As filed with the Securities and Exchange Commission on February 12, 1998
Registration No. 333-42147
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
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
[VENETIAN LOGO]
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
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.
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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 Financing (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 Financing).
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 1996, approximately 900,000 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 34
trade shows, conventions and business events for the calendar year 1999,
covering 123 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. 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 September 30, 1997, approximately $111.0 million of this total budgeted
cost has been expended or incurred. Of the amount expended and incurred,
approximately $90.3 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. The Sole Stockholder
contributed an additional $5.0 million to the Company upon the closing of the
Offering.
As of September 30, 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 $260.0 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
6
<PAGE>
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 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
------
<S> <C>
Bank Credit Facility (4) ............ $ 150.0
Mall Construction Loan Facility ..... 140.0
FF&E Financing (5) .................. 97.7
Mortgage Notes ...................... 425.0
Senior Subordinated Notes ........... 90.5
Equity Contribution (6) ............. 320.3
---------
Total Sources ...................... $ 1,223.5
=========
</TABLE>
<TABLE>
<CAPTION>
Uses
----
<S> <C>
Hotel and Casino .................... $ 486.3
Mall ................................ 123.6
FF&E (4)(7) ......................... 121.1
Land (6)(8) ......................... 225.0
Parking and site work ............... 36.4
Interest, net ....................... 88.4
Pre-opening costs and expenses ...... 34.4
Contingency (9) ..................... 66.1
Financing fees and expenses ......... 42.2
---------
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 Financing (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 Financing."
(5) The FF&E Lenders have committed to provide the $97.7 million of financing
required for the acquisition of the Specified FF&E. The availability of
such funds is subject to certain conditions including the negotiation and
execution of definitive agreements and substantial completion of the
Casino Resort. See "Description of Certain Indebtedness--FF&E Financing."
(6) Equity Contribution represents (i) $95.3 million in cash advanced by the
Sole Stockholder or his affiliates prior to the closing of the Offering 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 September 30, 1997, which includes
the $7.6 million book value of the 1.55 acres of land contributed on
September 30, 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 Financing."
(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 secured by certain
furniture, fixtures and equipment (the "Specified FF&E") (the "FF&E Financing"
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). General Electric Capital Corporation and BancBoston Leasing
Inc. (the "FF&E Lenders") have committed to provide the $97.7 million of FF&E
Financing. The availability of the FF&E Financing is subject to certain
conditions including the negotiation and execution of definitive agreements and
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. 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. In
addition to owning and operating the Sands, the Sole Stockholder has extensive
experience in the trade show, convention and tour and travel businesses.
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.
[STOCKHOLDER CHART]
- --------------
(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 Financing.
(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>
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<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.
15
<PAGE>
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
16
<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
Financing). 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
18
<PAGE>
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 (as defined
herein) of the Senior Subordinated Notes so
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<PAGE>
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 the second anniversary of the
issuance date, in each case,
20
<PAGE>
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 Financing). 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 Intermediate Holdings, Mall
Construction Subsidiary and any
21
<PAGE>
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
the Indentures (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 and is required to
approve each request by the Issuers for the
22
<PAGE>
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
Financing."
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 Insurance. For delays that
continue beyond the 120th day
23
<PAGE>
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 suitable if the relevant Gaming
Authorities (as defined herein)
24
<PAGE>
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 the FF&E Financing
is subject to certain conditions including negotiation of definitive agreements
and reaching a certain level of construction progress of the Casino Resort.
Although the Company and the FF&E Lenders are currently negotiating definitive
agreements for the FF&E Financing and are expected to finalize arrangements in
a timely matter, no assurances can be given that definitive agreements will be
executed. If the Issuers were unable to finalize the FF&E Financing or if the
definitive agreements for the FF&E Financing contained terms different from
those described in this Prospectus, 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 Financing, 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
Financing. 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."
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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, 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
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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.
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
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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 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
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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 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
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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 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 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
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Notes--Repurchase at the Option of Holders--Change of Control," "Description of
Certain Indebtedness--Bank Credit Facility" and "--Mall Construction Loan
Facility."
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
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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 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.
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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 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 resolve 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 September 30, 1997, the Company had only entered into one lease for
the Mall, 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.
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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 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 Financing 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). 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
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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 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
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"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."
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
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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."
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
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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.
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
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<PAGE>
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.
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 has applied for a state gaming license, the
receipt of a gaming license 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
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<PAGE>
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 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
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Exercise Remedies" and "--Ranking of Senior Subordinated Notes; Subordination
to Senior Debt; Limitations on Remedies."
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
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<PAGE>
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.
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
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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.
[CHART OF STOCKHOLDERS]
- --------------
(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 Financing.
(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.
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<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 Financing, 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--Construction Loan." 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 September 30, 1997, approximately $111.0 million
of this total budgeted cost had been expended or incurred. Of the amount
expended and incurred, approximately $90.3 million represents cash contributed
to the Company by Sheldon G. Adelson, the Sole Stockholder of the Company,
through affiliates of the Company. The Sole Stockholder contributed an
additional $5.0 million to the Company upon the closing of the Offering.
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 Financing (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."
48
<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 Financing 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 FF&E Lenders have committed to provide the $97.7 million of financing
required for the acquisition of the Specified FF&E. The availability of
such funds is subject to certain conditions, including the negotiation and
execution of definitive agreements and reaching a certain level of
construction progress on the Casino Resort. See "Description of Certain
Indebtedness--FF&E Financing."
(6) Equity Contribution represents (i) $95.3 million in cash advanced by the
Sole Stockholder or his affiliates prior to the closing of the Offering 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 has a book value of $93.6 million at September 30, 1997,
which includes the $7.6 million book value of the 1.55 acres of land
contributed on September 30, 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 Financing."
(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."
49
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1997 and as adjusted to give effect to (i) the Offering, (ii) the
borrowing of $150.0 million under the Bank Credit Facility, (iii) the borrowing
of $140.0 million under the Mall Construction Loan Facility, (iv) the borrowing
of $97.7 million under the FF&E Financing and (v) the Equity Contribution. 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 September 30, 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
FF&E Financing (3) .......................... -- 97.7
Senior Subordinated Notes ................... -- 90.5
------ ---------
Total Long-Term Debt ...................... -- 903.2
------ ---------
Preferred Interest in Venetian (4) ............. 72.1 77.1
------ ---------
Stockholder's Equity (5) ....................... 112.6 112.6
------ ---------
Total Capitalization ........................... $ 184.7 $ 1,092.9
======= =========
</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 Financing 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 Lenders have committed to provide the $97.7 million of financing
required to acquire the Specified FF&E. The availability of such financing
is subject to certain conditions, including the negotiation and execution
of definitive agreements and reaching a certain level of construction
progress on the Casino Resort. See "Description of Certain
Indebtedness--FF&E Financing."
(4) As of the closing of the Offering, contributions by the Sole Stockholder
(or his affiliates) included $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 September 30, 1997, approximately $111.0 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 $90.3 million represents cash
contributed by the Sole Stockholder and his affiliates to the Company, and the
balance represents borrowings under the Construction Loan, which were repaid
with a portion of the net proceeds from the Senior Subordinated Notes. See
"Certain Transactions--Construction Loan." The remaining $954.5 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) gross 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, (v) borrowings under
the FF&E Financing of approximately $97.7 million and (vi) the balance of the
Sole Stockholder's Equity Contribution funded prior to the closing of the
Offering. 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 Issuance Date and are subject to
quarterly amortization payments which began on the earlier of (i) 120
51
<PAGE>
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. 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 Financing 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 Lenders have entered into a commitment letter relating to the
$97.7 million of financing required for the acquisition of the Specified FF&E.
Under the terms of the commitment letter, the FF&E Financing will consist of an
interim loan prior to completion of the Casino Resort and a term loan for a
period of 60 months after completion of the Casino Resort. Funding will not be
available under the FF&E Financing until the Casino Resort is within eight
months of the opening date of the Casino Resort. Interest on the interim loan,
if paid on a current basis, is expected to be due quarterly in arrears at a
floating rate equal to 30-day reserve adjusted LIBOR plus 375 basis points or
at the Prime Rate (but not less on any given day than the Federal Funds Rate
plus 50 basis points) plus 1%, whichever the Issuers elect. Upon the same date
as the Project Construction Completion Date (to be defined in the definitive
agreements relating to the FF&E Financing 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. The availability of the FF&E Financing is subject to certain
conditions including the negotiation and execution of definitive agreements.
See "Risk Factors--Substantial Leverage; Ability to Service Debt" and
"Description of Certain Indebtedness--FF&E Financing."
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
52
<PAGE>
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 not less than $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. In addition, the Company expects that the indebtedness under
the Mall Construction Loan Facility will be refinanced upon completion of the
Casino Resort. 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 Financing 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. 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:
<TABLE>
<S> <C> <C>
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
</TABLE>
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, 21,000 square foot 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 will
not 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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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 1996, approximately 900,000 visitors attended the trade shows and
conventions at the Expo Center during 145 show days. The Expo Center hosted 15
events on the Trade Show Week 200 list of the largest trade shows in the United
States in 1996, 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 1997, approximately 17 trade show events included on the
1996 Trade Show Week 200 list and 147 show days are scheduled for the Expo
Center. For 1999, the Expo Center has already booked or reserved 34 major trade
shows and conventions over the course of 123 show days, including approximately
20 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 "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 Number of 1996
Name of Event Pattern Show Days the Week Attendees(2)
- -------------------------------------------------------- -------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C>
International Winter Consumer Electronics Show
(IWCES)(3) ............................................ 1/7-10/99 4 Th-Su 70,000*
Giftsource West - Spring(3) ............................ 1/17-20/99 4 Su-W 8,000
Night Club and Bar ..................................... 1/19-20/99 2 T-W 8,000
AQUA '99 ............................................... 1/19-21/99 3 T-Th 8,000
World Floor Covering Association (SURFACES)(3) 1/27-28/99 3 W-F 37,000
Western Shoe Associates - Spring(3) .................... 2/9-12/99 4 T-F 43,000
Associated Surplus Dealers/Associated
Merchandise Dealers - Spring (ASD/AMD)(3) ............. 2/21-25/99 5 Su-Th 50,000
Men's Apparel Guild in California - Spring (MAGIC) (3) 3/1-4/99 4 M-Th 70,000*
Bedroom Show ........................................... 3/10-12/99 3 W-F 8,000
International Gaming Business Expo ..................... 3/16-18/99 3 T-Th 10,000
Amusement Showcase International ....................... 3/18-20/99 3 Th-S 10,000
Hospitality Design (3) ................................. 4/8-10/99 3 Th-S 13,000
National Association of Broadcasters '99 (NAB) (3) ..... 4/19-22/99 4 M-Th 101,000*
National OTC ........................................... 5/2-4/99 3 Su-T 7,000
Las Vegas Merchandise Expo ............................. 5/16-19/99 4 Su-W 5,000
International Trucking Show (3) ........................ 5/19-21/99 3 W-F 31,000
Jeweler's Circular Keystone International Jewelry
Show (JCK '99) (3) .................................... 6/4-8/99 5 F-T 35,000
Jewelry Manufacturers' Show ............................ 6/11-13/99 3 F-S 7,500
Giftsource West - Fall (3) ............................. 6/13-16/99 4 Su-W 10,000
Envirotech ............................................. 6/24-26/99 3 Th-S 2,500
Furniture Expo ......................................... 6/26-28/99 3 S-M 5,000
Billiard Congress ...................................... 7/15-17/99 3 Th-S 8,000
Western Shoe Associates - Fall (3) ..................... 8/5-8/99 4 T-F 45,000
Associated Surplus Dealers/Associated
Merchandise Dealers - Fall (ASD/AMD) (3) .............. 8/15-19/99 5 Su-Th 50,000
Men's Apparel Guild in California - Fall (MAGIC) (3) 8/30-9/2/99 4 M-Th 70,000*
True Value Hardware (3) ................................ 9/13-17/99 5 M-F 20,000
Amusement and Music Operator's Association
(AMOA '99) ............................................ 9/23-25/99 3 Th-S 8,500
Log Home Show .......................................... 9/30-10/3/99 4 Th-Su 11,000
Western Nursery ........................................ 10/6-7/99 2 W-Th 15,000
World Gaming Congress (3) .............................. 10/5-8/99 4 T-F 20,000
Package Machinery Manufacturers' Institute (Pack
Expo West) (3) ........................................ 10/18-21/99 4 M-Th 19,000
Automative Service Industry Association (ASIA)
Motor and Equipment Manufacturers'
Association (MEMA) Automotive Parts and
Accessories Association (APAA) (3) .................... 11/2-5/99 4 T-F 70,000*
Softbank COMDEX (3) .................................... 11/15-19/99 5 M-F 200,000*
AQUA 2000 .............................................. 12/1-3/99 3 W-F 6,000
Total 123 1,081,500
=== =========
</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 1996 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 1996, approximately 900,000 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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Expo Center already has booked or reserved 34 trade shows, conventions and
business events for the calendar year 1999, covering 123 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. 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 September 30, 1997, approximately $111.0 million of this total
budgeted cost has been expended or incurred. Of the amount expended and
incurred, approximately $90.3 million represents cash contributed to the
Company by the Sole Stockholder, through affiliates of the Company. The Sole
Stockholder contributed an additional $5.0 million to the Company upon the
closing of the Offering.
As of September 30, 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 $260.0 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 16.2 million visitors in 1987 to 29.6 million
visitors in 1996, a compound annual growth rate of 7.0%. 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 1,196,000 in 1996, a compound
growth rate of 5.6%. 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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[MARKET TRENDS LINE CHART]
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
1987, approximately 1.7 million persons attended trade shows and conventions in
Las Vegas and spent approximately $1.2 billion. In 1996, the number of trade
show and convention attendees had increased to more than 3.3 million and the
amount spent by trade show and convention attendees was approximately $3.9
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 1996, 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 61% from 61,394 in 1988 to 99,072 in
1996. 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 92.5% for the years
1993 to 1996, averaged 93.4% in 1996 and averaged 91.4% during the first seven
months of 1997. By the end of 1999, it is anticipated that, in addition to the
Casino Resort, at least another
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19,800 hotel rooms will be opened on the Strip, including the Bellagio and
Paris Casino Resort under construction, the planned construction of the Project
Paradise resort, 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."
[OCCUPANCY RATES LINE CHART]
The table below indicates mid-week and weekend occupancy rates for all Las
Vegas hotels and motels. While weekend occupancy rates have remained near 95%
for the past 10 years, mid-week occupancy rates have trended upward from below
80% to near 90%. 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)
[WEEKEND OCCUPANCY RATES LINE CHART]
71
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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 1987, Las
Vegas gaming revenues have increased at a compound annual rate of 8.4% from
$2.8 billion in 1987 to $5.8 billion in 1996. 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
1987 to 1996. 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>
1987 1988 1989 1990
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Las Vegas visitor volume ......... 16,216,102 17,199,608 18,129,684 20,954,420
Percentage change ................ 6.7% 6.1% 5.4% 15.6%
Total visitor expenditures(2) $ 8,602,966 $10,039,448 $11,912,941 $14,320,746
Percentage change ................ 15.3% 16.7% 18.7% 20.2%
Las Vegas Strip gaming
revenue(2) ...................... $ 1,752,258 $ 1,944,401 $ 2,070,328 $ 2,583,314
Percentage change ................ 12.9% 10.9% 6.4% 24.8%
Las Vegas convention
attendance ...................... 1,677,716 1,702,158 1,508,842 1,742,194
Percentage change ................ 10.4% 1.5% 11.4% 15.5%
Las Vegas hotel occupancy
rate ............................ 87.0% 89.3% 89.8% 89.1%
U.S. hotel occupancy
rate(3) ......................... 63.2% 63.4% 64.3% 63.5%
Las Vegas room supply ............ 58,474 61,394 67,391 73,730
Percentage change ................ 3.5% 5.0% 9.8% 9.4%
<CAPTION>
1991 1992 1993 1994 1995 1996
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Las Vegas visitor volume ......... 21,315,116 21,886,865 23,522,993 28,214,362 29,002,122 29,636,631
Percentage change ................ 1.7% 2.7% 7.5% 19.9% 2.8% 2.2%
Total visitor expenditures(2) $14,326,554 $14,686,644 $15,127,267 $19,163,212 20,686,800 22,533,258
Percentage change ................ 0.0% 2.5% 3.0% 26.7% 8.0% 8.8%
Las Vegas Strip gaming
revenue(2) ...................... $2,539,995 $2,625,274 $ 2,896,630 $ 3,485,307 $ 3,629,036 $ 3,579,237
Percentage change ................ (1.7)% 3.4% 10.3% 20.3% 4.1% (1.4%)
Las Vegas convention
attendance ...................... 1,794,444 1,969,435 2,439,734 2,684,171 2,924,879 3,305,507
Percentage change ................ 3.0% 9.8% 23.9% 10.0% 9.0% 13.0%
Las Vegas hotel occupancy
rate ............................ 85.2% 88.8% 92.6% 92.6% 91.4% 93.4%
U.S. hotel occupancy
rate(3) ......................... 61.8% 62.6% 63.5% 64.7% 65.0% 65.1%
Las Vegas room supply ............ 76,879 76,523 86,053 88,560 90,046 99,072
Percentage change ................ 4.3% (0.5)% 12.5% 2.9% 1.7% 10.0%
</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 15.6 million in 1987 to 30.5 million in 1996, a compound annual rate of
7.8%. 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 early 1998.
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 and Paris Casino Resort under
construction, the planned construction of the Project Paradise resort,
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 September 30, 1997, (i) pursuant to the Construction Management
Contract, and otherwise, trade contracts in excess of $260.0 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 $111.0 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 $1.3
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 \P250.6 million on revenues of \P7,090.8
million in 1996 and had net operating assets of \P4,726.4 million at December
31, 1996. Under U.S. GAAP, the Construction 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 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.
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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 has
applied for a gaming license, however the receipt of a gaming license 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 Offering, the hypothecation of assets and restrictions on stock.
However, there can be no assurance such approval will be granted. The Offering
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 ............... 42 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, 1996, the four 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. 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 ........... 1996 $772,717 -- -- $26,832
President and Chief
Operating Officer
Bradley H. Stone ............. 1996 493,606 -- -- 20,697
Executive Vice President
Robert G. Goldstein .......... 1996 369,770 -- -- 15,859
Senior Vice President
David Friedman
Assistant to Chairman of the
Board and Secretary ......... 1996 196,154 -- -- 21,849
</TABLE>
- --------------
(1) Represents moving and temporary living expenses, car allowances 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.
The terms of the Employment Agreements provide for an annual base salary
for Mr. Weidner, Mr. Stone and Mr. Goldstein of $772,717, $493,606 and
$369,770, respectively. The foregoing salaries are
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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. 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 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
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<PAGE>
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.
With respect to the options granted to Mr. Miltenberger, half the shares will
be vested and exercisable on the date of the opening of the Casino Resort (the
"Grand Opening") and the remaining half will become vested and exercisable in
one-third increments on December 31, 2000 (the "Final Vesting Date") and two
earlier dates determined by dividing into three substantially equal periods the
time between the Grand Opening and the Final Vesting Date. Options granted to
Mr. Weidner, Mr. Stone, Mr. Goldstein and Mr. Friedman will be immediately
vested and exercisable on the date of grant, however, all shares issued
pursuant to the exercise of an option prior to December 31, 2000 will be
subject to the following restrictions: (i) if the option is exercised prior to
the Grand Opening, half of the shares will vest on the Grand Opening, and the
remaining half shall vest in one-third increments on the Final Vesting Date and
two earlier dates, such as shall divide into three substantially equal periods,
the time between the Grand Opening and the Final Vesting Date, and (ii) if the
option is exercised after the Grand Opening, the shares shall be vested to the
extent that they would have vested had the option been exercised prior the
Grand Opening and shall continue to vest as set forth above. 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
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."
<TABLE>
<CAPTION>
Shares of
Common
Beneficial Owner(1) Stock Percentage
- ------------------------------------------------------- ---------- -----------
<S> <C> <C>
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%
</TABLE>
- ----------------
(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
$4.1 million, $7.9 million and $10.4 million in 1996, 1995 and 1994,
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 1994, 1995 and
1996, LVSI was paid $8 million, $8 million, and $0, respectively 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 nine months ended September 30, 1997, LVSI declared and paid
liquidating cash dividends totaling $27,600,000 from capital in excess of par
value to its Sole Stockholder.
In 1994, 1995 and 1996, 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
earlier of December 31, 1997 or 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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<PAGE>
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:
<TABLE>
<CAPTION>
Percentage
of Principal
Year Amount
- --------------------------------- -------------
<S> <C>
2001 106.125%
2002 103.063%
2003 and thereafter ........... 100.000%
</TABLE>
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 Financing are not currently expected to be
substantially more onerous than those set forth in the Disbursement Agreement;
provided, however, that the FF&E Financing is expected to include funding
conditions to the effect that the FF&E Lenders are not obligated to advance
funds under the FF&E Financing: (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 Financing." 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 agreed to enter 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 Financing"
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 Financing. 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
Financing. 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 Issuance 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 Financing
The Company and the FF&E Lenders have entered into a commitment letter
relating to the FF&E Financing. The FF&E Financing is expected to be subject to
certain conditions including the negotiation and execution of definitive
documents and reaching a certain level of construction progress of the Casino
Resort. The FF&E Lenders are expected to provide up to $97.7 million of
financing required for 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 and (ii) an electrical substation.
The FF&E Financing will be secured by a first priority lien on the Specified
FF&E. The FF&E Financing is expected to consist of an 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"). The FF&E Lenders are expected to agree to commence funding for the
Specified FF&E up to (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").
In the initial draw down, the FF&E Lenders are expected to reimburse the
Issuers for amounts spent on the purchase, construction and installation of the
Specified FF&E that occur prior to the Interim Loan Commencement Date. Upon the
satisfaction of certain conditions, the FF&E Lenders are expected to certify to
the Disbursement Agent that any Specified FF&E acquired prior to the Interim
Loan Commencement Date is eligible collateral.
No assurance can be given that negotiation of the definitive documentation
for the FF&E Financing with the FF&E Lenders will be completed or that the
terms of the definitive documentation will be similar to those described
herein. In addition, if the Company obtains its FF&E Financing from a source
different from that providing the commitment, the terms of such different
financing may be materially different from the terms described herein. See
"Risk Factors--Substantial Leverage; Ability to Service Debt."
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 Prime Rate (but not less on any given day than
the Federal Funds Rate plus 50 basis points) plus 1%, 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 expected to be required to
make mandatory prepayments of principal in the event of certain asset sales and
casualty events (subject to permitted
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reinvestments and equipment replacement purchases). Subject to certain limited
exceptions, the FF&E Financing may not be repaid prior to the first anniversary
of the Basic Loan Commencement Date. Thereafter, the Issuers may prepay 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 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.
Conditions to Availability of Funds
Advances under the FF&E Financing are expected to be 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 Financing, and (vi) other conditions for advances similar to
those contained in the Disbursement Agreement.
Covenants and Events of Default
Except for covenants related to the Specified FF&E, the covenants in the
FF&E Financing are expected to be 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 Financing are
expected to be generally similar to those in the Bank Credit Facility.
Exercise of Remedies
The FF&E Commitment contemplates that the FF&E Lenders will enter into
intercreditor agreements as part of the FF&E Financing (the "FF&E Intercreditor
Arrangements"). Under the FF&E Intercreditor Arrangements contemplated by the
commitment, the FF&E Lenders are expected to agree 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 Financing during the period
from the Interim Loan Commencement Date until the Basic Loan Commencement Date
(the "Funding Period"), the FF&E Lenders are expected to agree 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 Financing are
brought current and all interest, fees and payments under the FF&E Financing
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 equipment loan agreement 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 are expected to agree to recommence advancing funds under the FF&E
Financing if the event of default is cured during the standstill period and the
indebtedness under the FF&E Financing has not been accelerated. Finally, during
the period following the Basic Loan Commencement Date (the
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"Basic Loan Period"), the FF&E Lenders are expected to agree to a standstill
period of 30 days. It is expected to be agreed that 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 are expected to terminate under certain
circumstances including if any collateral is the subject of any material
damage, loss, removal, deterioration or disposition. Furthermore, such
standstill periods are not expected to apply if the event of default involves a
bankruptcy or insolvency proceeding. Finally, it is expected that in no event
will the FF&E Lenders be 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). If the Issuers
use another lender, no assurance can be given that such lender would agree to
similar intercreditor agreements.
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
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not permit cash interest payments unless no event of default exists under the
Tranche A Take-out Financing 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 agreed to pay P&O a $6.5
million fee for the P&O Guaranty to be paid in two equal installments, the
first installment was paid upon the closing of the Offering, and the second
installment is due December 15, 1997.
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
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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' (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
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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.
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 Financing, 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
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<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
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<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
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<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.
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<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 close 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, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, 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)
March 31, March 31,
1999 2000
--------- ----------
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
======== ========
- ------------
(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 Financing, $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 Financing 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
Average Assumed Interest
Debt Category Balance Rate Expense
Bank Credit Facility ...................... $ 125.0 8.25% $ 10.3
Mall Credit Facility ...................... 140.0 9.25% 13.0
FF&E Financing ............................ 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%
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
Financing, 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, 1996, 1995 and 1994, and the balance sheet data at
December 31, 1996 and 1995 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, 1993 and 1992
and the balance sheet data at December 31, 1994, 1993 and 1992 are derived from
the Company's audited historical financial statements that do not appear herein.
The data for the nine months ended September 30, 1997 and 1996, are derived from
unaudited financial statements also appearing elsewhere herein and which, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
unaudited interim periods. The financial results for the nine months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for any other interim period or the fiscal year. The historical results are not
necessarily indicative of the results of operations to be expected in the
future.
<TABLE>
<CAPTION>
Nine Months
ended
September 30, Year ended December 31,
-------------------------- --------------------------------------------------------------------------
1997 1996(2) 1996(2) 1995(1) 1994(1) 1993(1) 1992(1)
---------- --------------- --------------- ------------- ------------- --------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data
Gross revenues ............. $ 683 $ 43,191 $ 44,044 $95,469 $ 93,182 $ 83,652 $ 85,434
Promotional allowances -- (3,483) (3,483) (7,046) (6,779) (6,781) (8,830)
------- -------- -------- ------- -------- -------- --------
Net revenues ............... 683 39,708 40,561 88,423 86,403 76,871 76,604
Operating expenses ......... 75 99,181 99,890 84,449 82,712 80,321 79,957
------- -------- -------- ------- -------- -------- --------
Operating income (loss) 608 (59,473) (59,329) 3,974 3,691 (3,450) (3,353)
Interest income
(expense), net ........... 97 (2,961) (3,666) (7,352) (10,190) (10,679) (13,640)
------- -------- -------- ------- -------- -------- --------
Income (loss) before
extraordinary item ....... 705 (62,434) (62,995) (3,378) (6,499) (14,129) (16,993)
Extraordinary item (3) ..... -- -- -- -- -- 633 8,510
------- -------- -------- ------- -------- -------- --------
Net income (loss) .......... $ 705 $(62,434) $(62,995) $(3,378) $ (6,499) $(13,496) $ (8,483)
======= ======== ======== ======= ======== ======== ========
Per Share Data (4)
Other Data
Capital expenditures ....... $86,768 $ 13,447 $ 21,446 $ 1,661 $ 25,412 $ 7,349 $ 3,190
Ratio of earnings to
fixed charges (5) ........ N/A (6) (6) (6) (6) (6) (6)
</TABLE>
<TABLE>
<CAPTION>
December 31,
September 30, -----------------------------------------------------------
1997 1996 1995 1994 1993 1992
--------------- ----------- ----------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Total assets ............. $216,725 $114,109 $178,099 $187,774 $161,519 $166,594
Long-term debt ........... -- -- 120,066 115,639 81,375 79,444
Stockholders' equity ..... 112,572 106,335 45,989 53,755 15,364 21,804
</TABLE>
A-2
<PAGE>
- ----------------
(1) Financial data has been restated to reflect the December 1995 merger of LVSI
and NFG. See Note 5 of Notes to Financial Statements for further description
of the merger.
(2) 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.
(3) Extraordinary item represents gain on extinguishment of debt related to
merger of NFG referred to above.
(4) As a result of the Company presently having only one shareholder and given
the strategic redirection of the Company's operations, per share data has
been omitted as it is not considered meaningful. (5) 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.
(6) In the nine months ended September 30, 1996 earnings were insufficient to
cover fixed charges by $62,434. In the years ended December 31, 1996, 1995,
1994, 1993 and 1992, earnings were insufficient to cover fixed charges by
$62,995, $3,378, $6,499, $14,129 and $16,993 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
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. Accordingly, the historical results
will not be indicative of future operating results.
Nine Months Ended September 30, 1997 compared to the Nine Months Ended
September 30, 1996
Revenues. Overall revenues were impacted by the closure of the Sands Hotel
in June 1996. Net revenues decreased to $0.7 million from $39.7 million. Since
the date of closure of the Sands Hotel, and throughout construction of the
Casino Resort, the Company's revenues have been derived principally from royalty
income.
Operating Expenses. Operating expenses of the Company have decreased to
less than $0.1 million from $99.2 million. The $99.2 million includes a charge
for the write-down of property and equipment of $45.0 million. The write-down of
property and equipment resulted from a revaluation of the Company's assets as of
June 30, 1996, the date the Company approved a quasi-reorganization.
Interest Income (Expense). Interest income decreased from $0.4 million to
$0.1 million. The decrease is attributable to the Company's lack of operations
from which to generate excess cash flow. Interest expense decreased from $3.4
million to zero due to the acquisition and subsequent retirement during 1996 by
the Company of all the remaining outstanding Second and Third Mortgage Notes.
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 of 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 $12.0 million, $3.6 million, $8.7 million, $5.0 million and $2.3
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 $2.0 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.
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 Second and Third Mortgage Notes.
Year Ended December 31, 1995 compared to the Year Ended December 31, 1994
Revenues. Overall casino revenues increased slightly to $44.8 million from
$44.7 million, an increase of $0.1 million. Slot revenue increased $0.7 million
due to improved hold percentages. Race and sport book revenue increased $1.0
million due to increased volume resulting from the remodeling of the race and
sport book which was completed in late 1994. The increases in slot and race and
sport book revenues were partially offset by a decline in table games revenue of
$1.6 million, resulting primarily from the removal of baccarat and pai gow games
from the casino floor in late 1994 and early 1995.
A-4
<PAGE>
Room revenues increased to $15.8 million from $14.6 million, an increase of
$1.2 million or 8%, primarily due to an increase in the average daily room rate
to $63 from $57, offset slightly by a decrease in occupied room nights. Food and
beverage revenues increased to $18.8 million from $15.4 million, an increase of
$3.4 million or 22%. The increase was due to the full years operations of two
new upscale restaurants added in late 1994 combined with increasing patronage to
the buffet which was introduced in early 1994. Rental and other revenues
declined to $16.1 million from $18.5 million, a decrease of $2.4 million or 13%.
The decline was primarily due to reduced show dates in the Grand Ballroom
resulting from the cancellation of the Wayne Newton show which ran throughout
1994.
Operating Expenses. Casino expenses increased to $24.6 million from $23.6
million, an increase of $1.0 million or 4%. The increase was primarily due to
increased promotional allowances, which are charged to casino expense, along
with increases in payroll and related benefits. Room expenses declined to $7.7
million from $8.0 million, a decrease of $0.3 million or 4%, as a result of
5,700 fewer occupied room nights. Food and beverage costs increased to $19.2
million from $16.9 million, an increase $2.3 million or 14%. The increase is
attributable to the full years operations of two new upscale restaurants added
in late 1994 combined with increasing patronage to the buffet which was
introduced in early 1994.
Selling, general and administrative expenses increased to $16.4 million
from $15.9 million, an increase of $0.5 million or 3%, primarily due to
increased advertising costs associated with promoting the new buffet and
restaurants.
Depreciation and amortization increased to $9.8 million from $8.7 million,
an increase of $1.1 million or 13%. The increase is attributable to the first
full year of depreciation expense recognized on the $25.4 million in capital
expenditures primarily related to the 1994 room renovation and casino expansion
projects.
Interest Income (Expense). Interest income increased to $0.5 million from
$0.2 million, an increase of $0.3 million. The increase is due to higher cash
balances maintained throughout the year as a result of fewer capital
expenditures as the room renovation and casino expansion projects were
substantially completed in 1994. Interest expense to related party decreased to
$7.9 million from $10.4 million, a decrease of $2.5 million or 24%, due to a
reduction in interest rates on the Second and Third Mortgage Notes from 15%
during 1994 to the short-term quarterly applicable federal interest rate which
averaged 6.32% during 1995.
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. Capital expenditures of $25.4
million in 1994 included amounts for major room renovation and casino expansion
projects. No significant capital expenditures were incurred during 1995 and
through the first nine months of 1996 related to the Sands Hotel. Cash provided
by operating activities of $5.4 million in 1995, an increase from $0.6 million
in 1994, was primarily attributable to the room renovation and casino expansion
projects undertaken in 1994.
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. These 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. Such Second Mortgage Notes were retired as part of the merger.
Historical interest charges related to those notes totaling $2.3 million and
$5.7 million in 1995 and 1994, respectively, have been eliminated on the
assumption that the notes were retired when repurchased by NFG.
A-5
<PAGE>
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 34,999 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 1,150,000 square foot 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 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 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 building and related
land and equipment, 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 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 and subsequently demolished the facility to make
way for a planned Venetian-themed hotel-casino resort. The planned facility is
expected to include two phases. Construction of the Casino Resort as the first
phase commenced during April 1997.
At September 30, 1997 and December 31, 1996, the Company held cash and cash
equivalents of $9.6 million and $0.3 million, respectively. Cash used in
operating activities was $11.0 million in the first nine months of 1997 and $0.6
million for fiscal 1996.
The Company utilized operating cash flow, proceeds from preferred interest
in Venetian of $72.1 million in the first nine months of 1997 and additional
stockholder contributions of $11.1 million in 1996 to fund capital expenditures
of $86.8 million and $21.4 million for the first nine months of 1997 and fiscal
1996, respectively. Capital expenditures were used primarily to fund development
related costs of the Casino Resort. Ground breaking for the Casino Resort
occurred in April 1997. The cost of the Casino Resort is currently estimated at
approximately $1.065 billion. For description of the planned 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
Report of Independent Accountants ......................................... A-8
Consolidated Balance Sheets at September 30, 1997 (unaudited) and
December 31, 1996 and 1995 ............................................... A-9
Consolidated Statements of Operations for the
(unaudited) nine months ended September 30, 1997
and 1996 and for each of the three years
in the period ended December 31, 1996 .................................... A-10
Consolidated Statements of Stockholder's Equity
for each of the three years in the period
ended December 31, 1996 and for the (unaudited)
nine months ended September 30, 1997 ..................................... A-11
Consolidated Statements of Cash Flows for the (unaudited)
nine months ended September 30, 1997 and 1996 and for each
of the three years in the period ended December 31, 1996 ................. A-12
Notes to Financial Statements ............................................. A-13
A-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Director and Stockholder of Las Vegas Sands, Inc.
In our opinion, the accompanying balance sheet and the related 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, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, 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
April 16, 1997
A-8
<PAGE>
LAS VEGAS SANDS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
--------------- ---------------------------
1997 1996 1995
--------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ................................... $ 9,567 $ 298 $ 9,408
Certificates of deposit ..................................... 2 581 2,835
Accounts receivable, net (Note 6) ........................... 65 133 2,049
Amounts due from affiliates (Note 13) ....................... 294 463
Prepaid expenses and inventories ............................ 95 229 1,369
--------- --------- ---------
Total current assets ................................... 10,023 1,241 16,124
--------- --------- ---------
Property and equipment, net (Notes 3, 7 and 13) ............. 205,280 110,880 154,986
Other assets (Note 8) ....................................... 1,422 1,988 6,989
--------- --------- ---------
$ 216,725 $ 114,109 $ 178,099
========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable (Note 9) ................................... $ 11,516 $ 2,694 $ 1,383
Accrued salaries and wages .................................. 396 80 2,344
Other accrued liabilities (Note 9) .......................... 5,138 5,000 6,516
--------- --------- ---------
17,050 7,774 10,243
Current portion of long-term debt payable
to a related party (Note 10) .............................. 1,801
Construction Loan Payable (Note 10) ......................... 15,050
--------- --------- ---------
Total current liabilities .............................. 32,100 7,774 12,044
Long-term debt payable to a related party (Note 10) ......... 120,066
--------- --------- ---------
Total liabilities ...................................... 32,100 7,774 132,110
--------- --------- ---------
Preferred Interest in Venetian Casino Resort, LLC,
a wholly owned subsidiary (Notes 1 and 11) ................ 72,053
--------- --------- ---------
Commitments and contingencies (Note 15) Stockholder's equity:
Common stock, $.10 par value, 100,000 shares
authorized , 50,001 issued and outstanding in
1996 and 1995, respectively .............................. 5 5 5
Capital in excess of par value ............................. 113,064 107,532 139,216
Accumulated deficit (Note 3) ................................ (93,232)
Accumulated deficit since June 30, 1996 ..................... (497) (1,202)
--------- --------- ---------
Total stockholder's equity ............................. 112,572 106,335 45,989
--------- --------- ---------
$ 216,725 $ 114,109 $ 178,099
========= ========= =========
</TABLE>
See accompanying Notes to Financial Statements
A-9
<PAGE>
LAS VEGAS SANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
---------------------- -----------------------------------------
1997 1996 1996 1995 1994
-------- ------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Casino ...................................... $ 22,681 $ 23,058 $ 44,840 $ 44,695
Rooms ....................................... 8,501 8,500 15,765 14,593
Food and beverage ........................... 9,713 9,713 18,772 15,385
Rental income from related party (Note 13) .. 8,000 8,000
Other ....................................... $ 683 2,296 2,773 8,092 10,509
----- --------- --------- --------- ---------
683 43,191 44,044 95,469 93,182
Less--promotional allowances ................. (3,483) (3,483) (7,046) (6,779)
----- --------- --------- --------- ---------
Net revenues ................................ 683 39,708 40,561 88,423 86,403
----- --------- --------- --------- ---------
Operating expenses:
Casino ...................................... 15,196 15,235 29,925 29,294
Rooms ....................................... 3,485 3,531 6,767 6,955
Food and beverage ........................... 8,136 8,136 14,487 12,006
Other operating ............................. 4,369 4,377 6,581 9,325
Selling, general and administrative (Note 4). 18,185 18,752 16,863 16,399
Depreciation and amortization
(Notes 7 and 10) .......................... 75 4,768 4,817 9,826 8,733
Write-down of property and equipment
(Notes 2 and 3) ........................... 45,042 45,042
----- --------- --------- --------- ---------
Total operating expenses ............... 75 99,181 99,890 84,449 82,712
----- --------- --------- --------- ---------
Operating income (loss) ...................... 608 (59,473) (59,329) 3,974 3,691
Other income (expense):
Interest income ............................. 97 418 450 518 201
Interest expense to related party (Note 13) . (3,379) (4,116) (7,870) (10,391)
----- --------- --------- --------- ---------
Net income (loss) ............................ $ 705 $ (62,434) $ (62,995) $ (3,378) $ (6,499)
===== ========= ========= ========= =========
</TABLE>
See accompanying Notes to 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, 1993 ............ 85,000 $ 9 $ 98,710 $(83,355) $ 15,364
Capital contributions .................. 48,924 48,924
Distributions .......................... (4,034) (4,034)
Net loss ............................... (6,499) (6,499)
------ --- ---------- -------- --------
Balance at December 31, 1994 ............ 85,000 9 143,600 (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 ................. (34,999) (4) (202) (206)
------ --- ---------- -------- --------
Balance at December 31, 1995 ............ 50,001 5 139,216 (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
(Note 3) ............................. (155,025) 155,025
Adjustment to assets through
quasi-reorganization (Note 3) ......... 51,740 51,740
Net loss for the six months ended
December 31, 1996 ..................... (1,202) (1,202)
------ --- ---------- -------- --------
Balance at December 31, 1996 ............ 50,001 5 107,532 (1,202) 106,335
Capital contributions .................. 33,132 33,132
Dividends (Note 12) .................... (27,600) (27,600)
Net income ............................. 705 705
------ --- ---------- -------- --------
Balance at September 30, 1997
(unaudited) ............................ 50,001 $ 5 $ 113,064 $ (497) $112,572
====== === ========== ======== ========
</TABLE>
See accompanying Notes to Financial Statements
A-11
<PAGE>
LAS VEGAS SANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
-------------------------- ---------------------------------------
1997 1996 1996 1995 1994
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities: (Unaudited)
Net income (loss) .......................................... $ 705 $ (62,434) $ (62,995) $ (3,378) $ (6,499)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization ............................. 75 4,768 4,817 9,826 8,733
Non-cash interest expense due to related parties .......... 2,567 3,087 4,427 2,986
Loss (gain) on disposal of assets ......................... 3,092 2,906 (43) 49
Write-down of property and equipment (Notes 2 and 3)....... 45,042 45,042
Change in assets and liabilities which increase
(decrease) cash:
Certificates of deposit .................................. 579 2,835 2,254 (2,835)
Accounts receivable, net ................................. (226) 1,486 2,379 (13) 29
Prepaid expenses and inventories ......................... 134 1,054 1,140 (52) 77
Other assets ............................................. 491 2,897 3,275 816 (995)
Accounts payable ......................................... 8,822 (960) 1,311 (540) (72)
Accrued salaries and wages ............................... 316 (2,075) (2,264) 159 581
Other accrued liabilities ................................ 138 358 (1,516) (5,837) (1,410)
---------- --------- --------- --------- ---------
Net cash provided by (used in) operating activities ........ 11,034 (1,370) (564) 5,365 644
---------- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures ....................................... (86,768) (13,447) (21,446) (1,661) (25,412)
Proceeds from the sale of fixed assets ..................... 1,715 1,766
---------- --------- --------- --------- ---------
Net cash used in investing activities ...................... (86,768) (11,732) (19,680) (1,661) (25,412)
---------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions ........................ 25,500 3,733 11,134 11,142 48,924
Proceeds from preferred interest in Venetian (Note 11) ..... 72,053
Proceeds from construction loan ............................ 15,050
Payment of dividends ....................................... (27,600)
Redemption of second mortgage notes held by related
party ...................................................... (1,080)
Purchase of NFG common stock ............................... (13,176)
Purchase of LVSI common stock .............................. (206)
Distributions to stockholders .............................. (2,148) (4,034)
Payments of notes payable and capital lease obligation ..... (118) (13,118)
---------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities ........ 85,003 3,733 11,134 (4,506) 30,692
---------- --------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents ............ 9,269 (9,369) (9,110) (802) 5,924
Cash and cash equivalents at beginning of year .............. 298 9,408 9,408 10,210 4,286
---------- --------- --------- --------- ---------
Cash and cash equivalents at end of period .................. $ 9,567 $ 39 $ 298 $ 9,408 $ 10,210
Interest paid to related parties during the year ............ $ -- $ -- $ -- $ 3,261 $ 8,687
========== ========= ========= ========= =========
Supplemental Disclosures of Non-cash Investing and
Financing Activities:
Retirement of notes through stockholder contribution ....... $ -- $ -- $ 59,454
========== ========= =========
Acquisition of Expo Center by IGN (Notes 10 and 13)
Property and equipment sold ................................ $ -- $ (66,775) $ (66,775)
Reduction of notes ......................................... 65,500 65,500
Reduction of other related party liabilities ............... 181 2,288
--------- ---------
Increase (decrease) of capital in excess of par value ...... $ -- $ (1,094) $ 1,013
========== ========= =========
</TABLE>
See accompanying Notes to 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 hotel-casino
resort (the "Casino Resort") to include approximately 3,000 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). Construction of the Casino Resort commenced in
April 1997.
The consolidated financial statements as of September 30, 1997 and for the
nine months ended September 30, 1997 and 1996 include the accounts of LVSI and
its subsidiaries, including Venetian Casino Resort, LLC, Grand Canal Shops, LLC,
Mall Intermediate Holding Company, LLC ("Mall Intermediate"), Grand Canal Shops
Mall Construction, LLC ("Mall Construction") and Lido Intermediate Holding
Company, LLC ("Lido Intermediate") (collectively, the "Company"). The December
31, 1996, 1995 and 1994 periods include only the accounts of LVSI.
Venetian Casino Resort, LLC ("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 (Notes
11 and 16).
Mall Intermediate, Mall Construction and Lido Intermediate are special
purpose companies which are wholly owned subsidiaries of Venetian. They are
co-obligors or guarantors of the mortgage notes, senior subordinated notes and
other indebtedness related to the construction of the Casino Resort.
Grand Canal Shops, LLC ("the Mall Subsidiary"), a wholly owned subsidiary
of Mall Intermediate, was formed on March 20, 1997 to own and operate in the
first phase of the Casino Resort retail mall.
The Company has transacted business with a number of related parties
including Nevada Funding Group, Inc. ("NFG") and Interface Group-Nevada, Inc.
("IGN"). 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"). As discussed in Note 13,
the Expo Center was acquired by IGN in January 1996.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial data as of September 30, 1997 and for the nine months
ended September 30, 1997 and 1996 is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for the fair statement of the results for the
interim periods.
Certain reclassifications have been made to conform the prior year with the
current period presentation.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash and short-term investments
with original maturities not in excess of 90 days.
A-13
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Certificates of Deposit
Certificates of deposit of $581,000 and $2,835,000 at December 31, 1996 and
1995, represent a required regulatory deposit for the operation of the Company's
Race and Sports Book and collateral for a letter of credit, respectively.
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 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 statement 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.
Per Share Data
As a result of the Company having only one shareholder and given the
strategic redirection of the Company's operations, per share data has been
omitted as it is not considered meaningful.
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 rooms, food and beverage furnished
to customers without charge is included in revenues and deducted as promotional
allowances. The retail value of accommodations, food and beverage, and other
services furnished to hotel/ casino guests without charge is included in gross
revenue and then deducted as promotional allowances. The estimated retail value
of these promotional allowances was $0 and $3,483,000 for the nine months ended
September 30, 1997 and 1996, respectively, and $3,483,000, $7,046,000 and
$6,779,000 for the years ended December 31, 1996, 1995, and 1994, respectively.
The estimated cost of providing such promotional allowances has been classified
primarily as casino costs and expenses as follows:
Nine Months Ended
September 30, Year Ended December 31,
----------------- ------------------------------
1997 1996 1996 1995 1994
------ -------- -------- -------- --------
Rooms ..................... $-- $ 592 $ 592 $ 931 $1,055
Food and beverage ......... -- 2,348 2,348 4,717 4,887
Other ..................... -- 38 38 126 217
--- ------ ------ ------ ------
$-- $2,978 $2,978 $5,774 $6,159
=== ====== ====== ====== ======
Income Taxes
The Company has elected to be taxed as an S Corporation for federal income
tax purposes. As an S Corporation, corporate income is not taxed at the
corporate level but is passed through to the stockholder
A-14
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES (Continued)
and taxed at the stockholder's level. Nevada does not levy a corporate income
tax. Accordingly, no provision for federal or state income taxes is included in
the statement of operations.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
prepaid expenses, other assets, accounts payable, and accrued salaries and wages
and other liabilities approximate fair value due to the short maturity of these
instruments. There is no public market for the Company's long-term debt payable
to a related party and as such it is not practical to estimate its fair value.
Capitalized Interest
No material amounts of interest have been capitalized during the nine
months ended September 30, 1997, or the years ended December 31, 1996, 1995 or
1994. The Company capitalizes interest cost associated with debt incurred in
connection with major construction projects.
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--QUASI-REORGANIZATION
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
$51,740,000 and a corresponding decrease of $45,042,000 in buildings and other
property and equipment, net of accumulated depreciation and $6,698,000 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 $155,025,000 as of June 30, 1996, was transferred to capital in
excess of par value.
NOTE 4--STRATEGIC REDIRECTION
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 (Notes 1 and 3). As a result,
approximately 1,400 employee positions were eliminated. The severance and
related closing costs of $6,698,000 are included in selling, general and
administrative expense.
NOTE 5--NFG MERGER
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 $27,882,000.
A-15
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5--NFG MERGER (Continued)
NFG was incorporated in 1992 for the sole purpose of acquiring certain LVSI
Second Mortgage Notes from third parties and had no other operations. Throughout
its existence, the shareholders of NFG have been the same as those of the
Company. Based on the commonality of control, the merger has been accounted for
at historical cost in a manner similar to a pooling of interests. Accordingly,
the Company's financial statements have been restated to include the accounts
and operations of NFG for all periods prior to the merger.
As of the merger date, NFG owned $37,025,000 of the Company's Second
Mortgage Notes (Note 10) which were retired as part of the transaction.
Historical interest charges related to these notes totaling $2,249,000 and
$5,732,000 in 1995 and 1994, respectively, have been eliminated on the
assumption that the notes were retired when repurchased by NFG.
A-16
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6--ACCOUNTS RECEIVABLE
Accounts receivable consists of the following (in thousands):
December 31,
-----------------
1996 1995
------ --------
Casino ........................................ $830 $2,010
Hotel and other ............................... 86 1,025
---- ------
916 3,035
Less: Allowance for doubtful accounts ......... 783 986
---- ------
$133 $2,049
==== ======
The Company extended credit to a limited number of casino patrons following
an evaluation of the customer's creditworthiness. The Company monitored its
exposure to credit losses and maintained allowances for anticipated losses.
Management believes there are no significant concentrations of credit risks as
of December 31, 1996.
NOTE 7--PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
-------------- -----------------------
1997 1996 1995
-------------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Land and land improvements (Notes 3 and 13) ......... $ 93,634 $ 87,523 $ 46,000
Expo Center (Note 13) ............................... 70,573
Buildings and improvements (Note 3) ................. 62,982
Equipment, furniture and fixtures (Note 3) .......... 545 460 22,666
Equipment under capital lease ....................... 888
Construction in progress ............................ 111,139 22,935 230
-------- -------- --------
205,318 110,918 203,339
Less: Accumulated depreciation (Note 3) ............. 38 38 48,353
-------- -------- --------
$205,280 $110,880 $154,986
======== ======== ========
</TABLE>
Depreciation expense for property and equipment totaled $3,091,000 and
$9,360,000 for fiscal 1996 and 1995, respectively.
NOTE 8--OTHER NON-CURRENT ASSETS
At December 31, 1995, other assets include a $2,500,000 restricted bank
deposit. This deposit was pledged as collateral for a letter of credit which was
required for the Company to self-insure and administer its own state workers
compensation coverage. In 1996, the requirement for the letter of credit was
eliminated and the funds were transferred to cash and cash equivalents.
A-17
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9--ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following (in thousands):
December 31,
--------------------
1996 1995
--------- --------
Accrued closing costs ..................... $3,658 $ --
Casino related and other accruals ......... 1,342 6,516
------ ------
$5,000 $6,516
====== ======
Accrued closing costs at December 31, 1996, consist primarily of accrued
medical and dental costs for severed employees as a result of the closing of the
Sands (Note 3).
Accounts payable at September 30, 1997 and December 31, 1996, consist
primarily of construction project related liabilities.
NOTE 10--DEBT (Unaudited)
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
--------------- ------------------------
1997 1996 1995
--------------- ---------- -----------
<S> <C> <C> <C>
Construction Loan Payable .............................. $15,050 $ -- $ --
Second Mortgage Notes payable to IGN ................... -- -- 33,197
Third Mortgage Notes payable to IGN .................... 88,670
------- ------- --------
15,050 -- 121,867
Less: Current portion of Construction Loan Payable ..... 15,050
Current portion of Second Mortgage Notes ............... 1,801
------- ------- --------
Total long-term debt ................................... $ -- $ -- $120,066
======= ======= ========
</TABLE>
Construction Loan Payable
Interim construction financing entered into in August 1997, in the amount
of $15,050,000, was provided by GS Credit Partners, LP. The interest is payable
at the Eurodollar rate plus 25 basis points. At September 30, 1997, the interest
rate was 5.9375%. The construction loan is due at the earlier of project
financing or December 31, 1997 with interest payable monthly.
Second Mortgage Notes
The Second Mortgage Notes were held by IGN who purchased the notes from
third parties during 1994. These 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 interest rate reset on each quarterly interest payment date.
In connection with the 1996 acquisition by IGN of the Expo Center building
and related land and equipment, the Company retired $33,197,000 of Second
Mortgage Notes (Note 13) and wrote-off remaining capitalized financing costs of
$1,624,000 which are included in amortization expense.
Third Mortgage Notes Payable to IGN
The Third Mortgage Paid-In-Kind ("PIK") notes payable to IGN bore interest
at the short-term quarterly applicable federal interest rate as published by the
Internal Revenue Service. The interest rate reset on each quarterly interest
payment date. At December 31, 1995, the interest rate was 5.78%. Interest was
payable quarterly at a rate of $250,000 in cash and the remainder in additional
PIK notes.
A-18
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 10--DEBT (UNAUDITED) (Continued)
In connection with the 1996 acquisition by IGN of the Expo Center building
and related land and equipment, the Company retired $32,303,000 of Third
Mortgage Notes (Note 13).
The remaining $59,454,000 of Third Mortgage Notes were retired in 1996 by
the Company upon contribution by the stockholder of all the remaining notes held
by IGN.
NOTE 11--PREFERRED INTEREST IN VENETIAN CASINO RESORT, LLC (Unaudited)
During the nine months ended September 30, 1997, Interface Holding
contributed $72,053,000 in cash to Venetian in exchange for 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. The Series A Preferred Interest may, at any time, 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 accrue a preferred return of 12% and upon
the 12th anniversary of the closing of the offering of mortgage notes, senior
subordinated notes and obtaining of other financing related to construction of
the Casino Resort, distributions must be made to the extent of the positive
capital account of the holder. Subject to foregoing, distributions of the
preferred interest of the holder of 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 September 30, 1997, there were no distributions of preferred
interest or preferred return paid or accrued.
NOTE 12--STOCKHOLDER'S EQUITY
Share Repurchases
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 $13,176,000
which has been recorded as a reduction to capital in excess of par value.
In August 1995, the Company purchased 34,999 shares of its common stock
from the identical three stockholders for $206,000. 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
Sole Stockholder.
Employment Agreements/Stock Options
The Company has entered into 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 of the Company's common stock at
an exercise price to be determined by a formula involving the value of LVSI land
and certain capital contributions. The options will be exercisable in varying
proportions starting from the date the newly developed hotel and casino
commences operations. If fully exercised, shares acquired under such options
would represent approximately 5% of the Company's then outstanding stock.
Dividend
During the nine months ended September 30, 1997, LVSI declared and paid
liquidating cash dividends totaling $27,600,000 from capital in excess of par
value, to its Sole Stockholder.
A-19
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 13--RELATED PARTY TRANSACTIONS
The Company is a member of a group of affiliated companies and has
significant transactions and relationships with members of the group, including
providing to and receiving from IGN certain administrative services in the
normal course of operations. Because of these relationships, it is possible that
the terms of these transactions are not the same as those that would result from
transaction among wholly unrelated parties. Management believes, however, that
the terms of all transactions with affiliates are conducted at arm's length.
The 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 $4,116,000, $7,870,000
and $6,182,000 in 1996, 1995 and 1994, respectively, was paid or was payable to
IGN.
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
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
$66,775,000, in exchange for all of the Second Mortgage Notes and a portion of
the Third Mortgage Notes of the Company held by IGN. In connection with the
transaction, the Company subsequently retired the Second and Third Mortgage
Notes received and the above lease was canceled.
NOTE 14--PENSION PLANS
The Company contributed to multi-employer pension plans under various union
agreements. Contributions were based on wages paid to covered employees. The
Company's share of the unfunded liability related to multi-employer plans, if
any, is not determinable.
The Company maintains a 401(k) savings plan whereby eligible employees may
contribute up to 15% of their annual compensation, subject to certain
limitations. The Company may, at its discretion, match a portion of employee
contributions.
NOTE 15--COMMITMENTS AND CONTINGENCIES
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 of the Company.
Ground breaking for the new hotel-casino resort occurred in April 1997. The
Casino Resort is expected to be completed in two phases 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
phase I of the Casino Resort is currently estimated at $1 billion. In connection
with phase I of the Casino Resort, the Company has signed a construction
management agreement with Lehrer McGovern Bovis, Inc., a major construction
management firm. Such agreement provides for a maximum guaranteed price for
certain construction costs currently set at approximately $550 million and a
guaranteed completion period of 24 months from the effective starting date of
construction.
A-20
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 16--SUMMARIZED FINANCIAL INFORMATION (Unaudited)
LVSI, Venetian, Mall Intermediate, Mall Construction and Lido Intermediate
are co-obligors or guarantors of the mortgage notes, senior subordinated notes
and the indebtedness related to construction of the Casino Resort. Mall
Subsidiary is not an obligor or guarantor of any of the debt to be issued. No
summarized financial information is presented for Mall Subsidiary, Mall
Intermediate, Mall Construction and Lido Intermediate, as they had no assets or
results of operations from inception through September 30, 1997. Since the
Venetian also had no results of operations from inception through September 30,
1997, no condensed statements of operations are presented. Summarized financial
information of LVSI and Venetian as of and for the nine months ended September
30, 1997 is as follows (in thousands):
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
Venetian Consolidating/
Las Vegas Casino Eliminating
Sands, Inc. Resort Entries Total
------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents .............. $ 588 $ 8,979 $ -- $ 9,567
Amounts due from Venetian .............. 131 (131)
Other current assets ................... 425 31 456
--------- --------- ---------- ---------
Total current assets .................. 1,144 9,010 (131) 10,023
--------- --------- ---------- ---------
Property and equipment, net ............ 205,280 205,280
Investment in Venetian ................. 114,132 (114,132)
Other assets ........................... 1,388 34 1,422
--------- --------- ---------- ---------
$ 116,664 $ 214,324 $ (114,263) $ 216,725
========= ========= ========== =========
Accounts payable ....................... $ 42 $ 11,474 $ -- $ 11,516
Construction loan payable .............. 15,050 15,050
Amounts due to LVSI .................... 131 (131)
Other accrued liabilities .............. 4,050 1,484 5,534
--------- --------- ---------- ---------
Total current liabilities ............. 4,092 28,139 (131) 32,100
--------- --------- ---------- ---------
Preferred interest in Venetian ......... 72,053 72,053
--------- --------- ---------- ---------
Stockholder's equity ................... 112,572 114,132 (114,132) 112,572
--------- --------- ---------- ---------
$ 116,664 $ 214,324 $ (114,263) $ 216,725
========= ========= ========== =========
</TABLE>
A-21
<PAGE>
LAS VEGAS SANDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 16--SUMMARIZED FINANCIAL INFORMATION (Unaudited) (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Venetian Consolidating/
Las Vegas Casino Eliminating
Sands, Inc. Resort Entries Total
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities .......................................... $ 17,989 $ (6,955) $ -- $ 11,034
--------- --------- -------- ---------
Cash flows from investing activities:
Capital expenditures ................................ (25,399) (61,369) (86,768)
--------- --------- -------- ---------
Cash flows from financing activities:
Proceeds from capital contributions .................. 25,500 25,500
Proceeds from preferred interest in Venetian ......... 72,053 72,053
Proceeds from construction loan ...................... 15,050 15,050
Proceeds (payments) of intercompany dividends 9,800 (9,800)
Payment of dividends ................................. (27,600) (27,600)
--------- --------- -------- ---------
Net cash provided by financing activities ............ 7,700 77,303 -- 85,003
--------- --------- -------- ---------
Increase in cash and cash equivalents ................ 290 8,979 9,269
Cash and cash equivalents at beginning of
period .............................................. 298 298
--------- --------- -------- ---------
Cash and cash equivalents at end of period ........... $ 588 $ 8,979 $ -- $ 9,567
========= ========= ======== =========
</TABLE>
A-22
<PAGE>
LANDAUER ASSOCIATES, INC.
707 Wilshire Boulevard
[LANDAUER LOGO] 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.
[LANDAUER LOGO]
B-1
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[LANDAUER LOGO]
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
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======================================= =======================================
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 Prospectus
solicitation of an offer to buy any -----------------------
securities other than the securities
to which it relates, nor does it Las Vegas Sands, Inc.
constitute an offer to sell, or the Venetian Casino Resort, LLC
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 $425,000,000
making such offer or solicitation is 12-1/4% Mortgage Notes
not qualified to do so, or to any due 2004
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 $97,500,000
any circumstances, create any 14-1/4% Senior Subordinated Notes
implication that there has been no due 2005
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.
[VENETIAN LOGO]
-----------------
TABLE OF CONTENTS
-----------------------
Page Offer to Exchange $425,000,000 of
---- their 12-1/4% Mortgage Notes due 2004
Available Information ............ 2 and $97,500,000 of their 14-1/4%
Special Note Regarding Senior Subordinated Notes which have
Forward-Looking Statements ..... 3 been registered under the Securities
Prospectus Summary ............... 4 Act for $425,000,000 of their
Risk Factors ..................... 27 outstanding 12-1/4% Mortgage Notes due
LVSI and Venetian ................ 46 2004 and $97,500,000 of their
Use of Proceeds .................. 48 outstanding 14-1/4% Senior
Capitalization ................... 50 Subordinated Notes due 2005.
Management's Discussion and
Analysis of Liquidity and
Capital Resources .............. 51
The Exchange Offer ............... 55 , 1998
Business ......................... 63
Regulation and Licensing ......... 80
Appraisals ....................... 84 Until , 1998 (90 days after
Management ....................... 88 the date of this Prospectus), all
Ownership of Capital Stock ....... 92 dealers effecting transactions in the
Certain Transactions ............. 93 registered securities, whether or not
Description of Mortgage Notes .... 96 participating in this distribution,
Description of Senior may be required to deliver a
Subordinated Notes ............. 146 Prospectus. This is in addition to the
Book-Entry, Delivery and Form .... 190 obligation of dealers to deliver a
Description of Prospectus when acting as underwriters
Disbursement Agreement ......... 193 and with respect to their unsold
Description of allotments or subscriptions.
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
======================================= =======================================
<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
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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.
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Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description of Document
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<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>
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<TABLE>
<CAPTION>
Exhibit No. Description of Document
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<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>
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<TABLE>
<CAPTION>
Exhibit No. Description of Document
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<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.
12.1 Statement regarding computation of ratios of earnings to fixed charges.*
21.1 Subsidiaries of the Issuers and Guarantors.
</TABLE>
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<TABLE>
<CAPTION>
Exhibit No. Description of Document
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<S> <C>
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>
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*|Previously filed
**|To be filed by amendment.
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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 12th day
of February, 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 February 12, 1998
- ------------------------- Executive Officer and Director
Sheldon G. Adelson
* Special Director February 12, 1998
- -------------------------
William J. Raggio
* Vice President--Finance (principal February 12, 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 12th day
of February, 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 February 12, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant
* Special Director of managing member February 12, 1998
- ------------------------- of Registrant
William J. Raggio
* Vice President--Finance of managing February 12, 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 12th day
of February, 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 February 12, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant's sole member
* Special Director of managing member February 12, 1998
- ------------------------- of Registrant's sole member
William J. Raggio
* Vice President--Finance of managing February 12, 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 12th day
of February, 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 February 12, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant's sole member
* Special Director of managing member February 12, 1998
- ------------------------- of Registrant's sole member
William J. Raggio
* Vice President--Finance of managing February 12, 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 12th day
of February, 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 February 12, 1998
- ------------------------- Officer and Director of managing
Sheldon G. Adelson member of Registrant's sole member
* Special Director of managing member February 12, 1998
- ------------------------- of Registrant's sole member
William J. Raggio
* Vice President--Finance of managing February 12, 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
EXECUTION COPY
================================================================================
- --------------------------------------------------------------------------------
VENETIAN CASINO RESORT, LLC
LAS VEGAS SANDS, INC.
as Issuers
MALL INTERMEDIATE HOLDING COMPANY, LLC
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
LIDO INTERMEDIATE HOLDING COMPANY, LLC
as Mortgage Note Guarantors
$425,000,000
12 1/4% Mortgage Notes due 2004
-----------------
INDENTURE
Dated as of November 14, 1997
-----------------
-----------------
FIRST TRUST NATIONAL ASSOCIATION
as Mortgage Note Trustee
-----------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.............................................................. 1
Section 1.02. Other Definitions........................................................ 29
Section 1.03. Incorporation by Reference of Trust Indenture Act........................ 29
Section 1.04. Rules of Construction.................................................... 30
ARTICLE 2
THE MORTGAGE NOTES
Section 2.01. Form and Dating.......................................................... 30
Section 2.02. Execution and Authentication............................................. 32
Section 2.03. Registrar and Paying Agent............................................... 32
Section 2.04. Paying Agent to Hold Money in Trust...................................... 32
Section 2.05. Holder Lists............................................................. 33
Section 2.06. Transfer and Exchange.................................................... 33
Section 2.07. Replacement Mortgage Notes............................................... 44
Section 2.08. Outstanding Mortgage Notes............................................... 44
Section 2.09. Treasury Notes........................................................... 44
Section 2.10. Temporary Notes.......................................................... 45
Section 2.11. Cancellation............................................................. 45
Section 2.12. Defaulted Interest....................................................... 45
ARTICLE 3
OFFERS TO PURCHASE OR REDEMPTION
Section 3.01. Notices to Mortgage Note Trustee......................................... 45
Section 3.02. Selection of Mortgage Notes to Be Purchased or Redeemed.................. 46
Section 3.03. Notice of Redemption..................................................... 46
Section 3.04. Effect of Notice of Redemption........................................... 47
Section 3.05. Deposit of Purchase or Redemption Price.................................. 47
Section 3.06. Mortgage Notes Purchased or Redeemed in Part............................. 48
Section 3.07. Optional Redemption...................................................... 48
Section 3.08. Redemption Pursuant to Gaming Law........................................ 49
Section 3.09. Mandatory Redemption..................................................... 49
Section 3.10. Repurchase Offers........................................................ 49
ARTICLE 4
COVENANTS
Section 4.01. Payment of Mortgage Notes................................................ 51
Section 4.02. Maintenance of Office or Agency.......................................... 51
Section 4.03. Reports.................................................................. 52
Section 4.04. Compliance Certificate................................................... 52
Section 4.05. Taxes.................................................................... 53
Section 4.06. Stay, Extension and Usury Laws........................................... 53
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.07. Restricted Payments...................................................... 54
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries........... 57
Section 4.09. Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock....................................................... 58
Section 4.10. Asset Sales.............................................................. 61
Section 4.11. Event of Loss............................................................ 62
Section 4.12. Transactions with Affiliates............................................. 63
Section 4.13. Liens.................................................................... 64
Section 4.14. Line of Business......................................................... 65
Section 4.15. Corporate Existence...................................................... 65
Section 4.16. Offer to Repurchase Upon Change of Control............................... 65
Section 4.17. Designation of Unrestricted Subsidiary................................... 65
Section 4.18. Designation of Special Subsidiary........................................ 66
Section 4.19. Gaming Licenses.......................................................... 67
Section 4.20. Construction............................................................. 67
Section 4.21. Maintenance of Insurance and Amendment of the Cooperation Agreement...... 67
Section 4.22. Limitation on Status as Investment Company............................... 67
Section 4.23. Collateral Documents..................................................... 67
Section 4.24. Further Assurances....................................................... 68
Section 4.25. Restrictions on Leasing and Dedication of Property....................... 68
Section 4.26. Mortgage Note Guaranties................................................. 69
Section 4.27. Special Subsidiary Restricted Payments................................... 70
Section 4.28. Ownership of Unrestricted Subsidiaries and Special Subsidiaries.......... 70
Section 4.29. Limitation on Phase II Construction...................................... 70
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets................................. 71
Section 5.02. Successor Corporation Substituted........................................ 72
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default........................................................ 72
Section 6.02. Acceleration............................................................. 74
Section 6.03. Other Remedies........................................................... 75
Section 6.04. Waiver of Past Defaults.................................................. 75
Section 6.05. Control by Majority...................................................... 76
Section 6.06. Limitation on Suits...................................................... 76
Section 6.07. Rights of Holders of Mortgage Notes to Receive Payment................... 76
Section 6.08. Collection Suit by Mortgage Note Trustee................................. 77
Section 6.09. Mortgage Note Trustee May File Proofs of Claim........................... 77
Section 6.10. Priorities............................................................... 77
Section 6.11. Undertaking for Costs.................................................... 78
Section 6.12. Management of Casinos.................................................... 78
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 7
MORTGAGE NOTE TRUSTEE
Section 7.01. Duties of Mortgage Note Trustee.......................................... 78
Section 7.02. Rights of Mortgage Note Trustee.......................................... 79
Section 7.03. Individual Rights of Mortgage Note Trustee............................... 80
Section 7.04. Mortgage Note Trustee's Disclaimer....................................... 80
Section 7.05. Notice of Defaults....................................................... 81
Section 7.06. Reports by Mortgage Note Trustee to Holders of the Mortgage Notes........ 81
Section 7.07. Compensation and Indemnity............................................... 82
Section 7.08. Replacement of Mortgage Note Trustee..................................... 82
Section 7.09. Successor Mortgage Note Trustee by Merger, etc........................... 84
Section 7.10. Eligibility; Disqualification............................................ 84
Section 7.11. Preferential Collection of Claims Against Company........................ 84
Section 7.12. Authorization of Trustee to Take Other Actions........................... 84
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance................. 85
Section 8.02. Legal Defeasance and Discharge........................................... 85
Section 8.03. Covenant Defeasance...................................................... 86
Section 8.04. Conditions to Legal or Covenant Defeasance............................... 86
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions................................................. 87
Section 8.06. Repayment to the Issuers................................................. 88
Section 8.07. Reinstatement............................................................ 88
Section 8.08. Note Collateral.......................................................... 88
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Mortgage Notes............................. 89
Section 9.02. With Consent of Holders of Mortgage Notes................................ 90
Section 9.03. Compliance with Trust Indenture Act...................................... 91
Section 9.04. Revocation and Effect of Consents........................................ 91
Section 9.05. Notation on or Exchange of Mortgage Notes................................ 91
Section 9.06. Mortgage Note Trustee to Sign Amendments, etc............................ 92
ARTICLE 10
COLLATERAL AND SECURITY
Section 10.01. Security................................................................. 92
Section 10.02. Recording and Opinions................................................... 93
Section 10.03. Release of Collateral.................................................... 94
Section 10.05. Certificates of the Issuers.............................................. 95
Section 10.06. Certificates of the Mortgage Note Trustee................................ 96
Section 10.07. Authorization of Actions to Be Taken by the Mortgage Note Trustee
Under the Collateral Documents........................................... 96
Section 10.08. Authorization of Receipt of Funds by the Mortgage Note Trustee Under the
Collateral Documents..................................................... 96
Section 10.09. Termination of Security Interest......................................... 97
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.10. Cooperation of Mortgage Note Trustee..................................... 97
Section 10.11. Collateral Agent......................................................... 97
ARTICLE 11
MORTGAGE NOTE GUARANTIES
Section 11.01. Mortgage Note Guaranties................................................. 98
Section 11.02. Additional Mortgage Note Guaranties...................................... 99
Section 11.03. Limitation of Mortgage Note Guarantor's Liability........................100
Section 11.04. Mortgage Note Guarantors May Consolidate, etc., on Certain Terms.........100
Section 11.05. Releases of Mortgage Note Guaranties.....................................101
Section 11.06. "Mortgage Note Trustee" to Include Paying Agent..........................102
Section 11.07. Subordination of Subordinated Mortgage Note Guarantors...................102
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.............................................106
Section 12.02. Notices..................................................................106
Section 12.03. Communication by Holders of Mortgage Notes with Other Holders of Mortgage
Notes....................................................................107
Section 12.04. Certificate and Opinion as to Conditions Precedent.......................107
Section 12.05. Statements Required in Certificate or Opinion............................107
Section 12.06. Rules by Mortgage Note Trustee and Agents................................108
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders.108
Section 12.08. Governing Law............................................................108
Section 12.09. No Adverse Interpretation of Other Agreements............................108
Section 12.10. Successors...............................................................108
Section 12.11. Severability.............................................................109
Section 12.12. Counterpart Originals....................................................109
Section 12.13. Table of Contents, Headings, etc.........................................109
EXHIBITS
Exhibit A-1. Form of Mortgage Note
Exhibit A-2. Form of Temporary Regulation S Note
Exhibit B. Form of Certificate of Transfer
Exhibit C. Form of Certificate of Exchange
Exhibit D. Form of Certificate from Acquiring Institutional Accredited Investor
Exhibit E. Form of Notation of Mortgage Note Guaranty
Exhibit F. Form of Supplemental Indenture to be Delivered by Subsequent Mortgage Note
Guarantors
Exhibit G. Disbursement Agreement
Exhibit H. Intercreditor Agreement
Exhibit I. Mortgage Notes Indenture Deeds of Trust
Exhibit J. Mall Space Description
</TABLE>
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1).................................................................7.10
(a)(2).................................................................7.10
(a)(3).................................................................N.A.
(a)(4).................................................................N.A.
(a)(5).................................................................7.10
(b)....................................................................7.10
(c)....................................................................N.A.
311 (a)....................................................................7.11
(b)....................................................................7.11
(c)....................................................................N.A.
312 (a)....................................................................2.05
(b)...................................................................12.03
(c)...................................................................12.03
313 (a)....................................................................7.06
(b)(1) ...............................................................10.03
(b)(2).................................................................7.07
(c.............................................................. 7.06;12.02
(d)....................................................................7.06
314 (a)..............................................................4.03;12.05
(b)...................................................................10.02
(c)(1)................................................................11.04
(c)(2)................................................................11.04
(c)(3).................................................................N.A.
(d).......................................................10.03,10.04,10.05
(e).............................................................10.02;12.05
(f)....................................................................N.A.
315 (a)....................................................................7.01
(b)..............................................................7.05,12.02
(c)....................................................................7.01
(d)....................................................................7.01
(e)....................................................................6.11
316 (a)(last sentence).....................................................2.09
(a)(1)(A)..............................................................6.05
(a)(1)(B)..............................................................6.04
(a)(2).................................................................N.A.
(b)....................................................................6.07
(c)....................................................................2.12
317 (a)(1).................................................................6.08
(a)(2).................................................................6.09
(b)....................................................................2.04
318 (a)...................................................................12.01
(b)....................................................................N.A.
(c)...................................................................12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
INDENTURE dated as of November 14, 1997 among Venetian Casino Resort,
LLC, a Nevada limited liability company ("Venetian"), Las Vegas Sands, Inc., a
Nevada corporation (the "Company" and, together with Venetian, the "Issuers"),
Mall Intermediate Holding Company, LLC, a Delaware limited liability company
("Mall Intermediate Holdings"), Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company ("Mall Construction Subsidiary"), and Lido
Intermediate Holding Company, LLC, a Delaware limited liability company ("Phase
II Intermediate Holdings" and, together with Mall Intermediate Holdings, Mall
Construction Subsidiary and all future Restricted Subsidiaries (as defined
below), the "Mortgage Note Guarantors") and First Trust National Association, as
trustee (the "Mortgage Note Trustee").
The Issuers, the Mortgage Note Guarantors and the Mortgage Note Trustee
agree as follows for the benefit of each other and for the equal and ratable
benefit of the Holders of the 12 1/4% Mortgage Notes due 2004 (the "Initial
Mortgage Notes") and the 12 1/4% Mortgage Notes due 2004 (the "Exchange Mortgage
Notes" and, together with the Initial Mortgage Notes, the "Mortgage Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Mortgage Notes sold in reliance on Rule 144A.
"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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"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
1
<PAGE>
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; (ii) the collateral to
secure Indebtedness under such commitment does not include any Note Collateral;
and (iii) to the extent the lenders under the Bank Credit Facility deem it
appropriate in their sole discretion, the lender under such commitment executes
and delivers an intercreditor agreement in accordance with Section 7.12(c)
hereof.
"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 Article 5 hereof or any disposition that constitutes a
Change of Control hereunder, (c) any disposition that is a Restricted Payment or
that is a dividend or distribution permitted under Section 4.07 hereof 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 Section 4.25; (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 under Section 4.09(p) 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.
"Available Funds" shall have the meaning set forth in the Disbursement
Agreement.
"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, dated as of
November 14, 1997, 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
2
<PAGE>
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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Billboard Lease" means that certain Lease Agreement, dated as of
November 14, 1997, 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.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"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
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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 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 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.
"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, partnership 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.
"Cedel" means Cedel Bank, SA.
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"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 Agent" means any person appointed by the Mortgage Note
Trustee as a collateral agent hereunder.
"Collateral Documents" means, collectively, the Disbursement Agreement,
the Completion Guaranty, 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 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 $0.10 per share, of
the Company.
"Company" means Las Vegas Sands, Inc., a Nevada corporation, or any
successor thereto is permitted under this Indenture.
"Completed" or "Completion" has the meaning given to the term "Mall
Release Date" under the Disbursement Agreement.
"Completion Guaranty" means that certain Guaranty, dated as of November
14, 1997, 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 Note Trustee (acting on behalf of the Holders) as
amended, revised or modified from time to time in accordance with the terms
thereof.
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"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.
"Congress Center" means that certain meeting and conference center
complex of approximately 500,000 net leasable square feet more particularly
described in the Plans and Specifications.
"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 Guaranty of Indebtedness of any other Person if such
Guaranty 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
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
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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 Note 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, dated as of February 15, 1997, between the Company and
Lehrer McGovern Bovis, Inc., a New York corporation, as assigned by the Company
to Venetian and amended by that certain Assignment and Amendment of Construction
Management Agreement, dated as of November 14, 1997, among the Company, Venetian
and Lehrer McGovern Bovis, Inc., as amended, revised or modified from time to
time in accordance with its terms.
"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, dated as of November 14, 1997,
among the Mall Construction Subsidiary, Venetian and Interface, as amended,
revised or modified from time to time in accordance with its terms.
"Corporate Trust Office of the Mortgage Note Trustee" shall be at the
address of the Mortgage Note Trustee specified in Section 12.02 hereof or such
other address as to which the Mortgage Note Trustee may give notice to the
Issuers.
"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.
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"Definitive Note" means a certificated Mortgage Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A-1 hereto except that such Mortgage Note shall not bear the
Global Note Legend and shall not have the "Schedule of Exchanges of Interests in
the Global Note" attached thereto.
"Depositary" means, with respect to the Mortgage Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Mortgage Notes, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Direct Construction Guaranty" means that certain Guaranty of
Performance and Completion, dated as of November 14, 1997, 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, dated as of November
14, 1997, 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, dated as of November 14, 1997, among
the Issuers, Mall Construction Subsidiary, the Bank Agent, the Mortgage Note
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 Sections 4.10, 4.11 and 4.16.
"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.
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"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Mortgage Notes" means the Mortgage Notes issued in the
Exchange Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means (i) up to $1.5 million in aggregate
principal amount of Indebtedness (other than Capital Lease Obligations) of the
Issuers or their 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 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.
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"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 this
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 their 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.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibits A-1 and A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"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
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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, revised, modified or restated, as
contemplated by the existing Letter of Intent, dated as of July 2, 1997, between
the parties with respect to the sharing of the common road way 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, dated as of November 14, 1997, between Venetian and the HVAC
Provider, (ii) that certain Ground Lease between Venetian and the HVAC Provider,
(iii) that certain Construction Agency Agreement, dated as of November 14, 1997,
between Venetian and the HVAC Provider and (iv) that certain Energy Services
Agreement, dated as of November 14, 1997, between Mall Subsidiary and the HVAC
Provider, in each case, as amended, revised or modified from time to time in
accordance with its terms.
"Holder" means a Person in whose name a Mortgage Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Mortgage Notes sold to Institutional Accredited
Investors.
"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
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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.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"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 Issuers and their Subsidiaries, each Affiliate of the Issuers,
and the Sole Stockholder and its Related Parties.
"Indirect Construction Guaranty" means that certain Guaranty of
Performance dated as of November 14, 1997 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 dated as of November 14, 1997 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.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Intercreditor Agreement" means the Intercreditor Agreement, a copy of
which is attached hereto as Exhibit H, 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 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 and
The Bank of Nova Scotia, as Intercreditor Agent, 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.
"Interface Holding" means Interface Group Holding Company, Inc., a
Nevada corporation and wholly owned direct 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 Guaranties), 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
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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.
"Issuers" means the Company and Venetian, and any successor to any of
them permitted under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lenders" means any of the lenders under the Bank Credit Facility, the
Mall Construction Lender and the Holders of the Mortgage Notes.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Issuers and sent to all Holders of the Mortgage Notes for use by such
Holders in connection with the Exchange Offer.
"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).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"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,
dated as of November 14, 1997, between the Issuers, Mall Construction Subsidiary
and Mall Construction Lender, as amended, revised or modified from time to time
in accordance with its terms.
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"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 (as defined in the
Mall Construction Loan Facility) 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.
"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, dated as of November 14, 1997, by and
between Venetian and Mall Construction Subsidiary pursuant to which Mall
Construction Subsidiary will lease 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, dated
as of November 14, 1997, between Forest City Enterprises and the Mall
Construction Subsidiary, as amended, revised or modified.
"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 Exhibit J hereto.
"Mall Subsidiary" means Grand Canal Shops Mall, LLC, a Delaware limited
liability company.
"Mortgage Note Custodian" means the Mortgage Note Trustee, when serving
as custodian for the Depositary with respect to the Mortgage Notes in global
form, or any successor entity thereto.
"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
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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" has the meaning assigned to it in the preamble to this
Indenture.
"Mortgage Note Guaranties" means, collectively, the Secured Mortgage
Note Guaranties and the Subordinated Mortgage Note Guaranties.
"Mortgage Note Guarantors" has the meaning assigned to it in the
preamble to this Indenture, and includes any successors thereto permitted under
this Indenture.
"Mortgage Notes Indenture Environmental Indemnity" means that
Environmental Indemnity Agreement, dated as of November 14, 1997, 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,
dated as November 14, 1997 and 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 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 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
will be deposited in accordance with the Disbursement Agreement.
"Mortgage Note Trustee" means the party named as such in the preamble
hereto until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"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 Loss Proceeds" means the aggregate cash proceeds received by the
Issuers or any of their Restricted Subsidiaries in respect of any Event of Loss,
including, without limitation, insurance proceeds
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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
Issuers or any of their 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 Issuers or any
Restricted Subsidiary only through the return or sale of the property, 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 Issuers 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 Issuers nor any of their 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 Issuers or any of their
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.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Collateral" means all assets, now owned or hereafter acquired, of
the Company, Venetian or any Mortgage Note Guarantor included in the collateral
securing the Mortgage Notes under the Collateral Documents, which will initially
include 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. Notwithstanding the forgoing, "Note Collateral" shall not include:
(i) the assets of the
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Phase II Subsidiary and, after the release thereof, the Mall Collateral; (ii)
heating and air-conditioning related and other equipment owned by the HVAC
Provider, which provides thermal energy services to the Issuers pursuant to the
HVAC Services Agreement; (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) assets financed with Indebtedness
permitted to be incurred pursuant to clauses (g), (h) or (p) of the Section 4.09
hereof and such Indebtedness is permitted to be secured pursuant to Section 4.13
hereof.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering by the Issuers of $425,000,000 in
aggregate principal amount of their 12 1/4% Mortgage Notes due 2004.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"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 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 this Indenture.
"Opinion of Counsel" means an opinion from legal counsel, that meets
the requirements of Section 12.05 hereof. The counsel may be an employee of or
counsel to the Issuers, any Subsidiary of the Issuers, any Mortgage Note
Guarantor or the Mortgage Note Trustee.
"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.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights 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
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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 Section 4.10 hereof; (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 Issuers
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 this 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 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 this
Indenture; provided, however, that the Issuers have obtained a title insurance
endorsement insuring against losses arising therewith or if such Lien arises in
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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 this
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 Section 4.25
hereof; (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 this 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 Section 4.25 hereof, (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 of Section 4.25
(k) Liens securing the Mall Construction Loan Facility and any additional
Indebtedness permitted to be incurred thereunder pursuant to clause (n)(A) of
Section 4.09 hereof; (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 Pre-development Agreement, as in effect on a date of this
Indenture; (o) Liens (1) to secure Indebtedness permitted by clauses (g), (h) or
(p) of Section 4.09 and extending only to such 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 (2) to secure Indebtedness permitted by clause (d) of Section 4.09; 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 and any Guarantees thereof incurred
pursuant to clause (a) of Section 4.09 hereof and any additional Indebtedness
permitted to be incurred thereunder pursuant to clause (n)(A) of Section 4.09
hereof; (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 Section 4.09 hereof; (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
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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 Section 4.09 hereof and (B) up to an aggregate of
$20.0 million of Indebtedness permitted to be incurred pursuant to clause (o) of
Section 4.09 hereof.
"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.
"Phase II Holdings" means Lido Casino Resort Holding Company, LLC, a
Delaware limited liability company and a subsidiary of Phase II Intermediate
Holdings, and any successor thereto permitted under this Indenture.
"Phase II Intermediate Holdings" means Lido Intermediate Holding
Company, LLC, a Delaware limited liability company, and a Wholly Owned
Subsidiary of the Company, and any successor thereto permitted under this
Indenture.
"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.
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"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 this Indenture), owning and operating
joint ventures to supply materials or services for the construction or operation
of any resorts owned or operated by the Issuers and their 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.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Mortgage Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"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
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permitted by this 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.
"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).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 14, 1997, by and among the Issuers, the Initial
Purchasers and the other parties named on the signature pages thereof, as such
agreement may be amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Mortgage
Note in the form of Exhibit A-2 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Mortgage
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
the Regulation Temporary Global Note
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Legend set forth in Section 2.06(g)(iii) and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Mortgage Notes
initially sold in reliance on Rule 903 of Regulation S.
"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 Sections 4.10, 4.11 or
4.16 hereof, respectively.
"Responsible Officer," when used with respect to the Mortgage Note
Trustee, means any officer within the Corporate Trust Administration of the
Mortgage Note Trustee (or any successor group of the Mortgage Note Trustee) or
any other officer of the Mortgage Note Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"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 Period" means the 40-day restricted period as defined in
Regulation S.
"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."
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
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"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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Secured Mortgage Note Guaranties" means the unconditional guaranties
of the Mortgage Notes on a senior, secured basis by the Mall Construction
Subsidiary and any future Restricted Subsidiary of the Issuers.
"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.
"Senior Subordinated Note Indenture" means that certain Indenture,
dated as of November 14, 1997, 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, dated as of November 14, 1997, by and among the Company, Interface,
Interface Group Holding Company, Inc., a Nevada corporation, and the parties
stated on the signature page thereto, as amended from time to time in accordance
with its terms.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"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.
"Sole Stockholder Intercreditor Agreement" means the Intercreditor
Agreement, among the Sole Stockholder, the Company, Venetian, Mall Construction
Subsidiary, The Bank of Nova Scotia, as Bank Agent acting on behalf of the other
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,
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.
"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 this Indenture.
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"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 this 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 Section 4.09 hereof,
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.
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"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.
"Subordinated Mortgage Note Guaranties" means the unconditional
guaranties of the Mortgage Notes on a subordinated, unsecured basis by Mall
Intermediate Holdings and Phase II Intermediate Holdings.
"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 and Mall Subsidiary.
"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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
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"Tranche A Take-out Commitment" means the commitment of Goldman Sachs
Mortgage Company, 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.
"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 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 indicating the True-up
Amount; provided, however, that the
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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 Issuers but for its designation as an "Unrestricted
Subsidiary" in accordance with the provisions of this Indenture and any
Subsidiary of such entity, so long as it remains an Unrestricted Subsidiary in
accordance with the terms of this Indenture.
"Unrestricted Global Note" means a permanent global Mortgage Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Mortgage Notes that do not bear the
Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"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 to manage the operations 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
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or refinancing from time to time, including any agreement to renew, extend,
refinance or replace all or any portion of such facility.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
- ---- ----------
"Affiliate Transaction".....................................................4.12
"Asset Sale Offer"..........................................................4.10
"Authentication Order"......................................................2.02
"Benefitted Party".........................................................11.01
"Change of Control Offer"...................................................4.16
"Change of Control Payment".................................................4.16
"Change of Control Payment Date"............................................4.16
"Covenant Defeasance".......................................................8.03
"Custodian".................................................................6.01
"DTC".......................................................................2.03
"Employee Stock Buybacks"...................................................4.07
"Event of Default"..........................................................6.01
"Event of Loss Offer".......................................................4.11
"Excess Loss Proceeds"......................................................4.11
"Excess Proceeds"...........................................................4.10
"incur".....................................................................4.09
"Lease Transaction".........................................................4.25
"Legal Defeasance" .........................................................8.02
"Offer Amount"..............................................................3.10
"Offer Period"..............................................................3.10
"Paying Agent"..............................................................2.03
"Payment Blockage Notice"...............................................11.07(c)
"Payment Default"...........................................................6.01
"Permitted Junior Securities"...........................................11.07(e)
"Purchase Date".............................................................3.10
"Refinancing Indebtedness"..................................................4.09
"Registrar".................................................................2.03
"Repurchase Offer"..........................................................3.10
"Restricted Payments".......................................................4.07
"Senior Debt of Mortgage Note Guarantors"...............................11.07(e)
"Special Subsidiary Restricted Payments"....................................4.27
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Mortgage Notes and the Mortgage Note
Guaranties;
"indenture security Holder" means a Holder of a Mortgage Note;
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"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Mortgage Note
Trustee;
"obligor" on the Mortgage Notes means each of the Issuers, the Mortgage
Note Guarantors, if any, and any successor obligor upon the Mortgage Notes or
any Mortgage Note Guaranty, as the case may be.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time;
(7) the term "redeem" and the correlative terms "redemption" and
"redeemed" shall not include any Repurchase Offer; and
(8) the term "consolidated" when used in the context of the Issuers and
their Restricted Subsidiaries shall exclude all assets, liabilities, revenue, or
expenses of Unrestricted Subsidiaries and Special Subsidiaries.
ARTICLE 2
THE MORTGAGE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Mortgage Notes and the Mortgage Note Trustee's
certificate of authentication shall be substantially in the form of Exhibit A-1
or A-2 attached hereto. The Mortgage Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Mortgage Note
shall be dated the date of its authentication. The Mortgage Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Mortgage Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Issuers, the Mortgage Note Guarantors and the Mortgage
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Note Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby. However, to the extent any
provision of any Mortgage Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Mortgage Notes issued in global form shall be
substantially in the form of Exhibits A-1 or A-2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Mortgage Notes issued in definitive form shall
be substantially in the form of Exhibit A-1 attached hereto (but without the
Global Note Legend thereon and without the "Schedule of Exchanges of Interests
in the Global Note" attached thereto). Each Global Note shall represent such of
the outstanding Mortgage Notes as shall be specified therein and each shall
provide that it shall represent the aggregate principal amount of outstanding
Mortgage Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Mortgage Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Mortgage
Notes represented thereby shall be made by the Mortgage Note Trustee or the
Mortgage Note Custodian, at the direction of the Mortgage Note Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
(c) Temporary Global Notes. Mortgage Notes offered and sold in reliance
on Regulation S shall be issued initially in the form of the Regulation S
Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Mortgage Notes represented thereby with the Mortgage Note Trustee, at its
New York office, as custodian for the Depositary, and registered in the name of
the Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel Bank, duly executed by the
Issuers and authenticated by the Mortgage Note Trustee as hereinafter provided.
The Restricted Period shall be terminated upon the receipt by the Mortgage Note
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and Cedel Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all
as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Issuers. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication of
Regulation S Permanent Global Notes, the Mortgage Note Trustee shall cancel the
Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Mortgage Note Trustee and the Depositary or its nominee, as the
case may be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
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SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer of each Issuer shall sign the Mortgage Notes for the
Issuers by manual or facsimile signature. Each Issuer's seal shall be reproduced
on the Mortgage Notes and may be in facsimile form.
If an Officer whose signature is on a Mortgage Note no longer holds
that office at the time a Mortgage Note is authenticated, the Mortgage Note
shall nevertheless be valid.
A Mortgage Note shall not be valid until authenticated by the manual
signature of the Mortgage Note Trustee. The signature shall be conclusive
evidence that the Mortgage Note has been authenticated under this Indenture.
The Mortgage Note Trustee shall, upon a written order of the Issuers
signed by an Officer of each Issuer (an "Authentication Order"), authenticate
Mortgage Notes for original issue up to the aggregate principal amount stated in
paragraph 4 of the Mortgage Notes.
The Mortgage Note Trustee may appoint an authenticating agent
acceptable to the Issuers to authenticate Mortgage Notes. An authenticating
agent may authenticate Mortgage Notes whenever the Mortgage Note Trustee may do
so. Each reference in this Indenture to authentication by the Mortgage Note
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Issuers.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Mortgage Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Mortgage Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Mortgage Notes and of their
transfer and exchange. The Issuers may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Issuers
may change any Paying Agent or Registrar without notice to any Holder. The
Issuers shall notify the Mortgage Note Trustee in writing of the name and
address of any Agent not a party to this Indenture. If the Issuers fail to
appoint or maintain another entity as Registrar or Paying Agent, the Mortgage
Note Trustee shall act as such. The Issuers or any of their Subsidiaries may act
as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Issuers initially appoint the Mortgage Note Trustee to act as the
Registrar and Paying Agent and to act as Mortgage Note Custodian with respect to
the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the Mortgage
Note Trustee to agree in writing that the Paying Agent will hold in trust for
the benefit of Holders or the Mortgage Note Trustee all money held by the Paying
Agent for the payment of principal, premium or Liquidated Damages, if any, or
interest on the Mortgage Notes, and will notify the Mortgage Note Trustee of any
default by the Issuers in making any such payment. While any such default
continues, the Mortgage Note Trustee may require a Paying Agent to pay all money
held by it to the Mortgage Note Trustee. The Issuers at any time may require a
Paying Agent to pay all money held by it to the Mortgage Note Trustee. Upon
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payment over to the Mortgage Note Trustee, the Paying Agent (if other than the
Issuers or a Subsidiary) shall have no further liability for the money. If the
Issuers or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Issuers, the Mortgage Note Trustee shall serve as Paying Agent for the Mortgage
Notes.
SECTION 2.05. HOLDER LISTS.
The Mortgage Note Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Mortgage Note Trustee is not the Registrar, the Issuers shall furnish to the
Mortgage Note Trustee at least seven Business Days before each interest payment
date and at such other times as the Mortgage Note Trustee may request in
writing, a list in such form and as of such date as the Mortgage Note Trustee
may reasonably require of the names and addresses of the Holders of Mortgage
Notes and the Issuers shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Issuers for Definitive Notes if (i) the Issuers deliver to the Mortgage Note
Trustee notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Issuers within 120 days after the date of such notice from the Depositary or
(ii) the Issuers in their sole discretion determine that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and deliver a
written notice to such effect to the Mortgage Note Trustee; provided that in no
event shall the Regulation S Temporary Global Note be exchanged by the Issuers
for Definitive Notes prior to (x) the expiration of the Restricted Period and
(y) the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Mortgage Note Trustee. Global Notes
also may be exchanged or replaced, in whole or in part, as provided in Sections
2.07 and 2.10 hereof. Every Mortgage Note authenticated and delivered in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to
this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and
delivered in the form of, and shall be, a Global Note. A Global Note may not be
exchanged for another Mortgage Note other than as provided in this Section
2.06(a). However, beneficial interests in a Global Note may be transferred and
exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a
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beneficial interest in the same Restricted Global Note in accordance with
the transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted Period,
transfers of beneficial interests in the Temporary Regulation S Global Note
may not be made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered
to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant's
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Issuers in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall
be deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the Holder
of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Mortgage Notes or otherwise applicable under the Securities Act, the
Mortgage Note Trustee shall adjust the principal amount of the relevant
Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
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(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in an Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of the beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Mortgage Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been
issued, the Issuers shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Mortgage Note Trustee
shall authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the aggregate principal amount of beneficial
interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
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(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Issuers
or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Mortgage Note Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Issuers shall execute and the Mortgage Note Trustee
shall authenticate and deliver to the Person designated in the instructions
a Definitive Note in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Mortgage
Note Trustee shall deliver such Definitive Notes to the Persons in whose
names such Mortgage Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(i)
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shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for
a Definitive Note or transferred to a Person who takes delivery thereof in
the form of a Definitive Note prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates required
pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the
case of a transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Note that
does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Mortgage Note
Trustee shall cause the aggregate principal amount of the
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applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Issuers shall execute and the Mortgage Note Trustee
shall authenticate and deliver to the Person designated in the instructions
a Definitive Note in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Mortgage Note
Trustee shall deliver such Definitive Notes to the Persons in whose names
such Mortgage Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Mortgage Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Mortgage Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Issuers or any of their Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
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the Mortgage Note Trustee shall cancel the Restricted Definitive Note,
increase or cause to be increased the aggregate principal amount of, in the
case of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note, and in all other cases, the IAI Global
Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Mortgage Note for a beneficial interest in an Unrestricted
Global Note or transfer such Restricted Definitive Note to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Mortgage Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c) thereof;
or
(2) if the Holder of such Definitive Notes proposes to
transfer such Mortgage Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Mortgage Note Trustee shall cancel the Definitive
Notes and increase or cause to be increased the aggregate principal amount
of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Mortgage Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note at any time. Upon receipt of a request for such an exchange or
transfer, the Mortgage Note Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
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If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Issuers
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Mortgage Note Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Issuers;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the Holder of such Restricted Definitive Notes proposes
to exchange such Mortgage Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Mortgage Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Issuers to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Mortgage Notes to
a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuers shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Mortgage Note Trustee shall authenticate (i) one or more Unrestricted Global
Notes in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Notes tendered for acceptance by
Persons that certify in the applicable Letters of Transmittal that (x) they are
not broker-dealers, (y) they are not participating in a distribution of the
Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the
Issuers, and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Mortgage Notes, the Mortgage Note Trustee
shall cause the aggregate principal amount of the applicable Restricted Global
Notes to be reduced accordingly, and the Issuers shall execute and the Mortgage
Note Trustee shall authenticate and deliver to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THE MORTGAGE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A
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QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT (INCLUDING RULE 144 THEREUNDER (IF AVAILABLE)),
(5) TO LAS VEGAS SANDS, INC. OR VENETIAN CASINO RESORT, LLC, OR (6)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (B) IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES AND OTHER JURISDICTIONS."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Mortgage Notes issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS MORTGAGE NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II)
THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO
SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED
TO THE MORTGAGE NOTE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF
THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Mortgage Note Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another
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Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Mortgage Note Trustee or by the Depositary at
the direction of the Mortgage Note Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Note, such other Global Note shall be increased accordingly and an endorsement
shall be made on such Global Note by the Mortgage Note Trustee or by the
Depositary at the direction of the Mortgage Note Trustee to reflect such
increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Issuers
shall execute and the Mortgage Note Trustee shall authenticate Global Notes
and Definitive Notes upon the Issuers' order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Issuers may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.11, 4.16 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Mortgage Note selected for redemption in whole or in part,
except the unredeemed portion of any Mortgage Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Issuers, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Issuers shall not be required (A) to issue, to register the
transfer of or to exchange any Mortgage Notes during a period beginning at
the opening of business 15 days before the day of any selection of Notes
for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or to
exchange any Mortgage Note so selected for redemption in whole or in part,
except the unredeemed portion of any Mortgage Note being redeemed in part
or (C) to register the transfer of or to exchange a Mortgage Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Mortgage Note, the Mortgage Note Trustee, any Agent and the Issuers may
deem and treat the Person in whose name any Mortgage Note is registered as
the absolute owner of such Mortgage Note for the purpose of receiving
payment of principal of and interest on such Mortgage Notes and for all
other purposes, and none of the Mortgage Note Trustee, any Agent or the
Issuers shall be affected by notice to the contrary.
(vii) The Mortgage Note Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
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SECTION 2.07. REPLACEMENT MORTGAGE NOTES.
If any mutilated Mortgage Note is surrendered to the Mortgage Note
Trustee or the Issuers and the Mortgage Note Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Mortgage Note, the Issuers
shall issue and the Mortgage Note Trustee, upon receipt of an Authentication
Order, shall authenticate a replacement Note if the Mortgage Note Trustee's
requirements are met. If required by the Mortgage Note Trustee or the Issuers,
an indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Mortgage Note Trustee and the Issuers to protect the Issuers,
the Mortgage Note Trustee, any Agent and any authenticating agent from any loss
that any of them may suffer if a Mortgage Note is replaced. The Issuers may
charge for their expenses in replacing a Mortgage Note.
Every replacement Mortgage Note is an additional obligation of the
Issuers and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Mortgage Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING MORTGAGE NOTES.
The Mortgage Notes outstanding at any time are all the Mortgage Notes
authenticated by the Mortgage Note Trustee except for (i) those cancelled by it,
(ii) those delivered to it for cancellation, (iii) those reductions in the
interest in a Global Note effected by the Mortgage Note Trustee in accordance
with the provisions hereof, and (iv) those described in this Section as not
outstanding. Except as set forth in Section 2.09 hereof, a Mortgage Note does
not cease to be outstanding because the Issuer or an Affiliate of the Issuer
holds the Mortgage Note; however, Notes held by the Issuers or a Subsidiary of
the Issuers shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Mortgage Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Mortgage Note Trustee receives proof
satisfactory to it that the replaced Mortgage Note is held by a bona fide
purchaser.
If the principal amount of any Mortgage Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Issuers, a Subsidiary or an
Affiliate of any of the foregoing) holds, on a redemption date or maturity date,
money sufficient to pay Mortgage Notes payable on that date, then on and after
that date such Mortgage Notes shall be deemed to be no longer outstanding and
shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Mortgage Notes have concurred in any direction, waiver or consent, Mortgage
Notes owned by the Issuers, or by any Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Issuers,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Mortgage Note Trustee shall be protected in relying on
any such direction, waiver or consent, only Mortgage Notes that the Mortgage
Note Trustee knows are so owned shall be so disregarded.
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SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Mortgage Notes are ready for delivery,
the Issuers may prepare and the Mortgage Note Trustee, upon receipt of an
Authentication Order, shall authenticate temporary Mortgage Notes. Temporary
Mortgage Notes shall be substantially in the form of certificated Mortgage Notes
but may have variations that the Issuers consider appropriate for temporary
Mortgage Notes and as shall be reasonably acceptable to the Mortgage Note
Trustee. Without unreasonable delay, the Issuers shall prepare and the Mortgage
Note Trustee shall authenticate definitive Mortgage Notes in exchange for
temporary Mortgage Notes.
Holders of temporary Mortgage Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Mortgage Notes to the Mortgage Note
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Mortgage Note Trustee any Mortgage Notes surrendered to them for registration of
transfer, exchange or payment. The Mortgage Note Trustee and no one else shall
cancel all Mortgage Notes surrendered for registration of transfer, exchange,
payment, replacement or cancellation and shall destroy cancelled Mortgage Notes
(subject to the record retention requirement of the Exchange Act). Certification
of the destruction of all cancelled Mortgage Notes shall be delivered to the
Issuers. The Issuers may not issue new Mortgage Notes to replace Mortgage Notes
that they have paid or that have been delivered to the Mortgage Note Trustee for
cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of interest on the Mortgage Notes,
they shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Mortgage Notes and in Section 4.01 hereof. The Issuers shall notify the
Mortgage Note Trustee in writing of the amount of defaulted interest proposed to
be paid on each Mortgage Note and the date of the proposed payment. The Issuers
shall fix or cause to be fixed each such special record date and payment date;
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days before
the special record date, the Issuers (or, upon the written request of the
Issuers, the Mortgage Note Trustee in the name and at the expense of the
Issuers) shall mail or cause to be mailed to Holders a notice that states the
special record date, the related payment date and the amount of such interest to
be paid.
ARTICLE 3
OFFERS TO PURCHASE OR REDEMPTION
SECTION 3.01. NOTICES TO MORTGAGE NOTE TRUSTEE.
If the Issuers elect to redeem Mortgage Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, they shall furnish to the Mortgage
Note Trustee, at least 45 days (or such shorter period as may be acceptable to
the Mortgage Note Trustee) but not more than 60 days before a redemption date,
an Officers' Certificate setting forth (i) the Section of this Indenture
pursuant to which
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the redemption shall occur, (ii) the redemption date, (iii) the principal amount
of Mortgage Notes to be redeemed and (iv) the redemption price.
If the Issuers are required to make an offer to purchase Mortgage Notes
pursuant to the provisions of Section 4.10, 4.11 or 4.16 they shall furnish to
the Mortgage Note Trustee, at least 45 days (or such shorter period as may be
acceptable to the Mortgage Note Trustee) but not more than 60 days before the
scheduled purchase date, an Officers' Certificate setting forth (i) the Section
of this Indenture pursuant to which the offer to purchase shall occur, (ii) the
offer's terms, (iii) the purchase price, (iv) the principal amount of the
Mortgage Notes to be purchased, and (v) further setting forth a statement to the
effect that (a) one of the Issuers or one of their Restricted Subsidiaries has
made an Asset Sale and there are Excess Proceeds aggregating more than $10.0
million, (b) the Issuers or one of their Restricted Subsidiaries has suffered an
Event of Loss and there are Excess Loss Proceeds aggregating more than $10.0
million or (c) a Change of Control has occurred, as applicable.
SECTION 3.02. SELECTION OF MORTGAGE NOTES TO BE PURCHASED OR REDEEMED.
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, the Mortgage Note
Trustee shall select the Mortgage Notes to be purchased or redeemed among the
Holders of the Mortgage Notes 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 in accordance with any other method the Mortgage Note Trustee considers fair
and appropriate (and in such manner as complies with applicable law). In the
event of partial purchase or partial redemption in the manner provided above,
the particular Mortgage Notes to be purchased or redeemed shall be selected,
unless otherwise provided herein, not less than 30 nor more than 60 days prior
to the purchase or redemption date by the Mortgage Note Trustee from the
outstanding Mortgage Notes not previously purchased or called for redemption. In
the event that less than all of the Mortgage Notes properly tendered in an Asset
Sale Offer or Event of Loss Offer are to be purchased, the particular Mortgage
Notes to be purchased shall be selected promptly upon the expiration of such
Asset Sale Offer or Event of Loss Offer.
The Mortgage Note Trustee shall promptly notify the Issuers in writing
of the Mortgage Notes selected for purchase or redemption and, in the case of
any Mortgage Note selected for partial purchase or redemption, the principal
amount thereof to be purchased or redeemed. Mortgage Notes and portions of
Mortgage Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Mortgage Notes of a Holder are to be purchased
or redeemed, the entire outstanding amount of Mortgage Notes held by such
Holder, even if not a multiple of $1,000, shall be purchased or redeemed. Except
as provided in the preceding sentence, provisions of this Indenture that apply
to Mortgage Notes purchased or called for redemption also apply to portions of
Mortgage Notes purchased or called for redemption.
In the event the Issuers are required to make an Asset Sale Offer or an
Event of Loss Offer pursuant to Section 4.10 or 4.11 hereof, respectively, and
the amount of Excess Proceeds or Excess Loss Proceeds, as the case may be, to be
applied to such purchase would result in the purchase of a principal amount of
Mortgage Notes which is not evenly divisible by $1,000, the Mortgage Note
Trustee shall promptly refund to the Issuers the amount of Excess Proceeds or
Excess Loss Proceeds, as the case may be, that is not necessary to purchase the
immediately lesser principal amount of Mortgage Notes that is so divisible.
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SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.10 hereof, at least 30 days but
not more than 60 days before a redemption date, the Issuers shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Mortgage Notes are to be redeemed at its registered address.
The notice shall identify the Mortgage Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Mortgage Note is being redeemed in part, the portion of the
principal amount of such Mortgage Note to be redeemed and that, after the
redemption date upon surrender of such Mortgage Note, a new Mortgage Note
or Mortgage Notes in principal amount equal to the unredeemed portion shall
be issued upon cancellation of the original Mortgage Note;
(d) the name and address of the Paying Agent;
(e) that Mortgage Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Issuers defaults in making such redemption
payment, interest on Mortgage Notes called for redemption ceases to accrue
on and after the redemption date;
(g) the paragraph of the Mortgage Notes and/or Section of this
Indenture pursuant to which the Mortgage Notes called for redemption are
being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Mortgage
Notes.
At the Issuers' request, the Mortgage Note Trustee shall give the
notice of redemption in the Issuers' name and at its expense; provided, however,
that the Issuers shall have delivered to the Mortgage Note Trustee, at least 45
days (or such shorter period as may be acceptable to the Mortgage Note Trustee)
than 60 days prior to the redemption date, an Officers' Certificate requesting
that the Mortgage Note Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Mortgage Notes called for redemption become irrevocably due and payable
on the redemption date at the redemption price. A notice of redemption may not
be conditional.
SECTION 3.05. DEPOSIT OF PURCHASE OR REDEMPTION PRICE.
On or prior to any purchase date with respect to an offer to purchase
the Mortgage Notes required hereunder or any redemption date, the Issuers shall
deposit with the Mortgage Note Trustee or with the Paying Agent money sufficient
to pay the purchase or redemption price of, and accrued and unpaid interest and
Liquidated Damages, if any, on all Mortgage Notes to be purchased or redeemed on
that date. The Mortgage Note Trustee or the Paying Agent shall promptly return
to the Issuers any money deposited with the Mortgage Note Trustee or the Paying
Agent by the Issuers in excess of the
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amounts necessary to pay the purchase or redemption price of, and accrued and
unpaid interest and Liquidated Damages, if any, on, all Mortgage Notes to be
purchased or redeemed.
If the Issuers comply with the provisions of the preceding paragraph,
on and after the purchase or redemption date, interest shall cease to accrue on
the Mortgage Notes or the portions of Mortgage Notes purchased or called for
redemption. If a Mortgage Note is purchased or redeemed on or after an interest
record date but on or prior to the related interest payment date, then any
accrued and unpaid interest and Liquidated Damages shall be paid to the Person
in whose name such Mortgage Note was registered at the close of business on such
record date. If any Mortgage Note tendered for purchase or called for redemption
shall not be so paid upon surrender for such tender or redemption because of the
failure of the Issuers to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the purchase or redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Mortgage Notes and in
Section 4.01 hereof.
SECTION 3.06. MORTGAGE NOTES PURCHASED OR REDEEMED IN PART.
Upon surrender of a Mortgage Note that is purchased or redeemed in
part, the Issuers shall issue and, upon the Issuers' written request, the
Mortgage Note Trustee shall authenticate for the Holder at the expense of the
Issuers a new Mortgage Note equal in principal amount to the unpurchased or
unredeemed portion of the Mortgage Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) On or after November 15, 2001, the Mortgage Notes shall 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%
(b) 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 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.
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(c) 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.
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. REDEMPTION PURSUANT TO GAMING LAW.
(a) Notwithstanding any other provisions of this Article 3, 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 Issuers 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 such 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.
(b) In connection with any redemption pursuant to this Section 3.08, and
except as may be required by a Gaming Authority, the Issuers shall be required
to comply with Sections 3.01 through 3.06 hereof.
(c) The Issuers shall not be required to pay or reimburse any Holder or
beneficial owner of Mortgage Notes who is required to apply for any such
license, qualification or finding of suitability for the costs of the licensure
or investigation for such qualification or finding of suitability. Such expenses
shall be the obligation of such Holder or beneficial owner.
SECTION 3.09. MANDATORY REDEMPTION.
The Issuers shall not be required to make mandatory redemption or
sinking fund payments prior to maturity with respect to the Mortgage Notes.
SECTION 3.10. REPURCHASE OFFERS.
In the event that, pursuant to Section 4.10, 4.11 or 4.16 hereof, the
Issuers shall be required to commence an offer to all Holders to purchase
Mortgage Notes (a "Repurchase Offer"), it shall follow the procedures specified
below.
The Repurchase Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the
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"Purchase Date"), the Issuers shall purchase at the Purchase Price (as
determined in accordance with Section 4.10, 4.11 or 4.16 hereof, as the case may
be) the principal amount of Mortgage Notes required to be purchased pursuant to
Section 4.10, 4.11 or 4.16 hereof, as the case may be (the "Offer Amount"), or,
if less than the Offer Amount has been tendered, all Mortgage Notes tendered in
response to the Repurchase Offer. Payment for any Mortgage Notes so purchased
shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Mortgage
Note is registered at the close of business on such record date, and no
additional interest shall be payable to Holders who tender Mortgage Notes
pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Issuers shall send, by
first class mail, a notice to the Mortgage Note Trustee and each of the Holders.
The notice shall contain all instructions and materials necessary to enable such
Holders to tender Mortgage Notes pursuant to the Repurchase Offer. The
Repurchase Offer shall be made to all Holders. The notice, which shall govern
the terms of the Repurchase Offer, shall state:
(a) that the Repurchase Offer is being made pursuant to this
Section 3.10 and Section 4.10, 4.11 or 4.16 hereof, as the case may be, and
the length of time the Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Mortgage Note not tendered or accepted for payment
shall continue to accrue interest and Liquidated Damages, if any;
(d) that, unless the Issuers default in making such payment, any
Mortgage Note accepted for payment pursuant to the Repurchase Offer shall
cease to accrue interest and Liquidated Damages, if any, after the Purchase
Date;
(e) that Holders electing to have a Mortgage Note purchased
pursuant to any Repurchase Offer shall be required to surrender the
Mortgage Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Mortgage Note completed, to the Issuers, a
depositary, if appointed by the Issuers, or a Paying Agent at the address
specified in the notice at least three Business Days before the Purchase
Date;
(f) that Holders shall be entitled to withdraw their election if
the Issuers, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Mortgage Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Mortgage Note purchased; and
(g) that, if the aggregate principal amount of Mortgage Notes
surrendered by Holders exceeds the Offer Amount, the Mortgage Notes shall
be selected for purchase pursuant to the terms of Section 3.02 hereof, and
that Holders whose Mortgage Notes were purchased only in part shall be
issued new Mortgage Notes equal in principal amount to the unpurchased
portion of the Mortgage Notes surrendered.
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On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, pursuant to the terms of Section 3.02 hereof, the
Offer Amount of Mortgage Notes or portions thereof tendered pursuant to the
Repurchase Offer, or if less than the Offer Amount has been tendered, all
Mortgage Notes tendered, and shall deliver to the Mortgage Note Trustee an
Officers' Certificate stating that such Mortgage Notes or portions thereof were
accepted for payment by the Issuers in accordance with the terms of this Section
3.10. The Issuers, the Depository or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
Mortgage Notes tendered by such Holder and accepted by the Issuers for purchase,
and the Issuers shall promptly issue a new Mortgage Note, and the Mortgage Note
Trustee, upon written request from the Issuers shall authenticate and mail or
deliver such new Mortgage Note to such Holder, in a principal amount equal to
any unpurchased portion of the Mortgage Note surrendered. Any Mortgage Note not
so accepted shall be promptly mailed or delivered by the Issuers to the Holder
thereof. The Issuers shall publicly announce the results of the Repurchase Offer
on the Purchase Date.
The Issuers shall 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 Repurchase Offer.
Other than as specifically provided in this Section 3.10, any purchase
pursuant to this Section 3.10 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof to the extent applicable.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF MORTGAGE NOTES.
The Issuers shall pay or cause to be paid the principal of, premium, if
any, and interest on the Mortgage Notes on the dates and in the manner provided
in the Mortgage Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Issuers
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date,
money deposited by the Issuers in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Issuers shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Mortgage
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Mortgage Note Trustee
or an affiliate of the Mortgage Note Trustee, Registrar or co-registrar) where
Mortgage Notes may be surrendered for registration of transfer or for exchange
and where notices and demands to or upon the Issuers or the Mortgage Note
Guarantors
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in respect of the Mortgage Notes and this Indenture may be served. The Issuers
shall give prompt written notice to the Mortgage Note Trustee of the location,
and any change in the location, of such office or agency. If at any time the
Issuers shall fail to maintain any such required office or agency or shall fail
to furnish the Mortgage Note Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Mortgage Note Trustee.
The Issuers may also from time to time designate one or more other
offices or agencies where the Mortgage Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Issuers of their obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Issuers shall
give prompt written notice to the Mortgage Note Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Issuers hereby designate the Corporate Trust Office of the Mortgage
Note Trustee as one such office or agency of the Issuers in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
The Company shall file with the Mortgage Note Trustee and provide
Holders of Mortgage Notes, within 15 days after it files them with the SEC,
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 SEC may by rule or
regulation prescribe) which the Company is required to file with the SEC
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 SEC, the Company shall
continue to file with the SEC 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 SEC if the SEC 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
shall 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 shall 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 SEC,
shall make available such information to prospective purchasers and to
securities analysts and broker-dealers upon their request. In addition, the
Company shall, for so long as any Mortgage Notes remain outstanding, furnish to
the Holders of Mortgage Notes 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. Notwithstanding anything to the
contrary herein, the Trustee shall have no duty to review such document for
purposes of determining compliance with any provisions of this Indenture.
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SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Issuers shall deliver to the Mortgage Note Trustee, within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Issuers and their Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers of the Issuers with a view to determining whether the Issuers and each
obligor on the Mortgage Notes and this Indenture is in compliance with this
Indenture and each Collateral Document and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge the
Issuers and each such obligor is in compliance with each and every covenant
contained in this Indenture and each Collateral Document and is not in default
in the performance or observance of any of the terms, provisions and conditions
of this Indenture or any Collateral Document (or, if a Default or Event of
Default shall exist, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action the Issuers or such obligor, as the
case may be, is taking or proposes to take with respect thereto) and that to the
best of his or her knowledge no event has occurred that remains in existence by
reason of which payments on account of the principal of or interest, if any, on
the Mortgage Notes is prohibited or if such event exists, a description of the
event and what action the Issuers or such obligor, as the case may be, is taking
or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers are in
violation of any provisions of Article 4 or Article 5 hereof or, if any such
violation exists, specifying the nature and period of existence thereof, it
being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Issuers shall, so long as any of the Mortgage Notes are
outstanding, deliver to the Mortgage Note Trustee, within five Business Days
upon any Officer becoming aware of any Default or Event of Default or any event
of default under any document, instrument or agreement representing Indebtedness
of the Issuers, an Officers' Certificate specifying such Default, Event of
Default or event of default and what action the Issuers are taking or propose to
take with respect thereto.
(d) Immediately upon Completion, the Issuers shall deliver promptly to
the Mortgage Note Trustee an Officers' Certificate which shall state that (i)
Completion has been achieved and (ii) the date on which Completion was achieved.
SECTION 4.05. TAXES.
The Issuers shall pay, and shall cause each of their Restricted
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment would not
have any material adverse effect on the Holders of the Mortgage Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
Each of the Issuers and the Mortgage Note Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and each of the
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Issuers and the Mortgage Note Guarantors (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Mortgage Note Trustee, but
shall suffer and permit the execution of every such power as though no such law
has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
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 Section 4.09 hereof;
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), (xvii) and (xviii)
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
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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 will 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 this
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, retired or otherwise acquired, (3)
such Subordinated Indebtedness shall be 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
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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 this 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
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 Section 3.10 of the Senior Subordinated Note Indenture; (xvii)
on the Final Completion Date (as defined in the Disbursement Agreement),
payments on the Completion Guaranty Loan from amounts which are returned to 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) (a) 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
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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 (xvii),
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 shall 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.
Not later than the date of filing any quarterly or annual report, the
Issuers 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
this Section 4.07 were computed, which calculations may be based upon the
Issuers' latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Issuers shall not, and shall 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 Guaranties or any other Indebtedness incurred pursuant to the
terms of this 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), this Indenture, the Mortgage Notes, the Mall Construction
Loan Facility (and any related security agreements), any Mortgage Note
Guaranties, the Collateral Documents, indebtedness incurred pursuant to clause
(g), (h), (j), (l), (n) or (o) of Section 4.09 hereof and any related security
agreements, (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 this 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 Section 4.25, (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
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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.
SECTION 4.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND
ISSUANCE OF DISQUALIFIED STOCK.
The Issuers shall not, and shall 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 will 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 this Indenture) actually made from
time to time after the date of this Indenture with respect to such Indebtedness,
and (ii) permanent reductions resulting from the application of Asset Sale or
Event of Loss 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, 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
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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 this 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 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;
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(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 at least one day later 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
Section 4.07 hereof;
(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 Issuers shall 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 purposes of determining compliance with this Section 4.09, 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 Section 4.09,
the Issuers shall, in their sole discretion, classify such item of Indebtedness
in any manner that complies with this Section 4.09 and such item of Indebtedness
will be treated as having been incurred pursuant to only
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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 Section 4.09.
SECTION 4.10. ASSET SALES.
The Issuers shall not, and shall 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 Issuers', or such Restricted
Subsidiary's, as the case may be, most recent balance sheet or in the notes
thereto) of the Issuers, or such 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), that are assumed by the
transferee of any such assets and (B) any notes 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 Section 4.10 and for no
other purpose.
Within 180 days after any such Issuer's or any Restricted Subsidiary's
receipt of the Net Proceeds of any Asset Sale, any 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
shall 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 Section 3.10 hereof. To the extent that the aggregate
amount of Mortgage Notes tendered pursuant to an Asset
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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 Section 3.10 of the
Senior Subordinated Note Indenture. If the aggregate amount of Mortgage Notes
surrendered by Holders thereof exceeds the amount of Excess Proceed, the
Mortgage Note Trustee shall select the Mortgage Notes to be purchased in
accordance with Section 3.02 and 3.03 hereof. Upon completion of any such Asset
Sale Offer, the amount of Excess Proceeds shall be deemed reset at zero.
The Issuers or such Restricted Subsidiary shall 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 Issuers or
such Restricted Subsidiary shall 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 acquired with the Net Proceeds of any such Asset Sale.
SECTION 4.11. EVENT OF LOSS.
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 shall 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 that the Project can be
rebuilt, repaired, replaced, or constructed and Completed within one year of
delivery of such opinion (or if later, the Outside Completion Date)
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 Section 4.09 hereof 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 Issuers 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) after Completion, 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
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used to repay Indebtedness or as working capital as provide 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 Section 3.10 hereof.
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 Section
3.10 of the Senior Subordinated Note Indenture. 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 accordance with Sections 3.02 and 3.03 hereof. Upon
completion of any such Event of Loss Offer, the amount of Excess Loss Proceeds
shall be reset at zero.
The Issuers or such Restricted Subsidiary shall 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 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, this Indenture will
also require 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.
SECTION 4.12. TRANSACTIONS WITH AFFILIATES.
The Issuers shall not, and shall 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 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 shall not
apply to the following: (f) rental payments from Mall Subsidiary to Venetian
under the Billboard Lease, as in effect on the date of this Indenture; (g) the
lease agreement relating to a restaurant to be operated by Wolfgang Puck and
currently contemplated to
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be known as "Oba Chine" 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 this 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, in each case, as in
effect on the date of this 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 clause (xi) of Section 4.07 hereof; (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 under
Section 4.07 hereof and with respect to any Special Subsidiary, Special
Subsidiary Restricted Payments permitted under Section 4.27; (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 hereof; (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
Offering Circular relating to the Offering under the caption "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 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 Project in
substantially similar manners and (iii) the Company
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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).
SECTION 4.13. LIENS.
The Issuers shall not, and shall 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.
SECTION 4.14. LINE OF BUSINESS.
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 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.
SECTION 4.15. CORPORATE EXISTENCE.
Subject to Article 5 and Article 11 hereof, as the case may be, each of
the Issuers and each of the Mortgage Note Guarantors shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate or limited liability company existence, and the corporate, limited
liability company, partnership or other existence of each of its Subsidiaries,
in accordance with the respective organizational documents (as the same may be
amended from time to time) of the Issuers, any such Mortgage Note Guarantor or
any such Subsidiary and (ii) the material rights (charter and statutory),
licenses and franchises of the Issuers, the Mortgage Note Guarantors and their
respective Subsidiaries; provided, however, that the Issuers and the Mortgage
Note Guarantors shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of their
respective Subsidiaries, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Issuers, the Mortgage Note Guarantors and their
Subsidiaries, taken as a whole, and that the loss thereof would not have a
material adverse effect on the Holders of the Mortgage Notes.
SECTION 4.16. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Issuers shall make an
offer to each Holder of Mortgage Notes 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. Such Change of Control Offer shall be made in accordance with
the procedures set forth in Article 3 hereof. The Issuers shall commence such
Change of Control Offer by mailing the notice set forth in Section 3.10 hereof
to Holders of Mortgage Notes.
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SECTION 4.17. DESIGNATION OF UNRESTRICTED SUBSIDIARY
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 the Issuers or any Restricted
Subsidiary other than as permitted by the provisions of this Indenture,
including Sections 4.07 and 4.10 hereof; (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 Issuers (1) such Subsidiary acquires any assets from the
Issuers or any Restricted Subsidiary other than as permitted by this Indenture,
including Sections 4.07 and 4.10 hereof; (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 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 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.
After the transfer of the Phase II Land to the Phase II Subsidiary, the
Phase II Land shall 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 which
Person the Sole Stockholder does not own any Equity Interest, directly or
indirectly, except through the Issuers.
SECTION 4.18. DESIGNATION OF SPECIAL SUBSIDIARY
The Board of Directors of the Company may designate any Restricted
Subsidiary to be 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
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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 Indenture, including Sections 4.07 and 4.10 hereof; (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 this
Indenture, including Section 4.07 and 4.10 hereof; (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.
As of the Issuance Date, each of Mall Subsidiary, Mall Manager and Mall
Holdings is designated a Special Subsidiary. Any future 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.
SECTION 4.19. GAMING LICENSES.
The Issuers shall 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.
SECTION 4.20. CONSTRUCTION.
The Issuers shall cause construction of the Project, including the
furnishing, fixturing and equipping thereof, to be prosecuted with diligence and
continuity in a good and workerlike manner substantially in accordance with the
Plans and Specifications within the Project Budget.
SECTION 4.21. MAINTENANCE OF INSURANCE AND AMENDMENT OF THE COOPERATION
AGREEMENT.
Until the Mortgage Notes have been paid in full, the Issuers shall, and
shall 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). The Issuers shall not amend, waive or modify
Articles X and XI of the Cooperation Agreement.
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SECTION 4.22. LIMITATION ON STATUS AS INVESTMENT COMPANY.
None of the Issuers and their Restricted Subsidiaries shall become an
Investment Company subject to registration as an "investment company" (as that
term is defined in the Investment Company Act of 1940, as amended).
SECTION 4.23. COLLATERAL DOCUMENTS.
None of the Issuers or any of their Restricted Subsidiaries shall
amend, waive or modify, or take or refrain from taking any action that has the
effect of amending, waiving or modifying, any provision of the Collateral
Documents to the extent that such amendment, waiver, modification or action
could have an adverse effect on the rights of the Mortgage Note Trustee or the
Holders of the Mortgage Notes; provided, that: (i) the Note Collateral may be
released or modified as expressly provided in this Indenture and in the
Collateral Documents, the Intercreditor Agreement and the Sole Stockholder
Intercreditor Agreement; (ii) any Mortgage Note Guaranty may be released as
expressly provided in this Indenture and in the Collateral Documents; (iii) the
Project Budget may be amended as expressly provided in the Disbursement
Agreement; and (iv) this Indenture and any of the Collateral Documents may be
otherwise amended, waived or modified as set forth under Article 9 hereof.
SECTION 4.24. FURTHER ASSURANCES.
The Issuers shall (and shall 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
reasonably be 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.
SECTION 4.25. RESTRICTIONS ON LEASING AND DEDICATION OF PROPERTY.
The Issuers shall not, and shall 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 (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 judgement 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
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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 Section 4.12, 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 Issuers shall not enter into any
Lease Transaction: (1) if, except in the case of clause (h), 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 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
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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.
SECTION 4.26. MORTGAGE NOTE GUARANTIES.
The Issuers shall, and shall cause each of their Restricted
Subsidiaries, to comply with Section 11.02 hereof.
SECTION 4.27. SPECIAL SUBSIDIARY RESTRICTED PAYMENTS.
Any Special Subsidiary shall not and shall 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 will 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.
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
which the Sole Stockholder does not own any Equity Interests, directly or
indirectly, except through the Issuers.
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SECTION 4.28. OWNERSHIP OF UNRESTRICTED SUBSIDIARIES AND SPECIAL
SUBSIDIARIES.
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.
SECTION 4.29. LIMITATION ON PHASE II CONSTRUCTION.
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 defined on the Issuance Date) (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.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
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 shall 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 shall have been made assumes all the obligations
of the Issuers under this 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 this
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 or
Venetian or any Person formed by or surviving any such consolidation or
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merger, or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (A) shall 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) shall, 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 set
forth in the first paragraph of Section 4.09 hereof; and (vi) such transactions
would not require any Holder of Mortgage Notes (other than any Person acquiring
the Company or Venetian or their assets or any Affiliate thereof) to obtain a
gaming license or be qualified under the laws 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 the foregoing,
the Issuers may consolidate or merge with or wind up into each other without
meeting the requirements set forth in clause (v) above.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Issuers in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which one of the Issuers is merged
or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" or
"Venetian", as the case may be, shall refer instead to the successor corporation
and not to the Company or Venetian, as the case may be), and may exercise every
right and power of an Issuer under this Indenture with the same effect as if
such successor Person had been named as an Issuer herein; provided, however,
that the surviving entity or acquiring corporation shall (i) assume all of the
obligations of the acquired Person incurred under this Indenture, the Mortgage
Notes, and, if applicable, the Collateral Documents, (ii) acquire and own and
operate, directly or through Wholly Owned Subsidiaries, all or substantially all
of the properties and assets then constituting the assets of the Company or
Venetian, as the case may be, or any of their Subsidiaries, as the case may be,
(iii) have been issued, or have a consolidated Subsidiary which has been issued,
Gaming Licenses to operate the acquired casino operations and entities
substantially in the manner and scope operated prior to such transaction, which
Gaming Licenses are in full force and effect, and (iv) be in compliance fully
with Section 5.01 hereof and (v) the Issuers have delivered to the Mortgage Note
Trustee an Officers' Certificate and Opinion of Counsel, subject to customary
assumptions and exclusions, stating that the proposed transaction complies with
this Indenture; provided further, however, that the predecessor Person shall not
be relieved from the obligation to pay the principal of and interest on the
Mortgage Notes except in the case of a sale of all of one of the Issuers' assets
that meets the requirements of Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuers or any Mortgage Note Guarantor defaults 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;
(b) one of the Issuers or any Mortgage Note Guarantor defaults 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;
(c) 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 Section 3.10 hereof;
(d) failure by (i) the Issuers or any Mortgage Note Guarantor to
comply with Sections 4.07 or 4.09 hereof or (ii) any Special Subsidiary
to comply with Section 4.27;
(e) failure by any of 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 their other agreements under this
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;
(f) 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 any of 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 any 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;
(g) failure by any of 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;
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(h) the repudiation by any of the Issuers or any of their
Subsidiaries of their obligations under, or any judgment or decree by a
court or governmental agency of competent jurisdiction declaring the
unenforceability of, any Mortgage Note Guaranty 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;
(i) any of the Issuers, any Special Subsidiary or any Mortgage Note
Guarantor that is a Significant Subsidiary or any group of Mortgage
Note Guarantors that would together constitute a Significant Subsidiary
of any Issuer pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying, or shall admit in writing its
inability to pay, its debts as they become due and, in each case, a
period of 30 days shall have elapsed; or
(j) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against any of the Issuers or a Mortgage
Note Guarantor that is a Significant Subsidiary or any group of
Mortgage Note Guarantors that would together constitute a
Significant Subsidiary of any Issuer in an involuntary case;
(ii) appoints a Custodian of any of the Issuers or a Mortgage
Note Guarantor that is a Significant Subsidiary or any group of
Mortgage Note Guarantors that would together constitute a
Significant Subsidiary of the Issuers or for all or substantially
all of the property of any of the Issuers or a Mortgage Note
Guarantor that is a Significant Subsidiary or any group Issuers of
Mortgage Note Guarantors that would together constitute a
Significant Subsidiary of any Issuer; or
(iii) orders the liquidation of any Issuer or a Mortgage Note
Guarantor that is a Significant Subsidiary of any Issuers or any
group of Mortgage Note Guarantors that would together constitute a
Significant Subsidiary of any Issuer;
and the order or decree remains unstayed and in effect for 60
consecutive days;
(k) 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;
(l) the Project is not Completed by the Outside Completion Deadline
and continues to be not Completed; or
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(m) 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.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
SECTION 6.02. ACCELERATION.
(a) Subject to the provisions of clause (b) of this Section 6.02, if
any Event of Default (other than an Event of Default specified in clause (i) or
(j) of Section 6.01 hereof with respect to the Issuers or any Mortgage Note
Guarantor that is a Significant Subsidiary or any group of Mortgage Note
Guarantors that would together constitute a Significant Subsidiary), 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 of the Mortgage Notes to be due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (i) or (j) of Section 6.01 hereof occurs with respect to the Issuers or
any Mortgage Note Guarantor that is a Significant Subsidiary or any group of
Mortgage Note Guarantors that would together constitute a Significant Subsidiary
of the Issuers, the principal, premium and Liquidated Damages, if any, interest
any other monetary obligations on all of the outstanding Mortgage Notes shall be
due and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Mortgage Notes by
written notice to the Mortgage Note Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium or Liquidated Damages that
has become due solely because of the acceleration) have been cured or waived.
Notwithstanding the foregoing, 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.
If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Issuers with the intention
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 Section 3.07
hereof, then, upon acceleration of the Mortgage Notes, an equivalent premium
shall also become and be immediately due and payable, to the extent permitted by
law, anything in this Indenture or in the Mortgage Notes to the contrary
notwithstanding.
(b) The provisions of the TIA shall govern this Mortgage Note Indenture
whether or not this Mortgage Note Indenture is qualified under the TIA. Subject
to the mandatory provisions of the TIA, the rights of the Mortgage Note Trustee
and the Holders to accelerate obligations under the Mortgage Notes, rescind such
acceleration, or to exercise rights and remedies under the Collateral Documents
or to enforce the terms of this Indenture shall be limited as provided in the
terms of the Intercreditor Agreement. To the extent permissible under the TIA,
the terms of the Intercreditor Agreement or the Sole Stockholder Intercreditor
Agreement shall not be interpreted as impairing or affecting, in violation of
Section 316(b) of the TIA, the right of any Holder to receive payment of
principal of and interest on the Mortgage Notes on or after the respective due
dates expressed in the Mortgage Notes or to institute suit for the enforcement
of any such payment on or after such respective dates.
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SECTION 6.03. OTHER REMEDIES.
Subject to the terms of the Intercreditor Agreement, if an Event of
Default occurs and is continuing, the Mortgage Note Trustee may pursue any
available remedy to collect the payment of principal, premium and Liquidated
Damages, if any, and interest on the Mortgage Notes or to enforce the
performance of any provision of the Mortgage Notes or this Indenture.
The Mortgage Note Trustee may maintain a proceeding even if it does not
possess any of the Mortgage Notes or does not produce any of them in the
proceeding. A delay or omission by the Mortgage Note Trustee or any Holder of a
Mortgage Note in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to the extent
permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Mortgage Notes by notice to the Mortgage Note Trustee may
on behalf of the Holders of all of the Mortgage Notes waive an existing Default
or Event of Default and its consequences hereunder, except a continuing Default
or Event of Default in the payment of the principal of, premium and Liquidated
Damages, if any, or interest on, the Mortgage Notes (including in connection
with an offer to purchase) (provided, however, that the Holders of a majority in
aggregate principal amount of the then outstanding Mortgage Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to the terms of the Intercreditor Agreement, Holders of a
majority in principal amount of the then outstanding Mortgage Notes may direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Mortgage Note Trustee or exercising any trust or power
conferred on it, including the exercise of any remedy under the Collateral
Documents or the Intercreditor Agreement. However, the Mortgage Note Trustee may
refuse to follow any direction that conflicts with law, this Indenture or the
Intercreditor Agreement that the Mortgage Note Trustee determines may be unduly
prejudicial to the rights of other Holders of Mortgage Notes or that may involve
the Mortgage Note Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Mortgage Note may pursue a remedy with respect to this
Indenture or the Mortgage Notes (except as provided in Section 6.07) only if:
(a) the Holder of a Mortgage Note gives to the Mortgage Note Trustee
written notice of a continuing Event of Default or the Mortgage Note
Trustee receives such notice from the Issuers;
(b) the Holders of at least 25% in principal amount of the then
outstanding Mortgage Notes make a written request to the Mortgage Note
Trustee to pursue the remedy;
(c) such Holder of a Mortgage Note or Holders of Mortgage Notes offer
and, if requested, provide to the Mortgage Note Trustee indemnity
satisfactory to the Mortgage Note Trustee against any loss, liability or
expense;
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(d) the Mortgage Note Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Mortgage Notes do not give the Mortgage Note
Trustee a direction inconsistent with the request; provided, however, that
such provision does not effect the right of a Holder to sue for enforcement
of any overdue payment thereon.
A Holder of a Mortgage Note may not use this Indenture to prejudice the rights
of another Holder of a Mortgage Note or to obtain a preference or priority over
another Holder of a Mortgage Note or to take any action in violation of the
provisions of the Intercreditor Agreement.
SECTION 6.07. RIGHTS OF HOLDERS OF MORTGAGE NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, but subject to
the provisions of the Intercreditor Agreement the right of any Holder of a
Mortgage Note to receive payment of principal, premium and Liquidated Damages,
if any, and interest on the Mortgage Note, on or after the respective due dates
expressed in the Mortgage Note, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder, except the right of any Holder to institute
suit for the enforcement of any such payment is hereby limited or denied if and
to the extent that the institution or prosecution thereof or the entry of
judgement therein would, under applicable law, result in the surrender,
impairment, waiver or loss of the lien in favor of the Mortgage Note Trustee
securing the Note Collateral.
SECTION 6.08. COLLECTION SUIT BY MORTGAGE NOTE TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, subject to the terms of the Intercreditor Agreement, the Mortgage
Note Trustee is authorized to recover judgment in its own name and as trustee of
an express trust against the Issuers or any Mortgage Note Guarantor for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Mortgage Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Mortgage
Note Trustee, its agents and counsel.
SECTION 6.09. MORTGAGE NOTE TRUSTEE MAY FILE PROOFS OF CLAIM.
Subject to Section 6.02(b) hereof and the terms of the Intercreditor
Agreement, the Mortgage Note Trustee is authorized to file such proofs of claim
and other papers or documents as may be necessary or advisable in order to have
the claims of the Mortgage Note Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Mortgage Note Trustee,
its agents and counsel) and the Holders of the Mortgage Notes allowed in any
judicial proceedings relative to the Issuers (or any other obligor upon the
Mortgage Notes, including the Mortgage Note Guarantors), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Mortgage Note Trustee, and in the event that the
Mortgage Note Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Mortgage Note Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Mortgage
Note Trustee, its agents and counsel, and any other amounts due the Mortgage
Note Trustee under Section 7.07 hereof. To the extent
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that the payment of any such compensation, expenses, disbursements and advances
of the Mortgage Note Trustee, its agents and counsel, and any other amounts due
the Mortgage Note Trustee under Section 7.07 hereof out of the estate in any
such proceeding, shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Mortgage Note Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Mortgage Notes or the rights of any
Holder, or to authorize the Mortgage Note Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Mortgage Note Trustee collects any money pursuant to this
Article, it shall, subject to the terms of the Intercreditor Agreement, pay out
the money in the following order:
First: to the Mortgage Note Trustee, its agents and attorneys for
amounts due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Mortgage Note
Trustee and the costs and expenses of collection;
Second: to Holders of Mortgage Notes for amounts due and unpaid on the
Mortgage Notes for principal, premium and Liquidated Damages, if any, and
interest ratably, without preference or priority of any kind, according to the
amounts due and payable on the Mortgage Notes for principal, premium and
Liquidated Damages, if any, and interest, respectively; and
Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Mortgage Note Trustee may fix a record date and payment date for
any payment to Holders of Mortgage Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Mortgage Note Trustee for any action taken
or omitted by it as a Mortgage Note Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Mortgage Note Trustee, a suit by a Holder of a Mortgage Note pursuant to Section
6.07 hereof, or a suit by Holders of more than 10% in principal amount of the
then outstanding Mortgage Notes.
SECTION 6.12. MANAGEMENT OF CASINOS.
Notwithstanding any provision of this Article 6 to the contrary,
following an Event of Default which permits the taking of possession of the
Project by the Mortgage Note Trustee or the appointment of a receiver of either
the Note Collateral or any part thereof pursuant to the Mortgage Notes Indenture
Fee Deed of Trust, the Mortgage Notes Indenture Leasehold Deed of Trust or the
Mortgage Notes Indenture Mall Parcel Fee Deed of Trust or after such taking of
possession of such appointment, the Mortgage Note Trustee or any such receiver
shall be authorized, in addition to the rights and powers of the Mortgage Note
Trustee and such receiver set forth elsewhere in this Indenture and the
Collateral
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Documents, to retain one or more experienced operators of casinos to manage the
casino located at the Project on behalf of the Holders of Mortgage Notes;
provided, however, that any such operator shall have all necessary legal
qualifications, including all Gaming Licenses to manage the casino located at
the Project.
ARTICLE 7
MORTGAGE NOTE TRUSTEE
SECTION 7.01. DUTIES OF MORTGAGE NOTE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Mortgage
Note Trustee shall exercise such of the rights and powers vested in it by this
Indenture and the Collateral Documents, and use the same degree of care and
skill in its exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Mortgage Note Trustee shall be determined solely
by the express provisions of this Indenture, the Collateral Documents and
the Intercreditor Agreement and the Mortgage Note Trustee need perform only
those duties that are specifically set forth in this Indenture, the
Collateral Documents and the Intercreditor Agreement and no others, and no
implied covenants or obligations shall be read into this Indenture against
the Mortgage Note Trustee; and
(ii) in the absence of bad faith on its part, the Mortgage Note Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Mortgage Note Trustee and conforming in all
material respects to the requirements of this Indenture, the Collateral
Documents and the Intercreditor Agreement. However, the Mortgage Note
Trustee shall examine the certificates and opinions to determine whether or
not they conform in all material respects to the requirements of this
Indenture and the Collateral Documents.
(c) The Mortgage Note Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph (b) of
this Section;
(ii) the Mortgage Note Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved
that the Mortgage Note Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Mortgage Note Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Mortgage Note Trustee is subject
to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Mortgage Note
Trustee to expend or risk its own funds or incur any liability. The Mortgage
Note Trustee shall be under no obligation to exercise
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any of its rights and powers under this Indenture before or following the
occurrence of any Event of Default at the request of any Holders, unless such
Holder shall have offered to the Mortgage Note Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
(f) The Mortgage Note Trustee shall not be liable for interest on any
money received by it except as the Mortgage Note Trustee may agree in writing
with the Issuers or the Mortgage Note Guarantors. Money held in trust by the
Mortgage Note Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF MORTGAGE NOTE TRUSTEE.
(a) The Mortgage Note Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Mortgage Note Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Mortgage Note Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel or both. The
Mortgage Note Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Officers' Certificate or Opinion of
Counsel. The Mortgage Note Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection from liability in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Mortgage Note Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Mortgage Note Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers or any Mortgage Note
Guarantor shall be sufficient if signed by an Officer of the Issuers or such
Mortgage Note Guarantor.
(f) The Mortgage Note Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have requested such
action in accordance with this Indenture and have offered to the Mortgage Note
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) Except with respect to Section 4.01 hereof, the Mortgage Note
Trustee shall have no duty to inquire as to the performance of the Issuers'
covenants in Article Four hereof. In addition, the Mortgage Note Trustee shall
not be deemed to have knowledge of any Default or Event of Default except (i)
any Event of Default occurring pursuant to Section 6.01(a) or 6.01(b) or (ii)
any Default of Event of Default of which the Mortgage Note Trustee shall have
received written notification or obtained actual knowledge.
SECTION 7.03. INDIVIDUAL RIGHTS OF MORTGAGE NOTE TRUSTEE.
The Mortgage Note Trustee in its individual or any other capacity may
become the owner or pledgee of Mortgage Notes and may otherwise deal with the
Issuers and the Mortgage Note Guarantors
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with the same rights it would have if it were not Mortgage Note Trustee.
However, in the event that the Mortgage Note Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Mortgage Note Trustee is also subject to Sections 7.10
and 7.11 hereof.
SECTION 7.04. MORTGAGE NOTE TRUSTEE'S DISCLAIMER.
The Mortgage Note Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Collateral
Documents, the Intercreditor Agreement, the Sole Stockholder Intercreditor
Agreement, the Mortgage Notes or any Mortgage Note Guaranty, it shall not be
accountable for the Issuers' use of the proceeds from the Mortgage Notes or any
money paid to the Issuers or upon the Issuers' direction under any provision of
this Indenture or the Collateral Documents, it shall not be responsible for the
use or application of any money received by any Paying Agent other than the
Mortgage Note Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Mortgage Notes or any other document in
connection with the sale of the Mortgage Notes or pursuant to this Indenture
other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Mortgage Note Trustee, the Mortgage Note Trustee shall mail to
Holders of Mortgage Notes a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in
payment of principal of, premium and Liquidated Damages, if any, or interest on
any Mortgage Note, the Mortgage Note Trustee may withhold the notice if and so
long as the Mortgage Note Trustee in good faith determines that withholding the
notice is in the interests of the Holders of the Mortgage Notes.
SECTION 7.06. REPORTS BY MORTGAGE NOTE TRUSTEE TO HOLDERS OF
THE MORTGAGE NOTES.
Within 60 days of each May 15th beginning with the May 15th following
the date of this Indenture, and for so long as Mortgage Notes remain
outstanding, the Mortgage Note Trustee shall mail to the Holders of the Mortgage
Notes a brief report dated as of such reporting date that complies with TIA ss.
313(a) (but if no event described in TIA ss. 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted). The
Mortgage Note Trustee also shall comply with TIA ss. 313(b)(2). The Mortgage
Note Trustee shall also transmit by mail all reports as required by TIA ss.
313(c).
A copy of each report at the time of its mailing to the Holders of
Mortgage Notes shall be mailed to the Issuers and filed with the SEC and each
stock exchange on which the Mortgage Notes are listed in accordance with TIA ss.
313(d). The Issuers shall promptly notify the Mortgage Note Trustee when the
Mortgage Notes are listed on any stock exchange.
At the expense of the Issuers, the Mortgage Note Trustee or, if the
Mortgage Note Trustee is not the Registrar, the Registrar, shall report the
names of record holders of the Mortgage Notes to any Gaming Authority when
requested to do so by the Issuers.
At the express direction of the Issuers and at the Issuers' expense,
the Mortgage Note Trustee will provide any Gaming Authority with:
(i) copies of all notices, reports and other written communications
which the Mortgage Note Trustee gives to Holders;
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(ii) a list of all of the Holders promptly after the original issuance
of the Mortgage Notes and periodically thereafter if the Issuers
so direct;
(iii) notice of any Default under this Indenture, any acceleration of
the Indebtedness evidenced hereby, the institution of any legal
actions or proceedings before any court or governmental authority
in respect of a Default or Event of Default hereunder;
(iv) notice of the removal or resignation of the Mortgage Note Trustee
within five Business Days of the effectiveness thereof;
(v) notice of any transfer or assignment of rights under this
Indenture or the Mortgage Note Guaranties known to the Mortgage
Note Trustee within five Business Days thereof; and
(vi) a copy of any amendment to the Mortgage Notes or this Indenture
within five Business Days of the effectiveness thereof.
To the extent requested by the Issuers and at the Issuers' expense, the
Mortgage Note Trustee shall cooperate with any Gaming Authority in order to
provide such Gaming Authority with the information and documentation requested
and as otherwise required by applicable law.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers and the Mortgage Note Guarantors shall pay to the Mortgage
Note Trustee from time to time reasonable compensation for its acceptance of
this Indenture and services hereunder in accordance with a written schedule
provided by the Mortgage Note Trustee to the Issuers. The Mortgage Note
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers and the Mortgage Note Guarantors shall
reimburse the Mortgage Note Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Mortgage Note Trustee's agents
and counsel.
The Issuers and the Mortgage Note Guarantors shall indemnify the
Mortgage Note Trustee against any and all losses, liabilities or expenses
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Issuers (including this Section
7.07) and defending itself against any claim (whether asserted by the Issuers or
any Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence, willful
misconduct or bad faith. The Mortgage Note Trustee shall notify the Issuers
promptly of any claim for which it may seek indemnity. Failure by the Mortgage
Note Trustee to so notify the Issuers shall not relieve the Issuers or any
Mortgage Note Guarantor of its obligations hereunder. The Issuers shall defend
the claim and the Mortgage Note Trustee shall cooperate in the defense. To the
extent there exists a conflict or potential conflict of interest, the Mortgage
Note Trustee may have separate counsel and the Issuers and the Mortgage Note
Guarantors shall pay the reasonable fees and expenses of such counsel. Neither
the Issuers nor any Mortgage Note Guarantor need pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers and the Mortgage Note Guarantors under
this Section 7.07 shall survive the satisfaction and discharge of this
Indenture.
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When the Mortgage Note Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(i) or (j) hereof occurs, the
expenses and the compensation for the services (including the reasonable fees
and expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
The Mortgage Note Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF MORTGAGE NOTE TRUSTEE.
A resignation or removal of the Mortgage Note Trustee and appointment
of a successor Mortgage Note Trustee shall become effective only upon the
successor Mortgage Note Trustee's acceptance of appointment and taking of office
as provided in this Section.
The Mortgage Note Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Issuers. The
Holders of Mortgage Notes of a majority in principal amount of the then
outstanding Mortgage Notes may remove the Mortgage Note Trustee by so notifying
the Mortgage Note Trustee and the Issuers in writing. The Issuers may remove the
Mortgage Note Trustee if:
(a) the Mortgage Note Trustee fails to comply with Section 7.10 hereof;
(b) the Mortgage Note Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Mortgage Note Trustee
under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Mortgage Note
Trustee or its property; or
(d) the Mortgage Note Trustee becomes incapable of acting.
If the Mortgage Note Trustee resigns or is removed or if a vacancy
exists in the office of Mortgage Note Trustee for any reason, the Issuers shall
promptly appoint a successor Mortgage Note Trustee. For up to one year after the
successor Mortgage Note Trustee takes office, the Holders of a majority in
principal amount of the then outstanding Mortgage Notes may by written action
appoint a successor Mortgage Note Trustee to replace the successor Mortgage Note
Trustee appointed by the Issuers.
If any Gaming Authority requires a Mortgage Note Trustee to be
approved, licensed or qualified and the Mortgage Note Trustee fails or declines
to do so, such approval, license or qualification shall be obtained upon the
request of, and at the expense of, the Issuers unless the Mortgage Note Trustee
declines to do so, or, if the Mortgage Note Trustee's relationship with either
the Issuers or the Mortgage Note Guarantors may, in the Issuers' discretion,
jeopardize any material gaming license or franchise or right or approval granted
thereto, the Mortgage Note Trustee shall resign, and, in addition, the Mortgage
Note Trustee may at its option resign if the Mortgage Note Trustee in its sole
discretion determines not to be so approved, licensed or qualified.
If a successor Mortgage Note Trustee does not take office within 60
days after the retiring Mortgage Note Trustee resigns or is removed, the
retiring Mortgage Note Trustee, the Issuers, any Mortgage Note Guarantor or the
Holders of Mortgage Notes of at least 10% in principal amount of the
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then outstanding Mortgage Notes may petition any court of competent jurisdiction
for the appointment of a successor Mortgage Note Trustee.
If the Mortgage Note Trustee, after written request by any Holder of a
Mortgage Note who has been a Holder of a Mortgage Note for at least six months,
fails to comply with Section 7.10, such Holder of a Mortgage Note may petition
any court of competent jurisdiction for the removal of the Mortgage Note Trustee
and the appointment of a successor Mortgage Note Trustee.
A successor Mortgage Note Trustee shall deliver a written acceptance of
its appointment to the retiring Mortgage Note Trustee and to the Issuers.
Thereupon, the resignation or removal of the retiring Mortgage Note Trustee
shall become effective, and the successor Mortgage Note Trustee shall have all
the rights, powers and duties of the Mortgage Note Trustee under this Indenture.
The successor Mortgage Note Trustee shall mail a notice of its succession to
Holders of the Mortgage Notes. The retiring Mortgage Note Trustee shall promptly
transfer all property held by it as Mortgage Note Trustee to the successor
Mortgage Note Trustee, provided all sums owing to the Mortgage Note Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Mortgage Note Trustee pursuant to
this Section 7.08, the Issuers' and the Mortgage Note Guarantors' obligations
under Section 7.07 hereof shall continue for the benefit of the retiring
Mortgage Note Trustee.
SECTION 7.09. SUCCESSOR MORTGAGE NOTE TRUSTEE BY MERGER, ETC.
If the Mortgage Note Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Mortgage Note Trustee; provided such corporation shall be otherwise
eligible and qualified under this Article.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Mortgage Note Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Mortgage Note Trustee who satisfies
the requirements of TIA ss. 310(a)(1), (2) and (5). The Mortgage Note Trustee is
subject to TIA ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Mortgage Note Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Mortgage Note Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated therein.
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SECTION 7.12. AUTHORIZATION OF TRUSTEE TO TAKE OTHER ACTIONS.
(a) The Mortgage Note Trustee is hereby authorized to enter into and
take any actions or deliver such consents required by or requested under each of
the Collateral Documents, the Intercreditor Agreement, the Sole Stockholder
Intercreditor Agreement, the Disbursement Agreement and such other documents as
directed by the Holders of a majority of outstanding aggregate principal amount
of the Mortgage Notes. If at any time any action by or the consent of the
Mortgage Note Trustee is required under any of the Collateral Documents, the
Intercreditor Agreement, the Sole Stockholder Intercreditor Agreement, the
Disbursement Agreement or any other document entered into by the Mortgage Note
Trustee at the direction of a majority of the Holders of outstanding aggregate
principal amount of the Mortgage Notes, such action or consent shall be taken or
given by the Mortgage Note Trustee upon the consent to such action by the
Holders of a majority of outstanding aggregate principal amount of the Mortgage
Notes.
(b) Under any refinancing or replacement of the Bank Credit Facility or
the Mall Construction Loan Facility with a lender that does not become a party
to the Intercreditor Agreement or the Sole Stockholder Intercreditor Agreement,
the Mortgage Note Trustee shall enter into an intercreditor agreement with such
lender, at such lender's request, with terms that are substantially as favorable
to the Mortgage Note Trustee or the Holders of Mortgage Notes as those contained
in the Intercreditor Agreement or the Sole Stockholder Intercreditor Agreement,
as applicable. The Mortgage Note Trustee shall also enter into such amendments
or supplements to the Intercreditor Agreement and the Sole Stockholder
Intercreditor Agreement to provide for additional parties to be bound by and
subject to the benefits of the terms thereof.
(c) The Mortgage Note Trustee shall enter into an intercreditor
agreement upon the request of the Issuers with respect to any financing for any
Specified FF&E; provided that the Issuers deliver an Officers' Certificate that
such financing (i) will not violate this Indenture, (ii) the terms of such
intercreditor agreement will not violate this Indenture or any of the Collateral
Documents, (iii) any Liens incurred in connection with such financing extend
only to such Specified FF&E and such other assets as permitted clause (o) of the
definition of Permitted Liens included herein, and (iv) if any Indebtedness
under the Bank Credit Facility is outstanding, the interests of the lenders
under the Bank Credit Facility and the Mortgage Notes are treated on a
substantially equivalent or pari passu basis as compared to such equipment
lender, except (1) the lenders under the Bank Credit Facility may be treated
differently compared to the Holders of the Mortgage Notes with respect to
deposits thereunder or (2) if such provisions would be consistent with the
description of such arrangements in the Offering Circular dated November 6, 1997
relating to the Mortgage Notes, the lenders under the Bank Credit Facility may
be treated differently compared to the Holders of the Mortgage Notes with
respect to the return of funds representing deposits on the Lien position on
collateral securing the Bank Credit Facility and the Mortgage Notes.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the option of the Board of Directors of the Company
evidenced by a resolution set forth in an Officers' Certificate delivered to the
Mortgage Note Trustee, at any time, elect to have either Section 8.02 or 8.03
hereof be applied to all outstanding Mortgage Notes upon compliance with the
conditions set forth below in this Article Eight.
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SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Issuers and the Mortgage Note Guarantors
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be deemed to have been discharged from their respective obligations with
respect to all outstanding Mortgage Notes and any Mortgage Note Guaranties on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Issuers shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Mortgage Notes and cured all existing Events of Default, which
Mortgage Notes shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Mortgage Notes, the Collateral Documents and this
Indenture (and the Mortgage Note Trustee, on demand of and at the expense of the
Issuers, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Mortgage Notes to
receive solely from the trust fund described in Section 8.04 hereof, and as more
fully set forth in such Section, payments in respect of the principal of,
premium and Liquidated Damages, if any, and interest on such Mortgage Notes when
such payments are due, (b) the Issuers' and the Mortgage Note Guarantors'
obligations with respect to such Mortgage Notes under Article 2 and Section 4.02
hereof, (c) the rights, powers, trusts, duties and immunities of the Mortgage
Note Trustee hereunder and the Issuers' and the Mortgage Note Guarantors'
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Issuers may exercise their option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Issuers and the Mortgage Note Guarantors
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be released from their obligations under the covenants contained in
Sections 4.03, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16,
4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.25, 4.26, 4.27, 4.28 and 4.29 and
Articles 5, 10 and 11 hereof with respect to the outstanding Mortgage Notes and
Mortgage Note Guaranties on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Mortgage Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Mortgage Notes shall not be deemed outstanding for accounting purposes). For
this purpose, Covenant Defeasance means that, with respect to the outstanding
Mortgage Notes, the Issuers and the Mortgage Note Guarantors may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Mortgage Notes and Mortgage Note Guaranties shall be
unaffected thereby. In addition, upon the Issuers' exercise under Section 8.01
hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(g) and 6.01(k) through 6.01(m) hereof shall not constitute
Events of Default.
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SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Mortgage Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit with the Mortgage
Note Trustee, in trust, for the benefit of the Holders, cash in United
States 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 as
evidenced by a certificate delivered to the Mortgage Note Trustee, to
pay the principal of, premium and Liquidated Damages, if any, and
interest on the outstanding Mortgage Notes on the stated maturity date
or on an applicable redemption date, as the case may be, of such
principal of, premium and Liquidated Damages, if any, or interest on
the outstanding Mortgage Notes;
(b) in the case of an election under Section 8.02 hereof, the
Issuers shall have delivered to the Mortgage Note Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Mortgage Note
Trustee confirming that, subject to customary assumptions and
exclusions, (A) the Issuers have received from, or there has been
published by, the United States Internal Revenue Service a ruling or
(B) since the Issuance Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of 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;
(c) in the case of an election under Section 8.03 hereof, the
Issuers shall have delivered to the Mortgage Note Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Mortgage Note
Trustee confirming 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 Covenant 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 Covenant Defeasance had
not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing pursuant to Section 6.01(a), 6.01(b), 6.01(i) or 6.01(j)
hereof on the date of such deposit;
(e) 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 this 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;
(f) the Issuers shall have delivered to the Mortgage Note
Trustee an Opinion of Counsel in the United States to the effect that,
as of the date of such opinion and subject to customary assumptions and
exclusions, 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
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a perfected security interest in such trust for the ratable benefit of
the Holders of Mortgage Notes;
(g) 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
(h) 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.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Mortgage Note
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Mortgage Note Trustee") pursuant to Section 8.04 hereof in respect of
the outstanding Mortgage Notes shall be held in trust and applied by the
Mortgage Note Trustee, in accordance with the provisions of such Mortgage Notes
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Issuers acting as Paying Agent) as the Mortgage Note Trustee may
determine, to the Holders of such Mortgage Notes of all sums due and to become
due thereon in respect of principal, premium and Liquidated Damages, if any, and
interest but such money need not be segregated from other funds except to the
extent required by law.
The Issuers and the Mortgage Note Guarantors shall pay and indemnify
the Mortgage Note Trustee against any tax, fee or other charge imposed on or
assessed against the cash or non-callable Government Securities deposited
pursuant to Section 8.04 hereof or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Mortgage Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Mortgage Note Trustee shall deliver or pay to the Issuers from time to time upon
the request of the Issuers any money or non-callable Government Securities held
by it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Mortgage Note Trustee (which may be the
opinion delivered under Section 8.04(a) hereof), are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE ISSUERS.
Any money deposited with the Mortgage Note Trustee or any Paying Agent,
or then held by the Issuers, in trust for the payment of the principal of,
premium and Liquidated Damages, if any, or interest on any Mortgage Note and
remaining unclaimed for two years after such principal, premium and Liquidated
Damages, if any, or interest has become due and payable shall be paid to the
Issuers on its request or (if then held by the Issuers) shall be discharged from
such trust; and the Holder of such Mortgage Note shall thereafter, as a secured
creditor, look only to the Issuers for payment thereof, and all liability of the
Mortgage Note Trustee or such Paying Agent with respect to such trust money, and
all liability of the Issuers as trustee thereof, shall thereupon cease;
provided, however, that the Mortgage
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Note Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Issuers cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Issuers.
SECTION 8.07. REINSTATEMENT.
If the Mortgage Note Trustee or Paying Agent is unable to apply any
United States dollars or non-callable Government Securities in accordance with
Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Issuers' and the Mortgage Note
Guarantors' obligations under this Indenture and the Mortgage Notes and Mortgage
Note Guaranties shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Mortgage
Note Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that,
if the Issuers and the Mortgage Note Guarantors make any payment of principal
of, premium and Liquidated Damages, if any, or interest on any Mortgage Note
following the reinstatement of its obligations, the Issuers and the Mortgage
Note Guarantors shall be subrogated to the rights of the Holders of such
Mortgage Notes to receive such payment from the money held by the Mortgage Note
Trustee or Paying Agent.
SECTION 8.08. NOTE COLLATERAL.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to either Section 8.02 or 8.03, the Note Collateral, except the funds
in the trust fund described in Section 8.04 hereof, shall be released pursuant
to Section 10.03 hereof.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF MORTGAGE NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuers, the
Mortgage Note Guarantors and the Mortgage Note Trustee may amend or supplement
this Indenture, the Mortgage Notes, the Mortgage Note Guaranties, the
Intercreditor Agreement, the Sole Stockholder Intercreditor Agreement or the
Collateral Documents without the consent of any Holder of a Mortgage Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article 5 or Article 11 hereof;
(c) to provide for uncertificated Mortgage Notes in addition to or in
place of certificated Mortgage Notes;
(d) to provide for the assumption of the Issuers' or the Mortgage Note
Guarantors' obligations to the Holders of the Mortgage Notes in the case of
a merger or consolidation pursuant to Articles 5 or 11 hereof, as the case
may be;
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(e) 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 Section 11.02 hereof) or
that does not adversely affect the legal rights hereunder, under the
Collateral Documents, the Intercreditor Agreement or the Sole Stockholder
Intercreditor Agreement of any Holder of a Mortgage Note;
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(g) to enter into additional or supplemental Collateral Documents.
Upon the request of the Issuers accompanied by a resolution of the
Board of Directors of the Issuers and the Mortgage Note Guarantors (or their
managing members) authorizing the execution of any such amended or supplemental
Indenture, Mortgage Notes, Mortgage Note Guaranties or Collateral Documents, and
upon receipt by the Mortgage Note Trustee of the documents described in Section
7.02 hereof, the Mortgage Note Trustee shall join with the Issuers and the
Mortgage Note Guarantors in the execution of any amended or supplemental
Indenture, Mortgage Notes, Mortgage Note Guaranties or Collateral Documents
authorized or permitted by the terms of this Indenture, but the Mortgage Note
Trustee shall not be obligated to enter into such amended or supplemental
Indenture, Mortgage Notes, Mortgage Note Guaranties or Collateral Documents that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF MORTGAGE NOTES.
Except as provided below in this Section 9.02 or elsewhere in this
Indenture, the Issuers and the Mortgage Note Trustee may amend or supplement
this Indenture, the Mortgage Notes, the Mortgage Note Guaranties, the Collateral
Documents, the Intercreditor Agreement or the Sole Stockholder Intercreditor
Agreement 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 the Mortgage Notes), and,
subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium and Liquidated Damages, if any, or interest on the
Mortgage Notes, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the
Mortgage Notes, the Mortgage Note Guaranties, the Collateral Documents, the
Intercreditor Agreement or the Sole Stockholder Intercreditor Agreement 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 the Mortgage Notes).
Upon the request of the Issuers accompanied by a resolution of the
Board of Directors of the Company and the Mortgage Note Guarantors authorizing
the execution of any such amended or supplemental Indenture, Mortgage Notes,
Mortgage Note Guaranties, Collateral Documents, the Intercreditor Agreement or
the Sole Stockholder Intercreditor Agreement, and upon the filing with the
Mortgage Note Trustee of evidence reasonably satisfactory to the Mortgage Note
Trustee of the consent of the Holders of Mortgage Notes as aforesaid, and upon
receipt by the Mortgage Note Trustee of the documents described in Section 7.02
hereof, the Mortgage Note Trustee shall join with the Issuers and the Mortgage
Note Guarantors in the execution of such amended or supplemental Indenture,
Mortgage Notes, Mortgage Note Guaranties, Collateral Documents, Intercreditor
Agreement or Sole Stockholder Intercreditor Agreement, unless such amended or
supplemental Indenture, Mortgage Notes, Mortgage Note Guaranties, Collateral
Documents or Intercreditor Agreement affects the Mortgage Note Trustee's own
rights, duties or immunities under this Indenture, the Mortgage Notes, the
Mortgage Note Guaranties, the Collateral
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Documents, the Intercreditor Agreement, the Sole Stockholder Intercreditor
Agreement or otherwise, in which case the Mortgage Note Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture, Mortgage Notes, Mortgage Note Guaranties, Collateral
Documents Intercreditor Agreement or Sole Stockholder Intercreditor Agreement.
It shall not be necessary for the consent of the Holders of Mortgage
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuers shall mail to the Holders of Mortgage Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture, Mortgage Notes, Mortgage Note Guaranties, Collateral
Documents Intercreditor Agreement or Sole Stockholder Intercreditor Agreement or
waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
aggregate principal amount of the Mortgage Notes then outstanding may waive
compliance in a particular instance with any provision of this Indenture, the
Mortgage Notes, the Mortgage Note Guaranties, the Collateral Documents, the
Intercreditor Agreement or the Sole Stockholder Intercreditor Agreement.
However, without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Mortgage Notes held by a non-consenting Holder):
(a) reduce the principal amount of Mortgage Notes whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Mortgage Note or alter or waive any of the provisions with respect to
the optional or mandatory redemption provisions of the Mortgage Notes
(provided, however, that the term "redemption" does not apply to any
provision with respect to any Repurchase Offer);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Mortgage Note;
(d) waive a Default or Event of Default in the payment of principal
of or 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 then outstanding Mortgage Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Mortgage Note payable in money other than that stated
in the Mortgage Notes;
(f) make any change in the provisions of this 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;
(g) release all or substantially all of the Note Collateral from
the Lien of this Indenture and the Collateral Documents; or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
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SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Mortgage Notes,
the Mortgage Note Guaranties and the Collateral Documents shall be set forth in
a amended or supplemental Indenture or Collateral Document that complies with
the TIA as then in effect, if applicable. This Indenture shall be construed to
comply in every respect with the TIA.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Mortgage Note is a continuing consent by the Holder of a
Mortgage Note and every subsequent Holder of a Mortgage Note or portion of a
Mortgage Note that evidences the same debt as the consenting Holder's Mortgage
Note, even if notation of the consent is not made on any Mortgage Note. However,
any such Holder of a Mortgage Note or subsequent Holder of a Mortgage Note may
revoke the consent as to its Mortgage Note if the Mortgage Note Trustee receives
written notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF MORTGAGE NOTES.
The Mortgage Note Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Mortgage Note thereafter authenticated.
The Issuers in exchange for all Mortgage Notes may issue and the Mortgage Note
Trustee shall authenticate new Mortgage Notes (accompanied by a notation of the
Mortgage Note Guaranties duly endorsed by the Mortgage Note Guarantors) that
reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Mortgage Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. MORTGAGE NOTE TRUSTEE TO SIGN AMENDMENTS, ETC.
The Mortgage Note Trustee shall sign any amended or supplemental
indenture, Mortgage Note, Mortgage Note Guaranty or Collateral Document, if
necessary, authorized pursuant to this Article Nine if the amendment or
supplement does not adversely affect the rights, duties, liabilities or
immunities of the Mortgage Note Trustee. The Issuers or any Mortgage Note
Guarantor may not sign an amendment or supplemental Indenture, Mortgage Note,
Mortgage Note Guaranty or Collateral Document until the Board of Directors
approves it. In executing any amended or supplemental indenture, Mortgage Note,
Mortgage Note Guaranty or Collateral Document, if necessary, the Mortgage Note
Trustee shall be entitled to receive and (subject to Section 7.01) shall be
fully protected in relying upon, an Officer's Certificate and an Opinion of
Counsel, which Opinion of Counsel may be subject to customary assumptions and
exclusions, stating that the execution of such amended or supplemental
indenture, Mortgage Note, Mortgage Note Guaranty or Collateral Document is
authorized or permitted by this Indenture.
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ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.01. SECURITY.
The due and punctual payment of the principal of, premium and
Liquidated Damages, if any, and interest on the Mortgage Notes when and as the
same shall be due and payable, whether on an interest payment date, at maturity,
by acceleration, repurchase, redemption or otherwise, and interest on the
overdue principal of, premium and Liquidated Damages, if any, and interest on
the Mortgage Notes and performance of all other obligations of the Issuers and
the Mortgage Note Guarantors to the Holders of Mortgage Notes or the Mortgage
Note Trustee under this Indenture, the Mortgage Notes and the Mortgage Note
Guaranties, according to the terms hereunder or thereunder, shall be secured by
the Note Collateral, as provided in the Collateral Documents which the Issuers
and the Mortgage Note Guarantors have entered into simultaneously with the
execution of this Indenture for the benefit of the Holders of Mortgage Notes.
Each Holder of Mortgage Notes, by its acceptance thereof, consents and agrees to
the terms of the Collateral Documents, the Intercreditor Agreement (including,
without limitation, the provisions providing for foreclosure and release of Note
Collateral as well as any additional intercreditor arrangements entered into by
the Mortgage Note Trustee pursuant to Section 7.12 hereof) and the Sole
Stockholder Intercreditor Agreement as the same may be in effect or may be
amended from time to time in accordance with its terms and authorizes and
directs the Mortgage Note Trustee to enter into the Collateral Documents, the
Intercreditor Agreement and the Sole Stockholder Intercreditor Agreement and to
perform its obligations and exercise its rights thereunder in accordance
therewith. The Issuers and the Mortgage Note Guarantors shall deliver to the
Mortgage Note Trustee copies of all documents executed pursuant to this
Indenture, the Collateral Documents, the Intercreditor Agreement and the Sole
Stockholder Intercreditor Agreement and shall do or cause to be done all such
acts and things as may be necessary or proper, or as may be required by the
provisions of the Collateral Documents, the Intercreditor Agreement and/or the
Sole Stockholder Intercreditor Agreement to assure and confirm to the Mortgage
Note Trustee the security interest in the Note Collateral contemplated hereby,
by the Collateral Documents, the Intercreditor Agreement and the Sole
Stockholder Intercreditor Agreement or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Mortgage Notes and the Mortgage Note Guaranties
secured hereby, according to the intent and purposes herein and therein
expressed. The Issuers shall take, or shall cause its Restricted Subsidiaries to
take, upon request of the Mortgage Note Trustee, any and all actions reasonably
required to cause the Collateral Documents, the Intercreditor Agreement and/or
the Sole Stockholder Intercreditor Agreement to create and maintain, as security
for the obligations of the Issuers hereunder, a valid and enforceable perfected
Lien on the Note Collateral, subject to Permitted Liens.
SECTION 10.02. RECORDING AND OPINIONS.
The Issuers and the Mortgage Note Guarantors will cause the applicable
Collateral Documents, including this Indenture Fee Deed of Trust, the Mortgage
Note Indenture Leasehold Deed of Trust, and the Mortgage Notes Indenture Mall
Parcel Fee Deed of Trust and any financing statements, all amendments or
supplements to each of the foregoing and any other similar security documents as
necessary, to be registered, recorded and filed and/or re-recorded, re-filed and
renewed in such manner and in such place or places, if any, as may be required
by law or reasonably requested by the Mortgage Note Trustee in order fully to
preserve and protect the Lien securing the obligations under the Mortgage Notes
and the Mortgage Note Guaranties pursuant to the Collateral Documents, the
Intercreditor Agreement and the Sole Stockholder Intercreditor Agreement.
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The Issuers, the Mortgage Note Guarantors and any other obligor shall
furnish to the Mortgage Note Trustee:
(a) promptly after the execution and delivery of this Indenture, and
promptly after the execution and delivery of any other instrument of further
assurance or amendment, an Opinion of Counsel in the United States either (i)
stating that, subject to customary assumptions and exclusions, in the opinion of
such counsel, this Indenture, this Indenture Fee Deed of Trust, the Mortgage
Note Indenture Leasehold Deed of Trust, and the Mortgage Notes Indenture Mall
Parcel Fee Deed of Trust and other applicable Collateral Documents and all other
instruments of further assurance or amendment have been properly recorded,
registered and filed to the extent necessary to make effective the Lien intended
to be created by such Collateral Documents and reciting the details of such
action or referring to prior Opinions of Counsel in which such details are given
or (ii) stating that, subject to customary assumptions and exclusions, in the
opinion of such counsel, no such action is necessary to make any other Lien
created under any of the Collateral Documents effective as intended by such
Collateral Documents; and
(b) within 30 days after January 1, in each year beginning with the
year 1998, an Opinion of Counsel, dated as of such date, either (i) stating
that, subject to customary assumptions and exclusions, in the opinion of such
counsel, such action has been taken with respect to the recording, registering,
filing, re-recording, re-registering and re-filing of this Indenture and all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of this
Indenture and the Collateral Documents until the next Opinion of Counsel is
required to be rendered pursuant to this paragraph and reciting the details of
such action or referring to prior Opinions of Counsel in which such details are
given or (ii) stating that, subject to customary assumptions and exclusions, in
the opinion of such counsel, no such action is necessary to maintain such Lien,
until the next Opinion of Counsel is required to be rendered pursuant to this
paragraph.
(c) The Issuers shall furnish to the Mortgage Note Trustee the
certificates or opinions, as the case may be, required by TIA Section 314(d).
Such certificates or opinions will be subject to the terms of TIA Section
314(e).
SECTION 10.03. RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this Section 10.03, Note
Collateral may be released from the Lien and security interest created by this
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 hereunder 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 this 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 that
is contributed, sold, leased, conveyed, transferred or otherwise disposed of to
an Unrestricted Subsidiary, but excluding any such contribution, sale, lease,
conveyance, transfer or other distribution to the Issuers or a Restricted
Subsidiary); provided, such contribution, sale, lease, conveyance, transfer or
other distribution is or will be in accordance with the provisions of this
Indenture, including, without limitation, the requirement that the net proceeds
from such contribution, sale, lease, conveyance, transfer or other distribution
are or will be applied in accordance with this 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 Section 4.11 hereof and that no Default or
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Event of Default has occurred and is continuing or would occur immediately
following such release; (iii) Note Collateral which may be released with the
consent of Holders pursuant to Article 9 hereof; (iv) all Note Collateral
(except as provided in Article 8 hereof and, in particular, the funds in the
trust fund described in Section 8.04 hereof) upon discharge or defeasance of
this Indenture in accordance with Article 8 hereof; (v) all Note Collateral upon
the payment in full of all obligations of the Issuers with respect to the
Mortgage Notes; (vi) Note Collateral of a Guarantor whose Mortgage Note Guaranty
is released pursuant to Section 11.06 hereof; (vii) Note Collateral that is
expressly required to be released by any Collateral Document, the Intercreditor
Agreement or the Sole Stockholder Intercreditor Agreement; (viii) all Mall
Collateral upon the transfer of the Mall Collateral to the Mall Subsidiary in
accordance with the Sale and Contribution Agreement; (ix) the Phase II Land upon
the contribution of the Phase II Land to the Phase II Subsidiary; and (x) after
termination of all of the Sole Stockholder's Obligations under the Completion
Guaranty, the assets securing such Obligations, to the extent any such assets
remain. Upon receipt of such Officers' Certificate the Mortgage Note Trustee
shall execute, deliver or acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Note
Collateral permitted to be released pursuant to this Indenture or the Collateral
Documents. The Trustee is hereby authorized and shall, from time to time upon
request of the Issuers, execute and deliver UCC-3 termination statements and
such other documents evidencing release of (i) Note Collateral available for
release pursuant to clauses (i) through (x) above, and (ii) any Specified FF&E
or deposits or advances used for the purpose of acquiring Specified FF&E;
provided that in the case of each of clause (i) and (ii), such request by the
Issuers is accompanied by an Officers' Certificate of the Issuers certifying
that any assets being so released are not subject to Liens in favor of the
lenders under the Bank Credit Facility.
(b) Except pursuant to Section 10.03(a), no Note Collateral shall be
released from the Lien and security interest created by the Collateral Documents
pursuant to the provisions of the Collateral Documents unless there shall have
been delivered to the Mortgage Note Trustee the certificate required by this
Section 10.03.
(c) The Mortgage Note Trustee may release Note Collateral from the Lien
and security interest created by this Indenture and the Collateral Documents
upon the sale or disposition of Note Collateral pursuant to the Mortgage Note
Trustee's powers, rights and duties with respect to remedies provided under any
of the Collateral Documents.
(d) The release of any Note Collateral from the terms of this Indenture
and the Collateral Documents shall not be deemed to impair the security under
this Indenture in contravention of the provisions hereof if and to the extent
the Note Collateral is released pursuant to the terms hereof. To the extent
applicable, the Issuers shall cause TIA ss. 313(b), relating to reports, and TIA
ss. 314(d), relating to the release of property or securities from the Lien and
security interest of the Collateral Documents and relating to the substitution
therefor of any property or securities to be subjected to the Lien and security
interest of the Collateral Documents to be complied with. Any certificate or
opinion required by TIA ss. 314(d) may be made by an Officer of the Issuers
except in cases where TIA ss. 314(d) requires that such certificate or opinion
be made by an independent Person, which Person shall be an independent engineer,
appraiser or other expert selected or approved by the Mortgage Note Trustee in
the exercise of reasonable care.
SECTION 10.04. PROTECTION OF THE TRUST ESTATE.
Subject to the terms of the Intercreditor Agreement and the Collateral
Documents, upon prior written notice to the Issuers and the Mortgage Note
Guarantors, the Mortgage Note Trustee shall have the power (i) to institute and
maintain such suits and proceedings as it may deem expedient, to prevent
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any impairment of the Note Collateral under any of the Collateral Documents and
in the profits, rents, revenues and other income arising therefrom, including
the power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair any Note Collateral or be prejudicial to the interests of the Holders of
Mortgage Notes or the Mortgage Note Trustee, to the extent permitted thereunder;
and (ii) to enforce the obligations of the Issuers, the Mortgage Note Guarantors
or any Restricted Subsidiary under this Indenture or the Collateral Documents.
Upon receipt of notice that a Restricted Subsidiary or a Guarantor is not in
compliance with any of the requirements of the Mortgage Note Deed of Trust, the
Mortgage Note Trustee may, but shall have no obligation to purchase, at the
Issuers' expense, such insurance coverage necessary to comply with the
appropriate section of the mortgage.
SECTION 10.05. CERTIFICATES OF THE ISSUERS.
The Issuers shall furnish to the Mortgage Note Trustee, prior to each
proposed release of Note Collateral pursuant to the Collateral Documents (i) all
documents required by TIA ss.314(d) and (ii) an Opinion of Counsel in the United
States, which may be rendered by internal counsel to the Issuers, to the effect
that, subject to customary assumptions and exclusions, such accompanying
documents constitute all documents required by TIA ss.314(d). The Mortgage Note
Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as
conclusive evidence of compliance with the foregoing provisions the appropriate
statements contained in such documents and such Opinion of Counsel.
SECTION 10.06. CERTIFICATES OF THE MORTGAGE NOTE TRUSTEE.
In the event that the Issuers wish to release Note Collateral in
accordance with the Collateral Documents and have delivered the certificates and
documents required by the Collateral Documents and Sections 10.03 and 10.04
hereof, the Mortgage Note Trustee shall determine whether it has received all
documentation required by TIA ss.314(d) in connection with such release and,
based on such determination and the Opinion of Counsel delivered pursuant to
Section 10.05(ii), shall deliver a certificate to the Mortgage Note Trustee
setting forth such determination.
SECTION 10.07. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE MORTGAGE NOTE
TRUSTEE UNDER THE COLLATERAL DOCUMENTS.
Subject to the provisions of Section 7.01, 7.02 and 7.12 hereof and the
Intercreditor Agreement, the Mortgage Note Trustee may, in its sole discretion
and without the consent of the Holders of Mortgage Notes, on behalf of the
Holders of Mortgage Notes, take all actions it deems necessary or appropriate in
order to (a) enforce any of the terms of the Collateral Documents, the
Intercreditor Agreement, the Sole Stockholder Intercreditor Agreement and (b)
collect and receive any and all amounts payable in respect of the Obligations of
the Issuers hereunder, including but not limited to the appointment and approval
of collateral agents, any actions of consents required to be taken under the
Intercreditor Agreement, the Sole Stockholder Intercreditor Agreement or the
Disbursement Agreement and the appointment and approval of an insurance trustee.
The Mortgage Note Trustee shall have power to institute and maintain such suits
and proceedings as it may deem expedient to prevent any impairment of the Note
Collateral by any acts that may be unlawful or in violation of the Collateral
Documents or this Indenture, and such suits and proceedings as the Mortgage Note
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders of Mortgage Notes in the Note Collateral (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or other governmental enactment, rule or
order that may be
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unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders of Mortgage Notes or of the Mortgage
Note Trustee).
SECTION 10.08. AUTHORIZATION OF RECEIPT OF FUNDS BY THE MORTGAGE NOTE TRUSTEE
UNDER THE COLLATERAL DOCUMENTS.
Upon an Event of Default and so long as such Event of Default
continues, the Mortgage Note Trustee may, subject to the terms of the
Intercreditor Agreement, exercise in respect of the Note Collateral, in addition
to the other rights and remedies provided for herein, in the Note Collateral
Documents or otherwise available to it, all of the rights and remedies of a
secured party under the Uniform Commercial Code or other applicable law, and the
Mortgage Note Trustee may also upon obtaining possession of the Note Collateral
as set forth herein, without notice to the Issuers, except as specified below,
sell the Note Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Mortgage Note
Trustee's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Mortgage Note Trustee may deem commercially
reasonable. The Issuers acknowledge and agree that any such private sale may
result in prices and other terms less favorable to the seller than if such a
sale were a public sale. The Issuers agree that, to the extent notice of sale
shall be required by law, at least 10 days' notice to the Issuers of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Mortgage Note Trustee shall
not be obligated to make any sale regardless of notice of sale having been
given. The Mortgage Note Trustee may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
Any cash that is Note Collateral held by the Mortgage Note Trustee and
all cash proceeds received by the Mortgage Note Trustee in respect of any sale
of, collection from, or other realization upon all or any part of the Note
Collateral shall be applied (unless otherwise provided for in the Note
Collateral Documents and after payment of any and all amounts payable to the
Mortgage Note Trustee pursuant to the Indenture), as the Mortgage Note Trustee
shall determine or as the Holders of the Mortgage Notes shall direct pursuant to
Section 6.05 hereof, (i) against the obligations for the ratable benefit of the
Holders of the Mortgage Notes, (ii) to maintain, repair or otherwise protect the
Note Collateral or (iii) to take such other action to protect the other rights
of the Holders of the Mortgage Notes or to take any other appropriate action or
remedy for the benefit of the Holders of the Mortgage Notes. Any surplus of such
cash or cash proceeds held by the Mortgage Note Trustee and remaining after
payment in full of all the obligations shall be paid over to the Issuers or to
whomsoever may be lawfully entitled to receive such surplus or as a court of
competent jurisdiction may direct.
SECTION 10.09. TERMINATION OF SECURITY INTEREST.
Upon the payment in full of all Obligations of the Issuers under this
Indenture and the Mortgage Notes, the Mortgage Note Trustee shall (at the
request of the Issuers accompanied by (i) an Officers' Certificate of the
Issuers to the Mortgage Note Trustee stating that such Obligations have been
paid in full, and (ii) instructions from the Issuers to the Mortgage Note
Trustee to release the Liens pursuant to this Indenture and the Collateral
Documents) release the Liens securing the Note Collateral.
SECTION 10.10. COOPERATION OF MORTGAGE NOTE TRUSTEE.
In the event the Issuers or any Mortgage Note Guarantor pledge or grant
a security interest in additional Note Collateral, the Mortgage Note Trustee
shall cooperate with the Issuers or such Mortgage
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Note Guarantor in reasonably and promptly agreeing to the form of, and executing
as required, any instruments or documents necessary to make effective the
security interest in the Note Collateral to be so substituted or pledged. To the
extent practicable, the terms of any security agreement or other instrument or
document necessitated by any such substitution or pledge shall be comparable to
the provisions of the existing Collateral Documents. Subject to, and in
accordance with the requirements of this Article 10 and the terms of the
Collateral Documents, in the event that the Issuers or any Mortgage Note
Guarantor engages in any transaction pursuant to Section 10.03, the Mortgage
Note Trustee shall cooperate with the Issuers or such Mortgage Note Guarantor in
order to facilitate such transaction in accordance with any reasonable time
schedule proposed by the Issuers, including by delivering and releasing the Note
Collateral in a prompt and reasonable manner.
SECTION 10.11. COLLATERAL AGENT.
The Mortgage Note Trustee may, from time to time, appoint one or more
Collateral Agents hereunder. Each of such Collateral Agents may be delegated any
one or more of the duties or rights of the Mortgage Note Trustee hereunder or
under the Collateral Documents or Intercreditor Agreement or which are specified
in any Collateral Documents or Intercreditor Agreement, including without
limitation, the right to hold any Note Collateral in the name of, registered to,
or in the physical possession of, such Collateral Agent, for the rateable
benefit of the Holders of the Mortgage Notes. Each such Collateral Agent shall
have such rights and duties as may be specified in an agreement between the
Mortgage Note Trustee and such Collateral Agent. The Mortgage Note Trustee and
any Collateral Agent shall be authorized hereunder to give any acknowledgment
reasonably requested by any party under the Intercreditor Agreement to confirm
the rights and obligations of the parties under the Intercreditor Agreement.
ARTICLE 11
MORTGAGE NOTE GUARANTIES
SECTION 11.01. MORTGAGE NOTE GUARANTIES.
The Mortgage Notes are hereby unconditionally guaranteed (i) on a
senior, secured basis by the Secured Mortgage Guarantors and (ii) on a
subordinated, unsecured basis by each of the Subordinated Mortgage Note
Guarantors. The Mortgage Note Guarantors hereby guarantee to each Holder of a
Mortgage Note authenticated and delivered by the Mortgage Note Trustee
irrespective of the validity or enforceability of this Indenture, the Mortgage
Notes or the obligations of the Issuers under this Indenture, the Mortgage Notes
or the Collateral Documents, that: (i) the principal of, premium and Liquidated
Damages, if any, and interest on the Mortgage Notes will be paid in full when
due, whether at the maturity or interest payment or mandatory redemption date,
by acceleration, call for redemption or otherwise, and interest on the overdue
principal and interest, if any, of the Mortgage Notes and all other obligations
of the Issuers to the Holders or the Mortgage Note Trustee under this Indenture
or the Mortgage Notes will be promptly paid in full or performed, all in
accordance with the terms of this Indenture and the Mortgage Notes; and (ii) in
case of any extension of time of payment or renewal of any Mortgage Notes or any
of such other obligations, they will be paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration, prepayment, declaration, demand or otherwise. Failing
payment when due of any amount so guaranteed for whatever reason, each Mortgage
Note Guarantor will be obligated to pay the same whether or not such failure to
pay has become an Event of Default which could cause acceleration pursuant to
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Section 6.02 hereof. Each Mortgage Note Guarantor agrees that this is a
guarantee of payment not a guarantee of collection.
Each Mortgage Note Guarantor hereby agrees that its obligations with
regard to this Mortgage Note Guaranty shall be joint and several, unconditional,
irrespective of the validity or enforceability of the Mortgage Notes or the
obligations of the Issuers under this Indenture, the absence of any action to
enforce the same, the recovery of any judgment against the Issuers or any other
obligor with respect to this Indenture, the Mortgage Notes or the Obligations of
the Issuers under this Indenture or the Mortgage Notes, any action to enforce
the same or any other circumstances (other than complete performance) which
might otherwise constitute a legal or equitable discharge or defense of a
Mortgage Note Guarantor. Each Mortgage Note Guarantor further, to the extent
permitted by law, waives and relinquishes all claims, rights and remedies
accorded by applicable law to guarantors and agrees not to assert or take
advantage of any such claims, rights or remedies, including but not limited to:
(a) any right to require any of the Mortgage Note Trustee, the Holders or the
Issuers (each a "Benefitted Party"), as a condition of payment or performance by
such Mortgage Note Guarantor, to (i) proceed against the Issuers, any other
guarantor (including any other Mortgage Note Guarantor) of the Obligations under
the Mortgage Note Guaranties or any other Person, (ii) proceed against or
exhaust any security held from the Issuers, any such other guarantor or any
other Person, (iii) proceed against or have resort to any balance of any deposit
account or credit on the books of any Benefitted Party in favor of the Issuers
or any other Person, or (iv) pursue any other remedy in the power of any
Benefitted Party whatsoever; (b) any defense arising by reason of the
incapacity, lack of authority or any disability or other defense of the Issuers
including any defense based on or arising out of the lack of validity or the
unenforceability of the Obligations under the Mortgage Note Guaranties or any
agreement or instrument relating thereto or by reason of the cessation of the
liability of the Issuers from any cause other than payment in full of the
Obligations under the Mortgage Note Guaranties; (c) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (d) any defense based upon any Benefitted Party's errors or omissions
in the administration of the Obligations under the Mortgage Note Guaranties,
except behavior which amounts to bad faith; (e) (i) any principles or provisions
of law, statutory or otherwise, which are or might be in conflict with the terms
of the Mortgage Note Guaranties and any legal or equitable discharge of such
Mortgage Note Guarantor's obligations hereunder, (ii) the benefit of any statute
of limitations affecting such Mortgage Note Guarantor's liability hereunder or
the enforcement hereof, (iii) any rights to set-offs, recoupments and
counterclaims, and (iv) promptness, diligence and any requirement that any
Benefitted Party protect, secure, perfect or insure any security interest or
lien or any property subject thereto; (f) notices, demands, presentments,
protests, notices of protest, notices of dishonor and notices of any action or
inaction, including acceptance of the Mortgage Note Guaranties, notices of
default under the Mortgage Notes or any agreement or instrument related thereto,
notices of any renewal, extension or modification of the Obligations under the
Mortgage Note Guaranties or any agreement related thereto, and notices of any
extension of credit to the Issuers and any right to consent to any thereof; (g)
to the extent permitted under Section 40.495 of the Nevada Revised Statutes, the
benefits of the "One Action" rule under Section 40.430 of the Nevada Revised
Statutes and (h) any defenses or benefits that may be derived from or afforded
by law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of the Mortgage Note Guaranties. Each Mortgage
Note Guarantor hereby covenants that its Mortgage Note Guaranty will not be
discharged except by complete performance of the obligations contained in its
Mortgage Note Guaranty and this Indenture.
If any Holder or the Mortgage Note Trustee is required by any court or
otherwise to return to either the Issuers or any Mortgage Note Guarantor, or any
custodian, trustee, or similar official acting in relation to either the Issuers
or such Mortgage Note Guarantor, any amount paid by the Issuers or such Mortgage
Note Guarantor to the Mortgage Note Trustee or such Holder, the applicable
Mortgage Note
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Guaranty, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Mortgage Note Guarantor agrees that it will not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
Each Mortgage Note Guarantor further agrees that, as between such
Mortgage Note Guarantor, on the one hand, and the Holders and the Mortgage Note
Trustee, on the other hand, (i) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Section 6.02 hereof for the purposes of
this Mortgage Note Guaranty, notwithstanding any stay, injunction or other
prohibition preventing such acceleration as to the Issuers or any other obligor
on the Mortgage Notes of the obligations guaranteed hereby, and (ii) in the
event of any declaration of acceleration of those obligations as provided in
Section 6.02 hereof, those obligations (whether or not due and payable) will
forthwith become due and payable by such Mortgage Note Guarantor for the purpose
of this Mortgage Note Guaranty.
SECTION 11.02. ADDITIONAL MORTGAGE NOTE GUARANTIES.
If (a) 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 Section 4.07 hereof), 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
Unrestricted Subsidiary pursuant to the terms of this Indenture or is designated
by the Board of Directors of the Company to be a Restricted Subsidiary pursuant
to the terms of this 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,
in the case of any Secured Mortgage Note Guarantor, supplemental Collateral
Documents in form reasonably satisfactory to the Mortgage Note Trustee pursuant
to which such Restricted Subsidiary shall, in the case of a Secured Mortgage
Note Guarantor, unconditionally guarantee, on a secured basis, all of the
Issuers' obligations under the Mortgage Notes, this Indenture and the Collateral
Documents on the terms set forth in this 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. Any Mortgage Note Guaranty executed and delivered in accordance with
this Section 11.02, to the extent given by a Secured Mortgage Note Guarantor,
shall be secured by a Lien or charge on all Note Collateral of such Secured
Mortgage Note Guarantor. Any such Mortgage Note Guaranty shall be released if
the Issuers or its Restricted Subsidiaries cease to own any Equity Interests in
such Restricted Subsidiary or if such Restricted Subsidiary becomes an
Unrestricted Subsidiary in accordance with the terms of this Indenture.
SECTION 11.03. LIMITATION OF MORTGAGE NOTE GUARANTOR'S LIABILITY.
Each Mortgage Note Guarantor and by its acceptance hereof, each
beneficiary hereof, hereby confirm that it is its intention that the Mortgage
Note Guaranty by such Mortgage Note Guarantor not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law to the extent applicable to any Mortgage Note Guaranties.
To effectuate the foregoing intention, each such
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person hereby irrevocably agrees that the obligation of such Mortgage Note
Guarantor under its Mortgage Note Guaranty under this Article 11 shall be
limited to the maximum amount as will, after giving effect to such maximum
amount and all other (contingent or otherwise) liabilities of such Mortgage Note
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Mortgage Note Guarantor in respect of the obligations of
such other Mortgage Note Guarantor under this Article 11, result in the
obligations of such Mortgage Note Guarantor in respect of such maximum amount
not constituting a fraudulent conveyance. Each beneficiary under the Mortgage
Note Guaranties, by accepting the benefits hereof, confirms its intention that,
in the event of a bankruptcy, reorganization or other similar proceeding of the
Issuers or any Mortgage Note Guarantor in which concurrent claims are made upon
such Mortgage Note Guarantor hereunder, to the extent such claims will not be
fully satisfied, each such claimant with a valid claim against the Issuers shall
be entitled to a ratable share of all payments by such Mortgage Note Guarantor
in respect of such concurrent claims.
SECTION 11.04. MORTGAGE NOTE GUARANTORS MAY CONSOLIDATE, ETC.,
ON CERTAIN TERMS.
(a) 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 it is affiliated with such Mortgage Note
Guarantor unless (i) subject to the provisions of the following paragraph
and Section 11.05, 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 a form reasonably
satisfactory to the Mortgage Note Trustee pursuant to which such Person
shall unconditionally guarantee, on senior secured basis, all of such
Mortgage Note Guarantor's obligations under such Mortgage Note Guarantor's
Mortgage Note Guaranty, this Indenture and the Collateral Documents on the
terms set forth in this Indenture and the Collateral Documents on the terms
set forth in the 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; (iv) such Mortgage Note Guarantor, or any Person
formed by or surviving any such consolidation or merger, (A) shall have
Consolidated Net Worth (immediately after giving effect to such
transaction), equal to or greater than the Consolidated Net Worth of such
Mortgage Note Guarantor immediately preceding the transaction and (B) will
be permitted by virtue of the Issuers' 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 set forth in Section 4.09 hereof; and (v) such
transactions would not require any Holder of Mortgage Notes (other than any
Person acquiring the Company or Venetian or their assets or any Affiliate
thereof) to obtain a gaming license or be qualified under the laws 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. In
case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Mortgage Note Trustee and reasonably
satisfactory in form to the Mortgage Note Trustee, of the Mortgage Note
Guaranty in this Indenture and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by the Mortgage Note Guarantor, such successor corporation shall
succeed to and be substituted for the Mortgage Note Guarantor with the same
effect as if it had been named herein as a Mortgage Note Guarantor.
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Notwithstanding the foregoing, (A) a Mortgage Note Guarantor may
consolidate with or merge with or into, or sell or otherwise dispose of all or
substantially all of its assets to, the Issuers, provided, that the surviving
corporation (if other than the Issuers) shall expressly assume by supplemental
indenture complying with the requirements of this Indenture, the due and
punctual payment of the principal of, premium and Liquidated Damages, if any,
and interest on all of the Mortgage Notes, and the due and punctual performance
and observance of all the covenants and conditions of this Indenture to be
performed by the Issuers and (B) a Mortgage Note Guarantor may consolidate with
or merge with or into, or sell or otherwise dispose of all or substantially all
of its assets to, any other Mortgage Note Guarantor.
SECTION 11.05. RELEASES OF MORTGAGE NOTE GUARANTIES.
Upon (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
pursuant to the terms of this Indenture or (iii) a sale or other disposition of
all of the capital stock of any Mortgage Note Guarantor, 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 becomes an Unrestricted Subsidiary
pursuant to the terms of this 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 its 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 Section 4.10 hereof and the Collateral Documents.
SECTION 11.06. "MORTGAGE NOTE TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Mortgage Note
Trustee shall have been appointed by the Issuers and be then acting hereunder,
the term "Mortgage Note Trustee" as used in this Article 11 shall in such case
(unless the context shall otherwise require) be construed as extending to and
including such Paying Agent within its meaning as fully and for all intents and
purposes as if such Paying Agent were named in this Article 11 in place of the
Mortgage Note Trustee.
SECTION 11.07. SUBORDINATION OF SUBORDINATED MORTGAGE NOTE GUARANTORS.
(a) The Subordinated Mortgage Note Guarantors agree, and each Holder of
Mortgage Notes agrees, that the Indebtedness represented by the Subordinated
Mortgage Note Guaranties is subordinated in right of payment, to the extent set
forth in this Section 11.07 to the prior payment in full of all Senior Debt (as
defined below) of the Subordinated Mortgage Note Guarantors, whether outstanding
on the date hereof or thereafter incurred. Such subordination is for the benefit
of and enforceable by the holders of such Senior Debt of the Subordinated
Mortgage Note Guarantors. Nothing contained in this Section 11.07 shall be
construed as any agreement or understanding by the Issuer or by any secured
Mortgage Note Guarantor that any Indebtedness represented by the Mortgage Notes
or any secured Mortgage Notes Guaranty is subordinated to the prior payment of
any other Indebtedness and it is expressly understood and agreed that the
Obligations under the Mortgage Notes and the Secured Mortgage Note Guaranty are
not in any manner subordinated (other than effectively by priority of Lien on
the Note Collateral) to any other Indebtedness.
(b) 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) with respect to Mall
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Intermediate Holdings only, 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
this 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 of Subordinated Mortgage Note Guarantors 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 Subordinated Mortgage Note Guaranties are subordinated to Senior Debt of the
Subordinated Mortgage Guarantors pursuant to this Indenture.
(c) 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 will be entitled to
receive payment in full in cash 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, whether or not
allowed) before the Holders of Subordinated Mortgage Note Guaranties will be
entitled to receive any payment with respect to the Subordinated Mortgage Note
Guaranties from any asset of a Subordinated Mortgage Note Guarantor, 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 from any assets of a
Subordinated Mortgage Note Guarantor 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 by a trust established pursuant to Article 8 hereof).
(d) The Subordinated Mortgage Note Guarantors shall not make any
payment upon or in respect of the Subordinated Mortgage Note Guaranties (except
in Permitted Junior Securities or from a trust established pursuant to Article 8
hereof) 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 below in this
Section 11.07(d), 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
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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 Payment Blockage Notice
unless such default shall have been waived for a period of not less than 180
days.
(e) The Subordinated Mortgage Note Guarantors shall 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.
(f) If payment of the Subordinated Mortgage Note Guaranties is
accelerated because of an Event of Default, the Subordinated Mortgage Note
Guarantors shall promptly notify holders of Senior Debt of the Subordinated
Mortgage Note Guarantors of the acceleration.
(g) In the event that the Mortgage Note Trustee or any Holder of
Subordinated Mortgage Note Guaranties receives any payment of any Obligations
with respect to the Subordinated Mortgage Note Guaranties at a time when the
Mortgage Note Trustee or such Holder, as applicable, has actual knowledge that
such payment is prohibited by this Section 11.07 hereof, such payment shall be
held by the Mortgage Note Trustee or such Holder, in trust for the benefit of,
and shall be paid forthwith over and delivered, upon written request, to, the
holders of Senior Debt of the Subordinated Mortgage Note Guarantors as their
interests may appear or their representative under the indenture or other
agreement (if any) pursuant to which Senior Debt of the Subordinated Mortgage
Note Guarantors may have been issued, as their respective interests may appear,
for application to the payment of all Obligations with respect to Senior Debt of
the Subordinated Mortgage Note Guarantors remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt of the Subordinated Mortgage Note Guarantors.
(h) With respect to the holders of Senior Debt of the Subordinated
Mortgage Note Guarantors, the Mortgage Note Trustee undertakes to perform only
such obligations on the part of the Mortgage Note Trustee as are specifically
set forth in this Section 11.07, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Mortgage Note
Indenture against the Mortgage Note Trustee. The Mortgage Note Trustee shall not
be deemed to owe any fiduciary duty to the holders of Senior Debt of the
Subordinated Mortgage Note Guarantors, and shall not be liable to any such
holders if the Mortgage Note Trustee shall pay over or distribute to or on
behalf of Holders or the Subordinated Mortgage Note Guarantors or any other
Person money or assets to which any holders of Senior Debt of the Subordinated
Mortgage Note Guarantors shall be entitled by virtue of this Section 11.07,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Mortgage Note Trustee.
(i) The Subordinated Mortgage Note Guarantors shall promptly notify the
Mortgage Note Trustee and the Paying Agent of any facts known to the
Subordinated Mortgage Note Guarantors that would cause a payment of any
Obligations with respect to the Subordinated Mortgage Note Guaranties to violate
this Section 11.07, but failure to give such notice shall not affect the
subordination of the Subordinated Mortgage Note Guaranties to the Senior Debt of
the Subordinated Mortgage Note Guarantors as provided in this Section 11.07.
(j) After all Senior Debt of the Subordinated Mortgage Note Guarantors
is paid in full and until the Subordinated Mortgage Note Guaranties are paid in
full, Holders of Subordinated Mortgage Note Guaranties shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the
Subordinated Mortgage Note Guaranties) to the rights of holders of Senior Debt
of the Subordinated
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Mortgage Note Guarantors to receive distributions applicable to Senior Debt of
the Subordinated Mortgage Note Guarantors to the extent that distributions
otherwise payable to the Holders of Subordinated Mortgage Note Guaranties have
been applied to the payment of Senior Debt of the Subordinated Mortgage Note
Guarantors. A distribution made under this Section 11.07 to holders of Senior
Debt of the Subordinated Mortgage Note Guarantors that otherwise would have been
made to Holders of Subordinated Mortgage Note Guaranties is not, as between the
Subordinated Mortgage Note Guarantors and Holders, a payment by the Subordinated
Mortgage Note Guarantors on the Subordinated Mortgage Note Guaranties.
(k) This Section 11.07 defines the relative rights of Holders of Notes
and holders of Senior Debt of the Subordinated Mortgage Note Guarantors. Nothing
in this Indenture shall:
(1) impair, as between the Subordinated Mortgage Note Guarantors and
Holders of Subordinated Mortgage Note Guaranties, the obligation of the
Subordinated Mortgage Note Guarantors, which is absolute and unconditional,
to pay principal of and interest on the Subordinated Mortgage Note
Guaranties in accordance with their terms;
(2) affect the relative rights of Holders of Subordinated Mortgage Note
Guaranties and creditors of the Subordinated Mortgage Note Guarantors other
than their rights in relation to holders of Senior Debt of the Subordinated
Mortgage Note Guarantors; or
(3) prevent the Mortgage Note Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt of the
Subordinated Mortgage Note Guarantors to receive distributions and payments
otherwise payable to Holders of Subordinated Mortgage Note Guaranties.
If the Subordinated Mortgage Note Guarantors fails because of this
Section 11.07 to pay principal of or interest on a Note on the due date, the
failure is still a Default or Event of Default.
No right of any holder of Senior Debt of the Subordinated Mortgage Note
Guarantors to enforce the subordination of the Indebtedness evidenced by the
Subordinated Mortgage Note Guaranties shall be impaired by any act or failure to
act by the Subordinated Mortgage Note Guarantors or any Holder or by the failure
of the Subordinated Mortgage Note Guarantors or any Holder to comply with this
Indenture.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of the Subordinated Mortgage Note Guarantors, the distribution may
be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Subordinated Mortgage
Note Guarantors referred to in this Section 11.07, the Mortgage Note Trustee and
the Holders of Subordinated Mortgage Note Guaranties shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Mortgage Note Trustee or to the
Holders of Subordinated Mortgage Note Guaranties for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt of the Subordinated Mortgage Note Guarantors and other Indebtedness
of the Subordinated Mortgage Note Guarantors, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 11.07.
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(l) Notwithstanding the provisions of this Section 11.07 or any other
provision of this Indenture, the Mortgage Note Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making of any
payment or distribution by the Mortgage Note Trustee, and the Mortgage Note
Trustee and the Paying Agent may continue to make payments on the Subordinated
Mortgage Note Guaranties, unless the Mortgage Note Trustee shall have received
at its Corporate Trust Office at least five Business Days prior to the date of
such payment written notice of facts that would cause the payment of any
Obligations with respect to the Subordinated Mortgage Note Guaranties to violate
this Section 11.07. Only the Subordinated Mortgage Note Guarantors or the
Issuers may give the notice. Nothing in this Section 11.07 shall impair the
claims of, or payments to, the Mortgage Note Trustee under or pursuant to
Section 7.07 hereof.
The Mortgage Note Trustee in its individual or any other capacity may
hold Senior Debt of the Subordinated Mortgage Note Guarantors with the same
rights it would have if it were not Mortgage Note Trustee. Any Agent may do the
same with like rights.
(m) Each Holder of Subordinated Mortgage Note Guaranties, by the
Holder's acceptance thereof, authorizes and directs the Mortgage Note Trustee on
such Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Section 11.07, and appoints the
Mortgage Note Trustee to act as such Holder's attorney-in-fact for any and all
such purposes. If the Mortgage Note Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Bank Agent is hereby authorized to file an appropriate claim for
and on behalf of the Holders of the Subordinated Mortgage Note Guaranties.
(n) The provisions of this Section 11.07 shall not be amended or
modified without the written consent of the holders of all Senior Debt of the
Subordinated Mortgage Note Guarantors.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Issuers, any Mortgage Note Guarantor
or the Mortgage Note Trustee to the others is duly given if in writing and
delivered in Person or mailed by first class mail (registered or certified,
return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address:
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If to the Issuers or the Mortgage Note Guarantors:
3335 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telecopier No.: (702) 733-5499
Attention: General Counsel
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: James Purcell, Esq.
If to the Mortgage Note Trustee:
First Trust National Association
180 East 5th Street
St. Paul, Minnesota 55101
Telecopier No.: (612) 244-0711
Attention: Corporate Trust Department
If to the Mortgage Note Trustee for purposes of Section 4.02 hereof:
First Trust New York
100 Wall Street, 20th Floor
New York, New York 10005
Attention: Corporate Trust Department
The Issuers, the Mortgage Note Guarantors or the Mortgage Note Trustee,
by notice to the others may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
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If the Issuers or a Mortgage Note Guarantor mails a notice or
communication to Holders, it shall mail a copy to the Mortgage Note Trustee and
each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF MORTGAGE NOTES WITH OTHER
HOLDERS OF MORTGAGE NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Mortgage Notes. The
Issuers, the Mortgage Note Guarantors, the Mortgage Note Trustee and the
Registrar shall have the protection of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers or the Mortgage Note
Guarantors to the Mortgage Note Trustee to take any action under this Indenture,
the Issuers or the Mortgage Note Guarantors shall furnish to the Mortgage Note
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Mortgage Note Trustee (which shall include the
statements set forth in Section 12.05 hereof) stating that, in the opinion
of the signers, all conditions precedent and covenants, if any, provided
for in this Indenture relating to the proposed action have been satisfied;
and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Mortgage Note Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, subject to customary assumptions and
exclusions, in the opinion of such counsel, all such conditions precedent
and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY MORTGAGE NOTE TRUSTEE AND AGENTS.
The Mortgage Note Trustee may make reasonable rules for action by or at
a meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
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SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.
No officer, employee, incorporator or stockholder of the Issuers or the
Mortgage Note Guarantors, as such, shall have any liability for any obligations
of the Issuers or the Mortgage Note Guarantors under the Mortgage Notes, any
Mortgage Note Guaranties, this Indenture or 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 by accepting a Mortgage Note and the
Mortgage Note Guaranties waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Mortgage Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE MORTGAGE NOTES AND THE MORTGAGE NOTE GUARANTIES,
EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF NEVADA LAW, INCLUDING
THE GAMING CONTROL ACT AND THE REGULATIONS PROMULGATED THEREUNDER.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Issuers or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Issuers and the Mortgage Note Guarantors in this
Indenture, the Mortgage Notes and the Mortgage Note Guaranties, as applicable,
shall bind their respective successors. All agreements of the Mortgage Note
Trustee in this Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, in the Mortgage Notes or in
the Mortgage Note Guaranties shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
109
<PAGE>
SIGNATURES
Dated as of November 14, 1997 LAS VEGAS SANDS, INC.
By: /s/ W. P. Weidner
--------------------------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.
--------------------------------------
As Managing Member
By: /s/ W. P. Weidner
--------------------------------------
Name: William P. Weidner
Title: President
MALL INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC
--------------------------------------
As Sole Member
By: Las Vegas Sands, Inc.
---------------------------------
As Managing Member
By: /s/ W. P. Weidner
----------------------------------
Name: William P. Weidner
Title: President
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC
--------------------------------------
As Sole Member
By: Las Vegas Sands, Inc.
---------------------------------
As Managing Member
By: /s/ W. P. Weidner
----------------------------------
Name: William P. Weidner
Title: President
<PAGE>
LIDO INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC
-------------------------------------
As Managing Member
By: Las Vegas Sands, Inc.
---------------------------------
As Managing Member
By: /s/ W. P. Weidner
----------------------------------
Name: William P. Weidner
Title: President
<PAGE>
Dated as of November 14, 1997 FIRST TRUST NATIONAL ASSOCIATION
as Mortgage Note Trustee
By: /s/ R. Prokosch
--------------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
EXECUTION COPY
================================================================================
VENETIAN CASINO RESORT, LLC
LAS VEGAS SANDS, INC.
as Issuers
MALL INTERMEDIATE HOLDING COMPANY, LLC
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
LIDO INTERMEDIATE HOLDING COMPANY, LLC
as Senior Subordinated Note Guarantors
$97,500,000
14 1/4% Senior Subordinated Notes due 2005
-----------------
INDENTURE
Dated as of November 14, 1997
-----------------
-----------------
FIRST UNION NATIONAL BANK
as Senior Subordinated Note Trustee
-----------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.............................................. 1
Section 1.02. Other Definitions........................................ 28
Section 1.03. Incorporation by Reference of Trust Indenture Act........ 29
Section 1.04. Rules of Construction.................................... 30
ARTICLE 2
THE SENIOR SUBORDINATED NOTES
Section 2.01. Form and Dating.......................................... 30
Section 2.02. Execution and Authentication............................. 31
Section 2.03. Registrar and Paying Agent............................... 32
Section 2.04. Paying Agent to Hold Money in Trust...................... 32
Section 2.05. Holder Lists............................................. 33
Section 2.06. Transfer and Exchange.................................... 33
Section 2.07. Replacement Senior Subordinated Notes.................... 44
Section 2.08. Outstanding Senior Subordinated Notes.................... 44
Section 2.09. Treasury Notes........................................... 45
Section 2.10. Temporary Notes.......................................... 45
Section 2.11. Cancellation............................................. 45
Section 2.12. Defaulted Interest....................................... 45
ARTICLE 3
OFFERS TO PURCHASE OR REDEMPTION
Section 3.01. Notices to Senior Subordinated Note Trustee.............. 46
Section 3.02. Selection of Senior Subordinated Notes to Be Purchased
or Redeemed ............................................ 46
Section 3.03. Notice of Redemption..................................... 47
Section 3.04. Effect of Notice of Redemption........................... 48
Section 3.05. Deposit of Purchase or Redemption Price.................. 48
Section 3.06. Senior Subordinated Notes Purchased or Redeemed in Part.. 48
Section 3.07. Optional Redemption...................................... 48
Section 3.08. Redemption Pursuant to Gaming Law........................ 49
Section 3.09. Mandatory Redemption..................................... 50
Section 3.10. Repurchase Offers........................................ 50
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ARTICLE 4
COVENANTS
Section 4.01. Payment of Senior Subordinated Notes..................... 51
Section 4.02. Maintenance of Office or Agency.......................... 52
Section 4.03. Reports.................................................. 52
Section 4.04. Compliance Certificate................................... 53
Section 4.05. Taxes.................................................... 54
Section 4.06. Stay, Extension and Usury Laws........................... 54
Section 4.07. Restricted Payments...................................... 54
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries............................................ 57
Section 4.09. Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock................................... 58
Section 4.10. Asset Sales.............................................. 61
Section 4.11. Transactions with Affiliates............................. 62
Section 4.12. No Senior Subordinated Debt.............................. 64
Section 4.13. Liens.................................................... 64
Section 4.14. Line of Business......................................... 64
Section 4.15. Corporate Existence...................................... 64
Section 4.16. Offer to Repurchase Upon Change of Control............... 64
Section 4.17. Designation of Unrestricted Subsidiary................... 65
Section 4.18. Designation of Special Subsidiary........................ 65
Section 4.19. Gaming Licenses.......................................... 66
Section 4.20. Construction............................................. 66
Section 4.21. Limitation on Status as Investment Company............... 66
Section 4.22. Senior Subordinated Note Guaranties...................... 67
Section 4.23. Special Subsidiary Restricted Payments................... 67
Section 4.24. Ownership of Unrestricted Subsidiaries and Special
Subsidiaries............................................ 67
Section 4.25. Limitation on Phase II Construction...................... 68
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets................. 68
Section 5.02. Successor Corporation Substituted........................ 69
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default........................................ 69
Section 6.02. Acceleration............................................. 71
Section 6.03. Other Remedies........................................... 72
Section 6.04. Waiver of Past Defaults.................................. 72
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<PAGE>
Section 6.05. Control by Majority...................................... 73
Section 6.06. Limitation on Suits...................................... 73
Section 6.07. Rights of Holders of Senior Subordinated Notes to Receive
Payment................................................. 74
Section 6.08. Collection Suit by Senior Subordinated Note Trustee...... 74
Section 6.09. Senior Subordinated Note Trustee May File Proofs of Claim 74
Section 6.10. Priorities............................................... 75
Section 6.11. Undertaking for Costs.................................... 75
ARTICLE 7
SENIOR SUBORDINATED NOTE TRUSTEE
Section 7.01. Duties of Senior Subordinated Note Trustee............... 75
Section 7.02. Rights of Senior Subordinated Note Trustee............... 76
Section 7.03. Individual Rights of Senior Subordinated Note Trustee.... 78
Section 7.04. Senior Subordinated Note Trustee's Disclaimer............ 78
Section 7.05. Notice of Defaults....................................... 78
Section 7.06. Reports by Senior Subordinated Note Trustee to Holders of
the Senior Subordinated Notes........................... 78
Section 7.07. Compensation and Indemnity............................... 79
Section 7.08. Replacement of Senior Subordinated Note Trustee.......... 80
Section 7.09. Successor Senior Subordinated Note Trustee by
Merger, etc. ........................................... 81
Section 7.10. Eligibility; Disqualification............................ 81
Section 7.11. Preferential Collection of Claims Against Issuers........ 82
Section 7.12. Authorization of Trustee to Take Other Actions........... 82
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. 83
Section 8.02. Legal Defeasance and Discharge........................... 83
Section 8.03. Covenant Defeasance...................................... 83
Section 8.04. Conditions to Legal or Covenant Defeasance............... 84
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions................... 85
Section 8.06. Repayment to the Issuers................................. 86
Section 8.07. Reinstatement............................................ 86
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Senior Subordinated Notes.. 86
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<PAGE>
Section 9.02. With Consent of Holders of Senior Subordinated Notes..... 87
Section 9.03. Compliance with Trust Indenture Act...................... 89
Section 9.04. Revocation and Effect of Consents........................ 89
Section 9.05. Notation on or Exchange of Senior Subordinated Notes..... 89
Section 9.06. Senior Subordinated Note Trustee to Sign Amendments, etc. 89
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate................................. 90
Section 10.02. Certain Definitions...................................... 90
Section 10.03. Liquidation; Dissolution; Bankruptcy..................... 90
Section 10.04. Default on Designated Senior Debt........................ 91
Section 10.05. Acceleration of Securities............................... 92
Section 10.06. When Distribution Must Be Paid Over...................... 92
Section 10.07. Notice by Company or Venetian............................ 92
Section 10.08. Subrogation.............................................. 92
Section 10.09. Relative Rights.......................................... 93
Section 10.10. Subordination May Not Be Impaired by Company or Venetian. 93
Section 10.11. Distribution or Notice to Representative................. 93
Section 10.12. Rights of Senior Subordinated Note Trustee and
Paying Agent............................................ 93
Section 10.13. Authorization to Effect Subordination.................... 94
Section 10.14. Amendments............................................... 94
ARTICLE 11
SENIOR SUBORDINATED NOTE GUARANTIES
Section 11.01. Senior Subordinated Note Guaranties...................... 94
Section 11.02. Additional Senior Subordinated Note Guaranties........... 96
Section 11.03. Limitation of Senior Subordinated Note Guarantor's
Liability............................................... 96
Section 11.04. Senior Subordinated Note Guarantors May Consolidate,
etc., on Certain Terms.................................. 97
Section 11.05. Releases of Senior Subordinated Note Guaranties.......... 98
Section 11.06. "Senior Subordinated Note Trustee" to Include Paying
Agent................................................... 98
Section 11.07. Subordination of Senior Subordinated Note Guaranties..... 98
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls............................. 98
Section 12.02. Notices.................................................. 99
Section 12.03. Communication by Holders of Senior Subordinated Notes
with Other Holders of Senior Subordinated Notes.........100
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<PAGE>
Section 12.04. Certificate and Opinion as to Conditions Precedent.......100
Section 12.05. Statements Required in Certificate or Opinion............100
Section 12.06. Rules by Senior Subordinated Note Trustee and Agents.....100
Section 12.07. No Personal Liability of Directors, Officers, Employees
and Stockholders........................................101
Section 12.08. Governing Law............................................101
Section 12.09. No Adverse Interpretation of Other Agreements............101
Section 12.10. Successors...............................................101
Section 12.11. Severability.............................................101
Section 12.12. Counterpart Originals....................................101
Section 12.13. Table of Contents, Headings, etc.........................101
EXHIBITS
Exhibit A-1. Form of Senior Subordinated Note
Exhibit A-2. Form of Temporary Regulation S Note
Exhibit B Form of Certificate of Transfer
Exhibit C Form of Certificate of Exchange
Exhibit D Form of Certificate from Acquiring Institutional
Accredited Investor Exhibit E Form of Notation of Senior
Subordinated Note Guaranty Exhibit F Form of Supplemental
Indenture to be Delivered by Subsequent Senior
Subordinated Note Guarantors
Exhibit G Intercreditor Agreement
Exhibit H Mall Space Description
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<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1)................................................................7.10
(a)(2)................................................................7.10
(a)(3)................................................................N.A.
(a)(4)................................................................N.A.
(a)(5)................................................................7.10
(b)...................................................................7.10
(c)...................................................................N.A.
311 (a)...................................................................7.11
(b)...................................................................7.11
(c)...................................................................N.A.
312 (a)...................................................................2.05
(b)..................................................................12.03
(c)..................................................................12.03
313 (a)...................................................................7.06
(b)(1) ...............................................................10.03
(b)(2).................................................................7.07
(c.............................................................. 7.06;12.02
(d)....................................................................7.06
314 (a).............................................................4.03;12.05
(b)...................................................................10.02
(c)(1)................................................................11.04
(c)(2)................................................................11.04
(c)(3).................................................................N.A.
(d).......................................................10.03,10.04,10.05
(e).............................................................10.02;12.05
(f)....................................................................N.A.
315 (a)...................................................................7.01
(b)..............................................................7.05,12.02
(c)....................................................................7.01
(d)....................................................................7.01
(e)....................................................................6.11
316 (a)(last sentence)....................................................2.09
(a)(1)(A)..............................................................6.05
(a)(1)(B)..............................................................6.04
(a)(2).................................................................N.A.
(b)....................................................................6.07
(c)....................................................................2.12
317 (a)(1)................................................................6.08
(a)(2).................................................................6.09
(b)....................................................................2.04
318 (a)..................................................................12.01
(b)....................................................................N.A.
(c)...................................................................12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
v
<PAGE>
INDENTURE dated as of November 14, 1997 among Venetian Casino Resort, LLC,
a Nevada limited liability company ("Venetian"), Las Vegas Sands, Inc., a Nevada
corporation (the "Company" and, together with Venetian, the "Issuers"), Mall
Intermediate Holding Company, LLC, a Delaware limited liability company ("Mall
Intermediate Holdings"), Grand Canal Shops Mall Construction, LLC, a Delaware
limited liability company ("Mall Construction Subsidiary"), and Lido
Intermediate Holding Company, LLC, a Delaware limited liability company ("Phase
II Intermediate Holdings" and, together with Mall Intermediate Holdings, Mall
Construction Subsidiary and all future Restricted Subsidiaries (as defined
below), the "Senior Subordinated Note Guarantors") and First Union National
Bank, as trustee (the "Senior Subordinated Note Trustee").
