in whole or in
part, at a redemption price equal to 114.25% of the Accreted Value of the
Senior Subordinated Notes so redeemed, if prior to the second anniversary of
the issuance date, or 114.25% of the principal thereof, if on or after the
second anniversary of the issuance date, plus, in each case, accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption.
Upon a Change of Control (as defined), each holder of Notes will have the
right to require the Issuers to repurchase Mortgage Notes or Senior
Subordinated Notes owned by such holder at 101% of the principal amount or
Accreted Value, as the case may be, thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of repurchase, subject, in the case
of the Senior Subordinated Notes, to prior repurchase obligations under the
Mortgage Notes.
(Continued next page)
--------------
See "Risk Factors" beginning on page 27, for a discussion of certain factors
that should be considered in evaluating an investment in the Notes.
--------------
NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL BOARD
HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT
MERITS OF THE NOTES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is , 1998.
<PAGE>
(Continued from previous page)
The Mortgage Notes are secured by second priority liens on the Note
Collateral (as defined) (consisting of substantially all of the assets of the
Issuers with certain exceptions) and by third priority liens on the Mall
Collateral (as defined). Upon completion of the Casino Resort, the Mall
Collateral will be transferred to a non-guarantor subsidiary of the Issuers,
will be released by the Mortgage Note Trustee and will not be available as
security for the holders of the Mortgage Notes. The Mortgage Notes are senior
in right of payment to all subordinated indebtedness of the Issuers. The
Mortgage Notes are effectively subordinated to (i) the indebtedness under the
Bank Credit Facility (as defined) (to the extent of the Note Collateral and the
Mall Collateral on which the lenders under the Bank Credit Facility will have a
prior lien) and (ii) the indebtedness under the Mall Construction Loan Facility
(as defined) (to the extent the Mall Collateral on which the Mall Construction
Lender (as defined) will have a prior lien). The Mortgage Notes also are
effectively subordinated to any indebtedness of the Issuers secured by assets
other than the Note Collateral (to the extent of such assets), such as the
Specified FF&E (as defined). Upon completion of the Casino Resort, the Issuers
are expected to have $910.2 million of indebtedness (including accreted
original issue discount on the Senior Subordinated Notes) outstanding
(including $150.0 million outstanding under the Bank Credit Facility, $140.0
million outstanding under the Mall Construction Loan Facility and $97.7 million
outstanding under the FF&E Credit Facility (as defined)). The rights and
remedies of the holders of the Mortgage Notes with respect to the Note
Collateral and the Mall Collateral are limited by the terms of certain
intercreditor agreements among the Issuers and certain of their lenders. See
"Description of Disbursement Agreement" and "Description of Intercreditor
Agreement."
The Senior Subordinated Notes are unsecured obligations of the Issuers,
are subordinated to all existing and future Senior Debt (as defined) of the
Issuers and are senior or pari passu in right of payment to all existing and
future subordinated indebtedness of the Issuers. Upon completion of the Casino
Resort, the Issuers are expected to have $812.7 million of Senior Debt
outstanding (including (i) $150.0 million of indebtedness outstanding under the
Bank Credit Facility, (ii) $425.0 million of indebtedness outstanding under the
Mortgage Notes, (iii) $140.0 million of indebtedness outstanding under the Mall
Construction Loan Facility and (iv) $97.7 million of indebtedness outstanding
under the FF&E Credit Facility).
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Issuers and the Guarantors contained in a Registration
Rights Agreement, dated as of November 14, 1997 (the "Registration Rights
Agreement"), among the Issuers, the Guarantors and Goldman, Sachs & Co. and
Bear Stearns & Co. Inc., as the initial purchasers of the Existing Notes (the
"Initial Purchasers").
The Issuers will not receive any proceeds from the Exchange Offer. Tenders
of Existing Notes pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date (as defined) of the Exchange Offer. The Issuers
expressly reserve the right to terminate or amend the Exchange Offer upon the
occurrence of any of the events specified under "The Exchange Offer--Conditions
to the Exchange Offer." If any such termination or amendment occurs, the
Issuers will notify the Exchange Agent (as defined) and will either issue a
press release or give oral or written notice to the holders of the Existing
Notes as promptly as practicable. The Exchange Offer will expire at 5:00 P.M.,
New York City time, on , 1998, unless the Issuers, in their sole
discretion, have extended the period of time for which the Exchange Offer is
open.
The Issuers currently do not intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active public market for
the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange pursuant to the Exchange Offer. See
"The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivery of a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Issuers have agreed that, for a period of 180 days from the
date on which the Registration Statement relating to this Prospectus is
declared effective, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
<PAGE>
AVAILABLE INFORMATION
Upon the effectiveness of this registration statement, LVSI will be
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith, will file
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports and other information filed by LVSI with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Northwestern Atrium Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661 and copies of such material may be
obtained from the Public Reference Section of the Commission, at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
also maintains an Internet Web Site at http://www.sec.gov that contains reports
and other information.
Under the Indentures, LVSI has agreed that, whether or not it is required
to do so by the rules and regulations of the Commission, it will file with the
Commission (unless the Commission will not accept such a filing) (i) reports
containing all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if LVSI were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section and
summarized financial information concerning Venetian, and with respect to the
annual information only, a report thereon by LVSI's independent accountants and
(ii) all reports that would be required to be filed with the Commission on Form
8-K if LVSI were required to file such reports. Notwithstanding the foregoing,
if any issuer that, directly or indirectly, owns more than 50% of the common
equity of LVSI is subject to the periodic reporting and the informational
requirements of the Exchange Act, LVSI will not be required to file the reports
specified in the preceding sentence so long as it provides annual and quarterly
financial statements of LVSI (which will include summarized financial
information concerning Venetian) to the holders of the Notes.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Issuers and the Guarantors with the
Commission under the Securities Act. As permitted by the rules and regulations
of the Commission, this Prospectus does not contain all of the information
contained in the Registration Statement and the exhibits and schedules thereto
and reference is hereby made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the Issuers, the
Guarantors and the securities offered hereby. Statements contained herein
concerning the provisions of any documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete. The Registration Statement, including the exhibits
thereto, may be inspected and copies thereof can be obtained as described in
the preceding paragraph with respect to periodic reports and other information
filed by LVSI under the Exchange Act.
2
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Liquidity and Capital Resources" and
"Business" and in the Forecasted Financial Statements and elsewhere in this
Prospectus constitute "forward-looking statements." Such forward-looking
statements include the financial forecast provided by the Issuers, the
discussions of the business strategies of the Issuers and expectations
concerning future operations, margins, profitability, liquidity and capital
resources. Although the Issuers believe that the financial forecast and the
expectations in such forward-looking statements are reasonable, they can give
no assurance that any forward-looking statements will prove to be correct. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results, performance or achievements
of the Issuers to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the risks associated with entering into a new
venture and new construction, competition and other planned construction in Las
Vegas, government regulation related to the casino industry, uncertainty of
casino spending and vacationing in casino resorts in Las Vegas, occupancy rates
and average daily room rates in Las Vegas, demand for all-suites rooms, the
popularity of Las Vegas as a convention and trade show destination, the
completion of infrastructure improvements in Las Vegas, including the on-going
expansion of McCarran International Airport, and general economic and business
conditions which may impact levels of disposable income of consumers and
pricing of hotel rooms. For a further discussion of such factors and others,
see "Risk Factors" and the Forecasted Financial Statements.
3
<PAGE>
PROSPECTUS SUMMARY
The following material is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless otherwise indicated, references in this Prospectus to the Company mean
Las Vegas Sands, Inc. and its consolidated subsidiaries, references to LVSI
mean Las Vegas Sands, Inc., references to Venetian mean Venetian Casino Resort,
LLC, the owner of the Casino Resort (as defined herein) and references to the
Issuers mean LVSI and Venetian. Venetian is a Nevada limited liability company
whose managing member is LVSI. References in this Prospectus to the Mall
Subsidiary mean Grand Canal Shops Mall, LLC, a Delaware limited liability
company and indirect subsidiary of the Company formed to separately own and
operate the Mall (as defined herein) upon completion of the Casino Resort.
Certain statements in this Prospectus (including this Prospectus Summary)
constitute "forward-looking statements." See "Special Note Regarding
Forward-Looking Statements."
The Issuers and the Venetian Casino Resort
The Company is constructing and will own and operate the Venetian Casino
Resort, a Renaissance Venice-themed resort situated at one of the premier
locations on the Las Vegas Strip (the "Strip"). The Casino Resort is located
across from The Mirage and the Treasure Island Hotel and Casino at the site of
the former Sands Hotel and Casino (the "Sands"). As planned, the Casino Resort
will include the first all-suites hotel on the Strip with approximately 3,036
suites (the "Hotel"); a gaming facility of approximately 116,000 square feet
(the "Casino"); an enclosed retail, dining and entertainment complex of
approximately 500,000 net leasable square feet (the "Mall"); and a meeting and
conference facility of approximately 500,000 square feet (the "Congress
Center"). The Casino Resort will be physically connected to the approximately
1,150,000 square foot existing Sands Expo and Convention Center (the "Expo
Center"), one of the largest facilities in the United States specifically
designed for trade shows and conventions. Management believes that the combined
facilities of the Casino Resort and the Expo Center (which is separately owned
by an affiliate of the Company) will be one of the largest hotel and meeting
complexes in the United States. Ground breaking for the Casino Resort occurred
in April 1997, with an opening to the general public scheduled for April 1999.
Business and Marketing Strategy
The Company's business strategy is to (i) create a "must-see" destination
resort at a premier location at the heart of the Las Vegas Strip, (ii) provide
a differentiated superior all-suites product, (iii) capitalize on the link to
the Expo Center and the Congress Center, (iv) utilize the Casino Resort's
unique assets and facilities to appeal to a higher budget customer mix, (v) use
the Casino Resort's themed facilities and location to generate Casino revenues,
(vi) target premium gaming customers, and (vii) carefully manage construction
costs and risks.
Create a "Must-See" Destination Casino Resort at the Heart of the Las Vegas
Strip
The Casino Resort, with its extensive theming, dining, shopping and
entertainment, is expected to be a "must-see" destination resort located at the
heart of the Strip. The Casino Resort is designed to provide visitors with the
sense of being surrounded by the festivity and splendor of Renaissance Venice's
architecture, music, art and history. The Venetian-themed setting along the
Casino Resort's frontage on the Strip will include waterways, gondolas, and
replicas of Venetian landmarks, such as the Doge's Palace, the Rialto Bridge,
the Ca Doro and the Campanile Tower. The Mall will feature a one-quarter mile
Venetian streetscape, with intimate "piazza"-style settings and a 630 foot
"grand" canal running its length, with gondolas and waterside cafes and crossed
by authentically-styled Venetian bridges.
The Company believes that the Casino Resort's Venetian-theming, and its
central location on the Strip will appeal to business travelers, leisure
travelers and gaming customers and will position the Casino Resort to draw
significant pedestrian traffic from the Strip. The Casino Resort will have 740
feet of frontage on the east side of the Strip and will be located next to
Harrah's and across from some of the most visited casino resorts and
attractions on the Strip, including The Mirage, the Treasure Island Hotel and
Casino and The Forum Shops at Caesars Palace Hotel. Based on information
gathered from public sources, the
4
<PAGE>
Company estimates that on average each day during 1996, approximately 57,000
vehicles passed the site of the Casino Resort, approximately 13,000 persons
watched the pirate show in front of the Treasure Island Hotel and Casino, and
approximately 43,000 persons visited The Forum Shops at Caesars Palace Hotel.
Provide a Differentiated Superior All-Suites Product
The Hotel is expected to offer the only all-suites product with
first-class services and facilities on the Strip. In management's experience,
business and leisure travelers consider suites desirable, superior
accommodations. For business travelers, the Hotel's suites, which will
accommodate informal business meetings and social gatherings, will offer guests
a unique, single location in which to work and entertain in close proximity to
the Expo Center and the Strip. Leisure travelers will appreciate both the
Hotel's spacious suites and extensive facilities. The Company believes that the
all-suites format, together with the Casino Resort's many other unique
attributes, will result in a highly differentiated resort product, and provide
a competitive advantage over other Strip hotel/casino properties and resorts.
The typical Hotel suite will range in size from approximately 655 square
feet to approximately 735 square feet (compared to 360 to 400 square feet on
average for a standard room in competing facilities on the Strip), and will
consist of a sunken living/working area and a raised sleeping area with a
marble bathroom. The suite's living/working area will include a sitting area
and a writing desk and will offer business amenities such as dual-line speaker
phones, a fax machine and dataport access. The bathrooms will be oversized,
featuring a separate bathtub and shower, dual sinks and a phone. In addition,
the Hotel will offer larger suites, including the "Presidential" and penthouse
suites, with exclusive services such as butlers.
Capitalize on the Link to the Expo Center and the Congress Center
The Casino Resort will be the first themed entertainment resort in Las
Vegas designed specifically to accommodate large scale trade shows,
conventions, conferences and meetings. The Expo Center and the Congress Center
are expected to provide recurring, predictable demand for mid-week room nights
from business travelers. During 1997, approximately 1,150,000 visitors attended
trade shows and conventions at the Expo Center. Through an agreement with
Venetian, the owner of the Expo Center has agreed to market the Casino Resort
to promoters of Expo Center trade shows, conventions and other events as the
"headquarters hotel" for such events. The Casino Resort will offer attendees of
events at the Expo Center and the Congress Center the most convenient hotel
accommodations in Las Vegas. The Expo Center already has booked or reserved 37
trade shows, conventions and business events for the calendar year 1999,
covering 131 separate show days. It should be noted that trade show and
convention promoters are under no obligation to select the Casino Resort as the
"headquarters hotel" for their events. See "Risk Factors--Possible Conflicts of
Interest." In addition to being an expected source of room demand for the
Hotel, the Expo Center and the Congress Center are expected to draw pedestrian
traffic from guests of hotels throughout Las Vegas, providing a significant
source of traffic for the Casino and the Mall.
Appeal to a Higher Budget Customer Mix
Management expects the Casino Resort to attract higher budget business
travelers and free and independent travelers, resulting in a higher budget
customer mix both on weekdays and weekends. By appealing to customers in these
market segments, the Company expects to reduce its reliance on the lower-budget
tour and travel market. Management believes business travelers typically pay
more for rooms and spend more on entertainment than weekday customers in other
categories, such as tour groups. Management believes that the Casino Resort's
central location adjacent to the Expo Center and on the Strip and its
all-suites hotel product will allow it to compete effectively for higher budget
mid-week trade show, convention and meeting attendees. On both weekdays and
weekends, the all-suites product at the Hotel is expected to appeal to free and
independent leisure travelers and "high-roller" gaming customers, also segments
of the travel market that spend more on rooms and entertainment.
Use the Casino Resort's Themed Facilities and Location to Generate Casino
Revenues
Management believes the Casino will capture gaming revenues from (i) the
foot traffic generated by Expo Center and Congress Center events, (ii) Hotel
guests, (iii) the foot traffic generated by shoppers and diners at the Mall and
the Casino and (iv) visitors attracted to the Casino Resort's unique,
Venetian-themed facilities.
5
<PAGE>
The Casino Resort is planned to include a concentration of some of the
finest restaurants in Las Vegas, brand name and exclusive boutique shopping,
and themed entertainment concepts. Letters of intent have been signed with
several well-known restauranteurs to operate their "signature" restaurants at
the Casino Resort. In addition, the Company has entered into a lease for the
"Billboard Live!" entertainment complex, which is affiliated with Billboard
Magazine. Management believes that the combination of brand name awareness and
extensive theming will generate significant foot traffic for the Casino Resort.
The Casino Resort has been designed so that foot traffic from the Strip, the
Expo Center, the Congress Center and the Hotel are funneled through the Casino
floor in order to attract and retain a broad base of casino patrons.
Target Premium Gaming Customers
Management believes that the Casino Resort's all-suites product, themed
atmosphere and amenities will offer gaming customers a unique Las Vegas
experience. The Company intends to market the Casino to frequent premium gaming
customers. In particular, the Company will seek to attract "high roller" gaming
customers by offering premium suites and special hotel services. Because of the
all-suites format in the Hotel, the Casino Resort will be able to offer many
gaming customers complementary suites (considered premium accommodations in Las
Vegas) during high occupancy periods such as weekends and holidays when they
would not otherwise be offered such suites by the Company's competitors. The
Company believes that the premium gaming customer is a significant market
segment that has been inadequately addressed by the Casino Resort's
competitors. The Casino Resort will be the first all-suites resort on the Strip
with facilities and amenities designed from inception to attract and serve
premium gaming customers.
Carefully Manage Construction Costs and Risks
The Casino Resort is budgeted to cost approximately $1.065 billion to
develop, equip and open (such costs include approximately $70.0 million for
certain heating and air conditioning-related and other equipment (the "HVAC
Equipment") to be owned by a third party, but exclude land acquisition costs).
As of December 31, 1997, approximately $228.1 million of this total budgeted
cost has been expended or incurred. Of the amount expended and incurred,
approximately $95.3 million represents cash contributed to the Company by
Sheldon G. Adelson, the sole stockholder of the Company (the "Sole
Stockholder"), through affiliates of the Company.
As of December 31, 1997, (i) the foundation for the principal structure of
the Casino Resort has been constructed and the superstructure is under
construction and (ii) pursuant to the Construction Management Contract (as
defined herein) and otherwise, trade contracts in excess of $303.7 million for
various components of the project, including excavation, foundations,
structural steel, mechanical and plumbing systems and structural concrete have
been entered into or negotiated. In order to manage its construction risk, the
Company has entered into various agreements designed to protect it against
construction delays and cost overruns, including (i) a guaranteed maximum price
construction contract (the "Construction Management Contract") which protects
the Company against certain cost overruns in the amount of $547.8 million (or
approximately 52% of the expected cost of the Casino Resort) with Lehrer
McGovern Bovis, Inc. (the "Construction Manager") for the principal components
of the Casino Resort, (ii) a guaranty of certain of the Construction Manager's
obligations by its parent corporation, The Peninsular and Oriental Steam
Navigation Company ("P&O"), and (iii) a liquidated damages insurance policy for
costs of certain construction delays (the "Liquidated Damages Insurance"). The
budget for the Casino Resort contains a Construction Manager's construction
budget contingency and an owner's contingency totaling $66.1 million in the
aggregate that can be used to cover cost overruns. Further, the Sole
Stockholder has provided a $25.0 million collateralized completion guaranty
(the "Completion Guaranty"). The Completion Guaranty is not available to fund
any increases in costs attributable to discretionary "scope changes." Any such
"scope changes" may only be implemented if the Issuers demonstrate that they
have sufficient available funds to cover the anticipated increased costs, or if
the Sole Stockholder increases his Completion Guaranty by such amount. To the
extent that any cost overruns are not covered by the Construction Management
Agreement or the other protections described above, such cost overruns could be
substantial and have a material adverse effect on the Company's liquidity and
results of operations and its ability to meet its principal and interest
payments on the Notes. See "Risk Factors--Construction Budget; Construction
Management Contract and Guaranties."
6
<PAGE>
To further ensure that there are sufficient funds to construct the Casino
Resort as planned and that such funds are disbursed appropriately, certain
lenders to the Issuers and the Mortgage Note Trustee have entered into a funds
disbursement and administration agreement (the "Disbursement Agreement") to
establish the conditions for and the sequencing of funding construction costs
and procedures for approving construction change orders and amendments to the
construction budget and schedule. The Disbursement Agreement provides that
project costs (other than costs for the HVAC Equipment, furniture, fixtures and
other equipment) will, generally, be funded first from the cash portion of the
Equity Contribution (as defined herein) and the proceeds of the Senior
Subordinated Notes, and thereafter, on a pro rata basis from the proceeds of
the Bank Credit Facility, the Mall Construction Loan Facility and the Mortgage
Notes. However, the HVAC Equipment and the Specified FF&E (as defined herein),
will be funded through the Disbursement Agreement from separate commitments
from the HVAC Provider (as defined herein) and the FF&E Lenders (as defined
herein), respectively, subject to limited exceptions.
A subsidiary of Tishman Corporation ("Tishman"), one of the nation's
leading construction managers and largest hotel developers and owners, acts as
construction consultant (the "Construction Consultant") to certain of the
lenders to the Company and is required to review each request by the Issuers
for the disbursement of funds. Representatives of the Construction Consultant
have worked with the Company since early August 1997 in reviewing construction
plans, schedules and budgets. The disbursement conditions under the
Disbursement Agreement generally provide that funds will be disbursed to the
Issuers only if the Construction Consultant determines that construction is on
schedule and that there are sufficient available funds to complete the Casino
Resort in accordance with the construction drawings and budget. See "Risk
Factors--Construction Budget; Construction Management Contract and Guaranties,"
"--Completion Guaranty," "Description of Disbursement Agreement," "Description
of Intercreditor Agreement" and "Certain Material Agreements."
7
<PAGE>
Sources and Uses of Funds
The estimated sources and uses of funds to construct, develop, equip, and
open the Casino Resort (including the Hotel, the Mall, the Casino and the
Congress Center, but excluding HVAC Equipment, which will be owned by a third
party) are as follows (in millions)(1)(2)(3):
<TABLE>
<CAPTION>
Sources Uses
- ------------------------------------- -------------------------------------
<S> <C> <C> <C>
Bank Credit Facility (4) ............ $ 150.0 Hotel and Casino .................... $ 486.3
Mall Construction Loan Facility ..... 140.0 Mall ................................ 123.6
FF&E Credit Facility (5) ............ 97.7 FF&E (4)(7) ......................... 121.1
Mortgage Notes ...................... 425.0 Land (6)(8) ......................... 225.0
Senior Subordinated Notes ........... 90.5 Parking and site work ............... 36.4
Equity Contribution (6) ............. 320.3 Interest, net ....................... 88.4
--------- Pre-opening costs and expenses ...... 34.4
Contingency (9) ..................... 66.1
Financing fees and expenses ......... 42.2
---------
Total Sources ...................... $ 1,223.5 Total Uses ......................... $ 1,223.5
========= =========
</TABLE>
- --------------
(1) The Company believes that the construction and development budget for the
Casino Resort is reasonable; however, given the risks inherent in the
construction process, it is possible that construction and development
costs for the Casino Resort could be significantly higher. See "Risk
Factors--Risks of New Construction," "--Construction Budget; Construction
Management Contract and Guaranties," "--Completion Guaranty" and "Use of
Proceeds."
(2) The sources and uses table does not include approximately $70.0 million for
the HVAC Equipment, which will be paid for and owned by the HVAC Provider.
See "Certain Material Agreements--Agreements Relating to the Casino
Resort--HVAC Services Agreement and Related Documents."
(3) The Issuers used a portion of the net proceeds from the Offering to repay
$30.1 million of indebtedness plus accrued interest under a construction
loan (the "Construction Loan"). The net proceeds from the Construction
Loan were used to fund the development and construction costs of the
Casino Resort. See "Use of Proceeds" and "Management's Discussion and
Analysis of Liquidity and Capital Resources."
(4) Additional borrowings under the Bank Credit Facility of up to $20.0 million
are available under a revolving loan facility (approximately $15.0 million
of which will be available during the construction period: (i) to fund the
purchase of the Specified FF&E (including deposits thereon), with such
amounts to be repaid from funds drawn under the FF&E Credit Facility (as
defined herein) and (ii) to support letters of credit relating to the
construction of the Casino Resort). See "Description of Certain
Indebtedness--Bank Credit Facility" and "--FF&E Credit Facility."
(5) The availability of funds under the FF&E Credit Facility is subject to
certain conditions including substantial completion of the Casino Resort.
See "Description of Certain Indebtedness--FF&E Credit Facility."
(6) Equity Contribution represents (i) $95.3 million in cash advanced by the
Sole Stockholder or his affiliates to fund construction and development of
the Casino Resort and (ii) $225.0 million representing the appraised value
of the 45 acre site (the "Project Site") upon a portion of which the
Casino Resort will be built (such land had a book value of $93.6 million
at December 31, 1997). See "Appraisals--Land Appraisal" and "Certain
Transactions--Equity Contribution."
(7) Includes $26.9 million of gaming equipment and $94.2 million of other
furniture, fixtures and equipment. See "Description of Certain
Indebtedness--FF&E Credit Facility."
(8) Upon the completion of a subdivision of the Project Site, approximately 14
acres of land included in the Project Site (the "Phase II Land") may be
released from the Note Collateral and transferred to a subsidiary of
Venetian (the "Phase II Subsidiary"). See "Description of Mortgage
Notes--Ranking and Security."
(9) The total contingency consists of $66.1 million, which is currently
allocated as follows: (i) a $26.1 million contingency included in the
Construction Manager's guaranteed maximum price (the "Construction
Manager's Contingency") and (ii) a $40.0 million general project
contingency (the "Owner's Contingency"). In addition, the Sole
Stockholder's collateralized Completion Guaranty is available to cover
cost overruns. See "Risk Factors--Construction Budget; Construction
Management Contract and Guaranties" and "Certain Material
Agreements--Agreements Relating to the Casino Resort--Construction
Management Contract."
8
<PAGE>
Financing Transactions and HVAC Agreement
The funding of development and construction costs for the Casino Resort
will be provided by: (i) $425.0 million in gross proceeds from the issuance of
the Mortgage Notes; (ii) $90.5 million in gross proceeds (net of original issue
discount) from the issuance of the Senior Subordinated Notes; (iii) borrowings
of approximately $150.0 million under the secured bank credit facility (the
"Bank Credit Facility"); (iv) borrowings of approximately $140.0 million under
the secured mall construction loan facility (the "Mall Construction Loan
Facility") provided by GMAC Commercial Mortgage Corporation (the "Mall
Construction Lender"); (v) $97.7 million of indebtedness under a credit
facility provided by General Electric Capital Corporation and BancBoston
Leasing Inc. (the "FF&E Lenders") and secured by certain furniture, fixtures
and equipment (the "Specified FF&E") (the "FF&E Credit Facility" and, together
with the financings described in clauses (i), (ii), (iii) and (iv) above, the
"Financing Transactions"); and (vi) the Equity Contribution (as defined
herein). The availability of funds under the FF&E Credit Facility is subject to
certain conditions including reaching a certain level of construction progress
on the Casino Resort. In addition, Atlantic-Pacific Las Vegas, LLC (the "HVAC
Provider") has committed to provide up to $70.0 million for the purchase and
installation of the HVAC Equipment. Pursuant to thermal energy service
agreements with Venetian, Interface (as defined herein) and the Mall
Construction Subsidiary (collectively, the "HVAC Services Agreement"), the HVAC
Provider will own and operate all of the HVAC Equipment and provide heating and
air-conditioning to the Casino Resort and the Expo Center. The HVAC Provider's
obligation to provide the above-described $70.0 million will be secured by
irrevocable, stand-by letters of credit. Rates to be charged under the HVAC
Services Agreement have been set with the expectation that during the initial
ten-year term of the HVAC Services Agreement, the HVAC Provider will recover
the major portion of its investment. See "Certain Material
Agreements--Agreements Relating to the Casino Resort--HVAC Services Agreement
and Related Documents."
The Issuers, The Bank of Nova Scotia, as administrative agent under the
Bank Credit Facility (the "Bank Agent"), the Mall Construction Lender, the
Mortgage Note Trustee and The Bank of Nova Scotia, as disbursement agent (the
"Disbursement Agent") have entered into the Disbursement Agreement which
establishes procedures and conditions to the Company's right to obtain funding
to construct the Casino Resort. In addition, the Disbursement Agreement
obligates each of the various lenders to fund its pro-rata share of the
construction costs of the Casino Resort and the HVAC Provider to fund the costs
of the HVAC Equipment, in each case, once the conditions to funding have been
satisfied. The Bank Agent, the Mall Construction Lender, the trustee under the
Senior Subordinated Notes (the "Senior Subordinated Note Trustee") and the
Mortgage Note Trustee have entered into an intercreditor agreement (the
"Intercreditor Agreement") setting forth certain agreements among them. These
agreements relate, among other things, to (i) their claims and interests in the
Note Collateral and the Mall Collateral (as such terms are defined herein) and
other assets of the Issuers, (ii) the ability of the Issuers to incur
additional indebtedness under the Bank Credit Facility or the Mall Construction
Loan Facility, (iii) procedures for waiver of certain funding disbursement
conditions, (iv) limitations on the rights of the Mortgage Note Trustee and the
Senior Subordinated Note Trustee and holders of the Mortgage Notes and the
Senior Subordinated Notes to exercise remedies under certain circumstances and
(v) provisions for the recommencement of disbursements upon curing of defaults
under the Disbursement Agreement. See "Description of Disbursement Agreement"
and "Description of Intercreditor Agreement."
Upon completion of the Casino Resort and satisfaction of certain other
conditions, pursuant to the Sale and Contribution Agreement among Venetian, the
Mall Construction Subsidiary and the Mall Subsidiary (the "Sale and
Contribution Agreement"), the Mall Construction Subsidiary will transfer the
Mall and certain related assets (collectively, the "Mall Collateral") to the
Mall Subsidiary. Upon such transfer, the Mall Collateral will be released by
the Mortgage Note Trustee and the Bank Agent and will not be available as
security for the holders of the Mortgage Notes or the indebtedness under the
Bank Credit Facility, and the indebtedness under the Mall Construction Loan
Facility will either be repaid or assumed by the Mall Subsidiary (with the
Issuers and the Guarantors being released from all obligations under such
indebtedness). See "Certain Material Agreements--Agreements Relating to the
Mall--Sale and Contribution Agreement."
9
<PAGE>
To finance the obligations of the Mall Subsidiary under the Sale and
Contribution Agreement, Goldman Sachs Mortgage Company ("GSMC") and an entity
wholly owned by the Sole Stockholder (the "Tranche B Take-out Lender") have
entered into separate commitment agreements with the Mall Subsidiary whereby,
subject to completion of the Casino Resort and certain other conditions, (i)
GSMC has agreed to provide debt financing to the Mall Subsidiary of up to
$105.0 million (the "Tranche A Take-out Financing") and (ii) the Tranche B
Take-out Lender has agreed to provide debt financing to the Mall Subsidiary of
up to $35.0 million (the "Tranche B Take-out Financing" and, together with the
Tranche A Take-out Financing, the "Mall Take-out Financings"). The indebtedness
under the Mall Take-out Financings will not be recourse to LVSI or Venetian.
See "Risk Factors--Sole Stockholder" and "Description of Certain
Indebtedness--Mall Take-out Financing Commitments."
Sole Stockholder, Equity Contribution and Ownership
Sheldon G. Adelson, the Sole Stockholder, beneficially owns all of the
capital stock and membership interests of the Issuers and Interface
Group-Nevada, Inc. ("Interface"), the owner of the Expo Center. The Sole
Stockholder has been Chairman and Chief Executive Officer of LVSI since it was
formed in 1988 to own and operate the Sands. In addition to owning and
operating the Sands, the Sole Stockholder has extensive experience in the trade
show, convention and tour and travel businesses.The Sole Stockholder created
and developed the COMDEX Trade Shows, including the COMDEX Fall Trade Show, the
world's largest computer show, all of which were sold in April 1995. Although
the Company and Interface have agreed to cooperate in the marketing of the
Casino Resort and the Expo Center, the Company has no ownership or financial
interest in Interface or the Expo Center, and the Company does not exercise any
control over the business or management of Interface or the Expo Center. The
Notes represent obligations of the Company and Venetian only and do not
represent obligations of, and are not guaranteed by, Interface, the Sole
Stockholder or any of their affiliates (other than LVSI, Venetian and certain
of their subsidiaries described herein). See "Risk Factors--Possible Conflicts
of Interest" and "--Sole Stockholder."
As support for the development of the Casino Resort, the Sole Stockholder
or his affiliates have provided the following:
(i) $95.3 million in cash to partially fund construction costs and expenses
of the Casino Resort (the "Cash Contribution");
(ii) the 45-acre Project Site (approximately 14 acres of which (the Phase
II Land) may be transferred to the Phase II Subsidiary), which has an
appraised value of $225.0 million (together with the Cash Contribution, the
"Equity Contribution");
(iii) the $25.0 million Completion Guaranty collateralized by cash or cash
equivalents;
(iv) a $35.0 million guaranty of the Mall Construction Loan Facility and a
commitment to provide the Tranche B Take-out Financing (collateralized by
an aggregate of $35.0 million of cash or cash equivalents); and
(v) a $20.0 million unsecured guaranty of the Tranche A Take-out Financing.
See "Risk Factors--Completion Guaranty" and "--Sole Stockholder," "Appraisals,"
"Certain Transactions" and "Description of Certain Indebtedness."
10
<PAGE>
Ownership Structure
Set forth below is an ownership chart for the Issuers and their
subsidiaries following the Offering. For a full description of the Issuers and
their subsidiaries, see "LVSI and Venetian." References to Mall Intermediate
Holdings mean Mall Intermediate Holding Company, LLC; references to Phase II
Intermediate Holdings mean Lido Intermediate Holding Company, LLC; references
to Mall Holdings mean Grand Canal Shops Mall Holding Company, LLC; and
references to Phase II Holdings mean Lido Casino Resort Holding Company, LLC.
[OWNERSHIP STRUCTURE]
- --------------
(1) LVSI and Venetian are co-obligors of the Notes and the co-obligors of the
indebtedness under the Bank Credit Facility, the Mall Construction Loan
Facility and the FF&E Credit Facility.
(2) The Mall Construction Subsidiary has entered into a long-term agreement
(the "Mall Lease") with Venetian to lease the space that constitutes the
Mall until such space becomes a separate legal and tax parcel, at which
time Venetian will, pursuant to the Mall Lease, transfer fee ownership of
such space to the Mall Construction Subsidiary. The Mall Construction
Subsidiary has guaranteed the indebtedness under the Bank Credit Facility
and the Mortgage Notes on a secured basis and the Senior Subordinated
Notes on an unsecured, subordinated basis. The Mall Construction
Subsidiary is a co-obligor of the Mall Construction Loan Facility. Upon
completion of the Casino Resort, pursuant to the Sale and Contribution
Agreement, the Mall Construction Subsidiary will transfer the Mall
Collateral to the Mall Subsidiary. See "Certain Material
Agreements--Agreements Relating to the Mall--Sale and Contribution
Agreement."
(3) Mall Intermediate Holdings and Phase II Intermediate Holdings have
guaranteed the indebtedness under the Bank Credit Facility on a senior
basis and the Notes on a subordinated basis. Mall Intermediate Holdings
also has guaranteed the indebtedness under the Mall Construction Loan
Facility on a senior basis. See "Description of Mortgage Notes--Mortgage
Note Guaranties" and "Description of Senior Subordinated Notes--Senior
Subordinated Note Guaranties."
(4) Upon subdivision of the Project Site, the Phase II Land may be released
from the Note Collateral and transferred to the Phase II Subsidiary.
Although no plans for the Phase II Land have been finalized, it is
currently planned that the Phase II Subsidiary will construct a themed
hotel and casino (the "Phase II Resort") on the Phase II Land that will be
physically connected to the Casino Resort. Under the Indentures, the
Issuers have agreed that they will not commence construction of the Phase
II Resort (other than the parking garage on the Phase II Land) until a
temporary certificate of occupancy has been issued for the Casino Resort.
11
<PAGE>
Summary Consolidated Financial Forecast Information
Set forth below is summary financial forecast information of operations
for the Company for the first twelve months of operations of the Casino Resort.
The information is presented to show both the inclusion and exclusion of
operations of the Mall Subsidiary. See Forecasted Consolidated Financial
Statements and the accompanying Summary of Significant Forecast Assumptions and
Accounting Policies (the "Financial Forecast"). The Financial Forecast was
prepared as of June 30, 1997 except for the amount of Mortgage Notes and Senior
Subordinated Notes and the assumed interest rates on such Notes, which were
updated as of November 6, 1997. The prospective financial information included
in this Prospectus has been prepared by, and is the responsibility of, the
Company's management. Price Waterhouse LLP has neither examined nor compiled
the accompanying prospective financial information, and accordingly, Price
Waterhouse LLP does not express an opinion or provide any other form of
assurance with respect thereto. The Price Waterhouse LLP report included in
this Prospectus relates to the Company's historical financial information and
does not extend to the prospective financial information and should not be read
to do so. Neither the Initial Purchasers nor any independent expert has
reviewed the Financial Forecast. While such Financial Forecast is presented
with numerical specificity, it is based on the best estimate of the Company
described in the Summary of Significant Assumptions and Accounting Policies in
the Financial Forecast of the results it expects for the Casino Resort given
the Company's assumptions (including that (i) the Casino Resort will open on
schedule and be successful, (ii) the Casino Resort will attract a substantial
number of visitors and (iii) the average daily hotel room rate paid by the
visitors at the Casino Resort will be higher than room rates at other
hotel/casinos on the Strip because of room demand from the trade shows and
conventions currently booked at the Expo Center for the first projected year of
operation of the Casino Resort, the Casino Resort's all-suite format and
amenities, its location and its target market). Furthermore, such estimates are
inherently subject to significant business, economic and competitive
uncertainties and contingencies (many of which are beyond the control of the
Company), including future business decisions which are subject to change.
Financial forecasts are necessarily speculative in nature, and it is usually
the case that one or more of the assumptions do not materialize. For instance,
the Financial Forecast assumes higher than average daily room rates of $167
during the initial year of operations (as compared to an average daily room
rate of $79 for the upper quartile of casinos located on the Las Vegas Strip
with gaming revenues greater than $72.0 million (the "Large Strip Hotels") for
1996 according to the Nevada State Gaming Control Board (the "Nevada Board" or
"NGCB") and average daily room rates at major convention hotels in New York,
Chicago and San Francisco of approximately $160 during the first quarter of
1997 according to "Smith Travel Research"), which may not be achieved. In
addition, the results, performance and achievements of the Casino Resort
involve known and unknown risks, uncertainties and other factors, including the
risks associated with new construction, government regulation relating to the
casino industry, the completion of infrastructure improvements in Las Vegas,
including the ongoing expansion of McCarran International Airport, and general
economic and business conditions which may impact levels of disposable income
for consumers and pricing of hotel rooms. Accordingly, the Financial Forecast
is only an estimate, and actual results can be expected to vary from estimates,
and the variations may be material. The Financial Forecast herein should not be
regarded as a representation by the Company or any other person that the
Financial Forecast will be achieved. Holders of the Notes are cautioned not to
place undue reliance on the Financial Forecast. The Company does not intend to
update or otherwise revise the Financial Forecast to reflect events or
circumstances existing or arising after the date of this Prospectus or to
reflect the occurrence of unanticipated events, except as required by
applicable law. This Summary Consolidated Financial Forecast Information and
the information that follows constitute forward-looking statements. See
"Special Note Regarding Forward-Looking Statements."
12
<PAGE>
Summary Consolidated Financial Forecast Information
<TABLE>
<CAPTION>
For the First Twelve Months
of Operations
-----------------------------------
(includes Mall (excludes Mall
Subsidiary) Subsidiary) (1)
---------------- ----------------
(in millions, except for
certain assumptions)
<S> <C> <C>
Operating Data:
Casino revenues (2) .............................................. $ 280.5 $280.5
Room revenues .................................................... 172.6 172.6
Mall revenues .................................................... 28.2 --
Total net revenues (3) ........................................... 527.8 499.6
Depreciation and amortization .................................... 43.3 37.4
Income from operations ........................................... 181.1 160.8
Interest expense, net ............................................ (97.7) (85.0)
Net income ....................................................... 83.4 75.8
Balance Sheet Data: .................................................
Total assets ..................................................... $1,078.8 $935.9
Total long-term debt ............................................. 782.5 642.5
Preferred interest ............................................... 77.1 77.1
Stockholder's equity ............................................. 117.2 116.7
Other Data:
Ratio of earnings to fixed charges (4) ........................... 1.8x 1.8x
Net cash provided by operating activities ........................ $ 107.5 $ 93.6
Net cash used in investing activities ............................ (8.5) (8.3)
Net cash used in financing activities ............................ (82.6) (79.5)
EBITDA (5) ....................................................... 224.4 198.2
Total debt (6) ................................................... 856.3 716.3
Ratio of EBITDA to interest expense, net (6) ..................... 2.3x 2.3x
Ratio of total debt to EBITDA (6) ................................ 3.8x 3.6x
Certain Assumptions:
Number of slot machines .......................................... 2,500 2,500
Number of table games (excluding four baccarat tables) ........... 114 114
Slot machine win per unit per day (2) ............................ $ 151 $ 151
Table game (excluding baccarat) win per unit per day (2) ......... $ 2,463 $2,463
Number of hotel rooms ............................................ 3,036 3,036
Average daily room rate .......................................... $ 167 $ 167
Occupancy rate ................................................... 93% 93%
</TABLE>
- --------------
(1) Does not include the operations of the Mall Subsidiary. Upon the completion
of the Casino Resort, the Mall Subsidiary is expected to incur
indebtedness under the Mall Take-out Financings. The ability of the Mall
Subsidiary to distribute or otherwise transfer funds to the Company will
be limited by, among other things, the agreements governing such
indebtedness.
(2) Amounts include an estimated 3% annual inflation factor for the period
December 1996 through April 1999, which is the estimated construction
period. The Company's estimates of win per unit per day amounts are based
on the State of Nevada Gaming Control Board's gaming figures for casinos
located on the Strip with gaming revenues greater than $72.0 million
(upper quartile of Large Strip Hotels (as defined herein)) for the
calendar year ended December 31, 1996, adjusted for inflation during the
construction period. See "Summary of Significant Forecast Assumptions and
Accounting Policies" in the Financial Forecast.
(3) Net of promotional allowances of $51.0 million. See the Financial Forecast.
(4) The ratio of earnings to fixed charges is determined by dividing (i) net
income plus fixed charges by (ii) fixed charges. Fixed charges consist of
interest expense (including amortization of discount on indebtedness),
amortization of debt expense and that portion of rental expense
representative of interest.
(5) EBITDA represents earnings before interest, taxes, depreciation and
amortization and is presented as income from operations before
depreciation and amortization. EBITDA is presented to enhance the
understanding of the financial performance of the Company and its ability
to service its indebtedness, including the Notes. EBITDA is not intended
to represent and should not be considered an alternative to, or more
meaningful than, net income and income from operations as an indicator of
the operating performance of the Company. EBITDA should not be considered
by investors as an indicator of cash flows from operating activities,
investing activities and financing activities as determined in accordance
with generally accepted accounting principles. Items excluded for EBITDA,
such as depreciation and amortization, are significant components in
understanding and assessing the Company's financial performance. EBITDA
measures presented may not be comparable to similarly titled measures
presented by other issuers.
(6) Ratios computed as of the end of the forecasted first twelve months of
operations.
13
<PAGE>
The Exchange Offer
<TABLE>
<S> <C>
Securities Offered ....................... Up to $425,000,000 aggregate principal amount of 12 1/4%
Mortgage Notes due 2004 and up to $97,500,000 aggregate
principal amount of 14 1/4% Senior Subordinated Notes due
2005 which have been registered under the Securities Act.
The terms of the New Notes are identical in all material
respects to those of the Existing Notes, except for certain
transfer restrictions and registration rights relating to the
Existing Notes.
The Exchange Offer ....................... The New Notes are being offered in exchange for a like
principal amount of Existing Notes. Existing Notes may be
exchanged only in integral multiples of $1,000. The issuance
of the New Notes is intended to satisfy obligations of the
Issuers under the Registration Rights Agreement.
Expiration Date;
Withdrawal of Tender .................... The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1998 or such later date and time to which it is
extended by the Issuers .The tender of Existing Notes pursuant
to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. Any Existing Notes not accepted for exchange
for any reason will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Conditions to the Exchange Offer ......... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Issuers. The Issuers
currently expect that each of the conditions will be satisfied
and that no waivers will be necessary. See "The Exchange
Offer--Conditions to the Exchange Offer."
Procedures for Tendering
Existing Notes .......................... Unless a tender of Existing Notes is effected pursuant to the
procedures for book-entry transfer as provided herein, each
holder of Existing Notes wishing to accept the Exchange Offer
must complete, sign and date a Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver
such Letter of Transmittal, or such facsimile, together with
such Existing Notes and any other required documentation,
to the Exchange Agent at the address set forth herein. See
"The Exchange Offer--Procedures for Tendering Existing
Notes."
Use of Proceeds .......................... There will be no proceeds to the Issuers from the exchange
of Notes pursuant to the Exchange Offer. See "Use of
Proceeds."
Certain Federal Income
Tax Considerations ...................... The exchange pursuant to the Exchange Offer should not be
a taxable event for federal income tax purposes. See "Certain
Federal Income Tax Considerations."
Exchange Agent ........................... First Trust National Association is serving as the Exchange
Agent in connection with the Exchange Offer.
</TABLE>
14
<PAGE>
Consequence of Exchanging Existing Notes
Pursuant to the Exchange Offer
Based on certain no action letters issued by the staff of the Commission
to third parties in unrelated transactions, the Issuers believe that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any holder who is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchases Notes from the Issuers to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of the holder's business and such holders have
no arrangement or understanding with any person to participate in a
distribution of such New Notes and are not participating in, and do not intend
to participate in, the distribution of such New Notes. By tendering, each
holder will represent to the Issuers in the Letter of Transmittal that, among
other things, the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes whether or not such person is the holder, that neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, that neither the holder nor
any such other person is participating in or intends to participate in the
distribution of such New Notes and that neither the holder nor any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Issuers. Each broker-dealer that receives New Notes for its own account in
exchange for Existing Notes must acknowledge that it will deliver a prospectus
in connection with any resale of such New Notes. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and complied with. The Issuers have
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the New Notes for offer
or sale under the securities or blue sky laws of such jurisdictions as are
necessary to permit the consummation of the Exchange Offer. If a holder of
Existing Notes does not exchange such Existing Notes for New Notes pursuant to
the Exchange Offer, such Existing Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the
Existing Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "The
Exchange Offer--Consequences of Failure to Exchange; Resales of New Notes."
The Existing Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the New Notes will not be eligible for
PORTAL trading.
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The Notes
Except as otherwise indicated, the following description relates both to
the Existing Notes and to the New Notes to be issued in exchange for Existing
Notes in connection with the Exchange Offer. The form and terms of the New
Notes are the same as the form and terms of the Existing Notes, except that the
New Notes will have been registered under the Securities Act and therefore will
not bear legends restricting the transfer thereof. For a more complete
description of the Notes, see "Description of Mortgage Notes" and "Description
of Senior Subordinated Notes."
Issuers....................... Las Vegas Sands, Inc. and Venetian Casino
Resort, LLC, jointly and severally.
Mortgage Notes
Issue......................... $425.0 million principal amount of 12 1/4%
Mortgage Notes due November 15, 2004.
Interest Payment Dates........ The Mortgage Notes bear interest at the rate
of 12 1/4% per annum, payable in cash
semi-annually in arrears on May 15 and November
15, commencing May 15, 1998.
Optional Redemption........... On or after November 15, 2001, the Mortgage
Notes will be redeemable at the option of the
Issuers, in whole or in part, at the redemption
prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages (as
defined herein), if any, to the date of
redemption. At any time on or prior to November
15, 2000, the Issuers may, within 60 days of
(i) a Public Equity Offering (as defined
herein) or (ii) the receipt by the Issuers or
any of their Restricted Subsidiaries of Excess
Mall Proceeds (as such terms are defined
herein) (each of the events described in (i)
and (ii) being a "Redemption Triggering
Event"), at their option, use the net cash
proceeds of such Redemption Triggering Event to
redeem up to 35% of the aggregate principal
amount of the Mortgage Notes originally issued
at a redemption price equal to 112.25% of the
aggregate principal amount so redeemed, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
Prior to November 15, 2001, the Issuers may,
at their option, redeem the Mortgage Notes, in
whole or in part, at a redemption price equal
to 100% of the principal amount thereof plus
an amount equal to the greater of (i) 12.25%
of the outstanding principal amount of such
Mortgage Notes and (ii) the excess of (a) the
present value of the remaining interest,
premium and principal payments due on such
Mortgage Notes as if such Mortgage Notes were
redeemed on November 15, 2001 computed using a
discount rate equal to the Treasury Rate plus
50 basis points over (b) the outstanding
principal amount of such Mortgage Notes, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
The Issuers have the option to redeem the
Mortgage Notes of any holder at any time to
prevent the loss or material impairment of a
gaming license or an application for a gaming
license at a redemption price equal to the
lesser of (i) the cost
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<PAGE>
paid by such holder or (ii) 100% of the
aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
See "Regulation and Licensing" and
"Description of Mortgage Notes--Optional
Redemption."
Change of Control............. Upon a Change of Control (as defined herein),
each holder of the Mortgage Notes will have the
right, at such holder's option, to require the
Issuers to repurchase such holder's Mortgage
Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase.
There can be no assurance that the Issuers will
have sufficient funds to repurchase the
Mortgage Notes or any other indebtedness
(including indebtedness under the Bank Credit
Facility and the Mall Construction Loan
Facility) upon a Change of Control. See "Risk
Factors--Change of Control" and "Description
of Mortgage Notes--
Repurchase at the Option of Holders--Change of
Control."
Security...................... The Mortgage Notes are secured by second
priority liens on substantially all of the
assets, now owned or hereafter acquired, of the
Company, Venetian or any of the Secured
Mortgage Note Guarantors (as defined herein),
which initially includes all real estate,
improvements and all personal property owned by
the Issuers and any Secured Mortgage Note
Guarantors (with certain exceptions), as well
as a pledge of any intercompany notes held by
either of the Issuers or the Secured Mortgage
Note Guarantors (collectively, the "Note
Collateral") and (until the Casino Resort is
completed) third priority liens on the Mall
Collateral. The Note Collateral does not
include (i) the Specified FF&E, (ii) any assets
which if pledged, hypothecated or given as
collateral security would require the Company
or Venetian to seek approval by the Nevada
Gaming Authorities (as defined herein) of the
pledge, hypothecation or collateralization, or
require the Trustee or a holder or beneficial
holder of the Mortgage Notes to be licensed,
qualified or found suitable under applicable
gaming laws (including, without limitation,
LVSI's gaming license) other than any approval
required for the pledge, hypothecation or
collateralization of assets in connection with
the Exchange Offer (as defined herein), (iii)
any stock of or membership interests in any
subsidiaries of the Company, and (iv) certain
other assets to the extent permitted under the
Mortgage Note Indenture. Pending disbursement
of the proceeds of the Mortgage Notes, the
Mortgage Notes are also secured by a first
priority pledge of unexpended funds in the
Mortgage Notes Proceeds Account, which are not
otherwise encumbered. See "Description of
Mortgage Notes--Ranking and Security."
Upon completion of the Casino Resort and the
satisfaction of certain other conditions,
pursuant to the Sale and
Contribution Agreement, the Mall Construction
Subsidiary will transfer the Mall Collateral
to the Mall Subsidiary in
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<PAGE>
exchange for an amount equal to the
outstanding balance on the Mall Construction
Loan Facility (or certain refinancings
thereof). Upon such transfer, the Mall
Collateral will be released from the liens
securing the Mortgage Notes and the
indebtedness under the Bank Credit Facility
and will not be available as security for the
holders of the Mortgage Notes or the
indebtedness under the Bank Credit Facility.
The Note Collateral currently includes the
entire Project Site, approximately 45 acres of
land on the Strip. The site of the Casino
Resort (including the Congress Center and the
Mall) will consist of approximately 31 acres
of the Project Site (the "Venetian Site").
Upon a subdivision of the Project Site, the
Mortgage Note Trustee and the Bank Agent will
release the remaining 14 acres of land (the
Phase II Land) included in the Note Collateral
and Venetian may transfer such land to the
Phase II Subsidiary. Although no plans for the
Phase II Land have been finalized, it is
currently planned that the Phase II Subsidiary
will construct the Phase II Resort on the
Phase II Land. The Phase II Resort is planned
to be physically connected to the Casino
Resort. See "Risk Factors--Possible Conflicts
of Interest," "--Shared Facilities" and
"Certain Material Agreements."
Ranking....................... The Mortgage Notes are senior secured
obligations of the Issuers and are senior in
right of payment to all subordinated unsecured
indebtedness of the Issuers. The Mortgage Notes
are effectively subordinated to the
indebtedness under the Bank Credit Facility and
the Mall Construction Loan, both of which are
secured by prior liens on the Note Collateral
and/or the Mall Collateral, but only to the
extent of such liens. The Mortgage Notes are
also effectively subordinated to any
indebtedness of the Issuers secured by assets
other than the Note Collateral (to the extent
of such assets), such as the Specified FF&E,
and to any indebtedness of any subsidiary of
the Issuers that is not a guarantor of the
Mortgage Notes. Upon completion of the Casino
Resort, the Issuers are expected to have $910.2
million of indebtedness (including accreted
original issue discount on the Senior
Subordinated Notes) outstanding (including
$150.0 million outstanding under the Bank
Credit Facility, $140.0 million outstanding
under the Mall Construction Loan Facility and
$97.7 million outstanding under the FF&E Credit
Facility). Prior to completion, the Indentures
permit the Issuers (i) to incur up to an
aggregate of $20.0 million of additional
indebtedness under the Bank Credit Facility
and/or the Mall Construction Loan Facility plus
(ii) if a default occurs under the Disbursement
Agreement, to incur up to an aggregate of $30.0
million of additional indebtedness under the
Bank Credit Facility and/or the Mall
Construction Loan Facility (in addition to the
additional indebtedness described in the
foregoing clause (i)) on a dollar for dollar
basis with additional equity investments from
the Sole Stockholder. In addition, after
completion, the Indentures permit the Issuers
to incur up
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<PAGE>
to (i) $20.0 million of working capital
secured by prior liens on the Note Collateral
and (ii) $20.0 million of additional
indebtedness secured by prior liens on the
Note Collateral (subject in the case of clause
(ii) to reduction to the extent of any
indebtedness incurred as contemplated in the
prior sentence). Upon the transfer of the Mall
Collateral, the Mall Subsidiary (which is not
a guarantor of the Mortgage Notes) is expected
to incur approximately $140.0 million of
indebtedness under the Mall Take-out
Financings to refinance the Mall Construction
Loan Facility. See "Description of Mortgage
Notes--Ranking and Security," "--Certain
Covenants--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified
Stock" and "Description of Intercreditor
Agreement."
Mortgage Note Guaranties...... The Mortgage Notes are fully, unconditionally
and jointly and severally guaranteed on a
senior secured basis (the "Secured Mortgage
Note Guaranties") by the Mall Construction
Subsidiary and any future Restricted Subsidiary
(as defined herein) of the Issuers (the
"Secured Mortgage Note Guarantors"). In
addition, Mall Intermediate Holdings and Phase
II Intermediate Holdings (the "Subordinated
Mortgage Note Guarantors") have fully,
unconditionally and jointly and severally
guaranteed the Mortgage Notes on a subordinated
and unsecured basis (the "Subordinated Mortgage
Note Guaranties"). The Subordinated Mortgage
Note Guaranties are subordinated in right of
payment to all Senior Debt (as defined in the
Mortgage Note Indenture). See "Description of
Mortgage Notes--Mortgage Note Guaranties."
Senior Subordinated Notes
Issue......................... $97.5 million principal amount of 14 1/4%
Senior Subordinated Notes due November 15,
2005.
Interest Payment Dates........ The Senior Subordinated Notes bear interest
at the rate of 10% per annum, payable in cash
semi-annually in arrears on May 15 and November
15, commencing May 15, 1998 through November
15, 1999, and thereafter at a rate of 14 1/4%
per annum. The Senior Subordinated Notes were
sold at a discount to their face amount in the
Offering in order to yield 14 1/4% per annum to
maturity and will accrue to par by the second
anniversary of the original date of issuance in
the Offering. See "Description of Certain
Federal Income Tax Considerations."
Optional Redemption........... On or after November 15, 2001, the Senior
Subordinated Notes will be redeemable at the
option of the Issuers, in whole or in part, at
the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
On or prior to November 15, 2000, the Issuers,
within 60 days of any Public Equity Offering,
at their option, may use the net cash proceeds
from such Public Equity Offering to redeem the
Senior Subordinated Notes, in whole or in
part, at a redemption price equal to (i)
114.25% of the Accreted Value
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<PAGE>
(as defined herein) of the Senior Subordinated
Notes so redeemed, if prior to the second
anniversary of the issuance date, or (ii)
114.25% of the principal amount of the Senior
Subordinated Notes so redeemed, if on or after
the second anniversary of the issuance date,
in each case, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
redemption.
Prior to November 15, 2001, the Issuers may, at
their option, redeem the Senior Subordinated
Notes, in whole or in part, at a redemption
price equal to (a) 100% of the Accreted Value
of the Senior Subordinated Notes so redeemed,
if prior to the second anniversary of the
issuance date, or (b) 100% of the principal
amount of the Senior Subordinated Notes so
redeemed, if on or after the second anniversary
of the issuance date, in each case plus an
amount equal to the greater of (i) (a) 14.25%
of the Accreted Value, if prior to the second
anniversary of the issuance date of such Senior
Subordinated Notes, or (b) 14.25% of the
outstanding principal amount, if on or after
the second anniversary of Issuance Date, of
such Senior Subordinated Notes and (ii) the
excess of (a) the present value of the
remaining interest, premium and principal
payments due on such Senior Subordinated Notes
as if such Senior Subordinated Notes were
redeemed on November 15, 2001, computed using a
discount rate equal to the Treasury Rate plus
50 basis points, over (b) the outstanding
principal amount of such Senior Subordinated
Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
redemption.
The Issuers also have the option to redeem the
Senior Subordinated Notes of any holder at any
time to prevent the loss or material
impairment of a gaming license or an
application for a gaming license at a
redemption price equal to the lesser of (i)
the cost paid by such holder, or (ii) (a) 100%
of the Accreted Value of the Senior
Subordinated Notes so redeemed, if prior to
the second anniversary of the issuance date,
or (b) 100% of principal amount of the Senior
Subordinated Notes so redeemed, if on or after
the second anniversary of the issuance date,
in each case plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
redemption. See "Regulation and Licensing" and
"Description of Senior Subordinated
Notes--Optional Redemption."
Change of Control............. Upon a Change of Control, subject to any
required repurchase of the Mortgage Notes, each
holder of the Senior Subordinated Notes will
have the right, at such holder's option, to
require the Issuers to repurchase such holder's
Senior Subordinated Notes at a purchase price
equal to (i) 101% of the Accreted Value of the
Senior Subordinated Notes so redeemed, if prior
to the second anniversary of the issuance date,
or (ii) 101% of the aggregate principal amount
of the Senior Subordinated Notes so redeemed,
if on or after
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<PAGE>
the second anniversary of the issuance date, in
each case, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
repurchase. There can be no assurance that the
Issuers will have sufficient funds to
repurchase the Senior Subordinated Notes or any
other indebtedness (including indebtedness
under the Bank Credit Facility, the Mortgage
Notes, the Mall Construction Loan Facility, or
any other Senior Debt (as defined herein)) upon
a Change of Control. See "Risk Factors--Change
of Control" and "Description of Senior
Subordinated Notes--Repurchase at the Option of
Holders--Change of Control."
Subordination................. The Senior Subordinated Notes are unsecured
obligations of the Issuers, are subordinated in
right of payment to all existing and future
Senior Debt of the Issuers and are senior or
pari passu in right of payment to all existing
and future subordinated indebtedness of the
Issuers. The Senior Subordinated Notes are also
effectively subordinated to any indebtedness of
any Subsidiary (as defined herein) of the
Issuers that is not a guarantor of the Senior
Subordinated Notes. Upon completion of the
Casino Resort, the Issuers are expected to have
$812.7 million of Senior Debt outstanding
(including (i) $150.0 million outstanding under
the Bank Credit Facility, (ii) $140.0 million
outstanding under the Mall Construction Loan
Facility, (iii) $425.0 million outstanding
under the Mortgage Notes and (iv) $97.7 million
outstanding under the FF&E Credit Facility).
Prior to completion, the Indentures permit the
Issuers (i) to incur up to an aggregate of
$20.0 million of additional indebtedness under
the Bank Credit Facility and/or the Mall
Construction Loan Facility plus (ii) if a
default occurs under the Disbursement
Agreement, to incur up to an aggregate of $30.0
million of additional indebtedness under the
Bank Credit Facility and/or the Mall
Construction Loan Facility (in addition to the
additional indebtedness described in the
foregoing clause (i)) on a dollar for dollar
basis with additional equity investments from
the Sole Stockholder. In addition, after
completion, the Indentures permit the Issuers
to incur up to (i) $20.0 million of additional
Senior Debt as working capital and (ii) $20.0
million of other additional Senior Debt
(subject in the case of clause (ii) to
reduction to the extent of any indebtedness
incurred as contemplated in the prior
sentence). The Mall Subsidiary (which is not a
guarantor of the Senior Subordinated Notes) is
expected to incur approximately $140.0 million
of indebtedness under the Mall Take-out
Financings upon the transfer of the Mall
Collateral to refinance the indebtedness under
the Mall Construction Loan Facility. See
"Description of Senior Subordinated
Notes--Subordination," "--Certain
Covenants--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified
Stock" and "Description of Intercreditor
Agreement."
Senior Subordinated
Note Guaranties............... The Senior Subordinated Notes are fully,
unconditionally and jointly and severally
guaranteed (the "Senior Subordinated Note
Guaranties") by Mall Intermediate Holdings,
Phase II
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<PAGE>
Intermediate Holdings, Mall Construction
Subsidiary and any future Restricted
Subsidiaries of the Issuers (the "Senior
Subordinated Note Guarantors"). The Senior
Subordinated Note Guaranties are unsecured
obligations of each such guarantor and are
subordinated in right of payment to all Senior
Debt of the Senior Subordinated Note
Guarantors, including the guaranties by such
guarantors of the indebtedness under the Bank
Credit Facility, the Mall Construction Loan
Facility and the Mortgage Notes. See
"Description of Senior Subordinated
Notes--Senior Subordinated Notes Guaranties."
Original Issue Discount....... For federal income tax purposes, each Senior
Subordinated Note is treated as issued with
"original issue discount." See "Certain Federal
Income Tax Considerations."
Terms Applicable to Both Issues
Certain Covenants............. The Indentures contain certain covenants
that, among other things, limit the ability of
LVSI, Venetian and their Restricted
Subsidiaries to incur additional indebtedness
and issue disqualified stock or equity
interests, pay dividends or make other
distributions, repurchase equity interests or
certain indebtedness, create certain liens,
enter into certain transactions with
affiliates, sell certain assets of LVSI,
Venetian, or their Restricted Subsidiaries,
issue or sell equity interests of the
Restricted Subsidiaries or enter into certain
mergers and consolidations. Unrestricted
Subsidiaries (as defined herein) of the Issuers
(including the Phase II Subsidiary) are not
subject to the covenants set forth in the
Indentures. In addition, Special Subsidiaries
(as
defined herein) of the Issuers (including the
Mall Subsidiary) are not subject to all of the
restrictions set forth in theIndentures
(including limitations on the incurrence of
indebtedness). In addition, under certain
circumstances,LVSI and Venetian are required
to offer to use the Excess Proceeds (as
defined herein) of certain Asset Sales (as
defined herein) and, in the case of the
Mortgage Notes only, Excess Loss Proceeds (as
defined herein) of certain Events of Loss (as
defined herein), as the case may be, to
purchase Notes from the holders thereof at a
price equal to 100% of the principal amount
thereof or the Accreted Value thereof, as the
case may be, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
purchase. See "Description of Mortgage Notes"
and "Description of Senior Subordinated
Notes."
Disbursement Agreement........ The Mortgage Note Trustee, the Bank Agent,
the Mall Construction Lender, the HVAC
Provider, the Disbursement Agent, LVSI,
Venetian and the Mall Construction Subsidiary
have entered into the Disbursement Agreement
which establishes conditions to and the
sequencing of funding construction costs and
procedures for approving construction change
orders and amendments to the construction
budget and schedule. A subsidiary of Tishman
acts as the Construction Consultant under the
Disbursement Agreement
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and is required to approve each request by the
Issuers for the disbursement of funds. See
"Description of Disbursement Agreement."
Intercreditor Agreement....... The Mortgage Note Trustee, the Senior
Subordinated Note Trustee, the Bank Agent, and
the Mall Construction Lender have entered into
the Intercreditor Agreement setting forth
certain agreements among them regarding, among
other things, their claims and interests in the
Note Collateral and the Mall Collateral and
other assets of the Issuers, the ability of the
Issuers to incur additional Indebtedness under
the Bank Credit Facility and the Mall
Construction Loan Facility, and limitations on
the rights of the parties thereto to exercise
remedies under certain circumstances. See
"Description of Intercreditor Agreement."
Additional intercreditor arrangements have been
entered into with the HVAC Provider and will be
entered into with the FF&E Lenders. See
"Certain Material Agreements--Agreements
Relating to the Casino Resort--HVAC Services
Agreement and Related Documents" and
"Description of Certain Indebtedness--FF&E
Credit Facility."
Construction Management Contract
and Guaranties................ The Issuers have entered into the
Construction Management Contract with the
Construction Manager for construction of the
Casino Resort (exclusive of certain furniture,
fixtures and equipment, the fabrication of
certain theming elements and the parking
garage/electrical substation facility) for an
aggregate guaranteed maximum price of
approximately $547.8 million. The Construction
Management Contract provides that if the
aggregate cost of the items covered by the
Construction Management Contract exceeds the
guaranteed maximum price, the Construction
Manager will be liable for such excess. Bovis,
Inc. ("Bovis"), the parent of the Construction
Manager, has entered into a guaranty (the
"Construction Management Contract Guaranty"),
pursuant to which it has agreed, subject to
certain conditions and limitations, to
guarantee the obligations of Construction
Manager under the Construction Management
Contract. P&O, the ultimate parent of the
Construction Manager, has entered into a
guaranty (the "P&O Guaranty"), pursuant to
which it has agreed to guarantee the
obligations of Bovis under the Construction
Management Contract Guaranty. In addition,
under the Construction Management Contract, the
Construction Manager, solely, is liable for
liquidated damages for the first 30 days of any
delay in completing the construction of the
Casino Resort beyond the deadline for
substantial completion set forth in the
Construction Management Contract. For delays in
completion which continue beyond such 30-day
period (and up to the 120th day following the
date completion was supposed to have been
achieved), liquidated damages are not payable
by the Construction Manager, but are payable by
the insurance companies that have provided the
Liquidated Damages
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<PAGE>
Insurance. For delays that continue beyond the
120th day following the deadline for
completion of construction of the Casino
Resort, the Construction Manager, Bovis and
P&O will be jointly and severally liable for
liquidated damages. The above-described
obligations of the Construction Manager, Bovis
and P&O are subject to certain conditions,
limitations and exceptions. For example, the
Construction Management Contract provides that
the guaranteed maximum price is to be
appropriately increased, and the deadline for
substantial completion is to be appropriately
extended, to reflect "force majeure" events,
deficiencies or changes in the drawings
prepared by the Issuers' architects and
engineers, and Issuer-mandated "scope
changes." See "Risk Factors--Construction
Budget; Construction Management Contract and
Guaranties," "Insurance Requirements,"
"Certain Material Agreements--Agreements
Relating to the Casino Resort--Construction
Management Contract" and "--Liquidated Damages
Insurance."
Completion Guaranty........... Pursuant to the Completion Guaranty, the Sole
Stockholder has guaranteed, subject to certain
conditions and limitations, payment of
construction and development costs in excess of
available funds, up to a maximum of $25.0
million. The Sole Stockholder's obligation to
fund such excess construction and development
costs is collateralized by $25.0 million in
cash or cash equivalents which have been
pledged to the Disbursement Agent. If the
Issuers want to implement a discretionary scope
change or change order, and such scope change
or change order would cause construction and
development costs to exceed available funds,
such scope change or change order cannot be
implemented unless the Sole Stockholder
increases the maximum amount available under
the Completion Guaranty, and pledges to the
Disbursement Agent additional cash or cash
equivalents, in the amount of such excess. The
Completion Guaranty does not provide for the
incurrence by the Sole Stockholder, directly or
indirectly, of any obligation, contingent or
otherwise, for the payment of the principal,
premium and interest on the Notes or any other
indebtedness under the financings described
herein. If the Sole Stockholder provides funds
under the Completion Guaranty, the amount of
such funds will be treated as a junior
subordinated loan from the Sole Stockholder to
the Issuers. See "Risk Factors--Completion
Guaranty" and "Certain Material Agreements--
Agreements Relating to the Casino
Resort--Completion Guaranty."
Requirements by
Gaming Authorities............ The Exchange Offer may not become effective
without the prior approval of the Nevada Gaming
Authorities (as defined herein). The Issuers
have applied for such approval.
Any beneficial owner of debt securities (such
as the Notes) of a Corporate Licensee (as
defined herein) or a Registered Corporation
(as defined herein) may be required to be
found
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<PAGE>
suitable if the relevant Gaming Authorities
(as defined herein) have reason to believe
that such ownership would be inconsistent with
the declared policy of the State of Nevada.
See "Risk Factors--Government Regulation,"
"Regulation and Licensing," "Description of
Mortgage Notes--Optional Redemption" and
"Description of Senior Subordinated
Notes--Optional Redemption."
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Comparison of New Notes With Existing Notes
Freely Transferable........... Generally, the New Notes will be freely
transferable under the Securities Act by
holders thereof other than any holder that is
either an affiliate of the Issuers or a
broker-dealer that purchased the Notes from the
Issuers to resell pursuant to Rule 144A or any
other available exemption. The New Notes
otherwise will be substantially identical in
all material respects (including interest rates
and maturities) to the Existing Notes. See "The
Exchange Offer."
Registration Rights........... The holders of Existing Notes currently are
entitled to certain registration rights
pursuant to the Registration Rights Agreement.
However, upon consummation of the Exchange
Offer, subject to certain exceptions, holders
of Existing Notes who do not exchange their
Existing Notes for New Notes in the Exchange
Offer will no longer be entitled to
registration rights and will not be able to
offer or sell their Existing Notes, unless such
Existing Notes are subsequently registered
under the Securities Act (which, subject to
certain limited exceptions, the Issuers will
have no obligation to do), except pursuant to
an exemption from, or in a transaction not
subject to, the Securities Act and applicable
state securities laws. See "Risk
Factors--Adverse Consequences of Failure to
Adhere to Exchange Offer Procedures."
Absence of a Public Market
for the New Notes............. The New Notes are new securities and there is
currently no established market for the New
Notes. Accordingly, there can be no assurances
as to the development or liquidity of any
market for the New Notes. The Issuers do not
intend to apply for listing on a securities
exchange of the New Notes.
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RISK FACTORS
Set forth below are the principal risk factors involved in an exchange of
or investment in the Notes. Holders of Existing Notes and prospective
purchasers of the New Notes should carefully consider these risk factors as
well as the other information set forth elsewhere in this Prospectus which may
affect a decision to acquire the New Notes. Certain statements in "Risk
Factors" constitute "forward-looking statements." Actual results could differ
materially from those projected in the forward-looking statements as a result
of certain factors and uncertainties set forth below and elsewhere in this
Prospectus. See "Special Note Regarding Forward-Looking Statements."
Substantial Leverage; Ability to Service Debt
Upon completion of the Casino Resort, the Company will have total
indebtedness of approximately $910.2 million (including $7.0 million of
accreted original issue discount on the Senior Subordinated Notes). The Company
may draw up to $20.0 million of revolving indebtedness under the Bank Credit
Facility. In addition to the undrawn amounts under such revolving facility, the
Indentures allow the Issuers (or their subsidiaries) to incur additional
indebtedness under certain circumstances. For example, prior to completion, the
Indentures permit the Issuers (i) to incur up to an aggregate of $20.0 million
of additional indebtedness under the Bank Credit Facility and/or the Mall
Construction Loan Facility plus (ii) if a default occurs under the Disbursement
Agreement, to incur up to an aggregate of $30.0 million of additional
indebtedness under the Bank Credit Facility and/or Mall Construction Loan
Facility (in addition to the additional indebtedness described in the foregoing
clause (i)) on a dollar for dollar basis with additional equity investments
from the Sole Stockholder. In addition, after completion, the Indentures permit
the Issuers to incur up to (i) $20.0 million of working capital secured by
prior liens on the Note Collateral and (ii) $20.0 million of additional
indebtedness secured by prior liens on the Note Collateral (subject in the case
of clause (ii) to reduction to the extent of any indebtedness incurred as
contemplated in the prior sentence). See "Description of Mortgage
Notes--Certain Covenants--Limitations on Incurrence of Indebtedness and
Issuance of Disqualified Stock," and "Description of Senior Subordinated
Notes--Certain Covenants--Limitations on Incurrence of Indebtedness and
Issuance of Disqualified Stock" and "Description of Intercreditor Agreement."
The substantial indebtedness of the Company could limit its ability to respond
to changing business and economic conditions. Insofar as changing business and
economic conditions may affect the financial condition and financing
requirements of the Company, they could pose a significant risk to the holders
of the Notes. Further, there can be no assurance that the Company will have the
right under the agreements governing its then existing debt obligations to
issue such additional debt as may be necessary or desirable or as permitted
under the Mortgage Note Indenture.
The Company has substantial annual fixed debt service along with other
substantial operating expenses (including payments to the HVAC Provider under
the HVAC Services Agreement) and initially is dependent on the proceeds of the
Offering and borrowings under the Bank Credit Facility and the Mall
Construction Loan Facility to meet its obligations. Prior to the opening of the
Casino Resort, which is expected to occur in April 1999, the Company will have
no significant operations. The cash interest payments on the Notes, the Mall
Construction Loan Facility, the Bank Credit Facility and the other indebtedness
and obligations of the Issuers which will be due prior to the estimated
commencement of operations of the Casino Resort have been provided for in the
construction budget for the Casino Resort. In order to manage its construction
risk (and provide cash to make interest payments on the Notes) if the opening
of the Resort is delayed or there are cost overruns, the Company has entered
into various agreements designed to protect it against certain cost overruns,
including (i) the Construction Management Contract, (ii) a guaranty of certain
of the Construction Manager's obligations by P&O, and (iii) the Liquidated
Damages Insurance. The budget for the Casino Resort contains a Construction
Manager's construction budget contingency and an owner's contingency totaling
$66.1 million and the Sole Stockholder has provided the Completion Guaranty,
each of which can be used to cover cost overruns (including cash interest
payments). See "Risk Factors--Construction Budget; Construction Management
Contract and Guaranties."
After the opening of the Casino Resort, the ability of the Issuers to make
interest payments on the Notes and such other indebtedness will depend on their
ability to generate sufficient cash flow from operations. There can be no
assurance that operations will commence by the scheduled opening date
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or at all or that the Company will be able to generate sufficient cash flow to
meet its expenses, including such debt service requirements. See "--Risk of New
Venture."
The FF&E Lenders have committed to provide the $97.7 million of financing
required to acquire the Specified FF&E. The availability of funds under the
FF&E Credit Facility is subject to certain conditions including reaching a
certain level of construction progress of the Casino Resort. If borrowings
under the FF&E Credit Facility were not available for any reason, the Issuers
could be materially and adversely affected. See "Description of Certain
Indebtedness--FF&E Financing."
The Sale and Contribution Agreement provides for the Mall Collateral to be
transferred to the Mall Subsidiary upon completion of the Casino Resort. The
Mall Subsidiary has obtained commitments for the Mall Take-out Financings to
fund the purchase price under the Sale and Contribution Agreement so as to
permit the Issuers to repay the indebtedness under the Mall Construction Loan
Facility. The consummation of the Tranche A Take-out Financing is subject to
certain conditions, including completion of the Casino Resort and delivery of
legal opinions (including certain substantive non-consolidation opinions).
Subject to the foregoing, the Issuers do not currently know of any condition
which would cause the Mall Take-out Financings not to be completed.
Notwithstanding the foregoing, if the Mall Subsidiary were unable to consummate
the Mall Take-out Financings for any reason, the Issuers could be materially
and adversely affected. In addition, if such financing is not obtained, there
will be an event of default under the Mall Construction Loan Facility. See
"--Operating Restrictions."
Ranking of Mortgage Notes; Effective Subordination
Because (i) the indebtedness under the Bank Credit Facility is secured by
prior liens on the Note Collateral and the Mall Collateral and (ii) the
indebtedness under the Mall Construction Loan Facility is secured by first
priority liens on the Mall Collateral, the Mortgage Notes are effectively
subordinated to (i) the indebtedness under the Bank Credit Facility (to the
extent of the Note Collateral and the Mall Collateral) and (ii) the
indebtedness under the Mall Construction Loan Facility (to the extent of the
Mall Collateral). The Mortgage Notes are effectively subordinated to any
indebtedness of the Issuers secured by assets other than the Note Collateral
(to the extent of such assets), including the FF&E Credit Facility, and to
indebtedness of any subsidiary of the Issuers that is not a guarantor of the
Mortgage Notes. In addition, because the HVAC Equipment is separately owned by
the HVAC Provider, such equipment is not an asset of the Issuers and is not
available to pay any indebtedness of the Issuers (including the Notes).
Upon completion of the Casino Resort, in addition to indebtedness
outstanding as a result of the Offering, the Company is expected to have (i)
$150.0 million of indebtedness outstanding under the Bank Credit Facility, (ii)
$140.0 million of indebtedness outstanding under the Mall Construction Loan
Facility and (iii) $97.7 million of secured indebtedness under the FF&E Credit
Facility. Prior to completion, the Indentures permit the Issuers (i) to incur
up to an aggregate of $20.0 million of additional indebtedness under the Bank
Credit Facility and/or the Mall Construction Loan Facility plus (ii) if a
default occurs under the Disbursement Agreement, to incur up to an aggregate of
$30.0 million of additional indebtedness under the Bank Credit Facility and/or
the Mall Construction Loan Facility (in addition to the additional indebtedness
described in the foregoing clause (i)) on a dollar for dollar basis with
additional equity investments from the Sole Stockholder. In addition, after
completion, the Indentures permit the Issuers to incur up to (i) $20.0 million
of working capital secured by prior liens on the Note Collateral and (ii) $20.0
million of additional indebtedness secured by prior liens on the Note
Collateral (subject in the case of clause (ii) to reduction to the extent of
any indebtedness incurred as contemplated in the prior sentence). The Mall
Subsidiary (which is not a Guarantor) is expected to incur approximately $140.0
million of secured indebtedness under the Mall Take-out Financings upon the
transfer of the Mall Collateral to refinance the indebtedness under the Mall
Construction Loan Facility. The Mortgage Note Indenture permits Special
Subsidiaries (including the Mall Subsidiary) and Unrestricted Subsidiaries
(including the Phase II Subsidiary) to incur debt, without limitation, provided
certain conditions are met. See "Description of Mortgage Notes--Ranking and
Security."
The Subordinated Mortgage Note Guaranties are unsecured obligations of
each of the Subordinated Mortgage Note Guarantors and are subordinated in right
of payment to all Senior Debt of the Subordinated Mortgage Note Guarantors,
including the guaranties by the Subordinated Mortgage Note Guarantors of the
indebtedness under the Bank Credit Facility and, in the case of Mall
Intermediate Holdings, the Mall Construction Loan Facility. By reason of such
subordination, in the event of the insolvency, liquidation,
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<PAGE>
reorganization, dissolution or other winding up of any Subordinated Mortgage
Note Guarantor or upon a default in payment with respect to, or the
acceleration of any Senior Debt of any Subordinated Mortgage Note Guarantor,
the lenders under such Senior Debt must be paid in full before obligations
under the Subordinated Mortgage Note Guaranties may be paid.
Ranking of Senior Subordinated Notes; Subordination to Senior Debt; Limitations
on Remedies
The Senior Subordinated Notes and the Senior Subordinated Note Guaranties
are subordinated in right of payment to all existing and future Senior Debt,
including the principal of (and premium, if any) and interest on and all other
amounts due on or payable in connection with Senior Debt. Upon completion of
the Casino Resort, the Company is expected to have $812.7 million of Senior
Debt outstanding. Prior to completion, the Indentures permit the Issuers to
incur additional Senior Debt up to (i) an aggregate of $20.0 million of
additional indebtedness under the Bank Credit Facility and/or the Mall
Construction Loan Facility plus (ii) if a default occurs under the Disbursement
Agreement, an aggregate of $30.0 million of additional indebtedness under the
Bank Credit Facility and/or the Mall Construction Loan Facility (in addition to
the additional indebtedness described in the foregoing clause (i)) on a dollar
for dollar basis with additional equity investments from the Sole Stockholder.
In addition, after completion, the Indentures permit the Issuers to incur up to
(i) $20.0 million of additional Senior Debt as working capital and (ii) $20.0
million of other additional Senior Debt (subject in the case of clause (ii) to
reduction to the extent of any indebtedness incurred as contemplated in the
prior sentence). In addition, the Issuers are permitted to incur additional
Senior Debt under certain circumstances. See "Description of Senior
Subordinated Notes--Certain Covenants--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock." By reason of such
subordination, in the event of the insolvency, liquidation, reorganization,
dissolution or other winding-up of the Issuers or any Senior Subordinated Note
Guarantor upon a default in payment with respect to, or the acceleration of,
any Senior Debt, the holders of such Senior Debt must be paid in full before
the holders of the Senior Subordinated Notes and the Senior Subordinated Note
Guaranties may be paid. In addition, no payment may be made upon or in respect
of the Senior Subordinated Notes (except (i) in equity interests in the Issuers
or debt securities substantially similar to the Senior Subordinated Notes or
(ii) from the trust described under "Description of Senior Subordinated
Notes--Legal Defeasance and Covenant Defeasance") if a payment default exists
with respect to Senior Debt or any other default occurs that permits
acceleration of Senior Debt and the Senior Subordinated Note Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or the
holders of any Senior Debt. Payments on the Senior Subordinated Notes may
resume (i) in the case of a payment default, upon the date on which such
default is cured or waived and (ii) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived or 179
days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Senior Debt has been accelerated. See
"--Substantial Leverage; Ability to Service Debt."
In addition, the Senior Subordinated Notes and the Senior Subordinated
Note Guaranties are effectively subordinated to any indebtedness of any
Subsidiary of the Issuers that is not a guarantor of the Senior Subordinated
Notes. The Mall Subsidiary is expected to incur approximately $140.0 million of
secured indebtedness under the Mall Take-out Financings upon transfer of the
Mall Collateral to refinance the indebtedness under the Mall Construction Loan
Facility. The Senior Subordinated Note Indenture permits Special Subsidiaries
of the Issuers (including the Mall Subsidiary) and Unrestricted Subsidiaries
(including the Phase II Subsidiary) to incur debt, without limitation, provided
certain conditions are met. In addition, because the HVAC Equipment is
separately owned by the HVAC Provider, such equipment is not an asset of the
Issuers and is not available to pay any indebtedness of the Issuers (including
the Notes). See "Description of Senior Subordinated Notes--Subordination."
The Issuers and the Mall Construction Subsidiary have granted to the
lenders under the Bank Credit Facility, holders of the Mortgage Notes and Mall
Construction Lender security interests in all, or a portion, of the Note
Collateral and Mall Collateral and will grant other lenders security interests
in other collateral (including the Specified FF&E). In the event of a default
under any such secured indebtedness (whether as a result of the failure to
comply with a payment or other covenant, a cross-default, or otherwise), the
parties granted such security interests will have a prior secured claim on the
Note Collateral, Mall Collateral or other collateral, as the case may be. If
such parties should attempt to foreclose on the Note Collateral, Mall
Collateral or other collateral, as the case may be, the financial condition of
the Issuers and the value of the Senior Subordinated Notes will be materially
adversely affected.
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The Intercreditor Agreement limits the rights of the Senior Subordinated
Note Trustee and the holders of the Senior Subordinated Notes to exercise
remedies under the Senior Subordinated Note Indenture. Under the Intercreditor
Agreement, for a period of up to 45 days following an event of default under
the Disbursement Agreement (which may be extended for an additional 15-day
period by the lenders under the Bank Credit Facility or the Mall Construction
Lender), the Senior Subordinated Note Trustee and the holders of the Senior
Subordinated Notes may not exercise remedies under the Senior Subordinated Note
Indenture. Upon expiration of such standstill period, remedies may be
exercised, except that during the construction of the Casino Resort no judgment
may be enforced by the holders of the Senior Subordinated Notes and the Senior
Subordinated Note Trustee until 240 days after such event of default. The
lenders under the Bank Credit Facility and the Mall Construction Loan Facility,
and the holders of the Mortgage Notes, are permitted to complete foreclosure
and enforce judgments well in advance of such time period. In addition, the
holders of the Senior Subordinated Notes and the Senior Subordinated Note
Trustee will not be entitled to initiate or join as a petitioning creditor in
an involuntary bankruptcy proceeding against the Issuers (or any affiliate of
the Issuers) until 10 days after the expiration of the standstill period. If
the Senior Subordinated Note Trustee and the holders of the Senior Subordinated
Notes are prohibited from exercising remedies, the financial condition of the
Issuers and the value of the Senior Subordinated Notes could be adversely
affected.
Ability of Holders of Mortgage Notes to Realize on Collateral and Exercise
Remedies
The Mortgage Notes are secured by second priority liens on the Note
Collateral and third priority liens on the Mall Collateral. The indebtedness
under the Bank Credit Facility is secured by first priority liens on the Note
Collateral (other than the Mortgage Notes Proceeds Account) and second priority
liens on the Mall Collateral. The indebtedness under the Mall Construction Loan
Facility is secured by first priority liens on the Mall Collateral, and the
Mall Collateral will be released from liens securing the Mortgage Notes upon
completion of the Casino Resort. Upon subdivision of the Project Site, the
Phase II Land may be released from the Note Collateral and transferred to the
Phase II Subsidiary, which is not a guarantor of the Notes. Pending
disbursement of the proceeds of the Mortgage Notes, the Mortgage Notes also
will be secured by a first priority pledge of unexpended funds in the Mortgage
Notes Proceeds Account. The foregoing priorities potentially expose the holders
of Mortgage Notes to certain risks, including the following:
Liquidation Value of Collateral
If an Event of Default occurs with respect to the Mortgage Notes, whether
prior to or after completion of construction of the Casino Resort, there can be
no assurance that the liquidation of the collateral securing the Mortgage
Notes, the Mall Construction Loan Facility and the Bank Credit Facility would
produce proceeds in an amount sufficient to repay borrowings under the Mall
Construction Loan Facility, borrowings under the Bank Credit Facility and the
principal of or accrued and unpaid interest, if any, on the Mortgage Notes.
Further, in any foreclosure sale of the Casino Resort, the purchaser or the
operator of the facility would be subject to certain obligations under the
Cooperation Agreement (including an obligation to pay certain shared expenses
and maintain certain common areas), which also may affect the liquidation value
of the collateral securing the Mortgage Notes. Finally, the ability of the
Mortgage Note Trustee and the holders of the Mortgage Notes to exercise
remedies are subject to limitations under Nevada law. See "Description of the
Mortgage Notes--Events of Default and Remedies."
Risks Associated with Gaming Foreclosures
In any foreclosure sale of the Casino Resort, the purchaser or the
operator of the facility would need to be licensed in order to operate the
Casino under the Nevada Act (as defined herein) and if the Mortgage Note
Trustee acting on behalf of the holders of the Mortgage Notes or the lenders
under the Bank Credit Facility purchases the Casino Resort at a foreclosure
sale and thereafter is unable or chooses not to sell the Casino, the Mortgage
Note Trustee or the lenders unless licensed themselves would be required to
retain an entity who would be required to be licensed under the Nevada Act in
order to conduct gaming operations in the Casino. The holders of the Mortgage
Notes may have to be licensed or found suitable in any event. Because potential
bidders who wish to operate the Casino must satisfy such requirements, the
number of potential bidders in a foreclosure sale could be less than in
foreclosures of other types of facilities, and such requirement may delay the
sale of, and may adversely affect the sales price for, the
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collateral. See "Description of Mortgage Notes-- Ranking and Security" and
"--Events of Default and Remedies."
Certain Risks Associated with Intercreditor Arrangements
The Disbursement Agreement and the Intercreditor Agreement provide the
holders of the Mortgage Notes certain rights with respect to, among other
things, the Note Collateral. However, such agreements also could subject the
Mortgage Noteholders to certain risks. For example, the Intercreditor Agreement
permits the Bank Agent and the Mall Construction Lender (acting without consent
of the holders of the Mortgage Notes) in certain circumstances and subject to
certain limitations to waive conditions to funding under the Disbursement
Agreement. While such waivers may facilitate the completion of the Casino
Resort and benefit of the holders of Mortgage Notes, it also could result in
funding additional amounts from the Mortgage Notes Proceeds Account to the
detriment of the holders of Mortgage Notes. See "--Sole Shareholder" and
"Description of Intercreditor Agreement."
The Intercreditor Agreement establishes interim standstill periods which
must expire prior to exercise of remedies by the Mortgage Note Trustee or the
holders of the Mortgage Notes. While the lenders under the Bank Credit Facility
and the Mall Construction Loan Facility also are subject to standstill periods,
the standstill period applicable to the Bank Agent prior to Completion expires
before that applicable to the Mortgage Note Trustee or the holders of the
Mortgage Notes. Accordingly, in certain circumstances, the lenders under the
Bank Credit Facility will have an opportunity to foreclose their liens on the
Note Collateral and the Mall Collateral prior to a foreclosure of the liens
securing the Mortgage Notes. The FF&E Lenders also are subject to standstill
periods, though such periods expire prior to the earliest date upon which the
holders of the Mortgage Notes are permitted to foreclose under the
Intercreditor Agreement.
If the liens securing the Bank Credit Facility or the Mall Construction
Loan Facility are foreclosed in advance of a foreclosure of the Liens securing
the Mortgage Notes, then liens encumbering the Note Collateral or the Mall
Collateral to secure the Mortgage Notes would terminate. Similarly, if the
liens securing the Specified FF&E are foreclosed, then the Specified FF&E may
be removed or disposed of by the FF&E Lenders. In order to forestall such
foreclosures, the Company, the holders of the Mortgage Notes, the holders of
the Senior Subordinated Notes and/or various other interested persons may be
motivated to commence bankruptcy proceedings involving the Issuers as debtors.
The commencement of such bankruptcy proceedings would expose the holders of the
Mortgage Notes and the Senior Subordinated Notes to certain additional risks.
See "Risk Factors--Certain Bankruptcy Considerations." The Mortgage Note
Trustee has agreed not to challenge the validity, enforceability or priority
over any collateral granted to any lender that is a party to the Disbursement
Agreement. See "Description of Disbursement Agreement" and "Description of
Intercreditor Agreement."
The Disbursement Agreement provides for use of the proceeds of the
Mortgage Notes to cover costs associated with both (i) the Hotel and the Casino
and (ii) the Mall. Such funds shall be disbursed on a pro rata basis with
advances under the Bank Credit Facility and the Mall Construction Loan Facility
irrespective of the subset of collateral (i.e., the Hotel and the Casino or the
Mall) to which they are applied. Costs may be incurred at different rates
during the construction process with respect to these subsets of collateral.
Given the different priorities enjoyed by the holders of the Mortgage Notes in
these two subsets of collateral, there can be no assurance that the pro rata
funding of the costs for these subsets of collateral will not work to the
disadvantage of the holders of the Mortgage Notes.
The Intercreditor Agreement also permits the lenders under the Bank Credit
Facility and the Mall Construction Loan to make certain "protective advances"
under their respective loan facilities in order to protect, preserve, repair
and maintain the Casino Resort and their respective security interests therein.
Any amounts so advanced will be included in the amounts secured by the liens in
favor of an advancing lender with the same priority afforded regular advances
made by such lender in accordance with the Disbursement Agreement. See
"Description of Intercreditor Agreement--Permitted Facility Amendments;
Additional Indebtedness." While the inclusion of such provisions in certain
circumstances could induce these lenders to make protective advances which
otherwise might not be made, and thus facilitate completion of the Casino
Resort to the benefit of the holders of the Mortgage Notes and the Senior
Subordinated Notes, such advances also could increase the aggregate senior
secured claims on the Casino Resort, even beyond the maximum commitments of
such lenders. Such additional debt could increase both (i) the periodic amounts
payable on secured debt by the Company and (ii) the amounts
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secured by claims potentially disadvantaging the holders of the Mortgage Notes
and the holders of the Senior Subordinated Notes.
Following completion of the Casino Resort, the Intercreditor Agreement
permits the holders of Mortgage Notes to foreclose on the Note Collateral prior
to the lenders under the Bank Credit Facility, provided that the purchaser at
the foreclosure sale (including the holders of Mortgage Notes, if applicable)
is required concurrently to pay all obligations under the Bank Credit Facility
in full. There can be no assurance that funds will be available to the holders
of Mortgage Notes at such time to pay the amounts due under the Bank Credit
Facility.
In addition, in the event that the Intercreditor Agent or other secured
parties elect to exercise all rights and to cure any defaults of Venetian, or
to succeed to Venetian's interests under the Collateral Documents, under
certain circumstances such parties will be required to cure defaults, and/or
perform certain obligations, or pay certain amounts owed by Venetian under such
contracts, under the HVAC Services Agreement and related documents. See
"Certain Material Agreements--Agreements Relating to the Casino Resort--HVAC
Services Agreement and Related Documents."
The Intercreditor Agreement provides that all lenders must rescind an
acceleration, and resume funding of the Casino Resort's development, if an
event of default under the Disbursement Agreement is cured in accordance with
the terms of the Disbursement Agreement. While such provision could work to the
benefit of the holders of the Notes by maintaining the Issuers' access to
funding sources to complete the Casino Resort, it also could result in
rescission of a default in circumstances disadvantageous to the holders of the
Notes.
Unrestricted and Special Subsidiaries
Unrestricted and Special Subsidiaries (including the Mall Subsidiary and
the Phase II Subsidiary) are not subject to all or certain of the covenants
under the Indentures. Upon completion of the Casino Resort, the Mall Collateral
will be transferred to the Mall Subsidiary, will be released by the Mortgage
Note Trustee and will not be available as security for the holders of the
Mortgage Notes. Additionally, upon subdivision of the Project Site, the Phase
II Land may be released from the Note Collateral and transferred to the Phase
II Subsidiary. Neither the Mall Subsidiary nor the Phase II Subsidiary is a
guarantor of the Notes. The Mall Subsidiary and the Phase II Subsidiary may
incur indebtedness without restriction under the Indentures and are permitted
to incur restrictions on their ability to pay dividends or to make
distributions or loans to the Issuers and their Restricted Subsidiaries. Any
indebtedness incurred by the Mall Subsidiary (including the Tranche A Take-out
Financing) and the Phase II Subsidiary is expected to include material
restrictions on the ability of the Mall Subsidiary and the Phase II Subsidiary,
as the case may be, to pay dividends or to make distributions or loans to the
Issuers and their Restricted Subsidiaries. Accordingly, the Company may not be
able to rely on the cash flow or assets of Unrestricted and Special
Subsidiaries (including the Mall Subsidiary and the Phase II Subsidiary) to pay
its indebtedness (including the Notes).
Risks of Multiple Lenders
Financing for the construction and development of the Casino Resort is
being provided by multiple parties, including the lenders under the Bank Credit
Facility, the holders of the Mortgage Notes and the Senior Subordinated Notes,
the Mall Construction Lender and the FF&E Lenders. In addition, the HVAC
Provider has committed to fund the acquisition, installation and testing of the
HVAC Equipment, which it will own and operate. The Issuers, their various
lenders and the HVAC Provider have entered into various agreements (including
the Disbursement Agreement and the Intercreditor Agreement, or in the case of
each of the FF&E Lenders and the HVAC Provider, an agreement that provides for
arrangements to govern the relationships among them and their obligations and
rights (including rights to exercise certain remedies) in respect of funding
construction and development costs of the Casino Resort). The Disbursement
Agreement provides, for example, that the Construction Consultant will review
disbursement requests and other matters under the Disbursement Agreement in
order to assess compliance or non-compliance with the requirements under the
Disbursement Agreement. Accordingly, the Construction Consultant will be making
judgments from time to time which may bear upon, and perhaps adversely affect,
the interests of the holders of the Mortgage Notes or holders of the Senior
Subordinated Notes. The Disbursement Agreement and the Intercreditor Agreement
also provide that in
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certain circumstances, the Bank Agent and the Mall Construction Lender (without
the consent of the holders of the Mortgage Notes and the holders of Senior
Subordinated Notes), prior to Completion of the Casino Resort, may waive
certain defaults and conditions to funding under the Disbursement Agreement,
thereby permitting (among other things) the Issuers to continue to receive
disbursements under the Disbursement Agreement notwithstanding the occurrence
of said defaults or failures of conditions. The Intercreditor Agreement also
permits the lenders under the Bank Credit Facility and the Mall Construction
Lender, in certain circumstances, to advance further secured indebtedness
senior to the Mortgage Notes without the consent of the holders of Mortgage
Notes or the holders of the Senior Subordinated Notes. Further, the
Disbursement Agreement provides that if, following an event of default under
the Disbursement Agreement and/or acceleration of the Mortgage Notes or the
Senior Subordinated Notes, the defaults and events of default under the
Disbursement Agreement are cured prior to a foreclosure under any of the
various mortgage liens, then the defaults and events of default and/or
acceleration shall be rescinded and the Issuers once again shall be permitted
to receive disbursements under the Disbursement Agreement (including advances
under the Bank Credit Facility and the Mall Construction Loan Facility and
distributions from the Mortgage Notes Proceeds Account). See "Description of
Disbursement Agreement" and "Description of Intercreditor Agreement." While
such agreements contain various provisions governing the relationships among
such parties under different circumstances, such agreements do not, and were
not expected to, cover all possible circumstances that may give rise to
disputes among such parties.
There can be no assurance that each lender or the HVAC Provider will
perform its obligations or observe the limitations on the exercise of remedies
as set forth under the agreements described above. Failure of any one or more
of the lenders or the HVAC Provider to fund its obligations under the
Disbursement Agreement, or otherwise to perform under the Disbursement
Agreement, the Intercreditor Agreement or the other pertinent agreements, could
materially and adversely affect the Issuers. In addition, financing by multiple
lenders with security interests in common collateral or collateral that is
interrelated by use or location, and the fact that the HVAC Equipment will be
owned by the HVAC Provider, not the Company, may result in increased complexity
and lack of flexibility in a debt restructuring or other work-out of the
Company.
Operating Restrictions
The terms of the Bank Credit Facility, the Mall Construction Loan
Facility, the Indentures and the other agreements governing the indebtedness of
the Company impose significant operating and financial restrictions on the
Company. Such restrictions significantly limit or prohibit, among other things,
the ability of LVSI, Venetian and their subsidiaries to incur additional
indebtedness, make certain capital expenditures, repay indebtedness prior to
its stated maturity, create liens, sell assets or engage in mergers or
acquisitions. These restrictions, in combination with the leveraged nature of
the Issuers, could limit the ability of the Company to respond to market
conditions or meet extraordinary capital needs or otherwise restrict corporate
activities. There can be no assurances that such restrictions will not
adversely affect the ability of the Company to finance its future operations or
capital needs. See "Description of Mortgage Notes--Certain Covenants,"
"Description of Senior Subordinated Notes--Certain Covenants" and "Description
of Certain Indebtedness."
Change of Control
Upon a Change of Control, each holder of the Notes will have the right, at
such holder's option, to require the Issuers to repurchase the Mortgage Notes
or Senior Subordinated Notes owned by such holder at 101% of the principal
amount or Accreted Value, as the case may be, thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of repurchase, subject, in
the case of the Senior Subordinated Notes, to prior repurchase obligations
under the Mortgage Notes. There can be no assurance that the Issuers will have
sufficient funds to purchase the Notes after a Change of Control or to repay
any other indebtedness (including the indebtedness under the Bank Credit
Facility, the FF&E Credit Facility and the Mall Construction Loan Facility)
that becomes due as a result of such event. See "Description of Mortgage
Notes--Repurchase at the Option of Holders--Change of Control," "Description of
Senior Subordinated Notes--Repurchase at the Option of Holders--Change of
Control," "Description of Certain Indebtedness--Bank Credit Facility" and
"--Mall Construction Loan Facility."
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Certain Bankruptcy Considerations
Creditor's Rights
The right of the Mortgage Note Trustee to repossess and dispose of the
Note Collateral upon the occurrence of an Event of Default under the Mortgage
Note Indenture is likely to be significantly impaired by applicable bankruptcy
law if a bankruptcy case were to be commenced by or against LVSI or Venetian,
whether by a holder of the Notes, the Mall Construction Lender, the lenders
under the Bank Credit Facility or another creditor (including a junior
creditor), prior to such repossession and disposition. Under applicable
bankruptcy law, secured creditors, such as the holders of the Mortgage Notes,
the Mall Construction Lender and the lenders under the Bank Credit Facility,
are prohibited from repossessing their security from a debtor in a bankruptcy
case, or from disposing of collateral in their possession, without bankruptcy
court approval. Moreover, applicable bankruptcy law permits the debtor to
continue to retain and use the collateral even though the debtor is in default
under the applicable debt instruments, provided that the secured creditor is
given "adequate protection." The meaning of the term "adequate protection" may
vary according to circumstances, but it is intended in general to protect the
value of the secured creditor's interest in the collateral from diminution as a
result of the stay of repossession or disposition or any use of the collateral
by the debtor during the pendency of the bankruptcy case, and may include cash
payments or the granting of additional security at such time and in such amount
as the court may determine. The automatic stay would apply to, among other
things, the holders of the Mortgage Notes' ability to use the funds in the
Mortgage Notes Proceeds Account, which cash collateral the debtor could use if
it provides adequate protection for such use. In view of the lack of a precise
definition of the term "adequate protection," the broad discretionary powers of
a bankruptcy court and the possible complexity of valuation issues, it is
impossible to predict how long payments under the Mortgage Notes could be
delayed following commencement of a bankruptcy case, whether or when the
Mortgage Note Trustee could repossess or dispose of the collateral or whether
or to what extent, through the requirement of "adequate protection," the
holders of the Mortgage Notes would be compensated for any delay in payment or
loss of value of the collateral.
It cannot be predicted how long and at what cost the holders of the
Mortgage Notes would be deprived of their collateral and prevented from
receiving distributions on their claims in a bankruptcy case of the Company.
Factors that might bear on the recovery by the holders of the Mortgage Notes in
such circumstances, among others, would include: (i) a debtor in a bankruptcy
case does not have the ability to compel performance of a "financial
accommodation," including the various loans contemplated to fund construction
of the Casino Resort; (ii) lenders with liens senior to the liens securing the
Mortgage Notes may seek and perhaps receive relief from the automatic stay to
foreclose their respective liens; and (iii) the cost and delay of developing a
confirmed Chapter 11 plan could adversely affect the present value of revenues.
Contractual Rights
Among other things, contract rights under certain agreements serve as
collateral for the Mortgage Notes, including rights that stem from the
agreements to which Interface is a party) such as the Cooperation Agreement. In
the event a bankruptcy case were to be commenced by or against Interface, it is
possible that all or part of the Cooperation Agreement could be rejected by
Interface or a trustee appointed in the bankruptcy case pursuant to section 365
or section 1123 of the United States Bankruptcy Code (the "Bankruptcy Code")
and thus not be specifically enforceable. Additionally, to the extent any
rejected agreement constitutes a lease of real property, the resulting claim of
the lessor for damages resulting from termination may be capped pursuant to
section 502(b)(6) of the Bankruptcy Code.
Substantive Consolidation
The Notes represent obligations of the Issuers only and do not represent
obligations of, and are not guaranteed by, Interface, the Sole Stockholder, or
any of their affiliates other than LVSI, Venetian and certain of their
subsidiaries. The Issuers believe that if Interface, Interface Holding Company,
Inc. ("Interface Holding") or the Sole Stockholder (each an "Affiliated Party")
becomes a debtor under the Bankruptcy Code, a bankruptcy court, applying
substantive consolidation principles, would not order substantive consolidation
of LVSI and Venetian with any Affiliated Party.
Such belief is based on and subject to a number of assumptions concerning
facts and circumstances, which have been noted, cited or acknowledged by courts
in other cases. The belief relies on the
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assumptions that each of the Issuers observe certain formalities and operating
procedures that are generally recognized requirements for maintaining the
separate identities of legal entities, that the assets and liabilities of the
Issuers can be readily identified as distinct from those of any Affiliated
Party and that the Initial Purchasers of the Notes rely on the separate
existence of the Issuers and their assets, and not the assets of the Affiliated
Parties, in purchasing the Notes. The organizational documents of the Issuers
require the Issuers to conform substantially to the foregoing assumptions.
There is no controlling precedent in this area. Substantive consolidation is an
equitable, fact-based remedy, not prescribed by statute, with respect to which
the court has considerable discretion. In addition, the adequacy of the
formalities and operating procedures referred to above has not been considered
by any court in the context of entities such as the Issuers involved in a
transaction similar to the one described herein. Thus, while the separate legal
existence of the Issuers should effectively preclude, based on the present
state of the case law, (i) a finding that the assets of the Issuers are
property of the bankruptcy estate of any Affiliated Party, and (ii) the
substantive consolidation of the assets and liabilities of each of the Issuers
with those of any Affiliated Party, there can be no assurance that such a
result would not occur. In addition, there can be no assurance that during
litigation of such issues delays would not occur in payments on the Notes, even
if the court ultimately rules as the Company believes or that parties in
interest might determine to settle such issues to avoid the expense and delay
of litigation. If the court concludes that substantive consolidation is
warranted, however, payments on the Notes could be delayed or reduced.
Risk of Foreclosure of Expo Center
The Company's rights under the Cooperation Agreement with respect to,
among other things, the cooperative marketing of the Expo Center and the Casino
Resort are subordinated to the rights of certain lenders whose loan is secured
by the Expo Center. In the event of a foreclosure or similar action with
respect to such loan, the lenders under such loan would not be obligated to
observe the cooperative marketing rights and certain other rights and
restrictions set forth in the Cooperation Agreement, including the restriction
on indebtedness encumbering the Expo Center. The failure of Interface to comply
with its obligations under the Cooperation Agreement with respect to a change
of control of Interface or a sale, transfer or other disposition by Interface
of its interest in the Expo Center or the incurrence by Interface of
indebtedness would be an event of default under the Mortgage Note Indenture and
the Senior Subordinated Note Indenture. See "Certain Material Agreements."
Risk of New Venture
Although certain members of the Company's management have experience
developing and operating large scale hotels and casinos, none of these
individuals has developed or operated a project of the anticipated size of the
Casino Resort.
The opening of the Casino Resort by the Company will be contingent upon
the receipt of all regulatory licenses, permits, allocations and
authorizations. The scope of the approvals required to construct and open a
facility are extensive, and the failure to obtain or maintain such approvals
could prevent or delay the completion or opening of all or part of such
facility or otherwise affect the design and features of the Casino Resort. See
"--Government Regulation."
The operations of the Company are subject to significant business,
economic, regulatory and competitive uncertainties and contingencies, many of
which are beyond the control of the Company. No assurances can be given that
the Company will be able to manage the Casino Resort on a profitable basis or
to attract a sufficient number of guests, gaming customers and other visitors
to the Casino Resort to make its various operations profitable independently or
as a whole or to pay the principal of and interest on the Notes. In addition,
although the Company expects the Casino Resort to benefit from the cooperative
marketing arrangements with Interface, the owner of the Expo Center, there can
be no assurance that attendees of Expo Center events will be guests of the
Hotel or utilize the Casino Resort's other facilities.
The Company will be required to undertake a training program for new
employees prior to the opening of the Casino Resort at a time when other major
new facilities may be approaching completion and also recruiting employees. The
Company does not know whether or to what extent the employees of the Company
will be covered by collective bargaining agreements, as that will be a
determination ultimately made by such employees. See "Business--Employees."
Local 226 of the Hotel Employees and
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Restaurant Employees Union (the "Local") has requested the Company to recognize
it as the bargaining agent for future employees of the Casino Resort. The
Company has declined to do so, believing that the future employees are entitled
to choose their own bargaining agent, if any. In the past, when other hotel/
casino operators have taken a similar position, the Local has engaged in
certain confrontational and obstructive tactics, including contacting potential
customers, tenants and investors, objecting to various administrative approvals
and picketing the opening of the preview site at the Casino Resort. The Local
has engaged in such tactics with respect to the Casino Resort and may continue
to do so. Although the Company believes it will be able to operate despite such
dispute, no assurance can be given that it will be able to do so and that such
failure would not result in a material adverse effect on the Issuers.
As of December 31, 1997, the Company had only entered into two leases for
the Mall, including the 50,000 square foot Billboard Operating Lease (as
defined herein). See "Certain Material Agreements--Agreements Relating to the
Mall--"Billboard Live!" Lease." In connection with the leasing of the Mall and
the retail portions of the Hotel, the Company has, or is currently negotiating,
letters of intent with certain well-known, national retailers and restaurant
operators. There can be no assurance that any such letters of intent will
result in binding agreements between the Company and such retailers and
restaurant operators, as the case may be. Furthermore, there is no assurance
that the Company will obtain the number or quality of tenants for the Mall or
the retail portions of the Hotel that are currently planned. The failure to
obtain sufficient leases or leases of the quality as planned could impair the
competitive position of the Mall and affect its operating performance.
The Company does not intend to offer to fund or construct, at its own
cost, tenant improvements for Mall tenants. The Company is marketing the Mall
to tenants on the basis that tenants will fund or construct, at their own
expense, tenant improvements. There can be no assurance that the Company will
not have to fund or construct, at its cost, tenant improvements in connection
with the leasing of the Mall.
In addition, if the Company is unable to complete the Casino Resort
(including Mall tenant improvements) within its construction budget or, once
operating, unable to generate sufficient cash flow, it could be required to
adopt one or more alternatives, such as obtaining additional financing to the
extent permitted by the Indentures, the Mall Construction Loan Facility and the
Bank Credit Facility, reducing or delaying planned construction or capital
expenditures (to the extent it does not materially affect the opening of the
Casino Resort), restructuring debt or obtaining additional equity capital.
There can be no assurance that any of these alternatives could be effected on
satisfactory terms, and any resort to alternative sources of funds could impair
the competitive position of the Company and reduce its future cash flows. In
addition, under such circumstance, the Sole Stockholder is not obligated to
make any payments or capital contributions to the Issuers or their lenders,
except for the obligations described in "Description of Certain Indebtedness"
and "Certain Material Agreements." See "Management's Discussion and Analysis of
Liquidity and Capital Resources."
Although the scope and design of the Casino Resort has been determined,
and the Company is constructing the Casino Resort in accordance with plans and
specifications which reflect such scope and design, the Company continues to
evaluate the project design in relation to its construction schedule and budget
and the requirements of the Las Vegas travel and gaming market. The
Disbursement Agreement provides the Company with flexibility to change the
plans and specifications, subject to certain limitations designed to preserve
the intended first-class quality for each of the Hotel and Casino and Mall. As
a condition to changes requested by the Company, the Company is required to
demonstrate to the Construction Consultant that sufficient funds are available
(including through certain lending commitments, additional deposits into the
Company's Funds Account or through increases by the Sole Stockholder of the
amounts available under the Completion Guaranty) to cover the anticipated
additional costs attributable to the change in the plans and specifications.
Accordingly, the scope and design of individual components of the Casino Resort
may be modified from the descriptions thereof in this Offering Circular.
Risks of New Construction
Major construction projects (and particularly one of the scope and scale
of the Casino Resort) entail significant risks, including shortages of
materials or skilled labor, unforeseen engineering, environmental and/or
geological problems, work stoppages, weather interference, unanticipated cost
increases and
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unavailability of construction equipment. Construction, equipment or staffing
problems or difficulties in obtaining any of the requisite licenses, permits,
allocations and authorizations from regulatory authorities could increase the
total cost, delay, or prevent the construction or opening of the Casino Resort
or otherwise affect the design and features of the Casino Resort.
In addition, the Company is constructing the Casino Resort utilizing an
accelerated construction schedule which includes the use of multiple shifts,
early ordering of materials, "fast tracking" (i.e., commencement of
construction before all design documents are finalized) and an extended work
week (when feasible). The "fast tracking" may result in certain inefficiencies
which may cause actual construction costs to exceed budgeted amounts. For
example, certain items may need to be modified or replaced after they have been
purchased, constructed or installed in order to conform with the final design
documents.
The anticipated costs and opening dates for the Casino Resort are based on
budgets, conceptual design documents and schedule estimates prepared by the
Company with the assistance of the architects and contractors described herein.
See "Business--Design and Construction Team." Under the terms of the
Construction Management Contract, the Construction Manager is, subject to
certain conditions and limitations (and Bovis and P&O, pursuant to the
Construction Contract Guaranty and the P&O Guaranty, respectively, are, subject
to certain significant conditions and limitations), responsible for all
construction costs covered by the Construction Management Contract that are in
excess of the guaranteed maximum price set forth therein. However, the
Construction Management Contract provides that the guaranteed maximum price
will be appropriately increased upon the occurrence of certain events. If any
of such events occur, the construction costs which must be borne by the Company
may increase. Furthermore, there are certain items outside of the scope of the
work to which the guaranteed maximum price applies, and therefore, the
Construction Manager is not responsible for increases in the cost of such
items. See "--Construction Budget; Construction Management Contract and
Guaranties." It is anticipated that all major subcontractors engaged by the
Construction Manager to perform work and/or supply materials in connection with
the construction of the Casino Resort will post bonds guaranteeing timely
completion of any such subcontractor's work and payment for all of any such
subcontractor's labor and materials. Nevertheless, there is no assurance that
the Casino Resort will commence operations on schedule or that construction
costs for the Casino Resort will not exceed budgeted amounts. In this regard,
it should be noted that the FF&E Credit Facility will not become available
until either eight or three months (at the option of the Company) prior to
completion of the Casino Resort. Failure to complete the Casino Resort on
budget or on schedule may have a material adverse effect on the Company.
Construction Budget; Construction Management Contract and Guaranties
The Casino Resort is budgeted to cost approximately $1.065 billion
(including the cost of the purchase and installation of the HVAC Equipment and
the purchase of the Specified FF&E, but excluding the land costs). The
Construction Management Contract covers approximately $547.8 million of such
budgeted cost. The remaining $517.7 million of budgeted cost includes
owner-managed construction (approximately $69.7 million), certain furniture,
fixtures and equipment, certain so-called "soft" construction costs (which
include fees of architects, attorneys and other professionals), costs of
obtaining required governmental approvals and permits, pre-opening expenses,
construction period interest and other costs that are not so-called "hard"
construction costs. Accordingly, neither the Construction Management Contract's
guaranteed maximum price nor other safeguards against cost overruns (other than
the "owner's contingency" of $40.0 million, the Sole Stockholder's $25.0
million Completion Guaranty and certain bonds and insurance policies) will
provide any safeguards against increased costs relative to such excluded items.
There can be no assurance that the Casino Resort can be completed within the
budgeted costs.
Under the terms of the Construction Management Contract, the Construction
Manager is, subject to certain conditions and limitations, responsible for all
construction costs covered by the Construction Management Contract that are in
excess of the guaranteed maximum price set forth therein. As of the date
hereof, such guaranteed maximum price includes a contingency equal to 5% of all
construction costs covered by the Construction Management Contract, but the
Construction Management Contract provides that on the date (the "Final GMP
Date") when design documents have been finalized and trade contracts for 90% of
the work covered by the Construction Management Contract have been entered
into, such contingency will be reduced from 5% to 3% of the costs covered by
the Construction Management Contract, thereby automatically reducing the
guaranteed maximum price. (When this happens, the
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owner's contingency for the entire Casino Resort construction and development
budget will be increased by an amount equal to the above-described decrease in
the Construction Manager's contingency.) In addition, if, as of the Final GMP
Date, the Construction Manager has entered into trade contracts providing for
amounts to be paid to trade contractors that are less than the aggregate amount
attributed to such trade contracts in the calculation of the guaranteed maximum
price, the Construction Management Contract provides that the guaranteed
maximum price will be appropriately reduced. The Construction Management
Contract also provides that if the work required to be performed thereunder is
performed for an aggregate cost that is less than the final guaranteed maximum
price, the Construction Manager is entitled to receive a bonus payment equal to
50% of the amount saved. In addition, the Construction Manager is entitled to a
per-day early completion bonus which is structured as the "mirror-image" of the
liquidated damages provisions described below.
Notwithstanding the provisions of the Construction Management Contract
described above that are designed to put downward pressure on the guaranteed
maximum price and the actual cost of constructing the Casino Resort and to
properly incentivize the Construction Manager to reduce construction costs and
complete its obligations on schedule, the Construction Management Contract has
various limitations as a result of which construction costs for the Casino
Resort may exceed budgeted amounts without the Construction Manager (or Bovis
or P&O pursuant to the Construction Management Contract Guaranty and P&O
Guaranty, respectively) being liable for such excess. In addition, the
Construction Management Contract provides that the guaranteed maximum price
will be appropriately increased, and the deadline for completion of
construction will be appropriately adjusted, on account of (i) changes in the
design documents prepared by the architect or deficiencies in such documents;
(ii) changes requested by Venetian in the scope of the work to be performed
pursuant to the Construction Management Contract (although, under the terms of
the Disbursement Agreement, Venetian may not request any such change unless it
funds such changes or demonstrates to the Construction Consultant that
necessary funds are available to complete all remaining construction); and
(iii) natural disasters, casualties, changes in legal requirements and other
"force majeure" events beyond the reasonable control of the Construction
Manager. Finally, although the Construction Management Contract provides for
"liquidated damages" penalties to be imposed on the Construction Manager on a
daily basis if all work required by the Construction Management Contract is not
completed by the deadline set forth in the Construction Management Contract,
there is no assurance that construction will be completed on schedule or that
the Issuers will be able to collect the "liquidated damages" penalties in a
timely manner. Failure to complete construction on schedule may have a material
adverse effect on the Company.
The obligations of the Construction Manager under the Construction
Management Contract are guaranteed by Bovis, pursuant to the Construction
Contract Guaranty, and Bovis's obligations under such guaranty are guaranteed
by P&O, pursuant to the P&O Guaranty. However, Bovis's (and ultimately P&O's)
liability for excess construction costs is subject to the same conditions and
limitations on the Construction Manager's liability described above. In
addition, with respect to the Construction Manager's obligation to complete
construction on schedule, (i) for the first 30 days of any delay in such
scheduled completion, the Construction Manager solely (and not Bovis or P&O) is
liable for liquidated damages, (ii) for the 90-day period thereafter, only the
insurers under the Liquidated Damages Insurance procured by the Construction
Manager on behalf of the Company (and not the Construction Manager, Bovis or
P&O), subject to certain conditions and exceptions (including the failure of
the Construction Manager to make "good faith efforts" to prevent or mitigate
any delay), are liable for liquidated damages, and (iii) Bovis and P&O are
liable for liquidated damages only to the extent, if any, that the Construction
Manager misses the required deadline by more than 120 days. A default by either
the Construction Manager under the Construction Management Contract or by Bovis
or P&O under the Construction Contract Guaranty and the P&O Guaranty,
respectively, could result in the Casino Resort not being completed on schedule
and have a material adverse effect on the Issuers. In the event that there are
excess construction costs with respect to which neither the Construction
Manager nor Bovis or P&O is liable pursuant to the Construction Management
Contract, the Construction Contract Guaranty or the P&O Guaranty, respectively,
or if such costs otherwise exceed the other available contingency funds (such
as the "owner's contingency" and the Completion Guaranty), no assurance can be
given that the Sole Stockholder or any of his affiliates will provide the
necessary additional funds and no assurance can be given that the Issuers will
be able to raise the necessary additional funds. See "Certain Material
Agreements--Agreements Relating to the Casino Resort--Construction Management
Contract" and "--Liquidated Damages Insurance."
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The Construction Management Contract does not include, among other things,
the construction of the principal parking garage facility for the Casino Resort
(which includes space for the Casino Resort's electrical substation). The
Company has estimated that the cost to construct this facility is $21.2
million. Since these costs are excluded from the Construction Management
Contract, neither the Construction Manager and P&O, nor the insurance companies
providing the Liquidated Damages Insurance, will be responsible for any cost
overruns or delays in connection with the garage/electrical substation
facility. The Company intends, however, to enter into a design-build contract
with a third party, nationally-recognized contractor for the construction of
the parking garage facility, with such contractor's obligations fully bonded
and insured.
Completion Guaranty
Pursuant to the Completion Guaranty, the Sole Stockholder has guaranteed,
subject to certain conditions and limitations, payment of construction and
development costs in excess of available funds, up to a maximum of $25.0
million. The Completion Guaranty does not provide for the incurrence by the
Sole Stockholder, directly or indirectly, of any obligation, contingent or
otherwise, for the payment of the principal, premium and interest on the Notes
or any other indebtedness under the financings described herein. If
construction and development costs exceed the amount of funds available to the
Issuers for construction of the Casino Resort, including amounts available
under the Completion Guaranty, no assurance can be given that the Sole
Stockholder or any of his affiliates will provide any additional funds and no
assurance can be given that the Company will be able to raise additional funds.
See "Certain Material Agreements--Agreements Relating to the Casino
Resort--Completion Guaranty."
Possible Conflicts of Interest
The planned second phase of the redevelopment of the Project Site is the
Phase II Resort. The Phase II Resort is planned to be constructed on the Phase
II Land. Under the Mortgage Note Indenture, upon the completion of the
subdivision of the Project Site, the Phase II Land may be released from the
Note Collateral, and transferred to the Phase II Subsidiary, a wholly-owned
subsidiary of Venetian. Upon such release and transfer, the Company will have
no direct interest in such released land. Subject to certain conditions, the
Indentures do not restrict the ability of the Phase II Subsidiary to incur
indebtedness or to sell the Phase II Land. There is no guarantee that the Phase
II Resort will be built in the near future, in the manner currently planned, or
at all. In addition, although the Company intends to construct the Phase II
Resort so as to mitigate the impact of such construction on the Casino Resort,
there can be no assurance that such construction will commence as planned, and
therefore, the construction of the Phase II Resort may adversely impact
portions of the Casino Resort. The completion and full operation of the Casino
Resort is not contingent upon the subsequent financing or completion of the
Phase II Resort and the Casino Resort has all necessary facilities to operate
on a stand alone basis. See "--Shared Facilities" and "Certain Material
Agreements." Under the Indentures, the Issuers have agreed that they will not
commence construction of the Phase II Resort (other than the parking garage on
the Phase II Land) until a temporary certificate of occupancy has been issued
for the Casino Resort.
The common ownership of the Casino Resort and the Phase II Resort may
result in potential conflicts of interest. For example, management may offer
discounts and other incentives for visitors to stay at the Phase II Resort
which might result in a competitive advantage of the Phase II Resort over the
Casino Resort. In addition, management may choose to allocate certain business
opportunities to the Phase II Resort rather than to the Casino Resort. Although
common ownership of both the Casino Resort and the Phase II Resort often may
result in economies, efficiencies and joint business opportunities for the two
resorts in the aggregate, the Casino Resort may, in certain circumstances, bear
the greater burden of the expenses that are shared by both resorts. In
addition, inasmuch as there may be a common management for both the Casino
Resort and the Phase II Resort, management's time may be split between
overseeing the operation of each resort, and management, in certain
circumstances, may devote more time to its ownership and operations
responsibilities of the Phase II Resort than those of the Casino Resort.
Finally, because it is expected that the Company will lease and operate the
casino for the Phase II Resort, potential conflicts may arise from the common
operation of the Casino and the Phase II Resort casino, such as the allocation
of management's time. In order to share expenses and provide for efficient
management and operations of the Casino Resort and Phase II Resort and shared
facilities, LVSI, Venetian and the Phase II Subsidiary are expected to enter
into certain cost sharing and easement agreements, such as the Cooperation
Agreement. See "--Shared Facilities" and "Certain Material Agreements."
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The common ultimate ownership, and management, of the Casino Resort and
the Expo Center also may result in potential conflicts of interest. The Expo
Center and the Congress Center are potential competitors in the business
conference and meetings business. As a result, the Casino Resort could engage
in certain businesses which may have an adverse impact on the Expo Center.
However, under the Cooperation Agreement, Venetian has agreed that it will not
conduct, or permit to be conducted at the Casino Resort, trade shows or
expositions of the type generally held at the Expo Center. Furthermore,
management may engage in marketing practices with respect to the Casino Resort
that are intended to benefit the Expo Center and may have a detrimental effect
on the Casino Resort.
Shared Facilities
Because the Casino Resort and the planned Phase II Resort will share
certain operational facilities (the "Shared Facilities"), the construction of
the Casino Resort will include the construction of the Shared Facilities in
sizes and/or capacities that will be sufficient for the Casino Resort and the
Phase II Resort together. The Shared Facilities may include, among other
things, (i) the loading docks; (ii) utility distributions and substations;
(iii) management information systems; (iv) gaming surveillance facilities; (v)
offices; and (vi) warehouses. The Company will bear the full cost of
constructing the Shared Facilities. However, if the Phase II Resort is
completed, under the Cooperation Agreement, the Phase II Subsidiary will be
obligated to pay its allocated share of the operating expenses (but will not be
obligated to pay any portion of the construction costs) related to the Shared
Facilities (such share to be mutually agreed upon by the Company and the Phase
II Subsidiary prior to commencement of construction of the Phase II Resort).
There can be no assurance that the Phase II Resort will ever be built, or that
it will be built in a configuration that maximizes the value of the Shared
Facilities or that, if built, the Phase II Resort will generate sufficient cash
flow to pay its share of the operating expenses related to the Shared
Facilities.
Mechanics' Liens
Nevada law provides contractors, subcontractors and material suppliers
with a lien on the real property being improved by their services or supplies
in order to secure their right to be paid. Such parties may foreclose their
liens if they are not paid in full. The priority of all mechanics' liens
arising out of a particular construction project relates back to the date on
which construction of the project first commenced.
Construction of the Casino Resort commenced prior to the recordation of
the deeds of trust (collectively, the "Deed of Trust") that secure the
repayment of the Mortgage Notes. Accordingly, all contractors, subcontractors
and material suppliers providing services or material in connection with the
Casino Resort (including parties providing services or materials near the end
of the construction period and after the issuance of the Mortgage Notes) who
otherwise comply with the applicable requirements of Nevada law will have a
lien on the project senior in priority to the lien of the Deed of Trust.
Nevertheless, the priority of the Deed of Trust is impaired to the extent
that contractors, subcontractors and material providers are not paid in full.
Pursuant to the Disbursement Agreement, the Issuers are subject to certain fund
control procedures intended to assure the proper payment of contractors,
subcontractors and material suppliers. The Issuers (and the Construction
Manager pursuant to the Construction Management Contract) also are required to
obtain lien waivers from such parties in connection with interim and final
payments during the construction period whereby such parties will release their
lien claims to the extent of such payments. In addition, as a condition to the
consummation of the Offering, the Issuers were required to obtain a policy of
title insurance for the benefit of the holders of the Mortgage Notes, the Mall
Construction Lender and the lenders under the Bank Credit Facility insuring the
priority of such lenders and insuring against any loss incurred as a result of
mechanics' liens.
Competition and Planned Construction in Las Vegas
The casino/hotel industry is highly competitive. Hotels located on or near
the Strip ("Strip Hotels") compete with other Strip Hotels and with other
hotels in Las Vegas. The Casino Resort also will compete with a large number of
hotels and motels located in and near Las Vegas. The Mall will compete with
retail malls in or near Las Vegas, including The Fashion Show Mall, The Forum
Shops at Caesars Palace Hotel and retailers in theme-oriented resorts. Many of
the competitors of the Company are subsidiaries or divisions of large public
companies and may have greater financial and other resources than the Company.
40
<PAGE>
According to the Las Vegas Convention and Visitors Authority (the
"LVCVA"), as of July 1, 1997, there were 101,106 hotel and motel rooms in the
Las Vegas area. Competitors of the Casino Resort will include theme-oriented
resorts on the Strip, among which are Caesars Palace Hotel, The Mirage, the
Treasure Island Hotel and Casino, Harrah's, The MGM Grand Hotel and Casino, New
York--New York Hotel and Casino, The Monte Carlo Resort and Casino, Bally's
Casino Resort Las Vegas and Luxor Hotel. In addition, the construction of
several new major resort projects that will compete with the Casino Resort and
the expansion of several existing resorts recently have commenced or have been
announced. These include the Bellagio, Paris Casino Resort and Project Paradise
under construction, expansions at Caesars Palace Hotel, Harrah's and The MGM
Grand Hotel and Casino and the planned expansions of the Hard Rock Hotel and
Casino and the Aladdin Hotel and Casino. These projects and others are expected
to add approximately 19,800 hotel rooms to the Las Vegas inventory by 1999. The
construction and expansion of these properties during the time that the Casino
Resort is being constructed may affect the availability of construction labor
and supplies, resulting in increased costs. Finally, the Casino Resort will
compete with the planned Phase II Resort (which will be separately owned by a
subsidiary of the Company) to the extent the business of the Phase II Resort is
not complimentary to that of the Casino Resort. The future operating results of
the Company could be adversely affected by excess Las Vegas room, gaming,
conference center and trade show capacity.
The Expo Center and Las Vegas generally compete, and the Congress Center
will compete, with convention and trade show facilities located in and around
major cities, including Atlanta, Chicago, New York and Orlando. Within Las
Vegas, the Expo Center competes, and the Congress Center will compete, with the
Las Vegas Convention Center, which is located off the Strip and currently has
1.3 million gross feet of convention and exhibit facilities. An expansion of
300,000 square feet of meeting and exhibition space is planned for the Las
Vegas Convention Center. In addition, The MGM Grand Hotel and Casino has
announced plans to construct new conference and meeting facilities of
approximately 300,000 square feet and several other existing or planned major
Strip hotel/casino properties are intending to expand or construct conference
facilities. The conference and meeting facilities at these hotel/resorts are
expected to be the Congress Center's primary competition. In addition, several
of the planned resort developments on the Strip, such as the Bellagio and Paris
Casino Resort, are expected to include significant conference facilities.
However, because none of these hotel/resorts plans to offer convention and
trade show facilities on the same relative size as the Expo Center
(approximately 1.15 million gross square feet), the Las Vegas Convention Center
is expected to remain the primary competitor of the Expo Center. To the extent
that any of the competitors of the Casino Resort can offer substantial
integrated hotel/casino and convention and trade show or conference and meeting
facilities, the Casino Resort's competitive advantage in attracting convention,
trade show, meeting and conference attendees could be adversely affected.
However, the ability of any such competitor to offer such show facilities equal
to the nearly 1.65 million combined gross square footage of the Expo Center and
the planned Congress Center is limited by any such competitor's location and
available contiguous undeveloped lands.
The hotel/casino operation of the Casino Resort will also compete,
to some extent, with other hotel/casino facilities in Nevada and in Atlantic
City, with hotel/casino facilities elsewhere in the world and with state
lotteries. In addition, certain states have recently legalized, and others may
or are likely to legalize, casino gaming in specific areas, and passage of the
Indian Gaming Regulatory Act in 1988 has led to rapid increases in Native
American gaming operations. Such proliferation of gaming activities could
significantly and adversely affect the business of the Company. In particular,
the legalization of casino gaming in or near metropolitan areas, such as New
York, Los Angeles, San Francisco and Boston, from which the Company intends to
attract customers, could have a material adverse effect on the business of the
Company. See "Business--Competition."
Government Regulation
The gaming operations and the ownership of securities of the Issuers, are
subject to extensive regulation by the Nevada Gaming Commission (the "Nevada
Commission"), the NGCB and the Clark County Liquor and Gaming Licensing Board
(the "CCLGLB" and, together with the Nevada Commission and the Nevada Board,
the "Nevada Gaming Authorities"). The Nevada Gaming Authorities have broad
authority with respect to licensing and registration of entities and
individuals involved with the Issuers, including the holders of the Notes.
41
<PAGE>
The Company is required to be and has applied for registration as a
publicly traded corporation ("Registered Corporation") with the Nevada
Commission. The Company and Venetian may not consummate the Exchange Offer
without the prior approval of the Nevada Gaming Authorities. The Company and
Venetian have applied for the approval of the Exchange Offer, and this offering
will not be completed until such registrations and approvals are received.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation, such as the Notes, to file an
application, be investigated and be found suitable to own the debt security of
a Registered Corporation. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada Gaming Control Act
and the regulations promulgated thereunder (collectively, the "Nevada Act"),
the Registered Corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada Commission, it: (i) pays
to the unsuitable person any dividend, interest, or any distribution
whatsoever; (ii) recognizes any voting right by such unsuitable person in
connection with such securities; (iii) pays the unsuitable person remuneration
in any form; or (iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation, or similar
transaction.
Each holder of the Notes shall be deemed to have agreed (to the extent
permitted by law) that if the Nevada Gaming Authorities determine that a holder
or beneficial owner of the Notes must be found suitable (whether as a result of
a foreclosure of the Casino or for any other reason), and if such holder or
beneficial owner either refuses to file an application or is found unsuitable,
such holder shall, upon request of the Issuers, dispose of such holder's Notes
within 30 days after receipt of such request or such earlier date as may be
ordered by the Nevada Gaming Authorities. The Issuers also will have the right
to call for the redemption of Notes by any holder at any time to prevent the
loss or material impairment of a gaming license or an application for a gaming
license at a redemption price equal to the lessor of (i) the cost paid by such
holder or (ii) 100% of the aggregate principal amount or Accreted Value
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of redemption.
Although the Company currently holds a gaming license issued by the Nevada
Gaming Authorities, the Nevada Gaming Authorities may, among other things,
revoke the gaming license of any corporate entity (a "Corporate Licensee") or
the registration of a Registered Corporation or any entity registered as a
holding company of a Corporate Licensee. In addition, the Nevada Gaming
Authorities may revoke the license or finding of suitability of any officer,
director, controlling person, shareholder, noteholder or key employee of a
licensed or registered entity. If the gaming licenses of the Company were
revoked for any reason, the Nevada Gaming Authorities could require the closing
of the Casino, which would result in a material adverse effect on the business
of the Company and Venetian. The Company and certain of its officers,
directors, shareholders and key employees either have been licensed by, or have
applied for licensing with, the Nevada Gaming Authorities. In addition, prior
to opening, LVSI must apply for and receive a Clark County gaming license and a
Clark County liquor license. Although Venetian intends to apply for a state
gaming license, registration or other finding of suitability, the receipt of
such by Venetian is not required for the completion and operation of the Casino
Resort.
In addition, any future public offering of debt or equity securities by
the Venetian and/or the Company (including the hypothecation of the Company's
or Venetian's assets), if the securities or the proceeds from the sale thereof
are intended to be used by the Company and Venetian to pay for construction of,
or to acquire an interest in, any gaming facilities in Nevada, to finance the
gaming operations of an affiliated company or to retire or extend obligations
incurred for any such purpose, requires the prior approval of the Nevada
Commission. See "Regulation and Licensing," "Description of Mortgage
Notes--Optional Redemption" and "Description of Senior Subordinated
Notes--Optional Redemption."
Dependence Upon Key Management and Lack of Experienced Personnel
The ability of the Company to maintain its competitive position is
dependent to a large degree on the services of the Company's senior management
team, including Sheldon G. Adelson, currently LVSI's sole stockholder. Although
certain of the senior managers of the Company have employment agreements with
the Company, there can be no assurance that such individuals will remain with
the Company. The death or loss of the services of any of the senior managers or
an inability to attract and retain additional senior management personnel could
have a material adverse effect on the Issuers. There can be no assurance
42
<PAGE>
that the Company will be able to retain its existing senior management
personnel or to attract additional qualified senior management personnel. See
"Management."
Until construction of the Casino Resort is close to completion, the
Company does not believe that it will require extensive operational management
and, accordingly, has kept and intends to keep its permanent staff at
relatively low levels. The Company will be required to undertake a major
recruiting and training program prior to the opening of the Casino Resort at a
time when other major new facilities may be approaching completion and also
recruiting employees. While the Company believes that it will be able to
attract and retain a sufficient number of qualified individuals to operate the
Casino Resort on acceptable terms, the pool of experienced gaming and other
personnel is limited and competition to recruit and retain gaming and other
personnel is likely to intensify as more casinos are opened. No assurance can
be given that such employees will be available to the Company.
Sole Stockholder
The Sole Stockholder beneficially owns all of the outstanding common
equity of Venetian and LVSI. LVSI acts as the managing member of Venetian.
Except for actions that require the approval of the Special Director (as
defined herein) described in "LVSI and Venetian," the Sole Stockholder will be
able to control the business, policies and affairs of the Company, including
the election of directors and major corporate transactions of LVSI. For a
description of certain relationships among LVSI, Venetian and the Sole
Stockholder, see "LVSI and Venetian," "Certain Transactions" and "Certain
Material Agreements."
Management believes that the Sole Stockholder's common ownership of
Interface and LVSI will provide the Casino Resort with significant competitive
advantages because of management's ability to market the Casino Resort in
conjunction with the Expo Center. Except for the Cooperation Agreement, there
are no agreements for the benefit of the holders of the Notes that restrict the
ability of the Sole Stockholder to incur indebtedness or to transfer or dispose
of his assets. Except as provided under the Cooperation Agreement, there are no
limitations on the ability of Interface to incur debt for the benefit of the
holders of the Notes. As of the date hereof, Interface has $80.0 million of
indebtedness secured by a lien on the Expo Center. In addition, under an
existing credit facility, subject to the satisfaction of certain conditions,
Interface may incur an additional $60.0 million of indebtedness secured by a
lien on the Expo Center. The sale of the Expo Center or Interface by the Sole
Stockholder, either voluntarily or as a result of a foreclosure or bankruptcy
of Interface, could have a material adverse effect on the Company and will
result in an "Event of Default" under the Notes and the Bank Credit Facility.
While the Sole Stockholder has informed the Company that he believes he
will be able to perform his obligations under (i) the Sole Stockholder's $25.0
million Completion Guaranty, (ii) the Sole Stockholder's guarantee of the $35.0
million Tranche B Loan under the Mall Construction Loan Facility, (iii) the
Sole Stockholder's obligations under the Tranche B Take-out Financing and (iv)
the Sole Stockholder's $20.0 million guarantee of the Tranche A Take-out
Financing, the Sole Stockholder's obligation under the $20.0 million guarantee
of the Tranche A Take-out Financing is not collateralized. If Mr. Adelson were
to die or become bankrupt or insolvent, the performance of such collateralized
and non-collateralized obligations could be delayed or adversely affected. In
addition, any successors to Mr. Adelson's assets may be less likely to advance
additional funds to the Company than the Sole Stockholder.
The Indentures and the Intercreditor Agreement do not contain any
prohibition on the ability of the Sole Stockholder or any of his affiliates
from purchasing, refinancing, replacing or otherwise acquiring indebtedness of
the Issuers secured by liens prior to the liens in favor of the holders of the
Mortgage Notes, including indebtedness under the Bank Credit Facility or the
Mall Construction Loan Facility. In addition, the Senior Subordinated Note
Indenture does not limit the ability of the Sole Stockholder or any of his
affiliates from purchasing, refinancing, replacing or otherwise acquiring any
Senior Debt. To the extent the Sole Stockholder acquires interests in such
indebtedness, no assurance can be given that the Sole Stockholder would not be
in a position to exercise rights or remedies under state or bankruptcy laws or
otherwise that could materially adversely affect the interests of the holders
of the Mortgage Notes and the Senior Subordinated Notes. See "--Ability of
Holders of Mortgage Notes to Realize on Collateral and Exercise Remedies" and
"--Ranking of Senior Subordinated Notes; Subordination to Senior Debt;
Limitations on Remedies."
43
<PAGE>
Financial Forecast
The Financial Forecast was prepared as of June 30, 1997 except for the
amount of Mortgage Notes and Senior Subordinated Notes and the assumed interest
rate on such Notes, which were updated as of
November 6, 1997. The prospective financial information included in this
Prospectus has been prepared by, and is the responsibility of, the Company's
management. Price Waterhouse LLP has neither examined nor compiled the
accompanying prospective financial information, and accordingly, Price
Waterhouse LLP does not express an opinion or provide any other form of
assurance with respect thereto. The Price Waterhouse LLP report included in
this Prospectus relates to the Company's historical financial information and
does not extend to the prospective financial information and should not be read
to do so. Neither the Initial Purchasers nor any independent expert has
reviewed the Financial Forecast. While such Financial Forecast is presented
with numerical specificity, it is based on the best estimate of the Company,
described in the Summary of Significant Assumptions and Accounting Policies in
the Financial Forecast, of the results it expects for the Casino Resort given
the Company's assumptions (including that (i) the Casino Resort will open on
schedule and be successful, (ii) that the Casino Resort will attract a
substantial number of visitors and (iii) that the average daily hotel room rate
paid by the visitors at the Casino Resort will be higher than that paid at
other hotel/casinos on the Strip because of room demand from the trade shows
and conventions currently booked at the Expo Center for the first projected
year of operation of the Casino Resort, the Casino Resort's all-suites format
and amenities, its location and its target market). Furthermore, such estimates
are inherently subject to significant business, economic and competitive
uncertainties and contingencies (many of which are beyond the control of the
Company), including future business decisions which are subject to change.
Financial forecasts are necessarily speculative in nature, and it is usually
the case that one or more of the assumptions do not materialize. For instance,
the Financial Forecast assumes higher than average daily room rates of $167
during the initial year of operations (as compared to an average daily room
rate of $79 for the upper quartile of the Large Strip Hotels for 1996 according
to the NGCB and average daily room rates at major convention hotels in New
York, Chicago and San Francisco of approximately $160 during the first quarter
of 1997 according to "Smith Travel Research"), which may not be achieved. In
addition, the results, performance or achievements of the Casino Resort involve
known and unknown risks, uncertainties and other factors, including the risks
associated with new construction, government regulation relating to the casino
industry, the completion of infrastructure improvements in Las Vegas, including
the ongoing expansion of McCarran International Airport, and general economic
and business conditions which may impact levels of disposable income for
consumers and pricing of hotel rooms. Accordingly, the Financial Forecast is
only an estimate, and actual results can be expected to vary from estimates,
and the variations may be material. The Financial Forecast herein should not be
regarded as a representation by the Company or any other person that the
Financial Forecast will be achieved. Holders of the Notes are cautioned not to
place undue reliance on the Financial Forecast. The Company does not intend to
update or otherwise revise the Financial Forecast to reflect events or
circumstances existing or arising after the date of this Prospectus or to
reflect the occurrence of unanticipated events, except as required by
applicable law. The Company's forecasted results of operations are based on
assumptions regarding, among other things, revenues and expenses, some of which
differ from the assumptions used by the Appraiser in its valuation of the
Hotel, the Casino and the Mall. For example, the Appraiser deducted an assumed
management fee of approximately $9.0 million and made different assumptions
regarding certain operating expense line items. Management believes that such
differences are not material to their forecasted results of operations. See
"Appraisals."
Lack of Public Market for the Notes
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. The Issuers currently do not intend to list the New Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system and no active public market for the New Notes is currently
anticipated. There can be no assurance that an active public market for the New
Notes will develop, or if developed, will continue.
Although the Initial Purchasers have acted as market makers with respect
to the Existing Notes and have informed the Issuers that they currently intend
to make a market in the New Notes, they are not obligated to do so and any such
market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the New Notes.
44
<PAGE>
Adverse Consequences of Failure to Adhere to Exchange Offer Procedures
Issuance of the New Notes in exchange for Existing Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent
of such Existing Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of Existing
Notes desiring to tender such Existing Notes in exchange for New Notes should
allow sufficient time to ensure timely delivery. Neither the Issuers nor the
Exchange Agent are under any duty to give notification of defects or
irregularities with respect to the tenders of Existing Notes for exchange.
Existing Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof and, upon consummation of the
Exchange Offer certain registration rights under the Registration Rights
Agreement will terminate.
Receipt of Restricted Securities Under Certain Circumstances
Any holder of Existing Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes may be deemed to
have received restricted securities and, if so, will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Consequences
of Failure to Exchange; Resales of New Notes."
Adverse Effect on Market for Existing Notes
To the extent that Existing Notes are tendered and accepted in the
Exchange Offer, the trading market for the untendered and tendered but
unaccepted Existing Notes could be adversely affected. See "The Exchange
Offer."
45
<PAGE>
LVSI AND VENETIAN
In March 1997, Venetian Casino Resort, LLC was organized as a Delaware
limited liability company and was merged into a Nevada limited liability
company in October 1997. LVSI was incorporated in 1988 under the laws of the
State of Nevada. In April 1989, LVSI acquired the Sands from MGM Grand. LVSI
owned and operated the Sands from April 1989 to June 1996 when hotel operations
ceased. Construction of the Casino Resort commenced in April 1997. LVSI is the
managing member of Venetian. Under the casino lease between LVSI and Venetian
(the "Casino Lease"), LVSI will operate the Casino. The executive offices of
LVSI and Venetian are located at 3355 Las Vegas Boulevard South, Rooms 1A and
1C, respectively, Las Vegas, Nevada 89109 and their phone number is (702)
733-5000.
LVSI has a Board of Directors comprised of two persons. One director is
the Sole Stockholder, who has two votes for all matters before the Board of
Directors. In the event that LVSI increases the number of directors comprising
the Board of Directors, the number of votes which the Sole Stockholder has will
be increased so that the Sole Stockholder will have one more vote than the
number of votes of all of the other directors aggregated. The second director
(the "Special Director") is unaffiliated with the Sole Stockholder or any other
affiliate of the Sole Stockholder, has no other position with LVSI or Venetian
and has one vote for all matters before the Board of Directors. To the extent
the Special Director receives compensation, it is paid by LVSI from sources
unrelated to and independent from the Sole Stockholder and its affiliates
(other than the Issuers). The Special Director is required to file an
application for a gaming license with the Nevada Gaming Authorities.
The Amended and Restated Articles of Incorporation of LVSI and the limited
liability company agreement of Venetian provide that, without the express
approval of the Special Director, neither Venetian nor LVSI may (i) file, or
consent to the filing of, a petition for bankruptcy or reorganization, (ii)
engage in certain transactions with affiliates, (iii) merge or consolidate with
any entity or convey or transfer all or substantially all of its properties and
assets to any entity except as contemplated by the Indentures and certain other
debt instruments, (iv) voluntarily terminate the Cooperation Agreement or the
Sale and Contribution Agreement (or any similar replacement agreement), or (v)
amend provisions of LVSI's Amended and Restated Articles of Incorporation and
Venetian's limited liability company agreement if such amendment bears upon the
maintenance of the separate identity of LVSI or Venetian.
LVSI and Venetian will not be dependent on the Sole Stockholder or his
affiliates for, nor is it anticipated that they will receive from the Sole
Stockholder or his affiliates, any funds for, working capital or administrative
expenses, and will be solely responsible for their operating costs. LVSI and
Venetian maintain their own separate bank operating accounts, maintain their
own separate books and records, prepare their own separate financial statements
and retain their own auditors (who may, however, be the firm that also is
engaged by the Sole Stockholder with respect to his affiliates).
In addition, LVSI and Venetian will take the following steps to assure
that they operate separately from the Sole Stockholder and his affiliates: (i)
each of LVSI and Venetian will observe all corporate or limited liability
company formalities regarding its existence and, in the case of LVSI, conduct
regular meetings (at least once annually) of the Board of Directors and
memorialize decisions made and actions taken by the Board of Directors on all
significant transactions; (ii) LVSI and Venetian will take steps to assure that
any of their respective assets are not commingled with those of the Sole
Stockholder or any of his affiliates except to the extent contemplated by, and
only pursuant to the terms of, the Indentures and certain other debt
instruments and, in any event, to assure that their assets are readily
identifiable; and (iii) the Company and Venetian will be able to conduct their
businesses without dependence on the Sole Stockholder or any of his affiliates.
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<PAGE>
Set forth below is an ownership chart for the Issuers and their
subsidiaries.
[STOCKHOLDERS CHART]
- --------------
(1) LVSI and Venetian are co-obligors of the Notes and co-obligors of the
indebtedness under the Bank Credit Facility, the Mall Construction Loan
Facility and the FF&E Credit Facility.
(2) The Mall Construction Subsidiary is a wholly-owned subsidiary of Venetian,
is a co-obligor of the Mall Construction Facility and has guaranteed the
indebtedness under the Bank Credit Facility and the Mortgage Notes on a
secured basis and the Senior Subordinated Notes on an unsecured,
subordinated basis.
(3) Mall Intermediate Holdings and Phase II Intermediate Holdings has
guaranteed the indebtedness under the Bank Credit Facility on a senior
basis and the Notes on a subordinated basis. Mall Intermediate Holdings
has guaranteed the indebtedness under the Mall Construction Loan Facility
on a senior basis. See "Description of Mortgage Notes--Mortgage Note
Guaranties" and "Description of Senior Subordinated Notes--Senior
Subordinated Note Guaranties."
(4) Upon the transfer of the Mall Collateral from the Mall Construction
Subsidiary to the Mall Subsidiary, the Mall Subsidiary is expected to be
owned 99% by Mall Holdings and 1% by a special purpose wholly-owned
subsidiary of the Company (the "Mall Manager"), and Mall Holdings is
expected to be owned 99% by Mall Intermediate Holdings and 1% by Mall
Manager. The Mall Manager will act as the managing member of the Mall
Subsidiary and Mall Holdings. Neither the Mall Subsidiary, the Mall
Manager nor Mall Holdings has guaranteed indebtedness or provided credit
support for any of the indebtedness of the Issuers.
(5) Upon subdivision of the Project Site, the Phase II Land may be released
from the Note Collateral and transferred to the Phase II Subsidiary. Under
the Indentures, the Issuers have agreed that they will not commence
construction of the Phase II Resort (other than the parking garage on the
Phase II Land) until a temporary certificate of occupancy has been issued
for the Casino Resort. The Phase II Subsidiary is a limited liability
company and, upon such transfer, is expected to be owned 99% by Phase II
Holdings and 1% by a special purpose wholly-owned subsidiary of the
Company (the "Phase II Manager"), and Phase II Holdings is expected to be
owned 99% by Phase II Intermediate Holdings and 1% by Phase II Manager.
The Phase II Manager will act as the managing member of the Phase II
Subsidiary and Phase II Holdings. Neither the Phase II Subsidiary nor the
Phase II Manager nor Phase II Holdings has guaranteed or provided credit
support for any indebtedness of the Issuers.
47
<PAGE>
USE OF PROCEEDS
No proceeds will be received by the Issuers from the Exchange Offer.
Use of Proceeds from the Existing Notes
The net proceeds received by the Issuers from the Offering were
approximately $490.0 million (after deduction of the Initial Purchasers'
discounts and estimated offering expenses). The net proceeds from the Offering,
together with the proceeds from the Bank Credit Facility, the Mall Construction
Loan Facility and the FF&E Credit Facility, the contribution provided by the
HVAC Provider and the Equity Contribution will be used to develop, construct,
equip and open the Casino Resort and to repay the Construction Loan. For a
description of the terms of the Construction Loan, see "Certain
Transactions--Transactions Relating to the Venetian." The Casino Resort is
budgeted to cost approximately $1.065 billion to develop, equip and open (such
costs include approximately $70.0 million of costs of acquiring and installing
the HVAC Equipment, which will be owned and operated by the HVAC Provider, but
exclude land acquisition costs). As of December 31, 1997, approximately $228.1
million of this total budgeted cost had been expended or incurred. Of the
amount expended and incurred, approximately $95.3 million represents cash
contributed to the Company by Sheldon G. Adelson, the Sole Stockholder of the
Company, through affiliates of the Company.
Proceeds from the offering of the Mortgage Notes were deposited by the
Issuers into the Mortgage Notes Proceeds Account and will be disbursed by the
Disbursement Agent only after the fulfillment of certain conditions. After
repayment of $30.1 million for the Construction Loan, the remaining proceeds
from the Senior Subordinated Notes were deposited in the Company's Funds
Account (as defined herein). The funds held in the Company's Funds Account will
be used to pay construction and development costs prior to disbursement of
funds from the Mortgage Notes Proceeds Account. The Disbursement Agreement
provides that project costs generally will be funded first from the Equity
Contribution and the proceeds of the Senior Subordinated Notes, and thereafter,
pro rata from the proceeds of the Bank Credit Facility, the Mall Construction
Loan Facility and the Mortgage Notes. However, the HVAC Equipment will be
funded through the Disbursement Agreement pursuant to the separate commitment
from the HVAC Provider, subject to limited exceptions. Pending disbursement,
the funds held in the Mortgage Notes Proceeds Account are invested in cash and
cash equivalent instruments, including bonds and notes, which have been pledged
as additional collateral for the Mortgage Notes. See "Description of
Disbursement Agreement."
The estimated sources and uses of funds to construct, develop, equip and
open the Casino Resort (including the Hotel, the Mall, the Casino and the
Congress Center, but excluding the HVAC Equipment, which will be owned by the
HVAC Provider) are as follows (in millions)(1)(2)(3):
<TABLE>
<CAPTION>
Sources Uses
- ------------------------------------------ -----------------------------------------
<S> <C> <C> <C>
Bank Credit Facility (4) ................. $ 150.0 Hotel and Casino ........................ $ 486.3
Mall Construction Loan Facility .......... 140.0 Mall .................................... 123.6
FF&E Credit Facility (5) ................. 97.7 FF&E (4)(7) ............................. 121.1
Mortgage Notes ........................... 425.0 Land (6)(8) ............................. 225.0
Senior Subordinated Notes ................ 90.5 Parking and site work ................... 36.4
Equity Contribution (6) .................. 320.3 Interest, net ........................... 88.4
--------- Pre-opening costs and expenses .......... 34.4
Contingency (9) ......................... 66.1
Financing fees and expenses ............. 42.2
---------
Total Sources .......................... $ 1,223.5 Total Uses ............................ $ 1,223.5
========= =========
</TABLE>
- --------------
(1) The Company believes that the construction and development budget for the
Casino Resort is reasonable; however, given the risks inherent in the
construction process, it is possible that construction and development
costs for the Casino Resort could be significantly higher. See "Risk
Factors--Risk of New Construction," "--Construction Budget; Construction
Management Contract and Guaranties" and "--Completion Guaranty."
(2) The sources and uses table does not include approximately $70.0 million for
the HVAC Equipment, which will be provided by the HVAC Provider. See
"Certain Material Agreements--Agreements Relating to the Casino
Resort--HVAC Services Agreement and Related Documents."
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<PAGE>
(3) The Issuers used a portion of the net proceeds from the Offering to repay
$30.1 million of indebtedness plus accrued interest under the Construction
Loan. The net proceeds from the Construction Loan were used to fund the
development and construction costs of the Casino Resort. See "Management's
Discussion and Analysis of Liquidity and Capital Resources."
(4) Additional borrowings under the Bank Credit Facility of up to $20.0 million
are available under a revolving loan facility (approximately $15.0 million
of which will be available during the construction period: (i) to fund the
purchase of the Specified FF&E (including deposits thereon), with such
amounts to be repaid from funds drawn under the FF&E Credit Facility and
(ii) to support letters of credit related to the construction of the
Casino Resort). See "Description of Certain Indebtedness--Bank Credit
Facility."
(5) The availability of funds under the FF&E Credit Facility is subject to
certain conditions, including reaching a certain level of construction
progress on the Casino Resort. See "Description of Certain
Indebtedness--FF&E Credit Facility."
(6) Equity Contribution represents (i) $95.3 million in cash advanced by the
Sole Stockholder or his affiliates to fund construction and development
costs and expenses of the Casino Resort and (ii) $225.0 million
representing the appraised value of the Project Site (such land had a book
value of $93.6 million at December 31, 1997). See "Appraisals--Land
Appraisal" and "Certain Transactions--Equity Contribution."
(7) Includes $26.9 million of gaming equipment and $94.2 million of other
furniture, fixtures and equipment. See "Description of Certain
Indebtedness--FF&E Credit Facility."
(8) Upon the completion of a subdivision of the Project Site, the Phase II Land
may be released from the Note Collateral and transferred to the Phase II
Subsidiary. See "Description of Mortgage Notes--Ranking and Security."
(9) The total contingency consists of $66.1 million which is currently
allocable as follows: (i) the $26.1 million Construction Manager's
Contingency and (ii) the $40.0 million Owner's Contingency. In addition,
the Sole Stockholder's collateralized Completion Guaranty also is
available to cover cost overruns. See "Risk Factors--Construction Budget;
Construction Management Contract and Guaranties" and "Certain Material
Agreements--Agreements Relating to the Casino Resort--Construction
Management Contract."
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1997 and as adjusted to give effect to (i) the borrowing of $150.0
million under the Bank Credit Facility, (ii) the borrowing of $140.0 million
under the Mall Construction Loan Facility and (iii) the borrowing of $97.7
million under the FF&E Credit Facility. This table should be read in
conjunction with the more detailed information and financial statements
appearing elsewhere in this Prospectus. See "Use of Proceeds," "Description of
Mortgage Notes," "Description of Senior Subordinated Notes" and "Description of
Certain Indebtedness."
<TABLE>
<CAPTION>
As of December 31, 1997
(in millions)
Actual As Adjusted
---------- ------------
<S> <C> <C>
Long-Term Debt:
Bank Credit Facility (1) .................... $ -- $ 150.0
Mall Construction Loan Facility (2) ......... -- 140.0
Mortgage Notes .............................. 425.0 425.0
FF&E Credit Facility (3) .................... -- 97.7
Senior Subordinated Notes ................... 90.5 90.5
------ ---------
Total Long-Term Debt ...................... 515.5 903.2
------ ---------
Preferred Interest in Venetian (4) ............. 77.1 77.1
------ ---------
Stockholder's Equity (5) ....................... 111.3 111.3
------ ---------
Total Capitalization ........................... $ 703.9 $ 1,091.6
======= =========
</TABLE>
- --------------
(1) The Bank Credit Facility consists of (i) multiple draw term loans of up to
$150.0 million (the "Term Loans") available for a period commencing on the
closing date of the Bank Credit Facility (the "Closing Date") and ending
on the earlier to occur of
(a) April 21, 1999, subject to extension under the Disbursement Agreement
(the "Outside Completion Deadline") and (b) Completion (the "Term Loan
Commitment Termination Date") and (ii) revolving credit facility loans of up
to $20.0 million (the "Revolving Loans") available for a period commencing
eight months prior to the opening date and ending two years from the initial
draw on the Revolving Loans, but in no event later than the second
anniversary of the Term Loan Commitment Termination Date. In addition, up to
$15.0 million of borrowings under the Bank Credit Facility will be available
during the construction period: (i) to fund the purchase of Specified FF&E
(including deposits thereon), with such amounts to be repaid from funds
drawn under the FF&E Credit Facility and (ii) to support letters of credit
related to the construction of the Casino Resort. See "Description of
Certain Indebtedness--Bank Credit Facility."
(2) Upon the completion of the Casino Resort and the satisfaction of certain
other conditions, pursuant to the Sale and Contribution Agreement, the
Mall Construction Subsidiary will transfer the Mall Collateral to the Mall
Subsidiary. Upon such transfer, the indebtedness under the Mall
Construction Loan Facility will either be repaid or assumed by Mall
Subsidiary. See "Certain Material Agreements--Agreements Relating to the
Mall--Sale and Contribution Agreement." GSMC and the Tranche B Take-out
Lender separately have entered into commitment agreements with the Mall
Subsidiary whereby, subject to completion of the Casino Resort and the
satisfaction of certain other conditions, (i) GSMC has agreed to provide
the Tranche A Take-out Financing of up to $105.0 million and (ii) the
Tranche B Take-out Lender has agreed to provide the Tranche B Take-out
Financing of up to $35.0 million. See "Description of Certain
Indebtedness--Mall Take-out Financing Commitments."
(3) The FF&E Credit Facility is a $97.7 million multiple draw facility
available to fund the acquisition and installation of the Specified FF&E.
The availability of such financing is subject to certain conditions,
including reaching a certain level of construction progress on the Casino
Resort. See "Description of Certain Indebtedness--FF&E Credit Facility."
(4) Contributions by the Sole Stockholder (or his affiliates) include $77.1
million of preferred interest in Venetian and $18.2 million of common
equity in the Company. See "Certain Transactions--Preferred Interest."
(5) The principal components of stockholder's equity are land of $93.6 million
and cash of $18.2 million contributed by the Sole Stockholder for
construction funding.
50
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Financial Forecast and Historical Financial
Statements and the notes thereto and other financial information included
elsewhere in this Prospectus. Certain statements contained in "Management's
Discussion and Analysis of Liquidity and Capital Resources" constitute
forward-looking statements. See "Special Note Regarding Forward-Looking
Statements."
Development Activities
The Company is constructing and will own and operate the Casino Resort, a
large-scale Venetian-themed hotel, casino, retail, meeting and entertainment
complex in Las Vegas, Nevada. The Casino Resort is expected to commence
operations in the second quarter of 1999. Formal ground breaking occurred in
April 1997. In June 1997, LVSI transferred the Project Site to Venetian.
Results of Operations
In April 1989, the Company acquired the Sands from MGM Grand Inc. The
Company owned and operated the Sands from April 1989 to June 1996 when
operations ceased. The Company's historical operating results will not be
indicative of future operating results because such information is relevant
only to the Company's ownership and operation of the Sands, which was
demolished in November 1996, and which was a much different and smaller
facility than the planned Casino Resort. In addition, the Sands was operated by
a substantially different management team. See "Annex A--Certain Historical
Financial Information" for certain historical financial information relating to
the Company's historical operations. See the Financial Forecast for information
relating to the first twelve months of operations of the Casino Resort.
Liquidity and Capital Resources
Venetian Casino Resort
As of December 31, 1997, approximately $228.1 million of the total project
cost of $1.065 billion (including approximately $70.0 million of HVAC Equipment
costs, but excluding land acquisition costs) had been expended or incurred to
fund construction and development of the Casino Resort. Of the costs expended
or incurred, approximately $95.3 million represents cash contributed by the
Sole Stockholder and his affiliates to the Company, and the balance represents
proceeds from the Senior Subordinated Notes and year end accruals for
construction payables and contractor retention amounts. The remaining $837.4
million of estimated construction and development costs for the Casino Resort
is expected to be funded from a combination of (i) borrowings of approximately
$150.0 million under the Bank Credit Facility, (ii) gross proceeds from the
offering of the Mortgage Notes of approximately $425.0 million, (iii) remaining
proceeds from the offering of the Senior Subordinated Notes of approximately
$90.5 million (net of original issue discount), (iv) borrowings of
approximately $140.0 million under the Mall Construction Loan Facility and (v)
borrowings under the FF&E Credit Facility of approximately $97.7 million. In
addition, the HVAC Provider will separately contribute up to $70.0 million for
the purchase and installation of the HVAC Equipment, which the HVAC Provider
will own and operate. For more information, see "Use of Proceeds," "Description
of Mortgage Notes," "Description of Senior Subordinated Notes" and "Description
of Certain Indebtedness."
The Bank Credit Facility consists of (i) multiple draw Term Loans of up to
$150.0 million which may be drawn to fund the development and construction of
the Casino Resort, and will be available for a period commencing upon the
Closing Date and ending on the earlier to occur of (a) the Outside Completion
Deadline and (b) Completion, and (ii) Revolving Loans of up to $20.0 million,
which may be drawn to fund certain start-up operational costs of the Casino
Resort, and will be available for a period commencing eight months prior to the
opening date and ending two years from the initial draw on the Revolving Loans
(but in no event later than the second anniversary of the Term Loan Commitment
Termination Date), at which time all Revolving Loans must be repaid. The Term
Loans mature not later than six years from the Closing Date and are subject to
quarterly amortization payments which began on the earlier of (i) 120 days
after the Opening Date, (ii) the Completion Date and (iii) the Outside
Completion Deadline. Amortization during
51
<PAGE>
the first four quarters following the amortization commencement date will be
3.75% of principal per quarter; during the second four quarters, 5% of
principal per quarter; during the third four quarters, 7.5% of principal per
quarter; and during the fourth four quarters, 8.75% of principal per quarter.
Up to $15.0 million under the Revolving Loans will be available prior to such
eight-month period: (i) to fund the purchase of the Specified FF&E (including
deposits thereon), with such amounts to be repaid from funds drawn under the
FF&E Credit Facility and (ii) to support letters of credit related to the
construction of the Casino Resort. All amounts outstanding under the Bank
Credit Facility bear interest, at the option of the Issuers (subject to certain
limitations) as follows: (A) with respect to the period prior to the
Substantial Completion Date, (i) at the Base Rate plus 2.00% per annum; or (ii)
at the reserve adjusted Eurodollar Rate plus 3.00% per annum; (B) with respect
to outstandings under the Bank Credit Facility for the period between the
Substantial Completion Date and ending on the second full fiscal quarter
following the Substantial Completion Date, (i) at the Base Rate plus 1.50%; or
(ii) at the reserve adjusted Eurodollar Rate plus 2.50% per annum; and (C) with
respect to outstandings under the Bank Credit Facility for the period
commencing on the second full fiscal quarter following the Substantial
Completion Date, at the Base Rate or reserve adjusted Eurodollar Rate, as the
case may be, plus the relevant margin based on certain leverage ratios set
forth in the Bank Credit Facility loan agreement. For a description of the
terms of the Bank Credit Facility, see "Description of Certain
Indebtedness--Bank Credit Facility."
The Mall Construction Loan Facility consists of (i) a $105.0 million
tranche (the "Tranche A Loan") and (ii) a $35.0 million tranche (the "Tranche B
Loan"). Borrowings under the Tranche B Loan will be used to fund the
development and construction of the Casino Resort, and were available as of the
closing of the Mall Construction Loan Facility. Borrowings under the Tranche A
Loan will be used to fund the development and construction of the Casino Resort
but will not be drawn until the Tranche B Loan is fully funded. Borrowings
under the Tranche A Loan are available until the earlier to occur of (i)
Completion and (ii) the Outside Completion Deadline. The Mall Construction Loan
Facility matures on May 1, 2000 (unless extended). The interest rate on
indebtedness outstanding under the Mall Construction Loan Facility is 275 basis
points over 30-day LIBOR, provided that effective as of April 10, 1998, if the
Mall Parcel is not a separate legal and tax parcel by July 10, 1998, such
interest rate shall be 375 basis points over 30-day LIBOR until such time, if
any, as the Mall Parcel becomes a separate legal and tax parcel. For a
description of the terms of the Mall Construction Loan Facility, see
"Description of Certain Indebtedness--Mall Construction Loan Facility."
The FF&E Credit Facility consists of a $97.7 million multiple draw,
interim loan prior to completion of the Casino Resort, which converts to a term
loan for a period of 60 months after completion of the Casino Resort. If the
FF&E Credit Facility is not fully funded on the Project Construction Completion
Date (as defined in the Disbursement Agreement), the unused portion of the
commitment under the FF&E Credit Facility may be drawn in whole and placed in a
cash collateral account and used to fund the purchase and installation of
Specified FF&E for a period of 120 days, with any proceeds remaining in such
cash collateral account after such 120-day period being used by the FF&E
Lenders to prepay an equivalent portion of the outstanding borrowings at such
time. Funding will not be available under the FF&E Credit Facility until the
Casino Resort is within eight months of the opening date of the Casino Resort
and is subject to certain pre-funding conditions, including, delivery of
certain customary legal opinions, filing of UCC-1 financing statements and
evidence that the Casino Resort will open within such eight-month period.
Interest on the interim loan, if paid on a current basis, will be due quarterly
in arrears at a floating rate equal to 30-day reserve adjusted LIBOR plus 375
basis points or at the Base Rate (the greater of the Prime Rate or the Federal
Funds Rate plus 50 basis points) plus 100 basis points, whichever the Issuers
elect. Upon the same date as the Project Construction Completion Date but no
later than November 1, 1999 (or January 31, 2000 if certain casualty events
occur after November 1, 1998 and the Casino Resort can be repaired on or before
January 31, 2000)) (the "Basic Loan Commencement Date"), but subject to certain
conditions, the interim loan will convert to a sixty-month term loan with
quarterly amortization payments. Amortization on the FF&E Basic Loan will be 3%
of principal for the first four quarters and 5.5% of principal for the last 16
quarters. Interest on the FF&E Basic Loan is expected to be a floating monthly
rate calculated at the higher of (a) the reserve-adjusted 30-day LIBOR plus 375
basis points or (b) the eurodollar interest rate margin in effect on the Bank
Credit Facility plus 125 basis points. See "Risk Factors--Substantial Leverage;
Ability to Service Debt" and "Description of Certain Indebtedness--FF&E Credit
Facility."
52
<PAGE>
The funds provided by these sources (together with amounts to be provided
by the HVAC Provider) are expected to be sufficient to develop, construct and
commence operations of the Casino Resort, assuming there are no delay costs or
construction cost overruns. If there are any delay costs and construction cost
overruns, the Company expects to use cash received from the following sources
to fund such delay costs and cost overruns (including interest on the Notes):
(i) a Construction Management Contract contingency of approximately $26.1
million, (ii) an Owner's Contingency of approximately $40.0 million, (iii) the
Liquidated Damages Insurance and the proceeds of other (e.g., casualty)
insurance policies, (iv) the Construction Manager, Bovis or P&O, pursuant to
the Construction Management Contract, the Construction Management Contract
Guaranty and the P&O Guaranty, respectively, (v) other third parties, pursuant
to their liability to the Company under their agreements with the Company, and
(vi) the Sole Stockholder, pursuant to his liability under the collateralized
Completion Guaranty of up to $25.0 million. The Completion Guaranty provides
that, subject to certain conditions and limitations, if available funds are not
sufficient to fund all construction and development costs, the Sole Stockholder
is obligated to fund excess costs up to a maximum aggregate amount of $25.0
million. The Sole Stockholder's obligation to fund such excess construction and
development costs is collateralized by $25.0 million of cash or cash
equivalents pledged to the Disbursement Agent. If the Sole Stockholder provides
funds under the Completion Guaranty, the amount of such funds will be treated
as a junior subordinated loan from the Sole Stockholder to Venetian. See "Risk
Factors--Completion Guaranty" and "Certain Material Agreements--Agreements
Relating to the Casino Resort--Completion Guaranty."
Following the completion of the Casino Resort, the Issuers expect to fund
their operations and capital requirements from (i) operating cash flow and (ii)
additional indebtedness of up to $20.0 million of revolving loans under the
Bank Credit Facility. Assuming an opening of the Casino Resort in April 1999,
the aggregate scheduled principal payments due under the Bank Credit Facility
and the FF&E Credit Facility will be zero dollars, $25.7 million, $47.2
million, $62.7 million, $72.1 million and $40.0 million, payable in 1998, 1999,
2000, 2001, 2002 and all years thereafter, respectively. In addition, the
Company expects that the indebtedness under the Mall Construction Loan Facility
will be refinanced upon completion of the Casino Resort. Upon the completion of
the Casino Resort and the satisfaction of certain other conditions, pursuant to
the Sale and Contribution Agreement, the Mall Construction Subsidiary will
transfer the Mall Collateral to the Mall Subsidiary. Upon such transfer, the
Mall Collateral will be released by the Mortgage Note Trustee and the Bank
Agent and will not be available as security for the holders of the Mortgage
Notes or the indebtedness under the Bank Credit Facility, and the indebtedness
under the Mall Construction Loan Facility will either be repaid or assumed by
the Mall Subsidiary (with the Issuers and the Guarantors being released from
all obligations under such indebtedness). See "Certain Material
Agreements--Agreements Relating to the Mall--Sale and Contribution Agreement."
To finance the obligations of the Mall Subsidiary under the Sale and
Contribution Agreement, GSMC and the Tranche B Take-out Lender separately have
entered into commitment agreements with the Mall Subsidiary whereby GSMC and
the Tranche B Take-out Lender have agreed to provide the Mall Take-out
Financings. The consummation of the Tranche A Take-out Financing is subject to
certain conditions, including completion of the Casino Resort and delivery of
legal opinions (including certain substantive non-consolidation opinions). The
Mall Subsidiary is not obligated to draw on the Mall Take-out Financings in
order to fund its obligations under the Sale and Contribution Agreement and may
obtain alternative sources of financing to fund such obligations. Any
indebtedness incurred by the Mall Subsidiary (including the Tranche A Take-out
Financing) is expected to include material restrictions on the ability of the
Mall Subsidiary to pay dividends or to make distributions or loans to the
Issuers and their Restricted Subsidiaries. See "Risk Factors--Substantial
Leverage; Ability to Service Debt," "Description of Certain Indebtedness--Mall
Take-out Financing Commitments" and "Unrestricted and Special Subsidiaries."
Although no additional financing for the Casino Resort is currently
contemplated (other than that described above), the Company will seek, if
necessary and to the extent permitted under the Indentures and the terms of the
Bank Credit Facility and the Mall Construction Loan Facility, additional
financing through additional bank borrowings or debt or equity financings.
There can be no assurance that additional financing, if needed, will be
available to the Company, and, if available, that the financing will be on
terms favorable to the Company, or that the Sole Stockholder or any of his
affiliates will provide any such financing. Finally, there can be no assurance
that new business developments or other unforeseen events will not occur
resulting in the need to raise additional funds.
53
<PAGE>
Phase II Resort
If the Phase II Subsidiary determines to construct the Phase II Resort,
the Phase II Subsidiary will be required to raise substantial debt and/or
equity financings. Currently, there are no commitments to fund any portion of
the construction and development costs of the Phase II Resort. The Phase II
Subsidiary is an Unrestricted Subsidiary for purposes of the Indentures.
Accordingly, the Phase II Subsidiary is not subject to any of the restrictive
covenants of the Indentures (including, without limitation, the covenants with
respect to the limitations on indebtedness and restrictions on the ability to
pay dividends or to make distributions or loans to the Issuers and their
Restricted Subsidiaries). Any indebtedness incurred by the Phase II Subsidiary
is expected to include material restrictions on the ability of the Phase II
Subsidiary to pay dividends or make distributions or loans to the Issuers and
their Restricted Subsidiaries. See "Risk Factors--Unrestricted and Special
Subsidiaries."
However, the Indentures limit the ability of Venetian, LVSI or any of
their Restricted Subsidiaries to guarantee or otherwise become liable for any
indebtedness of the Phase II Subsidiary. The Indentures also restrict the sale
or other disposition by the Issuers and their Restricted Subsidiaries of
Capital Stock (as defined herein) of the Phase II Subsidiary, including the
sale of any such Capital Stock to the Sole Stockholder or any Affiliate of the
Sole Stockholder. In addition, prior to commencement of construction of the
Phase II Resort, Venetian has the right to approve the plans and specifications
for the Phase II Resort. The development, construction and opening of the
Casino Resort is not dependent on the construction and opening of the Phase II
Resort. The development of the Phase II Resort may require obtaining additional
regulatory approvals. Under the Indentures, the Issuers have agreed that they
will not commence construction of the Phase II Resort (other than the parking
garage on the Phase II Land) until a temporary certificate of occupancy has
been issued for the Casino Resort.
Year 2000
The Company has conducted a review of its financial and sales software,
construction job costs software and computer systems in order to identify any
adverse effects of the Year 2000 issue. The Year 2000 issue refers to the
inability of many computer systems to accurately process dates subsequent to
December 31, 1999. Possible Year 2000 problems create risk for a company in
that unforeseen problems in its own computer systems or those of its third
party suppliers could have a material impact on a company's ability to conduct
its business operations. The Company has determined that the internal staff
costs as well as consulting and other expenses to prepare its systems for the
year 2000 will have no material impact on the Company's expenses during 1998
and 1999 and will not have a material impact on its ongoing operating results.
The Company is presently making inquiries to determine whether the Year 2000
issue will have any effect on its suppliers and business partners.
54
<PAGE>
THE EXCHANGE OFFER
General
The Issuers hereby offer, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $425.0 million
aggregate principal amount of New Mortgage Notes and up to $97.5 million
aggregate principal amount of New Senior Subordinated Notes for a like
aggregate principal amount of Existing Mortgage Notes and Existing Senior
Subordinated Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Existing Notes: the total
aggregate principal amount of Existing Mortgage Notes and New Mortgage Notes
will in no event exceed $425.0 million, and the total aggregate principal
amount of Existing Senior Subordinated Notes and New Senior Subordinated Notes
will in no event exceed $97.5 million.
This Prospectus, together with the Letter of Transmittal, is first being
sent on or about , 1998 to all holders of Existing Notes known to
the Issuers. The Issuers' obligation to accept Existing Notes for exchange
pursuant to the Exchange Offer is subject to certain conditions as set forth
under "--Conditions to the Exchange Offer" below.
Purpose of the Exchange Offer
The Existing Notes were issued by the Issuers on November 14, 1997 in
transactions exempt from the registration requirements of the Securities Act.
Accordingly, the Existing Notes may not be reoffered, resold, or otherwise
transferred in the United States unless so registered or unless an applicable
exemption from the registration and prospectus delivery requirements of the
Securities Act is available.
In connection with the issuance and sale of the Existing Notes, the
Issuers and the Guarantors entered into the Registration Rights Agreement,
which requires the Issuers and the Guarantors to (x) file on or before December
29, 1997 (45 days after the date of issuance of the Existing Notes) a
registration statement relating to the Exchange Offer (the "Exchange Offer
Registration Statement") and (y) use their respective best efforts to cause the
Exchange Offer Registration Statement to become effective on or before May 13,
1998 (180 days after the date of issuance of the Existing Notes). The
Registration Rights Agreement requires the Issuers and the Guarantors, under
certain circumstances, to provide a shelf registration statement (the "Shelf
Registration Statement") to cover resales of the Notes by the holders thereof
and to keep such shelf registration statement effective until two years after
the date of original issuance of the Notes or such other period of time as
provided in the Registration Rights Agreement. If (i) the Issuers and the
Guarantors fail to cause the Exchange Offer Registration Statement to become
effective within 180 days of the date of issuance of the Existing Notes, (ii)
the Issuers and the Guarantors are obligated to provide a Shelf Registration
Statement and such Shelf Registration Statement is not filed within 30 days or
declared effective within 90 days (or if later 45 days and 180 days after the
date of issuance of the Existing Notes, respectively), of the date on which the
Issuers and the Guarantors became so obligated, (iii) subject to certain
exceptions, the Issuers and the Guarantors fail to consummate the Exchange
Offer within 30 business days of the effectiveness target date or (iv) the
Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but shall thereafter cease to be effective or usable in
connection with resales of the Transfer Restricted Securities (as defined in
the Registration Rights Agreement), for the periods specified in the
Registration Rights Agreement (each event referred to in clauses (i) through
(iv) above a "Registration Default"), then LVSI and Venetian shall pay to each
holder of Transfer Restricted Securities, with respect to the first 90-day
period following such Registration Default, liquidated damages ("Liquidated
Damages") in an amount equal to 0.25% per annum on the principal amount of
Transfer Restricted Damages held by such holder. The amount of such Liquidated
Damages will increase by an additional 0.25% per annum for each subsequent
90-day period until such Registration Default has been cured, up to a maximum
of 2.0% per annum on the principal amount of the Notes constituting Transfer
Restricted Securities. See "Risk Factors--Government Regulation." The Exchange
Offer is being made by the Issuers and the Guarantors to satisfy their
obligations with respect to the Registration Rights Agreement.
Based on no-action letters issued by the staff of the Commission to third
parties in unrelated transactions, the Issuers believe that the New Notes
issued pursuant to the Exchange Offer may be offered
55
<PAGE>
for resale, resold or otherwise transferred by holders thereof (other than (i)
any such holder that is an "affiliate" of either of the Issuers within the
meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that
purchases Notes from the Issuers to resell pursuant to Rule 144A or any other
available exemption) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement or understanding with any person to participate in the
distribution of such New Notes and are not participating in, and do not intend
to participate in, the distribution of such New Notes. Any holder of Existing
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Thus, any New Notes acquired by such holders will
not be freely transferable except in compliance with the Securities Act. See
"--Consequences of Failure to Exchange; Resale of New Notes."
Expiration Date; Extension; Termination; Amendment
The Exchange Offer will expire at 5:00 P.M., New York City time, on
, 1998 unless the Issuers, in their sole discretion, have extended
the period of time for which the Exchange Offer is open (such date, as it may
be extended, is referred to herein as the "Expiration Date"). The Expiration
Date will be at least 20 business days after the commencement of the Exchange
Offer in accordance with Rule 14e-1(a) under the Exchange Act. The Issuers
expressly reserve the right, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open and thereby delay
acceptance for exchange of any Existing Notes, by giving oral notice (promptly
confirmed in writing) or written notice to the Exchange Agent and by giving
written notice of such extension to the holders thereof no later than 9:00 A.M.
New York City time, on the next business day after the previously scheduled
Expiration Date. During any such extension, all Existing Notes previously
tendered will remain subject to the Exchange Offer unless properly withdrawn.
In addition, the Issuers expressly reserve the right to terminate or amend
the Exchange Offer and not to accept for exchange any Existing Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "--Conditions to the Exchange Offer." If any such
termination or amendment occurs, the Issuers will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Existing Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 A.M. through 12:00 midnight, New York City time.
Procedures for Tendering Existing Notes
The tender to the Issuers of Existing Notes by a holder thereof as set
forth below and the acceptance thereof by the Issuers will constitute a binding
agreement between the tendering holder and the Issuers upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Existing Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Existing Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth below on
or prior to the Expiration Date (or complying with the procedure for book-entry
transfer described below) or (ii) complying with the guaranteed delivery
procedures described below.
The method of delivery of Existing Notes, Letters of Transmittal and all
other required documents is at the election and risk of the holders. If such
delivery is by mail, it is recommended that registered mail properly insured,
with return receipt requested, be used. In all cases, sufficient time should be
allowed to insure timely delivery. No Existing Notes or Letters of Transmittal
should be sent to the Issuers.
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Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution (as defined below). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantees must be by a
firm which is a member of a registered national securities exchange or a member
of the National Association of Securities Dealers, Inc. or by a clearing
agency, an insured credit union, a savings association or a commercial bank or
trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Existing Notes are registered in
the name of a person other than a signer of the Letter of Transmittal, the
Existing Notes surrendered for exchange must be endorsed by, or be accompanied
by a written instrument or instruments of transfer or exchange, in satisfactory
form as determined by the Issuers in their sole discretion, duly executed by
the registered holder with the signature thereon guaranteed by an Eligible
Institution.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Existing Notes by
causing DTC to transfer such Existing Notes into the Exchange Agent's account
in accordance with DTC's procedures for such transfer. In connection with a
book-entry transfer, a Letter of Transmittal need not be transmitted to the
Exchange Agent and manually executed, if delivery of the New Notes is to be
made by book-entry transfer to the account maintained by the Exchange Agent at
DTC; provided, however, that the book-entry transfer procedure must be complied
with prior to 5:00 p.m., New York City time, on the Expiration Date and tenders
of the Existing Notes must be effected in accordance with the procedures
mandated by DTC's Automated Tender Offer Program.
If a holder desires to accept the Exchange Offer and time will not permit
a Letter of Transmittal or Existing Note to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date a letter,
telegram or facsimile transmission from an Eligible Institution setting forth
the name and address of the tendering holder, the names in which the Existing
Notes are registered and, if possible, the certificate numbers of the Existing
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date the
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Existing Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Issuers may, at their
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the book-entry
transfer facility) is received by the Exchange Agent, or (ii) a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) from an Eligible Institution is received by the
Exchange Agent. Issuances of New Notes in exchange for Existing Notes tendered
pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) by an Eligible Institution
will be made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Issuers in their sole discretion, which determination shall
be final and binding. The Issuers reserve the absolute right to reject any and
all tenders of any particular Existing Notes not properly tendered or to not
accept any particular Existing Notes which acceptance might, in the judgment of
the Issuers or their counsel, be unlawful. The Issuers also reserve
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the absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Existing Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Existing Notes in the Exchange Offer). The interpretation
of the terms and conditions of the Exchange Offer as to any particular Existing
Notes either before or after the Expiration Date (including the Letter of
Transmittal and the instructions thereto) by the Issuers shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes for exchange must be cured within
such reasonable period of time as the Issuers shall determine. Neither the
Issuers, the Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Existing Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Existing Notes, such Existing Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders appear
on the Existing Notes.
If the Letter of Transmittal or any Existing Notes or powers of attorney
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless waived by the Issuers, proper evidence satisfactory to the Issuers of
their authority to so act must be submitted.
By tendering, each holder will represent to the Issuers and the Guarantors
in the Letter of Transmittal that, among other things, the New Notes acquired
pursuant to the Exchange Offer are being acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the holder, that neither the holder nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes, that neither the holder nor any such other person is
participating in or intends to participate in the distribution of such New
Notes and that neither the holder nor any such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Issuers and the
Guarantors.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
Withdrawal Rights
Tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent prior to the Expiration Date at its
address set forth below. Any such notice of withdrawal must (i) specify the
name of the person having tendered the Existing Notes to be withdrawn (the
"Depositor"), (ii) identify the Existing Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Existing Notes),
(iii) be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such Existing Notes were tendered or as
otherwise described above (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the applicable Trustee
under the applicable Indenture register the transfer of such Existing Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Existing Notes are to be registered, if different from that of
the depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuers
in their sole discretion, which determination will be final and binding on all
parties. Any Existing Notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any Existing
Notes which have been tendered for exchange and which are properly withdrawn
will be returned to the holder thereof without cost to such holder as soon as
practicable after such withdrawal. Properly withdrawn Existing Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Existing Notes" above at any time on or prior to the Expiration Date.
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Acceptance of Existing Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Issuers will accept, promptly after the Expiration Date, all
Existing Notes properly tendered and will issue the New Notes promptly after
acceptance of the Existing Notes. See "--Conditions to the Exchange Offer"
below. For the purposes of the Exchange Offer, the Issuers shall be deemed to
have accepted properly tendered Existing Notes for exchange when, as and if the
Issuers have given oral and written notice thereof to the Exchange Agent.
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note.
In all cases, issuance of New Notes for Existing Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Existing Notes or a
timely Book-Entry Confirmation of such Existing Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal and all other required documents. If any
tendered Existing Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Existing Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted
or non-exchanged Existing Notes will be returned without expense to the
tendering holder thereof (or, in case of Existing Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Existing Notes will be credited to an account maintained with
such Book-Entry Transfer Facility) as promptly as practicable after the
expiration of the Exchange Offer.
Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, the Issuers
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Existing Notes and may terminate or amend the Exchange Offer if at any
time before the acceptance of such Existing Notes for exchange or the exchange
of the New Notes for such Existing Notes any of the following events shall
occur:
(i) any injunction, order or decree shall have been issued by any
court or any governmental agency (including any Nevada gaming authority)
that would prohibit, prevent or otherwise materially impair the ability of
the Issuers to proceed with the Exchange Offer, or
(ii) the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Issuers and may
be asserted by the Issuers regardless of the circumstances giving rise to any
such condition or may be waived by the Issuers in whole or in part at any time
and from time to time in its reasonable judgment. The failure by the Issuers at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, the Issuers will accept for exchange any Existing Notes
tendered, and no New Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of either of the indentures under the Trust Indenture
Act of 1939 (the "Trust Indenture Act"). In any such event the Issuers and the
Guarantors are required to use every reasonable effort to obtain the withdrawal
of any stop order at the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange.
Exchange Agent
First Trust National Association has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. Requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests
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for Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
By Mail: By Hand Delivery: By Overnight Mail or Courier:
First Trust National First Trust National First Trust National
Association Association Association
180 East 5th Street 180 East 5th Street 180 East 5th Street
St. Paul, MN 55101 St. Paul, MN 55101 St. Paul, MN 55101
Attn: Corporate Finance Attn: Corporate Finance Attn: Corporate Finance
Rick Prokosch Rick Prokosch Rick Prokosch
For information, call
Ph: (612) 244-0721
Fax: (612) 244-0711
DELIVERY OF THE EXISTING NOTES, LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION
OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE
A VALID DELIVERY.
Solicitation of Tenders; Fees and Expenses
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payment to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Issuers, however,
will pay the Exchange Agent reasonable and customary fees for its services and
will reimburse it for its reasonable out-of-pocket expenses in connection
therewith. The cash expenses to be incurred by the Issuers in connection with
the Exchange Offer will be paid by the Issuers.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Issuers. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Issuers since the respective dates as of
which information is given herein. The Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) holders of Existing Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
Transfer Taxes
Holders who tender their Existing Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith except that holders who
instruct the Issuers to register New Notes in the name of, or request that
Existing Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
Accounting Treatment
The New Notes will be recorded at the carrying value of the Existing Notes
as reflected in the Issuers' accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Issuers upon the exchange of New Notes for Existing Notes. Expenses incurred in
connection with the issuance of the New Notes will be amortized over the term
of the New Notes.
Consequences of Failure to Exchange; Resales of New Notes
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Existing Notes not exchanged pursuant to the Exchange Offer will continue to
remain outstanding in accordance with their terms. In general, the Existing
Notes may not be altered or sold unless
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registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. The Issuers and the Guarantors do not currently anticipate
that they will register the Existing Notes under the Securities Act. However,
in the event that the Issuers and the Guarantors determine that the Exchange
Offer is not available or may not be consummated as soon as practicable after
the last date the Exchange Offer is open: (i) because it would violate
applicable law or the applicable interpretations of the staff of the
Commission, (ii) if the Exchange Offer is not approved by the applicable gaming
authorities in the State of Nevada, or (iii) if any holder of Existing Notes
shall notify the Issuers within 20 business days following the consummation of
the Exchange Offer that (a) such holder was prohibited by law or Commission
policy from participating in the Exchange Offer, (b) such holder may not resell
the Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
holder, or (c) such holder is a broker-dealer and holds Notes acquired directly
from the Issuers or one of their affiliates, then, in each case, the Issuers
and the Guarantors will at their sole expense, (i) use their reasonable best
efforts to cause the Shelf Registration Statement to be filed on or prior to 30
days after the date on which the Issuers and the Guarantors determine that they
are not required to file the Exchange Offer Registration Statement pursuant to
clause (i) or (ii) above or 30 days after the date on which the Issuers receive
the notice specified in clause (iii) above, (ii) use their reasonable best
efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act on or prior to 90 days after the Issuers and the
Guarantors became obligated to file such Shelf Registration Statement and (iii)
use their reasonable best efforts to keep effective the Shelf Registration
Statement until the earlier of two years after the Issue Date or such time as
all of the applicable Notes have been sold thereunder. The Issuers will, in the
event that a Shelf Registration Statement is filed, provide to each Holder
copies of the prospectus that is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration for the Notes has become
effective and take certain other actions as are required to permit unrestricted
resales of the Notes. A Holder that sells such Notes pursuant to the Shelf
Registration Statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreements that are applicable to such a
Holder (including certain indemnification rights and obligations).
Based on certain no-action letters issued by the staff of the Commission
to third parties in unrelated transactions, the Issuers believe that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act or, (ii) any broker-dealer that purchases Notes from the Issuers
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes and are not participating in, and do not intend to participate in, the
distribution of such New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holders (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction. A broker-dealer who
holds Existing Notes that were acquired for its own account as a result of
market making or other trading activities may be deemed to be an "underwriter"
within the meaning of the Securities Act and must, therefore, deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of New Notes. Each such broker-dealer that receives New Notes for
its own account in exchange for Existing Notes, where such Existing Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Issuers
have agreed, pursuant to the Registration Rights Agreement and subject to
certain specified limitations therein, to
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register or qualify the New Notes for offer or sale under the securities or
blue sky laws of such jurisdictions as are necessary to permit the consummation
of the Exchange Offer.
Participation in the Exchange Offer is voluntary, and holders of Existing
Notes should carefully consider whether to participate. Holders of the Existing
Notes are urged to consult their financial and tax advisors in making their own
decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
the Issuers and the Guarantors will have fulfilled a covenant contained in the
Registration Rights Agreement. Holders of Existing Notes who do not tender
their Existing Notes in the Exchange Offer will continue to hold such Existing
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indentures, except for any such rights under the
Registration Rights Agreement that by their terms terminate or cease to have
further effectiveness as a result of the making of this Exchange Offer. See
"Description of Mortgage Notes" and "Description of Senior Subordinated Notes."
All untendered Existing Notes will continue to be subject to the restriction on
transfer set forth in the Indentures. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
Existing Notes could be adversely affected.
The Issuers may in the future seek to acquire untendered Existing Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuers have no present plan to acquire any Existing
Notes which are not tendered in the Exchange Offer.
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BUSINESS
The Company is constructing and will own and operate the Venetian Casino
Resort, a Renaisssance Venice-themed resort situated at one of the premier
locations on the Strip. The Casino Resort is located across from The Mirage and
the Treasure Island Hotel and Casino at the site of the Sands. As planned, the
Casino Resort will include the first all-suites hotel on the Strip with
approximately 3,036 suites; a gaming facility of approximately 116,000 square
feet; an enclosed retail, dining and entertainment complex of approximately
500,000 net leasable square feet; and a meeting and conference facility of
approximately 500,000 square feet. The Casino Resort will be physically
connected to the approximately 1,150,000 square foot existing Expo Center, one
of the largest facilities in the United States specifically designed for trade
shows and conventions. Management believes that the combined facilities of the
Casino Resort and the Expo Center (which is separately owned by an affiliate of
the Company) will be one of the largest hotel and meeting complexes in the
United States. Ground breaking for the Casino Resort occurred in April 1997,
with an opening to the general public scheduled for April 1999.
The Casino Resort
The Hotel
The Hotel will have approximately 3,036 single and multiple bedroom suites
situated in a 35-story, three-winged tower rising above the Casino. The lobby
will feature a 65-foot domed ceiling decorated with Venetian-themed
fresco-style paintings, a main passageway formed by a barrel-vaulted ceiling
carried on ornamental columns, and a replica of the unique three
dimensional-style marble floors found in Venetian palaces.
A typical Hotel suite will be approximately 655 to 735 square feet
consisting of a raised sleeping area with a bathroom and a sunken
living/working area. The suite's bi-level configuration is intended to create a
multi-function living space in which guests can sleep, work or entertain and
will include two queen-size beds or one king-size bed, a writing desk, dual
line speaker phones, a fax machine and a sitting area. Furthermore,
approximately 318 of the suites will be of larger size allowing for the
possibility of entertaining from 20 to 100 persons in the living area.
The Hotel will lease space to (or operate) approximately six restaurants
that will be located adjacent to the Casino. To date, letters of intent have
been entered into with several well-known restauranteurs for upscale
restaurants. Hotel guests also will have the option of casual dining at a
20,000 square foot cafe, which is expected to be operated by a
nationally-recognized operator of premium casual restaurants, and at a 15,000
square foot Venetian-style market food court, both of which will be located at
the casino level of the Hotel. Live entertainment will be offered at the Mall's
50,000 square foot "Billboard Live!" entertainment complex. Hotel guests will
have access to concierge services and express room service through pantries
that are planned for every other floor of the Hotel tower. In addition, the
Hotel will provide a variety of amenities for its guests, including a
state-of-the-art health spa, with massage and treatment rooms, exercise and
fitness areas and a beauty salon. The Hotel also will feature an outdoor
swimming complex (including five pools, spas, pool bars and cabanas) surrounded
by gardens, waterways, fountains and sculptures. The Hotel has been designed to
accommodate future expansion, including a 1,500 seat showcase theater.
The Casino
The Casino will be approximately 116,000 square feet and will be situated
adjacent to the Hotel lobby. The Casino floor will be accessible from each of
the Hotel, the Mall, the Congress Center, the Expo Center and the Strip. The
Casino will be marketed to attract a broad base of patrons, with a specific
focus on frequent premium gaming customers. The Company will market the Casino
directly to this gaming market segment using database marketing techniques,
slot clubs and traditional incentives, such as reduced room rates and
complementary meals and suites. The Company will offer "high roller" gaming
customers premium suites and special hotel services.
The Casino and its adjacent amenities will be stylized to resemble a
Venetian "palazzo," with architectural and interior design features
representative of Venice's Renaissance era. The ceilings in the table games
area will feature fresco-style paintings of Venetian palaces. The gaming
facilities will include
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approximately 2,500 slot machines of various denominations, including the
popular multi-property, linked progress games. A high-end slot area, with a
private lounge, will provide slot customers with premium slot products and
services. The Casino's approximately 114 table games (excluding baccarat
tables) will feature the traditional games of black jack, craps and roulette,
Asian games, such as "Pai Gow" and "Pai Gow Poker," and popular progressive
table games, such as "Caribbean Stud Poker" and "Let It Ride." In addition, the
Casino will offer gaming customers an upscale sportsbook room, a keno lounge, a
poker room and an upscale baccarat pit. The baccarat pit is specially designed
for premium, "high roller" gaming, with baccarat, black jack and roulette, a
private lounge with butler service, direct access to private cash-out windows
at the Casino cage and direct access to the Casino's credit department.
Although the Company intends to target "high roller" gaming customers, it does
not expect to target the known top 50 to 100 baccarat players in the world in
order to avoid the risks associated with the amounts wagered by these players.
The Mall
The Mall will offer approximately 500,000 net leasable square feet of
shopping, dining and entertainment space located (i) on two levels within the
Casino Resort's main structure, between the Casino level and the Hotel tower,
and (ii) in a separate approximately 28,000 square foot retail annex adjacent
to the Casino Resort's main structure. The Mall is expected to include
approximately seven dining establishments and 55 retail stores. Visitors and
guests can enter the Mall from several different directions, including from the
Strip via a moving sidewalk or by pedestrian bridges, from the main gaming area
of the Casino via escalators, from the Expo Center through the Congress Center,
and directly from the Hotel.
The Mall has been planned to include well-known restaurants and retail
establishments to draw on brand name awareness, all offered at various price
points in order to appeal to a broad market. The success of brand name and
boutique retailers at The Forum Shops at Caesars Palace Hotel and the Fashion
Show Mall on the Strip, and the success of brand name, premium restaurants at
The Forum Shops at Caesars Palace Hotel and existing themed resorts has
demonstrated the demand in Las Vegas for quality shopping and dining.
The Company has planned for an array of quality dining experiences for the
Mall. Letters of intent have been entered into, or are being negotiated, with
several well-known restauranteurs for upscale restaurants that will offer
international and American regional cuisines. The Mall is also expected to
offer themed restaurants, such as the "Billboard Live!" Cafe. The Mall's retail
offerings are expected to include exclusive showcase boutiques, popular brand
name mid-priced stores and themed entertainment concepts. The restaurants and
stores will be set along an approximately one-quarter mile Venetian-themed
streetscape, and will front on the Venetian-themed canal running its length or
will be grouped in "piazza"-style settings. Store and restaurant facades will
be designed to project the Venetian theme, and state-of-the-art lighting will
alternately simulate a day and night sky in an open-air environment beneath the
Mall's vaulted ceiling.
Expo Center and the Congress Center
With over 1.15 million gross square feet of exhibit and meeting space,
including four exhibit halls and 22 meeting rooms, the existing Expo Center is
one of the largest trade show and convention facilities in the United States
(as measured by net leasable square footage). As part of the Casino Resort, the
Company is constructing and will own and operate the Congress Center, an
approximately 500,000 gross square foot meeting and conference facility which
will link the Expo Center and the rest of the Casino Resort. The Congress
Center, which management expects will open concurrently with the Venetian, will
include an approximately 80,000 square foot column-free "Grand Ballroom," an
approximately 13,500 square foot "Venetian Ballroom" and a meeting complex of
42 individual rooms which can be combined to create three additional ballrooms.
Together, the Expo Center and the Congress Center will offer nearly 1.65
million square feet of state-of-the-art exhibition and meeting facilities,
which can be configured to provide 108 meeting rooms or accommodate large-scale
multi-media events. Management intends to market the Congress Center to
complement the operations of the Expo Center by target marketing the Congress
Center for business conferences and upscale business events typically held
during the mid-week period. The Company believes that the Congress Center also
can be marketed to generate room night demand during the move-in/move-out
phases of Expo Center events. The Company's goal is to draw from attendees and
exhibitors at Expo Center events and from attendees of Congress Center events
to
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<PAGE>
maintain weekday room-night demand at the Hotel from this higher budget market
segment, when room demand would otherwise be derived from the lower budget tour
and travel group market segment.
In 1997, approximately 1,150,000 visitors attended the trade shows and
conventions at the Expo Center during 150 show days. The Expo Center hosted 17
events on the 1996 Trade Show Week 200 list of the largest trade shows in the
United States in 1997, including the COMDEX Fall Trade Show, the Spring and
Fall Western Shoe Show and JCK Jewelry Show, as well as the convention of
National Association of Broadcasters, the Automotive Service Industry
Association Week, and the International Consumer Electronics Show, each of
which were multiple location events. In 1998, approximately 16 trade show
events included on the 1996 Trade Show Week 200 list and 145 show days are
scheduled for the Expo Center. For 1999, the Expo Center has already booked or
reserved 37 major trade shows and conventions over the course of 131 show days,
including approximately 16 trade shows of a size that would qualify for the
1996 Trade Show Week 200 list.
It should be noted that the Company has no ownership or financial interest
in the Expo Center or Interface, and does not exercise any control over the
business or management of the Expo Center or Interface. See "Risk Factors--Sole
Stockholder" and "Certain Material Agreements."
The Company and Interface intend to market jointly the Casino Resort and
the Expo Center. The Cooperation Agreement provides that until December 31,
2010, Interface will use commercially reasonable efforts to have the Hotel
designated as the "headquarters hotel" for trade show and convention events at
the Expo Center and the Company will use commercially reasonable efforts to
promote the use and occupancy of the Expo Center. In order to obtain the Casino
Resort's "headquarters hotel" designation, the Company has agreed with
Interface that, except under certain circumstances, trade shows of the type
generally held at the Expo Center will not be held in the Congress Center.
Under the Cooperation Agreement, Interface and Venetian will allocate expenses
shared by the Expo Center and the Casino Resort. In addition, Interface has
agreed to limit the amount of secured indebtedness on the Expo Center until
such time as the Notes are repaid in full. It should be noted that trade show
and convention promoters will be under no obligation to select the Casino
Resort as the "headquarters hotel" for their events. See "Risk
Factors--Possible Conflicts of Interest" and "Certain Material Agreements--
Cooperation Agreement."
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Major Trade Show and Convention Events
Booked or Reserved for 1999 at the Expo Center (1)
<TABLE>
<CAPTION>
Estimated
Show Day Number of Days of 1997
Name of Event Pattern Show Days the Week Attendance (2)
- ------------- ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
International Winter Consumer Electronic Show (IWCES) (3) ......... 1/7-10 4 Th-Su 95,000*
GiftSource West - Spring .......................................... 1/17-20 4 Su-W 7,500
Night Club and Bar ................................................ 1/19-20 2 T-W 8,000
Aqua '99 .......................................................... 1/19-21 3 T-Th 5,000
World Floor Covering Assn. (Surfaces) (3) ......................... 1/27-29 3 W-F 37,000
Western Shoe Associates - Spring (3) .............................. 2/9-12 4 T-F 43,000
Associated Surplus Dealers/Associated Merchandise Dealers
(ASD/AMD) - Spring (3) ........................................... 2/21-25 5 Su-Th 50,000
Men's Apparel Guild in California (MAGIC) - Spring (3) ............ 3/1-4 4 M-Th 80,000*
Int'l Security Conference ......................................... 3/10-12 3 W-F 12,000
National Archery .................................................. 3/12-14 3 F-Su 5,000
Bedroom Show ...................................................... 3/17-19 3 W-F 5,000
Century 21 ........................................................ 3/17-19 3 W-F 10,000
Amusement Showcase International .................................. 3/18-20 3 Th-S 10,000
ASI Show .......................................................... 3/22-24 3 M-W 15,000
International Gaming Business Expo ................................ 3/29-31 3 T-Th 10,000
Hospitality Design ................................................ 4/8-10 3 Th-S 10,000
National Association of Broadcasters (NAB) (3) .................... 4/19-22 4 M-Th 101,000*
National OTC ...................................................... 5/2-4 3 Su-T 7,000
Las Vegas Merchandise ............................................. 5/16-19 4 Su-W 5,000
International Trucking Show (3) ................................... 5/19-21 3 W-F 31,000
Jeweler's Circular Keystone International Jewelry Show
(JCK) (3) ........................................................ 6/4-8 5 F-T 35,000
GiftSource West - Fall ............................................ 6/13-16 4 Su-W 7,500
National Nutritional Foods ........................................ 6/25-27 3 F-Su 7,500
Furniture & Decorative Expo ....................................... 6/26-28 3 S-M 6,000
Billiard Congress ................................................. 7/15-17 3 Th-S 7,000
Western Shoe Associates - Fall (3) ................................ 8/5-8 4 Th-Su 45,000
Associated Surplus Dealers/Associated Merchandise Dealers
(ASD/AMD) - Fall (3) ............................................. 8/15-19 5 Su-Th 50,000
Men's Apparel Guild in California (MAGIC) - Fall (3) .............. 8/30-9/2 4 M-Th 80,000*
Interbike Show (3) ................................................ 9/10-13 4 F-M 35,000
Western Nursery ................................................... 9/22-23 2 W-Th 10,000
Amusement and Music Operator's Assn. (AMOA) ....................... 9/23-25 3 Th-S 8,500
LV '99 Italian Furniture .......................................... 9/24-27 4 F-M 5,000
True Serve (3) .................................................... 10/4-8 5 M-F 20,000
Package Machinery Manufacturers' Institute (Pack Expo
West) (3) ........................................................ 10/18-20 3 M-W 19,000
Automotive Service Industry Assn. (ASIA) Motor and Equipment
Manufacturers' Assn. (MEMA) Automotive Parts And
Accessories Assn. (APAA) (3) ..................................... 11/2-5 4 T-F 80,000*
Softbank COMDEX '99 (3) ........................................... 11/15-19 5 M-F 220,000*
Aqua 2000 ......................................................... 12/1-3 3 W-F 5,000
Total 131 1,187,000
=== =========
</TABLE>
- --------------
(1) Shows include those contracted and those reserved, some of which are
scheduled to occur prior to the scheduled opening of the Casino Resort.
The Company believes that these shows are representative of the typical
major events at the Expo Center.
(2) Based solely on the number of attendees for the 1997 trade show or
convention events. Certain of the estimates for these shows or conventions
are marked with an asterisk because they were held at multiple locations
in Las Vegas, and not all attendees visited the Expo Center.
(3) A 1996 Trade Show Week 200 show.
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Business and Marketing Strategy
The Company's business strategy is to (i) create a "must-see" destination
resort at a premier location at the heart of the Las Vegas Strip, (ii) provide
a differentiated superior all-suites product, (iii) capitalize on the link to
the Expo Center and the Congress Center, (iv) utilize the Casino Resort's
unique assets and facilities to appeal to a higher budget customer mix, (v) use
the Casino Resort's themed facilities and location to generate Casino revenues,
(vi) target premium gaming customers, and (vii) carefully manage construction
costs and risks.
Create a "Must-See" Destination Casino Resort at the Heart of the Las Vegas
Strip
The Casino Resort, with its extensive theming, dining, shopping and
entertainment, is expected to be a "must-see" destination resort located at the
heart of the Strip. The Casino Resort is designed to provide visitors with the
sense of being surrounded by the festivity and splendor of Renaissance Venice's
architecture, music, art and history. The Venetian-themed setting along the
Casino Resort's frontage on the Strip will include waterways, gondolas, and
replicas of Venetian landmarks, such as the Doge's Palace, the Rialto Bridge,
the Ca Doro and the Campanile Tower. The Mall will feature a one-quarter mile
Venetian streetscape, with intimate "piazza"-style settings and a 630 foot
"grand" canal running its length, with gondolas and water-side cafes and
crossed by authentically-styled Venetian bridges.
The Company believes that the Casino Resort's Venetian-theming, and its
central location on the Strip will appeal to business travelers, leisure
travelers and gaming customers and will position the Casino Resort to draw
significant pedestrian traffic from the Strip. The Casino Resort will have
approximately 740 feet of frontage on the east side of the Strip and will be
located next to Harrah's and across from some of the most visited casino
resorts and attractions on the Strip, including The Mirage, the Treasure Island
Hotel and Casino and The Forum Shops at Caesars Palace Hotel. Based on
information gathered from public sources, the Company estimates that on average
each day during 1996, approximately 57,000 vehicles passed the site of the
Casino Resort, approximately 13,000 persons watched the pirate show in front of
the Treasure Island Hotel and Casino, and approximately 43,000 persons visited
The Forum Shops at Caesars Palace Hotel.
Provide a Differentiated Superior All-Suites Product
The Hotel is expected to offer the only all-suites product with
first-class services and facilities on the Strip. In management's experience,
business and leisure travelers consider suites desirable, superior
accommodations. For business travelers, the Hotel's suites, which will
accommodate informal business meetings and social gatherings, will offer guests
a unique, single location in which to work and entertain in close proximity to
the Expo Center and the Strip. Leisure travelers will appreciate both the
Hotel's spacious suites and extensive facilities. The Company believes that the
all-suites format, together with the Casino Resort's many other unique
attributes, will result in a highly differentiated resort product, and provide
a competitive advantage over other Strip hotel/casino properties and resorts.
The typical Hotel suite will range in size from approximately 655 square
feet to 735 square feet (compared to 360 to 400 square feet on average for a
standard room in competing facilities on the Strip), and will consist of a
sunken living/working area and a raised sleeping area with a marble bathroom.
The suite's living/working area will include a sitting area and a writing desk
and will offer business amenities such as dual-line speaker phones, a fax
machine and dataport access. The bathrooms will be oversized, featuring a
separate bathtub and shower, dual sinks and a phone. In addition, the Hotel
will offer larger suites, including the "Presidential" and penthouse suites,
with exclusive services such as butlers.
Capitalize on the Link to the Expo Center and the Congress Center
The Casino Resort will be the first themed entertainment resort in Las
Vegas designed specifically to accommodate large scale trade shows,
conventions, conferences and meetings. The Expo Center and the Congress Center
are expected to provide recurring, predictable demand for mid-week room nights
from business travelers. During 1997, approximately 1,150,000 visitors attended
trade shows and conventions at the Expo Center. Through an agreement with
Venetian, the owner of the Expo Center has agreed to market the Casino Resort
to promoters of Expo Center trade shows, conventions and other events as the
"headquarters hotel" for such events. The Casino Resort will offer attendees of
events at the Expo Center and the Congress Center the most convenient hotel
accommodations in Las Vegas. The
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<PAGE>
Expo Center already has booked or reserved 37 trade shows, conventions and
business events for the calendar year 1999, covering 131 separate show days. It
should be noted that trade show and convention promoters will be under no
obligation to select the Casino Resort as the "headquarters hotel" for their
events. See "Risk Factors--Possible Conflicts of Interest." In addition to
being an expected source of room demand for the Hotel, the Expo Center and the
Congress Center are expected to draw pedestrian traffic from guests of hotels
throughout Las Vegas, providing a significant source of traffic for the Casino
and the Mall.
Appeal to a Higher Budget Customer Mix
Management expects the Casino Resort to attract higher budget business
travelers and free and independent travelers, resulting in a higher budget
customer mix both on weekdays and weekends. By appealing to customers in these
market segments, the Company expects to reduce its reliance on the lower-budget
tour and travel market. Management believes that business travelers typically
pay more for rooms and spend more on entertainment than weekday customers in
other categories, such as tour groups. Management believes that the Casino
Resort's central location adjacent to the Expo Center and the Strip and its
all-suites hotel product will allow it to compete effectively for the higher
budget mid-week trade show, convention and meeting attendees. On both weekdays
and weekends, the all-suites product at the Hotel is expected to appeal to free
and independent leisure travelers and "high-roller" gaming customers, also
segments of the travel market that spend more on rooms and entertainment.
Use the Casino Resort's Themed Facilities and Location to Generate Casino
Revenues
Management believes the Casino will capture gaming revenues from (i) the
foot traffic generated by Expo Center and Congress Center events, (ii) Hotel
guests, (iii) the foot traffic generated by shoppers and diners at the Mall and
the Casino and (iv) visitors attracted to the Casino Resort's unique, Venetian-
themed facilities. The Casino Resort is planned to include a concentration of
some of the finest restaurants in Las Vegas, brand name and exclusive boutique
shopping, and themed entertainment concepts. Letters of intent have been signed
with several well-known restauranteurs, such as Wolfgang Puck, to operate their
"signature" restaurants at the Casino Resort. In addition, the Company has
entered into a lease for the "Billboard Live!" entertainment complex, which is
affiliated with Billboard Magazine. Management believes that the combination of
brand name awareness and extensive theming will generate significant foot
traffic for the Casino Resort. The Casino Resort has been designed so that foot
traffic from the Strip, the Expo Center, the Congress Center and the Hotel are
funneled through the Casino floor in order to attract and retain a broad base
of Casino patrons.
Target Premium Gaming Customers
Management believes that the Casino Resort's all-suites product, themed
atmosphere and amenities will offer gaming customers a unique Las Vegas
experience. The Company intends to market the Casino to frequent premium gaming
customers. In particular, the Company will seek to attract "high roller" gaming
customers by offering premium suites and special hotel services. Because of the
all-suites format in the Hotel, the Casino Resort will be able to offer many
gaming customers complementary suites (considered premium accommodations in Las
Vegas) during high occupancy periods such as weekends and holidays when they
would not otherwise be offered such suites by the Company's competitors. The
Company believes that the premium gaming customer is a significant market
segment that has been inadequately addressed by the Casino Resort's
competitors. The Casino Resort will be the first all-Suites resort on the Strip
with facilities and amenities designed from inception to attract and serve
premium gaming customers.
Carefully Manage Construction Costs and Risks
The Casino Resort is budgeted to cost approximately $1.065 billion to
develop, equip and open (such costs include approximately $70.0 million for the
HVAC Equipment to be owned by a third party, but exclude land acquisition
costs). As of December 31, 1997, approximately $228.1 million of this total
budgeted cost has been expended or incurred. Of the amount expended and
incurred, approximately $95.3 million represents cash contributed to the
Company by the Sole Stockholder, through affiliates of the Company.
As of December 31, 1997, (i) the foundation for the principal structure of
the Casino Resort has been constructed and the superstructure is under
construction and (ii) pursuant to the Construction Management Contract, and
otherwise, trade contracts in excess of $303.7 million for various components
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<PAGE>
of the project, including excavation, foundations, structural steel, mechanical
and plumbing systems and structural concrete have been entered into or
negotiated. In order to manage its construction risk, the Company has entered
into various agreements designed to protect it against construction delays and
cost overruns (including (i) a guaranteed maximum price Construction Management
Contract which protects the Company against certain cost overruns in the amount
of $547.8 million (or approximately 52% of the expected cost of the Casino
Resort) with the Contruction Manager for the principal components of the Casino
Resort, (ii) guaranties of certain of the Construction Manager's obligations
(with certain limited exceptions) by its parent corporation, P&O, and (iii)
Liquidated Damages Insurance for costs of certain construction delays. The
budget for the Casino Resort contains a Construction Manager's construction
budget contingency and an Owner's Contingency totaling $66.1 million in the
aggregate that can be used to cover cost overruns. Further, the Sole
Stockholder has provided a $25.0 million collateralized Completion Guaranty.
The Completion Guaranty is not available to fund any increases in costs
attributable to discretionary "scope changes." Any such "scope changes" may
only be implemented if the Issuers demonstrate that they have sufficient
available funds to cover the anticipated increased costs, or if the Sole
Stockholder increases his Completion Guaranty by such amount. To the extent
that any cost overruns are not covered by the Construction Management Agreement
or the other protections described above, such cost overruns could be
substantial and have a material adverse effect on the Company's liquidity and
results of operations and its ability to meet its principal and interest
payments on the Notes. See "Risk Factors--Construction Budget; Construction
Management Contract and Guaranties."
To further ensure that there are sufficient funds to construct the Casino
Resort as planned and that such funds are disbursed appropriately, certain
lenders to the Issuers and the Mortgage Note Trustee have entered into the
Disbursement Agreement to establish the conditions for and the sequencing of
funding construction costs and procedures for approving construction change
orders and amendments to the construction budget and schedule. The Disbursement
Agreement provides that project costs (other than costs for the HVAC Equipment,
furniture, fixtures and other equipment) will, generally, be funded first from
the cash portion of the Equity Contribution and the proceeds of the Senior
Subordinated Notes, and thereafter on a pro rata basis from the proceeds of the
Bank Credit Facility, the Mall Construction Loan Facility and the Mortgage
Notes. However, the HVAC Equipment will be funded through the Disbursement
Agreement from a separate commitment from the HVAC Provider, subject to limited
exceptions.
Under the Disbursement Agreement, a subsidiary of Tishman acts as
Construction Consultant to such lenders and is required to review each request
by the Issuers for the disbursement of funds. The disbursement conditions under
the Disbursement Agreement generally provide that funds will be disbursed to
the Issuers only if it is determined that construction is on schedule and that
there are sufficient available funds to complete the Casino Resort in
accordance with the construction drawings and budget. See "Risk
Factors--Construction Budget; Construction Management Contract and Guaranties,"
"--Completion Guaranty," "Description of Disbursement Agreement," "Description
of Intercreditor Agreement" and "Certain Material Agreements."
The Las Vegas Market
Las Vegas is one of the fastest growing and largest entertainment markets
in the country. Las Vegas hotel occupancy rates are among the highest of any
major market in the United States. According to the LVCVA, the number of
visitors traveling to Las Vegas has increased at a steady and significant rate
for the last ten years from 17.2 million visitors in 1988 to 30.5 million
visitors in 1997, a compound annual growth rate of 6.5%. Aggregate expenditures
by Las Vegas visitors increased at a compound annual growth rate of 11.3% from
$8.6 billion (or $531 per visitor) in 1987 to $22.5 billion (or $760 per
visitor) in 1996. In addition, the population of Las Vegas has grown from
approximately 863,000 in 1990 to approximately 1,193,000 in 1997, a compound
growth rate of 4.8%. Management believes that the growth in the Las Vegas
market has been enhanced as a result of a dedicated program by the LVCVA and
major Las Vegas hotels to promote Las Vegas as a major vacation and convention
site, the increased capacity of McCarran International Airport and the
introduction of large, themed destination resorts in Las Vegas.
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Las Vegas Convention Market Trends
[Graph showing Number of Delegates and Number of Conventions]
Number of Conventions
1990 1011
1991 1655
1992 2199
1993 2443
1994 2662
1995 2826
1996 3827
1997 3749
Number of Delegates [millions]
1990 1.74
1991 1.97
1992 1.97
1993 2.44
1994 2.68
1995 2.92
1996 3.31
1997 3.52
Source: LVCVA
Las Vegas as a Trade Show, Convention and Meeting Destination
In 1996, Las Vegas was the most popular trade show destination (with a 25%
market share of the Trade Show Week 200 Shows in terms of net square footage)
and the fourth most popular convention destination in the United States. In
1988, approximately 1.7 million persons attended trade shows and conventions in
Las Vegas and spent approximately $1.2 billion. In 1997, the number of trade
show and convention attendees had increased to more than 3.5 million and the
amount spent by trade show and convention attendees was approximately $4.4
billion.
Trade shows are held for the purpose of getting sellers and buyers of
products or services together for the purpose of conducting business. Trade
shows differ from conventions in that trade shows typically require substantial
amounts of space for exhibition purposes and circulation. Conventions generally
are group gatherings of companies or groups that require less space for
breakout meetings and general meetings of the overall group. Las Vegas offers
trade shows and conventions a unique infrastructure for handling the world's
largest shows, including the concentration of 45,000 hotel rooms located on the
Strip, two convention centers with a total of approximately 3.0 million square
feet of convention and exhibition space, convenient air service from major
cities throughout the United States and other countries and significant
entertainment opportunities. Plans have been announced for the addition of
300,000 square feet of meeting and convention space to the Las Vegas Convention
Center. The expansion of the Las Vegas Convention Center is expected to bring
convention and exhibit space in Las Vegas to over 3.5 million square feet. In
addition, The MGM Grand Hotel and Casino has announced plans to construct
conference and meeting facilities of approximately 300,000 gross square feet.
Management believes that Las Vegas will continue to evolve as the country's
preferred trade show and convention destination.
Expanding Hotel Market
During 1997, Las Vegas was among the most popular vacation destinations in
the United States. Following the opening of The Mirage in 1989, Las Vegas
experienced a period of rapid hotel development with the number of hotel and
motel rooms in Las Vegas increasing by 72% from 61,394 in 1988 to 105,347 in
1997. Other major properties on the Strip opening over this time period include
Excalibur Hotel and Casino, The MGM Grand Hotel and Casino, the Treasure Island
Hotel and Casino, Luxor Hotel, The Monte Carlo Resort and Casino, The
Stratosphere Hotel and Casino and New York-New York Hotel and Casino. In
addition, a number of existing properties on the Strip embarked on expansions,
including Harrah's, Flamingo Hilton Las Vegas and The Las Vegas Hilton. Despite
this significant increase in the supply of hotel rooms in Las Vegas, hotel room
occupancy rates (which exclude motels) exceeded on average 92.1% for the years
1993 to 1997, averaged 93.4% in 1996 and 90.3% in 1997. By the end of 1999, it
is anticipated that, in addition to the Casino Resort, at least another 19,800
hotel rooms will be opened
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on the Strip, including the Bellagio, Paris Casino Resort and Mandalay Bay
Resort under construction, the expansions at Caesars Palace Hotel and Harrah's,
and the planned expansions of Hard Rock Hotel and Casino, Aladdin Hotel and
Casino and The MGM Grand Hotel and Casino. The Company expects that the
concentration of quality themed casino hotels and resorts will increase visitor
interest in Las Vegas as a business event and vacation destination, and, as a
result, increase overall demand for hotel rooms, gaming and entertainment. In
the event that the increased concentration does not substantially increase
visitor interest, overcapacity at these casino hotels and resorts could lead to
price competition in the form of reduced room rates. Lost revenue from such
reduced room rates could materially impact the Company's ability to service its
debt obligations (including the Notes). See "Risk Factors--Risk of New
Venture."
Las Vegas Hotel Room Inventory and Occupancy Rates
[Graph showing Hotel/Motel Room Inventory and Total Occupancy Percentage(1)]
Hotel/Motel Room Inventory
1990 73,000
1991 76,000
1992 75,500
1993 87,000
1994 89,000
1995 90,000
1996 98,000
1997 105,500
Total Occupancy Percentage(1)
1990 85%
1991 81%
1992 84%
1993 88%
1994 89%
1995 88%
1996 91%
1997 90%
(1) Occupancy is calculated based on the inventory of Las Vegas Hotel rooms, and
does not include motel rooms.
Source: LVCVA
The table below indicates mid-week and weekend occupancy rates for all Las
Vegas hotels and motels. While weekend occupancy rates have remained above 90%
for the past 10 years, mid-week occupancy rates have trended upward from below
80% to near 85%. Management believes that due to the lower mid-week demand
demonstrated by the table, many hotels and motels offer reduced room rates and
rely on lower budget tour groups for occupancy.
Occupancy Rates Mid-Week and Weekend (all Las Vegas Hotels)
Mid-Week Weekend
1987 78.8% 94.5%
1988 81.4% 93.5%
1989 81.6% 94%
1990 80.9% 93.6%
1991 76% 89.8%
1992 80.4% 92%
1993 87.6% 94.2%
1994 86.5% 94.4%
1995 85.6% 93.5%
1996 88.7% 94.4%
1997 84.1% 91.6%
Source: LVCVA
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Expanding Gaming Market
The expansion of gaming in the United States has been accompanied by an
increasing acceptance of gaming as a form of entertainment. Gaming has
continued to be a strong and growing business in Las Vegas. Since 1988, Las
Vegas gaming revenues have increased at a compound annual rate of 7.2% from
$3.1 billion in 1988 to $6.2 billion in 1997. With the increased popularity and
public acceptance of gaming, Las Vegas has sought to increase its popularity as
an overall vacation resort destination.
The following table sets forth certain information derived from published
reports of the LVCVA and the Nevada State Gaming Control Board concerning Las
Vegas Strip gaming revenues and visitor volume and hotel data for the years
1988 to 1997. As shown in the table, the Las Vegas market has achieved
significant growth in visitor volume and gaming and non-gaming tourist revenues
and favorably absorbed significant additional room capacity despite the
occurrence of a series of adverse economic, regulatory and competitive events
during the past decade, such as the recession of the early 1990s, the expansion
of gaming into new jurisdictions, the modification of existing regulations in
other jurisdictions, and the expansion of Native American gaming.
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Historical Data for Las Vegas Gaming Industry (1)
<TABLE>
<CAPTION>
1988 1989 1990 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Las Vegas visitor volume ......... 17,199,608 18,129,684 20,954,420 21,315,116
Percentage change ................ 6.1% 5.4% 15.6% 1.7%
Total visitor expenditures(2) $10,039,448 $11,912,941 $14,320,746 $14,326,554
Percentage change ................ 16.7% 18.7% 20.2% 0.0%
Las Vegas Strip gaming
revenue(2) ...................... $ 1,944,401 $ 2,070,328 $ 2,583,314 $2,539,995
Percentage change ................ 10.9% 6.4% 24.8% (1.7)%
Las Vegas convention
attendance ...................... 1,702,158 1,508,842 1,742,194 1,794,444
Percentage change ................ 1.5% 11.4% 15.5% 3.0%
Las Vegas hotel occupancy
rate ............................ 89.3% 89.8% 89.1% 85.2%
U.S. hotel occupancy
rate(3) ......................... 63.4% 64.3% 63.5% 61.8%
Las Vegas room supply ............ 61,394 67,391 73,730 76,879
Percentage change ................ 5.0% 9.8% 9.4% 4.3%
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Las Vegas visitor volume ......... 21,886,865 23,522,993 28,214,362 29,002,122 29,636,631 30,464,635
Percentage change ................ 2.7% 7.5% 19.9% 2.8% 2.2% 2.8%
Total visitor expenditures(2) $14,686,644 $15,127,267 $19,163,212 20,686,800 22,533,258 N/A
Percentage change ................ 2.5% 3.0% 26.7% 8.0% 8.8%
Las Vegas Strip gaming
revenue(2) ...................... $2,625,274 $ 2,896,630 $ 3,485,307 $ 3,629,036 $ 3,579,673 $ 3,809,395
Percentage change ................ 3.4% 10.3% 20.3% 4.1% (1.4%) 6.4%
Las Vegas convention
attendance ...................... 1,969,435 2,439,734 2,684,171 2,924,879 3,305,507 3,519,424
Percentage change ................ 9.8% 23.9% 10.0% 9.0% 13.0% 6.5%
Las Vegas hotel occupancy
rate ............................ 88.8% 92.6% 92.6% 91.4% 93.4% 90.3%
U.S. hotel occupancy
rate(3) ......................... 62.6% 63.5% 64.7% 65.0% 65.1% 64.5%
Las Vegas room supply ............ 76,523 86,053 88,560 90,046 99,072 105,347
Percentage change ................ (0.5)% 12.5% 2.9% 1.7% 10.0% 6.3%
</TABLE>
- -----------
(1) Sources: LVCVA and the Nevada Board for the fiscal years ended December 31.
(2) In thousands.
(3) Source: Smith Travel Research for the years ended December 31.
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Growth of Las Vegas Retail Sector and Non-Gaming Revenue Expenditures
An increasing number of destination resorts are developing non-gaming
entertainment to complement their gaming activities in order to draw additional
visitors. According to the LVCVA, while gaming revenues have increased from
$2.8 billion in 1987 to $5.8 billion in 1996, the percentage of an average
tourist's budget spent on gaming has declined from 32.6% in 1987 to 25.8% in
1996, with non-gaming tourist revenues increasing from $5.8 billion in 1987 to
$16.7 billion in 1996. The newer large themed Las Vegas destination resorts
have been designed to capitalize on this development by providing better
quality hotel rooms at higher rates and by providing expanded shopping, dining
and entertainment opportunities to their patrons in addition to gaming.
Infrastructure Improvements
Clark County and metropolitan Las Vegas have commenced or completed
several infrastructure improvements to accommodate the increase in travel to
Las Vegas by all modes of transportation. According to the LVCVA, in 1996
visitors to Las Vegas arrived by the following methods of transportation: 44%
by air; 41% by auto; 7% by bus; and 8% by recreational vehicle.
McCarran International Airport Expansion. During the past five years, the
facilities of McCarran International Airport have been expanded to accommodate
the increased number of airlines and passengers which it services. The number
of passengers traveling through McCarran International Airport has increased
from 16.2 million in 1988 to 30.3 million in 1997, a compound annual rate of
6.9%. A $200 million expansion project was completed in 1995, allowing for the
accommodation of up to 30 million travelers annually. Long-term expansion plans
for McCarran International Airport provide for additional runway and related
areas (a new runway was completed in October 1997), three new satellite
concourses, 65 additional gates, improved public transportation roads and other
infrastructure leading from McCarran International Airport to the Strip and
other facilities which would allow McCarran International Airport to handle up
to 60 million Las Vegas visitors annually. To the extent that McCarran
International Airport is not expanded in accordance with its plans, the
occupancy rates and average daily hotel room rates in Las Vegas could be
adversely affected due to the planned construction of new hotel rooms.
Spring Mountain Road Improvements. A new high speed off-ramp is being
constructed from Interstate 15 (the primary vehicular access from Los Angeles)
onto Spring Mountain Road to ease traffic congestion on the Strip. Spring
Mountain Road becomes Sands Avenue and intersects the Strip adjacent to the
Project Site. This major interchange will be located approximately one-half
mile from the Casino Resort and is scheduled to be completed in 1999.
Competition
The casino/hotel industry is highly competitive. Strip hotels compete with
other hotels on the Strip and with other hotels in downtown Las Vegas. The
Casino Resort will compete with a large number of hotels and motels in and near
Las Vegas. Many of the competitors of the Company are subsidiaries or divisions
of large public companies and may have greater financial and other resources
than the Company.
Hotel/Casino Properties
Competitors of the Casino Resort will include themed resorts on the Strip,
such as Caesars Palace Hotel, The Mirage, the Treasure Island Hotel and Casino,
Harrah's, The MGM Grand Hotel and Casino, the New York-New York Hotel and
Casino, The Monte Carlo Resort and Casino, Bally's Casino Resort Las Vegas and
the Excalibur Hotel and Casino. In addition, the construction of several new
major resort projects that will compete with the Casino Resort and the
expansion of several existing resorts recently have commenced or have been
announced. These include the Bellagio, Paris Casino Resort and Mandalay Bay
Resort under construction, expansions at Caesars Palace Hotel and Harrah's and
the planned expansions of Hard Rock Hotel and Casino, Aladdin Hotel and Casino
and The MGM Grand Hotel and Casino. These projects and others are expected to
add approximately 19,800 hotel rooms to the Las Vegas inventory by the end of
1999. Finally, the Casino Resort will compete with the planned Phase II Resort
(which will be separately owned by a subsidiary of the Company) to the extent
its business is not complementary to that of the Casino Resort. The future
operating results of the Company could be adversely affected by excess Las
Vegas room, gaming, conference center and trade show capacity.
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The Company believes that themed resorts are generally more successful at
generating high volume traffic and higher revenues and operating income when
compared with large-scale non-themed properties in Las Vegas. The Company also
believes that recently developed integrated themed resorts have been more
successful than expansions to existing Strip hotels. Themed resorts compete on
the basis of the quality of theming, as well as on more traditional bases, such
as quality of rooms, pricing and location. Themed resorts tend to be clustered
on the Strip, creating a critical mass of entertainment experiences which
generate significant traffic for the themed resorts as a group, thereby
capturing a larger portion of the Las Vegas hotel and gaming market than
non-themed properties. The Company believes that the existence of other
competitive themed resorts in close proximity to the Casino Resort directly
benefits the Casino Resort. The Casino Resort will be part of a cluster of
themed properties which includes The Mirage, the Treasure Island Hotel and
Casino, the Bellagio and The Forum Shops at Caesars Palace Hotel. The Company
believes that the Casino Resort will benefit from the significant traffic drawn
to these properties. In addition to the advantages of being a centrally
located, themed resort, the Cooperation Agreement and the Casino Resort's
direct connection with the Expo Center will provide the Casino Resort a unique
tie-in with one of the premier trade show and convention facilities in the
United States. With these competitive advantages, the Casino Resort will be
positioned to appeal to the mid-week meeting, trade show, convention and
meeting market composed of customers who pay higher average room rates and have
higher average travel budgets than other categories of weekday customers, such
as tour groups.
The hotel/casino operation of the Casino Resort will also compete, to some
extent, with other hotel/casino facilities in Nevada and in Atlantic City, with
hotel/casino facilities elsewhere in the world and with state lotteries. In
addition, certain states have recently legalized, and others may legalize,
casino gaming in specific areas, and passage of the Indian Gaming Regulatory Act
in 1988 has led to rapid increases in Native American gaming operations. Such
proliferation of gaming venues could significantly and adversely affect the
business of the Company. In particular, the legalization of casino gaming in or
near metropolitan areas, such as New York, Los Angeles, San Francisco and
Boston, from which the Company intends to attract customers, could have a
material adverse effect on the business of the Company. See "Risk
Factors--Competition and Planned Construction in Las Vegas."
Trade Show and Convention Facilities
The Expo Center and Las Vegas generally compete, and the Congress Center
will compete, with trade show and convention facilities located in and around
major cities, including Atlanta, Chicago, New York and Orlando. Within Las
Vegas, the Expo Center competes, and the Congress Center will compete, with the
Las Vegas Convention Center, which is located off the Strip and currently has
1.3 million gross square feet of convention and exhibit facilities. An
expansion of 300,000 square feet of meeting and exhibition space is planned for
the Las Vegas Convention Center for 1998. In addition, The MGM Grand Hotel and
Casino has announced plans to construct new conference and meeting facilities
of approximately 300,000 square feet and several other existing or planned
major Strip hotel/casino properties are intending to expand or construct
conference facilities. The conference and meeting facilities at these
hotel/resorts are expected to be the Congress Center's primary competition.