The Issuers, the Senior Subordinated Note Guarantors and the Senior
Subordinated Note Trustee agree as follows for the benefit of each other and for
the equal and ratable benefit of the Holders of the 14 1/4% Senior Subordinated
Notes due 2005 (the "Initial Senior Subordinated Notes") and the 14 1/4% Senior
Subordinated Notes due 2005 (the "Exchange Senior Subordinated Notes" and,
together with the Initial Senior Subordinated Notes, the "Senior Subordinated
Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1 hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Senior Subordinated Notes sold in reliance on Rule 144A.
"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 Senior Subordinated 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,
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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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"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; (ii) the collateral to
secure Indebtedness under each commitment does not include any Note Collateral;
and (iii) to the extent the lenders under the Bank Credit Facility deem it
appropriate in their sole discretion, the lender under such commitment executes
and delivers an intercreditor agreement in accordance with Section 7.12(c)
hereof.
"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 Article 5 hereof or any disposition that constitutes a Change of
Control hereunder, (c) any disposition that is a Restricted Payment or that is a
dividend or distribution permitted under Section 4.07 hereof 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 Section 4.10 hereof; (f) any Lease Transaction or any grant of easement or
Permitted Liens, (g) any dedication permitted pursuant to Section 4.25 of the
Mortgage Note Indenture; (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 under Section 4.09(p) 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.
2
<PAGE>
"Available Funds" shall have the meaning set forth in the Disbursement
Agreement.
"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, dated as of
November 14, 1997, 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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Billboard Lease" means that certain Lease Agreement, dated as of November
14, 1997, 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.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"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
3
<PAGE>
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
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 acquisition thereof) of at
least "A" or "A2" or the equivalent by any Rating Agency.
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"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.
"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, partnership 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.
"Cedel" means Cedel Bank, SA.
"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 Agent" means any person appointed by the Senior Subordinated
Note Trustee as a collateral agent hereunder.
"Collateral Documents" means, collectively, the Disbursement Agreement, the
Completion Guaranty, 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 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 $0.10 per share, of the
Company.
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"Company" means Las Vegas Sands, Inc., a Nevada corporation, or any
successor thereto permitted under this Indenture.
"Completed" or "Completion" has the meaning given to the term "Mall Release
Date" under the Disbursement Agreement.
"Completion Guaranty" means that certain Guaranty, dated as of November 14,
1997, 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 Note Trustee (acting on behalf of the 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.
"Congress Center" means that certain meeting and conference center complex
of approximately 500,000 net leasable square feet more particularly described in
the Plans and Specifications.
"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 Guaranty of Indebtedness of any other Person if such
Guaranty 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
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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 (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 Note 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, dated as of February 15, 1997, between the Company and
Lehrer McGovern Bovis, Inc., a New York corporation, as assigned by the Company
to Venetian and amended by that certain Assignment and Amendment of Construction
Management Agreement, dated as of November 14, 1997, among the Company, Venetian
and Lehrer McGovern Bovis, Inc., as amended, revised or modified from time to
time in accordance with its terms.
"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.
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"Cooperation Agreement" means that certain Amended and Restated Reciprocal
Easement, Use and Operating Agreement, dated as of November 14, 1997, among the
Mall Construction Subsidiary, Venetian and Interface, as amended, revised or
modified from time to time in accordance with its terms.
"Corporate Trust Office of the Senior Subordinated Note Trustee" shall be
at the address of the Senior Subordinated Note Trustee specified in Section
12.02 hereof or such other address as to which the Senior Subordinated Note
Trustee may give notice to the Issuers.
"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.
"Definitive Note" means a certificated Senior Subordinated Note registered
in the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A-1 hereto except that such Senior Subordinated
Note shall not bear the Global Note Legend and shall not have the "Schedule of
Exchanges of Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Senior Subordinated Notes issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Senior Subordinated Notes, and
any and all successors thereto appointed as depositary hereunder and having
become such pursuant to the applicable provision of this Indenture.
"Direct Construction Guaranty" means that certain Guaranty of Performance
and Completion, dated as of November 14, 1997, 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, dated as of November 14, 1997, by
and among the Company, Venetian and Bovis, Inc., as amended, revised or modified
from time to time in accordance with its terms, 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, dated as of November 14, 1997, among the Issuers,
Mall Construction Subsidiary, the Bank Agent, the Mortgage Note 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 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 Sections 4.10 and 4.16.
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"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.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Senior Subordinated Notes" means the Senior Subordinated Notes
issued in the Exchange Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means (i) up to $1.5 million in aggregate principal
amount of Indebtedness (other than Capital Lease Obligations) of the Issuers or
their 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.
9
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"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 this
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
their 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.
"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, in the form of Exhibits A-1 and
A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or
2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"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
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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, revised, modified or restated, as
contemplated by the existing Letter of Intent, dated as of July 2, 1997, between
the parties with respect to the sharing of the common road way 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, dated as of November 14, 1997, between Venetian and the HVAC
Provider, (ii) that certain Ground Lease between Venetian and the HVAC Provider,
(iii) that certain Construction Agency Agreement, dated as of November 14, 1997,
between Venetian and the HVAC Provider and (iv) that certain Energy Services
Agreement, dated as of November 14, 1997, 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.
"Holder" means a Person in whose name a Senior Subordinated Note is
registered.
"IAI Global Note" means the global Note in the form of Exhibit A-1 hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its nominee
that will be issued in a denomination equal to the outstanding principal amount
of the Senior Subordinated Notes sold to Institutional Accredited Investors.
"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
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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.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent Financial Advisor" means an accounting, appraisal or
nvestment banking firm of nationally recognized standing that is, in the udgment
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
Issuers and their Subsidiaries, each Affiliate of the Issuers, and the Sole
Stockholder and its Related Parties.
"Indirect Construction Guaranty" means that certain Guaranty of
Performance dated as of November 14, 1997 executed by The Peninsular and riental
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 dated as of November 14, 1997 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.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"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 Senior Subordinated Note Trustee, acting on behalf
of the holders of the Senior Subordinated Notes, the Mall Construction Lender,
the Senior Subordinated Note Trustee, acting on behalf of the holders of the
Senior Subordinated Notes, and the Bank of Nova Scotia, as Intercreditor Agent,
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.
"Interface Holding" means Interface Group Holding Company, Inc., a Nevada
corporation and wholly owned direct 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
Guaranties), 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
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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.
"Issuers" means the Company and Venetian, and any successor to any of them
permitted under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lenders" means any of the lenders under the Bank Credit Facility, the Mall
Construction Lender and the Holders of the Senior Subordinated Notes.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Issuers and sent to all Holders of the Senior Subordinated Notes for use by
such Holders in connection with the Exchange Offer.
"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).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"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,
dated as of November 14, 1997, between the Issuers, Mall Construction Subsidiary
and Mall Construction Lender, as amended, revised or modified from time to time
in accordance with its terms.
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"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 (as defined in the
Mall Construction Loan Facility) 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.
"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, dated as of November 14, 1997, by and between
Venetian and Mall Construction Subsidiary pursuant to which Mall Construction
Subsidiary will lease 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, dated as
of November 14, 1997, between Forest City Enterprises and the Mall Construction
Subsidiary, as amended, revised or modified.
"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 Exhibit H hereto.
"Mall Subsidiary" means Grand Canal Shops Mall, LLC, a Delaware limited
liability company.
"Mortgage Note Indenture" means that certain Indenture, dated as of
November 14, 1997, by and among the Issuers, the Mortgage Note Guarantors and
the Mortgage Note Trustee, as amended, modified or supplemented from time to
time.
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"Mortgage Notes" means the $425,000,000 million in aggregate principal
amount of the Issuers' 12 1/4% Mortgage Notes due 2005, and any series of
mortgage notes issued in exchange for such Mortgage Notes pursuant to the
Exchange Offer contemplated by the Registration Rights Agreement.
"Mortgage Note Guaranties" means, collectively, the unconditional
guaranties of the Mortgage Notes (i) on a senior, secured basis by the Mall
Construction Subsidiary and any future Restricted Subsidiary of the Issuers and
(ii) on a subordinated, unsecured basis by Mall Intermediate Holdings and Phase
II Intermediate Holdings.
"Mortgage Note Guarantors" means Phase II Intermediate Holdings, Mall
Intermediate Holdings, Mall Construction Subsidiary and all future Restricted
Subsidiaries of the Issuers, or any successor thereto.
"Mortgage Notes Indenture Environmental Indemnity" means that Environmental
Indemnity Agreement, dated as of November 14, 1997, among the Company, Venetian
and the Mortgage Note Trustee, as amended, revised or modified from time to time
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,
dated as November 14, 1997 and made by the Company and Venetian, as trustor and
the trustee thereunder, for the benefit of the Mortgage Note Trustee, as
beneficiary, as amended, revised or modified from time to time 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 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, revised or modified from time to time 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, revised or modified from
time to time 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
will be deposited in accordance with the Disbursement Agreement.
"Mortgage Note Trustee" means First Trust National Association in its
capacity as trustee under the Mortgage Note Indenture.
"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).
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"Net Proceeds" means the aggregate cash proceeds received by the Issuers or
any of their 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 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 Issuers or any Restricted
Subsidiary only through the return or sale of the property or the other
Specified FF&E 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 Issuers 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 Issuers nor any of their 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 Issuers or any of their
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.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Collateral" means all assets, now owned or hereafter acquired, of the
Company, Venetian or any Mortgage Note Guarantor included in the collateral
securing the Mortgage Notes under the Collateral Documents, which will initially
include 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. Notwithstanding the forgoing, "Note Collateral" shall not include:
(i) the assets of the Phase II Subsidiary and, after the release thereof, the
Mall Collateral; (ii) heating and air-conditioning related and other equipment
owned by the HVAC Provider, which provides thermal energy services to the
Issuers pursuant to the HVAC Services Agreement; (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
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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) assets
financed with Indebtedness permitted to be incurred pursuant to clauses (g), (h)
or (p) of the Section 4.09 hereof and such Indebtedness is permitted to be
secured pursuant to Section 4.13 hereof.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering by the Issuers of $97,500,000 in aggregate
principal amount of their 14 1/4% Senior Subordinated Notes due 2005.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"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 managing its members) or a
Senior Subordinated Note Guarantor, as the case may be, that meets the
requirements set forth in this Indenture.
"Opinion of Counsel" means an opinion from legal counsel, that meets the
requirements of Section 12.05 hereof. The counsel may be an employee of or
counsel to the Issuers, any Subsidiary of the Issuers, any Senior Subordinated
Note Guarantor or the Senior Subordinated Note Trustee.
"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.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to The Depository Trust Company, shall include Euroclear and
Cedel).
"Participating Broker-Dealer" has the meaning set forth in the Registration
Rights 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.
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"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 Section 4.10 hereof; (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 Issuers 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 this 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; (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 this 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 this Indenture, the Mortgage Notes and any
Secured Mortgage Note Guaranty; (f) leases or other Liens, to the extent
permitted pursuant to Section 4.25 under the Mortgage Note Indenture; (g) (1)
Liens for taxes, assessments or governmental charges
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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 this 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 Section 4.25
under the Mortgage Note Indenture and (ii) 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 Section 4.09 hereof; (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 Pre-development Agreement, as in
effect on the date of this Indenture; (o) Liens (1) to secure Indebtedness
permitted by clauses (g), (h) or (p) of Section 4.09, 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 (2) to secure Indebtedness permitted by clause (d)
of Section 4.09; provided that such Liens on the assets acquired 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 and any Guarantees
thereof, incurred pursuant to clause (a) of Section 4.09 hereof and any
additional Indebtedness permitted to be incurred thereunder pursuant to clause
(n)(A) of Section 4.09 hereof; (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 Section 4.09 hereof; (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 Section 4.09 hereof and (B) up to an
aggregate of $20.0 million of Indebtedness permitted to be incurred pursuant to
clause (o) of Section 4.09 hereof.
"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
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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
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 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, and any successor thereto permitted under this Indenture.
"Phase II Intermediate Holdings" means Lido Intermediate Holding Company,
LLC, a Delaware limited liability company, and a Wholly Owned Subsidiary of the
Company, and any successor thereto permitted under this Indenture.
"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.
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"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 this Indenture), owning and operating
joint ventures to supply materials or services for the construction or operation
of any resorts owned or operated by the Issuers and their 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.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
to be placed on all Senior Subordinated Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"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 this 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).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of November 14, 1997, by and among the Issuers, the Initial Purchasers
and the other parties named on the signature pages thereof, as such agreement
may be amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Senior
Subordinated Note in the form of Exhibit A-2 hereto bearing the Global Note
Legend and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Note upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Senior
Subordinated Note in the form of Exhibit A-2 hereto bearing the Private
Placement Legend and the Regulation Temporary Global Note Legend set forth in
Section 2.06(g)(iii) and deposited with or on behalf of and registered in the
name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Senior Subordinated Notes initially sold in
reliance on Rule 903 of Regulation S.
"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),
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(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 Sections 4.10 or
4.16 hereof, respectively.
"Responsible Officer," when used with respect to the Senior Subordinated
Note Trustee, means any officer within the Corporate Trust Department of the
Senior Subordinated Note Trustee (or any successor group of the Senior
Subordinated Note Trustee) or any other officer of the Senior Subordinated Note
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"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 Period" means the 40-day restricted period as defined in
Regulation S.
"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."
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Subordinated Note Custodian" means the Senior Subordinated Note
Trustee, when serving as custodian for the Depositary with respect to the Senior
Subordinated Notes in global form, or any successor entity thereto.
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"Senior Subordinated Notes" has the meaning assigned to it in the preamble
to this Indenture.
"Senior Subordinated Note Guaranties" means the unconditional guaranties of
the Senior Subordinated Notes on a subordinated, unsecured basis by Mall
Intermediate Holdings and Phase II Intermediate Holdings.
"Senior Subordinated Note Guarantors" has the meaning assigned to it in the
preamable to this Indenture, and includes any successors thereto permitted under
this 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 such
Issuance Date 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 Note Trustee" means the party named as such in the
preamble hereto until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"Services Agreement" means that Amended and Restated Services Agreement,
dated as of November 14, 1997, by and among the Company, Interface, Interface
Group Holding Company, Inc., a Nevada corporation, and the parties stated on the
signature page thereto, as amended from time to time in accordance with its
terms.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"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.
"Sole Stockholder Intercreditor Agreement" means the Intercreditor
Agreement, among the Sole Stockholder, the Company, Venetian, Mall Construction
Subsidiary, The Bank of Nova Scotia, as Bank Agent acting on behalf of the other
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,
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.
"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 this 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
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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 this 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 Section 4.09 hereof,
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
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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 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 and Mall Subsidiary.
"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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
"Tranche A Take-out Commitment" means the commitment of Goldman Sachs
Mortgage Company, 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.
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"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.
"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, 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.
"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 Senior Subordinated Note Trustee 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).
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"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 Issuers but for its designation as an "Unrestricted
Subsidiary" in accordance with the provisions of this Indenture and any
Subsidiary of such entity, so long as it remains an Unrestricted Subsidiary in
accordance with the terms of this Indenture.
"Unrestricted Global Note" means a permanent global Senior Subordinated
Note in the form of Exhibit A-1 attached hereto that bears the Global Note
Legend and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing a series of Senior Subordinated Notes
that do not bear the Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"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 to manage the operations 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.
SECTION 1.02. OTHER DEFINITIONS.
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Defined in
Term Section
"Affiliate Transaction"...................................................4.11
"Asset Sale Offer"........................................................4.10
"Authentication Order"....................................................2.02
"Benefitted Party".......................................................11.01
"Change of Control Offer".................................................4.16
"Change of Control Payment"...............................................4.16
"Change of Control Payment Date"..........................................4.16
"Covenant Defeasance".....................................................8.03
"Custodian"...............................................................6.01
"Designated Senior Debt".................................................10.02
"DTC".....................................................................2.03
"Employee Stock Buybacks".................................................4.07
"Event of Default"........................................................6.01
"Excess Proceeds".........................................................4.10
"incur"...................................................................4.09
"Legal Defeasance" .......................................................8.02
"Offer Amount"............................................................3.10
"Offer Period"............................................................3.10
"Paying Agent"............................................................2.03
"Payment Blockage Notice".............................................11.07(c)
"Payment Default".........................................................6.01
"Permitted Junior Securities"............................................10.02
"Purchase Date"...........................................................3.10
"Refinancing Indebtedness"................................................4.09
"Registrar"...............................................................2.03
"Repurchase Offer"........................................................3.10
"Restricted Payments".....................................................4.07
"Senior Debt"............................................................10.07
"Special Subsidiary Restricted Payments"..................................4.23
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Senior Subordinated Notes and the Senior
Subordinated Note Guaranties;
"indenture security Holder" means a Holder of a Senior Subordinated Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Senior
Subordinated Note Trustee;
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"obligor" on the Senior Subordinated Notes means each of the Issuers, the
Senior Subordinated Note Guarantors, if any, and any successor obligor upon the
Senior Subordinated Notes or any Senior Subordinated Note Guaranty, as the case
may be.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions;
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time;
(7) the term "redeem" and the correlative terms "redemption" and "redeemed"
shall not include any Repurchase Offer; and
(8) the term "consolidated" when used in the context of the Issuers and
their Restricted Subsidiaries shall exclude all assets, liabilities, revenue, or
expenses of Unrestricted Subsidiaries and Special Subsidiaries.
ARTICLE 2
THE SENIOR SUBORDINATED NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Senior Subordinated Notes and the Senior Subordinated Note
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1 or A-2 attached hereto. The Senior Subordinated Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Senior Subordinated Note shall be dated the date of its
authentication. The Senior Subordinated Notes shall be in denominations of
$1,000 and integral multiples thereof.
The terms and provisions contained in the Senior Subordinated Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Issuers, the Senior Subordinated Note Guarantors and the Senior Subordinated
Note Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby. However, to the extent any
provision of any Senior Subordinated Note conflicts with the express provisions
of this Indenture, the provisions of this Indenture shall govern and be
controlling.
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(b) Global Notes. Senior Subordinated Notes issued in global form shall be
substantially in the form of Exhibits A-1 or A-2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Senior Subordinated Notes issued in definitive
form shall be substantially in the form of Exhibit A-1 attached hereto (but
without the Global Note Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Senior Subordinated Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
principal amount of outstanding Senior Subordinated Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Senior
Subordinated Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the
aggregate principal amount of outstanding Senior Subordinated Notes represented
thereby shall be made by the Senior Subordinated Note Trustee or the Senior
Subordinated Note Custodian, at the direction of the Senior Subordinated Note
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
(c) Temporary Global Notes. Senior Subordinated Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the Regulation
S Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Senior Subordinated Notes represented thereby with the Senior Subordinated
Note Trustee, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary for
the accounts of designated agents holding on behalf of Euroclear or Cedel Bank,
duly executed by the Issuers and authenticated by the Senior Subordinated Note
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Senior Subordinated Note Trustee of (i) a written certificate
from the Depositary, together with copies of certificates from Euroclear and
Cedel Bank certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the Regulation
S Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein during the Restricted Period pursuant to
another exemption from registration under the Securities Act and who will take
delivery of a beneficial ownership interest in a 144A Global Note or an IAI
Global Note bearing a Private Placement Legend, all as contemplated by Section
2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Issuers.
Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Senior Subordinated Note Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Senior
Subordinated Note Trustee and the Depositary or its nominee, as the case may be,
in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer of each Issuer shall sign the Senior Subordinated Notes for the
Issuers by manual or facsimile signature. Each Issuer's seal shall be reproduced
on the Senior Subordinated Notes and may be in facsimile form.
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If an Officer whose signature is on a Senior Subordinated Note no longer
holds that office at the time a Senior Subordinated Note is authenticated, the
Senior Subordinated Note shall nevertheless be valid.
A Senior Subordinated Note shall not be valid until authenticated by the
manual signature of the Senior Subordinated Note Trustee. The signature shall be
conclusive evidence that the Senior Subordinated Note has been authenticated
under this Indenture.
The Senior Subordinated Note Trustee shall, upon a written order of the
Issuers signed by an Officer of each Issuer (an "Authentication Order"),
authenticate Senior Subordinated Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Senior Subordinated Notes.
The Senior Subordinated Note Trustee may appoint an authenticating agent
acceptable to the Issuers to authenticate Senior Subordinated Notes. An
authenticating agent may authenticate Senior Subordinated Notes whenever the
Senior Subordinated Note Trustee may do so. Each reference in this Indenture to
authentication by the Senior Subordinated Note Trustee includes authentication
by such agent. An authenticating agent has the same rights as an Agent to deal
with Holders or an Affiliate of the Issuers.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Senior Subordinated
Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Senior Subordinated Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Senior Subordinated Notes and of their transfer and exchange. The Issuers
may appoint one or more co-registrars and one or more additional paying agents.
The term "Registrar" includes any co-registrar and the term "Paying Agent"
includes any additional paying agent. The Issuers may change any Paying Agent or
Registrar without notice to any Holder. The Issuers shall notify the Senior
Subordinated Note Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Issuers fail to appoint or maintain another
entity as Registrar or Paying Agent, the Senior Subordinated Note Trustee shall
act as such. The Issuers or any of their Subsidiaries may act as Paying Agent or
Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Issuers initially appoint the Senior Subordinated Note Trustee to act
as the Registrar and Paying Agent and to act as Senior Subordinated Note
Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the Senior
Subordinated Note Trustee to agree in writing that the Paying Agent will hold in
trust for the benefit of Holders or the Senior Subordinated Note Trustee all
money held by the Paying Agent for the payment of principal, premium or
Liquidated Damages, if any, or interest on the Senior Subordinated Notes, and
will notify the Senior Subordinated Note Trustee of any default by the Issuers
in making any such payment. While any such default continues, the Senior
Subordinated Note Trustee may require a Paying Agent to pay all money held by it
to the Senior Subordinated Note Trustee. The Issuers at any time may require a
Paying Agent to pay all money held by it to the Senior Subordinated Note
Trustee. Upon payment over to the Senior Subordinated Note Trustee, the Paying
Agent (if other than the Issuers or a Subsidiary) shall have no
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further liability for the money. If the Issuers or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Issuers, the Senior Subordinated Note
Trustee shall serve as Paying Agent for the Senior Subordinated Notes.
SECTION 2.05. HOLDER LISTS.
The Senior Subordinated Note Trustee shall preserve in as current a form as
is reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Senior Subordinated Note Trustee is not the Registrar, the Issuers shall furnish
to the Senior Subordinated Note Trustee at least seven Business Days before each
interest payment date and at such other times as the Senior Subordinated Note
Trustee may request in writing, a list in such form and as of such date as the
Senior Subordinated Note Trustee may reasonably require of the names and
addresses of the Holders of Senior Subordinated Notes and the Issuers shall
otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Issuers for Definitive Notes if (i) the Issuers deliver to the Senior
Subordinated Note Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Issuers within 120 days after the date of
such notice from the Depositary or (ii) the Issuers in their sole discretion
determine that the Global Notes (in whole but not in part) should be exchanged
for Definitive Notes and deliver a written notice to such effect to the Senior
Subordinated Note Trustee; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Issuers for Definitive Notes prior to
(x) the expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act. Upon the occurrence of either of the preceding events in (i) or
(ii) above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Senior Subordinated Note Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Senior Subordinated Note authenticated and delivered in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to
this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and
delivered in the form of, and shall be, a Global Note. A Global Note may not be
exchanged for another Senior Subordinated Note other than as provided in this
Section 2.06(a). However, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
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(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant's
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Issuers in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall
be deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the Holder
of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Senior Subordinated Notes or otherwise applicable under the Securities Act,
the Senior Subordinated Note Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof;
and
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(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in an Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of the beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Senior Subordinated Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Issuers
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Senior Subordinated Note Trustee shall authenticate one
or more Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
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Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Issuers or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Senior Subordinated Note Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Issuers shall execute and the Senior
Subordinated Note Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate principal
amount. Any Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
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instructions from the Depositary and the Participant or Indirect Participant.
The Senior Subordinated Note Trustee shall deliver such Definitive Notes to the
Persons in whose names such Senior Subordinated Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on transfer contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for a
Definitive Note or transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates required pursuant to
Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer
pursuant to an exemption from the registration requirements of the Securities
Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global Note
may exchange such beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the transferee,
in the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a Definitive Note that does
not bear the Private Placement Legend, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial
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interest for a Definitive Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Senior Subordinated Note Trustee shall cause the aggregate principal amount of
the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Issuers shall execute and the Senior Subordinated Note Trustee
shall authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note issued
in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall be registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Senior Subordinated Note Trustee shall deliver such
Definitive Notes to the Persons in whose names such Senior Subordinated Notes
are so registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Senior Subordinated Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Senior Subordinated Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Issuers or any of their Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
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(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Senior Subordinated Note Trustee shall cancel the Restricted Definitive
Note, increase or cause to be increased the aggregate principal amount of,
in the case of clause (A) above, the appropriate Restricted Global Note, in
the case of clause (B) above, the 144A Global Note, in the case of clause
(C) above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Senior Subordinated Note for a beneficial interest in an
Unrestricted Global Note or transfer such Restricted Definitive Note to a
Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144)
of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange
such Senior Subordinated Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer
such Senior Subordinated Notes to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Senior Subordinated Note Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of an Unrestricted Definitive Note may exchange such
Senior Subordinated Note for a
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beneficial interest in an Unrestricted Global Note or transfer such Definitive
Notes to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note at any time. Upon receipt of a request
for such an exchange or transfer, the Senior Subordinated Note Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Issuers
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Senior Subordinated Note Trustee shall authenticate one
or more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then
the transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144)
of the Issuers;
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(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Senior Subordinated Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Senior Subordinated Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Issuers to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Senior Subordinated
Notes to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuers shall issue
and, upon receipt of an Authentication Order in accordance with Section
2.02, the Senior Subordinated Note Trustee shall authenticate (i) one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of the beneficial interests in the Restricted Global Notes
tendered for acceptance by Persons that certify in the applicable Letters of
Transmittal that (x) they are not broker-dealers, (y) they are not
participating in a distribution of the Exchange Notes and (z) they are not
affiliates (as defined in Rule 144) of the Issuers, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Senior Subordinated Notes, the Senior Subordinated Note
Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Notes to be reduced accordingly, and the Issuers shall
execute and the Senior Subordinated Note Trustee shall authenticate and
deliver to the Persons designated by the Holders of Definitive Notes so
accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
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(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the following
form:
"THE SENIOR SUBORDINATED NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER
THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (INCLUDING RULE 144 THEREUNDER (IF
AVAILABLE)), (5) TO LAS VEGAS SANDS, INC. OR VENETIAN CASINO RESORT, LLC
OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF
THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Senior
Subordinated Notes issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS SENIOR SUBORDINATED NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE
INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE MORTGAGE NOTE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED
TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS
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REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE
PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Senior Subordinated Note Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Senior Subordinated Note Trustee or by the
Depositary at the direction of the Senior Subordinated Note Trustee to reflect
such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Senior Subordinated Note Trustee or by the Depositary at the direction of
the Senior Subordinated Note Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Issuers shall
execute and the Senior Subordinated Note Trustee shall authenticate Global
Notes and Definitive Notes upon the Issuers' order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Issuers may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10,
4.16 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Senior Subordinated Note selected for redemption in whole or in
part, except the unredeemed portion of any Senior Subordinated Note being
redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Issuers, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Issuers shall not be required (A) to issue, to register the
transfer of or to exchange any Senior Subordinated Notes during a period
beginning at the opening of business 15 days before the day of any selection
of Notes for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or to
exchange any Senior Subordinated Note so selected for redemption in whole or
in part, except the unredeemed portion of any Senior Subordinated Note being
redeemed in part or (C) to register the transfer of or to exchange a Senior
Subordinated Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Senior Subordinated Note, the Senior Subordinated Note Trustee, any Agent and
the Issuers may deem and treat the Person in
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whose name any Senior Subordinated Note is registered as the absolute owner of
such Senior Subordinated Note for the purpose of receiving payment of
principal of and interest on such Senior Subordinated Notes and for all other
purposes, and none of the Senior Subordinated Note Trustee, any Agent or the
Issuers shall be affected by notice to the contrary.
(vii) The Senior Subordinated Note Trustee shall authenticate Global
Notes and Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT SENIOR SUBORDINATED NOTES.
If any mutilated Senior Subordinated Note is surrendered to the Senior
Subordinated Note Trustee or the Issuers and the Senior Subordinated Note
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Senior Subordinated Note, the Issuers shall issue and the Senior
Subordinated Note Trustee, upon receipt of an Authentication Order, shall
authenticate a replacement Note if the Senior Subordinated Note Trustee's
requirements are met. If required by the Senior Subordinated Note Trustee or the
Issuers, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Senior Subordinated Note Trustee and the Issuers to protect
the Issuers, the Senior Subordinated Note Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Senior
Subordinated Note is replaced. The Issuers may charge for their expenses in
replacing a Senior Subordinated Note.
Every replacement Senior Subordinated Note is an additional obligation of
the Issuers and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Senior Subordinated Notes duly issued
hereunder.
SECTION 2.08. OUTSTANDING SENIOR SUBORDINATED NOTES.
The Senior Subordinated Notes outstanding at any time are all the Senior
Subordinated Notes authenticated by the Senior Subordinated Note Trustee except
for (i) those cancelled by it, (ii) those delivered to it for cancellation,
(iii) those reductions in the interest in a Global Note effected by the Senior
Subordinated Note Trustee in accordance with the provisions hereof, and (iv)
those described in this Section as not outstanding. Except as set forth in
Section 2.09 hereof, a Senior Subordinated Note does not cease to be outstanding
because the Issuer or an Affiliate of the Issuer holds the Senior Subordinated
Note; however, Notes held by the Issuers or a Subsidiary of the Issuers shall
not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a Senior Subordinated Note is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Senior Subordinated Note Trustee receives
proof satisfactory to it that the replaced Senior Subordinated Note is held by a
bona fide purchaser.
If the principal amount of any Senior Subordinated Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases
to accrue.
If the Paying Agent (other than the Issuers, a Subsidiary or an Affiliate
of any of the foregoing) holds, on a redemption date or maturity date, money
sufficient to pay Senior Subordinated Notes payable
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on that date, then on and after that date such Senior Subordinated Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Senior Subordinated Notes have concurred in any direction, waiver or consent,
Senior Subordinated Notes owned by the Issuers, or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Issuers, shall be considered as though not outstanding, except
that for the purposes of determining whether the Senior Subordinated Note
Trustee shall be protected in relying on any such direction, waiver or consent,
only Senior Subordinated Notes that the Senior Subordinated Note Trustee knows
are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Senior Subordinated Notes are ready for
delivery, the Issuers may prepare and the Senior Subordinated Note Trustee, upon
receipt of an Authentication Order, shall authenticate temporary Senior
Subordinated Notes. Temporary Senior Subordinated Notes shall be substantially
in the form of certificated Senior Subordinated Notes but may have variations
that the Issuers consider appropriate for temporary Senior Subordinated Notes
and as shall be reasonably acceptable to the Senior Subordinated Note Trustee.
Without unreasonable delay, the Issuers shall prepare and the Senior
Subordinated Note Trustee shall authenticate definitive Senior Subordinated
Notes in exchange for temporary Senior Subordinated Notes.
Holders of temporary Senior Subordinated Notes shall be entitled to all of
the benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Senior Subordinated Notes to the Senior
Subordinated Note Trustee for cancellation. The Registrar and Paying Agent shall
forward to the Senior Subordinated Note Trustee any Senior Subordinated Notes
surrendered to them for registration of transfer, exchange or payment. The
Senior Subordinated Note Trustee and no one else shall cancel all Senior
Subordinated Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall destroy cancelled Senior Subordinated
Notes (subject to the record retention requirement of the Exchange Act).
Certification of the destruction of all cancelled Senior Subordinated Notes
shall be delivered to the Issuers. The Issuers may not issue new Senior
Subordinated Notes to replace Senior Subordinated Notes that they have paid or
that have been delivered to the Senior Subordinated Note Trustee for
cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of interest on the Senior Subordinated
Notes, they shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Senior Subordinated Notes and in Section 4.01 hereof. The
Issuers shall notify the Senior Subordinated Note Trustee in writing of the
amount of defaulted interest proposed to be paid on each Senior Subordinated
Note and the date of the proposed payment. The Issuers shall fix or cause to be
fixed each such special record date and payment date; provided that no such
special record date shall be less than 10 days prior to the related payment date
for such defaulted interest. At least 15 days before the special record date,
the Issuers (or, upon the written request of the Issuers, the Senior
Subordinated
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Note Trustee in the name and at the expense of the Issuers) shall mail or cause
to be mailed to Holders a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
ARTICLE 3
OFFERS TO PURCHASE OR REDEMPTION
SECTION 3.01. NOTICES TO SENIOR SUBORDINATED NOTE TRUSTEE.
If the Issuers elect to redeem Senior Subordinated Notes pursuant to the
optional redemption provisions of Section 3.07 hereof, they shall furnish to the
Senior Subordinated Note Trustee, at least 45 days (or such shorter period as
may be acceptable to the Senior Subordinated Note Trustee) but not more than 60
days before a redemption date, an Officers' Certificate setting forth (i) the
Section of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Senior Subordinated Notes to be
redeemed and (iv) the redemption price.
If the Issuers are required to make an offer to purchase Senior
Subordinated Notes pursuant to the provisions of Section 4.10 or 4.16 they shall
furnish to the Senior Subordinated Note Trustee, at least 45 days (or such
shorter period as may be acceptable to the Senior Subordinated Note Trustee) but
not more than 60 days before the scheduled purchase date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the offer to purchase shall occur, (ii) the offer's terms, (iii) the purchase
price, (iv) the principal amount of the Senior Subordinated Notes to be
purchased, and (v) further setting forth a statement to the effect that (a) one
of the Issuers or one of their Restricted Subsidiaries has made an Asset Sale
and there are Excess Proceeds aggregating more than $10.0 million, (b) the
Issuers or one of their Restricted Subsidiaries has suffered an Event of Loss
and there are Excess Loss Proceeds aggregating more than $10.0 million or (b) a
Change of Control has occurred, as applicable.
SECTION 3.02. SELECTION OF SENIOR SUBORDINATED NOTES TO BE PURCHASED OR
REDEEMED.
If less than all of the Senior Subordinated Notes are to be purchased in an
Asset Sale Offer or redeemed at any time, the Senior Subordinated Note Trustee
shall select the Senior Subordinated Notes to be purchased or redeemed among the
Holders of the Senior Subordinated Notes 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 in accordance with any other method the
Senior Subordinated Note Trustee considers fair and appropriate (and in such
manner as complies with applicable law). In the event of partial purchase or
partial redemption in the manner provided above, the particular Senior
Subordinated Notes to be purchased or redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
purchase or redemption date by the Senior Subordinated Note Trustee from the
outstanding Senior Subordinated Notes not previously purchased or called for
redemption. In the event that less than all of the Senior Subordinated Notes
properly tendered in an Asset Sale Offer are to be purchased, the particular
Senior Subordinated Notes to be purchased shall be selected promptly upon the
expiration of such Asset Sale Offer.
The Senior Subordinated Note Trustee shall promptly notify the Issuers in
writing of the Senior Subordinated Notes selected for purchase or redemption
and, in the case of any Senior Subordinated Note selected for partial purchase
or redemption, the principal amount thereof to be purchased or redeemed.
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Senior Subordinated Notes and portions of Senior Subordinated Notes selected
shall be in amounts of $1,000 or whole multiples of $1,000; except that if all
of the Senior Subordinated Notes of a Holder are to be purchased or redeemed,
the entire outstanding amount of Senior Subordinated Notes held by such Holder,
even if not a multiple of $1,000, shall be purchased or redeemed. Except as
provided in the preceding sentence, provisions of this Indenture that apply to
Senior Subordinated Notes purchased or called for redemption also apply to
portions of Senior Subordinated Notes purchased or called for redemption.
In the event the Issuers are required to make an Asset Sale Offer pursuant
to Section 4.10 hereof, respectively, and the amount of Excess Proceeds to be
applied to such purchase would result in the purchase of a principal amount of
Senior Subordinated Notes which is not evenly divisible by $1,000, the Senior
Subordinated Note Trustee shall promptly refund to the Issuers the amount of
Excess Proceeds that is not necessary to purchase the immediately lesser
principal amount of Senior Subordinated Notes that is so divisible.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.10 hereof, at least 30 days but not
more than 60 days before a redemption date, the Issuers shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Senior Subordinated Notes are to be redeemed at its registered address.
The notice shall identify the Senior Subordinated Notes to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Senior Subordinated Note is being redeemed in part, the portion
of the principal amount of such Senior Subordinated Note to be redeemed and
that, after the redemption date upon surrender of such Senior Subordinated
Note, a new Senior Subordinated Note or Senior Subordinated Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Senior Subordinated Note;
(d) the name and address of the Paying Agent;
(e) that Senior Subordinated Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Issuers defaults in making such redemption payment,
interest on Senior Subordinated Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Senior Subordinated Notes and/or Section of this
Indenture pursuant to which the Senior Subordinated Notes called for
redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Senior
Subordinated Notes.
At the Issuers' request, the Senior Subordinated Note Trustee shall give
the notice of redemption in the Issuers' name and at its expense; provided,
however, that the Issuers shall have delivered to the Senior Subordinated Note
Trustee, at least 45 days (or such shorter period as may be acceptable to the
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Senior Subordinated Note Trustee) than 60 days prior to the redemption date, an
Officers' Certificate requesting that the Senior Subordinated Note Trustee give
such notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Senior Subordinated Notes called for redemption become irrevocably due and
payable on the redemption date at the redemption price. A notice of redemption
may not be conditional.
SECTION 3.05. DEPOSIT OF PURCHASE OR REDEMPTION PRICE.
On or prior to any purchase date with respect to an offer to purchase the
Senior Subordinated Notes required hereunder or any redemption date, the Issuers
shall deposit with the Senior Subordinated Note Trustee or with the Paying Agent
money sufficient to pay the purchase or redemption price of, and accrued and
unpaid interest and Liquidated Damages, if any, on all Senior Subordinated Notes
to be purchased or redeemed on that date. The Senior Subordinated Note Trustee
or the Paying Agent shall promptly return to the Issuers any money deposited
with the Senior Subordinated Note Trustee or the Paying Agent by the Issuers in
excess of the amounts necessary to pay the purchase or redemption price of, and
accrued and unpaid interest and Liquidated Damages, if any, on, all Senior
Subordinated Notes to be purchased or redeemed.
If the Issuers comply with the provisions of the preceding paragraph, on
and after the purchase or redemption date, interest shall cease to accrue on the
Senior Subordinated Notes or the portions of Senior Subordinated Notes purchased
or called for redemption. If a Senior Subordinated Note is purchased or redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest and Liquidated Damages shall
be paid to the Person in whose name such Senior Subordinated Note was registered
at the close of business on such record date. If any Senior Subordinated Note
tendered for purchase or called for redemption shall not be so paid upon
surrender for such tender or redemption because of the failure of the Issuers to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the purchase or redemption date until such principal is paid,
and to the extent lawful on any interest not paid on such unpaid principal, in
each case at the rate provided in the Senior Subordinated Notes and in Section
4.01 hereof.
SECTION 3.06. SENIOR SUBORDINATED NOTES PURCHASED OR REDEEMED IN PART.
Upon surrender of a Senior Subordinated Note that is purchased or redeemed
in part, the Issuers shall issue and, upon the Issuers' written request, the
Senior Subordinated Note Trustee shall authenticate for the Holder at the
expense of the Issuers a new Senior Subordinated Note equal in principal amount
to the unpurchased or unredeemed portion of the Senior Subordinated Note
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) On or after November 15, 2001, the Senior Subordinated Notes shall 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:
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Percentage
of Principal
Year Amount
2001................................... 107.125%
2002................................... 103.563%
2003 and thereafter.....................100.000%
(b) 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.
(c) 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.
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. REDEMPTION PURSUANT TO GAMING LAW.
(a) Notwithstanding any other provisions of this Article 3, 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 Issuers 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 such 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
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.
(b) In connection with any redemption pursuant to this Section 3.08, and
except as may be required by a Gaming Authority, the Issuers shall be required
to comply with Sections 3.01 through 3.06 hereof.
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(c) The Issuers shall not be required to pay or reimburse any Holder or
beneficial owner of Senior Subordinated Notes who is required to apply for any
such license, qualification or finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Such expenses shall be the obligation of such Holder or beneficial owner.
SECTION 3.09. MANDATORY REDEMPTION.
The Issuers shall not be required to make mandatory redemption or sinking
fund payments prior to maturity with respect to the Senior Subordinated Notes.
SECTION 3.10. REPURCHASE OFFERS.
In the event that, pursuant to Section 4.10 or 4.16 hereof, the Issuers
shall be required to commence an offer to all Holders to purchase Senior
Subordinated Notes (a "Repurchase Offer"), it shall follow the procedures
specified below.
The Repurchase Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Issuers shall purchase at the Purchase Price (as determined in accordance
with Section 4.10 or 4.16 hereof, as the case may be) the principal amount of
Senior Subordinated Notes required to be purchased pursuant to Section 4.10 or
4.16 hereof, as the case may be (the "Offer Amount"), or, if less than the Offer
Amount has been tendered, all Senior Subordinated Notes tendered in response to
the Repurchase Offer. Payment for any Senior Subordinated Notes so purchased
shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Senior
Subordinated Note is registered at the close of business on such record date,
and no additional interest shall be payable to Holders who tender Senior
Subordinated Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Issuers shall send, by
first class mail, a notice to the Senior Subordinated Note Trustee and each of
the Holders. The notice shall contain all instructions and materials necessary
to enable such Holders to tender Senior Subordinated Notes pursuant to the
Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice,
which shall govern the terms of the Repurchase Offer, shall state:
(a) that the Repurchase Offer is being made pursuant to this Section 3.10
and Section 4.10 or 4.16 hereof, as the case may be, and the length of time the
Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Senior Subordinated Note not tendered or accepted for payment
shall continue to accrue interest and Liquidated Damages, if any;
(d) that, unless the Issuers default in making such payment, any Senior
Subordinated Note accepted for payment pursuant to the Repurchase Offer shall
cease to accrue interest and Liquidated Damages, if any, after the Purchase
Date;
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(e) that Holders electing to have a Senior Subordinated Note purchased
pursuant to an y Repurchase Offer shall be required to surrender the Senior
Subordinated Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Senior Subordinated Note completed, to the Issuers, a
depositary, if appointed by the Issuers, or a Paying Agent at the address
specified in the notice at least three Business Days before the Purchase Date;
(f) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Senior Subordinated Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Senior
Subordinated Note purchased; and
(g) that, if the aggregate principal amount of Senior Subordinated Notes
surrendered by Holders exceeds the Offer Amount, the Senior Subordinated Notes
shall be selected for purchase pursuant to the terms of Section 3.02 hereof, and
that Holders whose Senior Subordinated Notes were purchased only in part shall
be issued new Senior Subordinated Notes equal in principal amount to the
unpurchased portion of the Senior Subordinated Notes surrendered.
On or before the Purchase Date, the Issuers shall, to the extent lawful,
accept for payment, pursuant to the terms of Section 3.02 hereof, the Offer
Amount of Senior Subordinated Notes or portions thereof tendered pursuant to the
Repurchase Offer, or if less than the Offer Amount has been tendered, all Senior
Subordinated Notes tendered, and shall deliver to the Senior Subordinated Note
Trustee an Officers' Certificate stating that such Senior Subordinated Notes or
portions thereof were accepted for payment by the Issuers in accordance with the
terms of this Section 3.10. The Issuers, the Depository or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Senior Subordinated Notes tendered by such Holder and
accepted by the Issuers for purchase, and the Issuers shall promptly issue a new
Senior Subordinated Note, and the Senior Subordinated Note Trustee, upon written
request from the Issuers shall authenticate and mail or deliver such new Senior
Subordinated Note to such Holder, in a principal amount equal to any unpurchased
portion of the Senior Subordinated Note surrendered. Any Senior Subordinated
Note not so accepted shall be promptly mailed or delivered by the Issuers to the
Holder thereof. The Issuers shall publicly announce the results of the
Repurchase Offer on the Purchase Date.
The Issuers shall 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 Repurchase Offer.
Other than as specifically provided in this Section 3.10, any purchase
pursuant to this Section 3.10 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof to the extent applicable.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SENIOR SUBORDINATED NOTES.
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The Issuers shall pay or cause to be paid the principal of, premium, if
any, and interest on the Senior Subordinated Notes on the dates and in the
manner provided in the Senior Subordinated Notes. Principal, premium, if any,
and interest shall be considered paid on the date due if the Paying Agent, if
other than the Issuers or a Subsidiary thereof, holds as of 10:00 a.m. Eastern
Time on the due date, money deposited by the Issuers in immediately available
funds and designated for and sufficient to pay all principal, premium, if any,
and interest then due. The Issuers shall pay all Liquidated Damages, if any, in
the same manner on the dates and in the amounts set forth in the Registration
Rights Agreement.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Senior
Subordinated Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Senior Subordinated
Note Trustee or an affiliate of the Senior Subordinated Note Trustee, Registrar
or co-registrar) where Senior Subordinated Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Issuers or the Senior Subordinated Note Guarantors in respect of the
Senior Subordinated Notes and this Indenture may be served. The Issuers shall
give prompt written notice to the Senior Subordinated Note Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers shall fail to maintain any such required office or agency or
shall fail to furnish the Senior Subordinated Note Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Senior Subordinated Note Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Senior Subordinated Notes may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Issuers of their obligation to maintain an office or
agency in the Borough of Manhattan, the City of New York for such purposes. The
Issuers shall give prompt written notice to the Senior Subordinated Note Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the Senior
Subordinated Note Trustee as one such office or agency of the Issuers in
accordance with Section 2.03.
SECTION 4.03. REPORTS.
The Company shall file with the Senior Subordinated Note Trustee and
provide Holders of Senior Subordinated Notes, within 15 days after it files them
with the SEC, 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 SEC may
by rule or regulation prescribe) which the Company is required to file with the
SEC 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 SEC, the Company shall
continue to file with the SEC 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
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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 SEC if the SEC 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 shall 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 shall 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 SEC, shall make available such information to prospective
purchasers and to securities analysts and broker-dealers upon their request. In
addition, the Company shall, for so long as any Senior Subordinated Notes remain
outstanding, furnish to the Holders of Senior Subordinated Notes 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. Notwithstanding anything to the contrary herein, the Trustee
shall have no duty to review such document for purposes of determining
compliance with any provisions of this Indenture.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Issuers shall deliver to the Senior Subordinated Note Trustee,
within 90 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Issuers and their Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers of the Issuers with a view to determining whether the Issuers
and each obligor on the Senior Subordinated Notes and this Indenture is in
compliance with this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Issuers
and each such obligor is in compliance with each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall exist, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Issuers or such
obligor, as the case may be, is taking or proposes to take with respect thereto)
and that to the best of his or her knowledge no event has occurred that remains
in existence by reason of which payments on account of the principal of or
interest, if any, on the Senior Subordinated Notes is prohibited or if such
event exists, a description of the event and what action the Issuers or such
obligor, as the case may be, is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers are in
violation of any provisions of Article 4 or Article 5 hereof or, if any such
violation exists, specifying the nature and period of existence thereof, it
being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
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(c) The Issuers shall, so long as any of the Senior Subordinated Notes are
outstanding, deliver to the Senior Subordinated Note Trustee, within five
Business Days upon any Officer becoming aware of any Default or Event of Default
or any event of default under any document, instrument or agreement representing
Indebtedness of the Issuers, an Officers' Certificate specifying such Default,
Event of Default or event of default and what action the Issuers are taking or
propose to take with respect thereto.
(d) Immediately upon Completion, the Issuers shall deliver promptly to the
Senior Subordinated Note Trustee an Officers' Certificate which shall state that
(i) Completion has been achieved and (ii) the date on which Completion was
achieved.
SECTION 4.05. TAXES.
The Issuers shall pay, and shall cause each of their Restricted
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment would not
have any material adverse effect on the Holders of the Senior Subordinated
Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
Each of the Issuers and the Senior Subordinated Note Guarantors covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and each of the Issuers and the Senior Subordinated Note Guarantors
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Senior Subordinated Note Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
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 Section 4.09 hereof;
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), (xvii) and (xviii)
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 will 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 this
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
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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 shall be 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 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 this 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
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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 Agreement); (xvii) on the Final Completion Date
(as defined in the Disbursement Agreement), payments on the Completion Guaranty
Loan from amounts which are returned to 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
Guaranty Deposit Account (as defined in the Disbursement Agreement); and (xviii)
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 (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 shall 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.
Not later than the date of filing any quarterly or annual report, the
Issuers 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 this Section 4.07 were computed, which calculations may be based
upon the Issuers' latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Issuers shall not, and shall 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 Guaranties or any other
Indebtedness incurred pursuant to the terms of this Indenture, as the case may
be), (b) make loans or advances to the Issuers or any of their Restricted
Subsidiaries or
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(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) and any Guaranties thereof, this
Indenture, the Senior Subordinated Notes, the Mall Construction Loan Facility
(and any related security agreements), any Senior Subordinated Note Guaranties,
the Collateral Documents, indebtedness incurred pursuant to clause (g), (h),
(j), (l), (n) or (o) of Section 4.09 hereof and any related security agreements,
(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 this 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 Section 4.25 under the Mortgage Note Indenture, (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.
SECTION 4.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED STOCK.
The Issuers shall not, and shall 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 will not apply to:
(a) the incurrence by the Issuers or any of their Restricted Subsidiaries
of Indebtedness under the Bank Credit Facility and any Guaranties thereof 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
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connection with a refinancing permitted under this Indenture) actually made from
time to time after the date of this 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, 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 Senior Subordinated Notes,
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 this 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
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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 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 Senior Subordinated 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 at least one day later than
the Senior Subordinated Notes and is by its terms subordinated to the Senior
Subordinated 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 Section 4.07 hereof;
(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;
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(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 Issuers shall 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 purposes of determining compliance with this Section 4.09, 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 Section 4.09,
the Issuers shall, in their sole discretion, classify such item of Indebtedness
in any manner that complies with this Section 4.09 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 Section 4.09.
SECTION 4.10. ASSET SALES.
The Issuers shall not, and shall 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
Issuers', or such Restricted Subsidiary's, as the case may be, most recent
balance sheet or in the notes thereto) of the Issuers, or such 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), that are assumed by the transferee of any such
assets and (B) any notes 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 Section 4.10 and for no other purpose.
Within the later of (i) 180 days after any such 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,
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(the "Reinvestment Period"), any 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 Sale 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
aggregate 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 as provided in the first sentence of this
paragraph shall 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 Section
3.10 hereof. 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 Section 3.10 of the Senior Subordinated Note Indenture. 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 accordance
with Sections 3.02 and 3.02 hereof. Upon completion of any such Asset Sale
Offer, the amount of Excess Proceeds shall be deemed reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Issuers shall not, and shall 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 shall not
apply to the following: (f) rental payments from Mall Subsidiary to Venetian
under the Billboard Lease, as in effect on the date of this
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Indenture; (g) the lease agreement relating to a restaurant to be operated by
Wolfgang Puck and currently contemplated to be known as "Oba Chine" 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 this 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, in each case, as in effect on the
date of this 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 clause (xi) of Section 4.07 hereof; (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 under
Section 4.07 hereof and with respect to any Special Subsidiary, Special
Subsidiary Restricted Payments permitted under Section 4.23; (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
Offering Circular relating to the Offering under the caption "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 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 Project in
substantially similar manners and (iii) the Company
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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).
SECTION 4.12. NO SENIOR SUBORDINATED DEBT
Subject to the provisions of the Intercreditor Agreement, the Issuers shall
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.
SECTION 4.13. LIENS.
The Issuers shall not, and shall 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.
SECTION 4.14. LINE OF BUSINESS.
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.
SECTION 4.15. CORPORATE EXISTENCE.
Subject to Article 5 and Article 11 hereof, as the case may be, each of the
Issuers and each of the Senior Subordinated Note Guarantors shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate or limited liability company existence, and the corporate, limited
liability company, partnership or other existence of each of its Subsidiaries,
in accordance with the respective organizational documents (as the same may be
amended from time to time) of the Issuers, any such Senior Subordinated Note
Guarantor or any such Subsidiary and (ii) the material rights (charter and
statutory), licenses and franchises of the Issuers, the Senior Subordinated Note
Guarantors and their respective Subsidiaries; provided, however, that the
Issuers and the Senior Subordinated Note Guarantors shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of their respective Subsidiaries, if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Issuers, the Senior
Subordinated Note Guarantors and their Subsidiaries, taken as a whole, and that
the loss thereof would not have a material adverse effect on the Holders of
Senior Subordinated Notes.
SECTION 4.16. OFFER TO REPURCHASE UPON 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 in accordance with the terms of the Mortgage Note
Indenture, the Issuers shall make an offer to purchase to each Holder of Senior
Subordinated Notes to purchase all or any part (equal to $1,000 or an integral
multiple thereof)
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of the Senior Subordinated Notes held by each such Holder 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, 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 purchase. Such Change of Control
Offer shall be made in accordance with the procedures set forth in Article 3
hereof. The Issuers shall commence such Change of Control Offer by mailing the
notice set forth in Section 3.10 hereof to Holders of Senior Subordinated Notes.
SECTION 4.17. DESIGNATION OF UNRESTRICTED SUBSIDIARY
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 the Issuers or any Restricted
Subsidiary other than as permitted by the provisions of this Indenture,
including Sections 4.07 and 4.10 hereof; (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 Issuers (1) such Subsidiary acquires any assets from the Issuers or any
Restricted Subsidiary other than as permitted by this Indenture, including
Sections 4.07 and 4.10 hereof; (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 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 is designated an Unrestricted 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.
After the transfer of the Phase II Land to the Phase II Subsidiary, the
Phase II Land shall 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 which
Person the Sole Stockholder does not own any Equity Interest, directly or
indirectly, except through the Issuers.
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SECTION 4.18. DESIGNATION OF SPECIAL SUBSIDIARY
The Board of Directors of the Company may designate any Restricted
Subsidiary to be 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 Indenture, including Sections 4.07 and 4.10 hereof; (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 this
Indenture, including Section 4.07 and 4.10 hereof; (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.
As of the Issuance Date, each of Mall Subsidiary, Mall Holdings and Mall
Manager is designated a Special 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 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.
SECTION 4.19. GAMING LICENSES.
The Issuers shall 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.
SECTION 4.20. CONSTRUCTION.
The Issuers shall cause construction of the Project, including the
furnishing, fixturing and equipping thereof, to be prosecuted with diligence and
continuity in a good and workerlike manner substantially in accordance with the
Plans and Specifications within the Project Budget.
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SECTION 4.21. LIMITATION ON STATUS AS INVESTMENT COMPANY.
None of the Issuers and their Restricted Subsidiaries shall become an
Investment Company subject to registration as an "investment company" (as that
term is defined in the Investment Company Act of 1940, as amended).
SECTION 4.22. SENIOR SUBORDINATED NOTE GUARANTIES.
The Issuers shall, and shall cause each of their Restricted Subsidiaries,
to comply with Section 11.02 hereof.
SECTION 4.23. SPECIAL SUBSIDIARY RESTRICTED PAYMENTS.
Any Special Subsidiary shall not and shall 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 will 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.
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
which the Sole Stockholder does not own any Equity Interests, directly or
indirectly, except through the Issuers.
SECTION 4.24. OWNERSHIP OF UNRESTRICTED SUBSIDIARIES AND SPECIAL SUBSIDIARIES.
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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.
SECTION 4.25. LIMITATION ON PHASE II CONSTRUCTION.
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 defined on the Issuance Date) (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.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
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 shall 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 shall have been made assumes all the obligations of the Issuers
under this 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 this 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 or 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 shall have
been made (A) shall have Consolidated Net Worth (immediately after the
transaction but prior to any purchase
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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) shall, 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 set
forth in the first paragraph of Section 4.09 hereof; 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 or any Affiliate thereof) to
obtain a gaming license or be qualified under the laws 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 the foregoing,
the Issuers may consolidate or merge with or wind up into each other without
meeting the requirements set forth in clause (v) above.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Issuers in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which one of the Issuers is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" or "Venetian", as the
case may be, shall refer instead to the successor corporation and not to the
Company or Venetian, as the case may be), and may exercise every right and power
of an Issuer under this Indenture with the same effect as if such successor
Person had been named as an Issuer herein; provided, however, that the surviving
entity or acquiring corporation shall (i) assume all of the obligations of the
acquired Person incurred under this Indenture and the Senior Subordinated Notes,
(ii) acquire and own and operate, directly or through Wholly Owned Subsidiaries,
all or substantially all of the properties and assets then constituting the
assets of the Company or Venetian, as the case may be, or any of their
Subsidiaries, as the case may be, (iii) have been issued, or have a consolidated
Subsidiary which has been issued, Gaming Licenses to operate the acquired casino
operations and entities substantially in the manner and scope operated prior to
such transaction, which Gaming Licenses are in full force and effect, and (iv)
be in compliance fully with Section 5.01 hereof and (v) the Issuers have
delivered to the Senior Subordinated Note Trustee an Officers' Certificate and
Opinion of Counsel, subject to customary assumptions and exclusions, stating
that the proposed transaction complies with this Indenture; provided further,
however, that the predecessor Person shall not be relieved from the obligation
to pay the principal of and interest on the Senior Subordinated Notes except in
the case of a sale of all of one of the Issuers' assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuers or any Senior Subordinated Note Guarantor defaults
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;
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(b) one of the Issuers or any Senior Subordinated Note Guarantor
defaults 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;
(c) 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 Section 3.10 hereof;
(d) failure by (i) the Issuers or any Senior Subordinated Note
Guarantor to comply with Sections 4.07 or 4.09 hereof or (ii) any Special
Subsidiary to comply with Section 4.23 hereof;
(e) failure by any of 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 their other agreements
under this Indenture, the Senior Subordinated Notes or the Senior
Subordinated Note Guaranties;
(f) 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 any of 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 any 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;
(g) failure by any of 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;
(h) the repudiation by any of the Issuers or any of their
Subsidiaries of their obligations under, or any judgment or decree by a
court or governmental agency of competent jurisdiction declaring the
unenforceability of, any Senior Subordinated Note Guaranty 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;
(i) any of the Issuers, any Special Subsidiary or any Senior
Subordinated Note Guarantor that is a Significant Subsidiary or any group
of Senior Subordinated Note Guarantors that would together constitute a
Significant Subsidiary of any Issuer pursuant to or within the meaning of
Bankruptcy Law:
(i)commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
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(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying, or shall admit in writing its
inability to pay its debts as they become due and, in each case, a
period of 30 days shall have elapsed; or
(j) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against any of the Issuers or a Senior
Subordinated Note Guarantor that is a Significant Subsidiary or any
group of Senior Subordinated Note Guarantors that would together
constitute a Significant Subsidiary of any Issuer in an involuntary
case;
(ii) appoints a Custodian of any of the Issuers or a Senior
Subordinated Note Guarantor that is a Significant Subsidiary or any
group of Senior Subordinated Note Guarantors that would together
constitute a Significant Subsidiary of the Issuers or for all or
substantially all of the property of any of the Issuers or a Senior
Subordinated Note Guarantor that is a Significant Subsidiary or any
group Issuers of Senior Subordinated Note Guarantors that would
together constitute a Significant Subsidiary of any Issuer; or
(iii) orders the liquidation of any Issuer or a Senior
Subordinated Note Guarantor that is a Significant Subsidiary of any
Issuers or any group of Senior Subordinated Note Guarantors that
would together constitute a Significant Subsidiary of any Issuer;
and the order or decree remains unstayed and in effect for 60 consecutive
days;
(k) 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;
(l) the Project is not Completed by the Outside Completion Deadline
and continues to be not Completed; or
(m) 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.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
SECTION 6.02. ACCELERATION.
(a) Subject to the provisions of clause (b) of this Section 6.02, if any
Event of Default (other than an Event of Default specified in clause (i) or (j)
of Section 6.01 hereof with respect to the Issuers or any Senior Subordinated
Note Guarantor that is a Significant Subsidiary or any group of Senior
Subordinated Note Guarantors that would together constitute a Significant
Subsidiary), 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
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Damages, if any, interest and any other monetary obligations on all of the
Senior Subordinated Notes to be due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (i) or (j) of Section 6.01
hereof occurs with respect to the Issuers or any Senior Subordinated Note
Guarantor that is a Significant Subsidiary or any group of Senior Subordinated
Note Guarantors that would together constitute a Significant Subsidiary of the
Issuers, the principal, premium and Liquidated Damages, if any, interest any
other monetary obligations on all of the outstanding Senior Subordinated Notes
shall be due and payable immediately without further action or notice. The
Holders of a majority in aggregate principal amount of the then outstanding
Senior Subordinated Notes by written notice to the Senior Subordinated Note
Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium or Liquidated Damages that has become due solely because of the
acceleration) have been cured or waived.
Notwithstanding the foregoing, 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.
If an Event of Default occurs by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Issuers with the intention of
avoiding payment of the premium that the Issuers would have had to pay if the
Issuers then had elected to redeem the Senior Subordinated Notes pursuant to
Section 3.07 hereof, then, upon acceleration of the Senior Subordinated Notes,
an equivalent premium shall also become and be immediately due and payable, to
the extent permitted by law, anything in this Indenture or in the Senior
Subordinated Notes to the contrary notwithstanding.
(b) The provisions of the TIA shall govern this Senior Subordinated Note
Indenture whether or not this Senior Subordinated Note Indenture is qualified
under the TIA. Subject to the mandatory provisions of the TIA, the rights of the
Senior Subordinated Note Trustee and the Holders to accelerate obligations under
the Senior Subordinated Notes, rescind such acceleration, or to exercise rights
and remedies under, or to enforce the terms of, this Indenture shall be limited
as provided in the terms of the Intercreditor Agreement. To the extent
permissible under the TIA, the terms of the Intercreditor Agreement or the Sole
Stockholder Intercreditor Agreement shall not be interpreted as impairing or
affecting, in violation of Section 316(b) of the TIA, the right of any Holder to
receive payment of principal of and interest on the Senior Subordinated Notes on
or after the respective due dates expressed in the Senior Subordinated Notes or
to institute suit for the enforcement of any such payment on or after such
respective dates.
SECTION 6.03. OTHER REMEDIES.
Subject to the terms of the Intercreditor Agreement, if an Event of Default
occurs and is continuing, the Senior Subordinated Note Trustee may pursue any
available remedy to collect the payment of principal, premium and Liquidated
Damages, if any, and interest on the Senior Subordinated Notes or to enforce the
performance of any provision of the Senior Subordinated Notes or this Indenture.
The Senior Subordinated Note Trustee may maintain a proceeding even if it
does not possess any of the Senior Subordinated Notes or does not produce any of
them in the proceeding. A delay or omission by the Senior Subordinated Note
Trustee or any Holder of a Senior Subordinated Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
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SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Senior Subordinated Notes by notice to the Senior Subordinated
Note Trustee may on behalf of the Holders of all of the Senior Subordinated
Notes waive an existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of the
principal of, premium and Liquidated Damages, if any, or interest on, the Senior
Subordinated Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Senior Subordinated Notes may rescind an acceleration
and its consequences, including any related payment default that resulted from
such acceleration). Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to the terms of the Intercreditor Agreement, Holders of a majority
in principal amount of the then outstanding Senior Subordinated Notes may direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Senior Subordinated Note Trustee or exercising any trust
or power conferred on it, including the exercise of any remedy under the
Intercreditor Agreement. However, the Senior Subordinated Note Trustee may
refuse to follow any direction that conflicts with law, this Indenture or the
Intercreditor Agreement that the Senior Subordinated Note Trustee determines may
be unduly prejudicial to the rights of other Holders of Senior Subordinated
Notes or that may involve the Senior Subordinated Note Trustee in personal
liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Senior Subordinated Note may pursue a remedy with respect to
this Indenture or the Senior Subordinated Notes (except as provided in Sections
6.06 and 6.07) only if:
(a) the Holder of a Senior Subordinated Note gives to the Senior
Subordinated Note Trustee written notice of a continuing Event of Default
or the Senior Subordinated Note Trustee receives such notice from the
Issuers;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Subordinated Notes make a written request to the Senior
Subordinated Note Trustee to pursue the remedy;
(c) such Holder of a Senior Subordinated Note or Holders of Senior
Subordinated Notes offer and, if requested, provide to the Senior
Subordinated Note Trustee indemnity satisfactory to the Senior
Subordinated Note Trustee against any loss, liability or expense;
(d) the Senior Subordinated Note Trustee does not comply with the
request within 60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Subordinated Notes do not give the
Senior Subordinated Note Trustee a direction inconsistent with the
request; provided, however, that such provision does not effect the right
of a Holder to sue for enforcement of any overdue payment thereon.
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A Holder of a Senior Subordinated Note may not use this Indenture to prejudice
the rights of another Holder of a Senior Subordinated Note or to obtain a
preference or priority over another Holder of a Senior Subordinated Note or to
take any action in violation of the provisions of the Intercreditor Agreement.
SECTION 6.07. RIGHTS OF HOLDERS OF SENIOR SUBORDINATED NOTES TO RECEIVE
PAYMENT.
Notwithstanding any other provision of this Indenture, but subject to the
provisions of the Intercreditor Agreement the right of any Holder of a Senior
Subordinated Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Senior Subordinated Note, on or after the
respective due dates expressed in the Senior Subordinated Note, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY SENIOR SUBORDINATED NOTE TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, subject to the terms of the Intercreditor Agreement, the Senior
Subordinated Note Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Issuers or any Senior Subordinated
Note Guarantor for the whole amount of principal of, premium and Liquidated
Damages, if any, and interest remaining unpaid on the Senior Subordinated Notes
and interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Senior Subordinated Note Trustee, its agents and counsel.
SECTION 6.09. SENIOR SUBORDINATED NOTE TRUSTEE MAY FILE PROOFS OF CLAIM.
Subject to Section 6.02(b) hereof and the terms of the Intercreditor
Agreement, the Senior Subordinated Note Trustee is authorized to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Senior Subordinated Note Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Senior Subordinated Note Trustee, its agents and counsel) and the Holders
of the Senior Subordinated Notes allowed in any judicial proceedings relative to
the Issuers (or any other obligor upon the Senior Subordinated Notes, including
the Senior Subordinated Note Guarantors), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Senior Subordinated Note Trustee, and in the event that the
Senior Subordinated Note Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Senior Subordinated Note Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Senior Subordinated Note Trustee, its agents and counsel, and
any other amounts due the Senior Subordinated Note Trustee under Section 7.07
hereof. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Senior Subordinated Note Trustee, its agents
and counsel, and any other amounts due the Senior Subordinated Note Trustee
under Section 7.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties that the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Senior Subordinated Note Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Senior Subordinated Notes or the rights
of any
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Holder, or to authorize the Senior Subordinated Note Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Senior Subordinated Note Trustee collects any money pursuant to this
Article, it shall, subject to the terms of the Intercreditor Agreement, pay out
the money in the following order:
First: to the Senior Subordinated Note Trustee, its agents and attorneys
for amounts due under Section 7.07 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances made, by the
Senior Subordinated Note Trustee and the costs and expenses of collection;
Second: to Holders of Senior Subordinated Notes for amounts due and unpaid
on the Senior Subordinated Notes for principal, premium and Liquidated Damages,
if any, and interest ratably, without preference or priority of any kind,
according to the amounts due and payable on the Senior Subordinated Notes for
principal, premium and Liquidated Damages, if any, and interest, respectively;
and
Third: to the Issuers or to such party as a court of competent jurisdiction
shall direct.
The Senior Subordinated Note Trustee may fix a record date and payment date
for any payment to Holders of Senior Subordinated Notes pursuant to this Section
6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Senior Subordinated Note Trustee for any action taken
or omitted by it as a Senior Subordinated Note Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Senior Subordinated Note Trustee, a suit by a Holder of a Senior
Subordinated Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Senior Subordinated Notes.
ARTICLE 7
SENIOR SUBORDINATED NOTE TRUSTEE
SECTION 7.01. DUTIES OF SENIOR SUBORDINATED NOTE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Senior
Subordinated Note Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in its exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Senior Subordinated Note Trustee shall be
determined solely by the express provisions of this Indenture and the
Intercreditor Agreement and the Senior Subordinated
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Note Trustee need perform only those duties that are specifically set
forth in this Indenture and the Intercreditor Agreement and no others, and
no implied covenants or obligations shall be read into this Indenture
against the Senior Subordinated Note Trustee; and
(ii) in the absence of bad faith on its part, the Senior
Subordinated Note Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Senior Subordinated Note Trustee
and conforming in all material respects to the requirements of this
Indenture and the Intercreditor Agreement. However, the Senior
Subordinated Note Trustee shall examine the certificates and opinions to
determine whether or not they conform in all material respects to the
requirements of this Indenture.
(c) The Senior Subordinated Note Trustee may not be relieved from
liabilities for its own negligent action, its own negligent failure to
act, or its own willful misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph (b) of
this Section;
(ii) the Senior Subordinated Note Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer, unless
it is proved that the Senior Subordinated Note Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Senior Subordinated Note Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 6.05
hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Senior Subordinated Note
Trustee is subject to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Senior
Subordinated Note Trustee to expend or risk its own funds or incur any
liability. The Senior Subordinated Note Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture
before or following the occurrence of any Event of Default at the request
of any Holders, unless such Holder shall have offered to the Senior
Subordinated Note Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
(f) The Senior Subordinated Note Trustee shall not be liable for
interest on any money received by it except as the Senior Subordinated
Note Trustee may agree in writing with the Issuers or the Senior
Subordinated Note Guarantors. Money held in trust by the Senior
Subordinated Note Trustee need not be segregated from other funds except
to the extent required by law.
SECTION 7.02. RIGHTS OF SENIOR SUBORDINATED NOTE TRUSTEE.
(a) The Senior Subordinated Note Trustee may conclusively rely upon
any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Senior Subordinated Note Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Senior Subordinated Note Trustee acts or refrains
from acting, it may require an Officers' Certificate or an Opinion of
Counsel or both. The Senior Subordinated Note Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel. The Senior Subordinated Note
Trustee may consult with counsel and the written
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advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Senior Subordinated Note Trustee may act through its
attorneys and agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Senior Subordinated Note Trustee shall not be liable for any
action it takes or omits to take in good faith that it believes to be
authorized or within the rights or powers conferred upon it by this
Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers or any Senior
Subordinated Note Guarantor shall be sufficient if signed by an Officer of
the Issuers or such Senior Subordinated Note Guarantor.
(f) The Senior Subordinated Note Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders unless such
Holders shall have requested such action in accordance with this Indenture
and have offered to the Senior Subordinated Note Trustee reasonable
security or indemnity against the costs, expenses and liabilities that
might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.01 hereof, the Senior
Subordinated Note Trustee shall have no duty to inquire as to the
performance of the Issuers' covenants in Article 4 hereof. In addition,
the Senior Subordinated Note Trustee shall not be deemed to have knowledge
of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Section 6.01(a) or 6.01(b) or (ii) any Default of
Event of Default of which the Senior Subordinated Note Trustee shall have
received written notification or obtained actual knowledge.
(h) The Senior Subordinated Notes Trustee may construe any of the
provisions of this Senior Subordinated Notes Indenture insofar as the same
may appear to be ambiguous or inconsistent with any other provision
hereof, and any construction of such provisions hereof by the Senior
Subordinated Note Trustee in good faith shall be binding upon the Holders
and the Issuers, provided such construction is not contrary to law.
(i) The permissive right of the Senior Subordinated Notes Senior
Subordinated Notes Trustee to do things enumerated in this Senior
Subordinated Notes Indenture shall not be construed as a duty.
(j) Except as may be required by an applicable law or regulation
that may not be waived or varied by the terms of this Senior Subordinated
Notes Indenture, the Senior Subordinated Notes Trustee shall not be
required to give any bond or surety in respect to the execution of the
said trusts and powers or otherwise in respect of the premises.
(k) The Senior Subordinated Notes Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, coupon or other paper or
document but the Senior Subordinated Notes Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as
it may see fit, and, if the Senior Subordinated Notes Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books and records of the Issuers, personally or by
agent or attorney.
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(l) The Senior Subordinated Note Trustee shall be entitled to rely
on an Officers' Certificate with respect to any calculations relating to
the determination of Accreted Value, Senior Subordinated Note Make-Whole
Premium and Liquidated Damages.
SECTION 7.03. INDIVIDUAL RIGHTS OF SENIOR SUBORDINATED NOTE TRUSTEE.
The Senior Subordinated Note Trustee in its individual or any other
capacity may become the owner or pledgee of Senior Subordinated Notes and may
otherwise deal with the Issuers and the Senior Subordinated Note Guarantors with
the same rights it would have if it were not Senior Subordinated Note Trustee.
However, in the event that the Senior Subordinated Note Trustee acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the SEC for permission to continue as trustee or resign. Any Agent may do the
same with like rights and duties. The Senior Subordinated Note Trustee is also
subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. SENIOR SUBORDINATED NOTE TRUSTEE'S DISCLAIMER.
The Senior Subordinated Note Trustee shall not be responsible for and makes
no representation as to the validity or adequacy of this Indenture, the
Intercreditor Agreement, the Sole Stockholder Intercreditor Agreement, the
Senior Subordinated Notes or any Senior Subordinated Note Guaranty, it shall not
be accountable for the Issuers' use of the proceeds from the Senior Subordinated
Notes or any money paid to the Issuers or upon the Issuers' direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Senior
Subordinated Note Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Senior Subordinated Notes or any other
document in connection with the sale of the Senior Subordinated Notes or
pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Senior Subordinated Note Trustee, the Senior Subordinated Note
Trustee shall mail to Holders of Senior Subordinated Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium and
Liquidated Damages, if any, or interest on any Senior Subordinated Note, the
Senior Subordinated Note Trustee may withhold the notice if and so long as the
Senior Subordinated Note Trustee in good faith determines that withholding the
notice is in the interests of the Holders of the Senior Subordinated Notes.
SECTION 7.06. REPORTS BY SENIOR SUBORDINATED NOTE TRUSTEE TO HOLDERS OF THE
SENIOR SUBORDINATED NOTES.
Within 60 days of each May 15th beginning with the May 15th following the
date of this Indenture, and for so long as Senior Subordinated Notes remain
outstanding, the Senior Subordinated Note Trustee shall mail to the Holders of
the Senior Subordinated Notes a brief report dated as of such reporting date
that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a)
has occurred within the twelve months preceding the reporting date, no report
need be transmitted). The Senior Subordinated Note Trustee also shall comply
with TIA ss. 313(b)(2). The Senior Subordinated Note Trustee shall also transmit
by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of Senior
Subordinated Notes shall be mailed to the Issuers and filed with the SEC and
each stock exchange on which the Senior
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Subordinated Notes are listed in accordance with TIA ss. 313(d). The Issuers
shall promptly notify the Senior Subordinated Note Trustee when the Senior
Subordinated Notes are listed on any stock exchange.
At the expense of the Issuers, the Senior Subordinated Note Trustee or, if
the Senior Subordinated Note Trustee is not the Registrar, the Registrar, shall
report the names of record holders of the Senior Subordinated Notes to any
Gaming Authority when requested to do so by the Issuers.
At the express direction of the Issuers and at the Issuers' expense, the
Senior Subordinated Note Trustee will provide any Gaming Authority with:
(i) copies of all notices, reports and other written communications
which the Senior Subordinated Note Trustee gives to Holders;
(ii) a list of all of the Holders promptly after the original issuance of
the Senior Subordinated Notes and periodically thereafter if the
Issuers so direct;
(iii) notice of any Default under this Indenture, any acceleration of the
Indebtedness evidenced hereby, the institution of any legal actions
or proceedings before any court or governmental authority in respect
of a Default or Event of Default hereunder;
(iv) notice of the removal or resignation of the Senior Subordinated Note
Trustee within five Business Days of the effectiveness thereof;
(v) notice of any transfer or assignment of rights under this Indenture
or the Senior Subordinated Note Guaranties known to the Senior
Subordinated Note Trustee within five Business Days thereof; and
(vi) a copy of any amendment to the Senior Subordinated Notes or this
Indenture within five Business Days of the effectiveness thereof.
To the extent requested by the Issuers and at the Issuers' expense, the
Senior Subordinated Note Trustee shall cooperate with any Gaming Authority in
order to provide such Gaming Authority with the information and documentation
requested and as otherwise required by applicable law.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers and the Senior Subordinated Note Guarantors shall pay to the
Senior Subordinated Note Trustee from time to time reasonable compensation for
its acceptance of this Indenture and services hereunder in accordance with a
written schedule provided by the Senior Subordinated Note Trustee to the
Issuers. The Senior Subordinated Note Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuers
and the Senior Subordinated Note Guarantors shall reimburse the Senior
Subordinated Note Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Senior Subordinated Note
Trustee's agents and counsel.
The Issuers and the Senior Subordinated Note Guarantors shall indemnify the
Senior Subordinated Note Trustee against any and all losses, liabilities or
expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Issuers (including this Section
7.07) and
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defending itself against any claim (whether asserted by the Issuers or any
Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence, willful
misconduct or bad faith. The Senior Subordinated Note Trustee shall notify the
Issuers promptly of any claim for which it may seek indemnity. Failure by the
Senior Subordinated Note Trustee to so notify the Issuers shall not relieve the
Issuers or any Senior Subordinated Note Guarantor of its obligations hereunder.
The Issuers shall defend the claim and the Senior Subordinated Note Trustee
shall cooperate in the defense. To the extent there exists a conflict or
potential conflict of interest, the Senior Subordinated Note Trustee may have
separate counsel and the Issuers and the Senior Subordinated Note Guarantors
shall pay the reasonable fees and expenses of such counsel. Neither the Issuers
nor any Senior Subordinated Note Guarantor need pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers and the Senior Subordinated Note Guarantors
under this Section 7.07 shall survive the satisfaction and discharge of this
Indenture.
When the Senior Subordinated Note Trustee incurs expenses or renders
services after an Event of Default specified in Section 6.01(i) or (j) hereof
occurs, the expenses and the compensation for the services (including the
reasonable fees and expenses of its agents and counsel) are intended to
constitute expenses of administration under any Bankruptcy Law.
The Senior Subordinated Note Trustee shall comply with the provisions of
TIA ss. 313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF SENIOR SUBORDINATED NOTE TRUSTEE.
A resignation or removal of the Senior Subordinated Note Trustee and
appointment of a successor Senior Subordinated Note Trustee shall become
effective only upon the successor Senior Subordinated Note Trustee's acceptance
of appointment and taking of office as provided in this Section.
The Senior Subordinated Note Trustee may resign in writing at any time and
be discharged from the trust hereby created by so notifying the Issuers. The
Holders of Senior Subordinated Notes of a majority in principal amount of the
then outstanding Senior Subordinated Notes may remove the Senior Subordinated
Note Trustee by so notifying the Senior Subordinated Note Trustee and the
Issuers in writing. The Issuers may remove the Senior Subordinated Note Trustee
if:
(a) the Senior Subordinated Note Trustee fails to comply with
Section 7.10 hereof;
(b) the Senior Subordinated Note Trustee is adjudged a bankrupt or
an insolvent or an order for relief is entered with respect to the Senior
Subordinated Note Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Senior
Subordinated Note Trustee or its property; or
(d) the Senior Subordinated Note Trustee becomes incapable of
acting.
If the Senior Subordinated Note Trustee resigns or is removed or if a
vacancy exists in the office of Senior Subordinated Note Trustee for any reason,
the Issuers shall promptly appoint a successor Senior Subordinated Note Trustee.
For up to one year after the successor Senior Subordinated Note
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Trustee takes office, the Holders of a majority in principal amount of the then
outstanding Senior Subordinated Notes may by written action appoint a successor
Senior Subordinated Note Trustee to replace the successor Senior Subordinated
Note Trustee appointed by the Issuers.
If any Gaming Authority requires a Senior Subordinated Note Trustee to be
approved, licensed or qualified and the Senior Subordinated Note Trustee fails
or declines to do so, such approval, license or qualification shall be obtained
upon the request of, and at the expense of, the Issuers unless the Senior
Subordinated Note Trustee declines to do so, or, if the Senior Subordinated Note
Trustee's relationship with either the Issuers or the Senior Subordinated Note
Guarantors may, in the Issuers' discretion, jeopardize any material gaming
license or franchise or right or approval granted thereto, the Senior
Subordinated Note Trustee shall resign, and, in addition, the Senior
Subordinated Note Trustee may at its option resign if the Senior Subordinated
Note Trustee in its sole discretion determines not to be so approved, licensed
or qualified.
If a successor Senior Subordinated Note Trustee does not take office
within 60 days after the retiring Senior Subordinated Note Trustee resigns or is
removed, the retiring Senior Subordinated Note Trustee, the Issuers, any Senior
Subordinated Note Guarantor or the Holders of Senior Subordinated Notes of at
least 10% in principal amount of the then outstanding Senior Subordinated Notes
may petition any court of competent jurisdiction for the appointment of a
successor Senior Subordinated Note Trustee.
If the Senior Subordinated Note Trustee, after written request by any
Holder of a Senior Subordinated Note who has been a Holder of a Senior
Subordinated Note for at least six months, fails to comply with Section 7.10,
such Holder of a Senior Subordinated Note may petition any court of competent
jurisdiction for the removal of the Senior Subordinated Note Trustee and the
appointment of a successor Senior Subordinated Note Trustee.
A successor Senior Subordinated Note Trustee shall deliver a written
acceptance of its appointment to the retiring Senior Subordinated Note Trustee
and to the Issuers. Thereupon, the resignation or removal of the retiring Senior
Subordinated Note Trustee shall become effective, and the successor Senior
Subordinated Note Trustee shall have all the rights, powers and duties of the
Senior Subordinated Note Trustee under this Indenture. The successor Senior
Subordinated Note Trustee shall mail a notice of its succession to Holders of
the Senior Subordinated Notes. The retiring Senior Subordinated Note Trustee
shall promptly transfer all property held by it as Senior Subordinated Note
Trustee to the successor Senior Subordinated Note Trustee, provided all sums
owing to the Senior Subordinated Note Trustee hereunder have been paid and
subject to the Lien provided for in Section 7.07 hereof. Notwithstanding
replacement of the Senior Subordinated Note Trustee pursuant to this Section
7.08, the Issuers' and the Senior Subordinated Note Guarantors' obligations
under Section 7.07 hereof shall continue for the benefit of the retiring Senior
Subordinated Note Trustee.
SECTION 7.09. SUCCESSOR SENIOR SUBORDINATED NOTE TRUSTEE BY MERGER, ETC.
If the Senior Subordinated Note Trustee consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Senior Subordinated Note Trustee; provided such corporation shall
be otherwise eligible and qualified under this Article.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Senior Subordinated Note Trustee hereunder
that is a corporation or banking association organized and doing business under
the laws of the United States of America or
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of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Senior Subordinated Note Trustee who
satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Senior
Subordinated Note Trustee is subject to TIA ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Senior Subordinated Note Trustee is subject to TIA ss. 311(a),
excluding any creditor relationship listed in TIA ss. 311(b). A Senior
Subordinated Note Trustee who has resigned or been removed shall be subject to
TIA ss. 311(a) to the extent indicated therein.
SECTION 7.12. AUTHORIZATION OF TRUSTEE TO TAKE OTHER ACTIONS.
(a) The Senior Subordinated Note Trustee is hereby authorized to enter
into and take any actions or deliver such consents required by or requested
under the Intercreditor Agreement and the Sole Stockholder Intercreditor
Agreement and such other documents as directed by the Holders of a majority of
outstanding aggregate principal amount of the Senior Subordinated Notes. If at
any time any action by or the consent of the Senior Subordinated Note Trustee is
required under the Intercreditor Agreement and the Sole Stockholder
Intercreditor Agreement or any other document entered into by the Senior
Subordinated Note Trustee at the direction of a majority of the Holders of
outstanding aggregate principal amount of the Senior Subordinated Notes, such
action or consent shall be taken or given by the Senior Subordinated Note
Trustee upon the consent to such action by the Holders of a majority of
outstanding aggregate principal amount of the Senior Subordinated Notes.
(b) Upon any refinancing or replacement of the Bank Credit Facility or the
Mall Construction Loan Facility with a lender that does not become a party to
the Intercreditor Agreement or the Sole Stockholder Intercreditor Agreement, the
Senior Subordinated Note Trustee shall enter into an intercreditor agreement
with such lender, at such lender's request, with terms that are substantially as
favorable to the Senior Subordinated Note Trustee or the Holders of Senior
Subordinated Notes as those contained in the Intercreditor Agreement or the Sole
Stockholder Intercreditor Agreement, as applicable. The Senior Subordinated Note
Trustee shall also enter into such amendments or supplements to the
Intercreditor Agreement and the Sole Stockholder Intercreditor Agreement to
provide for additional parties to be bound by the terms thereof.
(c) Each Holder of Senior Subordinated Notes, by its acceptance thereof,
consents and agrees to the terms of the Intercreditor Agreement (including,
without limitation, the provisions providing for foreclosure and release of Note
Collateral as well as any additional intercreditor arrangements entered into by
the Senior Subordinated Note Trustee pursuant to this Section 7.12) and the Sole
Stockholder Intercreditor Agreement as the same may be in effect or may be
amended from time to time in accordance with its terms and authorizes and
directs the Subordinated Note Trustee to enter into the Intercreditor Agreement
and the Sole Stockholder Intercreditor Agreement and to perform its obligations
and exercise its rights thereunder in accordance therewith. The Issuers and the
Senior Subordinated Note Guarantors shall deliver to the Senior Subordinated
Note Trustee copies of all documents executed pursuant to this Indenture, the
Intercreditor Agreement and the Sole Stockholder Intercreditor Agreement and
shall do or cause to be done all such acts and things as may be necessary or
proper, or as may be required by the provisions of the Intercreditor Agreement
and/or the Sole Stockholder Intercreditor Agreement.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the option of the Board of Directors of the Company
evidenced by a resolution set forth in an Officers' Certificate delivered to the
Senior Subordinated Note Trustee, at any time, elect to have either Section 8.02
or 8.03 hereof be applied to all outstanding Senior Subordinated Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Issuers and the Senior Subordinated Note
Guarantors shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be deemed to have been discharged from their respective
obligations with respect to all outstanding Senior Subordinated Notes and any
Senior Subordinated Note Guaranties on the date the conditions set forth below
are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
Defeasance means that the Issuers shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Senior Subordinated Notes
and cured all existing Events of Default, which Senior Subordinated Notes shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Senior
Subordinated Notes, and this Indenture (and the Senior Subordinated Note
Trustee, on demand of and at the expense of the Issuers, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Senior Subordinated Notes to receive solely from the
trust fund described in Section 8.04 hereof, and as more fully set forth in such
Section, payments in respect of the principal of, premium and Liquidated
Damages, if any, and interest on such Senior Subordinated Notes when such
payments are due, (b) the Issuers' and the Senior Subordinated Note Guarantors'
obligations with respect to such Senior Subordinated Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Senior Subordinated Note Trustee hereunder and the Issuers' and the Senior
Subordinated Note Guarantors' obligations in connection therewith and (d) this
Article 8. Subject to compliance with this Article 8, the Issuers may exercise
their option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Issuers and the Senior Subordinated Note
Guarantors shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be released from their obligations under the covenants
contained in Sections 4.03, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.14,
4.15, 4.16, 4.17, 4.18, 4.20, 4.21, 4.22, 4.23 and 4.24 and Articles 5 and 11
hereof with respect to the outstanding Senior Subordinated Notes and Senior
Subordinated Note Guaranties on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Senior
Subordinated Notes shall thereafter be deemed not "outstanding" for the purposes
of any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Senior Subordinated Notes shall not be deemed outstanding
for accounting purposes). For this purpose,
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Covenant Defeasance means that, with respect to the outstanding Senior
Subordinated Notes, the Issuers and the Senior Subordinated Note Guarantors may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Senior Subordinated Notes and
Senior Subordinated Note Guaranties shall be unaffected thereby. In addition,
upon the Issuers' exercise under Section 8.01 hereof of the option applicable to
this Section 8.03 hereof, subject to the satisfaction of the conditions set
forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(g) and 6.01(k)
through 6.01(m) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Senior Subordinated Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit with the Senior
Subordinated Note Trustee, in trust, for the benefit of the Holders, cash
in United States 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 as
evidenced by a certificate delivered to the Senior Subordinated Note
Trustee, 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 on the outstanding Senior Subordinated Notes on the stated
maturity date or on an applicable redemption date, as the case may be, of
such principal of, premium and Liquidated Damages, if any, or interest on
the outstanding Senior Subordinated Notes;
(b) in the case of an election under Section 8.02 hereof, the
Issuers shall have delivered to the Senior Subordinated Note Trustee an
Opinion of Counsel in the United States reasonably acceptable to the
Senior Subordinated Note Trustee confirming that, subject to customary
assumptions and exclusions, (A) the Issuers have received from, or there
has been published by, the United States Internal Revenue Service a ruling
or (B) since the Issuance Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of 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;
(c) in the case of an election under Section 8.03 hereof, the
Issuers shall have delivered to the Senior Subordinated Note Trustee an
Opinion of Counsel in the United States reasonably acceptable to the
Senior Subordinated Note Trustee confirming 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 Covenant Defeasance and
will be subject to U.S. federal income tax on the same
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amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing pursuant to Section 6.01(a), 6.01(b), 6.01(i) or 6.01(j) hereof
on the date of such deposit;
(e) 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 this 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;
(f) the Issuers shall have delivered to the Senior Subordinated Note
Trustee an Opinion of Counsel in the United States to the effect that, as
of the date of such opinion and subject to customary assumptions and
exclusions, 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 for the ratable benefit of the Holders of
Senior Subordinated Notes;
(g) 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
(h) 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.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Senior
Subordinated Note Trustee (or other qualifying trustee, collectively for
purposes of this Section 8.05, the "Senior Subordinated Note Trustee") pursuant
to Section 8.04 hereof in respect of the outstanding Senior Subordinated Notes
shall be held in trust and applied by the Senior Subordinated Note Trustee, in
accordance with the provisions of such Senior Subordinated Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuers acting as Paying Agent) as the Senior Subordinated Note
Trustee may determine, to the Holders of such Senior Subordinated Notes of all
sums due and to become due thereon in respect of principal, premium and
Liquidated Damages, if any, and interest but such money need not be segregated
from other funds except to the extent required by law.
The Issuers and the Senior Subordinated Note Guarantors shall pay and
indemnify the Senior Subordinated Note Trustee against any tax, fee or other
charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Subordinated Notes.
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Anything in this Article 8 to the contrary notwithstanding, the Senior
Subordinated Note Trustee shall deliver or pay to the Issuers from time to time
upon the request of the Issuers any money or non-callable Government Securities
held by it as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Senior Subordinated Note Trustee
(which may be the opinion delivered under Section 8.04(a) hereof), are in excess
of the amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE ISSUERS.
Any money deposited with the Senior Subordinated Note Trustee or any
Paying Agent, or then held by the Issuers, in trust for the payment of the
principal of, premium and Liquidated Damages, if any, or interest on any Senior
Subordinated Note and remaining unclaimed for two years after such principal,
premium and Liquidated Damages, if any, or interest has become due and payable
shall be paid to the Issuers on its request or (if then held by the Issuers)
shall be discharged from such trust; and the Holder of such Senior Subordinated
Note shall thereafter, as a secured creditor, look only to the Issuers for
payment thereof, and all liability of the Senior Subordinated Note Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Issuers as trustee thereof, shall thereupon cease; provided, however, that the
Senior Subordinated Note Trustee or such Paying Agent, before being required to
make any such repayment, may at the expense of the Issuers cause to be published
once, in the New York Times and The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Issuers.
SECTION 8.07. REINSTATEMENT.
If the Senior Subordinated Note Trustee or Paying Agent is unable to apply
any United States dollars or non-callable Government Securities in accordance
with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Issuers' and the Senior
Subordinated Note Guarantors' obligations under this Indenture and the Senior
Subordinated Notes and Senior Subordinated Note Guaranties shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Senior Subordinated Note Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Issuers and the
Senior Subordinated Note Guarantors make any payment of principal of, premium
and Liquidated Damages, if any, or interest on any Senior Subordinated Note
following the reinstatement of its obligations, the Issuers and the Senior
Subordinated Note Guarantors shall be subrogated to the rights of the Holders of
such Senior Subordinated Notes to receive such payment from the money held by
the Senior Subordinated Note Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF SENIOR SUBORDINATED NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuers, the Senior
Subordinated Note Guarantors and the Senior Subordinated Note Trustee may amend
or supplement this Indenture, the
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Senior Subordinated Notes, the Senior Subordinated Note Guaranties, the
Intercreditor Agreement or the Sole Stockholder Intercreditor Agreement without
the consent of any Holder of a Senior Subordinated Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article 5 or Article 11 hereof;
(c) to provide for uncertificated Senior Subordinated Notes in
addition to or in place of certificated Senior Subordinated Notes;
(d) to provide for the assumption of the Issuers' or the Senior
Subordinated Note Guarantors' obligations to the Holders of the Senior
Subordinated Notes in the case of a merger or consolidation pursuant to
Articles 5 or 11 hereof, as the case may be;
(e) 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
Section 11.02 hereof) or that does not adversely affect the legal rights
hereunder or under the Intercreditor Agreement or Sole Stockholder
Intercreditor Agreement, of any Holder of a Senior Subordinated Note; or
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Issuers accompanied by a resolution of the Board
of Directors of the Issuers and the Senior Subordinated Note Guarantors (or
their managing members) authorizing the execution of any such amended or
supplemental Indenture, Senior Subordinated Notes or Senior Subordinated Note
Guaranties, and upon receipt by the Senior Subordinated Note Trustee of the
documents described in Section 7.02 hereof, the Senior Subordinated Note Trustee
shall join with the Issuers and the Senior Subordinated Note Guarantors in the
execution of any amended or supplemental Indenture, Senior Subordinated Notes or
Senior Subordinated Note Guaranties authorized or permitted by the terms of this
Indenture, but the Senior Subordinated Note Trustee shall not be obligated to
enter into such amended or supplemental Indenture, Senior Subordinated Notes or
Senior Subordinated Note Guaranties that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR SUBORDINATED NOTES.
Except as provided below in this Section 9.02 or elsewhere in this
Indenture, the Issuers and the Senior Subordinated Note Trustee may amend or
supplement this Indenture, the Senior Subordinated Notes, the Senior
Subordinated Note Guaranties, the Intercreditor Agreement or the Sole
Stockholder Intercreditor Agreement 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 exchange offer
for the Senior Subordinated Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium and Liquidated Damages,
if any, or interest on the Senior Subordinated Notes, except a payment default
resulting from an acceleration that has been rescinded) or compliance with any
provision of this Indenture, the Senior Subordinated Notes, the Senior
Subordinated Note Guaranties, the Intercreditor Agreement or the Sole
Stockholder Intercreditor Agreement may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Senior
Subordinated Notes
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(including consents obtained in connection with a tender offer or exchange offer
for the Senior Subordinated Notes).
Upon the request of the Issuers accompanied by a resolution of the Board
of Directors of the Company and the Senior Subordinated Note Guarantors
authorizing the execution of any such amended or supplemental Indenture, Senior
Subordinated Notes, the Senior Subordinated Note Guaranties or the Intercreditor
Agreement and upon the filing with the Senior Subordinated Note Trustee of
evidence reasonably satisfactory to the Senior Subordinated Note Trustee of the
consent of the Holders of Senior Subordinated Notes as aforesaid, and upon
receipt by the Senior Subordinated Note Trustee of the documents described in
Section 7.02 hereof, the Senior Subordinated Note Trustee shall join with the
Issuers and the Senior Subordinated Note Guarantors in the execution of such
amended or supplemental Indenture, Senior Subordinated Notes, Senior
Subordinated Note Guaranties, Intercreditor Agreement or Sole Stockholder
Intercreditor Agreement, unless such amended or supplemental Indenture, Senior
Subordinated Notes, Senior Subordinated Note Guaranties, Intercreditor Agreement
or Sole Stockholder Intercreditor Agreement affects the Senior Subordinated Note
Trustee's own rights, duties or immunities under this Indenture, the Senior
Subordinated Notes or the Senior Subordinated Note Guaranties, the Intercreditor
Agreement, the Sole Stockholder Intercreditor Agreement or otherwise, in which
case the Senior Subordinated Note Trustee may in its discretion, but shall not
be obligated to, enter into such amended or supplemental Indenture, Senior
Subordinated Notes, Senior Subordinated Note Guaranties, Intercreditor Agreement
or Sole Stockholder Intercreditor Agreement.
It shall not be necessary for the consent of the Holders of Senior
Subordinated Notes under this Section 9.02 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuers shall mail to the Holders of Senior Subordinated Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Issuers to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture, Senior Subordinated Notes, Senior Subordinated Note
Guaranties, Intercreditor Agreement or Sole Stockholder Intercreditor Agreement
waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
aggregate principal amount of the Senior Subordinated Notes then outstanding may
waive compliance in a particular instance with any provision of this Indenture,
the Senior Subordinated Notes, the Senior Subordinated Note Guaranties, the
Intercreditor Agreement or the Sole Stockholder Intercreditor Agreement.
However, without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Senior Subordinated Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Senior Subordinated Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Senior Subordinated Note or alter or waive any of the provisions with
respect to the optional or mandatory redemption provisions of the Senior
Subordinated Notes (provided, however, that the term "redemption" does not
apply to any provision with respect to any Repurchase Offer);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Senior Subordinated Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium and Liquidated Damages, if any, or interest on the Senior
Subordinated Notes (except a rescission
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of acceleration of the Senior Subordinated Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding
Senior Subordinated Notes and a waiver of the payment default that
resulted from such acceleration);
(e) make any Senior Subordinated Note payable in money other than
that stated in the Senior Subordinated Notes;
(f) make any change in the provisions of this 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
(g) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Senior Subordinated
Notes and the Senior Subordinated Note Guaranties shall be set forth in a
amended or supplemental Indenture that complies with the TIA as then in effect,
if applicable. This Indenture shall be construed to comply in every respect with
the TIA.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Senior Subordinated Note is a continuing consent by the
Holder of a Senior Subordinated Note and every subsequent Holder of a Senior
Subordinated Note or portion of a Senior Subordinated Note that evidences the
same debt as the consenting Holder's Senior Subordinated Note, even if notation
of the consent is not made on any Senior Subordinated Note. However, any such
Holder of a Senior Subordinated Note or subsequent Holder of a Senior
Subordinated Note may revoke the consent as to its Senior Subordinated Note if
the Senior Subordinated Note Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR SUBORDINATED NOTES.
The Senior Subordinated Note Trustee may place an appropriate notation
about an amendment, supplement or waiver on any Senior Subordinated Note
thereafter authenticated. The Issuers in exchange for all Senior Subordinated
Notes may issue and the Senior Subordinated Note Trustee shall authenticate new
Senior Subordinated Notes (accompanied by a notation of the Senior Subordinated
Note Guaranties duly endorsed by the Senior Subordinated Note Guarantors) that
reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior
Subordinated Note shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 9.06. SENIOR SUBORDINATED NOTE TRUSTEE TO SIGN AMENDMENTS, ETC.
The Senior Subordinated Note Trustee shall sign any amended or
supplemental indenture, Senior Subordinated Note or Senior Subordinated Note
Guaranty, if necessary, authorized pursuant to this Article 9 if the amendment
or supplement does not adversely affect the rights, duties, liabilities or
immunities
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of the Senior Subordinated Note Trustee. The Issuers or any Senior Subordinated
Note Guarantor may not sign an amendment or supplemental Indenture, Senior
Subordinated Note or Senior Subordinated Note Guaranty until the Board of
Directors approves it. In executing any amended or supplemental indenture,
Senior Subordinated Note or Senior Subordinated Note Guaranty, if necessary, the
Senior Subordinated Note Trustee shall be entitled to receive and (subject to
Section 7.01) shall be fully protected in relying upon, an Officer's Certificate
and an Opinion of Counsel, which Opinion of Counsel may be subject to customary
assumptions and exclusions, stating that the execution of such amended or
supplemental indenture, Senior Subordinated Note or Senior Subordinated Note
Guaranty is authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company and Venetian agree, and each Holder by accepting a Senior
Subordinated Note agrees, that the Indebtedness evidenced by the Senior
Subordinated Notes is subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment in full of all Senior
Debt (whether outstanding on the date hereof or hereafter incurred), and that
the subordination is for the benefit of the holders of Senior Debt.
SECTION 10.02. CERTAIN DEFINITIONS.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Bank Credit Facility and (ii) any other Senior Debt permitted under this
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. The Issuers
hereby designate all Obligations under the Mortgage Notes and the Mall
Construction Loan Facility as Designated Senior Debt hereunder.
"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 this Indenture.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness outstanding under Bank Credit
Facility, any Guarantees thereof 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 this 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 this Indenture.
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A distribution may consist of cash, securities or other property, by
set-off or otherwise.
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company or Venetian in a
liquidation or dissolution of the Company or Venetian or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or either of their property, in an assignment for the benefit of
creditors or any marshalling of the Company's or Venetian's assets and
liabilities:
(1) holders of Senior Debt shall 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 an allowed claim)
before Holders of the Senior Subordinated Notes shall be entitled to
receive any payment with respect to the Senior Subordinated Notes (except
that Holders may receive (i) Permitted Junior Securities and (ii) payments
and other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as provided
in subsection (1) above) are paid in full, any distribution to which
Holders would be entitled but for this Article 10 shall be made to holders
of Senior Debt (except that Holders of Senior Subordinated Notes may
receive (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section
8.01 hereof), as their interests may appear.
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company and Venetian may not make any payment or distribution to the
Senior Subordinated Note Trustee or any Holder in respect of Obligations with
respect to the Senior Subordinated Notes and may not acquire from the Senior
Subordinated Note Trustee or any Holder any Senior Subordinated Notes for cash
or property (other than (i) Permitted Junior Securities and (ii) payments and
other distributions made from any defeasance trust created pursuant to Section
8.01 hereof) until all principal and other Obligations with respect to the
Senior Debt have been paid in full 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 grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits holders of the Designated
Senior Debt to accelerate its maturity and the Senior Subordinated Note
Trustee receives a notice of the default (a "Payment Blockage Notice")
from a Representative of Designated Senior Debt. If the Senior
Subordinated Note Trustee receives any such Payment Blockage Notice, no
subsequent Payment Blockage Notice shall be effective for purposes of this
Section unless and until (i) at least 360 days shall 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 Securities 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.
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The Company and Venetian may and shall resume payments on and
distributions in respect of the Senior Subordinated Notes and may acquire them
upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii) hereof, 179
days pass after notice is received if the maturity of such Designated Senior
Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.05. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company and Venetian shall promptly notify holders of Senior Debt
of the acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Senior Subordinated Note Trustee or any Holder
receives any payment of any Obligations with respect to the Senior Subordinated
Notes at a time when the Senior Subordinated Note Trustee or such Holder, as
applicable, has actual knowledge that such payment is prohibited by Section
10.04 hereof, such payment shall be held by the Senior Subordinated Note Trustee
or such Holder, in trust for the benefit of, and shall be paid forthwith over
and delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
With respect to the holders of Senior Debt, the Senior Subordinated Note
Trustee undertakes to perform only such obligations on the part of the Senior
Subordinated Note Trustee as are specifically set forth in this Article 10, and
no implied covenants or obligations with respect to the holders of Senior Debt
shall be read into this Indenture against the Senior Subordinated Note Trustee.
The Senior Subordinated Note Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Debt, and shall not be liable to any such holders
if the Senior Subordinated Note Trustee shall pay over or distribute to or on
behalf of Holders or the Company or Venetian or any other Person money or assets
to which any holders of Senior Debt shall be entitled by virtue of this Article
10, except if such payment is made as a result of the willful misconduct or
gross negligence of the Senior Subordinated Note Trustee.
SECTION 10.07. NOTICE BY COMPANY OR VENETIAN.
The Company and Venetian shall promptly notify the Senior Subordinated
Note Trustee and the Paying Agent of any facts known to the Company or Venetian
that would cause a payment of any Obligations with respect to the Senior
Subordinated Notes to violate this Article 10, but failure to give such notice
shall not affect the subordination of the Senior Subordinated Notes to the
Senior Debt as provided in this Article 10.
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SECTION 10.08. SUBROGATION.
After all Senior Debt is paid in full and until the Senior Subordinated
Notes are paid in full, Holders of Senior Subordinated Notes shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the Senior
Subordinated Notes) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders of Senior Subordinated Notes have been applied
to the payment of Senior Debt. A distribution made under this Article 10 to
holders of Senior Debt that otherwise would have been made to Holders of Senior
Subordinated Notes is not, as between the Company, Venetian and Holders, a
payment by the Company and Venetian on the Senior Subordinated Notes.
SECTION 10.09. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Senior
Subordinated Notes and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company, Venetian and Holders of Senior
Subordinated Notes, the obligation of the Company and Venetian, which is
absolute and unconditional, to pay principal of and interest on the Senior
Subordinated Notes in accordance with their terms;
(2) affect the relative rights of Holders of Senior Subordinated Notes
and creditors of the Company or Venetian other than their rights in relation
to holders of Senior Debt; or
(3) prevent the Senior Subordinated Note Trustee or any Holder of Senior
Subordinated Notes from exercising its available remedies upon a Default or
Event of Default, subject to the rights of holders and owners of Senior Debt
to receive distributions and payments otherwise payable to Holders of Senior
Subordinated Notes.
If the Company or Venetian fails because of this Article 10 to pay
principal of or interest on a Senior Subordinated Note on the due date, the
failure is still a Default or Event of Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY OR VENETIAN.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Senior Subordinated Notes shall be impaired by
any act or failure to act by the Company, Venetian or any Holder or by the
failure of the Company or any Holder to comply with this Indenture.
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company and Venetian
referred to in this Article 10, the Senior Subordinated Note Trustee and the
Holders of Senior Subordinated Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction or upon any certificate of
such Representative or of the liquidating trustee or agent or other Person
making any distribution to the Senior Subordinated Note Trustee or to the
Holders of Senior Subordinated Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the Company or Venetian, the amount thereof or payable
thereon,
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the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
SECTION 10.12. RIGHTS OF SENIOR SUBORDINATED NOTE TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Senior Subordinated Note Trustee shall not be charged
with knowledge of the existence of any facts that would prohibit the making of
any payment or distribution by the Senior Subordinated Note Trustee, and the
Senior Subordinated Note Trustee and the Paying Agent may continue to make
payments on the Senior Subordinated Notes, unless the Senior Subordinated Note
Trustee shall have received at its Corporate Trust Office at least five Business
Days prior to the date of such payment written notice of facts that would cause
the payment of any Obligations with respect to the Senior Subordinated Notes to
violate this Article 10. Only the Company, Venetian or a Representative may give
the notice. Nothing in this Article 10 shall impair the claims of, or payments
to, the Senior Subordinated Note Trustee under or pursuant to Section 7.07
hereof.
The Senior Subordinated Note Trustee in its individual or any other
capacity may hold Senior Debt with the same rights it would have if it were not
Senior Subordinated Note Trustee. Any Agent may do the same with like rights.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Senior Subordinated Notes, by the Holder's acceptance
thereof, authorizes and directs the Senior Subordinated Note Trustee on such
Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article 10, and appoints the
Senior Subordinated Note Trustee to act as such Holder's attorney-in-fact for
any and all such purposes. If the Senior Subordinated Note Trustee does not file
a proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, a Representative of Designated Senior Debt is hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Senior Subordinated Notes.
SECTION 10.14. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
SENIOR SUBORDINATED NOTE GUARANTIES
SECTION 11.01. SENIOR SUBORDINATED NOTE GUARANTIES.
The Senior Subordinated Notes are hereby jointly, severally and
unconditionally guaranteed by the Senior Subordinated Note Guarantors. The
Senior Subordinated Note Guarantors hereby guarantee to each Holder of a Senior
Subordinated Note authenticated and delivered by the Senior Subordinated Note
Trustee irrespective of the validity or enforceability of this Indenture, the
Senior Subordinated Notes or the obligations of the Issuers under this Indenture
or the Senior Subordinated Notes, that: (i) the principal of, premium and
Liquidated Damages, if any, and interest on the Senior Subordinated Notes will
be paid in full when due, whether at the maturity or interest payment or
mandatory redemption date, by acceleration, call for redemption or otherwise,
and interest on the overdue principal and interest, if
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any, of the Senior Subordinated Notes and all other obligations of the Issuers
to the Holders or the Senior Subordinated Note Trustee under this Indenture or
the Senior Subordinated Notes will be promptly paid in full or performed, all in
accordance with the terms of this Indenture and the Senior Subordinated Notes;
and (ii) in case of any extension of time of payment or renewal of any Senior
Subordinated Notes or any of such other obligations, they will be paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration, prepayment, declaration, demand or
otherwise. Failing payment when due of any amount so guaranteed for whatever
reason, each Senior Subordinated Note Guarantor will be obligated to pay the
same whether or not such failure to pay has become an Event of Default which
could cause acceleration pursuant to Section 6.02 hereof. Each Senior
Subordinated Note Guarantor agrees that this is a guarantee of payment not a
guarantee of collection.
Each Senior Subordinated Note Guarantor hereby agrees that its
obligations with regard to this Senior Subordinated Note Guaranty shall be joint
and several, unconditional, irrespective of the validity or enforceability of
the Senior Subordinated Notes or the obligations of the Issuers under this
Indenture, the absence of any action to enforce the same, the recovery of any
judgment against the Issuers or any other obligor with respect to this
Indenture, the Senior Subordinated Notes or the Obligations of the Issuers under
this Indenture or the Senior Subordinated Notes, any action to enforce the same
or any other circumstances (other than complete performance) which might
otherwise constitute a legal or equitable discharge or defense of a Senior
Subordinated Note Guarantor. Each Senior Subordinated Note Guarantor further, to
the extent permitted by law, waives and relinquishes all claims, rights and
remedies accorded by applicable law to guarantors and agrees not to assert or
take advantage of any such claims, rights or remedies, including but not limited
to: (a) any right to require any of the Senior Subordinated Note Trustee, the
Holders or the Issuers (each a "Benefitted Party"), as a condition of payment or
performance by such Senior Subordinated Note Guarantor, to (i) proceed against
the Issuers, any other guarantor (including any other Senior Subordinated Note
Guarantor) of the Obligations under the Senior Subordinated Note Guaranties or
any other Person, (ii) proceed against or exhaust any security held from the
Issuers, any such other guarantor or any other Person, (iii) proceed against or
have resort to any balance of any deposit account or credit on the books of any
Benefitted Party in favor of the Issuers or any other Person, or (iv) pursue any
other remedy in the power of any Benefitted Party whatsoever; (b) any defense
arising by reason of the incapacity, lack of authority or any disability or
other defense of the Issuers including any defense based on or arising out of
the lack of validity or the unenforceability of the Obligations under the Senior
Subordinated Note Guaranties or any agreement or instrument relating thereto or
by reason of the cessation of the liability of the Issuers from any cause other
than payment in full of the Obligations under the Senior Subordinated Note
Guaranties; (c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal; (d) any defense based upon
any Benefitted Party's errors or omissions in the administration of the
Obligations under the Senior Subordinated Note Guaranties, except behavior which
amounts to bad faith; (e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of the Senior
Subordinated Note Guaranties and any legal or equitable discharge of such Senior
Subordinated Note Guarantor's obligations hereunder, (ii) the benefit of any
statute of limitations affecting such Senior Subordinated Note Guarantor's
liability hereunder or the enforcement hereof, (iii) any rights to set-offs,
recoupments and counterclaims, and (iv) promptness, diligence and any
requirement that any Benefitted Party protect, secure, perfect or insure any
security interest or lien or any property subject thereto; (f) notices, demands,
presentments, protests, notices of protest, notices of dishonor and notices of
any action or inaction, including acceptance of the Senior Subordinated Note
Guaranties, notices of default under the Senior Subordinated Notes or any
agreement or instrument related thereto, notices of any renewal, extension or
modification of the Obligations under the Senior Subordinated Note Guaranties or
any agreement related thereto, and notices of any extension of credit to the
Issuers and any right to consent
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to any thereof; (g) to the extent permitted under Section 40.495 of the Nevada
Revised Statutes, the benefits of the "One Action" rule under Section 40.430 of
the Nevada Revised Statutes and (h) any defenses or benefits that may be derived
from or afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of the Senior Subordinated Note
Guaranties. Each Senior Subordinated Note Guarantor hereby covenants that its
Senior Subordinated Note Guaranty will not be discharged except by complete
performance of the obligations contained in its Senior Subordinated Note
Guaranty and this Indenture.
If any Holder or the Senior Subordinated Note Trustee is required by any
court or otherwise to return to either the Issuers or any Senior Subordinated
Note Guarantor, or any custodian, trustee, or similar official acting in
relation to either the Issuers or such Senior Subordinated Note Guarantor, any
amount paid by the Issuers or such Senior Subordinated Note Guarantor to the
Senior Subordinated Note Trustee or such Holder, the applicable Senior
Subordinated Note Guaranty, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Senior Subordinated Note Guarantor
agrees that it will not be entitled to any right of subrogation in relation to
the Holders in respect of any obligations guaranteed hereby until payment in
full of all obligations guaranteed hereby.
Each Senior Subordinated Note Guarantor further agrees that, as between
such Senior Subordinated Note Guarantor, on the one hand, and the Holders and
the Senior Subordinated Note Trustee, on the other hand, (i) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Section 6.02
hereof for the purposes of this Senior Subordinated Note Guaranty,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration as to the Issuers or any other obligor on the Senior Subordinated
Notes of the obligations guaranteed hereby, and (ii) in the event of any
declaration of acceleration of those obligations as provided in Section 6.02
hereof, those obligations (whether or not due and payable) will forthwith become
due and payable by such Senior Subordinated Note Guarantor for the purpose of
this Senior Subordinated Note Guaranty.
SECTION 11.02. ADDITIONAL SENIOR SUBORDINATED NOTE GUARANTIES.
If (a) 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 Section 4.07 hereof), 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 pursuant to the terms of this Indenture
or is designated by the Board of Directors of the Company to be a Restricted
Subsidiary pursuant to the terms of this 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, on a subordinated basis, all of the Issuers'
obligations under the Senior Subordinated Notes and this Indenture on the terms
set forth in this Indenture and (ii) deliver to the Senior Subordinated Note
Trustee an opinion of counsel that, subject to customary assumptions and
exclusions, such supplemental indenture have been duly executed and delivered by
such Restricted Subsidiary.
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SECTION 11.03. LIMITATION OF SENIOR SUBORDINATED NOTE GUARANTOR'S LIABILITY.
Each Senior Subordinated Note Guarantor and by its acceptance hereof,
each beneficiary hereof, hereby confirms that it is its intention that the
Senior Subordinated Note Guaranty by such Senior Subordinated Note Guarantor not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar federal or state law to the extent applicable to any Senior
Subordinated Note Guaranties. To effectuate the foregoing intention, each such
person hereby irrevocably agrees that the obligation of such Senior Subordinated
Note Guarantor under its Senior Subordinated Note Guaranty under this Article 11
shall be limited to the maximum amount as will, after giving effect to such
maximum amount and all other (contingent or otherwise) liabilities of such
Senior Subordinated Note Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Senior Subordinated Note Guarantor in
respect of the obligations of such other Senior Subordinated Note Guarantor
under this Article 11, result in the obligations of such Senior Subordinated
Note Guarantor in respect of such maximum amount not constituting a fraudulent
conveyance. Each beneficiary under the Senior Subordinated Note Guaranties, by
accepting the benefits hereof, confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of the Issuers or any
Senior Subordinated Note Guarantor in which concurrent claims are made upon such
Senior Subordinated Note Guarantor hereunder, to the extent such claims will not
be fully satisfied, each such claimant with a valid claim against the Issuers
shall be entitled to a ratable share of all payments by such Senior Subordinated
Note Guarantor in respect of such concurrent claims.
SECTION 11.04. SENIOR SUBORDINATED NOTE GUARANTORS MAY CONSOLIDATE, ETC., ON
CERTAIN TERMS.
(a) 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 it is affiliated with such
Senior Subordinated Note Guarantor unless (i) subject to the provisions of the
following paragraph and Section 11.05, 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 a form reasonably satisfactory
to the Senior Subordinated Note Trustee pursuant to which such Person shall
unconditionally guarantee, on subordinated basis, all of such Senior
Subordinated Note Guarantor's obligations under such Senior Subordinated Note
Guarantor's Senior Subordinated Note Guaranty and this Indenture on the terms
set forth in this 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; (iv) such Senior Subordinated Note Guarantor, or any Person
formed by or surviving any such consolidation or merger, (A) shall have
Consolidated Net Worth (immediately after giving effect to such transaction),
equal to or greater than the Consolidated Net Worth of such Senior Subordinated
Note Guarantor immediately preceding the transaction and (B) will be permitted
by virtue of the Issuers' 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 set
forth in Section 4.09 hereof; and (v) such transactions would not require any
Holder of Senior Subordinated Notes (other than any Person acquiring the Company
or Venetian or their assets or an Affiliate thereof) to obtain a gaming license
or be qualified under the laws 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. In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Senior Subordinated Note Trustee
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and reasonably satisfactory in form to the Senior Subordinated Note Trustee, of
the Senior Subordinated Note Guaranty in this Indenture and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Senior Subordinated Note Guarantor, such
successor corporation shall succeed to and be substituted for the Senior
Subordinated Note Guarantor with the same effect as if it had been named herein
as a Senior Subordinated Note Guarantor.
Notwithstanding the foregoing, (A) a Senior Subordinated Note Guarantor
may consolidate with or merge with or into, or sell or otherwise dispose of all
or substantially all of its assets to, the Issuers, provided, that the surviving
corporation (if other than the Issuers) shall expressly assume by supplemental
indenture complying with the requirements of this Indenture, the due and
punctual payment of the principal of, premium and Liquidated Damages, if any,
and interest on all of the Senior Subordinated Notes, and the due and punctual
performance and observance of all the covenants and conditions of this Indenture
to be performed by the Issuers and (B) a Senior Subordinated Note Guarantor may
consolidate with or merge with or into, or sell or otherwise dispose of all or
substantially all of its assets to, any other Senior Subordinated Note
Guarantor.
SECTION 11.05. RELEASES OF SENIOR SUBORDINATED NOTE GUARANTIES.
Upon (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 pursuant to the terms of this Indenture or (iii) a sale
or other disposition of all of the capital stock of any Senior Subordinated Note
Guarantor, 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 becomes an Unrestricted Subsidiary pursuant to the terms
of this 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 its
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 Section 4.10 hereof.
SECTION 11.06. "SENIOR SUBORDINATED NOTE TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Senior Subordinated
Note Trustee shall have been appointed by the Issuers and be then acting
hereunder, the term "Senior Subordinated Note Trustee" as used in this Article
11 shall in such case (unless the context shall otherwise require) be construed
as extending to and including such Paying Agent within its meaning as fully and
for all intents and purposes as if such Paying Agent were named in this Article
11 in place of the Senior Subordinated Note Trustee.
SECTION 11.07 SUBORDINATION OF SENIOR SUBORDINATED NOTE GUARANTIES.
The Obligations of each Senior Subordinated Note Guarantor under its
Senior Subordinated Note Guaranty pursuant to this Article 11 shall be junior
and subordinated to the Senior Debt of such Senior Subordinated Note Guarantor
(including such Senior Subordinated Note Guarantor's guaranty of the Bank Credit
Facility) to the same extent as the Senior Subordinated Notes are junior and
subordinated to Senior Debt of the Company and Venetian. For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Senior Subordinated Note
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Guarantors only at such times as they may receive and/or retain payments in
respect of the Senior Subordinated Notes pursuant to this Indenture, including
Article 10 hereof.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Issuers, any Senior Subordinated Note
Guarantor or the Senior Subordinated Note Trustee to the others is duly given if
in writing and delivered in Person or mailed by first class mail (registered or
certified, return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address:
If to the Issuers or the Senior Subordinated Note Guarantors:
3335 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telecopier No.: (702) 733-5499
Attention: General Counsel
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: James Purcell, Esq.
If to the Senior Subordinated Note Trustee:
First Union National Bank
999 Peachtree Street, N.E.
Suite 1100
Atlanta, Georgia 30309
Telecopier No.: (404) 827-7347
Attention: Corporate Trust Department
The Issuers, the Senior Subordinated Note Guarantors or the Senior
Subordinated Note Trustee, by notice to the others may designate additional or
different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being
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deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuers or a Senior Subordinated Note Guarantor mails a notice or
communication to Holders, it shall mail a copy to the Senior Subordinated Note
Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF SENIOR SUBORDINATED NOTES WITH OTHER
HOLDERS OF SENIOR SUBORDINATED NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Senior Subordinated
Notes. The Issuers, the Senior Subordinated Note Guarantors, the Senior
Subordinated Note Trustee and the Registrar shall have the protection of TIA ss.
312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers or the Senior
Subordinated Note Guarantors to the Senior Subordinated Note Trustee to take any
action under this Indenture, the Issuers or the Senior Subordinated Note
Guarantors shall furnish to the Senior Subordinated Note Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Senior Subordinated Note Trustee (which shall include
the statements set forth in Section 12.05 hereof) stating that, in the
opinion of the signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action have been
satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Senior Subordinated Note Trustee (which shall include the statements
set forth in Section 12.05 hereof) stating that, subject to customary
assumptions and exclusions, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
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(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY SENIOR SUBORDINATED NOTE TRUSTEE AND AGENTS.
The Senior Subordinated Note Trustee may make reasonable rules for
action by or at a meeting of Holders. The Registrar or Paying Agent may make
reasonable rules and set reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No officer, employee, incorporator or stockholder of the Issuers or the
Senior Subordinated Note Guarantors, as such, shall have any liability for any
obligations of the Issuers or the Senior Subordinated Note Guarantors under the
Senior Subordinated Notes, any Senior Subordinated Note Guaranties or this
Indenture, as applicable, or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder by accepting a Senior
Subordinated Note and the Senior Subordinated Note Guaranties waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Subordinated Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE SENIOR SUBORDINATED NOTES AND THE SENIOR
SUBORDINATED NOTE GUARANTIES, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY
PROVISIONS OF NEVADA LAW, INCLUDING THE GAMING CONTROL ACT AND THE REGULATIONS
PROMULGATED THEREUNDER.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Issuers or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Issuers and the Senior Subordinated Note
Guarantors in this Indenture, the Senior Subordinated Notes and the Senior
Subordinated Note Guaranties, as applicable, shall bind their respective
successors. All agreements of the Senior Subordinated Note Trustee in this
Indenture shall bind its successors.
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SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, in the Senior Subordinated
Notes or in the Senior Subordinated Note Guaranties shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
102
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SIGNATURES
Dated as of November 14, 1997 LAS VEGAS SANDS, INC.
By: /s/ W.P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.
----------------------------------------
As Managing Member
By: /s/ W.P. Weidner
----------------------------------
Name: William P. Weidner
Title: President
MALL INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC
----------------------------------------
As Sole Member
By: Las Vegas Sands, Inc.
-----------------------------------
As Managing Member
By: /s/ W.P. Weidner
-----------------------------
Name: William P. Weidner
Title: President
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC
-----------------------------------------
As Sole Member
By: Las Vegas Sands, Inc.
------------------------------------
As Managing Member
By: /s/ W.P. Weidner
-----------------------------
Name: William P. Weidner
Title: President
<PAGE>
LIDO INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC
----------------------------------------
As Managing Member
By: Las Vegas Sands, Inc.
------------------------------------
As Managing Member
By: /s/ WP Weidner
-----------------------------
Name: William P. Weidner
Title: President
<PAGE>
Dated as of November 14, 1997 FIRST UNION NATIONAL BANK
as Senior Subordinated Note Trustee
By: /s/ Emily E. Katt
----------------------------------------
Name: Emily E. Katt
Title: Vice President
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of November 14, 1997
by and among
Venetian Casino Resort, LLC
Las Vegas Sands, Inc.
as Issuers
Mall Intermediate Holding Company, LLC
Lido Intermediate Holding Company, LLC
Grand Canal Shops Mall Construction, LLC
as Guarantors
and
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
as Initial Purchasers
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of November 14, 1997, by and among Las Vegas Sands, Inc., a Nevada
corporation (the "Company"), Venetian Casino Resort, LLC, a Nevada limited
liability company ("Venetian" and together with the Company, the "Issuers"),
Mall Intermediate Holding Company, LLC, a Delaware limited liability company,
Grand Canal Shops Mall Construction, LLC, a Delaware limited liability company
and Lido Intermediate Holding Company, LLC, a Nevada limited liability company
(each a "Guarantor and collectively, the "Guarantors") and Goldman, Sachs & Co.
and Bear, Stearns & Co. Inc. (each an "Initial Purchaser" and, collectively, the
"Initial Purchasers"), each of whom has agreed to purchase the Issuers' 12 1/4%
Mortgage Notes due 2004 (the "Mortgage Notes") and 14 1/4% Senior Subordinated
Notes due 2005 (the "Senior Subordinated Notes", and together with the Mortgage
Notes, the "Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated November
6, 1997, (the "Purchase Agreement"), by and among the Issuers, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Notes, the Issuers and the Guarantors have agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 3 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined are used as defined in the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York, or in the city of the Corporate Trust Office (as defined in the
Indenture) of the Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: Exchange Notes that are
acquired by a Broker-Dealer in the Exchange Offer in exchange for Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Notes acquired directly from
the Issuers or any of their affiliates).
Certificated Securities: As defined in each of the Indentures.
Closing Date: The date hereof.
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Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Exchange
Notes to be issued in the Exchange Offer, (b) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof and (c) the delivery by the Issuers to the Registrar under
the applicable Indenture of Exchange Notes in the same aggregate principal
amount as the aggregate principal amount of Notes validly tendered by Holders
thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Notes, each Interest Payment
Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The Issuers' (i) 12 1/4% Mortgage Notes due 2004 to be
issued pursuant to the Mortgage Notes Indenture in the Exchange Offer and (ii)
14 1/4% Senior Subordinated Notes due 2005 to be issued pursuant to the Senior
Subordinated Notes Indenture in the Exchange Offer.
Exchange Offer: The registration by the Issuers under the Act of any
Exchange Notes pursuant to an Exchange Offer Registration Statement pursuant to
which the Issuers shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities validly
tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to an Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Notes (i) to certain "qualified institutional buyers," as such term
is defined in Rule 144A under the Act or (ii) in an offshore transaction
complying with Rule 903 or 904 of Regulation S under the Act.
Guarantors: The Guarantors defined in the preamble hereto and any Person
which becomes a guarantor after the date hereof pursuant to the terms of the
Indentures.
Global Noteholder: As defined in each of the Indentures.
Holders: As defined in Section 2(b) hereof.
Indentures: The Mortgage Notes Indenture and the Senior Subordinated Notes
Indenture.
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Interest Payment Date: As defined in each of the Indentures and the
Securities.
Mortgage Notes Indenture: The indenture, dated the Closing Date, among the
Issuers, the Guarantors and First Trust National Association, as trustee (the
"Trustee"), pursuant to which the Mortgage Notes are to be issued, as such
indenture is amended or supplemented from time to time in accordance with the
terms thereof.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, limited liability company,
corporation, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, in each
case at the time such Registration Statement is declared effective, as amended
or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person who
is a Holder of Securities on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Default Period: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuers and the
Guarantors relating to (a) an offering of any Exchange Notes (including
guarantees thereof by the Guarantors) pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) which is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Securities: The Notes and the Exchange Notes (including guarantees thereof
by the Guarantors).
Senior Subordinated Notes Indenture: The indenture, dated the Closing
Date, among the Issuers, the Guarantors and First Union National Bank of
Georgia, as trustee (the "Senior Subordinated Notes Trustee"), pursuant to which
the Senior Subordinated Notes are to be issued, as such indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Shelf Registration Statement: As defined in Section 4 hereof.
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<PAGE>
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in an Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, (c) the date
on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by an Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Issuers are sold to an underwriter for reoffering to the
public.
2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a) below have been complied
with), the Issuers and the Guarantors shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 45 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use their reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 180 days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Exchange Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the Notes that
are Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers as contemplated by Section
3(c) below. The 45 and 180 day periods referred to in (i) and (ii) of this
Section 3(a) shall not include any period in which the Issuers are pursuing a
Commission decision pursuant to 6(a)(i) below.
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<PAGE>
(b) The Issuers and the Guarantors shall use their reasonable best efforts
to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Issuers shall cause the Exchange Offer to comply
in all material respects with all applicable federal and state securities laws.
No securities other than the Securities shall be included in the Exchange Offer
Registration Statement. The Issuers shall use their respective reasonable best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 Business Days thereafter.
(c) The Issuers and the Guarantors shall include a "Plan of Distribution"
section in the Prospectus contained in the Exchange Offer Registration Statement
and indicate therein that any Restricted Broker-Dealer who holds Notes that are
Transfer Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Notes (other than Transfer Restricted Securities
acquired directly from the Issuers or any affiliate of the Issuers) pursuant to
the Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Exchange Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker- Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Securities held by any
such Broker- Dealer, except to the extent required by the Commission as a result
of a change in policy after the date of this Agreement.
The Issuers and the Guarantors shall use their respective reasonable best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available for sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and
to ensure that such Registration Statement conforms in all material respects
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
180 days from the date on which the Exchange Offer Registration Statement is
declared effective.
The Issuers shall promptly provide sufficient copies of the latest version
of such Prospectus to such Restricted Broker-Dealers promptly upon request, at
any time during such 180 days period in order to facilitate such sales.
4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Issuers and the Guarantors are not
required to file an Exchange Offer Registration Statement with respect to the
Exchange Notes because the
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Exchange Offer is not permitted by applicable law (after the procedures set
forth in Section 6(a) below have been complied with) or (ii) the Exchange Offer
is not approved by the applicable Gaming Authorities (as defined in the Offering
Circular) in the State of Nevada or (iii) if any Holder of Transfer Restricted
Securities 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 or (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 the Issuers
and the Guarantors shall (x) use their respective reasonable best efforts to
cause 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
(or, if later, the date on which the Issuers and Guarantors are obligated to
file the Exchange Offer Registration Statement pursuant to Section 3(a)(i)), a
shelf registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement) (in either event, the
"Shelf Registration Statement"), relating to all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and (y) use their respective reasonable best efforts to
cause such Shelf Registration Statement to become effective on or prior to 90
days after the date on which the Issuers and Guarantors become obligated to file
such Shelf Registration Statement (or if later, the date on which the Issuers
and Guarantors are obligated to cause the Exchange Offer Registration Statement
to become effective pursuant to Section 3(a)(ii). The Issuers and the Guarantors
shall use their respective reasonable best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by and subject to the provisions of Sections 6(b) and (c) hereof to the
extent necessary to ensure that it is available for sales of Transfer Restricted
Securities by the Holders thereof entitled to the benefits as provided under
this Section 4(a), and to ensure that it conforms in all material respects with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(c)(i)) following the Closing
Date or such shorter period that will terminate when all Transfer Restricted
Securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuers in writing, within 20 days after receipt of a request therefor, such
information specified in item 507 of Regulation S-K under the Act and such other
information as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such information. Each Holder as
to which any Shelf Registration Statement is being effected agrees
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<PAGE>
to furnish promptly to the Issuers all information required to be disclosed in
order to make the information previously furnished to the Issuers by such Holder
not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has
not been Consummated within 30 Business Days after the Effectiveness Target Date
or (iv) subject to the provisions of Section 6(c)(i) below, any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded within two Business Days by a post-effective amendment
to such Registration Statement that cures such failure and that is itself
declared effective immediately (each such event referred to in clauses (i)
through (iv), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then the Issuers and the Guarantors hereby jointly and severally agree
to pay liquidated damages to each Holder of Transfer Restricted Securities
which, in addition to the base interest that would otherwise accrue on the
Securities, shall accrue at a rate of 0.25% per annum for the first 90 days of
the Registration Default Period, and will increase by an additional 0.25% per
annum with respect to each subsequent 90-day period, up to a maximum amount of
liquidated damages of 2.00% for the remaining Registration Default Period. All
accrued liquidated damages shall be paid to Record Holders by the Issuers by
wire transfer of immediately available funds or by federal funds check on each
Damages Payment Date, as provided in the applicable Indenture. Following the
cure of all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of liquidated damages with respect to such Transfer
Restricted Securities will cease.
All obligations of the Issuers and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Issuers and the Guarantors shall comply with all applicable
provisions of Section 6(c) below, shall use their respective best efforts to
effect such exchange and to permit the sale of Broker- Dealer Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If, following the date hereof there has been published a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, such that in the reasonable opinion of counsel to the Issuers there
is a substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Issuers and the Guarantors hereby agree to
seek a no-action letter or other favorable decision from the
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Commission allowing the Issuers and the Guarantors to Consummate an
Exchange Offer for such Notes. The Issuers and the Guarantors hereby agree
to pursue the issuance of such a decision to the Commission staff level,
but shall not be required to take commercially unreasonable actions to
effect a change of Commission policy. In connection with the foregoing,
the Issuers and the Guarantors hereby agree to take all such other actions
as are requested by the Commission or otherwise required in connection
with the issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to the
Issuers setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursuing a resolution (which need not be favorable) by the
Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Issuers,
prior to the Consummation of the Exchange Offer, a written representation
to the Issuers (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of either of the Issuers, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring
the Exchange Notes in its ordinary course of business. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to
be acquired in the Exchange Offer (1) could not under Commission policy as
in effect on the date of this Agreement rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5,
1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and similar no-action letters (including, if applicable, any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K if the resales are of
Exchange Notes obtained by such Holder in exchange for Notes acquired by
such Holder directly from the Issuers or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Issuers and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Issuers and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above,
(B) including a representation that no Issuer or Guarantor has entered
into any arrangement or understanding with any Person to distribute the
Exchange Notes to be received in the Exchange Offer and that, to the best
of the Issuers' information and belief, each Holder
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<PAGE>
participating in the Exchange Offer is acquiring the Exchange Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuers and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their respective reasonable best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Issuers pursuant to Section 4(b) hereof), and pursuant thereto the Issuers
and the Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus, to the extent that the
same are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Issuers and the
Guarantors (where applicable) shall:
(i) use their respective reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Issuers shall file promptly an
appropriate amendment to such Registration Statement, (1) in the case of
clause (A), correcting any such misstatement or omission, and (2) in the
case of clauses (A) and (B) use their respective reasonable best efforts
to cause such amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for applicable
period set forth in Section 3 or 4 hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
Rules 424, 430A and 462, as applicable, under the Act in a timely manner;
and comply in all material respects with the provisions of the Act with
respect to the disposition of all securities covered by such Registration
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Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof as provided above
and as set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirming such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities or Broker-Dealer Transfer Restricted Securities, as
applicable, for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, and (D) of the existence
of any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in
the Prospectus in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, including,
without limitation, under circumstances described in Section 6(c)(i)
above. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities or Broker-Dealer Transfer Restricted Securities, as
applicable, under state securities or Blue Sky laws, the Issuers and the
Guarantors shall use their respective best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) in the case of a Shelf Registration Statement, furnish to each
selling Holder named in any Registration Statement or Prospectus and each
of the underwriter(s) in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of such Registration Statement),
which documents will be subject to the review and comment of such Holders
and underwriter(s) in connection with such sale, if any, for a period of
at least five Business Days, and the Issuers will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably
object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus
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<PAGE>
or supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply in all material respects with
the applicable requirements of the Act;
(v) in the case of a Shelf Registration Statement, promptly prior to
the filing of any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document to
the selling Holders and to the underwriter(s) in connection with such
sale, if any, make the Issuers' representatives (and representatives of
the Guarantors) available for discussion of such document and other
customary due diligence matters, subject to the execution and delivery of
customary confidentiality agreements, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) in the case of a Shelf Registration Statement, subject to the
execution and delivery of customary confidentiality agreements, make
available at reasonable times for inspection by the selling Holders, any
underwriter participating in any disposition pursuant to such Registration
Statement and any attorney or accountant retained by such selling Holders
or any of such underwriter(s), all financial and other records, pertinent
corporate documents and properties of the Issuers and the Guarantors and
cause the Issuers' and the Guarantors' officers, directors and employees
to supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness;
(vii) in the case of a Shelf Registration Statement if requested by
any selling Holders or the underwriter(s) in connection with such sale, if
any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities, being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Securities, to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Issuers are
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) in the case of a Shelf Registration Statement, furnish to
each selling Holder and each of the underwriter(s) in connection with such
sale, if any, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and all
exhibits (including exhibits incorporated therein by reference);
(ix) in the case of a Shelf Registration Statement, deliver to each
selling Holder and each of the underwriter(s), if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as
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<PAGE>
such Persons reasonably may request; the Issuers and the Guarantors hereby
consent to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(x) in the case of a Shelf Registration Statement, enter into such
agreements (including an underwriting agreement) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably requested by any
Holder of Transfer Restricted Securities or underwriter in connection with
any sale or resale pursuant to any Registration Statement contemplated by
this Agreement, and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an
Underwritten Registration, the Issuers and the Guarantors shall:
(A) furnish to each selling Holder and each underwriter, if
any, upon the effectiveness of the Shelf Registration Statement:
(1) a certificate dated the date of effectiveness of the
Shelf Registration Statement signed on behalf of the Issuers
by (x) the President or any Vice President and (y) a principal
financial or accounting officer of each of the Issuers and the
Guarantors, confirming, as of the date thereof, the matters
set forth in paragraphs (d) and (e) of Section 7 of the
Purchase Agreement and such other similar matters as the
Holders, underwriter(s) may reasonably request;
(2) an opinion dated the date of effectiveness of the
Shelf Registration Statement, of counsel for the Issuers and
the Guarantors covering matters similar to those set forth in
paragraph (b) of Section 7 of the Purchase Agreement and such
other matter as the Holders, and/or underwriters may
reasonably request, and in any event including a statement to
the effect that such counsel has participated in conferences
with officers and other representatives of the Issuers,
representatives of the independent public accountants for the
Issuers, the Initial Purchasers' representatives and the
Initial Purchasers' counsel in connection with the preparation
of such Registration Statement and the related Prospectus and
have considered the matters required to be stated therein and
the statements contained therein, although such counsel has
not independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises
that, on the basis of the foregoing (relying as to materiality
to a certain extent upon facts provided to such counsel by
officers and other representatives of the Issuers and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
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<PAGE>
thereto became effective, and, in the case of the Exchange
Offer Registration Statement, as of the date of Consummation,
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement
as of its date contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. Without limiting
the foregoing, such counsel may state further that such
counsel assumes no responsibility for, has not independently
verified and expresses no opinion with respect to, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus nor to that part of such
Registration Statement that constitutes the Statement of
Eligibility (Form T-1) under the Trust Indenture Act of 1939,
as amended; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement from the
Issuers' independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with primary
underwritten offerings;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if
any, and Restricted Broker-Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Issuers pursuant to this clause (x).
The above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Issuers and the Guarantors contemplated in
(A)(1) above cease to be true and correct, the Issuers or the Guarantors shall
so advise the underwriter(s), if any, the selling Holders and each Restricted
Broker-Dealer promptly and if requested by such Persons, shall confirm such
advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities or Broker-Dealer Transfer Restricted
Securities, as applicable, under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s), if any, may
reasonably request and do any and all other acts or things necessary or
advisable to
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<PAGE>
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that no Issuer or Guarantor shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xii) issue, upon the request of any Holder of Notes covered by any
Shelf Registration Statement contemplated by this Agreement, Exchange
Notes having an aggregate principal amount equal to the aggregate
principal amount of Notes surrendered to the Issuers by such Holder in
exchange therefor or being sold by such Holder; such Exchange Notes to be
registered in the name of such Holder or in the name of the purchaser(s)
of such Securities, as the case may be; in return, the Notes held by such
Holder shall be surrendered to the Issuers for cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities
in such denominations and such names as the Holders or the underwriter(s),
if any, may request at least two Business Days prior to such sale of
Transfer Restricted Securities;
(xiv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities or Broker-Dealer Transfer Restricted
Securities, as applicable, covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities, including, without limitation, the Nevada Gaming Control
Board or any other Nevada Gaming Authority, as may be necessary to enable
the seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities or Broker-Dealer
Transfer Restricted Securities, as applicable, subject to the proviso
contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities or Broker-Dealer Transfer
Restricted Securities, as applicable, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the trustee under the
applicable Indenture with printed certificates
15
<PAGE>
for the Transfer Restricted Securities which are in a form eligible for
deposit with The Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD, and use their respective best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities; provided, however, that no Issuer or Guarantor
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xviii) otherwise use their respective best efforts to comply in all
material respects with all applicable rules and regulations of the
Commission, and make generally available to its security holders with
regard to any applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning after
the effective date of the Registration Statement (as such term is defined
in paragraph (c) of Rule 158 under the Act);
(xix) cause the applicable Indenture to be qualified under the TIA
not later than the effective date of the first Registration Statement
relating to such Indenture required by this Agreement and, in connection
therewith, cooperate with the applicable Trustee and the Holders of
Securities to effect such changes to such Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its best efforts to cause the applicable Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner;
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act; and
(xxi) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal amount
of Securities covered thereby or the underwriters, if any.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Issuers of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to
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<PAGE>
the applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(xv)
hereof, or until it is advised in writing by the Issuers (the "Advice") that the
use of the Prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Issuers, each Holder will deliver to the Issuers (at the
Issuers' expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Issuers shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof
or shall have received the Advice.
7. REGISTRATION EXPENSES
All expenses incident to the Issuers' and the Guarantors' performance of
or compliance with this Agreement will be borne by the Issuers and the
Guarantors, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the reasonable fees and expenses of any "qualified independent
underwriter" and its counsel) that may be required by the rules and regulations
of the NASD); (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Exchange Notes to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel for the Issuers and the Guarantors;
(v) all application and filing fees in connection with listing the Securities on
a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Issuers and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Issuers will bear their own internal expenses and the internal
expenses of the Guarantors (including, without limitation, all salaries and
expenses of their officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by either of the Issuers.
8. INDEMNIFICATION
(a) In connection with a Shelf Registration Statement or the delivery of a
Prospectus contained in an Exchange Offer Registration Statement by any
participating Broker-Dealer or Initial Purchaser who seeks to sell Exchange
Notes, the Issuers and the Guarantors will, jointly and severally, indemnify and
hold harmless each Holder against any losses, claims, damages or liabilities,
joint or several, to which it may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are
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<PAGE>
based upon an untrue statement or alleged untrue statement of material fact
contained in any Registration Statement, preliminary Prospectus or Prospectus,
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading, and will reimburse each Holder for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that none of the Issuers or the Guarantors shall be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission contained in any Registration
Statement, preliminary Prospectus or Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Issuers or the Guarantors by or on behalf of any of the Holders expressly
for inclusion therein.
(b) Each Holder will, severally and not jointly, indemnify and hold
harmless the Issuers and the Guarantors against any losses, claims, damages or
liabilities to which either of the Issuers may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of material fact contained in any Registration Statement,
preliminary Prospectus or Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Registration Statement, preliminary Prospectus or Prospectus, or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Issuers and the Guarantors by such Holder expressly
for use therein; and will reimburse the Issuers and the Guarantors for any legal
or other expenses reasonably incurred by the Issuers and the Guarantors in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
under this Section 8, except to the extent that it has been materially
prejudiced by such failure. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. In no event
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<PAGE>
shall the indemnifying party be liable for the fees and expenses of more than
one counsel (in addition to local counsel) for the indemnified parties subject
to such claim. No indemnifying party shall, without the written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought (whether or not the indemnified
party is an actual or potential party to such action or claim) thereunder unless
such settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such action or claim and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act, by or on behalf of any indemnified party. No indemnifying
party shall be liable for any settlement or compromise of, or consent to the
entry of any judgment with respect to any such action or claim effected without
its consent (which consent shall not be unreasonably withheld). Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
the Issuers or the Guarantors to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second sentence of this paragraph,
the Issuers and the Guarantors agree that they shall be liable for any
settlement of any proceeding effected without the Issuers' written consent if
(i) such settlement is entered into more than thirty (30) business days after
receipt by the Issuers or the Guarantors of the aforesaid request, and (ii) none
of the Issuers or the Guarantors shall have reimbursed the indemnified party in
accordance with such request or contested the reasonableness of such fees and
expenses prior to the date of such settlement.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Issuers and the Guarantors from their sale of the Notes, on the one hand,
and any Holder, on the other, from such Holder's sale of Transfer Restricted
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Issuers and the Guarantors, on the one hand,
and of such Holder, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Issuers and the Guarantors, on the one hand,
and any Holder, on the other, shall be deemed to be in the same proportion as
the total net proceeds from the sale of the Notes (before deducting expenses)
received by the Issuers bear to the total proceeds received by such Holder upon
its sale of Notes. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuers and the Guarantors on the one hand or the
Holders on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuers, the Guarantors and each Holder of Transfer Restricted Securities
agree
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<PAGE>
that it would not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation (even if the Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Holder shall be
required to contribute any amount in excess of the amount by which the total
received by such Holder with respect to the sale of its Notes pursuant to a
Registration Statement exceeds the sum of (a) the amount paid by such Holder for
such Notes plus (b) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Holders' obligations in this subsection (d) to
contribute are several in proportion to the respective principal amount of
Securities held by each of the Holders hereunder and not joint.
(e) The obligations of the Issuers and the Guarantors under this Section 8
shall be in addition to any liability which the Issuers and the Guarantors may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of such Holder, if any, and to each person, if any, who
controls any Holder within the meaning of the Act. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to indemnification from any person who was not
guilty of such fraudulent misrepresentation.
9. RULE 144A
The Issuers hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, lock-up letters and other documents required
under the terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment bankers
and manager or managers for any Underwritten Offering that will administer such
offering will be selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted
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<PAGE>
Securities included in such offering; provided, that such investment bankers or
managers must be reasonably acceptable to the Company; provided, further, that
each of Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. are hereby agreed to
be reasonably acceptable to the Company. Such investment bankers and managers
are referred to herein as the "underwriters."
12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Issuers and the
Guarantors agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by them of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. None of the Issuers or the Guarantors
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
None of the Issuers or the Guarantors has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Issuers'
securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Securities. Neither of the Issuers will take
any action, or voluntarily permit any change to occur, with respect to the
Securities that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer unless such action or change is required by law
or regulation.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Issuers have obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Issuers have obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
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(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Issuers or the Guarantors:
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
3355 Las Vegas Blvd. South
Las Vegas, NV 89109
Telecopier No.: (702) 733-5110
Attention: David Friedman, Esq.
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Telecopier No.: (212) 757-3990
Attention: James L. Purcell
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided that this Agreement shall
not inure to the benefit of or be binding upon a successor or assign of a Holder
unless and to the extent such successor or assign acquired Transfer Restricted
Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
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WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF, SUBJECT TO REQUIREMENTS OF
ALL APPLICABLE GAMING LAWS.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[signature page follows]
23
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
LAS VEGAS SANDS, INC.
By: /s/ W P Weidner
----------------------------------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.
----------------------------------------------
As Managing Member
By: /s/ W P Weidner
----------------------------------------------
Name: William P. Weidner
Title: President
MALL INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC
----------------------------------------------
As Sole Member
By: Las Vegas Sands, Inc.
----------------------------------------------
As Managing Member
By: /s/ W P Weidner
----------------------------------------------
Name: William P. Weidner
Title: President
<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/ W P Weidner
-------------------------------------------
Name: William P. Weidner
Title: President
LIDO INTERMEDIATE HOLDING COMPANY, LLC
By:Venetian Casino Resort, LLC
-----------------------------------------------
As Sole Member
By: Las Vegas Sands, Inc.
-------------------------------------------
As Managing Member
By: /s/ W P Weidner
-------------------------------------------
Name: William P. Weidner
Title: President
GOLDMAN, SACHS & CO.
/s/ Goldman Sachs & Co.
- --------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Initial Purchasers
================================================================================
FUNDING AGENTS' DISBURSEMENT
AND ADMINISTRATION AGREEMENT
among
LAS VEGAS SANDS, INC.,
VENETIAN CASINO RESORT, LLC,
and
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
jointly and severally as the Company,
THE BANK OF NOVA SCOTIA,
as the Bank Agent,
FIRST TRUST NATIONAL ASSOCIATION,
as the Mortgage Notes Indenture Trustee,
GMAC COMMERCIAL MORTGAGE CORPORATION,
as the Interim Mall Lender,
ATLANTIC-PACIFIC LAS VEGAS, LLC
as the HVAC Provider,
and
THE BANK OF NOVA SCOTIA,
as the Disbursement Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 - DEFINITIONS; RULES OF INTERPRETATION.............................3
1.1 Definitions......................................................3
1.2 Rules of Interpretation..........................................3
1.3 Conflict with a Facility Agreement...............................3
ARTICLE 2 - FUNDING..........................................................3
2.1 Representations Regarding Project Status.........................3
2.2 Availability of Advances.........................................3
2.3 Accounts.........................................................5
2.4 HVAC Letters of Credit...........................................9
2.5 Mechanics for Obtaining Advances................................11
2.6 Allocation of Advances..........................................15
2.7 Disbursements...................................................17
2.8 Payments of Interest and Fees...................................18
2.9 Advances Under the Bank Credit Facility.........................19
2.10 Mall Release Date Funding Procedures............................19
2.11 Completion Date Procedures......................................21
2.12 Final Completion Procedures.....................................22
2.13 No Approval of Work.............................................22
2.14 Security........................................................22
ARTICLE 3 - CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND
SUBSEQUENT ADVANCES.............................................22
3.1 Conditions Precedent to the Initial Advance.....................22
3.2 Conditions Precedent to Subsequent Advances.....................31
3.3 No Waiver or Estoppel...........................................36
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES..................................36
4.1 Organization....................................................36
4.2 Authorization; No Conflict......................................36
4.3 Legality, Validity and Enforceability...........................37
4.4 Compliance with Law, Permits and Operative Documents............37
4.5 Permits.........................................................37
4.6 Litigation......................................................37
4.7 Financial Statements............................................37
4.8 Security Interests..............................................38
4.9 Existing Defaults...............................................39
4.10 Taxes...........................................................39
4.11 Contingent Liabilities..........................................39
4.12 Business, Debt, Contracts, Etc..................................39
4.13 Representations and Warranties..................................40
4.14 Environmental Laws..............................................40
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Page
----
4.15 Utilities.......................................................40
4.16 In Balance Requirement..........................................41
4.17 Sufficiency of Interests and Project Documents..................41
4.18 Intellectual Property...........................................41
4.19 Project Budget; Summary Anticipated Cost Report.................42
4.20 Fees and Enforcement............................................43
4.21 ERISA...........................................................43
4.22 Subsidiaries and Beneficial Interest............................43
4.23 Labor Disputes and Acts of God..................................43
4.24 Liens...........................................................43
4.25 Title...........................................................44
4.26 Investment Company Act..........................................44
4.27 Project Schedule................................................44
4.28 Proper Subdivision..............................................44
4.29 Offices, Location of Collateral.................................44
4.30 Regulation U, Etc...............................................44
4.31 Governmental Regulation.........................................44
ARTICLE 5 - AFFIRMATIVE COVENANTS...........................................45
5.1 Use of Proceeds; Repayment of Indebtedness......................45
5.2 Existence, Conduct of Business, Properties, Etc.................46
5.3 Diligent Construction of the Project............................46
5.4 Compliance with Legal Requirements..............................46
5.5 Books, Records, Access..........................................46
5.6 Financial Statements............................................47
5.7 Reports; Cooperation............................................47
5.8 Notices.........................................................48
5.9 Company Equity..................................................49
5.10 Indemnification; Costs and Expenses.............................49
5.11 Project Documents and Permits...................................49
5.12 Security Interest in Newly Acquired Property....................49
5.13 Plans and Specifications........................................50
5.14 Construction Consultant.........................................50
5.15 Proper Legal Forms..............................................50
5.16 Preserving the Project Security.................................50
5.17 Management Letters..............................................53
5.18 Governmental and Environmental Reports..........................53
5.19 Insurance.......................................................54
5.20 Application of Insurance and Condemnation Proceeds..............54
5.21 Buffer Zone Encroachments.......................................54
5.22 Compliance with Material Project Documents......................54
5.23 Title Insurer Escrow Agreement..................................55
5.24 Billboard Lease Space and Mall Space............................55
5.25 Utility Easement Modifications..................................55
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Page
----
ARTICLE 6 - NEGATIVE COVENANTS..............................................55
6.1 Waiver, Modification and Amendment..............................55
6.2 Construction Management Agreement; Completion; Drawings.........57
6.3 Amendment to Operative Documents................................58
6.4 Project Budget and Project Schedule Amendment...................58
6.5 Hazardous Substances............................................60
6.6 No Other Powers of Attorney.....................................60
6.7 Opening.........................................................60
6.8 Reduction of Commitments........................................60
ARTICLE 7 - EVENTS OF DEFAULT...............................................61
7.1 Events of Default...............................................61
7.2 Remedies........................................................64
ARTICLE 8 - CONSULTANTS AND REPORTS.........................................65
8.1 Removal and Fees................................................65
8.2 Duties..........................................................65
8.3 Acts of Disbursement Agent......................................65
ARTICLE 9 - THE DISBURSEMENT AGENT..........................................65
9.1 Appointment and Acceptance......................................65
9.2 Duties and Liabilities of the Disbursement Agent Generally......65
9.3 Particular Duties and Liabilities of the Disbursement Agent.....67
9.4 Segregation of Funds and Property Interest......................68
9.5 Compensation and Reimbursement of the Disbursement Agent........68
9.6 Qualification of the Disbursement Agent.........................69
9.7 Resignation and Removal of the Disbursement Agent...............69
9.8 Merger or Consolidation of the Disbursement Agent...............69
9.9 Statements; Information.........................................70
9.10 Limitation of Liability.........................................70
ARTICLE 10 - SAFEKEEPING OF ACCOUNTS........................................71
10.1 Application of Funds in Accounts................................71
10.2 Event of Default................................................71
10.3 Liens...........................................................71
10.4 Perfection......................................................71
10.5 Mortgage Notes Proceeds Account.................................72
10.6 Bank Proceeds Account...........................................72
ARTICLE 11 - MISCELLANEOUS..................................................72
11.1 Addresses.......................................................72
11.2 Further Assurances..............................................74
11.3 Delay and Waiver................................................74
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Page
----
11.4 Additional Security; Right to Set-Off...........................74
11.5 Entire Agreement................................................74
11.6 Governing Law...................................................74
11.7 Severability....................................................75
11.8 Headings........................................................75
11.9 Limitation on Liability.........................................75
11.10 Waiver of Jury Trial............................................75
11.11 Consent to Jurisdiction.........................................75
11.12 Successors and Assigns..........................................75
11.13 Reinstatement...................................................76
11.14 No Partnership; Etc.............................................76
11.15 Costs and Expenses..............................................76
11.16 Agreements Among Funding Agents and Other Secured Parties.......78
11.17 Counterparts....................................................79
11.18 Intercreditor Agreement.........................................79
11.19 Confidentiality.................................................79
11.20 Certain Agreements Relating to the Mall.........................80
11.21 Termination.....................................................80
iv
<PAGE>
EXHIBITS
Exhibit A Definitions
Exhibit B-1 The Company's Closing Certificate
Exhibit B-2 Construction Consultant's Closing Certificate
Exhibit B-3 Insurance Advisor's Closing Certificate
Exhibit B-4 Company's Insurance Broker's Closing Certificate
Exhibit C-1 Advance Request and Certificate
Exhibit C-2 Construction Consultant's Certificate
Exhibit D Notice of Funding Request
Exhibit E Project Budget/Schedule Amendment Certificate
Exhibit F Additional Contract Certificate
Exhibit G Contract Amendment Certificate
Exhibit H Project Budget
Exhibit H-1 Summary Anticipated Cost Report
Exhibit H-2 Element Specific Anticipated Cost Report
Exhibit I Project Schedule
Exhibit J Construction Benchmark Schedule
Exhibit K-1 Pre-Opening Expenses
Exhibit K-2 Issuance Fees and Expenses
Exhibit L-1 Form of Six Month Certificate
Exhibit L-2 Form of Eight Month Certificate
Exhibit M Schedule of Permits
Exhibit N-1 VCR Permitted Encumbrances
Exhibit N-2 GCCLLC Permitted Encumbrances
Exhibit O Insurance Requirements
Exhibit P Schedule of Security Filings
Exhibit Q Opinion List
Exhibit R-1 Litigation Disclosure
Exhibit R-2 Violations Disclosure
Exhibit R-3 Labor Disputes Disclosure
Exhibit S Form of Consent to Assignment
Exhibit T-1 Description of the Project
Exhibit T-2 Description of the HVAC Component
Exhibit T-3 Description of Equipment Component
Exhibit T-4 Description of the Site
Exhibit T-5 Description of the Phase II Land
Exhibit T-6 Description of the Mall
Exhibit T-7 Description of the Mall Space
Exhibit T-8 Description of the Hotel/Casino Space
Exhibit T-9 Description of the Buffer Zone Space
Exhibit T-10 List of Plans and Specifications
Exhibit U List of Project Documents
Exhibit V-1 Form of Grant Deed
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Exhibit V-2 Form of Assignment of Lease
Exhibit W-1 Form of Company's Completion Certificate
Exhibit W-2 Form of Construction Consultant's Completion Certificate
Exhibit W-3 Form of Company's Mall Release Certificate
Exhibit W-4 Form of Construction Consultant's Mall Release Certificate
Exhibit W-5 Form of Project Architect's Mall Release Certificate
Exhibit W-6 Form of Company's Opening Date Certificate
Exhibit W-7 Form of Construction Consultant's Opening Date Certificate
Exhibit W-8 Form of Company's Final Completion Certificate
Exhibit W-9 Form of Construction Consultant's Final Completion Certificate
Exhibit X Safe Harbor Scope Changes
Exhibit Y Realized Savings Certificate
vi
<PAGE>
THIS FUNDING AGENTS' DISBURSEMENT AND ADMINISTRATION AGREEMENT
(the "Agreement"), dated as of November 14, 1997, is entered into by and among
LAS VEGAS SANDS, INC., a Nevada corporation ("LVSI"), VENETIAN CASINO RESORT,
LLC, a Nevada limited liability company ("VCR"), GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC, a Delaware limited liability company ("GCCLLC" and, jointly
and severally with VCR and LVSI, the "Company"), THE BANK OF NOVA SCOTIA, a
Canadian chartered bank, as the initial Bank Agent, FIRST TRUST NATIONAL
ASSOCIATION, as the initial Mortgage Notes Indenture Trustee, GMAC COMMERCIAL
MORTGAGE CORPORATION, a California corporation (the "Interim Mall Lender"),
ATLANTIC-PACIFIC LAS VEGAS, a Delaware limited liability company (the "HVAC
Provider"), and THE BANK OF NOVA SCOTIA, a Canadian chartered bank, as the
initial Disbursement Agent.
RECITALS
A. The Project. The Company proposes to develop, construct and operate the
Venetian Casino Resort, a large scale Venetian-themed hotel, casino, retail,
meeting and entertainment complex, with related heating, ventilation and air
conditioning and power station facilities, as part of the redevelopment of the
site of the former Las Vegas Sands Hotel and Casino.
B. Construction Management Agreement. VCR (as assignee of LVSI) and the
Construction Manager are parties to the Construction Management Agreement
pursuant to which the Construction Manager will, subject to certain conditions,
limitations and exclusions, construct the Project on a guaranteed maximum price
basis. The Construction Manager's obligations under the Construction Management
Agreement are (a) directly guaranteed by the Direct Construction Guarantor as
and to the extent provided in the Direct Construction Guaranty and (b)
indirectly guaranteed by the Indirect Construction Guarantor as and to the
extent provided in the Indirect Construction Guaranty.
C. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank
Agent, Goldman Sachs Credit Partners L.P., as arranger, and the Bank Lenders
have entered into the Bank Credit Agreement pursuant to which the Bank Lenders
have agreed, subject to the terms thereof and hereof, to provide certain loans
to LVSI and VCR, jointly and severally, in an aggregate amount not to exceed
$170,000,000. Of such amount, subject to Section 2.2.3(b), $150,000,000 is
intended to finance Project Costs, as more particularly described therein and
herein. GCCLLC has, pursuant to the GCCLLC Bank Guaranty, guaranteed LVSI's and
VCR's obligations under the Bank Credit Agreement.
D. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR, GCCLLC
and the Interim Mall Lender have entered into the Interim Mall Credit Agreement
pursuant to which the Interim Mall Lender has agreed, subject to the terms
thereof and hereof, to provide certain loans to LVSI, GCCLLC and VCR, jointly
and severally, in an aggregate amount not to exceed $140,000,000, to finance
Project Costs, as more particularly described therein and herein.
E. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors signatory thereto (including GCCLLC) and the Mortgage Notes Indenture
Trustee have entered into the Mortgage Notes Indenture pursuant to which LVSI
and VCR will issue the Mortgage Notes in an aggregate principal amount equal to
$425,000,000 to finance Project Costs, as more particularly described therein
and herein.
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F. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors signatory thereto (including GCCLLC) and the Subordinated Notes
Indenture Trustee have entered into the Subordinated Notes Indenture pursuant to
which LVSI and VCR will issue the Subordinated Notes in an aggregate face amount
equal to $97,500,000, to finance Project Costs, as more particularly described
therein and herein.
G. HVAC Services Agreement. Concurrently herewith, VCR and the HVAC
Provider have entered into the HVAC Services Agreement pursuant to which the
HVAC Provider has agreed, subject to the terms thereof and hereof, to contribute
up to $70,000,000 for the acquisition, construction, testing and installation of
the HVAC Component. Pursuant to the HVAC Services Agreement, the HVAC Provider
will own the HVAC Component and, upon completion of the HVAC Component, operate
and maintain the HVAC Component to provide thermal energy (heating, air
conditioning and other services) to the Hotel/Casino. Pursuant to HVAC services
agreements entered into by the HVAC Provider with Interface Group-Nevada, Inc.
and GCCLLC, the HVAC Provider will supply thermal energy (heating, air
conditioning and other services) to the Sands Expo and Convention Center and the
Mall. In addition, if certain conditions are met, as set forth in the HVAC
Services Agreement, the HVAC Provider may enter into an HVAC services agreement
to supply similar services to the Phase II Project.
H. Intercreditor Agreement. Concurrently herewith, the Intercreditor
Agent, the Bank Agent (acting on behalf of itself and the Bank Lenders), the
Interim Mall Lender, the Mortgage Notes Indenture Trustee (acting on behalf of
itself and the Mortgage Note Holders) and the Subordinated Notes Indenture
Trustee (acting on behalf of itself and the Subordinated Note Holders) have
entered into the Intercreditor Agreement pursuant to which the parties thereto
have set forth certain intercreditor provisions, including the priority of the
liens, the method of decision making for the Lenders, the arrangements
applicable to actions in respect of approval rights and waivers, the limitations
on rights of enforcement upon default and the application of proceeds upon
enforcement.
I. Adelson Completion Guaranty. Concurrently herewith, Adelson has
executed 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) the Adelson Completion Guaranty pursuant to which
Adelson has agreed, subject to the terms and limitations thereof, to guaranty
payment by the Company of certain Project Costs.
J. Purpose. The parties are entering into this Agreement in order to set
forth, among other things, (a) the mechanics for and allocation of the Company's
requests for Advances under the various Facilities and from the Company's Funds
Account, (b) the conditions precedent to the initial Advance and conditions
precedent to subsequent Advances, (c) certain common representations, warranties
and covenants of the Company in favor of the Funding Agents and the Lenders and
(d) the common events of default and remedies.
AGREEMENT
NOW, THEREFORE, in consideration of the Bank Agent, the Interim Mall
Lender, the Mortgage Notes Indenture Trustee, the Disbursement Agent, the other
Secured Parties and the HVAC Provider entering into the respective Facility
Agreements and Financing Agreements, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
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ARTICLE 1 - DEFINITIONS; RULES OF INTERPRETATION
1.1 Definitions. Except as otherwise expressly provided herein,
capitalized terms used in this Agreement and its exhibits shall have the
meanings given in Exhibit A hereto. To the extent such terms are defined by
reference to the Financing Agreements, such terms shall continue to have their
original definitions notwithstanding any termination, expiration or amendment of
such agreements.
1.2 Rules of Interpretation. Except as otherwise expressly provided
herein, the rules of interpretation set forth in Exhibit A hereto shall apply to
this Agreement.
1.3 Conflict with a Facility Agreement. This Agreement and each of the
Facility Agreements is being drafted concurrently and are each intended to cover
the respective matters specifically set forth therein. In the case of any
express conflict between the terms of this Agreement and the terms of any
Facility Agreement, the terms of this Agreement shall control.
ARTICLE 2 - FUNDING
2.1 Representations Regarding Project Status. The parties hereto
acknowledge that construction of the Project commenced prior to the date hereof
and that, in connection therewith, the Company has entered into certain
Contracts, the Construction Manager has engaged certain Subcontractors, and the
Company has incurred and paid for certain Project Costs. In order to account for
such construction activity for purposes of the funding procedures and mechanics
set forth herein, the Company has certified and made certain representations in
the Company's Closing Certificate as to various facts pertaining to the status
of the Project, including, without limitation, the work performed, the Contracts
entered into and the Project Costs incurred to date. The Company has further
represented that the Project Budget attached hereto as Exhibit H, the Summary
Anticipated Cost Report attached hereto as Exhibit H-1 and the Project Schedule
attached hereto as Exhibit I are true and accurate in all material respects as
of the date hereof and incorporate and reflect the work performed and Project
Costs incurred to date. Such certifications and representations of the Company
have been confirmed by the Construction Consultant to the extent set forth in
the Construction Consultant's Closing Certificate.
2.2 Availability of Advances.
2.2.1 Generally. Each of the Bank Lenders, the Interim Mall Lender,
the Mortgage Notes Indenture Trustee and the HVAC Provider shall make or cause
to be made Advances under its Facility to the Company in accordance with and
pursuant to the terms of this Agreement and the respective Facility Agreement.
2.2.2 Availability. Subject to the satisfaction of all conditions
precedent listed in Article 3 and the other terms and provisions of this
Agreement, Advances under the Facilities and from the Company's Funds Account
shall be made during the Availability Period. Advances shall be made no more
frequently than twice in any 30-day period; provided that (a) payments to the
Construction Manager or any given Contractor or Subcontractor may not be made
more frequently than once in any 30-day period and (b) the advances and
transfers of funds contemplated in Section 2.10 and 2.11 shall be disregarded
for purposes of this sentence.
3
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2.2.3 Approved Equipment Funding Commitments; Working Capital.
(a) Funding Mechanics for Equipment Component Costs. The
parties hereto acknowledge that financing of the costs of acquisition and
installation of the items comprising the Equipment Component will, subject to
Section 2.2.3(b) and Section 2.6.1(d) be made available to the Company through
Approved Equipment Funding Commitments and that advances of funds under such
commitments will not be made pursuant to this Agreement but, instead, will be
made pursuant to separate agreements entered into between the Company and the
providers of such financings. In order to account for such funding commitments
for purposes of tracking the progress and status of the Project hereunder,
including the amount of Available Funds from time to time, (i) it is
contemplated that the providers of the Approved Equipment Funding Commitments
will agree, pursuant to the Equipment Funding Providers' Intercreditor
Agreements to, among other things, notify the Disbursement Agent from time to
time of the amounts drawn and amounts available to be drawn under their
respective commitments, (ii) the Company has represented that the Project
Budget, Project Schedule and Plans and Specifications include and reflect the
work to be performed in connection with the Equipment Component, (iii) the
Advance Requests to be submitted by the Company hereunder require the Company
to, among other things, certify as to the Project Costs incurred and work from
time to time performed in connection with the Equipment Component, and (iv) the
Construction Consultant has and will confirm the Company's certifications and
representations to the extent set forth in the Construction Consultant's Closing
Certificate and in the other certificates to be submitted by the Construction
Consultant hereunder from time to time.
(b) Temporary Funding of Equipment Component Costs. The
parties further acknowledge that certain Approved Equipment Funding Commitments
require that the Project be no more than eight months from satisfying the
Opening Conditions before any advances may be made thereunder. In addition,
certain Approved Equipment Funding Commitments provide that the Company may not
obtain draws thereunder until delivery to the site of the Equipment Component
items financed thereby. In order to fund costs related to the Equipment
Component until draws are permitted under such Approved Equipment Funding
Commitments, the Company may (i) make draws on the Bank Revolving Facility, up
to an aggregate amount of Fifteen Million Dollars ($15,000,000), in accordance
with the provisions of Bank Credit Agreement and (ii) request Advances from
HC/Mall Component Funding Sources, up to an aggregate amount of Five Million
Dollars ($5,000,000). At such time as the Company believes that the Project is
within eight months of satisfying the Opening Conditions, the Company shall
request the Construction Consultant to issue a certificate to such effect.
Should the Construction Consultant concur with the Company's determination
(which concurrence shall not be unreasonably withheld), the Construction
Consultant shall promptly issue a certificate in the form of Exhibit L-2 hereto.
Upon obtaining proceeds of draws under the Approved Equipment Funding
Commitments in respect of Equipment Component items the purchase of which was
financed, in whole or in part, pursuant to clauses (i) and (ii) above, the
Company shall use such proceeds to (A) first, repay amounts drawn on the Bank
Revolving Facility in accordance with clause (i) above and (B) then, deposit in
the Company's Funds Account an amount equal to the amounts drawn on the HC/Mall
Component Funding Sources in accordance with clause (ii) above. The Bank Agent
agrees to notify the Disbursement Agent from time to time of the amounts drawn
and the amounts available to be drawn under the Bank Revolving Facility for the
purposes set forth in this Section 2.2.3(b). Each of the Disbursement Agent and
the Bank Agent shall promptly notify the other upon receipt of notices of any
draws on Approved Equipment Funding Commitments or acquisitions or placing of
purchase orders on Equipment Component items.
(c) Working Capital. The parties acknowledge that, in
accordance with Section 6.4, the Company may, after the Revolving Loan
Availability Date, add the Working Capital Line Item Category to the Project
Budget. Financing to pay the costs incurred by the Company with respect
4
<PAGE>
to such Line Item Category will, subject to Section 2.6.1.(d), be made available
to the Company through the Bank Revolving Facility. Advances of funds under the
Bank Revolving Facility will be made in accordance with the provisions of the
Bank Credit Agreement. In order to account for the funding commitment under the
Bank Revolving Facility for purposes of tracking the progress and status of the
Project hereunder, including the amount of Available Funds from time to time,
(i) the Bank Agent agrees to notify the Disbursement Agent from time to time of
the amounts drawn and amounts available to be drawn under the Bank Revolving
Facility, (ii) the Advance Requests to be submitted by the Company hereunder
require the Company to, among other things, certify as to the Project Costs
incurred in connection with the Working Capital Line Item and (iii) the
Construction Consultant will confirm the Company's certifications and
representations to the extent set forth in the Construction Consultant's
certificates submitted by the Construction Consultant hereunder from time to
time.
2.3 Accounts.
2.3.1 Company's Funds Account. On or prior to the Financing Date,
there shall be established the Company's Funds Account pursuant to the Company
Collateral Account Agreement. The Company's Funds Account shall be subject to
the sole control of the Disbursement Agent. There shall be deposited into the
Company's Funds Account all cash amounts described in Section 3.1.26(a)(ii), (b)
and (c) and certain amounts required pursuant to Sections 5.9.1 and 5.9.2. As
more particularly provided in Section 5.1.1, there shall be deposited into the
Company's Funds Account certain amounts received by the Company in respect of
liquidated or other damages under the Construction Management Agreement and the
Contracts, amounts paid to the Company under the Direct Construction Guaranty
and the Indirect Construction Guaranty and all other funds or amounts received
by the Company and not otherwise provided for in this Agreement, in each case,
prior to the Final Completion Date. There shall also be deposited in the
Company's Funds Account the amounts specified in Section 2.2.3(b) and all Loss
Proceeds received by the Company, the Disbursement Agent or any other Person as
required pursuant to Section 5.20 and all amounts received by the Disbursement
Agent, the Intercreditor Agent or any of the Bank Agent, the Interim Mall Lender
or the Mortgage Notes Indenture Trustee and required to be deposited in the
Company's Funds Account pursuant to the Intercreditor Agreement. Subject to the
provisions of Section 10.2 and the Company Collateral Account Agreement, amounts
on deposit in the Company's Funds Account shall, from time to time, (a) be
transferred to the Collection Account and thereafter transferred to the
Disbursement Account for application to pay Project Costs in accordance with
Section 2.5.4(a) and/or (b) applied to prepayment of the Obligations in
accordance with Section 5.20, and, on the Final Completion Date, applied as
provided in Section 2.12. Investment income from Permitted Investments on
amounts on deposit in the Company's Funds Account shall be deposited at all
times therein until applied to the payment of Project Costs or application in
accordance with Section 2.12.
2.3.2 Mortgage Notes Proceeds Account. On or prior to the Issuance
Date, there shall be established the Mortgage Notes Proceeds Account pursuant to
the Mortgage Notes Collateral Account Agreement. The Mortgage Notes Proceeds
Account shall be subject to the sole control of the Disbursement Agent. There
shall be deposited into the Mortgage Notes Proceeds Account the Mortgage Notes
Proceeds. Subject to the provisions of Section 10.2 and the Mortgage Notes
Collateral Account Agreement, amounts on deposit in the Mortgage Notes Proceeds
Account shall, from time to time, be transferred to the Collection Account and
thereafter transferred to the Disbursement Account for application to pay
Project Costs in accordance with Section 2.5.4(a) and, on the Final Completion
Date, be applied as provided in Section 2.12. Investment income from Permitted
Investments on amounts on deposit in the Mortgage Notes Proceeds Account shall
be deposited at all times therein until applied to the payment of Project Costs
or application in accordance with Section 2.12.
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2.3.3 Collection Account. On or prior to the Financing Date, there
shall be established the Collection Account pursuant to the Company Collateral
Account Agreement. The Collection Account shall be subject to the sole control
of the Disbursement Agent. There shall be deposited in the Collection Account
(a) all funds advanced from time to time by the Bank Lenders (and/or withdrawn
from the Bank Proceeds Account or the Pre-Completion Revenues Account pursuant
to Section 2.9), the Interim Mall Lender (and/or withdrawn from the Mall
Retainage/Punchlist Account pursuant to Section 2.10(e)) and the HVAC Provider
(and/or drawn on the HVAC Letters of Credit or withdrawn from the HVAC Accounts)
and (b) all funds withdrawn by the Disbursement Agent from the Company's Funds
Account and the Mortgage Notes Proceeds Account, in each case, pursuant to
Section 2.5.4(a). Subject to the provisions of Section 10.2 and the Company
Collateral Account Agreement, amounts on deposit in the Collection Account
shall, from time to time, be transferred to the Disbursement Account in
accordance with Section 2.5.4(a). On the Final Completion Date, funds remaining
in the Collection Account shall be applied as provided in Section 2.12. The
deposit of funds into the Collection Account shall not create, vest in, or give
the Company any rights to such funds, and the Company shall have no right to
draw, obtain the release or otherwise use such funds until (x) the requirements
of Section 2.5 have been satisfied and (y) the conditions set forth in Section
3.1 or 3.2, as the case may be, have been satisfied or waived in accordance with
the terms hereof. Further, funds deposited in the Collection Account pursuant to
clause (a) above shall not be within the bankruptcy "estate" (as such term is
used in 11 U.S.C. ss. 541) of the Company. In the event that any funds deposited
in the Collection Account are, for any reason, (i) not withdrawn therefrom
pursuant to Section 2.5.4(a) on the day on which they are deposited (or, in the
case of amounts advanced by the HVAC Provider or drawn from the HVAC Letters of
Credit or HVAC Accounts, on the day following the day on which they are
deposited), or (ii) are returned thereto from the Disbursement Account, such
funds shall, on the next day, be withdrawn from the Collection Account and (i)
in the case of funds advanced by the Bank Lenders or withdrawn from the Pre-
Completion Revenues Account or the Bank Proceeds Account, deposited in the Bank
Proceeds Account, (ii) in the case of funds advanced by the Interim Mall Lender,
returned to the Interim Mall Lender, (iii) in the case of funds withdrawn from
the Mortgage Notes Proceeds Account, returned to the Mortgage Notes Proceeds
Account, (iv) in the case of funds withdrawn from the Mall Retainage/Punchlist
Account, returned to the Mall Retainage/Punchlist Account and (v) in the case of
funds advanced by the HVAC Provider, returned to the HVAC Provider (except that
amounts drawn under the HVAC Letters of Credit or withdrawn from the HVAC
Accounts shall not be paid to the HVAC Provider but instead shall be deposited
in the Atlantic Account and Pacific Account, respectively). The Collection
Account shall be a non-interest bearing account.
2.3.4 Disbursement Account. On or prior to the Financing Date, there
shall be established the Disbursement Account pursuant to the Company Collateral
Account Agreement. The Disbursement Account shall be subject to the sole control
of the Disbursement Agent. On each Advance Date, funds shall be withdrawn from
the Collection Account and deposited in the Disbursement Account in accordance
with Section 2.5.4(a). Subject to the provisions of Section 10.2 and the Company
Collateral Account Agreement, amounts on deposit in the Disbursement Account
shall be transferred to the HC/Mall Component Cash Management Sub-Account and/or
the HVAC Component Cash Management Sub-Account and/or the Interest Payment
Account and/or the Lien Protection Account and/or applied to pay Project Costs
in accordance with Section 2.7. On the Final Completion Date, funds remaining in
the Disbursement Account shall be applied as provided in Section 2.12. The
deposit of funds into the Disbursement Account shall not give the Company any
greater rights to such funds than the rights, if any, that the Company had to
such funds while they were on deposit in the Collection Account. In the event
that any funds deposited in the Disbursement Account are, for any reason, not
withdrawn therefrom pursuant to Section 2.7 on the same day on which they are
deposited (or, with respect to amounts to be disbursed in accordance with
Section 2.7.2, the third day following their deposit), such funds shall, on the
next day, be withdrawn from the Disbursement Account and returned
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to the Collection Account. Any interest which may accrue on amounts deposited in
the Disbursement Account shall be deposited in the Company's Funds Account until
applied as herein provided.
2.3.5 Cash Management Account. On or prior to the Financing Date,
there shall be established the Cash Management Account pursuant to the Company
Collateral Account Agreement and within the Cash Management Account, the HC/Mall
Component Cash Management Sub-Account and the HVAC Component Cash Management
Sub-Account. On the third day after the Financing Date, Six Million Five Hundred
Thousand Dollars ($6,500,000) shall be withdrawn from the Disbursement Account
and of such amount Five Million Five Hundred Thousand Dollars ($5,500,000) shall
be deposited in the HC/Mall Component Cash Management Sub-Account and One
Million Dollars ($1,000,000) shall be deposited in the HVAC Component Cash
Management Sub-Account. Subject to the provisions of Section 10.2 and the
Company Collateral Account Agreement, the Company shall be permitted from time
to time to draw checks on and otherwise withdraw amounts on deposit in the
HC/Mall Component Cash Management Sub-Account and the HVAC Component Cash
Management Sub-Account to pay due and payable Project Costs allocated to the
HC/Mall Component and the HVAC Component, respectively, in accordance with the
terms hereof. The Company shall be permitted from time to time to replace
amounts drawn from the HC/Mall Component Cash Management Sub-Account and the
HVAC Component Cash Management Sub-Account pursuant to the preceding sentence by
including a request to such effect in Advance Requests submitted in accordance
with Sections 2.5 and 2.6. On the Final Completion Date, funds remaining in the
HC/Mall Component Cash Management Sub-Account and the HVAC Component Cash
Management Sub-Account (but only to the extent funded from HC/Mall Component
Funding Sources) shall be applied as provided in Section 2.12 and funds
remaining in the HVAC Component Cash Management Sub-Account shall, to the extent
funded from the HVAC Commitment Facility, be returned to the HVAC Provider.
2.3.6 Interest Payment Account. On or prior to the Financing Date,
there shall be established the Interest Payment Account pursuant to the Company
Collateral Account Agreement. The Interest Payment Account shall be subject to
the sole control of the Disbursement Agent. On each Advance Date until the
Opening Date, funds shall be withdrawn from the Disbursement Account and
deposited in the Interest Payment Account to the extent necessary to pay
interest under the Bank Credit Agreement, the Interim Mall Credit Agreement, the
Mortgage Notes, the Approved Equipment Funding Commitments and the Subordinated
Notes, as set forth in Advance Requests delivered to the Disbursement Agent and
in accordance with Section 2.8. Amounts on deposit in the Interest Payment
Account shall be applied by the Disbursement Agent to pay interest under the
Bank Credit Agreement, the Interim Mall Credit Agreement, the Mortgage Notes,
the Approved Equipment Funding Commitments and the Subordinated Notes, in each
case, on the dates that such amounts become due and payable, provided, however,
that no such payment shall be made in respect of the Subordinated Notes from and
after receipt by the Disbursement Agent of notice from any Funding Agent that
payment on the Subordinated Notes is blocked under Article 10 of the
Subordinated Notes Indenture.
2.3.7 Bank Proceeds Account. On or prior to the Financing Date,
there shall be established the Bank Proceeds Account pursuant to the Company
Collateral Account Agreement. The Bank Proceeds Account shall be subject to the
sole control of the Disbursement Agent. As provided in Section 2.3.3, there
shall be deposited in the Bank Proceeds Account all amounts deposited by the
Bank Lenders in the Collection Account (or transferred to the Collection Account
from the Bank Proceeds Account or the Pre-Completion Revenues Account) which (a)
are not transferred to the Disbursement Account on the same day such funds were
deposited in the Collection Account or (b) which are transferred to the
Disbursement Account on the day deposited but are later returned to the
Collection Account. There shall also be deposited in the Bank Proceeds Account
the amounts set forth in Section 2.11(d). Subject to the provisions of Section
10.2 and the Company Collateral Account Agreement,
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amounts on deposit in the Bank Proceeds Account shall, from time to time be
transferred to the Collection Account in accordance with Section 2.9 and
thereafter transferred to the Disbursement Account for application to pay
Project Costs in accordance with Section 2.5.4(a) and on the earlier to occur of
(i) the Final Completion Date, or (ii) the expiration of six (6) months from the
Completion Date, be applied as provided in Section 2.11(e) or 2.12, as
applicable.
2.3.8 Pre-Completion Revenues Account. On or prior to the Financing
Date, there shall be established the Pre-Completion Revenues Account pursuant to
the Company Collateral Account Agreement. The Pre-Completion Revenues Account
shall be subject to the sole control of the Disbursement Agent. There shall be
deposited in the Pre-Completion Revenues Account all amounts which the Company
is required to withdraw from the Operating Account pursuant to Section 2.3.12.
Subject to the provisions of Section 10.1 and the Company Collateral Account
Agreement, on each Advance Date, funds shall be withdrawn from the
Pre-Completion Revenues Account to the extent set forth in Section 2.9 and
deposited in the Collection Account for further transfer to the Disbursement
Account and application to the payment of Project Costs. In addition, the
Company shall be permitted to, from time to time, transfer amounts on deposit in
the Pre-Completion Revenues Account to the Operating Account to the extent
necessary to pay due and payable Operating Costs. On the Final Completion Date,
subject to the provisions of Section 10.2 and the Company Collateral Account
Agreement, all funds on deposit in the Pre-Completion Revenues Account shall be
applied as set forth in Section 2.11(d)(ii). Any funds remaining in the
Pre-Completion Revenues Account on the Final Completion Date (after application
in accordance with the previous sentence) shall be applied in accordance with
Section 2.12.
2.3.9 Mall Leasing Commissions Reserve Account. On or prior to the
Mall Release Date, there shall be established the Mall Leasing Commissions
Reserve Account (the "Mall Leasing Commissions Reserve Account"). The Mall
Leasing Commissions Reserve Account and all amounts therein shall be owned by
GCCLLC and shall be subject to the sole control of the Disbursement Agent. There
shall be deposited into the Mall Leasing Commissions Reserve Account the amounts
set forth in Section 2.10. On the Mall Release Date, GCCLLC shall assign and
transfer all of its right, title and interest in and to the Mall Leasing
Commissions Reserve Account to Mall I LLC in accordance with Section 5.16(c).
2.3.10 Mall Tenant Improvements Reserve Account. On or prior to the
Mall Release Date, there shall be established the Mall Tenant Improvements
Reserve Account (the "Mall Tenant Improvements Reserve Account"). The Mall
Tenant Improvements Reserve Account and all amounts therein shall be owned by
GCCLLC and shall be subject to the sole control of the Disbursement Agent. There
shall be deposited into the Mall Tenant Improvements Reserve Account the amounts
set forth in Section 2.10. On the Mall Release Date, GCCLLC shall assign and
transfer all of its right, title and interest in and to the Mall Tenant
Improvements Reserve Account to Mall I LLC in accordance with Section 5.16(c).
2.3.11 Mall Retainage/Punchlist Account. On or prior to the Mall
Release Date, there shall be established the Mall Retainage/Punchlist Account
pursuant to the Mall Escrow Agreement. The Mall Retainage/Punchlist Account and
all amounts on deposit therein shall be owned by Mall I LLC. The Mall
Retainage/Punchlist Account shall be held in escrow by the Disbursement Agent in
accordance with the Mall Escrow Agreement. There shall be deposited in the Mall
Retainage/Punchlist Account the amounts set forth in Section 2.10(d)(ii) and
2.10(d)(iii). Amounts on deposit in the Mall Retainage/Punchlist Account shall,
from time to time be transferred to the Collection Account in accordance with
Section 2.10(e) and thereafter transferred to the Disbursement Account for
application to pay Project Costs in accordance with Section 2.5.4(a). As further
provided in the Mall Escrow
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Agreement, Mall I LLC shall, on the Final Completion Date release and transfer
to GCCLLC all funds then on deposit in the Mall Retainage/Punchlist Account.
2.3.12 Operating Account. On or promptly after the Financing Date
the Company shall establish a local deposit account (the "Operating Account") in
Las Vegas, Nevada at a bank that is reasonably acceptable to the Disbursement
Agent and that enters into a letter agreement with the Disbursement Agent on
behalf of the Secured Parties in form and substance reasonably satisfactory to
the Disbursement Agent pursuant to which such bank (a) acknowledges the security
interest of the Secured Parties in such account, (b) waives its right of set-off
with respect to amounts held therein and (c) agrees that if the Disbursement
Agent notifies such bank that an Event of Default has occurred, then until such
notification is rescinded, such bank will act only on instructions from the
Disbursement Agent and will, if so instructed to, block further withdrawals from
such account. The Company shall take such further actions and execute such
further documents in connection therewith as the Disbursement Agent may
reasonably request in order to perfect or maintain the perfection, to the
greatest extent reasonably practicable, of the Lien of the Secured Parties in
the Operating Account. There shall be deposited in the Operating Account all
revenues received by the Company as a consequence of sales of goods or rendering
of services in the ordinary course of business prior to the Final Completion
Date. In addition, there shall be deposited in the Operating Account funds
transferred from the Pre-Completion Revenues Account in accordance with Section
2.3.8. Subject to the Disbursement Agent's rights upon the occurrence of an
Event of Default, the Company shall be permitted from time to time to draw
checks on and otherwise withdraw amounts on deposit in the Operating Account to
pay due and payable Operating Costs. Until the Opening Date, the Company shall
at such times as the amounts on deposit in the Operating Account exceed $100,000
promptly withdraw such excess and deposit the same in the Pre-Completion
Revenues Account. The foregoing limit on amounts on deposit in the Operating
Account shall be increased for the period from the Opening Date through the
Final Completion Date to an amount mutually agreed upon between the Company and
the Disbursement Agent that will enable the Company to pay its Operating Costs
as they become due and payable.
2.4 HVAC Letters of Credit.
2.4.1 In order to secure its obligation to make the Advances
required hereunder, the HVAC Provider shall, on or prior to the Financing Date,
deliver or cause to be delivered to the Disbursement Agent for the benefit of
the Lenders, (a) an unconditional, irrevocable, standby letter of credit issued
in a stated amount equal to $35 million for the account of Atlantic (the
"Atlantic Letter of Credit") and (b) two unconditional, irrevocable, standby
letters of credit each issued in a stated amount equal to $17.5 million for the
account of Pacific (the "Pacific Letters of Credit" and, together with the
Atlantic Letter of Credit, the "HVAC Letters of Credit"). Each of the HVAC
Letters of Credit (i) shall be issued by a financial institution rated at least
A or the equivalent thereof by S&P or at least A2 or the equivalent thereof by
Moody's, (ii) shall name the Disbursement Agent on behalf of the Lenders as
beneficiary, (iii) shall have an initial expiration date of at least one (1)
year after its date of issuance and be automatically renewable on each
anniversary of the issuance date thereof for one (1) additional year unless the
issuing bank delivers notice to the Disbursement Agent no less than ninety (90)
days prior to the scheduled expiration date that it does not intend to renew the
letter of credit and (iv) shall contain terms and provisions and otherwise be in
form and substance acceptable to the Disbursement Agent in its sole discretion.
The stated amount of the Atlantic Letter of Credit may be reduced from time to
time to equal one-half of the remaining unutilized amount of the HVAC Commitment
Facility. The stated amount of each Pacific Letter of Credit may be reduced from
time to time to equal one-half of the remaining unutilized amount of the HVAC
Commitment Facility.
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2.4.2 On or prior to the Financing Date there shall be established
the Atlantic Account pursuant to the Atlantic Collateral Account Agreement and
the Pacific Account pursuant to the Pacific Collateral Account Agreement. The
HVAC Accounts shall be subject to the sole control of the Disbursement Agent.
2.4.3 If the issuing bank under any HVAC letter of credit issues a
notice to the Disbursement Agent indicating its intent to cancel such Letter of
Credit and no agreement for a renewal or replacement of such letter of credit
has been made thirty (30) days prior to the expiration thereof, the Disbursement
Agent shall draw the entire undrawn amount of such letter of credit and deposit
the proceeds of such drawing in the Atlantic Account or the Pacific Account, as
applicable. In addition, as further provided in Section 2.3.3, in the event that
(a) after funds have been drawn on the Atlantic Letter of Credit or the Pacific
Letters of Credit and deposited in the Collection Account, such funds are not
transferred to the Disbursement Account on the same day on which they are
deposited or (b) funds are returned from the Disbursement Account to the
Collection Account, such funds (and all interest earned thereon) shall, on the
next day, be deposited in the Atlantic Account or the Pacific Account, as
applicable.
2.4.4 If, on any day on which the HVAC Provider is required to make
an Advance hereunder, the Disbursement Agent shall not have received the amount
of such Advance by the time required pursuant to Section 2.5.4(a), then the
Disbursement Agent shall withdraw funds from the HVAC Accounts and/or draw upon
the HVAC Letters of Credit as follows:
(a) 50% of the amount required to be advanced by the HVAC
Provider shall be funded from the Atlantic Account and the Atlantic Letter of
Credit (collectively, the "Atlantic Sources") in the following order of
priority: first, from funds from time to time on deposit in the Atlantic Account
until exhausted, and then from funds available to be drawn under the Atlantic
Letter of Credit;
(b) 50% of the amount required to be advanced by the HVAC
Provider shall be funded from the Pacific Account and the Pacific Letters of
Credit (collectively, the "Pacific Sources") in the following order of priority:
first, from funds from time to time on deposit in the Pacific Account until
exhausted, and then from funds available to be drawn under the Pacific Letters
of Credit in equal amounts (or to the extent the Disbursement Agent is unable to
obtain any portion of the required amount from one of the Pacific Letters of
Credit, the Disbursement Agent shall be entitled to draw the full required
amount from the other Pacific Letter of Credit); and
(c) if, for any reason, the Disbursement Agent is unable to
obtain any portion of the required funds from either the Atlantic Sources or the
Pacific Sources, the Disbursement Agent shall be entitled to obtain from the
other of the Atlantic Sources or the Pacific Sources, as the case may be, up to
the full amount required to be advanced by the HVAC Provider on the relevant
Advance Date; it being understood that neither Atlantic nor Pacific shall be
obligated hereunder beyond the required amount of its HVAC Letter of Credit and
amounts on deposit in its HVAC Account.
2.4.5 The Disbursement Agent shall deposit all amounts drawn from
Atlantic Sources and Pacific Sources in the Collection Account. All interest
accruing on amounts on deposit in the HVAC Accounts shall be deposited therein.
At such time as all of the HVAC Provider's obligations to make Advances
hereunder have terminated, the Disbursement Agent shall return to the HVAC
Provider the HVAC Letters of Credit and/or release to the HVAC Provider any
amounts remaining in the HVAC Accounts.
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2.5 Mechanics for Obtaining Advances.
2.5.1 Preliminary Notices From the Company.
(a) Subject to Section 2.2.2, the Company shall have the right
to, from time to time, deliver to the Disbursement Agent and the Construction
Consultant a preliminary Advance Request requesting that an Advance be made on
or after the nineteenth (19th) day after delivery of such preliminary Advance
Request.
(b) Concurrently with the delivery by the Company of each
preliminary Advance Request pursuant to subsection (a) above, the Company shall
deliver to the Funding Agents and the Disbursement Agent a preliminary Notice of
Funding Request. Such preliminary Notice of Funding Request shall reference the
requested Advance Date set forth in the preliminary Advance Request and shall
contain the other information required thereby. Each of the Interim Mall Lender,
the Mortgage Notes Indenture Trustee and the HVAC Provider shall, as soon as
practicable (but no later than two (2) Banking Days) after receiving each Notice
of Funding Request, deliver a notice confirming such receipt to the Disbursement
Agent.
(c) Each preliminary Advance Request delivered by the Company
pursuant to subsection (a) above shall request Advances in order to (i) until
Opening Date, pay interest and fees under the Bank Credit Agreement, the Interim
Mall Credit Agreement, the Mortgage Notes, the Approved Equipment Funding
Commitments and the Subordinated Notes which will become due and payable on or
after the requested Advance Date and prior to the next succeeding Advance Date,
and/or (ii) pay other Project Costs estimated to become due and payable on or
prior to the requested Advance Date, and/or (iii) replenish funds in the HC/Mall
Component Cash Management Sub-Account and/or the HVAC Component Cash Management
Sub-Account (or, with respect to the initial Advance Request to be delivered
hereunder, the Company shall request that $5,500,000 be deposited in the HC/Mall
Component Cash Management Sub-Account and $1,000,000 be deposited in the HVAC
Component Cash Management Sub-Account). The Company shall not be permitted to
obtain Advances for the purpose of paying Debt Service at any time after the
Opening Date. Each such preliminary Advance Request shall include an estimated
cash flow for the requested Advance broken down by Contractor, Subcontractor and
Line Item. Promptly after delivery of each preliminary Advance Request, the
Company, the Disbursement Agent and the Construction Consultant shall review
such Advance Request and attachments thereto to determine whether all required
documentation has been provided. The Company and the Construction Consultant
also shall review the work referenced in such preliminary Advance Request,
including work estimated to be completed through the applicable Advance Date as
such work is being performed.
2.5.2 Final Notices From the Company.
(a) The Company shall have the right, with respect to each
preliminary Advance Request delivered in accordance with Section 2.5.1(a) above,
to deliver to the Disbursement Agent and the Construction Consultant a final
Advance Request containing all exhibits, attachments and certificates required
thereby (other than the Construction Consultant's Certificate), all
appropriately completed and duly executed. Each final Advance Request shall be
delivered no later than nine (9) days prior to the requested Advance Date (it
being understood that the Company may request an Advance Date that is later than
the date originally requested pursuant to the Preliminary Advance Request).
(b) Concurrently with the delivery by the Company of each
final Advance Request pursuant to subsection (a) above, the Company shall
deliver to each Funding Agent and the
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Disbursement Agent a final Notice of Funding Request appropriately completed and
duly executed. Each final Notice of Funding Request shall state that pursuant to
an Advance Request being concurrently delivered to the Disbursement Agent, the
Company is requesting that an Advance be made on the Advance Date set forth in
such final Advance Request. Each Funding Agent shall, as soon as practicable
(but no later than two (2) Banking Days) after receiving each final Notice of
Funding Request, deliver a notice confirming such receipt to the Disbursement
Agent.
(c) Within five (5) days after its receipt of each final
Advance Request pursuant to subsection (a) above, the Construction Consultant
shall deliver directly to the Disbursement Agent (with a copy to the Company)
its certificate with respect to such Advance Request, in substantially the form
of Exhibit C-2 either approving or disapproving the Advance Request; provided
that if the Construction Consultant disapproves one or more particular payments
or disbursements to the Construction Manager or any Contractor or Subcontractor
requested by the Advance Request, but the Advance Request otherwise complies
with the requirements hereof, then the Construction Consultant shall approve the
Advance Request and all payments and disbursements requested therein other than
the particular payments or disbursements so disapproved.
(d) Promptly after receipt of a request therefor, the
Disbursement Agent shall deliver copies of any Advance Request to the Funding
Agents.
2.5.3 Funding Notices from Disbursement Agent.
(a) (i) Promptly after delivery of each final Advance Request
and related final Notice of Funding Request by the Company pursuant to
Section 2.5.2(a) and (b) above, the Disbursement Agent shall review the
same in order to reconcile the information set forth in the Advance
Request with the information set forth in the related Notice of Funding
Request and determine whether all required documentation has been provided
and whether all applicable conditions precedent pursuant to this Agreement
have been satisfied. In particular, and without limiting the generality of
the foregoing, the Disbursement Agent shall independently verify, using
information in its possession and obtained from the Funding Agents and the
Construction Consultant, (A) the Company's calculation of Available Funds,
including Anticipated Earnings, set forth in the Advance Request (provided
that with respect to amounts available under Approved Equipment Funding
Commitments, the Disbursement Agent shall be entitled to rely on
statements received from the providers of such Approved Equipment Funding
Commitments as contemplated in Section 2.2.3(a)(i) in verifying such
calculation), (B) that after giving effect to the requested Advance, the
Available Funds equal or exceed the Remaining Costs, (C) that the
Unallocated Contingency Balance equals or exceeds the Required Minimum
Contingency, (D) that the allocation of the requested Advance among the
various funding sources complies with the provisions of Section 2.6, and
(E) that the Company's calculation of interest and fees to become due and
payable under the Bank Credit Agreement, the Interim Mall Credit
Agreement, the Mortgage Notes, the Approved Equipment Funding Commitments
and the Subordinated Notes, in each case, from and after the requested
Advance Date and prior to the immediately succeeding Advance Date, is
accurate. Subject to the other subsections of this Section 2.5, at such
time as the Disbursement Agent has received the Construction Consultant's
certificate as required by Section 2.5.2(c) and otherwise determines that
the applicable conditions precedent set forth in Article 3 with respect to
a requested Advance have been satisfied, but no less than three (3)
Banking Days prior to the requested Advance Date, the Disbursement Agent
shall countersign the Notice of Funding Request and deliver the same to
the Company and each of the Funding Agents (as so countersigned, an
"Advance Confirmation Notice").
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(ii) In the event that, pursuant to Section 2.5.2(c),
the Construction Consultant approves only a portion of the payments or
disbursements requested by the Advance Request or, if based on its review
of the Advance Request and accompanying Notice of Funding Request, the
Disbursement Agent finds any minor or purely mathematical errors or
inaccuracies in the Advance Request or the Notice of Funding Request
(including any inaccuracy in the allocations made pursuant to Section 2.6
hereof), but the Advance Request and Notice of Funding Request otherwise
conform to the requirements of this Agreement, the Disbursement Agent
shall (A) notify the Company thereof, (B) revise (to the extent it is able
to do so) or request the Company to revise such certificates to remove the
request for the disapproved payment and/or rectify any errors or
inaccuracies, (C) deliver or request the Company to deliver to the Funding
Agents the revised Notice of Funding Request and (D) approve the requested
Advance and issue the Advance Confirmation Notice after making the
required revisions (or receiving from the Company the revised
certificates) on the basis of the certificates as so revised. In the event
that the Disbursement Agent revises the Advance Request and Notice of
Funding Request so as to increase the amounts to be advanced under the
Bank Credit Facility, the amounts of such increase shall (unless otherwise
requested by the Company) constitute Base Rate Loans. In the event that
the Disbursement Agent revises the Advance Request and Notice of Funding
Request so as to decrease the amounts to be advanced under the Bank Credit
Facility, the amounts of such decrease shall (unless otherwise requested
by the Company) first reduce the amount of Base Rate Loans requested under
such Facility and then reduce the amount of Eurodollar Rate Loans
requested under such Facility. All references to a particular requested
Advance, Advance Request or Notice of Funding Request in the ensuing
provisions of this Article 2 shall, to the extent the context so requires,
refer to the same as revised or modified pursuant to the preceding
sentence.
(iii) Notwithstanding the provisions of clauses (a)(i)
and (a)(ii) above, the Company's initial Advance Request hereunder shall
not be approved by the Disbursement Agent but instead shall be reviewed
and approved by each of the Bank Agent, the Interim Mall Lender, the
Initial Purchasers and the HVAC Provider. At such time as each such Person
has notified the Disbursement Agent that it approves the initial Advance
Request, the Disbursement Agent shall issue the corresponding Advance
Confirmation Notice. In addition, the Company shall not be required to
submit Element Specific Anticipated Cost Reports or Component Specific
Anticipated Cost Reports in connection with any Advances requested on or
within 45 days after the Financing Date, and the Disbursement Agent and
Construction Consultant shall be permitted to approve any Advance Requests
delivered during such period so long as all other requirements have been
satisfied (including delivery to the Construction Consultant of the
Anticipated Cost Reports as required pursuant to Section 5.14(d)).
(b) In the event that the Disbursement Agent (i) on or prior
to the third Banking Day prior to the requested Advance Date determines pursuant
to Section 2.5.3(a) that the conditions precedent to an Advance have not been
satisfied or (ii) prior to the requested Advance Date receives notice from any
Funding Agent that an Event of Default has occurred and is continuing, then the
Disbursement Agent shall notify the Company and each Funding Agent thereof as
soon as reasonably possible but in no event later than one (1) Banking Day after
such determination or receipt, as the case may be (a "Stop Funding Notice"). The
Stop Funding Notice shall specify the conditions precedent which the
Disbursement Agent has determined have not been satisfied and/or shall attach a
copy of any notice of default received by the Disbursement Agent. Upon such
written notice from the Disbursement Agent, and subject to the provisions of the
Intercreditor Agreement and Section 1(e) of the HVAC Provider's Consent (with
respect to the HVAC Provider), (i) none of the Bank Lenders, the Interim Mall
Lender or the HVAC Provider shall have any obligation to advance their
respective Facilities' portion
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of the requested Advance, (ii) the Disbursement Agent shall not withdraw any
funds from the Mortgage Notes Proceeds Account (except for the purpose of paying
scheduled Debt Service on the Mortgage Notes when directed to do so by the
Mortgage Notes Indenture Trustee) or the Company's Funds Account and shall not
draw upon the HVAC Letters of Credit or withdraw funds from the HVAC Accounts to
satisfy such requested Advance, (iii) the Disbursement Agent shall not withdraw,
transfer or release to the Company any funds then on deposit in the Collection
Account or the Disbursement Account (other than in respect of checks previously
delivered) and (iv) any Advance Confirmation Notice issued prior to the issuance
of a Stop Funding Notice (if the Advance to which such Advance Confirmation
Notice relates has not been made) shall become null and void and of no force or
effect; provided that such nullification of any such Advance Confirmation Notice
shall not affect the obligations of the Company for break funding costs under
the Bank Credit Facility and the Interim Mall Facility.
(c) At such time, if ever, as (i) the Disbursement Agent (A)
determines that the condition precedent to the requested Advance which had not
been satisfied has become satisfied or (B) receives notice from the Funding
Agent who issued the notice of default described in the preceding paragraph that
such Event of Default no longer exists, as the case may be, or (ii) the Bank
Agent and the Interim Mall Lender, acting pursuant to the Intercreditor
Agreement and, if required pursuant to Section 1(e) of the HVAC Provider's
Consent, the HVAC Provider, inform the Disbursement Agent that the event or
events giving rise to the Stop Funding Notice has been waived, the Disbursement
Agent shall deliver an Advance Confirmation Notice to the Company and each of
the Funding Agents.
2.5.4 Provision of Funds by the Funding Agents.
(a) (i) (A) In the case of an Advance Confirmation
Notice issued pursuant to Section 2.5.3(a) above, on the day immediately
preceding the requested Advance Date, and (B) in the case of an Advance
Confirmation Notice issued pursuant to Section 2.5.3(c) above, on the
second (2nd) day after such issuance, before 12:00 p.m. New York, New York
time, the HVAC Provider shall deposit or cause to be deposited in the
Collection Account, in immediately available funds its Facility's portion
of the requested Advance, as determined pursuant to Sections 2.6.1 and
2.6.2 and set forth in the related Advance Confirmation Notice. In the
event that the HVAC Provider fails to make the deposit described above by
the required time, the Disbursement Agent shall draw on the HVAC Letters
of Credit (or withdraw funds from the HVAC Accounts) as provided in
Section 2.4 and deposit in the Collection Account the HVAC Commitment
Facility's portion of the requested Advance.
(ii) (A) In the case of an Advance Confirmation Notice issued
pursuant to Section 2.5.3(a) above, on the requested Advance Date, and (B)
in the case of an Advance Confirmation Notice issued pursuant to Section
2.5.3(c) above, on the third (3rd) day after such issuance, before 12:00
p.m. New York, New York time, the Bank Lenders (subject to Section 2.9)
and the Interim Mall Lender (subject to Section 2.10(e)) shall deposit or
cause to be deposited in the Collection Account, in immediately available
funds, their Facility's portion of the requested Advance, as determined
pursuant to Sections 2.6.1 and 2.6.2 and set forth in the related Advance
Confirmation Notice.
(iii) Upon confirming that all funds required to be deposited
in the Collection Account pursuant clauses (i) and (ii) above have been
deposited, the Disbursement Agent promptly (considering the requirements
of this Agreement) shall withdraw from the Company's Funds Account, the
Mortgage Notes Proceeds Account, the Mall Retainage/Punchlist Account, the
Bank Proceeds Account and the Pre-Completion Revenues Account the portion
of the Advance to be funded from each such account as determined pursuant
to Sections 2.6.1,
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2.6.2, 2.9 and 2.10(e) and set forth in the related Advance Confirmation
Notice and deposit such funds in the Collection Account. Once all such
funds have been deposited in the Collection Account, the Disbursement
Agent shall (subject to Section 2.5.3(b)) promptly considering the
requirements of this Agreement withdraw such funds and deposit them in the
Disbursement Account. All funds so deposited in the Disbursement Account
shall thereafter be applied as provided in Section 2.7.
(b) Subject to Section 2.5.3(b), after an Advance Confirmation
Notice has been given, the failure of any Funds Provider to make any Advance
under its Facility shall not relieve any other Funds Provider of its obligation
hereunder to make any Advance under its Facility, but no Funds Provider shall be
responsible for the failure of any other Funds Provider to make any Advance.
Neither the Disbursement Agent nor the Bank Agent shall be responsible for any
Funds Provider's failure to make any required Advance. The Disbursement Agent
shall not transfer funds to the Disbursement Account or release to the Company
any amounts properly advanced until all Advances requested by the relevant
Advance Request have been deposited in the Collection Account unless the Funds
Providers who have made the Advances request such release (the Disbursement
Agent shall promptly notify all Funding Agents upon receiving any such request).
However, the withholding of such Advances by the Disbursement Agent shall not
release the Funds Provider who failed to make the Advance under its Facility
from liability to the other Funds Providers and the Company.
(c) The Disbursement Agent shall have no liability to the
Company arising from any Stop Funding Notice issued pursuant to Section 2.5.3(b)
at the request of any Funding Agent (a "Stop Funding Request"), whether or not
such Funding Agent was entitled to make any such Stop Funding Request. None of
the Funding Agents shall have any liability to the Company, the Disbursement
Agent, any other Funding Agent or any Lender arising from any Stop Funding
Notice issued by the Disbursement Agent in response to a Stop Funding Request by
such Funding Agent; provided, however, that nothing herein shall release from
liability the Funding Agent who issued the Stop Funding Request if such issuance
constituted an act of gross negligence or willful misconduct.
2.5.5 Change in Facts Certified. The Company shall notify the
Disbursement Agent prior to the making of any Advances in the event that any of
the matters to which the Company certified in the corresponding Advance Request
is no longer true and correct in all material respects as of the applicable
Advance Date. The acceptance by the Company of the proceeds of any Advance shall
constitute a re-certification by the Company, as of the applicable Advance Date,
of all matters certified to in the related Advance Request.
2.5.6 References to Dates. In the event that any day or date
referred to in the foregoing provisions of this Section 2.5 occurs on a day that
is not a Banking Day, the reference shall be deemed to be to the next succeeding
Banking Day.
2.6 Allocation of Advances.
2.6.1 Allocations Among Construction Components. Subject to Section
2.6.1(d), (i) all Project Costs allocated pursuant to the Project Budget to the
HC/Mall Component shall be paid from HC/Mall Component Funding Sources, (ii) all
Project Costs allocated pursuant to the Project Budget to the HVAC Component
shall be paid from the HVAC Commitment Facility, (iii) all Project Costs
allocated pursuant to the Project Budget to the Equipment Component shall be
paid from Approved Equipment Funding Commitments and, to the extent set forth in
Section 2.2.3(b), the Bank Revolving Facility and (iv) all Project Costs in
respect of the Working Capital Line Item Category shall be paid from the Bank
Revolving Facility. In furtherance of the foregoing principle, all Advances to
be made
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hereunder shall be allocated between HC/Mall Component Funding Sources and the
HVAC Commitment Facility as follows:
(a) With respect to Advances which will be implemented by
disbursement of checks to the Construction Manager and/or any Contractors or
Subcontractors, the Company shall allocate its request between HC/Mall Component
Funding Sources and the HVAC Commitment Facility on the basis of the amount of
Project Costs allocated to the HC/Mall Component and the HVAC Component,
respectively, to be paid from the proceeds of the applicable Advance, as set
forth in the Project Budget and the relevant Advance Request.
(b) With respect to Advances which will be implemented by
transfers of funds into the Cash Management Account, the Company shall allocate
its request between HC/Mall Component Funding Sources and the HVAC Commitment
Facility on the basis of the amounts to be deposited in the HC/Mall Component
Cash Management Sub-Account and the HVAC Component Cash Management Sub- Account,
respectively.
(c) Advances which will be implemented by transfer of funds
into the Interest Payment Account shall be allocated to HC/Mall Component
Funding Sources.
(d) Notwithstanding Sections 2.6.1(a), (b) and (c) above, the
Company may:
(i) After the HVAC Commitment Facility has been fully
funded and utilized, request Advances from HC/Mall Component Funding
Sources to pay Project Costs allocated to the HVAC Component or to deposit
funds in the HVAC Component Cash Management Sub-Account (it being
understood that no such Advances will be made unless all conditions
precedent to the requested Advance set forth in this Agreement have been
satisfied or waived in accordance herewith).
(ii) After all Approved Equipment Funding Commitments
have been fully funded and utilized and to the extent amounts are not
available thereafter under the Bank Revolving Facility, request Advances
from HC/Mall Component Funding Sources to pay Project Costs allocated to
the Equipment Component but only if the Company establishes to the
satisfaction of the Disbursement Agent that the items of the Equipment
Component to be acquired with such Advances will not be subject to a lien
in favor of any Person other than the Bank Agent, the Interim Mall Lender
and the Mortgage Notes Indenture Trustee (it being understood that no such
Advances will be made unless all conditions precedent to the requested
Advance set forth in this Agreement have been satisfied or waived in
accordance herewith).
(iii) After and so long as the Bank Revolving Facility
has been fully funded and utilized, request advances from HC/Mall
Component Funding Sources to pay Project Costs in respect of the Working
Capital Line Item Category (it being understood that no such Advances will
be made unless all conditions precedent to the requested Advance set forth
in this Agreement have been satisfied or waived in accordance herewith).
(iv) Request the Advances contemplated by clause (ii) of
Section 2.2.3(b).
2.6.2 Allocations among HC/Mall Component Funding Sources. All
Advances to be satisfied from the HC/Mall Component Funding Sources shall be
made in the following order of priority:
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(a) First, from funds from time to time on deposit in the
Company's Funds Account, until exhausted;
(b) Then, from funds available to be drawn under the Bank
Credit Facility and the Interim Mall Facility or withdrawn from the Mortgage
Notes Proceeds Account in such amounts so that after giving effect to the
requested Advance, the aggregate amount of all Advances made under such
Facilities through and including such Advance (including (x) all Protective
Advances (as defined in the Intercreditor Agreement) made in accordance with the
Intercreditor Agreement, (y) for purposes of determining the amounts advanced
under the Bank Credit Facility, 75% of the amounts transferred from the
Pre-Completion Revenues Account to the Collection Account prior to the
Completion Date and all amounts transferred from the Bank Proceeds Account into
the Collection Account and (z) for purposes of determining the amounts advanced
under the Interim Mall Facility, all amounts transferred from the Mall
Retainage/Punchlist Account to the Collection Account) shall be allocated among
them, pro rata, based on (i) in the case of the Bank Credit Facility, the total
amount of the Commitment thereunder, (ii) in the case of the Interim Mall
Facility, the total amount of the Commitment thereunder and (iii) in the case of
the Mortgage Notes Proceeds Account, the amount of the Mortgage Notes Proceeds;
provided, however, that (A) the amounts to be advanced under the Bank Credit
Facility on each Advance Date shall be rounded up (with a corresponding
reduction in the amount to be advanced from the Interim Mall Facility and the
Mortgage Notes Proceeds Account on a pro rata basis) to the extent necessary to
comply with the draw amount limitations under the Bank Credit Agreement and (B)
from and after the Exhaustion of the Bank Credit Facility, the Interim Mall
Facility or the Mortgage Notes Proceeds, any such Facility shall be disregarded
for purposes of the foregoing calculation.
2.6.3 Post-Funding Reallocations. In the event that at any time the
Disbursement Agent determines that the allocations made in any previous Advance
Requests pursuant to the foregoing provisions of this Section 2.6 were erroneous
or inaccurate, the parties shall cooperate to rectify such misallocations by
allocating future Advances in a manner that accounts for the previous
misallocation or by using such other methods reasonably determined by the
Disbursement Agent.
2.7 Disbursements.
2.7.1 No later than 2:00 p.m. New York, New York time on the
requested Advance Date, or such later date as may occur pursuant to Section
2.5.4(a), if the Disbursement Agent has (i) received funds from each Funds
Provider required to make an Advance pursuant to the relevant Advance Request
(or if the applicable Funding Agents make the request described in the
next-to-last sentence of Section 2.5.4(b)), (ii) transferred funds from the
Mortgage Notes Proceeds Account, the Bank Proceeds Account the Pre-Completion
Revenues Account and/or the Mall Retainage/Punchlist Account to the Collection
Account as required pursuant to the terms hereof and (iii) transferred the funds
from the Collection Account to the Disbursement Account, the Disbursement Agent
shall transfer all funds(or where applicable, the funds as to which the request
described in the next-to-last sentence of Section 2.5.4(b) has been made) other
than the funds described in Section 2.7.2 in the Disbursement Account as
follows:
(a) to the extent set forth in the Advance Request, by
disbursement to the Interest Payment Account and/or the Lien Protection Account;
and
(b) with respect to amounts requested by the Advance Request
to be paid to the Construction Manager and/or any Contractors and/or
Subcontractors, (i) if so requested by the Company, by wiring funds or
distributing checks payable to the Construction Manager and/or one or more such
Contractors and/or Subcontractors directly to the Construction Manager and/or
such
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Contractors and/or Subcontractors (or to the Construction Manager for further
distribution to such Subcontractors) or (ii) if not so requested, by delivering
such checks to the Company for further distribution to the Construction Manager
and/or such Contractors and/or Subcontractors.
2.7.2 On the second day after the day referenced in Section 2.7.1
above, the Disbursement Agent shall transfer from the Disbursement Account to
the HC/Mall Component Cash Management Sub-Account and/or the HVAC Component Cash
Management Sub-Account the amounts requested by the Company in the Advance
Request to be so transferred.
2.7.3 All disbursements made pursuant to Section 2.7.1(b) above
shall satisfy, in and of themselves, the obligations of the Disbursement Agent,
the Funding Agents and each Lender hereunder and under the relevant Facility
Agreements and (except for amounts which were obtained from the Pre- Completion
Revenues Account pursuant to Section 2.9(b) and the Company's Funds Account)
shall be secured by the Facilities' respective Security Documents, if any, to
the same extent as if made directly to the Company, regardless of the
disposition thereof by the payees of such disbursements.
2.8 Payments of Interest and Fees. Until the Opening Date, the Company
shall include in each Advance Request delivered pursuant to Sections 2.5.1(a)
and 2.5.2(a) a request that an Advance be made to pay the interest and fees that
will become due and payable under each of the Bank Credit Agreement, the Interim
Mall Credit Agreement, the Mortgage Notes, the Approved Equipment Funding
Commitments and the Subordinated Notes on or after the requested Advance Date
under such Advance Request and prior to the immediately succeeding Advance Date.
Each such Advance Request shall specify the Facility, the amount and the date on
which such interest or fees will become due and payable. If the Company fails to
set forth such information in any Advance Request or fails to deliver timely any
Advance Request, then (a) with respect to the Bank Credit Facility, the Interim
Mall Facility and the Mortgage Notes, the Funding Agent under the relevant
Facility may deliver such information and a request for payment to the
Disbursement Agent upon which request the Disbursement Agent shall revise the
Advance Request and related Notice of Borrowing to provide for such payment, and
(b) with respect to the Approved Equipment Funding Commitments and the
Subordinated Notes, the Disbursement Agent shall, upon receiving documentation
from the lender under the Approved Equipment Funding Commitment or the
Subordinated Notes Indenture Trustee reasonably establishing that a payment of
interest or fees, as the case may be, on the Approved Equipment Funding
Commitments or the Subordinated Notes, as the case may be, will be due during
the relevant period and the amount of such payment, be entitled to revise the
Advance Request and related Notice of Funding Request to provide for the payment
of interest or fees, as the case may be, on the Approved Equipment Funding
Commitments or the Subordinated Notes, as the case may be, subject, in the case
of the Subordinated Notes, to not having received a request for blockage of
payments on the Subordinated Notes pursuant to Article 10 of the Subordinated
Notes Indenture. The Company acknowledges that failure of any notice referenced
in this Section to be delivered to the Disbursement Agent shall not in any way
exonerate or diminish the Company's obligation to make all payments under each
of the Bank Credit Agreement, the Interim Mall Credit Agreement, the Mortgage
Notes, the Approved Equipment Funding Commitment and the Subordinated Notes as
and when due. Subject to the provisions of Section 10.2 and the Company
Collateral Account Agreement, the Disbursement Agent shall apply amounts on
deposit in the Interest Payment Account to the payment of interest and fees
under the Bank Credit Agreement, the Interim Mall Credit Agreement, the Mortgage
Notes the Approved Equipment Funding Commitment and the Subordinated Notes, in
each case, on the date that the Disbursement Agent is advised such amounts will
become due and payable (provided that no such payment shall be made in respect
of the Subordinated Notes from and after receipt by the Disbursement Agent of
notice from any Funding Agent that payment on the Subordinated Notes is blocked
under Article 10 of the Subordinated Note Indenture). The
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Company shall not be permitted to obtain Advances for the purpose of paying
interest or other Debt Service at any time after the Opening Date.
2.9 Advances Under the Bank Credit Facility.
(a) Prior to and on the Completion Date, all amounts required to be
obtained from the Bank Credit Facility for deposit in the Collection Account
shall be satisfied as follows:
(i) first, from amounts on deposit in the Bank Proceeds
Account on the relevant date, to the extent thereof;
(ii) then, to the extent requested by the Company in the
relevant Advance Request (or Completion Certificate), from amounts on
deposit in the Pre-Completion Revenues Account on the relevant date; and
(iii) then, through advances of funds by the Bank Lenders.
(b) After the Completion Date, all amounts required to be obtained
from the Bank Credit Facility for deposit in the Collection Account shall be
satisfied (i) first, to the extent requested by the Company in the relevant
Advance Request, from amounts on deposit in the Pre-Completion Revenues, and
(ii) then, through withdrawals from amounts from time to time on deposit in the
Bank Proceeds Account.
(c) All amounts withdrawn from the Pre-Completion Revenues Account
and transferred to the Collection Account pursuant to clause (a)(ii) above shall
reduce the commitment under the Bank Credit Facility to the extent set forth in
Section 2.4B(iii)(l) of the Bank Credit Agreement.
(d) Notwithstanding anything set forth herein to the contrary, the
commitment of the Bank Lenders to advance funds under the Bank Credit Facility
shall terminate on the earlier of (i) the Outside Completion Deadline and (ii)
the Completion Date, and thereafter the Bank Lenders shall not be required to
advance any funds hereunder and any amounts required to be advanced from the
Bank Credit Facility hereunder shall be satisfied from the Bank Proceeds Account
and the Pre-Completion Revenues Account as provided in Section 2.9(b) above.
2.10 Mall Release Date Funding Procedures.
(a) No less than ten (10) days prior to the anticipated Mall Release
Date, the Company shall deliver to the Construction Consultant, the Disbursement
Agent, each Funding Agent and the Tranche A Take Out Lender, the Company's Mall
Release Certificate with all attachments thereto (including the Project
Architect's Mall Release Certificate). The Company's Mall Release Certificate
shall indicate the anticipated Mall Release Date and set forth all the other
information required thereby, including (i) the amount allocated to the "mall
leasing commissions reserve" and "mall tenant improvements reserves" Line Items
in the Project Budget as then in effect and (ii) the Mall Punchlist Completion
Amount. The Company's Mall Release Certificate further shall set forth each
HC/Mall Component Funding Source's portion of the amount set forth in clause (i)
above calculated in accordance with Section 2.6.
(b) The Disbursement Agent and the Construction Consultant shall
review the Company's Mall Release Certificate. In the event that the
Disbursement Agent or the Construction Consultant discovers any mathematical or
other minor errors in the Company's Mall Release Certificate,
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they shall request the Company to revise and resubmit the certificate. Within
five (5) days after its receipt of the Company's Mall Release Certificate, the
Construction Consultant shall deliver to the Disbursement Agent, each Funding
Agent, the Tranche A Take Out Lender and the Company, the Construction
Consultant's Mall Release Certificate.
(c) Upon receipt by the Disbursement Agent of the Construction
Consultant's Mall Release Certificate approving the Company's Mall Release
Certificate, but no later than three (3) days prior to the Mall Release Date,
the Disbursement Agent shall, subject to its own approval of the information
required pursuant to the last sentence of Section 2.10(a) set forth in the
Company's Mall Release Certificate, countersign the Company's Mall Release
Certificate and forward the same to each of the Funding Agents.
(d) On the Mall Release Date:
(i) before 12:00 p.m. New York, New York time, (A) the Bank
Lenders and the Interim Mall Lender shall deposit or cause to be deposited
in the Collection Account their respective portions of the amounts set
forth in Section 2.10(a)(i) above (less, in the case of the Bank Lenders,
the portion of such amount which will be funded through withdrawals from
the Bank Proceeds Account and/or the Pre-Completion Revenues Account as
provided in Section 2.9) and (B) the Disbursement Agent shall withdraw
form the Company's Funds Account, the Mortgage Notes Proceeds Account, the
Bank Proceeds Account and the Pre-Completion Revenues Account the portion
of the amount set forth in Section 2.10(a)(i) to be funded from each
Account as determined pursuant to Section 2.6.1, 2.6.2 and 2.9 and set
forth in the Company's Mall Release Certificate and deposit the same in
the Collection Account. At such time as such deposits and transfers have
been completed, the Disbursement Agent shall transfer such funds to the
Mall Leasing Commissions Reserve Account and the Mall Tenant Improvements
Reserve Account in the respective amounts allocated in the Project Budget
to the "mall leasing commissions reserve" and "mall tenants improvements
reserve" Line Items;
(ii) before 12:00 p.m. New York, New York time, the Interim
Mall Lender shall deposit or cause to be deposited in the Mall
Retainage/Punchlist Account the remaining undrawn commitment (after giving
effect to the advance contemplated by clause (i) above) under the Interim
Mall Facility (the "Mall Release Disbursement");
(iii) in the event that the amounts advanced by the Interim
Mall Lender pursuant to clause (ii) above are less than 125% of the Mall
Punchlist Completion Amount, the Company shall, in accordance with Section
5.9.1., deposit in the Mall Retainage/Punchlist Account the amount of such
shortfall (or, if the Company fails to do so, the Disbursement Agent shall
withdraw the required amount of funds from the Guaranty Deposit Account
and deposit the same in the Mall Retainage/Punchlist Account in accordance
with Section 5.9.1 and the Adelson Completion Guaranty); and
(iv) after making the deposit specified in clauses (i) and
(ii) above, the Interim Mall Lender shall be released from all further
obligations hereunder and shall cease to be a party hereto.
(e) From the Mall Release Date through the Final Completion Date,
all amounts which would, but for the funding and release contemplated under
Section 2.10(d) above, be required to be deposited by the Interim Mall Lender in
the Collection Account shall be satisfied through withdrawals from amounts from
time to time on deposit in the Mall Retainage/Punchlist Account.
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2.11 Completion Date Procedures.
(a) No less than ten (10) days prior to the anticipated Completion
Date, the Company shall deliver to the Construction Consultant, the Disbursement
Agent, the Bank Agent, the Tranche A Take Out Lender, the HVAC Provider and the
Mortgage Notes Indenture Trustee the Company's Completion Certificate with all
attachments thereto. The Company's Completion Certificate shall indicate the
anticipated Completion Date and set forth all the other information required
thereby, including the aggregate amount of Project Costs anticipated to become
due and payable after the Completion Date in order to achieve Final Completion
(the "Required Completion Amount"). The Required Completion Amount shall be
based on the allocation rules set forth in Sections 2.6.1 and 2.6.2 and after
subtracting amounts then on deposit in the HC/Mall Cash Management Sub-Account
and the HVAC Component Cash Management Sub-Account. The Company's Completion
Certificate further shall set forth each HC/Mall Component Funding Source's
portion of the Required Completion Amount calculated in accordance with the
preceding sentence.
(b) The Disbursement Agent and the Construction Consultant shall
review the Company's Completion Certificate. In the event that the Disbursement
Agent or the Construction Consultant discovers any mathematical or other minor
errors in the Company's Completion Certificate they shall request the Company to
revise and resubmit the certificate. Within five (5) days after its receipt of
the Company's Completion Certificate, the Construction Consultant shall deliver
to the Disbursement Agent, the Bank Agent, the Tranche A Take Out Lender, the
Mortgage Notes Indenture Trustee and the Company, the Construction Consultant's
Completion Certificate.
(c) Upon receipt by the Disbursement Agent of the Construction
Consultant's Completion Certificate approving the Company's Completion
Certificate, but no later than three (3) days prior to the Completion Date, the
Disbursement Agent shall, subject to its approval of the Company's Completion
Certificate (as contemplated in clause (c) of the definition of "Completion")
and determination (in accordance with the relevant provisions of Section 3.2)
that each of the conditions set forth in Section 3.2 (other than Sections 3.2.4
through 3.2.8, 3.2.12 and 3.2.21) is being satisfied as of the Completion Date,
countersign the Company's Completion Certificate and forward the same to the
Bank Agent, the HVAC Provider, the Tranche A Take Out Lender and the Mortgage
Notes Indenture Trustee. In determining whether to approve the Company's
Completion Certificate, the Disbursement Agent may rely on the certifications of
the Company and the Construction Consultant set forth in their respective
Completion Certificates.
(d) On the Completion Date, before 12:00 p.m. New York, New York
time, (i) the Bank Lenders shall deposit or cause to be deposited in the Bank
Proceeds Account the Bank Credit Facility's portion of the Required Completion
Amount calculated in accordance with Section 2.6 and subsection (a) above and
set forth in the Company's Completion Certificate (less the amount of any funds
on deposit in the Bank Proceeds Account and amounts which will be funded through
withdrawals from the Pre-Completion Revenues Account as provided in Section 2.9)
and (ii) the Disbursement Agent shall withdraw from the Pre-Completion Revenues
Account and deposit in the Bank Proceeds Account the portion of the Required
Completion Amount to be funded therefrom in accordance with Section 2.9.
(e) In the event that the Final Completion Date shall not have
occurred within six (6) months from the Completion Date, then on the expiration
of such six (6) month period, the Disbursement Agent shall withdraw any
remaining funds on deposit in the Bank Proceeds Account and deliver such funds
to the Bank Agent.
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2.12 Final Completion Procedures. On the Final Completion Date, the
Disbursement Agent shall make an Advance to the Company from the HC/Mall
Component Funding Sources with respect to any Project Costs of the type
described in clause (j) of the definition thereof (even though the procedures
set forth in Section 2.5 shall not have been carried out with respect to such
Advance) and then shall (a) in the event that the Final Completion Date shall
have occurred prior to the expiration of six (6) months after the Completion
Date, withdraw all remaining funds from the Bank Proceeds Account and deliver
such funds to the Bank Agent, (b) withdraw all funds remaining in the Mall
Retainage/Punchlist Account and deposit such funds (i) first, into the Guaranty
Deposit Account in an amount up to the aggregate of all amounts previously
withdrawn from the Guaranty Deposit Account and deposited in the Mall
Retainage/Punchlist Account pursuant to Section 5.9.1 and (ii) then, into the
Company's Funds Account, (c) withdraw from the Mortgage Notes Proceeds Account
and transfer via electronic wire transfer to an account designated by the Bank
Agent the excess, if any, of (i) the amount on deposit in the Mortgage Notes
Proceeds Account over (ii) Fifty Million Dollars ($50,000,000), (d) release to
the HVAC Provider all amounts on deposit in the HVAC Accounts and all amounts
remaining in the HVAC Component Cash Management Sub-Account, to the extent
funded from the HVAC Commitment Facility and (e) release to the Company all
other amounts on deposit in the Accounts. The Disbursement Agent may rely on the
certifications of the Company and the Construction Consultant set forth in their
respective Final Completion Certificates in determining whether the Final
Completion Date has occurred.
2.13 No Approval of Work. The making of any Advance shall not be deemed an
approval or acceptance by the Disbursement Agent, any Funding Agent or any
Lender of any work, labor, supplies, materials or equipment furnished or
supplied with respect to the Project.
2.14 Security. The Obligations shall be secured by the Project Security in
accordance with the Security Documents. Further, all funds advanced by the Bank
Lenders and the Interim Mall Lender hereunder to complete the Project or to
protect the rights and interests of the Secured Parties under the Financing
Agreements are deemed to be obligatory advances and are to be added to the total
indebtedness secured by each of the respective Facilities' Deeds of Trust. All
sums so advanced shall be secured by each such Deed of Trust with the same
priority of lien as the security for any other obligations secured thereunder.
ARTICLE 3 - CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND
SUBSEQUENT ADVANCES
3.1 Conditions Precedent to the Initial Advance. The obligations of the
Bank Lenders, the Interim Mall Lender, the Mortgage Notes Indenture Trustee and
the HVAC Provider to make the initial Advance hereunder are subject to the prior
satisfaction of each of the conditions precedent hereinafter set forth in this
Section 3.1 in form and substance satisfactory to each of the Bank Agent, the
Interim Mall Lender, the Initial Purchasers and the HVAC Provider in its sole
discretion. Subject to Section 3.3., by executing this Agreement (or, in the
case of (a) the Initial Purchasers, by purchasing the Mortgage Notes and (b) the
Bank Lenders, by becoming a party to the Bank Credit Agreement) each of the Bank
Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC Provider and
the Bank Lenders shall be deemed to have confirmed that it has become satisfied
that each of the following conditions precedent has been satisfied.
3.1.1 Financing Agreements and Project Documents. Delivery to each
of the Bank Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC
Provider and the Disbursement Agent (with such number of originally executed
copies as they may reasonably request) of (a) executed originals of each
Financing Agreement and true and correct copies of each Material Project
Document and any
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supplements or amendments thereto, all of which shall be in form and substance
satisfactory to each of the Bank Agent, the Interim Mall Lender, the Initial
Purchasers and the HVAC Provider and shall have been duly authorized, executed
and delivered by the parties thereto, and each such Material Project Document
shall be certified by an Authorized Representative of the Company as of the
Financing Date as being true, complete and correct and in full force and effect,
(b) evidence satisfactory to each of the Bank Agent, the Interim Mall Lender,
the Initial Purchasers and the HVAC Provider that each such Material Project
Document is in full force and effect and that no party to any such Project
Document is or, but for the passage of time or giving of notice or both will be,
in breach of any obligation thereunder and (c) copies of all payment and/or
performance bonds delivered to the Company and/or Construction Manager pursuant
to any Project Documents or Subcontracts.
3.1.2 Corporate Authority of the Company. Delivery to each of the
Bank Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC Provider
and the Disbursement Agent of (a) a certified copy of the Articles of
Incorporation of LVSI and Certificates of Formation of VCR and GCCLLC, (b) good
standing certificates for each of LVSI, VCR and GCCLLC issued by the Secretary
of State of Nevada and, in the case of GCCLLC, the State of Delaware, (c) a
certified copy of the bylaws of LVSI, (d) a copy of the Operating Agreement of
each of VCR and GCCLLC, certified by an appropriate officer of each of VCR and
GCCLLC, respectively and (e) a copy of one or more resolutions or other
authorizations of LVSI and the managing member of each of VCR and GCCLLC
certified by the appropriate officers of LVSI, and the managing member of each
of VCR and GCCLLC, respectively, as being in full force and effect on the
Financing Date, authorizing the Advances herein provided for and the execution,
delivery and performance of this Agreement and the other Operative Documents and
any instruments or agreements required hereunder or thereunder to which each
such entity is a party.
3.1.3 Incumbency of the Company. Delivery to each of the Bank Agent,
the Interim Mall Lender, the Initial Purchasers, the HVAC Provider and the
Disbursement Agent of a certificate from each of LVSI, VCR and GCCLLC,
satisfactory in form and substance to each of the Bank Agent, the Interim Mall
Lender, the Initial Purchasers and the HVAC Provider signed by an Authorized
Representative of LVSI, VCR and GCCLLC, respectively, and dated as of the
Financing Date, as to the incumbency of the Person or Persons authorized to
execute and deliver this Agreement and the other Operative Documents and any
instruments or agreements required hereunder or thereunder to which each such
entity is a party.
3.1.4 Other Parties. With respect to Interface Holding, Interface,
Mall Holding, Mall Intermediate Holding, Lido Intermediate Holding Company, LLC
and Mall I LLC, delivery to each of the Bank Agent, the Interim Mall Lender, the
Initial Purchasers, the HVAC Provider and the Disbursement Agent of (i) a
certified copy of the Certificates or Articles of Incorporation of such entity
(or the appropriate equivalent in the jurisdiction of formation of the relevant
entity), (ii) a copy of the bylaws, if applicable, of such entity (or the
equivalent) certified by the secretary of such entity, (iii) a certificate
issued by the Secretary of State of Nevada and, if other than such state, the
state (or country) of formation of such entity certifying that such entity is in
good standing and is qualified to do business in, Nevada and (if applicable) its
state (or country) of formation, (iv) a fully executed certificate as to the
incumbency of the Persons authorized to execute and deliver the Operative
Documents and any other instruments or agreements contemplated hereby to which
such entity is a party, and (v) a copy of one or more resolutions for each of
the foregoing entities (or their respective managing members where applicable),
certified by the appropriate officer of such entity as being in full force and
effect as of the Financing Date, authorizing the transactions contemplated
hereby to which such entity is a party and the execution, delivery and
performance of the Operative Documents to which such Person is a party and any
other instruments and agreements with respect thereto.
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3.1.5 Corporate Proceedings. All corporate, limited liability
company, partnership and legal proceedings and all instruments in connection
with the transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to each of the Bank Agent, the Interim Mall
Lender, the Initial Purchasers and the HVAC Provider and each such Person shall
have received all information, legal and technical opinions and copies of all
documents, including records of corporate, limited liability company or
partnership proceedings and copies of any approval by any Governmental
Instrumentality required in connection with any transaction herein contemplated,
which any of the Bank Agent, the Interim Mall Lender, the Initial Purchasers and
the HVAC Provider may reasonably have requested in connection herewith, such
documents to be reasonably satisfactory in form and substance to each such
Person and where appropriate to be certified by the requisite corporate, limited
liability company or partnership officers or Governmental Instrumentalities.
3.1.6 Insurance.
(a) Policies. Insurance complying with the requirements of
Exhibit O shall be in place and in full force and effect.
(b) The Company's Insurance Certificates. Delivery to each of
the Bank Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC
Provider and the Disbursement Agent of (i) a certificate, in substantially the
form of Exhibit B-4 attached hereto and otherwise in form and substance
satisfactory to each of the Bank Agent, the Interim Mall Lender, the Initial
Purchasers and the HVAC Provider from the Company's insurance broker(s), dated
as of the Financing Date and identifying underwriters, type of insurance,
insurance limits and policy terms, listing the special provisions required as
set forth in Exhibit O, describing the insurance obtained and stating that such
insurance is in full force and effect and that all premiums then due thereon
have been paid and that, in the Company's insurance broker's opinion, such
insurance complies with Exhibit O, and (ii) certified copies of all policies
evidencing such insurance (or a binder, commitment or certificates signed by the
insurer or a broker authorized to bind the insurer along with a commitment to
issue the policies within 45 days after the Financing Date) naming the
Disbursement Agent, the Funding Agents and the Lenders as additional insureds
and otherwise in form and substance satisfactory to each of the Bank Agent, the
Interim Mall Lender, the Initial Purchasers and the HVAC Provider.
(c) Construction Manager's Insurance Certificates. Delivery to
each of the Bank Agent, the Interim Mall Lender, the Initial Purchasers, the
HVAC Provider and the Disbursement Agent of (i) a certificate of the Company, in
form and substance satisfactory to each of the Bank Agent, the Interim Mall
Lender, the Initial Purchasers and the HVAC Provider with respect to insurance
under the Construction Management Agreement, dated as of the Financing Date and
identifying underwriters, type of insurance, insurance limits and policy terms,
listing the special provisions required to be maintained by the Construction
Manager as set forth in the Construction Management Agreement, describing the
insurance obtained and stating that such insurance is in full force and effect
and that all premiums then due thereon have been paid and that such insurance
complies with the Construction Management Agreement, and (ii) certified copies
of all policies evidencing such insurance (or a binder, commitment or
certificates signed by the insurer or a broker authorized to bind the insurer
along with a commitment to issue the policies within 45 days after the Financing
Date) naming the Disbursement Agent, the Funding Agents and the Lenders as
additional insureds under Construction Manager's general liability policy and
otherwise in form and substance satisfactory to each of the Bank Agent, the
Interim Mall Lender, the Initial Purchasers and the HVAC Provider.
(d) Insurance Advisor's Certificate. Delivery to each of the
Bank Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC Provider
and the Disbursement Agent of the
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Insurance Advisor's certificate, substantially in the form of Exhibit B-3, and
otherwise in form and substance satisfactory to each of the Bank Agent, the
Interim Mall Lender, the Initial Purchasers and the HVAC Provider.
3.1.7 Project Security. All of the Security Documents and the HVAC
Services Agreement, in form and substance satisfactory to the Funding Agents
party thereto and (in the case of the Bank Security Documents) the Arranger (as
defined in the Bank Credit Agreement), shall have been executed and delivered to
the secured parties thereunder and be in full force and effect and all actions
necessary or desirable, including all filings, in the reasonable opinion of the
Funding Agents party thereto and (in the case of the Bank Security Documents)
the Arranger (as defined in the Bank Credit Agreement) to perfect the security
interests granted therein as a valid security interest over the Project Security
(or, in the case of the security interest granted in the HVAC Services
Agreement, the HVAC Component) having the priority contemplated therefor by this
Agreement, the Intercreditor Agreement, the HVAC Services Agreement and the
Security Documents shall have been taken or made.
3.1.8 Opinions. Each of the Bank Agent, the Interim Mall Lender, the
Initial Purchasers, the HVAC Provider and the Disbursement Agent shall have
received the opinions identified in Exhibit Q.
3.1.9 Company's Closing Certificate. Delivery to each of the Bank
Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC Provider and
the Disbursement Agent of the Company's Closing Certificate signed by an
Authorized Representative of the Company.
3.1.10 Notice of Funding Request. The Disbursement Agent shall have
received, and shall have been notified that the Bank Agent, the Interim Mall
Lender, the Mortgage Notes Indenture Trustee and the HVAC Provider have each
received, a preliminary and a final Notice of Funding Request in accordance with
Sections 2.5.1(b) and 2.5.2(b), respectively.
3.1.11 Advance Request. Delivery to the Disbursement Agent and the
Construction Consultant of a preliminary Advance Request in accordance with
Section 2.5.1(a) and a final executed Advance Request in accordance with Section
2.5.2(a), in each case, with all attachments, exhibits and certificates required
by Section 2.5.1(a) or 2.5.2(a), as the case may be. Such Advance Request shall
request an Advance in an amount sufficient to (a) pay all amounts due and
payable for work performed on the Project through October 31, 1997, (b) repay in
full the Construction Loan and (c) pay all Issuance Fees and Expenses.
3.1.12 Construction Consultant's Certificates and Report. Delivery
to each of the Bank Agent, the Interim Mall Lender, the Initial Purchasers, the
HVAC Provider and the Disbursement Agent, of (a) the Construction Consultant's
Closing Certificate with the Construction Consultant's Report in form and
substance satisfactory to each of the Bank Agent, the Interim Mall Lender, the
Initial Purchasers and the HVAC Provider attached thereto and (b) the
Construction Consultant's certificate with respect to the requested Advance as
and when required by Section 2.5.2(c), substantially in the form of Exhibit C-2
approving (subject to Section 2.5.2(c)) the corresponding Advance Request.
3.1.13 Litigation. Except as set forth on Exhibit R-1, no action,
suit, proceeding or investigation of any kind shall have been instituted or, to
the Company's knowledge, pending or threatened, including actions or proceedings
of or before any Governmental Instrumentality, to which the Company, Interface,
Interface Holding, Mall Holding, Mall Intermediate Holding, Mall I LLC, Mall I
MM, Lido Intermediate Holding Company, LLC, Adelson, the Project or, to the
knowledge of the Company, the Construction Manager, the Indirect Construction
Guarantor, the HVAC Provider, the
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Project Architect, Treadway or any other party (other than the Company) to a
Material Project Document, is a party or is subject, or by which any of them or
any of their properties or the Project are bound that could reasonably be
expected to have a Material Adverse Effect nor, to the Company's knowledge,
shall there be any reasonable basis for any such action, suit, proceeding or
investigation and no injunction or other restraining order shall have been
issued and no hearing to cause an injunction or other restraining order to be
issued shall be pending or noticed with respect to any action, suit or
proceeding if the same reasonably could be expected to have a Material Adverse
Effect.
3.1.14 Fees. All amounts required to be paid to or deposited with
the Funding Agents, the Initial Purchasers, the Disbursement Agent or the
Independent Consultants and all taxes, fees and other costs payable in
connection with the execution, delivery, recordation and filing of the documents
and instruments referred to in this Section 3.1, shall have been paid or
deposited, as the case may be, in full. The Company shall have paid or arranged
for payment out of the requested Advance of all fees, expenses and other charges
then due and payable by it under this Agreement or other Financing Agreements or
under any agreements between the Company and any of the Independent Consultants.
3.1.15 Project Budget. Delivery to each of the Disbursement Agent,
the Bank Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC
Provider and the Construction Consultant of a budget in substantially the form
of Exhibit H (as amended from time to time in accordance with the terms hereof,
the "Project Budget") for all anticipated Project Costs (including, without
limitation, Project Costs incurred prior to, as well as after, the Financing
Date, Pre-Opening Expenses, Issuance Fees and Expenses and Debt Service), which
includes a drawdown schedule for Advances necessary to achieve Final Completion
and such other information as any of the Bank Agent, the Interim Mall Lender,
the Initial Purchasers, the HVAC Provider, the Disbursement Agent or the
Construction Consultant may reasonably require, together with a balanced
statement of sources and uses of proceeds (and any other funds necessary to
complete the Project), broken down by Construction Component and Line Item,
which Project Budget shall be satisfactory to the Construction Consultant, as
and to the extent certified to in the Construction Consultant's Closing
Certificate.
3.1.16 Project Schedule. Delivery to the Disbursement Agent, the
Bank Agent, the Interim Mall Lender, the Initial Purchasers, the HVAC Provider
and the Construction Consultant of a schedule for construction and completion of
each Construction Component and the Project as a whole in substantially the form
of Exhibit I (as amended from time to time in accordance with the terms hereof,
the "Project Schedule") which demonstrates that the Completion Date will occur
on or before the Outside Completion Deadline and which is otherwise satisfactory
to the Construction Consultant, as certified to in the Construction Consultant's
Closing Certificate.
3.1.17 Financial Statements. Delivery to the Disbursement Agent, the
Bank Agent, the Interim Mall Lender, the Initial Purchasers and the HVAC
Provider of the most recent annual consolidated and consolidating financial
statements of the type which must be provided under Section 5.6 and most recent
quarterly consolidated and consolidating financial statements from LVSI and its
Subsidiaries, Construction Manager and Treadway, together with certificates from
the appropriate partners or officers of each such Person certifying such
financial statements and stating that no material adverse change in the
consolidated assets, liabilities, operations or financial condition of each such
Person has occurred since the dates of the respective financial statements
provided to the Disbursement Agent, the Bank Agent, the Interim Mall Lender, the
Initial Purchasers and the HVAC Provider, except as otherwise provided in such
certificate.
3.1.18 Material Adverse Effect. Since June 30, 1997, there shall not
have occurred any change in the Project Budget, in the economics or feasibility
of constructing and/or operating the Project,
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or in the financial condition, business or property of the Company, Adelson,
Interface, Interface Holding, Mall Holding, Mall Intermediate Holding, Lido
Intermediate Holding Company, LLC, Mall I MM, Mall I LLC, Construction Manager,
Indirect Construction Guarantor, or Treadway, which could reasonably be expected
to have a Material Adverse Effect.
3.1.19 Events of Default. No Event of Default or Potential Event of
Default shall have occurred and be continuing and an Authorized Representative
of the Company shall have delivered a certificate to the Funding Agents and the
Disbursement Agent to such effect.
3.1.20 Permits.
(a) All Permits described in Exhibit M as required to have
been obtained by the Company or any other Person by the Financing Date shall
have been issued and be in full force and effect and not subject to current
legal proceedings or to any unsatisfied conditions (that are required to be
satisfied by the Financing Date) that could reasonably be expected to allow
material modification or revocation, and all applicable appeal periods with
respect thereto shall have expired; and
(b) With respect to any of the Permits described in Exhibit M
as not yet required to be obtained, (i) each such Permit (except approval by the
applicable Governmental Instrumentalities of the creation of the Mall Space as a
separate legal parcel under Nevada subdivision law) is of a type that is
routinely granted on application and (ii) no facts or circumstances exist which
indicate that any such Permit will not be timely obtainable without material
difficulty, expense or delay by the Company or the applicable Person,
respectively, prior to the time that it becomes required.
3.1.21 Third Party Consents. Delivery to the Disbursement Agent and
each of the Bank Agent, the Interim Mall Lender and the Initial Purchasers of
Consents from (a) Construction Manager, (b) Direct Construction Guarantor, (c)
Indirect Construction Guarantor, (d) each Major Contractor that is party to a
Contract with the Company, (e) HVAC Provider, (f) Treadway, (g) Project
Architect, and (h) each other party (other than the Company) to the Material
Project Documents, each in form and substance satisfactory to the Bank Agent,
the Interim Mall Lender and the Initial Purchasers.
3.1.22 Representations and Warranties. Each representation and
warranty of (a) the Company and its Affiliates and Adelson set forth in Article
4 hereof or in any of the other Operative Documents shall 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), and (b) to the Company's knowledge, Construction
Manager, Direct Construction Guarantor, Indirect Construction Guarantor, Project
Architect, Treadway, FCMI and each other party (other than the Company) to a
Material Project Document set forth in any of the Operative Documents shall 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 and warranty to be true and correct could not reasonably be
expected to have a Material Adverse Effect, in each case, as certified by the
Company in the Company's Closing Certificate.
3.1.23 Service of Process. Delivery to the Funding Agents and the
Disbursement Agent of a letter from The Prentice-Hall Corporation Systems Inc.,
presently located at 15 Columbus Circle, New York, New York 10023 or any other
Person reasonably satisfactory to each of the Bank Agent, the Interim Mall
Lender, the Initial Purchasers and the HVAC Provider consenting to its
appointment by the Company, Adelson, Mall Intermediate Holding, Mall Holding,
Mall I MM, Mall I LLC, and each other party (other than the Company) to a
Material Project Document (other than Construction Manager, Direct
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Construction Guarantor and Indirect Construction Guarantor) in each case in form
and substance acceptable to each of the Bank Agent, the Interim Mall Lender, the
Initial Purchasers and the HVAC Provider, as each such Person's agent to receive
service of process in New York, New York.
3.1.24 Utility Availability. The Construction Consultant shall have
become satisfied, as certified to in the Construction Consultant's Closing
Certificate, that arrangements, which are reflected accurately in the Project
Budget, shall have been or will be made under the Construction Management
Agreement or otherwise on commercially reasonable terms for the provision of all
services, materials and utilities necessary for the construction, operation and
maintenance of the Project as contemplated by the Operative Documents and the
Plans and Specifications.
3.1.25 Establishing of Accounts; Mortgage Notes Proceeds. Each of
the Accounts and the HVAC Accounts shall have been established pursuant hereto
and the Collateral Account Agreements, the Guaranty Deposit Account shall have
been established pursuant to the Adelson Completion Guaranty and the Adelson
Guaranty Collateral Account Agreement and (a) the Mortgage Notes Proceeds shall
have been deposited in the Mortgage Notes Proceeds Account and (b) funds in an
amount equal to Twenty-Five Million Dollars ($25,000,000) shall have been
deposited in the Guaranty Deposit Account.
3.1.26 Funding of Equity; Proceeds of Subordinated Notes. Delivery
to each of the Bank Agent, the Interim Mall Lender, the Initial Purchasers and
the HVAC Provider of evidence reasonably satisfactory to each such Person that:
(a) cash in the amount of (i) Ninety Million Three Hundred
Thousand Dollars ($90,300,000) has been irrevocably and unconditionally
contributed to the Company and that such cash has been applied to payment of
Project Costs, as certified to by the Construction Consultant in the
Construction Consultant's Closing Certificate and (ii) Five Million Dollars
($5,000,000) has been irrevocably and unconditionally contributed to the Company
and that such cash has been deposited in the Company's Funds Account.
(b) the Subordinated Notes have been issued and that proceeds
thereof in an amount equal to Eighty-Six Million Four Hundred and Ninety-Eight
Thousand Seven Hundred Dollars ($86,498,700) have been deposited in the
Company's Funds Account.
(c) Five Million Three Hundred and Seventy Thousand Three
Hundred and Forty-Four Dollars and Forty-Seven Cents ($5,370,344.47) in cash
held by the Company from the remaining proceeds of the Construction Loan have
been deposited in the Company's Funds Account.
3.1.27 A.L.T.A. Surveys. The Disbursement Agent and each of the Bank
Agent, the Interim Mall Lender, the HVAC Provider and the Initial Purchasers
shall have received A.L.T.A. surveys of the Site, the Site Easements and the
Mall Easements, satisfactory in form and substance to the Title Insurer and each
of the Bank Agent, the Interim Mall Lender, the HVAC Provider and the Initial
Purchasers, reasonably current and certified to each such Person by a licensed
surveyor satisfactory to each such Person, showing (a) as to the Site, the exact
location and dimensions thereof, including the location of all means of access
thereto and all easements relating thereto and showing the perimeter within
which all foundations are or are to be located; (b) as to the Site Easements and
the Mall Easements, the exact location and dimensions thereof to the extent
capable of being described, including the location of all means of access
thereto, and all improvements or other encroachments in or on the Site Easements
and the Mall Easements; (c) the existing utility facilities servicing the
Project (including water, electricity, gas, telephone, sanitary sewer and storm
water distribution and detention facilities); (d) that such existing
improvements do not encroach or interfere with adjacent property or existing
easements or other rights
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(whether on, above or below ground), and that there are no gaps, gores,
projections, protrusions or other survey defects other than VCR Permitted
Encumbrances and GCCLLC Permitted Encumbrances; (e) whether the Site or any
portion thereof is located in a special earthquake or flood hazard zone; and (f)
that there are no other matters that could reasonably be expected to be
disclosed by a survey constituting a defect in title other than VCR Permitted
Encumbrances and GCCLLC Permitted Encumbrances.
3.1.28 Title Policies. The Company shall have delivered to (a) the
Bank Agent, a lender's A.L.T.A. policy of title insurance, or a commitment to
issue such policy, in the amount of $170,000,000, (b) the Mortgage Notes
Indenture Trustee on behalf of the Mortgage Note Holders, a lender's A.L.T.A.
policy of title insurance, or a commitment to issue such policy, in the amount
of $425,000,000, and (c) the Interim Mall Lender, a lender's A.L.T.A. policy of
title insurance, or a commitment to issue such policy, in the amount of
$140,000,000. Each such policy or commitment shall (i) include such endorsements
as are required by the Bank Agent, the Initial Purchasers and the Interim Mall
Lender, respectively, (ii) be reinsured by such reinsurance as is satisfactory
to the Bank Agent, the Initial Purchasers and the Interim Mall Lender,
respectively, (iii) be issued by Title Insurer in form and substance
satisfactory to the Bank Agent, the Initial Purchasers and the Interim Mall
Lender, respectively, and (iv) insure (or agree to insure) that:
(a) VCR has a good, fee simple title to the Site and the Site
Easements, free and clear of liens, encumbrances or other exceptions to title
except those exceptions specified on Exhibit N-1 ("VCR Permitted Encumbrances")
and GCCLLC has good leasehold title to the Mall and the Mall Easements free and
clear of all liens, encumbrances and other exceptions to title except those
exceptions specified in Exhibit N-2 ("GCCLLC Permitted Encumbrances"); and
(b) each Deed of Trust is (or will be when recorded) a valid
lien on the Trust Estate (as defined in each Deed of Trust) entitled to the
priority described therein, free and clear of all liens, encumbrances and
exceptions to title whatsoever, other than VCR Permitted Encumbrances in the
case of the Deeds of Trust executed by VCR and GCCLLC Permitted Encumbrances in
the case of the Deeds of Trust executed by GCCLLC.
3.1.29 HVAC Letters of Credit. The HVAC Provider shall have
delivered to the Disbursement Agent the HVAC Letters of Credit, each in form and
substance satisfactory to the Disbursement Agent and each of the Bank Agent, the
Interim Mall Lender and the Initial Purchasers.
3.1.30 Other Documents. The Disbursement Agent and each of the Bank
Agent, the Interim Mall Lender, the Initial Purchasers and the HVAC Provider
shall have received such other documents and evidence as each such Person may
reasonably request in connection with the transactions contemplated hereby.
3.1.31 Agent Fee Letters. The letters regarding the fees of the Bank
Agent and the Disbursement Agent, respectively, shall have been executed and
delivered.
3.1.32 Plans and Specifications. The Company shall have delivered to
the Construction Consultant Plans and Specifications for each Construction
Component and the Project as a whole in form and substance satisfactory to the
Construction Consultant, as certified to in the Construction Consultant's
Closing Certificate. Subject to (a) finalizing the Plans and Specifications in a
manner that reflects a natural evolution from the Plans and Specifications as of
the Financing Date in a manner consistent with the standards set forth on
Exhibit X and (b) submission of the finalized Plans and Specifications to the
proper Governmental Instrumentality for approval, such Plans and Specifications
shall constitute Final Plans and Specifications.
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3.1.33 Corporation and Capital Structure; Management. The corporate
organization structure, capital structure and ownership of LVSI and its
Subsidiaries shall be satisfactory to each of the Bank Agent, the Interim Mall
Lender and the Initial Purchasers. The management structure of LVSI and its
Subsidiaries shall be satisfactory to each of the Bank Agent, the Interim Mall
Lender and the Initial Purchasers, and each such Person shall have received
copies of, and shall be satisfied with the form and substance of, any and all
employment contracts with senior management of LVSI.
3.1.34 Real Estate Appraisals. Each of the Bank Agent, the Interim
Mall Lender, the Initial Purchasers and the Disbursement Agent shall have
received an appraisal of the Site from an independent real estate appraiser
satisfactory to the Bank Agent, the Interim Mall Lender and the Initial
Purchasers, in form, scope and substance satisfactory to each such Person and
satisfying the requirements of any applicable laws and regulations.
3.1.35 Environmental Reports. Each of the Bank Agent, the Interim
Mall Lender, the Initial Purchasers, the Disbursement Agent and the HVAC
Provider shall have received reports and other information, in form, scope and
substance satisfactory to such Person, regarding environmental matters relating
to the Company and the Site, which reports shall include a Phase I environmental
assessment for the Site (the "Phase I Report") which (a) conforms to the ASTM
Standard Practice for Environmental Site Assessments: Phase I Environmental Site
Assessment Process, E 1527 and (b) was conducted no more than six months prior
to the Financing Date by EMG or another environmental consulting firm or firms
reasonably satisfactory to each of the Bank Agent, the Interim Mall Lender, the
Initial Purchasers and the HVAC Provider.
3.1.36 Liens. The Company shall have delivered or caused to be
delivered to each of the Disbursement Agent, the Bank Agent, the Interim Mall
Lender and the Initial Purchasers:
(a) Unconditional Releases. Duly executed acknowledgments of
payments and unconditional releases of mechanics' and materialmen's liens in
form and substance reasonably satisfactory to each of the Bank Agent, the
Interim Mall Lender and the Initial Purchasers (in consultation with the
Construction Consultant) from the Construction Manager and each Contractor and
Subcontractor for all work, services and materials, including equipment and
fixtures of all kinds, done, performed or furnished for the construction of the
Project through September 30, 1997 with a value or contract price in excess of
$50,000; and
(b) Conditional Releases. Duly executed acknowledgments of
payments and releases of mechanics' and materialmen's liens in form and
substance reasonably satisfactory to each of the Bank Agent, the Interim Mall
Lender and the Initial Purchasers (in consultation with the Construction
Consultant) from the Construction Manager and each Contractor and Subcontractor
for all work, services and materials, including equipment and fixtures of all
kinds, done, performed or furnished for the construction of the Project from
September 30, 1997 through October 31, 1997 with a value or contract price in
excess of $50,000, conditioned upon receiving payment from the proceeds of the
requested Advance.
The Disbursement Agent may rely on the certifications by the Company and the
Construction Consultant set forth in their respective certificates relating to
the requested Advance in determining that all Contractors and Subcontractors
that will not be paid out of the requested Advance but who are required to
deliver lien releases pursuant to clauses (a) and (b) above have delivered the
same.
3.1.37 Proceeds. The Company shall be in compliance with Sections
5.1.1 and 5.9, and no demands for funds shall be outstanding under Sections
5.9.1 or 5.9.2.
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3.1.38 In Balance Requirement. The Unallocated Contingency Balance
shall equal or exceed the Required Minimum Contingency and after giving effect
to the requested Advance, the Available Funds shall equal or exceed the
Remaining Costs.
3.1.39 No Restrictions. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain any of
the Bank Lenders, Interim Mall Lender or the HVAC Provider from making the
Advances to be made by it on the Financing Date.
3.1.40 Violation of Certain Regulations. The making of the requested
Advance shall not violate any law including Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System.
3.2 Conditions Precedent to Subsequent Advances. The obligations of the
Bank Lenders, the Interim Mall Lender (or, with respect to Advances to be made
after the Mall Release Date, the obligation of the Disbursement Agent to
withdraw funds from the Mall Retainage/Punchlist Account), the Mortgage Notes
Indenture Trustee and the HVAC Provider to make subsequent Advances hereunder
are subject to the prior satisfaction of each of the following conditions
precedent in form and substance reasonably satisfactory to the Disbursement
Agent in its reasonable discretion:
3.2.1 Operative Documents. Each Operative Document shall be in full
force and effect, without amendment since the respective date of its execution
and delivery, and in a form which was approved by the Bank Agent, the Interim
Mall Lender, the Initial Purchasers and the HVAC Provider, except (a) as
permitted pursuant to Section 6.1 and (b) to the extent the Company has entered
into a replacement Operative Document to the extent permitted by Section 7.1.8
or if pursuant to such Section the Company is not required to enter into a
replacement Operative Document, and each certificate delivered by the Company
with respect to any such document shall be true and correct in all material
respects, as certified by the Company in the relevant Advance Request. The
Disbursement Agent shall be entitled to rely on the certification by the Company
in the relevant Advance Request or, if applicable, in the Company's Completion
Certificate, determining that this condition has been satisfied unless the
Disbursement Agent shall have actual knowledge that the Company's certification
is inaccurate.
3.2.2 Representations and Warranties. Each representation and
warranty of (a) the Company, Adelson, Interface, Interface Holding, Mall
Intermediate Holding, Mall Holding, Mall I MM and Mall I LLC set forth in
Article 4 hereof or in any of the other Operative Documents shall 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), and (b) to the Company's knowledge,
of Construction Manager, Direct Construction Guarantor, Indirect Construction
Guarantor, Project Architect, Treadway, FCMI and each other party (other than
the Company) to a Material Project Document set forth in any of the Operative
Documents shall 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 and warranty to be true and correct could not
reasonably be expected to have a Material Adverse Effect, in each case, as
certified by the Company in the relevant Advance Request. The Disbursement Agent
shall be entitled to rely on the certification by the Company in the relevant
Advance Request or, if applicable, in the Company's Completion Certificate, in
determining that this condition has been satisfied unless the Disbursement Agent
shall have actual knowledge that the Company's certification is inaccurate.
3.2.3 Events of Default. No Event of Default or Potential Event of
Default shall have occurred and be continuing or could reasonably be expected to
result from such Advance, as certified by
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the Company in the relevant Advance Request. The Disbursement Agent shall be
entitled to rely on the certification by the Company in the relevant Advance
Request or, if applicable, in the Company's Completion Certificate, in
determining that this condition has been satisfied unless the Disbursement Agent
shall (a) have received notice from any Funding Agent that an Event of Default
has occurred or (b) otherwise shall have acquired actual knowledge that the
Company's certification is inaccurate.
3.2.4 Notice of Funding Request. Disbursement Agent shall have
received and shall have been notified that each of the Interim Mall Lender, the
Mortgage Notes Indenture Trustee and the HVAC Provider has received a
preliminary Notice of Funding Request in accordance with Section 2.5.1(b) and a
final Notice of Funding Request in accordance with Section 2.5.2(b) with respect
to the requested Advance.
3.2.5 Advance Request and Certificate. The Company shall have
delivered to the Disbursement Agent and the Construction Consultant a
preliminary Advance Request for the requested Advance in accordance with Section
2.5.1(a) and a final executed Advance Request for the requested Advance in
accordance with Section 2.5.2(a), in each case, with all attachments, exhibits
and certificates required by Section 2.5.1(a) or 2.5.1(b), as the case may be.
Such Advance Request shall request an Advance in an amount sufficient to pay all
amounts due and payable for work performed on the Project through the last day
of the period covered by such Advance Request. The Disbursement Agent shall have
reviewed and evaluated the same as provided in Section 2.5.3(a) and, subject to
Section 2.5.3(a)(ii), shall not have become aware of any material error,
inaccuracy, misstatement or omission of fact in an Advance Request or an
attachment, exhibit or certificate attached thereto or information provided by
the Company upon the request of the Disbursement Agent.
3.2.6 Construction Consultant's Certificate. Delivery to the
Disbursement Agent of the Construction Consultant's certificate with respect to
the requested Advance as and when required by Section 2.5.2(c), substantially in
the form of Exhibit C-2, approving (subject to the proviso in Section 2.5.2(c))
the corresponding Advance Request.
3.2.7 Liens. The Company shall have delivered or caused to be
delivered to the Disbursement Agent:
(a) Unconditional Releases. Duly executed acknowledgments of
payments and unconditional releases of mechanics' and materialmen's liens in
form and substance reasonably satisfactory to the Disbursement Agent (in
consultation with the Construction Consultant) from the Construction Manager and
each Contractor and Subcontractor for all work, services and materials,
including equipment and fixtures of all kinds, done, performed or furnished for
the construction of the Project through the last day covered by the immediately
preceding Advance Request with a value or contract price in excess of $50,000,
except for such work, services and materials the payment for which is being
disputed in good faith, by appropriate means and with appropriate reserves
(through funds on deposit in the Lien Protection Account which in the aggregate
with all amounts on deposit therein shall not exceed $20,000,000).
(b) Conditional Releases. Duly executed acknowledgments of
payments and releases of mechanics' and materialmen's liens in form and
substance reasonably satisfactory to the Disbursement Agent (in consultation
with the Construction Consultant) from the Construction Manager and each
Contractor and Subcontractor for all work, services and materials, including
equipment and fixtures of all kinds, done, performed or furnished for the
construction of the Project from the last day covered by the immediately
preceding Advance Request through the last day covered by the current Advance
Request with a value or contract price in excess of $50,000, conditioned upon
receiving payment
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from the proceeds of the requested Advance, except for work, services or
materials the payment for which (i) is being disputed in good faith, by
appropriate means and with appropriate reserves (through funds on deposit in the
Lien Protection Account or funds to be deposited in the Lien Protection Account
from the proceeds of the requested Advance which in the aggregate with all
amounts on deposit therein shall not exceed $20,000,000).
The Disbursement Agent may rely on the certification by the Company and the
Construction Consultant set forth in their respective certificates relating to
the requested Advance in determining that all Contractors and Subcontractors
that will not be paid out of the requested Advance but who are required to
deliver lien releases pursuant to clauses (a) and (b) above have delivered the
same.
3.2.8 Title Policy Endorsement. The Disbursement Agent shall have
received a commitment from Title Insurer, attached to the Advance Request,
evidencing the Title Insurer's unconditional commitment to issue an endorsement
to each of the Bank Agent's, the Interim Mall Lender's, and the Mortgage Notes
Indenture Trustee's Title Policy in the form of a 122 CLTA Endorsement insuring
the continuing priority of the Lien of each Deed of Trust as security for the
requested Advance and confirming and/or insuring that (i) since the previous
disbursement from the Disbursement Account, there has been no change in the
condition of title unless permitted by the Financing Agreements, and (ii) there
are no intervening liens or encumbrances which may then or thereafter take
priority over the respective Liens of the Deeds of Trust (other than VCR
Permitted Encumbrances and GCCLLC Permitted Encumbrances and such intervening
liens or encumbrances securing amounts the payment of which is being disputed in
good faith by the Company, so long as the Disbursement Agent has received
confirmation from the applicable Funding Agents that the Title Insurer has
delivered to such Funding Agents any endorsement to the respective Title
Policies required or desirable to assure against loss to the Secured Parties due
to the priority of such lien or encumbrance).
3.2.9 Permits. The Company shall have certified (and, as set forth
in the Construction Consultant's certificate related to the requested Advance,
the Construction Consultant shall not have become aware of any inaccuracies in
the Company's certification) that:
(a) all Permits described in Exhibit M as required to have
been obtained by the Company or any other Person by the date of such Advance
shall have been issued and be in full force and effect and not subject to
current legal proceedings or to any unsatisfied conditions (that are required to
be satisfied by the date of the relevant requested Advance) that could
reasonably be expected to allow material modification or revocation, and all
applicable appeal periods with respect thereto shall have expired; and
(b) With respect to any of the Permits described in Exhibit M
as not yet required to be obtained, (i) each such permit is of a type that is
routinely granted on application (except approval by the applicable Governmental
Instrumentalities of the creation of the Mall Space as a separate legal parcel
under Nevada subdivision law) and (ii) no facts or circumstances exist which
indicate that any such Permit will not be timely obtainable without material
difficulty, expense or delay by the Company or the applicable Person,
respectively, prior to the time that it becomes required.
3.2.10 Additional Documents. With respect to any Project Documents
entered into or obtained, transferred or required (whether because of the status
of the construction or operation of the Project or otherwise) since the date of
the most recent Advance, there shall be redelivery of such matters as are
described in Section 3.1.1, Section 3.1.4 (to the extent such Project Document
is, is in substitution of or is a replacement for a Material Project Document),
and, if requested by any Funding Agent or the Disbursement Agent, Section 3.1.8,
in each case, to the extent not previously addressed.
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3.2.11 Plans and Specifications. The Disbursement Agent and the
Construction Consultant shall have received copies of all Plans and
Specifications which, as of the date of the requested Advance Date, constitute
Final Plans and Specifications subject, until such time as all Plans and
Specifications have been prepared and completed by the Project Architect, to (a)
finalizing the Plans and Specifications in a manner that reflects a natural
evaluation from the Plans and Specifications as in effect on the requested
Advance Date in a manner consistent with the standards set forth in Exhibit X
and (b) submission of the finalized Plans and Specifications to the proper
Governmental Instrumentality for approval. The Disbursement Agent may rely upon
the certification of the Company set forth in the relevant Advance Request or,
if applicable, in the Company's Completion Certificate, in order to establish
satisfaction of this condition unless the Disbursement Agent shall have actual
knowledge that the Company's certification is inaccurate.
3.2.12 Cash Management Account. With respect to an Advance Request
which requests that funds be deposited in the HC/Mall Component Cash Management
Sub-Account or the HVAC Component Cash Management Sub-Account, the Company shall
have substantiated to the Construction Consultant's satisfaction (as set forth
in the Construction Consultant's certificate), in the manner contemplated by the
Advance Request, that the amounts previously drawn by the Company from each such
Account have been used to pay Project Costs allocated to the HC/Mall Component
or the HVAC Component, as the case may be, in accordance with the Project
Budget. After giving effect to the requested Advance, the balance in the HC/Mall
Component Cash Management Sub-Account will not exceed $5,500,000 and the balance
in the HVAC Component Cash Management Sub-Account will not exceed $1,000,000.
3.2.13 Proceeds. The Company shall be in compliance with Sections
5.1.1 and 5.9, and no demands for funds shall be outstanding under Sections
5.9.1 or 5.9.2.
3.2.14 Fees and Expenses. The Company shall have paid or arranged
for payment out of the requested Advance of all fees, expenses and other charges
then due and payable by it under this Agreement or under the other Financing
Agreements or under any agreements between the Company and any of the
Independent Consultants. The Disbursement Agent shall be entitled to rely upon
the certification of the Company in the relevant Advance Request or, if
applicable, in the Company's Completion Certificate, in determining that this
condition has been satisfied unless the Disbursement Agent shall have actual
knowledge that the Company's certification is inaccurate.
3.2.15 Insurance. Insurance complying in all material respects with
the requirements of Exhibit O shall be in place and in full force and effect.
The Disbursement Agent shall be entitled to rely upon the certification of the
Company in the relevant Advance Request or, if applicable, in the Company's
Completion Certificate, in determining that this condition has been satisfied
unless the Disbursement Agent shall have actual knowledge that the Company's
certification is inaccurate.
3.2.16 Project Security. All of the Security Documents shall
continue to be in full force and effect and all actions necessary or desirable
(including all filings) in the reasonable opinion of the Funding Agents party
thereto to perfect the security interests granted therein as a valid security
interest over the Project Security thereunder having the priority contemplated
therefor by this Agreement, the Security Documents shall have been taken or
made. The HVAC Services Agreement shall continue to be in full force and effect
and, to the extent that the Company has any right, title or interest in the HVAC
Component, all actions necessary or desirable (including all filings) in the
reasonable opinion of the HVAC Provider to perfect the security interest of the
HVAC Provider as a valid security interest over the HVAC Component having the
priority contemplated therefor in the HVAC Services Agreement shall have been
taken or made. All property, rights and assets required for the Project shall be
free and clear
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of all encumbrances except for Permitted Liens. The Disbursement Agent shall be
entitled to rely upon the certification of the Company in the relevant Advance
Request or, if applicable, in the Company's Completion Certificate, in
determining that this condition has been satisfied unless the Disbursement Agent
shall have actual knowledge that the Company's certification is inaccurate.
3.2.17 Litigation. No action, suit, proceeding or investigation of
any kind shall have been instituted or, to the Company's knowledge, pending or
threatened, including actions or proceedings of or before any Governmental
Instrumentality, to which the Company, Adelson, Interface, Interface Holding,
Mall Intermediate Holding, Mall Holding, Mall I MM, Mall I LLC, the Project or,
to the knowledge of the Company, the Construction Manager, the Indirect
Construction Guarantor, the HVAC Provider, Project Architect, or any other party
(other than the Company) to a Material Project Document, is a party or is
subject, or by which any of them or any of their properties or the Project are
bound that could reasonably be expected to have a Material Adverse Effect nor,
to the Company's knowledge, shall there be any reasonable basis for any such
action, suit, proceeding or investigation and no injunction or other restraining
order shall have been issued and no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed with respect to any
action, suit or proceeding if the same could reasonably be expected to have a
Material Adverse Effect. The Disbursement Agent shall be entitled to rely upon
the certification of the Company in the relevant Advance Request or, if
applicable, in the Company's Completion Certificate, in determining that this
condition has been satisfied unless the Disbursement Agent shall have actual
knowledge that the Company's certification is inaccurate.
3.2.18 In Balance Requirement. The Unallocated Contingency Balance
shall equal or exceed the Required Minimum Contingency and after giving effect
to the requested Advance, the Available Funds shall equal or exceed the
Remaining Costs.
3.2.19 No Restriction. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain any of
the Bank Lenders, Interim Mall Lender, the Mortgage Notes Indenture Trustee or
HVAC Provider from making the Advances to be made by it on the requested Advance
Date. The Disbursement Agent shall be entitled to rely upon a certification of
the Company in the relevant Advance Request or, if applicable, in the Company's
Completion Certificate, in determining that this condition has been satisfied
unless the Disbursement Agent shall have actual knowledge that the Company's
certification is inaccurate.
3.2.20 Violation of Certain Regulations. The making of the requested
Advance shall not violate any law including Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System. The Disbursement Agent shall be entitled to rely upon the certification
of the Company in the relevant Advance Request or, if applicable, in the
Company's Completion Certificate, in determining that this condition has been
satisfied unless the Disbursement Agent shall have actual knowledge that the
Company's certification is inaccurate.
3.2.21 Mall Retainage/Punchlist Account. From and after the Mall
Release Date, after giving effect to the requested Advance, the amount of funds
on deposit in the Mall Retainage/Punchlist Account shall equal or exceed 125% of
the Mall Punchlist Completion Amount. The Disbursement Agent shall be entitled
to rely on the certifications of the Company and the Construction Consultant in
their respective certificates relating to the requested Advance in determining
that this condition has been satisfied.
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3.3 No Waiver or Estoppel.
3.3.1 The making of any Advance hereunder shall not preclude any
Funding Agent from later asserting that (and enforcing any remedies it may have
if) any representation, warranty or certification made or deemed made by the
Company in connection with such Advance was not true and accurate when made. No
course of dealing or waiver by any Funding Agent or Secured Party in connection
with any condition precedent to any Advance under this Agreement or any Facility
Agreement shall impair any right, power or remedy of any such Funding Agent or
Secured Party with respect to any other condition precedent, or be construed to
be a waiver thereof; nor shall the action of any Funding Agent or Secured Party
in respect of any Advance affect or impair any right, power or remedy of any
Funding Agent or Secured Party in respect of any other Advance.
3.3.2 Unless otherwise notified to the Company by a Funding Agent or
Secured Party and without prejudice to the generality of Section 3.3.1, the
right of any Funding Agent or Secured Party to require compliance with any
condition under this Agreement or its respective Facility Agreement which may be
waived by such Funding Agent or Secured Party in respect of any Advance is
expressly preserved for the purpose of any subsequent Advance.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
The Company makes all of the following representations and warranties to
and in favor of the Funding Agents, the Lenders and the Disbursement Agent as of
the Financing Date and the date of each Advance, except as such representations
relate to an earlier date. All of these representations and warranties shall
survive the Financing Date and the Advances until, with respect to each Funding
Agent and the Lenders, the Obligations under such Funding Agent's and Lenders'
respective Facilities have been repaid in full and their respective Facility
Agreements (including, in the case of the HVAC Provider, the HVAC Ground Lease)
and the other respective Financing Agreements terminated.
4.1 Organization. (a) LVSI is a corporation duly incorporated and validly
existing under the laws of the State of Nevada and VCR is a limited liability
company duly organized and validly existing under the laws of the State of
Nevada, (b) GCCLLC is a limited liability company duly organized and validly
existing under the laws of the State of Delaware, (c) each of LVSI, VCR and
GCCLLC is in good standing and duly qualified to do business in Nevada and in
each other State where the nature of its assets or business makes such
qualification necessary and (d) each of LVSI, VCR and GCCLLC has all requisite
power and authority to (i) own or hold under lease and operate the properties it
purports to own or hold under lease, (ii) carry on its business as now being
conducted and as now proposed to be conducted in respect of the Project, (iii)
incur Indebtedness and create a Lien on its property, and (iv) execute, deliver
and perform under each of the Operative Documents to which it is a party. As of
the Financing Date, the sole shareholder of LVSI is Adelson. As of the Financing
Date, the sole members of VCR are Interface Holding and LVSI. The sole member of
GCCLLC is VCR.
4.2 Authorization; No Conflict. Each of LVSI, VCR and GCCLLC has duly
authorized, executed and delivered the Financing Agreements and the other
Operative Documents to which it is a party, and neither the execution and
delivery thereof nor the consummation of the transactions contemplated thereby
nor the compliance with the terms thereof by LVSI, VCR and GCCLLC, respectively,
(a) does or will contravene the formation documents or any other Legal
Requirement then applicable to or binding on LVSI, VCR or GCCLLC, as the case
may be, (b) does or will contravene or result in any breach or constitute any
default under, or result in or require the creation of any Lien upon any of
LVSI's, VCR's or GCCLLC's properties or under any agreement or instrument to
which
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LVSI, VCR or GCCLLC is a party or by which it or any of their respective
properties may be bound, or (c) does or will require the consent or approval of
any Person other than as set forth on Schedule 4.2.
4.3 Legality, Validity and Enforceability. Each of the Operative Documents
to which LVSI, VCR or GCCLLC is a party is a legal, valid and binding obligation
of LVSI, VCR or GCCLLC, as the case may be, enforceable against LVSI, VCR or
GCCLLC, as the case may be, in accordance with its terms, subject only to
bankruptcy and similar laws and principles of equity. None of the Operative
Documents to which LVSI, VCR or GCCLLC is a party has been amended or modified
except in accordance with this Agreement.
4.4 Compliance with Law, Permits and Operative Documents. Each of LVSI,
VCR and GCCLLC is in compliance in all material respects with all Legal
Requirements (including all Environmental Laws) and Permits and Operative
Documents to which it is a party, and no notices of violation of any Permit or
Operative Document relating to the Project have been issued, entered or received
by LVSI, VCR or GCCLLC, except for violations that could not reasonably be
expected to have a Material Adverse Effect.
4.5 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 Exhibit M. Exhibit M accurately states the
stage in construction by which each such Permit is required to be obtained. Each
Permit described in Exhibit M as required to be obtained by the date that this
representation is deemed to be made 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 date that this representation
is deemed to be made) that may allow modification or revocation. Each Permit
described in Exhibit M as not required to have been obtained by the date that
this representation is deemed to be made is of a type that is routinely granted
on application except approval by the applicable Governmental Instrumentalities
of the creation of the Mall Space as a separate legal parcel under Nevada
subdivision law. The Company has no 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. The Company is not in violation of
any condition in any Permit the effect of which could reasonably be expected to
have a Material Adverse Effect.
4.6 Litigation. Except as set forth on Exhibit R-1 (as the same may be
updated from time to time by the Company), there are no pending or, to the
Company's knowledge, threatened actions, suits, proceedings or investigations of
any kind, including actions or proceedings of or before any Governmental
Instrumentality, to which LVSI, VCR, GCCLLC, Adelson, Interface, Interface
Holding, Lido Intermediate Holding Company, LLC, Mall Intermediate Holding, Mall
Holding, Mall I MM, Mall I LLC or the Project or, to the knowledge of the
Company, HVAC Provider, Construction Manager, Indirect Construction Guarantor,
Project Architect, or any other party (other than the Company) to a Material
Project Document is a party or is subject, or by which any of them or any of
their properties or the Project are bound that could reasonably be expected to
have a Material Adverse Effect nor, to the Company's knowledge, is there any
reasonable basis for any such action, suit, proceeding or investigation.
4.7 Financial Statements.
4.7.1 The consolidated and consolidating financial statements of
LVSI and its subsidiaries delivered to the Lenders pursuant to Section 3.1.17 on
the Financing Date, were, and, in the case of financial statements to be
delivered after the Financing Date pursuant to Section 5.6, will be,
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prepared in conformity with generally accepted accounting principles and fairly
present, in all material respects, the financial position (on a consolidated and
consolidating basis) of the entities described in such financial statements as
of the respective dates thereof and the results of operations and cash flows (on
a consolidated and 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.
4.7.2 Except as reflected in the consolidated and consolidating
financial statements of LVSI and its subsidiaries delivered pursuant to Section
3.1.17 or 5.6 there are no liabilities or obligations with respect to the
Company 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 LVSI, VCR, GCCLLC or
LVSI's other Subsidiaries in relation to their business, operations, properties,
assets, financial condition or prospects taken as a whole. The Company does not
know of any reasonable basis for the assertion against LVSI, VCR, GCCLLC or the
Project of any liability or obligation of any nature whatsoever that is not
fully reflected in the financial statements delivered pursuant to Section 3.1.17
or 5.6, as the case may be, which, either individually or in the aggregate,
could reasonably be expected to be material to LVSI, VCR, GCCLLC or LVSI's other
Subsidiaries.
4.8 Security Interests.
(a) The security interests granted to the Secured Parties pursuant
to the Security Documents in the Project Security (i) constitute as to personal
property included in the Project Security and, with respect to subsequently
acquired personal property included in the Project Security, will constitute, a
perfected security interest under the UCC and/or other applicable law and (ii)
have, and, with respect to such subsequently acquired property, will have been
perfected under the UCC and/or other applicable law as aforesaid, (A) as among
the Secured Parties, the priority contemplated thereby and (B) as between the
Secured Parties and any third Persons, superior priority and rights than the
rights of any such third Persons now existing or hereafter arising whether by
way of mortgage, lien, security interests, encumbrance, assignment or otherwise,
subject to the rights and priorities of Permitted Liens. To the extent that the
Company has any right, title or interest to the HVAC Component, the security
interests granted to the HVAC Provider pursuant to the HVAC Services Agreement
(i) constitute as to personal property included in the HVAC Component and, with
respect to subsequently acquired personal property included in the HVAC
Component, will constitute a perfected security interest under the UCC and/or
other applicable law and (ii) have, and, with respect to such subsequently
acquired property, will have been perfected under the UCC and/or other
applicable law as aforesaid, superior priority and rights than the rights of any
third Persons now existing or hereafter arising whether by way of mortgage,
lien, security interest, encumbrance, assignment or otherwise, subject to the
rights and priorities of Permitted Liens. All such action as is necessary has
been taken to establish and perfect the Secured Parties' and (to the extent of
the Company's right, title and interest to the HVAC Component) the HVAC
Provider's respective rights in and to the Project Security (or, in the case of
the HVAC Provider, the HVAC Component), including any recording, filing,
registration, giving of notice or other similar action. As of the Financing
Date, no filing, recordation, re-filing or re-recording other than those listed
on Exhibit P is necessary to perfect and maintain the perfection of the
interest, title or Liens of the Security Documents and (to the extent of the
Company's right, title and interest to the HVAC Component) the HVAC Services
Agreement, and on the Financing Date all such filings or recordings will have
been made except for any filings or recordings for Liens as to which Title
Insurer has issued or committed to issue a title policy acceptable to the
Funding Agents. The Company has properly delivered or caused to be delivered to
the Disbursement Agent all Project Security that requires perfection of the Lien
and security interest described above by possession.
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(b) 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 Company of the Liens purported to be
created in favor of the Secured Parties and the HVAC Provider pursuant to any of
the Security Documents and the HVAC Services Agreement, respectively, or (ii)
the exercise by the Disbursement Agent, the other Secured Parties and the HVAC
Provider of any rights or remedies in respect of any Project Security and the
HVAC Component, respectively (whether specifically granted or created pursuant
to any of the Security Documents or created or provided for by applicable law),
except for filings or recordings contemplated by Section 4.8(a) above or as set
forth on Exhibit P.
(c) Except such as may have been filed in favor of the Funding
Agents as contemplated by Section 4.8(a) above or as set forth on Exhibit P, no
effective UCC financing statement, fixture filing or other instrument similar in
effect covering all or any part of the Project Security or the HVAC Component is
on file in any filing or recording office.
(d) All information supplied to the Disbursement Agent and the
Funding Agents by or on behalf of the Company with respect to any of the Project
Security and the HVAC Component (in each case taken as a whole with respect to
the HVAC Component and any particular Project Security) is accurate and complete
in all material respects.
4.9 Existing Defaults. There is no Potential Event of Default or Event
of Default under any of the Operative Documents.
4.10 Taxes.
4.10.1 The Company has filed, or caused to be filed, all tax and
informational returns that are required to have been filed by it in any
jurisdiction, and has paid all taxes shown to be due and payable on such returns
and all other taxes and assessments payable by it, to the extent the same have
become due and payable (other than those taxes that (a) it is contesting in good
faith and by appropriate proceedings, with adequate, segregated reserves
established for such taxes or (b) failure to pay the same could not reasonably
be expected to have a Material Adverse Effect or to impair the respective
interests of the Lenders in the Project Security) and, to the extent such taxes
are not due, has established reserves therefor by allocating, in the Summary
Anticipated Cost Report, amounts that are adequate for the payment thereof and
are required by generally accepted accounting principles.
4.10.2 The Company has not incurred any material tax liability in
connection with the Project or the other transactions contemplated by the
Operative Documents which has not been disclosed in writing to the Funding
Agents.
4.11 Contingent Liabilities. The Company has no material contingent
liabilities or obligations except those authorized under or contemplated by the
Operative Documents and not prohibited by the Financing Agreements.
4.12 Business, Debt, Contracts, Etc. Neither VCR nor GCCLLC has conducted
any business other than the business contemplated by the Operative Documents.
The Company has no outstanding Debt other than Debt incurred under the Financing
Agreements or permitted under the Financing Agreements and has no other
liabilities other than those incurred under the Operative Documents or permitted
under the Financing Agreements, and is not a party to or bound by any contract
other than as contemplated by the Operative Documents to which the Company is a
party and those contracts permitted under this Agreement.
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4.13 Representations and Warranties. As of the Financing Date (in each
case except to the extent related to a different date), all representations and
warranties of the Company, Adelson and Interface Holding, Mall Intermediate
Holding, Lido Intermediate Holding Company, LLC, and, to the Company's
knowledge, HVAC Provider, Construction Manager, Direct Construction Guarantor,
Indirect Construction Guarantor, Treadway, Project Architect, FCMI and each
other Major Contractor and each other party (other than the Company) to a
Material Project Document contained in the Operative Documents are true and
correct in all material respects (unless the failure of any such representation
or warranty could not reasonably be expected to have a Material Adverse Effect)
and the Company hereby confirms each such representation and warranty of the
Company with the same effect as if set forth in full herein.
4.14 Environmental Laws.
4.14.1 Except as set forth in Exhibit R-2 (as in effect from time to
time): (a) Neither the Company nor any Affiliate of the Company is or has in the
past been in violation of any Environmental Law which violation could reasonably
be expected to result in any material liability to the Company or its properties
and assets or in an inability of the Company to perform its obligations under
the Operative Documents; (b) neither the Company nor any Affiliate of the
Company nor, to the knowledge of the Company, any third party, has used,
released, discharged, generated, manufactured, produced, stored, or disposed of
in, on, under, or about the Site, Improvements or Site Easements or transported
thereto or therefrom, any Hazardous Substances that could reasonably be expected
to subject any Funding Agent, the Mortgage Note Holders, the Disbursement Agent,
any Lender or the Company to any material liability under any Environmental Law;
(c) there are no underground tanks and no Hazardous Substances used, stored or
present at, on or near the Site, Improvements or the Site Easements except as
disclosed in the Phase I Report and (d) to the knowledge of the Company after
due inquiry, there is or has been no condition, circumstance, action, activity
or event that could reasonably form the basis of any violation of, or any
material liability to any Funding Agent, the Mortgage Note Holders, the
Disbursement Agent, any Lender or the Company under, any Environmental Law.
4.14.2 Except as set forth on Exhibit R-1 or Exhibit R-2 (as in
effect from time to time), there is no pending or, to the knowledge of the
Company, threatened, action, proceeding, investigation or inquiry by any
Governmental Instrumentality or any non-governmental third party with respect to
the presence or Release of Hazardous Substances in, on, from or to the Site,
Improvements or Site Easements.
4.14.3 Except as set forth on Exhibit R-2 (as in effect from time to
time), the Company has no knowledge of any past or existing violations of any
Environmental Laws by any Person relating in any way to the Site, Improvements
or Site Easements. Except as set forth in Exhibit R-2 (as in effect on the
Financing Date), the Company has been issued and will maintain all required
Permits relating to any Environmental Law. Except as set forth in Exhibit R-2
(as in effect from time to time), the Company has received no complaint, order,
directive, citation or notice from any Governmental Instrumentality with respect
to any Environmental Law.
4.14.4 None of the matters disclosed on Exhibit R-1 or Exhibit R-2
(as in effect from time to time) could reasonably be expected to have a Material
Adverse Effect.
4.15 Utilities. All utility services necessary for the construction and
the operation of the Project for its intended purposes are or will be available
at the Site as and when required on commercially reasonable terms.
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4.16 In Balance Requirement. As of each Advance Date (a) the Unallocated
Contingency Balance equals or exceeds the Required Minimum Contingency and (b)
after giving effect to the requested Advance, the Available Funds equal or
exceed the Remaining Costs.
4.17 Sufficiency of Interests and Project Documents.
4.17.1 VCR owns the Site and the Site Easements in fee simple.
GCCLLC has and, until the earlier to occur of the Mall Release Date and the Mall
Parcel Creation Date, will have, good leasehold title to the Mall and the Mall
Easements. From and after the Mall Parcel Creation Date and until the Mall
Release Date GCCLLC will own the Mall and the Mall Easements in fee simple. From
and after the Mall Release Date, Mall I LLC will (a) if the Mall Parcel Creation
Date has occurred and from and after such occurrence, own the Mall and the Mall
Easements in fee simple and (b) if the Mall Parcel Creation Date has not
occurred and until such occurrence, have good leasehold title to the Mall and
the Mall Easements. Other than those services to be performed and materials to
be supplied that can be reasonably expected to be commercially available when
and as required, the Company owns all of the property interests and has entered
into all 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.
4.17.2 The HVAC Ground Lease creates a valid and subsisting
leasehold estate in the land and the improvements covered thereby, subject only
to Permitted Liens. Except for the rights of the HVAC Provider in and to the
HVAC Component, the Company has not granted any rights in or to the HVAC
Component to any Person and the Company has no knowledge of any rights of any
Person to the HVAC Component.
4.17.3 Each of the Funding Agents has received a true, complete and
correct copy of each of the Project Documents in effect or required to be in
effect as of the date this representation is made or deemed made (including all
exhibits, schedules, side letters and disclosure letters referred to therein or
delivered pursuant thereto, if any). A list of all Project Documents entered
into as of the Financing Date is attached hereto as Exhibit U.
4.17.4 All conditions precedent to the obligations of the respective
parties (other than the Company) under the Project Documents have been
satisfied, except for such conditions precedent (a) the failure of which to be
satisfied could not reasonably be expected to have a Material Adverse Effect or
(b) which by their terms cannot be met until a later stage in the construction
or operation of the Project, and the Company has no reason to believe that any
such condition precedent (the failure of which to be satisfied could reasonably
be expected to have a Material Adverse Effect) cannot be satisfied on or prior
to the appropriate stage in the construction or operation of the Project.
4.18 Intellectual Property. The Company owns or has the right to use all
patents, trademarks, permits, service marks, trade names, copyrights,
franchises, formulas, licenses and other rights with respect thereto and has
obtained assignment of all leases, all of which are necessary for the operation
of its business, except where failure to obtain such rights could not reasonably
be expected to result in a Material Adverse Effect. Nothing has come to the
attention of the Company to the effect that any product, process, method,
substance, part or other material presently contemplated to be sold by or
employed by the Company in connection with its business will infringe any
license or other right owned by any other Person.
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4.19 Project Budget; Summary Anticipated Cost Report.
4.19.1 The Project Budget (a) is, to the Company's knowledge as of
the Financing Date, based on reasonable assumptions as to all legal and factual
matters material to the estimates set forth therein, (b) as of the Financing
Date is consistent with the provisions of the Operative Documents and the
Financing Agreements in all material respects, (c) has been and will be prepared
in good faith and with due care, (d) as of the Financing Date sets forth, for
each Line Item, the total costs anticipated to be incurred through Final
Completion, (e) fairly represents the Company's expectation as to the matters
covered thereby as of its date and (f) as of the Financing Date sets forth a
total amount of Project Costs, including contingencies, which is equal to the
Available Funds. The Construction Manager has, as contemplated by Section 6.4 of
the Construction Management Agreement, 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 (including the detailed
schedules thereto) reflects such allocation.
4.19.2 The Summary Anticipated Cost Report (as in effect from time
to time):
(a) sets forth in column 3 thereof the amount allocated to
each Line Item Category pursuant to the Project Budget then in effect;
(b) sets forth in column 7 thereof, for the Construction
Period Interest Line Item Category, the total amount of interest anticipated to
be accrued on the Facilities (other than the HVAC Commitment Facility), the
Subordinated Notes and the Approved Equipment Funding Commitments through the
anticipated Opening Date;
(c) 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 not reflected in
the Project Budget); and
(d) is true and correct in all material respects.
4.19.3 The Component Specific Anticipated Cost Reports and Element
Specific Anticipated Cost Reports accurately reflect the detail underlying the
Summary Anticipated Cost Report, segregated by each Construction Component and
element of the Project, respectively, described therein.
4.19.4 The Component Specific Anticipated Cost Report for the HVAC
Component sets forth in column 7 thereof, an aggregate amount that is not less
than the total amount of the commitment under the HVAC Commitment Facility.
4.19.5 The Anticipated Cost Report (as in effect from time to time)
sets forth in column 7 thereof, for each Line Item other than the "unallocated
contingency" and the "Bovis contingency" Line Items, an amount no less than the
total anticipated costs to be incurred by the Company from the commencement
through the completion of the work contemplated by such Line Item, as determined
by the Company and approved by the Construction Consultant in the Construction
Consultant's certificate dated the date on which this representation is made or
deemed made;
4.19.6 The Anticipated Cost Report (as in effect from time to time)
sets forth in column 7 thereof, for each of the "mall leasing commissions
reserve" and the "mall tenant improvements reserve"
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Line Items an amount equal to the amount allocated to such Line Items in the
Project Budget then in effect.
4.20 Fees and Enforcement. Other than amounts that have been paid in full
or will have been paid in full by the Financing Date, no fees or taxes,
including without limitation stamp, transaction, registration or similar taxes,
are required to be paid for the legality, validity, or enforceability of this
Agreement or any of the other Operative Documents.
4.21 ERISA. Either (a) there are not ERISA Plans for the Company or any
member of the Controlled Group or (b) the Company and each member of the
Controlled Group have fulfilled their obligations (if any) under the minimum
funding standards of ERISA and the Code for each ERISA Plan in compliance in all
material respects with the currently applicable provisions of ERISA and the Code
and have not incurred any liability to the PBGC or an ERISA Plan under Title IV
of ERISA (other than liability for premiums due in the ordinary course).
Assuming that the credit extended hereunder does not involve the assets of any
ERISA Plans for the Company or any member of the Controlled Group, neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will involve a "prohibited transaction" within the meaning
of 406 of ERISA or section 4975 of the Code which is not exempt under Section
408 of ERISA or under Section 4975(d) of the Code.
4.22 Subsidiaries and Beneficial Interest. LVSI has no direct subsidiaries
and does not directly own the whole or any part of the issued share capital or
other direct ownership interest of any company or corporation or other Person
other than VCR, Lido Casino Resort, MM, Inc., and Mall I MM. VCR has no direct
subsidiaries and does not directly own the whole or any part of the issued share
capital or other direct ownership interest of any company or corporation or any
other Person other than Mall Intermediate Holding, Lido Intermediate Holding
Company, LLC and GCCLLC. GCCLLC, Mall I LLC, and Lido Casino Resort, LLC have no
subsidiaries and do not own the whole or any part of the issued share capital or
other ownership interest of any other company or corporation or other Person.
Mall Intermediate Holding and Lido Intermediate Holding Company, LLC have no
direct subsidiaries and do not directly own the whole or any part of the issued
share capital or other direct ownership interest of any company or corporation
or other Person other than Mall Holding and Lido Casino Resort Holding Company,
LLC, respectively. Mall Holding and Lido Casino Resort Holding Company, LLC have
no direct subsidiaries and do not directly own the whole or any part of the
issued share capital or other direct ownership interest of any company or
corporation or other Person other than Mall I LLC and Lido Casino Resort, LLC,
respectively.
4.23 Labor Disputes and Acts of God. Neither the business nor the
properties of the Company, Adelson, Mall Intermediate Holding, Lido Resort
Intermediate Holding Company, LLC, or Interface Holding nor, to the knowledge of
the Company, HVAC Provider, Construction Manager, Direct Construction Guarantor,
Indirect Construction Guarantor, Treadway or any other party to a Material
Project Document is affected by any fire, explosion, accident, strike, lockout
or other labor dispute (except as set forth in Exhibit R-3 as in effect on the
Financing Date), drought, storm, hail, earthquake, embargo, act of God or of the
public enemy, or other casualty or event of force majeure, that could reasonably
be expected to have a Material Adverse Effect.
4.24 Liens. Except for Permitted Liens, the Company has not secured or
agreed to secure any Debt by any Lien upon any of its present or future revenues
or assets or capital stock. The Company does not have outstanding any Lien or
obligation to create Liens on or with respect to any of its properties or
revenues, other than Permitted Liens and as provided in the Security Documents.
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4.25 Title. Except as set forth on Schedule 4.25, each of LVSI, VCR and
GCCLLC owns and has good, legal and beneficial title to the property, assets and
revenues of the Company on which it purports to grant Liens pursuant to the
Security Documents free and clear of all Liens, except Permitted Liens.
4.26 Investment Company Act. Neither LVSI nor VCR nor GCCLLC nor any of
their respective Affiliates is an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act.
4.27 Project Schedule. To the Company's knowledge, the Project Schedule
accurately specifies in summary form the work that the Company and the
Construction Manager propose to complete in each calendar quarter from the
Financing Date through the Final Completion of the Project, all of which can be
expected to be achieved.
4.28 Proper Subdivision. The Site has been properly subdivided or entitled
to exception therefrom, and for all purposes the Site may be mortgaged, conveyed
and otherwise dealt with as separate legal lot or parcel. The parties
acknowledge, however, that this Agreement contemplates the creation of a
separate legal parcel for the Mall Space and the Phase II Land.
4.29 Offices, Location of Collateral.
4.29.1 The chief executive office or chief place of business (as
such term is used in Article 9 of the Uniform Commercial Code as in effect in
the State of Nevada from time to time) of the Company is located at 3355 Las
Vegas Boulevard South, Las Vegas, Nevada. LVSI's federal employer identification
number is 04-3010100. VCR's federal employer identification number is
86-0863398. GCCLLC's federal employer identification number is 88-0377973.
4.29.2 All of the Project Security (other than the Accounts and
general intangibles), including the Trust Estate (as defined in each Deed of
Trust) is, or when installed pursuant to the Project Documents will be, located
on the Site.
4.29.3 The Company's books of accounts and records are located at
3355 Las Vegas Boulevard South, Las Vegas, Nevada.
4.30 Regulation U, Etc. Neither LVSI nor VCR nor GCCLLC is engaged
principally, or as one of its principal activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (as defined in
Regulations G, T, U or X of the Federal Reserve Board), and no part of the
proceeds of the Advances or the revenues from the Project will be used by LVSI,
VCR or GCCLLC to purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying any such margin stock.
4.31 Governmental Regulation. Neither the Company nor any of the
Subsidiaries of the entities comprising the Company 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 Financing Agreements complies with all applicable
provisions of the Nevada Gaming Laws.
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ARTICLE 5 - AFFIRMATIVE COVENANTS
The Company covenants and agrees, with and for the benefit of the
Funding Agents, the Lenders and the Disbursement Agent that until this Agreement
is terminated pursuant to Section 11.21 hereof, it will:
5.1 Use of Proceeds; Repayment of Indebtedness.
5.1.1 Proceeds. Deposit (a) all amounts required pursuant to Section
5.9.1 into the Company's Funds Account, (b) all amounts required pursuant to
Section 5.9.2 into the Company's Funds Account or, at the Company's option, the
Guaranty Deposit Account, (c) all Loss Proceeds and all amounts released from
the Lien Protection Account into the Company's Funds Account, (d) all revenues
received by the Company through sales of goods or rendering of services in the
ordinary course of business prior to the Final Completion Date into the
Operating Account, (e) all amounts required pursuant to Section 2.2.3(b) into
the Company's Funds Account, (f) all amounts required pursuant to Section 2.3.12
into the Pre-Completion Revenues Account, (g) all funds received by the Company
prior to the Final Completion Date (other than those permitted or required to be
deposited elsewhere) into the Company's Funds Account, and (h) all damages,
liquidated or otherwise, and all other amounts paid to the Company prior to the
Final Completion Date pursuant to the Construction Management Agreement, the
Direct Construction Guaranty, the Indirect Construction Guaranty, the Contracts
and the other Project Documents, (i) first, into the Guaranty Deposit Account in
an amount up to the aggregate of all amounts previously withdrawn from the
Guaranty Deposit Account and deposited in the Company's Funds Account pursuant
to section 5.9.1 and (ii) then, into the Company's Funds Account. The Company
shall not, until the Final Completion Date, open or establish any bank, deposit
or any other accounts at any financial institution other than the accounts
provided for herein; provided that on or after the Opening Date, the Company may
establish an account to hold the proceeds of any Approved Equipment Funding
Commitments.
5.1.2 Project Costs. Apply all proceeds described in Section 5.1.1
above and all other amounts in the Accounts only to pay Project Costs in
accordance with the terms of this Agreement. Without limiting the generality of
the foregoing, the Company shall:
(a) apply the proceeds of HC/Mall Component Funding Sources
and the HVAC Commitment Facility only to pay Project Costs permitted pursuant to
the allocation procedures of Section 2.6;
(b) apply the proceeds of Approved Equipment Funding
Commitments and the Bank Revolving Facility (to the extent set forth in Section
2.2.3(b)) only to the payment of Project Costs allocated to the Equipment
Component;
(c) apply amounts in the HC/Mall Component Cash Management
Sub- Account and the HVAC Component Cash Management Sub-Account only to pay
Project Costs allocated to the HC/Mall Component and the HVAC Component,
respectively, as set forth in the Project Budget; and
(d) incur and pay Pre-Opening Expenses only after the required
Benchmarks for such Pre-Opening Expenses have been achieved in accordance with
the Construction Benchmark Schedule attached hereto as Exhibit J.
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5.1.3 Repayment of Indebtedness. 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 the repayment of which is limited by any term of any Financing
Agreement, repay subject to such limitation.
5.2 Existence, Conduct of Business, Properties, Etc.. Except as otherwise
expressly permitted (a) under this Agreement or (b) under each of Section 7.7 of
the Bank Credit Agreement and Section 6.6 of the Interim Mall Credit Agreement,
(i) maintain and preserve its existence and all rights, privileges and
franchises necessary in the normal conduct of its business, and (ii) engage only
in the businesses contemplated or permitted by the Financing Agreements and the
Operative Documents; provided, however, that from and after the transfer of the
Mall to Mall I LLC in accordance with Section 5.16(c), GCCLLC may be liquidated,
dissolved and/or merged out of existence.
5.3 Diligent Construction of the Project.
(a) 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.
(b) At such time as the Company believes that the Project is within
six months from satisfying the Opening Conditions, request the Construction
Consultant to issue a certificate to such effect. Should the Construction
Consultant concur with the Company's determination (which concurrence shall not
be unreasonably withheld), the Construction Consultant shall promptly issue a
certificate in the form of Exhibit L-1 attached hereto.
5.4 Compliance with Legal Requirements. Promptly and diligently (a) own,
construct, maintain and operate the Project in compliance in all material
respects with all applicable Legal Requirements, including, but not limited to
Environmental Laws and (b) procure, maintain and comply, or cause to be
procured, maintained and complied with, in all material respects, all Permits
required for any ownership, construction, financing, maintenance or operation of
the Project or any part thereof at or before the time each such Permit becomes
necessary for the ownership, construction, financing, maintenance or operation
of the Project, as the case may be, as contemplated by the Operative Documents,
except that the Company may, at its expense, contest by appropriate proceedings
conducted in good faith the validity or application of any such Legal
Requirements, provided that, (i) none of the Funding Agents, the Disbursement
Agent, any of the Lenders or the Company would be subject to any criminal
liability for failure to comply therewith and (ii) all proceedings to enforce
such Legal Requirements against the Funding Agents, the Disbursement Agent, any
of the Lenders, the Company, or the Project or any part of any of them, shall
have been duly and effectively stayed during the entire pendency of such
contest, except where failure to procure such stay could not reasonably be
expected to result in a Material Adverse Effect.
5.5 Books, Records, Access. Maintain adequate books, accounts and records
with respect to the Company and the Project in compliance in all material
respects with the regulations of any Governmental Instrumentality having
jurisdiction thereof, and, with respect to financial statements, in accordance
with generally accepted accounting principles consistently applied. Subject to
reasonable safety requirements and the rights of other Persons, the Company
shall, at its cost and expense, permit employees or agents of the Funding Agents
and the Construction Consultant at any reasonable times and upon reasonable
prior notice to inspect the Project, to examine or audit all of the Company's
books, accounts and records pertaining or related to the Project, to make copies
and memoranda thereof and, with respect to any Environmental Matters, to perform
any tests or studies and prepare any reports
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reasonably required by the Funding Agents. For all expenditures with respect to
which Advances are made, the Company shall retain, until at least five (5) years
after each Funding Agent has received the report specified in Section 5.7.1 for
the financial year in which the last Advance was made by such Funding Agent, all
records (contracts, orders, invoices, bills, receipts and other documents)
evidencing such expenditures.
5.6 Financial Statements.
5.6.1 Provide to the Funding Agents:
(a) As soon as available and in any event within ninety (90)
days after the close of each fiscal year commencing with the first fiscal year
ended after the Financing Date, audited consolidated and consolidating financial
statements of LVSI and its Subsidiaries including statements of equity, balance
sheets as of the close of such year, income and expense statements,
reconciliations of capital accounts and statements of sources and uses of funds,
all prepared in accordance with generally accepted accounting principles
consistently applied and certified by an Officer of each such Person.
(b) As soon as available and in any event within forty-five
(45) days after the end of each of the first three quarterly accounting periods
of their respective fiscal years commencing with the first quarter ending after
the Financing Date, unaudited consolidated and consolidating financial
statements of LVSI and its Subsidiaries including, without limitation, unaudited
consolidated and consolidating balance sheets of LVSI and its Subsidiaries as of
the last day of such quarterly period, the related statements of income and cash
flows for such quarterly period and (in the case of second, third and fourth
quarterly periods) for the portion of the fiscal year ending with the last day
of such quarterly period, setting forth in each case in comparative form
corresponding unaudited figures from the preceding fiscal year.
5.6.2 Each time the consolidated and consolidating financial
statements of LVSI and its Subsidiaries are delivered under this Section 5.6, a
certificate of LVSI signed by an Authorized Representative of LVSI, shall be
delivered along with such financial statements, certifying that such officer has
made or caused to be made a review of the transactions and financial condition
of LVSI and its Subsidiaries during the relevant fiscal period and that such
review has not, to the best of such Authorized Representative's knowledge,
disclosed the existence of any event or condition which constitutes a Potential
Event of Default or an Event of Default under any Financing Agreement to which
LVSI or its Subsidiaries is a party, or if any such event or condition existed
or exists, the nature thereof and the corrective actions that LVSI or such
Subsidiary, as the case may be, has taken or proposes to take with respect
thereto, and also certifying that LVSI or such Subsidiary, as the case may be,
is in compliance in all material respects with its obligations under this
Agreement and each other Financing Agreement to which it is a party or, if such
is not the case, stating the nature of such non-compliance and the corrective
actions which LVSI or such Subsidiary, as the case may be, has taken or proposes
to take with respect thereto.
5.7 Reports; Cooperation.
5.7.1 Prior to the Final Completion Date, deliver to the Funding
Agents, the Construction Consultant and the Disbursement Agent within thirty
(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 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
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other information which any Funding Agent or the Disbursement Agent may
reasonably request including information and reports reasonably requested by the
Construction Consultant.
5.7.2 Prior to the Mall Release Date, deliver to the Funding Agents
and the Disbursement Agent within thirty (30) days of 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.
5.7.3 Promptly after its receipt thereof, deliver to the Funding
Agents, the Construction Consultant and the Disbursement Agent all progress
reports provided by the Construction Manager pursuant to the Construction
Management Agreement and such additional information as the Funding Agents or
the Disbursement Agent may reasonably request.
5.8 Notices. Promptly, upon acquiring notice or giving notice, or
obtaining knowledge thereof, as the case may be, provide to the Disbursement
Agent, the Construction Consultant and the Funding Agents written notice of:
5.8.1 Any Event of Default or Potential Event of Default of which it
has knowledge, specifically stating that an Event of Default or Potential Event
of Default has occurred and describing such Event of Default or Potential Event
of Default and any action being taken or proposed to be taken with respect to
such Event of Default or Potential Event of Default.
5.8.2 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 the Company incapable of, or prevent the Company from
(a) achieving the Completion Date on or before the Outside Completion Deadline
or (b) meeting any material obligation of the Company under the Construction
Management Agreement and the other Material Project Documents as and when
required thereunder.
5.8.3 Any termination or event of default or notice thereof under
any Material Project Document.
5.8.4 Any (a) fact, circumstance, condition or occurrence at, on, or
arising from, the Site, that results in noncompliance with any Environmental Law
that has resulted or could reasonably be expected to result in a Material
Adverse Effect, and (b) pending or, to the Company's knowledge, threatened,
Environmental Claim against the Company, Construction Manager, any Contractor or
any Subcontractor 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.
5.8.5 Any change in the Authorized Representatives of the Company,
and such notice shall include a certified specimen signature of any new officer
or director so appointed and, if requested by any Funding Agent or the
Disbursement Agent, satisfactory evidence of the authority of such new
Authorized Representative.
5.8.6 Any proposed material change in the nature or scope of the
Project or the business or operations of the Company.
5.8.7 Any notice of any schedule delay delivered under the
Construction Management Agreement and all remedial plans and updates thereof.
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5.8.8 Any other event or development which could reasonably be
expected to have a Material Adverse Effect.
5.8.9 Promptly upon any Person becoming a Subsidiary of any of the
entities comprising the Company, a written notice setting forth with respect to
such Person the date on which such Person became a Subsidiary of any of the
entities comprising the Company.
5.8.10 Any payment made by the Construction Manager, the Direct
Construction Guarantor or the Indirect Construction Guarantor of amounts
previously committed by any such Person and which were included in the
calculation of Available Funds pursuant to clause (vi) of the definition
thereof.
5.9 Company Equity.
5.9.1 (a) From time to time deposit or cause to be deposited into
the Company's Funds Account, in cash, amounts sufficient so that the Liquid
Available Funds shall at all times be equal to or greater than seventy-five
percent (75%) of the Remaining Costs, (b) from time to time from the Mall
Release Date through the Final Completion Date, deposit or cause to be deposited
into the Mall Retainage/Punchlist Account, in cash, amounts sufficient so that
the amounts on deposit therein shall equal 125% of the Mall Punchlist Completion
Amount, and (c) upon the occurrence of an Event of Default or a Death Event (as
defined in the Adelson Completion Guaranty) or Bankruptcy (as defined in the
Mortgage Notes Indenture Fee Deed of Trust) of Adelson, deposit or cause to be
deposited in the Company's Funds Account, in cash, an amount equal to the amount
of funds then on deposit in the Guaranty Deposit Account. In the event that the
Company fails to so deposit or cause to be deposited such funds, the
Disbursement Agent shall be entitled to draw such funds from the Guaranty
Deposit Account.
5.9.2 At such times, if ever, as (a) the Remaining Costs exceed the
Available Funds or (b) the Required Minimum Contingency exceeds the Unallocated
Contingency Balance, then the Company shall deposit or cause to be deposited in
the Company's Funds Account or, at the Company's election, the Guaranty Deposit
Account, in cash, funds in an amount equal to the amount of either such excess.
5.10 Indemnification; Costs and Expenses. Pay all amounts required to be
paid by the Company pursuant to Section 11.15.
5.11 Project Documents and Permits. Deliver to the Disbursement Agent, the
Funding Agents and the Construction Consultant promptly, but in no event later
than ten (10) days after the receipt thereof by the Company, copies of (a) all
Material Project Documents and Permits obtained or entered into by the Company
after the Financing Date, (b) any amendment, supplement or other modification to
any Permit received by the Company after the Financing Date and (c) all notices
relating to the Project or received by or delivered to the Company from any
Governmental Instrumentality.
5.12 Security Interest in Newly Acquired Property.
(a) If the Company shall at any time acquire any interest in
property not covered by the Security Documents (other than property in which,
pursuant to the Financing Agreements, the Company is not required to grant a
security interest in favor of any Secured Party) or enter into a Project
Document, promptly upon such acquisition or execution, execute, deliver and
record a supplement to the Security Documents, reasonably satisfactory in form
and substance to each Funding Agent, if any, who,
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pursuant to the Financing Agreements, is entitled to have a security interest in
such property, subjecting such interests to the lien and security interests
created by the applicable Security Documents (with the priority contemplated
thereby in favor of each Secured Party) and (if the Project Document is a
Material Project Document) deliver to the Disbursement Agent, on behalf of the
Secured Parties, consents to assignment, substantially in the form of Exhibit S
(with such changes thereto as are reasonably acceptable to the Disbursement
Agent) of any such Project Document.
(b) If the Company shall at any time acquire any interest in
property comprising the HVAC Component which is not covered by the security
interest granted in the HVAC Services Agreement (other than property which,
pursuant to the HVAC Services Agreement, the Company is not required to grant a
security interest in favor of the HVAC Provider), promptly upon such
acquisition, execute, deliver and record a supplement to the HVAC Services
Agreement, reasonably satisfactory in form and substance to the HVAC Provider,
subjecting such interests to the lien and security interest created by the HVAC
Services Agreement.
5.13 Plans and Specifications. Provide to the Disbursement Agent and the
Construction Consultant copies of, and maintain at the Site a complete set of
Plans and Specifications, as in effect from time to time.
5.14 Construction Consultant.
(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.
Without limiting the generality of the foregoing, the Company 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 Consultant, (ii) authorize the Contractors and the Subcontractors
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 out of the
Advances made hereunder all amounts required hereunder and under the
Construction Consultant Engagement Agreement.
(c) In addition to any other consultation required hereunder,
following the end of each quarter, upon the reasonable request of any Funding
Agent, consult with any such Person regarding any adverse event or condition
identified in any report prepared by the Construction Consultant.
(d) Deliver to the Construction Consultant, no less than every
fifteen (15) days an Anticipated Cost Report, as in effect from time to time.
5.15 Proper Legal Forms. Take all action within its control required or
advisable to ensure that each of the Operative Documents is in proper legal
form.
5.16 Preserving the Project Security.
(a) Subject to Sections 5.16(b), 5.16(c) and 5.16(d) below,
undertake all actions which are necessary or appropriate in the reasonable
judgment of the Funding Agents to (i) maintain the
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Secured Parties' respective security interests under the Security Documents in
the Project Security in full force and effect at all times (including the
priority thereof), and (ii) preserve and protect the Project Security and (to
the extent of the Company's right, title and interest in the HVAC Component) the
HVAC Component and protect and enforce the Company's rights and title and the
respective rights of the Secured Parties and the HVAC Provider to the Project
Security and the HVAC Component, respectively, including, without limitation,
the making or delivery of all filings and recordations, the payments of fees and
other charges, the issuance of supplemental documentation, the discharge of all
claims or other liens other than Permitted Liens adversely affecting the
respective rights of the Secured Parties and the HVAC Provider to and under the
Project Security and the HVAC Component, respectively, and the publication or
other delivery of notice to third parties.
(b) Take all actions and do all things as may be reasonably
necessary to cause the Mall to become a separate legal parcel under Nevada
Revised Statutes, Chapter 278 (the "Mall Parcel") as promptly as practicable.
The Company shall, upon creation of the Mall Parcel, deliver a notice to such
effect to the Disbursement Agent, the Bank Agent, the Interim Mall Lender and
the Mortgage Notes Indenture Trustee. Promptly thereafter (and in any event no
later than 10 days thereafter), at the Company's sole cost and expense, in
substantially concurrent transactions:
(i) VCR shall, in accordance with the Mall Lease, transfer all
of its right, title and interest in and to the Mall Parcel to GCCLLC (or,
if after the Mall Release Date, to Mall I LLC), by executing, delivering
and recording at the Clark County, Nevada, Recorder's Office a grant,
bargain and sale deed in the form of Exhibit V-1 attached hereto;
(ii) VCR and LVSI shall execute such bills of sale, assignment
agreements and other documents as may be necessary to sell, assign,
transfer and convey to GCCLLC all of their respective rights, titles and
interests to the Mall Assets;
(iii) VCR and GCCLLC (or, if after the Mall Release Date, Mall
I LLC) shall terminate the Mall Lease;
(iv) the Interim Mall Leasehold Deed of Trust shall be amended
to reflect the release of the Mall Lease from the collateral encumbered
thereby (leaving the tenant's interests under the Master Lease for
Additional Billboard Space as the only tenant's leasehold interest
encumbered thereby) and shall be re-recorded at the Clark County, Nevada
Recorder's Office;
(v) the Interim Mall Space Fee Deed of Trust shall be amended
to reflect the legal description of the Mall Parcel and the fee ownership
therein of GCCLLC and re-recorded at the Clark County, Nevada Recorder's
Office;
(vi) the Bank Leasehold Deed of Trust and the Mortgage Notes
Indenture Leasehold Deed of Trust shall be amended to reconvey the Mall
Space (specifically excluding the space covered by the Billboard Lease
which is located within the Hotel/Casino Space) from their respective
Liens and re-recorded at the Clark County, Nevada Recorder's Office;
(vii) each of the Bank Fee Deed of Trust and the Mortgage
Notes Indenture Fee Deed of Trust shall be amended to reconvey the Mall
Parcel from their respective Liens and shall be re-recorded at the Clark
County, Nevada, Recorder's Office;
(viii) GCCLLC shall execute, acknowledge, deliver and record
at the Clark County, Nevada Recorder's Office the Bank Mall Parcel Fee
Deed of Trust and the Mortgage
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Notes Indenture Mall Parcel Fee Deed of Trust encumbering GCCLLC's
interest in the Mall Parcel, and in connection therewith the Bank Agent
and the Mortgage Notes Indenture Trustee shall execute a subordination
agreement reasonably satisfactory to the Interim Mall Lender to reflect
that (A) as to the tenant's interests under the Master Lease for
Additional Billboard Space, the Interim Mall Leasehold Deed of Trust (as
amended) shall have priority over the Bank Leasehold Deed of Trust (as
amended), and the Bank Leasehold Deed of Trust (as amended) shall have
priority over the Mortgage Notes Indenture Leasehold Deed of Trust (as
amended), and (B) as to the Mall Parcel, the Interim Mall Space Fee Deed
of Trust (as amended) shall have priority over the Bank Mall Fee Deed of
Trust (as amended), and the Bank Mall Fee Deed of Trust (as amended) shall
have priority over the Mortgage Notes Indenture Fee Deed of Trust (as
amended); and
(ix) substantially concurrently with the foregoing, and as a
condition precedent thereto, the Company shall deliver to the Bank Agent,
the Interim Mall Lender and the Mortgage Notes Indenture Trustee: (A) a
legal opinion from counsel reasonably acceptable to the Bank Agent and the
Interim Mall Lender to the effect that (1) the Mall Parcel has been
legally created as a separate legal parcel under Nevada Revised Statutes,
Chapter 278 and (2) that each of the deeds of trust described in clauses
(iv), (v), (vi), (vii) and (viii) above, as amended or rerecorded, if
applicable, are enforceable in accordance with their terms and are
effective to create the security interests described therein, and (iii)
such other legal opinions as the Bank Agent and the Interim Mall Lender
may reasonably request, each in form and substance reasonably satisfactory
to each such Funding Agent, and (B) endorsements, or commitments by the
Title Insurer to issue endorsements, in each case, in form and substance
satisfactory to the Bank Agent and the Interim Mall Lender, to the Bank
Agent's, the Interim Mall Lender's and Mortgage Notes Indenture Trustee's
respective Title Policies, insuring the continuing perfection and priority
of the respective Liens on the Project Security (after giving effect to
the amendments and re-recordations contemplated by this Section 5.16(b)).
(c) On the Mall Release Date, and subject to receipt by the
Disbursement Agent of documents and instruments satisfactory to the Disbursement
Agent in its sole discretion effecting the release by the lender under the
Tranche B Take Out Loan of LVSI, VCR and GCCLLC and each of their respective
Affiliates (other than Mall I LLC) from any and all further obligations under
the Tranche B Take Out Loan, then, at the Company's sole cost and expense, in
substantially concurrent transactions:
(i) in the event that the Mall Parcel Creation Date shall not
have occurred and the Mall Lease shall not have been terminated, GCCLLC
shall, in accordance with the Sale and Contribution Agreement, transfer
all of its right, title and interest in and to the Mall Lease and the
Master Lease for Additional Billboard Space to Mall I LLC;
(ii) in the event that the Mall Parcel Creation Date shall
have occurred, GCCLLC shall, in accordance with the Sale and Contribution
Agreement, transfer all of its right, title and interest in and to the
Mall Parcel and the Master Lease for Additional Billboard Space to Mall I
LLC;
(iii) VCR, LVSI and GCCLLC shall execute such bills of sale,
assignment agreements and other documents, in accordance with the Sale and
Contribution Agreement, as may reasonably be necessary to sell, assign,
transfer and convey to Mall I LLC all of their respective rights, titles,
and interests in and to the Mall Assets including (A) all warranties and
guaranties given by the Construction Manager and the Contractors and
Subcontractors with
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respect to the Mall and the Mall Assets and (B) the Mall Leasing
Commissions Reserve Account and the Mall Tenant Improvements Reserve
Account;
(iv) the Interim Mall Lender shall, in accordance with the
Sale and Contribution Agreement, and at the Company's expense, execute,
acknowledge and deliver to LVSI, VCR, the Bank Agent and the Mortgage
Notes Indenture Trustee such documents and instruments, including UCC-3
termination statements, as may reasonably be necessary to release LVSI,
VCR, GCCLLC and Intermediate Mall Holding, LLC and their respective assets
(after giving effect to the transfers contemplated by clauses (i), (ii)
and (iii) above) from any and all further Obligations to, and Liens in
favor of, the Interim Mall Lender under the Interim Mall Credit Agreement
and the Security Documents;
(v) each of the Bank Leasehold Deed of Trust, the Mortgage
Notes Leasehold Deed of Trust, the Bank Mall Parcel Fee Deed of Trust and
the Mortgage Notes Indenture Mall Parcel Fee Deed of Trust shall be
terminated, released and reconveyed by the Bank Agent and the Mortgage
Notes Indenture Trustee, as applicable;
(vi) each of the Bank Agent and the Mortgage Notes Indenture
Trustee shall, at the Company's expense, execute, acknowledge and deliver
to the Company and the Interim Mall Lender such documents and instruments,
including UCC-3 termination statements, as may reasonably be necessary to
release their respective liens on the Mall; and
(vii) the transfers and advances of funds set forth in Section
2.10(d) above shall be implemented.
(d) At such time as the Disbursement Agent has confirmed to its
reasonable satisfaction that each of the Phase II Release Conditions has been
satisfied, the Disbursement Agent shall give notice of such effect to the
Company, the Bank Agent and the Mortgage Notes Indenture Trustee. Upon receipt
of such notice, VCR shall be entitled to transfer all of its right, title and
interest in and to the Phase II Land to Lido Casino Resort, LLC by executing,
delivering and recording at the Clark County, Nevada, Recorder's Office a grant,
bargain and sale deed in Title Insurer's standard form but which (i)
specifically provides that the transfer implemented thereby is made subject to
the Cooperation Agreement and (ii) reserves unto VCR, as owner of the Phase I
Land, the easements burdening the Phase II Land pursuant to the terms of the
Cooperation Agreement. Simultaneously with the execution and delivery of such
grant, bargain and sale deed each of the Bank Agent and the Mortgage Notes
Indenture Trustee shall, at the Company's expense, execute, acknowledge and
deliver to the Company such documents and instruments, including UCC-3
termination statements, as may reasonably be necessary to release and/or
reconvey their respective Liens and interests in the Phase II Land. The Company
shall pay or cause to be paid all costs and expenses incurred in connection with
the transfer and release of the Phase II Land and the satisfaction of the Phase
II Release Conditions, including, but not limited to, title insurance premiums,
recording costs, and reasonable fees and expenses of counsel to the Funding
Agents.
5.17 Management Letters. Deliver to the Funding Agents and the
Disbursement Agent a copy of any "management letter" or other similar
communication received by the Company from the Reviewing Accountant in relation
to the Company's financial, accounting and other systems, management or
accounts.
5.18 Governmental and Environmental Reports. Deliver to the Funding
Agents, the Disbursement Agent and the Construction Consultant copies of all
reports required to be filed by the
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Company with any Governmental Instrumentality, including without limitation, any
reports with respect to Environmental Matters.
5.19 Insurance. Comply in all material respects with the insurance
requirements of Exhibit O.
5.20 Application of Insurance and Condemnation Proceeds. If any Event of
Loss shall occur with respect to the Project or any part thereof, the Company
shall (a) promptly upon discovery or receipt of notice thereof provide written
notice thereof to the Disbursement Agent, (b) diligently pursue all its rights
to compensation against all relevant insurers, reinsurers and/or Governmental
Instrumentalities, as applicable, in respect of such event and (c) comply with
all of its obligations under Articles XI and XII of the Cooperation Agreement.
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 Company hereunder (collectively, "Loss Proceeds") shall be applied as
provided in this Section 5.20. All Loss Proceeds shall be paid by the insurers,
reinsurers, Governmental Instrumentalities or other payors directly to the
Disbursement Agent for deposit in the Company's Funds Account. If any Loss
Proceeds are paid directly to the Company, any affiliate of the Company or any
Funding Agent or Lender by any insurer, reinsurer, Governmental Instrumentality,
"Trustee" (pursuant to and as defined in the Cooperation Agreement) or such
other payor, (i) such Loss Proceeds shall be received in trust for the
Disbursement Agent, (ii) such Loss Proceeds shall be segregated from other funds
of the Company or such other Person, and (iii) the Company or such other Person
shall pay (or, if applicable, the Company shall cause such of its affiliates to
pay) such Loss Proceeds over to the Disbursement Agent in the same form as
received (with any necessary endorsement) for deposit in the Company's Funds
Account. In the event that for a period of ninety (90) days after any Loss
Proceeds are deposited in the Company's Funds Account, the Company is not
permitted pursuant to the terms hereof to obtain Advances of such Loss Proceeds,
then (i) the amount of such proceeds that is reasonably allocable to the HVAC
Component shall be applied in accordance with the HVAC Services Agreement and
(ii) the Company shall use all other such proceeds to prepay the Bank Loans, the
Interim Mall Loan and the Mortgage Notes in accordance with the Bank Credit
Agreement, the Interim Mall Credit Agreement and the Mortgage Notes Indenture,
respectively, in each case, subject to the Intercreditor Agreement.
5.21 Buffer Zone Encroachments. Construct or cause to be constructed the
Hotel/Casino within the Hotel/Casino Space and the Mall within the Mall Space
(or, after the Mall Parcel Creation Date, the Mall Parcel); provided, however,
that the Hotel/Casino may encroach into the Mall Space and/or Mall Parcel and
the Mall may encroach into the Hotel/Casino Space so long as: (a) none of such
encroachments extend beyond the Buffer Zone Space and (b) the Company complies
with the provisions set forth in Section 6.2 in implementing any Scope Change
that causes such encroachment. Promptly after the Mall Release Date, the Company
shall implement such lot line adjustments as may be necessary to ensure that (i)
all portions of the Mall are located on a parcel owned by or leased to GCCLLC or
Mall I LLC or as to which either such entity has an easement, in each case, in
form and substance reasonably satisfactory to the Interim Mall Lender or, after
funding of the Tranche A Take Out Loan, the Tranche A Take Out Lender and (ii)
all portions of the Hotel/Casino are located on a parcel owned by VCR or as to
which VCR has an easement, in each case, in form and substance reasonably
satisfactory to the Bank Agent.
5.22 Compliance with Material Project Documents. The Company shall comply
duly and promptly, in all material respects, with its obligations, and enforce
all of its respective rights under all Material Project Documents, except where
the failure to comply or enforce such rights, as the case may be, could not
reasonably be expected to have a Material Adverse Effect.
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5.23 Title Insurer Escrow Agreement. On or promptly after the Financing
Date the Company shall use its diligent efforts to enter into an escrow
agreement (the "Title Insurer Escrow Agreement") with the Title Insurer and the
Disbursement Agent (acting on behalf of the Secured Parties), which Title
Insurer Escrow Agreement shall be in form and substance satisfactory to the Bank
Agent and the Interim Mall Lender. The Title Insurer Escrow Agreement shall set
forth the mechanics for handling Advances requested by the Company in order to
cover mechanics' and materialmen's liens which have been filed against the
Project and which the Company is disputing. The Bank Agent and the Interim Mall
Lender agree to cooperate with the Company and the Title Insurer in order to
finalize and approve the Title Insurer Escrow Agreement and to cause the
Disbursement Agent to execute the same.
5.24 Billboard Lease Space and Mall Space. The Company shall apply
reasonable efforts to determine the precise boundaries for the space covered by
the Billboard Lease in an expeditious manner, and in any event by the Mall
Release Date. Similarly, the Company shall determine the precise boundaries for
the Mall I Space by the Mall Release Date. In connection therewith, (a) the
Company and the Lenders shall amend their respective Security Documents to
reflect the precise boundaries of said spaces, and (b) the Company (at its sole
expense) shall provide the Lenders with appropriate endorsements to their
respective title insurance policies.
5.25 Utility Easement Modifications. The Company shall immediately
commence and diligently proceed to cause all utility or other easements that
would underlie, or interfere with, the construction or maintenance of the
improvements within the Project to be removed as expeditiously as possible. In
any event, the Company shall remove such easements before they interfere in any
material respect with the prosecution in accordance with the Project Schedule of
the work involved with the Project, and in any event, prior to the Mall Release
Date. In the event such easements are not removed prior to such time as
reasonably determined by the Construction Consultant, and the Company fails to
provide title insurance to the Lenders in form reasonably satisfactory to them
insuring over any loss the Lenders may suffer as a result of Company's failure
to so remove such easements, then the Company (a) agrees that the Disbursement
Agent shall have the right to authorize such advances as it deems appropriate in
order to remove or insure over the utility easements as exceptions to the title
insurance policies in favor of the Lenders, and (b) hereby grants to the
Disbursement Agent an irrevocable power of attorney to take such further steps
in the name of the Company as the Construction Consultant determines are
appropriate in order to remove or insure over such easements.
ARTICLE 6 - NEGATIVE COVENANTS
The Company covenants and agrees, with and for the benefit of the
Funding Agents, the Lenders and the Disbursement Agent that until this Agreement
is terminated pursuant to Section 11.21 hereof, it shall not:
6.1 Waiver, Modification and Amendment.
6.1.1 Directly or indirectly enter into, amend, modify, terminate
(except in accordance with its terms), supplement or waive a right or permit or
consent to the amendment, modification, termination (except in accordance with
its terms), supplement or waiver of any of the provisions of, or give any
consent under (a) any Financing Agreement or Third Party Financing Agreement
without the consent of the Bank Agent, the Interim Mall Lender and the Mortgage
Notes Indenture Trustee (provided that no such consent shall be required
hereunder from the Bank Agent, the Interim Mall Lender or the Mortgage Notes
Indenture Trustee to the extent such amendment, termination, supplement, waiver
or consent is permitted under the Bank Credit Agreement, the Interim Mall Credit
Agreement or the
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Mortgage Notes Indenture, as the case may be), (b) any Permit, the effect of
which could reasonably be expected to have a Material Adverse Effect, (c) the
HVAC Services Agreement, the Construction Agency Agreement, the HVAC Ground
Lease, the Billboard Master Lease, the Cooperation Agreement, the Casino Lease,
the Mall Lease, the Sale and Contribution Agreement, the Bylaws or Articles of
Incorporation of LVSI or Mall I MM or the Certificate of Formation or Operating
Agreement of VCR, GCCLLC, Mall Intermediate Holding, Lido Intermediate Holding
Company, LLC, Mall Holding or Mall I LLC, the Work Continuation Agreement, the
Direct Construction Guaranty, the Indirect Construction Guaranty without (i)
obtaining the Bank Agent's prior written consent, (ii) obtaining the prior
written consent of the Interim Mall Lender and (iii) obtaining (A) the consent
of a majority in principal amount of the holders of the Mortgage Notes or, (B)
if the Mortgage Notes are then rated CCC+ or higher by S&P, confirmation from
the Rating Agencies that such amendment, waiver or other modification will not
result in a Ratings Downgrade (provided that (1) the Company may amend the Sale
and Contribution Agreement without obtaining such consents and/or confirmations
in order to increase the sales price thereunder to equal the maximum amount of
the commitment under the Interim Mall Credit Agreement as the same may be
increased from time to time in accordance with the terms of the Intercreditor
Agreement and (2) the Company and its Subsidiaries may amend, modify, terminate,
supplement or waive any provision under (or provide a consent under) any
document described in this clause (c) if such amendment, modification,
termination, supplement, waiver or consent (x) has no adverse effect on any
Lender and (y) does not relate to any of the substantive non-consolidation
related provisions in the organizational documents of the Company and its
Subsidiaries), (d) the Construction Management Agreement, the Professional
Services Agreement, the Treadway Agreement, or any other Contract (constituting
a Material Project Document) except in accordance with the procedures set forth
in Section 6.1.2 or Section 6.1.3, as applicable, below (provided that the same
shall not relieve the Company of the requirements of Section 6.2) or (e) any
other Material Project Documents, the effect of which, with respect to such
other Material Project Document, could reasonably be expected to have a Material
Adverse Effect. Notwithstanding any of the foregoing, the Company may:
6.1.1.1 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. Each such Contract
shall be in writing and shall become effective when and only when: (i) the
Company and the 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 Company has submitted to the
Disbursement Agent an Additional Contract Certificate together with all
exhibits, attachments and certificates required thereby (including the
Construction Consultant's Certificate), each duly completed and executed; (iii)
if entering into such Contract will result in an amendment to the Project Budget
or extension of the Outside Completion Deadline, the Company has complied with
the requirements of Section 6.4; (iv) if entering into such Contract will have
the effect of a Scope Change, the Company has complied with the provisions of
Section 6.2; (v) if entering into such Contract will 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 Company has complied
with the requirements of Section 5.9.2; and (vi) the Disbursement Agent has
acknowledged receipt of the materials referenced in clause (ii) above, as
contemplated in the Additional Contract Certificate (which the Disbursement
Agent agrees to promptly do upon receipt of said material);
6.1.1.2 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 Company's 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 Company and the Construction Manager,
Project Architect, Treadway or other Contractor, as the case may be, have
executed and delivered the contract amendment (with the
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effectiveness thereof subject only to satisfaction of the conditions in clauses
(ii), (iii), (iv), (v) and (vi) below); (ii) the Company has submitted to the
Disbursement Agent a Contract Amendment Certificate together with all exhibits,
attachments and certificates required thereby each duly completed and executed;
(iii) if such amendment will result in an amendment to the Project Budget or
extension of the Outside Completion Deadline, the Company has complied with the
requirements of Section 6.4; (iv) if such amendment will change the scope of
work or otherwise will have the effect of a Scope Change, the Company has
complied with the provisions of Section 6.2; (v) if such amendment will 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
Company has complied with the requirements of Section 5.9.2; and (vi) the
Disbursement Agent has acknowledged its receipt of the materials referenced in
clause (ii) above, as contemplated in the Contract Amendment Certificate (which
the Disbursement Agent agrees to promptly do upon receipt of said materials).
6.2 Construction Management Agreement; Completion; Drawings.
6.2.1 Without obtaining the Required Scope Change Approval, direct,
consent to or enter into any Scope Change if such Scope Change:
(a) will cause Remaining Costs to exceed Available Funds or
the Required Minimum Contingency to exceed the Unallocated Contingency Balance,
unless the Company complies with the requirements of Section 5.9.2 and/or amends
the Project Budget as provided in Section 6.4.1 so that, after giving effect to
the proposed Scope Change the Available Funds will equal or exceed the Remaining
Costs and the Unallocated Contingency Balance will equal or exceed the Required
Minimum Contingency (provided, however, that for purposes of this Section
6.2.1(a), 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);
(b) is not, in the reasonable judgment of the Construction
Consultant, a Safe Harbor Scope Change;
(c) in the reasonable judgment of the Construction Consultant
(based on its experience, familiarity and review of the Project and
representations provided by the Company, Construction Manager, the Contractors
and Subcontractors), could reasonably delay the Completion Date beyond the
Outside Completion Deadline;
(d) 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;
(e) in the reasonable judgment of the Construction Consultant,
is not permitted by a Project Document and could adversely impact the Project;
(f) in the reasonable judgment of the Construction Consultant,
could reasonably present a significant risk of the revocation or material
adverse modification of any Permit;
(g) 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 on the basis of
a certification by the Company to such effect unless the Construction Consultant
is aware of any inaccuracies in such certification); or
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(h) 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 Company
pursuant to Section 5.19.
Prior to implementing any Scope Change, the Company shall submit an Additional
Contract Certificate or Contract Amendment Certificate and otherwise comply with
the provisions of Section 6.1.2 or 6.1.3, as applicable.
6.2.2 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 (provided that the Construction Consultant shall act with
due diligence and as promptly as possible in making its determination to approve
or disapprove).
6.2.3 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.
6.3 Amendment to Operative Documents. Enter into any agreement (other than
this Agreement and the other Financing Agreements) restricting its ability to
amend any of the Financing Agreements or other Operative Documents.
6.4 Project Budget and Project Schedule Amendment. Directly or indirectly,
amend, modify, allocate, re-allocate 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 Outside Completion Deadline, except as follows:
6.4.1 (a) (i) Concurrently with the implementation of any Scope
Change, the Company shall submit a Project Budget/Schedule Amendment
Certificate and amend the Project Budget in accordance with the provisions
of Section 6.4.1(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 commissions reserve" or the "mall tenant improvements reserve"
Line Items, the Company promptly (but in no event later than the earlier
of (A) thirty days thereafter and (B) the day prior to the Completion
Date) shall submit a Project Budget/Schedule Amendment Certificate and
amend the Project Budget in accordance with Section 6.4.1.(d) below 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 Company shall submit a Project
Budget/Schedule Amendment Certificate and amend the Project Budget in
accordance with the provisions of Section 6.4.1(d) below to the extent
necessary so that the amount allocated to the "mall tenant improvements
reserve" Line Item shall equal the Required Minimum TI Budget Amount.
(iv) At any time after the Revolving Loan Availability
Date the Company may amend the Project Budget in accordance with Section
6.4.1(d) below to add a
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Working Capital Line Item Category and allocate to such Line Item Category
the amount then available to the Company to be drawn under the Bank
Revolving Facility. Project Costs in respect of the Working Capital Line
Item Category shall be deemed to be outside the three Construction
Components.
(b) On the "Final GMP Date" (as defined in the Construction
Management Agreement) the Company shall amend the Project Budget in accordance
with the procedures set forth in Section 6.4.1(d) 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 (i) decrease the amount of the "Bovis contingency" Line
Item and (ii) 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 Company may from time to time amend the Project Budget
in accordance with the provisions of Section 6.4.1(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 6.4.1(a) and (b) above.
(d) (i) The Company shall implement any amendment to the
Project Budget by delivering to the Disbursement Agent a Project
Budget/Schedule Amendment Certificate 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.
(ii) Increases to the aggregate amount budgeted for any
Line Item Category will only be permitted to the extent of (A) allocation
of Realized Savings obtained in a different Line Item Category, (B)
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 Contingency), or (C) allocation of an
increase in Available Funds, including additional funds deposited in the
Guaranty Deposit Account or the Company's Funds Account.
(iii) Decreases to any Line Item Category will only be
permitted upon obtaining Realized Savings in such Line Item Category.
(iv) Increases and decreases to particular Line Items
shall be permitted to the extent not inconsistent with the foregoing
provisions of this paragraph or with Sections 6.4.1(a) and (b) above
provided that (A) the Company may not increase the amount budgeted to the
"mall leasing commissions reserve" and "mall tenant improvements reserve"
Line Items except as required pursuant to Section 6.4.1(a)(iii) above, (B)
no decreases shall be permitted for the "mall leasing commissions reserve"
and "mall tenant improvements reserve" Line Items except to the extent of
Realized Savings specifically relating to such Line Items and (C)
increases to the "unallocated contingency" Line Item shall only be
permitted 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.
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(v) 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.
6.4.2 The Company may, from time to time, amend the Project Schedule
to extend the Outside Completion Deadline, but (except as permitted in the
following sentence) not beyond the second anniversary of the Financing Date, by
delivering to the Disbursement Agent a Project Budget/Schedule Amendment
Certificate (a) containing a revised Project Schedule reflecting the new Outside
Completion Deadline and (b) complying with the provisions of Section 6.4.1(d)
above with respect to the changes in the Project Budget that will result from
the extension of the Outside Completion Deadline. If an Event of Loss or an
Event of Force Majeure occurs, then the Company shall be permitted to extend the
Outside Completion Deadline to the extent that the Company certifies in writing,
and the Construction Consultant confirms, to the Disbursement Agent that such
extension is reasonably necessary to overcome any delays caused by the Event of
Loss or Event of Force Majeure, provided that no such extension may extend
beyond May 1, 2000 unless the Interim Mall Lender agrees to extend the maturity
date of the Interim Mall Credit Facility, in which case the Company may extend
the Outside Completion Deadline until the earlier of (i) the maturity date of
the Interim Mall Facility, as so extended, and (ii) the third anniversary of the
Financing Date.
6.4.3 Upon submission of the Project Budget/Schedule Amendment
Certificate to the Disbursement Agent, 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 Outside Completion
Deadline, shall thereafter be as so amended.
6.5 Hazardous Substances. Release, emit or discharge into the environment
any Hazardous Substances in violation of any Environmental Law, Legal
Requirement or Permit, in each case which could reasonably be expected to have a
Material Adverse Effect.
6.6 No Other Powers of Attorney. Execute or deliver any agreement creating
any lien (other than Permitted Liens), powers 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 the Security
Documents or, with respect to the HVAC Component, the HVAC Services Agreement.
6.7 Opening. Cause or permit the Opening Date to occur unless each of the
Opening Conditions has been satisfied and the Company has delivered to the
Disbursement Agent a certificate in the form of Exhibit W-6 and the Construction
Consultant has delivered to the Disbursement Agent a certificate in the form of
Exhibit W-7 to the Funding Agents' Disbursement and Administration Agreement.
6.8 Reduction of Commitments. Reduce or permit to be reduced (a) except as
otherwise specifically permitted hereunder, the commitment under the Bank Credit
Facility at any time prior to the Completion Date, (b) the Bank Revolving
Facility to less than $10,000,000 at any time prior to delivery by the
Construction Consultant of the Six Month Certificate or (c) the commitment under
the Interim Mall Facility.
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ARTICLE 7 - EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of any of the following events shall
constitute an event of default ("Event of Default") hereunder:
7.1.1 Other Financing Documents. The occurrence of an "Event of
Default" under and as defined (a) in the Bank Credit Agreement, (b) in the
Mortgage Notes Indenture, (c) in the Interim Mall Credit Agreement or (d) in the
HVAC Services, the Construction Agency Agreement or the HVAC Ground Lease.
7.1.2 Failure to Demonstrate Balancing. The failure, from time to
time, of (a) Available Funds to equal or exceed the Remaining Costs or (b) the
Unallocated Contingency Balance to equal or exceed the Required Minimum
Contingency, if such failure shall continue for 30 days without being cured.
7.1.3 Inability to Deliver Certificates. The failure, for 30
consecutive days, of the Company to submit an Advance Request which is approved,
unless the Company demonstrates to the reasonable satisfaction of the
Disbursement Agent after consultation with the Construction Consultant that (a)
Available Funds equal or exceed the Remaining Costs and (b) the Unallocated
Contingency Balance equals or exceeds the Required Minimum Contingency.
7.1.4 Misstatements; Omissions. Any representation, warranty or
certification confirmed or made in any Operative Document (including any Advance
Request or other certificate) by the Company, Adelson, Interface Holding, Mall
Intermediate Holding, Lido Intermediate Holding Company, LLC, or an Affiliate of
any of them or in any writing provided by the Company or such other Persons in
connection with the transactions contemplated by this Agreement shall be found
to have been incorrect in any material respect when made or deemed to be made
and the failure of such representation could reasonably be expected to result in
a Material Adverse Effect; provided, however, that no Event of Default shall
occur pursuant hereto, if within thirty (30) days after the date on which the
Company receives notice or has or should have had knowledge (from any source)
that such incorrect statement has occurred, the Company shall eliminate any
Material Adverse Effect relating to such incorrect statement.
7.1.5 Covenants.
(a) The Company shall fail to perform or observe any of its
obligations under Sections 5.1.1, 5.1.2, 5.9.1, 6.1, 6.2, 6.3 or 6.4 hereof; or
(b) The Company shall fail to perform or observe any of its
obligations under Articles 5 or 6 hereof (other than those listed in Section
7.1.5(a) above) where such default shall not have been remedied within thirty
(30) days after notice of such failure; provided, however, if such default is of
a nature such that it cannot reasonably be remedied within such thirty (30) day
period, but is susceptible to cure within a longer period, an Event of Default
shall not result therefrom so long as (i) the Company has, promptly upon
discovery thereof, given written notice to the Funding Agents of such default,
(ii) the Company as promptly as practicable commences action reasonably designed
to cure such default and continues diligently to pursue such action until cured
(but in no event longer than ninety (90) days in the aggregate), and (iii) such
default does not have a Material Adverse Effect.
7.1.6 Breach of Project Documents. LVSI, VCR or GCCLLC or any other
party thereto shall breach or default under any term, condition, provision,
covenant, representation or warranty contained in any Material Project Document
or any other agreement (other than the Facility Agreements
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or other Financing Agreements) to which LVSI, VCR or GCCLLC is a party if the
effect of such breach or default could reasonably be expected to have a Material
Adverse Effect and such breach or default shall continue unremedied for thirty
(30) days after notice from any Funding Agent to the Company; provided, however,
that in the case of any Project Document, (a) if the breach or default is
reasonably susceptible to cure within 90 days but cannot be cured within such
thirty (30) days despite the Company's and/or such other party's, as the case
may be, good faith and diligent efforts to do so, the cure period shall be
extended as is reasonably necessary beyond such thirty (30) day period (but in
no event longer than ninety (90) days) if remedial action reasonably likely to
result in cure is promptly instituted within such thirty (30) day period and is
thereafter diligently pursued until the breach or default is corrected and (b)
if the breach is by a party other than the Company, then no Event of Default
shall be deemed to have occurred as a result of such breach if the Company
provides written notice to the Funding Agents immediately upon (but in no event
more than two (2) Banking Days after) the Company, Adelson, or any of the
Company's Subsidiaries becoming aware of such breach that the Company intends to
replace such Project Document (or that replacement is not necessary) and (i) the
Company obtains a replacement obligor or obligors reasonably acceptable to the
Disbursement Agent (in consultation with the Construction Consultant) for the
affected party (if in the reasonable judgment of the Disbursement Agent (in
consultation with the Construction Consultant) a replacement is necessary), (ii)
the Company enters into a replacement Project Document in accordance with
Section 6.1 on terms no less beneficial to the Company 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
(iii) 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.
7.1.7 Financing Agreements. (a) Any of the Financing Agreements,
once executed and delivered, shall cease to be in full force and effect (other
than in accordance with its terms) or shall be declared null and void by any
Governmental Instrumentality of competent jurisdiction, or (b) any of the
Security Documents, once executed and delivered, shall fail to provide the
secured parties thereunder the Liens, security interest, rights, titles,
interest, priorities, remedies, powers or privileges intended to be created
thereby or cease to be in full force and effect, or (c) the validity or the
applicability of the Security Documents to the Loans or the Mortgage Notes, or
any other obligations purported to be secured or guaranteed thereby or any part
thereof shall be disaffirmed or contested by or on behalf of the Company or any
other party thereto (including, after Adelson's death, with respect to the
Adelson Completion Guaranty, any heir of Adelson or any executor, administrator
or legal representative of Adelson's estate) or (d) the Company or any other
party to the Financing Agreements shall deny in writing that it has any further
liability thereunder prior to the payment in full of all the Obligations
thereunder, including, with respect to the Bank Credit Agreement, the
cancellation of all outstanding Letters of Credit (as defined in the Bank Credit
Agreement) and termination of the Commitments thereunder.
7.1.8 Termination or Invalidity of Project Documents; Abandonment of
Project.
(a) Any of the Material Project Documents shall have
terminated, become invalid or illegal, or otherwise ceased 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 or
the Indirect Construction Guaranty, the Sale and Contribution Agreement, no
Event of Default shall be deemed to have occurred as a result of such
termination if the Company provides written notice to the Funding Agents
immediately upon (but in no event more than two (2) Banking Days after) the
Company, Adelson, or any of the Company's Subsidiaries becoming aware of such
Project Document ceasing to be
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in full force or effect that the Company intends to replace such Project
Document (or that replacement is not necessary) and (i) the Company obtains a
replacement obligor or obligors reasonably acceptable to the Disbursement Agent
(in consultation with the Construction Consultant), for the affected party (if
in the reasonable judgment of the Disbursement Agent (in consultation with the
Construction Consultant) a replacement is necessary), (ii) the Company enters
into a replacement Project Document in accordance with Section 6.1, on terms no
less beneficial to the Company 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 (iii) 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;
(b) The Company shall cease to own the Site (other than (i)
the Mall Parcel to the extent permitted by Section 5.16(b) and (ii) the Phase II
Land to the extent permitted by Section 5.16(d)) and all parcels and
subdivisions comprising thereof or located thereon, 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;
(c) The Company 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;
(d) The Company 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
(e) To the extent that the Company has 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 cease to be in full force and effect.
7.1.9 Government Authorizations. Any Permit necessary for the
ownership, construction, maintenance, financing or operation of the Project
shall be modified, revoked or cancelled, or a notice of violations is issued
under any Permit, by the issuing agency or other Governmental Instrumentality
having jurisdiction or any proceeding is commenced by any Governmental
Instrumentality for the purpose of modifying, revoking or cancelling any Permit
and the effect of such modification, revocation or loss of such Permit or notice
of violations is reasonably likely to have a Material Adverse Effect.
7.1.10 Schedule; Completion.
(a) The Construction Consultant shall reasonably determine
(based on its experience, familiarity and review of the Project and information
and schedule provided by the Company and the Construction Manager) that the
Completion Date is likely to occur no earlier than seventy-five (75) days after
the Outside Completion Deadline; or
(b) Failure to achieve the Completion Date on or before the
Outside Completion Deadline.
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7.2 Remedies. Upon the occurrence and during the continuation of an Event
of Default,
(a) the Lenders, the Intercreditor Agent, and the Disbursement
Agent may, without further notice of default, presentment or demand for payment,
protest or notice of non-payment or dishonor, or other notices or demands of any
kind, all such notices and demands being waived (to the extent permitted by
applicable law), exercise any or all rights and remedies at law or in equity (in
any combination or order that the Lenders may elect, subject to the foregoing),
including without limitation or prejudice to the Lenders' other rights and
remedies, the following:
(i) refuse, and the Lenders shall not be obligated, to
make any Advances or make any payments from any Account or other funds
held by the Disbursement Agent by or on behalf of the Company or suspend
or terminate the Commitments.
(ii) declare and make all sums of accrued and
outstanding principal and accrued but unpaid interest remaining under the
Financing Agreements together with all unpaid fees, costs and charges due
hereunder or under the Financing Agreements, immediately due and payable,
provided that in the event of an Event of Default occurring under Sections
8.6 or 8.7 of the Bank Credit Agreement, Sections 7.6 or 7.7 of the
Interim Mall Credit Agreement or Section 6.1(h) or (i) of the Mortgage
Notes Indenture with respect to any of the entities comprising the Company
only, all such amounts shall become immediately due and payable without
further act of any Lender;
(iii) enter into possession of the Project and perform
any and all work and labor necessary to complete the Project or to operate
and maintain the Project, and all sums expended by the Disbursement Agent
or any other Secured Party in so doing, together with interest on such
total amount at the highest default rate provided in any Financing
Agreement, shall be repaid by the Company to the Disbursement Agent or
such Secured Party upon demand and shall be secured by the Financing
Agreements, notwithstanding that such expenditures may, together with
amounts advanced under this Agreement, exceed the total amount of the
Commitments;
(iv) set off and apply all monies on deposit in any
Account (except that amounts on deposit in the Mortgage Notes Proceeds
Account are pledged solely to the benefit of the Mortgage Note Holders and
only the Mortgage Notes Indenture Trustee has the right to direct the
Disbursement Agent with respect thereto to the extent permitted under the
Intercreditor Agreement) or any amounts paid under the Adelson Completion
Guaranty or any other monies of the Company on deposit with the
Disbursement Agent to the satisfaction of the Obligations under all of the
Financing Agreements; and
(v) exercise any and all rights and remedies available
to it under any of the Financing Agreements.
(b) the HVAC Provider may exercise any or all rights and
remedies at law or in equity (in any combination that the HVAC Provider may
elect), including without limitation or prejudice to the HVAC Provider's other
rights and remedies, its rights and remedies under the HVAC Services Agreement,
the Construction Agency Agreement and the HVAC Ground Lease.
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ARTICLE 8 - CONSULTANTS AND REPORTS
8.1 Removal and Fees. Any two of the Bank Agent, the Interim Mall Lender
and the Mortgage Notes Indenture Trustee, in their sole discretion and acting
under the Intercreditor Agreement may remove from time to time the Independent
Consultants and, subject to Section 11.15.1, appoint replacements as such
parties may choose in consultation with the Company. Notice of any replacement
Independent Consultant shall be given by the Bank Agent to the Disbursement
Agent, the Company and the Independent Consultant being replaced. All reasonable
fees and expenses of the Independent Consultants (whether the original ones or
replacements) shall, subject to the limitations set forth in Section 11.15.1
hereof, be paid by the Company.
8.2 Duties. The Independent Consultants shall be contractually obligated
to the Bank Agent, the Interim Mall Lender and the Mortgage Notes Indenture
Trustee to carry out the activities required of them in this Agreement and in
the Construction Consultant Engagement Agreement and as otherwise requested by
such Funding Agents. The Company acknowledges that, except as provided in the
Construction Consultant's Engagement Agreement with respect to the Construction
Consultant, it will not have any cause of action or claim against any
Independent Consultant resulting from any decision made or not made, any action
taken or not taken or any advice given by such Independent Consultant in the due
performance in good faith of its duties.
8.3 Acts of Disbursement Agent. The Disbursement Agent will take such
actions as any Funding Agent or the Company may reasonably request to cause the
Independent Consultants to act diligently in the issuance of all certificates
required to be delivered by the Independent Consultants hereunder and to
otherwise fulfill their obligations to the Bank Agent, the Interim Mall Lender
and the Mortgage Notes Indenture Trustee as described in the first sentence of
Section 8.2.
ARTICLE 9 - THE DISBURSEMENT AGENT
9.1 Appointment and Acceptance. Subject to and on the terms and conditions
of this Agreement, the Funding Agents hereby jointly and irrevocably appoint and
authorize the Disbursement Agent to act as their agent hereunder and as their
agent and, where applicable, secured party on their behalf under the Collateral
Account Agreements, the Mall Escrow Agreement and the Title Insurer Escrow
Agreement and any other account agreements to which it is a party (collectively,
the "Related Agreements"). The Disbursement Agent accepts such appointment and
agrees to exercise commercially reasonable efforts and utilize commercially
prudent practices in the performance of its duties hereunder consistent with
those of similar institutions holding collateral, administering construction
loans and disbursing disbursement control funds.
9.2 Duties and Liabilities of the Disbursement Agent Generally.
9.2.1 Commencing upon execution and delivery hereof, the
Disbursement Agent shall have the right to meet periodically at reasonable
times, however no less frequently than quarterly, upon three (3) Banking Days'
notice, with representatives of the Company, the Construction Consultant, the
Construction Manager, the Project Architect and such other employees,
consultants or agents as the Disbursement Agent shall reasonably request to be
present for such meetings. The Disbursement Agent may perform such inspections
and tests of the Project as it deems reasonably appropriate in the performance
of its duties hereunder. In addition, the Disbursement Agent shall have the
right at reasonable times upon prior notice to review all information (including
Contracts) supporting the amendments to the Project Budget, amendments to any
Contracts, the Company's Advance Requests and
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any certificates in support of any of the foregoing, to inspect materials stored
on the Site then owned by the Company, to review the insurance required pursuant
to the terms of the Financing Agreements, to confirm receipt of endorsements
from Title Insurer insuring the continuing priority of the liens of the Deeds of
Trust as security for each Advance hereunder, and to examine the Plans and
Specifications and all shop drawings relating to the Project. The Disbursement
Agent is authorized to contact the Construction Manager or any Contractor for
purposes of confirming receipt of progress payments. The Disbursement Agent
shall be entitled to examine, copy and make extracts of the books, records,
accounting data and other documents of the Company, including without limitation
bills of sale, statements, receipts, conditional and unconditional lien
releases, contracts or agreements, which relate to any materials, fixtures or
articles incorporated into the Project. From time to time, at the request of the
Disbursement Agent, the Company shall make available to the Disbursement Agent a
Project Schedule. The Company agrees to cooperate with the Disbursement Agent in
assisting the Disbursement Agent to perform its duties hereunder and to take
such further steps as the Disbursement Agent reasonably may request in order to
facilitate the Disbursement Agent's performance of its obligations hereunder.
9.2.2 The Disbursement Agent is authorized to take such actions and
to exercise such powers, rights and remedies under this Agreement and the
Related Agreements as are specifically delegated or granted to Disbursement
Agent by the terms hereof or thereof, together with such powers, rights and
remedies as are reasonably incidental thereto. Disbursement Agent agrees to act
in accordance with the instructions of Intercreditor Agent and in the absence of
such instructions shall take such actions or refrain from acting as it deems
reasonable subject to any express requirements of this Agreement.
9.2.3 If the Disbursement Agent notifies any Lender that an Event of
Default known to it (or as to which it has received notice from any Funding
Agent) has occurred (which has not been cured or waived), the Disbursement Agent
shall provide prompt notice to each of the Funding Agents and the Intercreditor
Agent of the same and otherwise shall exercise such of the rights and powers
vested in it by this Agreement and the documents constituting or executed in
connection with this Agreement, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the reasonable administration of its own affairs.
9.2.4 None of the provisions of this Agreement shall require the
Disbursement Agent to expend or risk its own funds or otherwise to incur any
personal financial liability in the performance of any of its duties hereunder
or under the Related Agreements, or in the exercise of any of its rights or
powers if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
9.2.5 Notwithstanding anything to the contrary in this Agreement, if
the entity acting as Disbursement Agent also serves as a collateral agent or
Funding Agent under the Financing Agreements, and except if such functions shall
be performed by the same group, agency or division of such entity, the
Disbursement Agent shall not be deemed to have any knowledge of any fact known
to such entity in its capacity as the collateral agent or Funding Agent by
reason of the fact that the Disbursement Agent and the collateral agent or
Funding Agent, as the case may be, are the same entity. Except as aforesaid, no
knowledge of the collateral agent or any Funding Agent shall be attributed to
the Disbursement Agent. 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
the Disbursement Agent in its capacity as Bank Agent or as Lender. With respect
to its participation in the extensions of credit under the Bank Credit
Agreement, the Disbursement Agent shall have the same rights and powers
hereunder as any other Funding Agent or Lender and may exercise the same as
though it were not performing the duties and functions delegated to it
hereunder. The Disbursement Agent and its Affiliates may accept deposits from,
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lend money to and generally engage in any kind of banking, trust, financial
advisory or other business with the Company or any of its Affiliates as if it
were not performing the duties specified herein, and may accept fees and other
consideration from the Company for services in connection with this Agreement
and otherwise without having to account for the same to the Lenders. Each party
hereto acknowledges that, as of the Financing Date, The Bank of Nova Scotia is,
in addition to acting as the Disbursement Agent hereunder, also acting as the
Bank Agent, Intercreditor Agent and Trustee (as defined in the Cooperation
Agreement) and may be a Bank Lender.
9.3 Particular Duties and Liabilities of the Disbursement Agent.
9.3.1 Reliance Generally. The Disbursement Agent may, from time to
time, in the event that any matter arises as to which specific instructions are
not provided herein or in a Related Agreement (as applicable), request
directions from the Funding Agents or the Intercreditor Agent with respect to
such matters and may refuse to act until so instructed and shall be fully
protected in acting or refusing to act in accordance with such instructions. The
Disbursement Agent may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval or other paper or document believed by
it on reasonable grounds to be genuine and to have been signed or presented by
the proper party or parties.
9.3.2 Court Orders. The Disbursement Agent is authorized, in its
exclusive discretion, to obey and comply with all writs, orders, judgments or
decrees issued by any court or administrative agency affecting any money,
documents or things held by the Disbursement Agent. The Disbursement Agent shall
not be liable to any of the parties hereto, their successors, heirs or personal
representatives by reason of the Disbursement Agent's compliance with such
writs, orders, judgments or decrees, notwithstanding such writ, order, judgment
or decree is later reversed, modified, set aside or vacated.
9.3.3 Requests, etc. of the Company. Any request, direction, order
or demand of the Company mentioned herein shall be sufficiently evidenced
(unless other evidence in respect thereof be herein specifically prescribed) by
an instrument signed by one of its Authorized Representatives, and any
resolution of the Company may be evidenced to the Disbursement Agent by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company.
9.3.4 Reliance on Opinions of Counsel. The Disbursement Agent may
consult with counsel and any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder or under any Related Agreement in good faith and in accordance with
such opinion of counsel.
9.3.5 Action through Agents or Attorneys. The Disbursement Agent may
execute any of the trusts or powers hereunder or perform any duties hereunder or
under any Related Agreement either directly or by or through agents or attorneys
appointed with due care, but the Disbursement Agent shall be responsible for any
willful misconduct or gross negligence on the part of any agent or attorney so
appointed.
9.3.6 Marshaling of Assets. The Disbursement Agent need not marshal
in any particular order any particular part or piece of the Project Security
held by the Disbursement Agent in its capacity as Disbursement Agent hereunder
or under any Related Agreement, or any of the funds or assets that the
Disbursement Agent may be entitled to receive or have claim upon.
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9.3.7 Disagreements.
(a) In the event of any disagreement between a Funding Agent
and the Company or any other Person or Persons whether or not named herein, and
adverse claims or demands are made in connection with or for any of the
investments or amounts held pursuant to this Agreement or under any Related
Agreement, the Disbursement Agent shall be entitled at its option to refuse to
comply with any such claim or demand so long as such disagreement shall
continue, and in so doing, the Disbursement Agent shall not be or become liable
for damages or interest to such Funding Agent or the Company or any other Person
or Persons for the Disbursement Agent's failure or refusal to comply with such
conflicting or adverse claims or demands. The Disbursement Agent shall be
entitled to continue so to refrain and refuse so to act until:
(i) the rights of the adverse claimants have been fully
adjudicated in the court assuming and having jurisdiction of the claimants
and the investments and amounts held pursuant to this Agreement or under
any Related Agreement; or
(ii) all differences shall have been adjusted by
agreement, and the Disbursement Agent shall have been notified thereof in
writing by all persons deemed by the Disbursement Agent, in its sole
discretion, to have an interest therein.
(b) In addition, the Disbursement Agent, in its sole
discretion, upon giving thirty (30) days' prior written notice to the Funding
Agents may file a suit in interpleader for the purpose of having the respective
rights of all claimants adjudicated, and may deposit with the court all of the
investments and amounts held pursuant to this Agreement or under any Related
Agreement. The Company agrees to pay all costs and reasonable counsel fees
incurred by the Disbursement Agent in such action, said costs and fees to be
included in the judgment in any such action.
9.3.8 Collateral Account Agreements; Mall Escrow Agreement; Title
Insurer Escrow Agreement. The Disbursement Agent shall not amend or modify any
of the Collateral Account Agreements, the Mall Escrow Agreement or the Title
Insurer Escrow Agreement unless it has been instructed to do so by the
Intercreditor Agent (acting pursuant to the Intercreditor Agreement).
9.4 Segregation of Funds and Property Interest. Except as otherwise
expressly provided in the Financing Agreements, monies and other property
received by the Disbursement Agent shall, until used or applied as herein
provided, be held for the purposes for which they were received, and shall be
segregated from other funds except to the extent required herein or by law. The
Disbursement Agent shall note in its records that all funds and other assets in
the Accounts, the HVAC Accounts and the Guaranty Deposit Account have been
pledged to the Secured Parties and that the Disbursement Agent is holding such
items as agent for the Secured Parties. Accordingly, all such funds and assets
shall not be within the bankruptcy "estate" (as such term is used in 11 U.S.C.
ss. 541) of the Disbursement Agent. The Disbursement Agent shall not be under
any liability for interest on any monies received by it hereunder, except as
otherwise specified in this Agreement. The Disbursement Agent hereby expressly
waives any right of set-off or similar right it may have against or in relation
to the Accounts, the HVAC Accounts, the Mall Retainage/Punchlist Account, the
Lien Protection Account and the Guaranty Deposit Account and any monies,
Permitted Investments or other amounts on deposit therein.
9.5 Compensation and Reimbursement of the Disbursement Agent. The Company
covenants and agrees to pay to the Disbursement Agent from time to time, and the
Disbursement Agent shall be entitled to, the fees set forth in that certain
letter agreement between the Company and the Disbursement Agent, and the Company
will further pay or reimburse the Disbursement Agent upon its request for all
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reasonable expenses, disbursements and advances incurred or made by the
Disbursement Agent in accordance with any of the provisions of the Financing
Agreements or the documents constituting or executed in connection with the
Project Security including any Related Agreements (including the reasonable
compensation and the reasonable expenses and disbursements of its counsel and of
all persons not regularly in its employ). The obligations of the Company under
this Section 9.5 to compensate the Disbursement Agent and to pay or reimburse
the Disbursement Agent for reasonable expenses, disbursements and advances shall
constitute additional indebtedness (and shall be deemed permitted indebtedness
under each Financing Agreement) hereunder and shall survive the satisfaction and
discharge of this Agreement.
9.6 Qualification of the Disbursement Agent. The Disbursement Agent
hereunder shall at all times be a corporation with offices in New York City, New
York which (a) is authorized to exercise corporation trust powers, (b) is
subject to supervision or examination by the applicable Governmental
Instrumentality, (c) shall have a combined capital and surplus of at least Five
Hundred Million Dollars (US$500,000,000), (d) shall have a long-term credit
rating of not less than A- or A3, respectively, by S&P or Moody's; and provided,
that any such bank with a long-term credit rating of A- or A3 shall not cease to
be eligible to act as Disbursement Agent upon a downward change in either such
rating of no more than one category or grade of such minimum rating, as the case
may be; and (e) with respect to any replacement of the Person acting as
Disbursement Agent as of the Financing Date, shall be acceptable to each of the
Bank Agent, the Interim Mall Lender and the Mortgage Notes Indenture Trustee
acting pursuant to the Intercreditor Agreement. In case at any time the
Disbursement Agent shall cease to be eligible in accordance with the provisions
of this Section 9.6, the Disbursement Agent shall resign immediately in the
manner and with the effect specified in Section 9.7.
9.7 Resignation and Removal of the Disbursement Agent. The Bank Agent, the
Interim Mall Lender and the Mortgage Notes Indenture Trustee, acting pursuant to
the Intercreditor Agreement, shall have the right should they reasonably
determine that the Disbursement Agent has breached or failed to perform its
obligations hereunder or has engaged in wilful misconduct or gross negligence,
upon the expiration of thirty (30) days following delivery of written notice of
substitution to the Disbursement Agent and the Company, to cause the
Disbursement Agent to be relieved of its duties hereunder and to select a
substitute disbursement agent to serve hereunder. The Disbursement Agent may
resign at any time upon forty-five (45) days' written notice to all parties
hereto. Such resignation shall take effect upon the earlier of receipt by the
Disbursement Agent of an instrument of acceptance executed by a successor
disbursement agent meeting the qualifications set forth in Section 9.6 and
consented to by the other parties hereto or forty-five (45) days after the
giving of such notice. Upon selection of a substitute disbursement agent, the
Funding Agents and the Company and the substitute disbursement agent shall enter
into an agreement substantially identical to this Agreement and, the
Disbursement Agent shall transfer to the substitute disbursement agent upon
request therefor originals of all books, records, and other documents in the
Disbursement Agent's possession relating to this Agreement.
9.8 Merger or Consolidation of the Disbursement Agent. Any corporation
into which the Disbursement Agent may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Disbursement Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Disbursement
Agent, shall, if eligible hereunder, be the successor of the Disbursement Agent
hereunder; provided, that such corporation shall be eligible under the
provisions of Section 9.6 without the execution or filing of any paper with any
party hereto or any further act on the part of any of the parties hereto except
where an instrument of transfer or assignment is required by law to effect such
succession, anything herein to the contrary notwithstanding.
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9.9 Statements; Information.
(a) The Disbursement Agent shall provide to the Funding Agents and
the Company a monthly statement of all deposits to, and disbursements from, each
account maintained with it and interest and earnings credited to each account
established and maintained hereunder and under the other Operative Documents by
the Disbursement Agent. The Disbursement Agent shall forward to the Funding
Agents any such statements delivered to it by the securities intermediaries
under the Collateral Account Agreements.
(b) The Disbursement Agent shall, at the expense of the Company (i)
as promptly as is reasonably practicable after receipt of any reasonable written
request by the Company or any Funding Agent, but not more frequently than
monthly, provide the Company or such Funding Agent, as the case may be, with
such information as the Company or such Funding Agent may reasonably request
regarding all categories, amounts, maturities and issuers of investments made by
the Disbursement Agent pursuant to this Agreement and regarding amounts
available in the Accounts, the Guaranty Deposit Account and the HVAC Accounts,
and the various sub-accounts included therein, and (ii) upon the reasonable
written request of the Company, arrange with the Company for a mutually
convenient time for an authorized representative of the Reviewing Accountant to
visit the offices of the Disbursement Agent to examine and take copies of
records relating to and instruments evidencing the investments made by the
Disbursement Agent pursuant to this Agreement.
9.10 Limitation of Liability. The Disbursement Agent's responsibility and
liability under this Agreement shall be limited as follows: (a) the Disbursement
Agent does not represent, warrant or guaranty to the Funding Agents or the
Lenders the performance by the Company, Construction Manager, Direct
Construction Guarantor, Indirect Construction Guarantor, Project Architect or
any other Contractor of their respective obligations under the Operative
Documents and shall have no duty to inquire whether a Potential Event of Default
or an Event of Default has occurred and is continuing; (b) the Disbursement
Agent shall have no responsibility to the Company, the Funding Agents or the
Lenders as a consequence of performance by the Disbursement Agent hereunder
except for any bad faith, fraud, gross negligence or willful misconduct of the
Disbursement Agent; (c) the Company shall remain solely responsible for all
aspects of its business and conduct in connection with the Project, including
but not limited to the quality and suitability of the Plans and Specifications,
the supervision of the work of construction, the qualifications, financial
condition and performance of all architects, engineers, contractors, subcon
tractors, suppliers, consultants and property managers, the accuracy of all
applications for payment, and the proper application of all disbursements; and
(d) the Disbursement Agent is not obligated to supervise, inspect or inform the
Company of any aspect of the construction of the Project or any other matter
referred to above. Each Funding Agent and Lender has made its own independent
investigation of the financial condition and affairs of the Company and its
Subsidiaries in connection with the making of the extensions of credit
contemplated by the Financing Agreements and has made and shall continue to make
its own appraisal of the creditworthiness of the Company and its Subsidiaries.
Except as specifically set forth herein, the Disbursement Agent shall not 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 Funding Agents or
Lenders or to provide any Funding Agent or Lender with any credit or other
information with respect thereto. The Disbursement Agent shall not have, by
reason of this Agreement, a fiduciary relationship in respect of any Funding
Agent or Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon the Disbursement Agent
any obligations in respect of this Agreement except as expressly set forth
herein or therein. The Disbursement Agent shall have no duties or obligations
hereunder except as expressly set forth herein, shall be responsible only for
the performance of such duties and obligations and shall not be required to take
any action otherwise than in accordance with the terms hereof. The provisions of
this Article 9 are solely for the benefit of the
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Disbursement Agent and the Funding Agents and Lenders and the Company shall have
no rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, the Disbursement Agent
does not assume and shall not be deemed to have assumed any obligation towards
or relationship of agency or trust with or for the Company or any of its
Affiliates. Neither the Disbursement Agent nor any of its officers, directors,
employees or agents shall be in any manner liable or responsible for any loss or
damage arising by reason of any act or omission to act by it or them hereunder
or in connection with any of the transactions contemplated hereby, including,
but not limited to, any loss that may occur by reason of forgery, false
representations, the exercise of its discretion, or any other reason, except as
a result of their bad faith, fraud, gross negligence or willful misconduct.
ARTICLE 10 - SAFEKEEPING OF ACCOUNTS
10.1 Application of Funds in Accounts. Amounts deposited in the Accounts
shall be applied exclusively as provided in this Agreement and the Disbursement
Agent shall at all times act and direct the securities intermediaries under the
Collateral Account Agreements so as to implement the application of funds
provisions and procedures herein set forth. The Disbursement Agent is hereby
authorized to direct the Securities Intermediary to reduce to cash any Permitted
Investment (without regard to maturity) in any account in order to make any
application required hereunder. No amount held in any Account maintained
hereunder shall be disbursed except in accordance with the provisions hereof or
as required by law.
10.2 Event of Default. Notwithstanding anything to the contrary in this
Agreement, (a) upon the occurrence and during the continuance of an Event of
Default of which it has notice, the Disbursement Agent shall not in any such
event deposit or cause to be deposited any amounts into the Collection Account,
the Disbursement Account, the Cash Management Account, the Lien Protection
Account or the Interest Payment Account or release or cause to be released any
amounts to the Company unless instructed to the contrary by the Intercreditor
Agent, acting pursuant to the Intercreditor Agreement and (b) upon the
occurrence of an Event of Default, Death Event (as defined in the Adelson
Completion Guaranty) or Bankruptcy (as defined in the Mortgage Notes Indenture
Fee Deed of Trust) of Adelson, in each case, of which it has knowledge, the
Disbursement Agent shall withdraw all funds then on deposit in the Guaranty
Deposit Account and deposit the same in the Company's Funds Account. Subject to
the terms of the Intercreditor Agreement, the Disbursement Agent is hereby
irrevocably authorized by the Company to apply, or cause to be applied, amounts
in any Account and any other sums held by the securities intermediary under any
Collateral Account Agreement to the payment of interest, principal, fees, costs,
charges or other amounts due or payable to the Secured Parties.
10.3 Liens. The Disbursement Agent shall take such actions within its
control that it customarily takes in the conduct of its business to protect the
Accounts, the Guaranty Deposit Account and the HVAC Accounts and all cash,
funds, Permitted Investments from time to time deposited therein, as well as any
proceeds or income therefrom (collectively, the "Account Collateral") free and
clear of all liens, security interests, safekeeping or other charges, demands
and claims of any nature whatsoever now or hereafter existing, in favor of
anyone other than the Secured Parties (or the Disbursement Agent, as agent for
the Secured Parties) (collectively, the "Third Party Claims"); it being
understood, however, that the foregoing shall in no way be deemed to be a
guaranty or other assurance by the Disbursement Agent that Third Party Claims
will not arise.
10.4 Perfection. The Disbursement Agent shall take any steps from time to
time requested by the Bank Agent, the Interim Mall Lender or the Mortgage Notes
Indenture Trustee to confirm or cause
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the securities intermediaries under the Collateral Account Agreements to confirm
and maintain the priority of their respective security interests in the Accounts
Collateral.
10.5 Mortgage Notes Proceeds Account. Notwithstanding any other provision
hereof other than Section 11.16(a), the parties hereto acknowledge that the
security interest granted by the Company to the Disbursement Agent in the
Mortgage Notes Proceeds Account (including any Permitted Investments held
therein) pursuant to the Mortgage Notes Collateral Account Agreement is for the
sole and exclusive benefit of the Mortgage Notes Indenture Trustee and the
Mortgage Note Holders and only the Mortgage Notes Indenture Trustee shall have
the right to direct the Disbursement Agent with respect thereto.
10.6 Bank Proceeds Account. Notwithstanding any other provision hereof
other than Section 11.16(a), the parties hereto acknowledge that the security
interest granted by the Company to the Disbursement Agent in the Bank Proceeds
Account (including any Permitted Investments held therein) pursuant to the
Company Collateral Account Agreement is for the sole and exclusive benefit of
the Bank Agent and the Bank Lenders and only the Bank Agent shall have the right
to direct the Disbursement Agent with respect thereto.
ARTICLE 11 - MISCELLANEOUS
11.1 Addresses. Any communications between the parties hereto or notices
provided herein to be given may be given to the following addresses:
If to the Company: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: General Counsel
Telephone No.: (702) 733-5000
Facsimile No.: (702) 733-5502
If to the Bank Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Allan Pendergast
Telephone No.: (415) 986-1100
Facsimile No.: (415) 397-0791
If to the Mortgage Notes First Trust National Association
Indenture Trustee: 180 East Fifth Street
St. Paul, MN 55101
Attn: Corporate Trust Administration
Telephone No.: (612) 244-0721
Facsimile No.: (612) 244-0711
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If to the Interim Mall Lender: GMAC Commercial Mortgage Corporation
100 South Wacker Dr., Suite 100
Chicago, IL 60604
Attn: Vacys Garbonkus
Telephone No.: (312) 845-8520
Facsimile No.: (312) 845-8623
If to the HVAC Provider: Atlantic-Pacific Las Vegas, LLC
5100 Harding Highway
Mays Landing, New Jersey 08330
Attn: Carl H. Fogler
Telephone No.: (609) 625-9000
Facsimile No: (609) 625-3866
with a copy to: Buchanan Ingersoll
500 College Road East
Princeton, New Jersey 08540
Attn: Michael A. Walker, Esq.
Telephone No.: (609) 987-6808
Facsimile No.: (609) 520-0360
If to the Disbursement Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Allan Pendergast
Telephone No.: (415) 986-1100
Facsimile No.: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, NE
Atlanta, GA 30308
Attn: Marianne Velker
Telephone No.: (404) 877-1525
Facsimile No.: (404) 888-8998
All notices or other communications required or permitted to be given hereunder
shall be in writing and shall be considered as properly given (a) if delivered
in person, (b) if sent by reputable overnight delivery service, (c) in the event
overnight delivery services are not readily available, if mailed by first class
mail, postage prepaid, registered or certified with return receipt requested or
(d) if sent by prepaid telex, or by telecopy with correct answer back received.
Notice so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Banking Day and, if not, on the next following Banking Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Banking Day; provided,
however, that if any notice is tendered to an addressee and the delivery thereof
is refused by such addressee, such notice shall be effective upon such tender.
Any party shall have the right to change its address for notice hereunder to any
other location by giving of no less than twenty (20) days' notice to the other
parties in the manner set forth hereinabove.
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11.2 Further Assurances. The Company shall deliver to the Funding Agents
and the Disbursement Agent each of the instruments, agreements, certificates,
opinions and documents as any such Person may reasonably request to perfect and
maintain the Liens granted under the Financing Agreements. The Company shall
fully cooperate with the Funding Agents and the Disbursement Agent and perform
all additional acts reasonably requested by any such Person to effect the
purposes of the Financing Agreements.
11.3 Delay and Waiver. No delay or omission to exercise any right, power
or remedy accruing upon the occurrence of any Potential Event of Default or
Event of Default or any other breach or default of the Company under this
Agreement shall impair any such right, power or remedy of the Funding Agents,
the Lenders, the Disbursement Agent or any other Secured Party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or in any similar breach or default thereafter occurring, nor shall any
waiver of any single Potential Event of Default, Event of Default or other
breach or default be deemed a waiver of any other Potential Event of Default,
Event of Default or other breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part of
any of the Funding Agents, the Lenders, the Disbursement Agent or any other
Secured Party, of any Potential Event of Default, Event of Default or other
breach or default under this Agreement or any other Financing Agreement, or any
waiver on the part of any of the Funding Agents, the Lenders, the Disbursement
Agent or any other Secured Party, of any provision or condition of this
Agreement or any other Operative Document, must be in writing and shall be
effective only to the extent in such writing specifically set forth. All
remedies, either under this Agreement or any other Financing Agreement or by law
or otherwise afforded to any of the Funding Agents, the Lenders, the
Disbursement Agent or any other Secured Party, shall be cumulative and not
alternative.
11.4 Additional Security; Right to Set-Off. Any deposits or other sums at
any time credited or due from any Secured Party and any securities or other
property of the Company in the possession of any Secured Party may at all times
be treated as collateral security for the payment of the Obligations, and the
Company hereby pledges to the Disbursement Agent for the benefit of the Secured
Parties and grants the Disbursement Agent a security interest in and to all such
deposits, sums, securities or other property on deposit or in the possession of
such Secured Party, as the case may be. Regardless of the adequacy of any other
collateral, any Secured Party may execute or realize on the Secured Parties'
security interest in any such deposits or other sums credited by or due from any
such Person to the Company, may apply any such deposits or other sums to or set
them off against the Company's obligations to the Secured Parties under this
Agreement and the other Financing Agreements at any time after the occurrence
and during the continuance of any Event of Default.
11.5 Entire Agreement. This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
negotiations and prior writings in respect to the subject matter hereof, all of
which negotiations and writings are deemed void and of no force and effect.
11.6 Governing Law. This Agreement shall be governed by the laws of the
State of New York of the United States of America and shall for all purposes be
governed by and construed in accordance with the laws of such state without
regard to the conflict of law rules thereof other than Section 5-1401 of the New
York General Obligations Law, provided, however, that to the extent any terms of
this Agreement are incorporated in and made part of any other Financing
Agreement, any such term so incorporated shall for all purposes be governed by
and construed in accordance with the law governing the Financing Agreement into
which such term is so incorporated.
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11.7 Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby, and the parties hereto shall enter into
good faith negotiations to replace the invalid, illegal or unenforceable
provision.
11.8 Headings. Paragraph headings have been inserted in this Agreement as
a matter of convenience for reference only and it is agreed that such paragraph
headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
11.9 Limitation on Liability. No claim shall be made by the Company or any
of its Affiliates against the Funding Agents, the Lenders, the Disbursement
Agent, the Intercreditor Agent or any other Secured Party or any of their
respective Affiliates, directors, employees, attorneys or agents for any
special, indirect, consequential or punitive damages (whether or not the claim
therefor is based on contract, tort or duty imposed by law), in connection with,
arising out of or in any way related to the transactions contemplated by this
Agreement or the other Operative Documents or any act or omission or event
occurring in connection therewith; and the Company hereby waives, releases and
agrees not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
11.10 Waiver of Jury Trial. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE COMPANY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE FUNDING AGENTS, DISBURSEMENT AGENT
AND EACH OF THE OTHER LENDERS AND SECURED PARTIES TO ENTER INTO THIS AGREEMENT.
11.11 Consent to Jurisdiction. Any legal action or proceeding by or
against the Company or with respect to or arising out of this Agreement may be
brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District
of New York. By execution and delivery of this Agreement, the Company, accepts,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts for legal proceedings arising out of or in
connection with this Agreement and irrevocably consents to the appointment of
the Prentice-Hall Corporation Systems Inc. as its agent to receive service of
process in New York, New York. Nothing herein shall affect the right to serve
process in any other manner permitted by law or any right to bring legal action
or proceedings in any other competent jurisdiction, including judicial or
non-judicial foreclosure of real property interests which are part of the
Project Security. The Company further agrees that the aforesaid courts of the
State of New York and of the United States of America for the Southern District
of New York shall have exclusive jurisdiction with respect to any claim or
counterclaim of the Company based upon the assertion that the rate of interest
charged by or under this Agreement, or under the other Financing Agreements is
usurious. The Company hereby waives any right to stay or dismiss any action or
proceeding under or in connection with any or all of the Project, this Agreement
or any other Operative Document brought before the foregoing courts on the basis
of forum non-conveniens.
11.12 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding the foregoing, the Company may not
assign or otherwise transfer any of its rights under this Agreement.
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11.13 Reinstatement. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Company's obligations hereunder or under the other Financing Agreements, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by the Secured Parties. In the event that
any payment or any part thereof is so rescinded, reduced, restored or returned,
such obligations shall be reinstated and deemed reduced only by such amount paid
and not so rescinded, reduced, restored or returned.
11.14 No Partnership; Etc. The Secured Parties and the Company intend that
the relationship between them shall be solely that of creditor and debtor.
Nothing contained in this Agreement or in any of the other Financing Agreements
shall be deemed or construed to create a partnership, tenancy-in-common, joint
tenancy, joint venture or co-ownership by or between the Secured Parties and the
Company or any other Person. The Secured Parties shall not be in any way
responsible or liable for the debts, losses, obligations or duties of the
Company or any other Person with respect to the Project or otherwise. All
obligations to pay real property or other taxes, assessments, insurance
premiums, and all other fees and charges arising from the ownership, operation
or occupancy of the Project and to perform all obligations under the agreements
and contracts relating to the Project shall be the sole responsibility of the
Company.
11.15 Costs and Expenses.
11.15.1 The Company shall (subject to the limitations set forth
herein and, with respect to each Funding Agent, in the Financing Agreements to
which such Funding Agent is a party) pay the reasonable legal, engineering and
other professional fees and costs of consultants and advisors to the Funding
Agents, the Disbursement Agent, the Intercreditor Agent and the reasonable
travel expenses and other out-of-pocket costs incurred by each of them in
connection with the preparation, negotiation, execution and delivery, and where
appropriate, registration of the Operative Documents (and all matters incidental
thereto), the syndication of the Loans, the administration of the transactions
contemplated by the Operative Documents (including, without limitation, the
administration of this Agreement, the other Operative Documents and the Security
Documents) and the preservation or enforcement of any of their respective rights
or in connection with any amendments, waivers or consents required under the
Financing Agreements or the Operative Documents. The Funding Agents will
reasonably consult with the Company on a regular basis with respect to on-going
costs of such Persons' consultants and advisors.
11.15.2 The Company shall indemnify, defend and hold harmless the
Mortgage Notes Indenture Trustee, the Mortgage Notes Holders, the HVAC Provider
(including any guarantors and other parties providing credit support for the
HVAC Provider's obligations hereunder), the Insurance Advisor, the Intercreditor
Agent, the Disbursement Agent and their respective shareholders, partners,
officers, directors, employees, representatives and agents, (collectively, the
"Indemnitees") from and against and reimburse the Indemnitees for any and all
present and future claims, expenses, obligations, liabilities, losses, damages,
injuries (to person, property, or natural resources), penalties, stamp or other
similar taxes, actions, suits, judgments, reasonable costs and expenses
(including reasonable attorney's fees) of whatever kind or nature, whether or
not well founded, meritorious or unmeritorious, demanded, asserted or claimed
against any such Indemnitee including any liability resulting from any delay or
omission to pay any such tax (collectively, "Claims") by reason of their
participation in the transactions contemplated by this Agreement or any other
Operative Document, including without limitation any and all Claims arising in
connection with the release or presence of any Hazardous Substances at the
Project, whether foreseeable or unforeseeable, including all costs of removal
and disposal of such Hazardous Substances, all reasonable costs required to be
incurred in (a) determining whether the Project is in compliance and (b) causing
the Project to be in compliance, with all applicable Legal Requirements, all
reasonable costs
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associated with claims for damages to persons or property, and reasonable
attorneys' and consultants' fees and court costs.
11.15.3 The indemnity obligation of the Company pursuant to this
Section 11.15 shall not apply with respect to an Indemnitee, to the extent
arising as a result of the fraud, bad faith, gross negligence or willful
misconduct of such Indemnitee, but shall continue to apply to other Indemnitees.
11.15.4 To the extent that the undertaking in the preceding
paragraphs of this Section 11.15 may be unenforceable because it is violative of
any law or public policy, the Company will contribute the maximum portion that
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of such undertakings.
11.15.5 The provisions of this Section 11.15 shall survive
foreclosure of the Security Documents and satisfaction or discharge of the
Company's obligations hereunder, and shall be in addition to any other rights
and remedies of any Indemnitee.
11.15.6 Any amounts payable by the Company pursuant to this Section
11.15 shall be payable within the later to occur of (i) ten (10) Banking Days
after the Company receives an invoice for such amounts from any applicable
Indemnitee or (ii) five (5) Banking Days prior to the date on which such
Indemnitee reasonably expects to pay such costs on account of which the
Company's indemnity hereunder is payable, and if not paid by such applicable
date shall bear interest at the highest default rate set forth in any of the
Financing Agreements from and after such applicable date until paid in full.
11.15.7 In case any action, suit or proceeding shall be brought
against any Indemnitee, such Indemnitee shall notify the Company of the
commencement thereof. The Company shall be entitled, at its expense, acting
through counsel reasonably acceptable to such Indemnitee, to participate in and,
to the extent that the Company desires, to assume and control the defense
thereof. Upon assumption by the Company of the defense of any such action, suit
or proceeding, the Indemnitee shall have the right to participate in such
action, suit or proceeding and to retain its own counsel but the Company 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 Indemnitee in connection with the defense thereof unless (a) the Company
has agreed to pay such fees and expenses or (b) the Company shall have failed to
employ counsel reasonably satisfactory to the Indemnitee in a timely manner.
Notwithstanding the foregoing, the Company shall not be entitled to assume and
control the defenses of any such action, suit or proceedings if and to the
extent that, in the reasonable opinion of such Indemnitee and its counsel (which
counsel shall be reasonably acceptable to the Company), such action, suit or
proceeding involves the potential imposition of criminal liability upon such
Indemnitee or a conflict of interest between such Indemnitee and the Company or
between such Indemnitee and another Indemnitee (unless such conflict of interest
is waived in writing by the affected Indemnitees), and in such event (other than
with respect to disputes between such Indemnitee and another Indemnitee) the
Company shall pay the reasonable expenses of such Indemnitee in such defense.
11.15.8 The Company shall report to such Indemnitee on the status of
such action, suit or proceeding as material developments shall occur and from
time to time as requested by such Indemnitee. The Company shall deliver to such
Indemnitee a copy of each document filed or served on any party in such action,
suit or proceeding, and each material document which the Company possesses
relating to such action, suit or proceeding.
11.15.9 The Company shall not consent to the terms of any compromise
or settlement of any action defended by the Company in accordance with the
foregoing without the prior consent of
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the Indemnitee, unless such compromise or settlement (i) includes an
unconditional release of the Indemnitee from all liability arising out of such
action or claim and (ii) does not include a statement as to, or an admission of,
fault, culpability or a failure to act by or on behalf of the Indemnitee.
11.15.10 Any Indemnitee against whom any Claim is made shall be
entitled, after consultation with the Company and upon consultation with legal
counsel wherein such Indemnitee is advised that such Claim is reasonably
meritorious, to compromise or settle any such Claim if such Indemnitee
determines in its reasonable discretion that failure to compromise or settle
such Claim is reasonably likely to have a material adverse effect on such
Indemnitee, the Company, the Project or such Indemnitee's interest in the
Project. Any such compromise or settlement shall be binding upon the Company for
purposes of this Section 11.15.
11.15.11 Upon payment of any Claim by the Company pursuant to this
Section 11.15 or other similar indemnity provisions contained herein to or on
behalf of an Indemnitee, the Company, without any further action, shall be
subrogated to any and all claims that such Indemnitee may have relating thereto,
and such Indemnitee shall at the request and expense of the Company cooperate
with the Company and give at the request and expense of the Company such further
assurances as are necessary or advisable to enable the Company vigorously to
pursue such claims.
11.16 Agreements Among Funding Agents and Other Secured Parties.
(a) Notwithstanding any other provision in this Agreement to the
contrary, (a) no provision hereof shall be deemed to relieve or in any way
affect the Secured Parties' respective obligations or liabilities under the
Intercreditor Agreement and (b) no provision hereof shall be deemed to relieve
or in any way affect the HVAC Provider's obligations or liabilities under the
HVAC Provider's Consent.
(b) The HVAC Provider acknowledges and agrees that, except as
specifically set forth herein, none of the Disbursement Agent, the Bank Agent,
the Mortgage Notes Indenture Trustee, the Interim Mall Lender, nor any other
Lender owes a fiduciary duty or any other duty to the HVAC Provider. Except in
respect of their obligations specifically set forth herein, no such Person shall
in any way be responsible or liable for any losses or liabilities of the HVAC
Provider arising in connection with the Project. Without limiting the generality
of the foregoing, none of the Bank Agent, the Mortgage Notes Indenture Trustee,
the Interim Mall Lender or any other Lender shall be under any duty to ensure
that the HC/Mall Component or the HVAC Component is completed, to share, subject
to Section 11.16(d), with the HVAC Provider any information which any of them
may have relating to the Company or the Project, to include the HVAC Provider in
any discussions or communications among such parties, or to take any action or
do any thing to protect or preserve the HVAC Provider interest or investment in
the Project, the Company, or the HVAC Services Agreement. Each of the
Disbursement Agent, the Bank Agent, the Mortgage Notes Indenture Trustee and the
Interim Mall Lender acknowledge and agree that the HVAC Provider does not owe a
fiduciary duty or any other duty to the Disbursement Agent and such Funding
Agents. Except in respect of its obligations specifically set forth herein, the
HVAC Provider shall in no way be responsible or liable for any losses or
liabilities of the Disbursement Agent or such Funding Agents arising in
connection with the Project. Without limiting the generality of the foregoing,
the HVAC Provider shall not be responsible for ensuring that the HC/Mall
Component is completed, to share, subject to Section 11.6(d), with the
Disbursement Agent and such Funding Agents any information which the HVAC
Provider may have relating to the Company or the Project, to include the
Disbursement Agent or any such Funding Agents in any discussions or
communication between the HVAC Provider and any other party or to take any
action or do anything to protect or preserve the
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Disbursement Agent's and such Funding Agents' interest or investment in the
Project, the Company or (except as set forth in the HVAC Provider's consent) the
Operative Documents.
(c) The HVAC Provider acknowledges and agrees that the pledge,
assignment and grant of security interest to the Disbursement Agent set forth in
the Collateral Account Agreements is for the sole and exclusive benefit of the
Secured Parties as security for the Obligations.
(d) Each Funding Agent agrees with each of the other Funding Agents
that it will, upon request, provide such information to the other Funding Agents
and the Disbursement Agent as may be necessary to enable them to make any
calculation required under the Financing Agreements.
11.17 Counterparts. This Agreement may be executed in one or more
duplicate counterparts and when signed by all of the parties listed below shall
constitute a single binding agreement.
11.18 Intercreditor Agreement. The Company acknowledges that the Bank
Agent, the Interim Mall Lender, the Mortgage Notes Indenture Trustee, the
Subordinated Notes Indenture Trustee and the Intercreditor Agent have entered
into the Intercreditor Agreement and agrees that the agreements set forth
therein do not violate the Bank Agent's, the Interim Mall Lender's or the
Mortgage Notes Indenture Trustee's obligation to the Company under the Financing
Agreements. The Company agrees not to take any action to invalidate or challenge
the validity of any provisions of the Intercreditor Agreement. Notwithstanding
anything to the contrary contained herein or in any other Financing Agreement,
at such time that all Obligations other than amounts due under the Mortgage
Notes Indenture have been indefeasibly paid or otherwise satisfied in full and
all Commitments thereunder have been terminated each reference to the
Intercreditor Agreement shall be of no further force or effect.
11.19 Confidentiality. Each of the Funding Agents agrees not to disclose
to any third party any Confidential Information (as defined below), except that
any of the Funding Agents may disclose such information (a) in connection with
any litigation between such Funding Agent and the Company, Adelson or any
Affiliate of either of them, (b) upon the order, request or demand of any
Governmental Instrumentality or if otherwise required by applicable law, (c) in
connection with the exercise of any right or remedy hereunder or under any
Facility Agreement or Financing Agreement after the occurrence of an Event of
Default or Potential Event of Default, (d) to those of its employees,
accountants, attorneys, agents and other advisors, directors, officers,
shareholders, partners, members and other principals who are working on, or are
consulted in connection with, the transactions contemplated by the Facility
Agreements or Financing Agreements or (e) in the case of the Bank Agent, to any
actual or potential participant, assignee, lender, agent or servicer that agrees
to be bound by the provisions of this Section 11.19. "Confidential Information"
shall mean any information relating to the business of the Company, Adelson or
any Affiliate of the Company which is delivered by the Company, Adelson or such
Affiliate of the Company to any Funding Agent or relating to the Loans, the
Advances, the Facility Agreements or the Financing Agreements; provided, that
"Confidential Information" shall not include information (i) that is or becomes
generally available to the public, other than as a result of the disclosure by
any Funding Agent in breach of this provision, (ii) that is or becomes available
to any Funding Agent from any source other than the Company, Adelson or such
Affiliate unless the party supplying such information shall have advised the
Funding Agent that such source is subject to a confidentiality agreement that
covers the information in question or (iii) that is already in the possession of
any Funding Agent on the date hereof and that is not otherwise "Confidential
Information" as defined herein. In the event that any Funding Agent is required
or demanded by legal process (e.g., depositions, interrogatories, requests for
information or documents, subpoena, civil investigation demand or similar
process) to disclose any of the Confidential Information, such Funding Agent
shall give prompt written notice to the Company of such request or demand so
that the Company may, should it elect to do so, within ten (10)
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Business Days of receipt of such notice, seek a protective order or other
appropriate remedy to challenge or contest such request (and give such Funding
Agent notice thereof), and during the pendency of any such action by the
Company, such Funding Agent shall not, to the extent permitted by applicable
law, disclose such Confidential Information.
11.20 Certain Agreements Relating to the Mall.
(a) The Funding Agents agree, for the benefit of Mall I LLC and its
lenders that so long as (i) the conditions precedent to Advances set forth in
Section 3.2 hereof are being satisfied and (ii) Mall I LLC satisfies its
obligations under the Mall Escrow Agreement to provide funds to GCCLLC in
accordance with the terms thereof, then the Funding Agents shall continue making
Advances in accordance with the terms hereof (it being understood that from and
after the Completion Date, the obligation of the Bank Lenders shall be limited
as provided in Section 2.9(c)).
(b) The parties acknowledge that pursuant to the Mall Lease, any
improvements constructed or installed in the Mall Space shall be property of
GCCLLC and its successors in interest to the Mall (including Mall I LLC).
Mall I LLC and its lenders are intended third party beneficiaries of the
provisions of this Section 11.20.
11.21 Termination. This Agreement shall, subject to Section 11.13 and to
the next sentence, terminate and be of no further force or effect upon
completion of the transfer and release of funds contemplated by Section 2.12.
The provisions of Article 9 and Section 11.15 shall survive the termination of
this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Funding Agents'
Disbursement and Administration Agreement to be duly executed by their officers
thereunto duly authorized as of the day and year first above written.
COMPANY:
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: /s/ W P Weidner
------------------------------------
Name: William P. Weidner
------------------------------------
Title: President
------------------------------------
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
By: Las Vegas Sands, Inc., as Managing Member
By: /s/ W P Weidner
------------------------------------
Name: William P. Weidner
------------------------------------
Title: President
------------------------------------
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
a Delaware limited liability company
By: Venetian Casino Resort, LLC. as Sole Member
By: Las Vegas Sands, Inc., as Managing Member
By: /s/ W P Weidner
------------------------------------
Name: William P. Weidner
------------------------------------
Title: President
------------------------------------
BANK AGENT:
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank
By: /s/ Allan Pendergast
------------------------------------
Name: Allan Pendergast
------------------------------------
Title: Relationship Manager
------------------------------------
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MORTGAGE NOTES INDENTURE TRUSTEE:
FIRST TRUST NATIONAL ASSOCIATION,
By: /s/ R Prokosch
----------------------------
Name: Richard H. Prokosch
----------------------------
Title: Assistant Vice President
----------------------------
INTERIM MALL LENDER:
GMAC COMMERCIAL MORTGAGE CORPORATION,
a California corporation
By: /s/ Vacys Garbonkus
----------------------------
Name: VACYS GARBONKUS
----------------------------
Title: SENIOR VICE PRESIDENT
----------------------------
HVAC PROVIDER:
ATLANTIC-PACIFIC LAS VEGAS, LLC,
a Delaware limited liability company
By: /s/ Carl H. Fogler
----------------------------
Name: Carl H. Fogler
----------------------------
Title: Vice President
----------------------------
DISBURSEMENT AGENT:
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank
By: /s/ Allan Pendergast
----------------------------
Name: Allan Pendergast
----------------------------
Title: Relationship Manager
----------------------------
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EXHIBIT A to
Funding Agents'
Disbursement and
Administration Agreement
DEFINITIONS
"Accounts" means the Company's Funds Account, the Mortgage Notes
Proceeds Account, the Disbursement Account, the Cash Management Account, the
HC/Mall Component Cash Management Sub-Account, the HVAC Component Cash
Management Sub-Account, the Interest Payment Account, the Bank Proceeds Account,
the Pre-Completion Revenues Account, the Collection Account, the Operating
Account and any other accounts or sub-accounts established pursuant to the
Collateral Account Agreements other than the HVAC Accounts, the Mall
Retainage/Punchlist Account, the Mall Leasing Commissions Reserve Account, the
Mall Tenant Improvements Reserve Account, the Lien Protection Account, and the
Guaranty Deposit Account.
"Additional Company Equity" means 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 Funding Agents' Disbursement and Administration
Agreement.
"Additional Contract Certificate" means an Additional Contract
Certificate substantially in the form of Exhibit F to the Funding Agents'
Disbursement and Administration Agreement.
"Adelson" means Sheldon G. Adelson, an individual.
"Adelson Completion Guaranty" means that certain Guaranty dated as
of November 14, 1997 executed by 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" means that certain Intercreditor
Agreement dated as of November 14, 1997 among the Bank Agent, the Interim Mall
Lender, the Mortgage Notes Indenture Trustee, the Subordinated Notes Indenture
Trustee, VCR, LVSI, GCCLLC and Adelson.
"Advance" means (a) with respect to the Bank Credit Facility and the
Interim Mall Facility, an advance of Loans deposited in the Collection Account
or a transfer of funds from the Mall Retainage/Punchlist Account, the Bank
Proceeds Account or the Pre-Completion Revenues Account to the Collection
Account, (b) with respect to the Mortgage Notes, a release of funds from the
Mortgage Notes Proceeds Account, (c) with respect to the HVAC Commitment
Facility, a contribution of funds by the HVAC Provider pursuant to the HVAC
Services Agreement and (d) with respect to amounts on deposit in the Company's
Funds Account, a release of funds from the Company's Funds Account, in each
case, made pursuant to Article 2 of the Funding Agents' Disbursement and
Administration Agreement and (except with respect to funds on deposit in the
<PAGE>
Company's Funds Account) the applicable Facility Agreements under which all or
any part of such Advance is requested.
"Advance Confirmation Notice" has the meaning given in Section
2.5.3(a) of the Funding Agents' Disbursement and Administration Agreement.
"Advance Date" means the date on which an Advance is required to be
deposited in the Collection Account pursuant to Section 2.5.4(a)(ii) of the
Funding Agents' Disbursement and Administration Agreement.
"Advance Request" means an Advance Request and Certificate
substantially in the form of Exhibit C-1 to the Funding Agents' Disbursement and
Administration Agreement.
"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.
"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 Earnings" means, at any time, with respect to the
Mortgage Notes Proceeds Account and the Company's Funds Account, respectively,
the amount of investment income which the Company reasonably determines with (a)
the reasonable concurrence of the Construction Consultant and (b) the
concurrence of the Disbursement Agent (acting in its sole discretion exercised
in good faith) will accrue on the funds in each such Account through the
anticipated Completion Date, taking into account the current and future
anticipated rates of return on Permitted Investments in such Accounts and the
anticipated times and amounts of draws from each such Account for the payment of
Project Costs.
"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 Financing Date: (a) that are reflected in amendments to the
Plans and Specifications implemented after the Financing Date in accordance with
the provisions of Section 6.2 of the Funding Agents' Disbursement and
Administration 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 (other than such
addition or expansion), (ii) in any material 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 Purposes or any
other portion of the remainder of the Project (other than such addition or
expansion) for the Project Intended Purposes or (iv) in any material respect,
the appearance of the Mall or any other portion of the Project (other than such
addition or expansion).
"Approved Equipment Funding Commitments" means, collectively, (a)
the GECC Commitment and (b) any replacement of all or a portion of the GECC
Commitment from an
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institutional or other lender that qualifies as an Eligible Assignee (as defined
in the Bank Credit Agreement) if (i) such commitment is in form and substance
reasonably satisfactory to the Bank Agent and the Interim Mall Lender, (ii) the
collateral securing the Indebtedness under such commitment includes only items
comprising the Equipment Component and (iii) to the extent that the Bank Agent
deems it appropriate in their sole discretion, the lender under such commitment
executes an intercreditor agreement in accordance with Section 7.12(c) of the
Mortgage Notes Indenture and otherwise satisfactory to the Bank Agent.
"Atlantic" means Atlantic Thermal Systems, Inc., a Delaware
corporation.
"Atlantic Account" has the meaning given in the Atlantic Collateral
Account Agreement.
"Atlantic Collateral Account Agreement" means that certain
Collateral Account Agreement dated as of November 14, 1997 among Atlantic, the
Disbursement Agent and The Bank of Nova Scotia, as securities intermediary.
"Atlantic Letter of Credit" has the meaning given in Section 2.4 of
the Funding Agents' Disbursement and Administration Agreement.
"Authorized Representative" means as to any Person, its president,
chief executive officer, any vice president, treasurer or secretary or any other
person identified as such in a certificate of such Person delivered to the
Funding Agents.
"Availability Period" shall mean the period commencing on the
Financing Date and ending on the earlier to occur of (a) the Final Completion
Date and (b) the Outside Completion Deadline.
"Available Funds" means, from time to time, the sum of (i) the
aggregate of the unutilized Commitments under the Bank Credit Facility and the
Interim Mall Facility, plus (ii) the aggregate of amounts on deposit in the HVAC
Accounts and the amounts available to be drawn under the HVAC Letters of Credit,
plus (iii) the aggregate of the amounts on deposit in the Company's Funds
Account and the Mortgage Notes Proceeds Account and all Anticipated Earnings
thereon, plus (iv) the aggregate of the amounts on deposit 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 under all
Approved Equipment Funding Commitments less amounts drawn under the Bank
Revolving Facility pursuant to Section 2.2.3(b) of the Funding Agents'
Disbursement and Administration Agreement, 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 from time to time), plus
(vi) the lesser of (A) the aggregate amount of Project Costs which the
Construction Manager, Direct Construction Guarantor or 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 (B) the aggregate amount of Remaining Costs set forth in column
10 of the Anticipated Cost Report (as in effect from time to time) for the Line
Items for which the Company may use such funds, plus (vii) (A) prior to the
Completion Date, 25% of the amount on deposit in the Pre-Completion Revenues
Account and (B) after the Completion Date, the amount on deposit in the
Pre-Completion Revenues Account, plus (viii) from and after the inclusion of the
Working Capital Line Item Category
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in the Project Budget in accordance with Section 6.4 of the Funding Agents'
Disbursement and Administration Agreement, the lesser of (A) the amount
available to be drawn under the Bank Revolving Facility 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).
"Bank Agent" has the meaning given to the term "Administrative
Agent" in the Bank Credit Agreement.
"Bank Credit Agreement" means that certain Credit Agreement dated as
of November 14, 1997 among LVSI, VCR, the Bank Agent, Goldman Sachs Credit
Partners L.P., as syndication agent and arranger, and the Bank Lenders.
"Bank Credit Facility" means the term loan credit facility described
and made available to LVSI and VCR by the Bank Lenders pursuant to the Bank
Credit Agreement (specifically excluding the Bank Revolving Facility).
"Bank Deeds of Trust" means, collectively, the Bank Fee Deed of
Trust, the Bank Mall Parcel Fee Deed of Trust and the Bank Leasehold Deed of
Trust.
"Bank Environmental Indemnity" means that certain Environmental
Indemnity Agreement dated as of November 14, 1997 among LVSI, VCR and the Bank
Agent.
"Bank Fee 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, made by LVSI and VCR as trustors, to Lawyers Title of
Nevada, Inc., as trustee, for the benefit of the Bank Agent, as beneficiary.
"Bank Leasehold Deed of Trust" means that certain Leasehold Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing
dated as of November 14, 1997, made by GCCLLC as trustor, to Lawyers Title of
Nevada, Inc., as trustee, for the benefit of the Bank Agent, as beneficiary.
"Bank Lenders" means the financial institutions which are now, or
may in the future become, parties to the Bank Credit Agreement.
"Bank Mall Parcel Fee Deed of Trust" means the deed of trust to be
executed by GCCLLC for the benefit of the Bank Agent in accordance with Section
5.16(b)(viii) of the Funding Agents' Disbursement and Administration Agreement,
which deed of trust shall be in a form substantially similar to the Bank Fee
Deed of Trust and shall encumber the Mall Parcel.
"Bank Proceeds Account" has the meaning given in the Company
Collateral Account Agreement.
"Bank Revolving Facility" means the revolving loan credit facility
described and made available to the Company under the Bank Credit Agreement.
"Bank Security Documents" means the Bank Deeds of Trust, the Bank
Environmental Indemnity, the Company Security Agreement, the GCCLLC Security
Agreement, the Company Collateral Account Agreements (other than the Mortgage
Notes Collateral Account Agreement), the
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GCCLLC Bank Guaranty and any other guaranties, deeds of trust, security
agreements or collateral account agreements executed from time to time by LVSI,
VCR or GCCLLC or direct or indirect subsidiaries of LVSI, VCR or GCCLLC in favor
of the Bank Agent or the Bank Lenders to guaranty the Obligations under the Bank
Credit Facility.
"Banking Day" means (a) for all purposes other than as covered by
clause (b) below, any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York or Nevada or is a day on
which banking institutions located in either such state are authorized or
required by law or other governmental action to close, and (b) with respect to
all notices, determinations, fundings and payments in connection with the
"Adjusted Eurodollar Rate" or any "Eurodollar Rate Loans" (each, as defined in
the Bank Credit Agreement), any day that is a Banking Day described in clause
(a) above and that is also a day for trading by and between banks in Dollar
deposits in the London interbank market.
"Base TI Budget Amount" means, from time to time, the sum of (a) the
aggregate amount of tenant improvement allowances granted by the Company 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.
"Benchmark" shall have the meaning given in Exhibit J to the Funding
Agents' Disbursement and Administration Agreement.
"Billboard Lease" means that certain restaurant lease dated as of
June 26, 1997 between VCR as landlord and "B.L. of Las Vegas, Inc." as tenant,
as ratified and confirmed as follows. Pursuant to a Subordination,
Nondistrubance and Attornment Agreement dated on or about November 14, 1997, the
tenant under said lease confirmed that its correct name is B.L. International,
Inc., and said tenant ratified and confirmed all of the terms of said lease and
that B.L. International of Nevada, Inc. is responsible for all of the
obligations of the tenant thereunder. The Billboard Lease sometimes also is
referred to herein as the "Billboard Operating Lease." The parties to the
Funding Agents' Disbursement and Administration Agreement agree that all
references to the "Billboard Lease" or the "Billboard Operating Lease" in the
various Financing Agreements and Project Documents shall be deemed to refer to
the lease references in this definition, as so ratified and confirmed,
notwithstanding any inconsistent references therein.
"Billboard Master Lease" means that certain lease dated as of
November 14, 1997 executed by VCR as landlord and GCCLLC as tenant concerning
that portion of the Site covered by the Billboard Lease that is not within the
Mall Space. The Billboard Master Lease also is sometimes referred to herein as
the "Master Lease for Additional Billboard Space."
"Bovis Balance" means, 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 under 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).
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"Bovis Line Items" means, collectively, the Line Items of the
Project Budget which relate to work covered by the Construction Management
Agreement.
"Buffer Zone Space" means the property and space described in
Exhibit T-9 to the Funding Agents' Disbursement and Administration Agreement.
"Building Department" means the Clark County Building Department.
"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 Management Account" has the meaning given in the Company
Collateral Account Agreement.
"Casino Lease" means that certain Lease dated as of November 14,
1997 by and between VCR and LVSI.
"Collateral Account Agreements" means, collectively, the Company
Collateral Account Agreement, the Mortgage Notes Collateral Account Agreement,
the Atlantic Collateral Account Agreement, the Pacific Collateral Account
Agreement, the Completion Guaranty Collateral Account Agreement and any other
collateral account agreement entered into after the Financing Date granting the
Disbursement Agent for the benefit of Secured Parties a security interest in any
account.
"Collection Account" has the meaning given in the Company Collateral
Account Agreement.
"Commitment" means, (a) with respect to the Bank Credit Facility,
the aggregate principal amount of all Loans to the Company which may be made
under such Facility for the purpose of financing Project Costs (specifically
excluding the amount made available under the Bank Revolving Facility), and (b)
with respect to each other Facility, the aggregate principal amount of all Loans
or other advances (or, in the case of the HVAC Commitment Facility,
contributions) to the Company which may be made under such Facility, as
specified in the applicable Facility Agreement.
"Company" means LVSI, VCR and GCCLLC, jointly and severally.
"Company Collateral Account Agreement" means that certain
Disbursement Collateral Account Agreement dated as of November 14, 1997, among
LVSI, VCR, GCCLLC, the Disbursement Agent and The Bank of Nova Scotia, as
securities intermediary.
"Company Security Agreement" means that certain Security Agreement
dated as of November 14, 1997 executed by LVSI, VCR and GCCLLC in favor of the
Intercreditor Agent on behalf of itself, the Disbursement Agent, the Bank Agent,
the Interim Mall Lender and the Mortgage Notes Indenture Trustee.
"Company's Closing Certificate" means a Closing Certificate in the
form of Exhibit B-1 to the Funding Agents' Disbursement and Administration
Agreement.
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"Company's Funds Account" has the meaning given in the Company
Collateral Account Agreement.
"Completion" means that each of the following has occurred:
(a) the Company shall be permitted to cause the Opening Date to
occur under Section 6.7 of the Funding Agents' Disbursement and
Administration Agreement;
(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 Company and approved by the Construction
Consultant and the Disbursement Agent as a reasonable final punchlist
(such approval not to be unreasonably withheld);
(d) the Company and the Construction Consultant shall have certified
to the Disbursement Agent and the other 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 of such date and
at a total cost not to exceed $20,000,000;
(e) the Company and the Construction Consultant shall have certified
to the Disbursement Agent and the other 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; and
(f) HVAC Completion shall have occurred.
"Completion Certificates" means, collectively, the Completion
Certificates in the form of Exhibit W-1 and W-2 to the Funding Agents'
Disbursement and Administration Agreement to be delivered by the Company and the
Construction Consultant, respectively.
"Completion Date" means the date on which Completion occurs.
"Completion Guaranty Collateral Account Agreement" means,
collectively, that certain Completion Guaranty Collateral Account Agreement
dated as of November 14, 1997 between Adelson and the Disbursement Agent and the
related third party account agreement .
"Component Specific Anticipated Cost Reports" means anticipated cost
reports in a format similar to Exhibit H-1 to the Funding Agents Disbursement
and Administration Agreement and which provide, with respect to each
Construction Component, the information indicated therein segregated by Line
Item.
"Consents" means consents to the collateral assignment by the
Company of Project Documents in substantially the form of Exhibit S to the
Funding Agents' Disbursement and Administration Agreement.
"Construction Agency Agreement" means that certain Construction
Agency Agreement dated as of May 1, 1997 by and between the HVAC Provider and
VCR.
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"Construction Component" means any of the HC/Mall Component, the
HVAC Component or the Equipment Component.
"Construction Consultant" means 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 Intercreditor Agreement, to serve as the
Construction Consultant under the Funding Agents' Disbursement and
Administration Agreement.
"Construction Consultant Engagement Agreement" means that certain
Engagement Letter dated as of November 14, 1997 by and among the Construction
Consultant, the Company, the Bank Agent, the Interim Mall Lender, the Mortgage
Notes Indenture Trustee, the Tranche A Take Out Lender and Goldman, Sachs & Co.
"Construction Consultant's Closing Certificate" means a closing
certificate in the form of Exhibit B-2 to the Funding Agents' Disbursement and
Administration Agreement.
"Construction Consultant's Report" means a report of the
Construction Consultant delivered to the Disbursement Agent, the Bank Agent, the
Interim Mall Lender, the Initial Purchasers and the HVAC Provider pursuant to
Section 3.1.12 of the Funding Agents' Disbursement and Administration Agreement
and stating, among other things, that (a) the Construction Consultant has
reviewed the Project Documents, the Plans and Specifications, and other material
information deemed necessary by the Construction Consultant for the purpose of
evaluating whether the Project can be constructed and completed in the manner
contemplated by the Operative Documents and (b) based on its review of such
information, the Construction Consultant is of the opinion that the Project can
be constructed in the manner contemplated by the Operative Documents and, in
particular, that the Project can be constructed and completed in accordance with
the Project Documents and the Plans and Specifications within the parameters set
by the Project Schedule and the Project Budget.
"Construction Expenses" means all Project Costs other than (a)
Pre-Opening Expenses, (b) Debt Service and (c) Issuance Fees and Expenses.
"Construction Loan" means the loan or loans made to the Company in
an aggregate amount not exceeding $45 Million pursuant to that certain
Promissory Note dated as of September 8, 1997 executed by LVSI and VCR in favor
of Goldman Sachs Credit Partners L.P.
"Construction Management Agreement" means 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 executed by LVSI, VCR, the Construction Manager, the
Direct Construction Guarantor and the Indirect Construction Guarantor.
"Construction Manager" means Lehrer McGovern Bovis, Inc., a New York
corporation.
"Contract Amendment Certificate" means a Contract Amendment
Certificate substantially in the form of Exhibit G to the Funding Agents'
Disbursement and Administration Agreement.
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"Contractors" means any architects, consultants, designers,
contractors, subcontractors, suppliers, laborers or any other Persons engaged by
the Company 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 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.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Internal Revenue Code of 1986, as
amended.
"Cooperation Agreement" means that certain Amended and Restated
Reciprocal Easement, Use and Operating Agreement dated as of November 14, 1997
by and between LVSI, VCR, GCCLLC and Interface Group-Nevada, Inc.
"Debt Service" means all principal repayments or interest and other
amounts payable or accrued from time to time under any of the Bank Credit
Agreement, the Interim Mall Credit Agreement, the Mortgage Notes, the
Subordinated Notes or the Approved Equipment Funding Commitments.
"Deeds of Trust" means, collectively, the Bank Deeds of Trust, the
Interim Mall Deeds of Trust and the Mortgage Notes Indenture Deeds of Trust.
"Development Agreements" means, collectively, that certain Sands
Resort Hotel & Casino Agreement dated as of February 18, 1997 by and between the
County of Clark and LVSI, which agreement is commonly referred to as the
"Predevelopment Agreement" and any other agreements relating to the construction
of the Project entered into between the Company and a Governmental
Instrumentality.
"Direct Construction Guarantor" means Bovis, Inc., a New York
corporation.
"Direct Construction Guaranty" means that certain 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 Account" has the meaning given in the Company
Collateral Account Agreement.
"Disbursement Agent" means The Bank of Nova Scotia, in its capacity
as the disbursement agent under the Funding Agents' Disbursement and
Administration Agreement and its successors in such capacity.
"Eight Month Certificate" means a certificate to be issued by the
Construction Consultant in the form of Exhibit L-2 to the Funding Agents'
Disbursement and Administration Agreement.
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"Element Specific Anticipated Cost Report" means any of the Element
Specific Anticipated Cost Reports in the forms of Schedules 1 through 8 to
Exhibit H-2 to the Funding Agents' Disbursement and Administration Agreement.
"Environmental Claim" means any and all obligations, liabilities,
losses, administrative, regulatory or judicial actions, suits, demands, decrees,
claims, liens, judgments, warning notices, notices of noncompliance or
violation, investigations, proceedings, removal or remedial actions or orders,
or damages (foreseeable and unforeseeable, including consequential and punitive
damages), penalties, fees, out-of-pocket costs, expenses, disbursements,
attorneys' or consultants' fees, relating in any way to any Environmental Law or
any Permit issued under any such Environmental Law (hereafter "Claims")
including (a) any and all Claims by Governmental Instrumentalities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Substances or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" means any of:
(a) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.)
("CERCLA");
(b) the Federal Water Pollution Control Act (33 U.S.C. Section 1251
et seq.) ("Clean Water Act" or "CWA");
(c) the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.) ("RCRA");
(d) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.)
("AEA");
(e) the Clean Air Act (42 U.S.C. Section 7401 et seq.) ("CAA");
(f) the Emergency Planning and Community Right to Know Act (42
U.S.C. Section 11001 et seq.) ("EPCRA");
(g) the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. Section 136 et seq.) ("FIFRA");
(h) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486);
(i) the Safe Drinking Water Act (42 U.S.C. Sections 300f et seq.)
("SDWA");
(j) the Surface Mining Control and Reclamation Act of 1974 (30
U.S.C. Sections 1201 et seq.) ("SMCRA");
(k) the Toxic Substances Control Act (15 U.S.C. Section 2601 et
seq.) ("TSCA");
(l) the Hazardous Materials Transportation Act (49 U.S.C. Section
1801 et seq.) ("HMTA");
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(m) the Uranium Mill Tailings Radiation Control Act of 1978 (42
U.S.C. Section 7901 et seq.) ("UMTRCA");
(n) the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.) ("OSHA");
(o) the Nevada Hazardous Materials law (NRS Chapter 459);
(p) the Nevada Solid Waste/Disposal of Garbage or Sewage law (NRS
444.440 to 444.650, inclusive);
(q) the Nevada Water Controls/Pollution law (NRS Chapter 445A);
(r) the Nevada Air Pollution law (NRS Chapter 445B);
(s) the Nevada Cleanup of discharged Petroleum law (NRS 590.700 to
590.920, inclusive);
(t) the Nevada Control of Asbestos law (NRS 618.750 to 618.850);
(u) the Nevada Appropriation of public waters law (NRS 533.324 to
533.4385, inclusive);
(v) the Nevada Artificial water body development permit law (NRS
502.390);
(w) the Nevada Protection of Endangered Species, Endangered wildlife
permit (NRS 503.585) and Endangered flora permit law (NRS 527.270);
(x) and all other Federal, state and local Legal Requirements which
govern Hazardous Substances, and the regulations adopted and publications
promulgated pursuant to all such foregoing laws.
"Environmental Matter" 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;
(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, 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);
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(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 Component" means the equipment, fixtures and other items
described in Exhibit T-3 to the Funding Agents' Disbursement and Administration
Agreement.
"Equipment Funding Providers' Intercreditor Agreements" means,
collectively, any one or more intercreditor agreements executed by lenders party
to the Approved Equipment Funding Commitments.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and ruling issued
thereunder.
"ERISA Plan" means any employee benefit plan (a) maintained by the
Company or any member of the Controlled Group, or to which the Company or any
member of the Controlled Group contributes or is obligated to contribute, for
its employees and (b) covered by Title IV of ERISA or to which Section 412 of
the Code applies.
"Event of Default" has the meaning given in Section 7.1 of the
Funding Agents' Disbursement and Administration Agreement.
"Event of Force Majeure" means any event that causes a delay in the
construction of the Project and is outside the Company's reasonable control but
only to the extent (a) such event does not arise out of the negligence or
willful misconduct of the Company and (b) such event consists of an Act of God
(such as tornado, flood, hurricane, etc.); fires and other casualties; strikes,
lockouts or other labor disturbances (except to the extent taking place at the
Site only); riots, insurrections or civil commotions; embargoes, shortages or
unavailability of materials, supplies, labor, equipment and systems that first
arise after the Financing Date, but only to the extent caused by another act,
event or condition covered by this clause (b); sabotage; vandalism; act,
omissions to act, or failures to timely act by the Project Architect; the
requirements of law, statutes, regulations and other Legal Requirements enacted
after the Financing Date (unless the Company should, in the exercise of due
diligence and prudent judgment, have anticipated such enactment); orders or
judgments; or any similar types of events, provided that the Company has sought
to mitigate the impact of the delay.
"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.
"Executed Leases" means, collectively and from time to time, (a) the
Billboard Lease, (b) letters of intent executed prior to the Financing Date 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
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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 the Financing Date with respect to
the First Level Space.
"Exhaustion" means, (a) with respect to the Bank Credit Facility,
the Interim Mall Facility and the HVAC Commitment Facility, the time at which
the Commitment under such Facility has been utilized and no further Advances are
available thereunder and (b) with respect to the Mortgage Notes, the time at
which no funds remain in the Mortgage Notes Proceeds Account.
"Facility" or "Facilities" means, as the context may require, any or
all of the Bank Credit Facility, the Interim Mall Facility, the HVAC Commitment
Facility and the Mortgage Notes Proceeds.
"Facility Agreements" means, collectively, the Bank Credit
Agreement, the Interim Mall Credit Agreement, the Mortgage Notes Indenture and
the HVAC Services Agreement.
"FCMI" means Forest City Commercial Management, Inc., an Ohio
corporation.
"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 Building Department (and copies of such certificates shall
have been delivered to the Disbursement Agent, the Bank Agent, the Mortgage
Notes Indenture Trustee and the Tranche A Take Out Lender), (c) a Notice of
Completion has been posted with respect to the Project and recorded in the
Office of the County Recorder of Clark County, Nevada, (d) the Funding Agents
have received final 101.6 endorsements from the Title Insurer insuring the
priority of their respective Liens on the Project Security, (e) the Company
shall have delivered to the Disbursement Agent, the Bank 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 Company has 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 has been
completed, (f) the Construction Consultant shall have delivered its Final
Completion Certificate and (g) the Company shall have delivered to the Funding
Agents and the Tranche A Take Out Lender an "as built survey" of the Project.
"Final Completion Certificates" means, collectively, the Final
Completion Certificates in the forms of Exhibits W-8 and W-9, respectively, to
the Funding Agents' Disbursement and Administration Agreement.
"Final Completion Date" means the date on which Final Completion
occurs.
"Final Plans and Specifications" with respect to any particular work
or improvement means Plans and Specifications which (i) have received final
approval from all Governmental Instrumentalities required to approve such Plans
and Specifications prior to completion of the work or improvements; and (ii)
contain sufficient specificity to permit the completion of the work or
improvement.
"Financing Agreements" means, collectively, the Funding Agents'
Disbursement and Administration Agreement, the Bank Credit Agreement, the
Interim Mall Credit Agreement, the
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Mortgage Notes Indenture, the Security Documents, the Mortgage Notes, and any
other loan or security agreements entered into on, prior to or after the
Financing Date with the Bank Agent, the Interim Mall Lender or the Indenture
Trustee to finance the Project, as the same may be amended from time to time in
accordance with the terms and conditions of the Funding Agents' Disbursement and
Administration Agreement and thereof.
"Financing Date" means the first date on which each of the
conditions precedent listed in Section 3.1 of the Funding Agents' Disbursement
and Administration Agreement have been satisfied or waived and an Advance is
made.
"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
Funding Agents' Disbursement and Administration Agreement) comprising the first
level space in the Mall (including the space covered by the Billboard Lease
(which is within the Mall) but excluding the Retail Annex) and the first and
second level space of the Retail Annex.
"Funding Agents" means, collectively, the Bank Agent, the Interim
Mall Lender, the Mortgage Notes Indenture Trustee and the HVAC Provider.
"Funding Agents' Disbursement and Administration Agreement" means
that certain Funding Agents' Disbursement and Administration Agreement dated as
of November 14, 1997 among the Company, the Bank Agent, the Mortgage Notes
Indenture Trustee, the Interim Mall Lender, the HVAC Provider and the
Disbursement Agent.
"Funds Providers" means, collectively, the Bank Lenders, the Interim
Mall Lender and the HVAC Provider.
"Gaming Control Acts" means Nevada Gaming Laws.
"GCCLLC" means Grand Canal Shops Mall Construction, LLC, a Delaware
limited liability company.
"GCCLLC Bank Guaranty" means that certain Guaranty dated as of
November 14, 1997, executed by GCCLLC, in favor of the Bank Agent.
"GCCLLC Permitted Encumbrances" has the meaning given in Section
3.1.28 of the Funding Agents' Disbursement and Administration Agreement.
"GCCLLC Security Agreement" means that certain Security Agreement
dated as of November 14, 1997 executed by GCCLLC in favor of the Intercreditor
Agent on behalf of itself and the Secured Parties.
"GECC Commitment" means the commitment of General Electric Capital
Corporation to advance loans to VCR pursuant to that certain letter agreement
dated as of October, 1997 between VCR and General Electric Capital Corporation.
"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
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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" has the meaning given in the Completion
Guaranty Collateral Account Agreement.
"Harrah's Shared Roadway Agreement" means an agreement between VCR
and Harrah's Casino Resort, 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.
"Hazardous Substances" means (statutory acronyms and abbreviations
having the meaning given them in the definition of "Environmental Laws")
substances defined as "hazardous substances," "pollutants" or "contaminants" in
Section 101 of the CERCLA; those substances defined as "hazardous waste,"
"hazardous materials" or "regulated substances" by the RCRA; those substances
designated as a "hazardous substance" pursuant to Section 311 of the CWA; those
substances defined as "hazardous materials" in Section 103 of the HMTA; those
substances regulated as a hazardous chemical substance or mixture or as an
imminently hazardous chemical substance or mixture pursuant to Sections 6 or 7
of the TSCA; those substances defined as "contaminants" by Section 1401 of the
SDWA, if present in excess of permissible levels; those substances regulated by
the Oil Pollution Act; those substances defined as a pesticide pursuant to
Section 2(u) of the FIFRA; those substances defined as a source, special nuclear
or by-product material by Section 11 of the AEA; those substances defined as
"residual radioactive material" by Section 101 of the UMTRCA; those substances
defined as "toxic materials" or "harmful physical agents" pursuant to Section 6
of the OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part
261.3; those substances defined as hazardous waste constituents in 40 C.F.R.
Part 260.10, specifically including Appendix VII and VIII of Subpart D of 40
C.F.R. Part 261; those substances designated as hazardous substances in 40
C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous substances
or hazardous materials in 49 C.F.R. Part 171.8; those substances regulated as
hazardous materials, hazardous substances, or toxic substances in 40 C.F.R. Part
1910; in any other Environmental Laws; and in the regulations adopted and
publications promulgated pursuant to said laws, whether or not such regulations
or publications are specifically referenced herein.
"HC/Mall Component" means all portions of the Project other than the
HVAC Component and the Equipment Component.
"HC/Mall Component Cash Management Sub-Account" has the meaning
given in the Company Collateral Account Agreement.
"HC/Mall Component Funding Sources" means the Bank Credit Facility,
the Interim Mall Facility, the Mortgage Notes Proceeds and amounts on deposit in
the Company's Funds Account.
"Hotel/Casino" means all portions of the HC/Mall Component other
than the Mall.
"Hotel/Casino Space" means the property and space described in
Exhibit T-8 to the Funding Agents' Disbursement and Administration Agreement.
"HVAC Accounts" means, collectively, the Atlantic Account and the
Pacific Account.
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"HVAC Commitment Facility" means the funding commitment of up to
Seventy Million Dollars ($70,000,000) in respect of the Total Energy Improvement
Costs as determined, described and made available to the Company by the HVAC
Provider pursuant to the HVAC Services Agreement.
"HVAC Completion" means that (a) each of the Company 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 Company and the HVAC Provider have
certified to the Disbursement Agent that the Company (with the HVAC Provider's
assistance) has 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 aids,
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 Consultant 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
Manager's and each Subcontractor's personnel, supplies, equipment, waste
materials, rubbish and temporary facilities have been removed from the HVAC
Component.
"HVAC Component" means the equipment and fixtures described in
Exhibit T-2 to the Funding Agents' Disbursement and Administration Agreement and
the other components of the Total Energy Improvement Costs.
"HVAC Component Cash Management Sub-Account" has the meaning given
in the Company Collateral Account Agreement.
"HVAC Ground Lease" means that certain Ground Lease dated as of
November 14, 1997 between VCR and the HVAC Provider.
"HVAC Letters of Credit" has the meaning given in Section 2.4 of the
Funding Agents' Disbursement and Administration Agreement.
"HVAC Provider" means Atlantic-Pacific Las Vegas, LLC, a Delaware
limited liability company.
"HVAC Provider's Consent" means that certain Consent and Agreement
dated as of November 14, 1997 executed by the HVAC Provider in favor of the Bank
Agent, the Interim Mall Lender and the Mortgage Notes Indenture Trustee.
"HVAC Services Agreement" means that certain Energy Services
Agreement dated as of May 1, 1997 between VCR and the HVAC Provider.
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"Improvements" means the buildings, fixtures and other improvements
to be situated on the Site.
"Indebtedness," as applied to any Person, means (a) all indebtedness
for borrowed money, (b) that portion of obligations with respect to leases which
are or should be, in accordance with generally accepted accounting principles,
classified as a capital lease and a liability on a balance sheet, (c) notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money, (d) any obligation owed for all or
any part of the deferred purchase price of property or services (excluding any
such obligations incurred under ERISA), which purchase price is (i) due more
than six months from the date of incurrence of the obligation in respect thereof
or (ii) evidenced by a note or similar written instrument, and (e) 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.
Obligations under Interest Rate Agreements do not constitute Indebtedness
hereunder. All obligations under the Financing Agreements shall constitute
Indebtedness hereunder. In no event shall obligations under the HVAC Services
Agreement be deemed to be Indebtedness for purposes of the Financing Agreements.
"Independent Consultants" means collectively the Construction
Consultant, the Insurance Advisor or their successors appointed pursuant to the
Funding Agents' Disbursement and Administration Agreement.
"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 of
Performance dated as of August 19, 1997 executed by the Indirect 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.
"Initial Purchasers" means Goldman, Sachs & Co. and Bear Stearns &
Co. Inc.
"Insurance Advisor" means Sedgwick James of Tennessee, Inc., or its
successor, appointed pursuant to the Funding Agents' Disbursement and
Administration Agreement.
"Intercreditor Agent" means The Bank of Nova Scotia, in its capacity
as the intercreditor agent under the Intercreditor Agreement and its successors
in such capacity.
"Intercreditor Agreement" means that certain Intercreditor Agreement
dated as of November 14, 1997 among the Bank Agent, the Interim Mall Lender, the
Mortgage Notes Indenture Trustee, the Subordinated Notes Indenture Trustee and
The Bank of Nova Scotia, as the intercreditor agent thereunder.
"Interest Payment Account" has the meaning given in the Company
Collateral Account Agreement.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement.
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"Interface" means Interface Group of Nevada, Inc., a Nevada
corporation.
"Interface Holding" means Interface Group Holding Company, Inc., a
Nevada corporation.
"Interim Mall Credit Agreement" means that certain Credit Agreement
dated as of November 14, 1997 among LVSI, VCR, GCCLLC and the Interim Mall
Lender.
"Interim Mall Deeds of Trust" means, collectively, the Interim Mall
Space Fee Deed of Trust and the Interim Mall Leasehold Deed of Trust.
"Interim Mall Environmental Indemnity" means that certain
Environmental Indemnity Agreement dated as of November 14, 1997 among LVSI, VCR
and the Interim Mall Lender.
"Interim Mall Facility" means the credit facility described and made
available to LVSI, VCR and GCCLLC by the Interim Mall Lender pursuant to the
Interim Mall Credit Agreement.
"Interim Mall 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, made by GCCLLC, as trustor, to Lawyers Title of
Nevada, Inc. as trustee, for the benefit of the Interim Mall Lender, as
beneficiary.
"Interim Mall Lender" means GMAC Commercial Mortgage Corporation, a
California corporation.
"Interim Mall Security Documents" means, collectively, the Interim
Mall Deeds of Trust, the Interim Mall Environmental Indemnity, the guaranty
executed by Mall Intermediate Holding in favor of the Interim Mall Lender, the
Company Security Agreement, the GCCLLC Security Agreement, the Company
Collateral Account Agreement, the Atlantic Collateral Account Agreement, the
Pacific Collateral Account Agreement, the Completion Guaranty Collateral Account
Agreement, and any other guaranties, deeds of trust, security agreements or
collateral account agreements executed from time to time by LVSI, VCR or GCCLLC
or direct or indirect subsidiaries of LVSI, VCR or GCCLLC in favor of the
Interim Mall Lender to guaranty the Obligations under the Interim Mall Facility.
"Interim Mall Space Fee 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, made by LVSI and VCR, as trustor, to Lawyers
Title of Nevada, Inc., as trustee, for the benefit of the Interim Mall Lender,
as beneficiary.
"Issuance Date" has the meaning given in the Mortgage Notes
Indenture.
"Issuance Fees and Expenses" means fees and expenses (a) incurred by
the Company in connection with the raising of debt or equity to finance the
Project and (b) paid on or before the Financing Date. The Issuance Fees and
Expenses are identified on Exhibit K-2 to the Funding Agents' Disbursement and
Administration Agreement as "Fees and Expenses."
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<PAGE>
"Legal Requirements" means all laws, statutes, orders, decrees,
injunctions, licenses, permits, approvals, agreements and regulations of any
Governmental Instrumentality having jurisdiction over the matter in question,
including, without limitation, Nevada Gaming Laws.
"Lender" means any of the Bank Lenders, the Interim Mall 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 statues) of any jurisdiction).
"Lien Protection Account" means an escrow account to be established
pursuant to the Title Insurer Escrow Agreement.
"Line Item" means each of the individual line items set forth in the
Project Budget (as in effect on the Financing Date).
"Line Item Category" means each of the following line item
categories of the Project Budget:
(a) Bovis Construction Costs;
(b) Owner Construction and Equipment Costs;
(c) FF&E;
(d) Signage and Graphics;
(e) Design Costs;
(f) Permits and Fees;
(g) Owner Construction Administration;
(h) Organization Expenses;
(i) Pre-Opening Expenses;
(j) Construction Period Interest;
(k) Consumer Experience;
(l) Financing Fees; and
(m) From and after the date on which the Company amends the Project
Budget as contemplated in Section 6.4.1(a)(iii) of the Funding Agents'
Disbursement and Administration Agreement, Working Capital.
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<PAGE>
"Liquid Available Funds" means the Available Funds without taking
into account any amounts on deposit in the Guaranty Deposit Account.
"Loans" means, collectively, the loans made under each of the Bank
Credit Facility and the Interim Mall Facility.
"Loss Proceeds" has the meaning given in Section 5.20 of the Funding
Agents' Disbursement and Administration Agreement.
"LVSI" means Las Vegas Sands, Inc., a Nevada corporation.
"Major Contractor" shall mean a Contractor who is party to a
Material Project Document.
"Mall" means the restaurant and retail complex and retail annex to
be developed as part of the Project, as more particularly described in Exhibit
T-6 to the Funding Agents' Disbursement and Administration Agreement.
"Mall Assets" has the meaning given in the Sale and Contribution
Agreement.
"Mall Certificate of Occupancy" means a permanent certificate of
occupancy or a temporary certificate of occupancy, in either case, for the Mall
issued by the Building Department pursuant to applicable Legal Requirements
which permanent or temporary certificate of occupancy shall (a) permit the Mall
to be used for the Mall Intended Uses, (b) be in full force and effect and (c)
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
no less than 133% of the number of days that the Construction Consultant,
pursuant to the its Mall Release Certificate, estimates it will take to complete
the Mall Punchlist Items (assuming reasonable diligence in performing the same).
"Mall Construction Termination" means that construction of the Mall
(and all infrastructure and other improvements required to be constructed under
applicable Legal Requirements or pursuant to the Development Agreements (to the
extent the Development Agreements 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 Tranche A Take Out Lender.
"Mall Easements" means the easements appurtenant, easements in
gross, license agreements and other rights running for the benefit of GCCLLC
and/or appurtenant to the Mall, including, without limitation, those certain
easements and licenses described in each Title Policy.
"Mall Escrow Agreement" means the Escrow Agreement to be entered
into pursuant to the Sale and Contribution Agreement and attached as an exhibit
to the Sale and Contribution Agreement.
"Mall Holding" means Grand Canal Shops Mall Holding Company, LLC, a
Delaware limited liability company.
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<PAGE>
"Mall I LLC" means Grand Canal Shops Mall, LLC, a Delaware limited
liability company.
"Mall I MM" means Grand Canal Shops Mall MM, Inc., a Nevada
corporation.
"Mall Intended Uses" means the intended uses for the Mall, as more
particularly set forth in Exhibit X to the Funding Agents' Disbursement and
Administration Agreement.
"Mall Intermediate Holding" means Mall Intermediate Holding Company,
LLC, a Delaware limited liability company.
"Mall Lease" means that certain Indenture of Lease dated as of
November 14, 1997 by and between VCR and GCCLLC.
"Mall Leasing Agreement" means the Consulting and Lease Brokerage
Agreement dated as of January 23, 1997 by and between GCCLLC (as assignee of
LVSI) and Blatteis Realty Co.
"Mall Leasing Commissions Reserve Account" has the meaning given in
Section 2.3.9 of the Funding Agents' Disbursement and Administration Agreement.
"Mall Parcel" has the meaning given in Section 5.16(b) of the
Funding Agents' Disbursement and Administration Agreement.
"Mall Parcel Creation Date" means the date on which the Mall Parcel
is created in accordance with Section 5.16(b) of the Funding Agents'
Disbursement and Administration Agreement.
"Mall Punchlist Completion Amount" means, from time to time, the
estimated cost to complete all remaining Mall Punchlist Items if the owner of
the Mall were to engage independent, reputable and appropriately experienced and
licensed contractor(s) to complete such work and no other work (as more
specifically certified by the Construction Consultant (a) on the Mall Release
Date pursuant to its Mall Release Certificate and (b) on each Advance Date
thereafter, pursuant to a certificate in the form of Exhibit C-2 to the Funding
Agents' Disbursement and Administration Agreement).
"Mall Punchlist Items" means 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 Company 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.
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<PAGE>
"Mall Release Certificates" means, collectively, the certificates in
the form of Exhibits W-3, W-4 and W-5 to the Funding Agents' Disbursement and
Administration Agreement to be delivered by the Company, the Construction
Consultant and the Project Architect, respectively.
"Mall Release Conditions" means, collectively, the following:
(a) the Mall Release Interested Parties shall have received from the
Company its Mall Release Certificate, pursuant to which the Company
certifies 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 (in the case of 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 Requirements (including, without limitation, all
applicable building and zoning laws, ordinances 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 Project 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.
(b) The Construction Consultant has delivered its Mall Release
Certificate approving the Company's Mall Release Certificate and the
Project Architect has 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.
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"Mall Release Date" means the date on which each of the Mall Release
Conditions have been satisfied.
"Mall Release Disbursement" has the meaning given in Section 2.10 of
the Funding Agents' Disbursement and Administration Agreement.
"Mall Release Interested Parties" means, collectively, the Bank
Agent, the Interim Mall Lender, the Mortgage Notes Indenture Trustee and the
Tranche A Take Out Lender.
"Mall Retainage/Punchlist Account" has the meaning given in the Mall
Escrow Agreement.