However, because none of these hotel/resorts plans to offer convention and
trade show facilities on the same relative size as the Expo Center (over 1.15
million gross square feet), the Las Vegas Convention Center is expected to
remain the primary competitor of the Expo Center. To the extent that any of the
competitors of the Casino Resort can offer substantial integrated hotel/casino
and trade show and convention or conference and meeting facilities, the Casino
Resort's competitive advantage in attracting trade show and convention meeting
and conference attendees could be adversely affected. However, the ability of
any such competitor to offer such show facilities equal to the nearly 1.65
million combined gross square footage of the Expo Center and the planned
Congress Center is limited by any such competitor's location and available
contiguous undeveloped land. In addition, trade show and convention centers
book major events three to five years in advance. As a result, any newly
developed trade show and convention facility would experience a significant
vacancy period before events would commit to any such facility. The Company
believes this vacancy period acts as a barrier to entry into the trade show and
convention business by private developers.
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Mall
The Mall will compete with both themed resorts which offer shopping,
dining and entertainment opportunities to their patrons and other retail malls
in or near Las Vegas. The direct competition of the Mall will include The Forum
Shops at Caesars Palace Hotel and other similar themed mall attractions whose
planned construction has been announced, such as the mall to be constructed on
the site of the Aladdin Hotel and Casino. The Forum Shops at Caesars Palace
Hotel has recently undergone an expansion of approximately 250,000 square feet.
The Mall also will compete with The Fashion Show Mall, a more traditional mall,
located near the Casino Resort. The Fashion Show Mall is currently undergoing
or plans to undergo expansions which will almost double such facility's size.
The Mall also will compete with the planned retail, dining and entertainment
mall in the Phase II Resort.
Construction Schedule and Budget
Formal ground-breaking for the Casino Resort occurred in April 1997 with
an opening to the general public scheduled for April 1999. The Casino Resort is
expected to be developed on a stand-alone basis as the first phase of the
planned two phase redevelopment of the site of the Sands. In the planned second
phase of the redevelopment, it is contemplated that the Phase II Subsidiary
will construct and develop the Phase II Resort, which also is planned to be a
themed resort. The completion and full operation of the Casino Resort is not
contingent upon the subsequent financing or completion of the Phase II Resort,
and the Casino Resort has all the attributes and facilities to operate as a
stand-alone resort. See "Risk Factors--Possible Conflicts of Interest" and
"--Shared Facilities."
The Casino Resort (including the HVAC Equipment) is budgeted to cost
approximately $1.065 billion, which includes $637.0 million of construction
costs and $428.0 million of other costs (including furniture, fixtures and
equipment, certain so-called "soft" construction costs (which include fees of
architects, attorneys and other professionals), costs of obtaining required
governmental approvals, pre-opening expenses, construction period interest and
other costs that are not so-called "hard" construction costs, but excluding
land acquisition costs). In order to manage its construction risk, the Company
has entered into various agreements designed to protect it against construction
delays and cost overruns. The Company and the Construction Manager have entered
into the Construction Management Contract pursuant to which the Construction
Manager has agreed to construct the Casino Resort (with certain exceptions, but
including the HVAC Equipment) for a guaranteed maximum price of $547.8 million
(subject to certain conditions and limitations, such as an exclusion from the
guaranteed maximum price of cost overruns due to "scope changes"). The
Construction Management Contract and the guaranteed maximum price does not
include certain construction costs, including $69.7 million of owner managed
construction costs. The Company believes that the construction budget is
reasonable, and the Construction Management Contract contains certain
incentives designed to put downward pressure on the construction budget and
actual construction costs; however, given the risks inherent in the
construction process, it is possible that construction costs could be
significantly higher. If construction costs do exceed the amounts set forth in
the construction budget, potential sources to pay such excess include:
(i) a Construction Management Contract contingency of approximately
$26.1 million;
(ii) the Owner's Contingency of approximately $40.0 million;
(iii) the Liquidated Damages Insurance and proceeds of other (e.g.,
casualty) insurance policies;
(iv) the Construction Manager, Bovis and P&O, pursuant to their
liability to the Company under the Construction Management
Contract, Construction Management Contract Guaranty and P&O
Guaranty, respectively;
(v) other third parties pursuant to their liability to the Company
under their agreements with the Company; and (vi) the Sole
Stockholder, pursuant to his liability under the collateralized
Completion Guaranty of up to $25.0 million.
As of December 31, 1997, (i) pursuant to the Construction Management
Contract, and otherwise, trade contracts in excess of $303.7 million for
various components of the project, including excavation, foundations,
structural steel, mechanical and plumbing systems and structural concrete had
been entered into or negotiated, (ii) the foundation for the principal
structure of the Casino Resort had been constructed and the superstructure is
under construction and (iii) approximately $228.1 million of the total project
cost of $1.065 billion had been expended.
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Advertising and Marketing
The Company has a $9.4 million pre-opening marketing and advertising
budget, including a planned pre-opening marketing campaign targeted at select
core markets such as Southern California. To date, the Company has spent $2.0
million to create the Casino Resort's preview center (the "Preview Center"),
which opened in August 1997 and includes models of the Casino Resort and a full
scale model suite. The Company intends to use the Preview Center to market the
Casino Resort and Expo Center events. The Company will advertise in many types
of media, including television, radio, newspapers, magazines and billboards.
The pre-opening advertising will promote general market awareness of the
Venetian as a unique vacation, business and convention destination for its
first-class hotel, casino, retail stores and restaurants. It is also expected
that Mall tenants, such as "Billboard Live!" will pursue their own general
advertising and promotional activity, which the Company expects to benefit the
Mall. The Company will also actively engage in direct marketing which will be
targeted at specific market segments, such as the meeting, convention and trade
show market and the premium gaming market, and data base marketing which will
focus on high-frequency, high-margin market segments such as the "high-roller"
gaming market.
Design and Construction Team
The Company has assembled what it believes to be a highly qualified team
of specialists to design and construct the Casino Resort.
Lehrer McGovern Bovis, Inc.
The Casino Resort is being constructed by Lehrer McGovern Bovis, Inc., a
leading international construction concern. The Construction Manager is an
indirectly owned subsidiary of Bovis whose ultimate parent company is P&O. The
Construction Manager is primarily engaged in the business of providing
construction management services. The Construction Manager also provides
construction consulting, project and program management, preconstruction,
estimating, design-build and mortgage loan monitoring services. Major market
sectors include commercial, education, transportation, sports and recreation,
healthcare, research and development, correctional, civic and cultural.
Services are performed under contracts whereby the Construction Manager acts as
an agent for an owner supervising the construction activity of trade
subcontractors and others. Projects are also performed under fixed or
guaranteed maximum price arrangements and on certain of these projects, the
Construction Manager may contract directly with trade subcontractors performing
the construction activities.
Bovis
Bovis has worked on a number of hotel and resort projects throughout the
world including the Trump Castle Expansion program and the Atlantic City
Seaside Resort in Atlantic City, the Embassy Suites Hotels in New York, La
Jolla, California and Washington, D.C., the Parc Fifty Five Hotel in San
Francisco, California, the Hyatt Regency Grand Cypress and Universal Studios
Florida Theme Park in Orlando, Florida, the 1996 Summer Olympic Games in
Atlanta, Georgia, the Grand InterContinental Hotel in Yokohoma Japan, The
Langham and Canary Wharf in London, England, and Euro Disney Theme Park in
France.
P&O
P&O is a corporation based in the United Kingdom and is listed on the
London Stock Exchange. P&O is a holding company which through its subsidiaries
provides a variety of services throughout the world. P&O's businesses include
operating cruise ships and ferries, providing container, cargo and bulk
shipping services, home construction and building and managing construction
projects. Under United Kingdom accounting standards (which differ from
generally accepted accounting standards in the United States ("U.S. GAAP"),
P&O reported that it earned a profit of (English Pound)250.6 million on revenues
of (English Pound)7,090.8 million in 1996 and had net operating assets of
(English Pound)4,726.4 million at December 31, 1996. Under U.S. GAAP, the
Construciton Manager reported that it had net income of $5.7 million on revenues
of $703.2 million in 1996 and had total assets of $248.7 million at December 31,
1996.
Architects
Wimberly Allison Tong & Goo ("WATG") and The Stubbins Associates Design
Group ("TSA") are the principal architects for the Casino Resort. WATG is an
architectural, planning and consultant firm active throughout the world. WATG
specializes in the design and planning of resorts and hotels, and in the
related
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fields of entertainment and leisure design, new town and environmental design,
residential projects from high to low density, mixed-use and retail centers,
office buildings, conference and recreational facilities. WATG has designed and
completed projects in over 65 countries, including The Palace of the Lost City
in South Africa, The Ritz-Carlton Laguna Niguel in California, Hotel Bora Bora
in French Polynesia, Shangri-La Garden Wing in Singapore, Grand Hyatt Bali in
Indonesia, Cheju Shilla Hotel in South Korea, Hyatt Regency Kauai in Hawaii,
Four Seasons Chinzan-so in Tokyo, and Disney's Grand Floridian Beach Resort in
Orlando.
TSA is an international architecture, planning and interior design firm.
TSA's professional services include: feasibility studies, programming and
master planning; architectural, interior and landscape design; and technical
services including construction documentation and construction administration.
Among TSA's completed hotel/casino projects are: the Spa at Bally's Park Place
Hotel and Casino and the interior design for Harrah's Marina Hotel Casino in
Atlantic City. In addition, TSA was the principal architect for the Expo
Center.
Tishman
Tishman Construction Corporation of Nevada, a subsidiary of Tishman, is
providing construction management consulting services on behalf of the various
lenders, including pre-construction consulting project analysis. The
Construction Consultant also has agreed to review, on behalf of the lenders,
contribution plans and the progress of construction. In addition, the
Construction Consultant will review and approve, on behalf of the lenders,
proposed contracts, proposed plan changes, proposed budget changes and
disbursement requests during the course of construction. Tishman is one of the
nation's leading construction companies and is one of the nation's largest
hotel developers and owners. As a developer and owner, Tishman has developed
5,665 rooms around the country in various types of lodging markets including
downtown commercial, convention and resort hotels. In its capacity as owner and
builder of hotels, Tishman has worked with virtually every major hotel
operator/owner including Hilton, Sheraton, Westin, Hyatt, Marriott, Ritz
Carlton, Holiday Inn Crown Plaza, Four Seasons, The Walt Disney Company, Golden
Nugget, Nikko Hotels International, Fairmont and Loews.
Other Consultants
Wilson & Associates, Inc. ("Wilson") and Dougall Designs are designing the
interior of the Casino Resort. Wilson specializes in the interior architectural
design of hotels, restaurants, clubs and casinos and offers a full range of
interior architectural design services from initial space planning and design
through construction documents and construction administration. Wilson has
designed and installed more than 75,000 guest rooms in over 150 hotels
world-wide. Wilson's interior design credits include The MGM Grand Hotel and
Casino, The Mirage Resorts' Beau Rivage and Caesars Palace Hotel in Atlantic
City and Las Vegas.
Dougall Designs ("Dougall") specializes in the interior design of casino
resorts. Dougall's projects in Las Vegas include The Luxor, The Monte Carlo
Resort and Casino, The Forum Shops at Caesars Palace Hotel, Stardust Resort and
Casino and Harrah's.
Martin & Peltyn ("Martin & Peltyn") is providing structural engineering
services in connection with the construction of the Casino Resort. Martin &
Peltyn has provided structural engineering services for over twenty
hotel/casinos in the United States, including the following Las Vegas resorts:
The MGM Grand Hotel and Casino, The Mirage, the Treasure Island Hotel and
Casino, Tropicana Resort and Casino and The Las Vegas Hilton.
Employees
The Company anticipates that it will directly employ approximately 3,800
employees in connection with the Casino Resort. The Company will be required to
undertake a major recruiting and training program prior to the opening of the
Casino Resort at a time when other major new facilities may be approaching
completion and also recruiting employees. The Company believes that it will be
able to attract and retain a sufficient number of qualified individuals to
operate the Casino Resort. The Company does not know whether or to what extent
the Casino Resort's employees will be covered by collective bargaining
agreements, as that determination will ultimately be made by the employees.
Most, but not all major casino resorts situated on the Strip have collective
bargaining contracts covering at least some of the labor force at such sites.
The unions currently on the Strip include the Local, the Operating Engineers
Union and the
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Teamsters Union. Although no assurances can be given, management does not
believe that the representation of its employees by labor unions would have a
material impact upon the Company's results of operations, liquidity or
financial position.
Properties
Venetian currently owns approximately 45 acres of land on or near the
Strip on the site of the former Sands Hotel. Such property includes the site on
which the Casino Resort is being constructed and the site on which the Phase II
Resort is planned to be constructed. As described in "Description of Mortgage
Notes--Ranking and Security," approximately 14 acres of such land may be
released from the collateral securing the Mortgage Notes and transferred to the
Phase II Subsidiary upon completion of the subdivision for the Project Site.
Litigation
The Company and its subsidiaries are parties to various claims and legal
actions arising from the construction of the Casino Resort, in the ordinary
course of their businesses and in the ordinary course of business of the Sands
Hotel and Casino. Although the amount of any liability that could arise with
respect to these claims and actions cannot be accurately predicted, the Company
believes that any such liability will not have a material adverse effect on the
Company.
The Guarantors
Venetian formed the Mall Construction Subsidiary as a Delaware limited
liability company on September 12, 1997. The purpose of the Mall Construction
Subsidiary is to own and construct the Mall. Upon completion of the Casino
Resort, the Mall Construction Subsidiary will transfer the Mall to the Mall
Subsidiary pursuant to the Sale and Contribution Agreement. See "Certain
Material Agreements--Agreements Relating to the Mall--Sale and Contribution
Agreement."
Venetian formed Mall Intermediate Holdings as a Delaware limited liability
company on September 24, 1997. The purpose of Mall Intermediate Holdings is to
own an interest in Mall Holdings, which in turn owns an interest in the Mall
Subsidiary. Currently, Mall Intermediate Holdings owns a 100% membership
interest in Mall Holdings, which in turn owns a 100% membership interest in the
Mall Subsidiary. Upon the transfer of the Mall Collateral from the Mall
Construction Subsidiary to the Mall Subsidiary, the Mall Subsidiary is expected
to be owned 99% by Mall Holdings and 1% by the Mall Manager, and Mall Holdings
is expected to be owned 99% by Mall Intermediate Holdings and 1% by the Mall
Manager. At such time, the Mall Manager will act as the managing member of the
Mall Subsidiary and Mall Holdings. Mall Manager, Mall Holdings and Mall
Subsidiary are direct or indirect 100%-owned subsidiaries of LVSI.
Venetian formed Phase II Intermediate Holdings as a Delaware limited
liability company on September 24, 1997. The purpose of Phase II Intermediate
Holdings is to own an interest in Phase II Holdings, which in turn owns an
interest in Phase II Subsidiary. Currently, Phase II Intermediate Holdings owns
a 100% membership interest in Phase II Holdings, which in turn owns a 100%
membership interest in Phase II Subsidiary. Upon the release of the Phase II
Land from the Note Collateral and its transfer to the Phase II Subsidiary, the
Phase II Subsidiary is expected to be owned 99% by Phase II Holdings and 1% by
the Phase II Manager, and Phase II Holdings is expected to be owned 99% by
Phase II Intermediate Holdings and 1% by Phase II Manager. At such time, the
Phase II Manager will act as the managing member of the Phase II Subsidiary and
Phase II Holdngs. Phase II Manager, Phase II Holdings and Phase II Subsidiary
are direct or indirect 100%-owned subsidiaries of LVSI.
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REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in the State of
Nevada are subject to the Nevada Act and various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Authorities.
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) providing a source of state and
local revenues through taxation and licensing fees. Any change in such laws,
regulations and procedures could have an adverse effect on the Company's gaming
operations or on the operation of the Venetian.
The Company is required to be licensed by the Nevada Gaming Authorities to
operate a casino, and is currently so licensed. The gaming license requires the
periodic payment of fees and taxes and is not transferable. The Company will be
required to be, and has applied for, registration by the Nevada Commission as a
Registered Corporation and as such, will be required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish
any other information that the Nevada Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, the Company
without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company will operate the Casino pursuant to the Casino Lease,
which will provide for a fixed monthly rental payment. The Company and Venetian
have applied for approval by the Nevada Gaming Commission of the Exchange
Offer. There can be no assurance that the Company and Venetian will be granted
all the various approvals required to consummate the Exchange Offer. The
Offering will not be completed until such approvals are received. The Company
possesses, has applied for, or will apply for, all state and local government
registrations, approvals, permits and licenses required in order for the
Company to engage in gaming activities at the Casino Resort. There can be no
assurance that the Company will be granted all of such approvals. Venetian
intends to apply for a state gaming license, registration or other finding of
suitability, however the receipt of such by Venetian is not required in
connection with the Exchange Offer. If a gaming license is issued to Venetian,
the Casino Lease may be terminated.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or Venetian
to determine whether such individual is suitable or should be licensed as a
business associate of a gaming licensee. Officers, directors and certain key
employees of the Company must file applications with the Nevada Gaming
Authorities and may be required to be licensed by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for
licensing or a finding of suitability for any cause they deem reasonable. A
finding of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability, or the
gaming licensee by whom the applicant is employed or for whom the applicant
serves, must pay all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities, and in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or to continue having a relationship with the
Company or Venetian, it would have to sever all relationships with such person.
In addition, the Nevada Commission may require the Company to terminate the
employment of any person who refuses to file appropriate applications.
Determinations of suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.
The Company is required to submit detailed financial and operating reports
to the Nevada Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by the Company must be reported
to or approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by the Company, the
registration and gaming licenses it then holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company and the persons involved could
be subject to
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substantial fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could be appointed
by the Nevada Commission to operate the Casino Resort and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of the Casino Resort) could be forfeited to the
State of Nevada. Limitation, conditioning or suspension of any gaming
registration or license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the gaming
operations of the Company.
Any beneficial holder of the Company's voting securities, regardless of
the number of shares owned, may be required to file an application, be
investigated, and have their suitability as a beneficial holder of the
Company's voting securities determined if the Nevada Commission has reason to
believe that such ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in conducting any such
investigation.
The Nevada Act requires any person who acquires more than 5% of the
Company's voting securities to report the acquisition to the Nevada Commission.
The Nevada Act requires that beneficial owners of more than 10% of the
Company's voting securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, the
"institutional investor" as defined in the Nevada Act, which acquires more than
10% but not more than 15% of the Company's voting securities, may apply to the
Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment purposes
only. An institutional investor shall not be deemed to hold voting securities
for investment purposes unless the voting securities were acquired and are held
in the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the Company or
any of its gaming affiliates, or any other action which the Nevada Commission
finds to be inconsistent with holding the Company's voting securities for
investment purposes only. Activities that are not deemed to be inconsistent
with holding voting securities for investment purposes only include: (i) voting
on all matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management, policies or
operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial
holder of voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and financial
information including a list of beneficial owners. The applicant is required to
pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and
who holds, directly or indirectly, any beneficial ownership of the common stock
of a Registered Corporation beyond such period of time as may be prescribed by
the Nevada Commission may be guilty of a criminal offense. The Company is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with the
Company or Venetian it: (i) pays that person any dividend or interest upon
voting securities of the Company; (ii) allows that person to exercise, directly
or indirectly, any voting right conferred through securities held by that
person; (iii) pays remuneration in any form to that person for services
rendered or otherwise; or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities for cash at fair
market value. Additionally, the CCLGLB has taken the position that it has the
authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming license.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file an application, be
investigated and be found suitable to own the debt security of a Registered
Corporation, such as the Notes. If the Nevada Commission determines that a
person is unsuitable to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss of its approvals,
if without the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest, or any distribution whatsoever; (ii)
recognizes any voting right by such unsuitable person in connection
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with such securities; (iii) pays the unsuitable person remuneration in any
form; or (iv) makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation, or similar transaction.
LVSI is required to maintain a current stock ledger in Nevada that may be
examined by the Nevada Gaming Authorities at any time. If any securities are
held in trust by an agent or by a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada Gaming Authorities.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. The Company is also required to disclose the identity of the
beneficial owner to the Nevada Gaming Authorities. A failure to make such
disclosure may be grounds for finding the record holder unsuitable. The Company
is also required to render maximum assistance in determining the identity of
the beneficial owner. LVSI stock certificates bear a legend indicating that
such securities are subject to the Nevada Act.
LVSI and Venetian may not make a public offering of any securities without
the prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. The hypothecation of the Company's assets and restrictions on stock
in connection with any public offering will require the prior approval of the
Nevada Commission. In addition, if Venetian receives a gaming license, the
hypothecation of its assets and restrictions on stock in respect of any public
offering will require the approval of the Nevada Commission to remain
effective. LVSI and Venetian have applied for approval by the Nevada Commission
of the Exchange Offer, the hypothecation of assets and restrictions on stock.
However, there can be no assurance such approval will be granted. The Exchange
Offer will not be completed until such approvals are received. Any such
approval does not constitute a finding, recommendation or approval by the
Nevada Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities offered. Any
representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by any person whereby he or she obtains control, may not occur without the
prior approval of the Nevada Commission. Entities seeking to acquire control of
a Registered Corporation must satisfy the Nevada Board and the Nevada
Commission concerning a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process of the
transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (1) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated.
The Nevada Act also requires prior approval of a plan of recapitalization
proposed by the Company's board of directors in response to a tender offer made
directly to the Registered Corporation's stockholders for the purposes of
acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to Clark
County, Nevada. Depending upon the particular fee or tax involved, these fees
and taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax also is paid by the Company where certain entertainment is
provided in a cabaret, nightclub, cocktail lounge or casino showroom in
connection with the serving or selling of food, refreshments or merchandise.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a
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gaming venture outside of Nevada, is required to deposit with the Nevada Board
and, thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board of their participation in such
foreign gaming. The revolving fund is subject to increase or decrease at the
discretion of the Nevada Commission. Thereafter, Licensees are also required to
comply with certain reporting requirements imposed by the Nevada Act. Licensees
are also subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fail to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required of Nevada
gaming operations, engage in activities that are harmful to the State of Nevada
or its ability to collect gaming taxes and fees, or employ a person in the
foreign operation who has been denied a license or a finding of suitability in
Nevada on the ground of personal unsuitability.
The sale of alcoholic beverages by the Company on the premises of the
Casino Resort is subject to licensing, control and regulation by the applicable
local authorities. The Company will also be required to apply for and receive a
Clark County gaming license. All licenses are revocable and are not
transferable. The agencies involved have full power to limit, condition,
suspend or revoke any such license, and any such disciplinary action could (and
revocation would) have a material adverse effect upon the operations of the
Company.
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APPRAISALS
Land Appraisal
Landauer Associates, Inc. (the "Appraiser") has prepared and delivered an
appraisal (the "Land Appraisal") of the approximately 45 acre land parcel (the
"Contributed Land") currently owned by Venetian. The Appraiser's personnel are
experienced in appraising Las Vegas resort and gaming properties. The Appraiser
has been providing real estate consulting and valuation services since 1946.
Rodney A. Wycoff and Karen Johnson of the Appraiser have prepared the
appraisals described herein. Mr. Wycoff, CRE, MAI is a Senior Managing Director
and has appraised hotel and resort properties throughout the Southwestern
United States for more than 15 years. Mr. Wycoff previously appraised the Dunes
Hotel and has served as an asset manager for a portfolio that included a number
of large convention hotels. Ms. Johnson, MAI, is a Managing Director and has
extensive experience in resort and hotel consulting as well. Ms. Johnson
recently completed an investment value appraisal of the Bally's assets in Las
Vegas as part of the acquisition of Bally's by Hilton, as well as a market
value appraisal of the land underlying the Wet n' Wild water park on the Strip.
Off the Strip, Ms. Johnson has appraised the land for a proposed casino hotel
and entertainment center in Henderson, Nevada and other parcels in northwest
and southwest Las Vegas. The Land Appraisal has been completed, and was
delivered to the Issuers on October 20, 1997. The Land Appraisal states that as
of October 17, 1997, the "market value" of the Contributed Land (as if vacant)
was $225.0 million or $5.0 million per acre. The Land Appraisal defines "market
value" as the most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently and knowledgeably, and assuming the
price is not affected by undue stimuli. In addition, implicit in this
definition is the consummation of a sale on a specific date and the passing of
title from seller to buyer under conditions whereby: (i) buyer and seller are
typically motivated; (ii) both parties are well informed or well advised and
acting in what they consider their own best interests; (iii) a reasonable time
is allowed for exposure on the open market; (iv) payment is made in terms of
cash in United States dollars or in terms of financial arrangements comparable
thereto; and (v) the price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions granted
by anyone associated with the sale. See "Annex B--Letter from the Appraiser"
for more information regarding the Land Appraisal.
The following is a summary of material analyses performed by the Appraiser
in conducting the Land Appraisal and presented to the Company. In preparing its
analysis, the Appraiser used the following methodology: the Appraiser (i)
inspected the property, (ii) interviewed representatives of the Company, (iii)
reviewed and considered the forecast for the project provided by the Company
and made adjustments to such forecast as it deemed necessary based upon its
independent research, (iv) reviewed thoroughly, analyzed and compared to the
subject site recent relevant land sales on or near the Strip, (v) performed a
residual land value analysis on the subject site and (vi) undertook such other
applicable alternative methods of valuation as it deemed necessary.
The Appraiser then performed various analyses of factors that might affect
the market value of the property, including an area and neighborhood analysis,
a site and improvement analysis, and a highest and best use analysis. The
Appraiser then applied and reconciled two relevant valuation methodologies, the
sales comparison technique, which is the most commonly used technique, and the
land residual technique.
For the sales comparison technique, the Appraiser reviewed the available
body of information on consummated sales of large, comparable zoned parcels on
the Strip. The Appraiser considered the fact that most of the well-located
comparable sales pre-dated the opening of the previous wave of mega-casino
resorts and were influenced by concerns regarding the overbuilding that
preceded the opening of The MGM Grand Hotel and Casino, The Luxor and the
Treasure Island Hotel and Casino in 1994. The more current arm's length sales
were situated in less desirable locations. Rates of appreciation appear to be
significant, such that even these require adjustments for appreciation. Because
of the absence of truly comparable sales, the Appraiser relied upon other more
complicated transactions, rejected offers and asking prices for comparable
parcels in addition to the sales of parcels that were not ideally comparable
for one reason or another. The Appraiser then adjusted each comparable sale or
rejected offer or asking price, rejected the extremes of the range and
concluded that current prices for comparable parcels of land
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would range from $5.0 million to $5.8 million per acre. Because of the
magnitude of some of the adjustments, and after taking into account some site
specific development cost issues, the Appraiser selected a value of $5.0
million per acre for the subject property based on the sales comparison
technique. The site development costs issues that affected the comparable sales
included but were not limited to: buy-outs of leasehold interests, costs for
the demolition of existing improvements and environmental mitigation, none of
which were material when expressed as percentage adjustments. For the subject
property, nominal adjustments were made for the perpetual easement benefiting
the Expo Center, specifically regarding parking, and the net present value of
the ongoing immaterial environmental soil mitigation.
For the land residual technique, the Appraiser estimated earnings before
interest, taxes, depreciation and amortization ("EBITDA") for two recently
completed resorts based on published earnings data. EBITDA was also estimated
for a theoretical, somewhat more generic subject property. A capitalization
rate was applied to obtain market values for the developed properties. The
known or assumed hard and soft costs of constructing the projects, were
deducted along with estimates of entrepreneurial profit. The appraisers
concluded that a theoretical resort on the subject site supports a residual
land value equal to $7.9 million per acre.
The Appraiser concluded that the land residual technique supported the
$5.0 million per acre price estimated for the subject property using the sales
comparison technique and is a reasonable economically viable price per acre and
concluded that as of October 17, 1997, the market value for the subject site
was $225.0 million or $5.0 million per acre.
The Appraiser has certified that its employment and compensation in
connection with the Land Appraisal were in no way contingent upon the value
reported in the Land Appraisal and that it has no direct or indirect current or
prospective personal interest or bias in the subject matter of the Land
Appraisal or to the parties involved.
The Land Appraisal necessarily is based upon prevailing physical and
economic conditions and available information as they existed on the date of
the Land Appraisal. Economic projections do not represent forecasting of future
events. Rather, they reflect a method commonly used by investors to gauge the
effect of anticipated trends on investment yields. The information reported in
the Land Appraisal was obtained from sources deemed to be reliable by the
Appraiser and, when feasible, was verified by the Appraiser. The Appraiser
reserves the right, however, to make appropriate revisions to the Land
Appraisal in the event of discovery of additional or more accurate data. In
addition, various subsequent events may significantly alter the conclusions
reported in the Appraisal.
Hotel/Casino Appraisal
In connection with the Bank Credit Facility, the Mortgage Notes and the
Senior Subordinated Notes, the Appraiser has prepared and delivered an
appraisal (the "Hotel/Casino Appraisal") of the Hotel and the Casino, assuming
it is completed and contains a total of 3,036 rooms and 116,000 square feet of
gaming area. The Hotel/Casino Appraisal estimates "market value" of the Hotel
and Casino upon completion (assumed to be April 1, 1999) and upon stabilized
occupancy and average daily rate (assumed to be April 1, 2001). Using an
"income approach" methodology, the Appraisers prepared two ten-year forecasted
cash flows, the "as completed" cash flows commencing on April 1, 1999 and upon
attainment of "as stabilized" cash flows commencing on April 1, 2001. The net
operating income for each year was discounted back to the appropriate date of
value. The value of the reversionary interest for each valuation scenario was
estimated by capitalizing the projected net income after all expenses but
before capital items for the eleventh year and was discounted back to the
applicable valuation date. By combining the stream of income during the holding
period and the net proceeds from the hypothetical sale at the end of the
holding period, the Appraiser concluded that, as of October 17, 1997, the
"market value" of the Hotel and the Casino, together, upon completion and upon
stabilized occupancy would be approximately $1.1 billion (excluding the Mall)
and $1.3 billion (excluding the Mall), respectively. In reaching the foregoing
conclusions, the Appraiser assumed an average daily room rate of $167 (1999
dollars) and an average daily occupancy rate of 93% in its analysis. The
estimated average daily rate was estimated on a segment by segment basis
utilizing: (i) survey responses from show managers for 51 of the 200 largest
trade shows (a 29 percent response rate), (ii) trends in average daily rates
for major
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convention hotels in other key competitive destinations and (iii) current peak
and non-peak pricing at Las Vegas' casino hotels. The weighted average result
of the segment by segment estimates was compared for reasonableness to the
average daily rates currently achieved by better quality casino hotels in Las
Vegas, taking into account their disadvantages with regard to convention and
meeting space, basic guest room size and amenities, and was discounted for the
first two years of operation. Consistent with what the Appraiser understood to
be the casino hotel accounting convention, the casino department's usage of
complimentary rooms was recorded as revenue at the prevailing rate for that
period and reflected as a cost to that department. In deriving the "market
value" of the Hotel and the Casino together, the Appraiser used assumptions
regarding, among other things, revenues and expenses, some of which differ from
the assumptions used by the Appraiser in its valuation of the Hotel, the Casino
and the Mall. For example, the Appraiser deducted an assumed approximately $9.0
million management fee and made different assumptions regarding certain
operating expense line items. Management believes that such differences are not
material to their forecasted results of operations. See "Annex B--Letter from
Appraiser" for more information regarding the Hotel/Casino Appraisal.
The Appraiser has certified that its employment and compensation in
connection with the Hotel/Casino Appraisal were in no way contingent upon the
value reported in the Hotel/Casino Appraisal and that it has no direct or
indirect current or prospective personal interest or bias in the subject matter
of the Hotel/Casino Appraisal or to the parties involved.
The Hotel/Casino Appraisal necessarily is based upon the prevailing
physical and economic conditions and available information as they existed on
the date of the Hotel/Casino Appraisal. Economic projections do not represent
forecasting of future events. Rather, they reflect a method commonly used by
investors to gauge the effect of anticipated trends on investment yields. The
information reported in the Hotel/Casino Appraisal was obtained from sources
deemed to be reliable by the Appraiser and, when feasible, was verified by the
Appraiser. The Appraiser reserves the right, however, to make appropriate
revisions to the Hotel/Casino Appraisal in the event of discovery of additional
or more accurate data. In addition, various subsequent events may significantly
alter the conclusions reported in the Hotel/Casino Appraisal.
Mall Appraisal
In connection with the Mall Construction Loan Facility, the Appraiser has
prepared and delivered an appraisal (the "Mall Appraisal") of an unanchored
Mall, assuming it is completed and contains a total gross leasable area of
518,000 square feet to be physically situated within the Casino Resort and a
Retail Annex (as defined in the Mall Appraisal) on the Project Site. Mr.
Charles P. Gardener, MAI, and Mr. John R. Forbes, MAI, of the Appraiser assumed
the primary responsibility for the preparation of the retail analysis. The
Appraiser has advised the Company that both Mr. Gardener and Mr. Forbes have
extensive experience in appraising retail and complex property types. The Mall
Appraisal estimates (i) the "market value" of the Mall upon completion (assumed
to be April 1, 1999) and upon stabilized occupancy (assumed to be April 1,
2000) and (ii) the value of the development rights to construct the Mall as
proposed. Using an "income approach" methodology, the Appraisers prepared two
ten-year forecasted cash flows, the "as completed" cash flows commencing on
April 1, 1999 and the "as stabilized" cash flows commencing on April 1, 2000.
The net operating income for each year was discounted back to the appropriate
date of value. The value of the reversionary interest for each valuation
scenario was estimated by capitalizing the projected net operating income
(income after all expenses, but before capital items) for the eleventh year and
was discounted back to the applicable valuation date. By combining the stream
of income during the holding period and the net proceeds from a hypothetical
sale at the end of the holding period, the Appraiser concluded that, as of
October 17, 1997, the "market value" of the Mall upon completion and upon
stabilized occupancy would be approximately $220.0 million and $248.0 million,
respectively. Based on the estimated costs to develop the Mall and a value upon
completion of $220.0 million, the development rights were valued at
approximately $33.0 million.
The Appraiser has certified that its employment and compensation in
connection with the Mall Appraisal were in no way contingent upon the value
reported in the Mall Appraisal and that it has no direct or indirect current or
prospective personal interest or bias in the subject matter of the Mall
Appraisal or to the parties involved.
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The Mall Appraisal necessarily is based upon the prevailing physical and
economic conditions and available information as they existed on the date of
the Mall Appraisal. Economic projections do not represent forecasting of future
events. Rather, they reflect a method commonly used by investors to gauge the
effect of anticipated trends on investment yields. The information reported in
the Mall Appraisal was obtained from sources deemed to be reliable by the
Appraiser and, when feasible, was verified by the Appraiser. The Appraiser
reserves the right, however, to make appropriate revisions to the Mall
Appraisal in the event of discovery of additional or more accurate data. In
addition, various subsequent events may significantly alter the conclusions
reported in the Mall Appraisal. See "Annex B--Letter from Appraiser" for
information regarding the Mall Appraisal.
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MANAGEMENT
The following table sets forth the executive officers and the directors of
the Company. The Company is the managing member of Venetian. Under the limited
liability company agreement of Venetian, the Company is entitled to be
reimbursed for all expenses incurred in connection with its activities as the
managing member of Venetian, including all employee compensation costs.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Sheldon G. Adelson ............. 64 Chairman of the Board, Chief Executive Officer
and Director
William J. Raggio .............. 71 Special Director
William P. Weidner ............. 51 President and Chief Operating Officer
Bradley H. Stone ............... 43 Executive Vice President
Robert G. Goldstein ............ 42 Senior Vice President
David Friedman ................. 41 Assistant to Chairman
of the Board and Secretary
Harry D. Miltenberger .......... 54 Vice President--Finance
</TABLE>
Sheldon G. Adelson has been the Chairman of the Board, Chief Executive
Officer and a director of the Company since April 1988 when the Company was
formed to own and operate the former Sands Hotel. Mr. Adelson has extensive
experience in the convention, trade show, tour and travel businesses. Mr.
Adelson also has investments in other business enterprises. He has been
President and Chairman of Interface since the mid-1970s and Chairman of
Interface Group-Massachusetts Inc. since 1990. Mr. Adelson created and
developed the COMDEX Trade Shows, including the COMDEX Fall Trade Show, the
world's largest computer show, all of which were sold to Softbank Corporation
in April 1995.
William J. Raggio was elected as Special Director of the Company upon
consummation of the Offering in November 1997. Since 1991, Mr. Raggio has been
an attorney and shareholder in the law firm of Vargas & Bartlett and since
1972, has served as an elected member of the Nevada State Senate, holding the
positions of Senate Majority Leader and Chairman of the Finance Committee. Mr.
Raggio is also a member of the Board of Directors of Sierra Health Services and
a member of the Board of Directors and an Executive Vice President of Santa Fe
Gaming Corp. since 1984 and 1987, respectively.
William P. Weidner has been the President and Chief Operating Officer of
the Company since December 1995. From 1985 to 1995, Mr. Weidner was President
and Chief Operating Officer and served on the board of Pratt Hotel Corporation.
From February 1991 to December 1995, Mr. Weidner was also the President of
Pratt's Hollywood Casino-Aurora subsidiary and from June 1992 until December
1995, he served on the board of the Hollywood Casino Corporation. Since
September 1993, Mr. Weidner has served on the Board of Directors of Shorewood
Packaging Corporation. Mr. Weidner directed the opening of Hollywood Casino,
one of Chicago's first riverboat casino hotels, New York City's Maxim's de
Paris (now the Peninsula), and hotels in Orlando and Palm Springs.
Bradley H. Stone has been Executive Vice President of the Company since
December 1995. From June 1984 through December 1995, Mr. Stone was President
and Chief Operating Officer of the Sands Hotel in Atlantic City. Mr. Stone also
served as an Executive Vice President of the parent Pratt Hotel Corporation
from June 1986 through December 1995.
Robert G. Goldstein has been Senior Vice President of the Company since
December 1995. From 1992 until joining the Company in December 1995, Mr.
Goldstein was the Executive Vice President of Marketing at the Sands in
Atlantic City as well as an Executive Vice President of the parent Pratt Hotel
Corporation.
David Friedman has been Assistant to the Chairman of Interface since
October 1995. Subsequently, Mr. Friedman became both Assistant to the Chairman
of the Company and Secretary of the Company. Mr. Friedman is also an officer of
other companies owned by Mr. Adelson. Prior to joining the Company, Mr.
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Friedman was the Senior Vice President of Development and Legal Affairs for
President Casinos, Inc. from May 1993 to October 1995. He was Vice President
and General Counsel to Resorts International from 1990 to December 1993. Mr.
Friedman also held various positions at Bally's in Atlantic City.
Harry D. Miltenberger is a certified public accountant and has been Vice
President--Finance of the Company since February 1997. From March 1995 until
February 1997 he was Senior Vice President and Chief Financial Officer of SUB,
a banking company; from April 1993 to March 1995 he was a Director of Winco
Product Corp. From February 1988 to December 1994, Mr. Miltenberger was Chief
Financial Officer of SPOA Inc., a real estate development company.
Executive Compensation
The following table sets forth certain information concerning the
compensation for the last completed year of those persons who were, at December
31, 1997, the five highest paid executive officers of LVSI, which is the
managing member of Venetian. In 1996, LVSI had only four paid executive
officers. Sheldon G. Adelson, the Chairman of the Board and Chief Executive
Officer of LVSI, received no compensation in 1996 and 1997. Notwithstanding the
foregoing, in future years, LVSI plans to provide salary, bonus or other
compensation to Mr. Adelson in his capacity as Chairman of the Board and Chief
Executive Officer of LVSI. Under the limited liability company agreement of
Venetian, LVSI is entitled to be reimbursed for all expenses incurred in
connection with its activities as the managing member of Venetian, including
all employee compensation costs.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation Securities All Other
---------------------- Underlying Compensation
Name and Principal Position Year Salary Bonus Options (1)
- ------------------------------- ------ ----------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
William P. Weidner ............ 1997 $794,915 50,000 -- $ 6,570
President and Chief 1996 772,717 -- -- 26,832
Operating Officer
Bradley H. Stone .............. 1997 510,430 40,000 -- 918
Executive Vice President 1996 493,606 -- -- 20,697
Robert G. Goldstein ........... 1997 384,220 40,000 -- 918
Senior Vice President 1996 369,770 -- -- 15,859
David Friedman ................ 1997 228,654 90,000 -- 816
Assistant to Chairman of the 1996 196,154 -- -- 21,849
Board and Secretary
Harry D. Miltenberger ......... 1997 147,769 30,000 -- 12,307
Vice President-Finance 1996 -- -- -- --
</TABLE>
- --------------
(1) Represents entertainment and other miscellaneous expenses.
Employment Agreements
William P. Weidner, Bradley H. Stone and Robert Goldstein each has an
employment agreement (collectively, the "Employment Agreements") with the
Company continuing through December 31, 2000 (the "Initial Term"). The
agreements originally had a termination date of December 31, 1998, but have
been extended by the Company through December 31, 2000, in accordance with
two-year extension rights of the Company. If the Nevada Gaming Authorities
refuse to grant the officers licenses, the Employment Agreements terminate.
Pursuant to the Employment Agreements, the officers have such powers, duties
and responsibilities as are generally associated with their offices, as may be
modified or assigned by the Chairman of the Board of Directors (or the
President in the case of Mr. Stone and Mr. Goldstein), and subject to the
supervision of the Board of Directors (and the President in the case of Mr.
Stone and Mr. Goldstein). The agreements provide that, during the terms of
their employment, the officers will not engage in any other business or
professional pursuit unless consented to by the Company in writing.
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The terms of the Employment Agreements provide for an annual base salary
for Mr. Weidner, Mr. Stone and Mr. Goldstein of $794,915, $510,430 and
$384,220, respectively. The foregoing salaries are subject to cost-of-living
adjustments, effective January 1, 1999, if no written incentive compensation
plans have been established for the executives prior to January 1, 1999. The
employment agreements also provide for the grant of options to acquire shares
of common stock of the Company representing 2%, 1.5% and 1.0%, respectively, of
the shares issued and outstanding upon the issuance of all shares for which
options have been granted under the Employment Agreements. However, none of
such options are effective for any purpose whatsoever until and unless the
grant of such options has been approved by the Nevada Commission. See "--Las
Vegas Sands, Inc. 1997 Fixed Stock Option Plan." The officers are also entitled
to receive other employee benefits of the Company. The agreements may be
terminated by either the Company or the officer upon proper notice, pursuant to
the terms of the Employment Agreements. Under the agreements, in the event of a
Cause Termination, Breach Termination, Voluntary Termination or Licensing
Termination (each as defined therein), all salary and benefits shall
immediately cease subject to any requirements of law, all unexercised options
shall be canceled and forfeited and all shares of common stock held shall be
redeemed by the Company at a price equal to the lesser of the exercise price of
such shares or the Fair Market Value (as defined therein) on the date of
termination, payable in sixty equal consecutive monthly installments with
interest at the Applicable Federal Rate (as defined therein). In the event of a
Company Breach Termination, Constructive Termination or Involuntary Termination
(each as defined therein), the Company is obliged to pay to the officer
involved his salary for the rest of the term of the Employment Agreement until
the officer becomes gainfully employed elsewhere, in which event the Company is
obliged to pay the difference in the income earned in such other employment and
the salary payable under the agreement with the Company. The amount that the
officer is entitled to receive upon termination will depend upon the amount of
time remaining in the term of such agreement as of the date of the officer's
termination of employment. If a Company Breach Termination, Constructive
Termination or Involuntary Termination occurred with respect to Mr. Weidner,
Mr. Stone and Mr. Goldstein on December 31, 1997, the amounts that Mr. Weidner,
Mr. Stone and Mr. Goldstein would have been entitled to receive pursuant to
their Employment Agreements as continued salary through December 31, 2000 would
have been $2,318,151, $1,480,818 and $1,109,310, respectively, based on their
salaries of $772,717, $493,606 and $369,770, respectively. Such amounts would
have been subject to mitigation, as described above, if the officer became
gainfully employed elsewhere. In addition, all unexercised options shall be
canceled and forfeited and all shares of the Company held by the officer shall
be redeemed by the Company at a price equal to the greater of the exercise
price for such shares or the Fair Market Value on the date of termination,
payable in 36 equal consecutive monthly installments with interest at the
Applicable Federal Rate. In the case of a Death Termination (as defined
therein), salary shall be paid through the date of death, all unexercised
options shall be automatically cancelled, and all shares of the Company held by
the officer shall be redeemed by the Company for a price payable by the Company
to the officer's estate equal to all sums paid by the officer for the shares
plus the difference between (x) the exercise price paid for the shares and (y)
the Fair Market Value of such shares, payable in 36 equal consecutive monthly
installments with interest at the Applicable Federal Rate. In the case of
Disability Termination, salary, less any applicable disability insurance
payments, shall be continued for a period of six months following the date of
termination and all options and shares shall be treated in the same way as upon
a Death Termination. The employment agreements may not be amended, changed, or
modified except by a written document signed by each of the parties.
Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan
The Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan (the "Plan")
provides for 75,000 shares of common stock of the Company to be reserved for
issuance by the Company to officers and other key employees or consultants of
the Company or any of its Affiliates or Subsidiaries (each as defined in the
Plan) pursuant to options granted under the Plan. None of the options granted
under the Plan will become effective for any purpose whatsoever until and
unless the grant of such options has been approved by the Nevada Commission.
The purpose of the Plan is to promote the interest of the Company and its
Stockholder by (i) attracting and retaining exceptional officers and other key
employees and consultants to the Company and its Affiliates and Subsidiaries
and (ii) enabling such individuals to participate in the long-term growth and
financial success of the Company. The Board of Directors has the authority to
determine the participants to whom options are granted, the number of shares
covered by each option
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or any repurchase or other disposition of shares thereunder, the exercise price
therefor, and the conditions and limitations applicable to the exercise of the
option. The Board of Directors is authorized to make adjustments in the terms
and conditions of, and the criteria included in, options, in the case of
certain unusual or nonrecurring events, whenever the Board of Directors
determines that such adjustments are appropriate in order to prevent dilution
or enlargement of benefits or potential benefits under the Plan. In the event
of any Acceleration Event (as defined in the Plan) any outstanding options then
held by the participants which are unexercisable or otherwise unvested, shall
automatically become fully vested and shall be exercisable pursuant to the
applicable award agreement. The Plan provides that the Sole Stockholder may, at
any time, assume the Plan or certain obligations under the Plan, in which case
the Sole Stockholder will be the administrator of the Plan, the issuer of the
Options, and will have all the rights, powers, and responsibilities granted to
the Company or the Board of Directors under the Plan with respect to such
assumed obligations. The terms of the options are set forth in individual award
agreements between the Company (or the Sole Stockholder) and each participant.
The Board of Directors may amend, alter, suspend, discontinue or terminate
the Plan or any portion thereof at any time, provided that such shall not be
made without Shareholder approval if such approval is necessary to comply with
any tax or regulatory requirement applicable to the plan and provided that any
such amendment, alteration, suspension, discontinuance or termination that
would impair the rights of any holder of an option already granted shall not be
effective without the holder's consent. The Plan expires, and no options may be
granted under the Plan after the year 2007.
Upon approval of the Plan by the Nevada Commission, options are intended
to be granted under the Plan to Mr. Weidner, Mr. Stone, Mr. Goldstein, Mr.
Friedman and Mr. Miltenberger (the "Optionees") to acquire shares representing
2%, 1.5%, 1.0%, 0.5% and 0.1%, respectively, of the common stock of the
Company. The Plan allows Mr. Adelson to assume the obligations under the Plan
relating to such options and to enter into award agreements with the Optionees.
The options are expected to be subject to certain vesting and forfeiture
provisions. If the Optionee's employment with the Company is terminated for any
reason, all unvested shares shall be forfeited. The options expire on the
earlier of (i) the eighth anniversary of the date of grant, (ii) the date three
days prior to a Change in Control Acceleration Event (as defined in the Plan),
(iii) the date three days prior to a Public Offering Acceleration Event (as
defined in the Plan) and (iv) the participant's termination of employment
(after receipt of any applicable notice as provided for in the Plan). Shares
issued to the Optionees pursuant to the exercise of an option and held (and
vested) at the time of the Optionee's termination of employment are subject to
redemption by the Company or Mr. Adelson, if he so issued them, in accordance
with the terms of the applicable award agreements of the Optionees and for
Messrs. Weidner, Stone and Goldstein, also consistent with the terms of the
Employment Agreements, as described in "--Employment Agreements" above.
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OWNERSHIP OF CAPITAL STOCK
The following table sets forth certain information as of the date of this
Prospectus with respect to the beneficial ownership of the common stock of LVSI
by (i) each person who, to the knowledge of LVSI, beneficially owns more than
5% of its outstanding common stock, (ii) the directors of LVSI, (iii) all
executive officers named in "Management" and (iv) all executive officers and
directors of LVSI as a group. Venetian currently has two members, the Company
and Interface Group Holding Company, Inc. ("Interface Holding"), which owns all
of the capital stock of Interface. LVSI is the managing member of Venetian and
owns 100% of the common equity interests in Venetian and Interface Holding owns
a non-voting preferred interest in Venetian. See "Certain
Transactions--Preferred Interest."
Shares of
Common
Beneficial Owner(1) Stock Percentage
- ------------------- --------- ----------
Sheldon G. Adelson .................................... 925,000 100%
William J. Raggio ..................................... 0 0%
William P. Weidner (2) ................................ 0 0%
Bradley H. Stone (2) .................................. 0 0%
Robert G. Goldstein (2) ............................... 0 0%
David Friedman (2) .................................... 0 0%
Harry Miltenberger (2) ................................ 0 0%
All executive officers and the directors of the Company
as a group ........................................... 925,000 100%
- ----------------
(1) The address of each person named below is c/o the Company, 3355 Las Vegas
Boulevard South, Room 1A, Las Vegas, Nevada 89109.
(2) Does not include options to purchase common stock of the Company not
exercisable within 60 days of the date hereof. In connection with the
development of the Casino Resort and pursuant to the terms of each of
their employment agreements or other agreements with the Company, each of
Messrs. Weidner, Stone, Goldstein, Friedman and Miltenberger are to be
granted options to purchase common stock of LVSI representing 2.0%, 1.5%,
1.0%, 0.5% and 0.1%, respectively, of the shares of common stock of LVSI
outstanding after giving effect to the issuance of all shares for which
options have been granted. However, none of such options are effective for
any purpose whatsoever until and unless the grant of such options has been
approved by the Nevada Commission. See "Management--Las Vegas Sands, Inc.
1997 Stock Option Plan."
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CERTAIN TRANSACTIONS
Equity Contribution
As support for the development of the Casino Resort, the Sole Stockholder
and his affiliates have provided or contributed to the Issuers $95.3 million of
the Cash Contribution and the approximately 45 acre Project Site, which has an
appraised value of $225.0 million. See "Risk Factors--Sole Stockholder,"
"Appraisals" and "Description of Certain Indebtedness."
Preferred Interest
Interface Holding currently holds a Series A Preferred Interest in
Venetian. The Series A Preferred Interest is non-voting, accrues no preferred
return and is not subject to mandatory redemption or redemption at the option
of the holder. At any time, the Series A Preferred Interest may be converted
into a Series B Preferred Interest. The rights of the Series B Preferred
Interest are the same as the Series A Preferred Interest except that the Series
B Preferred Interest will have a preferred return of 12% and upon the 12th
anniversary of the closing of the Offering, to the extent of the positive
capital account of the holders of the Series B Preferred Interest, there must
be a distribution on the Series B Preferred Interests. Until the indebtedness
under the Bank Credit Facility is repaid and cash payments are permitted under
the restricted payment covenants under the Indentures, the preferred return on
the Series B Preferred Interest will accrue and will not be paid in cash.
Subject to the foregoing, distributions with respect to the preferred capital
of the holders of the Series A Preferred Interest and the Series B Preferred
Interest may, at the option of the Company, be made at any time.
Historical Transactions with the Sole Stockholder and his Affiliates
Merger with Nevada Funding Group, Inc.
In December 1995, LVSI completed a merger (the "NFG Merger") with Nevada
Funding Group, Inc. ("NFG") through the contribution of all the outstanding
common stock of NFG to LVSI. At the time of the NFG Merger, the Sole
Stockholder owned all of the outstanding common stock of NFG. NFG was
incorporated in 1992 for the sole purpose of acquiring certain second mortgage
notes of LVSI (the "Second Mortgage Notes") from third parties and had no other
operations. As of the date of the NFG Merger, NFG owned $37.0 million of the
Second Mortgage Notes, which were retired as part of the NFG Merger.
Share Repurchases
As a result of the NFG Merger, LVSI and NFG were merged in December 1995.
Prior to April 1995, 41,175 shares, or 41%, of NFG common stock were held by
three stockholders (other than the Sole Stockholder). In April 1995, NFG
purchased all 41,175 shares for a total price of approximately $13.2 million.
In August 1995, LVSI purchased 34,999, or 41%, shares of its common stock from
the same three stockholders for a total price of $206,000 (at the time of the
purchase LVSI had intercompany debt to affiliates of $161.0 million as of
August 1995). As a result, NFG and LVSI became wholly-owned by the Sole
Stockholder.
Prior Debt Obligations
Interface is currently wholly-owned indirectly by the Sole Stockholder and
prior to May 1995, was majority-owned by the Sole Stockholder. From 1992 to
1994, Interface and NFG acquired 99% of the outstanding balance of Second
Mortgage Notes (or $71.0 million) of the total $72.0 million of Second Mortgage
Notes. From their issuance in 1989, Interface was the sole holder of Third
Mortgage Pay-in-Kind Notes of the Company (the "Third Mortgage Notes"). The
Second Mortgage Notes earned interest at 15% per annum to January 15, 1995, at
which time the interest rate was reduced to the short-term quarterly applicable
federal interest rate as published by the Internal Revenue Service. Beginning
in January 1992, the Third Mortgage Notes earned interest at the short-term
quarterly applicable federal interest rate as published by the Internal Revenue
Service. Interest on the Third Mortgage Notes was payable quarterly with
$250,000 of the interest payable in cash and the remainder payable in
additional Third Mortgage Notes. Interest expense relating to the Second
Mortgage Notes and the Third Mortgage Notes owned by NFG and Interface totaled
$0, $4.1 million and $7.9 million in 1997, 1996 and 1995, respectively. As
described in "--Merger with Nevada Funding Group, Inc." and "--Expo Center," as
a result of the NFG
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Merger and the sale of the Expo Center, the Second Mortgage Notes and a portion
of the Third Mortgage Notes were retired in 1995 and 1996. The remaining Third
Mortgage Notes were redeemed in December 1996.
Expo Center
Prior to January 1996, LVSI owned the Expo Center land and building and
leased it to Interface. Pursuant to the operating lease agreement, Interface
paid an annual rental of $8 million and was responsible for all taxes,
insurance, and costs to operate and maintain the facility. In 1995, LVSI was
paid $8 million in rent under the operating lease agreement. In January 1996,
Interface acquired from LVSI the Convention Center and related land and
equipment at its carrying value of $66.8 million in exchange for all of the
Second Mortgage Notes and a portion of the Third Mortgage Notes of LVSI held by
Interface. Concurrent with the sale, the operating lease agreement described
above was canceled. In addition, in August 1996, Interface purchased the power
plant and related equipment of the Sands Hotel from LVSI for approximately
$181,000.
Other Transactions
Prior to April 1995, Interface was in the trade show business and
sponsored various COMDEX Trade Shows, including the COMDEX Fall Trade Show in
Las Vegas every year. In the normal course of business, during the show,
Interface held various functions and many of its attendees stayed at the former
Sands Hotel.
During the year ended December 31, 1997, LVSI declared and paid
liquidating cash dividends totaling $27,600,000 from capital in excess of par
value to its Sole Stockholder.
In 1995, 1996 and 1997, LVSI received from, and rendered to, Interface and
its affiliates, certain administrative services. However, the value of such
services was not considered material to the Casino Resort's results of
operations. Upon completion of the Offering, any such services are provided
either on an arm's-length basis or at a cost based on the actual costs incurred
to provide such services.
Cooperation Agreement
The Company's business plan calls for the Hotel and Casino, the Mall and
the Expo Center, though separately owned, to be part of an integrally related
project. In order to establish terms for the integrated operation of these
facilities, Venetian (as owner of the Hotel and Casino and the Phase II Land),
the Mall Construction Subsidiary, and Interface have entered into the
Cooperation Agreement. The Cooperation Agreement sets forth agreements among
the parties regarding, among other things, construction of the Casino Resort,
encroachments, easements, operating standards, maintenance requirements,
insurance requirements, casualty and condemnation, joint marketing, the sharing
of certain facilities and costs relating thereto. See "Certain Material
Agreements-Cooperation Agreement."
Administrative Services Agreement
Pursuant to a certain services agreement (the "Services Sharing
Agreement") among LVSI, certain of its subsidiaries and Interface Holdings
(collectively, the "Participants"), the Participants have agreed to share
ratably in the costs of, and under certain circumstances provide to one
another, shared services, including legal services, accounting services,
insurance administration, benefits administration, and such other services as
each party may request of the other. In addition, under the Services Sharing
Agreement, the Participants have agreed to share ratably the costs of any
shared office space.
Temporary Lease
On November 1, 1996, LVSI and Interface entered into a lease agreement
whereby LVSI agreed to lease approximately 5,000 square feet in the Expo Center
to be used as its temporary executive offices during the construction of the
Casino Resort. Management believes that the lease agreement, which provides for
monthly rent of $5,000 to be paid by LVSI to Interface, is at least as
favorable as the Company could have obtained from an independent third party.
The initial term of the lease agreement expires on November 1, 1998, and at any
time during the last year of the initial term, LVSI may extend the term for an
additional two-year period.
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Retirement Plan
All of the employees of Interface are eligible to participate in the Las
Vegas Sands, Inc. 401(k) Retirement Plan sponsored by LVSI. Costs related to
the administration of such plan are shared with LVSI based on the number of
employees of each of Interface and LVSI participating in the plan.
Airplane Expenses
LVSI utilizes a Gulfstream III aircraft, which is operated by an affiliate
of the Sole Stockholder. The aircraft is used primarily for the benefit of
LVSI's executive officers, including the Sole Stockholder. Charge-backs to LVSI
in connection with such use are based on the actual costs to operate the
aircraft allocated in accordance with purpose for which the aircraft is used.
Transactions Relating to the Venetian
An affiliate of Goldman Sachs & Co. acted as the lender under the
Construction Loan, a senior secured construction loan, which matured on the
date of the closing of the Offering, and had an interest rate of LIBOR plus 25
basis points. The Construction Loan was guaranteed by the Sole Stockholder,
which guarantee was collateralized by certain assets of the Sole Stockholder.
As of the closing of the Offering, the outstanding amount of indebtedness under
the Construction Loan was approximately $30.1 million. The Construction Loan
was repaid with the net proceeds from the Offering. See "Use of Proceeds."
For a description of certain agreements entered into by the Sole
Stockholder, Venetian, the Company, their subsidiaries and affiliates in
connection with the construction and operation and financing of the Casino
Resort, see "Description of Certain Indebtedness" and "Certain Material
Agreements."
Possible Conflicts of Interest
The common ownership of the Casino Resort, the Phase II Resort and the
Expo Center may present potential conflicts of interest. See "Risk
Factors--Possible Conflicts of Interest."
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DESCRIPTION OF MORTGAGE NOTES
General
The Mortgage Notes were issued pursuant to the Mortgage Note Indenture
among the Issuers, the Mortgage Note Guarantors and First Trust National
Association, as trustee (the "Mortgage Note Trustee"), in a private transaction
that was not subject to the registration requirements of the Securities Act.
See "Notice to Investors." The Mortgage Notes are fully, unconditionally and
jointly and severally guaranteed (i) on a senior, secured basis (the "Secured
Mortgage Note Guaranties") by the Mall Construction Subsidiary and any future
Restricted Subsidiary of the Issuers (the "Secured Mortgage Note Guarantors")
and (ii) on a subordinated, unsecured basis (the "Subordinated Mortgage Note
Guaranties" and, together with the Secured Mortgage Note Guaranties, the
"Mortgage Note Guaranties") by Mall Intermediate Holdings and Phase II
Intermediate Holdings (the "Subordinated Mortgage Note Guarantors" and,
together with the Secured Mortgage Note Guarantors, the "Mortgage Note
Guarantors"), with certain exceptions, pursuant to the terms of the Mortgage
Note Indenture. The terms of the Mortgage Notes include those stated in the
Mortgage Note Indenture, the Collateral Documents and those made part of the
Mortgage Note Indenture by reference to the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). The Mortgage Notes are subject to all such terms, and
holders of Mortgage Notes are referred to the Mortgage Note Indenture, the
Collateral Documents and the Trust Indenture Act for a statement thereof. The
following summary of the material provisions of the Mortgage Note Indenture and
the Collateral Documents does not purport to be complete and is qualified in
its entirety by reference to the Mortgage Note Indenture and the Collateral
Documents, including the definitions therein of certain terms used below. A
copy of the form of Mortgage Note Indenture and each of the Collateral
Documents is available from the Company as described under "Additional
Information." The definitions of certain terms used in the following summary
are set forth below under "--Certain Definitions." Capitalized terms that are
used but not otherwise defined in this Prospectus have the meanings assigned
them in the Mortgage Note Indenture. A copy of the Mortgage Note Indenture has
been filed with the Commission as an exhibit to the Registration Statement. For
purposes of this "Description of Mortgage Notes," the term "Issuers" refers
only to the Issuers and not to any of their respective Subsidiaries, the term
the "Company" refers only to Las Vegas Sands, Inc. and not to any of its
Subsidiaries, and the term "Venetian" refers only to Venetian Casino Resort,
LLC and not to any of its Subsidiaries.
Ranking and Security
The Mortgage Notes constitute joint and several obligations of the Issuers
and rank senior in right of payment to all Subordinated Indebtedness of the
Issuers. The Secured Mortgage Note Guaranties rank senior in right of payment
to all Subordinated Indebtedness of the Secured Mortgage Guarantors. The
Subordinated Mortgage Note Guaranties rank senior or pari passu in right of
payment to all subordinated indebtedness of the Subordinated Mortgage Note
Guarantors and rank subordinate in right of payment to all Senior Debt of the
Subordinated Mortgage Note Guarantors. As of the date hereof, (i) the only
outstanding Subordinated Indebtedness are the Senior Subordinated Notes; (ii)
Venetian, Mall Manager and Phase II Manager are the only direct Subsidiaries of
the Company and Mall Intermediate Holdings, Phase II Intermediate Holdings,
Mall Construction Subsidiary, Mall Holdings, Phase II Holdings, Mall Subsidiary
and Phase II Subsidiary are the only direct or indirect Subsidiaries of
Venetian; and (iii) Mall Intermediate Holdings, Phase II Intermediate Holdings
and Mall Construction Subsidiary are Restricted Subsidiaries of the Issuers and
Phase II Manager, Phase II Holdings and Phase II Subsidiary are Unrestricted
Subsidiaries of the Issuers. The Board of Directors of the Company has
designated each of Mall Manager, Mall Holdings and Mall Subsidiary as a Special
Subsidiary.
To the extent permitted by applicable law and subject to any required
approval of any Governmental Instrumentality, the Mortgage Notes are secured by
a Lien on the Note Collateral owned by the Issuers and the Secured Mortgage
Note Guaranties are secured by the Note Collateral owned by the Secured
Mortgage Note Guarantors, in each case whether such Note Collateral is now
owned or hereafter acquired. Such Lien is prior to all other Liens on the Note
Collateral, except for Permitted Liens, which includes the Lien on the Project
Assets securing the Bank Credit Facility and the Lien on the Mall Collateral
securing the Mall Construction Loan Facility and the Bank Credit Facility.
Except for the Lien in favor of the Mortgage Notes on the Mortgage Notes
Proceeds Account, the Liens securing the Bank Credit Facility
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and the Mall Construction Loan Facility are each prior to the Liens securing
the Mortgage Notes and the Secured Mortgage Note Guaranties. Mall Construction
Lender has a first priority Lien on the Mall Collateral, the lenders under the
Bank Credit Facility have a first priority Lien on the Project Assets and a
second priority Lien on the Mall Collateral and the holders of the Mortgage
Notes have a second priority Lien on the Project Assets and a third priority
Lien on the Mall Collateral. Upon Completion and the satisfaction of certain
other conditions, the Mall Collateral will be released from the Lien securing
the Bank Credit Facility and the Mortgage Notes and transferred to the Mall
Subsidiary in connection with the release of the Issuers and the Mall
Construction Subsidiary from further obligations under the Mall Construction
Loan Facility. Upon the creation of the Phase II Land as a separate parcel and
the satisfaction of certain other conditions, the Phase II Land may be
transferred to the Phase II Subsidiary and, upon such transfer, the Phase II
Land will be released from the Liens securing the Bank Credit Facility and the
Mortgage Notes.
The Note Collateral includes substantially all of the assets comprising
the Project, except as described below. In addition to the Note Collateral, the
Mortgage Notes are secured by a first priority pledge of the Mortgage Notes
Proceeds Account. The Note Collateral does not include: (i) the assets of the
Phase II Subsidiary and, after the release thereof, the Mall Collateral; (ii)
certain equipment owned by the HVAC Provider relating to the Project; (iii) the
Specified FF&E; (iv) any assets which if pledged, hypothecated or given as
collateral security would require the Issuers to seek approval of the Nevada
Gaming Authorities of the pledge, hypothecation or collateralization, or
require the Mortgage Note Trustee or a holder or beneficial holder of the
Mortgage Notes to be licensed, qualified or found suitable by an applicable
Gaming Authority (other than any approval required for the pledge,
hypothecation or collateralization of assets in connection with the Exchange
Offer); (v) a pledge of the capital stock of the Company or Venetian or any of
the Issuers' Subsidiaries; and (vi) certain assets to the extent such assets
are permitted to be financed by Indebtedness permitted to be incurred pursuant
to the covenant entitled "Limitations on Incurrence of Indebtedness and
Issuance of Disqualified Stock" and such Indebtedness is permitted to be
secured pursuant to the covenant entitled "Liens" pursuant to clause (b), (c),
(i) or (o) of the definition of "Permitted Liens."
The right of the Mortgage Note Trustee to realize upon and sell the Note
Collateral is likely to be significantly impaired by applicable bankruptcy and
insolvency laws if a proceeding under such laws were commenced in respect of
the Issuers or any Mortgage Note Guarantor. Such laws may impose limitations or
prohibitions on the exercise of rights and remedies under the Collateral
Documents for a substantial or indefinite period of time. During the pendency
of any foreclosure proceeding, the Mortgage Note Trustee could seek the
appointment of a receiver through a petition to the appropriate Nevada state
court for the taking of possession of the Note Collateral. The receiver may be
required to obtain the approval of Nevada Gaming Authorities to continue gaming
operations until the foreclosure sale. If the Mortgage Note Trustee acquired
the Note Collateral in a foreclosure sale, it may contract for the operation of
the Note Collateral by an independent operator who would be required to comply
with the licensing requirements and other restrictions imposed by the Nevada
Gaming Authorities, pursuant to an arrangement under which the Holders of the
Mortgage Notes would not share in the profits or losses of gaming operations.
In addition, if the Mortgage Note Trustee acquires and operates the Note
Collateral, the Mortgage Note Trustee and the Holders of the Mortgage Notes
will, if they share in the profits and losses, and may, in any event, be
required to comply with the licensing requirements under the Nevada gaming
laws. In any foreclosure sale, licensing requirements under the Nevada Gaming
Control Act may limit the number of potential bidders and may delay the sale of
the Note Collateral, either of which could adversely affect the sale price of
the Note Collateral. See "Risk Factors--Ability to Realize on Collateral and
Exercise Remedies" and "--Certain Bankruptcy Considerations."
Principal, Maturity and Interest
The Mortgage Notes are joint and several secured obligations of the
Issuers, limited in aggregate principal amount to $425.0 million and will
mature on November 15, 2004. The Mortgage Notes bear interest at the rate of
12 1/4% per annum of the principal amount then outstanding from the Issuance
Date to the date of payment of such principal amount. Installments of interest
become due and payable semi-annually in arrears on May 15 and November 15 of
each year, commencing May 15, 1998, to the holders of record at the close of
business on the preceding May 1 or November 1. Additionally, installments of
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accrued and unpaid interest will become due and payable with respect to any
principal amount of the Mortgage Notes that matures (whether at stated
maturity, upon acceleration, upon maturity of repurchase obligation or
otherwise) upon such maturity of such principal amount of the Mortgage Notes.
Interest on the Mortgage Notes is computed on the basis of a 360-day year,
consisting of twelve 30-day months. Each installment of interest is calculated
to accrue from and including the most recent date to which interest has been
paid or provided for (or from and including the Issuance Date if no installment
of interest has been paid) to, but not including, the date of payment.
Principal of, premium and Liquidated Damages, if any and interest on the
Mortgage Notes are payable at the office or agency of the Issuers maintained
for such purpose within the City and State of New York or, at the option of the
Issuers, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the holders of the Mortgage Notes at their respective addresses
set forth in the register of holders of Mortgage Notes; provided that all
payments of principal, premium and Liquidated Damages, if any and interest on
the Mortgage Notes the holders of which have given wire transfer instructions
to the Issuers are required to be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof. Until
otherwise designated by the Issuers, their office or agency in New York is the
office of the Mortgage Note Trustee maintained for such purpose. The Mortgage
Notes are issued in registered form, without coupons, and in denominations of
$1,000 and integral multiples thereof.
Mandatory Redemption
The Issuers are not required to make mandatory redemptions or sinking fund
payments prior to maturity with respect to the Mortgage Notes.
Optional Redemption
Except as described below, the Mortgage Notes are not redeemable at the
option of the Issuers prior to November 15, 2001. On or after November 15,
2001, the Mortgage Notes will be redeemable at the option of the Issuers, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on November 15 of the years indicated below:
Percentage
of Principal
Year Amount
- ---- ------
2001 .......................... 106.125%
2002 .......................... 103.063%
2003 and thereafter ........... 100.000%
Notwithstanding the foregoing, on or prior to November 15, 2000, the
Issuers may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Mortgage Notes originally issued at a redemption price of
112.25% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the redemption date, with the proceeds
of or the savings recognized from one or more Redemption Triggering Events;
provided that at least 65% of the aggregate principal amount of Mortgage Notes
originally issued remain outstanding immediately after the occurrence of such
redemption; and provided, further, that (i) such redemption shall occur within
60 days of the date of such Redemption Triggering Event and (ii) Mortgage Notes
held by the Issuers and not cancelled will not be deemed to be outstanding for
purposes of calculating the aggregate principal amount of Mortgage Notes
outstanding after the occurrence of such redemption.
In addition, at any time prior to November 15, 2001, the Issuers may, at
their option, redeem the Mortgage Notes, in whole or in part, at a redemption
price equal to 100% of the principal amount thereof plus the applicable
Mortgage Note Make-Whole Premium, plus, to the extent not included in the
Mortgage Note Make-Whole Premium, accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption. For purposes of the foregoing,
"Mortgage Note Make-Whole Premium" means, with respect to a Mortgage Note, an
amount equal to the greater of (i) 12.25% of the outstanding principal amount
of such Mortgage Note and (ii) the excess of (a) the present value of the
remaining interest, premium and principal payments due on such Mortgage Note as
if such Mortgage Note were redeemed on
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November 15, 2001, computed using a discount rate equal to the Treasury Rate
plus 50 basis points, over (b) the outstanding principal amount of such
Mortgage Note.
Notwithstanding any other provision hereof, if any Gaming Authority
requires that a holder or beneficial owner of the Mortgage Notes must be
licensed, qualified or found suitable under any applicable gaming laws in order
to maintain any gaming license or franchise of the Company or any Restricted
Subsidiary under any applicable gaming laws, and the holder or beneficial owner
fails to apply for a license, qualification or finding of suitability within 30
days after being requested to do so by the Gaming Authority (or such lesser
period that may be required by such Gaming Authority) or if such holder or
beneficial owner is not so licensed, qualified or found suitable, the Issuers
shall have the right, at their option, (i) to require such holder or beneficial
owner to dispose of such holder's or beneficial owner's Mortgage Notes within
30 days of receipt of such finding by the applicable Gaming Authority (or such
earlier date as may be required by the applicable Gaming Authority) or (ii) to
call for redemption of the Mortgage Notes of such holder or beneficial owner at
a redemption price equal to the lesser of the principal amount thereof or the
price at which such holder or beneficial owner acquired the Mortgage Notes,
together with, in either case, accrued and unpaid interest and Liquidated
Damages, if any, to the earlier of the date of redemption or, the date of the
finding of unsuitability by such Gaming Authority, which may be less than 30
days following the notice of redemption if so ordered by such Gaming Authority.
In connection with any such redemption, and except as may be required by a
Gaming Authority, the Issuers shall comply with the procedures contained in the
Mortgage Notes for redemptions of the Mortgage Notes. Under the Mortgage Note
Indenture, the Issuers are not required to pay or reimburse any holder of the
Mortgage Notes or beneficial owner who is required to apply for such license,
qualification or finding of suitability for the costs of the licensure or
investigation for such qualification or finding of suitability. Such expenses
will, therefore, be the obligation of such holder or beneficial owner. See
"Regulation and Licensing."
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, the Issuers will make an offer
to purchase all or any part (equal to $1,000 or an integral multiple thereof)
of the Mortgage Notes pursuant to the offer described below (the "Change of
Control Offer") at a price in cash (the "Change of Control Payment") equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase. Within 30
days following any Change of Control, the Issuers will mail a notice to each
holder stating the following: (1) a Change of Control is being made pursuant to
the covenant entitled "Change of Control," and all Mortgage Notes properly
tendered pursuant to such Change of Control Offer will be accepted for payment;
(2) the purchase price and the purchase date, which will be no earlier than 30
days nor later than 60 days from the date such notice is mailed, except as may
be otherwise required by applicable law (the "Change of Control Payment Date");
(3) any Mortgage Note not properly tendered will remain outstanding and
continue to accrue interest; (4) unless the Issuers default in the payment of
the Change of Control Payment, all Mortgage Notes accepted for payment pursuant
to the Change of Control Offer will cease to accrue interest after the Change
of Control Payment Date; (5) holders electing to have any Mortgage Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Mortgage Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Mortgage Notes completed, to the paying agent (which may
be the Company or Venetian) specified in the notice at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (6) holders will be entitled to withdraw
their tendered Mortgage Notes and their election to require the Issuers to
purchase the Mortgage Notes, provided, that the paying agent receives, not
later than the close of business on the last day of the Offer Period (as
defined in the Mortgage Note Indenture), a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of Mortgage Notes tendered for purchase, and a statement that such
holder is withdrawing his tendered Mortgage Notes and his election to have such
Mortgage Notes purchased; and (7) that holders whose Mortgage Notes are being
purchased only in part will be issued new Mortgage Notes equal in principal
amount to the unpurchased portion of the Mortgage Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof.
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The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the
repurchase of the Mortgage Notes pursuant to a Change of Control Offer.
On the Change of Control Payment Date, the Issuers will, to the extent
permitted by law, (1) accept for payment all Mortgage Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
paying agent an amount equal to the aggregate Change of Control Payment in
respect of all Mortgage Notes or portions thereof so tendered and (3) deliver,
or cause to be delivered, to the Mortgage Note Trustee for cancellation the
Mortgage Notes so accepted together with an Officers' Certificate stating that
such Mortgage Notes or portions thereof have been tendered to and purchased by
the Issuers. The paying agent will promptly mail to each holder of Mortgage
Notes the Change of Control Payment for such Mortgage Notes, and the Mortgage
Note Trustee will promptly authenticate and mail to each holder a new Mortgage
Note equal in principal amount to any unpurchased portion of the Mortgage Notes
surrendered, if any, provided, that each such new Mortgage Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Issuers will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The existence of a holder's right to require the Issuers to repurchase
such holder's Mortgage Notes upon the occurrence of a Change of Control may
deter a third party from seeking to acquire either of the Issuers in a
transaction that would constitute a Change of Control.
The source of funds for any repurchase of Mortgage Notes upon a Change of
Control will be cash generated from operations or other sources, including
borrowings, sales of assets or sales of Capital Stock. However, there can be no
assurance that sufficient funds will be available at the time of any Change of
Control to make any required repurchases. Any failure by the Issuers to
repurchase Mortgage Notes tendered pursuant to a Change of Control Offer will
be deemed an Event of Default.
The Bank Credit Facility and the Mall Construction Loan Facility contain,
and future agreements relating to any senior debt of the Issuers may contain,
restrictions or prohibitions on the Issuers' ability to repurchase the Mortgage
Notes. In the event that a Change of Control occurs at a time when the Issuers
are prohibited from repurchasing the Mortgage Notes, the Issuers could seek the
consent of their lenders to purchase the Mortgage Notes or could attempt to
refinance the borrowings that contain such prohibition or restriction. If the
Issuers do not obtain such consent or refinance such Indebtedness, they will
remain prohibited or restricted from repurchasing the Mortgage Notes. In such
case, the Issuers' failure to repurchase the Mortgage Notes tendered in the
Change of Control Offer would constitute an Event of Default under the Mortgage
Note Indenture which would in turn constitute an event of default under the
agreements governing the Issuers of the senior debt. See "Description of Other
Indebtedness."
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Issuers and their Subsidiaries, taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precisely established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Mortgage Notes to
require the Issuers to repurchase such Mortgage Notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of the Issuers and their Subsidiaries taken as a whole to another Person or
group may be uncertain.
Asset Sales
The Mortgage Note Indenture provides that the Issuers will not, and will
not permit any of their Restricted Subsidiaries to consummate an Asset Sale,
unless (w) no Default or Event of Default exists or is continuing immediately
prior to or after giving effect to such Asset Sale, (x) the Issuers or their
Restricted Subsidiaries, as the case may be, receive consideration at the time
of such Asset Sale at least equal to the fair market value (as determined by
the Board of Directors and set forth in an Officers' Certificate delivered to
the Mortgage Note Trustee) of the assets sold or otherwise disposed of and (y)
at least 85% of the consideration therefor received by either of the Issuers or
any Restricted Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; provided, however, that the amount of (A) any liabilities (as
shown on such Issuer's or such Restricted Subsidiary's, as the case may be,
most
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recent balance sheet or in the notes thereto) of the Issuers or any Restricted
Subsidiary, as the case may be (other than liabilities that are by their terms
expressly subordinated to the Mortgage Notes or any Mortgage Note Guaranty,
which may be assumed only if such liabilities are deemed to be Restricted
Payments in the case of the Issuer or any Restricted Subsidiary), that are
assumed by the transferee of any such assets and (B) any notes, securities or
other obligations received by the Issuers or any Restricted Subsidiary, as the
case may be, from such transferee that are converted by the Issuers or such
Restricted Subsidiary, as the case may be, into cash (to the extent of the cash
received) within 20 Business Days following the closing of such Asset Sale,
shall be deemed to be cash only for purposes of satisfying clause (y) of this
paragraph and for no other purpose.
Within 180 days after any Issuer's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, such Issuer or such Restricted
Subsidiary may apply the Net Proceeds from such Asset Sale (i) to permanently
reduce Indebtedness under the Bank Credit Facility or other Indebtedness that
is not Subordinated Indebtedness, (ii) in an investment in any one or more
business, capital expenditure or other tangible asset of the Issuers or any
Restricted Subsidiary, in each case, engaged, used or useful in the Principal
Business, or (iii) for working capital purposes in an aggregate amount not to
exceed $20.0 million, in each case, with no concurrent obligation to make an
offer to purchase any Mortgage Notes. Pending the final application of any such
Net Proceeds, such Issuer or such Restricted Subsidiary may temporarily reduce
Indebtedness under the Bank Credit Facility or another revolving credit
facility, if any, or otherwise invest such Net Proceeds in Cash Equivalents
which shall be pledged to the Mortgage Note Trustee or an agent thereof
(including an agent under the Bank Credit Facility) as security for the holders
of Mortgage Notes with the same relative priority with respect to the other
secured creditors as the priority of the Liens securing the asset that is the
subject of the Asset Sale, except (i) such Cash Equivalents shall be pledged to
the Disbursement Agent as security for the Lenders prior to Completion and (ii)
such Cash Equivalents need not be pledged to the Mortgage Note Trustee or an
agent thereof (including an agent under the Bank Credit Facility) to the extent
that the assets subject to such Asset Sale were not subject to Liens securing
the Note Collateral prior to such Asset Sale. Any Net Proceeds from the Asset
Sale that are not invested or used to repay Indebtedness or as working capital
within 180 days of receipt as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Issuers shall, subject to any
repayment obligations owed to the lenders under the Bank Credit Facility and
the Mall Construction Lender, make an offer to all holders of Mortgage Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Mortgage
Notes, that is an integral multiple of $1,000, that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Mortgage Note Indenture. The Issuers will
commence an Asset Sale Offer with respect to Excess Proceeds within 30 days
after the date that Excess Proceeds exceeds $10.0 million by mailing the notice
required pursuant to the terms of the Mortgage Note Indenture. To the extent
that the aggregate amount of Mortgage Notes tendered pursuant to an Asset Sale
Offer is less than the applicable Excess Proceeds, the Issuers may use any
remaining Excess Proceeds for general corporate purposes or to offer to redeem
Senior Subordinated Notes pursuant to the provisions of the Senior Subordinated
Note Indenture described below under the caption "Description of Senior
Subordinated Notes --Repurchase at the Option of the Holders--Asset Sales." If
the aggregate principal amount of Mortgage Notes surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Mortgage Note Trustee shall select
the Mortgage Notes to be purchased in the manner described under the caption
"Selection and Notice" below. Upon completion of any such Asset Sale Offer, the
amount of Excess Proceeds shall be deemed reset at zero. The Mortgage Note
Indenture also requires the Issuers or such Restricted Subsidiary to grant (i)
to the lenders under the Bank Credit Facility a first priority lien and (ii) to
the Mortgage Note Trustee, on behalf of the holders of the Mortgage Notes, a
second priority lien, in each case, on any properties or assets acquired with
the Net Proceeds of any such Asset Sale to the extent that the assets subject
to such Asset Sale were subject to Liens securing the Note Collateral prior to
such Asset Sale. To the extent that any assets subject to an Asset Sale were
subject to Liens securing the Mall Collateral prior to such Asset Sale, the
Mortgage Note Indenture also requires the Issuers or such Restricted Subsidiary
to grant (i) to the Mall Construction Lender a first priority lien, (ii) to
the lenders under the Bank Credit Facility a second priority lien and (iii) to
the Mortgage Note Trustee, on behalf of the holders
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of the Mortgage Notes, a third priority lien, in each case, on any property or
assets acquired with the Net Proceeds of any such Asset Sale.
Event of Loss
The Mortgage Note Indenture provides that upon the occurrence of any Event
of Loss with respect to Note Collateral with a fair market value (or
replacement cost, if greater) in excess of $1.5 million, the Issuers or the
affected Restricted Subsidiary, as the case may be, may apply the Net Loss
Proceeds from such Event of Loss to (X) the rebuilding, repair, replacement or
construction of improvements to the Project, with no concurrent obligation to
make any purchase of any Mortgage Notes; provided that (A) if such Event of
Loss occurs prior to Completion, the Issuers ability to apply such Net Loss
Proceeds to rebuild, repair, replace or construct improvements to the Project
will be subject to the terms of the Disbursement Agreement and (B) if such
Event of Loss occurs on or after Completion, the Issuers deliver to the
Mortgage Note Trustee within 90 days of such Event of Loss (i) a written
opinion from a reputable architect or an Independent Expert (as defined in the
Cooperation Agreement) that the Project can be rebuilt, repaired, replaced, or
constructed and Completed within one year of delivery of such opinion
substantially in the condition prior to such Event of Loss and (ii) an
Officers' Certificate certifying that the Issuers have available from Net Loss
Proceeds, cash on hand or available borrowings under Indebtedness permitted to
be incurred pursuant to the covenant described below under the caption
"Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock"
to complete such rebuilding, repair, replacement or construction, (Y)
permanently reduce Indebtedness or commitments under the Bank Credit Facility
or other Indebtedness that is not Subordinated Indebtedness or (Z) for working
capital purposes in an aggregate amount not to exceed $20.0 million, in each
case, with no concurrent obligation to make an offer to purchase Mortgage
Notes. Pending the final application of any such Net Loss Proceeds, the Issuer
or the applicable Restricted Subsidiary, as the case may be, may temporarily
reduce Indebtedness under the Bank Credit Facility or another revolving credit
facility, if any, or otherwise invest such Net Loss Proceeds in Cash
Equivalents which shall be pledged to the Mortgage Note Trustee or an agent
thereof (including the agent under the Bank Credit Facility) as security for
the holders of Mortgage Notes with the same relative priority with respect to
the other secured creditors as the priority of the Liens securing the asset
that is the subject of the Event of Loss, except (i) such Cash Equivalents
shall be pledged to the Disbursement Agent as security for the lenders prior to
Completion and (ii) such Cash Equivalents need not be pledged to the Mortgage
Note Trustee or an agent thereof (including the agent under the Bank Credit
Facility) to the extent that the assets subject to such Event of Loss were not
subject to Liens securing the Note Collateral prior to such Event of Loss. Any
Net Loss Proceeds from an Event of Loss that are not reinvested or used to
repay Indebtedness or as working capital as provided in the first sentence of
this paragraph will be deemed to constitute Excess Loss Proceeds. When the
aggregate amount of "Excess Loss Proceeds" exceeds $10.0 million, the Issuers
shall, subject to any repayment obligations owed to the lenders under the Bank
Credit Facility and Mall Construction Lender, make an offer to all holders of
Mortgage Notes (an "Event of Loss Offer") to purchase the maximum principal
amount of Mortgage Notes, that is an integral multiple of $1,000, that may be
purchased out of the Excess Loss Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the Mortgage Note
Indenture. The Issuers will commence an Event of Loss Offer with respect to
Excess Loss Proceeds within 30 days after the date that Event of Loss Proceeds
exceeds $10.0 million by mailing the notice required pursuant to the terms of
the Mortgage Note Indenture. To the extent that the aggregate amount of
Mortgage Notes tendered pursuant to an Event of Loss Offer is less than the
applicable Excess Loss Proceeds, the Issuers may use any remaining Excess Loss
Proceeds for general corporate purposes or to offer to redeem Senior
Subordinated Notes pursuant to the provisions of the Senior Subordinated Note
Indenture described below under the caption "Description of Senior Subordinated
Notes--Repurchase at the Option of the Holders--Asset Sales." If the aggregate
principal amount of Mortgage Notes surrendered by holders thereof exceeds the
amount of Excess Loss Proceeds, the Mortgage Note Trustee shall select the
Mortgage Notes to be purchased in the manner described under the caption
"Selection and Notice" below. Upon completion of any such Event of Loss Offer,
the amount of Excess Loss Proceeds shall be reset at zero. The Mortgage Note
Indenture also requires the Issuers or such Restricted Subsidiary to grant (i)
to the lenders under the Bank Credit Facility a first priority lien and (ii) to
the Mortgage Note Trustee, on behalf of the holders of the
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Mortgage Notes, a second priority Lien, in each case, on any properties or
assets rebuilt, repaired or constructed with such Net Loss Proceeds to, the
extent that the assets subject to the Event of Loss were subject to Liens
securing the Note Collateral prior to such Event of Loss. If the Event of Loss
occurred prior to Completion, then to the extent that any assets subject to an
Event of Loss were subject to liens securing the Mall Collateral prior to such
Event of Loss, the Mortgage Note Indenture also requires the Issuers or the
applicable Restricted Subsidiary to grant (i) to the Mall Construction Lender a
first priority lien, (ii) to the lenders under the Bank Credit Facility a
second priority lien and (iii) to the Mortgage Note Trustee, on behalf of the
holders of the Mortgage Notes, a third priority Lien, in each case on any
property or assets rebuilt, repaired or constructed with the Net Loss Proceeds
of any such Event of Loss.
Selection and Notice
If less than all of the Mortgage Notes are to be purchased in an Asset
Sale Offer or Event of Loss Offer or redeemed at any time, selection of
Mortgage Notes for purchase or redemption will be made by the Mortgage Note
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Mortgage Notes are listed, or, if the
Mortgage Notes are not so listed, on a pro rata basis, by lot or by such other
method as the Mortgage Note Trustee shall deem fair and appropriate (and in
such manner as complies with applicable legal requirements); provided, that no
Mortgage Notes of $1,000 or less shall be purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each holder of Mortgage Notes to be purchased or redeemed at
such holder's registered address. Notices of redemption may not be conditional.
If any Mortgage Note is to be purchased or redeemed in part only, any notice of
purchase or redemption that relates to such Mortgage Note shall state the
portion of the principal amount thereof that has been or is to be purchased or
redeemed.
A new Mortgage Note in principal amount equal to the unpurchased or
unredeemed portion of any Mortgage Note purchased or redeemed in part will be
issued in the name of the holder thereof upon cancellation of the original
Mortgage Note. Mortgage Notes called for redemption become due on the date
fixed for redemption. On and after the purchase or redemption date (unless the
Issuers default in payment of the purchase or redemption price), interest and
Liquidated Damages, if any, shall cease to accrue on Mortgage Notes or portions
thereof purchased or called for redemption.
Certain Covenants
Gaming Licenses
The Mortgage Note Indenture provides that the Issuers will use their best
efforts to obtain and retain in full force and effect at all times all Gaming
Licenses necessary for the operation of the Project.
Restricted Payments
The Mortgage Note Indenture provides that the Issuers will not, and will
not permit any of their Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any distribution on account of either of
the Issuers' or any of their Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving either of the Issuers) or to the direct or indirect
holders of either of the Issuers' Equity Interests in their capacity as such
(other than (1) dividends or distributions by the Issuers payable in Equity
Interests (other than Disqualified Stock) of the Issuers (or accretions
thereon); or (2) dividends or distributions paid to the Issuers or a Wholly
Owned Restricted Subsidiary of the Issuers); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving either of the Issuers) any Equity
Interests of the Issuers or any of its Restricted Subsidiaries, or any other
Affiliate of the Issuers (other than any such Equity Interests owned by the
Issuers or any Wholly Owned Restricted Subsidiary of the Issuers); (iii) make
any payment on or with respect to or purchase, redeem, defease or otherwise
acquire or retire for value any Subordinated Indebtedness of the Issuers or any
of their Restricted Subsidiaries (other than, in each case, scheduled interest
and principal payments with respect to any such Subordinated Indebtedness);
(iv) make any payment in respect of repayment or reimbursement of amounts
advanced under any obligation under the Completion Guaranty; or (v) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (v) above being collectively referred to as "Restricted Payments"),
unless, at the time of such Restricted Payment:
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(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Issuers would, after giving pro forma effect to such Restricted
Payment as if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of the description of
the covenant described under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuers and their Restricted Subsidiaries
after the Issuance Date (excluding Restricted Payments permitted by clauses
(ii), (iii), (v), (vi), (vii), (viii), (ix) (but only to the extent necessary
under clause (ix) to pay the fees and expenses of any lenders or agents under
the Tranche A Take-out Commitment), (x), (xiii), (xiv), (xv) and (xvii) of the
next succeeding paragraph and including the other Restricted Payments permitted
by the next paragraph), is less than the sum of (X) 50% of (1) the Consolidated
Net Income of the Company for the period (taken as one accounting period) from
the first day after the Project is Completed to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available (or, in the case such Consolidated Net Income for such period is a
deficit, minus 100% of such deficit) less (2) the amount paid or to be paid in
respect of such period pursuant to clause (v) of the next following paragraph
to shareholders or members other than the Issuers, plus (Y) without
duplication, 100% of the aggregate net cash proceeds received by the Issuers
since the Issuance Date from capital contributions or the issue or sale of
Equity Interests (other than Disqualified Stock) or debt securities of the
Issuers that have been converted into or exchanged for such Equity Interests of
the Issuers (other than Equity Interests or such debt securities of the Issuers
sold to a Restricted Subsidiary of the Issuers and other than Disqualified
Stock or debt securities that have been converted into or exchanged for
Disqualified Stock), plus (Z) to the extent not otherwise included in the
Company's Consolidated Net Income, 100% of the cash dividends or distributions
or the amount of the cash principal and interest payments received since the
Issuance Date by the Issuers or any Restricted Subsidiary from any Unrestricted
Subsidiary or Special Subsidiary or in respect of any Restricted Investment
(other than dividends or distributions to pay obligations of or with respect to
such Unrestricted Subsidiary or Special Subsidiary such as income taxes) until
the entire amount of the Investment in such Unrestricted Subsidiary or Special
Subsidiary has been received or the entire amount of such Restricted Investment
has been returned, as the case may be, and 50% of such amounts thereafter. In
the event that the Issuers convert an Unrestricted Subsidiary or Special
Subsidiary to a Restricted Subsidiary, the Issuers may add back to this clause
(c) the aggregate amount of any Investment in such Subsidiary that was a
Restricted Payment at the time of such Investment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at the date of
declaration such payment would have complied with the provisions of the
Mortgage Note Indenture; (ii) (a) an Investment in Phase II Subsidiary, Phase
II Manager, Phase II Holdings or any Special Subsidiary or (b) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Issuers or any Restricted Subsidiary, in each case, in exchange for, or out of
the proceeds of, the substantially concurrent sale or issuance (other than to a
Restricted Subsidiary of the Issuers) of Equity Interests of the Issuers (other
than any Disqualified Stock); provided that the amount of any net cash proceeds
from the sale of such Equity Interests shall be excluded from clause (c)(Y) of
the preceding paragraph; (iii) the defeasance, redemption, repurchase,
retirement or other acquisition of any Subordinated Indebtedness of the Issuers
or any Restricted Subsidiary in exchange for, or out of the proceeds of, the
substantially concurrent sale or issuance (other than to a Restricted
Subsidiary of the Issuers) of Subordinated Indebtedness (other than any
Subordinated Indebtedness issued in respect of the Completion Guaranty) of the
Issuers or such Restricted Subsidiary or Equity Interests of the Issuers (other
than Disqualified Stock); provided, however, that (1) the principal amount of
such Subordinated Indebtedness incurred pursuant to this clause (iii) shall not
exceed the principal amount of the Subordinated Indebtedness so redeemed,
repurchased, retired or otherwise acquired (plus the amount of reasonable
expenses incurred and any premium paid in connection therewith), (2) such
Subordinated Indebtedness shall have a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of the Subordinated
Indebtedness being redeemed, repurchased,
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retired or otherwise acquired, (3) such Subordinated Indebtedness is
subordinate in right of payment to the Mortgage Notes and any Mortgage Note
Guaranty on terms at least as favorable to the holders of the Mortgage Notes or
the Mortgage Note Guaranties as those contained in the documentation governing
the Subordinated Indebtedness being redeemed, repurchased, retired or otherwise
acquired and (4) the net cash proceeds from the sale of any Equity Interests
issued pursuant to this clause (iii) shall be excluded from clause (c)(Y) of
the preceding paragraph; (iv) any redemption or purchase by the Issuers or any
Restricted Subsidiary of Equity Interests or Subordinated Indebtedness of
either of the Issuers required by a Gaming Authority in order to preserve a
material Gaming License; provided, that so long as such efforts do not
jeopardize any material Gaming License, the Issuers or such Restricted
Subsidiary shall have diligently tried to find a third-party purchaser for such
Equity Interests or Subordinated Indebtedness and no third-party purchaser
acceptable to the applicable Gaming Authority was willing to purchase such
Equity Interests or Subordinated Indebtedness within a time period acceptable
to such Gaming Authority; (v) (a) for so long as the Company is a corporation
under Subchapter S of the Code or a substantially similarly treated
pass-through entity or Venetian is a limited liability company that is treated
as a partnership or a substantially similarly treated pass-through entity, in
each case, for Federal income tax purposes (as evidenced by an opinion of
counsel at least annually), the Issuers may each make cash distributions to
their shareholders or members, during each Quarterly Payment Period, in an
aggregate amount not to exceed the Permitted Quarterly Tax Distribution in
respect of the related Estimation Period, and if any portion of the Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, the Permitted Quarterly Tax Distribution payable during the immediately
following four quarter period shall be increased by such undistributed portion
and (b) distributions by non-Wholly Owned Subsidiaries of either of the Issuers
or any Restricted Subsidiary of the Issuers but only to the extent required to
pay any tax liability of such non-Wholly Owned Subsidiary; (vi) the transfer of
the Mall Collateral to the Mall Subsidiary in accordance with the Sale and
Contribution Agreement and the Disbursement Agreement and the transfer of 1%
managing members interests in Mall Subsidiary and Mall Holdings to Mall
Manager; (vii) the transfer of the Phase II Land to the Phase II Subsidiary and
the transfer of 1% managing members interests in Phase II Subsidiary and Phase
II Holdings to Phase II Manager; (viii) Investments by the Issuers in Supplier
Joint Ventures in an amount not to exceed $10.0 million in the aggregate; (ix)
Investments in any Special Subsidiary in an amount not to exceed $2.0 million
in the aggregate (plus amounts necessary to fund the fees and expenses of the
lenders or agents under the Tranche A Take-out Commitment), excluding for
purposes of this clause (ix) the value of any Restricted Payments under clauses
(ii), (vii) or (xiv); (x) intercompany payments, including without limitation,
debt repayments, between or among the Issuers and their Wholly Owned Restricted
Subsidiaries; (xi) the repurchase of shares of, or options to purchase, common
stock of either of the Issuers from employees, former employees, directors or
former directors of either of the Issuers (or permitted transferees of such
individuals), pursuant to the terms of the agreements (including employment
agreements) or plans (or amendments thereto), in each case, as in effect on the
date of the Mortgage Note Indenture and as approved by the board of directors
of the Company under which such individuals purchase or sell, or are granted
the option to purchase or sell, shares of such common stock (the "Employee
Stock Buybacks"); (xii) following an initial Public Equity Offering, dividends
or common stock buybacks in an aggregate amount in any calendar year not to
exceed 6% of the aggregate Net Proceeds received by either of the Issuers in
connection with such initial Public Equity Offering and any subsequent Public
Equity Offering; (xiii) repurchases of Capital Stock of either of the Issuers
deemed to occur upon exercise of stock options if such Capital Stock represents
a portion of the exercise price of such options; (xiv) cash contributions to a
Special Subsidiary which are funded through a contribution (that does not
constitute Disqualified Stock) by the Sole Stockholder or any of his Affiliates
to either of the Issuers and any related Investment in any Special Subsidiary
by either of the Issuers or any Restricted Subsidiary; provided that the amount
of such contributions shall be excluded from clause (c)(Y) of the proceeding
paragraph; (xv) contributions of cash, real property or other property to the
Phase II Subsidiary, Phase II Holdings or Phase II Manager by the Sole
Stockholder or any of his Affiliates through a contribution (that does not
constitute Disqualified Stock) to either of the Issuers and any related
Investment in the Phase II Subsidiary, Phase II Holdings or Phase II Manager by
either of the Issuers or any Restricted Subsidiary; provided that the amount of
such contributions shall be excluded from clause (c)(Y) of the proceeding
paragraph; (xvi) the payment of any Change of Control Payment (as defined in
the Senior Subordinated Note Indenture) and/or the
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application of the Excess Proceeds (as defined in the Senior Subordinated Note
Indenture) from any Asset Sale Offer (as defined in the Senior Subordinated
Note Indenture), in each case, to redeem or repurchase Senior Subordinated
Notes in accordance with provisions of the Senior Subordinated Note Indenture
described below under the caption "Description of Senior Subordinated Notes
- --Repurchase at the Option of the Holders"; (xvii) on the Final Completion Date
(as defined in the Disbursement Agreement), payments on the Completion Guaranty
Loan from amounts which are returned to the Mall Construction Subsidiary from
funds in the Mall Retainage/Punchlist Account (as defined in the Disbursement
Agreement) in accordance with the Mall Escrow Agreement (as defined in the
Disbursement Agreement); provided that such payments shall not be greater than
all amounts previously deposited into the Mall Retainage/ Punchlist Account
from the Guaranty Deposit Account (as defined in the Disbursement Agreement);
(xviii) the repayment of all or a portion of the Completion Guaranty Loan with
Available Funds to the extent permitted by the terms of the Disbursement
Agreement and the Completion Guaranty or, after Completion, with funds received
by the Company as a result of judgments or settlements of claims under the
Project Documents (including insurance policies and the Construction Management
Contract); and (xix) the repayment of the Substitute Tranche B Loan with the
proceeds of the Permitted Construction Loan Refinancing or the assumption of
the Substitute Tranche B Loan by the Mall Subsidiary; provided, that at the
time of, and after giving effect to, any Restricted Payment permitted under
clauses (ii) (b) (to the extent that any Equity Interests are redeemed, retired
or acquired from the cash proceeds from the sale or issuance of Equity
Interests), (iii) (to the extent that any Subordinated Indebtedness is
defeased, redeemed, retired, repurchased or otherwise acquired from the cash
proceeds from the sale or issuance of other Subordinated Indebtedness or Equity
Interests), (viii), (ix), (xii), and (xviii), no Default or Event of Default
shall have occurred and be continuing or would occur as a consequence thereof.
For purposes of determining the amount of Restricted Investments
outstanding at any time, all Restricted Investments will be valued at their
fair market value at the time made (as determined in good faith by the
Company's Board of Directors), and no adjustments will be made for subsequent
changes in fair market value.
Special Subsidiary Restricted Payments
The Mortgage Note Indenture provides that a Special Subsidiary will not
and will not permit any of its Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any distribution on account of its Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving such Special Subsidiary or its Subsidiaries)
(other than (1) dividends or distributions paid or made pro rata to all holders
of Equity Interests of such Special Subsidiary or its Subsidiaries; (2)
dividends or distributions by such Special Subsidiary payable in Equity
Interests (other than Disqualified Stock) of such Special Subsidiary (or
accretions thereon); or (3) dividends or distributions paid to such Special
Subsidiary or a Wholly Owned Subsidiary of such Special Subsidiary by a
Subsidiary of such Special Subsidiary); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving any Special Subsidiary or its
Subsidiaries) any Equity Interests of any Special Subsidiary or any Subsidiary
of any Special Subsidiary; or (iii) make any Special Subsidiary Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iii) above being collectively referred to as "Special Subsidiary
Restricted Payments").
The foregoing provisions do not prohibit (i) the redemption, repurchase,
retirement or other acquisition of any Equity Interests of any Special
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale or issuance (other than to the Issuers or any Restricted
Subsidiary of the Issuers) of Equity Interests of such Special Subsidiary and
(ii) the payment to or declaration or payment of any distribution or dividend
to the Issuers and any of their Restricted Subsidiaries or the redemption,
repurchase, retirement or other acquisition of any Equity Interests of any
Special Subsidiary held by the Issuers or any Wholly Owned Restricted
Subsidiary.
For purposes of determining the amount of Special Subsidiary Restricted
Investments outstanding at any time, all Special Subsidiary Restricted
Investments are valued at their fair market value at the time made (as
determined in good faith by the Company's Board of Directors), and no
adjustments are made for subsequent changes in fair market value.
In addition, after the transfer of the Mall Collateral to the Mall
Subsidiary, the assets comprising the Mall Collateral may not be sold, leased
or transferred to an Affiliate of the Issuers other than an Issuer, any
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Restricted Subsidiary or any Special Subsidiary that is a Subsidiary of Mall
Intermediate Holdings and in which the Sole Stockholder does not own any Equity
Interests directly or indirectly, except through the Issuers.
Designation of Unrestricted Subsidiary
The Mortgage Note Indenture provides that the Board of Directors of the
Company may designate any Restricted Subsidiary to be an Unrestricted
Subsidiary; provided, that: (i) at the time of designation, the Investment by
either of the Issuers and any of their Restricted Subsidiaries in such
Subsidiary (other than Permitted Investments) shall be deemed a Restricted
Investment (to the extent not previously included as a Restricted Investment)
made on the date of such designation in the amount of the fair market value of
such Investment as determined in good faith by the Board of Directors and, in
the case of Investments in excess of $5.0 million, supported by a fairness
opinion issued by an accounting, appraisal or investment banking firm of
national standing; (ii) since the Issuance Date, such Unrestricted Subsidiary
has not acquired any assets from either of the Issuers or any Restricted
Subsidiary other than as permitted by the provisions of the Mortgage Note
Indenture, including the provisions described under the covenants entitled
"Restricted Payments" and "Repurchase at the Option of Holders--Asset Sales";
(iii) at the time of designation, no Default or Event of Default has occurred
and is continuing or results immediately after such designation or as a result
of any Restricted Investment made in such Subsidiary at the time of such
designation; (iv) at the time of designation, such Subsidiary has no
Indebtedness other than Non-Recourse Indebtedness of such Subsidiary; (v) such
Subsidiary does not own any Equity Interests in a Restricted Subsidiary; and
(vi) such Subsidiary does not own or operate or possess any material license,
franchise or right used in connection with the ownership or operation of any
part of the Project Assets of the Project or any material portion of the
Project Assets of the Project.
A Subsidiary ceases to be an Unrestricted Subsidiary and becomes a
Restricted Subsidiary if either (i) at any time while it is a Subsidiary of the
Company (1) such Subsidiary acquires any assets from the Company or any
Restricted Subsidiary other than as permitted by the provisions of the Mortgage
Note Indenture, including the provisions described under the covenants entitled
"Restricted Payments" and "Repurchase at the Option of Holders--Asset Sales";
(2) such Subsidiary has any Indebtedness other than Non-Recourse Indebtedness
of such Subsidiary; (3) such Subsidiary owns any Equity Interests in a
Restricted Subsidiary of the Company; or (4) such Subsidiary owns or operates
or possesses any material license, franchise or right used in connection with
the ownership or operation of any part of the Project Assets of the Project or
(ii) the Board of Directors of the Company designates such Unrestricted
Subsidiary to be a Restricted Subsidiary and no Default or Event of Default
occurs or is continuing immediately after such designation.
As of the date hereof, each of Phase II Subsidiary, Phase II Manager and
Phase II Holdings is designated an Unrestricted Subsidiary. Any future
designation by the Board of Directors of the Company shall be evidenced to the
Mortgage Note Trustee by filing with the Mortgage Note Trustee a certified copy
of the resolutions of the Board of Directors of the Company giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
As of the date hereof, the Issuers have no Unrestricted Subsidiaries other
than Phase II Subsidiary, Phase II Holdings and Phase II Manager. Under certain
circumstances, as described above, the Company is able to designate future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries are not
subject to any of the restrictive covenants set forth in the Mortgage Note
Indenture and will not be Mortgage Note Guarantors.
In addition, after the transfer of the Phase II Land to the Phase II
Subsidiary, the Phase II Land may not be sold, leased or transferred to an
Affiliate of the Issuers other than an Issuer, any Restricted Subsidiary or any
Unrestricted Subsidiary that is a Subsidiary of Phase II Intermediate Holdings
and in which the Sole Stockholder does not own any Equity Interests, directly
or indirectly.
Designation of Special Subsidiary
The Mortgage Note Indenture provides that the Board of Directors of the
Company may designate any Restricted Subsidiary to be a Special Subsidiary;
provided, that: (i) at the time of designation, the Investment by either of the
Issuers and any of their Restricted Subsidiaries in such Subsidiary (other than
Permitted Investments) shall be deemed a Restricted Investment (to the extent
not previously included
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as a Restricted Investment) made on the date of such designation in the amount
of the fair market value of such Investment as determined in good faith by the
Board of Directors of the Company and, in the case of Investments in excess of
$5.0 million, supported by a fairness opinion issued by an accounting,
appraisal or investment banking firm of national standing; (ii) since the
Issuance Date, such Special Subsidiary has not acquired any assets from the
Issuers or any Restricted Subsidiary other than as permitted by the provisions
of the Mortgage Note Indenture, including the provisions described under the
covenants entitled "Restricted Payments" and "Repurchase at the Option of
Holders--Asset Sales"; (iii) at the time of designation, no Default or Event of
Default has occurred and is continuing or results immediately after such
designation or as a result of any Restricted Investment made in such Subsidiary
at the time of such designation; (iv) at the time of designation, such
Subsidiary has no Indebtedness other than Non-Recourse Indebtedness of such
Subsidiary; (v) such Subsidiary does not own any Equity Interests in a
Restricted Subsidiary; and (vi) such Subsidiary does not own or operate or
possess any material license, franchise or right used in connection with the
ownership or operation of any part of the Project Assets of the Project or any
material portion of the Project Assets of the Project.
A Subsidiary shall cease to be a Special Subsidiary and shall become a
Restricted Subsidiary if either (i) at any time while it is a Subsidiary of the
Issuers (1) such Subsidiary acquires any assets from the Issuers or any
Restricted Subsidiary other than as permitted by the provisions of the Mortgage
Note Indenture, including the provisions described under the covenants entitled
"Restricted Payments" and "Repurchase at the Option of Holders--Asset Sales";
(2) such Subsidiary has any Indebtedness other than Non-Recourse Indebtedness
of such Subsidiary; (3) such Subsidiary owns any Equity Interests in a
Restricted Subsidiary of the Issuers; or (4) such Subsidiary owns or operates
or possesses any material license, franchise or right used in connection with
the ownership or operation of any part of the Project Assets of the Project or
(ii) the Issuers designate such Special Subsidiary to be a Restricted
Subsidiary and no Default or Event of Default occurs or is continuing
immediately after such designation.
Any such designation by the Board of Directors shall be evidenced to the
Mortgage Note Trustee by filing with the Mortgage Note Trustee a certified copy
of the resolution of the Board of Directors of the Company giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
As of the Issuance Date, Mall Subsidiary, Mall Holdings and Mall Manager
were each a Special Subsidiary. Under certain circumstances, as described
above, the Company is able to designate certain Subsidiaries as Special
Subsidiaries. Special Subsidiaries are not subject to all of the restrictive
covenants set forth in the Mortgage Note Indenture and will not be Mortgage
Note Guarantors.
Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock
The Mortgage Note Indenture provides that the Issuers will not, and will
not permit any of their Restricted Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to (collectively, "incur" and correlatively, an
"incurrence" of) any Indebtedness (including Acquired Indebtedness) or any
shares of Disqualified Stock; provided, however, that the Issuers and their
Restricted Subsidiaries may incur Indebtedness or issue shares of Disqualified
Stock if (i) the Project is Completed and (ii) the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date of
such incurrence would have been at least 2.0 to 1.0 determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock had
been issued, as the case may be, and application of proceeds had occurred at
the beginning of such four-quarter period.
The foregoing limitations do not apply to:
(a) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness under the Bank Credit Facility in an aggregate principal amount
not to exceed at any one time $170.0 million, less (i) the aggregate amount of
all principal repayments and mandatory prepayments (other than repayments made
under a revolving loan facility prior to maturity or in connection with a
refinancing permitted under the Mortgage Note Indenture) actually made from
time to time after the date of the Mortgage Note Indenture with respect to such
Indebtedness, and (ii) permanent reductions resulting from the application of
Asset Sale or Event of Loss proceeds;
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(b) the incurrence by the Issuers or any of their Restricted Subsidiaries
of any Existing Indebtedness;
(c) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness represented by the Mortgage Notes, the Mortgage Note
Guaranties, the Senior Subordinated Notes, the Senior Subordinated Note
Guaranties and obligations arising under the Collateral Documents to the extent
that such obligations would constitute Indebtedness;
(d) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness (the "Refinancing Indebtedness") issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace, substitute or
refund Indebtedness referred to in the first paragraph of this covenant or in
clauses (b), (c), this clause (d), (g), (h), (j) or (l); provided, however,
that (1) the principal amount of such Refinancing Indebtedness shall not exceed
the principal amount of Indebtedness (or, in the case of Indebtedness with
original issue discount, the accreted value of such Indebtedness) so extended,
refinanced, renewed, replaced, substituted or refunded (plus the amount of
reasonable expenses incurred and any premium paid in connection therewith), (2)
if the Indebtedness being extended, refinanced, renewed, replaced, substituted
or refunded is subordinate in right of payment to the Mortgage Notes, such
Refinancing Indebtedness shall be subordinate in right and priority of payment
to the Mortgage Notes and any Mortgage Note Guaranty on terms at least as
favorable to the holders of Mortgage Notes and the Mortgage Note Guaranties as
those contained in the documentation governing any subordinated Indebtedness
being extended, refinanced, renewed, replaced, substituted or refunded, and (3)
the Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded;
(e) intercompany Indebtedness between or among the Issuers, any Mortgage
Note Guarantor and any Wholly Owned Restricted Subsidiary of the Issuers;
provided, however, the obligations to pay principal, interest or other amounts
under such intercompany Indebtedness is subordinated to the payment in full of
the Mortgage Notes and any Mortgage Note Guaranties;
(f) Hedging Obligations that are incurred (1) for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of the Mortgage Note Indenture to be outstanding or
(2) for the purpose of fixing or hedging currency exchange rate risk with
respect to any currency exchanges;
(g) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness (which may include Capital Lease Obligations or purchase money
obligations), incurred for the purpose of financing all or any part of the
purchase or lease of personal property or equipment, including the Specified
FF&E, used in the business of the Issuers or such Restricted Subsidiary, in an
aggregate principal amount pursuant to this clause (g) (including any
refinancings thereof pursuant to clause (d) above) not to exceed $100.0 million
(plus accrued interest thereon and the amount of reasonable expenses incurred
and premium paid in connection with any refinancing pursuant to clause (d)
above) outstanding at any time;
(h) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Non-Recourse Financing used to finance the purchase or lease of personal or
real property used in the business of the Issuers or such Restricted
Subsidiary; provided, that (i) such Non-Recourse Financing represents at least
75% of the purchase price of such personal or real property; (ii) the
Indebtedness incurred pursuant to this clause (h) (including any refinancings
thereof pursuant to clause (d) above) shall not exceed $50.0 million (plus the
amount of reasonable expenses incurred and premium paid in connection with any
refinancing pursuant to clause (d) above) outstanding at any time; and (iii) no
such Indebtedness may be incurred pursuant to this clause (h) unless the
Project is Completed and the Company shall have generated at least $10.0
million of Consolidated Cash Flow in one fiscal quarter;
(i) to the extent that such incurrence does not result in the incurrence
by the Issuers or any of their Restricted Subsidiaries of any obligation for
the payment of borrowed money of others, Indebtedness incurred solely in
respect of performance bonds, completion guarantees, standby letters of credit
or bankers' acceptances; provided, that such Indebtedness was incurred in the
ordinary course of business of the Issuers or any of their Restricted
Subsidiaries and in an aggregate principal amount outstanding under this clause
(i) at any one time of less than $20.0 million;
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(j) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Subordinated Indebtedness to the Sole Stockholder pursuant to an advance
under the Completion Guaranty in an aggregate amount not to exceed $25.0
million plus accrued interest thereon; provided that such Subordinated
Indebtedness has a Weighted Average Life to Maturity greater than the Senior
Subordinated Notes and is by its terms subordinated to the Mortgage Notes and
the Senior Subordinated Notes;
(k) the incurrence by the Issuers of up to $140.0 million of Indebtedness
represented by the Mall Construction Loan Facility;
(l) the incurrence by the Issuers of Indebtedness represented by the
Substitute Tranche B Loan plus accrued interest thereon; provided that such
Indebtedness has a Weighted Average Life to Maturity greater than the Senior
Subordinated Notes and is by its terms subordinated to the Mortgage Notes;
(m) the incurrence by the Issuers of unsecured Indebtedness (subordinated
in right of payment to the Senior Subordinated Notes) issued in connection with
the Employee Stock Buybacks permitted under clause (xi) of the covenant
described above under the caption "--Restricted Payments";
(n) the incurrence by the Issuers or any Restricted Subsidiary of (A)(i)
at any time prior to Completion, additional Indebtedness under clause (a) or
(k) in an aggregate amount not to exceed $20.0 million, plus (ii) after a
default under the Disbursement Agreement and at any time prior to Completion,
additional Indebtedness under clause (a) or (k) in an aggregate amount not to
exceed $30.0 million (provided that Indebtedness incurred pursuant to this
clause (n)(A)(ii) is matched, dollar for dollar, by additional equity
investments by the Sole Stockholder or an Affiliate of the Sole Stockholder),
in the case of each of clause (A)(i) and (A)(ii), incurred in accordance with
the Intercreditor Agreement and (B) after Completion, additional Indebtedness
in an aggregate amount at any time outstanding not to exceed $25.0 million
(less any amounts incurred pursuant to clause (n)(A) above that remain
outstanding after Completion);
(o) after Completion, the incurrence by the Issuers or any of their
Restricted Subsidiaries of Indebtedness under any Working Capital Facility in
an aggregate amount at any time outstanding not to exceed $20.0 million;
(p) the incurrence by the Issuers of Indebtedness incurred for the purpose
of financing all or any part of the purchase or lease of gaming equipment to be
used in connection with the casino located at the casino resort to be owned by
Phase II Subsidiary or any casino operated pursuant to an Other Phase II
Agreement in an aggregate amount at any time outstanding not to exceed $10.0
million; provided, that upon default under such Indebtedness, the lender under
such Indebtedness may seek recourse or payment against the Issuers only through
the return or sale of the property or equipment so purchased or leased and may
not otherwise assert a valid claim for payment on such Indebtedness against the
Issuers or any other property of the Issuers; and
(q) the guaranty by the Issuers or any Restricted Subsidiary of
Indebtedness of the Issuers or a Restricted Subsidiary that was permitted to be
incurred by another provision of this covenant.
The Mortgage Note Indenture provides that the Issuers will not permit any
of their Unrestricted Subsidiaries or Special Subsidiaries to incur any
Indebtedness (including Acquired Indebtedness) or issue any shares of
Disqualified Stock, other than Non-Recourse Indebtedness; provided, however,
that if any such Unrestricted Subsidiary or Special Subsidiary ceases to remain
an Unrestricted Subsidiary or Special Subsidiary, such event shall be deemed to
constitute the incurrence of the Indebtedness in such Subsidiary by a
Restricted Subsidiary. For a discussion of the Issuers' ability to incur
additional Indebtedness, see "Description of Intercreditor Agreement."
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Indebtedness permitted in clauses (a) through (q) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Issuers shall, in their sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only such clause or clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value or principal and the payment of interest in the form of
additional Indebtedness will not be deemed to be an incurrence of Indebtedness
for purposes of this covenant.
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Upon any refinancing or replacement of the Bank Credit Facility with a
lender that does not become party to the Intercreditor Agreement, the Mortgage
Note Trustee shall enter into an intercreditor agreement with such lender with
terms that are no less favorable to the Mortgage Note Trustee or the Holders of
Mortgage Notes than those contained in the Intercreditor Agreement.
Liens
The Mortgage Note Indenture provides that the Issuers will not, and will
not permit any of their Restricted Subsidiaries to, directly or indirectly
create, incur, assume or suffer to exist any Lien on any asset owned as of the
Issuance Date or thereafter acquired by the Issuers or any such Restricted
Subsidiary, or any income or profits therefrom, or assign or convey any right
to receive income therefrom, except, in each case, Permitted Liens.
Merger, Consolidation, or Sale of Assets
The Mortgage Note Indenture provides that neither of the Issuers shall
consolidate or merge with or into or wind up into (whether or not such entity
is the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, any Person unless (i) the Company or
Venetian, as the case may be, is the surviving Person or the Person formed by
or surviving any such consolidation or merger (if other than the Company or
Venetian) or to which such sale, assignment, transfer, lease, conveyance or
other disposition will have been made is a Person organized or existing under
the laws of the United States, any state thereof, the District of Columbia, or
any territory thereof; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company or Venetian) or the Person
to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made assumes all the obligations of the Company or
Venetian, as the case may be, under the Mortgage Note Indenture and the
Collateral Documents pursuant to a supplemental indenture or other documents or
instruments in form reasonably satisfactory to the Mortgage Note Trustee under
the Mortgage Notes and the Mortgage Note Indenture; (iii) immediately after
such transaction no Default or Event of Default exists; (iv) such transaction
will not result in the loss or suspension or material impairment of any
material Gaming License; (v) the Company, Venetian or any Person formed by or
surviving any such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made (A) will
have Consolidated Net Worth (immediately after the transaction but prior to any
purchase accounting adjustments resulting from the transaction) equal to or
greater than the Consolidated Net Worth of the Company or Venetian immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test described above under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock"; and (vi) such transactions
would not require any holder of Mortgage Notes (other than any Person acquiring
the Company or Venetian or their assets and any Affiliate thereof) to obtain a
gaming license or be qualified under the law of any applicable gaming
jurisdiction; provided that such holder would not have been required to obtain
a gaming license or be qualified under the laws of any applicable gaming
jurisdiction in the absence of such transactions. Notwithstanding anything to
the contrary, the Issuers may consolidate or merge with or wind up into each
other without meeting the requirements set forth in clause (v) above.
Transactions with Affiliates
The Mortgage Note Indenture provides that the Issuers will not, and will
not permit any of their Restricted Subsidiaries or Special Subsidiaries to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guaranty with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(a) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary or Special Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary or Special Subsidiary with an unrelated Person and
(b) the Company delivers to the Mortgage Note Trustee (i) with respect to any
Affiliate Transaction involving aggregate payments in excess of (A) $500,000,
an Officers' Certificate
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certifying that such Affiliate Transaction complies with clause (a) above, or
(B) $1.0 million, a resolution adopted by a majority of the disinterested
non-employee directors of the Board of Directors approving such Affiliate
Transaction and set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (a) above and (ii) with respect to
any Affiliate Transaction that is a loan transaction involving a principal
amount in excess of $10.0 million or any other type of Affiliate Transaction
involving aggregate payments in excess of $10.0 million, an opinion as to the
fairness to the Company or such Restricted Subsidiary or Special Subsidiary
from a financial point of view issued by an Independent Financial Advisor. The
foregoing provisions do not apply to the following: (f) rental payments from
Mall Subsidiary to Venetian under the Billboard Lease, as in effect on the date
of the Mortgage Note Indenture; (g) the lease agreement relating to a
restaurant to be operated by Wolfgang Puck and currently contemplated to be
known as "Oba Chine" restaurant on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary or Special Subsidiary than those
that would have been obtained with an unrelated Person; (h) the Services
Agreement, as in effect on the date of the Mortgage Note Indenture; (i) the
Other Phase II Agreements on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary or Special Subsidiary than those that would
have been obtained with an unrelated Person; (j) purchases of materials or
services from a Joint Venture Supplier by the Issuers or any of their
Restricted Subsidiaries or Special Subsidiaries in the ordinary course of
business on arm's length terms; (k) any employment, indemnification,
noncompetition or confidentiality agreement entered into by either of the
Issuers or any of their Restricted Subsidiaries or Special Subsidiaries with
their employees or directors in the ordinary course of business (other than an
employment agreement with the Sole Stockholder); (l) loans or advances to
employees of the Issuers or their Restricted Subsidiaries or Special
Subsidiaries (i) to fund the exercise price of options granted under employment
agreements or the Issuers' stock option plans or agreements in each case, as in
effect on the date of the Mortgage Note Indenture or (ii) for any other purpose
not to exceed $2.0 million in the aggregate outstanding at any one time under
this clause (ii); (m) the payment of reasonable fees to directors of the
Issuers and their Restricted Subsidiaries and Special Subsidiaries who are not
employees of the Issuers or their Restricted Subsidiaries or Special
Subsidiaries; (n) the grant of stock options or similar rights to employees and
directors of either of the Issuers pursuant to agreements or plans approved by
the Board of Directors of the Company or the managing member of Venetian and
any repurchases of stock options of the Issuers from such employees to the
extent provided for in such plans or agreements or permitted under the covenant
described above under the caption "--Restricted Payments"; (o) transactions
between or among the Issuers and/or any of their Restricted Subsidiaries or
transactions between or among the Special Subsidiaries and/or any Wholly-Owned
Subsidiary of Special Subsidiaries; (p) with respect to the Issuers and any
Restricted Subsidiary, Restricted Payments permitted by the provisions of the
Mortgage Note Indenture described above under the caption "Restricted Payments"
and with respect to any Special Subsidiary, Special Subsidiary Restricted
Payments permitted by the provisions of the Mortgage Note Indenture described
above under the caption "Special Subsidiary Restricted Payments"; (q) purchases
of Equity Interests of the Issuers (other than Disqualified Stock) by any
stockholder or member of the Issuers (or an Affiliate of a stockholder or
member of the Issuers); (r) the Completion Guaranty and related Completion
Guaranty Loan; (s) the transactions contemplated by the Cooperation Agreement,
the Mall Lease, the Sale and Contribution Agreement and the HVAC Services
Agreement, in each case, as in effect on the date of the Mortgage Note
Indenture; (t) the use of the Congress Center by the owner of the Expo Center;
provided that Venetian receives fair market value for the use of such property,
as determined in the reasonable discretion of the Board of Directors of the
Company; (u) the transactions contemplated in "Certain Transactions--Temporary
Lease," "--Retirement Plan" and "--Airplane Expenses"; (v) transactions
relating to the Permitted Construction Loan Refinancing, including the Tranche
B Take-out Commitment and the guaranty by the Sole Stockholder of the loan to
be made under the Tranche A Take-out Commitment; (w) transactions relating to
the guaranty of Tranche B Loan of the Mall Construction Loan Facility by the
Sole Stockholder, including the making of the Substitute Tranche B Loan; (x)
the transfer of the Phase II Parcel to the Phase II Subsidiary and, upon
Completion and in accordance with the Sale and Construction Agreement, the
transfer of the Mall Collateral to the Mall Subsidiary; and (y) the Company or
Venetian may enter into and perform their obligations under a gaming operations
lease or management agreement with Phase II Subsidiary relating to the casino
to be operated in the casino resort owned by the Phase II Subsidiary on terms
substantially similar to those of the Casino Lease except that
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(a) the rent payable to the Phase II Subsidiary under such lease shall be equal
to all revenue derived from such casino minus the sum of (1) the operating
costs related to such casino (including an allocated portion (based on gaming
revenue) of the Company's or Venetian's, as the case may be, administrative
costs related to its gaming operations) and (2) the lesser of $250,000 or 1.0%
of such casino's operating income (or zero if there is an operating loss)
(determined in accordance with generally accepted accounting principles), (b)
the Company or Venetian, as the case may be, may agree that they shall operate
the casino in the resort owned by the Phase II Subsidiary and the Casino in the
Project in substantially similar manners and (c) the Company or Venetian, as
the case may be, may agree to have common gaming and surveillance operations in
such casinos (based on equal allocations of revenues and operating costs).
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Mortgage Note Indenture provides that the Issuers will not, and will
not permit any of their Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any such Restricted
Subsidiary (other than Venetian) to (a) (i) pay dividends or make any other
distributions to the Issuers or any of their Restricted Subsidiaries (A) on
their Capital Stock or (B) with respect to any other interest or participation
in, or measured by, its profits, or (ii) pay any Indebtedness owed to the
Issuers or any of their Restricted Subsidiaries (other than in respect of the
subordination of such Indebtedness to the Mortgage Notes, the Mortgage Note
Guarantees or any other Indebtedness incurred pursuant to the terms of the
Mortgage Note Indenture, as the case may be), (b) make loans or advances to the
Issuers or any of their Restricted Subsidiaries or (c) sell, lease, or transfer
any of its properties or assets to the Issuers or any of their Restricted
Subsidiaries, except (in each case) for such encumbrances or restrictions
existing under or by reason of (1) contractual encumbrances or restrictions in
effect on the Issuance Date, (2) the Bank Credit Facility (and any related
security agreements), the Mortgage Note Indenture, the Mortgage Notes, the Mall
Construction Loan Facility (and any related security agreements), any Mortgage
Note Guarantees, indebtedness incurred pursuant to clause (g), (h), (j), (l),
(n) or (o) of the covenant described above under the caption "Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock" and the
Collateral Documents, (3) the Senior Subordinated Note Indenture, the Senior
Subordinated Notes and the Senior Subordinated Note Guarantees, (4) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any Restricted Subsidiary as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that the Consolidated Cash Flow of such Person is not taken into
account in determining whether such acquisition was permitted by the terms of
the Mortgage Note Indenture, (5) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices and any leases permitted by the provisions of
the covenant entitled "Restrictions on Leasing and Dedication of Property," (6)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature discussed in clause (c) above
on the property so acquired, (6) applicable law or any applicable rule or order
of any Gaming Authority, (7) Permitted Liens, (8) customary restrictions
imposed by asset sale or stock purchase agreements relating to the sale of
assets or stock by the Issuers or any Restricted Subsidiary, or (9) any
encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (1) through (8) above, provided, that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Company's Board of
Directors, no more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment restrictions
prior to such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing.
Line of Business
The Mortgage Note Indenture provides that for so long as any Mortgage
Notes are outstanding, the Issuers shall not, and shall not permit any of their
Restricted Subsidiaries or Special Subsidiaries to, engage in any business or
activity other than, (i) with respect to the Issuers and their Restricted
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Subsidiaries, the Principal Business, and (ii) with respect to any Special
Subsidiary, the Special Subsidiary Principal Business, except, in each case, to
such extent as would not be material to (a) the Issuers and their Subsidiaries
taken as a whole or (b) the Special Subsidiary, respectively.
Restrictions on Leasing and Dedication of Property
The Mortgage Note Indenture provides that the Issuers will not, and will
not permit any of their Restricted Subsidiaries to, lease, sublease, or grant a
license, concession or other agreement to occupy, manage or use any real or
personal Project Assets owned or leased by the Issuers or any Restricted
Subsidiary (each, a "Lease Transaction"), other than the following Lease
Transactions:
(a) the Issuers or any Restricted Subsidiary may enter into a Lease
Transaction with respect to any space on or within the Project with any Person
(other than an Unrestricted Subsidiary), provided that, in the reasonable
opinion of the Issuers, (i) such Lease Transaction will not materially
interfere with, impair or detract from the operations of any of the Project
Assets, and will in the reasonable judgment of the Issuers enhance the value
and operations of the Project and (ii) such Lease Transaction is at a fair
market rent (in light of other similar or comparable prevailing commercial
transactions) and contains such other terms such that the Lease Transaction,
taken as a whole, is commercially reasonable and fair to the Issuers or such
Restricted Subsidiary in light of prevailing or comparable transactions in
other casinos, hotels, attractions or shopping venues comparable to the
Project;
(b) the Issuers or any Restricted Subsidiary may enter into a Lease
Transaction with any Unrestricted Subsidiary or Special Subsidiary with respect
to (i) the Mall Space and (ii) the Phase II Land;
(c) the Issuers may enter into Lease Transactions with any Wholly Owned
Restricted Subsidiary of the Issuers, including the lease of the Casino by the
Company from Venetian and the Billboard Lease;
(d) the Issuers or any Restricted Subsidiary may enter into a management
or operating agreement with respect to any Project Asset, including any hotel
(other than any Project Asset or space used for any casino or gaming
operations) with any Person (other than an Unrestricted Subsidiary); provided
that (i) the manager or operator has experience in managing or operating
similar operations and (ii) such management or operating agreement is on
commercially reasonable and fair terms to the Issuers or such Restricted
Subsidiary (in either case, in the reasonable judgment of the Issuers);
(e) the Issuers may dedicate space for the purpose of constructing (i) a
mass transit system, (ii) a pedestrian bridge over or pedestrian tunnel under
Las Vegas Boulevard and Sands Avenue or similar structures to facilitate
pedestrian or traffic flow, and (iii) a right turn lane or other roadway
dedication at or near the Project; provided that, in each case, such dedication
does not materially impair the use or operations of the Project;
(f) the Mall Management Agreement and any Lease Transaction where the
interest created is a Permitted Lien;
(g) to the extent permitted under the covenant described above under the
caption "--Affiliate Transactions," any use or lease agreement between
Interface and Venetian relating to the Congress Center; and
(h) Venetian may enter into the HVAC Services Agreement.
Notwithstanding the foregoing, the Mortgage Note Indenture provides that
the Issuers shall not be permitted to enter into any Lease Transaction: (1)
except in the case of clause (h), if at the time of such proposed Lease
Transaction, a Default or Event of Default has occurred and is continuing or
would occur immediately after entering into such Lease Transaction (or
immediately after any extension or renewal of such Lease Transaction made at
the option of the Issuers or any Restricted Subsidiary); (2) no gaming or
casino operations may be conducted on any Project Asset that is the subject of
such Lease Transaction other than by the Issuers, a Restricted Subsidiary or
pursuant to any Other Phase II Agreements; and (3) no Lease Transaction may
provide that the Issuers or any Restricted Subsidiary may subordinate its fee
or leasehold interest to any lessee or any party providing financing to any
lessee.
The Mortgage Note Trustee shall at the request of the Issuers or any
Restricted Subsidiary enter into a commercially customary leasehold
non-disturbance and attornment agreement with the lessee under
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any Lease Transaction permitted under the covenant described above. Such
agreement, among other things, shall provide that if the interests of the
Issuers (or in the case of a Lease Transaction being entered by a Restricted
Subsidiary, the interests of the Restricted Subsidiary) in the Project Assets
subject to the Lease Transaction are acquired by the Mortgage Note Trustee (on
behalf of the holders of the Mortgage Notes), whether by purchase and sale,
foreclosure, or deed in lieu of foreclosure or in any other way, or by a
successor to the Mortgage Note Trustee, including without limitation a
purchaser at a foreclosure sale, then (A) the interests of the lessee in the
Project Assets subject to the Lease Transaction shall continue in full force
and effect and shall not be terminated or disturbed, except in accordance with
the lease documentation applicable to the Lease Transaction, and (B) the lessee
in the Lease Transaction shall attorn to and be bound to the Mortgage Note
Trustee (on behalf of the Holders), its successors and assigns under all terms,
covenants and conditions of the lease documentation applicable to the Lease
Transaction. Such agreement shall also contain such other provisions that are
commercially customary and that will not materially and adversely affect the
Lien granted by any of the Mortgage Note Indenture Fee Deed of Trust, the
Mortgage Note Indenture Leasehold Deed of Trust or the Mortgage Note Indenture
Mall Parcel Fee Deed of Trust, in each case as certified to the Mortgage Note
Trustee by an Officer of the Company.
Insurance
The Mortgage Note Indenture provides that the Issuers will, and will cause
their Restricted Subsidiaries to, maintain the specified levels of insurance
set forth in the Cooperation Agreement (whether or not the Cooperation
Agreement is then in force). Additionally, the Issuers will not amend, waive or
modify the provisions applicable to such insurance in the Cooperation
Agreement. See "Insurance Requirements."
Limitation on Status as Investment Company
The Mortgage Note Indenture prohibits the Issuers and their Restricted
Subsidiaries from being required to register as an "investment company" (as
that term is defined in the Investment Company Act of 1940, as amended).
Ownership of Unrestricted Subsidiaries and Special Subsidiaries
The Mortgage Note Indenture provides that, at all times from the Issuance
Date until all of the Capital Stock of the Phase II Subsidiary or the Mall
Subsidiary is sold or otherwise disposed of to any Person other than an
Affiliate of the Issuers, one of the Issuers will directly or indirectly own
(i) at least a majority of the issued and outstanding Capital Stock of Phase II
Subsidiary (which is an Unrestricted Subsidiary) and (ii) at least 80% of the
issued and outstanding Capital Stock of Mall Subsidiary (which is a Special
Subsidiary); provided that the Sole Stockholder or any of his Affiliates (other
than the Issuers or any of their Wholly-Owned Restricted Susidiaries) will not
purchase or otherwise acquire, directly or indirectly, any of the Capital Stock
of the Phase II Subsidiary, Mall Subsidiary or any of their respective
Subsidiaries.
Limitation on Phase II Construction
The Mortgage Note Indenture provides that the Issuers shall not, and shall
not permit any of their Subsidiaries (including Unrestricted Subsidiaries and
Special Subsidiaries), at any time prior to receipt by the Issuers or any such
Subsidiary of a temporary certificate of occupancy from Clark County, Nevada
with respect to the Project (as currently defined) (a) to construct, develop or
improve the Phase II Land or any building on the Phase II Land (including any
excavation or site work and excluding the proposed parking garage on the Phase
II Land), (b) enter into any contract or agreement for such construction,
development or improvement, or for any materials, supplies or labor necessary
in connection with such construction, development or improvement (other than a
contract or agreement that is conditional upon satisfaction of the above
condition), or (c) incur any Indebtedness the proceeds of which are expected to
be used for the construction, development or improvement of the Phase II Land
or any building on the Phase II Land, except (i) any construction, development
or improvement on the Phase II Land or any temporary building on the Phase II
Land in connection with the Project in accordance with the Plans and
Specifications and included in the Project Budget; and (ii) any design,
architectural, engineering or development work not involving actual
construction on the Phase II Land.
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Mortgage Note Guaranties
The Issuers' obligations under the Mortgage Notes, the Mortgage Note
Indenture and the Collateral Documents are unconditionally guaranteed (i) on a
senior, secured basis by the Secured Mortgage Note Guarantors and (ii) on a
subordinated, unsecured basis by the Subordinated Mortgage Note Guarantors,
pursuant to the terms of the Mortgage Note Indenture. The obligations of each
Mortgage Note Guarantor under its Mortgage Note Guaranty is limited to the
extent necessary under any applicable corporate law to ensure it does not
constitute a fraudulent conveyance under applicable law.
Except in the event of a disposition of all or substantially all of the
assets of a Mortgage Note Guarantor by way of merger or consolidation, the
Mortgage Note Indenture provides that no Mortgage Note Guarantor shall
consolidate with or merge with or into (whether or not such Mortgage Note
Guarantor is the surviving Person), another Person, whether or not affiliated
with such Mortgage Note Guarantor, unless (i) subject to the provisions of the
following paragraph and certain other provisions of the Mortgage Note
Indenture, the Person formed by or surviving any such consolidation or merger
(if other than such Mortgage Note Guarantor) assumes all the obligations of
such Mortgage Note Guarantor pursuant to a supplemental indenture and
supplemental Collateral Documents in form reasonably satisfactory to the
Mortgage Note Trustee pursuant to which such Person shall unconditionally
guarantee, on either a senior or subordinated basis (equivalent to the existing
Mortgage Note Guaranty), all of such Mortgage Note Guarantor's obligations
under such Mortgage Note Guaranty, the Mortgage Note Indenture and the
Collateral Documents on the terms set forth in the Mortgage Note Indenture;
(ii) immediately after giving effect to such transaction, no Default or Event
of Default exists; (iii) such transaction will not result in the loss or
suspension or material impairment of any material Gaming License; and (iv) the
Company (A) will have Consolidated Net Worth (immediately after giving effect
to such transaction), equal to or greater than the Consolidated Net Worth of
the Company immediately preceding the transaction and (B) will be permitted by
virtue of its pro forma Fixed Charge Coverage Ratio to incur, immediately after
giving effect to such transaction, at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test described above under the
caption "Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock." Notwithstanding anything herein to the contrary, a Wholly Owned
Restricted Subsidiary of the Issuers that is a Mortgage Note Guarantor may
consolidate or merge with, or sell or otherwise dispose of all or substantially
all of its assets to, one of the Issuers or another Wholly Owned Restricted
Subsidiary of the Issuers that is a Mortgage Note Guarantor.
The Mortgage Note Indenture provides that in the event of (i) a sale or
other disposition of all or substantially all of the assets of any Mortgage
Note Guarantor, by way of merger, consolidation or otherwise, (ii) a Restricted
Subsidiary becoming an Unrestricted Subsidiary or a Special Subsidiary pursuant
to terms of the Mortgage Note Indenture or (iii) a sale or other disposition of
all of the Capital Stock of any Mortgage Note Guarantor that is a Subsidiary,
then such Mortgage Note Guarantor (in the event of a sale or other disposition,
by way of such a merger, consolidation or otherwise, of all of the Capital
Stock of such Mortgage Note Guarantor or the Restricted Subsidiary becoming an
Unrestricted Subsidiary or a Special Subsidiary pursuant to the terms of the
Mortgage Note Indenture) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of the assets
of such Mortgage Note Guarantor) shall be released and relieved of any
obligations under its Mortgage Note Guaranty; provided that (i) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof and
(ii) the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Mortgage Note Indenture. See
"--Repurchase at Option of Holders -- Asset Sales."
The Mortgage Note Indenture provides that if (a) either of the Issuers or
any Restricted Subsidiary transfers or causes to be transferred, in one or a
series of related transactions (other than a transaction or series of related
transactions constituting a Restricted Payment permitted pursuant to the
provisions of the Mortgage Note Indenture described above under the caption
"Restricted Payments"), property or assets having a fair market value exceeding
$1.0 million to any Restricted Subsidiary of the Issuers (other than a Mortgage
Note Guarantor), (b) any Restricted Subsidiary that is not a Mortgage Note
Guarantor shall have a net worth, annual revenues or net income in excess of
$1.0 million (including by reason of acquisition, consolidation or merger) or
shall own any material license, franchise or right used in the operation of any
of the Project Assets of the Project or (c) an Unrestricted Subsidiary or
Special Subsidiary ceases to be an
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Unrestricted Subsidiary or Special Subsidiary, as the case may be, pursuant to
the terms of the Mortgage Note Indenture or is designated by the Board of
Directors to be a Restricted Subsidiary pursuant to the terms of the Mortgage
Note Indenture and, in each case such Restricted Subsidiary shall have a net
worth, annual revenues or net income in excess of $1.0 million (including by
reason of acquisition, consolidation or merger) or shall own any material
license, franchise or right used in the operation of any of the Project Assets
of the Project, the Issuers shall cause such Restricted Subsidiary to (i)
execute and deliver to the Mortgage Note Trustee a supplemental indenture and
supplemental Collateral Documents in form reasonably satisfactory to the
Mortgage Note Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee, on a secured basis, all of the Issuers obligations
under the Mortgage Notes, the Mortgage Note Indenture and the Collateral
Documents on the terms set forth in the Mortgage Note Indenture and (ii)
deliver to the Mortgage Note Trustee an opinion of counsel that, subject to
customary assumptions and exclusions, such supplemental indenture and
supplemental Collateral Documents have been duly executed and delivered by such
Restricted Subsidiary. Such newly created Mortgage Note Guaranty will be
secured by a lien or charge on all Note Collateral of such Restricted
Subsidiary.
The payment of principal of, premium, if any, and interest on the
Subordinated Mortgage Note Guaranties is subordinated in right of payment, as
set forth in the Mortgage Note Indenture, to the prior payment in full of all
Senior Debt of the Subordinated Mortgage Note Guarantors, whether outstanding
on the date of the Mortgage Note Indenture or thereafter incurred.
Upon any distribution to creditors of the Subordinated Mortgage Note
Guarantors in a liquidation or dissolution of the Subordinated Mortgage Note
Guarantors in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Subordinated Mortgage Note Guarantors or their
property, an assignment for the benefit of creditors or any marshalling of the
Subordinated Mortgage Note Guarantors' assets and liabilities, the holders of
Senior Debt of the Subordinated Mortgage Note Guarantors are entitled to
receive payment in full of all Obligations due in respect of such Senior Debt
of the Subordinated Mortgage Note Guarantors (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt of the Subordinated Mortgage Note Guarantors) before the Holders of
Subordinated Mortgage Note Guaranties will be entitled to receive any payment
with respect to the Subordinated Mortgage Note Guaranties, and until all
Obligations with respect to Senior Debt of the Subordinated Mortgage Note
Guarantors are paid in full, any distribution to which the holders of
Subordinated Mortgage Note Guaranties would be entitled shall be made to the
holders of Senior Debt of the Subordinated Mortgage Note Guarantors (except
that Holders of Subordinated Mortgage Note Guaranties may receive Permitted
Junior Securities and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance"). The Subordinated Mortgage Note Guarantors
also may not make any payment upon or in respect of the Subordinated Mortgage
Note Guaranties (except in Permitted Junior Securities or from the trust
described under "--Legal Defeasance and Covenant Defeasance") if (i) a default
in the payment of the principal of, premium, if any, or interest on Senior Debt
of the Subordinated Mortgage Note Guarantors occurs and is continuing beyond
any applicable period of grace or (ii) any other default occurs and is
continuing with respect to Senior Debt of the Subordinated Mortgage Note
Guarantors that permits holders of the Senior Debt of the Subordinated Mortgage
Note Guarantors as to which such default relates to accelerate its maturity and
the Mortgage Note Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Subordinated Mortgage Note Guarantors or the holders
of any Senior Debt of the Subordinated Mortgage Note Guarantors; provided,
however, that, except to the extent provided in the second succeeding
paragraph, the foregoing provisions shall not restrict the Issuers from making
payments of principal, premium or interest on or with respect to the Mortgage
Notes (including without limitation, by redemption, repurchase or other
acquisition). Payments on the Subordinated Mortgage Note Guaranties may and
shall be resumed (a) in the case of a payment default, upon the date on which
such default is cured or waived and (b) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived or 179
days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Senior Debt of the Subordinated Mortgage
Note Guarantors has been accelerated. No new period of payment blockage may be
commenced unless and until (i) 360 days have elapsed since the effectiveness of
the immediately prior Payment Blockage Notice and (ii) all scheduled payments
of principal, premium, if any, and interest on the Subordinated Mortgage Note
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Mortgage Note Trustee shall be, or be made, the basis for a
subsequent
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Payment Blockage Notice unless such default shall have been waived for a period
of not less than 180 days.
The Mortgage Note Indenture further requires that the Subordinated
Mortgage Note Guarantors promptly notify holders of Senior Debt of the
Subordinated Mortgage Note Guarantors if payment of the Mortgage Notes is
accelerated because of an Event of Default.
As used in the foregoing, "Senior Debt" of the Subordinated Mortgage Note
Guarantors means (i) the guaranties by the Subordinated Mortgage Note
Guarantors of all Indebtedness outstanding under Bank Credit Facility and all
Hedging Obligations with respect thereto, (ii) the guaranty by Mall
Intermediate Holdings of all Indebtedness outstanding under the Mall
Construction Loan Facility and all Hedging Obligation with respect thereto,
(iii) any other Indebtedness permitted to be incurred by the Subordinated
Mortgage Note Guarantors under the terms of the Mortgage Note Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides
that it is on a parity with or subordinated in right of payment to the
Subordinated Mortgage Note Guaranties and (iv) all obligations with respect to
the foregoing. Also, as used in the foregoing, "Permitted Junior Securities"
means Equity Interests in the Subordinated Mortgage Note Guarantors or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt of the Mortgage Note Indenture) to
substantially the same extent as, or to a greater extent than, the Subordinated
Mortgage Note Guaranties are subordinated to Senior Debt of the Subordinated
Mortgage Guarantors pursuant to the Mortgage Note Indenture.
Further Assurances
The Mortgage Note Indenture provides that the Issuers will (and will cause
each of their Restricted Subsidiaries to) do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register, any and all such
further acts, deeds, conveyances, security agreements, mortgages, assignments,
estoppel certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as may be reasonably required from time to
time in order (i) to carry out more effectively the express purposes of the
Collateral Documents, (ii) to subject to the Liens created by any of the
Collateral Documents any of the properties, rights or interests required to be
encumbered thereby and contemplated thereby, (iii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and the
Liens intended to be created thereby and contemplated thereby, and (iv) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Mortgage Note Trustee any of the rights granted or now or hereafter
intended by the parties thereto to be granted to the Mortgage Note Trustee or
under any other instrument executed in connection therewith or granted to the
Issuers under the Collateral Documents or under any other instrument executed
in connection therewith.
Reports
Under the terms of the Mortgage Note Indenture, the Company will file with
the Mortgage Note Trustee and provide holders of Mortgage Notes, within 15 days
after it files them with the Commission, copies of its annual report and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rule or regulation prescribe) which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act or otherwise report on an annual and quarterly basis on forms
provided for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the Commission, the Mortgage Note Indenture requires
the Company to continue to file with the Commission and provide the Mortgage
Note Trustee and each holder with, without cost to each holder, (a) within 90
days after the end of each fiscal year, annual reports on Form 10-K (or any
successor form) containing the information required to be contained therein (or
required in such successor form); (b) within 45 days after the end of each of
the first three fiscal quarters of each fiscal year, reports on Form 10-Q (or
any successor form); and (c) promptly from time to time after the occurrence of
an event required to be therein reported, such other reports on Form 8-K (or
any successor form) containing the information required to be contained therein
(or required in any successor form); provided, however, that the Company shall
not be so obligated to file such reports with the Commission if the Commission
does not permit such filings. Notwithstanding
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the foregoing, if any Person that, directly or indirectly, owns more than 50%
of the common equity of the Company is subject to the periodic reporting and
the informational requirements of the Exchange Act, the Company will not be
required to file the reports specified in the preceding sentence so long as it
provides annual and quarterly financial statements of the Company (which will
include summarized financial information concerning Venetian) to the holders of
the Mortgage Notes. The Company will in all cases, without cost to each
recipient, provide copies of such information to the holders of the Mortgage
Notes and, if it is not permitted to file such reports with the Commission,
shall make available such information to prospective purchasers and to
securities analysts and broker-dealers upon their request. In addition, the
Company has agreed that, for so long as any Mortgage Notes remain outstanding,
it will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
Not later than the date of filing any quarterly or annual report, the
Company shall deliver to the Mortgage Note Trustee an Officers' Certificate
stating that each Restricted Payment made in the prior fiscal quarter was
permitted and setting forth the basis upon which the calculations required by
the covenant relating to "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements at the time of such Restricted Payment.
Security
To the extent permitted by applicable law and subject to any required
approval of any Governmental Instrumentality, the Mortgage Notes are secured by
a Lien on the Note Collateral owned by the Issuers and each Secured Mortgage
Note Guaranty is secured by the Note Collateral owned by each Secured Mortgage
Note Guarantors, in each case whether such Note Collateral is now owned or
hereafter acquired. Such Lien is prior to all other Liens on the Note
Collateral, except for Permitted Liens which includes the prior Lien on the
Project Assets securing the Bank Credit Facility and the prior Lien on the Mall
Collateral securing the Mall Construction Loan Facility and the Bank Credit
Facility. Except for the Lien in favor of the Mortgage Notes on the Mortgage
Notes Proceeds Account, the Liens securing the Bank Credit Facility and the
Mall Construction Loan Facility will be prior to the Lien securing the Mortgage
Notes. Mall Construction Lender has a first priority Lien on the Mall
Collateral, the lenders under the Bank Credit Facility have a first priority
Lien on the Project Assets and a second priority Lien on the Mall Collateral
and the holders of the Mortgage Notes have a second priority Lien on the
Project Assets and a third priority Lien on the Mall Collateral. Upon
Completion and the satisfaction of certain other conditions, the assets
comprising the Mall Collateral will be released from the Lien securing the Bank
Credit Facility and the Mortgage Notes and transferred to the Mall Subsidiary
in connection with the release of the Issuers and the Mall Construction
Subsidiary from further obligations under the Mall Construction Loan Facility.
Upon the creation of the Phase II Land as a separate parcel, the Phase II Land
may be transferred to the Phase II Subsidiary and upon such transfer the Phase
II Land will be released from the Lien securing the Bank Credit Facility and
the Mortgage Notes. To the extent that any Specified FF&E is purchased
(including providing any deposits) with the proceeds under the revolving loan
facility of the Bank Credit Facility, all indebtedness under the Bank Credit
Facility will be secured by the Note Collateral and such Specified FF&E and the
Mortgage Note Trustee and the holders of the Mortgage Notes will have no
security interest in such Specified FF&E.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the Mortgage Note Indenture and the
Collateral Documents, the Issuers and their Subsidiaries are entitled to use
the Note Collateral in a manner consistent with normal business practices. Upon
the occurrence and during the continuance of an Event of Default, but subject
to certain terms, conditions and limitations in the Intercreditor Agreement,
the Mortgage Note Trustee may sell the Note Collateral or any part thereof in
accordance with the terms of the Collateral Documents. All funds distributed
under the Collateral Documents and received by the Mortgage Note Trustee for
the benefit of the holders of the Mortgage Notes shall be distributed by the
Mortgage Note Trustee in accordance with the provisions of the Mortgage Note
Indenture. See "Description of Intercreditor Agreement."
Under the terms of the Collateral Documents but subject to certain terms,
conditions and limitations set forth in the Intercreditor Agreement, the
Mortgage Note Trustee determines the circumstances and manner in which the Note
Collateral shall be disposed of, including, but not limited to, the
determination
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of whether to release all or any portion of the Note Collateral from the Liens
created by the Collateral Documents and whether to foreclose on the Note
Collateral following an Event of Default. Subject to certain additional
provisions set forth in the Mortgage Note Indenture, the Note Collateral may be
released from the Lien and security interest created by the Mortgage Note
Indenture and the Collateral Documents at any time or from time to time upon
the request of the Issuers pursuant to an Officers' Certificate certifying that
all terms for release and conditions precedent under the Mortgage Note
Indenture and under any applicable Collateral Document have been met and
specifying (i) the identity of the Note Collateral to be released and (ii) the
provision of the Mortgage Note Indenture which authorizes such release. The
Mortgage Note Trustee shall release (at the sole cost and expense of the
Issuers) (i) all Note Collateral that is contributed, sold, leased, conveyed,
transferred or otherwise disposed of (including, without limitation, any Note
Collateral that does not constitute Project Assets), and all Note Collateral
that is contributed, sold, leased, conveyed, transferred or otherwise disposed
of to an Unrestricted Subsidiary or Special Subsidiary but excluding any such
contribution, sale, lease, conveyance, transfer or other distribution to the
Company or a Restricted Subsidiary); provided, such contribution, sale, lease,
conveyance, transfer or other disposition is or will be in accordance with
provisions of the Mortgage Note Indenture, including, without limitation, the
requirement that the net proceeds from such contribution, sale, lease,
conveyance, transfer or other disposition are or will be applied (subject to
the provisions of the Intercreditor Agreement) in accordance with the Mortgage
Note Indenture and that no Default or Event of Default has occurred and is
continuing or would occur immediately following such release; (ii) Note
Collateral that is condemned, seized or taken by the power of eminent domain or
otherwise confiscated pursuant to an Event of Loss; provided that the Net Loss
Proceeds, if any, from such Event of Loss are or will be applied in accordance
with the covenant described above under "Event of Loss"; (iii) all Note
Collateral which may be released with the consent of holders pursuant to the
amendment provisions of the Mortgage Note Indenture; (iv) the Mall Collateral
and the Phase II Land, in accordance with the terms of the Mortgage Note
Indenture and the Collateral Documents; (v) all Note Collateral (except as
provided in the discharge and defeasance provisions of the Mortgage Note
Indenture and, in particular, the funds in the trust fund described in such
provisions) upon discharge or defeasance of this Indenture in accordance with
the discharge and defeasance provisions of the Mortgage Note Indenture; (vi)
all Note Collateral upon the payment in full of all obligations of the Issuers
with respect to the Mortgage Notes and the Mortgage Note Guarantors with
respect the Mortgage Note Guaranties; and (vii) Note Collateral of a Mortgage
Note Guarantor whose Note Guaranty is released pursuant to the terms of the
Mortgage Note Indenture.
Events of Default and Remedies
The Mortgage Note Indenture provides that each of the following
constitutes an Event of Default: (i) default in payment when due and payable,
upon redemption or otherwise, of principal or premium, if any, on the Mortgage
Notes or under any Mortgage Note Guaranty; (ii) default for 30 days or more in
the payment when due of interest on, or Liquidated Damages, if any, with
respect to the Mortgage Notes or under any Mortgage Note Guaranty; (iii)
failure by the Issuers or any Mortgage Note Guarantor to offer to purchase or
to purchase the Mortgage Notes, in each case when required under an offer made
pursuant to the provisions of the Mortgage Note Indenture; (iv) failure by (a)
the Issuers or any Mortgage Note Guarantor to comply with the provisions
described under the captions "Restricted Payments" or limitations on
"Incurrence of Indebtedness and Issuance of Disqualified Stock" or (b) any
Special Subsidiary to comply with the provisions described under the caption
"Special Subsidiary Restricted Payments"; (v) failure by the Issuers or any
Mortgage Note Guarantor for 45 days after receipt of written notice from the
Mortgage Note Trustee to comply with any of its other agreements in the
Mortgage Note Indenture, the Collateral Documents, the Mortgage Notes or the
Mortgage Note Guaranties; provided, however, that any such failure with respect
to any Collateral Documents will not be deemed to have occurred for purposes of
the foregoing, and notice thereof shall not be deemed to have been delivered,
until the delivery of notice and the expiration of all available grace periods
provided for in the applicable Collateral Documents; (vi) default under any
mortgage, indenture or instrument under which there is issued or by which there
is secured or evidenced any Indebtedness for money borrowed by the Issuers, any
of their Restricted Subsidiaries or any Special Subsidiary or the payment of
which is guaranteed by the Issuers, any of their Restricted Subsidiaries or any
Special Subsidiary, whether such Indebtedness or Guaranty now exists or is
created after the Issuance Date, which default (a) in the case of the Issuers
or any of their Restricted
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Subsidiaries only, is caused by a failure to pay when due at final maturity
(giving effect to any grace period or waiver related thereto) the principal of
such Indebtedness (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount
of any other such Indebtedness under which a Payment Default then exists or
with respect to which the maturity thereof has been so accelerated or which has
not been paid at maturity, aggregates $10 million or more; (vii) failure by the
Issuers or any of their Restricted Subsidiaries to pay final judgments
aggregating in excess of $10 million, which final judgments remain unpaid,
undischarged and unstayed for a period of more than 60 days; (viii) the
repudiation by the Issuers or any of their Subsidiaries of its obligations
under, or any judgment or decree by a court or governmental agency of competent
jurisdiction declaring the unenforceability of, any Note Guarantee or any of
the Collateral Documents for any reason that, in each case, would materially
and adversely impair the benefits to the Mortgage Note Trustee or the holders
of the Mortgage Notes thereunder; (ix) certain events of bankruptcy or
insolvency with respect to the Issuers, any Special Subsidiary or any Mortgage
Note Guarantor that is a Significant Subsidiary of the Issuers or any group of
Mortgage Note Guarantors that together would constitute a Significant
Subsidiary of the Issuers; (x) after the Project becomes Completed, revocation,
termination, suspension or other cessation of effectiveness of any Gaming
License, which results in the cessation or suspension of gaming operations for
a period of more than 90 consecutive days at the Project; (xi) the Project is
not Completed by the Outside Completion Deadline and continues to be not
Completed; or (xii) failure by Interface to comply with its obligations under
the Cooperation Agreement with respect to a change of control of Interface or a
sale, transfer or other disposition by Interface of its interest in the Expo
Center or the incurrence by Interface of Indebtedness.
Subject to the provisions of the Intercreditor Agreement, if any Event of
Default (other than by reason of bankruptcy or insolvency) occurs and is
continuing, the Mortgage Note Trustee or the holders of at least 25% in
principal amount of the then outstanding Mortgage Notes may declare the
principal, premium and Liquidated Damages, if any, interest and any other
monetary obligations on all the Mortgage Notes to be due and payable
immediately. See "Description of Intercreditor Agreement." Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuers, or any Mortgage Note
Guarantor that is a Significant Subsidiary, all outstanding Mortgage Notes will
become due and payable without further action or notice. Holders of the
Mortgage Notes may not enforce the Mortgage Note Indenture or the Mortgage
Notes except as provided in the Mortgage Note Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Mortgage Notes may direct the Mortgage Note Trustee in its exercise of any
trust power, including the exercise of any remedy under the Collateral
Documents. The Mortgage Note Trustee may withhold from holders of Mortgage
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. In addition, the
Mortgage Note Trustee shall have no obligation to accelerate the Mortgage Notes
if in the best judgment of the Mortgage Note Trustee acceleration is not in the
best interest of the holders of the Mortgage Notes.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention and for the purpose of avoiding payment of the premium that the
Issuers would have had to pay if the Issuers then had elected to redeem the
Mortgage Notes pursuant to the optional redemption provisions of the Mortgage
Note Indenture, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law.
The holders of a majority in aggregate principal amount of the Mortgage
Notes then outstanding by notice to the Mortgage Note Trustee may on behalf of
the holders of all of the Mortgage Notes waive any existing Default or Event of
Default and its consequences under the Mortgage Note Indenture except a
continuing Default or Event of Default in the payment of interest on, premium
or Liquidated Damages, if any, or the principal of, any Mortgage Note held by a
non-consenting holder.
For a discussion of the effect of the Intercreditor Agreement on the
ability of the Mortgage Note Trustee or the holders of Mortgage Notes to
exercise remedies after an Event of Default, see "Description of Intercreditor
Agreement--Events of Default; Pre-Completion Remedies," and "--Events of
Default; Post-Completion Remedies."
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The Collateral Documents generally provide for the application of the
internal laws of the State of New York, except to the extent that (i) the laws
of Nevada are mandatory or (ii) validity or perfection of security interests in
respect of certain items of collateral (such as real property) is governed by
the laws of the jurisdiction where such collateral is located. The Mortgage
Note Indenture, the Mortgage Notes and any Mortgage Note Guaranty provide, with
certain exceptions, for the application of the internal laws of the State of
New York. There is no certainty regarding whether New York or Nevada law would
be applied by any court with respect to the enforcement of remedies under the
Mortgage Notes, the Mortgage Note Indenture, any Mortgage Note Guaranty or the
Collateral Documents.
Due to restrictions upon gaming activities in Nevada, the Mortgage Note
Trustee may incur delays or possibly frustration in its effort to sell all or a
portion of the Note Collateral. Operators of gaming facilities in Nevada are
required to be licensed and are required by applicable Gaming Authorities to
file applications, be investigated and be found suitable. Such requirements for
governmental approval may delay or preclude a sale of the Note Collateral to a
potential buyer at a foreclosure sale or sales. This may effectively limit the
number of potential bidders and may delay such sales, either of which could
adversely affect the sale price of the Note Collateral. In addition, the
disposition of Note Collateral consisting of gaming devices is subject to the
prior approval of the Nevada Board. Moreover, the gaming industry could become
subject to different or additional regulations during the term of the Mortgage
Notes, which could further adversely affect the practical rights and remedies
that the Mortgage Note Trustee would have upon the occurrence of an Event of
Default.
Before pursuing any foreclosures or otherwise executing on any of the Note
Collateral, the Mortgage Note Trustee will need to consider the effect of
Nevada law, which requires that where a debt is secured by real property, the
debtor may require the creditor to exhaust its real property security before
pursuing a judicial proceeding to obtain a monetary judgment against the
debtor. If the creditor attempts to collect the indebtedness without first
exercising its remedies under its deed of trust, the debtor could defend such
action by requiring the creditor to first exhaust its rights under the deed of
trust through statutory foreclosure proceedings. If, however, the debtor
permitted the creditor to obtain a judgment without first exhausting remedies
under the deed of trust, assuming such action was not stayed or dismissed
before the entry of a final monetary judgment, then under Nevada law the lien
of the deed of trust would be released and discharged. This Nevada law is
referred to as the "One Action" Rule.
Real property pledged as security may be subject to known and unknown
environmental risks or liabilities which can adversely affect the property's
value. In addition, under the federal Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), as amended, for example, a secured
lender may be held liable, in certain limited circumstances, for the costs of
remediating a release of or preventing a threatened release of hazardous
substances at a mortgaged property. There may be similar risks under state laws
or common law theories.
Under CERCLA, a person "who, without participating in the management of a
. . . facility, holds indicia of ownership primarily to protect his security
interest" is not a property owner, and thus not a responsible person under
CERCLA. Lenders have seldom been held liable under CERCLA. The lenders who have
been found liable have generally been found to have been sufficiently involved
in the mortgagor's operations so that they have "participated in the management
of the borrower." CERCLA does not specify the level of actual participation in
management. CERCLA was amended in 1996 to provide certain "safe harbors" for
foreclosing Lenders; however, the courts have not yet issued any definitive
interpretations of the extent of these safe harbors. There is currently no
controlling authority on this matter.
The Mortgage Note Trustee may appoint one or more collateral agents, who
may be delegated any one or more of the duties or rights of the Mortgage Note
Trustee under the Collateral Documents or which are specified in any Collateral
Documents.
The Issuers are required to deliver to the Mortgage Note Trustee annually
a statement regarding compliance with the Mortgage Note Indenture, and the
Issuers are required, within five Business Days, upon becoming aware of any
Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Issuers, to deliver to the Mortgage
Note Trustee a statement specifying such Default or Event of Default.
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No Personal Liability of Directors, Officers, Employees, Incorporators and
Stockholders
No director, officer, employee, incorporator or stockholder of the Issuers
or the Mortgage Note Guarantors, as such, has any liability for any obligations
of the Issuers or the Mortgage Note Guarantors under the Mortgage Notes, any
Mortgage Note Guaranty, the Mortgage Note Indenture, the Collateral Documents,
as applicable, or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each holder of the Mortgage Notes by accepting a
Mortgage Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Mortgage Notes and the
Mortgage Note Guaranties.
Legal Defeasance and Covenant Defeasance
The obligations of the Issuers and the Mortgage Note Guarantors under the
Mortgage Note Indenture will terminate (other than certain obligations) and the
Note Collateral will be released upon payment in full of all of the Mortgage
Notes. The Issuers may, at their option and at any time, elect to have all of
their and any Mortgage Note Guarantor's obligations discharged with respect to
the outstanding Mortgage Notes and any Mortgage Note Guarantees ("Legal
Defeasance") and cure all then existing Events of Default except for (i) the
rights of holders of outstanding Mortgage Notes to receive payments in respect
of the principal of, premium, if any, and interest on such Mortgage Notes when
such payments are due solely out of the trust created pursuant to the Mortgage
Note Indenture, (ii) the Company's, Venetian's and any Mortgage Note
Guarantor's obligations with respect to the Mortgage Notes concerning issuing
temporary Mortgage Notes, registration of Mortgage Notes, mutilated, destroyed,
lost or stolen Mortgage Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Mortgage Note Trustee, and the
Issuers' and any Mortgage Note Guarantor's obligations in connection therewith
and (iv) the Legal Defeasance provisions of the Mortgage Note Indenture. In
addition, the Issuers may, at their option and at any time, elect to have the
obligations of the Issuers and any Mortgage Note Guarantor released with
respect to certain covenants that are described in the Mortgage Note Indenture
("Covenant Defeasance") and, thereafter, any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Mortgage Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the Mortgage Notes. In addition,
the Note Collateral will be released upon Covenant Defeasance or Legal
Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Mortgage Note Trustee, in trust,
for the benefit of the holders of the Mortgage Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and Liquidated
Damages, if any, and interest due on the outstanding Mortgage Notes on the
stated maturity date or on the applicable redemption date, as the case may be,
in accordance with the terms of the Mortgage Notes Indenture; (ii) in the case
of Legal Defeasance, the Issuers shall have delivered to the Mortgage Note
Trustee an opinion of tax counsel in the United States reasonably acceptable to
the Mortgage Note Trustee confirming that (A) the Issuers have received from
the United States Internal Revenue Service a ruling (a copy of which shall
accompany such opinion of counsel) or (B) since the Issuance Date of the
Mortgage Note Indenture, there has been a change in the applicable U.S. federal
income tax law such that a ruling is no longer required, in either case to the
effect that, and based thereon such opinion of tax counsel in the United States
shall confirm that, subject to customary assumptions and exclusions, the
holders of the outstanding Mortgage Notes will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such Legal Defeasance
and will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Issuers shall have delivered to the Mortgage Note Trustee an opinion of tax
counsel in the United States reasonably acceptable to the Mortgage Note Trustee
confirming that the holders of the outstanding Mortgage Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such Covenant Defeasance and will be subject to such tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing
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with respect to certain Events of Default on the date of such deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under any material agreement or
instrument (other than the Mortgage Note Indenture) to which the Issuers or any
of their Subsidiaries is a party or by which the Issuers or any of their
Subsidiaries is bound; (vi) the Issuers shall have delivered to the Mortgage
Note Trustee an opinion of counsel to the effect that, as of the date of such
opinion following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally under any applicable United States state
law and that the Mortgage Note Trustee has a perfected security interest in
such trust funds for the ratable benefit of the holders; (vii) the Issuers
shall have delivered to the Mortgage Note Trustee an Officers' Certificate
stating that the deposit was not made by the Issuers with the intent of
defeating, hindering, delaying or defrauding any creditors of the Issuers or
others; and (viii) the Issuers shall have delivered to the Mortgage Note
Trustee an Officers' Certificate and an opinion of counsel in the United States
(which opinion of counsel may be subject to customary assumptions and
exclusions) each stating that all conditions precedent provided for or relating
to the Legal Defeasance or the Covenant Defeasance, have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Mortgage Notes in accordance with the
Mortgage Note Indenture. The Registrar and the Mortgage Note Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Issuers may require a Holder to pay any taxes and
fees required by law or permitted by the Mortgage Note Indenture. The Issuers
are not required to transfer or exchange any Mortgage Note selected for
redemption. Also, the Issuers are not required to transfer or exchange any
Mortgage Note for a period of 15 days before a selection of Mortgage Notes to
be redeemed.
The registered Holder of a Mortgage Note will be treated as the owner of
it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the Mortgage
Note Indenture, the Mortgage Notes, the Mortgage Note Guaranties or the
Collateral Documents may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the Mortgage Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Mortgage Notes), and any existing default or compliance with
any provision of the Mortgage Note Indenture, the Mortgage Notes, the Mortgage
Note Guaranties or the Collateral Documents may be waived with the consent of
the holders of a majority in principal amount of the then outstanding Mortgage
Notes (including consents obtained in connection with a tender offer or
exchange offer for Mortgage Notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any Mortgage Notes held by a nonconsenting holder of
Mortgage Notes): (i) reduce the principal amount of Mortgage Notes whose
holders must consent to an amendment, supplement or waiver; (ii) reduce the
principal of or change the fixed maturity of any Mortgage Note or alter or
waive the provisions with respect to the redemption of the Mortgage Notes
(other than provisions relating to the covenants described above under the
caption "Repurchase at the Option of Holders"); (iii) reduce the rate of or
change the time for payment of interest on any Mortgage Note; (iv) waive a
Default or Event of Default in the payment of principal of, premium and
Liquidated Damages, if any, or interest on the Mortgage Notes (except a
rescission of acceleration of the Mortgage Notes by the holders of at least a
majority in aggregate principal amount of the Mortgage Notes and a waiver of
the payment default that resulted from such acceleration); (v) make any
Mortgage Note payable in money other than that stated in the Mortgage Notes;
(vi) make any change in the provisions of the Mortgage Note Indenture relating
to waivers of past Defaults or the rights of holders of Mortgage Notes to
receive payments of principal of or premium and Liquidated Damages, if any, or
interest on the Mortgage Notes; (vii) release all or substantially all of the
Note Collateral from the Lien of the Mortgage Note Indenture or the Collateral
Documents (other than in accordance with the Mortgage Note Indenture and the
Collateral Documents); or (viii) make any change in the foregoing amendment and
waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of
Mortgage Notes, the Issuers, the Mortgage Note Guarantors and the Mortgage Note
Trustee together may amend or supplement the
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Mortgage Note Indenture, the Mortgage Notes, the Mortgage Note Guaranties or
the Collateral Documents to cure any ambiguity, defect or inconsistency, to
comply with the covenant relating to mergers, consolidations and sales of
assets, to provide for uncertificated Mortgage Notes in addition to or in place
of certificated Mortgage Notes, to provide for the assumption of the Issuers'
obligations to holders of the Mortgage Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the holders of the Mortgage Notes (including providing for
additional Mortgage Note Guaranties pursuant to the Mortgage Note Indenture or
additional collateral), or that does not adversely affect the legal rights
under the Mortgage Note Indenture or the Collateral Documents of any such
holder, to comply with requirements of the Commission in order to effect or
maintain the qualification of the Mortgage Note Indenture under the Trust
Indenture Act or to enter into additional or supplemental Collateral Documents.
Concerning the Mortgage Note Trustee
The Mortgage Note Indenture contains certain limitations on the rights of
the Mortgage Note Trustee, should it become a creditor of the Issuers, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Mortgage
Note Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Mortgage Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy, available to the Mortgage
Note Trustee, subject to certain exceptions. The Mortgage Note Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Mortgage Note Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of his own
affairs. Subject to such provisions, the Mortgage Note Trustee will be under no
obligation to exercise any of its rights or powers under the Mortgage Note
Indenture at the request of any holder of Mortgage Notes, unless such holder
shall have offered to the Mortgage Note Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
Governing Law
The Mortgage Note Indenture and the Mortgage Notes are, subject to certain
exceptions, governed by and construed in accordance with the internal laws of
the State of New York, without regard to the choice of law rules thereof. The
Collateral Documents are governed by the laws of the State of New York, except
to the extent that (i) the laws of Nevada are mandatory or (ii) validity or
perfection of security interests in respect of certain items of collateral,
including, without limitation, real property, is governed by the laws of the
jurisdiction where such collateral is located.
Additional Information
Any holder of the Mortgage Notes or prospective investor may obtain a copy
of the Mortgage Note Indenture, the Registration Rights Agreement and the
Collateral Documents without charge by writing to Las Vegas Sands, Inc., 3355
Las Vegas Boulevard South, Las Vegas, Nevada 89109; Attention: Corporate
Secretary.
Certain Definitions
Set forth below are certain defined terms used in the Mortgage Note
Indenture. Reference is made to the Mortgage Note Indenture for full disclosure
of all such terms, as well as any other capitalized terms used herein for which
no definition is provided.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Restricted Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Restricted Subsidiary of
such specified Person and (ii) Indebtedness encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this
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definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; provided, however, that beneficial ownership of 20% or more of
the voting securities of a Person shall be deemed to be control.
"Applicable Tax Percentage" means the highest aggregate effective marginal
rate of federal, state and local income tax or, when applicable, alternative
minimum tax, to which any direct or indirect member or S corporation
shareholder of the Issuers subject to the highest marginal rate of tax would be
subject in the relevant year of determination (as certified to the Mortgage
Note Trustee by a nationally recognized tax accounting firm), taking into
account only that member's or S corporation shareholder's share of income and
deductions attributable to its interest in the Issuers.
"Approved Equipment Funding Commitments" means, collectively, (a) the
General Electric Capital Corporation Commitment (as defined in the Disbursement
Agreement) and (b) any replacement of such commitment from an institutional or
other lender reasonably acceptable to the Bank Agent and the Mall Construction
Lender if (i) such commitment is in form and substance reasonably satisfactory
to the Bank Agent and the Mall Construction Lender and does not include any
conditions to funding that are not included in the General Electric Capital
Corporation Commitment and (ii) the lender providing such commitment enters
into intercreditor arrangements substantially similar to the intercreditor
arrangements of General Electric Capital Corporation.
"Asset Sale" means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of assets
or rights (including by way of a sale and leaseback) of the Issuers or any
Restricted Subsidiary (each referred to in this definition as a "disposition")
or (ii) the issuance or sale of Equity Interests of any Restricted Subsidiary
other than Venetian (whether in a single transaction or a series of related
transactions), in each case, other than (a) a disposition of inventory or goods
held in the ordinary course of business, (b) the disposition of all or
substantially all of the assets of either of the Issuers in a manner permitted
pursuant to the provisions described above under the caption "Certain
Covenants--Merger, Consolidation or Sale of Assets" or any disposition that
constitutes a Change of Control pursuant to the Mortgage Note Indenture, (c)
any disposition that is a Restricted Payment or that is a dividend or
distribution permitted under the covenant described above under the caption
"Certain Covenants--Restricted Payments" or any Investment that is not
prohibited thereunder or any disposition of cash or Cash Equivalents, (d) any
single disposition, or related series of dispositions, of assets with an
aggregate fair market value of less than $1.0 million, (e) any Event of Loss,
(f) any Lease Transaction or any grant of easement or Permitted Liens, (g) any
dedication permitted pursuant to the covenant described above under the caption
"Certain Covenants--Restrictions on Leasing and Dedication of Property," (h)
the transfer of the Mall Collateral to the Mall Subsidiary, (i) the transfer of
the Phase II Land to the Phase II Subsidiary, (j) a transfer of assets by the
Issuers to a Wholly Owned Restricted Subsidiary of the Issuers or by a Wholly
Owned Restricted Subsidiary of the Issuers to another Wholly Owned Restricted
Subsidiary of the Issuers, (k) an issuance of Equity Interests by a Wholly
Owned Restricted Subsidiary of the Issuers to the Issuers or another Wholly
Owned Restricted Subsidiary of the Issuers, (l) any sale, conveyance, transfer
or other disposition of property that secures Non-Recourse Financing or any
financing permitted by clause (p) under the caption "Limitations on Incurrence
of Indebtedness and Issuance of Disqualified Stock" that is to or on behalf of
the lender of such Non-Recourse Financing or other financing or (m) any
licensing of tradenames or trademarks in the ordinary course of business by any
of the Issuers or their Restricted Subsidiaries.
"Bank Agent" means The Bank of Nova Scotia, in its capacity as
administrative agent under the Bank Credit Facility and its successors in such
capacity.
"Bank Credit Facility" means that certain Credit Agreement among the
Company and Venetian, as borrowers, the lenders listed therein, Goldman Sachs
Credit Partners L.P., as arranger and syndication agent and The Bank of Nova
Scotia, as administrative agent, and any extension, refinancing, renewal,
replacement, substitution or refund thereof ("Bank Credit Facility
Refinancing"); provided, however that (i) the aggregate amount of such Bank
Credit Facility Refinancing shall not exceed the principal amount of
Indebtedness so extended, refinanced, renewed, replaced, substituted or
refunded (plus the amount
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of reasonable expenses incurred and any premium paid in connection therewith)
and (ii) such Bank Credit Facility Refinancing Indebtedness shall have a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of the Indebtedness being extended, refinanced, renewed,
replaced, substituted or refunded.
"Billboard Lease" means that certain Lease Agreement by and between
Venetian and Mall Subsidiary relating to certain space that will be subleased
by "Billboard Live!" as amended from time to time in accordance with the terms
thereof.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability
on the balance sheet in accordance with GAAP.
"Capital Stock" means with respect to any Person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock of such Person, including, without limitation, if such Person
is a partnership or limited liability company, partnership or membership
interests (whether general or limited) and any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership or limited liability
company.
"Cash Equivalents" means (a) United States dollars, (b)(i) direct
obligations of the United States of America (including obligations issued or
held in book-entry form on the books of the Department of the Treasury of the
United States of America) or obligations fully guaranteed by the United States
of America, (ii) obligations, debentures, notes or other evidence of
indebtedness issued or guaranteed by any other agency or instrumentality of the
United States, (iii) interest-bearing demand or time deposits (which may be
represented by certificates of deposit) issued by banks having general
obligations rated (on the date of acquisition thereof) at least "A" by Standard
& Poor's Corporation ("S&P") or "A2" by Moody's Investors Service, Inc.
("Moody's") (S&P and Moody's together with any other nationally recognized
credit rating agency if neither of such corporations is then currently rating
the pertinent obligations, a "Rating Agency") or the equivalent by another
Rating Agency, if applicable, or, if not so rated, secured at all times, in the
manner and to the extent provided by law, by collateral security in clause (i)
or (ii) of this definition, of a market value of no less than the amount of
monies so invested, (iv) commercial paper rated (on the date of acquisition
thereof) at least "A-1" or "P-1" or the equivalent by any Rating Agency issued
by any Person, (v) repurchase obligations for underlying securities of the
types described in clause (i) or (ii) above, entered into with any commercial
bank or any other financial institution having long-term unsecured debt
securities rated (on the date of acquisition thereof) at least "A" or "A2" or
the equivalent by any Rating Agency in connection with which such underlying
securities are held in trust or by a third-part custodian, (vi) guaranteed
investment contracts of any financial institution which has a long-term debt
rated (on the date of acquisition thereof) at least "A" or "A2" or the
equivalent by any Rating Agency, (vii) obligations (including both taxable and
nontaxable municipal securities) issued or guaranteed by, and any other
obligations the interest on which is excluded from income for Federal income
tax purposes issued by, any state of the United States of America or the
District of Columbia or the Commonwealth of Puerto Rico or any political
subdivision, agency, authority or instrumentality thereof, which issuer or
guarantor has (A) a short-term debt rated (on the date of acquisition thereof)
at least "A-1" or "P-1" or the equivalent by any Rating Agency and (B) a
long-term debt rated (on the date of acquisition thereof) at least "A" or "A2"
or the equivalent by any Rating Agency, (viii) investment contracts of any
financial institution either (A) fully secured by (1) direct obligations of the
United States, (2) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States or (3) securities
or receipts evidencing ownership interest in obligations or specified portions
thereof described in clause (1) or (2), in each case guaranteed as full faith
and credit obligations of the United States of America, having a market value
at least equal to 102% of the amount deposited thereunder, or (B) with
long-term debt rated (on the date of acquisition of such investment contract)
at least "A" or "A2" or the equivalent by any Rating Agency and short-term debt
rated (on the date of acquisition of such investment contract) at least "A-1"
or "P-1" or the equivalent by any Rating Agency, (ix) a contract or investment
agreement with a provider or guarantor (A) which provider or guarantor is rated
(on the date of acquisition of such contract or investment agreement) at least
"A" or "A2" or the equivalent by any Rating Agency (provided that if a
guarantor is party to the rating, the guaranty must be unconditional and must
be confirmed in writing prior to any assignment by the provider to another
subsidiary of such guarantor), (B) providing that monies invested shall be
payable without condition (other than notice) and without brokerage fee or
other penalty, upon not more than two Business Days' notice for application
when
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and as required or permitted under the Collateral Documents, and (C) stating
that such contract or agreement is unconditional, expressly disclaiming any
right of setoff and providing for immediate termination in the event of
insolvency of the provider and termination upon demand of the Disbursement
Agent if prior to Completion or (subject to the rights of creditors with prior
Liens) the Mortgage Note Trustee if after Completion (which demand shall only
be made at the direction of the Company) after any payment or other covenant
default by the provider, or (x) any debt instruments of any Person which
instruments are rated (on the date of acquisition thereof) at least "A," "A2,"
"A-1" or "P-1" or the equivalent by any Rating Agency; provided that in each
case of clauses (i) through (x), such investments are denominated in United
States dollars and maturing not more than 13 months from the date of
acquisition thereof; (c) investments in any money market fund which is rated
(on the date of acquisition thereof) at least "A" or "A2" or the equivalent by
any Rating Agency; (d) investments in mutual funds sponsored by any securities
broker-dealer of recognized national standing having an investment policy that
requires substantially all the invested assets of such fund to be invested in
investments described in any one or more of the foregoing clauses and having a
rating of at least "A" or "A2" or the equivalent by any Rating Agency or (e)
investments in both taxable and nontaxable (i) periodic auction reset
securities which have final maturities between one and 30 years from the date
of issuance and are repriced through a dutch auction or other similar method
every 35 days or (ii) auction preferred shares which are senior securities of
leveraged closed end municipal bond funds and are repriced pursuant to a
variety of rate reset periods, in each case having a rating (on the date of
aquisition thereof) of at least "A" or "A2" or the equivalent by any Rating
Agency.
"Casino Lease" means that certain lease between the Company and Venetian
dated as of the Closing Date with respect to the operation of the Casino for
the Project, as amended, revised or modified from time to time in accordance
with the terms thereof.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of transactions, of all or
substantially all of the assets of the Issuers and their Restricted
Subsidiaries, taken as a whole (except in connection with an Event of Loss);
(ii) either of the Issuers becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any person or group (within the meaning
of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor
provision), including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Sole Stockholder and its Related Parties, in a
single transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision) of 50% or more of the total voting power of the Voting Stock of the
Issuers; (iii) after an initial public offering of the common stock of the
Issuers, the consummation of any transaction or series of transactions the
result of which is that any person or group (as defined above), other than the
Sole Stockholder and its Related Parties, (1) beneficially owns more of the
voting power of the Voting Stock of the Issuers than is beneficially owned, in
the aggregate, by the Sole Stockholder and its Related Parties and (2)
beneficially owns more than 20% of the voting power of the Voting Stock of
either of the Issuers; (iv) the first day within any two-year period on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors; (v) the adoption of a plan relating to liquidation or
dissolution of either of the Issuers or any Mortgage Note Guarantor (except
liquidation of (a) Venetian into the Company and (b) any Mortgage Note
Guarantor into the Company, Venetian or another Mortgage Note Guarantor) or
(vi) if any Person other than the Sole Stockholder and Related Parties
beneficially owns more than 50% of the voting and non voting common stock of
the Company.
"Code" means, the Internal Revenue Code of 1986, as amended (or any
successor statute thereto).
"Collateral Documents" means, collectively, the Mortgage Notes Indenture
Leasehold Deed of Trust, the Mortgage Notes Indenture Fee Deed of Trust, the
Mortgage Notes Indenture Mall Parcel Fee Deed of Trust, the Disbursement
Agreement, the Completion Guaranty, the Mortgage Notes Indenture Leasehold
Security Agreement, the Mortgage Notes Indenture Fee Security Agreement, the
Mortgage Notes Indenture Environmental Indemnity or any other agreements,
instruments, financing statements or other documents that evidence, set forth
or limit the Lien of the Mortgage Note Trustee in the Note Collateral.
"Common Stock" means the Common Stock, par value $.10 per share, of the
Company.
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"Company" means Las Vegas Sands, Inc., a Nevada corporation, or any
successor thereto permitted under the Mortgage Note Indenture.
"Completed" or "Completion" has the meaning given to the term "Mall
Release Date" under the Disbursement Agreement, which term generally means that
(a) the Project has been substantially completed in substantial accordance with
the Plans and Specifications (except for additions and expansions to the Casino
Resort (other than the Mall) not contemplated by the Plans and Specifications
in effect on the Issuance Date, which additions and expansions will be subject
to certain limitations, including the requirement that they do not materially
interfere with the use and operation of any other portion of the Casino Resort)
and is free of Liens (other than Permitted Liens), (b) the furnishings,
fixtures and equipment for the Casino and the Mall have been installed and the
furnishings, fixtures and equipment for at least 2000 suites in the Hotel have
been installed, (c) the scope and costs to complete remaining items have been
quantified, and (d) the Issuers have sufficient available funds, pursuant to
the Disbursement Agreement, to pay for remaining project costs plus a specified
contingency, each as appropriately certified by the Construction Consultant
and/or the Project Architect, all as more particularly set forth in the
Disbursement Agreement.
"Completion Guaranty" means that certain Guaranty executed by the Sole
Stockholder in favor of the Bank Agent (acting on behalf of the lenders under
the Bank Credit Facility), the Mall Construction Lender and the Mortgage Notes
Trustee (acting on behalf of the Mortgage Note holders) as amended, revised or
modified from time to time in accordance with the terms thereof.
"Completion Guaranty Loan" means funds provided by the Sole Stockholder in
satisfaction of his obligations pursuant to the Completion Guaranty which are
treated by the Sole Stockholder and the Issuers as a subordinated loan to the
Issuers pursuant to the Completion Guaranty.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (a) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing
Consolidated Net Income), plus (b) provision for taxes based upon net income or
net profits of such Person and its Restricted Subsidiaries to the extent such
provision for taxes was deducted in computing Consolidated Net Income, plus (c)
Consolidated Interest Expense of such Person for such period to the extent such
expenses were deducted in computing Consolidated Net Income (not including any
gaming revenue tax), plus (d) Consolidated Depreciation and Amortization
Expense of such Person for such period to the extent such expenses were
deducted in computing Consolidated Net Income, minus (e) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis for such Person and its Restricted Subsidiaries and
determined in accordance with GAAP.
"Consolidated Depreciation and Amortization Expense" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense and other noncash expenses (excluding any noncash expense that
represents an accrual, reserve or amortization of a cash expenditure for a
past, present or future period) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis as defined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, the sum
of (a) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income (including original
issue discount and deferred financing fees, non-cash interest payments, the
interest component of Capital Lease Obligations, and net payments (if any)
pursuant to Hedging Obligations, but excluding amortization of debt issuance
costs and deferred financing fees), (b) commissions, discounts and other fees
and charges paid or accrued with respect to letters of credit and bankers'
acceptance financing and (c) to the extent not included above, the maximum
amount of interest which would have to be paid by such Person or its Restricted
Subsidiaries under a Guarantee of Indebtedness of any other Person if such
Guarantee were called upon.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (i) the Net Income for such period of any
Person that is not a Subsidiary or that is accounted for by the equity method
of accounting, shall be
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included only to the extent of the amount of dividends or distributions paid in
cash (or to the extent converted into cash) to the referent Person or a Wholly
Owned Subsidiary thereof in respect of such period, (ii) the Net Income of any
Person acquired in a pooling of interests transaction shall not be included for
any period prior to the date of such acquisition, (iii) the Net Income for such
period of any Restricted Subsidiary that is not a Mortgage Note Guarantor shall
be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of its Net Income is not at
the date of determination permitted without any prior governmental approval
(which has not been obtained) or, directly or indirectly, by the operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, unless such restriction with respect to the
payment of dividends or in similar distributions has been legally waived, (iv)
the cumulative effect of a change in accounting principles shall be excluded
and (v) no effect shall be given to any minority or preferred interest in
Venetian for purposes of computing Consolidated Net Income.
"Consolidated Net Worth" means, with respect to any Person at any time,
the sum of the following items, as shown on the consolidated balance sheet of
such Person and its Restricted Subsidiaries as of such date (i) the common
equity of such Person and its Restricted Subsidiaries; (ii) (without
duplication), (a) the aggregate liquidation preference of Preferred Stock of
such Person and its Restricted Subsidiaries (other than Disqualified Stock),
and (b) any increase in depreciation and amortization resulting from any
purchase accounting treatment from an acquisition or related financing; (iii)
less any goodwill incurred subsequent to the Issuance Date; and (iv) less any
write up of assets (in excess of fair market value) after the Issuance Date, in
each case on a consolidated basis for such Person and its Restricted
Subsidiaries, determined in accordance with GAAP; provided, that in calculating
Consolidated Net Worth, any gain or loss from any Asset Sale shall be excluded;
provided, however that in computing "Consolidated Net Worth," no adjustment
shall be made for any minority interest in Venetian.
"Construction Consultant" means Tishman Construction Corporation of Nevada
or any other Person designated from time to time by the Bank Agent, the Mall
Construction Lender and the Mortgage Notes Trustee, in their sole discretion
acting pursuant to the Intercreditor Agreement, to serve as the Construction
Consultant under the Disbursement Agreement.
"Construction Management Agreement" means that certain Construction
Management Agreement between the Company and the Construction Manager, dated as
of February 15, 1997, as such agreement may be amended, modified, supplemented,
restated or replaced from time to time.
"Construction Manager" means Lehrer McGovern Bovis, Inc., a New York
corporation.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on
the Issuance Date, (ii) was nominated for election or elected to such Board of
Directors with, or whose election to such Board of Directors was approved by,
the affirmative vote of a majority of the Continuing Directors who were members
of such Board of Directors at the time of such nomination or election or (iii)
was appointed or elected to such Board of Directors by the Sole Stockholder or
a Related Party.
"Contracts" means, collectively, the contracts entered into, from time to
time, between the Company and any contractor for performance of services or
sales of goods in connection with the design, engineering, installation or
construction of the Project.
"Cooperation Agreement" means that certain Amended and Restated Reciprocal
Easement, Use and Operating Agreement among the Mall Construction Subsidiary,
Venetian and Interface, as amended, revised or modified from time to time in
accordance with its terms thereof.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Direct Construction Guaranty" means that certain Guaranty of Performance
and Completion executed by Bovis, Inc., a New York corporation, in favor of the
Company, as assigned by the Company to Venetian by that certain Assignment
Agreement by and among the Company, Venetian and Bovis, Inc., as amended,
revised or modified from time to time in accordance with its terms.
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"Disbursement Agent" means The Bank of Nova Scotia, in its capacity as the
disbursement agent under the Disbursement Agreement and its successors in such
capacity.
"Disbursement Agreement" means that certain Funding Agents' Disbursement
and Administration Agreement among the Issuers, Mall Construction Subsidiary,
the Bank Agent, the Mortgage Notes Trustee, the Mall Construction Lender, the
HVAC Provider and the Disbursement Agent as amended, revised or modified from
time to time in accordance with its terms.
"Disqualified Stock" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to
November 15, 2004; provided, however, that any Capital Stock which would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require the Issuers to repurchase or redeem such Capital Stock
upon the occurrence of a Change of Control, and Event of Loss or an Asset Sale
occurring prior to the final maturity of the Mortgage Notes shall not
constitute Disqualified Stock if the change of control provisions, event of
loss provisions, or asset sale provisions, as the case may be, applicable to
such Capital Stock specifically provide that the Issuers will not repurchase or
redeem any such stock pursuant to such provisions prior to the Company's and
Venetian's compliance with the provisions of the Mortgage Note Indenture,
including the covenant described under "Repurchase at the Option of Holders--
Change of Control," "--Event of Loss" and "--Asset Sales."
"Equity Contribution" means the approximately $320.3 million of proceeds
received by Venetian from the Company, Interface Holding or the Sole
Stockholder (in the form of cash or property).
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Estimation Period" means the period for which a shareholder, partner or
member, who is an individual is required to estimate for federal income tax
purposes his allocation of taxable income from a Subchapter S corporation or a
partnership for federal income tax purposes in connection with determining his
estimated federal income tax liability for such period.
"Event of Loss" means, with respect to any property or asset (tangible or
intangible, real or personal), any of the following: (A) any loss, destruction
or damage of such property or asset; (B) any actual condemnation, seizure or
taking by exercise of the power of eminent domain or otherwise of such property
or asset, or confiscation of such property or asset or the requisition of the
use of such property or asset; or (C) any settlement in lieu of clause (B)
above.
"Excess Mall Proceeds" means the aggregate cash proceeds received by Mall
Subsidiary from borrowings or from debt or equity issuances in excess of the
cash amounts necessary to fund Mall Subsidiary's obligation to purchase certain
assets pursuant to the Sale and Contribution Agreement.
"Existing Indebtedness" means (i) up to $1.5 million in aggregate
principal amount of Indebtedness (other than Capital Lease Obligations) of the
Company or its Restricted Subsidiaries in existence on the Issuance Date, plus
interest accruing thereon, after application of the net proceeds of sale of the
Mortgage Notes on the Issuance Date and (ii) any current or future obligations
under the HVAC Services Agreement as in effect on the Issuance Date.
"Expo Center" means the Sands Expo and Convention Center.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness and the use of proceeds
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therefrom, or such issuance or redemption of Preferred Stock, as if the same
had occurred at the beginning of the applicable four-quarter period. For
purposes of making the computation referred to above, acquisitions,
dispositions and discontinued operations (as determined in accordance with
GAAP) that have been made by the Company or any of its Restricted Subsidiaries,
including all mergers, consolidations and dispositions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date shall be calculated on a pro forma basis assuming that all
such acquisitions, dispositions, discontinued operations, mergers,
consolidations (and the reduction of any associated fixed charge obligations
resulting therefrom) had occurred on the first day of the four-quarter
reference period.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (a) Consolidated Interest Expense of such Person for
such period and (b) all capitalized interest of such Person and its Restricted
Subsidiaries and (c) the product of (i) to the extent such Person is not
treated as an S corporation, a partnership or a substantially similarly treated
pass-through entity for federal income tax purposes, all dividend payments,
whether or not in cash on any series of Preferred Stock of such Person or any
of its Subsidiaries, other than dividend payments on Equity Interests payable
solely in Equity Interests or dividends paid as an increase in liquidation
preference on Preferred Stock, times (ii) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined
federal, state and local statutory income tax rate of such Person, expressed as
a decimal, in each case, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date. For the purposes of the
Mortgage Note Indenture, the term "consolidated" with respect to any Person
shall mean such Person consolidated with its Restricted Subsidiaries (without
giving effect to any minority or preferred interest of Venetian) and shall not
include any Unrestricted Subsidiary or Special Subsidiary.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or foreign government, any state, province or any city or other
political subdivision, whether now or hereafter existing, or any officer or
official thereof, including without limitation, the Nevada Gaming Commission,
the Nevada State Gaming Control Board, the Clark County Liquor and Gaming
Licensing Board and any other agency with authority to regulate any gaming
operation (or proposed gaming operation) owned, managed or operated by the
Issuers or any of its Subsidiaries.
"Gaming License" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct governing activities of
the Issuers or any of their Restricted Subsidiaries, including without
limitation, all such licenses granted under the Nevada Gaming Control Act, and
the regulations promulgated pursuant thereto, and other applicable federal,
state, foreign or local laws.
"Government Instrumentality" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity, (including any
zoning authority, the Federal Deposit Insurance Corporation, the Comptroller of
the Currency or the Federal Reserve Board, any central bank or any comparable
authority) or any arbitrator with authority to bind a party at law.
"Government Securities" means securities that are (a) direct obligations
of the United States of America for the timely payment of which its full faith
and credit is pledged or (b) obligations of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended), as custodian with respect to any such
Government Security or a specific payment of principal of or interest on any
such Government Security held by such custodian for the account
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of the holder of such depository receipt; provided, that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the Government Security or the specific payment of
principal of or interest on the Government Security evidenced by such
depository receipt.
"Guaranty" means a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Harrah's Road Way Agreement" means an agreement between Venetian and
Harrah's Casino Resort as amended, revised, modified or restated, as
contemplated by the existing Letter of Intent between the parties with respect
to the sharing of the common roadway between the parties and certain plans with
respect to the improvements to be made thereto.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"HVAC Provider" means Atlantic-Pacific Las Vegas, LLC, a Delaware limited
liability company.
"HVAC Services Agreement" means, collectively (i) that certain Energy
Services Agreement between Venetian and the HVAC Provider, (ii) that certain
Ground Lease between Venetian and the HVAC Provider, (iii) that certain
Construction Agency Agreement between Venetian and the HVAC Provider and (iv)
that certain Energy Services Agreement between Mall Subsidiary and the HVAC
Provider, in each case, as amended from time to time in accordance with its
terms.
"Indebtedness" means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof), (iii) representing the
balance deferred and unpaid of the purchase price of any property (including
Capital Lease Obligations), except any such balance that constitutes an accrued
expense or trade payable, or (iv) representing any Hedging Obligations, if and
to the extent any of the foregoing indebtedness (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, (b) to the extent not otherwise
included, any obligation by such Person to be liable for, or to pay, as
obligor, guarantor or otherwise, on the Indebtedness of another Person (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business) and (c) to the extent not otherwise included, Indebtedness
of another Person secured by a Lien on any asset owned by such Person (whether
or not such Indebtedness is assumed by such Person). For purposes of this
definition, the term "Indebtedness" shall not include any amount of the
liability in respect of an operating lease that at such time would not be
required to be capitalized and reflected as a liability on the balance sheet in
accordance with GAAP. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Company's Board of Directors, (i) qualified to perform the task
for which it has been engaged and (ii) disinterested and independent with
respect to the Company and its Subsidiaries, each Affiliate of the Company, and
the Sole Stockholder and its Related Parties.
"Indirect Construction Guaranty" means that certain Guaranty of
Performance executed by The Peninsular and Oriental Steam Navigation Company, a
corporation organized under the laws of England and Wales, in favor of the
Company, as assigned by the Company to Venetian by that certain Assignment
Agreement by and among the Company, Venetian and The Peninsular and Oriental
Steam Navigation Company as amended, revised, modified or restated from time to
time in accordance with its terms.
"Intercreditor Agreement" means the Intercreditor Agreement, among The
Bank of Nova Scotia, as Bank Agent acting on behalf of the other lenders
pursuant to the Bank Credit Facility, the Mortgage Note
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Trustee, acting on behalf of the holders of the Mortgage Notes, the Mall
Construction Lender and the Senior Subordinated Note Trustee, acting on behalf
of the holders of the Senior Subordinated Notes, as amended, revised, modified
or restated from time to time in accordance with its terms.
"Interface" means Interface Group-Nevada, Inc., a Nevada corporation and
wholly owned indirect subsidiary of the Sole Stockholder.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
Guarantees), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issuance Date" means the closing date for the sale and original issuance
of the Mortgage Notes.
"Lenders" means any of the lenders under the Bank Credit Facility, the
Mall Construction Lender and the Mortgage Note holders.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Mall" means that certain enclosed retail, dining and entertainment
complex of approximately 500,000 net leasable square feet more particularly
described in the Plans and Specifications.
"Mall Collateral" means all of the Issuers' and their Subsidiaries' right,
title, and interest in and to (i) prior to the creation of the Mall I Parcel,
the leasehold estate created by the Mall Lease and, thereafter, the Mall I
Parcel; (ii) the leasehold estate created by the Billboard Lease; (iii) the
Mall and any related improvements and equipment thereto; (iv) any reserves
established by the Issuers, any of their Restricted Subsidiaries or any of
their Special Subsidiaries relating to the Mall; and (v) any and all security
agreements and an assignment of leases and rents creating a security interest
in any rents or other income derived from the Mall.
"Mall Construction Lender" means GMAC Commercial Mortgage Corporation, a
California corporation, and its permitted successors and assigns.
"Mall Construction Loan Agreement" means that certain Credit Agreement
between the Issuers, Mall Construction Subsidiary and Mall Construction Lender,
as amended, revised or modified from time to time in accordance with its terms.
"Mall Construction Loan Facility" means the credit facility described and
made available to the Issuers and Mall Construction Subsidiary pursuant to the
Mall Construction Loan Agreement and any extension, refinancing, renewal,
replacement, substitution or refunding thereof ("Mall Construction Loan
Facility Refinancing"); provided, however that (i) the aggregate amount of
Indebtedness under such Mall Construction Loan Facility Refinancing shall not
exceed the principal amount of Indebtedness so extended, refinanced, renewed,
replaced, substituted or refunded (plus the amount of reasonable expenses
incurred and any premium paid in connection therewith), (ii) such Mall
Construction Loan Facility Refinancing Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded and (iii) to the extent such Mall Construction Loan
Facility Refinancing Indebtedness is not supported by a guaranty of the Sole
Stockholder on substantially similar terms as the terms of the Sole
Stockholder's guaranty of Tranche B of the Mall Construction Loan Facility,
such Mall Construction Loan Facility Refinancing Indebtedness shall contain a
tranche with a principal amount, relative payment priority and other terms
which are substantially similar to those required to be contained in the
Substitute Tranche B Loan.
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"Mall Construction Subsidiary" means Grand Canal Shops Mall Construction,
LLC, a Delaware limited liability company and a wholly owned subsidiary of
Venetian.
"Mall Holdings" means Grand Canal Shops Mall Holding Company, LLC, a
Delaware limited liability company and a subsidiary of Mall Intermediate
Holdings.
"Mall Intermediate Holdings" means Mall Intermediate Holding Company, LLC,
a Delaware limited liability company, and a wholly owned subsidiary of
Venetian.
"Mall I Parcel" means the Mall Space subdivided from the Project Site as a
legally separate parcel and recorded with the applicable Government
Instrumentalities.
"Mall Lease" means the Lease by and between Venetian and Mall Construction
Subsidiary pursuant to which Mall Construction Subsidiary leases from Venetian
the Mall Space, as amended, revised or modified from time to time in accordance
with its terms.
"Mall Management Agreement" means the Mall Management Agreement between
Forest City Enterprises and the Mall Contruction Subsidiary, as amended,
revised or modifed.
"Mall Manager" means Grand Canal Shops Mall MM, Inc., a wholly owned
subsidiary of the Company.
"Mall Space" means that certain space upon which the Mall will be located
as more specifically described in an Annex to the Mortgage Note Indenture.
"Mall Subsidiary" means Grand Canal Shops Mall, LLC, a Delaware limited
liability company.
"Mortgage Note Make-Whole Premium" means, with respect to a Mortgage Note,
an amount equal to the greater of (i) 12.25% of the outstanding principal
amount of such Mortgage Note and (ii) the excess of (a) the present value of
the remaining interest, premium and principal payments due on such Mortgage
Note as if such Mortgage Note were redeemed on November 15, 2001, computed
using a discount rate equal to the Treasury Rate plus 50 basis points, over (b)
the outstanding principal amount of such Mortgage Note.
"Mortgage Notes" means the Company's 12 1/4% Mortgage Notes due November
15, 2004 issued pursuant to the Mortgage Note Indenture.
"Mortgage Notes Indenture Environmental Indemnity" means that
Environmental Indemnity Agreement among the Company, Venetian and the Mortgage
Note Trustee, as amended, modified or revised in accordance with its terms.
"Mortgage Notes Indenture Fee Deed of Trust" means that certain Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing
made by the Company and Venetian, as trustor, to the trustee thereunder, for
the benefit of the Mortgage Note Trustee, as beneficiary, as amended, modified
or revised in accordance with its terms.
"Mortgage Notes Indenture Leasehold Deed of Trust" means that certain Deed
of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing
and made by the Mall Construction Subsidiary, as trustor, to the trustee
thereunder, for the benefit of the Mortgage Note Trustee, as beneficiary, as
amended, modified or revised in accordance with its terms.
"Mortgage Notes Indenture Mall Parcel Fee Deed of Trust" means the deed of
trust in the form of Exhibit V-4 to the Disbursement Agreement to be executed
by Mall Construction Subsidiary for the benefit of the Mortgage Note Trustee in
accordance with the Disbursement Agreement, as amended, modified or revised in
accordance with its terms.
"Mortgage Notes Proceeds Account" means that certain Mortgage Notes
Proceeds Account into which the net proceeds from the sale of the Mortgage
Notes were deposited in accordance with the Disbursement Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant
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to sale and leaseback transactions) or (b) the disposition of any securities or
the extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries, and (iii) excluding any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Loss Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Event of Loss,
including, without limitation, insurance proceeds from condemnation awards or
damages awarded by any judgment, net of the direct costs in recovery of such
Net Loss Proceeds (including, without limitation, legal, accounting, appraisal
and insurance adjuster fees and expenses) and any taxes paid or payable as a
result thereof (including, without limitation, any taxes paid or payable by an
owner of the Issuers or any Restricted Subsidiary).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and expenses, employee severance and
termination costs, any trade payables or similar liabilities related to the
assets sold and required to be paid by the seller as a result thereof and
sales, finder's or broker's commissions), and any relocation expenses incurred
as a result thereof, taxes paid or payable as a result thereof (including,
without limitation, any taxes paid or payable by an owner of the Issuers or any
Restricted Subsidiary) (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien (other than the Mortgage Notes)
on the asset or assets that are the subject of such Asset Sale or amounts
permitted by the terms of such Indebtedness to be otherwise reinvested in the
Project to the extent so reinvested, all distributions and other payments
required to be made to minority interest holders in a subsidiary or joint
venture as a result of the Asset Sale and any reserve for adjustment in respect
of the sale price of such asset or assets or any liabilities associated with
the asset disposed of in such Asset Sale.
"Non-Recourse Financing" means Indebtedness incurred in connection with
the purchase or lease of personal or real property useful in the Principal
Business or to construct, develop or equip the Mall Space and (i) as to which
the lender upon default may seek recourse or payment against the Company or any
Restricted Subsidiary only through the return or sale of the property or
equipment or the other Specified FF&E so purchased or leased, or in the case of
any Indebtedness with respect to the Mall Space, only through foreclosure upon
the Mall Collateral and (ii) may not otherwise assert a valid claim for payment
on such Indebtedness against the Company or any Restricted Subsidiary or any
other property of the Company or any Restricted Subsidiary.
"Non-Recourse Indebtedness" means Indebtedness or Disqualified Stock, as
the case may be, or that portion of Indebtedness or Disqualified Stock, as the
case may be, (a) as to which neither the Company nor any of its Restricted
Subsidiaries (i) provides credit support pursuant to any undertaking, agreement
or instrument that would constitute Indebtedness or Disqualified Stock, as the
case may be, or (ii) is directly or indirectly liable, and (b) with respect to
Non-Recourse Indebtedness of an Unrestricted Subsidiary, no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness or
Disqualified Stock, as the case may be, of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or Disqualified
Stock, as the case may be, or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
"Note Collateral" means all assets, now owned or hereafter acquired, of
the Company, Venetian or any Mortgage Note Guarantor defined as Collateral in
the Collateral Documents, which will initially include (with certain
exceptions) all real estate, improvements and all personal property owned by
the Issuers (including (i) the Project Assets, (ii) the Mall Collateral, until
the transfer and release thereof in accordance with the Sale and Contribution
Agreement and the Disbursement Agreement), as well as a pledge of any
intercompany notes held by either of the Issuers or the Mortgage Note
Guarantors.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed on behalf of the
Issuers or a Mortgage Note Guarantor, as the case may be, by two Officers (or
if a limited liability company, two Officers of the
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managing member of such limited liability company) of the Issuers or a Mortgage
Note Guarantor, as the case may be, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, Venetian (or its managing members) or a
Mortgage Note Guarantor, as the case may be, that meets the requirements set
forth in the Mortgage Note Indenture.
"Other Phase II Agreements" means any agreement entered into by the
Issuers or their Subsidiaries with a Person for construction, development and
operation of a hotel or casino on the Phase II Land (other than the Phase II
Resort).
"Outside Completion Deadline" means April 21, 1999, as the same may from
time to time be extended pursuant to the Disbursement Agreement.
"Permitted Construction Loan Refinancing" means (i) the incurrence of
indebtedness and/or the issuance of Capital Stock by the Mall Subsidiary the
proceeds of which are used to purchase the Mall Collateral pursuant to the Sale
and Contribution Agreement (including, without limitation, the Tranche A
Take-out Commitment and the Tranche B Take-out Commitment) and/or (ii) the
assumption of the Mall Construction Loan Facility and/or the Substitute Tranche
B Loan (or any permitted refinancing thereof) pursuant to the Sale and
Contribution Agreement.
"Permitted Investments" means (a) any Investments in the Issuers, any
Mortgage Note Guarantor or in any Restricted Subsidiary that is not a Mortgage
Note Guarantor if the Investments in such Restricted Subsidiary that is not a
Mortgage Note Guarantor from the Issuers, any Mortgage Note Guarantor or any of
the other Restricted Subsidiaries aggregate less than $1.0 million; (b) any
Investments in Cash Equivalents; (c) Investments by the Issuers or any
Restricted Subsidiary of the Issuers in a Person, if as a result of such
Investment (i) such Person becomes a Mortgage Note Guarantor or (ii) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, one of the
Issuers or a Mortgage Note Guarantor; (d) any Restricted Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "Repurchase at the Option of Holders--Asset Sales"; (e) any acquisition
of assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Issuers; (f) receivables owing to the Issuers or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances; (g) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (h) loans or advances to employees of the Issuers or their Restricted
Subsidiaries or Special Subsidiaries (i) to fund the exercise price of options
granted under the employment agreements and the Issuers' stock option plans or
agreements, in each case, as in effect on the date of the Mortgage Note
Indenture or (ii) for any other purpose not to exceed $2.0 million in the
aggregate at any one time outstanding under this clause (ii); (i) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Issuers and any Restricted
Subsidiary or in satisfaction of judgments; (j) other Investments in any Person
(other than in an Affiliate of the Issuers) having a fair market value
(measured on the date each such Investment was made and without giving effect
to subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (j) that are at the time outstanding, not to
exceed $5.0 million; (k) Investments in any person engaged in the Principal
Business which Investment is solely in the form of Equity Interests (other than
Disqualified Stock) of the Issuers and (l) the initial designation on the
Issuance Date of (i) Phase II Subsidiary, Phase II Holdings and Phase II
Manager as Unrestricted Subsidiaries and (ii) Mall Subsidiary, Mall Holdings
and Mall Manager as Special Subsidiaries; provided that in each case, no more
than $1,000 is invested in any such Person at the time of designation.
"Permitted Liens" means (a) Liens in favor of the Issuers and their Wholly
Owned Restricted Subsidiaries; provided that if such Liens are on any Note
Collateral, that such Liens are either collaterally assigned to the Mortgage
Note Trustee or subordinate to the Lien in favor of the Mortgage Note Trustee
securing the Mortgage Notes or any Mortgage Note Guaranty; (b) Liens on
property of a Person existing
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at the time such Person became a Restricted Subsidiary, is merged into or
consolidated with or into, or wound up into, one of the Issuers or any
Restricted Subsidiary of the Issuers; provided, that such Liens were in
existence prior to the contemplation of such acquisition, merger or
consolidation or winding up and do not extend to any other assets other than
those of the Person acquired by, merged into or consolidated with one of the
Issuers or such Restricted Subsidiary; (c) Liens on property existing at the
time of acquisition thereof by the Issuers or any Restricted Subsidiary of the
Issuers; provided that such Liens were in existence prior to the contemplation
of such acquisition; (d) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business or in the
construction of the Project and which obligations are not expressly prohibited
by the Mortgage Note Indenture; provided, however, that the Issuers have
obtained a title insurance endorsement insuring against losses arising
therewith or if such Lien arises in the ordinary course of business or in the
construction of the Project, the Issuers have bonded within a reasonable time
after becoming aware of the existence of such Lien; (e) Liens securing
obligations in respect of the Mortgage Note Indenture, the Mortgage Notes and
any Secured Mortgage Note Guaranty; (f) leases or Liens, to the extent
permitted pursuant to the covenant entitled "Restrictions on Leasing and
Dedication of Property"; (g) (1) Liens for taxes, assessments or governmental
charges or claims or (2) statutory Liens of landlords, and carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other
similar Liens arising in the ordinary course of business or in the construction
of the Project, in the case of each of (1) and (2), with respect to amounts
that either (A) are not yet delinquent or (B) are being contested in good faith
by appropriate proceedings as to which appropriate reserves or other provisions
have been made in accordance with GAAP; (h) easements, rights-of-way,
navigational servitudes, restrictions, minor defects or irregularities in title
and other similar charges or encumbrances which do not interfere in any
material respect with the ordinary conduct of business of the Issuers and their
Restricted Subsidiaries; (i) after Completion, Liens securing Indebtedness in
an aggregate amount not exceeding $25.0 million at any one time securing
purchase money or lease obligations otherwise permitted by the Mortgage Note
Indenture incurred or assumed in connection with the acquisition, purchase or
lease of real or personal property to be used in the Principal Business of the
Issuers or any of their Restricted Subsidiaries within 180 days of such
incurrence or assumption; provided, that such Liens do not extend to any Note
Collateral or to any property or assets of the Issuers or any Restricted
Subsidiary other than the property or assets so purchased or leased and, at the
time of incurrence, the principal amount of such Indebtedness does not exceed
75% of the value of the collateral securing such Indebtedness; (j) a leasehold
mortgage in favor of a party financing the lessee of space within the Project;
provided that (i) the lease affected by such leasehold mortgage is permitted
pursuant to the covenant entitled "Restrictions on Leasing and Dedication of
Property," (ii) neither the Issuers nor any Restricted Subsidiary is liable for
the payment of any principal of, or interest or premium on, such financing and
(iii) the affected lease and leasehold mortgage are expressly made subject and
subordinate to the Lien of the Mortgage Notes Indenture Leasehold Deed of Trust
and the Mortgage Notes Indenture Fee Deed of Trust, subject to the provisions
of the last paragraph in the covenant described under the caption "--
Restrictions on Leasing and Dedication of Property"; (k) Liens securing the
Mall Construction Loan Facility and any additional Indebtedness permitted to be
incurred thereunder pursuant to clause (n)(A) of the second paragraph of the
covenant described above under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock;" (l) Liens created or
contemplated by the Cooperation Agreement and the HVAC Services Agreement; (m)
Liens on real property of the Issuers arising pursuant to that certain Harrah's
Road Way Agreement; (n) Liens created by the Predevelopment Agreement, as in
effect on the date of the Mortgage Note Indenture; (o) Liens (i) to secure
Indebtedness permitted by clauses (g), (h) or (p) of the second paragraph of
the covenant entitled "--Incurrence of Indebtedness and Issuance of Preferred
Stock" and extending only to assets or Specified FF&E acquired in accordance
with such clause and to any proceeds of such assets or Indebtedness and related
collateral accounts in which such proceeds are held, and (ii) to secure
Indebtedness permitted by clause (d) of the second paragraph of the covenant
entitled "--Incurrence of Indebtedness and Issuance of Preferred Stock";
provided that such Liens are not materially greater in extent than the Liens
securing the Indebtedness so refinanced; (p) Liens created by the Other Phase
II Agreements; (q) Liens prior to the Lien securing the Mortgage Notes to
secure all Obligations under the Bank Credit Facility incurred pursuant to
clause (a) of the second paragraph of the covenant described above under the
caption "--Incurrence of
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Indebtedness and Issuance of Disqualified Stock" and any additional
Indebtedness permitted to be incurred thereunder pursuant to clause (n)(A) of
the second paragraph of the covenant described above under the caption
"Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock;"
(r) until Completion is achieved, Permitted Liens (as defined in the
Disbursement Agreement); (s) Liens incurred in connection with the construction
of a pedestrian bridge over or a pedestrian tunnel under Las Vegas Boulevard
and Sands Avenue; (t) Liens incurred in connection with the traffic study
relating to increased traffic on Las Vegas Boulevard as a result of the
Completion of the Project; (u) Liens incurred in connection with Hedging
Obligations incurred pursuant to clause (f) of the covenant described under the
caption "Limitations on Incurrence of Indebtedness and the Issuance of
Disqualified Stock"; (v) licenses of patents, trademarks and other intellectual
property rights granted by the Issuers or any Subsidiary of the Issuers in the
ordinary course of business and not interfering in any material respect with
the ordinary conduct of the business of such Issuer or such Subsidiary; (w) any
judgment attachment or judgment Lien not constituting an Event of Default; (x)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(y) any Lien created under the Sale and Contribution Agreement and (z) after
Completion, Liens prior to the Lien securing the Mortgage Notes securing (A) up
to an aggregate of $20.0 million of Indebtedness permitted to be incurred
pursuant to clause (n)(B) of the second paragraph of the covenant described
above under the caption "Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock" and (B) up to an aggregate of $20.0 million of
Indebtedness permitted to be incurred pursuant to clause (o) of the second
paragraph of the covenant described above under the caption "Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock."
"Permitted Quarterly Tax Distributions" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of the
Company or Venetian, as the case may be (in each case, including any such
taxable income attributable to such entity's ownership of interest in any other
pass-through entity for Federal income tax purposes (except that if all or any
portion of the Completion Guaranty Loan or the Substitute Tranche B Loan is
outstanding and held by the Sole Stockholder or a Related Party and is not
paying current cash interest, then such estimated taxable income shall be
determined without giving effect to any non-cash interest payments on such
loans held by the Sole Stockholder or the Related Parties to the extent such
non-cash interest is deductible)), for the related Estimation Period, as in a
statement filed with the Mortgage Note Trustee, provided; however, that (A)
prior to any distributions of Tax Amounts the Issuers shall deliver an
officers' certificate to the effect that, in the case of distributions to be
made by Venetian, Venetian qualifies as a partnership or a substantially
similarly treated pass-through entity for federal income tax purposes or that,
in the case of distributions to be made by the Company, the Company qualifies
as a Subchapter S corporation under the Code or a substantially similarly
treated pass-through entity for federal income tax purposes, as the case may
be, and (B) at the time of such distributions, the most recent audited
financial statements of the Company reflect that the Company was treated as a
Subchapter S corporation under the Code or a substantially similarly treated
pass-through entity for federal income tax purposes and Venetian was treated as
a partnership or substantially similarly treated pass-through entity for
Federal income tax purposes for the period covered by such financial
statements; provided, further, that, for an Estimation Period that includes a
True-up Determination Date, (A) if the True-up Amount is due to the members or
shareholders, as the case may be, the Permitted Quarterly Tax Distribution
payable by the Company or Venetian, as the case may be, for the Estimation
Period shall be increased by such True-up Amount, and (B) if the True-up Amount
is due to the Company or Venetian, the Permitted Quarterly Tax Distribution
payable by the Company or Venetian, as the case may be, for the Estimation
Period shall be reduced by such True-up Amount and the excess, if any, of the
True-up Amount over such Permitted Quarterly Tax Distribution shall be applied
to reduce the immediately following Permitted Quarterly Tax Distribution(s)
until such True-up Amount is entirely offset. The amount of Permitted Quarterly
Tax Distribution relating to an Estimation Period including a True-up
Determination Date shall be determined by a Tax Amounts CPA, and the amount of
Permitted Quarterly Tax Distribution relating to all other Estimation Periods
shall be determined by the Company or Venetian, as the case may be.
"Person" means any individual, corporation, partnership, limited liability
company or partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
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"Phase II Holdings" means Lido Casino Resort Holding Company, LLC, a
Delaware limited liability company and a subsidiary of Phase II Intermediate
Holdings.
"Phase II Intermediate Holdings" means Lido Intermediate Holding Company,
LLC, a Delaware limited liability company, and a Wholly Owned Subsidiary of the
Company.
"Phase II Land" means that portion of the Project Site designated as the
Phase II Land in the Collateral Documents, together with all improvements
thereon and all rights appurtenant thereto.
"Phase II Manager" means Lido Casino Resort MM, Inc., a special purpose
Wholly Owned Subsidiary of the Company.
"Phase II Resort" means the themed hotel and casino currently contemplated
to be constructed on the Phase II Land and which will be physically connected
to the Casino Resort.
"Phase II Subsidiary" means Lido Casino Resort, LLC, a Nevada limited
liability company and, at the Issuance Date, an Unrestricted Subsidiary of the
Issuers.
"Plans and Specifications" means the plans and specifications for the
construction of the Casino Resort listed in an exhibit to the Disbursement
Agreement, as the same may be modified from time to time in accordance with the
Disbursement Agreement.
"Pre-development Agreement" means the Sands Resort Hotel & Casino
Agreement dated February 18, 1997 by and between Clark County and the Company
as amended, revised, modified and restated.
"Preferred Stock" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"Principal Business" means the casino gaming, hotel, retail and
entertainment mall and resort business and any activity or business incidental,
directly related or similar thereto (including owning interests in
Subsidiaries, operating the conference center and meeting facilities and owning
and operating a retail and entertainment mall (including the Mall prior to its
transfer to the Mall Subsidiary) and acting as a member of Venetian in the case
of the Company), or any business or activity that is a reasonable extension,
development or expansion thereof or ancillary thereto, including any hotel,
entertainment, recreation, convention, trade show, meeting, retail sales or
other activity or business designed to promote, market, support, develop,
construct or enhance the casino gaming, hotel, retail and entertainment mall
and resort business operated by the Company, Venetian and direct and indirect
Restricted Subsidiaries (including, without limitation, engaging in
transactions with Affiliates and incurring Indebtedness, providing guarantees
or providing other credit support, in each case to the extent permitted under
the Mortgage Note Indenture), owning and operating joint ventures to supply
materials or services for the construction or operation of any resorts owned or
operated by the Company and its Restricted Subsidiaries and entering into
casino leases or management agreements for any casino situated on land owned by
the Issuers or any of their Subsidiaries or owned or operated by the Issuers or
any Affiliate of the Issuers.
"Project" means the Venetian-themed hotel, casino, retail, meeting and
entertainment complex, with related heating, ventilation and air conditioning
and power station facilities to be developed at the Project Site, all as more
particularly described in Exhibit T-1 to the Disbursement Agreement.
"Project Architect" means collectively, TSA of Nevada, LLP, and WAT&G,
Inc. Nevada.
"Project Assets" means, with respect to the Project at any time, all of
the assets then in use related to the Project including any real estate assets,
any buildings or improvements thereon, and all equipment, furnishings and
fixtures, but excluding: (i) the Phase II Land and/or the Mall Collateral and
any improvements thereon after their transfer to the Unrestricted Subsidiary or
Special Subsidiary as permitted by the Mortgage Note Indenture; (ii) any
obsolete personal property determined by the Company's Board of Directors to be
no longer useful or necessary to the operations or support of the Project;
(iii) the equipment owned by the HVAC Provider (unless purchased by Venetian or
Mall Construction Subsidiary after the date hereof); and (iv) any equipment
leased from a third party in the ordinary course of business.
"Project Budget" means the Project Budget as in effect on the Issuance
Date and attached as an exhibit to the Disbursement Agreement, as amended,
revised or modified from time to time in accordance with the terms thereof.
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"Project Documents" means the Construction Management Agreement, the
Direct Construction Guaranty, the Indirect Construction Guaranty, the
Contracts, the Approved Equipment Funding Commitments, the Cooperation
Agreement, the HVAC Services Agreement, the Mall Lease, the Sale and
Contribution Agreement, the Treadway Agreement, the operating agreement of each
of Venetian, Mall Intermediate Holdings, Mall Holdings and Mall Subsidiary and
any other document or agreement entered into, relating to the development,
construction, maintenance or operation of the Project (other than the documents
relating to the Tranche A Take-out Commitment and the Tranche B Take-out
Commitment) as the same may be amended from time to time in accordance with the
terms and conditions of the Disbursement Agreement.
"Public Equity Offering" means a bona fide underwritten sale to the public
of common equity of the Company, Venetian or a Person holding more than 50% of
the common equity of the Company pursuant to a registration statement (other
than on Form S-8 or any other form relating to securities issuable under any
benefit plan of the Company) that is declared effective by the SEC and results
in gross aggregate proceeds to the Company or Venetian of at least $20.0
million.
"Quarterly Payment Period" means the period commencing on the tenth day
and ending on and including the twentieth day of each month in which federal
estimated tax payments are due (provided that payments in respect of estimated
state income taxes due in January may instead, at the option of the Issuers, be
paid during the last five days of the immediately preceding December).
"Redemption Triggering Event" means (i) a Public Equity Offering; or (ii)
the receipt by the Issuers or any of their Restricted Subsidiaries of Excess
Mall Proceeds.
"Related Parties" means (i) any spouse and any child, stepchild, sibling
or descendant of the Sole Stockholder, (ii) any estate of the Sole Stockholder
or any person under clause (i), (iii) any person who receives a beneficial
interest in the Company or Venetian from any estate under clause (ii) to the
extent of such interest, (iv) any executor, personal administrator or trustee
who holds such beneficial interest in the Company or Venetian for the benefit
of, or as fiduciary for, any person under clauses (i), (ii) or (iii) to the
extent of such interest, (v) any corporation, trust, or similar entity owned or
controlled by the Sole Stockholder or any person referred to in clause (i),
(ii), (iii) or (iv) or for the benefit of any person referred to in clause (i)
and (vi) the spouse or issue of one or more of the individuals described in
clause (i).
"Repurchase Offer" means an offer made by the Issuers to purchase all or
any portion of a holder's Mortgage Notes pursuant to the covenants described
above under the captions entitled "Repurchase at the Option of Holders--Change
of Control," "Repurchase at the Option of Holders--Asset Sales," or "Repurchase
at the Option of Holders--Event of Loss."
"Restricted Investment" means (i) an Investment other than a Permitted
Investment or (ii) any sale, conveyance, lease, transfer or other disposition
of assets at less than fair market value to an Unrestricted Subsidiary,
provided that the amount of such Restricted Investment under this clause (ii)
shall be such difference in value.
"Restricted Subsidiary" means, at any time, any direct or indirect
Subsidiary of the Issuers that is not then an Unrestricted Subsidiary or a
Special Subsidiary; provided, however, that upon the occurrence of any
Unrestricted Subsidiary or Special Subsidiary ceasing to be an Unrestricted
Subsidiary or Special Subsidiary, such Subsidiary shall be included in the
definition of "Restricted Subsidiary."
"Sale and Contribution Agreement" means that certain Sale and Contribution
Agreement among the Venetian, Mall Construction Subsidiary and Mall Subsidiary,
as such agreement may be amended, modified or renewed from time to time in
accordance with its terms.
"Senior Subordinated Notes" means the $97.5 million in aggregate principal
amount of the Issuers 14 1/4% Senior Subordinated Notes due 2005, and any series
of senior subordinated notes issued in exchange for such Senior Subordinated
Notes pursuant to the Exchange Offer contemplated by the Registration Rights
Agreement.
"Senior Subordinated Note Guarantors" means Phase II Intermediate
Holdings, Mall Intermediate Holdings, Mall Construction Subsidiary and all
future Restricted Subsidiaries of the Issuers.
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"Senior Subordinated Note Indenture" means that certain Indenture by and
among the Issuers, the Senior Subordinated Note Guarantors and the Senior
Subordinated Note Trustee, as amended or supplemented from time to time.
"Senior Subordinated Note Trustee" means First Union National Bank, in its
capacity as trustee.
"Services Agreement" means that Amended and Restated Services Agreement by
and among the Company, Interface, Interface Holdings and the parties stated on
the signature page thereto, as amended from time to time in accordance with its
terms.
"Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the
Issuance Date.
"Sole Stockholder" means Sheldon G. Adelson.
"Special Subsidiary" means the Mall Subsidiary, Mall Holdings, Mall
Manager and any other Subsidiary so designated by the Board of Directors of the
Company in accordance with the terms of the Mortgage Note Indenture.
"Special Subsidiary Permitted Investments" means with respect to any
Special Subsidiary (a) any Investments in a Wholly Owned Subsidiary of such
Special Subsidiary engaged in a Special Subsidiary Principal Business; (b) any
Investments in Cash Equivalents; (c) receivables owing to such Special
Subsidiary or any Wholly Owned Subsidiary of such Special Subsidiary if created
or acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Special Subsidiary deems
reasonable under the circumstances; (d) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (e) loans or advances to employees made in the ordinary
course of business of the Special Subsidiary; (f) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to Special Subsidiary or a Subsidiary or in satisfaction of
judgments and (g) other Investments in any Person (other than an Affiliate of
the Special Subsidiary) having a fair market value (measured on the date of
each such Investment was made and without giving effect to subsequent changes
in value), when taken together with all other investments made pursuant to this
clause (g) that are at the time outstanding, not to exceed $5.0 million.
"Special Subsidiary Principal Business" means business limited to the
following: (i) to acquire, hold, own, manage, market and operate a retail,
restaurant and entertainment complex known as the Grand Canal Shops Mall (the
"Property"), located at 3355 Las Vegas Boulevard, South, Las Vegas, Nevada,
(ii) to engage in the retail, restaurant and entertainment business at the
Property and any activity and business incidental, directly related or similar
thereto, and (iii) to engage in any business or activity that is a reasonable
extension, development or expansion thereof or ancillary thereto including any
retail, restaurant, entertainment or other activity or business designed to
promote, market, support, develop, construct or enhance the retail, restaurant
and entertainment business operated by the Mall Subsidiary (including, without
limitation, owning and operating joint ventures to supply materials or services
for the construction or operation of the Property, engaging in transactions
with Affiliates to the extent permitted under the Mortgage Note Indenture, and
incurring Indebtedness, providing guarantees or providing other credit
support). Special Subsidiary Principal Business does not mean any of the
foregoing to the extent engaged in on the Phase II Land.
"Special Subsidiary Restricted Investment" means (i) an Investment by a
Special Subsidiary or a Subsidiary of a Special Subsidiary other than a Special
Subsidiary Permitted Investment or (ii) any Investment by a Special Subsidiary
or a Subsidiary of a Special Subsidiary in the equity of the Issuers or any of
the Issuers' Restricted Subsidiaries.
"Specified FF&E" means any furniture, fixtures, equipment and other
personal property financed or refinanced with the proceeds from the incurrence
of Indebtedness pursuant to clauses (g), (h) or (p) of the covenant described
above under the caption "Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock," including (i) each and every item or unit of equipment
acquired with proceeds thereof, (ii) each and every item or unit of equipment
acquired in substitution or replacement thereof, (iii) all parts,
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components and other items pertaining to such collateral, (iv) all documents
(including without limitation all warehouse receipts, dock receipts, bills of
lading and the like), (v) all licenses (other than gaming licenses),
warranties, guaranties, service contracts and related rights and interests
covering all or any portion of such collateral, (vi) to the extent not
otherwise included, all proceeds (including insurance proceeds) of any of the
foregoing and all accessions to, substitutions and replacements for, and the
rents, profits and products of, each of the foregoing, and (vii) so long as
Indebtedness under the Bank Credit Facility is outstanding, such other
collateral reasonably determined by the lenders under the Bank Credit Facility
to be collateral for Indebtedness incurred in connection with the purchase of
Specified FF&E so long as the Lien securing Indebtedness incurred under the
Bank Credit Facility does not extend to such collateral.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Indebtedness" means any Indebtedness of the Issuers or any
of their Restricted Subsidiaries which is expressly by its terms subordinated
in right of payment to the Mortgage Notes or any Mortgage Note Guaranty.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof and (ii) any
partnership of which more than 50% of the partnership's capital accounts,
distribution rights or general or limited partnership interests are owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Substitute Tranche B Loan" means amounts drawn upon under the guarantee
of the Sole Stockholder of the Tranche B loan of the Mall Construction Loan
Facility, which amounts, when drawn upon may be treated as a subordinated loan
to the Issuers from the Sole Stockholder.
"Supplier Joint Venture" means any Person that supplies or provides
materials or services to the Issuers or the Construction Manager or any
contractor in the Project and in which the Issuers or one of their Restricted
Subsidiaries have Investments.
"Tax Amount" means, with respect to a Estimation Period or a taxable year,
as the case may be, an amount equal to (A) the product of (x) the taxable
income (including all separately stated items of income) of the Company or
Venetian, as the case may be, for such Estimation Period or a taxable year, as
the case may be, and (y) the Applicable Tax Percentage reduced by (B) to the
extent not previously taken into account, any income tax benefit attributable
to the Company or Venetian, as the case may be, which could be utilized
(without regard to the actual utilization) by its members or shareholders, as
the case may be, in the current or any prior taxable year, or portion thereof,
commencing on or after the Issuance Date (including any tax losses or tax
credits), computed at the Applicable Tax Percentage of the year that such
benefit is taken into account for purposes of this computation; provided,
however, that, the computation of Tax Amount shall also take into account (C)
the deductibility of state and local taxes for federal income tax purposes, and
(D) any difference in the Applicable Tax Percentage resulting from the nature
of taxable income (such as capital gain as opposed to ordinary income).
"Tax Amounts CPA" means a nationally recognized certified public
accounting firm.