"Mall Retainage/Punchlist Amount" means the aggregate amount
deposited in the Mall Retainage/Punchlist Account on the Mall Release Date
pursuant to Sections 2.10(d)(ii) and (iii) of the Funding Agents' Disbursement
and Administration Agreement.
"Mall Space" means the property and space described in Exhibit T-7
to the Funding Agents' Disbursement and Administration Agreement.
"Mall Tenant Improvements Reserve Account" has the meaning given in
Section 2.3.10 of the Funding Agents' Disbursement and Administration Agreement.
"Mall TESA" means that certain Energy Services Agreement dated as of
May 1, 1997 between GCCLLC and the HVAC Provider.
"Margin Stock" has the meaning given in Regulation U of the Board of
Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
performance, operations, business, property, assets, liabilities or financial
condition of the Company or the Project; (ii) the ability of the Company to
achieve Completion on or prior to the Outside Completion Deadline; or (iii) the
rights or interest of the Secured Parties under the Financing Agreements or
Security Documents or on any security interest granted pursuant thereto or the
value thereof.
"Material Project Document" means any of the Cooperation Agreement,
the Casino Lease, the Mall Lease, the Sale and Contribution Agreement, the
Harrah's Shared Roadway Agreement, the HVAC Services Agreement, the Mall TESA,
the SECC TESA, the Work Continuation Agreement, and, without duplication, any
Project Document with a total contract amount in excess of $500,000.
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, or any successor thereof.
"Mortgage Note(s)" means the 12 1/4% Mortgage Note(s) Due 2004
issued by LVSI and VCR pursuant to the Mortgage Notes Indenture.
"Mortgage Notes Collateral Account Agreement" means, collectively,
that certain Mortgage Notes Proceeds Collateral Account Agreement dated as of
November 14, 1997 among LVSI, VCR and the Disbursement Agent and the related
third party account agreement.
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"Mortgage Note Holder(s)" means the holder(s) of the Mortgage
Note(s).
"Mortgage Notes Indenture" means that certain Mortgage Notes
Indenture dated as of November 14, 1997 among LVSI, VCR, the guarantors
signatory thereto and the Mortgage Notes Indenture Trustee.
"Mortgage Notes Indenture Deeds of Trust" means, collectively, the
Mortgage Notes Indenture Fee Deed of Trust, the Mortgage Notes Indenture Mall
Parcel Fee Deed of Trust and the Mortgage Notes Indenture Leasehold Deed of
Trust.
"Mortgage Notes Indenture Environmental Indemnity" means that
certain Environmental Indemnity Agreement dated as of November 14, 1997 among
LVSI, VCR and the Mortgage Notes Indenture Trustee.
"Mortgage Notes Indenture Fee 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 LVSI and VCR, as trustor, to Lawyers
Title of Nevada, Inc., as trustee, for the benefit of the Mortgage Notes
Indenture Trustee, as beneficiary.
"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 GCCLLC, as trustor, to
Lawyers Title of Nevada, Inc., as trustee, for the benefit of the Mortgage Notes
Indenture Trustee, as beneficiary.
"Mortgage Notes Indenture Mall Parcel Fee Deed of Trust" means the
deed of trust to be executed by GCCLLC for the benefit of the Mortgage Notes
Indenture Trustee in accordance with Section 5.16(b)(viii) of the Funding
Agents' Disbursement and Administration Agreement, which deed of trust shall be
in a form substantially similar to the Mortgage Notes Indenture Fee Deed of
Trust and shall encumber the Mall Parcel.
"Mortgage Notes Indenture Security Documents" means, collectively,
the Mortgage Notes Indenture Deeds of Trust, the Mortgage Notes Indenture
Environmental Indemnity, the Company Security Agreement, the GCCLLC Security
Agreement, the Collateral Account Agreements and any guaranties, deeds of trust,
security agreements or collateral account agreements executed from time to time
by LVSI, VCR or GCCLLC or direct or indirect subsidiaries of LVSI, VCR or GCCLLC
in favor of the Mortgage Notes Indenture Trustee or the Mortgage Notes Holders
to guaranty the Obligations under the Mortgage Notes and the Mortgage Notes
Indenture.
"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 proceeds from the issuance of
the Mortgage Notes (net of any underwriter's discount, certain expense
reimbursements and certain reductions for the receipt of immediately available
funds).
"Mortgage Notes Proceeds Account" has the meaning given in the
Mortgage Notes Collateral Account Agreement.
"Net Guaranty Amount" means, from time to time, (a) the amounts of
funds on deposit in the Guaranty Deposit Account up to $25,000,000, less (b) the
aggregate of all amounts
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<PAGE>
previously withdrawn from the Guaranty Deposit Account and transferred to the
Company Funds Account pursuant to Section 2(a)(i) of the Adelson Completion
Guaranty.
"Nevada Gaming Authorities" means, collectively, the Nevada Gaming
Commission, the Nevada State Gaming Control Board, and the Clark County Liquor
and Gaming Licensing Board.
"Nevada Gaming Laws" means 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.
"Notice of Funding Request" means a Notice of Funding Request
substantially in the form of Exhibit D to the Funding Agents' Disbursement and
Administration Agreement.
"Obligations" means (a) all loans, advances, debts, liabilities, and
obligations, howsoever arising, owed by the Company and its direct and indirect
Subsidiaries under the Bank Credit Agreement, the Interim Mall Credit Agreement,
the Mortgage Notes Indenture or otherwise to any Lender of every kind and
description (whether or not evidenced by any note or instrument and whether or
not for the payment of money), direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, pursuant to the terms of
the Funding Agents' Disbursement and Administration Agreement, any of the other
Financing Agreements or any of the other Operative Documents, including all
interest, fees, charges, expenses, attorneys' fees and accountants fees
chargeable to the Company in connection with its dealings with the Company and
payable by the Company hereunder or thereunder; (b) any and all sums advanced by
the Disbursement Agent, the Intercreditor Agent, or any other Secured Party in
order to preserve the Project Security or preserve any Secured Party's security
interest in the Project Security, including all Protective Advances (as defined
in the Intercreditor Agreement); and (c) in the event of any proceeding for the
collection or enforcement of the Obligations after an Event of Default shall
have occurred and be continuing, the reasonable expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Project Security, or of any exercise by any Secured Party of its rights
under the Security Documents, together with reasonable attorneys' fees and court
costs.
"Opening Conditions" means, collectively, the following:
(a) that each of the Mall Release Conditions (other than delivery of
the punchlists from Governmental Instrumentalities referenced in the
definition of "Mall Punchlist Items") shall have been satisfied;
(b) that the remaining work on punchlist items and Anticipated
Future Work shall be such that it will not interfere with or disrupt 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;
(c) that the failure to complete the remaining punchlist items and
Anticipated Future Work would not interfere with or disrupt 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; and
(d) the Company shall have available a fully trained staff to
operate the Project including the hotel and casino in accordance with
industry standards.
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"Opening Date" means the 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.
"Operating Account" has the meaning given in Section 2.3.12 of the
Funding Agents' Disbursement and Administration Agreement.
"Operating Costs" means all actual cash costs incurred by the
Company and related to the operation of the Project or any portion thereof in
the ordinary course of business, including, without limitation, costs incurred
for labor, consumables, utility services, and all other operation related costs;
provided that (a) Operating Costs shall not include non-cash charges (including
depreciation and amortization), (b) Debt Service shall constitute Operating
Costs from and after the Opening Date but not prior to such date and (c)
operating costs of the "preview center" at the site shall constitute Operating
Costs at all times.
"Operative Documents" means the Financing Agreements and the Project
Documents.
"Outside Completion Deadline" means April 21, 1999, as the same may
from time to time be extended pursuant to Section 6.4 of the Funding Agents'
Disbursement and Administration Agreement.
"Pacific" means Pacific Enterprises Energy Services.
"Pacific Account" has the meaning given in the Pacific Collateral
Account Agreement.
"Pacific Collateral Account Agreement" means that certain Collateral
Account Agreement dated as of November 14, 1997 among Pacific, the Disbursement
Agent and The Bank of Nova Scotia, as securities intermediary.
"Pacific Letter of Credit" has the meaning given in Section 2.4 of
the Funding Agents' Disbursement and Administration Agreement.
"Permits" means all authorizations, consents, decrees, permits,
waivers, privileges, approvals from and filings with all Governmental
Instrumentalities necessary for the realization of the Project in accordance
with the Operative Documents.
"Permitted Investments" 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" or the
equivalent by S&P or Moody's 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
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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 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 interests 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 at least "A" or "A2" or the equivalent by any
Rating Agency and short-term debt rated 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 at least "A" 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 Banking 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 if prior to Final
Completion or (subject to the rights of creditors with prior Liens) the Mortgage
Note Trustee if after Final 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 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, in each case having
ratings of at least "A" or "A2" or the equivalent by any Rating Agency.
"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 Security Documents):
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(a) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time due and payable or which is being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, so long as (a) such reserve or other appropriate
provision, if any, as shall be required in conformity with generally
accepted accounting principles shall have been made therefor through an
allocation in the Anticipated Cost Report and (ii) in the case of any
charge or claim which has or may become a Lien against any of the Project
Security, such contest proceedings conclusively operate to stay the sale
of any portion of the Project Security to satisfy such charge or claim;
(b) 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 (i) for amounts not
yet overdue or (ii) 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 and with appropriate
reserves (through funds on deposit in the Lien Protection Account which,
in the aggregate with all amounts on deposit therein shall not exceed
$20,000,000), so long as in the case of a Lien with respect to any portion
of the Project Security, such contest proceedings conclusively operate to
stay the sale of any portion of the Project Security on account of such
Lien;
(c) 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
(i) for amounts not yet overdue or (ii) 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 (A) such reserves or other appropriate provisions, if any, as
shall be required by generally accepted accounting principles shall have
been made for any such contested amounts, and (B) in the case of a Lien
with respect to any portion of the Project Security, such contest
proceedings conclusively operate to stay the sale of any portion of the
Project Security on account of such Lien;
(d) any attachment or judgment Lien not constituting an Event of
Default under Section 8.8 of the Bank Credit Agreement;
(e) leases or subleases granted to third parties in accordance with
any applicable terms of the Security Documents and not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(f) 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 the Company or any of its Subsidiaries or result in a
material diminution in the value of any Project Security as security for
the Obligations;
(g) leases permitted under Section 7.7 of the Bank Credit Agreement
and any leasehold mortgage in favor of any party financing the lessee
under such lease provided that (i) neither the Company nor any of its
Subsidiaries is liable for the payment of any principal
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of, or interest, premiums or fees on, such financing and (ii) the affected
lease and leasehold mortgage are expressly made subject and subordinate to
the Liens of the Bank Deeds of Trust, the Interim Mall Deeds of Trust and
the Mortgage Notes Indenture Deeds of Trust encumbering the affected
property;
(h) Liens created or contemplated by the Cooperation Agreement (as
in effect and on the Financing Date);
(i) Liens on real property of the Company arising pursuant to that
certain Harrah's Shared Roadway Agreement (as in effect on the Financing
Date);
(j) 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 (a) materially interfere
with, impair or detract from the operation of the business of the Company
and its Subsidiaries or the construction or operation of the Project and
(b) cause a material decrease in the value of the Project Security;
(k) any (i) interest or title of a lessor or sublessor under any
lease permitted by Subsection 7.8 of the Bank Credit Agreement, (ii)
restriction or encumbrance that the interest or title of such lessor or
sublessor may be subject to, or (iii) subordination of the interest of the
lessee or sublessee under such lease to any restriction or encumbrance
referred to in the preceding clause (ii), so long as the holder of such
restriction or encumbrance agrees to recognize the rights of such lessee
or sublessee under such lease;
(l) Liens arising from filing UCC financing statements relating
solely to leases permitted by the Bank Credit Agreement;
(m) 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;
(n) 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;
(o) licenses of patents, trademarks and other intellectual property
rights granted by the Company 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 the Company or such Subsidiary;
(p) Liens created under the HVAC Services Agreement and the HVAC
Ground Lease (as in effect on the Financing Date);
(q) Liens created under the Pre-Development Agreement as in effect
on the Financing Date;
(r) easements, restrictions, rights of way, encroachments and other
minor defects 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;
(s) Liens incurred in connection with Interest Rate Agreements
maintained under the Bank Credit Agreement, the Interim Mall Credit
Agreement, the other Financing
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Agreements, the approved Equipment Funding Commitment or other
Indebtedness which the Company is permitted to incur, provided that to the
extent such Interest Rate Agreement is intended to hedge interest risk in
respect of the Interim Mall Facility such Liens attach only to the Mall
Collateral (as defined in the Bank Credit Agreement);
(t) restrictions created under the Sale and Contribution Agreement
as in effect on the Financing Date;
(u) the rights and interests of the Lenders as provided under the
Financing Agreements;
(v) VCR Permitted Encumbrances and GCCLLC Permitted Encumbrances;
and
(v) after the Opening Date, liens in an account holding the proceeds
of draws under Approved Equipment Funding Commitments.
"Person" means any natural person, corporation, partnership, firm,
association, Governmental Instrumentality or any other entity whether acting in
an individual, fiduciary or other capacity.
"Phase I Land" means all portions of the Site other than the Phase
II Land.
"Phase II Land" means the 14 acre tract of land located on the north
side of the Site and more particularly described in Exhibit T-5.
"Phase II Project" means a hotel, casino and mall complex proposed
to be developed on the Phase II Land and integrated with the Project.
"Phase II Release Conditions" means, collectively, the following:
(a) the Phase II Land being a separate legal parcel under the Nevada
Revised Statutes Chapter 278 and all other applicable Legal Requirements,
as confirmed by an opinion of counsel addressed to the Bank Agent and the
Mortgage Notes Indenture Trustee and reasonably acceptable to the Bank
Agent; and
(b) the Title Insurer shall have issued or committed to issue to the
Bank Agent and the Mortgage Notes Indenture Trustee endorsements, in form
and substance satisfactory to the Bank Agent, to their respective Title
Policies insuring the continuing priority and perfection of their
respective Liens on the Project Security (after giving effect to the
release of the Phase II Land).
"Plans and Specifications" means 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 Funding
Agents' Disbursement and Administration 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 Funding Agents' Disbursement and Administration Agreement and (b) amended
in accordance with Section 6.2 of the Funding Agents' Disbursement and
Administration Agreement.
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"Potential Event of Default" means any event, which with the passage
of time and/or the giving of notice would become an Event of Default.
"Pre-Completion Revenues Account" has the meaning given in the
Company Collateral Account Agreement.
"Pre-Development Agreement" means the Sands Resort Hotel and Casino
Agreement dated February 18, 1997 by and between Clark County and LVSI.
"Pre-Opening Expenses" means expenses of the type described on
Exhibit K-1 to the Funding Agents' Disbursement and Administration Agreement.
"Professional Services Agreement" means that certain Agreement
between Owner and Architect dated as of November 14, 1997 between the Company
and Project Architect.
"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 Funding Agents' Disbursement
and Administration Agreement.
"Project Architect" means collectively, TSA of Nevada, LLP, and
WAT&G, Inc. Nevada.
"Project Budget" shall have the meaning given in Section 3.1.15 of
the Funding Agents' Disbursement and Administration Agreement.
"Project Budget/Schedule Amendment Certificate" means a Project
Budget/Schedule Amendment Certificate substantially in the form of Exhibit E to
the Funding Agents' Disbursement and Administration Agreement.
"Project Certificate of Occupancy" means a permanent certificate of
occupancy or a temporary certificate of occupancy, in either case, for the
Project issued by the Building Department pursuant to applicable Legal
Requirements which permanent or temporary certificate of occupancy shall permit
the Project (other than the Mall and Anticipated Future Work) to be used for the
Project 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 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 Termination" means 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
Development Agreements (but excluding the Mall, the Unfinished Hotel
Suites and the Anticipated Future Work) shall have been completed (except
for Project Punchlist Items) in accordance with the Plans and
Specifications;
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(b) all furnishings, fixtures and equipment necessary to use and
occupy two thousand (2000) hotel suites in the Hotel for their intended
uses (as more particularly set forth in Exhibit X to the Funding Agents'
Disbursement and Administration 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 any other hotel suites in addition to the foregoing 2000
suites (the "Unfinished Hotel Suites")) for their intended uses (as more
specifically reflected in the standards set forth in Exhibit X to the
Funding Agents' Disbursement and Administration 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 Project 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 Funding Agents' Disbursement and
Administration 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; and
(f) all punchlists referenced under the definition of "Project
Punchlist Items" have been delivered to each Lender, the Tranche A Take
Out Lender and the Construction Consultant.
"Project Costs" means all costs (other than any such costs for
interest and other Debt Service accruing under the Bank Credit Agreement,
Interim Mall Credit Agreement, the Mortgage Notes, the Approved Equipment
Funding Commitments and the Subordinated Notes from and after the Opening Date)
incurred, or to be incurred in accordance with the Project Budget, in connection
with the development, design, engineering, procurement, installation,
construction and opening of the Project, which costs shall include, but not be
limited to: (a) all costs incurred under the Construction Management Agreement
and the Contracts, (b) interest accruing under the Bank Credit Agreement,
Interim Mall Credit Agreement, the Mortgage Notes, the Approved Equipment
Funding Commitments and the Subordinated Notes prior to the Opening Date, (c)
reasonable financing, closing and administration costs related to the Project
until the Completion Date including, but not limited to, insurance costs
(including, with respect to directors and officers insurance costs, costs
relating to such insurance extending beyond the Completion Date), guarantee
fees, legal fees and expenses, financial advisory fees and expenses, technical
fees and expenses (including, without limitation, fees and expenses of the
Construction Consultant and the Insurance Advisor), commitment fees, management
fees, agency fees (including, without limitation, fees and expenses of the
Disbursement Agent and the Intercreditor Agent), interest, taxes (including
value added tax), and other out-of-pocket expenses payable by the Company under
all documents related to the financing and administration of the Project
(including, without limitation, the documents related to the Tranche A Take Out
Loan) until the Opening Date, (d) the costs of acquiring Permits for the Project
prior to the Completion Date, (e) costs incurred in settling insurance claims in
connection with Events of Loss and collecting Loss Proceeds at any time prior to
the Final Completion Date, (f) the funding of amounts into the Mall Leasing
Commissions Reserve Account and the Mall Tenant Improvements Reserve Account
pursuant
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to Section 2.10 of the Funding Agents' Disbursement and Administration
Agreement, (g) up to an aggregate amount of Twenty Million Dollars ($20,000,000)
at any given time to be deposited in the Lien Protection Account in order to
cover amounts claimed under mechanics' liens filed against the Project, (h)
amounts due under the HVAC Services Agreement and the Construction Agency
Agreement prior to the Opening Date (other than any termination fee, any
indemnities, or any damages or other costs payable in connection with or as a
result of any breach by the Company of such agreements), (i) from and after the
inclusion of the Working Capital Line Item Category in the Project Budget in
accordance with Section 6.4 of the Funding Agents' Disbursement and
Administration Agreement, working capital costs incurred in accordance with the
Project Budget and (j) payments on the Completion Guaranty Loan (as defined in
the Adelson Intercreditor Agreement), provided that such payments shall only be
deemed Project Costs (1) on the Final Completion Date and (2) to the extent that
the amount deemed loaned under the Completion Guaranty Loan represents an amount
that was actually used to pay Project Costs (other than Project Costs pursuant
to this clause (j)).
"Project Documents" means the Construction Management Agreement, the
Direct Construction Guaranty, the Indirect Construction Guaranty, the Contracts,
the Third Party Financing Agreements, the Cooperation Agreement, the
Professional Services Agreement, the HVAC Services Agreement, the Construction
Agency Agreement, the HVAC Ground Lease, the Work Continuation Agreement, the
Harrah's Shared Roadway Agreement, the Pre-Development Agreement, the Casino
Lease, the Mall Lease, the Sale and Contribution Agreement, the Treadway
Agreement, the Billboard Lease, the Billboard Master Lease, the Mall TESA, the
SECC TESA, the Title Insurer Escrow Agreement, the Mall Escrow Agreement, the
Mall Leasing Agreement, the Development Agreements, the Operating Agreement of
each of VCR, GCCLLC, Grand Canal Shops Mall, LLC, Mall Holding, Mall
Intermediate Holding and Lido Intermediate Holding Company, LLC and any other
document or agreement entered into on, prior to or after the Financing Date,
relating to the development, construction, maintenance or operation of the
Project (other than the Financing Agreements, the Tranche A Take Out Loan
Commitment Agreement, the Tri Party Agreement, the Tranche B Collateral Security
Agreement and any other documents related to the Tranche A Take Out Loan or the
Tranche B Take Out Loan) as the same may be amended from time to time in
accordance with the terms and conditions of the Funding Agents' Disbursement and
Administration Agreement and thereof.
"Project Intended Uses" means the intended uses of the Project, as
more particularly set forth in Exhibit X to the Funding Agents' Disbursement and
Administration Agreement.
"Project Punchlist Completion Amount" means, from time to time after
the Completion Date, the estimated cost to complete all remaining Project
Punchlist Items if the owner of the Project were to engage independent,
reputable and appropriately experienced and licensed contractor(s) to complete
such work and no other work certified by the Company and the Construction
Consultant with respect to each Advance from and after the Completion Date in
their respective certificates in the form of Exhibits C-1 and C-2 to the Funding
Agents' Disbursement and Administration Agreement).
"Project Punchlist Items" means 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
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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 Company
in connection with Substantial Completion under the Construction Management
Agreement and all items that are 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
Project temporary certificate of occupancy as those that must be completed in
order for the Building Department to issue a Project permanent certificate of
occupancy.
"Project Schedule" has the meaning given in Section 3.1.16 of the
Funding Agents' Disbursement and Administration Agreement.
"Project Security" means all real and personal property which is
subject or is intended to become subject to the security interests or liens
granted by any of the Security Documents.
"Rating Agencies" means, collectively, Moody's and S&P (or, if
either or both of them is no longer in the business of rating debt securities,
any other nationally recognized rating agency or agencies).
"Rating Downgrade" means a lowering by either Rating Agency of the
then current credit rating of the Mortgage Notes.
"Realized Savings" means:
(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 (or the Disbursement Agent is otherwise reasonably
satisfied) 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 Company
having entered into a guaranteed maximum price Contract for the purchase
of the 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 (A) the demolition of the existing
structures at the Site being completed for an amount that is less than the
amount budgeted therefor, (B) all theming related work contemplated by the
Owner Construction and Equipment Cost Line Item Category being completed
for an amount that is less than the amount budgeted therefor, or (C) the
substation being purchased for an amount that is less than the amount
budgeted therefor, in each case, as confirmed by the Construction
Consultant, (iii) results from a decrease in the anticipated cost to
complete the work contemplated by the "owner general conditions" Line Item
which the Company is 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 Funding Agent's
Disbursement and Administration Agreement and (B) results, to the
reasonable satisfaction of the Construction Consultant, in a quantifiable
decrease in materials, supplies, or required services;
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(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
Company having obtained a permit for an amount that is less than the
amount budgeted for such permit, as confirmed by the Construction
Consultant;
(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 Company is able
to demonstrate to the reasonable satisfaction of the Construction
Consultant;
(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 Company entering into leases
with prospective Mall tenants with respect to which lease the Company is
not required to pay leasing commissions (in which case the amount of
Realized Savings shall be the amount of leasing commissions which the
Company 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 Item, 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 Company 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 Company during construction or (ii) the anticipated Opening Date being
earlier than the date set therefor in the Project Schedule, in each case,
as determined by the Company with (i) the reasonable concurrence of the
Construction Consultant and (ii) the concurrence of the Disbursement Agent
(acting in its sole discretion exercised in good faith) taking into
account the current and future anticipated interest rates and the
anticipated times and amounts of draws under the relevant Facilities for
the payment of Project Costs;
(g) with respect to the Signage and 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 Funding Agents' Disbursement
and Administration 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 Company is 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 Company
certifies that it does not intend to 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
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Category if the Company certifies that it does not intend to spend more
than the reduced amount and that such reduced amount is an appropriate
amount for such Line Item Category;
(j) 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 Funding Agents' Disbursement and
Administration Agreement and (ii) results, to the reasonable satisfaction
of the Construction Consultant in a quantifiable decrease in materials,
supplies or required services; and
(k) 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 Company
to complete all aspects of the work contemplated by such Line Item
Category (as confirmed by the Construction Consultant) which amount, if
any, may not be established until the Company has actually completed all
such work;
in each case, which is documented by the Company in a Realized Savings
Certificate substantially in the form of Exhibit Y attached to the Funding
Agents' Disbursement and Administration Agreement, duly executed and completed
with all exhibits and attachments thereto. No Realized Savings shall be
obtainable with respect to the Working Capital Line Item Category.
"Remaining Costs" means, at any given time, the difference between
(a) the aggregate amount of Total Anticipated Costs set forth in column 7 of the
Summary Anticipated Cost Report as in effect from time to time and (b) the
aggregate amount of Project Costs Incurred set forth in column 9 of the Summary
Anticipated Cost Report.
"Required Completion Amount" has the meaning given in Section
2.11(a) of the Funding Agents' Disbursement and Administration Agreement.
"Required Minimum Contingency" means, (a) from time to time prior to
the Completion Date, the sum of (i) the amount allocated to the "unallocated
contingency" Line Item in the Project Budget as of the Financing Date less
$9,830,250 amortized straight line from April 21, 1997 through April 21, 1999,
plus (ii) from and after the date that the "unallocated contingency" Line Item
is increased pursuant to Section 6.4.1(b) of the Funding Agents' Disbursement
and Administration Agreement, the amount of such increase amortized straight
line from April 21, 1997 through April 21, 1999, plus (iii) Five Million Dollars
($5,000,000) and (b) from time to time after the Completion Date, 200% of the
Project Punchlist Completion Amount.
"Required Minimum TI Budget Amount" means, from time to time, the
sum of (a) the aggregate amount of tenant improvement allowances granted by the
Company to tenants and prospective tenants of the First Level Space pursuant to
Executed Leases, plus (b) the product of (i) Thirty Dollars ($30) times (ii) the
number of square feet in the First Level Space as to which no Executed Leases
are in effect.
"Required Scope Change Approval" means, with respect to each
proposed Scope Change, each of the following: (a) the consent of the Bank Agent
(not to be unreasonably withheld), (b) the consent of the Interim Mall Lender
(not to be unreasonably withheld), (c) (i) the consent of a majority in
principal amount of the holders of the Mortgage Notes or (ii) if the Mortgage
Notes are then rated CCC+ or higher by S&P, confirmation by the Rating Agencies
that the proposed scope
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change or change order will not cause a Ratings Downgrade and (d) if the
proposed scope change or change order relates to the HVAC Component, the consent
of the HVAC Provider.
"Retail Annex" means 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 Funding Agents' Disbursement and
Administration Agreement.
"Retainage Amounts" means 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 but 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.
"Reviewing Accountant" means Price Waterhouse LLP or any subsequent
nationally recognized firm of independent public accountants selected by the
Company, with the consent of the Bank Agent from time to time (which shall not
be unreasonably withheld or delayed), as auditors of the Company.
"Revolving Loan Availability Date" has the meaning given in the Bank
Credit Agreement.
"S&P" means Standard & Poor's Ratings Group, a New York corporation,
or any successor thereof.
"Safe Harbor Scope Change" means 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 Funding Agents' Disbursement and Administration
Agreement.
"Sale and Contribution Agreement" means that certain Sale and
Contribution Agreement dated as of November 14, 1997 among GCCLLC, VCR and Grand
Canal Shops LLC.
"Sands Expo and Convention Center" means the exposition and meeting
facilities located adjacent to the Site and commonly known as the Sands Expo and
Convention Center.
"Scope Change" means 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 "Assumptions" (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.
"SECC TESA" means that certain Energy Services Agreement dated as of
November 14, 1997 between Interface and the HVAC Provider.
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"Secured Parties" means the Disbursement Agent, the Intercreditor
Agent, the Bank Agent, the Interim Mall Lender, the Mortgage Notes Indenture
Trustee, the Lenders, and the counterparties to any Interest Rate Agreements
entered into by the Company under the Bank Credit Agreement.
"Security Documents" means, collectively and without duplication,
the Bank Security Documents, the Interim Mall Security Documents, the Mortgage
Notes Indenture Security Documents, the Adelson Completion Guaranty, the
Collateral Account Agreements, the Consents, and any other deeds of trust,
security agreements or collateral account agreements entered into by LVSI and/or
one or more of its Subsidiaries for the benefit of any Secured Party in
accordance with the terms of the Financing Agreements and the Intercreditor
Agreement.
"Site" means the land on which the Project is to be located, as
described in Exhibit T-4 to the Funding Agents' Disbursement and Administration
Agreement.
"Site Easements" means 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.
"Six Month Certificate" means a certificate to be issued by the
Construction Consultant in the form of Exhibit L-1 to the Funding Agents'
Disbursement and Administration Agreement.
"Stop Funding Notice" has the meaning given in Section 2.5.3(b) of
the Funding Agents' Disbursement and Administration Agreement.
"Subcontractor" has the meaning given to the term "Contractor" in
the Construction Management Agreement.
"Subordinated Note Holders" means the holders of the Subordinated
Notes.
"Subordinated Notes" means the 14 1/4% Senior Subordinated Note(s)
Due 2005 issued by LVSI and VCR pursuant to the Subordinated Notes Indenture.
"Subordinated Notes Indenture" means that certain Indenture dated as
of November 14, 1997 among LVSI, VCR, the guarantors signatory thereto and the
Subordinated Notes Indenture Trustee.
"Subordinated Notes Indenture Trustee" means First Union National
Bank of Georgia, in its capacity as the trustee under the Subordinated Notes
Indenture and its successors in such capacity.
"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,
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<PAGE>
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
"Summary Anticipated Cost Report" means an Anticipated Cost Report
in the form of Exhibit H-1 to the Funding Agents' Disbursement and
Administration Agreement.
"Take Out Title Policy" means a mortgagee title insurance policy
insuring that the Mall is free of all liens and encumbrances other than
Permitted Liens.
"Tax" shall mean shall mean any federal, state, local, foreign or
other tax, levy, impost, fee, assessment or other government charge, including
without limitation income, estimated income, business, occupation, franchise,
property, payroll, personal property, sales, transfer, use, employment,
commercial rent, occupancy, franchise or withholding taxes, and any premium,
including without limitation interest, penalties and additions in connection
therewith.
"Third Party Financing Agreement" means any Approved Equipment
Funding Commitments, the Subordinated Notes Indenture, the Subordinated Notes
and any other loan or security document entered into on, prior to, or after the
Financing Date (other than documents relating to the Tranche A Take Out Loan and
the Tranche B Take Out Loan) with parties other than any one or more of the Bank
Agent, the Interim Mall Lender or the Mortgage Notes Indenture Trustee.
"Title Insurer" means Lawyers Title of Nevada, Inc.
"Title Insurer Escrow Agreement" has the meaning given in Section
5.23 of the Funding Agents' Disbursement and Administration Agreement.
"Title Policies" means, collectively, the policies of title
insurance issued by Title Insurer as of the Financing Date, as provided in
Section 3.1.28(i), (ii) and (iii) of the Funding Agents' Disbursement and
Administration Agreement, including all amendments thereto, endorsements thereof
and substitutions or replacements therefor.
"Total Energy Improvement Costs" has the meaning given in the HVAC
Services Agreement.
"Tranche A Take Out Lender" means 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 Loan Commitment Agreement, (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 I LLC.
"Tranche A Take Out Loan Commitment Agreement" means that certain
___________ Agreement dated as of November 14, 1997 between the Goldman Sachs
Mortgage Company and Mall I LLC.
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"Tranche B Collateral" means an amount no less than Thirty-Five
Million Dollars ($35,000,000) deposited by Adelson in an account subject to the
security interest of the Interim Mall Lender pursuant to the Tranche B
Collateral Security Agreement.
"Tranche B Collateral Security Agreement" means that certain
Security Agreement dated as of November 14, 1997 between Adelson and the Interim
Mall Lender.
"Tranche B Take Out Loan" means the loan in an aggregate principal
amount equal to $35 Million which is (a) funded by Adelson pursuant to the Tri
Party Agreement or (b) deemed to be made to the Company pursuant to the Tranche
B Guaranty Agreement as a result of the Interim Mall Lender drawing on the
Tranche B Collateral and applying the amounts so drawn against the Company's
obligations under the Interim Mall Loan.
"Treadway" means Treadway Industries of Phoenix, Inc., an Arizona
corporation.
"Treadway Agreement" means that certain Time and Materials Agreement
Between Owner and Contractor, dated as of February 10, 1997, by and between LVSI
and Treadway.
"Tri Party Agreement" means that certain Tri-Party Agreement dated
as of November 14, 1997 by and among Venetian, LVSI, Adelson, GCCLLC, Mall I
LLC, the Interim Mall Lender and the Tranche A Take Out Lender.
"Trust Estate" shall have, with respect to each Deed of Trust, the
meaning set forth in such Deed of Trust.
"UCC" means the Uniform Commercial Code of the jurisdiction the law
of which governs the document with respect to the term is used.
"Unallocated Contingency Balance" means, from time to time, the
amount of the "unallocated contingency" Line Item set forth in the Project
Budget then in effect (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 then in effect, (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 then in effect, (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" has the meaning given to such term in
clause (b) of the definition of "Project Construction Termination".
"VCR" means Venetian Casino Resort, LLC, a Nevada limited liability
company.
"VCR Permitted Encumbrances" has the meaning given in Section 3.1.28
of the Funding Agents' Disbursement and Administration Agreement.
"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.
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RULES OF INTERPRETATION
1. The singular includes the plural and the plural includes the
singular.
2. The word "or" is not exclusive.
3. A reference to a Legal Requirement includes any amendment or
modification of such Legal Requirement, and all regulations, rulings and other
Legal Requirements promulgated under such Legal Requirement.
4. A reference to a Person includes its permitted successors and
permitted assigns.
5. Accounting terms have the meanings assigned to them by U.S. GAAP,
as applied by the accounting entity to which they refer.
6. The words "include," "includes" and "including" are not limiting.
7. A reference in a document to an Article, Section, Exhibit,
Schedule, Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex
or Appendix of such document unless otherwise indicated. Exhibits, Schedules,
Annexes or Appendices to any document shall be deemed incorporated by reference
in such document.
8. References to any document, instrument or agreement (a) shall
include all exhibits, schedules and other attachments thereto, (b) shall include
all documents, instruments or agreements issued or executed in replacement
thereof, and (c) shall mean such document, instrument or agreement, or
replacement or predecessor thereto, as amended, modified and supplemented from
time to time and in effect at any given time.
9. The words "hereof," "herein" and "hereunder" and words of similar
import when used in any document shall refer to such document as a whole and not
to any particular provision of such document.
10. References to "days" shall mean calendar days, unless the term
"Banking Days" shall be used.
11. The Financing Agreements are the result of negotiations among,
and have been reviewed by, the Company, Adelson, the Company's Subsidiaries,
Interface Holding, the Funding Agents, the Lenders and the Disbursement Agent.
Accordingly, the Financing Agreements shall be deemed to be the product of all
parties thereto, and no ambiguity shall be construed in favor of or against any
such Person.
41
EXECUTION
COMPANY SECURITY AGREEMENT
This COMPANY SECURITY AGREEMENT (this "Agreement"), dated as of November
14, 1997, is entered into by and between LAS VEGAS SANDS, INC., a Nevada
corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a Nevada limited liability
company ("VCR"), GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware limited
liability company ("GCCLLC" and together with LVSI and VCR, individually each a
"Debtor" and together, as joint and several obligors, the "Debtors"), and THE
BANK OF NOVA SCOTIA, a Canadian chartered bank ("Scotiabank") in its capacity as
Intercreditor Agent under the Intercreditor Agreement (as defined below) (in
such capacity, "Intercreditor Agent") for and on behalf of (i) each agent and
each Bank Lender under the Bank Credit Agreement (as defined below) and any
Interest Rate Exchangers (as defined below) (individually, each a "Bank Secured
Party" and together, the "Bank Secured Parties"), (ii) GMAC Commercial Mortgage
Corporation, a California corporation ("GMAC"); (iii) First Trust National
Association, a national banking association, as the trustee (the "Mortgage Note
Indenture Trustee") for and on behalf of the Mortgage Note Holders
(individually, each a "Mortgage Note Secured Party" and together, the "Mortgage
Note Secured Parties") under the Mortgage Notes Indenture (as defined below) and
(iv) Intercreditor Agent and Disbursement Agent.
RECITALS
A. The Project. The Debtors propose to develop, construct and operate the
Venetian Casino Resort, a large scale Venetian-themed hotel, casino, retail,
convention, trade show, meeting and entertainment complex, with related heating,
ventilation and air conditioning and power station facilities, as part of the
redevelopment of the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI and VCR (as joint
and several obligors) have entered into a Credit Agreement, dated the date
hereof with the financial institutions party thereto as lenders (the "Bank
Lenders"), Scotiabank, as administrative agent and Goldman Sachs Credit Partners
L.P., as arranger and syndication agent (such credit agreement as it may be
modified, amended, supplemented, extended, refinanced, refunded, renewed,
replaced or substituted from time to time, the "Bank Credit Agreement") pursuant
to which the Bank Lenders will extend certain credit to LVSI and VCR subject to
the terms and conditions set forth therein. LVSI and VCR may from time to time
enter into one or more Interest Rate Agreements (collectively, the "Lender
Interest Rate Agreements") with one or more Bank Lenders (in such capacity,
collectively, "Interest Rate Exchangers") in accordance with the terms of the
Bank Credit Agreement, and it is desired that the obligations of LVSI and VCR
under the Lender Interest Rate Agreements,
<PAGE>
including the obligation of LVSI and VCR to make payments thereunder in the
event of early termination thereof, be included in the Bank Secured Obligations
secured hereunder.
C. GMAC Credit Agreement. Concurrently herewith, Debtors have entered into
a Credit Agreement, dated as of the date hereof, with GMAC (such credit
agreement as it may be modified, amended, supplemented, extended, refinanced,
refunded, renewed, replaced or substituted from time to time, the "GMAC Credit
Agreement") pursuant to which GMAC has agreed to extend certain credit
facilities to the Debtors subject to the terms and conditions set forth therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI and VCR, certain
guarantors named therein and the Mortgage Note Indenture Trustee have entered
into that certain Mortgage Notes Indenture, dated as of the date hereof (such
indenture as modified, amended or supplemented from time to time, the "Mortgage
Notes Indenture") pursuant to which LVSI and VCR will issue the Mortgage Notes
in a principal amount equal to $425,000,000 to finance certain costs of
constructing the Project, as more particularly described therein.
E. Disbursement Agreement. Concurrently herewith, the Debtors, the Bank
Agent, the Mortgage Notes Indenture Trustee, GMAC, Atlantic-Pacific Las Vegas,
LLC, and Scotiabank, as Disbursement Agent (the "Disbursement Agent") have
entered into the Funding Agents Disbursement and Administration Agreement, dated
as of the date hereof (such agreement as modified, amended or supplemented from
time to time, the "Disbursement Agreement") setting forth conditions to and the
sequencing of funding construction costs for the Project and certain other
matters.
F. Intercreditor Agreement. Concurrently herewith, the Intercreditor
Agent, the Bank Agent, the Mortgage Note Indenture Trustee, GMAC and the trustee
for certain senior subordinated notes issued by LVSI and VCR, have entered into
an Intercreditor Agreement (Credit Parties), dated as of the date hereof (such
agreement as it may be modified, amended or supplemented from time to time, the
"Intercreditor Agreement") which sets forth certain agreements among such
lenders with respect to the priority of the liens created hereunder, the
enforcement of remedies and the allocation of the proceeds of any realization
upon the collateral. The Intercreditor Agent is entering into this Agreement and
shall perform its obligations as set forth and in the manner provided, pursuant
to the provisions of the Intercreditor Agreement and shall take directions from
time to time from one or more of the Credit Parties as defined and provided for
therein.
G. Condition Precedent. It is a condition precedent to entering into the
Mortgage Notes Indenture, the Bank Credit Agreement and the GMAC Credit
Agreement and consummating the transactions contemplated therein (including the
extension of credit thereunder) that the Debtors enter into this Agreement.
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AGREEMENT
In consideration of the promises contained herein and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Debtors hereby agree as follows:
1. Definitions.
1.1 "Bank Event of Default" shall mean any Event of Default under and as
defined in either the Disbursement Agreement or the Bank Credit Agreement.
1.2 "Event of Default" shall mean a Bank Event of Default, a GMAC Event of
Default or a Mortgage Note Event of Default.
1.3 "GECC Proceeds Account" means an account funded solely by proceeds of
loans made pursuant to a credit agreement by and between LVSI and/or VCR and
General Electric Capital Corporation and other lenders party thereto.
1.4 "GMAC Event of Default" shall mean any Event of Default under and as
defined in either the Disbursement Agreement or the GMAC Credit Agreement.
1.5 "Mortgage Note Event of Default" shall mean any Event of Default under
the Mortgage Notes Indenture.
1.6 "Obligations" shall mean collectively the Bank Secured Obligations,
the GMAC Secured Obligations and the Mortgage Notes Secured Obligations.
1.7 "Receivables" shall mean all of the Debtor's accounts and accounts
receivable, including, without limitation, all rights to payment for goods sold
or leased or secured or for services rendered which are not evidenced by an
instrument or chattel paper, all other present or future rights for money due or
to become due, all of the accounts, chattel paper, instruments, promissory
notes, contract rights, documents, other obligations and general intangibles for
money due or to become due of any kind, in each case whether now existing or
hereafter arising and wherever arising and whether or not earned by performance.
1.8 "Secured Parties" shall mean individually and collectively,
Disbursement Agent, Intercreditor Agent, the Bank Secured Parties, GMAC and the
Mortgage Note Secured Parties.
1.9 "Specified FF&E" shall mean any furniture, fixtures, equipment and
other personal property which is acquired with proceeds of any Approved
Equipment Funding Commitments.
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1.10 "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 the security interest 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.
1.11 Unless otherwise defined herein, all capitalized terms used herein
which are defined in the Disbursement Agreement shall have their respective
meanings as used in the Disbursement Agreement as in effect on the date hereof.
The rules of interpretation contained in Exhibit A to the Disbursement Agreement
as in effect on the date hereof shall apply to this Agreement.
2. Assignment, Pledge and Grant of Security Interests.
2.1 Senior Grant in Favor of Bank Secured Parties, GMAC and Intercreditor
Agent in Assigned Agreements. To secure the timely payment and performance of
the Bank Secured Obligations (as defined in Section 3.1 hereof) and the GMAC
Secured Obligations (as defined in Section 3.2 hereof), subject to compliance
with applicable Nevada Gaming Laws, each Debtor does hereby assign, grant and
pledge to, and subject to a security interest on a first priority basis in favor
of, the Intercreditor Agent, on behalf and for the benefit of the Bank Secured
Parties, GMAC, the Intercreditor Agent and the Disbursement Agent, all the
estate, right, title and interest of such Debtor, whether now owned or hereafter
acquired or arising and wheresoever located, whether or not of a type which may
be subject to a security interest under the UCC, in, to and under the following
(the "Shared Intangible Collateral"):
2.1.1 the following agreements and documents, as amended,
supplemented or otherwise modified from time to time (individually, an
"Assigned Agreement," and collectively, the "Assigned Agreements") and all
of such Debtor's rights thereunder:
(A) the Construction Management Agreement;
(B) the Direct Construction Guaranty;
(C) the Indirect Construction Guaranty;
(D) the Professional Services Agreement;
(E) the HVAC Services Agreement;
(F) the Contracts;
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(G) the Approved Equipment Funding Commitments;
(H) the Cooperation Agreement;
(I) the HVAC Ground Lease;
(J) the Services Agreement;
(K) the Treadway Agreement;
(L) the Predevelopment Agreement;
(M) the Mall Lease (excluding, however, any rights of GCCLLC
as tenant thereunder, such rights having been granted as collateral
pursuant to a separate security interest agreement (the "Mall
Construction Subsidiary Security Agreement"), of even date herewith,
by and between GCCLLC and the Intercreditor Agent for and on behalf
of the Secured Parties);
(N) the Casino Lease;
(O) the Billboard Master Lease (excluding, however, any rights
of GCCLLC as tenant thereunder, such rights having been granted as
collateral pursuant to the Mall Construction Subsidiary Security
Agreement);
(P) the Construction Agency Agreement;
(Q) the Harrah's Shared Roadway Agreement;
(R) all other documents and agreements entered into on, prior
to or after the date hereof, relating to the development and
construction of the Project (other than the Financing Agreements,
the Tranche A Take Out Loan Commitment Agreement, the Tranche B Take
Out Loan Commitment Agreement, the Tranche B Collateral Security
Agreement and any other documents related to the Tranche A Take Out
Loan or the Tranche B Take Out Loan) as the same may be amended from
time to time in accordance with the terms and conditions of the
Disbursement Agreement and to the extent assignable any other
agreements to which such Debtor is or becomes a party;
(S) the insurance policies maintained by such Debtor or any
other Person under the Disbursement Agreement, the Cooperation
Agreement or any other Project Document (except (i) as specifically
provided above, and (ii) such Project Documents that have been
granted as collateral pursuant to the Mall Construction Subsidiary
Security Agreement), including, but not limited to any such policies
insuring against loss of revenues by reason of
5
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interruption of the operation of the Project and all loss proceeds
and other amounts payable to such Debtor thereunder, and all eminent
domain proceeds;
(T) to the extent assignable, all other agreements, including
vendor warranties, indemnities, and guarantees running to such
Debtor or assigned to such Debtor, including, but not limited to,
all such agreements relating to the construction, maintenance,
improvement, operation or acquisition of the Project or any part
thereof, or transport of material, equipment and other parts of the
Project or any part thereof;
(U) any other lease or sublease agreements or easement
agreements including, but not limited to, all such agreements
relating to the Project (other than the Mall) or any part thereof or
any ancillary facilities to which such Debtor is or becomes a party;
(V) all amendments, supplements, substitutions and renewals to
any of the aforesaid agreements;
(W) all rights of such Debtor to receive (i) monies due or to
become due under or pursuant to the aforesaid agreements and (ii)
proceeds of any insurance, indemnity, warranty or guaranty with
respect to the aforesaid agreements;
(X) all claims of such Debtor for damages arising out of
breach or default under any of the aforesaid agreements;
(Y) the rights of such Debtor to terminate, amend, supplement,
or modify any of the aforesaid agreements, to perform thereunder and
to compel performance and otherwise exercise all remedies
thereunder; and
(Z) all Permits, including those described on Annex 5 hereto,
necessary for or relating to the construction of the Project.
2.1.2 the proceeds of all of the foregoing, including without
limitation, (a) all rights of such Debtor to receive proceeds, rents,
profits and moneys due and to become due under or pursuant to the Assigned
Agreements; (b) all rights of such Debtor to receive the return of any
premiums for, or proceeds of, any insurance, indemnity, warranty or
guaranty with respect to the Assigned Agreements or to receive any
condemnation proceeds; (c) all claims of such Debtor for damages arising
out of, or for breach of or default under, any Assigned Agreement; and (d)
to the extent not included in the foregoing, all proceeds receivable or
received when any and all of the Assigned Agreements or proceeds thereof
is sold, collected, exchanged or otherwise disposed of, whether
voluntarily or involuntarily.
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Notwithstanding anything to the contrary contained herein, the term
"Shared Intangible Collateral" for purposes of this Section 2.1 shall not
include (i) the Accounts to the extent included in the Collateral under
any Collateral Account Agreements, (ii) any common stock, preferred stock
or membership interest, whether represented by certificates or otherwise,
in Debtors or any of their Subsidiaries (including Excluded Subsidiaries),
(iii) Specified FF&E (except to the extent that the Bank Secured Parties
finance Specified FF&E pursuant to an Approved Equipment Funding
Commitment), (iv) the HVAC Component, (v) any gaming devices or other
equipment which would require a finding of suitability or other similar
procedure by an applicable Nevada Gaming Authority prior to being pledged,
hypothecated, or given as collateral security, (vi) contract rights in
respect of agreements entered into with regard to the purchase of any
furniture, fixtures and equipment for use in the hotel/casino component of
the Project and any deposits paid in respect thereof and (vii) the GECC
Proceeds Account.
2.2 Senior Grant to Bank Secured Parties and Intercreditor Agent in Other
Collateral. To secure the timely payment and performance of the Bank Secured
Obligations (as defined in Section 3.1 hereof), subject to compliance with
applicable Nevada Gaming Laws, each of LVSI and VCR does hereby assign, grant
and pledge to, and subject to a security interest on a first priority basis in
favor of, the Intercreditor Agent, on behalf and for the benefit of the Bank
Secured Parties, the Intercreditor Agent and the Disbursement Agent, all the
estate, right, title and interest of each of LVSI and VCR, whether now owned or
hereafter acquired or arising and wheresoever located, whether or not of a type
which may be subject to a security interest under the UCC, in, to and under the
following:
2.2.1 all Permits (except for those described in section 2.1.1(Z)),
but excluding any of the Permits which by their terms or by operation of
law prohibit or do not allow assignment or which would become void solely
by virtue of a security interest being granted therein;
2.2.2 all rents, profits, income, royalties, revenues, accounts,
contract rights, chattel paper, documents, instruments, general
intangibles and other rights of any kind and all rights in, to and under
all security agreements, leases and other contracts securing or otherwise
relating to any such rents, profits, income, royalties, revenues,
accounts, contract rights, chattel paper, instruments, documents, general
intangibles or other rights and claims to the payment or receipt of money
or other forms of consideration;
2.2.3 all equipment in all of its forms and all parts thereof and
accessions thereto, including, but not limited to, all plant, machinery,
tools, engines, and equipment of any type including, without limitation,
control equipment, gaming equipment and general equipment and devices, all
computer equipment, calculators, adding machines, slot gaming tables,
video game and slot machines and any other electronic equipment of every
nature, appliances, mechanical and electrical systems, elevators,
lighting, alarm systems, fire control systems, furnishings, furniture,
service
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equipment, motor vehicles, building or maintenance equipment, building or
maintenance materials, pipes and pipelines, spare parts, maps, plans,
specifications, architectural, engineering, construction or shop drawings,
manuals or similar documents and any replacements, renewals or
substitutions for any of the foregoing;
2.2.4 all plant fixtures, business fixtures and other fixtures and
storage and office facilities and accessions thereto and replacements
thereof and products thereof;
2.2.5 all inventory in all of its forms, including, but not limited
to, (i) all goods held by such Debtor for sale or lease or to be furnished
under contracts of service or so leased or furnished, (ii) all supplies,
raw materials, work in process, finished goods, and materials used or
consumed in LVSI's and VCR's business, (iii) all goods covered by any
warehouse receipts, bills of lading or other such documents or in which
such Debtor has an interest in mass or a joint or other interest or right
of any kind and (iv) all goods which are returned to or repossessed by
such Debtor and all accessions thereto and products thereof;
2.2.6 all trademarks and service marks now held or hereafter
acquired by any Debtor which are registered in the United States Patent
and Trademark Office or in any similar office or agency of the United
States or any state thereof or any political subdivision thereof and any
application for such trademarks and service marks, as well as any
unregistered marks used by such Debtor in the United States and trade
dress including logos, designs, trade names, business names, fictitious
business names and other business identifiers in connection with which any
of these registered or unregistered marks are used in the United States
(collectively, the "Marks") including, but not limited to, the Marks
listed on Annex 2, together with the registration and right to renewals
thereof, and the goodwill of the business of such Debtor symbolized by the
Marks and all licenses associated therewith, it being understood that the
rights and interests included herein shall include, without limitation,
all rights and interests pursuant to licensing or other contracts in favor
of such Debtor pertaining to the Marks presently or in the future owned or
used by third parties but, in the case of third parties which are not
Affiliates of such Debtor, only to the extent permitted by such licensing
or other contracts and, if not so permitted, except with respect to the
rights of such Debtor to receive payments thereunder, only with the
consent of such third parties;
2.2.7 all United States copyrights which such Debtor now or
hereafter owns or has registered with the United States Copyright Office,
as well as any application for a United States copyright registration now
or hereafter made with the United States Copyright Office by such Debtor
(collectively, the "Copyrights") including, but not limited to, the
Copyrights listed on Annex 3, and all United States patents to which of
such Debtor now or hereafter has title and any divisions or continuations
thereof, as well as any application for a United States patent now or
hereafter made by of such Debtor (collectively, the "Patents"), including,
but not limited to, all
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Patents listed on Annex 4, and all reissues, renewals or extensions of
each of them, it being understood that the rights and interests included
herein shall include, without limitation, all rights and interests
pursuant to licensing or other contracts in favor of such Debtor
pertaining to the Copyrights and Patents presently or in the future owned
or used by third parties but, in the case of third parties which are not
Affiliates of such Debtor, except with respect to the rights of such
Debtor to receive payments thereunder, only to the extent permitted by
such licensing or other contracts and, if not so permitted, only with the
consent of such third parties;
2.2.8 all computer programs and software of such Debtor and all
intellectual property rights therein and all other proprietary information
of such Debtor, including, but not limited to, trade secrets, it being
understood that the rights and interests included herein shall include,
without limitation, all rights and interests pursuant to licensing or
other contracts in favor of pertaining to computer programs and software
presently or in the future owned or used by third parties but, in the case
of third parties which are not Affiliates of such Debtor, only to the
extent permitted by such licensing or other contracts and, if not so
permitted, except with respect to the rights of each of such Debtor to
receive payments thereunder, only with the consent of such third parties;
2.2.9 to the extent not covered by any other clause of this
subsection 2.2 but subject to the exclusions specified above, all other
trademarks, tradenames, tradesecrets, goodwill, business names, patents,
patent applications, licenses and copyrights, registrations, and franchise
rights;
2.2.10 to the extent not covered by any other clause of this
subsection 2.2 but subject to the exclusions specified above, all other
general intangibles (including, but not limited to, tax refunds, rights to
payment or performance, chooses in action and judgments taken on any
rights or claims included in the Collateral);
2.2.11 contract rights in respect of agreements entered into with
regard to the purchase of any furniture, fixtures and equipment for use in
the hotel/casino component of the Project and any deposits paid in respect
thereof;
2.2.12 the proceeds of all of the foregoing (all of the collateral
described in 2.2.1 through and including 2.2.11 being herein collectively
referred to as the "Other Collateral" and together with the Shared
Intangible Collateral, the "Collateral"), including without limitation,
(a) all rights of such Debtor to receive proceeds, rents, profits and
moneys due and to become due under or pursuant to the Other Collateral;
(b) all rights of such Debtor to receive the return of any premiums for,
or proceeds of, any insurance, indemnity, warranty or guaranty with
respect to the Other Collateral or to receive any condemnation proceeds;
(c) all claims of such Debtor for damages arising out of, or for breach of
or default under, any Other Collateral; and (d) to the extent not included
in the foregoing, all proceeds receivable or received when any and all of
the foregoing Other Collateral or
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proceeds thereof is sold, collected, exchanged or otherwise disposed of,
whether voluntarily or involuntarily.
Notwithstanding anything to the contrary contained herein, the term "Other
Collateral" for purposes of this Section 2.2 shall not include (i) any
Accounts to the extent included in the Collateral under any Collateral
Account Agreements, (ii) any common stock, preferred stock or membership
interest, whether represented by certificates or otherwise, in such Debtor
or any of its Subsidiaries (including Excluded Subsidiaries), (iii)
Specified FF&E (except to the extent that the Bank Secured Parties finance
Specified FF&E pursuant to an Approved Equipment Funding Commitment), (iv)
any gaming devices or other equipment which would require a finding of
suitability or other similar procedure by an applicable Nevada Gaming
Authority prior to being pledged, hypothecated, or given as collateral
security, (v) the HVAC Component, (vi) the Shared Intangible Collateral
and (vii) the GECC Proceeds Account.
2.3 Junior Grant in Favor of Mortgage Note Secured Parties. To secure the
timely payment and performance of the Mortgage Note Secured Obligations (as
defined in Section 3.3 hereof), subject to compliance with applicable Nevada
Gaming Laws, each Debtor does hereby assign, grant and pledge to, and subject to
a security interest on a second priority basis, in favor of, the Intercreditor
Agent, on behalf of and for the benefit of the Mortgage Note Secured Parties,
the Intercreditor Agent and the Disbursement Agent, all the estate, right, title
and interest of each Debtor, whether now owned or hereafter acquired or arising
and wheresoever located, whether or not of a type which may be subject to a
security interest under the UCC, in, to and under the Collateral provided, that
with respect to GCCLLC, the foregoing grant shall be limited to that portion of
the Collateral that constitutes Shared Intangible Collateral.
Notwithstanding anything to the contrary contained herein, the term "Collateral"
for purposes of this Section 2.3 shall not include (i) any common stock,
preferred stock or membership interest, whether represented by certificates or
otherwise, in such Debtors or any of their Subsidiaries (including Excluded
Subsidiaries), (ii) any gaming devices or other equipment which would require a
finding of suitability or other similar procedure by an applicable Nevada Gaming
Authority prior to being pledged, hypothecated, or given as collateral security,
(iii) any Accounts to the extent included in the Collateral under any Collateral
Account Agreements, (iv) any Specified FF&E, (v) the HVAC Component and (vi) the
GECC Proceeds Account.
2.4 Delivery of Assigned Agreements. Each Debtor has heretofore delivered,
or concurrently with the delivery hereof, is delivering to the Intercreditor
Agent an executed counterpart or certified copy of each of the Assigned
Agreements. Each Debtor will likewise deliver to the Intercreditor Agent an
executed counterpart of each future lease, construction agreement, operation
agreement and other agreement entered into by Debtors, any notices, reports or
requests for information related to any of the foregoing, and amendments and
supplements to the foregoing, as they are entered into by Debtor promptly
upon the execution thereof. Each Debtor will further: (1) mark conspicuously
each item of chattel paper and, at the reasonable request of the Intercreditor
Agent, each of its
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records pertaining to the Collateral, with a legend, in form and substance
reasonably satisfactory to the Intercreditor Agent, indicating that such
Collateral is subject to the security interest granted hereby, (ii) at the
reasonable request of the Intercreditor Agent, deliver and pledge to the
Intercreditor Agent hereunder all promissory notes and other instruments
(including checks) and all original counterparts of chattel paper constituting
Collateral, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the
Intercreditor Agent. Notwithstanding anything to the contrary contained herein,
no such future lease, construction agreement, operation agreement or other
material agreement may be entered into by Debtor except as permitted under the
Disbursement Agreement, while applicable, the Bank Credit Agreement, the
Mortgage Notes Indenture and the GMAC Credit Agreement.
2.5 Debtors to Remain Liable. Notwithstanding anything to the contrary
contained herein, Debtors shall remain liable under each of the Assigned
Agreements to perform all of the obligations undertaken by them thereunder, all
in accordance with and pursuant to the terms and provisions thereof and take
such action to such end as requested by the Intercreditor Agent, and the Secured
Parties shall have no obligation or liability under any of such Assigned
Agreements by reason of or arising out of this Agreement, nor shall the
Intercreditor Agent or any other Secured Party be required or obligated in any
manner to perform or fulfill any obligations of Debtors thereunder or to make
any payment or inquiry as to the nature or sufficiency of any payment received
by it, or present or file any claim or take any action to collect or enforce the
payment of any amounts which may have been assigned to Secured Parties or to
which such Secured Party may be entitled at any time.
2.6 Action by Intercreditor Agent and Secured Parties to Cure Certain
Defaults. If any default by a Debtor under any of the Assigned Agreements shall
occur and be continuing that constitutes an Event of Default, then subject to
the terms of the Intercreditor Agreement any of the Intercreditor Agent and
Secured Parties shall be permitted (but shall not be obligated) to remedy any
such default by giving written notice of such intent to Debtors and to the
parties to the Assigned Agreement or Assigned Agreements for which such of the
Intercreditor Agent and Secured Parties intends to remedy the default. After
giving such notice of its intent to cure such default and upon the commencement
thereof, the Intercreditor Agent or Secured Parties, as applicable, will proceed
diligently to cure such default. Any cure by the Intercreditor Agent or any of
the Secured Parties of Debtor's default under any of the Assigned Agreements
shall not be construed as an assumption by the Intercreditor Agent or any of the
other Secured Parties of any obligations, covenants or agreements of Debtors
under such Assigned Agreement, and neither the Intercreditor Agent nor any of
the Secured Parties shall be liable to either Debtor or any other Person as a
result of any actions undertaken by the Intercreditor Agent or any of the
Secured Parties pursuant hereto or pursuant to any Consent or in curing or
attempting to cure any such default. This Agreement shall not be deemed to
release or to affect in any way the obligations of Debtors under the Assigned
Agreements or the rights of Intercreditor Agent hereunder with respect to the
exercise of remedies.
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2.7 Restrictions on Modification of Assigned Agreements. Debtor shall not
without the consent of the Intercreditor Agent:
2.7.1 cancel or terminate any of the Assigned Agreements or consent
to or accept any cancellation or termination thereof;
2.7.2 amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
2.7.3 waive any default under or breach of the Assigned Agreements;
2.7.4 consent to or permit or accept any prepayment of amounts to
become due under or in connection with the Assigned Agreements, except as
expressly provided therein; or,
2.7.5 take any other action in connection with the Assigned
Agreements that would impair the value of the interest or rights of Debtor
thereunder or that would impair the interest or rights of the Secured
Parties.
Notwithstanding the foregoing, Debtors may take any actions otherwise prohibited
under this subsection 2.7 to the extent permitted by the Disbursement Agreement,
the Mortgage Notes Indenture, the Bank Credit Agreement and GMAC Credit
Agreement. Further, Debtors shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral except as permitted by
the Disbursement Agreement, the Mortgage Notes Indenture, the Bank Credit
Agreement and the GMAC Credit Agreement so long as any such agreement by its
terms restricts the sale, assignment or other disposition of Collateral.
3. Obligations Secured.
3.1 Bank Secured Obligations. This Agreement secures, and all of the
Collateral is collateral security for (i) the prompt payment and performance by
each Debtor when due whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all obligations and
liabilities of every nature of Debtors now or hereafter existing under or
arising out of or in connection with the Bank Credit Agreement and the other
Loan Documents (as defined in the Bank Credit Agreement) and the Lender Interest
Rate Agreements and all extensions and renewals thereof, whether for principal,
interest (including without limitation, interest that, but for the filing of a
petition in bankruptcy with respect to such Debtor, would accrue on such
obligations at the contract rate whether or not a claim for such interest is
allowed in any such proceeding), reimbursement for draws on letters of credit,
payments for early termination, fees, expenses, increased costs,
indemnification, or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated and whether or not
jointly owed with others, (ii) any
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and all sums advanced by any of the Bank Secured Parties in order to preserve
the Collateral or preserve Bank Secured Parties' security interest in the
Collateral (or the priority thereof), (iii) the expenses of any Bank Secured
Parties of retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, of any proceeding for the
collection or enforcement of any indebtedness, obligations or liabilities of
Debtors referred to above, or of any exercise by the Bank Secured Parties of
their rights hereunder, together with reasonable attorneys' fees and
disbursements and court costs, (iv) any and all obligations of Debtors to the
Intercreditor Agent and any other agents in respect of costs, fees,
indemnification or otherwise under this Agreement, the Disbursement Agreement,
the Collateral Account Agreements and/or any other Financing Agreement whether
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated and whether or not jointly owed with others and (v) any of the
foregoing obligations that are paid to the extent all or any portion of such
payment is avoided or recovered directly or indirectly from any Bank Secured
Party as a preference, fraudulent transfer or otherwise (collectively, the "Bank
Secured Obligations").
3.2 GMAC Secured Obligations. This Agreement secures, and all of the
Shared Intangible Collateral is collateral security for (i) the prompt payment
and performance by each Debtor when due whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all
obligations and liabilities of every nature of Debtors now or hereafter existing
under or arising out of or in connection with the GMAC Credit Agreement and the
other Loan Documents (as defined in the GMAC Credit Agreement) and all
extensions and renewals thereof, whether for principal, interest (including
without limitation, interest that, but for the filing of a petition in
bankruptcy with respect to such Debtor, would accrue on such obligations at the
contract rate whether or not a claim for such interest is allowed in any such
proceeding), payments for early termination, fees, expenses, increased costs,
indemnification, or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated and whether or not
jointly owed with others, (ii) any and all sums advanced by GMAC in order to
preserve the Collateral or preserve GMAC's security interest in the Collateral
(or the priority thereof), (iii) the expenses of GMAC of retaking, holding,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Collateral, of any proceeding for the collection or enforcement of any
indebtedness, obligations or liabilities of Debtors referred to above, or of any
exercise by GMAC of its rights hereunder, together with reasonable attorneys'
fees and disbursements and court costs, (iv) any and all obligations of Debtors
to the Disbursement Agent and the Intercreditor Agent in respect of costs, fees,
indemnification or otherwise under this Agreement, the Disbursement Agreement,
the Collateral Account Agreements and/or any other Financing Agreement whether
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated and whether or not jointly owed with others and (v) any of the
foregoing obligations that are paid to the extent all or a portion of such
payment is avoided or recovered directly or indirectly from GMAC as a
preference, fraudulent transfer or otherwise (collectively, the "GMAC Secured
Obligations").
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3.3 Mortgage Note Secured Obligations. This Agreement secures, and all of
the Collateral is collateral security for (i) the prompt payment and performance
by each Debtor when due whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all obligations and
liabilities of every nature of Debtors now or hereafter existing under or
arising out of or in connection with the Mortgage Notes, the Mortgage Note
Indenture, this Agreement, the Disbursement Agreement, the Collateral Account
Agreements and the Mortgage Notes Indenture Security Documents and all
extensions and renewals thereof, whether for principal, interest (including
without limitation, interest that, but for the filing of a petition in
bankruptcy with respect to such Debtor, would accrue on such obligations at the
contract rate whether or not a claim for such interest is allowed in any such
proceeding), payments for early termination, fees, expenses, increased costs,
indemnification, or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated and whether or not
jointly owed with others, (ii) any and all sums advanced by any of the Mortgage
Note Secured Party in order to preserve the Collateral or preserve the Mortgage
Note Secured Parties' security interest in the Collateral (or the priority
thereof), (iii) the expenses of the Intercreditor Agent or the Mortgage Note
Indenture Trustee of retaking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, of any proceeding for the
collection or enforcement of any indebtedness, obligations or liabilities of
Debtors referred to above, or of any exercise by the Mortgage Note Indenture
Trustee of its rights hereunder, together with reasonable attorneys' fees and
disbursements and court costs, (iv) any and all obligations of Debtors to the
Disbursement Agent and the Intercreditor Agent in respect of costs, fees,
indemnification or otherwise under this Agreement, the Disbursement Agreement,
the Collateral Account Agreements and/or any other Financing Agreement whether
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated and whether or not jointly owed with others and (v) any of the
foregoing obligations that are paid, to the extent all or a portion of such
payment is avoided or recovered directly or indirectly from any Mortgage Note
Secured Party as a preference, fraudulent transfer or otherwise (collectively,
the "Mortgage Note Secured Obligations").
4. Representations and Warranties of Debtor.
Each Debtor represents and warrants as of the date hereof as follows:
4.1 Such Debtor has not assigned any of its rights under the Assigned
Agreements except as expressly permitted under the Disbursement Agreement and
each of the Bank Credit Agreement, the GMAC Credit Agreement and the Mortgage
Notes Indenture.
4.2 Such Debtor has not executed and is not aware of any effective
financing statement, security agreement or other instrument similar in effect
covering all or any part of the Collateral, except such as may have been filed
in accordance with the terms of this Agreement and the other Financing
Agreements in favor of Secured Parties.
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4.3 Except as otherwise permitted by the Disbursement Agreement, the Bank
Credit Agreement, the GMAC Credit Agreement and the Mortgage Notes Indenture
such Debtor is lawfully possessed of ownership of the Collateral and has full
right, title and interest in and to all rights purported to be granted to it
under the Assigned Agreements, not subject to any Liens except Permitted Liens.
Such Debtor has full power and lawful authority to grant and assign the
Collateral hereunder and all consents of third parties required in connection
therewith have been obtained except for the license from Pratt Hotel Corporation
with respect to the use of the Sands name. All of the assets, equipment and
personal property of Debtor secured hereby is, as of the date hereof, located at
the places specified in Annex 1 attached hereto.
4.4 Such Debtor does not do business, and for the previous five years has
not done business, under any fictitious business names or trade names.
4.5 Such Debtor is the true, lawful and exclusive owner of the Marks
listed in Annex 2, except those listed as being held under a non-exclusive
license, and said listed Marks include all of such Debtor's United States
federal registrations or applications registered in the United States Patent and
Trademark office. Such Debtor owns or is licensed to use all Marks that it uses
that are material to its business. Such Debtor is aware of no material third
party claim that any aspect of such Debtor's present or contemplated business
operations infringes or will infringe on any such third party's rights to such
Marks. Such Debtor is the owner of record of all United States registrations and
applications listed in Annex 2 hereto and that said registrations are valid,
subsisting, have not been cancelled and that such Debtor is not aware of any
material third-party claim that any of said registrations is invalid or
unenforceable.
4.6 Such Debtor is the true, lawful and exclusive owner of all rights in
the Patents listed in Annex 3 hereto and in the Copyrights listed in Annex 4
hereto. Said listed Patents include all the United States patents and
applications for United States patents that such Debtor owns and said listed
Copyrights constitute all the United States copyrights registered in the United
States Copyright Office and applications for United States copyrights that it
now uses or practices under that are material to its business. Such Debtor is
aware of no material third party claim that any aspect of such Debtor's present
or contemplated business operations infringes or will infringe on any such third
party's rights to any patent or any copyright.
4.7 All notes and other instruments (excluding checks) and all
certificated securities comprising any and all items of Collateral have been
delivered to the Intercreditor Agent duly endorsed and accompanied by duly
executed instruments of transfer or assignment in blank.
5. Covenants of Debtors.
Each Debtor covenants as follows:
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5.1 Any action or proceeding to enforce this Agreement after an Event of
Default has occurred and is continuing under any Assigned Agreement may be taken
by the Intercreditor Agent either in such Debtor's name or in the Intercreditor
Agent's name, as the Intercreditor Agent may deem necessary.
5.2 Such Debtor will, so long as any Obligations shall be outstanding,
warrant and defend its title to the Collateral and the interests of the
Intercreditor Agent and the Secured Parties in the Collateral against any claim
or demand of any persons (other than Permitted Liens) which could reasonably be
expected to materially and adversely affect such Debtor's title to, or the
Secured Parties right or interest in, such Collateral.
5.3 Such Debtor will at all times keep accurate and complete records of
the Collateral. Such Debtor shall, at its own expense, permit representatives of
the Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note Indenture
Trustee upon reasonable prior notice, and in accordance with Section 5.5 of the
Disbursement Agreement (while applicable), at any time during normal business
hours of such Debtor to inspect and make abstracts from such Debtor's books and
records pertaining to the Collateral subject to a confidentiality undertaking in
form and substance reasonably satisfactory to Debtors. Upon the occurrence and
during the continuation of any Event of Default, at the Intercreditor Agent's
request, Debtors shall promptly deliver copies of any and all such records to
the Intercreditor Agent.
5.4 Unless waived in writing by the Intercreditor Agent, such Debtor shall
give the Intercreditor Agent at least forty-five (45) days' notice before it
changes its name, identity, corporate structure, location of its principal place
of business or location of its chief executive office and shall at the expense
of such Debtor execute and deliver such instruments and documents as may
reasonably be required by the Intercreditor Agent to maintain a prior perfected
security interest in the Collateral.
5.5 Such Debtor will keep and maintain the Collateral in good condition,
working order and repair and from time to time will make or cause to be made all
repairs, replacements and other improvements in connection therewith that are
necessary or desirable toward such end. Such Debtor will not misuse the
Collateral, or allow it to deteriorate except for the ordinary wear and tear of
its normal and expected use in such Debtor's business in accordance with such
Debtor's policies as then in effect (provided that no changes are made to such
Debtor's policies as in effect on the date hereof that would be materially
adverse to the interests of the Secured Parties), and will comply in all
material respects with all laws, statutes and regulations pertaining to the use
or ownership of the Collateral. Such Debtor will promptly notify the
Intercreditor Agent, Bank Agent, GMAC and the Mortgage Note Indenture Trustee
regarding any material loss or damage to any material Collateral or portion
thereof; provided, however, that the foregoing provisions exclude normal wear
and tear to the Collateral, items that the such Debtor reasonably believes are
no longer necessary to the successful operation of its business and the
disposition of obsolete items. Such Debtor will not use or permit any Collateral
to be used unlawfully or in violation of any provision of this Agreement or any
applicable statute,
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regulation or ordinance or any policy of insurance covering the Collateral.
Nothing contained in this Section 5.5 shall prohibit such Debtor from taking any
action or refraining from taking any action permitted by the Disbursement
Agreement (while applicable), the Bank Credit Agreement, the GMAC Credit
Agreement or the Mortgage Note Indenture.
5.6 Upon the reasonable request of the Intercreditor Agent, Bank Agent,
GMAC or the Mortgage Notes Indenture Trustee, such Debtor will promptly deliver
to such Person records and schedules that show the status, condition and
location of the Collateral, including accounts receivable aging reports and
other reports reasonably requested by such Person, all in reasonable detail; and
will promptly notify the Intercreditor Agent, Bank Agent, GMAC and the Mortgage
Note Indenture Trustee in writing of any event, or change of law, regulation,
business practice, or business condition that may materially adversely affect
the value of the Collateral. The Intercreditor Agent, Bank Agent, GMAC and the
Mortgage Note Indenture Trustee shall have the right to review and verify such
records, schedules, financial information and notices, and such Debtor will
reimburse each such Person for all costs incurred thereby. Such review and
verification shall include the right of the Intercreditor Agent, Bank Agent,
GMAC and the Mortgage Note Indenture Trustee to contact account debtors to
confirm balances owing on and the terms of Receivables, provided that an Event
of Default has occurred and is continuing.
5.7 Except as otherwise provided in this Section 5.7, such Debtor shall
continue to collect at its own expense, all amounts due or to be become due such
Debtor under the Receivables. In connection with such collections, such Debtor
may take (and, at the Intercreditor Agent's reasonable direction, shall take)
such action as such Debtor or the Intercreditor Agent after consultation with
such Debtor reasonably deem necessary or advisable to enforce collection of the
Receivables; provided, however, that such Debtor shall not adjust, settle or
compromise the amount or payment of any Receivable, or release wholly or partly
any account debtor or obligor thereof, or allow any credit or discount thereon,
other than adjustments, settlements, or discounts that are in accordance with
such Debtor's policies as then in effect; provided that no changes are made to
such Debtor's policies as in effect on the date hereof that would be materially
adverse to the interests of the Secured Parties. The Intercreditor Agent shall
have the right at any time after the occurrence and during the continuation of
an Event of Default to notify the account debtors or obligors under any of the
Receivables of the assignment of such Receivables to the Secured Parties and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to such Debtor thereunder directly to the Intercreditor Agent or to
such Secured Parties as Intercreditor Agent may direct in accordance with the
Intercreditor Agreement and, upon such notification and at the expense of such
Debtor, to enforce collection of any such Receivables, and to adjust, settle or
compromise the amount or payment thereof, as the Intercreditor may deem
appropriate in its sole discretion. After the occurrence and during the
continuation of an Event of Default (i) all amounts and proceeds (including
instruments) received by such Debtor in respect of the Receivables shall be
received in trust for the benefit of the Secured Parties hereunder and, upon
notice from the Intercreditor Agent, shall be segregated from other funds of
such Debtor and shall be forthwith paid over to the Intercreditor Agent or to
such Secured Parties as Intercreditor
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Agent may direct in accordance with the Intercreditor Agreement in the same form
as so received (with all necessary or appropriate endorsements) to be held as
cash collateral and applied as provided by Section 8, and (ii) such Debtor shall
not adjust, settle or compromise the amount or payment of any Receivable, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
5.8 Such Debtor shall pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon, and all claims against, the
Collateral, except to the extent the validity thereof is being contested in good
faith; provided that such Debtor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five (5) days prior to the date of any
proposed sale under any judgement, writ or warrant of attachment entered or
filed against such Debtor or any of the Collateral as a result of the failure to
make such payment.
5.9 Marks.
(a) Each such Debtor hereby agrees not to sell, assign (by operation
of law or otherwise) or otherwise dispose of any right under any material
Mark that such Debtor is required to maintain under Section 5.9(b) hereof
except as permitted by the Disbursement Agreement (while applicable), the
Bank Credit Agreement, the GMAC Credit Agreement and the Mortgage Note
Indenture, absent prior written approval of the Intercreditor Agent. Each
such Debtor agrees to use such Marks in interstate commerce in a manner
that is sufficient to preserve such Marks as trademarks or service marks
registered under the laws of the United States.
(b) Each such Debtor shall, at its own expense, diligently prosecute
all applications for Marks listed in Annex 2 hereto and further, for all
of its material registered Marks, shall diligently process all documents
required by the Trademark Act of 1946, 15 U.S.C. ss.ss. 1051 et seq. to
maintain trademark registration, including but not limited to affidavits
of use and applications for renewals of registration in the United States
Patent and Trademark Office pursuant to 15 U.S.C. ss.ss. 1058(a), 1059 and
1065, and shall pay all fees and disbursements in connection therewith and
shall not abandon any such filing of affidavit of use or any such
application of renewal prior to the exhaustion of all administrative and
judicial remedies without the prior written consent of the Intercreditor
Agent; provided, that such Debtor shall not be obligated to maintain any
Mark in the event that such Debtor determines, in its reasonable business
judgment, that the maintenance of such Mark is no longer necessary or
desirable in the conduct of its business. Each Debtor agrees to notify the
Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note Indenture
Trustee three (3) months prior to the date on which the affidavits of use
or the applications for renewal registration are due with respect to any
material registered Mark.
(c) If any material Mark registration certificate is issued
hereafter to a Debtor as a result of any application now or hereafter
pending before the United
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States Patent and Trademark Office, within thirty (30) days of receipt of
such certificate confirming such registration such Debtor shall deliver a
copy of such certificate, and a grant of security in such Mark on behalf
of the Secured Parties to the Intercreditor Agent, the Bank Agent, GMAC
and the Mortgage Note Indenture Trustee, confirming the grant thereof
hereunder together with all cover sheets or other documents or instruments
required to be filed with the United States Patent and Trademark Office in
order to create or perfect a lien in respect of such Mark.
(d) Each Debtor agrees, promptly upon learning thereof, to notify
the Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note
Indenture Trustee in writing of the name and address of, and to furnish
such pertinent information that may be available with respect to, any
party who such Debtor believes is infringing or otherwise violating any of
such Debtor's rights to any material Mark, or with respect to any party
claiming that such Debtor's use of any such Mark violates in any material
respect any property right of that party. Such Debtor further agrees,
unless otherwise agreed by the Intercreditor Agent, diligently to
prosecute any Person infringing any material Mark.
5.10 Patents and Copyrights.
(a) Each Debtor hereby agrees not to sell, assign (by operation of
law or otherwise), or otherwise dispose of any right under any material
Patent or Copyright except as permitted by the Disbursement Agreement
(while applicable), the Bank Credit Agreement, the GMAC Credit Agreement
and the Mortgage Note Indenture, absent prior written approval of the
Intercreditor Agent.
(b) Each Debtor shall, at its own expense, diligently prosecute all
applications for material Patents and material Copyrights listed in Annex
3 and Annex 4 hereto, respectively, and shall not abandon any such
application prior to exhaustion of all reasonable administrative and
judicial remedies, absent written consent of the Intercreditor Agent. Each
Debtor shall do all acts and things reasonably necessary to maintain the
Patents and Copyrights listed in Annex 3 and Annex 4, respectively, and
all Patents and Copyrights hereafter obtained or acquired by such Debtor,
including, without limitation, making timely payment of all post-issuance
fees required pursuant to 35 U.S.C. ss. 41 to maintain in force rights
under each Patent.
(c) Within thirty (30) days of acquisition of a Patent or Copyright,
or of filing of an application for a Patent or Copyright by a Debtor, such
Debtor shall deliver to the Intercreditor Agent, the Bank Agent, GMAC and
the Mortgage Note Indenture Trustee a copy of said Patent or Copyright or
such application, as the case may be, with a grant of security as to such
Patent or Copyright, as the case may be, confirming the grant thereof
hereunder together with all cover sheets or other documents or instruments
required to be filed with the United States Patent and
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Trademark Office in order to create or perfect a lien in respect of such
Patent or Copyright.
(d) Each Debtor agrees, promptly upon learning thereof, to notify
the Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note
Indenture Trustee in writing of the name and address of, and to furnish
such pertinent information available to such Debtor with respect to any
party who Debtor believes is infringing or otherwise violating any of such
Debtor's rights in any material Patent or material Copyright, or with
respect to any party claiming that Debtor's practice of any Patent or use
of any Copyright violates any property right of that third party. Each
Debtor further agrees, unless otherwise agreed by the Intercreditor Agent,
diligently to prosecute any Person infringing any material Patent or
material Copyright.
5.11 Accounts. Following termination of the Accounts, Debtors shall
establish a cash management system in form and substance reasonably acceptable
to Intercreditor Agent and shall only establish and maintain deposit accounts,
investment accounts or like accounts with financial institutions that have
entered into letter agreements with the Intercreditor Agent and the Debtors (or
their subsidiaries) in form and substance satisfactory to Intercreditor Agent
pursuant to which such financial institution confirms and acknowledges the
security interest of Secured Parties in such account, waives its right of
set-off with respect to amounts held therein and agrees that if Intercreditor
Agent notifies such institution that an Event of Default has occurred, then
until such notification is rescinded, such institution will act only on
instructions from Intercreditor Agent and will, if so instructed to, block
further withdrawals from such account. Debtors will take such further actions
and execute such further documents in connection therewith as Intercreditor
Agent may reasonably request in order to perfect, or maintain the perfection of
the security interest of Secured Parties in such accounts.
6. Remedies Upon Event of Default.
6.1 Subject to compliance with applicable Nevada Gaming Laws, if any Event
of Default shall have occurred and be continuing, the Intercreditor Agent may
exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral), and also may (a) require Debtors to, and
Debtors hereby agree that they will at their expense and upon request of the
Intercreditor Agent forthwith, assemble all or part of the Collateral as
directed by the Intercreditor Agent and make it available to the Intercreditor
Agent at a place to be designated by the Intercreditor Agent that is reasonably
convenient to both parties, (b) enter onto the property where any Collateral is
located and take possession thereof with or without judicial process, (c) prior
to the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent the Intercreditor Agent deems appropriate, (d) take
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possession of Debtors' premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of Debtors' equipment
for the purpose of completing any work in process, taking any actions described
in the preceding clause (c) and collecting any Obligation, and (e) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Intercreditor Agent's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as the
Intercreditor Agent may deem commercially reasonable. The Intercreditor Agent or
any of the Secured Parties or Interest Rate Exchanger may be the purchaser of
any or all of the Collateral at any such sale and the Intercreditor Agent as
agent for and representative of the Secured Parties and Interest Rate Exchangers
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 Intercreditor Agent at such
sale. Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of Debtors, and Debtors hereby waive
(to the extent permitted by applicable law) all rights of redemption, stay
and/or appraisal which they now have or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted. Debtors agree
that, to the extent notice of sale shall be required by law, at least ten days'
notice to Debtors of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Intercreditor Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Intercreditor Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Debtors hereby waive any claims
against the Intercreditor Agent arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if the Intercreditor
Agent accepts the first offer received and does not offer such Collateral to
more than one offeree. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Obligations, Debtors shall be liable
for the deficiency and the reasonable fees of any attorneys employed by the
Intercreditor Agent to collect such deficiency. Upon written demand from the
Intercreditor Agent, each Debtor shall execute and deliver to the Intercreditor
Agent an assignment or assignments of the Patents, Copyrights, and Marks and
such other documents as are necessary or appropriate to carry out the intent and
purposes of this Agreement. Each Debtor agrees that such an assignment and/or
recording shall be applied to reduce the Obligations outstanding only to the
extent that the Intercreditor Agent receives cash proceeds in respect of the
sale of, or other realization upon, the Collateral.
7. Remedies Cumulative; Delay Not Waiver.
7.1 No right, power or remedy herein conferred upon or reserved to the
Intercreditor Agent is intended to be exclusive of any other right, power or
remedy and every such right, power and remedy shall, to the extent permitted by
law, be cumulative and
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in addition to every other right, power and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder or otherwise shall not
prevent the concurrent assertion or employment of any other appropriate right or
remedy. Resort to any or all security now or hereafter held by the Intercreditor
Agent may be taken concurrently or successively and in one or several
consolidated or independent judicial actions or lawfully taken nonjudicial
proceedings, or both.
7.2 No delay or omission of the Intercreditor Agent to exercise any right
or power accruing upon the occurrence and during the continuance of any Event of
Default as aforesaid shall impair any such right or power or shall be construed
to be a waiver of any such Event of Default or an acquiescence therein; and
every power and remedy given by this Agreement may be exercised from time to
time, and as often as shall be deemed expedient, by the Intercreditor Agent.
8. Application of Proceeds.
All proceeds received by the Intercreditor Agent in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
shall be applied to repay the Secured Obligations as provided in the
Intercreditor Agreement.
9. Attorney-In-Fact.
Subject to compliance with applicable Nevada Gaming Laws, each Debtor
hereby irrevocably appoints the Intercreditor Agent as Debtors'
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of such Debtor, the Intercreditor Agent or otherwise, from time to time
upon and following the occurrence and continuation of an Event of Default or
Potential Event of Default in the Intercreditor Agent's discretion to take any
action and to execute any instrument that the Intercreditor Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including
without limitation:
(a) to obtain and adjust insurance required to be maintained by
Debtors or paid to the Intercreditor Agent pursuant to this Agreement;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
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(d) to file any claims or take any action or institute any
proceedings that the Intercreditor Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Intercreditor Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Permitted Liens)
levied or placed upon or threatened against the Collateral, the legality
or validity thereof and the amounts necessary to discharge the same to be
determined by the Intercreditor Agent in its sole discretion, any such
payments made by the Intercreditor Agent to become obligations of Debtor
to the Intercreditor Agent, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other documents relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Intercreditor Agent were the absolute owner
thereof for all purposes, and to do, at the Intercreditor Agent's option
and Debtors' expense, at any time or from time to time, all acts and
things that the Intercreditor Agent deems necessary to protect, preserve
or realize upon the Collateral and the Intercreditor Agent's security
interest therein in order to effect the intent of this Agreement, all as
fully and effectively as Debtor might do.
10. The Intercreditor Agent May Perform.
Upon the occurrence and during the continuance of an Event of Default, if
Debtor fails to perform any agreement contained herein, the Intercreditor Agent
may itself perform, or cause performance of, such agreement, and the reasonable
expenses of the Intercreditor Agent incurred in connection therewith shall be
part of the Obligations of the Relevant Secured Parties.
11. Perfection; Further Assurances.
11.1 Each Debtor agrees that from time to time, at the expense of such
Debtor, such Debtor shall promptly execute and deliver all further instruments
and documents, and take all further action, that may be reasonably necessary, or
that the Intercreditor Agent may reasonably request, in order to perfect and
protect the assignment and security interest granted, purported or intended to
be granted hereby in favor of the Secured Parties or to enable the Intercreditor
Agent to exercise and enforce its rights and remedies hereunder
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with respect to any Collateral. Without limiting the generality of the
foregoing, each Debtor shall (i) if any Collateral shall be evidenced by a
promissory note or other instrument in excess of $5,000, deliver and pledge to
the Intercreditor Agent for the benefit of the Secured Parties granted a
security interest in such Collateral such note duly endorsed without recourse,
and accompanied by duly executed instruments of transfer or assignment, all in
form and substance satisfactory to Intercreditor Agent, (ii) execute and deliver
to the Intercreditor Agent such financing or continuation statements, or
amendments thereto, and such other instruments, endorsements or notices, as may
be reasonably necessary or desirable or as such Secured Parties may reasonably
request, in order to perfect and preserve the assignments and security interests
granted, purported or intended to be granted hereby in favor of the Relevant
Secured Parties and (iii) at the Intercreditor Agent's reasonable request,
appear in and defend any action or proceeding that may affect Debtor's title to
or the Intercreditor Agent's or any of the Secured Parties security interest in
all or any part of the Collateral.
11.2 Each Debtor hereby authorizes the Bank Agent, GMAC, the Mortgage Note
Indenture Trustee and the Intercreditor Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral in which such Secured Party has been granted a security interest
without the signature of such Debtor where permitted by law.
11.3 Each Debtor shall pay all filing, registration and recording fees and
all refiling, re-registration and re-recording fees, and all reasonable expenses
incident to the execution and acknowledgment of this Agreement, any assurance,
and all federal, state, county and municipal stamp taxes and other taxes (other
than income taxes), duties, imports, assessments and charges arising out of or
in connection with the execution and delivery of this Agreement, any agreement
supplemental hereto, any financing statements, and any instruments of further
assurance.
11.4 Each Debtor shall, promptly upon request, provide to the
Intercreditor Agent, all information and evidence it may reasonably request
concerning the Collateral to enable the Intercreditor Agent to enforce the
provisions of this Agreement.
12. Place of Business; Location of Records.
Unless the Intercreditor Agent is otherwise notified under Section 5.4,
the place of business and chief executive office of each Debtor is, and all
records of such Debtor concerning the Collateral are and will be, located at the
address of such Debtor set forth on the signature pages to this Agreement.
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13. Continuing Assignment and Security Interest; Transfer of Debt.
This Agreement shall create a continuing assignment of, and security
interest in, the Collateral and shall (a) remain in full force and effect until
payment in full of all Obligations, (b) be binding upon each Debtor, its
successors and assigns; provided, however, that the obligations of each Debtor,
its successors and assigns hereunder may not be assigned without the prior
written consent of the Intercreditor Agent; and (c) inure, together with the
rights and remedies of the Intercreditor Agent hereunder, to the benefit of the
Intercreditor Agent, its successors, transferees and assigns, the other Secured
Parties and their respective successors, transfers and assigns (whether as a
result of a refinancing or otherwise). Without limiting the generality of the
foregoing but subject to the terms of the Financing Agreements evidencing the
Obligations owed to particular Secured Parties, such Secured Parties may assign
or otherwise transfer all or any part of or interest in such Financing
Agreements or other evidence of indebtedness held by them to any other Person to
the extent permitted by such Financing Agreements, and such other Person shall
thereupon become vested with all or an appropriate part of the benefits in
respect thereof granted to the Secured Parties herein or otherwise. The release
of the security interest in any or all of the Collateral, the taking or
acceptance of additional security, or the resort by any Secured Party or the
Intercreditor Agent to any security it may have in any order it may deem
appropriate, shall not affect the liability of any person on the Obligations
secured hereby. If this Agreement shall be terminated or revoked by operation of
law, each Debtor will indemnify and save the Secured Parties harmless from any
loss which may be suffered or incurred by the Secured Parties in acting
hereunder prior to the receipt by the Intercreditor Agent, its successors,
transfers, or assigns of notice of such termination or revocation. Each Debtor
acknowledges and agrees that, pursuant to and in accordance with the terms of
the Intercreditor Agreement, one or more additional or successor Intercreditor
Agents, or other agents or representatives of the Intercreditor Agent or other
secured Parties may be appointed, by written notice to each Debtor, and such
person or persons shall be entitled to exercise or perform all or a portion of
the duties or obligations of the Intercreditor Agent hereunder in accordance
with the terms of such appointment.
14. Termination of Security Interest.
14.1 Upon the indefeasible payment in full of the Bank Secured
Obligations, the security interest granted under Subsection 2.1 and 2.2 in favor
of the Intercreditor Agent on behalf of the Bank Secured Parties shall
terminate; provided that such termination shall not affect the rights of the
other Secured Parties hereunder. Upon any such termination, the Intercreditor
Agent will, at the Debtors' expense, execute and deliver to the Debtors such
documents (including, without limitation, UCC-3 termination statements) as the
Debtors shall reasonably request to evidence such termination. Following any
such termination any references to the Bank Agent and the Bank Credit Agreement
shall be deemed to be deleted.
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14.2 Upon the indefeasible payment in full of the GMAC Obligations or, if
earlier, the Mall Release Date, the security interest granted under Subsection
2.1 hereof in favor of GMAC shall terminate; provided that such termination
shall not affect the rights of the other Secured Parties hereunder. Upon any
such termination, the Intercreditor Agent will, at the Debtors' expense, execute
and, deliver to the Debtors such documents (including, without limitation, UCC-3
termination statements) as the Debtors shall reasonably request to evidence such
termination. Following any such termination any references to GMAC and the GMAC
Credit Agreement shall be deemed to be deleted.
14.3 Upon the indefeasible payment in full of the Mortgage Note Secured
Obligations, the security interest granted under Subsection 2.3 in favor of the
Mortgage Note Indenture Trustee shall terminate; provided that such termination
shall not affect the rights of the other Secured Parties hereunder. Upon any
such termination, the Intercreditor Agent will, at the Debtors' expense, execute
and deliver to the Debtors such documents (including, without limitation, UCC-3
termination statements) as the Debtors shall reasonably request to evidence such
termination. Following any such termination any references to the Mortgage Note
Secured Parties, the Mortgage Note Indenture Trustee and the Mortgage Note
Indenture shall be deemed to be deleted.
14.4 To the extent any Specified FF&E is financed by any other lender
pursuant to an Approved Equipment Funding Commitment rather than Bank Secured
Parties, the Intercreditor Agent shall release the Liens in favor of the Secured
Parties on such Specified FF&E and in connection therewith at the Debtor's
expense, execute and deliver to the Debtors' such documents (including, without
limitation, UCC-3 termination statements) as the Debtors may reasonably request
to evidence such termination. To the extent requested by the Debtors, the
Intercreditor Agent shall release any liens in favor of the Mortgage Note
Secured Parties on such Specified FF&E and in connection therewith, at Debtors'
expense, execute and deliver to Debtors such documents (including, without
limitation, UCC-3 termination statements) as Debtors may reasonably request to
evidence such termination.
14.5 Upon the termination of the security interests of the Bank Secured
Parties and GMAC in accordance with Sections 14.1 and 14.2 above, the
appointment of Intercreditor Agent shall terminate and all duties, rights and
remedies vested in Intercreditor Agent shall thereupon be vested in the Mortgage
Notes Indenture Trustee.
15. Indemnity and Expenses.
To the extent not covered by the Bank Credit Agreement, the GMAC Credit
Agreement or the Mortgage Note Indenture, the Debtors agree, jointly and
severally, to indemnify the Intercreditor Agent and each other Secured Party
from and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from such
Secured Party's gross negligence or willful misconduct as finally determined by
a court of competent jurisdiction.
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16. Attorneys' Fees.
In the event any legal action or proceeding (including, without
limitation, any of the remedies provided for herein or at law) is commenced to
enforce or interpret this Agreement or any provision thereof, the Debtors shall
indemnify each of the Secured Parties and the Intercreditor Agent for their
reasonable attorneys' fees and other costs and expenses incurred therein, and if
a judgment or award is entered in any such action or proceeding, such reasonable
attorneys' fees and other costs and expenses may be made a part of such judgment
or award.
17. Amendments; Waivers; Consents.
No amendment, modification, termination or waiver of any provision of this
Agreement, or consent to any departure by the Debtors therefrom, shall in any
event be effective without the written concurrence of the Intercreditor Agent
and the Debtors.
18. Notices.
All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be considered as properly given (a) if
delivered in person, (b) if sent by reputable overnight delivery service, (c) in
the event overnight delivery services are not readily available, if mailed by
first class mail, postage prepaid, registered or certified with return receipt
requested or (d) if sent by prepaid telex, or by telecopy with correct answer
back received. Notice so given shall be effective upon receipt by the addressee,
except that communication or notice so transmitted by telecopy or other direct
written electronic means shall be deemed to have been validly and effectively
given on the day (if a Banking Day and, if not, on the next following Banking
Day) on which it is validly transmitted if transmitted before 4 p.m.,
recipient's time, and if transmitted after that time, on the next following
Banking Day; provided, however, that if any notice is tendered to an addressee
and the delivery thereof is refused by such addressee, such notice shall be
effective upon such tender. The addresses of the parties for purposes hereof
shall be as set forth on the signature pages hereof unless and until notice
changing such address is given in accordance with this Section 18. Any party
shall have the right to change its address for notice hereunder to any other
location by giving of no less than twenty (20) days' notice to the other parties
in the manner set forth hereinabove.
19. Governing Law.
Subject to the application of Nevada Gaming Laws, this Agreement,
including all matters of construction, validity, performance and the creation,
validity, enforcement or priority of the lien of, and security interests created
by, this Agreement in or upon the
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Collateral shall be governed by the laws of the state of New York, without
reference to conflicts of law (other than Section 5-1401 of the New York General
Obligations Law), except as required by mandatory provisions of law and except
to the extent that the validity or perfection of the lien and security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the state of New York.
20. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST DEBTORS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH DEBTOR, FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO DEBTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
18;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER DEBTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT INTERCREDITOR AGENT RETAINS THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST EACH DEBTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 20 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402
OR OTHERWISE.
21. Reinstatement.
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This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any amount received by any Secured Party in respect
of the Obligations is rescinded or must otherwise be restored or returned by
such Secured Party upon the insolvency, bankruptcy, reorganization, liquidation
of a Debtor or upon the dissolution of, or appointment of any intervenor or
conservator of, or trustee or similar official for, a Debtor or any substantial
part of a Debtor's assets, or otherwise, all as though such payments had not
been made.
22. Severability.
The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Agreement in any jurisdiction.
23. Survival of Provisions.
All agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement and the other Financing Agreements
and extensions of credit thereunder. Notwithstanding anything in this Agreement
or implied by law to the contrary, the agreements, representations and
warranties of Debtors set forth herein shall terminate only upon full repayment
of the Obligations.
24. Headings Descriptive.
The headings in this Agreement are for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or be given
any substantive effect.
25. Entire Agreement.
This Agreement, together with any other agreement executed in connection
herewith, is intended by the parties as a final expression of their agreement
and is intended as a complete and exclusive statement of the terms and
conditions thereof.
26. Time.
Time is of the essence of this Agreement.
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27. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which shall together constitute one and
the same agreement.
28. Waiver of Jury Trial.
EACH DEBTOR AND THE INTERCREDITOR AGENT HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS AGREEMENT AND THE RELATIONSHIP AMONG THEM THAT IS BEING ESTABLISHED. EACH
DEBTOR AND THE INTERCREDITOR AGENT ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT IT HAS ALREADY RELIED ON
THE WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT IT WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH SUCH PERSON 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.
29. Responsibilities of the Intercreditor Agent.
The powers conferred on the Intercreditor Agent hereunder are solely to
protect its interest in the Collateral granted for the benefit of the Secured
Parties and shall not impose any duty upon it to exercise any such powers.
Except for the exercise of reasonable care in the custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Intercreditor Agent shall have no duty as to any Collateral, it being
understood that the Intercreditor Agent shall have no responsibility for (a)
taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Collateral) to
preserve rights against any parties with respect to any Collateral or (b) taking
any necessary steps to collect or realize upon the Obligations or any guarantee
therefor, or any part thereof, or any of the Collateral. The Intercreditor Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which such Person accords its own property
of like kind.
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IN WITNESS WHEREOF, each of the undersigned has caused this Company
Security Agreement to be duly executed and delivered as of the day and year
first above written.
DEBTORS:
LAS VEGAS SANDS, INC.,
a Nevada Corporation
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
Notice Address:
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
By: Las Vegas Sands, Inc.,
a Nevada corporation,
its managing member
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
Notice Address:
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
S-1
<PAGE>
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC,
a Delaware limited liability company
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 Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
S-2
<PAGE>
INTERCREDITOR AGENT:
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank,
as Intercreditor Agent
By: /s/ Alan W. Pendergast
----------------------------------------
Name: Alan W. Pendergast
Title: Relationship Manager
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a Canadian
chartered bank, as Disbursement Agent under
the Disbursement Agreement
By: /s/ Alan W. Pendergast
----------------------------------------
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S-3
EXECUTION
MALL CONSTRUCTION SUBSIDIARY SECURITY AGREEMENT
This MALL CONSTRUCTION SUBSIDIARY SECURITY AGREEMENT (this "Agreement"),
dated as of November 14, 1997, is entered into by and between GRAND CANAL SHOPS
MALL CONSTRUCTION, LLC, a Delaware limited liability company ("Debtor") and THE
BANK OF NOVA SCOTIA, a Canadian chartered bank ("Scotiabank") in its capacity as
Intercreditor Agent under the terms of the Intercreditor Agreement (as defined
below) (in such capacity, "Intercreditor Agent") for and on behalf of (i) each
agent and each Bank Lender under the Bank Credit Agreement (as defined below)
and any Interest Rate Exchangers (as defined below) (individually, each a "Bank
Secured Party" and together, the "Bank Secured Parties"), (ii) GMAC Commercial
Mortgage Corporation, a California corporation ("GMAC"), (iii) First Trust
National Association, a national banking association as the trustee (the
"Mortgage Note Indenture Trustee") for and on behalf of the Mortgage Note
Holders (individually, each a "Mortgage Note Secured Party" and together, the
"Mortgage Note Secured Parties") under the Mortgage Notes Indenture (as defined
below) and (iv) Intercreditor Agent and Disbursement Agent.
RECITALS
A. The Project. LAS VEGAS SANDS, INC., a Nevada corporation ("LVSI"),
VENETIAN CASINO RESORT, LLC, a Nevada limited liability company ("VCR", and
together with LVSI, individually each a "Borrower" and together, as joint and
several obligors, the "Borrowers"), and Debtor propose to develop, construct and
operate the Venetian Casino Resort, a large scale Venetian-themed hotel, casino,
retail, convention, trade show, meeting and entertainment complex, with related
heating, ventilation and air conditioning and power station facilities, as part
of the redevelopment of the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, the Borrowers have
entered into a Credit Agreement, dated the date hereof with the financial
institutions party thereto as lenders (the "Bank Lenders"), Scotiabank, as
administrative agent and Goldman Sachs Credit Partners L.P., as arranger and
syndication agent (such credit agreement as it may be modified, amended,
supplemented, extended, refinanced, refunded, renewed, replaced or substituted
from time to time, the "Bank Credit Agreement") pursuant to which the Bank
Lenders will extend certain credit to the Borrowers subject to the terms and
conditions set forth therein. Borrowers may from time to time enter into one or
more Interest Rate Agreements (collectively, the "Lender Interest Rate
Agreements") with one or more Bank Lenders (in such capacity, collectively,
"Interest Rate Exchangers") in accordance with the terms of the Bank Credit
Agreement, and it is desired that the obligations of Borrowers under the Lender
Interest Rate
<PAGE>
Agreements, including the obligation of Borrowers to make payments thereunder in
the event of early termination thereof, be included in the Bank Secured
Obligations secured hereunder.
C. GMAC Credit Agreement. Concurrently herewith, the Borrowers and
Debtor have entered into a Credit Agreement, dated as of the date hereof, with
GMAC (such credit agreement as it may be modified, amended, supplemented,
extended, refinanced, refunded, renewed, replaced or substituted from time to
time, the "GMAC Credit Agreement") pursuant to which GMAC has agreed to extend
certain credit facilities to the Borrowers and Debtor subject to the terms and
conditions set forth therein.
D. Mortgage Notes Indenture. Concurrently herewith, the Borrowers,
certain guarantors named therein and the Mortgage Note Indenture Trustee have
entered into that certain Mortgage Notes Indenture, dated as of the date hereof
(such indenture as modified, amended or supplemented from time to time, the
"Mortgage Notes Indenture") pursuant to which the Borrowers will issue the
Mortgage Notes in a principal amount equal to $425,000,000 to finance certain
costs of constructing the Project, as more particularly described therein.
E. Disbursement Agreement. Concurrently herewith, the Borrowers,
Debtor, the Bank Agent, the Mortgage Notes Indenture Trustee, GMAC,
Atlantic-Pacific Las Vegas, LLC, and Scotiabank, as Disbursement Agent (the
"Disbursement Agent") have entered into the Funding Agents Disbursement and
Administration Agreement, dated as of the date hereof (such agreement as
modified, amended or supplemented from time to time, the "Disbursement
Agreement") setting forth conditions to and the sequencing of funding
construction costs for the Project and certain other matters.
F. Intercreditor Agreement. Concurrently herewith the Intercreditor
Agent, the Bank Agent, the Mortgage Note Indenture Trustee, GMAC and the trustee
for certain senior subordinated notes issued by the Borrowers, have entered into
an Intercreditor Agreement (Credit Parties), dated as of the date hereof (such
agreement as it may be modified, amended or supplemented from time to time, the
"Intercreditor Agreement") which sets forth certain agreements among such
lenders with respect to the priority of the liens created hereunder, the
enforcement of remedies and the allocation of the proceeds of any realization
upon the collateral. The Intercreditor Agent is entering into this Agreement and
shall perform its obligations as set forth and in the manner provided, pursuant
to the provisions of the Intercreditor Agreement and shall take directions from
time to time from one or more of the Credit Parties as defined and provided for
therein.
G. Condition Precedent. It is a condition precedent to entering into
the Mortgage Notes Indenture, the Bank Credit Agreement and the GMAC Credit
Agreement and consummating the transactions contemplated therein (including the
extension of credit thereunder) that Debtor enter into this Agreement.
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AGREEMENT
In consideration of the promises contained herein and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Debtor hereby agrees as follows:
1. Definitions.
1.1 "Bank Event of Default" shall mean any Event of Default under and as
defined in either the Disbursement Agreement or the Bank Credit Agreement.
1.2 "Event of Default" shall mean a Bank Event of Default, a GMAC Event
of Default or a Mortgage Note Event of Default.
1.3 "GECC Proceeds Account" means an account funded solely by proceeds
of loans made pursuant to a credit agreement by and between LVSI and/or VCR and
General Electric Capital Corporation and other lenders party thereto.
1.4 "GMAC Event of Default" shall mean any Event of Default under and as
defined in either the Disbursement Agreement or the GMAC Credit Agreement.
1.5 "Mortgage Note Event of Default" shall mean any Event of Default
under the Mortgage Notes Indenture.
1.6 "Obligations" shall mean collectively the Bank Secured Obligations,
the GMAC Secured Obligations and the Mortgage Notes Secured Obligations.
1.7 "Receivables" shall mean all of Debtor's accounts and accounts
receivable, including, without limitation, all rights to payment for goods sold
or leased or secured or for services rendered which are not evidenced by an
instrument or chattel paper, all other present or future rights for money due or
to become due, all of the accounts, chattel paper, instruments, promissory
notes, contract rights, documents, other obligations and general intangibles for
money due or to become due of any kind, in each case whether now existing or
hereafter arising and wherever arising and whether or not earned by performance.
1.8 "Secured Parties" shall mean individually and collectively,
Intercreditor Agent, Disbursement Agent, the Bank Secured Parties, GMAC and the
Mortgage Note Secured Parties.
1.9 "Specified FF&E" shall mean any furniture, fixtures, equipment and
other personal property which is acquired with proceeds of any Approved
Equipment Funding Commitments.
1.10 "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
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<PAGE>
of mandatory provisions of law, any or all of the attachment, perfection or
priority of the security interest 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.
1.11 Unless otherwise defined herein, all capitalized terms used herein
which are defined in the Disbursement Agreement shall have their respective
meanings as used in the Disbursement Agreement as in effect on the date hereof.
The rules of interpretation contained in Exhibit A to the Disbursement Agreement
as in effect on the date hereof shall apply to this Agreement.
2. Assignment, Pledge and Grant of Security Interests.
2.1 Senior Grant to GMAC, the Disbursement Agent and the Intercreditor
Agent in Collateral. To secure the timely payment and performance of the GMAC
Secured Obligations (as defined in Section 3.1 hereof), subject to compliance
with applicable Nevada Gaming Laws, Debtor does hereby assign, grant and pledge
to, and subject to a security interest on a first priority basis in favor of,
the Intercreditor Agent, on behalf and for the benefit of GMAC, the
Intercreditor Agent and the Disbursement Agent, all the estate, right, title and
interest of Debtor, whether now owned or hereafter acquired or arising and
wheresoever located, whether or not of a type which may be subject to a security
interest under the UCC, in, to and under the following:
2.1.1 the following agreements and documents, as amended,
supplemented or otherwise modified from time to time (individually, an
"Assigned Agreement," and collectively, the "Assigned Agreements") and
all of such Debtor's rights thereunder:
(A) the Mall TESA;
(B) the Puck JV Letter of Intent ;
(C) the Billboard Master Lease (Debtor being in the
capacity
of the tenant thereunder), and the Billboard Operating Lease
(Debtor being in the capacity as landlord thereunder);
(D) the Mall Management Agreement;
(E) the Mall Leasing Agreement;
(F) The Mall Lease (Debtor being in the capacity of
the tenant thereunder);
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(G) the Tri-Party Agreement;
(H) the Sale and Contribution Agreement and any Mall
Retainage/ Punchlist Escrow Agreement entered pursuant
thereto;
(I) all rights of Debtor under that certain
Cross-License Agreement dated as of the date hereof among
LVSI, VCR and Debtor as it may be supplemented, amended or
otherwise modified;
(J) all amendments, supplements, substitutions and
renewals to any of the aforesaid agreements;
(K) all rights of Debtor to receive (i) monies due or
to become due under or pursuant to the aforesaid agreements
and (ii) proceeds of any insurance, indemnity, warranty or
guaranty with respect to the aforesaid agreements;
(L) all claims of Debtor for damages arising out of
breach or default under any of the aforesaid agreements;
(M) the rights of Debtor to terminate, amend,
supplement, or modify any of the aforesaid agreements, to
perform thereunder and to compel performance and otherwise
exercise all remedies thereunder; and
(N) all other documents and agreements entered into
on, prior to or after the Financing Date, pertaining to or
benefitting exclusively the Mall Assets as the same may be
amended from time to time in accordance with the terms and
conditions of the GMAC Credit Agreement and to the extent
assignable any other agreements to which Debtor is or becomes
a Party.
2.1.2 all Permits granted to or held by Debtor, including those
described on Annex 5 hereto, but excluding any of the Permits which by
their terms or by operation of law prohibit or do not allow assignment or
which would become void solely by virtue of a security interest being
granted therein;
2.1.3 all rents, profits, income, royalties, revenues, accounts,
contract rights, chattel paper, documents, instruments, general
intangibles and other rights of any kind and all rights in, to and under
all security agreements, leases and other contracts securing or otherwise
relating to any such rents, profits, income, royalties, revenues,
accounts, contract rights, chattel paper, instruments, documents, general
intangibles or other rights and claims to the payment or receipt of money
or other forms of consideration;
2.1.4 all equipment in all of its forms and all parts thereof and
accessions thereto, including, but not limited to, all plant, machinery,
tools, engines, and equipment of any type including, without limitation,
control equipment, gaming equipment and general equipment and devices, all
computer equipment, calculators, adding machines,
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slot gaming tables, video game and slot machines and any other electronic
equipment of every nature, appliances, mechanical and electrical systems,
elevators, lighting, alarm systems, fire control systems, furnishings,
furniture, service equipment, motor vehicles, building or maintenance
equipment, building or maintenance materials, pipes and pipelines, spare
parts, maps, plans, specifications, architectural, engineering,
construction or shop drawings, manuals or similar documents and any
replacements, renewals or substitutions for any of the foregoing;
2.1.5 all plant fixtures, business fixtures and other fixtures and
storage and office facilities and accessions thereto and replacements
thereof and products thereof;
2.1.6 all inventory in all of its forms, including, but not limited
to, (i) all goods held by Debtor for sale or lease or to be furnished
under contracts of service or so leased or furnished, (ii) all supplies,
raw materials, work in process, finished goods, and materials used or
consumed in Debtor's business, (iii) all goods covered by any warehouse
receipts, bills of lading or other such documents or in which Debtor has
an interest in mass or a joint or other interest or right of any kind and
(iv) all goods which are returned to or repossessed by Debtor and all
accessions thereto and products thereof;
2.1.7 all trademarks and service marks now held or hereafter
acquired by Debtor, which are registered in the United States Patent and
Trademark Office or in any similar office or agency of the United States
or any state thereof or any political subdivision thereof and any
application for such trademarks and service marks, as well as any
unregistered marks used by Debtor in the United States and trade dress
including logos, designs, trade names, business names, fictitious business
names and other business identifiers in connection with which any of these
registered or unregistered marks are used in the United States
(collectively, the "Marks") including, but not limited to, the Marks
listed on Annex 2, together with the registration and right to renewals
thereof, and the goodwill of the business of Debtor symbolized by the
Marks and all licenses associated therewith, it being understood that the
rights and interests included herein shall include, without limitation,
all rights and interests pursuant to licensing or other contracts in favor
of Debtor pertaining to the Marks presently or in the future owned or used
by third parties but, in the case of third parties which are not
Affiliates of Debtor, only to the extent permitted by such licensing or
other contracts and, if not so permitted, except with respect to the
rights of Debtor to receive payments thereunder, only with the consent of
such third parties;
2.1.8 all United States copyrights which Debtor now or hereafter
owns or has registered with the United States Copyright Office, as well as
any application for a United States copyright registration now or
hereafter made with the United States Copyright Office by Debtor
(collectively, the "Copyrights") including, but not limited to, the
Copyrights listed on Annex 3, and all United States patents to which
Debtor now or hereafter has title and any divisions or continuations
thereof, as well as any application for a United States patent now or
hereafter made by Debtor (collectively, the "Patents"), including, but not
limited to, all Patents listed on Annex 4, and all reissues,
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renewals or extensions of each of them, it being understood that the
rights and interests included herein shall include, without limitation,
all rights and interests pursuant to licensing or other contracts in favor
of Debtor pertaining to the Copyrights and Patents presently or in the
future owned or used by third parties but, in the case of third parties
which are not Affiliates of Debtor, except with respect to the rights of
Debtor to receive payments thereunder, only to the extent permitted by
such licensing or other contracts and, if not so permitted, only with the
consent of such third parties;
2.1.9 all computer programs and software of Debtor and all
intellectual property rights therein and all other proprietary information
of Debtor, including, but not limited to, trade secrets; it being
understood that the rights and interests included herein shall include,
without limitation, all rights and interests pursuant to licensing or
other contracts in favor of Debtor pertaining to the computer programs and
software presently or in the future owned or used by third parties but, in
the case of third parties which are not Affiliates of Debtor, except with
respect to the rights of Debtor to receive payments thereunder, only to
the extent permitted by such licensing or other contracts and, if not so
permitted, only with the consent of such third parties;
2.1.10 to the extent not covered by any other clause of this
subsection 2.1, but subject to the exclusions set out in the last sentence
of each of subsections 2.1.7 and 2.1.8, all other trademarks, tradenames,
tradesecrets, goodwill, business names, patents, patent applications,
licenses and copyrights, registrations, and franchise rights;
2.1.11 to the extent not covered by any other clause of this
subsection 2.1, all other general intangibles (including, but not limited
to, tax refunds, rights to payment or performance, chooses in action and
judgments taken on any rights or claims included in the Collateral);
2.1.12 the proceeds of all of the foregoing (all of the collateral
described in 2.1.1 through and including 2.1.11 being herein collectively
referred to as the "Collateral"), including without limitation, (a) all
rights of Debtor to receive proceeds, rents, profits and moneys due and to
become due under or pursuant to the Collateral; (b) all rights of Debtor
to receive the return of any premiums for, or proceeds of, any insurance,
indemnity, warranty or guaranty with respect to the Collateral or to
receive any condemnation proceeds; (c) all claims of Debtor for damages
arising out of, or for breach of or default under, any Collateral; and (d)
to the extent not included in the foregoing, all proceeds receivable or
received when any and all of the foregoing Collateral or proceeds thereof
is sold, collected, exchanged or otherwise disposed of, whether
voluntarily or involuntarily.
Notwithstanding anything to the contrary contained herein, the term "Collateral"
for the purposes of this Section 2.1 shall not include (i) any Accounts to the
extent included in the collateral under any of the Collateral Account
Agreements, (ii) any Specified FF&E, (iii) the HVAC Component, (iv) any common
stock, preferred stock or membership interest, whether represented by
certificates or otherwise, in Debtor or any of its Subsidiaries (including
Excluded
7
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Subsidiaries) (v) any gaming devices or other equipment which would require a
finding of suitability or other similar procedure by an applicable Gaming
Authority prior to being pledged, hypothecated, or given as collateral security
and (vi) the GECC Proceeds Account.
2.2 Second Priority Grant in Favor of Bank Secured Parties, the
Disbursement Agent and the Intercreditor Agent. To secure the timely payment and
performance of the Bank Secured Obligations (as defined in Section 3.2 hereof),
subject to compliance with applicable Nevada Gaming Laws, Debtor does hereby
assign, grant and pledge to, and subject to a security interest on a second
priority basis in favor of, the Intercreditor Agent, on behalf and for the
benefit of the Bank Secured Parties, the Intercreditor Agent and the
Disbursement Agent all the estate, right, title and interest of Debtor, whether
now owned or hereafter acquired or arising and wheresoever located, whether or
not of a type which may be subject to a security interest under the UCC, in, to
and under the Collateral.
Notwithstanding anything to the contrary contained herein, the term "Collateral"
for the purposes of this Section 2.2 shall not include (i) any Accounts to the
extent included in the collateral under any of the Collateral Account
Agreements, (ii) any Specified FF&E (except to the extent that the Bank Secured
Parties finance Specified FF&E pursuant to an Approved Equipment Funding
Commitment), (iii) the HVAC Component, (iv) any common stock, preferred stock or
membership interest, whether represented by certificates or otherwise, in Debtor
or any of its Subsidiaries (including Excluded Subsidiaries) (v) any gaming
devices or other equipment which would require a finding of suitability or other
similar procedure by an applicable Gaming Authority prior to being pledged,
hypothecated, or given as collateral security and (vi) the GECC Proceeds
Account.
2.3 Third Priority Grant in Favor of Mortgage Note Secured Parties, the
Disbursement Agent and the Intercreditor Agent. To secure the timely payment and
performance of the Mortgage Note Secured Obligations (as defined in Section 3.3
hereof) subject to compliance with applicable Nevada Gaming Laws, Debtor does
hereby assign, grant and pledge to, and subject to a security interest on a
third priority basis, in favor of, the Intercreditor Agent, on behalf of and for
the benefit of the Mortgage Note Indenture Trustee, and the Disbursement Agent
and the Intercreditor Agent, all the estate, right, title and interest of
Debtor, whether now owned or hereafter acquired or arising and wheresoever
located, whether or not of a type which may be subject to a security interest
under the UCC, in, to and under the Collateral.
Notwithstanding anything to the contrary contained herein, the term "Collateral"
for the purposes of this Section 2.3 shall not include (i) any Accounts to the
extent included in the collateral under any of the Collateral Account
Agreements, (ii) any Specified FF&E, (iii) the HVAC Component, (iv) any common
stock, preferred stock or membership interest, whether represented by
certificates or otherwise, in Debtor or any of its Subsidiaries (including
Excluded Subsidiaries) (v) any gaming devices or other equipment which would
require a finding of suitability or other similar procedure by an applicable
Gaming Authority prior to being pledged, hypothecated, or given as collateral
security and (vi) the GECC Proceeds Account.
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2.4 Delivery of Assigned Agreements. Debtor has heretofore delivered, or
concurrently with the delivery hereof, is delivering to the Intercreditor Agent
an executed counterpart or certified copy of each of the Assigned Agreements.
Debtor will likewise deliver to the Intercreditor Agent an executed counterpart
of each future lease, construction agreement, operation agreement and other
agreement entered into by Debtor, any notices, reports or requests for
information related to any of the foregoing, and amendments and supplements to
the foregoing, as they are entered into by Debtor promptly upon the execution
thereof. Debtor will further: (1) mark conspicuously each item of chattel paper
and, at the reasonable request of the Intercreditor Agent, each of its records
pertaining to the Collateral, with a legend, in form and substance reasonably
satisfactory to the Intercreditor Agent, indicating that such Collateral is
subject to the security interest granted hereby, (ii) at the reasonable request
of the Intercreditor Agent, deliver and pledge to the Intercreditor Agent
hereunder all promissory notes and other instruments (including checks) and all
original counterparts of chattel paper constituting Collateral, duly endorsed
and accompanied by duly executed instruments of transfer or assignment, all in
form and substance satisfactory to the Intercreditor Agent.
2.5 Debtor to Remain Liable. Notwithstanding anything to the contrary
contained herein, Debtor shall remain liable under each of the Assigned
Agreements to perform all of the obligations undertaken by them thereunder, all
in accordance with and pursuant to the terms and provisions thereof and take
such action to such end as requested by the Intercreditor Agent, and the Secured
Parties shall have no obligation or liability under any of such Assigned
Agreements by reason of or arising out of this Agreement, nor shall the
Intercreditor Agent or any other Secured Party be required or obligated in any
manner to perform or fulfill any obligations of Debtor thereunder or to make any
payment or inquiry as to the nature or sufficiency of any payment received by
it, or present or file any claim or take any action to collect or enforce the
payment of any amounts which may have been assigned to Secured Parties or to
which such Secured Party may be entitled at any time.
2.6 Action by Intercreditor Agent and Secured Parties to Cure Certain
Defaults. If any default by Debtor under any of the Assigned Agreements shall
occur and be continuing that constitutes an Event of Default, then subject to
the terms of the Intercreditor Agreement any of the Intercreditor Agent and
Secured Parties shall be permitted (but shall not be obligated) to remedy any
such default by giving written notice of such intent to Debtor and to the
parties to the Assigned Agreement or Assigned Agreements for which such of the
Intercreditor Agent and Secured Parties intends to remedy the default. After
giving such notice of its intent to cure such default and upon the commencement
thereof, the Intercreditor Agent or Secured Parties, as applicable, will proceed
diligently to cure such default. Any cure by the Intercreditor Agent or any of
the Secured Parties of Debtor's default under any of the Assigned Agreements
shall not be construed as an assumption by the Intercreditor Agent or any of the
other Secured Parties of any obligations, covenants or agreements of Debtor
under such Assigned Agreement, and neither the Intercreditor Agent nor any of
the Secured Parties shall be liable to either Debtor or any other Person as a
result of any actions undertaken by the Intercreditor Agent or any of the
Secured Parties pursuant hereto or pursuant to any Consent or in curing or
attempting to cure any such default. This Agreement shall not be deemed to
release or to affect in any way the
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obligations of Debtor under the Assigned Agreements or the rights of
Intercreditor Agent hereunder with respect to the exercise of remedies.
2.7 Restrictions on Modification of Assigned Agreements. Debtor shall
not without the consent of the Intercreditor Agent:
2.7.1 cancel or terminate any of the Assigned Agreements or consent
to or accept any cancellation or termination thereof;
2.7.2 amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
2.7.3 waive any default under or breach of the Assigned Agreements;
2.7.4 consent to or permit or accept any prepayment of amounts to
become due under or in connection with the Assigned Agreements, except as
expressly provided therein; or,
2.7.5 take any other action in connection with the Assigned
Agreements that would impair the value of the interest or rights of Debtor
thereunder or that would impair the interest or rights of the Secured
Parties.
Notwithstanding the foregoing, Debtor may take any actions otherwise
prohibited under this Agreement to the extent permitted by the Disbursement
Agreement, the Mortgage Notes Indenture, the Bank Credit Agreement and the GMAC
Credit Agreement. Further, Debtor shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral except as permitted by
the Disbursement Agreement, the Bank Credit Agreement, the Mortgage Notes
Indenture or the GMAC Credit Agreement so long as any such agreement by its
terms restricts the sale, assignment or other disposition of Collateral.
3. Obligations Secured.
3.1 GMAC Secured Obligations. This Agreement secures, and all of the
Collateral is collateral security for (i) the prompt payment and performance by
each of the Borrowers and Debtor when due whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
ss.362(a)), of all obligations and liabilities of every nature of each of the
Borrowers and Debtor now or hereafter existing under or arising out of or in
connection with the GMAC Credit Agreement and the other Loan Documents (as
defined in the GMAC Credit Agreement) and all extensions and renewals thereof,
whether for principal, interest (including without limitation, interest that,
but for the filing of a petition in bankruptcy with respect to any of such
Borrowers and Debtor, would accrue on such obligations at the contract rate
whether or not a claim for such interest is allowed in any such proceeding),
payments for early termination, fees, expenses,
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increased costs, indemnification, or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated and whether or not jointly owed with others, (ii) any and all sums
advanced by GMAC in order to preserve the Collateral or preserve GMAC's security
interest in the Collateral (or the priority thereof), (iii) the expenses of GMAC
of retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, of any proceeding for the
collection or enforcement of any indebtedness, obligations or liabilities of
each of Borrowers and Debtor referred to above, or of any exercise by GMAC of
its rights hereunder, together with reasonable attorneys' fees and disbursements
and court costs, (iv) any and all obligations of Borrowers and Debtor to the
Disbursement Agent and Intercreditor Agent in respect of costs, fees,
indemnification or otherwise under this Agreement, the Disbursement Agreement,
the Collateral Account Agreements and/or any other Financing Agreement whether
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated and whether or not jointly owed with others and (v) any of the
foregoing obligations that are paid to the extent all or a portion of such
payment is avoided or recovered directly or indirectly from GMAC as a
preference, fraudulent transfer or otherwise (collectively, the "GMAC Secured
Obligations").
3.2 Bank Secured Obligations. This Agreement secures, and all of the
Collateral is collateral security for (i) the prompt payment and performance by
each Borrower and Debtor when due whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all
obligations and liabilities of every nature of Borrowers and Debtor now or
hereafter existing under or arising out of or in connection with the Bank Credit
Agreement and the other Loan Documents (as defined in the Bank Credit Agreement)
and the Lender Interest Rate Agreements and all extensions and renewals thereof,
whether for principal, interest (including without limitation, interest that,
but for the filing of a petition in bankruptcy with respect to such Borrowers or
Debtor, would accrue on such obligations at the contract rate whether or not a
claim for such interest is allowed in any such proceeding), reimbursement for
draws on letters of credit, payments for early termination, fees, expenses,
increased costs, indemnification, or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated and whether or not jointly owed with others, (ii) any and all sums
advanced by any of the Bank Secured Parties in order to preserve the Collateral
or preserve Bank Secured Parties' security interest in the Collateral (or the
priority thereof), (iii) the expenses of any Bank Secured Parties of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, of any proceeding for the collection or enforcement
of any indebtedness, obligations or liabilities of Borrowers or Debtor referred
to above, or of any exercise by the Bank Secured Parties of its rights
hereunder, together with reasonable attorneys' fees and disbursements and court
costs, (iv) any and all obligations of Borrowers and Debtor to the Disbursement
Agent and Intercreditor Agent in respect of costs, fees, indemnification or
otherwise under this Agreement, the Disbursement Agreement, the Collateral
Account Agreements and/or any other Financing Agreement whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated and whether or not jointly owed with others and (v) any of the
foregoing obligations that are paid to the extent all or any portion of
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such payment is avoided or recovered directly or indirectly from any Bank
Secured Party as a preference, fraudulent transfer or otherwise (collectively,
the "Bank Secured Obligations").
3.3 Mortgage Note Secured Obligations. This Agreement secures, and all
of the Collateral is collateral security for (i) the prompt payment and
performance by each Borrower and Debtor when due whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
ss.362(a)), of all obligations and liabilities of every nature of Borrowers and
Debtor now or hereafter existing under or arising out of or in connection with
the Mortgage Notes, the Mortgage Note Indenture, this Agreement, the
Disbursement Agreement, the Collateral Account Agreements and the Mortgage Notes
Indenture Security Documents and all extensions and renewals thereof, whether
for principal, interest (including without limitation, interest that, but for
the filing of a petition in bankruptcy with respect to such Borrower or Debtor,
would accrue on such obligations at the contract rate whether or not a claim for
such interest is allowed in any such proceeding), payments for early
termination, fees, expenses, increased costs, indemnification, or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated and whether or not jointly owed with others, (ii) any
and all sums advanced by any of any Mortgage Note Secured Party in order to
preserve the Collateral or preserve the Mortgage Note Secured Parties' security
interest in the Collateral (or the priority thereof), (iii) the expenses of the
Mortgage Note Indenture Trustee of retaking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Collateral, of any
proceeding for the collection or enforcement of any indebtedness, obligations or
liabilities of Borrowers or Debtor referred to above, or of any exercise by the
Mortgage Note Indenture Trustee of its rights hereunder, together with
reasonable attorneys' fees and disbursements and court costs, (iv) any and all
obligations of Borrowers and Debtor to the Disbursement Agent and Intercreditor
Agent in respect of costs, fees, indemnification or otherwise under this
Agreement, the Disbursement Agreement, the Collateral Account Agreements and/or
any other Financing Agreement whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated and whether or not
jointly owed with others and (v) any of the foregoing obligations that are paid,
to the extent all or a portion of such payment is avoided or recovered directly
or indirectly from any Mortgage Note Secured Party as a preference, fraudulent
transfer or otherwise (collectively, the "Mortgage Note Secured Obligations").
4. Representations and Warranties of Debtor.
Debtor represents and warrants as of the date hereof as follows:
4.1 Debtor has not assigned any of its rights under the Assigned
Agreements except as expressly permitted under the Disbursement Agreement and
each of the Bank Credit Agreement, the GMAC Credit Agreement and the Mortgage
Notes Indenture.
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4.2 Debtor has not executed and is not aware of any effective financing
statement, security agreement or other instrument similar in effect covering all
or any part of the Collateral, except such as may have been filed in accordance
with the terms of this Agreement and the other Financing Agreements in favor of
Secured Parties.
4.3 Except as otherwise permitted by the Disbursement Agreement, the
Bank Credit Agreement, the GMAC Credit Agreement and the Mortgage Notes
Indenture Debtor is lawfully possessed of ownership of the Collateral and has
full right, title and interest in and to all rights purported to be granted to
it under the Assigned Agreements, not subject to any Liens except Permitted
Liens. Debtor has full power and lawful authority to grant and assign the
Collateral hereunder and all consents of third parties required in connection
therewith have been obtained. All of the assets, equipment and personal property
of Debtor secured hereby is, as of the date hereof, located at the places
specified in Annex 1 attached hereto.
4.4 Debtor does not do business, and for the previous five years has not
done business, under any fictitious business names or trade names.
4.5 Debtor is the true, lawful and exclusive owner of the Marks listed
in Annex 2, except those listed as being held under a non-exclusive license, and
said listed Marks include all of Debtor's United States federal registrations or
applications registered in the United States Patent and Trademark office. Debtor
owns or is licensed to use all Marks that it uses that are material to its
business. Debtor is aware of no material third party claim that any aspect of
Debtor's present or contemplated business operations infringes or will infringe
on any such third party's rights to such Marks. Debtor is the owner of record of
all United States registrations and applications listed in Annex 2 hereto and
that said registrations are valid, subsisting, have not been cancelled and that
Debtor is not aware of any material third-party claim that any of said
registrations is invalid or unenforceable.
4.6 Debtor is the true, lawful and exclusive owner of all rights in the
Patents listed in Annex 3 hereto and in the Copyrights listed in Annex 4 hereto.
Said listed Patents include all the United States patents and applications for
United States patents that Debtor owns and said listed Copyrights constitute all
the United States copyrights registered in the United States Copyright Office
and applications for United States copyrights that it now uses or practices
under that are material to its business. Debtor is aware of no material third
party claim that any aspect of Debtor's present or contemplated business
operations infringes or will infringe on any such third party's rights to any
patent or any copyright.
4.7 All notes and other instruments (excluding checks) and all
certificated securities comprising any and all items of Collateral have been
delivered to the Intercreditor Agent duly endorsed and accompanied by duly
executed instruments of transfer or assignment in blank.
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5. Covenants of Debtor.
Debtor covenants as follows:
5.1 Any action or proceeding to enforce this Agreement after an Event of
Default has occurred and is continuing under any Assigned Agreement may be taken
by the Intercreditor Agent either in Debtor's name or in the Intercreditor
Agent's name, as the Intercreditor Agent may deem necessary.
5.2 Debtor will, so long as any Obligations shall be outstanding,
warrant and defend its title to the Collateral and the interests of the
Intercreditor Agent and the Secured Parties in the Collateral against any claim
or demand of any persons (other than Permitted Liens) which could reasonably be
expected to materially and adversely affect Debtor's title to, or the Secured
Parties right or interest in, such Collateral.
5.3 Debtor will at all times keep accurate and complete records of the
Collateral. Debtor shall, at its own expense, permit representatives of the
Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note Indenture
Trustee upon reasonable prior notice, and in accordance with Section 5.5 of the
Disbursement Agreement (while applicable), at any time during normal business
hours of Debtor to inspect and make abstracts from Debtor's books and records
pertaining to the Collateral subject to a confidentiality undertaking in form
and substance reasonably satisfactory to Debtor. Upon the occurrence and during
the continuation of any Event of Default, at the Intercreditor Agent's request,
Debtor shall promptly deliver copies of any and all such records to the
Intercreditor Agent.
5.4 Unless waived in writing by the Intercreditor Agent, Debtor shall
give the Intercreditor Agent at least forty-five (45) days' notice before it
changes its name, identity, corporate structure, location of its principal place
of business or location of its chief executive office and shall at the expense
of Debtor execute and deliver such instruments and documents as may reasonably
be required by the Intercreditor Agent to maintain a prior perfected security
interest in the Collateral.
5.5 Debtor will keep and maintain the Collateral in good condition,
working order and repair and from time to time will make or cause to be made all
repairs, replacements and other improvements in connection therewith that are
necessary or desirable toward such end. Debtor will not misuse the Collateral,
or allow it to deteriorate except for the ordinary wear and tear of its normal
and expected use in Debtor's business in accordance with Debtor's policies as
then in effect (provided that no changes are made to Debtor's policies as in
effect on the date hereof that would be materially adverse to the interests of
the Secured Parties), and will comply in all material respects with all laws,
statutes and regulations pertaining to the use or ownership of the Collateral.
Debtor will promptly notify the Intercreditor Agent, Bank Agent, GMAC and the
Mortgage Note Indenture Trustee regarding any material loss or damage to any
material Collateral or portion thereof; provided, however, that the foregoing
provisions exclude normal wear and tear to the Collateral, items that Debtor
reasonably believes are no longer necessary to the successful operation of its
business and the disposition of obsolete items. Debtor will not
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use or permit any Collateral to be used unlawfully or in violation of any
provision of this Agreement or any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral. Nothing contained in this
Section 5.5 shall prohibit Debtor from taking any action or refraining from
taking any action permitted by the Disbursement Agreement (while applicable),
the Bank Credit Agreement, the Mortgage Note Indenture or the GMAC Credit
Agreement.
5.6 Upon the reasonable request of the Intercreditor Agent, Bank Agent,
GMAC or the Mortgage Notes Indenture Trustee, Debtor will promptly deliver to
such Person records and sche dules that show the status, condition and location
of the Collateral, including accounts receivable aging reports and other reports
reasonably requested by such Person, all in reasonable detail; and will promptly
notify the Intercreditor Agent, Bank Agent, GMAC and the Mortgage Note Indenture
Trustee in writing of any event, or change of law, regulation, business
practice, or business condition that may materially adversely affect the value
of the Collateral. The Intercreditor Agent, Bank Agent, GMAC and the Mortgage
Note Indenture Trustee shall have the right to review and verify such records,
schedules, financial information and notices, and Debtor will reimburse each
such Person for all costs incurred thereby. Such review and verification shall
include the right of the Intercreditor Agent, Bank Agent, GMAC and the Mortgage
Note Indenture Trustee to contact account debtors to confirm balances owing on
and the terms of Receivables, provided that an Event of Default has occurred and
is continuing.
5.7 Except as otherwise provided in this Section 5.7, Debtor shall
continue to collect, at its own expense, all amounts due or to be become due
Debtor under the Receivables. In connection with such collections, Debtor may
take (and, at the Intercreditor Agent's reasonable direction, shall take) such
action as Debtor or the Intercreditor Agent after consultation with Debtor
reasonably deem necessary or advisable to enforce collection of the Receivables;
provided, however, that Debtor shall not adjust, settle or compromise the amount
or payment of any Receivable, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon, other than
adjustments, settlements, or discounts that are in accordance with Debtor's
policies as then in effect; provided that no changes are made to Debtor's
policies as in effect on the date hereof that would be materially adverse to the
interests of the Secured Parties. The Intercreditor Agent shall have the right
at any time after the occurrence and during the continuation of an Event of
Default to notify the account debtors or obligors under any of the Receivables
of the assignment of such Receivables to the Secured Parties and to direct such
account debtors or obligors to make payment of all amounts due or to become due
to Debtor thereunder directly to the Intercreditor Agent or to such Secured
Parties as Intercreditor Agent may direct in accordance with the Intercreditor
Agreement and, upon such notification and at the expense of Debtor, to enforce
collection of any such Receivables, and to adjust, settle or compromise the
amount or payment thereof, as the Intercreditor may deem appropriate in its sole
discretion. After the occurrence and during the continuation of an Event of
Default (i) all amounts and proceeds (including instruments) received by Debtor
in respect of the Receivables shall be received in trust for the benefit of the
Secured Parties hereunder and, upon notice from the Intercreditor Agent, shall
be segregated from other funds of Debtor and shall be forthwith paid over to the
Intercreditor Agent or to such Secured Parties as Intercreditor Agent may direct
in accordance with the Intercreditor Agreement in the same form as so
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received (with all necessary or appropriate endorsements) to be held as cash
collateral and applied as provided by Section 8, and (ii) Debtor shall not
adjust, settle or compromise the amount or payment of any Receivable, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
5.8 Debtor shall pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon, and all claims against, the
Collateral, except to the extent the validity thereof is being contested in good
faith; provided that Debtor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five (5) days prior to the date of any
proposed sale under any judgement, writ or warrant of attachment entered or
filed against Debtor or any of the Collateral as a result of the failure to make
such payment.
5.9 Marks.
(a) Debtor hereby agrees not to sell, assign (by operation of law
or otherwise) or otherwise dispose of any right under any material Mark
that Debtor is required to maintain under Section 5.9(b) hereof except as
permitted by the Disbursement Agreement (while applicable), the Bank
Credit Agreement, the GMAC Credit Agreement and the Mortgage Note
Indenture, absent prior written approval of the Intercreditor Agent. Each
Debtor agrees to use such Marks in interstate commerce in a manner that is
sufficient to preserve such Marks as trademarks or service marks
registered under the laws of the United States.
(b) Debtor shall, at its own expense, diligently prosecute all
applications for Marks listed in Annex 2 hereto and further, for all of
its material registered Marks, shall diligently process all documents
required by the Trademark Act of 1946, 15 U.S.C. ss.ss. 1051 et seq. to
maintain trademark registration, including but not limited to affidavits
of use and applications for renewals of registration in the United States
Patent and Trademark Office pursuant to 15 U.S.C. ss.ss. 1058(a), 1059 and
1065, and shall pay all fees and disbursements in connection therewith and
shall not abandon any such filing of affidavit of use or any such
application of renewal prior to the exhaustion of all administrative and
judicial remedies without the prior written consent of the Intercreditor
Agent; provided, that Debtor shall not be obligated to maintain any Mark
in the event that Debtor determines, in its reasonable business judgment,
that the maintenance of such Mark is no longer necessary or desirable in
the conduct of its business. Debtor agrees to notify the Intercreditor
Agent, the Bank Agent, GMAC and the Mortgage Note Indenture Trustee three
(3) months prior to the date on which the affidavits of use or the
applications for renewal registration are due with respect to any material
registered Mark.
(c) If any material Mark registration certificate is issued
hereafter to Debtor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within
thirty (30) days of receipt of such certificate confirming such
registration Debtor shall deliver a copy of such certificate, and a grant
of security in such Mark on behalf of the Secured Parties, to the
Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note Indenture
Trustee, confirming the grant thereof
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hereunder together with all cover sheets or other documents or instruments
required to be filed with the United States Patent and Trademark Office in
order to create or perfect a lien in respect of such Mark.
(d) Debtor agrees, promptly upon learning thereof, to notify the
Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note Indenture
Trustee in writing of the name and address of, and to furnish such
pertinent information that may be available with respect to, any party who
Debtor believes is infringing or otherwise violating any of Debtor's
rights to any material Mark, or with respect to any party claiming that
Debtor's use of any such Mark violates in any material respect any
property right of that party. Debtor further agrees, unless otherwise
agreed by the Intercreditor Agent, diligently to prosecute any Person
infringing any material Mark.
5.10 Patents and Copyrights.
(a) Debtor hereby agrees not to sell, assign (by operation of law
or otherwise), or otherwise dispose of any right under any material Patent
or Copyright except as permitted by the Disbursement Agreement (while
applicable), the Bank Credit Agreement, the GMAC Credit Agreement and the
Mortgage Note Indenture, absent prior written approval of the
Intercreditor Agent.
(b) Debtor shall, at its own expense, diligently prosecute all
applications for material Patents and material Copyrights listed in Annex
3 and Annex 4 hereto, respectively, and shall not abandon any such
application prior to exhaustion of all reasonable administrative and
judicial remedies, absent written consent of the Intercreditor Agent.
Debtor shall do all acts and things reasonably necessary to maintain the
Patents and Copyrights listed in Annex 3 and Annex 4, respectively, and
all Patents and Copyrights hereafter obtained or acquired by Debtor,
including, without limitation, making timely payment of all post-issuance
fees required pursuant to 35 U.S.C. ss. 41 to maintain in force rights
under each Patent.
(c) Within thirty (30) days of acquisition of a Patent or
Copyright, or of filing of an application for a Patent or Copyright by
Debtor, Debtor shall deliver to the Intercreditor Agent, the Bank Agent,
GMAC and the Mortgage Note Indenture Trustee a copy of said Patent or
Copyright or such application, as the case may be, with a grant of
security as to such Patent or Copyright, as the case may be, confirming
the grant thereof hereunder together with all cover sheets or other
documents or instruments required to be filed with the United States
Patent and Trademark Office in order to create or perfect a lien in
respect of such Patent or Copyright.
(d) Debtor agrees, promptly upon learning thereof, to notify the
Intercreditor Agent, the Bank Agent, GMAC and the Mortgage Note Indenture
Trustee in writing of the name and address of, and to furnish such
pertinent information available to Debtor with respect to any party who
Debtor believes is infringing or otherwise violating any of Debtor's
rights in any material Patent or material Copyright, or with respect to
any
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party claiming that Debtor's practice of any Patent or use of any
Copyright violates any property right of that third party. Debtor further
agrees, unless otherwise agreed by the Intercreditor Agent, diligently to
prosecute any Person infringing any material Patent or material Copyright.
5.11 Accounts. Following termination of the Accounts, Debtor shall
establish a cash management system in form and substance reasonably acceptable
to Intercreditor Agent and shall only establish and maintain deposit accounts,
investment accounts or like accounts with financial institutions that have
entered into letter agreements with the Intercreditor Agent and the Debtor (or
its subsidiaries) in form and substance satisfactory to Intercreditor Agent
pursuant to which such financial institution confirms and acknowledges the
security interest of Secured Parties in such account, waives its right of
set-off with respect to amounts held therein and agrees that if Intercreditor
Agent notifies such institution that an Event of Default has occurred, then
until such notification is rescinded, such institution will act only on
instructions from Intercreditor Agent and will, if so instructed to, block
further withdrawals from such account. Debtor will take such further actions and
execute such further documents in connection therewith as Intercreditor Agent
may reasonably request in order to perfect, or maintain the perfection of the
security interest of Secured Parties in such accounts.
6. Remedies Upon Event of Default.
6.1 Subject to compliance with applicable Nevada Gaming Laws, if any
Event of Default shall have occurred and be continuing, the Intercreditor Agent
may exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral), and also may (a) require Debtor to, and
Debtor hereby agrees that it will at its expense and upon request of the
Intercreditor Agent forthwith, assemble all or part of the Collateral as
directed by the Intercreditor Agent and make it available to the Intercreditor
Agent at a place to be designated by the Intercreditor Agent that is reasonably
convenient to both parties, (b) enter onto the property where any Collateral is
located and take possession thereof with or without judicial process, (c) prior
to the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent the Intercreditor Agent deems appropriate, (d) take possession of
Debtor's premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of Debtor's equipment for the purpose of
completing any work in process, taking any actions described in the preceding
clause (c) and collecting any Obligation, and (e) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Intercreditor Agent's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as the Intercreditor Agent may
deem commercially reasonable. The Intercreditor Agent or any of the Secured
Parties or Interest Rate Exchanger may be the purchaser of any or all of the
Collateral at any such sale and the Intercreditor Agent as agent for and
representative of the Secured Parties and Interest Rate Exchangers shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for
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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 Intercreditor Agent at such sale. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of Debtor, and Debtor hereby waives (to the extent permitted
by applicable law) all rights of redemption, stay and/or appraisal which they
now have or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted. Debtor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to Debtor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Intercreditor Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Intercreditor Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Debtor hereby waives any claims against the Intercreditor Agent
arising by reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if the Intercreditor Agent accepts the first
offer received and does not offer such Collateral to more than one offeree. If
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay all the Obligations, Debtor shall be liable for the deficiency and the
reasonable fees of any attorneys employed by the Intercreditor Agent to collect
such deficiency. Upon written demand from the Intercreditor Agent, Debtor shall
execute and deliver to the Intercreditor Agent an assignment or assignments of
the Patents, Copyrights, and Marks and such other documents as are necessary or
appropriate to carry out the intent and purposes of this Agreement. Debtor
agrees that such an assignment and/or recording shall be applied to reduce the
Obligations outstanding only to the extent that the Intercreditor Agent receives
cash proceeds in respect of the sale of, or other realization upon, the
Collateral.
7. Remedies Cumulative; Delay Not Waiver.
7.1 No right, power or remedy herein conferred upon or reserved to the
Intercreditor Agent is intended to be exclusive of any other right, power or
remedy and every such right, power and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right, power and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder or otherwise shall not
prevent the concurrent assertion or employment of any other appropriate right or
remedy. Resort to any or all security now or hereafter held by the Intercreditor
Agent may be taken concurrently or successively and in one or several
consolidated or independent judicial actions or lawfully taken nonjudicial
proceedings, or both.
7.2 No delay or omission of the Intercreditor Agent to exercise any
right or power accruing upon the occurrence and during the continuance of any
Event of Default as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein; and every power and remedy given by this Agreement may
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be exercised from time to time, and as often as shall be deemed expedient, by
the Intercreditor Agent.
8. Application of Proceeds.
All proceeds received by the Intercreditor Agent in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
shall be applied to repay the Secured Obligations as provided in the
Intercreditor Agreement.
9. Attorney-In-Fact.
Subject to compliance with applicable Nevada Gaming Laws, Debtor hereby
irrevocably appoints the Intercreditor Agent as Debtor's attorney-in-fact, with
full authority in the place and stead of Debtor and in the name of Debtor, the
Intercreditor Agent or otherwise, from time to time upon and following the
occurrence and continuation of an Event of Default or Potential Event of Default
in the Intercreditor Agent's discretion to take any action and to execute any
instrument that the Intercreditor Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including without limitation:
(a) to obtain and adjust insurance required to be maintained by
Debtor or paid to the Intercreditor Agent pursuant to this Agreement;
(b) to ask for, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clauses (a)
and (b) above;
(d) to file any claims or take any action or institute any
proceedings that the Intercreditor Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Intercreditor Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Permitted
Liens) levied or placed upon or threatened against the Collateral, the
legality or validity thereof and the amounts necessary to discharge the
same to be determined by the Intercreditor Agent in its sole discretion,
any such payments made by the Intercreditor Agent to become obligations of
Debtor to the Intercreditor Agent, due and payable immediately without
demand;
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(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other documents relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Intercreditor Agent were the absolute owner
thereof for all purposes, and to do, at the Intercreditor Agent's option
and Debtor's expense, at any time or from time to time, all acts and
things that the Intercreditor Agent deems necessary to protect, preserve
or realize upon the Collateral and the Intercreditor Agent's security
interest therein in order to effect the intent of this Agreement, all as
fully and effectively as Debtor might do.
10. The Intercreditor Agent May Perform.
Upon the occurrence and during the continuance of an Event of Default, if
Debtor fails to perform any agreement contained herein, the Intercreditor Agent
may itself perform, or cause performance of, such agreement, and the reasonable
expenses of the Intercreditor Agent incurred in connection therewith shall be
part of the Obligations of the Relevant Secured Parties.
11. Perfection; Further Assurances.
11.1 Debtor agrees that from time to time, at the expense of Debtor,
Debtor shall promptly execute and deliver all further instruments and documents,
and take all further action, that may be reasonably necessary, or that the
Intercreditor Agent may reasonably request, in order to perfect and protect the
assignment and security interest granted, purported or intended to be granted
hereby in favor of the Secured Parties or to enable the Intercreditor Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Debtor shall (i)
if any Collateral shall be evidenced by a promissory note or other instrument in
excess of $5,000, deliver and pledge to the Intercreditor Agent for the benefit
of the Secured Parties granted a security interest in such Collateral such note
duly endorsed without recourse, and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Intercreditor
Agent, (ii) execute and deliver to the Intercreditor Agent such financing or
continuation statements, or amendments thereto, and such other instruments,
endorsements or notices, as may be reasonably necessary or desirable or as such
Secured Parties may reasonably request, in order to perfect and preserve the
assignments and security interests granted, purported or intended to be granted
hereby in favor of the Relevant Secured Parties and (iii) at the Intercreditor
Agent's reasonable request, appear in and defend any action or proceeding that
may affect Debtor's title to or the Intercreditor Agent's or any of the Secured
Parties security interest in all or any part of the Collateral.
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11.2 Debtor hereby authorizes the Bank Agent, GMAC, the Mortgage Note
Indenture Trustee and the Intercreditor Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral in which such Secured Party has been granted a security interest
without the signature of Debtor where permitted by law.
11.3 Debtor shall pay all filing, registration and recording fees and all
refiling, re-registration and re-recording fees, and all reasonable expenses
incident to the execution and acknowledgment of this Agreement, any assurance,
and all federal, state, county and municipal stamp taxes and other taxes (other
than income taxes), duties, imports, assessments and charges arising out of or
in connection with the execution and delivery of this Agreement, any agreement
supplemental hereto, any financing statements, and any instruments of further
assurance.
11.4 Debtor shall, promptly upon request, provide to the Intercreditor
Agent, all information and evidence it may reasonably request concerning the
Collateral to enable the Intercreditor Agent to enforce the provisions of this
Agreement.
12. Place of Business; Location of Records.
Unless the Intercreditor Agent is otherwise notified under Section 5.4,
the place of business and chief executive office of Debtor is, and all records
of Debtor concerning the Collateral are and will be, located at the address of
Debtor set forth on the signature pages to this Agreement.
13. Continuing Assignment and Security Interest; Transfer of Debt.
This Agreement shall create a continuing assignment of, and security
interest in, the Collateral and shall (a) remain in full force and effect until
payment in full of all Obligations, (b) be binding upon Debtor, its successors
and assigns; provided, however, that the obligations of Debtor, its successors
and assigns hereunder may not be assigned without the prior written consent of
the Intercreditor Agent; and (c) inure, together with the rights and remedies of
the Intercreditor Agent hereunder, to the benefit of the Intercreditor Agent,
its successors, transferees and assigns (whether as a result of a refinancing or
otherwise), the other Secured Parties and their respective successors, transfers
and assigns (whether as a result of a refinancing or otherwise). Without
limiting the generality of the foregoing but subject to the terms of the
Financing Agreements evidencing the Obligations owed to particular Secured
Parties, such Secured Parties may assign or otherwise transfer all or any part
of or interest in such Financing Agreements or other evidence of indebtedness
held by them to any other Person to the extent permitted by such Financing
Agreements, and such other Person shall thereupon become vested with all or an
appropriate part of the benefits in respect thereof granted to the Secured
Parties herein or otherwise. The release of the security interest in any or all
of the Collateral, the taking or acceptance of additional security, or the
resort by any Secured Party or the Intercreditor Agent to any security it may
have in any order it may deem appropriate, shall not affect the liability of any
person on the Obligations secured hereby. If this Agreement shall be
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terminated or revoked by operation of law, Debtor will indemnify and save the
Secured Parties harmless from any loss which may be suffered or incurred by the
Secured Parties in acting hereunder prior to the receipt by the Intercreditor
Agent, its successors, transfers, or assigns of notice of such termination or
revocation. Debtor acknowledges and agrees that, pursuant to and in accordance
with the terms of the Intercreditor Agreement, one or more additional or
successor Intercreditor Agents, or other agents or representatives of the
Intercreditor Agent may be appointed, by written notice to Debtor, and such
person or persons shall be entitled to exercise or perform all or a portion of
the duties or obligations of the Intercreditor Agent hereunder in accordance
with the terms of such appointment.
14. Termination of Security Interest.
14.1 Upon the indefeasible payment in full of the GMAC Obligations or, if
earlier, the Mall Release Date, the security interest granted under Subsection
2.1 hereof in favor of GMAC shall terminate; provided that such termination
shall not affect the rights of the other Secured Parties hereunder. Upon any
such termination, the Intercreditor Agent will, at Debtor's expense, execute
and, deliver to Debtor such documents (including, without limitation, UCC-3
termination statements) as Debtor shall reasonably request to evidence such
termination. Following any such termination any references to GMAC and the GMAC
Credit Agreement shall be deemed to be deleted.
14.2 Upon the indefeasible payment in full of the Bank Secured
Obligations, the security interest granted under Subsection 2.2 hereof in favor
of the Intercreditor Agent on behalf of the Bank Secured Parties shall
terminate; provided that such termination shall not affect the rights of the
other Secured Parties hereunder. Upon any such termination, the Intercreditor
Agent will, at Debtor's expense, execute and deliver to Debtor such documents
(including, without limitation, UCC-3 termination statements) as Debtor shall
reasonably request to evidence such termination. Following any such termination
any references to the Bank Agent, the Bank Secured Parties and the Bank Credit
Agreement shall be deemed to be deleted.
14.3 Upon the indefeasible payment in full of the Mortgage Note Secured
Obligations, the security interest granted under Subsection 2.3 hereof in favor
of the Mortgage Note Indenture Trustee shall terminate; provided that such
termination shall not affect the rights of the other Secured Parties hereunder.
Upon any such termination, the Intercreditor Agent will, at Debtor's expense,
execute and deliver to Debtor such documents (including, without limitation,
UCC-3 termination statements) as Debtor shall reasonably request to evidence
such termination. Following any such termination any references to the Mortgage
Note Secured Parties, the Mortgage Note Indenture Trustee and the Mortgage Note
Indenture shall be deemed to be deleted.
14.4 Upon the termination of the security interests of GMAC and the Bank
Secured Parties in accordance with Sections 14.1 and 14.2 above, the appointment
of Intercreditor Agent shall terminate and all duties, rights and remedies
vested in Intercreditor Agent shall thereupon be vested in the Mortgage Notes
Indenture Trustee.
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15. Indemnity and Expenses.
To the extent not covered by the Bank Credit Agreement, the GMAC Credit
Agreement or the Mortgage Note Indenture, Debtor agrees to indemnify the
Intercreditor Agent and each other Secured Party from and against any and all
claims, losses and liabilities growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from such Secured Party's gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction.
16. Attorneys' Fees.
In the event any legal action or proceeding (including, without
limitation, any of the remedies provided for herein or at law) is commenced to
enforce or interpret this Agreement or any provision thereof, Debtor shall
indemnify each of the Secured Parties and the Intercreditor Agent for their
reasonable attorneys' fees and other costs and expenses incurred therein, and if
a judgment or award is entered in any such action or proceeding, such reasonable
attorneys' fees and other costs and expenses may be made a part of such judgment
or award.
17. Amendments; Waivers; Consents.
No amendment, modification, termination or waiver of any provision of this
Agreement, or consent to any departure by Debtor therefrom, shall in any event
be effective without the written concurrence of the Intercreditor Agent and
Debtor.
18. Notices.
All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be considered as properly given (a) if
delivered in person, (b) if sent by reputable overnight delivery service, (c) in
the event overnight delivery services are not readily available, if mailed by
first class mail, postage prepaid, registered or certified with return receipt
requested or (d) if sent by prepaid telex, or by telecopy with correct answer
back received. Notice so given shall be effective upon receipt by the addressee,
except that communication or notice so transmitted by telecopy or other direct
written electronic means shall be deemed to have been validly and effectively
given on the day (if a Banking Day and, if not, on the next following Banking
Day) on which it is validly transmitted if transmitted before 4 p.m.,
recipient's time, and if transmitted after that time, on the next following
Banking Day; provided, however, that if any notice is tendered to an addressee
and the delivery thereof is refused by such addressee, such notice shall be
effective upon such tender. The addresses of the parties for purposes hereof
shall be as set forth on the signature pages hereof unless and until notice
changing such address is given in accordance with this Section 18. Any party
shall have the
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right to change its address for notice hereunder to any other location by giving
of no less than twenty (20) days' notice to the other parties in the manner set
forth hereinabove.
19. Governing Law.
Subject to the application of Nevada Gaming Laws, this Agreement,
including all matters of construction, validity, performance and the creation,
validity, enforcement or priority of the lien of, and security interests created
by, this Agreement in or upon the Collateral shall be governed by the laws of
the state of New York, without reference to conflicts of law (other than Section
5-1401 of the New York General Obligations Law), except as required by mandatory
provisions of law and except to the extent that the validity or perfection of
the lien and security interest hereunder, or remedies hereunder, in respect of
any particular Collateral are governed by the laws of a jurisdiction other than
the state of New York.
20. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST DEBTOR ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW
YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, DEBTOR, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO DEBTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
18;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER DEBTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT INTERCREDITOR AGENT AND ANY SECURED PARTY RETAINS
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST DEBTOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND
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(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 20 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402
OR OTHERWISE.
21. Reinstatement.
This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any amount received by any Secured Party in respect
of the Obligations is rescinded or must otherwise be restored or returned by
such Secured Party upon the insolvency, bankruptcy, reorganization, liquidation
of Debtor or upon the dissolution of, or appointment of any intervenor or
conservator of, or trustee or similar official for, Debtor or any substantial
part of Debtor's assets, or otherwise, all as though such payments had not been
made.
22. Severability.
The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Agreement in any jurisdiction.
23. Survival of Provisions.
All agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement and the other Financing Agreements
and extensions of credit thereunder. Notwithstanding anything in this Agreement
or implied by law to the contrary, the agreements, representations and
warranties of Debtor set forth herein shall terminate only upon full repayment
of the Obligations.
24. Headings Descriptive.
The headings in this Agreement are for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or be given
any substantive effect.
25. Entire Agreement.
This Agreement, together with any other agreement executed in connection
herewith, is intended by the parties as a final expression of their agreement
and is intended as a complete and exclusive statement of the terms and
conditions thereof.
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26. Time.
Time is of the essence of this Agreement.
27. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which shall together constitute one and
the same agreement.
28. Waiver of Jury Trial.
DEBTOR AND THE INTERCREDITOR AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT AND THE RELATIONSHIP AMONG THEM THAT IS BEING ESTABLISHED. DEBTOR AND
THE INTERCREDITOR AGENT ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT IT HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT, AND THAT IT WILL CONTINUE TO RELY ON THE WAIVER IN
THEIR RELATED FUTURE DEALINGS. EACH SUCH PERSON FURTHER WARRANTS AND REPRE SENTS
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.
29. Responsibilities of the Intercreditor Agent.
The powers conferred on the Intercreditor Agent hereunder are solely to
protect its interest in the Collateral granted for the benefit of the Secured
Parties and shall not impose any duty upon it to exercise any such powers.
Except for the exercise of reasonable care in the custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Intercreditor Agent shall have no duty as to any Collateral, it being
understood that the Intercreditor Agent shall have no responsibility for (a)
taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Collateral) to
preserve rights against any parties with respect to any Collateral or (b) taking
any necessary steps to collect or realize upon the Obligations or any guarantee
therefor, or any part thereof, or any of the Collateral. The Intercreditor Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which such Person accords its own property
of like kind.
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IN WITNESS WHEREOF, each of the undersigned has caused this Mall
Construction Subsidiary Security Agreement to be duly executed and delivered as
of the day and year first above written.
DEBTOR:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC,
a Delaware limited liability company
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
S-1
<PAGE>
INTERCREDITOR AGENT:
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank,
as Intercreditor Agent
By: /s/ Alan W. Pendergast
----------------------
Name: Alan W. Pendergast
Title: Relationship Manager
S-2
Recording Requested By and recorded
counterparts should be returned to:
Dru Greenhalgh, Esq.
Latham & Watkins
701 B Street, Suite 2100
San Diego, California 92101
DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT
MADE BY
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
and
LAS VEGAS SANDS, INC.
a Nevada corporation
jointly and severally
as Trustor,
to
Lawyers Title of Nevada, Inc.
a Nevada corporation,
as Trustee,
for the benefit of
FIRST TRUST NATIONAL ASSOCIATION,
in its capacity as the Mortgage Notes Indenture Trustee,
as Beneficiary
- --------------------------------------------------------------------------------
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND
IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS OF CLARK COUNTY,
NEVADA UNDER THE NAMES OF VENETIAN CASINO RESORT, LLC AND LAS VEGAS SANDS, INC.
AS "DEBTOR" AND FIRST TRUST NATIONAL ASSOCIATION AS SECURED PARTY.
THIS INSTRUMENT IS A "CONSTRUCTION MORTGAGE" AS THAT TERM IS DEFINED IN
SECTION 104.9313(1)(C) OF THE NEVADA REVISED STATUTES AND SECURES AN OBLIGATION
INCURRED FOR THE CONSTRUCTION OF AN IMPROVEMENT UPON LAND.
<PAGE>
DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT
(hereinafter called "Deed of Trust") is made and effective as of November 14,
1997, by VENETIAN CASINO RESORT, LLC, a Nevada limited liability company ("VCR")
and LAS VEGAS SANDS, INC., a Nevada corporation ("LVSI," and jointly and
severally with VCR together with all successors and assigns of the Trust Estate
(as hereinafter defined), "Trustor",) whose address is 3355 Las Vegas Blvd.
South Room 1C, Las Vegas, Nevada 89109, to LAWYERS TITLE OF NEVADA, INC., a
Nevada corporation, whose address is 1050 East Flamingo, Suite 150, Las Vegas,
Nevada 09119, as Trustee ("Trustee"), for the benefit of FIRST TRUST NATIONAL
ASSOCIATION, ("Beneficiary"), in its capacity as the Mortgage Notes Indenture
Trustee under that certain Indenture, dated of even date herewith, among
Trustor, Beneficiary and the other parties signatory thereto (as the same may be
amended or modified from time to time, the "Mortgage Notes Indenture") and
pertaining to the 12.25% Mortgage Notes 2004 issued by Trustor in the aggregate
principal amount of $425,000,000.
DEFINITIONS - As used in this Deed of Trust, the following terms have the
meanings hereinafter set forth:
"Accounts Receivable" shall have the meaning set forth in Section 9-106
(NRS 104.9106) of the UCC for the term "account."
"Appurtenant Rights" means all and singular tenements, hereditaments,
rights, reversions, remainders, development rights, privileges, benefits,
easements (in gross or appurtenant), rights-of-way, gores or strips of land,
streets, ways, alleys, passages, sewer rights, water courses, water rights and
powers, and all appurtenances whatsoever and claims or demands of Trustor at law
or in equity in any way belonging, benefitting, relating or appertaining to the
Land, the airspace over the Land, the Improvements or any of the Trust Estate
encumbered by this Deed of Trust, or which hereinafter shall in any way belong,
relate or be appurtenant thereto, whether now owned or hereafter acquired by
Trustor.
"Bankruptcy" means, with respect to any Person, that (i) a court having
jurisdiction in the Trust Estate shall have entered a decree or order for relief
in respect of such Person 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 has not been stayed; or any other
similar relief shall have been granted under any applicable federal or state
law; or (ii) an involuntary case shall be commenced against such Person, 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 Trust Estate for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
such Person, 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 such Person, 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 such
Person, and any such event described in this clause (ii) shall continue for 60
days unless dismissed, bonded or discharged; or (iii) such Person 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
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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 such Person shall make any assignment for
the benefit of creditors, or shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due and payable and a period of
thirty (30) days shall have elapsed; or (iv) such Person shall, or the Board of
Directors of such Person (or any committee thereof) shall, adopt any resolution
or otherwise authorize any action to approve any of the actions referred to in
clause (iii) above.
"Bankruptcy Code" means Title 11 of the United Sates Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute thereto.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which banking institutions in the State of Nevada or the City of New York are
not required to be open.
"Deed of Trust" means this Deed of Trust as it may be amended, increased
or modified from time to time.
"Event of Default" has the meaning set forth in Section 3.1 hereof.
"FF&E" means all furniture, fixtures, equipment, appurtenances and
personal property now or in the future contained in, used in connection with,
attached to, or otherwise useful or convenient to the use, operation, or
occupancy of, or placed on, but unattached to, any part of the Land or
Improvements whether or not the same constitutes real property or fixtures in
the State of Nevada, including all removable window and floor coverings, all
furniture and furnishings, heating, lighting, plumbing, ventilating, air
conditioning, refrigerating, incinerating and elevator and escalator plants,
cooking facilities, vacuum cleaning systems, public address and communications
systems, sprinkler systems and other fire prevention and extinguishing apparatus
and materials, motors, machinery, pipes, appliances, equipment, fittings,
fixtures, and building materials, all gaming and financial equipment, computer
equipment, calculators, adding machines, gaming tables, video game and slot
machines, and any other electronic equipment of every nature used or located on
any part of the Land or Improvements, together with all venetian blinds, shades,
draperies, drapery and curtain rods, brackets, bulbs, cleaning apparatus,
mirrors, lamps, ornaments, cooling apparatus and equipment, ranges and ovens,
garbage disposals, dishwashers, mantels, and any and all such property which is
at any time installed in, affixed to or placed upon the Land or Improvements.
"FF&E Financing Agreement" means any financing agreement entered into by
Trustor (i) the proceeds of which are used by Trustor for the acquisition or
lease of FF&E, (ii) pursuant to which Trustor grants to the lender or lessor
thereunder a security interest in the FF&E so acquired or leased and (iii) which
is permitted by the Mortgage Notes Indenture.
"Funding Agents' Disbursement and Administration Agreement" means that
certain Funding Agents' Disbursement and Administration Agreement, dated of even
date herewith, by and among Trustor, Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company, The Bank of Nova Scotia, as the Bank Agent
and the Disbursement Agent, Beneficiary, as the Mortgage Notes Indenture
Trustee, the Interim Mall Lender and Atlantic-Pacific, Las Vegas, LLC, a
Delaware limited liability company, as the HVAC Provider, as the same may
hereafter be amended or modified in accordance with its terms and the terms of
the Mortgage Notes Indenture.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office, public entity, or instrumentality of any nature
whatsoever of the United
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States federal or foreign government, any state, province or any city or other
political subdivision or otherwise, whether now or hereafter in existence, or
any officer or official thereof, including, without limitation, any Gaming
Authority.
"Imposition" means any taxes, assessments, water rates, sewer rates,
maintenance charges, other governmental impositions and other charges now or
hereafter levied or assessed or imposed against the Trust Estate or any part
thereof.
"Improvements" means (1) all the buildings, structures, facilities and
improvements of every nature whatsoever now or hereafter situated on the Land or
any real property encumbered hereby, and (2) all fixtures, machinery,
appliances, goods, building or other materials, equipment, including without
limitation all gaming equipment and devices, and all machinery, equipment,
engines, appliances and fixtures for generating or distributing air, water,
heat, electricity, light, fuel or refrigeration, or for ventilating or sanitary
purposes, or for the exclusion of vermin or insects, or for the removal of dust,
refuse or garbage; all wall-beds, wall-safes, built-in furniture and
installations, shelving, lockers, partitions, doorstops, vaults, motors,
elevators, dumb-waiters, awnings, window shades, venetian blinds, light
fixtures, fire hoses and brackets and boxes for the same, fire sprinklers,
alarm, surveillance and security systems, computers, drapes, drapery rods and
brackets, mirrors, mantels, screens, linoleum, carpets and carpeting, plumbing,
bathtubs, sinks, basins, pipes, faucets, water closets, laundry equipment,
washers, dryers, ice-boxes and heating units; all kitchen and restaurant
equipment, including but not limited to silverware, dishes, menus, cooking
utensils, stoves, refrigerators, ovens, ranges, dishwashers, disposals, water
heaters, incinerators, furniture, fixtures and furnishings, communication
systems, and equipment; all cocktail lounge supplies, including but not limited
to bars, glassware, bottles and tables used in connection with the Land; all
chaise lounges, hot tubs, swimming pool heaters and equipment and all other
recreational equipment (computerized and otherwise), beauty and barber
equipment, and maintenance supplies used in connection with the Land; all
amusement rides and attractions attached to the Land, all specifically designed
installations and furnishings, and all furniture, furnishings and personal
property of every nature whatsoever now or hereafter owned or leased by Trustor
or in which Trustor has any rights or interest and located in or on, or attached
to, or used or intended to be used or which are now or may hereafter be
appropriated for use on or in connection with the operation of the Land or any
real or personal property encumbered hereby or any other Improvements, or in
connection with any construction being conducted or which may be conducted
thereon, and all extensions, additions, accessions, improvements, betterments,
renewals, substitutions, and replacements to any of the foregoing, and all of
the right, title and interest of Trustor in and to any such property, which, to
the fullest extent permitted by law, shall be conclusively deemed fixtures and
improvements and a part of the real property hereby encumbered.
"Insolvent" means with respect to any person or entity, that such person
or entity shall be deemed to be insolvent if he or it shall fail generally, or
shall admit in writing its inability, to pay its debts as such debts become due
and payable and a period of thirty (30) days shall have elapsed.
"Intangible Collateral" means (a) the rights to use all names and all
derivations thereof now or hereafter used by Trustor in connection with the Land
or Improvements, including, without limitation, the names "Venetian" and
"Sands," including any variations thereon, together with the goodwill associated
therewith, and all names, logos, and designs used by Trustor, or in connection
with the Land or in which Trustor has rights, with the exclusive right to use
such names, logos and designs wherever they are now or hereafter used in
connection with the Project (or in connection with the marketing of the Project
together with the "SECC Land" (as defined in the Cooperation Agreement) in
accordance with the terms of the Cooperation Agreement), and any and all other
trade names, trademarks or service marks, whether or not registered, now or
hereafter used in the operation of the
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Project, including, without limitation, any interest as a lessee, licensee or
franchisee, and, in each case, together with the goodwill associated therewith;
(b) subject to the absolute assignment contained herein, the Rents; (c) any and
all books, records, customer lists, concession agreements, supply or service
contracts, licenses, permits, governmental approvals (to the extent such
licenses, permits and approvals may be pledged under applicable law), signs,
goodwill, casino and hotel credit and charge records, supplier lists, checking
accounts, safe deposit boxes (excluding the contents of such deposit boxes owned
by persons other than Trustor and its subsidiaries), cash, instruments, chattel
papers, including inter-company notes and pledges, documents, unearned premiums,
deposits, refunds, including but not limited to income tax refunds, prepaid
expenses, rebates, tax and insurance escrow and impound accounts, if any,
actions and rights in action, and all other claims, including without limitation
condemnation awards and insurance proceeds, and all other contract rights and
general intangibles resulting from or used in connection with the operation and
occupancy of the Trust Estate and the Improvements and in which Trustor now or
hereafter has rights; and (d) general intangibles, vacation license resort
agreements or other time share license or right to use agreements, including
without limitation all rents, issues, profits, income and maintenance fees
resulting therefrom, whether any of the foregoing is now owned or hereafter
acquired.
"Interim Mall Lender" means GMAC Commercial Mortgage Corporation, a
California corporation, and its permitted successors, assigns and replacements.
"Land" means the real property situated in the County of Clark, State of
Nevada, more specifically described in Schedule A attached hereto and
incorporated herein by reference, including any after acquired title thereto.
"Legal Requirements" means all applicable restrictive covenants,
applicable zoning and subdivision ordinances and building codes, all applicable
health and Environmental Laws and regulations, all applicable gaming laws and
regulations, and all other applicable laws, ordinances, rules, regulations,
judicial decisions, administrative orders, and other requirements of any
Governmental Authority having jurisdiction over Trustor, the Trust Estate and/or
any Affiliate of Trustor, in effect either at the time of execution of this Deed
of Trust or at any time during the term hereof, including, without limitation,
all Environmental Laws and Gaming Control Laws.
"Notes" means, collectively, those certain Mortgage Note(s) issued
pursuant to the Mortgage Notes Indenture, as the same may be amended or replaced
from time to time in accordance with its terms.
"NRS" means the Nevada Revised Statutes as in effect from time to time.
"Obligations" means the payment and performance of each covenant and
agreement of Trustor contained in this Deed of Trust, the Mortgage Notes
Indenture, the Notes and the Mortgage Notes Indenture Security Documents.
"Permitted Dispositions" means (a) the sale, transfer, lease or other
disposition of assets in the Trust Estate, in the ordinary course of business,
of inventory held in the ordinary course of business (b) the dispositions set
forth in Section 1.10 hereof and (c) other sales, transfers, leases or other
dispositions of assets in the Trust Estate; provided that all applicable
provisions of the Mortgage Notes Indenture are complied with, including Sections
4.10 and 4.24.
"Personal Property" has the meaning set forth in Section 1.12 hereof.
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"Proceeds" has the meaning assigned to it under the UCC and, in any event,
shall include but not be limited to (i) any and all proceeds of any insurance
(including without limitation property casualty and title insurance), indemnity,
warranty or guaranty payable from time to time with respect to any of the Trust
Estate; (ii) any and all proceeds in the form of accounts, security deposits,
tax escrows (if any), down payments (to the extent the same may be pledged under
applicable law), collections, contract rights, documents, instruments, chattel
paper, liens and security instruments, guarantees or general intangibles
relating in whole or in part to the Project and all rights and remedies of
whatever kind or nature Trustor may hold or acquire for the purpose of securing
or enforcing any obligation due Trustor thereunder; (iii) any and all payments
in any form whatsoever made or due and payable from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Trust Estate by any Governmental Authority; (iv) subject to
the absolute assignment contained herein, the Rents or other benefits arising
out of, in connection with or pursuant to any Space Lease of the Trust Estate;
and (v) any and all other amounts from time to time paid or payable in
connection with any of the Trust Estate; provided, however, that the Trustor is
not authorized to dispose of any of the Trust Estate unless such disposition is
a Permitted Disposition.
"Project" means the resort-hotel-casino-mall complex proposed to be
constructed in Clark County, Nevada as described in the Plans and
Specifications, as such Plans and Specifications may be amended pursuant to the
Funding Agents' Disbursement and Administration Agreement.
"Rents" means all rents, room revenues, income, receipts, issues, profits,
revenues and maintenance fees, room, food and beverage revenues, license and
concession fees, income, proceeds and other benefits to which Trustor may now or
hereafter be entitled from the Land, the Improvements, the Space Leases or any
property encumbered hereby or any business or other activity conducted by
Trustor at the Land or the Improvements.
"Space Leases" means any and all leases, subleases, lettings, licenses,
concessions, operating agreements, management agreements, and all other
agreements affecting the Trust Estate that Trustor has entered into, taken by
assignment, taken subject to, or assumed, or has otherwise become bound by, now
or in the future, that give any person the right to conduct its business on, or
otherwise use, operate or occupy, all or any portion of the Land or Improvements
and any leases, agreements or arrangements permitting anyone to enter upon or
use any of the Trust Estate to extract or remove natural resources of any kind,
together with all amendments, extensions, and renewals of the foregoing entered
into in compliance with this Deed of Trust, together with all rental, occupancy,
service, maintenance or any other similar agreements pertaining to use or
occupation of, or the rendering of services at the Land, the Improvements or any
part thereof.
"Space Lessee(s)" means any and all tenants, licensees, or other grantees
of the Space Leases and any and all guarantors, sureties, endorsers or others
having primary or secondary liability with respect to such Space Leases.
"Tangible Collateral" means all personal property, goods, equipment,
supplies, building and other materials of every nature whatsoever and all other
tangible personal property constituting a part or portion of the Project and/or
used in the operation of the hotel, casino, restaurants, stores, parking
facilities, observation tower and all other commercial operations on the Land or
Improvements, including but not limited to communication systems, visual and
electronic surveillance systems and transportation systems and not constituting
a part of the real property subject to the real property lien of this Deed of
Trust and including all property and materials stored therein in which Trustor
has an interest and all tools, utensils, food and beverage, liquor, uniforms,
linens, housekeeping and maintenance supplies, vehicles, fuel, advertising and
promotional material, blueprints, surveys, plans
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and other documents relating to the Land or Improvements, and all construction
materials and all furnishings, fixtures and equipment, including, but not
limited to, all FF&E and all equipment and devices which are or are to be
installed and used in connection with the operation of the Project, those items
of furniture, fixtures and equipment which are to be purchased or leased by
Trustor, machinery and any other item of personal property in which Trustor now
or hereafter own or acquire an interest or right, and which are used or useful
in the construction, operation, use and occupancy of the Project and all present
and future right and interest of Trustor in and to any casino operator's
agreement, license agreement or sublease agreement used in connection with the
Land or the Improvements.
"Title Insurer" means Lawyers Title of Nevada, Inc., a Nevada corporation.
"Trust Estate" means all of the property described in Granting Clauses (A)
through (O) below, inclusive, and each item of property therein described,
provided, however, that such term shall not include the property described in
Granting Clause (P) below.
"UCC" means the Uniform Commercial Code in effect in the State of Nevada
from time to time, NRS chapters 104 and 104A.
The following terms shall have the meaning assigned to such terms in the
Funding Agents' Disbursement and Administration Agreement:
Cooperation Agreement
Environmental Laws
Financing Agreements
Gaming Control Acts
Intercreditor Agreement
HVAC Component
Lender
Mortgage Notes Indenture Security Documents
Mortgage Note Holder(s)
VCR Permitted Encumbrances
Plans and Specifications
Security Documents
The following terms shall have the meaning assigned to such terms in the
Mortgage Notes Indenture:
Affiliate
Gaming Authority
Gaming License
Issuance Date
Lease Transaction
Lien
Permitted Liens
Person
In addition, any capitalized terms used in this Deed of Trust which are not
otherwise defined herein shall have the meaning ascribed to such terms in the
Funding Agents' Disbursement and Administration Agreement and, if not defined
therein, the meaning ascribed to such terms in the Mortgage Notes Indenture.
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W I T N E S E T H:
IN CONSIDERATION OF TEN DOLLARS AND OTHER GOOD AND VALUABLE CONSIDERATION;
THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, AND FOR THE
PURPOSE OF SECURING in favor of Beneficiary (1) the due and punctual payment of
the indebtedness evidenced by the Notes; (2) the performance of each covenant
and agreement of Trustor contained in the Mortgage Notes Indenture, herein, in
the Mortgage Notes Indenture Security Documents, each other Security Document
granting a security interest for the benefit of the Beneficiary is a party and
the Funding Agents' Disbursement and Administration Agreement; (3) the payment
of such additional loans or advances as hereafter may be made to Trustor
(individually or jointly and severally with any other Person) or its successors
or assigns, when evidenced by a promissory note or notes reciting that they are
secured by this Deed of Trust; provided, however, that any and all future
advances by Beneficiary to Trustor made for the improvement, protection or
preservation of the Trust Estate, together with interest at the rate applicable
to overdue principal set forth in Section 4.01 of the Mortgage Notes Indenture,
shall be automatically secured hereby unless such a note or instrument
evidencing such advances specifically recites that it is not intended to be
secured hereby and (4) the payment of all sums expended or advanced by
Beneficiary under or pursuant to the terms hereof or to protect the security
hereof (including Protective Advances as such term is defined in Section 4.2
hereof), together with interest thereon as herein provided, Trustor, in
consideration of the premises, and for the purposes aforesaid, does hereby
ASSIGN, BARGAIN, CONVEY, PLEDGE, RELEASE, HYPOTHECATE, WARRANT, AND TRANSFER
WITH POWER OF SALE UNTO TRUSTEE IN TRUST FOR THE BENEFIT OF BENEFICIARY, AND THE
MORTGAGE NOTE HOLDER(S) each of the following:
(A) The Land;
(B) TOGETHER WITH all the estate, right, title and interest of Trustor of,
in and to the Improvements;
(C) TOGETHER WITH all Appurtenant Rights;
(D) TOGETHER WITH all the estate, right, title and interests of Trustor
of, in and to the Tangible Collateral to the extent permitted by, or
not prohibited by, Gaming Control Laws and other applicable law;
(E) TOGETHER WITH the Intangible Collateral to the extent permitted by, or
not prohibited by, Gaming Control Laws and other applicable law;
(F) TOGETHER WITH (i) all the estate, right, title and interest of Trustor
of, in and to all judgments and decrees, insurance proceeds, awards of damages
and settlements hereafter made resulting from condemnation proceedings or the
taking of any of the property described in Granting Clauses (A), (B), (C), (D)
and (E) hereof or any part thereof under the power of eminent domain, or for any
damage (whether caused by such taking or otherwise) to the property described in
Granting Clauses (A), (B), (C), (D) and (E) hereof or any part thereof, or to
any Appurtenant Rights thereto, and Beneficiary is (subject to the terms hereof)
hereby authorized to collect and receive said awards and proceeds and to give
proper receipts and acquittance therefor, and (subject to the terms hereof) to
apply the same toward the payment of the indebtedness and other sums secured
hereby, notwithstanding the fact that the amount owing thereon may not then be
due and payable; (ii) all proceeds of any sales or other
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dispositions of the property or rights described in Granting Clauses (A),
(B), (C), (D) and (E) hereof or any part thereof whether voluntary or
involuntary, provided, however, that the foregoing shall not be deemed to permit
such sales, transfers, or other dispositions except as specifically permitted
herein; and (iii) whether arising from any voluntary or involuntary disposition
of the property described in Granting Clauses (A), (B), (C), (D) and (E), all
Proceeds, products, replacements, additions, substitutions, renewals and
accessions, remainders, reversions and after-acquired interest in, of and to
such property;
(G) TOGETHER WITH the absolute assignment of any Space Leases (except with
respect to the absolute assignment of the Casino Lease (as such term is defined
in the Funding Agents' Disbursement and Administration Agreement), which may be
subject to Gaming Control Laws and other applicable law) or any part thereof
that Trustor has entered into, taken by assignment, taken subject to, or
assumed, or has otherwise become bound by, now or in the future, together with
all of the following (including all "Cash Collateral" within the meaning of the
Bankruptcy Law) arising from the Space Leases: (a) Rents (subject, however, to
the aforesaid absolute assignment to Trustee for the benefit of Beneficiary and
the conditional permission hereinbelow given to Trustor to collect the Rents),
(b) all guarantees, letters of credit, security deposits, collateral, cash
deposits, and other credit enhancement documents, arrangements and other
measures with respect to the Space Leases, (c) all of Trustor's right, title,
and interest under the Space Leases, including the following: (i) the right to
receive and collect the Rents from the lessee, sublessee or licensee, or their
successor(s), under any Space Lease(s) and (ii) the right to enforce against any
tenants thereunder and otherwise any and all remedies under the Space Leases,
including Trustor's right to evict from possession any tenant thereunder or to
retain, apply, use, draw upon, pursue, enforce or realize upon any guaranty of
any Space Lease; to terminate, modify, or amend the Space Leases; to obtain
possession of, use, or occupy, any of the real or personal property subject to
the Space Leases; and to enforce or exercise, whether at law or in equity or by
any other means, all provisions of the Space Leases and all obligations of the
tenants thereunder based upon (A) any breach by such tenant under the applicable
Space Lease (including any claim that Trustor may have by reason of a
termination, rejection, or disaffirmance of such Space Lease pursuant to any
Bankruptcy Law) and (B) the use and occupancy of the premises demised, whether
or not pursuant to the applicable Space Lease (including any claim for use and
occupancy arising under landlord-tenant law of the State of Nevada or any
Bankruptcy Law). Permission is hereby given to Trustor, so long as no Event of
Default has occurred and is continuing hereunder, to collect and use the Rents,
as they become due and payable, but not more than one (1) month in advance
thereof. Upon the occurrence of an Event of Default, the permission hereby given
to Trustor to collect the Rents shall automatically terminate, but such
permission shall be reinstated upon a cure of such Event of Default. Beneficiary
shall have the right, at any time and from time to time, to notify any Space
Lessee of the rights of Beneficiary as provided by this section;
Notwithstanding anything to the contrary contained herein, the foregoing
provisions of this Paragraph (G) shall not constitute an assignment for purposes
of security but shall constitute an absolute and present assignment of the Rents
to Beneficiary (except with respect to the absolute and present assignment of
the Rents from the Casino Lease, which may be subject to Gaming Control Laws and
other applicable law), subject, however, to the conditional license given to
Trustor to collect and use the Rents as hereinabove provided; and the existence
or exercise of such right of Trustor shall not operate to subordinate this
assignment to any subsequent assignment, in whole or in part, by Trustor;
(H) TOGETHER WITH all of Trustor's right, title and interest in and to any
and all Plans and Specifications and all maps, plans, specifications, surveys,
studies, tests, reports, data and drawings relating to the development of the
Land or the Project and the construction of the Improvements, including, without
limitation, all marketing plans, feasibility studies, soils tests, design
contracts and all contracts and agreements of Trustor relating thereto
including, without limitation,
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architectural, structural, mechanical and engineering plans and specifications,
studies, data and drawings prepared for or relating to the development of the
Land or the Project or the construction, renovation or restoration of any of the
Improvements or the extraction of minerals, sand, gravel or other valuable
substances from the Land and purchase contracts or any agreement granting
Trustor a right to acquire any land situated within Clark County, Nevada;
(I) TOGETHER WITH, to the extent permitted by applicable law, all of
Trustor's right, title, and interest in and to any and all licenses, permits,
variances, special permits, franchises, certificates, rulings, certifications,
validations, exemptions, filings, registrations, authorizations, consents,
approvals, waivers, orders, rights and agreements (including, without
limitation, options, option rights, contract rights now or hereafter obtained by
Trustor from any Governmental Authority having or claiming jurisdiction over the
Land, the FF&E, the Project, or any other element of the Trust Estate or
providing access thereto, or the operation of any business on, at, or from the
Land including, without limitation, any liquor or Gaming Licenses (except for
any registrations, licenses, findings of suitability or approvals issued by the
Nevada Gaming Authorities or any other liquor or gaming licenses which are
non-assignable); provided, that upon an Event of Default hereunder or under the
Mortgage Notes Indenture, if Beneficiary is not qualified under the Gaming
Control Laws to hold such Gaming Licenses, then Beneficiary may designate an
appropriately qualified third party to which an assignment of such Gaming
Licenses can be made in compliance with the Gaming Control Laws;
(J) TOGETHER WITH all water stock, water permits and other water rights
relating to the Land;
(K) TOGETHER WITH all oil and gas and other mineral rights, if any, in or
pertaining to the Land and all royalty, leasehold and other rights of Trustor
pertaining thereto;
(L) TOGETHER WITH any and all monies and other property, real or personal,
which may from time to time be subjected to the lien hereof by Trustor or by
anyone on its behalf or with its consent, or which may come into the possession
or be subject to the control of Trustee or Beneficiary pursuant to this Deed of
Trust, any Mortgage Notes Indenture Security Document or any other Security
Document granting a security interest to the Beneficiary, including, without
limitation, any Protective Advances (as defined in Section 4.2 hereof) under
this Deed of Trust; and all of Trustor's right, title, and interest in and to
all extensions, improvements, betterments, renewals, substitutes for and
replacements of, and all additions, accessions, and appurtenances to, any of the
foregoing that Trustor may subsequently acquire or obtain by any means, or
construct, assemble, or otherwise place on any of the Trust Estate, and all
conversions of any of the foregoing; it being the intention of Trustor that all
property hereafter acquired by Trustor and required by any Mortgage Notes
Indenture Security Document, this Deed of Trust or any other Security Document
granting a security interest to the Beneficiary to be subject to the lien of
this Deed of Trust or intended so to be shall forthwith upon the acquisition
thereof by Trustor be subject to the lien of this Deed of Trust as if such
property were now owned by Trustor and were specifically described in this Deed
of Trust and granted hereby or pursuant hereto, and Trustee and Beneficiary are
hereby authorized, subject to Gaming Control Laws and other applicable laws, to
receive any and all such property as and for additional security for the
obligations secured or intended to be secured hereby. Trustor agrees to take any
action as may reasonably be necessary to evidence and perfect such liens or
security interests, including, without limitation, the execution of any
documents necessary to evidence and perfect such liens or security interests;
(M) TOGETHER WITH, to the extent permitted by applicable laws, any and all
Accounts Receivable and all royalties, earnings, income, proceeds, products,
rents, revenues, reversions, remainders, issues, profits, avails, production
payments, and other benefits directly or
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indirectly derived or otherwise arising from any of the foregoing, all of which
are hereby assigned to Beneficiary, who, except as otherwise expressly provided
in this Deed of Trust (including the provisions of Section 1.13 hereof), is
authorized to collect and receive the same, to give receipts and acquittances
therefor and to apply the same to the Obligations secured hereunder, whether or
not then due and payable;
(N) TOGETHER WITH Proceeds of the foregoing property described in Granting
Clauses (A) through (M);
(O) TOGETHER WITH Trustor's rights further to assign, sell, lease,
encumber or otherwise transfer or dispose of the property described in Granting
Clauses (A) through (N) inclusive, above, for debt or otherwise; and
(P) EXPRESSLY EXCLUDING, HOWEVER, (i) FF&E and items described in clause
(2) of the definition of Improvements (to the extent that (a) such FF&E and
items described in clause (2) of the definition of Improvements were financed
through an FF&E Financing Agreement which together with all other FF&E Financing
Agreements shall be in an aggregate amount not to exceed $100,000,000 and (b)
such FF&E Financing Agreement prohibits the Beneficiary and the Mortgage Note
Holder(s) under the Mortgage Notes Indenture from maintaining a security
interest in the FF&E and items described in clause (2) of the definition of
Improvements covered thereby); (ii) any other assets expressly excluded from the
definition of "Note Collateral" in the Mortgage Notes Indenture; and (iii) the
HVAC Component.
Trustor, for itself and its successors and assigns, covenants and agrees
to and with Trustee that, at the time or times of the execution of and delivery
of these presents or any instrument of further assurance with respect thereto,
Trustor has good right, full power and lawful authority to assign, grant,
convey, warrant, transfer, bargain or sell its interests in the Trust Estate in
the manner and form as aforesaid, and that the Trust Estate is free and clear of
all liens and encumbrances whatsoever, except Permitted Liens, and Trustor shall
warrant and forever defend the above-bargained property in the quiet and
peaceable possession of Trustee and its successors and assigns against all and
every person or persons lawfully or otherwise claiming or to claim the whole or
any part thereof, except for Permitted Liens. Trustor agrees that any greater
title to the Trust Estate hereafter acquired by Trustor during the term hereof
shall be automatically subject hereto.
ARTICLE ONE
COVENANTS OF TRUSTOR
The Mortgage Note Holder(s) have been induced to purchase the Notes on the
basis of the following material covenants, all agreed to by Trustor:
1.1 Performance of Financing Agreements. Trustor shall perform, observe
and comply with each and every provision hereof, and with each and every
provision contained in the Financing Agreements and shall promptly pay to the
respective Funding Agents, when payment shall become due, the principal with
interest thereon and all other sums required to be paid by Trustor under this
Deed of Trust and the other Financing Agreements.
1.2 General Representations, Covenants and Warranties. Trustor represents,
covenants and warrants that: (a) Trustor has good and marketable title to an
indefeasible fee estate in
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the Land, free and clear of all encumbrances except VCR Permitted Encumbrances,
and that it has the right to hold, occupy and enjoy its interest in the Trust
Estate, and has good right, full power and lawful authority to subject the Trust
Estate to the Lien of this Deed of Trust and pledge the same as provided herein
and Beneficiary may at all times peaceably and quietly enter upon, hold, occupy
and enjoy the entire Trust Estate in accordance with the terms hereof; (b)
Trustor is not Insolvent and no bankruptcy or insolvency proceedings are pending
or contemplated by or, to the best of Trustor's knowledge, threatened against
Trustor; (c) all costs arising from construction of any Improvements, the
performance of any labor and the purchase of all Tangible Collateral and
Improvements have been or shall be paid when due (subject to the provisions of
the Funding Agents' Disbursement and Administration Agreement, the Mortgage
Notes Indenture and this Deed of Trust); (d) the Land has frontage on, and
direct access for ingress and egress to dedicated street(s); (e) Trustor shall
at all times conduct and operate the Trust Estate in a manner so as not to lose,
or permit its affiliate to lose, the right to conduct gaming activities at the
Project; (f) no material part of the Trust Estate has been damaged, destroyed,
condemned or abandoned, other than those portions of the Trust Estate that have
been the subject of condemnation proceedings that have resulted in the
conveyance of such portion of the Trust Estate to the Trustor; (g) no part of
the Trust Estate is the subject of condemnation proceedings, other than
condemnation proceedings to convey Land to the Trustor, and Trustor has no
knowledge of any contemplated or pending condemnation proceeding with respect to
any portion of the Trust Estate other than condemnation proceedings to convey
Land to the Trustor and other than those proceedings set forth in Schedule C
attached hereto; and (h) Trustor acknowledges and agrees that it presently uses,
and has in the past used, certain trade or fictitious names in connection with
the operation of the business at the Trust Estate, including the names listed on
Schedule D attached hereto (all of the foregoing, collectively, the "Enumerated
Names"). For all purposes under this Deed of Trust it shall be deemed that the
term "Trustor" includes, in addition to "Venetian Casino Resort, LLC" and "Las
Vegas Sands, Inc." all trade or fictitious names that Venetian Casino Resort,
LLC or Las Vegas Sands, Inc. (or any successor or assign thereof) now or
hereafter uses, or has in the past used, including, without limitation, the
Enumerated Names, with the same force and effect as if this Deed of Trust had
been executed in all such names (in addition to "Venetian Casino Resort, LLC"
and "Las Vegas Sands, Inc.").
1.3 Compliance with Legal Requirements. Trustor shall promptly, fully, and
faithfully comply in all material respects with all Legal Requirements and shall
cause all portions of the Trust Estate and its use and occupancy to fully comply
in all material respects with Legal Requirements at all times, whether or not
such compliance requires work or remedial measures that are ordinary or
extraordinary, foreseen or unforeseen, structural or nonstructural, or that
interfere with the use or enjoyment of the Trust Estate.
1.4 Taxes. Except as otherwise permitted by Section 4.05 of the Mortgage
Notes Indenture and Section 4.10 of the Funding Agents' Disbursement and
Administration Agreement, (a) Trustor shall pay all Impositions as they become
due and payable and shall deliver to Beneficiary promptly upon Beneficiary's
request, evidence satisfactory to Beneficiary that the Impositions have been
paid or are not delinquent; (b) Trustor shall not suffer to exist, permit or
initiate the joint assessment of the real and personal property, or any other
procedure whereby the lien of the real property taxes and the lien of the
personal property taxes shall be assessed, levied or charged to the Land as a
single lien, except as may be required by law; and (c) in the event of the
passage of any law deducting from the value of real property for the purposes of
taxation any lien thereon, or changing in any way the taxation of deeds of trust
or obligations secured thereby for state or local purposes, or the manner of
collecting such taxes and imposing a tax, either directly or indirectly, on this
Deed of Trust or the Notes, Trustor shall pay all such taxes and all payments
required with respect to taxes pursuant to the terms of the Cooperation
Agreement (including, without limitation, Article VI thereof).
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1.5 Insurance.
(a) Hazard Insurance Requirements and Proceeds.
(1) Hazard Insurance. Trustor shall at its sole expense obtain
for, deliver to, assign and maintain for the benefit of Beneficiary, during the
term of this Deed of Trust, insurance policies insuring the Trust Estate and
liability insurance policies, all in accordance with the requirements of Section
4.20 of the Mortgage Notes Indenture, Section 5.19 of the Funding Agents'
Disbursement and Administration Agreement, while in effect, and Article X of the
Cooperation Agreement. Trustor shall pay promptly when due any premiums on such
insurance policies and on any renewals thereof and all payments required with
respect to the procurement of insurance pursuant to the terms of the Cooperation
Agreement (including, without limitation, Article VI thereof). In the event of
the foreclosure of this Deed of Trust or any other transfer of title to the
Trust Estate in partial or complete extinguishment of the indebtedness and other
sums secured hereby, all right, title and interest of Beneficiary in and to all
insurance policies and renewals thereof then in force shall pass to the
purchaser or grantee.
(2) Handling of Proceeds. All Proceeds from any insurance policies
shall be collected, held, handled and disbursed in accordance with the
provisions of Section 5.20 of the Funding Agents' Disbursement and
Administration Agreement, while in effect, and thereafter in accordance with
Articles X and XI of the Cooperation Agreement. Beneficiary shall have the right
to apply toward payment of all Obligations (to the extent then due and payable)
any insurance proceeds which (a) arise out of damage to property of the Trustor
(including without limitation any insurance proceeds recovered under the
policies of insurance maintained pursuant to Article X Section 2(A)(iv), (v) or
(vi) or Article X Section 2(B)(v) or (vi) of the Cooperation Agreement), (b) are
allocable to Trustor, and (c) are not required to be applied toward restoration
of the improvements on the Land pursuant to the terms of the Cooperation
Agreement. All proceeds of insurance allocable to Trustor, as owner of the Land,
and attributable to business interruption insurance shall be collected, held,
handled and disbursed in accordance with the provisions of Section 5.20 of the
Funding Agents' Disbursement and Administration Agreement, while in effect, and
thereafter, in accordance with the Cooperation Agreement. Any such proceeds
disbursed to Beneficiary shall be applied to pay amounts then due and payable
under this Deed of Trust. The balance shall be retained by Beneficiary or its
designee in an interest bearing or other investment account approved by
Beneficiary, which account Trustor hereby pledges to Beneficiary to secure the
Obligations. Disbursements shall be permitted from such account to pay expenses
reasonably incurred by Trustor in owning and operating the Trust Estate, as
reasonably approved by Beneficiary.
(b) Compliance with Insurance Policies. Trustor shall not violate or
permit to be violated any of the conditions or provisions of any policy of
insurance required by the Mortgage Notes Indenture, the Funding Agents'
Disbursement and Administration Agreement (while in effect), the Cooperation
Agreement or this Deed of Trust and Trustor shall so perform and satisfy the
requirements of the companies writing such policies that, at all times,
companies of good standing shall be willing to write and/or continue such
insurance. Trustor further covenants to promptly send to Beneficiary all notices
relating to any violation of such policies or otherwise affecting Trustor's
insurance coverage or ability to obtain and maintain such insurance coverage.
1.6 Condemnation. Subject to Article XII of the Cooperation Agreement,
Beneficiary is hereby authorized, at its option, to commence, appear in and
prosecute in its own or Trustor's name any action or proceeding relating to any
condemnation and to settle or compromise any claim in connection therewith, and
Trustor hereby appoints Beneficiary as its attorney-in-fact to take any action
in Trustor's name pursuant to Beneficiary's rights hereunder. Immediately upon
obtaining
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knowledge of the institution of any proceedings for the condemnation of the
Trust Estate or any portion thereof, Trustor shall notify the Trustee and
Beneficiary of the pendency of such proceedings. Trustor from time to time shall
execute and deliver to Beneficiary all instruments requested by it to permit
such participation; provided, however, that such instruments shall be deemed as
supplemental to the foregoing grant of permission to Trustee and Beneficiary,
and unless otherwise required, the foregoing permission shall, without more, be
deemed sufficient to permit Trustee and/or Beneficiary to participate in such
proceedings on behalf of Trustor. All such compensation awards, damages, claims,
rights of action and Proceeds, and any other payments or relief, and the right
thereto, are, whether paid to Beneficiary or Trustor or a third party trustee,
included in the Trust Estate. Beneficiary, after deducting therefrom all its
expenses, including reasonable attorneys fees, shall apply all Proceeds paid
directly to it in accordance with the provisions of Section 4.11 of the Mortgage
Notes Indenture. All Proceeds paid directly to the Trustor shall be applied in
accordance with Section 5.20 of the Funding Agents' Disbursement and
Administration Agreement, while in effect, and thereafter in accordance with
Article XII of the Cooperation Agreement. To the extent that any condemnation
proceeds are not required to be applied towards restoration of the improvements
upon the Land, then Beneficiary shall have the right to apply said condemnation
proceeds towards repayment of the Obligations. Trustor hereby waives any rights
it may have under NRS 37.115, as amended or recodified from time to time.
1.7 Care of Trust Estate.
(a) Trustor shall preserve and maintain the Trust Estate in good
condition and repair. Trustor shall not permit, commit or suffer to exist any
waste, impairment or deterioration of the Trust Estate or of any part thereof
that in any manner materially impairs Beneficiary's security hereunder and shall
not take any action which will materially increase the risk of fire or other
hazard to the Trust Estate or to any part thereof.
(b) Except for Permitted Dispositions, no material part of the
Improvements or Tangible Collateral that are part of the Trust Estate shall be
removed, demolished or materially altered, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed.
Trustor shall have the right, without such consent, to remove and dispose of
free from the lien of this Deed of Trust any part of the Improvements or
Tangible Collateral that are part of the Trust Estate as from time to time may
become worn out or obsolete or otherwise not useful in connection with the
operation of the Trust Estate, provided that either (i) such removal or
disposition does not materially affect the value of the Trust Estate or (ii)
prior to or promptly following such removal, any such property shall be replaced
with other property of substantially equal utility and of a value at least
substantially equal to that of the replaced property when first acquired and
free from any security interest of any other person (subject only to Permitted
Liens), and by such removal and replacement Trustor shall be deemed to have
subjected such replacement property to the lien of this Deed of Trust.
(c) Notwithstanding the foregoing provisions of this Section 1.7, the
Trustor may develop the Project in the manner contemplated by the Funding
Agents' Disbursement and Administration Agreement, the Mortgage Notes Indenture,
the other Financing Agreements and the Cooperation Agreement.
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1.8 Leases
(a) Trustor represents and warrants that:
(i) Trustor has delivered to Beneficiary true, correct and
complete copies of all Space Leases, including all amendments and modifications,
written or oral existing as of the Issuance Date;
(ii) Trustor has not executed or entered into any modifications or
amendments of the Space Leases, either orally or in writing, other than written
amendments that have been disclosed to Beneficiary in writing;
(iii) to Trustor's knowledge, no default now exists under any
Space Lease;
(iv) to Trustor's knowledge, no event has occurred that, with the
giving of notice or the passage of time or both, would constitute such a default
or would entitle Trustor or any other party under such Space Lease to cancel the
same or otherwise avoid its obligations;
(v) Trustor has not accepted prepayments of installments of Rent
under any Space Leases, except for installment payments not in excess of one
month's Rent and security deposits;
(vi) except for the assignment effected hereby and in the other
Financing Agreements, Trustor has not executed any assignment or pledge of any
of Space Leases, the Rents, or of Trustor's right, title and interest in the
same; and
(vii) this Deed of Trust does not constitute a violation or
default under any Space Lease, and is and shall at all times constitute a valid
lien on Trustor's interests in the Space Leases.
(b) Trustor shall not enter into any Lease Transaction unless such
Lease Transaction complies with the requirements of Sections 4.24 of the
Mortgage Notes Indenture.
(c) After an Event of Default, Trustor shall deliver to Beneficiary
the executed originals of all Space Leases.
1.9 Further Encumbrance.
(a) Trustor covenants that at all times prior to the discharge of the
Mortgage Notes Indenture and the Notes, except for Permitted Liens and Permitted
Dispositions, Trustor shall neither make nor suffer to exist, nor enter into any
agreement for, any sale, assignment, exchange, mortgage, transfer, Lien,
hypothecation or encumbrance of all or any part of the Trust Estate, including,
without limitation, the Rents. As used herein, "transfer" includes the actual
transfer or other disposition, whether voluntary or involuntary, by law, or
otherwise, except those transfers specifically permitted herein, provided,
however, that "transfer" shall not include the granting of utility or other
beneficial easements with respect to the Trust Estate which have been or are
granted by Trustor and are reasonably necessary to the construction, maintenance
or operation of the Project.
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(b) Any Permitted Lien consisting of the lien of a deed of trust which
is junior to the lien of the Mortgage Notes Indenture Security Documents, or any
other Security Document granting a security interest for the benefit of the
Mortgage Notes Indenture Trustee (a "Subordinate Deed of Trust") shall be
permitted hereunder so long as there shall have been delivered to Beneficiary,
not less than thirty (30) days prior to the date thereof, a copy thereof which
shall contain express covenants in form and substance satisfactory to
Beneficiary to the effect that: (i) the Subordinate Deed of Trust is in all
respects subject and subordinate to this Deed of Trust; (ii) if any action or
proceeding shall be brought to foreclose the Subordinate Deed of Trust
(regardless of whether the same is a judicial proceeding or pursuant to a power
of sale contained therein), no tenant of any portion of the Trust Estate shall
be named as a party defendant nor shall any action be taken with respect to the
Trust Estate which would terminate any occupancy or tenancy of the Trust Estate,
or any portion thereof, without the consent of Beneficiary; (iii) any Rents, if
collected through a receiver or by the holder of the Subordinate Deed of Trust,
shall be applied first to the obligations secured by this Deed of Trust,
including principal and interest due and owing on or to become due and owing on
the Notes, and then to the payment of maintenance expenses, operating charges,
taxes, assessments, and disbursements incurred in connection with the ownership,
operation, and maintenance of the Trust Estate; and (iv) if any action or
proceeding shall be brought to foreclose the Subordinate Deed of Trust, prompt
notice of the commencement thereof shall be given to Beneficiary. The provisions
of this Section 1.9 (b) shall not apply to the Interim Mall Space Fee Deed of
Trust.
(c) Trustor agrees that in the event the ownership of the Trust Estate
or any part thereof becomes vested in a person other than Trustor, Beneficiary
may, without notice to Trustor, deal in any way with such successor or
successors in interest with reference to this Deed of Trust, the Notes and other
Obligations hereby secured without in any way vitiating or discharging Trustor's
or any guarantor's, surety's or endorser's liability hereunder or upon the
obligations hereby secured. No sale of the Trust Estate and no forbearance to
any person with respect to this Deed of Trust and no extension to any person of
the time for payment of the Notes, and other sums hereby secured given by
Beneficiary shall operate to release, discharge, modify, change or affect the
original liability of Trustor, or such guarantor, surety or endorser either in
whole or in part.
(d) Trustor covenants and agrees to comply with all of the terms and
conditions set forth in any FF&E Financing Agreement. If Trustor shall fail to
make any payment required to be made by it under any FF&E Financing Agreement,
except where Trustor is contesting such payment in good faith, then the
Beneficiary shall be entitled to make such payment on Trustor's behalf and any
and all sums so expended by the Beneficiary shall be secured by this Deed of
Trust and shall be repaid by Trustor upon demand, together with interest thereon
at the interest at the rate applicable to overdue principal set forth in Section
4.01 of the Mortgage Notes Indenture from the date of advance.
1.10 Partial Releases of Trust Estate.
(a) Trustor may from time to time make a Permitted Disposition
including, but not limited to, (i) transferring a portion of the Trust Estate
(including any temporary taking) to any person legally empowered to exercise the
power of eminent domain, (ii) granting utility easements reasonably necessary or
desirable for the construction and/or operation of the Project, which grant or
transfer is for the benefit of the Trust Estate, or (iii) transferring a portion
of the Trust Estate as permitted pursuant to Sections 5.16 (b), (c) and (d) of
the Funding Agents' Disbursement and Administration Agreement. In each such
case, Beneficiary shall execute and deliver any instruments necessary or
appropriate to effectuate or confirm any such transfer or grant, free from the
lien of this Deed of Trust, provided, however, that Beneficiary shall execute a
lien release or subordination agreement, as appropriate, for matters described
in clauses (i) and (iii) above only if:
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(A) Beneficiary and Trustee shall have received an
Officer's Certificate if required by Section 4.10 of the Mortgage
Notes Indenture;
(B) Such transfer, grant or release is not prohibited by
the Mortgage Notes Indenture and all conditions precedent
contained in the Mortgage Notes Indenture for such transfer,
grant or release, if any, shall have been satisfied;
(C) Beneficiary and Trustee shall have received a
counterpart of the instrument pursuant to which such transfer,
grant or release is to be made, and each instrument which
Beneficiary or Trustee is requested to execute in order to
effectuate or confirm such transfer, grant or release;
(D) In the case of a transfer to a person legally
empowered to exercise the power of eminent domain, which transfer
involves property whose value is greater than $5,000,000,
Beneficiary and Trustee shall have received an opinion of
counsel, who may be counsel to Trustor, to the effect that the
assignee or grantee of the portion of the Trust Estate being
transferred is legally empowered to take such portion under the
power of eminent domain; and
(E) Beneficiary and Trustee shall have received such
other instruments, certificates (including evidence of authority)
and opinions as Beneficiary or Trustee may reasonably request,
including, but not limited to, opinions that the proposed release
is permitted by this Section 1.10.
(b) Any consideration received for a transfer to any person
empowered to exercise the right of eminent domain shall be subject to Section
1.6 hereof.
1.11 Further Assurances.
(a) At its sole cost and without expense to Trustee or Beneficiary,
and subject in all events to compliance with the Gaming Control Laws and other
applicable Legal Requirements, Trustor shall do, execute, acknowledge and
deliver any and all such further acts, deeds, conveyances, notices, requests for
notices, financing statements, continuation statements, certificates,
assignments, notices of assignments, agreements, instruments and further
assurances, and shall mark any chattel paper, deliver any chattel paper or
instruments to Beneficiary and take any other actions that are necessary,
prudent, or reasonably requested by Beneficiary or Trustee to perfect or
continue the perfection and first priority of Beneficiary's security interest in
the Trust Estate, to protect the Trust Estate against the rights, claims, or
interests of third persons other than holders of Permitted Liens or to effect
the purposes of this Deed of Trust, including the security agreement and the
absolute assignment of Rents contained herein, or for the filing, registering or
recording thereof.
(b) Trustor shall forthwith upon the execution and delivery of this
Deed of Trust, and thereafter from time to time, cause this Deed of Trust and
each instrument of further assurance to be filed, indexed, registered, recorded,
given or delivered in such manner and in such places as may be required by any
present or future law in order to publish notice of and fully to protect the
lien hereof upon, and the title of Trustee and/or Beneficiary to, the Trust
Estate.
1.12 Security Agreement and Financing Statements.
Trustor (as debtor) hereby grants to Beneficiary (as creditor and
secured party) a present and future security interest in all Tangible
Collateral, Intangible Collateral, FF&E (to the extent Beneficiary is not
prohibited, in each applicable
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FF&E Financing Agreement, to maintain a security interest therein), Improvements
(to the extent, in the case of Improvements described in clause (2) of the
definition thereof, that Beneficiary is not prohibited in each applicable FF&E
Financing Agreement covering such Improvements, to maintain a security interest
therein), all other personal property now or hereafter owned or leased by
Trustor or in which Trustor has or will have any interest, to the extent that
such property constitutes a part of the Trust Estate (whether or not such items
are stored on the premises or elsewhere), Proceeds of the foregoing comprising a
portion of the Trust Estate and all proceeds of insurance policies and
consideration awards arising therefrom and all proceeds, products,
substitutions, and accessions therefor and thereto, subject to Beneficiary's
rights to treat such property as real property as herein provided (collectively,
the "Personal Property"). Trustor shall execute any and all documents and
writings, including without limitation financing statements pursuant to the UCC,
as may be necessary or prudent to preserve and maintain the priority of the
security interest granted hereby on property which may be deemed subject to the
foregoing security agreement or as Beneficiary may reasonably request, and shall
pay to Beneficiary on demand any reasonable expenses incurred by Beneficiary in
connection with the preparation, execution and filing of any such documents.
Trustor hereby authorizes and empowers Beneficiary to execute and file, on
Trustor's behalf, all financing statements and refiling and continuations
thereof as advisable to create, preserve and protect said security interest.
This Deed of Trust constitutes both a real property deed of trust and a
"security agreement," within the meaning of the UCC, and the Trust Estate
includes both real and personal property and all other rights and interests,
whether tangible or intangible in nature, of Trustor in the Trust Estate.
Trustor by executing and delivering this Deed of Trust has granted to
Beneficiary, as security of the Obligations, a security interest in the Trust
Estate.
(a) Fixture Filing. Without in any way limiting the generality
of the immediately preceding paragraph or of the definition of the Trust Estate,
this Deed of Trust constitutes a fixture filing under Sections 9-313 and 9-402
of the UCC (NRS 104.9313 and 104.9402). For such purposes, (i) the "debtor" is
Trustor and its address is the address given for it in the initial paragraph of
this Deed of Trust; (ii) the "secured party" is Beneficiary, and its address for
the purpose of obtaining information is the address given for it in the initial
paragraph of this Deed of Trust; (iii) the real estate to which the fixtures are
or are to become attached is Trustor's interest in the Land; and (iv) the record
owner of such real estate is Trustor.
(b) Remedies. This Deed of Trust shall be deemed a security
agreement as defined in the UCC and the remedies for any violation of the
covenants, terms and conditions of the agreements herein contained shall include
any or all of (i) those prescribed herein, and (ii) those available under
applicable law, and (iii) those available under the UCC, all at Beneficiary's
sole election. In addition, a photographic or other reproduction of this Deed of
Trust shall be sufficient as a financing statement for filing wherever filing
may be necessary to perfect or continue the security interest granted herein.
(c) Derogation of Real Property. It is the intention of the
parties that the filing of a financing statement in the records normally having
to do with personal property shall never be construed as in anyway derogating
from or impairing the express declaration and intention of the parties hereto as
hereinabove stated that everything used in connection with the production of
income from the Trust Estate and/or adapted for use therein and/or which is
described or reflected in this Deed of Trust is, and at all times and for all
purposes and in all proceedings both legal or equitable, shall be regarded as
part of the real property encumbered by this Deed of Trust irrespective of
whether (i) any such item is physically attached to the Improvements, (ii)
serial numbers are used for the better identification of certain equipment items
capable of being thus identified in a recital contained herein or in any list
filed with Beneficiary, or (iii) any such item is referred to or reflected in
any such financing statement so filedat any time. It is the intention of the
parties that the mention in any such financing statement of (1) rights
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in or to the proceeds of any fire and/or hazard insurance policy, or (2) any
award in eminent domain proceedings for a taking or for loss of value, or (3)
Trustor's interest as lessors in any present or future Space Lease or rights to
Rents, shall never be construed as in anyway altering any of the rights of
Beneficiary as determined by this Deed of Trust or impugning the priority of
Beneficiary's real property lien granted hereby or by any other recorded
document, but such mention in the financing statement is declared to be for the
protection of Beneficiary in the event any court or judge shall at any time hold
with respect to the matters set forth in the foregoing clauses (1), (2) and (3)
that notice of Beneficiary's priority of interest to be effective against a
particular class of persons, including but not limited to, the federal
government and any subdivisions or entity of the federal government, must be
filed in the UCC records.
(d) Priority; Permitted Financing of Tangible Collateral. All
Personal Property of any nature whatsoever which is subject to the provisions of
this security agreement shall be purchased or obtained by Trustor in its name
and free and clear of any lien or encumbrance, except for Permitted Liens and
the lien hereof, for use only in connection with the business and operation of
the Project, and shall be and at all times remain free and clear of any lease or
similar arrangement, chattel financing, installment sale agreement, security
agreement and any encumbrance of like kind, so that Beneficiary's security
interest shall attach to and vest in Trustor for the benefit of Beneficiary,
with the priority herein specified, immediately upon the installation or use of
the Personal Property at the Land and Trustor warrants and represents that
Beneficiary's security interest in the Personal Property is a validly attached
and binding security interest, properly perfected and prior to all other
security interests therein except as otherwise permitted in this Deed of Trust.
The foregoing shall not be construed as limiting Trustor's rights to transfer
Personal Property pursuant to Permitted Dispositions or to obtain releases of
Personal Property from the Lien of this Deed of Trust pursuant to Section 1.10
hereof.
(e) Preservation of Contractual Rights of Collateral. Trustor
shall, prior to delinquency, default, or forfeiture, perform all obligations and
satisfy all material conditions required on its part to be satisfied to preserve
its rights and privileges under any contract, lease, license, permit, or other
authorization (i) under which it holds any Tangible Collateral or (ii) which
constitutes part of the Intangible Collateral, except where Trustor is
contesting such obligations in good faith.
(f) Removal of Collateral. Except as permitted by the Funding
Agents' Disbursement and Administration Agreement (while in effect), and except
for damaged or obsolete Tangible Collateral which is either no longer usable or
which is removed temporarily for repair or improvement or removed for
replacement on the Trust Estate with Tangible Collateral of similar function or
as otherwise permitted herein, none of the Tangible Collateral shall be removed
from the Trust Estate without Beneficiary's prior written consent.
(g) Change of Name. Trustor shall not change its corporate or
business name, or do business within the State of Nevada under any name other
than such name, or any trade name(s) other than those as to which Trustor gives
prior written notice to Beneficiary of its intent to use such trade names, or
any other business names (if any) specified in the financing statements
delivered to Beneficiary for filing in connection with the execution hereof,
without providing Beneficiary with the additional financing statement(s) and any
other similar documents deemed reasonably necessary by Beneficiary to assure
that its security interest remains perfected and of undiminished priority in all
such Personal Property notwithstanding such name change.
1.13 Assignment of Leases and Rents. Subject to Gaming Control
Laws and other applicable Legal Requirements, the assignment of Leases and Rents
set out above in Granting Clause (G) shall constitute an absolute and present
assignment to Beneficiary, subject to the license herein given to
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Trustor to collect the Rents, and shall be fully operative without any further
action on the part of any party, and specifically Beneficiary shall be entitled
upon the occurrence of an Event of Default hereunder to all Rents and to enter
upon the Land and the Improvements to collect such Rents, provided, however,
that Beneficiary shall not be obligated to take possession of the Trust Estate,
or any portion thereof. The absolute assignment contained in Granting Clause (G)
shall not be deemed to impose upon Beneficiary any of the obligations or duties
of Trustor provided in any such Space Lease (including, without limitation, any
liability under the covenant of quiet enjoyment contained in any lease in the
event that any lessee shall have been joined as a party defendant in any action
to foreclose this Deed of Trust and shall have been barred and foreclosed
thereby of all right, title and interest and equity of redemption in the Trust
Estate or any part thereof).
1.14 Expenses.
(a) Trustor shall pay when due and payable all costs,
including without limitation, those reasonable appraisal fees, recording fees,
taxes, abstract fees, title policy fees, escrow fees, attorneys' and paralegal
fees, travel expenses, fees for inspecting architect(s) and engineer(s) and all
other reasonable costs and expenses of every character which may hereafter be
incurred by Beneficiary or any assignee of Beneficiary in connection with the
preparation and execution of amendments to the Mortgage Notes Indenture and the
Mortgage Notes Indenture Security Documents or instruments, agreements or
documents of further assurance, the funding of the indebtedness secured hereby,
and the enforcement of any Mortgage Notes Indenture Security Document; and
(b) Trustor shall, upon demand by Beneficiary, reimburse
Beneficiary or any assignee of Beneficiary for all such reasonable expenses
which have been incurred or which shall be incurred by it; and
(c) Trustor shall indemnify Beneficiary with respect to any
transaction or matter in any way connected with any portion of the Trust Estate,
this Deed of Trust, including any occurrence at, in, on, upon or about the Trust
Estate (including any personal injury, loss of life, or property damage), or
Trustor's use, occupancy, or operation of the Trust Estate, or the filing or
enforcement of any mechanic's lien, or otherwise caused in whole or in part by
any act, omission or negligence occurring on or at the Trust Estate, including
failure to comply with any Legal Requirement or with any requirement of this
Deed of Trust that applies to Trustor, except to the extent resulting from the
gross negligence, fraud or willful misconduct of Trustee or Beneficiary. If
Beneficiary is a party to any litigation as to which either Trustor is required
to indemnify Beneficiary (or is made a defendant in any action of any kind
against Trustor or relating directly or indirectly to any portion of the Trust
Estate) then, at Beneficiary's option, Trustor shall undertake Beneficiary's
defense, using counsel reasonably satisfactory to Beneficiary (and any
settlement shall be subject to Beneficiary's consent, which consent shall not be
unreasonably withheld), and in any case shall indemnify Beneficiary against such
litigation. Trustor shall pay all reasonable costs and expenses, including
reasonable legal costs, that Beneficiary pays or incurs in connection with any
such litigation. Any amount payable under any indemnity in this Deed of Trust
shall be a demand obligation, shall be added to, and become a part of, the
secured obligations under this Deed of Trust, shall be secured by this Deed of
Trust, and shall bear interest at the interest rate specified in the Mortgage
Notes Indenture. Such indemnity shall survive any release of this Deed of Trust
and any foreclosure.
1.15 Beneficiary's Cure of Trustor's Default. If Trustor defaults
hereunder in the payment of any tax, assessment, lien, encumbrance or other
Imposition, in its obligation to furnish insurance hereunder, or in the
performance or observance of any other covenant, condition or term of this Deed
of Trust or any other Financing Agreement or the Cooperation Agreement or any
FF&E
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Financing Agreement, Beneficiary may, but is not obligated to, to preserve
its interest in the Trust Estate, perform or observe the same, and all payments
made (whether such payments are regular or accelerated payments) and reasonable
costs and expenses incurred or paid by Beneficiary in connection therewith shall
become due and payable immediately. The amounts so incurred or paid by
Beneficiary, together with interest thereon at the interest rate applicable to
overdue principal set forth in Section 4.01 of the Mortgage Notes Indenture,
from the date incurred until paid by Trustor, shall be added to the indebtedness
and secured by the lien of this Deed of Trust. Beneficiary, is hereby empowered
to enter and to authorize others to enter upon the Land or any part thereof for
the purpose of performing or observing any such defaulted covenant, condition or
term, without thereby becoming liable to Trustor or any person in possession
holding under Trustor. No exercise of any rights under this Section 1.15 by
Beneficiary shall cure or waive any Event of Default or notice of default
hereunder or invalidate any act done pursuant hereto or to any such notice, but
shall be cumulative of all other rights and remedies.
1.16 Use of Land. Trustor covenants that the Trust Estate shall
be (i) used and operated in a manner reasonably consistent with the description
of the Project in the Cooperation Agreement and (ii) open during such days and
hours as are customarily observed by casino-hotels located in Las Vegas, Nevada,
reasonably consistent with the provisions of the Cooperation Agreement
(including those provisions thereof that permit the Project not to be opened).
1.17 Compliance with Permitted Lien Agreements. Trustor or any
Affiliate of Trustor shall comply with each and every material obligation
contained in any agreement pertaining to a material Permitted Lien, including,
without limitation, any obligations set forth in the Cooperation Agreement, the
HVAC Ground lease or the Mall Lease, to the extent applying to the owner of all
or any part of the Trust Estate.
1.18 Defense of Actions. Trustor shall appear in and defend any
action or proceeding affecting or purporting to affect the security hereof or
the rights or powers of Beneficiary or Trustee, and shall pay all costs and
expenses, including cost of title search and insurance or other evidence of
title, preparation of survey, and reasonable attorneys' fees in any such action
or proceeding in which Beneficiary or Trustee may appear or may be joined as a
party and in any suit brought by Beneficiary based upon or in connection with
this Deed of Trust or any Mortgage Notes Indenture Security Document. Nothing
contained in this section shall, however, limit the right of Beneficiary to
appear in such action or proceeding with counsel of its own choice, either on
its own behalf or on behalf of Trustor.
1.19 Affiliates.
(a) Subject to Trust Deed. Subject to compliance with the
requirements of applicable Gaming Control Laws, Trustor shall cause all of its
Affiliates in any way involved with the operation of the Trust Estate or the
Project to observe the covenants and conditions of this Deed of Trust to the
extent necessary to give the full intended effect to such covenants and
conditions and to protect and preserve the security of Beneficiary hereunder.
Trustor shall, at Beneficiary's request, cause any such Affiliate to execute and
deliver to Beneficiary or Trustee such further instruments or documents as
Beneficiary may reasonably deem necessary to effectuate the terms of this
Section 1.19.
(b) Restriction on Use of Subsidiary or Affiliate. Except as
permitted under the Mortgage Notes Indenture, the Notes, the Mortgage Notes
Indenture Security Documents or any other Security Document granting a security
interest for the benefit of the Beneficiary, Trustor shall not use any Affiliate
in the operation of the Trust Estate or the Project if such use would in any way
impair the
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security for the Notes and the Mortgage Notes Indenture or circumvent
any covenant or condition of this Deed of Trust or of any other Mortgage Notes
Indenture Security Document.
1.20 Title Insurance. Promptly after the execution and delivery
of this Deed of Trust, Trustor shall cause to be delivered to Trustee at
Trustor's expense, one or more ALTA extended coverage Lender's Policies of Title
Insurance showing fee title to the real property situated in the County of
Clark, State of Nevada, more specifically described in Schedule A attached
hereto, vested in Trustor and the lien of this Deed of Trust to be a perfected
lien, prior to any and all encumbrances other than VCR Permitted Encumbrances
(excluding, however, any such non-VCR Permitted Encumbrances for which the Title
Insurer has agreed to provide an endorsement or affirmative coverage protecting
the lien of this Deed of Trust against such non-VCR Permitted Encumbrances).
ARTICLE TWO
CORPORATE LOAN PROVISIONS
2.1 Interaction with Mortgage Notes Indenture.
(a) Incorporation by Reference. All terms, covenants,
conditions, provisions and requirements of the Mortgage Notes Indenture are
incorporated by reference in this Deed of Trust.
(b) Conflicts. In the event of any conflict or inconsistency
between the provisions of this Deed of Trust and those of the Mortgage Notes
Indenture or the Funding Agents' Disbursement and Administration Agreement, the
provisions of the Mortgage Notes Indenture or the Funding Agents' Disbursement
and Administration Agreement, as applicable, shall govern. Trustor agrees that
notwithstanding any provisions of the Mortgage Notes Indenture or the Funding
Agents' Disbursement and Administration Agreement to the contrary, Trustor shall
not amend any of the agreements described in Section 2.4, except with the prior
written consent of the Beneficiary.
2.2 Other Collateral. This Deed of Trust is one of a number of
security agreements to secure the debt delivered by or on behalf of Trustor
pursuant to the Mortgage Notes Indenture and the other Mortgage Notes Indenture
Security Documents and securing the Obligations secured hereunder. All potential
junior Lien claimants are placed on notice that, under any of the Mortgage Notes
Indenture Security Documents and each other Security Document granting a
security interest to the Beneficiary or otherwise (such as by separate future
unrecorded agreement between Trustor and Beneficiary), other collateral for the
Obligations secured hereunder (i.e., collateral other than the Trust Estate)
may, under certain circumstances, be released without a corresponding reduction
in the total principal amount secured by this Deed of Trust. Such a release
would decrease the amount of collateral securing the same indebtedness, thereby
increasing the burden on the remaining Trust Estate created and continued by
this Deed of Trust. No such release shall impair the priority of the lien of
this Deed of Trust. By accepting its interest in the Trust Estate, each and
every junior Lien claimant shall be deemed to have acknowledged the possibility
of, and consented to, any such release. Nothing in this paragraph shall impose
any obligation upon Beneficiary.
2.3 Subordination to Bank Fee Deed of Trust. Notwithstanding any
other provision hereof, this Deed of Trust, including, without limitation, the
security interest granted herein, the rights, powers and remedies of the Trustee
and the Beneficiary and the obligations of Trustor set forth herein, shall, to
the extent provided in the Intercreditor Agreement, be subject and subordinate
to the Bank Fee Deed of Trust.
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2.4 Subordination to Cooperation Agreement, Mall Lease, the
Billboard Master Lease and HVAC Ground Lease. Beneficiary hereby (a)
subordinates this Deed of Trust and the lien hereof to the Cooperation
Agreement, the Mall Lease, the Billboard Master Lease and the HVAC Ground Lease
(as in effect as of the date hereof) and to the rights, interest, obligations,
duties, conditions, covenants and agreements granted pursuant to the Cooperation
Agreement, the Mall Lease, the Billboard Master Lease and the HVAC Ground Lease
(as in effect as of the date hereof) and (b) agrees to be bound by the terms and
conditions of the Cooperation Agreement, the Mall Lease, the Master Billboard
Lease and the HVAC Ground Lease (as in effect as of the date hereof) upon its
taking title to the Trust Estate.
ARTICLE THREE
DEFAULTS
3.1 Event of Default. The term "Event of Default," wherever used
in this Deed of Trust, shall mean any of (i) one or more of the events of
default listed in Section 6.01 of the Mortgage Notes Indenture or (ii) so long
as the Funding Agents' Disbursement and Administration Agreement is in effect,
one or more of the events of default listed in Section 7.1 of the Funding
Agents' Disbursement and Administration Agreement (whether any such event shall
be voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body).
ARTICLE FOUR
REMEDIES
4.1 Acceleration of Maturity. If an Event of Default occurs,
Beneficiary may (except that such acceleration shall be automatic if the Event
of Default is caused by reason of an Event of Default under Section 6.01(h) or
(i) of the Mortgage Notes Indenture), in accordance with Section 6.02 of the
Mortgage Notes Indenture, declare the Notes and all indebtedness or sums secured
hereby, to be due and payable immediately, and upon such declaration such
principal and interest and other sums shall immediately become due and payable
without demand, presentment, notice or other requirements of any kind (all of
which Trustor waives) notwithstanding anything in this Deed of Trust or any
Mortgage Notes Indenture Security Document or applicable law to the contrary.
4.2 Protective Advances. If Trustor fails to make any payment or
perform any other obligation under the Notes or any other Financing Agreement,
then without thereby limiting Beneficiary's other rights or remedies, waiving or
releasing any of Trustor's obligations, or imposing any obligation on
Beneficiary, Beneficiary may either advance any amount owing or perform any or
all actions that Beneficiary considers necessary or appropriate to cure such
default. All such advances shall constitute "Protective Advances." No sums
advanced or performance rendered by Beneficiary shall cure, or be deemed a
waiver of any Event of Default.
4.3 Institution of Equity Proceedings. If an Event of Default
occurs, Beneficiary may institute an action, suit or proceeding in equity for
specific performance of this Deed of Trust, the Notes, any Mortgage Notes
Indenture Security Document or any other Security Document which grants a
security interest for the benefit of the Beneficiary, all of which shall be
specifically enforceable by injunction or other equitable remedy. Trustor waives
any defense based on laches or any applicable statute of limitations.
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4.4 Beneficiary's Power of Enforcement.
(a) If an Event of Default occurs, Beneficiary shall be
entitled, at its option and in its sole and absolute discretion, to prepare and
record on its own behalf, or to deliver to Trustee for recording, if
appropriate, written declaration of default and demand for sale and written
Notice of Breach and Election to Sell (NRS 107.080(3)) (or other statutory
notice) to cause the Trust Estate to be sold to satisfy the obligations hereof,
and in the case of delivery to Trustee, Trustee shall cause said notice to be
filed for record.
(b) After the lapse of such time as may then be required by
law following the recordation of said Notice of Breach and Election to Sell, and
notice of sale having been given as then required by law, including compliance
with all applicable Gaming Control Laws, Trustee without demand on Trustor,
shall sell the Trust Estate or any portion thereof at the time and place fixed
by it in said notice, either as a whole or in separate parcels, and in such
order as it may determine, at public auction to the highest bidder, of cash in
lawful money of the United States payable at the time of sale. Trustee may, for
any cause it deems expedient, postpone the sale of all or any portion of said
property until it shall be completed and, in every case, notice of postponement
shall be given by public announcement thereof at the time and place last
appointed for the sale and from time to time thereafter Trustee may postpone
such sale by public announcement at the time fixed by the preceding
postponement. Trustee shall execute and deliver to the purchaser its Deed, Bill
of Sale, or other instrument conveying said property so sold, but without any
covenant or warranty, express or implied. The recitals in such instrument of
conveyance of any matters or facts shall be conclusive proof of the truthfulness
thereof. Any person, including Beneficiary, may bid at the sale.
(c) After deducting all costs, fees and expenses of Trustee
and of this Deed of Trust, including, without limitation, costs of evidence of
title and reasonable attorneys' fees and other legal expenses of Trustee or
Beneficiary in connection with a sale, Trustee shall apply the proceeds of such
sale to payment of all sums expended under the terms hereof not then repaid,
with accrued interest at the rate applicable to overdue principal set forth in
Section 4.01 of the Mortgage Notes Indenture to the payment of all other sums
then secured hereby and the remainder, if any, to the person or persons legally
entitled thereto as provided in NRS 40.462.
(d) Subject to compliance with applicable Gaming Control Laws,
if any Event of Default occurs, Beneficiary may, either with or without entry or
taking possession of the Trust Estate, and without regard to whether or not the
indebtedness and other sums secured hereby shall be due and without prejudice to
the right of Beneficiary thereafter to bring an action or proceeding to
foreclose or any other action for any default existing at the time such earlier
action was commenced, proceed by any appropriate action or proceeding: (1) to
enforce payment of the Notes, to the extent permitted by law, or the performance
of any term hereof or any other right; (2) to foreclose this Deed of Trust in
any manner provided by law for the foreclosure of mortgages or deeds of trust on
real property and to sell, as an entirety or in separate lots or parcels, the
Trust Estate or any portion thereof pursuant to the laws of the State of Nevada
or under the judgment or decree of a court or courts of competent jurisdiction,
and Beneficiary shall be entitled to recover in any such proceeding all costs
and expenses incident thereto, including reasonable attorneys' fees in such
amount as shall be awarded by the court; (3) to exercise any or all of the
rights and remedies available to it under the Mortgage Notes Indenture; and (4)
to pursue any other remedy available to it. Beneficiary shall take action either
by such proceedings or by the exercise of its powers with respect to entry or
taking possession, or both, as Beneficiary may determine.
(e) The remedies described in this Section 4.4 may be
exercised with respect to all or any portion of the Personal Property, either
simultaneously with the sale of any real property
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encumbered hereby or independent thereof. Beneficiary shall at any time be
permitted to proceed with respect to all or any portion of the Personal Property
in any manner permitted by the UCC. Trustor agrees that Beneficiary's inclusion
of all or any portion of the Personal Property (and all personal property that
is subject to a security interest in favor, or for the benefit, of Beneficiary)
in a sale or other remedy exercised with respect to the real property encumbered
hereby, as permitted by the UCC, is a commercially reasonable disposition of
such property.
4.5 Beneficiary's Right to Enter and Take Possession, Operate and
Apply Income.
(a) Subject to compliance with applicable Gaming Control Laws,
if an Event of Default occurs, (i) Trustor, upon demand of Beneficiary, shall
forthwith surrender to Beneficiary the actual possession and, if and to the
extent permitted by law, Beneficiary itself, or by such officers or agents as it
may appoint, may enter and take possession of all the Trust Estate including the
Personal Property, without liability for trespass, damages or otherwise, and may
exclude Trustor and its agents and employees wholly therefrom and may have joint
access with Trustor to the books, papers and accounts of Trustor; and (ii)
Trustor shall pay monthly in advance to Beneficiary on Beneficiary's entry into
possession, or to any receiver appointed to collect the Rents, all Rents then
due and payable.
(b) If Trustor shall for any reason fail to surrender or
deliver the Trust Estate, the Personal Property or any part thereof after
Beneficiary's demand, Beneficiary may obtain a judgment or decree conferring on
Beneficiary or Trustee the right to immediate possession or requiring Trustor to
deliver immediate possession of all or part of such property to Beneficiary or
Trustee and Trustor hereby specifically consents to the entry of such judgment
or decree. Trustor shall pay to Beneficiary or Trustee, upon demand, all
reasonable costs and expenses of obtaining such judgment or decree and
reasonable compensation to Beneficiary or Trustee, their attorneys and agents,
and all such costs, expenses and compensation shall, until paid, be secured by
the lien of this Deed of Trust.
(c) Subject to compliance with applicable Gaming Control Laws,
upon every such entering upon or taking of possession, Beneficiary or Trustee
may hold, store, use, operate, manage and control the Trust Estate and conduct
the business thereof, and, from time to time in its sole and absolute discretion
and without being under any duty to so act:
(1) make all necessary and proper maintenance, repairs,
renewals, replacements, additions, betterments and improvements thereto and
thereon and purchase or otherwise acquire additional fixtures, personalty and
other property;
(2) insure or keep the Trust Estate insured;
(3) manage and operate the Trust Estate and exercise all
the rights and powers of Trustor in their name or otherwise with respect to the
same;
(4) enter into agreements with others to exercise the
powers herein granted Beneficiary or Trustee, all as Beneficiary or Trustee from
time to time may determine; and, subject to the absolute assignment of the
Leases and Rents to Beneficiary, Beneficiary or Trustee may collect and receive
all the Rents, including those past due as well as those accruing thereafter;
and shall apply the monies so received by Beneficiary or Trustee in such
priority as Beneficiary may determine to (1) the payment of interest and
principal due and payable on the Notes, (2) the deposits for taxes and
assessments and insurance premiums due, (3) the cost of insurance, taxes,
assessments and other proper charges upon the Trust Estate or any part thereof;
(4) the compensation, expenses and disbursements of
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the agents, attorneys and other representatives of Beneficiary or Trustee; and
(5) any other charges or costs required to be paid by Trustor under the terms
hereof; and
(5) rent or sublet the Trust Estate or any portion
thereof for any purpose permitted by this Deed of Trust.
Beneficiary or Trustee shall surrender possession of the Trust
Estate and the Personal Property to Trustor only when all that is due upon such
interest and principal, tax and insurance deposits, and all amounts under any of
the terms of the Mortgage Notes Indenture or this Deed of Trust, shall have been
paid and all defaults made good. The same right of taking possession, however,
shall exist if any subsequent Event of Default shall occur and be continuing.
4.6 Leases. Beneficiary is authorized to foreclose this Deed of
Trust subject to the rights of any tenants of the Trust Estate, and the failure
to make any such tenants parties defendant to any such foreclosure proceedings
and to foreclose their rights shall not be, nor be asserted by Trustor to be, a
defense to any proceedings instituted by Beneficiary to collect the sums secured
hereby or to collect any deficiency remaining unpaid after the foreclosure sale
of the Trust Estate, or any portion thereof. Unless otherwise agreed by
Beneficiary in writing, all Space Leases executed subsequent to the date hereof,
or any part thereof, shall be subordinate and inferior to the lien of this Deed
of Trust; provided, however that (i) in accordance with the terms of Section
4.24 of the Mortgage Notes Indenture, Beneficiary may be required to execute a
non-disturbance and attornment agreement in connection with certain Lease
Transactions; and (ii) from time to time Beneficiary may execute and record
among the land records of the jurisdiction where this Deed of Trust is recorded,
subordination statements with respect to such of said Space Leases as
Beneficiary may designate in its sole discretion, whereby the Space Leases so
designated by Beneficiary shall be made superior to the lien of this Deed of
Trust for the term set forth in such subordination statement. From and after the
recordation of such subordination statements, and for the respective periods as
may be set forth therein, the Space Leases therein referred to shall be superior
to the lien of this Deed of Trust and shall not be affected by any foreclosure
hereof. All such Space Leases shall contain a provision to the effect that the
Trustor and Space Lessee recognize the right of Beneficiary to elect and to
effect such subordination of this Deed of Trust and consents thereto.
4.7 Purchase by Beneficiary. Upon any foreclosure sale (whether
judicial or nonjudicial), Beneficiary may bid for and purchase the property
subject to such sale and, upon compliance with the terms of sale, may hold,
retain and possess and dispose of such property in its own absolute right
without further accountability.
4.8 Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Trustor agrees to the full extent permitted by law that if an
Event of Default occurs, neither Trustor nor anyone claiming through or under it
shall or will set up, claim or seek to take advantage of any appraisement,
valuation, stay, extension or redemption laws now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Deed of Trust
or the absolute sale of the Trust Estate or any portion thereof or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchasers thereof, and Trustor for itself and all who may at any time claim
through or under it, hereby waives, to the full extent that it may lawfully so
do, the benefit of all such laws, and any and all right to have the assets
comprising the Trust Estate marshalled upon any foreclosure of the lien hereof
and agrees that Trustee or any court having jurisdiction to foreclose such lien
may sell the Trust Estate in part or as an entirety.
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4.9 Receiver. If an Event of Default occurs, Beneficiary, to the
extent permitted by law and subject to compliance with all applicable Gaming
Control Laws, and without regard to the value, adequacy or occupancy of the
security for the indebtedness and other sums secured hereby, shall be entitled
as a matter of right if it so elects to the appointment of a receiver to enter
upon and take possession of the Trust Estate and to collect all Rents and apply
the same as the court may direct, and such receiver may be appointed by any
court of competent jurisdiction upon application by Beneficiary. Beneficiary may
have a receiver appointed without notice to Trustor or any third party, and
Beneficiary may waive any requirement that the receiver post a bond. Beneficiary
shall have the power to designate and select the Person who shall serve as the
receiver and to negotiate all terms and conditions under which such receiver
shall serve. Any receiver appointed on Beneficiary's behalf may be an Affiliate
of Beneficiary. The expenses, including receiver's fees, attorneys' fees, costs
and agent's compensation, incurred pursuant to the powers herein contained shall
be secured by this Deed of Trust. The right to enter and take possession of and
to manage and operate the Trust Estate and to collect all Rents, whether by a
receiver or otherwise, shall be cumulative to any other right or remedy
available to Beneficiary under this Deed of Trust, the Mortgage Notes Indenture
or otherwise available to Beneficiary and may be exercised concurrently
therewith or independently thereof. Beneficiary shall be liable to account only
for such Rents (including, without limitation, security deposits) actually
received by Beneficiary, whether received pursuant to this section or any other
provision hereof. Notwithstanding the appointment of any receiver or other
custodian, Beneficiary shall be entitled as pledgee to the possession and
control of any cash, deposits, or instruments at the time held by, or payable or
deliverable under the terms of this Deed of Trust to, Beneficiary.
4.10 Suits to Protect the Trust Estate. Beneficiary shall have
the power and authority to institute and maintain any suits and proceedings as
Beneficiary, in its sole and absolute discretion, may deem advisable (a) to
prevent any impairment of the Trust Estate by any acts which may be unlawful or
in violation of this Deed of Trust, (b) to preserve or protect its interest in
the Trust Estate, or (c) to restrain the enforcement of or compliance with any
legislation or other Legal Requirement that may be unconstitutional or otherwise
invalid, if the enforcement of or compliance with such enactment, rule or order
might impair the security hereunder or be prejudicial to Beneficiary's interest.
4.11 Proofs of Claim. In the case of any receivership,
Insolvency, Bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceedings affecting Trustor, or, to the extent the same would
result in an Event of Default hereunder, any Subsidiary, or any guarantor,
co-maker or endorser of any of Trustor's obligations, its creditors or its
property, Beneficiary, to the extent permitted by law, shall be entitled to file
such proofs of claim or other documents as it may deem to be necessary or
advisable in order to have its claims allowed in such proceedings for the entire
amount due and payable by Trustor under the Notes, any other Mortgage Notes
Indenture Security Document or any other Security Document, at the date of the
institution of such proceedings, and for any additional amounts which may become
due and payable by Trustor after such date.
4.12 Trustor to Pay the Notes on Any Default in Payment;
Application of Monies by Beneficiary.
(a) In case of a foreclosure sale of all or any part of the
Trust Estate and of the application of the proceeds of sale to the payment of
the sums secured hereby, Beneficiary shall be entitled to enforce payment from
Trustor of any additional amounts then remaining due and unpaid and to recover
judgment against Trustor for any portion thereof remaining unpaid, with interest
at the rate applicable to overdue principal as set forth in Section 4.01 of the
Mortgage Notes Indenture.
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(b) Trustor hereby agrees to the extent permitted by law, that
no recovery of any such judgment by Beneficiary or other action by Beneficiary
and no attachment or levy of any execution upon any of the Trust Estate or any
other property shall in any way affect the Lien and security interest of this
Deed of Trust upon the Trust Estate or any part thereof or any Lien, rights,
powers or remedies of Beneficiary hereunder, but such Lien, rights, powers and
remedies shall continue unimpaired as before.
(c) Any monies collected or received by Beneficiary under this
Section 4.12 shall be first applied to the payment of reasonable compensation,
expenses and disbursements of the agents, attorneys and other representatives of
Beneficiary, and the balance remaining shall be applied to the payment of
amounts due and unpaid under the Notes.
(d) The provisions of this section shall not be deemed to
limit or otherwise modify the provisions of any guaranty of the indebtedness
evidenced by the Notes.
4.13 Delay or Omission; No Waiver. No delay or omission of
Beneficiary or any Mortgage Note Holder to exercise any right, power or remedy
upon any Event of Default shall exhaust or impair any such right, power or
remedy or shall be construed to waive any such Event of Default or to constitute
acquiescence therein. Every right, power and remedy given to Beneficiary whether
contained herein or in the Mortgage Notes Indenture or otherwise available to
Beneficiary may be exercised from time to time and as often as may be deemed
expedient by Beneficiary.
4.14 No Waiver of One Default to Affect Another. No waiver of any
Event of Default hereunder shall extend to or affect any subsequent or any other
Event of Default then existing, or impair any rights, powers or remedies
consequent thereon. If Beneficiary or a majority of the Mortgage Note Holder(s),
to the extent applicable under the Mortgage Notes Indenture, (a) grants
forbearance or an extension of time for the payment of any sums secured hereby;
(b) takes other or additional security for the payment thereof; (c) waives or
does not exercise any right granted in the Notes, the Mortgage Notes Indenture,
this Deed of Trust, the Funding Agents' Disbursement and Administration
Agreement, any other Mortgage Notes Indenture Security Document or any other
Security Document; (d) releases any part of the Trust Estate from the lien or
security interest of this Deed of Trust or any other instrument securing the
Notes; (e) consents to the filing of any map, plat or replat of the Land (to the
extent such consent is required); (f) consents to the granting of any easement
on the Land (to the extent such consent is required); or (g) makes or consents
to any agreement changing the terms of this Deed of Trust or any Mortgage Notes
Indenture Security Document subordinating the lien or any charge hereof, no such
act or omission shall release, discharge, modify, change or affect the original
liability of Trustor under the Notes, this Deed of Trust, any other Mortgage
Notes Indenture Security Document or any other Security Document or otherwise,
or any subsequent purchaser of the Trust Estate or any part thereof or any
maker, co-signer, surety or guarantor. No such act or omission shall preclude
Beneficiary from exercising any right, power or privilege herein granted or
intended to be granted in case of any Event of Default then existing or of any
subsequent Event of Default, nor, except as otherwise expressly provided in an
instrument or instruments executed by Beneficiary, shall the lien or security
interest of this Deed of Trust be altered thereby, except to the extent
expressly provided in any releases, maps, easements or subordinations described
in clause (d), (e), (f) or (g) above of this Section 4.14. In the event of the
sale or transfer by operation of law or otherwise of all or any part of the
Trust Estate, Beneficiary, without notice to any person, firm or corporation, is
hereby authorized and empowered to deal with any such vendee or transferee with
reference to the Trust Estate or the indebtedness secured hereby, or with
reference to any of the terms or conditions hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any of the liabilities or undertakings hereunder, or
waiving its right to declare such sale or transfer an Event of Default as
provided herein. Notwithstanding anything to the contrary contained in this Deed
of Trust,
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any Mortgage Notes Indenture Security Document or any other Security Document,
(i) in the case of any non-monetary Event of Default, Beneficiary may continue
to accept payments due hereunder without thereby waiving the existence of such
or any other Event of Default and (ii) in the case of any monetary Event of
Default, Beneficiary may accept partial payments of any sums due hereunder
without thereby waiving the existence of such Event of Default if the partial
payment is not sufficient to completely cure such Event of Default.
4.15 Discontinuance of Proceedings; Position of Parties Restored.
If Beneficiary shall have proceeded to enforce any right or remedy under this
Deed of Trust by foreclosure, entry of judgement or otherwise and such
proceedings shall have been discontinued or abandoned for any reason, or such
proceedings shall have resulted in a final determination adverse to Beneficiary,
then and in every such case Trustor and Beneficiary shall be restored to their
former positions and rights hereunder, and all rights, powers and remedies of
Beneficiary shall continue as if no such proceedings had occurred or had been
taken.
4.16 Remedies Cumulative. No right, power or remedy, including
without limitation remedies with respect to any security for the Notes,
conferred upon or reserved to Beneficiary by this Deed of Trust, any other
Mortgage Notes Indenture Security Document or any other Security Document is
exclusive of any other right, power or remedy, but each and every such right,
power and remedy shall be cumulative and concurrent and shall be in addition to
any other right, power and remedy given hereunder, under any Mortgage Notes
Indenture Security Document or any other Security Document, now or hereafter
existing at law, in equity or by statute, and Beneficiary shall be entitled to
resort to such rights, powers, remedies or security as Beneficiary shall in its
sole and absolute discretion deem advisable.
4.17 Interest After Event of Default. If an Event of Default
shall have occurred and is continuing, all sums outstanding and unpaid under the
Notes and this Deed of Trust shall, at Beneficiary's option, bear interest at
the rate applicable to overdue principal set forth in Section 4.01 of the
Mortgage Notes Indenture until such Event of Default has been cured. Trustor's
obligation to pay such interest shall be secured by this Deed of Trust.
4.18 Foreclosure; Expenses of Litigation. If Trustee forecloses,
reasonable attorneys' fees for services in the supervision of said foreclosure
proceeding shall be allowed to the Trustee and Beneficiary as part of the
foreclosure costs. In the event of foreclosure of the lien hereof, there shall
be allowed and included as additional indebtedness all reasonable expenditures
and expenses which may be paid or incurred by or on behalf of Beneficiary for
attorneys' fees, appraiser's fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which may be estimated as
to items to be expended after foreclosure sale or entry of the decree) of
procuring all such abstracts of title, title searches and examinations, title
insurance policies and guarantees, and similar data and assurances with respect
to title as Beneficiary may deem reasonably advisable either to prosecute such
suit or to evidence to a bidder at any sale which may be had pursuant to such
decree the true condition of the title to or the value of the Trust Estate or
any portion thereof. All expenditures and expenses of the nature in this section
mentioned, and such expenses and fees as may be incurred in the protection of
the Trust Estate and the maintenance of the lien and security interest of this
Deed of Trust, including the fees of any attorney employed by Beneficiary in any
litigation or proceeding affecting this Deed of Trust or any Mortgage Notes
Indenture Security Document, the Trust Estate or any portion thereof, including,
without limitation, civil, probate, appellate and bankruptcy proceedings, or in
preparation for the commencement or defense of any proceeding or threatened suit
or proceeding, shall be immediately due and payable by Trustor, with interest
thereon at the rate applicable to overdue principal set forth in Section 4.01 of
the Mortgage Notes Indenture, and shall be secured by this Deed of Trust.
Trustee
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waives its right to any statutory fee in connection with any judicial or
nonjudicial foreclosure of the lien hereof and agrees to accept a reasonable fee
for such services.
4.19 Deficiency Judgments. If after foreclosure of this Deed of
Trust or Trustee's sale hereunder, there shall remain any deficiency with
respect to any amounts payable under the Notes or hereunder or any amounts
secured hereby, and Beneficiary shall institute any proceedings to recover such
deficiency or deficiencies, all such amounts shall continue to bear interest at
the rate applicable to overdue principal set forth in Section 4.01 of the
Mortgage Notes Indenture. Trustor waives any defense to Beneficiary's recovery
against Trustor of any deficiency after any foreclosure sale of the Trust
Estate. Trustor expressly waives any defense or benefits that may be derived
from any statute granting Trustor any defense to any such recovery by
Beneficiary. In addition, Beneficiary and Trustee shall be entitled to recovery
of all of their reasonable costs and expenditures (including without limitation
any court imposed costs) in connection with such proceedings, including their
reasonable attorneys' fees, appraisal fees and the other costs, fees and
expenditures referred to in Section 4.18 above. This provision shall survive any
foreclosure or sale of the Trust Estate, any portion thereof and/or the
extinguishment of the lien hereof.
4.20 Waiver of Jury Trial. Beneficiary and Trustor each waive any
right to have a jury participate in resolving any dispute whether sounding in
contract, tort or otherwise arising out of, connected with, related to or
incidental to the relationship established between them in connection with the
Notes, this Deed of Trust, any other Mortgage Notes Indenture Security Document
or any other Security Document. Any such disputes shall be resolved in a bench
trial without a jury.
4.21 Exculpation of Beneficiary. The acceptance by Beneficiary of
the assignment contained herein with all of the rights, powers, privileges and
authority created hereby shall not, prior to entry upon and taking possession of
the Trust Estate by Beneficiary, be deemed or construed to make Beneficiary a
"mortgagee in possession"; nor thereafter or at any time or in any event
obligate Beneficiary to appear in or defend any action or proceeding relating to
the Space Leases, the Rents or the Trust Estate, or to take any action hereunder
or to expend any money or incur any expenses or perform or discharge any
obligation, duty or liability under any Space Lease or to assume any obligation
or responsibility for any security deposits or other deposits except to the
extent such deposits are actually received by Beneficiary, nor shall
Beneficiary, prior to such entry and taking, be liable in any way for any injury
or damage to person or property sustained by any Person in or about the Trust
Estate.
ARTICLE FIVE
RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE
------------------------------------
Notwithstanding anything to the contrary in this Deed of Trust,
Trustor and Beneficiary agree as follows.
5.1 Exercise of Remedies by Trustee. To the extent that this Deed
of Trust or applicable law, including all applicable Gaming Control Laws,
authorizes or empowers, or does not require approval for, Beneficiary to
exercise any remedies set forth in Article Four hereof or otherwise, or perform
any acts in connection therewith, Trustee (but not to the exclusion of
Beneficiary unless so required under the law of the State of Nevada) shall have
the power to exercise any or all such remedies, and to perform any acts provided
for in this Deed of Trust in connection therewith, all for the benefit of
Beneficiary and on Beneficiary's behalf in accordance with applicable law of the
State of Nevada. In connection therewith, Trustee: (a) shall not exercise, or
waive the exercise of, any Beneficiary's remedies
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(other than any rights of Trustee to any indemnity or reimbursement), except at
Beneficiary's request, and (b) shall exercise, or waive the exercise of, any or
all of Beneficiary's remedies at Beneficiary's request, and in accordance with
Beneficiary's directions as to the manner of such exercise or waiver. Trustee
may, however, decline to follow Beneficiary's request or direction if Trustee
shall be advised by counsel that the action or proceeding, or manner thereof, so
directed may not lawfully be taken or waived.
5.2 Rights and Privileges of Trustee. To the extent that this
Deed of Trust requires Trustor to indemnify Beneficiary or reimburse Beneficiary
for any expenditures Beneficiary may incur, Trustee shall be entitled to the
same indemnity and the same rights to reimbursement of expenses as Beneficiary,
subject to such limitations and conditions as would apply in the case of
Beneficiary. To the extent that this Deed of Trust negates or limits
Beneficiary's liability as to any matter, Trustee shall be entitled to the same
negation or limitation of liability. To the extent that Trustor, pursuant to
this Deed of Trust, appoints Beneficiary as Trustor's attorney in fact for any
purpose, Beneficiary or (when so instructed by Beneficiary) Trustee shall be
entitled to act on Trustor's behalf without joinder or confirmation by the
other.
5.3 Resignation or Replacement of Trustee. Trustee may resign by
an instrument in writing addressed to Beneficiary, and Trustee may be removed at
any time with or without cause (i.e., in Beneficiary's sole and absolute
discretion) by an instrument in writing executed by Beneficiary. In case of the
death, resignation, removal or disqualification of Trustee or if for any reason
Beneficiary shall deem it desirable to appoint a substitute, successor or
replacement Trustee to act instead of Trustee originally named (or in place of
any substitute, successor or replacement Trustee), then Beneficiary shall have
the right and is hereby authorized and empowered to appoint a successor,
substitute or replacement Trustee, without any formality other than appointment
and designation in writing executed by Beneficiary, which instrument shall be
recorded if required by the law of the State of Nevada. The law of the State of
Nevada (including, without limitation, the Gaming Control Laws) shall govern the
qualifications of any Trustee. The authority conferred upon Trustee by this Deed
of Trust shall automatically extend to any and all other successor, substitute
and replacement Trustee(s) successively until the obligations secured hereunder
have been paid in full or the Trust Estate has been sold hereunder or released
in accordance with the provisions of the Mortgage Notes Indenture Security
Documents and each other Security Document to which the Beneficiary is a party
or which grants a security interest for the benefit of the Beneficiary.
Beneficiary's written appointment and designation of any Trustee shall be full
evidence of Beneficiary's right and authority to make the same and of all facts
therein recited. No confirmation, authorization, approval or other action by
Trustor shall be required in connection with any resignation or other
replacement of Trustee.
5.4 Authority of Beneficiary. If Beneficiary is a banking
corporation, state banking corporation or a national banking association and the
instrument of appointment of any successor or replacement Trustee is executed on
Beneficiary's behalf by an officer of such corporation, state banking
corporation or national banking association, then such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any superior
officer of Beneficiary.
5.5 Effect of Appointment of Successor Trustee. Upon the
appointment and designation of any successor, substitute or replacement Trustee,
and subject to compliance with applicable Gaming Control Laws and other
applicable laws, Trustee's entire estate and title in the Trust Estate shall
vest in the designated successor, substitute or replacement Trustee. Such
successor, substitute or replacement Trustee shall thereupon succeed to and
shall hold, possess and execute all the rights, powers, privileges, immunities
and duties herein conferred upon Trustee. All references herein to Trustee shall
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be deemed to refer to Trustee (including any successor or substitute appointed
and designated as herein provided) from time to time acting hereunder.
5.6 Confirmation of Transfer and Succession. Upon the written
request of Beneficiary or of any successor, substitute or replacement Trustee,
any former Trustee ceasing to act shall execute and deliver an instrument
transferring to such successor, substitute or replacement Trustee all of the
right, title, estate and interest in the Trust Estate of Trustee so ceasing to
act, together with all the rights, powers, privileges, immunities and duties
herein conferred upon Trustee, and shall duly assign, transfer and deliver all
properties and moneys held by said Trustee hereunder to said successor,
substitute or replacement Trustee.
5.7 Exculpation. Trustee shall not be liable for any error of
judgment or act done by Trustee in good faith, or otherwise be responsible or
accountable under any circumstances whatsoever, except for Trustee's gross
negligence, willful misconduct or knowing violation of law. Trustee shall have
the right to rely on any instrument, document or signature authorizing or
supporting any action taken or proposed to be taken by it hereunder, believed by
it in good faith to be genuine. All moneys received by Trustee shall, until used
or applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated in any manner from any other moneys
(except to the extent required by law). Trustee shall be under no liability for
interest on any moneys received by it hereunder.
5.8 Endorsement and Execution of Documents. Upon Beneficiary's
written request, Trustee shall, without liability or notice to Trustor, execute,
consent to, or join in any instrument or agreement in connection with or
necessary to effectuate the purposes of the Mortgage Notes Indenture Security
Documents and each other Security Document to which the Beneficiary is a party
or which grants a security interest for the benefit of the Beneficiary. Trustor
hereby irrevocably designates Trustee as its attorney in fact to execute,
acknowledge and deliver, on Trustor's behalf and in Trustor's name, all
instruments or agreements necessary to implement any provision(s) of this Deed
of Trust or to further perfect the lien created by this Deed of Trust on the
Trust Estate. This power of attorney shall be deemed to be coupled with an
interest and shall survive any disability of Trustor.
5.9 Multiple Trustees. If Beneficiary appoints multiple trustees,
then any Trustee, individually, may exercise all powers granted to Trustee under
this instrument, without the need for action by any other Trustee(s).
5.10 Terms of Trustee's Acceptance. Trustee accepts the trust
created by this Deed of Trust upon the following terms and conditions:
(a) Delegation. Trustee may exercise any of its powers through
appointment of attorney(s) in fact or agents.
(b) Counsel. Trustee may select and employ legal counsel
(including any law firm representing Beneficiary). Trustor shall reimburse all
reasonable legal fees and expenses that Trustee may thereby incur.
(c) Security. Trustee shall be under no obligation to take any
action upon any Event of Default unless furnished security or indemnity, in form
satisfactory to Trustee, against costs, expenses, and liabilities that Trustee
may incur.
(d) Costs and Expenses. Trustor shall reimburse Trustee, as
part of the Obligations secured hereunder, for all reasonable disbursements and
expenses (including reasonable legal
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fees and expenses) incurred by reason of and as provided for in this Deed of
Trust, including any of the foregoing incurred in Trustee's administering and
executing the trust created by this Deed of Trust, in complying with all
applicable Gaming Control Laws and performing Trustee's duties and exercising
Trustee's powers under this Deed of Trust.
(e) Release. Upon payment and performance of the Obligations
secured hereunder, Beneficiary shall request that Trustee release this Deed of
Trust. Upon receipt of such request Trustee shall release this Deed of Trust to
Trustor. Trustor shall pay all costs of recordation, if any.
ARTICLE SIX
MISCELLANEOUS PROVISIONS
------------------------
6.1 Heirs, Successors and Assigns Included in Parties. Whenever
one of the parties hereto is named or referred to herein, the heirs, successors
and assigns of such party shall be included, and subject to the limitations set
forth in Section 1.9, all covenants and agreements contained in this Deed of
Trust, by or on behalf of Trustor or Beneficiary shall bind and inure to the
benefit of its heirs, successors and assigns, whether so expressed or not.
6.2 Addresses for Notices, Etc. Any notice, report, demand or
other instrument authorized or required to be given or furnished under this Deed
of Trust to Trustor or Beneficiary shall be deemed given or furnished (i) when
addressed to the party intended to receive the same, at the address of such
party set forth below, and delivered by hand at such address or (ii) three (3)
days after the same is deposited in the United States mail as first class
certified mail, return receipt requested, postage paid, whether or not the same
is actually received by such party:
Beneficiary: First Trust National Association
180 East 5th Street
St.Paul, MN 55101
Attn: Corporate Trust Department
Trustor: Venetian Casino Resort, LLC
3355 Las Vegas Blvd. South, Room 1C
Las Vegas, Nevada 89109
Attn: General Counsel
With a copy to: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard, South
Las Vegas, Nevada 89109
Attn: General Counsel
Trustee: Lawyers Title of Nevada, Inc.
1050 East Flamingo
Suite 180
Las Vegas, Nevada 09119
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6.3 Change of Notice Address. Any Person may change the address to which
any such notice, report, demand or other instrument is to be delivered or mailed
to that person, by furnishing written notice of such change to the other
parties, but no such notice of change shall be effective unless and until
received by such other parties.
6.4 Headings. The headings of the articles, sections, paragraphs and
subdivisions of this Deed of Trust are for convenience of reference only, are
not to be considered a part hereof, and shall not limit or expand or otherwise
affect any of the terms hereof.
6.5 Invalid Provisions to Affect No Others. In the event that any of the
covenants, agreements, terms or provisions contained herein or in the Notes, the
Mortgage Notes Indenture, any other Mortgage Notes Indenture Security Document
or any other Security Document shall be invalid, illegal or unenforceable in any
respect, the validity of the lien hereof and the remaining covenants,
agreements, terms or provisions contained herein or in the Notes, the Mortgage
Notes Indenture, any other Mortgage Notes Indenture Security Document or in any
other Security Document shall be in no way affected, prejudiced or disturbed
thereby. To the extent permitted by law, Trustor waives any provision of law
which renders any provision hereof prohibited or unenforceable in any respect.
6.6 Changes and Priority Over Intervening Liens. Neither this Deed of
Trust nor any term hereof may be changed, waived, discharged or terminated
orally, or by any action or inaction, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. Any agreement hereafter made by Trustor and
Beneficiary relating to this Deed of Trust shall be superior to the rights of
the holder of any intervening lien or encumbrance.
6.7 Estoppel Certificates. Within ten (10) Business Days after
Beneficiary's written request, Trustor shall from time to time execute a
certificate, in recordable form (an "Estoppel Certificate"), stating, except to
the extent it would be inaccurate to so state: (a) the current amount of the
Obligations secured hereunder and all elements thereof, including principal,
interest, and all other elements; (b) that Trustor has no defense, offset,
claim, counterclaim, right of recoupment, deduction, or reduction against any of
the Obligations secured hereunder; (c) that none of the Mortgage Notes Indenture
Security Documents and each other Security Document to which the Beneficiary is
a party or which grants a security interest for the benefit of the Beneficiary
have been amended, whether orally or in writing; (d) that Trustor has no claims
against Beneficiary of any kind; (e) that any Power of Attorney granted to
Beneficiary is in full force and effect; and (f) such other matters relating to
this Deed of Trust, any Mortgage Notes Indenture Security Document and each
other Security Document to which the Beneficiary is a party or which grants a
security interest for the benefit of the Beneficiary and the relationship of
Trustor and Beneficiary as Beneficiary shall request. In addition, the Estoppel
Certificate shall set forth the reasons why it would be inaccurate to make any
of the foregoing assurances ("a" through "f").
6.8 Waiver of Setoff and Counterclaim. All amounts due under this Deed of
Trust, the Notes, the other Mortgage Notes Indenture Security Documents and each
other Security Document to which the Beneficiary is a party or which grants a
security interest for the benefit of the Beneficiary shall be payable without
setoff, counterclaim or any deduction whatsoever. Trustor hereby waives the
right to assert a counterclaim (other than a compulsory counterclaim) in any
action or proceeding brought against it by Beneficiary and/or any Lender under
the Mortgage Notes Indenture, or arising out of or in any way connected with
this Deed of Trust, the other Mortgage Notes Indenture Security Documents, each
other
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Security Document to which the Beneficiary is a party or which grants a security
interest for the benefit of the Beneficiary or the Obligations.
6.9 Governing Law. The Mortgage Notes Indenture and the Notes provide that
they are governed by, and construed and enforced in accordance with, the laws of
the State of New York. This Deed of Trust shall also be construed under and
governed by the laws of the State of New York; provided, however, that (i) the
terms and provisions of this Deed of Trust pertaining to the priority,
perfection, enforcement or realization by Beneficiary of its respective rights
and remedies under this Deed of Trust with respect to the Trust Estate shall be
governed and construed and enforced in accordance with the internal laws of the
State of Nevada (the "State") without giving effect to the conflicts-of-law
rules and principles of the State; (ii) Trustor agrees that to the extent
deficiency judgments are available under the laws of the State after a
foreclosure (judicial or nonjudicial) of the Trust Estate, or any portion
thereof, or any other realization thereon by Beneficiary or any Lender under the
Mortgage Notes Indenture, Beneficiary or such Lender, as the case may be, shall
have the right to seek such a deficiency judgment against Trustor in the State;
and (iii) Trustor agrees that if Beneficiary or any Lender under the Mortgage
Notes Indenture obtains a deficiency judgment in another state against Trustor,
then Beneficiary or such Lender, as the case may be, shall have the right to
enforce such judgment in the State to the extent permitted under the laws of the
State, as well as in other states. Nothing contained in this Section 6.9 shall
be deemed to expand the limitations set forth in Section 12.08 of the Mortgage
Notes Indenture.
6.10 Required Notices. Trustor shall notify Beneficiary promptly of the
occurrence of any of the following and shall immediately provide Beneficiary a
copy of the notice or documents referred to: (i) receipt of notice from any
Governmental Authority relating to all or any material part of the Trust Estate
if such notice relates to a default or act, omission or circumstance which would
result in a default after notice or passage of time or both; (ii) receipt of any
notice from any tenant leasing all or any material portion of the Trust Estate
if such notice relates to a default or act, omission or circumstance which would
result in a default after notice or passage of time or both; (iii) receipt of
notice from the holder of any Permitted Lien relating to a default or act,
omission or circumstance which would result in a default after notice or passage
of time or both; (iv) the commencement of any proceedings or the entry of any
judgment, decree or order materially affecting all or any portion of the Trust
Estate or which involve the potential liability of Trustor or its Affiliates in
an amount in excess of $25,000,000 (other than for personal injury actions and
related property damage suits which are covered by such insurance); or (v)
commencement of any judicial or administrative proceedings or the entry of any
judgment, decree or order by or against or otherwise affecting Trustor or any
Affiliate of Trustor, a material portion of the Trust Estate, or a material
portion of the Personal Property, or any other action by any creditor or lessor
thereof as a result of any default under the terms of any lease.
6.11 Reconveyance. Upon written request of Trustor when the Obligations
secured hereby have been satisfied in full, Beneficiary shall cause Trustee to
reconvey, without warranty, the property then held hereunder. The recitals in
such reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The grantee in such reconveyance may be described as "the
person or persons legally entitled thereto."
6.12 Attorneys' Fees. Without limiting any other provision contained
herein, Trustor agrees to pay all costs of Beneficiary or Trustee incurred in
connection with the enforcement of this Deed of Trust or of the Notes, including
without limitation all reasonable attorneys' fees whether or not suit is
commenced, and including, without limitation, fees incurred in connection with
any probate, appellate, bankruptcy, deficiency or any other litigation
proceedings, all of which sums shall be secured hereby.
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6.13 Late Charges. By accepting payment of any sum secured hereby after
its due date, Beneficiary does not waive its right to collect any late charge
thereon or interest thereon at the interest rate on the Notes, if so provided,
not then paid or its right either to require prompt payment when due of all
other sums so secured or to declare default for failure to pay any amounts not
so paid.
6.14 Cost of Accounting. Trustor shall pay to Beneficiary, for and on
account of the preparation and rendition of any accounting, which Trustor may be
entitled to require under any law or statute now or hereafter providing
therefor, the reasonable costs thereof.
6.15 Right of Entry. Subject to compliance with applicable Gaming Control
Laws, Beneficiary may at any reasonable time or times and on reasonable prior
written notice to Trustor make or cause to be made entry upon and inspections of
the Trust Estate or any part thereof in person or by agent.
6.16 Corrections. Trustor shall, upon request of Beneficiary or Trustee,
promptly correct any defect, error or omission which may be discovered in the
contents of this Deed of Trust (including, but not limited to, in the exhibits
and schedules attached hereto) or in the execution or acknowledgement hereof,
and shall execute, acknowledge and deliver such further instruments and do such
further acts as may be necessary or as may be reasonably requested by Trustee to
carry out more effectively the purposes of this Deed of Trust, to subject to the
lien and security interest hereby created any of Trustor's properties, rights or
interest covered or intended to be covered hereby, and to perfect and maintain
such lien and security interest.
6.17 Statute of Limitations. To the fullest extent allowed by the law, the
right to plead, use or assert any statute of limitations as a plea or defense or
bar of any kind, or for any purpose, to any debt, demand or obligation secured
or to be secured hereby, or to any complaint or other pleading or proceeding
filed, instituted or maintained for the purpose of enforcing this Deed of Trust
or any rights hereunder, is hereby waived by Trustor.
6.18 Subrogation. Should the proceeds of any loan or advance made by
Beneficiary or any Lender under the Mortgage Notes Indenture to Trustor,
repayment of which is hereby secured, or any part thereof, or any amount paid
out or advanced by Beneficiary or any Lender under the Mortgage Notes Indenture,
be used directly or indirectly to pay off, discharge, or satisfy, in whole or in
part, any prior or superior lien or encumbrance upon the Trust Estate, or any
part thereof, then, as additional security hereunder, Trustee, on behalf of
Beneficiary, shall be subrogated to any and all rights, superior titles, liens,
and equities owned or claimed by any owner or holder of said outstanding liens,
charges, and indebtedness, however remote, regardless of whether said liens,
charges, and indebtedness are acquired by assignment or have been released of
record by the holder thereof upon payment.
6.19 Joint and Several Liability. All obligations of Trustor hereunder, if
more than one, are joint and several. Recourse for deficiency after sale
hereunder may be had against the property of Trustor, without, however, creating
a present or other lien or charge thereon.
6.20 Homestead. Trustor hereby waives and renounces all homestead and
exemption rights provided by the constitution and the laws of the United States
and of any state, in and to the Trust Estate as against the collection of the
Obligations, or any part hereof.
6.21 Context. In this Deed of Trust, whenever the context so requires, the
neuter includes the masculine and feminine, and the singular including the
plural, and vice versa.
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6.22 Time. Time is of the essence of each and every term, covenant and
condition hereof. Unless otherwise specified herein, any reference to "days" in
this Deed of Trust shall be deemed to mean "calendar days."
6.23 Interpretation. As used in this Deed of Trust unless the context
clearly requires otherwise: The terms "herein" or "hereunder" and similar terms
without reference to a particular section shall refer to the entire Deed of
Trust and not just to the section in which such terms appear; the term "lien"
shall also mean a security interest, and the term "security interest" shall also
mean a lien.
6.24 Effect of NRS ss. 107.030. To the extent not inconsistent herewith,
the provisions of NRS ss. 107.030 are included herein by reference.
6.25 Amendments. This Deed of Trust cannot be waived, changed, discharged
or terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of any waiver, change, discharge or termination is
sought and only as permitted by the provisions of the Mortgage Notes Indenture.
6.26 No Conflicts. In the event that any of the provisions contained here
conflict with that certain Security Agreement dated as of the date hereof, by
and between Trustor, and Beneficiary, the provisions contained in the Security
Agreement shall prevail.
ARTICLE SEVEN
POWER OF ATTORNEY
7.1 Grant of Power. Subject to compliance with applicable Gaming Control
Laws, Trustor irrevocably appoints Beneficiary and any successor thereto as its
attorney-in-fact, with full power and authority, including the power of
substitution, exercisable only during the continuance of an Event of Default to
act for Trustor in its name, place and stead as hereinafter provided:
7.1.1 Possession and Completion. To take possession of the Land and
the Project, remove all employees, contractors and agents of Trustor therefrom,
complete or attempt to complete the work of construction, and market, sell or
lease the Land and the Project.
7.1.2 Plans. To make such additions, changes and corrections in the
current Plans and Specifications as may be necessary or desirable, in
Beneficiary's reasonable discretion, or as it deems proper to complete the
Project.
7.1.3 Employment of Others. To employ such contractors,
subcontractors, suppliers, architects, inspectors, consultants, property
managers and other agents as Beneficiary, in its discretion, deems proper for
the completion of the Project, for the protection or clearance of title to the
Land or Personal Property, or for the protection of Beneficiary's interests with
respect thereto.
7.1.4 Security Guards. To employ watchmen to protect the Land and
the Project from injury.
7.1.5 Compromise Claims. To pay, settle or compromise all bills and
claims then existing or thereafter arising against Trustor, which Beneficiary,
in its discretion, deems proper for the protection or clearance of title to the
Land or Personal Property, or for the protection of Beneficiary's interests with
respect thereto.
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7.1.6 Legal Proceedings. To prosecute and defend all actions and
proceedings in connection with the Land or the Project.
7.1.7 Other Acts. To execute, acknowledge and deliver all other
instruments and documents in the name of Trustor that are necessary or
desirable, to exercise Trustor's rights under all contracts concerning the Land
or the Project, including, without limitation, under any Space Leases, and to do
all other acts with respect to the Land or the Project that Trustor might do on
its own behalf, as Beneficiary, in its reasonable discretion, deems proper.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Trustor has executed this Deed of Trust, Assignment of
Leases and Rents and Security Agreement as of the day and year first above
written.
TRUSTOR:
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company,
BY: LAS VEGAS SANDS, INC.,
a Nevada corporation,
its managing member
By: /s/ William Weidner
-------------------
Name: William Weidner
Title: President
LAS VEGAS SANDS, INC.
a Nevada corporation
By: /s/ William Weidner
-------------------
Name: William Weidner
Title: President
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STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on November 14, 1997 by
William P. Weidner, the President of Las Vegas Sands, Inc., the managing
member of Venetian Casino Resort, LLC.
/s/ Caitlin A. Monck
--------------------
NOTARY PUBLIC
[Seal of Notary Public]
Caitlin A. Monck
Notary Public, State of New York
No. 01MO5086188
Qualified in New York County
Commission Expires Oct. 6, 1999
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on November 14, 1997 by
William P. Weidner, the President of Las Vegas Sands, Inc..
/s/ Caitlin A. Monck
--------------------
NOTARY PUBLIC
[Seal of Notary Public]
Caitlin A. Monck
Notary Public, State of New York
No. 01MO5086188
Qualified in New York County
Commission Expires Oct. 6, 1999
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TABLE OF CONTENTS
ARTICLE ONE
COVENANTS OF TRUSTOR.......................... 10
1.1 Performance of Financing Agreements................................. 10
1.2 General Representations, Covenants and Warranties................... 10
1.3 Compliance with Legal Requirements.................................. 11
1.4 Taxes............................................................... 11
1.5 Insurance........................................................... 12
1.6 Condemnation........................................................ 12
1.7 Care of Trust Estate................................................ 13
1.8 Leases.............................................................. 13
1.9 Further Encumbrance................................................. 14
1.10 Partial Releases of Trust Estate................................... 15
1.11 Further Assurances................................................. 16
1.12 Security Agreement and Financing Statements........................ 16
1.13 Assignment of Leases and Rents..................................... 18
1.14 Expenses........................................................... 19
1.15 Beneficiary's Cure of Trustor's Default............................ 19
1.16 Use of Land........................................................ 20
1.17 Compliance with Permitted Lien Agreements.......................... 20
1.18 Defense of Actions................................................. 20
1.19 Affiliates......................................................... 20
1.20 Title Insurance.................................................... 21
ARTICLE TWO
CORPORATE LOAN PROVISIONS....................... 21
2.1 Interaction with Mortgage Notes Indenture........................... 21
2.2 Other Collateral.................................................... 21
2.3 Subordination to Bank Fee Deed of Trust............................. 21
2.4 Subordination to Cooperation Agreement, Mall Lease, the Billboard
Master Lease and HVAC Ground Lease.................................. 22
ARTICLE THREE
DEFAULTS................................ 22
3.1 Event of Default.................................................... 22
ARTICLE FOUR
REMEDIES................................ 22
4.1 Acceleration of Maturity............................................ 22
4.2 Protective Advances................................................. 22
4.3 Institution of Equity Proceedings................................... 22
4.4 Beneficiary's Power of Enforcement.................................. 23
4.5 Beneficiary's Right to Enter and Take Possession, Operate
and Apply Income ................................................... 24
4.6 Leases.............................................................. 25
4.7 Purchase by Beneficiary............................................. 25
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4.8 Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws .................................................... 25
4.9 Receiver............................................................ 26
4.10 Suits to Protect the Trust Estate.................................. 26
4.11 Proofs of Claim.................................................... 26
4.12 Trustor to Pay the Notes on Any Default in Payment; Application
of Monies by Beneficiary........................................... 26
4.13 Delay or Omission; No Waiver....................................... 27
4.14 No Waiver of One Default to Affect Another......................... 27
4.15 Discontinuance of Proceedings; Position of Parties Restored........ 28
4.16 Remedies Cumulative................................................ 28
4.17 Interest After Event of Default.................................... 28
4.18 Foreclosure; Expenses of Litigation................................ 28
4.19 Deficiency Judgments............................................... 29
4.20 Waiver of Jury Trial............................................... 29
4.21 Exculpation of Beneficiary......................................... 29
ARTICLE FIVE
RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE.................. 29
5.1 Exercise of Remedies by Trustee..................................... 29
5.2 Rights and Privileges of Trustee.................................... 30
5.3 Resignation or Replacement of Trustee............................... 30
5.4 Authority of Beneficiary............................................ 30
5.5 Effect of Appointment of Successor Trustee.......................... 30
5.6 Confirmation of Transfer and Succession............................. 31
5.7 .................................................................... 31
Exculpation.............................................................. 31
5.8 Endorsement and Execution of Documents.............................. 31
5.9 Multiple Trustees................................................... 31
5.10 Terms of Trustee's Acceptance...................................... 31
ARTICLE SIX
MISCELLANEOUS PROVISIONS........................ 32
6.1 Heirs, Successors and Assigns Included in Parties................... 32
6.2 Addresses for Notices, Etc.......................................... 32
6.3 Change of Notice Address............................................ 33
6.4 Headings............................................................ 33
6.5 Invalid Provisions to Affect No Others.............................. 33
6.6 Changes and Priority Over Intervening Liens......................... 33
6.7 Estoppel Certificates............................................... 33
6.8 Waiver of Setoff and Counterclaim................................... 33
6.9 Governing Law....................................................... 34
6.10 Required Notices................................................... 34
6.11 Reconveyance....................................................... 34
6.12 Attorneys' Fees.................................................... 34
6.13 Late Charges....................................................... 35
6.14 Cost of Accounting................................................. 35
6.15 Right of Entry..................................................... 35
6.16 Corrections........................................................ 35
6.17 Statute of Limitations............................................. 35
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6.18 Subrogation........................................................ 35
6.19 Joint and Several Liability........................................ 35
6.20 Homestead.......................................................... 35
6.21 Context............................................................ 35
6.22 Time............................................................... 36
6.23 Interpretation..................................................... 36
6.24 Effect of NRS ss. 107.030.......................................... 36
6.25 Amendments......................................................... 36
6.26 No Conflicts....................................................... 36
ARTICLE SEVEN
POWER OF ATTORNEY........................... 36
7.1 Grant of Power...................................................... 36
7.1.1 Possession and Completion....................................... 36
7.1.2 Plans........................................................... 36
7.1.3 Employment of Others............................................ 36
7.1.4 Security Guards................................................. 36
7.1.5 Compromise Claims............................................... 36
7.1.6 Legal Proceedings............................................... 37
7.1.7 Other Acts...................................................... 37
SCHEDULE A DESCRIPTION OF THE LAND
SCHEDULE C CONTEMPLATED CONDEMNATION
SCHEDULE D LIST OF TRADE AND FICTITIOUS NAMES
Recording Requested by and Recorded
Counterparts Should be Returned to:
Sony Ben-Moshe, Esq.
Latham & Watkins
701 B Street, Suite 2100
San Diego, California 92101
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES
AND SECURITY AGREEMENT
made by
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
a Delaware limited liability company,
as Trustor,
to
LAWYERS TITLE OF NEVADA, INC.
a Nevada corporation,
as Trustee,
for the benefit of
FIRST TRUST NATIONAL ASSOCIATION,
in its capacity as the Mortgage Notes Indenture
as Beneficiary
***************************************************************************
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND
IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS OF CLARK COUNTY,
NEVADA UNDER THE NAMES OF GRAND CANAL SHOPS MALL CONSTRUCTION, LLC AS "DEBTOR"
AND FIRST TRUST NATIONAL ASSOCIATION, AS MORTGAGE NOTES INDENTURE TRUSTEE, AS
SECURED PARTY.
THIS INSTRUMENT IS A "CONSTRUCTION MORTGAGE" AS THAT TERM IS DEFINED IN
SECTION 104.9313(1)(C) OF THE NEVADA REVISED STATUTES AND SECURES AN OBLIGATION
INCURRED FOR THE CONSTRUCTION OF AN IMPROVEMENT UPON LAND.
<PAGE>
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES
AND SECURITY AGREEMENT
THIS LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (hereinafter called "Leasehold Deed of Trust") is made effective as of
November 14, 1997, by GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware
limited liability company, and (together with all successors and assigns of the
Trust Estate (as hereinafter defined), "Trustor") whose address is 3355 Las
Vegas Boulevard South, Room 1G, Las Vegas, Nevada 89109, Attention: General
Counsel, to LAWYERS TITLE OF NEVADA, INC. a Nevada corporation, whose address is
1050 E. Flamingo, Suite 180, Las Vegas, Nevada 09119, Attention: Mr. Ray Griego,
as Trustee ("Trustee"), for the benefit of FIRST TRUST NATIONAL ASSOCIATION,
("Beneficiary"), in its capacity as the Mortgage Notes Indenture Trustee under
that certain Indenture, dated of even date herewith, among Venetian Casino
Resort, LLC, a Nevada limited liability company ("Venetian"), Las Vegas Sands,
Inc., a Nevada corporation ("LVSI"), Trustor, Beneficiary and the other parties
signatory thereto (as the same may be amended or modified from time to time, the
"Mortgage Notes Indenture") and pertaining to the 12.25% Mortgage Notes 2004
issued by Venetian and LVSI in the aggregate principal amount of $425,000,000.
DEFINITIONS - As used in this Leasehold Deed of Trust, the following
terms have the meanings hereinafter set forth:
"Accounts Receivable" shall have the meaning set forth in Section
9-106 (NRS 104.9106) of the UCC for the term "account."
"Appurtenant Rights" means all and singular tenements,
hereditaments, rights, reversions, remainders, development rights, privileges,
benefits, easements (in gross or appurtenant), rights-of-way, gores or strips of
land, streets, ways, alleys, passages, sewer rights, water courses, water rights
and powers, and all appurtenances whatsoever and claims or demands of Trustor at
law or in equity in any way belonging, benefitting, relating or appertaining to
the Leased Premises, the airspace over the Leased Premises, the Improvements or
any of the Trust Estate encumbered by this Leasehold Deed of Trust, or which
hereinafter shall in any way belong, relate or be appurtenant thereto, whether
now owned or hereafter acquired by Trustor.
"Bankruptcy" means, with respect to any Person that: (i) a court
having jurisdiction in the Trust Estate shall have entered a decree or order for
relief in respect of such Person in an involuntary case under the Bankruptcy Law
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order has not been stayed; or any other
similar relief shall have been granted under any applicable federal or state
law; or (ii) an involuntary case shall be commenced against such Person, under
the Bankruptcy Law 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 Trust Estate for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having
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similar powers over such Person, 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 such Person,
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 such Person, and any such event described in this clause (ii)
shall continue for 60 days unless dismissed, bonded or discharged; or (iii) such
Person shall have an order for relief entered with respect to it or shall
commence a voluntary case under the Bankruptcy Law 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 such Person
shall make any assignment for the benefit of creditors or shall fail generally,
or shall admit in writing its inability, to pay its debts as such debts become
due and payable and a period of thirty days (30) shall have elapsed; or (iv)
such Person 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 such Person (or any committee
thereof) or the managing member of such Person shall, adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (iii) above or this clause (iv).
"Billboard Leased Premises" means the real property situated in the
County of Clark, State of Nevada described in the Billboard Master Lease and
more specifically described in Exhibit A-4 attached hereto and incorporated
herein by reference.
"Billboard Master Lease" means that certain lease dated effective as
of November 14, 1997 between Venetian, as lessor, and Trustor, as lessee, for
the Billboard Leased Premises, as more particularly described in Exhibit A-3
attached hereto.
"Default Rate" means the maximum interest rate due upon an Event of
Default pursuant under the Mortgage Notes Indenture pursuant to Section 4.01
thereof.
"Disbursement Agreement" means that certain Funding Agents'
Disbursement and Administration Agreement dated as of November 14, 1997 by and
among Trustor, LVSI, Venetian, The Bank of Nova Scotia, as the Bank Agent and
the Disbursement Agent, Beneficiary, as the Mortgage Notes Indenture Trustee,
the Interim Mall Lender and Atlantic- Pacific Las Vegas, LLC, a Delaware limited
liability company, as the HVAC Provider, as the same may hereafter be amended or
modified in accordance with its terms and the terms of the Mortgage Notes
Indenture.
"Event of Default" has the meaning set forth in Section 3.1 hereof.
"FF&E" means all furniture, fixtures, equipment, appurtenances and
personal property now or in the future contained in, used in connection with,
attached to, or otherwise useful or convenient to the use, operation, or
occupancy of, or placed on, but unattached to, any part of the Leased Premises
or Improvements whether or not the same constitutes real property or fixtures in
the State of Nevada, including all removable window and floor
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coverings, all furniture and furnishings, heating, lighting, plumbing,
ventilating, air conditioning, refrigerating, incinerating and elevator and
escalator plants, cooking facilities, vacuum cleaning systems, public address
and communications systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, appliances,
equipment, fittings, fixtures, and building materials, all gaming and financial
equipment, computer equipment, calculators, adding machines, gaming tables,
video game and slot machines, and any other electronic equipment of every nature
used or located on any part of the Leased Premises or Improvements, together
with all venetian blinds, shades, draperies, drapery and curtain rods, brackets,
bulbs, cleaning apparatus, mirrors, lamps, ornaments, cooling apparatus and
equipment, ranges and ovens, garbage disposals, dishwashers, mantels, and any
and all such property which is at any time installed in, affixed to or placed
upon the Leased Premises or Improvements.
"FF&E Financing Agreement" means any financing agreement entered
into by Trustor (i) the proceeds of which are used by Trustor for the
acquisition or lease of FF&E, (ii) pursuant to which Trustor grants to the
lender or lessor thereunder a security interest in the FF&E so acquired or
leased and (iii) which is permitted by the Mortgage Notes Indenture.
"Imposition" means any taxes, assessments, water rates, sewer rates,
maintenance charges, other governmental impositions and other charges now or
hereafter levied or assessed or imposed against the Trust Estate or any part
thereof, and any amount payable with respect thereto under the Cooperation
Agreement.
"Improvements" means (1) all the buildings, structures, facilities
and improvements of every nature whatsoever now or hereafter situated on the
Leased Premises or any real property encumbered hereby, and (2) all fixtures,
machinery, appliances, goods, building or other materials, equipment, including
without limitation all gaming equipment and devices, and all machinery,
equipment, engines, appliances and fixtures for generating or distributing air,
water, heat, electricity, light, fuel or refrigeration, or for ventilating or
sanitary purposes, or for the exclusion of vermin or insects, or for the removal
of dust, refuse or garbage; all wall-beds, wall-safes, built-in furniture and
installations, shelving, lockers, partitions, doorstops, vaults, motors,
elevators, dumb-waiters, awnings, window shades, venetian blinds, light
fixtures, fire hoses and brackets and boxes for the same, fire sprinklers,
alarm, surveillance and security systems, computers, drapes, drapery rods and
brackets, mirrors, mantels, screens, linoleum, carpets and carpeting, plumbing,
bathtubs, sinks, basins, pipes, faucets, water closets, laundry equipment,
washers, dryers, ice-boxes and heating units; all kitchen and restaurant
equipment, including but not limited to silverware, dishes, menus, cooking
utensils, stoves, refrigerators, ovens, ranges, dishwashers, disposals, water
heaters, incinerators, furniture, fixtures and furnishings, communication
systems, and equipment; all cocktail lounge supplies, including but not limited
to bars, glassware, bottles and tables used in connection with the Leased
Premises; all chaise lounges, hot tubs, swimming pool heaters and equipment and
all other recreational equipment (computerized and otherwise), beauty and barber
equipment, and maintenance supplies used in connection with the Leased Premises;
all amusement rides and attractions attached to the Leased Premises, all
specifically designed installations and furnishings, and all furniture,
furnishings and personal property of every nature whatsoever now or hereafter
owned or leased by Trustor or in which Trustor has any
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rights or interest and located in or on, or attached to, or used or intended to
be used or which are now or may hereafter be appropriated for use on or in
connection with the operation of the Leased Premises or any real or personal
property encumbered hereby or any other Improvements, or in connection with any
construction being conducted or which may be conducted thereon, and all
extensions, additions, accessions, improvements, betterments, renewals,
substitutions, and replacements to any of the foregoing, and all of the right,
title and interest of Trustor in and to any such property, which, to the fullest
extent permitted by law, shall be conclusively deemed fixtures and improvements
and a part of the real property hereby encumbered.
"Insolvent" means with respect to any person or entity, that such
person or entity shall be deemed to be insolvent if he or it shall fail
generally, or shall admit in writing its inability to pay its debts as such
debts become due and payable and a period of thirty (30) days shall have
elapsed.
"Intangible Collateral" means (a) the rights to use all names and
all derivations thereof now or hereafter used by Trustor in connection with the
Leased Premises or Improvements, including, without limitation, the names
"Venetian," "Sands," "Grand Canal" and "Grand Canal Shoppes" including any
variations thereon, together with the goodwill associated therewith, and all
names, logos, and designs used by Trustor, or in connection with the Leased
Premises or in which Trustor has rights, with the exclusive right to use such
names, logos and designs wherever they are now or hereafter used in connection
with the Project (or in connection with the marketing of the Project together
with the "SECC Land" (as defined in the Cooperation Agreement) in accordance
with the terms of the Cooperation Agreement), and any and all other trade names,
trademarks or service marks, whether or not registered, now or hereafter used in
the operation of the Project, including, without limitation, any interest as a
lessee, licensee or franchisee, and, in each case, together with the goodwill
associated therewith; (b) subject to the absolute assignment contained herein,
the Rents; (c) any and all books, records, customer lists, concession
agreements, supply or service contracts, licenses, permits, governmental
approvals (to the extent such licenses, permits and approvals may be pledged
under applicable law), signs, goodwill, supplier lists, checking accounts, safe
deposit boxes (excluding the contents of such deposit boxes owned by persons
other than Trustor and its subsidiaries), cash, instruments, chattel papers,
including inter-company notes and pledges, documents, unearned premiums,
deposits, refunds, including but not limited to income tax refunds, prepaid
expenses, rebates, tax and insurance escrow and impound accounts, if any,
actions and rights in action, and all other claims, including without limitation
condemnation awards and insurance proceeds, and all other contract rights and
general intangibles resulting from or used in connection with the operation and
occupancy of the Trust Estate and the Improvements and in which Trustor now or
hereafter has rights; and (d) general intangibles, vacation license resort
agreements or other time share license or right to use agreements, including
without limitation all rents, issues, profits, income and maintenance fees
resulting therefrom, whether any of the foregoing is now owned or hereafter
acquired.
"Interim Mall Lender" means GMAC Commercial Mortgage Corporation, a
California corporation, and its permitted successors, assigns and replacements.
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"Leasehold Deed of Trust" means this Leasehold Deed of Trust,
Assignment of Rents and Leases and Security Agreement as it may be amended,
increased or modified from time to time.
"Leasehold Estate" means, with respect to each Subject Lease, the
right, title and interest of the tenant or lessee thereunder.
"Legal Requirements" means all applicable restrictive covenants,
applicable zoning and subdivision ordinances and building codes, all applicable
health and Environmental Laws and regulations, all applicable gaming laws and
regulations, and all other applicable laws, ordinances, rules, regulations,
judicial decisions, administrative orders, and other requirements of any
Governmental Instrumentality having jurisdiction over Trustor, the Trust Estate
and/or any Affiliate of Trustor, in effect either at the time of execution of
this Leasehold Deed of Trust or at any time during the term hereof, including,
without limitation, all Environmental Laws and Nevada Gaming Laws.
"Mall Lease" means that certain Mall I Airspace/Ground Lease dated
effective as of the date hereof by and between Venetian, as lessor, and Trustor,
as lessee, for the Mall Leased Premises, as more particularly described in
Exhibit A-1 attached hereto.
"Mall Leased Premises" means the real property situated in the
County of Clark, State of Nevada, described in the Mall Lease and more
specifically described in Exhibit A-2 attached hereto and incorporated herein by
reference, including any after acquired title, estates, interests or rights
thereto.
"Notes" means collectively, those certain Mortgage Note(s) issued
pursuant to the Mortgage Notes Indenture, as the same may be amended or replaced
from time to time in accordance with its terms.
"NRS" means the Nevada Revised Statutes as in effect from time to
time.
"Obligations" means the payment and performance of each covenant and
agreement of Trustor contained in this Leasehold Deed of Trust, the Mortgage
Notes Indenture (including, without limitation, the guaranty provided therein by
Trustor of the obligations of LVSI and Venetian with respect to the Notes and
under the Mortgage Notes indenture), the Notes, the Mortgage Notes Indenture
Security Documents and the Disbursement Agreement.
"Permitted Dispositions" means (a) the sale, transfer, lease or
other disposition of assets in the Trust Estate, in the ordinary course of
business, or of inventory held in the ordinary course of business, (b) the
dispositions set forth in Section 1.10 hereof and (c) other sales, transfers,
leases or other dispositions of assets in the Trust Estate; provided that all
applicable provisions of the Mortgage Notes Indenture are complied with,
including Sections 4.10 and 4.24.
"Personal Property" has the meaning set forth in Section 1.12
hereof.
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"Proceeds" has the meaning assigned to it under the UCC and, in any
event, shall include but not be limited to (i) any and all proceeds of any
insurance (including without limitation property casualty and title insurance),
indemnity, warranty or guaranty payable from time to time with respect to any of
the Trust Estate; (ii) any and all proceeds in the form of accounts, security
deposits, tax escrows (if any), down payments (to the extent the same may be
pledged under applicable law), collections, contract rights, documents,
instruments, chattel paper, liens and security instruments, guarantees or
general intangibles relating in whole or in part to the Project and all rights
and remedies of whatever kind or nature Trustor may hold or acquire for the
purpose of securing or enforcing any obligation due Trustor thereunder; (iii)
any and all payments in any form whatsoever made or due and payable from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Trust Estate by any Governmental
Instrumentality; (iv) subject to the absolute assignment contained herein, the
Rents or other benefits arising out of, in connection with or pursuant to any
Space Lease of the Trust Estate; and (v) any and all other amounts from time to
time paid or payable in connection with any of the Trust Estate; provided,
however, that the Trustor is not authorized to dispose of any of the Trust
Estate unless such disposition is a Permitted Disposition.
"Project" means the resort-hotel-casino-mall complex proposed to be
constructed in Clark County, Nevada as described in the Plans and
Specifications, as such Plans and Specifications may be amended pursuant to the
Disbursement Agreement.
"Rents" means all rents, room revenues, income, receipts, issues,
profits, revenues and maintenance fees, room, food and beverage revenues,
license and concession fees, income, proceeds and other benefits to which
Trustor may now or hereafter be entitled from the Leased Premises, the
Improvements, the Space Leases or any property encumbered hereby or any business
or other activity conducted by Trustor at the Leased Premises or the
Improvements.
"Security Agreements" means (i) that certain Mall Construction
Security Agreement dated as of November 14, 1997 by and between Trustor, as
debtor, and The Bank of Nova Scotia, a Canadian chartered bank through its New
York Agency, as Intercreditor Agent under the Intercreditor Agreement for and on
behalf of (a) each agent and each Bank Lender (as defined in the Bank Credit
Agreement) under the Bank Credit Agreement and any Interest Rate Exchangers (as
defined in the Bank Credit Agreement), (b) GMAC Commercial Mortgage Corporation,
a California corporation, (c) Beneficiary, for and on behalf of the Mortgage
Note Holders under the Mortgage Notes Indenture, and (d) the Intercreditor Agent
and the Disbursement Agent; and (ii) that certain Borrower Security Agreement
dated as of November 14, 1997 by and among Venetian, LVSI and Trustor,
collectively as debtor, and The Bank of Nova Scotia, a Canadian chartered bank
through its New York Agency, as Intercreditor Agent under the Intercreditor
Agreement for and on behalf of (a) each agent and each Bank Lender under the
Bank Credit Agreement and any Interest Rate Exchangers, (b) GMAC Commercial
Mortgage Corporation, a California corporation, (c) Beneficiary for and on
behalf of the Mortgage Note Holders under the Mortgage Notes indenture and (d)
the Intercreditor Agent and the Disbursement Agent (referred to herein as the
"Company Security Agreement").
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"Space Leases" means any and all leases, subleases, lettings,
licenses, concessions, operating agreements, management agreements, and all
other agreements affecting the Trust Estate, other than the Subject Leases, that
Trustor has entered into, taken by assignment, taken subject to, or assumed, or
has otherwise become bound by, now or in the future, that give any person the
right to conduct its business on, or otherwise use, operate or occupy, all or
any portion of the Leased Premises or Improvements and any leases, agreements or
arrangements permitting anyone to enter upon or use any of the Trust Estate to
extract or remove natural resources of any kind, together with all amendments,
extensions, and renewals of the foregoing entered into in compliance with this
Leasehold Deed of Trust, together with all rental, occupancy, service,
maintenance or any other similar agreements pertaining to use or occupation of,
or the rendering of services at the Leased Premises, the Improvements or any
part thereof.
"Space Lessee(s)" means any and all tenants, licensees, or other
grantees of the Space Leases and any and all guarantors, sureties, endorsers or
others having primary or secondary liability with respect to such Space Leases.
"Subject Leases" means the Mall Lease and the Billboard Master
Lease.
"Subordinate Deed of Trust" shall have the meaning ascribed thereto
in Section 1.9(b) of this Leasehold Deed of Trust.
"Tangible Collateral" means all personal property, goods, equipment,
supplies, building and other materials of every nature whatsoever and all other
tangible personal property constituting a part or portion of the Project and/or
used in the operation of the retail complex, restaurants, stores, parking
facilities, observation tower and all other commercial operations on the Leased
Premises or Improvements, including but not limited to communication systems,
visual and electronic surveillance systems and transportation systems and not
constituting a part of the real property subject to the real property lien of
this Leasehold Deed of Trust and including all property and materials stored
therein in which Trustor has an interest and all tools, utensils, food and
beverage, liquor, uniforms, linens, housekeeping and maintenance supplies,
vehicles, fuel, advertising and promotional material, blueprints, surveys, plans
and other documents relating to the Leased Premises or Improvements, and all
construction materials and all furnishings, fixtures and equipment, including,
but not limited to, all FF&E and all equipment and devices which are or are to
be installed and used in connection with the operation of the Project, those
items of furniture, fixtures and equipment which are to be purchased or leased
by Trustor, machinery and any other item of personal property in which Trustor
now or hereafter own or acquire an interest or right, and which are used or
useful in the construction, operation, use and occupancy of the Project and all
present and future right and interest of Trustor in and to any casino operator's
agreement, license agreement or sublease agreement used in connection with the
Leased Premises or the Improvements.
"Title Insurer" means Lawyers Title of Nevada, Inc., a Nevada
corporation, or an Affiliate thereof.
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"Trust Estate" means all of the property described in Granting
Clauses (A) through (O) below, inclusive, and each item of property therein
described, provided, however, that such term shall not include the property
described in Granting Clause (P) below.
"UCC" means the Uniform Commercial Code in effect in the State of
Nevada from time to time, NRS chapters 104 and 104A.
The following terms shall have the meaning assigned to such terms in
the Disbursement Agreement:
Affiliate
Bank Credit Agreement
Bank Leasehold Deed of Trust
Billboard Master Lease
Casino Lease
Cooperation Agreement
Environmental Laws
Financing Agreements
Funding Agents
GCCLLC Permitted Encumbrance
Governmental Instrumentality
HVAC Component
HVAC Ground Lease
Intercreditor Agreement
Interim Mall Leasehold Deed of Trust
Mortgage Note Holders
Mortgage Notes Indenture Trustee
Nevada Gaming Laws
Operative Documents
Permitted Liens
Person
Plans and Specifications
Pre-Development Agreement
Security Documents
Subsidiary
The following terms shall have the meaning assigned to such terms in
the Mortgage Notes Indenture:
Bankruptcy Law
Business Day
Gaming License
Issuance Date
Lien
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In addition, any capitalized terms used in this Leasehold Deed of Trust which
are not otherwise defined herein shall have the meaning ascribed to such terms
in the Disbursement Agreement and, if not defined therein, the meaning ascribed
to such terms in the Mortgage Notes Indenture.
W I T N E S S E T H:
IN CONSIDERATION OF TEN DOLLARS AND OTHER GOOD AND VALUABLE
CONSIDERATION; THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, AND
FOR THE PURPOSE OF SECURING in favor of Beneficiary (1) the due and punctual
payment of the indebtedness evidenced by the Notes; (2) the performance of each
covenant and agreement of Trustor contained in the Mortgage Notes Indenture,
herein, in the Mortgage Notes Indenture Security Documents, each other Security
Document granting a security interest for the benefit of the Beneficiary is a
party and the Disbursement Agreement; (3) the payment of such additional loans
or advances as hereafter may be made to Trustor (individually or jointly and
severally with any other Person) or its successors or assigns, when evidenced by
a promissory note or notes reciting that they are secured by this Deed of Trust;
provided, however, that any and all future advances by Beneficiary to Trustor
made for the improvement, protection or preservation of the Trust Estate,
together with interest at the Default Rate, shall be automatically secured
hereby unless such a note or instrument evidencing such advances specifically
recites that it is not intended to be secured hereby and (4) the payment of all
sums expended or advanced by Beneficiary under or pursuant to the terms hereof
or to protect the security hereof (including Protective Advances as such term is
defined in Section 4.2 hereof), together with interest thereon as herein
provided, Trustor, in consideration of the premises, and for the purposes
aforesaid, does hereby ASSIGN, BARGAIN, CONVEY, PLEDGE, RELEASE, HYPOTHECATE,
WARRANT, AND TRANSFER WITH POWER OF SALE UNTO TRUSTEE IN TRUST FOR THE BENEFIT
OF BENEFICIARY, AND THE MORTGAGE NOTE HOLDER(S) each of the following:
(A) The Leasehold Estate;
(B) TOGETHER WITH all the estate, right, title and interest of
Trustor of, in and to the Improvements;
(C) TOGETHER WITH all Appurtenant Rights;
(D) TOGETHER WITH all the estate, right, title and interest of
Trustor of, in and to the Tangible Collateral to the extent permitted by, or not
prohibited by, Nevada Gaming Laws and other applicable law;
(E) TOGETHER WITH the Intangible Collateral to the extent permitted
by, or not prohibited by, Nevada Gaming Laws and other applicable law;
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(F) TOGETHER WITH (i) all the estate, right, title and interest of
Trustor of, in and to all judgments and decrees, insurance proceeds, awards of
damages and settlements hereafter made resulting from condemnation proceedings
or the taking of any of the property described in Granting Clauses (A), (B),
(C), (D) and (E) hereof or any part thereof under the power of eminent domain,
or for any damage (whether caused by such taking or otherwise) to the property
described in Granting Clauses (A), (B), (C), (D) and (E) hereof or any part
thereof, or to any Appurtenant Rights thereto, and Beneficiary is hereby
authorized to collect and receive said awards and proceeds and to give proper
receipts and acquittance therefor, and (subject to the terms hereof) to apply
the same toward the payment of the indebtedness and other sums secured hereby,
notwithstanding the fact that the amount owing thereon may not then be due and
payable; (ii) all proceeds of any sales or other dispositions of the property or
rights described in Granting Clauses (A), (B), (C), (D) and (E) hereof or any
part thereof whether voluntary or involuntary, provided, however, that the
foregoing shall not be deemed to permit such sales, transfers, or other
dispositions except as specifically permitted herein; and (iii) whether arising
from any voluntary or involuntary disposition of the property described in
Granting Clauses (A), (B), (C), (D) and (E), all Proceeds, products,
replacements, additions, substitutions, renewals and accessions, remainders,
reversions and after-acquired interest in, of and to such property;
(G) TOGETHER WITH the absolute assignment of any Space Leases
(except with respect to the absolute assignment of the Casino Lease which may be
subject to Nevada Gaming Laws and other applicable law) or any part thereof that
Trustor has entered into, taken by assignment, taken subject to, or assumed, or
has otherwise become bound by, now or in the future, together with all of the
following (including all "Cash Collateral" within the meaning of the Bankruptcy
Law) arising from the Space Leases: (a) Rents (subject, however, to the
aforesaid absolute assignment to Trustee for the benefit of Beneficiary and the
conditional permission hereinbelow given to Trustor to collect the Rents), (b)
all guarantees, letters of credit, security deposits, collateral, cash deposits,
and other credit enhancement documents, arrangements and other measures with
respect to the Space Leases, (c) all of Trustor's right, title, and interest
under the Space Leases, including the following: (i) the right to receive and
collect the Rents from the lessee, sublessee or licensee, or their successor(s),
under any Space Lease(s) and (ii) the right to enforce against any tenants
thereunder and otherwise any and all remedies under the Space Leases, including
Trustor's right to evict from possession any tenant thereunder or to retain,
apply, use, draw upon, pursue, enforce or realize upon any guaranty of any Space
Lease; to terminate, modify, or amend the Space Leases; to obtain possession of,
use, or occupy, any of the real or personal property subject to the Space
Leases; and to enforce or exercise, whether at law or in equity or by any other
means, all provisions of the Space Leases and all obligations of the tenants
thereunder based upon (A) any breach by such tenant under the applicable Space
Lease (including any claim that Trustor may have by reason of a termination,
rejection, or disaffirmance of such Space Lease pursuant to the Bankruptcy Law)
and (B) the use and occupancy of the premises demised, whether or not pursuant
to the applicable Space Lease (including any claim for use and occupancy arising
under landlord- tenant law of the State of Nevada or the Bankruptcy Law).
Permission is hereby given to Trustor, so long as no Event of Default has
occurred and is continuing hereunder, to collect and use the Rents, as they
become due and payable, but not more than one (1) month in advance thereof. Upon
the occurrence of an Event of Default, the permission hereby given to
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Trustor to collect the Rents shall automatically terminate, but such permission
shall be reinstated upon a cure of such Event of Default. Beneficiary shall have
the right, at any time and from time to time, to notify any Space Lessee of the
rights of Beneficiary as provided by this section;
Notwithstanding anything to the contrary contained herein, the
foregoing provisions of this Paragraph (G) shall not constitute an assignment
for purposes of security constitute an absolute and present assignment of the
Rents to Beneficiary (except with respect to the absolute and present assignment
of the Rents from the Casino Lease, which may be subject to the Nevada Gaming
Laws and other applicable law), subject, however, to the conditional license
given to Trustor to collect and use the Rents as hereinabove provided; and the
existence or exercise of such right of Trustor shall not operate to subordinate
this assignment to any subsequent assignment, in whole or in part, by Trustor;
(H) TOGETHER WITH all of Trustor's right, title and interest in and
to any and all Plans and Specifications and all maps, plans, specifications,
surveys, studies, tests, reports, data and drawings relating to the development
of the Leased Premises or the Project and the construction of the Improvements,
including, without limitation, all marketing plans, feasibility studies, soils
tests, design contracts and all contracts and agreements of Trustor relating
thereto including, without limitation, architectural, structural, mechanical and
engineering plans and specifications, studies, data and drawings prepared for or
relating to the development of the Leased Premises or the Project or the
construction, renovation or restoration of any of the Improvements or the
extraction of minerals, sand, gravel or other valuable substances from the
Leased Premises and purchase contracts or any agreement granting Trustor a right
to acquire any land situated within Clark County, Nevada;
(I) TOGETHER WITH, to the extent permitted by applicable law, all of
Trustor's right, title, and interest in and to any and all licenses, permits,
variances, special permits, franchises, certificates, rulings, certifications,
validations, exemptions, filings, registrations, authorizations, consents,
approvals, waivers, orders, rights and agreements (including, without
limitation, options, option rights, contract rights now or hereafter obtained by
Trustor from any Governmental Instrumentality having or claiming jurisdiction
over the Leased Premises, the FF&E, the Project, or any other element of the
Trust Estate or providing access thereto, or the operation of any business on,
at, or from the Leased Premises including, without limitation, any liquor or
Gaming Licenses, (except for any registrations, licenses, findings of
suitability or approvals issued by the Nevada Gaming Authorities or any other
liquor or gaming licenses which are non-assignable); provided, that upon an
Event of Default hereunder or under the Mortgage Notes Indenture, if Beneficiary
is not qualified under the Nevada Gaming Laws to hold such Gaming Licenses, then
Beneficiary may designate an appropriately qualified third party to which an
assignment of such Gaming Licenses can be made in compliance with the Nevada
Gaming Laws;
(J) TOGETHER WITH all water stock, water permits and other water
rights relating to the Leased Premises;
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(K) TOGETHER WITH all oil and gas and other mineral rights, if any,
in or pertaining to the Leased Premises and all royalty, leasehold and other
rights of Trustor pertaining thereto;
(L) TOGETHER WITH any and all monies and other property, real or
personal, which may from time to time be subjected to the lien hereof by Trustor
or by anyone on its behalf or with its consent, or which may come into the
possession or be subject to the control of Trustee or Beneficiary pursuant to
this Leasehold Deed of Trust, any Mortgage Notes Indenture Security Document or
any other Security Document granting a security interest to the Beneficiary,
including, without limitation, any Protective Advances under this Leasehold Deed
of Trust; and all of Trustor's right, title, and interest in and to all
extensions, improvements, betterments, renewals, substitutes for and
replacements of, and all additions, accessions, and appurtenances to, any of the
foregoing that Trustor may subsequently acquire or obtain by any means, or
construct, assemble, or otherwise place on any of the Trust Estate, and all
conversions of any of the foregoing; it being the intention of Trustor that all
property hereafter acquired by Trustor and required by this Leasehold Deed of
Trust, any Mortgage Notes Indenture Security Document or any other Security
Document granting a security interest to the Beneficiary that is to be subject
to the lien of this Leasehold Deed of Trust or intended so to be shall forthwith
upon the acquisition thereof by Trustor be subject to the lien of this Leasehold
Deed of Trust as if such property were now owned by Trustor and were
specifically described in this Leasehold Deed of Trust and granted hereby or
pursuant hereto, and Trustee and Beneficiary are hereby authorized, subject to
Nevada Gaming Laws and other applicable laws, to receive any and all such
property as and for additional security for the obligations secured or intended
to be secured hereby. Trustor agrees to take any action as may reasonably be
necessary to evidence and perfect such liens or security interests, including,
without limitation, the execution of any documents necessary to evidence and
perfect such liens or security interests;
(M) TOGETHER WITH, to the extent permitted by applicable laws, any
and all Accounts Receivable and all royalties, earnings, income, proceeds,
products, rents, revenues, reversions, remainders, issues, profits, avails,
production payments, and other benefits directly or indirectly derived or
otherwise arising from any of the foregoing, all of which are hereby assigned to
Beneficiary, who, except as otherwise expressly provided in this Leasehold Deed
of Trust, is authorized, subject to the provisions of Section 1.13 hereof, to
collect and receive the same, to give receipts and acquittances therefor and to
apply the same to the Obligations secured hereunder, whether or not then due and
payable;
(N) TOGETHER WITH Proceeds of the foregoing property described in
Granting Clauses (A) through (M);
(O) TOGETHER WITH Trustor's rights further to assign, sell, lease,
encumber or otherwise transfer or dispose of the property described in Granting
Clauses (A) through (N) inclusive, above, for debt or otherwise; and
(P) EXPRESSLY EXCLUDING, HOWEVER, (i) FF&E and items described in
clause (2) of the definition of Improvements (to the extent that such FF&E and
items
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described in clause (2) of the definition of Improvements were financed through
an FF&E Financing Agreement which together with all other FF&E Financing
Agreements shall be in an aggregate amount not to exceed $100,000,000 and such
FF&E Financing Agreement prohibits the Beneficiary and the Mortgage Note
Holder(s) under the Mortgage Notes Indenture from maintaining a security
interest in the FF&E and items described in clause (2) of the definition of
Improvements covered thereby; (ii) any other assets expressly excluded from the
definition of "Note Collateral" in the Mortgage Notes Indenture, and (iii) the
HVAC Component.
Trustor, for itself and its successors and assigns, covenants and
agrees to and with Trustee that, at the time or times of the execution of and
delivery of these presents or any instrument of further assurance with respect
thereto, Trustor has good right, full power and lawful authority to assign,
grant, convey, warrant, transfer, bargain or sell its interests in the Trust
Estate in the manner and form as aforesaid, and that the Trust Estate is free
and clear of all liens and encumbrances whatsoever, except the Permitted Liens,
and Trustor shall warrant and forever defend the above-bargained property in the
quiet and peaceable possession of Trustee and its successors and assigns against
all and every person or persons lawfully or otherwise claiming or to claim the
whole or any part thereof, except for Permitted Liens. Trustor agrees that any
greater title to the Trust Estate hereafter acquired by Trustor during the term
hereof shall be automatically subject hereto.
ARTICLE ONE
COVENANTS OF TRUSTOR
The Mortgage Note Holder(s) have been induced to purchase the Notes on the
basis of the following material covenants, all agreed to by Trustor
1.1 Performance of Financing Agreements. Trustor shall perform, observe
and comply with each and every provision hereof, and with each and every
provision contained in the Financing Agreements and shall promptly pay to the
respective Funding Agents, when payment shall become due, the principal with
interest thereon and all other sums required to be paid by Trustor under this
Leasehold Deed of Trust and the other Financing Agreements.
1.2 Leasehold Estate. Trustor represents, covenants and warrants: (a) that
the Subject Leases are in full force and effect and unmodified; (b) Trustor will
defend the Leasehold Estate under each Subject Lease for the entire remainder of
the term set forth in each of the said Subject Leases against all and every
Person or Persons lawfully claiming, or who may claim the same or any part
thereof, subject to the payment of the rents in the Subject Lease reserved and
subject to the performance and observance of all of the terms, covenants,
conditions and warranties thereof; (c) that there is no uncured default under
any Subject Lease or in the performance of any of the terms, covenants,
conditions or warranties thereof on the part of the lessee to be observed and
performed and that no state of facts exist under a Subject Lease which, with the
lapse of time or giving of notice or both would constitute a default thereunder;
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1.3 General Representations, Covenants and Warranties. Trustor represents,
covenants and warrants that: (a) Trustor has a valid leasehold interest in the
Leased Premises, free and clear of all encumbrances except GCCLLC Permitted
Encumbrances, and that it has the right to hold, occupy and enjoy its interest
in the Trust Estate, and has good right, full power and lawful authority to
subject the Trust Estate to the Lien of this Leasehold Deed of Trust and pledge
the same as provided herein and Beneficiary may at all times peaceably and
quietly enter upon, hold, occupy and enjoy the entire Trust Estate in accordance
with the terms hereof; (b) Trustor is not Insolvent and no bankruptcy or
insolvency proceedings are pending or contemplated by or, to the best of
Trustor's knowledge, threatened against Trustor; (c) all costs arising from
construction of any Improvements, the performance of any labor and the purchase
of all Tangible Collateral and Improvements have been or shall be paid when due
(subject to the provisions of the Disbursement Agreement, the Mortgage Notes
Indenture and this Leasehold Deed of Trust); (d) the Leased Premises has
frontage on, and direct access for ingress and egress to dedicated street(s);
(e) Trustor shall at all times conduct and operate the Trust Estate in a manner
so as not to lose, or permit its affiliate to lose the right to conduct gaming
activities at the Project; (f) no material part of the Trust Estate has been
damaged, destroyed, condemned or abandoned, other than those portions of the
Trust Estate that have been the subject of condemnation proceedings that have
resulted in the conveyance of such portion of the Trust Estate to the Trustor;
(g) no part of the Trust Estate is the subject of condemnation proceedings,
other than condemnation proceedings to convey Leased Premises to the Trustor,
and Trustor has no knowledge of any contemplated or pending condemnation
proceeding with respect to any portion of the Trust Estate other than
condemnation proceedings to convey Leased Premises to the Trustor and other than
those proceedings set forth in Exhibit B attached hereto; and (h) Trustor
acknowledges and agrees that it presently uses, and has in the past used,
certain trade or fictitious names in connection with the operation of the
business at the Trust Estate, including the names listed on Exhibit C attached
hereto (all of the foregoing, collectively, the "Enumerated Names"). For all
purposes under this Leasehold Deed of Trust it shall be deemed that the term
"Trustor" includes, in addition to "Grand Canal Shops Mall Construction, LLC"
all trade or fictitious, names that Grand Canal Mall Shops Construction, LLC (or
any successor or assign thereof) now or hereafter uses, or has in the past used,
including, without limitation, the Enumerated Names, with the same force and
effect as if this Leasehold Deed of Trust had been executed in all such names
(in addition to "Grand Canal Mall Shops Construction, LLC").
1.4 Payment of Expenses of the Subject Leases. The Trustor shall pay or
cause to be paid on or prior to the date due all rents, additional rents and
other Impositions payable by the lessee under the Subject Leases for which
provision has not been made hereinbefore, when and as often as the same shall
become due and payable and the share of all amounts payable under the
Cooperation Agreement allocable to the Leased Premises. Trustor will in every
case deliver, or cause to be delivered, proper receipts for any such item so
paid and will within ten (10) days after the time when such payment shall be due
and payable deliver to the Beneficiary, a copy of the receipts for any such
payments.
1.5 Trustor's Covenants with Respect to the Subject Leases.
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a. The Trustor shall at all times promptly and faithfully keep and
perform, or cause to be kept and performed, all the covenants and conditions
contained in the Subject Leases to be kept and performed by the lessee under the
Subject Leases and in all respects conform to and comply with the terms and
conditions of the Subject Leases. The Trustor further covenants that it shall
not do or permit anything to occur or omit to occur which will impair or tend to
impair the security of this Leasehold Deed of Trust or will be grounds for
declaring a forfeiture of either Subject Lease, and upon any such failure
aforesaid, Trustor shall be subject to all of the rights and remedies granted
Beneficiary in this Leasehold Deed of Trust.
b. Trustor shall not modify, extend or in any way alter the terms of the
Subject Leases or cancel or surrender said Subject Leases, or waive, execute,
condone or in any way release or discharge the applicable lessor thereunder of
or from the obligations, covenants, conditions and agreements by the applicable
lessor to be done and performed; and Trustor does expressly release, relinquish
and surrender unto Beneficiary all of its rights, power and authority to cancel,
surrender, amend, modify or alter in any way the terms and provisions of the
Subject Leases and any attempt on the part of Trustor to exercise any such right
without the written approval and consent of Beneficiary thereto being first had
and obtained shall constitute an Event of Default under the terms hereof and the
Notes and all indebtedness or sums secured hereby shall, at the option of
Beneficiary, become due and payable forthwith and without notice.
c. The Notes and all indebtedness of Trustor to Beneficiary secured hereby
shall immediately become due and payable at the option of Beneficiary, if
Trustor fails to give Beneficiary immediate notice of any default under the
Subject Leases or of the receipt by it of any notice of default from the lessor
thereunder, or if Trustor fails to furnish to Beneficiary immediately any and
all information which it may request concerning the performance by Trustor of
the covenants of the Subject Leases, or if Trustor fails to permit Beneficiary
or its representative at all reasonable times to make investigation or
examination concerning the performance by Beneficiary of the covenants of the
Subject Leases, or if Trustor fails to permit Beneficiary or its representative
at all reasonable times to make investigation or examination concerning such
performance. Trustor shall deliver to Beneficiary an original executed copy of
each Subject Lease, an estoppel certificate from the applicable lessor within
ten (10) days of request by Beneficiary and in such form and content as shall be
satisfactory to Beneficiary, as well as any and all documentary evidence
received by it showing compliance by Trustor with the provisions of the Subject
Leases.
d. In the event of any failure by Trustor to perform any covenant on the
part of lessee to be observed and performed under the Subject Leases, the
performance by Beneficiary on behalf of Trustor of the applicable Subject Lease
covenant shall not remove or waive, as between Trustor and Beneficiary, the
corresponding Event of Default under the terms hereof and any amount so advanced
by Beneficiary or any costs incurred in connection therewith, with interest
thereon at the Default Rate shall constitute additional indebtedness secured
hereby and be immediately due and payable.
e. To the extent permitted by law, the price payable by Trustor, or by any
other party so entitled, in the exercise of the right of redemption, if any,
shall include all rents paid
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and other sums advanced by Beneficiary, on behalf of Trustor, as lessee under
the Subject Leases.
1.6 Compliance with Legal Requirements. Trustor shall promptly, fully, and
faithfully comply in all material respects with all Legal Requirements and shall
cause all portions of the Trust Estate and its use and occupancy to fully comply
in all material respects with Legal Requirements at all times, whether or not
such compliance requires work or remedial measures that are ordinary or
extraordinary, foreseen or unforeseen, structural or nonstructural, or that
interfere with the use or enjoyment of the Trust Estate.
1.7 Taxes. Except as otherwise permitted by Section 4.05 of the Mortgage
Notes Indenture and Section 4.10 of the Disbursement Agreement, (a) Trustor
shall pay all Impositions as they become due and payable and shall deliver to
Beneficiary promptly upon Beneficiary's request, evidence satisfactory to
Beneficiary that the Impositions have been paid or are not delinquent; (b)
Trustor shall not suffer to exist, permit or initiate the joint assessment of
the real and personal property, or any other procedure whereby the lien of the
real property taxes and the lien of the personal property taxes shall be
assessed, levied or charged to the Leased Premises as a single lien, except as
may be required by law; and (c) in the event of the passage of any law deducting
from the value of real property for the purposes of taxation any lien thereon,
or changing in any way the taxation of deeds of trust or obligations secured
thereby for state or local purposes, or the manner of collecting such taxes and
imposing a tax, either directly or indirectly, on this Leasehold Deed of Trust
or the Notes, Trustor shall pay all such taxes and all payments required with
respect to taxes pursuant to the terms of the Cooperation Agreement (including,
without limitation, Article VI thereof).
1.8 Insurance.
(a) Hazard Insurance Requirements and Proceeds.
(1) Hazard Insurance. Trustor shall at its sole expense obtain
for, deliver to, assign and maintain for the benefit of Beneficiary, during the
term of this Leasehold Deed of Trust, insurance policies insuring the Trust
Estate and liability insurance policies, all in accordance with the requirements
of Section 4.20 of the Mortgage Notes Indenture, Section 5.19 of the
Disbursement Agreement, while in effect, and Article X of the Cooperation
Agreement. Trustor shall pay promptly when due any premiums on such insurance
policies and on any renewals thereof and all payments required with respect to
the procurement of insurance pursuant to the terms of the Cooperation Agreement
(including, without limitation, Article VI thereof). In the event of the
foreclosure of this Leasehold Deed of Trust or any other transfer of title to
the Trust Estate in partial or complete extinguishment of the indebtedness and
other sums secured hereby, all right, title and interest of Beneficiary in and
to all insurance policies and renewals thereof then in force shall pass to the
purchaser or grantee.
(2) Handling of Proceeds. All Proceeds from any insurance
policies shall be collected, held, handled and disbursed in accordance with the
provisions of Section 5.20 of the Disbursement Agreement, while in effect, and
thereafter in accordance with Articles X and
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XI of the Cooperation Agreement. Beneficiary shall have the right to apply
toward payment of all Obligations (to the extent then due and payable) any
insurance proceeds which (a) arise out of damage to property of the Trustor
(including without limitation any insurance proceeds recovered under the
policies of insurance maintained pursuant to Article X Section 2(A)(iv), (v) or
(vi) or Article X Section 2(B)(v) or (vi) of the Cooperation Agreement), (b) are
allocable to Trustor, and (c) are not required to be applied toward restoration
of the improvements on the Leased Premises pursuant to the terms of the
Cooperation Agreement. All proceeds of insurance allocable to Trustor, as lessee
of the Leased Premises and owner of the Improvements, and attributable to
business interruption insurance shall be collected, held, handled and disbursed
in accordance with the provisions of Section 5.20 of the Disbursement Agreement,
while in effect, and thereafter, in accordance with the Cooperation Agreement.
Any such proceeds disbursed to Beneficiary shall be applied to pay amounts then
due and payable under this Leasehold Deed of Trust. The balance shall be
retained by Beneficiary or its designee in an interest bearing or other
investment account approved by Beneficiary, which account Trustor hereby pledges
to Beneficiary to secure the Obligations. Disbursements shall be permitted from
such account to pay expenses reasonably incurred by Trustor in owning and
operating the Trust Estate, as reasonably approved by Beneficiary.
(b) Compliance with Insurance Policies. Trustor shall not violate or
permit to be violated any of the conditions or provisions of any policy of
insurance required by the Mortgage Notes Indenture, the Disbursement Agreement
(while in effect), the Cooperation Agreement or this Leasehold Deed of Trust and
Trustor shall so perform and satisfy the requirements of the companies writing
such policies that, at all times, companies of good standing shall be willing to
write and/or continue such insurance. Trustor further covenants to promptly send
to Beneficiary all notices relating to any violation of such policies or
otherwise affecting Trustor's insurance coverage or ability to obtain and
maintain such insurance coverage.
1.9 Condemnation. Beneficiary is hereby authorized, at its option, to
commence, appear in and prosecute in its own or Trustor's name any action or
proceeding relating to any condemnation and, subject to Article XII of the
Cooperation Agreement, to settle or compromise any claim in connection
therewith, and Trustor hereby appoints Beneficiary as its attorney-in-fact to
take any action in Trustor's name pursuant to Beneficiary's rights hereunder.
Immediately upon obtaining knowledge of the institution of any proceedings for
the condemnation of the Trust Estate, or any portion thereof, Trustor shall
notify the Trustee and Beneficiary of the pendency of such proceedings. Trustor
from time to time shall execute and deliver to Beneficiary all instruments
requested by it to permit such participation; provided, however, that such
instruments shall be deemed as supplemental to the foregoing grant of permission
to Trustee and Beneficiary, and unless otherwise required, the foregoing
permission shall, without more, be deemed sufficient to permit Trustee and/or
Beneficiary to participate in such proceedings on behalf of Trustor. All such
compensation awards, damages, claims, rights of action and Proceeds, and any
other payments or relief, and the right thereto, are, whether paid to
Beneficiary or Trustor or a third party trustee, included in the Trust Estate.
Beneficiary, after deducting therefrom all its expenses, including reasonable
attorneys fees, shall apply all Proceeds paid directly to it in accordance with
the provisions of Section 4.11 of the Mortgage Notes Indenture. All such
Proceeds paid directly to the Trustor shall be
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applied by Trustor in accordance with Section 5.20 of the Disbursement
Agreement, while in effect, and thereafter in accordance with Article XII of the
Cooperation Agreement. To the extent that any condemnation proceeds are not
required to be applied towards restoration of the Improvements, then Beneficiary
shall have the right to apply said condemnation proceeds to the Obligations.
Trustor hereby waives any rights it may have under NRS 37.115, as amended or
recodified from time to time.
1.10 Care of Trust Estate.
(a) Trustor shall preserve and maintain the Trust Estate in good
condition and repair. Trustor shall not permit, commit or suffer to exist any
waste, impairment or deterioration of the Trust Estate or of any part thereof
that in any manner materially impairs Beneficiary's security hereunder and shall
not take any action which will materially increase the risk of fire or other
hazard to the Trust Estate or to any part thereof.
(b) Except for Permitted Dispositions, no material part of the
Improvements or Tangible Collateral that are part of the Trust Estate shall be
removed, demolished or materially altered, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed.
Trustor shall have the right, without such consent, to remove and dispose of
free from the lien of this Leasehold Deed of Trust any part of the Improvements
or Tangible Collateral that are part of the Trust Estate as from time to time
may become worn out or obsolete or otherwise not useful in connection with the
operation of the Trust Estate, provided that either (i) such removal or
disposition does not materially affect the value of the Trust Estate or (ii)
prior to or promptly following such removal, any such property shall be replaced
with other property of substantially equal utility and of a value at least
substantially equal to that of the replaced property when first acquired and
free from any security interest of any other person (subject only to Permitted
Liens), and by such removal and replacement Trustor shall be deemed to have
subjected such replacement property to the lien of this Leasehold Deed of Trust.
(c) Notwithstanding the foregoing provisions of this Section 1.7,
the Trustor may develop the Project in the manner contemplated by the Plans and
Specifications and in accordance with the Mortgage Notes indenture and the other
Financing Agreements and the Cooperation Agreement.
1.11 Leases
(a) Trustor represents and warrants that:
(i) Trustor has delivered to Beneficiary true, correct and
complete copies of all Space Leases, including all amendments and modifications,
written or oral existing as of the Issuance Date;
(ii) Trustor has not executed or entered into any
modifications or amendments of the Space Leases, either orally or in writing,
other than written amendments that have been disclosed to Beneficiary in
writing;
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(iii) to Trustor's knowledge, no default now exists under any
Space Lease;
(iv) to Trustor's knowledge, no event has occurred that, with
the giving of notice or the passage of time or both, would constitute such a
default or would entitle Trustor or any other party under such Space Lease to
cancel the same or otherwise avoid its obligations;
(v) Trustor has not accepted prepayments of installments of
Rent under any Space Leases, except for installment payments not in excess of
one month's Rent and security deposits;
(vi) except for the assignment effected hereby and in the
other Financing Agreements, Trustor has not executed any assignment or pledge of
any of Space Leases, the Rents, or of Trustor's right, title and interest in the
same; and
(vii) this Leasehold Deed of Trust does not constitute a
violation or default under any Space Lease, and is and shall at all times
constitute a valid lien on Trustor's interests in the Space Leases.
(b) Trustor shall not enter into any Lease Transaction unless such
Lease Transaction complies with the requirements of Section 4.24 of the Mortgage
Notes Indenture.
(c) After an Event of Default, Trustor shall deliver to Beneficiary
the executed originals of all Space Leases.
1.12 Further Encumbrance.
(a) Trustor covenants that at all times prior to the discharge of
the Mortgage Notes Indenture and the Notes, except for Permitted Liens and
Permitted Dispositions, Trustor shall neither make nor suffer to exist, nor
enter into any agreement for, any sale, assignment, exchange, mortgage,
transfer, Lien, hypothecation or encumbrance of all or any part of the Trust
Estate, including, without limitation, the Rents. As used herein, "transfer"
includes the actual transfer or other disposition, whether voluntary or
involuntary, by law, or otherwise, except those transfers specifically permitted
herein, provided, however, that "transfer" shall not include the granting of
utility or other beneficial easements with respect to the Trust Estate which
have been or are granted by Trustor and are reasonably necessary to the
construction, maintenance or operation of the Project.
(b) Any Permitted Lien consisting of the lien of a deed of trust
which is junior to the lien of the Mortgage Notes Indenture Security Documents,
or any other Security Document granting a security interest for the benefit of
the Mortgage Notes Indenture Trustee (a "Subordinate Deed of Trust") shall be
permitted hereunder so long as there shall have been delivered to Beneficiary,
not less than thirty (30) days prior to the date thereof, a copy thereof which
shall contain express covenants in form and substance satisfactory to
Beneficiary to the effect that: (i) the Subordinate Deed of Trust is in all
respects subject and subordinate
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to this Leasehold Deed of Trust; (ii) if any action or proceeding shall be
brought to foreclose the Subordinate Deed of Trust (regardless of whether the
same is a judicial proceeding or pursuant to a power of sale contained therein),
no tenant of any portion of the Trust Estate shall be named as a party defendant
nor shall any action be taken with respect to the Trust Estate which would
terminate any occupancy or tenancy of the Trust Estate, or any portion thereof,
without the consent of Beneficiary; (iii) any Rents, if collected through a
receiver or by the holder of the Subordinate Deed of Trust, shall be applied
first to the obligations secured by this Leasehold Deed of Trust, including
principal and interest due and owing on or to become due and owing on the Notes,
and then to the payment of maintenance expenses, operating charges, taxes,
assessments, and disbursements incurred in connection with the ownership,
operation, and maintenance of the Trust Estate; and (iv) if any action or
proceeding shall be brought to foreclose the Subordinate Deed of Trust, prompt
notice of the commencement thereof shall be given to Beneficiary.
(c) Trustor agrees that in the event the ownership of the Trust
Estate or any part thereof becomes vested in a person other than Trustor,
Beneficiary may, without notice to Trustor, deal in any way with such successor
or successors in interest with reference to this Leasehold Deed of Trust, the
Notes and other Obligations hereby secured without in any way vitiating or
discharging Trustor's or any guarantor's, surety's or endorser's liability
hereunder or upon the obligations hereby secured. No sale of the Trust Estate
and no forbearance to any person with respect to this Leasehold Deed of Trust
and no extension to any person of the time for payment of the Notes, and other
sums hereby secured given by Beneficiary shall operate to release, discharge,
modify, change or affect the original liability of Trustor, or such guarantor,
surety or endorser either in whole or in part.
(d) Trustor covenants and agrees to comply with all of the terms and
conditions set forth in any FF&E Financing Agreement. If Trustor shall fail to
make any payment required to be made by it under any FF&E Financing Agreement,
except where Trustor is contesting such payment in good faith, then the
Beneficiary shall be entitled to make such payment on Trustor's behalf and any
and all sums so expended by the Beneficiary shall be secured by this Leasehold
Deed of Trust and shall be repaid by Trustor upon demand, together with interest
thereon at the Default Rate from the date of advance.
1.13 Partial Releases of Trust Estate.
(a) Trustor may from time to time make a Permitted Disposition
including, but not limited to, (i) transferring a portion of the Trust Estate
(including any temporary taking) to any person legally empowered to exercise the
power of eminent domain, (ii) granting utility easements reasonably necessary or
desirable for the construction and/or operation of the Project, which grant or
transfer is for the benefit of the Trust Estate, or (iii) transferring a portion
of the Trust Estate as permitted pursuant to Sections 5.16 (b), (c) and (d) of
the Disbursement Agreement. In each such case, Beneficiary shall execute and
deliver any instruments necessary or appropriate to effectuate or confirm any
such transfer or grant, free from the lien of this Leasehold Deed of Trust,
provided, however, that Beneficiary shall execute a lien release or
subordination agreement, as appropriate, for matters described in clauses (i)
and (iii) above only if:
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(A) Beneficiary and Trustee shall have received an Officer's
Certificate if required by Section 4.10 of the Mortgage Notes Indenture;
(B) Such transfer, grant or release is not prohibited by the
Mortgage Notes Indenture and all conditions precedent contained in the
Mortgage Notes Indenture for such transfer, grant or release, if any,
shall have been satisfied;
(C) Beneficiary and Trustee shall have received a counterpart
of the instrument pursuant to which such transfer, grant or release is to
be made, and each instrument which Beneficiary or Trustee is requested to
execute in order to effectuate or confirm such transfer, grant or release;
(D) In the case of a transfer to a Person legally empowered to
exercise the power of eminent domain, which transfer involves property
whose value is greater than $5,000,000, Beneficiary and Trustee shall have
received an opinion of counsel, who may be counsel to Trustor, to the
effect that the assignee or grantee of the portion of the Trust Estate
being transferred is legally empowered to take such portion under the
power of eminent domain; and
(E) Beneficiary and Trustee shall have received such other
instruments, certificates (including evidence of authority) and opinions
as Beneficiary or Trustee may reasonably request, including, but not
limited to, opinions that the proposed release is permitted by this
Section 1.10.
(b) Any consideration received for a transfer to any person
empowered to exercise the right of eminent domain shall be subject to Section
1.9 hereof.
1.14 Further Assurances.
(a) At its sole cost and without expense to Trustee or Beneficiary,
and subject in all events to compliance with Nevada Gaming Laws and other
applicable Legal Requirements, Trustor shall do, execute, acknowledge and
deliver any and all such further acts, deeds, conveyances, notices, requests for
notices, financing statements, continuation statements, certificates,
assignments, notices of assignments, agreements, instruments and further
assurances, and shall mark any chattel paper, deliver any chattel paper or
instruments to Beneficiary and take any other actions that are necessary,
prudent, or reasonably requested by Beneficiary or Trustee to perfect or
continue the perfection and first priority of Beneficiary's security interest in
the Trust Estate, to protect the Trust Estate against the rights, claims, or
interests of third persons other than holders of Permitted Liens or to effect
the purposes of this Leasehold Deed of Trust, including the security agreement
and the absolute assignment of Rents contained herein, or for the filing,
registering or recording thereof.
(b) Trustor shall forthwith upon the execution and delivery of this
Leasehold Deed of Trust, and thereafter from time to time, cause this Leasehold
Deed of Trust and each instrument of further assurance to be filed, indexed,
registered, recorded, given or delivered in such manner and in such places as
may be required by any present or future law in order to
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publish notice of and fully to protect the lien hereof upon, and the title of
Trustee and/or Beneficiary to, the Trust Estate.
(c) Upon any modification of the boundaries of the leased premises
pursuant to the Cooperation Agreement, Trustor, at Trustor's expense, shall
notify Beneficiary and amend this Leasehold Deed of Trust to reflect an accurate
description of the Leased Premises. In connection therewith, Trustor shall
provide Beneficiary with such title insurance endorsements to Beneficiary's
title policy as Beneficiary may reasonably request.
1.15 Security Agreement and Financing Statements. Trustor (as debtor)
hereby grants to Beneficiary (as creditor and secured party) a present and
future security interest in all Tangible Collateral, Intangible Collateral, FF&E
(to the extent Beneficiary is not prohibited, in each applicable FF&E Financing
Agreement, to maintain a security interest therein), Improvements (to the
extent, in the case of Improvements described in clause (2) of the definition
thereof, that Beneficiary is not prohibited in each applicable FF&E Financing
Agreement covering such Improvements, to maintain a security interest therein),
all other personal property now or hereafter owned or leased by Trustor or in
which Trustor has or will have any interest, to the extent that such property
constitutes a part of the Trust Estate (whether or not such items are stored on
the premises or elsewhere), Proceeds of the foregoing comprising a portion of
the Trust Estate and all proceeds of insurance policies and consideration awards
arising therefrom and all proceeds, products, substitutions, and accessions
therefor and thereto, subject to Beneficiary's rights to treat such property as
real property as herein provided (collectively, the "Personal Property").
Trustor shall execute any and all documents and writings, including without
limitation financing statements pursuant to the UCC, as may be necessary or
prudent to preserve and maintain the priority of the security interest granted
hereby on property which may be deemed subject to the foregoing security
agreement or as Beneficiary may reasonably request, and shall pay to Beneficiary
on demand any reasonable expenses incurred by Beneficiary in connection with the
preparation, execution and filing of any such documents. Trustor hereby
authorizes and empowers Beneficiary to execute and file, on Trustor's behalf,
all financing statements and refiling and continuations thereof as advisable to
create, preserve and protect said security interest. This Leasehold Deed of
Trust constitutes both a real property deed of trust and a "security agreement,"
within the meaning of the UCC, and the Trust Estate includes both real and
personal property and all other rights and interests, whether tangible or
intangible in nature, of Trustor in the Trust Estate. Trustor by executing and
delivering this Leasehold Deed of Trust has granted to Beneficiary, as security
of the Obligations, a security interest in the Trust Estate.
(a) Fixture Filing. Without in any way limiting the generality of
the immediately preceding paragraph or of the definition of the Trust Estate,
this Leasehold Deed of Trust constitutes a fixture filing under Sections 9-313
and 9-402 of the UCC (NRS 104.9313 and NRS 104.9402). For such purposes, (i) the
"debtor" is Trustor and its address is the address given for it in the initial
paragraph of this Leasehold Deed of Trust; (ii) the "secured party" is
Beneficiary, and its address for the purpose of obtaining information is the
address given for it in Section 6.2 of this Leasehold Deed of Trust; (iii) the
real estate to which the fixtures are or are to become attached is Trustor's
interest in the Leased Premises; and (iv) the record owner of such real estate
is Venetian.
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(b) Remedies. This Leasehold Deed of Trust shall be deemed a
security agreement as defined in the UCC and the remedies for any violation of
the covenants, terms and conditions of the agreements herein contained shall
include any or all of (i) those prescribed herein, and (ii) those available
under applicable law, and (iii) those available under the UCC, all at
Beneficiary's sole election. In addition, a photographic or other reproduction
of this Leasehold Deed of Trust shall be sufficient as a financing statement for
filing wherever filing may be necessary to perfect or continue the security
interest granted herein.
(c) Derogation of Real Property. It is the intention of the parties
that the filing of a financing statement in the records normally having to do
with personal property shall never be construed as in anyway derogating from or
impairing the express declaration and intention of the parties hereto as
hereinabove stated that everything used in connection with the production of
income from the Trust Estate and/or adapted for use therein and/or which is
described or reflected in this Leasehold Deed of Trust is, and at all times and
for all purposes and in all proceedings both legal or equitable, shall be
regarded as part of the real property encumbered by this Leasehold Deed of Trust
irrespective of whether (i) any such item is physically attached to the
Improvements, (ii) serial numbers are used for the better identification of
certain equipment items capable of being thus identified in a recital contained
herein or in any list filed with Beneficiary, or (iii) any such item is referred
to or reflected in any such financing statement so filed at any time. It is the
intention of the parties that the mention in any such financing statement of (1)
rights in or to the proceeds of any fire and/or hazard insurance policy, or (2)
any award in eminent domain proceedings for a taking or for loss of value, or
(3) Trustor's interest as lessors in any present or future Space Lease or rights
to Rents, shall never be construed as in anyway altering any of the rights of
Beneficiary as determined by this Leasehold Deed of Trust or impugning the
priority of Beneficiary's real property lien granted hereby or by any other
recorded document, but such mention in the financing statement is declared to be
for the protection of Beneficiary in the event any court or judge shall at any
time hold with respect to the matters set forth in the foregoing clauses (1),
(2) and (3) that notice of Beneficiary's priority of interest to be effective
against a particular class of persons, including but not limited to, the federal
government and any subdivisions or entity of the federal government, must be
filed in the UCC records.
(d) Priority; Permitted Financing of Tangible Collateral. All
Personal Property of any nature whatsoever which is subject to the provisions of
this security agreement shall be purchased or obtained by Trustor in its name
and free and clear of any lien or encumbrance, except for Permitted Liens and
the lien hereof, for use only in connection with the business and operation of
the Project, and shall be and at all times remain free and clear of any lease or
similar arrangement, chattel financing, installment sale agreement, security
agreement and any encumbrance of like kind, so that Beneficiary's security
interest shall attach to and vest in Trustor for the benefit of Beneficiary,
with the priority herein specified, immediately upon the installation or use of
the Personal Property at the Leased Premises and Trustor warrants and represents
that Beneficiary's security interest in the Personal Property is a validly
attached and binding security interest, properly perfected and prior to all
other security interests therein except as otherwise permitted in this Leasehold
Deed of Trust. The foregoing shall not be construed as limiting Trustor's rights
to transfer Personal Property
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pursuant to Permitted Dispositions or to obtain releases of Personal Property
from the Lien of this Leasehold Deed of Trust pursuant to Section 1.13 hereof.
(e) Preservation of Contractual Rights of Collateral. Trustor shall,
prior to delinquency, default, or forfeiture, perform all obligations and
satisfy all material conditions required on its part to be satisfied to preserve
its rights and privileges under any contract, lease, license, permit, or other
authorization (i) under which it holds any Tangible Collateral or (ii) which
constitutes part of the Intangible Collateral, except where Trustor is
contesting such obligations in good faith.
(f) Removal of Collateral. Except as permitted in the Disbursement
Agreement (while in effect), and except for damaged or obsolete Tangible
Collateral which is either no longer usable or which is removed temporarily for
repair or improvement or removed for replacement on the Trust Estate with
Tangible Collateral of similar function or as otherwise permitted herein, none
of the Tangible Collateral shall be removed from the Trust Estate without
Beneficiary's prior written consent.
(g) Change of Name. Trustor shall not change its corporate or
business name, or do business within the State of Nevada under any name other
than such name, or any trade name(s) other than those as to which Trustor gives
prior written notice to Beneficiary of its intent to use such trade names, or
any other business names (if any) specified in the financing statements
delivered to Beneficiary for filing in connection with the execution hereof,
without providing Beneficiary with the additional financing statement(s) and any
other similar documents deemed reasonably necessary by Beneficiary to assure
that its security interest remains perfected and of undiminished priority in all
such Personal Property notwithstanding such name change.
1.16 Assignment of Rents and Leases. The assignment of Rents and Leases
set out above in Granting Clause (G) shall constitute an absolute and present
assignment to Beneficiary, subject to the license herein given to Trustor to
collect the Rents, and shall be fully operative without any further action on
the part of any party, and specifically Beneficiary shall be entitled upon the
occurrence of an Event of Default hereunder to all Rents and to enter into the
Leased Premises and the Improvements to collect all such Rents, provided,
however, that Beneficiary shall not be obligated to take possession of the Trust
Estate, or any portion thereof. The absolute assignment contained in Granting
Clause (G) shall not be deemed to impose upon Beneficiary any of the obligations
or duties of Trustor provided in any such Space Lease (including, without
limitation, any liability under the covenant of quiet enjoyment contained in any
lease in the event that any lessee shall have been joined as a party defendant
in any action to foreclose this Leasehold Deed of Trust and shall have been
barred and foreclosed thereby of all right, title and interest and equity of
redemption in the Trust Estate or any part thereof).
1.17 Expenses.
(a) Trustor shall pay when due and payable all costs, including
without limitation, those reasonable appraisal fees, recording fees, taxes,
abstract fees, title policy fees,
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escrow fees, attorneys' and paralegal fees, travel expenses, fees for inspecting
architect(s) and engineer(s) and all other reasonable costs and expenses of
every character which may hereafter be incurred by Beneficiary or any assignee
of Beneficiary in connection with the preparation and execution of amendments to
the Mortgage Notes Indenture and the Mortgage Notes Indenture Security
Documents, amendments thereto or instruments, agreements or documents of further
assurance, the funding of the indebtedness secured hereby, and the enforcement
of any Mortgage Notes Indenture Security Document; and
(b) Trustor shall, upon demand by Beneficiary, reimburse Beneficiary
or any assignee of Beneficiary for all such reasonable expenses which have been
incurred or which shall be incurred by it; and
(c) Trustor shall indemnify Beneficiary with respect to any
transaction or matter in any way connected with any portion of the Trust Estate,
this Leasehold Deed of Trust, including any occurrence at, in, on, upon or about
the Trust Estate (including any personal injury, loss of life, or property
damage), or Trustor's use, occupancy, or operation of the Trust Estate, or the
filing or enforcement of any mechanic's lien, or otherwise caused in whole or in
part by any act, omission or negligence occurring on or at the Trust Estate,
including failure to comply with any Legal Requirement or with any requirement
of this Leasehold Deed of Trust that applies to Trustor, except to the extent
resulting from the gross negligence, fraud or willful misconduct of Trustee or
Beneficiary. If Beneficiary is a party to any litigation as to which either
Trustor is required to indemnify Beneficiary (or is made a defendant in any
action of any kind against Trustor or relating directly or indirectly to any
portion of the Trust Estate) then, at Beneficiary's option, Trustor shall
undertake Beneficiary's defense, using counsel reasonably satisfactory to
Beneficiary (and any settlement shall be subject to Beneficiary's consent, which
consent shall not be unreasonably withheld) and in any case shall indemnify
Beneficiary against such litigation. Trustor shall pay all reasonable costs and
expenses, including reasonable legal costs, that Beneficiary pays or incurs in
connection with any such litigation. Any amount payable under any indemnity in
this Leasehold Deed of Trust shall be a demand obligation, shall be added to,
and become a part of, the secured obligations under this Leasehold Deed of
Trust, shall be secured by this Leasehold Deed of Trust, and shall bear interest
at the interest rate specified in the Mortgage Notes Indenture. Such indemnity
shall survive any release of this Leasehold Deed of Trust and any foreclosure.
1.18 Beneficiary's Cure of Trustor's Default. If Trustor defaults
hereunder in the payment of any tax, assessment, lien, encumbrance or other
Imposition, in its obligation to furnish insurance hereunder, or in the
performance or observance of any other covenant, condition or term of this
Leasehold Deed of Trust or any other Financing Agreement or the Cooperation
Agreement or any FF&E Financing Agreement, Beneficiary may, but is not obligated
to, to preserve its interest in the Trust Estate, perform or observe the same,
and all payments made (whether such payments are regular or accelerated
payments) and reasonable costs and expenses incurred or paid by Beneficiary in
connection therewith shall become due and payable immediately. The amounts so
incurred or paid by Beneficiary, together with interest thereon at the Default
Rate from the date incurred until paid by Trustor, shall be added to the
indebtedness and secured by the lien of this Leasehold Deed of Trust.
Beneficiary is hereby empowered to enter and to authorize others to enter upon
the Leased Premises or any
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part thereof for the purpose of performing or observing any such defaulted
covenant, condition or term, without thereby becoming liable to Trustor or any
person in possession holding under Trustor. No exercise of any rights under this
Section 1.18 by Beneficiary shall cure or waive any Event of Default or notice
of default hereunder or invalidate any act done pursuant hereto or to any such
notice, but shall be cumulative of all other rights and remedies.
1.19 Use of Leased Premises. Trustor covenants that the Trust Estate shall
be (i) used and operated in a manner reasonably consistent with the description
of the Project in the Cooperation Agreement and (ii) open during such days and
hours as are customarily observed by retail shopping malls located in Las Vegas,
Nevada, reasonably consistent with the provisions of the Cooperation Agreement
(including those provisions thereof that permit the Project not to be opened).
1.20 Compliance with Permitted Lien Agreements. Trustor or any Affiliate
of Trustor shall comply with each and every material obligation contained in any
agreement pertaining to a material Permitted Lien, including, without
limitation, any obligations set forth in the Cooperation Agreement, the HVAC
Ground Lease or the Mall Lease, to the extent applying to the owner of all or
any part of the Trust Estate.
1.21 Defense of Actions. Trustor shall appear in and defend any action or
proceeding affecting or purporting to affect the security hereof or the rights
or powers of Beneficiary or Trustee, and shall pay all costs and expenses,
including cost of title search and insurance or other evidence of title,
preparation of survey, and reasonable attorneys' fees in any such action or
proceeding in which Beneficiary or Trustee may appear or may be joined as a
party and in any suit brought by Beneficiary based upon or in connection with
this Leasehold Deed of Trust or any Mortgage Notes Indenture Security Document.
Nothing contained in this section shall, however, limit the right of Beneficiary
to appear in such action or proceeding with counsel of its own choice, either on
its own behalf or on behalf of Trustor.
1.22 Affiliates.
(a) Subject to Trust Deed. Subject to compliance with requirements
of applicable Nevada Gaming Laws, Trustor shall cause all of its Affiliates in
any way involved with the operation of the Trust Estate or the Project to
observe the covenants and conditions of this Leasehold Deed of Trust to the
extent necessary to give the full intended effect to such covenants and
conditions and to protect and preserve the security of Beneficiary hereunder.
Trustor shall, at Beneficiary's request, cause any such Affiliate to execute and
deliver to Beneficiary or Trustee such further instruments or documents as
Beneficiary may reasonably deem necessary to effectuate the terms of this
Section 1.22.
(b) Restriction on Use of Subsidiary or Affiliate. Except as
permitted under the Mortgage Notes Indenture, the Notes, the Mortgage Notes
Indenture Security Documents or any other Security Document granting a security
interest to or for the benefit of Beneficiary, Trustor shall not use any
Affiliate in the operation of the Trust Estate or the Project if such use would
in any way impair the security for the Notes and the Mortgage Notes Indenture or
circumvent any covenant or condition of this Leasehold Deed of Trust, the
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Mortgage Notes Indenture, the Mortgage Notes Indenture Security Documents or any
other Security Documents granting a security interest to Beneficiary.
1.23 Title Insurance. Promptly after the execution and delivery of this
Leasehold Deed of Trust, Trustor shall cause to be delivered to Beneficiary at
Trustor's expense, one or more ALTA extended coverage Lender's Policies of Title
Insurance showing a leasehold interest in the property described in the Subject
Leases, vested in Trustor, and the lien of this Leasehold Deed of Trust to be a
perfected lien, prior to any and all encumbrances other than Permitted Liens
(except for encumbrances which Title Insurer has agreed to provide an
endorsement or affirmative coverage protecting the lien of this Leasehold Deed
of Trust against irrevocably).
1.24 Merger. So long as any of the indebtedness secured hereby shall
remain unpaid, unless Beneficiary shall otherwise in writing consent, the fee
title and the Leasehold Estate shall not merge but shall always be kept separate
and distinct, notwithstanding the union of said estates either in the lessor or
in the lessee, or in a third party, by purchase or otherwise; and the Trustor
covenants and agrees that, if it shall acquire the fee title, or any other
estate, title or interest in the Leased Premises covered by the Subject Leases,
this Leasehold Deed of Trust shall be considered as mortgaged, assigned or
conveyed to the Beneficiary and the lien hereof spread to cover such estate with
the same force and effect as though specifically herein mortgaged, assigned or
conveyed and spread. The provisions of this paragraph shall not apply if
Beneficiary shall so elect.
ARTICLE TWO
CORPORATE LOAN PROVISIONS
2.1 Interaction with Mortgage Notes Indenture.
(a) Incorporation by Reference. All terms, covenants, conditions,
provisions and requirements of the Mortgage Notes Indenture are incorporated by
reference in this Leasehold Deed of Trust.
(b) Conflicts. In the event of any conflict or inconsistency between
the provisions of this Leasehold Deed of Trust and those of the Mortgage Notes
Indenture or the Disbursement Agreement, the provisions of the Mortgage Notes
Indenture or the Disbursement Agreement, as applicable, shall govern.
2.2 Other Collateral. This Leasehold Deed of Trust is one of a number of
security agreements to secure the debt delivered by or on behalf of Trustor
pursuant to the Mortgage Notes Indenture and the other Mortgage Notes Indenture
Security Documents and securing the Obligations secured hereunder. All potential
junior Lien claimants are placed on notice that, under any of the Mortgage Notes
Indenture Security Documents and each other Security Document granting a
security interest to the Beneficiary or otherwise (such as by separate future
unrecorded agreement between Trustor and Beneficiary), other collateral for the
Obligations secured hereunder (i.e., collateral other than the Trust Estate)
may, under certain
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circumstances, be released without a corresponding reduction in the total
principal amount secured by this Leasehold Deed of Trust. Such a release would
decrease the amount of collateral securing the same indebtedness, thereby
increasing the burden on the remaining Trust Estate created and continued by
this Leasehold Deed of Trust. No such release shall impair the priority of the
lien of this Leasehold Deed of Trust. By accepting its interest in the Trust
Estate, each and every junior Lien claimant shall be deemed to have acknowledged
the possibility of, and consented to, any such release. Nothing in this
paragraph shall impose any obligation upon Beneficiary.
2.3 Subordination to the Interim Mall Leasehold Deed of Trust and the Bank
Leasehold Deed of Trust. Notwithstanding any other provision hereof, this Deed
of Trust, including, without limitation, the security interest granted herein,
the rights, powers and remedies of the Trustee and the Beneficiary and the
obligations of Trustor set forth herein, shall, to the extent provided for in
the Intercreditor Agreement, be subject and subordinate to the Interim Mall
Leasehold Deed of Trust and the Bank Leasehold Deed of Trust.
2.4 Subordination to Cooperation Agreement and HVAC Ground Lease.
Beneficiary hereby (a) subordinates this Leasehold Deed of Trust and the lien
hereof to the Cooperation Agreement and the HVAC Ground Lease (as in effect as
of the date hereof) and to the rights, interest, obligations, duties,
conditions, covenants and agreements granted pursuant to the Cooperation
Agreement and the HVAC Ground Lease (as in effect as of the date hereof) and (b)
agrees to be bound by the terms and conditions of the Cooperation Agreement and
the HVAC Ground Lease (as in effect as of the date hereof) upon its taking title
to the Trust Estate.
ARTICLE THREE
DEFAULTS
3.1 Event of Default. The term "Event of Default," wherever used in this
Leasehold Deed of Trust, shall mean any of (i) one or more of the events of
default listed in Section 6.01 of the Mortgage Notes Indenture or (ii) so long
as the Disbursement Agreement is in effect, one or more of the events of default
listed in Section 7.1 of the Disbursement Agreement (whether any such event
shall be voluntary or involuntary or come about or be effected by operation of
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body).
ARTICLE FOUR
REMEDIES
4.1 Acceleration of Maturity. If an Event of Default occurs, Beneficiary
may (except that such acceleration shall be automatic if the Event of Default is
caused by reason of an Event of Default under Section 6.01(h) or (i) of the
Mortgage Notes Indenture), in accordance with Section 6.02 of the Mortgage Notes
Indenture, declare the Notes and all indebtedness or sums secured hereby, to be
due and payable immediately, and upon such declaration such
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principal and interest and other sums shall immediately become due and payable
without demand, presentment, notice or other requirements of any kind (all of
which Trustor waives) notwithstanding anything in this Leasehold Deed of Trust
or any Mortgage Notes Indenture Security Document or applicable law to the
contrary.
4.2 Protective Advances. If Trustor fails to make any payment or perform
any other obligation under the Notes or any other Financing Agreement, then
without thereby limiting Beneficiary's other rights or remedies, waiving or
releasing any of Trustor's obligations, or imposing any obligation on
Beneficiary, Beneficiary may either advance any amount owing or perform any or
all actions that Beneficiary considers necessary or appropriate to cure such
default. All such advances shall constitute "Protective Advances." No sums
advanced or performance rendered by Beneficiary shall cure, or be deemed a
waiver of any Event of Default.
4.3 Institution of Equity Proceedings. If an Event of Default occurs,
Beneficiary may institute an action, suit or proceeding in equity for specific
performance of this Leasehold Deed of Trust, the Notes, any Mortgage Notes
Indenture Security Documents or any other Security Document which grants a
security interest for the benefit of the Beneficiary, all of which shall be
specifically enforceable by injunction or other equitable remedy. Trustor waives
any defense based on laches or any applicable statute of limitations.
4.4 Beneficiary's Power of Enforcement.
(a) If an Event of Default occurs, Beneficiary shall be entitled, at
its option and in its sole and absolute discretion, to prepare and record on its
own behalf, or to deliver to Trustee for recording, if appropriate, written
declaration of default and demand for sale and written Notice of Breach and
Election to Sell (NRS 107.080(3) (or other statutory notice) to cause the Trust
Estate to be sold to satisfy the obligations hereof, and in the case of delivery
to Trustee, Trustee shall cause said notice to be filed for record.
(b) After the lapse of such time as may then be required by law
following the recordation of said Notice of Breach and Election to Sell, and
notice of sale having been given as then required by law, including compliance
with all applicable Nevada Gaming Laws, Trustee without demand on Trustor, shall
sell the Trust Estate or any portion thereof at the time and place fixed by it
in said notice, either as a whole or in separate parcels, and in such order as
it may determine, at public auction to the highest bidder, of cash in lawful
money of the United States payable at the time of sale. Trustee may, for any
cause it deems expedient, postpone the sale of all or any portion of said
property until it shall be completed and, in every case, notice of postponement
shall be given by public announcement thereof at the time and place last
appointed for the sale and from time to time thereafter Trustee may postpone
such sale by public announcement at the time fixed by the preceding
postponement. Trustee shall execute and deliver to the purchaser its Deed, Bill
of Sale, or other instrument conveying said property so sold, but without any
covenant or warranty, express or implied. The recitals in such instrument of
conveyance of any matters or facts shall be conclusive proof of the truthfulness
thereof. Any person, including Beneficiary, may bid at the sale.
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(c) After deducting all costs, fees and expenses of Trustee and of
this Leasehold Deed of Trust, including, without limitation, costs of evidence
of title and reasonable attorneys' fees of Trustee or Beneficiary in connection
with a sale, Trustee shall apply the proceeds of such sale to payment of all
sums expended under the terms hereof not then repaid, with accrued interest at
the Default Rate to the payment of all other sums then secured hereby and the
remainder, if any, to the person or persons legally entitled thereto as provided
in NRS 40.462.
(d) Subject to compliance with applicable Nevada Gaming Laws, if any
Event of Default occurs, Beneficiary may, either with or without entry or taking
possession of the Trust Estate, and without regard to whether or not the
indebtedness and other sums secured hereby shall be due and without prejudice to
the right of Beneficiary thereafter to bring an action or proceeding to
foreclose or any other action for any default existing at the time such earlier
action was commenced, proceed by any appropriate action or proceeding: (1) to
enforce payment of the Notes, to the extent permitted by law, or the performance
of any term hereof or any other right; (2) to foreclose this Leasehold Deed of
Trust in any manner provided by law for the foreclosure of mortgages or deeds of
trust on real property and to sell, as an entirety or in separate lots or
parcels, the Trust Estate or any portion thereof pursuant to the laws of the
State of Nevada or under the judgment or decree of a court or courts of
competent jurisdiction, and Beneficiary shall be entitled to recover in any such
proceeding all costs and expenses incident thereto, including reasonable
attorneys' fees in such amount as shall be awarded by the court; (3) to exercise
any or all of the rights and remedies available to it under the Mortgage Notes
Indenture; and (4) to pursue any other remedy available to it. Beneficiary shall
take action either by such proceedings or by the exercise of its powers with
respect to entry or taking possession, or both, as Beneficiary may determine.
(e) The remedies described in this Section 4.4 may be exercised with
respect to all or any portion of the Personal Property, either simultaneously
with the sale of any real property encumbered hereby or independent thereof.
Beneficiary shall at any time be permitted to proceed with respect to all or any
portion of the Personal Property in any manner permitted by the UCC. Trustor
agrees that Beneficiary's inclusion of all or any portion of the Personal
Property (and all personal property that is subject to a security interest in
favor, or for the benefit, of Beneficiary) in a sale or other remedy exercised
with respect to the real property encumbered hereby, as permitted by the UCC, is
a commercially reasonable disposition of such property.
4.5 Beneficiary's Right to Enter and Take Possession, Operate and Apply
Income.
(a) Subject to compliance with applicable Nevada Gaming Laws, if an
Event of Default occurs, (i) Trustor, upon demand of Beneficiary, shall
forthwith surrender to Beneficiary the actual possession and, if and to the
extent permitted by law, Beneficiary itself, or by such officers or agents as it
may appoint, may enter and take possession of all the Trust Estate including the
Personal Property, without liability for trespass, damages or otherwise, and may
exclude Trustor and its agents and employees wholly therefrom and may have joint
access with Trustor to the books, papers and accounts of Trustor; and (ii)
Trustor shall pay monthly
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in advance to Beneficiary on Beneficiary's entry into possession, or to any
receiver appointed to collect the Rents, all Rents then due and payable.
(b) If Trustor shall for any reason fail to surrender or deliver the
Trust Estate, the Personal Property or any part thereof after Beneficiary's
demand, Beneficiary may obtain a judgment or decree conferring on Beneficiary or
Trustee the right to immediate possession or requiring Trustor to deliver
immediate possession of all or part of such property to Beneficiary or Trustee
and Trustor hereby specifically consents to the entry of such judgment or
decree. Trustor shall pay to Beneficiary or Trustee, upon demand, all reasonable
costs and expenses of obtaining such judgment or decree and reasonable
compensation to Beneficiary or Trustee, their attorneys and agents, and all such
costs, expenses and compensation shall, until paid, be secured by the lien of
this Leasehold Deed of Trust.
(c) Subject to compliance with applicable Nevada Gaming Laws, upon
every such entering upon or taking of possession, Beneficiary or Trustee may
hold, store, use, operate, manage and control the Trust Estate and conduct the
business thereof, and, from time to time in its sole and absolute discretion and
without being under any duty to so act:
(1) make all necessary and proper maintenance, repairs,
renewals, replacements, additions, betterments and improvements thereto and
thereon and purchase or otherwise acquire additional fixtures, personalty and
other property;
(2) insure or keep the Trust Estate insured;
(3) manage and operate the Trust Estate and exercise all the
rights and powers of Trustor in their name or otherwise with respect to the
same;
(4) enter into agreements with others to exercise the powers
herein granted Beneficiary or Trustee, all as Beneficiary or Trustee from time
to time may determine; and, subject to the absolute assignment of the Rents and
Leases to Beneficiary, Beneficiary or Trustee may collect and receive all the
Rents, including those past due as well as those accruing thereafter; and shall
apply the monies so received by Beneficiary or Trustee in such priority as
Beneficiary may determine to (1) the payment of interest and principal due and
payable on the Notes, (2) the deposits for taxes and assessments and insurance
premiums due, (3) the cost of insurance, taxes, assessments and other proper
charges upon the Trust Estate or any part thereof; (4) the compensation,
expenses and disbursements of the agents, attorneys and other representatives of
Beneficiary or Trustee; and (5) any other charges or costs required to be paid
by Trustor under the terms hereof; and
(5) rent or sublet the Trust Estate or any portion thereof for
any purpose permitted by this Leasehold Deed of Trust.
Beneficiary or Trustee shall surrender possession of the Trust
Estate and the Personal Property to Trustor only when all that is due upon such
interest and principal, tax and insurance deposits, and all amounts under any of
the terms of the Mortgage Notes Indenture or this Leasehold Deed of Trust, shall
have been paid and all defaults made good. The same
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right of taking possession, however, shall exist if any subsequent Event of
Default shall occur and be continuing.
4.6 Leases. Beneficiary is authorized to foreclose this Leasehold Deed of
Trust subject to the rights of any tenants of the Trust Estate, and the failure
to make any such tenants parties defendant to any such foreclosure proceedings
and to foreclose their rights shall not be, nor be asserted by Trustor to be, a
defense to any proceedings instituted by Beneficiary to collect the sums secured
hereby or to collect any deficiency remaining unpaid after the foreclosure sale
of the Trust Estate, or any portion thereof. Unless otherwise agreed by
Beneficiary in writing, all Space Leases executed subsequent to the date hereof,
or any part thereof, shall be subordinate and inferior to the lien of this
Leasehold Deed of Trust; provided, however that (i) in accordance with the terms
of Section 4.24 of the Mortgage Notes Indenture, Beneficiary may be required to
execute a non-disturbance and attornment agreement in connection with certain
Space Leases; and (ii) from time to time Beneficiary may execute and record
among the land records of the jurisdiction where this Leasehold Deed of Trust is
recorded, subordination statements with respect to such of said Space Leases as
Beneficiary may designate in its sole discretion, whereby the Space Leases so
designated by Beneficiary shall be made superior to the lien of this Leasehold
Deed of Trust for the term set forth in such subordination statement. From and
after the recordation of such subordination statements, and for the respective
periods as may be set forth therein, the Space Leases therein referred to shall
be superior to the lien of this Leasehold Deed of Trust and shall not be
affected by any foreclosure hereof. All such Space Leases shall contain a
provision to the effect that the Trustor and Space Lessee recognize the right of
Beneficiary to elect and to effect such subordination of this Leasehold Deed of
Trust and consents thereto.
4.7 Purchase by Beneficiary. Upon any foreclosure sale (whether judicial
or nonjudicial), Beneficiary may bid for and purchase the property subject to
such sale and, upon compliance with the terms of sale, may hold, retain and
possess and dispose of such property in its own absolute right without further
accountability.
4.8 Waiver of Appraisement, Valuation, Stay, Extension and Redemption
Laws. Trustor agrees to the full extent permitted by law that if an Event of
Default occurs, neither Trustor nor anyone claiming through or under it shall or
will set up, claim or seek to take advantage of any appraisement, valuation,
stay, extension or redemption laws now or hereafter in force, in order to
prevent or hinder the enforcement or foreclosure of this Leasehold Deed of Trust
or the absolute sale of the Trust Estate or any portion thereof or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchasers thereof, and Trustor for itself and all who may at any time claim
through or under it, hereby waives, to the full extent that it may lawfully so
do, the benefit of all such laws, and any and all right to have the assets
comprising the Trust Estate marshalled upon any foreclosure of the lien hereof
and agrees that Trustee or any court having jurisdiction to foreclose such lien
may sell the Trust Estate in part or as an entirety.
4.9 Receiver. If an Event of Default occurs, Beneficiary, to the extent
permitted by law and subject to compliance with all applicable Nevada Gaming
Laws, and without regard to the value, adequacy or occupancy of the security for
the indebtedness and other sums
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secured hereby, shall be entitled as a matter of right if it so elects to the
appointment of a receiver to enter upon and take possession of the Trust Estate
and to collect all Rents and apply the same as the court may direct, and such
receiver may be appointed by any court of competent jurisdiction upon
application by Beneficiary. Beneficiary may have a receiver appointed without
notice to Trustor or any third party, and Beneficiary may waive any requirement
that the receiver post a bond. Beneficiary shall have the power to designate and
select the Person who shall serve as the receiver and to negotiate all terms and
conditions under which such receiver shall serve. Any receiver appointed on
Beneficiary's behalf may be an Affiliate of Beneficiary. The expenses, including
receiver's fees, attorneys' fees, costs and agent's compensation, incurred
pursuant to the powers herein contained shall be secured by this Leasehold Deed
of Trust. The right to enter and take possession of and to manage and operate
the Trust Estate and to collect all Rents, whether by a receiver or otherwise,
shall be cumulative to any other right or remedy available to Beneficiary under
this Leasehold Deed of Trust, the Mortgage Notes Indenture or otherwise
available to Beneficiary and may be exercised concurrently therewith or
independently thereof. Beneficiary shall be liable to account only for such
Rents (including, without limitation, security deposits) actually received by
Beneficiary, whether received pursuant to this section or any other provision
hereof. Notwithstanding the appointment of any receiver or other custodian,
Beneficiary shall be entitled as pledgee to the possession and control of any
cash, deposits, or instruments at the time held by, or payable or deliverable
under the terms of this Leasehold Deed of Trust to, Beneficiary.
4.10 Suits to Protect the Trust Estate. Beneficiary shall have the power
and authority to institute and maintain any suits and proceedings as
Beneficiary, in its sole and absolute discretion, may deem advisable (a) to
prevent any impairment of the Trust Estate by any acts which may be unlawful or
in violation of this Leasehold Deed of Trust, (b) to preserve or protect its
interest in the Trust Estate, or (c) to restrain the enforcement of or
compliance with any legislation or other Legal Requirement that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order might impair the security hereunder or be
prejudicial to Beneficiary's interest.
4.11 Proofs of Claim. In the case of any receivership, Insolvency,
Bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceedings affecting Trustor, or, to the extent the same would result
in an Event of Default hereunder, any Subsidiary, or any guarantor, co-maker or
endorser of any of Trustor's obligations, its creditors or its property,
Beneficiary, to the extent permitted by law, shall be entitled to file such
proofs of claim or other documents as it may deem to be necessary or advisable
in order to have its claims allowed in such proceedings for the entire amount
due and payable by Trustor under the Notes, any other Mortgage Notes Indenture
Security Document or any other Security Document, at the date of the institution
of such proceedings, and for any additional amounts which may become due and
payable by Trustor after such date.
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4.12 Trustor to Pay the Notes on Any Default in Payment; Application of
Monies by Beneficiary.
(a) In case of a foreclosure sale of all or any part of the Trust
Estate and of the application of the proceeds of sale to the payment of the sums
secured hereby, Beneficiary shall be entitled to enforce payment from Trustor of
any additional amounts then remaining due and unpaid and to recover judgment
against Trustor for any portion thereof remaining unpaid, with interest at the
Default Rate.
(b) Trustor hereby agrees to the extent permitted by law, that no
recovery of any such judgment by Beneficiary or other action by Beneficiary and
no attachment or levy of any execution upon any of the Trust Estate or any other
property shall in any way affect the Lien and security interest of this
Leasehold Deed of Trust upon the Trust Estate or any part thereof or any Lien,
rights, powers or remedies of Beneficiary hereunder, but such Lien, rights,
powers and remedies shall continue unimpaired as before.
(c) Any monies collected or received by Beneficiary under this
Section 4.12 shall be first applied to the payment of reasonable compensation,
expenses and disbursements of the agents, attorneys and other representatives of
Beneficiary, and the balance remaining shall be applied to the payment of
amounts due and unpaid under the Notes.
(d) The provisions of this section shall not be deemed to limit or
otherwise modify the provisions of any guaranty of the indebtedness evidenced by
the Notes.
4.13 Delay or Omission; No Waiver. No delay or omission of Beneficiary to
exercise any right, power or remedy upon any Event of Default shall exhaust or
impair any such right, power or remedy or shall be construed to waive any such
Event of Default or to constitute acquiescence therein. Every right, power and
remedy given to Beneficiary whether contained herein or in the Mortgage Notes
Indenture or otherwise available to Beneficiary may be exercised from time to
time and as often as may be deemed expedient by Beneficiary.
4.14 No Waiver of One Default to Affect Another. No waiver of any Event of
Default hereunder shall extend to or affect any subsequent or any other Event of
Default then existing, or impair any rights, powers or remedies consequent
thereon. If Beneficiary or a majority of the Mortgage Notes Holder(s), to the
extent applicable under the Mortgage Notes Indenture, (a) grants forbearance or
an extension of time for the payment of any sums secured hereby; (b) takes other
or additional security for the payment thereof; (c) waives or does not exercise
any right granted in the Notes, the Mortgage Notes Indenture, this Leasehold
Deed of Trust, the Disbursement Agreement or any other Mortgage Notes Indenture
Security Document; (d) releases any part of the Trust Estate from the lien or
security interest of this Leasehold Deed of Trust or any other instrument
securing the Notes; (e) consents to the filing of any map, plat or replat of the
Leased Premises (to the extent such consent is required); (f) consents to the
granting of any easement on the Leased Premises (to the extent such consent is
required); or (g) makes or consents to any agreement changing the terms of this
Leasehold Deed of Trust or any Mortgage Notes Indenture Security Document or
other Security Document for the benefit of Beneficiary subordinating the lien or
any charge hereof, no such
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act or omission shall release, discharge, modify, change or affect the original
liability under the Notes, this Leasehold Deed of Trust or any Mortgage Notes
Indenture Security Document or any other Security Document for the benefit of
Beneficiary or otherwise of Trustor, or any subsequent purchaser of the Trust
Estate or any part thereof or any maker, co-signer, surety or guarantor. No such
act or omission shall preclude Beneficiary from exercising any right, power or
privilege herein granted or intended to be granted in case of any Event of
Default then existing or of any subsequent Event of Default, nor, except as
otherwise expressly provided in an instrument or instruments executed by
Beneficiary, shall the lien or security interest of this Leasehold Deed of Trust
be altered thereby, except to the extent expressly provided in any releases,
maps, easements or subordinations described in clause (d), (e), (f) or (g) above
of this Section 4.14. In the event of the sale or transfer by operation of law
or otherwise of all or any part of the Trust Estate, Beneficiary, without notice
to any person, firm or corporation, is hereby authorized and empowered to deal
with any such vendee or transferee with reference to the Trust Estate or the
indebtedness secured hereby, or with reference to any of the terms or conditions
hereof, as fully and to the same extent as it might deal with the original
parties hereto and without in any way releasing or discharging any of the
liabilities or undertakings hereunder, or waiving its right to declare such sale
or transfer an Event of Default as provided herein. Notwithstanding anything to
the contrary contained in this Leasehold Deed of Trust or the Mortgage Notes
Indenture Security Documents or any other Security Documents, (i) in the case of
any non-monetary Event of Default, Beneficiary may continue to accept payments
due hereunder without thereby waiving the existence of such or any other Event
of Default and (ii) in the case of any monetary Event of Default, Beneficiary
may accept partial payments of any sums due hereunder without thereby waiving
the existence of such Event of Default if the partial payment is not sufficient
to completely cure such Event of Default.
4.15 Discontinuance of Proceedings; Position of Parties Restored. If
Beneficiary shall have proceeded to enforce any right or remedy under this
Leasehold Deed of Trust by foreclosure, entry of judgement or otherwise and such
proceedings shall have been discontinued or abandoned for any reason, or such
proceedings shall have resulted in a final determination adverse to Beneficiary,
then and in every such case Trustor and Beneficiary shall be restored to their
former positions and rights hereunder, and all rights, powers and remedies of
Beneficiary shall continue as if no such proceedings had occurred or had been
taken.
4.16 Remedies Cumulative. No right, power or remedy, including without
limitation remedies with respect to any security for the Notes, conferred upon
or reserved to Beneficiary by this Leasehold Deed of Trust or any other Mortgage
Notes Indenture Security Document or any other Security Document is exclusive of
any other right, power or remedy, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or under any Mortgage Notes Indenture
Security Document or any other Security Document, now or hereafter existing at
law, in equity or by statute, and Beneficiary shall be entitled to resort to
such rights, powers, remedies or security as Beneficiary shall in its sole and
absolute discretion deem advisable.
4.17 Interest After Event of Default. If an Event of Default shall have
occurred and is continuing, all sums outstanding and unpaid under the Notes and
this Leasehold Deed of
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Trust shall, at Beneficiary's option, bear interest at the Default Rate until
such Event of Default has been cured. Trustor's obligation to pay such interest
shall be secured by this Leasehold Deed of Trust.
4.18 Foreclosure; Expenses of Litigation. If Trustee forecloses,
reasonable attorneys' fees for services in the supervision of said foreclosure
proceeding shall be allowed to the Trustee and Beneficiary as part of the
foreclosure costs. In the event of foreclosure of the lien hereof, there shall
be allowed and included as additional indebtedness all reasonable expenditures
and expenses which may be paid or incurred by or on behalf of Beneficiary for
attorneys' fees, appraiser's fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which may be estimated as
to items to be expended after foreclosure sale or entry of the decree) of
procuring all such abstracts of title, title searches and examinations, title
insurance policies and guarantees, and similar data and assurances with respect
to title as Beneficiary may deem reasonably advisable either to prosecute such
suit or to evidence to a bidder at any sale which may be had pursuant to such
decree the true condition of the title to or the value of the Trust Estate or
any portion thereof. All expenditures and expenses of the nature in this section
mentioned, and such expenses and fees as may be incurred in the protection of
the Trust Estate and the maintenance of the lien and security interest of this
Leasehold Deed of Trust, including the fees of any attorney employed by
Beneficiary in any litigation or proceeding affecting this Leasehold Deed of
Trust or any Mortgage Notes Indenture Security Document, the Trust Estate or any
portion thereof, including, without limitation, civil, probate, appellate and
bankruptcy proceedings, or in preparation for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Trustor, with interest thereon at the Default Rate, and shall be
secured by this Leasehold Deed of Trust. Trustee waives its right to any
statutory fee in connection with any judicial or nonjudicial foreclosure of the
lien hereof and agrees to accept a reasonable fee for such services.
4.19 Deficiency Judgments. If after foreclosure of this Leasehold Deed of
Trust or Trustee's sale hereunder, there shall remain any deficiency with
respect to any amounts payable under the Notes or hereunder or any amounts
secured hereby, and Beneficiary shall institute any proceedings to recover such
deficiency or deficiencies, all such amounts shall continue to bear interest at
the Default Rate. Trustor waives any defense to Beneficiary's recovery against
Trustor of any deficiency after any foreclosure sale of the Trust Estate.
Trustor expressly waives any defense or benefits that may be derived from any
statute granting Trustor any defense to any such recovery by Beneficiary. In
addition, Beneficiary and Trustee shall be entitled to recovery of all of their
reasonable costs and expenditures (including without limitation any court
imposed costs) in connection with such proceedings, including their reasonable
attorneys' fees, appraisal fees and the other costs, fees and expenditures
referred to in Section 4.18 above. This provision shall survive any foreclosure
or sale of the Trust Estate, any portion thereof and/or the extinguishment of
the lien hereof.
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4.20 Waiver of Jury Trial. Beneficiary and Trustor each waive any right to
have a jury participate in resolving any dispute whether sounding in contract,
tort or otherwise arising out of, connected with, related to or incidental to
the relationship established between them in connection with the Notes, this
Leasehold Deed of Trust or any other Mortgage Notes Indenture Security Document
or any other Security Document. Any such disputes shall be resolved in a bench
trial without a jury.
4.21 Exculpation of Beneficiary. The acceptance by Beneficiary of the
assignment contained herein with all of the rights, powers, privileges and
authority created hereby shall not, prior to entry upon and taking possession of
the Trust Estate by Beneficiary, be deemed or construed to make Beneficiary a
"mortgagee in possession"; nor thereafter or at any time or in any event
obligate Beneficiary to appear in or defend any action or proceeding relating to
the Space Leases, the Rents or the Trust Estate, or to take any action hereunder
or to expend any money or incur any expenses or perform or discharge any
obligation, duty or liability under any Space Lease or to assume any obligation
or responsibility for any security deposits or other deposits except to the
extent such deposits are actually received by Beneficiary, nor shall
Beneficiary, prior to such entry and taking, be liable in any way for any injury
or damage to person or property sustained by any Person in or about the Trust
Estate.
ARTICLE FIVE
RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE
Notwithstanding anything to the contrary in this Leasehold Deed of Trust,
Trustor and Beneficiary agree as follows.
5.1 Exercise of Remedies by Trustee. To the extent that this Leasehold
Deed of Trust or applicable law, including all applicable Nevada Gaming Laws,
authorizes or empowers, or does not require approval for, Beneficiary to
exercise any remedies set forth in Article Four hereof or otherwise, or perform
any acts in connection therewith, Trustee (but not to the exclusion of
Beneficiary unless so required under the law of the State of Nevada) shall have
the power to exercise any or all such remedies, and to perform any acts provided
for in this Leasehold Deed of Trust in connection therewith, all for the benefit
of Beneficiary and on Beneficiary's behalf in accordance with applicable law of
the State of Nevada. In connection therewith, Trustee: (a) shall not exercise,
or waive the exercise of, any Beneficiary's remedies (other than any rights of
Trustee to any indemnity or reimbursement), except at Beneficiary's request, and
(b) shall exercise, or waive the exercise of, any or all of Beneficiary's
remedies at Beneficiary's request, and in accordance with Beneficiary's
directions as to the manner of such exercise or waiver. Trustee may, however,
decline to follow Beneficiary's request or direction if Trustee shall be advised
by counsel that the action or proceeding, or manner thereof, so directed may not
lawfully be taken or waived.
5.2 Rights and Privileges of Trustee. To the extent that this Leasehold
Deed of Trust requires Trustor to indemnify Beneficiary or reimburse Beneficiary
for any expenditures
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Beneficiary may incur, Trustee shall be entitled to the same indemnity and the
same rights to reimbursement of expenses as Beneficiary, subject to such
limitations and conditions as would apply in the case of Beneficiary. To the
extent that this Leasehold Deed of Trust negates or limits Beneficiary's
liability as to any matter, Trustee shall be entitled to the same negation or
limitation of liability. To the extent that Trustor, pursuant to this Leasehold
Deed of Trust, appoints Beneficiary as Trustor's attorney in fact for any
purpose, Beneficiary or (when so instructed by Beneficiary) Trustee shall be
entitled to act on Trustor's behalf without joinder or confirmation by the
other.
5.3 Resignation or Replacement of Trustee. Trustee may resign by an
instrument in writing addressed to Beneficiary, and Trustee may be removed at
any time with or without cause (i.e., in Beneficiary's sole and absolute
discretion) by an instrument in writing executed by Beneficiary. In case of the
death, resignation, removal or disqualification of Trustee or if for any reason
Beneficiary shall deem it desirable to appoint a substitute, successor or
replacement Trustee to act instead of Trustee originally named (or in place of
any substitute, successor or replacement Trustee), then Beneficiary shall have
the right and is hereby authorized and empowered to appoint a successor,
substitute or replacement Trustee, without any formality other than appointment
and designation in writing executed by Beneficiary, which instrument shall be
recorded if required by the law of the State of Nevada. The laws of the State of
Nevada (including, without limitation, the Nevada Gaming Laws) shall govern the
qualifications of any Trustee. The authority conferred upon Trustee by this
Leasehold Deed of Trust shall automatically extend to any and all other
successor, substitute and replacement Trustee(s) successively until the
obligations secured hereunder have been paid in full or the Trust Estate has
been sold hereunder or released in accordance with the provisions of the
Mortgage Notes Indenture Security Documents and each other Security Document to
which the Beneficiary is a party or which grants a security for the benefit of
the Beneficiary. Beneficiary's written appointment and designation of any
Trustee shall be full evidence of Beneficiary's right and authority to make the
same and of all facts therein recited. No confirmation, authorization, approval
or other action by Trustor shall be required in connection with any resignation
or other replacement of Trustee.
5.4 Authority of Beneficiary. If Beneficiary is a banking corporation,
state banking corporation or a national banking association and the instrument
of appointment of any successor or replacement Trustee is executed on
Beneficiary's behalf by an officer of such corporation, state banking
corporation or national banking association, then such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any superior
officer of Beneficiary.
5.5 Effect of Appointment of Successor Trustee. Upon the appointment and
designation of any successor, substitute or replacement Trustee, and subject to
compliance with applicable Nevada Gaming Laws and other applicable laws,
Trustee's entire estate and title in the Trust Estate shall vest in the
designated successor, substitute or replacement Trustee. Such successor,
substitute or replacement Trustee shall thereupon succeed to and shall hold,
possess and execute all the rights, powers, privileges, immunities and duties
herein conferred upon Trustee. All references herein to Trustee shall be deemed
to refer to Trustee (including any
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successor or substitute appointed and designated as herein provided) from time
to time acting hereunder.
5.6 Confirmation of Transfer and Succession. Upon the written request of
Beneficiary or of any successor, substitute or replacement Trustee, any former
Trustee ceasing to act shall execute and deliver an instrument transferring to
such successor, substitute or replacement Trustee all of the right, title,
estate and interest in the Trust Estate of Trustee so ceasing to act, together
with all the rights, powers, privileges, immunities and duties herein conferred
upon Trustee, and shall duly assign, transfer and deliver all properties and
moneys held by said Trustee hereunder to said successor, substitute or
replacement Trustee.
5.7 Exculpation. Trustee shall not be liable for any error of judgment or
act done by Trustee in good faith, or otherwise be responsible or accountable
under any circumstances whatsoever, except for Trustee's gross negligence,
willful misconduct or knowing violation of law. Trustee shall have the right to
rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by it hereunder, believed by it in good
faith to be genuine. All moneys received by Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received, but need not be segregated in any manner from any other moneys (except
to the extent required by law). Trustee shall be under no liability for interest
on any moneys received by it hereunder.
5.8 Endorsement and Execution of Documents. Upon Beneficiary's written
request, Trustee shall, without liability or notice to Trustor, execute, consent
to, or join in any instrument or agreement in connection with or necessary to
effectuate the purposes of the Mortgage Notes Indenture Security Documents and
each other Security Document to which the Beneficiary is a party or which grants
a security interest for the benefit of the Beneficiary. Trustor hereby
irrevocably designates Trustee as its attorney in fact to execute, acknowledge
and deliver, on Trustor's behalf and in Trustor's name, all instruments or
agreements necessary to implement any provision(s) of this Leasehold Deed of
Trust or to further perfect the lien created by this Leasehold Deed of Trust on
the Trust Estate. This power of attorney shall be deemed to be coupled with an
interest and shall survive any disability of Trustor.
5.9 Multiple Trustees. If Beneficiary appoints multiple trustees, then any
Trustee, individually, may exercise all powers granted to Trustee under this
instrument, without the need for action by any other Trustee(s).
5.10 Terms of Trustee's Acceptance. Trustee accepts the trust created by
this Leasehold Deed of Trust upon the following terms and conditions:
(a) Delegation. Trustee may exercise any of its powers through
appointment of attorney(s) in fact or agents.
(b) Counsel. Trustee may select and employ legal counsel (including
any law firm representing Beneficiary). Trustor shall reimburse all reasonable
legal fees and expenses that Trustee may thereby incur.
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(c) Security. Trustee shall be under no obligation to take any
action upon any Event of Default unless furnished security or indemnity, in form
satisfactory to Trustee, against costs, expenses, and liabilities that Trustee
may incur.
(d) Costs and Expenses. Trustor shall reimburse Trustee, as part of
the Obligations secured hereunder, for all reasonable disbursements and expenses
(including reasonable legal fees and expenses and any expenses incurred by
Trustee in complying with the Nevada Gaming Laws and Gaming Licenses) incurred
by reason of and as provided for in this Leasehold Deed of Trust, including any
of the foregoing incurred in Trustee's administering and executing the trust
created by this Leasehold Deed of Trust and performing Trustee's duties and
exercising Trustee's powers under this Leasehold Deed of Trust.
(e) Release. Upon satisfaction of the conditions for reconveyance
contained in Section 6.11 hereof, Beneficiary shall request that Trustee release
this Leasehold Deed of Trust and Trustee shall release this Leasehold Deed of
Trust and reconvey the Trust Estate in accordance with Section 6.11 hereof,
provided, however, that Trustor shall pay all costs of recordation, if any, and
all of Trustee's and Beneficiary's costs and expenses in connection with such
release, including, but not limited to, reasonable attorneys' fees.
ARTICLE SIX
MISCELLANEOUS PROVISIONS
6.1 Heirs, Successors and Assigns Included in Parties. Whenever one of the
parties hereto is named or referred to herein, the heirs, successors and assigns
of such party shall be included, and subject to the limitations set forth in
Section 1.9, all covenants and agreements contained in this Leasehold Deed of
Trust, by or on behalf of Trustor or Beneficiary shall bind and inure to the
benefit of its heirs, successors and assigns, whether so expressed or not.
6.2 Addresses for Notices, Etc. Any notice, report, demand or other
instrument authorized or required to be given or furnished under this Leasehold
Deed of Trust to Trustor or Beneficiary shall be deemed given or furnished (i)
when addressed to the party intended to receive the same, at the address of such
party set forth below, and delivered by hand at such address or (ii) three (3)
days after the same is deposited in the United States mail as first class
certified mail, return receipt requested, postage paid, whether or not the same
is actually received by such party:
Beneficiary: First Trust National Association
180 East 5th Street
St.Paul, MN 55101
Attn: Corporate Trust Department
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Trustor: Grand Canal Shops Construction, LLC
3355 Las Vegas Boulevard South, Room 1G
Las Vegas, Nevada 89109
Attention: General Counsel
Trustee: Lawyers Title of Nevada, Inc.
1050 E. Flamingo, Suite 180
Las Vegas, Nevada 09119
Attention: Ray Griego
6.3 Change of Notice Address. Any Person may change the address to which
any such notice, report, demand or other instrument is to be delivered or mailed
to that person, by furnishing written notice of such change to the other
parties, but no such notice of change shall be effective unless and until
received by such other parties.
6.4 Headings. The headings of the articles, sections, paragraphs and
subdivisions of this Leasehold Deed of Trust are for convenience of reference
only, are not to be considered a part hereof, and shall not limit or expand or
otherwise affect any of the terms hereof.
6.5 Invalid Provisions to Affect No Others. In the event that any of the
covenants, agreements, terms or provisions contained herein or in the Notes, the
Mortgage Notes Indenture any Mortgage Notes Indenture Security Document or any
other Security Document shall be invalid, illegal or unenforceable in any
respect, the validity of the lien hereof and the remaining covenants,
agreements, terms or provisions contained herein or in the Notes, the Mortgage
Notes Indenture, any other Mortgage Notes Indenture Security Document or any
other Security Document shall be in no way affected, prejudiced or disturbed
thereby. To the extent permitted by law, Trustor waives any provision of law
which renders any provision hereof prohibited or unenforceable in any respect.
6.6 Changes and Priority Over Intervening Liens. Neither this Leasehold
Deed of Trust nor any term hereof may be changed, waived, discharged or
terminated orally, or by any action or inaction, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any agreement hereafter made by Trustor and
Beneficiary relating to this Leasehold Deed of Trust or, if Trustor should
subsequent to the date hereof obtain a fee interest in the Leased Premises, any
fee deed of trust recorded hereafter which secures the Obligations shall be
superior to the rights of the holder of any intervening lien or encumbrance.
6.7 Estoppel Certificates. Within ten (10) Business Days after
Beneficiary's written request, Trustor shall from time to time execute a
certificate, in recordable form (an "Estoppel Certificate"), stating, except to
the extent it would be inaccurate to so state: (a) the current amount of the
Obligations secured hereunder and all elements thereof, including principal,
interest, and all other elements; (b) that Trustor has no defense, offset,
claim, counterclaim, right of recoupment, deduction, or reduction against any of
the Obligations secured hereunder; (c) that none of the Bank Security Documents
and each other Security Document to which the
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Beneficiary is a party or which grants a security interest for the benefit of
the Beneficiary have been amended, whether orally or in writing; (d) that
Trustor has no claims against Beneficiary of any kind; (e) that any Power of
Attorney granted to Beneficiary is in full force and effect; and (f) such other
matters relating to this Leasehold Deed of Trust, any Bank Security Document and
each other Security Document to which the Beneficiary is a party or which grants
a security interest for the benefit of the Beneficiary and the relationship of
Trustor and Beneficiary as Beneficiary shall request. In addition, the Estoppel
Certificate shall set forth the reasons why it would be inaccurate to make any
of the foregoing assurances ("a" through "f").
6.8 Waiver of Setoff and Counterclaim. All amounts due under this
Leasehold Deed of Trust, the Notes, the other Mortgage Notes Indenture Security
Documents and each other Security Document to which the Beneficiary is a party
or which grants a security interest for the benefit of the Beneficiary shall be
payable without setoff, counterclaim or any deduction whatsoever. Trustor hereby
waives the right to assert a counterclaim (other than a compulsory counterclaim)
in any action or proceeding brought against it by Beneficiary or arising out of
or in any way connected with this Leasehold Deed of Trust, the other Mortgage
Notes Indenture Security Documents, each other Security Document to which the
Beneficiary is a party or which grants a security interest for the benefit of
the Beneficiary or the Obligations.
6.9 Governing Law. The Mortgage Notes Indenture and the Notes provide that
they are governed by, and construed and enforced in accordance with, the laws of
the State of New York. This Leasehold Deed of Trust shall also be construed
under and governed by the laws of the State of New York; provided, however, that
(i) the terms and provisions of this Leasehold Deed of Trust pertaining to the
priority, perfection, enforcement or realization by Beneficiary of its
respective rights and remedies under this Leasehold Deed of Trust with respect
to the Trust Estate shall be governed and construed and enforced in accordance
with the internal laws of the State of Nevada (the "State") without giving
effect to the conflicts-of- law rules and principles of the State; (ii) Trustor
agrees that to the extent deficiency judgments are available under the laws of
the State after a foreclosure (judicial or nonjudicial) of the Trust Estate, or
any portion thereof, or any other realization thereon by Beneficiary,
Beneficiary shall have the right to seek such a deficiency judgment against
Trustor in the State; and (iii) Trustor agrees that if Beneficiary obtains a
deficiency judgment in another state against Trustor, then Beneficiary shall
have the right to enforce such judgment in the State to the extent permitted
under the laws of the State, as well as in other states. Nothing contained in
this Section 6.9 shall be deemed to expand the limitations set forth in Section
12.08 of the Mortgage Notes Indenture.
6.10 Required Notices. Trustor shall notify Beneficiary promptly of the
occurrence of any of the following and shall immediately provide Beneficiary a
copy of the notice or documents referred to: (i) receipt of notice from any
Governmental Instrumentality relating to all or any material part of the Trust
Estate if such notice relates to a default or act, omission or circumstance
which would result in a default after notice or passage of time or both; (ii)
receipt of any notice from any tenant leasing all or any material portion of the
Trust Estate if such notice relates to a default or act, omission or
circumstance which would result in a default after notice or passage of time or
both; (iii) receipt of notice from the holder of any GCCLLC
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Permitted Encumbrance relating to a default or act, omission or circumstance
which would result in a default after notice or passage of time or both; (iv)
the commencement of any proceedings or the entry of any judgment, decree or
order materially affecting all or any portion of the Trust Estate or which
involve the potential liability of Trustor or its Affiliates in an amount in
excess of $25,000,000 (other than for personal injury actions and related
property damage suits which are covered by such insurance); or (v) commencement
of any judicial or administrative proceedings or the entry of any judgment,
decree or order by or against or otherwise affecting Trustor or any Affiliate of
Trustor, a material portion of the Trust Estate, or a material portion of the
Personal Property, or any other action by any creditor or lessor thereof as a
result of any default under the terms of any lease.
6.11 Reconveyance. Upon written request of Trustor after the Obligations
secured hereby have been satisfied in full, Beneficiary shall cause Trustee to
reconvey, without warranty, the property then held hereunder. The recitals in
such reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The grantee in such reconveyance may be described as "the
person or persons legally entitled thereto."
6.12 Attorneys' Fees. Without limiting any other provision contained
herein, Trustor agrees to pay all costs of Beneficiary or Trustee incurred in
connection with the enforcement of this Leasehold Deed of Trust of the Notes,
including without limitation all reasonable attorneys' fees whether or not suit
is commenced, and including, without limitation, fees incurred in connection
with any probate, appellate, bankruptcy, deficiency or any other litigation
proceedings, all of which sums shall be secured hereby.
6.13 Late Charges. By accepting payment of any sum secured hereby after
its due date, Beneficiary does not waive its right to collect any late charge
thereon or interest thereon at the interest rate on the Notes, if so provided,
not then paid or its right either to require prompt payment when due of all
other sums so secured or to declare default for failure to pay any amounts not
so paid.
6.14 Cost of Accounting. Trustor shall pay to Beneficiary, for and on
account of the preparation and rendition of any accounting, which Trustor may be
entitled to require under any law or statute now or hereafter providing
therefor, the reasonable costs thereof.
6.15 Right of Entry. Subject to compliance with applicable Nevada Gaming
Laws, Beneficiary may at any reasonable time or times and on reasonable prior
written notice to Trustor make or cause to be made entry upon and inspections of
the Trust Estate or any part thereof in person or by agent.
6.16 Corrections. Trustor shall, upon request of Beneficiary or Trustee,
promptly correct any defect, error or omission which may be discovered in the
contents of this Leasehold Deed of Trust (including, but not limited to, in the
exhibits and schedules attached hereto) or in the execution or acknowledgement
hereof, and shall execute, acknowledge and deliver such further instruments and
do such further acts as may be necessary or as may be reasonably requested by
Trustee to carry out more effectively the purposes of this Leasehold Deed of
Trust, to subject to the lien and security interest hereby created any of
Trustor's properties,
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rights or interest covered or intended to be covered hereby, and to perfect and
maintain such lien and security interest.
6.17 Statute of Limitations. To the fullest extent allowed by the law, the
right to plead, use or assert any statute of limitations as a plea or defense or
bar of any kind, or for any purpose, to any debt, demand or obligation secured
or to be secured hereby, or to any complaint or other pleading or proceeding
filed, instituted or maintained for the purpose of enforcing this Leasehold Deed
of Trust or any rights hereunder, is hereby waived by Trustor.
6.18 Subrogation. Should the proceeds of any loan or advance made by
Beneficiary to Trustor, repayment of which is hereby secured, or any part
thereof, or any amount paid out or advanced by Beneficiary, be used directly or
indirectly to pay off, discharge, or satisfy, in whole or in part, any prior or
superior lien or encumbrance upon the Trust Estate, or any part thereof, then,
as additional security hereunder, Trustee, on behalf of Beneficiary, shall be
subrogated to any and all rights, superior titles, liens, and equities owned or
claimed by any owner or holder of said outstanding liens, charges, and
indebtedness, however remote, regardless of whether said liens, charges, and
indebtedness are acquired by assignment or have been released of record by the
holder thereof upon payment.
6.19 Joint and Several Liability. All obligations of Trustor hereunder, if
more than one, are joint and several. Recourse for deficiency after sale
hereunder may be had against the property of Trustor, without, however, creating
a present or other lien or charge thereon.
6.20 Homestead. Trustor hereby waives and renounces all homestead and
exemption rights provided by the constitution and the laws of the United States
and of any state, in and to the Trust Estate as against the collection of the
Obligations, or any part hereof.
6.21 Context. In this Leasehold Deed of Trust, whenever the context so
requires, the neuter includes the masculine and feminine, and the singular
including the plural, and vice versa.
6.22 Time. Time is of the essence of each and every term, covenant and
condition hereof. Unless otherwise specified herein, any reference to "days" in
this Leasehold Deed of Trust shall be deemed to mean "calendar days."
6.23 Interpretation. As used in this Leasehold Deed of Trust unless the
context clearly requires otherwise: The terms "herein" or "hereunder" and
similar terms without reference to a particular section shall refer to the
entire Leasehold Deed of Trust and not just to the section in which such terms
appear; the term "lien" shall also mean a security interest, and the term
"security interest" shall also mean a lien.
6.24 Effect of NRS ss. 107.030. To the extent not inconsistent herewith,
the provisions of NRS ss. 107.030 are included herein by reference.
6.25 Amendments. This Leasehold Deed of Trust cannot be waived, changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party
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against whom enforcement of any waiver, change, discharge or termination is
sought and only as permitted by the provisions of the Mortgage Notes Indenture.
6.26 No Conflicts. In the event that any of the provisions contained
herein conflict with the Security Agreement, then the provisions contained in
the Security Agreement shall prevail.
ARTICLE SEVEN
POWER OF ATTORNEY
7.1 Grant of Power. Subject to compliance with applicable Nevada Gaming
Laws, Trustor irrevocably appoints Beneficiary and any successor thereto as its
attorney-in-fact, with full power and authority, including the power of
substitution, exercisable only during the continuance of an Event of Default to
act for Trustor in its name, place and stead as hereinafter provided:
7.1.1 Possession and Completion. To take possession of the Leased
Premises and the Project, remove all employees, contractors and agents of
Trustor therefrom, complete or attempt to complete the work of construction, and
market, sell or lease the Leased Premises and the Project.
7.1.2 Plans. To make such additions, changes and corrections in the
current Plans and Specifications as may be necessary or desirable, in
Beneficiary's reasonable discretion, or as it deems proper to complete the
Project.
7.1.3 Employment of Others. To employ such contractors,
subcontractors, suppliers, architects, inspectors, consultants, property
managers and other agents as Beneficiary, in its discretion, deems proper for
the completion of the Project, for the protection or clearance of title to the
Leased Premises or Personal Property, or for the protection of Beneficiary's
interests with respect thereto.
7.1.4 Security Guards. To employ watchmen to protect the Leased
Premises and the Project from injury.
7.1.5 Compromise Claims. To pay, settle or compromise all bills and
claims then existing or thereafter arising against Trustor, which Beneficiary,
in its discretion, deems proper for the protection or clearance of title to the
Leased Premises or Personal Property, or for the protection of Beneficiary's
interests with respect thereto.
7.1.6 Legal Proceedings. To prosecute and defend all actions and
proceedings in connection with the Leased Premises or the Project.
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7.1.7 Other Acts. To execute, acknowledge and deliver all other
instruments and documents in the name of Trustor that are necessary or
desirable, to exercise Trustor's rights under all contracts concerning the
Leased Premises or the Project, including, without limitation, under any Space
Leases, and to do all other acts with respect to the Leased Premises or the
Project that Trustor might do on its own behalf, as Beneficiary, in its
reasonable discretion, deems proper.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Trustor has executed this Leasehold Deed of Trust,
Assignment of Rents and Leases and Security Agreement to be effective as of the
day and year first above written.
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
a Delaware limited liability company, as Trustor
BY: VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company,
its member
BY: LAS VEGAS SANDS, INC.,
a Nevada corporation,
its managing member
By: /s/ William Weidner
------------------------------
Name: William Weidner
Title: President
S-1
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on November 14, 1997 by
William P. Weidner, the President of Las Vegas Sands, Inc., the managing
member of Venetian Casino Resort, LLC, the member of Grand Canal Shops Mall
Construction, LLC.
/s/ Caitlin A. Monck
-----------------------
NOTARY PUBLIC
CAITLIN A. MONCK
Notary Public, State of New York
No. 01MO5086188
Qualified in New York County
Commission Expires Oct. 6, 1999
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on November 14, 1997 by
William P. Weidner, the President of Las Vegas Sands, Inc., the managing
member of Venetian Casino Resort, LLC, the member of Grand Canal Shops Mall
Construction, LLC.
/s/ Caitlin A. Monck
-----------------------
NOTARY PUBLIC
CAITLIN A. MONCK
Notary Public, State of New York
No. 01MO5086188
Qualified in New York County
Commission Expires Oct. 6, 1999
1
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TABLE OF CONTENTS
ARTICLE ONE
COVENANTS OF TRUSTOR........................... 14
1.1 Performance of Financing Agreements................................ 14
1.2 Leasehold Estate................................................... 14
1.3 General Representations, Covenants and Warranties.................. 15
1.4 Payment of Expenses of the Subject Leases.......................... 15
1.5 Trustor's Covenants with Respect to the Subject Leases............. 15
1.6 Compliance with Legal Requirements................................. 17
1.7 Taxes.............................................................. 17
1.8 Insurance.......................................................... 17
1.9 Condemnation....................................................... 18
1.10 Care of Trust Estate............................................... 19
1.11 Leases............................................................. 19
1.12 Further Encumbrance................................................ 20
1.13 Partial Releases of Trust Estate................................... 21
1.14 Further Assurances................................................. 22
1.15 Security Agreement and Financing Statements........................ 23
1.16 Assignment of Rents and Leases..................................... 25
1.17 Expenses........................................................... 25
1.18 Beneficiary's Cure of Trustor's Default............................ 26
1.19 Use of Leased Premises............................................. 27
1.20 Compliance with Permitted Lien Agreements.......................... 27
1.21 Defense of Actions................................................. 27
1.22 Affiliates......................................................... 27
1.23 Title Insurance.................................................... 28
ARTICLE TWO
CORPORATE LOAN PROVISIONS........................ 28
2.1 Interaction with Mortgage Notes Indenture.......................... 28
2.2 Other Collateral................................................... 28
2.4 Subordination to Cooperation Agreement and HVAC Ground Lease....... 29
ARTICLE THREE
DEFAULTS............................... 29
3.1 Event of Default................................................... 29
ARTICLE FOUR
REMEDIES................................. 29
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4.1 Acceleration of Maturity........................................... 29
4.2 Protective Advances................................................ 30
4.3 Institution of Equity Proceedings.................................. 30
4.4 Beneficiary's Power of Enforcement................................. 30
4.5 Beneficiary's Right to Enter and Take Possession, Operate and Apply
Income............................................................. 31
4.6 Leases............................................................. 33
4.7 Purchase by Beneficiary............................................ 33
4.8 Waiver of Appraisement, Valuation, Stay, Extension and Redemption
Laws................................................................33
4.9 Receiver........................................................... 33
4.10 Suits to Protect the Trust Estate.................................. 34
4.11 Proofs of Claim.................................................... 34
4.12 Trustor to Pay the Notes on Any Default in Payment; Application of
Monies by Beneficiary.............................................. 35
4.13 Delay or Omission; No Waiver....................................... 35
4.14 No Waiver of One Default to Affect Another......................... 35
4.15 Discontinuance of Proceedings; Position of Parties Restored........ 36
4.16 Remedies Cumulative................................................ 36
4.17 Interest After Event of Default.................................... 36
4.18 Foreclosure; Expenses of Litigation................................ 37
4.19 Deficiency Judgments............................................... 37
4.20 Waiver of Jury Trial............................................... 38
4.21 Exculpation of Beneficiary......................................... 38
ARTICLE FIVE
RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE.................. 38
5.1 Exercise of Remedies by Trustee..................................... 38
5.2 Rights and Privileges of Trustee.................................... 38
5.3 Resignation or Replacement of Trustee............................... 39
5.4 Authority of Beneficiary............................................ 39
5.5 Effect of Appointment of Successor Trustee.......................... 39
5.6 Confirmation of Transfer and Succession............................. 40
5.7 Exculpation......................................................... 40
5.8 Endorsement and Execution of Documents.............................. 40
5.9 Multiple Trustees................................................... 40
5.10 Terms of Trustee's Acceptance....................................... 40
ARTICLE SIX
MISCELLANEOUS PROVISIONS......................... 41
6.1 Heirs, Successors and Assigns Included in Parties................... 41
6.2 Addresses for Notices, Etc.......................................... 41
6.3 Change of Notice Address............................................ 42
6.4 Headings............................................................ 42
6.5 Invalid Provisions to Affect No Others.............................. 42
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6.6 Changes and Priority Over Intervening Liens......................... 42
6.7 Estoppel Certificates............................................... 42
6.8 Waiver of Setoff and Counterclaim................................... 43
6.9 Governing Law....................................................... 43
6.10 Required Notices.................................................... 43
6.11 Reconveyance........................................................ 44
6.12 Attorneys' Fees..................................................... 44
6.13 Late Charges........................................................ 44
6.14 Cost of Accounting.................................................. 44
6.15 Right of Entry...................................................... 44
6.16 Corrections......................................................... 44
6.17 Statute of Limitations.............................................. 45
6.18 Subrogation......................................................... 45
6.19 Joint and Several Liability......................................... 45
6.20 Homestead........................................................... 45
6.21 Context............................................................. 45
6.22 Time................................................................ 45
6.23 Interpretation...................................................... 45
6.24 Effect of NRS ss. 107.030........................................... 45
6.25 Amendments.......................................................... 46
6.26 No Conflicts........................................................ 46
ARTICLE SEVEN
POWER OF ATTORNEY............................ 46
7.1 Grant of Power...................................................... 46
7.1.1 Possession and Completion........................................... 46
7.1.2 Plans............................................................... 46
7.1.3 Employment of Others................................................ 46
7.1.4 Security Guards..................................................... 46
7.1.5 Compromise Claims................................................... 46
7.1.6 Legal Proceedings................................................... 46
7.1.7 Other Acts.......................................................... 47
Exhibit A-1 (MALL LEASE)
Exhibit A-2 LEGAL DESCRIPTION (MALL LEASED PREMISES)
Exhibit A-3 (BILLBOARD MASTER LEASE)
Exhibit A-4 LEGAL DESCRIPTION (BILLBOARD LEASED PREMISES)
Exhibit B CONTEMPLATED CONDEMNATION
Exhibit C ENUMERATED NAMES
iii
DISBURSEMENT COLLATERAL ACCOUNT AGREEMENT
This DISBURSEMENT COLLATERAL ACCOUNT AGREEMENT (this "Agreement") is
dated as of November 14, 1997 and entered into by and among LAS VEGAS SANDS,
INC., a Nevada corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a Nevada
limited liability company ("VCR"), GRAND CANAL SHOPS MALLS CONSTRUCTION, LLC, a
Delaware limited liability company ("GCCLLC", and jointly and severally with
LVSI and VCR, "Pledgor"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank
through its New York agency, as Disbursement Agent under the Disbursement
Agreement (in such capacity herein called "Secured Party"), and THE BANK OF NOVA
SCOTIA, through its New York agency, as custodian and securities intermediary
for the Pledgor and Secured Party (in such capacity, "Securities Intermediary").
PRELIMINARY STATEMENTS
A. The Project. LVSI, VCR and GCCLLC, propose to develop, construct and
operate the Venetian Casino Resort, a large scale Venetian-themed hotel, casino,
retail, meeting and entertainment complex, with related heating, ventilation and
air conditioning and power station facilities, as part of the redevelopment of
the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, GCCLLC, the
Bank Agent and the Bank Lenders have entered into the Bank Credit Agreement
pursuant to which the Bank Lenders have agreed, subject to the terms thereof, to
provide certain loans to LVSI and VCR, jointly and severally, in an aggregate
amount and for purposes specified therein.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR,
GCCLLC, and the Interim Mall Lender have entered into the Interim Mall Credit
Agreement pursuant to which the Interim Mall Lender has agreed to provide loans
to LVSI, VCR and GCCLLC, jointly and severally, in an aggregate amount and for
purposes specified therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Mortgage Notes Indenture Trustee have entered
into the Mortgage Notes Indenture pursuant to which LVSI and VCR will issue
Mortgage Notes in an aggregate principal amount and for purposes specified
therein.
E. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR and the
Subordinated Notes Indenture Trustee have entered into the Subordinated Notes
Indenture pursuant to which LVSI and VCR will issue Subordinated Notes in an
aggregate principal amount and for purposes specified therein.
F. HVAC Services Agreement. Concurrently herewith, VCR and the HVAC
Provider have
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entered into the HVAC Services Agreement pursuant to which the HVAC Provider has
agreed to advance, for the acquisition, construction, testing and installation
of that certain HVAC Component of the Project, an aggregate amount specified
therein.
G. Intercreditor Agreement. Concurrently herewith, the Bank Agent (acting
on behalf of itself and the Bank Lenders), the Interim Mall Lender, the Mortgage
Notes Indenture Trustee (acting on behalf of itself and the Mortgage Note
Holders) and the Subordinated Notes Indenture Trustee (acting on behalf of
itself and the Subordinated Note Holders) have entered into that certain
Intercreditor Agreement pursuant to which the parties thereto have set forth
certain intercreditor provisions, including the method of voting and decision
making among the Bank Lenders, the Interim Mall Lender, the Mortgage Note
Holders and the Subordinated Note Holders, the arrangements applicable to joint
consultation and actions in respect of approval rights and waivers, the
limitations on rights of enforcement upon default and the application of
proceeds upon enforcement.
H. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, the Pledgor, GCCLLC, the Bank Agent (acting on behalf of itself and
the Bank Lenders), the Interim Mall Lender, the Mortgage Notes Indenture Trustee
(acting on behalf of itself and the Mortgage Note Holders), the HVAC Provider
and The Bank of Nova Scotia, New York agency, as "Disbursement Agent" have
entered into that certain Funding Agents' Disbursement and Administration
Agreement ("Disbursement Agreement") for the purpose of setting forth, among
other things, (a) the mechanics for and allocation of the Company's requests for
Advances under the Facilities and from the Company's Funds Account, (b) the
conditions precedent to the initial Advance and conditions precedent to
subsequent Advances, (c) certain common representations, warranties and
covenants of the Company in favor of the Funding Agents, (d) the establishment
of the Collateral Accounts, (e) the pledge and management of the Collateral
Accounts, and (f) the common events of default and remedies.
I. Capacity and Obligations of Secured Party. The Secured Party has
entered into this Agreement pursuant to the Disbursement Agreement and is
obligated to exercise its rights and perform its duties hereunder in accordance
with the Disbursement Agreement and the Intercreditor Agreement.
J. Condition. It is a condition precedent to the extensions or purchase of
the Secured Facilities by the Lenders that Pledgor shall have established the
Collateral Accounts, grant control to the Disbursement Agent (as Secured Party)
of such accounts, and undertaken the obligations contemplated by this Agreement.
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NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to extend or purchase the Secured Facilities under the
Secured Facilities Agreements and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Pledgor hereby agrees
with Secured Party as follows:
SECTION 1. Certain Definitions.
(a) Specific Definitions. The following terms used in this Agreement
shall have the following meanings:
"Broker-Dealer" means a person registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended.
"Business Day" means any day other than a Saturday, Sunday or any
other day which is a legal holiday or a day on which banking institutions are
permitted to be closed in New York or Nevada.
"Code" shall mean the Uniform Commercial Code as in effect in New
York.
"Collateral" means (i) the Collateral Accounts, (ii) all amounts
held from time to time in the Collateral Accounts, (iii) all Investments,
including all Financial Assets, security entitlements, securities (whether
certificated or uncertificated), instruments, accounts, general intangibles and
deposits representing or evidencing any Investments, (iv) all interest,
dividends, cash, instruments, securities and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Collateral, and (v) to the extent not covered by clauses (i)
through (iv) above, all proceeds of any or all of the foregoing Collateral.
"Collateral Accounts" means the Restricted Securities Accounts and
the Restricted Deposit Accounts and any other accounts or subaccounts in which
Investments may be held or registered.
"Disbursement Secured Parties" shall have the same meaning as
"Secured Parties" under the Disbursement Agreement.
"Investments" means any Financial Assets credited to the Restricted
Securities Account or the Restricted Deposit Accounts, and any other property
acquired by Securities Intermediary as securities intermediary hereunder in
exchange for, with proceeds from or distributions on, or otherwise in respect of
any Investments.
"Overnight Investments" means an interest bearing overnight deposit
account
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with The Bank of Nova Scotia, [Vancouver branch.]
"Permitted Investments" means (a) (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 any Rating
Agency 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 at least "A" or "A2" or the
equivalent by any Rating Agency and short-term debt rated 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 thereof) 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 or permitted under
the Collateral
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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 (which demand shall only
be made at the direction of the Pledgor) after 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; (b)
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; (c)
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 (d) 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, in each case having rating of at least "A" or "A2" or the equivalent by
any Rating Agency.
"Restricted Credit Balance Accounts" means the restricted credit
balance accounts established and maintained by Pledgor and Secured Party with
Securities Intermediary pursuant to Section 2, including the Collection Account
and the Disbursement Account.
"Restricted Deposit Accounts" means the restricted deposit accounts
established and maintained by Pledgor and Secured Party with Securities
Intermediary pursuant to Section 2, including the HC/Mall Component Cash
Management Account, the HVAC Component Cash Management Account and the
Pre-Completion Revenues Account.
"Restricted Securities Accounts" means the restricted securities
accounts established and maintained with Securities Intermediary pursuant to
Section 2, including the Banks' Proceeds Account, the Company's Funds Account
and the Interest Payment Account.
"Secured Facilities" means all of the Facilities other than the HVAC
Commitments Facility.
"Secured Facilities Agreements" means all of the Facilities
Agreements other than the HVAC Services Agreement.
["Secured Obligations" shall have the meaning given to such term in
the Borrower Security Agreement of date even herewith among Pledgor and
Intercreditor Agent.]
"Securities Intermediary" means The Bank of Nova Scotia.
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"Suspension Period" means each period beginning on the occurrence of
a Potential Event of Default or Event of Default and continuing so long as any
Potential Event of Default or Event of Default shall continue.
(b) General Provisions. Capitalized terms used but not defined
herein shall have the meaning given to such terms in Exhibit A [As attached to
Disbursement Agreement]. Unless otherwise defined herein or in Exhibit A, terms
used in Articles 8 and 9 of the Code are used herein as therein defined. Words
used herein, regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context indicates is
appropriate. When a reference is made in this Agreement to an Appendix, Exhibit,
Introduction, Recital, Section or Schedule, such reference shall be to an
Appendix, an Exhibit, the Introduction, a Recital or a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
SECTION 2. Establishment and Operation of the Collateral Accounts.
[(a) Establishment of Banks' Proceeds Account. Pledgor and Secured
Party hereby authorize and direct Securities Intermediary to establish and
maintain at its office at One Liberty Plaza, New York, New York 10006, a
securities account in the name of Secured Party and under the sole dominion and
control of Secured Party, designated as "The Bank of Nova Scotia, as
Disbursement Agent under agreement dated [], Banks' Proceeds Account fbo the
Bank Lenders". Securities Intermediary hereby undertakes to treat Secured Party
as the person entitled to exercise the rights that comprise any Financial Asset
credited to the Banks' Proceeds Account. The Secured Party and the Pledgor agree
that this account shall be the "Banks' Proceeds Account."]
[(b) Establishment of Collection Account. Pledgor and Secured Party
hereby authorize and direct Securities Intermediary to establish and maintain at
its office at One Liberty Plaza, New York, New York 10006, as an account in the
name of Secured Party and under the sole dominion and control of Secured Party,
a restricted credit balance account designated as "The Bank of Nova Scotia, as
Disbursement Agent under the agreement dated November 14, 1997, Collection
Account". The Secured Party and the Pledgor agree that this account shall be the
"Collection Account."]
(c) Establishment of Company's Funds Account. Pledgor and Secured
Party hereby authorize and direct Securities Intermediary to establish and
maintain at its office at One Liberty Plaza, New York, New York 10006, a
securities account in the name of Secured Party and under the sole dominion and
control of Secured Party, designated as "The Bank of Nova Scotia, as
Disbursement Agent under agreement dated [], Company's Funds Account fbo Secured
Lenders". Securities Intermediary
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hereby undertakes to treat Secured Party as the person entitled to exercise the
rights that comprise any Financial Asset credited to the Company's Funds
Account. The Secured Party and the Pledgor agree that this account shall be the
"Company's Funds Account."
[(d) Establishment of Disbursement Account. Pledgor and Secured
Party hereby authorize and direct Securities Intermediary to establish and
maintain at its office at One Liberty Plaza, New York, New York 10006, as an
account in the name of Secured Party and under the sole dominion and control of
Secured Party, a restricted credit balance account designated as "The Bank of
Nova Scotia, as Disbursement Agent under the agreement dated [], Disbursement
Account". The Secured Party and the Pledgor agree that this account shall be the
"Disbursement Account."
[(e) Establishment of HC/Mall Component Cash Management Account.
Pledgor and Secured Party hereby authorize and direct Securities Intermediary to
establish and maintain at The Nova Scotia Bank, Portland branch, 888 S.W. 5th
Ave., Suite 750, Portland, Oregon, as an account in the name of Secured Party
and under the sole dominion and control of Secured Party, a restricted deposit
account designated as "The Bank of Nova Scotia, as Disbursement Agent under the
agreement dated [], HC/Mall Component Cash Management Account". The Secured
Party and the Pledgor agree that this account shall be the "HC/Mall Component
Cash Management Account."][Right of setoff]
[(f) Establishment of HVAC Component Cash Management Account.
Pledgor and Secured Party hereby authorize and direct Securities Intermediary to
establish and maintain at The Nova Scotia Bank, Portland branch, 888 S.W. 5th
Ave., Suite 750, Portland, Oregon, an account in the name of Secured Party and
under the sole dominion and control of Secured Party, a restricted deposit
account designated as "The Bank of Nova Scotia, as Disbursement Agent under the
agreement dated November 14, 1997, HVAC Component Cash Management Account". The
Secured Party and the Pledgor agree that this account shall be the "HVAC
Component Cash Management Account."][Right of setoff]
(g) Establishment of Interest Payment Account. Pledgor and Secured
Party hereby authorize and direct Securities Intermediary to establish and
maintain at its office at One Liberty Plaza, New York, New York 10006, a
securities account in the name of Secured Party and under the sole dominion and
control of Secured Party, designated as "The Bank of Nova Scotia, as
Disbursement Agent under agreement dated [], Interest Payment Account fbo
Disbursement Secured Parties". Securities Intermediary hereby undertakes to
treat Secured Party as the
person entitled to exercise the rights that comprise any Financial Asset
credited to the Interest Payment Account. The Secured Party and the Pledgor
agree that this account shall be the "Interest Payment Account."
[(h) Establishment of Pre-Completion Revenues Account. Pledgor and
Secured Party hereby authorize and direct Securities Intermediary to establish
and maintain at The Nova Scotia Bank, Portland branch, 888 S.W. 5th Ave., Suite
750, Portland, Oregon, as an account in the
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name of Secured Party and under the sole dominion and control of Secured Party,
a restricted deposit account designated as "The Bank of Nova Scotia, as
Disbursement Agent under the agreement dated November 14, 1997, Pre-Completion
Revenues Account". The Secured Party and the Pledgor agree that this account
shall be the "Pre-Completion Revenues Account."]
(i) Operations of the Collateral Accounts. The Collateral Accounts
shall be operated, and all Investments shall be acquired and registered or held
(as applicable), in accordance with the terms of this Agreement and the
directions of Secured Party.
(j) Account Statements. Securities Intermediary shall send Secured
Party and Pledgor written account statements with respect to the Collateral
Accounts not less frequently than monthly. Reports or confirmation of the
execution of orders and statements of account shall be conclusive if not
objected to in writing within 30 days after delivery pursuant to Section 21.
SECTION 3. Mechanics of Deposits of Funds in and between Collateral
Accounts.
(a) Transfers to Banks' Proceeds Account. All transfers of funds to
the Banks' Proceeds Account shall be made by wire transfer (or, if applicable,
intra-bank transfer from another account of Pledgor with Securities
Intermediary) of immediately available funds, in each case addressed as follows:
Account No.: #02256-14
ABA No.: #026002532
Reference: Venetian Project - Banks' Proceeds Account
Attention: Marianne Velker
[(b) Transfers to Collection Account. All transfers of funds to the
Collection Account shall be made by wire transfer (or, if applicable, intra-bank
transfer from another account of Pledgor with Securities Intermediary) of
immediately available funds, in each case addressed as follows:
Account No.: #02239-13
ABA No.: #026002532
Reference: Venetian Project - Collection Account
Attention: Marianne Velker
(c) Transfers to Company's Funds Account. All transfers of funds to
the Company's Funds Account shall be made by wire transfer (or, if applicable,
intra-bank transfer from another account of Pledgor with Securities
Intermediary) of immediately available funds, in each case addressed as follows:
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Account No.: #02235-14
ABA No.: #026002532
Reference: Venetian Project - Copmpany's Funds Account
Attention: Marianne Velker
[(d) Acknowledgement of Deposit. Securities Intermediary and Secured
Party acknowledge the deposit of $[5,000,000] in the Company's Funds Account on
the date hereof.]
(e) Transfers to HC/Mall Component Cash Management Account.
Transfers of funds to the HC/Mall Component Cash Management Account shall be
made by wire transfer (or, if applicable, intra-bank transfer from another
account of Pledgor with Securities Intermediary) of immediately available funds,
in each case addressed as follows:
Account No.: Credit with advise The Bank of Nova Scotia
Portland Branch IBA #6028-33
ABA No.: #026002532
Reference: Venetian Project - HC/Mall Component Cash
Management Account #7460011435
Attention: Julie Nelson
[(f) Acknowledgement of Deposit. Securities Intermediary and Secured
Party acknowledge the deposit by Pledgor of $[5,500,000] in the HC/Mall
Component Cash Management Account on the date hereof.]
(g) Transfers to HVAC Component Cash Management Account. Transfers
of funds to the HVAC Component Cash Management Account shall be made by wire
transfer (or, if applicable, intra-bank transfer from another account of Pledgor
with Securities Intermediary) of immediately available funds, in each case
addressed as follows:
Account No.: Credit with advise The Bank of Nova Scotia
Portland Branch IBA #6028-33
ABA No.: #026002532
Reference: Venetian Project - HVAC Component Cash
Management Account #7460011443
Attention: Julie Nelson
(h) Acknowledgement of Deposit. Securities Intermediary and Secured
Party acknowledge the deposit by Pledgor of $[1,000,000] in the HVAC Component
Cash Management Account on the date hereof.
(i) Transfers to Pre-Completion Revenues Account. All transfers of
funds to the Pre-Completion Revenues Account shall be made by wire transfer (or,
if applicable, intra-bank transfer from another account of Pledgor with
Securities Intermediary) of immediately available funds, in each case addressed
as follows:
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Account No.: #02257-11
ABA No.:
Reference: Pre-Completion Revenues Account
Attention: Marianne Velker
(j) Notice of Transfers. In the event of any transfer of funds to or
from the Collateral Accounts pursuant to any provision of Section 3, Pledgor,
Secured Party or Securities Intermediary, as the case may be, shall promptly
after initiating or sending out written instructions with respect to such
transfer, give notice to the other such party by facsimile of the date and
amount of such transfer.
SECTION 4. Permitted Investments and Transfers of Amounts in the
Collateral Accounts.
(a) Strict Compliance. Cash held by Securities Intermediary in the
Collateral Accounts shall not be (i) invested or reinvested, (ii) sold or
redeemed, or (iii) transferred from or among the Collateral Accounts, except as
provided in this Section 4.
(b) Pledgor's Right to Direct Investment. Except during any
Suspension Period, Securities Intermediary shall, in accordance with Pledgor's
written Entitlement Orders given to Securities Intermediary from time to time,
sell or redeem Investments, and apply amounts transferred to or held for the
credit of the respective Restricted Securities Accounts to make investments for
credit to the Restricted Securities Accounts, in Securities Intermediary's name
and as custodian under this Agreement, in Permitted Investments. During any
Suspension Period, (i) Pledgor's right to direct such investments under this
Section 4(b) shall be suspended, and Securities Intermediary shall not accept
Entitlement Orders with respect to the Restricted Securities Account from any
person other than Secured Party; and (ii) any credit balances shall be invested
and reinvested only as provided in Section 4(c).
(c) Overnight Investments. To the extent that, as of [2:00 p.m., New
York time] on any Business Day, there are credit balances expected to remain
after settlement of all pending transactions in any of the [Restricted
Securities Accounts], [Restricted Deposit Accounts] or the [Restricted Credit
Balance Accounts], unless otherwise instructed by Secured Party, Securities
Intermediary shall apply the expected credit balances to acquire Overnight
Investments. Any Overnight Investments shall be held for the credit of the
Collateral Account from which the proceeds for acquisition was derived. [Pledgor
hereby acknowledges that, as foreign deposit accounts, "Overnight Investments"
may not benefit from any protections afforded to domestic depositors by state or
Federal law, may have a lesser preference in a liquidation than a domestic
deposit, and are subject to cross-border risks. Neither The Bank of Nova Scotia,
New York agency, nor The Bank of Nova Scotia, Portland branch, separately
guarantee or promise the repayment of
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any Overnight Investment.]
(d) Actions of Securities Intermediary on Purchase of Investments.
Promptly upon the purchase, acquisition or transfer for credit of any Collateral
Account of any Investment, Securities Intermediary shall take all steps that it
customarily takes in the ordinary course of its business to ensure that such
Investment is credited on its books to the Collateral Account for which the
Investment was acquired. Without limiting the generality of the foregoing,
Securities Intermediary shall promptly (i) send to Pledgor and Secured Party a
written confirmation of the acquisition of such Investment, and (ii) indicate by
book entry in its records that such Investment has been credited to, and is held
for the credit of, the specified Collateral Account. Securities Intermediary
agrees with Pledgor and Secured Party that any cash or property credited to, or
held for the credit of, the Collateral Accounts shall be treated as "Financial
Assets" as that term is defined in Section 8-103(a)(9)(iii) of the Code.
(e) Interest on Collateral Accounts. Amounts held on deposit or as
credit balances, whether in a Restricted Deposit Account, a Restricted Credit
Balance Account or a Restricted Securities Account shall not bear interest,
although to the extent invested in Investments (including Overnight
Investments), deposit or credit balances may realize interest income.
(f) Control Agreement. Anything contained herein to the contrary
notwithstanding, including the actual or alleged absence of a Potential Event of
Default or Event of Default, Securities Intermediary shall, if and as directed
in writing by Secured Party, without the consent of Pledgor, (i) comply with
Entitlement Orders originated by Secured Party with respect to the Collateral
Accounts and any Security Entitlements therein, (ii) transfer, sell or redeem
any of the Collateral, (iii) transfer any or all of the Collateral to any
account or accounts designated by Secured Party, including any Collateral
Account or an account established in Secured Party's name (whether at Secured
Party or Securities Intermediary or otherwise), (iv) register title to any
Collateral in any name specified by Secured Party, including the name of Secured
Party or any of its nominees or agents, without reference to any interest of
Pledgor, or (v) otherwise deal with the Collateral as directed by Secured Party.
Securities Intermediary shall act on any instruction of Secured Party
notwithstanding assertions or proof that (1) Secured Party has no right under
Sections 14 or 15 to originate the instruction or take the underlying action;
(2) such instruction or action constitutes a breach of this Agreement or any
other agreement; or (3) this Agreement has terminated, unless notified in
writing by Secured Party that this Agreement has terminated and such notice has
not been withdrawn. Nothing contained in this paragraph shall constitute a
waiver of by Pledgor of any rights or remedies it may have against Secured Party
under this Agreement or any other agreement.
(g) Deposit of Proceeds. [Any interest earned on any of the
Restricted Deposit Balance Accounts in accordance with Section 4(e),] any
interest, cash dividends or other cash distributions received in respect of any
Investments and the net proceeds of any sale or payment of
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any Investments shall be promptly credited to, and held for the credit of, the
Collateral Account to which such Investment was credited. Any distribution of
property other than cash in respect of any Investment shall be credited to and
held for the credit of the Collateral Account to which the related Investment
was credited; provided that, unless otherwise instructed in writing by Secured
Party, Securities Intermediary shall, for credit to the Collateral Accounts,
promptly sell, redeem or otherwise liquidate any such property that, as of the
date of receipt, is not a] Permitted Investment.
(h) Segregation of Accounts. Except to the extent otherwise
instructed by Secured Party or as provided in Section 2(a), 2(b), 2(c), 2(d),
2(e), 2(f), 2(g), or 2(h)Securities Intermediary shall separately maintain each
of the Collateral Accounts and shall not transfer property or proceeds among the
Collateral Accounts.
SECTION 5. Pledge of Security for Secured Obligations. Pledgor
hereby pledges and assigns to Secured Party, and hereby grants to Secured Party
a security interest in, all of Pledgor's right, title and interest in and to the
Collateral as collateral security for the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. 362(a)), of all Secured
Obligations.
SECTION 6. Acknowledgement of Security Interest in Favor of Secured
Party; Covenant Against Creation of other Interests.
(a) Acknowledgement of Security Interest. Securities Intermediary
acknowledges the security interest granted by Pledgor in favor of Secured Party
in the Collateral.
(b) Acknowledgement of Securities Intermediary's Role. Securities
Intermediary hereby further acknowledges that it holds the Collateral Accounts,
and all Security Entitlements therein, as custodian for, for the benefit of, and
subject to the control of, Secured Party. Securities Intermediary shall, by book
entry or otherwise, indicate that the Collateral Accounts, and all Security
Entitlements registered to or held therein, are subject to the control of
Secured Party as provided in Section 4(f).
(c) Securities Intermediary Has No Notice of Adverse Claims.
Securities Intermediary represents and warrants that (i) it has no notice of any
Adverse Claim against any of the Collateral other than the claim of Secured
Party under this Agreement; and (ii) it is not, in its capacity as securities
intermediary, party to any agreement other than this Agreement that governs its
rights or duties, or limits or conflicts with the rights of Secured Party,
including the exclusive right of Secured Party to control as provided in Section
4(f), with respect to the Collateral Accounts.
(d) Securities Intermediary Shall Not Acknowledge Other Claims.
Securities
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Intermediary agrees that, except as expressly provided in this Agreement or with
the written consent of Secured Party, it shall not agree to or acknowledge (i)
any right by any Person other than Secured Party to originate Entitlement Orders
or control with respect to the Collateral Accounts; or (ii) any limitation on
the right of Secured Party to originate Entitlement Orders with respect to or
direct the transfer of any Investments or cash credited to the Collateral
Accounts.
SECTION 7. Securities Intermediary Maintenance of the Collateral
Accounts.
(a) Transactions Shall Comply With Rules. The parties acknowledge
that all transactions in Financial Assets under this Agreement shall be in
accordance with the rules and customs of the exchange, market or clearing
organization, if any, in which the transactions are executed or settled and in
conformity with applicable law and regulations of governmental authorities and
future amendments or supplements thereto.
(b) Fees and Charges of Securities Intermediary. Pledgor shall pay
to Securities Intermediary, in accordance with Securities Intermediary's usual
schedule of charges or any written agreement between Securities Intermediary and
Pledgor, any fees or charges reasonably imposed by Securities Intermediary with
respect to the establishment, maintenance and transactions in or affecting the
Collateral Accounts.
(c) Securities Intermediary Shall Not Permit Leverage of
Investments. Securities Intermediary shall not execute any transaction to
acquire a Financial Asset under Section 4(b) unless there are sufficient funds
in a specific Collateral Account or reasonably expected with respect to pending
transactions in such Collateral Account to settle such transaction for the
account of such Collateral Account. Notwithstanding the foregoing sentence, in
the event that Securities Intermediary executes a transaction without adequate
funds to settle the transaction, Pledgor shall be liable to Securities
Intermediary for any deficiency and shall promptly reimburse Securities
Intermediary for any loss or expense incurred thereby, including losses
sustained by reason of Securities Intermediary's inability to borrow any
securities or other property sold for the Collateral Account. Pledgor agrees to
pay interest charges which may be imposed by Securities Intermediary in
accordance with its usual custom, with respect to late payments for Financial
Assets purchased for any Collateral Account and prepayments to any Collateral
Account (i.e., the crediting of the proceeds of sale before the settlement date
or receipt by Securities Intermediary of the items sold in good deliverable
form). Pledgor agrees to pay promptly any amount which may become due in order
to satisfy demands for additional margin or marks to market with respect to any
security purchased or sold on instruction from Pledgor.
(d) Risk of Investments and Transactions. It is not the intention of
the parties that Securities Intermediary should bear any investment risk
associated with Permitted Investments or Overnight Investments acquired for the
credit of the Collateral Accounts in accordance with Section 4. Any losses or
gains realized on such Investments shall be charged or credited to the
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Collateral Accounts, as appropriate. On committing to a transaction for the
credit of the Collateral Accounts pursuant to an instruction permitted in
accordance with Section 4, Securities Intermediary may, (i) pending settlement,
block (A) the Investments to be sold or (B) credit balances sufficient to settle
any acquisition and, (ii) at the time of settlement, deliver such Investments or
funds in accordance with the rules, custom or practice of the particular market.
(e) Use of Intermediaries and Nominees. Securities Intermediary is
authorized, subject to Secured Party's written instructions, to register any
Financial Assets acquired by Securities Intermediary pursuant to this Agreement
in the name of Securities Intermediary or in the name of its nominee, or to
cause such securities to be registered in the name of a Federal reserve bank, a
recognized securities intermediary or clearing corporation, or a nominee of any
of them. Securities Intermediary may at any time and from time to time appoint,
and may at any time remove, any bank, trust company, clearing corporation, or
Broker-Dealer as its agent to carry out such of the provisions of this
Agreement. The appointment or use of any intermediary, or the appointment of any
such agent, shall not relieve Securities Intermediary of any responsibility or
liability under this Agreement.
(f) Corporate Actions. Except as otherwise set forth herein, the
parties agree that neither Secured Party nor Securities Intermediary shall have
any responsibility for ascertaining or acting upon any calls, conversions,
exchange offers, tenders, interest rate changes or similar matters relating to
any Financial Assets credited to or held for the credit of the Restricted
Securities Account (except based on written instructions originated by Pledgor
or Secured Party), or for informing Pledgor or Secured Party with respect
thereto, whether or not Securities Intermediary or Secured Party has, or is
deemed to have, knowledge of any of the aforesaid. Securities Intermediary is
authorized to withdraw securities sold or otherwise disposed of, and to credit
the appropriate Collateral Account with the proceeds thereof or make such other
disposition thereof as may be directed in accordance with this Agreement.
Securities Intermediary is further authorized to collect all income and other
payments which may become due on Financial Assets credited to the Collateral
Accounts, to surrender for payment maturing obligations and those called for
redemption and to exchange certificates in temporary form for like certificates
in definitive form, or, if the par value of any shares is changed, to effect the
exchange for new certificates. It is understood and agreed by Pledgor and
Secured Party that, although Securities Intermediary will use reasonable efforts
to effect the transactions set forth in the preceding sentence, Securities
Intermediary shall incur no liability for its failure to effect the same unless
its failure is the result of wilful misconduct.
(g) Disclosure of Account Relationships. Pledgor and Secured Party
acknowledge that Securities Intermediary may be required to disclose to
securities issuers the name, address and securities positions with respect to
Financial Assets credited to the Collateral Accounts, and hereby consent to such
disclosures.
(h) Forwarding of Documents. Securities Intermediary shall forward
to Pledgor
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and Secured Party, or notify Pledgor and Secured Party by telephone of, all
communications received by Securities Intermediary as owner of any Financial
Assets credited to the Collateral Accounts and which are intended to be
transmitted to the beneficial owner thereof.
(i) Direction of Secured Party Controls in Disputes. Pledgor,
Securities Intermediary and Secured Party hereby agree that in the event any
dispute arises with respect to the payment, ownership or right to possession of
the Collateral Accounts or any other Collateral credited to or held therein,
Securities Intermediary shall take such actions and shall refrain from taking
such actions with respect thereto as may be directed by Secured Party.
(j) No Setoff, etc. Securities Intermediary shall not exercise on
its own behalf any claim, right of set-off, banker's lien, clearing lien,
counterclaim or similar right against any of the Collateral[; provided that
Securities Intermediary may deduct, from any credit balances, any usual and
ordinary transaction and administration fees payable in connection with the
administration and operation of the Collateral Accounts. Except for claims for
deductions permitted in the preceding sentence, Securities Intermediary agrees
that any security interest it may have in the Collateral Accounts or any
security entitlement carried therein shall be subordinate and junior to the
interest of Secured Party.
(k) Only Agreement. This Agreement shall govern the actions, rights
and obligations of Securities Intermediary, and shall determine the governing
law, with respect to the Collateral Accounts and the Collateral notwithstanding
any term or condition in any agreement other than this Agreement as it may be
amended, supplemented or otherwise modified in writing.
(l) Care of Financial Assets. Securities Intermediary shall maintain
possession or control of all Financial Assets credited to the Collateral
Accounts by segregating such Financial Assets from its proprietary assets and
keeping them free of any lien, charge or claim of any third party granted or
created by Securities Intermediary. Securities Intermediary shall take such
other steps to ensure that Financial Assets credited to the Collateral Accounts
are identified as being held for customers of Securities Intermediary as may
required under applicable law, including 17 CFR Part 450, or in accordance with
custom and practice in the industry.
SECTION 8. Transactions in Collateral Accounts.
(a) Power of Secured Party to Sell or Transfer. Pledgor agrees that
Secured Party may sell or cause the sale or redemption of any Investment and
instruct Securities Intermediary to transfer the proceeds of such sale or any
other credit or balance in any of the Collateral Accounts Account to any of the
Collateral Accounts or any third party or account, in either case (i) if such
sale or redemption is necessary to permit Secured Party to perform its duties
under this Agreement, the Disbursement Agreement or the Intercreditor Agreement,
or (ii) as provided in Section 14.
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(b) Drawings Permitted from Certain Accounts. Except as provided in
subdivision 8(b)(ii), Pledgor has no right to draw Checks against the Collateral
Accounts.