"Tranche A Take-out Commitment" means the commitment of Goldman Sachs
Mortgage Company or such other lender suitable to the Issuers, to enter into
and make a loan in an aggregate of up to $105.0 million thereunder under the
Permitted Mall Construction Refinancing or any other commitment to make such a
loan that replaces the commitment of Goldman Sachs Mortgage Company in
accordance with the Tri-Party Agreement.
"Treadway Agreement" means that certain Time and Materials Agreement
between Owner and Contractor, dated as of February 10, 1997, by and between the
Company and Treadway Industries of
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Phoenix, Inc., an Arizona corporation, as amended, modified or revised from
time to time in accordance with its terms.
"Tranche B Take-out Commitment" means the commitment of the Sole
Stockholder to enter into and fund a loan to Mall Subsidiary in an aggregate of
up to $35.0 million under the Permitted Construction Loan Refinancing or any
other commitment to make such a loan that replaces the commitment of the Sole
Stockholder in accordance with the Tri-Party Agreement.
"Treasury Rate" means the yield to maturity at the time of the computation
of the United States Treasury securities with a constant maturity (as compiled
by and published in the most recent Federal Reserve Statistical Release
H.15(519), which has become publicly available at least two Business Days prior
to the date fixed for prepayment (or, if such Statistical Release is no longer
published, any publicly available source of similar market data) most nearly
equal to the then remaining average life to November 15, 2001; provided,
however, that if the average life of such Mortgage Note is not equal to the
constant maturity of the United States Treasury security for which weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the average life of such Mortgage Notes is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Tri-Party Agreement" means the agreement between Venetian, the Company,
the Sole Stockholder, the Mall Construction Subsidiary, the Mall Subsidiary,
the Mall Construction Lender and Goldman Sachs Mortgage Company (or any
successor provider of the Tranche A Take-out Commitment), as amended or
replaced from time to time in accordance with its terms.
"True-up Amount" means, in respect of a particular taxable year, an amount
determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year, without taking into account any adjustment to such
Permitted Quarterly Tax Distributions made with respect to any other taxable
year (including any adjustment to take into account a True-up Amount for the
immediately preceding taxable year) and (ii) the Tax Amount permitted to be
distributed in respect of such year as determined by reference to the Company's
Internal Revenue Service Form 1120-S or Venetian's IRS Form 1065 filed for such
year; provided, however, that if there is an audit or other adjustment with
respect to a return filed by the Company or Venetian (including a filing of an
amended return), upon a final determination or resolution of such audit or
other adjustment, the Tax Amounts CPA shall redetermine the True- up Amount for
the relevant taxable year. The amount equal to the excess, if any, of the
amount described in clause (i) above over the amount described in clause (ii)
above shall be referred to as the "True-up Amount due to the Company" or the
"True-up Amount due to Venetian," as the case may be, and the excess, if any,
of the amount described in clause (ii) over the amount described in clause (i)
shall be referred to as the "True-up Amount due to the shareholders or
members."
"True-up Determination Date" means the date on which the Tax Amounts CPA
delivers a statement to the Mortgage Note Trustee indication the True-up
Amount; provided, however, that the True-up Determination Date shall not be
later than 30 days after the occurrence of an event requiring the determination
of the True-up Amount (including, the filing of the federal and state tax
returns or the final determination or resolution of an audit or other
adjustment, as the case may be).
"Unrestricted Subsidiary" means (i) each of Phase II Holdings, Phase II
Manager and Phase II Subsidiary; and (ii) any entity that would have been a
Restricted Subsidiary of the Company but for its designation as an
"Unrestricted Subsidiary" in accordance with the provisions of the Mortgage
Note Indenture and any Subsidiary of such entity, so long as it remains an
Unrestricted Subsidiary in accordance with the terms of the Mortgage Note
Indenture.
"Venetian" means, Venetian Casino Resort, LLC, a Nevada limited liability
company.
"Voting Stock" means, with respect to any Person that is a corporation,
any class or series of capital stock of such Person that is ordinarily entitled
to vote in the election of directors thereof at a meeting of stockholders
called for such purpose, without the occurrence of any additional event or
contingency and with respect to any other Person that is a limited liability
company, membership interests entitled to manage the operations or business of
the limited liability company.
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"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the number
of years (calculated to the nearest one-twelfth) obtained by dividing (a) the
sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount or liquidation preference, as applicable, of such Indebtedness
or Disqualified Stock, as the case may be.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that
is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
"Working Capital Facility" means the credit facility pursuant to any
agreement or agreements providing for the making of loans or advances on a
revolving basis, the issuance of letters of credit and/or the creation of
bankers' acceptances to fund the Issuers' or any of their Restricted
Subsidiaries' general corporate requirements and any amendment, supplement,
extension, modification, renewal, replacement or refinancing from time to time,
including any agreement to renew, extend, refinance or replace all or any
portion of such facility.
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DESCRIPTION OF SENIOR SUBORDINATED NOTES
General
The Senior Subordinated Notes were issued pursuant to the Senior
Subordinated Note Indenture among the Issuers, the Senior Subordinated Note
Guarantors and First Union National Bank, as trustee (the "Senior Subordinated
Note Trustee"), in a private transaction that was not subject to the
registration requirements of the Securities Act. See "Notice to Investors." The
Senior Subordinated Notes are fully, unconditionally and jointly and severally
guaranteed (each a "Senior Subordinated Note Guaranty" and, together, the
"Senior Subordinated Note Guaranties"), by each existing Restricted Subsidiary
and any future Restricted Subsidiary of the Issuers (each, a "Senior
Subordinated Note Guarantor" and, together, the "Senior Subordinated Note
Guarantors"), with certain exceptions, pursuant to the terms of the Senior
Subordinated Note Indenture. The terms of the Senior Subordinated Notes include
those stated in the Senior Subordinated Note Indenture and those made part of
the Senior Subordinated Note Indenture by reference to the Trust Indenture Act.
The Senior Subordinated Notes are subject to all such terms, and holders of
Senior Subordinated Notes are referred to the Senior Subordinated Note
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Senior Subordinated Note Indenture
does not purport to be complete and is qualified in its entirety by reference
to the Senior Subordinated Note Indenture, including the definitions therein of
certain terms used below. A copy of the form of Senior Subordinated Note
Indenture is available from the Company as described under "Additional
Information." The definitions of certain terms used in the following summary
are set forth below under "--Certain Definitions." Capitalized terms that are
used but not otherwise defined in this Prospectus have the meanings assigned
them in the Senior Subordinated Note Indenture. A copy of the Senior
Subordinated Note Indenture has been filed with the Commission as an exhibit to
the Registration Statement. For purposes of this "Description of Senior
Subordinated Notes," the term "Issuers" refers only to the Issuers and not to
any of their respective Subsidiaries, the term the "Company" refers only to Las
Vegas Sands, Inc. and not to any of its Subsidiaries, and the term "Venetian"
refers only to Venetian Casino Resort, LLC and not to any of its Subsidiaries.
The Senior Subordinated Notes are general unsecured obligations of the
Issuers and are subordinated in right of payment to all existing and future
Senior Debt of the Issuers and are senior or pari passu in right of payment to
all existing and future subordinated indebtedness of the Issuers. The Senior
Subordinated Notes also are effectively subordinated to the Indebtedness of any
Subsidiaries of the Issuers that are not Senior Subordinated Note Guarantors.
See "--Subordination." Upon completion of the Casino Resort, the Issuers will
have $812.7 million of Senior Debt outstanding. In addition, under the Senior
Subordinated Note Indenture, the Issuers are permitted to incur additional
Senior Debt under certain circumstances. See "Description of Intercreditor
Agreement." The Mall Subsidiary (which is not a Senior Subordinated Note
Guarantor) may incur up to $140.0 million of Indebtedness under the Mall Take-
out Financings upon the transfer of the Mall Collateral to refinance the
Indebtedness under the Mall Construction Loan Facility. See "--Subordination"
and "--Certain Covenants--Limitations on Incurrence of Indebtedness."
Principal, Maturity and Interest
The Senior Subordinated Notes are joint and several secured obligations of
the Issuers, limited in aggregate principal amount to $97.5 million and will
mature on November 15, 2005. The Senior Subordinated Notes bear interest from
November 14, 1997 at the rate of 10.0% per annum on their principal amount at
maturity through and including November 15, 1999 and after such date until
maturity at a rate of 14 1/4% per annum on their principal amount at maturity.
Installments of interest will become due and payable semi-annually in arrears
on May 15 and November 15 of each year, commencing May 15, 1998, to the holders
of record at the close of business on the preceding May 1 or November 1. The
Senior Subordinated Notes were issued at a discount from their principal amount
at maturity (92.812% of the principal amount at maturity) and will accrue to
par by the second anniversary of the original date of issuance. Additionally,
installments of accrued and unpaid interest will become due and payable with
respect to any principal amount of the Senior Subordinated Notes that matures
(whether at stated maturity, upon acceleration, upon maturity of any repurchase
obligation or otherwise) upon such maturity of such principal amount of the
Senior Subordinated Notes. Interest on the Senior Subordinated Notes is
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computed on the basis of a 360-day year, consisting of twelve 30-day months.
Each installment of interest will be calculated to accrue from and including
the most recent date to which interest has been paid or provided for (or from
and including the Issuance Date if no installment of interest has been paid)
to, but not including, the date of payment.
Principal of, premium and Liquidated Damages, if any and interest on the
Senior Subordinated Notes are payable at the office or agency of the Issuers
maintained for such purpose within the City and State of New York or, at the
option of the Issuers, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the holders of the Senior Subordinated Notes at
their respective addresses set forth in the register of holders of Senior
Subordinated Notes; provided that all payments of principal, premium and
Liquidated Damages, if any and interest on the Senior Subordinated Notes the
holders of which have given wire transfer instructions to the Issuers are
required to be made by wire transfer of immediately available funds to the
accounts specified by the holders thereof. Until otherwise designated by the
Issuers, their office or agency in New York is the office of the Senior
Subordinated Note Trustee maintained for such purpose. The Senior Subordinated
Notes are issued in registered form, without coupons, and in denominations of
$1,000 and integral multiples thereof.
Subordination
The payment of principal of, premium, if any, and interest on the Senior
Subordinated Notes is subordinated in right of payment, as set forth in the
Senior Subordinated Note Indenture, to the prior payment in full of all Senior
Debt, whether outstanding on the date of the Senior Subordinated Note Indenture
or thereafter incurred.
Upon any distribution to creditors of the Company or Venetian in a
liquidation or dissolution of the Company or Venetian in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or Venetian or either of their property, an assignment for the benefit
of creditors or any marshalling of the Company's or Venetian's assets and
liabilities, the holders of Senior Debt will be entitled to receive payment in
full of all Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt, whether or not allowed) before the Holders of Senior
Subordinated Notes will be entitled to receive any payment with respect to the
Senior Subordinated Notes, and until all Obligations with respect to Senior
Debt are paid in full, any distribution to which the Holders of Senior
Subordinated Notes would be entitled shall be made to the holders of Senior
Debt (except that Holders of Senior Subordinated Notes may receive Permitted
Junior Securities and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance").
The Issuers also may not make any payment upon or in respect of the Senior
Subordinated Notes (except in Permitted Junior Securities or from the trust
described under "--Legal Defeasance and Covenant Defeasance") if (i) a default
in the payment of the principal of, premium, if any, or interest on Designated
Senior Debt occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Senior Subordinated Note
Trustee receives a notice of such default (a "Payment Blockage Notice") from
the Company or the holders of any Designated Senior Debt. Payments on the
Senior Subordinated Notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated. No new period of payment blockage may be
commenced unless and until (i) 360 days have elapsed since the effectiveness of
the immediately prior Payment Blockage Notice and (ii) all scheduled payments
of principal, premium, if any, and interest on the Senior Subordinated Notes
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Senior Subordinated Note Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default shall have been
waived for a period of not less than 180 days.
The Senior Subordinated Note Indenture further requires that the Issuers
promptly notify holders of Senior Debt if payment of the Senior Subordinated
Notes is accelerated because of an Event of Default.
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As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Senior Subordinated Notes may
recover less ratably than creditors of the Issuers who are holders of Senior
Debt. See "Risk Factors--Ranking of Senior Subordinated Notes; Subordination to
Senior Debt; Limitations on Remedies."
Mandatory Redemption
The Issuers are not required to make mandatory redemptions or sinking fund
payments prior to maturity with respect to the Senior Subordinated Notes.
Optional Redemption
Except as described below, the Senior Subordinated Notes are not
redeemable at the option of the Issuers prior to November 15, 2001. On or after
November 15, 2001, the Senior Subordinated Notes will be subject to redemption
at the option of the Issuers, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages
of principal amount) set forth below, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on November 15 of the years
indicated below:
Percentage
of Principal
Year Amount
- ---- ------
2001 ............................ 107.125%
2002 ............................ 103.563%
2003 (and thereafter) ........... 100.000%
Notwithstanding the foregoing, on or prior to November 15, 2000, the
Issuers may on any one or more occasions redeem up to 100% of the aggregate
principal amount of Senior Subordinated Notes originally issued at a redemption
price equal to (i) 114.25% of the Accreted Value of the Senior Subordinated
Notes so redeemed (determined at the date of redemption) if prior to the second
anniversary of the issuance date or (ii) 114.25% of the principal amount
thereof if on or after the second anniversary of the issuance date, in each
case, plus accrued and unpaid interest and Liquidated Damages, if any, thereon,
to the redemption date, with the proceeds of one or more Public Equity
Offerings; provided that such redemption shall occur within 60 days of the date
of such Public Equity Offering.
In addition, at any time prior to November 15, 2001, the Issuers may, at
their option, redeem the Senior Subordinated Notes, in whole or in part, at a
redemption price equal to (i) 100% of the Accreted Value of the Senior
Subordinated Notes so redeemed (determined at the date of redemption) if prior
to the second anniversary of the issuance date or (ii) 100% of the principal
amount of the Senior Subordinated Notes so redeemed if on or after the second
anniversary of the issuance date, in each case, plus the Senior Subordinated
Note Make-Whole Premium, plus, to the extent not included in the Senior
Subordinated Note Make-Whole Premium, accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption. For purposes of the
foregoing, "Senior Subordinated Note Make-Whole Premium" means, with respect to
a Senior Subordinated Note, an amount equal to the greater of (i) (a) 14.25% of
the Accreted Value if prior to the second anniversary of the Issuance Date of
such Senior Subordinated Note or (b) 14.25% of the outstanding principal amount
if on or after the second anniversary of the Issuance Date of such Senior
Subordinated Note and (ii) the excess of (a) the present value of the remaining
interest, premium and principal payments due on such Senior Subordinated Note
as if such Senior Subordinated Note were redeemed on November 15, 2001,
computed using a discount rate equal to the Treasury Rate plus 50 basis points,
over (b) the outstanding principal amount of such Senior Subordinated Note.
Notwithstanding any other provision hereof, if any Gaming Authority
requires that a holder or beneficial owner of the Senior Subordinated Notes
must be licensed, qualified or found suitable under any applicable gaming laws
in order to maintain any gaming license or franchise of the Company or any
Restricted Subsidiary under any applicable gaming laws, and the holder or
beneficial owner fails to apply for a license, qualification or finding of
suitability within 30 days after being requested to do so by the Gaming
Authority (or such lesser period that may be required by such Gaming Authority)
or if such holder
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or beneficial owner is not so licensed, qualified or found suitable, the
Issuers shall have the right, at their option, (i) to require such holder or
beneficial owner to dispose of such holder's or beneficial owner's Senior
Subordinated Notes within 30 days of receipt of such finding by the applicable
Gaming Authority (or such earlier date as may be required by the applicable
Gaming Authority) or (ii) to call for redemption of the Senior Subordinated
Notes of such holder or beneficial owner at a redemption price equal to the
lesser of the principal amount thereof or the price at which such holder or
beneficial owner acquired the Senior Subordinated Notes, together with, in
either case, accrued and unpaid interest and Liquidated Damages, if any, to the
earlier of the date of redemption or, the date of the finding of unsuitability
by such Gaming Authority, which may be less than 30 days following the notice
of redemption if so ordered by such Gaming Authority. In connection with any
such redemption, and except as may be required by a Gaming Authority, the
Issuers shall comply with the procedures contained in the Senior Subordinated
Notes for redemptions of the Senior Subordinated Notes. Under the Senior
Subordinated Note Indenture, the Issuers are not required to pay or reimburse
any holder of the Senior Subordinated Notes or beneficial owner who is required
to apply for such license, qualification or finding of suitability for the
costs of the licensure or investigation for such qualification or finding of
suitability. Such expenses will, therefore, be the obligation of such holder or
beneficial owner. See "Regulation and Licensing."
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control and subsequent to the
consummation of any required repurchase of the Mortgage Notes pursuant to a
Change of Control Offer under the terms of the Mortgage Note Indenture, the
Issuers will make an offer to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of the Senior Subordinated Notes pursuant to the
offer described below (the "Change of Control Offer") at a price in cash (the
"Change of Control Payment") equal to (i) 101% of the Accreted Value
(determined at the date of redemption) if prior to the second anniversary of
the issuance date or (ii) 101% of the aggregate principal amount thereof, in
each case, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of repurchase. Within 30 days following any Change of Control, the
Issuers will mail a notice to each holder stating the following: (1) a Change
of Control is being made pursuant to the covenant entitled "Change of Control,"
and all Senior Subordinated Notes properly tendered pursuant to such Change of
Control Offer will be accepted for payment; (2) the purchase price and the
purchase date, which will be no earlier than 30 days nor later than 60 days
from the date such notice is mailed, except as may be otherwise required by
applicable law (the "Change of Control Payment Date"); (3) any Senior
Subordinated Note not properly tendered will remain outstanding and continue to
accrue interest; (4) unless the Issuers default in the payment of the Change of
Control Payment, all Senior Subordinated Notes accepted for payment pursuant to
the Change of Control Offer will cease to accrue interest and Liquidated
Damages, if any, after the Change of Control Payment Date; (5) holders electing
to have any Senior Subordinated Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Senior Subordinated Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior
Subordinated Notes completed, to the paying agent (which may be the Company or
Venetian) specified in the notice at the address specified in the notice prior
to the close of business on the third Business Day preceding the Change of
Control Payment Date; (6) holders will be entitled to withdraw their tendered
Senior Subordinated Notes and their election to require the Issuers to purchase
the Senior Subordinated Notes, provided, that the paying agent receives, not
later than the close of business on the last day of the Offer Period (as
defined in the Senior Subordinated Note Indenture), a telegram, telex,
facsimile transmission or letter setting forth the name of the holder, the
principal amount of Senior Subordinated Notes tendered for purchase, and a
statement that such holder is withdrawing his tendered Senior Subordinated
Notes and his election to have such Senior Subordinated Notes purchased; and
(7) that holders whose Senior Subordinated Notes are being purchased only in
part will be issued new Senior Subordinated Notes equal in principal amount to
the unpurchased portion of the Senior Subordinated Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the
repurchase of the Senior Subordinated Notes pursuant to a Change of Control
Offer.
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On the Change of Control Payment Date, the Issuers will, to the extent
permitted by law, (1) accept for payment all Senior Subordinated Notes or
portions thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the paying agent an amount equal to the aggregate Change of
Control Payment in respect of all Senior Subordinated Notes or portions thereof
so tendered and (3) deliver, or cause to be delivered, to the Senior
Subordinated Note Trustee for cancellation the Senior Subordinated Notes so
accepted together with an Officers' Certificate stating that such Senior
Subordinated Notes or portions thereof have been tendered to and purchased by
the Issuers. The paying agent will promptly mail to each holder of Senior
Subordinated Notes the Change of Control Payment for such Senior Subordinated
Notes, and the Senior Subordinated Note Trustee will promptly authenticate and
mail to each holder a new Senior Subordinated Note equal in principal amount to
any unpurchased portion of the Senior Subordinated Notes surrendered, if any,
provided, that each such new Senior Subordinated Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The existence of a holder's right to require the Issuers to repurchase
such holder's Senior Subordinated Notes upon the occurrence of a Change of
Control may deter a third party from seeking to acquire either of the Issuers
in a transaction that would constitute a Change of Control.
The source of funds for any repurchase of Senior Subordinated Notes upon a
Change of Control will be cash generated from operations or other sources,
including borrowings, sales of assets or sales of Capital Stock. However, there
can be no assurance that sufficient funds will be available at the time of any
Change of Control to make any required repurchases. Any failure by the Issuers
to repurchase Senior Subordinated Notes tendered pursuant to a Change of
Control Offer will be deemed an Event of Default.
The Bank Credit Facility, the Mall Construction Loan Facility and the
Mortgage Note Indenture contain, and future agreements relating to the Issuers'
Senior Debt may contain, restrictions or prohibitions on the Issuers' ability
to repurchase the Senior Subordinated Notes. In the event that a Change of
Control occurs at a time when the Issuers are prohibited from repurchasing the
Senior Subordinated Notes, the Issuers could seek the consent of their lenders
to purchase the Senior Subordinated Notes or could attempt to refinance the
borrowings that contain such prohibition or restriction. If the Issuers do not
obtain such consent or refinance such Indebtedness, they will remain prohibited
or restricted from repurchasing the Senior Subordinated Notes. In such case,
the Issuers' failure to repurchase the Senior Subordinated Notes tendered in
the Change of Control Offer would constitute an Event of Default under the
Senior Subordinated Note Indenture which would in turn constitute an event of
default under the agreements governing the Issuers of the Senior Debt. In such
circumstances, the subordination provisions of the Senior Subordinated Note
Indenture would likely restrict payment to the holders of Senior Subordinated
Notes. See "--Subordination" and "Description of Other Indebtedness."
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Issuers and their Subsidiaries, taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precisely established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Senior
Subordinated Notes to require the Issuers to repurchase such Senior
Subordinated Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of the Issuers and their
Subsidiaries taken as a whole to another Person or group may be uncertain.
Asset Sales
The Senior Subordinated Note Indenture provides that the Issuers will not,
and will not permit any of their Restricted Subsidiaries to consummate an Asset
Sale, unless (w) no Default or Event of Default exists or is continuing
immediately prior to or after giving effect to such Asset Sale, (x) the Issuers
or their Restricted Subsidiaries, as the case may be, receive consideration at
the time of such Asset Sale at least equal to the fair market value (as
determined by the Board of Directors and set forth in an Officers' Certificate
delivered to the Senior Subordinated Note Trustee) of the assets sold or
otherwise disposed of and (y) at least 85% of the consideration therefor
received by either of the Issuers or any Restricted Subsidiary, as the case may
be, is in the form of cash or Cash Equivalents; provided, however, that the
amount of (A) any liabilities (as shown on such Issuer's or such Restricted
Subsidiary's, as the case may
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be, most recent balance sheet or in the notes thereto) of the Issuers or any
Restricted Subsidiary, as the case may be (other than liabilities that are by
their terms expressly subordinated to the Senior Subordinated Notes or any
Senior Subordinated Note Guaranty, which may be assumed only if such
liabilities are deemed to be Restricted Payments in the case of the Issuer or
any Restricted Subsidiary), that are assumed by the transferee of any such
assets and (B) any notes, securities or other obligations received by the
Company or any Restricted Subsidiary, as the case may be, from such transferee
that are converted by the Issuers or such Restricted Subsidiary, as the case
may be, into cash (to the extent of the cash received) within 20 Business Days
following the closing of such Asset Sale, shall be deemed to be cash only for
purposes of satisfying clause (y) of this paragraph and for no other purpose.
Within the later of (i) 180 days after any Issuer's or any Restricted
Subsidiary's receipt of the Net Proceeds of any Asset Sale and (ii) if
applicable, the consummation of any required repurchase of the Mortgage Notes
pursuant to an Asset Sale Offer under the terms of the Mortgage Note Indenture,
(the "Reinvestment Period"), such Issuer or such Restricted Subsidiary may
apply the Net Proceeds from such Asset Sale (i) to permanently reduce Senior
Debt (including by way of an Asset Offer pursuant to the Mortgage Note
Indenture) or other Indebtedness that is not Subordinated Indebtedness, (ii) in
an investment in any one or more business, capital expenditure or other
tangible asset of the Issuers or any Restricted Subsidiary, in each case,
engaged, used or useful in the Principal Business, or (iii) for working capital
purposes in an amount not to exceed $20.0 million, in each case, with no
concurrent obligation to make an offer to purchase any Senior Subordinated
Notes. Pending the final application of any such Net Proceeds, such Issuer or
such Restricted Subsidiary may temporarily reduce Senior Debt, if any, or
otherwise invest such Net Proceeds in Cash Equivalents. Any Net Proceeds from
the Asset Sale that are not invested or used to repay Indebtedness or as
working capital (including by way of an Asset Sale Offer under the terms of the
Mortgage Note Indenture) within the Reinvestment Period (including by way of an
Asset Sale Offer under the terms of the Mortgage Note Indenture) as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Issuers shall, subject to any repayment obligations owed to the lenders
under the Bank Credit Facility and the Mall Construction Lender as well as the
holders of the Mortgage Notes, make an offer to all holders of Senior
Subordinated Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Senior Subordinated Notes, that is an integral multiple of $1,000,
that may be purchased out of the Excess Proceeds at an offer price in cash in
an amount equal to (i) 101% of the Accreted Value (determined at the date of
the redemption) if prior to the second anniversary of the issuance date or (ii)
101% of the aggregate principal amount thereof if on or after the second
anniversary of the issuance date, in each case, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the Senior
Subordinated Note Indenture. The Issuers will commence an Asset Sale Offer with
respect to Excess Proceeds within 30 days after the date that Excess Proceeds
exceeds $10.0 million by mailing the notice required pursuant to the terms of
the Senior Subordinated Note Indenture. To the extent that the aggregate amount
of Senior Subordinated Notes tendered pursuant to an Asset Sale Offer is less
than the applicable Excess Proceeds, the Issuers may use any remaining Excess
Proceeds for general corporate purposes or to offer to redeem Senior
Subordinated Notes pursuant to the provisions of the Senior Subordinated Note
Indenture described below under the caption "Description of Senior Subordinated
Notes--Repurchase at the Option of the Holders--Asset Sales." If the aggregate
principal amount of Senior Subordinated Notes surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Senior Subordinated Note Trustee
shall select the Senior Subordinated Notes to be purchased in the manner
described under the caption "Selection and Notice" below. Upon completion of
any such Asset Sale Offer, the amount of Excess Proceeds shall be deemed reset
at zero.
Selection and Notice
If less than all of the Senior Subordinated Notes are to be purchased in
an Asset Sale Offer or redeemed at any time, selection of Senior Subordinated
Notes for purchase or redemption will be made by the Senior Subordinated Note
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Senior Subordinated Notes are listed,
or, if the Senior Subordinated Notes are not so listed, on a pro rata basis, by
lot or by such other method as the Senior Subordinated Note Trustee shall deem
fair and appropriate (and in such manner as complies with
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applicable legal requirements); provided, that no Senior Subordinated Notes of
$1,000 or less shall be purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each holder of Senior Subordinated Notes to be purchased or
redeemed at such holder's registered address. Notices of redemption may not be
conditional. If any Senior Subordinated Note is to be purchased or redeemed in
part only, any notice of purchase or redemption that relates to such Senior
Subordinated Note shall state the portion of the principal amount thereof that
has been or is to be purchased or redeemed.
A new Senior Subordinated Note in principal amount equal to the
unpurchased or unredeemed portion of any Senior Subordinated Note purchased or
redeemed in part will be issued in the name of the holder thereof upon
cancellation of the original Senior Subordinated Note. Senior Subordinated
Notes called for redemption become due on the date fixed for redemption. On and
after the purchase or redemption date (unless the Issuers default in payment of
the purchase or redemption price), interest and Liquidated Damages, if any,
shall cease to accrue on Senior Subordinated Notes or portions thereof
purchased or called for redemption.
Certain Covenants
Gaming Licenses
The Senior Subordinated Note Indenture provides that the Issuers will use
their best efforts to obtain and retain in full force and effect at all times
all Gaming Licenses necessary for the operation of the Project.
Restricted Payments
The Senior Subordinated Note Indenture provides that the Issuers will not,
and will not permit any of their Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any distribution on account
of either of the Issuers' or any of their Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving either of the Issuers) or to the direct or
indirect holders of either of the Issuers' Equity Interests in their capacity
as such (other than (1) dividends or distributions by the Issuers payable in
Equity Interests (other than Disqualified Stock) of the Issuers (or accretions
thereon); or (2) dividends or distributions paid to the Issuers or a Wholly
Owned Restricted Subsidiary of the Issuers); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving either of the Issuers) any Equity
Interests of the Issuers or any of its Restricted Subsidiaries, or any other
Affiliate of the Issuers (other than any such Equity Interests owned by the
Issuers or any Wholly Owned Restricted Subsidiary of the Issuers); (iii) make
any payment on or with respect to or purchase, redeem, defease or otherwise
acquire or retire for value any Subordinated Indebtedness of the Issuers or any
of their Restricted Subsidiaries (other than, in each case, scheduled interest
and principal payments with respect to any such Subordinated Indebtedness);
(iv) make any payment in respect of repayment or reimbursement of amounts
advanced under any obligation under the Completion Guaranty; or (v) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (v) above being collectively referred to as "Restricted Payments"),
unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Issuers would, after giving pro forma effect to such Restricted
Payment as if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of the description of
the covenant described under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuers and their Restricted Subsidiaries
after the Issuance Date (excluding Restricted Payments permitted by clauses
(ii), (iii), (v), (vi), (vii), (viii), (ix) (but only to the extent necessary
under
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clause (ix) to pay the fees and expenses of any lenders or agents under the
Tranche A Take-out Commitment), (x), (xiii), (xiv), (xv) and (xvii) of the next
succeeding paragraph and including the other Restricted Payments permitted by
the next paragraph), is less than the sum of (X) 50% of (1) the Consolidated
Net Income of the Company for the period (taken as one accounting period) from
the first day after the Project is Completed to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available (or, in the case such Consolidated Net Income for such period is a
deficit, minus 100% of such deficit) less (2) the amount paid or to be paid in
respect of such period pursuant to clause (v) of the next following paragraph
to shareholders or members other than the Issuers, plus (Y) without
duplication, 100% of the aggregate net cash proceeds received by the Issuers
since the Issuance Date from capital contributions or the issue or sale of
Equity Interests (other than Disqualified Stock) or debt securities of the
Issuers that have been converted into or exchanged for such Equity Interests of
the Issuers (other than Equity Interests or such debt securities of the Issuers
sold to a Restricted Subsidiary of the Issuers and other than Disqualified
Stock or debt securities that have been converted into or exchanged for
Disqualified Stock), plus (Z) to the extent not otherwise included in the
Company's Consolidated Net Income, 100% of the cash dividends or distributions
or the amount of the cash principal and interest payments received since the
Issuance Date by the Issuers or any Restricted Subsidiary from any Unrestricted
Subsidiary or Special Subsidiary or in respect of any Restricted Investment
(other than dividends or distributions to pay obligations of or with respect to
such Unrestricted Subsidiary or Special Subsidiary such as income taxes) until
the entire amount of the Investment in such Unrestricted Subsidiary or Special
Subsidiary has been received or the entire amount of such Restricted Investment
has been returned, as the case may be, and 50% of such amounts thereafter. In
the event that the Issuers convert an Unrestricted Subsidiary or Special
Subsidiary to a Restricted Subsidiary, the Issuers may add back to this clause
(c) the aggregate amount of any Investment in such Subsidiary that was a
Restricted Payment at the time of such Investment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at the date of
declaration such payment would have complied with the provisions of the Senior
Subordinated Note Indenture; (ii) (a) an Investment in Phase II Subsidiary,
Phase II Manager, Phase II Direct Holdings or any Special Subsidiary or (b) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Issuers or any Restricted Subsidiary, in each case, in exchange for, or
out of the proceeds of, the substantially concurrent sale or issuance (other
than to a Restricted Subsidiary of the Issuers) of Equity Interests of the
Issuers (other than any Disqualified Stock); provided that the amount of any
net cash proceeds from the sale of such Equity Interests shall be excluded from
clause (c)(Y) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase, retirement or other acquisition of any Subordinated Indebtedness of
the Issuers or any Restricted Subsidiary in exchange for, or out of the
proceeds of, the substantially concurrent sale or issuance (other than to a
Restricted Subsidiary of the Issuers) of Subordinated Indebtedness (other than
any Subordinated Indebtedness issued in respect of the Completion Guaranty) of
the Issuers or such Restricted Subsidiary or Equity Interests of the Issuers
(other than Disqualified Stock); provided, however, that (1) the principal
amount of such Subordinated Indebtedness incurred pursuant to this clause (iii)
shall not exceed the principal amount of the Subordinated Indebtedness so
redeemed, repurchased, retired or otherwise acquired (plus the amount of
reasonable expenses incurred and any premium paid in connection therewith), (2)
such Subordinated Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Subordinated Indebtedness being redeemed, repurchased, retired or otherwise
acquired, (3) such Subordinated Indebtedness is pari passu with or subordinate
in right of payment to the Senior Subordinated Notes and any Senior
Subordinated Note Guaranty on terms at least as favorable to the holders of the
Senior Subordinated Notes or the Senior Subordinated Note Guaranties as those
contained in the documentation governing the Subordinated Indebtedness being
redeemed, repurchased, retired or otherwise acquired and (4) the net cash
proceeds from the sale of any Equity Interests issued pursuant to this clause
(iii) shall be excluded from clause (c)(Y) of the preceding paragraph; (iv) any
redemption or purchase by the Issuers or any Restricted Subsidiary of Equity
Interests or Subordinated Indebtedness of either of the Issuers required by a
Gaming Authority in order to preserve a material Gaming License; provided, that
so long as such efforts do not jeopardize any material Gaming License, the
Issuers or such Restricted Subsidiary shall have diligently tried to find a
third-party purchaser for such Equity Interests or Subordinated Indebtedness
and no third-party purchaser acceptable to the
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applicable Gaming Authority was willing to purchase such Equity Interests or
Subordinated Indebtedness within a time period acceptable to such Gaming
Authority; (v) (a) for so long as the Company is a corporation under Subchapter
S of the Code or a substantially similarly treated pass-through entity or
Venetian is a limited liability company that is treated as a partnership or a
substantially similarly treated pass-through entity, in each case, for Federal
income tax purposes (as evidenced by an opinion of counsel at least annually),
the Issuers may each make cash distributions to their shareholders or members,
during each Quarterly Payment Period, in an aggregate amount not to exceed the
Permitted Quarterly Tax Distribution in respect of the related Estimation
Period, and if any portion of the Permitted Quarterly Tax Distribution is not
distributed during such Quarterly Payment Period, the Permitted Quarterly Tax
Distribution payable during the immediately following four quarter period shall
be increased by such undistributed portion and (b) distributions by non-Wholly
Owned Subsidiaries of either of the Issuers or any Restricted Subsidiary of the
Issuers but only to the extent required to pay any tax liability of such non-
Wholly Owned Subsidiary; (vi) the transfer of the Mall Collateral to the Mall
Subsidiary in accordance with the Sale and Contribution Agreement and the
Disbursement Agreement and the transfer of 1% managing members interests in
Mall Subsidiary and Mall Holdings to Mall Manager; (vii) the transfer of the
Phase II Land to the Phase II Subsidiary and the transfer of 1% managing
members interests in Phase II Subsidiary and Phase II Holdings to Phase II
Manager; (viii) Investments by the Issuers in Supplier Joint Ventures in an
amount not to exceed $10.0 million in the aggregate; (ix) Investments in any
Special Subsidiary in an amount not to exceed $2.0 million in the aggregate
(plus amounts necessary to fund the fees and expenses of the lenders or agents
under the Tranche A Take-out Commitment), excluding for purposes of this clause
(ix) the value of any Restricted Payments under clauses (ii), (vii) or (xiv);
(x) intercompany payments, including without limitation, debt repayments,
between or among the Issuers and their Wholly Owned Restricted Subsidiaries;
(xi) the repurchase of shares of, or options to purchase, common stock of
either of the Issuers from employees, former employees, directors or former
directors of either of the Issuers (or permitted transferees of such
individuals), pursuant to the terms of the agreements (including employment
agreements) or plans (or amendments thereto), in each case, as in effect on the
date of the Mortgage Note Indenture and as approved by the board of directors
of the Company under which such individuals purchase or sell, or are granted
the option to purchase or sell, shares of such common stock ("Employee Stock
Buybacks"); (xii) following an initial Public Equity Offering, dividends or
common stock buybacks in an aggregate amount in any calendar year not to exceed
6% of the aggregate Net Proceeds received by either of the Issuers in
connection with such initial Public Equity Offering and any subsequent Public
Equity Offering; (xiii) repurchases of Capital Stock of either of the Issuers
deemed to occur upon exercise of stock options if such Capital Stock represents
a portion of the exercise price of such options; (xiv) cash contributions to a
Special Subsidiary which are funded through a contribution (that does not
constitute Disqualified Stock) by the Sole Stockholder or any of his Affiliates
to either of the Issuers and any related Investment in any Special Subsidiary
by either of the Issuers or any Restricted Subsidiary; provided that the amount
of such contributions shall be excluded from clause (c)(Y) of the proceeding
paragraph; (xv) contributions of cash, real property or other property to the
Phase II Subsidiary, Phase II Holdings or Phase II Manager by the Sole
Stockholder or any of his Affiliates through a contribution to either of the
Issuers and any related Investment in the Phase II Subsidiary, Phase II
Holdings or Phase II Manager by either of the Issuers or any Restricted
Subsidiary; provided that the amount of such contributions shall be excluded
from clause (c)(Y) of the proceeding paragraph; (xvi) the repayment of all or a
portion of the Completion Guaranty Loan with Available Funds to the extent
permitted by the terms of the Disbursement Agreement and the Completion
Guaranty or, after Completion, with funds received by the Company as a result
of judgments or settlements of claims under the Project Documents (including
insurance policies and the Construction Management Contract); (xvii) on the
Final Completion Date (as defined in the Disbursement Agreement), payments on
the Completion Guaranty Loan from amounts which are returned to the Mall
Construction Subsidiary from funds in the Mall Retainage/Punchlist Account (as
defined in the Disbursement Agreement) in accordance with the Mall Escrow
Agreement (as defined in the Disbursement Agreement); provided that such
payments shall not be greater than all amounts previously deposited into the
Mall Retainage/Punchlist Account from the Guaranty Deposit Account (as defined
in the Disbursement Agreement); and (xviii) the repayment of the Substitute
Tranche B Loan with the process of the Permitted Construction Loan Refinancing
or the assumption of the Substitute Tranche B Loan by the Mall Subsidiary;
provided, that at the time of, and after giving effect to,
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any Restricted Payment permitted under clauses (ii) (b) (to the extent that any
Equity Interests are redeemed, retired or acquired from the cash proceeds from
the sale or issuance of Equity Interests), (iii) (to the extent that any
Subordinated Indebtedness is defeased, redeemed, retired, repurchased or
otherwise acquired from the cash proceeds from the sale or issuance of other
Subordinated Indebtedness or Equity Interests), (viii), (ix), (xii), and (xvi),
no Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof.
For purposes of determining the amount of Restricted Investments
outstanding at any time, all Restricted Investments will be valued at their
fair market value at the time made (as determined in good faith by the
Company's Board of Directors), and no adjustments will be made for subsequent
changes in fair market value.
Special Subsidiary Restricted Payments
The Senior Subordinated Note Indenture provides that a Special Subsidiary
will not and will not permit any of its Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any distribution on account
of its Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving such Special Subsidiary
or its Subsidiaries) (other than (1) dividends or distributions paid or made
pro rata to all holders of Equity Interests of such Special Subsidiary or its
Subsidiaries; (2) dividends or distributions by such Special Subsidiary payable
in Equity Interests (other than Disqualified Stock) of such Special Subsidiary
(or accretions thereon); or (3) dividends or distributions paid to such Special
Subsidiary or a Wholly Owned Subsidiary of such Special Subsidiary by a
Subsidiary of such Special Subsidiary); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving any Special Subsidiary or its
Subsidiaries) any Equity Interests of any Special Subsidiary or any Subsidiary
of any Special Subsidiary; or (iii) make any Special Subsidiary Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iii) above being collectively referred to as "Special Subsidiary
Restricted Payments").
The foregoing provisions do not prohibit (i) the redemption, repurchase,
retirement or other acquisition of any Equity Interests of any Special
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale or issuance (other than to the Issuers or any Restricted
Subsidiary of the Issuers) of Equity Interests of such Special Subsidiary and
(ii) the payment to or declaration or payment of any distribution or dividend
to the Issuers and any of their Restricted Subsidiaries or the redemption,
repurchase, retirement or other acquisition of any Equity Interests of any
Special Subsidiary held by the Issuers or any Wholly Owned Restricted
Subsidiary.
For purposes of determining the amount of Special Subsidiary Restricted
Investments outstanding at any time, all Special Subsidiary Restricted
Investments will be valued at their fair market value at the time made (as
determined in good faith by the Company's Board of Directors), and no
adjustments will be made for subsequent changes in fair market value.
In addition, after the transfer of the Mall Collateral to the Mall
Subsidiary, the assets comprising the Mall Collateral may not be sold, leased
or transferred to an Affiliate of the Issuers other than an Issuer, any
Restricted Subsidiary or any Special Subsidiary that is a subsidiary of Mall
Intermediate Holdings and in which the Sole Stockholder does not own any Equity
Interests directly or indirectly, except through the Issuers.
Designation of Unrestricted Subsidiary
The Senior Subordinated Note Indenture provides that the Board of
Directors of the Company may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary; provided, that: (i) at the time of designation, the
Investment by either of the Issuers and any of their Restricted Subsidiaries in
such Subsidiary (other than Permitted Investments) shall be deemed a Restricted
Investment (to the extent not previously included as a Restricted Investment)
made on the date of such designation in the amount of the fair market value of
such Investment as determined in good faith by the Board of Directors and, in
the case of Investments in excess of $5.0 million, supported by a fairness
opinion issued by an accounting, appraisal or investment banking firm of
national standing; (ii) since the Issuance Date, such Unrestricted
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Subsidiary has not acquired any assets from either of the Issuers or any
Restricted Subsidiary other than as permitted by the provisions of the Senior
Subordinated Note Indenture, including the provisions described under the
covenants entitled "Restricted Payments" and "Repurchase at the Option of
Holders--Asset Sales"; (iii) at the time of designation, no Default or Event of
Default has occurred and is continuing or results immediately after such
designation or as a result of any Restricted Investment made in such Subsidiary
at the time of such designation; (iv) at the time of designation, such
Subsidiary has no Indebtedness other than Non-Recourse Indebtedness of such
Subsidiary; (v) such Subsidiary does not own any Equity Interests in a
Restricted Subsidiary; and (vi) such Subsidiary does not own or operate or
possess any material license, franchise or right used in connection with the
ownership or operation of any part of the Project Assets of the Project or any
material portion of the Project Assets of the Project.
A Subsidiary shall cease to be an Unrestricted Subsidiary and shall become
a Restricted Subsidiary if either (i) at any time while it is a Subsidiary of
the Company (1) such Subsidiary acquires any assets from the Company or any
Restricted Subsidiary other than as permitted by the provisions of the Senior
Subordinated Note Indenture, including the provisions described under the
covenants entitled "Restricted Payments" and "Repurchase at the Option of
Holders--Asset Sales"; (2) such Subsidiary has any Indebtedness other than
Non-Recourse Indebtedness of such Subsidiary; (3) such Subsidiary owns any
Equity Interests in a Restricted Subsidiary of the Company; or (4) such
Subsidiary owns or operates or possesses any material license, franchise or
right used in connection with the ownership or operation of any part of the
Project Assets of the Project or (ii) the Board of Directors of the Company
designates such Unrestricted Subsidiary to be a Restricted Subsidiary and no
Default or Event of Default occurs or is continuing immediately after such
designation.
As of the Issuance Date, each of Phase II Subsidiary, Phase II Manager and
Phase II Holdings was designated an Unrestriced Subsidiary. Any future
designation by the Board of Directors of the Company shall be evidenced to the
Senior Subordinated Note Trustee by filing with the Senior Subordinated Note
Trustee a certified copy of the resolutions of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
As of the Issuance Date, the Issuers had no Unrestricted Subsidiaries
other than Phase II Subsidiary, Phase II Holdings and Phase II Manager. Under
certain circumstances, as described above, the Company is able to designate
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries are
not subject to any of the restrictive covenants set forth in the Senior
Subordinated Note Indenture and will not be Senior Subordinated Note
Guarantors.
In addition, after the transfer of the Phase II Land to the Phase II
Subsidiary, the Phase II Land may not be sold, leased or transferred to an
Affiliate of the Issuers other than an Issuer, any Restricted Subsidiary or any
Unrestricted Subsidiary that is a subsidiary of Phase II Intermediate Holdings
and in which Person the Sole Stockholder does not own any Equity Interests,
directly or indirectly, except through the Issuers.
Designation of Special Subsidiary
The Senior Subordinated Note Indenture provides that the Board of
Directors of the Company may designate any Restricted Subsidiary to be a
Special Subsidiary; provided, that: (i) at the time of designation, the
Investment by either of the Issuers and any of their Restricted Subsidiaries in
such Subsidiary (other than Permitted Investments) shall be deemed a Restricted
Investment (to the extent not previously included as a Restricted Investment)
made on the date of such designation in the amount of the fair market value of
such Investment as determined in good faith by the Board of Directors of the
Company and, in the case of Investments in excess of $5.0 million, supported by
a fairness opinion issued by an accounting, appraisal or investment banking
firm of national standing; (ii) since the Issuance Date, such Special
Subsidiary has not acquired any assets from the Issuers or any Restricted
Subsidiary other than as permitted by the provisions of the Senior Subordinated
Note Indenture, including the provisions described under the covenants entitled
"Restricted Payments" and "Repurchase at the Option of Holders--Asset Sales";
(iii) at the time of designation, no Default or Event of Default has occurred
and is continuing or results immediately after such designation or as a result
of any Restricted Investment made in such Subsidiary at the time of such
designation; (iv) at the time of designation, such Subsidiary
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has no Indebtedness other than Non-Recourse Indebtedness of such Subsidiary;
(v) such Subsidiary does not own any Equity Interests in a Restricted
Subsidiary; and (vi) such Subsidiary does not own or operate or possess any
material license, franchise or right used in connection with the ownership or
operation of any part of the Project Assets of the Project or any material
portion of the Project Assets of the Project.
A Subsidiary shall cease to be a Special Subsidiary and shall become a
Restricted Subsidiary if either (i) at any time while it is a Subsidiary of the
Issuers (1) such Subsidiary acquires any assets from the Issuers or any
Restricted Subsidiary other than as permitted by the provisions of the Senior
Subordinated Note Indenture, including the provisions described under the
covenants entitled "Restricted Payments" and "Repurchase at the Option of
Holders--Asset Sales"; (2) such Subsidiary has any Indebtedness other than
Non-Recourse Indebtedness of such Subsidiary; (3) such Subsidiary owns any
Equity Interests in a Restricted Subsidiary of the Issuers; or (4) such
Subsidiary owns or operates or possesses any material license, franchise or
right used in connection with the ownership or operation of any part of the
Project Assets of the Project or (ii) the Issuers designate such Special
Subsidiary to be a Restricted Subsidiary and no Default or Event of Default
occurs or is continuing immediately after such designation.
Any such designation by the Board of Directors shall be evidenced to the
Senior Subordinated Note Trustee by filing with the Senior Subordinated Note
Trustee a certified copy of the resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
As of the Issuance Date, Mall Subsidiary, Mall Holdings and Mall Manager
were each a Special Subsidiary. Under certain circumstances, as described
above, the Company is able to designate certain Subsidiaries as Special
Subsidiaries. Special Subsidiaries are not subject to all of the restrictive
covenants set forth in the Senior Subordinated Note Indenture and will not be
Senior Subordinated Note Guarantors.
Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock
The Senior Subordinated Note Indenture provides that the Issuers will not,
and will not permit any of their Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to (collectively, "incur" and
correlatively, an "incurrence" of) any Indebtedness (including Acquired
Indebtedness) or any shares of Disqualified Stock; provided, however, that the
Issuers and their Restricted Subsidiaries may incur Indebtedness or issue
shares of Disqualified Stock if (i) the Project is Completed and (ii) the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date of such incurrence would have been at least 2.0 to 1.0
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock had been issued, as the case may be, and application of
proceeds had occurred at the beginning of such four-quarter period.
The foregoing limitations do not apply to:
(a) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness under the Bank Credit Facility in an aggregate principal amount
not to exceed at any one time $170.0 million, less (i) the aggregate amount of
all principal repayments and mandatory prepayments (other than repayments made
under a revolving loan facility or prior to maturity in connection with a
refinancing permitted under the Senior Subordinated Note Indenture) actually
made from time to time after the date of the Senior Subordinated Note Indenture
with respect to such Indebtedness, and (ii) permanent reductions resulting from
the application of Asset Sale proceeds;
(b) the incurrence by the Issuers or any of their Restricted Subsidiaries
of any Existing Indebtedness;
(c) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness represented by the Mortgage Notes, the Mortgage Note
Guaranties, the Senior Subordinated Notes, the Senior Subordinated Note
Guaranties and obligations arising under the Collateral Documents to the extent
that such obligations would constitute Indebtedness;
(d) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness (the "Refinancing Indebtedness") issued in exchange for, or the
proceeds of which are used to extend,
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refinance, renew, replace, substitute or refund Indebtedness referred to in the
first paragraph of this covenant or in clauses (b), (c), this clause (d), (g),
(h), (j) or (l); provided, however, that (1) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount of Indebtedness
(or, in the case of Indebtedness with original issue discount, the accreted
value of such Indebtedness) so extended, refinanced, renewed, replaced,
substituted or refunded (plus the amount of reasonable expenses incurred and
any premium paid in connection therewith), (2) if the Indebtedness being
extended, refinanced, renewed, replaced, substituted or refunded is
subordinated in right of payment to the Senior Subordinated Notes Indenture,
such Refinancing Indebtedness shall be subordinate in right and priority of
payment to the Senior Subordinated Notes and any Senior Subordinated Note
Guaranty on terms at least as favorable to the holders of Senior Subordinated
Notes and the Senior Subordinated Note Guaranties as those contained in the
documentation governing any Subordinated Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded and (3) the Refinancing
Indebtedness shall have a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded;
(e) intercompany Indebtedness between or among the Issuers, any Senior
Subordinated Note Guarantor and any Wholly Owned Restricted Subsidiary of the
Issuers; provided, however, the obligations to pay principal, interest or other
amounts under such intercompany Indebtedness is subordinated to the payment in
full of the Senior Subordinated Notes and any Senior Subordinated Note
Guaranties;
(f) Hedging Obligations that are incurred (1) for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of the Senior Subordinated Note Indenture to be
outstanding or (2) for the purpose of fixing or hedging currency exchange rate
risk with respect to any currency exchanges;
(g) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness (which may include Capital Lease Obligations or purchase money
obligations), incurred for the purpose of financing all or any part of the
purchase or lease of personal property or equipment, including the Specified
FF&E, used in the business of the Issuers or such Restricted Subsidiary, in an
aggregate principal amount pursuant to this clause (g) (including any
refinancings thereof pursuant to clause (d) above) not to exceed $100.0 million
(plus accrued interest thereon and the amount of reasonable expenses incurred
and premium paid in connection with any refinancing pursuant to clause (d)
above) outstanding at any time;
(h) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Non-Recourse Financing used to finance the purchase or lease of personal or
real property used in the business of the Issuers or such Restricted
Subsidiary; provided, that (i) such Non-Recourse Financing represents at least
75% of the purchase price of such personal or real property; (ii) the
Indebtedness incurred pursuant to this clause (h) (including any refinancings
thereof pursuant to clause (d) above) shall not exceed $50.0 million (plus the
amount of reasonable expenses incurred and premium paid in connection with any
refinancing pursuant to clause (d) above) outstanding at any time; and (iii) no
such Indebtedness may be incurred pursuant to this clause (h) unless the
Project is Completed and the Company shall have generated at least $10.0
million of Consolidated Cash Flow in one fiscal quarter;
(i) to the extent that such incurrence does not result in the incurrence
by the Issuers or any of their Restricted Subsidiaries of any obligation for
the payment of borrowed money of others, Indebtedness incurred solely in
respect of performance bonds, completion guarantees, standby letters of credit
or bankers' acceptances; provided, that such Indebtedness was incurred in the
ordinary course of business of the Issuers or any of their Restricted
Subsidiaries and in an aggregate principal amount outstanding under this clause
(i) at any one time of less than $20.0 million;
(j) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Subordinated Indebtedness thereon to the Sole Stockholder pursuant to an
advance under the Completion Guaranty in an aggregate amount not to exceed
$25.0 million plus accrued interest thereon; provided that such Subordinated
Indebtedness has a Weighted Average Life to Maturity greater than the Senior
Subordinated Notes and is by its terms subordinated to the Mortgage Notes and
the Senior Subordinated Notes;
(k) the incurrence by the Issuers of up to $140.0 million of Indebtedness
represented by the Mall Construction Loan Facility;
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(l) the incurrence by the Issuers of Indebtedness represented by the
Substitute Tranche B Loan plus accrued interest thereon; provided that such
Indebtedness has a Weighted Average Life to Maturity greater than the Senior
Subordinated Notes and is by its terms subordinated to the Mortgage Notes;
(m) the incurrence by the Issuers of unsecured Indebtedness (subordinated
in right of payment to the Senior Subordinated Notes) issued in connection with
the Employee Stock Buybacks permitted under clause (xi) of the covenant
described above under the caption "--Restricted Payments";
(n) the incurrence by the Issuers or any Restricted Subsidiary of (A)(i)
at any time prior to Completion, additional Indebtedness under clause (a) or
(k) in an aggregate amount not to exceed $20.0 million, plus (ii) after a
default under the Disbursement Agreement and at any time prior to Completion,
additional Indebtedness under clause (a) or (k) in an aggregate amount not to
exceed $30.0 million (provided that Indebtedness incurred pursuant to this
clause (n)(A)(ii) is matched, dollar for dollar, by additional equity
investments by the Sole Stockholder or an Affiliate of the Sole Stockholder),
in the case of each of clause (A)(i) and (A)(ii), incurred in accordance with
the Intercreditor Agreement and (B) after Completion, additional Indebtedness
in an aggregate amount at any time outstanding not to exceed $25.0 million
(less any amounts incurred pursuant to clause (n)(A) above that remain
outstanding after Completion); and
(o) after Completion, the incurrence by the Issuers or any of their
Restricted Subsidiaries of Indebtedness under any Working Capital Facility in
an aggregate amount at any time outstanding not to exceed $20.0 million;
(p) the incurrence by the Issuers of Indebtedness incurred for the purpose
of financing all or any part of the purchase or lease of gaming equipment to be
used in connection with the casino located at the casino resort to be owned by
Phase II Subsidiary or any casino operated pursuant to an Other Phase II
Agreement in an aggregate amount at any time outstanding not to exceed $10.0
million; provided, that upon default under such Indebtedness, the lender under
such Indebtedness may seek recourse or payment against the Issuers only through
the return or sale of the property or equipment so purchased or leased and may
not otherwise assert a valid claim for payment on such Indebtedness against the
Issuers or any other property of the Issuers; and
(q) the guaranty by the Issuers or a Restricted Subsidiary of Indebtedness
of the Issuers or a Restricted Subsidiary that was permitted to be incurred by
another provision of this covenant.
The Senior Subordinated Note Indenture provides that the Issuers will not
permit any of their Unrestricted Subsidiaries or Special Subsidiaries to incur
any Indebtedness (including Acquired Indebtedness) or issue any shares of
Disqualified Stock, other than Non-Recourse Indebtedness; provided, however,
that if any such Unrestricted Subsidiary or Special Subsidiary ceases to remain
an Unrestricted Subsidiary or Special Subsidiary, such event shall be deemed to
constitute the incurrence of the Indebtedness in such Subsidiary by a
Restricted Subsidiary. For a discussion of the Issuers' ability to incur
additional Indebtedness, see "Description of Intercreditor Agreement."
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Indebtedness permitted in clauses (a) through (q) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Issuers shall, in their sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only such clause or clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value or principal and the payment of interest in the form of
additional Indebtedness is not deemed to be an incurrence of Indebtedness for
purposes of this covenant.
Upon any refinancing or replacement of the Bank Credit Facility with a
lender that does not become party to the Intercreditor Agreement, the Trustee
shall enter into an intercreditor agreement with such lender with terms that
are no less favorable to the Senior Subordinated Note Trustee or the Holders of
Senior Subordinated Notes than those contained in the Intercreditor Agreement.
Liens
The Senior Subordinated Note Indenture will provide that the Issuers will
not, and will not permit any of their Restricted Subsidiaries to, directly or
indirectly create, incur, assume or suffer to exist any Lien
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on any asset owned as of the Issuance Date or thereafter acquired by the
Issuers or any such Restricted Subsidiary, or any income or profits therefrom,
or assign or convey any right to receive income therefrom, except, in each
case, Permitted Liens.
Merger, Consolidation, or Sale of Assets
The Senior Subordinated Note Indenture provides that neither of the
Issuers shall consolidate or merge with or into or wind up into (whether or not
such entity is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless (i) the
Company or Venetian, as the case may be, is the surviving Person or the Person
formed by or surviving any such consolidation or merger (if other than the
Company or Venetian) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a Person organized or
existing under the laws of the United States, any state thereof, the District
of Columbia, or any territory thereof; (ii) the Person formed by or surviving
any such consolidation or merger (if other than the Company or Venetian) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made assumes all the obligations of the Company or
Venetian, as the case may be, under the Senior Subordinated Note Indenture
pursuant to a supplemental indenture or other documents or instruments in form
reasonably satisfactory to the Senior Subordinated Note Trustee under the
Senior Subordinated Notes and the Senior Subordinated Note Indenture; (iii)
immediately after such transaction no Default or Event of Default exists; (iv)
such transaction will not result in the loss or suspension or material
impairment of any material Gaming License; (v) the Company, Venetian or any
Person formed by or surviving any such consolidation or merger, or to which
such sale, assignment, transfer, lease, conveyance or other disposition will
have been made (A) will have Consolidated Net Worth (immediately after the
transaction but prior to any purchase accounting adjustments resulting from the
transaction) equal to or greater than the Consolidated Net Worth of the Company
or Venetian immediately preceding the transaction and (B) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test described above under the
caption "Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock"; and (vi) such transactions would not require any holder of Senior
Subordinated Notes (other than any Person acquiring the Company or Venetian or
their assets and any Affiliate thereof) to obtain a gaming license or be
qualified under the law of any applicable gaming jurisdiction; provided that
such holder would not have been required to obtain a gaming license or be
qualified under the laws of any applicable gaming jurisdiction in the absence
of such transactions. Notwithstanding anything to the contrary, the Issuers may
consolidate or merge with or wind up into each other without meeting the
requirements set forth in clause (v) above.
Transactions with Affiliates
The Senior Subordinated Note Indenture provides that the Issuers will not,
and will not permit any of their Restricted Subsidiaries or Special
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or guaranty with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary or Special
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary or Special Subsidiary with an
unrelated Person and (b) the Company delivers to the Senior Subordinated Note
Trustee (i) with respect to any Affiliate Transaction involving aggregate
payments in excess of (A) $500,000, an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (a) above, or (B) $1.0 million,
a resolution adopted by a majority of the disinterested non-employee directors
of the Board of Directors approving such Affiliate Transaction and set forth in
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (a) above and (ii) with respect to any Affiliate Transaction that
is a loan transaction involving a principal amount in excess of $10.0 million
or any other type of Affiliate Transaction involving aggregate payments in
excess of $10.0 million, an opinion as to the fairness to the Company or such
Restricted Subsidiary or Special Subsidiary from a financial point of view
issued by an Independent Financial Advisor. The foregoing provisions do not
apply to the following: (f) rental payments from Mall Subsidiary to Venetian
under the Billboard Lease, as in effect on the date of
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the Senior Subordinated Note Indenture; (g) the lease agreement relating to a
restaurant to be operated by Wolfgang Puck and currently contemplated to be
known as "Oba Chine" restaurant on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary or Special Subsidiary than those
that would have been obtained with an unrelated Person; (h) the Services
Agreement, as in effect on the date of the Senior Subordinated Note Indenture;
(i) the Other Phase II Agreements on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary or Special Subsidiary than those
that would have been obtained with an unrelated Person; (j) purchases of
materials or services from a Joint Venture Supplier by the Issuers or any of
their Restricted Subsidiaries or Special Subsidiaries in the ordinary course of
business on arm's length terms; (k) any employment, indemnification,
noncompetition or confidentiality agreement entered into by either of the
Issuers or any of their Restricted Subsidiaries or Special Subsidiaries with
their employees or directors in the ordinary course of business (other than an
employment agreement with the Sole Stockholder); (l) loans or advances to
employees of the Issuers or their Restricted Subsidiaries or Special
Subsidiaries (i) to fund the exercise price of options granted under employment
agreements or the Issuers' stock option plans or agreements, in each case, as
in effect on the date of the Mortgage Note Indenture or (ii) for any other
purpose not to exceed $2.0 million in the aggregate outstanding at any one
time; (m) the payment of reasonable fees to directors of the Issuers and their
Restricted Subsidiaries and Special Subsidiaries who are not employees of the
Issuers or their Restricted Subsidiaries or Special Subsidiaries; (n) the grant
of stock options or similar rights to employees and directors of either of the
Issuers pursuant to agreements or plans approved by the Board of Directors of
the Company or the managing member of Venetian and any repurchases of stock
options of the Issuers from such employees to the extent provided for in such
plans or agreements or permitted under the covenant described above under the
caption "--Restricted Payments"; (o) transactions between or among the Issuers
and/or any of their Restricted Subsidiaries or transactions between or among
the Special Subsidiaries and/or any Wholly-Owned Subsidiary of Special
Subsidiaries; (p) with respect to the Issuers and any Restricted Subsidiary,
Restricted Payments permitted by the provisions of the Senior Subordinated Note
Indenture described above under the caption "Restricted Payments" and with
respect to any Special Subsidiary, Special Subsidiary Restricted Payments
permitted by the provisions of the Senior Subordinated Note Indenture described
above under the caption "Special Subsidiary Restricted Payments"; (q) purchases
of Equity Interests of the Issuers (other than Disqualified Stock) by any
stockholder or member of the Issuers (or an Affiliate of a stockholder or
member of the Issuers); (r) the Completion Guaranty and related Completion
Guaranty Loan; (s) the transactions contemplated by the Cooperation Agreement,
the Mall Lease, the Sale and Contribution Agreement and the HVAC Services
Agreement, in each case, as in effect on the Issuance Date; (t) the use of the
Congress Center by an Affiliate of the Issuers; provided that Venetian receives
fair market value for the use of such property, as determined in the reasonable
discretion of the Board of Directors of the Company; (u) the transactions
contemplated in "Certain Transactions--Temporary Lease," "--Retirement Plan"
and "--Airplane Expenses"; (v) transactions relating to the Permitted
Construction Loan Refinancing, including the Tranche B Take-out Commitment and
the guaranty by the Sole Stockholder of the loan to be made under the Tranche A
Take-out Commitment; (w) transactions relating to the guaranty of Tranche B
Loan of the Mall Construction Loan Facility by the Sole Stockholder, including
the making of Substitute Tranche B Loan; (x) the transfer of the Phase II Land
to the Phase II Subsidiary and, upon Completion and in accordance with the Sale
and Construction Agreement, the transfer of the Mall Collateral to the Mall
Subsidiary; and (y) the Company or Venetian may enter into and perform their
obligations under a gaming operations lease or management agreement with Phase
II Subsidiary relating to the casino to be operated in the casino resort owned
by the Phase II Subsidiary on terms substantially similar to those of the
Casino Lease, except that (i) the rent payable to the Phase II Subsidiary under
such lease shall be equal to all revenue derived from such casino minus the sum
of (1) the operating costs related to such casino (including an allocated
portion (based on gaming revenue) of the Company's or Venetian's, as the case
may be, administrative costs related to its gaming operations) and (2) the
lesser of $250,000 or 1.0% of such casino's operating income (or zero if there
is an operating loss) (determined in accordance with generally accepted
accounting principles), (ii) the Company or Venetian, as the case may be, may
agree that they shall operate the casino in the resort owned by the Phase II
Subsidiary and the Casino in the
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Project in substantially similar manners and (iii) the Company or Venetian, as
the case may be, may agree to have common gaming and surveillance operations in
such casinos (based on equal allocations of revenues and operating costs).
No Senior Subordinated Debt
Subject to the Indebtedness described in the next sentence, the Senior
Subordinated Note Indenture provides that the Issuers will not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is subordinate or junior in right of payment to any Senior Debt and senior in
any respect in right of payment to the Senior Subordinated Notes. The
Intercreditor Agreement provides that up to $30.0 million of additional
Indebtedness that may be junior in right of payment to any Senior Debt and
senior in right of payment to the Senior Subordinated Notes may be incurred by
the Issuers, if among other things, a majority of the outstanding principal
amount of the Senior Subordinated Notes consent to such issuance. See
"Description of Intercreditor Agreement."
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Senior Subordinated Note Indenture provides that the Issuers will not,
and will not permit any of their Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any such
Restricted Subsidiary (other than Venetian) to (a) (i) pay dividends or make
any other distributions to the Issuers or any of their Restricted Subsidiaries
(A) on their Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits, or (ii) pay any Indebtedness
owed to the Issuers or any of their Restricted Subsidiaries (other than in
respect of the subordination of such Indebtedness to the Senior Subordinated
Notes, the Senior Subordinated Note Guarantees or any other Indebtedness
incurred pursuant to the terms of the Senior Subordinated Note Indenture, as
the case may be), (b) make loans or advances to the Issuers or any of their
Restricted Subsidiaries or (c) sell, lease, or transfer any of their properties
or assets to the Issuers or any of their Restricted Subsidiaries, except (in
each case) for such encumbrances or restrictions existing under or by reason of
(1) contractual encumbrances or restrictions in effect on the Issuance Date,
(2) the Bank Credit Facility (and any related security agreements), the
Mortgage Note Indenture, the Mortgage Notes, the Mall Construction Loan
Facility (and any related security agreements), any Mortgage Note Guaranties,
indebtedness incurred pursuant to clause (g), (h), (j), (l), (n) or (o) of the
covenant described above under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock" and the Collateral Documents,
(3) the Senior Subordinated Note Indenture, the Senior Subordinated Notes and
the Senior Subordinated Note Guaranties, (4) any instrument governing
Indebtedness or Capital Stock of a Person acquired by, the Company or any
Restricted Subsidiary as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that
the Consolidated Cash Flow of such Person is not taken into account in
determining whether such acquisition was permitted by the terms of the Senior
Subordinated Note Indenture, (5) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices and any leases permitted by the provisions of
the covenant entitled "Restrictions on Leasing and Dedication of Property," (6)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature discussed in clause (c) above
on the property so acquired, (6) applicable law or any applicable rule or order
of any Gaming Authority, (7) Permitted Liens, (8) customary restrictions
imposed by asset sale or stock purchase agreements relating to the sale of
assets or stock by the Issuers or any Restricted Subsidiary, or (9) any
encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (1) through (8) above, provided, that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Company's Board of
Directors, no more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment restrictions
prior to such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing.
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Line of Business
The Senior Subordinated Note Indenture provides that for so long as any
Senior Subordinated Notes are outstanding, the Issuers shall not, and shall not
permit any of their Restricted Subsidiaries or Special Subsidiaries to, engage
in any business or activity other than, (i) with respect to the Issuers and
their Restricted Subsidiaries, the Principal Business, and (ii) with respect to
any Special Subsidiary, the Special Subsidiary Principal Business, except, in
each case, to such extent as would not be material to (a) the Issuers and their
Subsidiaries taken as a whole or (b) the Special Subsidiary, respectively.
Limitation on Status as Investment Company
The Senior Subordinated Note Indenture prohibits the Issuers and their
Restricted Subsidiaries from being required to register as an "investment
company" (as that term is defined in the Investment Company Act of 1940, as
amended).
Ownership of Unrestricted Subsidiaries and Special Subsidiaries
The Senior Subordinated Note Indenture provides that, at all times from
the Issuance Date until all of the Capital Stock of the Phase II Subsidiary or
the Mall Subsidiary is sold or otherwise disposed of to any Person other than
an Affiliate of the Issuers, one of the Issuers will directly or indirectly own
(i) at least a majority of the issued and outstanding Capital Stock of Phase II
Subsidiary (which is an Unrestricted Subsidiary) and (ii) at least 80% of the
issued and outstanding Capital Stock of Mall Subsidiary (which is a Special
Subsidiary); provided that the Sole Stockholder or any of his Affiliates (other
than the Issuers or any of their Wholly-Owned Restricted Subsidiaries) will not
purchase or otherwise acquire, directly or indirectly, any of the Capital Stock
of the Phase II Subsidiary, Mall Subsidiary or any of their respective
Subsidiaries.
Limitation on Phase II Construction
The Senior Subordinated Note Indenture provides that the Issuers shall
not, and shall not permit any of their Subsidiaries (including Unrestricted
Subsidiaries and Special Subsidiaries), at any time prior to receipt by the
Issuers or any such Subsidiary of a temporary certificate of occupancy from
Clark County, Nevada with respect to the Project (as currently defined) (a) to
construct, develop or improve the Phase II Land or any building on the Phase II
Land (including any excavation or site work and excluding the proposed Phase II
parking garage), (b) enter into any contract or agreement for such
construction, development or improvement, or for any materials, supplies or
labor necessary in connection with such construction, development or
improvement (other than a contract or agreement that is conditional upon
satisfaction of the above condition) or (c) incur any Indebtedness the proceeds
of which are expected to be used for the construction, development or
improvement of the Phase II Land or any building on the Phase II Land, except
(i) any construction, development or improvement on the Phase II Land or any
temporary building on the Phase II Land in connection with the Project in
accordance with the Plans and Specifications and included in the Project
Budget; and (ii) any design, architectural, engineering or development work not
involving actual construction on the Phase II Land.
Senior Subordinated Note Guaranties
The Issuers' obligations under the Senior Subordinated Notes and the
Senior Subordinated Note Indenture are jointly, severally and unconditionally
guaranteed by the Senior Subordinated Note Guarantors. The Senior Subordinated
Note Guaranties are subordinated to the prior payment in full of all Senior
Debt of each Senior Subordinated Note Guarantor (including such Senior
Subordinated Note Guarantor's guaranty of the Bank Credit Facility) to the same
extent that the Senior Subordinated Notes are subordinated to Senior Debt of
the Issuers. As of the Issuance Date, each existing Restricted Subsidiary and
any future Restricted Subsidiary was a Senior Subordinated Note Guarantor. The
obligations of each Senior Subordinated Note Guarantor under its Senior
Subordinated Note Guaranty is limited to the extent necessary under any
applicable corporate law to ensure it does not constitute a fraudulent
conveyance under applicable law.
Except in the event of a disposition of all or substantially all of the
assets of a Senior Subordinated Note Guarantor by way of merger or
consolidation, the Senior Subordinated Note Indenture provides that
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no Senior Subordinated Note Guarantor shall consolidate with or merge with or
into (whether or not such Senior Subordinated Note Guarantor is the surviving
Person), another Person, whether or not affiliated with such Senior
Subordinated Note Guarantor, unless (i) subject to the provisions of the
following paragraph and certain other provisions of the Senior Subordinated
Note Indenture, the Person formed by or surviving any such consolidation or
merger (if other than such Senior Subordinated Note Guarantor) assumes all the
obligations of such Senior Subordinated Note Guarantor pursuant to a
supplemental indenture in form reasonably satisfactory to the Senior
Subordinated Note Trustee pursuant to which such Person shall unconditionally
guarantee, on a subordinated basis, all of such Senior Subordinated Note
Guarantor's obligations under such Senior Subordinated Note Guaranty and the
Senior Subordinated Note Indenture; (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists; (iii) such transaction
will not result in the loss or suspension or material impairment of any
material Gaming License; and (iv) the Company (A) will have Consolidated Net
Worth (immediately after giving effect to such transaction), equal to or
greater than the Consolidated Net Worth of the Company immediately preceding
the transaction and (B) will be permitted by virtue of its pro forma Fixed
Charge Coverage Ratio to incur, immediately after giving effect to such
transaction, at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test described above under the caption "Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock." Notwithstanding
anything herein to the contrary, a Wholly Owned Restricted Subsidiary of the
Issuers that is a Senior Subordinated Note Guarantor may consolidate or merge
with, or sell or otherwise dispose of all or substantially all of its assets
to, one of the Issuers or another Wholly Owned Restricted Subsidiary of the
Issuers that is a Senior Subordinated Note Guarantor.
The Senior Subordinated Note Indenture provides that in the event of (i) a
sale or other disposition of all or substantially all of the assets of any
Senior Subordinated Note Guarantor, by way of merger, consolidation or
otherwise, (ii) a Restricted Subsidiary becoming an Unrestricted Subsidiary or
a Special Subsidiary pursuant to terms of the Senior Subordinated Note
Indenture or (iii) a sale or other disposition of all of the Capital Stock of
any Senior Subordinated Note Guarantor that is a Subsidiary, then such Senior
Subordinated Note Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the Capital Stock
of such Senior Subordinated Note Guarantor or the Restricted Subsidiary
becoming an Unrestricted Subsidiary or a Special Subsidiary pursuant to the
terms of the Senior Subordinated Note Indenture) or the corporation acquiring
the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Senior Subordinated Note Guarantor)
shall be released and relieved of any obligations under its Senior Subordinated
Note Guaranty; provided that (i) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof and (ii) the Net Proceeds of
such sale or other disposition are applied in accordance with the applicable
provisions of the Senior Subordinated Note Indenture. See "--Repurchase at
Option of Holders--Asset Sales."
The Senior Subordinated Note Indenture provides that if (a) either of the
Issuers or any Restricted Subsidiary transfers or causes to be transferred, in
one or a series of related transactions (other than a transaction or series of
related transactions constituting a Restricted Payment permitted pursuant to
the provisions of the Senior Subordinated Note Indenture described above under
the caption "Restricted Payments"), property or assets having a fair market
value exceeding $1.0 million to any Restricted Subsidiary of the Issuers (other
than a Senior Subordinated Note Guarantor), (b) any Restricted Subsidiary that
is not a Senior Subordinated Note Guarantor shall have a net worth, annual
revenues or net income in excess of $1.0 million (including by reason of
acquisition, consolidation or merger) or shall own any material license,
franchise or right used in the operation of any of the Project Assets of the
Project or (c) an Unrestricted Subsidiary or Special Subsidiary ceases to be an
Unrestricted Subsidiary or Special Subsidiary, as the case may be, pursuant to
the terms of the Senior Subordinated Note Indenture or is designated by the
Board of Directors to be a Restricted Subsidiary pursuant to the terms of the
Senior Subordinated Note Indenture and, in each case such Restricted Subsidiary
shall have a net worth, annual revenues or net income in excess of $1.0 million
(including by reason of acquisition, consolidation or merger) or shall own any
material license, franchise or right used in the operation of any of the
Project Assets of the Project, the Issuers shall cause such Restricted
Subsidiary to (i) execute and deliver to the Senior Subordinated Note Trustee a
supplemental indenture in form reasonably satisfactory to the Senior
Subordinated Note Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee,
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on a subordinated basis, all of the Issuers obligations under the Senior
Subordinated Notes and the Senior Subordinated Note Indenture on the terms set
forth in the Senior Subordinated Note Indenture and (ii) deliver to the Senior
Subordinated Note Trustee an opinion of counsel that, subject to customary
assumptions and exclusions, such supplemental indenture has been duly executed
and delivered by such Restricted Subsidiary.
Reports
Under the terms of the Senior Subordinated Note Indenture, the Company
will file with the Senior Subordinated Note Trustee and provide holders of
Senior Subordinated Notes, within 15 days after it files them with the
Commission, copies of its annual report and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rule or regulation prescribe) which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act or
otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the Commission, the Senior Subordinated Note Indenture requires the Company to
continue to file with the Commission and provide the Senior Subordinated Note
Trustee and each holder with, without cost to each holder, (a) within 90 days
after the end of each fiscal year, annual reports on Form 10-K (or any
successor form) containing the information required to be contained therein (or
required in such successor form); (b) within 45 days after the end of each of
the first three fiscal quarters of each fiscal year, reports on Form 10-Q (or
any successor form); and (c) promptly from time to time after the occurrence of
an event required to be therein reported, such other reports on Form 8-K (or
any successor form) containing the information required to be contained therein
(or required in any successor form); provided, however, that the Company shall
not be so obligated to file such reports with the Commission if the Commission
does not permit such filings. Notwithstanding the foregoing, if any Person
that, directly or indirectly, owns more than 50% of the common equity of the
Company is subject to the periodic reporting and the informational requirements
of the Exchange Act, the Company will not be required to file the reports
specified in the preceding sentence so long as it provides annual and quarterly
financial statements of the Company (which will include summarized financial
information concerning Venetian) to the holders of the Senior Subordinated
Notes. The Company will in all cases, without cost to each recipient, provide
copies of such information to the holders of the Senior Subordinated Notes and,
if it is not permitted to file such reports with the Commission, shall make
available such information to prospective purchasers and to securities analysts
and broker-dealers upon their request. In addition, the Company has agreed
that, for so long as any Senior Subordinated Notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
Not later than the date of filing any quarterly or annual report, the
Company shall deliver to the Senior Subordinated Note Trustee an Officers'
Certificate stating that each Restricted Payment made in the prior fiscal
quarter was permitted and setting forth the basis upon which the calculations
required by the covenant relating to "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements at the time of such Restricted Payment.
Events of Default and Remedies
The Senior Subordinated Note Indenture provides that each of the following
constitutes an Event of Default: (i) default in payment when due and payable,
upon redemption or otherwise, of principal or premium, if any, on the Senior
Subordinated Notes or under any Senior Subordinated Note Guaranty; (ii) default
for 30 days or more in the payment when due of interest on, or Liquidated
Damages, if any, with respect to the Senior Subordinated Notes or under any
Senior Subordinated Note Guaranty; (iii) failure by the Issuers or any Senior
Subordinated Note Guarantor to offer to purchase or to purchase the Senior
Subordinated Notes, in each case when required under an offer made pursuant to
the provisions of the Senior Subordinated Note Indenture; (iv) failure by (a)
the Issuers or any Senior Subordinated Note Guarantor to comply with the
provisions described under the captions "Restricted Payments" or limitations on
"Incurrence of Indebtedness and Issuance of Disqualified Stock" or (b) any
Special Subsidiary to comply with the provisions described under the caption
"Special Subsidiary Restricted Payments"; (v)
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failure by the Issuers or any Senior Subordinated Note Guarantor for 45 days
after receipt of written notice from the Senior Subordinated Note Trustee to
comply with any of its other agreements in the Senior Subordinated Note
Indenture, the Senior Subordinated Notes or the Senior Subordinated Note
Guaranties; (vi) default under any mortgage, indenture or instrument under
which there is issued or by which there is secured or evidenced any
Indebtedness for money borrowed by the Issuers, or any of their Restricted
Subsidiaries or any Special Subsidiary or the payment of which is guaranteed by
the Issuers, or any of their Restricted Subsidiaries or any Special Subsidiary,
whether such Indebtedness or guarantee now exists or is created after the
Issuance Date, which default (a) in the case of the Issuers or any of their
Restricted Subsidiaries only, is caused by a failure to pay when due at final
maturity (giving effect to any grace period or waiver related thereto) the
principal of such Indebtedness (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which a Payment Default
then exists or with respect to which the maturity thereof has been so
accelerated or which has not been paid at maturity, aggregates $10 million or
more; (vii) failure by the Issuers, any of their Restricted Subsidiaries to pay
final judgments aggregating in excess of $10 million, which final judgments
remain unpaid, undischarged and unstayed for a period of more than 60 days;
(viii) the repudiation by the Issuers or any of their Subsidiaries of its
obligations under, or any judgment or decree by a court or governmental agency
of competent jurisdiction declaring the unenforceability of, any Senior
Subordinated Note Guarantee for any reason that, in each case, would materially
and adversely impair the benefits to the Senior Subordinated Note Trustee or
the holders of the Senior Subordinated Notes thereunder; (ix) certain events of
bankruptcy or insolvency with respect to the Issuers, any Special Subsidiary or
any Senior Subordinated Note Guarantor that is a Significant Subsidiary of the
Issuers or any group of Senior Subordinated Note Guarantors that together would
constitute a Significant Subsidiary of the Issuers; (x) after the Project
becomes Completed, revocation, termination, suspension or other cessation of
effectiveness of any Gaming License, which results in the cessation or
suspension of gaming operations for a period of more than 90 consecutive days
at the Project; (xi) the Project is not Completed by the Outside Completion
Deadline and continues to be not Completed; or (xii) failure by Interface to
comply with its obligations under the Cooperation Agreement with respect to a
change of control of Interface or a sale, transfer or other disposition by
Interface of its interest in the Expo Center or the incurrence by Interface of
Indebtedness.
Subject to the provisions of the Intercreditor Agreement, if any Event of
Default (other than by reason of bankruptcy or insolvency) occurs and is
continuing, the Senior Subordinated Note Trustee or the holders of at least 25%
in principal amount of the then outstanding Senior Subordinated Notes may
declare the principal, premium and Liquidated Damages, if any, interest and any
other monetary obligations on all the Senior Subordinated Notes to be due and
payable immediately. See "Description of Intercreditor Agreement."
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Issuers, or any
Senior Subordinated Note Guarantor that is a Significant Subsidiary, all
outstanding Senior Subordinated Notes will become due and payable without
further action or notice. Holders of the Senior Subordinated Notes may not
enforce the Senior Subordinated Note Indenture or the Senior Subordinated Notes
except as provided in the Senior Subordinated Note Indenture. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Senior Subordinated Notes may direct the Senior Subordinated Note
Trustee in its exercise of any trust power. The Senior Subordinated Note
Trustee may withhold from holders of Senior Subordinated Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. In addition, the Senior Subordinated
Note Trustee shall have no obligation to accelerate the Senior Subordinated
Notes if in the best judgment of the Senior Subordinated Note Trustee
acceleration is not in the best interest of the holders of the Senior
Subordinated Notes.
For a discussion of the effect of the Intercreditor Agreement on the
ability of the Senior Subordinated Note Trustee or the holders of Senior
Subordinated Notes to exercise remedies after an Event of Default, see
"Description of Intercreditor Agreement--Events of Default; Pre-Completion
Remedies" and "--Events of Default; Post-Completion Remedies."
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention and for the purpose of avoiding payment of
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the premium that the Issuers would have had to pay if the Issuers then had
elected to redeem the Senior Subordinated Notes pursuant to the optional
redemption provisions of the Senior Subordinated Note Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law.
The holders of a majority in aggregate principal amount of the Senior
Subordinated Notes then outstanding by notice to the Senior Subordinated Note
Trustee may on behalf of the holders of all of the Senior Subordinated Notes
waive any existing Default or Event of Default and its consequences under the
Senior Subordinated Note Indenture except a continuing Default or Event of
Default in the payment of interest on, premium or Liquidated Damages, if any,
or the principal of, any Senior Subordinated Note held by a non-consenting
holder.
The Issuers are required to deliver to the Senior Subordinated Note
Trustee annually a statement regarding compliance with the Senior Subordinated
Note Indenture, and the Issuers are required, within five Business Days, upon
becoming aware of any Default or Event of Default or any default under any
document, instrument or agreement representing Indebtedness of the Issuers, to
deliver to the Senior Subordinated Note Trustee a statement specifying such
Default or Event of Default.
No Personal Liability of Directors, Officers, Employees, Incorporators and
Stockholders
No director, officer, employee, incorporator or stockholder of the Issuers
or the Senior Subordinated Note Guarantors, as such, has any liability for any
obligations of the Issuers or the Senior Subordinated Note Guarantors under the
Senior Subordinated Notes, any Senior Subordinated Note Guarantee, the Senior
Subordinated Note Indenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. Each holder of the Senior
Subordinated Notes by accepting a Senior Subordinated Note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the Senior Subordinated Notes and the Senior Subordinated Note
Guaranties.
Legal Defeasance and Covenant Defeasance
The obligations of the Issuers and the Senior Subordinated Note Guarantors
under the Senior Subordinated Note Indenture will terminate (other than certain
obligations) upon payment in full of all of the Senior Subordinated Notes. The
Issuers may, at their option and at any time, elect to have all of their and
any Senior Subordinated Note Guarantor's obligations discharged with respect to
the outstanding Senior Subordinated Notes and any Senior Subordinated Note
Guarantees ("Legal Defeasance") and cure all then existing Events of Default
except for (i) the rights of holders of outstanding Senior Subordinated Notes
to receive payments in respect of the principal of, premium, if any, and
interest on such Senior Subordinated Notes when such payments are due solely
out of the trust created pursuant to the Senior Subordinated Note Indenture,
(ii) the Company's, Venetian's and any Senior Subordinated Note Guarantor's
obligations with respect to the Senior Subordinated Notes concerning issuing
temporary Senior Subordinated Notes, registration of Senior Subordinated Notes,
mutilated, destroyed, lost or stolen Senior Subordinated Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Senior Subordinated Note Trustee, and the Issuers' and any Senior Subordinated
Note Guarantor's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Senior Subordinated Note Indenture. In addition,
the Issuers may, at their option and at any time, elect to have the obligations
of the Issuers and any Senior Subordinated Note Guarantor released with respect
to certain covenants that are described in the Senior Subordinated Note
Indenture ("Covenant Defeasance") and, thereafter, any omission to comply with
such obligations shall not constitute a Default or Event of Default with
respect to the Senior Subordinated Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior
Subordinated Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Senior Subordinated Note Trustee,
in trust, for the benefit of the holders of the Senior Subordinated Notes, cash
in U.S. dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm
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of independent public accountants, to pay the Accreted Value thereof
(determined at the date of redemption) if prior to the second anniversary of
the issuance date or the principal amount thereof, premium and Liquidated
Damages, if any, and interest due on the outstanding Senior Subordinated Notes
on the stated maturity date or on the applicable redemption date, as the case
may be, in accordance with the terms of the Senior Subordinated Note Indenture;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered to the
Senior Subordinated Note Trustee an opinion of tax counsel in the United States
reasonably acceptable to the Senior Subordinated Note Trustee confirming that,
(A) the Issuers have received from the United States Internal Revenue Service a
ruling (a copy of which shall accompany such opinion of counsel) or (B) since
the Issuance Date of the Senior Subordinated Note Indenture, there has been a
change in the applicable U.S. federal income tax law such that a ruling is no
longer required, in either case to the effect that, and based thereon such
opinion of tax counsel in the United States shall confirm that, subject to
customary assumptions and exclusions, the holders of the outstanding Senior
Subordinated Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Legal Defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Issuers shall have delivered to
the Senior Subordinated Note Trustee an opinion of tax counsel in the United
States reasonably acceptable to the Senior Subordinated Note Trustee confirming
that the holders of the outstanding Senior Subordinated Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such Covenant Defeasance and will be subject to such tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing with respect to certain Events of
Default on the date of such deposit; (v) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under any material agreement or instrument (other than the Senior
Subordinated Note Indenture) to which the Issuers or any of their Subsidiaries
is a party or by which the Issuers or any of their Subsidiaries is bound; (vi)
the Issuers shall have delivered to the Senior Subordinated Note Trustee an
opinion of counsel to the effect that, as of the date of such opinion following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally under any applicable United States state law and
that the Senior Subordinated Note Trustee has a perfected security interest in
such trust funds for the ratable benefit of the holders; (vii) the Issuers
shall have delivered to the Senior Subordinated Note Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Issuers or others; and (viii) the Issuers shall have delivered to the Senior
Subordinated Note Trustee an Officers' Certificate and an opinion of counsel in
the United States (which opinion of counsel may be subject to customary
assumptions and exclusions) each stating that all conditions precedent provided
for or relating to the Legal Defeasance or the Covenant Defeasance, have been
complied with.
Transfer and Exchange
A Holder may transfer or exchange Senior Subordinated Notes in accordance
with the Senior Subordinated Note Indenture. The Registrar and the Senior
Subordinated Note Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Issuers may require a
Holder to pay any taxes and fees required by law or permitted by the Senior
Subordinated Note Indenture. The Issuers are not required to transfer or
exchange any Senior Subordinated Note selected for redemption. Also, the
Issuers are not required to transfer or exchange any Senior Subordinated Note
for a period of 15 days before a selection of Senior Subordinated Notes to be
redeemed.
The registered Holder of a Senior Subordinated Note will be treated as the
owner of it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the Senior
Subordinated Note Indenture, the Senior Subordinated Notes or the Senior
Subordinated Note Guaranties may be amended or supplemented with the consent of
the holders of at least a majority in principal amount of the Senior
Subordinated Notes then outstanding (including consents obtained in connection
with a tender offer or
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exchange offer for Senior Subordinated Notes), and any existing default or
compliance with any provision of the Senior Subordinated Note Indenture, the
Senior Subordinated Notes or the Senior Subordinated Note Guaranties may be
waived with the consent of the holders of a majority in principal amount of the
then outstanding Senior Subordinated Notes (including consents obtained in
connection with a tender offer or exchange offer for Senior Subordinated
Notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any Senior Subordinated Notes held by a nonconsenting
holder of Senior Subordinated Notes): (i) reduce the principal amount of Senior
Subordinated Notes whose holders must consent to an amendment, supplement or
waiver; (ii) reduce the principal of or change the fixed maturity of any Senior
Subordinated Note or alter or waive the provisions with respect to the
redemption of the Senior Subordinated Notes (other than provisions relating to
the covenants described above under the caption "Repurchase at the Option of
Holders"); (iii) reduce the rate of or change the time for payment of interest
on any Senior Subordinated Note; (iv) waive a Default or Event of Default in
the payment of principal of, premium and Liquidated Damages, if any, or
interest on the Senior Subordinated Notes (except a rescission of acceleration
of the Senior Subordinated Notes by the holders of at least a majority in
aggregate principal amount of the Senior Subordinated Notes and a waiver of the
payment default that resulted from such acceleration); (v) make any Senior
Subordinated Note payable in money other than that stated in the Senior
Subordinated Notes; (vi) make any change in the provisions of the Senior
Subordinated Note Indenture relating to waivers of past Defaults or the rights
of holders of Senior Subordinated Notes to receive payments of principal of or
premium and Liquidated Damages, if any, or interest on the Senior Subordinated
Notes; or (vii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any holder of Senior
Subordinated Notes, the Issuers, the Senior Subordinated Note Guarantors and
the Senior Subordinated Note Trustee together may amend or supplement the
Senior Subordinated Note Indenture, the Senior Subordinated Notes or the Senior
Subordinated Note Guaranties to cure any ambiguity, defect or inconsistency, to
comply with the covenant relating to mergers, consolidations and sales of
assets, to provide for uncertificated Senior Subordinated Notes in addition to
or in place of certificated Senior Subordinated Notes, to provide for the
assumption of the Issuers' obligations to holders of the Senior Subordinated
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the holders of the Senior
Subordinated Notes (including providing for additional Senior Subordinated Note
Guaranties pursuant to the Senior Subordinated Note Indenture, or that does not
adversely affect the legal rights under the Senior Subordinated Note Indenture
of any such holder, to comply with requirements of the Commission in order to
effect or maintain the qualification of the Senior Subordinated Note Indenture
under the Trust Indenture Act.
Concerning the Senior Subordinated Note Trustee
The Senior Subordinated Note Indenture contains certain limitations on the
rights of the Senior Subordinated Note Trustee, should it become a creditor of
the Issuers, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or
otherwise. The Senior Subordinated Note Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The holders of a majority in principal amount of the then outstanding
Senior Subordinated Notes have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy, available to the Senior
Subordinated Note Trustee, subject to certain exceptions. The Senior
Subordinated Note Indenture provides that in case an Event of Default shall
occur (which shall not be cured), the Senior Subordinated Note Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
person in the conduct of his own affairs. Subject to such provisions, the
Senior Subordinated Note Trustee will be under no obligation to exercise any of
its rights or powers under the Senior Subordinated Note Indenture at the
request of any holder of Senior Subordinated Notes, unless such holder shall
have offered to the Senior Subordinated Note Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
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Governing Law
The Senior Subordinated Note Indenture and the Senior Subordinated Notes
are governed by and construed in accordance with the internal laws of the State
of New York, without regard to the choice of law rules thereof.
Additional Information
Any holder of the Senior Subordinated Notes or prospective investor may
obtain a copy of the Senior Subordinated Note Indenture, the Registration
Rights Agreement or the Intercreditor Agreement without charge by writing to
Las Vegas Sands, Inc., 3355 Las Vegas Boulevard South, Las Vegas, Nevada 89109;
Attention: Corporate Secretary.
Certain Definitions
Set forth below are certain defined terms used in the Senior Subordinated
Note Indenture. Reference is made to the Senior Subordinated Note Indenture for
full disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
"Accreted Value" means, as of any date of determination, the sum of (a)
the initial offering price of each Senior Subordinated Note and (b) the portion
of the excess of (i) the principal amount of each Senior Subordinated Note over
(ii) such initial offering price that shall have been amortized through such
date, such amount to be so amortized on a daily basis and compounded
semi-annually on each May 15 and November 15 from the Issuance Date of the
Senior Subordinated Notes through the date of determination (until the second
anniversary of the Issuance Date) to achieve during such period, an annual rate
of return on the principal amount of each Senior Subordinated Note equal to
14 1/4% assuming a current rate of return of 10% per annum on the principal
amount of each such Senior Subordinate Note.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Restricted Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Restricted Subsidiary of
such specified Person and (ii) Indebtedness encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise, provided, however,
that beneficial ownership of 20% or more of the voting securities of a Person
shall be deemed to be control.
"Applicable Tax Percentage" means the highest aggregate effective marginal
rate of federal, state and local income tax or, when applicable, alternative
minimum tax, to which any direct or indirect member or S corporation
shareholder of the Issuers subject to the highest marginal rate of tax would be
subject in the relevant year of determination (as certified to the Senior
Subordinated Note Trustee by a nationally recognized tax accounting firm),
taking into account only that member's or S corporation shareholder's share of
income and deductions attributable to its interest in the Issuers.
"Approved Equipment Funding Commitments" means, collectively, (a) the
General Electric Capital Corporation Commitment (as defined in the Disbursement
Agreement) and (b) any replacement of such commitment from an institutional or
other lender reasonably acceptable to the Bank Agent and the Mall Construction
Lender if (i) such commitment is in form and substance reasonably satisfactory
to the Bank Agent and the Mall Construction Lender and does not include any
conditions to funding that are not included in the General Electric Capital
Corporation Commitment and (ii) the lender providing such commitment enters
into an intercreditor arrangement substantially similar to the intercreditor
arrangements of General Electric Capital Corporation.
"Asset Sale" means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of assets
or rights (including by way of a sale and leaseback) of the Issuers or any
Restricted Subsidiary (each referred to in this definition as a "disposition")
or (ii) the
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issuance or sale of Equity Interests of any Restricted Subsidiary other than
Venetian (whether in a single transaction or a series of related transactions),
in each case, other than (a) a disposition of inventory or goods held in the
ordinary course of business, (b) the disposition of all or substantially all of
the assets of either of the Issuers in a manner permitted pursuant to the
provisions described above under the caption "Certain Covenants--Merger,
Consolidation or Sale of Assets" or any disposition that constitutes a Change
of Control pursuant to the Senior Subordinated Note Indenture, (c) any
disposition that is a Restricted Payment or that is a dividend or distribution
permitted under the covenant described above under the caption "Certain
Covenants--Restricted Payments" or any Investment that is not prohibited
thereunder or any disposition of cash or Cash Equivalents, (d) any single
disposition, or related series of dispositions, of assets with an aggregate
fair market value of less than $1.0 million, (e) any Event of Loss (as defined
in the Mortgage Note Indenture, provided, that any additional proceeds
remaining after the application of Net Loss Proceeds (as defined in the
Mortgage Note Indenture) in an Event of Loss Offer (as defined in the Mortgage
Note Indenture) shall be deemed to be Excess Proceeds for purposes of the
covenant described above under the caption "Repurchase at the Option of
Holders--Asset Sale," (f) any Lease Transaction or any grant of easement or
Permitted Liens, (g) any dedication permitted pursuant to the covenant
described above under the caption "Certain Covenants--Restrictions on Leasing
and Dedication of Property," (h) the transfer of the Mall Space to the Mall
Subsidiary, (i) the transfer of the Phase II Land to the Phase II Subsidiary,
(j) a transfer of assets by the Issuers to a Wholly Owned Restricted Subsidiary
of the Issuers or by a Wholly Owned Restricted Subsidiary of the Issuers to
another Wholly Owned Restricted Subsidiary of the Issuers, (k) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary of the Issuers to the
Issuers or another Wholly Owned Restricted Subsidiary of the Issuers, (l) any
sale, conveyance, transfer or other disposition of property that secures
Non-Recourse Financing or any financing permitted by clause (p) under the
caption "Certain Covenants--Limitations on Incurrence of Indebtedness and
Issuance of Disqualified Stock" that is to or on behalf of the lender of such
Non-Recourse Financing or other financing or (m) any licensing of tradenames or
trademarks in the ordinary course of business by any of the Issuers or their
Restricted Subsidiaries.
"Bank Agent" means The Bank of Nova Scotia, in its capacity as agent under
the Bank Credit Facility and its successors in such capacity.
"Bank Credit Facility" means that certain Credit Agreement among the
Company and Venetian, as borrowers, the lenders listed therein, Goldman Sachs
Credit Partners L.P., as arranger and syndication agent and The Bank of Nova
Scotia, as administrative agent, and any extension, refinancing, renewal,
replacement, substitution or refund thereof ("Bank Credit Facility
Refinancing"); provided, however that (i) the aggregate amount of such Bank
Credit Facility Refinancing shall not exceed the principal amount of
Indebtedness so extended, refinanced, renewed, replaced, substituted or
refunded (plus the amount of reasonable expenses incurred and any premium paid
in connection therewith) and (ii) such Bank Credit Facility Refinancing
Indebtedness shall have a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded.
"Billboard Lease" means that certain Lease Agreement by and between
Venetian and Mall Subsidiary relating to certain space that will be subleased
by "Billboard Live!," as amended from time to time in accordance with the terms
thereof.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability
on the balance sheet in accordance with GAAP.
"Capital Stock" means with respect to any Person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock of such Person, including, without limitation, if such Person
is a partnership or limited liability company, partnership or membership
interests (whether general or limited) and any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership or limited liability
company.
"Cash Equivalents" means (a) United States dollars, (b)(i) direct
obligations of the United States of America (including obligations issued or
held in book-entry form on the books of the Department of the Treasury of the
United States of America) or obligations fully guaranteed by the United States
of America,
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(ii) obligations, debentures, notes or other evidence of indebtedness issued or
guaranteed by any other agency or instrumentality of the United States, (iii)
interest-bearing demand or time deposits (which may be represented by
certificates of deposit) issued by banks having general obligations rated (on
the date of acquisition thereof) at least "A" or the equivalent by Standard &
Poor's Corporation ("S&P") or "A2" by Moody's Investors Service, Inc.
("Moody's") (S&P and Moody's together with any other nationally recognized
credit rating agency if neither of such corporations is then currently rating
the pertinent obligations, a "Rating Agency") or the equivalent by another
Rating Agency, if applicable, or, if not so rated, secured at all times, in the
manner and to the extent provided by law, by collateral security in clause (i)
or (ii) of this definition, of a market value of no less than the amount of
monies so invested, (iv) commercial paper rated (on the date of acquisition
thereof) at least "A-1" or "P-1" or the equivalent by any Rating Agency issued
by any Person, (v) repurchase obligations for underlying securities of the
types described in clause (i) or (ii) above, entered into with any commercial
bank or any other financial institution having long-term unsecured debt
securities rated (on the date of acquisition thereof) at least "A" or "A2" or
the equivalent by any Rating Agency in connection with which such underlying
securities are held in trust or by a third-part custodian, (vi) guaranteed
investment contracts of any financial institution which has a long-term debt
rated (on the date of acquisition thereof) at least "A" or "A2" or the
equivalent by any Rating Agency, (vii) obligations (including both taxable and
nontaxable municipal securities) issued or guaranteed by, and any other
obligations the interest on which is excluded from income for Federal income
tax purposes issued by, any state of the United States of America or the
District of Columbia or the Commonwealth of Puerto Rico or any political
subdivision, agency, authority or instrumentality thereof, which issuer or
guarantor has (A) a short-term debt rated (on the date of acquisition thereof)
at least "A-1" or "P-1" or the equivalent by any Rating Agency and (B) a
long-term debt rated (on the date of acquisition thereof) at least "A" or "A2"
or the equivalent by any Rating Agency, (viii) investment contracts of any
financial institution either (A) fully secured by (1) direct obligations of the
United States, (2) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States or (3) securities
or receipts evidencing ownership interest in obligations or specified portions
thereof described in clause (1) or (2), in each case guaranteed as full faith
and credit obligations of the United States of America, having a market value
at least equal to 102% of the amount deposited thereunder, or (B) with
long-term debt rated (on the date of acquisition of such investment contract)
at least "A" or "A2" or the equivalent by any Rating Agency and short-term debt
rated (on the date of acquisition of such investment contract) at least "A-1"
or "P-1" or the equivalent by any Rating Agency, (ix) a contract or investment
agreement with a provider or guarantor (A) which provider or guarantor is rated
(on the date of acquisition of such contract or investment agreement) at least
"A" or "A2" or the equivalent by any Rating Agency (provided that if a
guarantor is party to the rating, the guaranty must be unconditional and must
be confirmed in writing prior to any assignment by the provider to another
subsidiary of such guarantor), (B) providing that monies invested shall be
payable without condition (other than notice) and without brokerage fee or
other penalty, upon not more than two Business Days' notice for application
when and as required, and (C) stating that such contract or agreement is
unconditional, expressly disclaiming any right of setoff and providing for
immediate termination in the event of insolvency of the provider and
termination upon demand of the Company or any of its secured lenders or their
agents after any payment or other covenant default by the provider, or (x) any
debt instruments of any Person which instruments are rated (on the date of
acquisition thereof) at least "A," "A2," "A-1" or "P-1" or the equivalent by
any Rating Agency; provided that in each case of clauses (i) through (x), such
investments are denominated in United States dollars and maturing not more than
13 months from the date of acquisition thereof; (c) investments in any money
market fund which is rated (on the date of acquisition thereof) at least "A" or
"A2" or the equivalent by any Rating Agency; (d) investments in mutual funds
sponsored by any securities broker-dealer of recognized national standing
having an investment policy that requires substantially all the invested assets
of such fund to be invested in investments described in any one or more of the
foregoing clauses and having a rating of at least "A" or "A2" or the equivalent
by any Rating Agency or (e) investments in both taxable and nontaxable (i)
periodic auction reset securities ("PARS") which have final maturities between
one and 30 years from the date of issuance and are repriced through a dutch
auction or other similar method every 35 days or (ii) auction preferred shares
("APS") which are senior securities of leveraged closed end municipal bond
funds and are repriced pursuant to a variety of rate reset periods,
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in each case having a rating (at the date of acquisition thereof) of at least
"A" or "A2" or the equivalent by any Rating Agency.
"Casino Lease" means that certain lease between the Company and Venetian
dated as of the Closing Date with respect to the operation of the Casino for
the Project, as amended, revised or modified from time to time in accordance
with the terms thereof.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of transactions, of all or
substantially all of the assets of the Issuers and their Restricted
Subsidiaries, taken as a whole (except in connection with an Event of Loss, as
defined in the Mortgage Note Indenture); (ii) either of the Issuers becomes
aware of (by way of a report or any other filing pursuant to Section 13(d) of
the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by
any person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2)
of the Exchange Act, or any successor provision), including any group acting
for the purpose of acquiring, holding or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act), other than the Sole
Stockholder and its Related Parties, in a single transaction or in a related
series of transactions, by way of merger, consolidation or other business
combination or purchase of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act, or any successor provision) of 50% or more of the
total voting power of the Voting Stock of the Issuers; (iii) after an initial
public offering of the common stock of the Issuers, the consummation of any
transaction or series of transactions the result of which is that any person or
group (as defined above), other than the Sole Stockholder and its Related
Parties, (1) beneficially owns more of the voting power of the Voting Stock of
the Issuers than is beneficially owned, in the aggregate, by the Sole
Stockholder and its Related Parties and (2) beneficially owns more than 20% of
the voting power of the Voting Stock of either of the Issuers; (iv) the first
day within any two-year period on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors; (v) the adoption of a
plan relating to liquidation or dissolution of either of the Issuers or any
Senior Subordinated Note Guarantor (except liquidation of (a) Venetian into the
Company and (b) any Senior Subordinated Note Guarantor into the Company,
Venetian or another Senior Subordinated Note Guarantor) or (vi) if any Person
other than the Sole Stockholder and Related Parties beneficially owns more than
50% of the voting and non voting common stock of the Company.
"Code" means, the Internal Revenue Code of 1986, as amended (or any
successor statute thereto).
"Collateral Documents" means, collectively, the Mortgage Notes Indenture
Leasehold Deed of Trust, the Mortgage Notes Indenture Fee Deed of Trust, the
Mortgage Notes Indenture Mall Parcel Fee Deed of Trust, the Disbursement
Agreement, the Completion Guaranty, the Mortgage Notes Indenture Environmental
Indemnity or any other agreements, instruments, financing statements or other
documents that evidence, set forth or limit the Lien of the Mortgage Note
Trustee in the Note Collateral.
"Common Stock" means the Common Stock, par value $.10 per share, of the
Company.
"Company" means Las Vegas Sands, Inc., a Nevada corporation, or any
successor thereto permitted under the Senior Subordinated Note Indenture.
"Completed" or "Completion" has the meaning given to the term "Mall
Release Date" under the Disbursement Agreement, which term generally means that
(a) the Project has been substantially completed in substantial accordance with
the Plans and Specifications (except for additions and expansions to the Casino
Resort (other than the Mall) not contemplated by the Plans and Specifications
in effect on the Issuance Date which additions and expansions will be subject
to certain limitations, including the requirement that they do not materially
interfere with the use and operation of any other portion of the Casino Resort)
and is free of Liens (other than Permitted Liens), (b) the furnishings,
fixtures and equipment for the Casino and the Mall have been installed and the
furnishings, fixtures and equipment for at least 2000 suites in the Hotel have
been installed, (c) the scope and costs to complete remaining items have been
quantified, and (d) the Issuers have sufficient available funds, pursuant to
the Disbursement Agreement, to pay for remaining project costs plus a specified
contingency, each as appropriately certified by the Construction Consultant
and/or the Project Architect, all as more particularly set forth in the
Disbursement Agreement.
"Completion Guaranty" means that certain Guaranty executed by the Sole
Stockholder in favor of the Bank Agent (acting on behalf of the lenders under
the Bank Credit Facility), the Mall Construction Lender
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and the Mortgage Notes Trustee (acting on behalf of the Mortgage Note holders),
as amended, revised or modified from time to time in accordance with the terms
thereof.
"Completion Guaranty Loan" means funds provided by the Sole Stockholder in
satisfaction of his obligations pursuant to the Completion Guaranty, which are
treated by the Sole Stockholder and the Issuers as a subordinated loan to the
Issuers pursuant to the Completion Guaranty.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (a) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing
Consolidated Net Income), plus (b) provision for taxes based upon net income or
net profits of such Person and its Restricted Subsidiaries to the extent such
provision for taxes was deducted in computing Consolidated Net Income, plus (c)
Consolidated Interest Expense of such Person for such period to the extent such
expenses were deducted in computing Consolidated Net Income (not including any
gaming revenue tax), plus (d) Consolidated Depreciation and Amortization
Expense of such Person for such period to the extent such expenses were
deducted in computing Consolidated Net Income, minus (e) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis for such Person and its Restricted Subsidiaries and
determined in accordance with GAAP.
"Consolidated Depreciation and Amortization Expense" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense and other noncash expenses (excluding any noncash expense that
represents an accrual, reserve or amortization of a cash expenditure for a
past, present or future period) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis as defined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, the sum
of (a) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income (including original
issue discount and deferred financing fees, non-cash interest payments, the
interest component of Capital Lease Obligations, and net payments (if any)
pursuant to Hedging Obligations, but excluding amortization of debt issuance
costs and deferred financing fees), (b) commissions, discounts and other fees
and charges paid or accrued with respect to letters of credit and bankers'
acceptance financing and (c) to the extent not included above, the maximum
amount of interest which would have to be paid by such Person or its Restricted
Subsidiaries under a Guarantee of Indebtedness of any other Person if such
Guarantee were called upon.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (i) the Net Income for such period of any
Person that is not a Subsidiary or that is accounted for by the equity method
of accounting, shall be included only to the extent of the amount of dividends
or distributions paid in cash (or to the extent converted into cash) to the
referent Person or a Wholly Owned Subsidiary thereof in respect of such period,
(ii) the Net Income of any Person acquired in a pooling of interests
transaction shall not be included for any period prior to the date of such
acquisition, (iii) the Net Income for such period of any Restricted Subsidiary
that is not a Senior Subordinated Note Guarantor shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of its Net Income is not at the date of
determination permitted without any prior governmental approval (which has not
been obtained) or, directly or indirectly, by the operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, unless such restriction with respect to the payment of dividends
or in similar distributions has been legally waived, (iv) the cumulative effect
of a change in accounting principles shall be excluded and (v) no effect shall
be given to any minority or preferred interest in Venetian for purposes of
computing Consolidated Net Income.
"Consolidated Net Worth" means, with respect to any Person at any time,
the sum of the following items, as shown on the consolidated balance sheet of
such Person and its Restricted Subsidiaries as of such date (i) the common
equity of such Person and its Restricted Subsidiaries; (ii) (without
duplication), (a) the aggregate liquidation preference of Preferred Stock of
such Person and its Restricted Subsidiaries
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(other than Disqualified Stock), and (b) any increase in depreciation and
amortization resulting from any purchase accounting treatment from an
acquisition or related financing; (iii) less any goodwill incurred subsequent
to the Issuance Date; and (iv) less any write up of assets (in excess of fair
market value) after the Issuance Date, in each case on a consolidated basis for
such Person and its Restricted Subsidiaries, determined in accordance with
GAAP; provided, that in calculating Consolidated Net Worth, any gain or loss
from any Asset Sale shall be excluded; provided, however that in computing
"Consolidated Net Worth," no adjustment shall be made for any minority interest
in Venetian.
"Construction Consultant" means Tishman Construction Corporation of Nevada
or any other Person designated from time to time by the Bank Agent, the Mall
Construction Lender and the Senior Subordinated Notes Trustee, in their sole
discretion acting pursuant to the Intercreditor Agreement, to serve as the
Construction Consultant under the Disbursement Agreement.
"Construction Management Agreement" means that certain Construction
Management Agreement between the Company and the Construction Manager, dated as
of February 15, 1997, as such agreement may be amended, modified, supplemented,
restated or replaced from time to time.
"Construction Manager" means Lehrer McGovern Bovis, Inc., a New York
corporation.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on
the Issuance Date, (ii) was nominated for election or elected to such Board of
Directors with, or whose election to such Board of Directors was approved by,
the affirmative vote of a majority of the Continuing Directors who were members
of such Board of Directors at the time of such nomination or election or (iii)
was appointed or elected to such Board of Directors by the Sole Stockholder or
a Related Party.
"Contracts" means, collectively, the contracts entered into, from time to
time, between the Company and any contractor for performance of services or
sale of goods in connection with the design, engineering, installation or
construction of the Project.
"Cooperation Agreement" means that certain Amended and Restated Reciprocal
Easement, Use and Operating Agreement among the Mall Construction Subsidiary,
Venetian and Interface, as amended, revised or modified from time to time in
accordance with its terms.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Bank Credit Facility and (ii) any other Senior Debt permitted under the Senior
Subordinated Note Indenture, the principal amount of which is $20.0 million or
more and that has been designated by the Issuers as "Designated Senior Debt";
provided, however, that the FF&E Financing does not constitute Designated
Senior Debt.
"Direct Construction Guaranty" means that certain Guaranty of Performance
and Completion executed by Bovis, Inc., a New York corporation, in favor of the
Company, as assigned by the Company to Venetian by that certain Assignment
Agreement by and among the Company, Venetian and Bovis, Inc., as amended,
revised or modified from time to time in accordance with its terms.
"Disbursement Agent" means The Bank of Nova Scotia, in its capacity as the
disbursement agent under the Disbursement Agreement and its successors in such
capacity.
"Disbursement Agreement" means that certain Funding Agents' Disbursement
and Administration Agreement among the Issuers, Mall Construction Subsidiary,
the Bank Agent, the Mortgage Notes Trustee, the Mall Construction Lender, the
HVAC Provider and the Disbursement Agent, as amended, revised or modified from
time to time in accordance with its terms.
"Disqualified Stock" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to
November 15, 2005; provided, however, that any Capital Stock which would not
constitute Disqualified Stock but for provisions thereof giving holders
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thereof the right to require the Issuers to repurchase or redeem such Capital
Stock upon the occurrence of a Change of Control, or an Asset Sale occurring
prior to the final maturity of the Senior Subordinated Notes shall not
constitute Disqualified Stock if the change of control provisions, event of
loss provisions, or asset sale provisions, as the case may be, applicable to
such Capital Stock specifically provide that the Issuers will not repurchase or
redeem any such stock pursuant to such provisions prior to the Company's and
Venetian's compliance with the provisions of the Senior Subordinated Note
Indenture, including the covenant described under "Repurchase at the Option of
Holders--Change of Control" and "--Asset Sales."
"Equity Contribution" means the approximately $320.3 million of proceeds
received by Venetian from the Company, Interface Holding or the Sole
Stockholder (in the form of cash or property).
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Estimation Period" means the period for which a shareholder, partner or
member, who is an individual is required to estimate for federal income tax
purposes his allocation of taxable income from a Subchapter S corporation or a
partnership for federal income tax purposes in connection with determining his
estimated federal income tax liability for such period.
"Existing Indebtedness" means (i) up to $1.5 million in aggregate
principal amount of Indebtedness (other than Capital Lease Obligations) of the
Company or its Restricted Subsidiaries in existence on the Issuance Date, plus
interest accruing thereon, after application of the net proceeds of sale of the
Senior Subordinated Notes on the Issuance Date and (ii) any current or future
obligations under the HVAC Services Agreement as in effect on the Issuance
Date.
"Expo Center" means the Sands Expo and Convention Center.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness and the use of proceeds therefrom, or such issuance or
redemption of Preferred Stock, as if the same had occurred at the beginning of
the applicable four-quarter period. For purposes of making the computation
referred to above, acquisitions, dispositions and discontinued operations (as
determined in accordance with GAAP) that have been made by the Company or any
of its Restricted Subsidiaries, including all mergers, consolidations and
dispositions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be calculated on
a pro forma basis assuming that all such acquisitions, dispositions,
discontinued operations, mergers, consolidations (and the reduction of any
associated fixed charge obligations resulting therefrom) had occurred on the
first day of the four-quarter reference period.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (a) Consolidated Interest Expense of such Person for
such period and (b) all capitalized interest of such Person and its Restricted
Subsidiaries and (c) the product of (i) to the extent such Person is not
treated as an S corporation, a partnership or a substantially similarly treated
pass-through entity for federal income tax purposes, all dividend payments,
whether or not in cash on any series of Preferred Stock of such Person or any
of its Subsidiaries, other than dividend payments on Equity Interests payable
solely in Equity Interests or dividends paid as an increase in liquidation
preference on Preferred Stock, times (ii) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined
federal, state and local statutory income tax rate of such Person, expressed as
a decimal, in each case, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
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Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the Issuance Date. For the purposes of the Senior Subordinated Note
Indenture, the term "consolidated" with respect to any Person shall mean such
Person consolidated with its Restricted Subsidiaries (without giving effect to
any minority or preferred interest of Venetian) and shall not include any
Unrestricted Subsidiary or Special Subsidiary.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or foreign government, any state, province or any city or other
political subdivision, whether now or hereafter existing, or any officer or
official thereof, including without limitation, the Nevada Gaming Commission,
the Nevada State Gaming Control Board, the Clark County Liquor and Gaming
Licensing Board and any other agency with authority to regulate any gaming
operation (or proposed gaming operation) owned, managed or operated by the
Issuers or any of its Subsidiaries.
"Gaming License" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct governing activities of
the Issuers or any of their Restricted Subsidiaries, including without
limitation, all such licenses granted under the Nevada Gaming Control Act, and
the regulations promulgated pursuant thereto, and other applicable federal,
state, foreign or local laws.
"Government Instrumentality" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity, (including any
zoning authority, the Federal Deposit Insurance Corporation, the Comptroller of
the Currency or the Federal Reserve Board, any central bank or any comparable
authority) or any arbitrator with authority to bind a party at law.
"Government Securities" means securities that are (a) direct obligations
of the United States of America for the timely payment of which its full faith
and credit is pledged or (b) obligations of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended), as custodian with respect to any such
Government Security or a specific payment of principal of or interest on any
such Government Security held by such custodian for the account of the holder
of such depository receipt; provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt from any amount received by the custodian
in respect of the Government Security or the specific payment of principal of
or interest on the Government Security evidenced by such depository receipt.
"Guaranty" means a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Harrah's Road Way Agreement" means an agreement between Venetian and
Harrah's Casino Resort, as amended, modified or restated, as contemplated by
the existing letter of intent between the parties with respect to the sharing
of the common road between the parties and certain plans with respect to the
improvements to be made thereto.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"HVAC Provider" means Atlantic-Pacific Las Vegas, LLC, a Delaware limited
liability company.
"HVAC Services Agreement" means, collectively (i) that certain Energy
Services Agreement between Venetian and the HVAC Provider (ii) that certain
Ground Lease between Venetian and the HVAC Provider, (iii) that certain
Construction Agency Agreement between Venetian and the HVAC Provider and (iv)
that certain Energy Services Agreement between the Mall Subsidiary and the HVAC
Provider, in each case, as amended, revised or modified from time to time in
accordance with its terms.
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"Indebtedness" means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof), (iii) representing the
balance deferred and unpaid of the purchase price of any property (including
Capital Lease Obligations), except any such balance that constitutes an accrued
expense or trade payable, or (iv) representing any Hedging Obligations, if and
to the extent any of the foregoing indebtedness (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, (b) to the extent not otherwise
included, any obligation by such Person to be liable for, or to pay, as
obligor, guarantor or otherwise, on the Indebtedness of another Person (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business) and (c) to the extent not otherwise included, Indebtedness
of another Person secured by a Lien on any asset owned by such Person (whether
or not such Indebtedness is assumed by such Person). For purposes of this
definition, the term "Indebtedness" shall not include any amount of the
liability in respect of an operating lease that at such time would not be
required to be capitalized and reflected as a liability on the balance sheet in
accordance with GAAP. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Company's Board of Directors, (i) qualified to perform the task
for which it has been engaged and (ii) disinterested and independent with
respect to the Company and its Subsidiaries, each Affiliate of the Company, and
the Sole Stockholder and its Related Parties.
"Indirect Construction Guaranty" means that certain Guaranty of
Performance executed by The Peninsular and Oriental Steam Navigation Company, a
corporation organized under the laws of England and Wales, in favor of the
Company, as assigned by the Company to Venetian by that certain Assignment
Agreement by and among the Company, Venetian and The Peninsular and Oriental
Steam Navigation Company, as amended, revised or modified from time to time in
accordance with its terms.
"Interface" means Interface Group-Nevada, Inc., a Nevada corporation and
wholly owned indirect subsidiary of the Sole Stockholder.
"Interface Holding" means Interface Group Holding Company, Inc., a Nevada
corporation and a wholly owned direct Subsidiary of the Sole Stockholder.
"Intercreditor Agreement" means the Intercreditor Agreement, among The
Bank of Nova Scotia, as Bank Agent acting on behalf of the lenders pursuant to
the Bank Credit Facility, the Mortgage Note Trustee, acting on behalf of the
holders of the Mortgage Notes, the Mall Construction Lender and the Senior
Subordinated Note Trustee, acting on behalf of the holders of the Senior
Subordinated Notes, as amended, revised, modified or restated from time to time
in accordance with its terms.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
Guarantees), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issuance Date" means the closing date for the sale and original issuance
of the Senior Subordinated Notes.
"Lenders" means any of the lenders under the Bank Credit Facility, the
Interim Mall Lender and the Senior Subordinated Note holders.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
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"Mall" means that certain enclosed retail, dining and entertainment
complex of approximately 500,000 net leasable square feet more particularly
described in the Plans and Specifications.
"Mall Collateral" means all of the Issuers' and their Subsidiaries' right,
title, and interest in and to (i) prior to creation of the Mall I Parcel, the
leasehold estate created by the Mall Lease and, thereafter, the Mall I Parcel;
(ii) the leasehold estate created by the Billboard Lease; (iii) the Mall and
any related improvements and equipment thereto; (iv) any reserves established
by the Issuers, any of their Restricted Subsidiaries or any of their Special
Subsidiaries relating to the Mall and (v) any and all security agreements and
an assignment of leases and rents creating a security interest in any rents or
other income derived from the Mall.
"Mall Construction Lender" means GMAC Commercial Mortgage Corporation, a
California corporation, and its permitted successors and assigns.
"Mall Construction Loan Agreement" means that certain Credit Agreement
between the Issuers, Mall Construction Subsidiary and Mall Construction Lender,
as amended, revised or modified from time to time in accordance with its terms.
"Mall Construction Loan Facility" means the credit facility described and
made available to the Issuers and Mall Construction Subsidiary pursuant to the
Mall Construction Loan Agreement and any extension, refinancing, renewal,
replacement, substitution or refunding thereof ("Mall Construction Loan
Facility Refinancing"); provided, however that (i) the aggregate amount of
Indebtedness under such Mall Construction Loan Facility Refinancing shall not
exceed the principal amount of Indebtedness so extended, refinanced, renewed,
replaced, substituted or refunded (plus the amount of reasonable expenses
incurred and any premium paid in connection therewith), (ii) such Mall
Construction Loan Facility Refinancing Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life
Maturity of the Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded and (iii) to the extent such Mall Construction Loan
Facility Refinancing Indebtedness is not supported by a guaranty of the Sole
Stockholder on substantially similar terms as the terms of the Sole
Stockholder's guaranty of Tranche B of the Mall Construction Loan Facility,
such Mall Construction Loan Facility Refinancing Indebtedness shall contain a
tranche with a principal amount, relative payment priority and other terms
which are substantially similar to those required to be contained in the
Substitute Tranche B Loan.
"Mall Construction Subsidiary" means Grand Canal Shops Mall Construction,
LLC, a Delaware limited liability company, and a wholly owned subsidiary of
Venetian.
"Mall Holdings" means Grand Canal Shops Mall Holding Company, LLC, a
Delaware limited liability company and a subsidiary of Mall Intermediate
Holdings.
"Mall Intermediate Holdings" means Mall Intermediate Holding Company, LLC,
a Delaware limited liability company, and a wholly owned subsidiary of
Venetian.
"Mall I Parcel" means the phase I mall space sudivided from the Project
Site as a legally separate parcel and recorded with the applicable Government
Instrumentalities.
"Mall Lease" means the Lease by and between Venetian and Mall Construction
Subsidiary pursuant to which Mall Construction Subsidiary leases from Venetian
the Mall Space, as amended, revised or modified from time to time in accordance
with its terms.
"Mall Management Agreement" means the Mall Management Agreement between
Forest City Enterprises and the Mall Construction Subsidiary, as amended,
revised or modified.
"Mall Manager" means Grand Canal Shops Mall MM, Inc., wholly owned
subsidiary of the Company.
"Mall Space" means that certain space referred to as the "Mall" in and on
the Project as more specifically described in an Annex to the Senior
Subordinated Note Indenture.
"Mall Subsidiary" means Grand Canal Shops Mall, LLC, a Delaware limited
liability company.
"Mortgage Notes" means the Company's 12 1/4% Mortgage Notes due November
15, 2004 issued pursuant to the Mortgage Note Indenture.
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"Mortgage Notes Indenture Environmental Indemnity" means that
Environmental Indemnity Agreement among the Company, Venetian and the Mortgage
Note Trustee, as amended, modified or revised in accordance with its terms.
"Mortgage Notes Indenture Fee Deed of Trust" means that certain Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing
made by the Company and Venetian, as trustor, to the trustee thereunder for the
benefit of the Mortgage Note Trustee, as beneficiary, as amended, modified or
revised in accordance with its terms.
"Mortgage Notes Indenture Leasehold Deed of Trust" means that certain Deed
of Trust, Assignment of Rents and Leases, Security Agreement and Fixture
Filing, dated as of November 14, 1997 and made by the Mall Construction
Subsidiary, as trustor, to the trustee thereunder for the benefit of the
Mortgage Note Trustee, as beneficiary, as amended, modified or revised in
accordance with its terms.
"Mortgage Notes Indenture Mall Parcel Fee Deed of Trust" means the deed of
trust in the form of Exhibit V-4 to the Disbursement Agreement executed by Mall
Construction Subsidiary for the benefit of the Mortgage Note Trustee in
accordance with the Disbursement Agreement, as amended, modified or revised in
accordance with its terms.
"Mortgage Notes Proceeds Account" means that certain Mortgage Notes
Proceeds Account into which the net proceeds from the sale of the Mortgage
Notes were deposited in accordance with the Disbursement Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries, and (iii) excluding any
extraordinary gain (but not loss), together with any related provision for
taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and expenses, employee severance and
termination costs, any trade payables or similar liabilities related to the
assets sold and required to be paid by the seller as a result thereof and
sales, finder's or broker's commissions), and any relocation expenses incurred
as a result thereof, taxes paid or payable as a result thereof (including,
without limitation, any taxes paid or payable by an owner of the Issuers or any
Restricted Subsidiary) (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien (other than the Senior
Subordinated Notes) on the asset or assets that are the subject of such Asset
Sale or amounts permitted by the terms of such Indebtedness to be otherwise
reinvested in the Project to the extent so reinvested, all distributions and
other payments required to be made to minority interest holders in a subsidiary
or joint venture as a result of the Asset Sale and any reserve for adjustment
in respect of the sale price of such asset or assets or any liabilities
associated with the asset disposed of in such Asset Sale.
"Non-Recourse Financing" means Indebtedness incurred in connection with
the purchase or lease of personal or real property useful in the Principal
Business or to construct, develop or equip the Mall Space and (i) as to which
the lender upon default may seek recourse or payment against the Company or any
Restricted Subsidiary only through the return or sale of the property or
equipment or the other Specified FF&E so purchased or leased, or in the case of
any Indebtedness with respect to the Mall Space, only through foreclosure upon
the Mall Collateral and (ii) may not otherwise assert a valid claim for payment
on such Indebtedness against the Company or any Restricted Subsidiary or any
other property of the Company or any Restricted Subsidiary.
"Non-Recourse Indebtedness" means Indebtedness or Disqualified Stock, as
the case may be, or that portion of Indebtedness or Disqualified Stock, as the
case may be, (a) as to which neither the Company nor any of its Restricted
Subsidiaries (i) provides credit support pursuant to any undertaking, agreement
or instrument that would constitute Indebtedness or Disqualified Stock, as the
case may be,
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or (ii) is directly or indirectly liable, and (b) with respect to Non-Recourse
Indebtedness of an Unrestricted Subsidiary, no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness or Disqualified Stock, as
the case may be, of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or Disqualified Stock, as the case
may be, or cause the payment thereof to be accelerated or payable prior to its
stated maturity.
"Note Collateral" means all assets, now owned or hereafter acquired, of
the Company, Venetian or any Mortgage Note Guarantor defined as Collateral in
the Collateral Documents, which will initially include (with certain
exceptions) all real estate, improvements and all personal property owned by
the Issuers (including (i) the Project Assets, (ii) the Mall Collateral, until
the transfer and release thereof in accordance with the Sale and Contribution
Agreement and the Disbursement Agreement), as well as a pledge of any
intercompany notes held by either of the Issuers or the Senior Subordinated
Note Guarantors.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed on behalf of the
Issuers or a Senior Subordinated Note Guarantor, as the case may be, by two
Officers (or if a limited liability company, two Officers of the managing
member of such limited liability company) of the Issuers or a Senior
Subordinated Note Guarantor, as the case may be, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company, Venetian (or its managing
members) or a Senior Subordinated Note Guarantor, as the case may be, that
meets the requirements set forth in the Senior Subordinated Note Indenture.
"Outside Completion Deadline" means April 21, 1999, as the same may from
time to time be extended pursuant to the Disbursement Agreement.
"Other Phase II Agreements" means any agreement entered into by the
Issuers or their Subsidiaries with a Person for construction, development and
operation of a hotel or casino on the Phase II Land (other than the Phase II
Resort).
"Permitted Construction Loan Refinancing" means (i) the incurrence of
indebtedness and/or the issuance of Capital Stock by the Mall Subsidiary the
proceeds of which are used to purchase the Mall Collateral pursuant to the Sale
and Contribution Agreement (including, without limitation, the Tranche A
Take-out Commitment and the Tranche B Take-out Commitment) and/or (ii) the
assumption of the Mall Construction Loan Facility and/or the Substitute Tranche
B Loan (or any permitted refinancing thereof) pursuant to the Sale and
Contribution Agreement.
"Permitted Investments" means (a) any Investments in the Issuers, any
Senior Subordinated Note Guarantor or in any Restricted Subsidiary that is not
a Senior Subordinated Note Guarantor if the Investments in such Restricted
Subsidiary that is not a Senior Subordinated Note Guarantor from the Issuers,
any Senior Subordinated Note Guarantor or any of the other Restricted
Subsidiaries aggregate less than $1.0 million; (b) any Investments in Cash
Equivalents; (c) Investments by the Issuers or any Restricted Subsidiary of the
Issuers in a Person, if as a result of such Investment (i) such Person becomes
a Senior Subordinated Note Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, one of the Issuers or a Senior
Subordinated Note Guarantor; (d) any Restricted Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the caption
"Repurchase at the Option of Holders--Asset Sales"; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Issuers; (f) receivables owing to the Issuers or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances; (g) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (h) loans or advances to employees of the Issuers or their Restricted
Subsidiaries or Special Subsidiaries
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(i) to fund the exercise price of options granted under employment agreements
and the Issuers' stock option plans or agreements, in each case, as in effect
on the date of the Senior Subordinated Note Indenture or (ii) for any other
purpose not to exceed $2.0 million in the aggregate at any one time outstanding
under this clause (ii); (i) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Issuers and any Restricted Subsidiary or in satisfaction of judgments; (j)
other Investments in any Person (other than in an Affiliate of the Issuers)
having a fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (j) that are at the
time outstanding, not to exceed $5.0 million; (k) Investments in any Person
engaged in the Principal Business which Investment is solely in the form of
Equity Interests (other than Disqualified Stock) of the Issuers and (l) the
initial designation on the Issuance Date of (i) Phase II Subsidiary, Phase II
Holdings and Phase II Manager as Unrestricted Subsidiaries and (ii) Mall
Subsidiary, Mall Holdings and Mall Manager as Special Subsidiaries; provided,
that, in each case, no more than $1,000 is invested any such Person at the time
of designation.
"Permitted Junior Securities" means Equity Interests in the Company or
Venetian or debt securities that are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) to substantially the same
extent as, or to a greater extent than, the Senior Subordinated Notes are
subordinated to Senior Debt pursuant to Article 10 of the Senior Subordinated
Note Indenture.
"Permitted Liens" means (a) Liens in favor of the Issuers and their Wholly
Owned Restricted Subsidiaries; provided that if such Liens are on any Note
Collateral, that such Liens are either collaterally assigned to the Mortgage
Note Trustee or subordinate to the Lien in favor of the Mortgage Note Trustee
securing the Mortgage Notes or any Mortgage Note Guaranty; (b) Liens on
property of a Person existing at the time such Person became a Restricted
Subsidiary, is merged into or consolidated with or into, or wound up into, one
of the Issuers or any Restricted Subsidiary of the Issuers; provided, that such
Liens were in existence prior to the contemplation of such acquisition, merger
or consolidation or winding up and do not extend to any other assets other than
those of the Person acquired by, merged into or consolidated with one of the
Issuers or such Restricted Subsidiary; (c) Liens on property existing at the
time of acquisition thereof by the Issuers or any Restricted Subsidiary of the
Issuers; provided that such Liens were in existence prior to the contemplation
of such acquisition; (d) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business or in the
construction of the Project and which obligations are not expressly prohibited
by the Senior Subordinated Note Indenture; provided, however, that the Issuers
have obtained a title insurance endorsement insuring against losses arising
therewith or if such Lien arises in the ordinary course of business or in the
construction of the Project, the Issuers have bonded within a reasonable time
after becoming aware of the existence of such Lien; (e) Liens securing
obligations in respect of the Mortgage Note Indenture, the Mortgage Notes and
any Secured Mortgage Note Guaranty; (f) Permitted Encumbrances, as such term is
defined in the Disbursement Agreement, and leases or other Liens, to the extent
permitted pursuant to the covenant entitled "Description of Mortgage Notes--
Restrictions on Leasing and Dedication of Property"; (g) (1) Liens for taxes,
assessments or governmental charges or claims or (2) statutory Liens of
landlords, and carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business or in the construction of the Project, in the case of each
of (1) and (2), with respect to amounts that either (A) are not yet delinquent
or (B) are being contested in good faith by appropriate proceedings as to which
appropriate reserves or other provisions have been made in accordance with
GAAP; (h) easements, rights-of-way, navigational servitudes, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances which do not interfere in any material respect with the ordinary
conduct of business of the Issuers and their Restricted Subsidiaries; (i) after
Completion, Liens securing Indebtedness in an aggregate amount not exceeding
$25.0 million at any one time securing purchase money or lease obligations
otherwise permitted by the Mortgage Note Indenture incurred or assumed in
connection with the acquisition, purchase or lease of real or personal property
to be used in the Principal Business of the Issuers or any of its Restricted
Subsidiaries within 180 days of such incurrence or assumption; provided, that
such Liens do not extend to any Note Collateral or to any property or assets of
the Issuers or any Restricted Subsidiary other than the property or assets so
purchased or leased and, at the time of incurrence, the principal amount of
such Indebtedness does not exceed 75% of the value
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of the collateral securing such Indebtedness; (j) a leasehold mortgage in favor
of a party financing the lessee of space within the Project; provided that
neither the Issuers nor any Restricted Subsidiary is liable for the payment of
any principal of, or interest or premium on, such financing; (k) Liens securing
the Mall Construction Loan Facility and any additional Indebtedness permitted
to be incurred thereunder pursuant to clause (n)(A) of the second paragraph of
the convenant described above under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock;" (l) Liens created by the
Cooperation Agreement and the HVAC Services Agreement; (m) Liens on real
property of the Issuers arising pursuant to that certain Harrah's Road Way
Agreement; (n) Liens created by the Predevelopment Agreement, as in effect on
the date of the Mortgage Note Indenture; (o) Liens (i) to secure Indebtedness
permitted by clauses (g), (h) or (p) of the second paragraph of the covenant
entitled "--Incurrence of Indebtedness and Issuance of Preferred Stock" and
extending only to assets or Specified FF&E acquired in accordance with such
clauses and to any proceeds of such assets or Indebtedness and related
collateral accounts in which such proceeds are held, and (ii) to secure
Indebtedness permitted by clause (d) of the second paragraph of the covenant
entitled "--Incurrence of Indebtedness and Issuance of Preferred Stock";
provided, that such Liens are not materially greater in extent than the Liens
securing the Indebtedness so refinanced; (p) Liens created by the Other Phase
II Agreements; (q) Liens to secure all Obligations under the Bank Credit
Facility incurred pursuant to clause (a) of the second paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock" and any additional Indebtedness permitted to be
incurred thereunder pursuant to clause (n)(A) of the second paragraph of the
convenant described above under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock;" (r) until Completion is
achieved, Permitted Liens (as defined in the Disbursement Agreement); (s) Liens
incurred in connection with the construction of a pedestrian bridge over or a
pedestrian tunnel under Las Vegas Boulevard and Sands Avenue; (t) Liens
incurred in connection with the traffic study relating to increased traffic on
Las Vegas Boulevard as a result of the Completion of the Project; (u) Liens
incurred in connection with Hedging Obligations incurred pursuant to clause (f)
of the covenant described under the caption "Limitations on Incurrence of
Indebtedness and the Issuance of Disqualified Stock"; (v) licenses of patents,
trademarks and other intellectual property rights granted by the Issuers or any
Subsidiary of the Issuers in the ordinary course of business and not
interfering in any material respect with the ordinary conduct of the business
of such Issuer or such Subsidiary; (w) any judgment attachment or judgment Lien
not constituting an Event of Default; (x) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (y) any Lien created under the Sale
and Contribution Agreement and (z) after Completion, Liens securing (A) up to
an aggregate of $20.0 million of Indebtedness permitted to be incurred pursuant
to clause (n)(B) of the second paragraph of the covenant described above under
the caption "Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" and (B) up to an aggregate of $20.0 million of Indebtedness
permitted to be incurred pursuant to clause (o) of the second paragraph of the
covenant described above under the caption "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock."
"Permitted Quarterly Tax Distributions" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of the
Company or Venetian, as the case may be (in each case, including any such
taxable income attributable to such entity's ownership of interest in any other
pass-through entity for Federal income tax purposes) (except that if all or any
portion of the Completion Guaranty Loan or the Substitute Tranche B Loan is
outstanding and held by the Sole Stockholder or a Related Party and is not
paying current cash interest, then such estimated taxable income shall be
determined without giving effect to any non-cash interest payments on such
loans held by the Sole Stockholder or a Related Party to the extent such
non-cash interest is deductible), for the related Estimation Period, as in a
statement filed with the Senior Subordinated Note Trustee; provided, however,
that (A) prior to any distributions of Tax Amounts the Issuers shall deliver an
officers' certificate to the effect that, in the case of distributions to be
made by Venetian, Venetian qualifies as a partnership or a substantially
similarly treated pass-through entity for federal income tax purposes or that,
in the case of distributions to be made by the Company, the Company qualifies
as a Subchapter S corporation under the Code or a substantially similarly
treated pass-through entity for federal income tax purposes, as the case may
be, and (B) at the time of such distributions, the most recent audited
financial statements of the Company reflect that the Company was treated as a
Subchapter S corporation under the Code or a substantially similarly treated
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pass-through entity for federal income tax purposes and Venetian was treated as
a partnership or substantially similarly treated pass-through entity for
Federal income tax purposes for the period covered by such financial
statements; provided, further, that, for an Estimation Period that includes a
True-up Determination Date, (A) if the True-up Amount is due to the members or
shareholders, as the case may be, the Permitted Quarterly Tax Distribution
payable by the Company or Venetian, as the case may be, for the Estimation
Period shall be increased by such True-up Amount, and (B) if the True-up Amount
is due to the Company or Venetian, the Permitted Quarterly Tax Distribution
payable by the Company or Venetian, as the case may be, for the Estimation
Period shall be reduced by such True-up Amount and the excess, if any, of the
True-up Amount over such Permitted Quarterly Tax Distribution shall be applied
to reduce the immediately following Permitted Quarterly Tax Distribution(s)
until such True-up Amount is entirely offset. The amount of Permitted Quarterly
Tax Distribution relating to an Estimation Period including a True-up
Determination Date shall be determined by a Tax Amounts CPA, and the amount of
Permitted Quarterly Tax Distribution relating to all other Estimation Periods
shall be determined by the Company or Venetian, as the case may be.
"Person" means any individual, corporation, partnership, limited liability
company or partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Phase II Holdings" means Lido Casino Resort Holding Company, LLC, a
Delaware limited liability company and a subsidiary of Phase II Intermediate
Holdings.
"Phase II Intermediate Holdings" means Lido Intermediate Holding Company,
LLC, a Delaware limited liability company, and a Wholly Owned Subsidiary of the
Company.
"Phase II Land" means that portion of the Project Site designated as the
Phase II Land in the Collateral Documents, together with all improvements
thereon and all rights appurtenant thereto.
"Phase II Manager" means Lido Casino Resort MM, Inc., a special purpose
Wholly Owned Subsidiary of the Company.
"Phase II Resort" means the themed hotel and casino currently contemplated
to be constructed on the Phase II Land and which will be physically connected
to the Casino Resort.
"Phase II Subsidiary" means Lido Casino Resort, LLC, a Nevada limited
liability company and, at the Issuance Date, an Unrestricted Subsidiary of the
Issuers.
"Plans and Specifications" means the plans and specifications for the
construction of the Casino Resort listed in an exhibit to the Disbursement
Agreement, as the same may be modified from time to time in accordance with the
Disbursement Agreement.
"Pre-development Agreement" means the Sands Resort Hotel & Casino
Agreement dated February 18, 1997 by and between Clark County and the Company,
as amended, restated and modified from time to time.
"Preferred Stock" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"Principal Business" means the casino gaming, hotel, retail and
entertainment mall and resort business and any activity or business incidental,
directly related or similar thereto (including owning interests in
Subsidiaries, operating the conference center and meeting facilities and owning
and operating a retail and entertainment mall (including the Mall prior to its
transfer to the Mall Subsidiary) and acting as a member of Venetian in the case
of the Company), or any business or activity that is a reasonable extension,
development or expansion thereof or ancillary thereto, including any hotel,
entertainment, recreation, convention, trade show, meeting, retail sales or
other activity or business designed to promote, market, support, develop,
construct or enhance the casino gaming, hotel, retail and entertainment mall
and resort business operated by the Company, Venetian and direct and indirect
Restricted Subsidiaries (including, without limitation, engaging in
transactions with Affiliates and incurring Indebtedness, providing guarantees
or providing other credit support, in each case to the extent permitted under
the Senior Subordinated Note Indenture) owning and operating joint ventures to
supply materials or services for the
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construction or operation of any resorts owned or operated by the Company and
its Restricted Subsidiaries and entering into casino leases or management
agreements for any casino situated on land owned by the Issuers or any of their
Subsidiaries or owned or operated by the Issuers or any Affiliate of the
Issuers.
"Project" means the Venetian-themed hotel, casino, retail, meeting and
entertainment complex, with related heating, ventilation and air conditioning
and power station facilities to be developed at the Project Site, all as more
particularly described in Exhibit T-1 to the Disbursement Agreement.
"Project Architect" means collectively, TSA of Nevada, LLP, and WAT&G,
Inc. Nevada.
"Project Assets" means, with respect to the Project at any time, all of
the assets then in use related to the Project including any real estate assets,
any buildings or improvements thereon, and all equipment, furnishings and
fixtures, but excluding: (i) the Phase II Land and/or the Mall Collateral and
any improvements thereon after their transfer to the Unrestricted Subsidiary or
Special Subsidiary as permitted by the Senior Subordinated Note Indenture; (ii)
any obsolete personal property determined by the Company's Board of Directors
to be no longer useful or necessary to the operations or support of the
Project; (iii) the HVAC Equipment owned by the HVAC provider (unless purchased
by Venetian or the Mall Construction Subsidiary after the date hereof); and
(iv) any equipment leased from a third party in the ordinary course of
business.
"Project Budget" means the Project Budget as in effect on the Issuance
Date and attached as an exhibit to the Disbursement Agreement, as amended,
revised or modified from time to time in accordance with the terms thereof.
"Project Documents" means the Construction Management Agreement, the
Direct Construction Guaranty, the Indirect Construction Guaranty, the
Contracts, the Approved Equipment Funding Commitments, the Cooperation
Agreement, the HVAC Services Agreement, the Mall Lease, the Sale and
Contribution Agreement, the Treadway Agreement, the operating agreement of each
of Venetian, Mall Intermediate Holdings, Mall Holdings and Mall Subsidiary and
any other document or agreement entered into, relating to the development,
construction, maintenance or operation of the Project (other than the documents
relating to the Tranche A Take-out Commitment and the Tranche B Take-out
Commitment) as the same may be amended from time to time in accordance with the
terms and conditions of the Disbursement Agreement.
"Public Equity Offering" means a bona fide underwritten sale to the public
of common equity of the Company, Venetian or a Person holding more than 50% of
the common equity of the Company pursuant to a registration statement (other
than on Form S-8 or any other form relating to securities issuable under any
benefit plan of the Company) that is declared effective by the SEC and results
in gross aggregate proceeds to the Company or Venetian of at least $20.0
million.
"Quarterly Payment Period" means the period commencing on the tenth day
and ending on and including the twentieth day of each month in which federal
estimated tax payments are due (provided that payments in respect of estimated
state income taxes due in January may instead, at the option of the Issuers, be
paid during the last five days of the immediately preceding December).
"Related Parties" means (i) any spouse and any child, stepchild, sibling
or descendant of the Sole Stockholder, (ii) any estate of the Sole Stockholder
or any person under clause (i), (iii) any person who receives a beneficial
interest in the Company or Venetian from any estate under clause (ii) to the
extent of such interest, (iv) any executor, personal administrator or trustee
who holds such beneficial interest in the Company or Venetian for the benefit
of, or as fiduciary for, any person under clauses (i), (ii) or (iii) to the
extent of such interest, (v) any corporation, trust, or similar entity owned or
controlled by the Sole Stockholder or any person referred to in clause (i),
(ii), (iii) or (iv) or for the benefit of any person referred to in clause (i)
and (vi) the spouse or issue of one or more of the individuals described in
clause (i).
"Repurchase Offer" means an offer made by the Issuers to purchase all or
any portion of a holder's Senior Subordinated Notes pursuant to the covenants
described above under the captions entitled "Repurchase at the Option of
Holders--Change of Control" or "Repurchase at the Option of Holders--Asset
Sales."
"Restricted Investment" means (i) an Investment other than a Permitted
Investment or (ii) any sale, conveyance, lease, transfer or other disposition
of assets at less than fair market value to an Unrestricted
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Subsidiary, provided that the amount of such Restricted Investment under this
clause (ii) shall be such difference in value.
"Restricted Subsidiary" means, at any time, any direct or indirect
Subsidiary of the Issuers that is not then an Unrestricted Subsidiary or a
Special Subsidiary; provided, however, that upon the occurrence of any
Unrestricted Subsidiary or Special Subsidiary ceasing to be an Unrestricted
Subsidiary or Special Subsidiary, such Subsidiary shall be included in the
definition of "Restricted Subsidiary."
"Sale and Contribution Agreement" means that certain Sale and Contribution
Agreement among the Venetian, Mall Construction Subsidiary and Mall Subsidiary,
as such agreement may be amended, modified or renewed from time to time in
accordance with its terms.
"Senior Debt" means (i) all Indebtedness outstanding under Bank Credit
Facility and all Hedging Obligations with respect thereto, (ii) Indebtedness
represented by the Mortgage Notes and the Mortgage Note Guaranties, (iii) any
other Indebtedness permitted to be incurred by the Issuers under the terms of
the Senior Subordinated Note Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Senior Subordinated Notes and (iv) all
Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company or Venetian,
(x) any Indebtedness of the Company or Venetian to any of their Subsidiaries or
other Affiliates, (y) any trade payables or (z) any Indebtedness that is
incurred in violation of the Senior Subordinated Note Indenture.
"Senior Subordinated Note Make-Whole Premium" means, with respect to a
Senior Subordinated Note, an amount equal to the greater of (i) (a) 14.25% of
the Accreted Value if prior to the second anniversary of the Issuance Date of
such Senior Subordinated Note or (b) 14.25% of the outstanding principal amount
of such Senior Subordinated Note, if on or after the second anniversary of the
Issuance Date of such Senior Subordinated Note and (ii) the excess of (a) the
present value of the remaining interest, premium and principal payments due on
such Senior Subordinated Note as if such Senior Subordinated Note were redeemed
on November 15, 2001, computed using a discount rate equal to the Treasury Rate
plus 50 basis points, over (b) the outstanding principal amount of such Senior
Subordinated Note.
"Senior Subordinated Notes" means the $97.5 million in aggregate principal
amount of the Issuers 14 1/4% Senior Subordinated Notes due 2005, and any series
of senior subordinated notes issued in exchange for such Senior Subordinated
Notes pursuant to the Exchange Offer contemplated by the Registration Rights
Agreement.
"Services Agreement" means that Amended and Restated Services Agreement by
and among the Company, Interface, Interface Holdings and the parties thereto
stated on the signature page, as amended from time to time in accordance with
its terms.
"Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the
Issuance Date.
"Sole Stockholder" means Sheldon G. Adelson.
"Special Subsidiary" means the Mall Subsidiary, Mall Holdings, Mall
Manager and any other Subsidiary so designated by the Board of Directors of the
Company in accordance with the terms of the Senior Subordinated Note Indenture.
"Special Subsidiary Permitted Investments" means with respect to any
Special Subsidiary (a) any Investments in a Wholly Owned Subsidiary of such
Special Subsidiary engaged in a Special Subsidiary Principal Business; (b) any
Investments in Cash Equivalents; (c) receivables owing to such Special
Subsidiary or any Wholly Owned Subsidiary of such Special Subsidiary if created
or acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Special Subsidiary deems
reasonable under the circumstances; (d) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting
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purposes and that are made in the ordinary course of business; (e) loans or
advances to employees made in the ordinary course of business of the Special
Subsidiary; (f) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to Special
Subsidiary or a Subsidiary or in satisfaction of judgments and (g) other
Investments in any Person (other than an Affiliate of the Special Subsidiary)
having a fair market value (measured on the date of each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other investments made pursuant to this clause (g) that are
at the time outstanding, not to exceed $5.0 million.
"Special Subsidiary Principal Business" means business limited to the
following: (i) to acquire, hold, own, manage, market and operate a retail,
restaurant and entertainment complex known as the Grand Canal Shops Mall (the
"Property"), located at 3355 Las Vegas Boulevard, South, Las Vegas, Nevada,
(ii) to engage in the retail, restaurant and entertainment business at the
Property and any activity and business incidental, directly related or similar
thereto, and (iii) to engage in any business or activity that is a reasonable
extension, development or expansion thereof or ancillary thereto including any
retail, restaurant, entertainment or other activity or business designed to
promote, market, support, develop, construct or enhance the retail, restaurant
and entertainment business operated by Mall Subsidiary (including, without
limitation, owning and operating joint ventures to supply materials or services
for the construction or operation of the Property, engaging in transactions
with Affiliates to the extent permitted under the Senior Subordinated Note
Indenture, and incurring Indebtedness, providing guarantees or providing other
credit support). Special Subsidiary Principal Business does not mean any of the
foregoing to the extent engaged in on the Phase II Land.
"Special Subsidiary Restricted Investment" means (i) an Investment by a
Special Subsidiary or a Subsidiary of a Special Subsidiary other than a Special
Subsidiary Permitted Investment or (ii) any Investment by a Special Subsidiary
or a Subsidiary of a Special Subsidiary in the equity of the Issuers or any of
the Issuers' Restricted Subsidiaries.
"Specified FF&E" means any furniture, fixtures, equipment and other
personal property financed or refinanced with the proceeds from the incurrence
of Indebtedness pursuant to clauses (g), (h) or (p) of the covenant described
above under the caption "Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock," including (i) each and every item or unit of equipment
acquired with proceeds thereof, (ii) each and every item or unit of equipment
acquired in substitution or replacement thereof, (iii) all parts, components
and other items pertaining to such collateral, (iv) all documents (including,
without limitation, all warehouse receipts, dock receipts, bills of lading and
the like), (v) all licenses (other than gaming licenses), warranties,
guaranties, service contracts and related rights and interests covering all or
any portion of such collateral, (vi) to the extent not otherwise included, all
proceeds (including insurance proceeds) of any of the foregoing and all
accessions to, substitutions and replacements for, and the rents, profits and
products of, each of the foregoing, and (vii) so long as Indebtedness under the
Bank Credit Facility is outstanding, such other collateral reasonably
determined by the lenders under the Bank Credit Facility to be collateral for
Indebtedness incurred in connection with the purchase of Specified FF&E so long
as the Lien securing Indebtedness incurred under the Bank Credit Facility does
not extend to such collateral.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Indebtedness" means any Indebtedness of the Issuers or any
of their Restricted Subsidiaries which is expressly by its terms subordinated
in right of payment to the Senior Subordinated Notes or any Senior Subordinated
Note Guaranty.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof and (ii) any
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partnership of which more than 50% of the partnership's capital accounts,
distribution rights or general or limited partnership interests are owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Substitute Tranche B Loan" means amounts drawn upon under the guarantee
of the Sole Stockholder of the Tranche B loan of the Mall Construction Loan
Facility, which amounts, when drawn upon may be treated as a loan to the
Issuers from the Sole Stockholder.
"Supplier Joint Venture" means any Person that supplies or provides
materials or services to the Issuers or the Construction Manager or any
contractor in the Project and in which the Issuers or one of their Restricted
Subsidiaries have Investments.
"Tax Amount" means, with respect to a Estimation Period or a taxable year,
as the case may be, an amount equal to (A) the product of (x) the taxable
income (including all separately stated items of income) of the Company or
Venetian, as the case may be, for such Estimation Period or a taxable year, as
the case may be, and (y) the Applicable Tax Percentage reduced by (B) to the
extent not previously taken into account, any income tax benefit attributable
to the Company or Venetian, as the case may be, which could be utilized
(without regard to the actual utilization) by its members or shareholders, as
the case may be, in the current or any prior taxable year, or portion thereof,
commencing on or after the Issuance Date (including any tax losses or tax
credits), computed at the Applicable Tax Percentage of the year that such
benefit is taken into account for purposes of this computation; provided,
however, that, the computation of Tax Amount shall also take into account (C)
the deductibility of state and local taxes for federal income tax purposes, and
(D) any difference in the Applicable Tax Percentage resulting from the nature
of taxable income (such as capital gain as opposed to ordinary income).
"Tax Amounts CPA" means a nationally recognized certified public
accounting firm.
"Tranche A Take-out Commitment" means the commitment of Goldman Sachs
Mortgage Company or such other lender suitable to the Issuers, to enter into
and make a loan in an aggregate of up to $105.0 million thereunder under the
Permitted Mall Construction Refinancing or any other commitment to make such a
loan that replaces the commitment of Goldman Sachs Mortgage Company in
accordance with the Tri-Party Agreement.
"Tranche B Take-out Commitment" means the commitment of the Sole
Stockholder to enter into and fund a loan to Mall Subsidiary in an aggregate of
up to $35.0 million under the Permitted Mall Construction Refinancing or any
other commitment to make such a loan that replaces the commitment of the Sole
Stockholder in accordance with the Tri-Party Agreement.
"Tri-Party Agreement" means the agreement between Venetian, the Company,
the Sole Stockholder, the Mall Construction Subsidiary, the Mall Subsidiary,
the Mall Construction Lender and Goldman Sachs Mortgage Company (or any
successor provider of the Tranche A Take-out Commitment), as amended or
replaced from time to time in accordance with its terms.
"Treadway Agreement" means that certain Time and Materials Agreement
between Owner and Contractor, dated as of February 10, 1997, by and between the
Company and Treadway Industries of Phoenix, Inc., an Arizona corporation, as
amended, modified or revised from time to time in accordance with its terms.
"Treasury Rate" means the yield to maturity at the time of the computation
of the United States Treasury securities with a constant maturity (as compiled
by and published in the most recent Federal Reserve Statistical Release
H.15(519), which has become publicly available at least two Business Days prior
to the date fixed for prepayment (or, if such Statistical Release is no longer
published, any publicly available source of similar market data) most nearly
equal to the then remaining average life to November 15, 2001; provided,
however, that if the average life of such Senior Subordinated Note is not equal
to the constant maturity of the United States Treasury security for which
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the average life of such Senior Subordinated Notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
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"True-up Amount" means, in respect of a particular taxable year, an amount
determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year, without taking into account any adjustment to such
Permitted Quarterly Tax Distributions made with respect to any other taxable
year (including any adjustment to take into account a True-up Amount for the
immediately preceding taxable year) and (ii) the Tax Amount permitted to be
distributed in respect of such year as determined by reference to the Company's
Internal Revenue Service Form 1120-S or Venetian's IRS Form 1065 filed for such
year; provided, however, that if there is an audit or other adjustment with
respect to a return filed by the Company or Venetian (including a filing of an
amended return), upon a final determination or resolution of such audit or
other adjustment, the Tax Amounts CPA shall redetermine the True-up Amount for
the relevant taxable year. The amount equal to the excess, if any, of the
amount described in clause (i) above over the amount described in clause (ii)
above shall be referred to as the "True-up Amount due to the Company" or the
"True-up Amount due to Venetian," as the case may be, and the excess, if any,
of the amount described in clause (ii) over the amount described in clause (i)
shall be referred to as the "True-up Amount due to the shareholders members."
"True-up Determination Date" means the date on which the Tax Amounts CPA
delivers a statement to the Senior Subordinated Note Trustee indication the
True-up Amount; provided, however, that the True-up Determination Date shall
not be later than 30 days after the occurrence of an event requiring the
determination of the True-up Amount (including, the filing of the federal and
state tax returns or the final determination or resolution of an audit or other
adjustment, as the case may be).
"Unrestricted Subsidiary" means (i) each of Phase II Holdings, Phase II
Manager and Phase II Subsidiary; and (ii) any entity that would have been a
Restricted Subsidiary of the Company but for its designation as an
"Unrestricted Subsidiary" in accordance with the provisions of the Senior
Subordinated Note Indenture and any Subsidiary of such entity, so long as it
remains an Unrestricted Subsidiary in accordance with the terms of the Senior
Subordinated Note Indenture.
"Venetian" means, Venetian Casino Resort, LLC, a Nevada limited liability
company.
"Voting Stock" means, with respect to any Person that is a corporation,
any class or series of capital stock of such Person that is ordinarily entitled
to vote in the election of directors thereof at a meeting of stockholders
called for such purpose, without the occurrence of any additional event or
contingency and with respect to any other person that is a limited liability
company, membership interests entitled to manage the operation or business of
the limited liability company.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the number
of years (calculated to the nearest one-twelfth) obtained by dividing (a) the
sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount or liquidation preference, as applicable, of such Indebtedness
or Disqualified Stock, as the case may be.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that
is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
"Working Capital Facility" means the credit facility pursuant to any
agreement or agreements providing for the making of loans or advances on a
revolving basis, the issuance of letters of credit and/or the creation of
bankers' acceptances to fund the Issuers' or any of their Restricted
Subsidiaries' general corporate requirements and any amendment, supplement,
extension, modification, renewal, replacement or refinancing from time to time,
including any agreement to renew, extend, refinance or replace all or any
portion of such facility.
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BOOK-ENTRY, DELIVERY AND FORM
General
Except as set forth below, the New Notes will be issued in the form of one
or more registered notes in global form without interest coupons, in
denominations of $1,000 and integral multiples thereof (each a "Global Note").
Notes will not be issued in bearer form. The Global Notes will be deposited
upon issuance with the Mortgage Note Trustee or the Senior Subordinated Note
Trustee, as applicable, as custodian for The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee, in
each case for credit to an account of a direct or indirect participant in DTC
as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
In addition, transfer of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time. Beneficial interests
in the Global Notes may not be exchanged for Notes in certificated form except
in the limited circumstances described below. See "Exchanges of Book-Entry
Notes for Certificated Notes."
Exchanges of Book-Entry Notes for Certificated Notes
A beneficial interest in a Global Note may not be exchanged for a Note in
certificated form unless (i) DTC (x) notifies the Issuers that it is unwilling
or unable to continue as Depository for the Global Note or (y) has ceased to be
a clearing agency registered under the Exchange Act, and in either case the
Issuers thereupon fail to appoint a successor Depository, (ii) the Issuers, at
their option, notify the Mortgage Note Trustee or Senior Subordinated Note
Trustee, as applicable, in writing that they elect to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
an event of default or any event which after notice or lapse of time or both
would be an event of default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depository (in accordance with
its customary procedures). Any certificated Note issued in exchange for an
interest in a Global Note will bear the legend restricting transfers that is
borne by such Global Note. Any such exchange will be effected through the DTC
Deposit/Withdraw at Custodian ("DWAC") System and an appropriate adjustment
will be made in the records of the Security Registrar to reflect a decrease in
the principal amount of the relevant Global Note.
Certain Book-Entry Procedures for Global Notes
The descriptions of the operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them from time to time. The Issuers take no responsibility for
these operations and procedures and urges investors to contact the system of
their participants directly to discuss these matters.
DTC has advised the Issuers as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
DTC has advised the Issuers that its current practice, upon the issuance
of the Global Note, is to credit, on its internal system, the respective
principal amount of the individual beneficial interest represented by such
Global Notes to the accounts with DTC of the participants through which such
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interests are to be held. Ownership of beneficial interests in the Global Notes
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominees (with respect to interests
of participants) and the records of participants and indirect participants
(with respect to interests of persons other than participants).
As long as DTC, or its nominee, is the registered Holder of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner and
Holder of the Mortgage Notes or Senior Subordinated Notes, as applicable,
represented by such Global Note for all purposes under the Mortgage Note
Indenture and the Mortgage Notes or the Senior Subordinated Note Indenture and
the Senior Subordinated Notes, as applicable. Except in the limited
circumstances described above under "--Exchanges of Book-Entry Notes for
Certificated Notes," owners of beneficial interests in a Global Note will not
be entitled to have any portions of such Global Note registered in their names,
will not receive or be entitled to receive physical delivery of Notes in
definitive form and will not be considered the owners or Holders of the Global
Note (or any Notes represented thereby) under the applicable indenture or
Notes.
Investors may hold their interests in the Global Note directly through
DTC, if they are participants in such system, or indirectly through
organizations which are participants in such system. The depositories, in turn,
will hold such interests in the Global Note in customers' securities accounts
in the depositories' names on the books of DTC. All interests in a Global Note
will be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such persons may
be limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and certain
banks, the ability of a person having beneficial interests in a Global Note to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on Global Notes will be made to DTC or its nominee as the
registered owner thereof. Neither the Company, Venetian, the Mortgage Note
Trustee, the Senior Subordinated Note Trustee nor any of their respective
agents will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Issuers expect that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note representing any Notes held
by it or its nominee, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Note for such Notes as shown on the records of DTC or its
nominee. The Issuers also expect that payments by participants to owners of
beneficial interests in such Global Note held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name."
Such payments will be the responsibility of such participants. None of the
Company, Venetian or the Mortgage Note Trustee or the Senior Subordinated Note
Trustee will be liable for any delay by DTC or any of its participants in
identifying the beneficial owners of the Notes, and the Issuers and the
Mortgage Note Trustee and the Senior Subordinated Note Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its
nominee as the registered owner of such Notes for all purposes.
Interests in the Global Notes will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of Mortgage Notes or Senior Subordinated Notes only at the
direction of one or more participants to show accounts with DTC interests in
the Global Notes are credited and only in respect of such portion of the
aggregate principal amount of the Notes as to which such participant or
participants has or have given such direction.
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However, if there is an Event of Default under the Mortgage Notes or the Senior
Subordinated Notes (each as defined above), DTC reserves the right to exchange
the Global Notes for legended Notes in certificated form, and to distribute
such Notes to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Notes among
participants of DTC, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Company, Venetian, the Mortgage Note Trustee, the Senior
Subordinated Note Trustee, nor any of their respective agents will have any
responsibility for the performance by DTC, or their participants or indirect
participants, of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in Global Notes.
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DESCRIPTION OF DISBURSEMENT AGREEMENT
The Issuers, the Mall Construction Subsidiary, the Mortgage Note Trustee,
The Bank of Nova Scotia, as the Bank Agent, the Mall Construction Lender, The
Bank of Nova Scotia, as the Disbursement Agent, and the HVAC Provider have
entered into the Disbursement Agreement. The following summary of the material
provisions of the Disbursement Agreement does not purport to be complete and is
qualified in its entirety by reference to the Disbursement Agreement, including
the definitions therein of certain terms used below. Capitalized terms that are
used but not otherwise defined in this Prospectus have the meanings assigned to
them in the Disbursement Agreement. For purposes of this "Description of
Disbursement Agreement," and the term "Company" refers to Las Vegas Sands,
Inc., Venetian Casino Resort, LLC and the Mall Construction Subsidiary,
collectively, and not to any of their respective subsidiaries. Although the
FF&E Lenders will not be parties to the Disbursement Agreement, the funding
conditions with respect to the FF&E Credit Facility are substantially similar
to those set forth in the Disbursement Agreement; provided, however, that the
FF&E Credit Facility include additional funding conditions to the effect that
the FF&E Lenders are not obligated to advance funds under the FF&E Credit
Facility: (a) until the Company can demonstrate that the Casino Resort will be
opened within the succeeding 8 months; and (b) if the Expo Center is closed for
30 consecutive days unless closure results from a casualty and the Company is
able to demonstrate that the resulting damage can be repaired by November 1,
1999 (or by January 31, 2000 with respect to casualty events occurring after
November 1, 1998). See "Description of Certain Indebtedness--FF&E Credit
Facility." A copy of the Disbursement Agreement has been filed with the
Commission as an exhibit to the Registration Statement.
General
The Disbursement Agreement sets forth the material obligations of the
Company to construct and complete the Casino Resort and establishes a line item
budget for the Casino Resort and a schedule for construction of the Casino
Resort. The Disbursement Agreement also establishes the conditions to, and the
relative sequencing of, the making of disbursements from the cash portion of
the Equity Contribution, the proceeds from the Offering, the Bank Credit
Facility, the Mall Construction Loan Facility and the funding commitment of the
HVAC Provider, and establishes the obligations of the Mortgage Note Trustee,
the Bank Agent, the Mall Construction Lender and the HVAC Provider to make
disbursements under their respective funding commitments upon satisfaction of
such conditions. The Disbursement Agreement further sets forth (i) the
mechanics for allocating disbursement requests among the funding sources, (ii)
the mechanics for approving change orders and amendments to the Project Budget
and schedule during the construction period, (iii) certain representations,
warranties, covenants and events of default that are common to the various
credit facilities, (iv) the conditions for release of the Phase II Land and the
Mall Collateral from the lien of the Collateral Documents, and (v) the
conditions to the exercise of the Disbursement Agent's right to draw on the
irrevocable, stand-by letters of credit furnished by the HVAC Provider if the
HVAC Provider does not comply with its funding obligations set forth in the
Disbursement Agreement.
The Disbursement Agreement provides that the Company is only permitted to
use the proceeds of the Offering, the Bank Credit Facility, the Mall
Construction Loan Facility and the cash portion of the Equity Contribution to
pay for Project Costs related to the Casino Resort, excluding the HVAC
Equipment and the Specified FF&E; provided, however, that (a) after the funding
commitment of the HVAC Provider has been fully utilized, the Company will be
permitted to use proceeds of the Offering, the Bank Credit Facility, the Mall
Construction Loan Facility and all cash equity contributions to pay costs
related to the HVAC Equipment if the Company can demonstrate that it has
sufficient funds (net of a specified amount of contingency reserves but
including certain lending commitments and amounts available under the
Completion Guaranty) available to complete the Casino Resort, and (b) the
Company will be permitted to use proceeds of the Offering, the Bank Credit
Facility, the Mall Construction Loan Facility and all cash equity contributions
to pay costs related to the Specified FF&E if the items of Specified FF&E that
will be acquired with such proceeds will not be subject to a lien in favor of
any Person other than the Bank Agent, the Mall Construction Lender and the
Mortgage Note Trustee and if the Company can demonstrate that it has sufficient
funds (net of a specified amount of contingency reserves but including certain
lending commitments and amounts available under the Completion Guaranty)
available to complete the Casino Resort.
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Funding Order
The Disbursement Agreement sets forth the sequencing order in which funds
from the various sources will be made available to the Company.
All disbursement requests permitted to be made from the proceeds of the
Offering, the Bank Credit Facility, the Mall Construction Loan Facility and
cash equity contributions shall be funded in the following sequence: (i) first,
from the cash equity contributions and certain other cash amounts received by
the Company and on deposit from time to time in the Company's Funds Account
(including the proceeds of the Senior Subordinated Notes), until exhausted,
(ii) then, pro rata from proceeds of the Mortgage Notes, the Bank Credit
Facility, and the Mall Construction Loan Facility. The Disbursement Agreement
also provides that the Company is only permitted to use proceeds of the funding
commitment of the HVAC Provider to pay for Project Costs related to the HVAC
Equipment.
Construction of the Casino Resort commenced in April 1997, and the Company
has incurred significant costs in connection with the Casino Resort prior to
the Offering. Pursuant to the Disbursement Agreement, the Construction
Consultant confirmed that such costs were incurred within the parameters set
forth in the approved Project Budget.
Accounts
In order to implement the funding of disbursements, the Disbursement
Agreement calls for the establishment of certain accounts, each of which is or
shall be, pursuant to a Control Account Agreement, subject to a security
interest in favor of the lenders under the Bank Credit Facility and the Mall
Construction Loan Facility and the Mortgage Note Holders (provided that (i) the
Mortgage Notes Proceeds Account is subject to a security interest in favor of
the Mortgage Note Holders only and (ii) the Mall Construction Proceeds Account
shall be owned by the Mall Subsidiary and pledged to the Mall Subsidiary's
lenders). Such accounts include the following:
Company's Funds Account
The net proceeds of the Senior Subordinated Notes and the cash portion of
the Equity Contribution and all other contributions required to be made by or
on behalf of the Company (except to the extent used to (i) pay Project Costs
incurred prior to the Issuance Date and (ii) repay the Construction Loan),
including contributions made pursuant to the Completion Guaranty, were
deposited into the Company's Funds Account. Subject to certain exceptions,
there shall also be deposited into the Company's Funds Account all amounts
received by the Company in respect of casualty and liquidated damages insurance
policies, liquidated or other damages under the Construction Management
Contract, the Construction Management Contract Guaranty, the P&O Guaranty and
certain other contracts, in each case, prior to final completion of the Casino
Resort. Amounts on deposit in the Company's Funds Account are or shall be held
in escrow and invested in cash or Cash Equivalents by the Disbursement Agent
until transferred, from time to time on each disbursement date, to the
Disbursement Account for the payment of Project Costs. Investment income from
amounts on deposit in the Company's Funds Account shall be deposited therein.
Mortgage Notes Proceeds Account
The net proceeds of the Mortgage Notes were deposited into the Mortgage
Notes Proceeds Account. Amounts on deposit in the Mortgage Notes Proceeds
Account are held in escrow and invested in cash or cash equivalents by the
Disbursement Agent until (i) transferred, from time to time on each
disbursement date, to the Disbursement Account for the payment of Project
Costs; and (ii) upon the occurrence of certain events, to repurchase a portion
of the Mortgage Notes. Investment income from amounts on deposit in the
Mortgage Notes Proceeds Account shall be deposited therein.
Disbursement Account
It is anticipated that all disbursements for major Project Costs will be
made from the Disbursement Account. On each disbursement date, each of the Bank
Agent, Mall Construction Lender and the HVAC Provider will deposit in the
Disbursement Account its facility's portion of the requested disbursement. Upon
confirming that such deposits have been made, the Disbursement Agent will
transfer from the Company's Funds Account and the Mortgage Notes Proceeds
Account the portions of the disbursement to be funded therefrom. Amounts in the
Disbursement Account will be transferred to the Cash Management Account
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and/or applied to pay Project Costs by disbursement to the Construction Manager
and other Persons providing goods or services to the Project.
Cash Management Account
The Cash Management Account is designed as an administrative convenience
that permits the Company to fund various Project Costs between dates on which
funds for major expenditures are released from the Disbursement Account. The
Cash Management Account is funded from time to time from the Disbursement
Account, using the proceeds of the disbursements. The Company is permitted to
withdraw funds from the Cash Management Account to pay Project Costs, from time
to time, during the periods between disbursement dates. The balance in the Cash
Management Account, which will not be allowed to exceed $6,500,000, will be
replenished only upon delivery by the Company of certificates, invoices and
other items demonstrating that all previous withdrawals from the Cash
Management Account have been applied to pay for Project Costs in accordance
with the Project Budget.
Pre-Completion Revenues Account
Until final completion of the Casino Resort, the Company is required to
deposit all revenues from operation of the Casino Resort in the Pre-Completion
Revenues Account. Amounts from time to time on deposit in the Pre-Completion
Revenues Account may be used by the Company to pay expenses related to the
operation of the Casino Resort or any portion thereof, including, after opening
of the Casino Resort, interest and other debt service. Amounts on deposit in
the Pre-Completion Revenues Account, to the extent in excess of amounts used
for operating expenses and a specified reserve, may, at the option of the
Company, be transferred to the Disbursement Account for the payment of Project
Costs. Any amounts so transferred shall (i) reduce the Bank Credit Facility's
pro rata portion of the Company's disbursement request and (ii) reduce the
total amount of the funding commitment under the Bank Credit Facility at a rate
of 75 cents for every $1.00 transferred to the Disbursement Account. At final
completion of the Casino Resort (or such earlier date as may be required by the
Bank Cedit Facility), any amounts on deposit in the Pre-Completion Revenues
Account shall be used to pay any principal that would have become payable on
the Bank Credit Facility had amortization of such facility commenced upon
opening of the Casino Resort. Any further amounts in the Pre-Completion
Revenues Account shall be released to the Company.
Mall Construction Proceeds Account
On the Mall Release Date, the Mall Construction Lender shall fund the
remaining unutilized commitment under the Mall Construction Facility into the
Mall Construction Proceeds Account. The Mall Construction Proceeds Account will
then be transferred to the Mall Subsidiary under the Sale and Contribution
Agreement and thereafter become subject to an escrow agreement. Pursuant to
such escrow agreement, the Mall Subsidiary will agree to disburse funds from
the Mall Construction Proceeds Account in order to fund any remaining
construction costs of the Casino Resort.
Funding Conditions
The Disbursement Agreement authorizes disbursement requests only upon the
satisfaction of various conditions precedent. These conditions include, among
others: (i) delivery by the Company of a disbursement request and certificate
certifying as to, among other things, (a) the application of funds to be
disbursed, (b) the substantial conformity of construction undertaken to date
with the Plans and Specifications, as amended from time to time in accordance
with the Disbursement Agreement, (c) the expectation that the Casino Resort
will achieve Completion by the Outside Completion Deadline, (d) the accuracy of
the Project Budget, as amended from time to time in accordance with the
Disbursement Agreement, (e) the sufficiency of remaining funds (net of a
specified amount of contingency reserves, but including certain lending
commitments and amounts available under the Completion Guaranty or under
certain financing commitments) to complete the Casino Resort, and (f)
compliance with line item budget allocations (as such allocations may be
amended from time to time in accordance with the Disbursement Agreement),
taking into account allocations for contingencies; (ii) delivery by the
Construction Manager, the Construction Consultant and the Project Architect of
certificates corroborating various matters set forth in the Company's
disbursement request and certificate; (iii) absence of a Default or Event of
Default under the Disbursement Agreement; (iv) each Operative Document being in
full force and effect; (v) the representations and warranties of the Company
and, to the Company's knowledge, the other parties to the Project Documents,
being true and correct in all material respects as if made on such date (except
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those that relate to a different date) unless the failure of the foregoing to
be the case would not have a material adverse effect; (vi) all of the Security
Documents being in full force and effect and all action having been taken as is
required to perfect and accord the appropriate priority to the security
interests granted under such Security Documents; (vii) receipt by the Company
of the governmental approvals required to be in effect at such time; (viii)
delivery by the Company to the Disbursement Agent of the acknowledgments of
payment and lien releases required under the Disbursement Agreement; (ix)
procurement of all required title insurance policies, commitments and
endorsements insuring that the Project continues to be subject only to
Permitted Liens; (x) the absence of pending or threatened material litigation;
(xi) procurement of all insurance policies required under the Disbursement
Agreement; and (xii) all additional Company equity (including amounts required
to be funded pursuant to the Completion Guaranty) required to have been funded
at such time having been funded. Pursuant to the Intercreditor Agreement and
subject to certain limitations, the Bank Agent and the Mall Construction
Lender, acting jointly, have the right (without obtaining the Morgage Note
Holders' or the HVAC Provider's consent) to waive certain conditions precedent
to funding. See "Risk Factors--Sole Stockholder" and "Description of
Intercreditor Agreement."
Construction Budget and Schedule
The Disbursement Agreement contains provisions generally designed to
assure that amendments to the budget and the Plans and Specifications can be
implemented only pursuant to guidelines administered by the Construction
Consultant and the Disbursement Agent. For example, the Disbursement Agreement
provides that the Company may amend the Project Budget to reallocate amounts
among the different Line Item Categories only upon the satisfaction of certain
conditions set forth therein. Such conditions generally include delivery by the
Company of a certificate describing the proposed amendment, identifying with
particularity the availability of funds to pay for any increased Line Item
Categories and certifying as to, among other things: (i) the reasonableness of
the Project Budget after giving effect to the proposed amendment; (ii)
substantial conformity with the Plans and Specifications, as amended from time
to time in accordance with the Disbursement Agreement; (iii) the expectation
that the Casino Resort will achieve Completion by the Outside Completion
Deadline; and (iv) the sufficiency of remaining funds (net of a specified
amount of contingency reserves, but including certain lending commitments and
amounts available under the Completion Guaranty) to complete the Casino Resort.
The conditions to amendment of the Project Budget also include the delivery by
the Construction Consultant of certificates corroborating certain matters set
forth in the Company's certificate. Increases to any Line Item Category will
only be permitted to the extent of (i) Realized Savings in a different Line
Item Category, (ii) allocation of previously "unallocated contingency," subject
to a specified minimum balance required, from time to time, to be maintained in
the "unallocated contingency" line item, (iii) additional Casino Resort
revenues on deposit in the Pre-Completion Revenues Account, less certain
specified deductions, (iv) additional Company equity and other amounts, to the
extent deposited in the Company's Funds Account or (v) an increase in the
amount available under the Completion Guaranty to the extent collateral in the
amount of such increase is pledged to the Disbursement Agent. The Company may
reallocate amounts among line items within the same Line Item Category so long
as after giving effect to such reallocation the amounts set forth for each line
item are sufficient, in the judgment of the Company and the Construction
Consultant, to complete the work covered thereby. The Company may, from time to
time, amend the Project Schedule to extend the Outside Completion Deadline, but
not beyond the second anniversary of the Issuance Date, by delivering to the
Disbursement Agent a certificate describing the amendment and complying with
the conditions set forth above with respect to the changes in the Project
Budget that will result from the extension of the Outside Completion Deadline.
If a casualty or Force Majeure Event occurs, the Company will be permitted to
extend the Outside Completion Deadline beyond the second anniversary of the
Issuance Date (but in no event beyond the third anniversary of such date) if
the Company certifies and the Construction Consultant confirms that such
extension is necessary to overcome delays caused by the casualty or Force
Majeure Event and the Company satisfies certain other conditions.
Covenants
The Disbursement Agreement contains various affirmative covenants that the
Company is obligated to comply with. Such covenants include the following: (i)
to use the proceeds of equity contributions, the Offering, the Bank Credit
Facility, the Mall Construction Loan Facility and the funding commitment of the
HVAC Provider only to pay Project Costs in accordance with the Project Budget
and the Disbursement Agreement; (ii) to repay all indebtedness in accordance
with its terms; (iii) to maintain its existence and
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engage only in the business permitted by the Disbursement Agreement; (iv) to
construct the Casino Resort diligently and substantially in accordance with the
Plans and Specifications (as the same may be amended from time to time in
accordance with the Disbursement Agreement); (v) to construct, maintain and
operate the Casino Resort in accordance in all material respects with all
applicable laws and procure, maintain and comply with all required governmental
approvals in all material respects; (vi) to permit the Mortgage Note Trustee to
inspect the Casino Resort and to examine the Company's books and records; (vii)
to provide the Mortgage Note Trustee with (a) annual audited and quarterly
unaudited consolidated financial statements of the Company and certain other
parties and (b) certain construction progress reports and other reports,
certificates and notices with respect to the Casino Resort; (viii) to cause to
be deposited into the Company's Funds Account all additional required equity as
and when required; (ix) to indemnify the Mortgage Note Trustee against claims,
expenses, obligations and liabilities incurred or asserted against it in
connection with its participation in the transactions contemplated, subject to
certain exceptions; (x) to maintain and preserve the liens of the Security
Documents and the priority thereof; and (xi) to maintain and comply with the
required insurance policies. See "Insurance Requirements."
The Disbursement Agreement also requires the Company to comply with
various negative covenants. These covenants prohibit the Company from, among
other things: (i) amending, terminating or waiving any right under (a) the
Financing Agreements, the Construction Management Contract Guaranty, the P&O
Guaranty, the Cooperation Agreement, the Mall Lease, the Master Lease for the
Additional Billboard Space, the Casino Lease, the Sale and Contribution
Agreement, the HVAC Services Agreement and certain other documents without
(subject to certain "safe harbor" exceptions) obtaining (A) the consent of the
Bank Agent and the Mall Construction Lender and (B) the consent of the Mortgage
Note Trustee or confirmation from the Rating Agencies that such amendment,
termination or waiver will not cause a rating agency downgrade of the Mortgage
Notes, (b) certain other Project Documents or any governmental approvals if
such amendment, termination or waiver could reasonably be expected to result in
a Material Adverse Effect or (c) the Construction Management Contract or
certain other contracts, unless the Company provides the certifications and
complies with the procedures set forth in the Disbursement Agreement; (ii)
entering into new Material Project Documents unless the Company provides the
certifications and complies with the procedures set forth in the Disbursement
Agreement; (iii) implementing any change in the Plans and Specifications or any
change order under the Construction Management Contract or other contracts,
without obtaining the consents and/or confirmation described in clauses
(i)(a)(A) and (i)(a)(B) above if such change or change order (a) requires an
amendment to the Project Budget, unless the Company complies with the
procedures for amending the Project Budget, (b) will cause the plans and
specifications to no longer comply with certain parameters, (c) could
reasonably delay Completion beyond the Outside Completion Deadline, (d) is not
permitted by a Project Document, or (e) could reasonably be expected to
adversely affect the Company's compliance with legal requirements and
governmental approvals; (iv) amending the Project Budget or the project
schedule except in accordance with the procedures set forth in the Disbursement
Agreement; or (v) releasing any hazardous substance in violation of any legal
requirement or governmental approval if it could reasonably be expected to have
a Material Adverse Effect.
Release of Phase II Land
The Disbursement Agreement sets forth the conditions upon which the Bank
Agent and the Mortgage Note Trustee will release their respective liens on the
Phase II Land. Such conditions include the creation of the Phase II Land as a
separate legal parcel, delivery of legal opinions to the same effect and the
issuance of title insurance endorsements ensuring the priority of the Bank
Agent's and the Mortgage Note Trustee's liens on the remaining portions of the
Note Collateral.
Transfer of Mall and Final Disbursements
The Disbursement Agreement provides that upon substantial completion of
the Casino Resort (i) the Mall will be transferred from the Mall Construction
Subsidiary to the Mall Subsidiary, (ii) the Bank Agent and the Mortgage Note
Trustee will release their respective liens on the Mall Collateral, (iii) the
Issuers will be released from all further obligations under the Mall
Construction Loan Facility and any Substitute Tranche B Loan and (iv) the final
advance will be made under the Mall Construction Loan Facility in an amount
equal to the
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remaining unutilized commitment under such facility and be deposited in the
Mall Construction Proceeds Account. Such proceeds shall be released to the
Company for the payment of retainage amounts and other Project Costs upon
satisfaction of certain specified conditions precedent.
Events of Default and Remedies
The Disbursement Agreement provides that each of the following constitutes
an Event of Default thereunder: (i) the occurrence of certain "events of
default" under the other Financing Agreements; (ii) the failure, from time to
time, of remaining funds (net of a specified amount of contingency reserves,
but including amounts available under lending commitments and the Completion
Guaranty) to be sufficient to complete the Casino Resort on or before the
Outside Completion Deadline, if such failure has not been remedied within 30
days; (iii) the failure of any representation or warranty made in any Operative
Document by the Company, the Sole Stockholder, or an affiliate of any of them
to have been correct when made or deemed made in any material respect, if such
failure could reasonably be expected to result in a material adverse effect and
if such failure has not been remedied within 30 days after notice thereof; (vi)
default by the Company in its compliance with any affirmative or negative
covenant contained in the Disbursement Agreement, subject to certain cure
periods not to exceed 90 days; (vii) default by the Company or any other party
thereto of any Project Document the effect of which reasonably could be
expected to have a Material Adverse Effect, subject to reasonable cure and
substitution rights by the Company; (viii) failure of any of the Security
Documents to be in full force and effect or to provide the secured parties
thereunder the security interest intended to be granted therein; (ix) any of
the Cooperation Agreement, the HVAC Services Agreement, the Construction
Management Contract Guaranty or the P&O Guaranty shall have terminated or
otherwise become invalid or illegal; (x) any of the other Project Documents
shall have terminated or otherwise become invalid or illegal, subject to
reasonable cure and substitution rights by the Company; (xi) the Company
ceasing to own the Project Site, the Improvements or certain easements, subject
to certain permitted exceptions; (xii) the Company abandoning the Casino Resort
or selling or disposing of its interest therein; (xiii) any governmental
approvals necessary for the ownership, construction, maintenance, financing or
operation of the Project being modified, revoked or cancelled and the effect of
such modification, revocation or cancellation is reasonably likely to have a
Material Adverse Effect; or (xiv) failure to achieve the Completion Date on or
before the Outside Completion Deadline.
The exercise of remedies relating to a Disbursement Agreement Event of
Default is subject to the Intercreditor Agreement. Pursuant to the
Intercreditor Agreement, the exercise of any such remedies is subject to
significant restrictions on actions. See "Description of Intercreditor
Agreement." Subject to such restrictions on their exercise, the remedies under
the Disbursement Agreement include: (i) termination of the Commitments and the
obligations to make any further disbursements; (ii) declaration of any and all
amounts outstanding under the Financing Transactions to be immediately due and
payable, provided that upon an Event of Default relating to the bankruptcy or
insolvency of the Company, all such amounts shall automatically become due and
payable; (iii) taking possession of the Casino Resort and completing its
construction and/or operating and maintaining the Casino Resort; (iv) setting
off and applying all monies on deposit in any account with the Disbursement
Agent to the satisfaction of all amounts outstanding under the Financing
Transactions, subject to certain priorities; (v) subject to certain
limitations, exercising the Company's rights under the various Project
Documents; and (vi) exercising any and all rights and remedies available under
the Financing Transactions. The Disbursement Agreement will terminate on or
about the date on which Completion occurs.
Pursuant to the Intercreditor Agreement and subject to certain
limitations, the Bank Agent and the Mall Construction Lender, acting jointly,
have the right (without obtaining the Mortgage Note Holders' or the HVAC
Provider's consent) to waive certain defaults and funding conditions under the
Disbursement Agreement. See "Risk Factors--Sole Stockholder" and "Description
of Intercreditor Agreement."
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DESCRIPTION OF INTERCREDITOR AGREEMENT
The Bank Agent, the Mall Construction Lender, the Mortgage Note Trustee
and the Senior Subordinated Note Trustee have entered into the Intercreditor
Agreement setting forth certain agreements among them regarding, among other
things, the priority of their claims and interests in the Note Collateral, the
Mall Collateral and other assets of the Issuers, the method of decision making
for the lenders, the arrangements applicable to actions with respect to
approval rights and waivers, certain limitations on rights of enforcement upon
default and the application of proceeds of enforcement. The following summary
of the material provisions of the Intercreditor Agreement does not purport to
be complete and is qualified in its entirety by reference to the Intercreditor
Agreement, including the definitions therein of certain terms used below. A
copy of the Intercreditor Agreement is available upon request to the Company. A
copy of the Intercreditor Agreement has been filed with the Commission as an
exhibit to the Registration Statement.
Although the FF&E Lenders and the HVAC Provider are not parties to the
Intercreditor Agreement, they have entered into other arrangements with the
lenders under the Bank Credit Facility, the Mall Construction Lender and the
Mortgage Note Trustee concerning exercise of remedies and other intercreditor
issues. See "Description of Certain Indebtedness--FF&E Credit Facility" and
"Certain Material Agreements--Agreements Relating to the Casino Resort--HVAC
Services Agreement and Related Documents."
Permitted Facility Amendments; Additional Indebtedness
The Intercreditor Agreement provides that the lenders under the Bank
Credit Facility and the Mall Construction Lender may amend their respective
facilities with the Issuers without the consent of the holders of the Mortgage
Notes or the Senior Subordinated Notes so long as such amendment does not: (i)
increase the maximum principal amount of Indebtedness under such facility by
more than the amounts permitted under the Indentures (which permit an
additional $20.0 million in the aggregate to be incurred prior to Mall Release
Date and $40.0 million in the aggregate to be incurred after Mall Release Date
under such facilities); (ii) except as permitted in the Disbursement Agreement,
reduce the unfunded commitment thereunder prior to Completion; (iii) reduce the
weighted average life to maturity of the existing indebtedness under the Bank
Credit Facility after giving effect to such amendment; and (iv) certain other
conditions are met.
The Intercreditor Agreement also provides that, upon the occurrence of a
potential event of default or event of default under the Disbursement
Agreement:
(i) the lenders under the Bank Credit Facility and the Mall Construction
Loan Facility may, without obtaining the consent of the Mortgage Notes or the
Senior Subordinated Notes, increase the amounts of their respective credit
facilities and/or advance additional loans to the Issuers secured with the same
priority as the original commitments so long as: (a) the aggregate maximum
amount of any such additional Indebtedness does not exceed $30.0 million; (b)
such additional Indebtedness is matched, dollar for dollar, by additional
equity investments in the Issuers; (c) all such additional Indebtedness will be
used to pay project costs and reasonable fees, costs and expenses incurred in
connection with such additional Indebtedness; (d) the applicable margin under
the additional Indebtedness will not exceed 7.0% per annum for base rate loans
and 8.0% per annum for Eurodollar rate loans; and (e) for any such additional
Indebtedness advanced by the lenders under the Bank Credit Facility, no
principal payments may be made prior to the later of (i) three years from the
Issuance Date and (ii) one year from the date of Completion; and
(ii) with the consent of a majority in principal amount of the holders of
the Mortgage Notes and the Senior Subordinated Notes, the Issuers will have the
right to issue additional secured indebtedness without the consent of the
lenders under the Bank Credit Facility or the Mall Construction Lender so long
as the incurrence of such Indebtedness complies with the following conditions:
(a) the maximum principal amount of any additional Indebtedness thereunder does
not exceed $50.0 million ("Additional Capital Proceeds"); (b) such additional
Indebtedness is matched, dollar for dollar, by additional equity investments in
the Issuers; (c) all such additional Indebtedness will be used to pay project
costs and reasonable fees, costs and expenses incurred in connection with such
additional Indebtedness; (d) such Indebtedness may
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be secured by Liens on the Note Collateral (but not the Mortgage Notes Proceeds
Account) so long as such Liens are subordinate to the liens in favor of the
lenders under the Bank Credit Facility and the Mall Construction Lender and are
subordinate or pari passu to liens in favor of the Mortgage Note Trustee and
the holders of the Mortgage Notes; (e) no cash payments of principal or
interest on any such indebtedness will be permitted until the first to occur of
the Mall Release Date and the date the Mall Construction Loan Facility has been
repaid in full and after such date no such cash payments of principal will be
permitted unless the Bank Credit Facility has been repaid in full; (f) the
maturity date for such additional Indebtedness will be at least six months
after the maturity date for the Bank Credit Facility; and (g) the holders of
any such additional Indebtedness will become parties to the Intercreditor
Agreement.
With respect to any Indebtedness advanced by the Mall Construction Lender
under the Intercreditor Agreement, it shall be a condition to the incurrence of
such Indebtedness that: (i) no principal payments may be made until at least
the maturity date of the Mall Construction Loan Facility; and (ii) Mall
Construction Lender shall confirm that Venetian and LVSI shall be released from
such additional indebtedness at Completion.
The Intercreditor Agreement also provides that the lenders under the Bank
Credit Facility, the Mall Construction Lender and the holders of the Mortgage
Notes have the right to make additional "protective" advances under their
respective loan facilities in order to protect, preserve, repair and maintain
the Casino Resort and their respective security interests therein. For example,
the Intercreditor Agreement provides that these lenders may make such advances
under their loan facilities (i) to pay delinquent taxes or insurance premiums,
(ii) to pay claims that otherwise might have lien priority over the liens of
the advancing lender, (iii) to pay Project Costs accruing or payable at any
time when disbursements are not permitted under the Disbursement Agreement, and
(iv) to pay amounts necessary to preserve the continued availability of thermal
energy services under the HVAC Service Agreements and the continued
availability of undisbursed funds under the FF&E Credit Facility. Any amounts
so advanced will be secured by the lien granted to secure the loan provided by
the advancing lender. In the event such advances are made at a time when the
other lenders and/or the HVAC Provider are not permitting disbursements under
the Disbursement Agreement because of the existence of an event of default
thereunder, and if such event of default is later cured, then the lender
providing such advances shall receive credit against the disbursements next due
from such lender until such time as the aggregate advances from the Mortgage
Notes Proceeds Account, the Bank Credit Facility and the Mall Construction Loan
once again are brought back into pro rata balance. The Intercreditor Agreement
further provides that any such protective advances made by a lender shall be
secured by its respective security interests in the same priority as regular
advances made by the lender in accordance with the Disbursement Agreement.
Waiver of Defaults
The Intercreditor Agreement provides that, prior to Completion and subject
to certain limitations, the lenders under the Bank Credit Facility and the Mall
Construction Loan Facility, acting jointly, may waive (i) any Events of Default
under the Disbursement Agreement that arise from acts or events which would not
independently constitute defaults or events of default under the Mortgage Notes
Indenture or (ii) failure by the Issuers to satisfy any conditions precedent to
obtaining disbursements under the Disbursement Agreement; provided, however,
that without the consent of the Mortgage Note holders, the lenders under the
Bank Credit Facility and the Mall Construction Loan Facility may not waive an
Event of Default resulting from, or a condition relating to, implementation of
scope changes that, pursuant to the Disbursement Agreement, require either
approval of a majority of the holders of the Mortgage Notes or confirmation
that the ratings for the Mortgage Notes will not be downgraded. See "Risk
Factors--Sole Stockholder" and "Description of Disbursement
Agreement--Covenants."
Events of Default; Pre-Completion Remedies
Upon the occurrence of an uncured and unwaived Event of Default under the
Disbursement Agreement, each party to the Intercreditor Agreement may declare
an event of default under its respective financing agreements and accelerate
all obligations due thereunder; provided, however, that, unless the lenders
otherwise agree, no party shall be entitled to exercise remedies against the
Issuers or with respect to the collateral until the expiration of the
Standstill Period (a period of 45 days following the occurrence of the Event of
Default), except that: (i) the Mortgage Notes may be paid regularly scheduled
interest
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payments out of the Mortgage Notes Proceeds Account, and (ii) the lenders under
the Bank Credit Facility or the Mall Construction Loan Facility may direct the
Disbursement Agent with respect to the enforcement of certain rights of the
lenders under the construction and other project contracts. See "Risk
Factors--Sole Stockholder." The Standstill Period may be extended by the
lenders under the Bank Credit Facility or by the Mall Construction Lender for
an additional 15-day period.
Upon expiration of the Standstill Period, each party to the Intercreditor
Agreement may exercise remedies against the Issuers, or with respect to the
Collateral, except that no party will be entitled to complete a foreclosure
against the Collateral or enforce a judgment against the Issuers earlier than
(i) for the lenders under the Bank Credit Facility, 180 days after the Event of
Default, (ii) for the Mall Construction Lender, 210 days after the Event of
Default, (iii) for the Mortgage Notes, 195 days after the Event of Default,
(iv) for the Additional Capital Proceeds, 210 days after the Event of Default
and (v) for the Senior Subordinated Notes, 240 days after the Event of Default.
Such dates will be tolled and/or extended for any period of time for which an
injunction and/or a bankruptcy stay is in effect. No party to the Intercreditor
Agreement is entitled to initiate or join as a petitioning creditor in an
involuntary proceeding in bankruptcy against the Issuers (or against any of
their Affiliates) until 10 days after the expiration of the Standstill Period.
Events of Default; Post-Completion Remedies
After the Completion of the Casino Resort, each party will be entitled to
accelerate its indebtedness and exercise remedies against the Issuers or with
respect to the Collateral, in accordance with the terms of its credit facility,
subject to the following conditions: (i) each party to the Intercreditor
Agreement will be subject to a 45-day Standstill Period; (ii) the Standstill
Period may be extended by the lenders under the Bank Credit Facility for an
additional 15-day period; (iii) each party to the Intercreditor Agreement will
not be entitled to initiate or join as a petitioning creditor in an involuntary
proceeding against the Issuers (or against any Affiliate of the Issuers) until
10 days after the expiration of the Standstill Period; and (iv) upon expiration
of the Standstill Period, each creditor party to the Intercreditor Agreement
shall be entitled to exercise remedies against the Issuers or, with respect to
the Collateral, provided that: (a) if the lenders under the Bank Credit
Facility accelerate the indebtedness under the Bank Credit Facility, then such
lenders will provide the Mortgage Note Indenture Trustee with notice of such
acceleration and at least 10 days' the Banks' intent to file the notice of
default, and (b) concurrently with any foreclosure by the Mortgage Noteholders,
the Mortgage Noteholders (or other purchaser in a foreclosure sale) must repay
in full all amounts outstanding under the Bank Credit Facility.
Funding Obligations; Reinstatement
The Disbursement Agreement provides for continued funding following a
default under the Disbursement Agreement in certain further limited
circumstances so as to protect against deterioration of the construction of the
project. More specifically, upon the occurrence of an uncured and unwaived
Event of Default or if the Issuers fail to satisfy a condition precedent to
disbursement under the Disbursement Agreement which has not been waived, no
lender will be required to advance any additional amounts under its financing
agreements unless and until all such defaults are cured; provided, however,
that, upon the consent of the lenders under the Bank Credit Facility and the
Mall Construction Facility acting jointly the lenders will be obligated to
advance funds for the following purposes: (i) to make advances which, subject
to certain exceptions, may not exceed $25 million in the aggregate to repair,
maintain, preserve and protect the Casino Resort, in each case, as certified to
be reasonably necessary by the Construction Consultant or to maintain in effect
the funding commitment of the FF&E Lenders; and (ii) if the Event of Default or
the failure by the Issuers to satisfy the condition to disbursement relating to
having sufficient funds available to complete the Casino Resort is cured or
waived, then the lenders will be required to make payments in respect of work
completed or materials purchased on or prior to the date on which the
Disbursement Agent determined that such default occurred or such condition was
not satisfied.
The Intercreditor Agreement further provides that notwithstanding the
occurrence of an event of default under the Disbursement Agreement and/or
acceleration of any indebtedness under the Bank Credit Facility, the Mall
Construction Loan or the Mortgage Notes, if prior to the completion of the
first permitted foreclosure by any lender with respect to all or any portion of
its collateral, all such defaults are
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cured or waived and all conditions set forth in the Disbursement Agreement are
satisfied or waived, then each lender will be required to reinstate its
commitment to make advances under its financing agreements in accordance with
the Disbursement Agreement.
Collateral; Priority of Liens
The Intercreditor Agreement provides that the liens and security interests
held by each lender in their respective collateral are held with the priority
specified therein, notwithstanding (i) the availability of any other collateral
to any lender, (ii) the actual date and time of execution, delivery, recording,
filing and perfection of any of the Security Documents, and (iii) the fact that
any lien or security interest created by any of the Security Documents, or any
claim with respect thereto, is or may be subordinated, avoided or disallowed in
whole or in part under the Bankruptcy Code or other applicable federal or state
law. Each party to the Intercreditor Agreement also has agreed that the
obligations due and outstanding under each credit facility shall include all
principal, additional advances permitted thereunder, protective advances made
by such party to protect or preserve the Casino Resort, its security interest
or its collateral, interest, default interest, LIBOR breakage and swap
breakage, post petition interest and all other amounts due thereunder, for
periods before and for periods after the commencement of any such proceedings,
even if the claim for such amounts is disallowed pursuant to applicable law.
After the closing of the Offering and the Financing Transactions, Venetian
granted the Mall Construction Lender a first lien on its fee ownership of the
Mall Parcel. Because the Mall Parcel is not yet a separate legal and tax
parcel, this lien (the "Mall Fee Lien") was recorded in the real estate and
county records against the entire Project Site, and is a recorded lien on the
Note Collateral. The Intercreditor Agreement therefore provides that the Mall
Fee Lien is initially subordinate to the liens of the Bank Credit Facility and
the Mortgage Notes on the Note Collateral. Upon the recordation of the
subdivision of the Project Site and creation of the Mall Parcel as a separate
legal and tax parcel, ownership of the Mall Parcel (subject to the Mall Fee
Lien) will, pursuant to the Mall Lease, be transferred to the Mall Construction
Subsidiary, at which point the Mall Fee Lien shall become part of the Mall
Construction Lender's first lien on all of the Mall Collateral (and the Mall
Lease shall terminate). In order to further clarify such first lien priority,
the Intercreditor Agreement provides that at such time as the subdivision of
the Project Site occurs, the liens on the Mall Collateral held by the Mortgage
Notes and the Bank Credit Facility will become subordinate to the Mall Fee
Lien. Upon the transfer by Mall Construction Subsidiary of the Mall to Mall
Subsidiary, the Mall Construction Lender shall cease to be a party to the
Intercreditor Agreement.
Each of the Bank Agent and the Mall Construction Lender have agreed that
without the consent of the other that it will not assign or transfer all or any
portion of its credit facility except to an eligible assignee under the Bank
Credit Facility. The holders of the Mortgage Notes and the Subordinated Notes
may each assign or transfer their respective interests in such Notes in
accordance with the provisions of the Mortgage Notes Indenture and the
Subordinated Notes Indenture, as applicable. An eligible assignee or the holder
of any refinancing indebtedness as the case may be, will be bound by the terms
and provisions of the Intercreditor Agreement and will continue to apply all
such obligations to the holders thereof, notwithstanding such transfer,
assignment or refinancing.
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INSURANCE REQUIREMENTS
The insurance requirements for the Casino Resort are set forth in the
Cooperation Agreement and bind the Issuers and the other owners of the
properties that comprise the Casino Resort and the Expo Center, and, subject to
certain exceptions, such owners' successors and assigns. See "Certain Material
Agreements--Cooperation Agreement." The following summary of the material
provisions of the insurance requirements does not purport to be complete and is
qualified in its entirety by reference to the Cooperation Agreement. A copy of
the Cooperation Agreement has been filed with the Commission as an exhibit to
the Registration Statement.
The Issuers believe that the insurance requirements set forth in the
Cooperation Agreement provide commercially appropriate protections against
insurable risks that could arise in connection with the construction and
operation of the Casino Resort and the operation of the Expo Center. These
insurance requirements are summarized below.
Liability Insurance
The Cooperation Agreement provides that each of Venetian and Interface
shall maintain the following types of insurance coverages, to the extent
obtainable on commercially reasonable terms: (i) Commercial general liability
insurance, with primary coverage limits of no less than $1.0 million per
occurrence and a $2.0 million aggregate limit; (ii) Automobile liability
insurance, with limits of no less than $1.0 million per accident; (iii)
Statutory workers compensation insurance and employers' liability or stop gap
liability with a limit of not less than $1.0 million; (iv) Umbrella Excess
Liability Insurance of not less than $100.0 million per occurrence and in the
aggregate; and (v) such additional insurance as an insurance trustee appointed
under the Cooperation Agreement (the "Insurance Trustee") may reasonably
request. The insurance for the Casino Resort will be purchased under blanket
policies for (i) the Hotel and Casino, (ii) the Mall, and (iii) the Expo
Center.
Property Damage Insurance for Expo Center
Interface shall maintain: (i) "All risk" business insurance on a
replacement value basis on improvements and equipment constituting the Expo
Center, subject to an annual limit of $50.0 million for flood and earthquake,
including contingent liability from the operation of building laws, demolition
costs and increased cost of construction endorsements; (ii) business
interruption insurance; (iii) to the extent not covered by the "all risk"
business insurance policy, comprehensive boiler and machinery insurance
(without exclusion for explosion), in amounts not less than the replacement
value of eligible components for coverage; and (iv) such additional insurance
as the senior mortgagee on the Expo Center may reasonably request. The senior
mortgagee on the Expo Center shall be the first loss payee for all insurance
described in this paragraph. Until such time as the existing mortgage liens
encumbering the Expo Center have been released, however, the insurance for the
Expo Center described in this paragraph must be purchased under policies
separate from those for the Hotel, the Casino and the Mall, unless otherwise
agreed by the senior existing mortgagee of the Expo Center to the extent
required under its presently existing loan documents.
Property Damage Insurance for Casino Resort--Construction Period
Until Completion of the Casino Resort, Venetian shall maintain: (i) from
the closing date of the Offering until such time as permanent coverage is
placed as set forth below, builder's risk insurance on an "all risk" basis,
with flood and earthquake on an "agreed amount" basis and providing full
replacement value coverage, subject to an annual limit of $50.0 million for
flood and earthquake, but in no event in an amount less than the limit
necessary to satisfy other contract requirements; (ii) full replacement value
ocean cargo coverage for equipment valued in excess of $500,000; (iii) delay in
opening insurance, on an "all risk" basis including machinery breakdown
coverage, with limits of insurance equivalent to 12 months projected revenues
less non-continuing expenses and a waiting period not in excess of 30 days, and
(iv) contingent business interruption insurance with respect to revenue effects
on the Casino Resort of a loss event at the Expo Center (including such a loss
event occurring prior to Completion). The Disbursement Agent shall be the first
loss payee for the foregoing insurance described in this paragraph. Venetian
has purchased an insurance program for itself and the major contractors and
subcontractors for the construction project.
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Property Damage Insurance for Casino Resort--Following Completion
From and after the date of Completion of the Casino Resort, Venetian shall
maintain the following insurance coverage: (i) "all risk" property insurance
with flood and earthquake coverage on an "agreed amount" basis providing full
replacement value coverage subject to an annual limit of $50.0 million for
flood and earthquake, but in no event in an amount less than the limit
necessary to satisfy other contract requirements; (ii) business interruption
insurance on an "all risk" basis, including boiler and machinery, in an amount
necessary to satisfy policy coinsurance conditions, but with no more than a 30
day waiting period and with appropriate limits; and (iii) contingent business
interruption insurance, or equivalent coverage with respect to the HVAC
Equipment and the Expo Center with appropriate limits.
After Completion of the Casino Resort (and with the consent of the
Insurance Trustee and the existing mortgagees on the Expo Center), the
insurance described in this paragraph may be procured under single blanket
policies for the Casino Resort and the Expo Center.
Insurance by Mall Tenants
Additionally, the Cooperation Agreement requires that Venetian and the
Mall Subsidiary require that all major tenants leasing space from Venetian or
the Mall Subsidiary procure and maintain pursuant to the terms of their leases
certain insurance coverages including without limitation (i) full replacement
cost coverage for improvements and personal property, (ii) business
interruption insurance, (iii) $5.0 million commercial general liability
insurance (or in such lesser amount as may be agreed to by a commercially
reasonable owner), and (iv) statutory workers compensation insurance.
General Requirements
All insurance must be obtained from insurance companies rated "A-" or
better, with a minimum size rating of "VIII" by Best's Insurance Guide and Key
Ratings. Each policy shall waive subrogation against the Insurance Trustee, or
the collateral agent under the existing senior mortgage on the Expo Center, any
Mortgagee, with an insurable interest, Venetian, the Mall Subsidiary and
Interface, and shall provide for at least 30 days notice of cancellation. The
owners of the Hotel and Casino, the Mall and the Expo Center also must deliver
annual certificates stating that their respective insurance policies comply
with the provisions of the Cooperation Agreement. Effective three years from
the date of the closing of the Offering, the owners of the Hotel and Casino,
the Mall and the Expo Center also must engage an independent insurance
consultant to review the insurance requirements of the Casino Resort, the Mall
and the Expo Center and to prepare a report setting out its recommendations
relating to insurance coverage for the next three years. The insurance
consultant's report shall be submitted to the Insurance Trustee, and upon
approval by the Insurance Trustee shall, to the extent the recommendations
differ from the requirements set forth in the Cooperation Agreement, amend and
supersede the applicable provisions of the Cooperation Agreement.
Force Majeure
Although the Company has not obtained insurance to cover all potential
events of force majeure that can delay completion, it has obtained various
coverages and entered into certain agreements that individually protect against
certain force majeure type events. For example, as described above, the Company
has obtained earthquake and flood insurance. In addition, the Company has
entered into certain agreements with trade unions representing key construction
trades pursuant to which such unions have agreed not to strike during
construction of the Casino Resort. There can be no assurance, however, that the
insurance package arranged for the Casino Resort and the Expo Center will be
adequate to cover all risks that the owners may encounter during the
construction period or operations.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following discussion summarizes the material terms of certain material
agreements to which LVSI and Venetian are parties, but this summary does not
purport to be complete and is qualified in its entirety by reference to the
relevant agreements described herein. Capitalized terms used but not otherwise
defined herein shall have the meaning ascribed to such terms in the agreement
being described (unless otherwise indicated). Copies of such documents have
been filed with the Commission as exhibits to the Registration Statement.
Bank Credit Facility
The Issuers have entered into the Bank Credit Agreement with a syndicate
of lenders, The Bank of Nova Scotia, as administrative agent, and Goldman Sachs
Credit Partners L.P., as arranger and as syndication agent. The Bank Credit
Facility consists of (i) the Term Loans (multiple draw term loans of up to
$150.0 million) available for the period commencing upon the Closing Date and
ending on the earlier to occur of (a) the Outside Completion Deadline and (b)
Completion and (ii) the Revolving Loans (revolving credit loans of up to $20.0
million) available for a period commencing eight months prior to the Opening
Date and ending either two years from the initial draw on the Revolving Loans
(but in no event later than the second anniversary of the Term Loan Commitment
Termination Date). During the construction period, up to $15 million of the
Revolving Loans will be available (i) to fund purchases of the Specified FF&E
(including deposits) and (ii) to support letters of credit related to the
construction of the Casino Resort. Any amounts borrowed to purchase the
Specified FF&E will be repaid from the proceeds of the loans under the FF&E
Credit Facility. Under the Bank Credit Facility, the aggregate principal amount
of the Revolving Loans may be increased to an amount not in excess of $40.0
million to the extent one or more of the Lenders (or an eligible assignee who
desires to become a lender) in their sole discretion, elect to increase their
commitments with respect to such Revolving Loans in excess of their
proportionate share of the initial $20.0 million commitment (or, in the case of
an eligible assignee, such eligible assignee commits to fund such excess). The
proceeds of the Bank Credit Facility will be utilized for similar purposes as
the proceeds of the Notes and will be drawn on a pro rata basis with proceeds
of the Notes and the Mall Construction Facility. See "Use of Proceeds."
The Term Loans mature not later than six years from the Closing Date and
are subject to quarterly amortization payments which begin on the earlier of
(i) 120 days after the Opening Date, (ii) the Completion Date and (iii) the
Outside Completion Deadline. Amortization during the first four quarters
following the amortization commencement date will be 3.75% of principal per
quarter; during the second four quarters, 5% of principal per quarter; during
the third four quarters, 7.5% of principal per quarter; and during the fourth
four quarters, 8.75% of principal per quarter. Notwithstanding the foregoing,
all revenues received from the operation of any portion of the Casino Resort
prior to completion, will be deposited in the Pre-Completion Revenues Account.
See "Description of Disbursement Agreement--Accounts--Pre-Completion Revenues
Account." Amounts on deposit in the Pre-Completion Revenues Account, to the
extent in excess of amounts used for operating expenses and debt service and a
specified reserve, may, at the option of the Company, be transferred to the
Disbursement Account for the payment of project costs or retained in such
account until released in accordance with the Disbursement Agreement. Any
amounts so transferred shall (a) reduce the Bank Credit Facility's pro rata
portion of the Company's disbursement request and (b) reduce the total amount
of the funding commitment under the Bank Credit Facility at a rate of 75 cents
for every $1.00 transferred to the Disbursement Account. Upon final completion
of the Casino Resort (or, under certain circumstances, an earlier date), any
amounts on deposit in the Pre-Completion Revenues Account will be used to pay
any principal that would have become payable on the Bank Credit Facility had
amortization of such facility commenced upon opening of the Casino Resort and
any remaining amounts in such account will be distributed to the Issuers. In no
event will the maturity of the Term Loans extend beyond the sixth anniversary
of the Closing Date.
Indebtedness under the Revolving Loans matures two years from the initial
draw on the Revolving Loans (or if earlier the second anniversary of the Term
Loan Commitment Termination Date); provided, however, that, in the event one or
more of the lenders (or eligible assignee) elects to extend the maturity date
of their portion of the Revolving Loans to a later date, the maturity date of
the Revolving Loans portion of the Bank Credit Facility as it relates to any
such Lender's (or eligible assignee's) portion may be so extended.
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Interest and Fees
All amounts outstanding under the Bank Credit Facility bear interest, at
the option of the Issuers (subject to certain limitations) as follows: (A) with
respect to the period prior to the Substantial Completion Date, (i) at the Base
Rate plus 2.00% per annum; or (ii) at the reserve adjusted Eurodollar Rate plus
3.00% per annum; (B) with respect to outstandings under the Bank Credit
Facility for the period between the Substantial Completion Date and ending on
the second full fiscal quarter following the Substantial Completion Date, (i)
at the Base Rate plus 1.50%; or (ii) at the reserve adjusted Eurodollar Rate
plus 2.50% per annum; and (C) with respect to outstandings under the Bank
Credit Facility for the period commencing on the second full fiscal quarter
following the Substantial Completion Date, at the Base Rate or reserve adjusted
Eurodollar Rate, as the case may be, plus the relevant margin based on certain
leverage ratios set forth in the Bank Credit Facility loan agreement. For
instance, if the range of Leverage Ratios is from 2.5x to 4.0x, then the range
for the relevant margin will be 0.25% to 1.5% for Base Rate loans and 1.25% to
2.5% for Eurodollar loans. The leverage ratio of the Company is generally
defined as the ratio of total debt to the earnings before interest, taxes,
depreciation and amortization of the Company for the last twelve months.
Within 60 days of the closing of the Bank Credit Facility, the Issuers
will obtain interest rate protection through interest rate swaps, caps or other
similar arrangements against increases in the interest rates with respect to an
aggregate nominal amount equal to not less than 50% of the aggregate principal
amount of Term Loans outstanding from time to time, such interest rate
protection to limit the interest rate on such principal amount to no more than
9% per annum.
Commitment fees equal to 0.50% per annum times the daily average unused
portion of the commitment under the Bank Credit Facility shall accrue and will
be payable quarterly in arrears.
Security
The obligations of the Issuers and the Mall Construction Subsidiary under
the Bank Credit Facility and the guaranty of Mall Construction Subsidiary are
secured by first priority liens on the Note Collateral (other than the Mortgage
Notes Proceeds Account) and by second priority liens on the Mall Collateral.
Upon the subdivision of the Project Site and satisfaction of certain other
conditions precedent, the Phase II Land shall be released from the security
interest of the Lenders, provided such land is transferred to a wholly-owned
indirect subsidiary of the Company. In addition, the Mall Collateral shall be
released from the security interest of the Bank Lenders, provided the Mall is
transferred to the Mall Subsidiary pursuant the Sale and Contribution Agreement
and certain other conditions are met.
Guarantees
The indebtedness under the Bank Credit Facility is guaranteed on a senior
basis by Mall Construction Subsidiary, Mall Intermediate Holdings and Phase II
Intermediate Holdings and all other Subsidiaries of LVSI and Venetian (other
than the subsidiaries which are Special Subsidiaries or Unrestricted
Subsidiaries on the Issuance Date).
Termination
The Issuers are required to make mandatory prepayments from certain
available cash flow and proceeds including (a) proceeds received by the Issuers
and certain subsidiaries as a result of (i) asset sales, (ii) equity offerings
by the Issuers and certain subsidiaries, (iii) debt offerings by the Issuers
and certain subsidiaries (other than those contemplated by the Bank Loan
Facility, including the Offering), (iv) debt offerings and equity offerings of
the Mall Subsidiary (to the extent not allocated to refinancing existing debt
or to use in the business of the Mall and only if such proceeds are actually
distributed to the Issuers or any subsidiary by the Mall Subsidiary) and (v)
pension plan reversions, (b) certain cost savings from the construction budget,
(c) excess cash flow and (d) excess insurance or condemnation proceeds. The
indebtedness under the Bank Credit Facility may be prepaid at any time.
Covenants
The Bank Credit Facility contains additional negative, affirmative and
financial covenants, including, without limitation, the following: (i)
restrictions on the ability of the Issuers and certain of their subsidiaries to
incur additional indebtedness; (ii) restrictions on the ability of the Issuers
and certain of their subsidiaries
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to make certain restricted payments (collectively "Bank Restricted Payments");
(iii) restrictions on the ability of LVSI and Venetian to engage in mergers,
acquisitions, joint venturers or partnerships for acquisitions; (iv)
prohibitions on the grant of negative pledges to any person; (v) minimum fixed
charge coverage; (vi) minimum EBITDA; (vii) total debt to EBITDA; (viii) EBITDA
to fixed charges; (ix) maximum capital expenditures; (x) minimum net worth;
(xi) prohibitions on liens; (xii) prohibitions on restrictions on distributions
by subsidiaries; and (xiii) prohibitions on contingent obligations. With
respect to the covenants relating to EBITDA, the Sole Stockholder has the right
to cure any deficiencies in EBITDA by contributing cash in the amount of the
deficiency up to $15.0 million per quarter, subject to limitation on the
exercise of such right to not more than two consecutive quarters. After two
consecutive quarters of cash contributions by the Sole Stockholder to cure the
deficiencies in EBITDA, the Sole Stockholder may not make any additional
contributions to cure any such deficiencies unless the Company is in compliance
with its financial covenants in any four-quarter period, without giving effect
to any previous cash contributions.
The Bank Credit Facility requires the Issuers to provide the Bank Lenders
with financial and certain other information.
Conditions to Availability of Funds
Advances of Term Loans under the Bank Credit Facility are available for
the purposes permitted under the Disbursement Agreement and are subject to the
satisfaction or waiver of all the conditions to disbursement set forth in the
Disbursement Agreement. See "Description of Disbursement Agreement." Advances
of Revolving Loans under the Bank Credit Facility are available for working
capital purposes and are subject to various conditions set forth in the Bank
Credit Facility.
Events of Default
Prior to Completion, "Events of Default" includes all events of default
under the Disbursement Agreement, the failure to make payments when due,
defaults under other agreements relating to, or instruments of, indebtedness,
loss of material licenses or permits (including gaming licenses), loss of
material contracts, breaches of representations and warranties, bankruptcy,
ERISA, impairment of security interests, cross acceleration to indebtedness of
the Mall Subsidiary, the Sole Stockholder makes certain prohibited investments
in the Phase II Subsidiary and the Mall Subsidiary, invalidity of guarantees,
default under material agreements and change of control (the Sole Stockholder
or certain related parties cease to beneficially own and control directly or
indirectly at least 70% of the issued and outstanding shares of capital stock
of LVSI (with certain exceptions) entitled to vote for the election of members
of the board of directors of LVSI or LVSI ceases to own 100% of the equity of
Venetian or LVSI and Venetian ceases to own 100% of the equity of each of their
subsidiaries (other than Mall Subsidiary, Phase II Subsidiary and any preferred
equity in Venetian held by Interface Holding or other affiliates of the Sole
Stockholder), or Mall Holdings ceases to own not less than 80% of the equity
securities in the Mall Subsidiary or Phase II Holding ceases to own at least
51% of the equity in the Phase II Subsidiary or the sole managing member of
Mall Intermediate Holdings, Phase II Intermediate Holdings, Mall Holdings, Mall
Subsidiary, Phase II Holdings and Phase II Subsidiary ceases to be LVSI,
Venetian or a wholly-owned subsidiary of LVSI or Venetian). After Completion,
"Events of Default" will not include defaults or events of default under the
Disbursement Agreement.
Mall Construction Loan Facility
LVSI, Venetian and the Mall Construction Subsidiary have entered into the
Mall Construction Loan Credit Agreement with the Mall Construction Lender. The
Mall Construction Loan Facility consists of two tranches: (i) the Tranche A
Loan in the amount of up to $105.0 million, and (ii) the Tranche B Loan in the
amount of up to $35.0 million. Borrowings under the Tranche B Loan were
available as of the Issuance Date. Borrowings under the Tranche A Loan were
available as of the Issuance Date, but will not be drawn until the full funding
of the Tranche B Loan. Borrowings under the Tranche B Loan will then be
available until the earlier of (a) the Mall Release Date and (b) the Outside
Completion Deadline. All indebtedness outstanding under the Mall Construction
Loan Facility matures on May 1, 2000, provided that the Issuers shall have the
option to extend the maturity of the Mall Construction Loan Facility until
November 14, 2000 if, as of May 14, 2000 (i) the Mall Take-out Financing
commitments are in full force and effect, (ii) fully executed leases are in
place, at the time of exercise of such option, yielding net rental income
sufficient to provide a 1.25x debt service coverage ratio on the Tranche A
Loan, based on the then current 30-day
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LIBOR rate plus 350 basis points and a 25-year amortization period and (iii)
certain other conditions are met. Borrowings under the Mall Construction Loan
Facility are funded pro-rata with the proceeds of the Bank Credit Facility and
Mortgage Notes. Upon Completion of the Casino Resort and the satisfaction of
certain other conditions (but not leasing conditions), (i) the indebtedness
under the Mall Construction Loan Facility will be either repaid and/or assumed
by the Mall Subsidiary in accordance with the Sale and Contribution Agreement
and (ii) the Mall Construction Lender will release the Issuers, Mall
Construction Subsidiary and Mall Intermediate Holdings from all liability under
the indebtedness under the Mall Construction Loan Facility.
Interest and Fees
The annual interest rate on indebtedness outstanding under the Mall
Construction Loan Facility is 275 basis points over 30-day LIBOR, provided that
effective as of April 10, 1998, if the Mall Parcel is not a separate legal and
tax parcel by July 10, 1998, such interest rate shall be 375 basis points over
30-day LIBOR until such time, if any, as the Mall Parcel becomes a separate
legal and tax parcel. In the event the term of the maturity is extended as
described above, a fee of $375,000 will be payable to Mall Construction Lender.
Security
The indebtedness under the Mall Construction Loan Facility was secured at
closing by a first priority lien on all of the Issuers' and their Subsidiaries'
right, title and interest in and to (i) the Mall, including the Mall Parcel and
all improvements and equipment located thereat or used in connection therewith;
(ii) any reserves established by the Issuers, any of their Restricted
Subsidiaries or any of their Special Subsidiaries relating to the Mall; and
(iii) all rents and other income derived from the Mall. With respect to the
lien described in clause (i) of the preceding sentence, at closing Venetian
granted the Mall Construction Lender a junior lien on its fee ownership of the
Mall Parcel (the "Mall Fee Lien"), and the Mall Construction Subsidiary granted
the Mall Construction Lender a first lien on its leasehold estate under the
Mall Lease. Because the Mall Parcel was not, as of the closing of the Offering,
a separate legal parcel, the Mall Fee Lien was recorded in the real estate and
county records against the entire Project Site, and so is a recorded lien on
the Note Collateral. The Intercreditor Agreement therefore provides that the
Mall Fee Lien is initially subordinate to the liens of the Bank Credit Facility
and the Mortgage Notes on the Note Collateral. When the Mall Parcel becomes a
separate legal and tax parcel, the Mall Lease (and, therefore, the
above-described lien on the leasehold estate created by the Mall Lease) will
terminate, and ownership of the Mall Parcel will (subject to the Mall Fee
Lien), (i) if prior to Completion, be transferred to Mall Construction
Subsidiary and (ii) if after Completion, be transferred to the Mall Subsidiary.
At this point, the Mall Fee Lien will be a first priority lien on the Mall
Parcel.
Covenants and Events of Default
Except for covenants related to the Mall Collateral, the covenants in the
Mall Construction Loan Facility are similar to those in the Bank Credit
Agreement (except that there are no financial covenants). In addition, the
events of default under the Mall Construction Loan Facility are generally
similar to those in the Bank Credit Facility.
Guaranties
The indebtedness under the Mall Construction Loan Facility is guaranteed
by Mall Intermediate Holdings on a senior basis.
Conditions to Availability of Funds
Advances under the Mall Construction Loan Facility to the Company and/or
the Construction Manager are subject to the satisfaction or waiver of all of
the conditions to disbursement set forth in the Disbursement Agreement. See
"Description of the Disbursement Agreement." In addition, advances under the
Mall Construction Loan Facility are conditioned upon the execution and delivery
of the commitments relating to the Mall Take-out Financings.
Sole Stockholder Guaranty of Mall Construction Loan Facility
The Sole Stockholder has guaranteed up to $35.0 million of indebtedness
outstanding under Tranche B of the Mall Construction Loan Facility. The Sole
Stockholder's obligations under such guaranty are collateralized by a cash
collateral account. If any amounts are drawn on the guaranty of Tranche B of
the
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Mall Construction Loan Facility, the Sole Stockholder will have the right to
elect to treat such amounts as a subordinated loan (the "Substitute Tranche B
Loan") from the Sole Stockholder to Venetian and the Mall Construction
Subsidiary. The Substitute Tranche B Loan will be subordinated in right of
payment to indebtedness under the Bank Credit Facility, the Mall Construction
Loan Facility and the Mortgage Notes. If the Sole Stockholder makes this
election: (i) the interest rate will not exceed that which was applicable to
Tranche B of the Mall Construction Loan; (ii) there will be no scheduled
principal amortization for the Substitute Tranche B Loan and the Substitute
Tranche B Loan will mature on the same date as the Senior Subordinated Notes;
(iii) irrespective of the stated interest payment schedules, no payments will
be permitted on the Substitute Tranche B Loan unless all payments then due on
any debt secured by the Mall Collateral on a senior basis at that time have
been paid in full, and any cash payments that are due but that are prohibited
will accrue; (iv) the Substitute Tranche B Loan will, until completion and
transfer of the Mall to the Mall Subsidiary, be pari passu in right of payment
with the Senior Subordinated Notes; (v) the Substitute Tranche B Loan provides
that Venetian and the Mall Construction Subsidiary will be released from
further liability with respect to the Substitute Tranche B Loan upon
satisfaction of the conditions to the release of the Mall Collateral and the
Substitute Tranche B Loan will be assumed by the Mall Subsidiary; and (vi) the
loan documents will contain certain subordination provisions (such as no right
to object to modifications of debt secured on a senior basis by the Mall
Collateral, and no right to exercise remedies without consent from the senior
lenders and the holders of the Senior Subordinated Notes).
FF&E Credit Facility
The FF&E Credit Facility is a $97.7 million multiple draw facility
available to fund the acquisition and installation of the Specified FF&E. The
Specified FF&E will be divided into two groups of assets: (i) the furniture,
certain fixtures, and equipment (approximately $90.7 million) and (ii) an
electrical substation (approximately $7.0 million). The FF&E Credit Facility
will be secured by a first priority lien on the Specified FF&E. The FF&E Credit
Facility consists of a multiple draw interim loan prior to completion of the
Casino Resort (the "FF&E Interim Loan") and a term loan for a period of 60
months after completion of the Casino Resort (the "FF&E Term Loan"). If the
FF&E Credit Facility is not fully funded on the Project Construction Completion
Date, the unused portion of the commitment under the FF&E Credit Facility may
be drawn in whole and placed in a cash collateral account and used to fund the
purchase and installation of Specified FF&E for a period of 120 days, with any
proceeds remaining in such cash collateral account after such 120-day period
being used by the FF&E Lenders to prepay an equivalent portion of the
outstanding borrowings at such time. Borrowings under the FF&E Credit Facility
may be made commencing (a) eight months prior to the anticipated opening date,
if the Issuers elect to pay Interim Loan interest on a current basis or (b)
three months prior to the anticipated construction completion date, if the
Issuers elect to accrue Interim Loan interest (the "Interim Loan Commencement
Date"). A portion of the initial draw down is expected to be used to repay
amounts drawn under the Bank Credit Facility or other funds subject to the
Disbursement Agreement that were used for the purchase, construction and
installation of the Specified FF&E prior to the Interim Loan Commencement Date.
Upon the satisfaction of certain conditions, the FF&E Lenders have agreed to
certify to the Disbursement Agent and the Bank Agent that any Specified FF&E
acquired prior to the Interim Loan Commencement Date is eligible collateral
under the FF&E Credit Facility.
Interest and Amortization
Interest on the FF&E Interim Loan, if paid on a current basis, will be due
quarterly in arrears at a floating rate equal to 30-day reserve adjusted LIBOR
plus 375 basis points or at the Base Rate (the greater of the Prime Rate or the
Federal Funds Rate plus 50 basis points) plus 100 basis points, whichever the
Issuers elect. Subject to certain circumstances, the Issuers may elect to
accrue FF&E Interim Loan interest, and such interest will accrue based on the
foregoing rates.
Upon the same date as the Basic Loan Commencement Date, but subject to
certain conditions, the FF&E Interim Loan converts to the FF&E Basic Loan, a
sixty-month term loan with quarterly amortization payments. Amortization on the
FF&E Basic Loan will be 3% of principal for the first four quarters and 5.5% of
principal for the last 16 quarters. The Issuers are required to make mandatory
prepayments of principal in the event of certain asset sales and casualty
events (subject to permitted reinvestments and equipment replacement
purchases). Subject to certain limited exceptions, the FF&E Credit Facility may
not be repaid prior to the first anniversary of the Basic Loan Commencement
Date. Thereafter, the Issuers may prepay
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such indebtedness subject to a penalty fee of 1.5% (if the loan is terminated
between the first and second anniversaries of the Basic Loan Commencement Date)
and 1.0% (if the loan is terminated between the second and fourth anniversaries
of the Basic Loan Commencement Date).
Interest on the FF&E Basic Loan is a floating monthly rate calculated at
the higher of (a) the reserve-adjusted 30-day LIBOR plus 375 basis points or
(b) the eurodollar interest rate margin in effect on the Bank Credit Facility
plus 125 basis points.
Conditions to Availability of Funds
Advances under the FF&E Credit Facility are subject to certain conditions,
including the following: (i) no event of default exists and is continuing under
any of the Financing Agreements or under any Material Contract or under any
other agreement of the Issuers involving obligations aggregating or projected
to aggregate $5.0 million or more (provided, that the condition with respect to
any Material Contract or other agreement equalling or exceeding the $5.0
million threshold will be deemed satisfied if the defaulting party is other
than the Issuers or an affiliate thereof and such Material Contract or other
agreement has been replaced with a similar agreement with a replacement party),
(ii) (a) in the case of interim loans, the Project Construction Completion Date
will be anticipated to occur within the next succeeding eight months, and (b)
in the case of the basic loan, the Project Construction Completion Date will
have occurred, (iii) the Expo Center will not have been closed for a period of
more than 30 consecutive days from the commitment date to the date of the
advance (subject to certain exceptions for casualty events if the Expo Center
is capable of being restored within a specified time period), (iv) there shall
not be any material pending or threatened litigation relating to the Casino
Resort which would result in any material adverse change in the economic
prospects of the Casino Resort or in the financial condition or operations of
the Issuers and their subsidiaries, taken as a whole and there shall not be any
material pending or threatened litigation relating to the Equipment Loan
Facility, (v) there shall be no default or event of default under the FF&E
Credit Facility, (vi) other conditions for advances similar to those contained
in the Disbursement Agreement, (vii) filing of customary financing statements,
(viii) delivery of a customary legal opinions, and (ix) execution of an
agreement among the Company, the FF&E Lenders and the Construction Consultant
pursuant to which the Construction Consultant will provide project monitoring
services to the FF&E Lenders.
Covenants and Events of Default
Except for covenants related to the Specified FF&E, the covenants in the
FF&E Credit Facility are similar to those in the Bank Credit Agreement
(including financial covenants such as minimum net worth, minimum EBITDA,
minimum fixed charge ratio, leverage ratio and restrictions on capital
expenditures). In addition, the events of default under the FF&E Credit
Facility are generally similar to those in the Bank Credit Facility.
Exercise of Remedies
The FF&E Lenders have entered into an intercreditor agreement with the
Bank Agent, the Mortgage Note Trustee, the Mall Construction Lender and General
Electric Capital Corporation as part of the FF&E Credit Facility (the "FF&E
Intercreditor Arrangement"). Under the FF&E Intercreditor Arrangement, the FF&E
Lenders have agreed that following an event of default during the period prior
to the Interim Loan Funding Commencement Date (the "Pre-funding Period") that
they will refrain from exercising certain remedies against their collateral for
a period of up to 120 days. Following the occurrence of an event of default
under the FF&E Credit Facility during the period from the Interim Loan
Commencement Date until the Basic Loan Commencement Date (the "Funding
Period"), the FF&E Lenders have agreed to refrain from exercising certain
remedies against their collateral for a period of up to 180 days so long as (i)
the event of default in question is susceptible of cure, (ii) all overdue
interest, fees and payments under the FF&E Credit Facility are brought current
and all interest, fees and payments under the FF&E Credit Facility are paid
currently on a monthly basis and (iii) in order to extend the standstill period
beyond the 120th day after the event of default, the only uncured event of
default at such time must be the failure to comply with "in-balance"
requirement of the FF&E Credit Facility and the FF&E Lenders further must
receive a written proposal demonstrating that a cure of such default on or
before the end of the 180-day standstill period will occur. The FF&E Lenders
have agreed to recommence advancing funds under the FF&E Credit Facility if the
event of default is cured during the standstill period and the indebtedness
under the FF&E Credit Facility has not been accelerated. Finally, during the
period following the Basic Loan Commencement Date
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(the "Basic Loan Period"), the FF&E Lenders have agreed to a standstill period
of 30 days. No more than two standstill periods may be commenced during the
Funding Period and only one standstill period may be commenced in either the
Pre-funding Period or the Basic Loan Period. The standstill periods will
terminate under certain circumstances including if any collateral is the
subject of any material damage, loss, removal, deterioration or disposition.