(i) By Negotiable Instruments Delivered to Pledgor. Secured
Party may, in accordance with the Disbursement Agreement, periodically
deliver to Pledgor preauthorized "Checks" (as defined in Section
3-103(2)(b) of the Code) drawn against the Disbursement Account in
specific amounts to the order of specific vendors or other third party
payees of Pledgor and appropriately executed by or for Secured Party. On
delivery of Checks to Pledgor, Secured Party shall cause funds in the
affected accounts to be blocked to the extent necessary to pay such items
and shall not otherwise disburse or apply such related funds (including to
make Investments pursuant to Section 4(b)) unless it has withdrawn the
authorization to deliver such items to the payees in advance of delivery
to the payee as set forth in the following sentence. If any Event of
Default has occurred and is continuing, Secured Party may notify Pledgor
that it has withdrawn Pledgor's right to deliver specified Checks or
similar items, or unblocked the related funds, by written notice. Unless
so notified by Secured Party in advance of delivery to the payee, Pledgor
is authorized to deliver such Checks to the appropriate payees. If so
notified by Secured Party in advance of delivery of any Check to the payee
thereof, Pledgor shall promptly return the Check or similar items to
Secured Party.
(ii) By Pledgor. Except during any Suspension Period, Pledgor
may by Check or other means draw funds from the HC/Mall Component Cash
Management Account and the HVAC Component Cash Management Account for the
purposes set forth in the Disbursement Agreement. During any Suspension
Period, the HC/Mall Component Cash Management Account and the HVAC
Component Cash Management Account shall be blocked, and Pledgor shall have
no right to draw any amounts therefrom.
SECTION 9. Representations and Warranties By Securities
Intermediary. Securities Intermediary hereby represents and warrants to Pledgor
and Secured Party as follows:
(a) Corporate Power. Securities Intermediary has all necessary
corporate power and authority to enter into and perform this Agreement.
(b) Execution Authorized. The execution, delivery and performance of
this Agreement by Securities Intermediary have been duly authorized by all
necessary corporate action on the part of Securities Intermediary.
(c) Securities Intermediary. Securities Intermediary is a
"securities intermediary" (as that term is defined in Section 8-102(a)(14) of
the Code) and is acting in such capacity with respect to the Collateral
Accounts. Securities Intermediary is not a "clearing corporation" (as that term
is defined in Section 8-102(a)(5) of the Code).
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SECTION 10. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Ownership of Collateral; Security Interest; Perfection and
Priority. [Except as specifically set forth in Section [] of the Disbursement
Agreement, ]Pledgor is (or at the time of transfer thereof to Securities
Intermediary will be) the legal and beneficial owner of the Collateral from time
to time transferred by Pledgor to Securities Intermediary, as agent for Secured
Party, free and clear of any Lien except for the security interest created by
this Agreement. The pledge and assignment of the Collateral pursuant to this
Agreement creates a valid security interest in the Collateral securing the
Payment of the Secured Obligations. Assuming compliance by Securities
Intermediary with this Agreement, Secured Party will have a perfected security
interest in the Collateral senior in priority to any other security interest
created by Pledgor.
(b) Governmental Authorizations. Except as may be required under
Nevada gaming laws, no authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
either (i) the grant by Pledgor of the security interest granted hereby, (ii)
the execution, delivery or performance of this Agreement by Pledgor, or (iii)
the perfection of or the exercise by Secured Party or Securities Intermediary of
its rights and remedies hereunder (except as may have been taken by or at the
direction of Pledgor).
(c) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party or Securities Intermediary by or on behalf
of Pledgor with respect to the Collateral, the establishment of the Collateral
Accounts or otherwise is accurate and complete in all material respects.
SECTION 11. Further Assurances.
(a) Pledgor. Pledgor agrees that from time to time, at the expense
of Pledgor, Pledgor shall promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or reasonably
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party or Securities Intermediary to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Pledgor shall: (a) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or reasonably desirable, or as
Secured Party may reasonably request, in order to perfect and preserve the
security interests granted or purported to be granted hereby, and (b) at Secured
Party's request, appear in and defend any action or proceeding that may affect
Pledgor's title to or Secured Party's security interest in all or any part of
the Collateral.
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(b) Securities Intermediary. Securities Intermediary shall take such
further actions as Secured Party shall reasonably request as being necessary or
desirable to maintain or achieve perfection or priority of Secured Party's
security interest with respect to the Collateral and to permit Secured Party to
exercise its rights with respect to the Collateral.
SECTION 12. Transfers and other Liens. Pledgor agrees that, except
as permitted in Section 4(b) and for the security interest created by this
Agreement, it shall not (a) sell, assign (by operation of law or otherwise),
redeem or otherwise dispose of any of the Collateral or (b) create or suffer to
exist any Lien upon or with respect to any of the Collateral.
SECTION 13. Secured Party Appointed Attorney-in-Fact; Secured Party
Performance.
(a) Secured Party Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including (a) to file
one or more financing or continuation statements, or amendments thereto,
relative to all or any part of the Collateral without the signature of Pledgor
and (b) to receive, endorse and collect any instruments or other Investments
made payable to Pledgor representing any dividend, principal or interest payment
or other distribution in respect of the Collateral or any part thereof and to
give full discharge for the same.
(b) Performance by Secured Party. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 16.
SECTION 14. Remedies.
(a) Transfer or Sequestration of Collateral after Potential Event of
Default or Event of Default. If any Potential Event of Default or Event of
Default shall have occurred and be continuing, Secured Party may instruct
Securities Intermediary to (i) sell or redeem any Investments, (ii) transfer any
or all of the Collateral constituting cash to the [Restricted Deposit] Account
or transfer any or all of the Collateral to any account designated by Secured
Party, including account or accounts established in Secured Party's name
(whether at Secured Party or Securities Intermediary or otherwise), (iii)
register title to any Collateral in any name specified by Secured Party,
including the name of Secured Party or any of its nominees or agents, without
reference to any interest of Pledgor, or (iv) otherwise deal with the Collateral
as directed by Secured Party.
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(b) Rights of Secured Party after Event of Default. If any Event of
Default shall have occurred and be continuing, Secured Party may exercise in
respect of the Collateral, in addition to all other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code as in effect in any
relevant jurisdiction (the "UCC") (whether or not the UCC applies to the
affected Collateral), and Secured Party may also in its sole discretion sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange or broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Secured Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(c) Agreement as to Manner of Sale. Pledgor hereby agrees that the
Collateral is of a type customarily sold on recognized markets and, accordingly,
that no notice to any Person is required before any sale of any of the
Collateral pursuant to the terms of this Agreement; provided that, without
prejudice to the foregoing, Pledgor agrees that, to the extent notice of any
such sale shall be required by law, at least ten days' notice to Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.
(d) Deficiency. If the proceeds of any sale or other disposition of
the Collateral are insufficient to pay all the Secured Obligations, Pledgor
shall be liable for the deficiency and the fees of any attorneys employed by
Secured Party to collect such deficiency.
(e) Set-off. Anything contained herein to the contrary
notwithstanding, in the case of the NC/Mall Component Cash Management Account
and the HVAC Component Cash Management Account, whether credited to the
Restricted Securities Account or otherwise, shall be subject to secured Party's
or any Secured Lender's rights of set-off.
SECTION 15. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, all cash included as Collateral and all
proceeds received by Secured Party in respect of any sale or redemption of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Secured Party, be held by or for Secured Party as
Collateral for, or then, or at any other time thereafter, applied in full or in
part by Secured Party against, the Secured Obligations in the following order of
priority:
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FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or reasonably incurred by Secured Party in
connection therewith, and all amounts for which Secured Party is entitled
to indemnification hereunder and all advances made by Secured Party
hereunder for the account of Pledgor, and to the payment of all costs and
expenses paid or incurred by Secured Party in connection with the exercise
of any right or remedy hereunder, all in accordance with Section 16;
SECOND: To the payment of all other Secured Obligations in
accordance with the Disbursement Agreement and the Intercreditor
Agreement; and
THIRD: To the payment to or upon the order of Pledgor, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 16. Limitations on Duties; Exculpation; Indemnity; Expenses.
(a) Securities Intermediary.
(i) Limitation on Duties. Securities Intermediary's duties
hereunder are only those specifically provided herein, and Securities
Intermediary shall incur no liability whatsoever for any actions or
omissions hereunder except for any such liability arising out of or in
connection with Securities Intermediary's gross negligence or wilful
misconduct. Securities Intermediary has no obligation to inquire into, or
to ensure, the sufficiency of this Agreement or the arrangements described
hereunder to satisfy any objectives of Secured Party or Pledgor.
Securities Intermediary shall have no duty to supervise or to provide
investment counseling or advice to Pledgor or Secured Party with respect
to the purchase, sale, retention or other disposition of any Financial
Assets held hereunder. Except as specifically otherwise provided in this
Agreement, Securities Intermediary shall not be responsible for enforcing
compliance by the other parties to this Agreement with their respective
duties and obligations to each other under this or any other Agreement.
(ii) Consultation with Counsel. Securities Intermediary may
consult with, and obtain advice from, legal counsel as to the construction
of any of the provisions of this Agreement, and shall incur no liability
in acting in good faith in accordance with the reasonable advice and
opinion of such counsel.
(iii) Indemnification. Pledgor agrees to indemnify Securities
Intermediary from and against any and all claims, losses, liabilities and
expenses (including reasonable
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attorneys' fees and expenses) in any way relating to, growing out of or
resulting from this Agreement or the performance of its obligations
hereunder, except to the extent arising out of or in connection with
Securities Intermediary's gross negligence or wilful misconduct.
(iv) Reasonable Reliance. Securities Intermediary shall be
fully protected and shall suffer no liability in acting in accordance with
any written instructions reasonably believed by it to have been given (A)
by Secured Party with respect to any aspect of the operation of the
Collateral Accounts (including any such instructions relating to any
investment or transfer of any amounts held therein or (B) by Pledgor, to
the extent provided in Section 4(b), with respect to the Collateral
Accounts.
(b) Secured Party.
(i) Exculpation. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Collateral in its
possession and the accounting for moneys actually received by it
hereunder, Secured Party shall have no duty as to any Collateral, it being
understood that Secured Party shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any
Collateral, whether or not Secured Party has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than
steps taken in accordance with the standard of care set forth above to
maintain possession of the Collateral) to preserve rights against any
parties with respect to any Collateral, (c) taking any necessary steps to
collect or realize upon the Secured Obligations or any guarantee therefor,
or any part thereof, or any of the Collateral, (d) initiating any action
to protect the Collateral against the possibility of a decline in market
value, (e) any loss resulting from Investments made, held or sold pursuant
to Section 4, except for a loss resulting from Secured Party's gross
negligence or wilful misconduct in complying with Section 4, or (f)
determining (i) the correctness of any statement or calculation made by
Pledgor in any written or telex (tested or otherwise) instructions or (ii)
whether any transfer to the Collateral Accounts is proper. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is
accorded treatment substantially equal to that which Secured Party accords
its own property of like kind. In addition to the foregoing and without
limiting the generality thereof, Secured Party shall not be responsible
for any actions or omissions of Securities Intermediary.
(ii) Indemnification. Pledgor agrees to indemnify Secured
Party and each Lender from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including enforcement
of this Agreement), except to the extent such claims, losses or
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liabilities result solely from Secured Party's gross negligence or wilful
misconduct as finally determined by a court of competent jurisdiction.
(iii) Reasonable Reliance. Secured Party shall be fully
protected and shall suffer no liability in acting in accordance with any
written instructions reasonably believed by it to have been given by
Pledgor, to the extent provided in Section 4(b), with respect to any
investments of any amounts held for the credit of the Collateral Accounts.
(iv) Expenses. Pledgor shall pay to Secured Party upon demand
the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that
Secured Party may reasonably incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to
perform or observe any of the provisions hereof.
SECTION 17. Resignation and Removal of Securities Intermediary.
(a) Removal. Securities Intermediary may be removed at any time by
written notice given by Secured Party to Securities Intermediary and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing.
(b) Resignation. Securities Intermediary may resign at any time by
giving not less than thirty days' written notice to Secured Party and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing. If an instrument of acceptance by a successor
Securities Intermediary shall not have been delivered to the resigning
Securities Intermediary within thirty days after the giving of any such notice
of resignation, the resigning Securities Intermediary may, at the expense of
Pledgor, petition any court of competent jurisdiction for the appointment of a
successor Securities Intermediary.
(c) Successor Securities Intermediary. Any successor Securities
Intermediary shall be a corporation qualified to, and located in, New York,
which (i) is subject to supervision or examination by the applicable
Governmental Authority, (ii) has a combined capital and surplus of at least
[Five Hundred Million Dollars (US$500,000,000)], (iii) has a long-term credit
rating of not less than ["A-" or "A3"], respectively, by any Rating Agency; and
provided, that any such bank with a long-term credit rating of ["A-" or "A3"]
shall not cease to be eligible to act as Securities Intermediary upon a downward
change in either such rating of no more than one category or grade of such
minimum rating, as the case may be. If any successor Securities Intermediary
does not accept deposits for non-fiduciary customers it may establish, in its
name as custodian under this
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agreement, appropriate deposit accounts ("Substitute Deposit Accounts") to hold
any cash balances which would otherwise have been held for the credit of the
[Restricted Deposit] Accounts on terms comparable to those required of the
[Restricted Deposit] Accounts. The Substitute Deposit Accounts may be
established with any depository institution, including a depository institution
affiliated with the successor Securities Intermediary, that (1) [is "Well
Capitalized" (as defined in the regulations of its primary Federal banking
regulator) to the extent determinable based on publicly available
information][has one of the three highest deposit rating available from any
Rating Agency or, if the institution is not rated, is a subsidiary of a holding
company that has one of the three highest long term credit ratings available
from any Rating Agency], (2) is a member of the Federal Deposit Insurance
Corporation, and (3) has Tier 1 capital (as defined in such regulations of its
primary Federal banking regulator) of not less than $500,000,000. In such
circumstances, the successor Securities Intermediary shall credit the Substitute
Deposit Account to the Collateral Accounts.
(d) Process of Succession. Upon the appointment of a successor
Securities Intermediary and its acceptance of such appointment, the resigning or
removed Securities Intermediary shall transfer all items of Collateral held by
it to such successor (which items of Collateral shall be transferred to
appropriate new Collateral Accounts established and maintained by such
successor). Following such appointment all references herein to Securities
Intermediary shall be deemed a reference to such successor; provided that the
provisions of Section 16(a) hereof shall continue to inure to the benefit of the
resigning or removed Securities Intermediary with respect to any actions taken
or omitted to be taken by it under this Agreement while it was Securities
Intermediary hereunder.
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SECTION 18. Continuing Security Interest; Termination of Obligations
of Securities Intermediary. This Agreement shall create a continuing security
interest in the Collateral and shall (a) remain in full force and effect until
the indefeasible payment in full of the Secured Obligations, the cancellation or
termination of the commitments under the Financing Agreements and the
cancellation or expiration of all letters of credit outstanding thereunder, (b)
be binding upon Pledgor, its successors and assigns, and (c) inure, together
with the rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and Lenders and their respective successors, transferees and
assigns. Upon the indefeasible payment in full of all Secured Obligations and
the cancellation or termination of the commitments under the Financing
Agreements and the cancellation or expiration of all letters of credit
outstanding thereunder, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Pledgor. Upon any such termination
Secured Party shall, at Pledgor's expense, execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination and
Pledgor shall be entitled to the return, upon its request and at its expense,
against receipt and without recourse to Secured Party, of such of the Collateral
as shall not have been sold or otherwise applied pursuant to the terms hereof.
Securities Intermediary shall not be released from its obligations hereunder,
and shall continue to maintain any Collateral in accordance with this Agreement,
until notified in writing by Secured Party that this Agreement has terminated
and so long as Secured Party has not withdrawn such notification.
SECTION 19. Secured Party as Disbursement Agent.
(a) Agency. Secured Party has been appointed to act as Secured Party
hereunder by Lenders pursuant to the Disbursement Agreement. Secured Party shall
be obligated, and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including, without limitation, the release or
substitution of Collateral), solely in accordance with this Agreement, the
Disbursement Agreement and the Intercreditor Agreement.
(b) Identity of Agent. Secured Party shall at all times be the same
Person that is Disbursement Agent under the Disbursement Agreement. Written
notice of resignation by Disbursement Agent pursuant to subsection 9.7 of the
Disbursement Agreement shall also constitute notice of resignation as Secured
Party under this Agreement; removal of Disbursement Agent pursuant to subsection
9.7 of the Disbursement Agreement shall also constitute removal as Secured Party
under this Agreement; and substitution of a successor disbursement agent
pursuant to subsection 9.7 of the Disbursement Agreement shall also constitute
substitution of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Disbursement Agent under subsection 9.7 of the
Disbursement Agreement by a successor Disbursement Agent, that successor
Disbursement Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Secured Party
under this Agreement,
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and the retiring or removed Secured Party under this Agreement shall promptly
(i) transfer to such successor Secured Party all items of Collateral held by
Secured Party (which as appropriate shall be credited to, and held for the
credit of, any new Restricted Collateral Accounts established and maintained by
such successor Secured Party), together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Secured Party under this Agreement, and (ii) execute and deliver to
such successor Secured Party such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Disbursement Agent's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
SECTION 20. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by any party herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
other parties, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
SECTION 21. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to the address of the party
as set forth under such party's name on the signature pages hereof. All notices
or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person,
(b) if sent by reputable overnight delivery service, (c) in the event overnight
delivery services are not readily available, if mailed by first class mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telex, or by telecopy with correct answer back received. Notice
so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Banking Day and, if not, on the next following Banking Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Banking Day; provided,
however, that if any notice is tendered to an addressee and the delivery thereof
is refused by such addressee, such notice shall be effective upon such tender.
Any party shall have the right to change its address for notice hereunder to any
other location by giving of no less than twenty (20) days' notice to the other
parties in the manner set forth hereinabove.
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SECTION 22. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 23. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 24. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 25. Governing Law. THIS AGREEMENT 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. Securities
Intermediary's Jurisdiction shall be New York.
SECTION 26. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Pledgor at
its address provided in Section 21, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
in any such court and to be otherwise effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
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SECTION 27. Waiver of Jury Trial. PLEDGOR, SECURITIES INTERMEDIARY
AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The
scope of this waiver is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Pledgor and Secured Party each
acknowledge that this waiver is a material inducement for Pledgor and Secured
Party to enter into a business relationship, that Pledgor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
SECTION 28. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
PLEDGOR:
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number:(702) 733-5499
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
By: LAS VEGAS SANDS, INC., its managing
member
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number:(702) 733-5499
S - 1
<PAGE>
GRAND CANAL SHOPS MALLS
CONSTRUCTION, LLC,
a Delaware limited liability company
By: Venetian Casino Resort, LLC,
as sole member
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ William P. Weidner
----------------------------
Name: William P. Weidner
Title: President
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
S - 2
<PAGE>
SECURITIES INTERMEDIARY:
THE BANK OF NOVA SCOTIA, a Canadian
chartered bank
By: /s/ Alan W. Pendergast
----------------------------------------
Name: Alan W. Pendergast
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a Canadian
chartered bank, as Disbursement Agent under
the Disbursement Agreement
By: /s/ Alan W. Pendergast
----------------------------------------
Name: Alan W. Pendergast
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Allan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S - 3
MORTGAGE NOTES PROCEEDS COLLATERAL ACCOUNT AGREEMENT
This MORTGAGE NOTES PROCEEDS COLLATERAL ACCOUNT AGREEMENT (this
"Agreement") is dated as of November 14, 1997, and entered into by and among LAS
VEGAS SANDS, INC., a Nevada corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a
Nevada limited liability company ("VCR", and jointly and severally with LVSI,
"Pledgor"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank, as Disbursement
Agent under the Disbursement Agreement (in such capacity herein called "Secured
Party").
PRELIMINARY STATEMENTS
A. The Project. LVSI, VCR and Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company ("GCCLLC"), propose to develop, construct and
operate the Venetian Casino Resort, a large scale Venetian-themed hotel, casino,
retail, meeting and entertainment complex, with related heating, ventilation and
air conditioning and power station facilities, as part of the redevelopment of
the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank Agent
and the Bank Lenders have entered into the Bank Credit Agreement pursuant to
which the Bank Lenders have agreed, subject to the terms thereof, to provide
certain loans to LVSI and VCR, jointly and severally, in an aggregate amount and
for purposes specified therein.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR,
GCCLLC, and the Interim Mall Lender have entered into the Interim Mall Credit
Agreement pursuant to which the Interim Mall Lender has agreed to provide loans
to LVSI, VCR and GCCLLC, jointly and severally, in an aggregate amount and for
purposes specified therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Mortgage Notes Indenture Trustee have entered
into the Mortgage Notes Indenture pursuant to which LVSI and VCR will issue
Mortgage Notes in an aggregate principal amount and for purposes specified
therein.
E. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Subordinated Notes Indenture Trustee have
entered into the Subordinated Notes Indenture pursuant to which LVSI and VCR
will issue Subordinated Notes in an aggregate principal amount and for purposes
specified therein.
F. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, Pledgor, GCCLLC, the Bank Agent (acting on behalf of itself and the
Bank Lenders), the Interim Mall Lender, the Mortgage Notes Indenture Trustee
(acting on behalf of itself and the Mortgage Note Holders), the HVAC Provider
and The Bank of Nova Scotia as "Disbursement Agent" have entered into that
certain Funding Agents'
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Disbursement and Administration Agreement ("Disbursement Agreement") for the
purpose of setting forth, among other things, (a) the mechanics for and
allocation of the Company's requests for Advances under the Facilities and from
the Company's Funds Account, (b) the conditions precedent to the initial Advance
and conditions precedent to subsequent Advances, (c) certain common
representations, warranties and covenants of the Company in favor of the Funding
Agents, (d) the establishment of the Collateral Accounts, (e) the pledge and
management of the Collateral Accounts, and (f) the common events of default and
remedies.
G. Capacity and Obligations of Secured Party. Secured Party has entered
into this Agreement pursuant to the Disbursement Agreement and is obligated to
exercise its rights and perform its duties hereunder in accordance with the
Disbursement Agreement and the Intercreditor Agreement.
H. Condition. It is a condition precedent to the purchase of the Mortgage
Notes by the Mortgage Note Holders that Pledgor shall have established the
Collateral Accounts, grant control to the Disbursement Agent (as Secured Party)
of such accounts, and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Mortgage Note Holders to purchase the Mortgage Notes under the
Mortgage Notes Indenture and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Pledgor hereby agrees
with Secured Party as follows:
SECTION 1. Certain Definitions.
(a) Specific Definitions. The following terms used in this
Agreement shall have the following meanings:
"Collateral" shall have the meaning given to that term in the
Third-Party Account Agreement.
"Collateral Accounts" shall have the meaning given to that term in
the Third-Party Account Agreement.
"Investments" shall have the meaning given to that term in the
Third-Party Account Agreement.
"Mortgage Notes Proceeds Account" shall have the meaning given to
that term in the Third-Party Account Agreement.
"Permitted Investments" shall have the meaning given to that term in
the Third-Party Account Agreement.
"Secured Obligations" means all obligations and liabilities of every
nature of Pledgor now or hereafter existing under or arising out of or in
connection with the
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Mortgage Notes Indenture, the Mortgage Notes, and each other Financing Agreement
to which the Mortgage Notes Indenture Trustee is a party or which grants a
security interest for the benefit of the Mortgage Notes Indenture Trustee or the
Mortgage Notes Holders, and all extensions or renewals thereof, whether for
principal, interest (including interest that, but for the filing of a petition
in bankruptcy with respect to Pledgor, would accrue on such obligations), fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliqui dated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Secured Party
or any Mortage Notes Holder as a preference, fraudulent transfer or otherwise,
and all obligations of every nature of Pledgor now or hereafter existing under
this Agreement.
"Securities Intermediary" means Goldman, Sachs & Co., identified as
the "Securities Intermediary" in the Third-Party Account Agreement.
"Third-Party Account Agreement" means the Mortgage Notes Proceeds
Third-Party Account Agreement, substantially in the form of Annex A hereto,
entered into among Pledgor, Secured Party and Securities Intermediary, as such
agreement may be amended, supplemented or otherwise modified from time to time.
(b) General Provisions. Capitalized terms used but not defined
herein or in the Third-Party Account Agreement shall have the meaning given to
such terms in Exhibit A to the Third-Party Account Agreement, although in the
event of a conflict, the meaning given to such term in the Third-Party Account
Agreement shall control. Unless otherwise defined herein, in the Third-Party
Account Agreement or in Exhibit A to the Third-Party Account Agreement, terms
used in Articles 8 and 9 of the Code are used herein as therein defined. Words
used herein, regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context indicates is
appropriate. When a reference is made in this Agreement to an Appendix, Exhibit,
Introduction, Recital, Section or Schedule, such reference shall be to an
Appendix, an Exhibit, the Introduction, a Recital or a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
SECTION 2. Establishment and Operation of the Mortgage Notes
Proceeds Account.
(a) Establishment of Mortgage Notes Proceeds Account. On the date
hereof, in accordance with the terms of the Third-Party Account Agreement,
Pledgor and Secured Party shall establish with Securities Intermediary at its
office at 85 Broad Street, New York, New York 10022, as a securities account in
the name of Secured Party, a
3
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restricted securities account designated as "The Bank of Nova Scotia Mortgage
Notes Proceeds Account".
(b) Compliance with Third-Party Account Agreement. The Collateral
Accounts shall be operated, and all Investments shall be purchased, registered
or held (as applicable), in accordance with the terms of the Third-Party Account
Agreement.
(c) Reasonable Reliance. Secured Party shall be fully protected
and shall suffer no liability in acting in accordance with any written
instructions reasonably believed by it to have been given by Pledgor with
respect to any aspect of the operation of the Collateral Accounts (including any
such instructions relating to any Investments of any amounts or Financial Assets
credited thereto).
SECTION 3. Pledge of Security for Secured Obligations. Pledgor
hereby pledges and assigns to Secured Party, and hereby grants to Secured Party,
in each case for the benefit of the Mortgage Notes Indenture Trustee and the
Mortgage Notes Holders, a security interest in, all of Pledgor's right, title
and interest in and to the Collateral as collateral security for the prompt
payment or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C.
362(a)), of all Secured Obligations.
SECTION 4. Investment of Amounts in the Mortgage Notes Proceeds
Account.
(a) Strict Compliance On Investment of Collateral. Credit balances
held by Securities Intermediary in the Collateral Accounts shall not be invested
or reinvested except as provided in this Section 4 and in the Third-Party
Account Agreement.
(b) Management by Pledgor. So long as no Potential Event of
Default or Event of Default shall have occurred and be continuing, Secured Party
shall instruct Securities Intermediary to follow, in accordance with the terms
of the Third-Party Account Agreement, any written instruction received by
Securities Intermediary from Pledgor (with a copy to Secured Party) (i) to
invest and reinvest funds held for the credit of the Collateral Accounts in
Permitted Investments for credit to the Collateral Accounts, (ii) to transfer
funds from the Collateral Accounts to the extent required for such investments,
against delivery of the related Financial Assets to Securities Intermediary for
credit to the Collateral Accounts, and (iii) to sell or redeem any Investment
against delivery of the proceeds to, or settlement to purchase an Permitted
Investment for credit of, the Collateral Accounts. Secured Party shall not
impose a Suspension Period so long as Pledgor is entitled to instruct Securities
Intermediary under this Section 4(b).
4
<PAGE>
(c) Power of Secured Party to Sell. Pledgor agrees that Secured
Party may sell or cause the sale or redemption of any Investment and instruct
Securities Intermediary to transfer the proceeds of such sale or any other
credit in the Collateral Accounts to any third party or account, in either case
(i) if such sale or redemption is necessary to permit Secured Party to perform
its duties under this Agreement, the Disbursement Agreement or the Intercreditor
Agreement, or (ii) as provided in Section 9.
SECTION 5. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Ownership of Collateral; Security Interest; Perfection and
Priority. Pledgor is (or at the time of transfer thereof to Securities
Intermediary will be) the beneficial owner of the Collateral from time to time
transferred by Pledgor for the benefit of Pledgor to Securities Intermediary, as
agent for Secured Party, free and clear of any Lien except for the security
interest created by this Agreement and the Third-Party Account Agreement. The
pledge and assignment of the Collateral pursuant to this Agreement and the
Third-Party Account Agreement creates a valid security interest in the
Collateral securing the Payment of the Secured Obligations. Assuming compliance
by Securities Intermediary with the Third-Party Account Agreement, Secured Party
will have a perfected security interest in the Collateral Accounts senior in
priority to any other security interest created by Pledgor.
(b) Governmental Authorizations. Except as may be required under
Nevada gaming laws, no authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
either (i) the grant by Pledgor of the security interest granted hereby or by
the Third-Party Account Agreement, (ii) the execution, delivery or performance
of this Agreement or the Third-Party Account Agreement by Pledgor, or (iii) the
perfection of or the exercise by Secured Party or Securities Intermediary of its
rights and remedies hereunder or under the Third-Party Account Agreement (except
as may have been taken by or at the direction of Pledgor).
(c) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party or Securities Intermediary by or on behalf
of Pledgor with respect to the Collateral is accurate and complete in all
material respects.
SECTION 6. Further Assurances. Pledgor agrees that from time to
time, at the expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or reasonably desirable, or that Secured Party may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or by the Third-Party Account Agreement or to enable Secured
Party or Securities Intermediary to exercise and enforce its rights and remedies
hereunder or under the Third-Party Account Agreement with respect to any
Collateral. Without limiting the generality of the foregoing, Pledgor shall: (a)
execute and file such financing or continuation
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statements, or amendments thereto, and such other instruments or notices, as may
be necessary or reasonably desirable, or as Secured Party may reasonably
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby or by the Third-Party Account Agreement, and (b)
at Secured Party's request, appear in and defend any action or proceeding that
may affect Pledgor's title to or Secured Party's security interest in all or any
part of the Collateral.
SECTION 7. Transfers and other Liens. Pledgor agrees that, except as
permitted in Section 4(b), it shall not (a) sell, assign (by operation of law or
otherwise), redeem or otherwise dispose of any of the Collateral or (b) create
or suffer to exist any Lien upon or with respect to any of the Collateral,
except for the security interest created under this Agreement and the
Third-Party Account Agreement.
SECTION 8. Secured Party Appointed Attorney-in-Fact; Secured Party
Performance.
(a) Secured Party Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement or the Third-Party
Account Agreement, including (a) to file one or more financing or continuation
statements, or amendments thereto, relative to all or any part of the Collateral
without the signature of Pledgor and (b) to receive, endorse and collect any
instruments or other Investments made payable to Pledgor representing any
dividend, principal or interest payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
(b) Performance by Secured Party. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 11.
SECTION 9. Remedies.
(a) Transfer or Sequestration of Collateral. If any Potential
Event of Default or Event of Default shall have occurred and be continuing,
Secured Party may instruct Securities Intermediary to (i) sell or redeem any
Investments, (ii) transfer any or all of the Collateral to any account
designated by Secured Party, including account or accounts established in
Secured Party's name (whether with Secured Party or Securities Intermediary or
otherwise), (iii) register title to any Collateral in any name specified by
Secured Party, including the name of Secured Party or any of its nominees or
agents, without reference to any interest of Pledgor, or (iv) otherwise deal
with the Collateral as directed by Secured Party.
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(b) Rights of Secured Party. If any Event of Default shall have
occurred and be continuing, Secured Party may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "UCC") (whether or not the UCC applies to the affected
Collateral), and Secured Party may also in its sole discretion sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange or broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Secured Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(c) Agreement as to Manner of Sale. Pledgor hereby agrees that
the Collateral is of a type customarily sold on recognized markets and,
accordingly, that no notice to any Person is required before any sale of any of
the Collateral pursuant to the terms of this Agreement; provided that, without
prejudice to the foregoing, Pledgor agrees that, to the extent notice of any
such sale shall be required by law, at least ten days' notice to Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.
(d) Deficiency. If the proceeds of any sale or other disposition
of the Collateral are insufficient to pay all the Secured Obligations, Pledgor
shall be liable for the deficiency and the fees of any attorneys employed by
Secured Party to collect such deficiency.
SECTION 10. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, all cash included as Collateral and all
proceeds received by Secured Party in respect of any sale or redemption of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Secured Party, be held by or for Secured Party as
Collateral for, or then, or at any other time thereafter, applied in full or in
part by Secured Party against, the Secured Obligations in the following order of
priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by
7
<PAGE>
Secured Party hereunder for the account of Pledgor, and to the payment of
all costs and expenses paid or incurred by Secured Party in connection
with the exercise of any right or remedy hereunder, all in accordance with
Section 11;
SECOND: To the payment of all of the Secured Obligations; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 11. Exculpation; Indemnity; Expenses.
(a) Exculpation. The powers conferred on Secured Party hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the exercise of reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Party shall have no duty as to
any Collateral, it being understood that Secured Party shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Collateral, whether or not Secured Party has or is deemed to have knowledge of
such matters, (b) taking any necessary steps (other than steps taken in
accordance with the standard of care set forth above to maintain possession of
the Collateral) to preserve rights against any parties with respect to any
Collateral, (c) taking any necessary steps to collect or realize upon the
Secured Obligations or any guarantee therefor, or any part thereof, or any of
the Collateral, (d) initiating any action to protect the Collateral against the
possibility of a decline in market value, (e) any loss resulting from
Investments made, held or sold pursuant to Section 4, except for a loss
resulting from Secured Party's gross negligence or wilful misconduct in
complying with Section 4, or (f) determining (i) the correctness of any
statement or calculation made by Pledgor in any written or telex (tested or
otherwise) instructions or (ii) whether any transfer to or from the Collateral
Accounts is proper. Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property of like kind. In addition to the foregoing and without
limiting the generality thereof, Secured Party shall not be responsible for any
actions or omissions of Securities Intermediary.
(b) Indemnification. Pledgor agrees to indemnify Secured Party,
the Mortgage Notes Indenture Trustee and each Mortgage Note Holder from and
against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or wilful misconduct as finally determined by a court of
competent jurisdiction.
8
<PAGE>
(c) Expenses. Pledgor shall pay to Secured Party upon demand the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
reasonably incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by Pledgor to perform or observe any of the provisions hereof.
SECTION 12. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations, (b) be binding upon Pledgor, its successors and assigns, and (c)
inure, together with the rights and remedies of Secured Party hereunder, to the
benefit of Secured Party and the Mortgage Note Holders and their respective
successors, transferees and assigns. Upon the indefeasible payment in full of
all Secured Obligations, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to Pledgor. Upon any such
termination Secured Party shall, at Pledgor's expense, execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and at
its expense, against receipt and without recourse to Secured Party, of such of
the Collateral as shall not have been sold, transferred or otherwise applied
pursuant to the terms hereof. Secured Party may terminate the Mortgage Note
Proceeds Account on full disbursement of the Mortgage Notes Proceeds pursuant to
the Disbursement Agreement.
SECTION 13. Secured Party as Disbursement Agent.
(a) Agency. Secured Party has been appointed to act as Secured
Party hereunder by Lenders pursuant to the Disbursement Agreement. Secured Party
shall be obligated, and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including, without limitation, the release or
substitution of Collateral), solely in accordance with this Agreement, the
Disbursement Agreement and the Intercreditor Agreement.
(b) Identity of Agent. Secured Party shall at all times be the
same Person that is Disbursement Agent under the Disbursement Agreement. Written
notice of resignation by Disbursement Agent pursuant to subsection 9.7 of the
Disbursement Agreement shall also constitute notice of resignation as Secured
Party under this Agreement; removal of Disbursement Agent pursuant to subsection
9.7 of the Disbursement Agreement shall also constitute removal as Secured Party
under this Agreement; and substitution of a successor disbursement agent
pursuant to subsection 9.7 of the Disbursement Agreement shall also constitute
substitution of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Disbursement Agent under subsection 9.7 of the
Disbursement Agreement by a successor Disbursement Agent, that successor
Disbursement Agent shall thereupon succeed to and
9
<PAGE>
become vested with all the rights, powers, privileges and duties of the retiring
or removed Secured Party under this Agreement, and the retiring or removed
Secured Party under this Agreement shall promptly (i) transfer to such successor
Secured Party all items of Collateral held by Secured Party together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Disbursement Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 14. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 15. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to the address of the party
as set forth under such party's name on the signature pages hereof. All notices
or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person,
(b) if sent by reputable overnight delivery service, (c) in the event overnight
delivery services are not readily available, if mailed by first class mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telex, or by telecopy with correct answer back received. Notice
so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next following Business Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Business Day;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. Any party shall have the right to change its address for
notice hereunder to any other location by giving of no less than twenty (20)
days' notice to the other parties in the manner set forth hereinabove.
SECTION 16. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any
10
<PAGE>
other power, right or privilege. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
SECTION 17. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 18. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 19. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE UCC PROVIDES THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
SECTION 20. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Pledgor at
its address as provided in Section 15, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
in any such court and to be otherwise effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 21. Waiver of Jury Trial. PLEDGOR AND SECURED PARTY HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE THIRD-PARTY ACCOUNT
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any
11
<PAGE>
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. Pledgor and Secured Party each acknowledge that this
waiver is a material inducement for Pledgor and Secured Party to enter into a
business relationship, that Pledgor and Secured Party have already relied on
this waiver in entering into this Agreement and that each will continue to rely
on this waiver in their related future dealings. Pledgor and Secured Party
further warrant and represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR THE THIRD-PARTY ACCOUNT AGREEMENT. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
SECTION 22. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
12
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
PLEDGOR:
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
By: LAS VEGAS SANDS, INC., its managing member
By: /s/ William P. Weidner
-----------------------
Name: William P. Weidner
Title: President
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
S-1
<PAGE>
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a Canadian
chartered bank, as Disbursement Agent under
the Disbursement Agreement
By: /s/ Alan W. Pendergast
-------------------
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S-2
<PAGE>
ANNEX A
[FORM OF MORTGAGE NOTES PROCEEDS THIRD-PARTY ACCOUNT AGREEMENT]
This MORTGAGE NOTES PROCEEDS THIRD-PARTY ACCOUNT AGREEMENT (this
"Agreement") is dated as of November 14, 1997 and entered into by and among LAS
VEGAS SANDS, INC., A Nevada corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a
Nevada limited liability company ("VCR", and jointly and severally with LVSI,
"Pledgor"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank, as Disbursement
Agent under the Disbursement Agreement (in such capacity herein called "Secured
Party") and GOLDMAN, SACHS & CO., a Broker-Dealer ("Securities Intermediary").
PRELIMINARY STATEMENTS
A. The Project. LVSI, VCR and Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company ("GCCLLC"), propose to develop, construct and
operate the Venetian Casino Resort, a large scale Venetian-themed hotel, casino,
retail, meeting and entertainment complex, with related heating, ventilation and
air conditioning and power station facilities, as part of the redevelopment of
the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank Agent
and the Bank Lenders have entered into the Bank Credit Agreement pursuant to
which the Bank Lenders have agreed, subject to the terms thereof, to provide
certain loans to LVSI and VCR, jointly and severally, in an aggregate amount and
for purposes specified therein.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR,
GCCLLC, and the Interim Mall Lender have entered into the Interim Mall Credit
Agreement pursuant to which the Interim Mall Lender has agreed to provide loans
to LVSI, VCR and GCCLLC, jointly and severally, in an aggregate amount and for
purposes specified therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Mortgage Notes Indenture Trustee have entered
into the Mortgage Notes Indenture pursuant to which LVSI and VCR will issue
Mortgage Notes in an aggregate principal amount and for purposes specified
therein.
E. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Subordinated Notes Indenture Trustee, have
entered into the Subordinated Notes Indenture pursuant to which LVSI and VCR
will issue Subordinated Notes in an aggregate principal amount and for purposes
specified therein.
F. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, Pledgor, GCCLLC, the Bank Agent (acting on behalf of itself and the
Bank Lenders),
ANNEX A-1
<PAGE>
the Interim Mall Lender, the Mortgage Notes Indenture Trustee (acting on behalf
of itself and the Mortgage Note Holders), the HVAC Provider and The Bank of Nova
Scotia as "Disbursement Agent" have entered into that certain Funding Agents'
Disbursement and Administration Agreement ("Disbursement Agreement") for the
purpose of setting forth, among other things, (a) the mechanics for and
allocation of the Company's requests for Advances under the Facilities and from
the Company's Funds Account, (b) the conditions precedent to the initial Advance
and conditions precedent to subsequent Advances, (c) certain common
representations, warranties and covenants of the Company in favor of the Funding
Agents, (d) the establishment of the Collateral Accounts, (e) the pledge and
management of the Collateral Accounts, and (f) the common events of default and
remedies.
G. Condition. It is a condition precedent to the purchase of the Mortgage
Notes by the Mortgage Note Holders that Pledgor shall have established the
Mortgage Note Proceeds Account, granted control to the Disbursement Agent (as
Secured Party) of such account, and undertaken the obligations contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Mortgage Note Holders to purchase the Mortgage Notes under the
Mortgage Notes Indenture and for other good consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor, Securities Intermediary and
Secured Party hereby agree as follows:
SECTION 1. Definitions.
(a) Specific Definitions. The following terms used in this
Agreement shall have the following meanings:
"Broker-Dealer" means a person registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or Nevada or
is a day on which banking institutions located in such states are authorized or
required by law or other governmental action to close, or a day on which the New
York Stock Exchange is closed.
"Code" shall mean the Uniform Commercial Code as in effect in New
York.
"Collateral" means (i) the Mortgage Notes Proceeds Account, (ii) all
amounts held from time to time in the Mortgage Notes Proceeds Account, (iii) all
Investments, including all Financial Assets, security entitlements, securities
(whether certificated or uncertificated), instruments, accounts, general
intangibles and deposits representing or evidencing any Investments, (iv) all
interest, dividends, cash, instruments, securities and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Collateral, and (v) to the extent not covered by
clauses (i) through (iv) above, all proceeds of any or all of the foregoing
Collateral.
"Collateral Accounts" means the Mortgage Notes Proceeds Account and
any
ANNEX A-2
<PAGE>
other accounts in which Investments may be held or registered.
"Investments" means any Financial Assets credited to the Mortgage
Notes Proceeds Account, and any other property acquired by Securities
Intermediary as securities intermediary hereunder in exchange for, with proceeds
from or distributions on, or otherwise in respect of any Investments.
"Mortgage Notes Proceeds Account" means the restricted securities
account established and maintained with Securities Intermediary pursuant to
Section 2(a).
"Overnight Investments" means Investments of the kind described in
subdivision (a)(v), (b) or (c) of the definition of "Permitted Investments."
"Permitted Investments" means (a) (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 any Rating
Agency 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-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 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
thereof) at least "A" or "A2" or the equivalent by any Rating Agency and
short-term debt rated at least
ANNEX A-3
<PAGE>
"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 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 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 (which demand shall only be made at
the direction of the Pledgor) after 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; (b)
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; (c)
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 (d) 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, in each case having rating of at least "A" or "A2" or the equivalent by
any Rating Agency.
"Suspension Period" means the period (i) beginning promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Prohibition Notice attached to this Agreement
as Attachment 1, suspending Pledgor's right to direct the investment of funds
held for the credit of the Collateral Accounts, and (ii) ending promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Rescission of Prohibition Notice attached to
this Agreement as Attachment 2, rescinding the preceding Prohibition Notice.
ANNEX A-4
<PAGE>
(b) General Provisions. Capitalized terms used but not defined
herein shall have the meaning given to such terms in Exhibit A. Unless otherwise
defined herein or in Exhibit A, terms used in Articles 8 and 9 of the Code are
used herein as therein defined. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate. When a reference is made in this
Agreement to an Appendix, Exhibit, Introduction, Recital, Section or Schedule,
such reference shall be to an Appendix, an Exhibit, the Introduction, a Recital
or a Section of, or a Schedule to, this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 2. Establishment and Operation of Mortgage Notes Proceeds
Account.
(a) Establishment of Mortgage Notes Proceeds Account. Pledgor and
Secured Party hereby authorize and direct Securities Intermediary to establish
and maintain at its office at 85 Broad Street, New York, New York 10022, a
securities account in the name of Secured Party and under the sole dominion and
control of Secured Party, designated as "Bank of Nova Scotia Mortgage Notes
Proceeds Account." Securities Intermediary hereby undertakes to treat Secured
Party as the person entitled to exercise the rights that comprise any Financial
Asset credited to the Mortgage Notes Proceeds Account. Secured Party and Pledgor
agree that this account shall be the "Mortgage Notes Proceeds Account."
(b) Operations of the Mortgage Notes Proceeds Account. The
Mortgage Notes Proceeds Account shall be operated, and all Investments shall be
acquired and registered or held (as applicable), in accordance with the terms of
this Agreement.
(c) Account Statements. Securities Intermediary shall send Secured
Party and Pledgor written account statements with respect to the Mortgage Notes
Proceeds Account not less frequently than monthly. Reports or confirmation of
the execution of orders and statements of account shall be conclusive if not
objected to in writing within 30 days after delivery pursuant to Section 12.
ANNEX A-5
<PAGE>
SECTION 3. Mechanics of Deposits of Funds to the Mortgage Notes
Proceeds Account.
(a) Transfers to the Mortgage Notes Proceeds Account. All
transfers of funds to the Mortgage Notes Proceeds Account shall be made by wire
transfer (or, if applicable, intra-bank transfer) of immediately available funds
addressed as follows:
The Chase Manhattan Bank, New York, New York
ABA No.: 021-0000-21
Reference: A/C Goldman, Sachs & Co.
A/C# 930-1-011483
FFC A/C: BANK OF NOVA SCOTIA MORTGAGE NOTES
PROCEEDS ACCOUNT (VCR)
A/C#: 010-20498-0
ANNEX A-6
<PAGE>
(b) Notice of Transfers. In the event of any transfer of funds to
the Mortgage Notes Proceeds Account pursuant to any provision of Section 3,
Pledgor, Secured Party, as the case may be, shall promptly after initiating or
sending out written instructions with respect to such transfer, give notice to
the other such party by facsimile of the date and amount of such transfer.
SECTION 4. Permitted Investments and Transfers of Amounts in the
Mortgage Notes Proceeds Account.
(a) Strict Compliance. Credit balances held by Securities
Intermediary in the Collateral Accounts shall not be (i) invested or reinvested,
(ii) sold or redeemed, or (iii) transferred from the Collateral Accounts, in
either case except as provided in this Section 4.
(b) Pledgor's Right to Direct Investment. Except during any
Suspension Period, Securities Intermediary shall, in accordance with Pledgor's
written Entitlement Orders given to Securities Intermediary from time to time,
sell or redeem Investments, and apply amounts transferred to or held for the
credit of the Mortgage Notes Proceeds Account to make investments for credit to
the Mortgage Notes Proceeds Account, in Securities Intermediary's name and as
custodian under this Agreement, in Permitted Investments denominated and payable
in United States dollars. During any Suspension Period, (i) Pledgor's right to
direct such investments under this Section 4(b) shall be suspended, and
Securities Intermediary shall not accept Entitlement Orders with respect to the
Mortgage Notes Proceeds Account from any person other than Secured Party; and
(ii) any credit balances shall be invested and reinvested only as provided in
Section 4(c).
(c) Overnight Investments. To the extent that, as of 12:00 noon,
New York time on any Business Day, there are credit balances expected to remain
after settlement of all pending transactions in any of the Collateral Accounts,
unless otherwise instructed by Secured Party, Securities Intermediary shall
apply the expected credit balances to acquire Overnight Investments. Any
Overnight Investments shall be held for the credit of the Collateral Accounts
from which the proceeds for acquisition was derived. If for any reason
Securities Intermediary fails to invest credit balances in Overnight Investments
as provided in this Section, Securities Intermediary shall credit the Mortgage
Notes Proceeds Account with daily interest on the uninvested free credit balance
in accordance with its usual practice.
ANNEX A-7
<PAGE>
(d) Actions of Securities Intermediary on Purchase of Investments.
Promptly upon the purchase, acquisition or transfer for credit of the Collateral
Accounts of any Investment, Securities Intermediary shall take all steps that it
customarily takes in the ordinary course of its business to ensure that such
Investment is credited on its books to the Collateral Accounts. Without limiting
the generality of the foregoing, Securities Intermediary shall promptly (i) send
to Pledgor and Secured Party a written confirmation of the acquisition of such
Investment, and (ii) indicate by book entry in its records that such Investment
has been credited to, and is held for the credit of, the Mortgage Notes Proceeds
Account. Securities Intermediary agrees with Pledgor and Secured Party that any
credit balances or property credited to, or held for the credit of, the
Collateral Accounts shall be treated as "Financial Assets" as that term is
defined in Section 8-103(a)(9)(iii) of the Code.
(e) Control Agreement. Anything contained herein to the contrary
notwithstanding, Securities Intermediary shall, if and as directed in writing by
Secured Party, without the consent of Pledgor, (i) comply with Entitlement
Orders originated by Secured Party with respect to the Collateral Accounts and
any Security Entitlements therein, (ii) transfer, sell or redeem any of the
Collateral, (iii) transfer any or all of the Collateral to any account or
accounts designated by Secured Party, including an account established in
Secured Party's name (whether at Secured Party or Securities Intermediary or
otherwise), (iv) register title to any Collateral in any name specified by
Secured Party consistent with the policies or practices of the applicable
depository, including the name of Secured Party or any of its nominees or
agents, without reference to any interest of Pledgor, or (v) otherwise deal with
the Collateral as directed by Secured Party. Nothing contained in this paragraph
shall constitute a waiver of by Pledgor of any rights or remedies it may have
against Secured Party under this Agreement or any other agreement.
(f) Deposit of Proceeds. Any interest, cash dividends or other
cash distributions received in respect of any Investments and the net proceeds
of any sale or payment of any Investments shall be promptly credited to, and
held for the credit of, the Mortgage Notes Proceeds Account. Any distribution of
property other than cash in respect of any Investment shall be credited to, and
held for the credit of, the Mortgage Notes Proceeds Account.
SECTION 5. Acknowledgement of Security Interest in Favor of Secured
Party; Covenant Against Creation of other Interests.
(a) Acknowledgement of Security Interest. Securities Intermediary
acknowledges the security interest granted by Pledgor in favor of Secured Party
in the Collateral.
(b) Acknowledgement of Securities Intermediary's Role. Securities
Intermediary hereby further acknowledges that it holds the Collateral Accounts,
and all Security Entitlements therein, as custodian for, for the benefit of, and
subject to the control of, Secured Party. Securities Intermediary shall, by book
entry or otherwise, indicate that the Collateral Accounts, and all Security
Entitlements registered to or held therein, are subject to the control of
Secured Party as provided in Section 4(e).
ANNEX A-8
<PAGE>
(c) Securities Intermediary Has No Notice of Adverse Claims.
Securities Intermediary represents and warrants that (i) it has no notice of any
Adverse Claim against any of the Collateral other than the claim of Secured
Party under this Agreement; and (ii) it is not party to any agreement other than
this Agreement that governs its rights or duties, or limits or conflicts with
the rights of Secured Party, including the exclusive right of Secured Party to
control as provided in Section 4(e), with respect to the Collateral Accounts.
(d) Securities Intermediary Shall Not Acknowledge Other Claims.
Securities Intermediary agrees that, except as expressly provided in this
Agreement (including Section 6(d)) or with the written consent of Secured Party,
it shall not agree to or acknowledge (i) any right by any Person other than
Secured Party to originate Entitlement Orders or control with respect to the
Collateral Accounts; or (ii) any limitation on the right of Secured Party to
originate Entitlement Orders with respect to or direct the transfer of any
Investments or cash credited to the Collateral Accounts.
SECTION 6. Securities Intermediary Maintenance of the Collateral
Accounts.
(a) Transactions Shall Comply With Rules. The parties acknowledge
that all transactions in Financial Assets under this Agreement shall be in
accordance with the rules and customs of the exchange, market or clearing
organization, if any, in which the transactions are executed or settled and in
conformity with applicable law and regulations of governmental authorities and
future amendments or supplements thereto.
(b) Fees and Charges of Securities Intermediary. Pledgor shall
promptly pay Securities Intermediary, in accordance with Securities
Intermediary's usual schedule of charges or any written agreement between
Securities Intermediary and Pledgor, any fees or charges reasonably imposed by
Securities Intermediary with respect to the establishment, maintenance or
transactions in or affecting the Collateral Accounts.
(c) Securities Intermediary Shall Not Permit Leverage of
Investments. Securities Intermediary shall not execute any transaction to
acquire Financial Assets under Section 4(b) unless (A) there are sufficient
funds in the Collateral Accounts to settle such transactions or (B) it is
reasonably anticipated that such funds may be generated through the liquidation
of Financial Assets then in the Collateral Accounts, or to sell or redeem any
Financial Asset which is not held, or reasonably expected to be acquired in
pending transactions, for the credit of the Mortgage Notes Proceeds Account.
Notwithstanding the foregoing sentence, in the event that Securities
Intermediary executes a transaction without adequate funds to settle the
transaction, Pledgor shall be liable to Securities Intermediary for any
deficiency and shall promptly reimburse Securities Intermediary for any loss or
expense incurred thereby, including losses sustained by reason of Securities
Intermediary's inability to borrow any securities or other property sold for the
Collateral Accounts. Pledgor agrees to pay interest charges which may be imposed
by Securities Intermediary in accordance with its usual custom, with respect to
late payments for securities or Financial Assets purchased for the Collateral
Accounts and prepayments in the Collateral Accounts (i.e., the crediting of the
proceeds of sale before the settlement date or receipt by Securities
Intermediary of the items
ANNEX A-9
<PAGE>
sold in good deliverable form). Pledgor agrees to pay promptly any amount which
may become due in order to satisfy demands for additional margin or marks to
market with respect to any security purchased or sold on instruction from
Pledgor.
(d) Risk of Investments and Transactions. It is not the intention
of the parties that Securities Intermediary should bear any investment risk
associated with Permitted Investments or Overnight Investments acquired for the
credit of the Collateral Accounts in accordance with Section 4. Any losses or
gains realized on such Investments shall be charged or credited to the
Collateral Accounts, as appropriate. On committing to a transaction for the
credit of the Collateral Accounts pursuant to an instruction permitted in
accordance with Section 4, Securities Intermediary may, (i) pending settlement,
block (A) the Investments to be sold or (B) credit balances sufficient to settle
any acquisition, or investments the liquidation of which will yield funds
sufficient to settle any acquisition and, (ii) at the time of settlement,
deliver such Investments or funds in accordance with the rules, custom or
practice of the particular market.
(e) Use of Intermediaries and Nominees. Securities Intermediary is
authorized, subject to Secured Party's written instructions, to register any
Financial Assets acquired by Securities Intermediary pursuant to this Agreement
in the name of Securities Intermediary or in the name of its nominee, or to
cause such securities to be registered in the name of a Federal reserve bank or
a recognized securities intermediary or clearing corporation, or any nominee
thereof. Securities Intermediary may at any time and from time to time appoint,
and may at any time remove, any bank, trust company, clearing corporation, or
Broker-Dealer as its agent to carry out such of the provisions of this
Agreement. The appointment or use of any intermediary, or the appointment of any
such agent, shall not relieve Securities Intermediary of any responsibility or
liability under this Agreement.
(f) Corporate Actions. Except as otherwise set forth herein,
Pledgor and Secured Party agree that Securities Intermediary shall have no
responsibility for ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters relating to any
Financial Assets credited to or held for the credit of the Collateral Accounts
(except based on written instructions originated by Pledgor or Secured Party),
or for informing Pledgor or Secured Party with respect thereto, whether or not
Securities Intermediary has, or is deemed to have, knowledge of any of the
aforesaid. Securities Intermediary is authorized to withdraw securities sold or
otherwise disposed of, and to credit the Mortgage Notes Proceeds Account's
account with the proceeds thereof or make such other disposition thereof as may
be directed in accordance with this Agreement. Securities Intermediary is
further authorized to collect all income and other payments which may become due
on Financial Assets credited to the Collateral Accounts, to surrender for
payment maturing obligations and those called for redemption and to exchange
certificates in temporary form for like certificates in definitive form, or, if
the par value of any shares is changed, to effect the exchange for new
certificates. It is understood and agreed by Pledgor and Secured Party that,
although Securities Intermediary will use reasonable efforts to effect the
transactions set forth in the preceding sentence, Securities Intermediary shall
incur no liability for its failure to effect the same unless its failure is the
result of wilful misconduct.
(g) Disclosure of Account Relationships. Pledgor and Secured Party
ANNEX A-10
<PAGE>
acknowledge that Securities Intermediary may be required to disclose to
securities issuers the name, address and securities positions with respect to
Financial Assets credited to the Collateral Accounts, and hereby consent to such
disclosures.
(h) Forwarding of Documents. Securities Intermediary shall forward
to Pledgor and, if requested, Secured Party, or notify Pledgor and, if
requested, Secured Party by telephone of, all written communications received by
Securities Intermediary as owner of any Financial Assets credited to the
Collateral Accounts and which are intended to be transmitted to the beneficial
owner thereof.
(i) Direction of Secured Party Controls in Disputes. Pledgor,
Securities Intermediary and Secured Party hereby agree that in the event any
dispute arises with respect to the payment, ownership or right to possession of
the Collateral Accounts or any other Collateral credited to or held therein,
Securities Intermediary shall take such actions and shall refrain from taking
such actions with respect thereto as may be directed by Secured Party.
(j) No Setoff, etc. Securities Intermediary shall not exercise on
its own behalf any claim, right of set-off, banker's lien, clearing lien,
counterclaim or similar right against any of the Collateral; provided that
Securities Intermediary may deduct, from any credit balances, any usual and
ordinary transaction and administration fees payable in connection with the
administration and operation of the Collateral Accounts. Except for claims for
deductions permitted in the preceding sentence, Securities Intermediary agrees
that any security interest it may have in the Collateral Accounts or any
security entitlement carried therein shall be subordinate and junior to the
interest of Secured Party.
(k) Only Agreement. This Agreement shall govern the actions,
rights and obligations of Securities Intermediary, and shall determine the
governing law, with respect to the Collateral Accounts and the Collateral
notwithstanding any term or condition in any agreement other than this Agreement
as it may be amended, supplemented or otherwise modified in writing.
(l) Care of Financial Assets. Securities Intermediary shall
maintain possession or control of all Financial Assets credited to the
Collateral Accounts by segregating such Financial Assets from its proprietary
assets and keeping them free of any lien, charge or claim of any third party
granted or created by Securities Intermediary. Securities Intermediary shall
take such other steps to ensure that Financial Assets credited to the Collateral
Accounts are identified as being held for customers of Securities Intermediary
as may required under applicable law or in accordance with custom and practice
in the industry.
(m) Further Actions. Securities Intermediary shall take such
further actions as Secured Party shall reasonably request as being necessary or
desirable to maintain or achieve perfection or priority of Secured Party's
security interest with respect to the Collateral and to permit Secured Party to
exercise its rights with respect to the Collateral.
SECTION 7. Limitations on Duties, and Exculpation and
Indemnification, of Securities Intermediary.
ANNEX A-11
<PAGE>
(a) Limitation on Duty of Care; Exculpation. Securities
Intermediary's duties hereunder are only those specifically provided herein, and
Securities Intermediary shall incur no liability whatsoever for any actions or
omissions hereunder except for any such liability arising out of or in
connection with Securities Intermediary's gross negligence or wilful misconduct.
Securities Intermediary has no obligation to ensure the sufficiency of this
Agreement or the arrangements described hereunder to satisfy any objectives of
Secured Party or Pledgor. Securities Intermediary shall have no duty to
supervise or to provide investment counseling or advice to Pledgor or Secured
Party with respect to the purchase, sale, retention or other disposition of any
Financial Assets held hereunder. Except as specifically otherwise provided in
this Agreement, Securities Intermediary shall not be responsible for enforcing
compliance by the other parties to this Agreement with their respective duties
and obligations to each other under this or any other Agreement.
(b) Consultation with Counsel. Securities Intermediary may consult
with, and obtain advice from, legal counsel as to the construction of any of the
provisions of this Agreement, and shall incur no liability in acting in good
faith in accordance with the reasonable advice and opinion of such counsel.
(c) Reasonable Reliance. Securities Intermediary shall be fully
protected and shall suffer no liability in acting in accordance with any written
instructions reasonably believed by it to have been given (i) by Secured Party
with respect to any aspect of the operation of the Collateral Accounts
(including any such instructions relating to any investment or transfer of any
amounts held therein), (ii) by Pledgor, to the extent provided in Section 4(b),
with respect to the Collateral Accounts, or (iii) by Secured Party originally
named herein until such time as Securities Intermediary receives notice of the
substitution of Secured Party pursuant to Section 11.
(d) Indemnification. Pledgor agrees to indemnify Securities
Intermediary from and against any and all claims, losses, liabilities and
expenses (including reasonable attorneys' fees and expenses) in any way relating
to, growing out of or resulting from this Agreement or the performance of its
obligations hereunder, except to the extent arising out of or in connection with
Securities Intermediary's gross negligence or wilful misconduct.
SECTION 8. Representations and Warranties By Securities
Intermediary. Securities Intermediary hereby represents and warrants to Pledgor
and Secured Party as follows:
(a) Corporate Power. Securities Intermediary has all necessary
corporate power and authority to enter into and perform this Agreement.
(b) Execution Authorized. The execution, delivery and performance
of this Agreement by Securities Intermediary have been duly authorized by all
necessary corporate action on the part of Securities Intermediary.
(c) Securities Intermediary. Securities Intermediary is a
"securities intermediary" (as that term is defined in Section 8-102(a)(14) of
the Code) and is acting in such
ANNEX A-12
<PAGE>
capacity with respect to the Collateral Accounts. Securities Intermediary is not
a "clearing corporation" (as that term is defined in Section 8-102(a)(5) of the
Code).
SECTION 9. Termination. This Agreement shall terminate, and all
rights to the Collateral Accounts and all other Collateral registered to or held
therein shall revert to Pledgor, upon Securities Intermediary's receipt of
written notice, signed by an authorized officer of Secured Party, that the
Mortgage Notes Proceeds Collateral Account Agreement has terminated.
SECTION 10. Resignation and Removal of Securities Intermediary.
(a) Removal. Securities Intermediary may be removed at any time by
written notice given by Secured Party to Securities Intermediary and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing.
(b) Resignation. Securities Intermediary may resign at any time by
giving not less than thirty days' written notice to Secured Party and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing. If an instrument of acceptance by a successor
Securities Intermediary shall not have been delivered to the resigning
Securities Intermediary within sixty days after the giving of any such notice of
resignation, the resigning Securities Intermediary may, at the expense of
Pledgor, petition any court of competent jurisdiction for the appointment of a
successor Securities Intermediary.
(c) Successor Securities Intermediary. Any successor Securities
Intermediary shall be a bank or trust company, having capital and surplus of at
least $100 million, located in the State of New York.
(d) Process of Succession. Upon the appointment of a successor
Securities Intermediary and its acceptance of such appointment, the resigning or
removed Securities Intermediary shall transfer all items of Collateral held by
it to such successor (which items of Collateral shall be transferred to a new
Mortgage Notes Proceeds Account established and maintained by such successor).
Following such appointment all references herein to Securities Intermediary
shall be deemed a reference to such successor; provided that the provisions of
Section 7 hereof shall continue to inure to the benefit of the resigning or
removed Securities Intermediary with respect to any actions taken or omitted to
be taken by it under this Agreement while it was Securities Intermediary
hereunder.
SECTION 11. Secured Party as Disbursement Agent. Secured Party has
been appointed to act as Secured Party hereunder by Lenders pursuant to the
Disbursement Agreement. Secured Party shall at all times be the same Person that
is Disbursement Agent under the Disbursement Agreement. Written notice of
resignation by Disbursement Agent pursuant to subsection 9.7 of the Disbursement
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; removal of Disbursement Agent pursuant to subsection 9.7 of the
Disbursement Agreement shall also constitute removal as Secured Party
ANNEX A-13
<PAGE>
under this Agreement; and substitution of a successor disbursement agent
pursuant to subsection 9.7 of the Disbursement Agreement shall also constitute
substitution of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Disbursement Agent under subsection 9.7 of the
Disbursement Agreement by a successor Disbursement Agent, that successor
Disbursement Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Secured Party
under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all items
of Collateral held by Secured Party, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Secured Party under this Agreement, and (ii) execute and
deliver to such successor Secured Party such documents and take such other
actions, as may be necessary or appropriate in connection with the assignment to
such successor Secured Party of the security interests created hereunder,
whereupon such retiring or removed Secured Party shall be discharged from its
duties and obligations under this Agreement.
SECTION 12. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to the address of the party
as set forth under such party's name on the signature pages hereof. All notices
or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person,
(b) if sent by reputable overnight delivery service, (c) in the event overnight
delivery services are not readily available, if mailed by first class mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telex, or by telecopy with correct answer back received. Notice
so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next following Business Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Business Day;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. Any party shall have the right to change its address for
notice hereunder to any other location by giving of no less than twenty (20)
days' notice to the other parties in the manner set forth hereinabove.
SECTION 13. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by any party herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
other parties, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
SECTION 14. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 15. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this
ANNEX A-14
<PAGE>
Agreement for any other purpose or be given any substantive effect.
SECTION 16. Governing Law. THIS AGREEMENT 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. Securities
Intermediary's Jurisdiction shall be New York.
SECTION 17. Waiver of Jury Trial. PLEDGOR, SECURED PARTY AND
SECURITIES INTERMEDIARY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims. Pledgor, Secured
Party and Securities Intermediary each acknowledge that this waiver is a
material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor, Secured Party and Securities Intermediary have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor,
Secured Party and Securities Intermediary further warrant and represent that
each has reviewed this waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 18. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
ANNEX A-15
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
PLEDGOR:
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: __________________________________
Name:
Title:
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
By: LAS VEGAS SANDS, INC., its managing member
By:______________________________
Name:
Title:
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
ANNEX A-S-1
<PAGE>
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
a Delaware limited liability company
By: VENETIAN CASINO RESORT, LLC, its sole
member
By: LAS VEGAS SANDS, INC., its managing
member
By:______________________________
Name:
Title:
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a Canadian chartered
bank, as Disbursement Agent under the Disbursement
Agreement
By: __________________________________
Alan Pendergast
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
ANNEX A-S-2
<PAGE>
SECURITIES INTERMEDIARY:
GOLDMAN, SACHS & CO., as Securities Intermediary
By: __________________________________
Title:
Notice Address: Goldman, Sachs & Co.
Oliver Street Tower
125 High Street, Suite 1700
Boston MA 02110-2704
Attention: Peter W. Grieve
Telephone: (800) 343-9120
Facsimile Number: (617) 204-2392
With a copy to: Goldman, Sachs & Co.
85 Broad Street
New York, NY 10022
Attention: Lisa Laura Mays
Facsimile Number: (212) 902-3737
ANNEX A-S-3
<PAGE>
ATTACHMENT 1
[FORM OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
---------------------
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-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Prohibition Notice under that Certain Mortgage Notes Proceeds Third-
Party Account Agreement/Bank of Nova Scotia Mortgage Notes
Proceeds Account Number 010-20498-0 ________________________________
Ladies and Gentlemen:
Pursuant to the Mortgage Notes Proceeds Third-Party Account Agreement dated
November 14, 1997 ("Third-Party Account Agreement") among The Bank of Nova
Scotia, as Secured Party, certain Pledgors and Securities Intermediary, we
hereby give you this Prohibition Notice and notify you of the commencement of a
Suspension Period. Until further notice from the undersigned substantially in
the form of Attachment 2 to the Third-Party Account Agreement, [Securities
Intermediary] shall not accept or follow instructions from Pledgor pursuant to
Section 4(b) of the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ANNEX A/ATTACHMENT 1-1
<PAGE>
ATTACHMENT 2
[FORM OF RESCISSION OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
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-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Rescission of Prohibition Notice under that Certain Mortgage Notes
Proceeds Third-Party Account Agreement/Bank of Nova Scotia Mortgage
Notes Proceeds Account Number 010-20498-0 _________________________
Ladies and Gentlemen:
Pursuant to the Mortgage Notes Proceeds Third-Party Account Agreement dated
November 14, 1997 ("Third-Party Account Agreement") among The Bank of Nova
Scotia, as Secured Party, certain Pledgors and Securities Intermediary, we
hereby notify you of the rescission by [Secured Party] of the Prohibition Notice
dated [date of Prohibition Notice] and the end of the related Suspension Period.
You are hereby instructed that, until receipt of a new Prohibition Notice, you
shall accept and follow written instructions from Pledgor pursuant to Section
4(b) of the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ANNEX A/ATTACHMENT 2-1
MORTGAGE NOTES PROCEEDS THIRD-PARTY ACCOUNT AGREEMENT
This MORTGAGE NOTES PROCEEDS THIRD-PARTY ACCOUNT AGREEMENT (this
"Agreement") is dated as of November 14, 1997 and entered into by and among LAS
VEGAS SANDS, INC., A Nevada corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a
Nevada limited liability company ("VCR", and jointly and severally with LVSI,
"Pledgor"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank through its New
York agency, as Disbursement Agent under the Disbursement Agreement (in such
capacity herein called "Secured Party") and GOLDMAN, SACHS & CO., a
Broker-Dealer ("Securities Intermediary").
PRELIMINARY STATEMENTS
A. The Project. LVSI, VCR and Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company ("GCCLLC"), propose to develop, construct and
operate the Venetian Casino Resort, a large scale Venetian-themed hotel, casino,
retail, meeting and entertainment complex, with related heating, ventilation and
air conditioning and power station facilities, as part of the redevelopment of
the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank Agent
and the Bank Lenders have entered into the Bank Credit Agreement pursuant to
which the Bank Lenders have agreed, subject to the terms thereof, to provide
certain loans to LVSI and VCR, jointly and severally, in an aggregate amount and
for purposes specified therein.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR,
GCCLLC, and the Interim Mall Lender have entered into the Interim Mall Credit
Agreement pursuant to which the Interim Mall Lender has agreed to provide loans
to LVSI, VCR and GCCLLC, jointly and severally, in an aggregate amount and for
purposes specified therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Mortgage Notes Indenture Trustee have entered
into the Mortgage Notes Indenture pursuant to which LVSI and VCR will issue
Mortgage Notes in an aggregate principal amount and for purposes specified
therein.
E. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Subordinated Notes Indenture Trustee, have
entered into the Subordinated Notes Indenture pursuant to which LVSI and VCR
will issue Subordinated Notes in an aggregate principal amount and for purposes
specified therein.
F. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, Pledgor, GCCLLC, the Bank Agent (acting on behalf of itself and the
Bank Lenders), the Interim Mall Lender, the Mortgage Notes Indenture Trustee
(acting on behalf of itself and the Mortgage Note Holders), the HVAC Provider
and The Bank of Nova Scotia, New York Agency, as "Disbursement Agent" have
entered into that certain Funding Agents' Disbursement and Administration
Agreement ("Disbursement Agreement") for the purpose of setting forth, among
other things, (a) the mechanics for and allocation of the
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Company's requests for Advances under the Facilities and from the Company's
Funds Account, (b) the conditions precedent to the initial Advance and
conditions precedent to subsequent Advances, (c) certain common representations,
warranties and covenants of the Company in favor of the Funding Agents, (d) the
establishment of the Collateral Accounts, (e) the pledge and management of the
Collateral Accounts, and (f) the common events of default and remedies.
G. Condition. It is a condition precedent to the purchase of the Mortgage
Notes by the Mortgage Note Holders that Pledgor shall have established the
Mortgage Note Proceeds Account, granted control to the Disbursement Agent (as
Secured Party) of such account, and undertaken the obligations contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Mortgage Note Holders to purchase the Mortgage Notes under the
Mortgage Notes Indenture and for other good consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor, Securities Intermediary and
Secured Party hereby agree as follows:
SECTION 1. Definitions.
(a) Specific Definitions. The following terms used in this
Agreement shall have the following meanings:
"Broker-Dealer" means a person registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or Nevada or
is a day on which banking institutions located in such states are authorized or
required by law or other governmental action to close, or a day on which the New
York Stock Exchange is closed.
"Code" shall mean the Uniform Commercial Code as in effect in New
York.
"Collateral" means (i) the Mortgage Notes Proceeds Account, (ii) all
amounts held from time to time in the Mortgage Notes Proceeds Account, (iii) all
Investments, including all Financial Assets, security entitlements, securities
(whether certificated or uncertificated), instruments, accounts, general
intangibles and deposits representing or evidencing any Investments, (iv) all
interest, dividends, cash, instruments, securities and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Collateral, and (v) to the extent not covered by
clauses (i) through (iv) above, all proceeds of any or all of the foregoing
Collateral.
"Collateral Accounts" means the Mortgage Notes Proceeds Account and
any other accounts in which Investments may be held or registered.
"Investments" means any Financial Assets credited to the Mortgage
Notes Proceeds Account, and any other property acquired by Securities
Intermediary as securities
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intermediary hereunder in exchange for, with proceeds from or distributions on,
or otherwise in respect of any Investments.
"Mortgage Notes Proceeds Account" means the restricted securities
account established and maintained with Securities Intermediary pursuant to
Section 2(a).
"Overnight Investments" means Investments of the kind described in
subdivision (a)(v), (b) or (c) of the definition of "Permitted Investments."
"Permitted Investments" means (a) (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 any Rating
Agency 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-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 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
thereof) at least "A" or "A2" or the equivalent by any Rating Agency and
short-term debt rated 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 at least "A" or "A2" or the equivalent by
any Rating Agency (provided
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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 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 (which demand shall only be made at the direction of the
Pledgor) after 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; (b) 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; (c) 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 (d) 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, in each case having rating
of at least "A" or "A2" or the equivalent by any Rating Agency.
"Suspension Period" means the period (i) beginning promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Prohibition Notice attached to this Agreement
as Attachment 1, suspending Pledgor's right to direct the investment of funds
held for the credit of the Collateral Accounts, and (ii) ending promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Rescission of Prohibition Notice attached to
this Agreement as Attachment 2, rescinding the preceding Prohibition Notice.
(b) General Provisions. Capitalized terms used but not defined
herein shall have the meaning given to such terms in Exhibit A. Unless otherwise
defined herein or in Exhibit A, terms used in Articles 8 and 9 of the Code are
used herein as therein defined. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate. When a reference is made in this
Agreement to an Appendix, Exhibit, Introduction, Recital, Section or Schedule,
such reference shall be to an Appendix, an Exhibit, the Introduction, a Recital
or a Section of, or a Schedule to, this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or
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"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
SECTION 2. Establishment and Operation of Mortgage Notes Proceeds
Account.
(a) Establishment of Mortgage Notes Proceeds Account. Pledgor and
Secured Party hereby authorize and direct Securities Intermediary to establish
and maintain at its office at 85 Broad Street, New York, New York 10022, a
securities account in the name of Secured Party and under the sole dominion and
control of Secured Party, designated as "Bank of Nova Scotia Mortgage Notes
Proceeds Account." Securities Intermediary hereby undertakes to treat Secured
Party as the person entitled to exercise the rights that comprise any Financial
Asset credited to the Mortgage Notes Proceeds Account. Secured Party and Pledgor
agree that this account shall be the "Mortgage Notes Proceeds Account."
(b) Operations of the Mortgage Notes Proceeds Account. The
Mortgage Notes Proceeds Account shall be operated, and all Investments shall be
acquired and registered or held (as applicable), in accordance with the terms of
this Agreement.
(c) Account Statements. Securities Intermediary shall send Secured
Party and Pledgor written account statements with respect to the Mortgage Notes
Proceeds Account not less frequently than monthly. Reports or confirmation of
the execution of orders and statements of account shall be conclusive if not
objected to in writing within 30 days after delivery pursuant to Section 12.
SECTION 3. Mechanics of Deposits of Funds to the Mortgage Notes
Proceeds Account.
(a) Transfers to the Mortgage Notes Proceeds Account. All
transfers of funds to the Mortgage Notes Proceeds Account shall be made by wire
transfer (or, if applicable, intra-bank transfer) of immediately available funds
addressed as follows:
The Chase Manhattan Bank, New York, New York
ABA No.: 021-0000-21
Reference: A/C Goldman, Sachs & Co.
A/C# 930-1-011483
FFC A/C: BANK OF NOVA SCOTIA MORTGAGE
NOTES PROCEEDS ACCOUNT (VCR)
A/C#: 010-20498-0
(b) Notice of Transfers. In the event of any transfer of funds to
the Mortgage Notes Proceeds Account pursuant to any provision of Section 3,
Pledgor, Secured Party, as the case may be, shall promptly after initiating or
sending out written instructions with respect to such transfer, give notice to
the other such party by facsimile of the date and amount of such transfer.
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SECTION 4. Permitted Investments and Transfers of Amounts in the
Mortgage Notes Proceeds Account.
(a) Strict Compliance. Credit balances held by Securities
Intermediary in the Collateral Accounts shall not be (i) invested or reinvested,
(ii) sold or redeemed, or (iii) transferred from the Collateral Accounts, in
either case except as provided in this Section 4.
(b) Pledgor's Right to Direct Investment. Except during any
Suspension Period, Securities Intermediary shall, in accordance with Pledgor's
written Entitlement Orders given to Securities Intermediary from time to time,
sell or redeem Investments, and apply amounts transferred to or held for the
credit of the Mortgage Notes Proceeds Account to make investments for credit to
the Mortgage Notes Proceeds Account, in Securities Intermediary's name and as
custodian under this Agreement, in Permitted Investments denominated and payable
in United States dollars. During any Suspension Period, (i) Pledgor's right to
direct such investments under this Section 4(b) shall be suspended, and
Securities Intermediary shall not accept Entitlement Orders with respect to the
Mortgage Notes Proceeds Account from any person other than Secured Party; and
(ii) any credit balances shall be invested and reinvested only as provided in
Section 4(c).
(c) Overnight Investments. To the extent that, as of 12:00 noon,
New York time on any Business Day, there are credit balances expected to remain
after settlement of all pending transactions in any of the Collateral Accounts,
unless otherwise instructed by Secured Party, Securities Intermediary shall
apply the expected credit balances to acquire Overnight Investments. Any
Overnight Investments shall be held for the credit of the Collateral Accounts
from which the proceeds for acquisition was derived. If for any reason
Securities Intermediary fails to invest credit balances in Overnight Investments
as provided in this Section, Securities Intermediary shall credit the Mortgage
Notes Proceeds Account with daily interest on the uninvested free credit balance
in accordance with its usual practice.
(d) Actions of Securities Intermediary on Purchase of Investments.
Promptly upon the purchase, acquisition or transfer for credit of the Collateral
Accounts of any Investment, Securities Intermediary shall take all steps that it
customarily takes in the ordinary course of its business to ensure that such
Investment is credited on its books to the Collateral Accounts. Without limiting
the generality of the foregoing, Securities Intermediary shall promptly (i) send
to Pledgor and Secured Party a written confirmation of the acquisition of such
Investment, and (ii) indicate by book entry in its records that such Investment
has been credited to, and is held for the credit of, the Mortgage Notes Proceeds
Account. Securities Intermediary agrees with Pledgor and Secured Party that any
credit balances or property credited to, or held for the credit of, the
Collateral Accounts shall be treated as "Financial Assets" as that term is
defined in Section 8-103(a)(9)(iii) of the Code.
(e) Control Agreement. Anything contained herein to the contrary
notwithstanding, Securities Intermediary shall, if and as directed in writing by
Secured Party, without the consent of Pledgor, (i) comply with Entitlement
Orders originated by Secured Party with respect to the Collateral Accounts and
any Security Entitlements therein, (ii) transfer, sell or redeem any of the
Collateral, (iii) transfer any or all of the Collateral to any
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account or accounts designated by Secured Party, including an account
established in Secured Party's name (whether at Secured Party or Securities
Intermediary or otherwise), (iv) register title to any Collateral in any name
specified by Secured Party consistent with the policies or practices of the
applicable depository, including the name of Secured Party or any of its
nominees or agents, without reference to any interest of Pledgor, or (v)
otherwise deal with the Collateral as directed by Secured Party. Nothing
contained in this paragraph shall constitute a waiver of by Pledgor of any
rights or remedies it may have against Secured Party under this Agreement or any
other agreement.
(f) Deposit of Proceeds. Any interest, cash dividends or other
cash distributions received in respect of any Investments and the net proceeds
of any sale or payment of any Investments shall be promptly credited to, and
held for the credit of, the Mortgage Notes Proceeds Account. Any distribution of
property other than cash in respect of any Investment shall be credited to, and
held for the credit of, the Mortgage Notes Proceeds Account.
SECTION 5. Acknowledgement of Security Interest in Favor of Secured
Party; Covenant Against Creation of other Interests.
(a) Acknowledgement of Security Interest. Securities Intermediary
acknowledges the security interest granted by Pledgor in favor of Secured Party
in the Collateral.
(b) Acknowledgement of Securities Intermediary's Role. Securities
Intermediary hereby further acknowledges that it holds the Collateral Accounts,
and all Security Entitlements therein, as custodian for, for the benefit of, and
subject to the control of, Secured Party. Securities Intermediary shall, by book
entry or otherwise, indicate that the Collateral Accounts, and all Security
Entitlements registered to or held therein, are subject to the control of
Secured Party as provided in Section 4(e).
(c) Securities Intermediary Has No Notice of Adverse Claims.
Securities Intermediary represents and warrants that (i) it has no notice of any
Adverse Claim against any of the Collateral other than the claim of Secured
Party under this Agreement; and (ii) it is not party to any agreement other than
this Agreement that governs its rights or duties, or limits or conflicts with
the rights of Secured Party, including the exclusive right of Secured Party to
control as provided in Section 4(e), with respect to the Collateral Accounts.
(d) Securities Intermediary Shall Not Acknowledge Other Claims.
Securities Intermediary agrees that, except as expressly provided in this
Agreement (including Section 6(d)) or with the written consent of Secured Party,
it shall not agree to or acknowledge (i) any right by any Person other than
Secured Party to originate Entitlement Orders or control with respect to the
Collateral Accounts; or (ii) any limitation on the right of Secured Party to
originate Entitlement Orders with respect to or direct the transfer of any
Investments or cash credited to the Collateral Accounts.
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SECTION 6. Securities Intermediary Maintenance of the Collateral
Accounts.
(a) Transactions Shall Comply With Rules. The parties acknowledge
that all transactions in Financial Assets under this Agreement shall be in
accordance with the rules and customs of the exchange, market or clearing
organization, if any, in which the transactions are executed or settled and in
conformity with applicable law and regulations of governmental authorities and
future amendments or supplements thereto.
(b) Fees and Charges of Securities Intermediary. Pledgor shall
promptly pay Securities Intermediary, in accordance with Securities
Intermediary's usual schedule of charges or any written agreement between
Securities Intermediary and Pledgor, any fees or charges reasonably imposed by
Securities Intermediary with respect to the establishment, maintenance or
transactions in or affecting the Collateral Accounts.
(c) Securities Intermediary Shall Not Permit Leverage of
Investments. Securities Intermediary shall not execute any transaction to
acquire Financial Assets under Section 4(b) unless (A) there are sufficient
funds in the Collateral Accounts to settle such transactions or (B) it is
reasonably anticipated that such funds may be generated through the liquidation
of Financial Assets then in the Collateral Accounts, or to sell or redeem any
Financial Asset which is not held, or reasonably expected to be acquired in
pending transactions, for the credit of the Mortgage Notes Proceeds Account.
Notwithstanding the foregoing sentence, in the event that Securities
Intermediary executes a transaction without adequate funds to settle the
transaction, Pledgor shall be liable to Securities Intermediary for any
deficiency and shall promptly reimburse Securities Intermediary for any loss or
expense incurred thereby, including losses sustained by reason of Securities
Intermediary's inability to borrow any securities or other property sold for the
Collateral Accounts. Pledgor agrees to pay interest charges which may be imposed
by Securities Intermediary in accordance with its usual custom, with respect to
late payments for securities or Financial Assets purchased for the Collateral
Accounts and prepayments in the Collateral Accounts (i.e., the crediting of the
proceeds of sale before the settlement date or receipt by Securities
Intermediary of the items sold in good deliverable form). Pledgor agrees to pay
promptly any amount which may become due in order to satisfy demands for
additional margin or marks to market with respect to any security purchased or
sold on instruction from Pledgor.
(d) Risk of Investments and Transactions. It is not the intention
of the parties that Securities Intermediary should bear any investment risk
associated with Permitted Investments or Overnight Investments acquired for the
credit of the Collateral Accounts in accordance with Section 4. Any losses or
gains realized on such Investments shall be charged or credited to the
Collateral Accounts, as appropriate. On committing to a transaction for the
credit of the Collateral Accounts pursuant to an instruction permitted in
accordance with Section 4, Securities Intermediary may, (i) pending settlement,
block (A) the Investments to be sold or (B) credit balances sufficient to settle
any acquisition, or investments the liquidation of which will yield funds
sufficient to settle any acquisition and, (ii) at the time of settlement,
deliver such Investments or funds in accordance with the rules, custom or
practice of the particular market.
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(e) Use of Intermediaries and Nominees. Securities Intermediary is
authorized, subject to Secured Party's written instructions, to register any
Financial Assets acquired by Securities Intermediary pursuant to this Agreement
in the name of Securities Intermediary or in the name of its nominee, or to
cause such securities to be registered in the name of a Federal reserve bank or
a recognized securities intermediary or clearing corporation, or any nominee
thereof. Securities Intermediary may at any time and from time to time appoint,
and may at any time remove, any bank, trust company, clearing corporation, or
Broker-Dealer as its agent to carry out such of the provisions of this
Agreement. The appointment or use of any intermediary, or the appointment of any
such agent, shall not relieve Securities Intermediary of any responsibility or
liability under this Agreement.
(f) Corporate Actions. Except as otherwise set forth herein,
Pledgor and Secured Party agree that Securities Intermediary shall have no
responsibility for ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters relating to any
Financial Assets credited to or held for the credit of the Collateral Accounts
(except based on written instructions originated by Pledgor or Secured Party),
or for informing Pledgor or Secured Party with respect thereto, whether or not
Securities Intermediary has, or is deemed to have, knowledge of any of the
aforesaid. Securities Intermediary is authorized to withdraw securities sold or
otherwise disposed of, and to credit the Mortgage Notes Proceeds Account's
account with the proceeds thereof or make such other disposition thereof as may
be directed in accordance with this Agreement. Securities Intermediary is
further authorized to collect all income and other payments which may become due
on Financial Assets credited to the Collateral Accounts, to surrender for
payment maturing obligations and those called for redemption and to exchange
certificates in temporary form for like certificates in definitive form, or, if
the par value of any shares is changed, to effect the exchange for new
certificates. It is understood and agreed by Pledgor and Secured Party that,
although Securities Intermediary will use reasonable efforts to effect the
transactions set forth in the preceding sentence, Securities Intermediary shall
incur no liability for its failure to effect the same unless its failure is the
result of wilful misconduct.
(g) Disclosure of Account Relationships. Pledgor and Secured Party
acknowledge that Securities Intermediary may be required to disclose to
securities issuers the name, address and securities positions with respect to
Financial Assets credited to the Collateral Accounts, and hereby consent to such
disclosures.
(h) Forwarding of Documents. Securities Intermediary shall forward
to Pledgor and, if requested, Secured Party, or notify Pledgor and, if
requested, Secured Party by telephone of, all written communications received by
Securities Intermediary as owner of any Financial Assets credited to the
Collateral Accounts and which are intended to be transmitted to the beneficial
owner thereof.
(i) Direction of Secured Party Controls in Disputes. Pledgor,
Securities Intermediary and Secured Party hereby agree that in the event any
dispute arises with respect to the payment, ownership or right to possession of
the Collateral Accounts or any other
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Collateral credited to or held therein, Securities Intermediary shall take such
actions and shall refrain from taking such actions with respect thereto as may
be directed by Secured Party.
(j) No Setoff, etc. Securities Intermediary shall not exercise on
its own behalf any claim, right of set-off, banker's lien, clearing lien,
counterclaim or similar right against any of the Collateral; provided that
Securities Intermediary may deduct, from any credit balances, any usual and
ordinary transaction and administration fees payable in connection with the
administration and operation of the Collateral Accounts. Except for claims for
deductions permitted in the preceding sentence, Securities Intermediary agrees
that any security interest it may have in the Collateral Accounts or any
security entitlement carried therein shall be subordinate and junior to the
interest of Secured Party.
(k) Only Agreement. This Agreement shall govern the actions,
rights and obligations of Securities Intermediary, and shall determine the
governing law, with respect to the Collateral Accounts and the Collateral
notwithstanding any term or condition in any agreement other than this Agreement
as it may be amended, supplemented or otherwise modified in writing.
(l) Care of Financial Assets. Securities Intermediary shall
maintain possession or control of all Financial Assets credited to the
Collateral Accounts by segregating such Financial Assets from its proprietary
assets and keeping them free of any lien, charge or claim of any third party
granted or created by Securities Intermediary. Securities Intermediary shall
take such other steps to ensure that Financial Assets credited to the Collateral
Accounts are identified as being held for customers of Securities Intermediary
as may required under applicable law or in accordance with custom and practice
in the industry.
(m) Further Actions. Securities Intermediary shall take such
further actions as Secured Party shall reasonably request as being necessary or
desirable to maintain or achieve perfection or priority of Secured Party's
security interest with respect to the Collateral and to permit Secured Party to
exercise its rights with respect to the Collateral.
SECTION 7. Limitations on Duties, and Exculpation and
Indemnification, of Securities Intermediary.
(a) Limitation on Duty of Care; Exculpation. Securities
Intermediary's duties hereunder are only those specifically provided herein, and
Securities Intermediary shall incur no liability whatsoever for any actions or
omissions hereunder except for any such liability arising out of or in
connection with Securities Intermediary's gross negligence or wilful misconduct.
Securities Intermediary has no obligation to ensure the sufficiency of this
Agreement or the arrangements described hereunder to satisfy any objectives of
Secured Party or Pledgor. Securities Intermediary shall have no duty to
supervise or to provide investment counseling or advice to Pledgor or Secured
Party with respect to the purchase, sale, retention or other disposition of any
Financial Assets held hereunder. Except as specifically otherwise provided in
this Agreement, Securities Intermediary shall not be
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responsible for enforcing compliance by the other parties to this Agreement with
their respective duties and obligations to each other under this or any other
Agreement.
(b) Consultation with Counsel. Securities Intermediary may consult
with, and obtain advice from, legal counsel as to the construction of any of the
provisions of this Agreement, and shall incur no liability in acting in good
faith in accordance with the reasonable advice and opinion of such counsel.
(c) Reasonable Reliance. Securities Intermediary shall be fully
protected and shall suffer no liability in acting in accordance with any written
instructions reasonably believed by it to have been given (i) by Secured Party
with respect to any aspect of the operation of the Collateral Accounts
(including any such instructions relating to any investment or transfer of any
amounts held therein), (ii) by Pledgor, to the extent provided in Section 4(b),
with respect to the Collateral Accounts, or (iii) by Secured Party originally
named herein until such time as Securities Intermediary receives notice of the
substitution of Secured Party pursuant to Section 11.
(d) Indemnification. Pledgor agrees to indemnify Securities
Intermediary from and against any and all claims, losses, liabilities and
expenses (including reasonable attorneys' fees and expenses) in any way relating
to, growing out of or resulting from this Agreement or the performance of its
obligations hereunder, except to the extent arising out of or in connection with
Securities Intermediary's gross negligence or wilful misconduct.
SECTION 8. Representations and Warranties By Securities
Intermediary. Securities Intermediary hereby represents and warrants to Pledgor
and Secured Party as follows:
(a) Corporate Power. Securities Intermediary has all necessary
corporate power and authority to enter into and perform this Agreement.
(b) Execution Authorized. The execution, delivery and performance
of this Agreement by Securities Intermediary have been duly authorized by all
necessary corporate action on the part of Securities Intermediary.
(c) Securities Intermediary. Securities Intermediary is a
"securities intermediary" (as that term is defined in Section 8-102(a)(14) of
the Code) and is acting in such capacity with respect to the Collateral
Accounts. Securities Intermediary is not a "clearing corporation" (as that term
is defined in Section 8-102(a)(5) of the Code).
SECTION 9. Termination. This Agreement shall terminate, and all
rights to the Collateral Accounts and all other Collateral registered to or held
therein shall revert to Pledgor, upon Securities Intermediary's receipt of
written notice, signed by an authorized officer of Secured Party, that the
Mortgage Notes Proceeds Collateral Account Agreement has terminated.
11
<PAGE>
SECTION 10. Resignation and Removal of Securities Intermediary.
(a) Removal. Securities Intermediary may be removed at any time by
written notice given by Secured Party to Securities Intermediary and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing.
(b) Resignation. Securities Intermediary may resign at any time by
giving not less than thirty days' written notice to Secured Party and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing. If an instrument of acceptance by a successor
Securities Intermediary shall not have been delivered to the resigning
Securities Intermediary within sixty days after the giving of any such notice of
resignation, the resigning Securities Intermediary may, at the expense of
Pledgor, petition any court of competent jurisdiction for the appointment of a
successor Securities Intermediary.
(c) Successor Securities Intermediary. Any successor Securities
Intermediary shall be a bank or trust company, having capital and surplus of at
least $100 million, located in the State of New York.
(d) Process of Succession. Upon the appointment of a successor
Securities Intermediary and its acceptance of such appointment, the resigning or
removed Securities Intermediary shall transfer all items of Collateral held by
it to such successor (which items of Collateral shall be transferred to a new
Mortgage Notes Proceeds Account established and maintained by such successor).
Following such appointment all references herein to Securities Intermediary
shall be deemed a reference to such successor; provided that the provisions of
Section 7 hereof shall continue to inure to the benefit of the resigning or
removed Securities Intermediary with respect to any actions taken or omitted to
be taken by it under this Agreement while it was Securities Intermediary
hereunder.
SECTION 11. Secured Party as Disbursement Agent. Secured Party has
been appointed to act as Secured Party hereunder by Lenders pursuant to the
Disbursement Agreement. Secured Party shall at all times be the same Person that
is Disbursement Agent under the Disbursement Agreement. Written notice of
resignation by Disbursement Agent pursuant to subsection 9.7 of the Disbursement
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; removal of Disbursement Agent pursuant to subsection 9.7 of the
Disbursement Agreement shall also constitute removal as Secured Party under this
Agreement; and substitution of a successor disbursement agent pursuant to
subsection 9.7 of the Disbursement Agreement shall also constitute substitution
of a successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Disbursement Agent under subsection 9.7 of the Disbursement
Agreement by a successor Disbursement Agent, that successor Disbursement Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Secured Party under this
Agreement, and the retiring or removed Secured Party under this Agreement shall
promptly (i) transfer to such successor Secured Party all items of Collateral
12
<PAGE>
held by Secured Party, together with all records and other documents necessary
or appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such documents and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Secured Party of the security interests created hereunder, whereupon such
retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement.
SECTION 12. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to the address of the party
as set forth under such party's name on the signature pages hereof. All notices
or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person,
(b) if sent by reputable overnight delivery service, (c) in the event overnight
delivery services are not readily available, if mailed by first class mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telex, or by telecopy with correct answer back received. Notice
so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next following Business Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Business Day;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. Any party shall have the right to change its address for
notice hereunder to any other location by giving of no less than twenty (20)
days' notice to the other parties in the manner set forth hereinabove.
SECTION 13. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by any party herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
other parties, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
SECTION 14. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 15. 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.
13
<PAGE>
SECTION 16. Governing Law. THIS AGREEMENT 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. Securities
Intermediary's Jurisdiction shall be New York.
SECTION 17. Waiver of Jury Trial. PLEDGOR, SECURED PARTY AND
SECURITIES INTERMEDIARY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims. Pledgor, Secured
Party and Securities Intermediary each acknowledge that this waiver is a
material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor, Secured Party and Securities Intermediary have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor,
Secured Party and Securities Intermediary further warrant and represent that
each has reviewed this waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 18. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
14
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
PLEDGOR:
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
By: LAS VEGAS SANDS, INC., its managing
member
By: /s/ William P. Weidner
---------------------
Name: William P. Weidner
Title: President
Notice Address: 3355 Las Vegas Blvd South
Room 1A
Las Vegas, Nevada 89109
Facsimile Number: (702) 733-5499
S-1
<PAGE>
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a Canadian
chartered bank, as Disbursement
Agent under the Disbursement
Agreement
By: /s/ Alan W. Pendergast
----------------------
Name: Alan Pendergast
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S-2
<PAGE>
SECURITIES INTERMEDIARY:
GOLDMAN, SACHS & CO., as Securities
Intermediary
By: /s/ David Z. Hark
-----------------
Title: Managing Director
Notice Address: Goldman, Sachs & Co.
Oliver Street Tower
125 High Street, Suite 1700
Boston MA 02110-2704
Attention: Peter W. Grieve
Telephone: (800) 343-9120
Facsimile Number: (617) 204-2392
With a copy to: Goldman, Sachs & Co.
85 Broad Street
New York, NY 10022
Attention: Lisa Laura Mays
Facsimile Number: (212) 902-3737
Facsimile Number:
-----------------------------
with a copy to:
S-2
<PAGE>
ATTACHMENT 1
[FORM OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
---------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Prohibition Notice under that Certain Mortgage Notes Proceeds Third-
Party Account Agreement/Bank of Nova Scotia Mortgage Notes
Proceeds Account Number 010-20498-0 ________________________________
Ladies and Gentlemen:
Pursuant to the Mortgage Notes Proceeds Third-Party Account Agreement dated
November 14, 1997 ("Third-Party Account Agreement") among The Bank of Nova
Scotia, as Secured Party, certain Pledgors and Securities Intermediary, we
hereby give you this Prohibition Notice and notify you of the commencement of a
Suspension Period. Until further notice from the undersigned substantially in
the form of Attachment 2 to the Third-Party Account Agreement, [Securities
Intermediary] shall not accept or follow instructions from Pledgor pursuant to
Section 4(b) of the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ATTACHMENT 1-1
<PAGE>
ATTACHMENT 2
[FORM OF RESCISSION OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
---------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Rescission of Prohibition Notice under that Certain Mortgage Notes
Proceeds Third-Party Account Agreement/Bank of Nova Scotia Mortgage
Notes Proceeds Account Number 010-20498-0 _________________________
Ladies and Gentlemen:
Pursuant to the Mortgage Notes Proceeds Third-Party Account Agreement dated
November 14, 1997 ("Third-Party Account Agreement") among The Bank of Nova
Scotia, as Secured Party, certain Pledgors and Securities Intermediary, we
hereby notify you of the rescission by [Secured Party] of the Prohibition Notice
dated [date of Prohibition Notice] and the end of the related Suspension Period.
You are hereby instructed that, until receipt of a new Prohibition Notice, you
shall accept and follow written instructions from Pledgor pursuant to Section
4(b) of the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ATTACHMENT 2-1
INTERCREDITOR AGREEMENT
(Credit Parties)
THE BANK OF NOVA SCOTIA
as Bank Agent
FIRST TRUST NATIONAL ASSOCIATION
as Mortgage Notes Indenture Trustee
GMAC COMMERCIAL MORTGAGE CORPORATION
as Interim Mall Lender
FIRST UNION NATIONAL BANK
as Subordinated Notes Trustee
and
THE BANK OF NOVA SCOTIA
as Intercreditor Agent
November 14, 1997
<PAGE>
Table of Contents
RECITALS.................................................................... 1
A. The Project....................................................... 1
B. The Bank Credit Facility.......................................... 1
C. The Interim Mall Facility......................................... 1
D. The Mortgage Notes Indenture...................................... 2
E. The Subordinated Notes Indenture.................................. 2
F. Financing Development of the Project.............................. 2
G. Funding and Security Agreements................................... 3
H. Intercreditor Agreement........................................... 4
1. Definitions and General Provisions....................................... 4
1.1 Definitions....................................................... 4
1.1.1 Disbursement Agreement Terms............................... 4
1.1.2 Other Terms................................................ 5
1.2 Interpretation.................................................... 15
2. Collateral, Priority of Liens, Subordination and Release................. 15
2.1 Liens and Security Interests...................................... 15
2.1.1 Collateral for Bank Secured Obligations.................... 15
2.1.2 Collateral for Mortgage Notes Secured Obligations.......... 16
2.1.3 Collateral for Interim Mall Secured Obligations............ 16
2.2 Liens on the Mall................................................. 17
2.2.1 Prior to Mall Parcel Creation Date......................... 17
2.2.2 Upon Creation of Mall Parcel............................... 19
2.3 Shared Collateral................................................. 19
2.4 Tranche B Collateral.............................................. 20
2.5 Separate Proceeds Accounts Collateral............................. 20
2.6 No Other Collateral............................................... 20
2.7 Confirmation of Liens............................................. 21
2.8 Phase II Release.................................................. 22
2.9 Mall Release...................................................... 22
2.10 Effect............................................................ 22
2.11 Mall Space Leases................................................. 23
3. Permitted Facility Amendments; Protective Advances....................... 23
3.1 Bank Credit Facility Amendments................................... 23
3.2 Interim Mall Facility Amendments.................................. 25
3.3 Note Holders...................................................... 27
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3.4 Waivers............................................................ 27
3.5 Protective Advances................................................ 28
3.6 No Other Facility Amendments....................................... 28
3.7 Additional Capital Indebtedness.................................... 28
3.8 No Approval Rights of Subordinated Note Indenture Trustee.......... 30
4. Events of Default; Remedies; Certain Actions by Intercreditor Agent....... 30
4.1 Declaration of Event of Default.................................... 30
4.2 Required Protective Advances....................................... 30
4.3 Standstill......................................................... 31
4.4 Waivers............................................................ 32
4.5 Shared Collateral.................................................. 33
4.6 Requirements Regarding Exercise of Remedies........................ 33
4.6.1 Prior to Mall Release Date.................................. 33
4.6.2 Remedies After Mall Release Date............................ 34
4.7 Exercise of Rights Under Security Agreements....................... 35
4.7.1 Related Collateral Agreements by Intercreditor Agent........ 35
4.7.2 Separate Realization........................................ 36
4.7.3 Foreclosure of Deeds of Trust............................... 38
4.8 Allocation of Shared Collateral Proceeds........................... 38
4.9 Other Duties of and Actions by Intercreditor Agent................. 40
5. Representations and Warranties............................................ 41
5.1 Organization....................................................... 41
5.2 Authorization...................................................... 41
5.3 Binding Agreement.................................................. 41
5.4 No Consent Required................................................ 41
5.5 No Conflict........................................................ 41
6. Appointment of Intercreditor Agent........................................ 42
6.1 Appointment........................................................ 42
6.2 Authority.......................................................... 42
6.3 Amendment of Agreements............................................ 43
6.4 Responsibility..................................................... 43
6.5 Liability.......................................................... 43
6.6 Capacity........................................................... 44
6.7 Resignation; Appointment of Additional Intercreditor Agents........ 44
7. Miscellaneous Provisions.................................................. 45
7.1 Notices; Addresses................................................. 45
7.2 Further Assurances................................................. 48
7.3 Delay and Waiver................................................... 48
7.4 Entire Agreement................................................... 48
7.5 Governing Law...................................................... 49
ii
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7.6 Severability....................................................... 49
7.7 Headings........................................................... 49
7.8 Limitations on Liability........................................... 49
7.9 Consent of Jurisdiction............................................ 49
7.10 Successors and Assigns............................................. 49
7.11 Counterparts....................................................... 50
7.12 No Third Party Beneficiaries....................................... 50
7.13 Amendment for New Credit Parties................................... 50
7.14 Trust Indenture Act................................................ 50
iii
<PAGE>
INTERCREDITOR AGREEMENT
(Credit Parties)
THIS AGREEMENT is made as of November 14, 1997, by and among THE BANK
OF NOVA SCOTIA, a Canadian chartered bank ("Scotiabank"), as the Administrative
Agent acting on behalf of itself and the Bank Lenders pursuant to the Bank
Credit Agreement (in such capacity, the "Bank Agent"), FIRST TRUST NATIONAL
ASSOCIATION, a national banking association in its capacity as Trustee under the
Mortgage Notes Indenture (in such capacity, the "Mortgage Notes Indenture
Trustee"), GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, as
lender with respect to the Interim Mall Credit Agreement (in such capacity, the
"Interim Mall Lender"), FIRST UNION NATIONAL BANK, a national banking
association, in its capacity as Trustee under the Subordinated Notes Indenture
(in such capacity, the "Subordinated Notes Indenture Trustee"), and SCOTIABANK,
as Intercreditor Agent hereunder and under the Related Collateral Agreements (in
such capacity, the "Intercreditor Agent").
RECITALS:
A. The Project. Las Vegas Sands, Inc., a Nevada corporation ("LVSI"),
Venetian Casino Resort, LLC, a Nevada limited liability company ("Venetian"),
and Grand Canal Shops Mall Construction, LLC, a Delaware limited liability
company ("Mall Construction Subsidiary") which is a wholly owned subsidiary of
Venetian (LVSI, Venetian and Mall Construction Subsidiary are collectively
referred to herein as the "Company;" provided, however, that after the Mall
Release Date, "Company" shall mean and refer to LVSI and Venetian only), propose
to develop, construct and operate the Venetian Casino Resort, a large-scale,
Venetian-themed hotel/casino/retail and entertainment complex with a related
heating, ventilation and air-conditioning central plant, related common parking
facilities and related central electrical sub-station facilities, all as part of
the redevelopment on the site of the former Las Vegas Sands Hotel and Casino.
B. The Bank Credit Facility. Concurrently herewith, LVSI, Venetian,
the Bank Agent, Goldman Sachs Credit Partners L.P. and the Bank Lenders have
entered into the Bank Credit Agreement pursuant to which the Bank Lenders have
agreed, subject to the terms thereof and hereof, to provide the Bank Credit
Facility to LVSI and Venetian.
C. The Interim Mall Facility. Concurrently herewith, the Company and
the Interim Mall Lender have entered into the Interim Mall Credit Agreement
pursuant to which the Interim Mall Lender has agreed, subject to terms thereof
and hereof, to provide the Interim Mall Facility to the Company.
<PAGE>
D. The Mortgage Notes Indenture. Concurrently herewith LVSI,
Venetian, certain guarantors named therein and the Mortgage Notes Indenture
Trustee have entered into the Mortgage Notes Indenture pursuant to which LVSI
and Venetian will issue the Mortgage Notes.
E. The Subordinated Notes Indenture. Concurrently herewith, LVSI,
Venetian, certain guarantors named therein and the Subordinated Notes Indenture
Trustee have entered into the Subordinated Notes Indenture pursuant to which
LVSI and Venetian will issue the Subordinated Notes.
F. Financing Development of the Project. The Company is financing the
development of the Project, in part, with the proceeds of the Bank Credit
Facility, the Interim Mall Facility, the Mortgage Notes and the Subordinated
Notes. Venetian and LVSI are constructing and developing the Project. As of the
date hereof, fee title to the entire Project is owned by Venetian, provided that
the retail mall portion of the Project (the "Mall") is leased to Mall
Construction Subsidiary by Venetian under the Mall Lease. On the Mall Parcel
Creation Date, Mall Construction Subsidiary is to acquire fee title to the Mall
Parcel from Venetian as provided for herein and the portion of the Project other
than the Mall will thereafter continue to be owned by Venetian. In addition to
certain other collateral and security interests (which other collateral and
security interests are more particularly described in this Agreement):
(1) the Interim Mall Facility is secured by a first priority
lien on Mall Construction Subsidiary's interest in the Mall, as more
particularly described in Section 2.1 and Section 2.2 hereof;
(2) the Bank Credit Facility is secured (i) by a first priority
lien on Hotel/Casino Collateral (including Venetian's interest in the
Mall), and (ii), until the Mall Release Date, by a second priority lien on
Mall Construction Subsidiary's interest in the Mall as more particularly
described in Section 2.1 and Section 2.2 hereof;
(3) the Mortgage Notes are secured (i) by a second priority
lien on Hotel/Casino Collateral and Venetian's interest in the Mall, and
(ii), until the Mall Release Date, by a third priority lien on the Mall
Construction Subsidiary's interest in Mall, as more particularly described
in Section 2.1 and Section 2.2 hereof; and
(4) certain contract rights, disbursement accounts and other
Shared Collateral applicable to the construction of the Project will be
subject to security interests (i) with first lien priority to secure the
Bank Secured Obligations and the Interim Mall Secured Obligations, and
(ii) with second lien priority to secure the Mortgage Notes Secured
Obligations, as more particularly described in Section 2.1 and Section 2.3
hereof.
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The Subordinated Notes are and will remain an unsecured obligation of Venetian
and LVSI. Upon the Mall Release Date, (i) the liens on the Mall securing the
Bank Credit Facility and the Mortgage Notes will be released, (ii) the liens on
LVSI's and Venetian's interests in the Shared Collateral securing the Interim
Mall Facility will be released, (iii) this Agreement will no longer apply to the
Mall or the Interim Mall Lender, except with respect to certain rights in the
Shared Collateral, and (iv) this Agreement will remain in full force and effect
among Bank Agent, Mortgage Note Indenture Trustee and Subordinated Note
Indenture Trustee, all as more particularly provided for herein.
G. Funding and Security Agreements. In connection with the matters
provided for herein, the parties have entered into, among other agreements, the
following additional agreements:
(1) Disbursement Agreement. LVSI, Venetian, Mall Construction
Subsidiary, the Bank Agent, the Mortgage Notes Indenture Trustee, the
Interim Mall Lender, Atlantic-Pacific, Las Vegas LLC, a Delaware limited
liability company (the "HVAC Provider"), and Scotiabank, as Disbursement
Agent thereunder, have entered into that Funding Agents' Disbursement and
Administration Agreement as of even date herewith (the "Disbursement
Agreement"), in order to set forth, among other things, (a) the mechanics
for and allocation of the Company's request for advances under the various
Facilities and from the Company's Funds Account, (b) the conditions
precedent to the initial advance and conditions precedent to subsequent
advances, (c) certain common representations, warranties and covenants of
the Company in favor of the Funding Agents and (d) common Events of
Default and remedies during construction of the Project.
(2) Borrower Security Agreement. LVSI, Venetian and Mall
Construction Subsidiary, as Debtors thereunder, and Scotiabank, as
Intercreditor Agent thereunder, have entered into that Borrower Security
Agreement as of even date herewith (the "Borrower Security Agreement"), to
provide for, among other things, (a) the creation of security interests in
certain "Shared Intangible Collateral" defined therein (which includes,
without limitation, rights of Venetian or LVSI under certain contracts
relating to the construction and development of the Project and insurance
proceeds) granted to the Intercreditor Agent (i) to secure the Bank
Secured Obligations and the Interim Mall Secured Obligations, with first
lien priority, and (ii) to secure the Mortgage Notes Secured Obligations,
with second lien priority, and (b) the creation of security interests in
all of the other Collateral described therein granted to the Intercreditor
Agent to secure the Bank Secured Obligations, with first lien priority,
and to secure the Mortgage Notes Secured Obligations, with second lien
priority.
(3) Mall Security Agreement. Mall Construction Subsidiary, as
Debtor thereunder, and Scotiabank, as Intercreditor Agent thereunder, have
entered into that Mall Construction Subsidiary Security Agreement as of
even date herewith
3
<PAGE>
(the "Mall Security Agreement"), to provide for, among other things, the
creation of security interests in certain personal property described
therein granted to the Intercreditor Agent to secure the Interim Mall
Secured Obligations, with first lien priority, to secure the Bank Secured
Obligations, with second lien priority, and to secure the Mortgage Notes
Secured Obligations, with third lien priority.
(4) Account Agreements. As provided for in the Disbursement
Agreement and the Borrower Security Agreement, in connection with the
development and financing of the Project, the collateral account
agreements described in Exhibit B attached hereto have been entered into
as of even date herewith among the Company or the other Persons shown
thereon as Debtors, Scotiabank as Disbursement Agent, and Scotiabank as
Securities Intermediary (except under the Mortgage Proceeds Collateral
Account Agreement), to provide for the creation of security interests in
the accounts described in each of such Account Agreements to secure the
Obligations to the Secured Lenders, as summarized on Exhibit B, and to
provide for the administration of such accounts by Disbursement Agent.
H. Intercreditor Agreement. The Credit Parties desire to enter into
this Agreement in order to appoint Scotiabank as the Intercreditor Agent
hereunder and under the Related Collateral Agreements, and to set forth certain
provisions relating to their respective rights in the Collateral, the exercise
of remedies in the event of default, the application of proceeds of enforcement
and certain other matters.
NOW, THEREFORE, with reference to the foregoing recitals and in
reliance thereon, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Credit Parties agree as
follows:
1. Definitions and General Provisions.
1.1 Definitions. Except as otherwise expressed and provided herein,
all capitalized terms used in this Agreement and its Exhibits shall have the
meanings provided for in this Section 1.1.
1.1.1 Disbursement Agreement Terms. The following terms shall
have the meanings set forth in the Disbursement Agreement:
Accounts Approved Equipment Funding
Additional Company Equity Commitments
Adelson Bank Credit Agreement
Advance Bank Credit Facility
Advance Confirmation Notice Bank Security Documents
Affiliate Banking Day
Billboard Master Lease
4
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Commitment Mall I LLC
Company's Funds Account Mall I Subsidiary
Completion Date Mall Lease
Construction Consultant Mall Parcel
Contractor Mall Space
Deeds of Trust Mortgage Note(s)
Equipment Component Mortgage Note Holders
Final Completion Mortgage Notes Indenture
Financing Agreements Mortgage Notes Security Documents
Financing Date Obligations
Funding Agents Permanent Mall Lender
GECC Commitment Person
Guaranty Deposit Account Phase II Land
Indebtedness Phase II Release Conditions
Interim Mall Credit Agreement Potential Event of Default
Interim Mall Facility Project
Interim Mall Security Documents Project Costs
Interim Mall Space Fee Deed of Trust Project Security
Interim Mall Leasehold Deed of Trust Security Documents
Lien Scope Change
Stop Funding Notice
Subordinated Note(s)
Subordinated Notes Indenture
Tranche B Collateral
1.1.2 Other Terms. The following terms shall have the meanings
set forth below:
"Acceleration Event" means the acceleration of the maturity of all
Obligations under a Facility Agreement in accordance with the terms and
conditions of such Facility Agreement.
"Account Agreements" means, collectively, the Collateral Account
Agreements listed on Exhibit B attached hereto and incorporated herein by
reference and more particularly described as follows:
(1) that Mortgage Notes Proceeds Collateral Account Agreement
dated as of even date herewith (the "Mortgage Notes Proceeds Account
Agreement") among Venetian, LVSI and Mall Construction Subsidiary, as
Pledgor, Scotiabank as Disbursement Agent, as Secured Party, and Goldman,
Sachs & Co., as Securities Intermediary;
(2) that HVAC Collateral Account Agreement dated as of even
date herewith (the "HVAC Account Agreement") among the HVAC Provider, as
Pledgor,
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Scotiabank as Disbursement Agent, as Secured Party, and Scotiabank, as
Securities Intermediary;
(3) that Completion Guaranty Collateral Account Agreement dated
as of even date herewith (the "Completion Guaranty Account Agreement")
among Adelson, as Pledgor, Scotiabank as Disbursement Agent, as Secured
Party, and Goldman, Sachs & Co., as Securities Intermediary; and
(4) that Disbursement Collateral Account Agreement dated as of
even date herewith (the "Disbursement Account Agreement") among Venetian,
LVSI and Mall Construction Subsidiary, as Pledgor, ScotiaBank as
Disbursement Agent, as Secured Party, and ScotiaBank, as Securities
Intermediary.
"Accounts" means, collectively, the accounts described in the
Account Agreements, including:
(1) the Mortgage Notes Proceeds Account described in the
Mortgage Notes Proceeds Account Agreement (the "Mortgage Notes Proceeds
Account");
(2) the HVAC Collateral Accounts described in the HVAC
Collateral Account Agreement (the "HVAC Accounts");
(3) the Completion Guaranty Account described in the Completion
Guaranty Account Agreement (the "Completion Guaranty Account");
(4) the Bank Proceeds Account described in the Disbursement
Account Agreement (the "Bank Proceeds Account"); and
(5) the Collection Account, the Company Funds Account, the
Disbursement Account, the HC/Mall Component Cash Management Account, the
HVAC Component Cash Management Account, the Interest Payment Account and
the Pre-Completion Revenues Account described in the Disbursement Account
Agreement, together with any other account which may hereafter be
established pursuant to the Disbursement Account Agreement (other than the
Bank Proceeds Account) or the Disbursement Agreement (collectively, the
"Project Development Accounts").
"Account Collateral" or "Accounts Collateral" means, collectively,
all of the Accounts and the amounts on deposit therein, any interest earned
thereon, and any investments of such amounts made pursuant to the Accounts
Agreements and any proceeds of the foregoing. When the term "Collateral" is used
in conjunction with any of the Accounts (e.g., the "Mortgage Notes Proceeds
Account Collateral" or the "HVAC Accounts Collateral"), said Account Collateral
means the specified Account and all amounts on deposit therein, any interest
earned thereon, and any investments of such amounts made pursuant to
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the applicable Account Agreement, and any proceeds of the foregoing except to
the extent such proceeds are deposited into another Account pursuant to the
terms of the Disbursement Agreement or the Account Agreements.
"Additional Bank Proceeds" means the proceeds advanced by the Bank
Lenders pursuant to any Facility Amendment which increases the maximum amount of
the existing commitments under the Bank Credit Facility, subject to the
limitations on the amount thereof provided for in Section 3.1.1 or Section 3.1.6
hereof; provided, however, that Additional Bank Proceeds shall not include (i)
any amounts advanced by the Bank Lenders, or any of them, pursuant to Approved
Equipment Funding Commitments, or (ii) any amounts advanced or re-advanced by
the Bank Lenders under the Revolving Bank Loan Commitment under the Bank Credit
Facility (but any Facility Amendment of the Bank Credit Facility to increase the
$20,000,000 maximum amount of the Revolving Bank Loan Commitment shall be
subject to the provisions of Section 3.1.1 or Section 3.1.6 below).
"Additional Capital Indebtedness" means additional indebtedness
issued by Venetian or LVSI pursuant to Section 3.7 of this Agreement.
"Additional Mall Proceeds" means the proceeds advanced by the Interim
Mall Lender pursuant to any Facility Amendment which increases the maximum
amount of the existing commitments under the Interim Mall Facility, subject to
the limitations on the amount thereof provided for in Section 3.2.1 or Section
3.2.4 hereof.
"Adelson Relative" means (i) any spouse, child, grandchild, or
sibling of Adelson, (ii) any other natural Person having a relationship by
blood, marriage or adoption not more remote than second cousin with Adelson or
any Person referenced in clause (i) of this definition, or (iii) any other
Person directly or indirectly controlled by Adelson or any other Person
referenced in clause (i) or clause (ii) of this definition. For purposes of this
definition, "control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of any
other Person whether through the ownership of voting securities or by agreement
or otherwise.
"Applicable Margin" shall have the meaning ascribed thereto in the
Bank Credit Agreement or the Interim Mall Credit Agreement, as the context
requires.
"Bank Agent" means Scotiabank or its successor or assignee in its
capacity as Administrative Agent under the Bank Credit Agreement.
"Bank Deed of Trust (Venetian)" means that certain Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as
of even date herewith, made by Venetian, as trustor, to Lawyers Title of Nevada,
Inc., as trustee, for the benefit of the Bank Agent, as beneficiary.
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"Bank Deed of Trust (Mall Parcel)" means that certain Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing to be
executed in accordance with the terms and conditions of the Disbursement
Agreement on the Mall Parcel Creation Date by Mall Construction Subsidiary, as
trustor, to Lawyers Title of Nevada, Inc., as trustee, for the benefit of Bank
Agent, as beneficiary.
"Bank Leasehold Deed of Trust (Mall)" means that certain Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated as of even date herewith, made by Mall Construction Subsidiary, as
trustor, to Lawyers Title of Nevada, Inc., as trustee, for the benefit of Bank
Agent, as beneficiary.
"Bank Lenders" means the Bank Lenders pursuant to the Bank Credit
Agreement or their successors or assignees in such capacity as lenders under the
Bank Credit Agreement.
"Bank Secured Obligations" means all Obligations under the Bank
Credit Facility, the Bank Security Documents and the other Bank Financing
Agreements.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"Base Rate Loan" shall have the meaning ascribed thereto in the Bank
Credit Agreement.
"Collateral" means the following unique and separate categories of
property encumbered to secure the Obligations to any of the Secured Lenders: (i)
the Hotel/Casino Collateral, (ii) the Mall Collateral, (iii) the Shared
Collateral, and (iv) the Separate Proceeds Accounts Collateral; provided,
however, that for purposes of this Agreement, the Collateral shall exclude the
Tranche B Collateral. Attached hereto as Exhibit C and incorporated herein by
reference is a schedule setting forth the allocation of certain Collateral into
said separate categories. To the extent that the definitions of "Hotel/Casino
Collateral" and "Mall Collateral," by reason of the references therein to
property encumbered under the Bank Security Documents and the Interim Mall
Security Documents, respectively, would result in any property being classified
as both Hotel/Casino Collateral and Mall Collateral, reference shall be made to
the allocations of Collateral set forth in Exhibit C to resolve such ambiguity.
"Consents" means the agreements described on Exhibit D attached
hereto and incorporated herein by reference.
"Company Group" means the Company and any Affiliate of the Company,
and references herein to "any of the Company Group" or words to that effect mean
any of the entities comprising the Company or any Affiliate of any of them.
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"Controlling Party" means one or more Secured Credit Parties with the
right to direct the Intercreditor Agent with respect to any decisions or action
made or taken or to be made or taken with respect to Collateral pursuant to any
of the Related Collateral Documents (including, without limitation, the matters
provided for in Section 4.7.1 and Section 4.9), determined in accordance with
the following:
(1) except with respect to Specified Actions, the Controlling
Party with respect to any Collateral shall be the Secured Credit Party or
Parties which, at the time any direction or consent is required or may be
given, has the most senior liens on or security interests in such
Collateral as established pursuant to Section 2.1; provided that, in the
event one or more Secured Credit Parties have pari passu liens on or
security interest in Collateral, the Controlling Party shall refer to both
such Secured Credit Parties and decisions shall be deemed to be made by
the Controlling Party only to the extent consented to or approved by both
such Secured Credit Parties; and
(2) with respect to Specified Actions, the Controlling Party
shall mean all of the Secured Credit Parties;
provided, however, that in the event Adelson or any Adelson Relative directly or
indirectly owns an interest (other than a participation) in excess of fifteen
percent (15%) of the aggregate Indebtedness under the Bank Credit Facility, the
Interim Mall Facility or the Mortgage Notes Facility (the percentage of the
total Indebtedness attributable to Adelson or any Adelson Relative shall be
determined in accordance with the procedure demonstrated by the following
example: a direct or indirect 50% interest in a $70 million portion of a $140
million Indebtedness would equal a 25% interest in such Indebtedness), then the
Secured Credit Party with respect to such Indebtedness (an "Ineligible Credit
Party") shall not have the right to act as a Controlling Party in accordance
with the foregoing, and the Controlling Party shall be the Credit Party or
Parties determined in accordance with such provisions among the Secured Credit
Parties other than the Ineligible Credit Party (the foregoing provisions shall
not, however, limit or restrict the other rights of a Secured Credit Party under
this Agreement, including, without limitation, exercise of the rights provided
for in Section 4.6.1 or Section 4.6.2 and in Section 4.7.2, whether or not such
Secured Credit Party is an Ineligible Credit Party in accordance with the
foregoing).
"Credit Parties" means the Bank Agent, the Mortgage Notes Indenture
Trustee, the Subordinated Notes Indenture Trustee and, until the Mall Release
Date, the Interim Mall Lender.
"Disbursement Agent" means Scotiabank or its successor or assignee in
its capacity as Disbursement Agent under the Disbursement Agreement, acting in
such capacity under the Disbursement Agreement, the Account Agreements and the
Consents.
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"Disbursement Agreement Default" means the occurrence and continuance
of an Event of Default under the Disbursement Agreement.
"Disbursement Agreement Default Date" the date upon which a
Disbursement Agreement Default occurs.
"Eurodollar Rate Loans" shall have the meaning ascribed thereto in
the Bank Credit Agreement.
"Event of Default" means, as the context requires, (i) a Disbursement
Agreement Default, or (ii) the occurrence and continuance of an "Event of
Default" by or with respect to the Company under the applicable Financing
Agreement; provided, however, that notwithstanding the provisions of Section 1.2
of this Agreement, any matter which would have constituted an "Event of Default"
under a Facility Agreement but for the waiver thereof by the Credit Party to
such Facility Agreement, or but for the termination of such Facility Agreement,
shall not constitute an Event of Default for purposes of this Agreement.
"Exercise Remedies" or the "Exercise of Remedies" means the recording
of a Notice of Default under any of the Deeds of Trust, the commencement of an
action for judicial foreclosure, the appointment of a receiver, the enforcement
of personal property foreclosure proceedings (whether judicial or non-judicial),
the filing of a complaint or other action to enforce any Obligations,
realization on Collateral or the enforcement of other remedies under any Related
Collateral Agreement or any Facility Agreement, or the exercise of set off, or
any combination of the foregoing, by or for the benefit of any Credit Party
hereto; provided, however, that "Exercise Remedies" or the "Exercise of
Remedies" shall exclude, without limitation, the following: (i) the giving of
notices of default (as distinguished from recording a Notice of Default), (ii)
any declaration of an Acceleration Event, and (iii) actions taken by any Secured
Credit Party or the Intercreditor Agent to perfect, or to extend or confirm the
perfection or effectiveness of, any lien provided for herein or in the
applicable Facility Agreements.
"Facility or Facilities" means, as the context requires, any or all
of the Bank Credit Facility, the Interim Mall Facility, the Mortgage Notes
Proceeds and the Subordinated Notes Proceeds.
"Facility Agreements" means, collectively, the Bank Credit Agreement,
the Interim Mall Credit Agreement, the Mortgage Notes Indenture and the
Subordinated Notes Indenture.
"Facility Amendment" means any amendment, modification, extension or
renewal of any Facility or Facility Agreement.
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"Hotel/Casino" means the entire Project other than the Mall;
provided, however, that after the release of the Phase II Land in accordance
with Section 2.8 below, the Hotel/Casino shall exclude the Phase II Land.
"Hotel/Casino Collateral" means all real and personal property
encumbered to secure the Bank Secured Obligations under the Bank Security
Documents other than: (a) the Shared Collateral, (b) the Separate Proceeds
Accounts Collateral, and (c) Mall Construction Subsidiary's interest in the Mall
Collateral; provided, however, that:
(1) until the creation and conveyance of the Mall Parcel and
the termination of the Mall Lease, all in accordance with the terms of
this Agreement and the Disbursement Agreement on the Mall Parcel Creation
Date, the Hotel/Casino Collateral shall include, without limitation, (A)
fee title to the real property leased to Mall Construction Subsidiary
pursuant to the Mall Lease (the "Pre-Separation Underlying Mall Fee"), and
(B) the interest of Venetian as lessor under the Mall Lease;
(2) after the Mall Parcel Creation Date, the Hotel/Casino
Collateral shall not include the Mall Parcel;
(3) prior to the Mall Release Date, any Shared Collateral
allocated to the Hotel/Casino pursuant to Section 4.8 shall become
Hotel/Casino Collateral as provided for therein,
(4) upon the Mall Release Date, all Shared Collateral shall
become Hotel/Casino Collateral (except any then-pending allocations of
Shared Collateral Proceeds in accordance with Section 4.8), and
(5) after the Phase II Land has been released from the liens
and security interests securing the Bank Credit Facility and the Mortgage
Notes, in accordance with Section 2.8 hereof, the Hotel/Casino Collateral
shall not include the Phase II Land.
"Intercreditor Agent" means Scotiabank as the Intercreditor Agent
pursuant to Section 6 of this Agreement, its permitted successor or assignee in
such capacity, and any Additional Intercreditor Agent appointed pursuant to said
Section 6.
"Interim Mall Lender" means GMAC Commercial Mortgage Corporation or
its successor or assignee in its capacity as lender under the Interim Mall
Credit Agreement.
"Interim Mall Secured Obligations" means all Obligations under the
Interim Mall Loan Facility, the Interim Mall Security Documents and the other
Interim Mall Financing Agreements.
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"Mall Collateral" means all real and personal property encumbered to
secure the Interim Mall Secured Obligations under the Interim Mall Security
Documents other than: (a) the Shared Collateral (other than Shared Collateral
allocated to the Mall pursuant to Section 4.8), (b) the Separate Proceeds
Accounts Collateral, (c) the Tranche B Collateral, and (d) the Pre-Separation
Underlying Mall Fee (encumbered under the Interim Mall Space Fee Deed of Trust
provided for herein); provided, however, that after the Mall Parcel Creation
Date, the Mall Collateral shall include the Mall Parcel. The Mall Collateral
shall include, without limitation, the interest of Mall Construction Subsidiary
as lessee under the Billboard Master Lease and (i) the interest of Mall
Construction Subsidiary as lessee under the Mall Lease until the creation and
conveyance of the Mall Parcel, and the termination of the Mall Lease, all in
accordance with the terms of this Agreement and the Disbursement Agreement on
the Mall Parcel Creation Date, and (ii), following such event, the Mall Parcel.
(The interest of Venetian as lessor under the Master Billboard Lease, and fee
title to the real property leased to Mall Construction Subsidiary under the
Billboard Master Lease, are, however, Hotel/Casino Collateral.)
"Mall Parcel Creation Date" means the date on which the transactions
provided for in Section 5.16(b) of the Disbursement Agreement occur in
connection with the creation of the Mall Parcel as a separate legal parcel of
real property under applicable Nevada law.
"Mall Release Date" means the date upon which the transactions
provided for in Section 5.16(c) of the Disbursement Agreement have occurred.
"Mortgage Notes Deed of Trust (Mall Parcel)" means that certain Deed
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
to be executed in accordance with the terms and conditions of the Disbursement
Agreement on the Mall Parcel Creation Date by Mall Construction Subsidiary, as
trustor, to Lawyers Title of Nevada, Inc., as trustee, for the benefit of the
Mortgage Notes Indenture Trustee, as beneficiary.
"Mortgage Notes Deed of Trust (Venetian)" means that certain Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated as of even date herewith, made by Venetian, as trustor, to Lawyers Title
of Nevada, Inc., as trustee, for the benefit of the Mortgage Notes Indenture
Trustee, as beneficiary.
"Mortgage Notes Leasehold Deed of Trust (Mall)" means that certain
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing dated as of even date herewith, made by Mall Construction Subsidiary, as
trustor, to Lawyers Title of Nevada, Inc., as trustee, for the benefit of the
Mortgage Notes Indenture Trustee, as beneficiary.
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"Mortgage Notes Indenture Trustee" means First Trust National
Association or its successor or assignee in its capacity as Trustee under the
Mortgage Notes Indenture.
"Mortgage Notes Proceeds" means the proceeds from the issuance of the
Mortgage Notes (net of any underwriter's discount and expenses).
"Mortgage Notes Secured Obligations" means all Obligations under the
Mortgage Notes Facility, the Mortgage Notes Security Documents and the other
Mortgage Notes Financing Agreements.
"Notice of Default" means a notice of default which must be recorded
in the official real property records of Clark County, Nevada, in order to
commence non-judicial foreclosure of a Deed of Trust in accordance with
applicable Nevada law.
"Permitted Facility Amendment" means a Facility Amendment of the Bank
Credit Facility or the Interim Mall Loan Facility, or the applicable Facility
Agreement of either, which is expressly permitted pursuant to Section 3 of this
Agreement.
"Project Security Agreements" means the Borrower Security Agreement
and the Mall Security Agreement, together with any security agreement hereafter
entered into by any Affiliates of the Company for the benefit of one or more of
the Secured Lenders.
"Protective Advances" means any Advances with respect to (i) the
payment of any delinquent taxes or insurance premiums owed by the any of the
Company Group with respect to the Project, (ii) the removal of any lien or
encumbrance on the Project or the defense of Company's title thereto or of the
validity, enforceability, perfection or priority of the liens and security
interests granted pursuant to the Security Documents, (iii) the payment of
Project Costs after delivery of a Stop Funding Notice by the Disbursement Agent,
or (iv) the repair, maintenance, protection or preservation of the value of the
Project or any portion thereof, including, without limitation, for payment of
(A) heating, gas, electric and other utility bills (including any payments due
under those Energy Services Agreements each dated as of May 1, 1997, between
Venetian and the HVAC Provider and between Mall Construction Subsidiary and the
HVAC Provider), or (B) amounts reasonably necessary to prevent the provider of
any financing pursuant to an Approved Equipment Funding Commitment (i) from
terminating its agreement to advance funds thereunder, or (ii) from exercising
rights under the documentation applicable to its financing commitment so as to
deprive the Project of the equipment procured with advances made pursuant to
such financing commitment.
"REA" means that certain Amended and Restated Reciprocal Easement,
Use and Operating Agreement dated as of the date hereof among Venetian, LVSI,
Mall Construction Subsidiary and Interface Group-Nevada, Inc.
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"Related Collateral Agreements" means the Project Security
Agreements, the Account Agreements and the Consents.
"Required Protective Advance" means any Protective Advance made by
the Secured Lenders pursuant to Section 4.2 hereof.
"Revolving Bank Loan Commitment" shall have the meaning ascribed to
the term "Revolving Loan Commitment" in the Bank Credit Agreement.
"Secured Credit Parties" means the Bank Agent, the Mortgage Notes
Indenture Trustee, and, until the Mall Release Date, the Interim Mall Lender.
"Secured Lenders" means the Bank Agent and the Bank Lenders, the
Mortgage Notes Indenture Trustee and the Mortgage Note Holders, and, until the
Mall Release Date, the Interim Mall Lender.
"Secured Obligations" means the Bank Secured Obligations, the Interim
Mall Secured Obligations or the Mortgage Notes Secured Obligations, as the
context requires.
"Securities Intermediary" means Scotiabank or its successor or
assignee in its capacity as Securities Intermediary under any Account Agreement,
except that under the Mortgage Notes Proceeds Account Agreement, "Securities
Intermediary" means Goldman, Sachs & Co. or its successor or assignee in such
capacity.
"Separate Proceeds Accounts Collateral" means the Mortgage Notes
Proceeds Account Collateral and the Bank Proceeds Account Collateral.
"Shared Accounts Agreements" means the HVAC Accounts Agreement, the
Completion Guaranty Account Agreement and the Disbursement Account Agreement.
"Shared Accounts Collateral" means (i) the HVAC Accounts Collateral,
(ii) the Completion Guaranty Account Collateral, and (iii) the Project
Development Accounts Collateral.
"Shared Collateral" means the Shared Accounts Collateral and the
Shared Intangible Collateral.
"Shared Collateral Proceeds" means the portion of the Shared
Collateral constituting proceeds received or held by the Disbursement Agent, the
Intercreditor Agent, the Securities Intermediary, any Secured Credit Party or
any Secured Lender.
"Shared Intangible Collateral" means the agreements, insurance
proceeds and other intangible property of Venetian or LVSI described as "Shared
Intangible Collateral" in
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the Borrower Security Agreement; provided, however, that the Shared Intangible
Collateral shall not include (i) the Mortgage Notes Proceeds Account Collateral,
(ii) the Tranche B Collateral, or (iii) the Bank Proceeds Account Collateral.
"Specified Actions" means any of the following except to the extent
required under the Disbursement Agreement, this Agreement or the Related
Collateral Agreements or required by law: (i) the release of any Collateral,
(ii) the release of any lien under the Related Collateral Agreements, or (iii)
any change in the priority of such liens.
"Subordinated Notes Indenture Trustee" means First Union National
Bank or its successor or assignee in the capacity of Trustee under the
Subordinated Notes Indenture.
"Subordinated Notes Proceeds" means the proceeds from the issuance of
the Subordinated Notes (net of any underwriter's discount and expenses).
"Standstill Period" means a period of forty-five (45) days commencing
upon the occurrence of a specified default, which period may be extended for an
additional fifteen (15) days upon written notice given to the other Credit
Parties within such 45-day period by Bank Agent or, prior to the Mall Release
Date only, by Interim Mall Lender.
1.2 Interpretation. To the extent that reference is made in this
Agreement to any term defined in, or to any other provision of, any other
agreement, such term or provision shall continue to have the original meaning
thereof notwithstanding any termination, expiration or amendment of such other
agreement; provided, however, that upon any formal written amendment of the
Disbursement Agreement or any other agreement to which all of the Credit Parties
are parties, to the extent such amendment modifies terms defined therein or
other provisions thereof which are referred to in this Agreement, then such
references herein shall be to such terms or provisions as so amended.
2. Collateral, Priority of Liens, Subordination and Release.
2.1 Liens and Security Interests. The Credit Parties agree that each
Secured Lender shall have the benefit of the following liens on and security
interests in the Collateral:
2.1.1 Collateral for Bank Secured Obligations. The Bank Secured
Obligations shall be secured:
(1) by a first priority lien on the Bank Proceeds Account
Collateral,
(2) by first priority liens on and security interests in
the Hotel/Casino Collateral,
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(3) together with the Interim Mall Secured Obligations, by
first priority liens on and security interests in the
Shared Collateral, and
(4) prior to the Mall Release Date, by second priority
liens on and security interests in the Mall Collateral,
which second priority liens and security interests
shall be subject and subordinate to the liens and
security interests in the Mall Collateral securing the
Interim Mall Secured Obligations;
2.1.2 Collateral for Mortgage Notes Secured Obligations. The
Mortgage Notes Secured Obligations shall be secured:
(1) by a first priority lien on and security interest in
the Mortgage Notes Proceeds Account Collateral,
(2) by second priority liens on and security interests in
the Hotel/Casino Collateral, which second priority
liens and security interests shall be subject and
subordinate to the liens and security interests in the
Hotel/Casino Collateral securing the Bank Secured
Obligations,
(3) by a second priority lien on and security interest in
the Shared Collateral, which second priority lien and
security interest shall be subject and subordinate to
the liens and security interests in the Shared
Collateral securing the Bank Secured Obligations and
securing the Interim Mall Secured Obligations, and
(4) prior to the Mall Release Date, by third priority liens
on and security interests in the Mall Collateral, which
third priority liens and security interests shall be
subject and subordinate to the liens and security
interests in the Mall Collateral securing the Interim
Mall Secured Obligations and securing the Bank Secured
Obligations, respectively; and
2.1.3 Collateral for Interim Mall Secured Obligations. The
Interim Mall Secured Obligations shall be secured:
(1) by a first priority lien on and security interest in
the Mall Collateral,
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(2) together with the Bank Secured Obligations, by a first
priority lien on and security interest in the Shared
Collateral, and
(3) prior to the earlier of the Mall Release Date or the
Mall Parcel Creation Date, by a third priority lien on
and security interest in the Pre-Separation Underlying
Mall Fee encumbered under the Interim Mall Space Fee
Deed of Trust, which third priority lien and security
interest shall be subject and subordinate to the liens
on and security interests in the Hotel/Casino
Collateral securing the Bank Secured Obligations and
securing the Mortgage Notes Secured Obligations,
respectively.
The Credit Parties further acknowledge and agree that the Subordinated Notes
shall be and remain unsecured obligations of LVSI and Venetian. Under the
Related Collateral Agreements, the liens and security interests in the
Collateral described therein have been granted to Intercreditor Agent on behalf
of the Secured Credit Parties, with the lien priorities provided for in this
Section 2.1. In addition to the liens and security interests securing the Bank
Secured Obligations as described in Section 2.1.1 above, advances may be made
under the Revolving Bank Loan Commitment under the Bank Credit Facility in
accordance with Section 2.2.3(b) of the Disbursement Agreement to finance
acquisition of portions of the Equipment Component prior to initial funding
under an Approved Equipment Funding Commitment, and in connection therewith the
Bank Agent on behalf of the Bank Lenders shall also have (in addition to the
liens described above) a first lien security interest in the portions of the
Equipment Component acquired with such advances, to secure such advances and all
other Bank Secured Obligations, which additional lien and security interest
shall be released by Bank Agent upon the date such advances by the Bank Lenders
are repaid from the proceeds of the initial funding under an Approved Equipment
Funding Commitment for such property (whether the GECC Commitment or otherwise);
no other Credit Party shall have a lien or security interest in such additional
collateral.
2.2 Liens on the Mall.
2.2.1 Prior to Mall Parcel Creation Date. Prior to the Mall
Parcel Creation Date, the Credit Parties agree as follows:
2.2.1.1 The Credit Parties agree that the Bank Deed of
Trust (Venetian) and the Mortgage Notes Indenture Deed of Trust (Venetian)
shall be subject and subordinate to the Mall Lease and the Billboard
Master Lease, such that the Mall Lease and the Billboard Master Lease will
survive any judicial or non-judicial foreclosure of either such Deed of
Trust, but in the event of the termination of the Mall Lease or the
Billboard Master Lease, such Deeds of Trust will remain in full
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force and effect (if such termination is a result of the rejection of the
Mall Lease or the Billboard Master Lease , subject to the obligations in
Section 2.2.1.2 below).
2.2.1.2 The Bank Agent and the Mortgage Note Indenture
Trustee agree that in the event that (i) the Mall Lease or the Billboard
Master Lease is rejected by the tenant in a proceeding under the
Bankruptcy Code, and (ii) the Bank Agent and/or the Mortgage Notes
Indenture Trustee, as the case may be, have thereafter succeeded to the
estate or interest of the Person which had been the landlord under the
Mall Lease and the Billboard Master Lease by foreclosure or otherwise and
upon such succession have the legal right to lease the premises previously
leased under the Mall Lease or the Billboard Master Lease, as the case may
be, free of claims of subsequent tenants and others holding interests
therein, then, upon a request of the Interim Mall Lender within thirty
(30) days following notice of such succession, the Bank Agent or the
Mortgage Notes Indenture Trustee, as the case may be, shall execute and
deliver a new Mall Lease or a new Billboard Master Lease with Interim Mall
Lender upon the same terms and conditions, for a term equal to what would
have been the remaining term of the Mall Lease or the Billboard Master
Lease, as applicable, but for such rejection. The Bank Agent and the
Mortgage Notes Indenture Trustee further agree that in the event that (i)
the Mall Lease or the Billboard Master Lease is rejected by the landlord
thereunder in a proceeding under the Bankruptcy Code, (ii) the Bank Agent
and/or the Mortgage Notes Indenture Trustee, as the case may be, have
thereafter succeeded to the estate or interest of the landlord under the
Mall Lease and the Billboard Master Lease by foreclosure or otherwise, and
(iii) the Interim Mall Lender has the right to possession of the premises
pursuant to the terms of the Interim Mall Leasehold Deed of Trust and the
Mall Lease or the Billboard Master Lease, as the case may be, then on the
request of the Interim Mall Lender within thirty (30) days following
notice of such succession, the Bank Agent or the Mortgage Notes Indenture
Trustee, as the case may be, shall execute and deliver a new Mall Lease or
a new Billboard Master Lease, as applicable, with Interim Mall Lender upon
the same terms and conditions, for a term equal to what would have been
the remaining term of the Mall Lease or the Billboard Master Lease but for
such rejection. Notwithstanding the foregoing, however, neither the Bank
Agent nor the Mortgage Notes Trustee shall have any obligation to enter
into a new Billboard Master Lease in accordance with this Section 2.2.1.2
prior to the Mall Parcel Creation Date unless either (i) the Interim Mall
Lender then simultaneously enters into a new Mall Lease in accordance with
the foregoing, or (ii) the Mall Lease (including any new Mall Lease
previously entered into in accordance with this Section 2.2.1.2) is then
in effect.
2.2.1.3 The Interim Mall Lender agrees (i) that the
Interim Mall Space Fee Deed of Trust constitutes a lien on the
Pre-Separation Underlying Mall Fee only, (ii) that the Interim Mall Space
Fee Deed of Trust shall be subject and subordinate to the liens on and
security interests in the Pre-Separation Underlying Mall
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Fee and the other Hotel/Casino Collateral created by the Bank Security
Documents and the Mortgage Notes Indenture Security Documents, (iii) that
the Interim Mall Space Fee Deed of Trust may not be foreclosed except with
the prior written consent of the Bank Agent and the Mortgage Notes
Indenture Trustee, (iv) that the Interim Mall Lender shall not contest the
validity or priority of the liens and security interests created thereby
or seek to enjoin, delay or otherwise interfere with any foreclosure
(whether judicial or non-judicial) of the Bank Deed of Trust (Venetian) or
the Mortgage Notes Indenture Deed of Trust (Venetian), as the case may be,
and (v) that the Interim Mall Lender shall not be entitled to any proceeds
arising from or in connection with any such foreclosure of the Bank Deed
of Trust (Venetian) or the Mortgage Notes Indenture Deed of Trust
(Venetian), as the case may be.
2.2.1.4 The Interim Mall Lender further acknowledges and
agrees (i) that all of the Collateral encumbered under the Borrower
Security Agreement other than the Shared Intangible Collateral is
Hotel/Casino Collateral which secures only the Bank Credit Facility and
the Mortgage Notes Facility (with the lien priority provided for in
Section 2.1 above, and none of such Collateral secures the Interim Mall
Facility, and (ii) that except for the lien and security interest created
by the Interim Mall Space Fee Deed of Trust on the Pre-Separation
Underlying Mall Fee, which shall be subject to the provisions of Section
2.2.1.3, no portion of the Hotel/Casino Collateral secures or shall secure
the Interim Mall Facility.
2.2.2 Upon Creation of Mall Parcel. On the Mall Parcel Creation
Date, pursuant to Section 5.16(b) of the Disbursement Agreement: (i) Venetian
shall convey the Mall Parcel to Mall Construction Subsidiary, (ii) Venetian and
Mall Construction Subsidiary shall terminate the Mall Lease, and (iii) the
Secured Credit Parties, subject to obtaining the legal opinions and title policy
endorsements provided for in Section 5.16(b), shall take the actions provided
for in said Section 5.16(b). Upon the occurrence of such events, the fee
ownership of the Mall Parcel shall no longer be Hotel/Casino Collateral, but
shall then become Mall Collateral. The provisions of Section 2.1 hereof with
respect to the validity, priority, perfection, and subordination of all liens on
and security interests in the Collateral shall continue to apply upon and
following the Mall Parcel Creation Date.
2.3 Shared Collateral. With respect to the Shared Collateral, (a) the
respective priorities of the liens and security interests securing the
Obligations to the Secured Lenders shall be as provided for in Section 2.1
above, and (b) the respective rights of the Secured Credit Parties shall be as
provided for in the Disbursement Agreement, the Borrower Security Agreement, the
Shared Account Agreements and this Agreement, including the provisions for
certain allocation of Shared Collateral Proceeds pursuant to Section 4.8 hereof.
With respect to the Shared Collateral, if the Secured Credit Parties are
entitled to Exercise Remedies with respect thereto prior to the Mall Release
Date, in accordance with Sections 4.6.1 and Section 4.7.1 of this Agreement,
then any Shared Collateral Proceeds shall be allocated between the Hotel/Casino
and the Mall pursuant to Section 4.8, and upon
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such allocation, (i) such Shared Collateral allocated to the Mall shall be
deemed to become Mall Collateral, with the lien priorities in such Mall
Collateral as provided for in Section 2.1 above (i.e., with first lien priority
to secure the Interim Mall Secured Obligations, second lien priority to secure
the Bank Secured Obligations, and third lien priority to secure the Mortgage
Notes Secured Obligations), and (ii) such Shared Collateral so allocated to the
Hotel/Casino shall be deemed to become Hotel/Casino Collateral, with the lien
priorities in such Hotel/Casino Collateral provided for in Section 2.1 (i.e.,
with first lien priority to secure the Bank Secured Obligations and second lien
priority to secure the Mortgage Notes Secured Obligations). Upon the Mall
Release Date, except to the extent of any then pending allocation of Shared
Collateral Proceeds pursuant to Section 4.8 by reason of a right of Interim Mall
Lender to Exercise Remedies against any Shared Collateral prior to the Mall
Release Date, all Shared Collateral shall be and become Hotel/Casino Collateral
for all purposes of this Agreement, with the lien priorities in such
Hotel/Casino Collateral provided for in Section 2.1 (i.e., with first lien
priority to secure the Bank Secured Obligations and second lien priority to
secure the Mortgage Notes Secured Obligations).
2.4 Tranche B Collateral. In addition to the Collateral described in
Section 2.1, the Interim Mall Obligations are secured by the Tranche B
Collateral described in the Disbursement Agreement. The Tranche B Collateral is
not "Collateral" for any purpose of this Agreement, no other Credit Party shall
have any liens thereon or any security interest therein, and the Interim Mall
Lender shall have the right to Exercise Remedies with respect to the Tranche B
Collateral at any time, without reference to the Standstill Periods or other
conditions provided for in this Agreement with respect to Collateral.
2.5 Separate Proceeds Accounts Collateral. The Mortgage Notes
Proceeds Account Collateral secures only the Mortgage Notes Secured Obligations,
and no other Credit Party shall have any liens thereon or any security interest
therein. The Bank Proceeds Account Collateral secures only the Bank Secured
Obligations, and no other Credit Party shall have any liens thereon or any
security interest therein.
2.6 No Other Collateral. Except as provided for in the preceding
provisions of this Section 2 and in this Section 2.6, no Credit Party shall be
entitled to receive and hold, directly or indirectly, any liens on or security
interests in (i) any property or assets owned directly or indirectly by any of
the Company Group, or (ii) any stock, securities, membership interests,
partnership interests or other direct or indirect equity interests in the
Company or in any Affiliate of the Company, except as follows:
2.6.1 The Bank Lenders, or any of them, may provide all or any
portion of financing pursuant to Approved Equipment Funding Commitments,
on similar or dissimilar terms to the GECC Commitment, and may secure such
obligations by liens on and security interests in the Equipment Component.
Unless LVSI, Venetian and the Credit Parties otherwise agree, (i) any
indebtedness owed to the Bank Lenders pursuant to financing by them
pursuant to Approved Equipment Funding Commitments
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shall not be secured by the Collateral, and (ii) the rights of such Bank
Lenders with respect to any financing provided for the Equipment Component
vis a vis the rights of the Credit Parties with respect to the Facilities
shall be governed and controlled by any separate consent and agreement as
may be executed by such parties, and shall not be governed and controlled
by this Agreement.
2.6.2 In connection with any Permitted Facility Amendment, the
Bank Agent may receive and hold liens on and security interests for the
benefit of the Bank Lenders in any other assets or property owned directly
or indirectly by any of the Company Group other than (i) the Mall
Collateral, the Mortgage Notes Proceeds Account Collateral, and the
Tranche B Collateral, and (ii) any stock, securities, membership interests
or other direct or indirect equity interests in the Company or any
Affiliate of the Company; provided, however, that any liens or security
interests shall be permitted in the Equipment Component only to the extent
same do not violate the terms of the Approved Equipment Funding Commitment
or the financing agreements executed pursuant thereto.
2.6.3 In connection with any Permitted Facility Amendment, the
Interim Mall Lender may receive and hold liens on and security interests
in any other assets or property owned directly or indirectly by any of the
Company Group other than (i) the Hotel/Casino Collateral, the Mortgage
Notes Proceeds Account Collateral and the Bank Proceeds Account
Collateral, and (ii) any stock, securities, membership interests or other
direct or indirect equity interests in the Company or any Affiliate of the
Company; provided, however, that any liens or security interests shall be
permitted in the Equipment Component only to the extent same do not
violate the terms of the Approved Equipment Funding Commitment or the
financing agreements executed pursuant thereto.
2.6.4 In connection with any Additional Capital Indebtedness, the
lender(s) thereof, including any Credit Party or Lender, may receive the
liens and security interests provided for in Section 3.7 below.
2.7 Confirmation of Liens. Each Credit Party hereto hereby confirms
and agrees that the liens and security interests held by or for the benefit of
each Secured Lender in the Collateral, as provided for in the preceding
provisions of this Section 2, shall secure all Obligations of the Company Group
or any of them now or hereafter owing to each Secured Lender in connection with
the applicable Facility throughout the term of this Agreement, in each case with
the priority specified in Section 2.1, notwithstanding (i) the availability of
any other collateral to any Secured Lender, (ii) the actual date and time of
execution, delivery, recording, filing and perfection of any of the Security
Documents, (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, or (iv) that the
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Mall Lease may be rejected under the Bankruptcy Code or other applicable federal
or state law; provided, however, that any Obligations owed to a Credit Party in
its capacity as the provider of financing pursuant to an Approved Equipment
Funding Commitment shall not be secured by the Hotel/Casino Collateral, the
Separate Proceeds Accounts Collateral, the Tranche B Collateral, the Shared
Collateral or the Mall Collateral. In the event of a proceeding, whether
voluntary or involuntary, for insolvency, liquidation, reorganization,
dissolution, bankruptcy or other similar proceedings pursuant to the Bankruptcy
Code or other applicable federal or state law, each Credit Party further
confirms and agrees that the Obligations due and outstanding under and with
respect to each Facility shall include all principal, additional advances
permitted hereunder, Protective Advances made by such Credit Party, 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, and all proceeds from the sale or other
disposition of the Collateral shall be paid to the Secured Lenders in the order
and priority provided for in this Section 2 notwithstanding the disallowance of
any such claim or the invalidity or subordination of any lien on or security
interest in the Collateral under applicable law.
2.8 Phase II Release. The Bank Agent and the Mortgage Notes Indenture
Trustee agree to release their respective liens on and security interests in the
Phase II Land upon compliance with and satisfaction of the Phase II Release
Conditions under the Disbursement Agreement and the conditions to the notice
thereof to be given by the Disbursement Agent under Section 5.16(d) of the
Disbursement Agreement.
2.9 Mall Release. On the Mall Release Date in accordance with Section
5.16(c) of the Disbursement Agreement, the Bank Agent and the Mortgage Notes
Indenture Trustee shall release their respective liens on and security interests
in the Mall Collateral and the Interim Mall Lender shall release LVSI, Venetian,
the Mall Construction Subsidiary and all other members of the Company Group
other than Mall I LLC from all Obligations and liabilities under the Interim
Mall Facility. Upon such releases, the Interim Mall Lender and/or the Permanent
Mall Lender shall not thereafter be parties to, be bound by or be entitled to
the benefits of this Agreement; provided, however, that (i) the provisions of
Section 2.2.2 with respect to a new Mall Lease shall survive until the Mall
Parcel Creation Date and the provisions of Section 2.2.2 with respect to a new
Billboard Master Lease shall survive until the termination of this Agreement
(following termination of the Disbursement Agreement referred to in said Section
2.2.2, the Intercreditor Agent shall replace the Disbursement Agent for purposes
of Section 5.16(b) thereof), and (ii) the provisions of Section 4.8 hereof shall
survive with respect to any then pending allocation of Shared Collateral
Proceeds pursuant to Section 4.8 by reason of a right of Interim Mall Lender to
Exercise Remedies in such Shared Collateral prior to the Mall Release Date.
2.10 Effect. All provisions of this Agreement, including but not
limited to, all matters relating to the creation, validity, perfection,
priority, subordination and release of the
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liens and security interests intended to be created by the Security Documents
and all provisions regarding the allocation and priority of payments with
respect to any Facility shall survive the filing of a proceeding under the
Bankruptcy Code and be fully enforceable by and against each Credit Party hereto
during any such proceeding.
2.11 Mall Space Leases. To the extent that the Mall Construction
Subsidiary enters into lease agreements for space in the Mall, and such leases
comply with the applicable requirements of the Interim Mall Credit Agreement,
then at the request of the Interim Mall Lender, the Bank Agent and the Mortgage
Notes Trustee shall execute instruments reasonably requested by the Interim Mall
Lender to provide for the survival of such leases in the event of the
foreclosure of any Deed of Trust on the Mall.
3. Permitted Facility Amendments; Protective Advances.
3.1 Bank Credit Facility Amendments. The Bank Agent and the Bank
Lenders shall have the right, at any time and without the consent of the other
Credit Parties, and without affecting the validity and priority of the liens on
and security interests in the Collateral created by the Bank Security Documents,
to enter into a Facility Amendment with respect to the Bank Credit Facility or
the Obligations evidenced thereby provided that, after giving effect to such
Facility Amendment, the following conditions are satisfied:
3.1.1 in the event that the maximum amount of the Commitment
under the Bank Credit Facility is increased pursuant to such Facility
Amendment, then the amount of Additional Bank Proceeds advanced and
outstanding pursuant to such Facility Amendment shall be subject to the
following limitation:
(1) prior to the Mall Release Date, except as
provided for in Section 3.1.6 below, such amount shall not
exceed Twenty Million Dollars ($20,000,000) minus the amount of
any Additional Mall Proceeds theretofore advanced by the
Interim Mall Lender pursuant to Section 3.2.1 hereof (no
Additional Bank Proceeds advanced pursuant to Section 3.1.6 or
any Additional Mall Proceeds advanced pursuant to Section 3.2.4
shall count against said $20,000,000 limitation applicable to
advances of Additional Bank Proceeds under this clause (1) of
Section 3.1.1); but
(2) following the Mall Release Date, except as
provided for in Section 3.1.6 below, such amount shall not
exceed Forty Million Dollars ($40,000,000) minus the aggregate
amount, not to exceed $20,000,000, of Additional Bank Proceeds
theretofore advanced pursuant to this Section 3.1.1(1) or
Section 3.1.6 below and of Additional Mall Proceeds advanced
prior to the Mall Release Date pursuant to Section 3.2.1 or
Section 3.2.4.
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3.1.2 any Additional Bank Proceeds advanced pursuant to a
Facility Amendment increasing the Commitment under Section 3.1.1 or
Section 3.1.6 shall be used to pay any Project Costs or, after the Mall
Release Date, any amounts for general corporate purposes or working
capital of the Company (in either case including the reasonable fees and
expenses incurred by the Bank Lenders in connection with such Facility
Amendment);
3.1.3 the unfunded Commitment under the Bank Credit Facility
shall not be reduced pursuant to such Facility Amendment prior to the Mall
Release Date except to the extent such reductions are permitted under
Section 6.8 of the Disbursement Agreement;
3.1.4 the weighted average life to maturity (as determined with
reference to scheduled amortization payments) of the Indebtedness under
the Bank Credit Facility (either outstanding or available to be borrowed
under the Bank Credit Facility in effect immediately prior to the Facility
Amendment) shall not be reduced as a result of such Facility Amendment;
3.1.5 such Facility Amendment shall not result in the creation
of a lien or security interest on additional collateral except in
accordance with the provisions of Section 2.6.2 above; and
3.1.6 in the event that a Disbursement Agreement Default or a
Potential Event of Default occurs, at any time thereafter but prior to the
Mall Release Date, the Bank Agent may enter into a Facility Amendment to
further increase the maximum amount of the Commitment under the Bank
Credit Facility in excess of the limitation set forth in Section 3.1.1
above, provided that:
3.1.6.1 the Additional Bank Proceeds advanced pursuant
thereto shall be advanced on or before the Mall Release Date and
shall not exceed the additional sum (i.e., in addition to amounts
advanced in accordance with the limitations provided in Section 3.1.1
above) of Thirty Million Dollars ($30,000,000), which sum shall be
reduced by the amount of any Additional Mall Proceeds theretofore
advanced by the Interim Mall Lender pursuant to Section 3.2.4
(provided, however, that such $30,000,000 sum shall not be reduced by
the amount of any Additional Bank Proceeds as may be advanced
pursuant to Section 3.1.1 above or by the amount of any Additional
Mall Proceeds as may be advanced pursuant to Section 3.2.1 below);
3.1.6.2 the Additional Bank Proceeds advanced pursuant
thereto must be matched, dollar for dollar, by Additional Company
Equity, which shall be deposited in the Company's Funds Account and
disbursed in accordance with the Disbursement Agreement;
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3.1.6.3 the Applicable Margin with respect to any
Additional Bank Proceeds in connection with such Facility Amendment
shall not exceed (i) 7% per annum for Base Rate Loans or any loan
based on the prime rate or the federal funds rate, and (ii) 8% per
annum for Eurodollar Rate Loans or any loan based on LIBOR, except
that the Bank Lenders may also receive in connection therewith,
contingent or participating interest, warrants, preferred or common
stock, securities or other direct or indirect equity interests in the
Company or its Affiliates so long as any required payments of
interest shall not exceed, in the aggregate, the amounts permitted by
the provisions of this Section 3.1.6.3; and
3.1.6.4 such Facility Amendment shall not increase the
scheduled payments of principal due under the Bank Credit Facility
during the period commencing on the Financing Date and ending on the
date which is the later of three years after the Financing Date, or
one year after the then-scheduled Mall Release Date.
Any Facility Amendment of the Bank Credit Facility in conformity with the
foregoing shall constitute a Permitted Facility Amendment under this Agreement.
The provisions of Section 2 hereof with respect to the validity, priority,
perfection, and subordination of all liens on and security interests in the
Collateral to secure the Bank Secured Obligations shall continue to apply to the
Bank Credit Facility as so amended, modified or refinanced. In addition to such
Facility Amendments, the Bank Lenders shall have the right to provide all or any
portion of the financing pursuant to Approved Equipment Funding Commitments in
accordance with Section 2.6.1 hereof.
3.2 Interim Mall Facility Amendments. The Interim Mall Lender shall
have the right, at any time and without the consent of the other Credit Parties,
and without affecting the validity and priority of the liens on and security
interests in the Collateral created by the Interim Mall Security Documents, to
enter into a Facility Amendment with respect to the Interim Mall Facility or the
Obligations evidenced thereby provided that, after giving effect to any such
Facility Amendment, the following conditions are satisfied:
3.2.1 in the event that the maximum amount of the Commitment
under the Interim Mall Facility is increased pursuant to such Facility
Amendment, then each of the following shall be satisfied:
3.2.1.1 the maximum amount of Additional Mall Proceeds
advanced and outstanding pursuant to such Facility Amendment plus
any the amount of any Additional Bank Proceeds theretofore
advanced by the Bank Lenders pursuant to Section 3.1.1 hereof
shall not exceed Twenty Million Dollars ($20,000,000), except as
provided for in Section 3.2.4 below (no Additional Bank Proceeds
advanced pursuant to Section 3.1.6 or any Additional
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Mall Proceeds advanced pursuant to Section 3.2.4 shall count
against said $20,000,000 limitation applicable to advances of
Additional Mall Proceeds under this Section 3.2.1);
3.2.1.2 the Additional Mall Proceeds advanced pursuant to a
Facility Amendment increasing the Commitment under Section 3.2.1
or Section 3.2.4 shall be advanced prior to the Mall Release Date
and shall be used to pay any Project Costs as may be designated by
the Interim Mall Lender (including the reasonable fees and
expenses incurred by the Interim Mall Lender in connection with
such Facility Amendment);
3.2.1.3 no principal payments shall be due or be paid with
respect to such Additional Mall Proceeds until at least the Mall
Release Date; and
3.2.1.4 Interim Mall Lender shall confirm that Venetian and
LVSI and all Affiliates of either other than Mall I Subsidiary
shall be released from all obligations with respect to such
Additional Mall Proceeds upon the occurrence of the Mall Release
Date;
3.2.2 the unfunded Commitment under the Interim Mall Facility
shall not be reduced pursuant to such Facility Amendment prior to the Mall
Release Date except to the extent such reductions are permitted under the
Disbursement Agreement;
3.2.3 such Facility Amendment shall not result in the creation of
a lien or security interest on additional collateral except in accordance
with the provisions of Section 2.6.3 above; and
3.2.4 in the event that a Disbursement Agreement Default or a
Potential Event of Default occurs, at any time thereafter but prior to the
Mall Release Date the Interim Mall Lender may enter into a Facility
Amendment to further increase the maximum amount of the Commitment under
the Interim Mall Facility in excess of the limitation set forth in Section
3.2.1.1 above, provided that:
3.2.4.1 the Additional Mall Proceeds advanced pursuant
thereto shall not exceed the additional sum (i.e., in addition to
amounts advanced by the Interim Mall Lender in accordance with the
limitations provided in Section 3.2.1 above) of Thirty Million
Dollars ($30,000,000), which sum shall be reduced by the amount of
any Additional Bank Proceeds theretofore advanced by the Bank
Lenders pursuant to Section 3.1.6 (provided, however, that such
$30,000,000 sum shall not be reduced by the amount of any
Additional Bank Proceeds as may be advanced pursuant to Section
3.1.1 above
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or by the amount of any Additional Mall Proceeds as may be
advanced pursuant to Section 3.2.1 above);
3.2.4.2 the Additional Mall Proceeds advanced pursuant
thereto must be matched, dollar for dollar, by Additional Company
Equity, which shall be deposited in the Company's Funds Account
and disbursed in accordance with the Disbursement Agreement;
3.2.4.3 the Applicable Margin with respect to any Additional
Mall Proceeds in connection with such Facility Amendment shall not
exceed (i) 7% per annum for any loan based on the prime rate or
the federal funds rate, and (ii) 8% per annum for any loan based
on LIBOR, except that the Interim Mall Lender may also receive in
connection therewith, contingent or participating interest,
warrants, preferred or common stock, securities or other direct or
indirect equity interests in the Company or its Affiliates so long
as any required payments of interest shall not exceed, in the
aggregate, the amounts permitted by the provisions of this
Section 3.2.4.3; and
3.2.4.4 no payments of principal shall be permitted with
respect to such Additional Mall Proceeds in connection with such
Facility Amendment of the Interim Mall Facility prior to the Mall
Release Date.
Any Facility Amendment of the Interim Mall Facility in conformity with the
foregoing shall constitute a Permitted Facility Amendment under this Agreement.
The provisions of Section 2 hereof with respect to the validity, priority,
perfection, and subordination of all liens on and security interests in the
Collateral to secure the Interim Mall Secured Obligations shall continue to
apply to the Interim Mall Facility as so amended, modified or refinanced.
3.3 Note Holders. The Mortgage Note Holders or the Subordinated Note
Holders or any of them may provide the Additional Capital Indebtedness in
accordance with the terms and conditions of Section 3.7 below; no other
provision of this Agreement shall be construed to constitute the consent of the
Bank Lenders or the Interim Mall Lender to any Facility Amendment with respect
to the Mortgage Notes Indenture or the Subordinated Notes Indenture, and any
such Facility Amendment which violates the terms and conditions of the Bank
Financing Agreements or the Interim Mall Financing Agreements shall permit Bank
Agent or the Interim Mall Lender to declare an Event of Default with respect to
the Company thereunder.
3.4 Waivers. Any Credit Party may, without the consent of the other
Credit Parties, defer any payments due under its Facility or waive any
provisions thereof.
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3.5 Protective Advances. Prior to the Mall Release Date, in the event
that a Disbursement Agreement Default or Potential Event of Default occurs,
thereafter any Secured Credit Party may, without the consent of the other Credit
Parties and without affecting the validity or priority of any liens on or
security interests in the Collateral created by the Security Documents, make
Protective Advances (in addition to Required Protective Advances) provided that
(i) such Protective Advances shall be deemed to be Advances under the
Disbursement Agreement, (ii) the Credit Party making any such Protective Advance
shall have the right to specify the costs to be paid from the proceeds of such
Advance, (iii), if made by the Bank Lenders, to the extent the maximum amount of
the Bank Credit Facility has been advanced, then the amount of any Additional
Bank Proceeds shall be subject to the limitations in Section 3.1 above, and
(iv), if made by the Interim Mall Lender, to the extent the maximum amount of
the Interim Mall Facility has been advanced, then the amount of any Additional
Mall Proceeds shall be subject to the limitations in Section 3.2 above.
3.6 No Other Facility Amendments. Any Facility Amendment of the Bank
Credit Facility or the Interim Mall Facility that does not comply with the
provisions set forth in this Section 3 shall not be effective unless the prior
written consent of the other Secured Credit Parties shall have been obtained, in
which event such Facility Amendment shall constitute a Permitted Facility
Amendment.
3.7 Additional Capital Indebtedness. Prior to the Mall Release Date,
upon the occurrence of a Disbursement Agreement Default or Potential Event of
Default and so long as such default is continuing, each Credit Party agrees
that, in addition to the Permitted Facility Amendments referred to above, LVSI
and Venetian shall have the right to issue additional indebtedness ("Additional
Capital Indebtedness") without the consent of the Bank Agent or the Interim Mall
Lender so long as such Additional Capital Indebtedness complies with each of the
following conditions (and each Credit Party hereby confirms to the other Credit
Parties that such Additional Capital Indebtedness in accordance with the
provisions of this Section 3.7 is permitted pursuant to the terms of its
Facility Agreement):
3.7.1 The maximum principal amount of any Additional Capital
Indebtedness shall not exceed Fifty Million Dollars ($50,000,000) and all
proceeds of such Additional Capital Indebtedness must be matched, dollar
for dollar, by Additional Company Equity, which shall be deposited in the
Company's Funds Account and disbursed in accordance with Article 2 of the
Disbursement Agreement.
3.7.2 The proceeds of the Additional Capital Indebtedness and
Additional Company Equity shall be used solely to pay Project Costs
(including reasonable fees, costs and expenses incurred in connection the
issuance thereof) pursuant to the Disbursement Agreement.
3.7.3 The Additional Capital Indebtedness may be unsecured or may
be secured by liens on and security interests in the Collateral (other
than the Mortgage
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Notes Proceeds Account Collateral or the Bank Proceeds Account Collateral)
so long as all such liens and security interests (i) are subject and
subordinate to the liens and security interests in favor of the Bank
Lenders and the Interim Mall Lender, and (ii) are pari-passu with or are
subject and subordinate to the liens on and security interests in the
Collateral held by the Mortgage Notes Indenture Trustee. If so secured,
then the Secured Lenders must receive endorsements to their respective
title policies confirming, in form reasonably satisfactory to Bank Agent,
Interim Mall Lender and the Mortgage Notes Indenture Trustee, the lien
priority of their respective liens on the real property comprising the
Collateral, in accordance with the foregoing.
3.7.4 The issuance of such Additional Capital Indebtedness, and
any related amendments to the Mortgage Notes Indenture and to the
Subordinated Notes Indenture, shall be approved by (i) the holders of a
majority (in aggregate principal amount) of the Mortgage Notes pursuant
the Mortgage Note Indenture and (ii) the holders of a majority (in
aggregate principal amount) of the Subordinated Notes pursuant to the
Subordinated Notes Indenture.
3.7.5 No cash payment of principal or interest shall be permitted
on any Additional Capital Indebtedness prior to the first to occur of the
Mall Release Date or the date the Interim Mall Facility is repaid in full;
after said date, no cash payment of principal shall be permitted on any
Additional Capital Indebtedness for so long as any portion of the Bank
Credit Facility remains outstanding.
3.7.6 Such Additional Capital Indebtedness shall have a maturity
date at least six months after the maturity date of the Bank Credit
Facility.
3.7.7 The holders of any such indebtedness (if other than the
Mortgage Note Holders) shall agree to become parties to and be bound by
this Agreement.
3.7.8 The terms and conditions of such Additional Capital
Indebtedness (including financial and other covenants, events of default,
provisions relating to notice and opportunities to cure) shall not be less
favorable to the Company than the terms and conditions of the Mortgage
Notes Indenture and provided further that the holders of any such
indebtedness shall not be entitled to Exercise Remedies against any of the
Company Group or with respect to the Collateral or file a petition in
Bankruptcy unless and to the extent such actions are permitted to be taken
hereunder by the Mortgage Notes Indenture Trustee; provided, however, that
with respect to their Exercise of Remedies, the holders of any such
Additional Capital Indebtedness shall be subject to the time periods
provided for Additional Capital Indebtedness under Exhibit A.
3.7.9 LVSI and Venetian shall pay all costs and expenses incurred
by the Credit Parties, the Disbursement Agent, the Intercreditor Agent,
the Securities
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Intermediary or the Secured Lenders, including, but not limited to,
attorney's fees, title insurance premiums and other costs incurred in
connection therewith.
3.8 No Approval Rights of Subordinated Note Indenture Trustee. Except
as expressly set forth in Section 3.7.4 hereof, neither the Subordinated Notes
Indenture Trustee nor any Subordinated Note Holder, in such capacity, shall have
the right to approve or withhold its consent (a) to any provision or action
permitted to be taken by the other Credit Parties hereunder, or (b) to any
amendment, supplement or waiver of any provisions of any Security Agreement.
4. Events of Default; Remedies; Certain Actions by Intercreditor Agent.
4.1 Declaration of Event of Default. If a Disbursement Agreement
Default has occurred and is continuing, each Credit Party may declare an Event
of Default under its Facility Agreement and accelerate all Obligations due
thereunder, to the extent and on the terms and conditions provided for in such
Facility Agreement; provided, however, that (a) no Credit Party shall be
entitled to Exercise Remedies against any of the Company Group or with respect
to the Collateral except as set forth in Section 4.3, and (b) in the case of an
acceleration prior to the Mall Release Date, each Credit Party agrees to
reinstate its Facility and to recommence funding thereunder if the conditions
provided for in Section 4.6.1.3 are satisfied.
4.2 Required Protective Advances. No Secured Lender shall be required
to advance any additional amounts under its Facility in the event that either:
(1) a Disbursement Agreement Default has occurred and is
continuing; or
(2) a Stop Funding Notice has been delivered by the Disbursement
Agent pursuant to the Disbursement Agreement and the
Disbursement Agent has not delivered an Advance Confirmation
Notice countermanding such Stop Funding Notice in accordance
with the Disbursement Agreement;
provided, however, that notwithstanding the existence of a Disbursement
Agreement Default or of any other fact or circumstance which would permit the
Disbursement Agent to issue a Stop Funding Notice under the Disbursement
Agreement, upon approval of the Bank Agent (acting solely upon the direction of
the Requisite Lenders, as defined in the Bank Credit Facility) and the Interim
Mall Lender, acting jointly, the Secured Lenders shall be obligated to make
Required Protective Advances, pro rata in accordance with the Disbursement
Agreement, for the following purposes:
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4.2.1 to repair, maintain, preserve and protect the Project, in
each case, as certified to be reasonably necessary by the Construction
Consultant;
4.2.2 to pay all interest, principal repayments and other amounts
then due on any financing pursuant to an Approved Equipment Commitment
(whether the GECC Commitment or otherwise) to the extent reasonably
necessary to prevent the provider of such Approved Equipment Financing
Commitment (i) from terminating its commitment to advance funds
thereunder, or (ii) from exercising rights under the documentation
applicable to its financing commitment so as to deprive the Project of the
equipment procured with the advances made pursuant to such financing
commitment; and
4.2.3 only in the event (a) such Disbursement Agreement Default
was declared solely under Section 7.1.2 of the Disbursement Agreement
(captioned "Failure to Demonstrate Balancing"), or (b) such Stop Funding
Notice was issued solely as a result of the failure by the Company to
satisfy the condition set forth in Section 3.2.18 of the Disbursement
Agreement (captioned "In Balance Requirement") (but all other conditions
as set forth in Section 3.2 of the Disbursement Agreement have been
satisfied), then to pay for Project Costs incurred in respect of work
completed or materials purchased on or prior to the date on which the
Disbursement Agent delivers notice that such Disbursement Agreement
Default has occurred or delivers such Stop Funding Notice, in which event
each such Required Protective Advance shall be made subject to receipt by
the Disbursement Agent of (i) a certificate from the Construction Manager
or the applicable Contractor(s) that such work was completed prior to such
date, or (ii) an invoice dated prior to such date for any material
purchased prior to such date, as appropriate and, in each case, confirmed
by the Construction Consultant;
provided further, however, that (A) the aggregate amount of all Required
Protective Advances pursuant to Section 4.2.1 and Section 4.2.2 shall not exceed
Twenty-Five Million Dollars ($25,000,000), (B) the obligation of the Mortgage
Notes Indenture Trustee and the Mortgage Note Holders to make Required
Protective Advances shall be satisfied solely out of the Mortgage Notes Proceeds
Account Collateral, and said parties shall have no obligation to make any
further Required Protective Advances from and after exhaustion of the Mortgage
Notes Proceeds Account Collateral, and (C) the Bank Lenders and the Interim Mall
Lender shall have no obligation to make any Required Protective Advances except
to the extent of the unfunded Commitments under their respective Facility
Agreements.
4.3 Standstill. Until and unless a Disbursement Agreement Default
shall occur and be continuing and the Standstill Period with respect thereto
shall have expired, no Credit Party shall Exercise Remedies against any of the
Company Group or with respect to the Collateral, except that (i) scheduled
payments of interest on the Mortgage Notes shall be paid out of the Mortgage
Notes Proceeds Account, unless otherwise agreed by the Mortgage
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Notes Indenture Trustee, and (ii) the Bank Agent and the Interim Mall Lender,
acting jointly, pursuant to Section 4.5 below, may direct the Disbursement
Agent, the Intercreditor Agent or the Securities Intermediary with respect to
the enforcement of or other actions with respect to the Shared Collateral. If
and when a Disbursement Agreement Default shall occur and be continuing and the
Standstill Period with respect thereto shall have expired, the Credit Parties
and the Intercreditor Agent may Exercise Remedies only in accordance with
Section 4.6.1 or Section 4.7.1 below.
4.4 Waivers. The Credit Parties agree that the Bank Agent and the
Interim Mall Lender, acting jointly, shall have the right, without the consent
of the other Credit Parties, (a) to waive any default or event of default by or
with respect to any of the Company Group under the Disbursement Agreement (i.e.,
any Potential Event of Default or Disbursement Agreement Default), any Project
Security Agreement or any Account Agreement, or (b) to waive any condition to
disbursements under the Disbursement Agreement; provided, however, that without
the consent of the holders of a majority (in aggregate principal amount) of the
Mortgage Notes, (i) such waiver of a Disbursement Agreement Default must be made
not later than one hundred eighty (180) days following the applicable
Disbursement Agreement Default Date, and any waiver of an event of default under
any Project Security Agreement or Account Agreement must similarly be made not
later than one hundred eighty (180) days following the date such event of
default was declared under such Agreement, (ii) the Bank Agent and the Interim
Mall Lender shall not waive any default or event of default which otherwise
independently (not by cross-default or cross-reference to another agreement)
constitutes a default or event of default under the Mortgage Notes Indenture,
and (iii) the Bank Agent and the Interim Mall Lender shall not waive any default
or event of default resulting from, or any condition relating to, implementation
of a Scope Change for which a Required Scope Change Approval is required
pursuant to Section 6.2.1 of the Disbursement Agreement. In addition to the
foregoing, in the event Adelson or any Adelson Relative directly or indirectly
owns any interest in the Indebtedness under the Bank Credit Facility or the
Interim Mall Facility, then:
(1) if either Bank Agent or Interim Mall Lender is an Ineligible Credit
Party, then neither the Bank Agent nor the Interim Mall Lender shall
have the right to waive any default or event of default pursuant to
this Section 4.4; and
(2) even if neither Bank Agent nor Interim Mall Lender is an Ineligible
Credit Party, any waiver by Bank Agent or Interim Mall Lender under
this Section 4.4 must be made, if at all, with the approval the
holders of a majority (in aggregate principal amount) of such
Indebtedness excluding the portion of such Indebtedness so attributed
to Adelson or any Adelson Relative;
provided, however, that neither Bank Agent nor Interim Mall Lender shall be
obligated to make inquiry beyond the records held by each as to the ownership of
the applicable Facility.
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4.5 Shared Collateral. With respect to the Shared Collateral:
4.5.1 any Shared Collateral Proceeds received by the Disbursement
Agent, the Intercreditor Agent or the Securities Intermediary shall be
retained by the Disbursement Agent, the Intercreditor Agent or the
Securities Intermediary and (i) shall be deposited into the Company's
Funds Account pursuant to Section 5.1.1 of the Disbursement Agreement
(except as otherwise specifically required by the terms of any Account
Agreement), or (ii), if received after the date of Final Completion, shall
be retained in an account maintained by the Intercreditor Agent for the
benefit of the Bank Lenders and the Mortgage Note Holders; provided,
however, that any unused insurance proceeds available for application to
the Secured Obligations pursuant to Section 5.20 of the Disbursement
Agreement (if received prior to the Mall Release Date, such sums shall be
allocated between the Mall and the Hotel/Casino in accordance with Section
4.8) shall be applied to repayment of the Obligations of the Secured
Lenders in the order of priority of their respective liens on the
Hotel/Casino Collateral in accordance with Section 2.1 (and, with respect
to such amounts allocated to the Mall prior to the Mall Release Date, in
the order of priority of their respective liens on the Mall Collateral in
accordance with Section 2.1).
4.5.2 if a Secured Credit Party is entitled to Exercise Remedies
against such Shared Collateral in accordance with the applicable
provisions of Section 4.6.1 or Section 4.6.2 below, such Exercise of
Remedies shall be in accordance with Section 4.7.1 and Section 4.7.1 and
the Shared Collateral shall be allocated between the Mall and the
Hotel/Casino in accordance with Section 4.8 below; and
4.5.3 prior to the Mall Release Date, notwithstanding the
commencement of the Exercise of Remedies against the Shared Collateral, in
the event that all Disbursement Agreement Defaults are cured (or are
waived, as provided for in Section 4.4 of this Agreement), and the
Disbursement Agent delivers an Advance Confirmation Notice to the Secured
Credit Parties, then all Shared Collateral Proceeds (except to the extent
such Shared Collateral Proceeds have been realized upon in accordance with
Section 4.7.1) shall be used to pay Project Costs.
4.6 Requirements Regarding Exercise of Remedies.
4.6.1 Prior to Mall Release Date. Prior to the Mall Release Date,
in the event a Disbursement Agreement Default has occurred and is continuing,
and not cured or waived in accordance with Section 4.4 above, then upon
expiration of the Standstill Period applicable thereto, each Credit Party may
Exercise Remedies against any of the Company Group or with respect to the
Collateral securing the Facility of such Credit Party, to the extent and on the
terms and conditions provided for in the applicable Facility Agreement, except
that:
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4.6.1.1 No Credit Party shall be entitled to complete a
foreclosure against or other realization upon the Collateral, or to
enforce a judgment against any of the Company Group, earlier than the
earliest date for such Secured Credit Party following the expiration of
the applicable time period provided for on Exhibit A attached hereto and
incorporated herein by reference (for each such Credit Party, its
"Earliest Realization Date"). Such Earliest Realization Dates shall be
tolled and/or extended for any period of time for which an injunction
and/or stay is in effect. Notwithstanding the foregoing provisions of this
Section 4.6.1.1, if two Secured Credit Parties hold pari passu liens on
any Shared Collateral but are subject to different Earliest Realization
Dates, then the Secured Credit Party with the later Earliest Realization
Date may share in any proceeds from a foreclosure sale with respect to
such Shared Collateral (but no other Collateral) that is effected in
accordance with Exhibit A and the other provisions of this Agreement by
the Secured Credit Party with the earlier Earliest Realization Date;
provided, however, that the foregoing provisions of this sentence shall
not be construed as permitting the Secured Credit Party with the later
Earliest Realization Date to effect a foreclosure sale prior to its
respective Earliest Realization Date with respect to any other Collateral
(or to share in any proceeds received by the Secured Credit Party with the
Earliest Realization Date through foreclosure with respect to any other
Collateral).
4.6.1.2 No Credit Party shall be entitled to initiate or
join as a petitioning creditor in an involuntary proceeding in bankruptcy
against the Company or against any Affiliate of the Company until ten (10)
days after the expiration of the Standstill Period.
4.6.1.3 Notwithstanding the expiration of the applicable
Standstill Period and the entitlement of each Credit Party to Exercise
Remedies against any of the Company Group or with respect to the
Collateral securing the Facility of such Credit Party, each Credit Party
agrees to reinstate its Facility and to recommence funding thereunder if,
prior to the completion of the first foreclosure permitted hereunder, all
Disbursement Agreement Defaults either (i) are cured in accordance with
the applicable provisions of the Disbursement Agreement, or (ii) are
waived by the Bank Agent and the Interim Mall Lender pursuant to Section
4.4 hereof, whereupon the time periods set forth in Exhibit A shall be
reinstated with respect to any subsequent default.
4.6.1.4 A Secured Credit Party shall only have the right to
Exercise Remedies in accordance with the foregoing provisions of this
Section 4.6.1 under the Related Collateral Agreements in accordance with
Section 4.7.1 below.
4.6.2 Remedies After Mall Release Date. After the Mall Release
Date, each Credit Party shall be entitled to declare an Acceleration Event and
Exercise Remedies
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against any of the Company Group or with respect to the Collateral in accordance
with the terms of its Facility Agreement subject to compliance with each of the
following conditions:
4.6.2.1 Such Credit Party shall give written notice to the
other Credit Parties of the matter which constitutes a default by or with
respect to any of the Company Group which would, but for the provisions of
this Agreement, permit such Credit Party to declare an Acceleration Event
or Exercise Remedies.
4.6.2.2 Each Credit Party shall be subject to the Standstill
Period commencing upon the date such notice is given, and until such
Standstill Period shall have expired, no Credit Party shall Exercise
Remedies against any of the Company Group or with respect to the
Collateral, except that if such Acceleration Event is declared prior to
Final Completion, then (i) scheduled payments of interest on the Mortgage
Notes may be paid out of the Mortgage Notes Proceeds Account, and (ii) the
Controlling Party may direct the Disbursement Agent, the Intercreditor
Agent or the Securities Intermediary with respect to the enforcement of
rights against the Shared Collateral, the exercise of other rights under
the applicable agreements, and the taking of protective action with
respect to the Company Group or the Collateral;
4.6.2.3 No Credit Party shall be entitled to initiate or
join as a petitioning creditor in an involuntary proceeding against the
Company or any Affiliate of the Company until ten (10) days after the
expiration of the Standstill Period;
4.6.2.4 Upon expiration of the Standstill Period, each
Credit Party shall be entitled to Exercise Remedies against any of the
Company Group or with respect to the Collateral, provided that: (a) if the
Bank Agent shall accelerate the Indebtedness under the Bank Credit
Facility, then concurrently therewith or thereafter the Bank Agent shall
provide the Mortgage Notes Indenture Trustee with (i) notice of such
acceleration, and (ii) at least ten (10) days notice of the intent of the
Bank Agent to file any Notice of Default; and (b) concurrently with any
foreclosure by the Mortgage Notes Indenture Trustee under the Mortgage
Notes Indenture Deed of Trust (Venetian), all Obligations under the Bank
Credit Facility must be paid in full.
4.6.2.5 If a Secured Credit Party has the right to Exercise
Remedies in accordance with the foregoing provisions of this Section
4.6.2, such exercise of remedies under the Related Collateral Agreements
shall only be made in accordance with Section 4.7.1 below.
4.7 Exercise of Rights Under Security Agreements.
4.7.1 Related Collateral Agreements by Intercreditor Agent.
Notwithstanding any other provision of this Agreement to the contrary, except as
provided for in Section 4.7.2 below, only the Intercreditor Agent shall cause
the Exercise of Remedies
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or otherwise act with respect to the Collateral encumbered under the Related
Collateral Agreements. The Intercreditor Agent shall be entitled to exercise,
and it shall exercise, rights and remedies and take such action as permitted to
be taken by the Intercreditor Agent under each Related Collateral Agreement as
it may be directed from time to time by the applicable Controlling Party
pursuant to the terms of this Agreement; provided that, such Controlling Party
shall have the right to Exercise Remedies only in accordance with the applicable
provisions of Section 4.6.1 or Section 4.6.2 above. Without limiting the
generality of the foregoing, the Intercreditor Agent shall act in accordance
with any written instructions delivered to the Intercreditor Agent from the
applicable Controlling Party hereunder, and shall refrain from exercising any
right, remedy or powers available to it or conferred on it hereunder or in the
applicable Related Collateral Agreement as set forth in such written
instructions; provided, however, that nothing shall impair the right of the
Intercreditor Agent, in its reasonable discretion, to take or omit to take any
action deemed proper by the Intercreditor Agent and permitted hereunder and
under the applicable Related Collateral Agreement which action or omission is
not inconsistent with any written direction of the Controlling Party.
4.7.2 Separate Realization. With respect to foreclosure against or
other realization upon the Collateral ("Realization"), unless the Secured Credit
Parties agree upon a single or coordinated Realization on all of the Collateral
for the benefit of all of the Secured Credit Parties (and no Secured Credit
Party shall be required to so agree), then notwithstanding the foregoing
provisions of Section 4.7.1 limiting enforcement of the Related Collateral
Documents to the Intercreditor Agent (acting on the direction of the Controlling
Party), any Secured Credit Party holding subordinate liens on any personal
property Collateral encumbered under the Project Security Agreements or the
Account Agreements, so that such Secured Credit Party is not a Controlling Party
with respect to such personal property Collateral, shall have the right to
effect a unified sale of such personal property Collateral together with its
real property Collateral, i.e., simultaneous Realization under the applicable
Deeds of Trust and the applicable Project Security Agreements and the Account
Agreements (a "Separate Unified Realization") in accordance with the following
terms and conditions of this Section 4.7.2:
4.7.2.1 Realization by such Secured Credit Party must be
permitted in accordance with the terms and conditions of Section 4.6.1 or
Section 4.6.2 above, as applicable.
4.7.2.2 The date of such Separate Unified Realization shall
be not earlier than thirty (30) days following the date such Secured
Credit Party has given the other Secured Parties notice of its election to
pursue Separate Unified Realization.
4.7.2.3 With respect to the personal property Collateral to
be sold at such Separate Unified Realization, the electing Secured Credit
Party or an agent on its behalf (other than the Intercreditor Agent) shall
have the right to schedule
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such sale, the right to give any required notices of such sale, the right
to conduct such sale in conjunction with the foreclosure or other
realization under such Secured Credit Party's Deeds of Trust, and the
right to take any other actions necessary for a secured party to so
foreclose such security interests in accordance with applicable law, but
such Secured Credit Party shall take no other action with respect to such
personal property Collateral, including, without limitation, giving any
other notices or directions to the debtor, the Intercreditor Agent, the
depository or Securities Intermediary with respect to any Account, the
account party on any assigned account or the contract obligor on any
assigned contract; freezing or otherwise taking action against any
Account; seeking the appointment of a receiver; bringing any action
against the Company; or taking any action to Realize on such Collateral
other than at the Separate Unified Realization in accordance with this
Section 4.7.2.
4.7.2.4 The rights of an electing Secured Credit Party
under Section 4.7.2.3 may be exercised by such Secured Credit Party or by
an agent or attorney on behalf of such Secured Credit Party; such rights
shall not be exercised by the Intercreditor Agent.
4.7.2.5 The Intercreditor Agent and the other Secured
Credit Parties shall permit an electing Secured Credit Party to conduct
such Separate Unified Realization; provided, however, that the
Intercreditor Agent shall not be required to conduct or participate in
such Separate Unified Realization. Subject to the obligation to permit the
electing Secured Credit Party to conduct such Separate Unified
Realization, the Controlling Party with respect to such Collateral shall
continue to have the sole right to direct the Intercreditor Agent in
accordance with this Agreement, and in connection therewith, may, without
limitation, cause the Intercreditor Agent to schedule and conduct
Realization on such Collateral at any time and cause the Intercreditor
Agent to take such other actions as may be permitted under the terms of
any of the Related Collateral Agreements.
4.7.2.6 Except for the extinguishment of junior liens and
security interests by operation of law upon any Separate Unified
Realization, no Separate Unified Realization shall operate to terminate
any Project Security Agreement or Account Agreement creating the security
interest then realized upon, or to terminate any other Related Collateral
Agreement, and all security interests, liens and other interests of the
Intercreditor Agent and the other Secured Lenders under each Project
Security Agreement and Account Agreement shall (except to the extent
extinguished by operation of law, as aforesaid) survive such Separate
Unified Realization and shall remain enforceable by the Intercreditor
Agent and the other Secured Lenders. The purchaser at such Separate
Unified Realization, whether the Secured Credit Party conducting same or
any other Person, shall acquire title to any Collateral sold at such sale
subject to the continuing encumbrances, liens and security interests in
favor of the
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other Secured Lenders (except to the extent extinguished by operation of
law, as aforesaid).
4.7.2.7 The Secured Credit Party conducting any Separate
Unified Realization shall be entitled to receive the proceeds, if any,
from the sale of the Collateral thereunder in accordance with applicable
law (including payment of excess proceeds to secured parties with junior
liens).
4.7.3 Foreclosure of Deeds of Trust. The provisions of the preceding
Section 4.7.1 and Section 4.7.2 shall not restrict the right of a Secured Credit
Party to Exercise Remedies against, and to complete a foreclosure against or
other realization upon, the following, provided that such Exercise of Remedies,
foreclosure or other realization is permitted in accordance with the applicable
provisions of Section 4.6: (a) any Collateral which constitutes an interest in
real property encumbered by a Deed of Trust granted for the benefit of such
Secured Credit Party, or (b) any Separate Proceeds Accounts Collateral in which
such Secured Credit Party holds the only lien and security interest.
4.8 Allocation of Shared Collateral Proceeds. In the event that the
Disbursement Agent, the Intercreditor Agent or the Securities Intermediary
receives or holds Shared Collateral Proceeds (including, but not limited to any
condemnation or casualty insurance proceeds) prior to the Mall Release Date, and
if (i) all Disbursement Agreement Defaults have not been cured or waived in
accordance with Section 4.4 above, and (ii) pursuant to Section 4.6.1.1 the
Secured Credit Parties or the Intercreditor Agent are entitled to Exercise
Remedies with respect to the Shared Collateral, such Shared Collateral Proceeds
shall be allocated between the Mall and the Hotel/Casino in accordance with this
Section 4.8, and upon such allocation, (a) such Shared Collateral Proceeds
allocated to the Mall shall be deemed to constitute Mall Collateral (i.e., the
security interests and lien priorities therein securing the Interim Mall Secured
Obligations, the Bank Secured Obligations and the Mortgage Notes Secured
Obligations shall be the same as the security interests and lien priorities in
the Mall Collateral securing such Secured Obligations pursuant to Section 2.1),
and (b) such Shared Collateral Proceeds allocated to the Hotel/Casino shall be
deemed to constitute Hotel/Casino Collateral (i.e., the security interests and
lien priorities therein securing the Bank Secured Obligations and the Mortgage
Notes Secured Obligations shall be the same as the security interests and lien
priorities in the Hotel/Casino Collateral securing such Secured Obligations
pursuant to Section 2.1). Such allocation between the Mall and the Hotel/Casino
shall be proposed by the Intercreditor Agent, with the advice of the
Construction Consultant, on a fair and reasonable basis taking into account the
following factors:
(1) the extent to which such Shared Collateral Proceeds represent
payment of or other compensation for damage to the Hotel/Casino Collateral
or the Mall Collateral, as the case may be;
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(2) the amount of Protective Advances, if any, made by the Bank
Lenders or the Interim Mall Lender which were attributable to the
Hotel/Casino Collateral or the Mall Collateral;
(3) the extent to which the amounts deposited in any Account
represent the undisbursed proceeds of any Advance under any Facility;
(4) such other allocation factors as shall be reasonable in light
of the then existing circumstances; and
(5) that to the extent such amounts of Shared Collateral Proceeds
cannot otherwise be specifically allocated between the Mall and the
Hotel/Casino in accordance with the foregoing factors, the parties will
make such allocation on a pro rata basis, based on the ratio of (i) the
aggregate amount of Advances under the Interim Mall Facility, to (ii) the
aggregate amount of Advances under the Bank Credit Facility and the
Mortgage Notes Facility, with such otherwise unallocated Shared Collateral
Proceeds allocated to the Mall and to the Hotel/Casino in such ratio;
provided, however, that notwithstanding the foregoing, any allocation of Shared
Collateral Proceeds pursuant to this Section 4.8 shall be subject to the
reasonable prior approval of the Bank Agent and the Interim Mall Lender. If the
Bank Agent and the Interim Mall Lender (who together for purposes of this
Section 4.8 only shall be referred to as the, "Arbitrating Parties" and each an
"Arbitrating Party") cannot reach an agreement on an allocation of Shared
Collateral Proceeds, then such dispute shall be resolved through arbitration in
accordance with the terms of this Section 4.8. All arbitration conducted under
this Section 4.8 shall be in accordance with the rules of the American
Arbitration Association, to the extent such rules do not conflict with the
procedures herein set forth.
4.8.1 The Arbitrating Parties shall, together, agree on one Person
to serve as an arbitrator, provided, however, that such Person shall (i)
have a minimum of ten (10) years of relevant experience and expertise with
respect to construction of and accounting for large multi-use properties,
and (ii) not be affiliated with any Arbitrating Party, the Company or any
Affiliate of any of them. Any arbitrator meeting such requirements shall
be deemed a "Qualified Arbitrator" for the purposes of this Section 4.8.
4.8.2 In the event that the Arbitrating Parties shall not be able
to agree on a single Person to serve as an arbitrator, then each
Arbitrating Party shall appoint one Qualified Arbitrator and the two
Qualified Arbitrators so appointed shall, together, decide upon and
appoint another Qualified Arbitrator who shall alone serve as the
arbitrator hereunder. The arbitrator shall resolve the dispute and make a
determination as to the proper allocation of Shared Collateral Proceeds.
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4.8.3 All determinations of the arbitrator, whether pursuant to
Section 4.8.1 or Section 4.8.2 shall be binding upon the Arbitrating
Parties. The decision of the arbitrator shall be in writing and shall be
made as promptly as possible after the designation of the sole arbitrator,
whether pursuant to Section 4.8.1 or Section 4.8.2, but in no event later
than thirty (30) days from the date such sole arbitrator is so appointed.
A copy of the decision of the arbitrator shall be signed by the arbitrator
and delivered to each Arbitrating Party in the manner provided for in
Section 7.1 of this Agreement for the giving of notice. The decision of
the arbitrators (i) may be entered as a judgment in a court of competent
jurisdiction, and (ii) shall in no event be, nor shall it be deemed to be,
a modification, amendment or supplement of any kind to this Agreement in
any manner.
4.8.4 For each arbitrable dispute the cost and expense of the
arbitrators and arbitration proceeding (except for an Arbitrating Party's
attorney's fees) shall be paid and shared equally by the Arbitrating
Parties, unless the arbitrator assesses such cost and expense unequally
between the Arbitrating Parties.
4.9 Other Duties of and Actions by Intercreditor Agent. To the extent
not otherwise provided for by this Agreement, with respect to the Related
Collateral Agreements, Intercreditor Agent may take and shall take, or refrain
from taking, action in its capacity as Intercreditor Agent thereunder, in
accordance with the following provisions:
4.9.1 Intercreditor Agent shall take such actions as it may be
specifically required to take under the express terms of the Related
Collateral Agreements and as otherwise may be required by law;
4.9.2 Intercreditor Agent may take such action or refrain from
taking such action as it may reasonably deem necessary for the normal
conduct of its business as Intercreditor Agent hereunder and under the
Related Collateral Agreements, or to the extent deemed necessary by
Intercreditor Agent, for purposes of preservation of the Collateral or
rights or interests of Secured Credit Parties thereunder; provided that,
unless instructed in writing by the Controlling Party to the contrary,
Intercreditor Agent shall have no obligation or liability as a result of
its taking or failing to take actions pursuant to this subsection 4.9.2;
4.9.3 with respect to any other action or omission relating to all
or any portion of the Collateral, Intercreditor Agent shall take such
actions or refrain from taking such action as the Controlling Party with
respect to such Collateral may direct in writing;
4.9.4 with respect to any other matter relating to the Related
Collateral Agreements, Intercreditor Agent shall act or refrain from
acting in accordance with the written instructions of (i) prior to the
Mall Release Date, two or more of the Secured
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<PAGE>
Credit Parties, and (ii) thereafter, the Bank Agent until the Bank Secured
Obligations are repaid in full and thereafter the Mortgage Notes Indenture
Trustee; and
4.9.5 beyond its duties set forth herein and in the Related
Collateral Agreements and as may be required by law, the Intercreditor
Agent shall not have any duty to any of the Company Group, to the Credit
Parties or to the Secured Lenders as to the Collateral in its possession
or control under the Related Collateral Agreements or in the possession or
control of any agent or nominee of it or as to the preservation of rights
against prior parties or any other rights pertaining thereto except as
required by applicable law.
5. Representations and Warranties. Each Credit Party represents and
warrants to each other Credit Party as follows:
5.1 Organization. It is duly organized and is validly existing under
the laws of the jurisdiction under which it was organized with full power to
execute, deliver, and perform this Agreement and consummate the transactions
contemplated hereby.
5.2 Authorization. All actions necessary to authorize the execution,
delivery and performance of this Agreement on behalf of such party have been
duly taken, and all such actions continue in full force and effect as of the
date hereof.
5.3 Binding Agreement. It has duly executed and delivered this
Agreement and this Agreement constitutes the legal, valid, and binding agreement
of such party enforceable in accordance with its terms and subject to (i)
applicable bankruptcy, reorganization, insolvency and moratorium laws, and (ii)
principles of equity, which may apply regardless of whether a proceeding is
brought in law or in equity.
5.4 No Consent Required. To the best of its knowledge, no consent of
any other party and no consent, license, approval, or authorization of, or
exemption by, or registration or declaration or filing with, any governmental
authority, bureau or agency is required in connection with the execution,
delivery, or performance by such party of this Agreement or consummation by such
party of the transactions contemplated by this Agreement.
5.5 No Conflict. None of the execution, delivery, and performance of
this Agreement nor the consummation of the transactions contemplated by this
Agreement will (i) violate or conflict with any provision of the organizational
or governing documents, if any, of such party; (ii) to the best of its
knowledge, violate, conflict with, or result in the breach or termination of, or
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time, or both, would constitute) a default under the
terms of any contract, mortgage, lease, bond, indenture, agreement, or other
instrument to which such party is a party or to which any of its properties are
subject; (iii) to the best of
41
<PAGE>
its knowledge, result in the creation of any lien, charge, encumbrance,
mortgage, lease, claim, security interest, or other right or interest upon the
properties or assets of such party pursuant to the terms of any such contract,
mortgage, lease, bond, indenture, agreement, franchise, or other instrument;
(iv) violate any judgment, order, injunction, decree, or award of any court,
arbitrator, administrative agency, or governmental or regulatory body of which
it has knowledge against, or binding upon such party or upon any of the
securities, properties, assets, or business of such party; or (v) to the best of
its knowledge, constitute a violation by such party of any statute, law, or
regulation that is applicable to such party.
6. Appointment of Intercreditor Agent.
6.1 Appointment. Scotiabank is hereby appointed Intercreditor Agent
hereunder and under the Related Collateral Agreements and each Secured Credit
Party hereby authorizes Intercreditor Agent to enter into the applicable Related
Collateral Agreements which secure Obligations to such Secured Credit Party, to
act as its agent in accordance with the terms of this Agreement and such Related
Collateral Agreement. Intercreditor Agent agrees to act upon the express
conditions contained in this Agreement and the Related Collateral Agreements, as
applicable. The provisions of this Section 6 are solely for the benefit of
Intercreditor Agent and the Secured Credit Parties, and none of the Company, any
Affiliate of the Company, Adelson, any Adelson Relative, the Subordinated Notes
Indenture Trustee or the Subordinated Note Holders shall have any rights as a
third party beneficiary of any of the provisions thereof. In performing its
functions and duties under this Agreement, Intercreditor Agent shall act solely
as an agent of the Secured Credit Parties and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for the Company, any Affiliate of the Company, Adelson, any Adelson
Relative, the Subordinated Notes Indenture Trustee or the Subordinated Note
Holders.
6.2 Authority. Each Secured Credit Party irrevocably authorizes
Intercreditor Agent to take such actions on such Secured Credit Party's behalf
and to exercise such powers, rights and remedies under the Related Collateral
Agreements as are specifically delegated or granted to Intercreditor Agent by
the terms hereof and thereof, together with such powers, rights and remedies as
are reasonably incidental thereto. Intercreditor Agent shall have only those
duties and responsibilities that are expressly specified in this Agreement and
the applicable Related Collateral Agreement. Intercreditor Agent agrees to act
in accordance with instructions of the Controlling Party pursuant to Section
4.7.1. Intercreditor Agent may exercise such powers, rights and remedies and
perform such duties by or through its agents or employees. Intercreditor Agent
shall not have, by reason of this Agreement or the Related Collateral
Agreements, a fiduciary relationship in respect of any Secured Credit Party or
any other Person; and nothing in this Agreement or the Related Collateral
Agreements, expressed or implied, is intended to or shall be so construed as to
impose upon Intercreditor Agent any obligations in respect of this Agreement or
the Related Collateral Agreements except as expressly set forth herein or
therein.
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<PAGE>
6.3 Amendment of Agreements. Without the prior written consent of the
Secured Credit Parties, the Intercreditor Agent (a) shall not amend any of the
Related Collateral Agreements to which it is a party, and (b) shall not direct
the Disbursement Agent to enter into any amendments of the Related Collateral
Agreements to which it is a party. Upon approval by the Secured Credit Parties
of any proposed amendment to the Related Collateral Agreements or to the
Disbursement Agreement, the Intercreditor Agent shall execute and deliver such
amendment, and shall direct the Disbursement Agent to execute and deliver such
amendment, as applicable, in each case in its capacity as Intercreditor Agent
hereunder or as Disbursement Agent under the Disbursement Agreement, as the case
may be.
6.4 Responsibility. Intercreditor Agent shall not be responsible to
any Credit Party for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement, any Related
Collateral Agreement or any Collateral 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 to the Secured Credit Parties in
connection with the Collateral and the transactions contemplated hereby or
thereby or any default under any agreement included in the Collateral or for the
financial condition or business affairs of the Company or any other Person
liable for the payment of any Obligations, nor shall the Intercreditor 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 this
Agreement or any other Financing Agreement or any Collateral or as to the
existence or possible existence of any Event of Default, Potential Event of
Default or any default under any agreement included in this Collateral.
6.5 Liability. Neither Intercreditor Agent nor any of its officers,
directors, employees or agents shall be liable to any Credit Party or any other
Person for any action taken or omitted by Intercreditor Agent under or in
connection with this Agreement, the Disbursement Agreement, the Related
Collateral Agreements, or the Collateral except to the extent caused by
Intercreditor Agent's gross negligence, bad faith or willful misconduct.
Intercreditor Agent 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, the Related Collateral Agreements, or the Collateral or from the
exercise of any power, discretion or authority vested in it hereunder or
thereunder unless and until Intercreditor Agent shall have received instructions
in respect thereof in accordance with this Agreement, and upon such instruction,
Intercreditor 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) Intercreditor Agent shall be entitled to rely, 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 Company and
the Affiliates of the Company), accountants, experts and other professional
advisors selected
43
<PAGE>
by it; and (ii) no Credit Party shall have any right of action whatsoever
against Intercreditor Agent as a result of Intercreditor Agent acting or (where
so instructed) refraining from acting under this Agreement or any Related
Collateral Agreement in its capacity as Intercreditor Agent to the extent
authorized, permitted, required or instructed in accordance with the terms of
this Agreement.
6.6 Capacity. 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, Intercreditor Agent in its individual capacity as Bank Agent, a Bank
Lender, Disbursement Agent or a Credit Party hereunder. Intercreditor Agent and
its Affiliates may accept deposits from, lend money to and generally engage in
any kind of banking, trust, financial advisory or other business with the
Company or any Affiliate of the Company as if it were not performing the duties
specified herein, and may accept fees and other consideration from any of the
Company Group for services in connection with this Agreement and otherwise
without having to account for the same to other Credit Parties.
6.7 Resignation; Appointment of Additional Intercreditor Agents.
6.7.1 Intercreditor Agent may resign at any time by giving thirty
(30) days' prior written notice thereof to the Secured Credit Parties, and
Intercreditor Agent may be removed at any time, with or without cause, by an
instrument or concurrent instruments in writing signed by any two of the three
Secured Credit Parties prior to the Mall Release Date, or by the Bank Agent
acting alone thereafter, delivered to the other Secured Credit Party and to the
Intercreditor Agent. Upon any such notice of resignation or any such removal,
any two of the three Secured Credit Parties prior to the Mall Release Date, or
the Bank Agent acting alone thereafter, shall have the right, upon seven days'
notice to the other Secured Credit Party to appoint a successor Intercreditor
Agent. Upon the acceptance of any appointment as Intercreditor Agent hereunder
by a successor Intercreditor Agent, that successor Intercreditor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Intercreditor Agent. The retiring or
removed Intercreditor Agent shall reasonably cooperate with the successor
Intercreditor Agent upon such appointment, to assist with such transition. Upon
the date of such removal or the effective date of such resignation (but not
later than the date of such succession) the retiring or removed Intercreditor
Agent shall be discharged from its duties and obligations under this Agreement;
provided, however, that commencing upon the date the Intercreditor Agent sends
its notice of resignation, the Intercreditor Agent shall not be required to take
any action hereunder until and unless the Secured Credit Party or Parties
requesting that such action be taken agree to reimburse all costs of the
Intercreditor Agent in connection therewith, and agree to indemnify, defend and
hold the Intercreditor Agent harmless from all claims, liabilities, costs or
expenses (including attorneys' fees) in connection with or arising out of such
actions taken by the Intercreditor Agent.
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<PAGE>
6.7.2 Any Controlling Party may elect to appoint one or more
additional Intercreditor Agents with respect to its interests in the Collateral
(each an "Additional Intercreditor Agent") and Intercreditor Agent shall, upon
receipt of written instructions of such Controlling Party, execute and deliver
all instruments and agreements necessary or proper to appoint the other person
or persons selected by the Controlling Party to act as an Additional
Intercreditor Agent with respect to such Collateral. Upon the written acceptance
of the terms of such appointment and written notice thereof to Credit Parties
and each member of the Company Group party to the Related Collateral Documents,
each such additional or successor Additional Intercreditor Agent shall (i)
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the Intercreditor Agent with respect to such Collateral and
replace the prior Intercreditor Agent with respect to matters pertaining to such
Collateral, (ii) shall be subject to the terms and provisions of this Agreement
and the other Related Collateral Agreements as they apply to the Intercreditor
Agent and such Collateral and (iii) not have any other rights or duties
hereunder or under the Related Collateral Agreements with respect to any other
Collateral or any other matter.
6.7.3 After any retiring, removed or replaced Intercreditor
Agent's resignation, removal or replacement hereunder as Intercreditor Agent,
the provisions of this Section 6 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Intercreditor Agent under this
Agreement.
7. Miscellaneous Provisions.
7.1 Notices; Addresses. Any communications between the Credit Parties
hereto or notices herein to be given may be given to the following addressees:
If to the Bank Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attn: Alan Pendergast
Phone: (415) 986-1100
Fax: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Phone: (404) 877-1525
Fax: (404) 888-8998
45
<PAGE>
If to the Mortgage Notes First Trust National Association
Indenture Trustee: 180 East Fifth Street
St. Paul, Minnesota 55164-0111
Attn: Corporate Trust Department
Phone: (612) 244-0721
Fax: (612) 244-0711
If to the Interim Mall Lender: GMAC Commercial Mortgage Corporation
100 South Wacker Drive, Suite 400
Chicago, Illinois 60606
Attn: Vacys Garbonkus
Phone: (312) 845-8520
Fax: (312) 845-8623
If to the Subordinated Notes First Union National Bank
Indenture Trustee: Corporate Trust Division
999 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30309
Attn:
Phone:
Fax:
If to the Disbursement Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attn: Alan Pendergast
Phone: (415) 986-1100
Fax: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Phone: (404) 877-1525
Fax: (404) 888-8998
46
<PAGE>
If to the Intercreditor Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attn: Alan Pendergast
Phone: (415) 986-1100
Fax: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Phone: (404) 877-1525
Fax: (404) 888-8998
If to the Securities
Intermediary: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attn: Alan Pendergast
Phone: (415) 986-1100
Fax: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Phone: (404) 877-1525
Fax: (404) 888-8998
All notices or other communications required or permitted to be given hereunder
shall be in writing and shall be considered as properly given (a) if delivered
in person, (b) if sent by reputable overnight delivery service, (c) in the event
overnight delivery services are not readily available, if mailed by first class
mail, postage prepaid, registered or certified with return receipt requested or
(d) if sent by prepaid telex, or by telecopy with correct answer back received.
Notice so given shall be effective upon receipt by the addressee, except that
any communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Banking Day and, if not, on the next following Banking Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Banking Day; provided,
however, that if any notice is tendered to an addressee and the delivery thereof
is refused by such addressee, such notice shall be effective upon such
47
<PAGE>
tender. Any party shall have the right to change its address for notice
hereunder to any other location by giving of no less than twenty (20) days'
notice to the other parties in the manner set forth hereinabove.
7.2 Further Assurances. Each Credit Party (i) shall deliver to each
other Credit Party, to the Disbursement Agent, to the Intercreditor Agent and to
the Securities Intermediary such instruments, agreements, certificates and
documents as any such Person may reasonably request to confirm the validity and
priority of the liens on and security interests in the Collateral granted
pursuant to the Security Documents as affected hereby, (ii) shall fully
cooperate with each other, with the Disbursement Agent, with the Intercreditor
Agent and with the Securities Intermediary, and (iii) shall perform all
additional acts reasonably requested by any such Person to effect the purposes
of this Agreement.
7.3 Delay and Waiver. No delay or omission to exercise any right,
power or remedy accruing upon the occurrence of any Potential Event of Default
or Event of Default or any other breach or default of the Company Group or any
of them under any Facility Agreement, the Disbursement Agreement or any Related
Collateral Agreement shall impair any such right, power or remedy of the Credit
Parties, the Disbursement Agent, the Intercreditor Agent or the Securities
Intermediary, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or in any similar breach or default
thereafter occurring, nor shall any waiver of any single Potential Event of
Default, Event of Default or other breach or default be deemed a waiver of any
other Potential Event of Default, Event of Default or other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval or
any kind or character on the part of any of the Credit Parties, the Disbursement
Agent, the Intercreditor Agent or the Securities Intermediary of any Potential
Event of Default, Event of Default or other breach or default under this
Agreement, any Related Collateral Agreement or any other Financing Agreement, or
any waiver on the part of any of the Credit Parties, the Disbursement Agent, the
Intercreditor Agent or the Securities Intermediary, of any provision or
condition of this Agreement or any other operative document, must be in writing
and shall be effective only to the extent in such writing specifically set
forth. All remedies, either under this Agreement, under any Related Collateral
Agreement or any other Financing Agreement or by law or otherwise afforded to
any of the Credit Parties, the Disbursement Agent, the Intercreditor Agent or
the Securities Intermediary shall be cumulative and not alternative (subject to
any limitations on the exercise of such remedies imposed under this Agreement).
7.4 Entire Agreement. This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
negotiations and prior writings in respect to the subject matter hereof, all of
which negotiations and writings are deemed void and of no force and effect. As
among the Credit Parties, in the event of any conflict between the terms of this
Agreement and the terms of the Disbursement Agreement or the Related Collateral
Agreements, the terms of this Agreement shall control.
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<PAGE>
7.5 Governing Law. This Agreement shall be governed by the laws of
State of New York of the United States of America and shall for all purposes be
governed by and construed in accordance with the laws of such state without
regard to the conflict of law rules thereof other than Section 5-1401 of the New
York General Obligations Law.
7.6 Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby, and the parties hereto shall enter
into good faith negotiations to replace the invalid, illegal or unenforceable
provision.
7.7 Headings. Section headings have been inserted in this Agreement
as a matter of convenience for reference only and it is agreed that such
headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
7.8 Limitations on Liability. No claim shall be made by any Credit
Party or any of its Affiliates against any other Credit Party, the Disbursement
Agent, the Intercreditor Agent, the Securities Intermediary or any of their
respective Affiliates, directors, employees, attorneys or agents for any
special, indirect, consequential or punitive damages (whether or not the claim
therefor is based on contract, tort or duty imposed by law), in connection with,
arising out of or in any way related to the transactions contemplated by this
Agreement or any act or omission or event occurring in connection therewith; and
each Credit Party hereby waives, releases and agrees not to sue upon any such
claim for any such special, indirect, consequential or punitive damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
7.9 Consent of Jurisdiction. Any legal action or proceeding arising
out of this Agreement may be brought in or removed to the courts of the State of
New York, in and for the County of New York, or of the United States of America
for the Southern District of New York. By execution and delivery of this
Agreement, each Credit Party, accepts, for its and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts for
legal proceedings arising out of or in connection with this Agreement and
irrevocably consents to the appointment of the Prentice-Hall Corporation System
Inc. as its agent to receive service of process in New York, New York. Nothing
herein shall affect the right to serve process in any other manner including
judicial or non-judicial foreclosure of real property interests which are part
of the Collateral. Each Credit Party hereby waives any right to stay or dismiss
any action or proceeding under or in connection with any or all of the Project,
this Agreement or any other operative document brought before the foregoing
courts on the basis of forum non-conveniens.
7.10 Successors and Assigns. The provision of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and
49
<PAGE>
assigns; provided, however, this Agreement shall terminate upon the last to
occur of (i) the Mall Release Date, or (ii) the date of payment in full of all
Obligations under the Bank Credit Facility.
7.11 Counterparts. This Agreement may be executed in one or more
duplicate counterparts and when signed by all of the Credit Parties listed below
shall constitute a single binding agreement.
7.12 No Third Party Beneficiaries. Except for the Bank Lenders, the
Mortgage Note Holders and the Subordinated Note Holders, the Credit Parties do
not intend the benefits of this Agreement to inure to the benefit of nor shall
it be enforceable by any third party (including, without limitation, any other
Funding Agent, the Company, any of its Affiliates, Adelson or any Adelson
Relative) nor shall this Agreement be construed to make or render any Credit
Party liable to any third party (including, without limitation, any other
Funding Agent, the Company, any of its Affiliates, Adelson or any Adelson
Relative) for the performance or failure to perform any obligations hereunder.
Notwithstanding the foregoing, however, the Permanent Mall Lender shall be
entitled to the benefits of the covenants in its favor set forth in Section
2.2.1.2 above.
7.13 Amendment for New Credit Parties. Upon any refinancing of any
Facility, or the incurring of other Indebtedness of the Company (subject to the
rights of the existing Credit Parties under their respective Financing
Agreements with respect to any such refinancing or other Indebtedness), the
applicable lender shall be bound by the terms of this Agreement and such lender,
or an agent or trustee on its behalf, and the Credit Parties shall execute and
deliver an amendment to this Agreement to make such Person a Credit Party
hereunder.
7.14 Trust Indenture Act. The parties do not intend that the
provisions of this Agreement violate the requirements of the Trust Indenture Act
of 1939, as amended.
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<PAGE>
IN WITNESS WHEREOF, the Credit Parties hereto have caused this
Agreement to be executed by their respective officers or agents thereunto duly
authorized as of the day and year first above written.
Bank Agent:
THE BANK OF NOVA SCOTIA, a
Canadian chartered bank
By: /s/ Alan Pendergast
----------------------------------------
Name: Alan Pendergast
Title: Relationship Manager
Interim Mall Lender:
GMAC COMMERCIAL MORTGAGE CORPORATION,
a California corporation
By: /s/ Vacys Garbonkus
----------------------------------------
Name: Vacys Garbonkus
Title: Senior Vice President
Mortgage Notes Indenture Trustee:
FIRST TRUST NATIONAL ASSOCIATION,
a national banking association
By: /s/ Richard H. Prokosch
----------------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
Subordinated Notes Indenture Trustee:
FIRST UNION NATIONAL BANK,
a national banking association
By: /s/ Emily E. Katt
----------------------------------------
Name: Emily E. Katt
Title: VICE PRESIDENT
S-1
<PAGE>
Intercreditor Agent:
THE BANK OF NOVA SCOTIA, a
Canadian chartered bank
By: /s/ Alan Pendergast
----------------------------------------
Name: Alan Pendergast
Title: Relationship Manager
S-2
<PAGE>
Exhibit A
Credit Party: Earliest Realization Date:
Bank Agent 180 days after Disbursement
Agreement Default Date
Mortgage Notes Indenture Trustee 195 days after Disbursement
Agreement Default Date
Interim Mall Lender 210 days after Disbursement
Agreement Default Date
Subordinated Notes Indenture Trustee 240 days after Disbursement
Agreement Default Date
Holders of Additional Capital Indebtedness 210 days after Disbursement
Agreement Default Date
Exhibit A-1
<PAGE>
Exhibit B
Accounts and Account Agreements
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Account Agreement Accounts Pledgor Secured Party
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Notes Proceeds Mortgage Notes Proceeds Account Company Disbursement Agent
Collateral Account Agreement
- ----------------------------------------------------------------------------------------------------
HVAC HVAC Collateral Accounts HVAC Provider Disbursement Agent
Collateral Account Agreement
- ----------------------------------------------------------------------------------------------------
Completion Guaranty Completion Guaranty Account Adelson Disbursement Agent
Collateral Account Agreement
- ----------------------------------------------------------------------------------------------------
Disbursement Bank Proceeds Account Company Disbursement Agent
Collateral Account Agreement
----------------------------------------------------------------------
Collections Account Company Disbursement Agent
Company's Funds Account
Disbursement Account
HC/Mall Component
Cash Management Account
HVAC Component
Cash Management Account
Interest Payment Account
Pre-Completion Revenues Account
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
Account Agreement Secured Obligations Securities
Intermediary
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Notes Proceeds Mortgage Notes Secured Obligations Goldman, Sachs
Collateral Account Agreement & Co.
- -----------------------------------------------------------------------------------------
HVAC 1. Bank Secured Obligations and Scotiabank
Collateral Account Agreement Interim Mall Secured Obligations
2. Mortgage Notes Secured Obligations
- -----------------------------------------------------------------------------------------
Completion Guaranty 1. Bank Secured Obligations and Goldman, Sachs
Collateral Account Agreement Interim Mall Secured Obligations & Co.