Furthermore, such standstill periods will not apply if the event of default
involves a bankruptcy or insolvency proceeding. Finally, the FF&E Lenders are
not obligated to continue the standstill period if the Casino Resort does not
open by November 1, 1999 or if completion is not likely to occur by November 1,
1999 (subject to extension to January 31, 2000 if a certain casualty event
occurs and certain conditions are met).
Mall Take-out Financing Commitments
Upon the completion of the Casino Resort and the satisfaction of certain
other conditions (but not any leasing condition), pursuant to the Sale and
Contribution Agreement, the Mall Construction Subsidiary will transfer the Mall
Collateral to the Mall Subsidiary. Following such transfer, all indebtedness
under the Mall Construction Loan Facility will be repaid and the Mall
Collateral will not be available as security for the holders of the Mortgage
Notes or the indebtedness under the Bank Credit Facility. The cash proceeds
received by the Mall Construction Subsidiary as a result of such transaction,
if any, must be used to repay the indebtedness under the Mall Construction Loan
Facility. See "Certain Material Agreements--Sale and Contribution Agreement."
GSMC and the Tranche B Take-out Lender separately have agreed to provide Mall
Take-out Financings to provide funds to the Mall Subsidiary to meet its
obligations under the Sale and Contribution Agreement.
GSMC has committed to provide the Tranche A Take-out Financing in an
amount of up to $105.0 million to the Mall Subsidiary subject to completion of
the Casino Resort and certain other conditions. The indebtedness under the
Tranche A Take-out Financing will be secured by a first lien on the Mall
Collateral and will bear interest at a floating rate equal to LIBOR plus 3.5%;
provided that if, as of the consummation of the Tranche A Take-out Financing,
the Mall Parcel is not a separate legal and tax parcel, such indebtedness shall
bear interest at a floating rate equal to LIBOR plus 5.0% until such time, if
any, that the Mall Parcel is a separate legal and tax parcel. The Tranche A
Take-out Financing will include certain customary covenants including
limitations on indebtedness, restricted payments and liens. In the event that
the Debt Service Coverage Ratio (as defined in the Tranche A Take-out Financing
agreements) is less than 1.25 for a period of six consecutive months, all rents
shall be payable into a cash collateral account and may not be distributed to
the Company or any of its subsidiaries without the consent of GSMC. The
indebtedness under the Tranche A Take-out Financing must be repaid within three
years and is prepayable (without penalty) at any time. The Sole Stockholder has
agreed to guarantee, on an unsecured basis, $20.0 million of indebtedness under
the Tranche A Take-out Financing. The Mall Subsidiary and the Sole Stockholder
have agreed to pay GSMC a non-refundable commitment fee payable in two
installments, the first of which was paid on the date of the Offering, and the
second of which is due on the first anniversary of the date of the Offering.
The proceeds from the Tranche A Take-out Financing will be used to partially
finance the purchase price under the Sale and Contribution Agreement, which, in
turn, will be used to partially repay the indebtedness outstanding under the
Mall Construction Loan Facility.
GSMC's commitment to provide the Tranche A Take-out Financing expires
November 1, 2000.
In addition to certain escrows in respect of tenant improvement costs,
leasing commissions, real estate taxes and insurance premiums which must be
funded as a condition to the funding of the Tranche A Take-out Financing, the
Mall Subsidiary will be required to fund an operating expense shortfall reserve
if a certain financial test is not satisfied.
The Tranche B Take-out Lender is providing the Tranche B Take-out
Financing to the Mall Subsidiary. The Tranche B Take-out Lender's total
commitment is $35.0 million and is unsecured, provided that to the extent the
Mall Construction Lender has not drawn on the Sole Stockholder's $35.0 million
collateralized guaranty of the Mall Construction Loan Facility, such
collateralized guaranty shall secure the Tranche B Take-out Lender's
commitment. The terms of the Tranche B Take-out Financing are generally the
same as the terms of the Tranche A Take-out Financing, except that the Tranche
B Take-out Financing (i) will be subordinated to the Tranche A Take-out
Financing and will be secured by a second mortgage on the Mall Collateral, (ii)
will not permit cash interest payments unless no event of default exists under
the Tranche A Take-out Financing
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and all payments on the Tranche A Take-out Financing have been paid when due
(and all operating expenses have been paid and all reserves required under the
Tranche A Take-out Financing have been funded), and (iii) will have an initial
term of five years (which term Mall Subsidiary will be entitled to extend). If
any interest payments on the Tranche B Take-out Financing are not paid, then
such interest will accrue. The Tranche B Take-out Financing documents will
provide that the holder thereof may not take enforcement action under such
documents without GSMC's consent until 90 days after the Tranche A Financing
has been paid in full.
Notwithstanding any of the foregoing, if the Mall Construction Lender
increases the principal amount of its loan above $140.0 million (but not in
excess of $170.0 million) in accordance with the terms of the Intercreditor
Agreement, then such loan increase shall remain outstanding after the Mall
Collateral is transferred to the Mall Subsidiary and shall be assumed by the
Mall Subsidiary (the "Mezzanine Loan"). The Mezzanine Loan will be subordinate
to the Tranche A Take-out Financing and superior to the Tranche B Take-out
Financing and will be secured by a second mortgage on the Mall Collateral. If
the Mezzanine Loan is made, then (X) the Tranche B Take-out Financing will be
secured by a third mortgage on the Mall Collateral and (Y) until the aggregate
principal amount of the Tranche A Take-out Financing, the Mezzanine Loan and
the Tranche B Take-out Financing is $140.0 million, the Mall Subsidiary will be
required to use all revenue from the Mall Collateral (after the payment of
operating and capital expenses, interest on the Tranche A Take-out Financing,
certain distributions to pay income taxes and the funding of certain reserves)
to prepay principal of the Tranche A Take-out Financing.
LVSI, Venetian, the Mall Subsidiary, the Mall Construction Subsidiary and
the Sole Stockholder (the "Borrower Parties") have entered into the Tri-Party
Agreement with GSMC and the Mall Construction Lender. Under the Tri-Party
Agreement, GSMC (i) covenants, for the benefit of the Mall Construction Lender,
to perform its obligations under its commitment to provide the Tranche A
Take-out Funding and (ii) pre-approves, for the benefit of the Mall Subsidiary
and the Mall Construction Lender certain of the conditions to the funding of
the Tranche A Take-out Financing. Also, all parties to the Tri-Party Agreement
have agreed that, in the event Mall Construction Lender, or its designee,
obtains title to the Mall, by foreclosure or otherwise, Mall Construction
Lender, or its designee, as the case may be, upon notice to GSMC, may assume
the Mall Subsidiary's rights under the Tranche A Take-out Financing commitment.
The Tri-Party Agreement permits the Mall Subsidiary to terminate GSMC's
commitment to provide the Tranche A Take-out Financing, so long as (i) such
commitment is replaced with a commitment from an institutional or other lender
reasonably satisfactory to the Mall Construction Lender that does not terminate
earlier than the termination date of GSMC's commitment and does not contain any
conditions not contained in GSMC's commitment, and (ii) such replacement
Tranche A Take-out Lender executes and delivers an agreement substantially
similar to the Tri-Party Agreement.
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CERTAIN MATERIAL AGREEMENTS
The following discussion summarizes the material terms of certain material
agreements to which one or more of the parties constituting the Company is a
party, but this summary does not purport to be complete and is qualified in its
entirety by reference to the relevant agreements described herein. Copies of
such agreements in preliminary or executed form are available upon request to
the Company. Capitalized terms used but not otherwise defined shall have the
meaning ascribed to such terms in the agreement being described (unless
otherwise indicated).
Agreements Relating to the Casino Resort
Construction Management Contract
The Company and the Construction Manager have entered into the
Construction Management Contract for the construction (but not the design) of
the Casino Resort (exclusive of certain demolition work, certain furniture,
fixtures and equipment, the fabrication of certain theming elements, the
parking garage/electrical substation facility and certain other items, the
aggregate cost of which is described in "Risk Factors--Construction Management
Contract and Guaranties") for a guaranteed maximum price (the "GMP"). To the
extent actual costs incurred or expended in connection with the construction of
the items covered by the Construction Management Contract exceed the GMP, then,
subject to certain limitations and exceptions, the Construction Manager is
liable for such excess. As of the Issuance Date, the GMP (the "Initial GMP"),
is approximately $547.8 million, including a 5% contingency amount. After (i)
the completion by the Company's architects and engineers, and approval by the
Company, of the final design documents that set forth in detail the plans and
specifications for the Casino Resort and (ii) the execution of trade contracts
for 90% (by dollar amount) of the trade contracts portion of the GMP, a final
GMP ("Final GMP") will be calculated by adjusting the Initial GMP to take into
account (among other things): (a) certain "scope changes" or other changes
implemented at the request of the Company; (b) the amount by which the actual
aggregate amount of the signed trade contracts is less than the amount
allocated to such contracts in the Initial GMP; and (iii) a reduction in the
contingency amount from 5% to 3%. The GMP does not include the construction
management fee to be paid to the Construction Manager or the fee payable to the
Construction Manager's ultimate parent, P&O, for the P&O Guaranty. The GMP is
to be appropriately increased to reflect (a) deficiencies or changes in the
drawings prepared by the Company's architects and engineers, and (b)
Company-mandated "scope changes" and "change orders."
The Company will pay the Construction Manager a construction management
fee of 1 1/2% of the Final GMP (the "CM Fee") payable in monthly installments
commencing May, 1997. In addition, upon final completion of the Casino Resort,
if the total construction costs covered by the Construction Management Contract
fall below the Final GMP, the savings will be allocated 50% to the Company and
50% to the Construction Manager. The Company has paid P&O a $6.5 million fee
for the P&O Guaranty.
Unless otherwise specified by the Company and approved by the Construction
Manager, such approval not to be unreasonably withheld, all trade contractors
have been or will be selected after a bidding process that includes at least
three bidders from a list of bidders approved by the Company. The Construction
Manager will submit to the Company the various bids received from prospective
trade contractors, all pertinent information available to Construction Manager
with respect to such bids and prospective trade contractors, and Construction
Manager's recommendation of the prospective trade contractor for the contract.
The Company will select each trade contractor based on this information. If the
Company does not select the party recommended by Construction Manager, the GMP
will be increased by the amount, if any, by which the trade contract amount
proposed by the trade contractor selected by the Company exceeds the trade
contract amount proposed by the party recommended by the Construction Manager.
The Construction Management Contract provides that the Construction
Manager will not be responsible for the consequences of any of the following
events, but only to the extent (a) such events do not arise out of the
negligence or wilful misconduct of the Construction Manager or any breach by
the Construction Manager of the Construction Management Contract, and (b) such
events are beyond the Construction Manager's reasonable control: Acts of God
(such as tornado, flood, hurricane, etc.); fires and other casualties;
Company's, architect's and agencies' (and their respective agents' and
employees'
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(other than trade contractors' and subcontractors')) acts, omissions to act, or
failures to act timely; strikes, lockouts or other labor disturbances (except
to the extent taking place at the Casino Resort site only); riots,
insurrections, and civil commotions; embargoes; shortage or unavailability of
materials, supplies, labor, equipment and systems that first arise after the
date hereof, but only to the extent caused by another act, event or condition
covered by this sentence; sabotage; vandalism; the requirements of laws,
statutes, regulations and other legal requirements enacted after the date of
the Construction Management Contract (unless the Construction Manager should,
in the exercise of due diligence and prudent judgment, have anticipated such
enactment); orders or judgments; and any other similar types of events. (The
Company has obtained insurance coverage for certain of the events described in
the preceding sentence. See "Insurance Requirements.")
The Construction Manager will be responsible for achieving "Substantial
Completion" (the stage in the progress of the development of the Casino Resort
when it is sufficiently complete, including the receipt of necessary permits,
licenses and approvals, so that all aspects of the Casino Resort can be open to
the general public) by April 1999 (the "Required Completion Date"). If
Substantial Completion is achieved prior to the Required Completion Date, the
Construction Manager will be entitled to a per-day early completion bonus as
described below. If Substantial Completion is not achieved by the Required
Completion Date, the Construction Manager will be liable for liquidated damages
as described below. The Required Completion Date may be extended if: (i)
certain "force majeure" events as described in the preceding paragraph occur
(with respect to some of which the Company has obtained insurance coverage--See
"Insurance Requirements"); (ii) the Company implements certain specified "scope
changes"; and/or (iii) the design documents prepared by the architect are
changed or are deficient. For the first 30 days of any delay in achieving
Substantial Completion beyond the Required Completion Date, liquidated damages
("Liquidated Damages") are assessed as follows: (i) for the first seven days of
such 30 day period, 1/7th of 11.11% of the "Monthly Amount" (CM Fee minus $1.4
million); for each of days 8 through 14 of such delay, 1/7th of 16.67% of the
Monthly Amount; for each of days 15 through 21 of any such delay, 1/7th of
22.22% of the Monthly Amount; and for each of days 22 through 30 of such delay,
1/9th of 50% of the Monthly Amount. Liquidated Damages Insurance has been
procured to cover Liquidated Damages for days 31 through 120 of a delay in
achieving Substantial Completion beyond the Required Completion Date. Under the
Liquidated Damages Insurance, the Company will receive, for the period
commencing the 31st day through the 60th day, approximately $300,000 per day,
and for the period commencing the 61st day through the 120th day, $250,000 per
day. The Company will pay all premiums and other costs in connection with the
Liquidated Damages Insurance. No liquidated damages are payable by the
Construction Manager for days 31 through 120 of a delay in achieving
Substantial Completion beyond the Required Completion Date. After the 120th day
of any delay in achieving Substantial Completion beyond the Required Completion
Date, the Construction Manager is (and Bovis and P&O pursuant to their
guaranties are) liable for liquidated damages at a per-day rate of 3.33% of the
Monthly Amount. The per-day completion bonus amounts are "mirror images" of the
per-day liquidated damages amounts payable by the Construction Manager.
All disputes between the Company and the Construction Manager as to
whether Construction Manager is entitled to an increase in the GMP (and if so,
what the amount of such increase will be), and/or whether Construction Manager
is entitled to an extension of the Required Completion Date, are to be resolved
by an "Independent Expert" jointly selected by both parties.
The Company will pay for and maintain property and "wrap-up" liability
insurance upon the entire Casino Resort. Such insurance includes (a) all risk
property insurance; (b) on-site workers compensation and employers liability
insurance; (c) commercial general liability insurance; and (d) umbrella and
excess liability insurance. The Construction Manager will arrange and pay for
automobile liability insurance, and offsite workers compensation insurance.
After the Casino Resort is completed, the Construction Manager will issue in
writing to the Company a general warranty. The general warranty will (i) be for
12 months from the date Substantial Completion of the Casino Resort is
achieved, (ii) provide that where defects occur, Construction Manager will
assume responsibility for all repairs to or replacements of work covered by the
Construction Management Contract made necessary by such defects, and for all
expenses incurred in repairing and replacing other components of the Casino
Resort that were not part of the work covered by the Construction Management
Contract, but were affected by such defects and (iii) be in form and substance
reasonably satisfactory to the Company.
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The Construction Manager's direct parent company, Bovis and ultimate
parent company, P&O, respectively, have executed and delivered to the Company
the Construction Management Contract Guaranty and the P&O Guaranty,
respectively, which guarantee the obligations of the Construction Manager under
the Construction Management Contract, including the Construction Manager's
obligations with respect to liquidated damages and the GMP, provided that such
guaranties only cover liquidated damages beginning with day 121 of any delay in
achieving Substantial Completion beyond the Completion Date. See "Risk
Factors--Construction Budget; Construction Management Contract and Guaranties."
Liquidated Damages Insurance
The Construction Manager has obtained on behalf of the Company (and at the
Company's expense) the Liquidated Damages Insurance. The Liquidated Damages
Insurance covers the above-described Liquidated Damages assessed under the
Construction Management Contract, provided that the Liquidated Damages
Insurance does not cover Liquidated Damages with respect to the first 30 days
of any delay in achieving Substantial Completion by the Required Completion
Date. Commencing with the 31st day of any such delay, and continuing until the
60th day thereof, the Company will receive under the Liquidated Damages
Insurance approximately $300,000 per day until Substantial Completion is
achieved. Commencing with the 61st day of any such delay, and continuing until
the 120th day thereof, the Company will receive under the Liquidated Damages
Insurance approximately $250,000 per day until Substantial Completion is
achieved. The Liquidated Damages Insurance does not cover penalties assessed
after the 120th day of any such delay. Additionally, the Liquidated Damages
Insurance contains various exceptions. For example, the Liquidated Damages
Insurance does not cover delays caused by (i) certain events of "force majeure"
(with respect to some of which the Company will have other insurance coverage.
See "Insurance Requirements"), (ii) any failure by the Construction Manager to
make "good faith efforts" to timely achieve Substantial Completion and to avoid
or mitigate any delay when an event likely to cause a delay occurs (which
failure is a breach by Construction Manager under the Construction Management
Contract with respect to which Construction Manager, Bovis and P&O, pursuant to
the Construction Management Contract, Construction Management Contract Guaranty
and the P&O Guaranty, respectively, are jointly and severally liable for
damages) and (iii) the "insolvency and/or financial default" of Construction
Manager, the Company, any trade contractor or any other person or entity. See
"Risk Factors--Construction Budget; Construction Management Contract and
Guaranties" and "--Construction Management Contract."
Completion Guaranty
Pursuant to the Completion Guaranty, the Sole Stockholder has guaranteed,
subject to certain conditions and limitations, payment of construction and
development costs in excess of available funds, up to a maximum of $25.0
million. The Sole Stockholder's obligation to fund such excess construction and
development costs is collateralized by $25.0 million in cash or cash
equivalents pledged to the Disbursement Agent. If the Issuers want to implement
a scope change or change order, and such scope change or change order would
cause construction and development costs to exceed available funds, such scope
change or change order cannot be implemented unless the Sole Stockholder
increases the maximum amount available under the Completion Guaranty, and
pledges to the Disbursement Agent additional cash or cash equivalents, in the
amount of such excess. The Completion Guaranty does not provide for the
incurrence by the Sole Stockholder, directly or indirectly, of any obligation,
contingent or otherwise, for the payment of the principal, premium and interest
on the Notes, or any other indebtedness under the financings described herein.
If the Sole Stockholder provides funds under the Completion Guaranty, the
amount of such funds, up to a maximum of $25.0 million, will be treated as a
loan from the Sole Stockholder to the Issuers that is subordinated in right of
payment to the indebtedness under the Bank Credit Facility, the Mall
Construction Loan Facility, the FF&E Credit Facility, the Mortgage Notes and
the Senior Subordinated Notes. Although interest may accrue on such loan, no
cash payments with respect to such loan may be made until all senior
indebtedness (including the Senior Subordinated Notes) is repaid, except for
payments made from certain construction-related recoveries. See "Risk Factors--
Completion Guaranty" and "--Sole Stockholder."
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HVAC Services Agreement and Related Documents
The HVAC Provider is a Delaware limited liability company whose members
are comprised of (a) Atlantic Thermal Systems, Inc., an indirect subsidiary of
Atlantic Energy, Inc., a utility holding company and (b) an indirect subsidiary
of Pacific Enterprises, a utility holding company.
Thermal energy (i.e., heating and air conditioning) will be provided to
the Casino Resort and the Expo Center by the HVAC Provider, using the HVAC
Plant and the HVAC Equipment. In addition, the HVAC Provider also will provide
other energy-related services. Pursuant to the Construction Management
Contract, the HVAC Plant is being constructed by the Construction Manager on
land owned by Venetian, which land and HVAC Plant has been leased to the HVAC
Provider for a nominal annual rent. The HVAC Equipment is and will be owned by
the HVAC Provider, and the HVAC Provider has been granted appropriate easements
and other rights so as to be able to use the HVAC Plant and the HVAC Equipment
to supply thermal energy to the Casino Resort and Expo Center (and,
potentially, other buildings), so long as such easements do not materially
interfere with the operations of the Casino Resort and Expo Center. The HVAC
Provider will pay all costs ("HVAC Costs") in connection with the purchase and
installaton of the HVAC Equipment, up to $70 million. Venetian is acting as the
HVAC Provider's agent to cause such purchase and installation to be
accomplished, and is responsible for any costs in connection therewith in
excess of $70.0 million. The HVAC Provider has entered into separate service
contracts with (i) Venetian; (ii) Interface; and (iii) the Mall Construction
Subsidiary, and will enter into separate service contracts with each Mall
tenant, for the provision of heat and cooling requirements at agreed-to rates.
The charges payable by all users will include a fixed component derived using a
fixed annual interest rate of 8.5% (subject to adjustment based on the change
in the rate on 10-year Treasury Constant Maturities from January 23, 1997 until
the service commencement date) applied to the HVAC Costs paid by the HVAC
Provider to recover a portion of the fair value of the HVAC Equipment over the
initial term of the service contracts and leave an agreed-upon residual value
(the "Fixed Rate Portion"). In addition, the users will reimburse the HVAC
Provider for the annual cost of operating and maintaining the HVAC Equipment
providing certain other energy related services (such reimbursement to include
an agreed upon margin to compensate the HVAC Provider for operating and
maintaining the HVAC Equipment). Each user will be allocated a portion of the
total agreed-to charges through its service contract, which portion shall
include paying 100% of the cost of services in connection with the HVAC
Equipment relating solely to such user. Each user will not be liable for the
obligations of the other users; provided, however, that the Mall Subsidiary
will be liable for the obligations of each Mall tenant. In the event of any
substantial capital improvements to the HVAC Equipment, the costs of such
improvements will be spread over the lesser of (i) the useful life of such
improvements and (ii) the remaining term of the HVAC Service Agreements, and
will include reimbursement to the HVAC Provider for use of its money at a
market rate. The HVAC Service Agreements have an initial term of ten years, and
provide that upon expiration of such term users will have the right, but not
the obligation, to collectively either extend the term of their agreements for
two consecutive periods of five years each or purchase the HVAC Equipment in
accordance with purchase provisions set forth in the service contracts.
The rights of the Company under its agreements with the HVAC Provider
under its HVAC Service Agreement and related documents are collaterally
assigned to the Disbursement Agent as security for Venetian's obligations under
the Financing Transactions. The HVAC Provider has consented to this collateral
assignment pursuant to a Consent and Agreement executed by the HVAC Provider in
favor of the Disbursement Agent. Under the HVAC Consent and Agreement, the HVAC
Provider has agreed (i) to continue advancing funds under the Disbursement
Agreement so long as the lenders party to the Intercreditor Agreement are
advancing funds under the Disbursement Agreement and certain funding conditions
relating solely to the HVAC Equipment and set forth in the Disbursement
Agreement are either satisfied or waived by the HVAC Provider, (ii) to
acknowledge that a security interest has been granted to Disbursement Agent by
the Company in its rights under the the Company's agreements with the HVAC
Provider, (iii) subject to certain requirements, to recognize the Disbursement
Agent or the other secured parties' rights to "step in" to the Company's rights
under these agreements within specified time periods, and to forbear from
exercising termination and certain other rights during such time periods, (iv)
not to cancel or terminate these agreements or to consent to or accept any
cancellation, termination or suspension of these agreements, without the
written notice to Disbursement Agent and first providing the Disbursement Agent
an opportunity to cure any default or breach by the Company, (v) subject to
certain
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conditions, to consent to the transfer of the Company's interest under these
agreements to any of the secured parties or any of them or a purchaser or
grantee at a foreclosure sale and to any purchases in lieu of foreclosure, and
(vi) that in the event one or more of the service contracts is rejected in any
bankruptcy or insolvency proceedings, to execute and deliver to the secured
parties a new contract which shall be on the same terms and conditions as the
original service contracts. Under the HVAC Consent and Agreement, the
Disbursement Agent will acknowledge the HVAC Provider's ownership of the HVAC
Equipment.
Cooperation Agreement
The Company's business plan calls for the Hotel and Casino, the Mall and
the Expo Center, though separately owned, to be part of an integrally related
project. In order to establish terms for the integrated operation of these
facilities, Venetian (as owner of the Hotel and Casino and the Phase II Land),
the Mall Construction Subsidiary, and Interface have entered into the
Cooperation Agreement. The Cooperation Agreement sets forth agreements among
the parties regarding, among other things, construction of the Casino Resort,
encroachments, easements, operating standards, maintenance requirements,
insurance requirements, casualty and condemnation, joint marketing, the sharing
of certain facilities and costs relating thereto. The obligations set forth in
the Cooperation Agreement bind the respective properties (including (i) the
Expo Center, (ii) the Hotel and Casino, (iii) the Mall and (iv) the Phase II
Land) with priority over the liens securing the Bank Credit Facility and the
Mortgage Notes and the liens encumbering the Mall to secure the Mall
Construction Loan and the Mall Take-out Financings. Conversely, certain of the
obligations under the Cooperation Agreement are not senior to the previously
recorded mortgages encumbering the Expo Center. Accordingly, the obligations
under the Cooperation Agreement "run with the land" in the event of transfers
of the respective properties (other than a transfer by foreclosure of the
existing mortgages encumbering the Expo Center).
Construction
The Cooperation Agreement sets forth covenants to effect and facilitate
construction of the Casino Resort. The Mall will be constructed within or upon
the areas that will constitute the Mall Parcel and the Retail Annex Parcel,
neither of which is yet a separate subdivided parcel. The Cooperation Agreement
contains cross encroachment provisions which will permit the Mall to encroach,
to a limited extent, on other portions of the Casino Resort, and which will
permit other portions of the Casino Resort to encroach, to a limited extent, on
the Mall Parcel.
Operating Covenants
The Cooperation Agreement also contains certain covenants respecting the
operation of the Expo Center and, once the Casino Resort is completed, the
Casino Resort. For example, under the Cooperation Agreement, Venetian covenants
to operate continuously and to use the Hotel and the Casino exclusively in
accordance with standards of first-class Las Vegas Boulevard-style hotels and
casinos, the Mall Subsidiary covenants to operate and to use the Mall
exclusively in accordance with standards of first-class retail and restaurant
complexes, and Interface covenants to operate and to use the Expo Center
exclusively in accordance with standards of first-class convention, trade show
and exposition centers. The Cooperation Agreement also provides that neither
Venetian nor the Mall Subsidiary will (and will not permit any other person to)
own, operate, lease, license or manage any building or other facility on, in
the case of Venetian, the Venetian Site or the Phase II Land, and in the case
of the Mall Subsidiary, on the Mall Parcel and the Retail Annex Parcel, if such
building or other facility provides space for or to shows or expositions of the
type generally held at the Expo Center. Additionally, with respect to the joint
marketing of the Casino Resort and the Expo Center, the Cooperation Agreement
provides that until December 31, 2010 Interface (upon request from the owner of
the Hotel and Casino) will use commercially reasonable efforts to have the
Hotel designated as the "headquarters hotel" for trade show and convention
events at the Expo Center, and the owner of the Hotel and Casino will use
commercially reasonable efforts to promote the use and occupancy of the Expo
Center. It should be noted that trade show and convention promoters will be
under no obligation to designate the Hotel as the "headquarters hotel" for
their events.
Further, Interface has agreed under the Cooperation Agreement that, until
such time as the indebtedness under the Mortgage Notes and Senior Subordinated
Notes have been paid in full, the owner of the Expo Center shall not incur
additional debt secured by the Expo Center if such additional debt will
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cause the aggregate Indebtedness secured by the Expo Center to exceed the
greater of (a) 85% of the then fair market value of the Expo Center or (b) to
the extent that the same may be incurred under the existing loans secured by
the Expo Center, $140.0 million plus any additional amounts permitted to be
advanced thereunder for equipment leases or equipment financings. In addition,
the Cooperation Agreement provides that, except in connection with the sale by
the Sole Stockholder of all of his right, title and interest in and to the
Project, (i) Interface will not sell, transfer or otherwise dispose of its
interest in the Expo Center and (ii) no transfer of the Sole Stockholder's
interest in Interface or the Expo Center, other than a Permitted Transfer (as
defined in the Senior Loan Agreement), will occur.
Maintenance and Repair
Additional operational provisions in the Cooperation Agreement include the
requirement that Venetian maintain, repair, and restore (a) the Hotel, the
Casino and the Congress Center, and (b) certain common areas and common
facilities in the Casino Resort which are to be shared with the Mall and
Interface. Venetian, the Mall Subsidiary and Interface will each pay its
proportionate share of the cost of maintenance of all shared common areas and
common facilities in the Casino Resort. Such proportionate share of each such
party will initially be determined by an Independent Expert selected by such
parties and their mortgage lenders, and may be adjusted from time to time as
agreed to by such parties; provided that if any of such parties' mortgage
lenders does not believe any such adjustment is equitable, an Independent
Expert selected by such parties and their mortgage lenders shall determine the
appropriate adjustment, if any. The Cooperation Agreement further provides that
the Mall Subsidiary will maintain, repair and restore the Mall and all common
areas and common facilities located entirely within the Mall, and that
Interface will maintain, repair and restore the Expo Center and all common
areas and common facilities located entirely within the Expo Center.
Insurance
The Cooperation Agreement also requires each of (a) the owners of the
Casino Resort (including both the Hotel and Casino and the Mall) and (b) the
owner of the Expo Center, to maintain certain minimum types and levels of
insurance, including property damage, general liability and delay in opening or
business interruption insurance.
The Cooperation Agreement establishes an insurance trustee to assist in
the implementation of the insurance requirements. See "Insurance Requirements"
for a description of the insurance required under the Cooperation Agreement.
The Cooperation Agreement provides that in the event of a casualty prior
to Completion of the Casino Resort, then the casualty proceeds will be applied
in accordance with the Disbursement Agreement. The Disbursement Agreement
generally provides that the Company may use such proceeds to restore the
affected property so long as the conditions to disbursements set forth in the
Disbursement Agreement are satisfied. See "Disbursement Agreement."
The Cooperation Agreement further provides that in the event of a casualty
affecting all or part of the Casino Resort or the Mall after Completion, then
(a) all insurance proceeds above $1.5 million shall be paid to an insurance
trustee to be disbursed in accordance with the provisions of the Cooperation
Agreement, and (b) the Owners of the affected properties will agree to permit
such proceeds to be used to restore such property as nearly as reasonably
possible to its condition immediately preceding the casualty; provided,
however, that no Mortgagee of a damaged property shall be required to permit
such application of the resulting insurance proceeds unless within 90 days
after the casualty (a) the Mortgagee receives an opinion from an "Independent
Expert" to the effect the damaged property may be completed within one year
after the delivery of the opinion and (b) the Mortgagee receives evidence that
the insurance proceeds (together with any other funds committed by the Owner)
are sufficient to cover the anticipated costs of the restoration (including
scheduled debt service payments through the anticipated date of Completion of
the restorations). If the owner of the affected property is unable to satisfy
the foregoing conditions, then the owner's equitable share of the insurance
proceeds shall be applied in accordance with the provisions of its mortgage(s).
See "Risk Factors--Ability of Holders of Mortgage Notes to Realize on
Collateral and Exercise Remedies."
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In the event of a casualty affecting all or part of the Expo Center, the
senior existing mortgage encumbering the Expo Center requires that all
insurance proceeds be paid to the collateral agent under said mortgage who
shall then pay all proceeds under $3.0 million to Interface to be used to
restore the property.
In the event of a condemnation of a part of the Casino Resort, a part of
the Mall or a part of the Expo Center, the Cooperation Agreement requires that
the affected owner restore the affected property as nearly as reasonably
possible to its condition at the time of the partial condemnation less the
portion condemned.
Parking
The Cooperation Agreement also addresses issues relating to the use of
parking facilities to be constructed by Venetian, the use of parking facilities
planned in connection with the Phase II Resort, and easements for, among other
things, access. Under the Cooperation Agreement, Venetian will furnish
temporary parking spaces to Interface for users of the Expo Center for a
monthly fee of $12,500 until the completion of the parking garage planned to be
built in connection with the Casino Resort. From and after the completion of
such parking garage, Venetian, the Mall Subsidiary and Interface may use the
parkingspaces on a "first come, first served" basis, so long as each property
retains use of sufficient spaces to comply with applicable laws to conduct its
business (such minimum protections referred to herein as the "Minimum Parking
Standards"). The Casino Resort Parking Garage will be owned, maintained and
operated by Venetian, with the operating costs allocated among Venetian, the
Mall Subsidiary, and Interface. The Cooperation Agreement also provides that
after the completion of the parking garage planned to be built in connection
with the Phase II Resort (if and when the same is constructed), each of
Venetian, the Mall Subsidiary, Interface and the Phase II Subsidiary shall have
the right to use the Phase II Resort parking garage, with the operating costs
allocated among Venetian, the Mall Subsidiary, Interface and the Phase II
Subsidiary. Under the Cooperation Agreement, Venetian, the Mall Subsidiary,
Interface and the Phase II Subsidiary grant to each other non-exclusive
easements and rights to use the roadways and walkways on their respective
properties for vehicular and pedestrian access to the parking garages.
Utility Easements
Venetian, the Mall Subsidiary, Interface and the Phase II Subsidiary also
have granted to each other under the Cooperation Agreement all appropriate and
necessary easement rights with respect to utility lines servicing the Casino
Resort, the Phase II Resort and the Expo Center.
Relations Between Venetian and the Phase II Resort
With respect to the future development of the Phase II Resort, the
Cooperation Agreement provides that, prior to the commencement of construction
of the Phase II Resort, Venetian may approve the plans and specifications for
the Phase II Resort, subject to the rights of the lenders pursuant to the Mall
Construction Loan Facility and the Tranche A Take-out Financing to approve any
construction or operation of a restaurant or retail complex located in the
Phase II Resort and connected to the Mall. Additionally, Venetian and the Phase
II Subsidiary will agree in good faith, and upon commercially reasonable terms,
on: (i) appropriate mutual operating covenants for the Hotel and the Casino and
the Phase II Resort other than the Phase II Mall, (ii) joint marketing and
advertising of the Hotel and the Casino and the Phase II Resort other than the
Phase II Mall, (iii) certain shared casino operations at the Hotel and the
Casino and the Phase II Resort other than the Phase II Mall, (iv) the sharing
of customer information with respect to the Hotel and the Casino and the Phase
II Resort other than the Phase II Mall, (v) the joint purchasing of insurance
for the Hotel and the Casino and the Phase II Resort other than the Phase II
Mall, (vi) shared security operations for the Hotel and the Casino and the
Phase II Resort other than the Phase II Mall and (vii) any other matters that
would be of mutual benefit in owning and operating the Hotel and the Casino and
the Phase II Resort other than the Phase II Mall.
Coordinated Relations with HVAC Provider
Although the owners of the Hotel and Casino, the Mall, the Expo Center and
the Phase II Land each have separate HVAC Services Agreements with the HVAC
Provider, the Cooperation Agreement also provides mechanisms for these parties
to deal with the HVAC Provider in a coordinated manner. In particular, the
Cooperation Agreement sets forth the conditions to the owner of the Phase II
Land receiving thermal energy services from the HVAC Plant, including the
requirement that the owner of the Phase II Land pay all incremental costs
attributable to such services (and any additional capital improvements required
for such services). The Cooperation Agreement also provides mechanisms for the
owners of the various properties to make decisions
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with respect to the termination or extension of the HVAC Services Agreements.
In general, these provisions permit a property owner that is not receiving
adequate HVAC services to replace the HVAC Provider, so long as the property
owner (i) arranges for an experienced substitute utility operator to take over
operation of the HVAC Plant, and (ii) indemnifies the other property owners
against additional payment obligations arising as a consequence of the
termination of the previous operator of the HVAC Plant.
Consents, Approvals and Disputes
The Cooperation Agreement provides that wherever any property owner has a
consent or approval right or otherwise has discretion to act or refrain from
acting thereunder, such consent or approval shall only be granted and such
action shall be taken or not taken, only where a Commercially Reasonable Owner
(as defined in the Cooperation Agreement) would do so and the same would not be
likely to have a Material Adverse Effect (as defined in the Cooperation
Agreement) on the property owned by the property owner. The Cooperation
Agreement also provides for the appointment by the parties of an "Independent
Expert" to resolve certain disputes between the parties, as well as for
expedited arbitration with respect to any other disputes.
Agreements Relating to the Mall
Sale and Contribution Agreement
Venetian, the Mall Construction Subsidiary and the Mall Subsidiary have
entered into a Sale and Contribution Agreement whereby the Mall Construction
Subsidiary agreed to sell and the Mall Subsidiary agreed to purchase, among
other things, (i) all of its right, title and interest (whether in fee or in
leasehold) in and to the property and improvements that constitute the Mall in
their "as is" condition on the date of Completion, (ii) monies deposited in
certain reserve accounts relating to the Mall, (iii) all right, title and
interest of the Mall Construction Subsidiary in and to the Master Billboard
Lease and (iv) all right, title and interest of the Mall Construction
Subsidiary (a) as landlord under Mall Tenant Leases, (b) under the Cooperation
Agreement, (c) in and to all other easements, fixtures and improvements
appurtenant thereto, (d) under the Energy Services Agreement, dated as of June
1, 1997 with the HVAC Provider and any other Mall Intangible Property Rights,
and (e) in and to all Mall Personal Property (collectively, the "Mall Assets").
In connection with the sale of the Mall, the Mall Construction Subsidiary also
will transfer to the Mall Subsidiary the proceeds of the final draw under the
Mall Construction Loan (and, under certain circumstances, a specified amount
under the Completion Guaranty) (the "Mall Retainage/Punchlist Amount").
As consideration for such transfers, the Mall Subsidiary shall, among
other things, repay or assume in full the outstanding balance of the Mall
Construction Loan (or certain refinancings thereof), including the amount of
the final draw thereunder.
The Sale and Contribution Agreement further provides that the Mall
Retainage/Punchlist Amount will be deposited into a segregated account governed
by an escrow agreement between the Mall Subsidiary and the Mall Construction
Subsidiary. The escrow agreement will provide that funds on deposit in the
account will be released to the Mall Construction Subsidiary, subject to
satisfaction of the conditions set forth in the Disbursement Agreement, for
application to the payment of retainage amounts owed to contractors, costs of
completing punchlist items and other remaining costs to complete the Casino
Resort. In the event that the Mall Construction Subsidiary fails to achieve
final completion of the Casino Resort within 18 months after the closing of the
sale of the Mall, the Mall Subsidiary will be permitted to withdraw funds from
the account and use them to complete the Mall punchlist items and pay other
unpaid project costs. Upon final completion of the Casino Resort, any amount
remaining in the escrow account shall be released to the Mall Construction
Subsidiary.
Mall Lease
Venetian, as landlord, and the Mall Construction Subsidiary, as tenant,
have entered into the Mall Lease pursuant to which Venetian will lease to the
Mall Construction Subsidiary (i) the space within the principal structure of
the Casino Resort located immediately above the Casino and immediately below
the Hotel Tower (the "Principal Mall Parcel"), together with (ii) certain land
(the "Retail Annex Parcel") (the Principal Mall Parcel and the Retail Annex
Parcel together constitute the Mall Parcel, and (i) and (ii) together with all
improvements thereon will comprise the Mall) for a nominal annual rent. The
Mall Lease
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automatically expires upon the 99th anniversary of the commencement date of the
Mall Lease. The tenant under the Mall Lease will own all improvements to be
made to the Mall Parcel during the term of the Mall Lease. The Mall Lease will
provide that fee title in and to the Mall Parcel automatically will vest in the
Mall Construction Subsidiary when and if the Mall Parcel becomes a separate
legal and tax parcel, and the Mall Lease thereupon shall terminate.
"Billboard Live!" Lease
Mall Construction Subsidiary, as landlord, and B.L. International of
Nevada, Inc. ("BLINI"), as tenant, are parties to a lease for a 50,000 square
foot "Billboard Live!" themed entertainment complex (the "Billboard Operating
Lease"). The leased space will include areas adjacent to the casino floor (the
"Additional Billboard Space") and within the Mall. The initial term of the
Billboard Lease is 20 years from the date of the opening of the Casino Resort
and BLINI has two five-year renewal options. The rent under the Billboard Lease
is comprised of an annual minimum rent component and percentage rent component.
In addition, BLINI will pay a pro-rata share of Mall common area cost charges.
The Billboard Lease also provides that Venetian may elect to terminate the
Billboard Lease without compensation to BLINI, in the event that, subsequent to
the initial 12-month period following the lease commencement date, BLINI's
average monthly gross income fails to meet certain thresholds during a period
consisting of three consecutive months. The Mall Construction Subsidiary may at
any time assign or transfer all or part of its interest as landlord in and to
the Billboard Lease, without notice or obtaining any approval from BLINI.
Venetian, as landlord, and the Mall Construction Subsidiary, as tenant,
have entered into a lease (the "Master Billboard Lease") for the Additional
Billboard Space pursuant to which Venetian will lease to the Mall Construction
Subsidiary the Additional Billboard Space for the term of the Billboard
Operating Lease.
Mall Management Contract
The Mall Subsidiary has entered into an agreement with Forest City
Enterprises ("Forest City"), a subsidiary of Forest City Ratner Enterprises, a
leading developer and manager of retail and commercial real estate
developments, whereby Forest City Enterprises will manage the Mall and
supervise and assist in the creation of an advertising and promotional program
and a marketing plan for the Mall. Forest City will also be responsible for,
among other things, preparation of a detailed plan for the routine operation of
the Mall, collection and deposit procedures for rents and other tenant charges,
supervision of maintenance and repairs and, on an annual basis, preparation of
a detailed budget (including any anticipated extraordinary expenses and capital
expenditures) for the Mall. The term of the management contract is five years
from the date the Mall opens for business to the public. Forest City will
receive a management fee of 2% of all gross rents received from the operation
of the Mall; provided, that Forest City will receive a minimum fee of $450,000
per year. Forest City is not affiliated with the Sole Stockholder or any of his
affiliates.
Mall Leasing Contract
LVSI has engaged the San Francisco and Los Angeles offices of Blatteis
Realty Co. ("BRC") as its retail leasing consultant (the "BRC Contract"). BRC
is a national real estate brokerage organization specializing in the leasing
and sales of high profile retail properties and representation of a select
portfolio of retailers and restaurants. Recent retail leasing transactions that
BRC has been involved with (at locations other than the Casino Resort) have
included the following tenants: Emporio Armani, Giorgio Armani, Jose Eber,
Prada, Salvatore Ferragamo, Barnes & Noble Superstore, The Pottery Barn, the
Disney Store, Williams-Sonoma, Planet Hollywood and Cafe Med. BRC will assist
with planning, marketing and leasing of the Mall. BRC also will advise the
Company and its architects, designers, consultants and other agents with
respect to the Mall's tenant mix and the conceptual layout of tenant space. The
term of the BRC Contract is for a period of 18 months from December 1, 1996,
and may be terminated by either party at any time on 60 days' prior written
notice to the other party. BRC, which is not affiliated with the Sole
Stockholder or any of his affiliates, receives a monthly consulting fee of
$10,000 plus a refundable monthly sum of $10,000 as an advance against, and
credited to the payment of, lease brokerage commissions. Leasing commissions
payable to BRC are calculated on the basis of $8.00 per leased square foot or
$4.00 per leased square foot, depending upon the location of the applicable
leased space within the Mall.
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Agreements Relating to the Lido Casino Resort
If the Phase II Resort is constructed, the following agreements may be
entered into by the Phase II Subsidiary and its subsidiaries, on one hand, and
the Company, Venetian and the Mall Subsidiary, on the other hand:
Casino Lease
If the Phase II Resort is constructed, in order to avoid the need for a
separate gaming license for the Phase II Subsidiary, LVSI or Venetian may
operate the casino for the Phase II Resort pursuant to a lease (the "Phase II
Casino Lease"). The Phase II Lease will have terms substantially similar to the
Casino Lease except that (i) the rent payable under such lease shall be equal
to all revenue derived from such casino minus the sum of (a) the operating
costs related to such casino (including an allocated portion (based on gaming
revenue) of the Company's or Venetian's, as the case may be, administrative
costs related to its gaming operations) and (b) the lesser of $250,000 or 1.0%
of such casino's operating income (or zero if there is an operating loss)
(determined in accordance with generally accepted accounting principles), (ii)
the Company or Venetian, as the case may be, may agree that they shall operate
the casino in the Phase II Resort and the Casino in substantially similar
manners and (iii) the Company or Venetian, as the case may be, may agree to
have common gaming and surveillance operations in such casinos (based on equal
allocations of revenues and operating costs).
Phase II HVAC Services Agreement
The Cooperation Agreement permits the owner of the Phase II Land to enter
into an HVAC Services Agreement to receive HVAC services from the HVAC Plant.
Any such agreement would have to be on terms satisfactory to the HVAC Provider.
See "Certain Material Agreements--Cooperation Agreement."
Phase II Mall Arrangments
The Cooperation Agreement and the Mall Take-out Financings further
condition development of retail and restaurant improvements upon the Phase II
Land upon the execution of appropriate reciprocal easement arrangements. See
"Certain Material Agreements--Cooperation Agreement" and "Description of
Certain Indebtedness--Mall Take-out Financing Commitments."
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of material federal income tax
considerations of an exchange of Existing Notes for New Notes, and resulting
from beneficial ownership of the Notes and is based upon laws, regulations,
rulings and decisions currently in effect, all of which are subject to change.
The discussion does not purport to deal with all aspects of federal taxation
that may be relevant to particular investors in light of their personal
investment circumstances, nor does it discuss federal tax laws applicable to
special classes of taxpayers (for example, life insurance companies, tax-exempt
organizations, financial institutions, and, except to the extent indicated
under "Non-U.S. Holders," below, foreign corporations, non-resident alien
individuals and other persons not subject to U.S. federal income tax on their
worldwide income). In addition, the description does not consider the effect of
any foreign, state, local or other tax laws that may be applicable to a
particular investor. The description assumes that investors will (except as
otherwise indicated) be initial purchasers that hold the Notes as capital
assets within the meaning of Section 1221 of the Code. Prospective investors
are strongly urged to consult their own tax advisors regarding the tax
consequences of purchasing, holding and disposing of the Notes.
Taxation of Holders on Exchange
An exchange of Existing Notes for New Notes should not be a taxable event
to holders of Existing Notes and holders should not recognize any taxable gain
or loss or any interest income as a result of such an exchange. Accordingly, a
holder would have the same adjusted basis and holding period in the New Notes
as it had in the Existing Notes immediately before the exchange. Further, the
tax consequences of ownership and disposition of any New Notes should be the
same as the tax consequences of ownership and disposition of Existing Notes.
U.S. Holders
The following summary generally describes certain United States federal
income tax consequences of beneficial ownership, purchase, holding and
disposition of Notes by a person who or which is (i) a citizen or resident of
the United States, (ii) a corporation created or organized under the laws of
the United States or any State thereof (including the District of Columbia),
(iii) a trust subject to the control of a United States person and the primary
supervision of a United States court, or (iv) a person otherwise subject to
United States Federal income taxation on its worldwide income (a "U.S.
Holder"). U.S. Holders should consult their own tax advisors concerning the
application of the following rules to their particular situations, as well as
the tax consequences to them under the laws of any other taxing jurisdiction.
Sale or Redemption
A holder generally will recognize gain or loss on the sale or redemption
of the Notes equal to the difference between the amount realized from such sale
or redemption (other than amounts attributable to accrued interest or original
issue discount ("OID") (within the meaning of Section 1273(a) of the Code)
which would be taxable as interest) and his adjusted basis for such Notes. A
U.S. Holder's adjusted tax basis in a Note will generally be its purchase
price, increased by the amount of any OID, de minimis OID, or market discount
included in the U.S. Holder's income with respect to the Note, and reduced by
the amount of any payments that are not qualified stated interest payments and
any amortizable bond premium applied to reduce interest on the Note. Except as
discussed below under "Market Discount" and "Amortizable Bond Premium," such
gain or loss generally will be capital gain or loss. For U.S. Holders other
than individuals, capital gain or loss will be long-term capital gain or loss
if the holding period for the Notes is more than one year. Certain changes to
the Code, enacted recently as part of the Taxpayer Relief Act of 1997, will
apply to U.S. Holders who are individuals. In general, the maximum tax rate for
such holders on long-term capital gains will be 20% (or, for holders in the 15%
regular tax bracket, will be 10%) for most capital assets (including the Notes)
held for more than 18 months. For individual holders holding Notes for more
than one year but not more than 18 months, the maximum tax rate on capital gain
("mid-term capital gain") will be 28%. Capital gain or loss will be short-term
if the Note is held for one year or less.
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Stated Interest and Original Issue Discount
Mortgage Notes
Because the stated redemption price at maturity of the Mortgage Notes will
not exceed their issue price by more than 1/4 of 1% of their stated redemption
price at maturity multiplied by the number of full years until maturity, such
Mortgage Notes will not be considered issued with OID for federal income tax
purposes. A holder of Mortgage Notes will be required to report as ordinary
income for federal income tax purposes stated interest earned on the Mortgage
Notes as it is received or accrued, in accordance with the holder's method of
accounting for tax purposes.
Senior Subordinated Notes
A holder of a Senior Subordinated Note is required (absent to the election
described below to treat all interest on the Senior Subordinated Note as OID)
to report as income for federal income tax purposes the portion of the stated
interest on the Senior Subordinated Note that constitutes "qualified stated
interest" in accordance with the holder's method of accounting for tax
purposes. "Qualified stated interest" on a Senior Subordinated Note is the
stated interest that is unconditionally payable at least annually at a single
fixed rate (i.e., the lower rate applicable to interest payments during the
first two years after issuance).
The Senior Subordinated Notes are treated as issued with OID. A holder of
a Senior Subordinated Note is also required to include OID on the Senior
Subordinated Note in gross income for federal income tax purposes as it
accrues, regardless of such holder's regular method of accounting for federal
income tax purposes. U.S. Holders will be required to include OID in income as
ordinary interest before they have received cash interest payments to which
such income is attributable. In general, OID on a Senior Subordinated Note will
equal the excess of (i) its "stated redemption price at maturity" over (ii) its
"issue price." The "stated redemption price at maturity" of a Senior
Subordinated Note will be equal to the sum of all payments to be made on the
Senior Subordinated Note other than qualified stated interest payments (that is
the sum of all amounts payable on the Note other than interest at the lower
rate applicable during the first two years after issuance). The "issue price"
of the Senior Subordinated Notes will be the first price at which a substantial
amount of the Senior Subordinated Notes is sold (excluding sales to bond
houses, brokers or similar persons acting in the capacity of underwriter,
placement agent or wholesaler).
A United States holder of the Senior Subordinated Notes must include such
OID in income on an economic accrual basis (using the constant yield method of
accrual described in Section 1272(a) of the Code) and the Treasury Regulations
promulgated thereunder. The amount of OID allocable to an accrual period will
equal the product of the "adjusted issue price" at the beginning of the accrual
period and the yield on the Senior Subordinated Note, less the amount of any
payments of qualified stated interest allocable to such accrual period. The
"adjusted issue price" of a Senior Subordinated Note will be its original issue
price, increased by the amount of OID previously includable in the gross income
of any holder with respect to such Note (without regard to any amortization of
bond purchase or acquisition premium, as discussed below), and decreased by the
amount of any payment previously made on the Senior Subordinated Note other
than a payment of qualified stated interest. The method by which OID is
calculated causes U.S. Holders of Notes issued with OID, such as the Senior
Subordinated Notes, to have to include in income increasingly greater amount of
OID over the period that they hold the Notes, and without regard to whether
they have received interest payments (or increased interest payments) that
correspond to their income inclusions.
A U.S. Holder of a Senior Subordinated Note, subject to certain
limitations, may elect to include in gross income for federal income tax
purposes all interest that accrues on the Senior Subordinated Note by using the
constant yield method described above. For purposes of the election, interest
includes all stated and unstated interest, acquisition discount, OID, market
discount and de minimis market discount, as adjusted by any amortizable bond
premium or acquisition premium. In applying the constant yield method to a Note
with respect to which an election is made, the issue price of the Note will
equal the electing U.S. Holder's adjusted basis in the Note immediately after
its acquisition, the issue date of the Note will be the date of its
acquisition, and no payments on the Note will be treated as payments of
qualified stated interest. This election is generally applicable only to the
Note with respect to which it is made and will not be revocable without the
consent of the Internal Revenue Service. If the election is made with respect
to a Note with amortizable bond premium, the Holder will be deemed to have
elected to apply
224
<PAGE>
amortizable bond premium against interest with respect to all debt instruments
with amortizable bond premium held by the electing Holder as of, or acquired
after, the beginning of the taxable year in which the Note is acquired. Such an
election, if made in respect of a market discount bond, will constitute an
election to include market discount in income currently on all market discount
bonds held by such United States holder. See the discussion below under "Market
Discount."
The Company and Venetian are required to provide information returns
stating the amount of OID accrued on Senior Subordinated Notes held of record
by persons other than corporations and other exempt holders.
U.S. Holders that acquire Senior Subordinated Notes after their original
issuance will be required to determine for themselves whether, by reason of the
rules described below, they are eligible to report a reduced amount of OID for
federal income tax purposes.
Market Discount
Upon a transfer, the Notes may be subject to the market discount
provisions of the Code. Market discount is the excess, if any, of an
instrument's adjusted issue price over its basis in the hands of the acquiror
immediately after their acquisition. However, market discount will not be
considered to exist if, at the time of acquisition, the discount is less than
1/4 of 1% of the obligation's adjusted issue price multiplied by the number of
complete years remaining to maturity.
When the acquiror disposes of a market discount obligation or recognizes
gain on the maturity of a market discount obligation, the lesser of the gain or
the accrued market discount will be taxable to him as ordinary income (and will
generally be treated as interest). Accrued market discount at such time is the
total market discount multiplied by a fraction, the numerator of which is the
number of days the acquiror held the obligation and the denominator of which is
the number of days from the date he acquired the obligation until its maturity
date. As an alternative to this ratable method, the acquiror may elect to
compute the accrued market discount based upon a constant yield to maturity
basis. Such election would apply only to the Note for which the election is
made. If the acquiror makes a gift of the obligation, he must recognize any
accrued market discount income as if he had sold the obligation for its fair
market value.
An acquiror of a market discount obligation who does not elect to include
such market discount in income on a current basis generally will be required to
defer a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry the obligation until
the maturity or earlier disposition of the obligation in a taxable transaction.
The Notes may be redeemed, in whole or in part, before maturity. If some
or all of the Notes are redeemed, each holder of the Notes acquired at a market
discount would be required to treat the principal payment as ordinary interest
income to the extent of any accrued market discount on such Notes.
A U.S. Holder of a debt instrument acquired at a market discount may elect
to include the market discount in income as the discount accrues. The current
inclusion election, once made, applies to all market discount obligations
acquired during or after the taxable year in which the election is made and may
not be revoked without the consent of the Internal Revenue Service. If a U.S.
Holder of Notes elects to include market discount in income in accordance with
the preceding sentence, the foregoing rules with respect to the recognition of
ordinary income on sales or certain other dispositions of such Notes and the
deferral of interest deduction on indebtedness related to such Notes would not
apply.
U.S. Holders should consult their own tax advisors regarding the
application of the market discount rules and the advisability of making the
elections described above.
Acquisition Premium and Amortizable Bond Premium
If a subsequent holder's tax basis in a Senior Subordinated Note (i)
exceeds the adjusted issue price of such note, and (ii) is less than or equal
to the stated redemption price at maturity (reduced by any payments made on the
Senior Subordinated Note other than payments of qualified stated interest),
such excess will be considered "acquisition premium." Such a holder is
permitted to reduce the amount of OID required to be included in gross income
by an amount equal to the OID otherwise includable multiplied by a fraction,
the numerator of which is the amount of acquisition premium and the denominator
of which
225
<PAGE>
is the excess of the sum of all amounts payable on the Notes after the purchase
date (other than qualified stated interest payments) of over the adjusted issue
price. Alternatively, a U.S. holder may elect to amortize acquisition premium
on a constant yield basis, treating the U.S. Holder's purchase price as the
Note's issue price. If the holder's tax basis in the Senior Subordinated Note
immediately after such holder's acquisition of the Senior Subordinated Note
were to exceed its stated redemption price at maturity (reduced as described
above), such holder would not be required to include any OID in income.
If a subsequent holder's tax basis in a Mortgage Note or a Senior
Subordinated Note exceeds the stated redemption price at maturity (reduced as
described above in the case of a Senior Subordinated Note) such excess would be
treated as "amortizable bond premium." The holder may elect to amortize such
excess over the period from the acquisition date of the Note to the maturity
date and to reduce the amount of interest included in income in respect of the
Note by such amount. Such amortizable bond premium may be offset against income
on the related security based on the holder's yield to maturity determined by
using the holder's tax basis in the Note and compounding at the close of each
accrual period. A holder who elects to amortize bond premium must reduce its
adjusted basis in the Note by the amount of such allowable amortization. An
election to amortize bond premium would apply to amortizable bond premium on
all taxable bonds held at or acquired at the beginning of the holder's taxable
year as to which the election is made, and may be revoked only with the consent
of the IRS.
Non-U.S. Holders
Subject to the discussion of information reporting and backup withholding
below, payments of interest (including OID on the Senior Subordinated Notes) to
or on behalf of any beneficial owner who is not a U.S. Holder (a "Non-U.S.
Holder") and who is not engaged in a trade or business within the United States
to which interest on the Notes is effectively connected, will not be subject to
United States federal income or withholding tax, provided that (i) such
beneficial owner is not a bank for United States federal income tax purposes,
(ii) such beneficial owner does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of the Company
entitled to vote, (iii) such beneficial owner is not a controlled foreign
corporation for United States income tax purposes (generally, a foreign
corporation controlled by United States shareholders) that is related to the
Company through stock ownership, and (iv) certain certification requirements
are met. A Non-U.S. Holder that is not exempt from tax under these rules
generally will be subject to United States federal income tax withholding at a
rate of 30% (or lower applicable treaty rate) on interest payments and, in the
case of the Senior Subordinated Notes, on payments attributable to OID.
Withholding attributable to OID, where required, is made at the time interest
on the Senior Subordinated Note is paid or, to the extent such OID was not
previously taxed, at the time the Senior Subordinated Note is sold, exchanged
or retired.
If the interest and OID is effectively connected with the conduct of a
trade or business in the United States of such Non-U.S. Holder, the interest
and OID will be subject to the United States federal income tax on net income
that applies to United States persons generally (and with respect to corporate
holders under certain circumstances, the branch profits tax).
Any capital gain realized upon a sale, exchange or retirement of a Note by
or on behalf of a Non-U.S. Holder generally will not be subject to United
States federal withholding or income tax, unless (i) such gain is effectively
connected with a United States trade or business of such Non-U.S. Holder or
(ii) in the case of an individual, such Non-U.S. Holder is present in the
United States for 183 days or more during the taxable year of the sale,
exchange or retirement and other requirements are met, or (iii) the Holder is
subject to tax pursuant to provisions of the Code applicable to certain United
States expatriates. Recently published final Treasury Regulations (the "Final
Withholding Regulations") make a number of important changes to the procedures
for income tax withholding and certification of eligibility for the portfolio
interest exemption or for a reduced rate of income tax withholding based on an
applicable income tax treaty. In general, the Final Withholding Regulations do
not significantly alter substantive withholding requirements, but unify
certification procedures and clarify reliance standards. The Final Withholding
Regulations are scheduled to be effective for payments made on or after January
1, 1999, subject to certain transition rules. Initial Non-U.S. Holders will be
required to submit certification complying with the temporary Treasury
Regulations described above upon purchase of the Notes. Certification that
complies with the procedures in the Final Withholding Regulations, where
required, must be provided not later than
226
<PAGE>
the earlier of (i) the date after January 1, 1999 on which such Holder's
certification is no longer accurate or has expired, and (ii) December 31, 1999,
by initial Non-U.S. Holders that remain Holders on such date, unless such
Non-U.S. Holders receive payments on the Notes through a qualified intermediary
(as defined in the Final Withholding Regulations) that has certified on such
Non-U.S. Holders' behalf. Non-U.S. Holders claiming under an income tax treaty
(and not relying on the portfolio interest exemption) should be aware that they
may be required to obtain taxpayer identifying numbers ("TINs") and to certify
their eligibility under the applicable treaty's limitations on benefits article
in order to comply with the Final Withholding Regulations' certification
requirements. THE FINAL WITHHOLDING REGULATIONS ARE QUITE COMPLEX. NON-U.S.
HOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
POTENTIAL APPLICATION OF THE FINAL WITHHOLDING REGULATIONS TO PAYMENTS ON THE
NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
Non-U.S. Holders should consult their own tax advisers regarding the
application of United States income tax laws and any income tax treaties and
the Final Withholding Regulations to their particular situations.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain
payments of principal, interest and OID paid on the Notes and proceeds of a
sale of a Note made to U.S. Holders other than certain exempt recipients (such
as corporations). In the event that a U.S. Holder of the Notes fails to supply
its correct taxpayer identification number in the manner required by applicable
law or underreports its tax liability, such Holder may be subject to "backup
withholding" at the rate of 31% of the "reportable payments," which include
interest (including OID) and, under certain circumstances, principal payments.
Under current Treasury Regulations, information reporting and backup
withholding will not apply to payments by the Company or Venetian or any
middleman to a Non-U.S. Holder of a Note, provided that the Holder (and, in
certain cases the custodian, nominee or other agent of such Holder) meets
certain certification requirements as to the status of the Holder as a Non-U.S.
Holder for United States federal income tax purposes (provided that such payor
does not have actual knowledge that the Holder is a United States person or
that the conditions of any other exemption are not in fact satisfied).
Backup withholding is not an additional tax; any amounts so withheld may
be credited against the United States federal income tax liability of the
Holder.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY OR MAY
NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S PARTICULAR SITUATION. EACH
INVESTOR SHOULD CONSULT HIS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO
HIM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
227
<PAGE>
ERISA CONSIDERATIONS
Sections 406 and 407 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and Section 4975 of the Code prohibit certain
employee benefit plans, individual retirement accounts, individual retirement
annuities, and employee annuity plans ("Plans") from engaging in certain
transactions with persons who, with respect to such Plan, are "parties in
interest" under ERISA or "disqualified persons" under the Code. A prohibited
transaction, in addition to imposing potential personal liability upon
fiduciaries of the Plans, may also generate excise taxes under the Code upon a
"party in interest" (as defined in ERISA) or "disqualified persons" (as defined
in the Code) with respect to the Plan, and other liabilities under ERISA for
such persons. Possible violations of the prohibited transaction rules occur if
the Notes are purchased with the assets of any Plan the Company or any of its
affiliates is a party in interest or disqualified person with respect to such
Plan, unless such acquisition is subject to a statutory or administrative
exemption.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Any fiduciary of a Plan considering the purchase of the Notes
should consult its legal advisors regarding the consequences of such purchases
under ERISA and the Code. Specifically, before authorizing an investment in the
Notes, any such fiduciary should, after considering the Plan's particular
circumstances, determine whether the investment of such Plan's assets in the
Notes is appropriate under the fiduciary standards of ERISA or other applicable
law including standards with respect to prudence, diversification and
delegation of control and the prohibited transaction provisions of ERISA and
the Code. If the Plan is not subject to ERISA, the fiduciary should consult its
legal advisors regarding the consequences of any state law or Code
considerations.
PLAN OF DISTRIBUTION
Based on certain no action letters issued by the staff of the Commission
to third parties in unrelated transactions, the Issuers believe that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any holder who is an
"affiliate" of either of the Issuers within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Issuers
to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any
other available exemption) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of the holder's business and such
holders have no arrangement or understanding with any person to participate in
a distribution of such New Notes and are not participating in, and do not
intend to participate in, the distribution of such New Notes. In addition, to
comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdiction or an exemption from registration or
qualification is available and complied with. The Issuers have agreed, pursuant
to the Registration Rights Agreement and subject to certain specified
limitations therein, to register to qualify the New Notes for offer or sale
under the securities or blue sky laws of such jurisdictions as are necessary to
permit the consummation of the Exchange Offer.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Issuers and the Guarantors have agreed that,
for a period of 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Issuers and the Guarantors will not receive any proceeds from any sale
of New Notes by broker-dealers. New Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers
228
<PAGE>
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of New Notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the closing of the Exchange Offer the
Issuers and the Guarantors will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Issuers and the Guarantors have agreed to pay all expenses incident to the
Exchange Offer other than commissions or concessions of any brokers or dealers
and will indemnify the holders of the Existing Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF THE NOTES
Certain legal matters in connection with the validity of the Notes will be
passed upon for the Issuers by Paul, Weiss, Rifkind, Wharton & Garrison, New
York, New York. Certain legal matters with respect to Nevada law will be passed
upon for the Issuers by Lionel Sawyer & Collins, Las Vegas, Nevada.
INDEPENDENT ACCOUNTANTS
The historical financial statements of Las Vegas Sands, Inc. as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
APPRAISERS
The Land Appraisal, the Hotel/Casino Appraisal and the Mall Appraisal,
each dated as of October 17, 1997, were prepared by Landauer Associates, Inc.
and are included herein in reliance upon the authority of such firm as expert
in real property valuations.
229
<PAGE>
LAS VEGAS SANDS, INC.
INDEX TO FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
Introduction to Forecasted Consolidated Financial Statements ........... P-2
Forecasted Consolidated Statement of Income ............................ P-3
Forecasted Consolidated Balance Sheets ................................. P-4
Forecasted Consolidated Statement of Cash Flows ........................ P-5
Summary of Significant Forecast Assumptions and Accounting Policies .... P-6
Supplemental Forecasted Casino Revenues Data ........................... P-14
Summary Consolidated Financial Forecast Information .................... P-15
P-1
<PAGE>
LAS VEGAS SANDS, INC.
INTRODUCTION TO FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
The following is the consolidated financial forecast of operations for Las
Vegas Sands, Inc. ("LVSI") and its subsidiaries (the "Company"), including
Venetian Casino Resort, LLC ("Venetian") and Grand Canal Shops, LLC (the "Mall
Subsidiary") for the first twelve months of operations of the Venetian Casino
Resort (the "Casino Resort") which the Company expects will be the twelve
months ending March 31, 2000 (the "Financial Forecast"). The Financial Forecast
was prepared as of June 30, 1997 except for the amount of Mortgage Notes and
Subordinated Notes and the assumed interest rates for such Notes, which were
updated as of November 6, 1997. The financial forecast is presented in
accordance with guidelines established by the American Institute of Certified
Public Accountants. The prospective financial information included in this
Prospectus has been prepared by, and is the responsibility of, the Company's
management. Price Waterhouse LLP has neither examined nor compiled the
accompanying prospective financial information, and accordingly, Price
Waterhouse LLP does not express an opinion or any other form of assurance with
respect thereto. The Price Waterhouse LLP report included in this document
relates to the Company's historical financial information, and it does not
extend to the prospective financial information and should not be read to do
so. Neither the Initial Purchasers nor any independent expert has reviewed the
Financial Forecast. While such Financial Forecast is presented with numerical
specificity, it is based on the best estimate of the Company, described in the
Summary of Significant Assumptions and Accounting Policies below, of the result
it expects for the Casino Resort given the Company's assumptions (including
that (i) the Casino Resort will open as scheduled and will be successful, (ii)
the Casino Resort will attract a substantial number of visitors, and (iii) the
average daily room rate paid by visitors to the Casino Resort will be higher
than room rates at other hotel/casinos on the Strip because of room demand from
trade shows and conventions currently booked at the Convention Center for the
first projected year of operation of the Casino Resort, the Casino Resort's
all-suite format and amenities, its location and its target market.
Furthermore, such estimates are inherently subject to significant business,
economic and competitive uncertanties and contingencies (many of which are
beyond the control of the Company), including future business decisions which
are subject to change. Financial forecasts are necessarily speculative in
nature, and it is usually the case that one or more of the assumptions do not
materialize. For instance, the Financial Forecasts assume higher than average
daily room rates of $167 during the initial year of operations (as compared to
an average daily room rate of $79 for the upper quartile casinos located on the
Las Vegas Strip with gaming revenue greater than $72.0 million (the "Large
Strip Hotels") for 1996 according to the Nevada State Gaming Control Board (the
"NGCB") and average daily room rates at major convention hotels in New York,
Chicago and San Francisco of approximately $160 during the first quarter of
1997 according to "Smith Travel Research"), which may not be achieved. In
addition, the results, performance and achievements of the Casino Resort
involve known and unknown risks, uncertainties and other factors, including the
risks associated with new construction, government regulation of the casino
industry, the completion of infrastructure improvements in Las Vegas, including
the ongoing expansion of McCarran International Airport, and general economic
and business conditions which may impact levels of disposable income for
consumers and pricing of hotel rooms. Accordingly, the Financial Forecast is
only an estimate, actual results can be expected to vary from estimates, and
the variations may be material. The Financial Forecast herein should not be
regarded as a representation by the Company or any other person (including the
Initial Purchasers) that the Financial Forecast will be achieved. Holders of
the Notes are cautioned not to place undue reliance on the Financial Forecast.
The Company does not intend to update or otherwise revise the Financial
Forecast to reflect events or circumstances existing or arising after the date
of this Prospectus or to reflect the occurrence of unanticipated events, except
as required by applicable law. This Introduction to Forecasted Consolidated
Financial Statements and the information that follows constitute
forward-looking statements. The Company's forecasted results of operations are
based on assumptions regarding, among other things, revenues and expenses, some
of which differ from the assumptions used by the Appraiser in its valuation of
the Hotel, the Casino and the Mall. See "Appraisals" and "Special Note
Regarding Forward-Looking Statements."
P-2
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED STATEMENT OF INCOME
(In millions)
Twelve Months Ending
March 31, 2000
---------------------
Revenues:
Casino ................................ $ 280.5
Rooms ................................. 172.6
Food and beverage ..................... 66.2
Retail and other ...................... 31.3
Mall .................................. 28.2
--------
578.8
Less: promotional allowances .......... (51.0)
--------
Net revenues ........................ $ 527.8
--------
Costs and Expenses:
Casino ................................ $ 126.9
Rooms ................................. 46.6
Food and beverage ..................... 42.9
Retail and other ...................... 11.0
Mall .................................. 2.0
Depreciation and amortization ......... 43.3
General and administrative ............ 66.1
Advertising and promotion ............. 7.9
--------
346.7
--------
Operating income ....................... 181.1
Interest expense, net ................. (97.7)
--------
Net income ............................. $ 83.4
========
See accompanying Summary of Significant Forecast
Assumptions and Accounting Policies
P-3
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED BALANCE SHEETS
(In millions)
<TABLE>
<CAPTION>
March 31, March 31,
1999 2000
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ............................... $ 5.0 $ 21.4
Restricted cash (a) ..................................... 61.7 --
Accounts receivable, net ................................ -- 30.0
Other ................................................... 11.3 11.3
-------- --------
Total current assets .................................. $ 78.0 $ 62.7
Property, equipment and other, net ....................... 1,050.9 1,016.1
-------- --------
Total assets .......................................... $1,128.9 $1,078.8
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable and accrued expenses ................... $ 18.3 $ 28.2
Construction accounts payable (a) ....................... 85.2 --
Current portion of long term debt ....................... 49.2 73.8
-------- --------
Total current liabilities ............................. $ 152.7 $ 102.0
Long-term debt, less current portion ..................... 831.9 782.5
-------- --------
Total liabilities ..................................... $ 984.6 $ 884.5
Preferred interest in Venetian ........................... 77.1 77.1
Stockholder's equity ..................................... 67.2 117.2
-------- --------
Total liabilities, preferred interest and stockholder's
equity .............................................. $1,128.9 $1,078.8
======== ========
</TABLE>
- ------------
(a) Estimated remaining proceeds from offering of the Mortgage Notes and the
Senior Subordinated Notes available at opening along with undrawn amounts
under the Bank Credit Facility of $23.5 million will be used to pay
construction accounts payable.
See accompanying Summary of Significant
Forecast Assumptions and Accounting Policies
P-4
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Twelve Months Ending
March 31, 2000
---------------------
Cash flows from operating activities:
Net income ............................................ $ 83.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Non-cash interest expense ........................... .9
Depreciation and amortization ....................... 43.3
Changes in working capital accounts ................. (20.1)
-------
Net cash provided by operating activities .............. 107.5
-------
Cash flows from investing activities:
Capital expenditures .................................. ( 8.5)
-------
Net cash used in investing activities .................. ( 8.5)
-------
Cash flows from financing activities:
Proceeds from long-term debt .......................... 85.2
Payment of construction accounts payables ............. (85.2)
Principal payments on long term debt .................. (49.2)
Payment of Dividends .................................. (33.4)
-------
Net cash used in financing activities .................. (82.6)
Increase in cash and cash equivalents .................. 16.4
Cash and cash equivalents, beginning of period ......... 5.0
-------
Cash and cash equivalents, end of period ............... $ 21.4
=======
See accompanying Summary of Significant
Forecast Assumptions and Accounting Policies
P-5
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
For the Twelve Months Ending March 31, 2000
Introduction
The forecasted consolidated balance sheets as of March 31, 1999 and March
31, 2000 and the related forecasted consolidated statements of income and of
cash flows for the twelve months ending March 31, 2000 and this accompanying
Summary of Significant Forecast Assumptions and Accounting Policies of the
Company represent management's best estimate as of June 30, 1997 (the date of
the Financial Forecast, except for the Mortgage Notes and the Senior
Subordinated Notes and the assumed interest rates on such notes, which were
updated as of November 6, 1997) of the most probable financial condition,
results of operations, and cash flows of the Company for the first twelve
months of operations ending March 31, 2000 based upon an estimated opening date
for the Casino Resort on April 1, 1999. For purposes of this Financial
Forecast, an opening date of April 1, 1999 is assumed whereas the construction
management agreement provides for an April 21, 1999 completion date. The
Company's actual financial statements are anticipated to be presented on a
calendar year basis. This Financial Forecast includes the operating results of
LVSI, Venetian and the Mall Subsidiary. Venetian was formed on March 20, 1997
to own and operate certain portions of the Casino Resort. LVSI is the managing
member and owns 100% of the common voting equity in Venetian. The entire
preferred membership interest in Venetian is owned by Interface Group Holding
Company, Inc., which is wholly owned by LVSI's sole stockholder. The Financial
Forecast reflects management's judgment based on present circumstances of the
most likely set of conditions and management's most likely course of action, to
the extent such conditions or actions are anticipated to affect the results
described in the Financial Forecast.
The assumptions described herein are those that management believes are
significant to the Financial Forecast or are the key factors upon which the
results shown in the Financial Forecast depend. As such, not all assumptions
used in the preparation of these statements have been set forth herein. The
Financial Forecast was prepared by management in good faith and is based upon a
variety of estimates and assumptions, which, though considered reasonable by
management, may not be achieved and are inherently subject to significant
business, economic, regulatory and competitive uncertainties and contingencies,
including possible competitive responses, many of which are not within the
control of the Company and are not possible to assess accurately, and upon
assumptions with respect to future business decisions which are subject to
change. Therefore, the actual results achieved during the forecast period will
vary from those set forth in the Financial Forecast, and the variations may be
material.
The Financial Forecast assumes, among other things, that (i) Venetian will
operate 3,036 all-suite hotel rooms, (ii) the Company will operate a casino of
approximately 116,000 square feet including approximately 2,500 slot machines
and 114 table games (excluding baccarat), (iii) the Casino Resort will be able
to commence operations on April 1, 1999, (iv) the Mall Subsidiary will commence
operations on April 1, 1999 and lease approximately 430,000 of the total
available 500,000 square feet of retail and restaurant space, (v) the Company
will not be adversely involved with any major legal proceedings which could
affect its revenues or expenses, (vi) there will be no change in generally
accepted accounting principles that may have a material effect on the financial
results of the Company and, (vii) the Company will maintain its license to
operate the Casino. If such assumptions are not met, the actual results will
vary from those set forth in the Financial Forecast, and variations may be
material.
The Financial Forecast was prepared as of June 30, 1997, except for the
Mortgage Notes and the Senior Subordinated Notes and the assumed interest rates
on such notes, which were updated as of November 6, 1997. The Financial
Forecast should not be regarded as a representation by the Company or any other
person (including the Initial Purchasers) that the Financial Forecast will be
achieved. Prospective investors in the Notes are cautioned not to place undue
reliance on the Financial Forecast. The Company does not intend to update or
otherwise revise the Financial Forecast to reflect events or circumstances
existing or arising after the date hereof or to reflect the occurrence of
unanticipated events, except as required by applicable law. See "Risk
Factors--Financial Forecast."
P-6
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
The Financial Forecast should be read in conjunction with the information
contained in the Prospectus in which the Financial Forecast is included,
including, particularly, but not without limitation, "Risk Factors," "LVSI and
Venetian," "Description of Mortgage Notes," "Description of Certain
Indebtedness" and "Description of Senior Subordinated Notes."
Estimated Project Cost and Financing Assumptions
Formal ground-breaking for the Casino Resort occurred in April 1997. For
the purpose of this Financial Forecast, the opening of the Casino Resort is
anticipated to occur at the beginning of the second quarter of 1999. The
Financial Forecast presents the forecasted results for the first twelve months
of operations ending March 31, 2000. The construction management agreement
described below provides for a scheduled completion date of April 1999.
Project Costs
The following is a summary of the forecasted development, construction,
design, financing and opening costs of the Casino Resort (including the Hotel,
the Mall, the Casino and the Congress Center but excluding $70.0 million of
HVAC Equipment owned by a third party and land acquisition costs) (in
millions):
Hotel/Casino ........................... $ 491.1
Mall ................................... 123.6
FF&E ................................... 121.1
Parking and Site Work .................. 36.4
Interest, net .......................... 88.4
Pre-opening costs and expenses ......... 34.4
Contingency ............................ 61.3
Financing fees and expenses ............ 42.2
--------
Total .................................. $ 998.5
========
Including the $70 million of HVAC Equipment owned by a third party, the
Casino Resort is budgeted to cost approximately $1.065 billion.
Major construction projects such as the Casino Resort entail significant
risks, including but not limited to, possible unanticipated shortages of
materials or skilled labor, unforeseen engineering, environmental and/or
geographical problems, work stoppages, weather interference, unanticipated cost
increases, mechanics liens and regulatory or entitlement delays, any of which
would delay the project and/or increase its costs. Management believes that the
budgeted construction cost is reasonable. The Company has entered into a
construction management agreement with Lehrer McGovern Bovis, Inc. (the
"Construction Manager") which provides for a guaranteed maximum price (subject
to certain limitations) for certain construction costs of approximately $547.8
million and a completion date of April 1999. In addition, the Construction
Manager's parent company, Bovis, Inc. ("Bovis") has agreed to guarantee the
obligation of the Construction Manager, subject to certain exceptions and
Bovis's parent, P&O, has agreed to guarantee Bovis's obligations, subject to
certain exceptions. The Company has also obtained liquidated damage insurance
that integrates the timing of damages with the above guarantees.
In addition to the land contributions by the Company described below, the
Financial Forecast assumes that the Casino Resort is financed with $150.0
million of indebtedness under the Bank Credit Facility, $97.7 million of
indebtedness under the FF&E Credit Facility, $425.0 million in Mortgage Notes,
$90.5 million (net of original issue discount) in Senior Subordinated Notes,
$140.0 million of indebtedness under the Mall Construction Loan Facility and
$95.3 million in cash equity contributions for a total of $998.5 million. It is
also assumed that prior to the opening of the Casino Resort, the Mall
Collateral will be transferred to the Mall Subsidiary pursuant to the Sale and
Contribution Agreement. To fund its obligations under the Sale and
P-7
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
Contribution Agreement, it is assumed that the Mall Subsidiary will borrow up
to $140.0 million under the Mall Take-out Financings. It also is assumed that
no conversion of the Series A Preferred Interest into Series B Preferred
Interest in Venetian will occur. See "Certain Transactions--Preferred
Interest."
Operating Assumptions
General
The Financial Forecast assumes that the Las Vegas market will continue to
experience increased gaming revenues and visitor volume. Gaming revenues for
the Las Vegas market have increased at a compound annual rate of 8.4% from $2.8
billion in 1987 to $5.8 billion in 1996. Over the same period, the number of
visitors traveling to Las Vegas grew at a 7.0% compound annual rate from 16.2
million visitors in 1987 to 29.6 million visitors in 1996, and, according to
the Las Vegas Convention and Visitors Authority ("LVCVA"), is expected to grow
at greater than 8% in 1997. Expenditures by visitors to Las Vegas grew at a
compound annual rate over the past nine years of 11.3% to $22.5 billion in
1996. Although Las Vegas has increased its room inventory from approximately
58,000 rooms to 99,000 rooms for a compound annual increase of 6.0% from 1987
to 1996, the Las Vegas hotel occupancy rate increased to 93.4% for 1996 from
87.0% in 1987. In addition to tourists, the attendance at Las Vegas conventions
and trade shows has increased at a compound annual rate of 7.6% from 1.7
million in 1987 to 3.3 million in 1996. Las Vegas was host to 3,827 conventions
in 1996 compared to 556 in 1987. The non-gaming convention revenues increased
at a compound rate of 14.2% over the past nine years generating over $3.9
billion in 1996 compared to $1.2 billion in 1987. There is no assurance that
these Las Vegas market statistics will increase at the same rates (or that they
will not decrease) in the future.
Management believes that the Casino Resort's all-suites room configuration
of an average size of approximately 655 to 735 square feet will enable it to
capture a significant portion of the Las Vegas tourist and convention and trade
show visitor market. Management also believes that the Casino Resort's
affiliation with the Sands Expo and Convention Center (the "Expo Center") will
attract a significant portion of the room nights generated by convention and
trade show attendees at the Expo Center. The Expo Center is owned by an
affiliated company that operates an existing approximately 1,150,000 square
foot convention and trade show facility located adjacent to the Casino Resort.
Although at least an additional 19,800 rooms are expected to be
constructed by other casino operators in Las Vegas by 1999 according to the
LVCVA, management believes that these properties will further enhance the
appeal of Las Vegas as a vacation destination and increase the number of
visitors to the area and their average length of stay. The Financial Forecast
assumes (but no assurances can be given) that the Company's results during the
period of the Financial Forecast will not be materially adversely affected by
these new projects.
Casino Revenues
The Company has drawn upon the combined experience of its management to
prepare the forecast of casino revenues. Management has utilized, where
available, information from certain other Las Vegas Strip hotel/casinos and
published information from the NGCB.
In developing the Financial Forecast, the Company has obtained published
data for other Las Vegas gaming properties (the "Premier Strip Hotels") located
on the Strip which management believes are comparable. The Company also has
obtained the NGCB published results of the Large Strip Hotels for the calendar
year ended December 31, 1996 (the "Gaming Revenue Analysis").
The Company's forecasted casino revenues are based upon the 1996 operating
performance of Large Strip Hotels and management's experience in operating
hotel and gaming operations. The accompanying schedule of Supplemental
Forecasted Casino Revenues Data summarizes management's
P-8
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
forecasted casino revenues for the first year of operation of the Company. Such
schedule sets forth the Company's forecasted revenues contributed by specific
table games, slot machines and other casino games.
As shown in the accompanying schedule, the Company forecasts that its
table games (excluding baccarat) and other casino games (such as keno, race and
sports book and poker) will generate revenues approximately equal to the
comparable amounts for the upper quartile of the Large Strip Hotels, as
adjusted for an estimated 3% annual inflation factor for the period December
1996 through April 1999, which is the construction period (win per unit per day
amounts are based on the NGCB's gaming figures for the year ended December 31,
1996, with inflation assumed for the two and one-quarter year period until the
opening of the Casino Resort). Management believes that its table games and
other casino games revenues forecast (which excludes baccarat) is reasonable
for the following reasons: (1) the largest hotels and casinos included in the
Large Strip Hotels category have generated revenue amounts significantly in
excess of the upper quartile figures according to their public filings; (2)
management believes that the facilities and special features of the Resort will
enable it to attract significant visitor volume and generate significant casino
revenues; and (3) the Casino revenues will be complemented by the convention
center and trade show attendance at the adjacent Expo Center.
Conversely, while the Casino Resort will have "state of the art" baccarat
facilities and 3,036 all-suite guest rooms, the Company's forecasted baccarat
revenues of $30.7 million is significantly below the upper quartile figure of
the Large Strip Hotels. The Company's forecasted baccarat revenues is based
upon an overall Large Strip Hotels average of $7.2 million win per unit in 1996
and an estimated 3% annual inflation factor during the two and one quarter year
construction period, while the upper quartile figure for Large Strip Hotels was
$9.7 million per unit in 1996. Management intends to pursue the baccarat
market, but the Company does not presently intend to adopt an aggressive credit
policy in order to increase its baccarat revenues. The Company believes its
forecast of baccarat revenues reflects a conservative operational approach
aimed at reducing the credit risks associated with baccarat.
The Company's forecast of slot machine revenues assumes that its average
daily win is $151 per machine. The Company's forecast is based upon the upper
quartile of the Large Strip Hotels average daily win per unit, and an estimated
3% annual inflation factor during the two and one quarter year construction
period. Management believes that this figure is reasonable given that several
of the largest hotels in the Large Strip Hotel category have been generating
average slot machine win significantly in excess of the upper quartile figure
according to their 1996 annual report to shareholders.
Hotel Revenues
The average daily room rate of $167 and hotel occupancy rate of 93% for
the Casino Resort's hotel were obtained from the Landauer Associates, Inc.
Appraisal of the Proposed Venetian Casino and Grand Canal Shops, finalized in
October 1997, set forth in the "Appraisals" section of this Prospectus. This
compares to an average daily room rate during 1996 of $79 and occupancy rates
of 94.8% for upper quartile Large Strip Hotels (according to the NGCB). The
Mirage and the Treasure Island Hotel and Casino adjacent to the Casino Resort,
have reported that standard room average daily rates increased 12% during 1996,
according to their 1996 annual report to stockholders. Average daily room rates
at major convention hotels in New York, Chicago, and San Francisco were
approximately $160 during the first quarter of 1997 according to "Smith Travel
Research."
P-9
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
In preparing its forecast of room revenues for the hotel, management also
analyzed future contractual bookings of major trade shows and conventions to be
held at the Expo Center. The Expo Center drew nearly 900,000 attendees and
generated approximately 2,150,000 room nights in 1996 based upon average
occupancy of 1.8 persons per room and average stay of 4.3 nights in Las Vegas
as reported by the LVCVA. In addition, average daily room rates during high
demand periods, trade show and convention periods and comparable daily room
rates for Premier Center Strip properties and other major convention cities
were analyzed. The Company estimates that approximately 48% of its total
occupied room nights and 60% of its weekday occupied room nights will be
generated from attendees at trade shows and conventions at the Expo Center and
city wide convention and trade shows held at the Las Vegas Convention Center.
Room rates at the Hotel are forecasted to be higher than Strip averages because
of anticipated higher mid-week convention and trade show room demand and lower
wholesale tour and travel room demand. Weekend rates are forecasted at
comparable rates of certain Premier Strip Hotels. Management believes the
forecasted average room rate to be reasonable given the all-suites nature of
the guest rooms, the quality of the Casino Resort's facilities, the amenities
offered, proximity to the Expo Center, and the Casino Resort's location on the
Strip adjacent to other Premier Strip Hotels which enjoy significantly higher
rates than the average in the Gaming Abstract.
Food and Beverage Revenues
The Casino Resort's forecast of food and beverage revenues is based upon
an analysis of comparable amounts for Premier Strip Hotels. The forecasted food
revenues include only sales for banquet and room service food facilities.
Banquet revenues are estimated based upon the estimated meetings and
conventions in the Casino Resort's conference and ballroom conferencing center.
Room service revenues are based upon the average sales per occupied room night
of comparable Premier Strip Hotels. All other food outlets will be leased and
operated by independent restaurant operators within the hotel and retail mall
area.
Mall Subsidiary Revenues
The Mall will be developed as a premier retail and restaurant mall
integrated into the Casino Resort. The Mall will contain approximately 500,000
square feet of leasable space. It is anticipated that the Mall will accommodate
approximately 55 retail stores and seven dining establishments. The retail
tenants are expected to include nationally recognized apparel shops and other
specialty retail shops. The restaurant tenants are expected to include
nationally known restaurant operators.
Revenues will include retail mall lease income derived from retail and
restaurant tenants. The retail mall rents are based upon the Mall containing
approximately 500,000 net leasable square feet and achieving average effective
rents of $66 per square foot and a vacancy factor of 20% of retail space during
the first year of Mall operations. These assumptions were developed by
examining comparable data for similar retail malls (The Forum Shops at Caesar's
Palace and the Fashion Show Mall), located on the Las Vegas Strip near the
Resort. The Financial Forecast assumes that nearly all Mall Subsidiary
operating expenses will be passed through to tenants in the form of common area
maintenance charges and that the Company will minimize tenant allowances to
build out the leased space. The Mall Subsidiary has entered into a management
contract with Forest City Enterprises to operate the Mall.
P-10
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
Retail and Other Revenues
Retail and other revenues for the Casino Resort include retail income
derived from retail and restaurant tenants located within the Casino Resort
(but outside of the Mall) and other items such as telephone revenue, spa
facilities, photography, and pool services revenues. Management's forecast for
other revenues is based upon retail and Premier Strip Hotels experience in
operating similar facilities. Lease revenues are forecasted at similar rents
per square foot of recently opened Premier Strip Hotels as reported by
restaurant operators.
Operating Expenses
In preparing its operating expense forecast for the Casino Resort, the
Company drew upon management's experience in operating other gaming resort
facilities to prepare a detailed cost estimate for the Casino Resort.
Management performed a detailed review of the staffing requirements for each of
the proposed operating departments of the Company, as well as for the general
and administrative functions associated with the operation of the Company.
Other operating expenses, including those allocated to casino, hotel, and food
and beverage operations have been forecasted based upon management's experience
in operating other gaming facilities and such expenses are comparable to other
Larger Strip Hotels. Promotional allowances have been forecasted at
approximately 18% of casino revenues. This promotional allowance is higher than
certain Premier Strip Hotels promotional allowances of approximately 15% for
1996 as published in the Gaming Abstract because of the Casino Resort's
forecasted higher average daily room rates.
Operating expenses for the Mall Subsidiary were estimated based upon a
review of similar malls and a management contract with Forest City Enterprises
to operate the Mall Subsidiary.
Pre-opening costs in the amount of $34.4 million will be expensed as
incurred during the construction period of the Casino Resort.
Interest Expense
Interest expense includes forecasted interest expense associated with the
$150.0 million of indebtedness under the Bank Credit Facility, $425.0 million
of Mortgage Notes, $140.0 million of indebtedness under the Mall Take-out
Financings, $97.7 million of FF&E Credit Facility and $90.5 million of Senior
Subordinated Notes (net of original issue discount) at rates of 8.25%, 12.25%,
9.25%, 9.50% and 14.25% respectively, applied to projected average balances
throughout the first year of operations. The $140.0 million of indebtedness
under the Mall Construction Loan Facility are assumed to be refinanced with
$140.0 million of indebtedness (under the Mall Take-out Financings) with
interest at 9.25% at the opening of the Mall Subsidiary. Interest income, shown
net of interest expense in the accompanying statement of income, is computed
using a 5.25% short term interest rate applied to forecasted average available
cash balances. The assumed blended interest rate for the indebtedness is
approximately 11.1%. The following table shows the calculation of such blended
rate.
P-11
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
<TABLE>
<CAPTION>
Average Assumed Interest
Debt Category Balance Rate Expense
<S> <C> <C> <C>
Bank Credit Facility ......................... $ 125.0 8.25% $ 10.3
Mall Credit Facility ......................... 140.0 9.25% 13.0
FF&E Credit Facility ......................... 92.0 9.50% 8.7
Mortgage Notes ............................... 425.0 12.25% 52.1
Senior Subordinated Notes .................... 97.5 14.25% 13.9
-------- ------
Accretion of Original Issue Discount on Senior
Subordinated Notes .......................... 0.8
------
Total interest expense ....................... 98.8
Less: Projected interest income .............. ( 1.1)
-------
Total ........................................ $ 879.5 $ 97.7
Blended interest rate ........................ 11.1%
</TABLE>
General and Administrative Expenses
General and administrative expenses are forecasted at similar amounts to
other comparable Large Strip Hotels except utilities which have been adjusted
to reflect an energy service agreement for the Casino Resort's HVAC Equipment
which the HVAC Provider has committed to provide up to $70.0 million for its
purchase and installation. The HVAC Provider will provide heating and cooling
service to the entire Casino Resort, including the Mall Subsidiary and the Expo
Center. Annual fixed operating costs allocated to LVSI and Venetian for these
services is forecasted to be $7.6 million and are included in general and
administrative expenses. Operating costs allocated to the Mall Subsidiary are
anticipated to be included in the tenants' common area maintenance charges.
P-12
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
Minimum future fixed payments under the HVAC Equipment energy service
agreement for LVSI and Venetian for each of the five years commencing April 1,
1999 and in the aggregate are as follows (in millions):
Year 1 $ 7.6
Year 2 7.6
Year 3 7.6
Year 4 7.6
Year 5 7.6
Subsequent to year 5 38.0
------
Total minimum future payments $ 76.0
======
Income Taxes
LVSI is a subchapter S corporation for federal income tax purposes.
Venetian and the Mall Subsidiary are limited liability companies for federal
income tax purposes. As pass through tax entities, income taxes are not taxed
at LVSI, Venetian and the Mall Subsidiary levels, but passed through to the
shareholders or members of such entities and taxed at the shareholder or member
level. The State of Nevada does not levy a corporate income tax.
The Company plans to distribute monies to its shareholders or members
sufficient to satisfy their tax obligations. Since taxes will be payable at the
individual level and since all individuals are residents of Nevada (which has
no state income tax) the forecasted tax distributions of $33.4 million have
been made at the highest effective individual federal income tax rate of
approximately 40%. An underlying assumption is that there are no significant
differences in the determination of book and taxable pass through income.
Cash Flow Items
Based on management's experience in operating hotel and gaming facilities
and analysis of other hotel and gaming operations, management forecasts that
net working capital requirements for the twelve months ending March 31, 2000
will be funded by a revolving credit facility of the Bank Credit Facility in
the amount of $20.0 million, and cash flow generated from operations during the
period.
The Company's forecasted depreciation and amortization expense includes
$7.3 million in amortization expense for the Company's $42.2 million in
financing and transaction costs, which are being amortized on a straight-line
basis over the life of the indebtedness under the Bank Credit Facility, the
FF&E Credit Facility, the Mall Take-out Financings, the Mortgage Notes and the
Senior Subordinated Notes of three to eight years (except in the case of the
Mall Take-out Financings, for which the amortization period is 3 years). The
Financial Forecast also includes $1.8 million of amortization expense of the
Company's $17.8 million of tenant allowances and lease acquisition costs.
The Company's forecasted depreciation and amortization expenses are
provided for on a straight-line basis over the estimated useful life of its
assets. The estimated useful lives of its assets are:
Building .................................. 40 years
Furniture, fixtures and equipment ......... 7 years
The Company forecasts that it will incur $8.5 million of capital
expenditures during the twelve months ending March 31, 2000, relating to the
betterment and replacement of existing capital assets and additions to capital
assets.
P-13
<PAGE>
LAS VEGAS SANDS, INC.
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES--(Continued)
For the Twelve Months Ending March 31, 2000
Summary of Significant Accounting Policies
The Financial Forecast has been prepared on the basis of generally
accepted accounting principles, which are the same as those presently used and
that are expected to be used in the preparation of the financial statements of
the Company for all periods subsequent to the opening of the Casino Resort. See
"Notes to Financial Statements" at Annex A for a description of historical
Significant Accounting Policies.
P-14
<PAGE>
LAS VEGAS SANDS, INC.
SUPPLEMENTAL FORECASTED CASINO REVENUES DATA
(Dollars in thousands except per unit data)
<TABLE>
<CAPTION>
1996 Win Year Ending
Estimated Win Per Per Unit March 31, 2000
Number Unit "Upper" Forecast
Of Units Forecast(1)(2) Quartile(3) Revenues
----------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
Twenty-One ....................... 72 $ 622.6 $ 582.5 $ 44,829
Craps ............................ 12 1,966.7 1,840.0 23,600
Roulette.......................... 10 932.8 872.7 9,328
Pai Gow .......................... 2 2,578.5 2,412.4 5,157
Pai Gow Poker .................... 3 922.3 862.9 2,767
Mini-baccarat .................... 5 2,031.5 1,900.6 10,158
Big 6 ............................ 2 451.4 422.3 903
Caribbean Stud ................... 4 812.3 760.0 3,249
Let It Ride ...................... 4 619.8 579.9 2,480
-- --------
Subtotal table games ............ 114 102,471
Baccarat ......................... 4 7,671.3 9,666.3 30,685
--- --------
Total table games (4) ............ 118 $133,156
Slot Machines
25 cents ......................... 1200 36.1 33.8 $ 43,349
50 cents ......................... 200 47.9 44.8 9,579
1 dollar ......................... 950 72.3 67.6 68,615
5 dollar ......................... 100 99.7 93.3 9,973
25 dollar ........................ 22 110.3 103.2 2,426
Megabucks ........................ 28 139.0 130.0 3,891
---- --------
Total slot machines (4) .......... 2500 $137,833
Other games
Keno ............................ 1 1,314.8 1,230.1 $ 1,315
Poker and pan ................... 9 200.8 187.9 1,808
Race book ....................... 1 4,058.8 3,797.3 4,059
Sports book ..................... 1 2,329.0 2,185.6 2,329
---- --------
Total other games ................ 12 $ 9,511
--------
Total casino revenue (4) ......... $280,500
========
</TABLE>
- --------------
(1) Represents annual win per unit. See "Summary of Significant Forecast
Assumptions and Accounting Policies--Casino Revenue."
(2) Inflated 3% per year for two and one quarter years during estimated
construction period.
(3) Source: Nevada State Gaming Control Board.
(4) Certain amounts do not agree because of rounding.
See accompanying Summary of Significant
Forecast Assumptions and Accounting Policies
P-15
<PAGE>
LAS VEGAS SANDS, INC.
SUMMARY CONSOLIDATED FINANCIAL FORECAST INFORMATION
<TABLE>
<CAPTION>
For the first
Twelve Months of Operations
-------------------------------------------------------
Adjustment to
(includes Mall reflect removal (excludes Mall
Subsidiary) (1) of Mall Subsidiary Subsidiary) (2)
----------------- -------------------- ----------------
(in millions, except for certain
assumptions)
<S> <C> <C> <C>
Operating Data:
Casino revenues (3) ..................................... $ 280.5 $ 280.5
Room revenues ........................................... 172.6 172.6
Mall revenues ........................................... 28.2 $ (28.2) --
Total net revenues (4) .................................. 527.8 (28.2) 499.6
Depreciation and amortization ........................... 43.3 (5.9) 37.4
Income from operations .................................. 181.1 (20.3) 160.8
Interest expense, net ................................... (97.7) 12.7 (85.0)
Net income .............................................. 83.4 (7.6) 75.8
Balance Sheet Data:
Total assets ............................................ $ 1,078.8 $ (142.9) $ 935.9
Total long-term debt .................................... 782.5 (140.0) 642.5
Preferred interest ...................................... 77.1 77.1
Stockholder's equity .................................... 117.2 (0.5) 116.7
Other Data:
Ratio of earnings to fixed charges (5) .................. 1.8x 1.8x
Net cash provided by operating activities ............... $ 107.5 $ (13.9) $ 93.6
Net cash used in investing activities ................... (8.5) 0.2 (8.3)
Net cash used in financing activities ................... (82.6) 3.1 (79.5)
EBITDA (6) (7) .......................................... 224.4 (26.2) 198.2
Total debt (8) .......................................... 856.3 (140.0) 716.3
Ratio of EBITDA to interest expense, net (8) ............ 2.3x 2.3x
Ratio of total debt to EBITDA (8) ....................... 3.8x 3.6x
Certain Assumptions:
Number of slot machines ................................. 2,500 2,500
Number of table games (excluding four baccarat tables) 114 114
Slot machine win per unit per day (3) ................... $ 151 $ 151
Table games (excluding baccarat) win per unit per day (3) $ 2,463 $ 2,463
Number of hotel rooms ................................... 3,036 3,036
Average daily room rate ................................. $ 167 $ 167
Occupancy rate .......................................... 93% 93%
</TABLE>
- --------------
(1) Includes the operations of the Mall Subsidiary.
(2) Does not include the operations of the Mall Subsidiary. Upon the completion
of the Casino Resort, the Mall Subsidiary is expected to incur
indebtedness under the Mall Take-out Financings. The ability of the Mall
Subsidiary to distribute or otherwise transfer funds to the Company will
be limited by, among other things, the agreements governing such
indebtedness.
(3) Amounts include an estimated 3% annual inflation factor for the period
December 1996 through April 1999, which is the estimated construction
period. The Company's estimates of win per unit per day amounts are based
on the NGCB's gaming figures for casinos located on the Strip with gaming
revenues greater than $72.0 million (upper quartile of Large Strip Hotels)
for the calendar year ended December 31, 1996, adjusted for inflation
during the construction period.
(4) Net of promotional allowances of $51.0 million.
(5) The ratio of earnings to fixed charges is determined by dividing (i) net
income plus fixed charges by (ii) fixed charges. Fixed charges consist of
interest expense (including amortization of discount on indebtedness),
amortization of debt expense and that portion of rental expense
representative of interest.
P-16
<PAGE>
LAS VEGAS SANDS, INC.
SUMMARY CONSOLIDATED FINANCIAL FORECAST INFORMATION
(6) EBITDA represents earnings before interest, taxes, depreciation and
amortization and is presented as income from operations before
depreciation and amortization. EBITDA is presented to enhance the
understanding of the financial performance of the Company and its ability
to service its indebtedness, including the Notes. EBITDA is not intended
to represent and should not be considered an alternative to, or more
meaningful than, net income and income from operations as an indicator of
the operating performance of the Company. EBITDA should not be considered
by investors as an indicator of cash flows from operating activities,
investing activities and financing activities as determined in accordance
with generally accepted accounting principles. Items excluded for EBITDA,
such as depreciation and amortization, are significant components in
understanding and assessing the Company's financial performance. EBITDA
meaures presented may not be comparable to similarly titled measures
presented by other issuers.
(7) EBITDA forecasted by the Appraiser (as defined herein) determined in
connection with establishing the "market value" of the Casino Resort is
different from that forecasted by the Company included above.
(8) Ratios computed as of the end of the forecasted first twelve months of
operations.
See accompanying Summary of Significant
Forecast Assumptions and Accounting Policies
P-17
<PAGE>
ANNEX A
CERTAIN HISTORICAL FINANCIAL INFORMATION
Because the historical results of the Company relate solely to the
operation of the Sands Hotel, which was closed in June 1996, the Company
believes that the financial information included in this Annex A will not
represent the future operation of the Casino Resort and that actual results of
the Casino Resort will differ materially.
A-1
<PAGE>
HISTORICAL SELECTED FINANCIAL INFORMATION (1)
The historical selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Historical Financial Statements and Notes
thereto included elsewhere in this Annex A. The statement of operations data
for the years ended December 31, 1997, 1996 and 1995, and the balance sheet
data at December 31, 1997 and 1996 are derived from, and are qualified by
reference to, the audited historical financial statements included elsewhere in
this Annex A. The statement of operations data for the years ended December 31,
1994 and 1993 and the balance sheet data at December 31, 1995, 1994 and 1993
are derived from the Company's audited historical financial statements that do
not appear herein. The historical results are not necessarily indicative of the
results of operations to be expected in the future.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------
1997 1996(1) 1995(2) 1994(2) 1993(2)
--------------- --------------- -------------- -------------- ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data
Gross revenues ................................. $ 895 $ 44,044 $95,469 $ 93,182 $ 83,652
Promotional allowances ......................... -- (3,483) (7,046) (6,779) (6,781)
-------- -------- ------- -------- --------
Net revenues ................................... 895 40,561 88,423 86,403 76,871
Operating expenses ............................. (1,727) 99,890 84,449 82,712 80,321
-------- -------- ------- -------- --------
Operating income (loss) ........................ 2,622 (59,329) 3,974 3,691 (3,450)
Interest income (expense), net ................. (3,142) (3,666) (7,352) (10,190) (10,679)
-------- -------- ------- -------- --------
Loss before extraordinary item (3) ............. (520) (62,995) (3,378) (6,499) (14,129)
Extraordinary item (3) ......................... -- -- -- -- 633
-------- -------- ------- -------- --------
Net loss ....................................... $ (520) $(62,995) $(3,378) $ (6,499) $(13,496)
======== ======== ======= ======== ========
Per Share Data
Loss before extraordinary item ................. $ (0.56) $ (68.10) $ (2.54) $ (4.13) $ (8.99)
Extraordinary item ............................. -- -- -- -- .40
-------- -------- ------- -------- --------
Basic and diluted loss per share ............... $ (0.56) $ (68.10) $ (2.54) $ (4.13) $ (8.59)
======== ======== ======= ======== ========
Other Data
Capital expenditures ........................... $ 130,827 $ 18,829 $ 1,661 $ 25,412 $ 7,349
Ratio of earnings to fixed charges (4) ......... (5) (5) (5) (5) (5)
</TABLE>
<TABLE>
<CAPTION>
As at December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Total assets ................. $ 747,767 $ 114,109 $ 178,099 $ 187,774 $ 161,519
Long-term debt ............... 515,612 -- 120,066 115,639 81,375
Stockholders' equity ......... 111,347 106,335 45,989 53,755 15,364
</TABLE>
A-2
<PAGE>
- ----------------
(1) Results of operations include a charge for the write-down of property and
equipment of $45,042 resulting from a revaluation of the Company's assets
as of June 30, 1996, the date the Company approved a quasi-reorganization.
(2) Financial data has been restated to reflect the December 1995 merger of
LVSI and NFG (the "NFG Merger").
(3) Extraordinary item represents gain on extinguishment of debt related to
merger of NFG referred to above.
(4) The ratio of earnings to fixed charges is determined by dividing (i)
operating income by (ii) fixed charges. Fixed charges consist of total
interest expense.
(5) In the years ended December 31, 1997, 1996, 1995, 1994 and 1993, earnings
were insufficient to cover fixed charges by $520, $62,995, $3,378, $6,499
and $14,129 respectively.
A-3
<PAGE>
HISTORICAL MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Historical Results of Operations
On June 30, 1996, the Company suspended operations and closed the existing
Sands Hotel to begin construction of the Casino Resort. The Company's operating
income since June 30, 1996 consists primarily of interest and rental income.
The Company's operating expenses since June 30, 1996 primarily consist of
employee-related costs, legal and accounting fees and other miscellaneous
expenses associated with the winding down and closing of the Sands Hotel. Other
expenses consist of non- capitalized interest expense associated with the
financing of the Company's development of the Casino Resort. Accordingly, the
historical results will not be indicative of future operating results.
Year Ended December 31, 1997 compared to the Year Ended December 31, 1996
Operating Revenues. Overall revenues were impacted by the closure of the
Sands Hotel in June 1996. Operating revenues during 1996, including casino
revenue of $23.1 million, room revenues of $8.5 million and food and beverage
revenue of $9.7 million all declined to $0 during the year ended December 31,
1997. Other revenue declined from $ 2.8 million to $0.9 million.
Operating Expenses. Overall operating expenses decreased to $(1.7) million
from $99.9 million, a decrease of $101.6 million. Declines in casino, rooms,
food and beverage and other expenses were directly attributable to no
operations during 1997 as a result of the June 1996 closure of the Sands Hotel.
The credit amount reflected in selling general and administrative expenses of
$1.8 million during 1997 results from a reevaluation of the accrued closing
costs associated with the closing of the Sands Hotel. This amount compares to
$18.8 million during 1996. The write down of property and equipment of $45.0
million during 1996 was related to the quasi-reorganization described below.
Interest Income (Expense). Interest income increased to $ 3.4 million
during 1997 from $ 0.5 million during 1996 as a result of investing proceeds
received from the Offering. The increase in interest expense to $ 6.6 million
during 1997 from $0 during 1996 represents the non-capitalized interest expense
resulting from the sale of the Notes in the principal amount of $522.5 million
on November 14, 1997 to fund the construction of the Casino Resort.
Year Ended December 31, 1996 compared to the Year Ended December 31, 1995
Revenues. Overall revenues were impacted by the closure of the Sands Hotel
in June 1996. Casino revenues declined to $23.1 million from $44.8 million, a
decrease of $21.7 million or 48%; room revenues declined to $8.5 million from
$15.8 million, a decrease of $7.3 million or 46%; and food and beverage
revenues declined to $9.7 million from $18.8 million, a decrease of $9.1
million or 48%. Other income declined to $2.8 million from $8.1 million, a
decrease of $5.3 million or 65%, primarily attributable to a loss realized on
the disposal of property and equipment auctioned after the closing of the Sands
Hotel. Rental revenue declined to zero from $8.0 million due to the acquisition
by Interface of the Sands Expo and Convention Center (the "Expo Center")
building and related land and equipment in January 1996. Prior to 1996, the
Company leased the Expo Center to Interface for an annual rental of $8.0
million.
Operating Expenses. Overall operating expenses increased to $99.9 million
from $84.4 million, an increase of $15.5 million or 18%. Declines in casino,
room, food and beverage, depreciation and amortization, and other operating
expenses of $14.7 million, $3.2 million, $6.4 million, $5.0 million and $2.2
million, respectively, were directly attributable to only six months of
operations as a result of the June 1996 closing of the Sands Hotel. These
declines were more than offset by an increase in selling, general and
administrative expenses of $1.9 million due primarily to severance and other
costs associated with the closing, and a charge for the write-down of property
and equipment of $45.0 million related to the quasi-reorganization described
below.
Interest Income (Expense). Interest income was consistent with the prior
year. Interest expense to related party declined to $4.1 million from $7.9
million, a decrease of $3.8 million or 48%. The decrease in interest expense to
related party was due to the acquisition and subsequent retirement during 1996
by the Company of all the remaining outstanding amounts of certain mortgage
notes of LVSI acquired in
A-4
<PAGE>
the NFG Merger (the "Second Mortgage Notes") and Third Mortgage Pay-In-Kind
Notes of the Company (the "Third Mortgage PIK Notes").
Liquidity and Capital Resources
Prior to the June 30, 1996 closing of the Sands Hotel, the Company
utilized operating cash flow and additional stockholder contributions to fund
working capital requirements and capital expenditures. No significant capital
expenditures were incurred during 1996 related to the Sands Hotel.
In December 1995, the Company completed a merger with NFG through the
contribution of all the outstanding common stock of NFG to the Company. At the
date of the merger, equity of NFG totaled $27.9 million. As of the merger date,
NFG owned $37.0 million of the Company's Second Mortgage Notes purchased from
third parties during 1994. The Second Mortgage Notes bore interest at 15% per
annum to January 15, 1995, at which time the interest rate was reduced to the
short-term quarterly applicable federal interest rate as published by the
Internal Revenue Service. The Second Mortgage Notes were retired as part of the
merger. Historical interest charges related to those notes totaling $2.3
million in 1995 have been eliminated on the assumption that the notes were
retired when repurchased by NFG.
In April 1995, NFG purchased and retired 41,175 shares of its common stock
from three stockholders. The total price paid for these shares was $13.2
million, which has been recorded as a reduction to capital in excess of par
value. In August 1995, the Company purchased 647,469 shares of its common stock
from the identical three stockholders for $0.2 million. Shares repurchased by
the Company have been retired and restored to authorized and unissued common
stock. Subsequent to these repurchases, both the Company and NFG were owned by
a single stockholder.
Through 1995, the Company leased the Expo Center to Interface. Pursuant to
the operating lease agreement, Interface paid an annual rental of $8.0 million
and was responsible for all taxes, insurance, and costs to operate and maintain
the facility. During 1996, Interface acquired from the Company the Expo Center
at its carrying value of $66.8 million, in exchange for all of the Second
Mortgage Notes and a portion of the Third Mortgage Notes of the Company held by
Interface. In connection with the transaction, the Company subsequently retired
the Second and Third Mortgage Notes received and the above lease was canceled.
In connection with the 1996 acquisition by Interface of the Expo Center, the
Company retired $33.2 million of Second Mortgage Notes and $32.3 million of
Third Mortgage Notes and wrote-off remaining capitalized financing costs of
$1.6 million which are included in amortization expense. The remaining $59.5
million of Third Mortgage Notes were retired in 1996 by the Company upon
contribution by the stockholder of all the remaining notes held by Interface.
In connection with the closing of the Sands, the Company's sole director
and stockholder approved a quasi-reorganization, effective as of June 30, 1996,
pursuant to which the Company revalued certain of its assets as of that date.
This revaluation, in accordance with the accounting principles applicable to a
quasi-reorganization, permitted the Company to eliminate the adjusted
accumulated deficit account as of that date, by a charge against capital in
excess of par value, and to establish a new retained earnings account for the
accumulation of the results of future operations. The quasi-reorganization
resulted in an increase in the carrying value of land of $51.7 million and a
corresponding decrease of $45.0 million in buildings and other property and
equipment net of accumulated depreciation and $6.7 million in severance and
related closing costs. The remaining accumulated depreciation was eliminated
against the cost basis of the remaining property, and the accumulated deficit
of $155.0 million as of June 30, 1996, was transferred to capital in excess of
par value.
Development at the Casino Resort
In response to increasing competition and rapid market changes, management
decided to strategically redirect the Company's business, and on June 30, 1996,
the Company closed the Sands Hotel and subsequently demolished the facility to
make way for a planned Venetian-themed hotel-casino resort.
A-5
<PAGE>
Construction of the Casino Resort commenced during April 1997.
On December 31, 1997 and December 31, 1996, the Company held cash and cash
equivalents of $0.9 million. Cash provided by (used in) in operating activities
was $3.9 million for 1997 and $(2.6) million for 1996, respectively. Restricted
cash and investments of $426.9 million represents the remaining proceeds, net
of offering and financing costs and capital expenditures, from the sale of
mortgage and subordinated notes to finance the Casino Resort.
The Company utilized operating cash flow, proceeds from preferred interest
in Venetian of $77.1 million and proceeds from the sale of $97.5 million of the
Senior Subordinated Notes during 1997 and additional stockholder contributions
of $11 .1 million in 1996 to fund capital expenditures of $130.8 million and
$18.8 million for 1997 and 1996, respectively. Capital expenditures were used
primarily to fund development related costs of the Casino Resort. The cost of
the Casino Resort is currently estimated at approximately $1.0 billion
(exclusive of the HVAC equipment costs and land costs). For description of the
financing for the construction of the Casino Resort, see "Management's
Discussion and Analysis of Liquidity and Capital Resources."
A-6
<PAGE>
LAS VEGAS SANDS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants ..................................................... A-8
Consolidated Balance Sheets at December 31, 1997 and 1996 ............................. A-9
Consolidated Statements of Operations for each of the three years in the period ended
December 31, 1997 .................................................................... A-10
Consolidated Statements of Stockholder's Equity for each of the three years in the
period
ended December 31, 1997 .............................................................. A-11
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 1997 .................................................................... A-12
Notes to Financial Statements ......................................................... A-13
</TABLE>
A-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Director and Stockholder of Las Vegas Sands, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
Las Vegas Sands, Inc. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 3 to the financial statements, the Company approved a
quasi-reorganization effective June 30, 1996.
PRICE WATERHOUSE LLP
Los Angeles, California
March 24, 1998
A-8
<PAGE>
LAS VEGAS SANDS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................. $ 857 $ 879
Restricted cash and investments ........................ 341,725
Other current assets ................................... 213 362
-------- --------
Total current assets .............................. 342,795 1,241
Property and equipment .................................... 279,770 111,233
Restricted investments .................................... 85,186
Deferred offering costs, net .............................. 38,618
Other assets............................................... 1,398 1,635
-------- --------
$747,767 $114,109
======== ========
LIABILITIES AND STOCKHOLDER'SEQUITY
Current liabilities:
Accounts payable ....................................... $ 1,701 $ 77
Construction payables .................................. 25,547 2,617
Other accrued liabilities .............................. 16,507 5,080
-------- --------
Total current liabilities ......................... 43,755 7,774
Long-term debt ............................................ 515,612
--------
559,367 7,774
-------- --------
Preferred Interest in Venetian Casino Resort, LLC, a wholly
owned subsidiary .......................................... 77,053
--------
Commitments and contingencies
Stockholder's equity:
Common stock, $.10 par value, 3,000,000 shares
authorized, 925,000 issued and outstanding ............ 92 92
Capital in excess of par value ......................... 112,977 107,445
Accumulated deficit since June 30, 1996 ................ (1,722) (1,202)
-------- --------
111,347 106,335
-------- --------
$747,767 $114,109
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
A-9
<PAGE>
LAS VEGAS SANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Casino ............................................... $ -- $ 23,058 $ 44,840
Rooms ................................................ 8,500 15,765
Food and beverage .................................... 9,713 18,772
Rental income from related party ..................... 8,000
Other ................................................ 895 2,773 8,092
-------- --------- --------
895 44,044 95,469
Less--promotional allowances .......................... (3,483) (7,046)
-------- --------- --------
Net revenues ......................................... 895 40,561 88,423
Operating expenses:
Casino ............................................... 15,235 29,925
Rooms ................................................ 3,531 6,767
Food and beverage .................................... 8,136 14,487
Other operating ...................................... 4,377 6,581
Selling, general and administrative .................. (1,827) 18,752 16,863
Depreciation and amortization ........................ 100 4,817 9,826
Write-down of property and equipment ................. 45,042
-------- --------- --------
Total operating expenses ............................. (1,727) 99,890 84,449
Operating income (loss) ............................... 2,622 (59,329) 3,974
Other income (expense):
Interest income ...................................... 3,439 450 518
Interest expense, net of amounts capitalized ......... (6,581)
Interest expense to related party .................... (4,116) (7,870)
-------- --------- --------
Net loss .............................................. $ (520) $ (62,995) $ (3,378)
======== ========= ========
Basic and diluted loss per share ...................... $ (0.56) $ (68.10) $ (2.54)
======== ========= ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
A-10
<PAGE>
LAS VEGAS SANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
----------------------
Capital in
Number Excess of Accumulated
Shares Amount Par Value Deficit Total
------------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 ............. 1,572,469 $ 157 $ 143,452 $ (89,854) $ 53,755
Capital Contributions ................... 11,142 11,142
Distributions ........................... (2,148) (2,148)
Net loss ................................ (3,378) (3,378)
Purchase of NFG shares from
Minority stockholders ................. (13,176) (13,176)
Purchase of LVSI shares from
Minority stockholders ................. (647,469) (65) (141) (206)
--------- ----- ---------- ---------
Balance at December 31, 1995 ............. 925,000 92 139,129 (93,232) 45,989
Capital contributions ................... 71,601 71,601
Net loss for the six months ended
June 30, 1996 ......................... (61,793) (61,793)
Elimination of deficit through quasi-
reorganization at June 30, 1996 ....... (155,025) 155,025
Adjustment to assets through
quasi-reorganization .................. 51,740 51,740
Net loss for the six months ended
December 31, 1996 ..................... (1,202) (1,202)
--------- ----- ---------- --------- ---------
Balance at December 31, 1996 ............. 925,000 92 107,445 (1,202) 106,335
Capital contributions ................... 33,132 33,132
Dividends ............................... (27,600) (27,600)
Net loss ................................ (520) (520)
--------- ----- ---------- --------- ---------
Balance at December 31, 1997 ............. 925,000 $ 92 $ 112,977 $ (1,722) $ 111,347
========= ===== ========== ========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
A-11
<PAGE>
LAS VEGAS SANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $ (520) $ (62,995) $ (3,378)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization .................................... 100 4,817 9,826
Non-cash interest expense due to related party ................... 3,087 4,427
Loss (gain) on disposal of assets ................................ 2,906 (43)
Write-down of property and equipment ............................. 45,042
Change in assets and liabilities:
Other current assets ............................................ (642) 6,354 (65)
Other assets .................................................... 137 3,275 816
Accounts payable ................................................ (77) (1,306) (540)
Other accrued liabilities ....................................... 4,861 (3,780) (5,678)
---------- --------- ---------
Net cash provided by (used in) operating activities ............... 3,859 (2,600) 5,365
---------- --------- ---------
Cash flows from investing activities:
Increase in restricted cash and investments ....................... (426,120)
Construction of Casino Resort ..................................... (130,827) (18,829) (1,661)
Proceeds from the sale of fixed assets ............................ 1,766
---------- --------- ---------
Net cash used in investing activities: ............................ (556,947) (17,063) (1,661)
---------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions ............................... 25,500 11,134 11,142
Proceeds from preferred interest in Venetian ...................... 77,053
Proceeds from mortgage notes ...................................... 425,000
Proceeds from senior subordinated notes ........................... 90,500
Payments of deferred offering costs ............................... (37,387)
Payment of dividends .............................................. (27,600)
Purchase of NFG common stock ...................................... (13,176)
Purchase of LVSI common stock ..................................... (206)
Distributions to stockholders ..................................... (2,148)
Payments of notes payable and capital lease obligation ............ (118)
---------- --------- ---------
Net cash provided by (used in) financing activities ............... 553,066 11,134 (4,506)
---------- --------- ---------
Net (decrease) in cash and cash equivalents ........................ (22) (8,529) (802)
Cash and cash equivalents at beginning of year ..................... 879 9,408 10,210
---------- --------- ---------
Cash and cash equivalents at end of year ........................... $ 857 $ 879 $ 9,408
========== ========= =========
The following supplemental disclosures are provided for the
consolidated statement of cash flows:
Cash payments for interest, net of amounts capitalized ............. $ 357 $ -- $ --
========== ========= =========
Interest paid to related parties during the year ................... $ -- $ -- $ 3,261
========== ========= =========
Retirement of notes through stockholder contribution ............... $ -- $ 59,454
========== =========
Acquisition of Expo Center by IGN
Property and equipment sold ....................................... $ -- $ (66,775) $ --
---------- --------- ---------
Reduction of notes ................................................ 65,500
Reduction of other related party liabilities ...................... 2,288
---------- --------- ---------
Increase of capital in excess of par value ........................ $ -- $ 1,013 $ --
========== ========= =========
Contribution of land by Sole Stockholder ........................... $ 7,632 $ -- $ --
========== ========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
A-12
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND BUSINESS OF COMPANY
Las Vegas Sands, Inc. ("LVSI") is a Nevada corporation. Effective April
28, 1989, LVSI commenced gaming operations in Las Vegas, Nevada, by acquiring
the Sands Hotel and Casino (the "Sands"). On June 30, 1996, LVSI closed the
Sands and subsequently demolished the facility to make way for a planned two
phase hotel-casino resort. The first phase of the hotel casino resort (the
"Casino Resort") will include approximately 3,036 suites, casino space
approximating 116,000 square feet, approximately 500,000 square feet of
convention space, and approximately 500,000 square feet of retail shops and
restaurants. In connection with the closing of the Sands, LVSI effected a
quasi-reorganization (Note 3).
The consolidated financial statements as of December 31, 1997 include the
accounts of LVSI and its wholly owned subsidiaries (the "Subsidiaries"),
including Venetian Casino Resort, LLC ("Venetian"), Grand Canal Shops Mall, LLC
(the "Mall Subsidiary"), Lido Casino Resort, LLC (the "Phase II Subsidiary"),
Mall Intermediate Holding Company, LLC ("Mall Intermediate"), Grand Canal Shops
Mall Construction, LLC ("Mall Construction"), Lido Intermediate Holding
Company, LLC ("Lido Intermediate"), Grand Canal Shops Mall Holding Company,
LLC, Lido Casino Resort Holding Company, LLC, Grand Canal Shops Mall MM, Inc.
and Lido Casino Resort MM, Inc. (collectively, the "Company"). The December 31,
1996 and 1995 periods include only the accounts of LVSI. Each of LVSI and the
Subsidiaries is a separate legal entity and the assets of each such entity are
intended to be available only to the creditors of such entity.
Venetian was formed on March 20, 1997 to own and operate certain portions
of the Casino Resort. LVSI is the managing member and owns 100% of the common
voting equity in Venetian. The entire preferred interest in Venetian is owned
by Interface Group Holding Company, Inc. ("Interface Holding"), which is wholly
owned by LVSI's sole stockholder (the "Sole Stockholder")(Note 8).
Mall Intermediate, Mall Construction and Lido Intermediate are special
purpose companies, which are wholly owned subsidiaries of Venetian. They are
guarantors or co-obligors of certain indebtedness related to the construction
of the Casino Resort.
The Mall Subsidiary is an indirect wholly owned subsidiary of Mall
Intermediate and was formed on March 20, 1997 to own and operate the retail
mall in the Casino Resort.
Construction of the Casino Resort commenced in April 1997 and completion
is scheduled for the second quarter of 1999. The Company expects to expend
approximately $868.0 million (excluding estimated capitalized interest and
financing costs of approximately $131.0 million) to complete construction and
open the Casino Resort.
The Company has transacted business with a number of related parties
including Interface Group-Nevada, Inc. ("IGN") and Nevada Funding Group, Inc.
("NFG"). The nature of such transactions and the amounts involved are disclosed
on the face of the financial statements and in the notes thereto.
In addition to its gaming operations, the Company also owned and leased
the Sands Expo and Convention Center (the "Expo Center") prior to January 1996.
As discussed in Note 10, the Expo Center was acquired by IGN in January 1996.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term investments with
original maturities not in excess of 90 days.
Property and Equipment
Property and equipment are generally stated at cost or, in the case of
assets under capital lease, at the present value of future minimum lease
payments, calculated as of the date of inception. Owned assets
A-13
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
prior to June 30, 1996 were depreciated using the straight-line method over
estimated useful lives ranging from three to thirty years. Subsequent to the
closing of the Sands, depreciable property and equipment consist of equipment,
furniture and fixtures which are being depreciated using the straight-line
method over their estimated useful life of five years. Maintenance, repairs and
renewals that neither materially add to the value of the property nor
appreciably prolong its life are charged to expense as incurred. Gains or
losses on disposition of property and equipment are included in the statements
of operations.
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," management reviews assets for possible impairment of
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Under SFAS No. 121, an
impairment loss would be recognized when estimated future cash flows expected
to result from the use of the assets and their eventual disposition are less
than their carrying amounts. See Note 3 for adjustment of carrying values as a
result of the quasi-reorganization.
Capitalized Interest
Interest costs associated with major construction projects are
capitalized. Interest is capitalized on amounts expended on the Casino Resort
using the weighted-average cost of the Company's outstanding borrowings.
Capitalization of interest ceases when the project is substantially complete.
Preopening Costs
Preopening costs, representing primarily direct personnel and other costs
incurred prior to the opening of the Casino Resort are expensed as incurred. No
such costs have been incurred as of December 31, 1997.
Debt Discount and Deferred Offering Costs
Debt discount and offering costs are amortized based on the terms of the
related debt instruments using the straight-line method, which approximates the
effective interest method. During the year ended December 31, 1997, $0.1
million and $0.5 million of debt discount and offering costs, respectively,
have been included in construction in progress.
Per Share Data
Basic and diluted loss per share are calculated based upon the weighted
average number of shares outstanding. The weighted average number of shares
outstanding used in the computation of loss per share of common stock was
925,000 in 1997 and 1996 and 1,329,661 in 1995.
Casino Revenue and Promotional Allowances
In accordance with industry practice, the Company recognizes as casino
revenue the net win from gaming activities, which is the difference between
gaming wins and losses. The retail value of accommodations, food and beverage,
and other services furnished to hotel-casino guests without charge is included
in gross revenues and deducted as promotional allowances. The estimated cost of
providing such promotional allowances has been classified primarily as casino
costs and expenses as follows (in thousands):
Year Ended December 31,
-----------------------------
1997 1996 1995
------ -------- ---------
Rooms ..................... $-- $ 592 $ 931
Food and Beverage ......... 2,348 4,717
Other ..................... 38 126
------ ------
$-- $2,978 $5,774
=== ====== ======
A-14
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
LVSI has elected to be taxed as an S Corporation and its wholly owned
subsidiaries are limited liability companies, each of which is a tax pass
through entity for federal income tax purposes. Nevada does not levy a
corporate income tax. Accordingly, no provision for federal or state income
taxes is included in the statement of operations.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of restricted investments.
These restricted investments are placed with a high credit quality financial
institution which invests primarily in U.S. Government backed repurchase
agreements. At December 31, 1997, the Company had no significant concentrations
of credit risk.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3--STRATEGIC REDIRECTION AND QUASI-REORGANIZATION
During 1996, in response to increasing competition and rapid market
changes, management decided to strategically redirect the Company's business.
On June 30, 1996, the Company suspended operations and closed the existing
Sands property to make way for a new hotel-casino resort (Note 1). As a result,
approximately 1,400 employee positions were eliminated. The severance and
related closing costs of $6.7 million are included in selling, general and
administrative expense for 1996. In December 1997, the Company reevaluated its
accrued closing costs and determined the remaining liability to be
approximately $0.9 million. As a result, the Company credited the remaining
unutilized closing costs of $1.8 million to selling, general and administrative
expense.
In connection with the closing of the Sands (Note 1), the Company's
director and sole stockholder approved a quasi-reorganization, effective as of
June 30, 1996, pursuant to which the Company revalued certain of its assets as
of that date. This revaluation, in accordance with the accounting principles
applicable to a quasi-reorganization, permitted the Company to eliminate the
adjusted accumulated deficit account as of that date, by a charge against
capital in excess of par value, and to establish a new retained earnings
account for the accumulation of the results of future operations. The
quasi-reorganization resulted in an increase in the carrying value of land of
$51.7 million and a corresponding decrease of $45.0 million in buildings and
other property and equipment, net of accumulated depreciation and $6.7 million
in severance and related closing costs. The remaining accumulated depreciation
was eliminated against the cost basis of the remaining property, and the
accumulated deficit of $155.0 million as of June 30, 1996, was transferred to
capital in excess of par value.
NOTE 4--RESTRICTED CASH AND INVESTMENTS
The net proceeds of the Company's 12 1/4% Mortgage Notes due 2004 (the
"Mortgage Notes") and its 14 1/4% Senior Subordinated Notes due 2005 (the
"Senior Subordinated Notes" and, together with the Mortgage Notes, the "Notes")
were deposited into restricted accounts and invested in cash or permitted
investments by a disbursement agent for the Company's lenders until required
for project costs under the terms of the disbursement agreement with certain of
the Company's lenders (the "Disbursement Agreement") (Note 7). Additional
amounts have been deposited to other restricted accounts, which are
A-15
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4--RESTRICTED CASH AND INVESTMENTS (Continued)
controlled by the Company but which are also restricted as to use under the
terms of the Disbursement Agreement. At December 31, 1997, $1.7 million of
restricted cash was included in restricted cash and investments.
At December 31, 1997, all of the Company's investments were classified as
held-to-maturity, which consists of securities that management has the ability
and intent to hold to maturity. These investments are carried at cost plus
accrued interest, which approximates fair value. There were no sales or
transfers of securities classified as held-to-maturity during 1997. Scheduled
maturities of securities classified as held-to-maturity at December 31, 1997
are summarized as follows (in thousands):
1998 $340,027
1999 85,186
--------
$425,213
========
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment includes costs incurred to construct the Casino
Resort and consists of the following (in thousands):
December 31,
-----------------------
1997 1996
---------- ----------
Land and land improvements ................ $ 93,634 $ 87,523
Equipment, furniture and fixtures ......... 422 422
Construction in progress .................. 185,714 23,288
-------- --------
$279,770 $111,233
======== ========
The Casino Resort serves as collateral for various financing facilities
(Note 7).
Construction in progress at December 31, 1997 and 1996 consists of
payments for construction of the Casino Resort including capitalized interest
of $2.2 million and $0 at December 31, 1997 and 1996, respectively.
NOTE 6--OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following (in thousands):
December 31,
----------------------
1997 1996
---------- ---------
Accrued closing costs .......... $ 924 $3,658
Accrued interest ............... 7,809
Construction retention ......... 6,594
Other accruals ................. 1,180 1,422
------- ------
$16,507 $5,080
======= ======
Accrued closing costs consist primarily of accrued medical costs for severed
employees and legal costs as a result of the closing of the Sands (Note 3).
A-16
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7--LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
----------- ---------
<S> <C> <C>
12 1/4% Mortgage Notes, due November 15, 2004 ......... $425,000 $ --
14 1/4% Senior Subordinated Notes, due November 15,
2005 (Net of unamortized discount of $6,888) ......... 90,612 --
-------- -----
Total long-term debt .................................. $515,612 $ --
======== =====
</TABLE>
In connection with the financing for the Casino Resort, the Company
entered into a series of transactions during 1997 to provide for the
development and construction of the Casino Resort:
Mortgage Notes and Senior Subordinated Notes
In November 1997, the Company issued $425.0 million aggregate principal
amount of the Mortgage Notes and $97.5 million aggregate principal amount of
the Senior Subordinated Notes in a private placement. Interest on the Notes is
payable each May 15 and November 15, commencing on May 15, 1998.
The Mortgage Notes are secured by second priority liens on the Note
Collateral (defined as real estate improvements and personal property with
certain exceptions) and third priority liens on the Mall Collateral (defined as
improvements to the retail mall space). Pending disbursement of the proceeds of
the Mortgage Notes, the Mortgage Notes also will be secured by a first priority
pledge of the proceeds in the Mortgage Notes Proceeds Account (as defined in
the Disbursement Agreement). The Senior Subordinated Notes are unsecured. As of
December 31, 1997, no proceeds from the Mortgage Notes and $80.9 million of the
proceeds from the Senior Subordinated Notes had been expended. The Notes are
redeemable at the option of LVSI and Venetian at prices ranging from 100% to
106.125% during specified years as set forth in the Notes and the indentures
pursuant to which the Notes were issued (the "Indentures"). Upon a change in
control (as defined in the Indentures), each Note holder may require LVSI and
Venetian to repurchase such Notes at 101% of the principal amount thereof (or
with respect to the Senior Subordinated Notes, prior to November 15, 1999, the
original issue price plus accrued original issue discount) plus accrued
interest and other amounts which are then due, if any. The Notes are not
subject to a sinking fund requirement.
The Company is committed under a registration rights agreement to use its
reasonable best efforts to effect a registered exchange offer for the Notes or
subject to certain conditions, to provide a shelf registration for the Notes.
Should the Company not meet certain requirements of the registration rights
agreement, liquidated damages in the amount of 0.25% to 2.00% per annum of the
aggregate principal amount of the Notes would accrue until such defaults are
cured.
The Senior Subordinated Notes bear cash interest at the rate of 10% per
annum, through November 15, 1999 and thereafter at a rate of 14 1/4% per annum.
The Senior Subordinated Notes were sold at a $7.0 million discount to their
face amount in order to yield 14 1/4% per annum to maturity and will accrue to
par by the second anniversary date of the issuance.
Bank Credit Facility
In November 1997, LVSI, Venetian and a syndicate of lenders entered into a
bank credit facility (the "Bank Credit Facility"). The Bank Credit Facility
provides up to $150 million in multiple draw term loans to the Company for
construction and development of the Casino Resort. The term loans mature not
later than the sixth anniversary of the closing date and are subject to
quarterly amortization payments which, subject to certain exceptions, begin at
the end of either the first or second fiscal quarter following the earlier of
(i) two years after the closing date or (ii) the date completion of the Casino
Resort occurs.
A-17
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7--LONG-TERM DEBT (Continued)
The indebtedness under the Bank Credit Facility is secured by first
priority liens on the Note Collateral (other than the Mortgage Notes Proceeds
Account) and second priority liens on the Mall Collateral. As of December 31,
1997, no amounts had been drawn under the Bank Credit Facility.
Up to $20.0 million of additional credit in the form of revolving loans
under the Bank Credit Facility is available generally for working capital
beginning six months prior to the completion date. The revolving loan will
mature on the second anniversary of the initial draw. During the construction
of the Casino Resort, up to $15.0 million of the revolving loans will be
available to fund purchases of certain furniture, fixtures and equipment (the
"Specified FF&E") (including deposits) and provide letters of credit for
construction activities. Any amounts borrowed to purchase the Specified FF&E
are expected to be repaid from the proceeds of a $97.7 million credit facility
secured by the Specified FF&E (the "FF&E Credit Facility").
Funds borrowed under the Bank Credit Facility bear interest through
Project Completion (as defined in the Bank Credit Facility) at (i) a base rate
plus 2% per annum or (ii) a reserve adjusted eurodollar rate plus 3% per annum.
Upon completion and for six months thereafter, the interest rate will be at (i)
a base rate plus 1 1/2% or (ii) a reserve adjusted eurodollar rate plus 2 1/2%
per annum. From six months after completion, the interest rate will be at a
base rate or a reserve adjusted eurodollar rate plus a margin based on certain
leverage ratios set forth in the Bank Credit Facility. In January 1998, LVSI
and Venetian purchased a eurodollar interest rate cap of up to $75.0 million
based on a percentage of the borrowings outstanding under the Bank Credit
Facility to limit the interest on the eurodollar component of the loans under
the Bank Credit Facility to 9%.
Under the terms of the Bank Credit Facility, a commitment fee equal to
0.50% per annum times the daily average unused portion under the Bank Credit
Facility is payable quarterly in arrears.
Mall Construction Loan Facility
In November 1997, LVSI, Venetian, Mall Construction and a major non-bank
lender entered into a mall construction loan facility to provide up to $140.0
million in financing for the retail mall in the Casino Resort (the "Mall
Construction Loan Facility"). The credit facility consists of two loan
tranches: a Tranche A loan in the amount up to $105.0 million and a Tranche B
loan in the amount up to $35.0 million. All indebtedness under the Mall
Construction Loan Facility matures on May 1, 2000 with an option of the Company
to extend the maturity of such indebtedness to November 14, 2000 based on
certain conditions and upon payment of a $0.4 million extension fee.
The indebtedness under the Mall Construction Loan Facility is secured by
first priority liens on the Mall Collateral. Upon completion of the Casino
Resort, the retail mall is expected to be transferred to the Mall Subsidiary
and the indebtedness under the Mall Construction Loan Facility either will be
repaid with the proceeds of borrowings by the Mall Subsidiary or will be
assumed by the Mall Subsidiary. As of December 31, 1997, no amounts had been
drawn under the Mall Construction Loan Facility.
The annual interest rate on the facility is 275 basis points over 30-day
LIBOR, with a retroactive increase in the interest rate to 375 basis points
over 30-day LIBOR to April 10, 1998 if the retail mall does not become a
separate legal and tax parcel prior to July 10, 1998. The increase in the
interest rate will cease on the date on which the retail mall becomes a
separate legal and tax parcel.
The Company has obtained commitments to refinance the Mall Construction
Loan Facility upon the completion of the retail mall under specified
conditions. The availability of such commitments are subject to certain
conditions, including the delivery of certain legal opinions.
FF&E Financing
In December 1997, the FF&E Credit Facility was entered into with certain
lenders (the "FF&E Lenders") to provide $97.7 million of financing for the
Specified FF&E and an electrical substation.
A-18
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7--LONG-TERM DEBT (Continued)
The financing provides for an interim loan during construction and a 60-month
basic term loan after completion of the Casino Resort. Funds are generally
available either three months prior to the anticipated project construction
completion date if the Company elects to accrue interim loan interest or eight
months prior to completion should the Company elect to pay interest currently.
In the initial and subsequent draws, the FF&E Lenders will reimburse the
Company for any amounts spent by the Company for Specified FF&E prior to the
initial draw.
Under the terms of the FF&E Credit Facility, a commitment fee equal to
0.50% per annum times the daily average unused portion under the FF&E Credit
Facility is payable monthly in arrears.
Interest on the interim loan is at a floating rate equal to the 30-day
reserve adjusted LIBOR plus 375 basis points or at a base rate (the greater of
the prime rate or the federal funds rate plus 50 basis points) plus 100 basis
points. If the Company elects to pay interest on the interim loan currently,
interest is due quarterly in arrears.
Interest on the basic term loan is a floating monthly rate calculated at
the higher of (a) the reserve adjusted 30-day LIBOR plus 375 basis points or
(b) the eurodollar interest rate margin in effect on the Bank Credit Facility
plus 125 basis points. Amortization on the FF&E basic loan will be 3% of the
principal for the first four quarters following the opening of the Casino
Resort and 5.5% of the principal for the next 16 quarters.
As of December 31, 1997, no amounts had been drawn under the FF&E Credit
Facility.
The debt instruments described above contain certain covenants and
restrictions that among other things, limit the ability of the Company and/or
certain subsidiaries to incur additional indebtedness, issue disqualified stock
or equity interests, pay dividends or make other distributions, repurchase
equity interests or certain indebtedness, create certain liens, enter into
certain transactions with affiliates, enter into certain mergers or
consolidations or sell assets of the Company without prior approval of the
lenders or noteholders.
Additionally the Company is a party to intercreditor arrangements,
including certain intercreditor agreements and the Disbursement Agreement. The
intercreditor agreements set forth the lenders interests and claims in the
Company's assets as collateral for borrowings. The Disbursement Agreement
establishes conditions to and the sequencing of funding construction costs and
procedures for approving construction change orders and amendments to the
construction budget and schedule.
As support for the development of the Casino Resort, the Sole Stockholder
or his affiliates have provided the following:
(i) a $25.0 million construction completion guaranty collateralized by cash
or cash equivalents. Such construction completion guaranty may be
increased under certain circumstances for scope changes (as defined in
the Disbursement Agreement) to the Casino Resort;
(ii) a $35.0 million guarantee of the Mall Construction Loan Facility and a
commitment to provide $35.0 million to refinance a portion of the Mall
Construction Loan Facility, collateralized by cash or cash equivalents;
and
(iii) a $20.0 million unsecured guaranty of the take-out financing for the
Mall Construction Loan Facility of $105.0 million.
Scheduled maturities of long-term debt outstanding at December 31, 1997
are summarized as follows: $0 in each of the years 1998 through 2002 and $515.6
million thereafter.
A-19
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7--LONG-TERM DEBT (Continued)
Construction Loan Payable
In 1997, interim construction financing of up to $45.0 million was
available. The interest rate was based on the eurodollar rate and averaged 5.9%
during 1997. Approximately $30.1 million was borrowed during 1997 and repaid
upon the closing of the offering of the Notes and other project financings in
November 1997.
NOTE 8--PREFERRED INTEREST IN VENETIAN CASINO RESORT, LLC
During 1997, Interface Holding contributed $77.1 million in cash to
Venetian in exchange for a Series A preferred interest (the "Series A Preferred
Interest") in Venetian. The Series A Preferred Interest is non-voting, accrues
no preferred return and is not subject to mandatory redemption or redemption at
the option of the holder. The Series A Preferred Interest may, at any time, be
converted into a Series B preferred interest in Venetian (the "Series B
Preferred Interest"). The rights of the Series B Preferred Interest are the
same as the Series A Preferred Interest except that the Series B Preferred
Interest will accrue a preferred return of 12% and commencing in November 2009,
distributions must be made to the extent of the positive capital account of the
holder. Subject to the restrictions in the debt instruments of the Company,
distributions on both the Series A Preferred Interest and Series B Preferred
Interest may be made at any time at the option of the Company. As of December
31, 1997, there were no distributions of preferred interest or preferred return
paid or accrued.
NOTE 9--STOCKHOLDER'S EQUITY
Increase in Shares Authorized and Outstanding
In November 1997, the Company's Board of Directors increased the number of
authorized shares of LVSI from 100,000 to 3,000,000 and authorized and
consented to increase the number of shares outstanding with respect to the
outstanding shares of common stock of LVSI, so that each share of such common
stock would henceforth be deemed to represent 18.4996 shares of common stock,
resulting in 925,000 shares of common stock outstanding on such date. The par
value remained $.10 per share. All references to share and per share data
herein have been adjusted retroactively to give effect to the change in shares
outstanding.
Share Repurchases
In December 1995, LVSI completed a merger with NFG, accounted for at
historical cost in a manner similar to a pooling of interests, through the
contribution of all of the outstanding common stock of NFG to the Company. In
April 1995, NFG purchased and retired 41,175 shares of its common stock from
three stockholders. The total price paid for these shares was $13.2 million,
which has been recorded as a reduction to capital in excess of par value. In
August 1995, LVSI purchased 647,469 shares of its common stock from the
identical three stockholders for $206,000. Shares repurchased by LVSI have been
retired and restored to authorized and unissued common stock. Subsequent to
these repurchases, both LVSI and NFG were owned by the Sole Stockholder.
1997 Fixed Stock Option Plan
The Company established a nonqualified stock option plan which provides
for the granting of stock options pursuant to the applicable provisions of the
Internal Revenue Code and regulations. The stock option plan provides for the
granting of up to 75,000 shares of common stock to officers and other key
employees of the Company.
Upon approval of the plan by the Nevada Gaming Commission, options are
intended to be granted to fulfill commitments under long-term employment
agreements with certain key executives. As part of the employment agreements,
the Company committed to grant each executive options to purchase shares
A-20
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9--STOCKHOLDER'S EQUITY (Continued)
of the Company's common stock at an exercise price to be determined by a
formula involving the value of LVSI's land and certain capital contributions.
If fully exercised, shares acquired under such options would represent
approximately 5% of the Company's then-outstanding stock.
Dividends
During the year ended December 31, 1997, LVSI declared and paid
liquidating cash dividends totaling $27.6 million from capital in excess of par
value, to its Sole Stockholder.
NOTE 10--RELATED PARTY TRANSACTIONS
Prior year's financial statements include significant transactions and
balances involving affiliates of the Company. Interest expense relating to the
Second Mortgage Notes and the Third Mortgage PIK Notes totaling $4.1 million
and $7.9 million in 1996 and 1995, respectively, was paid or was payable to
IGN. In addition, through 1995, the Company leased the 1,150,000 square foot
Expo Center to IGN. Pursuant to the operating lease agreement, IGN paid an
annual rental of $8.0 million and was responsible for all taxes, insurance, and
costs to operate and maintain the facility. During 1996, IGN acquired from the
Company the Expo Center building and related land and equipment at its carrying
value of $66.8 million in exchange for all of the Second Mortgage Notes and a
portion of the Third Mortgage PIK Notes of the Company held by IGN totaling
$65.5 million. In connection with the transaction, the above lease was
canceled, and the Company subsequently retired the Second and Third Mortgage
Notes received including $59.5 million of Third Mortgage Notes previously held
by IGN and contributed by the Sole Stockholder.
NOTE 11--COMMITMENTS AND CONTINGENCIES
Construction Costs
Ground breaking for the Casino Resort occurred in April 1997. The
redevelopment of the site of the Sands is expected to be completed in two
phases (with the first phase being construction of the Casino Resort), subject
to receipt of appropriate regulatory approvals, permits and licenses. There can
be no assurance, however, as to when, or if, such construction will be
completed due to risks and uncertainties inherent in the development process.
The cost of the Casino Resort is currently estimated at approximately $1
billion. In connection with the construction of the Casino Resort, the Company
has signed a construction management agreement (the "Construction Management
Agreement") with a major construction management firm (the "Construction
Manager"). Such agreement provides for a maximum guaranteed price for certain
construction costs currently set at $547.8 million and a guaranteed completion
period of 24 months from the effective starting date of construction. As of
December 31, 1997, the Company was committed to approximately $300 million for
capital expenditures relating to the Casino Resort.
Development costs are funded first from the proceeds of the Senior
Subordinated Notes and then pro rata among the proceeds of the Mortgage Notes
and draws on the Bank Credit Facility and the Mall Construction Loan Facility
(Note 7). Upon subdivision of the site of the Sands, the land for the second
phase of the redevelopment of the site of the Sands may be released from the
Note Collateral and transferred to the Phase II Subsidiary, which is not a
guarantor of the Notes or any other indebtedness of LVSI or Venetian.
Energy Services Agreement
During 1997, the Company entered into an energy services agreement with a
heating and air conditioning ("HVAC") provider. Under the terms of the energy
services agreement and other separate energy services agreements, HVAC energy
and services will be purchased by the Company, the Mall Subsidiary, its mall
tenants and IGN over initial terms of 10 years with an option to collectively
extend the terms of their agreements for two consecutive five year periods.
A-21
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 11--COMMITMENTS AND CONTINGENCIES (Continued)
Pursuant to the Construction Management Agreement, the HVAC plant is being
constructed by the Construction Manager on land owned by the Company and leased
to the HVAC provider. The HVAC equipment is and will be owned by the HVAC
provider, which will pay all costs ("HVAC Costs") in connection with the
purchase and installation of the HVAC equipment, up to $70.0 million. As of
December 31, 1997, HVAC Costs totaled $8.4 million.
The charges payable under the separate energy services agreements will
include a fixed component applied to the HVAC Costs paid by the HVAC provider
and reimbursement of operational and related costs.
Litigation
The Company is party to litigation matters and claims related to its
operations. The financial statements include provisions for estimated losses
related thereto. Management, based upon advice from legal counsel, does not
expect that the final resolution of these matters will have a material impact
on the financial position and results of operations of the Company.
NOTE 12--SUMMARIZED FINANCIAL INFORMATION
Venetian, Mall Intermediate, Mall Construction, and Lido Intermediate
(collectively, the "Subsidiary Guarantors") are wholly owned subsidiaries of
LVSI. Venetian and LVSI are co-obligors of the Notes and certain other
indebtedness related to construction of the Casino Resort and are jointly and
severally liable for such indebtedness. The Subsidiary Guarantors have jointly
and severally guaranteed (or are co-obligors of) such debt on a full and
unconditional basis (other than indebtedness under the Mall Construction Loan
Facility which is guaranteed only by Mall Intermediate and Mall Construction).
No other subsidiary of LVSI is an obligor or guarantor of any of the Casino
Resort financing. No summarized financial information is presented for any
non-guarantor subsidiaries of the Company, as they had no assets or results of
operations from inception through December 31, 1997. Separate financial
statements and other disclosures concerning each of Venetian and the Subsidiary
Guarantors are not presented because management believes that they are not
material to investors. Summarized financial information of LVSI, Venetian and
the Subsidiary Guarantors on a combined basis as of and for the year ended
December 31, 1997 is as follows (in thousands):
A-22
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 12--SUMMARIZED FINANCIAL INFORMATION (Continued)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
Venetian
and the Consolidating/
Las Vegas Subsidiary Eliminating
Sands, Inc. Guarantors Entries Total
------------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents ............... $ 142 $ 715 $ -- $ 857
Restricted cash and investments ......... 341,725 341,725
Amounts due from Venetian ............... 894 (894)
Other current assets .................... 118 95 213
-------- -------- ---------- --------
Total current assets ................... 1,154 342,535 (894) 342,795
-------- -------- ---------- --------
Property and equipment, net ............. 279,770 279,770
Restricted investments .................. 85,186 85,186
Investment in Venetian .................. 114,132 (114,132)
Deferred offering costs, net ............ 38,618 38,618
Other assets ............................ 1,358 40 1,398
-------- -------- ---------- --------
$116,644 $746,149 $ (115,026) $747,767
======== ======== ========== ========
Accounts payable ........................ $ -- $ 1,701 $ -- $ 1,701
Construction payables ................... 25,547 25,547
Amounts due to LVSI ..................... 894 (894)
Other accrued liabilities ............... 2,045 14,462 16,507
-------- -------- ---------- --------
Total current liabilities .............. 2,045 42,604 (894) 43,755
Long-term debt .......................... 515,612 515,612
-------- --------
2,045 558,216 (894) 559,367
-------- -------- ---------- --------
Preferred interest in Venetian .......... 77,053 77,053
-------- --------
Stockholder's equity .................... 114,599 110,880 (114,132) 111,347
-------- -------- ---------- --------
$116,644 $746,149 $ (115,026) $747,767
======== ======== ========== ========
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Venetian
and the Consolidating/
Las Vegas Subsidiary Eliminating
Sands, Inc. Guarantors Entries Total
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Revenues ........................ $ 895 $ -- $-- $ 895
Operating expenses .............. (1,727) (1,727)
-------- -------- --- --------
Operating income ................ 2,622 2,622
Other income (expense): .........
Interest income ................ 110 3,329 3,439
Interest expense ............... (6,581) (6,581)
-------- -------- --- --------
Net income (loss) ............... $ 2,732 $ (3,252) $-- $ (520)
======== ======== === ========
</TABLE>
A-23
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 12--SUMMARIZED FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Venetian
and the Consolidating/
Las Vegas Subsidiary Eliminating
Sands, Inc. Guarantors Entries Total
------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities ........................................... $ (838) $ 4,697 $-- $ 3,859
--------- -------- --- ----------
Cash flows from investing activities:
Increase in restricted cash and investments .......... (426,120) (426,120)
Purchases of property and equipment, net ............. (25,399) (105,428) (130,827)
--------- -------- --- ----------
Net cash used in investing activities ................. (25,399) (531,548) -- (556,947)
--------- -------- --- ----------
Cash flows from financing activities:
Proceeds from capital contributions .................. 25,500 25,500
Proceeds from preferred interest in Venetian ......... 77,053 77,053
Proceeds from mortgage notes ......................... 425,000 425,000
Proceeds from senior subordinated notes .............. 90,500 90,500
Proceeds (payments) of intercompany
dividends ............................................ 27,600 (27,600)
Payments of deferred offering costs .................. (37,387) (37,387)
Payments of dividends ................................ (27,600) (27,600)
--------- -------- --- ----------
Net cash provided by financing activities ............. 25,500 527,566 -- 553,066
--------- -------- --- ----------
Increase in cash and cash equivalents ................. (737) 715 (22)
Cash and cash equivalents at beginning of
period ............................................... 879 879
--------- -------- --- ----------
Cash and cash equivalents at end of period ............ $ 142 $ 715 $-- $ 857
========= ======== === ==========
</TABLE>
A-24
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS] LANDAUER ASSOCIATES, INC.
707 Wilshire Boulevard
Suite 4950
Los Angeles, CA 90017
(213) 624-3400
FAX (213) 624-0949
ANNEX B
December 12, 1997
To: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Venetian Casino Resort LLC
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Re: Sands Vacant Land/Casino Resort Appraisals
Ladies and Gentlemen:
At your request, this letter will serve to confirm that Landauer Associates
Inc. has prepared two full narrative appraisal reports, both dated October 17,
1997 (the "Appraisal Reports") which respectively estimate the market value of
1) the approximately 45 acre site formerly occupied by the Sands Hotel and
underlying the Casino Resort and 2) the Casino Resort (including the Hotel, the
Casino and, separately, the Mall). (The Casino Resort and the Mall are to be
separately demised.) Values for all components in both reports were estimated
based on economic conditions prevailing on October 17, 1997.
Our appraisal assignment was to estimate the market value of the fee simple
interest in the land as if vacant, assuming its highest and best use, in this
case for redevelopment as a casino hotel and retail/entertainment project, in
each case, and the market value on a "completed" and "stabilized occupancy"
basis, of the Casino Resort, including the Hotel, the Casino and the Mall
consistent with recent development activity elsewhere along the Strip.
In the process of preparing our Appraisal Reports, we inspected the property;
interviewed representatives of Las Vegas Sands, Inc. and Venetian Casino
Resort, LLC; reviewed and considered the projections for the project provided
by Las Vegas Sands, Inc. and made adjustments to such projections as we deemed
necessary based upon our independent research. We reviewed, thoroughly analyzed
and compared to the subject site recent relevant land sales on or near the
Strip in Las Vegas; and performed a residual land value analysis on the subject
site. We reviewed available improved sale data, but, due to the lack of
comparable casino hotel or mall sales, were not able to reach a value estimate
for either improved component based upon the Sales Comparison Approach. We
reviewed income and expense data for comparable casino hotels, comparable
convention hotels and comparable malls. After taking into account current local
supply and demand conditions, we forecasted income and expense for the Casino
Hotel and the Mall and performed a discounted cash flow analysis for each.
As specified in the Appraisal Reports, the value opinions reported below are
qualified by certain assumptions, limiting conditions, certifications, and
definitions which are set forth in the reports. Please note that this letter is
provided as a supplement to our Appraisal Reports which are available for your
review under separate cover.
B-1
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
December 12, 1997
Page 2
The property was inspected by and the report was prepared by Rodney A. Wycoff,
CRE, MAI and Karen L. Johnson, MAI with the assistance of other memebers of
Landauer's professional staff.
As result of our analysis, and as set forth in our appraisal report dated
October 17, 1997, we estimate (i) that the market value of the approximately 45
acres of land formerly occupied by the Sands Hotel and underlying Venetian
Casino Resort, as of October 17, 1997, was $225.0 million, (ii) the market
value of the Hotel and Casino components of the Venetian Casino Resort on an
"as completed" basis which is estimated to be April 1, 1999 will be $1.1
billion and the market value of the Hotel and Casino "as stabilized," which is
anticipated to be April 1, 2001, will be $1.3 billion, based on conditions
prevailing as of October 17, 1997, and (iii) the market value of the Mall upon
completion, which is anticipated to be April 1, 1999, will be approximately
$220.0 million and upon stabilization, which is anticipated to be April 1, 2000
will be $248.0 million, based on economic conditions prevailing as of Ocotber
17, 1997. In reaching the conclusions set forth in the foregoing clause (ii),
we derived an average room rate of $167 (1999 dollars) and an average occupancy
rate of 93% for the Venetian Casino Resort.
We hereby affirm that between the date of the Appraisal Reports and the date
hereof, nothing has come to the attention of the undersigned which would
invalidate or render incorrect any of the assumptions, estimates or conclusions
included in the Appraisal Reports.
We understand that this letter and the Appraisal Reports will be used, and
consent to their use, (a) in connection with borrowings being made from banks
and/or other institutional lenders in connection with the development of the
property and (b) in connection with a public offering or private placement of
securities. We further understand that the offering materials used in
connection with such financings will contain: 1) a reference to our firm and to
the valuation we derived for the property; 2) summary information regarding
such valuation; and 3) this letter. Copies of our Appraisal Reports will be
made available to banks for the purpose of evaluating and participating in the
Bank Credit Facility.
We have reviewed the descriptions of our Appraisal Reports contained in the
accompanying Prospectus under the captioned section "Appraisals," and hereby
confirm that the statements therein fairly represent our Appraisal Reports.
We hereby consent to the inclusion of such description, and to the references
to Landauer Associates, Inc. and to copies of the Appraisal Reports, in the
Prospectus referred in the foregoing paragraph. Furthermore, we hereby consent
to being named as experts in such Prospectus.
This letter summarizes our opinions of value. The reader is directed to our
fully documented narrative reports, which contain the text, exhibits, and
addenda, which is available under separate cover.
Sincerely,
LANDAUER ASSOCIATES, INC.
/s/ Rodney A. Wycoff
---------------------------
Rodney A. Wycoff, MAI, CRE
Senior Managing Director
B-2
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Issuers. This Prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which it relates, nor does it
constitute an offer to sell, or the solicitation of an offer to buy, to any
person in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Issuers since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
-----------------
TABLE OF CONTENTS
Page
-----------
Available Information ......................... 2
Special Note Regarding Forward-
Looking Statements ......................... 3
Prospectus Summary ............................ 4
Risk Factors .................................. 27
LVSI and Venetian ............................. 46
Use of Proceeds ............................... 48
Capitalization ................................ 50
Management's Discussion and Analysis of
Liquidity and Capital Resources ............ 51
The Exchange Offer ............................ 55
Business ...................................... 63
Regulation and Licensing ...................... 80
Appraisals .................................... 84
Management .................................... 88
Ownership of Capital Stock .................... 92
Certain Transactions .......................... 93
Description of Mortgage Notes ................. 96
Description of Senior Subordinated Notes ...... 146
Book-Entry, Delivery and Form ................. 190
Description of Disbursement Agreement ......... 193
Description of Intercreditor Agreement ........ 199
Insurance Requirements ........................ 203
Description of Certain Indebtedness ........... 205
Certain Material Agreements ................... 213
Certain Federal Income Tax Considerations 223
ERISA Considerations .......................... 228
Plan of Distribution .......................... 228
Validity of the Notes ......................... 229
Independent Accountants ....................... 229
Appraisers .................................... 229
Index to Forecasted Consolidated Financial
Statements ................................. P-1
Annex A--Certain Historical Financial
Information ................................ A-1
Annex B--Letter From the Appraiser ............ B-1
---------------------------------
Prospectus
---------------------------------
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
$425,000,000
12 1/4% Mortgage Notes
due 2004
$97,500,000
14 1/4% Senior Subordinated Notes
due 2005
---------------------------------
[VENETIAN LOGO]
---------------------------------
Offer to Exchange $425,000,000 of their 12 1/4% Mortgage Notes due 2004 and
$97,500,000 of their 14 1/4% Senior Subordinated Notes which have been
registered under the Securities Act for $425,000,000 of their outstanding
12 1/4% Mortgage Notes due 2004 and $97,500,000 of their outstanding 14 1/4%
Senior Subordinated Notes due 2005.
, 1998
Until , 1998 (90 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Las Vegas Sands, Inc. ("LVSI") is a Nevada corporation. Section 78.751 of
Chapter 78 of the Nevada Revised statutes (referenced as the Nevada General
Corporation Law, or the "NGCL") empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation or enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceedings, had no reasonable cause to believe his conduct was unlawful. No
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged by a court of competent jurisdiction
after exhaustion of all appeals therefrom to be liable to the corporation or
for amounts paid in settlement to the corporation unless and only to the extent
that the court in which such action or suit was brought or other court of
competent jurisdiction determines that in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
LVSI's Articles of Incorporation, as amended, provides in Article EIGHT
that the Corporation shall indemnify its directors and officers to the fullest
extent permitted by the laws of the State of Nevada for damages for breaches of
fiduciary duties. The provision does not eliminate liability for acts or
omissions involving intentional misconduct, fraud, a knowing violation of the
law, or the payment of dividends in violation of N.R.S. 78.300.
Venetian Casino Resort, LLC ("Venetian" and, together with LVSI, the
"Issuers"), is a Nevada limited liability company. Chapter 86 of the Nevada
Revised statutes (referenced as the Nevada Limited Liability Company Act, or
the "Act") provides that a limited liability company may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of the
company, by reason of the fact that the person is or was performing services
for the company (an "Indemnitee") against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by it in connection with the action, suit or proceeding if he acted in
good faith and in a manner which it reasonably believed to be in or not opposed
to the best interest of the company, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe its conduct was unlawful. The
Act further provides that all the expenses of such Indemnitee incurred in
defending any threatened, pending or completed civil, criminal, administrative
or investigative action, suit or proceeding (including attorney's fees,
judgments, fines and amounts paid in settlement), may be paid by the company as
they are incurred and in advance of the final disposition of the action, suit
or proceeding, upon receipt of an undertaking by the Indemnitee to repay the
amount if it is ultimately determined by a court of competent jurisdiction that
it is not entitled to be indemnified by the company (subject to the above
provision(s)). Indemnification may not be made for any claim, issue or matter
as to which the Indemnitee has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
company or for amounts paid in settlement to the company, unless and only to
the extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that in view of all
the circumstances of the case, it is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Venetian's limited liability company agreement provides that Venetian
shall indemnify any member, any affiliate of the member or any shareholders,
partners, members, employees, representatives or agents of the member or their
respective affiliates, any officer or any employee or agent of Venetian (each a
"Covered Person") who was or is a party or is threatened to be made a party to
any threatened, pending
II-1
<PAGE>
or completed action, suit or proceeding brought by or against Venetian or
otherwise, whether civil, criminal, administrative or investigative, including,
without limitation, an action by or in the right of Venetian to procure a
judgment in its favor, by reason of the fact that such Covered Person is or was
the member, officer, employee or agent of Venetian, or that such Covered Person
is or was serving at the request of Venetian as a partner, member, director,
officer, trustee, employee or agent of another person, against all expenses,
including attorneys' fees and disbursements, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such Covered Person in
connection with such action, suit or proceeding. Notwithstanding the foregoing,
no indemnification shall be provided to or on behalf of any Covered Person if a
judgment or other final adjudication adverse to such Covered Person establishes
that his or her acts constituted intentional misconduct or gross negligence.
Each of Mall Intermediate Holding Company, LLC ("Mall Intermediate
Holdings"), Lido Intermediate Holding Company, LLC ("Phase II Intermediate
Holdings") and Grand Canal Shops Mall Construction, LLC ("Mall Construction
Subsidiary" and, together with Mall Intermediate Holdings and Phase II
Intermediate Holdings, the "Guarantors") is a Delaware limited liability
company. Section 18-108 of the Delaware Limited Liability Company Act grants a
Delaware limited liability company the power, subject to such standards and
restrictions, if any, as are set forth in its limited liability company
agreement to indemnify and hold harmless any member or manager or other person
from and against any and all claims and demands whatsoever.
Section 7.3 of each of the Guarantors' limited liability company
agreements provides that such Guarantor shall indemnify any member, any
affiliate of the member or any shareholders, partners, members, employees,
representatives or agents of the member or their respective affiliates, any
officer or any employee or agent of the Guarantor (each a "Guarantor Covered
Person") who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding brought by or
against the Guarantor or otherwise, whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in the right of
the Guarantor to procure a judgment in its favor, by reason of the fact that
such Guarantor Covered Person is or was the member, officer, employee or agent
of the Guarantor, or that such Guarantor Covered Person is or was serving at
the request of the Guarantor as a partner, member, director, officer, trustee,
employee or agent of another person, against all expenses, including attorneys'
fees and disbursements, judgments, fines and amounts paid in settlement
actually and reasonably incurred by such Guarantor Covered Person in connection
with such action, suit or proceeding. Notwithstanding the foregoing, no
indemnification shall be provided to or on behalf of any Guarantor Covered
Person if a judgment or other final adjudication adverse to such Guarantor
Covered Person establishes that his or her acts constituted intentional
misconduct or gross negligence.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling the registrants pursuant to the foregoing
provisions, the Issuers and the Guarantors have been informed that in the
opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Pursuant to Section 8 of the registration rights agreement relating to
LVSI and Venetian's 12 1/4% Mortgage Notes due 2004 and 14 1/4% Senior
Subordinated Notes due 2005, the holders of such securities have agreed to
indemnify the directors, officers and controlling persons of the registrant
against certain liabilities, costs and expenses that may be incurred in
connection with the registration of such securities, to the extent that such
liabilities, costs and expenses that may be incurred in connection with the
registration of such securities to the extent that such liabilities, costs and
expenses arise from an omission or untrue statement contained in information
provided to the registrant by the holders of such securities.
The Issuers maintain a Directors' and Officers' Liability and
Reimbursement Insurance Policy designed to reimburse the Issuers for any
payments made by them pursuant to the foregoing indemnification. The Purchase
Agreement, dated as of November 6, 1997, among the Issuers, the Guarantors,
Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. (the "Initial Purchasers"),
contains provisions by which the Initial Purchasers agree to indemnify the
Issuers and the Guarantors (including their officers, directors, employees,
agents and controlling persons) against certain liabilities.
II-2
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description of Document
- ------------- -----------------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of LVSI.*
3.2 Certificate of Amendment of Amended and Restated Articles of Incorporation of
LVSI.*
3.3 Amended and Restated By-laws of LVSI.*
3.4 Amended and Restated Limited Liability Company Agreement of Venetian.*
3.5 Limited Liability Company Agreement of Phase II Intermediate Holdings.*
3.6 Limited Liability Company Agreement of Mall Intermediate Holdings.*
3.7 Limited Liability Company Agreement of Mall Construction Subsidiary.*
4.1 Indenture, dated as of November 14, 1997, among the Issuers, as issuers, the
Guarantors, as Mortgage Note guarantors, and First Trust National Association ("First
Trust"), as Mortgage Note trustee.*
4.2 Indenture, dated as of November 14, 1997, among the Issuers, as issuers, the
Guarantors, as Senior Subordinated Note guarantors, and First Union National Bank
("First Union"), as Senior Subordinated Note trustee.*
4.3 Registration Rights Agreement, dated as of November 14, 1997, among the Issuers,
the Guarantors, and the Initial Purchasers.*
4.4 Funding Agents' Disbursement and Administration Agreement, dated as of November
14, 1997, among LVSI, Venetian, Mall Construction Subsidiary, jointly and severally,
The Bank of Nova Scotia ("Scotiabank"), as the Bank Agent, First Trust, as the
Mortgage Note trustee, Atlantic-Pacific Las Vegas, LLC ("Atlantic-Pacific"), as the
HVAC Provider, and Scotiabank, as the Disbursement Agent.*
4.5 Company Security Agreement, dated as of November 14, 1997, by and among LVSI,
Venetian, Mall Construction Subsidiary and Scotiabank, as the Intercreditor Agent.*
4.6 Mall Construction Subsidiary Security Agreement, dated as of November 14, 1997,
between Mall Construction Subsidiary and Scotiabank, as the Intercreditor Agent.*
4.7 Deed of Trust, Assignment of Rents and Leases and Security Agreement made by
Venetian and LVSI, jointly and severally as trustor, to Lawyers Title of Nevada, Inc.
("Lawyer's Title"), as trustee, for the benefit of First Trust, in its capacity as the
Mortgage Note trustee, as Beneficiary.*
4.8 Leasehold Deed of Trust, Assignment of Rents and Leases and Security Agreement
made by Mall Construction Subsidiary, as trustor, to Lawyer's Title, as trustee, for the
benefit of First Trust, in its capacity as the Mortgage Note trustee, as Beneficiary.*
4.9 Disbursement Collateral Account Agreement, dated as of November 14, 1997, by and
among LVSI, Venetian, Mall Construction Subsidiary and Scotiabank, as
Disbursement Agent and as Securities Intermediary.*
4.10 Mortgage Notes Proceeds Collateral Account Agreement, dated as of November 14,
1997, by and among LVSI, Venetian and Scotiabank, as Disbursement Agent.*
4.11 Mortgage Notes Proceeds Account Third-Party Account Agreement, dated as of
November 14, 1997, by and among LVSI, Venetian, Scotiabank, as Disbursement
Agent, and Goldman, Sachs & Co., as Securities Intermediary.*
4.12 Intercreditor Agreement, dated as of November 14, 1997, among Scotiabank, as
Bank Agent and Intercreditor Agent, First Trust, as Mortgate Note trustee, GMAC
Commercial Mortgage Corporation ("GMAC"), as Interim Mall Lender, First Union, as
Senior Subordinated Note trustee.*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Document
- ------------- -------------------------------------------------------------------------------------
<S> <C>
4.13 Completion Guaranty, dated as of November 14, 1997, made by Sheldon G. Adelson,
in favor of Scotiabank, as the Bank Agent acting on behalf of the Bank Lenders,
GMAC, as the Interim Mall Lender, and First Trust, as the Mortgage Note trustee.*
4.14 Completion Guaranty Collateral Account Agreement, dated as of November 14, 1997,
by and between Sheldon G. Adelson, as Pledgor, and Scotiabank, as Disbursement
Agent.*
4.15 Completion Guaranty Third-Party Account Agreement, dated as of November 14,
1997, by and among Sheldon G. Adelson, Scotiabank, as Disbursement Agent, and
Goldman, Sachs & Co., as Securities Intermediary.*
4.16 Unsecured Indemnity Agreement, dated as of November 14, 1997, by LVSI, Venetian
and Mall Construction Subsidiary, to and for the benefit of First Trust.*
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, regarding legality of the
securities being registered.
5.2 Opinion of Lionel Sawyer & Collins, regarding legality of the securities being
registered.
8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, regarding certain tax matters.*
10.1 Bank Credit Agreement, dated as of November 14, 1997, among LVSI, Venetian, the
lender parties thereto, Goldman Sachs Credit Partners, L.P. ("GSCP"), as arranger
and syndication agent, and Scotiabank, as administrative agent.*
10.2 Credit Agreement, dated as of November 14, 1997, among LVSI, Venetian, Mall
Construction Subsidiary and GMAC.
10.3 Energy Services Agreement, dated as of November 14, 1997, by and between
Atlantic-Pacific and Venetian.
10.4 Energy Services Agreement, dated as of November 14, 1997, by and between
Atlantic-Pacific and Mall Construction Subsidiary.
10.5 Construction Management Agreement, dated as of February 15,1997, between LVSI,
as owner, and Lehrer McGovern Bovis, Inc., as construction manager.*
10.6 Assignment, Assumption and Amendment of Construction Management Agreement,
dated as of Novembr 14, 1997, by and between LVSI, Venetian and Lehrer
McGovern Bovis, Inc.*
10.7 Agreement, effective as of January 1, 1996, between Venetian, as owner, and the
architect, a collaboration between the firms of TSA of Nevada, LLP and WAT&G, Inc.,
Nevada.*
10.8 Amended and Restated Reciprocal Easement, Use and Operating Agreement, dated
as of November 14, 1997, among Interface Group-Nevada, Inc., Mall Construction
Subsidiary and Venetian.*
10.9 Sale and Contribution Agreement, dated as of November 14, 1997, among Venetian,
Grand Canal Shops Mall, LLC ("Mall Subsidiary") and Mall Construction Subsidiary.*
10.10 Indenture of Lease, dated as of November 14, 1997, by and between Venetian, as
landlord, and Mall Construction Subsidiary, as tenant.*
10.11 Commitment Letter, dated as of November 14, 1997, among LVSI, Mall Subsidiary
and Goldman Sachs Mortgage Company ("GSMC").*
10.12 Commitment Letter, dated as of November 14, 1997, between Mall Subsidiary and
Sheldon G. Adelson.*
10.13 Tri-Party Agreement, dated as of November 14, 1997, among LVSI, Venetian, Mall
Subsidiary, Mall Construction Subsidiary, Sheldon G. Adelson, GSMC and GMAC.*
10.14 Casino Lease, dated as of November 14, 1997, by and between LVSI and Venetian.*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Document
- ------------- --------------------------------------------------------------------------------------
<S> <C>
10.15 Amended and Restated Services Agreement, dated as of November 14, 1997, by
and between Venetian, Interface Group Holding Company, Inc., Interface Group-
Nevada, Inc., Lido Casino Resort MM, Inc., Grand Canal Shops Mall MM, Inc. and
certain subsidiaries of Venetian named therein.*
10.16 Completion Guaranty Loan Subordinated Note, dated as of November 14, 1997,
made by Venetian in favor of Sheldon G. Adelson.*
10.17 Substitute Tranche B Loan Subordinated Note, dated as of November 14, 1997,
made by Venetian and Mall Construction Subsidiary in favor of Sheldon G. Adelson.*
10.18 Intercreditor Agreement, dated as of November 14, 1997, by and among Scotiabank,
as the Administrative Agent, First Trust, as Mortgage Note trustee, GMAC, as the
Interim Mall Lender, First Union, as Subordinated Note trustee, LVSI, Venetian, Mall
Construction Subsidiary and Sheldon G. Adelson.*
10.19 Unsecured Indemnity Agreement, dated as of November 14, 1997, by LVSI, Venetian
and Mall Construction Subsidiary, to and for the benefit of Scotiabank, as
Administrative Agent under the Bank Credit Agreement.*
10.20 Unsecured Indemnity Agreement, dated as of November 14, 1997, by LVSI, Venetian
and Mall Construction Subsidiary, to and for the benefit of GMAC.*
10.21 Construction Agency Agreement, dated as of November 14, 1997, by and between
Venetian and Atlantic-Pacific.
10.22 Management Agreement, dated as of April 23, 1997, by and between LVSI and
Forest City Commercial Management, Inc., as assigned by LVSI to Mall Construction
Subsidiary, by that certain Assignment and Assumption of Contracts.*
10.23 Primary Liquidated Damages Insurance Agreement, dated August 4, 1997, by and
between Lehrer McGovern Bovis, Inc. and C.J. Coleman & Companies, Ltd.*
10.24 Guaranty of Performance, dated as of August 19, 1997, by the Peninsular and
Oriental Steam Navigation Company in favor of LVSI, as assigned by LVSI to
Venetian by that certain Assignment, Assumption and Amendment of Contracts.*
10.25 Guaranty of Performance and Completion, dated as of August 19, 1997, by Bovis,
Inc., LVSI, Venetian and Mall Construction Subsidiary, for the benefit of Scotiabank,
as the Intercreditor Agent.*
10.26 Consulting and Lease Brokerage Agreement between Blatteis Realty Co. and LVSI,
dated as of January 23, 1997.*
10.27 Sands Resort Hotel and Casino Agreement, dated February 18, 1997, by and
between Clark County and LVSI, and all amendments thereto.*
10.28 Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan.*
10.29 Employment Agreement, dated as of November 1, 1995, between LVSI and William
P. Weidner.*
10.30 Employment Agreement, dated as of November 1, 1995, between LVSI and Bradley
H. Stone.*
10.31 Employment Agreement, dated as of November 1, 1995, between LVSI and Robert
G. Goldstein.*
10.32 First Amendment to Credit Agreement, dated as of January 30, 1998, by and among
LVSI, Venetian, the lender parties thereto, GSCP, as arranger and syndication agent,
and Scotiabank, as administrative agent.*
10.33 Term Loan and Security Agreement, dated as of December 22, 1997, among LVSI
and Venetian, as Borrowers, the lender parties thereto, BancBoston Leasing, Inc., as
co-agent, and General Electric Capital Corporation ("GECC"), as admistrative agent.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Document
- ------------- ---------------------------------------------------------------------------------------
<S> <C>
10.34 Intercreditor Agreement, dated as of December 22, 1997, by and among Scotiabank,
as Bank Agent, First Trust, as Mortgage Note trustee, GMAC and GECC.
12.1 Statement regarding computation of ratios of earnings to fixed charges.
21.1 Subsidiaries of the Issuers and Guarantors.*
23.1 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in their opinions, filed
as Exhibits 5.1 and 8.1).
23.2 Consent of Lionel Sawyer & Collins (included in their opinion filed as Exhibit 5.2).
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Landauer Associates, Inc. ("Landauer") (included in Annex B to the
Prospectus).
24.1 Powers of Attorney.*
25.1 Statement of eligibility and qualification of First Trust National Association.*
25.2 Statement of eligibility and qualification of First Union National Bank.*
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.*
99.4 Form of Securities Dealers, Commercial Banks, Trust Companies and Other
Nominees Letter.*
99.5 Form of Client Letter.*
99.6 Land Appraisal, dated as of October 17, 1997, prepared by Landauer.*
99.7 Hotel/Casino and Mall Appraisal, dated as of October 17, 1997, prepared by
Landauer.*
</TABLE>
- ----------------
*|Previously filed
II-6
<PAGE>
Item 22. Undertakings
That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officers or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of this Registration Statement through the date of reponding to the
request.
(5) To supply by means of a post-effective amendment all information
concerning a transction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it
became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Las Vegas, Nevada, on the 27th day
of March, 1998.
LAS VEGAS SANDS, INC.
By: /s/ Sheldon G. Adelson
-----------------------
Sheldon G. Adelson,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- ------------------------------------ ---------------
<S> <C> <C>
/s/ Sheldon G. Adelson Chairman of the Board, Chief March 27, 1998
- ------------------------- Executive Officer and Director
Sheldon G. Adelson
* Special Director March 27, 1998
- -------------------------
William J. Raggio
* Vice President--Finance (principal March 27, 1998
- ------------------------- financial and accounting officer)
Harry D. Miltenberger
</TABLE>
*By: /s/ David Friedman
------------------
David Friedman,
Attorney-in-fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Las Vegas, Nevada, on the 27th day
of March, 1998.
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ Sheldon G. Adelson
-----------------------
Sheldon G. Adelson,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- ---------------------------------------- ---------------
<S> <C> <C>
/s/ Sheldon G. Adelson Chairman of the Board, Chief Executive March 27, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant
* Special Director of managing member March 27, 1998
- ------------------------- of Registrant
William J. Raggio
* Vice President--Finance of managing March 27, 1998
- ------------------------- member of Registrant (principal
Harry D. Miltenberger financial and accounting officer)
</TABLE>
*By: /s/ David Friedman
------------------
David Friedman,
Attorney-in-fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Las Vegas, Nevada, on the 27th day
of March, 1998.
LIDO INTERMEDIATE HOLDING
COMPANY, LLC
By: Venetian Casino Resort, LLC, its
sole member
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ Sheldon G. Adelson
-----------------------
Sheldon G. Adelson,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- ---------------------------------------- ---------------
<S> <C> <C>
/s/ Sheldon G. Adelson Chairman of the Board, Chief Executive March 27, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant's sole member
* Special Director of managing member March 27, 1998
- ------------------------- of Registrant's sole member
William J. Raggio
* Vice President--Finance of managing March 27, 1998
- ------------------------- member of Registrant's sole member
Harry D. Miltenberger (principal financial and accounting
officer)
</TABLE>
*By: /s/ David Friedman
------------------
David Friedman,
Attorney-in-fact
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Las Vegas, Nevada, on the 27th day
of March, 1998.
MALL INTERMEDIATE HOLDING
COMPANY, LLC
By: Venetian Casino Resort, LLC, its
sole member
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ Sheldon G. Adelson
-----------------------
Sheldon G. Adelson,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- ---------------------------------------- ---------------
<S> <C> <C>
/s/ Sheldon G. Adelson Chairman of the Board, Chief Executive March 27, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant's sole member
* Special Director of managing member March 27, 1998
- ------------------------- of Registrant's sole member
William J. Raggio
* Vice President--Finance of managing March 27, 1998
- ------------------------- member of Registrant's sole member
Harry D. Miltenberger (principal financial and accounting
officer)
</TABLE>
*By: /s/ David Friedman
David Friedman,
Attorney-in-fact
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Las Vegas, Nevada, on the 27th day
of March, 1998.
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, its
sole member
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ Sheldon G. Adelson
-------------------------
Sheldon G. Adelson,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- ---------------------------------------- ---------------
<S> <C> <C>
/s/ Sheldon G. Adelson Chairman of the Board, Chief Executive March 27, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant's sole member
* Special Director of managing member March 27, 1998
- ------------------------- of Registrant's sole member
William J. Raggio
* Vice President--Finance of managing March 27, 1998
- ------------------------- member of Registrant's sole member
Harry D. Miltenberger (principal financial and accounting
officer)
</TABLE>
*By: /s/ David Friedman
------------------
David Friedman,
Attorney-in-fact
II-12
(212) 373-3000
(212) 757-3990
March 27, 1998
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
Lido Intermediate Holding Company, LLC
Mall Intermediate Holding Company, LLC
Grand Canal Shops Mall Construction, LLC
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Registration Statement on Form S-4 (File No. 333-42147)
-------------------------------------------------------
Ladies and Gentlemen:
In connection with the referenced Registration Statement on
Form S-4 (the "Registration Statement") filed by Las Vegas Sands, Inc., a Nevada
corporation ("LVSI"), Venetian Casino Resort, LLC, a Nevada limited liability
company ("Venetian" and, together with LVSI, the "Issuers"), Lido Intermediate
Holding Company, LLC, a Delaware limited liability company ("Phase II
Intermediate Holdings"), Mall Intermediate Holding Company, LLC, a Delaware
<PAGE>
2
limited liability company ("Mall Intermediate Holdings"), and Grand Canal Shops
Mall Construction, LLC, a Delaware limited liability company (the "Mall
Construction Subsidiary" and, together with Phase II Intermediate Holdings and
Mall Intermediate Holdings, the "Guarantors"), with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations under the Act, we have been requested to
render our opinion as to the legality of the securities being registered. The
Registration Statement relates to the registration under the Act of the Issuers'
12 1/4% Mortgage Notes due 2004 (the "New Mortgage Notes") and 14 1/4% Senior
Subordinated Notes due 2005 (the "New Senior Subordinated Notes" and, together
with the New Mortgage Notes, the "New Notes") and the guarantees of each of the
New Notes by the Guarantors (the "Guarantees"). The New Notes are to be offered
in exchange for the Issuers' outstanding 12 1/4% Mortgage Notes due 2004 (the
"Existing Mortgage Notes") and 14 1/4% Senior Subordinated Notes due 2005 (the
"Existing Senior Subordinated Notes" and, together with the Existing Mortgage
Notes, the "Existing Notes"). The New Mortgage Notes will be issued by the
Issuers under the terms of the Indenture (the "Mortgage Notes Indenture"), dated
as of November 14, 1997, among LVSI and Venetian, as issuers, the Guarantors, as
Mortgage Note guarantors, and First Trust National Association, as Mortgage Note
trustee (the "Mortgage Note Trustee"), and the New Senior Subordinated Notes
will be issued by the Issuers under the terms of the Indenture (the "Senior
Subordinated Notes Indenture" and, together with the Mortgage Notes Indenture,
the "Indentures"), dated as of November 14, 1997, among LVSI and Venetian, as
<PAGE>
3
issuers, the Guarantors, as Senior Subordinated Note Guarantors, and First Union
National Bank, as Senior Subordinated Note trustee (the "Senior Subordinated
Note Trustee" and, together with the Mortgage Note Trustee, the "Trustees").
Capitalized terms used and not otherwise defined in this letter have the
respective meanings given them in the Registration Statement.
In connection with this opinion, we have examined originals,
conformed copies or photocopies, certified or otherwise identified to our
satisfaction, of the following documents (collectively, the "Documents"):
(i) the Registration Statement (including its exhibits);
(ii) the Mortgage Notes Indenture included as Exhibit 4.1 to the
Registration Statement;
(iii) the Senior Subordinated Notes Indenture included as Exhibit
4.2 to the Registration Statement;
(iv) the proposed form of the New Mortgage Notes included as Exhibit
A-1 to the Mortgage Notes Indenture (including the Guarantees set forth in
them);
(v) the proposed form of the New Senior Subordinated Notes included
as Exhibit A-1 to the Senior Subordinated Notes Indenture (including the
Guarantees set forth in them); and
(vi) the Registration Rights Agreement, dated as of November 14,
1997, among the Issuers, the Guarantors, Goldman, Sachs & Co. and Bear, Stearns
& Co., Inc. (the "Registration Rights Agreement").
<PAGE>
4
In addition, we have examined: (i) those limited liability company records of
each of the Guarantors as we have considered appropriate, including the
operating agreements of each of the Guarantors, each dated as of November 14,
1997 and each certified as in effect on the date hereof; and (ii) those other
certificates, agreements and documents as we deemed relevant and necessary as a
basis for the opinions expressed below.
In our examination of the documents and in rendering the opinions
set forth below, we have assumed, without independent investigation, (i) the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to the original documents of all documents
submitted to us as certified, photostatic, reproduced or conformed copies of
validly existing agreements or other documents, the authenticity of all the
latter documents and the legal capacity of all individuals who have executed any
of the documents which we examined, (ii) that LVSI, as managing member of
Venetian, and Venetian, as the sole member of each Guarantor, have taken all
necessary corporate or limited liability company action, on the part of LVSI and
Venetian, to authorize the Documents and the transactions provided for in them
and to which any Guarantor is a party and that each Document has been duly
authorized, executed and delivered by LVSI and Venetian, (iii) that the
execution and delivery by the Issuers of each Document to which they are a party
and the consummation by each party of the transactions contemplated thereby do
not violate or result in a breach of or default under the party's certificate or
articles of incorporation, by-laws, operating agreements or other organizational
documents, as the case may be, or any applicable
<PAGE>
5
Nevada state or local law or regulation or any laws relating to gaming that are
applicable to the Issuers, (iv) that the New Notes will be issued as described
in the Registration Statement, (v) that the Indentures were duly authorized,
executed and delivered by the parties to them (other than the Guarantors), (vi)
that the Mortgage Notes Indenture represents a valid and binding obligation of
the Mortgage Note Trustee, (vii) that the Senior Subordinated Notes Indenture
represents a valid and binding obligation of the Senior Subordinated Note
Trustee, (viii) that the New Notes will be in substantially the forms attached
to the Indentures and that any information omitted from any such forms will be
properly added and (ix) that the New Notes will be duly authorized, executed and
delivered by the Issuers. With regard to assumptions (ii), (iii), (v) and (ix),
we refer you to the opinion of Lionel, Sawyer & Collins, special counsel to the
Issuers, filed as Exhibit 5.2 to the Registration Statement. We have relied upon
the factual matters contained in the representations and warranties of the
Issuers and the Guarantors made in the Documents and upon certificates of
public officials and officers of the Issuers and the Guarantors.
Based on the foregoing, and subject to the assumptions, exceptions
and qualifications set forth in this letter, we are of the opinion that:
1. The Mortgage Notes Indenture represents a legal, valid and
binding obligation of each of the Issuers and the Guarantors enforceable against
each Issuer and Guarantor in accordance with its terms.
2. The Senior Subordinated Notes Indenture represents a legal,
valid and binding obligation of each of the Issuers and the Guarantors
enforceable against each Issuer and Guarantor in accordance with its terms.
<PAGE>
6
3. When duly issued, authenticated and delivered in accordance
with the terms of the Mortgage Notes Indenture and the Registration Rights
Agreement, the New Mortgage Notes will be legal, valid and binding obligations
of each of the Issuers enforceable against each Issuer in accordance with
their terms.
4. When duly issued, authenticated and delivered in accordance
with the terms of the Senior Subordinated Notes Indenture and the Registration
Rights Agreement, the New Senior Subordinated Notes will be legal, valid and
binding obligations of each of the Issuers enforceable against each Issuer
in accordance with their terms.
5. When duly issued, authenticated and delivered in accordance
with the terms of the Mortgage Notes Indenture and the Registration Rights
Agreement, the Guarantees to be endorsed on the New Mortgage Notes will be
legal, valid and binding obligations of each of the Guarantors enforceable
against each Guarantor in accordance with their terms.
6. When duly issued, authenticated and delivered in accordance
with the terms of the Senior Subordinated Notes Indenture and the Registration
Rights Agreement, the Guarantees to be endorsed on the New Senior Subordinated
Notes will be legal, valid and binding obligations of each of the Guarantors
enforceable against each Guarantor in accordance with their terms.
The foregoing opinions are subject to the following assumptions and
qualifications:
<PAGE>
7
(a) the enforceability of the Indentures, the New Notes and the
Guarantees may be (i) subject to bankruptcy, insolvency, fraudulent conveyance
or transfer, reorganization, moratorium and other similar laws affecting
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or in equity),
including principles of commercial reasonableness or conscionability and an
implied covenant of good faith and fair dealing.
(b) We express no opinion as to: (i) the enforceability of
any provisions contained in the Indentures that purport to establish (or may be
construed to establish) evidentiary standards; (ii) the enforceability of any
provisions contained in the Indentures that constitute waivers which are
prohibited or ineffective under Article 9 of the Uniform Commercial Code as
currently in effect in the State of New York; or (iii) any provision (remedial
or otherwise) of any Documents that is stated to be governed by any law other
than the laws of the State of New York (including without limitation the
provisions of the Notes and the Indentures which are stated to be governed by
the law of the State of Nevada).
Our opinion is limited to matters of New York law and Delaware
limited liability company law. In particular, we express no opinion as to (i)
the laws of the State of Nevada and (ii) any gaming or other laws relating
specifically to the particular business to be conducted by the Issuers and the
Guarantors. Our opinion is rendered only with respect to the laws, and the
rules, regulations and orders under them, which are currently in effect.
<PAGE>
8
We hereby consent to the use of our name in the Registration
Statement and in the prospectus contained in the Registration Statement as it
appears in the caption "Validity of the Notes" and to the use of this opinion as
an exhibit to the Registration Statement. In giving this consent, we do not
admit that we come within the category of persons whose consent is required by
the Act or by the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Page 1
March 27, 1998
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
Lido Intermediate Holding Company, LLC
Mall Intermediate Holding Company, LLC
Grand Canal Shops Mall Construction, LLC
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Re: Registration Statement on Form S-4 (File No. 333-42147)
Ladies and Gentlemen:
In connection with the above-referenced Registration Statement on Form S-4
(the "Registration Statement") filed by Las Vegas Sands, Inc., a Nevada
corporation ("LVSI"), Venetian Casino Resort, LLC, a Nevada limited liability
company ("Venetian" and, together with LVSI, the "Issuers"), Lido Intermediate
Holding Company, LLC, a Delaware limited liability company ("Phase II
Intermediate Holdings"), Mall Intermediate Holding Company, LLC, a Delaware
limited liability company ("Mall Intermediate Holdings") and Grand Canal Shops
Mall Construction, LLC, a Delaware limited liability company (the "Mall
Construction Subsidiary" and, together with Phase II Intermediate Holdings and
Mall Intermediate Holdings, the "Guarantors"), with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder, we have been
requested to render our opinion as to the following matters. The Registration
Statement relates to the registration under the Act of the Issuers' 12 1/4%
Mortgage Notes due 2004 (the "New Mortgage Notes")
and 14 1/4% Senior Subordinated Notes due 2005 (the "New Senior Subordinated
Notes" and, together with the New Mortgage
<PAGE>
Page 2
Notes, the "New Notes") and the guarantees of each of the New Notes by the
Guarantors (the "Guarantees"). The New Notes are to be offered in exchange for
the Issuers' outstanding 12 1/4% Mortgage Notes due 2004 (the "Existing Mortgage
Notes") and 14 1/4% Senior Subordinated Notes due 2005 (the "Existing Senior
Subordinated Notes" and, together with the Existing Mortgage Notes, the
"Existing Notes"). The New Mortgage Notes will be issued by the Issuers pursuant
to the terms of the Indenture (the "Mortgage Notes Indenture"), dated as of
November 14, 1997, among LVSI and Venetian, as Issuers, the Guarantors, as
Mortgage Note guarantors, and First Trust National Association, as Mortgage Note
trustee (the "Mortgage Note Trustee"), and the New Senior Subordinated Notes
will be issued by the Issuers pursuant to the terms of the Indenture (the
"Senior Subordinated Notes Indenture" and, together with the Mortgage Notes
Indenture, the "Indentures"), dated as of November 14, 1997, among LVSI and
Venetian, as Issuers, the Guarantors, as Senior Subordinated Note Guarantors,
and First Union National Bank, as Senior Subordinated Note trustee (the "Senior
Subordinated Note Trustee" and, together with the Mortgage Note Trustee, the
"Trustees"). Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Registration
Statement.
In connection with this opinion, we have examined originals, conformed
copies or photocopies, certified or otherwise identified to our satisfaction, of
the following documents (collectively, the "Documents"):
(i) the Registration Statement;
(ii) the Mortgage Notes Indenture included as Exhibit 4.1 to the
Registration Statement;
(iii) the Senior Subordinated Notes Indenture included as
Exhibit 4.2 to the Registration Statement;
(iv) the proposed form of the New Mortgage Notes included as
Exhibit A-1 to the Mortgage Notes Indenture (including the Guarantees set forth
therein); and
(v) the proposed form of the New Senior Subordinated Notes
included as Exhibit A-1 to the Senior Subordinated Notes Indenture (including
the Guarantees set forth therein).
In addition, we have examined: (i) such limited liability company and
corporate records of each of the Issuers as we have considered appropriate, and
each certified as in effect on the date hereof; and (ii) such other
certificates, agreements and documents as we deemed relevant and necessary as a
basis for the opinions hereinafter expressed.
<PAGE>
Page 3
In our examination of the aforesaid documents and in rendering the
opinions set forth below, we have assumed, without independent investigation,
(i) the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to the original documents of all
documents submitted to us as certified, photostatic, reproduced or conformed
copies of validly existing agreements or other documents, the authenticity of
all such latter documents and the legal capacity of all individuals who have
executed any of the documents which we examined, (ii) that the New Notes will be
issued as described in the Registration Statement, (iii) that the Mortgage Notes
Indenture represents a valid and binding obligation of the Mortgage Note
Trustee, (iv) that the Senior Subordinated Notes Indenture represents a valid
and binding obligation of the Senior Subordinated Note Trustee, (v) that the New
Notes will be in substantially the forms attached to the Indentures and that any
information omitted from any such forms will be properly added, and (vi) that
the execution, delivery and performance of each of the Mortgage Notes Indenture
and the Senior Subordinated Notes Indenture is within the power of the
Guarantors, such documents have been duly authorized, executed and delivered by
the Guarantors and will not violate or result in a breach of any term or
provision of any agreement, judgment, decree or administrative order to which
the Guarantors are subject. We have relied upon the factual matters contained in
the representations and warranties of the Issuers and the Guarantors made in
such documents and upon certificates of public officials and officers of the
Issuers and the Guarantors.
In addition, we have assumed that (i) the Nevada Gaming Commission will
have, prior to the exchange of the New Notes for the Existing Notes, registered
LVSI as a publicly traded corporation, approved the exchange of the New Notes
for the Existing Notes, and either approved the restrictions on LVSI's stock and
the pledge of assets contemplated by the Indentures or determined that such
approval is not necessary; and (ii) filings complying with any and all state
securities or Blue Sky laws in connection with the exchange of the New Notes for
the Existing Notes will occur concurrently with the exchange of the New Notes
for the Existing Notes contemplated by the Registration Statement and the
Indentures and within the time period prescribed by such regulations and/or
laws.
Based on the foregoing, and subject to the assumptions, exceptions and
qualifications set forth herein, we are of the opinion that:
1. The execution, delivery and performance of each Document entered into
by LVSI, for itself and in its capacity as managing member of Venetian, and
Venetian, for itself and in its capacity as the sole member of each Guarantor,
has been duly authorized by all necessary corporate or limited liability company
action.
2. The execution and delivery by the Issuers of each Document to which
they are a party and the consummation by each Issuer of the transactions
contemplated thereby do not violate or result in a breach of or default under
such party's articles of incorporation, by-laws, or operating agreements, as the
case may be,
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Page 4
or any applicable Nevada state or local law or regulation or any laws relating
to gaming that are applicable to the Issuers.
3. The Indentures have been duly and validly authorized, executed and
delivered by the Issuers.
4. Upon completion of the exchange contemplated by the Registration
Statement and the Indentures, the New Notes will be duly authorized, executed
and delivered by the Issuers.
5. To the extent governed by Nevada law, each of the provisions of the
Mortgage Notes Indenture which is to be governed by the laws of the State of
Nevada represents a legal, valid and binding obligation of each of the Issuers
and each of the Guarantors enforceable against each such Issuer and Guarantor in
accordance with its terms, except that certain provisions of the
above-referenced document may not be enforceable in whole or in part under the
laws of the State of Nevada, but the inclusion of such provisions does not
affect the validity of such document and such document contains adequate
provisions for enforcing payment of the monetary obligations of the Issuers
under the New Mortgage Notes and for the practical realization of the rights and
benefits afforded thereby, provided such enforcement is conducted in accordance
with the procedures established by the laws of the State of Nevada.
6. To the extent governed by Nevada law, each of the provisions of
the Senior Subordinated Notes Indenture which is to be governed by the laws of
the State of Nevada represents a legal, valid and binding obligation of each of
the Issuers and each of the Guarantors enforceable against each such Issuer and
Guarantor in accordance with its terms, except that certain provisions of the
above-referenced document may not be enforceable in whole or in part under the
laws of the State of Nevada, but the inclusion of such provisions does not
affect the validity of such document and such document contains adequate
provisions for enforcing payment of the monetary obligations of the Issuers
under the New Senior Subordinated Notes and for the practical realization of the
rights and benefits afforded thereby, provided such enforcement is conducted in
accordance with the procedures established by the laws of the State of Nevada.
7. Upon completion of the exchange contemplated by the Registration
Statement and the Indentures and to the extent governed by Nevada law, each of
the provisions of the New Mortgage Notes which is to be governed by the laws of
the State of Nevada will represent a legal, valid and binding obligation of each
of the Issuers enforceable against each such Issuer in accordance with its
terms, except that certain provisions of the above-referenced documents may not
be enforceable in whole or in part under the laws of the State of Nevada, but
the inclusion of such provisions does not affect the validity of such documents
and such documents contain adequate provisions for enforcing payment of the
monetary obligations of the Issuers under the
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Page 5
New Mortgage Notes and for the practical realization of the rights and benefits
afforded thereby, provided such enforcement is conducted in accordance with the
procedures established by the laws of the State of Nevada.
8. Upon completion of the exchange contemplated by the Registration
Statement and the Indentures and to the extent governed by Nevada law, each of
the provisions of the New Senior Subordinated Notes which is to be governed by
the laws of the State of Nevada will represent a legal, valid and binding
obligation of each of the Issuers enforceable against each such Issuer in
accordance with its terms, except that certain provisions of the
above-referenced documents may not be enforceable in whole or in part under the
laws of the State of Nevada, but the inclusion of such provisions does not
affect the validity of such documents and such documents contain adequate
provisions for enforcing payment of the monetary obligations of the Issuers
under the New Senior Subordinated Notes and for the practical realization of the
rights and benefits afforded thereby, provided such enforcement is conducted in
accordance with the procedures established by the laws of the State of Nevada.
The foregoing opinions are subject to the following assumptions and
qualifications:
a. The enforceability of the Indentures and the New Notes is subject to
(i) bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization,
moratorium and other similar laws affecting the rights of creditors generally,
(ii) compliance with Nevada gaming laws, and (iii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding at law or
in equity).
b. Nothing herein shall be deemed an opinion as to the reasonableness of
any late charge or liquidated damages.
c. Nothing herein shall be deemed an opinion as to the effectiveness under
all circumstances of broadly stated waivers.
d. Nothing herein shall be deemed an opinion as to the effectiveness of
any provision directly or indirectly requiring that any consent, modification,
amendment or waiver be in writing.
e. Nothing herein shall be deemed an opinion as to the effect of a finding
by the Nevada Gaming Commission or the Nevada Gaming Control Board that any
third party to the Documents is unsuitable.
f. We disclaim liability as an expert under the securities laws of the
United States or any other jurisdiction.
g. Nothing herein shall be deemed an opinion as to the laws of any
jurisdiction other than the State of Nevada.
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Page 6
This Opinion Letter is intended solely for the use of the addressees in
connection with the registration of the New Notes. It may not be relied upon by
any other person or for any other purpose, or reproduced or filed publicly by
any person, without the written consent of the firm; provided, however, we
hereby consent to the filing of this Opinion Letter as an exhibit to the
Registration Statement. In giving this consent, we do not hereby admit that we
are in a category of persons whose consent is required pursuant to Section 7 of
the Act or the rules and regulations of the SEC promulgated thereunder.
Very truly yours,
/s/ Lionel Sawyer & Collins
LIONEL SAWYER & COLLINS
LAS VEGAS SANDS, INC., VENETIAN CASINO RESORT, LLC
and GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of November 14, 1997 and
entered into by and among LAS VEGAS SANDS, INC. ("LVSI"), a Nevada corporation,
VENETIAN CASINO RESORT, LLC ("Venetian"), a Nevada limited liability company,
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC ("Mall Construction Subsidiary"), a
Delaware limited liability company, as joint and several obligors (each of LVSI,
Venetian and Mall Construction Subsidiary, "a Borrower" and, collectively, the
"Borrowers"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
("Lender").
R E C I T A L S
WHEREAS, Borrowers propose to develop and own the Project (such
defined term and other defined terms used in these Recitals shall have the
meanings given in subsection 1.1 of this Agreement), including the Mall;
WHEREAS, Borrowers desire to finance the development and
construction of the Project with (i) equity contributions to Borrowers from
Adelson in an aggregate amount of $320,000,000 consisting of the Real Estate
Contribution (approximately 14 acres of which will be released to the Phase II
Subsidiary upon the completion of a subdivision of such land) and cash, (ii)
proceeds of the issuance of senior secured Mortgage Notes in an aggregate
principal amount of not less than $425,000,000, (iii) proceeds of the issuance
of Senior Subordinated Notes of approximately $90,000,000, (iv) the proceeds of
the Bank Credit Facility in an aggregate principal amount of not less than
$170,000,000, (v) the proceeds of an equipment finance loan from the FF&E
Lenders of not less than approximately $98,000,000 to finance furniture,
fixtures and equipment (including, without limitation, gaming equipment and
power station equipment) a portion of which may be financed on an interim basis
with proceeds of the revolving loan portion of the senior secured credit
facilities contemplated by the Bank Credit Facility, (vi) the proceeds of a
contribution from a joint venture between Atlantic Thermal Systems, Inc., and
Pacific Enterprises Energy Services, in an amount up to approximately
$70,000,000 as necessary to purchase, construct and install (x) certain
equipment that will be located at or used in connection with the heating,
ventilation and air conditioning facility for the Project and (y) certain
equipment that will be part of the Project's mechanical or electrical systems;
and (vii) the senior secured credit facilities contemplated hereby;
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WHEREAS, Borrowers desire that Lender extend the senior secured
credit facilities contemplated hereby to Borrowers to provide a portion of the
financings necessary to develop and construct the Project;
WHEREAS, subject to the terms and conditions hereof Lender is
willing to extend such senior secured credit facilities to Borrowers, the
proceeds of which will be used, together with certain proceeds of the other
financing sources described above, to fund the development and construction of
the Project;
WHEREAS, Borrowers desire to secure all of the Obligations
hereunder and under the other Loan Documents by granting to Lender, a Lien on
the Collateral; and
WHEREAS, Mall Intermediate Holding Company, LLC, a subsidiary of
Venetian, shall guaranty the Obligations pursuant to Mall Intermediate Holding
Guaranty.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Borrowers and Lender
agree as follows:
Section 1. DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the
following meanings:
"Additional Billboard Space" shall have the meaning assigned that
term in the Cooperation Agreement.
"Adelson" means Sheldon G. Adelson, an individual.
"Adelson Completion Guaranty" means that certain Completion
Guaranty executed and delivered by Adelson on the Closing Date.
"Adelson Contributions" means the Real Estate Contribution and
the Adelson Equity Contribution.
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"Adelson Equity Contribution" means the cash equity contribution
received by Venetian from Adelson or his Affiliates in existence on the date
hereof in the aggregate amount of $95,000,000.
"Adelson Guaranty" means that certain Guaranty in favor of Lender
executed and delivered by Adelson on the Closing Date, substantially in the form
of Exhibit A hereto.
"Adelson Intercreditor Agreement" means the Intercreditor
Agreement (Adelson) dated as of November 14, 1997 among Adelson, Venetian, Mall
Construction Subsidiary, Bank Agent, Mortgage Notes Indenture Trustee, the
Subordinated Notes Indenture Trustee and Lender in substantially the form of
Exhibit B hereto.
"Adjustable Rate" means the sum of (i) the Current Index plus
(ii) the Margin.
"Advance Confirmation Notice" shall have the meaning assigned
that term in the Disbursement Agreement.
"Advance Request" shall have the meaning assigned that term in
the Disbursement Agreement.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agreement" means this Credit Agreement dated as of November 14,
1997.
"Applicable Tax Percentage" means the highest aggregate effective
marginal rate of federal, state and local income tax or, when applicable,
alternative minimum tax, to which any direct or indirect member or S corporation
shareholder of Borrowers subject to the highest marginal rate of tax would be
subject in the relevant year of determination (as certified to Lender by a
nationally recognized tax accounting firm), taking into account only that
member's or S corporation shareholder's share of income and deductions
attributable to its interest in Borrowers.
"Approved Equipment Funding Commitment" shall have the meaning
assigned that term in the Disbursement Agreement.
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"Asset Sale" means the sale by a Borrower or any of its
Subsidiaries to any Person of (i) any of the stock of any of such Person's
Subsidiaries, (ii) substantially all of the assets of any division or line of
business of a Borrower or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of a Borrower or any of its Subsidiaries (other
than (a) inventory or goods (other than equipment) sold in the ordinary course
of business, (b) any other assets to the extent that the aggregate fair market
value of such assets sold during any Fiscal Year is less than or equal to
$5,000,000) or (c) any transfers or dispositions permitted by clauses (iv)
through (xvii) inclusive of subsection 6.6.
"Assignment Agreement" means an Assignment Agreement in
substantially the form of Exhibit C hereto.
"Bank Agent" means Scotiabank, as administrative agent under the
Bank Credit Agreement, and any successor thereto.
"Bank Credit Agreement" means the credit agreement dated as of
the Closing Date among LVSI, Venetian, the Bank Agent, Goldman Sachs Credit
Partners L.P. and the Bank Lenders.
"Bank Credit Facility" means the credit facility in an aggregate
amount of $170,000,000 to be made available to Borrowers by the Bank Lenders
under the Bank Credit Agreement.
"Bank Lenders" means the financial institutions from time to time
parties to the Bank Credit Agreement as lenders.
"Bank Notes" means the promissory notes issued by Borrowers
pursuant to the Bank Credit Facility.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"Billboard" means B.L. of Las Vegas, Inc., a Nevada corporation.
"Billboard Master Lease" means that certain Lease Agreement dated
November 14, 1997 between Venetian and Mall Construction Subsidiary pursuant to
which the Mall Construction Subsidiary is leasing from Venetian the Additional
Billboard Space.
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"Billboard Operating Lease" means that certain restaurant lease
dated June 26, 1997 between Venetian and Billboard as assigned by Venetian to
Mall Construction Subsidiary prior to the Closing Date (together with all
assignments, modifications, amendments, rights and addenda thereto).
"Billboard Space" means the space covered by the Billboard
Operating Lease (including the Additional Billboard Space).
"Borrowers" shall have the meaning assigned that term in the
introduction to this Agreement and shall mean, as the context requires, any or
all of Borrowers.
"Borrowers Security Agreement" means the Borrowers Security
Agreement executed and delivered by Borrowers to Lender, Bank Agent,
Disbursement Agent, Intercreditor Agent and the Mortgage Notes Indenture Trustee
on the Closing Date, in substantially the form of Exhibit D hereto.
"Business Day" means any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of Nevada or State of
New York or is a day on which banking institutions located in such state are
authorized or required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means (a) Dollars, (b)(i) direct obligations
of the United States of America (including obligations issued or held in
book-entry form on the books of the Department of the Treasury of the United
States of America) or obligations fully guaranteed by the United States of
America, (ii) obligations, debentures, notes or other evidence of indebtedness
issued or guaranteed by any other agency or instrumentality of the United
States, (iii) interest-bearing demand or time deposits (which may be represented
by certificates of deposit) issued by banks having general obligations rated (on
the date of acquisition thereof) at least "A" or the equivalent by Standard &
Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") (S&P
and Moody's together with any other nationally recognized credit rating agency
if neither of such corporations is then currently rating the pertinent currently
rating the pertinent obligations, a "Rating Agency") or, if not so rated,
secured at all times, in the manner and to the extent provided by law, by
collateral
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security in clause (i) or (ii) of this definition, of a market value of no less
than the amount of monies so invested, (iv) commercial paper rated (on the date
of acquisition thereof) at least "A-1" or "P-1" or the equivalent by any Rating
Agency issued by any Person, (v) repurchase obligations for underlying
securities of the types described in clause (i) or (ii) above, entered into with
any commercial bank or any other financial institution having long-term
unsecured debt securities rated (on the date of acquisition thereof) at least
"A" or "A2" or the equivalent by any Rating Agency in connection with which such
underlying securities are held in trust or by a third-party custodian, (vi)
guaranteed investment contracts of any financial institution which has a
long-term debt rated (on the date of acquisition thereof) at least "A" or "A2"
or the equivalent by any Rating Agency, (vii) obligations (including both
taxable and non-taxable municipal securities) issued or guaranteed by, and any
other obligations the interest on which is excluded from income for Federal
income tax purposes issued by, and any state of the United States of America or
District of Columbia or the Commonwealth or Puerto Rico or any political
subdivision, agency, authority or instrumentality thereof, which issuer or
guarantor has (A) a short-term debt rated (on the date of acquisition thereof)
at least "A-1" or "P-1" or the equivalent by any Rating Agency and (B) a
long-term debt rated (on the date of acquisition thereof) at least "A" or "A2"
or the equivalent by any Rating Agency, (viii) investment contracts of any
financial institution either (A) fully secured by (1) direct obligations of the
United States, (2) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States or (3) securities or
receipts evidencing ownership interest in obligations or special portions
thereof described in clause (1) or (2), in each case guaranteed as full faith
and credit obligations of the United States of America, having a market value at
least equal to 102% of the amount deposited thereunder, or (B) with long-term
debt rated (on the date of acquisition thereof) at least "A" or "A2" or the
equivalent by any Rating Agency and short-term debt rated (on the date of
acquisition thereof) at least "A-1" or "P-1" or the equivalent by any Rating
Agency, (ix) a contract or investment agreement with a provider or guarantor (A)
which provider or guarantor is rated (on the date of the acquisition) at least
"A" or "A2" or the equivalent by any Rating Agency (provided that if a guarantor
is a party to the rating, the guaranty must be unconditional and must be
confirmed in writing prior to any assignment by the provider to any subsidiary
of such guarantor), (B) providing that monies invested shall be payable to the
Disbursement Agent while the Disbursement Agreement is in effect and thereafter
to Lender without condition (other than notice) and without brokerage fee or
other penalty, upon not more than two Business Days' notice for application when
and as required or permitted under the Collateral Documents, and (C) stating
that such contract or agreement is unconditional, expressly disclaiming any
right of setoff and providing for immediate termination in the event of
insolvency of the provider and termination upon demand of the Disbursement Agent
while the Disbursement Agreement is in effect and thereafter of Lender (which
demand shall only be made at the direction of Borrowers) after any payment or
other covenant default by the provider, or (x) any debt instruments of any
Person which instruments are rated (on the date of acquisition thereof) at least
"A," "A2", "A-1" or "P-1" or the equivalent by any Rating Agency, provided that
in each case of clauses (i) through (x), such
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investments are denominated in Dollars and maturing not more than 13 months
after the date of acquisition thereof; (c) investments in any money market fund
which is rated (on the date of acquisition thereof) at least "A" or "A2" or the
equivalent by any Rating Agency; or (d) investments in mutual funds sponsored by
any securities broker-dealer of recognized national standing having an
investment policy that requires substantially all the invested assets of such
fund to be invested in investments described in any one or more of the foregoing
clauses and having a rating of at least "A" or "A2" or the equivalent by any
Rating Agency or (e) investments in both taxable and nontaxable (i) periodic
auction reset securities which have final maturities between one and 30 years
from the date of issuance and are repriced through a dutch auction or other
similar method every 35 days or (ii) auction preferred shares ("APS") which are
senior securities of leveraged closed and municipal bond funds and are repriced
pursuant to a variety of rate reset periods, in each case having a rating (on
the date of acquisition thereof) of at least "A" or "A2" or the equivalent of
any Rating Agency.
"Casino Lease" means that certain Casino Lease between LVSI, as
lessee and Venetian, as lessor dated as of the Closing Date with respect to the
operation of the casino for the Project.
"Change of Control" shall have the meaning assigned that term in
the Indentures.
"Closing Date" means November 14, 1997.
"Collateral" means, collectively, all of the real, personal and
mixed property in which Liens are purported to be granted pursuant to the
Collateral Documents as security for the Obligations.
"Collateral Account Agreement" means that certain Collateral
Account Agreement dated as of the date hereof entered into between Adelson and
Lender, in substantially the form of Exhibit E hereto.
"Collateral Documents" means the Mall Construction Subsidiary
Security Agreement, the Deed of Trust, the Leasehold Deed of Trust, Adelson
Guaranty, Borrowers Security Agreement, Collateral Account Agreement,
Third-Party Account Agreement, and all other instruments or documents delivered
by a Loan Party pursuant to this Agreement or any of the other Loan Documents in
order to grant to Lender a Lien on any real, personal or mixed property of that
Loan Party as security for the Obligations.
"Collection Account" shall have the meaning assigned that term in
the Disbursement Agreement.
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"Commitment" means the commitment of Lender to make Loans as set
forth in subsection 2.1A.
"Commitment Termination Date" means the earlier of (i) Mall
Release Date and (ii) the Outside Completion Deadline.
"Completion Date" shall have the meaning assigned that term in
the Disbursement Agreement.
"Completion Guaranty" means each of the Direct Construction
Guaranty, the Indirect Construction Guaranty and the Adelson Completion Guaranty
or any one of them and "Completion Guaranties" means the Direct Construction
Guaranty, the Indirect Construction Guaranty and the Adelson Completion Guaranty
collectively.
"Completion Guaranty Loan" means any amounts advanced by Adelson
under the Adelson Completion Guaranty, which is treated as a loan to Borrowers
in an aggregate principal amount not to exceed $25,000,000 at any time plus
accrued and unpaid interest thereon, evidenced by a Completion Guaranty Note and
subject to the terms of the Adelson Intercreditor Agreement.
"Completion Guaranty Note" means a note in the form of Exhibit F
to the Adelson Completion Guaranty (as in effect on the Closing Date).
"Consents" means consents to the collateral assignment by
Borrowers of Project Documents in substantially the form of Exhibit S to the
Disbursement Agreement.
"Construction Agency Agreement" means that certain Construction
Agency Agreement dated as of the date hereof by and between HVAC Provider and
Venetian.
"Construction Consultant" means Tishman Construction Corporation
of Nevada, or any other person designated from time to time by the Bank Agent,
Lender and the Mortgage Notes Indenture Trustee, in their sole discretion,
acting pursuant to the Disbursement Agreement, to serve as the Construction
Consultant under the Disbursement Agreement.
"Construction Consultant Engagement Agreement" means that certain
engagement letter dated as of November 14, 1997 by and among the Construction
Consultant, Borrowers, Bank Agent, Lender, the Mortgage Notes Indenture Trustee,
the Permanent Mall Lender and Goldman Sachs & Co.
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"Construction Management Agreement" means that certain
Construction Management Agreement dated as of February 15, 1997 between
Borrowers and Construction Manager for the construction of the Project, as
amended and assigned to Venetian pursuant to a certain Assignment, Assumption
and Amendment of Construction Management Agreement dated as of the date hereof.
"Construction Manager" means Lehrer McGovern Bovis Inc., a New
York corporation and wholly owned subsidiary of Direct Construction Guarantor.
"Contingent Obligation", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, or (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings. Contingent Obligations shall include (a) the direct or indirect
guaranty, endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"Contractor" means any architects, consultants, designers,
contractors, subcontractors, suppliers, laborers or any other Person engaged by
any Borrower(s) in connection with the design, engineering, installation and
construction of the Project (other than Construction Manager).
"Contracts" means, collectively, the contracts entered into, from
time to time, between any Borrower(s) and any Contractor for performance of
services or sale of goods in connection with the design, engineering,
installation or construction of the Project.
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"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Cooperation Agreement" means that certain Amended and Restated
Reciprocal Easement, Use and Operating Agreement dated on or about the date
hereof by and among LVSI, Venetian, Mall Construction Subsidiary and Interface,
as the same may from time to time be supplemented, amended, modified or extended
in accordance with the provisions of this Agreement.
"Current Index" means the Index determined as of the immediately
preceding Rate Adjustment Date.
"Deed of Trust" means that certain First Deed of Trust,
Assignment of Leases and Rents and Security Agreement in the form of Exhibit G
hereto, dated as of the Closing Date granted by Venetian to Title Company for
the benefit of Lender.
"Deemed Debt Service Coverage Ratio" shall mean the ratio of (a)
the Deemed NOI during the one year period following the Primary Maturity Date to
(b) an amount equal to the projected debt service on outstanding and projected
Indebtedness attributable to the Mall during such period, including without
limitation, the Loans, with such debt service calculated based on an interest
rate equal to the Current Index in effect on the date of determination plus
three hundred and fifty (350) basis points, and with principal amortization
based on a 25 year schedule.
"Deemed NOI" shall mean annual net operating income projected for
the applicable period as a result of the operation of the Mall, which shall
equal Total Gross Revenue from the Mall less Expenses attributable to the Mall,
with all of such amounts being projected on a basis reasonably acceptable to
Lender consistent with the budgets provided by Borrowers to Lender.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Development Agreements" means, collectively, (i) that certain
Sands Resort Hotel Casino Agreement dated as of February 18, 1997 between the
County of Clark and LVSI which agreement is commonly referred to as the
"Predevelopment Agreement" and other development agreements to be enumerated by
Nevada counsel.
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"Direct Construction Guarantor" means Bovis, Inc., a New York
corporation and an indirect wholly-owned Subsidiary of Indirect Construction
Guarantor.
"Direct Construction Guaranty" means that certain Guaranty of
Performance dated as of August 19, 1997 executed by the Direct Construction
Guarantor in favor of LVSI.
"Disbursement Account" shall have the meaning assigned that term
in the Disbursement Agreement.
"Disbursement Agent" means Scotiabank, in its capacity as
Disbursement Agent under the Disbursement Agreement, and any successor
Disbursement Agent appointed pursuant to the terms of the Disbursement
Agreement.
"Disbursement Agreement" means that certain Funding Agents'
Disbursement and Administration Agreement in the form of Exhibit H hereto and
dated as of the date hereof among Borrowers, the Bank Agent, the Mortgage Notes
Indenture Trustee, the Subordinated Notes Indenture Trustee, Lender, the HVAC
Provider and the Disbursement Agent.
"Disbursement Agreement Event of Default" means any Event of
Default under and as defined in the Disbursement Agreement.
"Dollars" and the sign "$" mean the lawful money of the United
States of America.
"Eligible Assignee" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including insurance companies, mutual funds and lease
financing companies; and (B) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Borrowers shall be an Eligible Assignee; and
provided further that so long as no Event of Default shall have occurred and be
continuing, no (i) Person that owns or operates a casino located in the State of
Nevada or the State of New Jersey (or is an Affiliate of such a Person)
(provided that a passive investment constituting less than 20% of the common
stock of any such casino shall not constitute ownership thereof for the purposes
of this definition), (ii) Person that owns or operates a convention, trade show
or exhibition
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facility in Las Vegas, Nevada or Clark County, Nevada (or an Affiliate of such a
Person) (provided that a passive investment constituting less than 20% of the
common stock of any such convention or trade show facility shall not constitute
ownership for the purpose of this definition), or (iii) union pension fund
(provided that any intermingled fund or managed account which has as part of its
assets under management the assets of a union pension fund shall not be
disqualified from being an Eligible Assignee hereunder so long as the manager of
such fund is not controlled by a union), shall be an Eligible Assignee, in each
case which Person shall not have been denied an approval or a license, or found
unsuitable under the Nevada Gaming Laws applicable to Lender.
"Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is or was maintained or contributed to by
Borrowers, any of its Subsidiaries or any of their respective ERISA Affiliates.
"Employee Repurchase Notes" has the meaning set forth in
subsection 6.1.
"Environmental Claim" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any governmental authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Hazardous Materials or any actual or alleged Hazardous Materials Activity, or
(iii) in connection with any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"Environmental Laws" means any and all current or future
statutes, ordinances, orders, rules, regulations, guidance documents, judgments,
Permits, or any other requirements of governmental authorities relating to (i)
environmental matters, including those relating to any Hazardous Materials
Activity, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials, or (iii) occupational safety and health, industrial
hygiene, land use or the protection of human, plant or animal health or welfare,
in any manner applicable to Borrowers or any of its Subsidiaries or any
Facility, including the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss.136 et seq.),
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), the Oil
Pollution Act (33 U.S.C. ss. 2701 et seq) and the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. ss. 11001 et seq.), each as amended or
supplemented, any analogous present or future state or local statutes or laws,
and any regulations promulgated pursuant to any of the foregoing.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member. Any former ERISA Affiliate of Borrowers or any of
their Subsidiaries shall continue to be considered an ERISA Affiliate of
Borrowers or such Subsidiary within the meaning of this definition with respect
to the period such entity was an ERISA Affiliate of Borrowers or such Subsidiary
and with respect to liabilities arising after such period for which Borrowers or
such Subsidiary could be liable under the Internal Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning
of Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice to
the PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Borrowers, any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan with two or more contributing sponsors or
the termination of any such Pension Plan resulting in liability pursuant to
Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on Borrowers, any of its Subsidiaries or any of their respective ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal of Borrowers, any
of its Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by Borrowers, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section
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4241 or 4245 of ERISA, or that it intends to terminate or has terminated under
Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission
which could give rise to the imposition on Borrowers, any of its Subsidiaries or
any of their respective ERISA Affiliates of fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section 409,
Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee
Benefit Plan; (ix) the assertion of a material claim (other than routine claims
for benefits) against any Employee Benefit Plan other than a Multiemployer Plan
or the assets thereof, or against Borrowers, any of its Subsidiaries or any of
their respective ERISA Affiliates in connection with any Employee Benefit Plan;
(x) receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"Estimation Period" means the period for which a shareholder,
partner or member, who is an individual is required to estimate for federal
income tax purposes his allocation of taxable income from a Subchapter S
corporation or a partnership for federal income tax purposes in connection with
determining his estimated federal income tax liability for such period.
"Event of Default" means each of the events set forth in Section
7.
"Event of Loss" means, with respect to any property or asset
(tangible or intangible, real or personal), any of the following: (A) any loss,
destruction or damage of such property or asset; (B) any actual condemnation,
seizure or taking by exercise of the power of eminent domain or otherwise of
such property or asset, or confiscation of such property or asset or the
requisition of the use of such property or asset; or (C) any settlement in lieu
of clause (B) above.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Expenses" shall mean, for any specified projected period, all
ordinary, necessary and reasonable operating and capital expenses projected to
be paid on a cash basis during such period and which are related to the
ownership and operation of the Mall during such period. Such projected Expenses
shall include, by way of example rather than of limitation, projected expenses
resulting from: (1) property taxes and assessments; (2) utility charges; (3)
costs of providing elevator, janitorial, trash removal and maintenance service;
(4) costs of maintaining and repairing the Mall; (5) management fees (of no less
than 2% of gross annual revenues); (6) an equipment and property reserve of no
less than 1% of gross annual revenues; and (7) tenant improvements provided by
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Borrower and lease commission expenses, in each case amortized over the term of
the applicable lease. Expenses shall not include the following projected
expenses for: (a) any overhead incurred in connection with the management of the
Mall; (b) all amounts paid to Borrowers or an affiliate of Borrowers in excess
of amounts that would reasonably be paid in an arms-length transaction to a
person or entity that is not an affiliate of Borrowers; (c) non-cash deductions
of Borrowers and their affiliates; (d) distributions paid or made to any
partner, officer, director or shareholder of Borrowers or an affiliate of
Borrower; or (e) the cost of federal, state or local income taxes, franchise
taxes or other taxes of Borrowers and their affiliates (other than real property
taxes for the Mall).
"Extended Maturity Date" means November 14, 2000.
"Extension Election Notice" shall have the meaning assigned that
term in subsection 2.1A(i).
"Extension Fee" shall have the meaning assigned that term in
subsection 2.3A.
"Facilities" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Borrowers or any of their
Subsidiaries or any of their respective predecessors or Affiliates including,
without limitation, the Site.
"Facility Agreements" shall have the meaning assigned that term
in the Disbursement Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"FF&E Facility" means the credit facilities, equipment leases or
similar agreements with the FF&E Lenders in an aggregate principal amount of
approximately $98,000,000 (plus accrued and unpaid interest thereon) to finance
the purchase and installment of the Specified FF&E.
"FF&E Facility Agreement" means (i) the credit agreement among
Borrowers, General Electric Capital Corporation and the other FF&E Lenders party
thereto evidencing the debt facility on the terms described in the Approved
Equipment Funding Commitment or otherwise on terms reasonably acceptable to
Lender, (ii) such other agreements among FF&E Lender(s) and Borrowers providing
for all or a portion of the FF&E Facility (not covered under clause (i)) on
substantially the same terms as described in the Approved Equipment Funding
Commitment or otherwise reasonably satisfactory to Lender, provided in each case
that the applicable FF&E Lender(s) have entered into an intercreditor agreement
in form and substance satisfactory to Lender.
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"FF&E Intercreditor Agreement" means the Intercreditor Agreements
entered into between Lender, FF&E Lenders and such other Persons as may be
necessary parties thereunder in each case in form and substance satisfactory to
Lender.
"FF&E Lenders" means (i) General Electric Capital Corporation and
the other lenders that are parties to the FF&E Facility Agreement described in
clause (i) of the definition of such term and (ii) any other lenders under any
other FF&E Facility Agreement, provided that each such other lender described in
clause (ii) would be an Eligible Assignee hereunder.
"Final Completion Date" shall have the meaning assigned that term
in the Disbursement Agreement.
"Financial Plan" shall have the meaning assigned that term in
subsection 5.1(xiii).
"Financing Agreements" means, collectively, this Agreement, the
Bank Credit Agreement, the Disbursement Agreement, the Mortgage Notes Indenture,
the Collateral Documents, the Other Security Documents, the Completion
Guaranties, the Mortgage Notes, the Tranche A Take Out Commitment, the Tranche B
Take Out Commitment, the Tranche B Guaranty and Security Documents, the
Tri-Party Agreement, the Approved Equipment Funding Commitment, the FF&E
Facility Agreements, any Completion Guaranty Note, any Substitute Tranche B
Note, and any other loan or security agreements entered into on, prior to or
after the Closing Date to finance the Project in accordance with subsection 6.12
and, while applicable, the Disbursement Agreement.
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that such Lien is
the only Lien (other than Permitted Liens permitted pursuant to subsection 6.2)
to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Borrowers ending on
December 31 of each calendar year.
"Funding and Payment Office" means (i) the office of Lender
located at 100 South Wacker Drive, Suite 400, Chicago, Illinois 60606 or (ii)
such other office of Lender as may from time to time hereafter be designated as
such in a written notice delivered by Lender to Borrowers and each Lender.
"Funding Date" means the date of the funding of a Loan.
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"Future Financing" shall have the meaning set forth in Section
5.11.
"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting principles
set forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of deter mination.
"Gaming License" means every license, franchise or other
authorization to run, lease, operate or otherwise conduct gaming activities of
Borrowers or any of their Subsidiaries, including without limitation, all such
licenses granted under the Nevada Gaming Control Act, and the regulations
promulgated pursuant thereto, and other applicable federal, state, foreign or
local laws.
"GECC Commitment" means the commitment of General Electric
Capital Corporation to advance the loans to Venetian pursuant to that certain
Agreement dated as of October 20, 1997 between Venetian and General Electric
Capital Corporation.
"GECC Intercreditor Agreement" means that certain Intercreditor
Agreement to be entered between General Electric Capital Corporation in favor of
Lender, the Bank Agent and the Mortgage Notes Indenture Trustee within a period
reasonably acceptable to Lender.
"Governmental Instrumentality" means any national, state or local
government (whether domestic or foreign), any political subdivision thereof or
any other governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity, (including the
Nevada Gaming Authorities, any zoning authority, the FDIC, the Comptroller of
the Currency or the Federal Reserve Board, any central bank or any comparable
authority) or any arbitrator with authority to bind a party at law.
"Guaranty Deposit Account" shall have the meaning assigned that
term in the Adelson Completion Guaranty.
"Harrah's Shared Roadway Agreement" shall have the meaning
assigned that term in the Disbursement Agreement.
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"Hazardous Materials" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", acutely hazardous waste", "radioactive waste", "biohazardous waste",
"pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste",
"infectious waste", "toxic substances", or any other term or expression intended
to define, list or classify substances by reason of properties harmful to
health, safety or the indoor or outdoor environment (including harmful
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar import under any applicable Environmental Laws); (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(iv) any flammable substances or explosives; (v) any radioactive materials; (vi)
any asbestos-containing materials; (vii) urea formaldehyde foam insulation;
(viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or which may or could pose a hazard to
the health and safety of the owners, occupants or any Persons in the vicinity of
any Facility or to the indoor or outdoor environment.
"Hazardous Materials Activity" means any past, current, proposed
or threatened activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response action with respect to any of
the foregoing.
"HC/Mall Component" shall have the meaning assigned that term in
Exhibit A to the Disbursement Agreement.
"HVAC Ground Lease" means that certain Ground Lease made
effective as of the date hereof between Venetian and the HVAC Provider.
"HVAC Component" shall have the meaning assigned that term in
Exhibit A to the Disbursement Agreement.
"HVAC Letters of Credit" has the meaning given to that term in
Section 2.4 of the Disbursement Agreement.
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"HVAC Provider" means Atlantic-Pacific, Las Vegas LLC, a Delaware
limited liability company or its permitted successors under the HVAC Services
Agreement.
"HVAC Services Agreement" means collectively (i) that certain
Energy Services Agreement of even date herewith between Venetian and the HVAC
Provider, (ii) the HVAC Ground Lease, (iii) the Construction Agency Agreement
and (iv) that certain Energy Services Agreement of even date herewith between
Mall Construction Subsidiary and the HVAC Provider.
"Improvements" means the buildings, fixtures and other
improvements to be situated on the Mall.
"Indebtedness", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as
a liability on a balance sheet in conformity with GAAP, (iii) notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money, (iv) any obligation owed for all or any part of
the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA and trade payables and accruals incurred in the
ordinary course of business), and (v) all indebtedness secured by any Lien on
any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person. All obligations under the Financing
Agreements shall constitute Indebtedness. Obligations under the HVAC Services
Agreement (as in effect on the date hereof) shall be treated as a service
contract and not Indebtedness.
"Indemnitee" shall have the meaning assigned that term in
subsection 8.4.
"Indentures" means the Mortgage Notes Indenture and the
Subordinated Notes Indenture or either one of them.
"Independent Consultants" means collectively the Construction
Consultant, the Insurance Advisor or in either case their successors appointed
pursuant to the Disbursement Agreement.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of LVSI's Board of Directors, (i) qualified to perform the task for
which it has been engaged and (ii) disinterested and independent with respect to
LVSI and its Subsidiaries and each Affiliate of LVSI and Adelson.
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"Index" means the London interbank offered rates ("LIBOR") for a
term of thirty (30) days published in the Wall Street Journal on the second
(2nd) Business Day immediately preceding the Rate Adjustment Date; provided that
in the event the 30-day LIBOR rate is not published in the Wall Street Journal,
Index means the 30-day LIBOR rate provided on Telerate page 3750 on such date.
"Indirect Construction Guarantor" means The Peninsular and
Oriental Steam Navigation Company, a corporation organized under the laws of
England and Wales.
"Indirect Construction Guaranty" means that certain Guaranty
dated as of August 19, 1997 executed by Indirect Construction Guarantor in favor
of LVSI.
"Insurance Advisor" means Sedgwick James of Tennessee, Inc., or
its successor, appointed pursuant to the Disbursement Agreement.
"Intellectual Property" means all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in or necessary
for the conduct of the business of Borrowers and Mall Construction Subsidiary as
proposed to be conducted pursuant to the Operative Documents that are material
to the condition (financial or otherwise), business or operations of Borrowers
and Mall Construction Subsidiary.
"Intercreditor Agent" means Scotiabank, in its capacity as
Intercreditor Agent under the Intercreditor Agreement, and any successor
Intercreditor Agent appointed pursuant to the terms of the Intercreditor
Agreement.
"Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of the Closing Date among Lender, the Intercreditor Agent,
the Mortgage Notes Indenture Trustee, the Bank Lenders and the Subordinated
Notes Indenture Trustee, in substantially the form of Exhibit I hereto.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement.
"Interface" means Interface Group-Nevada, Inc., a Nevada
corporation.
"Interface Holding" means Interface Group Holding Company, Inc.,
a Nevada corporation.
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"Interface Lease" means the lease agreement dated November 1,
1996 between Interface and LVSI.
"Interim Construction Loan" means the loan from Goldman Sachs
Credit Partners L.P. to Borrowers in a maximum principal amount of $45,000,000,
to be repaid in full on the
Closing Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended to the date hereof and from time to time hereafter, and any successor
statute.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Borrowers or any of their Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary), (ii)
any direct or indirect redemption, retirement, purchase or other acquisition for
value, by Borrowers or any of their Subsidiaries from any Person, of any equity
Securities of any Subsidiary of Borrowers, or (iii) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Borrowers or any of their Subsidiaries to
any other Person, including all indebtedness and accounts receivable from that
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business. The amount of any Investment
shall be the original cost of such Investment plus the cost of all additions
thereto, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership, limited liability
company or other legal form; provided that in no event shall any corporate
Subsidiary of any Person be considered to be a Joint Venture to which such
Person is a party.
"Leasehold Deed of Trust" means that certain First Leasehold Deed
of Trust, Assignment of Leases and Rents and Security Agreement in the form of
Exhibit J hereto, dated as of the Closing Date granted by Mall Construction
Subsidiary to Title Company for the benefit of Lender.
"Lender" means GMAC Commercial Mortgage Corporation together with
its successors and permitted assigns pursuant to subsection 8.1.
"Lien" means with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or
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otherwise perfected under applicable law (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing of or
agreement to give any financing statements under the UCC.
"Liquidated Damages" means any proceeds or liquidated damages
paid pursuant to any obligation, default or breach under the Contracts and
Indirect Construction Guaranty and Direct Construction Guaranty (net of actual
and documented reasonable costs incurred by Borrowers in connection with
adjustment or settlement thereof, including taxes and any reasonable provisions
made in respect of such costs and expenses including any such taxes paid or
payable by an owner of any of Borrowers or any of their Subsidiaries). For
purposes of this definition, so-called "liquidated damages" insurance policies
shall be deemed to be Contracts.
"Loan" or "Loans" means one or more of the Tranche A Loans or the
Tranche B Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, Disbursement
Agreement and the Collateral Documents.
"Loan Party" means each Borrower and each Subsidiary and
Affiliate of a Borrower which is a party to or may hereafter become a party to
any Loan Document and "Loan Parties" means all such Persons, collectively.
"Loss Proceeds" shall have the meaning assigned that term in the
Disbursement Agreement.
"LVSI" means Las Vegas Sands, Inc., a Nevada corporation.
"Mall" means the mall space together with all Improvements and
equipment that are part of or attached or affixed thereto or located therein
described in more detail on Exhibit T-7 to the Disbursement Agreement.
"Mall Assets" means the assets described in subsection 5.9(A).
"Mall Collateral" means all of Borrowers' and their Subsidiaries'
right, title and interest in (i) prior to the Mall Parcel Creation Date, the
leasehold estate created by the Mall Lease and, thereafter, the Mall Parcel;
(ii) the leasehold estate created by the Billboard Master Lease; (iii) all
Improvements and equipment that are a part of or attached or affixed to the Mall
or located therein; (iv) any reserves established by Borrowers or any of their
Subsidiaries relating to the Mall;
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(v) all easements and other rights and interests granted to the owner of the
Mall in the Cooperation Agreement; (vi) all warranties relating to the Mall and
the above-described Improvements and equipment that are given pursuant to or in
connection with, the Contracts; and (vii) all contracts (including space leases)
entered into by, or assigned to, Mall Construction Subsidiary, relating to the
foregoing Mall Collateral or any portion thereof, and all rights under such
contracts.
"Mall Construction Subsidiary" means Grand Canal Shops Mall
Construction, LLC, a Delaware limited liability company and a wholly owned
subsidiary of Venetian.
"Mall Construction Subsidiary Security Agreement" means the
Security Agreement dated as of the date hereof entered into between Lender and
Mall Construction Subsidiary in substantially the form of Exhibit K hereto.
"Mall Direct Holdings" means Grand Canal Shops Mall Holding
Company, LLC, a Delaware limited liability company initially owned 99% by Mall
Intermediate Holdings and 1% by Mall Manager.
"Mall Escrow Agreement" shall have the meaning assigned to that
term in the Disbursement Agreement.
"Mall Intermediate Holdings" means Mall Intermediate Holdings
Company, LLC, a Delaware limited liability company and a wholly owned Subsidiary
of Venetian.
"Mall Intermediate Holding Guaranty" means that certain guaranty
of even date herewith executed by Mall Intermediate Holding in favor of Lender
in substantially the form of Exhibit L hereto.
"Mall Lease" means that certain Indenture of Lease dated as of
the date hereof between Venetian and Mall Construction Subsidiary pursuant to
which Mall Construction Subsidiary will lease the Mall from Venetian.
"Mall Management Agreement" means that certain Management
Agreement between LVSI and Mall Operator pursuant to which Mall Operator has
agreed to perform certain management services related to the Mall as assigned by
LVSI to Mall Construction Subsidiary as of the Closing Date.
"Mall Manager" means Grand Canal Shops Mall MM, Inc., a Nevada
corporation and a wholly owned Subsidiary of LVSI.
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"Mall Operator" means Forest City Commercial Management, Inc., an
Ohio corporation.
"Mall Parcel" means the mall space subdivided from the Site as
one or more legally separate parcels and recorded with the applicable
Governmental Authorities and recorded with the applicable Governmental
Authorities as described in more detail in Exhibit T-7 to the Disbursement
Agreement.
"Mall Parcel Creation Date" shall have the meaning assigned that
term in the Disbursement Agreement.
"Mall Release Conditions" shall have the meaning assigned that
term in the Disbursement Agreement.
"Mall Release Date" shall have the meaning assigned that term in
the Disbursement Agreement.
"Mall Retainage/Punchlist Account" shall have the meaning
assigned that term in the Mall Escrow Agreement.
"Mall Subsidiary" means Grand Canal Shops Mall LLC, a Delaware
limited liability company.
"Mall TESA" means that certain Energy Services Agreement dated as
of November 14, 1997 between Mall Construction Subsidiary and the HVAC Provider.
"Margin" shall mean two hundred seventy-five (275) basis points,
which is equivalent to 2.75% per annum; provided that in the event that the Mall
Parcel Creation Date does not occur on or before July 10, 1998, the Margin shall
be increased to be three hundred seventy-five (375) basis points, effective as
of April 10, 1998, with interest based on such retroactive increase in the
Margin; provided the Margin shall be two hundred seventy-five (275) basis points
after the Mall Parcel Creation Date.
"Margin Stock" shall have the meaning assigned that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Borrowers and any
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of their Subsidiaries, taken as a whole or Mall Subsidiary or (ii) the material
impairment of the ability of any Loan Party to observe or perform, or of Lender
to enforce, the Obligations.
"Maturity Date" means the Primary Maturity Date, unless the
Maturity Date is extended pursuant to Section 2.1(A) hereof, in which event the
Maturity Date shall be the Extended Maturity Date.
"Material Contract" means any contract or other arrangement to
which any Borrower(s), or any of their Subsidiaries are a party (other than the
Loan Documents) for which breach, nonperformance, cancellation or failure to
renew could reasonably be expected to have a Material Adverse Effect.
"Mortgage Note(s)" means the 12.25% Mortgage Note(s) Due 2004
issued by Borrowers pursuant to the Mortgage Notes Indenture.
"Mortgage Note Holder(s)" means the holder(s) of the Mortgage
Note(s).
"Mortgage Notes Indenture" means that certain Indenture dated as
of November 14, 1997 between Borrowers, certain guarantors named therein and the
Mortgage Notes Indenture Trustee.
"Mortgage Notes Indenture Trustee" means First Trust National
Association in its capacity as the trustee under the Mortgage Notes Indenture
and its successors in such capacity.
"Mortgage Notes Proceeds" means the gross proceeds from the
issuance of the Mortgage Notes in the amount of at least $425,000,000 (before
deduction for underwriter's discounts, fees and expenses).
"Mortgages Note Proceeds Account" shall have the meaning assigned
that term in Section 2.3.2. of the Disbursement Agreement.
"Mortgage Policy" shall have the meaning assigned that term in
subsection 3.1 of this Agreement.
"Mortgaged Property" means the property described in Schedule
4.5.
"Multiemployer Plan" means any Employee Benefit Plan which is a
"Multiemployer plan" as defined in Section 3(37) of ERISA.
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"Net Asset Sale Proceeds" means the aggregate cash proceeds
received by any Borrower or any of its Subsidiaries in respect of any Asset
Sale, net of the direct costs relating to such Asset Sale (including, without
limitation legal, accounting and investment banking fees and expenses, employee
severance and termination costs, any trade payables or similar liabilities
related to the assets sold and required to be paid by the seller as a result
thereof and sales, finders' or broker's commission), and any relocation expenses
incurred as a result thereof and taxes paid or payable as result thereof
(including, without limitation, any such taxes paid or payable by an owner of
Borrower or any of its Subsidiaries) (after taking into account any available
tax credits or deductions and any tax sharing arrangements), amounts required to
be applied to the repayment of Indebtedness secured by a Lien (or amounts
permitted by the terms of such Indebtedness to be otherwise reinvested in the
Project to the extent so reinvested) which is prior to the Lien under the
Collateral Documents on the asset or assets that are the subject of such Asset
Sale, all distributions and other payments required to be made to minority
interest holders in a Subsidiary or joint venture as a result of the Asset Sale
and any reserve for adjustment in respect of the sale price of such asset or
assets or any liabilities associated with the asset disposed of in such Asset
Sale.
"Net Loss Proceeds" means the aggregate cash proceeds received by
any Borrower or any of its Subsidiaries in respect of any Event of Loss,
including, without limitation, insurance proceeds, condemnation awards or
damages awarded by any judgment, net of the direct costs in recovery of such Net
Loss Proceeds (including, without limitation, legal, accounting, appraisal and
insurance adjuster fees and expenses), any taxes paid or payable as a result
thereof (including, without limitation, any such taxes paid or payable by an
owner of Borrower or any of its Subsidiaries after taking into account any
available tax credits or deductions and any tax sharing arrangements), and
amounts required to be applied to the repayment of Indebtedness required by a
Lien (or amounts permitted by the terms of such Indebtedness to be otherwise
reinvested in the Project to the extent so reinvested) which is prior to the
Liens of Lender under the Collateral Documents on the asset or assets that are
subject of the Event of Loss. Notwithstanding the foregoing all proceeds of
so-called "liquidated damages" insurance policies shall not be Net Loss Proceeds
but shall be Liquidated Damages.
"Nevada Gaming Authorities" shall mean, collectively, the Nevada
1Gaming Commission, the Nevada State Gaming Control Board, and the Clark County
Liquor and Gaming Licensing Board.
"Nevada Gaming Laws" shall mean the Nevada Gaming Control Act, as
modified in Chapter 463 of the Nevada Revised Statutes, as amended from time to
time, and the regulations of the Nevada Gaming Commission promulgated
thereunder, as amended from time to time.
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"Notes" means (i) the promissory notes of Borrowers issued
pursuant to subsection 2.1 on the Closing Date and (ii) any promissory notes
issued by Borrowers pursuant to the last sentence of subsection 8.1 in
connection with assignments of the Loan Commitments or Loans, in each case
substantially in the form of Exhibit M-1 and M-2 hereto.
"Notice of Funding Request" shall have the meaning assigned that
term in the Disbursement Agreement.
"Obligations" means all obligations of every nature of each Loan
Party from time to time owed to Lender under the Loan Documents, whether for
principal, interest, fees, expenses, indemnification or otherwise.
"Offer Notice" shall have the meaning set forth in Section 5.11.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer (in their capacity as such officer); provided
that every Officers' Certificate with respect to the compliance with a condition
precedent to the making of any Loans hereunder shall include (i) a statement
that the officer or officers making or giving such Officers' Certificate have
read such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is reasonably necessary to enable them to express an informed
opinion as to whether or not such condition has been complied with, and (iii) a
statement as to whether, in the opinion of the signers, such condition has been
complied with in all material respects.
"Operating Lease" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Operative Documents" means the Financing Agreements and the
Project Documents.
"Option Period" shall have the meaning set forth in Section 5.11.
"Other Indebtedness" means (i) the Indebtedness of any Borrower
or any of its Subsidiaries evidenced by the Mortgage Notes, (ii) the
Indebtedness of any Borrower or any of its Subsidiaries evidenced by the
Subordinated Notes, (iii) the Indebtedness of any Borrower or any of
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its Subsidiaries evidenced by the Bank Credit Facility, (iv) the Indebtedness of
any Borrower or any of its Subsidiaries evidenced by the FF&E Facility
Agreements, (v) any Indebtedness of any Borrower or any of its Subsidiaries in
respect of the Substitute Tranche B Loan or the Completion Guaranty Loan, and
(vi) any Indebtedness of any Borrower under an Employee Repurchase Note.
"Other Security Documents" means the Security Documents as
defined in the Disbursement Agreement, other than the Collateral Documents.
"Outside Completion Deadline" means April 21, 1999, or such later
date as may be extended pursuant to Section 6.4 of the Disbursement Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Permanent Mall Lender" means Goldman Sachs Mortgage Company or
any successor or replacement thereto permitted under the Tri-Party Agreement.
"Permits" means all authorizations, consents, decrees, permits,
waivers, privileges, approvals from and filings with all Governmental
Instrumentalities including, without limitation, the Nevada Gaming Authorities
necessary for the realization of the Project in accordance with the Operative
Documents.
"Permitted Employee Repurchase" has the meaning set forth in
subsection 6.1.
"Permitted Liens" means the following types of Liens (excluding
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any such Lien relating to or imposed in connection
with any Environmental Claim, and any such Lien expressly prohibited by any
applicable terms of any of the Collateral Documents) provided in each case that
such Liens do not secure Indebtedness for borrowed money:
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 4.7;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in
each case incurred in the ordinary course
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of business (a) for amounts not yet overdue or (b) for amounts that are
overdue and that (in the case of any such amounts overdue for a period in
excess of 5 days) are being contested in good faith by appropriate
proceedings, so long as (1) such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made for
any such contested amounts, and (2) in the case of a Lien with respect to
any portion of the Collateral, such contest proceedings conclusively
operate to stay the sale of any portion of the Collateral on account of
such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of- money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), incurred in the ordinary course of business
(a) for amounts not yet overdue or (b) for amounts that are overdue and
that (in the case of any such amounts overdue for a period in excess of 5
days) are being contested in good faith by appropriate proceedings, so
long as (1) such reserves or other appropriate provisions, if any, as
shall be required by GAAP shall have been made for any such contested
amounts, and (2) in the case of a Lien with respect to any portion of the
Collateral, such contest proceedings conclusively operate to stay the
sale of any portion of the Collateral on account of such Lien;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 7.8;
(v) leases or subleases granted to third parties in accordance
with any applicable terms of this Agreement and the Collateral Documents
and not interfering in any material respect with the ordinary conduct of
the business of a Borrower or any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not
and will not interfere in any material respect with the ordinary conduct
of the business of a Borrower or any of its Subsidiaries or result in a
material diminution in the value of any Collateral as security for the
Obligations;
(vii) leases permitted under subsection 6.6 and any leasehold
mortgage in favor of any party financing the lessee under any lease
permitted under subsection 6.6 provided that (a) none of Borrowers nor
any of their Subsidiaries is liable for the payment of any principal of,
or interest, premiums or fees on, such financing and (b) the affected
lease and leasehold mortgage are expressly made subject and subordinate
to the Lien of the Deed of Trust;
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(viii) Liens created or contemplated by the Cooperation Agreement
(as in effect on the Closing Date);
(ix) Liens on real property of Borrowers arising pursuant to that
certain Harrah's Shared Roadway Agreement (as in effect on the Closing
Date);
(x) Liens incurred in connection with the construction of a
pedestrian bridge or a pedestrian tunnel under Las Vegas Boulevard and
Sands Avenue provided that such Liens will not (i) materially interfere
with, impair or detract from the operation of the business of Borrowers
and their Subsidiaries or the construction or operation of the Project or
(ii) cause a material decrease in value of the Collateral.
(xi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(xii) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with
the importation of goods;
(xiii) any zoning or similar law or right reserved to or vested in
any governmental office or agency to control or regulate the use of any
real property;
(xiv) licenses of patents, trademarks and other intellectual
property rights granted by a Borrower or any of its Subsidiaries in the
ordinary course of business and not interfering in any material respect
with the ordinary conduct of the business of such Borrower or such
Subsidiary;
(xv) Liens created or contemplated by the HVAC Services Agreement
(as in effect on the Closing Date);
(xvi) Liens created under the Predevelopment Agreement as in
effect on the Closing Date;
(xvii) easements, restrictions, rights of way, encroachments and
other minor defects or irregularities in title created in connection with
the traffic study relating to increased traffic on Las Vegas Boulevard as
a result of completion of the Project;
(xviii) Liens incurred in connection with Interest Rate Agreements
permitted under Section 6.2(ix);
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(xix) restrictions created under the Sale and Contribution
Agreement as in effect on the Closing Date;
(xx) prior to the Mall Release Date any "Permitted Liens" under
the Disbursement Agreement; and
(xxi) Liens listed as exceptions to the Mortgage Policy.
"Permitted Quarterly Tax Distributions" means quarterly
distributions of Tax Amounts determined on the basis of the estimated taxable
income of LVSI or Venetian, as the case may be (in each case including any such
taxable income attributable to such entity's ownership of interest in any other
pass-through entity for Federal income tax purposes except that if all or any
portion of the Completion Guaranty Loan or the Substitute Tranche B Loan is
outstanding and held by Adelson or a Related Party and is not paying current
cash interest, then such estimated taxable income shall be determined without
giving effect to any non-cash interest payments on such loans held by Adelson or
the Related Parties to the extent such non-cash interest is deductible), for the
related Estimation Period, as in a statement filed with the Administrative
Agent, provided, however, that (A) prior to any distributions of Tax Amounts
Borrowers shall deliver an officers' certificate with a statement to the effect
that in the case of distributions to be made by Venetian, Venetian qualifies as
a partnership or a substantially similarly treated pass-through entity for
federal income tax purposes or that, in the case of distributions to be made by
LVSI, LVSI qualifies as a Subchapter S corporation under the Code or a
substantially similarly treated pass-through entity for federal income tax
purposes, as the case may be, and (B) at the time of such distributions, the
most recent audited financial statements of LVSI reflect that LVSI was treated
as a Subchapter S corporation under the Code or a substantially similarly
treated pass-through entity for federal income tax purposes and Venetian was
treated as a partnership or substantially similarly treated pass-through entity
for Federal income tax purposes for the period covered by such financial
statements; provided, further, that, for an Estimation Period that includes a
True-up Determination Date, (A) if the True-up Amount is due to the members or
shareholders, as the case may be, the Permitted Quarterly Tax Distribution
payable by LVSI or Venetian, as the case may be, for the Estimation Period shall
be increased by such True-up Amount, and (B) if the True-up Amount is due to
LVSI or Venetian, the Permitted Quarterly Tax Distribution payable by LVSI or
Venetian as the case may be, for the Estimation Period shall be reduced by such
True-up Amount and the excess, if any, of the True-up Amount over such Permitted
Quarterly Tax Distribution shall be applied to reduce the immediately following
Permitted Quarterly Tax Distribution(s) until such True-up Amount is entirely
offset. The amount of Permitted Quarterly Tax Distribution relating to an
Estimation Period including a True-up Determination Date shall
be determined by a Tax Amounts CPA, and the amount of Permitted Quarterly Tax
Distribution relating to all other Estimation Periods shall be determined by
LVSI or Venetian, as the case may be.
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"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"Phase II" means a hotel, casino and mall complex proposed to be
developed on the Phase II Land.
"Phase II Direct Holding Company" means Lido Casino Resort
Holding Company, LLC, a Delaware limited liability company.
"Phase II Land" means the real property consisting of
approximately 14 acres of the Real Estate Contribution as described in more
detail on Exhibit T-5 of the Disbursement Agreement with all improvements
thereon.
"Phase II Manager" means Lido Casino Resort MM, Inc., a Nevada
corporation, and wholly owned subsidiary of LVSI and the managing member of
Phase II Subsidiary.
"Phase II Subsidiary" means Lido Casino Resorts, LLC, a Nevada
limited liability company.
"Plans and Specifications" shall have the meaning assigned that
term in the Disbursement Agreement.
"Potential Event of Default" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default.
"Predevelopment Agreement" means the Sands Resort Hotel Casino
Agreement dated February 18, 1997 by and between Clark County and LVSI, as
amended, restated and modified from time to time.
"Primary Maturity Date" means May 1, 2000.
"Professional Services Agreement" means that certain Agreement
between Venetian and Project Architect dated on or about the date hereof.
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"Project" means the Venetian-themed hotel, casino, retail,
meeting and entertainment complex, with related heating, ventilation and air
conditioning and power station facilities to be developed at the Site, all as
more particularly described in Exhibit T-1 to the Disbursement Agreement.
"Project Architect" means collectively, TSA of Nevada, LLP, and
WAT&G, Inc. Nevada.
"Project Budget" has the meaning assigned that term in the
Disbursement Agreement.
"Project Documents" means the Construction Management Agreement,
the Direct Construction Guaranty, the Indirect Construction Guaranty, the
Completion Guaranties, the Approved Equipment Funding Commitments, the
Contracts, the GECC Intercreditor Agreement, the Cooperation Agreement, the
Professional Services Agreement, the HVAC Services Agreement, the HVAC Ground
Lease, the Mall Management Agreement, the Construction Agency Agreement, the
Predevelopment Agreement, the Work Continuation Agreement, the Billboard Master
Lease, the Services Agreement, the Sale and Contribution Agreement, the Mall
Lease, the Casino Lease, the Treadway Agreement, the Billboard Master Lease, the
Billboard Operating Lease, the Mall TESA, the SECC TESA, the Development
Agreements, the operating agreements or By-laws, as the case may be, for each of
LVSI, Venetian, Mall Direct Holdings, Mall Subsidiary and Mall Intermediate
Holdings, while applicable, the Disbursement Agreement relating to the
development, construction, maintenance or operation of the Project.
"Project Schedule" shall have the meaning assigned that term in
the Disbursement Agreement.
"Puck JV Letter of Intent" means the letter of intent dated May
16, 1997 between LVSI and Wolfgang Puck Food Company, L.P.
"Quarterly Payment Period" means the period commencing on the
tenth day and ending and including the twentieth day of each month in which
federal estimated tax payments are due (provided that payments in respect of
estimated state income taxes due in January may instead, at the option of
Borrowers, be paid during the last five days of the immediately preceding
December).
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"Rate Adjustment Date" means the first day of each calendar month
during the period between the Closing Date and the Commitment Termination Date,
unless it is not a Business Day, in which case, the first Business Day
immediately following such date.
"Real Estate Contribution" shall have the meaning assigned that
term in the introduction to this Agreement as described in more detail in
Schedule 4.5.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Related Parties" means and shall include: (i) Family Members, as
hereafter defined; (ii) directors of LVSI and Venetian and employees of LVSI or
Venetian who are senior managers or officers of LVSI, Venetian, Interface or any
of their Affiliates; (iii) any person who receives an interest in LVSI or
Venetian from any individual referenced in clauses (i)-(ii) in a gratuitous
transfer, whether by gift, bequest or otherwise, to the extent of such interest;
(iii) the estate of any individual referenced in clauses (i)-(iii); (iv) a trust
for the benefit of one or more of the individuals referenced in clauses
(i)-(iii); and/or (v) an entity owned or controlled, directly or indirectly, by
one or more of the individuals, estates of trusts referenced in clauses
(i)-(iv). For the purpose of this paragraph, a `Family Member' shall include:
(i) Sheldon G. Adelson; (ii) Dr. Miriam Adelson; (iii) any sibling of either of
the foregoing; (iv) any issue of any one or more of the individuals referenced
in the preceding clauses (i)-(iii); and (v) the spouse or issue of the spouse of
one or more of the individuals referenced in the preceding clauses (i)-(iv).
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Materials), including the
movement of any Hazardous Materials through the air, soil, surface water or
groundwater.
"Replacement FF&E Lenders" means any lender or lenders who commit
to replace the GECC Commitment, provided that each such lender shall be an
Eligible Assignee reasonably acceptable to Lender.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of any Borrower now or hereafter outstanding, except a dividend or distribution
payable solely in shares of that class of stock to the holders of that class (or
the accretion of such dividends or distribution), (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or
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indirect, of any shares of any class of stock of any Borrower now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of any Borrower now or hereafter outstanding, (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to Other Indebtedness other than
payments with respect to the Bank Credit Facility which are permitted pursuant
to the Intercreditor Agreement, and (v) any payment in respect of a repayment or
reimbursement of amounts advanced to Borrowers or any of their Subsidiaries by
Adelson or any Affiliate of Adelson under the Adelson Completion Guaranty or the
Tranche B Guaranty.
"Sale and Contribution Agreement" means that certain Sale and
contribution Agreement dated as of the date hereof between Venetian, Mall
Construction Subsidiary and Mall Subsidiary.
"Sands Expo and Convention Center" means the exposition and
meeting facilities commonly known as the Sands Expo and Convention Center.
"Scotiabank" means The Bank of Nova Scotia, a Canadian chartered
bank.
"SECC TESA" means that certain Energy Services Agreement dated as
of November 14, 1997 between Interface and HVAC Provider.
"Securities" means any stock, shares, partnership interests,
membership interests of a limited liability company, voting trust certificates,
certificates of interest or participation in any profit-sharing agreement or
arrangement, options, warrants, bonds, debentures, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire,
any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"Services Agreement" means that amended and restated Services
Agreement dated as of the date hereof by and among LVSI, Interface, Interface
Holding Company, Inc., and the parties stated on the schedule thereto.
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"Site" means the land on which the Project is to be constructed
as described in more detail in Exhibit T-4 to the Disbursement Agreement.
"Solvent" means, with respect to any Person, that as of the date
of determination both (A) (i) the then fair saleable value of the property of
such Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing alternatives
and potential asset sales reasonably available to such Person; (ii) such
Person's capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Specified FF&E" means any furniture, fixtures, equipment and
other personal property financed with the proceeds from the FF&E Facility.
"Stop Funding Notice" shall have the meaning assigned that term
in the Disbursement Agreement.
"Subordinated Indebtedness" means (i) the Indebtedness in respect
of the Subordinated Notes and (ii) any Indebtedness in respect of the Substitute
Tranche B Loan or the Completion Guaranty.
"Subordinated Notes" means the $97,500,000 in aggregate principal
amount of Split Coupon Senior Subordinated Notes due 2005 of Borrowers issued
pursuant to the Subordinated Notes Indenture.
"Subordinated Notes Indenture" means the Indenture dated as of
November 14, 1997 between Borrowers, certain guarantors named therein and the
Subordinated Notes Indenture Trustee.
"Subordinated Notes Indenture Trustee" means First Union National
Bank in its capacity as trustee under the Subordinated Notes Indenture and its
successors in such capacity.
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"Subsidiary" means, with respect to any Person, (i) any
corporation, partnership, limited liability company, association, joint venture
or other business entity of which more than 50% of the total voting power of
shares of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the Person or Persons
(whether directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the management
and policies thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other Subsidiaries of that Person or a
combination thereof and (ii) any partnership or limited liability company of
which more than 50% of such entities' capital accounts, distribution rights,
general or limited partnership interests or membership interests are owned or
controlled directly or indirectly by such Person or one or more other
Subsidiaries of that Person or a combination thereof. Notwithstanding the
foregoing, Mall Subsidiary, Phase II Subsidiary, Phase II Manager, Phase II
Direct Holding Company, Mall Manager, Mall Direct Holdings and their respective
Subsidiaries shall not constitute Subsidiaries under this Agreement or any other
Loan Document, except for purposes of Article 4 (representations and warranties)
(other than subsection 4.8), and subsection 5.1 and for purposes of any
definitions as used in Article 4 or subsection 5.1.
"Substitute Tranche B Loan" means (i) any amount which is
received by Lender pursuant to the Tranche B Guaranty and Security Documents
funded by Adelson upon a draw under the Tranche B Collateral which Adelson
elects to have treated as a subordinated loan to Venetian, (ii) any refinancing
of the loans described under clauses (i) or (ii) provided in the case of clauses
(i), (ii) and (iii) that such refinancing loan is in an amount not to exceed at
any time an aggregate principal amount of $35,000,000, (plus accrued and unpaid
interest thereon) is evidenced by a Substitute Tranche B Note and is subject to
the terms of the Adelson Intercreditor Agreement.
"Substitute Tranche B Note" means a note substantially in the
form of Exhibit N hereto (as in effect on the date hereof).
"Supplier Joint Venture" means any Person that supplies or
provides materials or services to any Borrower or the Construction Manager or
any contractor in the Project and in which a Borrower or one of its Subsidiaries
have Investments.
"Tax" or "Taxes" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever called,
by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld
or assessed; provided that "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person is organized or in which that Person's principal office (and/or, in the
case of a Lender, its lending
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office) is located or in which that Person (and/or, in the case of a Lender, its
lending office) is deemed to be doing business on all or part of the net income,
profits or gains (whether worldwide, or only insofar as such income, profits or
gains are considered to arise in or to relate to a particular jurisdiction, or
otherwise) of that Person (and/or, in the case of a Lender, its lending office).
"Tax Amount" means, with respect to a Estimation Period or a
taxable year, as the case may be an amount equal to (A) the product of (x) the
taxable income (including all separate items of income) of LVSI or Venetian, as
the case may be, for such Estimation Period or taxable year, as the case may be,
and (y) the Applicable Tax Percentage reduced by (B) to the extent not
previously taken into account, any income tax benefit attributable to LVSI or
Venetian, as the case may be, which could be utilized (without regard to the
actual utilization) by its members or shareholders, as the case may be, in the
current or prior taxable year, or portion thereof, commencing on or after the
Closing Date (including any tax losses or tax credits), computed at the
Applicable Tax Percentage of the year that such benefit is taken into account
for purposes of this computation; provided, however, that, the computation of
Tax Amount shall also take into account (C) the deductibility of state and local
taxes for federal income tax purposes, and (D) any difference in the Applicable
Tax Percentage resulting from the nature of taxable income (such as capital gain
as opposed to ordinary income).
"Tax Amounts CPA" means a nationally recognized certified public
accounting firm.
"Third-Party Account Agreement" means that certain Third-Party
Account Agreement dated as of the date hereof entered into among Lender, Adelson
and Goldman Sachs & Co., substantially in the form of Exhibit O hereto.
"Title Company" means Lawyers Title of Nevada, Inc. or an
Affiliate thereof and/or one or more other title insurance companies reasonably
satisfactory to Lender.
"Total Gross Revenue" shall mean, for any specified projected
period, the entire amount of fixed rental with respect to space in the Mall as
to which written, binding, fully executed leases have been signed plus the
amount of variable rent for such space in the Mall projected based on historical
levels of percentage rents yield pursuant to existing leases the term of which
extends through the projected period.
"Tranche A Commitment" means the commitment of Lender to make
Tranche A Loans as set forth in subsection 2.1A.
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"Tranche A Loan" means the loans made under the Tranche A
Commitment in an aggregate principal amount of up to $105,000,000 made by Lender
to Borrowers pursuant to subsection 2.1A.
"Tranche A Take Out Commitment" means the commitment of Permanent
Mall Lender dated as of the date hereof to make a loan to Mall Subsidiary in the
amount of $105,000,000 to take out the Tranche A Loan or any other commitment to
make such a loan that replaces the commitment described above in accordance with
the Tri-Party Agreement.
"Tranche B Collateral" means amounts or securities deposited by
Adelson in an account to the security interest of Lender pursuant to the terms
of the Tranche B Guaranty and Security Documents.
"Tranche B Commitment" means the commitment of Lender to make
"Tranche B" Loans as set forth in subsection 2.1A.
"Tranche B Guaranty and Security Documents" means the Adelson
Guaranty, the Collateral Account Agreement and the Third-Party Account
Agreement.
"Tranche B Loan" means the loans made under the Tranche B
Commitment in an aggregate principal amount of up to $35,000,000 made by Lender
to Borrowers pursuant to subsection 2.1A.
"Tranche B Take Out Commitment" means the commitment of Adelson
contained in the Tri-Party Agreement to enter into and fund a loan to Mall
Subsidiary in the amount of $35,000,000 less amounts drawn under the Adelson
Guaranty to take out the Tranche B Loan or any other commitment to make such a
loan that replaces the commitment of Adelson in accordance with the Tri-Party
Agreement.
"Transaction Costs" means the fees, costs and expenses payable by
Borrowers on or before the Closing Date in connection with the transactions
contemplated by the Loan Documents and the Project Documents.
"Tri-Party Agreement" means the agreement between Venetian, LVSI,
Adelson, the Mall Construction Subsidiary, the Mall Subsidiary, Lender and the
Permanent Mall Lender.
"True-up Amount" means, in respect of a particular taxable
year, an amount determined by the Tax Amounts CPA equal to the difference
between (i) the aggregated Permitted Quarterly Tax Distributions actually
distributed in respect of such taxable year, without taking into
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account any adjustments to such Permitted Quarterly Tax Distributions made with
respect to any other taxable year (including any adjustment to take into account
a True-up Amount for the immediately preceding taxable year) and (ii) the Tax
Amount permitted to be distributed in respect of such year as determined by
reference to LVSI's Internal Revenue Service Form 1120-S or Venetian's IRS Form
1065 filed for such year; provided, however, that if there is an audit or other
adjustment with respect to a return filed by the LVSI or Venetian (including a
filing of an amended return), upon a final determination or resolution of such
audit or other adjustment, the Tax Amounts CPA shall redetermine the True-up
Amount for the relevant taxable year. The amount equal to the excess, if any, of
the amount described in clause (i) above over the amount described in clause
(ii) above shall be referred to as the "True-up Amount due to LVSI" or the
"True-up Amount due to Venetian", as the case may be and the excess, if any, of
the amount described in clause (ii) over the amount described in clause (i)
shall be referred to as the "True-up Amount due to the shareholders or members."
"True-up Determination Date" means the date on which the Tax
Amounts CPA delivers a statement to the Administrative Agent indicating the
True-up Amount; provided, however, that the True-up Determination Date shall not
be later than 30 days after the occurrence of an event requiring the
determination of the True-up Amount (including, the filing of the federal and
state tax returns or the final determination or resolution of an audit or other
adjustment, as the case may be).
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any applicable jurisdiction.
"Venetian" means Venetian Casino Resort, LLC, a Nevada limited
liability company.
"Work Continuation Agreement" means that certain Work
Continuation Agreement for Construction of Sands Venetian Project, Las Vegas,
Nevada dated as of April 10, 1997 between the Construction Manager and the
Building and Construction Trades Council of Southern Nevada and its affiliated
local unions.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
them in conformity with GAAP. Financial statements and other information
required to be delivered by Borrowers to Lender pursuant to clauses (i), (ii),
(iii) and (xiii) of subsection 5.1 shall be prepared in accordance with GAAP as
in effect at the time of such preparation (and delivered together with the
reconciliation statements
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provided for in subsection 5.1(v)). Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 4.3.
1.3 Other Definitional Provisions and Rules of Construction.
A. Any of the terms defined herein may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
B. References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Agreement unless otherwise
specifically provided.
C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, 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 fall
within the broadest possible scope of such general statement, term or matter.
D. Any reference to any agreement or instrument shall be deemed
to include a reference to such agreement or instrument as assigned, amended,
supplemented or otherwise modified from time to time in accordance with
subsection 6.12 and, while applicable, the Disbursement Agreement.
E. Any reference to a term defined in the Disbursement Agreement
shall have the meaning assigned that term in the Disbursement Agreement whether
or not such agreement remains in effect.
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; Notes; Maturity.
A. Commitment. Subject to the terms and conditions of this Agreement
and, while in effect, the Disbursement Agreement and in reliance upon the
representations and warranties of Borrowers herein set forth and, while in
effect, the representations and warranties set forth in the Disbursement
Agreement, Lender hereby agrees to make the Loans described in this subsection
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2.1A. Lender agrees to lend to Borrowers from time to time during the period
from the Closing Date to but excluding the Commitment Termination Date an
aggregate amount not exceeding the aggregate amount of the Commitment to be used
for the purposes identified in subsection 2.5A. The amount of Lender's
Commitment is $105,000,000 under the Tranche A Commitment and $35,000,000 under
the Tranche B Commitment, with any Loans made by Lender to Borrowers pursuant to
this Agreement being deemed to be made pursuant to the Tranche B Commitment up
to the full amount of the Tranche B Commitment before any Loans are deemed to be
made pursuant to the Tranche A Commitment; provided that the Commitment of
Lender shall be adjusted to give effect to any assignments of the Loan or
Commitment pursuant to subsection 8.1; and provided, further that the amount of
the Commitment shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsections 2.4A or 2.4B. Amounts borrowed
under this subsection 2.1A and subsequently repaid or prepaid may not be
reborrowed.
B. Maturity. Subject to the conditions set forth in this subsection 2.1B
and subject to earlier acceleration, the Obligations shall be due and payable on
the Primary Maturity Date, provided that Borrowers shall have one (1) option to
extend the term of the Loans to the Extended Maturity Date, subject to the
satisfaction of the following conditions:
(i) Not less than thirty (30) nor more than sixty (60) days prior
to the Primary Maturity Date, all, and not less than all Borrowers shall
provide Lender with written notice of their election to extend the term
of the Loan (the "Extension Election Notice");
(ii) Borrowers shall have paid to Lender on or before the Primary
Maturity Date in immediately available funds the Extension Fee described
in subsection 2.3A;
(iii) At all times between the time the Extension Election Notice
is given and the Primary Maturity Date, no Event of Default or Potential
Event of Default shall have occurred and be continuing;
(iv) The Mall Parcel shall have been created prior to the Primary
Maturity Date;
(v) There shall be written, binding and fully executed, leases of
space in the Mall resulting in a Deemed Debt Service Coverage Ratio of
not less than 1.25 on the Tranche A Loan; and
(vi) There shall be no default under the Tranche A Take Out
Commitment, Tranche B Take Out Commitment and the Tranche B Guaranty and
Security Documents
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and each such agreement shall be in full force and effect and
unmodified except for modifications expressly and specifically
consented to in writing by Lender and each such agreement shall
not have expired or terminated prior to the Extended Maturity
Date.
C. Borrowing Mechanics. Whenever Borrowers desire Lender to make
Loans they shall deliver in accordance with and pursuant to the terms of
subsection 2.5 of the Disbursement Agreement such Advance Requests and Notices
of Funding Requests in the form, at the times and as required thereunder.
Notwithstanding the foregoing, in no case shall Lender have any obligation to
make Loans unless required pursuant to the Disbursement Agreement.
Borrowers shall notify Lender and Disbursement Agent prior to the
funding of any Loans in the event that any of the matters to which Borrowers are
required to certify in connection with the applicable Advance Request and Notice
of Funding Request is no longer true and correct as of the applicable Funding
Date, and the acceptance by Borrowers of the proceeds of any Loans shall
constitute a re-certification by Borrowers, as of the applicable Funding Date,
as to the matters to which Borrowers are required to certify in the applicable
Advance Request and Notice of Funding Request.
A Final Notice of Funding Request for a Loan shall be irrevocable
on and after the related Rate Adjustment Date, and Borrowers shall be bound to
make a borrowing in accordance therewith; provided that, in the event a Stop
Funding Notice is delivered with respect to any proposed Loans after delivery of
a Notice of Funding Request with respect thereto, Lender shall not make such
Loans, provided further that Borrower shall be obligated to make any payments
due pursuant to subsection 2.6 as a result thereof.
D. Disbursement of Funds. Upon satisfaction or waiver of the
conditions precedent specified in subsections 3.1 (in the case of Loans made on
the Closing Date) and 3.2 (in the case of all Loans), as evidenced by an Advance
Confirmation Notice issued by the Disbursement Agent, Lender shall make the
aggregate amount of the requested Loans available to the Disbursement Agent in
the Collection Account as required pursuant to the Disbursement Agreement on the
applicable Funding Date and the Disbursement Agent shall then make the proceeds
of such Loans available to Borrowers in accordance with and upon fulfillment of
conditions set forth in the Disbursement Agreement and in so doing Loans in such
amounts shall be deemed made to Borrowers hereunder.
In the event that the proceeds of any Loans are not disbursed by
the Disbursement Agent on the applicable Funding Date, the proceeds of such
Loans shall be held by the Disbursement Agent or returned to Lender in
accordance with the provisions set forth in the
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Disbursement Agreement; provided, however that the proceeds of such Loans shall
continue to bear interest and be repayable in accordance with the provisions set
forth in this Agreement. In the event that Lender receives a Stop Funding Notice
from the Disbursement Agent in accordance with and pursuant to the terms of the
Disbursement Agreement, Lender shall have no obligation to advance the Loans and
no Loans already provided to the Collection Account (i) before issuance of the
Stop Funding Notice and (ii) before such Loans are drawn by Borrowers or
disbursed by Disbursement Agent to Borrowers, shall be made available to
Borrowers.
E. Statements. Lender shall record on its internal records the
amount of each Loan made by it and each payment in respect thereof. Any such
recordation shall be conclusive and binding on Borrowers, absent manifest error;
provided that failure to make any such recordation, or any error in such
recordation, shall not affect Lender's Commitment or Obligations in respect of
any applicable Loans.
F. Notes. Borrowers shall execute and deliver on the Closing Date
to Lender (i) a Tranche A Note in substantially the form of Exhibit M-1 hereto
to evidence the Loans, in the principal amount of $105,000,000 and with other
appropriate insertions; and (ii) a Tranche B Note in substantially the form of
Exhibit M-2 hereto to evidence the Loans, in the principal amount of $35,000,000
and with other appropriate insertions.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6
and 2.7, each Loan shall bear interest on the unpaid principal amount thereof
from the date made through maturity (whether by acceleration or otherwise) at a
rate of interest equal to the Adjustable Rate.
B. Interest Payments. Subject to the provisions of subsection
2.2C, interest on each Loan shall be payable monthly in arrears on the last
Business Day of each calendar month, upon any prepayment of the Loans (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
C. Default Rate. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is five hundred (500) basis points per annum in excess of
the interest rate otherwise payable under this Agreement with respect to the
applicable Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2C shall not be a
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permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Lender.
D. Computation of Interest. Interest on the Loans shall be
computed on the basis of a 360-day year for the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the date
of the making of such Loan shall be included, and the date of payment of such
Loan shall be excluded; provided that if a Loan is repaid on the same day on
which it is made, one day's interest shall be paid on that Loan, and provided
further that interest shall be paid on the date of the payment of a Loan if
payment is received after 12:00 noon Chicago time.
2.3 Fees.
A. Commitment Fees. Borrowers agree to pay to Lender, as
consideration of the opening of and for the making of the Loans, a commitment
fee, which shall be earned and payable in full upon the Closing Date, in the
amount of $2,100,000, to be allocated as set forth in a separate fee agreement
between Borrowers, Lender and Goldman, Sachs & Co. In addition, in the event
that Borrowers elect to extend the term of the Loans pursuant to subsection 2.1,
Borrowers agree to pay Lender an additional fee (the "Extension Fee"), payable
on or before the Primary Maturity Date, in the amount of $350,000.
B. Other Fees. Borrowers agree to pay to Lender such other fees
in the amounts and at the times separately agreed upon between Borrowers and
Lender.
2.4 Prepayments; General Provisions Regarding Payments; Application
of Proceeds of Collateral and Payments Under Intermediate Holding
Company Guaranty.
A. Prepayments. Borrowers may, upon not less than three Business
Days' prior written or telephonic notice given to Lender by 12:00 Noon (Chicago
time) on the date required and, if given by telephone, promptly confirmed in
writing to Lender, at any time and from time to time prepay any Loans on any
Business Day in whole or in part in an aggregate minimum amount of $1,000,000
and integral multiples of $500,000 in excess of that amount provided, however,
that Borrowers shall pay any amount payable pursuant to subsection 2.6, and
provided, further, that no such prepayment shall reduce the commitment fees
provided for in subsection 2.3. Notice of prepayment having been given as
aforesaid, the principal amount of the Loans specified in such notice shall
become due and payable on the prepayment date specified therein.
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Any such voluntary prepayment shall be applied as specified in subsection
2.4C(ii). Any prepayments shall be applied first to outstanding principal and
interest and other amounts owed under the Tranche A Loans and second to
outstanding principal and interest and other amounts owed under the Tranche B
Loans.
B. Mandatory Prepayments and Mandatory Reduction of Commitment.
The Loans shall be prepaid and/or the Commitments shall be
permanently reduced in the amounts and under the circumstances set forth below,
all such prepayments and/or reductions to be applied as set forth below or as
more specifically provided in subsection 2.4C:
(i) Prepayments and Reductions From Net Asset Sale Proceeds. No
later than the first Business Day following the date of receipt by
Borrowers or any of their Subsidiaries of any Net Asset Sale Proceeds in
respect of any Asset Sale (other than Net Asset Sale Proceeds in respect
of the sale of any obsolete worn out or surplus assets or assets no
longer used or useful in the business of the Project or of construction
equipment having a fair market value not in excess of $4,000,000 prior
to Completion Date or during the first year following Completion Date,
but only in each case to the extent reinvested in the business of
Borrowers or such Subsidiary within 180 days of receipt), Borrowers
shall prepay the Loans and/or the Commitment shall be permanently
reduced in an aggregate amount equal to such Net Asset Sale Proceeds.
(ii) Prepayments and Reductions from Net Loss Proceeds and
Liquidated Damages. No later than the second Business Day on which Loss
Proceeds or Liquidated Damages are required to be applied to prepayment
of Loans under subsection 5.20 of the Disbursement Agreement, Article X,
sections 5 and 12 of the Cooperation Agreement or Article XII, section 8
of the Cooperation Agreement (as applicable), Borrowers shall prepay the
Loans and/or the Commitment shall be permanently reduced in an amount
equal to the Loss Proceeds or Liquidated Damages, as applicable,
available for such application under subsection 5.20 of the Disbursement
Agreement, Article X, sections 5 and 12 of the Cooperation Agreement or
Article XII, section 8 of the Cooperation Agreement (as applicable) but
not exceeding that portion thereof determined to be payable to Lender in
accordance with Section 4.5 of the Intercreditor Agreement.
(iii) Prepayments and Reductions Due to Issuance Debt or Equity.
On the first Business Day following the date of receipt by Borrowers or
any of their Subsidiaries, of the proceeds (including Cash, real
property or other property) (any such proceeds, net of underwriting
discounts and commissions and other reasonable costs and expenses
associated therewith, including reasonable legal fees and expenses,
being "Net
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Proceeds") from the issuance of any debt or equity of Borrowers or any
of their Subsidiaries (other than any debt expressly permitted under
subsection 6.1 and any equity issuances to employees of Borrowers upon
exercise of options issued pursuant to employment agreements and option
plans as in effect on the Closing Date), Borrowers shall prepay the
Loans and/or the Commitment shall be permanently reduced in an aggregate
amount equal to (i) in the case of any equity issuance, 75% of such Net
Proceeds and (ii) in the case of any debt, 100% of such Net Proceeds.
Notwithstanding the foregoing, (y) Borrowers shall not be required to
prepay the Loans and/or reduce Commitment from any proceeds (including
Cash, real property or other property), of equity contributions from, or
equity issuances to, Adelson or any of his Affiliates (other than the
Subsidiaries) to LVSI or Venetian or used for the expansion or
improvement of the Project or to pay operating costs with respect
thereto and (z) any portion of the Net Proceeds of equity issuances not
required to be applied to prepay the Loans and/or to reduce the
Commitment shall, in any event, be used for the expansion or improvement
of the Project or to pay operating costs with respect thereto.
(iv) Calculations of Net Proceeds Amounts; Additional Prepayments
and Reductions Based on Subsequent Calculations. Concurrently with any
prepayment of the Loans and/or if applicable the reduction of
Commitments pursuant to subsections 2.4B(i)-(iii), Borrowers shall
deliver to Lender an Officers' Certificate demonstrating
the calculation of the amount (the "Net Proceeds Amount") of the
applicable Net Asset Sale Proceeds or Loss Proceeds or Liquidated
Damages, Net Proceeds (as such terms are defined in subsections
2.4B(iii)), or the amount of the subsidiary distribution or other
amounts, as the case may be, that gave rise to such prepayment and/or
reduction. In the event that Borrowers shall subsequently determine that
the actual Net Proceeds Amount was greater than the amount set forth in
such Officers' Certificate, Borrowers shall promptly make an additional
prepayment of the Loans (and/or, if applicable, the Commitment shall be
permanently reduced) in an amount equal to the amount of such excess,
and Borrowers shall concurrently therewith deliver to Lender an
Officers' Certificate demonstrating the derivation of the additional Net
Proceeds Amount resulting in such excess.
C. Application of Prepayments and Unscheduled Reductions of
Commitment.
Any voluntary prepayments and any amount required to be applied
as a mandatory prepayment of the Loans and/or a reduction of the
Commitment pursuant to subsections 2.4B(i)-(iv) pursuant to subsection
2.4A shall be applied first to repay the outstanding Tranche A Loan to
the full extent thereof, then to repay the outstanding Tranche B Loan.
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D. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Borrowers of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense,
setoff or counterclaim, free of any restriction or condition, and
delivered to Lender not later than 12:00 Noon (Chicago time) on the date
due at the Funding and Payment Office for the account of Lender; funds
received by Lender after that time on such due date shall be deemed to
have been paid by Borrowers on the next succeeding Business Day.
Borrowers hereby authorize Lender to charge the Loans in order to cause
timely payment to be made to Lender of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being available in
its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Loan shall include
payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments shall be applied to the payment of
interest before application to principal and in accordance with
subsection 2.4A.
(iii) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may
be.
(iv) Notation of Payment. Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid;
provided that the failure to make (or any error in the making of) a
notation of any Loan made under such Note shall not limit or otherwise
affect the obligations of Borrowers hereunder or under such Note with
respect to any Loan or any payments of principal or interest on such
Note.
2.5 Use of Proceeds.
A. Use of Loans for Project. The proceeds of the Loans shall be applied
by Borrowers to fund the development and construction of the Project and costs
and expenses
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incurred by Borrowers in connection with the transactions contemplated hereby,
all pursuant to the Disbursement Agreement.
B. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Borrowers or any of their Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
2.6 Breakage Fees. Notwithstanding any other provision of this Agreement to the
contrary, Borrowers shall compensate Lender, upon written request by Lender
(which request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including any interest paid by
Lender to lenders of funds borrowed by it to make or carry its Loans and any
loss, expense or liability sustained by Lender in connection with the
liquidation or re-employment of such funds) which Lender may sustain: (i) if for
any reason (other than a default by Lender) a borrowing of any Loan does not
occur on a date specified therefor in an Advance Request and/or Notice of
Funding Request, (ii) if any prepayment (including any prepayment pursuant to
subsection 2.4C(i)) or other principal payment occurs on a date prior to the
Rate Adjustment Date, (iii) if any prepayment of any of its Loans is not made on
any date specified in a notice of prepayment given by Borrowers, or (iv) as a
consequence of any other default by Borrowers in the repayment of its Loans when
required by the terms of this Agreement. Calculation of all amounts payable to
Lender under this subsection 2.6 and under subsection 2.7A shall be made as
though Lender had actually funded each of its relevant Loans through the
purchase of a deposit bearing interest at the Index rate and having a thirty
(30) day maturity and through the transfer of such deposit from an offshore
office of Lender to a domestic office of Lender in the United States of America;
provided, however, Lender may fund each of its Loans in any manner it sees fit
and the foregoing assumptions shall be utilized only for the purposes of
calculating amounts payable under this subsection 2.6 and under subsection 2.7A.
2.7 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that Lender shall determine (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto) that any law, treaty or governmental rule, regulation or order,
or any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes
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effective after the date hereof, or compliance by Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) subjects Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of Lender)
with respect to this Agreement or any of its obligations hereunder or
any payments to Lender (or its applicable lending office) of principal,
interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve),
special deposit, compulsory loan or similar requirement against assets
held by or other liabilities in or for the account of, or advances or
loans by, or other credit extended by, or any other acquisition of funds
by, any office of Lender; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting Lender (or its applicable lending office) or
its obligations hereunder or the interbank market;
and the result of any of the foregoing is to increase the cost to Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by Lender (or its applicable lending office) with respect
thereto; then, in any such case, Borrowers shall promptly pay to Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as Lender in its sole discretion shall
determine) as may be necessary to compensate Lender for any such increased cost
or reduction in amounts received or receivable hereunder. Lender shall deliver
to Borrowers a written statement, setting forth in reasonable detail the basis
for calculating the additional amounts owed to Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Borrowers
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Tax (other than a Tax on the
overall net income of Lender) imposed, levied, collected, withheld or
assessed by or within the United States of America or any political
subdivision in or of the United States of America or any other
jurisdiction from or to
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which a payment is made by or on behalf of Borrowers or by any
federation or organization of which the United States of America or any
such jurisdiction is a member at the time of payment, all such
non-excluded Taxes being hereinafter collectively referred to as
"Included Taxes".
(ii) Grossing-up of Payments. If Borrowers or any other Person is
required by law to make any deduction or withholding on account of any
such Included Tax from any sum paid or payable by Borrowers to Lender
under any of the Loan Documents:
(a) Borrowers shall notify Lender of any such requirement
or any change in any such requirement as soon as Borrowers become
aware of it;
(b) Borrowers shall pay any such Included Tax before the
date on which penalties attach thereto, such payment to be made
(if the liability to pay is imposed on Borrowers) for its own
account or (if that liability is imposed on Lender) on behalf of
and in the name of Lender;
(c) the sum payable by Borrowers in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the
making of that deduction, withholding or payment, Lender receives
on the due date a net sum equal to what it would have received
had no such deduction, withholding or payment been required or
made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within
30 days after the due date of payment of any Included Tax which
it is required by clause (b) above to pay, Borrowers shall
deliver to Lender satisfactory evidence of such deduction,
withholding or payment and of the remittance thereof to the
relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to
Lender under clause (c) above except to the extent that any change after
the date hereof (in the case of Lender) or after the date of the
Assignment Agreement pursuant to which Lender became a Lender (in the
case of each other Lender) in any such requirement for a deduction,
withholding or payment as is mentioned therein shall result in an
increase in the rate of such deduction, withholding or payment from that
in effect at the date of this Agreement or at the date of such
Assignment Agreement, as the case may be, in respect of payments to
Lender.
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(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Borrowers, or on
or prior to the date of the Assignment Agreement pursuant to
which it becomes a Lender, and at such other times as may be
necessary in the determination of Borrowers (in the reasonable
exercise of their discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor
forms), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations
issued thereunder to establish that such Lender is not subject to
deduction or withholding of United States federal income tax with
respect to any payments to such Lender of principal, interest,
fees or other amounts payable under any of the Loan Documents or
(2) if such Lender is not a "bank" or other Person described in
Section 881(c)(3) of the Internal Revenue Code and cannot deliver
either Internal Revenue Service Form 1001 or 4224 pursuant to
clause (1) above, a Certificate re Non-Bank Status together with
two original copies of Internal Revenue Service Form W-8 (or any
successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of
interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to subsection
2.7B(iii)(a) hereby agrees, from time to time after the initial
delivery by such Lender of such forms, certificates or other
evidence, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence obsolete or
inaccurate in any material respect, that such Lender shall
promptly (1) deliver to Borrowers two new original copies of
Internal Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue
Service Form W-8, as the case may be, properly completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required in order to confirm or establish
that such Lender is not subject to deduction or withholding of
United States federal income tax with respect to payments to such
Lender under the Loan Documents or
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(2) notify Borrowers of its inability to deliver any such forms,
certificates or other evidence.
(c) Borrowers shall not be required to pay any
additional amount to any Non-US Lender under clause (c) of
subsection 2.7B(ii) if such Lender shall have failed to satisfy
the requirements of clause (a) or (b)(1) of this subsection
2.7B(iii); provided that if such Lender shall have satisfied the
requirements of subsection 2.7B(iii)(a) on the date of the
Assignment Agreement pursuant to which it became a Lender,
nothing in this subsection 2.7B(iii)(c) shall relieve Borrowers
of their obligation to pay any additional amounts pursuant to
clause (c) of subsection 2.7B(ii) in the event that, as a result
of any change in any applicable law, treaty or governmental
rule, regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such
Lender is not subject to withholding as described in subsection
2.7B(iii)(a).
C. Capital Adequacy Adjustment. If Lender shall have determined that the
adoption, effectiveness, phase-in or applicability after the date hereof of any
law, rule or regulation (or any provision thereof) regarding capital adequacy,
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender (or its
applicable lending office) with any guideline, request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of Lender or any
corporation controlling Lender as a consequence of, or with reference to,
Lender's Loans or Commitments or participations therein or other obligations
hereunder with respect to the Loans to a level below that which Lender or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of Lender or such controlling corporation with regard
to capital adequacy), then from time to time, within five Business Days after
receipt by Borrowers from Lender of the statement referred to in the next
sentence, Borrowers shall pay to Lender such additional amount or amounts as
will compensate Lender or such controlling corporation on an after-tax basis for
such reduction. Lender shall deliver to Borrowers a written statement, setting
forth in reasonable detail the basis of the calculation of such additional
amounts, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
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2.8 Obligation of Lender to Mitigate.
Lender agrees that, as promptly as practicable after the officer of
Lender responsible for administering the Loans becomes aware of the occurrence
of an event or the existence of a condition that would entitle Lender to receive
payments under subsection 2.7, it will, to the extent not inconsistent with the
internal policies of Lender and any applicable legal or regulatory restrictions,
use reasonable efforts (i) to make, issue, fund or maintain the Commitment
through another lending office of Lender or (ii) take such other measures as
Lender may deem reasonable, if as a result thereof the circumstances which would
entitle Lender to receive payments under subsection 2.7 would cease to exist or
the additional amounts which would otherwise be required to be paid to Lender
pursuant to subsection 2.7 would be materially reduced and if, as determined by
Lender in its sole discretion, the making, issuing, funding or maintaining of
such Commitment or Loan through such other lending office or in accordance with
such other measures, as the case may be, would not otherwise materially
adversely affect such Commitment or Loan or the interests of Lender provided
that Lender will not be obligated to utilize such other lending office pursuant
to this subsection 2.8 if Lender would incur incremental expenses as a result of
utilizing such other lending office as described in clause (i) above. A
certificate as to the amount of any such expenses payable by Borrowers pursuant
to this subsection 2.8 (setting forth in reasonable detail the basis for
requesting such amount) submitted by Lender to Borrowers (with a copy to
Disbursement Agent) shall be conclusive absent manifest error. Lender agrees
that it will not request compensation under subsection 2.7 unless Lender
requests compensation from borrowers under other lending arrangements with
Lender who are similarly situated.
2.9 Obligations Joint and Several.
Anything herein to the contrary notwithstanding, each Borrower hereby
agrees and acknowledges that the obligation of each Borrower for payment of the
Obligations shall be joint and several with the obligations of the other
Borrower hereunder regardless of which Borrower actually receives the proceeds
or benefits of any borrowing hereunder. Each Borrower hereby agrees and
acknowledges that it will receive substantial benefits from the Loans and credit
facilities made available under this Agreement.
Each Borrower agrees that its joint and several obligation to pay all
Obligations hereunder is irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than the indefeasible payment
in full of the Obligations, and the liability of each Borrower with respect to
the Obligations shall not be affected, reduced or impaired by (i) consideration
of the amount of proceeds of the Loans received by any Borrower relative to the
aggregate amount of the Loans, (ii) the dissolution or termination of or any
increase, decrease or change in personnel
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of, Borrower, (iii) the insolvency or business failure of, or any assignment for
the benefit of creditors by, or the commencement of any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceedings by or
against the other Borrower or (iv) the appointment of a receiver for, or the
attachment, restraint of or making or levying of any order of court or legal
process affecting, the property of the other Borrower. Each Borrower agrees that
a separate action or actions may be brought and prosecuted against such Borrower
whether or not action is brought against the other Borrower and whether or not
the other Borrower is joined in any such action or actions. Either Borrower's
payment of a portion, but not all, of the Obligations shall in no way limit,
affect, modify or abridge such Borrower's liability for that portion of the
Obligations which is not paid.
Each Borrower hereby waives any right to require Lender, as a condition
of payment or performance of the Obligations by such Borrower, to proceed
against the other Borrower or any other Person, to exhaust any security held
from any Borrower, or pursue any other remedy in the power of Lender. Each
Borrower hereby waives any defense arising by reason of incapacity, lack of
authority or any disability or other defense that may be available to the other
Borrower and any defenses or benefits that may be derived or afforded by law
which would limit the liability of or exonerate any guarantor or surety with
respect to the obligations, or which may conflict with the terms and provisions
of this Agreement, other than the indefeasible payment in full of the
Obligations.
Any indebtedness of a Borrower now or hereafter held by the other
Borrower is hereby subordinated in right of payment to the Obligations, and any
such indebtedness of a Borrower to the other Borrower collected or received by
such other Borrower after an Event of Default has occurred and is continuing
shall be held in trust for Lender and shall forthwith be paid over to Lender to
be credited and applied against the Obligations but without affecting, impairing
or limiting in any manner the liability of such other Borrower under any other
provision of this Agreement.
Section 3. CONDITIONS TO LOANS
The obligation of Lender to make Loans hereunder is subject to
the satisfaction of the following conditions.
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3.1 Conditions to Initial Loans.
The obligation of Lender to make the initial Loan, in addition to each
of the conditions precedent specified in Section 3.1 of the Disbursement
Agreement and subsection 3.2 herein, is subject to prior or concurrent
satisfaction of the following conditions:
A. Mall Lease; Deeds of Trust; Mortgage Policy; Etc. Lender shall have
received from Borrowers:
(i) Evidence that Venetian and Mall Construction Subsidiary shall
have entered into the Mall Lease and that the Mall Lease, or a
memorandum thereof, has been duly recorded in the appropriate filing or
recording office in the jurisdiction in which the Mortgaged Property is
located or that the Mall Lease or a memorandum thereof has been
irrevocably delivered to Title Company for such recordation.
(ii) Deeds of Trust. A fully executed and notarized Deed of Trust
and a fully executed and notarized Leasehold Deed of Trust, each duly
recorded in the appropriate filing or recording office in Clark County,
Nevada or evidence that such Deed of Trust and Leasehold Deed of Trust
have been irrevocably delivered to the Title Company for such
recordation.
(iii) Title Insurance. (a) A 1970 (amended October 17, 1970) ALTA
mortgagee title insurance policy or policies or unconditional commitment
therefor (the "Mortgage Policy") in the form of Exhibit P hereto issued
by the Title Company with respect to the Mortgaged Property in an amount
not less than the maximum aggregate amount of the Commitment, insuring a
valid leasehold interest in the Mall Lease vested in Mall Construction
Subsidiary and insuring, Lenders interest in the fee space of the Mall
for the benefit of Lender, that the Deed of Trust creates valid and
enforceable First Priority deed of trust Lien on the Mortgaged Property,
subject only to Permitted Liens and that the Leasehold Deed of Trust
creates a valid and enforceable deed of trust lien on or in the Mall
Construction Subsidiary's leasehold interest under the Mall Lease
subject only to Permitted Liens, which Mortgage Policy (1) shall include
an endorse ment for mechanics' liens, for future advances under this
Agreement and for any other matters reasonably requested by, (2) shall
provide for affirmative insurance and such reinsurance as Lender may
reasonably request, all of the foregoing in form and substance
satisfactory to Lender and (3) shall not have a creditor's rights
exception; and (b) evidence reasonably satisfactory to Lender that
Borrowers have or have caused to be (i) delivered to the Title Company
all certificates and affidavits required by the Title Company in
connection with
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the issuance of the Mortgage Policy and (ii) paid to the Title Company
or to the appropriate governmental authorities all expenses and premiums
of the Title Company in connection with the issuance of the Mortgage
Policy and all recording and stamp taxes (including mortgage recording
and intangible taxes) payable in connection with recording the Deed of
Trust and the Leasehold Deed of Trust in the appropriate real estate
records;
(iv) Copies of Documents Relating to Title Exceptions. Copies of
all recorded documents listed as exceptions to title or otherwise
referred to in the Mortgage Policy;
(v) Matters Relating to Flood Hazards. (a) Evidence, which may
be in the form of a letter from an insurance broker or a municipal
engineer, as to whether the Mortgaged Property is located in an area
designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards and if so, whether the community in which the
Mortgaged Property is located participates in the National Flood
Insurance Program, (b) if the Mortgaged Property is located in an area
designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards, written acknowledgment from Venetian and
Mall Construction Subsidiary of receipt of written notification from
Lender (1) that the Mortgaged Property is located in a special flood
hazard area and (2) as to whether the community in which the Mortgaged
Property is located is participating in the National Flood Insurance
Program, and (c) in the event the Mortgaged Property is located in a
community that participates in the National Flood Insurance Program,
evidence that Borrowers have obtained flood insurance in respect of the
Mortgaged Property to the extent required under the applicable
regulations of the Board of Governors of the Federal Reserve System; and
(vi) Environmental Indemnity. An environmental indemnity
agreement, in the form of Exhibit Q hereto, with respect to the
indemnification of Lender for any liabilities that may be imposed on or
incurred by it as a result of any Hazardous Materials Activity.
B. Security Interests in Personal and Mixed Property. Lender shall have
received evidence reasonably satisfactory to it that Borrowers shall have taken
or caused to be taken all such actions, executed and delivered or caused to be
executed and delivered all such agreements, documents and instruments, and made
or caused to be made all such filings and recordings (other than the filing or
recording of items described in clauses (iii) and (iv) below) that may be
necessary or, in the reasonable opinion of Lender, desirable in order to create
in favor of Lender, a valid and (upon such filing and recording) perfected First
Priority security interest in the entire personal and mixed property Collateral.
Such actions shall include the following:
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(i) Schedules to Collateral Documents. Delivery to Lender of
accurate and complete schedules to all of the applicable Collateral
Documents.
(ii) Lien Searches and UCC Termination Statements. Delivery to
Lender of (a) the results of a recent search, by a Person reasonably
satisfactory to Lender, of all effective UCC financing statements and
fixture filings and all judgment and tax lien filings which may have
been made with respect to any personal or mixed property of any Loan
Party, together with copies of all such filings disclosed by such
search, and (b) UCC termination statements duly executed by all
applicable Persons for filing in all applicable jurisdictions as may be
necessary to terminate any effective UCC financing statements or fixture
filings disclosed in such search (other than any such financing
statements or fixture filings in respect of Liens permitted to remain
outstanding pursuant to the terms of this Agreement); and
(iii) UCC Financing Statements and Fixture Filings. Delivery to
Lender of UCC financing statements and, where appropriate, fixture
filings, duly executed by each applicable Loan Party with respect to all
personal and mixed property Collateral of such Loan Party, for filing in
all jurisdictions as may be necessary or, in the reasonable opinion of
Lender, desirable to perfect the security interests created in such
Collateral pursuant to the Collateral Documents.
C. Solvency Assurances. On the Closing Date, Lender shall have received
a Financial Condition Certificate from Borrowers dated the Closing Date,
substantially in the form of Exhibit R hereto and with appropriate attachments,
in each case demonstrating that, after giving effect to the transactions
contemplated by this Agreement, the other Loan Documents and the other Operative
Documents, Borrowers will be Solvent.
D. Opinions of Counsel to Borrowers. Lender and its counsel shall have
received (i) originally executed copies of one or more favorable written
opinions of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for Borrowers and
their Subsidiaries, and (ii) originally executed copies of one or more favorable
written opinions of Lionel Sawyer & Collins, Nevada counsel for Borrowers and
their Subsidiaries, each in form and substance reasonably satisfactory to Lender
and its counsel, dated as of the Closing Date and setting forth substantially
the matters in the opinions designated in Exhibits S and T hereto, respectively,
and as to such other matters as Lender may reasonably request. Borrowers hereby
acknowledge and confirm that they have requested such counsel to deliver such
opinions to Lender.
E. Fees. Borrowers shall have paid to Lender, the fees payable on the
Closing Date referred to in subsection 2.3.
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F. Completion of Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found reasonably acceptable by
Lender and its counsel shall be reasonably satisfactory in form and substance to
Lender and such counsel, and Lender and such counsel shall have received all
such counterpart originals or certified copies of such documents as Lender may
reasonably request.
G. Conditions to Initial Advances Under Disbursement Agreement. Each of
the conditions set forth in Article 3.1 of the Disbursement Agreement shall have
been satisfied in form and substance reasonably satisfactory to Lender.
H. Take Out Agreements. Lender shall be satisfied in its sole discretion
that: (a) the Tranche A Take Out Commitment shall have been executed and
delivered and is in full force and effect; and (b) the Tranche B Take Out
Commitment has been executed and delivered and is in full force and effect; and
(c) the Tranche B Guaranty and Security Documents have been executed and
delivered and are in full force and effect and Adelson has deposited all amounts
required pursuant thereto.
3.2 Conditions to Subsequent Advances.
The obligation of Lender to make any subsequent Loans is subject
to Lender having received before the Funding Date, an Advance Confirmation
Notice in accordance with the provisions of the Disbursement Agreement.
Section 4. BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to
make the Loans, Borrowers represent and warrant to Lender that, on the Closing
Date, the following statements are true, correct and complete:
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Each Loan Party is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization as specified in Schedule 4.1A
hereto. Each Loan Party has all requisite corporate or limited liability company
power and authority to own and operate its properties, to carry on its business
as now conducted and as proposed to be conducted, to enter
into the Loan Documents
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and Project Documents to which it is a party and to carry out the transactions
contemplated thereby.
B. Qualification and Good Standing. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. Ownership of Borrowers. The equity interests in each of Borrowers is
duly authorized, validly issued and (if applicable) fully paid and nonassessable
and, as of the Closing Date, none of such equity interests constitute Margin
Stock. Schedule 4.1C correctly sets forth the ownership of each Borrower.
D. Subsidiaries. All of the Subsidiaries of Borrowers are identified in
Schedule 4.1D hereto. The equity interests of each of the Subsidiaries of
Borrowers identified in Schedule 4.1D hereto is duly authorized, validly issued
and (if applicable), fully paid and nonassessable and none of such equity
interests constitutes Margin Stock. Each of the Sub sidiaries of Borrowers
identified in Schedule 4.1D hereto is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization set forth therein, has all requisite
corporate or limited liability company power and authority to own and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 4.1D hereto
correctly sets forth the ownership interest of Borrowers and each of its
Subsidiaries in each of the Subsidiaries of Borrowers identified therein.
E. Rights to Acquire Equity. There are no options, warrants, convertible
securities or other rights to acquire any equity interests in any Borrower or
any of their Subsidiaries (other than Phase II Subsidiary) except as set forth
as Schedule 4.1E.
F. Conduct of Business. Borrowers and their Subsidiaries (other than the
Mall Subsidiary and Phase II Subsidiary) are engaged only in the businesses
permitted to be engaged in pursuant to subsections 6.11.
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4.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance
of the Loan Documents and the Project Documents have been duly authorized by all
necessary corporate action on the part of each Loan Party that is a party
thereto.
B. No Conflict. The execution, delivery and performance by Loan Parties
of the Loan Documents and the Project Documents to which they are parties and
the consummation of the transactions contemplated by the Loan Documents and such
Project Documents do not and will not (i) violate any provision of (a) any law
or any governmental rule or regulation applicable to any of their Subsidiaries,
Borrowers or any of their Subsidiaries, (b) the Certificate or Articles of
Incorporation, Bylaws or operating agreements of Borrowers or any of their
Subsidiaries or (c) any order, judgment or decree of any court or other agency
of government binding on Borrowers or any of their Subsidiaries, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Con tractual Obligation of Borrowers or any of their
Subsidiaries (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of Borrowers or any of their Subsidiaries
(other than any Liens created under any of the Loan Documents in favor of
Lender), or (iv) require any approval of stockholders or any approval or consent
of any Person under any Contractual Obligation of Borrowers or any of their
Subsidiaries except for such approvals or consents which will be obtained on or
before the Closing Date and disclosed in writing to Lender, except for such
violations, conflicts, approvals and consents the failure of which to obtain
could reasonably be expected to have a Material Adverse Effect.
C. Governmental Consents. The execution, delivery and performance by
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents do not and
will not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body.
D. Binding Obligation. Each of the Loan Documents and Project Documents
has been duly executed and delivered by Loan Parties that are parties hereto or
thereto, as applicable, and is the legally valid and binding obligation of Loan
Parties, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bank ruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting credi tors' rights generally
or by equitable principles relating to enforceability, whether brought in a
proceeding in equity or at law.
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E. Valid Issuance of Bank Notes, Mortgage Notes and Subordinated Notes.
Borrowers have the corporate or limited liability company power and authority to
issue the Bank Notes, Mortgage Notes and the Subordinated Notes. The Bank Notes,
Mortgage Notes and the Subordinated Notes, when issued and paid for, will be the
legally valid and binding obligations of Borrowers, enforceable against
Borrowers in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability. The issuance and sale of Bank Notes, Mortgage Notes and the
Subordinated Notes, either (a) have been registered or qualified under
applicable federal and state securities laws or (b) are exempt therefrom. The
Loans and all other monetary Obligations hereunder are and will be within the
definition of Senior Debt included in such provisions.
4.3 Financial Condition.
Borrowers have heretofore delivered to Lender, at Lender's request, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of LVSI and its Subsidiaries as at December 31,
1996 and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of LVSI and its Subsidiaries for the Fiscal
Year then ended and (ii) the unaudited consolidated and consolidating balance
sheets of LVSI and its Subsidiaries as at June 30, 1997 and the related
unaudited consolidated and consolidating statements of income, stockholders'
equity and cash flows of LVSI and its Subsidiaries for the six months then
ended. All such statements were prepared in conformity with GAAP and fairly
present, in all material respects, the financial position (on a consolidated
and, where applicable, consolidating basis) of the entities described in such
financial statements as at the respective dates thereof and the results of
operations and cash flows (on a consolidated and, where applicable,
consolidating basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and normal year-end adjustments. Except for
obligations under the Operative Documents, Borrowers do not (and will not
following the funding of the initial Loans) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or forward or
long-term commitment that is not reflected in the foregoing financial statements
or the notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, financial condition or prospects of
Borrowers and their Subsidiaries taken as a whole.
4.4 No Material Adverse Change; No Restricted Junior Payments.
Since June 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Except as set forth
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in Schedule 4.4, neither of Borrowers nor any of their Subsidiaries have
directly or indirectly declared, ordered, paid or made, or set apart any sum or
property for, any Restricted Junior Payment or agreed to do so except as
permitted by subsection 6.5 and the repayment of the Interim Construction Loan
on the Closing Date.
4.5 Title to Properties; Liens; Real Property.
A. Title to Properties; Liens. Borrowers and their Subsidiaries
have (i) good marketable and insurable fee simple title to (in the case of fee
interests in real property), (ii) valid leasehold interests in (in the case of
leasehold interests in real or personal property), or (iii) good title to (in
the case of all other personal property), all of their respective material
properties and assets reflected in the financial statements referred to in
subsection 4.3 or in the most recent financial statements delivered pursuant to
subsection 5.1, in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 6.6. Except as permitted by this Agreement, all such
properties and assets are held free and clear of Liens.
B. Real Property. As of the Closing Date, Schedule 4.5 hereto
contains a true, accurate and complete list of (i) all material properties owned
by Borrowers or any of their Subsidiaries and (ii) all material leases,
subleases or assignments of leases (together with all amendments, modifications,
supplements, renewals or extensions of any thereof) affecting real estate of
properties owned by Borrowers or any of their Subsidiaries regardless of whether
a Borrower or such Subsidiary is the landlord or tenant (whether directly or as
an assignee or successor in interest) under such lease, sublease or assignment.
Except as specified in Schedule 4.5 hereto, each agreement listed in clause (ii)
of the immediately preceding sentence is in full force and effect and Borrowers
do not have knowledge of any default that has occurred and is continuing
thereunder, and each such agreement constitutes the legally valid and binding
obligation of each applicable Borrower, enforceable against such Borrower in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles except to the extent that
the failure of such agreement to be in full force and effect could not
reasonably be expected to have a Material Adverse Effect.
4.6 Litigation; Adverse Facts.
Except as set forth in Schedule 4.6 hereto, there are no actions,
suits, proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of Borrowers or any of their Subsidiaries) at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
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or foreign (including any Environmental Claims) that are pending or, to the
knowledge of Borrowers, threatened against or affecting Borrowers or any of
their Subsidiaries or any property of Borrowers or any of their Subsidiaries and
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. Neither Borrowers nor any of their Subsidiaries
(i) is in violation of any applicable laws (including Environmental Laws) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, or (ii) is subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
4.7 Payment of Taxes.
Except to the extent permitted by subsection 5.3, all tax returns and
reports of Borrowers required to be filed by them have been timely filed, and
all taxes shown on such tax returns to be due and payable and all material
assessments, fees and other governmental charges upon Borrowers and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Borrowers know of no proposed
tax assessment against Borrowers or any of their Subsidiaries which is not being
actively contested by Borrowers or such Subsidiary in good faith and by
appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have been
made or provided therefor.
4.8 Performance of Agreements; Materially Adverse Agreements; Material
Contracts.
A. Neither Borrowers nor any of their Subsidiaries is in default in the
performance, observance or fulfillment of any of the Contractual Obligations,
covenants or conditions contained in any of its Contractual Obligations, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default, except where the consequences of such default
or defaults, if any, would not have a Material Adverse Effect.
B. Schedule 4.8 contains a true, correct and complete list of all the
Material Contracts in effect on the Closing Date. Except as described on
Schedule 4.8, all such Material Contracts are, to the knowledge of Borrowers, in
full force and effect and no material defaults currently exist thereunder.
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4.9 Governmental Regulation.
Neither Borrowers nor any of their Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, The Federal
Power Act, or the Interstate Commerce Act or registration under the Investment
Company Act of 1940 or under any other federal or state statute or regulation
which may limit its ability to incur Indebtedness other than the Nevada Gaming
Laws or which may otherwise render all or any portion of the Obligations
unenforceable. Incurrence of the Obligations under the Loan Documents complies
with all applicable provisions of the Nevada Gaming Laws.
4.10 Securities Activities.
Neither Borrowers nor any of their Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.
4.11 Employee Benefit Plans.
A. Borrowers, each of their Subsidiaries and each of their
respective ERISA Affiliates are in material compliance with all applicable
provisions and requirements of ERISA and the regulations thereunder with respect
to each Employee Benefit Plan and have performed all their obligations under
each Employee Benefit Plan. Each Employee Benefit Plan which is intended to
qualify under Section 401(a) of the Internal Revenue Code is so qualified.
B. No ERISA Event has occurred or is reasonably expected to occur
which has resulted or would be reasonably likely to result in a liability in the
aggregate amount of $1,000,000 or more.
C. Except to the extent required under Section 4980B of the
Internal Revenue Code or except as set forth in Schedule 4.11 hereto, no
Employee Benefit Plan provides health or welfare benefits (through the purchase
of insurance or otherwise) for any retired or former employee of Borrowers, any
of their Subsidiaries or any of their respective ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $1,000,000.
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E. As of the most recent valuation date for each Multiemployer
Plan for which the actuarial report is available, the potential liability of
Borrowers, their Subsidiaries and their respective ERISA Affiliates for a
complete withdrawal from such Multiemployer Plan (within the meaning of Section
4203 of ERISA), when aggregated with such potential liability for a complete
withdrawal from all Multiemployer Plans, based on information available pursuant
to Section 4221(e) of ERISA, does not exceed $1,000,000.
4.12 Certain Fees.
No broker's or finder's fee or commission will be payable with
respect to this Agreement or any of the transactions contemplated hereby except
as set forth on Schedule 4.12 (other than fees payable to Lender under
subsection 2.3 and fees payable to the Permanent Mall Lender), and each Borrower
hereby indemnifies Lender against, and agrees that it will hold Lender harmless
from, any claim, demand or liability for any such broker's or finder's fees
alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
4.13 Environmental Protection.
Except as set forth in Schedule 4.13 hereto:
(i) neither Borrowers nor any of their Subsidiaries nor any of
their respective Facilities or operations relating to the Site or the
Project are subject to any outstanding written order, consent decree or
settlement agreement with any Person relating to (a) any Environmental
Law, (b) any Environmental Claim, or (c) any Hazardous Materials
Activity;
(ii) neither Borrowers nor any of their Subsidiaries has received
any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. ss. 9604) or any comparable state law;
(iii) there are and, to Borrowers' knowledge, have been no
conditions, occurrences, or Hazardous Materials Activities on the Site
or any other Facility relating to the Project which could reasonably be
expected to form the basis of an Environmental Claim against Borrowers
or any of their Subsidiaries;
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(iv) neither Borrowers nor any of their Subsidiaries nor, to
Borrowers' knowledge, any predecessor of Borrowers or any of their
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment of Hazardous Materials at any Facility, and
none of Borrowers' or any of their Subsidiaries' operations involves the
generation, transportation, treatment, storage or disposal of hazardous
waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent;
(v) compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws will not,
individually or in the aggregate, have a reasonable possibility of
giving rise to a Material Adverse Effect.
Notwithstanding anything in this subsection 4.13 to the contrary,
no event or condition has occurred or is occurring with respect to Borrowers or
any of their Subsidiaries relating to any Environmental Law, any Release of
Hazardous Materials, or any Hazardous Materials Activity, including any matter
disclosed on Schedule 4.13 hereto, which individually or in the aggregate has
had or could reasonably be expected to have a Material Adverse Effect.
4.14 Employee Matters.
There is no strike or work stoppage in existence or threatened
involving Borrowers that could reasonably be expected to have a Material Adverse
Effect.
4.15 Solvency.
Each Borrower is Solvent.
4.16 Matters Relating to Collateral.
A. Creation, Perfection and Priority of Liens. The execution and
delivery of the Collateral Documents by Borrowers, their Related Parties and
their Affiliates, together with the actions taken on or prior to the date hereof
pursuant to subsections 3.1B and 3.1C are effective to create in favor of
Lender, as security for the respective Secured Obligations (as defined in the
applicable Collateral Document in respect of any Collateral), a valid and
perfected First Priority Lien on all of the Collateral, and all filings and
other actions necessary to perfect and maintain the perfection and priority
status of such Liens have been duly made or taken and remain in full force and
effect, other than the filing of any UCC financing statements delivered to
Lender for filing (but not yet filed) and the periodic filing of UCC
continuation statements in respect of UCC financing statements filed by or on
behalf of Lender.
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B. Permits. No authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
either (i) the pledge or grant by Borrowers of the Liens purported to be created
in favor of Lender pursuant to any of the Collateral Documents or (ii) the
exercise by Lender of any rights or remedies in respect of any Collateral
(whether specifically granted or created pursuant to any of the Collateral
Documents or created or provided for by applicable law), except for filings or
recordings contemplated by subsection 4.16A or as set forth in Schedule 4.16B.
C. Absence of Third-Party Filings. Except such as may have been filed in
favor of Lender as contemplated by subsection 4.16A or filed to perfect a Lien
permitted under clauses (iii) through (viii) inclusive of subsection 6.2, no
effective UCC financing statement, fixture filing or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office.
D. Information Regarding Collateral. The Collateral comprises all of the
real estate, personal properties, contract rights and other assets related to
construction and operation of the Mall, as contemplated by the Project. All
information supplied to Lender by or on behalf of Borrowers with respect to any
of the Collateral (in each case taken as a whole with respect to any particular
Collateral) is accurate and complete in all material respects.
Section 5. BORROWERS' AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as the Commitment
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Lender shall otherwise give its prior written
consent, Borrowers shall perform, and shall cause each of their Subsidiaries to
perform (x) prior to Completion Date, all covenants set forth in Article V of
the Disbursement Agreement and the covenants set forth in subsections 5.3, 5.5,
5.9, 5.11 and 5.12, inclusive, below and (y) on and after Completion Date all
covenants set forth in this Section 5.
5.1 Financial Statements and Other Reports.
Borrowers will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with GAAP. Borrowers will deliver to
Lender:
(i) Monthly Financials: as soon as available and in any event
within 30 days after the end of each month, the consolidated and
consolidating balance sheets of LVSI
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and its Subsidiaries as at the end of such month and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of LVSI and its Subsidiaries for such month and
for the period from the beginning of the then current Fiscal Year to the
end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous
Fiscal Year and the corresponding figures from the Financial Plan for
the current Fiscal Year, to the extent prepared on a monthly basis, all
in reasonable detail and certified by the chief financial officer of
LVSI, on behalf of LVSI that they fairly present, in all material
respects, the financial condition of LVSI and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated, subject to changes resulting from audit and
normal year-end adjustments.
(ii) Quarterly Financials: as soon as available and in any event
within 60 days after the end of each Fiscal Quarter,
(a) the consolidated and consolidating balance sheets of
LVSI and its Subsidiaries as at the end of such Fiscal Quarter
and the related consolidated and consolidating statements of
income, stockholders' equity and cash flows of LVSI and its
Subsidiaries for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the
previous Fiscal Year, all in reasonable detail and certified by
the chief financial officer of Borrowers that they fairly
present, in all material respects, the financial condition of
LVSI and its subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal
year-end adjustments,
(b) the consolidated balance sheets of LVSI and its
Subsidiaries as at the end of such Fiscal Quarter and the
related consolidated statements of income, stockholders' equity
and cash flows of LVSI and its Subsidiaries for such Fiscal
Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, setting
forth in each case in comparative form the corresponding figures
for the corresponding periods of the previous Fiscal Year and
the corresponding figures from the Financial Plan for the
current Fiscal Year, all in reasonable detail and certified by
the chief financial officer of LVSI that they fairly present, in
all material respects, the financial condition of LVSI and its
Subsidiaries as at the dates indicated and the results of their
operations and their
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cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments;
(c) the consolidated balance sheets of Mall Subsidiary
and its subsidiaries as at the end of such Fiscal Quarter and
the related consolidated statements of income, stockholders'
equity and cash flows of Mall Subsidiary and its subsidiaries
for such Fiscal Quarter and for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter,
setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal
Year, all in reasonable detail and certified by the chief
financial officer of Mall Subsidiary that they fairly present,
in all material respects, the financial condition of Mall
Subsidiary and its subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and
normal year-end adjustments; and
(d) a narrative report describing the operations of LVSI
and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Quarter and for the period
from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter;
(iii) Year-End Financials: as soon as available and in any event
within 90 days after the end of each Fiscal Year,
(a) the consolidated and consolidating balance sheets of
LVSI and its Subsidiaries as at the end of such Fiscal Year and
the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of LVSI and its subsidiaries
for such Fiscal Year, setting forth in each case in compara tive
form the corresponding figures for the previous Fiscal Year, all
in reasonable detail and certified by the chief financial
officer of LVSI that they fairly present, in all material
respects, the financial condition of LVSI and its subsidiaries
as at the dates indicated and the results of their operations
and their cash flows for the periods indicated;
(b) the consolidated balance sheets of LVSI and its
Subsidiaries as at the end of such Fiscal Year and the related
consolidated and consolidating statements of income,
stockholders' equity and cash flows of LVSI and its Subsidiaries
for such Fiscal Year, setting forth in each case in comparative
form the corresponding
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figures for the previous Fiscal Year and the corresponding
figures from the Financial Plan for the Fiscal Year covered by
such financial statements, all in reasonable detail and
certified by the chief financial officer of LVSI that they
fairly present, in all material respects, the financial
condition of LVSI and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the
periods indicated;
(c) the consolidated balance sheets of Mall Subsidiary
and its subsidiaries as at the end of such Fiscal Year and the
related consolidated statements of income, stockholders' equity
and cash flows of Mall Subsidiary and its subsidiaries for such
Fiscal Year, setting forth in each case in compara tive form the
corresponding figures for the previous Fiscal Year, all in
reasonable detail and certified by the chief financial officer
of Mall Subsidiary that they fairly present, in all material
respects, the financial condition of Mall Subsidiary and its
subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated;
(d) a narrative report describing the operations of LVSI
and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Year; and
(e) in the case of such consolidated financial
statements specified in subdivisions (a) to (c) above, a report
thereon of Price Waterhouse LLP or other independent certified
public accountants of recognized national standing selected by
Borrowers and reasonably satisfactory to Lender, which report
shall be unqualified as to scope of audit, shall express no
doubts about the ability of the Persons covered thereby to
continue as a going concern, and shall state that such
consolidated financial statements fairly present, in all
material respects, the consolidated financial position of LVSI
and its Subsidiaries (including LVSI and its Subsidiaries and
Mall Subsidiary its Subsidiaries respectively) as at the dates
indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied
on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination
by such accountants in connection with such consolidated
financial statements has been made in accordance with generally
accepted auditing standards;
(iv) Officers' Certificates: together with each delivery of
financial statements of LVSI and its Subsidiaries pursuant to
subdivisions (i), (ii) and (iii) above, an Officers' Certificate of
LVSI stating that the signers have reviewed the terms of this Agreement
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and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of LVSI and its
Subsidiaries (including, to the extent applicable, Mall Subsidiary, Mall
Manager, Mall Direct Holdings, and their respective subsidiaries) during
the accounting period covered by such financial statements and that such
review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any condition
or event that constitutes an Event of Default or Potential Event of
Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Borrowers have taken, is taking and proposes to take with respect
thereto;
(v) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 4.3, the
consolidated financial statements of LVSI and its Subsidiaries delivered
pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection
5.1 will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions
had no such change in accounting principles and policies been made, then
(a) together with the first delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 5.1 following
such change, consolidated financial statements of LVSI and its
Subsidiaries for (y) the current Fiscal Year to the effective date of
such change and (z) the two full Fiscal Years immediately preceding the
Fiscal Year in which such change is made, in each case prepared on a pro
forma basis as if such change had been in effect during such periods;
and (b) together with each delivery of financial statements for LVSI and
its Subsidiaries pursuant to subdivision (i), (ii), (iii) or (xiii) of
this subsection 5.1 following such change, a written statement of the
chief accounting officer or chief financial officer of LVSI setting
forth the differences which would have resulted if such financial
statements had been prepared without giving effect to such change;
(vi) Accountants' Certification: together with each delivery of
consolidated financial statements pursuant to subdivision (iii) above, a
written statement by the independent certified public accountants giving
the report thereon (a) stating that their audit examination has included
a review of the terms of this Agreement and the other Loan Documents as
they relate to accounting matters, (b) stating whether, in connection
with their audit examination, any condition or event that constitutes an
Event of Default or Potential Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that
such accountants shall not be liable by reason of any failure to obtain
knowledge of any such Event of Default or Potential Event of Default
that would not be
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disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention
that causes them to believe that the information contained in the
certificate delivered therewith pursuant to subdivision (iv) above is
not correct;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to Borrowers by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of LVSI and its subsidiaries made by such
accountants, including any comment letter submitted by such accountants
to management in connection with their annual audit;
(viii) SEC Filings, Press Releases and Other Financial Reports:
promptly upon their becoming available, copies of (a) all financial
statements, reports, notices and proxy statements sent or made available
generally by Borrowers or any of their Subsidiaries to their security
holders, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses,
if any, filed by Borrowers or any of their Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or
any governmental or private regulatory authority, (c) all press releases
and other statements made available generally by Borrowers or any of
their Subsidiaries to the public concerning material develop ments in
the business of Borrowers and their Subsidiaries and (d) any financial
statements and reports concerning any Subsidiaries of Borrowers prepared
for or delivered to any third party lender;
(ix) Events of Default, etc.: promptly upon any officer of
Borrowers obtain ing knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice or taken any other
action with respect to a claimed Event of Default or Potential Event of
Default, (b) that any Person has given any notice to Borrowers and their
Subsidiaries or taken any other action with respect to a claimed default
or event or condition of the type referred to in subsection 7.2, (c) of
any condition or event that would be required to be disclosed in a
current report filed by Borrowers with the Securities and Exchange
Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect
on the date hereof) if Borrowers were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature
and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
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default, event or condition, and what action Borrowers have taken, are
taking and propose to take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any
officer of Borrowers obtaining knowledge of (X) the non-frivolous
institution of, or threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Borrowers and their Subsidiaries, or
any property of Borrowers and their Subsidiaries (collectively,
"Proceedings") not previously disclosed in writing by Borrowers to
Lender or (Y) any material development in any Proceeding that, in any
case:
(1) if adversely determined, has a reasonable possibility
of giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of,
the transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Borrowers to enable Lender and its counsel to
evaluate such matters; and (b) within twenty days after the end of each
Fiscal Quarter, a schedule of all Proceedings involving an alleged
liability of, or claims against or affecting, Borrowers or any of their
Subsidiaries equal to or greater than $1,000,000, and promptly after
request by Lender such other information as may be reasonably requested
by Lender to enable Lender and its counsel to evaluate any of such
Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the occurrence
of or forthcoming occurrence of any ERISA Event, a written notice
specifying the nature thereof, what action Borrowers or any of their
respective ERISA Affiliates has taken, is taking or proposes to take
with respect thereto and, when known, any action taken or threatened by
the Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a)
each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Borrowers, any of their Subsidiaries or any of their
respective ERISA Affiliates with the Internal Revenue Service with
respect to each Pension Plan; (b) all notices received by Borrowers or
any of their respective ERISA Affiliates from a Multiemployer Plan
sponsor concerning an
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ERISA Event; and (c) copies of such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lender shall
reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event
no later than Completion Date and 30 days prior to the beginning of each
Fiscal Year thereafter, a consolidated and consolidating plan and
financial forecast for such Fiscal Year (or portion thereof from
Completion Date through the end of such Fiscal Year) and each succeeding
Fiscal Year through Maturity Date (the "Financial Plan" for such Fiscal
Years), including (a) forecasted consolidated and consolidating balance
sheets and forecasted consolidated and consolidating statements of
income and cash flows of LVSI and its Subsidiaries for each such Fiscal
Year, together with an explanation of the assumptions on which such
forecasts are based, (b) forecasted consolidated and consolidating
statements of income and cash flows of LVSI and its Subsidiaries for
each month of each such Fiscal Year, together with an explanation of the
assumptions on which such forecasts are based, (c) such other
information and projections as any Lender may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by the
last day of each Fiscal Year, a report in form and substance reasonably
satisfactory to Lender outlining all material insurance coverage
maintained as of the date of such report by Borrowers and their
Subsidiaries and all material insurance coverage planned to be
maintained by Borrowers and their Subsidiaries in the immediately
succeeding Fiscal Year;
(xv) Board of Directors: with reasonable promptness, written
notice of any change in the members of the Board of Directors of
Borrowers;
(xvi) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of either of Borrowers, a written notice setting forth with
respect to such Person (a) the date on which such Person became a
Subsidiary of either of Borrowers and (b) all of the data required to be
set forth in Schedule 4.1 hereto with respect to all Subsidiaries of
either of Borrowers (it being understood that such written notice shall
be deemed to supplement Schedule 4.1 hereto for all purposes of this
Agreement);
(xvii) Material Contracts: promptly, and in any event within ten
Business Days after any Material Contract of Borrowers or any of their
Subsidiaries is terminated or amended in a manner that is materially
adverse to Borrowers or any of their Subsidiaries or any new Material
Contract is entered into, or upon becoming aware of any material default
by any Party under a Material Contract, a written statement describing
such event
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with copies of such material amendments or new contracts, and an
explanation of any actions being taken with respect thereto;
(xviii) UCC Search Report: As promptly as practicable after the
date of delivery to Lender of any UCC financing statement executed by
any Loan Party pursuant to subsection 5.12, copies of completed UCC
searches evidencing the proper filing, recording and indexing of all
such UCC financing statement and listing all other effective financing
statements that name such Loan Party as debtor, together with copies of
all such other financing statements not previously delivered to Lender
by or on behalf of such Loan Party;
(xix) Notices under Operative Documents: promptly upon receipt,
copies of all notices provided to Borrowers or their Affiliates pursuant
to any Operative Documents relating to material defaults or material
delays and promptly upon execution and delivery thereof, copies of all
amendments to any of the Operative Documents; and
(xx) Other Information: with reasonable promptness, such other
information and data with respect to Borrowers or any of their
Subsidiaries as from time to time may be reasonably requested by any
Lender.
5.2 Corporate Existence, etc.
Borrowers will, and will cause each of their Subsidiaries to, at
all times preserve and keep in full force and effect their corporate or limited
liability company existence and all rights and franchises material to its
business; provided, however that Borrowers and their Subsidiaries may merge or
consolidate as permitted pursuant to subsection 6.6 of this Agreement and
provided, further, that no Borrower nor any such Subsidiary shall be required to
preserve any such right or franchise if the Board of Directors of the applicable
Borrower or Subsidiary (or the managing member thereof, if applicable) shall
determine (and shall so notify Lender) that the preservation thereof is no
longer desirable in the conduct of the business of such Borrower or Subsidiary,
as the case may be, and that the loss thereof is not disadvantageous in any
material respect to Borrowers and their Subsidiaries or Lender.
5.3 Payment of Taxes and Claims; Tax Consolidation.
A. Borrowers will, and will cause each of their Subsidiaries to,
pay all material taxes, assessments and other governmental charges imposed upon
it or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty accrues thereon, and all material
claims (including claims for labor, services, materials and
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supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; provided that no such
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long as
(1) such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and (2) in the case of a
charge or claim which has or may become a Lien against any of the Collateral,
such contest proceedings conclusively operate to stay the sale of any portion of
the Collateral to satisfy such charge or claim.
B. Borrowers will not, nor will they permit any of their
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person (other than Borrowers or any of their Subsidiaries)
unless Borrower and its Subsidiaries shall have entered into, a tax sharing
agreement with such Person, in form and substance satisfactory to Lender.
5.4 Maintenance of Properties; Insurance; Application of Net Loss Proceeds.
A. Maintenance of Properties. Borrowers will, and will cause each
of their Subsidiaries to, maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties used or useful in the business of Borrowers and their Subsidiaries
and from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof except to the extent that Borrowers determine
in good faith not to maintain, repair, renew or replace such property if such
property is no longer desirable in the conduct of their business and the failure
to do so is not disadvantageous in any material respect to Borrowers and their
Subsidiaries or Lender.
B. Insurance. Borrowers will maintain or cause to be maintained,
with financially sound and reputable insurers, such public liability insurance,
third party property damage insurance, business interruption insurance and
casualty insurance with respect to liabilities, losses or damage in respect of
the assets, properties and businesses of Borrowers, and their Subsidiaries as
may customarily be carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses, in each
case in such amounts (giving effect to self-insurance), with such deductibles,
covering such risks and otherwise on such terms and conditions as shall be
customary for corporations similarly situated in the industry. Without limiting
the generality of the foregoing, Borrowers will maintain or cause to be
maintained the insurance coverage required to be maintained under the
Disbursement Agreement and the Cooperation Agreement, such insurance coverage to
be provided by such insurance provider, in such amounts with such deductibles
and covering such risks as are all times required under the Disbursement
Agreement and the Cooperation Agreement and to include, if the Mortgaged
Property is located in an area designated by the Federal Emergency
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Management Agency as having special flood or mud slide hazards, flood insurance
in compliance with any applicable regulations of the Board of Governors of the
Federal Reserve System. Within thirty (30) days after the Closing Date,
Borrowers shall deliver the insurance certificates required pursuant to the
Disbursement Agreement.
C. Application of Net Loss Proceeds.
Borrowers shall (i) apply Loss Proceeds and Liquidated Damages to
restore, replace or rebuild the Project in accordance with the Cooperation
Agreement, (ii) apply Liquidated Damages, to repay any Completion Guaranty Loan
in accordance with the Cooperation Agreement but subject to Section 6.5 hereof
and the Adelson Intercreditor Agreement, and (iii) apply any Loss Proceeds and
Liquidated Damages not applied as provided in clauses (i) and (ii) to prepay the
Loans in accordance with the Cooperation Agreement and subsection 2.4B hereof.
Lender shall, and Borrowers hereby authorize Lender to, apply such Loss Proceeds
and Liquidated Damages to prepay the Loans as provided in subsection 2.4B.
5.5 Inspection; Lender Meeting.
Inspection Rights. Borrowers shall, and shall cause each of their
Subsidiaries to, permit any authorized representatives designated by Lender to
visit and inspect any of the properties of Borrowers and their Subsidiaries, to
inspect, copy and take extracts from its and their financial and accounting
records, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants, if requested by Lender
(provided that any Borrower may, if it so chooses, be present at or participate
in any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may reasonably be requested.
5.6 Compliance with Laws, etc.; Permits
A. Borrowers shall and shall cause each of their Subsidiaries and
all other Persons on or occupying any Facilities to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including all Environmental Laws), noncompliance with
which could reasonably be expected to cause, individually or in the aggregate, a
Material Adverse Effect.
B. Borrowers shall, and shall cause each of their Subsidiaries
to, from time to time obtain, maintain, retain, observe, keep in full force and
effect and comply in all material respects with the terms, conditions and
provisions of all Permits as shall now or hereafter be
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necessary under applicable laws except any thereof the noncompliance with which
could not reasonably be expected to have a Material Adverse Effect.
5.7 Environmental Review and Investigation, Disclosure, Etc.; Borrowers'
Actions Regarding Hazardous Materials Activities, Environmental Claims
and Violations of Environmental Laws.
A. Environmental Review and Investigation. Borrowers agree that
Lender may, from time to time and in its reasonable discretion, (i) retain, at
Borrowers' expense, an independent professional consultant to review any
environmental audits, investigations, analyses and reports relating to Hazardous
Materials in respect of the Site or the Project prepared by or for Borrowers and
(ii) conduct their own investigation of any Facility; provided that, in the case
of any Facility no longer owned, leased, operated or used by Borrowers or any of
their Subsidiaries, Borrowers shall only be obligated to use their best efforts
to obtain permission for Lender's professional consultant to conduct an
investigation of such Facility. For purposes of conducting such a review and/or
investigation, Borrowers hereby grant to Lender and its agents, employees,
consultants and contractors the right to enter into or onto any Facilities
currently owned, leased, operated or used by Borrowers or any of their
Subsidiaries and to perform such tests on such property (including taking
samples of soil, groundwater and suspected asbestos-containing materials) as are
reasonably necessary in connection therewith. Any such investigation of any
Facility shall be conducted, unless otherwise agreed to by Borrowers and Lender,
during normal business hours and, to the extent reasonably practicable, shall be
conducted so as not to interfere with the ongoing operations at such Facility or
to cause any damage or loss to any property at such Facility. Borrowers and
Lender hereby acknowledge and agree that any report of any investigation
conducted at the request of Lender pursuant to this subsection 5.7A will be
obtained and shall be used by Lender for the purposes of Lender's internal
credit decisions, to monitor and police the Loans and to protect Lender's
security interests, if any, created by the Loan Documents. Lender agrees to
deliver a copy of any such report to Borrowers with the understanding that
Borrowers acknowledge and agree that (x) they will indemnify and hold harmless
Lender from any costs, losses or liabilities relating to Borrowers' use of or
reliance on such report, (y) Lender makes no representation or warranty with
respect to such report, and (z) by delivering such report to Borrowers, Lender
is not requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
B. Environmental Disclosure. Borrowers will deliver to Lender:
(i) Environmental Audits and Reports. As soon as practicable
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Borrowers or any of their
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Subsidiaries or by independent consultants, governmental authorities or
any other Persons, with respect to significant environmental matters at
any Facility or with respect to any Environmental Claims;
(ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly
upon the occurrence thereof, written notice describing in reasonable
detail (a) any Release required to be reported to any federal, state or
local governmental or regulatory agency under any applicable
Environmental Laws, (b) any remedial action taken by Borrowers or any
other Person in response to (1) any Hazardous Materials Activities the
existence of which has a reasonable possibility of resulting in one or
more Environmental Claims having, individually or in the aggregate, a
Material Adverse Effect, or (2) any Environmental Claims that,
individually or in the aggregate, have a reasonable possibility of
resulting in a Material Adverse Effect.
(iii) Written Communications Regarding Environmental Claims,
Releases, Etc. As soon as practicable following the sending or receipt
thereof by Borrowers or any of their Subsidiaries, a copy of any and all
written communications with respect to (a) any Environmental Claims
that, individually or in the aggregate, have a reasonable possibility of
giving rise to a Material Adverse Effect, (b) any Release required to be
reported to any federal, state or local governmental or regulatory
agency, and (c) any request for information from any governmental agency
that suggests such agency is investigating whether Borrowers or any of
their Subsidiaries may be potentially responsible for any Hazardous
Materials Activity.
(iv) Notice of Certain Proposed Actions Having Environmental
Impact. Prompt written notice describing in reasonable detail (a) any
proposed acquisition of stock, assets, or property by Borrowers or any
of their Subsidiaries that could reasonably be expected to (1) expose
Borrowers or any of their Subsidiaries to, or result in, Environmental
Claims that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or (2) affect the ability of
Borrowers or any of their Subsidiaries to maintain in full force and
effect all material Permits required under any Environmental Laws for
their respective operations and (b) any proposed action to be taken by
Borrowers or any of their Subsidiaries to modify current operations in a
manner that could reasonably be expected to subject Borrowers or any of
their Subsidiaries to any material additional obligations or
requirements under any Environmental Laws that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.
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(v) Other Information. With reasonable promptness, such other
documents and information as from time to time may be reasonably
requested by Lender in relation to any matters disclosed pursuant to
this subsection 5.7.
C. Borrowers' Actions Regarding Hazardous Materials Activities,
Environmental Claims and Violations of Environmental Laws.
(i) Remedial Actions Relating to Hazardous Materials Activities.
Borrowers shall promptly undertake, and shall cause each of their
Subsidiaries promptly to undertake, any and all investigations, studies,
sampling, testing, abatement, cleanup, removal, remediation or other
response actions necessary to remove, remediate, clean up or abate any
Hazardous Materials Activity on, under or about any Facility that is in
violation of any Environmental Laws or that presents a material risk of
giving rise to an Environmental Claim. In the event Borrowers or any of
their Subsidiaries undertake any such action with respect to any
Hazardous Materials, Borrowers or such Subsidiary shall conduct and
complete such action in compliance with all applicable Environmental
Laws and in accordance with the policies, orders and directives of all
federal, state and local governmental authorities except when, and only
to the extent that, Borrowers' or such Subsidiary's liability with
respect to such Hazardous Materials Activity is being contested in good
faith by Borrowers or such Subsidiary.
(ii) Actions with Respect to Environmental Claims and Violations
of Environmental Laws. Borrowers shall promptly take, and shall cause
each of their Subsidiaries promptly to take, any and all actions
necessary to (i) cure any material violation of applicable Environmental
Laws by Borrowers or their Subsidiaries and (ii) make an appropriate
response to any Environmental Claim against Borrowers or any of their
Subsidiaries and discharge any obligations it may have to any Person
thereunder.
5.8 Compliance with Material Contracts.
Borrowers shall, and shall cause each of their Subsidiaries to,
comply, duly and promptly, in all material respects with its respective
obligations and enforce all of its respective rights under all Material
Contracts, including all Operative Documents except where the failure to comply
could not reasonably be expected to have a Material Adverse Effect.
5.9 Certain Post Closing Obligations.
A. Mall Transfer. On the Mall Release Date, Borrowers shall, and
shall cause Mall Construction Subsidiary, Mall Subsidiary and Mall Intermediate
Holdings to, take all
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actions as may be necessary to transfer the Mall Collateral to Mall Subsidiary
and Lender shall release Borrowers from their Obligations other than as set
forth in this subsection 5.9A. Borrowers further covenant and agree that, if all
Obligations of Borrowers to Lender have not been paid in full as of the Mall
Release Date Borrowers will take all actions necessary to and will cause Mall
Subsidiary to: (i) be bound by all terms and provisions of the Loan Documents as
though they had originally been executed and delivered by the Mall Subsidiary,
(ii) deliver to Lender, at Borrowers' expense, title policy date-downs insuring
Lender's interests under the Leasehold Deed of Trust and the Deed of Trust in
form and substance satisfactory to Lender, (iii) execute and deliver any
documents, including, without limitation, bills of sale and assignment
agreements, required to vest in Lender a security interest in and, if requested
by Lender, Mall Subsidiary, all right, title and interest of Borrowers in and to
all warranties and guaranties by the Construction Manager, Contractors and
Subcontractors with respect to the Mall, (iv) to execute, deliver and file all
UCC financing statements and assignment statements necessary to vest in Lender a
first priority perfected security interest in all property, rights and other
assets transferred by Mall Construction Subsidiary to Mall Subsidiary,
including, without limitation, the Interim Mall Proceeds Account, the Mall
Leasing Commissions Reserve Account, the Mall Tenant Improvements Reserve
Account and the Mall Retainage/Punch List Escrow (as defined in the Disbursement
Agreement) (the "Mall Assets"), and (v) to take all other actions necessary in
Lender's sole discretion in order to effectuate such assumption of Obligations
and other actions by or on behalf of the Mall Subsidiary. On the Mall Release
Date, Lender shall release VCR, LVSI and all of their related Affiliates (other
than Mall Subsidiary) from any further obligations with respect to the
Obligations.
B. Mall Commercial Subdivision. Borrowers shall use their best efforts
to (i) cause the commercial subdivision map for the Mall Space to be approved by
all applicable Governmental Authorities as soon as practicable following the
Closing Date and (ii) if such commercial subdivision map is not approved by
Governmental Authorities to have the Mall Space approved as a separate legal tax
parcel by all applicable Governmental Authorities and (iii) deliver a legal
opinion to Lender confirming that after giving effect to the transactions
described in either of clauses (i) or (ii) the Mall Space will be a separate
legal parcel within the meaning and in accordance with Nevada Revised Statute.
5.10 Payment of Liens.
A. Removal by Borrowers. In the event that, notwithstanding the
covenants contained in subsection 6.2, a Lien not otherwise permitted under
subsection 6.2 may encumber the Mortgaged Property or other item of Collateral
or any portion thereof, Borrowers shall promptly discharge or cause to be
discharged by payment to the lienor or lien claimant or promptly secure removal
by bonding or deposit with the county clerk or otherwise or, at Lender's
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option, and if obtainable promptly obtain title insurance against, any such Lien
or mechanics' or materialmen's claims of lien filed or otherwise asserted
against the Mortgaged Property or any other item of Collateral or any portion
thereof within 60 days after the date of notice thereof; provided that,
compliance with the provisions of this subsection 5.11 shall not be deemed to
constitute a waiver of the provisions of subsection 6.2. Borrowers shall exhibit
to Lender upon request all receipts or other satisfactory evidence of payment,
bonding, deposit of taxes, assessments, Liens or any other item which may cause
any such Lien to be filed against the Mortgaged Property or other item of
Collateral of any Borrower or any of its Subsidiaries. Each Borrower and each of
its Subsidiaries shall fully preserve the Lien and the priority of each of the
Deed of Trust and the other Collateral Documents without cost or expense to
Lender.
B. Removal by Lender. If any Borrower or any of its Subsidiaries fails
to promptly discharge, remove or bond off any such Lien or mechanics' or
materialmen's claim of lien as described above, which is not being contested by
either Borrower or any of its Subsidiaries in good faith by appropriate
proceedings promptly instituted and diligently conducted, within 30 days after
the receipt of notice thereof, then Lender may, but shall not be required to,
procure the release and discharge of such Lien, mechanics' or materialmen's
claim of lien and any judgment or decree thereon, and in furtherance thereof
may, in its sole discretion, effect any settlement or compromise with the lienor
or lien claimant or post any bond or furnish any security or indemnity as
Lender, in its sole discretion, may elect. In settling, compromising or
arranging for the discharge of any Liens under this subsection, Lender shall not
be required to establish or confirm the validity or amount of the Lien.
Borrowers agree that all costs and expenses expended or otherwise incurred
pursuant to this subsection 5.11 (including reasonable attorneys' fees and
disbursements) by Lender shall be paid by Borrowers in accordance with the terms
hereof.
5.11 Rights of First Offer. Borrowers and their Affiliates shall not enter into
any Future Financing unless Borrowers or such Affiliates shall have first
delivered to Lender at least ninety (90) days prior to the closing of such
Future Financing, written notice (the "Offer Notice") describing the principal
business terms and conditions of the proposed Future Financing. During the sixty
(60) day period following delivery of such notice (the "Option Period") Lender
shall have an option to provide to Borrowers the full amount of such Future
Financing on terms and conditions substantially similar to those set forth in
the written notice; provided that Lender will inform Borrowers reasonably
promptly if it has decided not to provide the Future Financing to Borrowers and
provide further that Borrowers may discuss such Future Financing with other
potential lenders during the Option Period if Borrowers afford Lender
information and access reasonably comparable to that provided such other
potential lenders. In the event that Lender fails to provide Borrowers with a
commitment letter or engagement letter containing terms and conditions
substantially similar to those set forth in the Offer Notice within the Option
Period,
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Borrowers and their Affiliates may enter into such Future Financing with
a Person other than Lender, with such changes to the terms set forth in the
Offer Notice as are reasonably necessary to obtain such Future Financing. For
purposes hereof, a "Future Financing" shall be: (i) a financing of the mall
component of Phase II if such financing is structured in a manner substantially
similar to the financing provided pursuant to this Agreement; and (ii) the
permanent financing of the Mall in the event the Permanent Mall Lender does not
provide such financing.
5.12 Further Assurances.
A. Assurances. Without expense or cost to Lender, each Borrower shall,
and shall cause each of its Subsidiaries to, from time to time hereafter,
execute, acknowledge, file, record, do and deliver all and any further acts,
deeds, conveyances, mortgages, deeds of trust, deeds to secure debt, security
agreements, hypothecations, pledges, charges, assignments, financing statements
and continuations thereof, notices of assignment, transfers, certificates,
assurances and other instruments as Lender may from time to time reasonably
require in order to carry out more effectively the purposes of this Agreement or
the other Loan Documents, including to subject any items of Collateral, intended
to now or hereafter be covered, to the Liens created by the Collateral
Documents, to perfect and maintain such Liens, and to assure, convey, assign,
transfer and confirm unto Lender the property and rights hereby conveyed and
assigned or intended to now or hereafter be conveyed or assigned or which any
Borrower or any such Subsidiary may be or may hereafter become bound to convey
or to assign to Lender or for carrying out the intention of or facilitating the
performance of the terms of this Agreement, or any other Loan Documents or for
filing, registering or recording this Agreement or any other Loan Documents.
Promptly upon a reasonable request each Borrower shall, and shall cause each of
its Subsidiaries to, execute and deliver, and hereby authorizes Lender to
execute and file in the name of such Borrower or Subsidiary, to the extent
Lender may lawfully do so, one or more financing statements, chattel mortgages
or comparable security instruments to evidence more effectively the Liens of the
Collateral Documents upon the Collateral.
B. Filing and Recording Obligations. Borrowers shall pay or cause to be
paid all filing, registration and recording fees and all expenses incident to
the execution and acknowledgment of the Deed of Trust, the Leasehold Deed of
Trust or any other Loan Document, including any instrument of further assurance
described in subsection 5.11A, and shall pay or cause to be paid all mortgage
recording taxes, transfer taxes, general intangibles taxes and governmental
stamp and other taxes, duties, imposts, assessments and charges arising out of
or in connection with the execution, delivery, filing, recording or registration
of the Deed of Trust, the
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Leasehold Deed of Trust or any other Loan Document or the Mall Lease or a
memorandum thereof, including any instrument of further assurance described in
subsection 5.11A, or by reason of its interest in, or measured by amounts
payable under, the Notes, the Deed of Trust, the Leasehold Deed of Trust or any
other Loan Document, including any instrument of further assurance described in
subsection 5.11A, and shall pay all stamp taxes and other taxes required to be
paid on the Notes or any other Loan Document, but excluding in the case of
Lender, Taxes imposed on its income by a jurisdiction under the laws of which it
is organized or in which its principal executive office is located or in which
its applicable lender office for funding or booking its Loans hereunder is
located. If any Borrower fails to make or cause to be made any of the payments
described in the preceding sentence within 15 days after notice thereof from
Lender (or such shorter period as is necessary to protect the loss of or
diminution in value of any Collateral by reason of tax foreclosure or otherwise,
as determined by Lender, in its sole discretion) accompanied by documentation
verifying the nature and amount of such payments, Lender may (but shall not be
obligated to) pay the amount due and such Borrower shall reimburse all amounts
in accordance with the terms hereof.
C. Costs of Defending and Upholding the Lien. Lender may, upon at least
five days' prior notice to the Borrower, (i) appear in and defend any action or
proceeding, in the name and on behalf of Lender in which Lender is named or
which Lender in its sole discretion determines is reasonably likely to
materially adversely affect the Mortgaged Property, any other Collateral, the
Deed of Trust, the Leasehold Deed of Trust, the Lien thereof or any other Loan
Document and (ii) institute any action or proceeding which Lender reasonably
determines should be instituted to protect the interest or rights of Lender in
the Mortgaged Property or other Collateral or under this Agreement or any other
Loan Document. Borrowers agree that all reasonable costs and expenses expended
or otherwise incurred pursuant to this subsection (including reasonable
attorneys' fees and disbursements) by Lender shall be paid by Borrowers or
reimbursed to Lender, as the case may be, promptly after demand.
D. Costs of Enforcement. Borrowers agree to bear and shall pay or
reimburse Lender in accordance with the terms of subsection 8.3 for all
reasonable sums, costs and expenses incurred by Lender (including reasonable
attorneys' fees and the expenses and fees of any receiver or similar official)
of or incidental to the collection of any of the Obligations, any foreclosure
(or transfer in lieu of foreclosure) of this Agreement, the Deed of Trust, the
Leasehold Deed of Trust or any other Loan Document or any sale of all or any
portion of the Mortgaged Property or all or any portion of the other Collateral.
E. Advertising and Signage. Upon Lender's reasonable request, Borrowers
shall place appropriate signage at the Project indicating that Lender provided
financing for the Mall portion (but not other portions) of the Project, and such
other information as is reasonably requested by Lender. Lender shall be allowed
to advertise its involvement in financing the Project in an appropriate manner.
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F. Amendment and Recordation of Deed of Trust. Promptly following
completion of construction of the Mall, Borrower will execute and record an
amendment to the Deed of Trust and Leasehold Deed of Trust to reflect any
changes to the legal description of the Mall Parcel to reflect changes therein
as provided in the Cooperation Agreement.
5.13 Maintenance of Take Out Agreements and Lease Terms. Borrowers shall
maintain in full force and effect and shall take all actions necessary to comply
with and prevent the occurrence of any default under the Tranche A Take Out
Commitment, the Tranche B Take Out Commitment and the Tri-Party Agreement and
shall take all actions necessary to cause the satisfaction of the conditions to
the Tranche A Take Out Commitment. Borrowers shall not enter into any leases
with respect to the Mall other than leases permitted under the Tranche A Take
Out Commitment.
Section 6. BORROWERS' NEGATIVE COVENANTS
Borrowers covenant and agree that, so long as the Commitment
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Lender shall otherwise give its prior written
consent, Borrowers shall perform, and shall cause each of their Subsidiaries to
perform, (x) prior to Completion Date, all of the covenants set forth in Article
6 of the Disbursement Agreement and the covenants set forth in subsections 6.1,
6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12B and 6.16 below and (y)
on and after Completion Date all of the covenants set forth in this Section 6.
6.1 Indebtedness.
Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Borrowers and their Subsidiaries may become and remain
liable with respect to the Obligations;
(ii) Borrowers and their Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection
6.4 and, (other than with respect to clause (v) and (vi) of subsection
6.4) upon any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so
extinguished;
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(iii) Borrowers may become and remain liable for Indebtedness
represented by the Mortgage Notes in an aggregate principal amount not
to exceed at any time $425,000,000, reduced by any principal payments
required to be made thereon;
(iv) Borrowers may become and remain liable for Indebtedness
represented by the Bank Credit Agreement in an aggregate principal
amount not to exceed at any time $170,000,000 reduced by any principal
payments required to be made thereon;
(v) Borrowers may become and remain liable for Indebtedness
represented by the Subordinated Notes in an aggregate principal amount
not to exceed at any time $97,500,000 reduced by any principal payments
required to be made thereon;
(vi) Borrowers may become and remain liable for Indebtedness
under the FF&E Facility Agreement in an aggregate principal amount not
to exceed at any time $98,000,000 (plus any accrued and unpaid interest
thereon added to principal) reduced by any principal payments required
to be made thereon;
(vii) Borrowers may become and remain liable for Indebtedness in
respect of any Completion Guaranty Loan in an aggregate amount not to
exceed $25,000,000 (plus any accrued and unpaid interest thereon added
to principal);
(viii) Borrowers and their Subsidiaries may become and remain
liable for additional Indebtedness to the extent permitted under and on
the terms described in the Intercreditor Agreement;
(ix) Borrowers may become and remain liable for Indebtedness to
employees of Borrowers ("Employee Repurchase Notes") incurred in
connection with any repurchase of employee options or stock upon death,
disability or termination of such employee in accordance with employment
agreements or option plans or agreements as in effect on the Closing
Date ("Permitted Employee Repurchases") provided that such Indebtedness
shall be unsecured and subordinated on terms not less favorable to
Borrowers and Lender than the terms of the Subordinated Notes and shall
expressly provide that payments thereon shall be required only to the
extent not restricted by any Financing Agreement;
(x) Borrowers may become and remain liable for Indebtedness
incurred for the purpose of financing all or any part of the purchase or
lease of gaming equipment to be used in connection with the casino
located at the casino resort to be owned by Phase II Subsidiary or any
casino to be operated within Phase II in the aggregate amount at any
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time outstanding not to exceed $10,000,000; provided, that upon default
under such Indebtedness, the lender under such Indebtedness may seek
recourse or payment against the Borrowers and their Subsidiaries only
through the return or sale of the property or equipment so purchased or
leased and may not otherwise assert a valid claim for payment on such
Indebtedness against the Borrowers and their Subsidiaries or any other
property of the Borrowers and their Subsidiaries;
(xi) Borrowers may become and remain liable with respect to other
Indebted ness in an aggregate principal amount not to exceed $10,000,000
at any time outstanding; and
(xii) Borrowers may become and remain liable for an aggregate of
$20,000,000 of additional Indebtedness under a working capital line;
provided that (x) no such Indebtedness may be incurred until after
Completion Date and (y) such Indebtedness shall be incurred with either
Lender or with other Persons who are Eligible Assignees on substantially
same terms (including security interests) hereunder and otherwise on
terms (including voting and intercreditor arrangements) reasonably
satisfactory to Lender.
6.2 Liens and Related Matters.
A. Prohibition on Liens. Borrowers shall not, and shall not permit any
of their Subsidiaries to, directly or indirectly, create, incur, assume or
permit to exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of such Borrower or Subsidiary, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any State or under any similar recording or
notice statute, except:
(i) Permitted Liens;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens securing Indebtedness permitted under clause (iii)
of subsection 6.1, provided that, after the Mall Parcel Creation Date,
any such Liens covering the Mall Collateral are junior in priority to
the Liens securing the Obligations other than in respect of the Mortgage
Notes Proceeds Account;
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(iv) Liens securing Indebtedness permitted under clause (iv) of
subsection 6.1, provided that any such Liens covering the Mall
Collateral are junior in priority to the Liens securing the Obligations;
(v) Liens securing Indebtedness permitted under clause (vi) of
subsection 6.1, provided that such Liens attach only to the Specified
FF&E and to any proceeds of such assets or indebtedness and related
collateral accounts in which such proceeds are held;
(vi) Liens in favor of the Mortgage Note Holders securing
Indebtedness advanced by such Person and permitted under (iii) of
subsection 6.1 to the extent that such Liens are permitted under the
Intercreditor Agreement provided that such Liens in favor of the
Mortgage Note Holders are junior to the Liens securing the Obligations;
(vii) Liens securing Indebtedness permitted under clause (x) of
subsection 6.1 provided that such Liens attach only to the casino
equipment purchased or leased with the proceeds of such Indebtedness and
such assets are acquired or leased within 180 days of the incurrence of
such Indebtedness;
(viii) Liens securing Indebtedness permitted under clause (xii)
of subsection 6.1; provided that such Liens are pari passu with the
Liens securing the Obligations;
(ix) Liens described in Schedule 6.2 hereto;
(x) Liens incurred in connection with Interest Rate Agreements
required or permitted under the Bank Credit Agreement, provided that (a)
to the extent that such Interest Rate Agreement is intended to hedge
interest rate risk in respect of the Bank Credit Facility such Liens
attach only to the collateral subject to Bank Lender's security interest
and (b) to the extent such Interest Rate Agreement relates to the FF&E
Facility such Liens attach only to Specified FF&E; and
(xi) Other Liens securing Indebtedness in an aggregate amount
not to exceed $5,000,000 at any time outstanding.
B. Equitable Lien in Favor of Lender. If Borrowers or any of their
Subsidiaries, shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 6.2A, they shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant
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shall not be construed as a consent by Lender to the creation or assumption of
any such Lien not permitted by the provisions of subsection 6.2A.
C. No Further Negative Pledges. Except with respect to specific property
encum bered to secure payment of particular Indebtedness or leases or to be sold
pursuant to an executed agreement with respect to an Asset Sale, none of
Borrowers nor any of their Subsidiaries, shall enter into any agreement
prohibiting the creation or assumption of any Lien upon any of its properties or
assets, whether now owned or hereafter acquired other than (x) as provided
herein or in the other Loan Documents, (y) as set forth in the documents
evidencing Other Indebtedness as in effect on the Closing Date including any
refinancing thereof permitted hereunder provided that the provisions regarding
the creation or assumption of Liens is not less favorable to Borrowers, such
Subsidiary or Lenders than those set forth in the documents evidencing the
Indebtedness being refinanced or (z) as required by applicable law or any
applicable rule or order of any Gaming Authority.
D. No Restrictions on Subsidiary Distributions to Borrowers or Other
Subsidiaries. Except as provided herein, Borrowers will not, and will not permit
any of their Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any of their Subsidiaries to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Borrowers or
any other Subsidiary of Borrowers, (ii) repay or prepay any Indebtedness owed by
any such Subsidiaries to Borrowers, (iii) make loans or advances to Borrowers,
or (iv) transfer any of its property or assets to Borrowers other than (x) as
provided herein or in the other Loan Documents, (y) as set forth in the
documents evidencing Other Indebtedness as in effect on the Closing Date
including any refinancing thereof permitted hereunder provided that the
provisions regarding dividends, distributions, repayments of Indebtedness, loans
and advances and transfers of assets are not less favorable to Borrowers, such
Subsidiary or Lender than those set forth in the documents evidencing the
Indebtedness being refinanced or (z) as required by applicable law or any
applicable rule or order of any Gaming Authority.
6.3 Investments; Joint Ventures; Formation of Subsidiaries.
Borrowers shall not, and shall not permit any of their Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture or otherwise form or create any Subsidiary, except:
(i) Borrowers and their Subsidiaries may make and own
Investments in Cash Equivalents;
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(ii) Borrowers may continue to own their existing Investments in
the Mall Intermediate Holdings, Mall Subsidiary, Phase II Subsidiary,
Phase II Manager, Phase II Direct Holding Company, Mall Manager, Mall
Direct Holdings and Mall Construction Subsidiary described in Schedule
6.3 hereto, provided that Borrowers and their Subsidiaries may not make
any additional Investments in such Persons except as permitted by
clauses (iii), (v) and (vi) below;
(iii) Borrowers may cause the transfer of the Mall Collateral to
Mall Subsidiary to the extent permitted by subsection 6.6(iv) and
immediately therewith transfer a 1% managing membership interest in each
of Mall Subsidiary and Mall Direct Holdings to Mall Manager;
(iv) Borrowers may transfer the Phase II Land to Phase II
Subsidiary to the extent permitted by subsection 6.6(v) and immediately
thereafter transfer a 1% managing membership interest in each of Mall
Subsidiary and Mall Direct Holdings to Mall Manager;
(v) Borrower and their Subsidiaries may invest in Mall Subsidiary
or Phase II Subsidiary any cash or other property contributed to
Borrowers by Adelson or any of his Affiliates after Completion Date for
such purpose;
(vi) So long as no Event of Default or Potential Event of Default
shall have occurred and be continuing or would result therefrom,
Borrowers may form and make Investments in new Subsidiaries and in
Supplier Joint Ventures; provided that the aggregate amount of all such
Investments shall not at any time exceed $10,000,000, (b) no such
Subsidiary or Supplier Joint Venture shall own or operate or posses any
material license, franchise or right used in connection with the
ownership or operation of the Project or any material Project assets,
(c) in the case of any Investment in a Supplier Joint Venture, LVSI
shall have delivered an Officers' Certificate which certifies that in
the reasonable judgment of such officer the Investment in such Supplier
Joint Venture will result in an economic benefit to Borrowers (taking
into account such Investment) as a result of a reduction in the cost of
the goods or services being acquired from the Supplier Joint Venture
over the life of the Investment and (d) none of Borrowers, nor any other
Subsidiary of the Borrower shall incur any liabilities or contingent
obligations in respect of the obligations of such Subsidiary or Joint
Venture;
(vii) Borrowers may make loans or advances to their employees (i)
to fund the exercise price of options granted under Borrowers' stock
option plans or agreements or
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employment agreements as in effect on the Closing Date and (ii) for
other purposes in an amount not to exceed $1,000,000 in the aggregate
outstanding at any time;
(viii) Borrowers and their Subsidiaries may hold investments
consisting of securities received in settlement of debt created in the
ordinary course of business and owing to Borrowers or any Subsidiary or
in satisfaction of judgments; and
(ix) Borrowers may make and own other Investments in an aggregate
amount not to exceed at any time $5,000,000.
6.4 Contingent Obligations.
Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) Borrowers may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements which are entered
into to hedge against interest rate fluctuations in respect of up to 50%
of the principal amount of the Indebtedness outstanding under clauses
(iv) and (vi) of subsection 6.1 so long as all obligations thereunder
are secured solely by Liens included in Permitted Liens under clause
(xx) of the definition thereof;
(ii) Borrowers and their Subsidiaries may become and remain
liable with respect to Contingent Obligations under the Loan Documents;
(iii) Borrowers may become and remain liable with respect to
Contingent Obligations for the Indebtedness permitted under clauses
(iii), (iv), (v), (vi), (vii), (viii), (ix) and (x) of subsection 6.1;
(iv) Subsidiaries of Borrowers may become and remain liable with
respect to the Contingent Obligations for the Indebtedness permitted
under clause (iii), (iv), (v), (vii) and (x) of subsection 6.1, provided
that such Contingent Obligations are expressly subordinate to the
Obligations;
(v) to the extent such incurrence does not result in the
incurrence by Borrowers or any of their Subsidiaries of any obligation
for the payment of borrowed money, Borrowers may become and remain
liable with respect to Contingent Obligations incurred solely in respect
of performance bonds, completion guaranties and standby letters of
credit or bankers' acceptances, provided that such Contingent
Obligations are
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incurred in the ordinary course of business and do not at any time
exceed $10,000,000 in the aggregate;
(vi) Borrowers and their Subsidiaries may become and remain
liable for customary indemnities under Project Documents as in effect on
the Closing Date; and
(vii) Borrowers may become and remain liable with respect to
other Contingent Obligations, provided that the maximum aggregate
liability, contingent or otherwise, of Borrowers in respect of all such
Contingent Obligations shall at no time exceed $5,000,000.
6.5 Restricted Junior Payments.
Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment, except:
(i) Borrowers may make regularly scheduled payments of principal
and interest in respect of any Other Indebtedness of Borrowers in
accordance with the terms of, and only to the extent required by the
agreement pursuant to which such Other Indebtedness was issued provided
that (a) any such payments shall be subject to the terms of the
Intercreditor Agreement, the Adelson Intercreditor Agreement, the
Adelson Completion Guaranty and the FF&E Intercreditor Agreement, as
applicable, (b) any such payments in respect of the Subordinated Notes
and any Completion Guaranty Note may be made only to the extent no Event
of Default or Potential Event of Default shall then exist and be
continuing or would result therefrom and (c) any such payments in
respect of the Substitute Tranche B Note may be made only to the extent
permitted pursuant to the terms of the Substitute Tranche B Note and
pursuant to the terms of the Adelson Intercreditor Agreement;
(ii) Borrowers and their Subsidiaries may redeem or purchase any
equity interests in Borrowers or their Subsidiaries or any Indebtedness
to the extent required by any Nevada Gaming Authority in order to
preserve a material Gaming License, provided that so long as such
efforts do not jeopardize any material Gaming License, Borrowers shall
have diligently tried to find a third-party purchaser for such equity
interests or Indebtedness and no third-party purchasers acceptable to
the Nevada Gaming Authority is willing to purchase such equity interests
or Indebtedness within a time period acceptable to the Nevada Gaming
Authority;
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(iii) for so long as LVSI is a corporation under Subchapter S of
the Code or a substantially similarly treated pass-through entity or
Venetian is a limited liability company that is treated as a partnership
or a substantially similarly treated pass-through entity for Federal
income tax purposes (as evidenced by an opinion of counsel at least
annually), Borrowers may each make cash distributions to shareholders or
members, during each Quarterly Payment Period, in an aggregate amount
not to exceed the Permitted Quarterly Tax Distribution in respect of the
related Estimation Period, and if any portion of the Permitted Quarterly
Tax Distribution is not distributed during such Quarterly Payment
Period, the Permitted Quarterly Tax Distribution payable during the
immediately following four quarter period shall be increased by such
undistributed portion; provided that Borrowers may not make any such
distribution to pay taxes attributable to income of Mall Subsidiary or
Phase II Subsidiary or any of their Subsidiaries unless Borrowers have
received a cash distribution from Mall Subsidiary or Phase II
Subsidiary, as applicable, for such purpose in respect of the applicable
Estimation Period in an equal amount;
(iv) LVSI may make repurchases of capital stock of LVSI deemed
to occur upon exercise of stock options to the extent such capital stock
represents a portion of the exercise price of such options;
(v) Borrowers may make payments on any Completion Guaranty Loan
prior to Completion Date, from amounts permitted to be deposited in the
Guaranty Deposit Account subject to the terms of the Adelson Completion
Guaranty and the Disbursement Agreement;
(vi) Borrowers and their wholly-owned Subsidiaries may make
intercompany payments between such entities and intercompany payments to
or from any Borrower; and
(vii) Subject to subsection 6.6(iii), Borrowers may repay loans
advanced pursuant to the FF&E Facility Agreement with Loss Proceeds and
proceeds from the sale of assets purchased with funds advanced pursuant
thereto.
(viii) Borrowers may make payments on any Completion Guaranty
Loan (a) prior to Final Completion Date, from amounts permitted to be
deposited in the Guaranty Deposit Account subject to the terms of the
Adelson Completion Guaranty and the Disbursement Agreement, (b) on Final
Completion Date from amounts which are advanced to the Company pursuant
to Section 2.12 of the Disbursement Agreement for the purpose of making
such payments, (c) after Final Completion Date from Liquidated
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Damages and (d) on Final Completion Date, from funds in the Mall
Retainage/Punchlist Account in accordance with the Mall Escrow
Agreement, up to the aggregate amount previously deposited into the Mall
Retainage/Punchlist Account from the Guaranty Deposit Account, provided
in each case that such payments shall be permitted only to the extent
allowed under the Adelson Intercreditor Agreement and only so long as no
Event of Default or Potential Event of Default shall then exist and be
continuing or would result therefrom.
6.6 Restriction on Fundamental Changes; Asset Sales and Acquisitions.
Borrowers shall not, and shall not permit any of their
Subsidiaries to, alter the corporate, capital or legal structure (except with
respect to changes in capital structure to the extent a Change of Control does
not occur as a result thereof) of any Borrower, or any of its Subsidiaries, or
enter into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of,
in one transaction or a series of transac tions, all or any part of its
business, property or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the business, property
or fixed assets of, or stock or other evidence of beneficial ownership of, any
Person or any division or line of business of any Person, except:
(i) Borrowers and their Subsidiaries may dispose of obsolete,
worn out or surplus assets or assets no longer used or useful in the
business of Borrowers and the Subsidiaries in each case to the extent
made in the ordinary course of business; provided that either (i) such
disposal does not materially adversely affect the Mortgaged Property or
(ii) prior to or promptly following such disposal any such property
shall be replaced with other property of substantially equal utility and
a value at least substantially equal to that of the replaced property
when first acquired and free from any security of any other Person
subject only to Permitted Liens and by such removal and replacement
Borrowers and their Subsidiaries shall be deemed to have subjected such
replacement to the lien of the Deed of Trust or the Leasehold Deed of
Trust, as applicable;
(ii) Borrowers and their Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales,
provided that the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof except under (iv)
- (x) below;
(iii) subject to subsection 6.10, Borrowers and their
Subsidiaries may make Asset Sales of assets having a fair market value
not in excess of (i) $4,000,000 in respect
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of sale or other disposition of construction equipment prior to or
during the first year following Completion Date and (ii) $2,000,000 with
respect to any other Asset Sales; provided in each case that (x) the
consideration received for such assets shall be in an amount at least
equal to the fair market value thereof; (y) the sole consideration
received shall be cash; and (z) the proceeds of such Asset Sales shall
be applied as required by subsection 2.4B(i);
(iv) Borrowers and Mall Construction Subsidiary may transfer
their respective interests in the Mall Collateral to Mall Subsidiary in
accordance with Section 5.16(c) of the Disbursement Agreement provided
that Borrowers and their Subsidiaries have complied in all material
respects with their obligations thereunder and all other conditions
thereunder have been satisfied in all material respects;
(v) Borrowers may transfer the Phase II Land to the Phase II
Subsidiary, in accordance with Section 5.16(d) of the Disbursement
Agreement, provided that Borrowers and their Subsidiaries have complied
in all material respects with their obligations thereunder and all other
conditions thereunder have been satisfied in all material respects;
(vi) Borrowers and their Subsidiaries may enter into any leases
with respect to any space on or within the Project where the interest
created is a Permitted Lien, provided that (a) no Event of Default or
Potential Event of Default shall exist and be continuing at the time of
such lease or would occur after entering into such lease (or immediately
after any renewal or extension thereof at the option of Borrowers or one
of their Subsidiaries), (b) such lease will not interfere with, impair
or detract from the operation of the business of Borrowers and their
Subsidiaries, (c) such lease is at a fair market rent (in light of other
similar or comparable prevailing commercial transactions) and contains
such other terms such that the lease, taken as a whole, is commercially
reasonable and fair to Borrowers and their Subsidiaries in light of
prevailing or comparable transactions in other casinos, hotels, hotel
attractions or shopping venues, (d) no gaming or casino operations
(other than the operation of arcades and games for children) may be
conducted on any space that is subject to the such lease other than by
Borrowers, (e) no lease may provide that Borrowers or any of their
Subsidiaries may subordinate its fee, commercial subdivision or
leasehold interest to any lessee or any party financing any lessee,
provided that, if such lease is permitted under the Tranche A Take Out
Commitment and if the Permanent Mall Lender shall be obligated to
provide the tenant under such lease with a Subordination,
Non-Disturbance and Attornment Agreement under the Tranche A Take Out
Commitment, Lender shall provide the tenant under any such lease with a
Subordination,
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Non-Disturbance and Attornment Agreement in Lender's customary form and
(f) if consent of the Permanent Mall Lender is required, such consent
has been obtained;
(vii) Borrowers may enter into the HVAC Ground Lease;
(viii) LVSI may lease the casino from Venetian pursuant to the
Casino Lease;
(ix) Mall Construction Subsidiary (and, if applicable, Mall
Subsidiary) may lease the Mall Collateral from Venetian pursuant to the
Mall Lease and, further, upon the occurrence of the Mall Parcel Creation
Date, Venetian and Mall Construction Subsidiary (or, if applicable, Mall
Subsidiary) may terminate the Mall Lease;
(x) Either Borrower may be merged with the other Borrower;
(xi) Either Borrower may sell, lease or otherwise transfer
assets to another Borrower or to a wholly-owned Subsidiary of such
Borrower to the extent permitted by subsection 6.3 and any wholly-owned
Subsidiary of a Borrower may sell, lease or otherwise transfer assets to
any other wholly-owned Subsidiary of such Borrower or to the other
Borrower;
(xii) Borrower may dedicate space for the purpose of
constructing (i) a mass transit system, (ii) a pedestrian bridge over or
a pedestrian tunnel under Las Vegas Boulevard and Sands Avenue or
similar structure to facilitate pedestrians or traffic and (iii) a right
turn lane or other roadway dedicated at or near the Project; provided in
each case that such dedication does not materially impair the use or
operations of the Project;
(xiii) Borrowers may license trademarks and tradenames in the
ordinary course of business;
(xiv) Mall Construction Subsidiary may enter into or take by
assignment the Mall Management Agreement;
(xv) Borrowers may make the transfers permitted under subsection
6.3(iii) and (iv);
(xvi) Venetian and Mall Construction Subsidiary may enter into
the Billboard Master Lease;
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(xvii) Borrowers may sell receivables for fair market value in
the ordinary course of business; and
(xviii) incurrence of Liens permitted under Section 6.2.
6.7 Sales and Lease-Backs.
Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, become or remain liable as lessee or as
a guarantor or other surety with respect to any lease, whether an Operating
Lease or a Capital Lease, of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, (i) which Borrowers or any of their
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person or (ii) which Borrowers or any of their Subsidiaries intends to use for
substantially the same purpose as any other property which has been or is to be
sold or transferred by Borrowers or any of their Subsidiaries to any Person in
connection with such lease, except that Borrowers and their Subsidiaries may
enter into sale-leaseback transactions in connection with financings permitted
under clause (ix) of subsection 6.1 to the extent that the assets subject to
such sale-leaseback are acquired contemporaneously with, or within 180 days
prior to, such financing and with the proceeds thereof and neither Borrower nor
any of its Subsidiaries theretofore held any interest in such assets.
6.8 Sale or Discount of Receivables.
Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its notes or
accounts receivable other than an assignment for purposes of collection in the
ordinary course of business.
6.9 Transactions with Shareholders and Affiliates.
Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any holder of 5% or more of any class of
equity Securities of any Borrower or with any Affiliate of a Borrower or of any
such holder, except, that Borrowers may enter into and permit to exist:
(i) transactions that are on terms that are not less favorable to
that Borrower or Subsidiary, as the case may be, than those that might
be obtained at the time from Persons who are not such a holder or
Affiliate if (a) Borrowers have delivered to Lender
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(1) with respect to any such transaction involving aggregate payments in
excess of $500,000, an Officers Certificate certifying that such
transaction complies with this subsection 6.9, (2) with respect to any
transaction involving an amount in excess of $1,000,000, a resolution
adopted by a majority of the disinterested non-employee directors of the
applicable Borrower or Subsidiary approving such transaction complies
with this subsection 6.9, at the time such transaction is entered into,
and (b) with respect to any such transaction that involves aggregate
payments in excess of $10,000,000 or that is a loan transaction
involving a principal amount in excess of $10,000,000, Borrowers have
delivered to Lender an opinion as to the fairness to the applicable
Borrower or Subsidiary from a financial point of view issued by an
Independent Financial Advisor at the time such transaction is entered
into,
(ii) the Services Agreement;
(iii) purchases of materials or services from a Joint Venture
Supplier by Borrowers or any of their Subsidiaries in the ordinary
course of business on arm's length terms;
(iv) any employment, indemnification, noncompetition or
confidentiality agreement entered into by Borrowers or any of their
Subsidiaries with their employees or directors in the ordinary course of
business;
(v) loans or advances to employees of Borrowers or their
Subsidiaries permitted under subsection 6.3(vii);
(vi) the payment of reasonable fees to directors of Borrowers
and their Subsidiaries who are not employees of Borrowers or their
Subsidiaries;
(vii) the grant of stock options or similar rights to employees
and directors of Borrowers pursuant to plans approved by the Board of
Directors of LVSI and any repurchases of stock or options of Borrowers
from such employees to the extent permitted by subsection 6.5;
(viii) transactions between or among Borrowers and any of their
wholly-owned Subsidiaries;
(ix) the transactions contemplated by the Adelson Completion
Guaranty;
(x) the transactions contemplated by the Cooperation Agreement;
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(xi) the transactions contemplated by the HVAC Services
Agreement;
(xii) the use of the Congress Center by the owner of the Sands
Expo and Convention Center; provided that Venetian receives fair market
value for the use of such property;
(xiii) any transactions relating to the guaranty of the Tranche
B Take Out Commitment by Adelson, including the Substitute Tranche B
Loan;
(xiv) transactions relating to the commercial subdivision of the
Mall;
(xv) the transfer of the Phase II Land to the Phase II
Subsidiary and the transfer of the Mall Collateral to Mall Subsidiary;
(xvi) any repayment or deemed repayment of the Substitute
Tranche B Loan in connection with the transfer of the Mall Collateral to
Mall Subsidiary; and
(xvii) Borrowers may enter into and perform their obligations
under a gaming operations lease agreement with Phase II Subsidiary
relating to the casino to be in the casino resort owned by the Phase II
Subsidiary on terms substantially similar to those of the Casino Lease
except that (a) the rent payable under such lease shall be equal to all
revenues derived from such casino minus the sum of (1) the operating
costs related to such casino (including an allocated portion (based on
gaming revenue) of the Borrower's administrative costs related to its
gaming operations) and (2) the lesser of $250,000 or 1% of such casino's
operating income (or zero (0) if there is an operating loss) (determined
in accordance with GAAP), (b) Borrowers may agree that they shall
operate the casino in Phase II and the casino in the Project in
substantially similar manners and (c) Borrowers may agree to have common
gaming and surveillance operations in such casinos (based on equal
allocations of revenues and operating costs).
(xviii) employees of Interface may participate in the Las Vegas
Sands Inc. 401(k) Retirement Plan if Interface reimburses Borrowers for
a pro rata portion of the administrative expenses of such plan based on
the number of employees of each of Interface and LVSI participating in
such plan;
(xix) transactions contemplated by the Interface Lease;
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(xx) Borrowers may reimburse Yona Aviation Services, Inc., or
its successors for its operating and lease costs related to the use of
its aircraft by the Borrower's employees (based on the actual allocated
costs and time of usage);
(xxi) transaction contemplated by the Puck JV Letter of Intent;
and
(xxii) transactions contemplated by the Billboard Master Lease.
6.10 Disposal of Subsidiary Stock.
Borrowers shall not, and shall not permit any of their Subsidiaries to,
directly or indirectly sell, assign, pledge or otherwise encumber or dispose of
any shares of capital stock or other equity Securities of Borrowers or any of
their Subsidiaries, except (i) to qualify directors if required by applicable
law and (ii) to the extent required by any Nevada Gaming Authority in order to
preserve a material Gaming License.
6.11 Conduct of Business.
Borrowers shall not, and shall not permit any of their Subsidiaries to,
engage in any business other than (i) in the case of LVSI, the casino gaming,
hotel, retail and entertainment mall and resort business (including operating
the conference center and meeting facilities) and any activity or business
incidental, directly related or similar thereto, or any business or activity
that is a reasonable extension, development or expansion thereof or ancillary
thereto, including any hotel, entertainment, recreation, convention, trade show,
meeting, retail sales or other activity or business designated to promote,
market, support, develop, construct or enhance the casino gaming, hotel, retail
and entertainment mall and resort business operated by Borrower and their
Subsidiaries, including, without limitation, participating in the Supplier Joint
Ventures and ownership of Mall Manager, Phase II Manager and Venetian, (ii) in
the case of Venetian and its Subsidiaries (other than those listed in clauses
(iii) below), (a) development, construction and the operation of the Project,
(b) the casino gaming, hotel, retail and entertainment mall and resort business
(including operating a conference center and meeting facilities at the Project
and any activity or business incidental, directly related or a similar thereto,
or any business or activity that is a reasonable extension, development or
expansion thereof or ancillary thereto, including any hotel, entertainment,
recreation, convention, trade show, meeting, retail sales, or other activity or
business designated to promote, market, support, develop, construct or enhance
the casino gaming, hotel, retail and entertainment mall and resort business
operated at the Project by Borrowers and their Subsidiaries, including, without
limitation, participating in the Supplier Joint Venturers, and (c) and ownership
of equity interests in Subsidiaries including the Mall Intermediate Holdings and
other matters reasonably incidental thereto, (iii) in the case of
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Intermediate Holdings Companies, the ownership of equity interests in Mall
Subsidiary, Mall II Holdings, Phase II Direct Holding Company and Phase II
Subsidiary and the delivery of guarantees in favor of Lender and the Mortgage
Noteholders and the holders of Subordinated Notes, (iv) in the case of Mall
Manager and Phase II Manager of 1% managing member interests in Mall Subsidiary,
Mall II Holdings, Phase II Direct Holding Company and Phase II Subsidiary,
respectively and (v) in the case of Mall Construction Subsidiary, ownership of
the Mall Collateral and other matters reasonably incidental thereto; and (vi) in
the case of Mall Direct Holdings and Phase II Direct Holdings ownership of
equity interests in Mall Subsidiary and Phase II Subsidiary respectively.
6.12 Certain Restrictions on Changes to Operative Documents, Permits, Project
Budget or Project Schedule
A. Modifications of Certain Operative Documents and Permits; New
Material Contracts or Permits. Borrowers shall not, and shall not permit any of
their Subsidiaries to, agree to any material amendment to, or waive any of its
material rights under, any Permit or Operative Document or enter into new
Material Contract or Permits it being understood that any Material Contracts
which are covered by clause B. or C. below shall also be subject to the
restrictions set forth therein) without in each case obtaining the prior written
consent of Lender if in any such case, such amendment or waiver or new Material
Contract or Permit could reasonably be expected to have a Material Adverse
Effect or otherwise adversely affect Lender in any material respect.
B. Amendments of Documents Relating to Other Indebtedness. Borrowers
shall not, and shall not permit any of their Subsidiaries to, amend or otherwise
change the terms of any Financing Agreements (other than the Loan Documents) or
permit the termination thereof (other than in accordance with the terms
thereof), or enter into any new Financing Agreements or make any payment
consistent with an amendment thereof or change thereto, if the effect of such
amendment or change is to increase the interest rate or fees on such Other
Indebtedness, change (to earlier dates) any dates upon which payments of
principal or interest are due thereon, change any event of default or condition
to an event of default with respect thereto (other than to eliminate any such
event of default or increase any grace period related thereto or otherwise
change such event of default in a manner less favorable to the Borrower or such
Subsidiary than the existing event of default), change the commitment
thereunder, change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder, to confer any additional rights on the holders of such Other
Indebtedness (or a trustee
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or other representative on their behalf) which would be materially adverse to
Borrowers, such Subsidiary or Lender, provided, that Borrowers may (i) enter
into new Approved Equipment Funding Commitments to the extent permitted by the
definition of such term and may amend, supplement or terminate an existing
Approved Equipment Funding Commitment for the purpose of replacing all or a
portion of it with such new Approved Funding Commitment and (ii) modify the
terms of any Financing Agreement or agreement relating thereto to the extent
expressly permitted by the Intercreditor Agreement.
C. Certain Other Restrictions on Amendments. Borrowers shall not,
and shall not permit any of their Subsidiaries to, agree to any material
amendment to, or waive any of its material right under the Cooperation
Agreement, without obtaining prior written consent of Lender, which consent
shall not be unreasonably withheld or delayed.
6.13 Fiscal Year.
Neither Borrower shall change its Fiscal Year-end from December
31.
6.14 Zoning and Contract Changes and Compliance.
Without the prior written approval of Lender, Borrowers shall not, and
shall not permit any of their Subsidiaries to, initiate or consent to any zoning
downgrade of the Mortgaged Property or seek any material variance under any
existing zoning ordinance or use or permit the use of the Mortgaged Property in
any manner that could result in such use becoming a non-conforming use (other
than a non-conforming use permissible under automatic grandfathering
provisions) under any zoning ordinance or any other applicable land use law,
rule or regulation. Borrowers shall not, and shall not permit any of their
Subsidiaries to, initiate or consent to any change in any laws, requirements of
Governmental Authorities or obligations created by private contracts which now
or hereafter could reasonably be likely to materially and adversely affect the
ownership, occupancy, use or operation of the Mortgaged Property without the
prior written consent of Lender.
6.15 No Joint Assessment; Separate Lots.
Without the prior written approval of Lender, which approval may be
granted, withheld, conditioned or delayed in its sole discretion, Borrowers
shall not suffer, permit or initiate, and shall not permit any of their
Subsidiaries to, suffer, permit or initiate, the joint assessment of the
Mortgaged Property (i) with any other real property constituting a separate tax
lot and (ii) with any portion of the Mortgaged Property which may be deemed to
constitute personal property, or any other procedure whereby the lien of any
Taxes which may be levied against any such
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personal property shall be assessed or levied or charged to the Mortgaged
Property as a single lien. The Mortgaged Property is comprised of one or more
parcels, each of which, to the knowledge of Borrowers, constitutes a separate
tax lot and none of which constitutes a portion of any other tax lot.
6.16 Certain Covenants Applicable to Mall Subsidiary.
A. Line of Business. Borrowers shall not permit Mall Subsidiary to
engage in any business other than (i) acquisition, development, construction,
ownership, holding, management, marketing and operation of the Mall, (ii) any
activity and business incidental, directly related to or similar thereto, and
(iii) engaging in any business or activity that is a reasonable extension,
development or expansion thereof or ancillary thereto including any retail,
restaurant, entertainment or other activity or business designed to promote,
market, support, develop, construct or enhance the retail, restaurant and
entertainment business of the Mall (including, owning and operating joint
ventures to supply materials or services for the construction or operation of
the Mall).
B. Restrictions on Investment. Borrowers shall not permit Mall
Subsidiary to purchase or acquire any Securities, loan, advance, capital
contribution or other investment of any kind except (i) advances to employees
for moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business, (ii) any such investments in
Cash Equivalents and similar liquid Investments permitted under the Financing
Agreements to which it is a party; (iii) any investments in Joint Ventures with
third parties to develop and operate restaurants in the Mall in an aggregate
amount not to exceed $5,000,000 at any time; (iv) other such investments
reasonably necessary for the operation, maintenance and improvement of the Mall
in an aggregate amount not to exceed $2,500,000 at any time; (v) loans or
advances to employees made in the ordinary course of business of the Mall
Subsidiary in an aggregate amount not to exceed $500,000 at any time; and (vi)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to Mall Subsidiary or in satisfaction of
judgments.
C. Affiliate Transactions. Borrowers shall not permit Mall Subsidiary
to, directly or indirectly, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service), with any holder of 5% or more of any class of equity
Securities of any Borrower or Mall Subsidiary or with any Affiliate of a
Borrower or Mall Subsidiary or any such holder, provided that Mall Subsidiary
may enter into or permit to exist (i) transactions that are not less favorable
to Mall Subsidiary than those that might be obtained at the time from Persons
who are not such a holder of Affiliate if Borrowers have delivered to Lender (a)
with respect to any transaction involving an amount in excess of
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$500,000, an Officers Certificate certifying that such transaction complies with
this clause (i), (b) with respect to any transaction involving an amount in
excess of $1,000,000, a resolution adopted by a majority of the disinterested
non-employee directors of Borrowers approving such transaction and an Officers
Certificate certifying that such transaction complies with this clause (i) and
(c) with respect to any such transaction that involves aggregate payments in
excess of $10,000,000 or that is a loan transaction involving a principal amount
in excess of $10,000,000, an opinion as to the fairness to Mall Subsidiary from
a financial point of view issued by an Independent Financial Advisor at the time
such transaction is entered into, (ii) transactions contemplated by the Sale and
Contribution Agreement, the Mall Lease, the Tranche A Take Out Commitment, the
Tranche B Take Out Commitment, the Substitute Tranche B Loan, the HVAC Services
Agreement, the Services Agreement, the Billboard Master Lease and the
Cooperation Agreement, (v) any guarantees by Adelson of Indebtedness of Mall
Subsidiary, (vi) purchases of materials or services from a Joint Venture
Supplier by the Mall Subsidiary in the ordinary course of business on arm's
length terms; (vii) any employment, indemnification, noncompetition or
confidentiality agreement entered into by Mall Subsidiary with its employees or
directors in the ordinary course of business, (viii) loans or advances to
employees of Mall Subsidiary, but in any event not to exceed $500,000 in the
aggregate outstanding at any one time and (ix) the payment of reasonable fees to
directors of Mall Subsidiary or its managing member who are not employees of
Mall Subsidiary.
D. Restricted Junior Payments. Borrowers shall not permit Mall
Subsidiary to make any Restricted Junior Payments described in clauses (i)
through (iii) inclusive of the definition of Restricted Junior Payments unless
such Restricted Junior Payments are made pro rata on all equity interests of
Mall Subsidiary (so that Borrowers receive a portion of such Restricted Junior
Payment equal to the direct or indirect ownership interest of Borrowers in Mall
Subsidiary).
6.17 Compliance with Take Out Agreements. Borrowers shall not take any
action which would cause a default beyond any applicable notice or grace period
under, terminate or prevent (as of the required time) the satisfaction of a
condition to the obligations of the Permanent Mall Lender or Adelson, under the
Tranche A Take Out Commitment or the Tranche B Take Out Commitment as the case
may be. Without limiting the generality of the foregoing, Borrowers shall comply
with the terms of the Tranche A Take Out Commitment with respect to entering
into any "COREA" "OEA" or "Permitted Leases" (as such terms are defined in the
Tranche A Take Out Commitment) required thereunder.
6.18 Limitation on Phase II Construction. Borrowers shall not, and shall
not permit any of their Subsidiaries, at any time prior to receipt by Borrowers
or any such Subsidiary of a temporary certificate of occupancy from Clark
County, Nevada with respect to the Project (as
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currently defined) (a) to construct, develop or improve the Phase II Land or any
building on the Phase II Land (including any excavation or site work and
including the proposed Phase II parking garage), (b) enter into any contract or
agreement for such construction, development or improvement, or for any
materials, supplies or labor necessary in connection with such construction
development or improvement (other than a contract of agreement that is
conditional upon satisfaction of the above condition), or (c) incur any
Indebtedness the proceeds of which are expected to be used for the construction,
development or improvement of the Phase II Land or any building on the Phase II
Land, except (i) any construction, development or improvement on the Phase II
Land or any temporary building on the Phase II Land in connection with the
Project in accordance with the Plans and Specifications and included in the
Project Budget; and (ii) any design, architectural, engineering or development
work not involving actual construction on the Phase II Land.
Section 7. EVENTS OF DEFAULT
If any of the following conditions or events set forth in subsections
7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.11, 7.12 or 7.15 below or any
Disbursement Agreement Event of Default shall occur prior to the Mall Release
Date or if any of the conditions or events set forth in subsections 7.1 through
7.19 inclusive below shall occur on or after the Mall Release Date (any such
conditions or events, before or after the Mall Release Date, collectively,
"Events of Default").
7.1 Failure to Make Payments When Due.
Failure by Borrowers to pay any installment of principal on any
Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; or failure by
Borrowers to pay any interest on any Loan or any fee or any other amount due
under this Agreement within five days after the date due; or
7.2 Default under Other Indebtedness or Contingent Obligations.
(i) Failure of any Borrower or any of its Subsidiaries, to pay
when due any principal of or interest on or any other amount payable in respect
of one or more items of Indebtedness (other than Indebtedness referred to in
subsection 7.1) or Contingent Obligations in an individual principal amount of
$2,500,000 or more or with an aggregate principal amount of $5,000,000 or more,
in each case beyond the end of any grace period provided therefor; or (ii)
breach or default by any Borrower or any of its Subsidiaries with respect to any
other material term of (a) one or more items of Indebtedness or Contingent
Obligations in the individual or
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aggregate principal amounts referred to in clause (i) above or (b) any loan
agreement, mortgage, indenture or other agreement relating to such item(s) of
Indebtedness or Contingent Obligation(s), if the effect of such breach or
default is to cause, or to permit the holder or holders of that Indebtedness or
Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to
cause, that Indebtedness or Contingent Obligation(s) to become or be declared
due and payable prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be (upon the giving or receiving of
notice, lapse of time, both, or otherwise); or
7.3 Breach of Certain Covenants.
Failure of Loan Parties to perform or comply with any term or
condition contained in subsection 2.5 or 5.2 or Section 6 (to the extent
applicable at such time) of this Agreement provided that the failure to perform
or comply with any such provision incorporated by reference from the
Disbursement Agreement shall constitute an Event of Default hereunder only to
the extent such failure to perform or comply constitutes a Disbursement
Agreement Event of Default; or
7.4 Breach of Warranty.
Any representation, warranty, certification or other statement
made by Borrowers or any of their Subsidiaries in any Loan Document or in any
statement or certificate at any time given by Borrowers or any of their
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made
provided that the failure to perform or comply with any such provision
incorporated by reference from the Disbursement Agreement shall constitute an
Event of Default hereunder only to the extent such failure to perform or to
comply constitutes a Disbursement Agreement Event of Default; or
7.5 Other Defaults Under Loan Documents.
Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 7,
and such default shall not have been remedied or waived within 30 days after the
earlier of (i) an officer of Borrowers or such Loan Party becoming aware of such
default or (ii) receipt by Borrowers and such Loan Party of notice from Lender
of such default provided that the failure to perform or comply with any such
provision incorporated by reference from the Disbursement Agreement shall
constitute an Event of Default hereunder only to the extent such failure to
perform or comply constitutes a Disbursement Agreement Event of Default; or
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7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of a Borrower or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against a Borrower or any of its Subsidiaries, under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over a Borrower or any of its
Subsidiaries, or over all or a substantial part of its property, shall have been
entered; or there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of a Borrower or any of its Subsidiaries,
for all or a substantial part of its property; or a warrant of attachment,
execution or similar process shall have been issued against any substantial part
of the property of a Borrower or any of its Subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) A Borrower or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or a Borrower or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) a Borrower or any of
its Subsidiaries shall be unable, or shall fail generally, or shall admit in
writing its inability, to pay its debts as such debts become due and in each
case a period of 30 days shall have elapsed; or the Board of Directors of a
Borrower or any of its Subsidiaries (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
7.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $2,500,000
or (ii) in the aggregate at any time an amount in excess of $5,000,000 (in
either case not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be
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entered or filed against a Borrower or any of its Subsidiaries or any of their
respective assets and shall remain unpaid, undischarged, unvacated, unbonded or
unstayed for a period of 60 days (or in any event later than five days prior to
the date of any proposed sale thereunder); or
7.9 Dissolution.
Any order, judgment or decree shall be entered against a Borrower
or any of its Subsidiaries decreeing the dissolution or split up of such Person
and such order shall remain undischarged or unstayed for a period in excess of
30 days; or
7.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or
in the aggregate results in or might reasonably be expected to result in
liability of a Borrower, or any of its Subsidiaries or any of their respective
ERISA Affiliates in excess of $2,500,000 during the term of this Agreement; or
there shall exist an amount of unfunded benefit liabilities (as defined in
Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension
Plans (excluding for purposes of such computation any Pension Plans with respect
to which assets exceed benefit liabilities), which exceeds $5,000,000; or
7.11 Change in Control.
As a result of any sale, pledge or other transfer, either (a)
Adelson and the Related Parties shall cease to beneficially own and control
directly or indirectly at least 70% of the issued and outstanding shares of
capital stock of LVSI, entitled (without regard to the occurrence of any
contingency) to vote for the election of members of the Board of Directors of
LVSI; (b) Adelson or any Related Party (as applicable but excluding any of the
Persons specified in clause (ii) of the definition of Related Parties) shall not
have invested the proceeds of any sale or transfer of shares of LVSI by Adelson
or any Related Party (as applicable) in the business of Borrowers or (c) LVSI
shall cease to own 100% of the equity Securities of Venetian other than any
preferred equity of Venetian owned by Interface or another Affiliate of Adelson
or (d) Borrowers shall cease to own 100% of the equity securities of each of
their Subsidiaries, Mall Manager and Phase II Manager, (e) the Intermediate
Holding Companies shall cease to own 100% of Mall Direct Holdings and Phase II
Direct Holding Company, (f) Mall Direct Holdings shall cease to own not less
than 80% of the equity securities in Mall Subsidiary or (g) Phase II Direct
Holding Company shall cease to own at least 51% of the equity securities in
Phase II Subsidiary or (h) the sole managing member of Mall Direct Holdings,
Phase II Direct Holding Company, Intermediate Holding Companies, Mall Subsidiary
and Phase II Subsidiary shall cease to be LVSI, Venetian or
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a wholly owned Subsidiary of LVSI or Venetian or (i) any "Change of Control" (as
defined in either of the Indentures) shall occur; or
7.12 Failure of Guaranty; Repudiation of Obligations.
At any time after the execution and delivery thereof, (i) Adelson
Guaranty for any reason, other than the satisfaction in full of all Obligations,
shall cease to be in full force or effect (other than in accordance with its
terms), or shall be declared null and void by a Governmental instrumentality of
competent jurisdiction, (ii) any Collateral Document shall cease to be in full
force and effect (other than by reason of a release of Collateral thereunder in
accordance with the terms hereof or thereof, the satisfaction in full of the
Obligations or any other termination of such Collateral Document in accordance
with the terms hereof or thereof) or shall be declared null and void by a
Governmental Instrumentality of competent jurisdiction, or Lender shall not have
or shall cease to have a valid and perfected First Priority Lien in any
Collateral purported to be covered thereby, in each case for any reason other
than the failure of Lender to take any action within its control, or (iii) any
Loan Party shall contest the validity or enforceability of any Loan Document in
writing or deny in writing that it has any further liability prior to the
indefeasible payment in full of all Obligations and the termination of all
Commitments, including with respect to future advances by Lender, under any Loan
Document to which it is a party, or (iv) the subordination provisions in the
Subordinated Notes, the Employee Repurchase Notes, any Completion Guaranty Note
or any Substitute Tranche B Note or in any other instrument required under any
provision of this Agreement to be subordinated to the Obligations shall cease to
be enforceable against the holder thereof; or
7.13 Default Under or Termination of Operative Documents or FF&E Facility
Agreement.
Any of the Operative Documents shall terminate or be terminated
or canceled, prior to its stated expiration date or either Borrower shall be in
default (after the giving of any applicable notice and the expiration of any
applicable grace period) or any Affiliate of Borrowers shall be in default
(after the giving of any applicable notice and the expiration of any applicable
grace period) under any of the Operative Documents; provided that a default or
termination under any Project Document shall constitute an Event of Default
hereunder only if such default or termination may reasonably be expected to
cause a Material Adverse Effect;
7.14 Default Under or Termination of Permits.
A Borrower or any of its Subsidiaries shall fail to observe,
satisfy or perform, or there shall be a violation or breach of, any of the
material terms, provisions, agreements,
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covenants or conditions attaching to or under the issuance to such Person of any
material Permit, including the gaming license held by LVSI or any such Permit or
any material provision thereof shall be terminated or fail to be in full force
and effect or any Governmental Instrumentality shall challenge or seek to revoke
any such Permit if such failure to perform, breach or termination could
reasonably be expected to have a Material Adverse Effect; or
7.15 Default Under or Termination of Cooperation Agreement.
Any default by Interface shall occur under Article III, Section 3
of the Cooperation Agreement beyond any applicable notice or cure periods; or
7.16 Bankruptcy or Dissolution of Mall Subsidiary.
Any event or circumstance described under subsections 7.6 or 7.7
hereof shall occur with respect to Mall Subsidiary, Mall Manager or Mall Direct
Holdings which would constitute an Event of Default if Mall Subsidiary, Mall
Manager or Mall Direct Holdings were a Subsidiary of Borrowers for purposes of
those subsections; or
7.17 Acceleration of Obligations of Mall Subsidiary.
Mall Subsidiary shall be in breach or default with respect to any
term of one or more items of Indebtedness or Contingent Obligation(s) in an
individual principal amount of $2,500,000 or more or an aggregate principal
amount of $5,000,000 or more, if as result thereof the holders of such
Indebtedness or Contingent Obligations) (or an agent or trustee acting on their
behalf) have caused that Indebtedness or Contingent Obligation(s) to become due
and payable prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be; or
7.18 Certain Investments in Mall Subsidiary or Phase II Subsidiary.
Adelson or any of his Affiliates (other than Borrowers and their
wholly owned Subsidiaries) shall acquire or hold any Investment in Mall
Subsidiary or Phase II Subsidiary or any Person which either Mall Subsidiary or
Phase II Subsidiary controls or holds an Investment other than (a) in the case
of Mall Subsidiary, through transactions expressly permitted under subsection
6.16 and (b) in the case of Phase II Subsidiary, investments arising through
loans, completion guaranties or other guaranties substantially similar to those
provided in connection with the development of the Project and permitted under
clause (a) of this subsection 7.18.
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7.19 Default Under or Termination of Take Out Commitments.
Any of the Tranche A Take Out Commitment or Tranche B Take Out
Commitment shall terminate or be terminated or canceled, prior to its stated
expiration date or any Borrower shall be in default (after the giving of any
applicable notice and the expiration of any applicable grace period) or any
Affiliate of Borrowers shall be in default (after the giving of any applicable
notice and the expiration of any applicable grace period) under any of such
agreements or, if the Tranche A Take Out Commitment or the Tranche B Take Out
Commitment shall not have funded on or before the Mall Release Date.
THEN (i) upon the occurrence of any Event of Default described in subsection 7.6
or 7.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, and (b) all other Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by Borrowers, and the obligation
of Lender to make any Loan shall thereupon terminate, and (ii) upon the
occurrence and during the continuation of any other Event of Default, Lender
may, by written notice to Borrowers, declare all or any portion of the amounts
described above to be, and the same shall forthwith become, immediately due and
payable, and the obligation of Lender to make any Loan hereunder shall thereupon
terminate. Upon the occurrence of any Event of Default, Lender shall have the
right to remove the existing manager of the Mall and/or the leasing broker of
the Mall and to appoint new managers and/or leasing brokers and shall have the
further right to terminate, modify or amend any contracts pursuant to which
management or leasing broker services are provided to the Mall.
Section 8. MISCELLANEOUS
8.1 Assignments and Participations in Loans.
A. General. Lender shall have the right at any time to (i) sell, assign
or transfer to any Eligible Assignee, or (ii) sell participations to any
Eligible Assignee or any other Person with the approval of Borrowers in, all or
any part of its Commitment or any Loan or Loans made by it or participations
therein or any other interest herein or in any other Obligations owed to it;
provided that no such sale, assignment, transfer or participation shall, without
the consent of Borrowers, require Borrowers to file a registration statement
with the Securities and Exchange Commission or apply to qualify such sale,
assignment, transfer or participation under the securities laws of any state.
Except as otherwise provided in this subsection 8.1, Lender shall not, as
between Borrowers and Lender, be relieved of any of its obligations hereunder as
a result
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of any sale, assignment or transfer of, or any granting of
participations in, all or any part of its Commitments or the Loans, or the other
Obligations owed to Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, or
participation therein, or other Obligation may (a) be assigned in any
amount to another Lender, or to an Affiliate of Lender, with the giving
of notice to Borrowers or (b) be assigned in an aggregate amount of not
less than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Commitments, Loans, and participations therein,
and other Obligations of the assigning Lender) to any other Eligible
Assignee with the consent of Borrowers (which consent shall not be
unreasonably withheld or delayed). To the extent of any such assignment
in accordance with either clause (a) or (b) above, the assigning Lender
shall be relieved of its obligations with respect to its Commitments,
Loans or participations therein, or other Obligations or the portion
thereof so assigned. The assignor or assignee to each such assignment
shall execute and deliver an Assignment Agreement, and, from and after
the effective date specified in such Assignment Agreement, (y) the
assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to
such Assignment Agreement, shall have the rights and obligations of a
Lender hereunder and (z) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, relinquish its rights (other than
any rights which by their terms survive the termination of this
Agreement) and be released from its obligations under this Agreement
(and, in the case of an Assignment Agreement covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto. The
Commitments hereunder shall be modified to reflect the Commitment of
such assignee and any remaining Commitment of such assigning Lender and,
if any such assignment occurs after the issuance of Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its applicable Notes to
Lender for cancellation, and thereupon new Notes shall be issued to the
assignee and to the assigning Lender, substantially in the form of
Exhibit M-1 and/or Exhibit M-2, as the case may be, hereto, with
appropriate insertions, to reflect the new Commitments and/or
outstanding Loans, as the case may be, of the assignee and the assigning
Lender.
C. Participations. The holder of any participation, other than an
Affiliate of Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity
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date of any Loan allocated to such participation or (ii) a reduction of the
principal amount of or the rate of interest payable on any Loan allocated to
such participation, and all amounts payable by Borrowers hereunder (including
amounts payable to such Lender pursuant to subsections 2.6 and 2.7) shall be
determined as if such Lender had not sold such participation. Borrowers and each
Lender hereby acknowledge and agree that, solely for purposes of subsections 8.5
and 8.6, (a) any participation will give rise to a direct obligation of
Borrowers to the participant and (b) the participant shall be considered to be a
"Lender".
D. Information. Lender may furnish any information concerning Borrowers
and their Subsidiaries in the possession of Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 8.19.
E. Representations of Lenders. Lender hereby represents and warrants (i)
that it is an Eligible Assignee described in clause (A) of the definition
thereof; (ii) that it has experience and expertise in the making of loans such
as the Loans; and (iii) that it will make its Loans for its own account in the
ordinary course of its business and without a view to distribution of such Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of this
subsection 8.1, the disposition of such Loans or any interests therein shall at
all times remain within its exclusive control). Each Lender that becomes a party
hereto pursuant to an Assignment Agreement shall be deemed to agree that the
representations and warranties of such Lender contained in Section 2(c) of such
Assignment Agreement are incorporated herein by this reference.
8.2 Performance of Borrowers' Obligations.
Borrowers agree that Lender may, but shall have no obligation to,
(i) make any other payment or perform any act required of Borrowers under any
Financing Agreement or (ii) take any other action which Lender in its discretion
deems necessary or desirable to protect or preserve the Collateral. Borrowers
agree to pay Lender, upon demand, the principal amount of all funds advanced by
Lender under this subsection 8.2, together with interest thereon at the rate
from time to time applicable to Loans from the date of such advance until the
outstanding principal balance thereof is paid in full; provided, however, that
Lender shall not make a demand for payment of such advance made in connection
with the Tranche A Take Out Commitment until after the Completion Date.
8.3 Expenses.
Whether or not the transactions contemplated hereby shall be
consummated, Borrowers agree to pay promptly (i) all the actual and reasonable
costs and expenses as well as
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travel costs and expenses incurred by Lender and its agents in investigating and
negotiating the transaction, of preparation of the Loan Documents and any
consents, amendments, waivers or other modifications thereto; (ii) all the costs
of furnishing all opinions by counsel for Borrowers (including any opinions
requested by Lender as to any legal matters arising hereunder) and of Borrowers'
performance of and compliance with all agreements and conditions on its part to
be performed or complied with under this Agreement and the other Loan Documents
including with respect to confirming compliance with environmental, insurance
and solvency requirements; (iii) the reasonable fees, expenses and disbursements
of counsel to Lender in connection with the negotiation, preparation, execution
and administration of the Loan Documents and any consents, amendments, waivers
or other modifications thereto and any other documents or matters requested by
Borrowers; (iv) all the actual costs and reasonable expenses of creating and
perfecting Liens in favor of Lender on behalf of Lenders pursuant to any
Collateral Document, including filing and recording fees, expenses and taxes,
stamp or documentary taxes, search fees, title insurance premiums, and
reasonable fees, expenses and disbursements of counsel to Lender and of counsel
providing any opinions that Lender may request in respect of the Collateral
Documents or the Liens created pursuant thereto; (v) all the actual costs and
reasonable expenses (including the reasonable fees, expenses and disbursements
of any auditors, accountants or appraisers and any environmental or other
consultants, advisors and agents employed or retained by Lender or its counsel)
of obtaining and reviewing any appraisals provided for under any Loan Documents
or the Disbursement Agreement, any environmental audits or reports provided for
under subsection 5.7B or under the Disbursement Agreement; and (vi) the custody
or preservation of any of the Collateral; (vii) all other actual and reasonable
costs and expenses incurred by Lender in connection with the syndication of the
Commitments and the negotiation, preparation and execution of the Loan Documents
and any consents, amendments, waivers or other modifications thereto and the
transactions contemplated thereby; and (viii) after the occurrence of an Event
of Default, all costs and expenses, including reasonable attorneys' fees
(including allocated costs of internal counsel) and costs of settlement,
incurred by Lender and Lenders in enforcing any Obligations of or in collecting
any payments due from any Loan Party hereunder or under the other Loan Documents
by reason of such Event of Default (including in connection with the sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of the Intermediate Holding Company Guaranty) or in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
8.4 Indemnity.
In addition to the payment of expenses pursuant to subsection
8.3, whether or not the transactions contemplated hereby shall be consummated,
Borrowers agree to defend (subject to Borrowers' selection of counsel with the
consent of the Indemnitee, which shall not be
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unreasonably withheld), indemnify, pay and hold harmless Lender, and the
officers, directors, employees, agents and affiliates of Lender (collectively
called the "Indemnitees"), from and against any and all Indemnified Liabilities
(as hereinafter defined); provided that Borrowers shall not have any obligation
to any Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent such Indemnified Liabilities arise solely from the gross negligence or
willful misconduct of that Indemnitee as determined by a final judgment of a
court of competent jurisdiction.
As used herein, "Indemnified Liabilities" means, collectively,
any and all liabilities, obligations, losses, damages (including natural
resource damages), penalties, actions, judgments, suits, claims (including
Environmental Claims), costs (including the costs of any investigation, study,
sampling, testing, abatement, cleanup, removal, remediation or other response
action necessary to remove, remediate, clean up or abate any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or the other Loan Documents or the Project
Documents or the transactions contemplated hereby or thereby (including Lenders'
agreement to make the Loans hereunder or the use or intended use of the proceeds
thereof or the use or intended use of any thereof, or any enforcement of any of
the Loan Documents (including any sale of, collection from, or other realization
upon any of the Collateral or the enforcement of the Intermediate Holding
Company Guaranty), (ii) the statements contained in the commitment letter
delivered by any Lender to Borrowers with respect thereto, or (iii) any
Environmental Claim or any Hazardous Materials Activity relating to or arising
from, directly or indirectly, any past or present activity, operation, land
ownership, or practice of Borrowers or any of their Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this subsection 8.4 may be unenforceable in whole or
in part because they are violative of any law or public policy, Borrowers shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
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8.5 Set-Off.
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default Lender is hereby authorized by Borrowers at
any time or from time to time, without notice to Borrowers or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all Indebtedness at any time held or owing by
Lender to or for the credit or the account of Borrowers against and on account
of the obligations and liabilities of Borrowers to Lender under this Agreement
and participations therein and the other Loan Documents, including all claims of
any nature or description arising out of or connected with this Agreement and
participations therein or any other Loan Document, irrespective of whether or
not (i) Lender shall have made any demand hereunder or (ii) the principal of or
the interest on the Loans or any other amounts due hereunder shall have become
due and payable pursuant to Section 7 and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
8.6 Amendments and Waivers.
This Agreement and the Notes and other Loan Documents may not be
modified, altered or amended, except by an agreement in writing signed by
Borrowers and Lender. No delay or omission of Lender to exercise any right or
remedy granted under this Agreement or the Notes or other Loan Documents shall
impair such right or remedy or be construed to be a waiver of any Default or the
acquiescence therein, and any single or partial exercise of any such right or
remedy shall not preclude other or further exercise thereof or the exercise of
any other right or remedy.
8.7 Certain Matters Affecting Lenders.
(a) If (i) the Nevada Gaming Commission shall determine that
Lender does not meet suitability standards prescribed under the Nevada Gaming
Regulations or (ii) any other gaming authority with jurisdiction over the gaming
business of Borrowers shall determine that Lender does not meet its suitability
standards (in any such case, a "Former Lender"), the Former Lender shall have
the right (but not the duty) to designate any other Eligible Assignee. The
Substitute Lender shall assume the rights and obligations of the Former Lender
under this Agreement. Borrowers shall bear the costs and expenses of any Lender
required by the Nevada Gaming Commission, or any other gaming authority with
jurisdiction over the gaming business of Borrowers, to file an application for a
finding of suitability in connection with the investigation of an application by
Borrowers for a license to operate a gaming establishment, in connection with
such application for a finding of suitability.
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(b) Notwithstanding the provisions of subsection (a) of this
subsection 8.7, if Lender becomes a Former Lender, and if the Former Lender
fails to find an Eligible Assignee pursuant to subsection (a) of this subsection
8.7 within any time period specified by the appropriate gaming authority for the
withdrawal of a Former Lender (the "Withdrawal Period"), Borrowers shall
immediately prepay in full the outstanding principal amount of Loans made by
such Former Lender, together with accrued interest thereon to the earlier of (x)
the date of payment or (y) the last day of any Withdrawal Period.
8.8 Independence of Covenants.
All covenants hereunder shall be given independent effect so that
if a particular action or condition is not permitted by any of such covenants,
the fact that it would be permitted by an exception to, or would otherwise be
within the limitations of, another covenant shall not avoid the occurrence of an
Event of Default or Potential Event of Default if such action is taken or
condition exists.
8.9 Notices.
Unless otherwise specifically provided herein, any notice or
other communica tion herein required or permitted to be given shall be in
writing and may be personally served, telexed or sent by telefacsimile or United
States mail or courier service and shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed; provided that notices to Lender shall
not be effective until received. For the purposes hereof, the address of each
party hereto shall be as set forth under such party's name on the signature
pages hereof or such other address as shall be designated by such Person in a
written notice delivered to the other parties hereto.
8.10 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
B. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Borrowers set forth in subsections 2.6, 2.7,
8.2, 8.3, 8.4, 8.5 and 8.19 shall survive the payment of the Loans and the
reimbursement of any amounts drawn thereunder, and the termination of this
Agreement.
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8.11 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Lender in the exercise of any
power, right or privilege hereunder or under any other Loan Document shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other power, right or privilege. All rights and remedies existing under this
Agreement and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
8.12 Marshalling; Payments Set Aside.
Lender shall not be under any obligation to marshal any assets in
favor of Borrowers or any other party or against or in payment of any or all of
the Obligations. To the extent that Borrowers make a payment or payments to
Lender, or Lender enforces any security interests or exercise its rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be fraudu
lent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, any other state or federal
law, common law or any equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or setoff had not occurred.
8.13 Severability.
In case any provision in or obligation under this Agreement or
the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
8.14 Headings.
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
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8.15 Applicable Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
8.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lender. Neither Borrowers' rights or
obligations hereunder nor any interest therein may be assigned or delegated by
Borrowers without the prior written consent of Lender.
8.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWERS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COUNTY OF COOK, STATE OF ILLINOIS OR NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, BORROWERS, FOR THEMSELVES AND IN CONNECTION WITH
THEIR PROPERTIES, IRREVOCABLY
(I) ACCEPT GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVE ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREE THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO BORROWERS AT THEIR ADDRESS PROVIDED IN ACCORDANCE
WITH SUBSECTION 8.9;
(IV) AGREE THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER BORROWERS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
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(V) AGREE THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST BORROWERS
IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREE THAT THE PROVISIONS OF THIS SUBSECTION 8.19 RELATING
TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER LAW.
8.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 8.18 AND EXECUT ED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICA TIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
8.19 Confidentiality.
Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement in accordance with Lender's customary
procedures for handling
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confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Borrowers that in any event
Lender may make disclosures to Affiliates of Lender or disclosures reasonably
required by any bona fide assignee, transferee or participant in connection with
the contemplated assignment or transfer by Lender of any Loans or any
participations therein (provided that such assignee, transferee or participant
agree to also be bound by this subsection 8.19), or disclosures required or
requested by any governmental agency or representative thereof or pursuant to
legal process; provided that, unless specifically prohibited by applicable law
or court order, Lender shall notify Borrowers of any request by any governmental
agency or representative thereof (other than any such request in connection with
any examination of the financial condition of Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; and provided, further that in no event shall Lender be
obligated or required to return any materials furnished by Borrowers or any of
their Subsidiaries.
8.20 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Borrowers and
Lender of written or telephonic notification of such execution and authorization
of delivery thereof.
8.21 Gaming Authorities.
Lender agrees to cooperate with the Nevada Gaming Authorities in
connection with the administration of their regulatory jurisdiction over
Borrowers and their Subsidiaries, including, without limitation, the provision
of such documents or other information as may be requested by any such Nevada
Gaming Authority relating to Lender, or Borrowers or any of their Subsidiaries,
or to the Loan Documents. Notwithstanding any other provision of the Agreement,
Borrowers expressly authorize Lender to cooperate with the Nevada Gaming
Authorities as described above.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWERS:
LAS VEGAS SANDS, INC.
By: /s/ William P. Weidner
------------------------------------
Name: William P. Weidner
Title: President
Notice Address:
3355 Las Vegas Sands, Inc.
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., as managing member
By: /s/ William P. Weidner
-------------------------------
Name: William P. Weidner
Title: President
Notice Address:
3355 Las Vegas Sands, Inc.
Room 1C
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
<PAGE>
GRAND CANAL SHOPS MALL CONSTRUCTION,
LLC
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc.,
as managing member
By: /s/ William P. Weidner
-----------------------------
Name: William P. Weidner
Title: President
Notice Address:
3355 Las Vegas Sands, Inc.
Room 1G
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
<PAGE>
LENDER:
GMAC COMMERCIAL MORTGAGE
CORPORATION
By: /s/ Vacys Garbonkus
----------------------------------------
Authorized signatory
Notice Address:
100 South Wacker Drive
Suite 400
Chicago, Illinois 60606
Attention: Vacys Garbonkus
Telefax: (312) 847-8623
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CREDIT AGREEMENT
DATED AS OF NOVEMBER 14, 1997
AMONG
LAS VEGAS SANDS, INC.,
VENETIAN CASINO RESORT, LLC and
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
as Borrowers,
and
GMAC COMMERCIAL MORTGAGE CORPORATION,
as Lender
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LAS VEGAS SANDS, INC.,
VENETIAN CASINO RESORT, LLC and
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
CREDIT AGREEMENT
TABLE OF CONTENTS
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Section 1. DEFINITIONS......................................................................2
1.1 Certain Defined Terms............................................................2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement.................................................................41
1.3 Other Definitional Provisions and Rules of Construction.........................42
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS......................................43
2.1 Commitments; Making of Loans; Notes; Maturity...................................43
2.2 Interest on the Loans...........................................................45
2.3 Fees............................................................................46
2.4 Prepayments; General Provisions Regarding Payments; Application of
Proceeds of Collateral and Payments Under Intermediate Holding
Company Guaranty................................................................47
2.5 Use of Proceeds.................................................................50
2.6 Breakage Fees...................................................................50
2.7 Increased Costs; Taxes; Capital Adequacy........................................51
2.8 Obligation of Lender to Mitigate................................................55
2.9 Obligations Joint and Several...................................................56
Section 3. CONDITIONS TO LOANS.............................................................57
3.1 Conditions to Initial Loans.....................................................57
3.2 Conditions to Subsequent Advances...............................................61
Section 4. BORROWERS' REPRESENTATIONS AND WARRANTIES.......................................61
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries....................................................................61
4.2 Authorization of Borrowing, etc.................................................63
4.3 Financial Condition.............................................................64
4.4 No Material Adverse Change; No Restricted Junior Payments.......................65
4.5 Title to Properties; Liens; Real Property.......................................65
4.6 Litigation; Adverse Facts.......................................................66
4.7 Payment of Taxes................................................................66
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4.8 Performance of Agreements; Materially Adverse Agreements; Material
Contracts.......................................................................66
4.9 Governmental Regulation.........................................................67
4.10 Securities Activities...........................................................67
4.11 Employee Benefit Plans..........................................................67
4.12 Certain Fees....................................................................68
4.13 Environmental Protection........................................................68
4.14 Employee Matters................................................................69
4.15 Solvency........................................................................69
4.16 Matters Relating to Collateral..................................................69
Section 5. BORROWERS' AFFIRMATIVE COVENANTS................................................70
5.1 Financial Statements and Other Reports..........................................70
5.2 Corporate Existence, etc........................................................79
5.3 Payment of Taxes and Claims; Tax Consolidation..................................79
5.4 Maintenance of Properties; Insurance; Application of Net Loss Proceeds..........79
5.5 Inspection; Lender Meeting......................................................81
5.6 Compliance with Laws, etc.; Permits.............................................81
5.7 Environmental Review and Investigation, Disclosure, Etc.; Borrowers'
Actions Regarding Hazardous Materials Activities, Environmental Claims
and Violations of Environmental Laws............................................81
5.8 Compliance with Material Contracts..............................................84
5.9 Certain Post Closing Obligations................................................84
5.10 Payment of Liens................................................................85
5.11 Rights of First Offer...........................................................86
5.12 Further Assurances..............................................................86
5.13 Maintenance of Take Out Agreements and Lease Terms..............................89
Section 6. BORROWERS' NEGATIVE COVENANTS...................................................89
6.1 Indebtedness....................................................................89
6.2 Liens and Related Matters.......................................................91
6.3 Investments; Joint Ventures; Formation of Subsidiaries..........................93
6.4 Contingent Obligations..........................................................95
6.5 Restricted Junior Payments......................................................96
6.6 Restriction on Fundamental Changes; Asset Sales and Acquisitions................98
6.7 Sales and Lease-Backs..........................................................101
6.8 Sale or Discount of Receivables................................................101
6.9 Transactions with Shareholders and Affiliates..................................102
6.10 Disposal of Subsidiary Stock...................................................104
6.11 Conduct of Business............................................................104
6.12 Certain Restrictions on Changes to Operative Documents, Permits, Project
Budget or Project Schedule.....................................................105
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6.13 Fiscal Year....................................................................106
6.14 Zoning and Contract Changes and Compliance.....................................106
6.15 No Joint Assessment; Separate Lots.............................................107
6.16 Certain Covenants Applicable to Mall Subsidiary................................107
6.17 Compliance with Take Out Agreements............................................109
6.18 Limitation on Phase II Construction............................................109
Section 7. EVENTS OF DEFAULT..............................................................109
7.1 Failure to Make Payments When Due..............................................110
7.2 Default under Other Indebtedness or Contingent Obligations.....................110
7.3 Breach of Certain Covenants....................................................110
7.4 Breach of Warranty.............................................................111
7.5 Other Defaults Under Loan Documents............................................111
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc...........................111
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.............................112
7.8 Judgments and Attachments......................................................112
7.9 Dissolution....................................................................112
7.10 Employee Benefit Plans.........................................................113
7.11 Change in Control..............................................................113
7.12 Failure of Guaranty; Repudiation of Obligations................................113
7.13 Default Under or Termination of Operative Documents or FF&E Facility
Agreement......................................................................114
7.14 Default Under or Termination of Permits........................................114
7.15 Default Under or Termination of Cooperation Agreement..........................115
7.16 Bankruptcy or Dissolution of Mall Subsidiary...................................115
7.17 Acceleration of Obligations of Mall Subsidiary.................................115
7.18 Certain Investments in Mall Subsidiary or Phase II Subsidiary..................115
7.19 Default Under or Termination of Take Out Commitments...........................115
Section 8. MISCELLANEOUS..................................................................116
8.1 Assignments and Participations in Loans........................................116
8.2 Performance of Borrowers' Obligations..........................................118
8.3 Expenses.......................................................................118
8.4 Indemnity......................................................................120
8.5 Set-Off........................................................................121
8.6 Amendments and Waivers.........................................................121
8.7 Certain Matters Affecting Lenders..............................................121
8.8 Independence of Covenants......................................................122
8.9 Notices........................................................................122
8.10 Survival of Representations, Warranties and Agreements.........................123
8.11 Failure or Indulgence Not Waiver; Remedies Cumulative..........................123
8.12 Marshalling; Payments Set Aside................................................123
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8.13 Severability...................................................................123
8.14 Headings.......................................................................124
8.15 Applicable Law.................................................................124
8.16 Successors and Assigns.........................................................124
8.17 Consent to Jurisdiction and Service of Process.................................124
8.18 Waiver of Jury Trial...........................................................125
8.19 Confidentiality................................................................126
8.20 Counterparts; Effectiveness....................................................126
8.21 Gaming Authorities.............................................................127
Signature pages .............................................................. S-1
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EXHIBITS
Exhibit A FORM OF ADELSON GUARANTY
Exhibit B FORM OF ADELSON INTERCREDITOR AGREEMENT
Exhibit C FORM OF ASSIGNMENT AGREEMENT
Exhibit D FORM OF BORROWERS SECURITY AGREEMENT
Exhibit E FORM OF COLLATERAL ACCOUNT AGREEMENT
Exhibit F FORM OF COMPLETION GUARANTY NOTE
Exhibit G FORM OF DEED OF TRUST
Exhibit H FORM OF DISBURSEMENT AGREEMENT
Exhibit I FORM OF INTERCREDITOR AGREEMENT
Exhibit J FORM OF LEASEHOLD DEED OF TRUST
Exhibit K FORM OF MALL CONSTRUCTION SUBSIDIARY SECURITY
AGREEMENT
Exhibit L FORM OF INTERMEDIATE HOLDING GUARANTY
Exhibit M-1 FORM OF TRANCHE A NOTE
Exhibit M-2 FORM OF TRANCHE B NOTE
Exhibit N FORM OF SUBSTITUTE TRANCHE B NOTE
Exhibit O FORM OF THIRD-PARTY ACCOUNT AGREEMENT
Exhibit P FORM OF MORTGAGE POLICY
Exhibit Q FORM OF ENVIRONMENTAL INDEMNITY AGREEMENT
Exhibit R FORM OF FINANCIAL CONDITION CERTIFICATE
Exhibit S FORM OF OPINION OF PAUL, WEISS, RIFKIND, WHARTON &
GARRISON
Exhibit T FORM OF OPINION OF LIONEL SAWYER & COLLINS
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SCHEDULES
4.1A ORGANIZATION AND POWERS
4.1C OWNERSHIP OF BORROWERS
4.1D SUBSIDIARIES OF BORROWERS
4.1E OPTIONS, WARRANTS AND OTHER RIGHTS TO ACQUIRE EQUITY
4.4 TRANSACTIONS SINCE JUNE 30, 1997; RESTRICTED JUNIOR
PAYMENTS
4.5 REAL PROPERTY
4.6 LITIGATION
4.8 MATERIAL CONTRACTS
4.11 CERTAIN EMPLOYEE BENEFIT PLANS
4.12 BROKER'S OR FINDER'S FEES OR COMMISSIONS
4.13 ENVIRONMENTAL MATTERS
4.16B PERMITS
5.1 NEW SUBSIDIARIES
6.2 CERTAIN EXISTING LIENS
6.3 CERTAIN EXISTING INVESTMENTS
E N E R G Y S E R V I C E S A G R E E M E N T
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This Energy Services Agreement ("Agreement") is entered into as of this
first day of May, 1997, by and between Atlantic-Pacific Las Vegas, LLC
("Seller"), a Delaware limited liability company ("Seller"), and Venetian Casino
Resort, LLC, a Delaware limited liability company ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of producing and selling
heating and cooling energy, and providing energy management and operations and
maintenance services; and
WHEREAS, Buyer's affiliate, Las Vegas Sands, Inc. ("Construction
Affiliate") has entered into, and assigned to Buyer, a Construction Management
Agreement (defined herein) in the form of Appendix A attached hereto, providing
for, among other things, the construction of (i) an integrated thermal energy
production facility (the "Central Plant", as defined herein), to be located on
property leased to Seller pursuant to a Ground Lease (as defined herein), and
designed to meet the aggregate Thermal Energy requirements of a hotel and casino
to be developed and owned by Buyer ("Buyer's Thermal Energy Requirements"), a
convention center owned by Interface Group - Nevada, Inc. and a mall complex to
be developed by Buyer and leased by Buyer to Grand Canal Shops Mall
Construction, LLC and (ii) certain energy related and other equipment,
improvements and interconnection facilities to be located at or connected to
Buyer's Facilities (as defined herein) ("Other Facilities") and the facilities
of the Other Customers (as defined herein) (Collectively, the Central Plant and
the Other Facilities shall be referred to as the "Energy Improvements");
WHEREAS, Seller is willing to finance, purchase, own, operate and
maintain the Energy Improvements, provide certain valued added engineering
services during the design and construction of the Energy Improvements, provide,
at Buyer's option, other operation and
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maintenance services in connection with certain electrical, HVAC, distribution
and other equipment owned by Buyer ("Buyer's Equipment") located at Buyer's
Facilities, and provide certain other services for Buyer as more specifically
set forth in this Agreement;
WHEREAS, Buyer, on behalf of itself, its successors, assigns and
tenants, desires to compensate Seller for the various undertakings and services
provided by Seller pursuant to this Agreement;
WHEREAS, Buyer, on behalf of itself, its successors, assigns and
tenants, desires to have, and Seller is willing to provide Buyer, an option to
purchase (i) collectively with the Other Customers, the Central Plant and (ii)
the Other Facilities.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements set forth herein and such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Buyer and Seller, each intending to be legally bound, do hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Except as otherwise expressly provided herein, all capitalized terms
used in this Agreement shall have the respective meanings as set forth below.
Section, Appendix and Schedule references shall mean the applicable Sections of,
and Appendices and Schedules to, this Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Architects Agreement" shall mean that certain Agreement between Owner
and Architect, dated and effective as of January 1, 1996, between Venetian
Casino Resort, LLC and a collaboration between the firms of TSA of Nevada, LLP
and WAT&G, Inc. Nevada, providing
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for a fixed price, subject to certain adjustments, for the design of the Project
inclusive of the Energy Improvements and Other Customer's Facilities.
"Billing Cycle" means each calendar month within a Contract Year.
"Buyer Additional Meters" shall have the meaning set forth in Section
5.1.
"Buyer Default" shall mean each of the events described in Section 8.2.
"Buyer's Equipment" means the systems and equipment, as specifically set
forth in Schedule 1.05, as amended from time to time by Seller and Buyer, that
are owned by Buyer, are located in or on Buyer's Facilities, and are, at Buyer's
election pursuant to this Agreement, to be operated and maintained by Seller in
accordance with the terms of this Agreement.
"Buyer's Equipment O&M" means the operations and maintenance services
provided by Seller, at Buyer's election pursuant to this Agreement, in
connection with Buyer's Equipment, as more specifically set forth in Schedule
3.2A.
"Buyer's Facilities" means the hotel and casino being developed and
which will be owned by Buyer in Las Vegas, Nevada, as more particularly
described in the Funding Agents' Disbursement and Administration Agreement as
the "HC/Mall Component", excluding the "Mall" assets as defined therein.
"Buyer's Lender" shall mean "Lender", as defined in the Funding Agents'
Disbursement and Administration Agreement, which is a lender to Buyer.
"Buyer's Maximum Thermal Energy Requirement" shall mean the maximum peak
amount of Thermal Energy Seller is obligated to provide Buyer in any Contract
Year as set forth in Schedule 4.8A.
"Buyer's Thermal Energy Requirement" shall mean the Thermal Energy
requirements of Buyer for the Contract Year as set forth in the O&M Budget for
each Contract Year determined in accordance with Schedule 4.2.
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"Capacity Payment" shall mean the sum of the Central Plant Capacity
Payment and the Other Facilities Capacity Payment, as provided and defined in
Section 4.1.
"Central Plant" means the integrated Thermal Energy production facility,
associated equipment and systems, as more specifically set forth in Schedule
2.2A, to be financed, owned, operated and maintained by Seller pursuant to the
terms of this Agreement.
"Central Plant O&M" means the operations and maintenance services
provided by Seller in connection with the Central Plant, as specifically set
forth in Schedule 3.2A.
"Change in Law" means any of the following events or conditions having,
or which may reasonably be expected to have, an adverse effect on the
performance of either party's respective obligations under this Agreement
(except for payment obligations):
(a) the adoption, promulgation, issuance, modification or
repeal, subsequent to the date of this Agreement, of any Legal
Requirement or the issuance of any modification of any
previously issued written administrative or judicial
interpretation thereof;
(b) the order, judgment, action or determination of any federal,
state or local court, administrative agency, governmental body
or officer, or regulatory commission on or after the date of
this Agreement to the extent such order, judgment, action or
determination is not the result of willful or negligent action
of the party asserting the occurrence of a Change in Law;
provided however, that any good faith actions or inactions to
contest any such order, judgment, action or determination shall
not be considered a willful or negligent action or lack of
reasonable diligence on the part of the party asserting the
Change in Law;
(c) the denial of an application for, delay in the review,
issuance or renewal of, or suspension, termination,
modification, interruption, or imposition of any material
condition in connection with the issuance, renewal or failure of
issuance or renewal on or after the date of this Agreement of
any Governmental Authorization to the extent that such denial,
delay, suspension, termination,
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modification, interruption, imposition, or failure is not the
result of the willful or negligent action or lack of reasonable
diligence on the part of the party asserting the occurrence of
the Change in Law; provided however, that good faith actions or
inactions to contest any such denial, delay, suspension,
termination, modification, interruption, imposition or failure
shall not be considered a willful or negligent action or lack of
reasonable diligence of the party asserting the Change in Law.
"Confidential Information" means any and all information, or any portion
thereof of a proprietary, confidential and/or trade secret nature, disclosed to
or otherwise obtained by the receiving party or its employees, agents or
affiliates (each individually referred to as a "recipient") either directly or
indirectly from the other party, whether oral, written, or in other recorded
form, including but not limited to the know-how, trade secrets, knowledge,
concepts, data, reports, methodology, pricing, business affairs, and any other
information or knowledge owned or developed by either party, except for
information which the recipient can demonstrate:
(a) was at the time of disclosure to such recipient, generally
part of the public domain or thereafter becomes generally part
of the public domain through no act or omission of recipient; or
(b) was lawfully in such recipient's possession as shown in
written records prior to such disclosure and without obligation
of confidentiality; or
(c) was lawfully received by such recipient after disclosure
from a third party without obligation of confidentiality and
without violation by such third party of an obligation of
confidentiality to another; or
(d) was independently developed by such recipient without any use
of or benefit of Confidential Information.
"Consent and Agreement" shall mean that certain Consent and Agreement
(HVAC AGREEMENTS) dated as of November 14, 1997 by Seller for the benefit of The
Bank of Nova Scotia, in its capacity as the Intercreditor Agent, as defined in
the Funding Agents' Disbursement and Administration Agreement, for and on behalf
of The Bank of Nova Scotia, as Bank Agent,
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The Bank of Nova Scotia, as Disbursement Agent, GMAC Commercial Mortgage
Corporation, as the Interim Mall Lender, First Trust National Association, as
the Mortgage Notes Indenture Trustee, and the Other Secured Parties thereunder.
"Construction Agency Agreement" means that certain Construction Agency
Agreement, of even date herewith, between Buyer and Seller.
"Construction Consultant" shall have the meaning set forth in the
Funding Agents' Disbursement and Administration Agreement.
"Construction Management Agreement" means that certain Construction
Management Agreement, dated as of the 15th day of February, 1997, between Lehrer
McGovern Bovis, Inc. and Las Vegas Sands, Inc., providing for a guaranteed,
not-to-exceed maximum price, subject to certain exceptions, for the construction
of the Project, inclusive of the Energy Improvements and Other Customer's
Facilities, which contract has been amended and assigned to Buyer pursuant to
that certain Assignment, Assumption and Amendment dated as of November 14, 1997
by and among Lehrer McGovern Bovis, Inc., Las Vegas Sands, Inc. and Buyer.
"Contract Year" shall mean, commencing on the Service Commencement Date,
each successive twelve (12) calendar month period, or other period mutually
agreed to in writing by Seller, Buyer and the Other Customers, during the Term.
"Contract Year Amount" shall have the meaning set forth in Section 4.3
of this Agreement.
"Contract Year Fixed Costs" shall have the meaning set forth in and be
determined in accordance with Schedule 4.2.
"Contractor" shall mean Lehrer McGovern Bovis, Inc.
"Credit" shall have the meaning set forth in Section 4.3 of this
Agreement.
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"Current Contract Year" shall mean, at any time during the Term, the
Contract Year within which the then current calendar date falls.
"Current O&M Budget" means the Annual O&M Budget applicable in the
Current Contract Year, determined in accordance with of Schedule 4.2.
"Divided Share" means the fixed ratio of Buyer's Maximum Thermal Energy
Requirement to the sum of Buyer's Maximum Thermal Energy Requirement and Initial
Customers Maximum Thermal Energy Requirement of each of the Other Customers, as
more specifically set forth on Schedule 2.2C, and as such schedule may be
amended from time to time based upon the mutual written agreement of Seller,
Buyer and the Other Customers. The sum of Divided Share of Buyer and the Other
Customers shall in no event be less than 100%; provided however, that in the
event Seller terminates its energy services agreements with one or both of the
Other Customers and this Agreement is not otherwise terminated, Buyer's Divided
Share in effect as of the date of such termination shall not be adjusted based
upon such termination(s) absent Buyer's and Seller's written consent.
"Easements" shall have the mean those easements granted to Seller
pursuant to the provisions of the Ground Lease and those certain Easement
Agreement, dated as of the same date as this Agreement, entered in to by Seller
and the Other Customers.
"Energy Improvements" means the Central Plant and the Other Facilities.
"Energy Management Services" shall have the meaning set forth in
Section 3.3.
"Engineering Services" means the services provided by Seller to Buyer
pursuant to the terms of this Agreement, as specifically set forth in Schedule
3.1.
"Event of Force Majeure" shall include the following acts, events or
conditions, or any combination thereof, which renders either party wholly or
partially unable to perform its obligations under this Agreement, other than the
payment of money, and which is beyond the
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reasonable control of the party relying thereon as justification for not
performing its obligations or complying with any condition required of such
party under the terms of this Agreement:
(a) an act of God, lightning, earthquake, hurricane, tornado,
acts of a public enemy, war, blockade, insurrection, riot or
other civil disturbance, sabotage or similar occurrence or any
exercise of the power of eminent domain, police power,
condemnation or other taking by or on behalf of any public,
quasi-public or private entity; or
(b) a landslide, fire, accident, strike or labor dispute,
curtailment of fuel supply, explosion, flood or nuclear
radiation, not created by an act or omission of the party
asserting an Event of Force Majeure has occurred; or
(c) a Change in Law; or
(d) the suspension, termination, interruption, denial or failure
of or inability to obtain any renewal or issuance of any permit,
license, right of way, consent, authorization or other approval
which is essential to Seller's performance of its obligations
under this Agreement; provided however, that such suspension,
termination, interruption, denial , failure or inability shall
not be the result of the failure of Seller to comply with Legal
Requirements or the willful, intentional or negligent action or
inaction of Seller, provided however, that the contesting, in
good faith, of any such suspension, termination, interruption,
denial , failure or inability, shall not constitute or be
construed as a willful, intentional or negligent action or
inaction by Seller; or
(e) any surface or subsurface condition not created by Seller and
existing at the Central Plant Site which shall require a redesign
or change in the construction of the Energy Improvements such
that Total Energy Improvement Cost is likely to exceed $70
million; or
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(f) Forced Outage, but only to the extent caused by any of the
acts, events or conditions described in the foregoing clauses
(a) through (e) of this definition of "Event of Force Majeure".
"Fixed Share" shall have the meaning set forth in, and be determined in
accordance with, Schedule 4.2.
"Forced Outage" shall mean any outage caused by mechanical, electric or
equipment failure, not caused by or resulting from the acts or omissions of
Seller (or Seller's employees or agents), that either fully or partially
curtails the operation of the Energy Improvements.
"Fully Burdened Payroll Costs" shall have the meaning set forth in, and
be determined in accordance with, Schedule 4.2.
"Funding Agents' Disbursement and Administration Agreement" shall mean
that certain Funding Agents' Disbursement and Administration Agreement dated as
of November 14, 1997 by and between Buyer The Bank of Nova Scotia, as
Disbursement Agent, The Bank of Nova Scotia, as the Bank Agent, First Trust
National Association, as trustee, GMAC Commercial Mortgage Corporation and
Seller, as amended pursuant to its terms.
"Governmental Approval" means any authorization, consent, approval,
waiver, exception, variance, franchise, permission, permit, filing, publication,
declaration, license or other form of required permission from, of or with any
Governmental Authority, and shall include, without limitation, those siting,
environmental and operating permits and licenses which are required for the
construction, modification, use, operation and maintenance of the Energy
Improvements.
"Governmental Authority" means any agency, department, court or other
administrative or regulatory authority of any federal, state or local
governmental body.
"Ground Lease" means that certain Ground Lease between Seller and
Venetian Casino Resort, LLC dated the same date as this Agreement.
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"HVAC Completion" shall have the meaning set forth in the Funding
Agents' Disbursement and Administration Agreement.
"Initial Customers' Maximum Thermal Energy Requirements" shall mean the
sum of the maximum peak amount of Thermal Energy Seller is obligated to provide
the Other Customers in any Contract Year as set forth in Schedule 2.2C.
"Initial Customers' Thermal Energy Requirements" shall mean the Thermal
Energy requirements of the Other Customers in the Contract Year, as set forth in
the O&M Budget for such Contract Year adopted pursuant to Schedule 4.2.
"Initial Term" shall have the meaning set forth in Section 2.1.
"Legal Requirements" shall mean all laws, statutes, codes, ordinances,
rules, regulations, orders, judgments, decrees, injunctions, directions and
requirements of all federal, state, county, municipal and local government
units, agencies and courts which must be complied with by either party in
performing its obligations pursuant to this Agreement, including but not limited
to, all applicable environmental laws and Governmental Approvals.
"Margin" shall have the meaning set forth in, and be determined in
accordance with, Schedule 4.2
"Metering Equipment" shall have the meaning set forth in Section 5.1.
"Monthly Capacity Payment" shall have the meaning set forth in, and
shall be determined in accordance with Schedule 4.1.
"O&M Budget" means the budget for O&M Services adopted in accordance
with Schedule 4.2.
"O&M Services" means the Central Plant O&M, Other Facilities O&M and, to
the extent applicable, Buyer's Equipment O&M.
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"Other Customers" means, collectively, Interface Group-Nevada, Inc. and
Grand Canal Shops Mall Construction, LLC and their permitted successors and
assigns.
"Other Customers Facilities" means the systems and equipment, as
specifically set forth on Schedule 2.2A, that are located in or on the
facilities of the Other Customers and are to be financed, owned, operated and
maintained by Seller pursuant to agreements with the Other Customers.
"Other Customers Facilities O&M" means the operations and maintenance
services provided by Seller in conjunction with the Other Customers Facilities,
as specifically set forth in Schedule 3.2A.
"Other Facilities" means the systems and equipment, as specifically set
forth in Schedule 2.2A, that are located in or on Buyer's Facilities and are to
be financed, owned, operated and maintained by Seller pursuant to the terms of
this Agreement.
"Other Facilities Capacity Payment" shall have the meaning set forth in
Schedule 4.1B.
"Other Facilities O&M" means the operations and maintenance services
provided by Seller in connection with the Other Facilities, as specifically set
forth in Schedule 3.2A.
"Permitted Liens" shall have the meaning set forth in the Funding
Agents' Disbursement and Administration Agreement.
"Person" means any individual, corporation, business, trust,
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or other entity of whatever nature.
"Prior Contract Year" shall mean, at any time during the Term commencing
on the first anniversary date of the Service Commencement Date, the Contract
Year preceding the Current Contract Year.
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"Project" shall have the meaning given in the Funding Agents'
Disbursement and Administration Agreement.
"Projected Contract Year" means commencing on the Service Commencement
Date and thereafter, at any time during the Term, the Contract Year next
succeeding the Current Contract Year.
"Projected O&M Budget" means the O&M Budget applicable to a Projected
Contract Year, determined in accordance with Schedule 4.2.
"Property" shall have the meaning set forth in the Ground Lease.
"Property Owner" means Venetian Casino Resort, LLC.
"Proportionate Share" shall mean (i) for the first Contract Year, the
fixed percentage set forth in Schedule 2.2B and (ii) for the second Contract
Year and each Contract Year thereafter, the ratio of Buyer's Thermal Energy
Requirements to the sum of Buyer's Thermal Energy Requirements and the Initial
Customers' Thermal Energy Requirements for the immediately preceding Contract
Year; provided however that in the event that Buyer, or both, of the Other
Customers did not actually fully occupy and use 100% of its respective
improvements for any portion of such preceding Contract Year (by reason of (i)
delay in the date such improvements are opened for business, (ii) fire or other
casualty, (iii) the non-occupancy and use of tenant space, or (iv) any other
cause, without limitation), then for purposes of such adjustment under clause
(ii) above, the actual total Thermal Energy received by such entity during the
prior Contract Year shall be increased to equitably reflect stabilized full
occupancy and use of 100% of such improvements for the entire preceding Contract
Year. Until and unless the appropriate amount of such adjustment has been
approved in writing by Seller, Buyer and the Other Customers, which approval
shall not be unreasonably withheld or delayed, the Proportionate Shares of Buyer
and the Other Customers shall not be changed from those then in effect for the
prior immediately preceding Contract Year, but upon such approval, such
Proportionate Share may be adjusted retroactively to the beginning of the
applicable Contract Year; provided however that, except as may be agreed to by
the parties in writing as a result of an agreement entered into
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by Seller with another customer pursuant to Section 4.8 of this Agreement, in no
event shall the sum of Buyer's Proportionate Share and the Initial Customers
Proportionate Shares be less than 100%. Any of Buyer, Seller or any Other
Customers shall have the right, upon written notice to the others, to request
such adjustment be considered for any improvements served by the Central Plant
which it reasonably believes were not fully used and occupied at all times
during the immediately preceding Contract Year; provided that such notice is
given not less than 30 calendar days following the last day of such Contract
Year.
"Prudent Operating Practices" means the practices, methods and acts
commonly used by experienced and prudent operators in the heating and cooling
industry, including that portion of the industry providing thermal energy
services to convention centers, casinos, malls and similar institutions, that at
a particular time, in the exercise of reasonable judgment in light of the facts
known and/or that reasonably should have been known at the time a decision was
made, would have been expected to accomplish the desired result in a manner
consistent with law and/or Governmental Authorizations, reliability, safety,
environmental protection, economy and expedition, including without limitation,
those practices, methods and acts which are required by manufacturers of
machinery and equipment constituting as applicable, the Central Plant, the Other
Facilities, or, if applicable, Buyer's Equipment.
"Purchase Option Payment" shall mean the amount set forth in Schedule
2.5 to be paid by Buyer upon exercising its purchase option under Section
2.5(a).
"Renewal Term" shall have the meaning set forth in Section 2.5(b).
"Seller Default" shall mean each of the events described in Section 8.1.
"Seller's Lender" means any party providing financing or refinancing to
Seller in connection with Seller's payment of the costs of the design,
engineering, procurement, acquisition, construction, start up, testing and/or
operation and maintenance of the Energy Improvements and the Other Customers
Facilities.
"Service Commencement Date" shall have the meaning set forth in Section
2.3.
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"Subcontractor" shall mean any supplier, other than Seller, of work,
materials, equipment or services to Contractor, Buyer or its Construction
Affiliate in connection with the design, construction, start up and testing of
the Energy Improvements and Other Customers Facilities.
"Tenants" or "Tenant" shall have the meaning set forth in Article XII of
this Agreement.
"Term" shall have the meaning set forth in Section 2.2.
"Termination Payment" means the amount, set forth in Schedule 9.3, which
Buyer shall pay Seller in accordance with Sections 2.4, 3.4(c), 9.1 and
9.3.
"Thermal Energy" means steam and chilled water produced at the Central
Plant and delivered by Seller to Buyer pursuant to this Agreement at the
interconnection points set forth in Schedule 3.4.
"Total Energy Improvements Cost" shall mean the total amount of costs
incurred by Seller, pursuant to the terms of this Agreement, the Construction
Agency Agreement and the Funding Agents' Disbursement and Administration
Agreement, in connection with the design, engineering, procurement,
construction, start-up and testing of the Energy Improvements and the Other
Customers Facilities, which amount shall not exceed $70 million, inclusive of
(i) interest on any such cost incurred by Seller during construction and prior
to the Service Commencement Date, at an interest rate equal to the Effective
Interest Rate set forth in Schedule 4.1 (ii) all out-of-pocket costs, expenses
and fees, including fees and expenses of all legal counsel of each such member's
letter of credit bank, incurred by Seller's members in connection with the
obtaining of a letter of credit in accordance with Section 2.4 of the Funding
Agents' Disbursement and Administration Agreement and (iii) that portion of the
cost of Transition Period O&M Services provided by Seller which Buyer, Seller
and the Other Customers mutually agree should be capitalized pursuant to
Schedule 3.2B.
"Transition Period O&M Services" means the operations and maintenance
services provided by Seller prior to the Service Commencement Date, as more
specifically set forth in Schedule 3.2B.
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"Unit Variable Cost" shall have the meaning set forth in, and be
determined in accordance with, Schedule 4.2.
"Unit Variable Share" shall have the meaning set forth in, and be
determined in accordance with, Section 4.2.
ARTICLE II
TERM; CONDITIONS PRECEDENT
2.1 Term. This Agreement shall be in full force and effect, be legally
binding upon the parties and their permitted successors and assigns, and be
enforceable in accordance with its terms, as of the date first set forth above
and shall remain in effect unless terminated earlier pursuant to the provisions
of Section 2.4, Article IX, or Section 10.2, for an initial term of ten (10)
Contract Years ("Initial Term") from the Service Commencement Date, and
thereafter for any Renewal Term, as defined provided in Section 2.5 (the Initial
Term and any Renewal Term being the "Term" of this Agreement).
2.2 Conditions Precedent to Seller's Payment of Total Energy
Improvements Cost. Subject to the provisions of this Agreement, the Construction
Agency Agreement and the Funding Agents' Disbursement and Administration
Agreement, Seller agrees to pay the Total Energy Improvement Costs up to a
maximum amount of $70 million dollars in the aggregate; provided however, that
Seller's obligation to pay, or advance funds for the payment of, such costs
shall be subject to the satisfaction or written waiver by Seller of each of the
following conditions precedent:
(a) Seller shall have executed the Ground Lease and the Easement
Agreement with the Buyer and the Other Customers, respectively and the Ground
Lease and the Easement Agreements, together with any financing statements
required by Section 13.17, shall have been delivered to Lawyers Title Insurance
Company for recording and recorded as soon as possible after such delivery but
in no event later than contemporaneously with the recording of the Deed of
Trust, as defined in the Funding Agents' Disbursement and Administration
Agreement.
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(b) there shall not be a Buyer Default under this Agreement, or
Seller's energy services agreements with the Other Customers, an Event of
Default of Landlord under the Ground Lease, an Event of Default under (and as
defined in the Funding Agents' Disbursement and Administration Agreement and/or
a Construction Agent Event of Default, as defined in and, under the Construction
Agency Agreement;
(c) Buyer and Seller shall have executed a Construction Agency
Agreement, in the form of Appendix B attached hereto and Buyer shall have
executed the Assignment of Construction Documents attached thereto and the
written consent, in the form attached to the Assignment of Construction
Documents, of each of the other parties to the Construction Documents (as
defined in the Construction Agency Agreement)shall have been obtained;
(d) All applicable conditions precedent to such funding as set
forth in, and determined in accordance with, the Funding Agents' Disbursement
and Administration Agreement shall have been satisfied, including but not
limited to the delivery by Buyer to the Disbursement Agent thereunder of the
requisite Advance Request the delivery by the Buyer of the requisite Notice of
Funding Request and the delivery by Buyer to Seller of the requisite
Consultant's Certificate, with each such certificate in the form provided in the
Funding Agents' Disbursement and Administration Agreement, together with such
other certificates as may be required pursuant to the Funding Agents'
Disbursement and Administration Agreement.
2.3 Service Commencement Date. The Service Commencement Date shall be
deemed to occur on the first day of the calendar month immediately following the
date that (i) HVAC Completion has occurred and (ii) the Opening Date, as defined
in the Funding Agents' Disbursement and Administration Agreement has occurred.
Pursuant to the Construction Agency Agreement, Buyer shall cause HVAC Completion
to occur no later than the Outside Completion Deadline (as defined and
determined in accordance with the Funding Agents' Disbursement and
Administration Agreement), which shall in no event be later than November 14,
2000.
2.4 Early Termination. (a) Subject to Section 2.4(b) in the event that
(i) prior to the Service Commencement Date, an Event of Default as defined under
the Funding Agents'
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Disbursement and Administration Agreement occurs for any reason other than a
breach by Seller of its obligations thereunder or (ii) other than due to a
breach by Seller of its obligations under this Agreement, the Service
Commencement does not occur on or before the Outside Completion Deadline, Seller
may, in its sole discretion, terminate this Agreement upon written notice to
Buyer. Upon such termination Seller shall have no further obligation to Buyer
hereunder and Buyer shall, on behalf of itself and the Other Customers, pay
Seller the sum of the Engineering Services Payment, as provided in Section 4.4,
and the Termination Payment, as set forth on Schedule 9.3. Upon such payment by
Buyer, Seller shall execute and deliver to (A) Buyer or its designee a quitclaim
bill of sale transferring to Buyer or such designee all of Seller's right, title
and interest in and to the Central Plant and the Other Facilities located at or
connected to Buyer's Facilities, AS IS WHERE IS, free and clear from any liens
or encumbrances of Seller, its agents (other than Buyer), contractors and/or
Seller's Lender and (B) to each of the Other Customers or their designee, a
quitclaim bill of sale transferring to each of the Other Customers all of
Seller's right, title and interest in and to the Other Customers Facilities
located at or connected to each of such Other Customers, AS IS WHERE IS, free
and clear from any liens or encumbrances of Seller, its agents (other than
Buyer), contractors and/or Seller's Lenders.
(b) In the event that HVAC Completion has occurred and Seller has
commenced providing Thermal Energy to the convention center owned by Interface
Group-Nevada, Inc., pursuant to the terms and conditions of Seller's energy
service agreement with such customer, and Final Completion is not achieved by
the Outside Completion Deadline, as provided in Section 2.3, Seller may
nevertheless terminate this Agreement and have no further obligation to Buyer;
provided however that upon such termination Buyer's Termination Payment to
Seller shall be reduced by an amount equal to Interface Group-Nevada, Inc.'s
Divided Share of the Termination Payment and provided further that upon such
payment Seller shall retain all right, title and interest in and to the Central
Plant and shall only execute and deliver to (1) Buyer or its designee a
quitclaim bill of sale transferring to Buyer or such designee all of Seller's
right, title and interest in and to the Other Customers Facilities located at or
connected to Buyer's Facilities, AS IS WHERE IS, free and clear from any liens
or encumbrances of Seller, its agents (other than Buyer), contractors and/or
Seller's Lender and (2) to Grand Canal Mall Shops
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Construction, LLC or its designee a quitclaim bill of sale transferring all of
Seller's right, title and interest in and to the Other Customers Facilities
located at or connected to such customer's facilities as provided in Seller's
energy service agreement with such customer, AS IS WHERE IS, free and clear from
any liens or encumbrances of Seller, its agents (other than Buyer), contractors
and/or Sellers Lenders. Furthermore, upon such termination Seller shall be
entitled to continue to occupy the Property pursuant to and as defined in the
Ground Lease to enable Seller to continue to provide Thermal Energy to
Interface-Group-Nevada, LLC pursuant to the terms and conditions of Seller's
energy service agreement with such customer.
2.5 Renewal Upon Expiration of Term / Purchase Option
(a) Subject to paragraph (b) of this Section 2.5, upon the
expiration of the Initial Term and the first and second Renewal Term (as
hereinafter defined), Buyer shall have the option of either (i) terminating this
Agreement, or (ii) subject to Section 2.5(b), extending the term of this
Agreement for a Renewal Term (as hereinafter defined), or (iii) purchasing from
Seller its (A) Divided Share of the Central Plant and (B) the Other Facilities,
by paying to Seller the Purchase Option Payment determined in accordance with
and pursuant to Schedule 2.5; provided however that such option by Buyer to
terminate this Agreement or exercise such purchase option may only be elected by
Buyer (A) upon written notice to Seller on or before the date which is one
hundred and eighty (180) days prior to the expiration of the Initial Term or the
applicable Renewal Term, as the case may be, and (B) in the event each of the
Other Customers has elected, by similar written notice to Seller, to likewise
terminate this Agreement or exercise its corresponding purchase option. In the
event such purchase option is elected by Buyer and each of the Other Customers,
upon exercise of such purchase option by Buyer and the Other Customers and the
payment by Buyer of the Purchase Option Payment and payment by the Other
Customers of the purchase option payment amount provided in such Other
Customers' agreements with Seller, Seller shall execute and deliver to Buyer,
the Other Customers or their designee a bill of sale transferring good and
marketable title in and to, in the case of Buyer, the Central Plant and the
Other Facilities, and, in the case of the Other Customers, the Other Customers
Facilities, free and clear of any liens or encumbrances of Seller, its agents,
contractors or Seller's Lenders. Alternatively, upon the exercise of such
termination option by Buyer and
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each of the Other Customers, this Agreement shall terminate, subject to Seller's
continuing right to occupy the Central Plant Site pursuant to the provisions of,
and to the extent provided in, the Ground Lease.
(b) In the event that Buyer and each of the Other Customers have
not elected to exercise their purchase option or terminate this Agreement
pursuant to Section 2.5 (b), the term of this Agreement shall be automatically
extended for an additional five (5) Contract Years (the period of each such
renewal being a "Renewal Term") upon the same terms and conditions contained
herein with the exception of the Capacity Payment paid by Buyer during any
Renewal Term shall be revised in accordance with the provisions of Schedule
4.1(C); provided further however that unless otherwise agreed to in writing
between Seller, Buyer and the Other Customers, and notwithstanding the
provisions of Section 2.5(a), in no event shall the Term of this Agreement
exceed twenty (20) Contract Years from the Service Commencement Date.
ARTICLE III
SCOPE OF SERVICES
3.1. Services Prior to and During Construction. Prior to the Service
Commencement Date, Seller shall, subject to Section 4.4, provide Buyer with the
engineering, fuel management planning, project management, and other services
set forth in Schedule 3.1 (the "Engineering Services").
3.2 Operations and Maintenance Services.
(a) Commencing on the Service Commencement Date, Seller will
provide, or caused to be provided, operations and maintenance services for the
Central Plant (the "Central Plant O&M"), the Other Facilities ("Other Facilities
O&M") and, to the extent requested by Buyer upon thirty (30) days prior written
notice to Seller, Buyer's Equipment ("Buyer's Equipment O&M") (collectively, the
"O&M Services") in accordance with the specifications, and operations and
maintenance standards and procedures set forth in Schedule 3.2A. In the event
Buyer requests Seller to operate and maintain Buyer's Equipment, the obligation
of Seller to provide such operation and maintenance services shall be subject to
Buyer and Seller first
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amending the O&M Budget adopted pursuant to Schedule 4.2 to reflect the Buyer's
Equipment O&M Payments due Seller in connection with such operation and
maintenance services.
(b) Prior to the Service Commencement Date, Seller will provide,
or cause to be provided, certain preoperational operation and maintenance
services ("Transition Period O&M Services") as set forth in Schedule 3.2B.
3.3 Energy Management Services. Commencing on the Service Commencement
Date or such earlier date mutually agreed to by the parties in writing, Seller
shall act as Buyer's broker with respect to the procurement of such supplies of
electricity, natural gas and alternate fuels as are necessary to serve the
energy requirements of Buyer's Facilities that are in addition to Buyer's
Thermal Energy requirements (such services, the "Energy Management Services").
Seller shall, in the performance of the Energy Management Services, use
reasonable efforts to assist Buyer in procuring and thereafter managing such
supplies of electricity, natural gas and alternate fuels purchased by Buyer.
Buyer and Seller shall implement, and Seller shall administer, an energy
procurement plan designed, to minimize, consistent with Buyer's reliability
requirements and Seller's other obligations under this Agreement, the
as-delivered cost of such electricity, natural gas and alternate fuels. Upon
Seller's written request, Buyer shall execute each procurement agreement that
Seller recommends; provided however, nothing herein shall be deemed to obligate
Buyer to execute such agreements. Seller shall, with Buyers assistance, make
arrangements for the supply of electricity, natural gas or alternate fuels
supplier(s) required to satisfy the energy requirements of Buyer's Facilities
that are in addition to Buyer's Thermal Energy Requirements. Buyer shall be
directly responsible for paying the costs of all such electricity, natural gas
and alternate fuel and Seller shall not be deemed to have, and Buyer shall
defend, indemnify and hold Seller harmless from any liabilities or obligations
of Buyer to the suppliers of such electricity, natural gas or alternative fuels
In the event that an Affiliate of any member of Seller provides such
electricity, natural gas or alternate fuels to Buyer, Seller's compensation for
such Energy Management Services shall be adjusted pursuant to the provisions of
Section 4.3 in such event.
3.4 Central Plant Performance Penalties
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(a) Seller acknowledges the importance to Buyer of the
availability and quality of Thermal Energy from the Central Plant required to
satisfy Buyer's Thermal Energy Requirements. Seller shall establish operation
and maintenance procedures and maintain appropriate monitoring equipment, which
monitoring equipment Buyer and Seller shall mutually agree upon and which Buyer
shall cause the Contractor to install pursuant to the provisions of the
Construction Management Agreement and the Construction Agency Agreement, the
costs of which shall be included in the Central Plant Capital Costs (as defined
in Schedule 4.1), in order to monitor the compliance of the steam and chilled
water produced by the Central Plant with the standards set forth in Schedule 3.4
(the "Steam and Chilled Water Standards").
(b) Commencing on the Service Commencement Date and during the
Term of this Agreement, upon discovery by either party of the unavailability of
the Central Plant or failure of the Central Plant to deliver Thermal Energy
meeting the Steam and Chilled Water Standards, such party shall, regardless of
the cause thereof, immediately notify the other party and thereafter Seller
shall use diligent efforts, subject to reasonable Central Plant operating
restrictions, to remedy such Central Plant unavailability and resume the
production and delivery of Thermal Energy which satisfies the Steam and Chilled
Water Standards. The costs of any corrections or modifications required to
correct such Central Plant unavailability and/or failure of the Thermal Energy
to satisfy the Steam and Chilled Water Standards shall be made at Seller's
expense but only to the extent such unavailability or failure is due to the
breach of Seller of its obligations under this Agreement and not due to an Event
of Force Majeure, or the acts of any Person not acting on behalf of, or under
contract with Seller in connection with the performance of its obligation under
this Agreement, or the acts or omissions of Contractors under the Construction
Documents and Construction Agreements, as each term is defined in the
Construction Agency Agreement, or Buyer, or any of their respective
subcontractors or vendors, and such parties' respective successors and/or
assigns. To the extent the cause of such Central Plant unavailability or failure
of the Thermal Energy to satisfy the Steam and Chilled Water Standards is not
due to the breach by Seller of it's obligations under this Agreement, the cost
of correcting the same shall be included in an amendment to the Current Contract
Year O&M Budget pursuant to Schedule 4.2. Notification pursuant to this Section
3.4(b) shall be made in person or by telephone call and confirmed in writing.
Seller shall not be responsible for compensating Buyer for any form of
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consequential, indirect or special damages or for lost profits or revenues as a
result of unavailability of the Central Plant to satisfy Buyer's Thermal Energy
Requirements or the failure of the Thermal Energy produced thereby to satisfy
the Steam and Chilled Water Standards. Except as set forth in Section 3.4(c),
Seller's payment of the costs to correct such cause of the Central Plant
unavailability or non-conforming Thermal Energy shall be Buyer's sole and
exclusive remedy against Seller due to a breach by Seller of its obligations
under this Agreement which results in the failure of the Central Plant to be
available to satisfy Buyer's Thermal Energy Requirements or to produce and
deliver Thermal Energy to Buyer which satisfies the Steam and Chilled Water
Standards and Buyer shall, subject to Article VII, indemnify, hold harmless and
defend Seller against any claims, liability, damages, costs and expenses,
including attorneys fees, arising from, incurred in connection with or suffered
by Seller from any third party (other than Seller's employees, contractors,
Affiliates and Seller's Lender) related to the unavailability of the Central
Plant to satisfy Buyer's Thermal Energy Requirements and/or the failure of such
Thermal Energy to satisfy the Steam and Chilled Water Standards. Buyer agrees
not to seek contribution or reimbursement from Seller for any claims, liability,
damages, costs or expenses, including attorneys fees, suffered or incurred by
Buyer related to the unavailability of the Central Plant or the failure of such
Thermal Energy to satisfy the Steam and Chilled Water Standard. In the event
that any such failure to deliver Thermal Energy meeting the Steam and Chilled
Water Standards is due to the acts or omissions of Contractor, Seller shall
enforce any warranties and/or guaranties of Contractor which has been assigned
to Seller by Contractor in writing pursuant to the Construction Management
Agreement and relate to such failure.