2. Mortgage Notes Secured Obligations
- -----------------------------------------------------------------------------------------
Disbursement Bank Secured Obligations Scotiabank
Collateral Account Agreement
-----------------------------------------------------------
1. Bank Secured Obligations and Scotiabank
Interim Mall Secured Obligations
2. Mortgage Notes Secured Obligations
- -----------------------------------------------------------------------------------------
</TABLE>
Exhibit B -- Page 1
<PAGE>
Exhibit C
Allocation of Collateral
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Category: Security Document: Collateral: Classification:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deeds of Trust Bank Deed of Trust (Venetian) all Hotel/Casino Collateral
(prior to Mall Parcel
Creation Date):
-------------------------------------------------------------------------------------------------------
Bank Leasehold Deed of Trust (Mall) all Mall Collateral
-------------------------------------------------------------------------------------------------------
Interim Mall Leasehold Deed of Trust all Mall Collateral
-------------------------------------------------------------------------------------------------------
Interim Mall Space Fee Deed of Trust all Hotel/Casino Collateral
-------------------------------------------------------------------------------------------------------
Mortgage Notes Deed of Trust (Venetian) all Hotel/Casino Collateral
-------------------------------------------------------------------------------------------------------
Mortgage Notes Leasehold Deed of Trust all Mall Collateral
(Mall)
- ------------------------------------------------------------------------------------------------------------------------------------
Deeds of Trust Bank Deed of Trust (Venetian) all Hotel/Casino Collateral
(after Mall Parcel Creation
Date):
-------------------------------------------------------------------------------------------------------
Bank Leasehold Deed of Trust (Mall) all Mall Collateral
-------------------------------------------------------------------------------------------------------
Bank Deed of Trust (Mall Parcel) all Mall Collateral
-------------------------------------------------------------------------------------------------------
Interim Mall Leasehold Deed of Trust all Mall Collateral
-------------------------------------------------------------------------------------------------------
Interim Mall Space Fee Deed of Trust [Mall all Mall Collateral
Parcel]
-------------------------------------------------------------------------------------------------------
Mortgage Notes Deed of Trust (Venetian) all Hotel/Casino Collateral
-------------------------------------------------------------------------------------------------------
Mortgage Notes Leasehold Deed of Trust all Mall Collateral
(Mall)
-------------------------------------------------------------------------------------------------------
Mortgage Notes Deed of Trust (Mall Parcel) all Mall Collateral
</TABLE>
Exhibit C -- Page 1
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Category: Security Document: Collateral: Classification:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Project Security Borrower Security Agreement Shared Intangible Shared Collateral
Agreements: Collateral
-------------------------------------------------------
all other Collateral Hotel/Casino Collateral
-------------------------------------------------------------------------------------------------------
Mall Construction Subsidiary Security all Mall Collateral
Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
Account Agreements: Mortgage Notes Proceeds Account all Separate Proceeds Accounts
Agreement Collateral
-------------------------------------------------------------------------------------------------------
HVAC Accounts Agreement all Shared Collateral
-------------------------------------------------------------------------------------------------------
Completion Guaranty Account Agreement all Shared Collateral
-------------------------------------------------------------------------------------------------------
Disbursement Account Agreement Bank Proceeds Account Separate Proceeds Accounts
Collateral
-------------------------------------------------------
all other Collateral Shared Collateral
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit C -- Page 2
<PAGE>
Exhibit D
Consents
1. Consent to Mall Management Agreement
2. GECC Consent (The GECC Consent will be part of the GECC
Intercreditor Agreement)
3. P & O Guaranty Consent
4. Bovis Guaranty Consent
5. Consent to Construction Agreement
6. Consent to Architect's Agreement
7. Consent to Treadway Agreement
8. Consent to Energy Services Agreement
Exhibit D - Page 1
COMPLETION GUARANTY
1
<PAGE>
COMPLETION GUARANTY
THIS COMPLETION GUARANTY (this "Guaranty") dated as of November 14,
1997, is made by SHELDON G. ADELSON ("Guarantor"), in favor of (a) The Bank of
Nova Scotia, a Canadian chartered bank, as the Bank Agent acting on behalf of
the Bank Lenders, (b) GMAC Commercial Mortgage Corporation, a California
corporation, as the Interim Mall Lender, and (c) First Trust National
Association, as the Mortgage Notes Indenture Trustee acting on behalf of the
Mortgage Note Holder(s). This Guaranty is made and delivered pursuant to the
Funding Agents' Disbursement and Administration Agreement (the "Funding Agents'
Disbursement and Administration Agreement") dated as of even date herewith among
Las Vegas Sands, Inc., a Nevada corporation ("LVSI"), Venetian Casino Resort,
LLC, a Nevada limited liability company ("VCR"), and Grand Canal Shops Mall
Construction, LLC, a Delaware limited liability company ("GCCLLC" and, jointly
and severally with LVSI and VCR, the "Company"), the Bank Agent, the Interim
Mall Lender, the Mortgage Notes Indenture Trustee, Atlantic-Pacific Las Vegas,
LLC, a Delaware limited liability company, as the HVAC Provider, and The Bank of
Nova Scotia, a Canadian chartered bank, as the Disbursement Agent. The Bank
Agent, the Interim Mall Lender, the Mortgage Notes Indenture Trustee and the
Lenders under their respective Facility Agreements are hereinafter referred to
as the "Lender Beneficiaries" (it being understood that the term "Lender
Beneficiaries" shall not include the HVAC Provider).
RECITALS
A. The Project. The Company proposes to develop, construct and operate the
Venetian Casino Resort, a large scale Venetian-themed hotel, casino, retail,
convention, trade show, meeting and entertainment complex, with related heating,
ventilation and air conditioning and power station facilities, as part of the
redevelopment of the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank
Agent, Goldman Sachs Credit Partners L.P., as arranger, and the Bank Lenders
have entered into the Bank Credit Agreement pursuant to which the Bank Lenders
have agreed, subject to the terms thereof, to provide certain loans to LVSI and
VCR, jointly and severally, in an aggregate amount not to exceed $170,000,000.
Of such amount, subject to Section 2.2.3(b) of the Funding Agents' Disbursement
and Administration Agreement, $150,000,000 is intended to finance Project Costs
(other than working capital), as more particularly described therein. GCCLLC
has, pursuant to the GCCLLC Bank Guaranty, guaranteed LVSI's and VCR's
obligations under the Bank Credit Agreement.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR, GCCLLC
and the Interim Mall Lender have entered into the Interim Mall Credit Agreement
pursuant to which the Interim Mall Lender has agreed, subject to the terms
thereof, to provide certain loans to LVSI, VCR and GCCLLC, jointly and
severally, in an aggregate amount not to exceed $140,000,000, to finance certain
Project Costs, as more particularly described therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors signatory thereto and the Mortgage Notes Indenture Trustee have
entered into the Mortgage Notes Indenture pursuant to which LVSI and VCR will
issue the Mortgage Notes in an aggregate principal amount equal to $425,000,000
to finance Project Costs, as more particularly described therein.
2
<PAGE>
E. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, the Company, the Disbursement Agent, the Bank Agent, the Mortgage
Notes Indenture Trustee, the Interim Mall Lender and the HVAC Provider have
entered into the Funding Agents' Disbursement and Administration Agreement in
order to set forth, among other things, (a) the mechanics for and allocation of
the Company's requests for Advances under the various Facilities and from the
Company's Funds Account, (b) the conditions precedent to the initial Advance and
conditions precedent to subsequent Advances, (c) certain common representations,
warranties and covenants of the Company in favor of the Funding Agents and (d)
the common events of default and remedies.
F. Requirement of Guaranty. The Lender Beneficiaries and the Disbursement
Agent have agreed to enter into and consummate the transactions contemplated
under the respective Facility Agreements and the Funding Agents' Disbursement
and Administration Agreement on the condition that Guarantor guarantee certain
of the Company's obligations under the Funding Agents' Disbursement and
Administration Agreement as provided herein.
G. Benefit to Guarantor. Guarantor owns all the outstanding stock of each
of LVSI and Interface Holding, the sole members in VCR. VCR is the sole member
in GCCLLC. As such, Guarantor acknowledges that it will benefit, directly and
indirectly, if the Lender Beneficiaries and the Disbursement Agent enter into
the respective Facility Agreements and the Funding Agents' Disbursement and
Administration Agreement.
H. Concurrent Obligations. The obligations of Guarantor hereunder are
being incurred concurrently with respective the obligations of VCR, LVSI and
GCCLLC under the Facility Agreements, the guaranty executed by GCCLLC and the
Funding Agents' Disbursement and Administration Agreement.
I. Capitalized Terms. Capitalized terms used but not defined herein shall
have the respective meanings given them in Exhibit A to the Funding Agents'
Disbursement and Administration Agreement, and the Rules of Interpretation
contained in said Exhibit A shall apply hereto.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and as an inducement to the Lender
Beneficiaries and the Disbursement Agent to enter into the Facility Agreements
and the Funding Agents' Disbursement and Administration Agreement, Guarantor
hereby consents and agrees as follows:
1. Guaranty.
(a) The undersigned Guarantor, as primary obligor and not
merely as surety, unconditionally and irrevocably guarantees to (i) the Bank
Agent acting on behalf of the Bank Lenders, (ii) the Interim Mall Lender and
(iii) the Mortgage Notes Indenture Trustee acting on behalf of the Mortgage Note
Holder(s), payment and performance when due, whether by acceleration or
otherwise, of the full amount of any and all obligations and liabilities of the
Company under Section 5.9.1 of the Funding Agents' Disbursement and
Administration Agreement (the "Relevant Provision") together with all expenses
incurred by the Disbursement Agent or the Lender Beneficiaries in enforcing any
of such obligations and liabilities or the terms hereof, including, without
limitation,
3
<PAGE>
reasonable fees and expenses of legal counsel (collectively, the "Obligations"),
and agrees that if for any reason the Company shall fail to pay or perform when
due any of such Obligations, Guarantor will pay or perform the same forthwith.
Notwithstanding any other provision hereof (but without in any way affecting
Guarantor's obligations under Section 2(e)), Guarantor's aggregate liability
under this Section 1(a) shall in no event exceed Twenty-Five Million Dollars
($25,000,000), as adjusted in accordance with the following sentence (as so
adjusted, the "Liability Cap"). The Liability Cap shall, from time to time, be
(i) increased by the aggregate amount of all funds deposited into the Guaranty
Deposit Account pursuant to Section 2(d) below and Section 5.9.2 of the Funding
Agents' Disbursement and Administration Agreement and (ii) decreased (but in no
event by an amount greater than the amount of any increases pursuant to clause
(i) above) by the aggregate amount of all funds withdrawn from the Guaranty
Deposit Account and returned to Guarantor pursuant to Section 2(f) below.
Guarantor waives notice of acceptance of this Guaranty and of any obligation to
which it applies or may apply under the terms hereof, and waives diligence,
presentment, demand of payment, notice of dishonor or non-payment, protest,
notice of protest, of any such obligations, suit or taking other action by the
Disbursement Agent, the Lender Beneficiaries or Lenders against, and giving any
notice of default or other notice to, or making any demand on, any party liable
thereon (including Guarantor).
(b) This Guaranty is a primary obligation of Guarantor and is
an absolute, unconditional, continuing and irrevocable guaranty of payment and
not of collectibility and is in no way conditioned on or contingent upon any
attempt to enforce in whole or in part the Company's liabilities and obligations
to the Funding Agents, the Lenders and the Disbursement Agent. Subject to the
limitation on liability set forth in Section 1(a) above, if the Company shall
fail to pay any of the Obligations as and when they are due, Guarantor shall
forthwith pay such Obligations in immediately available funds. Each failure by
the Company to pay any Obligations shall give rise to a separate cause of action
herewith, and separate suits may be brought hereunder as each cause of action
arises.
(c) The Funding Agents or the Lenders may, in accordance with
the Financing Agreements, at any time and from time to time (whether or not
after revocation or termination of this Guaranty) without the consent of or
notice to Guarantor, except such notice as may be required by the Financing
Agreements or applicable law which cannot be waived, without incurring
responsibility to Guarantor, without impairing or releasing the obligations of
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part, (i) change the manner, place and terms of payment or change or extend the
time of payment of, renew, or alter any Obligation, or any obligations and
liabilities (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof or in any manner modify, amend or supplement the
terms of any Facility Agreement, the Funding Agents' Disbursement and
Administration Agreement (including the Relevant Provision) or any documents,
instruments or agreements executed in connection therewith (in each case, with
the consent of the Company if required by such documents) and the guaranty
herein made shall apply to the Obligations, changed, extended, renewed,
modified, amended, supplemented or altered in any manner; (ii) exercise or
refrain from exercising any rights against the Company or others (including
Guarantor) or otherwise act or refrain from acting; (iii) add or release any
other guarantor from its obligations without affecting or impairing the
obligations of Guarantor hereunder; (iv) settle or compromise any Obligations
and/or any obligations and liabilities (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
obligations and liabilities which may be due to the Lenders or others; (v) sell,
exchange, release, surrender, realize upon or otherwise deal with in any manner
or in any order any property by whomsoever pledged or mortgaged to secure or
howsoever securing the Obligations or any liabilities or obligations (including
4
<PAGE>
any of those hereunder) incurred directly or indirectly in respect thereof or
hereof and/or any offset thereagainst; (vi) apply any sums by whomsoever paid or
howsoever realized to any obligations and liabilities of the Company to the
Funding Agents and the Lenders under any of the Financing Agreements in the
manner provided therein regardless of what obligations and liabilities remain
unpaid; (vii) consent to or waive any breach of, or any act, omission or default
under, any Facility Agreement or the Funding Agents' Disbursement and
Administration Agreement (including the Relevant Provision) or otherwise amend,
modify or supplement (with the consent of the Company, if required by such
documents) any Facility Agreement or the Funding Agents' Disbursement and
Administration Agreement (including the Relevant Provision) or any of such other
instruments or agreements; and/or (viii) act or fail to act in any manner
referred to in this Guaranty which may deprive Guarantor of any right to
subrogation which Guarantor may, notwithstanding the provisions of Section 7,
have against the Company to recover full indemnity for any payments made
pursuant to this Guaranty or of any right of contribution which Guarantor may
have against any other party.
(d) No invalidity, irregularity or unenforceability of the
Obligations shall affect, impair, or be a defense to this Guaranty, which is a
primary obligation of Guarantor.
(e) This is a continuing Guaranty and all obligations to which
it applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. In the event that, notwithstanding the
provisions of Section 1(a) hereof, this Guaranty shall be deemed revocable in
accordance with applicable law, then any such revocation shall become effective
only upon receipt by the Bank Agent, the Interim Mall Lender, the Mortgage Notes
Indenture Trustee and the Disbursement Agent of written notice of revocation
signed by Guarantor. No revocation or termination hereof shall affect in any
manner rights arising under this Guaranty with respect to Obligations (i)
arising prior to receipt by the Bank Agent, the Interim Mall Lender, the
Mortgage Notes Indenture Trustee and the Disbursement Agent of written notice of
such revocation or termination and the sole effect of revocation and termination
hereof shall be to exclude from this Guaranty Obligations thereafter arising
which are unconnected with Obligations theretofore arising or transactions
theretofore entered into or (ii) arising as a result of an Event of Default
under the Funding Agents' Disbursement and Administration Agreement occurring by
reason of the revocation or termination of this Guaranty.
(f) (i) Except as otherwise required by law, each payment
required to be made by Guarantor hereunder shall be made without deduction or
withholding for or on account of Taxes. If such deduction or withholding is so
required, Guarantor shall, upon notice thereof from the Bank Agent, the Interim
Mall Lender, the Mortgage Notes Indenture Trustee or the Disbursement Agent, (A)
pay the amount required to be deducted or withheld to the appropriate
authorities before penalties attach thereto or interest accrues thereon, (B) on
or before the sixtieth (60th) day after payment of such amount, forward to the
Bank Agent, the Interim Mall Lender, the Mortgage Notes Indenture Trustee and
the Disbursement Agent an official receipt evidencing such payment (or a
certified copy thereof), and (C) in the case of any such deduction or
withholding, but subject to the Liability Cap, forthwith pay to the Disbursement
Agent for application in accordance with Section 5.9.1 of the Funding Agents'
Disbursement and Administration Agreement such additional amount as may be
necessary to ensure that the net amount actually received by the Disbursement
Agent free and clear of such Taxes, including any Taxes on such additional
amount, is equal to the amount that the Disbursement Agent would have received
had there been no such deduction or withholding.
(ii) As used herein, the term "Tax" means any present or
future tax, levy, impost, duty, charge, assessment or fee of any nature
(including interest, penalties and additions
5
<PAGE>
thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Guaranty other than any income, franchise, transfer,
inheritance, capital stock or similar tax imposed upon the gross or net income
of any Lender by the United States, any state of the United States, any
jurisdiction where any Lender is organized and/or the jurisdiction in which is
located any office from or at which any Lender is making or maintaining any
Loans or acquiring the Mortgage Note(s), as the case may be, or receiving any
payments under any of the Financing Agreements.
2. Guaranty Deposit Account.
(a) As security for Guarantor's obligations hereunder,
Guarantor shall, on or prior to the Financing Date, establish or cause to be
established the Guaranty Deposit Account and deposit in the Guaranty Deposit
Account, in cash or Permitted Investments, Twenty-Five Million Dollars
($25,000,000).
(b) The Disbursement Agent shall have the right to withdraw
funds from the Guaranty Deposit Account at the following times and in the
following amounts:
(i) On any date on which the Company is required
to (but does not prior to 11:00 a.m. New York, New York time) deposit amounts in
the Company's Funds Account pursuant to Section 5.9.1 of the Funding Agents'
Disbursement and Administration Agreement, in the amount so required to be
deposited; or
(ii) Unless the Final Completion Date shall have
occurred, upon (A) the occurrence of an Event of Default, (B) the occurrence of
a Death Event (as defined below) or (C) Guarantor's Bankruptcy (as defined in
the Mortgage Notes Indenture Fee Deed of Trust), in the full amount of funds
then on deposit in the Guaranty Deposit Account. As used herein, the term Death
Event shall mean Guarantor's death, provided that Guarantor's death shall not be
a Death Event if, within ten (10) Banking Days after such death, either (a)
representatives of Guarantor's estate, in a written instrument reasonably
satisfactory to the Bank Agent and the Interim Mall Lender, affirm that
Guarantor's estate is fully bound by and agrees to keep, observe and perform all
of the terms, covenants, conditions and provisions of this Guaranty on the part
of Guarantor to be kept, observed and performed and the Bank Agent, the Interim
Mall Lender and the Mortgage Notes Indenture Trustee receive a legal opinion in
form and substance, and from counsel, reasonably acceptable to the Bank Agent
and the Interim Mall Lender to the effect that such written instrument was duly
executed and delivered and is enforceable against Guarantor's estate in
accordance with its terms, or (b) the Bank Agent, the Interim Mall Lender and
the Mortgage Notes Indenture Trustee receive a legal opinion in form and
substance, and from counsel, reasonably acceptable to the Bank Agent and the
Interim Mall Lender to the effect that this Guaranty is enforceable against
Guarantor's estate in accordance with its terms.
(c) Proceeds of any withdrawal from the Guaranty Deposit
Account shall (except as provided in Section 2(f) below) be applied by the
Disbursement Agent to the satisfaction of the Company's obligation to cause
funds to be deposited into the Company's Funds Account pursuant to Section 5.9.1
of the Funding Agents' Disbursement and Administration Agreement or as otherwise
permitted by Section 3 hereof.
(d) Guarantor shall be permitted from time to time to deposit
or cause to be deposited funds in the Guaranty Deposit Account (beyond the
$25,000,000 required to be deposited therein pursuant to Section 2(a) above)
thereby increasing the amount of Available Funds
6
<PAGE>
under the Funding Agents' Disbursement and Administration Agreement. Any such
increases shall (except as provided in Section 2(f) below) be irrevocable and,
as noted in Section 1(a) above, shall increase the Liability Cap.
(e) The Disbursement Agent shall, on the first day of each
calendar month assess the aggregate value of cash and Permitted Investments in
the Guaranty Deposit Account. In the event that the Disbursement Agent
determines that there has been a decrease in value since the first day of the
previous month, the Disbursement Agent shall issue notice to such effect to
Guarantor and Guarantor shall, within two (2) after the receipt of such notice,
deposit in the Guaranty Deposit Account cash or Permitted Investments in an
amount equal to such drop in value; provided, however, that Guarantor shall not
be required to so deposit funds in the Guaranty Deposit Account if, and to the
extent, that after giving effect to such deposit, Guarantor shall be permitted
to obtain a release of funds from the Guaranty Deposit Account pursuant to
Section 2(f) below.
(f) The Disbursement Agent shall, on the first day of any
month, at Guarantor's request, release funds in the Guaranty Deposit account to,
or as directed by, Guarantor so long as after such release (i) the aggregate
value of cash and Permitted Investments on deposit in the Guaranty Deposit
Account shall be equal to or greater than $25,000,000 less amounts withdrawn
pursuant to Section 2(b) above and (ii) the (A) the Available Funds will equal
or exceed Remaining Costs and (B) the Unallocated Contingency Balance will equal
or exceed the Required Minimum Contingency (provided that for purposes of this
clause (ii), the Net Guaranty Amount shall be disregarded in calculating the
Available Funds and the Unallocated Contingency Balance).
(g) On the Completion Date, (i) the Disbursement Agent shall
release all amounts remaining in the Guaranty Deposit Account to, or as directed
by, Guarantor and (ii) this Guaranty shall, except for the provisions set forth
in Sections 7 and 8 below and subject to Section 18, be deemed terminated and of
no force or effect. The provisions of Sections 7 and 8 below shall, subject to
Section 18, survive until all the Financing Agreements Obligations (as defined
in Section 7) have been paid in full.
3. Safekeeping of Guaranty Deposit Account.
(a) Amounts deposited in the Guaranty Deposit Account shall be
applied exclusively as provided in this Guaranty and the Disbursement Agent
shall at all times act and direct the securities intermediary under the
Completion Guaranty Collateral Account Agreement so as to implement the
application of funds provisions and procedures herein set forth. The
Disbursement Agent is hereby authorized to direct the securities intermediary to
reduce to cash any Permitted Investment (without regard to maturity) in any
account in order to make any application required hereunder. No amount held in
the Guaranty Deposit Account shall be disbursed or applied except in accordance
with the provisions hereof or as required by law.
(b) The Disbursement Agent shall take such actions within its
control that it customarily takes in the conduct of its business to protect the
Guaranty Deposit Account and all cash, funds and Permitted Investments from time
to time deposited therein, as well as any proceeds or income therefrom
(collectively, the "Guaranty Collateral") and maintain the same free and clear
of all liens, security interests, safekeeping or other charges, demands and
claims of any nature whatsoever now or hereafter arising in favor of any parties
other than the Secured Parties (or the Disbursement Agent as agent for the
Secured Parties) (collectively, "Third Party Claims"); it being understood,
7
<PAGE>
however, that the foregoing shall in no way be deemed to be a guaranty or other
assurance by the Disbursement Agent that Third Party Claims will not arise.
(c) The Disbursement Agent shall take any other steps from
time to time requested by the Bank Agent, Interim Mall Lender or Mortgage Notes
Indenture Trustee to confirm or cause the securities intermediary under the
Completion Guaranty Collateral Account Agreement to confirm and maintain the
priority of the security interests in the Guaranty Collateral.
4. Representations and Warranties. Guarantor makes the
representations and warranties set forth below to the Lender Beneficiaries and
the other Lenders as of the date hereof:
(a) All governmental authorizations and actions necessary in
connection with the execution and delivery by Guarantor of this Guaranty and the
performance of its obligations hereunder have been obtained or performed and
remain valid and in full force and effect.
(b) This Guaranty has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor (and Guarantor's heirs, executors, administrators,
legal representatives, successors and assigns) in accordance with the terms of
this Guaranty, subject to applicable bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and general principles
of equity.
(c) The execution, delivery and performance of this Guaranty
(i) do not and will not contravene any law, rule, regulation, order, judgment or
decree applicable to or binding on Guarantor or any of his assets or properties;
(ii) do not and will not contravene, or result in any breach of or constitute
any default under, any agreement or instrument to which Guarantor is a party or
by which Guarantor or any of his assets or properties may be bound or affected;
and (iii) do not and will not require the consent of any Person under any
existing law or agreement which has not already been obtained.
(d) There is no pending or, to the best of Guarantor's
knowledge, threatened action or proceeding affecting Guarantor before any court,
governmental agency or arbitrator, which might reasonably be expected to
materially and adversely affect the financial condition, results of operations,
business or prospects of Guarantor or the ability of Guarantor to perform his
obligations under this Guaranty.
(e) Guarantor possesses all franchises, certificates,
licenses, permits and other governmental authorizations and approvals necessary
for him to own his properties, conduct his businesses and perform his
obligations under this Guaranty.
(f) Guarantor has established adequate means of obtaining
financial and other information pertaining to the businesses, operations and
condition (financial and otherwise) of the Company and its properties on a
continuing basis, and Guarantor now is and hereafter will be completely familiar
with the businesses, operations and condition (financial and otherwise) of the
Company and its properties.
(g) (i) Guarantor is not, and will not as a result of the
execution and delivery of this Guaranty, be rendered insolvent and (ii)
Guarantor does not intend to incur, or believe it is incurring, obligations
beyond its ability to pay.
8
<PAGE>
5. Covenants. So long as any Obligations are outstanding, Guarantor
agrees that:
(a) He will maintain in full force and effect all consents of
any governmental or other authority that are required to be obtained by it with
respect to this Guaranty and will obtain any such consent that may become
necessary in the future;
(b) He will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Guaranty;
(c) Promptly, and in any event within thirty (30) Banking Days
after the obtaining knowledge thereof, Guarantor will give to the Bank Agent,
the Interim Mall Lender, the Mortgage Notes Indenture Trustee and the
Disbursement Agent notice of the occurrence of any event or of any litigation or
governmental proceeding pending (i) against Guarantor which could reasonably be
expected to affect the business, operations, property, assets or condition
(financial or otherwise) of Guarantor so as to materially and adversely affect
the ability of Guarantor to perform his obligations hereunder or (ii) which
relates to this Guaranty; and
(d) He will deliver such other documents and other information
(other than personal financial statements of any type or kind, including
personal asset statements, income statements, net worth statements and any tax
returns) reasonably requested by the Bank Agent, the Interim Mall Lender, the
Mortgage Notes Indenture Trustee or the Disbursement Agent.
6. Waiver. To the fullest extent permitted by law, Guarantor hereby
waives and relinquishes all rights and remedies accorded by applicable law to
sureties or guarantors and agrees not to assert or take advantage of any such
rights or remedies, including without limitation (a) any right to require the
Funding Agents, the Lenders or the Disbursement Agent to proceed against the
Company or any other person or to proceed against or exhaust any security held
by the Funding Agents, the Lenders or the Disbursement Agent at any time or to
pursue any other remedy in the Funding Agents', the Lenders' or the Disbursement
Agent's power before proceeding against Guarantor, (b) any defense that may
arise by reason of the incapacity, lack of power or authority, death,
dissolution, merger, termination or disability of the Company or any other
Person or the failure of the Funding Agents, the Lenders or the Disbursement
Agent to file or enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of the Company or any other Person, (c)
demand, presentment, protest and notice of any kind, including without
limitation notice of the existence, creation or incurring of any new or
additional indebtedness or obligation or of any action or non-action on the part
of the Company, the Funding Agents, the Lenders, the Disbursement Agent, any
endorser or creditor of the Company or Guarantor or on the part of any other
person under this or any other instrument in connection with any obligation or
evidence of indebtedness held by the Funding Agents, the Lenders or the
Disbursement Agent as collateral or in connection with any Obligations, (d) any
defense based upon an election of remedies by the Funding Agents, the Lenders or
the Disbursement Agent, including without limitation an election to proceed by
non-judicial rather than judicial foreclosure, which destroys or otherwise
impairs any subrogation rights which Guarantor may, notwithstanding the
provisions of Section 7, have against the Company, any right which Guarantor
may, notwithstanding the provisions of Section 7, have to proceed against the
Company for reimbursement, or both, (e) any defense based on any offset against
any amounts which may be owed by any Person to Guarantor for any reason
whatsoever, (f) any defense based on any act, failure to act, delay or omission
whatsoever on the part of the Company of the failure by the
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Company to do any act or thing or to observe or perform any covenant, condition
or agreement to be observed or performed by it under the Financing Agreements,
(g) any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal provided, that, upon payment in full
of the Obligations, this Guaranty shall no longer be of any force or effect, (h)
any defense, setoff or counterclaim which may at any time be available to or
asserted by the Company against the Funding Agents, the Lenders, the
Disbursement Agent, the Construction Consultant or any other Person under any of
the Financing Agreements, including in connection with the exercise of any
judgment by the Disbursement Agent, the Construction Consultant or any other
Person under the Funding Agents' Disbursement and Administration Agreement or by
reason of the delay or failure by the Disbursement Agent or the Construction
Consultant or any other Person to perform their duties thereunder, (i) any duty
on the part of the Funding Agents, the Lenders or the Disbursement Agent to
disclose to Guarantor any facts the Funding Agents, the Lenders or the
Disbursement Agent may now or hereafter know about the Company, regardless of
whether the Funding Agents, the Lenders or the Disbursement Agent have reason to
believe that any such facts materially increase the risk beyond that which
Guarantor intends to assume, or have reason to believe that such facts are
unknown to Guarantor, or have a reasonable opportunity to communicate such facts
to Guarantor, since Guarantor acknowledges that Guarantor is fully responsible
for being and keeping informed of the financial condition of the Company and of
all circumstances bearing on the risk of non-payment of any obligations and
liabilities hereby guaranteed, (j) the fact that Guarantor may at any time in
the future dispose of all or part of its direct or indirect interest in the
Company, (k) any defense based on any change in the time, manner or place of any
payment under, or in any other term of, any Facility Agreement, the Funding
Agents' Disbursement and Administration Agreement (including the Relevant
Provision) or any other amendment, renewal, extension, acceleration, compromise
or waiver of or any consent or departure from the terms of any Facility
Agreement, the Funding Agents' Disbursement and Administration Agreement
(including the Relevant Provision) or any other Financing Agreement, (l) any
defense arising because of the any Funding Agents', any Lender's or the
Disbursement Agent's election, in any proceeding instituted under the Federal
Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal
Bankruptcy Code, and (m) any defense based upon any borrowing or grant of a
security interest under Section 364 of the Federal Bankruptcy Code.
7. Subrogation. Until all obligations and liabilities of all kinds
and nature (including the "Obligations" (as defined in the Funding Agents'
Disbursement and Administration Agreement)) of the Company to the Lender
Beneficiaries (the "Financing Agreements Obligations") have been paid in full,
(a) Guarantor shall not have any right of subrogation and waives all rights to
enforce any remedy which the Lender Beneficiaries, the Lenders or the
Disbursement Agent now have or may hereafter have against the Company, and
waives the benefit of, and all rights to participate in, any security now or
hereafter held by the Lender Beneficiaries, the Lenders or the Disbursement
Agent from the Company and (b) subject to the terms of the Adelson Intercreditor
Agreement, Guarantor waives any claim, right or remedy which Guarantor may now
have or hereafter acquire against the Company that arises hereunder and/or from
the performance by the Guarantor hereunder including, without limitation, any
claim, remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of the Lender
Beneficiaries, the Lenders or the Disbursement Agent against the Company, or any
security which the Lender Beneficiaries, the Lenders or the Disbursement Agent
now have or hereafter acquire, whether or not such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise.
8. Bankruptcy.
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(a) So long as any of the Financing Agreements Obligations are
owed to the Lender Beneficiaries, Guarantor shall not commence, or join with any
other Person in commencing, any bankruptcy, reorganization, or insolvency
proceeding against the Company. The obligations of Guarantor under this Guaranty
shall not be altered, limited or affected by any proceeding, voluntary or
involuntary, involving the bankruptcy, reorganization, insolvency, receivership,
liquidation or arrangement of the Company, or by any defense which the Company
may have by reason of any order, decree or decision of any court or
administrative body resulting from any such proceeding.
(b) So long as any Financing Agreements Obligations are owed
to the Lender Beneficiaries, to the extent of such Financing Agreements
Obligations, Guarantor shall file, in any bankruptcy or other proceeding of or
against the Company in which the filing of proofs of claims is required or
permitted by law, all claims which Guarantor may have against the Company (but
only to the extent) relating to any indebtedness of the Company to Guarantor,
and hereby assigns to the Disbursement Agent, on behalf of the Lenders all
rights of Guarantor thereunder. If Guarantor does not file any such claim, the
Disbursement Agent as attorney-in-fact for Guarantor, is hereby authorized to do
so in the name of Guarantor or, in the Disbursement Agent's discretion, to
assign the claim to a nominee and to cause proofs of claim to be filed in the
name of such nominee. The foregoing power of attorney is coupled with an
interest and cannot be revoked. The Disbursement Agent or its nominee shall have
the sole right to accept or reject any plan proposed in any such proceeding and
to take any other action which a party filing a claim is entitled to take. In
all such cases, whether in administration, bankruptcy or otherwise, the person
authorized to pay such a claim shall pay the same to the Disbursement Agent to
the extent of any Financing Agreements Obligations which then remain unpaid,
and, to the full extent necessary for that purpose, Guarantor hereby assigns to
the Disbursement Agent all of Guarantor's rights to all such payments or
distributions to which Guarantor would otherwise be entitled; provided, however,
that Guarantor's obligations hereunder shall not be satisfied except to the
extent that the Disbursement Agent receives cash by reason of any such payment
or distribution. If the Disbursement Agent receives anything hereunder other
than cash, the same shall be held as collateral for amounts due under this
Guaranty.
9. Successions or Assignments.
(a) This Guaranty shall inure to the benefit of the successors
or assigns of the Lender Beneficiaries who shall have, to the extent of their
interest, the rights of the Lender Beneficiaries hereunder.
(b) This Guaranty is binding upon Guarantor and his heirs,
executors, administrators, legal representatives, successors and assigns,
regardless of whether, after Guarantor's death, the actions described in clause
(a) or (b) of the last sentence of Section 2(b)(ii) hereof are taken within the
required time period set forth in said sentence. Guarantor is not entitled to
assign its obligations hereunder to any other person, and any purported
assignment in violation of this provision shall be void.
10. Waivers.
(a) No delay on the part of the Lender Beneficiaries, the
Lenders or the Disbursement Agent in exercising any of their rights (including
those hereunder) and no partial or single exercise thereof and no action or
non-action by the Lender Beneficiaries, the Lenders or the
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Disbursement Agent, with or without notice to Guarantor or anyone else, shall
constitute a waiver of any rights or shall affect or impair this Guaranty.
(b) GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY OR RELATING
TO THE SUBJECT MATTER OF THIS GUARANTY AND THE RELATIONSHIP BETWEEN GUARANTOR
AND THE LENDER BENEFICIARIES AND THE DISBURSEMENT AGENT THAT IS BEING
ESTABLISHED. GUARANTOR ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT THE LENDER BENEFICIARIES AND THE
DISBURSEMENT AGENT HAVE ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
GUARANTY, AND THAT THE LENDER BENEFICIARIES AND THE DISBURSEMENT AGENT WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. GUARANTOR
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.
11. Interpretation. The section headings in this Guaranty are for
the convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
12. Notices. All notices in connection with this Guaranty shall be
given by notice in writing hand-delivered or sent by facsimile transmission or
by certified mail return-receipt requested (airmail, if overseas), postage
prepaid. All such notices shall be sent to the appropriate telecopier number or
address, as the case may be, set forth in Section 16 below or to such other
number or address as shall have been subsequently specified by written notice to
the other party, and shall be sent with copies, if any, as indicated below. All
such notices shall be effective upon receipt, and confirmation by answerback of
any such notice so sent by telecopier shall be sufficient evidence of receipt
thereof.
13. Amendments. This Guaranty may be amended only with the written
consent of the parties hereto.
14. Jurisdiction; Governing Law.
(a) Any action or proceeding relating in any way to this
Guaranty shall be brought and enforced in the courts of the State of New York in
Manhattan or of the United States for the Southern District of New York. Any
such process or summons in connection with any such action or proceeding may be
served by mailing a copy thereof by certified or registered mail, or any
substantially similar form of mail, addressed to Guarantor as provided for
notices hereunder.
(b) This Guaranty and the rights and obligations of Agent and
of the Guarantor shall be governed by and construed in accordance with the law
of the State of New York without reference to principles of conflicts of laws
(other than Section 5-1401 of the New York General Obligations Law).
15. Integration of Terms. This Guaranty contains the entire
agreement between the Guarantor, the Lender Beneficiaries, the Lenders and the
Disbursement Agent relating to the subject matter hereof and supersedes all oral
statements and prior writing with respect hereto.
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16. Addresses.
(a) The address of Guarantor for notices is:
Sheldon G. Adelson
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telephone Number: (702)733-5500
Telecopier Number: (702)733-5499
(b) The address of the Bank Agent for notices is:
The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attention: Allan Pendergast
Telephone Number: (415) 986-1100
Telecopier Number: (415) 397-0791
(c) The address of the Mortgage Notes Indenture Trustee for
notices is:
First Trust National Association
180 East Fifth Street
St. Paul, MN 55101
Attention: Corporate Trust Administration
Telephone Number: (612) 244-0721
Telecopier Number: (612) 244-0711
(d) The address of the Interim Mall Lender for notices is:
GMAC Commercial Mortgage Corporation
100 South Wacker Dr. Suite 100
Chicago, IL 60604
Attention: Vacys Garbonkus
Telephone Number:
Telecopier Number:
(e) The address of the Disbursement Agent for notices is:
The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attention: Allan Pendergast
Telephone Number: (415) 986-1100
Telecopier Number: (415) 397-0791
17. Interest; Collection Expenses. Any amount required to be paid by
Guarantor pursuant to the terms hereof shall bear interest at the highest
default rate provided in the Financing Agreement or the maximum rate permitted
by law, whichever is less, from the date due until paid in
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full. If the Lender Beneficiaries or the Disbursement Agent are required to
pursue any remedy against Guarantor hereunder (including, without limitation,
any remedy in connection with enforcing clause (B) of the first sentence of
Section 2(b)(ii) hereof), Guarantor shall pay to the Lender Beneficiaries or the
Disbursement Agent, as the case may be, upon demand, all reasonable attorneys'
fees and expenses all other costs and expenses incurred by the Lender
Beneficiaries or the Disbursement Agent in enforcing this Guaranty and such
amounts shall not be taken into account for purposes of the Liability Cap.
18. Reinstatement of Guaranty. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment to or
on behalf of the Company or by the Company under the Relevant Provision or by
Guarantor hereunder is rescinded or must otherwise be returned by the Lender
Beneficiaries, the Lenders or the Disbursement Agent upon the insolvency,
bankruptcy, reorganization, dissolution or liquidation of the Company or
otherwise, all as though such payment had not been made.
19. Counterparts. The Guaranty may be executed in one or more
duplicate counterparts, and when executed and delivered by all of the parties
listed below shall constitute a single binding agreement.
20. Disbursement Agent.
(a) The Lender Beneficiaries may appoint or designate the
Disbursement Agent to exercise or enforce their rights and remedies under this
Guaranty and to otherwise act on their behalf in all matters related hereto.
Guarantor shall respect and treat any and all actions so taken by the
Disbursement Agent as if taken by the Lender Beneficiaries.
(b) All references in this Guaranty to the Disbursement Agent
shall mean and be construed as the Disbursement Agent acting pursuant to the
Funding Agents' Disbursement and Administration Agreement.
21. No Benefit to the Company. This Guaranty is for the benefit of
only the Lender Beneficiary and is not for the benefit of the Company.
Notwithstanding that, pursuant to that certain Note dated of even date herewith,
by the Company in favor of Guarantor, Guarantor may treat any amounts actually
paid hereunder as a loan to the Company, the Guaranty shall not be deemed to be
a contract to make a loan, or extend other debt financing or financial
accommodation, for the benefit of the Company, in each case within the meaning
of Section 365(e) of the Bankruptcy Code.
22. Limitation on Personal Liabilities.
(a) Except as expressly set forth in Section 22(b) below, the
recourse of the Lender Beneficiaries with respect to the obligations of
Guarantor hereunder other than Guarantor's obligations under Section 2(e) above,
shall be solely to the Guaranty Collateral.
(b) Notwithstanding anything to the contrary contained in this
Guaranty or in any Financing Agreement, nothing shall be deemed in any way to
impair, limit or prejudice the rights of the Lender Beneficiaries (i) in
foreclosure proceedings or in any ancillary proceedings brought to facilitate
the Disbursement Agent's and the Lender Beneficiaries' foreclosure on the
Guaranty Collateral or any portion thereof; (ii) to recover from Guarantor
damages or costs (including without limitation reasonable attorneys' fees)
incurred by Disbursement Agent and the Lender
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<PAGE>
Beneficiaries as a result of actions taken by Guarantor to delay or prevent the
Disbursement Agent or the Lender Beneficiaries from exercising their rights
hereunder, and (iii) to exercise any specific rights to remedies afforded the
Disbursement Agent and the Lender Beneficiaries under any other provisions of
the Financing Agreements or by law or in equity, subject, in the case of this
clause (iii), to the non-recourse provisions set forth in Section 22(a).
(c) The agreement contained in this Section 22 to limit the
personal liability of Guarantor shall become null and void and be of no further
force and effect in the event that the Guaranty Collateral, or any part thereof
or any interest therein, shall be further encumbered by a voluntary lien
securing any obligation upon which Guarantor or affiliate of Guarantor shall be
personally liable for repayment, either as obligor or guarantor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
duly executed and delivered as of the day and year first written above.
Agreed and accepted: SHELDON G. ADELSON
--------------------------------------------------
/s/ Sheldon G. Adelson
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank,
as the Bank Agent
By: /s/ Allan Pendergast
----------------------------------
Name: Allan Pendergast
Title: Relationship Manager
GMAC COMMERCIAL MORTGAGE CORPORATION,
a California corporation,
as the Interim Mall Lender
By: /s/ Vacys Garbonkus
----------------------------------
Name: Vacys Garbonkus
Title: Senior Vice President
FIRST TRUST NATIONAL ASSOCIATION,
as the Mortgage Notes Indenture Trustee
By: /s/ Richard H. Prokosch
----------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank,
as the Disbursement Agent
By: /s/ Allan Pendergast
----------------------------------
Name: Allan Pendergast
Title: Relationship Manager
16
COMPLETION GUARANTY COLLATERAL ACCOUNT AGREEMENT
This COMPLETION GUARANTY COLLATERAL ACCOUNT AGREEMENT (this
"Agreement") is dated as of November 14, 1997, and entered into by and between
SHELDON G. ADELSON, an individual ("Pledgor"), and THE BANK OF NOVA SCOTIA, a
Canadian chartered bank through its New York agency, as Disbursement Agent under
the Disbursement Agreement (in such capacity herein called "Secured Party").
PRELIMINARY STATEMENTS
A. The Project. LVSI, VCR and Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company ("GCCLLC"), corporations directly or
indirectly wholly owned by Pledgor, propose to develop, construct and operate
the Venetian Casino Resort, a large scale Venetian-themed hotel, casino, retail,
meeting and entertainment complex, with related heating, ventilation and air
conditioning and power station facilities, as part of the redevelopment of the
site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank Agent
and the Bank Lenders have entered into the Bank Credit Agreement pursuant to
which the Bank Lenders have agreed, subject to the terms thereof, to provide
certain loans to LVSI and VCR, jointly and severally, in an aggregate amount and
for purposes specified therein.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR,
GCCLLC, and the Interim Mall Lender have entered into the Interim Mall Credit
Agreement pursuant to which the Interim Mall Lender has agreed to provide loans
to LVSI, VCR and GCCLLC, jointly and severally, in an aggregate amount and for
purposes specified therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Mortgage Notes Indenture Trustee have entered
into the Mortgage Notes Indenture pursuant to which LVSI and VCR will issue
Mortgage Notes in an aggregate principal amount and for purposes specified
therein.
E. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Subordinated Notes Indenture Trustee have
entered into the Subordinated Notes Indenture pursuant to which LVSI and VCR
will issue Subordinated Notes in an aggregate principal amount and for purposes
specified therein.
F. Intercreditor Agreement. Concurrently herewith, the Bank Agent (acting
on behalf of itself and the Bank Lenders), the Interim Mall Lender, the Mortgage
Notes Indenture Trustee (acting on behalf of itself and the Mortgage Note
Holders) and the Subordinated Notes Indenture Trustee (acting on behalf of
itself and the Subordinated Note Holders) have entered into that certain
Intercreditor Agreement pursuant to which the parties thereto have set forth
certain intercreditor provisions, including the method of voting and decision
making among the Bank Lenders, the Interim Mall Lender, the Mortgage Note
Holders and the Subordinated Note Holders, the arrangements applicable to joint
consultation and
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actions in respect of approval rights and waivers, the limitations on rights of
enforcement upon default and the application of proceeds upon enforcement.
G. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, Pledgor, GCCLLC, the Bank Agent (acting on behalf of itself and the
Bank Lenders), the Interim Mall Lender, the Mortgage Notes Indenture Trustee
(acting on behalf of itself and the Mortgage Note Holders), the HVAC Provider
and The Bank of Nova Scotia, New York Agency, as "Disbursement Agent" have
entered into that certain Funding Agents' Disbursement and Administration
Agreement ("Disbursement Agreement") for the purpose of setting forth, among
other things, (a) the mechanics for and allocation of the Company's requests for
Advances under the Facilities and from the Company's Funds Account, (b) the
conditions precedent to the initial Advance and conditions precedent to
subsequent Advances, (c) certain common representations, warranties and
covenants of the Company in favor of the Funding Agents, (d) the establishment
of the Collateral Accounts, (e) the pledge and management of the Collateral
Accounts, and (f) the common events of default and remedies.
H. Capacity and Obligations of Secured Party. Secured Party has entered
into this Agreement pursuant to the Disbursement Agreement and is obligated to
exercise its rights and perform its duties hereunder in accordance with the
Disbursement Agreement and the Intercreditor Agreement.
I. Condition. It is a condition precedent to the extensions or purchase of
the Mortgage Notes by the Mortgage Note Holders, the funding of the Bank Loans
by the Bank Lenders, and the funding of the Interim Mall Construction Loan by
the Interim Mall Lender that Pledgor shall have established the Collateral
Accounts, grant control to the Disbursement Agent (as Secured Party) of such
accounts, and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Mortgage Note Holders to purchase the Mortgage Notes under the
Mortgage Notes Indenture, the funding of the Bank Loans by the Bank Lenders, and
the funding of the Interim Mall Construction Loan by the Interim Mall Lender,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Pledgor hereby agrees with Secured Party as follows:
SECTION 1. Certain Definitions.
(a) Specific Definitions. The following terms used in this
Agreement shall have the following meanings:
"Collateral" shall have the meaning given to that term in the
Third-Party Account Agreement.
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"Collateral Accounts" shall have the meaning given to that term in
the Third-Party Account Agreement.
"Collateral Value" shall have the meaning given to that term in the
Third-Party Account Agreement.
"Investments" shall have the meaning given to that term in the
Third-Party Account Agreement.
"Secured Obligations" means all obligations and liabilities of every
nature of Pledgor now or hereafter existing under or arising out of or in
connection with the Completion Guaranty, whether for principal, interest
(including interest that, but for the filing of a petition in bankruptcy with
respect to Pledgor, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party as a preference,
fraudulent transfer or otherwise, and all obligations of every nature of Pledgor
now or hereafter existing under this Agreement.
"Securities Intermediary" means Goldman, Sachs & Co., identified as
the "Securities Intermediary" in the Third-Party Account Agreement.
"Third-Party Account Agreement" means the Completion Guaranty
Third-Party Account Agreement, substantially in the form of Annex A hereto,
entered into among Pledgor, Secured Party and Securities Intermediary, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"Value" shall have the meaning given to that term in the Third-Party
Account Agreement.
(b) General Provisions. Capitalized terms used but not defined
herein or in the Third-Party Account Agreement shall have the meaning given to
such terms in Exhibit A to the Third-Party Account Agreement, although in the
event of a conflict, the meaning given to such term in the Third-Party Account
Agreement shall control. Unless otherwise defined herein, in the Third-Party
Account Agreement or in Exhibit A to the Third-Party Account Agreement, terms
used in Articles 8 and 9 of the Code are used herein as therein defined. Words
used herein, regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context indicates is
appropriate. When a reference is made in this Agreement to an Appendix, Exhibit,
Introduction, Recital, Section or Schedule, such reference shall be to an
Appendix, an Exhibit, the Introduction, a Recital or a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes"
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or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation."
SECTION 2. Establishment and Operation of the Collateral Accounts.
(a) Establishment of Completion Guaranty Account. On the date
hereof, in accordance with the terms of the Third-Party Account Agreement,
Pledgor and Secured Party shall establish with Securities Intermediary at its
office at 85 Broad Street, New York, New York 10022, as a securities account in
the name of Secured Party, a restricted securities account designated as "The
Bank of Nova Scotia Completion Guaranty Account".
(b) Compliance with Third-Party Account Agreement. The Collateral
Accounts shall be operated, and all Investments shall be purchased, registered
or held (as applicable), in accordance with the terms of the Third-Party Account
Agreement.
(c) Reasonable Reliance. Secured Party shall be fully protected
and shall suffer no liability in acting in accordance with any written
instructions reasonably believed by it to have been given by Pledgor with
respect to any aspect of the operation of the Collateral Accounts (including any
such instructions relating to any Investments of any amounts or Financial Assets
credited thereto).
SECTION 3. Pledge of Security for Secured Obligations. Pledgor
hereby pledges and assigns to Secured Party, and hereby grants to Secured Party,
a security interest in, all of Pledgor's right, title and interest in and to the
Collateral as collateral security for the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. 362(a)), of all Secured
Obligations.
SECTION 4. Maintenance of Minimum Collateral Value Amount; Return of
Excess Collateral.
(a) Margin From Pledgor. Upon demand by Secured Party in
accordance with the Completion Guaranty, Pledgor shall promptly (and in any
event within two Business Days) transfer to the Completion Guaranty Collateral
Account, in accordance with Section 3(a) of the Third-Party Account Agreement,
any funds or Permitted Investments required in accordance with the Completion
Guaranty.
(b) Release of Excess Collateral. So long as no Potential Event of
Default or Event of Default shall have occurred and be continuing, upon written
demand by Pledgor in accordance with the Completion Guaranty, Secured Party
shall promptly (and in any event within two Business Days) instruct Securities
Intermediary pursuant to Section 4(e) of the Third-Party Account Agreement, to
transfer to Pledgor from the Completion Guaranty Account in accordance with such
written instructions as may have been delivered by Pledgor, cash and Financial
Assets designated by Pledgor (or in the absence of such a
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<PAGE>
designation, reasonably selected by Secured Party or Securities Intermediary)
having a total Value not exceeding the amount required to be released to Pledgor
in accordance with the Completion Guaranty.
SECTION 5. Investment of Amounts in the Collateral Accounts.
(a) Strict Compliance On Investment of Collateral. Credit balances
held by Securities Intermediary in the Collateral Accounts shall not be invested
or reinvested except as provided in this Section 5 and in the Third-Party
Account Agreement.
(b) Management by Pledgor. So long as no Potential Event of
Default or Event of Default shall have occurred and be continuing, Secured Party
shall instruct Securities Intermediary to follow, in accordance with the terms
of the Third-Party Account Agreement, any written instruction received by
Securities Intermediary from Pledgor (with a copy to Secured Party) (i) to
invest and reinvest funds held for the credit of the Collateral Accounts in
Permitted Investments for credit to the Collateral Accounts, (ii) to transfer
funds from the Collateral Accounts to the extent required for such investments,
against delivery of the related Financial Assets to Securities Intermediary for
credit to the Collateral Accounts, and (iii) to sell or redeem any Investment
against delivery of the proceeds to, or settlement to purchase an Permitted
Investment for credit of, the Collateral Accounts.
(c) Power of Secured Party to Sell. Pledgor agrees that Secured
Party may sell or cause the sale or redemption of any Investment and instruct
Securities Intermediary to transfer the proceeds of such sale or any other
credit in the Collateral Accounts to any third party or account, in either case
(i) if such sale or redemption is necessary to permit Secured Party to perform
its duties under this Agreement, the Disbursement Agreement or the Intercreditor
Agreement, or (ii) as provided in Section 10.
SECTION 6. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Ownership of Collateral; Security Interest; Perfection and
Priority. Except as specifically set forth in the Disbursement Agreement,
Pledgor is (or at the time of transfer thereof to Securities Intermediary will
be) the beneficial owner of the Collateral from time to time transferred by
Pledgor for the benefit of Pledgor to Securities Intermediary, as agent for
Secured Party, free and clear of any Lien except for the security interest
created by this Agreement and the Third-Party Account Agreement. The pledge and
assignment of the Collateral pursuant to this Agreement and the Third-Party
Account Agreement creates a valid security interest in the Collateral securing
the Payment of the Secured Obligations. Assuming compliance by Securities
Intermediary with the Third-Party Account Agreement, Secured Party will have a
perfected security interest in the Collateral Accounts senior in priority to any
other security interest created by Pledgor.
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(b) Governmental Authorizations. Except as may be required under
Nevada gaming laws, no authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
either (i) the grant by Pledgor of the security interest granted hereby or by
the Third-Party Account Agreement, (ii) the execution, delivery or performance
of this Agreement or the Third-Party Account Agreement by Pledgor, or (iii) the
perfection of or the exercise by Secured Party or Securities Intermediary of its
rights and remedies hereunder or under the Third-Party Account Agreement (except
as may have been taken by or at the direction of Pledgor).
(c) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party or Securities Intermediary by or on behalf
of Pledgor with respect to the Collateral is accurate and complete in all
material respects.
SECTION 7. Further Assurances. Pledgor agrees that from time to
time, at the expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or reasonably desirable, or that Secured Party may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or by the Third-Party Account Agreement or to enable Secured
Party or Securities Intermediary to exercise and enforce its rights and remedies
hereunder or under the Third-Party Account Agreement with respect to any
Collateral. Without limiting the generality of the foregoing, Pledgor shall: (a)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
reasonably desirable, or as Secured Party may reasonably request, in order to
perfect and preserve the security interests granted or purported to be granted
hereby or by the Third-Party Account Agreement, and (b) at Secured Party's
request, appear in and defend any action or proceeding that may affect Pledgor's
title to or Secured Party's security interest in all or any part of the
Collateral.
SECTION 8. Transfers and other Liens. Pledgor agrees that, except as
permitted in Section 5(b), it shall not (a) sell, assign (by operation of law or
otherwise), redeem or otherwise dispose of any of the Collateral or (b) create
or suffer to exist any Lien upon or with respect to any of the Collateral,
except for the security interest created under this Agreement and the
Third-Party Account Agreement.
SECTION 9. Secured Party Appointed Attorney-in-Fact; Secured Party
Performance.
(a) Secured Party Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement or the Third-Party
Account Agreement, including (a) to file one or more financing or continuation
statements, or amendments thereto, relative to all or any part of the Collateral
without the signature of Pledgor and (b) to receive, endorse and collect any
instruments or other
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Investments made payable to Pledgor representing any dividend, principal or
interest payment or other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same.
(b) Performance by Secured Party. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 12.
SECTION 10. Remedies.
(a) Transfer or Sequestration of Collateral. If any Potential
Event of Default or Event of Default shall have occurred and be continuing,
Secured Party may instruct Securities Intermediary to (i) sell or redeem any of
the Collateral, (ii) transfer any or all of the Collateral to any account
designated by Secured Party, including account or accounts established in
Secured Party's name (whether with Secured Party or Securities Intermediary or
otherwise), (iii) register title to any Collateral in any name specified by
Secured Party, including the name of Secured Party or any of its nominees or
agents, without reference to any interest of Pledgor, or (iv) otherwise deal
with the Collateral as directed by Secured Party.
(b) Rights of Secured Party. If any Event of Default shall have
occurred and be continuing, Secured Party may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "UCC") (whether or not the UCC applies to the affected
Collateral), and Secured Party may also in its sole discretion sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange or broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Secured Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(c) Agreement as to Manner of Sale. Pledgor hereby agrees that the
Collateral is of a type customarily sold on recognized markets and, accordingly,
that no notice to any Person is required before any sale of any of the
Collateral pursuant to the terms of this Agreement; provided that, without
prejudice to the foregoing, Pledgor agrees that, to the extent notice of any
such sale shall be required by law, at least ten days' notice
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to Pledgor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.
(d) Deficiency. If the proceeds of any sale or other disposition
of the Collateral are insufficient to pay all the Secured Obligations, Pledgor
shall be liable for the deficiency and the fees of any attorneys employed by
Secured Party to collect such deficiency.
SECTION 11. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, all cash included as Collateral and all
proceeds received by Secured Party in respect of any sale or redemption of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Secured Party, be held by or for Secured Party as
Collateral for, or then, or at any other time thereafter, applied in full or in
part by Secured Party against, the Secured Obligations in the following order of
priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by Secured Party hereunder
for the account of Pledgor, and to the payment of all costs and expenses
paid or incurred by Secured Party in connection with the exercise of any
right or remedy hereunder, all in accordance with Section 12;
SECOND: To the payment of all of the Secured Obligations in
accordance with the Disbursement Agreement and the Intercreditor
Agreement; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 12. Exculpation; Indemnity; Expenses.
(a) Exculpation. The powers conferred on Secured Party hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the exercise of reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Party shall have no duty as to
any Collateral, it being understood that Secured Party shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Collateral, whether or not Secured Party has or is deemed to have knowledge of
such matters, (b) taking any necessary steps (other than steps taken in
accordance with the standard of care set forth above to maintain possession of
the Collateral) to preserve rights against any parties with respect to any
Collateral, (c) taking any necessary steps to collect or realize upon the
Secured Obligations or any guarantee therefor, or any part thereof, or any of
the
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Collateral, (d) initiating any action to protect the Collateral against the
possibility of a decline in market value, (e) any loss resulting from
Investments made, held or sold pursuant to Section 5, except for a loss
resulting from Secured Party's gross negligence or wilful misconduct in
complying with Section 5, or (f) determining (i) the correctness of any
statement or calculation made by Pledgor in any written or telex (tested or
otherwise) instructions or (ii) whether any transfer to or from the Collateral
Accounts is proper. Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property of like kind. In addition to the foregoing and without
limiting the generality thereof, Secured Party shall not be responsible for any
actions or omissions of Securities Intermediary.
(b) Indemnification. Pledgor agrees to indemnify Secured Party
from and against any and all claims, losses and liabilities in any way relating
to, growing out of or resulting from this Agreement and the transactions
contemplated hereby (including enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or wilful misconduct as finally determined by a court of
competent jurisdiction.
(c) Expenses. Pledgor shall pay to Secured Party upon demand the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
reasonably incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by Pledgor to perform or observe any of the provisions hereof.
SECTION 13. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations, and the cancellation or termination of the commitments under the
Interim Mall Credit Agreement and the Bank Credit Agreement, and reimbursement
of amounts drawn under Letters of Credit issued under the Bank Credit Agreement,
(b) be binding upon Pledgor, its successors and assigns, and (c) inure, together
with the rights and remedies of Secured Party hereunder, for the benefit of the
Bank Lenders, the Mortgage Note Holders, the Interim Mall Lender and their
respective successors, transferees and assigns. Upon the indefeasible payment in
full of all Secured Obligations, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to Pledgor. Upon any
such termination Secured Party shall, at Pledgor's expense, execute and deliver
to Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and at
its expense, against receipt and without recourse to Secured Party, of such of
the Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.
SECTION 14. Secured Party as Disbursement Agent.
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(a) Agency. Secured Party has been appointed to act as Secured
Party hereunder by Lenders pursuant to the Disbursement Agreement. Secured Party
shall be obligated, and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including, without limitation, the release or
substitution of Collateral), solely in accordance with this Agreement, the
Disbursement Agreement and the Intercreditor Agreement.
(b) Identity of Agent. Secured Party shall at all times be the
same Person that is Disbursement Agent under the Disbursement Agreement. Written
notice of resignation by Disbursement Agent pursuant to subsection 9.7 of the
Disbursement Agreement shall also constitute notice of resignation as Secured
Party under this Agreement; removal of Disbursement Agent pursuant to subsection
9.7 of the Disbursement Agreement shall also constitute removal as Secured Party
under this Agreement; and substitution of a successor disbursement agent
pursuant to subsection 9.7 of the Disbursement Agreement shall also constitute
substitution of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Disbursement Agent under subsection 9.7 of the
Disbursement Agreement by a successor Disbursement Agent, that successor
Disbursement Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Secured Party
under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all items
of Collateral held by Secured Party together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Secured Party under this Agreement, and (ii) execute and
deliver to such successor Secured Party such amendments to financing statements,
and take such other actions, as may be necessary or appropriate in connection
with the assignment to such successor Secured Party of the security interests
created hereunder, whereupon such retiring or removed Secured Party shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Disbursement Agent's resignation or removal hereunder as
Secured Party, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 15. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 16. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to the address of the party
as set forth under such party's name on the signature pages hereof. All notices
or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person,
(b) if sent by reputable overnight delivery service, (c) in the event overnight
delivery services are not readily available, if mailed by first class mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telex, or by telecopy with correct answer back received.
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Notice so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next following Business Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Business Day;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. Any party shall have the right to change its address for
notice hereunder to any other location by giving of no less than twenty (20)
days' notice to the other parties in the manner set forth hereinabove.
SECTION 17. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 18. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 19. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 20. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE UCC PROVIDES THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
SECTION 21. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
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AGREEMENT. Pledgor hereby agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail, return
receipt requested, to Pledgor at its address as provided in Section 16, such
service being hereby acknowledged by Pledgor to be sufficient for personal
jurisdiction in any action against Pledgor in any such court and to be otherwise
effective and binding service in every respect. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of Secured Party to bring proceedings against Pledgor in the courts of any
other jurisdiction.
SECTION 22. Waiver of Jury Trial. PLEDGOR AND SECURED PARTY HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE THIRD-PARTY ACCOUNT
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims. Pledgor and Secured
Party each acknowledge that this waiver is a material inducement for Pledgor and
Secured Party to enter into a business relationship, that Pledgor and Secured
Party have already relied on this waiver in entering into this Agreement and
that each will continue to rely on this waiver in their related future dealings.
Pledgor and Secured Party further warrant and represent that each has reviewed
this waiver with its legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR THE THIRD-PARTY ACCOUNT
AGREEMENT. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
SECTION 23. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
PLEDGOR: /s/ Sheldon G. Adelson
------------------------------------
SHELDON G. ADELSON
Notice Address: 2950 Augusta Drive
Las Vegas, Nevada 8909
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a
Canadian chartered bank, as
Disbursement Agent under
the Disbursement Agreement
By: /s/ Alan W. Pendergast
----------------------
Title: Alan W. Pendergast
Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Allan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S-1
<PAGE>
ANNEX A
[FORM OF COMPLETION GUARANTY THIRD-PARTY ACCOUNT AGREEMENT]
This COMPLETION GUARANTY THIRD-PARTY ACCOUNT AGREEMENT (this
"Agreement") is dated as of November 14, 1997 and entered into by and among
SHELDON G. ADELSON, an individual ("Pledgor"), THE BANK OF NOVA SCOTIA, a
Canadian chartered bank through its New York agency, as Disbursement Agent under
the Disbursement Agreement (in such capacity herein called "Secured Party") and
GOLDMAN, SACHS & CO., a Broker-Dealer ("Securities Intermediary").
PRELIMINARY STATEMENTS
A. The Project. LVSI, VCR and Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company ("GCCLLC"), propose to develop, construct and
operate the Venetian Casino Resort, a large scale Venetian-themed hotel, casino,
retail, meeting and entertainment complex, with related heating, ventilation and
air conditioning and power station facilities, as part of the redevelopment of
the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank Agent
and the Bank Lenders have entered into the Bank Credit Agreement pursuant to
which the Bank Lenders have agreed, subject to the terms thereof, to provide
certain loans to LVSI and VCR, jointly and severally, in an aggregate amount and
for purposes specified therein.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR,
GCCLLC, and the Interim Mall Lender have entered into the Interim Mall Credit
Agreement pursuant to which the Interim Mall Lender has agreed to provide loans
to LVSI, VCR and GCCLLC, jointly and severally, in an aggregate amount and for
purposes specified therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Mortgage Notes Indenture Trustee have entered
into the Mortgage Notes Indenture pursuant to which LVSI and VCR will issue
Mortgage Notes in an aggregate principal amount and for purposes specified
therein.
E. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR and the
Subordinated Notes Indenture Trustee have entered into the Subordinated Notes
Indenture pursuant to which LVSI and VCR will issue Subordinated Notes in an
aggregate principal amount and for purposes specified therein.
F. HVAC Services Agreement. Concurrently herewith, VCR and the HVAC
Provider have entered into the HVAC Services Agreement pursuant to which the
HVAC Provider has agreed to advance, for the acquisition, construction, testing
and installation of that certain HVAC Component of the Project, an aggregate
amount specified therein.
G. Intercreditor Agreement. Concurrently herewith, the Bank Agent (acting
on behalf of
ANNEX A-1
<PAGE>
itself and the Bank Lenders), the Interim Mall Lender, the Mortgage Notes
Indenture Trustee (acting on behalf of itself and the Mortgage Note Holders) and
the Subordinated Notes Indenture Trustee (acting on behalf of itself and the
Subordinated Note Holders) have entered into that certain Intercreditor
Agreement pursuant to which the parties thereto have set forth certain
intercreditor provisions, including the method of voting and decision making
among the Bank Lenders, the Interim Mall Lender, the Mortgage Note Holders and
the Subordinated Note Holders, the arrangements applicable to joint consultation
and actions in respect of approval rights and waivers, the limitations on rights
of enforcement upon default and the application of proceeds upon enforcement.
H. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, Pledgor, GCCLLC, the Bank Agent (acting on behalf of itself and the
Bank Lenders), the Interim Mall Lender, the Mortgage Notes Indenture Trustee
(acting on behalf of itself and the Mortgage Note Holders), the HVAC Provider
and The Bank of Nova Scotia, New York Agency, as "Disbursement Agent" have
entered into that certain Funding Agents' Disbursement and Administration
Agreement ("Disbursement Agreement") for the purpose of setting forth, among
other things, (a) the mechanics for and allocation of the Company's requests for
Advances under the Facilities and from the Company's Funds Account, (b) the
conditions precedent to the initial Advance and conditions precedent to
subsequent Advances, (c) certain common representations, warranties and
covenants of the Company in favor of the Funding Agents, (d) the establishment
of the Collateral Accounts, (e) the pledge and management of the Collateral
Accounts, and (f) the common events of default and remedies.
I. Condition. It is a condition precedent to the extensions or purchase of
the Mortgage Notes by the Mortgage Note Holders, the funding of the Bank Loans
by the Bank Lenders and the funding of the Interim Mall Construction Loan by the
Interim Mall Lender that Pledgor shall have established the Collateral Accounts,
grant control to the Disbursement Agent (as Secured Party) of such accounts, and
undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to purchase the Mortgage Notes under the Mortgage Notes
Indenture, the funding of the Bank Loans by the Bank Lenders and the funding of
the Interim Mall Construction Loan by the Interim Mall Lender and for other good
consideration, the receipt and adequacy of which are hereby acknowledged,
Pledgor, Securities Intermediary and Secured Party hereby agree as follows:
ANNEX A-2
<PAGE>
SECTION 1. Definitions.
(a) Specific Definitions. The following terms used in this
Agreement shall have the following meanings:
"Broker-Dealer" means a person registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or Nevada or
is a day on which banking institutions located in such states are authorized or
required by law or other governmental action to close, or a day on which the New
York Stock Exchange is closed.
"Code" shall mean the Uniform Commercial Code as in effect in New
York.
"Collateral" means (i) the Completion Guaranty Account, (ii) all
amounts held from time to time in the Completion Guaranty Account, (iii) all
Investments, including all Financial Assets, security entitlements, securities
(whether certificated or uncertificated), instruments, accounts, general
intangibles and deposits representing or evidencing any Investments, (iv) all
interest, dividends, cash, instruments, securities and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Collateral, and (v) to the extent not covered by
clauses (i) through (iv) above, all proceeds of any or all of the foregoing
Collateral.
"Collateral Accounts" means the Completion Guaranty Account and any
other accounts in which Investments may be held or registered.
"Collateral Value" means, as at any date of determination, the Value
of all Collateral (other than Investments which are not Permitted Investments)
as of such date.
"Investments" means any Financial Assets credited to the Completion
Guaranty Account, and any other property acquired by Securities Intermediary as
securities intermediary hereunder in exchange for, with proceeds from or
distributions on, or otherwise in respect of any Investments.
"Overnight Investments" means Investments of the kind described in
subdivision (a)(v), (b) or (c) of the definition of "Permitted Investments."
ANNEX A-3
<PAGE>
ANNEX A-4
<PAGE>
"Permitted Investments" means (a) (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 any Rating
Agency 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 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 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 at least "A" or "A2" or the equivalent by any Rating Agency and
short-term debt rated 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 thereof) 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 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 (which demand shall only be made at the direction of Pledgor) after
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
ANNEX A-5
<PAGE>
investments are denominated in United States dollars and maturing not more than
13 months from the date of acquisition thereof; (b) 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; (c) 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 (d) 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, in each case having rating
of at least "A" or "A2" or the equivalent by any Rating Agency.
"Suspension Period" means the period (i) beginning promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Prohibition Notice attached to this Agreement
as Attachment 1, suspending Pledgor's right to direct the investment of funds
held for the credit of the Collateral Accounts, and (ii) ending promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Rescission of Prohibition Notice attached to
this Agreement as Attachment 2, rescinding the preceding Prohibition Notice.
"Valuation Date" means (i) the date hereof and (ii) the first
Business Day of each calendar month thereafter.
"Value" means the value in U.S. Dollars of any Financial Asset as
determined by Secured Party in its reasonable judgment based on pricing
information supplied by Securities Intermediary on a basis consistent with its
usual practice, including values obtained from a generally recognized source
(including any pricing service regularly utilized by Securities Intermediary).
Any information supplied by Securities Intermediary shall be conclusive absent
manifest error.
(b) General Provisions. Capitalized terms used but not defined
herein shall have the meaning given to such terms in Exhibit A. Unless otherwise
defined herein or in Exhibit A, terms used in Articles 8 and 9 of the Code are
used herein as therein defined. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate. When a reference is made in this
Agreement to an Appendix, Exhibit, Introduction, Recital, Section or Schedule,
such reference shall be to an Appendix, an Exhibit, the Introduction, a Recital
or a Section of, or a Schedule to, this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
ANNEX A-6
<PAGE>
SECTION 2. Establishment and Operation of Collateral Accounts.
(a) Establishment of Completion Guaranty Account. Pledgor and
Secured Party hereby authorize and direct Securities Intermediary to establish
and maintain at its office at 85 Broad Street, New York, New York 10022, a
securities account in the name of Secured Party and under the sole dominion and
control of Secured Party, designated as "Bank of Nova Scotia Completion Guaranty
Account." Securities Intermediary hereby undertakes to treat Secured Party as
the person entitled to exercise the rights that comprise any Financial Asset
credited to the Completion Guaranty Account. Secured Party and Pledgor agree
that this account shall be the "Completion Guaranty Account."
(b) Acknowledgement of Receipt of Investments. Securities
Intermediary acknowledges the transfer by Pledgor, and the acquisition by
Securities Intermediary, of Financial Assets that are Permitted Investments that
have a Value of $25,000,000 for the credit of the Completion Guaranty Account.
(c) Operations of the Collateral Accounts. The Collateral Accounts
shall be operated, and all Investments shall be acquired and registered or held
(as applicable), in accordance with the terms of this Agreement.
(d) Account Statements. Securities Intermediary shall send Secured
Party and Pledgor written account statements with respect to the Collateral
Accounts not less frequently than monthly. Reports or confirmation of the
execution of orders and statements of account shall be conclusive if not
objected to in writing within 30 days after delivery pursuant to Section 12.
SECTION 3. Mechanics of Deposits of Funds or Investments to the
Collateral Account.
(a) Transfers to the Completion Guaranty Account. All transfers of
funds to the Completion Guaranty Account shall be made by wire transfer (or, if
applicable, intra-bank transfer) of immediately available funds addressed as
follows:
The Chase Manhattan Bank, New York, New York
ABA No.: 021-0000-21
Reference: A/C Goldman, Sachs & Co.
A/C# 930-1-011483
FFC A/C: BANK OF NOVA SCOTIA COMPLETION GUARANTY
ACCOUNT
A/C#: 010-20499-8
Transfers of Financial Assets to the Completion Guaranty Account shall be
permitted by book-entry from securities accounts maintained with Securities
Intermediary.
ANNEX A-7
<PAGE>
(b) Notice of Transfers. In the event of any transfer of funds or
Financial Assets to the Collateral Accounts pursuant to any provision of Section
3, Pledgor, Secured Party, as the case may be, shall promptly after initiating
or sending out written instructions with respect to such transfer, give notice
to the other such party by facsimile of the date and amount of such transfer.
SECTION 4. Permitted Investments and Transfers of Amounts in the
Collateral Accounts.
(a) Strict Compliance. Credit balances held by Securities
Intermediary in the Collateral Accounts shall not be (i) invested or reinvested,
(ii) sold or redeemed, or (iii) transferred from the Collateral Accounts, in
either case except as provided in this Section 4.
(b) Pledgor's Right to Direct Investment. Except during any
Suspension Period, Securities Intermediary shall, in accordance with Pledgor's
written Entitlement Orders given to Securities Intermediary from time to time,
sell or redeem Investments, and apply amounts transferred to or held for the
credit of the Collateral Accounts to make investments for credit to the
Collateral Accounts, in Securities Intermediary's name and as custodian under
this Agreement, in Permitted Investments denominated and payable in United
States dollars. During any Suspension Period, Pledgor's right to direct such
investments under this Section 4(b) shall be suspended, and Securities
Intermediary shall not accept Entitlement Orders with respect to the Collateral
Accounts from any person other than Secured Party; and (ii) any credit balances
shall be invested and reinvested only as provided in Section 4(c).
(c) Overnight Investments. To the extent that, as of 12:00 noon,
New York time on any Business Day, there are credit balances expected to remain
after settlement of all pending transactions in any of the Collateral Accounts,
unless otherwise instructed by Secured Party, Securities Intermediary shall
apply the expected credit balances to acquire Overnight Investments. Any
Overnight Investments shall be held for the credit of the Collateral Accounts
from which the proceeds for acquisition was derived. If for any reason
Securities Intermediary fails to invest credit balances in Overnight Investments
as provided in this Section, Securities Intermediary shall credit the Mortgage
Construction Guaranty Account with daily interest on the uninvested free credit
balance in accordance with its usual practice.
(d) Actions of Securities Intermediary on Purchase of Investments.
Promptly upon the purchase, acquisition or transfer for credit of the Collateral
Accounts of any Investment, Securities Intermediary shall take all steps that it
customarily takes in the ordinary course of its business to ensure that such
Investment is credited on its books to the Collateral Accounts. Without limiting
the generality of the foregoing, Securities Intermediary shall promptly (i) send
to Pledgor and Secured Party a written confirmation of the acquisition of such
Investment, and (ii) indicate by book entry in its records that such Investment
has been credited to, and is held for the credit of, the Collateral Accounts.
Securities Intermediary agrees with Pledgor and Secured Party that any credit
balances or property credited to, or held for the credit of, the Collateral
Accounts shall be treated as "Financial Assets" as that term is defined in
Section 8-103(a)(9)(iii) of the Code.
ANNEX A-8
<PAGE>
(e) Control Agreement. Anything contained herein to the contrary
notwithstanding, Securities Intermediary shall, if and as directed in writing by
Secured Party, without the consent of Pledgor, (i) comply with Entitlement
Orders originated by Secured Party with respect to the Collateral Accounts and
any Security Entitlements therein, (ii) transfer, sell or redeem any of the
Collateral, (iii) transfer any or all of the Collateral to any account or
accounts designated by Secured Party, including an account established in
Secured Party's name (whether at Secured Party or Securities Intermediary or
otherwise), (iv) register title to any Collateral in any name specified by
Secured Party consistent with the policies or practices of the applicable
depository, including the name of Secured Party or any of its nominees or
agents, without reference to any interest of Pledgor, or (v) otherwise deal with
the Collateral as directed by Secured Party. Nothing contained in this paragraph
shall constitute a waiver of by Pledgor of any rights or remedies it may have
against Secured Party under this Agreement or any other agreement.
(f) Deposit of Proceeds. Any interest, cash dividends or other
cash distributions received in respect of any Investments and the net proceeds
of any sale or payment of any Investments shall be promptly credited to, and
held for the credit of, the Collateral Accounts. Any distribution of property
other than cash in respect of any Investment shall be credited to, and held for
the credit of, the Collateral Accounts.
(g) Valuation of Collateral. Securities Intermediary shall provide
access to its systems to Secured Party and Pledgor for the purpose of
communicating data as to the Collateral Accounts as of that date.
SECTION 5. Acknowledgement of Security Interest in Favor of Secured
Party; Covenant Against Creation of other Interests.
(a) Acknowledgement of Security Interest. Securities Intermediary
acknowledges the security interest granted by Pledgor in favor of Secured Party
in the Collateral.
(b) Acknowledgement of Securities Intermediary's Role. Securities
Intermediary hereby further acknowledges that it holds the Collateral Accounts,
and all Security Entitlements therein, as custodian for, for the benefit of, and
subject to the control of, Secured Party. Securities Intermediary shall, by book
entry or otherwise, indicate that the Collateral Accounts, and all Security
Entitlements registered to or held therein, are subject to the control of
Secured Party as provided in Section 4(e).
(c) Securities Intermediary Has No Notice of Adverse Claims.
Securities Intermediary represents and warrants that (i) it has no notice of any
Adverse Claim against any of the Collateral other than the claim of Secured
Party under this Agreement; and (ii) it is not party to any agreement other than
this Agreement that governs its rights or duties, or limits or conflicts with
the rights of Secured Party, including the exclusive right of Secured Party to
control as provided in Section 4(e), with respect to the Collateral Accounts.
(d) Securities Intermediary Shall Not Acknowledge Other Claims.
Securities
ANNEX A-9
<PAGE>
Intermediary agrees that, except as expressly provided in this Agreement
(including Section 6(d)) or with the written consent of Secured Party, it shall
not agree to or acknowledge (i) any right by any Person other than Secured Party
to originate Entitlement Orders or control with respect to the Collateral
Accounts; or (ii) any limitation on the right of Secured Party to originate
Entitlement Orders with respect to or direct the transfer of any Investments or
cash credited to the Collateral Accounts.
SECTION 6. Securities Intermediary Maintenance of the Collateral
Accounts.
(a) Transactions Shall Comply With Rules. The parties acknowledge
that all transactions in Financial Assets under this Agreement shall be in
accordance with the rules and customs of the exchange, market or clearing
organization, if any, in which the transactions are executed or settled and in
conformity with applicable law and regulations of governmental authorities and
future amendments or supplements thereto.
(b) Fees and Charges of Securities Intermediary. Pledgor shall
promptly pay Securities Intermediary, in accordance with Securities
Intermediary's usual schedule of charges or any written agreement between
Securities Intermediary and Pledgor, any reasonable fees or charges imposed by
Securities Intermediary with respect to the establishment, maintenance or
transactions in or affecting the Collateral Accounts.
(c) Securities Intermediary Shall Not Permit Leverage of
Investments. Securities Intermediary shall not execute any transaction to
acquire Financial Assets under Section 4(b) unless (A) there are sufficient
funds in the Collateral Accounts to settle such transactions or (B) it is
reasonably anticipated that such funds may be generated through the liquidation
of Financial Assets then credited to the Collateral Accounts, or to sell or
redeem any Financial Asset which is not held, or reasonably expected to be
acquired in pending transactions, for the credit of the Collateral Accounts.
Notwithstanding the foregoing sentence, in the event that Securities
Intermediary executes a transaction without adequate funds to settle the
transaction, Pledgor shall be liable to Securities Intermediary for any
deficiency and shall promptly reimburse Securities Intermediary for any loss or
expense incurred thereby, including losses sustained by reason of Securities
Intermediary's inability to borrow any securities or other property sold for the
Collateral Accounts. Pledgor agrees to pay interest charges which may be imposed
by Securities Intermediary in accordance with its usual custom, with respect to
late payments for securities or Financial Assets purchased for the Collateral
Accounts and prepayments in the Collateral Accounts (i.e., the crediting of the
proceeds of sale before the settlement date or receipt by Securities
Intermediary of the items sold in good deliverable form). Pledgor agrees to pay
promptly any amount which may become due in order to satisfy demands for
additional margin or marks to market with respect to any security purchased or
sold on instruction from Pledgor.
(d) Risk of Investments and Transactions. It is not the intention
of the parties that Securities Intermediary should bear any investment risk
associated with Permitted Investments or Overnight Investments acquired for the
credit of the Collateral Accounts in accordance with Section 4. Any losses or
gains realized on such Investments shall be charged or credited to the
Collateral
ANNEX A-10
<PAGE>
Accounts, as appropriate. On committing to a transaction for the credit of the
Collateral Accounts pursuant to an instruction permitted in accordance with
Section 4, Securities Intermediary may, (i) pending settlement, block (A) the
Investments to be sold or (B) credit balances sufficient to settle any
acquisition, or Investment the liquidation of which will yield funds sufficient
to settle any acquisition and, (ii) at the time of settlement, deliver such
Investments or funds in accordance with the rules, custom or practice of the
particular market.
(e) Use of Intermediaries and Nominees. Securities Intermediary is
authorized, subject to Secured Party's written instructions, to register any
Financial Assets acquired by Securities Intermediary pursuant to this Agreement
in the name of Securities Intermediary or in the name of its nominee, or to
cause such securities to be registered in the name of a Federal reserve bank or
a recognized securities intermediary or clearing corporation, or any nominee
thereof. Securities Intermediary may at any time and from time to time appoint,
and may at any time remove, any bank, trust company, clearing corporation, or
Broker-Dealer as its agent to carry out such of the provisions of this
Agreement. The appointment or use of any intermediary, or the appointment of any
such agent, shall not relieve Securities Intermediary of any responsibility or
liability under this Agreement.
(f) Corporate Actions. Except as otherwise set forth herein,
Pledgor and Secured Party agree that Securities Intermediary shall have no
responsibility for ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters relating to any
Financial Assets credited to or held for the credit of the Collateral Accounts
(except based on written instructions originated by Pledgor or Secured Party),
or for informing Pledgor or Secured Party with respect thereto, whether or not
Securities Intermediary has, or is deemed to have, knowledge of any of the
aforesaid. Securities Intermediary is authorized to withdraw securities sold or
otherwise disposed of, and to credit the Completion Guaranty Account with the
proceeds thereof or make such other disposition thereof as may be directed in
accordance with this Agreement. Securities Intermediary is further authorized to
collect all income and other payments which may become due on Financial Assets
credited to the Collateral Accounts, to surrender for payment maturing
obligations and those called for redemption and to exchange certificates in
temporary form for like certificates in definitive form, or, if the par value of
any shares is changed, to effect the exchange for new certificates. It is
understood and agreed by Pledgor and Secured Party that, although Securities
Intermediary will use reasonable efforts to effect the transactions set forth in
the preceding sentence, Securities Intermediary shall incur no liability for its
failure to effect the same unless its failure is the result of wilful
misconduct.
(g) Disclosure of Account Relationships. Pledgor and Secured Party
acknowledge that Securities Intermediary may be required to disclose to
securities issuers the name, address and securities positions with respect to
Financial Assets credited to the Collateral Accounts, and hereby consent to such
disclosures.
(h) Forwarding of Documents. Securities Intermediary shall forward
to Pledgor and, if requested, Secured Party, or notify Pledgor and, if
requested, Secured Party by telephone of, all written communications received by
Securities Intermediary as owner of any Financial Assets credited to the
Collateral Accounts and which are intended to be transmitted to the beneficial
owner thereof.
ANNEX A-11
<PAGE>
(i) Direction of Secured Party Controls in Disputes. Pledgor,
Securities Intermediary and Secured Party hereby agree that in the event any
dispute arises with respect to the payment, ownership or right to possession of
the Collateral Accounts or any other Collateral credited to or held therein,
Securities Intermediary shall take such actions and shall refrain from taking
such actions with respect thereto as may be directed by Secured Party.
(j) No Setoff, etc. Securities Intermediary shall not exercise on
its own behalf any claim, right of set-off, banker's lien, clearing lien,
counterclaim or similar right against any of the Collateral; provided that
Securities Intermediary may deduct, from any credit balances, any usual and
ordinary transaction and administration fees payable in connection with the
administration and operation of the Collateral Accounts. Except for claims for
deductions permitted in the preceding sentence, Securities Intermediary agrees
that any security interest it may have in the Collateral Accounts or any
security entitlement carried therein shall be subordinate and junior to the
interest of Secured Party.
(k) Only Agreement. This Agreement shall govern the actions,
rights and obligations of Securities Intermediary, and shall determine the
governing law, with respect to the Collateral Accounts and the Collateral
notwithstanding any term or condition in any agreement other than this Agreement
as it may be amended, supplemented or otherwise modified in writing.
(l) Care of Financial Assets. Securities Intermediary shall
maintain possession or control of all Financial Assets credited to the
Collateral Accounts by segregating such Financial Assets from its proprietary
assets and keeping them free of any lien, charge or claim of any third party
granted or created by Securities Intermediary. Securities Intermediary shall
take such other steps to ensure that Financial Assets credited to the Collateral
Accounts are identified as being held for customers of Securities Intermediary
as may required under applicable law or in accordance with custom and practice
in the industry.
(m) Further Actions. Securities Intermediary shall take such
further actions as Secured Party shall reasonably request as being necessary or
desirable to maintain or achieve perfection or priority of Secured Party's
security interest with respect to the Collateral and to permit Secured Party to
exercise its rights with respect to the Collateral.
SECTION 7. Limitations on Duties, and Exculpation and
Indemnification, of Securities Intermediary.
(a) Limitation on Duty of Care; Exculpation. Securities
Intermediary's duties hereunder are only those specifically provided herein, and
Securities Intermediary shall incur no liability whatsoever for any actions or
omissions hereunder except for any such liability arising out of or in
connection with Securities Intermediary's gross negligence or wilful misconduct.
Securities Intermediary has no obligation to ensure the sufficiency of this
Agreement or the arrangements described hereunder to satisfy any objectives of
Secured Party or Pledgor. Securities Intermediary shall have no duty to
supervise or to provide investment counseling or advice to Pledgor or Secured
Party with respect to the purchase, sale, retention or other disposition of any
Financial Assets held
ANNEX A-12
<PAGE>
hereunder. Except as specifically otherwise provided in this Agreement,
Securities Intermediary shall not be responsible for enforcing compliance by the
other parties to this Agreement with their respective duties and obligations to
each other under this or any other Agreement.
(b) Consultation with Counsel. Securities Intermediary may consult
with, and obtain advice from, legal counsel as to the construction of any of the
provisions of this Agreement, and shall incur no liability in acting in good
faith in accordance with the reasonable advice and opinion of such counsel.
(c) Reasonable Reliance. Securities Intermediary shall be fully
protected and shall suffer no liability in acting in accordance with any written
instructions reasonably believed by it to have been given (i) by Secured Party
with respect to any aspect of the operation of the Collateral Accounts
(including any such instructions relating to any investment or transfer of any
amounts held therein), (ii) by Pledgor, to the extent provided in Section 4(b),
with respect to the Collateral Accounts, or (iii) by Secured Party originally
named herein until such time as Securities Intermediary receives notice of the
substitution of Secured Party pursuant to Section 11.
(d) Indemnification. Pledgor agrees to indemnify Securities
Intermediary from and against any and all claims, losses, liabilities and
expenses (including reasonable attorneys' fees and expenses) in any way relating
to, growing out of or resulting from this Agreement or the performance of its
obligations hereunder, except to the extent arising out of or in connection with
Securities Intermediary's gross negligence or wilful misconduct.
SECTION 8. Representations and Warranties By Securities
Intermediary. Securities Intermediary hereby represents and warrants to Pledgor
and Secured Party as follows:
(a) Corporate Power. Securities Intermediary has all necessary
corporate power and authority to enter into and perform this Agreement.
(b) Execution Authorized. The execution, delivery and performance
of this Agreement by Securities Intermediary have been duly authorized by all
necessary corporate action on the part of Securities Intermediary.
(c) Securities Intermediary. Securities Intermediary is a
"securities intermediary" (as that term is defined in Section 8-102(a)(14) of
the Code) and is acting in such capacity with respect to the Collateral
Accounts. Securities Intermediary is not a "clearing corporation" (as that term
is defined in Section 8-102(a)(5) of the Code).
ANNEX A-13
<PAGE>
SECTION 9. Termination. This Agreement shall terminate, and all
rights to the Collateral Accounts and all other Collateral registered to or held
therein shall revert to Pledgor, upon Securities Intermediary's receipt of
written notice, signed by an authorized officer of Secured Party, that the
Completion Guaranty Collateral Account Agreement has terminated.
SECTION 10. Resignation and Removal of Securities Intermediary.
(a) Removal. Securities Intermediary may be removed at any time by
written notice given by Secured Party to Securities Intermediary and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing.
(b) Resignation. Securities Intermediary may resign at any time by
giving not less than thirty days' written notice to Secured Party and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing. If an instrument of acceptance by a successor
Securities Intermediary shall not have been delivered to the resigning
Securities Intermediary within sixty days after the giving of any such notice of
resignation, the resigning Securities Intermediary may, at the expense of
Pledgor, petition any court of competent jurisdiction for the appointment of a
successor Securities Intermediary.
(c) Successor Securities Intermediary. Any successor Securities
Intermediary shall be a bank or trust company, having capital and surplus of at
least $100 million, located in the State of New York.
(d) Process of Succession. Upon the appointment of a successor
Securities Intermediary and its acceptance of such appointment, the resigning or
removed Securities Intermediary shall transfer all items of Collateral held by
it to such successor (which items of Collateral shall be transferred to new
Collateral Accounts established and maintained by such successor). Following
such appointment all references herein to Securities Intermediary shall be
deemed a reference to such successor; provided that the provisions of Section 7
hereof shall continue to inure to the benefit of the resigning or removed
Securities Intermediary with respect to any actions taken or omitted to be taken
by it under this Agreement while it was Securities Intermediary hereunder.
SECTION 11. Secured Party as Disbursement Agent. Secured Party has
been appointed to act as Secured Party hereunder by Lenders pursuant to the
Disbursement Agreement. Secured Party shall at all times be the same Person that
is Disbursement Agent under the Disbursement Agreement. Written notice of
resignation by Disbursement Agent pursuant to subsection 9.7 of the Disbursement
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; removal of Disbursement Agent pursuant to subsection 9.7 of the
Disbursement Agreement shall also constitute removal as Secured Party under this
Agreement; and substitution of a successor disbursement agent pursuant to
subsection 9.7 of the Disbursement Agreement shall also constitute substitution
of a successor Secured Party under this Agreement.
ANNEX A-14
<PAGE>
Upon the acceptance of any appointment as Disbursement Agent under subsection
9.7 of the Disbursement Agreement by a successor Disbursement Agent, that
successor Disbursement Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all items
of Collateral held by Secured Party, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Secured Party under this Agreement, and (ii) execute and
deliver to such successor Secured Party such documents and take such other
actions, as may be necessary or appropriate in connection with the assignment to
such successor Secured Party of the security interests created hereunder,
whereupon such retiring or removed Secured Party shall be discharged from its
duties and obligations under this Agreement.
SECTION 12. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to the address of the party
as set forth under such party's name on the signature pages hereof. All notices
or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person,
(b) if sent by reputable overnight delivery service, (c) in the event overnight
delivery services are not readily available, if mailed by first class mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telex, or by telecopy with correct answer back received. Notice
so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next following Business Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Business Day;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. Any party shall have the right to change its address for
notice hereunder to any other location by giving of no less than twenty (20)
days' notice to the other parties in the manner set forth hereinabove.
SECTION 13. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by any party herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
other parties, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
SECTION 14. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 15. 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.
ANNEX A-15
<PAGE>
SECTION 16. Governing Law. THIS AGREEMENT 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. Securities
Intermediary's Jurisdiction shall be New York.
SECTION 17. Waiver of Jury Trial. PLEDGOR, SECURED PARTY AND
SECURITIES INTERMEDIARY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims. Pledgor, Secured
Party and Securities Intermediary each acknowledge that this waiver is a
material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor, Secured Party and Securities Intermediary have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor,
Secured Party and Securities Intermediary further warrant and represent that
each has reviewed this waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 18. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
ANNEX A-16
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
PLEDGOR:
------------------------------------
SHELDON G. ADELSON
Notice Address: 2950 Augusta Drive
Las Vegas, Nevada 89109
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a
Canadian chartered bank, as
Disbursement Agent under
the Disbursement Agreement
By: __________________________________
Title:
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Allan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
ANNEX A-S-1
<PAGE>
SECURITIES INTERMEDIARY:
GOLDMAN, SACHS & CO., as Securities Intermediary
By: __________________________________
Title:
Notice Address: Goldman, Sachs & Co.
Oliver Street Tower
125 High Street, Suite 1700
Boston MA 02110-2704
Attention: Peter W. Grieve
Telephone: (800) 343-9120
Facsimile Number: (617) 204-2392
With a copy to: Goldman, Sachs & Co.
85 Broad Street
New York, NY 10022
Attention: Lisa Laura Mays
Facsimile Number: (212) 902-3737
ANNEX A-S-2
<PAGE>
ATTACHMENT 1
[FORM OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
---------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Prohibition Notice under that Certain Completion Guaranty Third-Party
Account Agreement/Collateral Accounts Numbers 010-20499-8 ___________
Ladies and Gentlemen:
Pursuant to the Completion Guaranty Third-Party Account Agreement dated November
14, 1997 ("Third-Party Account Agreement") among The Bank of Nova Scotia, as
Secured Party, certain Pledgors, and Securities Intermediary, we hereby give you
this Prohibition Notice and notify you of the commencement of a Suspension
Period. Until further notice from the undersigned substantially in the form of
Attachment 2 to the Third-Party Account Agreement, [Securities Intermediary]
shall not accept or follow instructions from Pledgor pursuant to Section 4(b) of
the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ANNEX A/ATTACHMENT 1-1
<PAGE>
ATTACHMENT 2
[FORM OF RESCISSION OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
---------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Rescission of Prohibition Notice under that Certain Completion Guaranty
Third-Party Account Agreement/Completion Guaranty Account Number
010-20499-8 ___________________________________________________________
Ladies and Gentlemen:
Pursuant to the Completion Guaranty Third-Party Account Agreement dated November
14, 1997 ("Third-Party Account Agreement") among The Bank of Nova Scotia, as
Secured Party, certain Pledgors and Securities Intermediary, we hereby notify
you of the rescission by [Secured Party] of the Prohibition Notice dated [date
of Prohibition Notice] and the end of the related Suspension Period. You are
hereby instructed that, until receipt of a new Prohibition Notice, you shall
accept and follow written instructions from Pledgor pursuant to Section 4(b) of
the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ANNEX A/ATTACHMENT 2-1
COMPLETION GUARANTY THIRD-PARTY ACCOUNT AGREEMENT
This COMPLETION GUARANTY THIRD-PARTY ACCOUNT AGREEMENT (this
"Agreement") is dated as of November 14, 1997 and entered into by and among
SHELDON G. ADELSON, an individual ("Pledgor"), THE BANK OF NOVA SCOTIA, a
Canadian chartered bank through its New York agency, as Disbursement Agent under
the Disbursement Agreement (in such capacity herein called "Secured Party") and
GOLDMAN, SACHS & CO., a Broker-Dealer ("Securities Intermediary").
PRELIMINARY STATEMENTS
A. The Project. LVSI, VCR and Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company ("GCCLLC"), propose to develop, construct and
operate the Venetian Casino Resort, a large scale Venetian-themed hotel, casino,
retail, meeting and entertainment complex, with related heating, ventilation and
air conditioning and power station facilities, as part of the redevelopment of
the site of the former Las Vegas Sands Hotel and Casino.
B. Bank Credit Agreement. Concurrently herewith, LVSI, VCR, the Bank Agent
and the Bank Lenders have entered into the Bank Credit Agreement pursuant to
which the Bank Lenders have agreed, subject to the terms thereof, to provide
certain loans to LVSI and VCR, jointly and severally, in an aggregate amount and
for purposes specified therein.
C. Interim Mall Credit Agreement. Concurrently herewith, LVSI, VCR,
GCCLLC, and the Interim Mall Lender have entered into the Interim Mall Credit
Agreement pursuant to which the Interim Mall Lender has agreed to provide loans
to LVSI, VCR and GCCLLC, jointly and severally, in an aggregate amount and for
purposes specified therein.
D. Mortgage Notes Indenture. Concurrently herewith, LVSI, VCR, certain
guarantors named therein, and the Mortgage Notes Indenture Trustee have entered
into the Mortgage Notes Indenture pursuant to which LVSI and VCR will issue
Mortgage Notes in an aggregate principal amount and for purposes specified
therein.
E. Subordinated Notes Indenture. Concurrently herewith, LVSI, VCR and the
Subordinated Notes Indenture Trustee have entered into the Subordinated Notes
Indenture pursuant to which LVSI and VCR will issue Subordinated Notes in an
aggregate principal amount and for purposes specified therein.
F. HVAC Services Agreement. Concurrently herewith, VCR and the HVAC
Provider have entered into the HVAC Services Agreement pursuant to which the
HVAC Provider has agreed to advance, for the acquisition, construction, testing
and installation of that certain HVAC Component of the Project, an aggregate
amount specified therein.
G. Intercreditor Agreement. Concurrently herewith, the Bank Agent (acting
on behalf of itself and the Bank Lenders), the Interim Mall Lender, the Mortgage
Notes Indenture Trustee (acting on behalf of itself and the Mortgage Note
Holders) and the Subordinated Notes Indenture
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Trustee (acting on behalf of itself and the Subordinated Note Holders) have
entered into that certain Intercreditor Agreement pursuant to which the parties
thereto have set forth certain intercreditor provisions, including the method of
voting and decision making among the Bank Lenders, the Interim Mall Lender, the
Mortgage Note Holders and the Subordinated Note Holders, the arrangements
applicable to joint consultation and actions in respect of approval rights and
waivers, the limitations on rights of enforcement upon default and the
application of proceeds upon enforcement.
H. Funding Agents' Disbursement and Administration Agreement. Concurrently
herewith, Pledgor, GCCLLC, the Bank Agent (acting on behalf of itself and the
Bank Lenders), the Interim Mall Lender, the Mortgage Notes Indenture Trustee
(acting on behalf of itself and the Mortgage Note Holders), the HVAC Provider
and The Bank of Nova Scotia, New York Agency, as "Disbursement Agent" have
entered into that certain Funding Agents' Disbursement and Administration
Agreement ("Disbursement Agreement") for the purpose of setting forth, among
other things, (a) the mechanics for and allocation of the Company's requests for
Advances under the Facilities and from the Company's Funds Account, (b) the
conditions precedent to the initial Advance and conditions precedent to
subsequent Advances, (c) certain common representations, warranties and
covenants of the Company in favor of the Funding Agents, (d) the establishment
of the Collateral Accounts, (e) the pledge and management of the Collateral
Accounts, and (f) the common events of default and remedies.
I. Condition. It is a condition precedent to the extensions or purchase of
the Mortgage Notes by the Mortgage Note Holders, the funding of the Bank Loans
by the Bank Lenders and the funding of the Interim Mall Construction Loan by the
Interim Mall Lender that Pledgor shall have established the Collateral Accounts,
grant control to the Disbursement Agent (as Secured Party) of such accounts, and
undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to purchase the Mortgage Notes under the Mortgage Notes
Indenture, the funding of the Bank Loans by the Bank Lenders and the funding of
the Interim Mall Construction Loan by the Interim Mall Lender and for other good
consideration, the receipt and adequacy of which are hereby acknowledged,
Pledgor, Securities Intermediary and Secured Party hereby agree as follows:
SECTION 1. Definitions.
(a) Specific Definitions. The following terms used in this
Agreement shall have the following meanings:
"Broker-Dealer" means a person registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or Nevada or
is a day on which banking institutions located in such states are authorized or
required by law or other governmental action to close, or a day on which the New
York Stock Exchange is closed.
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<PAGE>
"Code" shall mean the Uniform Commercial Code as in effect in New
York.
"Collateral" means (i) the Completion Guaranty Account, (ii) all
amounts held from time to time in the Completion Guaranty Account, (iii) all
Investments, including all Financial Assets, security entitlements, securities
(whether certificated or uncertificated), instruments, accounts, general
intangibles and deposits representing or evidencing any Investments, (iv) all
interest, dividends, cash, instruments, securities and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Collateral, and (v) to the extent not covered by
clauses (i) through (iv) above, all proceeds of any or all of the foregoing
Collateral.
"Collateral Accounts" means the Completion Guaranty Account and any
other accounts in which Investments may be held or registered.
"Collateral Value" means, as at any date of determination, the Value
of all Collateral (other than Investments which are not Permitted Investments)
as of such date.
"Investments" means any Financial Assets credited to the Completion
Guaranty Account, and any other property acquired by Securities Intermediary as
securities intermediary hereunder in exchange for, with proceeds from or
distributions on, or otherwise in respect of any Investments.
"Overnight Investments" means Investments of the kind described in
subdivision (a)(v), (b) or (c) of the definition of "Permitted Investments."
"Permitted Investments" means (a) (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 any Rating
Agency 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 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 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
3
<PAGE>
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 at least "A" or "A2" or the equivalent by any Rating Agency and
short-term debt rated 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 thereof) 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 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 (which demand shall only be made at the direction of Pledgor) after
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; (b) 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; (c) 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 (d) 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, in each case having rating
of at least "A" or "A2" or the equivalent by any Rating Agency.
"Suspension Period" means the period (i) beginning promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Prohibition Notice attached to this Agreement
as Attachment 1, suspending Pledgor's right to direct the investment of funds
held for the credit of the Collateral Accounts, and (ii) ending promptly after
receipt by Securities Intermediary of written notice from Secured Party,
substantially in the form of the Rescission of Prohibition Notice attached to
this Agreement as Attachment 2, rescinding the preceding Prohibition Notice.
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"Valuation Date" means (i) the date hereof and (ii) the first
Business Day of each calendar month thereafter.
"Value" means the value in U.S. Dollars of any Financial Asset as
determined by Secured Party in its reasonable judgment based on pricing
information supplied by Securities Intermediary on a basis consistent with its
usual practice, including values obtained from a generally recognized source
(including any pricing service regularly utilized by Securities Intermediary).
Any information supplied by Securities Intermediary shall be conclusive absent
manifest error.
(b) General Provisions. Capitalized terms used but not defined
herein shall have the meaning given to such terms in Exhibit A. Unless otherwise
defined herein or in Exhibit A, terms used in Articles 8 and 9 of the Code are
used herein as therein defined. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate. When a reference is made in this
Agreement to an Appendix, Exhibit, Introduction, Recital, Section or Schedule,
such reference shall be to an Appendix, an Exhibit, the Introduction, a Recital
or a Section of, or a Schedule to, this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 2. Establishment and Operation of Collateral Accounts.
(a) Establishment of Completion Guaranty Account. Pledgor and
Secured Party hereby authorize and direct Securities Intermediary to establish
and maintain at its office at 85 Broad Street, New York, New York 10022, a
securities account in the name of Secured Party and under the sole dominion and
control of Secured Party, designated as "Bank of Nova Scotia Completion Guaranty
Account." Securities Intermediary hereby undertakes to treat Secured Party as
the person entitled to exercise the rights that comprise any Financial Asset
credited to the Completion Guaranty Account. Secured Party and Pledgor agree
that this account shall be the "Completion Guaranty Account."
(b) Acknowledgement of Receipt of Investments. Securities
Intermediary acknowledges the transfer by Pledgor, and the acquisition by
Securities Intermediary, of Financial Assets that are Permitted Investments that
have a Value of $25,000,000 for the credit of the Completion Guaranty Account.
(c) Operations of the Collateral Accounts. The Collateral Accounts
shall be operated, and all Investments shall be acquired and registered or held
(as applicable), in accordance with the terms of this Agreement.
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(d) Account Statements. Securities Intermediary shall send Secured
Party and Pledgor written account statements with respect to the Collateral
Accounts not less frequently than monthly. Reports or confirmation of the
execution of orders and statements of account shall be conclusive if not
objected to in writing within 30 days after delivery pursuant to Section 12.
SECTION 3. Mechanics of Deposits of Funds or Investments to the
Collateral Account.
(a) Transfers to the Completion Guaranty Account. All transfers of
funds to the Completion Guaranty Account shall be made by wire transfer (or, if
applicable, intra-bank transfer) of immediately available funds addressed as
follows:
The Chase Manhattan Bank, New York, New York
ABA No.: 021-0000-21
Reference: A/C Goldman, Sachs & Co.
A/C# 930-1-011483
FFC A/C: BANK OF NOVA SCOTIA COMPLETION
GUARANTY ACCOUNT
A/C#: 010-20499-8
Transfers of Financial Assets to the Completion Guaranty Account shall be
permitted by book-entry from securities accounts maintained with Securities
Intermediary.
(b) Notice of Transfers. In the event of any transfer of funds or
Financial Assets to the Collateral Accounts pursuant to any provision of Section
3, Pledgor, Secured Party, as the case may be, shall promptly after initiating
or sending out written instructions with respect to such transfer, give notice
to the other such party by facsimile of the date and amount of such transfer.
SECTION 4. Permitted Investments and Transfers of Amounts in the
Collateral Accounts.
(a) Strict Compliance. Credit balances held by Securities
Intermediary in the Collateral Accounts shall not be (i) invested or reinvested,
(ii) sold or redeemed, or (iii) transferred from the Collateral Accounts, in
either case except as provided in this Section 4.
(b) Pledgor's Right to Direct Investment. Except during any
Suspension Period, Securities Intermediary shall, in accordance with Pledgor's
written Entitlement Orders given to Securities Intermediary from time to time,
sell or redeem Investments, and apply amounts transferred to or held for the
credit of the Collateral Accounts to make investments for credit to the
Collateral Accounts, in Securities Intermediary's name and as custodian under
this Agreement, in Permitted Investments denominated and payable in United
States dollars. During any Suspension Period, Pledgor's right to direct such
investments under this Section 4(b) shall be suspended, and Securities
Intermediary shall not accept Entitlement Orders with respect to
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the Collateral Accounts from any person other than Secured Party; and (ii) any
credit balances shall be invested and reinvested only as provided in Section
4(c).
(c) Overnight Investments. To the extent that, as of 12:00 noon,
New York time on any Business Day, there are credit balances expected to remain
after settlement of all pending transactions in any of the Collateral Accounts,
unless otherwise instructed by Secured Party, Securities Intermediary shall
apply the expected credit balances to acquire Overnight Investments. Any
Overnight Investments shall be held for the credit of the Collateral Accounts
from which the proceeds for acquisition was derived. If for any reason
Securities Intermediary fails to invest credit balances in Overnight Investments
as provided in this Section, Securities Intermediary shall credit the Mortgage
Construction Guaranty Account with daily interest on the uninvested free credit
balance in accordance with its usual practice.
(d) Actions of Securities Intermediary on Purchase of Investments.
Promptly upon the purchase, acquisition or transfer for credit of the Collateral
Accounts of any Investment, Securities Intermediary shall take all steps that it
customarily takes in the ordinary course of its business to ensure that such
Investment is credited on its books to the Collateral Accounts. Without limiting
the generality of the foregoing, Securities Intermediary shall promptly (i) send
to Pledgor and Secured Party a written confirmation of the acquisition of such
Investment, and (ii) indicate by book entry in its records that such Investment
has been credited to, and is held for the credit of, the Collateral Accounts.
Securities Intermediary agrees with Pledgor and Secured Party that any credit
balances or property credited to, or held for the credit of, the Collateral
Accounts shall be treated as "Financial Assets" as that term is defined in
Section 8-103(a)(9)(iii) of the Code.
(e) Control Agreement. Anything contained herein to the contrary
notwithstanding, Securities Intermediary shall, if and as directed in writing by
Secured Party, without the consent of Pledgor, (i) comply with Entitlement
Orders originated by Secured Party with respect to the Collateral Accounts and
any Security Entitlements therein, (ii) transfer, sell or redeem any of the
Collateral, (iii) transfer any or all of the Collateral to any account or
accounts designated by Secured Party, including an account established in
Secured Party's name (whether at Secured Party or Securities Intermediary or
otherwise), (iv) register title to any Collateral in any name specified by
Secured Party consistent with the policies or practices of the applicable
depository, including the name of Secured Party or any of its nominees or
agents, without reference to any interest of Pledgor, or (v) otherwise deal with
the Collateral as directed by Secured Party. Nothing contained in this paragraph
shall constitute a waiver of by Pledgor of any rights or remedies it may have
against Secured Party under this Agreement or any other agreement.
(f) Deposit of Proceeds. Any interest, cash dividends or other
cash distributions received in respect of any Investments and the net proceeds
of any sale or payment of any Investments shall be promptly credited to, and
held for the credit of, the Collateral Accounts. Any distribution of property
other than cash in respect of any Investment shall be credited to, and held for
the credit of, the Collateral Accounts.
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(g) Valuation of Collateral. Securities Intermediary shall provide
access to its systems to Secured Party and Pledgor for the purpose of
communicating data as to the Collateral Accounts as of that date.
SECTION 5. Acknowledgement of Security Interest in Favor of Secured
Party; Covenant Against Creation of other Interests.
(a) Acknowledgement of Security Interest. Securities Intermediary
acknowledges the security interest granted by Pledgor in favor of Secured Party
in the Collateral.
(b) Acknowledgement of Securities Intermediary's Role. Securities
Intermediary hereby further acknowledges that it holds the Collateral Accounts,
and all Security Entitlements therein, as custodian for, for the benefit of, and
subject to the control of, Secured Party. Securities Intermediary shall, by book
entry or otherwise, indicate that the Collateral Accounts, and all Security
Entitlements registered to or held therein, are subject to the control of
Secured Party as provided in Section 4(e).
(c) Securities Intermediary Has No Notice of Adverse Claims.
Securities Intermediary represents and warrants that (i) it has no notice of any
Adverse Claim against any of the Collateral other than the claim of Secured
Party under this Agreement; and (ii) it is not party to any agreement other than
this Agreement that governs its rights or duties, or limits or conflicts with
the rights of Secured Party, including the exclusive right of Secured Party to
control as provided in Section 4(e), with respect to the Collateral Accounts.
(d) Securities Intermediary Shall Not Acknowledge Other Claims.
Securities Intermediary agrees that, except as expressly provided in this
Agreement (including Section 6(d)) or with the written consent of Secured Party,
it shall not agree to or acknowledge (i) any right by any Person other than
Secured Party to originate Entitlement Orders or control with respect to the
Collateral Accounts; or (ii) any limitation on the right of Secured Party to
originate Entitlement Orders with respect to or direct the transfer of any
Investments or cash credited to the Collateral Accounts.
SECTION 6. Securities Intermediary Maintenance of the Collateral
Accounts.
(a) Transactions Shall Comply With Rules. The parties acknowledge
that all transactions in Financial Assets under this Agreement shall be in
accordance with the rules and customs of the exchange, market or clearing
organization, if any, in which the transactions are executed or settled and in
conformity with applicable law and regulations of governmental authorities and
future amendments or supplements thereto.
(b) Fees and Charges of Securities Intermediary. Pledgor shall
promptly pay Securities Intermediary, in accordance with Securities
Intermediary's usual schedule of charges or any written agreement between
Securities Intermediary and Pledgor, any reasonable fees or charges imposed by
Securities Intermediary with respect to the establishment, maintenance or
transactions in or affecting the Collateral Accounts.
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(c) Securities Intermediary Shall Not Permit Leverage of
Investments. Securities Intermediary shall not execute any transaction to
acquire Financial Assets under Section 4(b) unless (A) there are sufficient
funds in the Collateral Accounts to settle such transactions or (B) it is
reasonably anticipated that such funds may be generated through the liquidation
of Financial Assets then credited to the Collateral Accounts, or to sell or
redeem any Financial Asset which is not held, or reasonably expected to be
acquired in pending transactions, for the credit of the Collateral Accounts.
Notwithstanding the foregoing sentence, in the event that Securities
Intermediary executes a transaction without adequate funds to settle the
transaction, Pledgor shall be liable to Securities Intermediary for any
deficiency and shall promptly reimburse Securities Intermediary for any loss or
expense incurred thereby, including losses sustained by reason of Securities
Intermediary's inability to borrow any securities or other property sold for the
Collateral Accounts. Pledgor agrees to pay interest charges which may be imposed
by Securities Intermediary in accordance with its usual custom, with respect to
late payments for securities or Financial Assets purchased for the Collateral
Accounts and prepayments in the Collateral Accounts (i.e., the crediting of the
proceeds of sale before the settlement date or receipt by Securities
Intermediary of the items sold in good deliverable form). Pledgor agrees to pay
promptly any amount which may become due in order to satisfy demands for
additional margin or marks to market with respect to any security purchased or
sold on instruction from Pledgor.
(d) Risk of Investments and Transactions. It is not the intention
of the parties that Securities Intermediary should bear any investment risk
associated with Permitted Investments or Overnight Investments acquired for the
credit of the Collateral Accounts in accordance with Section 4. Any losses or
gains realized on such Investments shall be charged or credited to the
Collateral Accounts, as appropriate. On committing to a transaction for the
credit of the Collateral Accounts pursuant to an instruction permitted in
accordance with Section 4, Securities Intermediary may, (i) pending settlement,
block (A) the Investments to be sold or (B) credit balances sufficient to settle
any acquisition, or Investment the liquidation of which will yield funds
sufficient to settle any acquisition and, (ii) at the time of settlement,
deliver such Investments or funds in accordance with the rules, custom or
practice of the particular market.
(e) Use of Intermediaries and Nominees. Securities Intermediary is
authorized, subject to Secured Party's written instructions, to register any
Financial Assets acquired by Securities Intermediary pursuant to this Agreement
in the name of Securities Intermediary or in the name of its nominee, or to
cause such securities to be registered in the name of a Federal reserve bank or
a recognized securities intermediary or clearing corporation, or any nominee
thereof. Securities Intermediary may at any time and from time to time appoint,
and may at any time remove, any bank, trust company, clearing corporation, or
Broker-Dealer as its agent to carry out such of the provisions of this
Agreement. The appointment or use of any intermediary, or the appointment of any
such agent, shall not relieve Securities Intermediary of any responsibility or
liability under this Agreement.
(f) Corporate Actions. Except as otherwise set forth herein,
Pledgor and Secured Party agree that Securities Intermediary shall have no
responsibility for ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters relating to any
Financial Assets credited to or held for the credit of the Collateral
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<PAGE>
Accounts (except based on written instructions originated by Pledgor or Secured
Party), or for informing Pledgor or Secured Party with respect thereto, whether
or not Securities Intermediary has, or is deemed to have, knowledge of any of
the aforesaid. Securities Intermediary is authorized to withdraw securities sold
or otherwise disposed of, and to credit the Completion Guaranty Account with the
proceeds thereof or make such other disposition thereof as may be directed in
accordance with this Agreement. Securities Intermediary is further authorized to
collect all income and other payments which may become due on Financial Assets
credited to the Collateral Accounts, to surrender for payment maturing
obligations and those called for redemption and to exchange certificates in
temporary form for like certificates in definitive form, or, if the par value of
any shares is changed, to effect the exchange for new certificates. It is
understood and agreed by Pledgor and Secured Party that, although Securities
Intermediary will use reasonable efforts to effect the transactions set forth in
the preceding sentence, Securities Intermediary shall incur no liability for its
failure to effect the same unless its failure is the result of wilful
misconduct.
(g) Disclosure of Account Relationships. Pledgor and Secured Party
acknowledge that Securities Intermediary may be required to disclose to
securities issuers the name, address and securities positions with respect to
Financial Assets credited to the Collateral Accounts, and hereby consent to such
disclosures.
(h) Forwarding of Documents. Securities Intermediary shall forward
to Pledgor and, if requested, Secured Party, or notify Pledgor and, if
requested, Secured Party by telephone of, all written communications received by
Securities Intermediary as owner of any Financial Assets credited to the
Collateral Accounts and which are intended to be transmitted to the beneficial
owner thereof.
(i) Direction of Secured Party Controls in Disputes. Pledgor,
Securities Intermediary and Secured Party hereby agree that in the event any
dispute arises with respect to the payment, ownership or right to possession of
the Collateral Accounts or any other Collateral credited to or held therein,
Securities Intermediary shall take such actions and shall refrain from taking
such actions with respect thereto as may be directed by Secured Party.
(j) No Setoff, etc. Securities Intermediary shall not exercise on
its own behalf any claim, right of set-off, banker's lien, clearing lien,
counterclaim or similar right against any of the Collateral; provided that
Securities Intermediary may deduct, from any credit balances, any usual and
ordinary transaction and administration fees payable in connection with the
administration and operation of the Collateral Accounts. Except for claims for
deductions permitted in the preceding sentence, Securities Intermediary agrees
that any security interest it may have in the Collateral Accounts or any
security entitlement carried therein shall be subordinate and junior to the
interest of Secured Party.
(k) Only Agreement. This Agreement shall govern the actions,
rights and obligations of Securities Intermediary, and shall determine the
governing law, with respect to the Collateral Accounts and the Collateral
notwithstanding any term or condition in any agreement other than this Agreement
as it may be amended, supplemented or otherwise modified in writing.
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(l) Care of Financial Assets. Securities Intermediary shall
maintain possession or control of all Financial Assets credited to the
Collateral Accounts by segregating such Financial Assets from its proprietary
assets and keeping them free of any lien, charge or claim of any third party
granted or created by Securities Intermediary. Securities Intermediary shall
take such other steps to ensure that Financial Assets credited to the Collateral
Accounts are identified as being held for customers of Securities Intermediary
as may required under applicable law or in accordance with custom and practice
in the industry.
(m) Further Actions. Securities Intermediary shall take such
further actions as Secured Party shall reasonably request as being necessary or
desirable to maintain or achieve perfection or priority of Secured Party's
security interest with respect to the Collateral and to permit Secured Party to
exercise its rights with respect to the Collateral.
SECTION 7. Limitations on Duties, and Exculpation and
Indemnification, of Securities Intermediary.
(a) Limitation on Duty of Care; Exculpation. Securities
Intermediary's duties hereunder are only those specifically provided herein, and
Securities Intermediary shall incur no liability whatsoever for any actions or
omissions hereunder except for any such liability arising out of or in
connection with Securities Intermediary's gross negligence or wilful misconduct.
Securities Intermediary has no obligation to ensure the sufficiency of this
Agreement or the arrangements described hereunder to satisfy any objectives of
Secured Party or Pledgor. Securities Intermediary shall have no duty to
supervise or to provide investment counseling or advice to Pledgor or Secured
Party with respect to the purchase, sale, retention or other disposition of any
Financial Assets held hereunder. Except as specifically otherwise provided in
this Agreement, Securities Intermediary shall not be responsible for enforcing
compliance by the other parties to this Agreement with their respective duties
and obligations to each other under this or any other Agreement.
(b) Consultation with Counsel. Securities Intermediary may consult
with, and obtain advice from, legal counsel as to the construction of any of the
provisions of this Agreement, and shall incur no liability in acting in good
faith in accordance with the reasonable advice and opinion of such counsel.
(c) Reasonable Reliance. Securities Intermediary shall be fully
protected and shall suffer no liability in acting in accordance with any written
instructions reasonably believed by it to have been given (i) by Secured Party
with respect to any aspect of the operation of the Collateral Accounts
(including any such instructions relating to any investment or transfer of any
amounts held therein), (ii) by Pledgor, to the extent provided in Section 4(b),
with respect to the Collateral Accounts, or (iii) by Secured Party originally
named herein until such time as Securities Intermediary receives notice of the
substitution of Secured Party pursuant to Section 11.
(d) Indemnification. Pledgor agrees to indemnify Securities
Intermediary from and against any and all claims, losses, liabilities and
expenses (including reasonable attorneys' fees and expenses) in any way relating
to, growing out of or resulting from this Agreement or
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<PAGE>
the performance of its obligations hereunder, except to the extent arising out
of or in connection with Securities Intermediary's gross negligence or wilful
misconduct.
SECTION 8. Representations and Warranties By Securities
Intermediary. Securities Intermediary hereby represents and warrants to Pledgor
and Secured Party as follows:
(a) Corporate Power. Securities Intermediary has all necessary
corporate power and authority to enter into and perform this Agreement.
(b) Execution Authorized. The execution, delivery and performance
of this Agreement by Securities Intermediary have been duly authorized by all
necessary corporate action on the part of Securities Intermediary.
(c) Securities Intermediary. Securities Intermediary is a
"securities intermediary" (as that term is defined in Section 8-102(a)(14) of
the Code) and is acting in such capacity with respect to the Collateral
Accounts. Securities Intermediary is not a "clearing corporation" (as that term
is defined in Section 8-102(a)(5) of the Code).
SECTION 9. Termination. This Agreement shall terminate, and all
rights to the Collateral Accounts and all other Collateral registered to or held
therein shall revert to Pledgor, upon Securities Intermediary's receipt of
written notice, signed by an authorized officer of Secured Party, that the
Completion Guaranty Collateral Account Agreement has terminated.
SECTION 10. Resignation and Removal of Securities Intermediary.
(a) Removal. Securities Intermediary may be removed at any time by
written notice given by Secured Party to Securities Intermediary and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing.
(b) Resignation. Securities Intermediary may resign at any time by
giving not less than thirty days' written notice to Secured Party and Pledgor,
but such removal shall not become effective until a successor Securities
Intermediary shall have been appointed by Secured Party and shall have accepted
such appointment in writing. If an instrument of acceptance by a successor
Securities Intermediary shall not have been delivered to the resigning
Securities Intermediary within sixty days after the giving of any such notice of
resignation, the resigning Securities Intermediary may, at the expense of
Pledgor, petition any court of competent jurisdiction for the appointment of a
successor Securities Intermediary.
(c) Successor Securities Intermediary. Any successor Securities
Intermediary shall be a bank or trust company, having capital and surplus of at
least $100 million, located in the State of New York.
(d) Process of Succession. Upon the appointment of a successor
Securities Intermediary and its acceptance of such appointment, the resigning or
removed Securities Intermediary shall transfer all items of Collateral held by
it to such successor (which items of
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Collateral shall be transferred to new Collateral Accounts established and
maintained by such successor). Following such appointment all references herein
to Securities Intermediary shall be deemed a reference to such successor;
provided that the provisions of Section 7 hereof shall continue to inure to the
benefit of the resigning or removed Securities Intermediary with respect to any
actions taken or omitted to be taken by it under this Agreement while it was
Securities Intermediary hereunder.
SECTION 11. Secured Party as Disbursement Agent. Secured Party has
been appointed to act as Secured Party hereunder by Lenders pursuant to the
Disbursement Agreement. Secured Party shall at all times be the same Person that
is Disbursement Agent under the Disbursement Agreement. Written notice of
resignation by Disbursement Agent pursuant to subsection 9.7 of the Disbursement
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; removal of Disbursement Agent pursuant to subsection 9.7 of the
Disbursement Agreement shall also constitute removal as Secured Party under this
Agreement; and substitution of a successor disbursement agent pursuant to
subsection 9.7 of the Disbursement Agreement shall also constitute substitution
of a successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Disbursement Agent under subsection 9.7 of the Disbursement
Agreement by a successor Disbursement Agent, that successor Disbursement Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Secured Party under this
Agreement, and the retiring or removed Secured Party under this Agreement shall
promptly (i) transfer to such successor Secured Party all items of Collateral
held by Secured Party, together with all records and other documents necessary
or appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such documents and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Secured Party of the security interests created hereunder, whereupon such
retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement.
SECTION 12. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to the address of the party
as set forth under such party's name on the signature pages hereof. All notices
or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person,
(b) if sent by reputable overnight delivery service, (c) in the event overnight
delivery services are not readily available, if mailed by first class mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telex, or by telecopy with correct answer back received. Notice
so given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next following Business Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Business Day;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. Any party shall have the right to change its address for
notice hereunder to any other location by giving of no less than twenty (20)
days' notice to the other parties in the manner set forth hereinabove.
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SECTION 13. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by any party herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
other parties, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
SECTION 14. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 15. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 16. Governing Law. THIS AGREEMENT 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. Securities
Intermediary's Jurisdiction shall be New York.
SECTION 17. Waiver of Jury Trial. PLEDGOR, SECURED PARTY AND
SECURITIES INTERMEDIARY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims. Pledgor, Secured
Party and Securities Intermediary each acknowledge that this waiver is a
material inducement for Pledgor and Secured Party to enter into a business
relationship, that Pledgor, Secured Party and Securities Intermediary have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor,
Secured Party and Securities Intermediary further warrant and represent that
each has reviewed this waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 18. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
PLEDGOR: /s/ Sheldon G. Adelson
------------------------------------
SHELDON G. ADELSON
Notice Address: 2950 Augusta Drive
Las Vegas, Nevada 89109
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a Canadian
chartered bank, as Disbursement Agent under
the Disbursement Agreement
By: /s/ Allan Pendergast
--------------------
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Allan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S - 1
<PAGE>
SECURITIES INTERMEDIARY:
GOLDMAN, SACHS & CO., as Securities
Intermediary
By: /s/ David Z. Hank
-----------------
Title: Managing Director
Notice Address: Goldman, Sachs & Co.
Oliver Street Tower
125 High Street, Suite 1700
Boston MA 02110-2704
Attention: Peter W. Grieve
Telephone: (800) 343-9120
Facsimile Number: (617) 204-2392
With a copy to: Goldman, Sachs & Co.
85 Broad Street
New York, NY 10022
Attention: Lisa Laura Mays
Facsimile Number: (212) 902-3737
S - 3
<PAGE>
ATTACHMENT 1
[FORM OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
---------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Prohibition Notice under that Certain Completion Guaranty Third-Party
Account Agreement/Collateral Accounts Numbers 010-20499-8 ___________
Ladies and Gentlemen:
Pursuant to the Completion Guaranty Third-Party Account Agreement dated November
14, 1997 ("Third-Party Account Agreement") among The Bank of Nova Scotia, as
Secured Party, certain Pledgors, and Securities Intermediary, we hereby give you
this Prohibition Notice and notify you of the commencement of a Suspension
Period. Until further notice from the undersigned substantially in the form of
Attachment 2 to the Third-Party Account Agreement, [Securities Intermediary]
shall not accept or follow instructions from Pledgor pursuant to Section 4(b) of
the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ATTACHMENT 1 - 1
<PAGE>
ATTACHMENT 2
[FORM OF RESCISSION OF PROHIBITION NOTICE]
[Letterhead of Secured Party]
[date of notice]
TO: [Securities Intermediary]
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
CC: [Pledgor]
---------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
--------------------------
Facsimile no.
------------------
Re: Rescission of Prohibition Notice under that Certain Completion Guaranty
Third-Party Account Agreement/Completion Guaranty Account Number
010-20499-8 ___________________________________________________________
Ladies and Gentlemen:
Pursuant to the Completion Guaranty Third-Party Account Agreement dated November
14, 1997 ("Third-Party Account Agreement") among The Bank of Nova Scotia, as
Secured Party, certain Pledgors and Securities Intermediary, we hereby notify
you of the rescission by [Secured Party] of the Prohibition Notice dated [date
of Prohibition Notice] and the end of the related Suspension Period. You are
hereby instructed that, until receipt of a new Prohibition Notice, you shall
accept and follow written instructions from Pledgor pursuant to Section 4(b) of
the Third-Party Account Agreement.
Capitalized terms used and not otherwise defined in this notice are used with
their respective meanings in the Third-Party Account Agreement.
Yours truly,
[Secured Party]
By:
-------------------------
Its:
-------------------------
ATTACHMENT 2 - 1
UNSECURED INDEMNITY AGREEMENT
THIS UNSECURED INDEMNITY AGREEMENT (the "Indemnity") is entered into as
of the 14th day of November, 1997, by LAS VEGAS SANDS, INC., a Nevada
corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a Nevada limited liability
company ("VCR") and GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware limited
liability company ("GCCLLC," and jointly and severally with LVSI and VCR, the
"Company"), to and for the benefit of First Trust National Association, (the
"Mortgage Notes Indenture Trustee"), and, to the extent not otherwise
referenced, the Indemnified Parties (as hereinafter defined).
W I T N E S S E T H:
A. Pursuant to that certain Indenture, dated as of November 14, 1997,
by and between the Company, Mall Intermediate Holding Company, LLC, Lido
Intermediate Holding Company, LLC, and the Mortgage Notes Indenture Trustee (the
"Indenture"), VCR and LVSI have issued those certain Mortgage Notes (as defined
in the Funding Agents' Disbursement and Administration Agreement). Pursuant to
that certain Funding Agents' Disbursement and Administration Agreement by and
among the Company, the Mortgage Notes Indenture Trustee, The Bank of Nova
Scotia, a Canadian chartered bank, as the Bank Agent and the Disbursement Agent,
GMAC Commercial Mortgage Corporation, a California corporation, as the Interim
Mall Lender, and Atlantic-Pacific Las Vegas, LLC, a Delaware limited liability
company, as the HVAC Provider, dated as of November 14, 1997 (the "Funding
Agents' Disbursement and Administration Agreement"), the Mortgage Notes will be
held in an account pending disbursement to the Company to construct the Project
in accordance with the Funding Agents' Disbursement and Administration
Agreement. Capitalized terms used herein, but not otherwise defined herein,
shall have the meaning assigned to such terms in the Funding Agents'
Disbursement and Administration Agreement.
B. The Obligations are secured by, among other things, the Mortgage
Notes Indenture Deeds of Trust (as defined in the Funding Agents' Disbursement
and Administration Agreement (the "Deeds of Trust"), which Deeds of Trust
encumber the real property described in Exhibit "A" attached hereto (the "Real
Property"), and the improvements now or hereafter constructed thereon (which
improvements, together with the Real Property, shall hereinafter be referred to
as the "Property"). The Indenture, the Deeds of Trust and all other documents
executed in connection with the Obligations are collectively referred to as the
"Indenture Documents."
C. It is a condition of the Mortgage Notes Indenture Trustee's entering
into the Indenture Documents and the Mortgage Note Holders purchasing the
Mortgage Notes that this Indemnity be executed and delivered by the Company, and
the Mortgage Notes Indenture Trustee is entering into the Indenture Documents
and the Mortgage Note Holders are purchasing the Mortgage Notes in reliance on
this Indemnity.
D. The obligations of the Company hereunder are unsecured obligations
of the Company.
NOW, THEREFORE, in consideration of the foregoing and other valuable
consideration, the receipt of which is hereby acknowledged, the Company
covenants and agrees to and for the benefit of the Mortgage Notes Indenture
Trustee and the Mortgage Note Holders as follows:
<PAGE>
1. Definitions.
(a) "Claims" means any and all actual out-of-pocket
costs incurred by an Indemnified Party (as defined below) (including, without
limitation, reasonable attorneys' fees and expenses, which fees and expenses
shall include, without limitation, fees and expenses of both outside and staff
counsel), expenses, losses, damages, liabilities, fines, penalties, charges,
injury to person, property, or natural resources, administrative and judicial
proceedings and orders, injunctive relief, judgments, remedial action
requirements and enforcement actions of any kind, arising directly or
indirectly, in whole or in part, out of or attributable to (i) any breach or
default by the Company in the performance of any of its obligations under
paragraphs 3(a)-(d) hereof, or (ii) any Release (as defined below) or threatened
Release, whether foreseeable or unforeseeable, arising prior to any release,
reconveyance or foreclosure of either Deed of Trust (or following any such
release, conveyance or foreclosure to the extent attributable to pre-existing
conditions), or conveyance in lieu of foreclosure; and in each instance,
regardless of when such Release, inaccuracy or breach is discovered and
regardless of whether or not caused by or in the control of the Company, any
employees, agents, contractors or subcontractors of the Company or any third
persons. Without limiting the generality of the foregoing and for purposes of
clarification only, Claims also include:
(i) actual out-of-pocket costs reasonably
incurred by an Indemnified Party in connection with (x) determining whether the
Property is in compliance with all applicable Hazardous Substances Laws (as
hereinafter defined), (y) taking any necessary precautions to protect against
any Release or threatened Release, or (z) any removal, remediation of any kind
and disposal of any Hazardous Substances (as hereinafter defined), and
(ii) any repair of any damage to the
Property or any other property caused by any such precautions, removal,
remediation or disposal.
The rights of the Indemnified Parties hereunder shall
not be limited by any investigation or the scope of any investigation undertaken
by or on behalf of the Mortgage Notes Indenture Trustee in connection with the
Property prior to the date hereof. Notwithstanding the foregoing, Claims shall
exclude any Release caused by or resulting from the negligence or misconduct of
any of the Indemnified Parties.
(b) "Hazardous Substances" means and includes any
flammable explosives, radioactive materials or hazardous, toxic or dangerous
wastes, substances or related materials or any other chemicals, materials or
substances, exposure to which is prohibited, limited or regulated by any
federal, state, county, regional or local authority or which, even if not so
regulated, may or could pose a hazard to the health and safety of the occupants
of the Property or of property adjacent to the Property, including, but not
limited to, asbestos, PCBs, petroleum products and byproducts (including, but
not limited to, crude oil or any fraction thereof, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel, or any mixture
thereof), substances defined or listed as "hazardous substances," "hazardous
materials," "hazardous wastes" or "toxic substances" or similarly identified in,
pursuant to, or for purposes of, any of the Hazardous Substances Laws,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act, as now or hereafter amended (42 U.S.C. Section
9601, et seq); the Hazardous Materials Transportation Act, as now or hereafter
amended (49 U.S.C. Section 1801, et seq); the Resource Conservation and Recovery
Act, as now or hereafter amended (42 U.S.C. Section 6901, et seq); any so-called
"Superfund" or "Superlien" law; or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing
2
<PAGE>
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material; or any substances or mixture regulated under the
Toxic Substance Control Act of 1976, as now or hereafter amended (15 U.S.C.
Section 2601 et seq); and any "pollutant" under the Clean Water Act, as now or
hereafter amended (33 U.S.C. Section 1251 et seq); and any hazardous air
pollutant under the Clean Air Act (42 U.S.C. Section 7901 et seq), in each case
as now or hereafter amended.
(c) "Hazardous Substances Laws" means all federal,
state and local environmental, health or safety laws, ordinances, regulations,
rules of common law or policies regulating Hazardous Substances, including,
without limitation, those governing the generation, use, refinement, handling,
treatment, removal, storage, production, manufacture, transportation or disposal
of Hazardous Substances, as such laws, ordinances, regulations, rules and
policies may be in effect from time to time and be applicable to the Property.
(d) "Indemnified Parties" means the Mortgage Notes
Indenture Trustee, and the directors, officers, shareholders, agents, employees,
participants, successors and assigns of the Mortgage Notes Indenture Trustee,
and shall also include any purchasers of all or any portion of the Property at
any foreclosure sale and the initial purchaser following the consummation of any
deed in lieu of foreclosure, but not including any other purchasers of the
Property.
(e) "Release" means any presence, use, generating,
storing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of Hazardous Substances into
the environment, or about, on, from, under, within or affecting the Property, or
transported to or from the Property, including continuing migration of Hazardous
Substances into or through soil, surface water or groundwater.
2. Environmental Indemnification by the Company.
(a) The Company hereby agrees to defend (with counsel
reasonably approved by the Mortgage Notes Indenture Trustee), indemnify and hold
the Indemnified Parties harmless from and against, and shall reimburse the
Indemnified Parties for, any and all Claims.
(b) The Mortgage Notes Indenture Trustee shall have
the right to employ independent counsel to represent it in any action or
proceeding to which this Indemnity is applicable if and to the extent that the
Mortgage Notes Indenture Trustee determines in good faith that its rights and
interests may be compromised or not fully and adequately represented by legal
counsel acting for the Company, whether on account of any potential defenses
that the Company may have to its obligations under this Indemnity or otherwise,
and in such event the reasonable fees and expenses of the Mortgage Notes
Indenture Trustee's independent counsel shall be paid by the Company.
(c) The Company's obligations hereunder shall not be
diminished or affected in any respect as a result of any notice or disclosure,
if any, to, or other knowledge, if any, by, any Indemnified Party of any Release
or threatened Release, or as a result of any other matter related to the
Company's obligations hereunder, nor shall any Indemnified Party be deemed to
have permitted or acquiesced in any Release or any breach of the Company's other
obligations hereunder, solely because any Indemnified Party had notice,
disclosure or knowledge thereof, whether at the time this Indemnity is delivered
or at any time thereafter.
(d) This Indemnity shall not be limited by any
representation, warranty or
3
<PAGE>
indemnity of the Company made herein or in connection with any indebtedness
secured by the Deeds of Trust, irrespective of whether the Company has knowledge
as of the date of each Deed of Trust, or during the term of each Deed of Trust,
of the matters to which such representation, warranty or indemnity relates.
3. Environmental Covenants
(a) The Company shall not, nor shall the Company
permit any tenants or other occupants of the Property to, at any time in the
future, cause or permit a Release, except in compliance with applicable
Hazardous Substances Laws.
(b) The Company shall give prompt written notice to
the Mortgage Notes Indenture Trustee of any Pending Claims, or of any
Proceedings.
(c) The Company shall give prompt written notice to
the Mortgage Notes Indenture Trustee of the Company's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of the
Property that could cause the Property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of the Property
under any Hazardous Substances Laws including, without limitation, the Company's
discovery of any occurrence or condition on the Property or on any real property
adjoining or in the vicinity of the Property that could cause the Property or
any part thereof to be classified as a hazardous waste property or border-zone
property, or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Hazardous Substances
Laws.
(d) In the event that any investigation, site
monitoring, containment, cleanup, removal, restoration, precautionary actions or
other remedial work of any kind or nature (hereinafter, "Remedial Work") is
required under any applicable Hazardous Substances Law as a result of, or in
connection with, any Release, suspected Release, or threatened Release, the
Company shall within thirty (30) days after receipt of information that such
Remedial Work is or may be required (or such shorter period of time as may be
required under applicable law, regulation, order or agreement), commence the
performance of, or cause to be commenced, and thereafter diligently prosecute to
completion, the performance of all such Remedial Work in compliance with all
applicable Hazardous Substances Laws. All Remedial Work shall be performed by
one or more contractors, approved in advance in writing by the Mortgage Notes
Indenture Trustee, and under the supervision of a consulting engineer approved
in advance in writing by the Mortgage Notes Indenture Trustee, which consent
shall not be unreasonably withheld. All costs and expenses of such Remedial Work
shall be paid by the Company, including, without limitation, the charges of such
contractor(s) and/or the consulting engineer, and the Indemnified Parties'
reasonable attorneys' fees and costs, including, without limitation, fees and
costs of both outside and staff counsel incurred in connection with monitoring
or review of such Remedial Work. In the event the Company shall fail to timely
commence, or cause to be commenced, or fail to diligently prosecute to
completion, the performance of such Remedial Work, the Mortgage Notes Indenture
Trustee or any other Indemnified Party may, but shall not be required to, cause
such Remedial Work to be performed and all costs and expenses thereof, or
incurred in connection therewith, shall be deemed Claims hereunder.
4. Liability.
(a) Notwithstanding any other provisions of this
Indemnity or any of the Indenture Documents, any liability of the Company
hereunder shall be its personal liability (but such personal liability shall not
be deemed to incorporate personal liability of its directors, officers,
employees
4
<PAGE>
or agents), and may be asserted against its interest in the Property as well as
against any and all of its other assets.
(b) Without limiting the foregoing, the obligations
of the Company hereunder shall survive the following events, to the maximum
extent permitted by law: (i) repayment of the Obligations and any judicial or
nonjudicial foreclosure under either Deed of Trust or conveyance in lieu of such
foreclosure, notwithstanding that all or any portion of any other obligations
secured by the such Deed of Trust shall have been discharged thereby, (ii) any
election by any Indemnified Party to purchase all or any portion of the Property
at a foreclosure sale by crediting all or any portion of the obligations secured
by either Deed of Trust against the purchase price therefor (except to the
extent and only to the extent that such Indemnified Party has specifically
elected in writing in its sole discretion to credit against the purchase price
any Claims hereunder which were liquidated in amount at the time of such
foreclosure sale, it being presumed for these purposes that the obligations
secured by such Deed of Trust shall be discharged by any such crediting in the
order set forth in paragraph 4.12 of such Deed of Trust), (iii) any release or
reconveyance of either Deed of Trust, any waiver of the lien of either Deed of
Trust, or any release or waiver of any other security for the Obligations, and
(iv) any termination, cancellation or modification of the Indenture, the
Mortgage Notes, the Funding Agents' Disbursement and Administration Agreement,
either Deed of Trust or any other agreement relating to the Obligations. Upon
and following the occurrence of any of the foregoing, the obligations of the
Company hereunder shall be unsecured obligations, and shall be enforceable
against the Company to the fullest extent permitted by applicable law.
(c) The obligations of the Company hereunder are not
intended to be the obligations of a surety or guarantor. The liability of the
Company under this Indemnity shall in no way be limited or impaired by (i) any
extensions of time for performance required by the Indenture Documents; (ii) the
accuracy or inaccuracy of any representations and warranties made by the Company
in any of the Indenture Documents; or (iii) the release of any person or entity
from performance or observance of any of the agreements, covenants, terms, or
conditions contained in any of the Indenture Documents by operation of law or
otherwise.
(d) The rights and remedies of the Indemnified
Parties under this Indemnity (i) shall be in addition to any other rights and
remedies of such Indemnified Parties under any Indenture Document or at law or
in equity, and (ii) may be enforced by any of the Indemnified Parties, to the
maximum extent permitted by law, without regard to or affecting any rights and
remedies that such Indemnified Party may have under any Indenture Document or at
law or in equity, and without regard to any limitations on such Indemnified
Party's recourse for recovery of the Obligations as may be provided in any
Indenture Document.
5. Site Visits, Observation and Testing. The Mortgage Notes
Indenture Trustee and any of the other Indemnified Parties and their respective
agents and representatives shall have the right at any reasonable time, and upon
reasonable prior notice, to enter and visit the Property to make such
inspections and inquiries as they shall deem appropriate, including inspections
for violations of any of the terms of this Indemnity and for determining the
existence, nature and magnitude of any past or present Release or threatened
Release, and they shall also have the right, following any Event of Default as
defined in the Indenture, or where the Mortgage Notes Indenture Trustee has a
reasonable basis upon which to believe that the Property may be harmed, unsafe
or contaminated, and upon reasonable prior notice, to enter and visit the
Property to make such tests (including, without limitation, taking and removing
soil or groundwater samples) as they shall deem appropriate. Neither the
Mortgage Notes Indenture Trustee nor any of the other Indemnified Parties have
any duty, however, to visit or observe the Property or to conduct
5
<PAGE>
tests, and no site visit, observation or testing by the Mortgage Notes Indenture
Trustee or any other Indemnified Party shall impose any liability on the
Mortgage Notes Indenture Trustee or such other Indemnified Party. In no event
shall any site visit, observation or testing by the Mortgage Notes Indenture
Trustee or any other Indemnified Party be a representation that Hazardous
Substances are or are not present in, on or under the Property, or that there
has been or shall be compliance with any Hazardous Substances Laws or any other
applicable governmental law. Neither the Company nor any other party is entitled
to rely on any site visit, observation or testing by the Mortgage Notes
Indenture Trustee or any other Indemnified Party. Neither the Mortgage Notes
Indenture Trustee nor any of the other Indemnified Parties owe any duty of care
to protect the Company or any other party against, or to inform the Company or
any other party of, any Hazardous Substances or any other adverse condition
affecting the Property. The Mortgage Notes Indenture Trustee and any other
Indemnified Party shall give the Company reasonable notice before entering the
Property, and shall make reasonable efforts to avoid interfering with the
Company's use of the Property in exercising any rights provided in this
paragraph 5.
6. Interest Accrued. Any amount claimed hereunder by an
Indemnified Party not paid within thirty (30) days after written demand from
such Indemnified Party with an explanation of the amounts claimed shall bear
interest at a rate per annum equal to the maximum interest rate applicable to
overdue principal set forth in Section 4.01 of the Indenture.
7. Subrogation of Indemnity Rights. If the Company fails to
fully perform its obligations hereunder, any Indemnified Party shall be entitled
to pursue any rights or claims that the Company may have against any present,
future or former owners, tenants or other occupants or users of the Property,
any portion thereof or any adjacent or proximate properties, relating to any
Claim or the performance of Remedial Work, and the Company hereby assigns all of
such rights and claims to the Indemnified Parties under such circumstances and
shall take all actions required by the Indemnified Parties to cooperate with
such Indemnified Parties in enforcing such rights and claims under such
circumstances.
8. Reliance. The Company acknowledges that it is making and
giving the indemnities and representations and covenants contained in this
Indemnity with the knowledge that the Mortgage Notes Indenture Trustee and the
Mortgage Note Holders are relying on such indemnities and representations and
covenants in making the Obligations to the Company.
9. Successors and Assigns. This Indemnity shall inure to the
benefit of each Indemnified Party's successors and assigns, and shall be binding
upon the heirs, successors, and assigns of the Company. The Company shall not
assign any rights or obligations under this Indemnity without first obtaining
the written consent of the Mortgage Notes Indenture Trustee, which may be given
or withheld in the sole discretion of the Mortgage Notes Indenture Trustee.
Notwithstanding any other provision of this Indemnity to the contrary, the
Company shall not be released from its obligations hereunder without obtaining
the written consent of the Mortgage Notes Indenture Trustee, which consent may
be given or withheld in the sole discretion of the Mortgage Notes Indenture
Trustee. Nothing herein shall be deemed to be a consent to the transfer of the
Property which transfer would be otherwise prohibited by any Document.
10. Miscellaneous. This Indemnity shall be governed by and
construed in accordance with the laws of the State of Nevada. If this Indemnity
is executed by more than one person or entity, the liability of the undersigned
hereunder shall be joint and several. Separate and successive actions may be
brought hereunder to enforce any of the provisions hereof at any time and from
time to time. No action hereunder shall preclude any subsequent action, and the
Company hereby waive and covenants not to
6
<PAGE>
assert any defense in the nature of splitting of causes of action or merger of
judgments. In no event shall any provision of this Indemnity be deemed to be a
waiver of or to be in lieu of any right or claim, including, without limitation,
any right of contribution or other right of recovery, that any party to this
Indemnity might otherwise have against any other party to this Indemnity under
any Hazardous Substances Laws. If any term of this Indemnity or any application
thereof shall be invalid, illegal or unenforceable, the remainder of this
Indemnity and any other application of such term shall not be affected thereby.
No delay or omission in exercising any right hereunder shall operate as a waiver
of such right or any other right.
11. Notices. All notices expressly provided hereunder to be
given by the Company to the Mortgage Notes Indenture Trustee and all notices and
demands of any kind or nature whatsoever which the Company may be required or
may desire to give to or serve on the Mortgage Notes Indenture Trustee shall be
in writing and shall be served by certified mail, return receipt requested, or
by a reputable commercial overnight carrier that provides a receipt, such as
Federal Express. Notice shall be addressed as follows:
Mortgage Notes Indenture Trustee: First Trust National Association
180 East 5th Street
St. Paul, Minnesota 55101
Attn: Corporate Trust Department
Telecopy No: (___) ___-____
Telephone No: (___) ___-____
with a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, California 92101
Attn: Sony Ben-Moshe, Esq.
Telecopy No.: (619) 696-7419
Telephone No.: (619) 236-1234
The Company: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard, South
Las Vegas, Nevada 89109
Attn: Sheldon G. Adelson,
Chairman of the Board
Telecopy No: (___) ___-____
Telephone No: (___) ___-____
with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas, 24th Floor
New York, New York, 10019
Attn: Harris B Fredius, Esq.
Telecopy No: (212) 757-3990
Telephone No: (212) 373-3003
7
<PAGE>
12. Attorneys' Fees and Expenses. If the Mortgage Notes
Indenture Trustee or any Mortgage Note Holder refers this Indemnity or any of
the other Indenture Documents to an attorney to enforce, construe or defend the
same, as a consequence of any Event of Default as defined in the Indenture, with
or without the filing of any legal action or proceeding, the Company shall pay
to the Mortgage Notes Indenture Trustee, immediately upon demand, the amount of
all attorneys' fees and costs incurred by the Mortgage Notes Indenture Trustee
in connection therewith, together with interest thereon from the date of award
at the maximum interest rate applicable to overdue principal set forth in
Section 4.01 of the Indenture.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, this Indemnity is executed as of the day
and year first above written.
The Company:
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
BY: LAS VEGAS SANDS, INC.,
a Nevada corporation,
its managing member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
a Delaware limited liability company
BY: VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company,
its member
BY: LAS VEGAS SANDS, INC.,
a Nevada corporation,
its managing member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
9
[PAUL, WEISS, RIFKIND, WHARTON & GARRISON LETTERHEAD]
February 12, 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
Registration No. 333-42147
----------------------------------
Dear Ladies and Gentlemen:
In connection with the above captioned Registration Statement and the
amendments thereto on Form S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations promulgated thereunder (the
"Rules"), we have been requested to render our opinion as to the matters
hereinafter set forth.
In this regard, we have reviewed copies of the Registration Statement. We
have also made such other investigations of fact and law and have examined the
originals, or copies authenticated to our satisfaction, of such documents,
records, certificates or other instruments as in our judgment are necessary or
appropriate to render the opinion expressed below.
<PAGE>
2
The opinion set forth below is limited to the Internal Revenue Code of
1986, as amended, administrative rulings, judicial decisions, Treasury
regulations and other applicable authorities, all as in effect on the date
hereof. The statutory provisions, regulations, and interpretations upon which
our opinion is based are subject to change, and such changes could apply
retroactively. Any such change could affect the continuing validity of the
opinion set forth below. We assume no responsibility to advise you of any
subsequent changes in existing law or facts, nor do we assume any responsibility
to update this opinion with respect to any matters expressly set forth herein,
and no opinions are to be implied or may be inferred beyond the matters
expressly so stated.
Based upon and subject to the foregoing, the discussion set forth in the
Registration Statement under the heading "Certain Federal Income Tax
Considerations" constitutes our opinion with respect to such matters.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our name under the heading "Validity of the Notes." In giving this
consent, we do not hereby agree that we come within the category of persons
whose consent is required by the Act or the Rules.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
CREDIT AGREEMENT
DATED AS OF NOVEMBER 14, 1997
AMONG
LAS VEGAS SANDS, INC.,
and
VENETIAN CASINO RESORT, LLC
as Borrowers,
THE LENDERS LISTED HEREIN,
as Lenders,
GOLDMAN SACHS CREDIT PARTNERS L.P.
as Arranger and Syndication Agent,
and
THE BANK OF NOVA SCOTIA
as Administrative Agent
<PAGE>
LAS VEGAS SANDS, INC.
and
VENETIAN CASINO RESORT, LLC
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. DEFINITIONS............................................................................................... 2
1.1 Certain Defined Terms..................................................................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement......................................................................................... 46
1.3 Other Definitional Provisions and Rules of Construction................................................... 47
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS ............................................................... 47
2.1 Commitments; Making of Loans; the Register; Notes......................................................... 47
2.2 Interest on the Loans..................................................................................... 52
2.3 Fees...................................................................................................... 55
2.4 Repayments, Prepayments and Reductions in Commitments; General Provisions Regarding Payments.............. 56
2.5 Use of Proceeds........................................................................................... 64
2.6 Special Provisions Governing Eurodollar Rate Loans........................................................ 64
2.7 Increased Costs; Taxes; Capital Adequacy.................................................................. 66
2.8 Obligation of Lenders to Mitigate......................................................................... 70
2.9 Obligations Joint and Several............................................................................. 71
Section 3. LETTERS OF CREDIT......................................................................................... 72
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein............................. 72
3.2 Letter of Credit Fees..................................................................................... 75
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit........................................ 76
3.4 Obligations Absolute...................................................................................... 78
3.5 Indemnification; Nature of Issuing Lenders' Duties........................................................ 79
3.6 Increased Costs and Taxes Relating to Letters of Credit................................................... 80
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT................................................................. 81
4.1 Conditions to Term Loans and Initial Revolving Loans...................................................... 82
4.2 Conditions to All Term Loans.............................................................................. 85
4.3 Conditions to all Revolving Loans......................................................................... 85
4.4 Conditions to Letters of Credit........................................................................... 87
Section 5. BORROWERS' REPRESENTATIONS AND WARRANTIES................................................................. 88
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries............................. 88
(i)
<PAGE>
Page
5.2 Authorization of Borrowing, etc........................................................................... 89
5.3 Financial Condition....................................................................................... 90
5.4 No Material Adverse Change; No Restricted Junior Payments................................................. 91
5.5 Title to Properties; Liens; Real Property................................................................. 91
5.6 Litigation; Adverse Facts................................................................................. 91
5.7 Payment of Taxes.......................................................................................... 92
5.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts.............................. 92
5.9 Governmental Regulation................................................................................... 92
5.10 Securities Activities..................................................................................... 93
5.11 Employee Benefit Plans.................................................................................... 93
5.12 Certain Fees.............................................................................................. 94
5.13 Environmental Protection.................................................................................. 94
5.14 Employee Matters.......................................................................................... 95
5.15 Solvency.................................................................................................. 95
5.16 Matters Relating to Collateral............................................................................ 95
Section 6. BORROWERS' AFFIRMATIVE COVENANTS.......................................................................... 96
6.1 Financial Statements and Other Reports.................................................................... 96
6.2 Corporate Existence, etc..................................................................................103
6.3 Payment of Taxes and Claims; Tax Consolidation............................................................103
6.4 Maintenance of Properties; Insurance; Application of Net Loss Proceeds....................................104
6.5 Inspection; Lender Meeting................................................................................105
6.6 Compliance with Laws, etc.; Permits.......................................................................105
6.7 Environmental Review and Investigation, Disclosure, Etc.; Borrowers' Actions Regarding Hazardous
Materials Activities, Environmental Claims and Violations of Environmental Laws.........................105
6.8 Interest Rate Protection..................................................................................108
6.9 Compliance with Material Contracts........................................................................108
6.10 Separate Legal and Tax Parcel for Mall....................................................................108
6.11 Payment of Liens..........................................................................................108
6.12 Further Assurances........................................................................................109
6.13 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain Subsidiaries
and Future Subsidiaries.................................................................................111
Section 7. BORROWERS' NEGATIVE COVENANTS.............................................................................112
7.1 Indebtedness..............................................................................................112
7.2 Liens and Related Matters.................................................................................114
7.3 Investments; Joint Ventures; Formation of Subsidiaries....................................................116
7.4 Contingent Obligations....................................................................................118
7.5 Restricted Junior Payments................................................................................119
7.6 Financial Covenants.......................................................................................121
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions..........................................123
7.8 Sales and Lease-Backs.....................................................................................126
(ii)
<PAGE>
Page
7.9 Sale or Discount of Receivables...........................................................................127
7.10 Transactions with Shareholders and Affiliates.............................................................127
7.11 Disposal of Subsidiary Stock..............................................................................129
7.12 Conduct of Business.......................................................................................129
7.13 Certain Restrictions on Changes to Operative Documents, Permits, Project Budget or Project Schedule.......130
7.14 Consolidated Capital Expenditures.........................................................................131
7.15 Fiscal Year...............................................................................................131
7.16 Zoning and Contract Changes and Compliance................................................................132
7.17 No Joint Assessment; Separate Lots........................................................................132
7.18 Certain Covenants Applicable to Mall Subsidiary...........................................................132
7.19 Limitation on Declaration of Restricted Subsidiaries......................................................134
7.20 Restrictions on Opening...................................................................................134
7.21 Limitation on Phase II Construction.......................................................................134
Section 8. EVENTS OF DEFAULT.........................................................................................134
8.1 Failure to Make Payments When Due.........................................................................134
8.2 Default under Other Indebtedness or Contingent Obligations................................................135
8.3 Breach of Certain Covenants...............................................................................135
8.4 Breach of Warranty........................................................................................135
8.5 Other Defaults Under Loan Documents.......................................................................135
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc......................................................136
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc........................................................136
8.8 Judgments and Attachments.................................................................................136
8.9 Dissolution...............................................................................................137
8.10 Employee Benefit Plans....................................................................................137
8.11 Change in Control.........................................................................................137
8.12 Failure of Guaranty; Repudiation of Obligations...........................................................137
8.13 Default Under or Termination of Operative Documents.......................................................138
8.14 Default Under or Termination of Permits...................................................................138
8.15 Default Under or Termination of Cooperation Agreement.....................................................138
8.16 Bankruptcy or Dissolution of Mall Subsidiary..............................................................139
8.17 Acceleration of Obligations of Mall Subsidiary............................................................139
8.18 Certain Investments in any Excluded Subsidiary............................................................139
Section 9. AGENTS....................................................................................................140
9.1 Appointment...............................................................................................140
9.2 Powers and Duties; General Immunity.......................................................................141
9.3 Representations and Warranties; No Responsibility For Appraisal of Credit Worthiness......................143
9.4 Right to Indemnity........................................................................................143
9.5 Successor Administrative Agent............................................................................144
9.6 Collateral Documents and Subsidiary Guaranties............................................................144
9.7 Disbursement Agreement and Intercreditor Agreement........................................................145
(iii)
<PAGE>
Page
Section 10. MISCELLANEOUS.............................................................................................145
10.1 Assignments and Participations in Loans...................................................................145
10.2 Expenses..................................................................................................148
10.3 Indemnity.................................................................................................149
10.4 Set-Off; Security Interest in Deposit Accounts............................................................150
10.5 Ratable Sharing...........................................................................................150
10.6 Amendments and Waivers....................................................................................151
10.7 Certain Matters Affecting Lenders.........................................................................152
10.8 Independence of Covenants.................................................................................153
10.9 Notices...................................................................................................153
10.10 Survival of Representations, Warranties and Agreements....................................................153
10.11 Failure or Indulgence Not Waiver; Remedies Cumulative.....................................................153
10.12 Marshalling; Payments Set Aside...........................................................................154
10.13 Severability..............................................................................................154
10.14 Obligations Several; Independent Nature of Lenders' Rights................................................154
10.15 Headings..................................................................................................154
10.16 Applicable Law............................................................................................155
10.17 Successors and Assigns....................................................................................155
10.18 Consent to Jurisdiction and Service of Process............................................................155
10.19 Waiver of Jury Trial......................................................................................156
10.20 Confidentiality...........................................................................................156
10.21 Counterparts; Effectiveness...............................................................................157
10.22 Gaming Authorities........................................................................................157
Signature pages S-1
</TABLE>
(iv)
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III-A FORM OF TERM NOTE
III-B FORM OF REVOLVING NOTE
IV FORM OF COMPLIANCE CERTIFICATE
V-A FORM OF OPINION OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON
V-B FORM OF OPINION OF LIONEL SAWYER & COLLINS
VI FORM OF OPINION OF O'MELVENY & MYERS LLP
VII FORM OF ASSIGNMENT AGREEMENT
VIII FORM OF SUBSIDIARY SECURITY AGREEMENT
IX FORM OF CERTIFICATE RE NON-BANK STATUS
X FORM OF FINANCIAL CONDITION CERTIFICATE
XI FORM OF SUBSIDIARY GUARANTY
XII FORM OF COMPANY SECURITY AGREEMENT
XIII-A FORM OF DEED OF TRUST
XIII-B FORM OF LEASEHOLD DEED OF TRUST
XIII-C FORM OF MALL FEE DEED OF TRUST
XIV FORM OF INTERCREDITOR AGREEMENT (CREDIT PARTIES)
XV FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
XVI FORM OF INTERCREDITOR AGREEMENT (ADELSON)
XVII FORM OF DISBURSEMENT AGREEMENT
XVIII FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
XIX FORM OF MALL CONSTRUCTION SUBSIDIARY SECURITY AGREEMENT
(v)
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1C OWNERSHIP OF BORROWERS
5.1D SUBSIDIARIES OF BORROWERS
5.1E OPTIONS
5.4 RESTRICTED JUNIOR PAYMENTS
5.5 REAL PROPERTY
5.6 LITIGATION
5.8 MATERIAL CONTRACTS
5.11 CERTAIN EMPLOYEE BENEFIT PLANS
5.12 CERTAIN FEES
5.13 ENVIRONMENTAL MATTERS
5.16 PERMITS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
(vi)
<PAGE>
LAS VEGAS SANDS, INC.
and
VENETIAN CASINO RESORT, 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, and VENETIAN
CASINO RESORT, LLC ("Venetian"), a Nevada limited liability company, as joint
and several obligors (each of LVSI and Venetian, a "Borrower" and, collectively,
the "Borrowers"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES
HEREOF (each individually referred to herein as a "Lender" and collectively as
"Lenders"), and GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as syndication
agent (in such capacity, "Syndication Agent") and arranger (in such capacity,
"Arranger") and THE BANK OF NOVA SCOTIA ("Scotiabank"), as administrative agent
for Lenders (in such capacity, "Administrative Agent").
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);
WHEREAS, Borrowers desire to finance the development and construction
of the Project with (i) equity contributions to Borrowers from Adelson
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 in an aggregate amount of $320,000,000, (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 Subordinated Notes
of approximately $90,000,000 in cash, (iv) the proceeds of the Interim Mall
Facility in an aggregate principal amount of not less than $140,000,000, (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
hereby, (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 and/or
electrical systems, and (vii) the term loan portion of the senior secured credit
facilities contemplated hereby;
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WHEREAS, Borrowers desire that Lenders extend the senior secured credit
facilities contemplated hereby to Borrowers to provide a portion of the
financings necessary to develop and construct the Project and, in the case of
the Revolving Loans, to provide working capital for the Project hotel and casino
following the Completion Date;
WHEREAS, subject to the terms and conditions hereof Lenders are 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; and
WHEREAS, Borrowers desire to secure all of the Obligations hereunder
and under the other Loan Documents by granting to Administrative Agent, on
behalf of Lenders, a First Priority Lien on the First Priority Collateral and a
second priority lien on the Mall Collateral.
WHEREAS, each Subsidiary of Borrowers shall guaranty the Obligations
pursuant to the Subsidiary Guaranty and each such Subsidiary other than the
Intermediate Holding Companies shall secure all of the Obligations under the
Subsidiary Guaranty by granting to Administrative Agent, on behalf of Lenders, a
First Priority Lien on the First Priority Collateral and a second priority lien
on the Mall Collateral.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrowers, Lenders and Agents agree
as follows:
Section 1. DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"Adelson" means Sheldon G. Adelson, an individual.
"Adelson Completion Guaranty" means that certain Completion
Guaranty dated as of the date hereof executed by Adelson in favor of
the Administrative Agent, Interim Mall Lender and the Mortgage Notes
Indenture Trustee (acting on behalf of the Mortgage Note Holders).
"Adelson Contributions" means the Real Estate Contribution and
the Adelson Equity Contribution.
"Adelson Equity Contribution" means the cash equity
contributions received by Borrowers from Adelson or his Affiliates in
the aggregate amount of $95,000,000.
"Adelson Intercreditor Agreement" means the Intercreditor
Agreement (Adelson) dated as of November 14, 1997 among Adelson,
Venetian, Mall Construction
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Subsidiary, Administrative Agent, Mortgage Note Indenture Trustee,
Interim Mall Lender and the Subordinated Notes Indenture Trustee in
substantially the form of Exhibit XVI hereto.
"Additional Billboard Space" has the meaning assigned to that
term in the Cooperation Agreement.
"Adjusted Eurodollar Rate" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar
Rate Loan, the rate per annum obtained by dividing (i) the arithmetic
average (rounded upward to the nearest 1/16 of one percent) of the
offered quotations, if any, to first class banks in the interbank
Eurodollar market Lenders for U.S. dollar deposits of amounts in same
day funds comparable to the respective principal amounts of the
Eurodollar Rate Loans of Scotiabank for which the Adjusted Eurodollar
Rate is then being determined with maturities comparable to such
Interest Period as of approximately 10:00 A.M. (New York time) on such
Interest Rate Determination Date by (ii) a percentage equal to 100%
minus the stated maximum rate of all reserve requirements (including
any marginal, emergency, supplemental, special or other reserves)
applicable on such Interest Rate Determination Date to any member bank
of the Federal Reserve System in respect of "Eurocurrency liabilities"
as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Administrative Agent" has the meaning assigned to that term
in the introduction to this Agreement and also means and includes any
successor Administrative Agent appointed pursuant to subsection 9.5.
"Advance Confirmation Notice" has the meaning assigned that
term in the Disbursement Agreement.
"Affected Lender" has the meaning assigned to that term in
subsection 2.6C.
"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 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.
"Agent" means, individually, each of the Administrative Agent,
Arranger and Syndication Agent, and "Agents" means Administrative Agent,
Arranger and Syndication Agent, collectively.
"Agreement" means this Credit Agreement dated as of November
14, 1997.
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<PAGE>
"Amortization Commencement Date" means the earlier of (i) the
Opening Date and (ii) Outside Completion Deadline.
"Amortization Date" means (i) with respect to the first
Amortization Date, the first date occurring after the Amortization
Commencement 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 Amortization
Commencement Date and (ii) with respect to each subsequent Amortization
Date, the end of the next succeeding Fiscal Quarter.
"Amortization Payment Date" means each Amortization Date
occurring on or after the earlier of (i) 120 days after the Opening
Date, (ii) the Completion Date and (iii) the Outside Completion
Deadline.
"Anticipated Future Work" has the meaning assigned to that
term in the Disbursement Agreement.
"Applicable Margin" means, (i) from the Closing Date until the
Substantial Completion Date, 2.00% per annum for Base Rate Loans and
3.00% per annum for Eurodollar Rate Loans, (ii) from the Substantial
Completion Date until the date on which a Compliance Certificate is
first delivered pursuant to subsection 6.1 with respect to the second
full Fiscal Quarter following the Substantial Completion Date, 1.50%
per annum for Base Rate Loans and 2.50% for Eurodollar Rate Loans, and
(iii) thereafter, a percentage per annum determined by reference to the
Leverage Ratio as set forth below:
=========================== ======================= ========================
Applicable Margin Applicable Margin
for Base for Eurodollar
Leverage Ratio Rate Loans Rate Loans
=========================== ======================= ========================
greater than 4.00 1.50% 2.50%
less than or equal to
4.00:1.00 but greater 1.25% 2.25%
than 3.50:1.00
less than or equal to
3.50:1.00 but greater 1.00% 2.00%
than 3.00:1.00
less than or equal to
3.00:1.00 but greater 0.50% 1.50%
than 2.50:1.00
less than or equal to 0.25% 1.25%
2.50:1.00
=========================== ======================= ========================
4
<PAGE>
With respect to the period covered by clause (iii) above, the
Applicable Margin for each Base Rate Loan shall be determined by
reference to the Leverage Ratio in effect from time to time and the
Applicable Margin for each Eurodollar Rate Loan shall be determined by
reference to the Leverage Ratio in effect on the first day of the
Interest Period for such Loan; provided, however, that (x) no change in
the Applicable Margin shall be effective until three Business Days
after the date on which the Administrative Agent receives a Compliance
Certificate pursuant to subsection 6.1(iv) calculating the Leverage
Ratio, and (y) the Applicable Margin shall be 1.50% per annum, in the
case of Base Rate Loans, and 2.50% per annum, in the case of Eurodollar
Rate Loans, for so long as Borrowers have not submitted to the
Administrative Agent the information described in clause (x) of this
proviso as and when required under subsection 6.1(iv) prior to the
first day of the applicable Interest Period, with respect to Eurodollar
Rate Loans.
"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.
"Approved Equipment Funding Commitment" has the meaning
assigned that term in the Disbursement Agreement.
"Arranger" has the meaning assigned to that term in the
introduction to this Agreement.
"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 $1,000,000
or (c) any transfers or dispositions permitted by clauses (v) through
(xix), inclusive, and (xxi) of subsection 7.7).
"Assignment Agreement" means an Assignment Agreement in
substantially the form of Exhibit VII annexed hereto.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any
successor statute.
5
<PAGE>
"Base Rate" means, at any time, the higher of (x) the Prime
Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds
Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection
2.2A.
"Billboard" means B.L. of Las Vegas, Inc., a Nevada
corporation.
"Billboard Master Lease" means that certain Lease Agreement
dated Novem ber 14, 1997 by and between Venetian and Mall Construction
Subsidiary pursuant to which the Mall Construction Subsidiary is
leasing from Venetian the Additional Billboard Space.
"Billboard Operating Lease" means that certain restaurant
lease dated June 26, 1997 by and between Venetian and Billboard
(together with all assignments, modifications, amendments, riders and
addendas thereto).
"Billboard Space" means the space covered by the Billboard
Operating Lease (including the Additional Billboard Space).
"Borrowers" has the meaning assigned to that term in the
introduction to this Agreement and shall mean, as the context requires,
any or all of the Borrowers.
"Business Day" means (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of New
York or Nevada or is a day on which banking institutions located in
either such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, fundings and payments in connection with the Adjusted
Eurodollar Rate or any Eurodollar Rate Loans, any day that is a
Business Day described in clause (i) above and that is also a day for
trading by and between banks in Dollar deposits in the London interbank
market.
"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 (i) money, (ii) currency or (iii) a credit
balance in a Deposit Account.
"Cash Equivalents" means (a) [intentionally deleted] (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
6
<PAGE>
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 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
acquisition thereof) 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 Administrative Agent 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
7
<PAGE>
insolvency of the provider and termination upon demand of the
Disbursement Agent while the Disbursement Agreement is in effect and
thereafter to Administrative Agent (which demand shall only be made at
the direction of the 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
investments are denominated in 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 acquisition thereof) of at least "A" or "A2" or the equivalent
of any Rating Agency.
"Casino Lease" means that certain Casino Lease between
Venetian as lessor and LVSI as lessee dated effective as of the date
hereof with respect to the operation of the casino for the Project.
"Certificate re Non-Bank Status" means a certificate
substantially in the form of Exhibit IX annexed hereto delivered by a
Lender to Administrative Agent pursuant to subsection 2.7B(iii).
"Class" means, as applied to Lenders, each of the following
two classes of Lenders: (i) Lenders having Term Loan Exposure and (ii)
Lenders having Revolving Loan Exposure.
"Closing Date" means the date on or before November 14, 1997,
on which this Agreement and Disbursement Agreement are executed and
delivered.
"Code" means the Internal Revenue Code of 1986, as amended to
the date hereof and from time to time hereafter, and any successor
statute.
"Collateral" means, collectively, all of the real, personal
and mixed property (including capital stock) in which Liens are
purported to be granted pursuant to the Collateral Documents as
security for the Obligations.
"Collateral Account Agreements" has the meaning assigned to
that term in the Disbursement Agreement.
8
<PAGE>
"Collateral Documents" means the Company Security Agreement,
the Deed of Trust, the Leasehold Deed of Trust, the Mall Fee Deed of
Trust, the Mall Construction Subsidiary Security Agreement, the
Collateral Account Agreements (other than the Mortgage Notes
Collateral Account Agreement), any Subsidiary Security Agreements 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 Intercreditor Agent, Disbursement Agent or Administrative Agent, on
behalf of Lenders, a Lien on any real, personal or mixed property of
that Loan Party as security for the Obligations.
"Collection Account" has the meaning assigned that term in the
Disbursement Agreement.
"Commercial Letter of Credit" means any letter of credit or
similar instrument issued for the purpose of providing the financing
payment mechanism in connection with the purchase of any materials,
goods or services by a Borrower in the ordinary course of business of
such Borrower.
"Commitment" means the commitment of a Lender to make Loans as
set forth in subsection 2.1A, and "Commitments" means such commitments
of all Lenders in the aggregate.
"Company Security Agreement" means the Company Security
Agreement executed and delivered by Borrowers and Mall Construction
Subsidiary on the Closing Date, substantially in the form of Exhibit
XII annexed hereto.
"Completion Date" has 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 Venetian 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 attached
to the Interim Mall Credit Agreement (as in effect on the Closing
Date).
"Compliance Certificate" means a certificate substantially in
the form of Exhibit IV annexed hereto delivered to Administrative Agent
and Lenders by Borrowers pursuant to subsection 6.1(iv).
9
<PAGE>
"Consents" means consents to the collateral assignment by
Borrowers of Project Documents in substantially the form of Exhibit S
to the Disbursement Agreement.
"Consolidated Adjusted EBITDA" means, for any period, the sum
of the amounts (without duplication) for such period of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii)
provision for taxes based on income to the extent deducted in
calculating Consolidated Net Income, (iv) total depreciation expense,
(v) total amortization expense, and (vi) other non-cash items reducing
Consolidated Net Income (including without limitation any reductions to
Consolidated Net Income as a result of minority or preferred interests
of Venetian) less other non-cash items increasing Consolidated Net
Income, all of the foregoing as determined on a consolidated basis for
Borrowers and their Subsidiaries in conformity with GAAP. Any cash
equity contributions made by Adelson or any of his Affiliates (other
than one of the Borrowers) to Borrowers during any quarter in an
aggregate amount not to exceed $15,000,000 per quarter may at the
written election of Borrowers be included in Consolidated Adjusted
EBITDA for such quarter for all purposes hereunder provided that
Borrowers may not include such cash equity contribu tions in
Consolidated Adjusted EBITDA for more than two consecutive quarters
unless, following any exercise of such election to include any such
cash equity contributions in Consolidated Adjusted EBITDA, Borrowers
have thereafter been in compliance with subsection 7.6 on a rolling
four quarter basis on any test date occurring after such election
(without giving affect to any previous cash contributions).
"Consolidated Capital Expenditures" means, 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 Borrowers) by Borrowers and their Subsidiaries during
that period that, 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 Borrowers plus (ii) to the
extent not covered by clause (i) of this definition, any expenditures
by Borrowers (excluding any Excluded Subsidiaries) 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.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense for such period, excluding, however, any
interest expense not payable in Cash (including amortization of
discount and amortization of debt issuance costs).
"Consolidated Current Assets" means, as at any date of
determination, the total assets of Borrowers and their Subsidiaries on
a consolidated basis (excluding any Excluded Subsidiaries) which may
properly be classified as current assets in conformity with GAAP,
excluding Cash and cash equivalents.
10
<PAGE>
"Consolidated Current Liabilities" means, as at any date of
determination, the total liabilities of Borrowers and their
Subsidiaries on a consolidated basis (excluding any Excluded
Subsidiaries) which may properly be classified as current liabilities
in conformity with GAAP, excluding the current portions of Funded Debt
and any liabilities otherwise classified as current liabilities in
conformity with GAAP to the extent incurred under the Operative
Documents with respect to construction of the Project.
"Consolidated Excess Cash Flow" means, for any period, an
amount (if positive) equal to (i) the sum, without duplication, of the
amounts for such period of (a) Consoli dated Adjusted EBITDA and (b)
the Consolidated Working Capital Adjustment minus (ii) the sum, without
duplication, of the amounts for such period of (a) voluntary and
scheduled repayments of Consolidated Total Debt to the extent actually
paid (excluding repayments of Revolving Loans except to the extent the
Commitments are permanently reduced in connection with such
repayments), (b) Consolidated Capital Expenditures (net of any proceeds
of any related financings with respect to such expenditures), (c)
Consolidated Cash Interest Expense other than any interest expense in
respect of Employee Repurchase Notes, (d) any amounts distributed by
Borrowers for tax payments in accordance with subsection 7.5 with
respect to such period and (without duplication) the provision for
current taxes based on income of Borrowers (excluding any Subsidiaries)
and payable by Borrowers to any Governmental Instrumentality in cash
with respect to such period, (e) any amounts distributed to Borrowers
or their Subsidiaries from Mall Subsidiary within 60 days of any debt
issuance by Mall Subsidiary up to the amount of the proceeds of such
debt or equity issuance to the extent included in Consolidated Adjusted
EBITDA and (f) any amounts distributed to Borrowers and their
Subsidiaries from Mall Subsidiary from proceeds of any equity issuance
of Mall Subsidiary up to the amount thereof but only to the extent
included in Consolidated Adjusted EBITDA.
"Consolidated Fixed Charges" means, 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), (iii) any amounts
distributed by Borrowers for tax payments in accordance with subsection
7.5 with respect to such period and (without duplication) provisions
for taxes based on income payable by Borrowers to any Governmental
Instrumentality, (iv) Consolidated Rental Payments, and (v)
Consolidated Capital Expenditures, all of the foregoing as determined
on a consolidated basis for Borrowers and their Subsidiaries in
conformity with GAAP.
"Consolidated Interest Expense" means, for any period, total
interest expense (including that portion attributable to Capital Leases
in accordance with GAAP and capitalized interest) of Borrowers and
their Subsidiaries on a consolidated basis with respect to all
outstanding Indebtedness of 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,
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however, any amounts referred to in subsection 2.3 payable to Agents
and Lenders on or before the Closing Date.
"Consolidated Net Income" means, for any period, the net
income (or loss) of 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),
except to the extent of the amount of dividends or other distributions
actually paid to 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 Borrowers or
that Person's assets are acquired by Borrowers, (iii) any after-tax
gains or losses attributable to Asset Sales or returned surplus assets
of any Pension Plan, (iv) dividends or distributions from any Excluded
Subsidiary to Borrowers or any Subsidiary which are used to fund
Permitted Quarterly Tax Distributions and (v) (to the extent not
included in clauses (i), (ii) and (iii) above) any net extraordinary
gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, 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
(a) the common equity of LVSI and its Subsidiaries, (b)(1) the
aggregate liquidation preference of preferred stock or preferred
membership interests of LVSI and its Subsidiaries and (2) any increase
in depreciation and amortization resulting from any purchase accounting
treatment from an acquisition or related financing; (ii) less any
goodwill incurred subsequent to the Closing Date and (iii) less any
write up of assets (in excess of fair market value) after the Closing
Date, in each case on a consolidated basis for LVSI and its
Subsidiaries, determined in accordance with GAAP; provided, that in
calculating Consolidated Net Worth, any gain or loss from any Asset
Sale shall be excluded.
"Consolidated Rental Payments" means, for any period, the
aggregate amount of all rents paid or payable by 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 of their respective Subsidiaries is a party as
lessee. Notwithstanding the foregoing, payments under the HVAC Services
Agreement shall in no event be included in Consolidated Rental
Payments.
"Consolidated Total Debt" means, as at any date of
determination, the aggregate stated balance sheet amount of all
Indebtedness of Borrowers and their Subsidiaries, determined on a
consolidated basis in accordance with GAAP, excluding, however, any
Employee Purchase Notes entered into in accordance with subsection 7.1
(xi).
"Consolidated Working Capital" means, as at any date of
determination, the excess (or deficit) of Consolidated Current Assets
over Consolidated Current Liabilities.
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"Consolidated Working Capital Adjustment" means, for any
period on a consolidated basis, the amount (which may be a negative
number) by which Consolidated Working Capital as of the beginning of
such period exceeds (or is less than) Consolidated Working Capital as
of the end of such period.
"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 Administrative Agent, the Interim Mall Lender and the Mortgage
Notes Indenture Trustee, in their sole discretion, acting pursuant to
the Intercreditor Agreement, to serve as the Construction Consultant
under the Disbursement Agreement.
"Construction Consultant Engagement Agreement" means that
certain engagement letter dated November 14, 1997 by and among the
Construction Consultant, Borrowers, Administrative Agent, Interim Mall
Lender, the Mortgage Notes Indenture Trustee, Permanent Mall Lender and
Goldman Sachs & Co.
"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 its successors and assigns permitted under the
Construction Management Agreement.
"Contingent Obligation", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person
(i) with respect to any Indebtedness, lease, dividend or other
obligation of another 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
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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" 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.
"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, con tract, 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 between LVSI, Venetian, Mall Construction
Subsidiary, and Interface.
"Deed of Trust" means that certain Deed of Trust, Assignment
of Rents and Leases and Security Agreement in the form of Exhibit
XIII-A annexed hereto, dated effective as of the Closing Date granted
by Borrowers to the Title Company, for the benefit of Administrative
Agent, as agent for the Lenders.
"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.
"Direct Construction Guarantor" means Bovis, Inc., a New York
corporation or any successor permitted under the Direct Construction
Guaranty.
"Direct Construction Guaranty" means that certain Guaranty of
Performance and Completion dated as of August 19, 1997 executed by the
Direct Construction Guarantor in favor of LVSI.
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"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 XVIII
annexed hereto and dated as of the date hereof among Borrowers, the
Mall Construction Subsidiary, the Administrative
Agent, the Mortgage Notes Indenture Trustee, the Interim Mall 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.
"Eighth Month Certificate" has the meaning set forth in the
Disbursement Agreement.
"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 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
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denied an approval or a license, or found unsuitable under the Nevada
Gaming Laws applicable to Lenders.
"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 7.1.
"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. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.),
the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136 et
seq.), the Occupational Safety and Health Act (29 U.S.C. 651 et seq.),
the Oil Pollution Act (33 U.S.C. 2701 et seq) and the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. 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.
"Equipment Component" has the meaning assigned to that term in
the Disbursement Agreement.
"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 Code of which that Person
is a member; (ii) any trade or business (whether or not
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incorporated) which is a member of a group of trades or businesses
under common control within the meaning of Section 414(c) of the 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 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 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 Code with respect to any Pension Plan (whether or not waived in
accordance with Section 412(d) of the Code) or the failure to make by
its due date a required installment under Section 412(m) of the 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
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 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 Service of notice of the
failure of any Pension Plan (or any
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other Employee Benefit Plan intended to be qualified under Section
401(a) of the Code) to qualify under Section 401(a) of the 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 Code; or (xi) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
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.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in
Section 8.
"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.
"Excluded Subsidiary" means any Person excluded from the
definition of Subsidiary by virtue of the last sentence of such
definition set forth in this Section 1.1 (including, without
limitation, Mall Subsidiary, Phase II Subsidiary, Mall Direct Holdings,
Phase II Direct Holdings, Mall Manager and Phase II Manager).
"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.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Funds Effective Rate" means, 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
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quotations for such day on such transactions received by Agent from
three Federal funds brokers of recognized standing selected by
Administrative Agent.
"FF&E Facility" means the credit facilities, equipment leases
or similar agreements with the FF&E Lenders in an aggregate principal
amount of approximately $97,700,000 (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 Arranger and Administrative Agent,
(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 Commitments or otherwise reasonably satisfactory to
the Arranger and Administrative Agent, provided in each case that the
applicable FF&E Lenders have entered into intercreditor agreement(s) in
form and substance satisfactory to the Administrative Agent.
"FF&E Intercreditor Agreement" means the Intercreditor
Agreement(s) entered into between the Administrative Agent, FF&E
Lenders and such other Persons as may be necessary parties thereunder
in each case in form and substance satisfactory to Administrative
Agent.
"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" has the meaning set forth in the
Disbursement Agreement.
"Final Completion Date" has the meaning set forth in the
Disbursement Agreement.
"Financial Plan" has the meaning assigned to that term in
subsection 6.1(xiii).
"Financing Agreements" means, collectively, this Agreement,
the Disbursement Agreement, the Interim Mall Credit Agreement, the
Mortgage Notes Indenture, the Collateral Documents, the Other Security
Documents, the Mortgage Notes, any 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 7.13 and, while
applicable, the Disbursement Agreement.
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"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 Liens permitted pursuant to
subsection 7.2) to which such Collateral is subject.
"First Priority Collateral" means all assets, property, real,
personal and mixed of Borrowers and their Subsidiaries, other than the
Mall Collateral, the Mortgage Notes Proceeds Account, the GECC Proceeds
Account, the Interim Mall Proceeds Account, the HVAC Component, the
stock or membership interests of Subsidiaries and Excluded
Subsidiaries, provided, that any assets expressly excluded from the
Lien in favor of Administrative Agent on behalf of lender under the
Collateral Documents shall not constitute First Priority Collateral and
provided further to the extent that the Lien of Administrative Agent in
favor of the Lenders in any of the Specified FF&E shall be
released in accordance with the terms of the Company Security
Agreement, such Specified FF&E shall thereafter be excluded from the
First Priority Collateral.
"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.
"Funded Debt", as applied to any Person, means all
Indebtedness of that Person (including any current portions thereof)
which by its terms or by the terms of any instrument or agreement
relating thereto matures more than one year from, or is directly
renewable or extendable at the option of that Person to a date more
than one year from (including an option of that Person under a
revolving credit or similar agreement obligating the lender or lenders
to extend credit over a period of one year or more from), the date of
the creation thereof.
"Funding and Payment Office" means (i) the office of
Administrative Agent located at 600 Peachtree Street NE, Suite 2700,
Atlanta, Georgia 30308 or (ii) such other office of Administrative
Agent as may from time to time hereafter be designated as such in a
written notice delivered by Administrative Agent to Borrowers and each
Lender.
"Funding Date" means the date of the funding of a Loan.
"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 pro nouncements 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 determination.
"Gaming License" means every license, franchise or other
authorization to own, lease, operate or otherwise conduct gaming
activities of the Borrowers or any of their
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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 Proceeds Account" means an account funded solely by
proceeds of loans made pursuant to a credit agreement made by and
between LVSI and/or VCR and General Electric Corporation and other
Lenders party thereto.
"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.
"GMAC Guaranty" means the guaranty dated as of November 14,
1997 by Adelson in favor of Interim Mall Lender.
"Harrah's Shared Roadway Agreement" has the meaning assigned
that term in the Disbursement Agreement.
"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,
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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" has the meaning given 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" has the meaning given 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.
"HVAC Provider" means Atlantic-Pacific, Las Vegas LLC, a
Delaware limited liability company or its permitted successors under
the HVAC Services Agreement.
"HVAC Services Agreements" means collectively (i) that certain
Energy Services Agreement dated as of the date hereof between Venetian
and the HVAC Provider, (ii) the HVAC Ground Lease, (iii) the
Construction Agency Agreement and (iv) that certain Energy Services
Agreement dated as of the date hereof between Mall Construction
Subsidiary and the HVAC Provider.
"Improvements" means the buildings, fixtures and other
improvements to be situated on the Site.
"Increased Commitment" has the meaning assigned in subsection
2.1A(ii).
"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
and under Contracts 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. Obligations under Interest
Rate Agreements constitute Contingent Obligations and not Indebtedness.
All obligations under the Financing Agreements shall
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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" has the meaning assigned to that term in
subsection 10.3.
"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.
"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 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.
"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 the Administrative Agent,
the Intercreditor Agent, the Mortgage Notes Indenture Trustee, the
Interim Mall Lender and the Subordinated Notes Indenture Trustee, in
substantially the form of Exhibit XIV annexed hereto.
"Interest Payment Date" means (i) with respect to any Base
Rate Loan, each March 31, June 30, September 30 and December 31 of each
year, commencing on the first such date to occur after the Closing
Date, and (ii) with respect to any Eurodollar
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Rate Loan, the last day of each Interest Period applicable to such
Loan; provided that in the case of each Interest Period of longer than
three months "Interest Payment Date" shall also include each date that
is three months, or an integral multiple thereof, after the
commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in
subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement.
"Interest Rate Determination Date" means, with respect to any
Interest Period, two Business Days prior to the first day of such
Interest Period.
"Interface" means Interface Group-Nevada, Inc., a Nevada
corporation.
"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.
"Interim Mall Credit Agreement" means that certain Credit
Agreement dated as of the date hereof among Borrowers, Mall
Construction Subsidiary and Interim Mall Lender.
"Interim Mall Facility" means the credit facility made
available to Borrowers and Mall Construction Subsidiary by Interim Mall
Lender pursuant to the Interim Mall Credit Agreement and any extension,
refinancing, renewal, replacement, substitution or refunding thereof
("Interim Mall Loan Refinancing"), provided that (a) the aggregate
principal amount outstanding under such Interim Mall Loan Refinancing
shall not exceed the aggregate principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, substituted or refunded or
such lesser amount permitted under clause (e), (b) any such Interim
Mall Loan Refinancing shall be on substantially the same terms as the
credit agreement described above except that, subject to clause (e)
below, the Interim Mall Loan Refinancing may be made without the
support of the GMAC Guaranty, (c) each lender under such Interim Mall
Loan Refinancing would be an Eligible Assignee hereunder, (d) each
lender under such Interim Mall Loan Refinancing (or a duly authorized
agent acting on their behalf) shall have entered into the Intercreditor
Agreement and the Disbursement Agreement and assumed all obligations
and agreements of the original Interim Mall Lender thereunder and (e)
to the extent the Interim Mall Loan Refinancing is made without the
support of a guaranty substantially similar to the GMAC Guaranty, the
principal amount under the Interim Mall Loan Refinancing may not exceed
$105,000,000 in the aggregate and the balance (representing the Tranche
B portion) shall be funded as a Substitute Tranche B Loan with the
terms set forth in the
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Substitute Tranche B Note and each lender thereunder shall have entered
into an intercreditor agreement in the form of the Adelson
Intercreditor Agreement and shall have entered into the Disbursement
Agreement and assumed the obligations and agreements of Interim Mall
Lender thereunder.
"Interim Mall Lender" means GMAC Commercial Mortgage
Corporation and its permitted successors and assigns.
"Interim Mall Proceeds Account" has the meaning assigned that
term in the Disbursement Agreement.
"Intermediate Holding Companies" means Mall Holdings and the
Phase II Holdings.
"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 other than Interest Rate Agreements required or permitted
hereunder to hedge against fluctuations in interest rates. 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.
"Issuing Lender" means, with respect to any Letter of Credit,
the Lender which agrees or is otherwise obligated to issue such Letter
of Credit, determined as provided in subsection 3.1B(ii).
"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 Leasehold Deed of
Trust, Assignment of Rents and Leases and Security Agreement in the
form of Exhibit XIII-B annexed hereto, dated as of Closing Date granted
by Mall Construction Subsidiary to Title Company, for the benefit of
Administrative Agent as agent for the Lenders which shall encumber Mall
Construction Subsidiary's interest in the Mall Collateral.
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"Legal Requirements" means all laws, statutes, orders,
decrees, injunctions, licenses, permits, approvals, agreements and
regulations of any Governmental Instrumentality having jurisdiction
over the matter in question.
"Lender" and "Lenders" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together
with their successors and permitted assigns pursuant to subsection
10.1; provided that the term "Lenders", when used in the context of a
particular Commitment, shall mean Lenders having that Commitment.
"Letter of Credit" or "Letters of Credit" means Commercial
Letters of Credit and Standby Letters of Credit issued or to be issued
by Issuing Lenders for the account of Borrowers pursuant to subsection
3.1.
"Letter of Credit Usage" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or
at any time thereafter may become available for drawing under all
Letters of Credit then outstanding plus (ii) the aggregate amount of
all drawings under Letters of Credit honored by Issuing Lenders and not
theretofore reimbursed by Borrowers (including any such reimbursement
out of the proceeds of Revolving Loans pursuant to subsection 3.3B).
"Leverage Ratio" has the meaning assigned that term in
subsection 7.6B.
"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 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 either
Borrower or any of its 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 Term Loans or the
Revolving Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters
of Credit (and any applications for, or reimbursement agreements or
other documents or certificates executed by Borrowers in favor of an
Issuing Lender relating to, the Letters of Credit) the Subsidiary
Guaranties, the Disbursement Agreement and the Collateral Documents.
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"Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Commitments,
that Lender's Commitment and (ii) after the termination of the
Commitments, the sum of (a) the aggregate outstanding principal amount
of the Loans of that Lender plus (b) in the event that Lender is an
Issuing Lender, the aggregate Letter of Credit Usage in respect of all
Letters of Credit issued by that Lender (in each case net of any
participations purchased by other Lenders in such Letters of Credit or
any unreimbursed drawings thereunder) plus (c) the aggregate amount of
all participations purchased by that Lender in any drawings under
Letters of Credit honored by Issuing Lenders and not theretofore
reimbursed by Borrowers.
"Loan Party" means each Borrower, Mall Construction
Subsidiary, each Intermediate Holding Company and each other Subsidiary
of a Borrower which may hereafter become a party to any Loan Document
and "Loan Parties" means all such Persons, collectively.
"Loss Proceeds" has the meaning assigned to that term in the
Disbursement Agreement.
"LVSI" means Las Vegas Sands, Inc., a Nevada corporation.
"Mall" means the retail mall component of the Project
described in more detail on Exhibit T-7 to the Disbursement Agreement.
"Mall Collateral" means 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) all Improvements and equipment that are a
part of or attached or affixed to the Mall or located therein; (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, 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 executed and delivered by Mall Construction
Subsidiary on the Closing Date, substantially in the form of Exhibit
XIX annexed hereto.
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"Mall Direct Holdings" means Grand Canal Shops Mall Holding
Company, LLC, a Delaware limited liability company.
"Mall Escrow Agreement" has the meaning set forth in the
Disbursement Agreement.
"Mall Fee Deed of Trust" means a fee Deed of Trust, Assignment
of Leases and Rents and Security Agreement in the form of Exhibit
XIII-C annexed hereto, dated the Mall Parcel Creation Date granted by
Mall Construction Subsidiary for the benefit of Administrative Agent as
agent for the Lenders.
"Mall Holdings" means Mall Intermediate Holdings Company LLC,
a Delaware limited liability company and a wholly-owned Subsidiary of
Venetian.
"Mall Lease" means that certain Mall I Airspace/Groundlease
dated effective as of the date hereof by and between Venetian, as
lessor, and Mall Construction Subsidiary,as lessee, 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 the same has been assigned to Mall Construction Subsidiary
pursuant to that certain assignment and assumption of contracts dated
as of November 14, 1997 between Venetian and Mall Construction
Subsidiary.
"Mall Manager" means Grand Canal Shops Mall MM, Inc., a Nevada
corporation and a wholly-owned subsidiary of LVSI.
"Mall Operator" means Forest City Commercial Management, Inc.,
an Ohio corporation, and any replacement Mall Operator selected in
accordance with the terms hereof.
"Mall Parcel" means the mall space 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" has the meaning assigned to that
term in the Disbursement Agreement.
"Mall Release Date" has the meaning assigned that term in the
Disbursement Agreement.
"Mall Retainage/Punchlist Account" has the meaning set forth
in the Disbursement Agreement.
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"Mall Subsidiary" means Grand Canal Shops Mall LLC, a Delaware
limited liability company.
"Margin Stock" has the meaning assigned to 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 either (a) Borrowers and any of their
Subsidiaries, taken as a whole or (b) Borrowers and any of their
Subsidiaries and Excluded Subsidiaries, taken as a whole or (ii) the
material impairment of the ability of any Loan Party to observe or
perform, or of Administrative Agent or Lenders to enforce, the
Obligations.
"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 Notes" means the 12.25% Mortgage Notes due 2004
issued by Borrowers pursuant to the Mortgage Notes Indenture.
"Mortgage Notes Collateral Account Agreement" has the meaning
assigned to that term in the Disbursement Agreement.
"Mortgage Note Holders" means the holders of the Mortgage
Notes.
"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).
"Mortgage Notes Proceeds Account" has the meaning set forth in
the Disbursement Agreement.
"Mortgage Policy" has the meaning assigned that term in
subsection 4.1 of this Agreement.
"Mortgaged Property" means the real property described in
Schedule 5.5.
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"Multiemployer Plan" means any Employee Benefit Plan which is
a "multi employer plan" as defined in Section 3(37) of ERISA.
"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)
and 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 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 Liens of Lenders under the Collateral Documents on the
asset or assets that are the 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 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.
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"Non-Recourse Financing" means Indebtedness incurred in
connection with the purchase or lease of personal or real property
useful in the business of Borrowers and their Subsidiaries and (i) as
to which the lender upon default may seek recourse or payment as
against a Borrower or any 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 any of its Subsidiaries or any other property of
a Borrower or any of its Subsidiaries.
"Notes" means one or more of the Term Notes or Revolving Notes
or any combination thereof.
"Notice of Borrowing" means a notice substantially in the form
of Exhibit I annexed hereto delivered by Borrowers to Administrative
Agent pursuant to subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice
substantially in the form of Exhibit II annexed hereto delivered to
Administrative Agent pursuant to subsection 2.2D with respect to a
proposed conversion or continuation of the applicable basis for
determining the interest rate with respect to the Loans specified
therein.
"Notice of Funding Request" has the meaning assigned that term
in the Disbursement Agreement.
"Notice of Issuance of Letter of Credit" means a notice
substantially in the form of Exhibit XV annexed hereto delivered by
Borrowers to Administrative Agent pursuant to subsection 3.1B(i) with
respect to the proposed issuance of a Letter of Credit.
"Obligations" means all obligations of every nature of each
Loan Party from time to time owed to Administrative Agent, Arranger,
Syndication Agent, Lenders or any of them under the Loan Documents,
whether for principal, interest, reimbursement of amounts drawn under
Letters of Credit, fees, expenses, indemnification or otherwise.
"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.
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"Opening Conditions" has the meaning set forth in the
Disbursement Agreement.
"Opening Date" means the date on which the hotel, casino, or
mall portion of the Project is open for business.
"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.
"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 its Subsidiaries evidenced by the Interim Mall
Facility, (iv) the Indebtedness of any Borrower or any of its
Subsidiaries evidenced by the FF&E Facility Agreement, (v) any
Indebtedness of any Borrower or any of its Subsidiaries in respect of
the Substitute Tranche B Loan and/or any 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, as such
date 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 Code or
Section 302 of ERISA.
"Permanent Mall Lender" means Goldman Sachs Mortgage Company
and 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 7.1.
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"Permitted Liens" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or
412(n) of the 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 6.3;
(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 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 8.8;
(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;
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(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 7.7 and any
leasehold mortgage in favor of any party financing the lessee
under any lease permitted under subsection 7.7 provided that
(a) none of the 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 or the Leasehold
Deed of Trust, as applicable;
(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 and (ii) cause a material decrease in the 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; and
(xv) Liens created under the HVAC Services Agreements
(as in effect on the Closing Date);
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(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 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 or permitted to be maintained
hereunder provided that (a) to the extent such Interest Rate
Agreement is intended to hedge interest rate risk in respect
of the Interim Mall Loan such Liens attach only to the Mall
Collateral and (b) to the extent such Interest Rate Agreement
is intended to hedge interest rate risk in respect of the FF&E
Facility;
(xix) restrictions created under the Sale and
Contribution Agreement (as in effect on the Closing Date);
(xx) prior to the Final Completion Date any
"Permitted Liens" under the Disbursement Agreement; and
(xxi) Liens listed on Schedule 7.7.
"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 the 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
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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.
"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 Casino Lease" means the gaming operations lease
between the Phase II Subsidiary and LVSI or Venetian pursuant to which
LVSI or Venetian will operate the gaming operations of the Phase II,
entered into in accordance with subsection 7.10.
"Phase II Direct Holdings" means Lido Casino Resort Holding
Company, LLC, a Delaware limited liability company.
"Phase II Holdings" means Lido Intermediate Holding Company,
LLC, a Delaware limited liability company, and a wholly-owned
Subsidiary of Venetian.
"Phase II Land" means the real property consisting of
approximately 14 acres of the Real Estate Contribution as described in
more detail in Exhibit T-5 of the Disbursement Agreement together 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 Release Conditions" has the meaning assigned to that
term in the Disbursement Agreement.
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"Phase II Subsidiary" means Lido Casino Resorts, LLC, a Nevada
limited liability company.
"Plans and Specifications" has the meaning assigned to 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.
"Pre-Completion Revenues Account" has the meaning assigned to
that term in the Disbursement Agreement.
"Predevelopment Agreement" means the Sands Resort Hotel Casino
Agreement dated February 18, 1997 by and between Clark County and LVSI.
"Prime Rate" means the rate that Scotiabank announces from its
New York office from time to time as its Dollar prime lending rate, as
in effect from time to time. The Prime Rate is a reference rate and
does not necessarily represent the lowest or best rate actually charged
to any customer. Scotiabank or any other Lender may make commercial
loans or other loans at rates of interest at, above or below the Prime
Rate.
"Pro Rata Share" means (i) with respect to all payments,
computations and other matters relating to the Term Loan Commitment or
the Term Loan of any Lender, the percentage obtained by dividing (x)
the Term Loan Exposure of that Lender by (y) the aggregate Term Loan
Exposure of all Lenders, (ii) with respect to all payments,
computations and other matters relating to the Revolving Loan
Commitment or the Revolving Loans of any Lender or any Letters of
Credit issued or participations therein purchased by any Lender, the
percentage obtained by dividing (x) the Revolving Loan Exposure of that
Lender by (y) the aggregate Revolving Loan Exposure of all Lenders, and
(iii) for all other purposes with respect to each Lender, the
percentage obtained by dividing (x) the sum of the Term Loan Exposure
of that Lender plus the Revolving Loan Exposure of that Lender by (y)
the sum of the aggregate Term Loan Exposure of all Lenders plus the
aggregate Revolving Loan Exposure of all Lenders, in any such case as
the applicable percentage may be adjusted by assignments permitted
pursuant to subsection 10.1. The initial Pro Rata Share of each Lender
for purposes of each of clauses (i), (ii) and (iii) of the preceding
sentence is set forth opposite the name of that Lender in Schedule 2.1
annexed hereto.
"Professional Services Agreement" means that certain Agreement
between Owner and Architect dated on or about the date hereof, between
Borrowers and Project Architect.
"Project" means the Venetian-themed hotel, casino, retail,
meeting and entertainment complex, with related heating, ventilation
and air conditioning and power
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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 Costs" has the meaning assigned to that term in the
Disbursement Agreement.
"Project Documents" means the Construction Management
Agreement, the Completion Guaranties, the Contracts, the Cooperation
Agreement, the Professional Services Agreement, the HVAC Services
Agreements, the HVAC Ground Lease, the Mall Management Agreement, the
Tri-Party Agreement, the Predevelopment Agreement, the Billboard Master
Lease, the Harrah's Roadway Agreement, the Services Agreement, the
Sale and Contribution Agreement, the Mall Lease, the Casino Lease, the
Treadway Agreement, the Work Continuation Agreement, the operating
agreements for each of Venetian and the Intermediate Holding Companies
and any other document or agreement entered into on, prior to or after
the Closing Date, in accordance with Section 7.13 and, while
applicable, 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 are transferred to Mall Subsidiary shall no longer
constitute Project Documents.
"Project Schedule" has the meaning assigned that term in the
Disbursement Agr eement.
"Puck JV Letter of Intent" means the letter of intent dated
May 16, 1997 between LVSI and Wolfgang Puck Food Company, L.P.
"Quarterly Date" means (i) with respect to 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) with respect to
each subsequent Quarterly Date, the end of the next succeeding Fiscal
Quarter.
"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).
"Real Estate Contribution" has the meaning assigned to that
term in the introduction to this Agreement as described in more detail
in Schedule 4.5.
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"Register" has the meaning assigned to that term in subsection
2.1D.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Related Parties" means and shall include: (i) Family Members,
as hereafter defined; (ii) directors of LVSI or 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.
"Requisite Class Lenders" means, at any time of determination
(i) for the Class of Lenders having Term Loan Exposure, Lenders having
or holding more than 50% of the sum of the aggregate Term Loan Exposure
of all Lenders and (ii) for the Class of Lenders having Revolving Loan
Exposure, Lenders having or holding more than 50% of the aggregate
Revolving Loan Exposure of all Lenders.
"Requisite Lenders" means Lenders having or holding more than
50% of the sum of the aggregate Loans and unused Commitment of all
Lenders.
"Restricted Junior Payment" means (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 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
indirect, of any shares of any class of stock of either Borrower now or
hereafter outstanding, (iii) any payment made to retire, or to
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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
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 Borrowers or any of their Subsidiaries by Adelson or any
Affiliate of Adelson under the Adelson Completion Guaranty or the GMAC
Guaranty.
"Revolving Loan Availability Date" means the date on which
Construction Consultant delivers the Six-Month Certificate to
Administrative Agent.
"Revolving Loan Commitment" means the commitment of a Lender
to make Revolving Loans to Borrowers pursuant to subsection 2.1A(ii),
and "Revolving Loan Commitments" means such commitments of all Lenders
in the aggregate.
"Revolving Loan Commitment Termination Date" means the date
which is two years from the initial draw of Revolving Loans or issuance
of a Letter of Credit on or after the Revolving Loan Availability Date
but is not later than two years after the Term Loan Commitment
Termination Date.
"Revolving Loan Exposure" means, with respect to any Lender as
of any date of determination (i) prior to the termination of the
Revolving Loan Commitments, that Lender's Revolving Loan Commitment and
(ii) after the termination of the Revolving Loan Commitments, the sum
of (a) the aggregate outstanding principal amount of the Revolving
Loans of that Lender plus (b) in the event that Lender is an Issuing
Lender, the aggregate Letter of Credit Usage in respect of all Letters
of Credit issued by that Lender (in each case net of any participations
purchased by other Lenders in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
participations purchased by that Lender in any outstanding Letters of
Credit or any unreimbursed drawings under any Letters of Credit.
"Revolving Loans" means the Loans made by Lenders to Borrowers
pursuant to subsection 2.1A(ii).
"Revolving Notes" means (i) the promissory notes of Borrowers
issued pursuant to subsection 2.1E on the Closing Date and (ii) any
promissory notes issued by Borrowers pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Revolving
Loan Commitments and Revolving Loans of any Lenders, in each case
substantially in the form of Exhibit III-B annexed hereto, as they may
be amended, supplemented or otherwise modified from time to time.
"Sale and Contribution Agreement" means that certain Sale and
Contribution Agreement dated as of the date hereof among Venetian, Mall
Construction Subsidiary and Mall Subsidiary.
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"Sands Expo and Convention Center" means the exposition and
meeting facilities commonly known as the Sands Expo and Convention
Center.
"Scotiabank" has the meaning assigned to that term in the
introduction to this Agreement.
"Securities" means 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" 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.
"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.
"Six-Month Certificate" has the meaning set forth in 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.
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"Standby Letter of Credit" means any standby letter of credit
or similar instrument issued for the purpose of supporting (i)
Indebtedness of Borrowers in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities
of Borrowers, (iii) the obligations of third party insurers of
Borrowers arising by virtue of the laws of any jurisdiction requiring
third party insurers, (iv) obligations with respect to Capital Leases
or Operating Leases of Borrowers, and (v) performance, payment, deposit
or surety obligations of Borrowers, in any case if required by law or
governmental rule or regulation or in accordance with custom and
practice in the industry; provided that Standby Letters of Credit may
not be issued for the purpose of supporting (a) trade payables or (b)
any Indebtedness constituting "antecedent debt" (as that term is used
in Section 547 of the Bankruptcy Code).
"Stop Funding Notice" has the meaning set forth in the
Disbursement Agreement.
"Subordinated Indebtedness" means (i) the Indebtedness in
respect of the Subordinated Notes, (ii) any Indebtedness in respect of
any Substitute Tranche B Loan or Completion Guaranty Loan and (iii) any
Indebtedness in respect of Employee Repurchase Notes.
"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.
"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 of more other Subsidiaries of that Person or a
combination thereof. Notwithstanding the foregoing, Mall Subsidiary,
Phase II Subsidiary, Phase II Manager, Phase II Direct
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Holdings, 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 Article 5
(representations and warranties) (other than subsection 5.8) and
subsection 6.1 (as specified therein) and for purposes of any
definitions as used in Article 5 or subsection 6.1.
"Subsidiary Guarantor" means each of the Intermediate Holding
Companies and any other Subsidiary of any of the Borrowers that
executes and delivers a counterpart of the Subsidiary Guaranty on the
Closing Date or from time to time thereafter pursuant to subsection
6.13.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed
and delivered by each of the Intermediate Holding Companies and
existing Subsidiaries of Borrowers on the Closing Date and to be
executed and delivered by additional Subsidiaries of Borrowers from
time to time thereafter in accordance with subsection 6.13,
substantially in the form of Exhibit XI annexed hereto, as such
Subsidiary Guaranty may hereafter be amended, supplemented or otherwise
modified from time to time.
"Subsidiary Security Agreement" means each Subsidiary Security
Agreement executed and delivered by any Subsidiary Guarantor other than
the Intermediate Holding Companies from time to time thereafter in
accordance with subsection 6.13, in each case substantially in the form
of Exhibit VIII annexed hereto, as such Subsidiary Security Agreement
may be amended, supplemented or otherwise modified from time to time,
and "Subsidiary Security Agreements" means all such Subsidiary Security
Agreements, collectively.
"Substantial Completion" means all conditions to Final
Completion have occurred other than completion of any Anticipated
Future Work, as certified by the Borrowers and the Construction
Consultant.
"Substantial Completion Date" means the date on which
Substantial Completion occurs.
"Substitute Tranche B Loan" means (i) any amount funded by
Adelson upon a draw under the GMAC Guaranty or the Tranche B Collateral
which Adelson elects to have treated as a subordinated loan to
Venetian, (ii) any amounts funded to refinance the Tranche B portion of
the Interim Mall Loan to the extent the Interim Mall Loan Refinancing
is not supported by a guaranty substantially similar to the GMAC
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 Tranche B portion of the Interim Mall Loan, the
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lender shall have entered into the Disbursement Agreement and assumed
the obligations and agreements of Interim Mall Lender thereunder.
"Substitute Tranche B Note" means a note substantially in the
form attached to the Interim Mall Credit Agreement (as in effect on the
date hereof).
"Supplemental Agent" has the meaning assigned to that term in
subsection 9.1B.
"Supplier Joint Venture" means any Person that supplies or
provides materials or services to any Borrower, the Construction
Manager or any contractor in the Project and in which a Borrower or one
of its Subsidiaries have Investments.
"Syndication Agent" has the meaning assigned to that term in
the introduction to this Agreement.
"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 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.
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"Term Loan Commitment" means the commitment of a Lender to
make a Term Loan to Borrowers pursuant to subsection 2.1A(i), and "Term
Loan Commitments" means such commitments of all Lenders in the
aggregate.
"Term Loan Commitment Termination Date" means the earlier of
(i) Completion and (ii) Outside Completion Deadline.
"Term Loan Exposure" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Term Loans,
that Lender's Term Loan Commitment and (ii) after the funding of the
Term Loans, the outstanding principal amount of the Term Loan of that
Lender.
"Term Loans" means the Loans made by Lenders to Borrowers
pursuant to subsection 2.1A(i).
"Term Notes" means (i) the promissory notes of Borrowers
issued pursuant to subsection 2.1E(i) on the Closing Date and (ii) any
promissory notes issued by Borrowers pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Term Loan
Commitments or Term Loans of any Lenders, in each case substantially in
the form of Exhibit III-A annexed 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 Administrative Agent.
"Total Utilization of Revolving Loan Commitments" means, as at
any date of determination, the sum of (i) the aggregate principal
amount of all outstanding Revolving Loans (other than Revolving Loans
made for the purpose of reimbursing the applicable Issuing Lender for
any amount drawn under any Letter of Credit but not yet so applied)
plus (ii) the Letter of Credit Usage.
"Tranche A Take Out Commitment" means the commitment of
Permanent Mall Lender dated as of the date hereof to make the loan to
Mall Subsidiary in the maximum amount of $105,000,000 to take out the
Tranche A portion of the Interim Mall 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 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" means that certain
Collateral Account Agreement dated as of November 14, 1997 between
Adelson and Interim Mall Lender.
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"Tranche B Take-Out Loan" means the loan to Mall Subsidiary
which is funded pursuant to the Tranche B Take Out Commitment.
"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 a maximum amount of $35,000,000 to take out
the Tranche B portion of the Interim Mall 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.
"Treadway Agreement" means that certain Time and Materials
Agreement dated February 10, 1997 by and between LVSI and Treadway
Industries of Phoenix, Inc., an Arizona corporation.
"Tri-Party Agreement" means the agreement between Venetian,
LVSI, Adelson, Mall Construction Subsidiary, the Mall Subsidiary,
Interim Mall Lender and 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 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).
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"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" has the meaning set forth in the
Disbursement Agreement.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Borrowers to Lenders pursuant to clauses (i), (ii),
(iii), (iv) and (xiii) of subsection 6.1 shall be prepared in accordance with
GAAP as in effect at the time of such preparation (and delivered together with
the reconciliation statements provided for in subsection 6.1(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 5.3.
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 6.13 and, while applicable, the Disbursement Agreement.
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E. Any reference to a term defined in the Disbursement Agreement shall
have the meaning assigned to it 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; the Register; Notes.
A. Commitments. Subject to the terms and conditions of this 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, each Lender hereby severally agrees to make the Loans
described in this subsection 2.1.A.
(i) Term Loans. Each Lender severally agrees to lend to the
Borrowers from time to time during the period from the Closing Date to
and including the Term Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Commitments to be used for the purposes identified in subsec tion 2.5A.
The amount of each Lender's Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the
Commitments is $150,000,000; provided that the Commitments of Lenders
shall be adjusted to give effect to any assignments of the Loan
Commitments pursuant to subsection 10.1B; and provided, further that
the amount of the Commitments shall be reduced from time to time by the
amount of any reductions thereto made pursuant to subsections 2.4B(ii)
and 2.4B(iii). Each Lender's Commitments shall expire immediately and
without further action on the Term Loan Commitment Termination Date and
no Term Loans shall be made after such date. Amounts borrowed under
this subsection 2.1A and subsequently repaid or prepaid may not be
reborrowed.
(ii) Revolving Loans. Each Lender severally agrees, subject to
the limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend
to Borrowers from time to time during the period from the Closing Date
to but excluding the Revolving Loan Commitment Termination Date an
aggregate amount not exceeding its Pro Rata Share of the aggregate
amount of the Revolving Loan Commitments to be used for the purposes
identified in subsection 2.5B. The original amount of each Lender's
Revolving Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate original amount of the Revolv ing
Loan Commitments is $20,000,000; provided that the Revolving Loan
Commitments of Lenders shall be adjusted to give effect to any
assignments of the Revolving Loan Commitments pursuant to subsection
10.1B; and provided, further that the amount of the Revolving Loan
Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsections 2.4B(ii) and 2.4B(iii);
provided still further that, in the event Borrowers request that a
Lender or Lenders (or other Eligible Assignee reasonably acceptable to
Administrative Agent, who desires to become a Lender) increase their
Revolving Loan Commitments, such Lender or Lenders
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may, in their sole and absolute discretion, increase the Revolving Loan
Commitments as requested by Borrowers (the "Increased Commitments") by
giving written notice to Borrowers and Administrative Agent, so long as
the aggregate amount of all such increases in the Revolving Loan
Commitments pursuant to this proviso does not exceed $20,000,000. Each
Lender's Revolving Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Revolving Loans and all other
amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that
date. Amounts borrowed under this subsection 2.1A(ii) may be repaid and
reborrowed to but excluding the Revolving Loan Commitment Termination
Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments
shall be subject to the following limitations in the amounts and during
the periods indicated:
(a) in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan
Commitments then in effect; and
(b) in no event shall the Total Utilization of the
Revolving Loan Commitments exceed at any time prior to
the Revolving Loan Availability Date an amount equal to
$15,000,000 reduced by the amount of any Revolving
Loans repaid or Letters of Credit cancelled prior to
the Revolving Loan Availability Date.
B. Borrowing Mechanics. Term Loans or Revolving Loans made on any
Funding Date (other than Revolving Loans made pursuant to subsection 3.3B for
the purpose of reimbursing any Issuing Lender for the amount of a drawing under
a Letter of Credit issued by it), shall be in an aggregate minimum amount of (y)
$3,000,000 and integral multiples of $1,000,000 in excess of that amount in the
case of Term Loans and (z) $1,000,000 and integral multiples of $500,000 in the
case of Revolving Loans.
Whenever Borrowers desire that Lenders make Term 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.
Whenever Borrowers desire that Lenders make Revolving Loans they shall
deliver to Administrative Agent a Notice of Borrowing no later than 10:00 A.M.
(New York City time) at least three Business Days in advance of the proposed
Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business
Day in advance of the proposed Funding Date (in the case of a Base Rate Loan).
The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall
be a Business Day), (ii) the amount of Revolving Loans requested, (iii) whether
such Revolving Loans shall be Base Rate Loan or Eurodollar Rate Loan, and (iv)
in the case of any Loans requested to be made as Eurodollar Rate Loans, the
initial Interest Period requested therefor. Borrowers shall notify
Administrative Agent and Disbursement Agent prior
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to the funding of any Revolving Loans in the event that any of the matters to
which Borrowers are required to certify in the applicable Notice of Borrowing is
no longer true and correct as of the applicable Funding Date, and the acceptance
by Borrowers of the proceeds of any Revolving 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 Notice of
Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing or Advance Request for a Eurodollar Rate Loan shall be
irrevocable on and after the related Interest Rate Determination Date, and
Borrowers shall be bound to make a borrowing in accordance therewith; provided
that, in the event a Stop Funding Notice ("Stop Funding Notice"), is delivered
with respect to any proposed Term Loans after delivery of a Notice of Funding
Request with respect thereto, Administrative Agent shall promptly notify Lenders
thereof and such Term Loans shall not be made, provided further that Borrower
shall be obligated to make any payments due pursuant to subsection 2.6D as a
result thereof.
C. Disbursement of Funds. All Loans under this Agreement shall be made
by Lenders simultaneously and proportionately to their respective Pro Rata
Shares, it being under stood that no Lender shall be responsible for any default
by any other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular type of
Loan requested be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Loan requested hereunder.
Promptly after receipt by Administrative Agent of (x) in the case of Term Loans,
an Advance Confirmation Notice from the Disbursement Agent in accordance with
the provisions of section 2.5 of the Disbursement Agreement, and (y) in the case
of Revolving Loans, a Notice of Borrowing pursuant to subsection 2.1B,
Administrative Agent shall notify each Lender of the proposed borrowing. Each
Lender shall make the amount of its Loan available to Administrative Agent not
later than 12:00 Noon (New York City time) on the applicable Funding Date, in
same day funds in Dollars, at the Funding and Payment Office. Except as provided
in subsection 3.3B with respect to Revolving Loans used to reimburse any Issuing
Lender for the amount of a drawing under a Letter of Credit issued by it, upon
satisfaction or waiver of the conditions precedent specified in subsections 4.1
(in the case of Loans made on the Closing Date) and 4.2 (in the case of all
Loans), Administrative Agent shall make the aggregate amount of the Loans
received by Administrative Agent from Lenders available (x) in the case of
Revolving Loans prior to the Revolving Loan Availability Date or Term Loans, to
the Disbursement Agent in the Collection Account no later than 3.00 p.m. (New
York City time) on the applicable Funding Date who 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 and (y) in the case of
Revolving Loans made on or after the Revolving Loan Availability Date by
crediting the account of Borrowers at the Funding and Payment Office in the
amount of such Loans.
In the event that the proceeds of any Term 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 and/or returned to the
Administrative Agent in accordance with the provisions set forth in the
Disbursement Agreement; provided, however that the proceeds of such
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Loans shall continue to bear interest and be repayable in accordance with the
provisions set forth in this Agreement. In the event that Administrative Agent
receives a Stop Funding Notice from the Disbursement Agent in accordance with
and pursuant to the terms of the Disbursement Agreement none of the
Administrative Agent and the Lenders shall have any obligation to advance the
Loans.
Unless Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Borrowers a corresponding amount on such Funding Date. If such
corre sponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Borrowers and Borrowers shall immediately pay such corresponding amount
to Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. Nothing in this
subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Borrowers may
have against any Lender as a result of any default by such Lender hereunder.
D. The Register.
(i) Administrative Agent shall maintain, at its address
referred to in subsection 10.9, 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 Borrowers or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Commitment and the Loans from time to time of each Lender, and each
repayment or prepayment in respect of the principal amount of the Loans
of each Lender. Any such recordation shall be conclusive and binding on
Borrowers and each Lender, absent manifest error; provided that failure
to make any such recordation, or any error in such recordation, shall
not affect any Lender's Commitments or Borrowers' Obligations in
respect of any applicable Loans.
(iii) Each Lender shall record on its internal records
(including the Notes held by such Lender) 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
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manifest error; provided that failure to make any such recordation, or
any error in such recordation, shall not affect any Lender's
Commitments or 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.
(iv) Administrative Agent and 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 each case unless and until an Assignment
Agreement effecting the assignment or transfer thereof shall have been
accepted by Administrative Agent and recorded in the Register as
provided in subsection 10.1B(ii). 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 Commitments or
Loans.
E. Notes. Borrowers shall execute and deliver on the Closing Date to
each Lender (or to Administrative Agent for that Lender) (i) a Term Note
substantially in the form of Exhibit III-A annexed hereto to evidence that
Lender's Term Loans, in the principal amount of that Lender's Term Loan
Commitment and with other appropriate insertions and (ii) a Revolving Note
substantially in the form of Exhibit III-B annexed hereto to evidence that
Lender's Revolving Loans, in the principal amount of that Lender's Revolving
Loan Commitment and with other appropriate insertions.
Administrative Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent as provided in subsection 10.1B(ii). Any request, authority
or consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, assignee or transferee of that Note or of
any Note or Notes issued in exchange therefor.
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
determined by reference to the Base Rate or the Adjusted Eurodollar Rate. The
applicable basis for determining the rate of interest with respect to any Loan
shall be selected by Borrowers initially at the time a Notice of Borrowing or
Notice of Funding Request is given with respect to such Loan pursuant to
subsection 2.1B, and the basis for determining the interest rate with respect to
any Loan may be changed from time to time pursuant to subsection 2.2D. If on any
day a Loan is outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement
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specifying the applicable basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the
Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base
Rate plus the Applicable Margin; or
(b) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin.
Notwithstanding anything set forth in the Agreement to the contrary,
Borrowers may not select that any Loans bear interest as Eurodollar Rate Loans
(or convert any Base Rate Loans to Eurodollar Rate Loans) until the earlier of
(i) 60 days after the Closing Date and (ii) notice in writing from
Administrative Agent that syndication has been successfully completed.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Borrowers may, pursuant to the applicable Notice of Funding Request, Notice of
Borrowing or Notice of Conversion/Continuation, as the case may be, select an
interest period (each an "Interest Period") to be applicable to such Loan, which
Interest Period shall be, at Borrowers' option, either a one, two, three or six
month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date in respect of such Loan, in the case
of a Loan initially made as a Eurodollar Rate Loan, or on the date
specified in the applicable Notice of Conversion/Continuation, in the
case of a Loan converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period
shall commence on the day on which the next preceding Interest Period
expires;
(iii) if an 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 any 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 Business Day;
(iv) 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 (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;
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(v) no Interest Period with respect to any portion of the
Loans shall extend beyond the sixth anniversary of the Closing Date;
(vi) no Interest Period shall extend beyond a date on which
Borrowers are required to make a scheduled payment of principal of the
Loans or a permanent reduction of the Revolving Loan Commitments is
scheduled to occur unless the sum of (a) the aggregate principal amount
of Loans that are Base Rate Loans plus (b) the aggregate principal
amount of Loans that are Eurodollar Rate Loans with Interest Periods
expiring on or before such date plus (c) the excess of the Commitments
then in effect over the aggregate principal amount of the Loans then
outstanding equals or exceeds the principal amount required to be paid
on the Loans or the permanent reduction of the Commitments that is
scheduled to occur, on such date;
(vii) there shall be no more than 8 Interest Periods
outstanding at any time; and
(viii) in the event Borrowers fail to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of Funding
Request, Notice of Borrowing or Notice of Conversion/Continuation,
Borrowers shall be deemed to have selected an Interest Period of one
month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Borrowers shall have the option (i) to convert at any time all or any part
of its outstanding Loans equal to $3,000,000 and integral multiples of
$1,000,000 in excess of that amount from Loans bearing interest at a rate
determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $3,000,000 and integral multiples of $1,000,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Borrowers shall deliver a Notice of Conversion/Continuation to
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 a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conver sion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of
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Default has occurred and is continuing. In lieu of delivering the
above-described Notice of Conversion/Continuation, Borrowers may give
Administrative Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.2D, Administrative
Agent shall promptly transmit such notice by telefacsimile or telephone to each
Lender.