(c) Subject to Section 3.4(d), in the event that after the
Service Commencement Date due to the breach of Seller's obligations under this
Agreement the Central Plant is unavailable to satisfy Buyer's Thermal Energy
Requirements or satisfy the Steam and Chilled Water Standard for more than 12
hours in any day, or for a total of more than 24 hours in any calendar quarter,
Buyer shall be entitled to (A) terminate this Agreement, effective upon one
day's prior written notice to Seller, and (B) purchase the Central Plant and the
Other Facilities by paying the Seller the Termination Payment applicable at the
effective date of such termination, in level monthly installments, at an
interest rate equal to the Effective Interest Rate, as defined in Schedule 4.1,
over a period equal to the balance of what would otherwise be the remaining Term
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of this Agreement as of the date of such termination. Upon the effective date of
such termination, Buyer shall assume complete responsibility for the operation
and maintenance of the Central Plant and the Other Facilities, consistent with
the standards set forth in this Agreement, and Seller shall have no further
obligation or liability to Buyer under this Agreement and Buyer shall indemnify
and hold Seller harmless from all claims, liabilities, damages, costs and
expenses arising after the termination date which are in any manner related to
the Central Plant and/or the Other Facilities. The exercise of such early
termination and buyout option by Buyer shall be in lieu of all other remedies of
Buyer pursuant to this Agreement or otherwise available at law or in equity.
Those provisions of this Agreement necessary for Seller to enforce its right to
payment of the Termination Payment shall survive termination of this Agreement
and Buyer shall execute all documents reasonably required by Seller in order to
secure Buyer's obligation to pay Seller the Termination Payment, including, but
not limited to, necessary UCC filings granting Seller a first priority security
interest in the Central Plant and the Other Facilities until the Termination
Payment is paid in full.
(d) Buyer's right to terminate this Agreement pursuant to Section
3.4(c) shall be subject to the exercise, by a like written notice to Seller from
the Other Customers of their election to exercise their right, pursuant to such
Other Customers agreements with Seller, to terminate such agreements with Seller
and purchase such Other Customers' (i) Divided Share of the Central Plant and
(ii) Other Facilities, upon notice by Buyer to Seller of Buyer's exercise of its
rights pursuant to Section 3.4 (c). Nothing in this Section 3.4(c) shall be
deemed to give the Buyer the right to terminate this Agreement absent the
contemporaneous notice written by the Other Customers terminating their
respective energy services agreements with Seller and pay to Seller of the
termination amounts due from such other Customers as set forth in such
agreements.
(e) In the event that Seller is not in default of its obligations
to Buyer pursuant to Section 3.4(b), but Seller has, nevertheless, defaulted in
such performance obligations pursuant to its energy service agreements with one
or both of the Other Customers and each of such Other Customers have elected to
terminate their energy services agreement with Seller, in accordance with the
provisions thereof, Buyer shall be entitled, subject to Section 3.4(d), to
terminate this Agreement contemporaneous with such termination by each of the
Other Customers and payment of the Termination Payment, as provided in Section
3.4(c).
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ARTICLE IV
SERVICE FEES
4.1 Capacity Payments. Subject to Section 4.5 (b), commencing on the
Service Commencement Date and for the balance of the Term, Buyer shall pay
Seller during each Contract Year, in accordance with the billing and payment
provisions of Section 4.5, the sum of (a) Buyer's Divided Share of the Central
Plant Capacity Payment, as defined and determined in accordance with Schedule
4.1(A) and (B) the Other Facilities Capacity Payment, as defined and determined
in accordance with Schedule 4.1(B); provided however that in the event that the
Term of this Agreement is extended pursuant to Section 2.5, the Central Plant
Capacity Payment and the Other Facilities Capacity Payment applicable during
each such Renewal Term shall be determined in accordance with Schedule 4.1(C).
4.2 Operations and Maintenance Services Payments.
(a) Commencing on the Service Commencement Date, and for the
balance of the Term, Buyer shall pay to Seller, in accordance with the billing
and payment provisions of Section 4.5, Buyer's share of the Current Contract
Year O&M Budget, as determined in accordance with Schedule 4.2.
4.3 Energy Management Services Payment. Commencing on the Service
Commencement Date or such earlier date mutually agreed to by the parties in
writing and for the balance of the Term of this Agreement, Buyer shall pay
Seller during, in the event such Energy Management Services are provided prior
to the Service Commencement Date from the date such services are provided until
the Service Commencement Date and thereafter each Contract Year, in accordance
with the billing and payment provisions of Section 4.5, of the costs of the
Energy Management Services provided by Seller pursuant to this Agreement (such
payment, the "Energy Management Services Payment"). Buyer's Energy Management
Services Payment in each Contract Year of this Agreement, shall be equal to
Contract Year Amount less the Credit, if any, (defined below). For purposes of
this Section 4.3, "Contract Year Amount" shall mean the
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product of Buyer's Proportionate Share and $75,000, and in each subsequent
Contract Year, the Contract Year Amount established for the immediately
preceding Contract Year, multiplied by the rate of the Consumer Price Index for
the Western United States Region, or such other area mutually agreed to by the
parties ("CPI Index") for the June of the Preceding Contract Year by CPI Index
for June, 1997, as updated. For purposes of this Section 4.3, the "Credit" shall
be equal to (A) the amount of profit realized by any Affiliate of Seller, or
either of the members of Seller, under any supply agreement entered into between
Seller and such Affiliate in connection with the Energy Management Services
provided by Seller during such period; provided however that (1) the Credit, if
any, shall in no event reduce Buyer's payment obligation pursuant to this
Section 4.3 in any Contract Year to less than zero, and (2) no Credit shall be
applied on account of any agreement between Seller and any Affiliate in
connection with any assistance provided by such Affiliate to Seller in
connection with Seller's preparation of the O&M Budget pursuant to Schedule 4.2.
In the event Buyer elects to have Seller provide such Energy Management Services
prior to the Service Commencement Date, Seller's obligation to provide such
services shall be subject to the prior written agreement between the parties
concerning the amount and method of Buyer's payment for such services; provided
however that in no event shall the costs of such services prior to the Service
Commencement Date exceed a monthly amount equal to Buyer's Proportionate Share
of the Contract Year Amount for the first Contract Year or the daily prorata
equivalent thereof for the period in which such services are provided.
4.4 Engineering Services Costs. Seller shall not be required to incur
more than $50,000 in costs (including, but not limited to internal costs)
associated with the provision the Engineering Services. The cost of such
Engineering Services, in an amount not to exceed $50,000, shall not be included
in the Central Plant Capital Cost, as defined in Schedule 4.1 or any of the
Services Fee charged by Seller pursuant to Article IV; provided however that in
the event that this Agreement is terminated pursuant to Section 2.4, Buyer shall
reimburse Seller for Buyer's share of Seller's reasonably incurred and
documented costs incurred in providing Engineering Services pursuant to Section
3.1. Buyer's share of such Engineering Services costs shall be equal to the
product of (x) Seller's documented time charges, in hours, devoted to the
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Engineering Services, (y) $80, and (z) Buyer's Divided Share; provided however,
that, except as otherwise agreed by the parties, the product of (x) and (y)
shall not exceed $50,000.
4.5 Billings and Payments.
(a) Subject to Section 4.5 (b), commencing on the Service
Commencement Date and for the balance of the Term, Seller shall invoice Buyer
and Buyer shall pay Seller for the services rendered pursuant to this Agreement
on a Billing Cycle basis. For each Billing Cycle, Seller shall invoice Buyer
within fifteen (15) days after the end of each Billing Cycle, such invoice
showing the separate charges for:
(i) One-twelfth of Buyer's Current Contract Year Capacity
Payment, determined in accordance with Schedule 4.1;
(ii) One-twelfth of Buyer's share of the Current Contract Year
O&M Budget, determined in accordance with Schedule 4.2;
(iii) the product of (x) the Unit Variable Costs applicable in
the Current Contract Year, determined in accordance with Schedule 4.2
and (y) Buyer's actual, metered consumption of Thermal Energy during the
Billing Cycle, taking into account the applicable conversion factors
mutually agreed to between the parties in the context of the preparation
of the Current Contract Year O&M Budget pursuant to Schedule 4.2;
(iv) one-twelfth of Buyer's share of the Energy Management
Payment for the Current Contract Year, determined pursuant to Section
3.3;
(v) if applicable, any amounts due in connection with Buyer
Additional Meters as provided in Section 5.1;
(vi) if applicable, any amounts due pursuant to the provisions
of Section 4.7 or Section (c) of Article XII; and
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(vii) any and all taxes and/or assessments, including, but not
limited to any sales or use taxes, imposed on Buyer's consumption, or
Seller's production or delivery to Buyer, of Thermal Energy during the
Billing Cycle, or on Seller's provision of any other services to Buyer
pursuant to this Agreement, which taxes and/or assessments are not
otherwise included in the changes set forth in (i) through (vii) of this
Section 4.5.
(b) In the event the Service Commencement Date has not occurred
on or before April 21, 1999, commencing on May 1, 1999 and on the first day of
each following month through the period ending on earlier of the Service
Commencement Date or the date this Agreement is terminated pursuant to Section
2.4, Buyer shall pay Seller the Capacity Reservation Charge, as defined and
determined in accordance with Schedule 4.1 (D).
(c) Prior to the Service Commencement Date, Buyer shall pay
Seller, on a monthly basis and within thirty (30) days of the date of Seller's
invoice (i) Buyer's Divided Share of the cost of the Transition Period O&M
Services incurred by Seller during the preceding month and not otherwise
capitalized pursuant to Schedule 3.2B plus (ii) the cost of any Thermal Energy
provided to Buyer during the preceding calendar month in an amount equal to the
product of the Unit Variable Costs and Buyer's actual, metered consumption of
Thermal Energy during such period.
4.6 Delinquent Payments. Any invoice tendered for service by Seller
pursuant to this Agreement shall be due and payable upon receipt by Buyer, and
shall be deemed delinquent if not paid by Buyer within thirty (30) days of the
postmark date. All delinquent invoices shall accrue interest from the postmark
date of such invoices at the prime rate then in effect for Chase Manhattan Bank,
N.A., as published in New York, New York, plus two percent (2%) per annum of the
outstanding balance until paid.
4.7 No Liability for Other Customers. Except as provided in Section 2.4
in the event of the early termination of this Agreement, Buyer shall have no
liability for the obligations of the Other Customers or, except as provided in
Article XII, any other customer of Seller.
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4.8 Additional Customers. Except as provided in Article XII of this
Agreement, Buyer's and Buyer's Lender's prior written consent, which consent
shall not be unreasonably withheld or delayed, shall be required prior to Seller
entering into an agreement with any other person or entity, other than the Other
Customers, to supply Thermal Energy from the Central Plant. Subject to the prior
written consent of Buyer and Buyer's Lenders as provided herein, in the event
that Seller enters into such agreement(s), such additional customers shall be
charged an appropriate proportion of the cost of production of such thermal
energy. The revenues Seller anticipates receiving in connection with any
contractual commitments pertaining to such excess Thermal Energy sales,
regardless of whether such revenues are actually received, shall be taken into
account by Seller in determining the appropriate revisions, if any, to Buyer's
Capacity Payments and O&M Services payment obligations to Seller pursuant to
Sections 4.1 and 4.2, respectively, of this Agreement to reflect the contractual
contribution, if any, of such anticipated third party revenues in reducing the
capital, operation and maintenance costs of the Energy Improvements which Buyer
is charged by Seller pursuant to this Agreement; provided however, that under no
circumstances shall the costs paid by Buyer pursuant to this Agreement be
increased as a result of Seller's agreement(s) with such additional customers.
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ARTICLE V
METERING
5.1 Metering Equipment. As part of the O&M Services, commencing on the
Service Commencement Date and for the Term of this Agreement, Seller will
maintain all required meters, instruments, recording devices, and other related
data logging equipment required to measure and record Buyer's consumption of
Thermal Energy from the Central Plant (collectively, the "Metering Equipment").
In addition, to the extent that Buyer may be permitted and elects to own and
maintain utility meters ("Buyer Additional Meters") located at Buyer's
Facilities under the terms of a utility tariff or service agreement with a
utility or other energy supplier, Buyer may elect to have Seller finance,
install and maintain at the cost of the Buyer Additional Meters, whereupon Buyer
shall agree to reimburse Seller, upon mutually agreeable terms, for Seller's
cost to finance and maintain such meters.
5.2 Testing. Commencing on the Service Commencement Date and during the
balance of the Term of this Agreement, all Metering Equipment will be tested and
calibrated by Seller in accordance with good industry practice. Test and
calibration records will be provided to the Buyer. Buyer may request additional
meter tests at any time in connection with the Metered Equipment; however, if a
meter is subsequently found to have a variance for accuracy of less than three
percent (3%) from the usage previously billed to Buyer, Buyer will bear the
reasonable cost of such testing. Buyer Additional Meters, if any, shall be
tested and calibrated by Seller to the extent permitted and provided pursuant to
utility tariff or service agreement with the utility or other energy supplier.
5.3 Meter Interruptions. If a meter record related to any of the
Metering Equipment is temporarily interrupted, Seller shall estimate the
quantities of Thermal Energy taken by Buyer during the period of interruption
based on Buyer's past or future usage patterns during a similar period and
whatever other data or methodology is available for estimating Buyer's usage
during the period of interruption.
ARTICLE VI
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REPRESENTATIONS AND WARRANTIES
6.1 Seller Representations. Seller hereby represents and warrants
that:
(a) It is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of its formation and
has all requisite corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(b) The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly authorized by all
necessary corporate action;
(c) This Agreement is a legal, valid and binding obligation of
Seller enforceable against Seller in accordance with its terms, subject to the
qualification, however, that the enforcement of the rights and remedies herein
is subject to (i) bankruptcy and other similar laws of general application
affecting rights and remedies of creditors and (ii) the application of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law);
(d) To the best knowledge of Seller, as of the date of execution
hereof, no Governmental Approval (other than any Governmental Approvals which
have been previously obtained or disclosed, in writing, to Buyer) is required in
connection with the due authorization, execution and delivery of this Agreement
by Seller or the performance by Seller's of its obligations hereunder which
Seller has reason to believe that it will be unable to obtain in due course on
or before the date required for Seller to perform such obligations; and
(e) Neither the execution and delivery of this Agreement by
Seller nor compliance by Seller with any of the terms and provisions hereof (i)
conflicts with, breaches or contravenes the provisions of the corporate charter
or by-laws of the Seller or any contractual obligation of the Seller or (ii) to
the best knowledge of Seller, results in a condition or event that constitutes
(or that, upon notice or lapse of time or both, would constitute) an event of
default under any contractual obligation of the Seller.
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6.2 Buyer Representations. Buyer hereby represents and warrants
that:
(a) It is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of its formation and
has all requisite corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(b) Subject to the provisions of the Funding Agents'
Disbursement Administration Agreement, Buyer has the exclusive right to develop
the hotel and casino portion of the Project, as defined in the Funding Agents'
Disbursement and Administration Agreement, and upon payment of the costs of
construction thereof, Buyer will have title thereto (excluding the Energy
Improvements) subject only to such liens and encumbrances permitted by Buyer's
Lender.
(c) The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly authorized by all
necessary corporate action;
(d) This Agreement is a legal, valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms, subject to the
qualification, however, that the enforcement of the rights and remedies herein
is subject to (i) bankruptcy and other similar laws of general application
affecting rights and remedies of creditors and (ii) the application of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law);
(e) To the best knowledge of Buyer, as of the date of execution
hereof, no Governmental Approval (other than any Governmental Approvals which
have been previously obtained or disclosed, in writing, to Seller) is required
in connection with the due authorization, execution and delivery of this
Agreement by Buyer or the performance by Buyer's of its obligations hereunder
which Buyer has reason to believe that it will be unable to obtain in due
course;
(f) Neither the execution and delivery of this Agreement by
Buyer nor compliance by Buyer with any of the terms and provisions hereof (i)
conflicts with, breaches or
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contravenes the provisions of the corporate charter or by-laws, or any corporate
governance document of the Buyer, or any contractual obligation of the Buyer, or
(ii) to the best knowledge of Buyer, results in a condition or event that
constitutes (or that, upon notice or lapse of time or both, would constitute) an
event of default under any contractual obligation of the Buyer; and
(g) all Governmental Approvals and consents of any third party
required to construct the Energy Improvements have or will be obtained on or
before the date required, and all such Governmental Approvals and third party
consents will, as of the date obtained and through the Service Commencement
Date, be maintained in full force and effect and complied with in all material
respects; and
(h) Buyer has not entered into any contracts or agreements with
any other person regarding the provision of the services contemplated to be
provided by Seller hereunder.
(i) the Construction Management Agreement and Architects
Agreement are the only contracts which Buyer or any of its Affiliates has
executed with respect to the design, engineering, construction, start-up and
testing of the Energy Improvements and the Other Customers Facilities.
6.3 Covenant of Buyer. Buyer covenants that during the Term of this
Agreement Seller shall be the exclusive supplier of Thermal Energy to Buyer;
provided however that this restriction shall not be deemed to apply to the
purchase by Buyer of Thermal Energy which is in excess of Buyer's Maximum
Thermal Energy Requirements ("Excess Thermal Energy"); provided however that
Buyer shall not enter into an agreement with any Person (other than Seller) with
respect to the supply of such Excess Thermal Energy without first providing
Seller with written notice and the opportunity to provide Buyer with such Excess
Thermal Energy pursuant to a mutually agreed upon amendment to this Agreement or
other written agreement between the parties. Nothing in this Agreement shall be
deemed to obligate either party to enter into such amendment or agreement. In
the event that the parties fail to enter into a written agreement or amendment
within six (6) months, or such lessor period reasonably consistent with the
circumstances, of the date such written notice by Buyer, as such period may be
extended by
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mutual written agreement of the parties, Buyer shall be free to enter into an
agreement with a third party for the provision of such Excess Thermal Energy.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
7.1 Indemnification.
(a) Except as otherwise explicitly provided for in this
Agreement, each party shall be solely responsible for its own negligence,
willful or reckless acts, or omissions, as well as the negligence, willful or
reckless acts, or omissions of its members and their respective officers,
directors, employees, agents, contractors, subcontractors, successors or
assignees and each party agrees to indemnify, defend and hold harmless the
non-indemnifying party, its officers, employees, directors, agents, contractors,
subcontractors and assigns against any and all claims, actions, costs, expenses,
damages and liabilities, including reasonably attorneys' fees, arising out of or
in connection with the negligent, willful or reckless acts or omissions of the
indemnifying party, its officers, directors, employees, agents, contractors,
subcontractors or assignees.
(b) In addition to the provisions of Section 7.1(a) and except as
otherwise specifically provided in this Agreement, Buyer shall indemnify, defend
and hold harmless Seller from and against:
(i) any and all claims by, or liability to, Buyer, its members
and their respective, officers, directors, employees,
agents, contractors, subcontractors, assignees or any
third party with respect to any assertion by Buyer, its
members or a third party to any right, title or interest
in the Energy Improvements, other than liabilities or
claims based upon the acts or omissions of Seller;
(ii) except to the extent of Permitted Liens, any and all
claims and/or liabilities resulting from or related to
encumbrances, liens or claims placed on the
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Energy Improvements, the Central Plant Site or the
Easements as a result of the acts or omissions of Buyer,
its members and their respective officers, directors,
employees, agents, contractors, subcontractors or
assignees;
(iii) any and all claims of any nature or liability of any
nature arising from environmental, health safety or land
use violations(s), hazard(s) or condition(s) on, affecting
or related to the Central Plant Site and the Easements:
(A) existing prior to the date Seller takes possession
of the Central Plant Site and the Easements under
the Ground Lease;
(B) arising after Seller takes possession of the
Central Plant Site or Easements, provided such
violation(s), hazard(s) or condition(s) shall not
result from or be caused by any acts or omissions
of Seller, its members and their respective
officers, directors, employees, agents,
contractors, subcontractors or assignees;
(iv) any claim or liabilities resulting from a breach of Buyer's
covenants, representations and warranties in this
Agreement; and/or
(v) any claims or liabilities arising from Buyer's and/or
Construction Affiliate's failure to pay Contractor or any
Subcontractor, or Contractor's failure to pay any
Subcontractor, pursuant to the Construction Management
Agreement and/or any other contractual arrangement or
understanding.
(c) In addition to the provisions of Section 7.1(a), Seller shall
indemnify, defend and hold harmless Buyer from and against:
(i) any and all claims by, and liability to, Seller, its
members and their respective officers, directors,
employees, agents, contractors,
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subcontractors or assignees for (A) payment of amounts owed
by Seller or for injuries, or property damage, sustained on
the Central Plant Site, the Easements, or on Buyer's
premises, except claims or liabilities resulting from or
caused by the act(s) or omission(s) of Buyer, its members
and their respective officers, directors, employees,
agents, contractors, subcontractors or assignees or any
third party not employed by or under contract with Seller
in connection with the services provided by Seller pursuant
to this Agreement.
(ii) except to the extent expressly permitted, any and all
claims and liability resulting from encumbrances, liens or
claims placed on Buyer's premises, the Central Plant Site
and/or the Easements by Seller's Lender, Seller or by
Seller or its members and their respective officers,
directors, employees, agents, contractors, subcontractors
or assigns, except such claims or liabilities resulting
from or caused by the act(s) or omission(s) of Buyer, its
members, and their respective officers, directors,
employees, agents, contractors, subcontractors or
assignees;
(iii) any and all claims of any nature and liability of any
nature arising from environmental, health, safety or land
use violations or hazards on, affecting or related to the
Central Plant Site and the Easements after the date Seller
takes possession of the Central Plant Site under the Ground
Lease and the Easements under the Easement Agreement,
except to the extent such violations, hazards or conditions
existed prior to the date Seller takes possession of the
Central Plant Site and the Easements and/or such
violations, hazards or conditions are due to the acts or
omissions of Buyer, its members, and their respective
officers, directors, employees, agents, contractors,
subcontractors, or assignees or any third party not
employed by or under contract with Seller in connection
with Seller's performance of its obligations pursuant to
this Agreement; and/or
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(iv) any claim or liabilities resulting from a breach of
Seller's covenants, representations, and warranties in
this Agreement.
(d) The duty of a party to defend, indemnify and hold harmless
the other party shall also apply at the time of notification of any potentially
responsible party designation under applicable federal, state or local
environmental, health, safety or land use laws. The duty to indemnify, defend
and hold harmless hereunder will continue in full force and effect,
notwithstanding the expiration or early termination of this Agreement.
(e) The provisions of this Section 7.1 shall survive termination
of this Agreement.
7.2 Seller's Insurance. Commencing on the date set forth on Schedule 7.2
with respect to each policy coverage and for the balance of the Term of this
Agreement, Seller shall maintain at the policies and amounts of insurance as set
forth in Schedule 7.2 with an insurance company or companies reasonably
satisfactory to Buyer and qualified to do business in the State of Nevada and
having a Best's rating not less than A-VII. Seller's costs of insurance shall be
included in the computation of Buyer's payment obligation pursuant to Section
4.2 of this Agreement.
7.3 Buyer's Insurance. Commencing on the date set forth on Schedule 7.3
with respect to each policy coverage and for the balance of the Term of this
Agreement, Buyer shall maintain at its sole cost and expense, the policies and
amounts of insurance as set forth in Schedule 7.3 with an insurance company or
companies reasonably satisfactory to Seller and qualified to do business in the
State of Nevada and having a Best's rating not less than A-VIII.
7.4 Additional Insureds and Waiver of Subrogation. Seller and Buyer
shall each name the other and their Affiliates as additional insureds on their
commercial general liability, automobile liability and umbrella liability
policies proceed in satisfaction of Section 7.2 of this Agreement. Further,
Seller and Buyer waive their rights of recovery against each other at the extent
of property and time element (business interruption/extra expense) insurance
maintained or required to be maintained against each other. Further, Seller and
Buyer will have their
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insurers providing the property and time element insurance under this Agreement
endorse their policies to waive their rights of subrogation against each other,
Affiliates of the Buyer and Seller and their respective lenders, and against
Contractor and all contractors and subcontractors engaged in the Project.
7.5 Evidence of Insurance. Within five (5) days of the date of this
Agreement or no later than the date such insurance is required pursuant to
Schedule 7.2, in the case of Seller, or 7.3, in the case of Buyer, Seller and
Buyer shall each furnish to the other one or more certificates of insurance
evidencing the existence of the coverages set forth in Sections 7.2 and 7.3,
respectively. Each certificate shall state that the insurance carrier will give
Seller and Buyer at least sixty (60) days written notice of any cancellation or
material change in the terms and conditions of such policy during the periods of
coverage.
ARTICLE VIII
DEFAULT
8.1 Seller Default. Any of the following events shall constitute a
Seller Default:
(a) In connection with itself or its assets, Seller shall (i) consent to
the appointment of a receiver or liquidator, (ii) make a general assignment for
the benefit of creditors, (iii) file a petition for relief under the Federal
Bankruptcy Code, or (iv) take similar action to commence a proceeding for relief
under any other law relating to the bankruptcy, insolvency, reorganization, or
winding up of itself or the composition or adjustment of its debts;
(b) An action shall commence in any court of competent jurisdiction for
(i) the liquidation, reorganization, dissolution, or winding up of Seller or the
composition or adjustment of its debts, (ii) the appointment of a trustee,
receiver, liquidator or custodian of Seller or substantially all of its assets,
or (iii) any similar relief under any law relating to Seller's bankruptcy or
insolvency, provided such proceeding shall continue undismissed for ninety (90)
days;
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(c) Any representation or warranty made by Seller shall prove to have
been incorrect in any material respect when made;
(d) Seller shall fail to perform any of its obligations under this
Agreement, and/or the Construction Agency Agreement and/or the Ground Lease and
fail to either (i), within thirty (30) days of written notice from Buyer of such
failure to perform, cure such failure, or (ii) in the event such failure is not
curable within such thirty day period, immediately initiate the actions
necessary to cure such failure, diligently prosecute such actions until cure is
effectuated and effectuate such cure within ninety (90) days of such Buyer's
notice; provided however that the failure of Seller to produce and deliver
Thermal Energy satisfying the Steam and Chilled Water Standards (as defined in
Section 3.4) shall not be deemed a Seller Default provided Seller has corrected
such failure and is otherwise in compliance with its obligations pursuant to
Section 3.4.
8.2 Buyer Default. The following events shall constitute a Buyer
Default:
(a) In connection with itself or its assets, Buyer shall (i) consent to
the appointment of a receiver or liquidator, (ii) make a general assignment for
the benefit of creditors, (iii) file a petition for relief under the Federal
Bankruptcy Code, or (iv) take similar action to commence a proceeding for relief
under any other law relating to the bankruptcy, insolvency, reorganization, or
winding up of itself or the composition or adjustment of its debts;
(b) An action shall commence in any court of competent jurisdiction for
(i) the liquidation, reorganization, dissolution, or winding up of Buyer or the
composition or adjustment of its debts, (ii) the appointment of a trustee,
receiver, liquidator or custodian of Buyer or substantially all of its assets,
or (iii) any similar relief under any law relating to Buyer's bankruptcy or
insolvency, provided such proceeding shall continue undismissed for ninety (90)
days;
(c) Any representation or warranty made by Buyer shall prove to have
been incorrect in any material respect when made;
(d) Buyer shall fail to perform any of its obligations under this
Agreement (other than the obligations described in and governed by Section
8.2(e) below), and/or the Construction
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Agency Agreement and/or the Ground Lease and fail to (i) , within thirty (30)
days of written notice from Seller of such failure to perform, cure such failure
or (ii) in the event such failure is not curable within such thirty (30) day
period, immediately initiate the actions necessary to cure such failure,
diligently prosecute such actions until cure is effectuated and effectuate such
cure within a ninety (90) days of such Seller notice; or
(e) Buyer shall fail or refuse to pay any invoice rendered under this
Agreement within thirty (30) days of Buyer's receipt of such invoice; provided,
that, in the event that Buyer disputes in good faith any such invoice, Buyer
shall pay that portion of the bill not in dispute when due and payable, and the
disputed portion shall be submitted to arbitration under Section 13.1 of this
Agreement, and pending resolution of the dispute, Buyer shall not be deemed in
default of this Agreement for such disputed portion of the bill while pending
resolution.
ARTICLE IX
REMEDIES
9.1 Seller's Remedies. Except as otherwise provided in Section 13.1 with
respect to the resolution of certain disputes between Buyer and Seller, upon a
Buyer Default, Seller may declare the Buyer to be in breach of this Agreement,
subject to the provisions of the Consent and Agreement and the Funding Agents'
Disbursement and Administration Agreement and (i) suspend service until Buyer
either cures such default or, in the case of nonpayment, provides Seller with
such written assurances and such security as Seller may reasonably request, (ii)
terminate this Agreement and provide written notice to Buyer declaring the
Termination Payment immediately due and payable or (iii) seek such other relief
to which Seller may be entitled at law or equity; provided however that payment
of the Termination Payment by Buyer shall be Seller's exclusive remedy against
Buyer for damages related to the Service Fees which Buyer is obligated to pay
Seller pursuant to Article IV of this Agreement and upon payment of such
Termination Payment Buyer shall have no further obligation or liability to
Seller under this Agreement except to the extent arising under Article VII of
this Agreement; and provided further that upon payment of such Termination
Payment, Seller shall be entitled to continue to occupy the Central Plant Site
pursuant to the provisions of the Ground Lease in order for Seller to continue
to provide service
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to the Other Customers and such other entities which Seller may, from time to
time and consistent with Section 4.8 of this Agreement, have agreements for the
provision of Thermal Energy from the Central Plant.
9.2 Buyer's Remedies. Except as otherwise provided in Sections 3.4(c)
and 13.1, with respect to Seller's termination rights in connection with
Seller's failure to deliver Thermal Energy satisfying the Steam and Chilled
Water Standard and the resolution of certain disputes between Buyer and Seller,
respectively, upon a Seller Default, Buyer may (i) terminate this Agreement by
written notice to Seller, and (ii) seek such other relief to which Buyer may be
entitled at law or equity.
9.3 Termination Payment. A schedule of the applicable Termination
Payment which Seller shall be entitled in the event Seller elects to terminate
this Agreement due to a Buyer Default or Buyer elects to terminate this
Agreement pursuant to Section 3.4(c) or (e) is set forth in Schedule 9.3. The
parties intend that the Termination Payment shall constitute liquidated damages
and not a penalty. The parties agree that the injury to Seller or Buyer, as the
case may be, as a result of termination of this Agreement is difficult to
precisely estimate and that the Termination Payment is a reasonable estimate of
the probable damage to such party as a result of such termination of this
Agreement. Such Termination Payment shall be in lieu of all other liabilities
and remedies of the parties as a result of termination of this Agreement, other
than liabilities and obligations pursuant to Article VII.
9.4 Survival. The provisions of this Article IX shall survive to the
extent necessary after termination of this Agreement in order for either party
to enforce it's rights and the obligations of the other party as of the date of
termination.
ARTICLE X
FORCE MAJEURE
10.1 Suspension of Performance. Neither Buyer nor Seller shall be in
default in respect of any obligation under the Agreement if the party is unable
to perform its obligation by reason of an Event of Force Majeure; provided
however that the suspension of performance shall
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be commensurate with the nature and duration of the Event of Force Majeure and
the nonperforming party is using diligent efforts to restore its ability to
perform; and provided further, that neither party shall be required to settle
any strike, walkout, lockout or other labor dispute on terms which, in the sole
judgment of the party involved in the dispute, are contrary to its interest. The
party claiming nonperformance by an Event of Force Majeure shall provide prompt
written notice to the other party, setting forth the particulars thereof.
ARTICLE XI
LIMITATION ON LIABILITY
Neither Buyer nor Seller shall be responsible to the other in contract
or in tort for any special, incidental or consequential loss or damage,
including lost profits and opportunity costs, arising out of this Agreement.
ARTICLE XII
DELEGATION OF BUYER'S PAYMENT OBLIGATIONS
Seller hereby acknowledges and agrees that Buyer may, subject to the
receipt of all necessary Governmental Authorizations, if any, which Governmental
Authorization shall not impose any unreasonable burden or cost on Seller and/or
Buyer, as determined in each party's sole reasonable discretion, delegate all or
a portion of Buyer's payment obligations pursuant to Sections 4.1 through 4.3 of
this Agreement to tenants of Buyer's Facilities (hereinafter, "Tenants"). Seller
hereby consents to Buyer's delegation of Buyer's above stated payment obligation
to Tenants, subject to the following terms and conditions:
(a) Seller, Buyer and the Tenant mutually agree in writing on
that portion of the payments for which Buyer is obligated to pay Seller pursuant
to Section 4.5(i) through (vii) that Tenant will pay to Seller;
(b) Buyer or Tenant shall have agreed to reimburse Seller for the
installation of Metering Equipment for Tenant's location, to the extent
necessary; and
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(c) Seller shall bill directly to any Tenant in lieu of Buyer,
and Tenant agrees to pay to Seller pursuant to an executed services agreement,
such Tenant's share of Buyer's payment obligation, as provided under paragraph
(a) of this Article XII; provided however, that in the event that Tenant is
delinquent in its payment to Seller, as determined pursuant to the services
agreement with Tenant, Buyer shall be liable to Seller for such delinquent
Tenant payment.
ARTICLE XIII
MISCELLANEOUS
13.1 Resolution of Certain Disputes. In the event of a budget dispute,
as set forth in Schedule 4.2, and/or a billing dispute between the parties,
authorized representatives of Seller and Buyer shall meet and use good faith
efforts to mutually resolve such dispute by negotiation. In the event that the
parties are unable to resolve such dispute by negotiation, then such dispute
shall be resolved by arbitration pursuant to the provisions of Appendix C of
this Agreement. Neither party shall suspend or otherwise fail to perform its
obligations under this Agreement pending the outcome of such dispute resolution
process.
13.2 Assignment. Without limiting Buyer's delegation rights pursuant to
Article XII of this Agreement and except as provided in Sections 13.2(a) and
(b), below, neither party shall assign its rights nor delegate its obligations
under this Agreement without first having obtained the written consent of the
other party, which consent shall not be unreasonably withheld or delayed,
provided that Buyer may assign its rights and delegate its obligations under
this Agreement to a purchaser of the hotel/casino portion of the Project, so
long as such purchaser agrees to assume Buyer's obligations under this Agreement
from and after the date of such assignment in a document reasonably satisfactory
to Seller and so long as all payments by Buyer hereunder are current as of the
date of such assignment; provided however that no such assignment shall be
deemed to release Buyer of its obligations under this Agreement through the date
of such assignment.
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(a) Seller may, without the consent of Buyer, collaterally assign
its rights under this Agreement to Seller's Lender, provided that Buyer's rights
and remedies, as provided in this Agreement, and Buyer's Lenders rights pursuant
to the Consent and Agreement , are not diminished or materially adversely
affected thereby; provided, however that in the event Seller's Lender exercises
its rights pursuant to such assignment to assume Seller's obligations pursuant
to this Agreement, Seller will require, as a condition to the exercise of such
rights by Seller Lender, that Seller's Lender cause the Energy Improvements to
be operated and maintained by an experienced and reputable operator of heating
and cooling facilities reasonably satisfactory to Buyer and Buyer's Lender.
(b) Seller acknowledges and consents to Buyer's assignment of its
rights and obligations under this Agreement to Buyer's Lender pursuant to that
certain Consent and Agreement.
13.3 Governing Law. This Agreement shall be construed in accordance with
and shall be enforceable under the laws of the State of Nevada, without giving
effect to principles related to conflicts of law.
13.4 Venue; Jurisdiction. Any action at law, suit in equity or other
proceeding against any party with respect to any term or provision of this
Agreement, including enforcement of the decisions in arbitration pursuant to
Section 13.1 (but excluding such terms or provisions under dispute that the
parties have agreed to submit in the first instance to arbitration for
resolution pursuant to Section 13.1) shall be brought and maintained in the
Supreme Court of the State of Nevada, or such lower court of the State of Nevada
having jurisdiction over the subject matter, or in a United States District
Court in Nevada. Each of the parties hereby (i) submits, to the fullest extent
permitted by applicable law, to the exclusive jurisdiction of such courts for
the purposes any action, suit or proceeding set forth above, and (ii) agrees, to
the fullest extent permitted by applicable law, that service of all writs,
processes and summonses in any such action, suit or proceeding brought in the
State of Nevada, may be made upon such person in the manner provided for notices
under this Agreement. The foregoing provisions of this Section shall not be
construed to limit the right of either party to serve any such writ, process or
summons in any
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manner permitted by applicable law. Each party further agrees that a final
judgment or order in any such action, suit or proceeding may be enforced against
such party in any other jurisdiction by suit on such judgment or order or in
such other manner as may be permitted by applicable law. Each party hereby
waives, to the fullest extent permitted by applicable law, any objection which
such party now has or hereafter may have to the lying of venue of any such
action, suit or proceeding brought or maintained in the Supreme Court of the
State of Nevada, or such lower court of the State of Nevada having jurisdiction
over the subject matter, or a United States District Court in Nevada. The
provisions of this Section shall survive any termination or expiration of this
Agreement, ad shall be binding on each party's successors and assigns.
13.5 Notice. All notices hereunder shall be sufficient if sent by
registered or certified mail postage prepaid, addressed:
If to Seller: Atlantic-Pacific Las Vegas, LLC
5100 Harding Highway
Mays Landing, New Jersey 08330
Attention: President
Telefax (609) 625-3866
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If to Buyer: Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
provided, that either Seller or Buyer may by like notice designate any further
or different address or addresses or person to which notices shall be sent.
13.6 Confidentiality. Each Party, on its behalf and behalf of its
Affiliates, and the directors, officers, employees, advisors, agents and
representatives of each, hereby covenants to the other Parties that:
(a) it will not disclose in any manner the Confidential
Information of another Party to any person that is not a
director, officer, employ, advisor, agent or
representative of it or its Affiliate, without the other
Party's prior written consent;
(b) it will, at all times, safeguard the Confidential
Information of another Party with no less than the same
standard of care with which it safeguards its own
Confidential Information; and
(c) it will not use the Confidential Information received by
it except for the purposes of this Agreement.
The Confidential Information of each Party shall at all times
remain the absolute property of it. None of the Parties, nor each of its
Affiliates, including the directors, officers, employees, advisors, agents and
representative of each, shall be liable to another Party with respect to the
disclosure of any Confidential Information that (i) enters the public domain
through no fault of it, (ii) is required, or is reasonably believed to be
required by the disclosing Party, to be disclosed pursuant to law, provided,
that the disclosing Party shall notify the Party to whom the Confidential
Information belongs in writing prior to such disclosure and shall, afford the
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Party to whom the Confidential Information belongs reasonable opportunity to
seek a protective decree or order with respect to the Confidential Information,
(iii) the disclosing Party can demonstrate was in its prior possession through
no malfeasance or misconduct, or was independently developed, without benefit of
having received such Confidential Information from the Party to whom such
Confidential Information belongs, and (iv) it discloses with the prior, written
consent of the Party to whom such Confidential Information belongs.
Without otherwise limiting the foregoing, Buyer and Seller each
hereby grants their respective consents, upon written notice received by the
other, to the disclosure of their respective Confidential Information to Buyer's
Lender of either Buyer or Seller, provided, upon request of either Party, that
any such Buyer's Lender enter into a confidentiality agreement with respect to
such Confidential Information.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
13.8 Entire Agreement. The Agreement constitutes the entire agreement
between the Parties with respect to the matters contained herein and all prior
agreements with respect thereto are superseded hereby. No amendment or
modification hereof shall be binding unless duly executed by both Parties.
Waiver of any provision of this Agreement by a Party shall not be deemed to have
been given by such Party unless given in writing.
13.9 Severability. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction and to the
fullest extent permitted by applicable law, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and without affecting the validity or enforceability of any provision in
any other jurisdiction.
13.10 Third Party Beneficiaries. Seller and Buyer acknowledge that,
except as set forth in Article XIII, the provisions of this Agreement are
intended for the sole benefit of Seller and Buyer. Except as provided in Article
XIII of this Agreement in connection with assignments
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undertaken by either party in conformance with the provisions of this Agreement,
there are no third party beneficiaries, express or implied, to this Agreement.
13.11 Section Headings. The section headings used in this Agreement are
for convenience only and shall not affect the construction of any terms of this
Agreement.
13.12 Incorporation of Exhibits. The Exhibits attached hereto and
referred to herein are a part of this Agreement for all purposes.
13.13 Non-Waiver. None of the provisions of this Agreement shall be
considered waived by either party except when such waiver is given in writing.
The failure of either party to insist in any instance on strict performance of
any of the provisions of this Agreement shall not be construed as a waiver of
any such provision or the relinquishment of any present or future rights
hereunder.
13.14 Independent Parties. Nothing contained in this Agreement shall be
deemed or construed for any purpose to establish, between the parties, a
partnership or joint venture, a principal-agent relationship, or any
relationship other than customer and supplier.
13.15 Binding Agreement. This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the benefit of the
parties and their respective permitted successors and assigns.
13.16 Estoppel Certificates. Upon the reasonable prior request by Seller
or Buyer (the "Requesting Party"), the other party (whichever party shall have
received such request, the "Certifying Party") shall furnish to the Requesting
Party a certificate signed by an individual having the office of vice president
or higher in the Certifying Party certifying that this Agreement is in full
force and effect to the best knowledge of the signer of such certificate,
whether or not the Requesting Party is, to the best knowledge of the Certifying
Party, in default under any of its obligations hereunder (and, if so, the nature
of such alleged default); and such other matters under this Agreement as the
Requesting Party may reasonably request. Any such certificate so furnished may
be relied upon by the Requesting Party, and any existing or prospective
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mortgagee, purchaser or lender, and any accountant or auditor, of, from or to
the Requesting Party.
13.17 Ownership of the Energy Improvements. Anything to the contrary in
this Agreement or any document or instrument executed in connection with the
transactions contemplated hereby notwithstanding (collectively, the "Operative
Documents"), the parties hereto intend and agree that, with respect to the
nature of the transactions evidenced by this Agreement in the context of the
exercise of remedies under the Operative Documents relating to and arising out
of any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of the
United States of America or any state or commonwealth thereof affecting Buyer,
Seller or any Buyer's Lenders or Seller's Lenders or any enforcement or
collection actions, solely to protect the Seller in the event the transactions
evidenced by this Agreement are recharacterized as loans, the Buyer hereby
grants a security interest or lien, as the case may be, to Seller in the Energy
Improvements and the other items and types of collateral described herein
[Remainder of this page left blank]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date and day first above written.
ATLANTIC-PACIFIC LAS VEGAS, LLC
("Seller")
By: /s/ Carl H. Fogler
----------------------------------------
Name: Carl H. Fogler
Title: Vice President
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., as managing member
("Buyer")
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
E N E R G Y S E R V I C E S A G R E E M E N T
================================================================================
This Energy Services Agreement ("Agreement") is entered into as of this
first day of May, 1997, by and between Atlantic-Pacific Las Vegas, LLC
("Seller"), a Delaware limited liability company ("Seller"), and Grand Canal
Shops Mall Construction, LLC, a Delaware limited liability Company ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of producing and selling
heating and cooling energy, and providing energy management and operations and
maintenance services; and
WHEREAS, Las Vegas Sands, Inc. ("LVSI") has entered into, and assigned to
Venetian Casino Resorts, LLC ("VCR"), a Construction Management Agreement
(defined herein) providing for, among other things, the construction of (i) an
integrated thermal energy production facility (the "Central Plant", as defined
herein), to be located on property leased to Seller pursuant to a Ground Lease
(as defined herein), and designed to meet the aggregate Thermal Energy
requirements of a hotel and casino to be developed and owned by VCR, a
convention center owned by Buyer and a mall complex to be developed by VCR and
leased by VCR to Grand Canal Shops Mall Construction, LLC ("GCSMC") and (ii)
certain energy related and other equipment, improvements and interconnection
facilities to be located or connected to at Buyer's Facilities (as defined
herein) ("Other Facilities") and the facilities of the Other Customers (as
defined herein) (Collectively, the Central Plant and the Other Facilities shall
be referred to as the "Energy Improvements");
WHEREAS, Seller is willing to finance, purchase, own, operate and maintain
the Energy Improvements, provide certain valued added engineering services
during the design and construction of the Energy Improvements, provide, at
Buyer's option, other operation and maintenance services in connection with
certain electrical, HVAC, distribution and
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other equipment owned by Buyer ("Buyer's Equipment") located at Buyer's
Facilities, and provide certain other services for Buyer as more specifically
set forth in this Agreement;
WHEREAS, Buyer, on behalf of itself, its successors, assigns and tenants,
desires to compensate Seller for the various undertakings and services provided
by Seller pursuant to this Agreement;
WHEREAS, Buyer, on behalf of itself, its successors, assigns and tenants,
desires to have, and Seller is willing to provide Buyer, an option to purchase
(i) collectively with the Other Customers, the Central Plant and (ii) the Other
Facilities.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements set forth herein and such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Buyer and Seller, each intending to be legally bound, do hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Except as otherwise expressly provided herein, all capitalized terms
used in this Agreement shall have the respective meanings as set forth below.
Section, Appendix and Schedule references shall mean the applicable Sections of,
and Appendices and Schedules to, this Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Architects Agreement" shall mean that certain Agreement between Owner and
Architect, dated and effective as of January 1, 1996, between Venetian Casino
Resort, LLC and a collaboration between the firms of TSA of Nevada, LLP and
WAT&G, Inc. Nevada, providing
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for a fixed price, subject to certain adjustments, for the design of the Project
inclusive of the Energy Improvements and Other Customer's Facilities.
"Billing Cycle" means each calendar month within a Contract Year.
"Buyer Additional Meters" shall have the meaning set forth in Section
5.1.
"Buyer Default" shall mean each of the events described in Section 8.2.
"Buyer's Equipment" means the systems and equipment, as specifically set
forth in Schedule 1.05, as amended from time to time by Seller and Buyer, that
are owned by Buyer, are located in or on Buyer's Facilities, and are, at Buyer's
election pursuant to this Agreement, to be operated and maintained by Seller in
accordance with the terms of this Agreement.
"Buyer's Equipment O&M" means the operations and maintenance services
provided by Seller, at Buyer's election pursuant to this Agreement, in
connection with Buyer's Equipment, as more specifically set forth in Schedule
3.2A.
"Buyer's Facilities" means the "Mall" as defined in the Funding Agents'
Disbursement and Administration Agreement.
"Buyer's Lender" shall mean a "Lender", as defined in the Funding Agents'
Disbursement and Administration Agreement, which is a lender to Buyer or any
other holder of a mortgage or deed of trust, on Buyer's Facilities.
"Buyer's Maximum Thermal Energy Requirement" shall mean the maximum peak
amount of Thermal Energy Seller is obligated to provide Buyer in any Contract
Year as set forth in Schedule 4.8A.
"Buyer's Thermal Energy Requirement" shall mean the Thermal Energy
requirements of Buyer for the Contract Year as set forth in the O&M Budget for
each Contract Year determined in accordance with Schedule 4.2.
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"Capacity Payment" shall mean the sum of the Central Plant Capacity
Payment and the Other Facilities Capacity Payment, as provided and defined in
Section 4.1.
"Central Plant" means the integrated Thermal Energy production facility,
associated equipment and systems, as more specifically set forth in Schedule
2.2A, to be financed, owned, operated and maintained by Seller pursuant to the
terms of this Agreement.
"Central Plant O&M" means the operations and maintenance services provided
by Seller in connection with the Central Plant, as specifically set forth in
Schedule 3.2A.
"Change in Law" means any of the following events or conditions having, or
which may reasonably be expected to have, an adverse effect on the performance
of either party's respective obligations under this Agreement (except for
payment obligations):
(a) the adoption, promulgation, issuance, modification or repeal,
subsequent to the date of this Agreement, of any Legal Requirement
or the issuance of any modification of any previously issued written
administrative or judicial interpretation thereof;
(b) the order, judgment, action or determination of any federal,
state or local court, administrative agency, governmental body or
officer, or regulatory commission on or after the date of this
Agreement to the extent such order, judgment, action or
determination is not the result of willful or negligent action of
the party asserting the occurrence of a Change in Law; provided
however, that any good faith actions or inactions to contest any
such order, judgment, action or determination shall not be
considered a willful or negligent action or lack of reasonable
diligence on the part of the party asserting the Change in Law;
(c) the denial of an application for, delay in the review, issuance
or renewal of, or suspension, termination, modification,
interruption, or imposition of any material condition in connection
with the issuance, renewal or failure of issuance or renewal on or
after the date of this Agreement of any Governmental Authorization
to the extent that such denial, delay, suspension, termination,
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modification, interruption, imposition, or failure is not the result
of the willful or negligent action or lack of reasonable diligence
on the part of the party asserting the occurrence of the Change in
Law; provided however, that good faith actions or inactions to
contest any such denial, delay, suspension, termination,
modification, interruption, imposition or failure shall not be
considered a willful or negligent action or lack of reasonable
diligence of the party asserting the Change in Law.
"Confidential Information" means any and all information, or any portion
thereof of a proprietary, confidential and/or trade secret nature, disclosed to
or otherwise obtained by the receiving party or its employees, agents or
affiliates (each individually referred to as a "recipient") either directly or
indirectly from the other party, whether oral, written, or in other recorded
form, including but not limited to the know-how, trade secrets, knowledge,
concepts, data, reports, methodology, pricing, business affairs, and any other
information or knowledge owned or developed by either party, except for
information which the recipient can demonstrate:
(a) was at the time of disclosure to such recipient, generally part
of the public domain or thereafter becomes generally part of the
public domain through no act or omission of recipient; or
(b) was lawfully in such recipient's possession as shown in written
records prior to such disclosure and without obligation of
confidentiality; or
(c) was lawfully received by such recipient after disclosure from a
third party without obligation of confidentiality and without
violation by such third party of an obligation of confidentiality to
another; or
(d) was independently developed by such recipient without any use of
or benefit of Confidential Information.
"Consent and Agreement" shall mean that certain Consent and Agreement
(HVAC AGREEMENTS) dated as of November 14, 1997 by Seller for the benefit of The
Bank of Nova Scotia, in its capacity as the Intercreditor Agent, as defined in
the Funding Agents' Disbursement and Administration Agreement, for and on behalf
of The Bank of Nova Scotia, as Bank Agent,
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The Bank of Nova Scotia, as Disbursement Agent, GMAC Commercial Mortgage
Corporation, as the Interim Mall Lender, First Trust National Association, as
the Mortgage Notes Indenture Trustee, and the Other Secured Parties thereunder.
"Construction Agency Agreement" means that certain Construction Agency
Agreement, of even date herewith, between VCR and Seller.
"Construction Consultant" shall have the meaning set forth in the Funding
Agents' Disbursement and Administration Agreement.
"Construction Management Agreement" means that certain Construction
Management Agreement, dated as of the 15th day of February, 1997, between Lehrer
McGovern Bovis, Inc. and Las Vegas Sands, Inc., providing for a guaranteed,
not-to-exceed maximum price, subject to certain exceptions, for the construction
of the Project, inclusive of the Energy Improvements, and Other Customer's
Facilities, which contract has been amended and assigned to VCR pursuant to that
certain Assignment, Assumption and Amendment dated as of November 14, 1997 by
and among Lehrer McGovern Bovis, Inc., Las Vegas Sands, Inc. and VCR.
"Contract Year" shall mean, commencing on the Service Commencement Date,
each successive twelve (12) calendar month period or other period mutually
agreed to in writing by Seller, Buyer and the Other Customers, during the Term.
"Contract Year Amount" shall have the meaning set forth in Section 4.3 of
this Agreement.
"Contract Year Fixed Costs" shall have the meaning set forth in and be
determined in accordance with Schedule 4.2.
"Contractor" shall mean Lehrer McGovern Bovis, Inc.
"Credit" shall have the meaning set forth in Section 4.3 of this
Agreement.
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"Current Contract Year" shall mean, at any time during the Term, the
Contract Year within which the then current calendar date falls.
"Current O&M Budget" means the Annual O&M Budget applicable in the Current
Contract Year, determined in accordance with of Schedule 4.2.
"Divided Share" means the fixed ratio of Buyer's Maximum Thermal Energy
Requirement to the sum of Buyer's Maximum Thermal Energy Requirement and Initial
Customers Maximum Thermal Energy Requirement, as more specifically set forth on
Schedule 2.2C and as such schedule may be amended from time to time based upon
the mutual written agreement of Seller, Buyer and the Other Customers. The sum
of Divided Share of Buyer and the Other Customers shall in no event be less than
100%; provided however, that in the event Seller terminates its energy services
agreements with one or both of the Other Customers and this Agreement is not
otherwise terminated, Buyer's Divided Share in effect as of the date of such
termination shall not be adjusted based upon such termination(s) absent Buyer's
and Seller's written consent.
"Easements" shall have the mean those easements granted to Seller pursuant
to the provisions of the Ground Lease and those certain Easement Agreements,
dated as of the same date as this Agreement, entered in to by Seller and Buyer.
"Energy Improvements" means the Central Plant and the Other Facilities.
"Energy Management Services" shall have the meaning set forth in
Section 3.3.
"Engineering Services" means the services provided by Seller to VCR, on
behalf of VCR, Buyer and GCSMC pursuant to the terms of this Agreement, as
specifically set forth in Schedule 3.1.
"Event of Force Majeure" shall include the following acts, events or
conditions, or any combination thereof, which renders either party wholly or
partially unable to perform its obligations under this Agreement, other than the
payment of money, and which is beyond the
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reasonable control of the party relying thereon as justification for not
performing its obligations or complying with any condition required of such
party under the terms of this Agreement:
(a) an act of God, lightning, earthquake, hurricane, tornado, acts
of a public enemy, war, blockade, insurrection, riot or other civil
disturbance, sabotage or similar occurrence or any exercise of the
power of eminent domain, police power, condemnation or other taking
by or on behalf of any public, quasi-public or private entity; or
(b) a landslide, fire, accident, strike or labor dispute,
curtailment of fuel supply, explosion, flood or nuclear radiation,
not created by an act or omission of the party asserting an Event of
Force Majeure has occurred; or
(c) a Change in Law; or
(d) the suspension, termination, interruption, denial or failure of
or inability to obtain any renewal or issuance of any permit,
license, right of way, consent, authorization or other approval
which is essential to Seller's performance of its obligations under
this Agreement; provided however, that such suspension, termination,
interruption, denial , failure or inability shall not be the result
of the failure of Seller to comply with Legal Requirements or the
willful, intentional or negligent action or inaction of Seller,
provided however, that the contesting, in good faith, of any such
suspension, termination, interruption, denial , failure or
inability, shall not constitute or be construed as a willful,
intentional or negligent action or inaction by Seller; or
(e) any surface or subsurface condition not created by Seller and
existing at the Central Plant Site which shall require a redesign or
change in the construction of the Energy Improvements such that
Total Energy Improvement Cost is likely to exceed $70 million; or
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(f) Forced Outage, but only to the extent caused by any of the acts,
events or conditions described in the foregoing clauses (a) through
(e) of this definition of "Event of Force Majeure".
"Fixed Share" shall have the meaning set forth in, and be determined in
accordance with, Schedule 4.2.
"Forced Outage" shall mean any outage caused by mechanical, electric or
equipment failure, not caused by or resulting from the acts or omissions of
Seller (or Seller's employees or agents), that either fully or partially
curtails the operation of the Energy Improvements.
"Fully Burdened Payroll Costs" shall have the meaning set forth in, and be
determined in accordance with, Schedule 4.2.
"Funding Agents' Disbursement and Administration Agreement" shall mean
that certain Funding Agents' Disbursement and Administration Agreement dated as
of November 14, 1997 by and between Buyer, The Bank of Nova Scotia, as
Disbursement Agent, The Bank of Nova Scotia, as the Bank Agent, First Trust
National Association, as trustee, GMAC Commercial Mortgage Corporation and
Seller, as amended pursuant to its terms.
"Governmental Approval" means any authorization, consent, approval,
waiver, exception, variance, franchise, permission, permit, filing, publication,
declaration, license or other form of required permission from, of or with any
Governmental Authority, and shall include, without limitation, those siting,
environmental and operating permits and licenses which are required for the
construction, modification, use, operation and maintenance of the Energy
Improvements.
"Governmental Authority" means any agency, department, court or other
administrative or regulatory authority of any federal, state or local
governmental body.
"Ground Lease" means that certain Ground Lease between Seller and VCR
dated the same date as this Agreement.
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"HVAC Completion" shall have the meaning set forth in the Funding Agents'
Disbursement and Administration Agreement.
"Initial Customers' Maximum Thermal Energy Requirements" shall mean the
sum of maximum peak amount of Thermal Energy Seller is obligated to provide the
Other Customers in any Contract Year as set forth in Schedule 2.2C.
"Initial Customers' Thermal Energy Requirements" shall mean the Thermal
Energy requirements of the Other Customers in the Contract Year, as set forth in
the O&M Budget for such Contract Year adopted pursuant to Schedule 4.2.
"Initial Term" shall have the meaning set forth in Section 2.1.
"Legal Requirements" shall mean all laws, statutes, codes, ordinances,
rules, regulations, orders, judgments, decrees, injunctions, directions and
requirements of all federal, state, county, municipal and local government
units, agencies and courts which must be complied with by either party in
performing its obligations pursuant to this Agreement, including but not limited
to, all applicable environmental laws and Governmental Approvals.
"Margin" shall have the meaning set forth in, and be determined in
accordance with, Schedule 4.2
"Metering Equipment" shall have the meaning set forth in Section 5.1.
"Monthly Capacity Payment" shall have the meaning set forth in, and shall
be determined in accordance with Schedule 4.1.
"O&M Budget" means the budget for O&M Services adopted in accordance with
Schedule 4.2.
"O&M Services" means the Central Plant O&M, Other Facilities O&M and, to
the extent applicable, Buyer's Equipment O&M.
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"Other Customers" means, collectively, Interface Group-Nevada, Inc. and
VCR and their permitted successors and assigns.
"Other Customers Facilities" means the systems and equipment, as
specifically set forth on Schedule 2.2A, that are located in or on the
facilities of the Other Customers and are to be financed, owned, operated and
maintained by Seller pursuant to agreements with the Other Customers.
"Other Customers Facilities O&M" means the operations and maintenance
services provided by Seller in conjunction with the Other Customers Facilities,
as specifically set forth in Schedule 3.2A.
"Other Facilities" means the systems and equipment, as specifically set
forth in Schedule 2.2A, that are located in or on Buyer's Facilities and are to
be financed, owned, operated and maintained by Seller pursuant to the terms of
this Agreement.
"Other Facilities Capacity Payment" shall have the meaning set forth in
Schedule 4.1B.
"Other Facilities O&M" means the operations and maintenance services
provided by Seller in connection with the Other Facilities, as specifically set
forth in Schedule 3.2A.
"Permitted Liens" shall have the meaning set forth in the Funding Agents'
Disbursement and Administration Agreement.
"Person" means any individual, corporation, business, trust, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or other entity of whatever nature.
"Prior Contract Year" shall mean, at any time during the Term commencing
on the first anniversary date of the Service Commencement Date, the Contract
Year preceding the Current Contract Year.
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"Project" shall have the meaning given in the Funding Agents' Disbursement
and Administration Agreement.
"Projected Contract Year" means commencing on the Service Commencement
Date and thereafter, at any time during the Term, the Contract Year next
succeeding the Current Contract Year.
"Projected O&M Budget" means the O&M Budget applicable to a Projected
Contract Year, determined in accordance with Schedule 4.2.
"Property" shall have the meaning set forth in the Ground Lease.
"Property Owner" means Venetian Casino Resort, LLC.
"Proportionate Share" shall mean (i) for the first Contract Year, the
fixed percentage set forth in Schedule 2.2B and (ii) for the second Contract
Year and each Contract Year thereafter, the ratio of Buyer's Thermal Energy
Requirements to the sum of Buyer's Thermal Energy Requirements and the Initial
Customers' Thermal Energy Requirements for the immediately preceding Contract
Year; provided however that in the event that Buyer, or both, of the Other
Customers did not actually fully occupy and use 100% of its respective
improvements for any portion of such preceding Contract Year (by reason of (i)
delay in the date such improvements are opened for business, (ii) fire or other
casualty, (iii) the non-occupancy and use of tenant space, or (iv) any other
cause, without limitation), then for purposes of such adjustment under clause
(ii) above, the actual total Thermal Energy received by such entity during the
prior Contract Year shall be increased to equitably reflect stabilized full
occupancy and use of 100% of such improvements for the entire preceding Contract
Year. Until and unless the appropriate amount of such adjustment has been
approved in writing by Seller, Buyer and the Other Customers which approval
shall not be unreasonably withheld or delayed, the Proportionate Shares of Buyer
and the Other Customers shall not be changed from those then in effect for the
prior immediately preceding Contract Year, but upon such approval, such
Proportionate Share may be adjusted retroactively to the beginning of the
applicable Contract Year; provided however that, except as may be agreed to by
the parties in writing as a result of an agreement entered into
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by Seller with another customer pursuant to Section 4.8 of this Agreement, in no
event shall the sum of Buyer's Proportionate Share and the Initial Customers
Proportionate Shares be less than 100%. Any of Buyer, Seller or any Other
Customers shall have the right, upon written notice to the others, to request
such adjustment be considered for any improvements served by the Central Plant
which it reasonably believes were not fully used and occupied at all times
during the immediately preceding Contract Year; provided that such notice is
given not less than 30 calendar days following the last day of such Contract
Year.
"Prudent Operating Practices" means the practices, methods and acts
commonly used by experienced and prudent operators in the heating and cooling
industry, including that portion of the industry providing thermal energy
services to convention centers, casinos, malls and similar institutions, that at
a particular time, in the exercise of reasonable judgment in light of the facts
known and/or that reasonably should have been known at the time a decision was
made, would have been expected to accomplish the desired result in a manner
consistent with law and/or Governmental Authorizations, reliability, safety,
environmental protection, economy and expedition, including without limitation,
those practices, methods and acts which are required by manufacturers of
machinery and equipment constituting as applicable, the Central Plant, the Other
Facilities, or, if applicable, Buyer's Equipment.
"Purchase Option Payment" shall mean the amount set forth in Schedule 2.5
to be paid by Buyer upon exercising its purchase option under Section 2.5(a).
"Renewal Term" shall have the meaning set forth in Section 2.5(b).
"Seller Default" shall mean each of the events described in Section 8.1.
"Seller's Lender" means any party providing financing or refinancing to
Seller in connection with Seller's payment of the costs of the design,
engineering, procurement, acquisition, construction, start up, testing and/or
operation and maintenance of the Energy Improvements and the Other Customers
Facilities.
"Service Commencement Date" shall have the meaning set forth in Section
2.3.
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"Subcontractor" shall mean any supplier, other than Seller, of work,
materials, equipment or services to Contractor, VCR or LVSI in connection with
the design, construction, start up and testing of the Energy Improvements and
Other Customers Facilities.
"Tenants" or "Tenant" shall have the meaning set forth in Article XII of
this Agreement.
"Term" shall have the meaning set forth in Section 2.2.
"Termination Payment" means the amount, set forth in Schedule 9.3, which
Buyer shall pay Seller in accordance with Sections 2.4, 3.4(c), 9.1 and
9.3.
"Thermal Energy" means steam and chilled water produced at the Central
Plant and delivered by Seller to Buyer pursuant to this Agreement at the
interconnection points set forth in Schedule 3.4.
"Total Energy Improvements Cost" shall mean the total amount of costs
incurred by Seller, pursuant to the terms of this Agreement, the Construction
Agency Agreement and the Funding Agents' Disbursement and Administration
Agreement, in connection with the design, engineering, procurement,
construction, start-up and testing of the Energy Improvements and the Other
Customers Facilities, which amount shall not exceed $70 million, inclusive of
(i) interest on any such cost incurred by Seller during construction and prior
to the Service Commencement Date, at an interest rate equal to the Effective
Interest Rate set forth in Schedule 4.1 (ii) all out-of-pocket costs, expenses
and fees, including fees and expenses of all legal counsel of each such member's
letter of credit bank, incurred by Seller's members in connection with the
obtaining of a letter of credit in accordance with Section 2.4 of the Funding
Agents' Disbursement and Administration Agreement and (iii) that portion of the
cost of Transition Period O&M Services provided by Seller which Buyer, Seller
and the Other Customers mutually agree should be capitalized pursuant to
Schedule 3.2B.
"Transition Period O&M Services" means the operations and maintenance
services provided by Seller prior to the Service Commencement Date, as more
specifically set forth in Schedule 3.2B.
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"Unit Variable Cost" shall have the meaning set forth in, and be
determined in accordance with, Schedule 4.2.
"Unit Variable Share" shall have the meaning set forth in, and be
determined in accordance with, Section 4.2.
ARTICLE II
TERM; CONDITIONS PRECEDENT
2.1 Term. This Agreement shall be in full force and effect, be legally
binding upon the parties and their permitted successors and assigns, and be
enforceable in accordance with its terms, as of the date first set forth above
and shall remain in effect unless terminated earlier pursuant to the provisions
of Section 2.4, Article IX, or Section 10.2, for an initial term of ten (10)
Contract Years ("Initial Term") from the Service Commencement Date, and
thereafter for any Renewal Term, as defined provided in Section 2.5 (the Initial
Term and any Renewal Term being the "Term" of this Agreement).
2.2 Conditions Precedent to Seller's Payment of Total Energy Improvements
Cost. Subject to the provisions of Seller's energy service agreement with VCR,
the Construction Agency Agreement and the Funding Agents' Disbursement and
Administration Agreement, Seller has agreed to pay the Total Energy Improvement
Costs up to a maximum amount of $70 million dollars in the aggregate; provided
however, that Seller's obligation to pay, or advance funds for the payment of,
such costs shall be subject to the satisfaction or written waiver by Seller of
each of the following conditions precedent:
(a) Seller shall have executed the Ground Lease with VCR and the
Easement Agreement with the Buyer and GCSMC, respectively and the Ground Lease
and the Easement Agreements, together with any financing statements required by
Section 13.17, shall have been delivered to Lawyers Title Insurance Company for
recording and recorded as soon as possible after such delivery but in no event
later than contemporaneously with the recording of the Deed of Trust, as defined
in the Funding Agents' Disbursement and Administration Agreement.
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(b) there shall not be a Buyer Default under this Agreement, or
Seller's energy services agreements with the Other Customers, an Event of
Default of Landlord under the Ground Lease, an Event of Default under and as
defined in the Funding Agents' Disbursement and Administration Agreement and/or
a Construction Agent Event of Default, as defined in and, under the Construction
Agency Agreement;
(c) Buyer and VCR shall have executed a Construction Agency
Agreement, in the form of Appendix B to the VCR energy services agreement and
VCR shall have executed the Assignment of Construction Documents attached
thereto and the written consent, in the form attached to the Assignment of
Construction Documents, of each of the other parties to the Construction
Documents (as defined in the Construction Agency Agreement)shall have been
obtained;
(d) All applicable conditions precedent to such funding as set forth
in, and determined in accordance with, the Funding Agents' Disbursement and
Administration Agreement shall have been satisfied, including but not limited to
the delivery by VCR to the Disbursement Agent thereunder of the requisite
Advance Request, the delivery by the Buyer of the requisite Notice of Funding
Request and the delivery by VCR to Seller of the requisite Consultant's
Certificate, with each such certificate in the form provided in the Funding
Agents' Disbursement and Administration Agreement, together with such other
certificates as may be required pursuant to the Funding Agents' Disbursement and
Administration Agreement.
2.3 Service Commencement Date. The Service Commencement Date shall be
deemed to occur on the first day of the calendar month immediately following the
date that (i) HVAC Completion has occurred and (ii) the Opening Date, as defined
in the Funding Agents' Disbursement and Administration Agreement has occurred.
Buyer acknowledges that, pursuant to the Construction Agency Agreement, VCR
shall cause HVAC Completion to occur no later than the Outside Completion
Deadline (as defined and determined in accordance with the Funding Agents'
Disbursement and Administration Agreement), which shall in no event be later
than November 14, 2000.
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2.4 Early Termination. In the event that (i) prior to the Service
Commencement Date, an Event of Default as defined under the Funding Agents'
Disbursement and Administration Agreement occurs for any reason other than a
breach by Seller of its obligations thereunder or (ii) other than due to a
breach by Seller of its obligations under this Agreement, the Service
Commencement does not occur on or before the Outside Completion Deadline, Seller
may, in its sole discretion, terminate this Agreement upon written notice to
Buyer. Upon such termination Seller shall have no further obligation to Buyer
hereunder and VCR shall, on behalf of itself, Buyer and, except as otherwise
provided in the VCR energy services agreement, Interface Group-Nevada, Inc., pay
Seller the sum of the Engineering Services Payment, as provided in Section 4.4,
and the Termination Payment, as set forth on Schedule 9.3. Except as otherwise
provided in Section 2.4(b) of the VCR energy services agreement, upon such
payment by VCR, Seller shall execute and deliver to (A) VCR or its designee a
quitclaim bill of sale transferring to VCR or such designee all of Seller's
right, title and interest in and to the Central Plant and deliver to Buyer or
its designee a quitclaim bill of sale transferring to Buyer or its designee all
of Seller's right, title and interest in and to the Other Facilities located at
or connected to Buyer's Facilities, AS IS WHERE IS, free and clear from any
liens or encumbrances of Seller, its agents (other than Buyer), contractors
and/or Seller's Lender and (B) to each of the Other Customers or their designee,
a quitclaim bill of sale transferring to each of the Other Customers all of
Seller's right, title and interest in and to the Other Customers Facilities
located at or connected to each of such Other Customers, AS IS WHERE IS, free
and clear from any liens or encumbrances of Seller, its agents (other than
Buyer), contractors and/or Seller's Lenders. Buyer shall be jointly and
severally liable with VCR for payment of that portion of such Engineering
Services Payment and Termination Payment pursuant to this Section 2.4
representing an amount equal to Buyer's Divided Share multiplied by each of the
Termination Payment and the Engineering Services Payment.
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2.5 Renewal Upon Expiration of Term / Purchase Option
(a) Subject to paragraph (b) of this Section 2.5, upon the
expiration of the Initial Term and the first and second Renewal Term (as
hereinafter defined), Buyer shall have the option of either (i) terminating this
Agreement, or (ii) subject to Section 2.5(b), extending the term of this
Agreement for a Renewal Term (as hereinafter defined), or (iii) purchasing from
Seller its (A) Divided Share of the Central Plant and (B) the Other Facilities,
by paying to Seller the Purchase Option Payment determined in accordance with
and pursuant to Schedule 2.5; provided however that such option by Buyer to
terminate this Agreement or exercise such purchase option may only be elected by
Buyer (A) upon written notice to Seller on or before the date which is one
hundred and eighty (180) days prior to the expiration of the Initial Term or the
applicable Renewal Term, as the case may be, and (B) in the event each of the
Other Customers has elected, by similar written notice to Seller, to likewise
terminate their energy services agreement with Seller or exercise its
corresponding purchase option. In the event such purchase option is elected by
Buyer and each of the Other Customers, upon exercise of such purchase option by
Buyer and the Other Customers and the payment by Buyer of the Purchase Option
Payment and payment by the Other Customers of the purchase option payment amount
provided in such Other Customers' agreements with Seller, Seller shall execute
and deliver to Buyer, the Other Customers or their designee a bill of sale
transferring good and marketable title in and to, in the case of Buyer, the
Central Plant and the Other Facilities, and, in the case of the Other Customers,
the Other Customers Facilities, free and clear of any liens or encumbrances of
Seller, its agents, contractors or Seller's Lenders. Alternatively, upon the
exercise of such termination option by Buyer and each of the Other Customers,
this Agreement shall terminate, subject to Seller's continuing right to occupy
the Central Plant Site pursuant to the provisions of, and to the extent provided
in, the Ground Lease.
(b) In the event that Buyer and each of the Other Customers have not
elected to exercise their purchase option or terminate this Agreement pursuant
to Section 2.5 (b), the term of this Agreement shall be automatically extended
for an additional five (5) Contract Years (the period of each such renewal being
a "Renewal Term") upon the same terms and conditions contained herein with the
exception of the Capacity Payment paid by Buyer during any Renewal
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Term shall be revised in accordance with the provisions of Schedule 4.1(C);
provided further however that unless otherwise agreed to in writing between
Seller, Buyer and the Other Customers, and notwithstanding the provisions of
Section 2.5(a), in no event shall the Term of this Agreement exceed twenty (20)
Contract Years from the Service Commencement Date.
ARTICLE III
SCOPE OF SERVICES
3.1. Services Prior to and During Construction. Prior to the Service
Commencement Date, Seller shall, subject to Section 4.4, provide Buyer with the
engineering, fuel management planning, project management, and other services
set forth in Schedule 3.1 (the "Engineering Services").
3.2 Operations and Maintenance Services.
(a) Commencing on the Service Commencement Date, Seller will
provide, or caused to be provided, operations and maintenance services for the
Central Plant (the "Central Plant O&M"), the Other Facilities ("Other Facilities
O&M") and, to the extent requested by Buyer upon thirty (30) days prior written
notice to Seller, Buyer's Equipment ("Buyer's Equipment O&M") (collectively, the
"O&M Services") in accordance with the specifications, and operations and
maintenance standards and procedures set forth in Schedule 3.2A. In the event
Buyer requests Seller to operate and maintain Buyer's Equipment, the obligation
of Seller to provide such operation and maintenance services shall be subject to
Buyer and Seller first amending the O&M Budget adopted pursuant to Schedule 4.2
to reflect the Buyer's Equipment O&M Payments due Seller in connection with such
operation and maintenance services.
(b) Prior to the Service Commencement Date, Seller will provide, or
cause to be provided, certain preoperational operation and maintenance services
("Transition Period O&M Services") in connection with the Central Plant as set
forth in Schedule 3.2B.
3.3 Energy Management Services. Commencing on the Service Commencement
Date or such earlier date mutually agreed to by the parties in writing, Seller
shall act as Buyer's broker
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with respect to the procurement of such supplies of electricity, natural gas and
alternate fuels as are necessary to serve the energy requirements of Buyer's
Facilities that are in addition to Buyer's Thermal Energy requirements (such
services, the "Energy Management Services"). Seller shall, in the performance of
the Energy Management Services, use reasonable efforts to assist Buyer in
procuring and thereafter managing such supplies of electricity, natural gas and
alternate fuels purchased by Buyer. Buyer and Seller shall implement, and Seller
shall administer, an energy procurement plan designed to minimize, consistent
with Buyer's reliability requirements and Seller's other obligations under this
Agreement, the as-delivered cost of such electricity, natural gas and alternate
fuels. Upon Seller's written request, Buyer shall execute each procurement
agreement that Seller recommends; provided however, nothing herein shall be
deemed to obligate Buyer to execute such agreements. Seller shall, with Buyer's
assistance, make arrangements for the supply of electricity, natural gas or
alternate fuels supplier(s) required to satisfy the energy requirements of
Buyer's Facilities that are in addition to Buyer's Thermal Energy Requirements.
Buyer shall be directly responsible for paying the costs of all such
electricity, natural gas and alternate fuel and Seller shall not be deemed to
have, and Buyer shall defend, indemnify and hold Seller harmless from any
liabilities or obligations of Buyer to the suppliers of such electricity,
natural gas or alternative fuels In the event that an Affiliate of any member of
Seller provides such electricity, natural gas or alternate fuels to Buyer,
Seller's compensation for such Energy Management Services shall be adjusted
pursuant to the provisions of Section 4.3 in such event.
3.4 Central Plant Performance Penalties
(a) Seller acknowledges the importance to Buyer of the availability
and quality of Thermal Energy from the Central Plant required to satisfy Buyer's
Thermal Energy Requirements. Seller shall establish operation and maintenance
procedures and maintain appropriate monitoring equipment, which monitoring
equipment Buyer and Seller shall mutually agree upon and which Buyer shall cause
the Contractor to install pursuant to the provisions of the Construction
Management Agreement and the Construction Agency Agreement, the costs of which
shall be included in the Central Plant Capital Costs (as defined in Schedule
4.1), in order
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to monitor the compliance of the steam and chilled water produced by the Central
Plant with the standards set forth in Schedule 3.4 (the "Steam and Chilled Water
Standards").
(b) Commencing on the Service Commencement Date and during the Term
of this Agreement, upon discovery by either party of the unavailability of the
Central Plant or failure of the Central Plant to deliver Thermal Energy meeting
the Steam and Chilled Water Standards, such party shall, regardless of the cause
thereof, immediately notify the other party and thereafter Seller shall use
diligent efforts, subject to reasonable Central Plant operating restrictions, to
remedy such Central Plant unavailability and resume the production and delivery
of Thermal Energy which satisfies the Steam and Chilled Water Standards. The
costs of any corrections or modifications required to correct such Central Plant
unavailability and/or failure of the Thermal Energy to satisfy the Steam and
Chilled Water Standards shall be made at Seller's expense but only to the extent
such unavailability or failure is due to the breach of Seller of its obligations
under this Agreement and not due to an Event of Force Majeure, or the acts of
any Person not acting on behalf of, or under contract with Seller in connection
with the performance of its obligation under this Agreement, or the acts or
omissions of Contractors under the Construction Documents and Construction
Agreements, as each term is defined in the Construction Agency Agreement, VCR,
in it's capacity as Construction Agent under the Construction Agency Agreement,
or Buyer, or any of their respective subcontractors or vendors, and such
parties' respective successors and/or assigns. To the extent the cause of such
Central Plant unavailability or failure of the Thermal Energy to satisfy the
Steam and Chilled Water Standards is not due to the breach by Seller of it's
obligations under this Agreement, the cost of correcting the same shall be
included in an amendment to the Current Contract Year O&M Budget pursuant to
Schedule 4.2. Notification pursuant to this Section 3.4(b) shall be made in
person or by telephone call and confirmed in writing. Seller shall not be
responsible for compensating Buyer for any form of consequential, indirect or
special damages or for lost profits or revenues as a result of unavailability of
the Central Plant to satisfy Buyer's Thermal Energy Requirements or the failure
of the Thermal Energy produced thereby to satisfy the Steam and Chilled Water
Standards. Except as set forth in Section 3.4(c), Seller's payment of the costs
to correct such cause of the Central Plant unavailability or non-conforming
Thermal Energy shall be Buyer's sole and exclusive remedy against Seller due to
a breach by Seller of its obligations under this Agreement
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which results in the failure of the Central Plant to be available to satisfy
Buyer's Thermal Energy Requirements or to produce and deliver Thermal Energy to
Buyer which satisfies the Steam and Chilled Water Standards and Buyer shall,
subject to Article VII, indemnify, hold harmless and defend Seller against any
claims, liability, damages, costs and expenses, including attorneys fees,
arising from, incurred in connection with or suffered by Seller from any third
party (other than Seller's employees, contractors, Affiliates and Seller's
Lender) related to the unavailability of the Central Plant to satisfy Buyer's
Thermal Energy Requirements and/or the failure of such Thermal Energy to satisfy
the Steam and Chilled Water Standards. Buyer agrees not to seek contribution or
reimbursement from Seller for any claims, liability, damages, costs or expenses,
including attorneys fees, suffered or incurred by Buyer related to the
unavailability of the Central Plant or the failure of such Thermal Energy to
satisfy the Steam and Chilled Water Standard. In the event that any such failure
to deliver Thermal Energy meeting the Steam and Chilled Water Standards is due
to the acts or omissions of Contractor, Seller shall enforce any warranties
and/or guaranties of Contractor which have been assigned to Seller by Contractor
in writing pursuant to the Construction Management Agreement and which relate to
such failure.
(c) Subject to Section 3.4(d), in the event that after the Service
Commencement Date due to the breach of Seller's obligations under this Agreement
the Central Plant is unavailable to satisfy Buyer's Thermal Energy Requirements
or satisfy the Steam and Chilled Water Standard for more than 12 hours in any
day, or for a total of more than 24 hours in any quarter, Buyer shall be
entitled to (A) terminate this Agreement, effective upon one day's prior written
notice to Seller, and (B) purchase, together with the Other Customers, the
Central Plant and the Other Facilities by paying the Seller the Termination
Payment applicable at the effective date of such termination, in level monthly
installments, at an interest rate equal to the Effective Interest Rate, as
defined in Schedule 4.1, over a period equal to the balance of what would
otherwise be the remaining Term of this Agreement as of the date of such
termination. Upon the effective date of such termination, VCR shall assume
complete responsibility for the operation and maintenance of the Central Plant
and Buyer shall assume complete responsibility for the operation and maintenance
of the Other Facilities, consistent with the standards set forth in this
Agreement, and Seller shall have no further obligation or liability to Buyer
under this Agreement and Buyer shall indemnify and hold Seller harmless from all
claims, liabilities,
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damages, costs and expenses arising after the termination date which are in any
manner related to the Central Plant and/or the Other Facilities. The exercise of
such early termination and buyout option by Buyer shall be in lieu of all other
remedies of Buyer pursuant to this Agreement or otherwise available at law or in
equity. Those provisions of this Agreement necessary for Seller to enforce its
right to payment of the Termination Payment shall survive termination of this
Agreement and Buyer shall execute all documents reasonably required by Seller in
order to secure Buyer's obligation to pay Seller the Termination Payment,
including, but not limited to, necessary UCC filings granting Seller a first
priority security interest in the Central Plant and the Other Facilities until
the Termination Payment is paid in full.
(d) Buyer's right to terminate this Agreement pursuant to Section
3.4(c) shall be subject to the exercise, by a like written notice to Seller from
the Other Customers of their election to exercise their right, pursuant to such
Other Customers agreements with Seller, to terminate such agreements with Seller
and purchase such Other Customers' (i) Divided Share of the Central Plant and
(ii) Other Facilities, upon notice by Buyer to Seller of Buyer's exercise of its
rights pursuant to Section 3.4 (c). Nothing in this Section 3.4(c) shall be
deemed to give the Buyer the right to terminate this Agreement absent the
contemporaneous notice written by the Other Customers terminating their
respective energy services agreements with Seller and pay to Seller of the
termination amounts due from such other Customers as set forth in such
agreements.
(e) In the event that Seller is not in default of its obligations to
Buyer pursuant to Section 3.4(b), but Seller has, nevertheless, defaulted in
such performance obligations pursuant to its energy service agreements with one
or both of the Other Customers and each of such Other Customers have elected to
terminate their energy services agreement with Seller, in accordance with the
provisions thereof, Buyer shall be entitled, subject to Section 3.4(d), to
terminate this Agreement contemporaneous with such termination by each of the
Other Customers and payment of the Termination Payment, as provided in Section
3.4(c).
ARTICLE IV
SERVICE FEES
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4.1 Capacity Payments. Subject to Section 4.5 (b), commencing on the
Service Commencement Date and for the balance of the Term, Buyer shall pay
Seller during each Contract Year, in accordance with the billing and payment
provisions of Section 4.5, the sum of (a) Buyer's Divided Share of the Central
Plant Capacity Payment, as defined and determined in accordance with Schedule
4.1(A) and (B) the Other Facilities Capacity Payment, as defined and determined
in accordance with Schedule 4.1(B); provided however that in the event that the
Term of this Agreement is extended pursuant to Section 2.5, the Central Plant
Capacity Payment and the Other Facilities Capacity Payment applicable during
each such Renewal Term shall be determined in accordance with Schedule 4.1(C).
4.2 Operations and Maintenance Services Payments.
(a) Commencing on the Service Commencement Date, and for the balance
of the Term, Buyer shall pay to Seller, in accordance with the billing and
payment provisions of Section 4.5, Buyer's share of the Current Contract Year
O&M Budget, as determined in accordance with Schedule 4.2.
4.3 Energy Management Services Payment. Commencing on the Service
Commencement Date or such earlier date mutually agreed to by the parties in
writing and for the balance of the Term of this Agreement, Buyer shall pay
Seller during, in the event such Energy Management Services are provided prior
to the Service Commencement Date from the date such services are provided until
the Service Commencement Date and thereafter each Contract Year, in accordance
with the billing and payment provisions of Section 4.5, of the costs of the
Energy Management Services provided by Seller pursuant to this Agreement (such
payment, the "Energy Management Services Payment"). Buyer's Energy Management
Services Payment in each Contract Year of this Agreement, shall be equal to
Contract Year Amount less the Credit, if any, (defined below). For purposes of
this Section 4.3, "Contract Year Amount" shall mean the product of Buyer's
Proportionate Share and $75,000, and in each subsequent Contract Year, the
Contract Year Amount established for the immediately preceding Contract Year,
multiplied by the rate of the Consumer Price Index for the Western United States
Region, or such other area mutually agreed to by the parties ("CPI Index") for
the June of the Preceding Contract Year by
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CPI Index for June, 1997, as updated. For purposes of this Section 4.3, the
"Credit" shall be equal to (A) the amount of profit realized by any Affiliate of
Seller, or either of the members of Seller, under any supply agreement entered
into between Seller and such Affiliate in connection with the Energy Management
Services provided by Seller during such period; provided however that (1) the
Credit, if any, shall in no event reduce Buyer's payment obligation pursuant to
this Section 4.3 in any Contract Year to less than zero, and (2) no Credit shall
be applied on account of any agreement between Seller and any Affiliate in
connection with any assistance provided by such Affiliate to Seller in
connection with Seller's preparation of the O&M Budget pursuant to Schedule 4.2.
In the event Buyer elects to have Seller provide such Energy Management Services
prior to the Service Commencement Date, Seller's obligation to provide such
services shall be subject to the prior written agreement between the parties
concerning the amount and method of Buyer's payment for such services; provided
however that in no event shall the costs of such services prior to the Service
Commencement Date exceed a monthly amount equal to Buyer's Proportionate Share
of the Contract Year Amount for the first Contract Year or the daily prorata
equivalent thereof for the period in which such services are provided.
4.4 Engineering Services Costs. Seller shall not be required to incur more
than $50,000 in costs (including, but not limited to internal costs) associated
with the provision the Engineering Services. The cost of such Engineering
Services, in an amount not to exceed $50,000, shall be included in the Central
Plant Capital Cost, as defined in Schedule 4.1 or any of the Services Fee
charged by Seller pursuant to Article IV; provided however that in the event
that this Agreement is terminated pursuant to Section 2.4, Buyer shall reimburse
Seller for Buyer's share of Seller's reasonably incurred and documented costs
incurred in providing Engineering Services pursuant to Section 3.1. Buyer's
share of such Engineering Services costs shall be equal to the product of (x)
Seller's documented time charges, in hours, devoted to the Engineering Services,
(y) $80, and (z) Buyer's Divided Share; provided however, that, except as
otherwise agreed by the parties, the product of (x) and (y) shall not exceed
$50,000.
4.5 Billings and Payments.
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(a) Subject to Section 4.5 (b), commencing on the Service
Commencement Date and for the balance of the Term, Seller shall invoice Buyer
and Buyer shall pay Seller for the services rendered pursuant to this Agreement
on a Billing Cycle basis. For each Billing Cycle, Seller shall invoice Buyer
within fifteen (15) days after the end of each Billing Cycle, such invoice
showing the separate charges for:
(i) One-twelfth of Buyer's Current Contract Year
Capacity Payment, determined in accordance with Schedule 4.1;
(ii) One-twelfth of Buyer's share of the Current Contract Year O&M
Budget, determined in accordance with Schedule 4.2;
(iii) the product of (x) the Unit Variable Costs applicable in the
Current Contract Year, determined in accordance with Schedule 4.2 and (y)
Buyer's actual, metered consumption of Thermal Energy during the Billing
Cycle, taking into account the applicable conversion factors mutually
agreed to between the parties in the context of the preparation of the
Current Contract Year O&M Budget pursuant to Schedule 4.2;
(iv) one-twelfth of Buyer's share of the Energy Management Payment
for the Current Contract Year, determined pursuant to Section 3.3;
(v) if applicable, any amounts due in connection with Buyer
Additional Meters as provided in Section 5.1;
(vi) if applicable, any amounts due pursuant to the provisions of
Section 4.7 or Section (c) of Article XII; and
(vii) any and all taxes and/or assessments, including, but not
limited to any sales or use taxes, imposed on Buyer's consumption, or
Seller's production or delivery to Buyer, of Thermal Energy during the
Billing Cycle, or on Seller's provision of any other
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services to Buyer pursuant to this Agreement, which taxes and/or
assessments are not otherwise included in the changes set forth in (i)
through (vii) of this Section 4.5.
(b) In the event the Service Commencement Date has not occurred on
or before April 21, 1999, commencing on May 1, 1999 and on the first day of each
following month through the period ending on earlier of the Service Commencement
Date or the date this Agreement is terminated pursuant to Section 2.4, Buyer
shall pay Seller the Capacity Reservation Charge, as defined and determined in
accordance with Schedule 4.1 (D).
(c) Prior to the Service Commencement Date, Buyer shall pay Seller,
on a monthly basis and within thirty (30) days of the date of Seller's invoice
(i) Buyer's Divided Share of the cost of the Transition Period O&M Services
incurred by Seller during the preceding month and not otherwise capitalized
pursuant to Schedule 3.2B plus (ii) the cost of any Thermal Energy provided to
Buyer during the preceding calendar month in an amount equal to the product of
the Unit Variable Costs and Buyer's actual, metered consumption of Thermal
Energy during such period.
4.6 Delinquent Payments. Any invoice tendered for service by Seller
pursuant to this Agreement shall be due and payable upon receipt by Buyer, and
shall be deemed delinquent if not paid by Buyer within thirty (30) days of the
postmark date. All delinquent invoices shall accrue interest from the postmark
date of such invoices at the prime rate then in effect for Chase Manhattan Bank,
N.A., as published in New York, New York, plus two percent (2%) per annum of the
outstanding balance until paid.
4.7 No Liability for Other Customers. Except as provided in Section 2.4 in
the event of the early termination of this Agreement, Buyer shall have no
liability for the obligations of the Other Customers or, except as provided in
Article XII, any other customer of Seller.
4.8 Additional Customers. Except as provided in Article XII of this
Agreement, Buyer's and Buyer's Lender's prior written consent, which consent
shall not be unreasonably withheld or delayed, shall be required prior to Seller
entering into an agreement with any other person or entity, other than the Other
Customers, to supply Thermal Energy from the Central
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Plant. Subject to the prior written consent of Buyer and Buyer's Lenders as
provided herein, in the event that Seller enters into such agreement(s), such
additional customers shall be charged an appropriate proportion of the cost of
production of such thermal energy. The revenues Seller anticipates receiving in
connection with any contractual commitments pertaining to such excess Thermal
Energy sales, regardless of whether such revenues are actually received, shall
be taken into account by Seller in determining the appropriate revisions, if
any, to Buyer's Capacity Payments and O&M Services payment obligations to Seller
pursuant to Sections 4.1 and 4.2, respectively, of this Agreement to reflect the
contractual contribution, if any, of such anticipated third party revenues in
reducing the capital, operation and maintenance costs of the Energy Improvements
which Buyer is charged by Seller pursuant to this Agreement; provided however,
that under no circumstances shall the costs paid by Buyer pursuant to this
Agreement be increased as a result of Seller's agreement(s) with such additional
customers.
ARTICLE V
METERING
5.1 Metering Equipment. As part of the O&M Services, commencing on the
Service Commencement Date and for the Term of this Agreement, Seller will
maintain all required meters, instruments, recording devices, and other related
data logging equipment required to measure and record Buyer's consumption of
Thermal Energy from the Central Plant (collectively, the "Metering Equipment").
In addition, to the extent that Buyer may be permitted and elects to own and
maintain utility meters ("Buyer Additional Meters") located at Buyer's
Facilities under the terms of a utility tariff or service agreement with a
utility or other energy supplier, Buyer may elect to have Seller finance,
install and maintain at the cost of the Buyer Additional Meters, whereupon Buyer
shall agree to reimburse Seller, upon mutually agreeable terms, for Seller's
cost to finance and maintain such meters.
5.2 Testing. Commencing on the Service Commencement Date and during the
balance of the Term of this Agreement, all Metering Equipment will be tested and
calibrated by Seller in accordance with good industry practice. Test and
calibration records will be provided to the Buyer. Buyer may request additional
meter tests at any time in connection with the Metered
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Equipment; however, if a meter is subsequently found to have a variance for
accuracy of less than three percent (3%) from the usage previously billed to
Buyer, Buyer will bear the reasonable cost of such testing. Buyer Additional
Meters, if any, shall be tested and calibrated by Seller to the extent permitted
and provided pursuant to utility tariff or service agreement with the utility or
other energy supplier.
5.3 Meter Interruptions. If a meter record related to any of the Metering
Equipment is temporarily interrupted, Seller shall estimate the quantities of
Thermal Energy taken by Buyer during the period of interruption based on Buyer's
past or future usage patterns during a similar period and whatever other data or
methodology is available for estimating Buyer's usage during the period of
interruption.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Seller Representations. Seller hereby represents and warrants that:
(a) It is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of its formation and
has all requisite corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(b) The execution and delivery of this Agreement and the performance
of its obligations hereunder have been duly authorized by all necessary
corporate action;
(c) This Agreement is a legal, valid and binding obligation of
Seller enforceable against Seller in accordance with its terms, subject to the
qualification, however, that the enforcement of the rights and remedies herein
is subject to (i) bankruptcy and other similar laws of general application
affecting rights and remedies of creditors and (ii) the application of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law);
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(d) To the best knowledge of Seller, as of the date of execution
hereof, no Governmental Approval (other than any Governmental Approvals which
have been previously obtained or disclosed, in writing, to Buyer) is required in
connection with the due authorization, execution and delivery of this Agreement
by Seller or the performance by Seller's of its obligations hereunder which
Seller has reason to believe that it will be unable to obtain in due course on
or before the date required for Seller to perform such obligations; and
(e) Neither the execution and delivery of this Agreement by Seller
nor compliance by Seller with any of the terms and provisions hereof (i)
conflicts with, breaches or contravenes the provisions of the corporate charter
or by-laws of the Seller or any contractual obligation of the Seller or (ii) to
the best knowledge of Seller, results in a condition or event that constitutes
(or that, upon notice or lapse of time or both, would constitute) an event of
default under any contractual obligation of the Seller.
6.2 Buyer Representations. Buyer hereby represents and warrants that:
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its formation and has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby;
(b) Subject to the provisions of the Funding Agents' Disbursement
Administration Agreement, Buyer has the exclusive right to use and occupy
Buyer's Facilities subject only to such liens and encumbrances permitted by
Buyer's Lender.
(c) The execution and delivery of this Agreement and the performance
of its obligations hereunder have been duly authorized by all necessary
corporate action;
(d) This Agreement is a legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, subject to the
qualification, however, that the enforcement of the rights and remedies herein
is subject to (i) bankruptcy and other similar laws of general application
affecting rights and remedies of creditors and (ii) the application of
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general principles of equity (regardless of whether considered in a proceeding
in equity or at law);
(e) To the best knowledge of Buyer, as of the date of execution
hereof, no Governmental Approval (other than any Governmental Approvals which
have been previously obtained or disclosed, in writing, to Seller) is required
in connection with the due authorization, execution and delivery of this
Agreement by Buyer or the performance by Buyer's of its obligations hereunder
which Buyer has reason to believe that it will be unable to obtain in due
course;
(f) Neither the execution and delivery of this Agreement by Buyer
nor compliance by Buyer with any of the terms and provisions hereof (i)
conflicts with, breaches or contravenes the provisions of the corporate charter
or by-laws, or any corporate governance document of the Buyer, or any
contractual obligation of the Buyer, or (ii) to the best knowledge of Buyer,
results in a condition or event that constitutes (or that, upon notice or lapse
of time or both, would constitute) an event of default under any contractual
obligation of the Buyer; and
(g) all Governmental Approvals and consents of any third party
required to construct the Other Facilities have or will be obtained on or before
the date required, and all such Governmental Approvals and third party consents
will, as of the date obtained and through the Service Commencement Date, be
maintained in full force and effect and complied with in all material respects;
and
(h) Buyer has not entered into any contracts or agreements with any
other person regarding the provision of the services contemplated to be provided
by Seller hereunder.
6.3 Covenant of Buyer. Buyer covenants that during the Term of this
Agreement Seller shall be the exclusive supplier of Thermal Energy to Buyer;
provided however that this restriction shall not be deemed to apply to the
purchase by Buyer of Thermal Energy which is in excess of Buyer's Maximum
Thermal Energy Requirements ("Excess Thermal Energy"); provided however that
Buyer shall not enter into an agreement with any Person (other than Seller) with
respect to the supply of such Excess Thermal Energy without first providing
Seller
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with written notice and the opportunity to provide Buyer with such Excess
Thermal Energy pursuant to a mutually agreed upon amendment to this Agreement or
other written agreement between the parties. Nothing in this Agreement shall be
deemed to obligate either party to enter into such amendment or agreement. In
the event that the parties fail to enter into a written agreement or amendment
within six (6) months, or such lessor period reasonably consistent with the
circumstances, of the date such written notice by Buyer, as such period may be
extended by mutual written agreement of the parties, Buyer shall be free to
enter into an agreement with a third party for the provision of such Excess
Thermal Energy. In addition, as of the Service Commencement Date and for the
Term of this Agreement, Buyer shall not operate its existing HVAC Plant, as
defined in that certain Amended and Reciprocal Easement, Use and Operating
Agreement between the Buyer and the Other Customers, to supply any of the
Thermal Energy contemplated to be provided by Seller hereunder.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
7.1 Indemnification.
(a) Except as otherwise explicitly provided for in this Agreement,
each party shall be solely responsible for its own negligence, willful or
reckless acts, or omissions, as well as the negligence, willful or reckless
acts, or omissions of its members and their respective officers, directors,
employees, agents, contractors, subcontractors, successors or assignees and each
party agrees to indemnify, defend and hold harmless the non-indemnifying party,
its officers, employees, directors, agents, contractors, subcontractors and
assigns against any and all claims, actions, costs, expenses, damages and
liabilities, including reasonably attorneys' fees, arising out of or in
connection with the negligent, willful or reckless acts or omissions of the
indemnifying party, its officers, directors, employees, agents, contractors,
subcontractors or assignees.
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(b) In addition to the provisions of Section 7.1(a) and except as
otherwise specifically provided in this Agreement, Buyer shall indemnify, defend
and hold harmless Seller from and against:
(i) any and all claims by, or liability to, Buyer, its members and
their respective, officers, directors, employees, agents,
contractors, subcontractors, assignees or any third party with
respect to any assertion by Buyer, its members or a third
party to any right, title or interest in the Other Facilities,
other than liabilities or claims based upon the acts or
omissions of Seller;
(ii) except to the extent of liens permitted under the SECC Loan
Documents or the Permitted Liens, any and all claims and/or
liabilities resulting from or related to encumbrances,
liens or claims placed on the Energy Improvements, the
Central Plant Site or the Easements as a result of the acts
or omissions of Buyer, its members and their respective
officers, directors, employees, agents, contractors,
subcontractors or assignees;
(iii) any and all claims of any nature or liability of any nature
arising from environmental, health safety or land use
violations(s), hazard(s) or condition(s) on, affecting or
related to the Other Facilities and the Easements granted by
Buyer:
(A) existing prior to the date Seller takes possession of
such Easements;
(B) arising after Seller such Easements, provided such
violation(s), hazard(s) or condition(s) shall not result
from or be caused by any acts or omissions of Seller,
its members and their respective officers, directors,
employees, agents, contractors, subcontractors or
assignees; and/or
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(iv) any claim or liabilities resulting from a breach of Buyer's
covenants, representations and warranties in this Agreement.
(c) In addition to the provisions of Section 7.1(a), Seller shall
indemnify, defend and hold harmless Buyer from and against:
(i) any and all claims by, and liability to, Seller, its
members and their respective officers, directors,
employees, agents, contractors, subcontractors or assignees
for (A) payment of amounts owed by Seller or for injuries,
or property damage, sustained on the Central Plant Site,
the Easements, or on Buyer's premises, except claims or
liabilities resulting from or caused by the act(s) or
omission(s) of Buyer, its members and their respective
officers, directors, employees, agents, contractors,
subcontractors or assignees or any third party not employed
by or under contract with Seller in connection with the
services provided by Seller pursuant to this Agreement.
(ii) except to the extent expressly permitted, any and all
claims and liability resulting from encumbrances, liens or
claims placed on Buyer's premises, the Central Plant Site
and/or the Easements by Seller's Lender, Seller or by
Seller or its members and their respective officers,
directors, employees, agents, contractors, subcontractors
or assigns, except such claims or liabilities resulting
from or caused by the act(s) or omission(s) of Buyer, its
members, and their respective officers, directors,
employees, agents, contractors, subcontractors or assignees;
(iii) any and all claims of any nature and liability of any nature
arising from environmental, health, safety or land use
violations or hazards on, affecting or related to the Central
Plant Site and the Easements after the date Seller takes
possession of the Central Plant Site under the Ground Lease
and the Easements under the Easement Agreement, except to the
extent such violations, hazards or conditions existed prior to
the date
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Seller takes possession of the Central Plant Site and the
Easements and/or such violations, hazards or conditions are
due to the acts or omissions of Buyer, its members, and their
respective officers, directors, employees, agents,
contractors, subcontractors, or assignees or any third party
not employed by or under contract with Seller in connection
with Seller's performance of its obligations pursuant to this
Agreement; and/or
(iv) any claim or liabilities resulting from a breach of Seller's
covenants, representations, and warranties in this Agreement.
(d) The duty of a party to defend, indemnify and hold harmless the
other party shall also apply at the time of notification of any potentially
responsible party designation under applicable federal, state or local
environmental, health, safety or land use laws. The duty to indemnify, defend
and hold harmless hereunder will continue in full force and effect,
notwithstanding the expiration or early termination of this Agreement.
(e) The provisions of this Section 7.1 shall survive termination of
this Agreement.
7.2 Seller's Insurance. Commencing on the date set forth on Schedule 7.2
with respect to each policy coverage and for the balance of the Term of this
Agreement, Seller shall maintain at the policies and amounts of insurance as set
forth in Schedule 7.2 with an insurance company or companies reasonably
satisfactory to Buyer and qualified to do business in the State of Nevada and
having a Best's rating not less than A-VII. Seller's costs of insurance shall be
included in the computation of Buyer's payment obligation pursuant to Section
4.2 of this Agreement.
7.3 Buyer's Insurance. Commencing on the date set forth on Schedule 7.3
with respect to each policy coverage and for the balance of the Term of this
Agreement, Buyer shall maintain at its sole cost and expense, the policies and
amounts of insurance as set forth in Schedule 7.3 with an insurance company or
companies reasonably satisfactory to Seller and qualified to do business in the
State of Nevada and having a Best's rating not less than A-VIII.
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7.4 Additional Insureds and Waiver of Subrogation. Seller and Buyer shall
each name the other and their Affiliates as additional insureds on their
commercial general liability, automobile liability and umbrella liability
policies procured in satisfaction of Section 7.2 of this Agreement. Further,
Seller and Buyer waive their rights of recovery against each other to the extent
of property and time element (business interruption/extra expense) insurance
maintained or required to be maintained against each other. Further, Seller and
Buyer will have their insurers providing the property and time element insurance
under this Agreement endorse their policies to waive their rights of subrogation
against each other, Affiliates of the Buyer and Seller and their respective
lenders and against Contractor and all contractors and subcontractors engaged in
the Project.
7.5 Evidence of Insurance. Within five (5) days of the date of this
Agreement, Seller and Buyer shall each furnish to the other one or more
certificates of insurance evidencing the existence of the coverages set forth in
Sections 7.2 and 7.3, respectively. Each certificate shall state that the
insurance carrier will give Seller and Buyer at least sixty (60) days written
notice of any cancellation or material change in the terms and conditions of
such policy during the periods of coverage.
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ARTICLE VIII
DEFAULT
8.1 Seller Default. Any of the following events shall constitute a
Seller Default:
(a) In connection with itself or its assets, Seller shall (i) consent to
the appointment of a receiver or liquidator, (ii) make a general assignment for
the benefit of creditors, (iii) file a petition for relief under the Federal
Bankruptcy Code, or (iv) take similar action to commence a proceeding for relief
under any other law relating to the bankruptcy, insolvency, reorganization, or
winding up of itself or the composition or adjustment of its debts;
(b) An action shall commence in any court of competent jurisdiction for
(i) the liquidation, reorganization, dissolution, or winding up of Seller or the
composition or adjustment of its debts, (ii) the appointment of a trustee,
receiver, liquidator or custodian of Seller or substantially all of its assets,
or (iii) any similar relief under any law relating to Seller's bankruptcy or
insolvency, provided such proceeding shall continue undismissed for ninety (90)
days;
(c) Any representation or warranty made by Seller shall prove to have been
incorrect in any material respect when made;
(d) Seller shall fail to perform any of its obligations under this
Agreement and/or the Easement Agreement and/or the Construction Agency Agreement
and/or the Ground Lease and fail to either (i), within thirty (30) days of
written notice from Buyer of such failure to perform, cure such failure, or (ii)
in the event such failure is not curable within such thirty day period,
immediately initiate the actions necessary to cure such failure, diligently
prosecute such actions until cure is effectuated and effectuate such cure within
ninety (90) days of such Buyer's notice; provided however that the failure of
Seller to produce and deliver Thermal Energy satisfying the Steam and Chilled
Water Standards (as defined in Section 3.4) shall not be deemed a Seller
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Default provided Seller has corrected such failure and is otherwise in
compliance with its obligations pursuant to Section 3.4.
8.2 Buyer Default. The following events shall constitute a Buyer Default:
(a) In connection with itself or its assets, Buyer shall (i) consent to
the appointment of a receiver or liquidator, (ii) make a general assignment for
the benefit of creditors, (iii) file a petition for relief under the Federal
Bankruptcy Code, or (iv) take similar action to commence a proceeding for relief
under any other law relating to the bankruptcy, insolvency, reorganization, or
winding up of itself or the composition or adjustment of its debts;
(b) An action shall commence in any court of competent jurisdiction for
(i) the liquidation, reorganization, dissolution, or winding up of Buyer or the
composition or adjustment of its debts, (ii) the appointment of a trustee,
receiver, liquidator or custodian of Buyer or substantially all of its assets,
or (iii) any similar relief under any law relating to Buyer's bankruptcy or
insolvency, provided such proceeding shall continue undismissed for ninety (90)
days;
(c) Any representation or warranty made by Buyer shall prove to have been
incorrect in any material respect when made;
(d) Buyer shall fail to perform any of its obligations under this
Agreement (other than the obligations described in and governed by Section
8.2(e) below), and/or the Easement Agreement and/or VCR shall fail to perform
any of its obligations under the Construction Agency Agreement and/or the Ground
Lease and Buyer or VCR, as applicable, fail to (i) , within thirty (30) days of
written notice from Seller of such failure to perform, cure such failure or (ii)
in the event such failure is not curable within such thirty (30) day period,
immediately initiate the actions necessary to cure such failure, diligently
prosecute such actions until cure is effectuated and effectuate such cure within
a ninety (90) days of such Seller notice; or
(e) Buyer shall fail or refuse to pay any invoice rendered under this
Agreement within thirty (30) days of Buyer's receipt of such invoice; provided,
that, in the event that Buyer disputes in good faith any such invoice, Buyer
shall pay that portion of the bill not in dispute when due
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and payable, and the disputed portion shall be submitted to arbitration under
Section 13.1 of this Agreement, and pending resolution of the dispute, Buyer
shall not be deemed in default of this Agreement for such disputed portion of
the bill while pending resolution.
ARTICLE IX
REMEDIES
9.1 Seller's Remedies. Except as otherwise provided in Section 13.1 with
respect to the resolution of certain disputes between Buyer and Seller, upon a
Buyer Default, Seller may declare the Buyer to be in breach of this Agreement,
subject to the provisions of the Consent and Agreement and the Funding Agents'
Disbursement and Administration Agreement and (i) suspend service until Buyer
either cures such default or, in the case of nonpayment, provides Seller with
such written assurances and such security as Seller may reasonably request, (ii)
terminate this Agreement and provide written notice to Buyer declaring the
Termination Payment immediately due and payable or (iii) seek such other relief
to which Seller may be entitled at law or equity; provided however that payment
of the Termination Payment by Buyer shall be Seller's exclusive remedy against
Buyer for damages related to the Service Fees which Buyer is obligated to pay
Seller pursuant to Article IV of this Agreement and upon payment of such
Termination Payment Buyer shall have no further obligation or liability to
Seller under this Agreement except to the extent arising before the dale of
termination.
9.2 Buyer's Remedies. Except as otherwise provided in Sections 3.4(c) and
13.1, with respect to Seller's termination rights in connection with Seller's
failure to deliver Thermal Energy satisfying the Steam and Chilled Water
Standard and the resolution of certain disputes between Buyer and Seller,
respectively, upon a Seller Default, Buyer may (i) terminate this Agreement by
written notice to Seller, and (ii) seek such other relief to which Buyer may be
entitled at law or equity.
9.3 Termination Payment. A schedule of the applicable Termination Payment
which Seller shall be entitled in the event Seller elects to terminate this
Agreement due to a Buyer Default or Buyer elects to terminate this Agreement
pursuant to Section 3.4(c) or (e) is set forth
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in Schedule 9.3. The parties intend that the Termination Payment shall
constitute liquidated damages and not a penalty. The parties agree that the
injury to Seller or Buyer, as the case may be, as a result of termination of
this Agreement is difficult to precisely estimate and that the Termination
Payment is a reasonable estimate of the probable damage to such party as a
result of such termination of this Agreement. Such Termination Payment shall be
in lieu of all other liabilities and remedies of the parties as a result of
termination of this Agreement, other than liabilities and obligations pursuant
to Article VII.
9.4 Survival. The provisions of this Article IX shall survive to the
extent necessary after termination of this Agreement in order for either party
to enforce it's rights and the obligations of the other party as of the date of
termination.
ARTICLE X
FORCE MAJEURE
10.1 Suspension of Performance. Neither Buyer nor Seller shall be in
default in respect of any obligation under the Agreement if the party is unable
to perform its obligation by reason of an Event of Force Majeure; provided
however that the suspension of performance shall be commensurate with the nature
and duration of the Event of Force Majeure and the nonperforming party is using
diligent efforts to restore its ability to perform; and provided further, that
neither party shall be required to settle any strike, walkout, lockout or other
labor dispute on terms which, in the sole judgment of the party involved in the
dispute, are contrary to its interest. The party claiming nonperformance by an
Event of Force Majeure shall provide prompt written notice to the other party,
setting forth the particulars thereof.
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ARTICLE XI
LIMITATION ON LIABILITY
Neither Buyer nor Seller shall be responsible to the other in contract or
in tort for any special, incidental or consequential loss or damage, including
lost profits and opportunity costs, arising out of this Agreement.
ARTICLE XII
DELEGATION OF BUYER'S PAYMENT OBLIGATIONS
Seller hereby acknowledges and agrees that Buyer may, subject to the
receipt of all necessary Governmental Authorizations, if any, which Governmental
Authorization shall not impose any unreasonable burden or cost on Seller and/or
Buyer, as determined in each party's sole reasonable discretion, delegate all or
a portion of Buyer's payment obligations pursuant to Sections 4.1 through 4.3 of
this Agreement to tenants of Buyer's Facilities (hereinafter, "Tenants"). Seller
hereby consents to Buyer's delegation of Buyer's above stated payment obligation
to Tenants, subject to the following terms and conditions:
(a) Seller, Buyer and the Tenant mutually agree in writing on that
portion of the payments for which Buyer is obligated to pay Seller pursuant to
Section 4.5(i) through (vii) that Tenant will pay to Seller;
(b) Buyer or Tenant shall have agreed to reimburse Seller for the
installation of Metering Equipment for Tenant's location, to the extent
necessary; and
(c) Seller shall bill directly to any Tenant in lieu of Buyer, and
Tenant agrees to pay to Seller pursuant to an executed services agreement, such
Tenant's share of Buyer's payment obligation, as provided under paragraph (a) of
this Article XII; provided however, that in the event that Tenant is delinquent
in its payment to Seller, as determined pursuant to the services agreement with
Tenant, Buyer shall be liable to Seller for such delinquent Tenant payment.
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ARTICLE XIII
MISCELLANEOUS
13.1 Resolution of Certain Disputes. In the event of a budget dispute, as
set forth in Schedule 4.2, and/or a billing dispute between the parties,
authorized representatives of Seller and Buyer shall meet and use good faith
efforts to mutually resolve such dispute by negotiation. In the event that the
parties are unable to resolve such dispute by negotiation, then such dispute
shall be resolved by arbitration pursuant to the provisions of Appendix C of
this Agreement. Neither party shall suspend or otherwise fail to perform its
obligations under this Agreement pending the outcome of such dispute resolution
process.
13.2 Assignment. Without limiting Buyer's delegation rights pursuant to
Article XII of this Agreement and except as provided in Sections 13.2(a) and
(b), below, neither party shall assign its rights nor delegate its obligations
under this Agreement without first having obtained the written consent of the
other party, which consent shall not be unreasonably withheld or delayed,
provided that Buyer may assign its rights and delegate its obligations under
this Agreement to a purchaser of Buyer's Facilities, so long as such purchaser
agrees to assume Buyer's obligations under this Agreement and the Easement
Agreement between Buyer and Seller from and after the date of such assignment in
a document reasonably satisfactory to Seller and so long as all payments by
Buyer hereunder are current as of the date of such assignment; provided however
that no such assignment shall be deemed to release Buyer of its obligations
under this Agreement through the date of such assignment..
(a) Seller may, without the consent of Buyer, collaterally assign
its rights under this Agreement to Seller's Lender, provided that Buyer's rights
and remedies, as provided in this Agreement, and Buyer's Lenders rights pursuant
to the Consent and Agreement , are not diminished or materially adversely
affected thereby; provided, however that in the event Seller's Lender exercises
its rights pursuant to such assignment to assume Seller's obligations pursuant
to this Agreement, Seller will require, as a condition to the exercise of such
rights by Seller Lender, that Seller's Lender cause the Energy Improvements to
be operated and maintained by an
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experienced and reputable operator of heating and cooling facilities reasonably
satisfactory to Buyer and Buyer's Lender.
(b) Seller acknowledges and consents to Buyer's assignment of its
rights and obligations under this Agreement to Buyer's Lenders pursuant to the
Consent and Agreements.
13.3 Governing Law. This Agreement shall be construed in accordance with
and shall be enforceable under the laws of the State of Nevada, without giving
effect to principles related to conflicts of law.
13.4 Venue; Jurisdiction. Any action at law, suit in equity or other
proceeding against any party with respect to any term or provision of this
Agreement, including enforcement of the decisions in arbitration pursuant to
Section 13.1 (but excluding such terms or provisions under dispute that the
parties have agreed to submit in the first instance to arbitration for
resolution pursuant to Section 13.1) shall be brought and maintained in the
Supreme Court of the State of Nevada, or such lower court of the State of Nevada
having jurisdiction over the subject matter, or in a United States District
Court in Nevada. Each of the parties hereby (i) submits, to the fullest extent
permitted by applicable law, to the exclusive jurisdiction of such courts for
the purposes any action, suit or proceeding set forth above, and (ii) agrees, to
the fullest extent permitted by applicable law, that service of all writs,
processes and summonses in any such action, suit or proceeding brought in the
State of Nevada, may be made upon such person in the manner provided for notices
under this Agreement. The foregoing provisions of this Section shall not be
construed to limit the right of either party to serve any such writ, process or
summons in any manner permitted by applicable law. Each party further agrees
that a final judgment or order in any such action, suit or proceeding may be
enforced against such party in any other jurisdiction by suit on such judgment
or order or in such other manner as may be permitted by applicable law. Each
party hereby waives, to the fullest extent permitted by applicable law, any
objection which such party now has or hereafter may have to the lying of venue
of any such action, suit or proceeding brought or maintained in the Supreme
Court of the State of Nevada, or such lower court of the State of Nevada having
jurisdiction over the subject matter, or a United States
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District Court in Nevada. The provisions of this Section shall survive any
termination or expiration of this Agreement, ad shall be binding on each party's
successors and assigns.
13.5 Notice. All notices hereunder shall be sufficient if sent by
registered or certified mail postage prepaid, addressed:
If to Seller: Atlantic Pacific Las Vegas LLC
5100 Harding Highway
Mays Landing, New Jersey 08330
Attention: President
Telefax (609) 625-3866
If to Buyer: Grand Canal Shops Mall Construction, LLC
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
provided, that either Seller or Buyer may by like notice designate any further
or different address or addresses or person to which notices shall be sent.
13.6 Confidentiality. Each Party, on its behalf and behalf of its
Affiliates, and the directors, officers, employees, advisors, agents and
representatives of each, hereby covenants to the other Parties that:
(a) it will not disclose in any manner the Confidential
Information of another Party to any person that is not a
director, officer, employ, advisor, agent or representative of
it or its Affiliate, without the other Party's prior written
consent;
(b) it will, at all times, safeguard the Confidential Information
of another Party with no less than the same standard of care
with which it safeguards its own Confidential Information; and
44
<PAGE>
(c) it will not use the Confidential Information received by it
except for the purposes of this Agreement.
The Confidential Information of each Party shall at all times remain
the absolute property of it. None of the Parties, nor each of its Affiliates,
including the directors, officers, employees, advisors, agents and
representative of each, shall be liable to another Party with respect to the
disclosure of any Confidential Information that (i) enters the public domain
through no fault of it, (ii) is required, or is reasonably believed to be
required by the disclosing Party, to be disclosed pursuant to law, provided,
that the disclosing Party shall notify the Party to whom the Confidential
Information belongs in writing prior to such disclosure and shall, afford the
Party to whom the Confidential Information belongs reasonable opportunity to
seek a protective decree or order with respect to the Confidential Information,
(iii) the disclosing Party can demonstrate was in its prior possession through
no malfeasance or misconduct, or was independently developed, without benefit of
having received such Confidential Information from the Party to whom such
Confidential Information belongs, and (iv) it discloses with the prior, written
consent of the Party to whom such Confidential Information belongs.
Without otherwise limiting the foregoing, Buyer and Seller each
hereby grants their respective consents, upon written notice received by the
other, to the disclosure of their respective Confidential Information to Buyer's
Lender of either Buyer or Seller, provided, upon request of either Party, that
any such Buyer's Lender enter into a confidentiality agreement with respect to
such Confidential Information.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
13.8 Entire Agreement. The Agreement constitutes the entire agreement
between the Parties with respect to the matters contained herein and all prior
agreements with respect thereto are superseded hereby. No amendment or
modification hereof shall be binding unless duly executed by both Parties.
Waiver of any provision of this Agreement by a Party shall not be deemed to have
been given by such Party unless given in writing.
45
<PAGE>
13.9 Severability. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction and to the
fullest extent permitted by applicable law, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and without affecting the validity or enforceability of any provision in
any other jurisdiction.
13.10 Third Party Beneficiaries. Seller and Buyer acknowledge that, except
as set forth in Article XIII, the provisions of this Agreement are intended for
the sole benefit of Seller and Buyer. Except as provided in Article XIII of this
Agreement in connection with assignments undertaken by either party in
conformance with the provisions of this Agreement, there are no third party
beneficiaries, express or implied, to this Agreement.
13.11 Section Headings. The section headings used in this Agreement are
for convenience only and shall not affect the construction of any terms of this
Agreement.
13.12 Incorporation of Exhibits. The Exhibits attached hereto and referred
to herein are a part of this Agreement for all purposes.
13.13 Non-Waiver. None of the provisions of this Agreement shall be
considered waived by either party except when such waiver is given in writing.
The failure of either party to insist in any instance on strict performance of
any of the provisions of this Agreement shall not be construed as a waiver of
any such provision or the relinquishment of any present or future rights
hereunder.
13.14 Independent Parties. Nothing contained in this Agreement shall be
deemed or construed for any purpose to establish, between the parties, a
partnership or joint venture, a principal-agent relationship, or any
relationship other than customer and supplier.
13.15 Binding Agreement. This Agreement shall be binding upon and, to the
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective permitted successors and assigns.
46
<PAGE>
13.16 Estoppel Certificates. Upon the reasonable prior request by Seller
or Buyer (the "Requesting Party"), the other party (whichever party shall have
received such request, the "Certifying Party") shall furnish to the Requesting
Party a certificate signed by an individual having the office of vice president
or higher in the Certifying Party certifying that this Agreement is in full
force and effect to the best knowledge of the signer of such certificate,
whether or not the Requesting Party is, to the best knowledge of the Certifying
Party, in default under any of its obligations hereunder (and, if so, the nature
of such alleged default); and such other matters under this Agreement as the
Requesting Party may reasonably request. Any such certificate so furnished may
be relied upon by the Requesting Party, and any existing or prospective
mortgagee, purchaser or lender, and any accountant or auditor, of, from or to
the Requesting Party.
13.17 Ownership of the Energy Improvements. Anything to the contrary in
this Agreement or any document or instrument executed in connection with the
transactions contemplated hereby notwithstanding (collectively, the "Operative
Documents"), the parties hereto intend and agree that, with respect to the
nature of the transactions evidenced by this Agreement in the context of the
exercise of remedies under the Operative Documents relating to and arising out
of any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of the
United States of America or any state or commonwealth thereof affecting Buyer,
Seller or any Buyer's Lenders or Seller's Lenders or any enforcement or
collection actions, solely to protect the Seller in the event the transactions
evidenced by this Agreement are recharacterized as loans, the Buyer hereby
grants a security interest or lien, as the case may be, to Seller in the Energy
Improvements and the other items and types of collateral described herein.
[Remainder of this page left blank]
47
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date and day first above written.
ATLANTIC-PACIFIC LAS VEGAS, LLC
("Seller")
By: ATLANTIC THERMAL SYSTEMS, INC.
a managing member
By: /s/ Carl H. Fogler
--------------------------------------
Name: Carl H. Fogler
Title: Vice President
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
("Buyer")
By: Venetian Casino Resort, LLC, as
sole Member
By: Las Vegas Sands, Inc.,
as managing member
By: /s/ William P. Weidner
----------------------------------
Name: William P. Weidner
Title: President
48
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CONSTRUCTION AGENCY AGREEMENT
dated as of May 1, 1997
between
ATLANTIC-PACIFIC LAS VEGAS, LLC
and
VENETIAN CASINO RESORT, LLC
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS...............................................................2
1.1 Defined Terms......................................................2
2. APPOINTMENT OF CONSTRUCTION AGENT.........................................2
2.1 Appointment........................................................2
2.2 Acceptance; Construction...........................................2
2.3 Commencement and Completion of Construction........................3
2.4 Term...............................................................3
2.5 Construction Documents and Related Agreements......................3
2.6 Scope of Authority.................................................6
2.7 Covenants of the Construction Agent................................8
3. AMENDMENTS; MODIFICATIONS................................................10
3.1 Amendments; Modifications.........................................10
4. PAYMENT OF FUNDS.........................................................10
4.1 Funding of Total Energy Improvements Costs........................10
5. CONSTRUCTION AGENCY EVENTS OF DEFAULT....................................11
5.1 Construction Agency Agreement Events of Default...................11
5.2 Damages...........................................................13
5.3 Remedies; Remedies Cumulative.....................................13
6. NO CONSTRUCTION AGENCY FEE...............................................14
6.1 ESA as Fulfillment of Owner's Obligations.........................14
7. NO OBLIGATION CURE CONSTRUCTION AGENT' EVENT OF DEFAULT..................14
8. MISCELLANEOUS............................................................15
8.1 Notices...........................................................15
8.2 Assignment........................................................15
8.3 GOVERNING LAW.....................................................16
8.4 Amendments and Waivers............................................16
8.5 Counterparts......................................................16
8.6 Severability......................................................16
8.7 Headings and Table of Contents....................................17
8.8 Limitations on Recourse...........................................17
8.9 Knowledge of Owner................................................17
- i -
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
CONSTRUCTION AGENCY AGREEMENT, dated as of May 1, 1997 (this "Agreement"),
between ATLANTIC-PACIFIC LAS VEGAS, LLC, a Delaware limited liability company
("Owner"), and VENETIAN CASINO RESORT, LLC, a Delaware Limited Liability Company
(in its capacity as construction agent, the "Construction Agent").
PRELIMINARY STATEMENT
A. Construction Agent and Owner are parties to that certain Energy
Services Agreement, dated of even date herewith (as amended, supplemented or
otherwise modified from time to time pursuant thereto, the ("ESA)"), pursuant to
which the Agent has agreed to accept from Owner, and Owner has agreed to provide
to the Construction Agent, various energy and energy related services in
accordance with the terms and conditions specified therein.
B. Subject to the terms and conditions hereof, (i) Owner desires to
appoint the Construction Agent as its sole and exclusive agent for the design,
construction and acquisition of the Energy Improvements and the Other Customers
Facilities, and (ii) the Construction Agent desires, for the benefit of Owner,
to cause the Energy Improvements and the Other Customers Facilities to be
designed and constructed in accordance with and pursuant to the ESA, the Funding
Agents' Disbursement and Administration Agreement and this Agreement, in each
case in accordance with the terms therein and herein set forth.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. DEFINITIONS
1.1 Defined Terms.
Capitalized terms used, but not otherwise defined, in this Agreement shall
have the meanings set forth in the ESA.
2. APPOINTMENT OF CONSTRUCTION AGENT
2.1 Appointment.
Pursuant to and subject to the terms and conditions set forth herein,
Owner hereby designates and appoints the Construction Agent as its exclusive
agent for the design and construction of the Energy Improvements and the Other
Customers Facilities in accordance with this Agreement, the Funding Agents'
Disbursement and Administration Agreement and the ESA.
2.2 Acceptance; Construction.
The Construction Agent hereby unconditionally accepts such designation and
appointment. The Construction Agent will cause the Energy Improvements and the
other Customer Facilities to be designed and constructed in accordance with this
Agreement, the ESA and in compliance with all applicable laws and insurance
requirements.
<PAGE>
2.3 Commencement and Completion of Construction.
The Construction Agent hereby agrees, unconditionally and for the benefit
of Owner, to complete or cause to be completed the design, construction,
installation, start-up, testing and completion of the Energy Improvements and
the Other Customers Facilities.
2.4 Term.
This Agreement shall commence on the date hereof and shall terminate upon
the first to occur of:
(a) termination of the ESA;
(b) termination of this Agreement pursuant to Article V hereof; or
(c) the date "Final Completion" is achieved, as defined and pursuant
to the provisions of the Construction Management Agreement ("Final
Completion Date").
2.5 Construction Documents and Related Agreements.
(a) The Construction Agent may execute any of its duties under this
Agreement by or through agreements with the Contractor, TSA of Nevada, LLP
and WAT&G, INC., NEVADA (collectively the "Contractors") for the design,
construction, start-up and testing of the Energy Improvements and the
Other Customers Facilities pursuant hereto (collectively the "Construction
Agreements"); provided, however, that no such delegation shall limit or
reduce in any way the Construction Agent's duties and obligations under
this Agreement and/or the ESA; provided, further, that
<PAGE>
contemporaneously with the execution and delivery of this Agreement, the
Construction Agent has executed and delivered to Owner the Assignment of
Construction Agreements in the form of Exhibit A attached hereto, pursuant
to which the Construction Agent assigns to Owner effective upon the Final
Completion Date, among other things, all of the Construction Agent's rights
under and interest in, and Contractor's obligations to Construction Agent
with respect to, the Energy Improvements and the Other Customers Facilities
under such Construction Agreements (as hereinafter defined). In addition,
Construction Agent shall amend the Construction Management Agreement,
effective as of the Date of the ESA, to provide that title to any of the
equipment, material or facilities constituting any portion of the Energy
Improvements or the Other Customer Facilities shall be vested in Owner as
of the date of payment of the costs thereof pursuant to this Agreement, the
ESA and the Funding Agents Disbursement and Administration Agreement.
(b) The Construction Agent shall direct the Contractors to prepare,
or cause to be prepared, those additional technical, commercial, and
administrative documents and agreements (the "Construction Documents")
deemed reasonably necessary and desirable by Owner, and which are
otherwise permitted by the Construction Agreements, for the design,
construction, start-up and testing and operation of the Energy
Improvements and the Other Customers Facilities as contemplated by the
ESA. The Construction Documents shall include, but not be limited to,
plans, drawings, sketches, schematics, studies, reports, calculations,
specifications, bids, bid evaluations, purchase orders, subcontracts,
drawdown schedules, payment requisitions and construction schedules.
<PAGE>
(c) Owner shall have the right to review all Construction Agreements
and Construction Documents for the purpose of advising the Construction
Consultant and the Contractors of methods of improving the design and
operation of the Energy Improvements and the Other Customers Facilities
based on Owner's experience in developing, designing, constructing,
owning, and operating similar facilities. Subject to any limitations set
forth in the Funding Agents' Disbursement and Administration Agreement,
Owner shall have the right to approve any amendments to any existing
Construction Documents and/or Construction Agreements related to the
Energy Improvements and/or the Other Customers Facilities, as well as any
future Construction Documents and/or Construction Agreements related to
the Energy Improvements and/or the Other Customers Facilities which are
not otherwise in effect as of the date of this Agreement; provided however
that such approval by Owner shall not be unreasonably withheld or delayed.
(d) The Construction Agent shall provide, or cause the Contractor to
provide, temporary office facilities for Owner's onsite construction
representative during the period of the construction of the Energy
Improvements and the Other Customers Facilities. The office facilities
shall be sufficiently sized to accommodate two individuals. The facilities
shall be reasonably furnished with such items as desks, reference tables,
chairs, book shelves, telephones, and filing cabinets. The facilities
shall also include reasonable access to a copy machine, a fax machine, and
a dedicated fax modem telephone line.
<PAGE>
2.6 Scope of Authority.
(a) Owner hereby expressly authorizes the Construction Agent, or any
agent or contractor of the Construction Agent, and the Construction Agent
unconditionally agrees, for the benefit of Owner, to take all action
necessary or desirable for the performance and satisfaction of all of the
Construction Agent's obligations hereunder, including, without limitation:
(i) the identification and assistance with the acquisition of
any leasehold interests or easements required in accordance with the
terms and conditions of the ESA and/or the Ground Lease and/or the
Utility Easement Agreement;
(ii) subject to the provisions of the ESA and this Agreement,
all design and supervisory functions and other services relating to
the construction of the Energy Improvements and the Other Customers
Facilities and performing all engineering work related to the design
and construction of the Energy Improvements and the Other Customers
Facilities;
(iii) subject to the provisions of the ESA and this
Agreement, negotiating and entering into all contracts or
arrangements to procure the equipment, materials and facilities
necessary so that the Energy Improvements and the Other Customers
Facilities will be designed and constructed with the care and skill
expected of design professionals and contractors with experience and
expertise in completing the Energy Improvements so that they will be
fit for the
<PAGE>
intended purpose, including, but not limited to the satisfaction of
the Steam and Chilled Water Standard set forth in the ESA;
(iv) subject to the provisions of the ESA, obtaining all
necessary permits, licenses, consents, approvals and other
authorizations, including those required under Applicable Law
(including Environmental Laws), required by any Governmental
Authority in connection with the design, development and
construction of the Energy Improvements and the Other Customers
Facilities in accordance this Agreement, the Ground Lease and the
ESA;
(v) maintaining, and delivering to Owner, all books and
records with respect to the design, construction, start-up and
testing of the Energy Improvements and the Other Customers
Facilities; and
(vi) subject to the provisions of the ESA and this Agreement,
performing any other acts and providing all other materials, labor
and services necessary in connection with the design, construction
and development of the Energy Improvements and the Other Customers
Facilities for their intended purpose.
(b) Neither the Construction Agent nor any of its Affiliates or
agents shall enter into any contract, other than the ESA, the Funding Agents'
Disbursement and Administration Agreement, the Ground Lease or the Easement
Agreements, which would, directly or indirectly, impose any liability or
obligation on Owner without Owner's prior written consent.
<PAGE>
(c) Subject to the terms and conditions of this Agreement, the ESA
and the Funding Agent's Disbursement and Administration Agreement, the
Construction Agent shall have sole management and control over the design and
all construction means, methods, sequences, techniques and procedures with
respect to the construction of the Energy Improvements and the Other Customers
Facilities.
2.7 Covenants of the Construction Agent.
The Construction Agent hereby covenants and agrees that it will:
(a) cause construction of the Energy Improvements and the Other
Customers Facilities to be prosecuted diligently and without delay
(subject to Events of Force Majeure (as defined in the Funding Agents'
Disbursement and Administration Agreement)) so that the Energy
Improvements and other Customers Facilities will be fit for their intended
purpose and shall be designed, constructed and equipped in compliance with
this Agreement, the ESA, the Construction Documents, the Construction
Agreements, the Funding Agents' Disbursement and Administration Agreement,
and all applicable laws and insurance requirements;
(b) notify Owner in writing not less than five (5) business days
after the occurrence of any such Event of Force Majeure affecting Seller's
obligations pursuant to Section 2.7(a);
<PAGE>
(c) take all reasonable and practical steps to minimize delays,
increased costs and the disruption of the construction process arising
from such Events of Force Majeure Events;
(d) cause the Service Commencement Date to occur on or prior to the
Outside Completion Deadline and cause any liens on the Energy Improvements
and the Other Customer Facilities (including, without limitation, liens or
claims for materials supplied or labor or services performed in connection
with the construction of the Energy Improvements and the Other Customers
Facilities) to be discharged or bonded off or over to the reasonable
satisfaction of Owner;
(e) at all times commencing with the purchase of any equipment,
material or facilities constituting any part, and during construction, of
any Energy Improvements and the Other Customers Facilities, cause title to
all such equipment, material and facilities constituting any part of the
Energy Improvement and the Other Customers Facilities to be and remain
vested in Owner.
3. AMENDMENTS; MODIFICATIONS
3.1 Amendments; Modifications.
The Construction Agent shall not, without Owner's prior written consent
and in compliance with the provisions of the Funding Agents' Disbursement and
Administration Agreement, at any time during the term hereof revise, amend or
modify the plans and specifications for the Energy Improvements and/or the Other
Customers Facilities.
<PAGE>
1. PAYMENT OF FUNDS
4.1 Funding of Total Energy Improvements Costs.
(a) During the course of the construction of the Energy Improvements and
the Other Customers Facilities, the Construction Agent may request, pursuant to
the provisions of the Funding Agents' Disbursement and Administration Agreement,
that Owner advance funds for the payment of costs of the Energy Improvements and
Other Customers Facilities, and Owner will comply with such request to the
extent provided for under, and subject to the conditions, restrictions and
limitations contained in, the ESA, this Agreement and the Funding Agents'
Disbursement and Administration Agreement. The Construction Agent and Owner
acknowledge and agree that the Construction Agent's right to request funds and
Owner's obligation to advance funds for such payment is subject in all respects
to the terms and conditions of the ESA, this Agreement and the Funding Agents'
Disbursement and Administration Agreement.
(b) The proceeds of any funds made available by Owner to pay any portion
of the costs of the Energy Improvement or Other Customers Facilities shall be
made available to the Construction Agent in accordance with the requirements to
the Funding Agents' Disbursement and Administration Agreement. The Construction
Agent shall use such proceeds only to pay costs of the "HVAC Component", as
described in and pursuant to the provisions of the Funding Agents' Disbursement
and Administration Agreement. If, for any reason, the aggregate cost to complete
construction of all Energy Improvements and the Other Customers Facilities
exceeds Owner's funding commitment limitations in respect to such Energy
Improvements and the Other Customers Facilities under the ESA, then all such
costs in excess of such Owner funding
<PAGE>
commitment shall be borne by the Construction Agent from its own funds and,
notwithstanding any payment of such costs by Construction Agent, Construction
Agent shall have no ownership, security interest or other interest in the Energy
Improvements or the Other Customers Facilities.
5. CONSTRUCTION AGENCY EVENTS OF DEFAULT
5.1 Construction Agency Agreement Events of Default.
If any one or more of the following events (each a "Construction Agent
Event of Default") shall occur:
(a) the Construction Agent fails to apply any funds advanced by
Owner to the acquisition and construction of the Energy Improvements and
Other Customers Facilities as provided herein, in the ESA and in the
Funding Agents' Disbursement and Administration Agreement;
(b) the Service Commencement Date shall fail to occur for any reason
on or prior to the Outside Completion Deadline;
(c) any Buyer Default by Construction Agent under the ESA shall have
occurred and be continuing;
(d) the Construction Agent shall fail to observe or perform any
term, covenant or condition of this Agreement and such failure shall
remain uncured for a period of thirty (30) days after receipt of written
notice thereof from Owner; provided, that if such failure to perform is
not capable of being cured within such period, immediately initiate the
<PAGE>
actions necessary to cure such failure, diligently prosecute such actions
until cure is effectuated and effectuate such cure within ninety (90) days
of such Owner's notice; or
(f) an Event of Default under the Funding Agents Disbursement and
Administration Agreement shall have occurred and be continuing, then, in
any such event, subject to Section 5.3, Owner may, in addition to the
other rights and remedies provided for in this Article and subject to any
limitations set forth in the Funding Agent's Disbursement and
Administration Agreement or the Consent and Agreement, immediately
terminate this Agreement by giving the Construction Agent written notice
of such termination, and upon the giving of such notice, this Agreement
shall terminate and all rights of the Construction Agent and all
obligations of Owner under this Agreement shall cease.
5.2 Damages.
The termination of this Agreement pursuant to Section 5.1 shall in no
event relieve the Construction Agent of its liability and obligations hereunder
which accrued or arise out of actions, or events or omissions occurring prior to
such termination, all of which shall survive any such termination. The
provisions of this Section 5.2 are subject, in all respects, to Article IX of
the ESA.
5.3 Remedies; Remedies Cumulative.
(a) If a Construction Agency Agreement Event of Default shall have
occurred and be continuing, Owner shall have all rights and remedies available
pursuant to the ESA.
<PAGE>
(b) No failure to exercise and no delay in exercising, on the part
of Owner, any right, remedy, power or privilege under this Agreement or under
the ESA shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges provided
in this Agreement are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
6. NO CONSTRUCTION AGENCY FEE
6.1 ESA as Fulfillment of Owner's Obligations.
All obligations, duties and requirements imposed upon or allocated to the
Construction Agent shall be performed by the Construction Agent at the
Construction's Agent's sole cost and expense, and the Construction Agent will
not be entitled to, and Owner shall have no obligation to pay, any agency fee or
other fee or compensation, and the Construction Agent shall not be entitled to,
and Owner shall have no obligation to make or pay, any reimbursement therefor,
it being understood that this Agreement is being entered into as consideration
for and as an inducement to Owner and the Construction Agent entering into the
ESA. The foregoing is subject, in all respects, to Owner's performance of its
payment obligations set forth in Article 4.
<PAGE>
7. NO OBLIGATION CURE CONSTRUCTION AGENT' EVENT OF DEFAULT
7.1 Owner, without waiving or releasing any obligation or Construction
Agent Event of Default and subject to any limitations set forth in the Consent
and Agreement, may (but shall be under no obligation to) remedy any Construction
Agent Event of Default for the account of and at the sole cost and expense of
the Construction Agent. All reasonable out of pocket costs and expenses so
incurred (including reasonable fees and expenses of counsel), together with
interest thereon at the rate of the prime rate then in effect for Chase
Manhattan Bank, N.A., as published in New York, New York plus two percent (2%)
per annum of any outstanding amount due from the date on which such sums or
expenses are paid by Owner, shall be paid by the Construction Agent to Owner on
demand.
8. MISCELLANEOUS
8.1 Notices.
All notices, consents, directions, approvals, instructions, requests,
demands and other communications required or permitted by the terms hereof to be
given to any person shall be given in writing in the manner provided in, shall
be sent to the respective addresses set forth in, and the effectiveness thereof
shall be governed by the provisions of, Section 13.5 of the ESA.
<PAGE>
8.2 Assignment.
Except as provided in Sections 8.2(a) and (b), below, neither party shall
assign its rights nor delegate its obligations under this Agreement without
first having obtained the written consent of the other party, which consent
shall not be unreasonably withheld or delayed.
(a) Owner may, without the consent of Construction Agent,
collaterally assign its rights under this Agreement to Seller's Lender, provided
that Construction Agent's rights and remedies, as provided in this Agreement,
and Buyer's Lenders rights pursuant to the Consent and Agreement, are not
diminished or adversely affected thereby.
(b) Seller acknowledges and consents to Buyer's assignment of its
rights and obligations under this Agreement to Buyer's Lender pursuant to that
certain Consent and Agreement.
8.3 GOVERNING LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
8.4 Amendments and Waivers.
Owner and the Construction Agent may from time to time, enter into written
amendments, supplements or modifications hereto.
<PAGE>
8.5 Counterparts.
This Agreement may be executed on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
8.6 Severability.
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
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.7 Headings and Table of Contents.
The headings and table of contents contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
8.8 Limitations on Recourse.
The parties hereto agree that Owner shall have no liability whatsoever to
the Construction Agent, its respective successors and assigns or any third party
for any claim based on or in respect of Construction Agent's performance of its
obligations under the Construction Documents, this Agreement or the ESA or
arising in any way from the transactions contemplated to be performed by
Construction Agent hereby or thereby; provided, however, that this provision
shall not be deemed to limit Owner's liability for its own willful misconduct or
negligence or for
<PAGE>
liabilities that may result from the incorrectness of any
representation or warranty expressly made by it in the ESA or from the failure
of Owner to perform its obligations set forth herein, the ESA, the Funding
Agents' Disbursement and Administration Agreement or the Ground Lease.
8.9 Knowledge of Owner.
For all purposes of this Agreement and ESA, in the absence of actual
knowledge of an officer of Owner, Owner shall not be deemed to have knowledge of
any Construction Agency Agreement Event of Default unless Owner receives written
notice thereof given by or on behalf of the Construction Agent.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
VENETIAN CASINO RESORTS, LLC
a Nevada limited liability company
By: /s/ William P. Weidner
--------------------------------
Name: William P. Weidner
--------------------------
Title: President
--------------------------
ATLANTIC-PACIFIC LAS VEGAS, LLC
a Delaware limited liability company
By: /s/ Carl H. Fogler
--------------------------------
Name: Carl H. Fogler
---------------------------
Title: Vice President
---------------------------
- -------------------------------------------------------------------------------
$97,700,000
TERM LOAN AND SECURITY AGREEMENT
Dated as of December 22, 1997
among
LAS VEGAS SANDS, INC.
and
VENETIAN CASINO RESORT, LLC,
as Borrowers,
the Lenders named herein,
BANCBOSTON LEASING INC.
as Co-Agent
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent
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TABLE OF CONTENTS
Page
1. AMOUNT AND TERMS OF INTERIM LOAN COMMITMENTS...............................1
1.1 Interim Loan Advances................................................1
1.2 Interim Loan Advance Procedures......................................3
1.3 Disbursements of Proceeds of Interim Loan Advances..................10
1.4 The Register........................................................12
1.5 The Notes...........................................................12
1.6 Basic Loans; Term and Maturities, etc...............................13
1.7 Interest on the Loans...............................................13
1.8 Fees................................................................19
1.9 Voluntary Prepayments...............................................19
1.10 Mandatory Prepayments and Commitment Reductions from Asset Sale
Proceeds............................................................21
1.11 Mandatory Prepayments and Commitment Reductions from Loss Net
Proceeds............................................................23
1.12 Calculations of Net Proceeds Amounts................................25
1.13 General Provisions Regarding Payments...............................25
1.14 Special Provisions Governing LIBOR Rate Loans.......................26
1.15 Increased Costs; Taxes; Capital Adequacy............................29
1.16 Obligation of Lenders to Mitigate...................................33
1.17 Obligations Joint and Several.......................................34
1.18 Use of Proceeds.....................................................35
1.19 Monthly Accountings.................................................35
1.20 Indemnity...........................................................36
1.21 Access..............................................................37
1.22 Security Interest in the Collateral.................................38
1.23 Rights of the Lender Parties, Limitations on the Obligations of
the Lender Parties..................................................39
2. CONDITIONS TO LOANS AND ADVANCES..........................................40
2.1 Conditions to the Initial Interim Loan Advances.....................40
2.2 Conditions to Basic Loans...........................................45
2.3 Conditions to All Loans and Advances................................46
3. REPRESENTATIONS AND WARRANTIES............................................51
3.1 Corporate or Limited Liability Company Existence; Compliance with
Law.................................................................51
3.2 Executive Offices; Corporate or Other Names.........................52
3.3 Corporate Power; Authorization; Enforceable Obligations.............52
3.4 Financial Statements................................................53
3.5 Material Adverse Change.............................................54
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3.6 Ownership of Property; Liens........................................54
3.7 Restrictions; No Default; Material Contracts........................55
3.8 Labor Matters.......................................................55
3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness........................................................56
3.10 Government Regulation...............................................57
3.11 Margin Regulations..................................................57
3.12 Taxes...............................................................58
3.13 ERISA...............................................................58
3.14 No Litigation.......................................................59
3.15 Brokers.............................................................60
3.16 Patents, Trademarks, Copyrights and Licenses........................60
3.17 Full Disclosure.....................................................60
3.18 Hazardous Materials; Environmental Protection, etc..................61
3.19 Insurance Policies..................................................62
3.20 Deposit and Disbursement Accounts...................................62
3.21 Force Majeure.......................................................62
3.22 Representations and Warranties Regarding the Collateral.............62
3.23 Permits.............................................................64
3.24 Sufficiency of Interests, Documents, etc............................64
3.25 Project Budget; Anticipated Cost Report............................65
3.26 Project Schedule; In Balance Requirement...........................66
3.29 Operative Document Representations and Warranties Generally.........67
3.30 Solvency............................................................67
4. FINANCIAL STATEMENTS AND INFORMATION......................................67
4.1 Financial Statements and Other Reports.............................67
4.2 Communication with Accountants.....................................76
5. AFFIRMATIVE COVENANTS.....................................................76
5.1 Maintenance of Existence and Conduct of Business...................77
5.2 Payment of Charges and Claims......................................77
5.3 Books and Records..................................................78
5.4 Maintenance of Properties; Insurance; Application of Net Loss
Proceeds...........................................................78
5.5 Compliance with Laws...............................................80
5.6 Agreements.........................................................80
5.7 Supplemental Disclosure............................................81
5.8 Environmental Review and Investigation, Disclosure, etc.,
Borrowers'Actions Regarding Hazardous Materials Activities,
Environmental Claims and Violations of Environmental Laws......82
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5.9 Landlords' and Mortgagees' Agreements..............................84
5.10 Certain Obligations Respecting Subsidiaries........................85
5.11 Application of Proceeds............................................85
5.12 Project Costs......................................................85
5.13 Repayment of Indebtedness..........................................85
5.14 Casualty and Condemnation..........................................85
5.15 Certain Covenants Regarding the Collateral.........................87
5.16 Administrative Agent's Appointment as Attorney-in-Fact.............90
5.17 Ownership of Collateral............................................92
5.18 Inspection; Lenders Meeting........................................92
5.19 Payment of Liens...................................................92
5.20 Diligent Construction of the Project...............................93
5.21 Project Plans......................................................93
5.22 Construction Consultant............................................93
5.23 Borrowers' Equity..................................................94
5.24 Project Document and Permits.......................................94
6. NEGATIVE COVENANTS........................................................95
6.1 Restriction on Fundamental Changes, Asset Sales and Acquisitions...95
6.2 Investments; Joint Ventures; Formation of Subsidiaries.............98
6.3 Indebtedness.......................................................99
6.4 Affiliate and Employee Loans and Transactions; Employment
Agreements........................................................104
6.5 Liens.............................................................106
6.6 ERISA.............................................................108
6.7 Contingent Obligations............................................109
6.8 Restricted Junior Payments........................................110
6.9 Financial Covenants...............................................113
6.10 Sale and Leasebacks...............................................116
6.11 Cancellation of Indebtedness......................................116
6.12 Bank Accounts.....................................................116
6.13 No Speculative Transactions.......................................117
6.14 Accounting Changes; Fiscal Year...................................117
6.15 Sale or Discount of Receivables...................................117
6.16 Disposal of Subsidiary Stock......................................117
6.17 Conduct of Business...............................................117
6.18 Certain Restrictions on Changes to Operative Documents, Permits,
Project Budget or Project Schedule................................118
6.19 Zoning and Contract Changes and Compliance........................120
6.20 Certain Covenants Applicable to the Mall Subsidiary...............120
6.21 Limitation on Declaration of Restricted Subsidiaries..............122
6.22 Construction Management Agreement; Completion; Drawings...........122
6.23 Project Budget and Project Schedule Amendment.....................124
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6.24 Hazardous Substances..............................................126
6.25 No Other Powers of Attorney.......................................127
6.26 Restrictions on Opening...........................................127
6.27 Restriction on Phase II Construction..............................127
6.28 Subordinated Indebtedness Payments................................127
7. TERM.....................................................................128
7.1 Duration..........................................................128
7.2 Survival of Obligations...........................................128
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES...................................129
8.1 Events of Default.................................................129
8.2 Remedies..........................................................135
8.3 Grant of License to Use Trademark Collateral......................138
8.4 Waivers by the Borrowers..........................................138
9. THE AGENTS...............................................................139
9.1 Appointment.......................................................139
9.2 Powers and Duties, etc............................................140
9.3 Representations and Warranties; No Responsibility for Appraisal of
Creditworthiness..................................................142
9.4 Right to Indemnity................................................142
9.5 Successor Administrative Agent....................................142
9.6 Concerning the Collateral.........................................143
10. PARTICIPATIONS AND ASSIGNMENTS...........................................144
11. MISCELLANEOUS............................................................146
11.1 Borrower Representative...........................................146
11.2 Successors and Assigns............................................146
11.3 Complete Agreement; Modification of Agreement, etc................147
11.4 Fees and Expenses.................................................147
11.5 No Waiver.........................................................149
11.6 emedies...........................................................149
11.7 Severability......................................................149
11.8 Conflict of Terms.................................................149
11.9 Right of Set-off..................................................149
11.10 Authorized Signature..............................................150
11.11 GOVERNING LAW.....................................................150
11.12 Notices...........................................................151
11.13 Section Captions..................................................153
11.14 Counterparts; Effectiveness.......................................153
11.15 Time of the Essence...............................................153
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11.16 WAIVER OF JURY TRIAL..............................................153
11.17 Confidentiality...................................................154
11.18 Ratable Sharing...................................................155
11.19 Cooperation Regarding Syndication.................................155
11.20 Certain Matters Affecting the Lenders.............................156
11.21 Gaming Authorities................................................157
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INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annexes
Annex A - Definitions
Annex B - Schedule of Furniture and Equipment
Annex C - Schedule of Insurance Requirements
Schedules
Schedule 2.1(b) - Schedule of Documents
Schedule 3.1(d) - Equity Rights in Borrowers
Schedule 3.2 - Executive Offices; Corporate or Other Names
Schedule 3.5 - Material Adverse Change
Schedule 3.6 - Ownership of Property; Liens
Schedule 3.7 - Material Contracts
Schedule 3.8 - Labor Matters
Schedule 3.9(a) - Joint Ventures and Partnerships
Schedule 3.9(c) - Rights to Purchase Options or Warrants
Schedule 3.9(d) - Indebtedness
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.15 - Brokers
Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses
Schedule 3.18 - Hazardous Materials
Schedule 3.19 - Insurance Policies
Schedule 3.20 - Disbursement and Deposit Accounts
Schedule 3.21 - Operative Documents
Schedule 3.22(a) - Individual Items and Units of Equipment
Comprising the Portions of the Collateral
Schedule 3.22(c) - Filing Jurisdictions
Schedule 3.22(d) - Locations
Schedule 3.23 - Permits
Schedule 3.28 - Other Contracts
Schedule 6.2 - Investments; Joint Ventures; Formation of
Subsidiaries
Schedule 6.5 - Liens
Exhibits
Exhibit A - Form of Notice of Borrowing
Exhibit B - Form of Note
Exhibit C - Form of Financial Condition Certificate
Exhibit D - Summary Anticipated Cost Report
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TERM LOAN AND SECURITY AGREEMENT
THIS TERM LOAN AND SECURITY AGREEMENT, dated as of December 22, 1997,
among LAS VEGAS SANDS, INC., a Nevada corporation ("LVSI"), VENETIAN CASINO
RESORT, LLC, a Nevada limited liability company ("VCR" and with LVSI
collectively, the "Borrowers"), as joint and several obligors, the lenders
listed on the signature pages hereof (collectively, the "Lenders"), BANCBOSTON
LEASING INC., a Massachusetts corporation, in its capacity as co-agent (in such
capacity, the "Co-Agent"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, in its capacity as administrative agent (in such capacity, the
"Administrative Agent" and with the Co-Agent collectively, the "Agents").
RECITALS
A. The Borrowers desire to obtain from each of the Lenders advances from
time to time on a term loan, and the Lenders are willing to make such term loan
advances to the Borrowers, upon the terms and conditions set forth herein.
B. Capitalized terms used herein shall have the meanings ascribed to
them in Annex A. All Annexes, Schedules and Exhibits hereto or otherwise
identified in this Agreement are incorporated herein by reference and, taken
together, shall constitute but a single agreement. Unless otherwise expressly
set forth herein, or in a written amendment referring to such Annexes and
Schedules, all Annexes and Schedules referred to herein shall mean the Annexes
and Schedules as in effect on the Closing Date and references herein to
sections, Annexes, Schedules and Exhibits shall be deemed to refer to the
sections of and the Annexes, Schedules and Exhibits to this Agreement. As used
herein, the plural shall include the singular, the singular shall include the
plural and pronouns in any gender (masculine, feminine or neuter) shall all
apply to all genders. These Recitals shall be construed as part of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF INTERIM LOAN COMMITMENTS
1.1 Interim Loan Advances.
(a) Upon and subject to the terms and conditions hereof, from time to
time during the period commencing on the date hereof and ending on the
Commitment Expiration Date, each Lender severally agrees to make advances
(individually, an "Interim Loan Advance" and collectively, the "Interim Loan
Advances") to the Borrowers jointly, and the Borrowers jointly agree to borrow
from each Lender, in an aggregate amount not to exceed the amount set opposite
the name of such Lender on a signature page hereof as its "Commitment" (as the
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same may be reduced in the manner described in the following sentence, the
"Commitment" of such Lender) and in an aggregate amount with respect to all of
the Interim Loan Advances of all of the Lenders not to exceed $97,700,000 (as
the same may be reduced in the manner aforesaid, the "Aggregate Commitment").
Each Lender's unutilized Commitment shall be reduced by the amount of each
Interim Loan Advance made by it hereunder. Each Lender's Commitment shall also
be adjusted to give effect to any assignment of such Lender's Commitment made
pursuant to section 10 and further shall be reduced from time to time by the
amount of any reductions of such Lender's Commitment made pursuant to sections
1.10, 1.11 and 11.20. Amounts borrowed under this Agreement and subsequently
repaid or prepaid may not be reborrowed hereunder, provided, however, that
conversions of the Interim Loans to Basic Loans under section 1.6 shall not be
considered repayments or prepayments for purposes of this sentence.
(b) Subject to section 8.2, each Commitment shall expire on the date
(the "Commitment Expiration Date") which shall be the earlier of (i) the Project
Construction Completion Date or (ii) the Completion Deadline Date. As used
herein, the term "Completion Deadline Date" shall mean April 21, 1999; provided,
however, that if from time to time the Outside Completion Deadline shall have
been extended under the terms of the Disbursement Agreement by an amendment of
the Project Schedule in accordance with section 6.4.2 thereof and section
6.23(e) hereof, and the Borrowers shall have demonstrated that, after giving
effect to the extension, the "in balance" requirements of section 2.3(f) hereof
are met and otherwise the conditions to such right of extension under the
Disbursement Agreement were fully satisfied without waiver of any material
condition thereof and the Agents shall have received copies of all documents
furnished to the Disbursement Agent in connection with such extension (the
foregoing conditions set forth in this proviso being herein sometimes referred
to collectively as the "General Deadline Extension Conditions"), then the
Completion Deadline Date shall be extended hereunder to the date which shall be
the earlier of (A) the date to which the Outside Completion Deadline was
extended in accordance with the applicable terms of the Disbursement Agreement
and this Agreement and (B) November 1, 1999; and provided, further, that if the
Project shall on or after November 1, 1998 suffer a material fire, explosion,
structural collapse or flood or other material casualty event, and if both on
the date of such event and on November 1, 1999 no Default or Event of Default
shall exist unremedied and the Borrowers shall demonstrate that (w) the General
Deadline Extension Conditions are satisfied, (x) the resulting damage to the
Project (including without limitation all Collateral, if any, affected by the
event) is fully covered (commercially reasonable deductibles excepted) by
casualty, delayed opening and business interruption insurance (including
endorsements covering the revenue effects of the material casualty event on both
the Sands Expo & Convention Center and the Project), (y) but for the occurrence
of such event the Project Construction Completion Date would have occurred on or
before November 1, 1999, and (z) the resulting damage is capable of repair by a
date no later than January 1, 2000 (the satisfaction of the condition set forth
in clause (x) to be evidenced by a certificate to such effect issued by the
Insurance Expert and the satisfaction of the conditions set forth in clauses (y)
and (z) to be evidenced by a
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certificate to such effect issued by the Construction Consultant), then the
Completion Deadline Date shall upon written request of the Borrowers be extended
as may be required to a date in no event later than the earlier of (1) the date
to which the Outside Completion Date was extended under the Disbursement
Agreement and (2) January 31, 2000 (any extension of the Completion Deadline
Date under this section 1.1(b) to a date subsequent to November 1, 1999 being
herein sometimes referred to as a "Special Late Casualty Deadline Extension").
If the Basic Loans provided for in section 1.6 shall not have been made on or
before the Commitment Expiration Date, then on the Commitment Expiration Date
all of the Interim Loan Advances of each Lender shall mature and the Borrowers
shall pay the aggregate principal balance of such Interim Loan Advances in full
with interest. If such payment shall be due on a day other than the last day of
an Interest Period (hereinafter defined) applicable to any LIBOR Rate Loans
(hereinafter defined) then outstanding, such payment shall be accompanied by the
payment of the compensation, if any, owing under section 1.14(d).
1.2 Interim Loan Advance Procedures.
(a) (i) The Interim Loan Advances made on any date shall be in an
aggregate amount of not less than $1,000,000 (the receipt by the Borrowers of
all of the Interim Loan Advances to be made on a particular day being herein
referred to as a "Borrowing").
(ii) In each case, the Borrower Representative shall give to
the Administrative Agent written preliminary notice of a proposed Borrowing not
later than 12:00 noon (New York City time) at least ten Business Days in advance
of the date of such Borrowing, in the case of a LIBOR Rate Advance, or at least
eight Business Days in advance of the date of such Borrowing, in the case of a
Base Rate Advance. Each such preliminary notice of a proposed Borrowing (a
"Preliminary Notice of Borrowing") shall be substantially in the form of Exhibit
A hereto with blanks appropriately completed, shall include the information
required by section 1.2(c), shall state that no Stop Funding Notice has been
issued and is outstanding under the Disbursement Agreement and that all
conditions precedent to any pending advance (and if none be pending then to an
advance of One Dollar) under the Disbursement Agreement are and on the date of
the proposed Borrowing will be fully satisfied without waiver, and shall specify
(i) the date of the proposed Borrowing (which shall be a Business Day), (ii) the
amount of the Borrowing requested and of the Interim Loan Advance of each Lender
comprising a part of such Borrowing (each Lender's Interim Loan Advance on the
occasion of a Borrowing to be in an amount equal to such Lender's Pro Rata Share
of the total amount of the Borrowing) and (iii) whether the Interim Loan
Advances to be made on occasion of such Borrowing shall be all Base Rate
Advances (in which case the Borrowing shall be a "Base Rate Borrowing") or all
LIBOR Rate Advances (in which case the Borrowing shall be a "LIBOR Rate
Borrowing").
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(iii) The Borrower Representative shall have the right, but
not the obligation, with respect to each Preliminary Notice of Borrowing
delivered in accordance with section 1.2(a)(i) above, to deliver to the
Administrative Agent a final notice of proposed Borrowing (a "Final Notice of
Borrowing") containing all the exhibits, attachments and certificates required
in connection with a Preliminary Notice of Borrowing, all appropriately
completed and duly executed, for the purpose of making revisions of the
Borrowing Notice Attachment and other changes to the corresponding Preliminary
Notice of Borrowing reasonably related to such revisions of the Borrowing Notice
Attachment, including without limitation an extension of the date on which the
applicable Interim Loan Advance shall be made; provided that in all events such
date shall be later than the date indicated for the Interim Loan Advance in the
corresponding Preliminary Notice of Borrowing (but not later than the Commitment
Expiration Date). Each Final Notice of Borrowing shall be delivered no later
than three Business Days prior to the date of the advance requested in the
corresponding Preliminary Notice of Borrowing. In the event that the Borrower
Representative shall fail to deliver a Final Notice of Borrowing as provided in
the preceding sentence, the Preliminary Notice of Borrowing then outstanding
shall be deemed a Final Notice of Borrowing.
(iv) Each Borrower shall notify the Administrative Agent,
immediately before each Borrowing, in the event that any of the matters as to
which the Borrower Representative is required to certify in the applicable
Preliminary Notice of Borrowing or Final Notice of Borrowing is no longer true
and correct as of the date of the Borrowing, and the acceptance by the Borrowers
of the proceeds of any Interim Loan Borrowing shall constitute a recertification
by each Borrower, as of the date of the Borrowing in question, with respect to
each of the matters concerning which the Borrower Representative is required to
provide certification in the applicable Preliminary Notice of Borrowing or Final
Notice of Borrowing.
(b) Except as otherwise provided in sections 1.14(b), 1.14(c) and
1.14(g), a Notice of Borrowing contemplating a LIBOR Rate Borrowing shall be
irrevocable and the Borrowers shall be bound to make the indicated Borrowing, in
accordance with the terms of such Notice, on the date indicated, provided,
however, that in the event a Stop Funding Notice shall be delivered pursuant to
section 2.5.3(b) of the Disbursement Agreement with respect to any proposed
Borrowing after the delivery of the Preliminary Notice of Borrowing with respect
thereto or if a Default or Event of Default shall have occurred hereunder and
then be continuing, the Administrative Agent shall notify each Lender of the
fact and substance of such Stop Funding Notice, Default or Event of Default
promptly after becoming aware of the same, and in any such event the Interim
Loan Advances to have been made on the date of the proposed Borrowing shall not
be made. Each of the Lenders and the Agents (collectively, the "Lender Parties")
shall be entitled to rely upon, and under this Agreement shall be fully
protected in relying upon, any Preliminary Notice of Borrowing or Final Notice
of Borrowing, as the case may be, believed by such Lender Party to be genuine,
and to assume (and be fully protected in assuming) that the Person or Persons
executing and
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delivering the same on behalf of the Borrowers were duly authorized to do so,
unless in each case the responsible individual acting thereon on behalf of such
Lender Party shall have acquired actual knowledge to the contrary.
(c) Attached hereto as Annex B is a list of the units or items of
new furniture and equipment (including a description of the General Electric
electrical substation) to be purchased with the proceeds of the Interim Loan
Advances for use or installation at the Project. Each Preliminary Notice of
Borrowing or Final Notice of Borrowing, as the case may be, shall include an
attachment (the "Borrowing Notice Attachment") which shall identify the specific
units or items of such furniture and equipment (from among those listed on Annex
B) to be paid for with the proceeds of the Interim Loan Advances being made on
the occasion of such Borrowing and, in the case of each such unit or item, shall
set forth the total cost of the unit or item (including, with respect to each
unit or item, separate breakouts of the portions of such total cost which
consist of the basic purchase price thereof, freight, installation, sales tax,
and other cost elements in addition to the basic purchase price thereof), shall
be dated the date of the Preliminary Notice of Borrowing or Final Notice of
Borrowing, as applicable, which it accompanies, and shall contain an express
warranty by the Borrower Representative (on behalf of the applicable Borrower)
that each such unit or item is, or at the time of the relevant borrowing will
be, owned by the Borrower specified for such unit or item on Annex B free and
clear of all Liens and rights of others, except only (i) Liens in favor of the
Administrative Agent for the benefit of the Lenders and (ii) Liens in favor of
the Bank Agent and the Mortgage Notes Indenture Trustee on particular units or
items of furniture and equipment to secure extensions of credit made to fund the
cost of those units or items (including deposits or down payments thereon made
prior to acquisition) all of which Liens shall be fully discharged and satisfied
upon the Borrowing hereunder with respect to such units or items. Each
Preliminary Notice of Borrowing or Final Notice of Borrowing shall also include
a further certification on behalf of the Borrowers, signed by a responsible
officer of the Borrower Representative and countersigned by the Construction
Consultant, to the effect that, as of the date of such certification, the total
cost set forth in the corresponding Borrowing Notice Attachment with respect to
each such unit or item of equipment is net of all discounts, credits, rebates
and allowances and, subject to the last sentence of this section 1.2(c), is
justly owing in full to the applicable vendor and that such unit or item, in all
respects material to the Lenders, (i) was purchased in an arm's length
transaction (or, if not, that fact and the purchase details have been fully
disclosed to and have been determined to be reasonably satisfactory to the
Agents), (ii) has been inspected and found to conform, in all respects material
to the Lenders, to its description in Annex B, (iii) is useful and is to be used
in the development or operation of the Project, (iv) has been delivered to and
is physically located at the Site of the Project and has been installed, or is
held in safe custody pending installation, at the Site of the Project (or at
another location reasonably acceptable to the Administrative Agent) and, if held
in custody, is covered by proper warehouse receipts which have been delivered to
the Administrative Agent properly and effectively endorsed to it, (v) is and
remains covered, in all respects material to the Lenders, by all applicable
manufacturer warranties and casualty insurance and (vi) has not been damaged, is
in good
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and serviceable condition and otherwise complies, in all respects material to
the Lenders, with all representations and warranties set forth herein which may
be applicable to it. The amount of the Interim Loan Borrowing requested in the
Preliminary Notice of Borrowing or Final Notice of Borrowing which such
Borrowing Notice Attachment shall accompany shall equal the aggregate of the
total costs of the individual units and items of equipment set forth in such
attachment. Such Borrowing Notice Attachment may, however, be modified as
necessary to reflect the fact that the proceeds of the Borrowing in question (to
the extent so identified in such attachment with reference to specific units and
items) will be used to refinance secured indebtedness previously incurred by the
Borrowers under the Bank Credit Agreement or to replace funds in the Company's
Funds Account (referred to in section 2.3.1 of the Disbursement Agreement)
previously drawn or funded pursuant to section 2.2.3(b)(ii) of the Disbursement
Agreement, in each case to pay the purchase price for the referenced units and
items of furniture and equipment (or the portion thereof not paid from other
funds), but such Borrowing Notice Attachment shall in all events contain the
above-mentioned express warranties concerning the applicable Borrower's
ownership free and clear of Liens and rights of others (except as aforesaid).
(d) From time to time prior to the Interim Loan Advance the
proceeds of which are to be used to pay the purchase price of one or more
specific units or items of furniture and equipment listed on Annex B, the
administrative agent under the Bank Credit Agreement (the "Bank Agent") may
submit to the Administrative Agent hereunder a schedule referring specifically
to such units or items the purchase price of which the Borrowers propose to fund
pursuant to section 2.2.3(b)(ii) of the Disbursement Agreement or to borrow
under the Bank Credit Agreement, with the request that the Administrative Agent
confirm to the Disbursement Agent and the Bank Agent whether or not such
referenced units and items are units and items that are included on Annex B
hereto. If the Administrative Agent shall determine that such referenced units
and items are units and items that are included on Annex B hereto, the
Administrative Agent shall confirm such determination to the Disbursement Agent
and the Bank Agent in writing. The Administrative Agent shall also confirm to
the Disbursement Agent and the Bank Agent from time to time the aggregate
outstanding principal amount of the Interim Loan Advances hereunder and the
remaining unutilized portion of the Aggregate Commitment hereunder. No
confirmation made under this section 1.2(d) shall in any event confer upon the
Bank Agent, the Disbursement Agent or any other party to the Bank Credit
Agreement or Disbursement Agreement, or any other Person, any status as a
third-party beneficiary of this Agreement or otherwise create in favor of any of
them any estoppel or any right to enforce any obligation of any Lender Party
hereunder.
(e) (i) From time to time prior to the date of the Basic Loan
(or, if the final Interim Loan Advance shall have been made pursuant to section
1.2(i), prior to the expiration of the 120-day period described in such section
1.2(i)), so long as there shall not have occurred and then be continuing any
Event of Default or Default, the Borrower Representative may submit to the
Administrative Agent (with a copy to each of the Lenders)
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a schedule specifying one or more units or items of new furniture and equipment
included on Annex B hereto which have not yet been the subject of a Borrowing
hereunder but with respect to which the Borrowers either (A) have determined
that the units or items are no longer useful and are not to be used in
connection with the operation of the Project ("Redundant Equipment") or (B) have
elected to avail themselves of Alternative Vendor Financing as further provided
in section 1.2(f) ("AVF Equipment") and also setting forth with respect to each
such unit or item of Redundant Equipment or AVF Equipment the total cost thereof
(which total shall agree with the total cost thereof set forth in Annex B as the
same may have previously been amended) and including an entry for the aggregate
of the total costs of the individual items of Redundant Equipment or AVF
Equipment so listed. Such schedule may also identify, subject to the reasonable
approval of the Administrative Agent, additional items of new furniture and
equipment, of like kind and good quality, which are not then listed on Annex B
hereto but which the Borrowers propose to add to Annex B ("Additional
Equipment"), in which case the schedule shall also state the total cost of each
item of Additional Equipment proposed to be added to Annex B and the aggregate
of the total cost thereof and shall be accompanied by such proper Uniform
Commercial Code financing statement amendment forms, duly executed by the
Borrowers (in form and number specified by the Administrative Agent), and such
evidence (including without limitation search reports) that the Additional
Equipment is free and clear of Liens, as the Administrative Agent may reasonably
request.
(ii) If the Administrative Agent shall approve the
Additional Equipment proposed to be added to Annex B, the Administrative Agent
shall confirm such approval to the Borrower Representative in writing. Upon the
submission of the schedule described in section 1.2(e)(i) (and the
Administrative Agent's confirmation of its approval when Additional Equipment is
involved), Annex B hereto shall be amended to exclude therefrom the Redundant
Equipment and AVF Equipment so scheduled and to add thereto the approved
Additional Equipment, if any, so scheduled, and the Aggregate Commitment shall
be reduced (or, if the final Interim Loan Advance shall have been made pursuant
to section 1.2(i), the balance of the cash collateral account described in such
section shall be reduced) by the amount by which (I) the aggregate total cost of
the Redundant Equipment and AVF Equipment specified on the schedule exceeds (II)
the aggregate total cost of the Additional Equipment specified on the schedule
(as reasonably approved by the Administrative Agent), such reduction, in the
case of a reduction of the Aggregate Commitment, to be allocated as amongst the
individual Commitments of the Lenders ratably in accordance with their Pro Rata
Shares or, in the case of a reduction of the section 1.2(i) cash collateral
account, to be applied in accordance with the proviso contained in the last
sentence of section 1.2(i) as though the amount of funds equivalent to such
reduction were funds remaining in such cash collateral account upon the
expiration of the 120-day period described in such section. The Administrative
Agent shall promptly inform the Borrower Representative and each of the Lenders
of the fact and amount of any reduction of the Commitments under this section
1.2(e).
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(iii) The foregoing notwithstanding, in no event shall any
amendment be made under this section 1.2(e) to Annex B unless after giving
effect to the amendment (x) the aggregate total cost of the furniture and
equipment listed on Annex B, after giving effect to the reductions resulting
from the AVF Equipment eliminated and the increases resulting from Additional
Equipment added, neither (I) exceeds the Aggregate Commitment then in effect,
nor (II) if the final Interim Loan Advance shall have been made pursuant to
section 1.2(i), exceeds the sum of (A) all Interim Loan Advances made prior to
the final Interim Loan Advance plus (B) the amount held in the cash collateral
account maintained pursuant to section 1.2(i) at the time of the proposed
amendment to Annex B) nor (III) is less than $90,000,000 (or, if less, the
Aggregate Commitment then in effect) reduced by the costs of the Redundant
Equipment that is not, and will not be, replaced with like or similar equipment
approved by the Administrative Agent in accordance with section 1.2(e)(ii), (y)
the aggregate total cost of the portion of the furniture and equipment
identified on Annex B as being "Gaming Equipment" shall not have been reduced by
more than $5,000,000, and (z) the provisions of section 1.22(b) shall be
complied with.
(f) Subject to and upon compliance with the provisions of section
1.2(e), and within the limits specified in such section and in section 1.22(b),
so long as there shall not have occurred and then be continuing any Event of
Default or Default, the Borrowers from time to time prior to the Commitment
Expiration Date (as the same may have been extended from time to time in
accordance with the provisions hereof) may elect to obtain from vendors, rather
than from the Lenders hereunder, financing ("Alternative Vendor Financing") for
one or more of the units or items of the new furniture and equipment intended to
be financed hereunder (as evidenced by the inclusion of such units or items on
Annex B), provided that the Borrowers can demonstrate, to the reasonable
satisfaction of the Agents, the presence of material cost economies to be
derived from the partial substitution of such Alternative Vendor Financing for
the financing intended to be provided through the Commitments of the Lenders
hereunder, and provided, further, that in no event shall the Lien of any
Alternative Vendor Financing spread to, cover or otherwise affect any of the
Collateral hereunder.
(g) Upon the elimination of any Redundant Equipment or AVF
Equipment from Annex B pursuant to section 1.2(e) or (f), the Administrative
Agent shall, upon the request and at the expense of the Borrowers, execute and
deliver to the Borrower Representative such Uniform Commercial Code release
forms and other documents and instruments as the Borrower Representative may
reasonably request to evidence and confirm of record the elimination of the
Redundant Equipment or AVF Equipment from the Collateral hereunder.
(h) Contemporaneously with the delivery of the Borrowers' monthly
financial statements under section 4.1(a), the Borrowers shall furnish to each
of the Lenders an updated Annex B which shall reconcile all eliminations of
Redundant Equipment and AVF Equipment and additions of Additional Equipment made
to Annex B since the most
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recent previous update furnished under this section 1.2(h) (since the date
hereof, in the case of the first such submission) and shall identify by item or
unit those items or units which have been the subject of Interim Loan Advances
made to date. Such updated Annex B shall be in reasonable detail and shall
include, as appropriate, make (manufacturer), model number and original cost
breakdown. Copies of such updated versions of Annex B may be furnished from time
to time by the Administrative Agent to the other lenders providing funds in
connection with the construction and development of the Project.
(i) If on a date within the seven days preceding (but no later
than the Business Day preceding) the Project Construction Completion Date any
portion of the Commitments remain unutilized by Borrowings hereunder, the
Borrower Representative may (but shall not be obligated to) deliver to the
Administrative Agent on behalf of the Borrowers a written notice stating the
good faith belief of the Borrowers, and accompanied by a certification of the
Construction Consultant to the effect, that the Project Construction Completion
Date will occur within the succeeding seven days and requesting that each Lender
make a final Interim Loan Advance to the Borrowers in an amount equal to all, or
any portion specified in such notice of, the remaining unutilized Commitment of
such Lender notwithstanding that there are no additional units or items of new
furniture and equipment to be acquired at that time with the proceeds of such
advance nor any loans outstanding under the Bank Credit Agreement which were
made, nor funds drawn pursuant to section 2.2.3(b)(ii) of the Disbursement
Agreement which were drawn, to acquire any such units or items (including
without limitation to fund deposits or down payments thereon) and which are to
be repaid at such time with the proceeds of such advance. In such event, the
Administrative Agent will on the date of its receipt of such notice furnish to
each Lender a copy thereof. On the Business Day following such date of receipt,
each Lender shall, upon satisfaction of all applicable conditions specified in
section 2 and subject to the terms and conditions of this Agreement, make a
final Interim Loan Advance to the Borrowers in an amount equal to the remaining
unutilized Commitment of such Lender (or the portion thereof specified in the
notice of the Borrower Representative) by directing the Administrative Agent to
fund, for the account of such Lender, to a separate and segregated
interest-bearing cash collateral account maintained by the Administrative Agent,
under its exclusive dominion and control, the balance of which account shall be
held by the Administrative Agent pending release to the Borrowers from time to
time (but at reasonable intervals) thereafter, in accordance with the last
sentence of this section 1.2(i), in order to fund the purchase price of one or
more specific units or items of furniture or equipment from among those listed
on Annex B (as amended from time to time in accordance with the provisions
hereof). If at the time there shall not have occurred and then be continuing any
Event of Default or Default, the Administrative Agent shall from time to time
(A) upon written request of the Borrowers (in a form reasonably satisfactory to
the Administrative Agent), release the funds held in such cash collateral
account in amounts so requested against delivery by the Borrowers of the
appropriate certificates, documents and instruments referred to in sections
1.2(a) through 1.2(e), as applicable, to be delivered on the occasion of
Borrowing hereunder and compliance by the Borrowers with the terms, conditions
and procedures specified in such sections for an
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Interim Loan Advance and (B) release from such cash collateral account and remit
to the Borrowers any income from or proceeds of the amounts held in such cash
collateral account; provided, however, that any amounts (other than amounts
referred to in the foregoing clause (B)) remaining in such cash collateral
account after the later to occur of (I) the 120th day after the date of such
final Interim Loan Advance or (II) the Final Completion Date shall (and upon any
earlier occurrence of an Event of Default which is continuing may) be applied by
the Administrative Agent to the prepayment of the Obligations in accordance with
section 1.13 hereof; and provided, further, that, notwithstanding the provisions
of section 1.13(a), the Borrowers shall not be required to give prior notice of
such payment and such payment shall be deemed to have been received on such
120th day. The Borrowers shall not be liable for any prepayment penalty in
connection with a prepayment of an Interim Loan Advance pursuant to the first
proviso contained in the preceding sentence, but the Borrowers shall be
responsible nonetheless for the compensation, if any, which may be owing to the
Administrative Agent under section 1.14(d) on the occasion of such prepayment.
All amounts held in any cash collateral account maintained by the Administrative
Agent under this section 1.2(i) or any other provision of this Agreement shall
be invested by the Administrative Agent (in consultation with the Borrower
Representative so long as there shall not have occurred and then be continuing
any Event of Default) in Cash Equivalents (as defined in Annex A hereto).
1.3 Disbursements of Proceeds of Interim Loan Advances.
(a) All Interim Loan Advances made under this Agreement shall be
made by the Lenders simultaneously and in proportion to their respective Pro
Rata Shares, it being understood and agreed that the obligations of the Lenders
hereunder are several and not joint and that no Lender shall be responsible for
any default on the part of any other Lender on such other Lender's obligation to
make the Interim Loan Advance requested of it hereunder nor shall the Commitment
of any Lender to make the Interim Loan Advance requested of it in the Notice of
Borrowing be increased or decreased as a result of any default on the part of
any other Lender in such other Lender's obligation to make the Interim Loan
Advance requested of it on the occasion of such Borrowing. Promptly upon its
receipt of a Preliminary Notice of Borrowing or a Final Notice of Borrowing, as
applicable, the Administrative Agent shall provide a copy thereof to each Lender
whereupon, subject to the terms and conditions of this Agreement, each Lender
shall make available to the Administrative Agent the amount of its Interim Loan
Advance (as the same may have been revised in the Final Notice of Borrowing),
not later than 10:00 a.m. (New York City time) on the date of the proposed
Borrowing, in immediately available funds in United States Dollars at the office
of Bankers Trust New York at 1 Bankers Trust Plaza, New York, New York 10006,
for the account of the Administrative Agent. Upon satisfaction or waiver of the
conditions precedent specified in sections 2.1 and 2.3, the Administrative Agent
shall make available to the Borrowers jointly the aggregate amount of the
Interim Loan Advances received by the Administrative Agent from the Lenders by
crediting the account of the Borrowers at such office in an amount equal to the
aggregate amount of such Interim Loan
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Advances. In the case of each Borrowing, the Final Notice of Borrowing shall
constitute an irrevocable authorization on the part of the Borrowers to charge
the proceeds of such credit immediately in an amount equal to the aggregate
amount of the invoices submitted to the Administrative Agent in connection with
such Borrowing pursuant to section 1.2(c) and to apply the proceeds of such
charge to the immediate and direct payment of such invoices for the joint
account of the Borrowers. In the case of any Borrowing, if the Preliminary
Notice of Borrowing or the Final Notice of Borrowing, as applicable, for such
Borrowing shall have been modified, in accordance with the last sentence of
section 1.2(c), to request the application of all or a portion of the proceeds
of such Borrowing either to refinance secured indebtedness under the Bank Credit
Agreement previously incurred, or to refund amounts previously funded pursuant
to section 2.2.3(b)(ii) of the Disbursement Agreement, in either case to pay the
purchase price of individual units or items of furniture and equipment listed on
Annex B (as updated, amended or modified from time to time in accordance with
the provisions hereof), such Preliminary Notice of Borrowing or Final Notice of
Borrowing, as the case may be, shall constitute an irrevocable authorization on
the part of the Borrowers to charge the indicated portion of the proceeds of
such credit and remit such portion to the Bank Agent or the Disbursement Agent,
or both, as the case may be, for application in accordance with the Bank Credit
Agreement or the Disbursement Agreement, or both, as the case may be, and to
charge and apply the remainder in accordance with the preceding sentence.
(b) Unless the Administrative Agent shall have been notified by a
Lender prior to the date scheduled for a proposed Borrowing that such Lender
does not intend to make available to the Administrative Agent the amount of the
Interim Loan Advance requested, the Administrative Agent may assume that such
Lender has made such amount available to the Administrative Agent on such date,
and in reliance thereon may, in its sole discretion (but it shall not be
obligated to), make available to the Borrowers a corresponding amount on such
date. If, however, such corresponding amount is not in fact then made available
to the Administrative Agent by such Lender, the Administrative Agent shall be
entitled to recover from such Lender such corresponding amount, on demand,
together with interest thereon for each day, from the date of such Borrowing
until the date such amount is paid to the Administrative Agent, at the customary
rate set by the Administrative Agent for the correction of errors among lending
institutions, for the first three Business Days and thereafter at the Base Rate.
If such Lender does not pay such corresponding amount (which the Administrative
Agent has made available to the Borrowers), forthwith upon demand of the
Administrative Agent, the Administrative Agent shall promptly notify the
Borrowers whereupon the Borrowers shall immediately pay to the Administrative
Agent such corresponding amount together with interest thereon, for each day
from the date of the applicable Interim Loan Advance until the date such amount
is paid in full to the Administrative Agent, at the rate payable under this
Agreement in respect of such Interim Loan Advance. Nothing in this section
1.3(b) shall be deemed to relieve any Lender of its obligation to fulfill its
Commitment hereunder or to prejudice any rights which either Borrower may have
against any defaulting Lender as a result of any such Lender's default
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on its obligations hereunder. Notwithstanding anything to the contrary set forth
in this Agreement, (i) the Borrowers shall not be obligated to pay to the
defaulting Lender interest on funds it has failed to advance and (ii) the
Borrowers shall not be liable for any fees, penalties or other expenses in
connection with a repayment of an Interim Loan Advance pursuant to the preceding
sentence, but the Borrowers shall be responsible nonetheless for the
compensation, if any, which may be owing to the Administrative Agent under
section 1.14(d) on the occasion of such repayment.
1.4 The Register. The Administrative Agent shall maintain, at its
address referred to in section 11.12, a register for the recordation of the
names and addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "Register"). The Register shall be available for inspection by
the Borrowers or any Lender Party at any reasonable time and from time to time
upon reasonable prior notice. The Administrative Agent shall record in the
Register the Commitment of each Lender (and any reduction thereof), the date,
the amount and the interest rate of each of the Interim Loan Advances from time
to time, and of the Basic Loans, of each Lender and the date and amount of each
repayment or prepayment in respect of the principal amount of the Loans of each
Lender. Any such recordation shall, absent manifest error, be conclusive and
binding on the Borrowers and each Lender; provided that no failure to make any
such recordation, nor any error in such recordation, shall affect any Lender's
Commitment or the Borrowers' Obligations in respect of any applicable Loans.
Each Lender shall record on its internal records (including the Note held by
such Lender) the amount of each Loan made by it and each payment or prepayment
in respect thereof. Any such recordation shall, absent manifest error, be
conclusive and binding on the Borrowers; provided that no failure to make or
error in making any such recordation shall affect any Lender's Commitment or the
Borrowers' Obligations in respect of any applicable Loans; and provided,
further, that in the event of any inconsistency between the Register and any
Lender's records, the recordations in the Register shall govern. The
Administrative Agent and the Lenders shall deem and treat the Persons listed as
Lenders in the Register as the holders and owners of the corresponding
Commitments and Loans listed therein for all purposes hereof, and no assignment
or transfer of any such Commitment or Loan shall be effective in any case unless
and until a proper instrument of assignment effecting the assignment or transfer
thereof shall have been accepted by the Administrative Agent. Prior to such
recordation, all amounts owed with respect to the applicable Commitment or Loan
shall be owed to the Lender listed in the Register as the owner thereof, and any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is listed in the Register as a
Lender shall be conclusive and binding on any subsequent holder, assignee or
transferee of the corresponding Commitment or Loans.
1.5 The Notes. The aggregate of the Interim Loan Advances from time to
time outstanding from a Lender is herein sometimes referred to as the "Interim
Loan" of such Lender. Each Lender's Interim Loan, and upon conversion of each
Lender's Interim Loan the Basic Loan (hereinafter referred to) of such Lender,
shall be evidenced by a single joint
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and several promissory note of the Borrowers, dated the date of the first
Borrowing, substantially in the form of Exhibit B hereto (the "Note" of such
Lender), payable to the order of such Lender in principal amount equal to the
amount of the Commitment of such Lender as originally in effect or so much
thereof as shall have been advanced and be outstanding hereunder, and otherwise
duly completed.
1.6 Basic Loans; Term and Maturities, etc. Provided that the Project
Construction Completion Date shall precede the Completion Deadline Date and the
other conditions set forth in sections 2.2 and 2.3 are satisfied, on the Project
Construction Completion Date the Interim Loan of each Lender then outstanding
together with accrued and unpaid interest thereon (collectively, the "Initial
Principal Amount" of such Lender's Basic Loan) shall, automatically and without
any further act on the part of any Person (and simultaneously with the like
conversion of the Interim Loan of each of the other Lenders), be converted into
a single loan of such Lender to the Borrowers (the "Basic Loan" of such Lender).
The Administrative Agent shall confirm in writing to each of the Borrowers and
the Lenders the fact and effective date of such conversion. The Interim Loan and
the Basic Loan of such Lender are herein sometimes referred to collectively as
the "Loans" of such Lender and the date on which the Interim Loans are converted
to Basic Loans hereunder is herein sometimes referred to as the "Basic Loan
Commencement Date." The Basic Loan of each Lender shall be payable in twenty
(20) consecutive quarterly installments of principal, with one installment due
on the same day of the month (or, if there be none, then on the final day of the
month) corresponding to the day preceding the Basic Loan Commencement Date in
each of the third, sixth, ninth and twelfth months following the month
containing the day preceding the Basic Loan Commencement Date, and continuing on
successive anniversaries of each of such first four payment dates through and
including the due date for the twentieth such quarterly installment or until the
Basic Loans shall be sooner paid in full with interest. In the case of each
Lender's Basic Loan, each of the first four of such consecutive quarterly
installments of principal shall be in an amount equal to 3% of the Initial
Principal Amount of such Lender's Basic Loan and each of the remaining sixteen
of such consecutive quarterly installments of principal shall be in an amount
equal to 5.5% of the Initial Principal Amount of such Lender's Basic Loan. In
all events, any amounts remaining outstanding on the Basic Loans shall be due
and payable on the fifth anniversary of the Basic Loan Commencement Date and the
final installment of principal payable by the Borrowers in respect of each Basic
Loan shall be in an amount sufficient to repay in full with interest all amounts
owing by the Borrowers under this Agreement with respect to such Basic Loan. All
mandatory and voluntary prepayments of principal made by the Borrowers on
account of the Basic Loans shall be made ratably as amongst the Lenders in
accordance with their Pro Rata Shares and, in the case of each Lender, shall be
applied against the principal installments of such Lender's Basic Loan in the
inverse order of their maturities.
1.7 Interest on the Loans.
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(a) Rate of Interest. Subject to the provisions of sections
1.7(e), 1.14 and 1.15, each Interim Loan Advance, and following the conversions
of the Interim Loans into the Basic Loans on the Basic Loan Commencement Date
each of the Basic Loans, shall bear interest on the unpaid principal balance
thereof from the date made until paid in full at a fluctuating rate per annum
determined by reference to the Base Rate or the Adjusted LIBOR Rate, but,
subject to section 1.14(c), at all times the portions of the aggregate
outstanding principal amounts of the Loans of the respective Lenders bearing
interest by reference to the Base Rate or the Adjusted LIBOR Rate, as the case
may be, shall be pro rata as amongst the Lenders in accordance with their Pro
Rata Shares. The applicable basis for determining the rate of interest with
respect to any Interim Loan Advance shall be selected by the Borrowers initially
at the time the Notice of Borrowing is given with respect to such Interim Loan
Advance pursuant to section 1.2, and the basis for determining the interest rate
with respect to any Interim Loan Advance may be continued or changed from time
to time pursuant to section 1.7(d). If on any day a Loan is outstanding with
respect to which notice has not been delivered to the Administrative Agent in
accordance with the terms of this Agreement specifying the applicable basis for
determining the rate of interest, then for that day such Loan shall bear
interest determined by reference to the Base Rate. Subject to the provisions of
sections 1.7(e), 1.14 and 1.15, the Base Rate Loans shall bear interest until
paid in full at a rate per annum equal to the sum of the Base Rate plus the
Applicable Base Rate Margin and the LIBOR Rate Loans shall bear interest until
paid in full at a rate equal per annum to the sum of the Adjusted LIBOR Rate
plus the Applicable LIBOR Rate Margin.
(b) Interest Periods. In connection with each LIBOR Rate Advance,
the Borrower Representative may, pursuant to the applicable Notice of Borrowing,
and in connection with each LIBOR Rate Loan the Borrower Representative may,
pursuant to the applicable Notice of Interest Rate Election, designate an
interest period (an "Interest Period") to be applicable to such Advance or Loan,
which Interest Period shall be the 30-day period commencing on the effective
date of such Notice; provided that:
(i) the Borrowers may not select any LIBOR Rate Advances,
or convert any Base Rate Advances to LIBOR Rate Advances, until the
earlier of (x) the date on which the Administrative Agent shall have
notified the Borrower Representative in writing that the Syndication has
been successfully completed or (y) the thirtieth day after the date of
the initial Borrowing and, in the case of any Borrowing occurring when
LIBOR Rate Advances are outstanding and the date of such Borrowing is
not the first day of the Interest Period for such LIBOR Rate Advances,
such Borrowing shall be in the form of Base Rate Advances until the end
of the current Interest Period in order that there be only one Interest
Period outstanding hereunder at any time; and
(ii) the initial Interest Period for a LIBOR Rate Advance
shall commence on the date of such LIBOR Rate Advance, in the case of an
Interim Loan Advance initially made as a LIBOR Rate Advance, or on the
date specified in the
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applicable Notice of Interest Rate Election, in the case of an Interim
Loan Advance converted to a LIBOR Rate Advance; and
(iii) in the case of immediately successive Interest
Periods applicable to a LIBOR Rate Loan continued as such pursuant to a
Notice of Interest Rate Election, each successive Interest Period shall
commence on the day on which the next preceding Interest Period shall
expire; and
(iv) if the current Interest Period would otherwise expire
on a day that is not a Business Day, such Interest Period shall expire
on the next succeeding Business Day; provided that if such Interest
Period would otherwise expire on a day that is not a Business Day but is
a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding day that
is a Business Day; and
(v) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (vi) of this section 1.7(b), end on the
last Business Day of the next succeeding calendar month; and
(vi) no Interest Period shall extend beyond a date on
which an installment of principal is scheduled to be due on the Basic
Loans, unless the sum of (a) the aggregate outstanding principal amount
of the Loans that are Base Rate Loans, plus (b) the aggregate principal
amount of the Loans that are LIBOR Rate Loans having Interest Periods
expiring on or before such date plus (c) the excess of the Commitments,
if any, then in effect over the aggregate principal amount of the Loans
then outstanding, equals or exceeds the sum of (x) the aggregate
principal amount scheduled to be paid on the Loans plus (y) the
aggregate of the permanent reductions of the Commitments scheduled to
occur on or before such date; and
(c) Interest Payments. Subject to the provisions of sections
1.7(e) and (g), interest on the Base Rate Loans shall be payable (i) quarterly
in arrears on and to each March 31, June 30, September 30 and December 31 prior
to the Basic Loan Commencement Date, (ii) on the Basic Loan Commencement Date,
and (iii) on each date thereafter on which any quarterly installment of the
principal of the Basic Loans shall be due and payable, and interest on the LIBOR
Rate Loans shall be payable on the last day of each Interest Period with respect
to such LIBOR Rate Loans. In addition, upon any prepayment of any Loan, accrued
interest on the principal amount being prepaid shall be paid on the date of the
principal prepayment. Accrued interest shall also be paid upon final payment of
the principal balance of the Loans.
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(d) Conversion or Continuation.
(i) Subject to the provisions of section 1.14, the Borrowers shall have
the option, exercisable upon delivery of a Notice of Interest Rate Election as
hereinafter provided (A) to convert at any time all or any portion (consisting
of $1,000,000 or an integral multiple thereof) of the aggregate principal amount
of the Loans then outstanding which bear interest at a rate determined by
reference to one interest rate basis to Loans bearing interest at a rate
determined by reference to the other basis or (B) upon the expiration of the
current Interest Period applicable to the LIBOR Rate Loans, to continue as such
all or any portion (consisting of $1,000,000 or an integral multiple thereof) of
the aggregate principal amount of the LIBOR Rate Loans then outstanding,
provided that LIBOR Rate Loans or portions thereof may be converted into Base
Rate Loans only upon the expiration of the current Interest Period with respect
thereto.
(ii) The Borrower Representative shall deliver a Notice of Interest Rate
Election to the Administrative Agent no later than 10:00 A.M. (New York City
time) at least one Business Day in advance of the proposed conversion date (in
the case of a conversion to Base Rate Loans) and at least three Business Days in
advance of the proposed conversion or continuation date (in the case of a
conversion to, or a continuation of, LIBOR Rate Loans). A Notice of Interest
Rate Election shall specify (i) the proposed conversion or continuation date
(which shall be a Business Day), (ii) whether a conversion or a continuation is
desired, (iii) in the case of a conversion to LIBOR Rate Loans, the requested
first day of the Interest Period, and (iv) in the case of a conversion to, or a
continuation of, LIBOR Rate Loans, that no Default or Event of Default has
occurred and is continuing. In lieu of delivering the above-described Notice of
Interest Rate Election, the Borrower Representative may give the Administrative
Agent telephonic notice by the required time of any proposed conversion or
continuation under this section 1.7(d); provided that such notice shall be
promptly confirmed in writing by delivery of a Notice of Interest Rate Election
to the Administrative Agent on or before the date of the proposed conversion or
continuation. Upon receipt of written or telephonic notice of any proposed
conversion or continuation under this section 1.7(d), the Administrative Agent
shall promptly transmit a copy of such notice by facsimile or telephone to each
Lender.
(iii) Each Lender Party shall be entitled to rely upon, and shall be
fully protected under this Agreement in relying upon, any Notice of Interest
Rate Election believed by the Administrative Agent to be genuine and to assume
that the Person or Persons giving the same on behalf of the Borrowers were duly
authorized to do so unless the responsible individual acting thereon for the
Administrative Agent shall have acquired actual knowledge to the contrary.
Neither the Administrative Agent nor any Lender shall incur any liability to
either Borrower in acting upon any telephonic notice referred to above that the
Administrative Agent believes in good faith to have been given by a duly
authorized officer of the Borrower Representative or by any other Person
authorized to act on behalf of the Borrowers or otherwise for acting in good
faith under this section 1.7(d), or in effecting any conversion or
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continuation of the applicable basis for determining the interest rate with
respect to the Loans or any portion thereof in accordance with this Agreement
pursuant to any such telephonic notice.
(iv) Except as otherwise provided in sections 1.14(b), (c) and (g), a
Notice of Interest Rate Election for a conversion to, or a continuation of,
LIBOR Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable,
and the Borrowers shall be bound to effect the indicated conversion or
continuation in accordance therewith.
(v) In the event that the Borrower Representative shall fail at any time
to submit a Notice of Interest Rate Election to the Administrative Agent in
accordance with paragraph (ii) above, or shall not be permitted to do so during
the pendency of a Default or Event of Default as provided in such paragraph (ii)
at a time when there are LIBOR Rate Loans outstanding hereunder, then all LIBOR
Rate Loans then outstanding shall become Base Rate Loans upon the expiration of
the Interest Period in effect at the time.
(e) Default Rate. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due and payable hereunder, shall,
effective from and after the date of the Default (the first such Default if
there be more than one) giving rise to such Event of Default, bear interest
(including post-petition interest in any proceeding under the Bankruptcy Code or
other applicable bankruptcy laws), payable on demand, at a rate per annum that
is the higher of (x) 2% per annum in excess of the interest rate otherwise then
applicable under this Agreement from time to time with respect to the applicable
Loans or (y) 2% per annum in excess of the interest rate otherwise payable under
this Agreement with respect to the applicable Loans as in effect on the date of
the Default occasioning the increase in interest rate (or, in the case of any
such fees and other amounts, at a rate per annum which is 2% per annum in excess
of the interest rate otherwise applicable under this Agreement for Base Rate
Loans); provided that, in the case of LIBOR Rate Loans, upon the expiration of
the Interest Period in effect when any such increase in interest rate is
effective, such LIBOR Rate Loans shall, in the discretion of the Requisite
Lenders (and automatically and without discretion upon the occurrence of an
Event of Default specified in section 8.1(f), (g) or (h)), thereupon become Base
Rate Loans and shall thenceforth bear interest, payable on demand, at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Base Rate Loans. Payment or acceptance of the increased rates
of interest provided for in this section 1.7(e) shall not be construed as a
permitted alternative to timely payment and shall not constitute a waiver of any
Default or Event of Default nor otherwise prejudice or limit any rights or
remedies of any Lender Party.
(f) Computation of Interest. Interest on the Loans shall be
computed on the basis of a 360-day year for the actual number of days elapsed in
the period during which it accrues. In computing interest, the date of the
making of each Interim Loan Advance, and
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the first day of an Interest Period applicable to such Interim Loan Advance (or,
with respect to Base Rate Loans or portions thereof being converted from LIBOR
Rate Loans, or vice versa, the date of such conversion, as the case may be)
shall be included, and the date of payment of such Interim Loan Advance or the
expiration date of the current Interest Period (or, with respect to Base Rate
Loans or portions thereof being converted to LIBOR Rate Loans, or vice versa,
the date of conversion, as the case may be) shall be excluded; provided that if
an Interim Loan Advance is repaid on the same day on which it is made, one day's
interest shall be paid on that Interim Loan Advance.
(g) Option to Accrue Interest During Loan Period. The Borrowers
shall have the option, exercisable by notice to such effect given by the
Borrower Representative to the Administrative Agent before the date of the first
Interim Loan Advance, to have interest on the Interim Loans accrue rather than
to pay interest periodically as provided in section 1.7(c). The Administrative
Agent shall promptly furnish to each Lender a copy of any notice of election it
receives under this section 1.7(g). If no such notice of election is given
before the date of the first Interim Loan Advance, interest on the Interim Loans
shall be payable as provided in section 1.7(c). If the Borrowers shall elect to
accrue interest in the manner provided in this section 1.7(g), all interest on
the Interim Loan of each Lender shall accrue and be added to principal on the
last day of each Interest Period applicable to a LIBOR Rate Loan and on each
quarterly interest payment date in the case of a Base Rate Loan and, unless the
Basic Loans are made on or before such date, shall be payable in full together
with the principal on the Interim Loans on the Commitment Expiration Date. An
election to accrue interest under this section 1.7(g) shall alter, in the manner
set forth in section 2.3(k), the condition precedent set forth in such section
to the obligation of each Lender to make its Interim Loan Advances.
(h) Interest Rate Not to Exceed Maximum Lawful Rate.
Notwithstanding anything to the contrary set forth in this section 1.7, if, at
any time until payment in full of all of the Obligations, the rate of interest
payable by the Borrowers hereunder and on the Notes shall exceed the highest
rate of interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto (the
"Maximum Lawful Rate"), then in such event and so long as the Maximum Lawful
Rate would be so exceeded, the rate of interest payable hereunder by the
Borrowers shall be equal to the Maximum Lawful Rate; provided, however, that if
at any time thereafter the rate of interest payable by the Borrowers hereunder
is less than the Maximum Lawful Rate, the Borrowers shall continue to pay
interest hereunder and on the Notes at the Maximum Lawful Rate until such time
as the total interest received by each Lender from the making of its Loans
hereunder to the Borrowers shall equal the total interest which such Lender
would have received had the interest rate payable hereunder by the Borrowers
been (but for the operation of this section) the interest rate payable since the
Closing Date as otherwise provided in this Agreement. Thereafter, the interest
rate payable by the Borrowers hereunder shall be the rate of interest otherwise
provided in this section 1.7, unless and until the rate of interest again
exceeds the Maximum Lawful Rate, in which event this paragraph shall again
apply. In no
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event shall the total interest received by any Lender pursuant to the terms of
this Agreement or any other Loan Document exceed the amount which such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate. All interest paid by, charged
to or collected from the Borrowers hereunder or under any other Loan Document
shall, to the maximum extent permitted by applicable law, be amortized,
allocated and spread throughout the full term of the Obligation on which it
accrued. In the event the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. In the event that a court of competent jurisdiction shall,
notwithstanding the provisions of this section 1.7(h), make a final
determination that any Lender has received from the Borrowers hereunder or under
any of the Loan Documents interest at a rate in excess of the Maximum Lawful
Rate, such Lender shall, to the extent permitted by applicable law, promptly
apply such excess first, to any interest due from the Borrowers and not yet paid
hereunder, and then to the outstanding principal of the Obligations of the
Borrowers, then to fees and any other unpaid Obligations owed by the Borrowers
and thereafter to the refund of any excess to the Borrowers or as a court of
competent jurisdiction may otherwise decree.
1.8 Fees.
(a) Commitment Fees. The Borrowers agree to pay to the
Administrative Agent, for distribution to each Lender in proportion to that
Lender's Pro Rata Share, commitment fees for the period from and including
December 31, 1997 to and excluding the date on which the Commitments of the
Lenders shall expire or otherwise be terminated, equal to the product of
one-half of one percent (1/2%) per annum times the average daily amount of the
excess of the Aggregate Commitment, as then in effect, over the aggregate
outstanding principal amount of Interim Loan Advances. Such commitment fees
shall be calculated on the basis of a 360-day year and actual number of days
elapsed and shall be payable monthly in arrears on the last day of each and
every month, commencing January 31, 1998, and on the earliest of the Basic Loan
Commencement Date, the Commitment Expiration Date or the date on which the
Commitments of the Lenders otherwise shall expire or be terminated.
(b) Other Fees. The Borrowers agree to pay to the Administrative
Agent such other fees, in such amounts and at such times, as have been agreed
upon in a separate letter agreement (the "Fee Letter"), dated October 20, 1997,
between them (but without duplication of the fees payable under section 1.8(a)).
1.9 Voluntary Prepayments.
(a) Except as provided in section 1.9(b), the Borrowers may not
voluntarily prepay any of the Interim Loan Advances, nor until after the first
anniversary of the Basic Loan Commencement Date, any Basic Loans. Following the
first anniversary of
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the Basic Loan Commencement Date and subject to section 1.9(c), the Basic Loans
of each Lender may be prepaid in whole at any time or in portions (in an
aggregate principal amount of $5,000,000 and integral multiples of $2,500,000 in
excess of that amount) from time to time, provided, however, that with respect
to any LIBOR Rate Loan not prepaid on the expiration of the Interest Period
applicable thereto the Borrowers shall also pay the amount, if any, payable
pursuant to section 1.14(d). Each such prepayment shall be made on not less than
ten Business Days' prior written or telephonic notice, in each case given to the
Administrative Agent and, if given by telephone, confirmed in writing to the
Administrative Agent promptly and in all events before the date of the
prepayment (which written or telephonic notice the Administrative Agent will
promptly transmit by facsimile or telephone to each Lender).
(b) Notwithstanding the provisions of section 1.9(a), the
aggregate principal amount of the Loans then outstanding may be prepaid in whole
(but not in part) by the Borrowers, together with accrued interest to the date
of payment, in the event (i) such prepayment is required by any order of a court
or governmental agency or authority or (ii) in the event of the declaration by
the Administrative Agent, pursuant to section 8.2, prior to the Project
Construction Completion Date, of an Event of Default which shall be continuing
if following such declaration of an Event of Default there shall have been
proposed by the Borrower, and transmitted to the Lenders, in good faith a
proposed cure of such Event of Default which proposed cure the Lenders shall
have rejected in writing or shall have failed to respond to within ten days
after receipt of the same in writing. In the event of any prepayment under this
section 1.9, the Commitments of the Lenders shall forthwith be terminated.
(c) All prepayments made under this section 1.9 or under section
1.10 or 1.11 shall be made, as amongst the Lenders, pro rata in accordance with
their Pro Rata Shares and shall be accompanied by the payment of accrued
interest to the date of the prepayment on the principal amount being prepaid
plus, in the case of a prepayment of LIBOR Rate Loans, payment of any amount
payable pursuant to section 1.14(d). In addition, each prepayment (other than a
prepayment permitted under section 1.2(i), 1.3(b), clause (i) of section 1.9(b),
1.10, 1.11 or 11.20(b)) shall be accompanied by a prepayment penalty equal to
the product of (x) the principal amount being prepaid multiplied by (y) the
percentage which shall be (A) 1.5% in the case of a prepayment made on or before
the second anniversary of the Basic Loan Commencement Date, (B) 1% in the case
of a prepayment made on a date which is after the second anniversary of the
Basic Loan Commencement Date but is on or before the third anniversary of the
Basic Loan Commencement Date and (C) nil after the third anniversary of the
Basic Loan Commencement Date.
(d) For the avoidance of doubt, no Collateral shall be released
from the Lien hereof on the occasion of any partial prepayment hereunder.
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1.10 Mandatory Prepayments and Commitment Reductions from Asset Sale
Proceeds.
(a) Not later than the first Business Day following receipt of
any Asset Sale Proceeds (other than Excepted Asset Sale Proceeds) in respect of
any Asset Sale of units or items of the Collateral, the Borrowers shall prepay
the Obligations, such prepayment to be applied in the manner specified in
section 1.13(b) and to be in an amount equal to the amount of such Asset Sale
Proceeds together with interest accrued to the date of payment on the principal
amount being prepaid. If the prepayment shall occur prior to the date of the
Basic Loans, the Commitments shall be permanently reduced, pro rata as amongst
the Lenders, in accordance with their Pro Rata Shares, in an aggregate amount
equal to the amount of such Asset Sale Proceeds applied to repay the principal
amounts of the Loans.
(b) (i) Notwithstanding the provisions of section 1.10(a) but
subject to section 1.22(b), the Borrowers may, upon compliance with the
provisions of this section 1.10(b), elect not to apply the Asset Sale Proceeds
resulting from a sale of individual units or items of furniture and equipment
included in the Collateral to the prepayment of the Loans if (A) such Asset Sale
Proceeds are intended to be reinvested, not later than six months after the
sale, in other units or items of equipment, of good quality and generally of the
type described in Annex B and which is otherwise reasonably satisfactory to the
Agents as Collateral, and is useful and to be used in the operation of the
Project, in which other units or items the Administrative Agent is to have a
perfected security interest for the benefit of the Lenders, (B) the units or
items which are sold are sold for a consideration consisting solely of cash, (C)
such Asset Sale Proceeds are deposited, on the same day as received, in a
separate and segregated interest-bearing cash collateral account maintained by
the Administrative Agent and under its exclusive dominion and control, subject
to the Lien of this Agreement and otherwise free and clear of Liens, (D) there
has not occurred any Event of Default or Default which is continuing unremedied
and (E) the Administrative Agent has received an Officers' Certificate to the
foregoing effects.
(ii) Not later than six months after the date of sale,
such Asset Sale Proceeds shall be reinvested in replacement furniture and
equipment (collectively, the "Replacement Equipment") which (A) is useful and to
be used in the operation of the Project, (B) is of good quality and generally of
the type described in Annex B and is otherwise reasonably satisfactory to the
Agents as Collateral, (C) is free and clear of all Liens and rights of others
(except only Liens in favor of the Administrative Agent for the benefit of the
Lenders), (D) was purchased in an arm's length transaction, (E) has been
inspected and found to conform in all material respects to its description in
the invoices and shipping documents related thereto, (F) has been delivered to
and is physically located at the Site of the Project and has been installed, or
is being held in safe custody pending installation, at the Site of the Project
and, if held in custody, is covered by proper warehouse receipts all of which
have been delivered to the Administrative Agent properly and effectively
endorsed to it, (G) is covered by all applicable manufacturers' warranties and
casualty insurance, and (H) has not
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been materially damaged, is in good and serviceable condition and otherwise
complies with all representations and warranties set forth herein which may be
applicable to it.
(iii) If the Borrower Representative within six months
after the sale of the original units or items of Collateral furnishes to the
Administrative Agent evidence reasonably satisfactory to the Administrative
Agent of the satisfaction of the conditions set forth in clauses (A) through (H)
of the preceding subsection 1.10(b)(ii), together with an Officers' Certificate
to such effects and the further effect that there has not occurred any Event of
Default or Default which continues unremedied and accompanied by copies of all
applicable purchase orders, purchase contracts, paid invoices, bills of sale,
shipping documents, insurance certificates and other appropriate documentation,
and by evidence of the due filing, in such offices and jurisdictions as the
Administrative Agent may reasonably require, of Uniform Commercial Code
financing statement amendment forms relating to the Replacement Equipment, and
the completion of all other actions, if any, necessary to perfect the security
interest of the Administrative Agent hereunder for the benefit of the Lenders in
the Replacement Equipment, then, if there be no Event of Default or Default
which is continuing, the Administrative Agent shall release to the Borrowers,
free of the Lien of this Agreement, out of the sums held in the cash collateral
account representing the Asset Sale Proceeds deposited therein and the income
and proceeds thereof, an amount equal to the total invoiced cost of the
Replacement Equipment but in no event more than the aggregate of the Asset Sale
Proceeds deposited therein and the income and proceeds thereof. The portion of
the total invoiced cost of the Replacement Equipment which consists of freight,
installation, sales taxes and other such costs shall not exceed 14% of the total
invoiced costs.
(iv) All sums, if any, remaining on deposit in the cash
collateral account established pursuant to this subsection 1.10(b) shall, on the
date which is six months after the date of the sale of units or items of
Collateral generating the Asset Sale Proceeds, be applied to the prepayment of
the Obligations in the manner described in sections 1.10(a) and 1.13(b). For the
avoidance of doubt, in no event shall any portion of the Collateral be sold
except for a consideration consisting entirely of cash.
(v) From and after the delivery of the Replacement
Equipment to the Site of the Project, such Replacement Equipment shall become
and thereafter be a part of the Collateral hereunder for all purposes hereof,
automatically and without the execution and delivery of any further documents or
instruments, but upon request of the Administrative Agent the Borrowers will
execute and deliver all such other and further documents and instruments, and do
and perform all such other and further acts and things, as the Administrative
Agent may reasonably request in order to vest more fully in and assure to the
Administrative Agent the Lien created by this Agreement or intended so to be in
and to the Replacement Equipment. Any Asset Sale Proceeds permitted under this
section 1.10(b) not required to be applied to the prepayment of the Loans are
herein referred to as "Excepted Asset Sale Proceeds."
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1.11 Mandatory Prepayments and Commitment Reductions from Loss Net
Proceeds.
(a) No later than the second Business Day after the date on which
Loss Net Proceeds (other than Excepted Loss Proceeds) resulting from an Event of
Loss with respect to any of the Collateral ("Collateral Loss Net Proceeds")
become available for application to the prepayment of the Obligations, the
Borrowers shall prepay the Obligations, such prepayment to be applied in the
manner specified in section 1.13(b) and to be in an amount equal to the amount
of such Loss Net Proceeds (other than Excepted Loss Proceeds), plus interest
accrued to the date of payment on the principal amount being prepaid. If the
prepayment shall occur prior to the date of the Basic Loans, the Commitments
shall be permanently reduced, pro rata as amongst the Lenders in accordance with
their Pro Rata Shares, in an aggregate amount equal to the amount of Collateral
Loss Net Proceeds (other than Excepted Loss Proceeds) so received and applied to
the payment of principal.
(b) (i) Notwithstanding the provisions of section 1.11(a) but
subject to section 1.22(b), the Borrowers may, upon compliance with the
provisions of this section 1.11(b), elect not to apply the Collateral Loss Net
Proceeds resulting from an Event of Loss to the prepayment of the Obligations to
the extent that (i) the Borrowers intend to repair, restore or rebuild the
Project and in such connection to apply the Collateral Loss Net Proceeds and the
income and proceeds thereof to acquire units or items of furniture and equipment
useful and to be used in the operation of the Project following the repair,
restoration or reconstruction thereof in all of which units or items the
Administrative Agent shall have a first perfected security interest for the
benefit of the Lenders, (ii) all Loss Proceeds, net of the expenses of the
Lender Parties, if any, in adjusting and collecting the same (the "Loss Net
Proceeds"), which pertain to the Collateral, are deposited, on the same day as
received, in a separate and segregated interest-bearing cash collateral account
maintained by the Administrative Agent and under its exclusive dominion and
control, subject to the Lien of this Agreement and otherwise free and clear of
Liens, (iii) there has not occurred any Event of Default or Default which is
continuing unremedied and (iv) within 30 days after the Event of Loss the
Borrowers have furnished to the Administrative Agent an Officers' Certificate to
the foregoing effects.
(ii) In such event, the Administrative Agent shall, so
long as the Borrowers shall remain in compliance with their obligations
hereunder, hold the Collateral Loss Net Proceeds, and the income and proceeds
thereof, in such cash collateral account for application in the manner provided
in this section 1.11(b). Within 180 days after the date of the above-mentioned
Event of Loss, the Borrowers shall deliver to the Administrative Agent an
Officers' Certificate specifying either (A) that the Borrowers (i) have
determined to effect, and have made satisfactory arrangements to obtain the
funds required to effect, the repair, restoration or reconstruction work
necessary to enable the Project to resume normal operations in the future, (ii)
have obtained (except to the extent that the failure to do so would not prevent
the conditions set forth in section 2.3(b) from being satisfied) all required
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consents and approvals of all Project lenders and others, and all required
Permits of Governmental Authorities, necessary to enable the repair, restoration
or reconstruction work to proceed and (iii) have received from their architects
and their insurance, restoration and construction consultants reasonable
assurances (copies of which shall accompany such Officers' Certificate)
concerning the feasibility of the repair, restoration or reconstruction program,
and that there has not occurred any Event of Default or Default which is
continuing, or (B) that the Borrowers have elected not to repair, restore or
rebuild the Project; provided, however, that if the total cost of repairing,
restoring and reconstructing the damage or loss (including but not limited to
the damage or loss to the Collateral) produced by the Event of Loss is neither
in excess of $1,500,000 nor, when added to the corresponding costs with respect
to all other Events of Loss occurring during the preceding twelve months, in
excess of $6,000,000 in the aggregate, then in lieu of including in such
Officers' Certificate evidence of compliance with the requirements specified in
subclauses (i), (ii) and (iii) of clause (A), the Borrowers may in the Officers'
Certificate delivered pursuant to such clause (A) set forth the evidence
necessary to demonstrate that such costs are within such dollar limits. If the
Borrowers shall deliver an Officers' Certificate to the effect set forth in
clause (B), or shall fail to deliver any such Officers' Certificate within the
180-day time period referred to in the preceding sentence, the Administrative
Agent promptly thereafter shall apply the balance in the cash collateral account
referred to above to the prepayment of the Obligations in the manner specified
in sections 1.11(a) and 1.13(b).
(iii) Provided the Borrowers shall have complied with the
provisions of section 1.11(b)(ii) and shall have delivered to the Administrative
Agent a list of replacement units and items of furniture and equipment (of good
quality, substantially equal aggregate value with the aggregate value of the
units and items damaged or destroyed in the Event of Loss and otherwise
reasonably satisfactory to the Administrative Agent as collateral (collectively,
the "Replacement Equipment")) and there shall not have occurred any Event of
Default or Default which is continuing, then the Administrative Agent shall
continue to hold the Collateral Loss Net Proceeds and the income and proceeds
thereof in the cash collateral account referred to above and shall from time to
time make disbursements therefrom, under arrangements to be mutually agreed upon
consistent with the conditions and arrangements set forth in sections 1.2(a)
through (e) and 1.10(b), to pay or reimburse to Borrowers for paying the costs
of the Replacement Equipment in all of which the Administrative Agent shall have
for the benefit of the Lenders a first perfected security interest, provided
that the Administrative Agent shall have received evidence reasonably
satisfactory to it that all costs associated with obtaining the Replacement
Equipment in excess of the balance in the cash collateral account referred to
above have first been paid from other sources.
(iv) Upon completion of the repair, restoration or
reconstruction program, all amounts, if any, remaining in the cash collateral
account shall be applied to the prepayment of the Obligations in the manner
specified in sections 1.11(a) and 1.13(b). Any
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Loss Net Proceeds that are not required under this section 1.11(b) to be applied
to the prepayment of the Obligations are herein referred to as "Excepted Loss
Proceeds."
1.12 Calculations of Net Proceeds Amounts. Contemporaneously with any
prepayment made pursuant to section 1.10 or 1.11, the Borrower Representative
shall deliver to the Administrative Agent an Officers' Certificate setting forth
a calculation of the amount of the Asset Sale Proceeds or Collateral Loss Net
Proceeds, as the case may be, the receipt of which occasioned such prepayment
and the portion thereof being applied to such prepayment. In the event that the
Borrowers shall subsequently determine that the actual amount of the Asset Sale
Proceeds or Collateral Loss Net Proceeds required to be applied to the
prepayment was greater than the amount set forth in such Officers' Certificate,
the Borrowers shall promptly make an additional prepayment of the Obligations in
an amount equal to the amount of such excess, and the Borrower Representatives
shall contemporaneously therewith deliver to the Administrative Agent a revised
Officers' Certificate setting forth a calculation of the additional Collateral
Loss Net Proceeds resulting in such excess. In all events, amounts prepaid may
not be reborrowed hereunder.
1.13 General Provisions Regarding Payments.
(a) Manner and Time of Payment, etc. All payments (including
prepayments) by the Borrowers of principal, interest, fees and other Obligations
hereunder or on the Notes shall be made in lawful money of the United States and
in immediately available funds, without defense, setoff or counterclaim, free of
any restriction or condition and delivered to the Administrative Agent at the
offices of Bankers Trust New York at 1 Bankers Trust Plaza, New York, New York
10006, for the account of the Administrative Agent for the accounts of the
Lenders not later than 12:00 noon (New York City time) on the due date. All
payments shall be made in the form of cash or wire or other electronic transfers
of immediately available funds. For purposes of computing interest and fees, all
payments shall be deemed received by the Administrative Agent when the same
shall have been deposited in the account of the Administrative Agent at the
offices of Bankers Trust New York aforesaid. Each payment received by the
Administrative Agent under this Agreement or any Note to or for the account of
any Lender shall be applied by the Administrative Agent to the Loan or other
Obligation in respect of which such payment is made. Funds received by the
Administrative Agent after 12:00 noon (New York City time) on the due date shall
be deemed to have been paid by the Borrowers on the next succeeding Business
Day, but for these purposes funds shall be deemed received on a given date as
soon as the Borrower Representative shall have furnished to the Administrative
Agent advice of such funds via the Federal Reserve wire transfer system to the
Administrative Agent at the offices aforesaid and shall have advised the
Administrative Agent of the complete eighteen-digit Federal Reserve confirmation
number pertaining to such wire transfer.
(b) Application and Allocation of Payments. All payments
(including prepayments) made by or for the account of the Borrowers hereunder
shall, irrespective of
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any allocation expressed by the Borrowers or either of them, be applied in the
following order: (i) to the payment of the Agents' and the Lenders' fees then
due and payable, if any, (ii) to payment or reimbursement of the reasonable
costs and expenses referred to in section 11.4, (iii) to then due and payable
interest payments on the Loans, (iv) to the payment of any remaining obligations
then due to the Lenders other than fees, expenses and interest and principal
payments, and (v) to the payment of principal then due and payable on the Loans.
Subject to the foregoing, all payments in respect of the principal amount of any
Loan shall include payment of accrued interest on the principal amount being
repaid or prepaid. Each Borrower irrevocably waives the right otherwise to
direct the application of any and all payments at any time or times hereafter
received from or on behalf of the Borrowers.
(c) Apportionment of Payments. Principal and interest payments in
respect of the Loans and Commitment Fee payments shall be apportioned amongst
all outstanding Loans proportionately to the Lenders' respective Pro Rata
Shares. The Administrative Agent shall promptly distribute to each Lender, at
its address set forth beneath its name on the appropriate signature page hereof
or at such other address as such Lender may hereafter request, its Pro Rata
Share of all such payments received by the Administrative Agent and the
Commitment Fees of such Lender when received by the Administrative Agent
pursuant to section 1.8. Notwithstanding the foregoing provisions of this
section 1.13(c), if, pursuant to the provisions of section 1.14(c), any Notice
of Interest Rate Election is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any LIBOR
Rate Advances, the Administrative Agent shall give effect thereto in
apportioning payments received thereafter.
(d) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder
or of the Commitment Fees hereunder, as the case may be.
(e) Notation of Payment. Each Lender agrees that before disposing
of any Note held by it, or any part thereof (other than by granting one or more
participation therein), such Lender will make a notation thereon of all Interim
Loan Advances and the Basic Loan, if any, then evidenced by that Note, of all
principal payments previously made thereon, and of the date to which interest
thereon has been paid, but the failure to make (or any error in the making of) a
notation of any of the foregoing on such Note shall not limit or otherwise
affect the obligations of the Borrowers hereunder or on such Note with respect
to any Interim Loan Advances or Basic Loan, if any, or any payments of the
principal of or interest on such Note.
1.14 Special Provisions Governing LIBOR Rate Loans. Notwithstanding any
other provision of this Agreement to the contrary, the following provisions
shall govern with respect to LIBOR Rate Loans as to the matters covered thereby:
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(a) Determination of Applicable Interest Rate. As soon as
practicable after 10:00 A.M. (New York City time) on each Interest Rate
Determination Date, the Administrative Agent shall determine (which
determination shall, absent manifest error, be final, conclusive and binding
upon all parties) the interest rate that shall apply to the LIBOR Rate Loans for
which an interest rate is then being determined for the applicable Interest
Period. The Administrative Agent shall promptly notify the Borrower
Representative of the interest rate thus determined.
(b) Inability to Determine Applicable Interest Rate. In the event
that the Administrative Agent shall have determined, or shall have been notified
by the Requisite Lenders that they have determined (which determination in
either case shall be final and conclusive and binding upon all parties hereto),
on any Interest Rate Determination Date with respect to the LIBOR Rate Loans,
that, by reason of circumstances affecting the interbank LIBOR market, adequate
and fair means do not exist for ascertaining the interest rate applicable to
such Loans on the basis provided for in the definition of Adjusted LIBOR Rate,
the Administrative Agent shall on such date give notice (by facsimile or by
telephone confirmed in writing) to the Borrowers and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to, LIBOR
Rate Loans until such time as the Administrative Agent shall have notified the
Borrowers and the Lenders that the circumstances giving rise to such notice no
longer exists and (ii) any Notice of Borrowing or Notice of Interest Rate
Election given by the Borrowers with respect to the Loans in respect of which
such determination was made shall be deemed to be made with respect to Base Rate
Loans.
(c) Illegality or Impracticability of LIBOR Rate Loans. In the
event that on any date any Lender shall have determined (which determination
shall be final and conclusive and binding upon all parties hereto but shall be
made only after consultation with the Borrowers and the Administrative Agent)
that the making, maintaining or continuing of its LIBOR Rate Loans (i) has
become unlawful as a result of compliance by such Lender in good faith with any
law, treaty, governmental rule, regulation, guideline or order not in effect on
the date such Person became a Lender (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful), or (ii)
would cause such Lender material financial hardship as a result of contingencies
occurring after the date of this Agreement which materially and adversely affect
the interbank LIBOR market or the position of such Lender in such market, then,
and in any such event, such Lender shall be an "Affected Lender" and it shall on
the date in question give notice (by facsimile or by telephone confirmed in
writing) to the Borrowers and the Administrative Agent of such determination
(which notice the Administrative Agent shall promptly transmit to each other
Lender). Thereafter, (1) the obligation of the Affected Lender to make Loans as,
or to convert Loans to, LIBOR Rate Loans shall be suspended until such notice
shall be withdrawn by the Affected Lender (which withdrawal such Affected Lender
shall effect at the earliest practicable date), (2) to the extent such
determination by the Affected Lender relates to a
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LIBOR Rate Loan then being requested by the Borrowers pursuant to a Notice of
Borrowing or a Notice of Interest Rate Election, the Affected Lender shall make
such Loan or (or as the case may be convert such Loan to) a Base Rate Loan, (3)
the Affected Lender's obligation to maintain its outstanding LIBOR Rate Loans
(the "Affected Loans") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law to do so, and (4) the Affected Loans shall
automatically convert to Base Rate Loans on the date of such termination. Except
as provided in the immediately preceding sentence, nothing in this section
1.14(c) shall affect the obligation of any Lender other than an Affected Lender
to make or maintain Loans as, or to convert Loans to, LIBOR Rate Loans in
accordance with the terms of this Agreement.
(d) Compensation for Breakage or Non-Commencement of Interest
Periods. The Borrowers shall compensate each Lender, upon written request by
that Lender (which request shall set forth the basis for requesting the relevant
amount), for all reasonable losses, expenses and liabilities (including any
interest paid by the Lender to lenders of funds borrowed by it to make or carry
its LIBOR Rate Loans and any loss, expense or liability sustained by that Lender
in connection with the liquidation or re-employment of such funds) which that
Lender may sustain: (i) if for any reason (other than a default by that Lender)
a borrowing of any LIBOR Rate Loan does not occur on a date specified therefor
in a Notice of Borrowing or a telephonic request for a borrowing, as applicable,
or a conversion to or continuation of any LIBOR Rate Loan does not occur on the
anticipated date of conversion or continuation, or (ii) if any prepayment
(including any prepayment pursuant to section 1.9(a)), or other principal
payment or any conversion of any of its LIBOR Rate Loans occurs on a date other
than the last day of an Interest Period applicable to that Loan, or (iii) if any
prepayment of any of its LIBOR Rate Loans is not made on any date specified in a
notice of prepayment given by the Borrowers, or (iv) as a consequence of any
default by the Borrowers in the repayment of the LIBOR Rate Loans when required
by the terms of this Agreement.
(e) Booking of LIBOR Rate Loans. Any Lender may make, carry or
transfer LIBOR Rate Loans at, to or for the account of any of its branch offices
or the office of an Affiliate of that Lender.
(f) Assumptions Concerning Funding of LIBOR Rate Loans.
Calculations of all amounts payable to a Lender under this section 1.14 and
under section 1.15(a) shall be made as though that Lender had actually funded
each of its relevant LIBOR Rate Loans through the purchase of a 30-day
eurodollar deposit bearing interest at the rate obtained pursuant to clause (i)
of the definition of Adjusted LIBOR Rate in an amount equal to the amount of
such LIBOR Rate Loan and through the transfer of such LIBOR deposit from an
offshore office of that Lender to a domestic office of that Lender in the United
States of America; provided, however, that each Lender may fund each of its
LIBOR Rate Loans in any manner it sees fit and the foregoing assumptions shall
be utilized only for the purposes of calculating amounts payable under this
section 1.14 and under section 1.15(a). Such calculation shall also be made on
the assumption that the proceeds of any prepayment made
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prior to the last day of the current Interest Period were reinvested at a rate
equal to the yield on the United States Treasury bill with the maturity that
most closely approximates the last day of such Interest Period, as quoted by
Telerate News Service (page 5).
(g) LIBOR Rate Loans after Default. After the occurrence and
during the continuation of a Default or an Event of Default, (i) the Borrowers
may not elect to have any Loan made or maintained as, or converted to, a LIBOR
Rate Loan following the expiration of any Interest Period then in effect for
that Loan and (ii) subject to the provisions of section 1.14(d), any Notice of
Borrowing or Notice of Interest Rate Election given by the Borrowers with
respect to a requested Borrowing or conversion or continuation that has not yet
occurred shall be deemed made with respect to Base Rate Loans.
1.15 Increased Costs; Taxes; Capital Adequacy.
(a) Compensation for Increased Costs and Taxes. Subject to the
provisions of section 1.15(b) (which shall be controlling with respect to the
matters covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending
office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account
of, or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to LIBOR Rate Loans that are
reflected in the definition of Adjusted LIBOR Rate); or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder or the interbank LIBOR market;
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and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, the Borrowers shall promptly pay to
such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to the Borrowers (with a copy to the
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
section 1.15(a), which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
(b) Withholding of Taxes.
(i) Payment to Be Free and Clear. All sums payable by or
on behalf of the Borrowers under this Agreement or any Note or other Loan
Documents shall (except to the extent required by law) be paid free and clear
of, and without any deduction or withholding on account of, any present or
future Tax (other than a Tax on the overall net income of any Lender) imposed,
levied, collected, withheld or assessed by or within the United States of
America or any political subdivision in or of the United States of America or
any other jurisdiction from or to which a payment is made by or on behalf of the
Borrowers or by any federation or organization of which the United States of
America or any such jurisdiction is a member at the time of payment, all such
non-excluded Taxes being hereinafter collectively referred to as "Included
Taxes".
(ii) Grossing-up of Payments. If the Borrowers or any
other Persons are required by law to make any deduction or withholding on
account of any such Included Tax from any sum paid or payable by or on behalf of
the Borrowers to the Administrative Agent or any Lender under any of the Loan
Documents:
(1) the Borrowers shall notify the Administrative
Agent of any such requirement and of any change in any such requirement
as soon as the Borrowers become aware of it;
(2) the Borrowers shall pay each such Included Tax
before the date on which penalties attach thereto, such payment to be
made (if the liability to pay is imposed on the Borrowers) for their
own accounts or (if that liability is imposed on the Administrative
Agent or such Lender, as the case may be) on behalf of and in the name
of the Administrative Agent or such Lender;
(3) the sum payable by the Borrowers in respect of
which the relevant deduction, withholding or payment is required shall
be increased to the
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extent necessary to ensure that, after the making of that deduction,
withholding or payment, the Administrative Agent or such Lender, as the
case may be, receives on the due date a net sum equal to what it would
have received had no such deduction, withholding or payment been
required or made; and
(4) within 30 days after paying any sum from which
either Borrower is required by law to make any deduction or
withholding, and within 30 days after the due date of payment of any
Included Tax which either Borrower is required by clause (2) above to
pay, the Borrowers shall deliver to the Administrative Agent evidence
reasonably satisfactory to the Administrative Agent of such deduction,
withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (3) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof)
and after the date of the proper instrument of assignment pursuant to which such
Lender became a Lender (in the case of each other Lender), in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of such
assignment instrument, as the case may be, in respect of payments to such
Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(1) Each Lender that is organized under the laws of
any jurisdiction other than the United States or any state or other political
subdivision thereof (for purposes of this section 1.15(b)(iii), a "Non-US
Lender") shall deliver to the Administrative Agent for transmission to the
Borrowers, on or prior to the Closing Date (in the case of each Lender listed on
the signature pages hereof), and on or prior to the date of the proper
instrument of assignment pursuant to which it becomes a Lender (in the case of
each other Lender), and at such other times as may be necessary in the
determination of the Borrowers or the Administrative Agent (each in the
reasonable exercise of its discretion), (x) two original copies of Internal
Revenue Service Form 1001 or 4224 (or any successor forms), properly completed
and duly executed by such Lender, together with any other certificate or
statement of exemption required under the IRC or the regulations issued
thereunder to establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to any payments to
such Lender of principal, interest, fees or other amounts payable under any of
the Loan Documents or (y) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the IRC and cannot deliver either Internal
Revenue Service Form 1001 or 4224 pursuant to clause (x) above, a Certificate re
Non-Bank Status together with two original copies of Internal Revenue Service
Form W-8 (or any successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of exemption required
under the IRC or the regulations issued
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thereunder to establish that such Lender is not subject to deduction or
withholding of United States federal income with respect to any payments to such
Lender of interest payable under any of the Loan Documents.
(2) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States federal income tax
withholding matters pursuant to section 1.15(b)(iii)(1) hereby agrees, from time
to time after the initial delivery by such Lender of such forms, certificates or
other evidence, whenever a lapse in time or change in circumstances renders such
forms, certificates or other evidence obsolete or inaccurate in any material
respect, that such Lender shall promptly (x) deliver to the Administrative Agent
for transmission to Borrowers two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two original
copies of Internal Revenue Service Form W-8, as the case may be, properly
completed and duly executed by such Lender, together with any other certificate
or statement of exemption required in order to confirm or establish that such
Lender is not subject to deduction or withholding of United States federal
income tax with respect to payments to such Lenders under the Loan Documents or
(y) notify the Administrative Agent and the Borrowers of its inability to
deliver any such forms, certificates or other evidence.
(3) The Borrowers shall not be required to pay any
additional amount to any Non-US Lender under clause (3) of section 1.15(b)(ii)
if such Lender shall have failed to satisfy the requirements of clause (1) or
(2)(x) of this section 1.15(b)(iii); provided that if such Lender shall have
satisfied the requirements of section 1.15(b)(iii)(1) on the Closing Date (in
the case of each Lender listed on the signature pages hereof) or on the date of
the proper instrument of assignment pursuant to which it became a Lender (in the
case of each other Lender), nothing in this section 1.15(b)(iii)(3) shall
relieve either Borrower of its obligation to pay any additional amounts pursuant
to clause (3) of section 1.15(b)(ii) in the event that, as a result of any
change in any applicable law, treaty or governmental rule, regulation or order,
or any change in the interpretation, administration or application thereof, such
Lender is no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such Lender is not
subject to withholding as described in section 1.15(b)(iii)(1).
(c) Other Taxes, etc. In addition to the foregoing, the Borrowers
agree to pay any and all present or future stamp, recording or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any of the other Loan Documents
(hereinafter referred to as "Other Taxes"). Each Borrower shall within ten days
after demand therefor, indemnify and pay to each Lender for the full amount of
Other Taxes (including without limitation any taxes imposed by any jurisdiction
on amounts payable under this section 1.15(c)) paid by such 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
calculated or asserted.
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Within 30 days after the date of any such payment of Other Taxes, the Borrowers
shall furnish to the Administrative Agent, at its address referred to in section
11.12, the original or a certified copy of a receipt evidencing payment thereof.
(d) Capital Adequacy Adjustment. If any Lender shall have
determined that the adoption, effectiveness, phase-in or applicability after the
date hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans or Commitments or participations therein or other
obligations hereunder with respect to the Loans to a level below that which such
Lender or such controlling corporation could have achieved but for such
adoption, effectiveness, phase-in, applicability, change or compliance (taking
into consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy), then from time to time, within five Business
Days after receipt by the Borrowers from such Lender of the statement referred
to in the next sentence, the Borrowers shall pay to such Lender such additional
amount or amounts as will compensate such Lender or such controlling corporation
on an after-tax basis for such reduction. Such Lender shall deliver to the
Borrowers (with a copy to the Administrative Agent) a written statement, setting
forth in reasonable detail the basis of the calculation of such additional
amounts, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
1.16 Obligation of Lenders to Mitigate. Each Lender agrees that, as
promptly as practicable after the officer of such Lender responsible for
administering the Loans of such Lender becomes aware of the occurrence of an
event or the existence of a condition that would cause such Lender to become an
Affected Lender or that would entitle such Lender to receive payments under
section 1.15, it will, to the extent not inconsistent with the internal policies
of such Lender and any applicable legal or regulatory restrictions, use
reasonable efforts (i) to make, issue, fund or maintain the Commitments of such
Lender or the affected Loans of such Lender through another lending office of
such Lender or (ii) to take such other measures as such Lender may deem
reasonable, if as a result thereof the circumstances which would cause such
Lender to be an Affected Lender would cease to exist or the additional amounts
which would otherwise be required to be paid to such Lender pursuant to section
1.15 would be materially reduced and if, as determined by such Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans through such other lending office or in accordance with such other
measures, as the case may be, would not otherwise materially adversely affect
such Commitments or Loans or the interests of such Lender; provided that such
Lender will not be obligated to utilize such other lending office
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pursuant to this section 1.16 unless the Borrowers agree to pay all incremental
expenses incurred by such Lender as a result of utilizing such other lending
office as described in clause (i) above. A certificate as to the amount of any
such expenses payable by the Borrowers pursuant to this section 1.16 (setting
forth in reasonable detail the basis for requesting such amount) submitted by
such Lender to the Borrowers (with a copy to the Administrative Agent) shall be
conclusive absent manifest error. Each Lender agrees that it will not request
compensation under section 1.15 unless such Lender requests compensation from
borrowers, under other lending arrangements with such Lender, who are similarly
situated.
1.17 Obligations Joint and Several.
(a) Anything herein to the contrary notwithstanding, each
Borrower hereby agrees and acknowledges that the obligations of each Borrower
for payment of the Obligations shall be joint and several with the obligations
of the other Borrower hereunder regardless of which Borrower actually receives
the proceeds or benefits of any borrowing hereunder. Each Borrower hereby agrees
and acknowledges that it will receive substantial benefits from the Loans and
credit facilities made available under this Agreement.
(b) Each Borrower agrees that its joint and several obligation to
pay all Obligations hereunder is irrevocable, absolute, independent and
unconditional and shall not be affected by any circumstance which constitutes a
legal or equitable discharge of a guarantor or surety other than the
indefeasible payment in full of the Obligations, and the liability of each
Borrower with respect to the Obligations shall not be affected, reduced or
impaired by (i) consideration of the amount of proceeds of the Loans received by
any Borrower relative to the aggregate amount of the Loans, (ii) the dissolution
or termination of, or any increase, decrease or change in personnel of, either
Borrower, (iii) the insolvency or business failure of, or any assignment for the
benefit of creditors by, or the commencement of any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceedings by or against the
other Borrower or (iv) the appointment of a receiver for, or the attachment,
restraint of or making or levying of any order of court or legal process
affecting, the property of the other Borrower. Each Borrower agrees that a
separate action or actions may be brought and prosecuted against such Borrower
whether or not action is brought against the other Borrower and whether or not
the other Borrower is joined in any such action or actions. Either Borrower's
payment of a portion, but not all, of the Obligations shall in no way limit,
affect, modify or abridge such Borrower's liability for that portion of the
Obligations which is not paid.
(c) Each Borrower hereby waives any right to require the
Administrative Agent or any Lender, as a condition of payment or performance of
the Obligations by such Borrower, to proceed against the other Borrower or any
other Person, to exhaust any security held from any Borrower or pursue any other
remedy in the power of the Administrative Agent or any Lender. Each Borrower
hereby waives any defense arising by reason of
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incapacity, lack of authority or any disability or other defense that may be
available to the other Borrower and any defenses or benefits that may be derived
or afforded by law which would limit the liability of or exonerate any guarantor
or surety with respect to the Obligations, or which may conflict with the terms
and provisions of this Agreement, other than the indefeasible payment in full of
the Obligations.
(d) Any Indebtedness of a Borrower now or hereafter held by the
other Borrower is hereby subordinated in right of payment to the Obligations.
1.18 Use of Proceeds. All proceeds of each Interim Loan Advance made
hereunder shall be applied by the Borrowers to pay the purchase price of units
or items of new furniture and equipment or to repay (i) any advance previously
made under the Bank Credit Agreement or (ii) funds drawn pursuant to section
2.2.3(b)(ii) of the Disbursement Agreement, as and to the extent provided in
section 1.2(c) hereof, to pay the costs of any of such units or items (including
deposits on and payments on account of the purchase price therefor). No portion
of the proceeds of any Interim Loan Borrowing or of any Basic Loan under this
Agreement shall be used by any of the Borrowers and their Affiliates in any
manner that might cause the borrowing or the application of the proceeds thereof
to violate any of Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate any
provision of the Securities Exchange Act of 1934, in each case as amended and in
effect on the date or dates of such borrowings and the use of such proceeds.
1.19 Monthly Accountings. The Administrative Agent will provide to the
Borrower Representative a monthly accounting of advances of the Interim Loans
and the Basic Loan and of principal, interest and fee payments hereunder. Each
and every such accounting shall (absent demonstrable error) be deemed final,
binding and conclusive on the Borrowers in all respects as to all matters
reflected therein, unless the Borrower Representative, within 30 days after the
date any such accounting is rendered, shall notify the Administrative Agent in
writing of any objection which the Borrowers may have to any such accounting,
describing the basis for such objection with specificity. In that event, only
those items (the "disputed items") expressly objected to in such notice shall be
deemed to be disputed by the Borrowers. The Administrative Agent's
determination, based upon the facts available and the submissions made in
support of the relevant objections, of any disputed item shall be entitled to a
rebuttable presumption of correctness.
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1.20 Indemnity.
(a) Each Borrower shall indemnify and hold each of the Lender
Parties and their respective Affiliates (including without limitation GECC
Capital Markets Group, Inc., in the case of General Electric Capital
Corporation), officers, directors, employees, attorneys, representatives and
agents (each, an "Indemnified Person") harmless from and against any and all
suits, actions, costs, fines, deficiencies, penalties, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigations or defense, including those
incurred upon any appeal) (each, a "Claim") which may be instituted or asserted
against or incurred by such Indemnified Person as the result of credit having
been extended under this Agreement or any other Loan Document or in connection
with or arising out of the transactions contemplated hereunder and thereunder,
the Fee Letter or the commitment letter or proposal letter related to this
Agreement, or any of the other Financing Agreements, and any actions or failures
to act in connection with any of the foregoing including those resulting from
disputes among the parties to any of the Loan Documents and any and all
Environmental Liabilities and Costs, provided that neither Borrower shall be
liable for any indemnification to such Indemnified Person with respect to any
portion of any such Claim which results solely from such Indemnified Person's
gross negligence, bad faith or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR
THIRD-PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED UNDER THE LOAN DOCUMENTS.
(b) In any suit, proceeding or action brought by any Lender Party
relating to any unit or item of equipment, or to any Document or other portion
of the Collateral for any sum owing thereunder, or to enforce any provision of
any such Document or any right otherwise related to or included in the
Collateral (including without limitation warranty claims), each Borrower shall
save, indemnify and keep harmless each Lender Party from and against all
expense, loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the obligor thereunder
arising out of a breach by either Borrower of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from either Borrower, and all
of such obligations of the Borrowers or either of them shall be and remain
enforceable against, and only against, the Borrowers and shall not be
enforceable against any Lender Party.
(c) Each Borrower hereby acknowledges and agrees that no Lender
Party (as of the date hereof) (i) is now or has ever been in control of any of
the Collateral or of the affairs of any of the Borrowers or their Affiliates or
(ii) has the capacity through the
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provisions of the Loan Documents to influence conduct with respect to the
ownership, operation or management of any of the Collateral, but the foregoing
is not intended to qualify the power and authority of the Administrative Agent
under section 1.2(i) or 5.16 hereof.
(d) Promptly after receipt by a person entitled to
indemnification by the Borrowers or any other person (in any event, the
"Indemnitor" or the "Indemnitors") under this section 1.20 or any other section
hereof (herein, an "Indemnified Person") of notice of its involvement in any
suit, proceeding or action of the kind described above, the Indemnified Person
shall, if a claim for indemnification in respect thereof is to be made against
the Indemnitors under this Agreement, notify the Indemnitors in writing of such
involvement. Failure by an Indemnified Person to so notify the Indemnitors shall
relieve the Indemnitors from the obligation to indemnify and reimburse the
Indemnified Person under this Agreement but only to the extent that the
Indemnitors suffer actual prejudice as a result of such failure. If an
Indemnified Person is entitled to indemnification under this Agreement with
respect to any suit, proceeding or action brought by a third party, the
Indemnitors shall be entitled to assume the defense of any such action or
proceeding with counsel reasonably satisfactory to the Indemnified Person. Upon
assumption by the Indemnitors of the defense of any suit, proceeding or action,
the Indemnified Person shall have the right to participate in such suit,
proceeding or action and to retain its own counsel, but the Indemnitors shall
not be liable for any legal fees and expenses of other counsel or the fees and
disbursements of other providers of professional services subsequently incurred
by such Indemnified Person in connection with the defense thereof unless (i) the
Indemnitors shall have agreed to pay such fees and expenses, (ii) the
Indemnitors shall have failed to employ counsel reasonably satisfactory to the
Indemnified Person in a timely manner, (iii) the Indemnified Person shall have
been advised by counsel that there are actual or potential conflicting interests
between the Indemnitors and the Indemnified Person, including situations in
which there are one or more legal defenses available to the Indemnified Person
that are different from or additional to those available to the Indemnitors, or
(iv) the suit, proceeding or action is of a criminal nature, provided, however,
that the Indemnitors shall not, in connection with any one such suit, proceeding
or action, or separate but substantially similar suits, proceedings or actions
arising out of the same general allegations, be liable for the legal fees and
expenses of more than one separate firm of attorneys at any time for all
Indemnified Persons, except to the extent that local counsel (limited to one
separate firm of attorneys in each applicable jurisdiction), in addition to its
regular counsel, is required in order to effectively defend against such suit,
proceeding or action. The Indemnitors shall not be required to indemnify any
Indemnified Person in the settlement of any suit, proceeding, action or
investigation (other than a criminal suit, proceeding, action or investigation)
entered into without the written consent of the Indemnitors.
1.21 Access. Each Borrower shall, and shall cause each of its
Subsidiaries to: (i) provide reasonable access during normal business hours to
the Lenders and any of their officers, employees and agents, as frequently as
the Lenders reasonably determine to be appropriate, upon reasonable advance
notice (unless a Default shall have occurred and be
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continuing, in which event no notice shall be required and the Lenders shall
have access at any and all times), to the properties and facilities of the
Borrowers or any of their Subsidiaries; (ii) permit the Lenders and any of their
officers, employees and agents to inspect, audit and make extracts from all of
such Borrower's records, files and books of account; and (iii) permit the
Lenders to review selected purchase orders and invoices for the Collateral to
verify payment and otherwise to conduct audits to inspect, review and evaluate
the Collateral, and each Borrower agrees to render to the Lenders, at such
Borrower's reasonable cost and expense, such clerical and other assistance as
may be reasonably requested with regard thereto, and to procure that, as needed,
its vendors provide such information concerning Collateral purchases as the
Administrative Agent may reasonably request. Each Borrower shall, and shall
cause each of its Subsidiaries to, make available to each of the Lenders and
their respective counsel, as quickly as practicable under the circumstances,
originals or copies of all books, records, board minutes, contracts, insurance
policies, environmental audits, business plans, files, financial statements
(actual and pro forma), filings with federal, state and local regulatory
agencies, and other instruments and documents which the Lenders may reasonably
request. Each Borrower shall deliver any document or instrument reasonably
necessary for the Lenders, as they may from time to time request, to obtain
records from any service bureau or other Person which maintains records for such
Borrower, and shall maintain duplicate records or supporting documentation on
media, including without limitation computer tapes and discs, owned by such
Borrower. Each Borrower shall instruct its certified public accountants and its
banking and other financial institutions to make available to the Lenders such
information and records concerning the Project and the Collateral as the Lenders
may reasonably request.
1.22 Security Interest in the Collateral.
(a) To secure the prompt and complete payment, performance and
observance of all of the Obligations, and to induce the Lenders to enter into
this Agreement and to make available to the Borrowers the Interim Loan Advances
and Basic Loans to be made by the Lenders, each Borrower hereby grants to the
Administrative Agent, for the pro rata benefit of the Lenders, a first priority
lien on and security interest in all of the Borrower's right, title and interest
in, to and under the following, whether now owned or hereafter acquired by or
arising in favor of such Borrower (including without limitation under any trade
styles), and whether owned, leased or consigned by or to such Borrower, and
regardless of where located (all of which are herein collectively referred to as
the "Collateral"):
(i) all of the Scheduled Equipment and each and every
item or unit thereof;
(ii) each and every item or unit of equipment acquired
in substitution or replacement for any item or unit of the Scheduled Equipment,
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including without limitation replacement units and items referred to in
sections 1.10 and 1.11;
(iii) all spare and other parts, attachments, components,
accessions, accessories, manuals, installation kits and the like
installed in or on or otherwise affixed or pertaining to any of the
Collateral referred to in clause (i) or (ii) above;
(iv) all Documents (including without limitation all
warehouse receipts, dock receipts, bills of lading and the like) and all
licenses and other rights under section 8.3 (excluding gaming licenses
and non-assignable software licenses referred to in Schedule 3.7), all
manufacturers' and other warranties, guarantees and service contracts,
and any and all software and firmware, and all other rights and
interests similar or related to any of the foregoing, covering all or
any portion of the Collateral referred to in clause (i), (ii) or (iii)
above;
(v) all cash collateral, if any, from time to held by the
Administrative Agent under any provision hereof; and
(vi) to the extent not otherwise included, all Proceeds
(including insurance and condemnation proceeds and proceeds of other
proceeds) of any of the foregoing and all accessories (including tools
specific to the included equipment) and accessions (excluding cash in
slot machines and the contents of minibars) to, substitutions and
replacements for each of the foregoing.
(b) Any provision of section 1.2(e), 1.2(f), 1.10(b) or 1.11(b)
to the contrary notwithstanding, in no event may any change in the composition
of the Collateral as set forth in Annex B, or as a result of any reinvestment of
Excepted Asset Sale Proceeds or Excepted Loss Proceeds, be made hereunder if
after giving effect to such change the sum of (i) the aggregate purchase price
of the portion of the Collateral which consists of gaming equipment, telephone
equipment or management information system (MIS) equipment plus (ii) the
aggregate value of the cash collateral, if any, then held by the Administrative
Agent hereunder would be less than 25% of the sum of (x) the aggregate value of
the cash collateral, if any, then held by the Administrative Agent hereunder
plus (y) the aggregate purchase price of all of the non-cash Collateral held
hereunder.
1.23 Rights of the Lender Parties, Limitations on the Obligations of
the Lender Parties.
(a) It is expressly agreed by the Borrowers that, anything herein
to the contrary notwithstanding, each Borrower shall remain liable under each of
its contracts and licenses pertaining to the Collateral or any unit or item
thereof to observe and perform all the conditions and obligations to be observed
and performed by it thereunder and no Lender Party shall have any obligation or
liability under any such contract or license by reason of or
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arising out of this Agreement or the granting hereunder of a security interest
therein or the receipt by any Lender Party pursuant hereto of any payment
relating to any such contract or license, nor shall any Lender Party be required
or obligated in any manner to perform or fulfill any of the obligations of
either Borrower under or pursuant to any such contract or license, or to make
any payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any such contract or license, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
(b) The Lenders shall have the right, at any time and from time
to time, but, so long as no Default or Event of Default shall have occurred and
then be continuing, at reasonable intervals, during normal business hours and
upon reasonable advance notice, to make physical verifications, inventories and
appraisals of the Collateral in any manner and through any medium that the
Administrative Agent may reasonably consider advisable, and the Borrowers agree
to furnish all such assistance and information as the Lenders may reasonably
require in connection therewith. The Administrative Agent may at any time, in
its own name or in the name of either Borrower, communicate with parties to any
such contracts, including the issuer of any such license, to verify with such
Persons, to Lenders' reasonable satisfaction, the existence, amount and terms of
any such contracts and licenses. Upon the occurrence and during the continuation
of any Event of Default, each Borrower, at its own expense, shall cause the
certified independent public accountant then engaged by such Borrower to prepare
and deliver to the Administrative Agent from time to time promptly upon
reasonable request of the Administrative Agent the results of any physical
verification of all or any portion of the Collateral made or observed by such
accountants when and if such verification is conducted.
2. CONDITIONS TO LOANS AND ADVANCES
The obligations of the Lenders to make the Interim Loan Advances and the
Basic Loans to be made by them hereunder are subject to the satisfaction of the
following conditions.
2.1 Conditions to the Initial Interim Loan Advances. The obligation of
each of the Lenders to make the initial Interim Loan Advance to be made by it on
the occasion of the first Borrowing hereunder is subject to prior or concurrent
satisfaction of each of the following conditions precedent (in addition to the
satisfaction of all of the conditions precedent specified in section 2.3
applicable to all Interim Loan Advances generally):
(a) This Agreement shall have been duly executed and delivered by
each of the Borrowers and the Lender Parties in such number of counterparts as
the Lenders may reasonably request, and each Lender shall have received a Note,
dated the Closing Date, payable to the order of such Lender in principal amount
equal to the Commitment of such
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Lender, duly executed by each of the Borrowers and otherwise in the form of
Exhibit B with blanks appropriately completed.
(b) Each of the Lenders shall have received:
(i) all of the documents, instruments, agreements and
other materials listed in the Schedule of Documents attached hereto as
Schedule 2.1 (b), each in form and substance reasonably satisfactory to
the Agents, and such other documents, instruments, certificates,
opinions and agreements as the Agents may reasonably request in
connection with the initial Interim Loan Advances; and
(ii) evidence reasonably satisfactory to the
Administrative Agent of the fulfillment and satisfaction (in each case,
without waiver or modification except as expressly consented to in
writing by the Requisite Lenders and except for waivers and
modifications of requirements at an earlier date which requirements were
fully met on a subsequent date prior to the initial Interim Loan
Advances) of each of the conditions precedent specified in section 3.1
of the Disbursement Agreement to the obligations of the lenders,
trustees and other funds providers referred to therein to make the
initial advance thereunder and each of the conditions precedent
specified in section 3.2 of the Disbursement Agreement to the
obligations of such parties to make any subsequent advances thereunder
which were made prior to or are being made contemporaneously with the
initial Interim Loan Advance hereunder, including copies of all
documents, instruments, certificates, opinions and agreements then or
theretofore delivered pursuant to such sections 3.1 and 3.2, all of
which shall, in the case of deliveries made on or after the date hereof,
be satisfactory in form and substance to the Administrative Agent.
(c) Each of the Lenders shall have received evidence reasonably
satisfactory to the Requisite Lenders that the Borrowers have obtained the
consent or approval of all Persons (including without limitation all requisite
Governmental Authorities) whose consent or approval may be required for the
valid and lawful execution and delivery of this Agreement and the other Loan
Documents, the making of the Interim Loan Advances and other extensions of
credit and the consummation of the other transactions contemplated hereby and
thereby except for Permits, licenses, orders and governmental authorizations
referred to in section 2.3(b) which as of the date in question have not yet been
obtained but are not then required (given the existing stage of development of
the Project) to be obtained by the Borrowers or any other Person in order to
satisfy the terms of the conditions set forth in section 2.3(b).
(d) Each of the Lender Parties shall have received evidence
reasonably satisfactory to the Agents that all of the insurance coverages and
policies required pursuant to section 5.4 have been obtained and are in full
force and effect, together with original counterparts of all loss payable,
additional insured and other clauses or endorsements in favor
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of the Lender Parties and each of them as may then be required under section
5.4, all of which shall be in form and substance satisfactory to the Agents.
(e) No material action, suit, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body seeking to enjoin,
restrain or prohibit, or to obtain damages or declaratory or other relief in
respect of, or which otherwise is related to or arises out of, this Agreement or
any of the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby or the Project and which could reasonably result
in a material adverse change in the Borrowers or the economic prospects of the
Project or in the financial condition or operations of the Borrowers and their
Subsidiaries, taken as a whole, since December 31, 1996.
(f) All corporate, limited liability company and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto shall be reasonably
satisfactory in form and substance to the Administrative Agent and its counsel,
and the Administrative Agent and such counsel shall have received such
counterpart originals or certified copies of all such documents as the
Administrative Agent may reasonably request, and the Agents shall have received
from each of the Borrowers an Officers' Certificate delivered on behalf of such
Borrower, dated as of the Closing Date, (i) certifying as to the truth and
completeness of the charter and other organizational documents and resolutions
of such corporate Borrower (the corporate managing member of a limited liability
company Borrower) in effect on such date of certification and attached thereto
and (ii) giving the name and bearing a specimen signature of each officer of
such Borrower (of the corporate managing member of a limited liability company
Borrower) who shall be authorized to execute this Agreement and the other Loan
Documents on behalf of such Borrower.
(g) The following financing transactions contemplated for the
Project shall have been completed (or as applicable the facilities for such
financing transactions shall have been established) each in substantially the
same amount, terms and condition described in the Offering Circular, dated
November 6, 1997, provided to the Agents, and the Requisite Lenders shall have
received evidence reasonably satisfactory to them, to the foregoing effects:
(i) the Bank Credit Agreement, providing for loans,
advances and letters of credit in an aggregate principal amount of not
less than $170,000,000 shall have been executed and delivered and be in
full force and effect and the Borrowers shall have borrowed thereunder;
(ii) the issuance, sale and purchase of not less than
$425,000,000 aggregate face amount of the Borrowers' Mortgage Notes
pursuant to the Mortgage
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Notes Indenture shall have been completed and shall have produced net
proceeds available to the Borrowers of $411,000,000;
(iii) the issuance, sale and purchase of not less than
$97,500,000 aggregate face amount of the Borrowers' Senior Subordinated
Notes pursuant to the Subordinated Notes Indenture shall have been
completed and shall have produced net proceeds available to the
Borrowers of $86,498,700;
(iv) the Interim Mall Credit Facility, providing for loans
in an aggregate principal amount of not less than $140,000,000, shall
have been executed and delivered and be in full force and effect and the
Borrowers shall have borrowed thereunder;
(v) the Energy Services Agreement, providing for a cost
contribution funding commitment of not less than $70,000,000 in the
aggregate for the purpose of providing for the payment of the costs of
heating, ventilating and air conditioning and related equipment for the
Project and related costs, shall have been executed and delivered by VCR
and the HVAC Provider, and shall be in full force and effect and VCR
shall have received the first contribution thereunder;
(vi) cash in the amount of $95,000,000 shall have been
irrevocably and unconditionally contributed to the Borrowers, all of
which cash shall have been applied to the payment of Project Costs, as
certified to by the Construction Consultant in the Construction
Consultant's Closing Certificate; and
(vii) VCR shall have acquired good fee simple title to the
Site and the Site Easements and the Mall Construction Subsidiary shall
have acquired good leasehold or fee title to the Mall and the Mall
Easements, in each case free and clear of Liens and other exceptions to
title except as specified in Exhibits N-1 and N-2, respectively, to the
Disbursement Agreement.
Each Lender shall have received a copy, certified as complete and correct by an
officer of the Borrower Representative, of each of the documents referred to in
the foregoing clauses (i) through (vi), inclusive.
(h) To the extent not otherwise satisfied pursuant to the
foregoing subsections of this section 2.1, the Lenders shall have received
evidence reasonably satisfactory to the Administrative Agent that the Borrowers
have taken or caused to be taken all such actions, executed and delivered or
caused to be executed and delivered all such agreements, documents and
instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (3) and (4) of
this section 2.1 (h)) that may be necessary or, in the reasonable opinion of
Administrative Agent, desirable in order to create in favor of the
Administrative Agent, for the pro rata benefit of
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the Lenders, a valid, enforceable and, upon the completion of such filings and
recordings, perfected first priority security interest in the Collateral and
each and every unit and item thereof, subject only to the acquisition by a
Borrower or the Borrowers of rights in the particular unit or item and except
for Liens in favor of the Bank Agent and the Mortgage Notes Indenture Trustee
encumbering such particular units or items of furniture and equipment to secure
extensions of credit to permit the funding of the costs of acquiring those units
or items (including deposits or down payments thereon made prior to acquisition)
which Liens shall be fully discharged and satisfied upon any advance hereunder
with respect to such units or items. Such actions shall include the following:
(1) delivery to the Administrative Agent of an accurate
and complete updated revision of Annex B hereto, which revision shall
reconcile all variations therein from the Annex B attached hereto at the
time of the execution and delivery hereof, certified by an officer of
the Borrower Representative to be complete and correct;
(2) delivery to the Administrative Agent of all purchase
orders, purchase contracts, bills of lading, warehouse receipts and
other documents of title evidencing any of the Collateral (in each case
properly and effectively endorsed to the Administrative Agent);
(3) delivery to the Administrative Agent of (a) the
results of a recent search, by a Person reasonably satisfactory to
Administrative Agent, of all effective UCC financing statements and
fixture filings and all judgments and federal and state tax lien filings
which may have been made with respect to any personal or mixed property
of either Borrower in such jurisdictions and offices as the
Administrative Agent may reasonably request, together with copies of all
such filings disclosed by such searches, and (b) UCC termination
statements duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective
UCC financing statements or fixture filings disclosed in such searches
(other than any such financing statements or fixture filings in respect
of Liens permitted to remain outstanding pursuant to the terms of this
Agreement but in all events terminating any security interest of record
in any of the Collateral with respect to which any Interim Loan Advance
shall have been made hereunder); and
(4) delivery to the Administrative Agent of UCC-1
financing statements and, where appropriate, fixture filings, each in
form satisfactory to the Administrative Agent, duly executed by each
Borrower with respect to all of the Collateral of such Borrower, for
filing in all jurisdictions and offices as may be necessary or, in the
reasonable opinion of Administrative Agent, desirable to perfect the
security interests in such Collateral created pursuant to this Agreement
or intended so to be.
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(i) On the Closing Date each Lender Party shall have received a
Financial Condition Certificate from the Borrowers dated the Closing Date,
substantially in the form of Exhibit C, with blanks appropriately completed and
with appropriate attachments, demonstrating that, after giving effect to the
transactions contemplated by this Agreement and the other Operative Documents,
each of the Borrowers will be Solvent.
(j) Each of the Lender Parties and their respective counsel shall
have received (i) originally executed copies of one or more favorable written
opinions of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Borrowers
and their Subsidiaries, and (ii) originally executed copies of one or more
favorable written opinions of Lionel Sawyer & Collins, Nevada counsel for the
Borrowers and their Subsidiaries, each dated the Closing Date and in form and
substance reasonably satisfactory to Administrative Agent and its counsel, as to
such other matters as the Agents may reasonably request. The Borrowers hereby
acknowledge and confirm that they have requested such counsel to deliver such
opinions to the Lender Parties.
(k) On or before the Closing Date, the Borrowers shall have paid
to the Administrative Agent the fees payable on the Closing Date as provided in
the Fee Letter.
(l) The Administrative Agent shall have received letters, dated a
date on or before the Closing Date, from each of the Construction Consultant and
the Insurance Expert, in form and scope satisfactory to the Agents, whereby the
Construction Consultant shall undertake to perform on behalf of the Lender
Parties the services which it has performed or agreed to perform for the Bank
Agent, the Interim Mall Lender, the Mortgage Notes Indenture Trustee, the
Permanent Mall Lender and Goldman Sachs & Co. under the Construction Consultant
Engagement Letter referred to in section 1.1 of the Bank Credit Agreement and
the Insurance Expert shall undertake to perform on behalf of the Lender Parties
the functions contemplated by this Agreement to be performed by the Insurance
Expert. Each of the Construction Consultant, the Insurance Advisor and the
Insurance Expert shall agree that the Lender Parties may rely on all of the
certifications, notices and similar communications furnished by it to the Bank
Agent, the Interim Mall Lender, the Mortgage Notes Indenture Trustee, the
Permanent Mall Lender and Goldman Sachs & Co. as though the same were
specifically addressed to the Lender Parties.
2.2 Conditions to Basic Loans. The obligation of each Lender to make its
Basic Loan (by the automatic conversion of the aggregate outstanding principal
balance of the Interim Loan Advances of such Lender to the Basic Loan of such
Lender on and as of the date of such Basic Loan) is subject to the satisfaction
of each of the conditions specified in section 2.3 and each of the following
additional conditions precedent:
(a) The date of the Basic Loans shall occur not later than the
Completion Deadline Date for the Project (as the same may have been extended on
account of a Special Late Casualty Deadline Extension pursuant to section
1.1(b)).
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(b) If the Project Construction Completion Date is later than
April 21, 1999, the Administrative Agent shall have received the certificates,
dated the Basic Loan Commencement Date, and other evidence contemplated by
section 1. l(b) to demonstrate that the Project Construction Completion Date was
not later than the Completion Deadline Date.
(c) The Administrative Agent shall have received a certificate,
dated the Basic Loan Commencement Date, of the Construction Consultant,
containing no reservations not acceptable to the Agents, to the effect that
Completion of the Project has been achieved and setting forth the date on which
such Completion was achieved.
(d) If the Sands Expo & Convention Center has been closed for any
period of 30 consecutive days referred to in section 2.3(c) for any reason
(including without limitation fire, flood, collapse, explosion or other material
casualty event), such Center has been restored to full operation.
2.3 Conditions to All Loans and Advances.
The obligation of each Lender to make each Interim Loan Advance or Basic
Loan to be made by it is subject to the prior or concurrent satisfaction of all
of the following additional conditions precedent:
(a) At the time of such Interim Loan Advance or Basic Loan, no
material adverse change in the financial condition or operations of the
Borrowers and their Subsidiaries taken as a whole or in the economic prospects
of the Project shall have occurred and be continuing; provided, however, that
the condition set forth in this section 2.3(a) shall not apply if at the time of
such Interim Loan Advance or Basic Loan none of the other Project lenders shall
possess the same or a similar condition under its Financing Agreements according
such other Project Lender the right to decline to make additional advances or to
declare an event of default or terminate a commitment to Lender, irrespective of
whether such other Project Lender shall have then or on one or more previous
occasions invoked or waived the condition or elected to exercise or not to
exercise such right; and provided, further, that the provisions of section 3.2
of the Disbursement Agreement shall not be deemed, in and of themselves, to
constitute such a "same or a similar condition" for purposes of this section
2.3(a).
(b) All Permits, licenses, orders or governmental authorizations
required to have been obtained by the Borrowers or any other Person by the date
of such Interim Loan Advance or Basic Loan shall have been issued and be in full
force and effect and not subject to current legal proceedings or any unsatisfied
conditions (that are required to be satisfied by the date of the applicable
Interim Loan Advance or Basic Loan) that could reasonably be expected to allow
material modification or revocation, and all applicable appeal periods with
respect thereto shall have expired; and with respect to any Permits, licenses,
orders or governmental authorizations not yet required to be obtained by the
Borrowers or any other
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Person by such date, (x) each such permit is of a type that is routinely granted
on application (except approval by the applicable Governmental Authorities of
the creation of the Mall Space as a separate legal parcel under Nevada
subdivision law) and (y) no facts or circumstances exist which indicate that any
such Permit, license, order or governmental authorization will not be timely
obtainable without material difficulty, expense or delay by the Borrowers or
other Person, as applicable, prior to the time that it becomes required, and the
Company shall have delivered to the Administrative Agent a certificate of an
officer of the Borrower Representative to the foregoing effect and an additional
certificate of the Construction Consultant to the effect that it has reviewed
such Officers' Certificate and is not aware of any inaccuracies therein.
(c) The Sands Expo & Convention Center shall not have been closed
for any period of 30 consecutive days occurring during the period from the date
of this Agreement to the date of the requested Interim Loan Advance or Basic
Loan, except for closures resulting from a material fire, flood, structural
collapse, explosion or other material casualty event but then only if both (i)
the resulting damage is fully covered (save for commercially reasonable
deductibles) by casualty, delayed opening and business interruption insurance
(including endorsements covering the revenue effects of the material casualty
event on both the Sands Expo & Convention Center and the Project), and (ii) the
resulting damage is capable of complete repair to enable the reopening of the
Sands Expo & Convention Center not later than the projected Project Construction
Completion Date (as evidenced, in the case of clauses (i) and (ii), by
certificates to such effect delivered by the Insurance Expert and the
Construction Consultant, respectively).
(d) In the case of an Interim Loan Advance, the Administrative
Agent shall have received, in accordance with the provisions of section 1.2(a)
hereof, an original executed Notice of Borrowing, in each case signed by the
chief executive officer, the chief financial officer or the treasurer of the
Borrower Representative or by any other executive officer of such Borrower
Representative designated by one of the above-specified officers on behalf of
the Borrower Representative in a writing delivered to the Administrative Agent
with all blanks appropriately completed and all required attachments so
attached.
(e) As of the date of such requested Interim Loan Advance or
Basic Loan:
(i) each of the representations and warranties contained
herein and in the other Loan Documents shall be true, correct and
complete in all material respects on and as of such date to the same
extent and with the same effect as though made on and as of that date
(except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and
warranties shall have been true, correct and complete in all material
respects on and as of such earlier date and except for failures of one
or more of the representations and warranties contained herein and in
the other Loan Documents to be true and
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correct which failures could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect);
(ii) no Default or Event of Default shall have occurred
and be continuing or would result from the consummation of the Borrowing
in question;
(iii) each Borrower shall have performed in all material
respects all of the agreements and observed and satisfied all of the
conditions which this Agreement provides shall have been performed,
observed or satisfied by it on or before such date;
(iv) no order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain any Lender
from making the Loan to be made by it on such date;
(v) the making of the Interim Loan Advances or Basic Loans
requested to be made on such date shall not violate any Legal
Requirement, including without limitation any of Regulations G, T, U or
X of the Board of Governors of the Federal Reserve System;
(vi) there shall not be pending, or to the knowledge of
the Borrowers threatened, any material action, suit, proceeding,
investigation or arbitration against or affecting the Borrowers or any
of their Subsidiaries, or any property of the Borrowers or any of their
Subsidiaries, which (A) relates to the Project and could reasonably
result in a material adverse change in the financial condition or
operations of the Borrowers and their Subsidiaries taken as a whole or
in the economic prospects of the Project or (B) seeks to enjoin,
restrain or prohibit, or to obtain damages or declaratory or other
relief in respect of, or which otherwise is related to or arises out of,
this Agreement or any of the other Loan Documents or the consummation of
the transactions among the Lender Parties and the Borrowers contemplated
hereby or thereby or (C) is required to be disclosed under, and has not
been disclosed by the Borrowers in writing pursuant to, the requirements
of this Agreement prior to the making of the most recent preceding
Interim Loan Advances (or, in the case of the initial Interim Loan
Advance, prior to the execution of this Agreement), and there shall not
have occurred any undisclosed development in any such disclosed action,
suit, proceeding, governmental investigation or arbitration that, in
either event, could reasonably be expected to result in a material
adverse change in the Borrowers or the economic prospects of the Project
or in the financial condition or operations of the Borrowers and their
Subsidiaries, taken as a whole, since December 31, 1996;
(vii) neither Borrower is in default, and to the
Borrowers' knowledge no other Person is in default, under or with
respect to any Operative
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Document (other than this Agreement) or any other Material Contract,
agreement, lease or other instrument to which either Borrower is a party
or by which it may be bound or to which any of its properties may be
subject which default could reasonably be expected to result in a
Material Adverse Effect or a Stop-Funding Notice under the Disbursement
Agreement; provided, however, that the occurrence of a default which
shall be continuing on the part of a party, other than a Borrower or an
Affiliate thereof, under a particular Material Contract or other
agreement referred to above (other than the Cooperation Agreement, the
HVAC Services Agreement, the HVAC Ground Lease, the Construction Agency
Agreement, the Direct Construction Guaranty, the Indirect Construction
Guaranty or the Sale and Contribution Agreement) will not preclude the
satisfaction of this condition if at the time in question such Contract
or other agreement has been replaced with a successor Material Contract
or other agreement under which the replacement party has, if its
performance is then timely, commenced such performance; and
(viii) the Administrative Agent shall have received an
Officers' Certificate duly executed by an executive officer of each of
the Borrowers to the foregoing effects.
(f) In the case of an Interim Loan Advance, (A) the Unallocated
Contingency Balance shall equal or exceed the Required Minimum Contingency and,
after giving effect to the requested Interim Loan Advance, the Available Funds
shall equal or exceed the Remaining Costs and (B) the Administrative Agent shall
have received such certifications by the Construction Consultant and such other
evidence to the foregoing effects as the Lenders may reasonably request.
(g) As of the date of such requested Interim Loan Advance or
Basic Loan, each of the representations and warranties of the Construction
Manager, the Direct Construction Guarantor, the Indirect Construction Guarantor,
the Project Architect, Treadway, FCMI and each other party (other than a
Borrower) to a Material Project Document set forth in any of the Operative
Documents shall, to the knowledge of the Borrowers, be true and correct in all
material respects as if made on such date (except that any representation and
warranty that relates expressly to an earlier date shall be deemed made only as
of such earlier date) unless the failure of any such representation or warranty
to be true and correct could not reasonably be expected to have a Material
Adverse Effect, in each case, as certified by the Borrower Representative.
(h) All of the conditions precedent set forth in section 3.1 of
the Disbursement Agreement to the initial advance under the Disbursement
Agreement were duly met (without waiver except as may have been approved by
Agents hereunder) at the time of such initial advance and all of the conditions
set forth in section 3.2 of the Disbursement Agreement which would be required
to be satisfied if an advance under the Disbursement Agreement were being made
on the date of the Interim Loan Advance or Basic
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Loan hereunder (or which are in fact required to be met, if an advance under the
Disbursement Agreement is being made on the same date as the Interim Loan
Advance or Basic Loan hereunder) have been duly met (without waiver except as
may have been approved by the Agents hereunder), and the Administrative Agent
shall have received copies of all of the documentation delivered under sections
3.1 and 3.2 of the Disbursement Agreement on or before the date of the Interim
Loan Advance or Basic Loan in question in satisfaction of, or to evidence the
satisfaction of, the conditions set forth in such sections 3.1 and 3.2.
(i) In the case of an Interim Loan Advance, the Administrative
Agent shall have received all such UCC-3 or other financing statement release
forms, purchase orders, purchase contracts, paid invoices (or invoice payment
wire transfer instructions), shipping documents, documents of title (including
bills of lading, dock warrants, dock receipts, warehouse receipts and the like),
and other similar documentation related to the units or items of the furniture
and equipment set forth on Annex B which are the subject of the requested
Interim Loan Advance as the Agents may have reasonably requested.
(j) In the case of an Interim Loan Advance, on a cumulative basis
from and after the initial Interim Loan Advance and after giving effect to the
requested Interim Loan Advance, the percentage of the aggregate total cost of
the units or items of new furniture and equipment which have been the subject of
Interim Loan Advances previously made or are the subject of the Interim Loan
Advance requested to be made which consists of freight, installation, sales tax
and other costs apart from the cost of the unit or item itself is not in excess
of 14%.
(k) In the case of an Interim Loan Advance, construction of the
Project shall have progressed to the extent that the Project Construction
Completion Date is anticipated to occur within the succeeding eight months
(within the succeeding three months in the event that the Borrowers shall have
elected pursuant to section 1.7(g) to accrue (rather than to pay currently)
interest on the Interim Loan Advances) and the Administrative Agent shall have
received from the Construction Consultant a certification, in form reasonably
satisfactory to the Administrative Agent, to the foregoing effect.
(l) Each of the other Lenders shall be contemporaneously making
the Interim Loan Advance or Basic Loan to be made by it hereunder on the
occasion of the same Borrowing.
(m) In the case of each Interim Loan Advance (other than a final
Interim Loan Advance made under the circumstances specified in section 1.2(i)),
there shall not have previously occurred another Interim Loan Advance within the
same calendar month.
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3. REPRESENTATIONS AND WARRANTIES
To induce each Lender Party to enter into this Agreement, the Borrowers
represent and warrant to each of the Lender Parties (all of which
representations and warranties shall survive the execution and delivery of this
Agreement and the making of all of the Interim Loan Advances and Basic Loans to
be made hereunder) that, until the termination of the Commitments and the
payment in full of all of the Obligations:
3.1 Corporate or Limited Liability Company Existence; Compliance with
Law.
(a) Each of the Borrowers (i) is a corporation (in the case of
LVSI) or limited liability company (in the case of VCR) duly incorporated or
organized, validly existing and in good standing under the laws of the State of
Nevada and is duly qualified to do business and is in good standing in each
other jurisdiction in which its ownership or lease of its properties or the
conduct of its business requires such qualification and the failure to obtain
which could result in a Material Adverse Effect; (ii) has the requisite
corporate or limited liability company power and authority and the legal right
to own, pledge, mortgage, grant a security interest in, or otherwise encumber
and operate its properties, to lease the properties it operates under lease, to
incur indebtedness, to execute, deliver and perform its obligations under each
of the Loan Documents to which it is a party and to conduct its business as now
or heretofore conducted and as proposed to be conducted; (iii) has made all
filings (required to be made at such time) with, and has given all notices to,
all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct except to the extent that the failure to
make any such filing or to give any such notice could not reasonably be expected
to result in a Material Adverse Effect; (iv) is in compliance with all of its
organic documents, including without limitation its articles of incorporation
and by-laws or its limited liability company agreement, as the case may be,
except to the extent that the failure to be in such compliance could not
reasonably be expected to result in a Material Adverse Effect; and (v) is in
compliance in all material respects with all applicable provisions of law except
to the extent that the failure to be in such compliance could not reasonably be
expected to result in a Material Adverse Effect. As of the date hereof, (A) the
sole shareholder of LVSI is Sheldon G. Adelson, (B) the only members of VCR are
Interface Holding and LVSI and (C) the sole shareholder of Interface Holding is
Sheldon G. Adelson.
(b) All of the equity interests in each of the Borrowers are duly
authorized, validly issued and (if applicable) fully paid and nonassessable and,
as of the Closing Date, none of such equity interests constitutes Margin Stock.
(c) All of the Subsidiaries of the Borrowers as of the date
hereof are identified in section 3.9(b). All of the equity interests of each of
such Subsidiaries is, and all future equity interests of any present or future
Subsidiary of either Borrower will at all relevant times be, duly authorized,
validly issued and (if applicable) fully paid and nonassessable, and none of
such equity interests constitutes (or will constitute) Margin Stock.
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Each of the Subsidiaries of Borrowers (including without limitation those
identified in section 3.9(b)) which is a corporation or limited liability
company is duly incorporated or organized, validly existing and in good standing
under the laws of its jurisdiction of organization, has all requisite corporate
or limited liability company power and authority to own and operate its
properties and to carry on its business as now conducted and as presently
proposed to be conducted, and is qualified to do business and is in good
standing in every jurisdiction in which any of its assets are located and
wherever else necessary in order to conduct its business and operations, in each
case except where the failure to be so qualified or to be in good standing or a
lack of such corporate power and authority has not had and will not have a
Material Adverse Effect.
(d) As of the date hereof, there are no options, warrants,
convertible securities or other rights to acquire any equity interest in any
Borrower or any of its Subsidiaries except as set forth in Schedule 3.1 (d).
3.2 Executive Offices; Corporate or Other Names. As of the date hereof,
the current locations of each Borrower's executive offices and principal place
of business are set forth in Schedule 3.2, and, except as noted in Schedule 3.2,
such location has not changed during the preceding twelve months. During the
preceding five years, except as noted in Schedule 3.2, neither Borrower has been
known as or has used any corporate, fictitious or trade name. Since the date
hereof, no change has occurred in any state of fact represented in this section
without the Administrative Agent having received 30 days' prior written notice
of the change.
3.3 Corporate Power; Authorization; Enforceable Obligations.
(a) The execution, delivery and performance by each Borrower of
the Loan Documents and all other instruments and documents to be delivered by
such Borrower hereunder and thereunder, in each case to the extent it is a party
thereto, and the creation of all Liens provided for herein and therein: (i) are
within such Borrower's corporate or limited liability company power; (ii) have
been duly authorized by all necessary corporate, limited liability company and
shareholder action; (iii) are not in contravention of any provision of such
Borrower's articles of incorporation or by-laws or limited liability company
agreement or other organizational documents; (iv) will not violate any law or
rule or regulation, or any order, judgment or decree of any court or other
Governmental Authority or any other Legal Requirement; (v) will not conflict
with or result in the breach or termination of, or constitute (with or without
notice or the lapse of time, or both) a default under or accelerate (or give
rise to any right of acceleration with respect to) any performance required by,
any material indenture, mortgage, deed of trust, lease, agreement or other
instrument to which either Borrower or any Subsidiary thereof is a party or by
which either Borrower or any of its Subsidiaries or any of the property of any
of them is or may be bound; (vi) will not result in the creation or imposition
of any Lien upon any of the properties of either Borrower or any Subsidiary
thereof other than Liens in favor of the Lender Parties pursuant to the Loan
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Documents, and (vii) do not require the consent or approval of any Governmental
Authority or any other Person which has not been obtained or which is not in
full force and effect. This Agreement has been duly executed by each of the
Borrowers and constitutes the legal, valid and binding obligation of each of the
Borrowers enforceable against each of the Borrowers in accordance with its
terms. Each of the Loan Documents has been duly executed and delivered in the
name of or on behalf of each Borrower and constitutes the legal, valid and
binding obligation of each Borrower enforceable against such Borrower in
accordance with its terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability, whether considered in a proceeding in equity or at law.
(b) Each Borrower has the corporate or limited liability company
power and authority to issue the Mortgage Notes and the Subordinated Notes. The
Mortgage Notes and the Subordinated Notes are the legally valid and binding
obligations of the Borrowers, enforceable against the Borrowers in accordance
with their respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors rights generally or by equitable principles relating to
enforceability, whether considered in a proceeding in equity or at law. The
issuance and sale of Mortgage Notes and the Subordinated Notes either (a) have
been registered or qualified under applicable federal and state securities laws
or (b) are exempt therefrom. The subordination provisions of the Subordinated
Notes are enforceable against the holders thereof, and the Loans and all of the
other monetary Obligations hereunder or on the Notes are and will be within the
definition of "Senior Debt" included in such subordination provisions and will
otherwise be entitled to the benefits of such subordination provisions.
3.4 Financial Statements. The Borrowers have heretofore delivered to the
Lenders, at the Lenders' request, the following financial statements and
information: (i) audited consolidated and consolidating balance sheets of LVSI
and its Subsidiaries as at December 31, 1996 and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of the
Borrowers and their Subsidiaries for the year then ended and (ii) unaudited
consolidated and consolidating balance sheets of Borrowers as at September 30,
1997 and the related unaudited consolidated and consolidating statements of
income, stockholders' equity and cash flows of LVSI and its Subsidiaries and for
the nine months then ended. All of such statements were prepared in conformity
with GAAP and fairly present, in all material respects, the financial position
(on a consolidated and, where applicable, consolidating basis) of the entities
described in such financial statements as at the respective dates thereof and
the results of operations and cash flows (on a consolidated and, where
applicable, consolidating basis) of the entities described therein for each of
the periods then ended, subject, in the case of such unaudited financial
statements, to changes resulting from normal year-end audit adjustments. The
Borrowers do not (and will not following the initial Borrowing hereunder) have
any Contingent Obligation, contingent liability or liability for Charges,
long-term lease or forward or long-term commitment that is not reflected in the
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foregoing financial statements or the notes thereto and which in any such case
is material in relation to the business, operations, properties, assets,
financial condition or prospects of the Borrowers and their Subsidiaries taken
as a whole. Except as reflected in such financial statements and those delivered
pursuant to section 4, there are no liabilities or obligations with respect to
either Borrower or any of its subsidiaries of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether or not due) which, either
individually or in the aggregate, would be material to either Borrower or any
Subsidiary thereof in relation to their business, operations, properties,
assets, financial condition or prospects taken as a whole. Neither Borrower
knows of any reasonable basis for the assertion against either Borrower or the
Project of any liability or obligation of any nature whatsoever that is not
fully reflected in such financial statements, including those delivered pursuant
to section 4, which, either individually or in the aggregate, could reasonably
be expected to be material to the Borrowers and their Subsidiaries taken as a
whole.
3.5 Material Adverse Change. As of the date hereof, there has not been
any material deviation from the Projections provided to the Lenders. Except as
otherwise permitted hereunder or as set forth on Schedule 3.5, no dividends,
advances or other distributions have been declared, paid or made upon any of the
capital stock of either Borrower, nor has any other Restricted Junior Payment or
any such dividend, advance, other distribution or payment been made or agreed to
be made, nor has any sum or property been set aside for any of the foregoing,
and, since December 31, 1996, no shares of the capital stock of either Borrower
have been, or are now required to be, redeemed, retired, purchased or otherwise
acquired for value by such Borrower. Since December 31, 1996 to the date hereof,
no event has occurred which would result in a Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the date hereof, the real estate
listed on Schedule 3.6 constitutes all of the real property owned, leased, or
used in their respective businesses by the Borrowers and their Subsidiaries.
None of the Borrowers and their Subsidiaries has acquired the ownership, lease
or use of any real property after the date hereof without the Administrative
Agent having received from the Borrower Representative prior written notice of
such acquisition. Each of the Borrowers and their Subsidiaries holds (i) good
and marketable fee simple title to all of its real estate owned in fee as
referred to in Schedule 3.6, (ii) valid leasehold interests in all of such
Borrower's Leases (both as lessor and lessee, sublessee or assignee) described
in Schedule 3.6 all of which Leases are in full force and effect and, to the
knowledge of the Borrowers, free of material defaults and are the legal, valid
and binding obligation of the Borrower or Subsidiary party thereto enforceable
against such Borrower or Subsidiary, as the case may be, in accordance with
their respective terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability whether considered in a proceeding in equity or at law, and (iii)
good title to, or valid leasehold interests in, all of its other properties and
assets. None of the properties and assets of either Borrower are subject to any
Liens (including agreements to create Liens), except (x) from and after the
Closing Date, the Lien created
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hereby in favor of the Administrative Agent for the benefit of the Lenders and
(y) other Liens permitted under section 6.5. Each Borrower has received all
deeds, assignments, waivers, consents, non-disturbance and recognition or
similar agreements, bills of sale and other documents, and duly effected all
recordings, filings and other actions, necessary to establish, protect and
perfect such Borrower's right, title and interest in and to all such real estate
and other assets and properties, except to the extent that the failure to have
received any of the foregoing would not result in a Material Adverse Effect.
Except as described in Schedule 3.6, (i) no Borrower or, to either Borrower's
knowledge, any other party to any such Lease described on Schedule 3.6 is in
default of its obligations thereunder or has delivered or received any notice of
default under any such Lease, and no event has occurred which, with the giving
of notice or the lapse of time, or both, would constitute a default under any
such Lease which default could, in any such case, result in a Material Adverse
Effect; (ii) neither Borrower owns or holds, or is obligated under or a party
to, any option, right of first refusal or any other contractual right to
purchase, acquire, sell, assign or dispose of any real property owned or leased
by such Borrower except as set forth on Schedule 3.6; and (iii) no portion of
any real property owned or leased by either Borrower has suffered any material
damage by fire or other casualty loss which has not heretofore been completely
repaired and restored to its original condition or is in the process of such
repair or restoration. All material permits required to have been issued or
appropriate to enable the real property owned or leased by either Borrower to be
lawfully occupied and used for all of the purposes for which it is currently
occupied and used, have been lawfully issued and are, as of the date hereof, in
full force and effect.
3.7 Restrictions; No Default; Material Contracts. No contract, lease,
agreement or other instrument to which either Borrower is a party or by which it
or any of its properties or assets is or may be bound or affected and no
provision of any charter, operating agreement, corporate restriction, applicable
law or governmental regulation has resulted in or will result in a Material
Adverse Effect. No Default has occurred and is continuing. As of the date
hereof, Schedule 3.7 sets forth a complete and accurate list of all Material
Contracts of the Borrowers and their respective Subsidiaries, and since the date
hereof no such Material Contract has been entered into by any of the Borrowers
and their Subsidiaries with respect to which the Administrative Agent has not
received written notice. Except as set forth in Schedule 3.7, all of the
software and firmware referred to in section 1.22(a)(iv) is transferrable to a
transferee of the related fixed asset.
3.8 Labor Matters. Except as set forth in Schedule 3.8, there are no
strikes, work stoppages or other labor disputes against either Borrower or any
shareholder or member thereof that are pending or to the Borrowers' knowledge
threatened either (i) as of the date hereof or (ii) to the extent that the same
has resulted or could reasonably be expected to result in a Material Adverse
Effect, as of any other date as of which this representation is deemed made.
Hours worked by and payment made to employees of Borrower have not been in
violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters to the extent that any such violation would have a Material
Adverse Effect. All
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material payments due from either Borrower on account of employee health and
welfare insurance have been paid or accrued as a liability on the books of such
Borrower. As of the date hereof, except as set forth on Schedule 3.8, neither
Borrower has any obligation under any collective bargaining agreement,
management agreement or employment agreement, and a correct and complete copy of
each agreement listed in Schedule 3.8 has been provided to each Lender. Since
the date hereof, neither Borrower has incurred any obligation under any
collective bargaining agreement, management agreement or employment agreement
without the Administrative Agent having received written notice of such
incurrence together with a copy of the relevant agreement. Except as set forth
in Schedule 3.8, there is no organizing activity involving either Borrower
pending or to the Borrowers' knowledge threatened by any labor union or group of
employees which could reasonably be expected to result in a Material Adverse
Effect. Except as set forth in Schedule 3.8 or Schedule 3.14, (i) there are no
representation proceedings pending or to the Borrowers' knowledge threatened
with the National Labor Relations Board, (ii) no labor organization or group of
employees of either Borrower has made a pending demand for recognition, and
(iii) there are no complaints or charges against either Borrower pending or
threatened to be filed with any federal, state, local or foreign court,
governmental agency or arbitrator based on, arising out of, in connection with
or otherwise relating to the employment or termination of employment by either
Borrower of any individual except in the case of clause (iii), for complaints or
charges which could not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness.
(a) Except as set forth in Schedule 3.9(a), as of the date hereof
neither Borrower is engaged in any joint venture or partnership with any other
Person. Neither Borrower has engaged since the date hereof in any such joint
venture or partnership without the Administrative Agent having received written
notice thereof.
(b) As of the date hereof, none of LVSI, VCR, Grand Canal Shops
Mall Holding Company, LLC, Lido Casino Resort Holding Company, LLC, Grand Canal
Shops Mall MM, Inc., Lido Casino Resort MM, Inc., the Mall Construction
Subsidiary, Grand Canal Shops Mall, LLC and Lido Casino Resort, LLC has any
direct Subsidiaries or directly owns the whole or any part of the issued share
capital or other direct ownership of any company, corporation or other Person
other than the Excepted Entities specified with respect to each in this section
3.9(b), all of which Excepted Entities are wholly-owned Subsidiaries. For
purposes of this Agreement, the "Excepted Entities" consist of (i) in the case
of LVSI: VCR, Lido Casino Resort MM, Inc. and Grand Canal Shops Mall MM, Inc.,
(ii) in the case of VCR: Mall Intermediate Holding Company, LLC, Lido
Intermediate Holding Company, LLC and the Mall Construction Subsidiary, (iii) in
the case of Mall Intermediate Holding Company, LLC and Lido Intermediate Holding
Company, LLC: Grand Canal Shops Holding Company, LLC and Lido Casino Resort
Holding Company, LLC, respectively, and (iv) in the case of Grand Canal Shops
Mall Holding Company, LLC and Lido Casino Resort
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Holding Company, LLC: Grand Canal Shops Mall, LLC and Lido Casino Resort, LLC,
respectively. As of the date hereof, there are no Excepted Entities in the case
of any of the Mall Construction Subsidiary, Grand Canal Shops Mall, LLC, Lido
Casino Resort, LLC, Grand Canal Shops MM, Inc., or Lido Casino Resort MM, Inc.
All of the corporations and limited liability companies referred to in this
section 3.9(b) are organized and subsist under the laws of the State of Delaware
(Nevada, in the case of LVSI, VCR, Lido Casino Resort, LLC, Grand Canal Shops
Mall MM, Inc. and Lido Casino Resort MM, Inc.). Each Borrower shall promptly
inform the Administrative Agent of any change hereafter occurring in the state
of facts represented in this section 3.9(b).
(c) As of the date hereof, except as set forth in Schedule 3.9(c)
there are no outstanding rights to purchase options, warrants or similar rights
or agreements pursuant to which either Borrower may be required to issue, sell
or purchase any shares of its capital stock or other equity security.
(d) Schedule 3.9(d) lists all Indebtedness of each Borrower as
of the date hereof.
3.10 Government Regulation. Neither Borrower is (i) an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended; (ii) is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or any other federal or (except for the Nevada Gaming Laws) state
statute that restricts or limits such Borrower's ability to incur Indebtedness,
pledge its assets, or perform its obligations hereunder or under any other Loan
Document (or which may otherwise render all or any portion of such obligations
unenforceable), and neither the making of the Interim Loan Advances and the
Basic Loans by the respective Lenders, nor the application of the proceeds and
repayment thereof by the Borrowers, nor the consummation of the transactions
otherwise contemplated by this Agreement and the other Loan Documents will
violate any provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission.
3.11 Margin Regulations. Neither Borrower is engaged in the business of
extending credit for the purpose of purchasing or carrying Margin Stock, and no
part of the proceeds of any Interim Loan Advance 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. Following application of the proceeds
of each Interim Loan Advance, not more than 25% of the value of the assets
(either of an individual Borrower only or of the Borrowers and their
Subsidiaries on a consolidated basis) will be Margin Stock. Neither Borrower
will take or permit to be taken any action which might cause any Loan Document
or any document or instrument delivered pursuant hereto or thereto to violate
any regulation of the Board of Governors of the Federal Reserve System.
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3.12 Taxes. All federal, state, local and foreign tax returns, reports
and statements, including but not limited to information returns (Form 1120-S)
required to be filed by each Borrower, have been timely filed with the
appropriate Governmental Authority and all taxes, assessments and other Charges
and impositions shown thereon to be due and payable have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof, or any such fine, penalty, interest, late charge or loss
has been paid. Each Borrower has paid when due and payable all material taxes,
assessments and other Charges required to be paid by it. To the extent such
taxes, assessments and other Charges are not due, each Borrower has established
appropriate reserves therefor (by allocating, on the Project Anticipated Cost
Reports, referred to in section 3.25(b) furnished to the Lenders in the case of
taxes accrued prior to the date of the Basic Loans, amounts that are adequate
for the payment thereof) in accordance with GAAP. Schedule 3.12 discloses those
taxable years, if any, for which any of the tax returns of either Borrower are
currently being audited by the IRS or any other applicable Governmental
Authority and identifies any assessments or threatened assessments in connection
with such audit or otherwise currently outstanding. Neither Borrower knows of
any proposed tax assessment against any of the Borrowers and their Subsidiaries
which is not being actively contested by the Borrower or such Subsidiary in good
faith and by appropriate proceedings or which, if contested, is not the subject
of an appropriate reserve or of the provision required in conformity with GAAP.
Except as described in Schedule 3.12, as of the date hereof neither Borrower has
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period for
assessment or collection of any taxes, assessments or other Charges. Neither
Borrower has any obligation under any written tax sharing agreement except as
described in Schedule 3.12.
3.13 ERISA.
(a) Schedule 3.13 lists all Plans maintained or contributed to by
either Borrower and all Qualified Plans maintained or contributed to by any
ERISA Affiliate, and separately identifies the Title IV Plans, Multiemployer
Plans, any multiple employer plans subject to Section 4064 of ERISA, unfunded
Pension Plans, Welfare Plans and Retiree Welfare Plans. IRS determination
letters regarding the qualified status under Section 401 of the IRC of each
Qualified Plan have been received as of the dates listed in Schedule 3.13. Each
of the Qualified Plans complies with the Tax Reform Act of 1986. To the
knowledge of each Borrower, the Qualified Plans as amended continue to qualify
under Section 401 of the IRC, the trusts created thereunder continue to be
exempt from tax under the provisions of Section 501 (a) of the IRC, and nothing
has occurred which would cause the loss of such qualification or tax-exempt
status. To the knowledge of each Borrower, each of the Borrowers and their
Subsidiaries and each of their respective Plans is in compliance in all material
respects with the applicable provisions of ERISA and the IRC, including the
filing of all reports required under the IRC or ERISA which are true and correct
as of the date filed, and all required contributions and benefits have been paid
in accordance with the provisions of each such Plan. No Borrower or other ERISA
Affiliate, with respect to any Qualified
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Plan, has failed to make any contribution or pay any amount due as required by
Section 412 of the IRC or Section 302 of ERISA or otherwise to perform any of
its obligations under any Plan. With respect to all Retiree Welfare Plans, the
present value of future anticipated expenses pursuant to the latest actuarial
projections of liabilities does not exceed $2,000,000, and copies of such latest
projections have been provided to each Lender, with respect to Pension Plans,
other than Qualified Plans and the unfunded Pension Plans listed in Schedule
3.13, the present value of the liabilities for current participants thereunder
using interest assumptions described in IRC 411(a)(ii) does not exceed $500,000.
Neither Borrower has engaged in a prohibited transaction, as defined in Section
4975 of the IRC or Section 406 of ERISA, in connection with any Plan which would
subject any such Person (after giving effect to any exemption) to a material tax
on prohibited transactions imposed by Section 4975 of the IRC or any other
material liability. Neither the execution and delivery of this Agreement and the
other Operative Documents nor the consummation of the transactions contemplated
hereby or thereby will constitute a "prohibited transaction" (as such term is
defined in ERISA).
(b) Except as set forth in Schedule 3.13 or a contrary state of
facts would not reasonably be expected to result in a material liability to
either Borrower, (i) no Title IV Plan has any Unfunded Pension Liability; (ii)
no ERISA Event or event described in Section 4062(e) of ERISA with respect to
any Title IV Plan has occurred or is reasonably expected to occur; (iii) there
are no claims, actions or lawsuits pending or to the knowledge of the Borrowers
threatened (other than claims for benefits in the normal course), asserted or
instituted against (1) any Plan or its assets, (2) any fiduciary (other than an
institutional fiduciary) with respect to any Plan or (3) either Borrower or any
ERISA Affiliate with respect to any Plan; (iv) no Borrower or other ERISA
Affiliate has incurred or reasonably expects to incur any Withdrawal Liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 of ERISA as a
result of a complete or partial withdrawal from a Multiemployer Plan; (v) within
the last five years no Borrower or other ERISA Affiliate has engaged in a
transaction which resulted in a Title IV Plan with Unfunded Pension Liabilities
being transferred outside of the "controlled group" (within the meaning of
Section 4001 (a)(14) of ERISA) of any such entity; (vi) no Plan which is a
Retiree Welfare Plan provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment (except as may be required by Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant); and (vii) each Borrower and other ERISA Affiliate has complied
with the notice and continuation coverage requirements of Section 4980B of the
IRC and the proposed or final regulations thereunder.
3.14 No Litigation. Except as set forth in Schedule 3.14, no action,
suit, claim, investigation or proceeding is now pending or to the knowledge of
either Borrower threatened against or affecting either Borrower or any
shareholder, member, Subsidiary or Affiliate of either Borrower, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state or local government or of any
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agency or subdivision thereof, domestic or foreign, or before any arbitrator or
panel of arbitrators, (i) which challenges any such Person's right, power or
competence to enter into or perform any of its obligations under any of the Loan
Documents, or the validity or enforceability of any Loan Document or any action
taken thereunder, or (ii) which either exists on the date of this Agreement or,
if determined adversely, could reasonably be expected to have or result in a
Material Adverse Effect. To the knowledge of the Borrowers, there does not exist
any state of facts which is reasonably likely to give rise to or form any
reasonable basis for any such proceeding.
3.15 Brokers. Except as set forth in Schedule 3.15, no broker or finder
acting on behalf of either Borrower brought about the obtaining, making or
closing of the credit extended pursuant to this Agreement or any of the
borrowings contemplated hereby and, subject to the payments to Lender Parties
referred to in section 1.8(b), neither Borrower has any obligation to any Person
in respect of any finder's or brokerage fees in connection therewith. Each
Borrower hereby indemnifies each of the Lender Parties against, and agrees that
it will hold each Lender Party harmless from, any claim, demand or liability for
any such broker's or finder's fees alleged to have been incurred in connection
herewith or therewith and any expenses (including reasonable fees, expenses and
disbursements of counsel) arising in connection with any such claim, demand or
liability.
3.16 Patents, Trademarks, Copyrights and Licenses. Except as otherwise
set forth in Schedule 3.16, each Borrower owns or has the right to use all
licenses, patents, patent applications, copyrights, franchises, service marks,
trademarks, trademark applications and trade names (collectively, "Proprietary
Rights") which are necessary to continue to conduct its business as heretofore
conducted by it, now conducted by it and proposed to be conducted by it, except
for those Proprietary Rights, if any, as to which such Borrower's failure to own
the same would not have a Material Adverse Effect. Each Borrower conducts
business without infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret or other
Intellectual Property right of others, except where such infringement or claim
of infringement could not have or result in a Material Adverse Effect. Except as
set forth in Schedule 3.16, to the Borrowers' knowledge there is no infringement
or claim of infringement by others of any material license, patent, copyright,
service mark, trademark, trade name, trade secret or other Intellectual Property
right of either Borrower.
3.17 Full Disclosure. In each case as of the date delivered or
furnished, no information contained in this Agreement, the other Loan Documents,
the financial statements referred to in section 3.4 or any other written
statement furnished by or on behalf of either Borrower or any Affiliate thereof
pursuant to the terms of this Agreement or any other Loan Document, which has
previously been delivered to the Lenders, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. With respect to all business plans and other forecasts and
projections (including
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without limitation the Projections) furnished by or on behalf of Borrower and
made available to the Lenders relating to the financial condition, operations,
business, properties or prospects of either Borrower or any Subsidiary thereof
(i) all facts stated as such therein were true and complete in all material
respects as of their date, (ii) all facts upon which the forecasts or
projections therein contained were based were true and complete in all material
respects and no material fact was omitted therefrom as of their respective
dates, (iii) all assumptions made on that basis were reasonable under the
circumstances and were disclosed therein, and (iv) the forecasts or projections
are reasonably based on those facts and assumptions as of their respective
dates. With respect to any such forecasts or projections made available to the
Lenders after the Closing Date, the foregoing clauses (i) through (iv) shall be
true and correct in all respects as of the date of such projections or
forecasts.
3.18 Hazardous Materials; Environmental Protection, etc. Except as
set forth in Schedule 3.18:
(i) none of the Borrowers and their Subsidiaries nor any of their
respective Facilities or operations relating to the Site or the Project
are subject to any outstanding written order, consent decree or
settlement agreement with any Person relating to any Environmental Law,
Environmental Claim, or Hazardous Materials Activity;
(ii) none of the Borrowers and their Subsidiaries has received
any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. ss.9604) or any comparable state law;
(iii) there are not and to the Borrowers' knowledge have not
been, any conditions, occurrences or Hazardous Materials Activities on
the Site or any other Facility relating to the Project which could
reasonably be expected to form the basis of an Environmental Claim
against any of the Borrowers or their Subsidiaries, and, without
limitation upon the generality of the foregoing, there are no
underground tanks present on the Site or any other Facility;
(iv) none of the Borrowers and their Subsidiaries, and to the
Borrowers' knowledge no predecessor of any of the Borrowers and their
Subsidiaries, has filed any notice under any Environmental Law
indicating past or present treatment of Hazardous Materials at any
Facility, and none of the operations of any of the Borrowers and their
Subsidiaries involves the generation, transportation, treatment, storage
or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270
or any state equivalent or otherwise could lead to the imposition of any
Lien under any Environmental Law;
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(v) compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws will not,
individually or in the aggregate, have a reasonable possibility of
giving rise to a Material Adverse Effect; and
(vi) the Borrowers and their Subsidiaries have been issued and
will maintain all required Permits relating to any Environmental Law and
none of them have received any complaint, order, directive, citation or
notice from any Governmental Authority with respect to any Environmental
Law.
Notwithstanding anything in this section 3.18 to the contrary, no event or
condition has occurred or is occurring with respect to any of the Borrowers and
their Subsidiaries relating to any Environmental Law, any Release of Hazardous
Materials or any Hazardous Materials Activity, including any matter disclosed in
Schedule 3.18, which individually or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect.
3.19 Insurance Policies. As of the date hereof, Schedule 3.19 lists all
insurance of any nature maintained for current occurrences by either Borrower,
as well as a summary of the terms of such insurance. Borrower covenants that in
all material respects such insurance complies with and shall at all times comply
with the standards set forth in Annex C, as the same may be modified with the
consent of the Administrative Agent which consent shall not be unreasonably
withheld.
3.20 Deposit and Disbursement Accounts. As of the date hereof, Schedule
3.20 lists all banks and other financial institutions at which either Borrower
or any Subsidiary thereof maintains deposits or other accounts or post office
lock boxes, and such Schedule correctly identifies the name, address and
telephone number of each depository and, in the case of each account, the name
in which the account is held, a description of the purpose of the account, and
the complete account number. Each Borrower will promptly notify the
Administrative Agent of any change in the facts represented in this section
3.20.
3.21 Force Majeure. Neither the business nor the properties of either
Borrower or any of its Subsidiaries is affected by any fire, explosion,
accident, strike, lockout, drought, storm, hail, earthquake, embargo, act of God
or of the public enemy, or other casualty or Event of Force Majeure (and the
effect of which has not already been cured or reversed) that has had or could
reasonably be expected to have a Material Adverse Effect.
3.22 Representations and Warranties Regarding the Collateral.
(a) Each Borrower is (or in the case of items of Collateral to be
delivered in the future when delivered will be) the sole owner of each item of
the Collateral in which it purports to grant a security interest hereunder (with
respect to each Borrower, such Borrower's "Portion" of the Collateral), with, in
each case, good and marketable title thereto
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free and clear of Liens except (i) the security interest granted to the
Administrative Agent for the benefit of the Lenders pursuant to this Agreement
and the Liens permitted under section 6.5(a)(ii). Each Borrower will warrant and
defend its Portion of the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein. The individual
constituent items and units of equipment comprising the Portions of the
Collateral owned by the respective Borrowers are accurately identified in
Schedule 3.22(a), which Schedule may be amended from time to time to reflect
changes in Annex B which are permitted pursuant to the provisions of Section 1
hereof (it being agreed that any such amendment made to reflect such a permitted
change shall not be a Default hereunder). None of the Collateral is owned by any
Person other than a Borrower.
(b) No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is on file or of record in any public office except
such as have been filed (i) in favor of Administrative Agent for the benefit of
the Lenders pursuant to this Agreement or (ii) to perfect Liens permitted under
section 6.5(a)(ii).
(c) As a result of the filing of appropriate financing statements
in the jurisdictions listed in Schedule 3.22(c) hereto, this Agreement and the
Collateral Documents, taken together, are effective to create a valid and
subsisting Lien on and perfected security interest in favor of the
Administrative Agent for the benefit of the Lenders in that portion of the
Collateral with respect to which a security interest may be perfected by filing
pursuant to the UCC (and such portion of the Collateral comprises all of the
Collateral except as set forth in Schedule 6.7(c)), which Lien and security
interest is prior to all other Liens and claims except only for Permitted
Collateral Encumbrances, and such Lien and security interest of the
Administrative Agent is enforceable as such as against all creditors of and
purchasers from the Borrowers or either of them. All action (including without
limitation all filings, registrations and recordings) necessary or desirable to
create, protect and perfect the security interest granted hereby to the
Administrative Agent for the benefit of the Lenders in respect of each unit or
item of the Collateral has been duly accomplished.
(d) All of the corporate offices (other than its chief executive
office or principal place of business) of each Borrower and all warehouses and
premises within which its Portion of the Collateral is stored or located, and
the locations of all of its books and records concerning its Portion of the
Collateral, are accurately set forth in Schedule 3.22(d). Such Schedule 3.22(d)
correctly identifies any of such facilities or locations that are not owned by a
Borrower and sets forth the names of the owners and lessors of, and the holders
of any mortgages on, such facilities and locations. Neither Borrower will change
its chief executive office or principal place of business, or any of its
corporate offices or warehouses or Collateral premises, or the location of its
records concerning its Portion of the Collateral, without giving thirty (30)
days' prior written notice thereof to the Administrative Agent and taking all
actions deemed by the Lenders necessary or appropriate to protect and perfect
the interest in the Collateral of the Administrative Agent for the benefit of
the Lenders. All of
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the Collateral is, or when installed pursuant to the applicable Project
Documents will be, located on one or more of the parcels of real property
described in Schedule 3.6. The Borrowers' federal employer identification
numbers are 04-3010100, in the case of LVSI, and 86-0863398, in the case of VCR.
(e) No authorization, approval or other action by, and no notice
to or filing with any governmental authority or regulatory body is required for
either (i) the pledge or grant by the Borrowers of the Liens purported to be
created hereby in favor of Administrative Agent or (ii) the exercise by the
Administrative Agent of any rights or remedies in respect of any Collateral
(whether specifically granted or created pursuant to this Agreement or created
or provided for by applicable law), except for filings or recordings
contemplated by sections 2.1(h)(4) and 3.22(c) or as set forth in Schedule
6.7(c).
(f) All information supplied to the Administrative Agent by or on
behalf of the Borrowers with respect to any of the Collateral (in each case
taken as a whole with respect to any particular item of Collateral) is accurate
and complete in all material respects.
3.23 Permits. There are no Permits that are required or will become
required for the ownership, construction, financing or operation of the Project,
other than the Permits described in Schedule 3.23. Such Schedule accurately
states the stage in construction by which each such Permit is required to be
obtained. Each Permit described in Schedule 3.23 as being required to be
obtained by the date that this representation is deemed to be made (each such
date, including without limitation the date hereof, being herein sometimes
referred to as a "Representation Date") is in full force and effect and is not
at such time subject to any appeals or further proceedings or to any unsatisfied
condition (that is required to be satisfied by the Representation Date) that may
allow modification or revocation. Each Permit described in Schedule 3.23 as
being not required to have been obtained by the Representation Date is of a type
that is routinely granted on application pursuant to objective standards and
without the exercise of any discretion on the part of the granting authority (or
any other reviewing authority). Neither Borrower has any reason to believe that
any Permit so indicated will not be obtained before it becomes necessary for the
ownership, construction, financing or operation of the Project or that obtaining
such Permit will result in undue expense or delay. Neither Borrower is in
violation of any condition in any Permit which violation has had a Material
Adverse Effect that has not already been cured or remedied or could reasonably
be expected to have a Material Adverse Effect.
3.24 Sufficiency of Interests, Documents, etc.
(a) VCR owns the Site and the Site Easements in fee simple. The
Mall Construction Subsidiary has, and until the Mall Parcel Creation Date will
have, valid leasehold estate in the Mall and the Mall Easements. From and after
the Mall Parcel Creation Date and until the Completion Date, Grand Canal Shops
Mall, LLC will own the Mall and the Mall Easements in fee simple. Other than
those services to be performed and
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materials to be supplied that can reasonably be expected to be commercially
available when and as required, the Borrowers own all of the property interests
and have entered into all of the material documents and agreements necessary to
develop, construct, complete, own and operate the Project on the Site and in
accordance with all Legal Requirements and the Project Schedule and as
contemplated in the Operative Documents.
(b) The Borrowers have furnished to each of the Lenders true,
complete and correct copies of each of the Operative Documents (other than the
Loan Documents) in effect on the date hereof, including all exhibits, schedules
and side and disclosure letters referred to therein or delivered pursuant
thereto, if any. There are no Operative Documents which as of any Representation
Date are required to be in effect and which are not in effect. Schedule 3.21
sets forth a list of all of the Operative Documents which are in effect on the
date hereof, or on the Representation Date.
(c) All conditions precedent to the obligations of the respective
parties (excluding the Borrowers) under the Operative Documents have been
satisfied, except for (i) such conditions precedent the failure of which to be
satisfied (and the effect of which failure to be satisfied has not already been
cured or reversed) has not had and could not reasonably be expected to have a
Material Adverse Effect and (ii) such other conditions which by their very
nature cannot be met until a later stage in the construction or development of
the Project but as to which neither Borrower has any reason to believe that the
same cannot be satisfied by the appropriate stage in such construction and
development.
(d) All electricity, water, sewerage, gas and other utility
services necessary for the construction and operation of the Project for its
intended purposes are or will be available at the Site as and when required on
commercially reasonable terms.
3.25 Project Budget; Anticipated Cost Report.
(a) As of each Representation Date, the Project Budget is, to the
Borrowers' knowledge, based on reasonable assumptions as to all matters material
to the estimates set forth therein. As of each Representation Date, the Project
Budget also is consistent in all material respects with the provisions of the
Financing Agreements and the other Operative Documents, was prepared in good
faith and with due care, sets forth, for each budget Line Item, the total costs
anticipated to be incurred through Final Completion and fairly represents the
Borrowers' collective expectations, as of such date, as to the matters covered
thereby. As contemplated by section 6.4 of the Construction Management
Agreement, the Construction Manager has properly allocated the Project Costs to
be incurred under the Construction Management Agreement between the HC/Mall
Component and the HVAC Component, and the Project Budget properly reflects such
allocation.
(b) As of each Representation Date, the Anticipated Cost
Report then in effect:
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(i) is true and correct in all material respects and sets
forth in column 3 thereof opposite each Line Item the proper amount
allocated to such Line Item pursuant to the Project Budget then in
effect;
(ii) sets forth in column 7 thereof opposite each Line
Item (except for the "unallocated contingency" and "Bovis contingency"
Line Items), an amount no less than the total anticipated costs to be
incurred by the Borrowers and the Mall Construction Subsidiary from the
commencement through the completion of the work contemplated by such
Line Item, as determined by the Borrowers and the Mall Construction
Subsidiary in good faith and approved by the Construction Consultant in
(and as of the date of) its certificate most recently dated on or before
the Representation Date; and
(iii) sets forth in column 7 thereof for each Line Item
Category an aggregate amount no less than the aggregate amount set forth
for such Line Item Category in the Project Budget then in effect less
Realized Savings obtained with respect to such Line Item Category and,
in the case of all of the items comprising the HVAC Component, an
aggregate amount that is not less than the total amount of the
commitment under the HVAC Commitment Facility.
3.26 Project Schedule; In Balance Requirement. To the knowledge of each
of the Borrowers, the Project Schedule accurately specifies in summary form the
work that the Borrowers and the Construction Manager propose to complete,
including the materials they propose to deliver, for each month from November
1997 through the Final Completion Date, all of which can reasonably be expected,
and is in fact expected, by them to be achieved within the confines of such
Schedule. As of each Representation Date, the Unallocated Contingency Balance
equals or exceeds the Required Minimum Contingency and, after giving effect to
any Interim Loan Advance proposed to be made as of such Representation Date, the
Available Funds equal or exceed the Remaining Costs.
3.27 Fees and Enforcement. Other than amounts that have been paid in
full or will have been paid in full by the Closing Date, no fees or taxes
(including without limitation stamp, transaction, registration, recording or
similar taxes) are required to be paid for the legality, validity or
enforceability of this Agreement or any of the other Operative Documents.
3.28 Business, Debt, Contracts, etc. Neither VCR nor the Mall
Construction Subsidiary has conducted any business other than the businesses
contemplated by the Operative Documents. Neither Borrower has any indebtedness
other than indebtedness incurred under, or permitted to be incurred by, the
Financing Agreements nor any other liabilities other than those incurred under
the Operative Documents or permitted under the Financing Agreements, nor is
either a party to or bound by any Material Contract other than
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as contemplated by the Operative Documents to which it is a party, those other
contracts permitted under this Agreement and those other contracts identified in
Schedule 3.28.
3.29 Operative Document Representations and Warranties Generally. As of
the date hereof (in each case except to the extent expressly specific to another
date), all of the representations and warranties of the Borrowers or either of
them, or of Sheldon G. Adelson or Interface Holding, or (but these limited to
the Borrowers' knowledge) any of the HVAC Provider, the Construction Manager,
the Direct Construction Guarantor, the Indirect Construction Guarantor,
Treadway, the Project Architect, FCMI and each other Major Contractor contained
in the Operative Documents are true and correct in all respects, except to the
extent that the failure of any of the representations and warranties contained
in an Operative Document other than this Agreement to be true and correct would
not have a Material Adverse Effect, and are, in each case, hereby confirmed by
each of the Borrowers to the same extent and with the same force and effect as
though such representations and warranties had been set forth at length in this
Agreement.
3.30 Solvency. Each Borrower is, and upon and after giving effect to the
incurrence of each of the Obligations to be incurred by such Borrower or before
each Representation Date will be, Solvent.
4. FINANCIAL STATEMENTS AND INFORMATION
The Borrowers covenant and agree that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless the Requisite Lenders shall otherwise give prior
written consent, the Borrowers shall perform, and cause each of their
Subsidiaries to perform (but only from and after the Project Construction
Completion Date in the case of the matters referred to in sections 4.1(a) (b),
(d), (e) and (f)), the following covenants in respect of financial statements
and other information.
4.1 Financial Statements and Other Reports. The Borrowers will maintain,
and will cause each of their Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP. The
Borrowers will deliver to Administrative Agent and each of the Lenders:
(a) Monthly Financials. As soon as available and in any event
within 30 days after the end of each month, the consolidated and consolidating
balance sheets of LVSI and its Subsidiaries as at the end of such month and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows of LVSI and its Subsidiaries for such month and for the
period from the beginning of the then current Fiscal Year to the end of such
month, setting forth in each case in comparative form the corresponding figures
for the corresponding periods of the previous Fiscal Year and the
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corresponding figures from the Financial Plan for the current Fiscal Year, all
in reasonable detail and certified by the chief financial officer of LVSI, on
behalf of LVSI, as fairly presenting, in all material respects, the financial
condition of LVSI and its Subsidiaries as at the dates indicated and the results
of their operations and their cash flows for the periods indicated, subject to
changes resulting from normal year-end audit adjustments and accompanied by a
Collateral schedule update in accordance with section 1.2(h);
(b) Quarterly Financials. As soon as available and in any
event within 60 days after the end of each Fiscal Quarter:
(i) the consolidated and consolidating balance sheets of
LVSI and its Subsidiaries (including the Excluded Subsidiaries) as at
the end of such Fiscal Quarter and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows
of LVSI and its Subsidiaries (including the Excluded Subsidiaries) for
such Fiscal Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year, all in reasonable
detail and certified by the chief financial officer of LVSI, on behalf
of LVSI, that they fairly present, in all material respects, the
financial condition of LVSI and its Subsidiaries (including the Excluded
Subsidiaries) as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from normal year-end audit adjustments;
(ii) the consolidated balance sheets of LVSI and its
Subsidiaries as at the end of such Fiscal Quarter and the related
consolidated statements of income, stockholders' equity and cash flows
of LVSI and its Subsidiaries for such Fiscal Quarter and for the period
from the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in comparative form the
corresponding figures from the Financial Plan for the current Fiscal
Year, all in reasonable detail and certified by the chief financial
officer of LVSI, on behalf of LVSI, that they fairly present, in all
material respects, the financial condition of LVSI and its Subsidiaries
as at the dates indicated and the results of their operations and their
cash flows for the periods indicated, subject to changes resulting from
normal year-end audit adjustments;
(iii) the consolidated balance sheets of Mall Subsidiary
and its Subsidiaries as at the end of such Fiscal Quarter and the
related consolidated statements of income, stockholders' equity and cash
flows of Mall Subsidiary and its Subsidiaries for such Fiscal Quarter
and for the period from the beginning of the then current Fiscal Year to
the end of such Fiscal Quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding periods
of the previous Fiscal Year, all in reasonable detail and certified by
the chief financial
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officer of LVSI on behalf of the Mall Subsidiary, that they fairly
present, in all material respects, the financial condition of Mall
Subsidiary and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
audit adjustments; and
(iv) a narrative report describing the operations of LVSI
and its Subsidiaries (including the Excluded Subsidiaries) in the form
prepared for presentation to senior management for such Fiscal Quarter
and for the period from the beginning of the then current Fiscal Year to
the end of such Fiscal Quarter;
(c) Year-End Financials. As soon as available and in any
event within 90 days after the end of each Fiscal Year:
(i) the consolidated and consolidating balance sheets of
LVSI and its Subsidiaries (including the Excluded Subsidiaries) as at
the end of such Fiscal Year and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows
of LVSI and its Subsidiaries (including the Excluded Subsidiaries) for
such Fiscal Year, setting forth in each case in comparative form the
corresponding figures for the previous Fiscal Year, all in reasonable
detail and certified by the chief financial officer of LVSI, on behalf
of LVSI, that they fairly present, in all material respects, the
financial condition of LVSI and its Subsidiaries (including the Excluded
Subsidiaries) as at the dates indicated and the results of their
operations and their cash flows for the periods indicated;
(ii) the consolidated balance sheets of LVSI and its
Subsidiaries as at the end of such Fiscal Year and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of LVSI and its Subsidiaries for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures
for the previous Fiscal Year and the corresponding figures from the
Financial Plan for the Fiscal Year covered by such financial statements,
all in reasonable detail and certified by the chief financial officer of
LVSI, on behalf of LVSI, that they fairly present, in all material
respects, the financial condition of LVSI and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated;
(iii) the consolidated balance sheets of Mall Subsidiary
and its Subsidiaries as at the end of each Fiscal Year and the related
consolidated statements of income, stockholders' equity and cash flows
of Mall Subsidiary and its Subsidiaries for such Fiscal Year, setting
forth in each case in comparative form the corresponding figures for the
previous Fiscal Year, all in reasonable detail and certified by the
chief financial officer of LVSI on behalf of the Mall Subsidiary, that
they fairly present, in all material respects the financial condition of
the Mall
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Subsidiary and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flow for the periods
indicated;
(iv) a narrative report describing the operations of LVSI
and its Subsidiaries (including the Excluded Subsidiaries) in the form
prepared for presentation to senior management for such Fiscal Year; and
(v) in the case of such consolidated financial statements
specified in subdivisions (i) to (iii) above, a report thereon of Price
Waterhouse LLP or other independent certified public accountants of
recognized national standing selected by Borrowers and reasonably
satisfactory to Administrative Agent, which report shall be unqualified
as to scope of audit, shall express no doubts about the ability of the
Persons covered thereby to continue as a going concern, and shall state
that such consolidated financial statements fairly present, in all
material respects, the consolidated financial position of LVSI and its
Subsidiaries (including the Excluded Subsidiaries, the Mall Subsidiary
and their respective Subsidiaries), as at the dates indicated and the
results of their operations and their cash flows for the period
indicated in the conformity with GAAP applied on a basis consistent with
prior years (except as otherwise disclosed in such financial statements)
and that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(d) Officer's and Compliance Certificates. Together with each
delivery of financial statements of LVSI and its Subsidiaries pursuant to
subdivisions (b) and (c) above, (1) an Officers' Certificate of LVSI stating
that the signers on behalf of LVSI have reviewed the terms of this Agreement and
have made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of LVSI and its Subsidiaries
(including, to the extent applicable, Mall Subsidiary, Mall Direct Holdings,
Phase II Subsidiary, Phase II Direct Holdings, Mall Manager, Phase II Manager
and their respective subsidiaries) during the accounting period covered by such
financial statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of such Officers' Certificate, of any
condition or event that constitutes an Event of Default or Default, or, if any
such condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Borrowers have taken, are taking and
propose to take with respect thereto; and (2) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the covenants contained in section 6
(including without limitation calculations of the financial covenants contained
in section 6.9);
(e) Reconciliation Statements. If, as a result of any change in
accounting principles and policies from those used in the preparation of the
audited financial statements referred to in section 4.1(c), the consolidated
financial statements of LVSI and its
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Subsidiaries (including, to the extent applicable, Mall Subsidiary, Mall Direct
Holdings, Phase II Subsidiary, Phase II Direct Holdings, Mall Manager, Phase II
Manager and their respective subsidiaries) delivered pursuant to paragraphs (a),
(b), (c) or (d) of this section 4.1 will differ in any material respect from the
consolidated financial statements that would have been delivered pursuant to
such paragraphs had no such change in accounting principles and policies been
made, then (i) together with the first delivery of financial statements pursuant
to paragraphs (a), (b), (c) or (d) of this subsection 4.1 following such change,
consolidated financial statements of LVSI and its Subsidiaries (including, to
the extent applicable, Mall Subsidiary, Mall Direct Holdings, Phase II
Subsidiary, Phase II Direct Holdings, Mall Manager, Phase II Manager and their
respective subsidiaries) for (y) the current Fiscal Year to the effective date
of such change and (z) the two full Fiscal Years immediately preceding the
Fiscal Year in which such change is made, in each case prepared on a pro forma
basis as if such change had been in effect during such periods, and (ii)
together with each delivery of financial statements for LVSI and its
Subsidiaries (including, to the extent applicable, Mall Subsidiary, Mall Direct
Holdings, Phase II Subsidiary, Phase II Direct Holdings, Mall Manager, Phase II
Manager and their respective subsidiaries) pursuant to paragraph (a), (b), (c)
or (d) of this section 4.1 following such change, a written statement of the
chief accounting officer or chief financial officer of LVSI setting forth the
differences (including any differences that would affect any calculations
relating to the financial covenants set forth in section 6.9 which would have
resulted if such financial statements had been prepared without giving effect to
such change);
(f) Accountants' Certification. Together with each delivery of
consolidated financial statements pursuant to section 4.1(c), a written
statement by the independent certified public accountants giving the report
thereon (i) stating that their audit examination has included a review of the
terms of this Agreement and the other Loan Documents as they relate to
accounting matters, (ii) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of Default or
Default has come to their attention and, if such a condition or event has come
to their attention, specifying the nature and period of existence thereof;
provided that such accountants shall not be liable by reason of any failure to
obtain knowledge of any such Event of Default or Default that would not be
disclosed in the course of their audit examination, and (iii) stating that based
on their audit examination nothing has come to their attention that causes them
to believe either or both that the information contained in the certificates
delivered therewith pursuant to section 4.1(d) is not correct or that the
matters set forth in the Compliance Certificates delivered therewith pursuant to
section 4.1(d)(ii) for the applicable Fiscal Year are not stated in accordance
with the terms of this Agreement;
(g) Accountants' Reports. Promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to the Borrowers by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of LVSI and its Subsidiaries (including to the extent applicable Mall
Subsidiary, Mall Direct Holdings, Phase II Subsidiary, Phase II Direct
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Holdings, Mall Manager, Phase II Manager and their respective subsidiaries) made
by such accountants, including any comment letter submitted by such accountants
to management in connection with their annual audit and copies of all
"management letters" and similar communications received by either Borrower from
its accountants in relation to either Borrower's financial, accounting or other
systems, management, controls, or accounts;
(h) Monthly Project Status Reports. Prior to the Project
Construction Completion Date, within 30 days following the end of each calendar
month, a monthly status report describing in reasonable detail the progress of
the construction of each Construction Component (as defined in the Disbursement
Agreement) and the Project as a whole since the immediately preceding report
hereunder, including without limitation the cost incurred to the end of such
month, an estimate of the time and cost required to complete each Construction
Component and the Project as a whole and such other information as the
Administrative Agent may reasonably request including information and reports
reasonably requested by the Construction Consultant;
(i) Monthly Leasing Report. Prior to the Project Construction
Completion Date, within thirty days after the end of each calendar month a
monthly status report describing in reasonable detail the progress of the
leasing activities with respect to the Mall and all leases that have been
entered into since the immediately preceding report hereunder;
(j) Progress Report. Promptly after its receipt thereof, all
progress reports provided by the Construction Manager pursuant to the
Construction Management Agreement and such additional information as the
Administrative Agent may reasonably request;
(k) SEC Filings, Press Releases and Other Financial Reports.
Promptly upon their becoming available, copies of (i) all financial statements,
reports, notices and proxy statements sent or made available generally by the
Borrowers or any of their Subsidiaries to their security holders as such, (ii)
all regular and periodic reports and all registration statements (other than on
Form S-8 or a similar form) and prospectuses, if any, filed by the Borrowers or
any of their Subsidiaries with any securities exchange or with the Securities
and Exchange Commission or any governmental or private regulatory authority,
(iii) all press releases and other statements made available generally by the
Borrowers or any of their Subsidiaries to the public concerning material
developments in the business of the Borrowers and their Subsidiaries and (iv) to
the extent prepared, any financial statements and reports concerning any
subsidiaries of the Borrowers (including Excluded Subsidiaries) not delivered
pursuant to clauses (a), (b) or (c) above);
(l) Events of Default, etc. Promptly upon any officer or other
representative of either of the Borrowers obtaining knowledge (i) of any
condition or event that constitutes a Default or an Event of Default, or
becoming aware that any Lender has given any notice (other than to the
Administrative Agent) or taken any other action with
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respect to a claimed Event of Default or Default, (ii) that any Person has given
any notice to the Borrowers or any of their Subsidiaries or taken any other
action with respect to a claimed default or event or condition of the type
referred to in section 8.1(d), (iii) of any condition or event that would be
required to be disclosed in a current report filed by either Borrower with the
Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such
Form as in effect on the date hereof) if such Borrower were required to file
such reports under the Securities Exchange Act of 1934 and the rules and
regulations thereunder, or (iv) of the occurrence of any event or change that
has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event of Default,
Default, other default, event or condition, and what action the Borrowers have
taken, are taking and propose to take with respect thereto;
(m) Litigation or Other Proceedings. Promptly upon any officer,
director, member or stockholder of either of the Borrowers obtaining knowledge
of (X) the non- frivolous institution of, or threat of, any action, suit,
proceeding (whether administrative, judicial or otherwise), governmental
investigation or arbitration against or affecting any of the Borrowers and their
Subsidiaries, or any property of any of the Borrowers and their Subsidiaries
(collectively, "Proceedings") not previously disclosed in writing by the
Borrowers to the Lenders or (Y) any material development in any Proceeding that,
in any case:
(1) if adversely determined, would result in a Material
Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, any of the
transactions between the Borrowers and the Lender Parties contemplated
hereby;
written notice thereof together with such other information as may be reasonably
available to the Borrowers to enable the Lenders and their counsel to evaluate
such matters; and within twenty days after the end of each Fiscal Quarter, a
schedule of all Proceedings involving an alleged liability of, or claims against
or affecting, any of the Borrowers and their Subsidiaries equal to or greater
than $1,500,000, and, promptly after request by the Administrative Agent, such
other information as may be reasonably requested by Administrative Agent to
enable the Lenders and their counsel to evaluate any of such Proceedings;
(n) ERISA Events. Promptly upon becoming aware of the occurrence
of or forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, what action the Borrowers or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened to be taken by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto;
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(o) ERISA Notices. With reasonable promptness, copies of (i) each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed
by any of the Borrowers and their Subsidiaries or any of their respective ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan;
(ii) all notices received by any of the Borrowers and their ERISA Affiliates
from a Multiemployer Plan sponsor concerning an ERISA Event; and (iii) copies of
such other documents or governmental reports or filings relating to any Employee
Benefit Plan as the Administrative Agent may reasonably request;
(p) Financial Plans. As soon as practicable and in any event no
later than the Project Construction Completion Date and 30 days prior to the
beginning of each Fiscal Year thereafter, a consolidated and consolidating plan
and financial forecast for such Fiscal Year (or portion thereof from the Project
Construction Completion Date through the end of such Fiscal Year) and each
subsequent Fiscal Year through the date of payment in full of the Basic Loans
(the "Financial Plan" for such Fiscal Years), including (A) forecasted
consolidated and consolidating balance sheets and forecasted consolidated and
consolidating statements of income and cash flows of LVSI and its Subsidiaries
for such Fiscal Year through the date of payment in full of the Basic Loans,
together with a pro forma Compliance Certificate for such Fiscal Year and an
explanation of the assumptions on which such forecasts are based, (B) forecasted
consolidated and consolidating statements of income and cash flows of LVSI and
its Subsidiaries for each month of such Fiscal Year, together with an
explanation of the assumptions on which such forecasts are based, and (C) such
other information and projections for such Fiscal Year as any Lender may
reasonably request;
(q) Insurance. As soon as practicable and in any event by the
last day of each Fiscal Year, a report in form and substance satisfactory to the
Administrative Agent outlining all material insurance coverage maintained as of
the date of such report by the Borrowers and their Subsidiaries and all material
insurance coverage planned to be maintained by the Borrowers and their
Subsidiaries in the immediately succeeding Fiscal Year;
(r) Board of Directors. With reasonable promptness, written
notice of any change in the members of the board of directors of LVSI or any of
its corporate Subsidiaries;
(s) New Subsidiaries. Promptly upon any Person becoming a
Subsidiary of either Borrower, a written notice setting forth with respect to
such Person (i) the date on which such Person became a Subsidiary of a Borrower
and the identity of the Borrower or Borrowers and (ii) all of the data required
to be furnished pursuant to the last sentence of section 3.9(b) with respect to
all Subsidiaries of either Borrower (it being understood that such written
notice shall be deemed to supplement such data for all purposes of this
Agreement);
(t) Material Contracts. Promptly, and in any event within ten
Business Days after any Material Contract of any of the Borrowers and their
Subsidiaries is terminated
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or amended in a manner that is materially adverse to any of them or any new
Material Contract is entered into, or upon becoming aware of any material
default by any Party under a Material Contract, a written statement describing
such event with copies of such material amendments or new contracts, and all
explanation of any actions being taken with respect thereto;
(u) UCC Search Report. As promptly as practicable after the date
of delivery to the Administrative Agent of any UCC financing statement executed
by either Borrower pursuant to section 5.15, copies of completed UCC searches
evidencing the proper filing, recording and indexing of such UCC financing
statement and listing all other effective financing statements that name such
Borrower as debtor, together with copies of all such other financing statements
not previously delivered to Administrative Agent by or on behalf of such
Borrower;
(v) Notices and Reports under Operative Documents. Promptly upon
receipt, copies of all notices provided to the Borrowers or their Affiliates
pursuant to any Operative Documents relating to material defaults or material
delays and promptly upon execution and delivery thereof, copies of all
amendments to any of the Operative Documents and, promptly upon delivery
thereof, copies of all financial, construction, legal and other reports (in
addition to the foregoing) delivered pursuant to any of the other Operative
Documents;
(w) Governmental and Environmental Reports. Contemporaneously
with the filing thereof with the relevant Governmental Authority, copies of all
reports required to be filed by the Borrowers with any Governmental Authority,
including without limitation any reports with respect to Environmental Matters;
(x) Notices. Promptly upon acquiring notice or giving notice or
obtaining knowledge thereof, as the case may be, written notice of:
(1) Any event, occurrence or circumstance which reasonably
could be expected to cause the aggregate amount of Project Costs to
exceed the Available Funds or render either Borrower incapable of, or
prevent either Borrower from (i) achieving the Project Construction
Completion Date on or before the Completion Deadline Date or (ii)
meeting any material obligation of either Borrower under the
Construction Management Agreement and the other Material Project
Documents as and when required thereunder;
(2) Any termination or event of default or notice thereof
under any Material Project Document;
(3) Any (i) fact, circumstance, condition or occurrence
at, on or arising from the Site that results in noncompliance with any
Environmental Law that
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has resulted or could reasonably be expected to result in a Material
Adverse Effect, and (ii) pending, or to either the Borrower's knowledge
threatened, Environmental Claim against any of the Borrowers, the
Construction Manager, any contractor arising in connection with their
occupying or conducting operations on or at the Project or the Site,
which could reasonably be expected to have a Material Adverse Effect;
(4) Any change in the authorized representatives of either
Borrower, and such notice shall include a certified specimen signature
of any new officer, director or other representative so appointed and,
if requested by the Administrative Agent, satisfactory evidence of the
authority of such new authorized representative;
(5) Any proposed material change in the nature or scope of
the Project or the businesses or operations of either of the Borrowers;
(6) Any notice of any schedule delay delivered under the
Construction Management Agreement and all remedial plans and updates
thereof; or
(7) Any other event or development which could reasonably
be expected to have a Material Adverse Effect; and
(y) Other Information. With reasonable promptness, such other
information and data with respect to the Borrowers or any of their Subsidiaries
as from time to time may be reasonably requested by any Lender.
4.2 Communication with Accountants. Each Borrower (for itself and each
Subsidiary thereof) authorizes the Lenders to communicate directly with its and
its Subsidiaries' independent certified public accountants and tax advisors and
authorizes those accountants to disclose to the Lenders any and all financial
statements and other supporting financial documents and schedules including
copies of any management letter with respect to the business, financial
condition and other affairs of each Borrower and each Subsidiary thereof. At or
before the Closing Date, Borrowers will deliver a letter addressed to such
accountants and tax advisors instructing them to comply with the provisions of
this Section 4.
5. AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as the Commitments hereunder
shall remain in effect and thereafter until payment in full of all of the Loans
and the other Obligations, the Borrowers shall, unless excused from doing so by
the prior written consent of the Requisite Lenders, perform and cause each of
the Subsidiaries to perform all of the covenants set forth in this Section 5.
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5.1 Maintenance of Existence and Conduct of Business. Each Borrower
shall, and shall cause each of its Subsidiaries to: (a) do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
or limited liability company existence and all of its rights and franchises
material to the conduct of its business; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; and (c)
transact business only under the names set forth in Schedule 3.2; provided,
however, that the Borrowers and their Subsidiaries may merge or consolidate as
permitted under section 6.1; and provided, further, that the Borrowers may
abandon, or permit a Subsidiary to abandon, any such right or franchise if the
board of directors of each of LVSI and, if applicable, the board of directors of
the managing member of the affected Subsidiary thereof shall determine that the
preservation of such right or franchise is no longer desirable in the conduct of
the business of such Borrower or Subsidiary, and that the loss thereof is not
disadvantageous in any material respect to the Borrowers and their Subsidiaries
or to the Lenders.
5.2 Payment of Charges and Claims.
(a) Each Borrower shall, and shall cause each of its Subsidiaries
to, pay and discharge, or cause to be paid and discharged, in accordance with
the terms thereof (i) all material Taxes imposed upon it or any of its
Subsidiaries or its or their income and profits, or any of its property (real,
personal or mixed), and (ii) lawful claims for labor, materials, supplies and
services or otherwise, which if unpaid might by law become a Lien on its
property; provided, that no Borrower or Subsidiary thereof shall be required to
pay any such Tax or claim which is being contested in good faith and by proper
legal actions or proceedings, so long as (i) adequate reserves with respect
thereto are established and are maintained in accordance with GAAP, (ii) in the
case of a Tax or claim which has or may become a Lien against any of the
Collateral, such contest proceedings conclusively operate to stay the sale of
any portion of the Collateral to satisfy such Tax or claim and otherwise
suspends collection of the contested Tax or claim, (iii) none of the Collateral
would be subject to forfeiture or loss or to any Lien (other than a Lien fully
and properly bonded off) by reason of such contest and (iv) if the contest is
terminated or discharged in a manner adverse to a Borrower or Subsidiary
thereof, the contested Tax or claim, together with all additional charges,
interest, penalties and expenses, if any, is fully paid or discharged and the
Administrative Agent receives appropriate proof to the foregoing effects.
(b) The Borrowers will not, nor will they permit any of their
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person (other than the Borrowers and any of their Subsidiaries)
unless the Borrowers and their Subsidiaries shall have entered into a tax
sharing agreement with such Person, in form and substance satisfactory to the
Lenders.
5.3 Books and Records. Each Borrower shall, and shall cause each of
its Subsidiaries to, maintain adequate records and books of account with respect
to its business
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activities and the Project, in which proper entries, reflecting all of its
financial transactions, are made in accordance with GAAP and on a basis
consistent with the financial statements referred to in section 3.4. Subject to
reasonable safety requirements and the rights of other Persons, the Borrowers
shall, at their cost and expense, permit employees or agents of the Lenders at
any reasonable times and upon reasonable prior notice to inspect the Project, to
examine or audit all of the Borrowers' books, accounts and records pertaining or
related to the Project and to make copies and memoranda thereof. For all
expenditures with respect to which Interim Loan Advances are made, the Borrowers
shall retain, until at least six years after the date of the last Interim Loan
Advance, all contracts, orders, invoices, bills, receipts and other documents
and records evidencing such expenditures.
5.4 Maintenance of Properties; Insurance; Application of Net Loss
Proceeds.
(a) The Borrowers shall, and shall cause each of their
Subsidiaries to, at all times maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, the Collateral,
all Intellectual Property and all other material properties used or useful in
the business of the Borrowers and their Subsidiaries and from time to time shall
make or cause to be made all appropriate repairs, renewals and replacements
thereof except to the extent that the Borrowers determine in good faith not to
maintain, repair, renew or replace individual items (not including any of the
Collateral) of such property if in the case of each such item the property is no
longer desirable in the conduct of the Borrowers' businesses, provided that the
failure to so maintain, repair, renew or replace is not disadvantageous in any
material respect to the Borrowers and their Subsidiaries or to the Lenders. All
of the Collateral will be maintained in accordance with standards consistent in
all material respects with manufacturers' specifications (including warranty
programs) and customary industry practices, as applicable. The Lenders reserve
the right at any time to review and request appropriate adjustments of the
maintenance programs of the Borrowers from time to time in effect with respect
to the Collateral. For the avoidance of doubt, the Borrowers shall bear all risk
of loss or damage to the Collateral.
(b) Each Borrower shall, and shall cause each of its Subsidiaries
to, maintain or cause to be maintained, at its sole cost and expense, with
financially sound and reputable insurers, policies of insurance in such amounts
and covering such casualty, liability and other risks and with such
endorsements, deductibles and other features as are specified in Annex D and
section 2.1(d) and, to the extent consistent with the foregoing, as shall be
required by the Disbursement Agreement and the Cooperation Agreement (while the
same are in effect). Without limitation upon the generality of the foregoing,
such insurance shall include business interruption and delayed opening insurance
covering, among other things, all debt service (including interest and principal
payments) payable during the period of rebuilding with respect to either or both
of the Project and the Sands Expo & Convention Center. All co-insurance
coverages shall be subject to the Lenders' review for acceptability. The
Borrowers shall notify the Lenders promptly of any occurrence causing a material
loss or decline in value of any real or personal property and the estimated (or
actual, if available)
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amount of such loss or decline. Each Borrower hereby directs all present and
future insurers under its "All Risk" and other policies of insurance to pay all
proceeds payable under such policies payable in respect of all or any portion of
the Collateral directly to the Administrative Agent for deposit in the cash
collateral account referred to in section 1.11 for application in the manner
therein specified. In the event either Borrower at any time or times hereafter
shall fail to obtain or maintain (or to cause to be obtained or maintained) any
of the policies of insurance required above or to pay any premium in whole or in
part relating thereto, the Administrative Agent may (and if so requested by the
Requisite Lenders shall), without waiving or releasing any of the Obligations or
any Default hereunder, at any time or times thereafter (but shall not be
obligated to) obtain and maintain such policies of insurance and pay such
premium and take any other action with respect thereto which the Lenders deem
advisable. All sums so disbursed, including attorneys' fees, court costs and
other charges related thereto, shall be payable on demand by the Borrowers to
the Administrative Agent and shall be additional Obligations hereunder secured
by the Collateral.
(c) All Loss Proceeds and Liquidated Damages relating to the
Collateral or any unit or item thereof shall be applied in the manner specified
in section 1.11, any provision of any other Financing Agreement to the contrary
notwithstanding. Subject to the preceding sentence, the Borrowers shall (i)
apply all other Loss Proceeds and Liquidated Damages to restore, replace or
rebuild the Project in accordance with the Cooperation Agreement, (ii) subject
to clause (i) hereof, apply Liquidated Damages, to the extent provided in the
Cooperation Agreement but only to the extent consistent with section 6.8(a)
hereof, section 7.5 of the Bank Credit Agreement and the applicable provisions
of the Adelson Intercreditor Agreement, to repay any Completion Guaranty Loan
and (iii) apply any Loss Proceeds and Liquidated Damages (other than those which
relate to the Collateral or any unit or item thereof) not applied as provided in
clauses (i) and (ii) hereof to prepay the loans made under the Financing
Agreements in accordance with the Cooperation Agreement and such Financing
Agreements, as applicable. The Administrative Agent shall, and the Borrowers
hereby authorize the Administrative Agent to, apply all Loss Proceeds and
Liquidated Damages relating to the Collateral or any portion thereof in the
manner specified in section 1.11.
(d) The Lenders reserve the right at any time, upon review of the
Borrowers' risk profile, to require additional forms and limits of insurance to,
in the Lenders' sole opinion, adequately protect interests of the Lenders with
respect to the Collateral. The Borrowers shall, if so requested by the Lenders,
deliver to the Lenders, as often as the Lenders may request, a report of a
reputable insurance broker satisfactory to the Lenders with respect to the
Borrowers' insurance policies.
(e) The Borrowers shall deliver to the Lenders endorsements to
all of their and their Subsidiaries' (i) "All Risk" and business interruption
insurance covering any part of the Collateral which shall name the
Administrative Agent for the benefit of the Lenders
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as the sole loss payee of proceeds payable in respect of the Collateral and (ii)
general liability and other liability policies naming each of the Lender Parties
as additional insureds.
(f) The Borrowers will not maintain with respect to the
Collateral or any unit or item thereof any insurance competing with any
insurance for the benefit and protection of the Lenders required to be
maintained with respect to the Collateral under the section 5.4.
5.5 Compliance with Laws.
(a) The Borrowers shall, and shall cause each of their
Subsidiaries and all other Persons on, in or occupying any of the Facilities to,
comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including all Environmental Laws) except
to the extent that (i) compliance therewith is not required by any of the other
Operative Documents and (ii) noncompliance therewith could not, individually or
in the context of other instances of such noncompliance, result in a Material
Adverse Effect.
(b) The Borrowers shall, and shall cause each of their
Subsidiaries to, from time to time, obtain, maintain, retain, observe, keep in
full force and effect and comply in all material respects with the terms,
conditions and provisions of all Permits as shall now or hereafter be necessary
under applicable material laws, provided, however, that the Borrowers may, at
their expense, contest by appropriate proceedings conducted in good faith the
validity or application of any such Legal Requirements so long as (i) none of
the Borrowers, their Subsidiaries or the Lender Parties would be subject to any
criminal liability for the failure to comply therewith pending the contest, (ii)
all proceedings to enforce such Legal Requirements against any of the Lender
Parties, the Borrowers, their Subsidiaries, or the Project or any part of any of
them, shall have been duly and effectively staved during the entire pendency of
such contest, except where failure to procure such stay could not to result in a
Material Adverse Effect, (iii) none of the Collateral would be subject to
forfeiture or loss or to any Lien (other than a Lien fully and properly bonded
off) by reason of such contest, and (iv) the Administrative Agent receives
appropriate proof to the foregoing effects.
5.6 Agreements.
(a) Each Borrower shall, and shall cause each of its Subsidiaries
to, comply, duly and promptly, and perform, in all material respects within all
required time periods (after giving effect to any applicable grace periods), all
of its obligations and enforce all of its rights under each agreement, contract,
instrument or other document to which it is a party, including without
limitation the Disbursement Agreement (while the same is in force and effect),
all other Material Contracts (including all Operative Documents as and to the
extent applicable at the time), any leases and customer contracts to which it is
a party where the failure to so perform or enforce could have or result in a
Material Adverse Effect.
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(b) The foregoing notwithstanding, so long as there shall not
have occurred and then be continuing any Event of Default, the Borrowers may in
their discretion terminate individual Material Contracts (the Construction
Management Agreement excepted) under which the Contractor (not a Borrower or any
Affiliate thereof) is in default or is insolvent and may, in their discretion,
refrain from enforcing their rights thereunder, provided that the Borrowers
shall proceed with all due dispatch to replace the terminated Material Contract
with a substitute therefor, not less advantageous to the Borrowers or the
Lenders in any material respect than the Material Contract terminated and shall
promptly report to the Administrative Agent in writing each such Material
Contract termination or replacement.
(c) Supplementing and without limiting the generality of section
5.6(a), the Borrowers shall, and shall cause each of their Subsidiaries to,
perform and comply in all material respects with all of its obligations and
enforce all of its rights in respect of all Licenses, Documents and other
agreements constituting, covering or giving rise to any portion of the
Collateral if the failure to perform, comply with or enforce the same would or
could reasonably be expected to have a material adverse effect on any of the
Collateral.
5.7 Supplemental Disclosure. At the request of the Administrative Agent
(in the event that such information is not otherwise delivered by the Borrowers
to the Lenders pursuant to this Agreement) but not more frequently than once
every three months, the Borrowers shall supplement (or cause to be supplemented)
each Schedule hereto, or representation herein or in any other Loan Document
with respect to any matter hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such Schedule or as an exception to such representation or which is
necessary to correct any information in such Schedule or representation which
has been rendered inaccurate thereby, provided, however, that such supplement to
such Schedule or representation shall not be deemed an amendment thereof unless
expressly consented to in writing by the Lenders, and no such amendments, except
as the same (i) may be consented to in a writing which expressly includes a
waiver, or (ii) relates to a representation or warranty which explicitly
requires the supplementing of a disclosure schedule to describe events occurring
or circumstances first existing after the date any such representation or
warranty was made and such supplement is in all respects consistent with the
tenor of the representation or warranty, shall be or be deemed a waiver by the
Lenders of any Default disclosed therein. Each Borrower shall, if so requested
by the Administrative Agent, furnish to all of the Lenders, as often as the
Administrative Agent may reasonably request, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Lenders may reasonably request, all in reasonable
detail, and each Borrower shall advise the Lenders, promptly and in reasonable
detail, of (i) any Lien, other than as permitted by section 6.5(a)(ii) which may
attach to or be asserted against any of the Collateral and (ii) any material
change in the composition of the Collateral or the Lien thereon of the
Administrative Agent for the benefit of the Lenders.
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5.8 Environmental Review and Investigation, Disclosure, etc.,
Borrowers' Actions Regarding Hazardous Materials Activities, Environmental
Claims and Violations of Environmental Laws.
(a) Professional Consultation, etc. The Borrowers agree that in
the event any of the Lenders become aware of the occurrence, or of an alleged or
reported occurrence, of a Release upon or under the surface of the portion of
the Site on which the electrical substation included in the Collateral is
situated (the "Relevant Facility"), or any of the Lenders otherwise has formed a
reasonable suspicion that such a Release has taken place, the Administrative
Agent may, in its reasonable discretion, request that the Borrowers retain, and
in the event of any such request the Borrowers shall retain at their sole
expense, an independent professional consultant to prepare such environmental
audits and make such investigations, analyses and reports, as such consultant
shall deem reasonably necessary or advisable and to review any environmental
audits, investigations, analyses and reports otherwise prepared by or for the
Borrowers, relating to Hazardous Materials in respect of the Relevant Facility;
provided that, in the case of a Relevant Facility which does not contain any of
the Collateral and is no longer owned, leased, operated or used by the Borrowers
or any of their Subsidiaries, the Borrowers shall only be obligated to use their
best efforts to obtain permission for such professional consultant to conduct an
investigation of the Relevant Facility. For purposes of conducting such a review
or investigation, or both, the Borrowers hereby grant to such consultant and its
agents, employees and contractors the right to enter into or onto the Relevant
Facility owned, leased, operated or used by the Borrowers or any of their
Subsidiaries and to perform such tests thereon (including taking samples of
soil, groundwater and suspected asbestos-containing materials) as are reasonably
necessary in connection therewith. Any such investigation of the Relevant
Facility shall be conducted, unless otherwise agreed, during normal business
hours and, to the extent reasonably practicable, shall be conducted so as not to
interfere with the ongoing operations at the Relevant Facility or to cause any
damage or loss to any property at the Relevant Facility. The Borrowers and the
Administrative Agent hereby acknowledge and agree that any report of any
investigation conducted at the request of the Administrative Agent pursuant to
section 5.8(a) will be obtained and shall be used by the Administrative Agent
and the Lenders for the purposes of the Lenders' internal credit decisions, to
monitor and police the Loans and to protect the Lenders' security interests in
the Collateral. The Borrowers agree to cause a copy of any such report to be
delivered to the Administrative Agent. The Borrowers further agree that (x) they
will indemnify and hold harmless each Lender Party from any costs, losses or
liabilities relating to the Lender Parties' use of or reliance on such report,
(y) no Lender Party makes any representation or warranty with respect to such
report and (z) no Lender Party, by receiving and reviewing such report, is
requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
(b) Certain Reports, etc. The Borrowers will deliver to the
Administrative Agent and the Lenders:
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(i) Environmental Audits and Reports. As soon as
practicable following receipt thereof, copies of all environmental
audits, investigations, analyses and reports of any kind or character,
whether prepared by personnel of the Borrowers or any of their
Subsidiaries or by independent consultants, governmental authorities or
any other Persons, with respect to significant environmental matters at
any Facility or with respect to any Environmental Claims;
(ii) Notice of Certain Releases, Remedial Actions, etc.
Promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any Release required to be reported to any
federal, state or local governmental or regulatory agency under any
applicable Environmental Laws, (b) any remedial action taken by the
Borrowers or any other Person in response to (1) any Hazardous Materials
Activities the existence of which has a reasonable possibility of
resulting in one or more Environmental Claims having, individually or in
the aggregate, a Material Adverse Effect, or (2) any Environmental
Claims that, individually or in the aggregate, have a possibility of
resulting in a Material Adverse Effect;
(iii) Written Communications Regarding Environmental
Claims, Releases, Etc. As soon as practicable following the sending or
receipt thereof by the Borrowers or any of their Subsidiaries, a copy of
any and all written communications with respect to (a) any Environmental
Claims that, individually or in the aggregate, have a possibility of
giving rise to a Material Adverse Effect, (b) any Release required to be
reported to any federal, state or local governmental or regulatory
agency and (c) any request for information from any governmental agency
that suggests such agency is investigating whether the Borrowers or any
of their Subsidiaries may be potentially responsible for any Hazardous
Materials Activity;
(iv) Notice of Certain Proposed Actions Having
Environmental Impact. Prompt written notice describing in reasonable
detail (a) any proposed acquisition of stock, assets, or property by the
Borrowers or any of their Subsidiaries that could reasonably be expected
to (1) expose the Borrowers or any of their Subsidiaries to, or result
in, any Environmental Claims that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or (2)
affect the ability of the Borrowers or any of their Subsidiaries to
maintain in full force and effect all material Permits required under
any Environmental Laws for their respective operation and (b) any
proposed action to be taken by the Borrowers or any of their
Subsidiaries to modify current operations in a manner that could
reasonably be expected to subject the Borrowers or any of their
Subsidiaries to any material additional obligations or requirements
under any Environmental Laws that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; and
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(v) Other Information. With reasonable promptness, such
other documents and information as from time to time may be reasonably
requested by the Administrative Agent in relation to any matters
disclosed pursuant to this section 5.8.
(c) Responsive Action, etc. The Borrowers' actions regarding Hazardous
Materials Activities, Environmental Claims and Violations of Environmental Laws
shall include the following:
(i) Remedial Actions Relating to Hazardous Materials
Activities. The Borrowers shall promptly undertake, and shall cause each
of their Subsidiaries promptly to undertake, any and all investigations,
studies, sampling, testing, abatement, cleanup, removal, remediation or
other response actions necessary to remove, remediate, clean up or abate
any Hazardous Materials Activity on, under or about any Facility that is
in violation of any Environmental Laws or that presents a materials risk
of giving rise to any Environmental Claim. In the event that the
Borrowers or any of their Subsidiaries undertake any such action with
respect to any Hazardous Materials, the Borrowers, or such Subsidiaries,
as the case may be, shall conduct and complete such action in compliance
with all applicable Environmental Laws and in accordance with the
policies, orders and directives of all federal, state and local
governmental authorities except when, and only to the extent that, such
Borrower's or such Subsidiary's liability with respect to such Hazardous
Materials Activity is being contested by such Borrower or such
Subsidiary in good faith and by appropriate proceedings.
(ii) Actions with Respect to Environmental Claims and
Violations of Environmental Laws. The Borrowers shall promptly take, and
shall cause each of their Subsidiaries promptly to take, any and all
actions necessary to (i) cure any material violation of applicable
Environmental Laws by the Borrowers or their Subsidiaries and (ii) make
an appropriate response to any Environmental Claim against the Borrowers
or any of their Subsidiaries and discharge any obligations it may have
to any Person thereunder.
5.9 Landlords' and Mortgagees' Agreements. The Borrowers shall obtain a
landlord's agreement in form and substance acceptable to the Agents from the
lessor of any present or future leased premises of the Borrowers and a
mortgagee's agreement in form and substance reasonably acceptable to the Agents
from each mortgagee of any mortgage of property at which any of the Collateral
is temporarily or permanently located agreeing (among other things) to waive any
Lien or interest which any of said entities may have upon or in the Collateral
or any of it.
5.10 Certain Obligations Respecting Subsidiaries. Except with respect
to the transactions contemplated by sections 6.2(c) and 6.2(d) hereof, the
Borrowers will, and will cause each of their Subsidiaries to, take such action
from time to time as shall be necessary
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to ensure that each of their Subsidiaries, other than VCR, is a wholly-owned
Subsidiary of a Borrower.
5.11 Application of Proceeds. The Borrowers shall apply the proceeds of
the Interim Loan Advances as provided in section 1.18. Subject to the provisions
hereof (including without limitation sections 1.10 and 1.11), so long as the
Disbursement Agreement is in force and effect the Borrowers (i) shall deposit or
apply (as applicable) all proceeds of loans and advances obtained under the
other Financing Agreements, and all proceeds of loss events therein described
(except any such proceeds in respect of the Collateral), in the manner specified
in the Disbursement Agreement or the Cooperation Agreement, as applicable, and
(ii) shall not open or establish any bank, deposit or any other accounts at any
financial institution other than accounts provided for herein, in the
Disbursement Agreement (for so long as the same shall be in force and effect)
and in the other Financing Agreements.
5.12 Project Costs. The Borrowers shall, and shall cause each of their
Subsidiaries to, apply all proceeds derived from the Financing Agreements other
than this Agreement duly in accordance with the terms of the Disbursement
Agreement (so long as the same shall be in force and effect) and the other
Financing Agreements.
5.13 Repayment of Indebtedness. The Borrowers shall, and shall cause
each of their Subsidiaries to, repay in accordance with its terms, all
indebtedness, including without limitation all sums due under this Agreement and
the other Financing Agreements, but, in the case of any such indebtedness (other
than indebtedness under this Agreement) with a repayment that is limited by any
term of any Financing Agreement, repay the same subject to such limitation.
5.14 Casualty and Condemnation.
(a) If any Event of Loss shall occur with respect to the Project
or any part thereof, the Borrowers shall (a) if such Event of Loss either
involves any of the Collateral or results in a loss that exceeds $1,500,000 in
aggregate repair, restoration and replacement costs, promptly upon discovery or
receipt of notice thereof provide written notice thereof to the Administrative
Agent, (b) diligently pursue all of their rights to compensation against all
relevant insurers, reinsurers and Governmental Authorities, as applicable, in
respect of such Event of Loss and (c) not, without written consent of the
Administrative Agent (which consent shall not be unreasonably withheld or
delayed), compromise or settle any claim involving (A) an amount in excess of
$1,500,000 per claim, or (B) any claim of any amount if the Event of Loss either
(x) involves all or any part of the Collateral or (y) arises out of an event
which involves claims of an amount which when added to the aggregate amount of
all other claims during the preceding period of 12 consecutive months, would
exceed $6,000,000. All amounts and proceeds (including instruments) in respect
of any Event of Loss, including the proceeds of any insurance policy required to
be maintained by the
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Borrowers hereunder (collectively, "Loss Proceeds") shall, subject to the
further provisions of this section 5.14, be applied as provided in section
5.4(c). The Borrowers warrant that none of the corresponding provisions of the
other Financing Agreements impose any obligations with respect to the
application of any proceeds of any of the Collateral except to the Lenders
hereunder. All Loss Proceeds relating to the Collateral shall be paid by the
insurers, reinsurers, Governmental Authorities or other payors directly to the
Administrative Agent for deposit in the cash collateral account referred to in
section 1.11 for application in the manner therein specified. If any Loss
Proceeds relating to the Collateral are paid by any insurer, reinsurer,
Governmental Authority or other such payor directly to either Borrower, any
Affiliate of either Borrower or any Lender Party other than the Administrative
Agent, (a) such Loss Proceeds shall be received in trust for the Administrative
Agent, (b) such Proceeds shall be segregated from other funds of the recipient,
and (c) the recipient shall promptly pay (and, if applicable, the Borrowers
shall cause any of their Affiliates receiving the same to promptly pay) such
Loss Proceeds over to the Administrative Agent in the same form as received
(with any necessary endorsement) for deposit in the cash collateral account
referred to in section 1.11 for application in the manner therein specified.
(b) Promptly upon learning of the institution of any proceeding
for the condemnation or other taking of any of their property (including without
limitation any of the Collateral), the Borrowers shall notify the Lenders of the
pendency of such proceeding and agree that to the extent the affected property
includes any of the Collateral, the Administrative Agent, on behalf of the
Lender Parties, may participate in any such proceeding and the Borrowers from
time to time shall deliver to the Administrative Agent and the Lenders all
instruments reasonably requested by the Administrative Agent to permit such
participation. The Administrative Agent shall (and is hereby authorized to)
collect any and all awards, payments or other proceeds of any such condemnation
or taking relating to any of the Collateral and apply such proceeds to the
reduction of the Obligations in the manner set forth in section 1.11 except to
the extent that the Borrowers shall be permitted or required to use such
proceeds, or a part thereof, to replace, repair or restore such Collateral as
provided in section 1.11 hereof.
(c) Any Collateral which is to be replaced, repaired or restored
pursuant to section 1.11 shall be replaced, repaired or restored with materials
and workmanship of substantially as good a quality as existed before such loss
or taking, and the Borrowers shall commence such replacement, repair or
restoration as soon as practicable and proceed diligently with it until
completion. The Borrowers shall, at reasonable intervals requested by the
Administrative Agent, provide to the Lenders written progress reports, other
information and evidence of the Borrowers' compliance with the foregoing.
5.15 Certain Covenants Regarding the Collateral.
(a) Assurances. Without expense or cost to any of the Lender
Parties, each Borrower shall, and shall cause each of its Subsidiaries to, from
time to time hereafter,
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execute, acknowledge, file, record, do and deliver all and any further acts,
deeds, conveyances, mortgages, deeds of trust, deeds to secure debt, security
agreements, hypothecations, pledges, charges, assignments, financing statements
and continuations thereof, notices of assignment, transfers, certificates,
assurances and other instruments as the Administrative Agent may from time to
time reasonably require in order to carry out more effectively the purposes of
this Agreement or the other Loan Documents, including to subject to the Liens
created hereby any and all of the units and items of Collateral intended now or
hereafter to be covered hereby, to perform and maintain such liens, and to
assure, convey, assign, transfer and confirm unto the Administrative Agent for
the benefit of the Lenders the property and rights conveyed and assigned hereby
or intended now or hereafter to be conveyed or assigned hereby, or which any
Borrower or any Subsidiary may be or may hereafter become bound to convey or to
assign to the Administrative Agent for the benefit of the Lenders, or for
carrying out the intention of or facilitating the performance of the terms of
this Agreement or any other Loan Document or for filing, registering or
recording this Agreement or any other Loan Document. Promptly upon written
request, each Borrower shall, and shall cause each of its Subsidiaries to,
execute and deliver, and hereby authorizes the Administrative Agent to execute
and file in the name of such Borrower or Subsidiary, to the extent the
Administrative Agent may lawfully do so, one or more financing statements,
chattel mortgages or comparable security instruments to evidence more
effectively the Liens upon the Collateral created hereby or intended so to be.
(b) Filing and Recording Obligations. Each Borrower shall execute
and deliver to the Administrative Agent, and shall pay all filing, registration
and recording fees and all expenses incident to the execution and filing of,
such Uniform Commercial Code financing statements for filing in all such
jurisdictions and offices as the Lenders may reasonably request, and all filing,
registration and recording fees and all expenses incidental to the execution,
acknowledgment, filing or recording of any other Loan Document, including any
instrument of further assurance described in section 5.15(a), and shall pay all
mortgage recording taxes, transfer taxes, general intangibles taxes and
governmental stamp and other taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution, delivery, filing, recording
or registration of any of the foregoing (or in connection with the discharge of
the corresponding obligations under any other Loan Document), including any
instrument of further assurance described in section 5.15(a), or by reason of
its interest in, or measured by amounts payable under, the Notes, or in respect
of the Loans or Advances or any other Loan Document, including any instrument of
further assurance described in section 5.15(a), and shall pay all stamp taxes
and other taxes required to be paid on the Notes or any other Loan Document, but
excluding in the case of each Lender Party any Taxes imposed on its income by a
jurisdiction under the laws of which it is organized or in which its principal
executive office is located or in which its applicable lending office for
funding or booking its Interim Loan Advances and Basic Loan hereunder is
located. If either Borrower fails to make any of the payments described in the
preceding sentence within 15 days after notice thereof from the Administrative
Agent (or such shorter period as may be necessary to protect against the loss of
or diminution in value of any
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Collateral by reason of tax foreclosure or otherwise, as determined by the
Administrative Agent, in its sole discretion) accompanied by documentation
verifying the nature and amount of such payments, the Administrative Agent may
(but shall not be obligated to) pay the amount due and such Borrower shall
reimburse all amounts so paid in accordance with the terms hereof.
(c) Maintenance of Records. The Borrowers shall keep and
maintain, at their own cost and expense, satisfactory and complete records of
the Collateral, including a record of any and all payments received and any and
all credits granted with respect to the Collateral and all other dealings with
the Collateral. The Borrowers shall mark their books and records pertaining to
the Collateral to evidence this Term Loan and Security Agreement and the
security interests granted hereby. As further security, each of the Borrowers
agrees that the Administrative Agent for the benefit of the Lenders shall have a
special property right and security interest in all of such Borrower's books and
records pertaining to the Collateral and, upon the occurrence and during the
continuation of a Default, the Borrowers shall deliver and turn over any and all
such books and records to the Administrative Agent for the benefit of the
Lenders or to its representatives at any time on demand of the Administrative
Agent. Prior to such delivery upon the occurrence of a Default and upon
reasonable notice from the Administrative Agent, the Borrowers shall permit any
representative of the Lenders to inspect such books and records and shall
provide photocopies thereof to the Lenders as more specifically set forth in
section 5.18 of this Agreement.
(d) Continuous Perfection. Each Borrower shall preserve in effect
without change its name, identity and corporate structure in any manner except
for (i) such changes, if any, as would not make any financing or continuation
statement filed in connection with this Agreement or any of the Collateral
seriously misleading within the meaning of section 9-402(7) of the UCC or any
other then applicable provision of the UCC and (ii) changes made after the
Borrowers shall have given the Administrative Agent at least 30 days' prior
written notice thereof and shall have taken all action (or made arrangements to
take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably requested by
Administrative Agent to amend such financing statement or continuation statement
so that it is not seriously misleading.
(e) Provisions Regarding Equipment. Borrowers represent and
warrant to and agree with Lenders that all of the Collateral which consists of
equipment (as defined in the Code) is and will be used or held for use in the
Borrowers' businesses. The Borrowers shall keep and maintain such equipment in
good operating condition and repair (ordinary wear and tear excepted) and shall
make all necessary replacements thereof. The Borrowers shall promptly inform the
Lenders of any material change in such equipment. The Borrowers shall not permit
any of such equipment (except for the electrical substation) to become a fixture
to real property or an accession to other personal property, unless Lenders have
a valid, perfected and first priority Lien in such real or personal property.
The Borrowers shall
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not, without the Administrative Agent's prior written consent, alter or remove
any identifying symbol or number on any of such equipment. The Borrowers shall
not, without the prior written consent of the Requisite Lenders, sell, lease as
a lessor, or otherwise dispose of any of such equipment except as provided in
sections 1.10 and 1.11.
(f) Provisions Regarding Trademarks. The Borrowers shall notify
the Lenders promptly if they know or have reason to know that any application or
registration relating to any Trademark or trade name that is material to the
conduct of the Borrowers' businesses may become abandoned or dedicated, or of
any adverse determination or development (including without limitation the
institution of, or an adverse determination or development in, any proceeding in
the United States Patent and Trademark Office or any court) regarding either
Borrower's ownership of any Trademark which is material to the conduct of such
Borrower's business or its right to register, keep or maintain the same.
(g) Costs of Defending and Upholding the Lien. The Administrative
Agent may, upon at least five days' prior notice to the Borrowers (or if such
notice is not feasible, on such shorter notice as may be feasible under the
circumstances), (i) appear in and defend any action or proceeding, in the name
and on behalf of the Lender Parties affected in which any Lender Party is named
or which the Administrative Agent in its sole discretion determines is
reasonably likely to materially adversely affect any of the Collateral, the Lien
hereof, or any other Loan Document and (ii) institute any action or proceeding
which the Administrative Agent reasonably determines should be instituted to
protect the interest or rights of the Lender Parties in the Collateral or under
this Agreement or any other Loan Document.
(h) Costs of Enforcement. The Borrowers agree to bear and shall
pay or reimburse the Administrative Agent and the other Lender Parties in
accordance with the terms of section 11.4 for all reasonable sums, costs and
expenses incurred by the Administrative Agent and the other Lender Parties
(including reasonable attorneys' fees and the expenses and fees of any receiver
or similar official) of or incidental to the collection of any of the
Obligations, any foreclosure (or transfer in lieu of foreclosure) of the
Collateral, the Lien of this Agreement or any other Loan Document or any sale of
all or any portion of the Collateral.
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5.16 Administrative Agent's Appointment as Attorney-in-Fact.
(a) Each Borrower hereby irrevocably constitutes and appoints the
Administrative Agent and any officers or agents thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Borrower, and in the name of
such Borrower or in its own name, from time to time in the Administrative
Agent's discretion, for the purpose of carrying out the terms of this Agreement,
to take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to perfect the
Lien hereof on or otherwise to protect the Collateral and accomplish the
purposes of this Agreement with respect to the protection, preservation or
collection of or realization on the Collateral, and, without limiting the
generality of the foregoing, hereby grants to the Administrative Agent the power
and right, on behalf of such Borrower, without notice to or assent by either
Borrower, and at any time to do the following (but, except in the case of clause
(i), only after the occurrence and during the continuation of an Event of
Default):
(i) in the name of such Borrower, in its own name or
otherwise, take possession of, endorse and receive payment of any
checks, drafts, notes, acceptances or other instruments for the payment
of monies, claims or other amounts due in respect of any of the
Collateral, including without limitation, but subject to section
1.11(b), payments made in respect of any insurance existing pursuant to
the terms of any of the Loan Documents to the extent such insurance
payments relate to the Collateral;
(ii) subject to the rights of the parties to the other
Financing Agreements to the extent (A) the same do not affect any of the
Collateral and (B) are not inconsistent with the express provisions
hereof, make all decisions and determinations with respect to any
insurance existing pursuant to the terms of the Loan Documents,
including continuations thereof, and pay all or any part of the premiums
therefor and the costs thereof, except that, to the extent that such
insurance does not cover any of the Collateral, or covers both the
Collateral and other assets of the Borrowers (it being agreed, however,
that casualty insurance covering the Collateral will not cover any other
assets of the Borrower or any other Person), such authority to make
decisions and determinations shall be limited to participating in such
decisions equally with the other Project lenders;
(iii) pay and discharge Taxes and Liens levied or placed
on or threatened against the Collateral;
(iv) effect any repairs or obtain any insurance called for
by the terms of this Agreement and pay all or any part of the premiums
therefor and costs thereof;
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(v) direct any party liable for any payment on account of
or in respect of any of the Collateral to make payment of any and all
monies due or to become due thereunder directly to the Administrative
Agent or as the Administrative Agent shall direct;
(vi) settle, compromise or adjust any suit, action, or
proceeding referred to in section 5.15(g) and (h) and, in connection
therewith, give such discharges or releases as the Administrative Agent
may deem appropriate to protect, preserve, collect or realize upon the
Collateral;
(vii) commence and prosecute any suits, actions or
proceedings at law or equity in any court of competent jurisdiction to
protect the Collateral or any part thereof and to enforce any other
right in respect of all or any of the Collateral;
(viii) defend any suit, action or proceeding brought
against either Borrower with respect to any Collateral if such Borrower
does not defend such suit, action or proceeding or if the Administrative
Agent believes that such Borrower is not pursuing such defense in a
manner that will optimize the recovery with respect to such Collateral;
and
(ix) sell, transfer, pledge, make any agreement with
respect to the protection, preservation or realization on, or the
insurance, storage, maintenance, repair or custody of, or otherwise deal
with any of the Collateral as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes,
and to do, at the Administrative Agent's option and the Borrowers'
expense, at any time, or from time to time, all acts and things which
the Administrative Agent reasonably deems necessary to perfect, protect,
preserve, or realize upon the Collateral and the Lien of the
Administrative Agent, for the benefit of the Lenders, thereon in order
to effect the intent of this Agreement, all as fully and effectively as
the Borrowers might do.
(b) The Borrowers hereby ratify, to the extent permitted by law,
all that said attorneys shall lawfully do or cause to be done by virtue hereof.
The power of attorney granted pursuant to this section 5.16 is a power coupled
with an interest and shall be irrevocable until the Commitments have expired or
been terminated and all of the Obligations have been paid in full.
(c) The powers conferred on the Lender Parties hereunder are
solely to protect the security interest in the Collateral of the Administrative
Agent for the benefit of the Lenders and shall not impose any duty upon any
Lender Party to exercise any such powers. Each Lender Party shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and none of its officers, directors, employees, agents or
representatives shall be responsible to either Borrower for any act or failure
to act,
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except for their own gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction.
(d) Each Borrower also authorizes each Lender Party, at any time
and from time to time, to (i) communicate in its own name with any party to any
contract pertaining to the Collateral with regard to the assignment of the
right, title and interest of the Borrowers in and under such contract and other
matters relating thereto and (ii) execute, in connection with any sale provided
for in section 8.2 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
5.17 Ownership of Collateral. Subject to section 1.10, until the
Commitments have expired or been terminated and all of the Obligations have been
paid in full, none of the Collateral will be owned by any Person other than a
Borrower.
5.18 Inspection; Lenders Meeting.
(a) Inspection Rights. The Borrowers shall, and shall cause each
of their Subsidiaries to, permit any authorized representatives designated by
any Lender to visit and inspect any of the properties of the Borrowers and their
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers, consultants (including without limitation
the Construction Consultant and the Insurance Expert) and independent public
accountants, if requested by the Administrative Agent, all upon reasonable
notice, at such reasonable times during normal business hours and as often as
may reasonably be requested (provided that each Borrower may, if it so chooses,
be present at or participate in any such discussion).
(b) Lenders Meeting. The Borrowers will, upon the request of the
Administrative Agent, participate in a meeting of the Lender Parties once during
each Fiscal Year to be held at the corporate offices of LVSI, or at such other
location, and in all events at such time, as may be agreed to by the Borrowers
and the Administrative Agent.
5.19 Payment of Liens.
(a) Removal by Borrowers. In the event that, notwithstanding the
covenants contained in section 6.5, a Lien or claim of Lien (including without
limitation a mechanic's or materialman's Lien) not permitted under section 6.5
may, or (in the case of a claim of Lien) may be asserted to, encumber the
Collateral or any unit or item thereof, the Borrowers shall promptly discharge
or cause to be discharged by payment or promptly (and in any event within 45
days after the date on which the Borrowers have notice or knowledge thereof)
secure removal of the same by bonding or deposit with the appropriate
Governmental Authority or otherwise; provided that compliance with the
provisions of this section 5.19 shall not be deemed to constitute a waiver of
the provisions of section 6.5. The
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Borrowers shall exhibit to the Administrative Agent upon request all receipts or
other satisfactory evidence of payment, bonding, deposit of Charges, Liens or
any other item which may cause any such Lien to be filed against any item of
Collateral of any Borrower or any of its Subsidiaries. Each of the Borrowers
and, as applicable, their Subsidiaries shall fully preserve the Lien (and the
priority thereof) created hereby or intended so to be without cost or expense to
the Administrative Agent or the Lenders.
(b) Removal by the Administrative Agent. If any of the Borrowers
and their Subsidiaries shall fail to promptly discharge, remove or bond off any
such Lien (including without limitation any mechanic's or materialman's claim of
Lien as described above), which is not being contested by a Borrower or
Subsidiary thereof in good faith and by appropriate proceedings promptly
instituted and diligently conducted, within 30 days after the receipt of notice
thereof, then the Administrative Agent may (but shall not be obligated to)
procure the release and discharge of such Lien (or mechanics' or materialmen's
claim of Lien) and any judgment or decree thereon, and in furtherance thereof
may, in its sole discretion, effect a settlement or compromise with the lienor
or Lien claimant and post any bond or furnish any security or indemnity as the
Administrative Agent, in its sole discretion, may determine to be advisable. In
settling, compromising or arranging for the discharge of any Liens or claims
under this section 5.19(b), the Administrative Agent shall not be required to
establish or confirm the validity or amount of any Lien. The Borrowers agree
that all costs and expenses expended or otherwise incurred by the Administrative
Agent pursuant to this section 5.19 (including reasonable attorneys' fees and
disbursements) shall be paid or reimbursed by the Borrowers in accordance with
the terms hereof.
5.20 Diligent Construction of the Project. The Borrowers shall take or
cause to be taken all action, make or cause to be made all contracts and do or
cause to be done all things necessary to construct the Project diligently in
accordance with the Construction Management Agreement, the Plans and
Specifications and the other Operative Documents.
5.21 Project Plans. The Borrowers shall make available to the
Administrative Agent and the Construction Consultant at the Site copies of, and
in all events maintain at the Site a complete set of, the Plans and
Specifications as in effect from time to time.
5.22 Construction Consultant. Prior to the Final Completion Date and
thereafter until the Disbursement Agreement shall cease to be in force or
effect, each Borrower shall:
(a) cooperate, and cause the Construction Manager to cooperate,
with the Construction Consultant in the performance of the Construction
Consultant's duties hereunder and under the Construction Consultant Engagement
Agreement (as the same may be supplemented or amended in a manner reasonably
satisfactory to the Administrative Agent). Without limiting the generality of
the foregoing, the Borrowers shall and shall cause the Construction Manager to:
(i) communicate with and promptly provide all invoices, documents, plans and
other information reasonably requested by the Construction
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Consultant, (ii) authorize the Project contractors to communicate directly with
the Construction Consultant regarding the progress of the work, (iii) provide
the Construction Consultant with access to the Site and, subject to required
safety precautions, the construction areas, (iv) provide the Construction
Consultant with reasonable working space and access to telephone, copying and
telecopying equipment and (v) otherwise facilitate the Construction Consultant's
review of the construction of the Project and preparation of the certificates
required hereby;
(b) pay or cause to be paid to the Construction Consultant all
amounts required to be paid under the Construction Consultant Engagement
Agreement (as the same may be supplemented or amended in a manner reasonably
satisfactory to the Administrative Agent);
(c) in addition to any other consultation required hereunder,
following the end of each Fiscal Quarter, upon the reasonable request of the
Administrative Agent, consult with the Lenders regarding any adverse event or
condition identified in any report prepared by the Construction Consultant; and
(d) procure the attendance and participation of the Construction
Consultant at the Lenders Meeting referred to in section 5.18(b).
5.23 Borrowers' Equity.
(a) Each Borrower shall from time to time deposit or cause to be
deposited into the appropriate Borrowers' funds accounts maintained pursuant to
the Disbursement Agreement amounts in cash sufficient so that at all times the
Liquid Available Funds (as defined in the Disbursement Agreement) shall equal or
exceed 75% of the Remaining Costs.
(b) Whenever (a) the Remaining Costs exceed the Available Funds
or (b) the Required Minimum Contingency exceeds the Unallocated Contingency
Balance, then the Borrowers, and each of them, shall deposit or cause to be
deposited in the Company's Funds Account, or at the Borrowers' election the
Guaranty Deposit Account (as such terms Company's Funds Account and Guaranty
Deposit Account are defined in the Disbursement Agreement), cash in an amount
equal to the greater of such excesses.
5.24 Project Document and Permits. The Borrowers shall deliver to the
Administrative Agent, and the Construction Consultant promptly, but in no event
later than 10 days after such Borrower's receipt thereof, copies of (a) all
Project Documents and Permits obtained or entered into by a Borrower after the
Financing Date, (b) any amendment, supplement or other modification to any
Permit received by a Borrower after the Closing Date and (c) all notices
relating to the Project received by the Borrowers from any Governmental
Authority.
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6. NEGATIVE COVENANTS
The Borrowers covenant and agree that, so long as any of the Commitments
shall remain in effect and until payment in full of all of the Loans and other
Obligations, unless such performance or observance shall be excused by the prior
written consent of the Requisite Lenders, the Borrowers shall perform and
observe all of the covenants set forth in this section 6, namely:
6.1 Restriction on Fundamental Changes, Asset Sales and Acquisitions.
The Borrowers shall not, and shall not permit any of their Subsidiaries to,
directly or indirectly, by operation of law or otherwise, alter the corporate,
capital or legal structure of any Borrower, or any Subsidiary thereof, or enter
into any transaction of merger or consolidation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or sell, convey,
assign, lease (as lessor), sublease (as sublessor), transfer or otherwise
dispose of, in one transaction or a series of related transactions, all or any
part of its business, property or assets, whether now owned or hereafter
acquired, or acquire, purchase, lease (as lessee) or sublease (as sublessee), in
one transaction or a series of related transactions, all or any substantial part
of the business, property or assets of, or stock or other evidence of beneficial
ownership of, any Person or any division or line of business of any Person,
except:
(a) the Borrowers may make Consolidated Capital
Expenditures, within the limits of section 6.9(e), and, subject to
section 1.22(b), may make sales of units and items of the Collateral no
longer useful and to be used in connection with the operation of the
Project to the extent permitted by and subject to the provisions
(including without limitation provisions governing the application of
proceeds) set forth in section 1.10, provided that in connection with
any such sale the Borrowers shall have furnished to the Administrative
Agent an Officers' Certificate to the effect that the conditions of this
section 6.1(a) have been satisfied;
(b) the Borrowers and their Subsidiaries may dispose of
obsolete, worn out or surplus assets or assets no longer used or useful
in the business of the Borrowers and the Subsidiaries, in each case to
the extent the assets in question do not constitute Collateral and the
disposition is made in the ordinary course of business;
(c) the Borrowers and their Subsidiaries may sell or
otherwise dispose of assets, which do not constitute Collateral, in
transactions that do not constitute Asset Sales, provided that the
consideration received for each such asset sold or otherwise disposed of
under the authority of this clause (c), except in an Asset Sale
permitted under clauses (e) through (i) of this section 6.1, shall not
be less than the fair market value of such asset;
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(d) subject to section 6.19, the Borrowers and their
Subsidiaries may make Asset Sales of assets, which do not constitute
Collateral, having a fair market value not in excess of (i) $4,000,000
in respect of the sale or other disposition of construction equipment
prior to or during the first year following the Final Completion Date
and (ii) $2,000,000 with respect to any other Asset Sales; provided in
each case that (x) the consideration received for each such asset shall
be in an amount at least equal to the fair market value thereof, (y) the
sole consideration received shall be cash and (z) the proceeds of such
Asset Sales shall be applied as required by the applicable provisions of
the other Financing Agreements, including without limitation section
2.4B(iii)(a) of the Bank Credit Agreement as applicable;
(e) the Borrowers and Mall Construction Subsidiary may
transfer their respective interests in the Mall Collateral to the Mall
Subsidiary in accordance with section 5.16(c) of the Disbursement
Agreement and to the extent permitted under the terms of the applicable
provisions of the Financing Agreements other than this Agreement,
including without limitation section 7.7(v) of the Bank Credit
Agreement, as in effect on the date hereof, as applicable;
(f) the Borrowers may transfer the Phase II Land to the
Phase II Subsidiary in accordance with section 5.16(d) of the
Disbursement Agreement and to the extent permitted under the terms of
section 7.7(vi) of the Bank Credit Agreement in effect on the date
hereof, subject to the observance of any applicable requirements under
the other Financing Agreements;
(g) the Borrowers and their Subsidiaries may enter into
any leases with respect to any space on or within the Project where none
of the Collateral is or shall be located;
(h) the Borrowers may enter into the HVAC Ground Lease;
(i) LVSI may lease the casino from VCR pursuant to the
Casino Lease;
(j) the Mall Construction Subsidiary (and, if applicable,
the Mall Subsidiary) may lease the Mall from Venetian pursuant to the
Mall Lease and, further, upon the occurrence of the Mall Parcel Creation
Date, VCR and the Mall Construction Subsidiary (or, if applicable, Mall
Subsidiary) may terminate the Mall Lease, in each case as and to the
extent consistent with section 5.16 of the Disbursement Agreement and as
permitted under the terms of the applicable provisions of the Financing
Agreements other than this Agreement, including without limitation
section 7.7(x) of the Bank Credit Agreement, as in effect on the date
hereof, as applicable;
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(k) either Borrower may be merged with the other Borrower;
(l) either Borrower may sell, lease or otherwise transfer
assets, which do not constitute Collateral, to the other Borrower or to
a wholly-owned Subsidiary of the transferor Borrower to the extent
permitted by section 6.2 and any wholly-owned Subsidiary of a Borrower
may sell, lease or otherwise transfer assets to any other wholly-owned
Subsidiary of such Borrower or to the other Borrower;
(m) the Mall Construction Subsidiary may be merged with or
liquidated into VCR;
(n) the Borrowers may dedicate space for the purpose of
construction of (i) a mass transit system, (ii) a pedestrian bridge over
or a pedestrian tunnel under Las Vegas Boulevard and Sands Avenue or
similar structures to facilitate pedestrians or traffic and (iii) a
right turn lane or other roadway dedication at or near the Project;
provided in each case that such dedication does not materially impair
the use or operations of the Project;
(o) the Mall Construction Subsidiary may enter into or
take by assignment the Mall Management Agreement;
(p) the Borrowers may make the transfers permitted under
sections 6.2(c), (d), (e) and (i) hereof;
(q) VCR and the Mall Construction Subsidiary may enter
into the Billboard Master Lease;
(r) the Borrowers and their Subsidiaries may transfer any
assets, which do not constitute Collateral, leased or acquired with
proceeds of a Non- Recourse Financing permitted under section 6.3 to the
lender providing such financing upon default, expiration or termination
of such Non-Recourse Financing;
(s) the Borrowers may sell receivables for fair market
value in the ordinary course of business; and
(t) the Borrowers may incur Liens permitted under section
6.5, provided that any leases (whether or not constituting Permitted
Liens) shall be permitted only to the extent provided in clause (g) of
this section 6.1 and the last sentence of this section 6.1.
Notwithstanding the foregoing provisions of this section 6.1, clauses (g) and
(as it relates to leases) (t) shall be subject to the additional provisos that:
(i) no Event of Default or Default would occur as a result of entering into such
transaction or lease (or immediately after any
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renewal or extension thereof at the option of the Borrowers or one of their
Subsidiaries), (ii) such transaction or lease will not materially interfere
with, impair or detract from the operation of the businesses of the Borrowers
and their Subsidiaries, (iii) such transaction or lease is at a fair market rent
or value (in light of other similar or comparable prevailing commercial
transactions) and contains such other terms such that the lease, taken as a
whole, is commercially reasonable and fair to the Borrowers and their
Subsidiaries in light of prevailing or comparable transactions in other casinos,
hotels, hotel attractions or shopping venues and (iv) no gaming or casino
operations (other than the operation of arcades and games for children) may be
conducted on any space that is subject to such transaction or lease other than
by one or more of the Borrowers and their Subsidiaries.
6.2 Investments; Joint Ventures; Formation of Subsidiaries. The
Borrowers shall not, and shall not permit any of their Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint
Venture, or otherwise form or create any Subsidiary, except:
(a) the Borrowers and their Subsidiaries may make and own
Investments in Cash Equivalents (as defined in section 1.1 of the Bank
Credit Agreement);
(b) the Borrowers may continue to own their existing
Investments in the Intermediate Holding Companies, the Excluded
Subsidiaries and the Mall Construction Subsidiary described in Schedule
6.2, provided that the Borrowers and their Subsidiaries may not make any
additional Investments in such Persons except as permitted by clauses
(c), (d), (e) and (i) below;
(c) the Borrowers may transfer the Mall Collateral to the
Mall Subsidiary to the extent permitted by section 6.1(e) and may
transfer a 1% managing membership interest in each of the Mall
Subsidiary and the Mall Direct Holdings to the Mall Manager;
(d) the Borrowers may transfer the Phase II Land to the
Phase II Subsidiary to the extent permitted by section 6.1(f) and may
transfer a 1% managing membership interest in each of the Phase II
Subsidiary and Phase II Direct Holdings to the Phase II Manager;
(e) the Borrowers and their Subsidiaries may invest in the
Mall Subsidiary or the Phase II Subsidiary, or both, any cash or other
property contributed to the Borrowers by Sheldon G. Adelson or any of
his Affiliates for either of such express purposes;
(f) so long as no Event of Default or Default shall have
occurred and be continuing or would result therefrom, the Borrowers may
form and make
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Investments in new Subsidiaries and in Joint Venture Suppliers; provided
that (i) the aggregate amount of all such Investments shall not at any
time exceed $10,000,000, (ii) no such Subsidiary or Joint Venture
Supplier shall own or operate or possess any material license, franchise
or right used in connection with the ownership or operation of the
Project or any material Project assets, (iii) in the case of any
Investment in a Joint Venture Supplier, LVSI shall have delivered to the
Administrative Agent an Officers' Certificate which certifies that in
the reasonable judgment of such officers the Investment in such Joint
Venture Supplier will result in an economic benefit to the Borrowers
(taking into account such Investment) as a result of a reduction in the
cost of the goods or services being acquired from the Joint Venture
Supplier over the life of the Investment and (iv) none of the Borrowers,
nor any other Subsidiary of either Borrower, shall incur any liabilities
or contingent obligations in respect of the obligations of such
Subsidiary or Joint Venture Supplier;
(g) the Borrowers may make Consolidated Capital
Expenditures to the extent permitted by section 6.9;
(h) the Borrowers and their Subsidiaries may hold
Investments consisting of securities received in settlement of
indebtednesses created in the ordinary course of business and owing to
one or more of the Borrowers and their Subsidiaries or in satisfaction
of judgments with respect to such indebtednesses;
(i) so long as no Event of Default or Default shall have
occurred and be continuing or would result therefrom, the Borrowers may
make cash contributions to the Mall Subsidiary in an aggregate amount
not to exceed $5,00,000 to pay fees and expenses in connection with the
refinancing of the Interim Mall Facility;
(j) the Borrowers may make loans or advances to their
employees (i) to fund the exercise price of options granted under the
Borrowers' stock option plans or agreements or employment agreements as
in effect on November 14, 1997, and (ii) for other purposes in an amount
not to exceed $1,000,000 in the aggregate outstanding at any time; and
(k) the Borrowers may make and own other Investments in an
aggregate amount not to exceed at any time $5,000,000.
6.3 Indebtedness. The Borrowers shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, create, incur, assume or guaranty
or permit to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
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(a) the Borrowers and their Subsidiaries may become and
remain liable with respect to the Obligations;
(b) the Borrowers and their Subsidiaries may become and
remain liable with respect to Contingent Obligations permitted by
section 6.7 and (other than with respect to subsections (e) and (f) of
section 6.7) upon any matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the Contingent Obligations so
extinguished;
(c) the Borrowers may become and remain liable for
Indebtedness evidenced by the Mortgage Notes in an aggregate principal
amount not to exceed at any time $425,000,000, reduced by any principal
payments required to be made thereon;
(d) the Borrowers may become and remain liable for
Indebtedness under the Interim Mall Credit Agreement representing the
Interim Mall Facility in an aggregate principal amount not to exceed at
any time $140,000,000 reduced by (x) any principal payments required to
be made thereon and (y) any amounts funded in respect of a Substitute
Tranche B Loan, provided that following the Mall Release Date or any
transfer of the Mall Collateral to the Mall Subsidiary, the Indebtedness
under the Interim Mall Facility shall not be Indebtedness permitted
under this section 6.3;
(e) the Borrowers may become and remain liable for
Indebtedness represented by the Subordinated Notes in an aggregate
principal amount not to exceed at any time $97,500,000 reduced by any
principal payments required to be made thereon;
(f) the Borrowers may become and remain liable for
Indebtedness under the Bank Credit Agreement, or any replacement,
refinancing or refunding thereof permitted pursuant to section 6.8(l),
in an aggregate principal amount not to exceed at any time $170,000,000
reduced by any principal payments required to be made thereon;
(g) the Borrowers and the Mall Construction Subsidiary may
become and remain liable for Indebtedness in respect of any Substitute
Tranche B Loan in an aggregate principal amount not to exceed
$35,000,000 at any time (plus any accrued and unpaid interest thereon
added to principal) reduced by any principal payments required to be
made thereon, provided that, following the Mall Release Date or any
transfer of the Mall Collateral to the Mall Subsidiary, such
Indebtedness shall not constitute Indebtedness permitted under this
section 6.3;
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(h) the Borrowers may become and remain liable for Non-
Recourse Financing, other than Alternate Vendor Financing, used to
finance the purchase or lease of personal or real property for use in
the business of a Borrower or one of its Subsidiaries, provided that (i)
such Non-Recourse Financing represents at least 75% of the purchase
price of such personal or real property, (ii) the Indebtedness incurred
pursuant to this section 6.3(h) shall not exceed $20,000,000 at any time
and (iii) no such Indebtedness may be incurred under this section 6.3(h)
until the Final Completion Date has occurred and the Borrowers have
generated Consolidated EBITDA for one Fiscal Quarter of at least
$25,000,000;
(i) the Borrowers may become and remain liable for
Indebtedness in respect of any Completion Guaranty Loan in an aggregate
amount not to exceed $25,000,000 (plus any accrued and unpaid interest
thereon added to principal);
(j) the Borrowers may become and remain liable for an
aggregate of $20,000,000 of additional Indebtedness under a working
capital line less the aggregate amount of all increases, if any, in
commitments granted under section 2.1A(ii) of the Bank Credit Agreement;
provided that (x) no such Indebtedness may be incurred until after the
Final Completion Date and (y) such Indebtedness shall be incurred either
with the lenders under the Bank Credit Agreement or with other Persons
who are "Eligible Assignees" (as such term is defined in section 1.1 of
the Bank Credit Agreement) on substantially the same terms as the
"revolving loans" under section 2.1A(ii) of the Bank Credit Agreement
and otherwise on terms reasonably satisfactory to the Bank Agent and
Goldman Sachs Credit Partners L.P. in its capacity as arranger under the
Bank Credit Agreement;
(k) the Borrowers may become and remain liable for
Indebtedness to employees of the Borrowers ("Employee Repurchase Notes")
incurred in connection with any repurchase of employee options or stock
upon death, disability or termination of such employee in accordance
with employment agreements or option plans or agreements as in effect on
the Closing Date ("Permitted Employee Repurchases") provided that such
Indebtedness shall be unsecured and subordinated on terms not less
favorable to the Borrowers and the Lenders than the terms of the
Subordinated Notes and shall expressly provide that payments thereon
shall be required only to the extent permitted by section 6.8(a) hereof
and not restricted by any other Financing Agreement;
(l) the Borrowers may become and remain liable for
Indebtedness incurred for the purpose of financing all or any part of
the purchase or lease of gaming equipment to be used in connection with
the casino located at the casino resort to be owned by Phase II
Subsidiary or any casino to be operated within Phase II in the aggregate
amount at any time outstanding not to exceed $10,000,000; provided that
upon default under such Indebtedness, the lender under such
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Indebtedness may seek recourse or payment against the Borrowers and
their Subsidiaries only through the return or sale of the property or
equipment so purchased or leased and may not otherwise assert a valid
claim for payment on such Indebtedness against the Borrowers and their
Subsidiaries or any other property of the Borrowers and their
Subsidiaries;
(m) Indebtedness under the Bank Credit Agreement in excess
of the amount permitted by section 6.3(f), and Indebtedness under the
Interim Mall Credit Agreement in excess of the amount permitted by
section 6.3(d) (without giving effect to the proviso set forth in
section 6.3(d)), provided that (x) the Indebtedness permitted under this
section 6.3(m) shall in no event exceed $20,000,000 in aggregate
principal amount and shall not be secured by any Liens other than Liens
permitted under section 6.5(a)(viii), (y) in the case of each Project
Lender (other than the Lenders hereunder), the Indebtedness permitted
under this section 6.3(m) shall be permitted either under the terms of
the Financing Agreement pursuant to which such Project Lender has
extended or committed to extend credit, under the terms of the Credit
Parties Intercreditor Agreement, or under the terms of an express
written consent or waiver by such Project Lender of such Financing
Agreement a copy of which consent or waiver has been furnished to the
Administrative Agent and (z) after giving effect to the incurrence of
the Indebtedness permitted under this section 6.3(m) and any other
Indebtedness being incurred contemporaneously therewith the Borrowers
shall be in compliance on a pro forma basis with all of their covenants
set forth in section 6.9 (to the extent section 6.9 is then applicable)
and the Administrative Agent shall have received an Officers'
Certificate to such effect and setting forth the calculations necessary
to demonstrate such compliance;
(n) Indebtedness under the Bank Credit Agreement or the
Interim Mall Credit Agreement, or both, not permitted under subsections
(d), (f) and (m), taken together, of this section 6.3, or under any
other subsection of this section 6.3 (such permitted Indebtedness being
herein sometimes referred to as "Subsection 6.3(n) Indebtedness"),
provided that (i) no Subsection 6.3(n) Indebtedness shall be incurred
prior to the occurrence of a Default hereunder nor on or after the Basic
Loan Commencement Date, (ii) Subsection 6.3(n) Indebtedness shall be
incurred for the purpose of curing, and shall have the effect of curing,
the Default, shall in no event exceed $30,000,000 in aggregate principal
amount and shall not be secured by any Liens other than Liens permitted
under section 6.5(a)(vii), (iii) contemporaneously with each incurrence
of Subsection 6.3(n) Indebtedness Sheldon G. Adelson shall have
contributed to the equity capital of LVSI, for use in connection with
the completion of the construction of the Project, cash in an amount
equal to or greater than the amount of the Subsection 6.3(n)
Indebtedness then being incurred, (iv) in the case of each Project
Lender (other than the Lenders hereunder), the Subsection 6.3(n)
Indebtedness shall be permitted either under the terms of the Financing
Agreement
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pursuant to which such Project Lender has extended or committed to
extend credit, under the terms of the Credit Parties Intercreditor
Agreement, or under the terms of an express written consent or waiver by
such Project Lender of such Financing Agreement a copy of which consent
or waiver has been furnished to the Administrative Agent and (v) after
giving effect to the incurrence of the Subsection 6.3(n) Indebtedness
and any other Indebtedness being incurred contemporaneously therewith
the Borrowers shall be in compliance on a pro forma basis with all of
their covenants set forth in section 6.9 (to the extent section 6.9 is
then applicable) and the Administrative Agent shall have received an
Officers' Certificate to such effect and setting forth the calculations
necessary to demonstrate such compliance;
(o) Indebtedness not permitted under subsections (d), (f),
(m) and (n), taken together, of this section 6.3, or under any other
subsection of this section 6.3 (such Indebtedness permitted only under
this section 6.3(o) being herein sometimes referred to as "Subsection
6.3(o) Indebtedness"), provided that (i) no Subsection 6.3(o)
Indebtedness shall be incurred prior to the occurrence of a Default
hereunder nor on or after the Basic Loan Commencement Date, (ii) the
Subsection 6.3(o) Indebtedness shall be incurred solely for the purpose
of curing, and shall have the effect of curing, the Default and shall in
no event exceed $50,000,000 in aggregate principal amount, (iii) all
Subsection 6.3(o) Indebtedness shall be secured by the Liens permitted
under section 6.5(a)(xi) and no other Liens, (iv) contemporaneously with
each incurrence of Subsection 6.3(o) Indebtedness Sheldon G. Adelson
shall have contributed to the equity capital of LVSI, for use in
connection with the completion of the construction of the Project, cash
in an amount equal to or greater than the amount of the Subsection
6.3(o) Indebtedness then being incurred, (v) in the case of each Project
Lender (other than the Lenders hereunder), the Subsection 6.3(o)
Indebtedness shall be permitted either under the terms of the Financing
Agreement pursuant to which such Project Lender has extended or
committed to extend credit, under the terms of the Credit Parties
Intercreditor Agreement, or under the terms of an express written
consent or waiver by such Project Lender of such Financing Agreement, a
copy of which consent or waiver has been furnished to the Administrative
Agent and (vi) after giving effect to the incurrence of the Subsection
6.3(o) Indebtedness and any other Indebtedness being incurred
contemporaneously therewith the Borrowers shall be in compliance on a
pro forma basis with all of their covenants set forth in section 6.9 (to
the extent section 6.9 is then applicable) and the Administrative Agent
shall have received an Officers' Certificate to such effect and setting
forth the calculations necessary to demonstrate such compliance;
(p) Indebtedness, not to exceed $7,700,000 in the
aggregate, which consists of Alternative Vendor Financing permitted
under section 1.2(f); and
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(q) Indebtedness, not to exceed $10,000,000 in the
aggregate, not permitted under any of the foregoing clauses (a) through
(p), inclusive.
6.4 Affiliate and Employee Loans and Transactions; Employment
Agreements. The Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any holder of 5% or more of any class of
equity Securities of either Borrower or with any Affiliate of a Borrower or of
any such holder, provided that Borrowers may enter into and permit to exist:
(a) transactions that are on terms that are not less
favorable to the affected Borrower or Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not
such holders or Affiliates if (i) the Borrowers have delivered to the
Administrative Agent (A) with respect to any transaction involving an
amount in excess of $500,000, a resolution adopted by a majority of the
disinterested non-employee directors of the applicable Borrower (of
LVSI, in the case of VCR) or Subsidiary approving such transaction and
an Officers' Certificate certifying that such transaction complies with
this section 6.4, at the time such transaction is entered into and (B)
with respect to any such transaction that involves aggregate payments in
excess of $10,000,000 or that is a loan transaction involving a
principal amount in excess of $10,000,000, an opinion as to the fairness
of the transaction to the applicable Borrower or Subsidiary from a
financial point of view issued by an Independent Financial Advisor at
the time such transaction is entered into;
(b) the Services Agreement;
(c) purchases of materials or services from a Joint
Venture Supplier by the Borrowers or any of their Subsidiaries in the
ordinary course of business on arm's length terms;
(d) any employment, indemnification, noncompetition or
confidentiality agreement entered into by the Borrowers or any of their
Subsidiaries with their employees or directors in the ordinary course of
business;
(e) loans or advances to employees of the Borrowers or
their Subsidiaries permitted under section 6.2(j);
(f) the payment of reasonable fees to directors of the
Borrowers and their Subsidiaries who are not employees of the Borrowers
or their Subsidiaries;
(g) the grant of stock options or similar rights to
employees and directors of the Borrowers pursuant to plans approved by
the board of directors of
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LVSI and any repurchases of stock or options of the Borrowers from such
employees to the extent permitted by section 6.8;
(h) transactions between or among the Borrowers and any of
their wholly-owned Subsidiaries;
(i) the transactions contemplated by the Adelson
Completion Guaranty;
(j) the transactions contemplated by the Cooperation
Agreement;
(k) the transactions contemplated by the HVAC Services
Agreement;
(l) the use of the Congress Center by the owner of the
Sands Expo and Convention Center, provided that VCR receives fair market
value for the use of such property;
(m) the transactions contemplated by the GMAC Guaranty,
including the Substitute Tranche B Loan;
(n) the transfer of the Phase II Land to the Phase II
Subsidiary, the transfer of the Mall Collateral to the Mall Subsidiary
and other asset transfers and investments permitted under sections
6.2(c), (d), (e) and (k);
(o) any repayment or deemed repayment of the Interim Mall
Loan and the Substitute Tranche B Loan in connection with the transfer
of the Mall Collateral to the Mall Subsidiary;
(p) the incurrence and discharge of obligations of the
Borrowers under a gaming operations lease agreement with the Phase II
Subsidiary relating to the casino to be in the casino resort owned by
the Phase II Subsidiary on terms substantially similar to those of the
Casino Lease except that (i) the rent payable under such lease shall be
equal to all revenues derived from such casino minus the sum of (1) the
operating costs related to such casino (including an allocated portion
(based on gaming revenue) of the Borrowers' administrative costs related
to its gaming operations) and (2) the lesser of $250,000 or 1.0% of such
casino's operating income (or zero if there is an operating loss)
(determined in accordance with GAAP), (ii) the Borrowers may agree that
they shall operate the casino in the casino resort owned by the Phase II
Subsidiary and the casino in the Project in substantially similar
manners, and (iii) the Borrowers may agree to have common gaming and
surveillance operations in such casinos (based on equal allocations of
revenues and operating costs);
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(q) the participation by employees of Interface in the Las
Vegas Sands, Inc. 401(k) Retirement Plan if Interface shall reimburse
the Borrowers for a pro rata portion of the administrative expenses of
such plan based on the number of employees of each of Interface and LVSI
participating in such plan;
(r) transactions contemplated by the Interface Lease;
(s) reimbursements by the Borrowers to Yona Aviation
Services, Inc. or its successors for its operating and lease costs
related to the use of its aircraft by the Borrowers' employees (based on
the actual allocated costs and time of usage);
(t) transactions contemplated by the Puck JV Letter of
Intent; and
(u) transactions contemplated by the Billboard Master
Lease.
6.5 Liens.
(a) Prohibition on Liens. The Borrowers shall not, and shall not
permit any of their Subsidiaries to, directly or indirectly, create, incur,
assume or permit to exist any Lien on or with respect to any property or asset
of any kind (including any document or instrument in respect of goods or
accounts receivable) of such Borrower or Subsidiary, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any jurisdiction or under any
similar recording or notice statute, except for the following none of which
(except as specified in clause (ii) below) shall in any event encumber or
otherwise affect any of the Collateral:
(i) Permitted Liens and Liens granted pursuant hereto;
(ii) Permitted Collateral Encumbrances;
(iii) Liens securing Indebtedness permitted under clause
(c) of section 6.3, to the extent permitted under the Bank Credit
Agreement and the Interim Mall Credit Agreement;
(iv) Liens securing Indebtedness permitted under clause
(d) of section 6.3, to the extent permitted under the Bank Credit
Agreement and the Mortgage Notes Indenture, provided that such Liens
shall attach only to the Mall Collateral;
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(v) Liens securing Indebtedness permitted under clause (f)
of section 6.3, to the extent permitted under the Mortgage Notes
Indenture and the Interim Mall Credit Agreement;
(vi) Liens securing Indebtedness permitted under clause
(h) of section 6.3, provided that such Liens shall attach only to the
real or personal property purchased or leased with the proceeds of the
Non-Recourse Financing referred to in such clause and such assets are
acquired or leased within 180 days after the incurrence of such
Indebtedness;
(vii) Liens in favor of the Mortgage Note Holders or the
Interim Mall Lender or other Person securing Indebtedness advanced by
any such Person and permitted under subsections (m) and (n) of section
6.3 to the extent that (A) such Liens are permitted under the terms of
the Credit Parties Intercreditor Agreement, the Bank Credit Agreement,
the Mortgage Notes Indenture and the Interim Mall Credit Agreement and
(B) any such Liens in favor of Interim Mall Lender attach only to the
Mall Collateral;
(viii) Liens securing Indebtedness permitted under clause
(l) of section 6.3, provided that such Liens shall attach only to the
casino equipment purchased or leased with the proceeds of such
Indebtedness and such assets are acquired or leased within 180 days of
the incurrence of such Indebtedness;
(ix) Liens securing Indebtedness permitted under clause
(j) of section 6.3; provided that such Liens are pari passu with the
Liens securing the Indebtedness permitted under clause (f) of section
6.3;
(x) Liens described in Schedule 6.5;
(xi) Liens securing Indebtedness permitted under clause
(o) of section 6.3; provided that such Liens are (A) subordinate to both
the Liens permitted under clause (iv) of this section 6.5 and the Liens
permitted under clause (v) of this section 6.5 and (B) subordinate to or
pari passu with the Liens permitted under clause (iii) of this section
6.5;
(xii) Liens securing Indebtedness permitted under section
6.3(p), provided that such Liens shall attach only to the individual
units and items of equipment purchased with the Alternative Vendor
Financing corresponding thereto; and
(xiii) Other Liens securing Indebtedness, permitted only
under section 6.3(q), in an aggregate amount not to exceed $5,000,000 at
any time outstanding.
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(b) Equitable Lien in Favor of Lenders. If either Borrower or any
Subsidiary thereof shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens permitted by
an express exception set forth in section 6.5(a), it shall make or cause to be
made effective provision whereby the Obligations will be secured by such Lien
equally and ratably with any and all other Indebtedness secured thereby as long
as any such Indebtedness shall be so secured; provided that, notwithstanding the
foregoing, this covenant shall not be construed as a consent by the Requisite
Lenders to the creation or assumption of any such Lien not permitted by the
provisions of section 6.5(a).
(c) No Further Negative Pledges. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or leases or to
be sold pursuant to an executed agreement with respect to an Asset Sale, neither
Borrower, nor any Subsidiary, shall enter into any agreement prohibiting the
creation or assumption of any Lien upon any of its properties or assets, whether
now owned or hereafter acquired, other than (x) as provided herein, (y) as set
forth in the documents evidencing Other Indebtedness as in effect on the Closing
Date including any refinancing thereof permitted hereunder, provided that the
provisions regarding the creation or assumption of Liens is not less favorable
to the applicable Borrower or Subsidiary or to the Lenders hereunder than those
set forth in the documents evidencing the Indebtedness being refinanced or (z)
as required by applicable law or any applicable rule or order of any Gaming
Authority.
(d) No Restrictions on Subsidiary Distributions to Borrowers or
Other Subsidiaries. The Borrowers will not, and will not permit any of their
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any of their Subsidiaries to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by either Borrower
or any other Subsidiary of a Borrower, (ii) repay or prepay any Indebtedness
owed by any of such Subsidiaries to either or both of the Borrowers, (iii) make
loans or advances to the Borrowers or (iv) transfer any of its property or
assets to either or both of the Borrowers other than (x) as provided herein or
in the other Loan Documents, (y) as set forth in the documents evidencing Other
Indebtedness as in effect on the date hereof, including any refinancing,
renewal, replacement or substitution thereof permitted hereunder, provided that
the provisions regarding dividends, distributions, repayments of Indebtedness,
loans and advances and transfers of assets are not less favorable to the
applicable Borrower or Borrowers, Subsidiary or Subsidiaries or to the Lenders
hereunder than those set forth in the documents evidencing the Indebtedness
being refinanced, renewed, replaced or substituted for or (z) as required by
applicable law or any applicable rule or order of the Nevada Gaming Authority.
6.6 ERISA. Unless doing so, individually or taken together with similar
acts or omissions in the past, would not present any reasonable likelihood of
resulting in a Material Adverse Effect, no Borrower or ERISA Affiliate (i) shall
acquire any new ERISA Affiliate
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that maintains or has an obligation to contribute to a Pension Plan that has
either an "accumulated funding deficiency," as defined in section 302 of ERISA,
or any "unfunded vested benefits" (as defined in section 4006(a)(3)(E)(iii) of
ERISA in the case of any Pension Plan other than a Multiemployer Plan and in
section 4211 of ERISA in the case of a Multiemployer Plan) or (ii) shall (a)
permit or suffer any condition specified in Schedule 3.13 to cease to be met and
satisfied at any time; or (b) terminate any Pension Plan that is subject to
Title IV of ERISA where such termination could reasonably be anticipated to
result in liability to either Borrower; or (c) permit any accumulated funding
deficiency, as defined in section 302(a)(2) of ERISA, to be incurred with
respect to any Pension Plan; or (d) fail to make any contributions or fail to
pay any amounts due and owing as required by the terms of any Plan before such
contributions or amounts become delinquent; or (e) make a complete or partial
withdrawal (within the meaning of section 4201 of ERISA) from any Multiemployer
Plan. No Borrower or ERISA Affiliate shall at any time fail to provide the
Lenders with copies of any Plan documents or governmental reports or filings, if
requested by the Requisite Lenders.
6.7 Contingent Obligations. The Borrowers shall not, and shall not
permit any of their Subsidiaries to, directly or indirectly, create or become or
remain liable with respect to any Contingent Obligation, except:
(a) the Borrowers may become and remain liable with
respect to Contingent Obligations under Interest Rate Agreements which
are (i) required under section 6.8 of the Bank Credit Agreement or under
the terms of any other Financing Agreement or (ii) entered into to hedge
against interest rate fluctuations in respect of the Obligations
hereunder or (iii) entered into to hedge against interest rate
fluctuations in respect of up to 100% of the outstanding principal
amount of the Indebtedness permitted under clauses (d) and (f) of
section 6.3 so long as such Interest Rate Agreements are on
substantially the same terms as those entered into to satisfy the
requirements of section 6.8 of the Bank Credit Agreement and all
obligations thereunder are secured solely by Liens included in Permitted
Liens under clause (xviii) of the definition of "Permitted Liens" in
Annex A hereto;
(b) the Borrowers and their Subsidiaries may become and
remain liable with respect to Contingent Obligations under the Loan
Documents;
(c) the Borrowers and their Subsidiaries may become and
remain liable with respect to the Contingent Obligations for the
Indebtedness permitted under subsections (c), (d), (e), (f), (h) and (j)
through (p), inclusive, of section 6.3, provided that, except with
respect to the Indebtedness permitted under subsections (d) and (l) and
Indebtedness to the Interim Mall Lender permitted under subsection (j),
any such Contingent Obligations of the Intermediate Holding Companies
are subordinate to the Obligations on terms at least as favorable to the
Lenders hereunder
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as those relating to the subordination of the Intermediate Holding
Company guaranties set forth in the Mortgage Notes Indenture as in
effect on the date hereof;
(d) to the extent such incurrence does not result in the
incurrence by the Borrowers or any of their Subsidiaries of any
obligation for the payment of borrowed money, the Borrowers may become
and remain liable with respect to Contingent Obligations incurred solely
in respect of performance bonds, completion guaranties and standby
letters of credit or bankers' acceptances, provided that such Contingent
Obligations are incurred in the ordinary course of business and do not
at any time exceed $10,000,000 in the aggregate;
(e) the Borrowers and their Subsidiaries may become and
remain liable for customary indemnities under Project Documents as in
effect on the date hereof; and
(f) the Borrowers may become and remain liable with
respect to other Contingent Obligations, provided that the maximum
aggregate liability, contingent or otherwise, of Borrowers in respect of
all such Contingent Obligations shall at no time exceed $5,000,000.
6.8 Restricted Junior Payments. The Borrowers shall not, and shall not
permit any of their Subsidiaries to, directly or indirectly, declare, order,
pay, make or set apart any sinking fund, defeasance fund or other sum for any
Restricted Junior Payment, except:
(a) the Borrowers may make regularly scheduled payments
and mandatory prepayments (not including any payments upon an
acceleration) of principal and interest in respect of any Other
Indebtedness of the Borrowers in accordance with the terms of, and only
to the extent required by the agreement pursuant to which such Other
Indebtedness was issued, provided that (i) any such payments shall be
subject to the terms of the Credit Parties Intercreditor Agreement, the
Adelson Intercreditor Agreement and the Adelson Completion Guaranty, as
applicable, (ii) any such payments in respect of any Completion Guaranty
Note or any Employee Repurchase Note may be made only to the extent that
no Event of Default or Default shall then exist and be continuing or
would result therefrom and (iii) any such payments in respect of any
Employee Repurchase Note may be made only to the extent that the ratio
of Consolidated Adjusted EBITDA to Consolidated Fixed Charges for the
four-Fiscal Quarter period ended on the most recent Quarterly Date
preceding such payment or such shorter period tested on such Quarterly
Date under section 6.9(a) (determined on a pro forma basis (as though
such payment on the Employee Repurchase Note had been made during the
period tested as of such Quarterly Date under section 6.9(a)) would have
been in compliance with the requirements of section 6.9(a) as certified
to the Administrative Agent by the chief
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financial officer of each of the Borrowers, on behalf of each of the
Borrowers, at the time of such payment;
(b) the Borrowers and the Mall Construction Subsidiary may
prepay the Interim Mall Loan from any loss proceeds related to the
collateral for the Interim Mall Loan to the extent required by the
Interim Mall Credit Agreement and in accordance with the Credit Parties
Intercreditor Agreement;
(c) the Borrowers and the Mall Construction Subsidiary may
make the payments, if any, which may be deemed to be made to the Interim
Mall Lender, funded from proceeds paid by the Mall Subsidiary to VCR or
the Mall Construction Subsidiary under the Sale and Contribution
Agreement, solely as a result of the assumption of the obligations under
the Interim Mall Credit Agreement by the Mall Subsidiary;
(d) the Borrowers and the Mall Construction Subsidiary may
make any payments in respect of the Substitute Tranche B Loan which are
either funded from proceeds paid by the Mall Subsidiary to VCR or the
Mall Construction Subsidiary under the Sale and Contribution Agreement
or which may be deemed to occur solely as a result of the assumption of
the obligations under the Substitute Tranche B Loan by the Mall
Subsidiary, provided that no cash payments on the Substitute Tranche B
Loan may be made from such proceeds unless the Interim Mall Loan has
been repaid in full;
(e) the Borrowers and the Mall Subsidiary may repay the
Substitute Tranche B Loan or the Interim Mall Facility from the proceeds
of (i) any "Interim Mall Loan Refinancing" included in the definition of
the term "Interim Mall Facility" set forth in section 1.1 of the Bank
Credit Agreement or (ii) a refinancing of the Substitute Tranche B Loan
permitted under section 6.3;
(f) the Borrowers and their Subsidiaries may redeem or
purchase any equity interests in the Borrowers or their Subsidiaries or
any Indebtedness to the extent required by any Nevada Gaming Authority
in order to preserve a material Gaming License, provided that, so long
as such efforts do not jeopardize any material Gaming License, the
Borrowers shall have diligently tried to find a third-party purchaser
for such equity interests or Indebtedness and no third-party purchasers
acceptable to the Nevada Gaming Authority shall have been willing to
purchase such equity interests or Indebtedness within a time period
acceptable to the Nevada Gaming Authority;
(g) for so long as a Borrower is a corporation under
Subchapter S of the IRC (in the case of LVSI) or a limited liability
company (in the case of VCR) or, in either case, a substantially
similarly treated pass-through entity for Federal
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income tax purposes (as evidenced by an opinion of counsel delivered at
least annually), such Borrower may make cash distributions to its
shareholders or members, during each Quarterly Period, in an aggregate
amount not to exceed the Permitted Quarterly Tax Distribution in respect
of the related Estimation Period, provided that neither Borrower may
make any such distribution to pay taxes attributable to the income of
the Mall Subsidiary or the Phase II Subsidiary, or any of their
Subsidiaries, unless the Borrowers shall have received a cash
distribution from the Mall Subsidiary or the Phase II Subsidiary, as
applicable, during the applicable Estimation Period in an equal amount;
(h) the Borrowers and their wholly-owned Subsidiaries may
make intercompany payments between such entities and intercompany
payments from any Subsidiary of a Borrower to any wholly-owned
Subsidiary of the Borrowers or to a Borrower;
(i) the Borrowers may make any repurchases of capital
stock of LVSI which are deemed to occur upon the exercise of stock
options to the extent such capital stock represents a portion of the
exercise price of such options;
(j) the Borrowers may make Permitted Employee Repurchases
so long as (i) no Event of Default or Default shall exist and be
continuing or would result therefrom and (ii) the ratio of Consolidated
Adjusted EBITDA to Consolidated Fixed Changes for the four-Fiscal
Quarter period ended as of the most recent Quarterly Date prior to such
repurchase or such shorter period tested on such immediately preceding
Quarterly Date under section 6.9(a) (determined on a pro forma basis as
though such Permitted Employee Repurchase had been made during the
period tested as of such Quarterly Date under section 6.9(a)) would have
been in compliance with the requirements of section 6.9(a) as certified
to Administrative Agent by the chief financial officer of each of the
Borrowers, on behalf of each of the Borrowers, at the time of such
payment;
(k) the Borrowers may make payments on any Completion
Guaranty Loan (i) prior to the Final Completion Date, from amounts
permitted to be deposited in the Guaranty Deposit Account subject to the
terms of the Adelson Completion Guaranty and the Disbursement Agreement,
(ii) after the Final Completion Date from Liquidated Damages, and (iii)
on the Final Completion Date, from amounts which are returned to the
Mall Construction Subsidiary from funds in the "Mall Retainage/Punchlist
Account" maintained in accordance with the Mall Escrow Agreement, up to
the aggregate amount previously deposited into such Mall
Retainage/Punchlist Account from the Guaranty Deposit Account, provided
in each case that such payments shall be permitted only to the extent
allowed under the Adelson Intercreditor Agreement and only so long as no
Event of Default or Default shall then exist and be continuing or would
result therefrom; and
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(l) the Borrowers may repay Indebtedness outstanding under
the Bank Credit Agreement out of the proceeds of any refinancing,
replacement or refunding of the facility under the Bank Credit Agreement
with the same or other institutional lenders, provided that any variance
between the terms and conditions of the refinanced facility and the
terms and conditions of the Bank Credit Agreement immediately before
such refinancing would have been permissible under the terms of section
6.18 as an amendment to the Bank Credit Agreement.
6.9 Financial Covenants. The Borrowers shall not breach or fail to
comply with any of the following financial covenants, each of which shall be
calculated in accordance with GAAP consistently applied (and based upon the
financial statements delivered hereunder):
(a) Minimum Fixed Charge Coverage Ratio. The Borrowers shall not
permit the ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed
Charges for any four-Fiscal Quarter period (or such shorter period ending on
such Quarterly Date and beginning on the Opening Date, if the first Quarterly
Date is the last day of the Fiscal Quarter in which the Completion Date occurs,
or otherwise on the first Fiscal Quarter which begins after the Completion Date)
ending on any Quarterly Date set forth below to be less than the ratio set forth
opposite that Fiscal Quarter in the following table:
Minimum Fixed Charge
Period Coverage Ratio
Ending on each of the first, second, 1.05:1
third and fourth Quarterly Dates
Ending on each of the fifth, sixth, 1.05:1
seventh and eighth Quarterly Dates
Ending on each of the ninth, tenth, 1.05:1
eleventh and twelfth Quarterly Dates
Ending on each of the thirteenth, 1.10:1
fourteenth, fifteenth and sixteenth
Quarterly Dates
Ending on the seventeenth and each 1.15:1
subsequent Quarterly Date
(b) Maximum Leverage Ratio. The Borrowers shall not permit the
ratio (the "Leverage Ratio") of (i) Consolidated Total Debt as of such Quarterly
Date to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period
ending on any Quarterly Date set forth below to exceed the ratio set forth
opposite that Fiscal Quarter in the following table; provided that for purposes
of calculating Consolidated Adjusted EBITDA pursuant to this section 6.9(b) for
any period ending prior to the first anniversary of the Project
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Completion Date ending on such Quarterly Date which is less than four Fiscal
Quarters, Consolidated Adjusted EBITDA shall be calculated on an annualized
basis:
Period Minimum Leverage Ratio
Ending on each of the first, second, 4.75:1
third and fourth Quarterly Dates
Ending on each of the fifth, sixth, 3.75:1
seventh and eighth Quarterly Dates
Ending on each of the ninth, tenth, 3.00:1
eleventh and twelfth Quarterly Dates
Ending on each of the thirteenth, 2.75:1
fourteenth, fifteenth and sixteenth
Quarterly Dates
Ending on the seventeenth and each 2.50:1
subsequent Quarterly Date
(c) Minimum Consolidated Adjusted EBITDA. The Borrowers shall not
permit Consolidated Adjusted EBITDA for any four-Fiscal Quarter period (or such
shorter period ending on such Quarterly Date and beginning on the Opening Date,
if the first Quarterly Date is the last day of the Fiscal Quarter in which the
Completion Date occurs, or, otherwise on the first Fiscal Quarter which begins
after the Completion Date) ending on any Quarterly Date set forth below to be
less than the correlative amount indicated, provided that for purposes of
calculating Consolidated Adjusted EBITDA pursuant to this section 6.9(c) for the
first, second, third and fourth Quarterly Dates, if the period tested is less
than one, two, three or four full Fiscal Quarters, respectively, Consolidated
Adjusted EBITDA shall be multiplied by a fraction the numerator of which is 90,
182, 273 and 365, respectively, and the denominator of which is the number of
days elapsed in the relevant test period set forth below to be less than the
amount set forth opposite such Fiscal Quarter in the following table:
Minimum Consolidated
Period Adjusted EBITDA
Ending on the first Quarterly Date $30,000,000
Ending on the second Quarterly Date $75,000,000
Ending on the third Quarterly Date $100,000,000
Ending on the fourth Quarterly Date $150,000,000
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Minimum Consolidated
Period Adjusted EBITDA
Ending on each of the fifth, sixth, $175,000,000
seventh and eighth Quarterly Dates
Ending on each of the ninth, tenth, $190,000,000
eleventh and twelfth Quarterly Dates
Ending on each of the thirteenth, $195,000,000
fourteenth, fifteenth and sixteenth
Quarterly Dates
Ending on the seventeenth and each $200,000,000
subsequent Quarterly Date
(d) Minimum Consolidated Net Worth. The Borrowers shall not
permit Consolidated Net Worth at any Quarterly Date to be less than $120,000,000
plus an amount equal to the sum of 85% of Consolidated Net Income for all
periods from November 14, 1997 through such Quarterly Date (net of all net
losses for the Borrowers and their Subsidiaries on a consolidated basis for the
same period).
(e) Consolidated Capital Expenditures. The Borrowers shall not,
and shall not permit their Subsidiaries to, make or incur Consolidated Capital
Expenditures, in any four-Fiscal Quarter period indicated below, in an aggregate
amount in excess of the corresponding amount (the "Maximum Consolidated Capital
Expenditures Amount") set forth below opposite such four-Fiscal Quarter period;
provided that the Maximum Consolidated Capital Expenditures Amount for any four
Fiscal Quarters shall be increased by an amount equal to the excess, if any, of
the Maximum Consolidated Capital Expenditures Amount for the previous
four-Fiscal Quarter period over the actual amount of Consolidated Capital
Expenditures for such previous four-Fiscal Quarter period:
Maximum
Fiscal Consolidated Capital
Quarter Expenditures Amount
First, second, third and
fourth Fiscal Quarters after
the Completion Date $15,000,000
Fifth, sixth, seventh and
eighth Fiscal Quarters after
the Completion Date $25,000,000
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Maximum
Fiscal Consolidated Capital
Quarter Expenditures Amount
Ninth, tenth, eleventh and
twelfth Fiscal Quarters
after the Completion Date $25,000,000
Thirteenth, fourteenth,
fifteenth and sixteenth
Fiscal Quarters after the
Completion Date $25,000,000
Seventeenth and each
subsequent Fiscal Quarter
after the Completion Date $30,000,000
6.10 Sale and Leasebacks. The Borrowers shall not, and shall not permit
any of their Subsidiaries to, directly or indirectly, become or remain liable as
lessee or as a guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any property (whether real, personal or
mixed), whether now owned or hereafter acquired, (i) which the Borrowers or any
of their Subsidiaries has sold or transferred or is to sell or transfer to any
other Person or (ii) which the Borrowers or any of their Subsidiaries intend to
use for substantially the same purpose as any other property which has been or
is to be sold or transferred by the Borrowers or any of their Subsidiaries to
any Person in connection with such lease, except that the Borrowers and their
Subsidiaries may enter into sale-leaseback transactions, in no event encumbering
or otherwise involving any of the Collateral, in connection with any
Non-Recourse Financing permitted under section 6.3(h) or any financing permitted
under section 6.3(l) to the extent that the assets subject to such
sale-leaseback are acquired contemporaneously with, or within 180 days prior to,
such Non-Recourse Financing or such other financings and with the proceeds
thereof and neither Borrower nor any of its Subsidiaries theretofore held any
interest in such assets.
6.11 Cancellation of Indebtedness. The Borrowers shall not, and shall
not permit any of their Subsidiaries to, cancel any claim or Indebtedness owing
to either of them, except for reasonable consideration and in the ordinary
course of its business, or voluntarily prepay any Indebtedness (other than the
Obligations as and to the extent permitted hereby).
6.12 Bank Accounts. The Borrowers shall not, and shall not permit any of
their Subsidiaries to, maintain any deposit, operating or other bank accounts
except for those accounts identified in Schedule 3.20 and except for other
accounts maintained with the prior written consent of the Administrative Agent
which consent shall not be unreasonably withheld.
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6.13 No Speculative Transactions. The Borrowers shall not, and shall not
permit any of their Subsidiaries to, directly or indirectly, engage in any
speculative transaction or any transaction involving commodity options or
futures contracts (other than in the ordinary course of business).
6.14 Accounting Changes; Fiscal Year. The Borrowers shall not, and shall
not permit any of their Subsidiaries to, make any significant change in
accounting treatment and reporting practices except for changes concurred in by
the Borrowers' independent public accountants. Neither Borrower shall change its
Fiscal Year-end from December 31.
6.15 Sale or Discount of Receivables. Except as permitted by section
6.1(s), the Borrowers shall not, and shall not permit any of their Subsidiaries
to, directly or indirectly, sell with recourse, or discount or otherwise sell
for less than the face value thereof, any of its notes or accounts receivable
other than an assignment for purposes of collection in the ordinary course of
business.
6.16 Disposal of Subsidiary Stock. The Borrowers shall not, and shall
not permit any of their Subsidiaries to, directly or indirectly, sell, assign,
pledge or otherwise encumber or dispose of any shares of capital stock or other
equity Securities of the Borrowers or any of their Subsidiaries, except (a) to
qualify directors if required by applicable law and (b) to the extent required
by any Nevada Gaming Authority in order to preserve a material Gaming License.
6.17 Conduct of Business. The Borrowers shall not, and shall not permit
any of their Subsidiaries or any of the Intermediate Holding Companies, the Mall
Manager, the Phase II Manager, the Mall Construction Subsidiary, Mall Direct
Holdings or Phase II Direct Holdings to, engage in any business other than (a)
in the case of LVSI, the casino gaming, hotel, retail and entertainment mall and
resort business (including operating the conference center and meeting
facilities) and any activity or business incidental, directly related or similar
thereto, or any business or activity that is a reasonable extension, development
or expansion thereof or ancillary thereto, including any hotel, entertainment,
recreation, convention, trade show, meeting, retail sales or other activity or
business designated to promote, market, support, develop, construct or enhance
the casino gaming, hotel, retail and entertainment mall and resort business
operated by the Borrowers and their Subsidiaries, including without limitation
participating in the Joint Venture Suppliers and the ownership of the Mall
Manager, the Phase II Manager and VCR, (b) in the case of VCR and its
Subsidiaries, (i) the development, construction and operation of the Project,
(ii) the casino gaming, hotel, retail and entertainment mall and resort business
(including operating a conference center and meeting facilities) at the Project
and any activity or business incidental, directly related or similar thereto, or
any business or activity that is a reasonable extension, development or
expansion thereof or ancillary thereto, including any hotel, entertainment,
recreation, convention, trade show, meeting, retail sales, or other activity or
business designated to promote, market, support, develop, construct or enhance
the casino
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gaming, hotel, retail and entertainment mall and resort business operated at the
Project by Borrowers and their Subsidiaries, including without limitation
participating in the Joint Venture Suppliers, and (iii) the ownership of equity
interests in Subsidiaries, including the Intermediate Holding Companies, (c) in
the case of the Intermediate Holding Companies, the ownership of equity
interests in Mall Direct Holding and Phase II Direct Holdings and the delivery
of guarantees in favor of the lenders under the Bank Credit Agreement and the
Mortgage Note Holders and the holders of the Subordinate Notes, (d) in the case
of the Mall Manager and the Phase II Manager, ownership of 1% managing member
interests in the Mall Subsidiary, Mall Direct Holdings, Phase II Direct Holdings
and Phase II Subsidiary, respectively, (e) in the case of the Mall Construction
Subsidiary, ownership of the Mall Collateral and other matters reasonably
incidental thereto, and (f) in the case of Mall Direct Holdings and Phase II
Direct Holdings, ownership of equity interests in the Mall Subsidiary and the
Phase II Subsidiary, respectively.
6.18 Certain Restrictions on Changes to Operative Documents, Permits,
Project Budget or Project Schedule.
(a) Modifications of Certain Operative Documents and Permits; New
Material Contracts or Permits. The Borrowers shall not, and shall not permit any
of their Subsidiaries to, agree to any material amendment to, or waive any of
its material rights under, any Permit or Material Contract or enter into any new
Material Contracts or Permits (it being understood that any Material Contracts
which are covered by section 6.21(b) or (c) shall also be subject to the
restrictions set forth therein) without in each case obtaining the prior written
consent of the Requisite Lenders if, in any such case, such amendment or waiver
or new Material Contract or Permit could reasonably be expected to have a
Material Adverse Effect or otherwise adversely affect the Lenders in any
material respect.
(b) Amendments of Documents Relating to Other Indebtedness. The
Borrowers shall not, and shall not permit any of their Subsidiaries to, amend or
otherwise change the terms of any Financing Agreements (other than the Loan
Documents) or permit the termination thereof (other than in accordance with the
terms thereof), or enter into any new Financing Agreements or make any payment
consistent with an amendment thereof or change thereto, if the effect of such
amendment or change is to increase the interest rate or fees on such Other
Indebtedness, change (to earlier dates) any dates upon which payments of
principal or interest are due thereon or reduce the weighted average life to
maturity (as determined with reference to scheduled amortization payments) of
the aggregate Indebtedness of the Borrowers under the Financing Agreements
(either outstanding or available to be borrowed under the respective commitments
of the lenders under such Financing Agreements), change any event of default or
condition to an event of default with respect thereto (other than to eliminate
any such event of default or condition to an event of default or to increase any
grace period related thereto or otherwise change such event of default in a
manner more favorable to the Borrower or such Subsidiary than the existing event
of default), change any commitment thereunder, change the redemption, prepayment
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or defeasance provision thereof, change the subordination provisions thereof (or
of any guaranty thereof), or change any collateral therefor (other than to
release such collateral), or if the effect of such amendment or change, together
with all other amendments or changes made, is to increase materially the
obligations of the obligor thereunder or to confer any additional rights on the
holders of such Other Indebtedness or other obligations evidenced thereby (or a
trustee or other representative on their behalf) which would be materially
adverse to Borrowers, such Subsidiary or the Lenders, provided that the
Borrowers may modify the terms of the Interim Mall Credit Agreement or any
agreement related thereto, to the extent permitted by the Credit Parties
Intercreditor Agreement, may enter into any replacement, refinancing or
substitution of the Bank Credit Agreement consistent with the foregoing
provisions and the provision of section 6.8(l), and may amend the terms of any
Financing Agreement solely to increase the principal amount thereof to the
extent expressly permitted by the Credit Parties Intercreditor Agreement and
sections 6.3(m), (n) and (o) hereof.
(c) Restrictions on Amendments. The Borrowers shall not, and
shall not permit any of their Subsidiaries to, agree to any material amendment
to, or waive any of its material rights under the Cooperation Agreement, without
obtaining the prior written consent of the Administrative Agent, which consent
shall not be unreasonably withheld or delayed.
(d) Certain Contracts Excepted. Notwithstanding the provisions of
sections 6.18(a), (b) and (c), so long as the Disbursement Agreement is in force
and effect, the Borrowers may enter into Contracts constituting Material Project
Documents consistent with the Plans and Specifications, the Project Schedule and
the Project Budget, as each is in effect from time to time, provided that each
such Contract shall be in writing and shall become effective when and only when:
(i) the Borrowers and applicable Contractor have executed and delivered the
Contract (with the effectiveness thereof subject only to satisfaction of the
conditions in clauses (ii), (iii), (iv), (v) and (vi) below); (ii) the Borrowers
have submitted to the Administrative Agent a copy of the Additional Contract
Certificate delivered in connection therewith under the Disbursement Agreement
together with all exhibits, attachments and certificates required thereby
(including the Construction Consultant's certificate delivered in the same
connection), each duly completed and executed; (iii) if entering into such
Contact would result in an amendment to the Project Budget or an extension of
the Completion Deadline Date, the Borrowers shall have complied with the
requirements of section 6.23; (iv) if entering into such Contract would have the
effect of a Scope Change, the Borrowers shall have complied with the provisions
of section 6.22; (v) if entering into such Contract would cause the Unallocated
Contingency Balance to be less than the Required Minimum Contingency or the
Available Funds to be less than the Remaining Costs, the Borrowers shall have
complied with the requirements of section 5.23; and (vi) the Administrative
Agent shall have acknowledged receipt of the materials referred to in clause
(ii) above (which the Administrative Agent agrees to promptly do upon receipt of
such materials).
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(e) Certain Scope Changes Excepted. Notwithstanding the
provisions of sections 6.18(a), (b) and (c), the Borrowers may, from time to
time, amend the Construction Management Agreement, the Professional Services
Agreement, the Treadway Agreement or any other Contract to change the scope of
the work and the Borrowers' payment obligations thereunder. Any such amendment
shall be in writing and shall identify with particularity all changes being
made. Each such amendment shall be effective when and only when: (i) the
Borrowers and the Construction Manager, the Project Architect, Treadway or the
other Contractor, as the case may be, have executed and delivered the contract
amendment (with the effectiveness thereof subject only to satisfaction of the
conditions in clauses (ii), (iii), (iv), (v) and (vi) below); (ii) the Borrowers
have submitted to the Administrative Agent a copy of the Contract Amendment
Certificate delivered in connection therewith under the Disbursement Agreement
together with all exhibits, attachments and certificates required thereby, each
duly completed and executed; (iii) if such amendment would result in an
amendment to the Project Budget or an extension of the Completion Deadline Date,
the Borrowers shall have complied with the requirements of section 6.23; (iv) if
such amendment would change the scope of work or otherwise would have the effect
of a Scope Change, the Borrowers shall have complied with the provisions of
section 6.22; (v) if such amendment would cause the Unallocated Contingency
Balance to be less than the Required Minimum Contingency or the Available Funds
to be less than the Remaining Costs, the Borrowers shall have complied with the
requirements of section 5.23; and (vi) the Administrative Agent shall have
acknowledged its receipt of the materials referred to in clause (ii) above
(which the Administrative Agent agrees to promptly do upon receipt of such
materials).
6.19 Zoning and Contract Changes and Compliance. Without the prior
written approval of the Administrative Agent, the Borrowers shall not, and shall
not permit any of their Subsidiaries to, initiate or consent to any zoning
downgrade of the Site or other Project property or seek any material variance
under any existing zoning ordinance or use or permit the use of the Site or
other Project property in any manner that could result in such use becoming a
non-conforming use (other than a non-conforming use permissible under automatic
grandfathering provisions) under any zoning ordinance or any other applicable
land use law, rule or regulation. The Borrowers shall not, and shall not permit
any of their Subsidiaries to, initiate or consent to any change in any laws,
requirements of Governmental Authorities or obligations created by private
contracts which now or hereafter could reasonably be likely to materially and
adversely affect the ownership, occupancy, use or operation of the Site or the
other Project property (including the Collateral), or the ability of the
Borrowers to repay the Loans, without the prior written consent of the
Administrative Agent.
6.20 Certain Covenants Applicable to the Mall Subsidiary.
(a) Line of Business. The Borrowers shall not permit the Mall
Subsidiary to engage in any business other than (i) the acquisition,
development, construction, ownership, holding, management, marketing and
operation of the Mall, (ii) any activity and
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business incidental, directly related or similar thereto, and (iii) engaging in
any reasonable extension development or expansion thereof or ancillary thereto
including any retail, restaurant, entertainment or other activity or business
designed to promote, market, support, develop, construct or enhance the retail,
restaurant and entertainment business of the Mall (including owning and
operating joint ventures to supply materials or services for the construction or
operation of the Mall).
(b) Restrictions on Investments. The Borrowers shall not permit
the Mall Subsidiary to purchase or acquire any securities, loan, advance,
capital contribution or other investment of any kind except (i) advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business, (ii) any such
investments in Cash Equivalents (as defined in section 1.1 of the Bank Credit
Agreement) and similar liquid Investments permitted under the Financing
Agreements to which it is a party, (iii) any investments in Joint Ventures with
third parties to develop and operate restaurants in the Mall in an aggregate
amount not to exceed $5,000,000 at any time, (iv) other such investments
reasonably necessary for the operation, maintenance and improvement of the Mall
in an aggregate amount not to exceed $2,500,000 at any time, (v) loans or
advances to employees made in the ordinary course of business of the Mall
Subsidiary in an aggregate amount not to exceed $500,000 at any time, and (vi)
stocks, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Mall Subsidiary or in satisfaction
of judgments.
(c) Affiliate Transactions. The Borrowers shall not permit the
Mall Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service), with any holder of 5% or more of any class of
equity Securities of any of the Borrowers and the Mall Subsidiary or with any
Affiliate of a Borrower or of the Mall Subsidiary or any such holder, provided
that the Mall Subsidiary may enter into or permit to exist (i) transactions that
are not less favorable to the Mall Subsidiary than those that might be obtained
at the time from Persons who are not such a holder or Affiliate if the Borrowers
shall have delivered to the Administrative Agent (A) with respect to any
transaction involving aggregate payments in excess of $500,000, an Officers'
Certificate certifying that such transaction complies with this clause (i), and
(B) with respect to any transaction involving aggregate payments in excess of
$1,000,000, a resolution adopted by a majority of the disinterested non-employee
directors of LVSI approving such transaction together with the Officers'
Certificate referred to in clause (A), and (C) with respect to any such
transaction involving aggregate payments in excess of $10,000,000 or that is a
loan transaction involving a principal amount in excess of $10,000,000, in
addition to the deliveries contemplated by clauses (A) and (B), an opinion as to
the fairness to the Mall Subsidiary from a financial point of view issued by an
Independent Financial Advisor at the time such transaction is entered into, (ii)
transactions contemplated by the Sale and Contribution Agreement, the Mall
Lease, the Tranche A Take Out Commitment, the Tranche B Take Out Commitment, the
Substitute Tranche B Loan, the HVAC Services Agreement, the Services Agreement,
the Puck JV Letter of Intent, the
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Billboard Master Lease and the Cooperation Agreement, (iii) any guarantees by
Sheldon G. Adelson of Indebtedness of the Mall Subsidiary, (iv) purchases of
materials or services from a Joint Venture Supplier by the Mall Subsidiary in
the ordinary course of business on arm's length terms, (v) any employment,
indemnification, noncompetition or confidentiality agreement entered into by the
Mall Subsidiary with its employees or directors in the ordinary course of
business, (vi) loans or advances to employees of the Mall Subsidiary, but in any
event not to exceed $500,000 in the aggregate outstanding at any one time, and
(vii) the payment of reasonable fees to directors of the Mall Subsidiary who are
not employees of the Mall Subsidiary.
(d) Restricted Junior Payments. The Borrowers shall not permit
the Mall Subsidiary to make any payments or distributions, or otherwise enter
into any transactions, which would constitute Restricted Junior Payments
described in clauses (i) through (iii) inclusive of the definition of Restricted
Junior Payments (considered as if the reference to Borrower in each such clause
were a reference to the Mall Subsidiary) unless such payments or distributions
and the benefits of all such other transactions are made or extended (A)
exclusively to the Borrowers or their Subsidiaries or (B) pro rata on all equity
interests of the Mall Subsidiary (so that the Borrowers receive a portion of
such Restricted Junior Payment equal to the direct and indirect ownership
interest of the Borrowers in the Mall Subsidiary).
6.21 Limitation on Declaration of Restricted Subsidiaries. The Borrowers
shall not declare or permit to be designated as a "Restricted Subsidiary" under
either of the Mortgage Note Indenture or Subordinated Notes Indenture any
Affiliate which is an Excluded Subsidiary.
6.22 Construction Management Agreement; Completion; Drawings.
(a) Unless (x) the Scope Change does not adversely affect the
Collateral, (y) all approvals therefor required under the terms of the
Disbursement Agreement have been obtained, and (z) the Scope Change does not by
its nature require any amendment to or modification of, or the granting of any
waiver or consent under, any of the terms of any of the Financing Agreements (it
being agreed that an amendment to the Project Budget or, subject to sections
2.2(a) and 8.1(x), the Project Schedule made in accordance with the provisions
of the pertinent Financing Agreements shall not be deemed to be an amendment,
modification, waiver or consent with respect to a Financing Agreement for
purposes of this sentence), the Borrower shall not direct, consent to or enter
into any Scope Change, without obtaining the consent of the Administrative
Agent, if such Scope Change:
(i) would cause Remaining Costs to exceed Available Funds
or the Required Minimum Contingency to exceed the Unallocated
Contingency Balance, unless the Borrowers comply with the requirements
of section 5.23 or amends the Project Budget as provided in Section
6.23(a), or both, so that, after
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giving effect to the proposed Scope Change, the Available Funds will
equal or exceed the Remaining Minimum Contingency and the Unallocated
Contingency Balance will equal or exceed the Required Minimum
Contingency (provided, however, for purposes of this section 6.22(a)(i)
any amounts on deposit in the Guaranty Deposit Account up to $25,000,000
shall be disregarded for purposes of calculating the Available Funds and
the Unallocated Contingency Balance);
(ii) is not, in the reasonable judgment of the
Construction Consultant, a Safe Harbor Scope Change;
(iii) in the reasonable judgment of the Construction
Consultant (based on its experience, familiarity and review of the
Project and representations provided by the Borrowers, the Construction
Manager and the Contractors and Subcontractors), could reasonably delay
the Completion Date beyond the Completion Deadline Date;
(iv) in the reasonable judgment of the Construction
Consultant, could reasonably permit or result in any materially adverse
modification, or materially impair the enforceability of any material
warranty under the Construction Management Agreement or any Contract;
(v) in the reasonable judgment of the Construction
Consultant, is not permitted by a Project Document and could adversely
impact the Project;
(vi) in the reasonable judgment of the Construction
Consultant, could reasonably present a significant risk of the
revocation or a material adverse modification of any Permit;
(vii) in the reasonable judgment of the Construction
Consultant, could reasonably cause the Project (including the Mall) not
to comply with Legal Requirements (provided that the Construction
Consultant shall be entitled to determine that no violation of any Legal
Requirement will occur if the Borrowers certify to such effect and the
Construction Consultant is not aware of any inaccuracies in such
certification); or
(viii) in the reasonable judgment of the Insurance
Advisor, could reasonably result in a material adverse modification,
cancellation or termination of any insurance policy required to be
maintained by the Borrowers pursuant to section 5.4.
Prior to implementing any Scope Change, Borrowers shall submit to the
Administrative Agent the required copies of the Additional Contract Certificate
or Contract Amendment
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Certificates, as the case may be, required under section 6.2.1 of the
Disbursement Agreement and otherwise comply with the provisions of section
6.18(d) or (e), as applicable.
(b) The Borrowers shall not accept (or be deemed to have
confirmed) any notice of "Substantial Completion" or "Final Completion" of the
Project issued by the Construction Manager under the Construction Management
Agreement without the written approval of the Construction Consultant, which
approval shall not be unreasonably withheld or delayed, provided that the
Construction Consultant shall act with due diligence and as promptly as possible
in making its determination to approve or disapprove.
(c) The Borrowers shall not agree with the Construction Manager
on the amount of "savings" or pay the Construction Manager any share of such
"savings" as contemplated by section 6.9 of the Construction Management
Agreement without the prior written approval of the Construction Consultant,
which approval shall not be unreasonably withheld or delayed.
6.23 Project Budget and Project Schedule Amendment. The Borrowers shall
not, directly or indirectly, amend, modify, allocate, reallocate or supplement
or permit or consent to the amendment, modification, allocation, reallocation or
supplementation of, any of the Line Items, Line Item Categories or other
provisions of the Project Budget, or modify or extend the Completion Deadline
Date, except as follows:
(a) (i) Concurrently with the implementation of any Scope Change,
the Borrowers shall, in accordance with the Disbursement Agreement,
submit the required Project Budget/Schedule Amendment Certificate and
amend the Project Budget in accordance with the provisions of section
6.23(d) below, to the extent necessary so that the amount set forth
therein for each Line Item shall reflect all Scope Changes that have
been made to such Line Item.
(ii) Upon obtaining Realized Savings in the "mall leasing
commission reserve" or the "mall tenant improvement reserve" Line Items,
the Borrowers promptly (but in no event later than the earlier of (A) 30
days thereafter and (B) the day prior to the Final Completion Date)
shall submit to the Administrative Agent a copy of the Project
Budget/Schedule Amendment Certificate required under section
6.4.1(a)(ii) of the Disbursement Agreement and amend the Project Budget
in accordance with section 6.23(d) to reduce the amounts allocated by
the Project Budget to such Line Items.
(iii) If at any time the amount allocated in the Project
Budget to the "mall tenant improvements reserve" Line Item is less than
the Required Minimum TI Budget Amount, the Borrowers shall submit to the
Administrative Agent a copy of the Project Budget/Schedule Amendment
Certificate required under section 6.4.1(a)(iii) of the Disbursement
Agreement and amend the Project Budget in
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accordance with the provisions of section 6.23(d) to the extent
necessary so that the amount allocated to the "mall tenant improvement
reserve" Line Item shall equal the Required Minimum TI Budget Amount.
(iv) At any time after the Revolving Loan Availability
Date (as defined in section 1.1 of the Bank Credit Agreement), the
Borrowers may amend the Project Budget in accordance with section
6.23(d) hereof and section 6.4.1(d) of the Disbursement Agreement to add
a Working Capital Line Item Category and allocate to such Line Item
Category the amount then available to the Borrowers to be drawn under
the Revolving Loan Commitment (as defined in section 1.1 of the Bank
Credit Agreement). Project Costs in respect of the Working Capital Line
Item Category shall be deemed to be outside the three Construction
Components (as such term is defined in the Disbursement Agreement).
(b) On the "Final GMP Date" (as defined in the Construction
Management Agreement), the Borrowers shall amend the Project Budget in
accordance with the procedures set forth in section 6.23(d) hereof to reflect
the reduction of the "contingency sum" pursuant to section 6.7.1 of the
Construction Management Agreement and any changes made to the Guaranteed Maximum
Price (as defined in the Construction Management Agreement) pursuant to the
other provisions of section 6.7 of the Construction Management Agreement. Such
amendment to the Project Budget shall (A) decrease the amount of the "Bovis
contingency" Line Item and (B) increase the "unallocated contingency" Line Item,
in each case by the amount of the net decrease, if any, in the amount payable
under the Construction Management Agreement resulting from the adjustments
contemplated in section 6.7 of the Construction Management Agreement.
(c) The Borrowers may from time to time amend the Project Budget
in accordance with the provisions of section 6.23(d) in order to increase,
decrease or otherwise reallocate amounts allocated to specific Line Items or
Line Item Categories. Any such amendments shall only be permitted to the extent
not inconsistent with the provisions of sections 6.23(a) and (b) above.
(d) The Borrowers shall implement any amendment to the Project
Budget by delivering to the Administrative Agent a copy of the Project
Budget/Schedule Amendment Certificate delivered pursuant to section 6.4.1(d) of
the Disbursement Agreement together with all exhibits, attachments and
certificates required thereby, each duly completed and executed. Such Project
Budget/Schedule Amendment Certificate shall describe with particularity the Line
Item or Line Item Category increases, decreases, contingency allocations and
other proposed amendments to the Project Budget. Increases to the aggregate
amount budgeted for any Line Item Category will only be permitted to the extent
of (i) allocation of Realized Savings obtained in a different Line Item
Category, (ii) allocation of previously "unallocated contingency" (so long as
after giving effect to such allocation the Unallocated Contingency Balance will
equal or exceed the Required Minimum
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Contingency), or (iii) allocation of an increase in Available Funds, including
additional funds deposited in the Guaranty Deposit Account maintained pursuant
to the Disbursement Agreement or the Company's Funds Account similarly
maintained. Decreases to any Line Item Category will only be permitted upon
obtaining Realized Savings in such Line Item Category. Increases and decreases
to particular Line Items shall be permitted to the extent not consistent with
the foregoing provisions of this section 6.23(d) or with section 6.23(a) or (b),
provided that (A) the Borrowers may not increase the amount budgeted to the
"mall leasing commissions reserve" or the "mall tenant improvements reserve"
Line Item except as required pursuant to section 6.23(a)(iii) above, (B) no
deceases shall be permitted for the "mall leasing commissions reserve" or "mall
tenant improvements reserve" Line Item except to the extent of Realized Savings
specifically relating to such Line Item and (C) increases to the "unallocated
contingency" Line Item shall be permitted only to the extent of (x) allocation
of Realized Savings obtained in any Line Item Category or (y) an increase in
Available Funds including additional funds deposited in the Guaranty Deposit
Account. Notwithstanding any of the foregoing provisions, the aggregate amount
allocated in the Project Budget to items comprising the HVAC Component shall in
no event be less than the total amount of the commitment under the HVAC
Commitment Facility.
(e) The Borrowers may from time to time amend the Project
Schedule to extend the Completion Deadline Date, but (except for a Special Late
Casualty Extension permitted by Section 1.1(b)) not beyond November 1, 1999, by
delivering to the Administrative Agent a copy of the Project Budget/Schedule
Amendment Certificate delivered pursuant to section 6.4.2 of the Disbursement
Agreement (a) containing a revised Project Schedule reflecting the new
Completion Deadline Date and (b) complying with the provisions of section
6.23(d) above with respect to the changes in the Project Budget that will result
from the extension of the Completion Deadline Date; provided, however, that the
Borrowers may amend the Project Schedule to extend the Completion Deadline Date
beyond November 1, 1999 (but in no event beyond January 31, 2000) if the
conditions of clauses (x), (y) and (z) of section 1.1(b) are met and the
Borrowers so certify in writing, and the Construction Consultant confirms to the
Administrative Agent in writing that such extension is reasonably necessary to
overcome any delays caused by the Event of Loss or Event of Force Majeure which
produced the delay.
(f) Upon submission to the Administrative Agent of a copy of the
Project Budget/Schedule Amendment Certificate as required by section 6.23(e),
together with all exhibits, attachments and certificates required pursuant
thereto, each duly completed and executed, such amendment shall become effective
hereunder, and the Project Budget for the Project and, if applicable, the
Project Schedule and the Completion Deadline Date, shall thereafter be as so
amended.
6.24 Hazardous Substances. The Borrowers shall not, and shall not permit
any of their Subsidiaries or any other Person within the control of the
Borrowers to, release, emit or discharge into the environment any Hazardous
Substances in violation of any
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Environmental Law, Legal Requirement or Permit, in each case which could
reasonably be expected to have a Material Adverse Effect.
6.25 No Other Powers of Attorney. So long as the Disbursement Agreement
shall be in force and effect, the Borrowers shall not execute or deliver any
agreement creating any power of attorney (other than powers of attorney for
signatories of documents permitted or contemplated by the Operative Documents),
or similar documents, instruments or agreements, except to the extent such
documents, instruments or agreements comprise part of this Agreement or the
security documents for the other Financing Agreements.
6.26 Restrictions on Opening. The Borrowers shall not, and shall not
permit any of their Subsidiaries or the Mall Subsidiary to, open any portion of
the Project for business such that the opening date would occur prior to the
satisfaction of the Opening Conditions (as such term is defined in the
Disbursement Agreement).
6.27 Restriction on Phase II Construction. The Borrowers shall not, and
shall not permit any of their Subsidiaries (including any Excluded Subsidiary),
at any time prior to receipt by the Borrowers or any such Subsidiary of a
temporary certificate of occupancy from Clark County, Nevada with respect to the
Project in its entirety, to (a) construct, develop or improve the Phase II Land
or any building on the Phase II Land (including any excavation or site work but
excluding the Phase II parking garage), (b) enter into any contract or agreement
for such construction, development or improvement, or for any materials,
supplies or labor necessary in connection with such construction, development or
improvement (other than a contract that is conditioned upon satisfaction of the
above condition), or (c) incur any Indebtedness the proceeds of which are
expected to be used for the construction, development or improvement of the
Phase II Land or any building on the Phase II Land, except (i) any construction,
development or improvement on the Phase II Land or any temporary building on the
Phase II Land in connection with the Project in accordance with the Plans and
Specifications and included in the Project Budget and (ii) any design,
architectural, engineering or development work not involving actual construction
on the Phase II Land.
6.28 Subordinated Indebtedness Payments. The Borrowers shall not make or
permit to be made any payment on account of any subordinated Indebtedness of
either Borrower or any Subsidiary thereof without the prior written consent of
the Requisite Lenders except for (i) payments of interest due and payable on the
Subordinated Notes in accordance with the terms of the Subordinated Notes
Indenture as in effect on the date hereof, (ii) payments on any Completion
Guaranty Loan or Substitute Tranche B Loan as and to the extent permitted by
section 6.8(k), subject to the terms of the Adelson Intercreditor Agreement, and
(iii) payments in respect of fees, penalties, optional and mandatory redemptions
(out of the proceeds of junior securities) pursuant to the Subordinated Notes
Indenture.
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7. TERM
7.1 Duration. Unless the Basic Loans shall have sooner been made, the
financing arrangement contemplated hereby shall be in effect until the
Commitment Expiration Date. On the Commitment Expiration Date, the Commitments
shall expire and the outstanding principal amount of and accrued interest on all
of the Interim Loans (unless converted into the Basic Loans as provided in
section 1.6), together with accrued interest thereon, and of the other
Obligations shall, forthwith and immediately become and be due and payable in
full, in cash. If the Basic Loans are made as provided in section 1.6, the
financing arrangements contemplated hereby shall, unless sooner terminated, be
in effect until the fifth anniversary of the Basic Loan Commencement Date, at
which time the Basic Loans and all other Obligations shall become immediately
due and payable. Notwithstanding anything to the contrary set forth therein,
this Agreement shall remain in full force and effect until the Lenders shall
have received indefeasible payment in full, in cash, of all of the Obligations
and the Commitments have been terminated. For the avoidance of doubt, this
Agreement and the Lien created hereby on the Collateral shall remain in full
force and effect and continue to be effective should any event of the type
described in section 8.1(f), (g) or (h) occur with respect to either Borrower
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of such Obligations, whether as a "voidable
preference," "fraudulent conveyance" or otherwise, all as through such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations secured
hereby shall be reinstated and deemed reduced only by such portion of the amount
paid as is not so rescinded, reduced, restored or returned.
7.2 Survival of Obligations. Except as otherwise expressly provided for
herein and in the other Loan Documents, no termination or cancellation
(regardless of cause or procedure) of any financing arrangement under this
Agreement shall in any way affect or impair the Obligations, duties, indemnities
and liabilities of either Borrower, or the rights of any Lender Party relating
to any Obligations, due or not due, liquidated, contingent or unliquidated, or
any transaction or event occurring prior to such termination, or any transaction
or event the performance of which is not required until after the payment in
full of all of the Loans and other Obligations and all of the Commitments shall
have expired. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon either Borrower, and all rights of the Lender
Parties, all as contained in the Loan Documents, shall not be terminated or
expire, but rather shall survive such termination or expiration and shall
continue in full force and effect until such time as all of the Obligations have
been indefeasibly paid in full with interest in accordance with the terms of the
agreements creating such Obligations.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
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8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) The Borrowers shall fail to pay the principal amount of any
Loan, punctually when due (including without limitation when due by reason of
any acceleration under section 11.20(c)), or shall fail to make payment of any
other Obligation hereunder or under any of the other Loan Documents when due and
payable, including without limitation interest and any fees owing hereunder or
under the Fee Letter, and in the case of any such other Obligation, such failure
shall continue unremedied for five days after the due date.
(b) Either Borrower shall fail or neglect to perform, keep or
observe any of the provisions of sections 1.10, 1.11, 1.18, 4.1, 5.1, 5.11 or
6.1 through 6.28, inclusive, or the first two sentences of section 5.4(b).
(c) Either Borrower shall fail or neglect to perform, keep or
observe any term or provision of this Agreement (other than any such term or
provision referred to in paragraph (a) or (b) above) or of any of the other Loan
Documents, and the same shall remain unremedied and unwaived for a period ending
on the first to occur of thirty (30) days after Borrowers shall receive written
notice of any such failure from the Administrative Agent or thirty (30) days
after any officer of either Borrower (or of the managing member of VCR) shall
have become aware thereof.
(d) Either Borrower or any Subsidiary thereof (i) shall fail to
pay when due any principal of or interest on or any other amount payable in
respect of one or more items of Indebtedness (other than Indebtedness referred
to in section 8.1(a)) or Contingent Obligations in an individual principal
amount of $2,500,000 or more or with an aggregate principal amount of $5,000,000
or more, in each case beyond the end of any grace period provided therefor; or
(ii) shall breach or default with respect to any other material term of (a) one
or more items of Indebtedness or Contingent Obligations in the individual or
aggregate principal amounts referred to in clause (i) above or (b) any loan
agreement, mortgage, indenture or other agreement relating to such item or items
of Indebtedness or Contingent Obligation or Obligations, if the effect of such
breach or default is to cause, or to permit the holder or holders of such
Indebtedness or Contingent Obligation or Obligations (or a trustee on behalf of
such holder or holders) to cause, that Indebtedness or Contingent Obligation or
Obligations to become or be declared due and payable prior to its or their
stated maturity or the stated maturity of any underlying obligation, as the case
may be (upon the giving or receiving of notice, lapse of time, or both, or
otherwise), whether or not such holder, holders or trustee are aware of the
breach or default or shall have elected to exercise any such right.
(e) Any representation or warranty herein or in any other Loan
Document or in any written statement pursuant hereto or thereto, or in
connection herewith or therewith, or any report, financial statement or
certificate made or delivered to any Lender Party by
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either Borrower, shall be untrue or incorrect in any material respect as of the
date when made or deemed made (including those made or deemed made pursuant to
section 2.3).
(f) Any of the assets of either Borrower or any of its
Subsidiaries shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of such Borrower or
Subsidiary and such attachment, seizure, levy, writ or warrant shall remain
unstayed or undismissed, or such possession shall remain unreleased, as the case
may be, for sixty (60) consecutive days; or any Person other than a Borrower or
Subsidiary thereof shall petition or apply for the appointment of a receiver,
trustee or custodian for either Borrower's assets and such petition or
application shall remain unstayed or undismissed for sixty (60) consecutive
days; or either Borrower or any Subsidiary thereof shall have concealed, removed
or permitted to be concealed or removed any part of its property, with intent to
hinder, delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(g) (1) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of a Borrower or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal, state or foreign law; or (2) an involuntary case shall be
commenced against a Borrower or any of its Subsidiaries under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, assignee, sequestrator,
trustee, custodian or other officer having similar powers over a Borrower or any
of its Subsidiaries, or over all or a substantial part of its property, shall
have been entered; or there shall have occurred the involuntary appointment of
an interim or permanent receiver, trustee or other custodian of a Borrower or
any of its Subsidiaries, for all or a substantial part of its property; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of a Borrower or any of its
Subsidiaries, and any such event described in this clause (2) shall continue for
60 days without having been dismissed, bonded or discharged.
(h) (1) A Borrower or any of its Subsidiaries shall have an order
for relief entered with respect to it or shall commence a voluntary case under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under such Code or any such other law, or shall
consent to or petition or apply for the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; or a Borrower or any of its Subsidiaries shall make any assignment for
the benefit of creditors; or (2) a Borrower or any of its Subsidiaries shall be
unable, or shall fail generally, or shall admit in writing its
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inability, to pay its debts as such debts become due and a period of 30 days
shall have elapsed; or the board of directors of a Borrower or any of its
Subsidiaries (or any committee thereof), or of a managing member of any such
Borrower or Subsidiary, shall adopt any resolution or otherwise authorize, or
take corporate action in furtherance of, any action to approve any of the acts
referred to in clause (1) above or this clause (2).
(i) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $2,500,000
or (ii) in the aggregate at any time an amount in excess of $5,000,000 (in
either case not adequately covered in accordance with section 5.4 by insurance
as to which a solvent and unaffiliated insurance company has acknowledged
coverage) shall be entered or filed against a Borrower or any of its
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any event later
than five days prior to the date of any proposed sale thereunder).
(j) Any provision of any Loan Document shall for any reason cease
to be valid, binding and enforceable in accordance with its terms or shall have
been declared null and void by any governmental authority of competent
jurisdiction; or either Borrower shall contest the validity or enforceability of
any Loan Document in writing or shall deny in writing that it has any further
liability, prior to the indefeasible payment in full of all of the Obligations
and the termination of all of the Commitments, under any Loan Document to which
it is a party; or any Lien created hereunder shall cease to be a valid and
perfected Lien having the first priority in any of the Collateral purported to
be covered thereby.
(k) As a result of any sale, pledge or other transfer, either (a)
Sheldon G. Adelson and the Related Parties shall cease to beneficially own and
control, directly or indirectly, at least 70% of the issued and outstanding
shares of capital stock of LVSI entitled (without regard to the occurrence of
any contingency) to vote for the election of members of the board of directors
of LVSI; or (b) Sheldon G. Adelson or any Related Party (as applicable, but
excluding directors of LVSI or VCR and employees of LVSI or VCR who are senior
managers or officers of LVSI, VCR or Interface or any of their Affiliates) shall
not have invested the proceeds of any sale or transfer of shares of LVSI by
Sheldon G. Adelson or any Related Party (as applicable) in the business of the
Borrowers (including any Excluded Subsidiary); or (c) LVSI shall cease to own
100% of the equity securities of VCR other than any preferred equity of VCR
owned by Interface Holding or another Affiliate of Sheldon G. Adelson; or (d)
subject to the foregoing clause (c) and clauses (f) and (g) below, the
Borrowers, taken together, shall cease to own 100% of the equity securities of
each of their Subsidiaries (other than any preferred equity of VCR owned by
Interface Holding or another Affiliate of Sheldon G. Adelson), or 99% of each of
the Mall Manager and the Phase II Manager; or (e) the Intermediate Holding
Companies shall cease to own 100% of Mall Direct Holdings and Phase II Direct
Holdings; or (f) Mall Direct Holdings shall cease to own not less than 80% of
the equity securities of the Mall Subsidiary; or (g) Phase II Direct Holdings
shall cease to own at least 51% of the equity securities of Phase II Subsidiary;
or (h) the sole
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managing member of each of Mall Direct Holdings, Phase II Direct Holdings,
Intermediate Holding Companies, Mall Subsidiary and Phase II Subsidiary shall
cease to be LVSI, VCR or a wholly-owned Subsidiary of LVSI or VCR; or (i) any
"Change of Control" (as defined in either the Mortgage Note Indenture or the
Subordinated Note Indenture) shall occur.
(l) Any of the Operative Documents shall expire or be terminated
or canceled, prior to its stated expiration date or there shall occur and then
be continuing any event of default under any of the Financing Agreements other
than this Agreement, or in any other respect either Borrower shall be in default
(after the giving of any applicable notice and the expiration of any applicable
grace period), or any Affiliate of the Borrowers shall be in default (after the
giving of any applicable notice and the expiration of any applicable grace
period) under any of the Operative Documents; provided that a default or
termination under any Project Document shall constitute an Event of Default
hereunder only if such default or termination may reasonably be expected to
cause a Material Adverse Effect.
(m) A Borrower or any of its Subsidiaries shall fail to observe,
satisfy or perform, or there shall be a violation or breach of, any of the
material terms, provisions, agreements, covenants or conditions attaching to or
under the issuance to such Person of any material Permit, including the gaming
license held by LVSI or any such Permit or any material provision thereof shall
be terminated or shall fail to be in full force and effect or any Governmental
Authority shall challenge or seek to revoke any such Permit if such failure to
perform, breach or termination could reasonably be expected to have a Material
Adverse Effect.
(n) Any default by Interface shall occur under Article III,
Section 3, or Article V, Section 3, or Article X, Section 1 of the Cooperation
Agreement and continue unremedied beyond any applicable notice or cure periods,
or such agreement shall be terminated or shall cease to be in full force and
effect.
(o) Any event or circumstance described under section 8.1(f), (g)
or (h) hereof shall occur with respect to the Mall Subsidiary, Mall Manager or
Mall Direct Holdings which would constitute an Event of Default if such Excluded
Subsidiary were a Subsidiary of Borrowers for purposes of those subsections.
(p) The Mall Subsidiary shall be in breach of or default with
respect to any term of one or more items of Indebtedness or Contingent
Obligation in an individual principal amount of $2,500,000 or more or an
aggregate principal amount of $5,000,000 or more, if as a result thereof the
holders of such Indebtedness or Contingent Obligation or Obligations (or an
agent or trustee acting on their behalf) shall have caused that Indebtedness or
Contingent Obligation or Obligations to become due and payable prior to its
stated maturity or the stated maturity of any underlying obligation, as the case
may be.
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(q) Sheldon G. Adelson or any of his Affiliates (other than the
Borrowers and their wholly-owned Subsidiaries) shall acquire or hold any
Investment in any Excluded Subsidiary or any Person which any Excluded
Subsidiary controls or in which it holds an Investment other than (1) in the
case of the Mall Subsidiary or the Phase II Subsidiary, through transactions
expressly permitted under section 6.20 or purchases of public debt securities in
the secondary market and (2) in the case of the Phase II Subsidiary or any of
its Subsidiaries, investments arising through loans, completion guaranties or
other guaranties substantially similar to those provided in connection with the
development of the Project and permitted under clause (1) of this section
8.1(q).
(r) Any payment on account of any subordinated indebtedness of
either Borrower or any Subsidiary thereof shall be made without the written
consent of the Requisite Lenders except for payments of interest due and payable
on the Subordinated Notes in accordance with the terms of the Subordinated Notes
Indenture as in effect on the date hereof.
(s) An event or condition specified in section 6.6 or other ERISA
Event shall occur or exist with respect to any Plan or Multiemployer Plan and,
as a result of such event or condition, together with all other such events or
conditions, either Borrower, any Subsidiary thereof or any ERISA Affiliate shall
incur or shall be reasonably likely to incur a liability to a Plan, a
Multiemployer Plan or the PBGC (or any combination of the foregoing) in excess
of $2,500,000 in the aggregate during the term of this Agreement; or there shall
exist an amount of unfunded benefit liabilities (as defined in section
4001(a)(18) of ERISA) individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans with respect to
which assets exceed benefit liabilities), which exceeds $5,000,000.
(t) At any time after the execution and delivery thereof, the
subordination provisions in the Subordinated Notes, the Employee Repurchase
Notes, any Completion Guaranty Note or any Substitute Tranche B Note or any
instrument required under any provision of this Agreement to be subordinated to
the Obligations shall cease to be enforceable against the holder thereof.
(u) There shall occur any liquidation, termination or dissolution
of either Borrower without the prior written consent of the Lender or the entry
of any order, judgment or decree against either Borrower or any Subsidiary
thereof decreeing the dissolution or split-up of such Person and such order
shall remain undischarged or unstayed for a period in excess of 30 days.
(v) At any time prior to the Final Completion Date, either (i)
Available Funds shall fail to equal or exceed the Remaining Costs or (ii) the
Unallocated Contingency Balance shall fail to equal or exceed the Required
Minimum Contingency, and, in the case of either clause (i) or (ii), such failure
shall continue unremedied for 30 days.
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(w) At any time while the Disbursement Agreement is in force and
effect:
(i) any of the Material Project Documents shall have been
terminated, become invalid or illegal, or otherwise shall cease to be in
full force and effect, provided that with respect to any Material
Project Document other than the Cooperation Agreement, the HVAC Services
Agreement, the HVAC Ground Lease, the Construction Agency Agreement, the
Direct Construction Guaranty, the Indirect Construction Guaranty or the
Sale and Contribution Agreement, no Event of Default shall be deemed to
have occurred as a result of such termination if the Borrowers provide
written notice to the Administrative Agent, immediately upon (but in no
event more than two Business Days after) either Borrowers or Sheldon G.
Adelson's becoming aware, or any of the Borrowers' Subsidiaries'
becoming aware, of such Material Project Document ceasing to be in full
force or effect, that the Borrowers intend to replace such Material
Project Document (or that replacement is not necessary) and (A) the
Borrowers obtain a replacement obligor or obligors reasonably acceptable
to the Administrative Agent (in consultation with the Construction
Consultant), for the affected party (if in the reasonable judgment of
the Administrative Agent (in consultation with the Construction
Consultant) a replacement is necessary), (B) the Borrowers enter into a
replacement Project Document in accordance with section 6.18, on terms
no less advantageous to the Borrower and the Lenders in any material
respect than the Project Document so terminated, within sixty (60) days
of such termination (if in the reasonable judgment of the Disbursement
Agent (in consultation with the Construction Consultant) a replacement
is necessary), and (C) such termination, after considering any
replacement obligor and replacement Project Document and the time
required to implement such replacement, has not had and would not
reasonably be expected to have a Material Adverse Effect; or
(ii) the Borrowers shall cease to own the Site (other than
(A) the Mall Parcel to the extent permitted by section 5.16(b) of the
Disbursement Agreement and (B) the Phase II Land to the extent permitted
by section 5.16(d) of the Disbursement Agreement) and all parcels and
subdivisions comprising the Mall Parcel or the Phase II Land or located
on either of them, the Improvements or the Site Easements for the
purpose of owning, constructing, maintaining and operating the Project
in the manner contemplated by the Operative Documents; or
(iii) either Borrower shall abandon the Project or
otherwise cease to pursue the operations of the Project in accordance
with standard industry practice or shall sell or otherwise dispose of
its interest in the Project; or
(iv) either Borrower shall deny in writing that it has any
further obligations under the HVAC Services Agreement, the HVAC Ground
Lease or the Construction Agency Agreement prior to the termination
thereof; or
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(v) to the extent that the Borrowers have right, title or
interest to the HVAC Component, the HVAC Services Agreement, once
executed and delivered, shall fail to provide the HVAC Provider the
liens, security interest, right, title, interest, priority, remedies,
power and privileges intended to be created thereby or shall cease to be
in full force and effect; or
(vi) the Construction Consultant shall reasonably
determine (based on its experience, familiarity and review of the
Project and information and schedule provided to the Borrowers and the
Construction Manager) that the Final Completion Date is likely to occur
no earlier than 75 days after the Outside Completion Deadline; or
(x) The Project Construction Completion Date shall fail to occur
prior to the Completion Deadline Date or the Final Completion Date shall fail to
occur prior to the Outside Completion Deadline.
8.2 Remedies.
(a) If any Event of Default shall have occurred and be
continuing, the rate of interest applicable to the Loans and the other
Obligations shall be increased, effective as of the date of the occurrence of
the Default giving rise to such Event of Default, to the Default Rate as
provided in section 1.7(e). If any Event of Default shall have occurred and be
continuing, the Administrative Agent may (and if directed to do so by the
Requisite Lenders in writing and provided with indemnification reasonably
satisfactory to it shall), without notice, except to the minimum extent required
by law, take any one or more of the following actions: (a) terminate the
Commitments whereupon the Lenders' several obligations to make further Interim
Loan Advances or the Basic Loan shall terminate; or (b) declare all or any
portion of the Obligations to be forthwith due and payable whereupon such
Obligations shall become and be due and payable; and (c) exercise any rights and
remedies provided to the Lender Parties or any of them under any of the Loan
Documents or otherwise at law or in equity, including all remedies provided
under the UCC; provided, however, that upon the occurrence of an Event of
Default specified in section 8.1 (f), (g) or (h), the Commitments shall
immediately terminate and the Obligations shall become immediately due and
payable, in each case without declaration, notice or demand by any Person.
(b) Without limiting the generality of the foregoing, the
Borrowers expressly agree that in any such event the Administrative Agent for
the benefit of the Lenders, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon either Borrower or any other
Person (all and each of which demands, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith enter upon the premises of either Borrower where any of the
Collateral is or may be located through self-help, without judicial process,
without first
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obtaining a final judgment or giving either Borrower notice and opportunity for
a hearing on the Lenders' claims or actions, and without paying rent to either
Borrower, and collect, receive, assemble, process, appropriate and realize upon
the Collateral, or any part thereof, and may forthwith sell, lease, assign, give
an option or options to purchase, or sell or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. Each Lender Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase for its benefit the whole or any part of said Collateral
so sold, free of any right or equity of redemption, which equity of redemption
the Borrowers hereby irrevocably release. Such sales may be adjourned or
continued from time to time with or without notice. The Administrative Agent
shall have the right to conduct such sales on either Borrower's premises or
elsewhere and shall have the right to use either Borrower's premises without
Scharge for such sales, or for storage of the Collateral in anticipation
thereof, for such time or times (including without limitation for at least one
year) as Requisite Lenders deem necessary or advisable and in all events until
the first anniversary of the acceleration of the Obligations. The Borrowers
acknowledge that an action for damages would not constitute an adequate remedy
for any breach of this subsection (b), or of subsection (c), of this section
8.2, and that upon any such breach the Administrative Agent shall be entitled,
forthwith and as a matter of right, to the entry of an injunction or other
equitable relief to enforce the provisions of either such subsection.
(c) The Borrowers further agree upon the request of the
Administrative Agent to assemble the Collateral and make it available to the
Lenders or their agent at places which Lenders shall reasonably select, whether
at a Borrower's premises or elsewhere. Until the Lenders or their agent is able
to effect a sale, lease or other disposition of the Collateral, the Lender
Parties shall have the right to use or operate the Collateral, or any part
thereof, on behalf of the Lenders, to the extent that they deem appropriate for
the purpose of preserving the Collateral or its value or for any other purpose
deemed appropriate by the Lenders. No Lender Party shall have any obligation to
either Borrower to maintain or preserve the rights of either Borrower as against
third parties with respect to the Collateral while the Collateral is in the
possession of any Lender Party. The Requisite Lenders may, if they so elect,
seek the appointment of a receiver or keeper to take possession of the
Collateral and to enforce any of the Lenders' remedies with respect to such
appointment without prior notice or hearing. The Lenders shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale as provided in section 8.2(f), the Borrowers remaining liable for any
deficiency remaining unpaid after such application, and only after so paying
over such net proceeds and after the payment by the Lenders of any other amount
required by any provision of law, including section 9-504(1)(c) of the UCC (but
only after the Lenders have received proof satisfactory to the Administrative
Agent of a subordinate party's security interest), need the Lenders account for
the surplus, if any, to either Borrower. To the maximum extent permitted by
applicable law, each Borrower waives all claims, damages and demands against the
Lender Parties and each of them arising out of the repossession,
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retention or sale of the Collateral except such as may arise out of the gross
negligence, bad faith or willful misconduct of a Lender Party. Each Borrower
agrees that five (5) days' prior notice by the Administrative Agent of the time
and place of any public sale or of the time after which a private sale may take
place is reasonable notification of such matters. Each Borrower shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay all amounts to which the Lenders are
entitled, the Borrowers also being liable for any and all attorneys' fees
incurred by any Lender Party to collect such deficiency.
(d) Each Borrower agrees to pay any and all costs of the Lender
Parties, including without limitation reasonable attorneys' fees, incurred in
connection with the enforcement of any of the rights and remedies of the Lender
Parties hereunder.
(e) Except as otherwise specifically provided herein, each
Borrower hereby waives presentment, demand, protest or any notice (to the
maximum extent permitted by applicable law) of any kind in connection with this
Agreement or any of the Collateral.
(f) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by the
Administrative Agent upon receipt, in the following order of priorities:
First, the payment in full of reasonable expenses of the
Lender Parties in connection with such sale, disposition or other
realization, including all expenses, liabilities and advances incurred
or made by the Lender Parties in connection therewith, including
reasonable attorneys' fees;
Second, to the ratable payment of accrued but unpaid
interest on the
Obligations;
Third, to the ratable payment of unpaid principal of the
Obligations;
Fourth, to the ratable payment of all other Obligations
until all other Obligations shall have been paid in full; and
Finally, subject to the payment of any other amount
required by any provision of law, including section 9-504(1)(c) of the
UCC (but only after receipt of proof satisfactory to the Administrative
Agent of a subordinate party's security interest), to the payment to the
Borrowers, or their successors or assigns, jointly, or as a court of
competent jurisdiction may otherwise direct, of any surplus then
remaining from such proceeds.
8.3 Grant of License to Use Trademark Collateral. For the purpose of
enabling the Lender Parties to exercise their rights and remedies under section
8.2 (including, without
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limiting the terms of section 8.2, in order to take possession of, hold,
preserve, process, assemble, prepare for sale, market for sale, sell or
otherwise dispose of the Collateral) at such time as the Lender Parties shall be
lawfully entitled to exercise such rights and remedies, each Borrower hereby
grants to the Lender Parties an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to either Borrower but only
after an Event of Default) to use, transfer, license or sublicense any Patent,
Trademark, copyright or trade secret now owned or hereafter acquired by either
Borrower which is used in connection with, or is printed on, the Collateral or
any of it.
8.4 Waivers by the Borrowers. Except as otherwise provided for in this
Agreement or by applicable law and to the fullest extent permitted by applicable
law, each Borrower hereby waives (i) presentment, demand and protest and notice
of presentment or dishonor, notice of intent to accelerate, notice of
acceleration or of protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all of the Loan Documents, at any
time held by any of the Lender Parties on which either Borrower may in any way
be liable, and each Borrower hereby ratifies and confirms whatever the Lender
may do in this regard, (ii) all rights to notice and a hearing prior to the
Lenders' taking possession or control of, or to the Lenders' replevin,
attachment or levy upon, the Collateral or any item or unit thereof or any bond
or security which might be required by any court prior to allowing the Lenders
to exercise any of their remedies and (iii) the benefit of any right of
redemption and all valuation, appraisal and exemption laws. Each Borrower
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement, the other Loan Documents and the transactions contemplated by
this Agreement and the other Loan Documents.
9. THE AGENTS
9.1 Appointment.
(a) Appointment of the Agents. General Electric Capital
Corporation is hereby appointed Administrative Agent hereunder and under the
other Loan Documents, and each Lender hereby authorizes the Administrative Agent
to act as its agent in accordance with the terms of this Agreement and the other
Loan Documents. BancBoston Leasing Inc. is hereby appointed Co-Agent hereunder
and under the other Loan Documents, but with only those duties expressly set
forth herein and each Lender hereby authorizes the Co-Agent to act as its agent
in accordance with the terms of this Agreement and the other Loan Documents.
Each Agent agrees to act upon the express conditions contained in this Agreement
and the other Loan Documents, as applicable. The provisions of this section 9
are solely for the benefit of each Agent and the Lenders, and the Borrowers
shall have no rights as a third-party beneficiary of any of the provisions
thereof. In performing its functions and duties under this Agreement, each Agent
shall act solely as an agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation
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towards or relationship of agency or trust with or for either of the Borrowers
or any of their Subsidiaries.
(b) Appointment of Supplemental Agents.
(i) It is the purpose of this Agreement and the other Loan
Documents that there shall be no violation of any law of any
jurisdiction denying or restricting the right of banking corporations
(including investment companies operating under the New York Banking
Law) or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this
Agreement or any of the other Loan Documents, and in particular in case
of the enforcement of any of the Loan Documents, or in case any Agent
deems that by reason of any present or future law of any jurisdiction it
may not exercise any of the rights, powers or remedies granted herein or
in any of the other Loan Documents or take any other action which may be
desirable or necessary in connection therewith, it may be necessary that
such Agent appoint an additional individual or institution as a separate
trustee, co-trustee, collateral agent or collateral co-agent (any such
additional individual or institution being referred to herein
individually as the "Supplemental Agent" and collectively as the
"Supplemental Agents").
(ii) In the event that an Agent shall appoint a
Supplemental Agent with respect to any of the Collateral, (1) each and
every right, power, privilege or duty expressed or intended by this
Agreement or any of the other Loan Documents to be exercised by or
vested in or conveyed to an Agent with respect to such Collateral shall
be exercisable by and vest in such Supplemental Agent to the extent, and
only to the extent, necessary to enable such Supplemental Agent to
exercise such rights, powers and privileges with respect to such
Collateral and to perform such duties with respect to such Collateral,
and every covenant and obligation contained in the Loan Documents and
necessary to the exercise or performance thereof by such Supplemental
Agent shall run to and be enforceable by either such Agent or such
Supplemental Agent, and (2) the provisions of this section 9 and of
sections 1.20 and 11.4 that refer to an Agent shall inure to the benefit
of such Supplemental Agent and all references therein to an Agent shall
be deemed to be references to the Administrative Agent or such
Supplemental Agent, as the context may require.
(iii) Should any instrument in writing from the Borrowers
be required by any Supplemental Agent so appointed for more fully and
certainly vesting in and confirming to him or it such rights, powers,
privileges and duties, the Borrowers shall execute, acknowledge and
deliver any and all such instruments promptly upon request by the
appropriate Agent. In case any Supplemental Agent, or a successor
thereto, shall die, become incapable of acting, resign or be removed,
all the rights, powers, privileges and duties of such Supplemental
Agent, to the extent
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permitted by law, shall vest in and be exercised by the Administrative
Agent until the appointment of a new Supplemental Agent.
9.2 Powers and Duties, etc.
(a) Powers; Duties Specified. Each Lender irrevocably authorizes
the Agents to take such action on such Lender's behalf and to exercise such
powers, rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to the Agents by the terms hereof and thereof,
together with such other powers, rights and remedies as are reasonably
incidental thereto. Without limiting the generality of the foregoing, each
Lender authorizes the Administrative Agent to execute and deliver an Agreement
among Creditors, among the Bank Agent, the Mortgage Notes Indenture Trustee, the
Interim Mall Lender and the Administrative Agent, a copy of which Agreement
among Creditors has been furnished to and approved by such Lender. The Agents
shall have only those duties and responsibilities that are expressly specified
in this Agreement and the other Loan Documents. The Agents may exercise such
powers, rights and remedies and perform such duties by or through their agents
or employees. Neither Agent shall have, by reason of this Agreement or any of
the other Loan Documents, a fiduciary relationship with respect to any Lender,
and nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon either Agent
any obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein.
(b) No Responsibility for Certain Matters. Neither Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by the Agents to the Lenders or by or on
behalf of the Borrowers to either Agent or any Lender in connection with the
Loan Documents and the transactions contemplated thereby or for the financial
condition or business affairs of the Borrowers or any other Person liable for
the payment of any Obligations, nor shall either Agent be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Interim Loan Advances or as to the existence
or possible existence of any Default or Event of Default. Anything contained in
this Agreement to the contrary notwithstanding, the Administrative Agent shall
not have any liability arising from confirmations of the amount of outstanding
Loans or the component amounts thereof.
(c) Exculpatory Provisions. No Agent or any officer, director,
employee or agent thereof shall be liable to the Lenders for any action taken or
omitted by such Agent under or in connection with any of the Loan Documents
except to the extent caused by such
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Agent's gross negligence or willful misconduct. The Agents shall be entitled to
refrain from any act or the taking of any action (including the failure to take
an action) in connection with this Agreement or any of the other Loan Documents
or from the exercise of any power, discretion or authority vested in it
hereunder or thereunder unless and until such Agent shall have received
instructions in respect thereof from the Requisite Lenders (or such other
Lenders as may be required to give such instructions under section 11.3) and,
upon receipt of such instructions from the Requisite Lenders (or such other
Lenders, as the case may be), such Agent shall be entitled to act or (where so
instructed) refrain from acting, or to exercise such power, discretion or
authority, in accordance with such instructions. Without prejudice to the
generality of the foregoing, (i) each Agent shall be entitled to receive, and
shall be fully protected in relying upon, any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons, and shall be entitled to rely, and shall
be protected in relying, on opinions and judgments of attorneys (who may be
attorneys for the Borrowers and their Subsidiaries), accountants, consultants,
experts and other professional advisors selected by it; and (ii) no Lender shall
have any right of action whatsoever against either Agent as a result of such
Agent's acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of the Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 11.3).
(d) Agents Entitled to Act as Lenders. The agency hereby created
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, either Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans, each Agent shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not performing the duties and functions delegated to it
hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include any institution then acting as
Agent in its individual capacity. Each Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of lending,
finance, financial advisory or other business with the Borrowers or any of their
Affiliates as if it were not performing the duties specified herein, and may
accept fees and other consideration from the Borrowers for services in
connection with this Agreement and otherwise without having to account for the
same to the Lenders.
9.3 Representations and Warranties; No Responsibility for Appraisal of
Creditworthiness. Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of the
Borrowers and their Subsidiaries and of the Project in connection with the
making of the Loans hereunder and that it has made and shall continue to make
its own appraisal of the creditworthiness of the Borrowers and their
Subsidiaries. Neither Agent shall have any duty or responsibility, either
initially or on a continuing basis, to make any such investigation or any such
appraisal on behalf of the Lenders or to provide any Lender with any credit or
other information with respect thereto, whether or not coming into its
possession before the making of the Loans or at any time or
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times thereafter, and the Agents shall not have any responsibility with respect
to the accuracy or completeness of any information provided to the Lenders.
9.4 Right to Indemnity. Each Lender, in proportion to its Pro Rata
Share, severally agrees to indemnify each Agent, to the extent that such Agent
shall not have been reimbursed by the Borrowers, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Loan Documents or otherwise in its
capacity as Agent in any way relating to or arising out of this Agreement or any
of the other Loan Documents; provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent's
gross negligence or willful misconduct. If any indemnity furnished to either
Agent for any purpose shall, in the opinion of such Agent, be insufficient or
become impaired, such Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
9.5 Successor Administrative Agent. The Administrative Agent may resign
at any time by giving 30 days' prior written notice thereof to the Lenders and
the Borrowers, and the Administrative Agent may be removed at any time with or
without cause by an instrument or concurrent instruments in writing delivered to
the Borrowers and the Administrative Agent and signed by the Requisite Lenders.
Upon any such notice of resignation or any such removal, the Requisite Lenders
shall have the right, upon five Business Days' notice to the Borrowers, to
appoint a successor Administrative Agent, provided that in all events any such
successor Administrative Agent shall satisfy the requirements set forth in
section 10(e) for being an Eligible Assignee. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, that successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Administrative Agent and the retiring or removed Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring or removed Administrative Agent's resignation or removal hereunder
as Administrative Agent, the provisions of this section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement.
9.6 Concerning the Collateral. Each Lender hereby further authorizes the
Administrative Agent, on behalf of and for the benefit of the Lenders, to act
hereunder as the secured party with respect to the Collateral, and each Lender
agrees to be bound accordingly by the terms and provisions hereof, provided that
the Administrative Agent shall not (i) enter into or consent to any material
amendment, modification, termination or waiver of any provision contained herein
with respect to the Lien hereof on the Collateral, or (ii) release
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any of the Collateral (except as otherwise expressly permitted or required
pursuant to the terms of this Agreement), in each case without the prior consent
of the Requisite Lenders (or, if required pursuant to section 11.3, all the
Lenders); provided, further, however, that, without further written consent or
authorization from the Lenders, the Administrative Agent may execute any
documents or instruments necessary to release any Lien encumbering any item of
Collateral that is the subject of a sale or other disposition of assets
permitted by this Agreement or to which the Requisite Lenders have otherwise
consented. Anything contained in any of the Loan Documents to the contrary
notwithstanding, the Borrowers, the Administrative Agent and each Lender hereby
agree that (i) no Lender shall have any right individually to realize upon any
of the Collateral, it being understood and agreed that all powers, rights and
remedies hereunder with respect to the Collateral may be exercised solely by the
Administrative Agent for the benefit of the Lenders in accordance with the terms
thereof, and (ii) in the event of a foreclosure by the Administrative Agent on
any of the Collateral pursuant to a public or private sale, any Lender Party may
be the purchaser of any or all of such Collateral at any such sale and the
Administrative Agent, as agent for and representative of the Lenders (but not
any Lender or Lenders in its or their respective individual capacities unless
the Requisite Lenders shall otherwise agree in writing) shall be entitled, for
the purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Collateral sold at any such public sale, to use
and apply any of the Obligations as a credit on account of the purchase price
for any Collateral payable by the Administrative Agent at such sale.
10. PARTICIPATIONS AND ASSIGNMENTS
(a) Subject to section 10(e) hereof, each Lender (without either
Borrower's consent) may assign and grant participations in all or any portion of
its rights and obligations under this Agreement (including without limitation
all or a part of its Commitment, its Interim Loan Advances, its Basic Loan and
its Note) to an Affiliate or to any other Person.
(b) In the case of an assignment by a Lender under this section
10, the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a Lender hereunder. Upon
execution by the assignor and the assignee of an instrument pursuant to which
the assignee assumes such rights and obligations, payment by such assignee to
such assignor of an amount equal to the purchase price agreed between such
assignor and such assignee and delivery to each of the Administrative Agent and
the Borrower Representative of an executed copy of such instrument, such
assignee shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights and benefits as it would have if it were an original
Lender hereunder and the assignor shall be, to the extent of such assignment
(unless otherwise provided therein), released from its obligations under this
Agreement. Each Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of the Borrowers to the assignee and that the
assignee shall be considered to be a "Lender" for all
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purposes of this Agreement and the other Loan Documents. Upon any such
assignment, the Borrowers, at their sole expense, shall execute and deliver to
the assignee lender in exchange for the surrendered Note of the assignor lender
a new Note payable to the order of the assignee lender in an amount equal to the
original principal amount of the surrendered Note. Such new Note shall be dated
the date of, and shall otherwise be in the form of, the Note replaced thereby.
To the extent that the assignment shall be of less than the entire amount of the
interest of the assignor, the Borrowers, at the discretion of the assignor but
at the sole expense of the Borrowers, shall execute and deliver to each of the
assignor and the assignee new Notes, payable to the orders of the assignor and
assignee, respectively, in respective principal amounts directed by the assignor
but in aggregate principal amount equal to the principal amount of the
surrendered Note. The Note surrendered to the assignee lender shall be returned
by the assignee lender to the Borrower Representative marked "canceled". Each
Borrower hereby waives and agrees not to assert against any such assignee any
defense, set-off, recoupment or counterclaim which either Borrower has or may at
any time have against the assigning lender or any other Person for any reason
whatsoever.
(c) Subject to section 10(e) hereof, each Borrower acknowledges
that it has been advised that each Lender may be acting hereunder for itself and
as agent for certain third parties (each being herein referred to as a
"Participant" and, collectively, as the "Participants"); that the interest of
any Lender in this Agreement, the other Loan Documents and any other related
instruments and documents may in whole or in part be conveyed to, and may be
used as security for financing obtained from, one or more third parties without
the consent of either Borrower (the "Syndication"). Each Borrower agrees
reasonably to cooperate with the Lenders in connection with the Syndication,
including the execution and delivery of such other documents, instruments,
notices, opinions, certificates and acknowledgments as reasonably may be
required by any Lender or any such Participant; provided, however, that in no
event shall either Borrower be required to consent to any change that would
adversely affect any of the economic terms of any of the transactions
contemplated hereby; and provided, further, that all Participants shall satisfy
the requirements set forth in section 10(e) for being an Eligible Assignee.
(d) Each such Participant shall be deemed to be a "Lender" and a
"Lender Party" hereunder for purposes of sections 1.14, 1.15, 1.16 and 1.20 (and
other provisions hereof according rights of indemnification to the Lenders or
Lender Parties) and for the purposes of determining the "Requisite Lenders"
hereunder at any time.
(e) Provided that at the time of such assignment there shall not
have occurred and then be continuing any Event of Default hereunder, unless each
of the Borrowers and the Administrative Agent shall otherwise consent in
writing, no assignment by a Lender shall be made under this section 10 except to
an assignee (1) which has not been denied an approval or a license, or been
found unsuitable under the Nevada Gaming Laws applicable to lenders and (2)
which is either (A) (i) a commercial bank organized under the laws of the United
States or any state thereof; (ii) a savings and loan association or savings
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bank organized under the laws of the United States or any state thereof; (iii) a
commercial bank organized under the laws of any other country or a political
subdivision thereof; provided that either (x) such bank is acting through a
branch or agency located in the United States or (y) such bank is organized
under the laws of a country that is a member of the Organization for Economic
Cooperation and Development or a political subdivision of such country; and (iv)
any other entity which is an "accredited investor" (as defined in Regulation D
under the Securities Act) which extends credit or buys loans as one of its
businesses, including insurance companies, mutual funds, investment companies,
finance companies and lease financing companies; or (B) any Lender and any
Affiliate of any Lender; provided that no Affiliate of either Borrower shall be
eligible as an assignee; and provided, further, that no such assignee (excepting
an assignee which has acquired such casino or convention, trade show or
exhibition facility, pending disposition of the same, in settlement or
satisfaction of a debt previously contracted in good faith) shall constitute (i)
a Person that owns or operates a casino located in the State of Nevada or the
State of New Jersey (or is an Affiliate of such a Person), provided that a
passive investment constituting less than 20% of the common stock of any such
casino shall not constitute ownership thereof for the purposes of this
definition, (ii) a Person that owns or operates a convention, trade show or
exhibition facility in Las Vegas, Nevada or Clark County, Nevada (or an
Affiliate of such a Person), provided that a passive investment constituting
less than 20% of the common stock of any such convention, trade show or
exhibition facility shall not constitute ownership for the purpose of this
definition) or (iii) a union pension fund, provided that any intermingled fund
or managed account which has as part of its assets under management the assets
of a union pension fund shall not be disqualified from being an eligible
assignee hereunder so long as the manager of such fund is not controlled by a
union. For purposes of this Agreement, any Person that satisfies the provisions
of both clauses (1) and (2) of this section 10(e) shall constitute an "Eligible
Assignee."
11. MISCELLANEOUS
11.1 Borrower Representative. Each of the Borrowers hereby designates
and appoints LVSI as the agent of such Borrower with full authority to act on
such Borrower's behalf in all matters pertaining to this Agreement or any of the
other Loan Documents wherein notices may or must be given or elections,
designations or other instructions must or may be made or given, or options or
discretion exercised or action otherwise taken by the Borrower Representative
hereunder or in connection herewith, and each of the Borrowers, recognizing that
the foregoing power is one coupled with an interest, agrees that the foregoing
designation shall be irrevocable throughout the term of this Agreement. Each
Lender Party shall be protected in relying in good faith on any notice,
instruction, election, designation or other action given or taken by the
Borrower Representative under the authority of this provision. The Borrower
Representative may resign at any time upon written notice to the other Borrower
and each of the Lender Parties, such resignation to be effective, however, only
upon the designation by the other Borrower of a successor Borrower
Representative (which successor shall be satisfactory to the Requisite Lenders
in their sole
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discretion) and the acceptance of such successor Borrower Representative of his
or its designation as such and the communication of such succession in writing
to each of the Lender Parties. Following such succession, the successor Borrower
Representative shall be vested with all of the rights, powers and authorities of
the predecessor Borrower Representative and the predecessor Borrower
Representative shall be entitled to the benefits of this section 11.1 with
respect to all actions taken or omitted to be taken by it while it was the
Borrower Representative hereunder. As used in this Agreement, the term "Borrower
Representative" shall mean LVSI in its capacity as such hereunder and any
successor Borrower Representative succeeding in the manner provided in the
foregoing provisions of this section 11.1. Each Borrower agrees to indemnify the
Borrower Representative and hold it harmless from and against any and all
damages, losses, liabilities and expenses (including without limitation
reasonable attorneys' fees and expenses) incurred or suffered by the Borrower
Representative in good faith in the exercise of its powers and the discharge of
its responsibilities hereunder on behalf of the Borrowers, but the foregoing
right to indemnification shall in all respects be subject and subordinate to the
liabilities of the Borrowers to the Lender Parties hereunder and under the other
Loan Documents.
11.2 Successors and Assigns. This Agreement and each of the other Loan
Documents shall bind and inure to the benefit of each of Borrowers, the Lenders,
the Agents and their respective successors and assigns, except as otherwise
provided herein or therein. Neither Borrower may assign, delegate, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the other Loan Documents without the prior express
written consent of each Lender. Any such purported assignment, transfer,
hypothecation or other conveyance by either Borrower without such prior express
written consent shall be void. The terms and provisions of this Agreement and
the other Loan Documents are for the purpose of defining the relative rights and
obligations of the Borrowers, the Lenders and their Agents with respect to the
transactions contemplated hereby, and there shall be no third-party
beneficiaries of any of the terms and provisions of this Agreement or any of the
other Loan Documents. For the avoidance of doubt and without limiting the
generality of the foregoing, no party to an Operative Document not a party
hereto shall be a third party beneficiary hereof or of any other Loan Document.
11.3 Complete Agreement; Modification of Agreement, etc. The Loan
Documents constitute the complete agreement among the parties with respect to
the subject matter thereof and supersede all prior agreements, commitments,
understandings and inducements (oral or written, expressed or implied). Whenever
the Borrowers, directly or though the Borrower Representative or another agent
thereof, shall pursuant to any provision thereof deliver to any Lender Party or
Lender Parties a copy of any certificate delivered under the provisions of
another Operative Document, the Borrowers shall be deemed to have made to such
Lender Party or Lender Parties all of the certifications set forth in the
certificate so delivered. Neither this Agreement nor any other Loan Document,
nor any of the terms hereof or thereof, may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by each of the Administrative Agent and the
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Requisite Lenders, provided that no such change, waiver, discharge or
termination shall, without the written consent of each of the Lenders, (i)
extend the Commitment Expiration Date or the scheduled final maturity of any
Basic Loan, (ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any post-default
increase in interest rates) on the Loans or of fees, or reduce the principal
amount of the Loans, or increase the Commitment of any Lender over the amount
thereof then in effect (it being understood that a waiver of any Default shall
not constitute a change in the terms of the Commitment of any Lender), (iii)
release all or any material portion of the Collateral (except as expressly
permitted by the Loan Documents), (iv) amend, modify or waive any provision of
section 11.2 or this section 11.3, (v) reduce any percentage specified in, or
otherwise modify, the definition of the term "Requisite Lenders" or (vi) consent
to the assignment or transfer by either Borrower of any of its rights and
obligations under this Agreement.
11.4 Fees and Expenses.
(a) The Borrowers shall pay on demand all reasonable costs and
expenses (including without limitation reasonable fees and disbursements of
counsel) of the Lender Parties in connection with the preparation, negotiation,
approval, execution, delivery, modification, amendment, waiver or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or the
administration of special problems related to, the Loan Documents, and
commitments relating thereto, and the other documents to be delivered hereunder
or thereunder and the transactions contemplated hereby and thereby and the
fulfillment or attempted fulfillment of conditions precedent hereunder,
including without limitation: (i) wire transfer fees and other costs of
forwarding, to the Borrowers or any other Person on behalf of the Borrowers, by
the Lenders and the Administrative Agent of the proceeds of Interim Loan
Advances; (ii) any amendment, modification or waiver of, or consent with respect
to, any of the Loan Documents or advice in connection with the administration of
the advances made pursuant hereto or its rights hereunder or thereunder; (iii)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by one or more of the Lender Parties, the Borrowers or any other Person) in any
way relating to the Collateral, any of the Loan Documents or any other
agreements to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against the Borrowers or either of them
or any other Person that may be obligated to one or more of the Lender Parties
by virtue of the Loan Documents; (iv) any attempt to enforce any rights of any
Lender against either Borrower or any other Person that may be obligated to any
Lender Party by virtue of any of the Loan Documents; or (v) after the occurrence
and during the continuance of any Default, any effort to (A) evaluate, observe
or assess either Borrower or any of its affairs or (B) verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral or any of it. In addition, the Borrowers shall pay on demand of
General Electric Capital Corporation all reasonable costs and expenses (not to
exceed $25,000 in the aggregate),
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including without limitation reasonable fees and disbursements of counsel,
incurred by GECC Capital Markets Group, Inc. in connection with its efforts to
syndicate a portion of the Commitment of the Lenders as more fully described in
section 11.19.
(b) Each Borrower shall pay on demand all reasonable costs and
expenses (including without limitation reasonable counsels' fees) of the Lender
Parties in connection with any Default and any enforcement or collection
proceedings resulting therefrom or any amendment, modification or waiver of, or
consent with respect to, any of the Loan Documents in connection with any
Default.
(c) Without limiting the generality of clauses (a) and (b) above,
the Borrowers' obligation to reimburse the Lender Parties for costs and expenses
shall include the reasonable fees and expenses of counsel (and local, foreign or
special counsel, advisors, consultants and auditors retained by such counsel),
accountants, field auditors, environmental advisors, appraisers, investment
bankers, insurance experts, management and other consultants and paralegals;
court costs and expenses; photocopying and duplicating expenses; lien and title
searches, Uniform Commercial Code and other filing and recording fees; notarial
fees; court reporter fees, costs and expenses; long distance telephone charges;
air express charges; telegram charges; secretarial overtime charges; expenses
for travel, lodging and food; and all other out-of-pocket costs and expenses of
every type and nature paid or incurred in connection with the performance of
such legal or other advisory services.
11.5 No Waiver. No failure on the part of any Lender Party, at any time
or times, to require strict performance by either Borrower of any provision of
this Agreement and any of the other Loan Documents shall waive, affect or
diminish any right of the Lender Parties thereafter to demand strict compliance
and performance therewith. No suspension or waiver of a Default shall suspend,
waive or affect any other Default whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of either
Borrower contained in this Agreement or any of the other Loan Documents and no
Default by either Borrower shall be deemed to have been suspended or waived by
any Lender Party, unless such suspension or waiver is by an instrument in
writing signed by an officer of or other authorized representative of the Lender
Party if required hereunder and directed to such Borrower specifying such
suspension or waiver.
11.6 Remedies. The rights and remedies of the Lender Parties under this
Agreement are cumulative and nonexclusive of any other rights and remedies which
the Lender Parties may have under any other agreement, including without
limitation the other Loan Documents, by operation of law or otherwise. Recourse
to the Collateral shall not be required.
11.7 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any
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provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11.8 Conflict of Terms. Except as otherwise provided in this Agreement,
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provisions contained in this Agreement shall govern and control.
11.9 Right of Set-off. Subject to section 11.18, upon the occurrence and
during the continuance of any Event of Default, each Lender is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of Borrower against any and
all of the Obligations now or hereafter existing irrespective of whether or not
such Lender shall have made any demand under this Agreement or any other Loan
Document and although such Obligations may be unmatured. Each Lender agrees
promptly to notify the Administrative Agent and each of the Borrowers after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Lenders under this section are in addition to the
other rights and remedies (including without limitation other rights of set-off)
which the Lenders may have.
11.10 Authorized Signature. Until such Lender Party shall be notified by
the applicable Borrower to the contrary, the signature upon any document or
instrument delivered pursuant hereto and believed by a Lender Party or any of
such Lender Party's officers or employees to be that of an officer or duly
authorized representative of such Borrower shall bind such Borrower and be
deemed to be the act of such Borrower affixed pursuant to and in accordance with
resolutions duly adopted by such Borrower's (or its managing member's) board of
directors, and the Lender Party shall be entitled to assume the authority of
each signatory and the authority of the person whose signature it is or appears
to be unless the person acting in reliance of such signature shall have actual
knowledge of the fact that such signature is false or the person whose signature
or purported signature is presented is without authority.
11.11 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE (BUT NOT PERFECTION TO THE EXTENT PERFECTION IS
GOVERNED BY THE MANDATORY PROVISIONS OF THE LAWS OF OTHER JURISDICTIONS), THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED
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IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK) APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH BORROWER HEREBY CONSENTS
AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK CITY SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED
THAT EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK CITY AND, PROVIDED,
FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
ANY LENDER PARTY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF ANY LENDER PARTY. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR
SUIT AND AGREES THAT SERVICE OF SUCH SUMMONSES, COMPLAINTS AND OTHER PROCESS MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE
ADDRESS SET FORTH IN SECTION 11.12 OF THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT THEREOF IN THE UNITED STATES MAILS,
PROPER POSTAGE PREPAID.
11.12 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party or parties, or whenever any of the parties shall
desire to give or serve upon any other party any communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have
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been validly served, given or delivered (i) upon the earlier of actual receipt
thereof or three (3) days after deposit of the same in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (ii) upon transmission, when sent by telecopy or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this Section 11.12 (provided that telecopy and other facsimile
transmissions received after the normal business hours of the recipient shall be
deemed to have been received at the opening of business on the next succeeding
Business Day of the recipient), (iii) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid and instructions given for
next Business Day delivery and (iv) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number set forth below in this Section 11.12, in the
case of the Borrowers and the Agents, or beneath its signature on a signature
page hereof, in the case of a Lender, and, in the case of all parties, to such
other address (or facsimile number) as may hereafter be substituted by a notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. No failure or
delay in delivering any copies of any notice, demand, request, consent,
approval, declaration or other communication to any Person (other than a
Borrower or Lender Party) designated below to receive copies shall in any way
adversely affect the effectiveness of any such notice, demand, request, consent,
approval, declaration or other communication. The above-mentioned addresses and
facsimile numbers for the Borrowers and the Agents are as follows:
(a) If to the Administrative Agent, at:
General Electric Capital Corporation,
as Administrative Agent
777 Long Ridge Road
Building B, First Floor
Stamford, Connecticut 06927
Attention: Account Manager-Venetian
Telecopy No.: (203) 316-7989
With a copy to:
David R. Huet, Esq.
Counsel, Capital Funding, Inc.
777 Long Ridge Road
Building B, First Floor
Stamford, Connecticut 06927
Telecopy No.: (203) 316-7989
(b) If to the Co-Agent, at:
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BancBoston Leasing Inc.
100 Federal Street
Boston, Massachusetts 02110
Attention: President
Telecopy No.: (617) 434-0112
(c) If to Borrowers, or either of them, in
care of the Borrower Representative, at:
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telecopy No.: (702) 733-5499
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: James L. Purcell, Esq.
Telecopy No.: (212) 757-3990
11.13 Section Captions. The section captions and the Table of
Contents contained in this Agreement are included for convenience of reference
only and shall not be construed as a part of this Agreement for any purpose.
11.14 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents or supplements hereto or in connection herewith may be
executed in any number of counterparts, and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto and receipt by the Borrowers and the Administrative Agent of written or
telephonic notification of such execution and authorization of delivery thereof.
11.15 Time of the Essence. Time is of the essence of this Agreement and
each of the other Loan Documents.
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11.16 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, OR RELATED OR INCIDENTAL TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
11.17 Confidentiality.
(a) Each Lender Party shall have reasonable access to all
relevant facilities, personnel and accountants, and copies of all documents of
the Borrowers and each of them, which such Lender Party may reasonably request,
including business plans, financial statements (actual and pro forma), books,
records and other documents. Each Lender Party hereby agrees that all written
information of a confidential or proprietary nature which has been marked or
designated "Confidential" by a Borrower ("Confidential Information") which is
obtained by such Lender Party as a result of its review of financial statements
and related business information pertaining to either Borrower obtained under
this Agreement shall be kept confidential and shall not be disclosed to any
other party or entity (other than another Lender Party), except for the
affiliated corporations of the Lender Parties and except for their independent
auditing, accounting and legal consultants. In connection with the foregoing,
each Lender Party shall use the same degree of care as it exercises to preserve
and safeguard its own proprietary information. Notwithstanding anything in this
Agreement to the contrary, no Lender Party shall be liable for the disclosure of
any Confidential Information if the same (i) is in the public domain at the time
it is disclosed; (ii) was known to such Lender Party at the time of its initial
receipt thereof; (iii) is disclosed with the prior approval of either Borrower;
(iv) is disclosed later than three years from the date of initial receipt; (v)
was independently developed by such Lender Party or an Affiliate thereof; (vi)
becomes known to such Lender Party from an independent source without breach by
such Lender Party of the confidentiality undertaking contained herein and
without any breach, of which breach such Lender Party is actually aware, of any
confidentiality undertaking or fiduciary duty by a third party; (vii) is
disclosed to a third party by either Borrower without restrictions similar to
those contained in this section 11.17(a); (viii) is disclosed pursuant to a
requirement of a court, administrative agency or other Governmental Authority;
or (ix) is disclosed pursuant to a requirement (in the reasonable judgment of
the disclosing party) under an applicable law,
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rule or regulation or a regulatory guideline to which an institutional party
adheres as a matter of policy.
(b) Each party hereto agrees to consult with the other parties
hereto (the Borrowers' consultation with the Administrative Agent being deemed
to constitute consultation with all of the Lender Parties but only for purposes
of this section 11.17(b)) prior to issuing any press release or other
announcement with respect to this Agreement or any of the transactions
contemplated hereby.
11.18 Ratable Sharing. The Lenders agree among themselves that if any of
them shall, whether by voluntary payment (other than a voluntary prepayment of
the Loans made and applied in accordance with the terms of this Agreement), by
realization upon security, through the exercise of any right of set-off or
banker's lien, by counterclaim or cross action or by the enforcement of any
right under the Loan Documents or otherwise, or as adequate protection of a
deposit treated as cash collateral under the Bankruptcy Code, receive payment or
reduction of a proportion of the aggregate amount of principal, interest, fees
and other amounts then due and owing to that Lender hereunder or under the other
Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) which
is greater than the proportion received by any other Lender in respect of the
Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify the Administrative Agent and
each other Lender of the receipt of such payment and (ii) apply a portion of
such payment to purchase participations (which it shall be deemed to have
purchased from each seller of a participation simultaneously upon the receipt by
such seller of its portion of such payment) in the Aggregate Amounts Due to the
other Lenders so that all such recoveries of Aggregate Amounts Due shall be
shared by all Lenders in proportion to the Aggregate Amounts Due to them;
provided that if all or part of such proportionately greater payment received by
such purchasing Lender is thereafter recovered from such Lender upon the
bankruptcy or reorganization of Borrowers or otherwise, those purchases shall be
rescinded and the purchase prices paid for such participations shall be restored
to such purchasing Lender, ratably to the extent of such recovery but without
interest. The Borrowers expressly consent to the foregoing arrangement and agree
that any holder of a participation so purchased may exercise any and all rights
of banker's lien, set-off or counterclaim with respect to any and all monies
owing by the Borrowers to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
11.19 Cooperation Regarding Syndication. The parties mutually
acknowledge that General Electric Capital Corporation's affiliate GECC Capital
Markets Group, Inc. ("GECMG") and BancBoston Leasing Inc. have undertaken
efforts to syndicate a portion of the Commitments of General Electric Capital
Corporation and BancBoston Leasing Inc. hereunder with other lenders who
constitute Eligible Assignees. Each of the Borrowers agrees to cooperate fully
with such syndication efforts and to afford all reasonable and appropriate
assistance to such Lenders in connection therewith. Such assistance shall
include
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without limitation (i) prompt assistance in the preparation of an information
memorandum (including the verification upon request of the completeness and
accuracy of the information provided by the Borrowers and contained therein);
(ii) the preparation of other offering materials and projections by the
Borrowers and their advisors pertaining to, among other things, the Project, the
construction thereof and the Project's projected operating results in the
context of the Borrower's performance of its obligations hereunder and under the
other Financing Agreements; (iii) the provision to GECMG and BancBoston Leasing
Inc. of all information either of them reasonably deems necessary to
successfully complete such syndication as the Borrowers shall have provided;
(iv) the confirmation of the accuracy and completeness of such offering
materials, projections and information as the Borrowers shall have provided; (v)
the participation by the Borrowers' senior management in meetings and conference
calls with potential lenders at such times and places as GECMG or BancBoston
Leasing Inc. may reasonably request; and (vi) the use of the Borrowers' best
efforts to ensure that the syndication efforts benefit from the Borrowers'
existing lending relationships.
11.20 Certain Matters Affecting the Lenders.
(a) If (i) the Nevada Gaming Commission shall determine that any
Lender does not meet the suitability standards prescribed under the Nevada
Gaming Regulations or (ii) any other gaming authority with jurisdiction over the
gaming business of the Borrowers shall determine that any Lender does not meet
its suitability standards (in any such case, a "Former Lender"), the
Administrative Agent or the Borrowers shall have the right (but not the duty) to
designate one or more banks or other financial institutions reasonably
acceptable to the Administrative Agent (in each case, a "Substitute Lender"),
which may be any Lender or Lenders that agree to become a Substitute Lender and
to assume the rights and obligations of the Former Lender. The Substitute Lender
shall assume the rights and obligations of the Former Lender under this
Agreement. The Borrowers shall bear the costs and expenses of any Lender
required by the Nevada Gaming Commission, or any other gaming authority with
jurisdiction over the gaming business of the Borrowers, to file an application
for a finding of suitability in connection with the investigation of an
application by the Borrowers for a license to operate a gaming establishment, in
connection with such application for a finding of suitability.
(b) Notwithstanding the provisions of section 11.20(a), if any
Lender becomes a Former Lender, and if the Administrative Agent or the Borrowers
shall fail to find a Substitute Lender pursuant to section 11.20(a) within any
time period specified by the appropriate gaming authority for the withdrawal of
a Former Lender (the "Withdrawal Period"), the Borrowers shall immediately
prepay in full the outstanding principal amount of Loans made by such Former
Lender, together with accrued interest thereon to the earlier of (x) the date of
payment or (y) the last day of any Withdrawal Period. In such event, upon the
prepayment in full of the outstanding principal amount of the Loans made by such
Former Lender, together with accrued interest thereon as aforesaid, the
Commitment of such Former Lender shall be terminated, the Aggregate Commitment
shall be reduced by the
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amount of the Commitment of the Former Lender immediately prior to such
termination and the Pro Rata Shares shall be adjusted accordingly.
(c) Any provision hereof to the contrary notwithstanding, in the
event that for any reason (including without limitation a change in law or
regulation or regulatory policy) any Lender Party (otherwise meeting the
standards set forth in section 10(e)) shall be required, prior to any
foreclosure upon the Collateral, to apply for or obtain any gaming license under
the laws of the State of Nevada solely as a result of its execution and delivery
of this Agreement or any other Loan Document or the consummation of the
transactions contemplated hereby or thereby, the Administrative Agent may, and
upon request of the Requisite Lenders shall, declare the outstanding principal
amount of all of the Loans outstanding to be, whereupon the same shall become
and forthwith be, due and payable and the Borrowers shall pay the same forthwith
together with interest thereon accrued to the date of payment and all other
Obligations outstanding hereunder (but without any prepayment penalty under
section 1.9(c) or any requirement of prior notice).
11.21 Gaming Authorities. Each Lender Party agrees to cooperate with the
Nevada Gaming Authorities in connection with the administration of their
regulatory jurisdiction over the Borrowers and their Subsidiaries by providing
to the Nevada Gaming Authorities from time to time upon request copies of this
Agreement and the other Loan Documents and of such other publicly available
information concerning such Lender Party as such Authorities may reasonably
request. Notwithstanding any other provision of this Agreement, the Borrowers
expressly authorize each Lender Party to cooperate with the Nevada Gaming
Authorities as described above.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of
the date first written above.
LAS VEGAS SANDS, INC.
By: /s/ William P. Weidner
-------------------------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.,
Managing Member
By: /s/ Harry D. Miltenberger
------------------------------
Name: Harry D. Miltenberger
Title: Vice President--Finance
Commitments:
GENERAL ELECTRIC CAPITAL
$60,000,000.00 CORPORATION
By: /s/ Daniel Gioia
-------------------------------------
Name: Daniel Gioia
Title: Sr. Credit Analyst
Address for payments:
c/o Bankers Trust New York, for
the account of General
Electric Capital Corporation
1 Bankers Trust Plaza
New York, NY 10006
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Address for notices:
General Electric Capital Corporation
777 Long Ridge Road
Building B, First Floor
Stamford, CT 06927
Attention: Account Manager-Venetian
Telecopy No.: (203) 316-7989
With a copy to:
David R. Huet, Esq.
Counsel, Capital Funding, Inc.
777 Long Ridge Road
Building B, First Floor
Stamford, Connecticut 06927
Telecopy No.: (203) 316-7989
$37,700,000.00 BANCBOSTON LEASING INC.
By: /s/ Philip Washburn
------------------------------------
Name: Philip Washburn
Title: Assistant Vice President
Address for payments:
Bank Boston N.A.
100 Federal Street
Boston, MA 02110
Acct. Name: BancBoston Leasing Inc.
Attn.: Payment Processing
ABA No.: 011-000-390
Acct #: 535-23473
Address for notices:
BancBoston Leasing Inc.
100 Federal Street
Boston, MA 02110
Attention: President
Telecopy No.: (617) 434-0112
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Exhibit A
[form of Preliminary or Final Notice of Borrowing]
________________, 19__
General Electric Capital Corporation,
as Administrative Agent
777 Long Ridge Road
Building B, First Floor
Stamford, CT 06927
Attention: Account Manager-Venetian
Ladies and Gentlemen:
Reference is made to the Term Loan and Security Agreement, dated
as of December 22, 1997 (the "Loan Agreement"), among Las Vegas Sands, Inc., a
Nevada corporation ("LVSI"), Venetian Casino Resorts, LLC, a Nevada limited
liability company ("VCR," and with LVSI collectively, the "Borrowers"), the
lenders named therein, BancBoston Leasing Inc., as co-Agent, and General
Electric Capital Corporation, as Administrative Agent. Terms defined in the Loan
Agreement and not otherwise defined herein are used herein with the meanings
ascribed to them in the Loan Agreement. This is a [Preliminary] [Final] Notice
of Borrowing under the Loan Agreement.
The Borrowers propose to make an Interim Loan Borrowing (the
"Borrowing") under the Loan Agreement and in such connection certify to you as
follows:
1. The date of the proposed Borrowing is ___________, 19__ (the
"Date of the Borrowing").
2. The aggregate amount of the proposed Borrowing is $__________.
[The Interim Loan Advance of each lender will be $__________, in the case of
[name of lender], $__________, in the case of [name of lender], . . . , and
$__________, in the case of [name of lender].]
3. The Interim Loan Advances on the occasion of the proposed
Borrowing are to be:
|_| Base Rate Advances
|_| LIBOR Rate Advances.
A-1
<PAGE>
4. Attached hereto is an attachment (the "Attachment"), dated the
date hereof, which identifies the specific units or items of furniture or
equipment to be paid for with the proceeds of the Interim Loan Advances to be
made on this Borrowing (the "Units"). The total purchase price of each Unit is
accurately set forth on the Attachment. In the case of each Unit, the portion of
such total purchase price which consists of freight, installation, sales tax and
other cost elements in addition to the basic purchase price is also accurately
set forth.
5. The Borrower Representative certifies on behalf of the
Borrowers that:
(a) each Unit is owned by the Borrower indicated for it on Annex
B to the Loan Agreement free and clear of all Liens and rights of others
except only (i) Liens in favor of the Bank Agent, the Disbursement Agent
or the Mortgage Notes Indenture Trustee which will be fully discharged
and satisfied upon completion of the Borrowing and (ii) Liens in your
favor.
(b) as of the date hereof, the total cost listed in the
Attachment with respect to each Unit is net of all discounts, credits,
rebates and allowances, and [add if applicable: except as set forth in
paragraph[s] [7] [8] [7 and 8] is justly owing to the applicable vendor;
(c) in all respects material to the Lenders, each Unit (i) was
purchased [in an arm's length transaction] [in a transaction which is
identified, as to that Unit, in the Attachment as not being an arm's
length transaction but as to which all of the details of the purchase
have been fully disclosed to you];
(d) each Unit has been inspected and found to conform, in all
respects material to the Lenders, to its description in Annex B, as
amended, to the Loan Agreement;
(e) each Unit is useful and is to be used in the development
or operation of the Project;
(f) each Unit has been delivered to and is physically located at
the Site of the Project and has been installed, or is held in safe
custody pending installation, at [the Site of the Project] [except for
individual Units which are held at the locations indicated with respect
to such Units, respectively, in the Attachment, all of which indicated
Units are covered by proper warehouse receipts that have been delivered
to you properly and effectively endorsed to you;
(g) each Unit is and will remain covered, in all respects
material to the Lenders, by all applicable manufacturers' warranties and
casualty insurance;
A-2
<PAGE>
(h) none of the Units has been damaged or is not in good and
serviceable condition;
(i) all of the Units comply, in all respects material to the
Lenders, with all representations and warranties set forth in the Loan
Agreement which may be applicable to it; and
(j) no uncured Default or Event of Default under the Loan
Agreement now exists, nor at the time of the acceptance by the Borrowers
of the proceeds of the Borrowing will any such Default or Event of
Default exist.
6. [add if applicable: All of the Units shown on the Attachment
preceded by a single asterisk are Units with respect to which the proceeds of
the Borrowing will be used to refinance secured indebtedness previously incurred
by the Borrowers under the Bank Credit Agreement.]
7. [add if applicable: All of the Units shown on the Attachment
which are preceded by a double asterisk are Units with respect to which the
proceeds of the Borrowing will be used to replace funds in the Company's Funds
Account previously drawn or funded to pay all or a portion of the purchase price
for such Units.]
8. No Stop Funding Notice has been issued and is outstanding
under the Disbursement Agreement, dated as of November 14, 1997, among the
Borrowers, the Mall Construction Subsidiary, the Bank Agent, the Mortgage Notes
Indenture Trustee, the Interim Mall Lender, the HVAC Provider and the
Disbursement Agent.
9. All conditions precedent [to the pending advance under the
Disbursement Agreement] [to an advance under the Disbursement Agreement of at
least One Dollar if such an advance were to be pending as of the date hereof]
are, and on the date of the proposed Borrowing (unless we sooner advise you in
writing) will be, fully satisfied without waiver.
10. Each Borrower will notify you, immediately before this
Borrowing, if any of the matters certified by the undersigned in this
[Preliminary][Final] Notice of Borrowing is no longer true and correct as of the
date of the Borrowing.
A-3
<PAGE>
11. The individual signing this [Preliminary][Final] Notice of
Borrowing on behalf of the Borrower Representative is a responsible officer of
the Borrower Representative.
Very truly yours,
LAS VEGAS SANDS, INC.
By:_____________________
[Name]
[Title]
Countersigned for the purpose
of confirming the certifications
made in subparagraphs (b) through
(i) of paragraph 5:
TISHMAN CONSTRUCTION
CORPORATION OF NEVADA
By:_________________________
[Name]
[Title]
A-4
<PAGE>
Exhibit B
[form of Note]
PROMISSORY NOTE
$________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, Las Vegas Sands, Inc., a
Nevada corporation ("LVSI"), and Venetian Casino Resort, LLC, a Nevada limited
liability company ("VCR" and together with LVSI collectively, the "Borrowers"),
hereby promise to pay, as joint and several obligors, to the order of
__________________ (the "Lender"), in lawful money of the United States of
America and in immediately available funds, the principal sum of
____________________ Dollars ($____________) or, if less, the aggregate unpaid
principal amount of the Interim Loan Advances, and of the Basic Loan from and
after the date thereof, made by the Lender to the Borrowers pursuant to sections
1.1 and 1.6 of the Loan Agreement hereinafter referred to.
This Note is issued pursuant to a Term Loan and Security
Agreement, dated as of December 22, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "Loan Agreement"), among the
Borrowers, the Lender and the other lenders referred to therein, BancBoston
Leasing Inc., as co-Agent, and General Electric Capital Corporation, as
Administrative Agent. Terms defined in the Loan Agreement and not otherwise
defined herein are used herein with the meanings ascribed to them in the Loan
Agreement. This Note is one of the "Notes" in the aggregate principal amount of
[$97,700,000] referred to in the Loan Agreement, and is entitled to the benefits
of and the security provided for therein and in the other Loan Documents
referred to therein. The Loan Agreement is hereby referenced for a statement of
all of the terms and conditions under which the Loans evidenced hereby are to be
made.
The principal amount of the indebtedness evidenced hereby shall
be payable in the amounts and on the dates specified in the Loan Agreement.
Interest on such principal amount of such indebtedness shall be paid until such
principal amount is paid in full at such interest rates and at such times as are
specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
B-1
<PAGE>
Upon and after the occurrence of an Event of Default which shall
be continuing, this Note may, as provided in the Loan Agreement, and without
demand, notice or legal process of any kind, be declared and immediately shall
become and be due and payable.
This Note is subject to restrictions on transfer or assignment as
provided in section 10 of the Loan Agreement. The payee and each subsequent
holder hereof hereby agrees, by its acceptance hereof, that before disposing of
this Note or any part hereof it will make a notation hereon of all principal
payments previously made hereunder and the date to which interest hereon has
been paid; provided, however, that the failure to make a notation of any payment
made on this Note shall not limit or otherwise affect the obligations of the
Borrowers hereunder with respect to payments of the principal of or interest on
this Note.
Demand, presentment, dishonor, protest and notice of nonpayment,
of dishonor and of protest are hereby waived by each Borrower.
THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK) APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN
SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH
BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES PERTAINING TO THIS NOTE, PROVIDED THAT EACH OF THE BORROWERS
ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF NEW YORK CITY AND, PROVIDED, FURTHER, THAT NOTHING IN THIS
NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER HEREOF FROM BRINGING SUIT
OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THIS NOTE, TO
REALIZE ON ANY COLLATERAL FOR THIS NOTE OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE HOLDER HEREOF. EACH BORROWER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION WHICH SUCH BORROWER
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
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<PAGE>
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONSES, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER
AT THE ADDRESS SET FORTH IN SECTION 11.12 OF THE LOAN AGREEMENT AND THAT SERVICE
SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
[remainder of page intentionally left blank]
B-3
<PAGE>
SUCH BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT THEREOF IN THE UNITED STATES MAILS, PROPER
POSTAGE PREPAID.
LAS VEGAS SANDS, INC.
By:_________________________
Name:
Title:
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.,
its Managing Member
By:_____________________
Name:
Title:
B-4
<PAGE>
Exhibit C
[form of Financial Condition Certificate]
This FINANCIAL CONDITION CERTIFICATE (this "Certificate") is
delivered in connection with the Term Loan and Security Agreement, dated as of
December 22, 1997 (the "Loan Agreement") by and among LAS VEGAS SANDS, INC., a
Nevada corporation ("LVSI"), and VENETIAN CASINO RESORT, LLC, a Nevada limited
liability company ("VCR," and with LVSI collectively, the "Borrowers"), as joint
and several obligors, the lenders referred to therein (the "Lenders"),
BancBoston Leasing Inc., as co-Agent, and General Electric Capital Corporation,
as Administrative Agent (the "Administrative Agent"). Terms defined in the Loan
Agreement and not otherwise defined herein are used herein with the meanings
ascribed to them in the Loan Agreement.
A. I am, and [at all pertinent times mentioned herein] [since
_________, 19__] have been, the duly qualified and acting [____________] [chief
financial officer] of the Borrowers. In such capacity, I am a senior financial
officer of each Borrower and I have participated actively in the management of
its financial affairs and am familiar with its financial statements and those of
its Subsidiaries. I am familiar with the terms and conditions of the Loan
Agreement.
B. I have carefully reviewed the contents of this Certificate,
and I have conferred with counsel for the Borrowers for the purpose of
discussing the meaning of its contents.
C. In connection with preparing for the consummation of the
transactions and financings contemplated by the Loan Agreement, the Bank Credit
Agreement, the Mortgage Notes Indenture, the Subordinated Notes Indenture, the
Interim Mall Loan, the HVAC Services Agreement and the other Financing
Agreements (collectively, the "Proposed Transactions"), I have participated in
the preparation of, and I have reviewed, pro forma projections of net income and
cash flows for the Borrowers and their Subsidiaries for the fiscal years of the
Borrowers ending [INSERT FIRST FISCAL YEAR ENDING AFTER INITIAL FUNDING UNDER
LOAN AGREEMENT] through [FISCAL YEAR ENDING AFTER SCHEDULED TERMINATION OF LOAN
AGREEMENT , 200[4/5]], inclusive (collectively, the "Projected Financial
Statements"). The Projected Financial Statements, attached hereto as Attachment
1, give effect to the consummation of the Proposed Transactions and assume that
the debt obligations of the Borrowers will be paid from the cash flow generated
by the operations of the Borrowers and their Subsidiaries and, in the case of
the Interim Mall Loan, the proceeds of certain take-out financings. The
Projected Financial Statements were prepared on the basis of information
available at _________, 1997. I know of no facts that have
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<PAGE>
occurred since such date that would lead me to believe that the assumptions upon
which the Projected Financial Statements are based are inaccurate in any
material respect. The Projected Financial Statements do not reflect (i) any
potential changes in interest rates from those assumed in the Projected
Financial Statements, (ii) any potential material, adverse changes in general
business conditions, or (iii) any potential changes in income tax laws.
D. I have also participated in the preparation of, and I have
reviewed, a pro forma summary balance sheet of the Borrowers and their
Subsidiaries (the "Fair Value Summary Balance Sheet") as of __________, 19__,
the expected Closing Date, giving effect to the Proposed Transactions. The Fair
Value Summary Balance Sheet is attached hereto as Attachment 2 and has been
prepared as described in paragraphs F and G below and not in accordance with
GAAP.
E. In connection with the preparation of the Projected Financial
Statements, I have made such investigations and inquiries as I have deemed
necessary and prudent therefor and, specifically, have relied on historical
information with respect to revenues, expenses and other relevant items supplied
by the supervisory personnel of the Borrowers and their Subsidiaries directly
responsible for the various operations involved. The assumptions upon which the
Projected Financial Statements are based are stated therein. Although any
assumptions and any projections by necessity involve uncertainties and
approximations, I believe, based on my discussions with other members of
management, that the assumptions on which the Projected Financial Statements are
based are reasonable. Based thereon, I believe that the projections for the
Borrowers and their Subsidiaries, taken as a whole, reflected in the Projected
Financial Statements provide reasonable estimations of future performance,
subject, as stated above, to the uncertainties and approximations inherent in
any projections.
F. The Fair Value Summary Balance Sheet has been prepared in a
manner which I believe reflects a conservative estimate of the fair value of the
assets of the Borrowers and their Subsidiaries on a consolidated basis and the
probable liability on all of their debts, contingent or otherwise. For purposes
of this Certificate, I understand "fair value" of any assets to mean the amount
which may be realized within a reasonable time, either through collection of
such assets or through sale of such assets at the regular market value thereof,
conceiving of the latter as the amount which could be obtained for the property
in question within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling conditions.
The specific methodology used by management for valuing the Borrowers and their
Subsidiaries is set forth in paragraph G below.
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<PAGE>
G. For purposes of constructing the Fair Value Summary Balance
Sheet, I have utilized the following procedures:
With respect to the asset values reflected in the Fair Value
Summary Balance Sheet (including the asset values used to calculate the fair
value of the stock of each of Borrowers' Subsidiaries), I have included the net
working capital of Borrowers and each of their Subsidiaries, calculated as the
difference between the current assets and current liabilities reported in their
___________, 199_ financial statements, and I have relied on the capitalization
of earnings methodology -- whereby earnings before interest and taxes (EBIT) are
capitalized at a specified EBIT multiple -- to arrive at the estimated fair
value of the long-term assets of the Borrowers and their Subsidiaries. For these
purposes, I have utilized an EBIT multiplier of ____, which reflects a
conservative estimate of the EBIT multiplier reflected in acquisition prices
paid for total ownership positions in companies whose lines of business are
similar to those of the Borrowers and their Subsidiaries. [DISCUSS DIFFERENT
EBIT MULTIPLIERS FOR DIFFERENT SUBSIDIARIES IN DIFFERENT LINES OF BUSINESS]].
With respect to liabilities reflected in the Fair Value Summary
Balance Sheet (including liabilities used to calculate the fair value of the
stock of each of Borrowers' Subsidiaries), I have included long-term liabilities
reported by the Borrowers and their Subsidiaries in their __________, 199_
financial statements and debts to be incurred or assumed by the Borrowers and
their Subsidiaries under the Loan Agreement and the Proposed Transactions. In
addition, with respect to contingent liabilities (such as litigation, guaranties
and pension plan liabilities), I have consulted with legal, financial and other
personnel of the Borrowers and their Subsidiaries and have reflected as
liabilities our best judgment as to the maximum exposure that can reasonably be
expected to result therefrom in light of all the facts and circumstances
existing at this time, recognizing that any such estimation is inherently
subject to uncertainties.
Based on the foregoing, I have reached the following conclusions:
1. The Borrowers is not now, nor will the incurrence of the
Obligations under the Loan Agreement and the incurrence of the other
obligations contemplated by the Proposed Transactions render Borrowers,
"insolvent" as defined in this paragraph 1. The recipients of this
Certificate and I have agreed that, in this context, "insolvent" means
that the present fair value of assets is less than the amount that will
be required to pay the probable liability on existing debts as they
become absolute and matured. We have also agreed that the term "debts"
includes any legal liability, whether matured or unmatured, liquidated
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<PAGE>
or unliquidated, absolute, fixed or contingent. My conclusion expressed
above is supported by the Fair Value Summary Balance Sheet. Valuation of
the Borrowers on the basis thereof would reflect the net value of the
Borrowers as $__________, representing the difference between asset
values of $__________ and liabilities of $__________.
2. By the incurrence of the Obligations under the Loan Agreement
and the incurrence of the other obligations contemplated by the Proposed
Transactions, the Borrowers will not incur debts beyond their ability to
pay as such debts mature. I have based my conclusion in part on the
Projected Financial Statements, which demonstrate that the Borrowers
will have positive cash flow after paying all of their scheduled
anticipated indebtedness (including scheduled payments under the Loan
Agreement, the other obligations contemplated by the Proposed
Transactions and other permitted indebtedness). I have concluded that
the realization of current assets in the ordinary course of business
will be sufficient to pay recurring current debt and short-term and
long-term debt service as such debts mature, and that the cash flow
(including earnings plus non-cash charges to earnings) will be
sufficient to provide cash necessary to repay the Loans and other
Obligations under the Loan Agreement, the other obligations contemplated
by the Proposed Transactions and other long-term indebtedness as such
debt matures.
3. The incurrence of the Obligations under the Loan Agreement and
the incurrence of the other obligations contemplated by the Proposed
Transactions will not leave the Borrowers with property remaining in
their hands constituting "unreasonably small capital." In reaching this
conclusion, I understand that "unreasonably small capital" depends upon
the nature of the particular business or businesses conducted or to be
conducted, and I have reached my conclusion based on the needs and
anticipated needs for capital of the businesses conducted or anticipated
to be conducted by the Borrowers and their Subsidiaries in light of the
Projected Financial Statements and available credit capacity.
4. To the best of my knowledge, the Borrowers have not executed
the Loan Agreement or any documents mentioned therein, or made any
transfer or incurred any obligations thereunder, with actual intent to
hinder, delay or defraud either present or future creditors.
I understand that the Administrative Agent and the Lenders are
relying on the truth and accuracy of the foregoing in connection with the
Lenders' extensions of credit to the Borrowers pursuant to the Loan Agreement.
C-4
<PAGE>
I represent the foregoing information to be, to the best of my
knowledge and belief, true and correct and I execute this Certificate this___day
of __________, 199_.
LAS VEGAS SANDS, INC.
By: ___________________________
Name: _________________________
Title: _______________________
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.,
its Managing Member
__________________________
By:
Title:
<PAGE>
ANNEXES, SCHEDULES AND EXHIBITS
TO
REVOLVING CREDIT AND SECURITY AGREEMENT
Dated as of December 22, 1997
among
LAS VEGAS SANDS, INC.
and
VENETIAN CASINO RESORT, LLC,
as Borrowers,
the Lenders named herein,
BANCBOSTON LEASING INC.
as Co-Agent
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Annexes
<S> <C>
Annex A - Definitions
Annex B - Schedule of Furniture and Equipment
Annex C - Schedule of Insurance Requirements
Schedules
Schedule 2.1(b) - Schedule of Documents
Schedule 3.1(d) - Equity Rights in Borrowers
Schedule 3.2 - Executive Offices; Corporate or Other Names
Schedule 3.5 - Material Adverse Change
Schedule 3.6 - Ownership of Property; Liens
Schedule 3.7 - Material Contracts
Schedule 3.8 - Labor Matters
Schedule 3.9(a) - Joint Ventures and Partnerships
Schedule 3.9(c) - Rights to Purchase Options or Warrants
Schedule 3.9(d) - Indebtedness
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.15 - Brokers
Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses
Schedule 3.18 - Hazardous Materials
Schedule 3.19 - Insurance Policies
Schedule 3.20 - Disbursement and Deposit Accounts
Schedule 3.21 - Operative Documents
Schedule 3.22(a) - Individual Items and Units of Equipment Comprising the
Portions of the Collateral
Schedule 3.22(c) - Filing Jurisdictions
Schedule 3.22(d) - Locations
Schedule 3.23 - Permits
Schedule 3.28 - Other Contracts
Schedule 6.2 - Investments; Joint Ventures; Formation of Subsidiaries
Schedule 6.5 - Liens
Exhibits
Exhibit A - Form of Notice of Borrowing
Exhibit B - Form of Note
Exhibit C - Form of Financial Condition Certificate
Exhibit D - Summary Anticipated Cost Report
</TABLE>
i
<PAGE>
ANNEX A
to
TERM LOAN AND SECURITY AGREEMENT
Dated as of December 22, 1997
DEFINITIONS
In addition to the defined terms appearing below, capitalized
terms used in the Agreement (as hereinafter defined) shall have (unless the
context otherwise requires) the following respective meanings:
"Additional Borrower Equity" shall mean any and all funds
required to be deposited in the Company's Funds Account or the Guaranty Deposit
Account pursuant to section 5.9.2 of the Disbursement Agreement.
"Additional Equipment" shall have the meaning ascribed to such
term in section 1.2(e).
"Adelson Completion Guaranty" shall mean that certain Guaranty
dated as of November 14, 1997 executed by Sheldon G. Adelson in favor of the
Bank Agent (acting on behalf of the Bank Lenders), the Interim Mall Lender and
the Mortgage Notes Indenture Trustee (acting on behalf of the Mortgage Note
Holders).
"Adelson Intercreditor Agreement" shall mean the Intercreditor
Agreement dated as of November 14, 1997 among Sheldon G. Adelson, the Bank
Agent, the Mortgage Notes Indenture Trustee, the Interim Mall Lender, the
Subordinated Notes Indenture Trustee, VCR, LVSI and the Mall Construction
Subsidiary.
"Adjusted LIBOR Rate" shall mean, for any Interest Period, the
rate per annum (rounded upwards to the nearest 1/16th of one percentage point,
if necessary) equal to the quotient obtained by dividing (i) the offered rate
for U.S. dollar deposits for a period of 30 days appearing on Telerate page 3750
(or as quoted by such other reference source as may be designated by the
Administrative Agent in writing) as of 11:00 a.m. (London time) on the day that
is two (2) Business Days prior to the beginning of such Interest Period (but if
two or more such rates appear on such page or are so quoted at such time, the
offered rate for such Interest Period shall be the arithmetic mean of such
rates), by (ii) a percentage (stated as a decimal) equal to one (1) minus the
then average stated maximum amount (stated as a decimal) of all reserve
requirements (including any marginal, supplemental, or emergency reserves)
applicable to any member of the Federal Reserve System in respect of
Eurocurrency liabilities as defined in Regulation D of the Board of Governors of
the Federal Reserve System (or any successor category for such liabilities under
Regulation D).
<PAGE>
"Administrative Agent" shall mean General Electric Credit
Corporation, not individually but in its capacity as Administrative Agent under
the Agreement.
"Affected Lender" shall have the meaning ascribed to it in
section 1.14(c).
"Affected Loans" shall have the meaning ascribed to it in section
1.14(c).
"Affiliate" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, that Person. For the purpose of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agents" shall mean, collectively, the Co-Agent and the
Administrative Agent
"Aggregate Amounts Due" shall have the meaning ascribed to such
term in section 11.18.
"Aggregate Commitment" shall have the meaning ascribed to it in
section 1.1(a).
"Agreement" shall mean the Term Loan and Security Agreement,
dated as of December 22, 1997, among LVSI, VCR, the Lenders, the Co-Agent and
the Administrative Agent to which this Annex A is attached and of which it forms
a part, including all annexes, schedules, and exhibits attached or otherwise
identified thereto, together with all restatements, modifications and
supplements thereto from time to time and all appendices, attachments, exhibits
or schedules thereto and shall refer to the Agreement as the same may be in
effect at the time such reference becomes operative, provided, however, that any
reference to the Schedules to the Agreement shall be deemed a reference to the
Schedules as in effect on the Closing Date or in a written amendment thereto
executed by the Borrowers and the Lender Parties.
"Alternative Vendor Financing" shall have the meaning ascribed to
it in section 1.2(f).
"Anticipated Cost Report" means a cost report in the format of
the Summary Anticipated Cost Report but which, instead of setting forth the
indicated information for each Line Item Category, sets forth the indicated
information for each Line Item.
"Anticipated Future Work" means additions or expansions to the
Project (other than the Mall) not contemplated by the Plans and Specifications
as in effect on the Completion Date: (a) that are reflected in amendments to the
Plans and Specifications implemented after the Completion Date in accordance
with the provisions of section 6.2 of the Disbursement Agreement and (b) the
non-performance of which will not adversely affect (i) the validity of any
temporary or permanent certificate of occupancy relating to the Mall or any
other portion of the Project, (ii) in any material
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<PAGE>
respect, the period of time following the issuance of any temporary certificate
of occupancy within which it will be possible to obtain a permanent certificate
of occupancy, (iii) in any material respect, the use of the Mall for the Mall
Intended Uses or any other portion of the remainder of the Project (other than
such addition or expansion) for the Project Intended Uses or (iv) in any
material respect, the appearance of the Mall or any other portion of the Project
(other than such addition or expansion).
"Applicable Base Rate Margin" shall mean 1% per annum.
"Applicable LIBOR Rate Margin" shall mean (i) prior to the date
of the Basic Loans, 3.75% per annum and (ii) from and after the date of the
Basic Loans, the greater of (x) 3.75% per annum and (y) the sum of 1.25% per
annum plus the "Applicable Margin" (as such term is defined in section 1.1 of
the Bank Credit Agreement) in effect from and after the "Completion Date" (as
such term is defined in section 1.1 of the Bank Credit Agreement) and applicable
to the "LIBOR Rate Loans" (as such term is defined in section 1.1 of the Bank
Credit Agreement), whether or not there shall at the time be outstanding any
such "LIBOR Rate Loans" under the Bank Credit Agreement and whether or not the
Borrowers shall be entitled to borrow thereunder at an interest rate determined
by reference to the "Adjusted LIBOR Rate" (as such term is defined in section
1.1 of the Bank Credit Agreement).
"Applicable Tax Percentage" means the highest aggregate effective
marginal rate of federal, state and local income tax or, when applicable,
alternative minimum tax, to which any direct or indirect member or S corporation
shareholder of the Borrowers subject to the highest marginal rate of tax would
be subject in the relevant year of determination (as certified to the
Administrative Agent by a nationally recognized tax accounting firm), taking
into account only that member's or S corporation shareholder's share of income
and deductions attributable to its interest in the Borrowers.
"Asset Sale" shall mean the sale by a Borrower or any of its
Subsidiaries to any Person of (i) any of the stock of any of such Person's
Subsidiaries, (ii) substantially all of the assets of any division or line of
business of a Borrower or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of a Borrower or any of its Subsidiaries (other
than (a) inventory or goods (other than equipment) sold in the ordinary course
of business, or (b) any other assets to the extent that (x) such assets do not
include any of the Collateral and (y) the aggregate fair market value of such
assets sold during any fiscal year, is less than or equal to $1,000,000).
"Asset Sale Proceeds" with respect to any Asset Sale, shall mean
the aggregate proceeds received by the Borrowers on account of such Asset Sale.
"Available Funds" shall mean, as of any date, the sum of (i) the
aggregate of the unutilized commitments under the Bank Credit Agreement and the
Interim Mall Facility on such date, plus (ii) the aggregate of the amounts on
deposit on such date in the HVAC Deposit Accounts and the amounts available to
be drawn on such date under the HVAC Letters of Credit, plus (iii) the
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aggregate of the amounts on deposit on such date in the Company's Funds Account
and the Mortgage Notes Proceeds Account and all Anticipated Earnings, as of such
date, thereon, plus (iv) the aggregate of the amounts on deposit on such date in
the Guaranty Deposit Account, the HC/Mall Component Cash Management Sub-Account,
the HVAC Component Cash Management Sub- Account, the Bank Proceeds Account, the
Mall Retainage/Punchlist Account and the Interest Payment Account, plus (v) the
lesser of (A) the aggregate of the amounts available to be drawn on such date
under the Commitments of the Lenders hereunder less amounts drawn on or before
such date under (1) the Bank Credit Agreement pursuant to section 2.2.3(b)(i) of
the Disbursement Agreement and (2) advances from HC/Mall Component Funding
Sources pursuant to section 2.2.3(b)(ii) of the Disbursement Agreement, in each
case not yet repaid, and (B) the aggregate amount of Remaining Costs set forth
in column 10 of the Component Specific Anticipated Cost Report for the Equipment
Component (as in effect on such date) plus (vi) the lesser of (I) the aggregate
amount as of such date of Project Costs which one or more of the Construction
Manager, the Direct Construction Guarantor and the Indirect Construction
Guarantor have agreed or confirmed in writing, to the reasonable satisfaction of
the Disbursement Agent, that they are responsible for paying (on a timely basis
relative to the Project's cash needs) from their own funds but which they have
not yet paid and (II) the aggregate amount of Remaining Cost set forth in column
10 of the Anticipated Cost Report (as in effect from time to time) for the Line
Items for which the Borrowers may use funds, plus (vii) (A) prior to the
Completion Date, 25% of the amount on deposit on such date in the Pre-Completion
Revenues Account and (B) after the Completion Date, 100% of the amount on
deposit in the Pre-Completion Revenues Account, plus (viii) from and after the
inclusion of the "Working Capital" Line Item Category in the Project Budget in
accordance with section 6.4 of the Disbursement Agreement, the lesser of (A) the
amount available to be drawn under the revolving loan credit facility described
and made available to the Borrowers under the Bank Credit Agreement and (B) the
amount of Remaining Costs for the "Working Capital" Line Item Category set forth
in column 10 of the Summary Anticipated Cost Report (as in effect from time to
time), all as such terms "HVAC Deposit Accounts," "HVAC Letters of Credit,"
"Anticipated Earnings," "HVAC Component Cash Management Sub-Account," "Bank
Proceeds Account," "Interest Payment Account" and "Pre-Completion Revenues
Account" are defined in the Disbursement Agreement.
"AVF Equipment" shall have the meaning ascribed to it in section
1.2(e)(i).
"Bank Agent" has the meaning given to the term "Administrative
Agent" in the Bank Credit Agreement.
"Bank Collateral Documents" shall have the meaning ascribed to
the term "Collateral Documents" in section 1.1 of the Bank Credit Agreement.
"Bank Credit Agreement" shall mean the Credit Agreement, dated as
of November 14, 1997, by and among LVSI, VCR, the financial institutions
identified therein as lenders, Goldman Sachs Credit Partners L.P., as
syndication agent, and the Bank Agent as such, a copy of which has been
furnished to the Lenders, as such agreement may be amended from time to time;
provided, however, that in any provision of this Agreement in which reference is
made to a specific provision
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of the Bank Credit Agreement, such reference shall be deemed to refer to the
Bank Credit Agreement as in effect on the date hereof.
"Bank Lenders" means the financial institutions which are now, or
may in the future become, parties to the Bank Credit Agreement as lenders.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy," as in effect from time to time, and any successor
statute.
"Base Rate" shall mean for any day the greater of (i) the Prime
Rate on that date and (ii) the sum of (x) the Federal Funds Effective Rate on
that date plus (y) one half of one percent (1/2%) per annum.
"Base Rate Advance" shall mean an Interim Loan Advance with
respect to which the Borrowers in the applicable Notice of Borrowing have
elected to have the rate of interest determined by reference to the Base Rate.
"Base Rate Borrowing" shall have the meaning ascribed to such
term in section 1.2(a).
"Base Rate Loans" shall mean Loans bearing interest at rates
determined by reference to the Base Rate as provided in section 1.7(a) of the
Agreement.
"Base TI Budget Amount" means, from time to time, the sum of (a)
the aggregate amount of tenant improvement allowances granted by the Borrowers
to tenants and prospective tenants of the First Level Space pursuant to Executed
Leases, plus (b) the product of (i) Fifty Dollars ($50) times (ii) the number of
square feet in the First Level Space as to which no Executed Leases are in
effect.
"Basic Loan" shall have the meaning ascribed to in section 1.6.
"Basic Loan Commencement Date" shall have the meaning ascribed to
such term in section 1.6.
"Billboard" shall mean B.L. of Las Vegas, Inc., a Nevada
corporation.
"Billboard Master Lease" shall mean that certain Lease Agreement
dated November 14, 1997 by and between VCR, as landlord, and the Mall
Construction Subsidiary, as tenant, pursuant to which the Mall Construction
Subsidiary is leasing that portion of the Billboard Space not within the Mall
Space.
"Billboard Space" shall have the meaning ascribed to that term in
the Cooperation Agreement.
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"Borrower Representative" shall have the meaning ascribed to it
in section 11.1.
"Borrowers" shall mean LVSI and VCR, jointly and severally.
"Borrowing" shall mean the receipt by the Borrowers of all of the
Interim Loan Advances to be made on a particular day.
"Borrowing Notice Attachment" shall have the meaning ascribed to
it in section 1.2(c).
"Bovis Balance" shall mean, from time to time, the aggregate of
all positive variances for Bovis Line Items (other than the "Bovis Contingency"
Line Item) listed in column 8 of the Anticipated Costs Report then in effect,
decreased by the aggregate of all negative variances for Bovis Line Items (other
than the "Bovis Contingency" Line Item) listed in column 8 of the Summary
Anticipated Cost Report then in effect; provided, however, that the Bovis
Balance may be a negative number only if, and to the extent, that (a) the
Guaranteed Maximum Price as defined in the Construction Management Agreement has
been reduced and such reduction has not been reflected in the Project Budget or
(b) all work under the Construction Management Agreement has been completed for
an amount that is less than the aggregate amount allocated thereto in the
Project Budget (in which case the negative number shall be limited to 50% of the
difference between such amounts).
"Bovis Line Item" means, collectively, the Line Items of the
Project Budget which relate to work covered by the Construction Management
Agreement.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York, and if the applicable Business Day relates to any LIBOR Rate
Loan or the determination of any Interest Period or the Adjusted LIBOR Rate
therefor, such term also shall exclude any day on which trading is not carried
on by and between banks in U.S. dollars in the London interbank market.
"Capital Expenditures" shall mean all payments or accruals
(including Capital Lease Obligations) for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee that,
in accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet, other than, in the case of a
Borrower, any such lease under which such Borrower is the lessor.
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"Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Cash Equivalents" shall mean, (i) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed or
insured by the United States government or any agency thereof and backed by the
full faith and credit of the United States, (ii) certificates of deposit, LIBOR
time deposits, overnight bank deposits and bankers' acceptances of any domestic
commercial bank having capital and surplus in excess of $500,000,000 having
maturities of one year or less from the date of acquisition, and (iii)
commercial paper of an issuer rated at least A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Services, Inc., or carrying an
equivalent rating by another nationally recognized rating agency if both of the
two named rating agencies cease publishing ratings of investments.
"Cash Flow" shall mean with respect to any Person for any period,
the Net Income of such Person for such period plus (a) the aggregate amounts
deducted in determining such Net Income in respect of (i) depreciation,
amortization, and other noncash charges, (ii) Interest Expense and (iii) taxes,
(b) the proceeds of the sale of Capital Assets of such Person during such period
not taken into account in the determination of such Net Income, and (c) the
proceeds of any loans and advances made to such Person during such period on
account of borrowed money, and minus (w) Capital Expenditures of such Person
during such period, (x) loans and advances made by such Person during such
period, (y) all scheduled payments by such Person for such period on the
principal of Indebtedness, and (z) all scheduled payments of operating lease
rentals and rentals under capital lease obligations of such Person for such
period excluding any portion of the rentals under capital lease obligations
allocable to Interest Expense of such Person.
"Casino Lease" shall mean the lease between VCR and LVSI, dated
as of November 14, 1997, with respect to the operation of the Venetian Casino
Resort in Las Vegas, Nevada.
"Change of Control" shall mean (a) capital stock of a Borrower
(after giving effect to the exercise of all outstanding Stock), having by its
terms voting power to elect greater than 50% (in number of votes) of the board
of directors of Borrower, shall cease to be owned in the aggregate by Sheldon G.
Adelson or members of his immediate family (including, parents, spouse, children
and siblings) or (b) a majority of the members of the board of directors of a
Borrower then in office are no longer individuals elected or designated by
Sheldon G. Adelson.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including without limitation taxes
owed to the PBGC and at the time due and payable), levies, assessments, charges,
liens, claims or encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) the employees, payroll, income or gross receipts of either
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Borrower, (iv) either Borrower's ownership or use of any of its assets, or (v)
any other aspect of either Borrower's business.
"Claim" shall have the meaning ascribed to it in Section 1.20.
"Closing Date" shall mean the date on which the initial Interim
Loan Advance has been made.
"Co-Agent" shall mean BancBoston Leasing Inc., a Massachusetts
corporation, not individually but in its capacity as Co-Agent hereunder, or any
successor thereto appointed in accordance with this Agreement.
"Collateral" shall have the meaning ascribed to it in section
1.22.
"Collateral Loss Net Proceeds" shall have the meaning ascribed to
it in section 1.11(a).
"Collection Account" shall have the meaning ascribed to that term
in the Disbursement Agreement.
"Commitment" with respect to a Lender shall mean the commitment
of such Lender hereunder to make its Interim Loan Advance and the Basic Loan of
such Lender hereunder, as such amount may be reduced pursuant to this Agreement,
the amount of such Lender's Commitment on the date hereof being the amount set
opposite the signature of such Lender on a signature page hereof.
"Commitment Expiration Date" shall mean the earlier of the
Project Construction Completion Date and the Completion Deadline Date.
"Commitment Fee" shall mean the fee payable to the Administrative
Agent for the ratable benefit of the Lenders, as set forth in section 1.8(a).
"Company Collateral Account Agreement" shall mean the
Disbursement Collateral Account Agreement, dated as of November 14, 1997, among
LVSI, VCR, the Mall Construction Subsidiary, the Disbursement Agent and The Bank
of Nova Scotia, as securities intermediary.
"Company's Funds Account" shall have the meaning ascribed to such
term in the Company Collateral Account Agreement.
"Completion" shall mean that all of the following events have
occurred:
(a) the Borrowers shall be permitted to cause the Opening Date to
occur under section 6.7 of the Disbursement Agreement;
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(b) each of the Mall Release Conditions shall have been
satisfied;
(c) a list of any remaining Mall Punchlist Items and any
remaining Project Punchlist Items have been delivered to the Construction
Consultant and the Disbursement Agent by the Borrowers and have been approved
(which approval shall not have been unreasonably withheld) by the Construction
Consultant and the Disbursement Agent as a reasonable final punchlist;
(d) the Borrowers and the Construction Consultant shall have
certified to the Disbursement Agent and the Bank Lenders, as and to the extent
set forth in their respective Completion Certificates, that all Anticipated
Future Work is expected to be completed within six months after such date and at
a total cost not to exceed $20,000,000;
(e) the Borrowers and the Construction Consultant shall have
certified to the Disbursement Agent and the Bank Lenders, as and to the extent
set forth in their respective Completion Certificates, that the Unfinished Hotel
Suites have been fully furnished as necessary to be ready for occupancy;
(f) HVAC Completion shall have occurred; and
(g) each of the Borrowers and the Construction Consultant shall
have received all Permits required by federal, state and local jurisdictions
regarding the maintenance and operation of the Project, and shall have delivered
to the Administrative Agent a certificate to the foregoing effects.
"Completion Certificates" shall mean, collectively, the
Completion Certificates in the form of Exhibit W-1 and W-2 to the Disbursement
Agreement to be delivered by the Borrowers and the Construction Consultant,
respectively.
"Completion Date" shall mean the date on which Completion of the
Project has been achieved.
"Completion Deadline Date" shall have the meaning ascribed to it
in section 1.1(b).
"Completion Guaranty" shall mean each of the Direct Construction
Guaranty, the Indirect Construction Guaranty and the Adelson Completion Guaranty
or any one of them and "Completion Guaranties" shall mean the Direct
Construction Guaranty, the Indirect Construction Guaranty and the Adelson
Completion Guaranty collectively.
"Completion Guaranty Loan" shall mean the amount, or the amounts,
if any, advanced by Sheldon G. Adelson under the Adelson Completion Guaranty,
which Sheldon G. Adelson shall elect to treat as a loan to VCR in an aggregate
principal amount not to exceed $25,000,000 at any time, plus accrued and unpaid
interest thereon, on the terms set forth in the
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Adelson Completion Guaranty, the Adelson Intercreditor Agreement and the
Completion Guaranty Note.
"Completion Guaranty Note" shall have the meaning ascribed to
that term in section 1.1 of the Bank Credit Agreement.
"Compliance Certificate" shall mean a certificate, in form
reasonably satisfactory to the Administrative Agent, from time to time delivered
to the Administrative Agent and the Lenders by the Borrowers pursuant to section
4.1(d).
"Component Specific Anticipated Cost Reports" means anticipated
cost reports, in a format similar to Exhibit H-1 to the Disbursement Agreement,
which provide, with respect to each Construction Component, the information
indicated in such Exhibit segregated by Line Item.
"Consolidated Adjusted EBITDA" shall mean, for any period, the
sum of the amounts for such period of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv)
total depreciation expense, (v) total amortization expense, and (vi) other
non-cash items reducing Consolidated Net Income less other non-cash items
increasing Consolidated Net Income, all of the foregoing as determined on a
consolidated basis for the Borrowers and their Subsidiaries in conformity with
GAAP. Any cash equity contributions made by Sheldon G. Adelson to the Borrowers
during any Fiscal Quarter may at the written election of the Borrowers be
included in Consolidated Adjusted EBITDA for such Fiscal Quarter for all
purposes hereunder, provided that the Borrowers may not include such cash equity
contributions in Consolidated Adjusted EBITDA for more than two consecutive
Fiscal Quarters, and provided, further that following any exercise of such
election to include any such cash equity contributions in Consolidated Adjusted
EBITDA, the Borrowers may not thereafter elect to have any cash equity
contribution included in Consolidated Adjusted EBITDA unless and until the
Borrowers shall have been in compliance with section 6.9(c) on a rolling
four-Fiscal Quarter on any test date (without giving affect to any previous cash
contributions).
"Consolidated Capital Expenditures" shall mean, for any period,
the sum of (i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of the Borrowers)
by the Borrowers and their Subsidiaries during that period which expenditures,
in conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of the Borrowers and (ii) to the extent not covered by clause (i) of this
definition, any expenditures by the Borrowers (excluding any Subsidiaries of the
Borrowers) during that period to acquire (by purchase or otherwise) the
business, property or fixed assets of any Person, or the stock or other evidence
of beneficial ownership of any Person that, as a result of such acquisition,
becomes a Subsidiary of the Borrowers or either of them.
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"Consolidated Cash Interest Expense" shall mean, for any period,
Consolidated Interest Expense for such period, excluding, however, any interest
expense not payable in cash (including amortization of discount and of debt
issuance costs).
"Consolidated Fixed Charges" shall mean, for any period, the sum
(without duplication) of the amounts for such period of (i) Consolidated Cash
Interest Expense, (ii) scheduled repayments of principal on Indebtedness (other
than repayment of the "Revolving Loan" on the "Revolving Loan Commitment
Termination Date," as such terms are defined in section 1.1 of the Bank Credit
Agreement), (iii) any amounts distributed by the Borrowers for tax payments in
accordance with section 6.8(g) with respect to such period and (without
duplication) provisions for taxes based on income payable by the Borrowers to
any Governmental Authority, (iv) Consolidated Rental Payments, and (v)
Consolidated Capital Expenditures, all of the foregoing as determined on a
consolidated basis for the Borrowers and their Subsidiaries in conformity with
GAAP.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of the Borrowers and their
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of the Borrowers, including all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Interest Rate Agreements, but excluding, however,
any amounts referred to in section 1.8 payable to the Lender Parties on or
before the Closing Date.
"Consolidated Net Income" shall mean, for any period, the net
income (or loss) of the Borrowers and their Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in conformity
with GAAP; provided that there shall be excluded (i) the income (or loss) of any
Person (other than a Subsidiary of a Borrower) in which any other Person (other
than a Borrower or any of its Subsidiaries), has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Borrowers or any of their Subsidiaries by such Person during such period, (ii)
the income (or loss) of any Person accrued prior to the date it is merged into
or consolidated with the Borrowers or that Person's assets are acquired by the
Borrowers, (iii) any after-tax gains or losses attributable to Asset Sales or
returned surplus assets of any Pension Plan and (iv) (to the extent not included
in clauses (i), (ii) and (iii) above) any net extra ordinary gains or net
non-cash extraordinary losses.
"Consolidated Net Worth" shall mean, as of any date of
determination, (i) the sum of the following items, as shown on the consolidated
balance sheet of LVSI and its Subsidiaries as of such date (i) the common equity
of LVSI and its Subsidiaries, (ii)(a) the aggregate liquidation preference of
preferred stock or member interests of LVSI and its Subsidiaries and (b) any
increase in depreciation and amortization resulting from any purchase accounting
treatment from an acquisition or related financing; and (iii) less any goodwill
incurred subsequent to November 14, 1997 and (iv) less any write up of assets
(in excess of fair market value) after November 14, 1997, in each case on a
consolidated basis for LVSI and its Subsidiaries, determined in accordance with
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GAAP; provided, that in calculating Consolidated Net Worth, any gain or loss
from any Asset Sale shall be excluded.
"Consolidated Rental Payments" shall mean, for any period, the
aggregate amount of all rents paid or payable by the Borrowers and their
Subsidiaries on a consolidated basis (excluding any Excluded Subsidiaries)
during that period under all Capital Leases to which either Borrower or any
Subsidiary of a Borrower is a party as lessee. Notwithstanding the foregoing,
payments under HVAC Services Agreement shall not be included in Consolidated
Rental Payments.
"Consolidated Total Debt" shall mean, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
the Borrowers and their Subsidiaries, determined on a consolidated basis in
accordance with GAAP, excluding, however any Employee Repurchase Notes entered
into in accordance with section 6.5(k) of the Agreement.
"Construction Agency Agreement" shall mean the Construction
Agency Agreement, dated as of November 14, 1997, by and between HVAC Provider
and VCR.
"Construction Component" shall mean any of the HC/Mall Component,
the HVAC Component or the Equipment Component.
"Construction Consultant" shall mean Tishman Construction
Corporation of Nevada, or any other person designated from time to time by the
Bank Agent, the Interim Mall Lender and the Mortgage Notes Indenture Trustee, in
their sole discretion, acting pursuant to the Credit Parties Intercreditor
Agreement, and the Administrative Agent, to serve as the Construction Consultant
hereunder and under the Disbursement Agreement.
"Construction Consultant Engagement Agreement" shall mean that
certain Engagement Letter, dated as of November 14, 1997, by and among the
Construction Consultant, the Borrowers, the Bank Agent, the Interim Mall Lender,
the Mortgage Notes Indenture Trustee, Permanent Mall Lender and Goldman Sachs &
Co, as amended by a letter agreement among Construction Consultant, the
Borrowers, the Bank Agent, the Interim Mall Lender, the Mortgage Notes Indenture
Trustee, Permanent Mall Lender and Goldman Sachs & Co.
"Construction Management Agreement" shall mean that certain
Construction Management Agreement, dated as of February 15, 1997, between LVSI
and the Construction Manager, as assigned by LVSI to VCR and amended by that
certain Assignment, Assumption and Amendment of Construction Management
Agreement, dated as of November 14, 1997, among LVSI, VCR, the Construction
Manager, the Direct Construction Guarantor and the Indirect Construction
Guarantor.
"Construction Manager" shall mean Lehrer McGovern Bovis Inc., a
New York corporation.
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"Contingent Obligation", as applied to any Person, shall mean any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Interest Rate Agreements. Contingent Obligations shall
include (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (Y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(X) or (Y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Contractors" shall mean any architects, consultants, designers,
contractors, subcontractors, suppliers, laborers or any other Person engaged by
either or both of the Borrowers in connection with the design, engineering,
installation and construction of the Project (other than Construction Manager).
"Contracts" shall mean, collectively, the contracts entered into,
from time to time, between either or both of the Borrowers and any Contractor
for performance of services or sale of goods in connection with the design,
engineering, installation or construction of the Project.
"Cooperation Agreement" shall mean the Amended and Restated
Reciprocal Easement, Use and Operating Agreement, dated as of November 14, 1997,
by and between LVSI, VCR, the Mall Construction Subsidiary and Interface, as the
same may from time to time be supplemented, amended, modified or extended in
accordance with the provisions of the Agreement.
"Copyrights" shall mean any United States copyright to which
either Borrower now or hereafter has title, as well as any application for a
United States copyright hereafter made by either Borrower.
"Credit Parties Intercreditor Agreement" shall mean the
Intercreditor Agreement, dated as of November 14, 1997, among the Intercreditor
Agent therein referred to, the Bank Agent,
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the Mortgage Notes Indenture Trustee, the Interim Mall Lender and the
Subordinated Notes Indenture Trustee.
"Default" shall mean any event which, with the passage of time or
notice, or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning ascribed to it in section
1.7(f).
"Direct Construction Guarantor" shall mean Bovis, Inc., a New
York corporation.
"Direct Construction Guaranty" shall mean the Guaranty of
Performance and Completion, dated as of August 19, 1997, executed by the Direct
Construction Guarantor in favor of LVSI as assigned by LVSI to VCR by that
certain Assignment Agreement, dated as of November 14, 1997, executed by LVSI,
VCR, the Construction Manager, the Direct Construction Guarantor and the
Indirect Construction Guarantor.
"Disbursement Agent" shall mean The Bank of Nova Scotia, in its
capacity as Disbursement Agent under the Disbursement Agreement, and any
successor Disbursement Agent appointed pursuant to the terms of the Disbursement
Agreement.
"Disbursement Agreement" shall mean the Funding Agents'
Disbursement and Administration Agreement, dated as of November 14, 1997, among
the Borrowers, the Mall Construction Subsidiary, the Bank Agent, the Mortgage
Notes Indenture Trustee, the Interim Mall Lender, the HVAC Provider and the
Disbursement Agent, a copy of which has been furnished to the Lenders, as such
agreement is in effect on the date hereof and as the same may be amended,
supplemented and modified from time to time hereafter with the approval of the
Administrative Agent.
"Documents" shall mean any "documents," as such term is defined
in the UCC, now owned or hereafter acquired by either Borrower, wherever
located, and in any event any bills of lading, dock warrants, dock receipts,
warehouse receipts, or other documents of title.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Eligible Assignee" shall have the meaning ascribed to such term
in section 10(e).
"Employee Repurchase Notes" shall have the meaning ascribed to
such term in section 6.3(k).
"Energy Services Agreement" shall mean the Energy Services
Agreement, dated as of November 14, 1997, between the Mall Construction
Subsidiary and the HVAC Provider.
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"Environmental Claim" shall mean any investigation, notice,
notice of violation, claim, action, suit, proceeding, demand, abatement order or
other order or directive (conditional or otherwise), by any governmental
authority or any other Person, arising (i) pursuant to or in connection with any
actual or alleged violation of any Environmental Law, (ii) in connection with
any Hazardous Materials or any actual or alleged Hazardous Materials Activity,
or (iii) in connection with any actual or alleged damage, injury, threat or harm
to health, safety, natural resources or the environment.
"Environmental Laws" shall mean all federal, state and local
laws, statutes, ordinances, orders and regulations, now or hereafter in effect,
and in each case as amended or supplemented from time to time, and any
applicable judicial or administrative interpretation thereof relating to the
regulation and protection of human health, safety, the environment and natural
resources (including without limitation ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. ss.ss. 9601 et seq.) ("CERCLA"); the Hazardous Material
Transportation Act, as amended (49 U.S.C. ss.ss. 1801 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. ss.ss. 136 et
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. ss.ss.
6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C.
ss.ss. 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. ss.ss. 740 et
seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. ss.ss.
1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C.
ss.ss. 651 et seq.) ("OSHA"); and the Safe Drinking Water Act, as amended (42
U.S.C. ss.ss. 300(f) et seq.); the Oil Pollution Act (33 U.S.C. ss. 2701 et
seq.; and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss.
1101 et seq., and any and all regulations promulgated under any of the
foregoing, and all analogous state and local counterparts or equivalents and any
transfer of ownership notification or approval statutes.
"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, remedial actions, removal costs, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all reasonable fees, disbursements and expenses
of counsel, experts and consultants and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
claim, suit, action or demand by any Person or entity, whether based in
contract, tort, implied or express warranty, strict liability, criminal or civil
statute or common law (including without limitation any thereof arising under
any Environmental Law, permit, order or agreement with any Governmental
Authority) and which relate to any health or safety condition regulated under
any Environmental Law or in connection with any other environmental matter or
Release, threatened Release, or the presence of a Hazardous Material.
"Environmental Matters" means any:
(a) release, emission, entry or introduction into the air,
including without limitation the air within buildings and other natural or
man-made structures above ground;
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(b) discharge, release or entry into water, including without
limitation into any river, watercourse, lake, or pond (whether natural or
artificial or above ground or which joins or flows into any such water outlet
above ground) or reservoir, or the surface of the riverbed or of other land
supporting such waters, ground waters or sewer or the sea;
(c) deposit, disposal, keeping, treatment, importation,
exportation, production, transportation, handling, processing, carrying,
manufacture, collection, sorting or presence of any Hazardous Substance
(including without limitation in the case of waste, any substance which
constitutes a scrap material or an effluent or other unwanted surplus substance
arising from the application of any process or activity (including making it
re-usable or reclaiming substances from it) and any substance or article which
is required to be disposed of as being broken, worn out, contaminated or
otherwise spoiled)
(d) nuisance, noise, defective premises, health and safety at
work, industrial illness, industrial injury due to environmental factors,
environmental health problems (including without limitation asbestosis or any
other illness or injury caused by exposure to asbestos) or genetically modified
organisms;
(e) conservation, preservation or protection of the natural or
man made environment or any living organisms supported by the natural or man
made environment; or
(f) other matter howsoever directly affecting the environment or
any aspect of it.
"Equipment" shall mean any "equipment" as such term is defined in
the UCC, and, in any event, shall include, but shall not be limited to, all
machinery, equipment, furnishings, fixtures and vehicles and any and all
additions, accessions, substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.
"Equipment Component" shall mean the equipment fixtures and other
items described in Exhibit T-3 to the Disbursement Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time, and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to either Borrower,
any trade or business (whether or not incorporated) under common control with
the Borrowers and which, together with Borrower, are treated as a single
employer within the meaning of section 414(b), (c), (m) or (o) of the IRC.
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"ERISA Event" shall mean, with respect to either Borrower, any
Subsidiary thereof or any ERISA Affiliate, (i) a Reportable Event with respect
to a Title IV Plan or a Multiemployer Plan; (ii) the withdrawal of such
Borrower, any Subsidiary thereof or any ERISA Affiliate from a Title IV Plan
subject to section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in section 4001(a) (2) of ERISA; (iii) the
complete or partial withdrawal of either Borrower, any Subsidiary thereof or any
ERISA Affiliate from any Multiemployer Plan; (iv) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under section 4041 of ERISA; (v) the institution of proceeding to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (vi) the failure to
make required contributions to a Qualified Plan; or (vii) any other event or
condition which might reasonably be expected to constitute grounds under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under section 4007 of ERISA.
"Estimation Period" shall mean the period for which a
shareholder, partner or member, who is an individual, is required to estimate
for federal income tax purposes his allocation of taxable income from a
Subchapter S corporation or a partnership for federal income tax purposes in
connection with determining his estimated federal income tax liability for such
period.
"Event of Default" shall have the meaning ascribed to it in
section 8.1.
"Event of Force Majeure" means an event that causes a delay in
the construction of the Project, due to acts of God, fire, wind storm, riot or
other civil disturbance, acts of the public enemy, accident in shipping or
transportation, strikes or other labor disputes (but not strikes or labor
disputes at the Site to which either Borrower or any Affiliate thereof is a
party), governmental preemption of priorities or other controls in connection
with a national or other public emergency or other similar unforeseeable causes
beyond the reasonable control and without the fault or negligence of either
Borrower or any Affiliate thereof, provided that such Borrower has sought to
mitigate the impact of the delay.
"Event of Loss" shall mean, with respect to any property or asset
(tangible or intangible, real or personal), any of the following: (A) any loss,
destruction or damage of such property or asset; (B) any actual condemnation,
seizure or taking by exercise of the power of eminent domain or otherwise of
such property or asset, or confiscation of such property or asset or the
requisition of the use of such property or asset; or (C) any settlement in lieu
of clause (B) above.
"Excepted Asset Sale Proceeds" shall have the meaning ascribed to
such term in section 1.10(b)(v).
"Excepted Entities" shall meaning ascribed to it in section
3.9(b).
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"Excepted Loss Proceeds" shall have the meaning ascribed to such
term in section 1.11(b)(iv).
"Excluded Subsidiary" shall mean any Person excluded from the
definition of Subsidiary by virtue of the last sentence of such definition set
forth in section 1.1 of the Bank Credit Agreement (including without limitation
the Mall Subsidiary, the Phase II Subsidiary, Mall Direct Holdings, Phase II
Direct Holdings, the Mall Manager and the Phase II Manager).
"Executed Leases" means, collectively and from time to time, (a)
the Billboard Master Lease, (b) letters of intent executed prior to November 14,
1997 for the leasing of space in the First Level Space but only until such time
as such letters of intent are (i) replaced (or superseded) by executed
definitive lease agreements or (ii) are otherwise terminated, (c) executed
definitive lease agreements replacing and/or superseding the letters of intent
referenced in clause (b) above and (d) without duplication, executed definitive
lease agreements entered into from and after November 14, 1997 with respect to
the First Level Space.
"Facilities" shall mean any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by the Borrowers or any of their
Subsidiaries or any of their respective predecessors or Affiliates, including
without limitation the Site.
"FCMI" shall mean Forest City Commercial Management, Inc., an
Ohio corporation.
"Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from a Federal funds
broker of recognized standing selected by the Administrative Agent.
"Fee Letter" shall have the meaning ascribed to it in section
1.8(b).
"Final Completion" means that (a) Completion shall have occurred,
(b) the Project and the Mall shall have received a permanent certificate of
occupancy from the Clark County Building Department (and copies of such
certificates shall have been delivered to the Administrative Agent, the
Disbursement Agent, the Bank Agent, and Mortgage Notes Indenture Trustee and the
Tranche A Take Out Lender), (c) a Notice of Completion shall have been posted
with respect to the Project and recorded in the Office of the County Recorder of
Clark County, Nevada, (d) the Funding Agents shall have received final 101.6
endorsements from the Title Insurer insuring the priority of their respective
Liens on the Project Security (as defined in the Disbursement Agreement), (e)
the Borrowers shall have delivered to the Administrative Agent, the Disbursement
Agent, the Bank
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Agent, the Mortgage Notes Indenture Trustee and the Tranche A Take Out Lender
its Final Completion Certificate certifying that (i) all Project Punchlist Items
and Mall Punchlist Items have been completed, (ii) the Borrowers have settled
with the Construction Manager, the Contractors and the Subcontractors all claims
for payments and amounts due under the Construction Management Agreement, the
Contracts and the Subcontracts, respectively, and (iii) all Anticipated Future
Work shall have been completed, (f) the Construction Consultant shall have
delivered its Final Completion Certificate and (g) the Borrowers shall have
delivered to the Funding Agents and the Tranche A Take Out Lender an "as-built
survey" of the Project.
"Final Completion Date" shall mean the date on which the Final
Completion occurs.
"Final Completion Certificate" shall mean, collectively, the
Final Completion Certificates in the forms of Exhibits W-8 and W-9,
respectively, to the Disbursement Agreement.
"Final Notice of Borrowing" shall have the meaning ascribed to
such term in section 1.2(a)(iii).
"Financial Condition Certificate" shall mean a certificate
substantially in the form of Exhibit C, to be delivered to the Administrative
Agent pursuant to section 2.1(i).
"Financial Plan" shall have the meaning ascribed to that term in
section 4.1(p).
"Financing Agreements" shall mean, collectively, the Bank Credit
Agreement, the Interim Mall Credit Agreement, the Mortgage Notes Indenture, the
Bank Collateral Documents, the Other Security Documents (as defined in section
1.1 of the Bank Credit Agreement), the Mortgage Notes, the Tranche B Take-Out
Commitment, this Agreement, the Adelson Completion Guaranty, the Completion
Guaranty Note, the Substitute Tranche B Note, and any other loan or security
agreements entered into on, prior to or after the Closing Date to finance the
Project in accordance with subsection 7.13 of the Bank Credit Agreement and,
while applicable, the Disbursement Agreement.
"Financing Date" shall have the meaning ascribed to that term in
the Disbursement Agreement.
"First Level Space" means approximately 300,000 square feet of
space (as the same may be increased or decreased in accordance with section 6.2
of the Disbursement Agreement) comprising the first level space in the Mall
(including the space covered by the Billboard Master Lease (which is within the
Mall) but excluding the Retail Annex) and the first and second level space of
the Retail Annex.
"Fiscal Quarter" shall mean any of the quarterly accounting
periods of the Borrowers.
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"Fiscal Year" shall mean the 12-month period of the Borrowers and
their Subsidiaries ending December 31 of each year. Subsequent changes of the
fiscal year of the Borrowers and their Subsidiaries shall not change the term
"Fiscal Year," unless the Requisite Lenders' shall consent in writing to such
change.
"Foreign Subsidiary" shall mean any Subsidiary of either Borrower
organized under the laws of any jurisdiction other than one of the fifty states
of the United States of America.
"Former Lender" shall have the meaning ascribed to such term in
section 11.20(a).
"Funding Agents" means, collectively, the Bank Agent, the Interim
Mall Lender, the Mortgage Notes Indenture Trustee and the HVAC Provider.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, which are applicable to the
circumstances as of the date of determination.
"Gaming License" shall mean every license, franchise or other
authorization to own, lease, operate or otherwise conduct gaming activities of
the Borrowers or any of their Subsidiaries, including without limitation, all
such licenses granted under the Nevada Gaming Control Act, and the regulations
promulgated pursuant thereto, and other applicable federal, state, foreign or
local laws.
"GECMG" shall have the meaning ascribed to such term in section
11.19.
"General Deadline Extension Condition" shall have the meaning
ascribed to such term in section 1.1(b).
"Governmental Authority" shall mean any national, state or local
government (whether domestic or foreign), any political subdivision thereof or
any other governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity, (including the
Nevada Gaming Authorities, any zoning authority, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency or the Board of
Governors of the Federal Reserve System, any central bank or any comparable
authority) or any arbitrator exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, including without limitation any obligation or
arrangement of such Person (i) to purchase or repurchase any such primary
obligation, (ii) to advance or supply funds (a) for the purchase or payment of
any such primary obligation or (b)
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to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (iv) to indemnify the owner of such primary obligation against
loss in respect thereof.
"Guaranty Deposit Account" shall have the meaning ascribed to it
in the Adelson Completion Guaranty.
"Harrah's Shared Roadway Agreement" shall have the meaning
ascribed to that term in the Disbursement Agreement.
"Hazardous Material" shall mean a Hazardous Substance or a
Hazardous Waste, or both.
"Hazardous Materials Activity" shall mean any past, present,
proposed or threatened activity, event or occurrence involving any Hazardous
Materials, including the use, manufacture, possession, storage, holding,
presence, existence, location, Release, threatened Release, discharge,
placement, generation, transportation, processing, construction, treatment,
abatement, removal, remediation, disposal, disposition or handling of any
Hazardous Materials, and any corrective action or response action with respect
to any of the foregoing.
"Hazardous Substance" shall mean any element, material, compound,
mixture, solution, chemical, substance, or pollutant within the definition of
"hazardous substance" under section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 USC ss. 9601(14); petroleum or any
fraction, byproduct or distillation product thereof; asbestos, polychlorinated
biphenyls, or any radioactive substances; and any material regulated as a
hazardous substance by any jurisdiction in which either Borrower owns or
operates or has owned or operated a facility.
"Hazardous Waste" shall mean any element, pollutant, contaminate
or discarded material (including any radioactive material) within the definition
of section 103(6) of the Resource Conservation and Recovery Act, 42 USCA ss.
6903(6); and any material regulated as a hazardous waste by any jurisdiction in
which either Borrower owns or operates or has owned or operated a facility, or
to which either Borrower sends material for treatment, storage or disposal as
waste.
"HC/Mall Component" shall have the meaning given that term in the
Disbursement Agreement.
"HC/Mall Component Funding Sources" shall mean the term loan
credit facility described and made available to the Borrowers by the Bank
Lenders pursuant to the Bank Credit Agreement, the Interim Mall Facility, the
proceeds from the issuance of the Mortgage Notes (net of
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any underwriter's discount, certain expense reimbursements and certain
reductions for the receipt of immediately available funds) and amounts on
deposit in the Company's Funds Account.
"Hotel/Casino" shall mean all portions of the HC/Mall Component
other than the Mall.
"Hotel/Casino Intended Uses"shall mean the intended uses for the
Hotel/Casino, as more particularly set forth in Exhibit X to the Disbursement
Agreement.
"Hotel/Casino Punch List Items" shall mean minor or other
non-material details of construction or mechanical adjustment related to the
Hotel/Casino the non-completion of which will not interfere with (a) the use or
occupancy of the Hotel/Casino for Hotel/Casino Intended Uses, or (b) the ability
of either Borrower (or any tenant of the Hotel/Casino) to prepare the same for
occupancy.
"HVAC Commitment Facility" shall mean the funding commitment of
up to $70,000,000 in respect of the Total Energy Improvement Costs (as defined
in the HVAC Services Agreement), as determined, described and made available to
the Borrowers by the HVAC Provider pursuant to the HVAC Services Agreement.
"HVAC Completion"shall mean that (a) each of the Borrowers and
the HVAC Provider has certified to the Disbursement Agent that it has received
all Permits required by federal, state and local jurisdictions regarding the
operation of the HVAC Component; (b) the Borrowers and the HVAC Provider have
certified to the Disbursement Agent that the Borrowers (with the HVAC Provider's
assistance) have made arrangements for the HVAC Provider to obtain reliable
electric service at the appropriate voltage and frequency levels required for
the operation of the HVAC Component; (c) the HVAC Provider has certified that it
has received from the Construction Manager all as-built documents (including two
(2) copies of as-built drawings of the HVAC Component, one (1) Mylar
reproducible copy thereof and, if the drawings are electronically prepared, one
(1) copy of the computer software as prepared by the Construction Manager or any
Subcontractor), specifications, calculations, test data, performance data,
equipment descriptions, equipment and system installation instruction manuals,
integrated and coordinated operation and maintenance manuals, training ads,
spare parts lists and other technical information required hereunder for the
HVAC Provider to start-up, operate and maintain the HVAC Component in a safe,
efficient and reliable manner; and (d) the Construction Consultants has
certified that, (i) subject to any remaining "punch list" items, the
Construction Manager, has completed or caused to be completed all construction,
installation, startup and test activities required by, and otherwise satisfied
its obligations under, the Construction Management Agreement regarding the HVAC
Component; and (ii) except as necessary in connection with any punchlist items,
all the Construction Manger's and each Subcontractor's personnel, supplies,
equipment, waste materials, rubbish and temporary facilities have been removed
from the HVAC Component.
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"HVAC Component" shall have the meaning given that term in the
Disbursement Agreement.
"HVAC Ground Lease" shall mean the Ground Lease, dated as of
November 14, 1997, between VCR and the HVAC Provider.
"HVAC Provider" shall mean Atlantic - Pacific Las Vegas, LLC, a
Delaware limited liability company.
"HVAC Services Agreement" shall mean collectively (i) the Energy
Services Agreement, dated as of November 14, 1997, between VCR and the HVAC
Provider (ii) the Ground Lease, dated as of November 14, 1997, between VCR and
the HVAC Provider, (iii) the Construction Agency Agreement, dated as of November
14, 1997, between VCR and the HVAC Provider and (iv) the Energy Services
Agreement.
"Included Taxes" shall have the meaning ascribed to such term in
section 1.15(b).
"Indebtedness" of any Person shall mean (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (including without limitation reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (iv) all Capital Lease Obligations,
(v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including without limitation accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (vii) the Obligations, and (viii)
all liabilities under Title IV of ERISA. All obligations under the Financing
Agreements constitute Indebtedness for the purposes of this definition.
"Indemnified Person" shall have the meaning ascribed to it in
section 1.20.
"Indemnitor" shall have the meaning ascribed to it in section
1.20(d).
"Independent Financial Advisor" shall mean an accounting,
appraisal or investment banking firm of nationally recognized standing that is,
in the judgment of LVSI's board of directors, (i) qualified to perform the task
for which it has been engaged and (ii) disinterested and independent with
respect to LVSI and its Subsidiaries and each Affiliate of LVSI and Sheldon G.
Adelson.
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"Indirect Construction Guarantor" shall mean The Peninsular and
Oriental Steam Navigation Company, a corporation organized under the laws of
England and Wales.
"Indirect Construction Guaranty" shall mean the Guaranty, dated
as of August 19, 1997, executed by Indirect Construction Guarantor in favor of
VCR as assigned by LVSI to VCR by the certain Assignment Agreement, dated as of
November 14, 1997, executed by LVSI, VCR, the Direct Construction Guarantor and
the Indirect Construction Guarantor.
"Initial Principal Amount" shall have the meaning ascribed to it
in section 1.6.
"Insurance Advisor" shall mean Sedgwick James of Tennessee, Inc.,
or its successor appointed pursuant to the Disbursement Agreement and with the
consent of the Administrative Agent.
"Insurance Expert" shall mean J.H. Alberts International
Insurance Advisors, Inc., or its successor appointed pursuant to the
Disbursement Agreement and with the consent of the Administrative Agent.
"Intellectual Property" shall mean all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in or necessary
for the conduct of the business of the Borrowers and the Mall Subsidiary as
proposed to be conducted pursuant to the Operative Documents that are material
to the condition (financial or otherwise), business or operations of the
Borrowers and the Mall Subsidiary.
"Interest Expense" shall mean for any period the amount which
would, in conformity with GAAP, be set forth opposite the caption "interest
expense" or any like caption on an income statement of the Borrower.
"Interest Payment Account" shall have the meaning ascribed to it
in the Company Collateral Account Agreement.
"Interest Period" shall have the meaning specified in section
1.7(b).
"Interest Rate Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement to which either of the Borrowers or the Mall
Subsidiary is a party.
"Interest Rate Determination Date" shall mean, with respect to
any Interest Period, the second Business Day preceding the first day of such
Interest Period.
"Interface" shall mean Interface Group-Nevada, Inc., a Nevada
corporation.
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"Interface Holding" shall mean Interface Group Holding Company,
Inc., a Nevada corporation.
"Interface Lease" shall mean the lease agreement, dated November
1, 1996, between Interface and LVSI covering a portion of the Site.
"Interim Loan" with respect to a Lender shall mean the aggregate
of the Interim Loan Advances made by such Lender from time to time outstanding.
"Interim Loan Advance" shall have the meaning ascribed to it in
section 1.1(a).
"Interim Mall Credit Agreement" shall mean the Credit Agreement,
dated November 14, 1997, between the Borrowers, the Mall Construction Subsidiary
and the Interim Mall Lender.
"Interim Mall Facility" shall mean the credit facility made
available to the Borrowers and the Mall Construction Subsidiary by the Interim
Mall Lender pursuant to the Interim Mall Credit Agreement.
"Interim Mall Lender" shall mean GMAC Commercial Mortgage
Corporation and its permitted successors and assigns.
"Intermediate Holding Companies" shall mean Mall Holdings and
Phase II Holdings.
"Investment" shall mean, for any Person (a) the acquisition
(whether for cash, property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition; (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of property
from another Person subject to an understanding or agreement, contingent or
otherwise, to resell such property to such Person); and (c) the entering into of
any Guaranteed Indebtedness of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person, including
Interest Rate Agreements.
"IRC" shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto.
"IRS" shall mean the Internal Revenue Service, and any successor
thereto.
"Joint Venture" shall mean a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.
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"Joint Venture Supplier" shall mean any Person that supplies or
provides materials or services to either Borrower, the Construction Manager or
any contractor in connection with the Project and in which a Borrower or one of
its Subsidiaries has an Investment .
"Leases" shall mean all of those leasehold estates in real
property now owned or hereafter acquired by a Borrower, as lessee.
"Legal Requirements" shall mean all laws, statutes, orders,
decrees, injunctions, licenses, permits, approvals, agreements and regulations
of any Governmental Authority having jurisdiction over the matter in question.
"Lender" and "Lenders" shall mean the Persons identified as
"Lenders" and listed on the signature pages of this Agreement, together with
their successors and permitted assigns pursuant to section 10; provided that the
term "Lender", when used in the context of a particular Commitment, shall mean
the Lenders having that Commitment.
"Lender Parties" shall mean and include each of the Lenders and
the Agents.
"Leverage Ratio" shall have the meaning ascribed to that term in
section 6.9(b).
"LIBOR Rate Advance" shall mean an Interim Loan Advance with
respect to which the Borrower in the applicable Notice of Borrowing has elected
to have the rate of interest determined by reference to the Adjusted LIBOR Rate.
"LIBOR Rate Borrowing" shall have the meaning ascribed to it in
section 1.2(a)
"LIBOR Rate Loans" shall mean a Loan bearing interest at rates
determined by reference to the Adjusted LIBOR Rate as provided in section
1.7(a).
"License" shall mean any Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by either
Borrower.
"Lien" shall mean, with respect to any asset, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, easement or encumbrance, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, with respect to such asset (including, without limitation,
any lease or title retention agreement, any financing lease having substantially
the same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement perfecting a security interest under
the UCC or comparable law of any jurisdiction).
"Line Item" shall mean and include each of the individual line
items set forth in the Project Budget (as in effect on the Financing Date).
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"Line Item Category" shall have the meaning ascribed to it in the
Disbursement Agreement.
"Liquidated Damages" shall mean any proceeds or liquidated
damages paid pursuant to any default or breach under the Contracts and Indirect
Construction Guaranty and Direct Construction Guaranty (net of actual and
documented reasonable costs incurred by the Borrowers in connection with
adjustment or settlement thereof, including taxes and any reasonable provisions
made in respect of such costs and expenses) (including any such taxes paid or
payable by an owner of either Borrower or any of its Subsidiaries) For purposes
of this definition, so-called "liquidated damages" insurance policies shall be
deemed to be Contracts.
"Liquid Available Funds" shall mean Available Funds without
taking into account any amounts on deposit in the Guaranty Deposit Account.
"Loan" or "Loans" with respect to a Lender shall mean and include
the Interim Loans and the Basic Loan of such Lender.
"Loan Documents" shall mean this Agreement, the Notes, the UCC
financing statements executed and delivered pursuant hereto and any other
documents, instruments or certificates executed and delivered by or on behalf of
the Borrowers hereunder.
"Loss Proceeds" shall have the meaning specified in section
5.14(a).
"Loss Net Proceeds" shall have the meaning ascribed to such term
in section 1.11(b)(i).
"LVSI" shall mean Las Vegas Sands, Inc., a Nevada corporation.
"Major Contractor" shall mean a Contractor who is a party to a
Material Project Document.
"Mall" shall mean the retail mall component of the Project
described in more detail on Exhibit T-7 to the Disbursement Agreement.
"Mall Assets" shall have the meaning ascribed to such term in the
Sale and Contribution Agreement.
"Mall Certificate of Occupancy" shall mean a permanent
certificate of occupancy or a temporary certificate of occupancy, in either
case, for the Mall issued by the Clark County Building Department pursuant to
applicable Legal Requirements which permanent or temporary certificate of
occupancy (a) shall permit the Mall to be used for the Mall Intended Uses, (b)
shall be in full force and effect and (c) in the case of a temporary certificate
of occupancy, shall be for a term such that, if such temporary certificate of
occupancy shall provide for an expiration date, the number of days
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in the period from the Mall Release Date to such expiration date shall
be no less than 133% of the number of days that the Construction Consultant,
pursuant to the its Mall Release Certificate, estimates its will take to
complete the Mall Punchlist Items (assuming reasonable diligence in performing
the same).
"Mall Collateral" shall mean all of the Borrowers' and their
Subsidiaries' right, title and interest in (i) prior to the Mall Parcel Creation
Date, the leasehold estate created by the Mall Lease and, thereafter, the Mall
Parcel; (ii) the leasehold estate created by the Billboard Master Lease; (iii)
the Mall and any related improvements and equipment thereto; (iv) any reserves
established by the Borrowers or any of their Subsidiaries relating to the Mall;
(v) all easements and other rights and interests granted to the owner of the
Mall in the Cooperation Agreement; (vi) all warranties relating to the Mall and
the above-described improvements and equipment that are given pursuant to or in
connection with, the Contracts; and (vii) all contracts (including space leases)
entered into by, or assigned to, the Mall Construction Subsidiary, relating to
the foregoing Mall Collateral or any portion thereof, and all rights under such
Contracts.
"Mall Construction Subsidiary" shall mean Grand Canal Shops Mall
Construction, LLC, a Delaware limited liability company and a wholly-owned
subsidiary of VCR.
"Mall Construction Termination" shall mean that construction of
the Mall (and all infrastructure and other improvements required to be
constructed under applicable Legal Requirements or pursuant to the
Predevelopment Agreement (to the extent that the Predevelopment Agreement affect
the Mall) has been completed (except for Mall Punchlist Items) in accordance
with the Plans and Specifications) and all punchlists referenced in the
definition of "Mall Punchlist Items" have been delivered to the Funding Agents
and the Permanent Mall Lender.
"Mall Direct Holdings" shall mean Grand Canal Shops Mall Holding
Company, LLC, a Delaware limited liability company.
"Mall Easements" shall mean the easements appurtenant, easements
in gross, license agreements and other rights running for the benefit of the
Mall Construction Subsidiary and appurtenant to the Mall, including without
limitation those certain easements and licenses described in each Title Policy.
"Mall Escrow Agreement" shall mean the Escrow Agreement to be
entered into pursuant to the Sale and Contribution Agreement and attached as an
exhibit to the Sales and Contribution Agreement.
"Mall Holdings" shall mean Mall Intermediate Holdings Company
LLC, a Delaware limited liability company and a wholly-owned Subsidiary of VCR.
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"Mall Intended Uses" shall mean the intended uses for the Mall,
as more particularly set forth in Exhibit X to the Disbursement Agreement.
"Mall Lease" shall mean the Indenture of Lease, dated as of
November 14, 1997, by and between VCR and the Mall Construction Subsidiary
pursuant to which the Mall Construction Subsidiary will lease the Mall from VCR.
"Mall Management Agreement" shall mean the Management Agreement,
dated as of November 14, 1997, between LVSI and the FCMI pursuant to which the
FCMI has agreed to perform certain management services related to the Mall, as
the same has been assigned to the Mall Construction Subsidiary pursuant to that
certain Assignment and Assumption of Contracts, dated as of November 14, 1997,
between VCR and the Mall Construction Subsidiary.
"Mall Manager" shall mean Grand Canal Shops Mall MM, Inc., a
Nevada corporation and a wholly-owned subsidiary of LVSI.
"Mall Parcel" shall mean the mall space to be subdivided from the
Site as one or more legally separate parcel and recorded with the applicable
Governmental Authorities as described in more detail in Exhibit T-7 to the
Disbursement Agreement.
"Mall Parcel Creation Date" shall have the meaning ascribed to
that term in the Disbursement Agreement.
"Mall Punchlist Items" shall mean minor or insubstantial details
of construction or mechanical adjustment relating to the Mall, the
non-completion of which, when all such items are taken together, will not
interfere in any material respect with the use or occupancy of any portion of
the Project (but excluding the Anticipated Future Work), for the Project
Intended Uses or the ability of the owner or master lessee, as applicable, of
any portion of the Project (including without limitation the Mall)(or any
tenant, licensee or concessionaire of such portion of the Project) to perform
work that is necessary or desirable to prepare such portion of the Project for
such use or occupancy; provided that, in all events, "Mall Punchlist Items"
shall include (to the extent not already completed) without limitation the items
set forth in the punchlist to be delivered by the Borrowers in connection with
Substantial Completion under the Construction Management Agreement to the extent
relating to the Mall, and all items listed on the "punchlists" furnished by the
Building Department, the Nevada Department of Transportation and the Clark
County Department of Public Works in connection with, or after, the issuance of
the Mall temporary certificate of occupancy as the items that must be completed
in order for the Building Department to issue a Mall permanent certificate of
occupancy.
"Mall Release Certificates" shall mean, collectively, the
certificates in the form of Exhibits W-3, W-4 and W-5 to the Disbursement
Agreement to be delivered by the Borrowers, the Constructions Consultant and the
Project Architect, respectively, pursuant to section 2.10 of the Disbursement
Agreement.
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"Mall Release Conditions" shall mean, collectively, the
following:
(a) the Mall Release Interested Parties shall have received from
the Borrowers their Release Certificate, pursuant to which the Borrowers certify
that:
(i) Mall Construction Termination and Project Construction
Termination shall have occurred;
(ii) all Project Costs (other than Project Costs consisting
of (A) Retainage Amounts, and other amounts that, as of
the Mall Release Date, are being withheld from the
Construction Manager, the Contractors or the
Subcontractors in accordance with the provisions of the
Project Documents, (B) amounts payable in respect of
Mall Punchlist Items and Project Punchlist Items to the
extent not covered by the foregoing clause (A) and (C)
amounts that will be payable in respect of Anticipated
Future Work) shall have been paid in full;
(iii)the Project (including without limitation the Mall)
shall be served by, and shall be equipped to accept,
water, gas, electric, sewer, sanitary sewer, storm
drain and other facilities and utilities necessary for
use of the Project and each portion thereof for Project
Intended Uses (including without limitation in the case
of the Mall, the Mall Intended Uses), which utility
service is provided by public or private utilities over
utility lines, pipes, wires and other facilities that
run solely over public streets or private property,
pursuant to easements created under the Cooperation
Agreement or other recorded easements);
(iv) the Plans and Specifications are in compliance with all
applicable Legal Requirement (including without
limitation all applicable building and zoning laws,
ordinance and regulations, and the Americans with
Disabilities Act of 1990) and applicable insurance
requirements; and
(v) the entire Project (other than the premises to be
occupied by individual retail and restaurant tenants in
the Mall or elsewhere in the Project, the Unfinished
Hotel Suites and the Anticipated Future Work) shall be
open for business, or shall be ready to be open for
business, to the general public for the Projected
Intended Uses; provided that in all events restaurants
containing at least 2,000 seats (at least 1,000 of
which are in the Hotel/Casino) should be ready to be
open for business.
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(b) The Construction Consultant shall have delivered its Mall
Release Certificate approving the Borrowers' Mall Release Certificate and the
Project Architect shall have delivered its Mall Release Certificate;
(c) the Mall Release Interested Parties shall have received a
copy of (i) a Mall Certificate of Occupancy and (ii) a Project Certificate of
Occupancy; and
(d) the Project shall be free of all liens and encumbrances other
than Permitted Liens.
"Mall Release Date" shall mean the date on which each of the Mall
Release Conditions have been satisfied.
"Mall Release Interested Parties" shall mean, collectively, the
Bank Agent, the Interim Mall Lender, the Mortgage Notes Indenture Trustee and
the Permanent Mall Lender.
"Mall Retainage/Punchlist Account" shall have the meaning
ascribed to it in the Mall Escrow Agreement.
"Mall Space" shall mean the property and space described in
Exhibit T-7 to the Disbursement Agreement.
"Mall Subsidiary" shall mean Grand Canal Shops Mall, LLC, a
Delaware limited liability company.
"Margin Stock" shall have the meaning specified in Regulation G
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.
"Material Adverse Change" shall have the meaning ascribed to it
in section 2.3(a).
"Material Adverse Effect" shall mean a material adverse effect on
(i) the business, assets, operations, prospects or financial or other condition
of either (a) the Borrowers and their Subsidiaries, taken as a whole or (b) the
Borrowers, all of their Subsidiaries and the Excluded Subsidiaries, taken as a
whole, (ii) either Borrower's ability to pay or observe or perform or of any
Lender Party's ability to enforce, such Borrower's obligations under the Loan
Documents executed by it in accordance with the terms thereof, (iii) the
Collateral or the Lien of the Administrative Agent on the Collateral or the
priority of any such Lien or (iv) the rights and remedies of the Lender under
this Agreement and the other Loan Documents.
"Material Contract" shall mean any contract or other arrangement
to which any of the Borrowers and their Subsidiaries is a party (other than the
Loan Documents) for which breach, nonperformance, cancellation or failure to
renew could reasonably be expected to have a Material Adverse Effect or which
involves aggregate consideration payable to or by a Borrower or any of its
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Subsidiaries, contingent or otherwise, in excess of $5,000,000, except contracts
as to which the remaining consideration payable to or by a Borrower or any of
its Subsidiaries is less than $5,000,000.
"Material Project Documents" shall mean and include the
Cooperation Agreement, the Casino Lease, the Mall Lease, the Sale and
Contribution Agreement, the Harrah's Shared Roadway Agreement, the Work
Continuation Agreement and any other Project Document with a total contract
amount in excess of $500,000.
"Maximum Consolidated Capital Expenditures Amount" shall have the
meaning ascribed to such term in section 6.9(e).
"Maximum Lawful Rate" shall have the meaning ascribed to it in
section 1.7(h).
"Moody's" shall mean Mood's Investors Service, Inc., a Delaware
corporation, or any successor thereof.
"Mortgage Note Holders" shall mean the holders from time to time
of the Mortgage Notes.
"Mortgage Notes" shall mean the 12 1/4 % Mortgage Notes of the
Borrowers Due 2004 issued pursuant to the Mortgage Notes Indenture.
"Mortgage Notes Indenture" shall mean the Indenture, dated as of
November 14, 1997, between the Borrowers, certain guarantors named therein and
the Mortgage Notes Indenture Trustee.
"Mortgage Notes Indenture Trustee" shall mean First Trust
National Association, in its capacity as the trustee under the Mortgage Notes
Indenture, and its successors in such capacity.
"Mortgage Notes Proceeds Account" shall have the meaning set
forth in section 2.3.2 of the Disbursement Agreement.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
in section 4001(a) (3) of ERISA, and to which either Borrower or any ERISA
Affiliate thereof is making, is obligated to make, has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"Net Income (Loss)" shall mean, for any Person for any period,
the aggregate net income (or loss) from continuing operations (excluding any
income (or loss) included therein resulting from extraordinary items) of such
Person and its Subsidiaries for such period.
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"Net Loss Proceeds" shall mean the aggregate cash proceeds
received by any of the Borrowers of any of their Subsidiaries in respect of any
Event of Loss, including without limitation insurance proceeds, condemnation
awards or damages awarded by any judgment, net of the direct costs in recovery
of such Net Loss Proceeds (including without limitation legal, accounting,
appraisal and insurance adjuster fees and expenses) and any taxes paid or
payable as a result thereof (including without limitation any such taxes paid or
payable by an owner of a Borrower or any of its Subsidiaries after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien (or amounts permitted by the terms of such Indebtedness to be
otherwise reinvested in the Project to the extent so reinvested).
Notwithstanding the foregoing, all proceeds of so-called "liquidated damages"
insurance policies shall not be Net Loss Proceeds but shall be Liquidated
Damages.
"Nevada Gaming Authority" shall mean, collectively, the Nevada
Gaming Commission, the Nevada State Gaming Control Board, and the Clark County
Liquor and Gaming
Licensing Board.
"Nevada Gaming Laws" shall mean the Nevada Gaming Control Act, as
modified in Chapter 463 of the Nevada Revised Statutes, as amended from time to
time, and the regulations of the Nevada Gaming Commission promulgated
thereunder, as amended from time to time.
"Non-Recourse Financing" shall mean Indebtedness incurred in
connection with the purchase or lease of personal or real property useful in the
business of the Borrowers and their Subsidiaries and (i) as to which the lender
upon default may seek recourse or payment as against a Borrower or one or more
of its Subsidiaries only through the return or sale of the property or equipment
so purchased or leased and (ii) may not otherwise assert a valid claim for
payment on such Indebtedness against a Borrower or one or more of its
Subsidiaries or any other property of a Borrower or one or more of its
Subsidiaries.
"Non-US Lender" shall have the meaning ascribed to such term in
section 1.15(b)(iii)(1).
"Notes" shall mean the promissory notes of the Borrowers to be
issued and delivered to the Lenders pursuant to section 1.5.
"Notice of Borrowing" shall mean, with respect to any Interim
Loan Advance, the Final Notice of Borrowing but, if a Final Notice of Borrowing
has not been delivered in connection with such Interim Loan Advance, then
"Notice of Borrowing" shall mean the Preliminary Notice of Borrowing delivered
to the Administrative Agent in connection with such Interim Loan Advance.
"Notice of Interest Rate Election" shall mean the notice to be
delivered by the Borrower Representative to the Administrative Agent from time
to time pursuant to section 1.7(d)(ii).
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"Obligations" shall mean all loans, advances, debts, liabilities
and obligations for the performance of covenants, tasks or duties or for payment
of monetary amounts (whether or not such performance is then required or
contingent, or amounts are liquidated or determinable) from time to time owing
by the Borrowers, or either of them to any Lender Party, and all covenants and
duties regarding such amounts, of any kind or nature, present or future, whether
or not evidenced by any note, agreement or other instrument, arising under any
of the Loan Documents. This term includes without limitation all principal,
interest (including without limitation interest which accrues after the
commencement of any case or proceeding referred to in section 8.1(g) or (h)),
all fees, Charges, expenses, attorneys' fees, indemnification and any other sum
chargeable to the Borrowers under any of the Loan Documents.
"Officers' Certificate" shall mean (a) as applied to any
corporation, a certificate executed on behalf of such corporation by its
chairman of the board (if an officer) or its president or one of its vice
presidents and by its chief financial officer or its treasurer (in their
capacity as such officer) and (b) as applied to any limited liability company, a
certificate executed on behalf of such limited liability company by its managing
member's chairman of the board (if an officer) or president or one of the vice
presidents and by the chief financial officer or treasurer (in their capacity as
such officer); provided that every Officers' Certificate with respect to the
compliance with a condition precedent to the making of any Interim Loan Advance
or Basic Loan shall include (i) a statement that the officer or officers making
or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with in all material respects.
"Opening Date" shall mean the first date on which all or any
portion of the Project is open for business other than the parking garage,
preview center, the HVAC Component or the Congress Center.
"Operative Documents" shall mean the Financing Agreements and the
Project Documents.
"Other Indebtedness" shall mean (i) Indebtedness evidenced by the
Mortgage Notes, (ii) Indebtedness evidenced by the Subordinated Notes, (iii)
Indebtedness evidenced by the Interim Mall Facility, (iv) Indebtedness evidenced
by the Bank Credit Agreement, (v) Indebtedness in respect of the Substitute
Tranche B Loan or any Completion Guaranty Loan, or both and (vi) Indebtedness
evidenced by the Employee Repurchase Notes.
"Other Taxes" shall have the meaning ascribed to it in section
1.15(c).
"Outside Completion Deadline" shall mean April 21, 1999; provided
that the "Outside Completion Deadline" may be extended from time to time in
accordance with section 6.4.2
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of the Disbursement Agreement pursuant to an amendment of the Project Schedule
in accordance with section 6.23(e) of the Agreement.
"Participant" shall have the meaning ascribed to it in section
10(c).
"Patent License" shall mean rights under any written agreement
now owned or hereafter acquired by either Borrower granting any right with
respect to any invention on which a Patent is in existence.
"Patents" shall mean all of the following in which either
Borrower now holds or hereafter acquires any interest: (i) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any state or territory thereof, or any other country, and
(ii) all reissues, divisions, continuations, continuations-in-part or extensions
thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, and
any successor thereto.
"Pension Plan" shall mean an employee pension benefit plan, as
defined in section (3) (2) of ERISA (other than a Multiemployer Plan), which is
not an individual account plan, as defined in section 3 (34) of ERISA, and which
a Borrower or, if a Title IV Plan, any Subsidiary of such Borrower or any ERISA
Affiliate thereof maintains, contributes to or has an obligation to contribute
to on behalf of participants who are or were employed by any of them.
"Permanent Mall Lender" shall mean Goldman Sachs Mortgage
Company, and any successor or replacement thereto permitted under the Tri-Party
Agreement.
"Permits" shall mean all authorizations, consents, decrees,
permits, waivers, privileges, approvals from and filings with all Governmental
Authorities, including without limitation the Nevada Gaming Authorities,
necessary for the realization of the Project in accordance with the Operative
Documents.
"Permitted Collateral Encumbrances" shall mean the following
encumbrances: (i) Liens for taxes, assessments or other governmental Charges or
levies, either not yet due and payable or to the extent that nonpayment thereof
is permitted by the terms of section 5.2 of the Agreement; (ii) warehousemen
possessory liens arising in the ordinary course of business, securing only
reasonable and customary warehousemen's charges not yet due and payable and
encumbering specific units or items of the Collateral in storage in warehouses
operated by such warehousemen pending their delivery to and installation at the
Site of the Project, but only to the extent that proper warehouse receipts,
properly and effectively endorsed to the Administrative Agent, shall have been
delivered to the Administrative Agent; and (iii) Liens either in favor of (a)
the Bank Agent pursuant
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to the Bank Credit Agreement, (b) the Disbursement Agent pursuant to the
Disbursement Agreement, or (c) the Mortgage Notes Indenture Trustee, in each
such case in individual units or items of the furniture and equipment identified
on Annex B hereto (provided that in all events the liens described in this
clause (iii) shall be released prior to or contemporaneously with the making of
an Interim Loan Advance under the Agreement with respect to such unit or item).
"Permitted Construction Loan Refinancing" shall mean and include
any one or more of (i) the incurrence of Indebtedness or the issuance of Stock,
or both, by the Mall Subsidiary the proceeds of which are used to purchase the
Mall Collateral pursuant to the Sale and Contribution Agreement (including
without limitation the Tranche A Take-out Commitment and the Tranche B Take-out
Commitment) and (ii) the assumption of the Interim Mall Facility or the
Substitute Tranche B Loan (or any permitted refinancing thereof), or both,
pursuant to the Sale and Contribution Agreement.
"Permitted Liens" shall mean the following types of Liens
(excluding (a) any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of
the IRC or by ERISA, (b) any such Lien relating to or imposed in connection with
any Environmental Claim, (c) any such Lien expressly prohibited by any
applicable provision of a Loan Document and (d) any Lien on the Collateral other
than Permitted Collateral Encumbrances), provided in each case that such Liens
do not secure Indebtedness:
(i) Liens for taxes, assessments or Charges or Claims the
payment of which is not at the time required by section 5.2;
(ii) Statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers,
warehousemen, mechanics, repairmen, workmen and materialmen,
and other Liens imposed by law, in each case incurred in the
ordinary course of business (a) for amounts not yet overdue
or (b) for amounts that are overdue and that (in the case of
any such amounts overdue for a period in excess of five
days) are being contested in good faith and by appropriate
proceedings, so long as (1) such reserves or other
appropriate provisions, if any, as shall be required by GAAP
shall have been made for any such contested amounts and (2)
in the case of a Lien with respect to any portion of the
Collateral, such contest proceedings shall conclusively
operate to stay the sale or other disposition of any portion
of the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security
obligations, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids,
leases, government contracts, trade contracts,
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performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of
borrowed money), incurred in the ordinary course of business
(a) for amounts not yet overdue or (b) for amounts that are
overdue and that (in the case of any such amounts overdue
for a period in excess of five days) are being contested in
good faith by appropriate proceedings, so long as (1) such
reserves or other appropriate provisions, if any, as shall
be required by GAAP shall have been made for any such
contested amounts and (2) no foreclosure, sale or similar
proceedings shall have been commenced with respect to any
portion of the Collateral or other property;
(iv) Any attachment or judgment Lien not constituting an Event of
Default under section 8.1(i) or (f);
(v) Leases or subleases granted to third parties in accordance
with any applicable terms of the Loan Documents and not
interfering in any material respect with the ordinary
conduct of the business of a Borrower or any of its
Subsidiaries;
(vi) Easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case
which do not and will not interfere in any material respect
with the ordinary conduct of the business of a Borrower or
any of its Subsidiaries or result in a material diminution
in the value of any of the property of the Borrowers and
their Subsidiaries taken as a whole;
(vii) Any leasehold mortgage in favor of any party financing the
lessee under any lease permitted under section 6.1; provided
that none of the Borrowers and their Subsidiaries are liable
for the payment of any principal of, or interest, premiums
or fees on, such financing;
(viii) Easements, restrictions, rights of way, encroachments and
other minor deficits or irregularities in title created by
the Cooperation Agreement (as in effect on the Closing Date
or as in effect following any amendment, revision or
supplement thereto to the extent permitted under the
Agreement);
(ix) Easements, restrictions, rights of way, encroachments and
other minor deficits or irregularities in title on real
property of either Borrower arising pursuant to the Harrah's
Roadway Agreement (as in effect on the Closing Date);
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(x) Liens incurred in connection with the construction of a
pedestrian bridge or a pedestrian tunnel under Las Vegas
Boulevard and Sands Avenue, provided that such Liens will
not (i) interfere with, impair or detract from the operation
of the business of the Borrowers and their Subsidiaries or
the construction or operation of the Project nor (ii) cause
a material decrease in the value of the Collateral;
(xi) Liens arising from the filing of UCC financing statements
relating solely to leases permitted by this Agreement;
(xii) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in
connection with the importation of goods;
(xiii) Any zoning or similar law or right reserved to or vested in
any Governmental Authority to control or regulate the use of
any real property;
(xiv) Licenses of patents, trademarks and other intellectual
property rights granted by a Borrower or Subsidiary thereof
in the ordinary course of business and not interfering in
any material respect with the ordinary conduct of the
business of such Borrower or Subsidiary;
(xv) Easements, restrictions, rights of way, encroachments and
other minor deficits or irregularities in title or Liens
created under the HVAC Services Agreement and the HVAC
Ground Lease (each as in effect on the Closing Date);
(xvi) Easements, restrictions, rights of way, encroachments and
other minor deficits or irregularities in title created
under the Predevelopment Agreement (as in effect on November
14, 1997);
(xvii) Easements, restrictions, rights of way, encroachments and
other minor deficits or irregularities in title incurred in
connection with the traffic study relating to increased
traffic on Las Vegas Boulevard as a result of completion of
the Project;
(xviii) Liens incurred in connection with Interest Rate Agreements
required to be maintained hereunder or under the other
Financing Agreements; and
(xix) Restrictions created under the Sale and Contribution
Agreement (as in effect on November 14, 1997).
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"Permitted Quarterly Tax Distributions" shall mean quarterly
distributions of Tax Amounts determined on the basis of the estimated taxable
income of LVSI or VCR, as the case may be (in each case including any such
taxable income attributable to such entity's ownership of interest in any other
pass-through entity for Federal income tax purposes, except that if all or any
portion of the Completion Guaranty Loan or the Substitute Tranche B Loan is
outstanding and held by Sheldon G. Adelson or a Related Party and is not paying
current cash interest, then such estimated taxable income shall be determined
without giving effect to any non-cash interest payments on such loans held by
Sheldon G. Adelson or the Related Parties to the extent such non-cash interest
is deductible), for the related Estimation Period, as in a statement filed with
the Administrative Agent, provided, however, that (A) prior to any distributions
of Tax Amounts the Borrowers shall deliver an Officers' Certificate with a
statement to the effect that in the case of distributions to be made by VCR, VCR
qualifies as a partnership or a substantially similarly treated pass-through
entity for federal income tax purposes and that, in the case of distributions to
be made by LVSI, LVSI qualifies as a Subchapter S corporation under the IRC or a
substantially similarly treated pass-through entity for federal income tax
purposes, as the case may be, and (B) at the time of such distributions, the
most recent audited financial statements of LVSI reflect that LVSI was treated
as a Subchapter S corporation under the IRC or a substantially similarly treated
pass-through entity for federal income tax purposes and VCR was treated as a
partnership or substantially similarly treated pass-through entity for Federal
income tax purposes for the period covered by such financial statements;
provided, further, that, for an Estimation Period that includes a True-Up
Determination Date, (A) if the True- up Amount is due to the members or
shareholders, as the case may be, the Permitted Quarterly Tax Distribution
payable by LVSI or VCR, as the case may be, for the Estimation Period shall be
increased by such True-up Amount, and (B) if the True-up Amount is due to LVSI
or VCR, the Permitted Quarterly Tax Distribution payable by LVSI or VCR, as the
case may be, for the Estimation Period shall be reduced by such True-up Amount
and the excess, if any, of the True-up Amount over such Permitted Quarterly Tax
Distribution shall be applied to reduce the immediately following Permitted
Quarterly Tax Distribution or Distributions until such True-up Amount is
entirely offset. The amount of Permitted Quarterly Tax Distribution relating to
an Estimation Period shall be determined by a Tax Amounts CPA, and the amounts
of Permitted Quarterly Tax Distributions relating to all other Estimation
Periods shall be determined by LVSI or VCR, as the case may be.
"Person" shall mean any individual, sole proprietorship,
partnership (general or limited), Joint Venture, limited liability company,
limited liability partnership; joint stock company, bank, company, trust
company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, domestic or foreign, including
without limitation any instrumentality, division, agency, body or department
thereof).
"Phase II" shall mean a hotel, casino and mall complex proposed
to be developed on the Phase II Land.
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"Phase II Direct Holdings" shall mean Lido Casino Resort Holding
Company, LLC, a Delaware limited liability company, initially wholly-owned by
Phase II Holdings and 1% owned by Phase II Manager.
"Phase II Holdings" shall mean Lido Intermediate Holding Company,
LLC, a Delaware limited liability company, and a wholly-owned Subsidiary of VCR.
"Phase II Land" shall mean the real property consisting of
approximately 14 acres of the Real Estate Contribution as described in more
detail in Exhibit T-5 to the Disbursement Agreement, together with all
improvements thereon.
"Phase II Manager" shall mean Lido Casino Resort MM, Inc., a
Nevada corporation and wholly-owned subsidiary of LVSI, the managing member of
Phase II Subsidiary upon transfer of an interest in the Phase II Subsidiary in
accordance with the terms of the Agreement.
"Phase II Subsidiary" shall mean Lido Casino Resorts, LLC, a
Nevada limited liability company.
"Plan" shall mean, with respect to a Borrower or any ERISA
Affiliate thereof, at any time, an employee benefit plan, as defined in section
3(3) of ERISA, which such Borrower maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Plans and Specifications" shall mean all plans, specifications,
design documents, schematic drawings and related items for the design,
architecture and construction of the Project that are listed on Exhibit T-10 to
the Disbursement Agreement as the same may be (a) finalized in a manner that
reflects a natural evolution of their status on the date hereof and in a manner
consistent with the standards set forth in Exhibit X to the Disbursement
Agreement and (b) amended in accordance with Section 6.2 of the Disbursement
Agreement.
"Portion" shall have the meaning ascribed to it in section
3.22(a).
"Predevelopment Agreement" shall mean the Sands Resort Hotel
Casino Agreement, dated February 18, 1997, by and between Clark County and LVSI,
as amended, restated and modified from time to time.
"Preliminary Notice of Borrowing" shall have the meaning ascribed
to such term in section 1.2(a)(ii).
"Prime Rate" shall mean the highest of the prime, base or
equivalent rate of interest announced or published from time to time by any of
the five largest member banks of the New York Clearing House Association (with
the understanding that such rates may merely serve as a basis upon which the
effective rates of interest are calculated for loans making reference thereto
and that such
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rates are not necessarily the lowest or best rates at which such banks calculate
interest or extend credit).
"Proceedings" shall have the meaning ascribed to it in section
4.1(m).
"Proceeds" shall mean "proceeds," as such term is defined in the
UCC and, in any event, shall include, with respect to any Person, (i) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable to such
Person from time to time with respect to any of its property or assets, (ii) any
and all payments (in any form whatsoever) made or due and payable to such Person
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of such Person's property
or assets by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), (iii) any claim of such Person
against third parties (a) for past, present or future infringement of any Patent
or Patent License or (b) for past, present or future infringement or dilution of
any Trademark or Trademark License or for injury to the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License, (iv) any recoveries by such Person against third parties with respect
to any litigation or dispute concerning any of such Person's property or assets,
and (v) any and all other amounts from time to time paid or payable under or in
connection with any of such Person's property or assets, upon disposition or
otherwise. Notwithstanding the foregoing, Proceeds shall not include Liquidated
Damages or proceeds of insurance subject to the claim of any Project Lender
other than a Lender.
"Professional Services Agreement" shall mean the Agreement, dated
as of November 14, 1997, between the Borrowers and the Project Architect.
"Project" shall mean the Venetian-themed hotel, casino, retail,
meeting and entertainment complex, with related heating, ventilation and air
conditioning and power station facilities to be developed at the Site, all as
more particularly described in Exhibit T-1 to the Disbursement Agreement.
"Project Architect" shall mean, collectively, TSA of Nevada, LLP,
and WAT&G, Inc. Nevada.
"Project Budget" shall have the meaning ascribed that term in the
Disbursement Agreement.
"Project Certificate of Occupancy" shall mean a permanent
certificate of occupancy or a temporary certificate of occupancy, in either
case, for the Project issued by the Clark County Building Department pursuant to
applicable Legal Requirements which permanent or temporary certificate of
occupancy shall permit the Project (other than the Mall) to be used for the
Projected Intended Uses, shall be in full force and effect and, in the case of a
temporary certificate of occupancy, if such temporary certificate of occupancy
shall provide for an expiration date, the number of days in the period from the
Mall Release Date to such expiration date shall be not less
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than 133% of the number of days that the Construction Consultant, pursuant to
the Mall Release Certificate, estimate it will take to complete the Project
Punchlist Items (assuming reasonable diligence in performing the same).
"Project Construction Completion Date" shall mean the date on
which the Project Construction Termination occurs.
"Project Construction Termination" shall mean that all of the
following shall have occurred:
(a) the construction of the Hotel/Casino and the remainder of the
Project and all infrastructure and other improvements required to be constructed
under applicable Legal Requirements or pursuant to the Predevelopment Agreement
(but excluding the Mall, the Unfinished Hotel Suites and the Anticipated Future
Work) shall have been completed (except for Project Punchlist Items that will
not interfere with or dispute the operation of the Project for its intended
purposes or detract from the aesthetic appearance of the Project other than to a
de minimis extent) in accordance with the Plans and Specifications;
(b) all furnishings, fixtures and equipment necessary to use and
occupy two thousand (2000) hotel suites in the Hotel for their intended use (as
more particularly set forth in Exhibit X to the Disbursement Agreement) shall
have been installed and shall be operational, and all furnishings, fixture and
equipment necessary to use and occupy the remainder of the hotel portion of the
Hotel/Casino (other than Unfinished Hotel Suites) for their intended use (as
more specifically reflected in the standards set forth in Exhibit X to the
Disbursement Agreement) shall have been installed and shall be operational;
(c) all furnishings, fixtures and equipment necessary to use and
occupy the casino portion of the Hotel/Casino for the Projected Intended Uses
shall have been installed shall be operational;
(d) all furnishings, fixtures and equipment necessary to use and
occupy all common areas and facilities of the Project (including, without
limitation, the HVAC Component and the "south" parking structure contemplated by
the Plans and Specifications) for their intended purposes (as reflected in
Exhibit X to the Disbursement Agreement) shall have been installed and shall be
operational;
(e) all furniture, fixtures and equipment necessary to use and
occupy restaurants containing at least 2,000 seats (at least 1,000 of which are
within the Hotel/Casino) shall have been installed and be operational;
(f) each of the Borrowers and the Construction Consultant shall
received all Permits required by federal, state and local jurisdictions
regarding the maintenance and operation
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of the Project, and shall have delivered to the Administrative Agent a
certificate to the foregoing effects;
(g) all Permits, licenses, orders and other authorizations
(including without limitation gaming licenses, temporary or permanent
certificates of occupancy and other regulatory requirements) required to be
obtained by the Borrowers or any other Person for the operation of the Project
as a casino resort and hotel shall have been issued and obtained and be in full
force and effect and not be subject to any unsatisfied conditions;
(h) all punchlists referenced under the definition of "Project
Punchlist Items" have been delivered to each Bank Lender, the Permanent Mall
Lender and the Construction Consultant;
(i) the Borrowers shall have available a fully trained staff to
operate the Project including the hotel and casino in accordance with industry
standards; and
(j) the Administrative Agent shall have received an Officers'
Certificate to the foregoing effects.
"Project Costs" shall have the meaning ascribed to that term in
the Disbursement Agreement.
"Project Documents" shall mean and include the Construction
Management Agreement, the Completion Guaranties, the Contracts, the Cooperation
Agreement, the Professional Services Agreement, the HVAC Services Agreement, the
Mall Management Agreement, the Construction Agency Agreement, the Predevelopment
Agreement, the Puck JV Lease, the Billboard Master Lease, the Interface Lease,
the Harrah's Shared Roadway Agreement, the Services Agreement, the Sale and
Contribution Agreement, the Mall Lease, the Casino Lease, the Treadway
Agreement, the operating agreements for each of LVSI, VCR, Mall Holdings and
Mall Subsidiary and any other document or agreement entered into on, prior to or
after the Closing Date, in accordance with section 6.18 of the Agreement (and so
long as the same is in force and effect, the Disbursement Agreement) relating to
the development, construction, maintenance or operation of the Project;
provided, that following the Mall Release Date any contracts and agreements
relating to the Mall which were transferred to the Mall Subsidiary shall no
longer constitute Project Documents.
"Project Intended Uses" shall mean the intended uses of the
Project, as more particularly set forth in Exhibit X of the Disbursement
Agreement.
"Projections" shall mean and include all projections delivered by
the Borrowers to the Administrative Agent prior to the date hereof pertaining to
the Project.
"Project Lenders" shall mean and include the Lenders, the Bank
Lenders, the Interim Mall Lender and the Mortgage Note Holders, collectively.
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"Project Punchlist Items" shall mean minor or insubstantial
details of construction or mechanical adjustment, the non-completion of which,
when all such items are taken together, will not interfere in any material
respect with the use or occupancy of any portion of the Project for the Project
Intended Uses or the ability of the owner or master lessee, as applicable, of
any portion of the Project (or any tenant thereof) to perform work that is
necessary or desirable to prepare such portion of the Project for such use or
occupancy; provided that, in all events, "Project Punchlist Items shall include
(to the extent not already completed) without limitation the items set forth in
the punchlist to be delivered by the Borrowers in connection with Substantial
Completion under the Construction Management Agreement and all items listed on
the "punchlists" furnished by the Building Department, the Nevada Department of
Transportation or the Clark County Department of Public Works in connection
with, or after, the issuance of the Mall temporary certificate of occupancy as
those that must be completed in order for the Clark County Building Department
to issue a permanent Project Certificate of Occupancy.
"Project Schedule" shall have the meaning ascribed to that term
in the Disbursement Agreement.
"Proprietary Rights" shall have the meaning ascribed to it in
section 3.16.
"Pro Rata Share" shall mean (i) with respect to a Lender prior to
the Commitment Expiration Date, the percentage obtained by dividing (x) the
Commitment of such Lender by (y) the Aggregate Commitment and (ii) from and
after the Commitment Expiration Date, the percentage obtained by dividing (x)
the outstanding principal balance of outstanding Loans of such Lender by (y) the
aggregate outstanding principal balance of all of the such Loans.
"Puck JV Letter of Intent" shall mean the letter of intent dated
May 16, 1997 between LVSI and Wolfgang Puck Food Company, L.P.
"Qualified Plan" shall mean an employee pension benefit plan, as
defined in section 3(2) of ERISA, which is intended to be tax-qualified under
section 401(a) of the IRC, and which a Borrower, any Subsidiary thereof or any
ERISA Affiliate thereof maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of them.
"Quarterly Date" shall mean (i) in the case of the first
Quarterly Date, the first date occurring after the Completion Date which is the
last day of a Fiscal Quarter and is 45 days or more after the earlier of the
Opening Date and the Completion Date and (ii) in the case of each subsequent
Quarterly Date, the end of the next succeeding Fiscal Quarter.
"Quarterly Period" shall mean the period commencing on the tenth
day and ending on and including the twentieth day of each month in which federal
estimated tax payments are due (provided that payments in respect of estimated
state income taxes due in January may instead, at the option of the Borrowers,
be paid during the last five days of the immediately preceding December).
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"Rating Agencies" shall mean, collectively, Moody's and S&P (or,
if either or both of them is no longer engaged in the business of rating debt
securities, any other nationally recognized rating agency or agencies).
"Rating Downgrade" shall mean a lowering by either Rating Agency
of the then current credit rating of the Mortgage Notes.
"Real Estate Contribution" shall have the meaning ascribed to
such term in the introduction to the Bank Credit Agreement as described in more
detail in Schedule 5 of the Bank Credit Agreement.
"Realized Savings" shall mean:
(a) with respect to the "Bovis Construction Costs" Line Item
Category, a decrease in the anticipated cost to complete the work contemplated
by such Line Item Category but only to the extent that the Construction Manager
certifies that the "Guaranteed Maximum Price" under and as defined in the
Construction Management Agreement has been reduced as a result of such decrease
in the anticipated cost;
(b) with respect to the "Owner Construction and Equipment Costs"
Line Item Category, a decrease in the anticipated cost to complete the work
contemplated by such Line Item Category which (i) results from the Borrower
having entered into a guaranteed maximum price Contract for the purchase of the
electrical substation equipment or the construction of the parking garage to be
located in the southern portion of the Site, in each case, supported by a
payment and performance bond reasonably satisfactory to the Construction
Consultant, (ii) results from the demolition of the existing structures at the
Site being completed for an amount that is less than the amount budgeted
therefor, (iii) results from a decrease in the anticipated cost to complete the
work contemplated by the "Owner General Conditions" Line Item which the
Borrowers are able to demonstrate to the reasonable satisfaction of the
Construction Consultant, or (iv) results from a Scope Change which (A) complies
with the requirements of section 6.2 of the Disbursement Agreement and (B)
results, to the reasonable satisfaction of the Construction Consultant, in a
quantifiable decrease in materials, supplies or required services;
(c) with respect to the "Permits and Fees" Line Item Category, a
decrease in the cost anticipated to be incurred to obtain the permits and pay
the fees contemplated by such Line Item Category as a result of the Borrower
having obtained a permit for an amount that is less than the amount budgeted for
such permit;
(d) with respect to the "Owner Construction Administration" or
"Design Costs" Line Item Categories, a decrease in the anticipated cost to
complete the work contemplated by such Line Item Category which the Borrowers
are able to demonstrate to the reasonable satisfaction of the Construction
Consultant;
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(e) with respect to the "Organizational Expenses" Line Item
Category, a decrease in the anticipated cost to complete the work contemplated
by such Line Item Category as a result of (i) tax bills or assessment for real
estate taxes being lower than the amounts budgeted therefor, as confirmed by the
Construction Consultant, (ii) with respect to the "mall leasing commissions
reserve" Line Item, the Borrowers entering into leases with prospective Mall
tenants with respect to which lease the Borrowers is not required to pay leasing
commissions (in which case the amount of Realized Savings shall be the amount of
leasing commissions which the Borrowers would have had to pay with respect to
such lease pursuant to the Mall Leasing Agreement), (iii) with respect to the
"mall tenant improvements reserve" Line Items, an excess of (A) the amount
allocated in the Project Budget to such Line Item over (B) the Base TI Budget
Amount (in which case the amount of Realized Savings shall be the amount of such
excess), or (iv) (any other savings demonstrated by the Borrowers to the
reasonable satisfaction of the Construction Consultant;
(f) with respect to the "Construction Period Interest" Line Item
Category, a decrease in the anticipated cost of construction period interest
resulting from (i) a decrease in the interest rates payable by the Borrowers
during construction or (ii) the anticipated Completion Date being earlier than
the date set therefor in the Project Schedule, in each case, as determined by
the Borrowers with (i) the concurrence of the Construction Consultant and (ii)
the concurrence of the Disbursement Agent taking into account the current and
future anticipated interest rates and the anticipated times and amounts of draws
under the relevant Financing Agreements for the payment of Project Costs;
(g) with respect to the Signage Graphics Line Item Category, a
decrease in the anticipated cost to complete the work contemplated by such Line
Item Category which (i) results from a Scope Change that (A) complies with the
requirements of section 6.2 of the Disbursement Agreement and (B) results, to
the reasonable satisfaction of the Construction Consultant, in a quantifiable
decrease in materials, supplies or required services, or (ii) the Borrowers are
otherwise able to demonstrate to the reasonable satisfaction of the Construction
Consultant;
(h) with respect to the Pre-Opening Expenses Line Item Category,
a decrease of up to twenty (20%) in the cost anticipated to be incurred to
complete the work contemplated by such Line Item Category if the Borrowers
certify that they will not spend more than the reduced amount and that such
reduced amount is an appropriate amount for such Line Item Category;
(i) with respect to the "Consumer Experience" Line Item Category,
a decrease in the cost anticipated to be incurred to complete the work
contemplated by such Line Item Category if the Borrowers certify that they do
not intend to spend more than the reduced amount and that such reduced amount is
an appropriate amount for such Line Item Category; and
(j) with respect to any Line Item Category other than the
"Working Capital" Line Item Category, the amount by which the total cost
allocated to such Line Item Category exceeds the total cost incurred by the
Borrowers to complete all aspects of the work contemplated by such Line
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Item Category (as confirmed by the Construction Consultant) which amount, if
any, may not be established until the Borrowers have actually completed all such
work; and
(k) with respect to the FF&E Line Item Category, a decrease in
the anticipated cost to complete the work contemplated by such Line Item
Category which results from a Scope Change that (i) complies with the
requirements of section 6.2 of the Disbursement Agreement and (ii) results, to
the reasonable satisfaction of the Construction Consultant in a quantifiable
decrease in materials, supplies or required services;
in each case, which is documented by the Borrowers in a Realized Savings
Certificate substantially in the form of Exhibit Y attached to the Disbursement
Agreement, duly executed and completed with all exhibits and attachments
thereto. No Realized Savings shall be obtainable with respect to the "financing
fees" or the "working capital" Line Items.
"Redundant Equipment"shall have the meaning ascribed to it in
section 1.2(e)(i).
"Register" shall mean the register of the Loans to be maintained
by the Administrative Agent pursuant to section 1.4.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
"Related Parties" shall mean and include: (i) Family Members (as
hereinafter defined); (ii) Employees and Consultants (as hereafter defined);
(iii) any person who receives an interest in LVSI or VCR from any individual
referenced in clauses (i) and (ii) in a gratuitous transfer, whether by gift,
bequest or otherwise, to the extent of such interest; (iii) the estate of any
individual referenced in clauses (i) through (iii); (iv) a trust for the benefit
of one or more of the individuals referenced in clauses (i) through (iii); and
(v) an entity owned or controlled, directly or indirectly, by one or more of the
individuals, estates of trusts referenced in clauses (i) through (iv). For the
purpose of this paragraph, a "Family Member" shall include: (i) Sheldon G.
Adelson; (ii) Dr. Miriam Adelson; (iii) any sibling of either of the foregoing;
(iv) any issue of any one or more of the individuals referenced in the preceding
clauses (i) through (iii); and (v) the spouse or issue of the spouse of one or
more of the individuals referenced in the preceding clauses (i) through (iv).
For the purpose of this paragraph, an "Employee" or "Consultant" shall include
(i) any employee of or consultant to LVSI or VCR, including but not limited to
any and all officers, managers, and directors, and (ii) the spouse and issue of
any such employee or consultant.
"Release" shall mean, as to any Person, any release or any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, disposing or migration of a Hazardous Material into
the indoor or outdoor environment by such Person (or by a person under such
Person's direction or control), including the movement of a Hazardous Material
through or in the air, soil, surface water, ground water or property; but shall
exclude any release,
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discharge, emission or disposal in material compliance with a then effective
permit or order of a Governmental Authority.
"Relevant Facility" shall have the meaning ascribed to such term
in section 5.8(a).
"Remaining Costs" shall mean, at any given time, the difference
between (a) the aggregate amount of Total Anticipated Costs set forth in column
7 of the Anticipated Costs Report as in effect from time to time and (b) the
aggregate amount of Project Costs incurred set forth in column 9 of the
Anticipated Cost Report.
"Replacement Equipment" shall have the meaning ascribed to such
term in section 1.10(b)(ii).
"Reportable Event" shall mean any of the events described in
section 4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Representation Date" shall mean and include each date on which
any representation or warranty hereunder is made or deemed to have been made.
"Required Minimum Contingency" shall have the meaning ascribed to
such term in the Disbursement Agreement.
"Required Scope Change" shall mean, with respect to each scope
change or change order proposed by either Borrower, each of the following: (a)
the consent of the Bank Agent, (b) the Consent (as defined in the Disbursement
Agreement) of the Interim Mall Lender and confirmation by the Permanent Mall
Lender that the Tranche A Take Out Commitment will continue to be in effect
after giving effect to the proposed scope change or change order (c) (i) the
consent of a majority in the principal amount of the holders of the Mortgage
Notes or (ii) confirmation by the Rating Agencies that the proposed scope change
or change order will not cause a Ratings Downgrade and (d) if the proposed scope
change or change order materially affects the HVAC Component, the consent of the
HVAC Provider.
"Requisite Lenders" shall mean Lenders having or holding more
than 50% of the sum of the aggregate Loans and unused Commitment of all Lenders.
"Restricted Junior Payment" shall mean (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of Stock
of either Borrower now or hereafter outstanding, except a dividend payable
solely in shares of that class of Stock to the holders of that class (or the
accretion of such dividends), (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of Stock of either Borrower now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of Stock of either Borrower now or hereafter outstanding, (iv) any payment or
prepayment of principal
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of, premium, if any, or interest on, or redemption, purchase, retirement,
defeasance (including in substance or legal defeasance), sinking fund or similar
payment with respect to Other Indebtedness and (v) any payment in respect of a
repayment or reimbursement of amounts advanced to any of the Borrowers and their
Subsidiaries by Sheldon G. Adelson or any Affiliate of Sheldon G. Adelson under
the Adelson Completion Guaranty or otherwise.
"Restricted Payment" shall mean, with respect to any Person, (i)
the declaration or payment of any dividend or the occurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock, (ii) any payment on account of the purchase,
redemption, defeasance or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly,
or (iii) any payment, loan, contribution, or other transfer of funds or other
property to any holder of Stock of such Person.
"Retail Annex" shall mean the retail and restaurant complex to be
developed as part of the Project and known as the "Retail Annex," as more
particularly described in Exhibit X to the Disbursement Agreement.
"Retainage Amounts" shall mean at any given time amounts which
have accrued and are owing under the terms of a Contract or Subcontract for work
or services already provided bu which at such time (and in accordance with the
terms of the Contract or Subcontract) are being withheld from payment to the
Contractor or Subcontractor, as the case may be, until certain subsequent events
(e.g., completion benchmarks) have been achieved under the Contract or
Subcontract.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing
for continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"Revolving Loans" shall mean the loans made by the Bank Lenders
to the Borrowers pursuant to section 2.1A(ii) of the Bank Credit Agreement.
"S&P" shall mean Standard & Poor's Ratings Group, a New York
corporation, or any successor thereof.
"Safe Harbor Scope Change" shall mean any Scope Change if, after
giving effect thereto the Project will be within or shall exceed the "standards"
set forth on Exhibit X to the Disbursement Agreement.
"Sale and Contribution Agreement" shall mean the Sale and
Contribution Agreement, dated as of November 14, 1997, among VCR, the Mall
Construction Subsidiary and the Mall Subsidiary.
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"Sands Expo and Convention Center" shall mean the exposition and
meeting facilities commonly known as the Sands Expo and Convention Center.
"Scheduled Equipment" shall mean all of the furniture,
furnishings, and equipment listed on Exhibit B, as amended and in effect from
time to time.
"Schedule of Documents" shall mean the schedule attached hereto
as Schedule 2.1(b), including all appendices, exhibits or schedules thereto,
listing certain documents and information to be delivered in connection with the
Loan Documents and the transactions contemplated thereunder.
"Scope Change" shall mean any change in the Plans and
Specifications or any other change to the design, layout, architecture or
quality of the Project from that which is contemplated on the Financing Date
(unless such change is required by Legal Requirements), including, without
limitation, (a) changes to the "Assumption" (as defined in the Construction
Management Agreement), (b) approval of "Drawings" (as defined in the
Construction Management Agreement) that are inconsistent with the Assumptions
(to the extent such approval constitutes a "Scope Change" under the Construction
Management Agreement), (c) additions, deletions or modifications in the "Work"
(as defined in the Construction Management Agreement), (d) uncovering and
covering a portion of the Work, if such portion, upon uncovering is found to be
acceptable and (e) modifications to the "Drawings" (as defined in the
Professional Services Agreement) to the extent the same constitute an Additional
Service under the Professional Services Agreement.
"Securities" shall mean any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and any successor statute.
"Services Agreement" shall mean the amended and restated Services
Agreement, dated as of November 14, 1997 by and among LVSI, Interface, Interface
Holding Company, Inc. and the parties stated on the schedule thereto.
"Site" shall mean the land on which the Project is to be
constructed as described in more detail in Exhibit T-4 to the Disbursement
Agreement.
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"Site Easements" shall mean the easements appurtenant, easements
in gross, license agreements and other rights running for the benefit of VCR
and/or appurtenant to the Site, including without limitation those certain
easements and licenses described in the Title Policy.
"Solvent" and "Solvency" shall mean, with respect to any Person
on a particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including without
limitation contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Special Late Casualty Deadline Extension" shall have the meaning
ascribed to it in section 1.1(b).
"Stock" shall mean all shares, options, warrants, member
interests, general or limited partnership interests, participation or other
equivalents (regardless of how designated) of or in a corporation, limited
liability company, partnership or equivalent entity whether voting or nonvoting,
including, without limitation, common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Stop Funding Notice" shall have the meaning set forth in the
Disbursement Agreement.
"Subcontracts" shall mean, collectively, the contracts entered
into, from time to time, between any Contractor and any Subcontractor for
performance of services or sale of goods in connection with the design,
engineering, installation or construction of the Project.
"Subcontractors" shall have the meaning ascribed to the term
"Contractor" in the Construction Management Agreement.
"Subordinated Noteholders" shall mean the holders of the
Subordinated Notes.
"Subordinated Notes" shall mean the $95,000,000 in aggregate face
amount of 14- 1/4% Senior Subordinated Notes due 2005 of the Borrowers issued
pursuant to the Subordinated Notes Indenture.
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"Subordinated Notes Indenture" shall mean the Indenture, dated as
of November 14, 1997, between the Borrowers, the guarantors named therein and
the Subordinated Notes Indenture Trustee.
"Subordinated Notes Indenture Trustee" shall mean First Union
National Bank in its capacity as trustee under the Subordinated Notes Indenture
and its successors in such capacity.
"Subsection 6.3(n) Indebtedness" shall have the meaning ascribed
to such term in section 6.3(n).
"Subsection 6.3(o) Indebtedness" shall have the meaning ascribed
to such term in section 6.3(o).
"Subsidiary" shall mean, with respect to any Person, (i) any
corporation of which an aggregate of 50% or more of the outstanding Stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or other wise and (ii) any partnership in which such Person
and/or one or more Subsidiaries of such Person shall have an interest (whether
in the form of voting or participation in profits or capital contribution) of
50% or more or of which any such Person is a general partner or may exercise the
powers of a general partner. Notwithstanding the foregoing, the Mall Subsidiary,
the Phase II Subsidiary, the Phase II Manager, the Phase II Direct Holdings, the
Mall Manager and Mall Direct Holdings and their respective Subsidiaries shall
not constitute Subsidiaries under this Agreement or any other Loan Document
except for purposes of section 3 (representations and warranties) (other than
section 3.7) and section 6.1 (as specified therein) and for purposes of any
definitions as used in section 3 or section 4.1.
"Substantial Completion" shall mean the Final Completion other
than any Anticipated Future Work as certified by the Borrowers and the
Construction Consultant.
"Substitute Tranche B Loan" shall mean (i) any amount funded by
Sheldon G. Adelson upon a draw under the Adelson Completion Guaranty or the
Tranche B Collateral which Sheldon G. Adelson elects to have treated as a
subordinated loan to VCR, (ii) any amounts funded to refinance the Tranche B
portion of the Interim Loan to the extent that any refinancing of the Interim
Loan is not supported by a guaranty substantially similar to the Adelson
Completion Guaranty, and (iii) any refinancing of the loans described under
clauses (i) or (ii) provided in the case of clauses (i), (ii) and (iii) that
such loans are in amounts not to exceed at any time an aggregate principal
amount of $35,000,000 (plus accrued and unpaid interest thereon) are evidenced
by Substitute Tranche B Notes and are subject to the terms of the Adelson
Intercreditor Agreement or a substantially similar intercreditor agreement, and
in the case of any such loan which refinances the
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Tranche B portion of the Interim Loan, the lender shall have entered into the
Disbursement Agreement and assumed the obligations and agreements of Interim
Mall Lender thereunder.
"Substitute Tranche B Note" shall mean a note substantially in
the form attached to the Interim Mall Credit Agreement (as in effect on the date
hereof).
"Summary Anticipated Cost Report" shall mean a report in the form
of Exhibit D to the Agreement.
"Supplemental Agent" shall have the meaning ascribed to that term
in section 9.1(b)(i).
"Syndication" shall have the meaning ascribed to it in section
10(c).
"Tax" or "Taxes" shall mean any present or future tax, levy,
impost, duty, Charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied, collected,
withheld or assessed; provided that "Tax on the overall net income" of a Person
shall be construed as a reference to a tax imposed by the jurisdiction in which
that Person is organized or in which that Person's principal office (and/or, in
the case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in
the case of a Lender, its lending office).
"Tax Amount" shall mean, with respect to an Estimation Period or
a taxable year, as the case may be, an amount equal to (A) the product of (x)
the taxable income (including all separate items of income) of LVSI or VCR, as
the case may be, for such Estimation Period or taxable year, as the case may be,
and (y) the Applicable Tax Percentage reduced by (B) to the extent not
previously taken into account, any income tax benefit attributable to LVSI or
VCR, as the case may be, which could be utilized (without regard to the actual
utilization) by its members or shareholders, as the case may be, in the current
or prior taxable year, or portion thereof, commencing on or after the Closing
Date (including any tax losses or tax credits), computed at the Applicable Tax
Percentage of the year that such benefit is taken into account for purposes of
this computation; provided, however, that, the computation of Tax Amount shall
also take into account (C) the deductibility of state and local taxes for
federal income tax purposes, and (D) any difference in the Applicable Tax
Percentage resulting from the nature of taxable income (such as capital gain as
opposed to ordinary income).
"Tax Amounts CPA" shall mean a nationally recognized certified
public accounting firm retained for the purpose of making the determinations
referred to in the last sentence of the definition of "Permitted Quarterly Tax
Distributions" set forth in this Annex A.
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"Title IV Plan" shall mean a Pension Plan, other than a
Multiemployer Plan, which is covered by Title IV of ERISA.
"Title Insurer" shall mean Lawyers Title of Nevada, Inc. or an
affiliate thereof and/or one or more other title insurance companies approved by
the Bank Agent.
"Title Policies" shall mean, collectively, the policies of the
title insurance issued by Title Insurer as of the Financing Date, as provided in
sections 3.128(i), (ii) and (iii) of the Disbursement Agreement, including all
amendments thereto, endorsements thereof and substitutions or replacements
therefor.
"Trademark License" shall mean rights under any written agreement
now owned or hereafter acquired by either Borrower granting any right to use any
Trademark or Trademark registration.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by either Borrower: (i) all common law and statutory
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles of
like nature, now existing or hereafter adopted or acquired, all registrations
and recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State or Territory thereof, or any other country or any political subdivision
thereof, (ii) all reissues, extensions or renewals thereof, and (iii) all
licenses thereunder and together with the goodwill associated with and
symbolized by such trademark.
"Tranche A Take Out Commitment" shall mean the letter, dated
November 14, 1997, setting forth the commitment of the Permanent Mall Lender to
make the loan to the Mall Subsidiary in the amount of $105,000,000 to take out
the Tranche A portion of the Interim Loan.
"Tranche A Take Out Lender" shall mean Goldman Sachs Mortgage
Company or any other lender that enters into a commitment to make and/or makes
the Tranche A Take Out Loan.
"Tranche A Take Out Loan" means a loan in an aggregate principal
amount of up to $105 Million the proceeds of which are used to pay a portion of
the purchase price under the Sale and Contribution Agreement, which loan may
consist of (a) the loan to be made by Goldman Sachs Mortgage Company pursuant to
the Tranche A Take Out Commitment, (b) a loan made by any other lender whose
commitment to make such loan replaces the commitment of Goldman Sachs Mortgage
Company in accordance with the Tri-Party Agreement or (c) the loan under the
Interim Mall Facility if and to the extent such loan is assumed by Mall
Subsidiary.
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"Tranche A Take Out Loan Agreement" shall mean the loan agreement
between the Permanent Mall Lender and the Mall Subsidiary on the terms described
in the Tranche A Take-Out Commitment.
"Tranche B Collateral" shall mean the amounts or Securities
deposited by Sheldon G. Adelson in an account subject to the security interest
of the Interim Mall Lender pursuant to the terms of the Tranche B Collateral
Security Agreement.
"Tranche B Collateral Security Agreement" shall mean the
Collateral Account Agreement, dated as of November 14, 1997, between Sheldon G.
Adelson and Interim Mall Lender.
"Tranche B Take-Out Commitment" shall mean the commitment of
Sheldon G. Adelson contained in the Tri-Party Agreement to enter into and fund a
loan to Mall Subsidiary in the maximum amount of $35.0 million to take out the
Tranche B portion of the Interim Loan or any other commitment to make such a
loan that replaces the commitment of Sheldon G. Adelson in accordance with the
Tri-Party Agreement.
"Treadway" shall mean Treadway Industries of Phoenix, Inc., an
Arizona corporation.
"Treadway Agreement" shall mean the Time and Materials Agreement,
dated February 10, 1997, by and between LVSI and Treadway.
"Tri-Party Agreement" shall mean the agreement among VCR, LVSI,
Sheldon G. Adelson, the Mall Construction Subsidiary, the Mall Subsidiary, the
Interim Mall Lender and the Permanent Mall Lender (or any successor provider of
the Tranche A Take-Out Commitment), as amended, revised or replaced from time to
time in accordance with its terms.
"True-up Amount" shall mean, in respect of a particular taxable
year, an amount determined by the Tax Amounts CPA equal to the difference
between (i) the aggregated Permitted Quarterly Tax Distributions actually
distributed in respect of such taxable year, without taking into account any
adjustments to such Permitted Quarterly Tax Distributions made with respect to
any other taxable year (including any adjustment to take into account a True-up
Amount for the immediately preceding taxable year) and (ii) the Tax Amount
permitted to be distributed in respect of such year as determined by reference
to LVSI's Internal Revenue Service Form 1120-S or VCR's IRS Form 1065 filed for
such year; provided, however, that if there is an audit or other adjustment with
respect to a return filed by the LVSI or VCR (including a filing of an amended
return), upon a final determination or resolution of such audit or other
adjustment, the Tax Amounts CPA shall redetermine the True-up Amount for the
relevant taxable year. The amount equal to the excess, if any, of the amount
described in clause (i) above over the amount described in clause (ii) above
shall be referred to as the "True-up Amount due to LVSI" or the "True-up Amount
due to VCR", as the case may be, and the excess, if any, of the amount described
in clause (ii) over the amount described in clause (i) shall be referred to as
the "True-up Amount due to the shareholders or members."
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"True-up Determination Date" shall mean the date on which the Tax
Amounts CPA shall deliver to the Administrative Agent a statement indicating the
True-up Amount; provided, however, that the True-up Determination Date shall not
be later than thirty days after the date of the occurrence of an event requiring
the determination of the True-up Amount (including the filing of the federal and
state tax returns or the final determination or resolution of an audit or other
adjustment, as the case may be).
"UCC" shall mean the Uniform Commercial Code as the same may from
time to time be in effect in the State of New York; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of security interest of the Administrative
Agent, for the benefit of the Lenders, in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, the term "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"Unallocated Contingency Balance" shall mean, as of any date, the
amount of the "unallocated contingency" Line Item set forth in the Project
Budget as in effect on such date (a) increased by the aggregate of all negative
variances (other than for Bovis Line Items) listed in column 8 of the Summary
Anticipated Cost Report in effect on such date, (b) decreased by the aggregate
of all positive variances (other than for Bovis Line Items) listed in column 8
of the Summary Anticipated Cost Report in effect on such date, (c) increased by
the negative amount, if any, of the Bovis Balance, and (d) decreased by the
positive amount, if any, of the Bovis Balance.
"Unfinished Hotel Suites" shall mean hotel suites that are in the
hotel portion of the Hotel/Casino other than the 2000 suites identified in
clause (b) of the definition of Project Construction Termination.
"Unfunded Pension Liability" shall mean, at any time, the
aggregate amount, if any, of the sum of (i) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions in
effect under such Title IV Plan, and (ii) for a period of five (5) years
following a transaction reasonably likely to be covered by section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by a
Borrower or any ERISA Affiliate thereof as a result of such transaction.
"VCR" shall mean Venetian Casino Resort, LLC, a Nevada limited
liability company.
"Welfare Plans" shall mean any welfare plan, as defined in
section 3(1) of ERISA, which is maintained or contributed to by a Borrower or
any ERISA Affiliate thereof.
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"Withdrawal Liability" shall mean, at any time, the aggregate
amount of the liabilities, if any, pursuant to section 4201 of ERISA, and any
increase in contributions pursuant to section 4243 of ERISA with respect to all
Multiemployer Plans.
"Withdrawal Period" shall have the meaning ascribed to such term
in section 11.20(b).
"Work Continuation Agreement" shall mean the Work Continuation
Agreement for Construction of Sands Venetian Project, Las Vegas, Nevada, dated
as of April 10, 1997, between the Construction Manager and the Building and
Trades Union of Southern Nevada and its affiliated local unions.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain items or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. All other undefined terms contained in this Agreement shall,
unless the context indicates otherwise, have the meanings provided for by the
UCC as in effect in the State of New York to the extent the same are used or
defined therein. The words "herein," "hereof" and "hereunder" or other words of
similar import refer to the Agreement as a whole, including the Annexes,
Exhibits and Schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
57
AGREEMENT AMONG CREDITORS
AGREEMENT, dated as of December 22, 1997, by and among THE BANK OF NOVA
SCOTIA, a Canadian chartered bank, in its capacity as Administrative Agent under
the Bank Credit Agreement hereinafter referred to (in such capacity, the "Bank
Agent"), FIRST TRUST NATIONAL ASSOCIATION, a national banking association, in
its capacity as trustee under the Mortgage Notes Indenture hereinafter referred
to (in such capacity, the "Mortgage Notes Indenture Trustee"), GMAC COMMERCIAL
MORTGAGE CORPORATION, a California corporation (the "Interim Mall Lender"), and
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, in its capacity as
Administrative Agent under the Equipment Loan Agreement hereinafter referred to
(in such capacity, the "Equipment Loan Agent").
Preliminary Statement
A. Las Vegas Sands, Inc., a Nevada corporation ("LVSI"), and its
subsidiary Venetian Casino Resort, LLC, a Nevada limited liability company
("VCR" and with LVSI, collectively, the "Borrowers"), are constructing and
developing a large scale Venetian-themed hotel, casino, retail, meeting and
entertainment complex to be known as the Venetian Casino Resort on the site of
the former Las Vegas Sands Hotel and Casino in Las Vegas, Nevada (the
"Project"). The parties to this agreement are all providing funds (or serving as
agents or trustees for providers of funds) to be used in connection with the
construction and development of the Project.
B. Under a Credit Agreement, dated as of November 14, 1997 (the "Bank
Credit Agreement"), among the Borrowers, the lenders referred to therein (herein
collectively, the "Bank Lenders"), Goldman Sachs Credit Partners L.P., as
syndication agent and arranger, and the Bank Agent, the Bank Lenders have agreed
on the terms set forth therein to provide term loans, revolving credit advances
and letters of credit of up to $170,000,000 in aggregate amount to fund a
portion of the costs of the construction and development of the Project (the
"Project Costs") and to provide working capital for the Borrowers' operations.
C. The Borrowers have issued and sold $425,000,000 aggregate face amount
of their 12-1/4% Mortgage Notes due November 15, 2004 (the "Mortgage Notes")
under an Indenture, dated as of November 14, 1997 (the "Mortgage Notes
Indenture"), by and among the Borrowers, certain guarantors named therein and
the Mortgage Notes Indenture Trustee. The proceeds of the issuance and sale of
the Mortgage Notes have been deposited in a senior notes proceeds account, to be
disbursed therefrom by the Disbursement Agent (hereinafter referred to) to pay
for a portion of the Project Costs.
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D. The Borrowers have also issued and sold $97,500,000 aggregate face
amount of their 14-1/4% Senior Subordinated Notes due November 15, 2005 (the
"Senior Subordinated Notes" and with the Mortgage Notes collectively, the
"Notes") under an Indenture, dated as of November 14, 1997 (the "Senior
Subordinated Notes Indenture" and with the Mortgage Notes Indenture
collectively, the "Indentures"), by and among the Borrowers, certain guarantors
named therein and First Union National Bank, a national banking association, in
its capacity as trustee (the "Subordinated Notes Indenture Trustee"). The
proceeds of the issuance and sale of the Senior Subordinated Notes have been
deposited in an account to be disbursed therefrom by the Disbursement Agent to
pay for a portion of the Project Costs.
E. The Borrowers, their affiliate Grand Canal Shops Mall Construction,
LLC, a Nevada limited liability company ("GCCLLC"), and the Interim Mall Lender
have entered into an Interim Mall Credit Agreement, dated as of November 14,
1997 (the "Interim Mall Credit Agreement"), under which the Interim Mall Lender
has agreed to make loans to the Borrowers and GCCLLC in principal amounts
aggregating $140,000,000 to fund a portion of the Project Costs.
F. VCR and Atlantic-Pacific, Las Vegas, LLC, a Delaware limited
liability company (the "HVAC Provider") have entered into an Energy Services
Agreement, dated as of November 14, 1997 (the "Energy Services Agreement"),
pursuant to which the HVAC Provider has agreed, among other things, subject to
the terms thereof, to contribute up to $70,000,000 for the acquisition,
construction, testing and installation of the Project's heating, ventilating and
air conditioning system, which system the HVAC Provider will own and will
operate for the benefit of the Project under a contract with VCR.
G. The Borrowers, certain lenders named therein (the "Equipment
Lenders"), BancBoston Leasing Inc. in its capacity as Co-Agent, and the
Equipment Loan Agent have entered or expect to enter into a Term Loan and
Security Agreement, dated as of December 22, 1997 (the "Equipment Loan
Agreement"), pursuant to which the Equipment Lenders have agreed or will agree
to make loans and advances to the Borrowers in principal amounts not to exceed
in the aggregate $97,700,000 to finance the costs of acquiring the Project's
electrical substation and certain other specified units and items of equipment,
furniture and furnishings to be used in connection with the operation of the
Project.
H. The Borrowers, GCCLLC, the Bank Agent, the Mortgage Notes Indenture
Trustee, the Interim Mall Lender and the HVAC Provider have entered into a
Funding Agents' Disbursement and Administration Agreement, dated as of November
14, 1997 (the "Original Disbursement Agreement"), with The Bank of Nova Scotia
in its capacity as Disbursement Agent thereunder (in such capacity, the
"Disbursement Agent") in order to establish certain mechanics for the
coordination of funding and disbursement procedures as among the various sources
of funds, including those described in paragraphs B through F above and for
certain other purposes. As used herein, the term "Disbursement Agreement" means
the Original Disbursement Agreement as the same may be amended (x) with the
consent of the Equipment Loan Agent (it
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being acknowledged that no consent of the Equipment Lenders is required for such
an amendment) or (y) without any consent of the Equipment Loan Agent having been
obtained but only if, in the event described in this clause (y), that the
amendment does not alter any definitions or other provisions therein which
impact this Agreement.
I. The Bank Agent, the Indenture Trustees and the Interim Mall Lender
have entered into an Intercreditor Agreement, dated as of November 14, 1997 (the
"Intercreditor Agreement"), with the Intercreditor Agent referred to therein in
order to formalize certain understandings among the Project creditors parties
thereto concerning decision making, enforcement initiatives and the application
of proceeds of enforcement actions in relation to their various sources of funds
for the Project.
J. The Bank Agent, the Mortgage Note Indenture Trustee, the Interim Mall
Lender and the Equipment Loan Agent now wish to enter into an agreement in order
to confirm certain understandings amongst themselves.
NOW, THEREFORE, the parties hereto, each intending to be legally bound,
hereby agree as follows:
1. The recitals contained in the Preliminary Statement preceding this
Agreement (the "Preliminary Statement") are hereby incorporated into this
Agreement and made a part hereof. The provisions of this Agreement Among
Creditors are strictly for the benefit of the parties hereto and their
successors and permitted assigns, and no provision hereof is intended to benefit
or shall inure to the benefit of either Borrower or any affiliate thereof or any
other person not a party hereto. Neither the Borrower, the Subordinated Notes
Indenture Trustee, the HVAC Provider nor any other third party shall have the
right to enforce any provision of this Agreement, whether as a third-party
beneficiary or otherwise. For the avoidance of doubt, nothing contained in this
Agreement shall affect the obligations of the Borrowers to pay, faithfully and
punctually when due, all of the principal of and interest on, and all fees and
other amounts owing from time to time under or in respect of, the loans,
extensions of credit and investments referred to in paragraphs B through G of
the Preliminary Statement, which obligations of the Borrowers are absolute and
unconditional.
2. Herein, (i) the Bank Lenders, the holders from time to time of the
Mortgage Notes, the Interim Mall Lender and the Equipment Lenders are sometimes
referred to individually (whether one or more entities in each case) as a
"Lender Group" and collectively as the "Lenders;" (ii) the Agreements and
Indentures identified in paragraphs B, C, E and G of the Preliminary Statement
are sometimes referred to collectively as the "Basic Documents;" (iii) all of
the obligations of the Borrowers (and in the case of the Interim Mall Credit
Agreement, GCCLLC), and their subsidiaries and affiliates as applicable, under
the Basic Documents and all of the other agreements, guarantees, documents and
instruments entered into pursuant to the terms of the Basic Documents, including
without limitation the obligations to pay when due the principal, interest, fees
and other amounts owing from time to time on, under or in respect of the
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loans, other extensions of credit and investments contemplated by the Basic
Documents and such other agreements, documents and instruments, are sometimes
referred to collectively as the "Obligations," and (iv) the parties obligated
from time to time on the Obligations, including without limitation the
Borrowers, GCCLLC and their various subsidiaries and affiliates as applicable,
are sometimes referred to collectively as the "Obligors."
3. (a) Attached hereto as Exhibit A is a list of the units or items
of the new furniture and equipment (including a description of the General
Electric electrical substation) to be purchased with the proceeds of the loans
to be made under the Equipment Loan Agreement (such listed units and items, as
the same may be amended from time to time in accordance with the terms of the
Equipment Loan Agreement, the "Specified Equipment").
(b) To the extent that before an advance under the Equipment Loan
Agreement with respect to particular units or items of Specified Equipment the
Bank Lenders may extend credit to the Borrowers, or the Disbursement Agent may
otherwise disburse funds, to permit the funding of the costs of acquiring those
units or items of the Specified Equipment (including deposits or down payments
thereon made prior to acquisition), the Bank Agent shall furnish to the
Equipment Loan Agent a written notice specifying the units or items in question
and setting forth with respect to each the amount or amounts advanced or to be
advanced, but the failure to do so shall not affect any lien of the Bank Agent
under the Bank Credit Agreement for the benefit of the Bank Lenders.
(c) On the date of a borrowing under the Equipment Loan Agreement
to finance an item or unit of the Specified Equipment referred to in paragraph
3(b), the Equipment Loan Agent shall upon instruction of the Borrowers (or their
representative) disburse out of the proceeds of such borrowing and transmit to
the Disbursement Agent a sum equal to the lesser of (x) the aggregate amount
advanced by the Bank Lenders or the Disbursement Agent on account of the costs
of acquisition of the units or items in question and (y) the aggregate of the
amounts set forth opposite the items or units in question on Exhibit A hereto,
against the delivery by the Bank Agent and the Mortgage Notes Indenture Trustee
to the Equipment Loan Agent of good receipt therefor together with such proper
Uniform Commercial Code financing statement release forms and other documents
and instruments as the Equipment Loan Agent may reasonably request in order to
enable the Equipment Loan Agent to document the release and to satisfy of record
any and all liens and security interests of the Bank Agent or any of the Bank
Lenders (or other members, if any, of the Lender Group including the Bank
Lenders) and the Mortgage Notes Indenture Trustee in or on the units or items of
the Specified Equipment in question.
(d) Each party hereto acknowledges and agrees that, regardless of
the execution, delivery, filing and/or recording of any financing statement or
other security document (i) except for the security interests of the Bank Agent
for the benefit of the Bank Lenders and the Mortgage Notes Indenture Trustee to
secure extensions of credit referred to in subparagraph (b) above, no Lender
Group (other than the Equipment Lenders, including the Equipment Loan Agent), or
any agent, trustee or other representative therefor, has or shall have any lien
on, security interest in or
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claim with respect to any unit or item of the Specified Equipment including any
of the Specified Substitutes and any of the other collateral referred to in
subparagraph (e) related to such unit or item, to the extent that the Equipment
Lenders have made advances with respect to such unit or item or such unit or
item constitutes a Specified Substitute, so long as any of the Obligations owing
to the Equipment Loan Agent or to any Equipment Lender shall remain unpaid or
the Equipment Lenders shall have any commitments to extend credit under the
Equipment Loan Agreement and (ii) from and after the delivery of the Bank
Agent's and the Disbursement Agent's receipt as provided in subparagraph (c)
none of the Bank Agent, any Bank Lender or other party to the Bank Credit
Agreement or the Mortgage Notes Indenture Trustee shall have or may assert any
lien on, security interest in or claim with respect to such unit or item of the
Specified Equipment (including Specified Substitutes therefor) or other related
collateral as set forth in subparagraph 3(e) so long as any of the Obligations
owing to the Equipment Loan Agent or to any Equipment Lender shall remain unpaid
or the Equipment Lenders shall have any commitments to extend credit under the
Equipment Loan Agreement. Without limiting the generality of paragraph 1, the
provisions of this paragraph 3(d) are strictly for the benefit of the parties
hereto, and nothing herein contained shall affect the validity or enforceability
of any security document, or the lien thereof.
(e) In consideration of the acknowledgments set forth in
subparagraph (d), the Equipment Loan Agent acknowledges and agrees that its
liens on and security interests in the property of the Borrowers are limited to
liens on and security interests in the Specified Equipment, all items or units
of equipment acquired in substitution or replacement therefor, spare and other
parts, attachments, components, substitutes, accessories, accessions (which term
shall not include the removable contents (not financed by the Equipment Lenders)
of any of the Specified Equipment or Specified Substitute, for example, and by
way of illustration, cash in slot machines and contents of minibars), manuals,
installation kits, manufacturers' and other warranties and guarantees and
service contracts and similar rights related to the foregoing, and rights in any
software and firmware, trademark licenses and other intellectual property
related to the foregoing goods, and all documents of title (including without
limitation warehouse receipts, dock receipts, bills of lading and the like)
covering any of the foregoing, cash collateral from time to time held by the
Equipment Loan Agent under any provision of the Equipment Loan Agreement, and
all proceeds (including insurance and condemnation proceeds and proceeds of
other proceeds) of the foregoing.
(f) As more fully provided therein, the Borrowers are entitled
under the terms of the Equipment Loan Agreement, with the consent of the
Equipment Loan Agent, eliminate from the list of Specified Equipment certain
units or items thereof and replace the same with other specific units or items
of furniture or equipment (the "Specified Substitutes") useful and to be used in
the operation of the Project of substantially like kind with the units or items
eliminated and of good quality. In such event, the Borrowers will, subject to
the approval of the Equipment Loan Agent, revise the list of Specified Equipment
accordingly and promptly furnish to the Disbursement Agent a copy of the
approved revised list of Specified Equipment. In addition, under the Equipment
Loan Agreement the Borrowers have certain limited rights to eliminate
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from the list of Specified Equipment specific units or items thereof to enable
the Borrowers to obtain Alternative Vendor Financing (as defined in the
Equipment Loan Agreement) for such eliminated units or items. From and after
their elimination from the list of Specified Equipment, the units or items so
eliminated to free them for Alternative Vendor Financing shall cease to be
covered by the lien and security interest created by the Equipment Loan
Agreement. Upon written request of the Bank Agent from time to time, the
Equipment Loan Agent will execute and deliver such proper Uniform Commercial
Code financing statement release forms and other documents and instruments as
the Bank Agent may reasonably request in order to document the release from and
satisfy of record any and all of the liens and security interests of the
Equipment Lenders and the Equipment Loan Agent in and to the eliminated units
and items of Specified Equipment referred to in this subparagraph (f).
(g) The parties hereto mutually acknowledge and agree that the
Specified Equipment includes an electrical power substation manufactured by the
General Electric Company (the "Power Substation"), that when installed such
Power Substation will be attached to the Project real property in such manner as
to enable the detachment and removal of the Power Substation without material
injury to the freehold and that none of the other Specified Equipment will be
attached or affixed to the Project real property in a manner that would prevent
its removal without material injury to the freehold. The parties further agree
that in the event that the Equipment Lenders or the Equipment Loan Agent or
another agent or representative of the Equipment Lenders shall be entitled under
the terms of the Equipment Loan Agreement (and subject to the provisions of
paragraphs 4 through 18 hereof) to remove or repossess, or otherwise take
possession of, the Power Substation or any other portion of the Specified
Equipment (including without limitation any Specified Substitutes) or other
collateral referred to in paragraph 3(e) of the Equipment Lenders as described
above, each of the other Lender Groups will refrain from interfering with,
delaying or otherwise impeding the efforts of the Equipment Lenders (or the
Equipment Loan Agent or other agent or representative referred to above) to
effect such removal, possession or repossession, or asserting any lien on,
security interest in or claim or right (including without limitation any right
in the nature of distress) to any portion of such Specified Equipment or other
collateral referred to in paragraph 3(e), but will instead extend such
reasonable cooperation (including without limitation access to the Project to
the extent under their control), but without incurring any material expense
unless reimbursed to their satisfaction, with the efforts of the Equipment
Lenders and their agents and representatives aforesaid to complete such removal,
possession or repossession as may reasonably be requested. The provisions of
this paragraph 3(g) are in addition to, and not in limitation on, the
undertakings of the Bank Agent, the Mortgage Notes Indenture Trustee and others
set forth in the mortgagee waivers and landlord waivers to be delivered and
recorded by the Borrowers in favor of the Equipment Loan Agent prior to the
first advance under the Equipment Loan Agreement.
(h) In addition to and without limitation upon the foregoing,
each party hereto shall provide, and shall procure that its Lender Group shall
provide, to each of the other Lender Groups all such further assurances,
including without limitation the execution and delivery of such additional
documents and instruments and the performance of such other and further acts
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and things, as any of the other Lender Groups may reasonably request in order to
carry out the provisions of this paragraph 3 and the other provisions of this
Agreement or otherwise to implement and give effect to the intent and purpose of
this paragraph 3 and the other provisions of this Agreement.
(i) Notwithstanding anything to the contrary contained in the
Equipment Loan Agreement or this Agreement, the Bank Agent, on behalf of the
Bank Lenders, shall have, insofar as the Equipment Lenders are concerned, a
first priority perfected security interest in any units or items of Specified
Equipment with respect to which the Bank Lenders or the Disbursement Agent
(pursuant to section 2.2.3(b)(ii) of the Disbursement Agreement) have advanced
funds until, in the case of each such unit or item, such security interest is
released in connection with an advance under the Equipment Loan Agreement with
respect to such unit or item, and (subject to any Standstill undertaking of the
Bank Lenders in effect at the time) the Equipment Lenders shall not challenge or
interfere in any manner with the exercise of remedies by the Bank Agent or the
Bank Lenders with respect to any such unit or item as to which the Bank Lenders
have advanced funds until such security interest of the Bank Agent is released
as aforesaid.
(j) In the event that (A) the commitments of the Equipment
Lenders to make loans or advances under the Equipment Loan Agreement have
expired or been terminated and (B) at the time of such expiration or termination
the Equipment Lenders have not made any loan or advance under the Equipment Loan
Agreement with respect to a particular unit or item of the Specified Equipment
and (C) the Bank Lenders or the Disbursement Agent have made loans or advances
under the Bank Credit Agreement or section 2.2.3(b)(ii) of the Disbursement
Agreement with respect to such unit or item, then upon request of the Bank Agent
the Equipment Loan Agent will execute and deliver to the Bank Agent such UCC-3
release or termination statements and other documents and instruments as the
Bank Agent may reasonably request in order to cancel and terminate of record any
security interest which the Equipment Loan Agent for the benefit of the
Equipment Lenders may have in such unit or item.
4. As used herein, the term "Standstill" shall refer to an undertaking
on the part of a Lender Group to forebear, for finite time periods as
hereinafter provided, the exercise of the remedies of such Lender Group (or
those of an agent or trustee therefor), including the right to terminate a
commitment to lend, invest or disburse occasioned by the occurrence of an
unremedied default or event of default on the part of an Obligor under an
Obligation, in order to enable the Lenders to explore among themselves (but
without any obligation to do so) and with the Borrowers possible financial
solutions. The taking of initial legal steps (including without limitation the
commencement of suits for foreclosure, repossession or other enforcement), and
the issuances of notices of default or of sale and the like on the part of a
Lender Group (or an agent or trustee therefor), shall not be considered
inconsistent with the observance of a Standstill on the part of such Lender
Group so long as no decree of foreclosure or sale shall have been entered, no
repossession or reentry shall have occurred, no levy or sale shall have taken
place, no receiver, custodian or similar official shall have been appointed or
introduced or shall have taken
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<PAGE>
custody, and the steps in question shall not have been such as to have made the
continued operation of the Project business impractical.
5. As used herein, the terms (i) "Phase I" shall refer to the period
from and after the date hereof until the date of the first interim loan advance
under the Equipment Loan Agreement, (ii) "Phase II" shall refer to the period
from and after the date of the first interim loan advance under the Equipment
Loan Agreement until the earlier of the date the Project shall have attained
"Completion" (as such term is defined in the Equipment Loan Agreement) and the
Completion Deadline Date (hereinafter defined), and (iii) "Phase III" shall
refer to the period from and after the date on which the Project shall have
attained Completion.
6. For value received, upon the written request of each of the other
parties hereto containing an agreement by each of them to effect and observe the
requested Standstill (a "Standstill Request") and which is received within 10
business days after notice from the Equipment Loan Agent that the Equipment
Lenders have either (i) accelerated the maturity of the Obligations of the
Borrowers under the Equipment Loan Agreement or (ii) intend to take remedies
that would not be permitted in the event of a Standstill (which notice the
Equipment Loan Agent agrees to give to each of the other parties hereto 10
business days before taking any action described in either of clauses (i) and
(ii) if at the time the obligation to effect a Standstill upon proper request
would apply), the Equipment Loan Agent, on behalf of the Equipment Lenders,
hereby undertakes to effect a Standstill, the same to commence as of the date
the notice from the Equipment Loan Agent is deemed given and to continue for the
duration applicable to the Phase during which the Standstill shall have
commenced (herein, the "Applicable Standstill Period"), as more fully specified
in paragraphs 7 through 12 inclusive, and thereafter to observe such Standstill
faithfully unless and until (i) the Applicable Standstill Period shall have
expired, (ii) any of the conditions set forth in section 7 shall no longer be
satisfied, including without limitation if a Special Default (as defined in
paragraph 17) (hereinafter defined) shall have occurred or (iii) the obligation
to observe the Standstill shall have been discharged by the mutual agreement of
all parties hereto. The observance of a Standstill hereunder shall in no event
obligate any Lender Group to make any additional advances or otherwise extend
any further credit to or make any additional investments in any Borrower or
affiliate thereof during the Standstill period nor otherwise when there shall
exist any unsatisfied conditions to the obligations of such Lender Group to do
so under its Basic Document or any document related thereto, nor to excuse or
waive any uncured default or event of default occasioning the Standstill or any
other uncured default or event of default, nor to restrict the ability of any
Lender Group (or an agent or trustee therefor) to declare the existence of an
event of default or to accelerate the maturity of the Obligations owed to it.
7. It shall in each such case be a condition precedent to the obligation
of the Equipment Lenders to undertake to observe, and once undertaken to
continue on any date to observe, a Standstill that:
(a) no Special Default shall have occurred;
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<PAGE>
(b) such Lender Group (or an agent or trustee therefor) shall
have declared the existence of an event of default under its Basic
Document or any document related thereto (or the event of default
thereunder shall have occurred automatically and without declaration),
or such Lender Group otherwise shall have accelerated the Obligations
owing to it;
(c) the default constituting or producing the event of default
which resulted in the declaration or acceleration or which otherwise
occasioned the request for a Standstill shall not be of a nature such
that it is inherently irreversible or incapable of rectification and
cure (such as, by way of illustration of irreversibility, the
effectuation of a merger of a Borrower contrary to a prohibition
contained in a Basic Document) (any such default or event of default
being herein sometimes referred to as an "Irreversible" default or event
of default);
(d) none of the Specified Equipment (including Specified
Substitutes) shall have suffered any material damage, loss, removal,
deterioration or disposition not otherwise permitted by the terms of the
Equipment Loan Agreement;
(e) each other Lender Group, the HVAC Provider and each provider
of any Alternative Vendor Financing (as defined in the Equipment Loan
Agreement) then outstanding shall be legally obligated to observe, and
shall be in compliance with its obligation to observe, the same
Standstill, as and to the same extent (except that each such Lender
Group may advance or disburse funds from cash collateral accounts to pay
current interest and current fees to itself or to other Lender Groups)
provided that either the Bank Agent or the Mortgage Notes Indenture
Trustee may give notice that their respective obligations to continue
the Standstill will terminate 10 business days after delivery of such
notice, in which case the obligations of the Equipment Lenders to effect
a Standstill will expire on such tenth business day; and provided, that
the HVAC Provider may be obligated for a Standstill of lesser duration
than the periods set forth herein, in which case the Equipment Lenders'
obligation to effect a Standstill will expire simultaneously with the
expiration of the corresponding obligation of the HVAC Provider unless
prior to such expiration the Equipment Loan Agent shall have received
evidence reasonably satisfactory to the Equipment Loan Agent that the
expiration of the corresponding obligations of the HVAC Provider have
been extended to a date on or after the date of expiration of the
Standstill obligation of the Equipment Lenders;
(f) there shall not have occurred a previous Standstill during
the same Phase, in the case of Phases I and III, nor more than one
previous Standstill during the same Phase, in the case of Phase II;
(g) in the case of a Standstill occurring during Phase I or II,
the Project (including without limitation the hotel and casino
component) shall be likely to commence
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operations and open to the general public, and the Project in general
shall be likely to attain Completion (as such term is defined in the
Equipment Loan Agreement), by the Completion Deadline Date referred to
in paragraph 15 (as the same may have been extended under such
paragraph), as evidenced by a certificate to such effect delivered to
such Lender Group by the Construction Consultant (defined for purposes
of this Agreement to be Tishman Construction Corporation of Nevada or a
successor construction consultant acceptable to the Equipment Lenders
(and for this purpose the Construction Consultant may assume that funds
will be available for such construction and development); and
(h) in the case of a Standstill occurring during Phase I or II,
the Completion Deadline Date shall not have occurred without the Project
having attained Completion (as defined in the Equipment Loan Agreement).
Whenever any of the foregoing conditions shall cease to be satisfied, any
Standstill obligation then in effect shall as to all parties expire, forthwith
and without notice.
8. During Phase I, the Applicable Standstill Period shall commence on
the date notice is deemed given of the declaration, acceleration or other action
occasioning the Standstill request (the "Declaration Date") and shall expire 120
days thereafter, or sooner if any condition set forth in section 7 shall cease
to be satisfied or if the event of default occasioning the declaration,
acceleration or other action, and all other events of default under the
Equipment Loan Agreement are cured and the Lenders are restored to their prior
positions (it being agreed that the Equipment Lenders shall rescind any
acceleration upon the cure of all events of default under the Equipment Loan
Agreement.
9. During Phase II, the Applicable Standstill Period shall commence on
the Declaration Date and, subject to paragraphs 10 and 11, shall expire 30 days
thereafter, or sooner if any condition set forth in section 7 shall cease to be
satisfied or if the event of default occasioning the declaration, acceleration
or other action, and all other events of default under the Equipment Loan
Agreement are cured and the Lenders are restored to their prior positions (it
being agreed that the Equipment Lenders shall rescind any acceleration upon the
cure of all events of default under the Equipment Loan Agreement.
10. If at the end of the 30-day period referred to in paragraph 9 the
Equipment Loan Agent shall have received a Standstill Request, all of the
conditions specified in paragraph 7 remain satisfied and the Equipment Lenders
are paid all interest, fees and expense payments if any, under the Equipment
Loan Agreement owed by the Borrowers at that time, the period of its Standstill
shall extend for up to three consecutive additional periods, each of 30 days'
duration, the first to commence on the day after the last day of the 30-day
period referred to in paragraph 9 and the other two to commence on the day after
the last day of the preceding period, provided, that the obligation of the
Equipment Lenders to observe the Standstill as so extended shall terminate,
automatically and without notice, if any Obligations owing to the Equipment
Lenders
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which consist of interest, fee or expense payments cease to be kept current by
prompt and timely payments on a monthly basis under the terms of the Equipment
Loan Agreement, (whether or not the Borrowers prior to the Standstill were
paying on a quarterly or other basis or at the end of an interest period, or had
elected to accrue interest rather than pay it periodically) or if any of the
conditions described in paragraph 7 shall cease to be satisfied.
11. (a) If on the last day of the Standstill period occurring during
Phase II (as such Standstill period shall have been extended to a total of 120
days in accordance with paragraph 10), the Equipment Loan Agent shall have
received a Standstill Request, all of the conditions specified in paragraph 7
remain satisfied, all interest, fees and expense payments owing to the Equipment
Lenders under the Equipment Loan Agreement have been paid and there exists no
event of default under the Equipment Loan Agreement other than an event of
default (i) which is susceptible of cure (such as through the contribution of
additional equity capital or by other means) and (ii) consists only of a failure
to comply with the In Balance Requirement (defined in paragraph 18), then the
Equipment Lenders shall further extend the period of the Standstill for an
additional period of 60 days (to a total not to exceed 180 days), to commence on
the day after the last day of the period referred to in paragraph 10, provided
that prior to such 60-day extension the Equipment Loan Agent shall have received
from the Borrowers a written plan, prepared in good faith by the management of
the Borrowers with the assistance of their financial advisers and the advice of
counsel which plan is reasonably acceptable to the Equipment Lenders, for the
obtaining of the additional funds required to restore compliance with the In
Balance Requirement by the end of the 60-day period referred to in this
paragraph 11(a). Notwithstanding the foregoing, the obligation of the Equipment
Lenders to observe the further extension of the Standstill contemplated by this
paragraph 11(a) shall expire, automatically and without notice, in the event
that such plan (as the same may have been subsequently modified in a manner
reasonably acceptable to the Equipment Lenders) is subsequently abandoned or
otherwise becomes manifestly incapable of timely implementation, or if
Obligations owing to that Lender Group which consist of interest, fee and other
expense payments cease to be kept current by prompt and timely payments on a
monthly basis or if any of the conditions described in paragraph 7 shall cease
to be satisfied.
(b) During the further extension of the Standstill period
contemplated by this paragraph 11, the Equipment Loan Agent will promptly notify
the Disbursement Agent in the event that any Obligations owing to the Equipment
Lenders which consist of interest, fee and other expense payments shall cease to
be kept current or otherwise if any event or condition shall have occurred or
exist which shall have caused the obligation of the Equipment Lenders to observe
the further extension of the Standstill under this paragraph 11 to be
terminated.
(c) Any extension or further extension of a Standstill period
contemplated by paragraph 10 or this paragraph 11 shall cease if the event or
events of default occasioning the declaration, acceleration or other action
resulting in the request for a Standstill shall have been cured, and
acceleration due to any such event or events of default shall have been
rescinded and
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the Lenders shall have been restored to their prior positions. In no event shall
any such extension or further extension provisions apply to a Standstill
occurring in Phase I or III.
12. During Phase III, the Applicable Standstill Period shall commence on
the Declaration Date and shall expire 30 days thereafter, or sooner in the event
that any condition specified in section 7 shall no longer be satisfied or if the
event of default occasioning the declaration, acceleration or other action is
cured and the Lenders are restored to their prior positions.
13. For purposes of the foregoing, interest, fee and expenses payments
owing to the Equipment Lenders shall not be considered to have been brought
current or kept current unless the Obligors shall continue to make payments,
faithfully on a monthly basis, of all commitment fees payable to the Equipment
Lenders under the Equipment Loan Agreement whether or not the commitments
thereunder shall have expired or been suspended by reason of any of the events
or circumstances giving rise to a request for a Standstill.
14. Nothing contained in this Agreement shall affect any limitation
contained in a Basic Document on the right of an Obligor to assign, transfer or
otherwise dispose, voluntarily or involuntarily, of any of its rights under a
Basic Document, including without limitation any restriction contained in a
Basic Document on the ability to assign or otherwise transfer to a successor
developer or as a collateral assignment by any Obligor or a Lender, it being
acknowledged that no such voluntary or involuntary assignment, transfer or other
disposition is permitted under the terms of the Equipment Loan Agreement. In
addition, nothing contained in this Agreement shall restrict the right of any
Lender Group to enter into an amendment to or grant a waiver or consent under a
Basic Document.
15. As used herein (and solely for purposes of this Agreement among
Creditors), the term "Completion Deadline Date" shall mean November 1, 1999,
provided, however, that if the Project shall on or after November 1, 1998 suffer
a material fire, explosion, structural collapse or flood or other material
casualty event, and if both on the date of such event and on November 1, 1999
there does not exist any unremedied event of default, or event which with notice
or lapse of time, or both, would constitute an event of default, under the Basic
Document of any Lender Group and (x) the resulting damage to the Project and the
collateral, if any, of each Lender Group is fully covered (commercially
reasonable deductibles excepted) by casualty, delayed opening and business
interruption insurance and (y) but for the occurrence of such event the Project
would have attained Completion (as defined in the
Equipment Loan Agreement) on or before November 1, 1999, and (z) the resulting
damage is capable of repair by a date no later than January 31, 2000 (the
satisfaction of such events to be evidenced by certificates to such effect
delivered to each of the Lenders by the Insurance Advisor, in the case of clause
(x), and by the Construction Consultant, in the case of clauses (y) and (z)),
then the Construction Deadline Date shall upon written request of the Obligors
be extended as may be required to a date or dates not later than January 31,
2000. For purposes of this Agreement, the term Insurance Adviser shall
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mean Sedgewick James of Tennessee, Inc. or a successor insurance adviser
acceptable to each of the Lender Groups.
16. Each party hereto represents and warrants to each other party as
follows:
(a) it is duly organized, validly existing and in good standing
under the laws of the jurisdiction under which it was organized with full power,
authority and legal right to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby;
(b) all actions necessary to authorize the execution, delivery
and performance of this Agreement by or on behalf of the representing party have
been duly taken, and all such authorizations continue to be in full force and
effect as of the date hereof;
(c) it has duly executed and delivered this Agreement and this
Agreement constitutes its legal, valid and binding obligation enforceable
against the representing party in accordance with the terms hereof subject to
applicable bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting the enforcement of creditors' rights generally and
to general principles of equity, which may apply regardless of whether a
proceeding is brought in equity or at law;
(d) to the best of its knowledge, no consent of any other party
and no consent, license, approval or authorization of, or exemption by, or
registration or declaration or filing with any governmental authority, bureau or
agency is required in connection with the execution, delivery or performance by
such party of this Agreement or the consummation by such party of the
transactions contemplated hereby; and
(e) neither the execution and delivery of this Agreement, nor the
performance and observance hereof, nor the consummation of the transactions
contemplated hereby, will (i) violate or conflict with any provision of the
organizational or governing documents of such party, (ii) to the best of the
knowledge of the representing party, violate, conflict with, or result in the
breach or termination of, or otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time, or both,
would constitute) a default under the terms of any contract, mortgage, lease,
bond, indenture, agreement or other instrument to which such party is a party or
by which it may be bound or to which any of its properties may be subject, (iii)
violate any judgment, order, writ, injunction, decree or award, of which it has
knowledge, of any court, arbitrator, administrative agency or governmental or
regulatory body against or binding upon such party or upon any of the
securities, properties, assets or business of such party, or (iv) to the best of
the knowledge of the representing party, constitute a violation on the part of
such party of any statute, law, rule or regulation applicable to it.
17. As used herein, the term "Special Default" shall mean any one or
more of the following events:
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(i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of a Borrower or any of its
subsidiaries in an involuntary case under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other
similar relief shall be granted under any applicable federal, state or
foreign law; or
(ii) an involuntary case shall be commenced against a Borrower or
any of its subsidiaries, under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, assignee,
sequestrator, trustee, custodian or other officer having similar powers
over a Borrower or any of its subsidiaries, or over all or a substantial
part of its property, shall have been entered; or there shall have
occurred the involuntary appointment of an interim receiver, trustee or
other custodian of a Borrower or any of its subsidiaries, or for all or
a substantial part of its property; or a warrant of attachment,
execution or similar process shall have been issued against any
substantial part of the property of a Borrower or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged; or
(iii) a Borrower or any of its subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or shall consent to the entry
of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall
consent to the appointment of or the taking of possession by a receiver,
trustee or other custodian for all or a substantial part of its
property; or a Borrower or any of its subsidiaries shall make any
assignment for the benefit of creditors; or
(iv) a Borrower or any of its subsidiaries shall be unable, or
shall fail generally, or shall admit in writing its inability, to pay
its debts as such debts become due and a period of 30 days shall have
elapsed; or the board of directors of a Borrower or any of its
subsidiaries (or any committee thereof) or of its managing member shall
adopt any resolution or otherwise authorize, or take corporate or
limited liability company action in furtherance of, any action to
approve any of the acts referred to in clause (iii) above or this clause
(iv).
18. For purposes hereof, the "In Balance Requirement" shall be deemed to
have been complied with as of any date if on that date both (i) the Unallocated
Contingency Balance equals or exceeds the Required Minimum Contingency and (ii)
the Available Funds equal or exceed the Remaining Costs, as such terms
"Unallocated Contingency Balance," "Required Minimum Contingency," "Available
Funds" and "Remaining Costs" are defined in the Disbursement Agreement.
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19. This Agreement shall bind and inure to the benefit of the parties
hereto and their successors and assigns, but no party shall assign any of its
rights hereunder without the written consent of each of the other parties,
except for an assignment by the Bank Agent or the Mortgage Notes Indenture
Trustee or the Equipment Loan Agent to a successor administrative agent under
the Bank Credit Agreement, or a successor trustee under the Mortgage Notes
Indenture or a successor administrative agent under the Equipment Loan
Agreement, as the case may be.
20. This Agreement constitutes the complete agreement among the parties
with respect to the subject matter thereof and supersedes all prior agreements,
commitments and understandings, written or oral. No provision of this Agreement
may be changed, waived, discharged or terminated unless the change, waiver,
discharge or termination is in writing signed by each of the parties hereto.
21. No party hereto shall be responsible for the expenses of any other
party incurred in connection with the preparation, execution and delivery of
this Agreement (including any enforcement, amendment or modification hereof or
waiver or consent granted hereunder).
22. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
23. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS OF THE PARTIES ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5- 1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. EACH PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT
OF OR RELATED TO THIS AGREEMENT, PROVIDED, THAT EACH PARTY ACKNOWLEDGES THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK CITY. EACH PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PARTY
HEREBY WAIVES ANY OBJECTION WHICH SUCH PARTY MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
15
<PAGE>
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. EACH PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS FOR NOTICES
TO SUCH PARTY GIVEN AS PROVIDED IN PARAGRAPH 24 OF THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
24. Subject to paragraph 23, any notice, request, declaration or other
communication given hereunder shall be in writing and shall be deemed to have
been validly delivered or given (i) upon the earlier of actual receipt or three
(3) days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (ii) upon transmission,
when sent by facsimile transmission, with such facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this paragraph 24 (provided that facsimile transmissions received
after the normal business hours of the recipient shall be deemed to have been
received at the opening of business on the next business day of the recipient),
(iii) one business day after deposit with a reputable overnight courier with all
charges prepaid and (iv) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address or
facsimile number indicated beneath the signature of such party on a signature
page hereof, or to such other address (or facsimile number) for a party as may
be substituted by notice given by that party, in the manner herein provided, to
each of the other parties. The giving of any notice, request, declaration or
other communication required hereunder may be waived in writing by the party
entitled to receive the same.
25. This Agreement and any amendments, modifications or waivers in
connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution and delivery
of a counterpart hereof by each of the parties hereto not later than January 31,
1998.
26. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
16
<PAGE>
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO, THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[remainder of page intentionally left blank]
17
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of
the date first written above.
THE BANK OF NOVA SCOTIA, as
Administrative Agent under the Bank
Credit Agreement hereinabove referred to
By: /s/ Alan Pendergast
-------------------------------
Name: Alan Pendergast
Title: Relationship Manager
580 California Street, 21st Floor
San Francisco, CA 94104
Attention: Mr. Allan Pendergast
Telecopy No.: (415) 397-0791
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee under the Mortgage Notes Indenture
hereinabove referred to
By: /s/ Richard H. Prokosch
-------------------------------
Name: Richard H. Prokosch
Title: Asst. Vice President
180 East Fifth Street
St. Paul, MN 55101
Attn: Corporate Trust Administration
Telecopy No.: (612) 244-0711
GMAC COMMERCIAL MORTGAGE
CORPORATION
By: /s/ Vacys Garbonkus
-------------------------------
Name: Vacys Garbonkus
Title: Senior Vice President
100 South Wacker Dr., Suite 100
Chicago, IL 60604
Attn: Vacys Garbonkus
Telecopy No.: (312) 845-8623
18
<PAGE>
GENERAL ELECTRIC CREDIT
CORPORATION, as Administrative
Agent under the Equipment Loan
Agreement hereinabove referred to
By: /s/ Daniel Gioia
-------------------------------
Name: Daniel Gioia
Title: Sr. Credit Analyst
777 Long Ridge Road
Building B, First Floor
Stamford, CT 06927
Attn: Account Manager-Venetian
Telecopy No.: (203) 316-7989
With a copy to:
David R. Huet, Esq.
Counsel, Capital Funding, Inc.
777 Long Ridge Road
Building B, First Floor
Stamford, CT 06927
Telecopy No.: (203) 316-7989
19
EXHIBIT 12.1
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
Year ended December 31,
---------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Ratio of earnings to
fixed charges(1) (2) (2) (2) (2) (2)
(1) The ratio of earnings to fixed charges is determined by dividing
(i) operating income by (ii) fixed charges. Fixed charges consist of total
interest expense.
(2) In the years ended December 31, 1997, 1996, 1995, 1994 and 1993, earnings
were insufficient to cover fixed charges by $520, $62,995, $3,378, $6,499,
and $14,129, respectively.
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 2 to Registration Statement on Form S-4 of Las Vegas Sands, Inc.
and Venetian Casino Resort, LLC of our report dated March 24, 1998 relating to
the historical financial statements of Las Vegas Sands, Inc. which appears in
such Prospectus. We also consent to the reference to us under the heading
"Independent Accountants" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Los Angeles, California
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 850994
<NAME> Las Vegas Sands
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 857
<SECURITIES> 426,911
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 342,795
<PP&E> 279,770
<DEPRECIATION> 0
<TOTAL-ASSETS> 747,767
<CURRENT-LIABILITIES> 43,755
<BONDS> 515,612
77,053
0
<COMMON> 92
<OTHER-SE> 111,255
<TOTAL-LIABILITY-AND-EQUITY> 747,767
<SALES> 895
<TOTAL-REVENUES> 895
<CGS> 0
<TOTAL-COSTS> (1,727)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,581
<INCOME-PRETAX> (520)
<INCOME-TAX> 0
<INCOME-CONTINUING> (520)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (520)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> (.56)
</TABLE>