Neither Administrative Agent nor any Lender shall incur any liability
to Borrowers in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Borrowers or
for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant to any
such telephonic notice Borrowers shall have effected a conversion or
continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Borrowers shall
be bound to effect a conversion or continuation in accordance there with.
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
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 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration
of the Interest Period in effect at the time any such increase in interest rate
is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon 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 subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Administrative Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed on
the basis of (i) a 360-day year, in the case of Eurodollar Rate Loans and (ii) a
365-day year, in respect of Base Rate Loans, in each case 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 or the first day of an Interest
Period applicable to such Loan or, with respect to a Base Rate Loan
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being converted from a Eurodollar Rate Loan, the date of conversion of such
Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, 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.
2.3 Fees.
A. Commitment Fees. Borrowers agree to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Term Loan Commitment Termination Date equal to the average of the
daily excess of the Term Loan Commitments, as then in effect, over the sum of
the aggregate principal amount of Term Loans outstanding multiplied by half of
1% per annum, such commitment fees to be calculated on the basis of a 360-day
year and the actual number of days elapsed and to be payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing on the first such date to occur after the Closing Date, and ending on
the Term Loan Commitment Termination Date. In addition, Borrowers agree to pay
to Administrative Agent, for distribution to each Lender in proportion to that
Lender's Pro Rata Share, commitment fees for the period from and including the
Closing Date to and excluding the Revolving Loan Commitment Termination Date
equal to the average of the daily excess of the Revolving Loan Commitments over
the sum of (i) the aggregate principal amount of outstanding Revolving Loans but
not the Letter of Credit Usage plus (ii) the Letter of Credit Usage multiplied
by half of 1% per annum, such commitment fees to be calculated on the basis of a
360-day year and the actual number of days elapsed and to be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year,
commencing on the first such date to occur after the Closing Date, and on the
Revolving Loan Commitment Termination Date.
B. Annual Administrative Fee. Borrowers agree to pay to Administrative
Agent an annual administrative fee in the amount and at the times separately
agreed to by the Administrative Agent and the Borrower.
C. Other Fees. Borrowers agree to pay to Syndication Agent, Arranger
and Administrative Agent such other fees in the amounts and at the times
separately agreed upon between Borrowers and Syndication Agent, Arranger and
Administrative Agent.
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2.4 Repayments, Prepayments and Reductions in Commitments; General
Provisions Regarding Payments.
A. Scheduled Payments of Term Loans.
Borrowers shall make principal payments on the Term Loans on
Amortization Payment Dates in amounts equal to (i) in the case of the
first Amortization Payment Date, the sum of the percentages for all
Amortization Dates occurring on or prior to such Amortization Payment
Date (provided that if the first Amortization Date is less than 90 days
from the Amortization Commencement Date, the percentage included in
such sum in respect of the first Amortization Date shall be 3.75%
multiplied by a fraction the numerator of which is the number of days
elapsed since the Amortization Commencement Date and the denominator of
which is 90), multiplied by the principal amount of the Term Loans
outstanding on the Term Loan Commitment Termination Date and (ii) in
the case of each Amortization Payment Date thereafter, an amount equal
to the percentage of the principal amount of the Term Loans outstanding
on the Term Loan Commitment Termination Date multiplied by the
percentage applicable to the Amortization Date which occurs on such
Amortization Payment Date:
===================================================== =========================
Scheduled
Date Repayment
of Loans
===================================================== =========================
First Amortization Date 3.75%
Second Amortization Date 3.75%
Third Amortization Date 3.75%
Fourth Amortization Date 3.75%
Fifth Amortization Date 5.00%
Sixth Amortization Date 5.00%
Seventh Amortization Date 5.00%
Eighth Amortization Date 5.00%
Ninth Amortization Date 7.50%
Tenth Amortization Date 7.50%
Eleventh Amortization Date 7.50%
Twelfth Amortization Date 7.50%
Thirteenth Amortization Date 8.75%
Fourteenth Amortization Date 8.75%
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Fifteenth Amortization Date 8.75%
Sixteenth Amortization Date All remaining
outstanding
amounts
===================================================== =========================
; provided that the scheduled installments of principal of the Loans
set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Loans in accordance with subsection
2.4B(iii); and provided, further that the Loans and all other amounts
owed hereunder with respect to the Loans shall be paid in full no later
than the sixth anniversary of the Closing Date, and the final
installment payable by Borrowers in respect of the Loans on such date
shall be in an amount, if such amount is different from that specified
above, sufficient to repay all amounts owing by Borrowers under this
Agreement with respect to the Loans. For the avoidance of doubt, it is
intended that should the Amortization Commencement Date be later than
90 days after the second anniversary of the Closing Date, the number of
Amortization Dates shall be reduced to the number occurring prior to
the sixth anniversary of the Closing Date and the final amortization
payment shall be increased so that all then outstanding principal on
the Term Loans is repaid on or before the sixth anniversary of the
Closing Date.
B. Prepayments and Unscheduled Reductions in Commitments.
(i) Voluntary Prepayments. Borrowers may, upon not less than
one Business Day's prior written or telephonic notice, in the case of
Base Rate Loans, and three Business Days' prior written or telephonic
notice, in the case of Eurodollar Rate Loans, in each case given to
Administrative Agent by 12:00 Noon (New York City time) on the date
required and, if given by telephone, promptly confirmed in writing to
Administrative Agent (which original written or telephonic notice
Administrative Agent will promptly transmit by telefacsimile or
telephone to each 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 with respect to any Eurodollar Rate
Loan not prepaid on the expiration of the Interest Period applicable
thereto Borrowers shall pay any amount payable pursuant to subsection
2.6D. 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. Any such
voluntary prepayment shall be applied as specified in subsection
2.4B(iii).
(ii) Voluntary Reductions of Commitments. Borrowers may, upon
not less than three Business Days' prior written or telephonic notice
confirmed in writing to Administrative Agent (which original written or
telephonic notice Administrative Agent
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will promptly transmit by telefacsimile or telephone to each Lender),
at any time and from time to time terminate in whole or permanently
reduce in part, without premium or penalty, the Revolving Loan
Commitments in an amount up to the amount by which the Revolving Loan
Commitments exceed the Total Utilization of Revolving Loan Commitments
at the time of such proposed termination or reduction; provided that
any such partial reduction of the Revolving Loan Commitments shall be
in an aggregate minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of that amount. Borrowers' notice to Administrative
Agent shall designate the date (which shall be a Business Day) of such
termination or reduction and the amount of any partial reduction, and
such termination or reduction of the Revolving Loan Commitments shall
be effective on the date specified in Borrowers' notice and shall
reduce the Revolving Loan Commitment of each Lender proportionately to
its Pro Rata Share. Any such voluntary reduction of the Revolving Loan
Commitments shall be applied as specified in subsection 2.4B(iv).
(iii) Mandatory Prepayments and Mandatory Reductions of
Commitments. 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
2.4B(iv):
(a) 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 or during the first
year following Completion, 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 Commitments shall be permanently reduced in an
aggregate amount equal to such Net Asset Sale Proceeds.
(b) 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 (if applicable) or Article X, Sections
5, 12(d) and 13, Article XI, Section 1 or Article XII,
sections 8-9 of the Cooperation Agreement (as applicable),
Borrowers shall prepay the Term Loans and/or the Commitments
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, 12(d) and 13, Article XI
Section 1 and Article XII, Sections 8-9 of the Cooperation
Agreement (as applicable) but not exceeding that
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portion thereof determined to be payable to Lenders in
accordance with Section 4.5 of the Intercreditor Agreement.
(c) Prepayments and Reductions Due to Reversion of
Surplus Assets of Pension Plans. On the first Business Day
following the date of return to Borrowers or any of their
Subsidiaries of any surplus assets of any pension plan of
Borrowers or any for their Subsidiaries, Borrowers shall
prepay the Loans and/or the Commitments shall be permanently
reduced in an aggregate amount (such amount being the "Net
Pension Proceeds") equal to 100% of such returned surplus
assets, net of transaction costs and expenses incurred in
obtaining such return, including incremental taxes payable as
a result thereof.
(d) Prepayments and Reductions Due to Issuance of
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 Proceeds") from the issuance of any debt or equity of
Borrowers or any of their Subsidiaries (other than any debt
expressly permitted under subsection 7.1 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 Commitments 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 Commit ments 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 that are 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 Commitments shall, in any event, be used to make
contributions to Excluded Subsidiaries or used for the
expansion or improvement of the Project or to pay operating
costs with respect thereto.
(e) Prepayments and Reductions from Consolidated
Excess Cash Flow. In the event that there shall be
Consolidated Excess Cash Flow for (y) the period from the
Opening Date through the end of the first Fiscal Year
occurring after the Completion Date or (z) any Fiscal Year
thereafter, Borrowers shall, no later than 90 days after the
end of such period or Fiscal Year, prepay the Term Loans
and/or the Commitments shall be permanently reduced in an
aggregate amount equal to (1) if the Leverage Ratio as at the
end of such period or Fiscal Year is greater than 2.5:1.00,
75% of such Consolidated Excess Cash Flow, and (2) if
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the Leverage Ratio as at the end of such period or Fiscal Year
is less than or equal to 2.5:1.00, 50% of such Consolidated
Excess Cash Flow.
(f) Prepayments and Reductions from Mortgage Notes
Proceeds Account. No later than the first Business Day
following the date on which funds in the Mortgage Notes
Proceeds Account are to be transferred to Administrative Agent
or released to the Borrowers under Section 2.12 of the
Disbursement Agreement, Borrowers shall prepay the Term Loans
and/or the Commitments shall be permanently reduced in an
aggregate amount equal to the amount on deposit on such date
in the Mortgage Notes Proceeds Account in excess of
$50,000,000.
(g) Prepayments from Certain Distributions from Mall
Subsidiary. On the date of receipt by Borrowers or any of
their Subsidiaries of any dividends or distributions in Cash
or Cash Equivalents from Mall Subsidiary, Mall Direct Holdings
or Mall Manager following the issuance of any debt or equity
of Mall Subsidiary, Mall Direct Holdings or Mall Manager
(excluding any such proceeds to the extent used to repay the
Interim Mall Facility and excluding any dividends or
distributions representing the proceeds of any such debt
issuance to the extent made 60 days or more after such debt
issuance), Borrowers shall prepay the Loans and/or the
Commitments shall be permanently reduced in an amount equal to
100% of such dividends or distributions but not to exceed (1)
with respect to any debt issuance, 50% of the Net Proceeds of
such issuance (excluding any such proceeds to the extent used
to repay the Interim Mall Facility) and (2) with respect to
any equity issuance, 100% of the Net Proceeds of such issuance
(excluding any such proceeds to the extent used to repay the
Interim Mall Facility). Notwithstanding the foregoing, any
dividends or distributions from Mall Subsidiary, Mall Direct
Holdings or Mall Manager which are applied by Borrowers within
15 days of receipt to fund Permitted Quarterly Tax
Distributions need not be applied to prepay the Loans or to
reduce Commitments, but such exclusion shall not reduce the
amounts otherwise required to be applied to prepay Loans
and/or reduce Commitments as provided above.
(h) Prepayments From Funds Returned to Administrative
Agent. To the extent no other provision of this subsection
2.4B(iii) would otherwise apply, no later than the Business
Day following the date on which funds representing the
proceeds of Loans are returned or distributed to
Administrative Agent on behalf of Lenders under Section 2.11
or 2.12 of the Disbursement Agreement, Administra tive Agent
shall apply such funds to prepay the Loans and/or the
Commitment shall be permanently reduced in an amount equal to
the amount of funds so returned or distributed.
(i) Other Prepayments. To the extent no other
provision of this subsection 2.4B(iii) would apply, if any
funds would be required to be used to redeem and/or prepay the
Mortgage Notes and/or the Subordinated Notes (other
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than funds from the Mortgage Notes Proceeds Account) if not
otherwise used to repay the Loans, then no later than one
Business Day prior to the date on which Borrowers would
otherwise be required to use such funds to effect such
prepayment or redemption of the Mortgage Notes and/or
Subordinated Notes, Borrowers shall prepay the Loans and/or
the Commitments shall be permanently reduced in an amount
equal to the amount of funds which would otherwise be used to
redeem and/or prepay Mortgage Notes and/or Subordinated Notes.
(j) 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(iii)(a)-(i), Borrowers shall deliver to
Administrative Agent 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, the applicable Net Pension Proceeds, Net
Proceeds (as such terms are defined in subsections
2.4B(iii)(c) and (d)), the applicable Consolidated Excess Cash
Flow, 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 Term Loans (and/or, if applicable, the
Commitments shall be permanently reduced) in an amount equal
to the amount of such excess, and Borrowers shall concurrently
therewith deliver to Administrative Agent an Officers'
Certificate demonstrating the derivation of the additional Net
Proceeds Amount resulting in such excess.
(k) Prepayments Due to Reductions or Restrictions of
Revolving Loan Commitments. Borrowers shall from time to time
prepay the Revolving Loans to the extent necessary so that (1)
the Total Utilization of Revolving Loan Commit ments shall not
at any time exceed the Revolving Loan Commitments then in
effect and (2) to give effect to the limitations set forth in
clause (b) of the second paragraph of subsection 2.1A(ii).
(l) Reduction of Term Loan Commitments from Revenues
Used in Construction. The Term Loan Commitments shall be
permanently reduced by an amount equal to 75% of the amounts
released to or on behalf of Borrowers at their election from
the Pre-Completion Revenues Account to fund Project Costs with
such reduction effective the date of such release.
(m) Reduction of Revolving Loans from FF&E Facility
Proceeds. Borrowers shall from time to time repay Revolving
Loans the proceeds of which were used to fund deposits for, or
to acquire, equipment to the extent required under subsection
6.14.
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(iv) Application of Prepayments and Unscheduled Reductions of
Revolving Loan Commitments.
(a) Application of Voluntary Prepayments by Type of
Loan and Order of Maturity. Any voluntary prepayments pursuant
to subsection 2.4B(i) shall be applied as specified by
Borrowers in the applicable notice of prepayment, provided
that in the event Borrowers fail to specify the Loans to which
any such prepayment shall be applied, such prepayment shall be
applied first to repay outstanding Revolving Loans to the full
extent thereof on a pro rata basis, second to repay out
standing Term Loans on a pro rata basis and third to
permanently reduce the Revolving Loan Commitments to the full
extent thereof.
(b) Application of Mandatory Prepayments by Type of
Loans. Any amount (the "Applied Amount") required to be
applied as a mandatory prepayment of the Term Loans and/or a
reduction of the Revolving Loan Commitments pursuant to
subsections 2.4B(iii)(a)-(j) shall be applied to first prepay
the Term Loans to the full extent thereof, second, to the
extent of any remaining portion of the Applied Amount, to
prepay the Revolving Loans to the full extent thereof and to
further permanently reduce the Revolving Loan Commitments by
the amount of such prepayment, and third, to the extent of any
remaining portion of the Applied Amount, to further
permanently reduce the Revolving Loan Commitments to the full
extent thereof. Any amount required to be applied as a
mandatory repayment of Revolving Loans pursuant to subsection
2.4B(iii)(m) shall be applied to prepay Revolving Loans.
(c) Application of Mandatory Prepayments of Term
Loans to the Scheduled Installments of Principal Thereof. Any
mandatory prepayments of the Term Loans pursuant to subsection
2.4B(iii)(a)-(d), (f), (g), (h), (i) or (j) shall be applied
to reduce the scheduled installments of principal of the Term
Loans set forth in subsection 2.4A, on a pro rata basis, and
any mandatory prepayments of the Term Loans pursuant to
subsection 2.4B(iii)(e) shall be applied to reduce the
scheduled installments of principal of the Loans set forth in
subsection 2.4A, in inverse order of maturity.
(d) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Considering Loans being prepaid
separately, any prepayment thereof shall be applied first to
Base Rate Loans to the full extent thereof before application
to Eurodollar Rate Loans, in each case in a manner which
minimizes the amount of any payments required to be made by
Borrowers pursuant to subsection 2.6D.
C. 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
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Dollars in same day funds, without defense, setoff or counterclaim, free of any
restriction or condition, and delivered to Administrative Agent not later than
12:00 Noon (New York City time) on the date due at the Funding and Payment
Office for the account of Lenders; funds received by Administrative Agent 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 Administrative Agent to
charge their accounts with Administrative Agent in order to cause timely payment
to be made to Administrative Agent 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.
(iii) Apportionment of Payments. Aggregate principal and interest
payments in respect of Loans shall be apportioned among all outstanding Loans
proportionately to Lenders' respective Pro Rata Shares. Administrative Agent
shall promptly distribute to each Lender, at its primary address set forth below
its name on the appropriate signature page hereof or at such other address as
such Lender may request, its Pro Rata Share of all such payments received by
Administrative Agent and the commitment fees of such Lender when received by
Administrative Agent pursuant to subsection 2.3. Notwithstanding the foregoing
provisions of this subsection 2.4C(iii), if, pursuant to the provisions of
subsection 2.6C, any Notice of Conversion/Continuation 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 Eurodollar Rate Loans, Administrative Agent shall give
effect thereto in apportioning payments received thereafter.
(iv) 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.
(v) Notation of Payment. Each 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.
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2.5 Use of Proceeds.
A. Term Loans. The proceeds of the Term Loans shall be applied by
Borrowers to pay Project Costs in accordance with the Disbursement Agreement
(including costs and expenses incurred by Borrowers in connection with the
transactions contemplated hereby), all in accordance with the Disbursement
Agreement.
B. Revolving Loans. The proceeds of the Revolving Loans shall be
applied by Borrowers for working capital and general corporate purposes
(including budgeted costs under the heading "Working Capital"), provided that
the proceeds of Revolving Loans may not be used for any purpose other than to
purchase Specified FF&E or to make deposits thereon prior to the Revolving Loan
Availability Date.
C. 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 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
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,
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 Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Borrowers
and each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar 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 Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Borrowers and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Borrowers and Lenders that the circum stances
giving rise to such notice no longer exist and (ii) any Notice of Borrowing or
Notice of Conversion/Continuation given by Borrowers with respect to the Loans
in respect
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of which such determination was made shall be deemed to be made with respect to
Base Rate Loans.
C. Illegality or Impracticability of Eurodollar 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 Borrowers and Administrative Agent) that the
making, maintaining or continuation of its Eurodollar 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 Eurodollar market or the position of such Lender in that market,
then, and in any such event, such Lender shall be an "Affected Lender" and it
shall on that day give notice (by telefacsimile or by telephone confirmed in
writing) to Borrowers and Administrative Agent of such determination (which
notice Administrative Agent shall promptly transmit to each other Lender).
Thereafter (a) the obligation of the Affected Lender to make Loans as, or to
convert Loans to, Eurodollar Rate Loans shall be suspended until such notice
shall be withdrawn by the Affected Lender (which such Affected Lender shall do
at the earliest practicable date), (b) to the extent such determination by the
Affected Lender relates to a Eurodollar Rate Loan then being requested by
Borrowers pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding Eurodollar 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, and (d) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Except as provided in the
immediately preceding sentence, nothing in this subsection 2.6C shall affect the
obligation of any Lender other than an Affected Lender to make or maintain Loans
as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms
of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Borrowers shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including any interest paid by that
Lender to lenders of funds borrowed by it to make or carry its Eurodollar 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 Eurodollar Rate Loan does not occur on a date specified therefor in an
Advance Confirmation Notice, Notice of Borrowing or a telephonic request for
borrowing, as applicable, or a conversion to or continuation of any Eurodollar
Rate Loan does not occur on a date specified therefor in a Notice of Conver
sion/Continuation or a telephonic request for conversion or continuation, (ii)
if any prepayment (including any prepayment pursuant to subsection 2.4B(i)) or
other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last
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day of an Interest Period applicable to that Loan, (iii) if any prepayment of
any of its Eurodollar Rate 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 Eurodollar Rate Loans when required by the
terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar 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 Eurodollar Rate Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar 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 Eurodollar 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 subsection 2.6 and
under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Borrowers may not elect to have a Loan be made or maintained as, or
converted to, a Eurodollar Rate Loan after the expiration of any Interest Period
then in effect for that Loan and (ii) subject to the provisions of subsection
2.6D, any Advance Confirmation Notice, Notice of Borrowing or Notice of
Conversion/Continuation given by Borrowers with respect to a requested borrowing
or conversion/continuation that has not yet occurred shall be deemed made with
respect to Base Rate Loans.
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 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
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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 Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar 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 Eurodollar
market;
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, 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 Borrowers (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such 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 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 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
Administrative Agent or any Lender under any of the Loan Documents:
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(a) Borrowers shall notify Administrative Agent of
any such require ment 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 Administrative
Agent or such Lender, as the case may be) on behalf of and in
the name of Administrative Agent or such 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,
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
(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 Administrative Agent evidence satisfactory to
the other affected parties 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 (c) above except to the extent that any change
after the date hereof (in the case of each Lender listed on the
signature pages hereof) or after the date of the Assignment Agreement
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 Agreement, as
the case may be, in respect of payments to such Lender.
(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
Administrative Agent for transmission to Borrowers, on or
prior to the Closing Date (in the case of each Lender listed
on the signature pages hereof) or on or prior to the date of
the Assignment Agreement 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 Borrowers or
Administrative Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue
Service Form 1001 or 4224 (or any successor forms), properly
completed and
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duly executed by such Lender, together with any other
certificate or statement of exemption required under the 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
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
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 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 Lender under the Loan
Documents or (2) notify Administrative Agent and 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
Closing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment
Agreement pursuant to which it became a Lender (in the case of
each other 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,
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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 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 after the date hereof 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 Letters of Credit or participations therein or other obligations
hereunder with respect to the Loans or the Letters of Credit 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 Borrowers from such Lender of the statement
referred to in the next sentence, 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 Borrowers (with a copy to 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.
2.8 Obligation of Lenders to Mitigate.
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender or Issuing Lender to become an Affected Lender or
that would entitle such Lender or Issuing Lender to receive payments under
subsection 2.7 or subsection 3.6 it will, to the extent not inconsistent with
the internal policies of such Lender or Issuing Lender and any applicable legal
or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or
maintain the Commitments of such Lender or Issuing Lender or the affected Loans
or Letters of Credit of such Lender or Issuing Lender through another lending or
Letters of Credit office of such Lender or Issuing Lender or (ii) take such
other measures as such Lender or Issuing Lender may deem reasonable, if as a
result thereof the circumstances which would cause such Lender or Issuing 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 or Issuing Lender pursuant
to subsection 2.7 would be materially reduced and if, as determined by such
Lender or Issuing Lender in its sole discretion, the making, issuing, funding or
maintaining of such Commitments or Loans or Letters
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of Credit through such other lending or Letters of Credit office or in
accordance with such other measures, as the case may be, would not otherwise
materially adversely affect such Commitments or Loans or Letters of Credit or
the interests of such Lender or Issuing Lender; provided that such Lender or
Issuing Lender will not be obligated to utilize such other lending or lending or
Letters of Credit office pursuant to this subsection 2.8 if such Lender or
Issuing 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 such Lender or Issuing Lender to Borrowers (with a copy to
Administrative Agent) shall be conclusive absent manifest error. Each Lender and
Issuing Lender agrees that it will not request compensation under subsection 2.7
unless such Lender or Issuing Lender requests compensation from borrowers under
other lending arrangements with such Lender or Issuing 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 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 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 incapacity, lack of authority or any disability or
other defense that may be available to the other Borrower and any defenses or
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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 the Administrative Agent on behalf of the Lenders and
shall forthwith be paid over to the Administrative Agent for the benefit of the
Lenders 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. LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein.
A. Letters of Credit. In addition to Borrowers requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(ii), Borrowers may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date, that one or more Lenders issue Letters of Credit for the
account of Borrowers for the purposes specified in the definitions of Commercial
Letters of Credit and Standby Letters of Credit; provided that prior to the
Revolving Loan Availability Date Borrowers may not request any Letters of Credit
for any purpose other than to support deposits for Specified FF&E. Subject to
the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Borrowers herein set forth, any one or more
Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be
obligated to, issue such Letters of Credit in accordance with the provisions of
this subsection 3.1; provided that Borrowers shall not request that any Lender
issue (and no Lender shall issue):
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Revolving Loan Commitments then in effect or if after giving
affect to such issuance, Borrowers would not be in compliance with
clause (b) of the second paragraph of subsection 2.1A(ii);
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $15,000,000;
(iii) any Standby Letter of Credit having an expiration date
later than the earlier of (a) the Revolving Loan Commitment Termination
Date and (b) the date which is one year from the date of issuance of
such Standby Letter of Credit; provided that the immediately preceding
clause (b) shall not prevent any Issuing Lender from agreeing that a
Standby Letter of Credit will automatically be extended for one or more
successive
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periods not to exceed one year each unless such Issuing Lender elects
not to extend for any such additional period; and provided, further
that such Issuing Lender shall elect not to extend such Standby Letter
of Credit if it has knowledge that an Event of Default has occurred and
is continuing (and has not been waived in accordance with subsection
10.6) at the time such Issuing Lender must elect whether or not to
allow such extension;
(iv) any Commercial Letter of Credit having an expiration date
(a) later than the earlier of (X) the date which is 30 days prior to
the Revolving Loan Commitment Termination Date and (Y) the date which
is 180 days from the date of issuance of such Commercial Letter of
Credit or (b) that is otherwise unacceptable to the applicable Issuing
Lender in its reasonable discretion; or
(v) any Letter of Credit denominated in a currency other than
Dollars.
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Borrowers desire the issuance
of a Letter of Credit, they shall deliver to Administrative Agent a
Notice of Issuance of Letter of Credit substantially in the form of
Exhibit XV annexed hereto no later than 12:00 Noon (New York City time)
at least three Business Days (in the case of Standby Letters of Credit)
or five Business Days (in the case of Commercial Letters of Credit), or
in each case such shorter period as may be agreed to by the Issuing
Lender in any particular instance, in advance of the proposed date of
issuance. The Notice of Issuance of Letter of Credit shall specify (a)
the proposed date of issuance (which shall be a Business Day), (b)
whether the Letter of Credit is to be a Standby Letter of Credit or a
Commercial Letter of Credit, (c) the face amount of the Letter of
Credit, (d) the expiration date of the Letter of Credit, (e) the name
and address of the beneficiary, and (f) either the verbatim text of the
proposed Letter of Credit or the proposed terms and conditions thereof,
including a precise descrip tion of any documents to be presented by
the beneficiary which, if presented by the beneficiary prior to the
expiration date of the Letter of Credit, would require the Issuing
Lender to make payment under the Letter of Credit; provided that the
Issuing Lender, in its reasonable discretion, may require changes in
the text of the proposed Letter of Credit or any such documents; and
provided, further that no Letter of Credit shall require payment
against a conforming draft to be made thereunder on the same business
day (under the laws of the jurisdiction in which the office of the
Issuing Lender to which such draft is required to be presented is
located) that such draft is presented if such presentation is made
after 10:00 A.M. (in the time zone of such office of the Issuing
Lender) on such business day.
Borrowers shall notify the applicable Issuing Lender (and
Administrative Agent, if Administrative Agent is not such Issuing
Lender) prior to the issuance of any Letter of Credit in the event that
any of the matters to which Borrowers are required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of Credit,
and upon the issuance of any Letter of Credit Borrowers shall be deemed
to have re-certified, as of the date of such
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issuance, as to the matters to which Borrowers are required to certify
in the applicable Notice of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by
Administrative Agent of a Notice of Issuance of Letter of Credit
pursuant to subsection 3.1B(i) requesting the issuance of a Letter of
Credit, in the event Administrative Agent elects to issue such Letter
of Credit, Administrative Agent shall promptly so notify Borrowers, and
Administrative Agent shall be the Issuing Lender with respect thereto.
In the event that Administrative Agent, in its sole discretion, elects
not to issue such Letter of Credit, Administrative Agent shall promptly
so notify Borrowers, whereupon Borrowers may request any other Lender
to issue such Letter of Credit by delivering to such Lender a copy of
the applicable Notice of Issuance of Letter of Credit. Any Lender so
requested to issue such Letter of Credit shall promptly notify
Borrowers and Administrative Agent whether or not, in its sole
discretion, it has elected to issue such Letter of Credit, and any such
Lender which so elects to issue such Letter of Credit shall be the
Issuing Lender with respect thereto. In the event that all other
Lenders shall have declined to issue such Letter of Credit,
notwithstanding the prior election of Administrative Agent not to issue
such Letter of Credit, Administrative Agent shall be obligated to issue
such Letter of Credit and shall be the Issuing Lender with respect
thereto, notwithstanding the fact that the Letter of Credit Usage with
respect to such Letter of Credit and with respect to all other Letters
of Credit issued by Administrative Agent, when aggregated with
Administrative Agent's outstanding Revolving Loans, may exceed
Administrative Agent's Revolving Loan Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or
waiver (in accordance with subsection 10.6) of the conditions set forth
in subsection 4.3, the Issuing Lender shall issue the requested Letter
of Credit in accordance with the Issuing Lender's standard operating
procedures.
(iv) Notification to Lenders. Upon the issuance of any Letter
of Credit the applicable Issuing Lender shall promptly notify
Administrative Agent and each other Lender of such issuance, which
notice shall be accompanied by a copy of such Letter of
Credit. Promptly after receipt of such notice (or, if Administrative
Agent is the Issuing Lender, together with such notice), Administrative
Agent shall notify each Lender of the amount of such Lender's
respective participation in such Letter of Credit, determined in
accordance with subsection 3.1C.
(v) Reports to Lenders. Within 15 days after the end of each
calendar quarter ending after the Closing Date, so long as any Letter
of Credit shall have been outstanding during such calendar quarter,
each Issuing Lender shall deliver to each other Lender a report setting
forth for such calendar quarter the daily aggregate amount available to
be drawn under the Letters of Credit issued by such Issuing Lender that
were outstanding during such calendar quarter.
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C. Lenders' Purchase of Participations in Letters of Credit.
Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby agrees to, have irrevocably purchased from the Issuing
Lender a participation in such Letter of Credit and any drawings honored
thereunder in an amount equal to such Lender's Pro Rata Share of the maximum
amount which is or at any time may become available to be drawn thereunder.
3.2 Letter of Credit Fees.
Borrowers agree to pay the following amounts with respect to Letters of
Credit issued hereunder:
(i) with respect to each Standby Letter of Credit, (a) a
fronting fee, payable directly to the applicable Issuing Lender for its
own account, equal to the greater of (X) $5,000 and (Y) 0.25% per annum
of the daily amount available to be drawn under such Standby Letter of
Credit and (b) a letter of credit fee, payable to Administrative Agent
for the account of Lenders, equal to the product of (y) a percentage
equal to the Applicable Margin with respect to Eurodollar Loans then in
effect and (z) the daily maximum amount available to be drawn under
such Standby Letter of Credit, each such fronting fee or letter of
credit fee to be payable in arrears on and to (but excluding) each
March 31, June 30, September 30 and December 31 of each year and
computed on the basis of a 360-day year for the actual number of days
elapsed;
(ii) with respect to each Commercial Letter of Credit, (a) a
fronting fee, payable directly to the applicable Issuing Lender for its
own account, equal to 0.25% per annum of the daily amount available to
be drawn under such Commercial Letter of Credit and (b) a letter of
credit fee, payable to Agent for the account of Lenders, equal to the
product of (y) a percentage equal to the Applicable Margin with respect
to Eurodollar Loans then in effect and (z) the daily maximum amount
available to be drawn under such Commercial Letter of Credit, each such
fronting fee or letter of credit fee to be payable in arrears on and to
(but excluding) each March 31, June 30, September 30 and December 31 of
each year and computed on the basis of a 360-day year for the actual
number of days elapsed; and
(iii) with respect to the issuance, amendment or transfer of
each Letter of Credit and each payment of a drawing made thereunder
(without duplication of the fees payable under clauses (i) and (ii)
above), documentary and processing charges payable directly to the
applicable Issuing Lender for its own account in accordance with such
Issuing Lender's standard schedule for such charges in effect at the
time of such issuance, amendment, transfer or payment, as the case may
be.
For purposes of calculating any fees payable under clauses (i) and (ii) of this
subsection 3.2, the daily amount available to be drawn under any Letter of
Credit shall be determined as of the close of business on any date of
determination. Promptly upon receipt by Administrative Agent of any amount
described in clause (i)(b) or (ii)(b) of this subsection 3.2, Administrative
Agent shall distribute to each Lender its Pro Rata Share of such amount.
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3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit.
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. Reimbursement by Borrowers of Amounts Paid Under Letters of Credit.
In the event an Issuing Lender has determined to honor a drawing under a Letter
of Credit issued by it, such Issuing Lender shall immediately notify Borrowers
and Administrative Agent, and Borrowers shall reimburse such Issuing Lender on
or before the Business Day immediately following the date on which such drawing
is honored (the "Reimbursement Date") in an amount in Dollars and in same day
funds equal to the amount of such honored drawing; provided that, anything
contained in this Agreement to the contrary notwithstanding, (i) unless
Borrowers shall have notified Administrative Agent and such Issuing Lender prior
to 10:00 A.M. (New York City time) on the date such drawing is honored that
Borrowers intend to reimburse such Issuing Lender for the amount of such honored
drawing with funds other than the proceeds of Revolving Loans, Borrowers shall
be deemed to have given a timely Notice of Borrowing to Administrative Agent
requesting Lenders to make Revolving Loans that are Base Rate Loans on the
Reimbursement Date in an amount in Dollars equal to the amount of such honored
drawing and (ii) subject to satisfaction or waiver of the conditions specified
in subsection 4.2B, Lenders shall, on the Reimbursement Date, make Revolving
Loans that are Base Rate Loans in the amount of such honored drawing, the
proceeds of which shall be applied directly by Agent to reimburse such Issuing
Lender for the amount of such honored drawing; and provided, further that if for
any reason proceeds of Revolving Loans are not received by such Issuing Lender
on the Reimburse ment Date in an amount equal to the amount of such honored
drawing, Borrowers shall reimburse such Issuing Lender, on demand, in an amount
in same day funds equal to the excess of the amount of such honored drawing over
the aggregate amount of such Revolving Loans, if any, which are so received.
Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its
obligation to make Revolving Loans on the terms and conditions set forth in this
Agreement, and Borrowers shall retain any and all rights it may have against any
Lender resulting from the failure of such Lender to make such Revolving Loans
under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of
Credit.
(i) Payment by Lenders. In the event that Borrowers shall fail
for any reason to reimburse any Issuing Lender as provided in
subsection 3.3B in an amount equal to the amount of any drawing honored
by such Issuing Lender under a Letter of Credit issued by it, such
Issuing Lender shall promptly notify each other Lender of the
unreimbursed amount of such honored drawing and of such other Lender's
respective participation therein based on such Lender's Pro Rata Share.
Each Lender shall make available to such Issuing Lender an amount equal
to its respective participation, in Dollars and in same day funds, at
the office of such Issuing Lender specified in such
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notice, not later than 12:00 Noon (New York City time) on the first
business day (under the laws of the jurisdiction in which such office
of such Issuing Lender is located) after the date notified by such
Issuing Lender. In the event that any Lender fails to make available to
such Issuing Lender on such business day the amount of such Lender's
participation in such Letter of Credit as provided in this subsection
3.3C, such Issuing Lender shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the rate
customarily used by such Issuing Lender for the correction of errors
among banks for three Business Days and thereafter at the Base Rate.
Nothing in this subsection 3.3C shall be deemed to prejudice the right
of any Lender to recover from any Issuing Lender any amounts made
available by such Lender to such Issuing Lender pursuant to this
subsection 3.3C in the event that it is determined by the final
judgment of a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Issuing Lender in respect of
which payment was made by such Lender constituted gross negligence or
willful misconduct on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Borrowers. In the event any Issuing Lender shall have been reimbursed
by other Lenders pursuant to subsection 3.3C(i) for all or any portion
of any drawing honored by such Issuing Lender under a Letter of Credit
issued by it, such Issuing Lender shall distribute to each other Lender
which has paid all amounts payable by it under subsection 3.3C(i) with
respect to such honored drawing such other Lender's Pro Rata Share of
all payments subsequently received by such Issuing Lender from
Borrowers in reimbursement of such honored drawing when such payments
are received. Any such distribution shall be made to a Lender at its
primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Borrowers. Borrowers agree to pay
to each Issuing Lender, with respect to drawings honored under any
Letters of Credit issued by it, interest on the amount paid by such
Issuing Lender in respect of each such honored drawing from the date
such drawing is honored to but excluding the date such amount is
reimbursed by Borrowers (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate
equal to (a) for the period from the date such drawing is honored to
but excluding the Reimbursement Date, the rate then in effect under
this Agreement with respect to Revolving Loans that are Base Rate Loans
and (b) thereafter, a rate which is 2% per annum in excess of the rate
of interest otherwise payable under this Agreement with respect to
Revolving Loans that are Base Rate Loans. Interest payable pursuant to
this subsection 3.3D(i) shall be computed on the basis of a 365-day
year for the actual number of days elapsed in the period during which
it accrues and shall be payable on demand or, if no demand is made, on
the date on which the related drawing under a Letter of Credit is
reimbursed in full.
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(ii) Distribution of Interest Payments by Issuing Lender.
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing honored under
a Letter of Credit issued by it, (a) such Issuing Lender shall
distribute to each other Lender, out of the interest received by such
Issuing Lender in respect of the period from the date such drawing is
honored to but excluding the date on which such Issuing Lender is
reimbursed for the amount of such drawing (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B), the amount that such other Lender would have been
entitled to receive in respect of the letter of credit fee that would
have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored under such
Letter of Credit, and (b) in the event such Issuing Lender shall have
been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all
or any portion of such honored drawing, such Issuing Lender shall
distribute to each other Lender which has paid all amounts payable by
it under subsection 3.3C(i) with respect to such honored drawing such
other Lender's Pro Rata Share of any interest received by such Issuing
Lender in respect of that portion of such honored drawing so reimbursed
by other Lenders for the period from the date on which such Issuing
Lender was so reimbursed by other Lenders to but excluding the date on
which such portion of such honored drawing is reimbursed by Borrowers.
Any such distribution shall be made to a Lender at its primary address
set forth below its name on the appropriate signature page hereof or at
such other address as such Lender may request.
3.4 Obligations Absolute.
The obligation of Borrowers to reimburse each Issuing Lender for
drawings honored under the Letters of Credit issued by it and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other
right which Borrower or any Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), any Issuing Lender or
other Lender or any other Person or, in the case of a Lender, against
Borrowers, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any
underlying transaction between Borrowers or one of its Subsidiaries and
the beneficiary for which any Letter of Credit was procured);
(iii) any draft or other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
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(iv) payment by the applicable Issuing Lender under any Letter
of Credit against presentation of a draft or other document which does
not substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
Borrowers;
(vi) any breach of this Agreement or any other Loan Document
by any party thereto;
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event
of Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 Indemnification; Nature of Issuing Lenders' Duties.
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Borrowers hereby agree to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Borrowers and any
Issuing Lender, Borrowers assume all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring
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or assigning or purporting to transfer or assign any such Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason; (iii) failure of
the beneficiary of any such Letter of Credit to comply fully with any conditions
required in order to draw upon such Letter of Credit; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of such Issuing Lender, including without
limitation any Governmental Acts, and none of the above shall affect or impair,
or prevent the vesting of, any of such Issuing Lender's rights or powers
hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Borrowers.
Notwithstanding anything to the contrary contained in this subsection
3.5, Borrowers shall retain any and all rights it may have against any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or 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 any
Issuing Lender or 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 Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than
any Tax on the overall net income of such Issuing Lender or Lender)
with respect to the issuing or maintaining of any Letters of Credit or
the purchasing or maintaining of any participations therein or any
other obligations under this Section 3, whether directly or by such
being imposed on or suffered by any particular Issuing Lender;
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(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement in respect of any Letters of Credit
issued by any Issuing Lender or participations therein purchased by any
Lender; or
(iii) imposes any other condition (other than with respect to
a Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter of credit office) regarding this Section 3
or any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Borrowers shall promptly pay to such Issuing Lender
or Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate such Issuing
Lender or Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Issuing Lender or Lender shall deliver to Borrowers a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Issuing Lender or Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans hereunder are subject to the
satisfaction of the following conditions.
4.1 Conditions to Term Loans and Initial Revolving Loans.
The obligations of Lenders to make the initial Loan, in addition to the
conditions precedent specified in subsection 4.2, 4.3 and 4.4, as applicable,
are subject to prior or concurrent satisfaction of the following conditions:
A. Deed of Trust; Mortgage Policy; Etc. Administrative Agent shall have
received from Borrowers:
(i) Mall Lease, and Billboard Master Lease. Evidence that the
Mall Lease and the Billboard Master Lease shall have been properly
executed and that the Mall Lease and the Billboard Master Lease or
memoranda thereof, have 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 and the Billboard Master Lease or
memoranda thereof have been irrevocably delivered to Title Company for
such recordation.
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(ii) Deed 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 the
jurisdiction in which the Mortgaged Property is located 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") issued by the Title Company
with respect to the Mortgaged Property in an amount not less than the
maximum aggregate amount of the Commitments, in each case, insuring for
the benefit of Administrative Agent on behalf of Agent and Lenders that
the Deed of Trust creates a 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 and the Billboard
Master Lease subject only to the Lien of the Interim Mall Lender
therein and other Permitted Liens, which Mortgage Policy (1) shall
include an endorsement for mechanics' liens, for future advances under
this Agreement and for any other matters reasonably requested by
Administrative Agent, (2) shall provide for affirmative insurance and
such reinsurance as Administrative Agent may reasonably request, all of
the foregoing in form and substance satisfactory to Administra tive
Agent and (3) shall not have a creditor's rights exception; and (b)
evidence reasonably satisfactory to Administrative Agent 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 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) 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 acknowledgement from Venetian and
Mall Construction Subsidiary of receipt of written notification from
Administrative Agent (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
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(v) Environmental Indemnity. If requested by Administrative
Agent, an environmental indemnity agreement, reasonably satisfactory in
form and substance to Administrative Agent and its counsel, with
respect to the indemnification of Administrative Agent and Lenders for
any liabilities that may be imposed on or incurred by any of them as a
result of any Hazardous Materials Activity.
B. Security Interests in Personal and Mixed Property. To the extent not
otherwise satisfied pursuant to subsection 4.1H, Administrative Agent 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 Administrative Agent, desirable in
order to create in favor of Administrative Agent, for the benefit of Lenders, a
valid and (upon such filing and recording) perfected First Priority security
interest in the First Priority Collateral, and a second priority Lien in the
Mall Collateral. Such actions shall include the following:
(i) Schedules to Collateral Documents. Delivery to
Administrative Agent of accurate and complete schedules to all of the
applicable Collateral Documents.
(ii) Instruments. Delivery to Administrative Agent of all
promissory notes or other instruments (duly endorsed, where
appropriate, in a manner satisfactory to Administrative Agent)
evidencing any Collateral;
(iii) Lien Searches and UCC Termination Statements. Delivery
to Administra tive 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 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);
(iv) UCC Financing Statements and Fixture Filings. Delivery to
Administrative Agent 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 Administrative Agent, desirable to
perfect the security interests created in such Collateral pursuant to
the Collateral Documents; and
C. Solvency Assurances. On the Closing Date, Arranger, Administrative
Agent and Lenders shall have received a Financial Condition Certificate from the
Borrowers dated the Closing Date, substantially in the form of Exhibit X annexed
hereto and with appropriate
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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. Lenders 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 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 Administrative Agent and its counsel, dated as of the Closing
Date and setting forth substantially the matters in the opinions designated in
Exhibits V-A and V-B annexed hereto, respectively, and as to such other matters
as Administrative Agent acting on behalf of Lenders may reasonably request.
Borrowers hereby acknowledge and confirm that they have requested such counsel
to deliver such opinions to Lenders.
E. Opinions of Administrative Agent's Counsel. Lenders shall have
received originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, counsel to Administrative Agent, dated as of the Closing
Date, substantially in the form of Exhibit VI annexed hereto and as to such
other matters as Administrative Agent acting on behalf of Lenders may reasonably
request.
F. Fees. Borrowers shall have paid to Syndication Agent, Arranger and
Administra tive Agent, for distribution (as appropriate) to Agents and Lenders,
the fees payable on the Closing Date referred to in subsection 2.3.
G. 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
Administrative Agent, acting on behalf of Lenders, and its counsel shall be
reasonably satisfactory in form and substance to Administrative Agent and such
counsel, and Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
H. 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 Administrative
Agent and Arranger.
Each Lender by execution and delivery of a signature page hereto on the
Closing Date confirms that it is satisfied that each of the conditions set forth
above in this Subsection 4.1 has been satisfied provided that neither such
confirmation nor any extension of credit hereunder shall preclude any Agent or
Lender from later asserting that (and enforcing any rights or remedies it may
have if), any representation, warranty or certification made or deemed made by
Borrowers or any of their Affiliates in connection therewith was not true and
accurate when made.
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4.2 Conditions to All Term Loans.
The obligations of Lenders to make Term Loans on each Funding Date are
subject to the following additional conditions precedent that Administrative
Agent shall have received before that Funding Date, in accordance with the
provisions of subsection 2.1B, an executed Advance Confirmation Notice in
accordance with and pursuant to the provisions of subsection 2.5 of the
Disbursement Agreement.
4.3 Conditions to all Revolving Loans.
The obligations of Lenders to make Revolving Loans on each Funding Date
are subject to the following further conditions precedent:
A. Administrative Agent shall have received before that
Funding Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, in each case signed by the
chief executive officer, the chief financial officer or the treasurer
of each Borrower or of the managing member of such Borrower or by any
executive officer of such Borrower or managing member designated by any
of the above described officers on behalf of Borrowers in a writing
delivered to Administrative Agent.
B. As of that Funding Date:
(i) if the proceeds of the Revolving Loans are to be
used (or the Letter of Credit is being issued for), for any
purpose other than the purchase of Specified FF&E, the
Revolving Loan Availability Date shall have occurred;
(ii) (a) if such Funding Date is prior to the
Revolving Loan Availability Date, the representations and
warranties contained in Section 4 of the Disbursement
Agreement shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent 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 (b) if
such Funding Date is on or after the Revolving Loan
Availability Date, 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 that Funding Date to the same extent 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;
(iii) No event shall have occurred and be continuing
or would result from the consummation of the borrowing
contemplated by such Notice of
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Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iv) Each Loan Party shall have performed in all
material respects all agreements and satisfied all conditions
which this Agreement provides shall be performed or satisfied
by it on or before that Funding Date;
(v) No order, judgment or decree of any court,
arbitrator or govern mental authority shall purport to enjoin
or restrain any Lender from making the Revolving Loans to be
made by it on that Funding Date;
(vi) The making of the Revolving Loans requested on
such Funding Date shall not violate any law including
Regulation G, Regulation T, Regulation U or Regulation X of
the Board of Governors of the Federal Reserve System; and
(vii) There shall not be pending or, to the knowledge
of Borrowers, threatened, any action, suit, proceeding,
governmental investigation or arbitration against or affecting
Borrowers or any of their Subsidiaries or any property of
Borrowers or any of their Subsidiaries that is required to be
disclosed under, and has not been disclosed by Borrowers in
writing pursuant to, subsection 5.6 or 6.1(x) prior to the
making of the last preceding Revolving Loans (or, in the case
of the initial Revolving Loans, prior to the execution of this
Agreement), and there shall have occurred no development not
so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that,
in either event, in the reasonable opinion of Administrative
Agent or of Requisite Lenders, would have a Material Adverse
Effect;
(viii) If such Funding Date is prior to the Revolving
Loan Availability Date, such Funding Date shall also be a date
on which Term Loans are being funded and all conditions to the
funding of the Term Loans on such Funding Date shall be
satisfied; and
(ix) If such Funding Date is prior to the Revolving
Loan Availability Date, Borrowers shall have provided to
Administrative Agent a detailed list showing the Specified
FF&E to be funded with the proceeds of the Revolving Loans to
be made (or Letters of Credit to be issued) on such Funding
Date.
4.4 Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
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A. On or before the date of issuance of the initial Letter of
Credit pursuant to this Agreement, the initial Loans shall have been
made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the
provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, in each case signed by the chief
executive officer, the chief financial officer or the treasurer of each
of the Borrowers or the managing member of such Borrower or by any
executive officer of each of the Borrowers or managing member
designated by any of the above-described officers on behalf of each of
the Borrowers in a writing delivered to Administrative Agent, together
with all other information specified in subsection 3.1B(i) and such
other documents or information as the applicable Issuing Lender may
reasonably require in connection with the issuance of such Letter of
Credit.
C. On the date of issuance of such Letter of Credit, all
conditions precedent described in subsection 4.3B shall be satisfied to
the same extent as if the issuance of such Letter of Credit were the
making of a Loan and the date of issuance of such Letter of Credit were
a Funding Date.
Section 5. BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans and to induce Issuing Lenders to issue Letters of Credit, Borrowers
represent and warrant to each Lender that, on the Closing Date, on each Funding
Date for Revolving Loans on or after the Revolving Loan Availability Date and on
the date of issuance of each Letter of Credit on or after the Revolving Loan
Availability Date, the following statements are true, correct and complete it
being understood that such representations and warranties are being made solely
as of the Closing Date and as a condition to the making of Revolving Loans and
the issuance of Letters of Credit on or after the Revolving Loan Availability
Date and shall not be made or be a condition to the funding of any Term Loans or
the funding of any Revolving Loans or the issuance of any Letters of Credit
prior to the Revolving Loan Availability Date.
5.1 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 5.1A
annexed 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 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
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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 the
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 5.1C, as it may be supplemented from time to
time, correctly sets forth the ownership of each Borrower.
D. Subsidiaries. All of the Subsidiaries of Borrowers are identified in
Schedule 5.1D annexed hereto, as said Schedule 5.1D may be supplemented from
time to time pursuant to the provisions of subsection 6.1(xvii). The equity
interests of each of the Subsidiaries of Borrowers identified in Schedule 5.1D
annexed hereto (as so supplemented) is duly authorized, validly issued and (if
applicable), fully paid and nonassessable and none of such equity interests
constitutes Margin Stock. Each of the Subsidiaries of Borrowers identified in
Schedule 5.1D annexed hereto (as so supplemented) 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 5.1D annexed
hereto (as so supplemented) 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 the Mall Subsidiary and Phase
II Subsidiary) except as set forth as Schedule 5.1E.
F. Conduct of Business. Borrowers and their Subsidiaries (other than
the Mall Subsidiary and the Phase II Subsidiary) are engaged only in the
businesses permitted to be engaged in pursuant to subsections 7.12.
5.2 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
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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 Contractual 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 Administrative Agent on behalf of Lenders), 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 Lenders and 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 govern mental 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 bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability, whether brought in a
proceeding in equity or at law.
E. Valid Issuance of Mortgage Notes and Subordinated Notes. Borrowers
have 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, 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 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.
5.3 Financial Condition.
Borrowers have heretofore delivered to Lenders, at Lenders' 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 Borrowers and their
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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.
5.4 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 on Schedule 5.4, 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 7.5 and the repayment of the Interim
Construction Loan on the Closing Date.
5.5 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 5.3 or in the most recent financial statements delivered pursuant to
subsection 6.1, 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 7.7. 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 5.5 annexed 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
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Schedule 5.5 annexed 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.
5.6 Litigation; Adverse Facts.
Except as set forth in Schedule 5.6 annexed 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 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.
5.7 Payment of Taxes.
Except to the extent permitted by subsection 6.3, 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.
5.8 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 obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse
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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 5.8 contains a true, correct and complete list of all the
Material Contracts in effect on the Closing Date. Except as described on
Schedule 5.8, all such Material Contracts are, to the knowledge of Borrowers, in
full force and effect and no material defaults currently exist thereunder.
5.9 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.
5.10 Securities Activities.
A. 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.
B. Following application of the proceeds of each Loan, not more than
25% of the value of the assets (either of Borrowers only or of Borrowers and
their Subsidiaries on a consolidated basis) subject to the provisions of
subsection 7.2 or 7.7 or subject to any restriction contained in any agreement
or instrument, between Borrowers and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 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 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 Code or
except as set forth in Schedule 5.11 annexed hereto, no Employee Benefit Plan
provides health or welfare
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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.
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.
5.12 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 5.12 (other than fees payable to Agents and Lenders under
subsection 2.3), and each Borrower hereby indemnifies Lenders against, and
agrees that it will hold Lenders 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.
5.13 Environmental Protection.
Except as set forth in Schedule 5.13 annexed 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 5.13 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 5.13 annexed hereto, which individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect.
5.14 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.
5.15 Solvency.
Each Borrower is and, upon the incurrence of any Obligations by such
Borrower on any date on which this representation is made, will be, Solvent.
5.16 Matters Relating to Collateral.
A. Creation, Perfection and Priority of Liens. The execution and
delivery of the Collateral Documents by Borrowers and their Subsidiaries,
together with the actions taken on or prior to the date hereof pursuant to
subsections 4.1B and 4.1C are effective to create in favor of Administrative
Agent for the benefit of Lenders, 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 First
Priority Collateral and a valid and perfected second priority lien on the Mall
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 Administrative Agent 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 Administrative Agent.
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 and their Subsidiaries
of the Liens purported to be created in favor of
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Administrative Agent pursuant to any of the Collateral Documents or (ii) the
exercise by Administrative Agent 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 5.16A or as set forth in
Schedule 5.16B.
C. Absence of Third-Party Filings. Except such as may have been filed
in favor of Administrative Agent as contemplated by subsection 5.16A or filed to
perfect a Lien permitted under subsection 7.2, 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. All information supplied to
Administrative Agent 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 6. BORROWERS' AFFIRMATIVE COVENANTS
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 and the cancellation or expiration of all Letters of
Credit, unless the Requisite Lenders shall otherwise give prior written consent,
Borrowers shall perform, and shall cause each of their Subsidiaries to perform,
(x) prior to the Final Completion Date, all covenants set forth in Article 5 of
the Disbursement Agreement and the covenants set forth in subsections 6.3, 6.5,
6.8 and 6.14 below and (y) on and after the Completion Date, all covenants set
forth in Article 5 of the Disbursement Agreement (while in effect), and all
covenants set forth in this Section 6.
6.1 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
Administrative Agent and Lenders:
(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 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
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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 45 days after the end of each Fiscal Quarter,
(a) 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,
stock holders' 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 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,
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;
(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 LVSI, on behalf of
LVSI, 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
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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 (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;
(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 (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;
(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 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;
(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 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 Mall Subsidiary and its subsidiaries as at the
dates indicated and the results of their operations and their
cash flows for the periods indicated;
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(d) 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
(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
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), LVSI and its Subsidiaries and Mall
Subsidiary and 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' and Compliance Certificates: together with each
delivery of financial statements of LVSI and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above, (a) 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 (and, to the extent applicable,
Mall Subsidiary, Mall Manager, Mall Direct Holdings, Phase II
Subsidiary, Phase II Manager, Phase II 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; and (b) a Compliance
Certificate demonstrating in reasonable detail compliance during and at
the end of the applicable accounting periods with the restrictions
contained in Section 7;
(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 5.3, the consolidated financial statements of LVSI and its
subsidiaries delivered pursuant to subdivisions (i), (ii), (iii) or
(xiii) of this subsection 6.1 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
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delivery of financial statements pursuant to subdivision (i), (ii),
(iii) or (xiii) of this subsection 6.1 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 6.1 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
subsection 7.6) 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 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 either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (iv) above is
not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision
(iv) above for the applicable Fiscal Year are not stated in accordance
with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to Borrowers by inde pendent 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 and any of their subsidiaries to the public concerning
material developments in the business of Borrowers and their
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subsidiaries and (d) to the extent prepared, any financial statements
and reports concerning any subsidiaries of Borrowers (including
Excluded Subsidiaries not delivered pursuant to clauses (i), (ii) or
(iii) above);
(ix) Events of Default, etc.: promptly upon any officer of
Borrowers obtaining 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 (other than to
Administrative Agent) 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 8.2, (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, 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
Lenders 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 Lenders and their 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 Administrative Agent such other information as may be
reasonably requested by
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Administrative Agent to enable Administrative Agent 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 ERISA Event; and (c) copies of such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any
event no later than the 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 Completion Date through the end of such Fiscal
Year) and each subsequent Fiscal Year through the final maturity date
of the Term 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 Years, together
with a pro forma Compliance Certificate for such Fiscal Years 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 Years,
together with an explanation of the assumptions on which such forecasts
are based, and (c) such other information and projections for such
Fiscal Years 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 Administrative Agent 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 main tained 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 LVSI
or any of its corporate Subsidiaries.
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(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 5.1 annexed hereto with respect to all
Subsidiaries of either of Borrowers (it being understood that such
written notice shall be deemed to supplement Schedule 5.1 annexed
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 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 Administrative Agent of any UCC financing
statement executed by any Loan Party pursuant to subsection 6.12,
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 Administrative Agent by or on behalf of such
Loan Party;
(xix) Notices 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
(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.
6.2 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 7.7 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 the Administrative Agent), 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
Lenders.
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6.3 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 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 Administrative Agent.
6.4 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 the 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 disadvanta geous in any material respect to the
Borrowers and their Subsidiaries or the Lenders.
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,
while applicable, and the Cooperation
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Agreement, such insurance coverage to be provided by such insurance provider, in
such amounts with such deductibles and covering such risks as are at all times
required under the Disbursement Agreement, while applicable, and the Cooperation
Agreement and to include, if the Mortgaged Property is located in an area
designated by the Federal Emergency 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.
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 Section 7.5 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(iii)(b)
hereof. Administrative Agent shall, and Borrowers hereby authorize
Administrative Agent to, apply such Loss Proceeds and Liquidated Damages to
prepay the Loans as provided in subsection 2.4B(iii)(b).
6.5 Inspection; Lender Meeting.
A. Inspection Rights. 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 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
Administrative Agent (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.
B. Lender Meeting. Borrowers will, upon the request of Administrative
Agent or Requisite Lenders, participate in a meeting of Administrative Agent and
Lenders once during each Fiscal Year to be held at Borrowers' corporate offices
(or at such other location as may be agreed to by Borrowers and Administrative
Agent) at such time as may be agreed to by Borrowers and Administrative Agent.
6.6 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 necessary under applicable laws except
any thereof the noncompliance with which could not reasonably be expected to
have a Material Adverse Effect.
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6.7 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
Administrative Agent 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 Administrative Agent's professional
consultant to conduct an investigation of such Facility. For purposes of
conducting such a review and/or investigation, Borrowers hereby grant to
Administrative Agent 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 Administrative Agent, 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 Administrative
Agent hereby acknowledge and agree that any report of any investigation
conducted at the request of Administrative Agent pursuant to this subsection
6.7A will be obtained and shall be used by Administrative Agent and Lenders for
the purposes of Lenders' internal credit decisions, to monitor and police the
Loans and to protect Lenders' security interests, if any, created by the Loan
Documents. Administrative Agent 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 Administrative Agent and each Lender from
any costs, losses or liabilities relating to Borrowers' use of or reliance on
such report, (y) neither Administrative Agent nor any Lender makes any
representation or warranty with respect to such report, and (z) by delivering
such report to Borrowers, neither Administrative Agent nor any Lender is
requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
B. Environmental Disclosure. Borrowers will deliver to Administrative
Agent and Lenders:
(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 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;
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(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.
(v) Other Information. With reasonable promptness, such other
documents and information as from time to time may be reasonably
requested by Administrative Agent in relation to any matters disclosed
pursuant to this subsection 6.7.
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
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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.
6.8 Interest Rate Protection.
At all times after the date which is 60 days after the Closing Date,
Borrowers shall maintain in effect one or more Interest Rate Agreements with
respect to the Term Loans, each such Interest Rate Agreement to be for a term
and in form and substance reasonably satisfactory to Administrative Agent, which
Interest Rate Agreements shall effectively limit the Unadjusted Eurodollar Rate
Component (as hereinafter defined) of the interest costs to Borrowers with
respect to an aggregate notional principal amount of not less than 50% of the
aggregate principal amount of the Term Loans outstanding from time to time
(based on the assumption that such notional principal amount was a Eurodollar
Rate Loan with an Interest Period of three months) to a rate equal to not more
than 9.0% per annum. For purposes of this subsection 6.8, the term "Unadjusted
Eurodollar Rate Component" means that component of the interest costs to
Borrowers in respect of a Eurodollar Rate Loan that is based upon the rate
obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate.
6.9 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.
6.10 Separate Legal and Tax Parcel for Mall.
Borrowers shall use their reasonable best efforts to have the Mall
designated as one or more separate legal parcels and separate tax parcels by all
applicable Governmental Authorities as soon as practicable following the Closing
Date and to deliver to Administrative Agent written evidence thereof from the
appropriate Governmental Instrumentality.
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6.11 Payment of Liens.
A. Removal by Borrowers. In the event that, notwithstanding the
covenants contained in subsection 7.2, a Lien not otherwise permitted under
subsection 7.2 may encumber the Mortgaged Property or other item of Collateral
or any portion thereof, the 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 the
Administrative Agent's 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 6.11
shall not be deemed to constitute a waiver of the provisions of subsection 7.2.
The Borrowers shall exhibit to the Administrative Agent 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 Lienand the priority of each of the Deed of Trust and the other
Collateral Documents without cost or expense to the Administrative Agent or the
Lenders.
B. Removal by the Agent. 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 the Administrative Agent 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 the Administrative Agent, in its sole discretion, may
elect. In settling, compromising or arranging for the discharge of any Liens
under this subsection, the Administrative Agent shall not be required to
establish or confirm the validity or amount of the Lien. The Borrowers agree
that all costs and expenses expended or otherwise incurred pursuant to this
subsection 6.11 (including reasonable attorneys' fees and disbursements) by the
Administrative Agent shall be paid by the Borrowers in accordance with the
terms hereof.
6.12 Further Assurances.
A. Assurances. Without expense or cost to the Administrative Agent or
the Lenders, 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 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 any items of Collateral, intended
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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 the Administrative Agent 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 the Administrative Agent 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 the 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 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 acknowledg ment of the Deed of Trust, the Leasehold Deed of
Trust or any other Loan Document, including any instrument of further assurance
described in subsection 6.12A, 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 any Collateral Document or any other Loan Document or the Mall Lease, the
Casino Lease and the Billboard Master Lease or memoranda thereof, including any
instrument of further assurance described in subsection 6.12A, or by reason of
its interest in, or measured by amounts payable under, the Notes, any Collateral
Document or any other Loan Document, including any instrument of further
assurance described in subsection 6.12A, 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 and the Administrative Agent, 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 the Administrative Agent (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 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 in accordance with the terms hereof.
C. Costs of Defending and Upholding the Lien. The Administrative Agent
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 the Administrative
Agent or the Lenders in which the Administrative Agent or any Lender is named or
which the Administrative Agent in its sole discretion determines is reasonably
likely to materially adversely affect the Mortgaged Property, any other
Collateral, any Collateral Document, the Lien thereof 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 Administrative Agent and the Lenders
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in the Mortgaged Property or other Collateral or under this Agreement or any
other Loan Document. The Borrowers agree that all reasonable costs and expenses
expended or otherwise incurred pursuant to this subsection (including reasonable
attorneys' fees and disbursements) by the Administrative Agent shall be paid by
the Borrowers or reimbursed to the Administrative Agent, as the case may be,
promptly after demand.
D. Costs of Enforcement. The Borrowers agree to bear and shall pay or
reimburse the Administrative Agent and the Lenders in accordance with the terms
of subsection 10.2 for all reasonable sums, costs and expenses incurred by the
Administrative Agent and the Lenders (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, any Collateral Document 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.
6.13 Execution of Subsidiary Guaranty and Personal Property Collateral
Documents by Certain Subsidiaries and Future Subsidiaries.
A. Execution of Subsidiary Guaranty and Personal Property Collateral
Documents. In the event that any Person becomes a Subsidiary on or after the
date hereof, Borrowers will promptly notify Administrative Agent of that fact
and cause such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty and a Subsidiary Security Agreement and
to take all such further actions and execute all such further documents and
instruments (including actions, documents and instruments comparable to those
described in subsection 4.1C) as may be necessary or, in the reasonable opinion
of Administrative Agent, desirable to create in favor of Administrative Agent,
for the benefit of Lenders, a valid and perfected First Priority Lien on all of
the personal and mixed property assets of such Subsidiary which constitute First
Priority Collateral and a valid and perfected second priority lien on all of the
personal and mixed property assets of such Subsidiary which constitute Mall
Collateral.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Borrowers shall
deliver to Administrative Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation
or equivalent limited liability company documents, together with a good standing
certificate from the Secretary of State of the jurisdiction of its incorporation
and each other state in which such Person is qualified as a foreign corporation
to do business and, to the extent generally available, a certificate or other
evidence of good standing as to payment of any applicable franchise or similar
taxes from the appropriate taxing authority of each of such jurisdictions, each
to be dated a recent date prior to their delivery to Administrative Agent, (ii)
a copy of such Subsidiary's Bylaws, certified by its corporate secretary or an
assistant secretary as of a recent date prior to their delivery to
Administrative Agent, (iii) a certificate executed by the secretary or an
assistant secretary of such Subsidiary as to (a) the fact that the attached
resolutions of the Board of Directors or managing member of such Subsidiary
approving and authorizing the execution, delivery and performance of such Loan
Documents are in full force and effect and have not been modified
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or amended and (b) the incumbency and signatures of the officers of such
Subsidiary executing such Loan Documents, and (iv) a favorable opinion of
counsel to such Subsidiary, in form and substance reasonably satisfactory to
Administrative Agent and its counsel, as to (a) the due organization and good
standing of such Subsidiary, (b) the due authorization, execution and delivery
by such Subsidiary of such Loan Documents, (c) the enforceability of such Loan
Documents against such Subsidiary, (d) such other matters (including matters
relating to the creation and perfection of Liens in any Collateral pursuant to
such Loan Documents) as Administrative Agent may reasonably request, all of the
foregoing to be reasonably satisfactory in form and substance to Administrative
Agent and its counsel.
C. Real Estate Collateral Documents. Borrowers shall deliver to
Administrative Agent together with such Loan Documents all such further
documents and instruments and take such further action necessary to create in
favor of Administrative Agent, for the benefit of Lenders, a valid and perfected
first priority security interest on any real property assets of such Subsidiary,
as Administrative Agent may reasonably request from time to time including
delivering documents and taking the other actions which would have been required
underSection 4.1A of this Agreement if such real property were part of the
Mortgaged Property on the Closing Date.
6.14 Contain Obligations in Connection with Specific FF&E.
Borrowers agree to make draws from time to time on the FF&E Facility as
soon as possible thereunder to purchase or finance any Specified FF&E where
proceeds of Revolving Loans have been used or Letters of Credit have been issued
to purchase or support deposit obligations incurred in connection with the
manufacture or acquisition of such Specified FF&E. Borrowers further agree that
in connection with any such draws they will repay the Revolving Loans or
terminate the Letters of Credit issued to purchase or provide deposits for the
Specified FF&E acquired or financed with the draw on the FF&E Facility.
Borrowers shall take all action within their control to maintain the eligibility
of any Specified FF&E financed by Lenders as collateral under the FF&E Facility.
Section 7. BORROWERS' NEGATIVE COVENANTS
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 and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Borrowers shall perform, and shall cause each of their Subsidiaries to perform,
(x) prior to the Completion Date, all of the covenants set forth in Article 6 of
the Disbursement Agreement and the covenants set forth in subsections 7.1, 7.2,
7.3, 7.4, 7.5, 7.7, 7.8, 7.9. 7.10, 7.11, 7.12, 7.13B or C, 7.15, 7.18, 7.19,
7.20 and 7.21 below and (y) on and after the Completion Date, all of the
covenants set forth in Article 6 of the Disbursement Agreement (while in effect)
and all of the covenants set forth in this Section 7.
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7.1 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
7.4 and (other than with respect to clauses (iv) and (v) of subsection
7.4) upon any matured obligations actually arising pursuant thereto,
the Indebtedness corresponding to the Contingent Obligations so extin
guished;
(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
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 Assets to Mall Subsidiary, the Indebtedness under the Interim
Mall Facility shall not be Indebtedness permitted under this subsection
7.1;
(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 $97,700,000 (plus any accrued and unpaid interest
thereon added to principal) reduced by any principal payments required
to be made thereon;
(vii) Borrowers and 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), provided, that following the Mall Release Date or any
transfer of the Mall Assets to Mall Subsidiary, such Indebtedness shall
not constitute Indebtedness permitted under this subsection 7.1;
(viii) Borrowers may become and remain liable for Non-Recourse
Financing used to finance the purchase or lease of personal or real
property for use in the business
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of a Borrower or one of its Subsidiaries provided that (x) such
Non-Recourse Financing represents at least 75% of the purchase price of
such personal or real property (y) the Indebtedness incurred pursuant
to this clause (viii) shall not exceed $20,000,000 at any time; and (z)
no such Indebtedness may be incurred under this clause (viii) until the
Completion Date has occurred and Borrowers have generated Consolidated
EBITDA for one Fiscal Quarter of at least $25,000,000;
(ix) 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);
(x) 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;
(xi) 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 the Lenders 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;
(xii) 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 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.
(xiii) Borrowers may become and remain liable with respect to
other Indebtedness in an aggregate principal amount not to exceed
$10,000,000 at any time outstanding; and
(xiv) Borrowers may become and remain liable for an aggregate
of $20,000,000 of additional Indebtedness under a working capital line
less the amount of Increased Commitments; provided that (x) no such
Indebtedness may be incurred until after the Completion Date and (y)
such Indebtedness shall be incurred either with Lenders or with other
Persons who are Eligible Assignees on substantially the same terms
(including
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security interests) as the Revolving Loans hereunder and otherwise on
terms (including voting and intercreditor arrangements) reasonably
satisfactory to Administrative Agent and Arranger;
7.2 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 7.1, provided that such Liens are junior in priority
(other than in respect of the Mortgage Notes Proceeds Account) to the
Liens securing the Obligations;
(iv) Liens securing Indebtedness permitted under clause (iv)
of subsection 7.1, provided that such Liens attach only to the Mall
Collateral;
(v) Liens securing Indebtedness permitted under clause (vi) of
subsection 7.1, provided that such Liens attach only to the Specified
FF&E and to any proceeds of such accounts or Indebtedness and related
collateral accounts in which such proceeds are held;
(vi) Liens securing Indebtedness permitted under clause (viii)
of subsection 7.1, provided that such Liens extend only to the real
property or personal property purchased or leased with the proceeds of
such Non-Recourse Financing and such assets are acquired or leased
within 180 days of the incurrence of such Indebtedness;
(vii) Liens in favor of the Mortgage Note Holders or the
Interim Mall Lender or other Persons securing Indebtedness advanced by
any such Person and permitted under (x) of subsection 7.1 to the extent
that such Liens are permitted under the Intercreditor Agreement,
provided that such Liens in favor of the Mortgage Note Holders or such
other Persons are junior (other than in respect of the Mortgage Notes
Proceeds Account) to the Liens securing the Obligations and such Liens
in favor of Interim Mall Lender attach only to the Mall Collateral;
(viii) Liens securing Indebtedness permitted under clause
(xii) of subsection 7.1 provided that such Liens attach only to the
casino equipment purchased or leased with
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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 (xiv)
of subsection 7.1; provided that such Liens are pari passu with the
Liens securing the Obligations;
(x) Liens described in Schedule 7.2 annexed hereto; and
(xi) Other Liens securing Indebtedness in an aggregate amount
not to exceed $5,000,000 at any time outstanding.
Notwithstanding the foregoing, the Borrowers shall not permit the Intermediate
Holding Companies to create, incur, assume or permit to exist any Lien on or
with respect to any property or asset of any kind of the Intermediate Holding
Companies other than Permitted Liens which do not secure Indebtedness.
B. Equitable Lien in Favor of Lenders. If Borrowers or any of their
Subsidiaries, shall create or assume any Lien upon any of its properties or
assets, whether now owned or here after acquired, other than Liens excepted by
the provisions of subsection 7.2A, 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 shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
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, none
of the 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
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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 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.
7.3 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;
(ii) Borrowers may continue to own their existing Investments
in the Intermediate Holding Companies, the Excluded Subsidiaries and
Mall Construction Subsidiary described in Schedule 7.3 annexed hereto,
provided that Borrowers and their Subsidiaries may not make any
additional Investments in such Persons except as permitted by clauses
(iii), (iv), (v) and (x) below;
(iii) Borrowers may cause the transfer of the Mall Collateral
to Mall Subsidiary to the extent permitted by subsection 7.7(v) and
immediately thereafter 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 7.7 (vi) and
immediately thereafter transfer a 1% managing membership interest in
each of Phase II Subsidiary and Phase II Direct Holdings to Phase II
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 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 (a) 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
possess 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
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Venture over the life of the Investment and (d) none of the 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 Consolidated Capital Expenditures
permitted by subsection 7.14;
(viii) Borrowers may make loans or advances to their employees
(a) to fund the exercise price of options granted under Borrowers'
stock option plans or agreements or employment agreements as in effect
on the Closing Date and (b) for other purposes in an amount not to
exceed $1,000,000 in the aggregate outstanding at any time;
(ix) 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 the Borrowers or any
Subsidiary or in satisfaction of judgements;
(x) So long as no Event of Default or Potential Event of
Default shall have occurred and be continuing or would result
therefrom, Borrowers may make Cash contributions to Mall Subsidiary in
an aggregate amount not to exceed $5,000,000 to pay fees and expenses
in connection with the refinancing of the Interim Mall Facility; and
(xi) Borrowers may make and own other Investments in an
aggregate amount not to exceed at any time $5,000,000.
7.4 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 (a)
required under subsection 6.8 or under the terms of any other Financing
Agreements or (b) 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 7.1
so long as such Interest Rate Agreements are on substantially the same
terms as those entered into to satisfy subsection 6.8 hereof and 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 and their Subsidiaries may become and remain
liable with respect to the Contingent Obligations for the Indebtedness
permitted under clauses (iii),
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(iv), (v), (viii), (x), (xiii) and (xiv) of subsection 7.1, provided
that except with respect to the Indebtedness permitted under clauses
(iv) and (xiv) and Indebtedness to Interim Mall Lender permitted under
clause (x) any such Contingent Obligations of the Intermediate Holding
Companies are subordinate to the Obligations on terms at least as
favorable to the Lender as those relating to the subordination of the
Intermediate Holding Company guaranties set forth in Section 11.07 of
the Mortgage Notes Indenture (as in effect on the Closing Date);
(iv) 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 incurred in the ordinary course of business and do not
at any time exceed $10,000,000 in the aggregate;
(v) Borrowers and their Subsidiaries may become and remain
liable for customary indemnities under Project Documents as in effect
on the Closing Date; and
(vi) 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.
7.5 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 or required
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 any FF&E Intercreditor
Agreements, as applicable, (b) any such payments in respect of any
Completion Guaranty Note and any Employee Repurchase 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 pay vments 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 subsection 7.6A
(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 subsection
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7.6A) would have been in compliance with the requirements of Section
7.6A as certified to Administrative Agent by the chief financial
officer of Borrowers, on behalf of Borrowers, at the time of such
payment;
(ii) Borrowers and Mall Construction Subsidiary may prepay the
Interim Mall Loan and the FF&E Facility from the portion of any Loss
Proceeds required to be so applied in accordance with the Interim Mall
Credit Agreement and the FF&E Facility respectively and each in
accordance with the Intercreditor Agreement;
(iii) Borrowers and Mall Construction Subsidiary may make
payments to Interim Mall Lender either funded from proceeds paid by
Mall Subsidiary to Venetian or Mall Construction Subsidiary under the
Sale and Contribution Agreement or which are deemed to occur solely as
a result of the assumption of the obligations under the Interim Mall
Credit Agreement by the Mall Subsidiary;
(iv) Borrowers and Mall Construction Subsidiary may make
payments in respect of the Substitute Tranche B Loan which are either
funded from proceeds paid by Mall Subsidiary to Venetian or Mall
Construction Subsidiary under the Sale and Contribution Agreement or
which are deemed to occur solely as a result of the assumption of
obligations under the Substitute Tranche B Loan by 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;
(v) Borrowers and Mall Subsidiary may repay the Substitute
Tranche B Loan or the Interim Mall Facility from proceeds of a
refinancing thereof permitted under the definition thereof;
(vi) 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;
(vii) 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 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 immediate-
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ly 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;
(viii) 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
Borrowers or any Borrower;
(ix) Borrowers may make Permitted Employee Repurchases so long
as (a) no Event of Default or Potential Event of Default shall exist
and be continuing or would result therefrom and (b) 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 subsection 7.6A (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 subsection
7.6A) would have been in compliance with the requirements of subsection
7.6A as certified to Administrative Agent by the chief financial
officer of Borrowers, on behalf of Borrowers, at the time of such
payment;
(x) Borrowers 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; and
(xi) Borrowers may make payments on any Completion Guaranty
Loan (a) prior to Final Completion, 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 Borrowers
pursuant to subsection 2.12 of the Disbursement Agreement for the
purpose of making such payments, (c) after Final Completion Date from
Liquidated Damages and (d) on Final Completion Date, from amounts which
are returned to Mall Construction Subsidiary 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.
7.6 Financial Covenants.
A. Minimum Fixed Charge Coverage Ratio. 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
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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 day of the first
Fiscal Quarter which begins after the Completion Date) ending on any Quarterly
Date set forth below to be less than the correlative ratio indicated:
============================================ ==========================
Minimum
Period Fixed Charge
Coverage Ratio
============================================ ==========================
Each of the first, second, third 1.05:1
and fourth Quarterly Dates
Each of the fifth, sixth, seventh 1.05:1
and eighth Quarterly Dates
Each of the ninth, tenth, eleventh 1.05:1
and twelfth Quarterly Dates
Each of the thirteenth, four- 1.10:1
teenth, fifteenth and sixteenth
Quarterly Dates
Each of the seventeenth, eighteenth, 1.15:1
nineteenth and twentieth
Quarterly Dates
============================================ ==========================
B. Maximum Leverage Ratio. 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
such Quarterly Date (or such shorter period ending on any Quarterly Date set
forth below 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 day of the first Fiscal Quarter which begins after the
Completion Date) ending on any Quarterly Date set forth below to exceed the
correlative ratio indicated; provided that for purposes of calculating
Consolidated Adjusted EBITDA pursuant to this subsection 7.6B for any period
ending prior to the first anniversary of the Completion Date which is less than
four Fiscal Quarters, Consolidated Adjusted EBITDA shall be calculated on an
annualized basis:
========================================== =============================
Maximum
Period Leverage Ratio
========================================== =============================
Each of the first, second, third 4.75:1
and fourth Quarterly Dates
Each of each of the fifth, sixth, 3.75:1
seventh and eighth Quarterly Dates
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Each of the ninth, tenth, elev- 3.00:1
enth and twelfth Quarterly Dates
Each of the thirteenth, four- 2.75:1
teenth, fifteenth and sixteenth
Quarterly Dates
Each of the seventeenth, eigh- 2.50:1
teenth, nineteenth and twentieth
Quarterly Dates
========================================== =============================
C. Minimum Consolidated Adjusted EBITDA. Borrowers shall not permit Con-
solidated Adjusted EBITDA for any four Fiscal Quarter period (or such shorter
period ending on any Quarterly Date set forth below 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 day of 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 subsection
7.6C 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 of 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:
========================================= ================================
Minimum Consolidated
Period Adjusted EBITDA
========================================= ================================
First Quarterly Date $30,000,000
Second Quarterly Date $75,000,000
Third Quarterly Date $100,000,000
Fourth Quarterly Date $150,000,000
Each of the fifth, sixth, seventh $175,000,000
and eighth Quarterly Dates
Each of the ninth, tenth, eleventh $190,000,000
and twelfth Quarterly Dates
Each of the thirteenth, fourteenth, $195,000,000
fifteenth and sixteenth
Quarterly Dates
Each of the seventeenth, $200,000,000
eighteenth, nineteenth and twentieth
Quarterly Dates
========================================= ================================
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D. Minimum Consolidated Net Worth. 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 the Closing Date through such Quarterly Date (net of all net losses for
Borrowers and their Subsidiaries on a consolidated basis for the same period).
7.7 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 transactions, 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 may make Consolidated Capital Expenditures
permitted under subsection 7.14;
(ii) 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 property to the lien of the Collateral
Documents in favor of Lenders, as applicable;
(iii) 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
subsections 7.7(v)-(xi) below;
(iv) subject to subsection 7.11, Borrowers and their
Subsidiaries may make Asset Sales of assets having a fair market value
not in excess of (x) $4,000,000 in respect of the sale or other
disposition of construction equipment prior to or during the first year
following the Completion Date and (y) $2,000,000 with respect to any
other Asset Sales; provided in each case that (1) the consideration
received for such assets shall be in an amount at least equal to the
fair market value thereof; (2) the sole consideration
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received shall be cash; and (3) the proceeds of such Asset Sales shall
be applied as required by subsection 2.4B(iii)(a);
(v) 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, provided that Borrowers and their Subsidiaries have complied
in all material respects with their obligations under Section 5.16(c)
of the Disbursement Agreement and all other conditions thereunder have
been satisfied in all material respects (whether or not such provision
is still in effect but substituting a reference to Administrative Agent
in lieu of Disbursement Agent if the Disbursement Agreement has been
terminated);
(vi) 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 under Section 5.16(d)
of the Disbursement Agreement and all other conditions thereunder have
been satisfied in all material respects (whether or not such provision
is still in effect but substituting a reference to Administrative Agent
in lieu of Disbursement Agent if the Disbursement Agreement has been
terminated);
(vii) Borrowers and their Subsidiaries may enter into any
leases with respect to any space on or within the Project;
(viii) Borrowers may enter into the HVAC Ground Lease.
(ix) LVSI may lease the casino from Venetian pursuant to the
Casino Lease;
(x) Mall Construction Subsidiary (and, if applicable, Mall
Subsidiary) may lease the Mall 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, provided that Borrowers and
their Subsidiaries have complied in all material respects with their
obligations set forth in Section 5.16(b) of the Disbursement Agreement
and all other conditions thereunder have been satisfied in all material
respects (whether or not such provision shall be in effect but
substituting a reference to Administrative Agent in lieu of
Disbursement Agent if the Disbursement Agreement has been terminated);
(xi) Either Borrower may be merged with the other Borrower;
(xii) 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 7.3 and any wholly-owned
Subsidiary of a Borrower may sell, lease or otherwise transfer assets
to any other wholly-owned Subsidiary of such Borrower (other than the
Intermediate Holding Companies) or to the other Borrower;
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(xiii) Mall Construction Subsidiary may be merged with or
liquidated into Venetian;
(xiv) 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 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;
(xv) Borrowers may license trademarks and tradenames in the
ordinary course of business;
(xvi) Mall Construction Subsidiary may enter into or take by
assignment the Mall Management Agreement;
(xvii) Borrowers may make the transfers permitted under
subsections 7.3(iii), (iv), (v) and (x).
(xviii) VCR and Mall Construction Subsidiary may enter into
the Billboard Master Lease;
(xix) Borrowers and their Subsidiaries may transfer any assets
leased or acquired with proceeds of a Non-Recourse Financing permitted
under Section 7.1 or other financing permitted under Section 7.1(xii)
to the lender providing such financing upon default, expiration or
termination of such Non-Recourse Financing or other financing;
(xx) Borrowers may sell receivables for fair market value in
the ordinary course of business; and
(xxi) incurrence of Liens permitted under Section 7.2,
provided that any leases (whether or not constituting Permitted Liens)
shall be permitted only to the extent provided in clause (vii) above
and the last paragraph of this Subsection 7.7.
Notwithstanding the foregoing provisions of this subsection 7.7, clause
(vii) shall be subject to the additional provisos that: (a) no Event of Default
or Potential Event of Default shall exist and be continuing at the time of such
transaction or lease or would occur after as a result of entering into such
transaction or lease (or immediately after any renewal or extension thereof at
the option of Borrowers or one of their Subsidiaries), (b) such transaction or
lease will not materially interfere with, impair or detract from the operation
of the business of Borrowers and their Subsidiaries, (c) 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 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 such
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<PAGE>
transaction or lease other than by Borrowers and (e) no lease may provide that
the Borrowers or any of their Subsidiaries may subordinate its fee, condominium
or leasehold interest to any lessee or any party financing any lessee, provided
that Administrative Agent on behalf of Lenders shall agree to provide the tenant
under any such lease with a Subordination, Non-Disturbance and Attornment
Agreement with the tenant under any such lease substantially in the form of
Exhibit VIII hereto with such changes as Administrative Agent may approve, which
approval shall not be unreasonably withheld or delayed.
7.8 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 any Non-Recourse Financing
permitted hereunder or such other financings permitted under clause (xii) of
subsection 7.1 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.
7.9 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.
7.10 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 Administrative Agent (1)
with respect to any transaction involving an amount in excess of
$500,000, an Officers Certificate certifying that such transaction
complies with this
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<PAGE>
subsection 7.10, (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 and an Officers Certificate
certifying that such transaction complies with this subsection 7.10, at
the time such transaction is entered into 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 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 the 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 7.3(viii);
(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
7.5;
(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;
(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;
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(xiii) the transactions contemplated by the GMAC Guaranty,
including the Substitute Tranche B Loan;
(xiv) the transfer of the Phase II Land to the Phase II
Subsidiary, the transfer of the Mall Assets to Mall Subsidiary and
other asset transfers and investments permitted under subsections
7.3(iii), (iv), (v) and (xi);
(xv) any repayment or deemed repayment of the Interim Mall
Loan and the Substitute Tranche B Loan in connection with the transfer
of the Mall Assets to Mall Subsidiary; and
(xvi) 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 1.0% of such
casino's operating income (or zero if there is an operating loss)
(determined in accordance with GAAP), (b) 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 (c) the Borrowers may agree to have common gaming and
surveillance operations in such casinos (based on equal allocations of
revenues and operating costs).
(xvii) employees of Interface may participate in the Las Vegas
Sands Inc. 401(k) Retirement Plan if Interface reimburses 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;
(xviii) transactions contemplated by the Interface Lease;
(xix) the 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);
(xx) transactions contemplated by the Puck JV Letter of
Intent; and
(xxi) transactions contemplated by the Billboard Master Lease.
7.11 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
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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.
7.12 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 and any activity or
business incidental, directly related or similar thereto (including operating
the conference center and meeting facilities), 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 Borrowers 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 clause
(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 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) ownership of
equity interests in Subsidiaries, including the Intermediate Holding Companies,
(iii) in the case of Intermediate Holding Companies, the ownership of equity
interests in Mall Direct Holdings, Phase II Direct Holdings and the delivery of
guarantees in favor of the Lenders, the Mortgage Noteholders and the holders of
the Subordinated Notes, (iv) in the case of Mall Manager and Phase II Manager
ownership of 1% managing member interests in Mall Subsidiary and Mall Direct
Holdings and Phase II Direct Holdings and Phase II Subsidiary, respectively, (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.
7.13 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 Material Contract 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 Requisite Lenders if in any such case, such amendment or waiver or
new Material Contract or Permit
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could reasonably be expected to have a Material Adverse Effect or otherwise
adversely affect Lenders 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 more 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 or to confer any additional rights on the holders of the Indebtedness
or obligations evidenced thereby (or a trustee or other representative on their
behalf) which would be materially adverse to Borrowers, such Subsidiary or
Lenders, provided, that (i) Borrowers may modify the terms of the Interim Mall
Credit Facility or any agreement relating thereto to the extent expressly
permitted by the Intercreditor Agreement, (ii) Borrowers may amend the terms of
any other Financing Agreement solely to increase the principal amount thereof to
the extent expressly permitted by the Intercreditor Agreement and (iii)
Borrowers may enter into an Approved Equipment Funding Commitment 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 Equipment Funding Commitment.
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 rights under the Cooperation Agreement which
would require the consent of the Administrative Agent pursuant to Article XIV,
Section 26 thereof, including, but not limited to, any material amendment to, or
any waiver of material rights under Article III, Sections 1 and 3, Article IV,
Section 1, Article IX(b)-(e), Articles X-XII and Article XIV, Sections 1, 3, 4,
6, 7, 8, 14 and 26, without obtaining the prior written consent of the
Administrative Agent, which consent shall not be unreasonably withheld or
delayed.
7.14 Consolidated Capital Expenditures.
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; provided that the Maximum Consolidated
Capital Expenditures Amount for any four Fiscal Quarters shall be
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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:
===================================== ==================================
Fiscal Maximum
Quarter Consolidated Capital
Expenditures Amount
===================================== ==================================
First, second, third and $15,000,000
fourth Fiscal Quarters after
the Completion Date
Fifth, sixth, seventh and $25,000,000
eighth Fiscal Quarters after
the Completion Date
Ninth, tenth, eleventh and $25,000,000
twelfth Fiscal Quarters
after the Completion Date
Thirteenth, fourteenth, $25,000,000
fifteenth and sixteenth Fiscal
Quarters after the
Completion Date
Seventeenth, eighteenth, $30,000,000
nineteenth and twentieth
Fiscal Quarters after the
Completion Date
===================================== ==================================
7.15 Fiscal Year.
Neither Borrower shall change its Fiscal Year-end from December 31.
7.16 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 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. 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 Mortgaged
Property without the prior written consent of the Administrative Agent.
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7.17 No Joint Assessment; Separate Lots.
Without the prior written approval of the Administrative Agent, which
approval may be granted, withheld, conditioned or delayed in its sole
discretion, the 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
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 the Borrowers, constitutes a
separate tax lot and none of which constitutes a portion of any other tax lot.
7.18 Certain Covenants Applicable to Mall Subsidiary.
A. Line of Business. Borrowers shall not permit Mall Subsidiary to
engage in any business other than (i) acquiring, developing, constructing,
owning, holding, managing, marketing and operating of the Mall, (ii) any
activity and business incidental, directly related 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
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might be obtained at the time from Persons who are not such a holder of
Affiliate if Borrowers have delivered to Administrative Agent (a) with respect
to any transaction involving an amount in excess of $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
the 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
Agreements, the Services Agreement, the Puck JV Letter of Intent, 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 payments or distributions which would constitute
Restricted Junior Payments described in clauses (i) through (iii) inclusive of
the definition of Restricted Junior Payments if the reference to Borrower in
each such clause were a reference to Mall Subsidiary unless such payments or
distributions are made (i) to the Borrowers or their Subsidiaries or (ii) pro
rata on all equity interests of Mall Subsidiary (so that Borrowers receive a
portion of such payment or distribution equal to the direct or indirect
ownership interest of Borrowers in Mall Subsidiary).
7.19 Limitation on Declaration of Restricted Subsidiaries.
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.
7.20 Restrictions on Opening.
Borrowers shall not, and shall not permit any of their subsidiaries or
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.
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7.21 Limitation on Phase II Construction.
Borrowers shall not, and shall not permit any of their Subsidiaries
(including any Excluded Subsidiary), 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 in its entirety (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 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.
Section 8. EVENTS OF DEFAULT
If any of the following conditions or events set forth in subsections
8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.11, 8.12, 8.15, 8.18 below or any
Disbursement Agreement Event of Default shall occur prior to the Final
Completion Date or if any of the conditions or events set forth in subsections
8.1 through 8.18 inclusive below shall occur on or after the Completion Date
(any such conditions or events, before or after the Completion Date,
collectively "Events of Default"):
8.1 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; failure by Borrowers to pay
when due any amount payable to an Issuing Lender in reimbursement of any
drawings; 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
8.2 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
8.1) 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 aggregate
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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
8.3 Breach of Certain Covenants.
Failure of Loan Parties to perform or comply with any term or condition
contained in subsection 2.5 or 6.2 or Section 7 (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
8.4 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
8.5 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 8, 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
Administrative Agent or any 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
8.6 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
applica ble 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
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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
8.7 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) or of its
managing member 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
8.8 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 entered or filed against a
Borrower or any of its Subsidiaries or any of their respective assets and shall
remain unpaid and 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
8.9 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
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8.10 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
8.11 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 (including any Excluded
Subsidiary) 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 Holdings, (f) Mall Direct Holdings shall
cease to own not less than 80% of the equity securities in Mall Subsidiary or
(g) Phase II Direct Holdings 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 Holdings, Intermediate Holding Companies, Mall
Subsidiary and Phase II Subsidiary shall cease to be LVSI, Venetian or a wholly
owned Subsidiary of LVSI or Venetian or (i) any "Change of Control" (as defined
in either of the Indentures) shall occur; or
8.12 Failure of Guaranty; Repudiation of Obligations.
At any time after the execution and delivery thereof, (i) the
Subsidiary 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 Administrative Agent shall not have or shall cease to have a
valid and perfected First Priority Lien in the First Priority Collateral, or a
valid and perfected second priority Lien on the Mall Collateral, in each case
for any reason other than the failure of Administrative Agent or any Lender to
take any action within its control, or (iii) any Loan Party shall contest the
validity or
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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, the cancellation of all outstanding Letters of Credit and the
termination of all Commitments, including with respect to future advances by
Lenders, under any Loan Document to which it is a party or (vi) 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
8.13 Default Under or Termination of Operative Documents.
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 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; or
8.14 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, 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
8.15 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
8.16 Bankruptcy or Dissolution of Mall Subsidiary.
Any event or circumstance described under subsections 8.6 or 8.7 hereof
shall occur with respect to Mall Subsidiary, Mall Manager or Mall Direct Holding
Company which would constitute an Event of Default if such Excluded Subsidiary
were a Subsidiary of Borrowers for purposes of those subsections; or
8.17 Acceleration of Obligations of Mall Subsidiary.
Mall Subsidiary shall be in breach or default with respect to any term
of one or more items or Indebtedness or Contingent Obligation(s) in an
individual principal amount of
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$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
8.18 Certain Investments in any Excluded Subsidiary.
Adelson or any of his Affiliates (other than 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 holds an
Investment other than (a) in the case of Mall Subsidiary or Phase II Subsidiary,
through transactions expressly permitted under subsection 7.18 or purchases of
public debt securities in the secondary market and (b) in the case of 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 (a) of this subsection 8.18.
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) 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 each Lender to make any Loan, the
obligation of Administrative Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Borrowers, declare
all or any portion of the amounts described in clauses (a) and (b) above to be,
and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Administrative
Agent to issue any Letter of Credit and the right of any Lender to issue any
Letter of Credit hereunder shall thereupon terminate; provided that the
foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent pursuant to a cash
collateral arrangement reasonably satisfactory to Administrative Agent.
Notwithstanding anything contained in the second preceding paragraph, if at any
time within 60 days after an acceleration of the Loans pursuant to clause (ii)
of such paragraph Borrowers shall pay all arrears of interest and all payments
on account of principal which shall have become due otherwise than as a result
of such acceleration (with interest on principal and, to the extent permitted by
law, on overdue interest, at the rates specified in this Agreement) and all
Events of Default and Potential Events of Default (other than non-payment of the
principal of and accrued interest on the Loans, in each case which is
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due and payable solely by virtue of acceleration) shall be remedied or waived
pursuant to subsection 10.6, then Requisite Lenders, by written notice to
Borrowers, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended,
directly or indirectly, to benefit Borrowers, and such provisions shall not at
any time be construed so as to grant Borrowers the right to require Lenders to
rescind or annul any acceleration hereunder or to preclude Administrative Agent
or Lenders from exercising any of the rights or remedies available to them under
any of the Loan Documents, even if the conditions set forth in this paragraph
are met.
Section 9. AGENTS
9.1 Appointment.
A. Appointment of Administrative Agent. Scotiabank is hereby appointed
Administrative Agent hereunder and under the other Loan Documents and each
Lender hereby authorizes Administrative Agent to act as its agent in accordance
with the terms of this Agreement and the other Loan Documents. GSCP is hereby
appointed Arranger and Syndication Agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Arranger and Syndication 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 Lenders; 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 Lenders and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for Borrowers or any of their Subsidiaries. Upon the Closing Date all
obligations of Arranger and the Syndication Agent hereunder shall terminate.
B. Appointment of Supplemental Agents. 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
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 a
"Supplemental Agent" and collectively as "Supplemental Agents").
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In the event that an Agent appoints a Supplemental Agent with respect
to any Collateral, (i) 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 enforceableby either such Agent or such
Supplemental Agent, and (ii) the provisions of this Section 9 and of subsections
10.2 and 10.3 that refer to Agent shall inure to the benefit of such
Supplemental Agent and all references therein to Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Agent, as the
context may require.
Should any instrument in writing from Borrowers or any other Loan Party
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, Borrowers shall, or shall cause such Loan Party to, execute, acknowledge
and deliver any and all such instruments promptly upon request by the
appropriate Agent. In case any Supplemental Collateral 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
permitted by law, shall vest in and be exercised by Administrative Agent until
the appointment of a new Supplemental Agent.
9.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes
Administrative Agent 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 Administrative Agent by the terms
hereof and thereof, together with such powers, rights and remedies as are
reasonably incidental thereto. Administrative Agent shall have only those duties
and responsibilities that are expressly specified in this Agreement and the
other Loan Documents. Administrative Agent may exercise such powers, rights and
remedies and perform such duties by or through its agents or employees.
Administrative Agent shall not have, by reason of this Agreement or any of the
other Loan Documents, a fiduciary relationship in respect of 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
Administrative 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. Administrative Agent shall
not 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 Administrative Agent to Lenders or by
or on behalf of Borrowers to Administrative Agent or any Lender in connection
with the Loan Documents
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and the transactions contemplated thereby or for the financial condition or
business affairs of Borrowers or any other Person liable for the payment of any
Obligations, nor shall Administrative 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 Loans or the use of the Letters of Credit or as to the
existence or possible existence of any Event of Default or Potential Event of
Default. Anything contained in this Agreement to the contrary notwithstanding,
Administrative Agent shall not have any liability arising from confirmations of
the amount of outstanding Loans or the Letter of Credit Usage or the component
amounts thereof.
C. Exculpatory Provisions. Neither Administrative Agent nor any of its
officers, directors, employees or agents shall be liable to Lenders for any
action taken or omitted by Administrative Agent under or in connection with any
of the Loan Documents except to the extent caused by Administrative Agent's
gross negligence or willful misconduct. Administrative Agent 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 Administrative Agent shall have
received instructions in respect thereof from Requisite Lenders (or such other
Lenders as may be required to give such instructions under subsection 10.6) and,
upon receipt of such instructions from Requisite Lenders (or such other Lenders,
as the case may be), Administrative 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) Administrative Agent shall be entitled to rely,
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 Borrowers and their Subsidiaries), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against Administrative Agent as a result of Administrative
Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. Administrative Agent Entitled to Act as Lender. 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, Administrative Agent in its individual
capacity as a Lender hereunder. With respect to its participation in the Loans
and the Letters of Credit, Administrative 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 Administrative Agent in its individual capacity.
Administrative Agent and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust, financial advisory or other
business with Borrowers or any of its Affiliates as if it were not performing
the duties specified herein, and may accept fees and other consideration from
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Borrowers for services in connection with this Agreement and otherwise without
having to account for the same to Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
Credit Worthi ness.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Borrowers
and their Subsidiaries in connection with the making of the Loans and the
issuance of the Letters of Credit hereunder and that it has made and shall
continue to make its own appraisal of the creditworthiness of Borrowers and
their Subsidiaries. Administrative Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter, and Administrative Agent shall not have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent, to the extent that Administrative Agent shall
not have been reimbursed by 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
Administrative 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 Administrative Agent in any way relating to or arising out of this
Agreement or 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
Administra tive Agent's gross negligence or willful misconduct. If any indemnity
furnished to Administrative Agent for any purpose shall, in the opinion of
Administrative Agent, be insufficient or become impaired, Administrative 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.
Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Borrowers, and Administrative Agent may be
removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Borrowers and Administrative Agent and
signed by Requisite Lenders. Upon any such notice of resignation or any such
removal, Requisite Lenders shall have the right, upon five Business Days' notice
to Borrowers, to appoint a successor Administrative Agent (provided that such
successor is or simultaneously therewith becomes a Lender). Upon the acceptance
of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, that successor
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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 Administrative Agent under this
Agreement.
9.6 Collateral Documents and Subsidiary Guaranties.
Each Lender hereby further authorizes Administrative Agent, on behalf
of and for the benefit of Lenders, to enter into each Collateral Document and
Subsidiary Guaranty as secured party or beneficiary (as applicable), and each
Lender agrees to be bound by the terms of each Collateral Document and
Subsidiary Guaranty; provided that Administrative Agent shall not (i) enter into
or consent to any material amendment, modification, termination or waiver of any
provision contained in any Collateral Document or Subsidiary Guaranty, or (ii)
release any Collateral (except as otherwise expressly permitted or required
pursuant to the terms of this Agreement or the applicable Collateral Document),
in each case without the prior consent of Requisite Lenders (or, if required
pursuant to subsection 10.6, all Lenders); provided further, however, that,
without further written consent or authorization from Lenders, Administrative
Agent may execute any documents or instruments necessary to (i) release any
Subsidiary from the Subsidiary Guaranty to the extent the stock of such
Subsidiary is sold in a transaction permitted under this Agreement or otherwise
consented to by Requisite Lenders in accordance with subsection 10.6 and (ii)
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
Requisite Lenders have otherwise consented in accordance with Subsection 10.6.
Anything contained in any of the Loan Documents to the contrary notwithstanding,
Borrowers, Administrative Agent and each Lender hereby agree that (X) no Lender
shall have any right individually to realize upon any of the Collateral under
any Collateral Document, it being understood and agreed that all powers, rights
and remedies under the Collateral Documents and each Guaranty may be exercised
solely by Administrative Agent for the benefit of Lenders in accordance with the
terms thereof, and (Y) in the event of a foreclosure by Administrative Agent on
any of the Collateral pursuant to a public or private sale, Administrative Agent
or any Lender may be the purchaser of any or all of such Collateral at any such
sale and Administrative Agent, as agent for and representative of Lenders (but
not any Lender or Lenders in its or their respective individual capacities
unless 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 Administrative Agent at such sale.
9.7 Disbursement Agreement and Intercreditor Agreement
Each Lender hereby further authorizes Administrative Agent, on behalf
of and for the benefit of Lenders, to enter into the Disbursement Agreement, the
Intercreditor Agreement, the Adelson Intercreditor Agreement and any FF&E
Intercreditor Agreements and any other
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intercreditor agreements in the form of the Adelson Intercreditor Agreement
entered into by Administrative Agent with any subsequent holders of a Substitute
Tranche B Note or a Completion Guaranty Note, and each Lender agrees to be bound
by the terms of the Disbursement Agreement, the Intercreditor Agreement and each
other such intercreditor agreement; provided that Administrative Agent shall not
enter into or consent to any amendment, modification, termination or waiver of
any provision contained in the Disbursement Agreement, the Intercreditor
Agreement or any other such intercreditor agreement without the prior consent of
Requisite Lenders (or, if such amendment, modification, termination or waiver
would result in a change that under Section 10.6 would require the consent of
all Lenders, then the prior consent of all Lenders).
Section 10. MISCELLANEOUS
10.1 Assignments and Participations in Loans.
A. General. Subject to subsection 10.1B, each 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 Commitments or any Loan or
Loans made by it or its Letters of Credit 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; provided,
further that no such sale, assignment or transfer described in clause (i) above
shall be effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii) and provided,
further that no such sale, assignment, transfer or participation of any Letter
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Commitment and the Loans of the Lender effecting such sale, assignment, transfer
or participation. Except as otherwise provided in this subsection 10.1, no
Lender shall, as between Borrowers and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment or transfer of, or any
granting of participations in, all or any part of its Commitments or the Loans,
the Letters of Credit or participations therein, or the other Obligations owed
to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan,
Letter of Credit or participation therein, or other Obligation may (a)
be assigned in any amount to another Lender, or to an Affiliate of the
assigning Lender or another Lender, with the giving of notice to
Borrowers and Administrative Agent 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, Letters of
Credit and participations therein, and other Obligations of the
assigning Lender) to any other Eligible Assignee
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with the consent of Borrowers and Administrative Agent (which consent
shall not be unreasonably withheld or delayed); provided that any such
assignment in accordance with either clause (a) or (b) above shall
effect a pro rata assignment (based on the respective principal amounts
thereof then outstanding or in effect) of both the Term Loan Commitment
and the Term Loans of the assigning Lender, on the one hand, and the
Revolving Loan Commitment and the Revolving Loans of the assigning
Lender, on the other hand. 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, Letters of Credit or participations therein, or other
Obligations or the portion thereof so assigned. The assignor or
assignee to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the Register,
an Assignment Agreement, together with a processing and recordation fee
of (a) $2,000 in respect of assignments made between parties which are
not Lenders as at the Closing Date and (b) $500 in respect of
assignments made between parties one of which is a Lender as at the
Closing Date, and such forms, certificates or other evidence, if any,
with respect to United States federal income tax withholding matters as
the assignee under such Assignment Agreement may be required to deliver
to Administrative Agent pursuant to subsection 2.7B(iii)(a). Upon such
execution, delivery, acceptance and recordation, 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 survive the termination of this Agreement under subsection
10.9B) 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; provided that,
anything contained in any of the Loan Documents to the contrary
notwithstanding, if such Lender is the Issuing Lender with respect to
any outstanding Letters of Credit such Lender shall continue to have
all rights and obligations of an Issuing Lender with respect to such
Letters of Credit until the cancellation or expiration of such Letters
of Credit and the reimbursement of any amounts drawn thereunder). 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 Administrative Agent for cancellation, and
thereupon new Notes shall be issued to the assignee and to the
assigning Lender, substantially in the form of Exhibit III-B annexed
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.
(ii) Acceptance by Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing and recordation
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fee referred to in subsection 10.1B(i) and any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters that such assignee may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iii)(a),
Administrative Agent shall, if Administrative Agent has consented to
the assignment evidenced thereby (to the extent such consent is
required pursuant to subsection 10.1B(i)), (a) accept such Assignment
Agreement by executing a counterpart thereof as provided therein (which
acceptance shall evidence any required consent of Administrative Agent
to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Borrowers.
Administrative Agent shall maintain a copy of each Assignment Agreement
delivered to and accepted by it as provided in this subsection
10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the 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 date of any
Loan allocated to such participation, (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation,
or (iii) releasing all or substantially all of the Collateral, and all amounts
payable by Borrowers hereunder (including amounts payable to such Lender
pursuant to subsections 2.6D 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 10.4 and 10.5, (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. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Borrowers and such Lender,
be relieved of any of its obligations hereunder as a result of any such
assignment and pledge and (ii) in no event shall such Federal Reserve Bank be
considered to be a "Lender" or be entitled to require the assigning Lender to
take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning
Borrowers and their Subsidiaries in the possession of that Lender from time to
time to assignees and participants (including prospective assignees and
participants), subject to subsection 10.20.
F. Representations of Lenders. Each Lender listed on the signature
pages hereof 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 or state securities laws (it
being understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests
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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.
10.2 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 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 Lenders 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 Administrative Agent 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; provided that the fees and
costs of such counsel for the preparation and negotiation of the Loan Documents
may not exceed $350,000; (iv) all the actual costs and reasonable expenses of
creating and perfecting Liens in favor of Administrative Agent 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 Administrative Agent and of counsel providing any opinions that
Administrative Agent or Requisite Lenders 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 Administrative
Agent 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 6.8B 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 Administrative
Agent 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 Administrative Agent 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 any 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.
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10.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 10.2,
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 unreasonably withheld), indemnify,
pay and hold harmless Administrative Agent, Arranger and Lenders, and the
officers, directors, employees, agents and affiliates of Administrative Agent,
Arranger and Lenders (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 extentsuch 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 disburse ments 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 any 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 10.3 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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10.4 Set-Off; Security Interest in Deposit Accounts.
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 each 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 deposits (general or special, including Indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts) and any other Indebtedness at any time held or owing by that Lender to
or for the credit or the account of Borrowers against and on account of the
obligations and liabilities of Borrowers to that Lender under this Agreement,
the Letters of Credit and participations therein and the other Loan Documents,
including all claims of any nature or description arising out of or connected
with this Agreement, the Letters of Credit and participations therein or any
other Loan Document, irrespec tive of whether or not (i) that Lender shall have
made any demand hereunder or (ii) the principal of or the interest on the Loans
or any amounts in respect of the Letters of Credit or any other amounts due
hereunder shall have become due and payable pursuant to Section 9 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured. Borrowers hereby further grants to Administrative Agent and each
Lender a security interest in all deposits and accounts maintained with
Administrative Agent or such Lender as security for the Obligations.
10.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of 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, amounts payable in
respect of Letters of Credit, 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
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 returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. Borrowers expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise
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any and all rights of banker's lien, set-off or counterclaim with respect to any
and all monies owing by Borrowers to that holder with respect thereto as fully
as if that holder were owed the amount of the participation held by that holder.
10.6 Amendments and Waivers.
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, and no consent to any departure by Borrowers
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; changes in any manner the
definition of "Pro Rata Share" or the definition of "Requisite Lenders" (it
being understood that, with the consent of Requisite Lenders, additional
extensions of credit pursuant to this Agreement may be included in "Pro Rata
Share" and "Requisite Lenders" on substantially the same terms as the Term Loan
Commitments and the Term Loans and the Revolving Loan Commitments and the
Revolving Loans); changes in any manner any provision of this Agreement which,
by its terms, expressly requires the approval or concurrence of all Lenders;
postpones the scheduled final maturity date of any of the Loans; postpones the
date or reduces the amount of any scheduled payment (but not prepayment) of
principal of any of the Loans or any scheduled reduction in commitments;
postpones the date on which any interest or any fees or other amounts are
payable; decreases the interest rate borne by any of the Loans (other than any
waiver of any increase in the interest rate applicable to any of the Loans
pursuant to subsection 2.2E) or the amount of any fees or other amounts payable
hereunder; reduces the amount or postpones the due date of any amount payable in
respect of, or extends the required expiration date of, any Letter of Credit;
changes in any manner the obligations of Lenders relating to the purchase of
participations in Letters of Credit; increases the maximum duration of Interest
Periods permitted hereunder; releases any Lien granted in favor of
Administrative Agent with respect to 25% or more in aggregate fair market value
of the Collateral; releases any Subsidiary Guarantor from its obligations under
its Guaranty, other than in accordance with the terms of the Loan Documents; or
changes in any manner the provisions contained in subsection 9.1 or this
subsection 10.6 shall be effective only if evidenced by a writing signed by or
on behalf of all Lenders. In addition, (i) any amendment, modification,
termination or waiver of any of the provisions contained in Section 4 shall be
effective only if evidenced by a writing signed by or on behalf of
Administrative Agent and Requisite Lenders, (ii) no amendment, modification,
termination or waiver of any provision of any Note shall be effective without
the written concurrence of the Lender which is the holder of that Note, (iii) no
amendment, modification, termination or waiver of any provision of Section 9 or
of any other provision of this Agreement which, by its terms, expressly requires
the approval or concurrence of Administrative Agent shall be effective without
the written concurrence of Administrative Agent and (iv) no amendment,
modification, termination or waiver of any provision of subsection 2.4 which has
the effect of changing any interim scheduled payments, voluntary or mandatory
prepayments, or Commitment reductions applicable to either Class (the "Affected
Class") in a manner that disproportionately disadvantages such Class relative to
the other Class shall be effective without the written concurrence of Requisite
Class Lenders of the Affected Class (it being understood and agreed that any
amendment, modification, termination or waiver of any such provision
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<PAGE>
which only postpones or reduces any interim scheduled payment, voluntary or
mandatory prepayment, or Commitment reduction from those set forth in subsection
2.4 with respect to one Class but not the other Class shall be deemed to
disproportionately disadvantage such one Class but not to disproportionately
disadvantage such other Class for purposes of this clause (iv). Administrative
Agent may, but shall have no obligation to, with the concurrence of any Lender,
execute amendments, modifications, waivers or consents on behalf of that Lender.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Borrowers
in any case shall entitle Borrowers to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 10.6 shall be binding
upon each Lender at the time outstanding, each future Lender and, if signed by
Borrowers, on Borrowers. To the extent the Bank Agent is entitled or required to
make any determinations under the Intercreditor Agreement, the Adelson
Intercreditor Agreement or any FF&E Intercreditor Agreement, Bank Agent shall
make such determinations upon the advice of Requisite Lenders.
10.7 Certain Matters Affecting Lenders.
(a) If (i) the Nevada Gaming Commission shall determine that any 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 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
bank(s) or other financial institution(s) (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, subject to receipt by
the Administrative Agent of evidence that such Substitute Lender is an 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.
(b) Notwithstanding the provisions of subsection (a) of this subsection
9.7, if any Lender becomes a Former Lender, and if the Administrative Agent or
the Borrowers fail to find a Substitute Lender pursuant to subsection (a) of
this subsection 9.7 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.
153
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10.8 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.
10.9 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Administrative Agent 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 (i) as to Borrowers and Administrative Agent, such other address as
shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
10.10 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
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrowers set forth in subsections 2.6D, 2.7, 10.2,
10.3 and 10.4 and the agreements of Lenders set forth in subsections 9.2C, 9.4,
10.5 and 10.20 shall survive the payment of the Loans and the reimbursement of
any amounts drawn thereunder, and the termination of this Agreement.
10.11 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Administrative Agent or any 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.
154
<PAGE>
10.12 Marshalling; Payments Set Aside.
Neither Administrative Agent nor any Lender shall 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 Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
10.13 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.
10.14 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.15 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.
10.16 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 (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW
155
<PAGE>
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.17 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 Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither
Borrowers' rights or obligations hereunder nor any interest therein may be
assigned or delegated by Borrowers without the prior written consent of all
Lenders.
10.18 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 STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, BORROWERS, FOR THEMSELVES AND IN CONNECTION WITH
THEIR PROPER TIES, IRREVOCABLY
(I) ACCEPT GENERALLY AND UNCONDITIONALLY THE NONEX CLUSIVE
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 10.9;
(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;
(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 10.18
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
156
<PAGE>
10.19 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 THE LEND
ER/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 10.19 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS 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.
10.20 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking or investment practices, it being
understood and agreed by Borrowers that in any event a Lender may make
disclosures to Affiliates of such Lender or disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participations therein (provided that such assignee, transferee or participant
agrees to also be bound by this subsection 10.20), 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, each 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 such Lender by
such governmental agency) for disclosure of any such non-public information; and
provided, further that in no event shall any Lender be obligated or required to
return any materials furnished by Borrowers or any of their Subsidiaries.
157
<PAGE>
10.21 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
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
10.22 Gaming Authorities.
The Arranger, the Administrative Agent and each Lender agree to
cooperate with the Nevada Gaming Authorities in connection with the
administration of their regulatory jurisdiction over the Borrowers and their
Subsidiaries, including, without limitation, to the extent not inconsistent with
the internal policies of such Lender or Issuing Lender and any applicable legal
or regulatory restrictions the provision of such documents or other information
as may be requested by any such Nevada Gaming Authority relating to the
Arranger, the Administrative Agent or any of the Lenders, or Borrowers or any of
their Subsidiaries, or to the Loan Documents. Notwithstanding any other
provision of the Agreement, Borrowers expressly authorize each Agent and Lender
to cooperate with the Nevada Gaming Authorities as described above.
[Remainder of page intentionally left blank]
158
<PAGE>
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 Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc. its managing member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
Notice Address:
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
S-1
<PAGE>
LENDERS:
GOLDMAN SACHS CREDIT PARTNERS L.P.
individually and as Arranger and Syndication Agent
By: /s/ Gary Moross
-----------------------
Authorized signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
Attention: Lisa-Laura Mays
THE BANK OF NOVA SCOTIA,
individually and as Administrative Agent
By: /s/ Alan W. Pendergrast
-----------------------
Name:
Title:
Notice Address:
The Bank of Nova Scotia
580 California Street, Suite 2100
San Francisco, California 94104
Attention: Alan Pendergast
Telefax: (415) 397-0791
With copy to:
The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Marianne Velker
Telefax: (404) 888-8998
S-2
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
----------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
Notice Address:
Van Kampen American Capital
One Parkview Plaza - 5th Floor
Oakbrook Terrace, IL 60181
Attention: Mr. Brian Murphy
Telefax: (630) 684-6740
Telephone: (630) 684-4479
With a copy to:
State Street Bank and Trust
Corporate Trust Department
P.O. Box 778
Boston, MA 02102
Attention: Mr. Sean Emerson
Telefax: (617) 664-5366
Telephone: (617) 664-5481
S-3
<PAGE>
THE INTERNATIONAL COMMERCIAL
BANK OF CHINA, NEW YORK AGENCY
By: /s/ Robin C.C. Lin
------------------
Name: Robin C.C. Lin
Title: Vice President and Deputy General Manager
Notice Address:
The International Commercial Bank of China
65 Liberty Street
New York, NY 10005
Attention: Mong-Shyr Wu
S-4
<PAGE>
BDC FINANCE LLC
By: /s/ James J. Zenni, Jr.
-----------------------
Name: James J. Zenni, Jr.
Title: Director
Notice Address:
Black Diamond Capital Management LLC
One Conway Park, Suite 330
100 Field Drive
Lake Forest, IL 60045
Attention: James J. Zenni, Jr.
Telefax: (847) 615-9064
Telephone: (847) 615-9000
With a copy to:
Black Diamond Capital Management LLC
230 Park Avenue, Suite 610
New York, NY 10169
Attn: Stephen H. Deckoff
Telefax: (212) 953-6063
Telephone: (212) 687-1726
S-5
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ Lynn Callicott Baranski
---------------------------
Name: Lynn Callicott Baranski
Title: Authorized Signatory
Notice Address:
Merrill Lynch Asset Management
800 Scudders Mill Road, Area 1B
Plainsboro, NJ 08536
Attention: Anne McCarthy
Telefax: (609) 282-2756
Telephone: (609) 282-2756
S-6
<PAGE>
ARCHIMEDES FUNDING, L.L.C.
By: ING CAPITAL ADVISORS, INC., as Collateral Manager
By: /s/ Michael D. Hatley
---------------------
Name: Michael D. Hatley
Title: Vice President & Portfolio Manager
Notice Address:
Archimedes Funding, L.L.C.
c/o ING Capital Advisors, Inc.
333 S. Grand Avenue, Suite #4250
Los Angeles, CA 90071
Attention: Michael Hatley
Vice President & Portfolio Manager
Telefax: (213) 346-3995
Telephone: (213) 346-3972
S-7
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /s/ Neva Nesbitt
----------------
Name: Neva Nesbitt
Title: Vice President
Notice Address:
The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Attention: David G. Parker
Manager-Credit Administration
Telefax: (713) 951-9921
S-9
<PAGE>
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
By:/s/ John M. Casparian
-------------------------
Name: John M. Casparian
Title: Investment Officer
Notice Address:
Transamerica Investment Services, Inc.
1150 S. Olive Street, Suite 2700
Los Angeles, CA 90071
Attention: Mr. John M.Casparian
Investment Officer
Telefax: (213) 742-4150
CONSTRUCTION MANAGEMENT AGREEMENT
BETWEEN
LEHRER McGOVERN BOVIS, INC.,
as Construction Manager
AND
LAS VEGAS SANDS, INC.,
as Owner
GRAND VENETIAN HOTEL/CASINO
LAS VEGAS, NEVADA
As of February 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS..................................................1
ARTICLE 2 ENGAGEMENT OF CONSTRUCTION MANAGER...........................8
ARTICLE 3 CONSTRUCTION MANAGER'S DUTIES...............................10
ARTICLE 4 ENGAGEMENT OF ARCHITECT.....................................25
ARTICLE 5 SELECTION OF CONTRACTORS; CONTRACTS.........................25
ARTICLE 6 CONSTRUCTION MANAGEMENT FEE;
GUARANTEED MAXIMUM PRICE; GUARANTY OF
TIME........................................................30
ARTICLE 7 PAYMENT OF REIMBURSABLE COSTS...............................45
ARTICLE 8 ADVANCE PURCHASING..........................................54
ARTICLE 9 APPLICATIONS FOR PAYMENT....................................55
ARTICLE 10 OWNER'S DUTIES AND RIGHTS...................................60
ARTICLE 11 TERMINATION.................................................67
ARTICLE 12 MISCELLANEOUS...............................................71
Schedules
- ---------
A Payment of Construction Management Fee
B Form of Trade Contract
C Liquidated Damages and Early Completion Bonus
D Wage Rates
E Required Insurance (Construction Manager)
F Owner's Insurance
Exhibits
- --------
A-1 Direct Guaranty
A-2 P & O Guaranty
B Guaranteed Maximum Price
i
<PAGE>
CONSTRUCTION MANAGEMENT AGREEMENT ("Agreement") dated as of
this 15th day of February, 1997, between Lehrer McGovern Bovis, Inc., a New York
corporation having its office at 200 Park Avenue, New York, NY 10166
("Construction Manager"), and Las Vegas Sands, Inc., a Nevada corporation having
its office at 3355 Las Vegas Boulevard South, Las Vegas, NV 89109 ("Owner"),
regarding the project known as the Grand Venetian Hotel/Casino.
FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED,
CONSTRUCTION MANAGER AND OWNER AGREE AS FOLLOWS:
ARTICLE 1
DEFINITIONS
1.1 The "Project" is the first phase of a mixed use
hotel/casino complex which will be constructed in two phases. The first phase
(to be constructed on the south portion of the site) will have:
a hotel tower with approximately 3,000 hotel suites;
a podium structure which contains a casino of approximately
100,000 gross square feet (gsf), banquet and meeting facilities, a showroom and
support spaces, which will be shared by this hotel and a second phase hotel; a
second level retail complex of approximately 485,000 gsf (250,000 sf of gross
leasable area (gla)) with an upper retail level of approximately 485,000 gsf
(including voids in double
<PAGE>
2
high spaces in the upper retail level (250,000 gla) and exitways and corridors);
and a pool deck with public areas at the roof;
a parking structure for approximately 4,500 vehicles;
expansion to the Sands Exposition Center;
a central utility plant to serve both the north and the south
portions (i.e., phases one and two) of the site; and
site improvements and infrastructure related to both the north
and south portions (i.e., phases one and two) of the site.
The site for phases one and two of the above-described complex
is the site of the Sands Expo Center and the former Sands Hotel and Casino and
may include small contiguous properties that are not currently owned by Owner.
Owner and Construction Manager acknowledge and confirm that Owner may wish to
engage Construction Manager to perform certain design management, value
engineering, procurement, scheduling, estimating and other services in
connection with the second phase of the above-described complex, and
Construction Manager desires to perform such services. However, such services
will be covered not by this Agreement (except in connection with components of
the entire complex that will be used by both phases and are being constructed as
part of the first phase (e.g., the central utility plant)), but by a separate
agreement to be entered into by and between Owner and Construction Manager.
Where there is unavoidable overlap between reimbursable costs covered by this
Agreement and reimbursable costs covered by such separate agreement (e.g.,
reimbursable costs in connection with services relating to the procurement of
materials and equipment for both phases of the above-described complex),
<PAGE>
3
Construction Manager and Owner shall jointly determine a reasonable allocation
of such costs. In no event shall any reimbursable cost be covered by both this
Agreement and such separate agreement.
1.2 The "Work" is the performance and supply through
independent Contractors and Construction Manager's own forces of all work,
labor, services, materials, supplies, and equipment necessary to construct the
Project, which Work is to be specified in the Contract Documents. The Work shall
not include activities to be performed, or labor, services, materials, supplies
and equipment to be supplied, by Owner hereunder.
1.3 "Work Charges" shall mean the sum of (a) all amounts
payable to Contractors pursuant to all trade contracts and purchase orders,
excluding all trade contracts and purchase orders covering inspections and/or
testing of the Work only and all contracts described in Section 1.4 and (b) all
Reimbursable Costs.
1.4 "Architect" refers to TSA of Nevada, LLP and WAT&G, Inc.
Nevada, jointly, or any replacement thereof designated by Owner. Architect shall
perform (and has been performing) design services for the Project; Owner intends
to enter into an agreement with Architect (the "Architect's Agreement") with
respect to these services, and will provide Construction Manager with a copy of
such agreement immediately upon its execution and delivery. The Architect and/or
Owner may retain the services of additional structural, mechanical, electrical
and other engineers, inspectors, inspection agencies, and all other contractors
and consultants (collectively, "Agencies") normally and customarily retained by
an architect or owner to design the elements and inspect and test the
construction of a complete building structure and
<PAGE>
4
system. In addition, Owner intends to engage Agencies to perform services in
connection with those services in connection with the Project that are Owner's
responsibility (i.e., the "exclusions" that are part of the Assumptions (as
defined in Section 6.4)), including certain construction services and the
providing of a field office at the Project site. Subject to Section 2.4,
Construction Manager's services hereunder shall include monitoring the work
performed by, and coordinating and managing the activities of (i.e., scheduling
and attending meetings, coordinating schedules, facilitating and participating
in communications, etc.), all Agencies, including those engaged to perform
design, engineering and/or construction services.
1.5 "Contractor" refers to any person or entity who or which
performs and/or supplies a portion of the Work as an independent contractor
pursuant to a trade contract with Construction Manager, or pursuant to a
purchase order issued by Construction Manager and approved by Owner, as herein
provided.
1.6 "Contract Documents" shall be comprised of as they come
into existence: this Agreement; the Architect's Agreement; the trade contracts;
the general conditions, exhibits and schedules to said trade contracts; the
purchase orders (together with terms and conditions thereof); the plans,
drawings, and specifications prepared, approved, or reevaluated by Architect;
all approved written or graphic interpretations, clarifications, amendments, and
changes to any of the foregoing documents; change orders; and scope changes.
1.7 "Guaranteed Maximum Price" shall have the meaning set
forth in Section 6.3 of this Agreement.
<PAGE>
5
1.8 "Substantial Completion" refers to the stage in the
progress of the Work when the Work is sufficiently complete in accordance with
the Contract Documents so that (assuming that the appropriate furniture,
fixtures and equipment (including casino equipment) the installation of which is
not part of the Work have been installed by Owner and that Owner's personnel
have received adequate training) Owner can utilize the Work for its intended
uses and all aspects of the Project can be open to the general public.
Substantial Completion shall not be achieved until, among other things,
subsection 3.3.23 is complied with, all Project systems included in the Work are
operational as designed, all designated or required governmental certificates of
occupancy and other permits, inspections and certifications have been achieved,
made and posted (provided that a temporary certificate of occupancy rather than
a permanent certificate of occupancy may have been achieved, made and posted, so
long as the obtaining of a temporary, rather than a permanent, certificate of
occupancy does not prevent any aspect of the Project from being open to the
general public) and all instruction of Owner's personnel in the operation of the
Project systems that is provided for in trade contracts has been completed. In
general, the only remaining Work after Substantial Completion has been achieved
shall be minor in nature, so that the completion of all remaining Work would not
materially interfere with or hamper the Project's normal business operations.
Notwithstanding any other provision hereof, but subject to the last sentence of
subsection 3.3.24, Construction Manager shall not be responsible for any delay
in achieving Substantial Completion to the extent such delay is (a) expressly
set forth in subsection 3.3.24 as not being Construction Manager's
responsibility, (b) attributable to any breach by Owner of its
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6
obligations hereunder, including its obligations under subsection 3.3.23 and/or
(c) attributable to any errors or omissions in the plans, drawings and
specifications prepared by Architect or any breach by Architect of its
obligations under the Architect's Agreement (except to the extent such delay
would have been prevented or reduced if Construction Manager had, with diligence
and due care and its best skill and attention, performed its duties and
responsibilities under Section 6.5 and the last sentence of Section 1.4).
1.9 "Final Completion" refers to the stage in the progress of
the Work after Substantial Completion has been achieved when the Owner finds the
Work (including all so-called "punch list" items) complete and in accordance
with the Contract Documents and all obligations of Construction Manager under
this Agreement (except for those obligations which are intended to be satisfied
after Final Completion) fully satisfied. In addition, before Final Completion
shall be deemed to have been achieved, Construction Manager shall have submitted
or caused to be submitted to Owner (i) all warranties and guarantees and
assignments thereof required under or pursuant to the Contract Documents in form
reasonably satisfactory to Owner; (ii) an affidavit that payrolls, bills for
materials and equipment and other indebtedness connected with the Work for which
the Owner or the Owner's property might be responsible or encumbered have been
paid or otherwise satisfied; (iii) a certificate evidencing that insurance
required by the Contract Documents to remain in force after final payment is
currently in effect and will not be canceled or allowed to expire until at least
30 days' prior written notice has been given to Owner; (iv) master, submaster
and special keys with keying schedule; (v) printed or
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7
typewritten operating, servicing, maintenance and cleaning instructions for all
Work and parts lists and special tools for mechanical and electrical Work; (vi)
if requested by Owner, adequate verbal instructions in the operation of
mechanical, electrical, plumbing and other systems; and (vii) if requested by
Owner other data establishing payment or satisfaction of Construction Manager's
obligations to all Contractors, such as receipts, releases, waivers of liens,
claims, security interests or encumbrances arising out of the Work, to the
extent and in such form as may be designated by Owner, including without
limitation a Final Waiver of Liens from Construction Manager (AIA Document G-706
or other form satisfactory to Owner) and final lien waivers or releases from
each Contractor in such form as to constitute effective releases of lien under
applicable law. If a Contractor refuses to furnish a release or waiver required
by Owner and such Contractor files a lien against the Project or any of Owner's
property, Construction Manager shall furnish a bond satisfactory to Owner to
indemnify Owner against such lien within thirty (30) days after being given
written notice or otherwise first becoming aware of the filing of such lien (or
any shorter period if required under any of Owner's loan documents, if such bond
is obtainable within such shorter period). If such lien remains unsatisfied
after payments are made and Construction Manager does not satisfy its
obligations under the preceding sentence, Construction Manager shall promptly
refund to Owner all money that Owner may be compelled to pay in discharging such
lien, including all costs and reasonable attorneys' fees.
1.10 "Project Components" shall have the meaning set forth in
Section 6.4 of this Agreement.
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8
1.11 "Drawings" shall mean all Schematic Design Documents,
Design Development Documents and Construction Documents prepared by Architect or
Agencies engaged by Architect and may, on a case-by-case basis, include
so-called "county submission documents." Wherever Construction Manager is unsure
whether a "county submission document" is a Drawing for purposes of this
Agreement, it shall request guidance from Owner and Owner shall promptly provide
such guidance.
ARTICLE 2
ENGAGEMENT OF CONSTRUCTION MANAGER
2.1 Owner engages Construction Manager to use its best skill
and attention to manage and coordinate the Work and to provide construction
management services, all in accordance with this Agreement and all such that the
Work will be timely and properly completed in accordance with this Agreement and
the other Contract Documents. Owner shall pay Construction Manager as
compensation for its services the Construction Management Fee set forth on
Schedule A attached hereto and made a part hereof.
2.2 Construction Manager represents that it has examined the
Project site and the surrounding locale, and is familiar with the working
conditions in and around such site except for conditions not apparent from tests
heretofore submitted to Construction Manager or from visual inspection of the
site, or from a review of surveys or plans heretofore submitted to Construction
Manager of presently existing conditions at the site.
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9
2.3 Nothing in this Agreement shall be deemed to require, or
authorize, or permit Construction Manager to perform any act, which would
constitute design services, laboratory testing, inspection services,
investigations, or the practice of architecture, professional engineering,
certified public accounting or law. Except as expressly set forth to the
contrary in Article 6 and any of the other provisions herein, the
recommendations, advice, budgetary information and schedules to be furnished by
Construction Manager under this Agreement shall not be deemed to be warranties
or guarantees or constitute the performance of licensed professional services,
but, nonetheless, such recommendations, advice, budgetary information and
schedules shall represent Construction Manager's best knowledge and judgment
relating to the construction of the Project.
2.4 Notwithstanding any other provision hereof, but subject to
Section 6.6, in no event shall Construction Manager be responsible for any
design errors or deficiencies in any Drawing prepared by Architect or any Agency
except to the extent such error or deficiency is attributable to the failure by
Construction Manager to perform any of its express obligations hereunder.
2.5 This Agreement is the principal document governing the
relationship between Construction Manager and Owner, and in connection with such
relationship, in the event of any conflict between this Agreement and any other
Contract Document, this Agreement shall govern.
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10
ARTICLE 3
CONSTRUCTION MANAGER'S DUTIES
Construction Manager accepts the relationship of trust and
confidence established between Construction Manager and Owner by this Agreement.
Construction Manager recognizes the necessity of a close working relationship
with Owner and agrees: to furnish the skill and judgment of its organization in
the performance of this Agreement and to cooperate with Architect in furthering
the interests of Owner. Construction Manager shall provide Construction
Manager's knowledge, ideas, experience and abilities relating to the planning of
the construction of the Project; furnish efficient business administration and
superintendence; and use its best efforts to arrange for an adequate supply of
workmen and materials, equipment, tools and other services and things to
complete the Work in the best and soundest way and in the most expeditious and
economical manner consistent with the interests and objectives of Owner and the
Contract Documents. Construction Manager agrees to advise and make
recommendations to Owner as follows:
3.1 DESIGN PHASE.
3.1.1 Owner and Construction Manager, in conjunction with
Architect, shall develop a design phase schedule as follows:
PHASE 1: Based upon Owner's Project requirements,
Schematic Design Documents will be prepared by Architect and approved by Owner.
These schematics are for the purpose of assisting Owner in determining the
feasibility and cost of the Project.
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11
PHASE 2: Upon approval of Schematic Designs Documents and
authorization from Owner to proceed, Architect shall prepare Design Development
Documents to fix the size and character of the Project as to structural,
mechanical and electrical systems, materials and other appropriate essential
items in the Project.
PHASE 3: From Owner approved Design Development Documents,
Architect will prepare working Construction Documents setting forth in detail
the requirements for the construction of the Project, and based upon codes, laws
or regulations which have been enacted at the time of their preparation.
Construction of the Project shall be in accordance with these Construction
Documents as approved by Owner. The Construction Documents shall remain the
property of Owner.
3.2 PRECONSTRUCTION PHASE. During the design and
preconstruction phases, Construction Manager's duties and services shall include
the following:
3.2.1 Construction Manager shall provide to Owner and
Architect for review and acceptance by Owner, and periodically update (not less
than monthly), a Project Schedule that coordinates and integrates Construction
Manager's services, the Architect's services, the Schedule (as defined in the
Architect's Agreement) and the Owner's responsibilities with anticipated
construction schedules. Supplementing the foregoing, Construction Manager shall
review all proposed updates to the Schedule submitted by the Architect to Owner
and Construction Manager and shall promptly recommend to Owner whether any such
update should be approved.
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12
3.2.2 Construction Manager shall provide preliminary
evaluation of the design documents for consistency with Project budget
requirements. Construction Manager shall consult with the entire construction
team, (i.e., Owner, Architect and any appropriate Agencies (as defined in
Section 1.4)) on the availability and costs of alternative systems and materials
and other "value engineering" suggestions, and shall provide cost evaluations of
alternative materials and systems. Construction Manager shall assist Owner and
Architect in achieving mutually-agreed upon program and Project budget
requirements and other design parameters.
3.2.3 Construction Manager shall review designs for con
structability during their development. Construction Manager shall advise on
site use and improvements, selection of materials, building systems and
equipment and methods of Project delivery. Construction Manager shall provide
recommendations on relative feasibility of construction methods, availability of
materials and labor, time requirements for procurement, installation and
construction, and factors related to cost including, but not limited to, costs
of alternative designs or materials, preliminary budgets and possible economies.
3.2.4 Construction Manager shall attend and if requested
arrange for meetings with Owner, Architect and others at reasonable times and
places and as Owner shall otherwise request.
3.2.5 Construction Manager shall coordinate efforts to obtain
all necessary permits, approvals, licenses (except gaming permits, approvals and
licenses) and easements required for the construction, use and occupancy of each
portion of the Project, shall attend meetings with governmental authorities and
other
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13
persons and entities in connection therewith as required, shall prepare
construction-related presentations, reports and data for such meetings, shall
prepare all required written applications relating to construction as necessary
or appropriate, and shall advise Owner in connection with all of the foregoing.
In connection with all of the foregoing, Owner shall comply with its obligations
under Sections 10.4 and 10.11 hereof and shall in general work jointly and
diligently with Construction Manager in connection with all efforts to obtain
such permits, approvals, licenses and easements.
3.2.6 Construction Manager shall coordinate Contract Documents
by consulting with Owner and the Architect regarding all Drawings as they are
being prepared, and recommending alternative solutions whenever design details
affect construction feasibility, cost or schedules. The preceding sentence, and
subsections 3.2.2 and 3.2.3, are supplemented by Section 6.5.
3.2.7 Construction Manager shall provide recommendations and
information to Owner regarding the assignment of responsibilities for safety
precautions and programs; temporary Project facilities; and equipment, materials
and services for common use of Contractors. Construction Manager shall verify
that the requirements and assignment of responsibilities are included in the
proposed Contract Documents.
3.2.8 Construction Manager shall advise on the separation of
the Project into Contracts for various categories of Work. Construction Manager
shall advise on the method to be used for selecting Contractors and awarding
Contracts. If separate Contracts are to be awarded, Construction Manager shall
review the Drawings and make recommendations as required to provide that (1) the
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14
Work of the separate Contractors is coordinated, (2) all requirements for the
Project have been assigned to the appropriate separate Contract, (3) the
likelihood of jurisdictional disputes has been minimized, and (4) proper
coordination has been provided for phased construction.
3.2.9 Construction Manager shall develop a Project
Construction Schedule providing for all major elements such as phasing of
construction and times of commencement and completion required of each separate
Contractor. Construction Manager shall provide a schedule for each set of
Bidding Documents.
3.2.10 Construction Manager shall investigate and recommend a
schedule for Owner's purchase of materials and equipment requiring long lead
time procurement, and coordinate the schedule with the early preparation of
portions of the Contract Documents by the Architect. Construction Manager shall
expedite and coordinate delivery of these purchases. Owner represents and
warrants that as of the date hereof, and except with respect to certain
agreements for the purchase of tower cranes (which tower cranes Owner is
permitting Construction Manager to use for no fee in connection with the Work),
it has not entered into any binding agreement for the purchase of any materials
and equipment intended to constitute part of the Work. (Owner has also entered
into a binding agreement with a third party for the fabrication of certain
theming elements, the installation of which (but not the fabrication of which)
is part of the Work.)
3.2.11 Construction Manager shall provide an analysis of the
types and quantities of labor required for the Project and review the
availability of
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15
appropriate categories of labor required for critical Phases. Construction
Manager shall make recommendations for actions designed to minimize adverse
effects of labor shortages.
3.2.12 Construction Manager shall assist Owner to identify or
verify applicable requirements for equal employment opportunity programs for
inclusion in the proposed Contract Documents.
3.2.13 Construction Manager shall make recommendations for
pre-qualification criteria for bidders and develop bidders' interest in the
Project and shall assist Owner in the selection of Contractors as set forth in
Article 4.
3.2.14 Construction Manager shall provide printing services
(at Owner's expense (i.e., outside of the Guaranteed Maximum Price)) for,
document storage of all originals of, and document inventory of, all Drawings.
3.3 CONSTRUCTION PHASE.
3.3.1 Construction Manager agrees to furnish a staff for the
overall administration, coordination, management, and superintendence of the
Work. Construction Manager is not expected to have the expertise or
responsibility of an architect or professional engineer. (The preceding sentence
is not meant to abrogate or modify subsection 3.3.13, Section 12.11 or Article
6.)
3.3.2 Construction Manager agrees to schedule and attend
regular meetings with Owner and Architect at reasonable times and places and as
Owner shall otherwise request, and to present reports on the progress of the
Work.
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16
3.3.3 Construction Manager agrees to require each Contractor
to perform and complete its respective portion of the Work in accordance with
the Contract Documents pertaining to such Contractor.
3.3.4 Construction Manager agrees to arrange for all work,
labor, services, materials, supplies, and equipment necessary for the execution
and completion of the Work.
3.3.5 Construction Manager agrees to cause to be performed any
work and furnish and install any materials and equipment which Construction
Manager deems reasonably necessary during an emergency endangering life or
property. Construction Manager shall notify Owner of the emergency as soon as
practicable but shall not wait for instruction before proceeding unless the cost
to be incurred by reason thereof shall exceed $5,000.00. Construction Manager
agrees to review and coordinate the safety programs of the Contractors who shall
have the primary obligation for Project safety.
3.3.6 Consistent with the construction schedule issued with
the Bidding Documents, and utilizing the Contractors' Construction Schedules
provided by the separate Contractors, Construction Manager shall update the
Project Construction Schedule incorporating the activities of Contractors on the
Project, including activity sequences and durations, allocation of labor and
materials, processing of Shop Drawings, Product Data and Samples, and delivery
of products requiring long lead time procurement. Construction Manager shall
include the Owner's occupancy requirements showing portions of the Project
having occupancy priority. Construction Manager shall update and reissue the
Project Construction
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17
Schedule as required to show current conditions and revisions required by actual
experience and furnish copies of such updates to Owner and Architect.
3.3.7 Construction Manager agrees to follow Owner's
instruction, upon Owner's or Architect's specific advice, to reject work which
does not conform to the Contract Documents. Upon advice of Architect,
Construction Manager shall make arrangements for special inspections or testing.
3.3.8 Subject to Section 10.7(a), Construction Manager agrees
to follow Owner's instructions regarding the removal or uncovering of portions
of the Work.
3.3.9 Construction Manager shall be the judge of performance
and progress by Contractors of their obligations under the Contract Documents,
following consultation with Owner. The foregoing is not meant to nullify,
restrict or modify any of Owner's rights hereunder, including Owner's rights
under subsection 3.3.13 and Sections 9.1 and 9.6.
3.3.10 Construction Manager agrees to prepare and issue change
orders evidencing a change in a Contract Document or a direction to a Contractor
with respect to the execution of the Work or the means, methods or pace of
performing the Work. Such orders shall be signed by Construction Manager only on
authorization by Owner, provided that Owner's prior authorization shall not be
required with respect to any such order that is under $10,000, and provided
further that the aggregate amount of such orders with respect to which both (i)
Owner's prior authorization is not required or obtained and (ii) Owner's
ratification of such change order for purposes of this sentence is not obtained
after such order has been issued,
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18
shall not exceed $100,000. In all events, (a) a copy of each such change order
shall be given promptly to Owner and Architect by Construction Manager and (b)
in no event shall any such change order result in a change in the Guaranteed
Maximum Price. Construction Manager shall have authority to direct that
Contractors work overtime and take such other steps as deemed by Construction
Manager to be necessary to achieve timely progress of the Work (unless the
necessity of such overtime or other steps in order to achieve timely progress of
the Work is caused by acts or omissions of Owner, Architect or Agencies, in
which case Construction Manager shall not so direct unless authorized to do so
by Owner), provided that in no event shall Construction Manager be entitled to
an increase in the Guaranteed Maximum Price on account of any such direction
except pursuant to a Scope Change issued in accordance with Section 10.7.
3.3.11 Construction Manager shall develop cash flow reports
and forecasts as needed.
3.3.12 Construction Manager shall provide regular monitoring
of the Guaranteed Maximum Price, showing actual costs for activities in progress
and estimates for uncompleted tasks. Construction Manager shall identify and
inform Owner of variances between actual costs and the budgeted costs that
comprise the then-existing Guaranteed Maximum Price, and shall promptly advise
Owner whenever the projected cost of any portion of the Work is likely to exceed
the budgeted cost for such portion used in the calculation of the then-existing
Guaranteed Maximum Price.
3.3.13 Construction Manager warrants to Owner that materials
and equipment furnished by Construction Manager and Contractors will be of first
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19
class quality and new unless otherwise required or permitted by the Contract
Documents, that the Work will be free from defects not inherent in the quality
required or permitted, and that the Work will conform with the requirements of
the Contract Documents. Work not conforming to these requirements shall be
considered defective. Construction Manager's warranty excludes remedy for damage
or defect caused by normal wear and tear under normal usage. If required by
Owner, Construction Manager shall furnish satisfactory evidence as to the kind
and quality of materials and equipment. The Contractor shall issue in writing to
the Owner as a condition precedent to final payment a "General Warranty"
reflecting the terms and conditions of this subsection 3.3.13 for all Work and
promising to replace or repair promptly, at its own cost and expense, any
defects which develop. The General Warranty (which shall be effective even if
Construction Manager refuses to deliver it in writing as required above) shall
(i) be for twelve (12) months from the date Substantial Completion of the Work
is achieved, (ii) provide that where defects occur, Construction Manager shall
assume responsibility for all repairs to or replacements of other portions of
the Work made necessary by such defects, and for all expenses incurred in
repairing and replacing other components of the Project that were not part of
the Work but were affected by such defects and (iii) shall otherwise be in form
and substance reasonably satisfactory to Owner. Construction Manager agrees to
use its best efforts to cause each Contractor to perform such guarantees and
warranties as are set forth in the Contractor's trade contract or purchase
order, and to assign any such guaranty or warranty to Owner upon request.
(Whether or not expenses incurred by Construction Manager in connection with its
efforts and actions pursuant to this
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20
subsection 3.3.13 shall be borne by Construction Manager or are Reimbursable
Costs is addressed in paragraph (C) of Section 6.3.)
3.3.14 Construction Manager shall record the progress of the
Project on a daily basis and shall submit such progress reports to Owner which
reports shall contain a record of weather, Work on the site, number of workers,
Work accomplished, problems encountered, and other similar relevant data as
Owner may require. Construction Manager shall submit monthly written progress
reports to Owner including information on each Contractor and each Contractor's
work, as well as the entire Project, showing percentages of completion and
number and amounts of Change Orders. Such progress reports shall be available to
Owner and Architect.
3.3.15 Construction Manager shall maintain at the Project
site, on a current basis: a record copy of all Contracts, Drawings,
Specifications, addenda, Change Orders and other Modifications, in good order
and marked to record all changes made during construction; Shop Drawings;
Product Data; Samples; submittals; purchases; materials; equipment; applicable
handbooks; maintenance and operating manuals and instructions; other related
documents and revisions which arise out of the Contracts or Work. Construction
Manager shall maintain records, in duplicate, of principal building layout
lines, elevations of the bottom of footings, floor levels and key site
elevations certified by a qualified surveyor or professional engineer.
Construction Manager shall make all records available to Owner and the
Architect.
3.3.16 Construction Manager shall arrange for delivery and
storage at the site (to the extent practical), for all purchased materials,
systems and
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21
equipment which are a part of the Project until such items are incorporated into
the Project. In addition, the protection of and security for such materials,
systems and equipment after such delivery to the site and until such items are
incorporated into the Project is Construction Manager's responsibility.
3.3.17 With Owner's maintenance personnel, Construction
Manager shall observe the Contractors' checkout of utilities, operational
systems and equipment for readiness and assist in their initial start-up and
testing. Construction Manager shall arrange for the appropriate Contractors to
assist in training Owner's personnel, as needed, to operate and maintain all
systems and equipment, and shall monitor, as necessary, this training.
3.3.18 When Construction Manager considers each Contractor's
Work or a designated portion thereof substantially complete, Construction
Manager shall prepare a list of incomplete or unsatisfactory items and a
schedule for their completion. Construction Manager shall assist Architect in
conducting inspections. After Substantial Completion of the Work has been
achieved, Construction Manager shall coordinate the correction and completion of
the Work remaining to be completed.
3.3.19 Construction Manager shall evaluate the completion of
the Work of the Contractors. Construction Manager shall assist Owner and
Architect in conducting final inspections.
3.3.20 Construction Manager shall secure from Contractors and
transmit to Owner required guarantees, warranties, affidavits, releases, bonds
and
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22
waivers. Construction Manager shall deliver all keys, manuals, record drawings
and maintenance stocks to Owner.
3.3.21 Construction Manager agrees that it will not disclose
to third parties, without the consent of Owner, any confidential or proprietary
information obtained from or through Owner.
3.3.22 Construction Manager agrees to exercise such controls
as may be necessary for proper financial management under this Agreement; the
accounting and control systems shall be satisfactory to Owner. Construction
Manager agrees to keep full and detailed Project books and records showing the
charges billed to Owner for performance of the Work. Such Project books and
records shall be open for inspection by Owner and its authorized representatives
upon reasonable notice to Construction Manager and at reasonable hours at
Construction Manager's office, and shall be retained by Construction Manager for
a period of three years after the Work has been completed.
3.3.23 Construction Manager agrees to cause the Work to be
performed in such a manner so that prior to achievement of Substantial
Completion (and as early as reasonably practicable), Owner will have access to
the site and the Project (without such access causing any safety hazard or any
delay in or interference with the Work, assuming that Owner complies with its
obligations under this subsection 3.3.23) in order to (a) begin installing the
appropriate furniture, fixtures and equipment (including casino equipment), the
installation of which is not part of the Work, at the site, (b) begin training
its personnel at the site, and (c) and perform other tasks Owner deems necessary
in connection with the opening of the Project (so
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23
long as Construction Manager is given reasonable prior notice of such other
tasks). Owner shall, in its performance of the above-described activities at the
Project, use due care and follow schedule and safety procedures reasonably
determined by Construction Manager, and shall be responsible for any damage to
the Project or delay thereof resulting from Owner's failure to use such due care
or follow such schedules and procedures.
3.3.24 Construction Manager shall 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 Construction
Manager or any breach by Construction Manager of this Agreement (including any
breach of Construction Manager's obligations under the last sentence of Section
1.4 and clause (ii) of the second-to-last sentence of this subsection 3.3.24),
and (b) such events are beyond Construction Manager's reasonable control: Acts
of God (such as tornado, flood, hurricane, etc.); fires and other casualties;
Owner's, Architect's and Agencies' (and their respective agents' and employees'
(other than Contractors' and subcontractors')) acts, omissions to act, or
failures to timely act; strikes, lockouts or other labor disturbances (except to
the extent taking place at the Project 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 this Agreement (unless Construction
Manager should, in the exercise of due diligence and prudent judgment, have
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24
anticipated such enactment); orders or judgments; and any other similar types of
events. Upon the occurrence of any event described in the preceding sentence,
Construction Manager shall (i) promptly advise Owner of such event, (ii) use
diligent efforts to mitigate the consequences of such event, (iii) keep Owner
advised of such efforts taken, and (iv) notify Owner when such event has ceased.
Notwithstanding any of the foregoing, Contractor shall be responsible for the
consequences of the events described in the first sentence of this subsection
3.3.24, and for delays covered by clause (b) or clause (c) of the last sentence
of Section 1.8, if Construction Manager does not give Owner written notice of
the applicable event within five (5) business days of Construction Manager first
becoming aware of its occurrence, provided that if such written notice is not
given within such five (5) business day period Construction Manager's
responsibility shall only be with respect to the period of time (and cost
increases in connection with the period of time) from the occurrence of such
event until such written notice is given to Owner.
3.3.25 Construction Manager shall receive and review all Shop
Drawings, Product Data and Samples prior to their submission to the Architect,
but only for the limited purpose of checking for general conformance with the
Contract Documents. If any such submittal is deemed to be in such general
conformance, Construction Manager shall promptly forward it to Architect; if any
such submission is deemed to not be in such general conformance, it shall be
returned to the applicable Contractor for correction and resubmittal to
Construction Manager. Construction Manager shall carry out its duties pursuant
to the preceding sentence in general conformance with a schedule with respect
thereto to be submitted to Owner and
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25
Architect within thirty (30) days after the execution of this Agreement.
Construction Manager shall, at all times, have available at the Project site all
approved Shop Drawings, Product Data and Samples for use by Construction
Manager, Contractors and Architect.
3.3.26 Construction Manager shall obtain and maintain
insurance in accordance with Schedule E attached hereto, and shall comply with
all requirements and obligations of Construction Manager set forth in Schedule F
attached hereto.
ARTICLE 4
ENGAGEMENT OF ARCHITECT
4.1 Construction Manager has heretofore assisted and advised,
and will continue to assist and advise, Owner in the negotiation of the
Architect's Agreement.
4.2 Construction Manager has heretofore arranged and attended,
or will promptly arrange and attend, a "kick-off" meeting with Architect and
Owner's representative for the purpose of identifying Owner's design standards,
the goals and requirements of the Project in terms of schedules and budgets, and
government agency approvals that may be required for the Project.
ARTICLE 5
SELECTION OF CONTRACTORS; CONTRACTS
5.1 Unless otherwise specified by Owner and approved by
Construction Manager, which approval shall not be unreasonably withheld, all
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26
Contractors shall be selected after a bidding process that includes at least
three bidders. Prior to solicitation of bids from potential Contractors,
Construction Manager shall submit to Owner and Architect a proposed list of
bidders. Owner reserves the right to (a) add to any such bidders list subject to
Construction Manager's approval, which approval shall not be unreasonably
withheld and (b) require Contractor to remove a proposed bidder from any such
list if Owner can demonstrate to the reasonable satisfaction of Construction
Manager that such proposed bidder dos not have the requisite experience or
qualifications to perform the applicable Work in accordance with the applicable
trade contract and first-class professional standards.
5.2 Construction Manager agrees to have each Contractor
execute the form of trade contract and general conditions or the form of
purchase order attached hereto as Schedule B, with such lump sum prices, unit
prices, terms, conditions, changes, amendments, modifications, or schedules, if
any, as may be negotiated by Construction Manager and agreed to by Owner. The
trade contracts, general conditions, and purchase orders shall govern the
relationship between Owner and Contractors, and in the event of any conflict
between such documents and any other Contract Document, such documents shall
govern.
5.3 As soon as practicable after the issuing of a bid package,
but before award of the applicable trade contract, Construction Manager shall
submit to Owner the various bids received from prospective Contractors, all
information available to Construction Manager with respect to such bids and
prospective Contractors as Owner deems pertinent, and Construction Manager's
opinion as to which prospective Contractor should be selected and its reasons
therefor. Owner
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27
shall promptly make the final selection. If Owner does not select as the
Contractor the party recommended by Construction Manager, the Guaranteed Maximum
Price shall be increased by the amount, if any, by which the trade contract
amount proposed by the Contractor selected by Owner exceeds the trade contract
amount proposed by the party recommended by Construction Manager.
5.4 Notwithstanding Section 5.3, in the case of contracts and
purchases of materials, supplies, machinery, equipment, and rentals thereof for
which the amount involved does not exceed $5,000, Construction Manager may
conclude the contract, purchase, or rental without the approval of Owner, in
which event Owner promptly shall be given a copy of the proposed contract or
purchase order.
5.5 Construction Manager shall observe and enforce all Rules
and Regulations of the Occupational Safety and Health Administration of the
United States Department of Labor for all phases of the Work. Construction
Manager shall prepare a site safety plan and submit such plan to Owner for
review and comment prior to the commencement of construction. Such plan shall
identify the location of the fire safety system, alarm system, fire-fighting
apparatus and exit routes. Safety head-gear shall be provided for
representatives of Owner and Architect's personnel and all others while on site.
Construction Manager shall designate a person responsible for job safety. This
person shall be thoroughly familiar with Construction Manager's safety manual
and shall require compliance of all applicable provisions of the manual, and all
other safety authorities. Construction Manager shall keep a copy of this manual
on the job. Construction Manager shall familiarize all Contractors on safety
measures.
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28
5.6 Protection of Persons and Property.
5.6.1 Construction Manager shall, or shall cause Contractors
to, take all precautionary measures as required by municipal and other
authorities to prevent and correct fire causing conditions, and shall conduct
all operations with due regard for the avoidance of fire hazards. Construction
Manager shall exercise the greatest care to prevent fires. The following minimum
precautions shall be taken by Construction Manager and Construction Manager
shall cause each Contractor to take the following precautions:
5.6.1.1 All scaffolding shall be metal.
5.6.1.2 All tarpaulins shall be flame resistant, and
certified to this respect.
5.6.1.3 Flammable liquids shall be stored in closed,
approved, covered metal containers, and as approved by the fire
wardens. All paint and oily rags shall be stored in approved containers
and removed daily.
5.6.1.4 Each gasoline or diesel powered vehicle shall
carry a fire extinguisher of adequate size and type to extinguish a
fire emanating from either the vehicle or its load.
5.6.2 Construction Manager shall plan all Work to minimize
personal injury, property damage and loss of productive time and shall maintain
a system of prompt detection and correction of unsafe practices and conditions.
Construction Manager shall furnish and maintain all necessary first aid
equipment in a special location on the Project. Construction Manager shall
investigate all accidents promptly to determine cause and to take necessary
corrective action, and shall file
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29
required reports. Construction Manager shall take and shall cause each
Contractor to take the following precautions:
5.6.2.1 No exit, corridor, or stairwell shall be used for
storage of materials of any type.
5.6.2.2 All exits, corridors and stairwells must be
accessible and free of materials of any type except as necessary for
the Work. Minimum exit widths as required by law shall be maintained at
all times.
5.6.2.3 Hard hat and construction areas shall be
identified and posted. All workmen and personnel in these areas shall
wear a hard hat.
5.6.2.4 All electrical equipment and tools shall be of an
adequate size to accomplish the task at hand and shall be properly
grounded.
5.6.2.5 Face, eye and respiratory protection shall be
available and used when the situation demands.
5.6.3 Construction Manager shall, or shall cause Contractors
to, adequately protect existing facilities and adjacent property. Any portion of
the Work and any existing improvements or appurtenances liable to damage shall
be properly protected. Construction Manager shall, or shall cause Contractors
to, provide and maintain suitable protections and enclosures around shafts,
stairs and other openings in floors.
5.6.4 Construction Manager shall, or shall cause Contractors
to, provide and maintain suitable temporary structures as required by law or
reasonable safety precautions to protect the public and avoid obstruction or
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30
interference with vehicular or pedestrian traffic in public streets, alleyways
or private rights-of-way. All construction field offices, shanties or other
temporary structures shall be built of fire-proof materials. Construction
Manager shall, or shall cause Contractors to, leave proper access to hydrants
and other similar places, and shall provide sufficient lighting during working
hours and from twilight of each day until full daylight of each following day.
When Work is suspended, Construction Manager shall, or shall cause Contractors
to, leave roadways and sidewalks in proper condition and restore all such to
good condition on completion of the Work. Construction Manager shall, or shall
cause Contractors to, maintain and keep in good repair, shift and alter as
conditions may require, all guard rails, passageways and temporary structures
and remove same when the Work is completed or when the need for their use has
ceased.
ARTICLE 6
CONSTRUCTION MANAGEMENT FEE;
GUARANTEED MAXIMUM PRICE; GUARANTY OF TIME
6.1 The Construction Management Fee shall be one and one-half
percent (1 1/2%) of the Final Guaranteed Maximum Price (as defined in Section
6.8, and as may be adjusted after the Final GMP Date (as defined in Section 6.8)
in accordance with Section 10.7), and shall be payable in accordance with
Schedule A attached hereto and made a part hereof and Section 6.2.
6.2 All amounts (other than cost reimbursements) previously
paid by Owner to Construction Manager pursuant to that certain Consulting
Services Agreement for Preconstruction Services dated as of August 15, 1996
between Owner
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31
and Construction Manager shall be credited against the Construction Management
Fee installment payments due pursuant to Section 6.1 and Schedule A (even if
such amounts were incurred prior to the date hereof).
6.3 The "Guaranteed Maximum Price" is the total of the
following amounts:
A. An estimate of the amount to be payable to Contractors
pursuant to each trade contract and purchase order to be entered into pursuant
to the terms hereof, excluding all trade contracts and purchase orders covering
inspections and/or testing of portions of the Work only and all contracts
covered by Section 1.4. Owner and Construction Manager acknowledge and confirm
that as of the date hereof, certain of such estimates are "allowances" only. An
"allowance" is an estimate that is included in the preliminary Guaranteed
Maximum Price described in the first sentence of Section 6.4, but that covers a
portion of the Work with respect to which the design documents, as of the date
hereof, do not show the material components in enough detail for such estimate
to be a binding component of the Guaranteed Maximum Price. Pursuant to Section
6.4 and subsection 6.7.5, allowances shall, over time, be replaced with
estimates or prices that are binding components of the Guaranteed Maximum Price,
subject to adjustment only in accordance with the further provisions of this
Article 6.
B. An estimate of all Reimbursable Costs.
C. A contingency sum equal to three percent (3%) of the
total amounts set forth in paragraphs (A) and (B) above. This amount is included
for the purpose of defraying unanticipated charges and additional expenses with
respect to
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32
items covered by the foregoing paragraphs A and B that are due to errors in
estimating both time and money, and includes expenses associated with
Construction Manager's obligations under subsection 3.3.13 ("Defect Expenses")
(except to the extent such Defect Expenses would not have been incurred if
Construction Manager had complied with its obligations hereunder), provided that
this amount excludes in all events expenses associated with concealed conditions
not reasonably anticipated, design defects or deficiencies (subject, however, to
Sections 2.4 and 6.6) and Scope of Work changes, which expenses shall be borne
by Owner. Construction Manager will be required to furnish documentation
evidencing expenditures charged to the contingency, and the reasons therefor.
6.4 Owner and Construction Manager acknowledge and confirm
that as of the date hereof, the Guaranteed Maximum Price is $547,431,225, but
that such preliminary Guaranteed Maximum Price includes a contingency sum equal
to five percent (5%), not three percent (3%), of the amounts set forth in
paragraphs (A) and (B) of Section 6.3. All of the amounts that comprise the
Guaranteed Maximum Price, and all of the applicable qualifications, assumptions,
exclusions and allowances (as defined in paragraph (A) of Section 6.3) used or
made by the parties with respect to the Guaranteed Maximum Price and the
calculation thereof (collectively, the "Assumptions"), are set forth in Exhibit
B. Owner may, at its option no later than five (5) business days prior to the
Initial GMP Date (as defined below), provide Construction Manager with written
direction (the "Allocation Direction") as to how the amounts that comprise the
Guaranteed Maximum Price are to be allocated among the (a) "hotel/mall/casino"
and (b) "power plant" components of the Project (such
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33
components, the "Project Components"), in which event Owner and Construction
Manager shall, no later than the Initial GMP Date, prepare a cost allocation
schedule, covering all amounts that comprise the Guaranteed Maximum Price (the
"Allocation Schedule"), pursuant to such direction. Subject to Section 6.6, if
the final Construction Documents and/or any other relevant facts turn out to be
inconsistent with any of the Assumptions, such inconsistency shall be deemed to
be a Scope Change and the provisions of Section 10.7, beginning with the fourth
sentence thereof, shall apply with respect thereto. Owner and Construction
Manager agree that from the date hereof until the Initial GMP Date, (i) they
shall use good faith efforts, as the design documents are revised and clarified,
to agree, for those portions of the Work covered as of the date hereof by
allowances, on estimates of trade contracts and purchase orders that will be
binding components of the Guaranteed Maximum Price (subject to adjustment only
in accordance with the further provisions of this Article 6) and (ii) if a trade
contract or purchase order is entered into for any portion of the Work covered
as of the date hereof by an allowance, the price of such trade contract or
purchase order shall become a binding component of the Guaranteed Maximum Price
(subject to adjustment only in accordance with the further provisions of this
Article 6) with respect to such portion. Owner and Construction Manager further
agree that (a) from the date hereof until the date (the "Initial GMP Date") that
the Guaranteed Maximum Price must be disclosed to Owner's potential lenders
(Owner hereby agreeing to keep Construction Manager informed of such date),
Owner and Construction Manager shall continuously adjust the preliminary
Guaranteed Maximum Price in accordance with the previous two (2) sentences and
subsections 6.7.3, 6.7.4
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34
and 6.7.5, and (b) on the Initial GMP Date, they shall execute an amendment to
this Agreement setting forth the revised preliminary Guaranteed Maximum Price,
the Allocation Schedule (but only if the Allocation Direction is given within
the time period set forth above) and any modifications to the Assumptions.
6.5 From the date hereof until the final Construction
Documents are completed, Construction Manager shall review and monitor all
Drawings prepared by Architect and Agencies (including pre-schematic design
documents, schematic design documents, design development documents and final
Construction Documents) during their development and shall supervise and manage
the "value engineering" and "design management" processes pursuant to which,
among other things, Owner, Architect and Construction Manager shall endeavor to
cause all Drawings to be consistent with the Assumptions. Construction Manager's
obligations in connection with such endeavoring shall be as set forth in the
further provisions of this Section 6.5 and the other applicable provisions of
this Agreement. The "value engineering" and "design management" processes shall
include, among other things, (a) Owner and Construction Manager providing
Architect with information that will enable Architect (to the extent feasible)
to prepare Drawings that are consistent with all allowances (subject to any
changes desired by Owner), (b) Construction Manager taking the actions described
in subsections 3.2.2, 3.2.3 and 3.2.6, (c) Construction Manager promptly (and in
all events within (1) forty-five (45) days after it has received an initial
submission of a design development document; (2) forty-five (45) days after it
has received an initial submission of a Construction Document; (3) subject to
clause (b) of the proviso clause of Section 6.6, fourteen (14) days after it
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35
has received a revision of a previously submitted design development document;
and (4) subject to clause (b) of the proviso clause of Section 6.6, fourteen
(14) days after it has received a revision of a previously submitted
Construction Document) notifying Owner and Architect whenever it becomes aware
that (i) the implementation of a proposed Drawing would violate applicable legal
requirements, (ii) a proposed Drawing (whether already submitted to Owner or
still in the drafting stage) is inconsistent with any Assumption, and/or (iii)
any portion of a proposed Drawing is not constructible, and, if the foregoing
clause (ii) and/or (iii) applies, simultaneously advising such parties as to its
best estimate of the likely cost impact of such inconsistency and any feasible
design and/or specification changes that would make such Drawing constructible
and/or consistent with both the Assumptions and Owner's requirements for the
Project, as applicable, and (d) Construction Manager, upon receipt from
Architect of a Drawing, distributing copies of such Drawing to Owner and other
appropriate parties in accordance with a transmittal letter from Architect that
is delivered to Construction Manager with such Drawing, provided that the cost
of making such copies shall be borne by Owner. Owner shall use diligent efforts
to cause Architect to comply with its obligations under the Architect's
Agreement to cooperate and work with Construction Manager as contemplated by the
foregoing, and to produce Drawings that are consistent with the Assumptions.
Notwithstanding any of the foregoing, Owner retains the right to approve
Drawings that are inconsistent with the Assumptions, in which case, subject to
Section 6.6, the fourth sentence of Section 6.4 shall apply.
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36
6.6 Notwithstanding any other provision hereof, if any Drawing
is inconsistent with any of the Assumptions, but Construction Manager does not
inform Owner and Architect of such inconsistency within the applicable time
period set forth in clause (c) of the third sentence of Section 6.5 and such
Drawing is approved by Owner, such inconsistency shall not be deemed a Scope
Change; provided, however, that (a) if Construction Manager, after such approval
by Owner but before Work covering the portion(s) or component(s) of the Project
covered by such Drawing actually commences, informs Owner and Architect of such
inconsistency, such inconsistency shall be deemed a Scope Change (unless the
final Construction Drawings do not include such inconsistency), but Construction
Manager shall nevertheless, and regardless of whether or not the final
Construction Drawings include such inconsistency, be responsible for any delays
and cost increases (including, without limitation, any increase in the amount
paid by Owner to Architect) to the extent attributable to Construction Manager's
failure to notify Owner and Architect of such inconsistency within the required
time period and (b) if (i) such Drawing was a revision of a previously submitted
Drawing, (ii) Architect did not either (1) "bubble" any applicable revised
portion(s) of such Drawing, if the previously submitted Drawing was a
Construction Document that was "sealed" and submitted to the applicable
governmental authority, or (2) describe all applicable revisions in a verbal
presentation to Owner and Construction Manager promptly following Architect's
submission of such revised Drawing, if such Drawing is a design development
document or is a Construction Document with respect to which the foregoing
clause (1) does not apply, and (iii) Construction Manager was not
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37
negligent in failing to discover, and notify Owner and Architect of, such
inconsistency within the applicable required time period, such inconsistency
shall be deemed a Scope Change (unless the final Construction Drawings do not
include such inconsistency), and the foregoing clause (a) shall not apply (so
that Construction Manager shall not be responsible for delays and cost increases
as set forth in said clause (a)).
6.7 On the date (the "Final GMP Date") the Final GMP
Conditions (as defined below) are met, the Guaranteed Maximum Price shall be
adjusted as follows:
6.7.1 There shall be an adjustment to the Guaranteed
Maximum Price by reason of the "contingency sum" being reduced from five percent
(5%) of the estimated Work Charges, as set forth in the first sentence of
Section 6.4, to three percent (3%) of the estimated Work Charges, as set forth
in paragraph C of Section 6.3.
6.7.2 There shall be a decrease in the Guaranteed Maximum
price equal to the amount by which the aggregate actual amount of all trade
contracts entered into as of the Final GMP Date is less than the aggregate
amount attributed to the Work covered by such trade contracts in the calculation
of the then-existing Guaranteed Maximum Price.
6.7.3 There shall be increases in the Guaranteed Maximum
Price in accordance with Section 5.3.
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38
6.7.4 There shall be adjustments in the Guaranteed Maximum
Price in accordance with Sections 10.7 and 10.13. (If appropriate, there may be
such adjustments after the Final GMP Conditions are met.)
6.7.5 There shall be adjustments in the Guaranteed Maximum
Price in accordance with Section 6.4.
There shall be no adjustments to the portion of the Guaranteed Maximum Price
covered by paragraph B of Section 6.3 except pursuant to and in accordance with
Section 10.7. From and after the date, if any, that the Allocation Direction is
given within the required time period, whenever the Guaranteed Maximum Price is
adjusted pursuant to the provisions hereof, the allocation of the amounts that
comprise the Guaranteed Maximum Price among each of the Project Components in
accordance with the Allocation Schedule (as defined in Section 6.4) shall also
be appropriately adjusted.
6.8 When the Final GMP Conditions have been achieved, the
final Guaranteed Maximum Price as of the Final GMP Date ("Final Guaranteed
Maximum Price") shall be established jointly by Owner and Construction Manager
in accordance with the foregoing provisions of this Article 6, at which point an
appropriate amendment ("GMP Amendment") to this Agreement will be executed by
the parties setting forth the Final Guaranteed Maximum Price and the Assumptions
(as the Assumptions may have been modified pursuant to the foregoing provisions
of this Article 6). Such Final Guaranteed Maximum Price shall not be subject to
adjustment, except in accordance with Section 10.7. As used herein, the "Final
GMP Conditions"
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39
shall mean (a) completion by Architect and approval by Owner of the Construction
Documents and (b) execution of trade contracts for ninety percent (90%) (by
dollar amount) of the portion of the then-existing Guaranteed Maximum Price
covered by paragraph A of Section 6.3.
6.9 (a) Upon Final Completion of the Work, if the total actual
Work Charges are less than the Final Guaranteed Maximum Price (as established
pursuant to Section 6.8 and as may be adjusted in accordance with Section 10.7),
then the difference ("savings") shall be allocated as follows:
Fifty percent (50%) to Owner
Fifty percent (50%) to Construction Manager
Owner shall pay Construction Manager's share of the savings as additional
compensation simultaneously with the Final Construction Management Fee
installment payment pursuant to Schedule A.
(b) Notwithstanding the provisions of Article 7 or any
other provision hereof, all Work Charges (including, without limitation, all
Reimbursable Costs) in excess of the Final Guaranteed Maximum Price (as
established pursuant to Section 6.8 and as may be adjusted in accordance with
Section 10.7) shall be paid by Construction Manager from its own funds without
reimbursement by Owner.
6.10 Construction Manager shall cause the "construction phase"
of the Project to be commenced immediately. Construction Manager shall be
required to achieve Substantial Completion of the Project within two (2) years
from the date (the "Commencement Date") excavation work at the Project
commences, as such (2) year
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40
time period may be adjusted pursuant to this Agreement. Owner and Construction
Manager acknowledge and confirm that the Commencement Date is April 21, 1997.
6.11 (a) If Substantial Completion is not achieved within the
two (2) year time period set forth in Section 6.10, as such time period may be
adjusted pursuant to this Agreement, Owner shall be entitled (as its sole and
exclusive remedy with respect to Construction Manager's breach of Section 6.10
(but not with respect to any breach by Construction Manager of any other
provisions of this Agreement, including the provisions of paragraph (c) of this
Section 6.11, as to which other provisions the last sentence of Section 11.2
shall apply), and subject to paragraph (b) of this Section 6.11) to liquidated
damages in the amount set forth in Schedule C. Owner and Construction Manager
hereby agree that it would be impractical or impossible to fix actual damages in
the case of Construction Manager's default of its obligation to cause
Substantial Completion to be completed within the required time period and also
agree to stipulate that Owner's loss in the case of any such default will be
deemed equal to the amounts set forth in Schedule C as liquidated damages, which
amounts both parties agree are reasonable estimates of Owner's actual damages in
such event. Construction Manager agrees to indemnify Owner for any such delay
and for the stipulated deemed loss associated with any such delay by paying to
Owner the liquidated damages set forth in Schedule C.
(b) With respect to liquidated damages attributable to
the Insured Period (as defined below), Owner shall, subject to paragraph (c) of
this Section 6.11, only have the right to collect such liquidated damages by
receiving the proceeds of a liquidated damages insurance policy issued to
Construction Manager in
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41
accordance with the further provisions of this paragraph (b). Owner and
Construction Manager acknowledge and confirm that one or more insurance company
syndicates (collectively, the "Insurance Companies") are being considered as the
provider(s) of such insurance, and either have performed, are in the process of
performing, or may in the future perform, due diligence with respect to the
Project. Construction Manager covenants that it shall fully cooperate with (i)
the Insurance Companies in connection with such due diligence and (ii) with
Owner in its efforts to negotiate the terms of such insurance, and cause such
insurance to be issued to Construction Manager, on terms satisfactory to Owner.
If such insurance is not issued by July 31, 1997, this Agreement shall, at
Owner's option in its sole and absolute discretion, be terminated, in which
event Section 11.6, other than the proviso clause of the first sentence thereof,
shall be deemed to apply. Owner shall pay all premiums and other costs in
connection with obtaining such insurance. As used herein, the "Insured Period"
shall mean the period beginning on the thirty-first day, and ending on the one
hundred twentieth (120th) day, after the last day of the two (2) year time
period set forth in Section 6.10, as such time period may be adjusted pursuant
to this Agreement.
(c) Construction Manager hereby agrees, in con
nection with the liquidated damages insurance policy contemplated by paragraph
(b) of this Section 6.11, that (i) upon discovery by it of any event likely to
give rise to a claim under such policy, it shall as soon as reasonably possible
give notice thereof to the Insurance Company, and shall use good faith efforts
(keeping in mind Construction Manager's identity and resources and available
Project funds) to timely
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42
complete the Project as soon as practicable in accordance with this Agreement
and to avoid or diminish the delay covered by such policy; (ii) the Project will
be carried out by or under the supervision of Construction Manager's Project
personnel; (iii) except as disclosed in the "Information Summary" furnished to
the Insurance Company, as of the inception date of such policy the Construction
Manager will have no knowledge of any matter, fact or circumstance which is
likely to give rise to a delay covered by such policy, provided that no such
knowledge shall be imputed or deemed imputed to Construction Manager based on
Construction Manager's judgment or opinion as to when Substantial Completion
will be achieved and/or the likelihood of Substantial Completion being achieved
within the two (2) year time period set forth in Section 6.10, as such time
period may be adjusted pursuant to this Agreement, unless any statement made by
Construction Manager in such "Information Summary" relating to such judgement or
opinion was false or was not made in good faith; (iv) it will not engage in any
wilful, deliberate or intentional misconduct (as opposed to the exercise of good
judgment) that would give the Insurance Company the right to not make a payment
to Owner with respect to the Insured Period or any portion thereof, including,
without limitation, the wilful, deliberate or intentional failure to comply with
the terms of this Agreement or the failure to obtain an extension to which it is
entitled of the 2-year time period set forth in Section 6.10, as such time
period may be adjusted pursuant to this Agreement; (v) it will not make any
misrepresentation of any material fact or circumstance in the application
completed by Construction Manager and submitted to the Insurance Company, and
will not commit any fraud relating to such application, provided that no such
misrepresentation or fraud shall be
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43
deemed to have been made or committed with respect to any good-faith statement
in such application relating to Construction Manager's judgment or opinion as to
when Substantial Completion will be achieved and/or the likelihood of
Substantial Completion being achieved within the two (2) year time period set
forth in Section 6.10, as such time period may be adjusted pursuant to this
Agreement; (vi) it will give a written notice of the type described in the last
sentence of subsection 3.3.24 within the five (5) business day period described
in said sentence (assuming Construction Manager would have been entitled to give
such notice), and will not otherwise fail to exercise a right which it was aware
of to extend the 2-year period described in Section 6.10; and (vii) it will
cooperate with, and execute documents and take other actions reasonably
requested in writing by, Owner in connection with Owner's efforts to maintain
such policy and collect proceeds under such policy, such cooperation in
connection with Owner's efforts to collect proceeds under such policy to
include, without limitation, if requested by the Insurance Company or its
representative, (A) submitting to an examination under oath, (B) producing for
examination, at such reasonable place as is designated by the Insurance Company
or its representative, all documents in its possession or control which relate
to the claim being made by Owner, and (C) permitting extracts and copies of such
documents to be made (provided that (1) if Construction Manager does not take
actions in response to any such request within five (5) days after such request
is made, Owner shall again make such request in writing, unless such policy has
already been canceled or Owner has already lost the right to collect proceeds
thereunder, and (2) all actions taken by Construction Manager pursuant to this
clause (vii) shall be at Owner's sole cost and
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44
expense). Construction Manager agrees that it shall (1) give Owner copies of all
notices and documents given to the Insurance Company pursuant to the preceding
sentence and (2) upon Owner's request, inform Owner of Construction Manager's
actions pursuant to the preceding sentence.
(d) If Substantial Completion is achieved prior to the
two (2) year time period set forth in Section 6.10, as such time period may be
adjusted pursuant to this Agreement, Construction Manager shall be entitled to a
payment (in addition to the Construction Management Fee) in the amount set forth
in Schedule C, such payment to be made simultaneously with the Final
Construction Management Fee installment payment pursuant to Schedule A.
6.12 It is the intent of the parties hereto that (i)
Construction Manager's direct parent, Bovis, Inc. ("Bovis"), will execute and
deliver to Owner a Guaranty in the form of Exhibit A-1 attached hereto (the
"Direct Guaranty") and (ii) Construction Manager's ultimate parent, The
Peninsular & Oriental Steam Navigation Company ("P&O"), will execute and deliver
to Owner a Guaranty in the form of Exhibit A-2 attached hereto (the "P&O
Guaranty"; together with the Direct Guaranty, the "Guaranties"). Owner
acknowledges and confirms that (a) it has agreed to pay Construction Manager a
fee for the P&O Guaranty equal to $6,500,000, (b) one half of such fee shall be
billed by Construction Manager no later than June 30, 1997 and paid no later
than the closing of Owner's bond financing for the Project, and (c) the
remaining half of such fee shall be paid to Construction Manager no later than
December 15, 1997. No fee is payable in connection with the Direct Guaranty.
Notwithstanding any other provision hereof, (i) if the Guaranties have not been
exe-
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45
cuted and delivered within three (3) weeks of the execution date of this
Agreement, Owner shall have the right to terminate this Agreement, in which
event Section 11.6, other than the proviso clause of the first sentence thereof,
shall be deemed to apply and (ii) to the extent Bovis and/or P&O pays any amount
to Owner under the Guaranties, Owner shall not be entitled to recover from
Construction Manager such amount.
ARTICLE 7
PAYMENT OF REIMBURSABLE COSTS
7.1 In accordance with the provisions of Article 9 of this
Agreement, Owner shall pay to Construction Manager during both preconstruction
and construction the amounts (i) charged by Construction Manager and (ii)
charged by others engaged by or through Construction Manager, for work, labor
and services in furtherance of or related to the Work for the following purposes
(the "Reimbursable Costs"):
7.1.1 Wages, standard and customary fringe benefits and
statutory charges including overtime for laborers, operators, foremen, and any
other persons (excluding those referred to in subsection 7.1.2) engaged by
Construction Manager for the Project. Charges for wages shall not be more than
prevailing rates and in accordance with (if applicable) the provisions of
collective bargaining agreements to which Construction Manager is bound.
7.1.2 Wages and salaries (including overtime for personnel
classified by Construction Manager as non-exempt under applicable laws) plus
standard and customary fringe and statutory charges and employment benefits for
the
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46
following classifications of personnel who provide services in connection with
the Work: Project Executive, Project Director, Project Manager, Project
Administrator, Assistant Project Manager(s), Estimator(s), Scheduler(s), General
Superintendent, Design Manager(s), Office Manager, Project Superintendent(s),
Assistant Superintendent(s), Site Logistics Manager, Site Safety personnel,
Technical support personnel, Mechanical/ Electrical Project Manager(s),
Contracts Administrator, Cost Control Specialist, General Conditions Purchasing
Agent, MIS Administrator and Superintendent(s), Project Accountant(s),
Timekeepers, personnel engaged (e.g., at shops or on the road) in expediting the
production or transportation of materials or equipment, EEO personnel, insurance
personnel, clerical and data processing personnel, and such other classes of
personnel as are approved by Owner. For any such personnel who are off-site,
their wages and salaries shall not be Reimbursable Costs unless their off-site
activities are either requested by Owner or approved in advance by Owner, such
approval not to be unreasonably withheld. For any such personnel who devotes at
least forty (40) hours and at least five (5) full working days to the Project
during the payroll week, Owner will pay to Construction Manager an amount equal
to the weekly salary paid to such personnel (except if the payroll week includes
Benefit Days as defined below, in which case Owner shall pay a pro rata portion
of such weekly salary based on days actually worked). If any such personnel
devotes less than forty (40) hours and five (5) full working days to the Project
during the payroll week, Owner will pay to Construction Manager an amount equal
to the weekly salary paid to such personnel, multiplied by a fraction, the
numerator of which is the number of hours worked on the Project, and the
denominator of which is
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47
the greater of (x) 40 and (y) the total number of hours worked by such personnel
on the Project and all other billable projects for Construction Manager. Fringe
and employment benefits and statutory charges shall be calculated at the rate of
35.66% of wages or salary for calendar year 1997, which rate shall be subject to
annual adjustment, at Owner's option and based on an audit of Construction
Manager's books and records, to reflect actual company-wide rates. This rate
includes vacation days, holidays, sick and personal days, authorized time off
(collectively referred to as "Benefit Days"), employee insurance (including
health care, life and disability insurance) and employee incentives (including
bonuses, retirement plan, tuition reimbursement and training courses). Schedule
D attached hereto and made a part hereof sets forth a wage rate schedule for the
personnel who will be providing services in connection with the Work.
Construction Manager agrees that (a) the identity of Construction Manager's
senior management personnel shall be subject to Owner's prior written approval,
which approval shall not be unreasonably withheld and (b) it shall not increase
the wage rates of any such personnel or any class of personnel as shown on
Schedule D by more than 10% at any time during the Project without the prior
written approval of Owner. Construction Manager acknowledges and confirms that
there shall be no adjustment to the Guaranteed Maximum Price by reason of any
increase in wage rates made in accordance with the foregoing.
7.1.3 Purchases of materials and supplies.
7.1.4 Purchases and rentals of tools (at lowest rates
reasonably available), equipment, facilities, and structures at prevailing
prices supplied either by Construction Manager or by other sources, and rental
and/or leasing of automobiles
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(including leased automobiles and vehicle allowances proved by Construction
Manager to those employees providing services in connection with the Work and
for such time as is actually devoted to the Work) including transportation,
storage, taxes, insurance, deposits, repairs, maintenance, unloading and return
to point of origin (at cost).
7.1.5 Obtaining of performance and payment bonds required
by Owner.
7.1.6 Royalties, license fees, and expenses in respect of
use of items protected by patent or trademark except where the Owner is exempt
from such payments.
7.1.7 Without intending to limit subparagraph 7.1.1 or
7.1.2 of the Article 7, premiums for unemployment insurance, social security
taxes, and all other assessments with respect to labor, foremen, and other
personnel engaged by Construction Manager in connection with the Work.
7.1.8 Federal, state, or local sales, use, excise and
other taxes on materials, labor, receipts, installations, or services furnished,
or any other taxes arising out of performance of the Work (excluding, however,
income and franchise taxes with respect to the Construction Manager's Fee only)
for which Construction Manager is or may become liable. The incidence of all
such taxes, whenever assessed, shall be upon Owner. Such taxes shall include
payroll taxes (FICA, FUDA and SUDA), which taxes will be charged at the agreed
upon rate of 8.70% of wages or salary, which rate shall be subject to annual
adjustment, at Owner's option and based on an audit of Construction Manager's
books and records, to reflect actual company-wide rates.
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7.1.9 Actual expenses for protection to adjoining property
and to the Project and repairs thereto except to the extent compensated by
insurance.
7.1.10 Heat, light, power, water, sanitary facilities,
first aid facilities, safety protection, safety personnel and advisors,
watchmen, winter and frost protection, elevator service, hoisting, waste and
debris removal, and all items ancillary to the foregoing.
7.1.11 Disposition of claims and losses asserted by third
parties (including settlements of such claims and losses), not compensated by
insurance or otherwise and sustained or incurred by Construction Manager in
connection with the Work.
7.1.12 Costs approved by Owner in advance and incurred in
connection with the transportation, freight, trucking, storage and warehousing
of materials purchased and received for the Work in advance of their need.
7.1.13 Amounts paid or to be paid directly by Construction
Manager to Contractors and any consultants or other entities providing services
in connection with the Work and approved by Owner.
7.1.14 Establishment and operation of field office at the
site. (Until such field office is established, Owner will provide temporary
facilities and shanties for Construction Manager's personnel.)
7.1.15 Reasonable moving expenses of Construction
Manager's personnel in connection with relocations to Las Vegas, provided that
the aggregate amount of such moving expenses shall not exceed $150,000.
Reasonable transpor tation, traveling and hotel expenses of Construction
Manager's employees incurred
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directly in connection with travels to and from the Project site, Construction
Manager's offices, Architect's offices, yards or fabrication plants (excluding
such expenses incurred in the Las Vegas area by Construction Manager's on-site
staff), provided that all travel outside of the locality of the Work shall be
approved in advance in writing by Owner and shall be booked through GWV Travel.
7.1.16 Telephone (installation, monthly service, local and
long distance calls), telegrams, telex, postage, messenger service, telecopier
charges, computer time charges, photographs, blueprinting and other
reproduction, fees, building and work permits, other permits, licenses, surveys,
tests, reports, research and other incidental expenses in carrying on the Work.
These items will be charged to Owner at Construction Manager's regular and
normal rates, so long as such rates are approved by Owner, which approval shall
not be unreasonably withheld.
7.1.17 Costs reasonably and necessarily incurred due to
any emergencies affecting the safety of persons or property until and unless
compensated by insurance.
7.1.18 Compliance with and all other items relating to
requirements of insurers and of safety, health, occupational, environmental and
other laws, regulations, or rulings of governmental agencies, but nothing stated
in this Agreement shall diminish the primary responsibility of the Contractors
regarding site safety.
7.1.19 Professional services (e.g., consulting or
engineering) and items related thereto, arising from or connected with the Work
or with Construction Manager's obligations under this Agreement, excluding,
however,
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51
professional services rendered to Construction Manager for the negotiation and
drafting of this Agreement and in connection with any disputes with Owner
hereunder. Such services shall not be reimbursed without Owner's prior written
approval, which approval shall not be unreasonably withheld.
7.1.20 Amounts paid out of the checking account referred
to in Section 7.3 of this Article 7.
7.1.21 Premiums and other costs of professional liability
insurance maintained by Construction Manager in accordance with Schedule E
attached hereto and made a part hereof (which professional liability insurance
Construction Manager shall be required to obtain and maintain), at Construction
Manager's standard and actual rates, provided that the foregoing shall not apply
if Owner's "wrap-up" liability insurance described in Section 10.10 includes
professional liability coverage insuring Construction Manager that is reasonably
satisfactory to Construction Manager.
7.1.22 Such other reasonable and necessary expenses as may
be approved by Owner.
Construction Manager shall use its best efforts to keep such
Reimbursable Costs at rates not higher than the standard paid in the Las Vegas
metropolitan area except with the prior written consent of Owner.
Construction Manager shall take every reasonable action
necessary or appropriate to obtain discounts, rebates, and refunds in respect of
all purchases or rentals made by Construction Manager for the Project and shall
credit such amounts to the Owner.
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52
7.2 Notwithstanding anything to the contrary set forth in
Section 7.1, the following cost items shall not be included in the Reimbursable
Costs and shall not be separately charged to the Project, it being the parties'
intent that the fee to Construction Manager under this Agreement shall represent
compensation therefor:
7.2.1 salary and fringe benefits of any officer or
employee of Construction Manager not covered under section 7.1.2;
7.2.2 overhead and general expenses of Construction
Manager's principal office and branch offices, including, without limitation,
general office expenses, overhead, and corporate franchise and income taxes;
7.2.3 any cost or expense due to or arising out of (a) the
negligent act or omission of Construction Manager in the performance of this
Agreement or the negligent act or omission of any Contractor or subcontractor in
connection with the Work or (b) the default of Construction Manager under this
Agreement;
7.2.4 Construction Manager's profit;
7.2.5 Construction Manager's capital expenses, including
interest on the Construction Manager's capital employed for the Work,
depreciation of other non-cash charges;
7.2.6 costs reimbursed by insurance obtained by
Construction Manager;
7.2.7 costs due to entities related to Construction
Manager providing services in connection with the Project which are in excess of
the market rates in the Las Vegas metropolitan area; and
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7.2.8 all other costs, expenses and charges of any kind
whatsoever not specifically included in the Reimbursable Costs, unless approved
by Owner.
7.3 In accordance with and subject to the provisions of
Article 9 of this Agreement (including Section 9.9) and of trade contracts and
purchase orders, Owner shall pay to Construction Manager the amounts due to
Contractors for disbursement by Construction Manager to the Contractors.
Receipt, clearance, and disbursement of funds shall be pursuant and subject to
Construction Manager's cash management and disbursement procedures and policies.
7.4 Prior to the start of construction, Owner shall pay over
to Construction Manager the amount of $25,000 ("base amount") to be used to
establish a checking account at a bank selected by Owner for prompt payment by
Construction Manager during the course of the Work of the Reimbursable Costs set
forth in Section 7.1 of this Article 7, and required to be paid by Construction
Manager or accrued by Construction Manager in accordance with its regular
accounting practices and GAAP, consistently applied, prior to Construction
Manager's receipt of Owner's regular payments under Article 9 of this Agreement.
The purpose of this account is to provide the working capital for the
Reimbursable Costs, it being understood that Construction Manager shall not be
required to use its own capital in performing its obligations under this
Agreement. Accordingly, from time to time, at Owner's reasonable discretion,
Owner shall increase the base amount on deposit in the account depending upon
the activity and intensity of the Work, and the expenditure level therefor. The
account shall be maintained by Construction Manager who shall make
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54
withdrawals in such amounts as it reasonably determines in accordance with this
Agreement. The account shall be replenished pursuant to Article 9, or more often
if necessary. Receipt, clearance, and disbursement of funds shall be pursuant
and subject to Construction Manager's cash management and disbursement
procedures and policies. Construction Manager shall establish the account such
that Owner shall receive duplicate bank statements. At the conclusion of the
Project, the amount remaining in the account shall be returned promptly to
Owner.
7.5 Title to all materials, tools, and equipment paid for by
Owner shall be vested in Owner. At the completion of the Work and when no longer
required, such tools, equipment and materials as remain shall be (a) sold at the
direction of Owner and all sums and allowances realized credited against Work
Charges for all purposes hereunder (including for purposes of Section 6.9) or
(b) delivered to Owner, all as Owner shall direct.
ARTICLE 8
ADVANCE PURCHASING
Construction Manager agrees to arrange to purchase such
materials or equipment in advance of the time for installation in the Project as
may be deemed advisable by Owner or Construction Manager, provided such
purchases in excess of $10,000 are approved by the other party hereto, which
approval shall not be unreasonably withheld. Owner shall pay for such purchases
upon presentation by Construction Manager to Owner of a bill from the
Construction Manager, approved for payment by Construction Manager, together
with an unconditional bill of sale
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55
transferring title to said materials or equipment to Owner. Owner shall include
such material or equipment in coverage under its all-risk insurance coverage.
ARTICLE 9
APPLICATIONS FOR PAYMENT
9.1 Construction Manager agrees to review and to approve,
reduce, or reject the Contractors' applications for payment; Owner (and
Architect, at Owner's option) shall review the Project Applications for Payment.
The requisitioning procedure shall be as follows: Construction Manager agrees to
submit to Owner a Project Application for Payment which shall include (i) the
applications of each of the Contractors, in the amount approved by Construction
Manager, for Work completed or estimated to have been completed as of the end of
the preceding month and for delivered, accepted and stored materials, less any
applicable retention and other deductions (if any), and (ii) all amounts due the
Construction Manager under Article 7. There shall be no retention on sums
payable for the items listed in Article 7. Within ten (10) business days after
the submission of the Project Application for Payment, Owner shall pay to
Construction Manager the sums due Construction Manager, and shall pay to
Construction Manager for disbursement to the Contractors the amounts due them.
If Owner, acting reasonably, disapproves a portion of the said Project
Application, Owner shall give Construction Manager written specification, of the
amount disapproved and the reasons therefor, and the balance of the Application
shall be paid within said ten (10) business days period. Owner may not
arbitrarily issue a disapproval.
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9.2 The period covered by each Project Application for Payment
shall, subject to Section 9.3, be one full calendar month. Each Project
Application for Payment shall use Construction Manager's standard form of
payment application (as modified as reasonably requested by Owner's lenders) and
shall be supported by copies of all Contractor bills and itemized statements of
costs incurred (including labor and vendor costs). With each Project Application
for Payment the Construction Manager shall submit payrolls, petty cash accounts,
receipted invoices or invoices with check vouchers attached, and any other
appropriate documentation with respect to amounts due the Construction Manager
under Article 7. In addition, each Application for Payment shall be accompanied
by (a) a lien release or waiver ("Lien Release") from Construction Manager
covering all work performed and materials and equipment supplied to the last day
of the period covered by such Project Application for Payment, conditional upon
receipt of payment thereof and (b) a Lien Release from each Contractor covering
all work performed and materials and equipment supplied to the last day of the
period covered by such Project Application for Payment, conditional upon receipt
of payment to such subcontractor of the amount indicated on such Project
Application for Payment. Each Lien Release shall be in such form as to
constitute an effective release of lien under applicable law. Each Project
Application for Payment shall also be supported by such documentation (including
the Contractors' applications) as Owner and Owner's lenders may reasonably
require; provided, however, that Construction Manager shall not be required to
use or maintain separate or special procedures or forms for this purpose unless
reasonably required by Owner's lenders or expressly described in this Section
9.2.
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9.3 Construction Manager agrees to submit one, and only one,
Project Application for Payment per month, provided that if Owner so requests,
Construction Manager shall submit two (2) Project Applications for payment per
month.
9.4 In each Project Application for Payment, the Construction
Manager shall certify (i) that this Agreement is in full force and effect and
that there are no defenses or offsets to Construction Manager's obligations
hereunder; (ii) what the Guaranteed Maximum Price, and what the portion of the
Guaranteed Maximum Price attributable to each Project Component (as defined in
Section 6.4), is at the time; and (iii) that such Application represents a just
amount of costs reimbursable to the Construction Manager under the terms of this
Agreement and (to the best of its knowledge and belief) to each Contractor under
the terms of its trade contract, and shall also certify in each Project
Application for Payment as follows:
To the best of the Construction Manager's knowledge and belief, there
are no known mechanics or materialmen's liens outstanding at the date
of this application other than those of which Owner has received prior
written notice; all due and payable bills with respect to the Work have
been paid to date or are included in the amount requested in the
current application; except for such bills not paid but so included,
there is no known basis for the filing of any mechanics or
materialmen's liens on the Work; and waivers from all Contractors have
been obtained with respect to all Work for which payments have been
heretofore made by Owner in such form as to constitute an effective
waiver of lien under the laws of the State of Nevada.
9.5 If the Allocation Direction was given by Owner within the
required time period, then, from and after receipt of such direction by
Construction Manager, each Project Application for Payment shall allocate all
amounts covered by
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such application among each of the Project Components in accordance with the
Allocation Schedule (as defined in Section 6.4).
9.6 Each Project Application for Payment shall include an
update of the Allocation Schedule as of the last day of the period covered by
such application, such update to show the amounts that have been incurred
through such date, and the amounts that are expected to be incurred (in
Construction Manager's best judgment) in the future, on account of the Work with
respect to each Project Component. Such update shall reflect the actual amount
of trade contracts that have been entered into, all changes to the Assumptions,
all Scope Changes and all other relevant facts and circumstances. To the extent,
if any, any such update shows that the sum of all Work Charges will exceed the
Guaranteed Maximum Price in effect on the Initial GMP Date (as defined in
Section 6.4), such update shall indicate the portions of such excess that (a)
are covered by increases in the Guaranteed Maximum Price pursuant to Section
10.7, (b) Construction Manager is, or will be, responsible for pursuant to
Section 6.9(b) and/or (c) are in dispute and are in the process of being
resolved in accordance with Section 10.7(b). If the Allocation Direction is not
given within the required time period (and if it is so given, prior to its being
given), all such updates shall be with respect to the entire Project only.
9.7 No payments made by Owner pursuant to a Project
Application for Payment as hereinabove provided shall be deemed to signify or
imply acceptance of the materials or workmanship covered by such application,
and none of them shall operate as an admission on the part of Owner as to the
propriety or accuracy of any of the amounts entered in the aforesaid
application. Furthermore, when computing
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59
subsequent payments, Owner shall not be bound by any entries in previous Project
Applications for Payment and shall be permitted to make corrections for errors
therein. Owner's Final Construction Management Fee installment payment shall in
no way relieve Construction Manager of any obligations or responsibilities under
this Agreement which extend beyond the date of such payment.
9.8 If Owner should fail to pay Construction Manager within
seven (7) days after the expiration of the ten (10) business day period
described in Section 9.1, then, unless Owner has objected to such payment in
writing as provided in Section 9.1 above, (a) interest shall accrue on the
amount due from the last day of such 7-day period until such amount is paid at
the rate of ten percent (10%) per year and (b) in addition to such other
remedies as Construction Manager has hereunder, Construction Manager may, upon
seven (7) additional days written notice to the Owner, stop the Project until
payment of the amount owing has been received.
9.9 Notwithstanding the foregoing provisions of this Article
9, Owner may, at its option and on prior written notice to Construction Manager,
elect to pay all or certain Contractors directly, provided that in such event it
shall do so pursuant to procedures jointly and reasonably established by Owner
and Construction Manager, which procedures shall include promptly providing
Construction Manager with copies of checks issued to Contractors or other
appropriate documentation of each direct payment to Contractors.
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60
ARTICLE 10
OWNER'S DUTIES AND RIGHTS
10.1 Whenever Construction Manager submits a plan, proposal,
specification, drawing or request for information or clarification (collectively
"RFI's"), Owner shall respond and, if appropriate, shall use diligent efforts to
cause the Architect to respond within seven (7) days (or within fourteen (14)
days if it is not reasonably feasible for Architect to respond within seven (7)
days, so long as Owner uses diligent efforts to cause Architect to give
Construction Manager within seven (7) days a written explanation as to why a
response is not reasonably feasible within seven (7) days), either graphically
or in writing, with such information, clarification, approval, rejection or
other decision as required. If any RFI is first submitted from a Contractor to
Construction Manager, Construction Manager shall promptly submit such RFI to
Owner (and Architect, if appropriate). Construction Manager shall keep accurate
records with respect to all RFI's, such records to include a log noting when
each RFI is submitted to Owner (and Architect, if appropriate), when a response
is received and what such response is, and, if applicable, when such RFI was
received from a Contractor.
10.2 Owner shall use all reasonable efforts to provide
Construction Manager with accurate and complete information regarding its
requirements for the Project, recognizing, however, that the Project is a
continuing development and that needs and requirements may change as the Project
progresses.
10.3 From and after the execution date of this Agreement, and
notwithstanding any other provision hereof, (a) no modifications may be made to
this
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Agreement without the express written approval of Sheldon G. Adelson on behalf
of Owner and (b) whenever this Agreement refers to an approval, authorization,
order (including any order pursuant to Section 10.7) or decision by Owner, such
approval, authorization, order or decision shall be deemed given or made only if
it is given or made in writing by Mr. Adelson (or by an individual designated by
Mr. Adelson in writing as an individual having the express authority to give or
make such approval, authorization, order or decision). If any such approval,
authorization, order or decision by Owner is not given or made by Mr. Adelson
(or such an authorized individual) in writing (or, with respect to an approval
or authorization, expressly not given in writing by Mr. Adelson (or such an
authorized individual)) within five (5) business days after the applicable
request is made in writing by Construction Manager, and the same is necessary in
order for Construction Manager to continue the Work, the 2-year time period set
forth in Section 6.10 shall be extended by the number of days in the period from
and including the day immediately after such 5- business day period until and
including the day that Mr. Adelson (or such an authorized individual) gives such
approval or authorization (or expressly elects in writing not to give such
approval or authorization), gives such order or makes such decision in writing.
In this regard Construction Manager acknowledges and confirms that no apparent
authority, agency or similar claims may be made by Construction Manager with
respect to any such approval, authorization, order or decision given or made
from and after the execution date of this Agreement by any other purported
representative or employee of Owner but not expressly given or made in writing
by Mr. Adelson (or such an authorized individual), and all such claims are
hereby
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waived by Construction Manager. The provisions of this Section 10.3 shall
continue to apply notwithstanding the assignment of this Agreement to a
Permitted Assignee (as defined in Section 12.2(b)).
10.4 Subject to Section 3.2.5, Owner shall secure and pay for
necessary approvals, easements, assessments and charges required for the
construction, use or occupancy of each portion of the Project.
10.5 The services and information required by the above
paragraphs shall be furnished promptly, at Owner's expense, and Construction
Manager shall be entitled to rely upon the accuracy and the completeness
thereof.
10.6 Owner shall have the right to communicate with
Contractors during the construction period, provided that (a) Owner shall give
Construction Manager a reasonable opportunity to be present at any such oral
communication and shall deliver to Construction Manager a copy of any such
written communication, and (b) Owner shall not direct Contractors except through
Construction Manager.
10.7 (a) Owner, from time to time and without invalidating
this Agreement or the Contract Documents, shall have the right to order (in
writing) changes in the Work consisting of: changes to the Assumptions; approval
of Drawings that are inconsistent with the Assumptions (subject to Section 6.6);
additions, deletions, and modifications in the Work; work which must be
performed in respect of unforeseen conditions; changes in the intensity and pace
of the Work (including suspensions of the Work or any portion thereof); and
uncovering and covering of a portion of the Work, if such portion, upon
uncovering, is found to be acceptable. Such changes shall be known as "Scope
Changes." The events described
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in subsection 3.3.24 shall, subject to the last sentence of said subsection,
also result in the issuance of a Scope Change if said events lead to an increase
in the Cost of the Work or a delay in the progress of the Work. If a Scope
Change is ordered, Owner and Construction Manager shall in good faith attempt to
agree on the appropriate adjustment (if any) to the time period for achieving
Substantial Completion referred to in Section 6.10, and the appropriate
adjustment (if any) to the Guaranteed Maximum Price, in connection with such
Scope Change, which adjustment to the Guaranteed Maximum Price shall be the
parties' best estimate of the cost of the applicable change in the Work.
(b) In the event Owner and Construction Manager cannot,
with respect to any Scope Change, agree in good faith on the appropriate
adjustments (if any) to the time period for achieving Substantial Completion
referred to in Section 6.10 or the Guaranteed Maximum Price, or cannot in good
faith agree on whether the fourth sentence of Section 6.4 and/or the last
sentence of Section 6.5 applies with respect to any design document or
specification or other relevant fact (and/or on whether Section 6.6 applies with
respect thereto), the matter(s) in question shall be resolved in accordance with
the further provisions of this Section 10.7(b). In the event of any such
disagreement, Owner and Construction Manager shall promptly jointly notify the
Independent Expert (as defined below) of such disagreement and of their desire
that such disagreement be resolved by the Independent Expert. The Independent
Expert shall be instructed to render its decision within thirty (30) days (or
any shorter time reasonably agreed to by Owner and Construction Manager, taking
into account that no such disagreement can be pending as of the Initial GMP
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Date) after such notification. Each of Owner and Construction Manager shall be
entitled to present evidence and arguments to the Independent Expert, which
evidence and arguments may include the relevant provisions hereof. During the
pendency of such dispute-resolution procedure, the parties shall continue their
performance under this Agreement, including with respect to the matter that is
the subject of such procedure. The determination of the Independent Expert
acting as above provided shall be conclusive and binding upon Owner and
Construction Manager. The Independent Expert shall be required to give written
notice to the parties stating its determination, and shall furnish to each party
a signed copy of such determination. Each of Owner and Construction Manager
shall pay one half of the fees and expenses of the Independent Expert and all
other expenses of the above-described dispute resolution procedure (not
including the attorneys' fees, witness fees and similar expenses of the parties,
which shall be borne separately by each of the parties). As used herein, the
"Independent Expert" shall mean an independent third party selected by Owner and
Construction Manager no later than July 15, 1997.
(c) If, pursuant to the contemplated liquidated damages
insurance policy described in Section 6.11 (or any comparable insurance policy
obtained by Construction Manager for the benefit of Construction Manager), the
Insurance Company must, pursuant to the terms of such policy, approve any Scope
Change or matter with respect thereto, then (i) whenever the Owner and
Construction Manager reach agreement with respect to any Scope Change or such
matter, and whenever the Independent Expert makes a determination with respect
to any Scope Change or such matter, Owner and Construction Manager shall use
good-faith,
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diligent efforts to cause the Insurance Company to approve any such agreement or
determination, and (ii) if the Insurance Company does not approve any such
agreement or determination, then Owner and/or Construction Manager may contest
such non-approval in an arbitration proceeding pursuant to the terms of its
liquidated damages insurance policy, and both Owner and Construction Manager
shall cooperate in connection with such arbitration. In all events, however,
regardless of whether or not the Insurance Company approves any such agreement
or determination, and regardless of the results of any such arbitration, any
such agreement between Owner and Construction Manager, and any such
determination by the Independent Expert, shall be fully binding on Owner and
Construction Manager for all purposes of this Agreement.
10.8 If Owner or Architect learns of or observes a fault or
defect in any of the Work, Owner shall notify (and shall cause the Architect to
notify) Construction Manager in writing of the fault or defect, and Construction
Manager agrees to either promptly correct such fault or defect (if the fault or
defect is attributable to Construction Manager's own forces) or direct the
Contractor(s) involved to make such corrections.
10.9 Owner shall make prompt payment of all amounts due in
accordance with the terms of Subcontracts, purchase orders and this Agreement,
subject to any disapproval rights provided for in Section 9.1 of this Agreement.
10.10 Owner shall maintain property and "wrap-up" liability
insurance upon the entire Work. Such insurance is more particularly described on
Schedule F, will be in effect as of the first day of the "construction phase" of
the Project and
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includes (a) all risk property insurance covering the entire replacement value
of the Work; (b) on-site workers compensation and employers liability insurance
covering Architect (at Owner's option), Agencies, Construction Manager,
Contractors and all tiers of subcontractors and the employees of each of the
foregoing; (c) commercial general liability insurance; and (d) umbrella and
excess liability insurance. The policy or policies shall name as insured Owner,
Architect (at Owner's option), Construction Manager, Contractors and all tiers
of subcontractors as their interests appear and shall insure against all perils,
with a waiver of subrogation against any insured. Copies of all policies shall
be delivered to Construction Manager. Coverage shall apply to materials and
property in storage, off premises, or in transit to the Project site. If such
insurance contains deductibles, Owner shall be liable to Construction Manager
with respect to such deductibles to the extent the aggregate of all deductibles
actually incurred by Construction Manager exceeds $100,000.
10.11 Owner shall execute all applications for permits,
licenses and approvals.
10.12 Owner represents that subject to clause (2) of Section
11.1 and the first sentence of Section 12.2, during the course of construction
of the Project, Owner shall be the fee owner of each portion of the Project and
its site, except for certain parts of the north portion of the site.
10.13 Until Owner obtains all of its financing for the
Project, Owner shall keep Construction Manager reasonably informed of the status
thereof and of how Owner intends to fund the Project prior to such financing
being obtained. The required time period for achieving Substantial Completion,
and the Guaranteed
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Maximum Price, shall be appropriately and equitably adjusted with respect to any
delay in the Project attributable to (a) Owner not having necessary funds and/or
(b) Owner's delay in performing any of its obligations hereunder.
10.14 All "exclusions" that are part of the Assumptions are
Owner's responsibility to furnish or provide.
10.15 Owner shall not hire any of Construction Manager's
personnel unless Construction Manager is given reasonable prior notice of such
hiring and a reasonable period of time to hire a replacement therefor. In
addition, in no event shall Owner make any "wholesale hirings" of Construction
Manager's personnel.
ARTICLE 11
TERMINATION
11.1 Construction Manager may terminate this Agreement in the
event: (1) Owner has materially breached this Agreement and Owner has been given
written notice, in hand or by certified or registered mail, seven (7) calendar
days before the proposed date of such termination, of Construction Manager's
intent to terminate; provided, however, that Owner may cure its default at any
time prior to the proposed date of the termination, in which event the
termination notice shall be deemed withdrawn and of no force or effect; (2)
Owner transfers title to, or there is a ground lease of, the Project or any
portion thereof, and the transferee or lessee, as the case may be, does not
assume in writing all obligations of Owner under this Agreement; or (3) if the
Project is stopped for a period of thirty (30) consecutive days
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under an order of any court or other public authority having jurisdiction, or as
the result of an act of government.
11.2 If Construction Manager materially breaches any provision
of this Agreement or fails substantially to perform in accordance with its
terms, then Owner may, without prejudice to any other right or remedy Owner may
have under law or this Agreement and after giving the Construction Manager seven
days' written notice, during which period Construction Manager fails to cure the
violation (or, in the case of any default which cannot be cured with all due
diligence within such seven-day period, within such longer period as may be
necessary to cure such default with all due diligence provided the Construction
Manager begins to cure within such seven-day period and thereafter continues
with due diligence), terminate this Agreement and take possession of the site
and of all materials, equipment, tools, construction equipment and machinery
thereon owned by Construction Manager and/or Owner and may finish the Project by
whatever method Owner may in good faith deem expedient (or may elect to not
finish the Project). In the event of any such termination, Construction Manager
shall execute and do all such assurances, acts and things as Owner may in its
good faith judgment consider expedient to facilitate Owner's taking of such
possession. In particular, and without limitation, Construction Manager
undertakes and agrees that it shall, upon Owner's request, execute assignments
as beneficial owner to Owner (or to its designee), without further payment, of
all trade contracts designated by Owner in such request, and of all Contractors'
guarantees and warranties, and shall give all notices, orders and directions
which Owner may in good faith think expedient for the purposes hereof.
<PAGE>
69
Subject to paragraphs (a) and (b) of Section 6.11 (which paragraphs apply only
with respect to Construction Manager's obligation to achieve Substantial
Completion within the two (2) year period set forth in Section 6.10, as such
time period may be adjusted pursuant to this Agreement), Construction Manager
shall be liable for any damages suffered by Owner arising out of Construction
Manager's breach of this Agreement, including, (a) in the case of any
termination of this Agreement by Owner pursuant to this Section 11.2, (i) if
Owner elects to complete the Project after such termination, the amount by which
the actual cost of completing the Project (including components of the Project
that are not part of the Work) is greater than what such actual cost (including
the actual cost of components of the Project that are not part of the Work)
would have been if Construction Manager had fulfilled its obligations hereunder,
together with increased financing costs incurred by Owner as a result of the
delay in the completion of the Project attributable to Construction Manager's
breaches, Owner's termination of Construction Manager and the finishing of the
Project by another method, and (ii) if Owner elects to not complete the Project
after such termination (Construction Manager hereby acknowledging that Owner has
the right to so elect without Owner waiving Construction Manager's liability for
damages arising out of the breach by Construction Manager that led to its
termination), all damages (other than consequential damages or damages for lost
profits) suffered by Owner (to the extent arising out of Construction Manager's
breach of this Agreement) that Construction Manager is liable for under
applicable law, and (b) in the case of any breach by Construction Manager of the
first sentence of paragraph (c) of Section 6.11, the damages suffered by Owner
as a result of its inability to collect proceeds
<PAGE>
70
from the liquidated damages insurance policy with respect to the Insured Period,
provided that in no event shall such damages be deemed to exceed one-thirtieth
of the Monthly Amount (as defined in Schedule C) for each day of the applicable
delay.
11.3 Either party may terminate this Agreement by giving ten
(10) calendar days written notice, in hand or by certified or registered mail,
to the other party in the event of the following:
11.3.1 If such other party shall: admit in writing its
inability to pay its debts generally as they become due; file a petition under
the federal bankruptcy laws; make an assignment for the benefit of creditors;
consent to the appointment of a receiver, liquidator or trustee of itself or all
or part of its assets; commence a proceeding seeking arrangement, composition,
readjustment, liquidation, dissolution, or similar relief; or if there shall be
filed against such other party any similar petition or there is commenced
against such other party any similar proceeding; or if a court shall enter an
order, judgment, or decree appointing a receiver, liquidator, or trustee of such
other party or of all or any of its assets.
11.4 Owner may, without cause and on seven days' written
notice to Construction Manager, terminate this Agreement and take possession of
the site and of all materials, equipment, tools, construction equipment and
machinery therein owned by Construction Manager and/or Owner and may finish the
Project by whatever method Owner may in good faith deem expedient.
11.5 In the event of any termination of this Agreement, Owner
shall make any payments then due and unpaid or thereafter due to any Contractors
directly to such Contractors.
<PAGE>
71
11.6 If this Agreement is terminated by Owner pursuant to
Section 11.2, 11.3 or 11.4, Owner shall be liable for and pay to Construction
Manager the Construction Management Fee billed to the date of termination (with
an appropriate prorated amount for any partial month) and all Reimbursable Costs
incurred to said date, provided that if this Agreement is terminated by Owner
pursuant to Section 11.4 then Owner shall also be liable for and shall pay to
Construction Manager (a) all reasonable "demobilization" costs and expenses
incurred by Construction Manager as a result of such termination and (b) an
amount equal to half of the amount, if any, by which actual Work Charges as of
the effective date of such termination is less than the sum of the components of
the Guaranteed Maximum Price then in effect attributable to Work completed as of
the effective date of such termination. The provisions of this Section 11.6
shall survive the termination of this Agreement.
11.7 Upon termination of this Agreement and payment by Owner
of such sums as may be owing to Construction Manager and upon release of
Construction Manager by Owner of any liability for acts or work occurring after
said termination, all of Construction Manager's right, title, and interest, if
any, in and to each of the trade contracts and purchase orders shall be assigned
to Owner together with any applicable warranties and guarantees, as Owner may
direct in writing.
ARTICLE 12
MISCELLANEOUS
12.1 Defined Terms. Unless the context requires otherwise,
terms used in this Agreement that are not specifically defined herein shall have
the same
<PAGE>
72
meaning as their common usage in the construction industry or in the 1980
Edition of AIA Document A201/CM, General Conditions of the Contract for
Construction, Construction Management Edition.
12.2 Assignment.
(a) This Agreement shall be binding upon, and inure
to the benefit of, Owner and Construction Manager and each of their respective
successors and permitted assigns.
(b) Owner shall have the right to assign the Contract
Documents to one or more entities affiliated with Owner so long as Owner's
ownership of the Project and rights under the loan documents with Lender (as
defined in paragraph (c) of this Section 12.2) are assigned to or otherwise held
by such entity or entities (such entity or entities, the "Permitted Assignee").
In the event Owner assigns its interest under the Contract Documents to a
Permitted Assignee, such Permitted Assignee shall assume Owner's obligations
under the Contract Documents, and Construction Manager agrees that Owner shall
thereupon be completely released from any liability under the Contract
Documents, whether accruing prior to or after the date of assignment (except
with respect to any breaches by Owner prior to the date of assignment), and
Construction Manager shall look solely to the Permitted Assignee for performance
of Owner's obligations under the Contract Documents; provided, however, that if
the Permitted Assignee is two or more entities, (a) the obligations and
liabilities of Owner hereunder shall be the joint and several obligations and
liabilities of each of such entities and (b) such entities shall inform
Construction Manager in writing which one (and only one) of such entities shall
have
<PAGE>
73
the power and authority to act as (and bind) Owner with respect to each right of
Owner hereunder and each decision, authorization, approval and order to be made
by Owner hereunder. Construction Manager agrees to use best efforts to include a
clause in all trade contracts similar to the one herein providing for Owner's
right to assign such trade contract to a Permitted Assignee and be released from
liability. In all events, Construction Manager shall have no recourse against
the officers, directors, employees, agents and direct and indirect owners of
Owner in connection with the obligations and liabilities of Owner hereunder.
(c) Owner shall have the right to assign this
Agreement as security to one or more of its lenders (collectively, "Lender"). If
this Agreement is so assigned to Lender, Construction Manager will, on request,
execute and deliver such documents and instruments as Lender may reasonably
request, including, without limitation, (i) an agreement whereby Construction
Manager agrees to perform its services hereunder for Lender or its designee in
the event that any default by Owner shall occur under the agreement with respect
to which such assignment has been made and (ii) an amendment to this Agreement
containing terms and conditions reasonably requested by Lender, so long as such
terms and conditions do not materially increase Construction Manager's
obligations hereunder.
(d) Construction Manager may not assign, transfer,
delegate or encumber its interest in or duties under this Agreement without the
prior written consent of Owner, except that Owner's consent shall not be
necessary if such an assignment is made to any affiliate of Construction Manager
(provided that Lehrer
<PAGE>
74
McGovern Bovis, Inc. shall remain liable for the obligations of Construction
Manager hereunder if any such assignment is made).
12.3 Drawings. All Drawings are and shall remain the property
of Owner.
12.4 Indemnification. (a) To the extent permitted by law, and
in addition to any other rights or remedies Owner may have, Construction Manager
shall assume the liability for and hereby agrees to indemnify and hold harmless
Owner, Architect and each Agency, and each of their respective officers,
directors, employees, agents, successors and assigns, from and against all
liabilities, losses, damages (including theft and loss of use), expenses,
actions, demands and claims (including reasonable attorneys' fees and
disbursements) (collectively, "Losses") in connection with or arising out of any
physical injury or alleged physical injury to persons (including death), or
damages or losses or alleged damages or losses to tangible property or the use
or loss of use thereof, sustained or alleged to have been sustained in
connection with or to have arisen out of performance of the Work by Construction
Manager and/or any Contractor or subcontractor. The foregoing shall not apply
with respect to any Losses covered by insurance obtained by Owner (except with
respect to deductibles that are not Owner's responsibility pursuant to the last
sentence of Section 10.10) to the extent such losses are actually paid by the
insurance company (unless not paid due to Owner's negligence in attempting to
collect from such company).
(b) To the extent permitted by law, Owner shall
indemnify and hold harmless Construction Manager and its officers and directors
<PAGE>
75
harmless of and from any and all Losses arising out of or in connection with (i)
compliance by Construction Manager with any request, direction or instruction by
Owner relating to the Project (except to the extent Construction Manager knows
that such request, direction or instruction will have an adverse impact upon the
Project and fails to so notify Owner) and (ii) Owner's negligent acts or
omissions, willful misconduct or breach of this Agreement.
(c) The indemnification obligations set forth in this
Section 12.4 shall not be construed to negate, abridge or reduce any other
rights or remedies which Owner or Construction Manager may have hereunder or
under applicable law. This Section 12.4 shall survive the termination or
expiration of this Agreement.
12.5 Publicity. In all publicity, press releases, brochures,
articles, interviews, and other announcements concerning the Project, Owner
shall refer and give credit to Construction Manager by name as the construction
manager for the Project. Construction Manager may, with Owner's consent, which
consent shall not be unreasonably withheld, erect signs at the Project site at
such locations and with such sizes as the Construction Manager may reasonably
request, provided that if such signs identify Construction Manager as the
construction manager for the Project, at least one (1) such sign shall also
identify Architect as the architects for the Project.
12.6 No Amendment. This Agreement may not be orally amended,
modified or terminated. This Agreement shall bind the successors and permitted
assigns of the respective parties.
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76
12.7 Entire Agreement. All understandings heretofore had
between the parties are merged in this Agreement, which alone fully and
completely expresses their Agreement. This Agreement shall be construed under
the laws of the State of Nevada, and any claims and causes of action arising
under or in connection with this Agreement shall be brought before a Nevada
court of competent jurisdiction.
12.8 Severability. In the event that any term or provision, or
part thereof, of this Agreement is held to be illegal, invalid or unenforceable
under law, regulations or ordinances of any federal, state or local governments
to which this Agreement is subject, such term or provision, or part thereof,
shall be deemed severed from this Agreement and the remaining term(s) and
provision(s) shall remain unaffected thereby.
12.9 Notices. Any notice, consent, approval or other
communication required to be given by the terms and provisions of this Agreement
or by any law or governmental regulation, either by Owner or Construction
Manager, shall be in writing and shall be delivered personally (to one of the
individuals named below) or sent by facsimile transmission, reputable overnight
courier or registered or certified mail, postage prepaid and addressed to Luther
Cochran, Peter Marchetto and Mark Melson for Construction Manager (facsimile
number (212) 592-6997) and Sheldon Adelson, David Friedman and Roger McElfresh
for Owner (facsimile number (702) 733-5620), at the address set forth on the
first page of this Agreement, and shall be deemed given when so delivered
personally, received by facsimile transmission with confirmed answerback,
received by reputable overnight courier or if mailed, three (3) days after the
date of mailing. A copy of any such notice to Construction Manager
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77
shall be sent to Reid and Priest, 40 West 57th Street, New York, New York 10019
(Attn.: Arthur C. Silverman, Esq.).
12.10 Disputes. In the event of any dispute (including a
monetary dispute) between Owner and Construction Manager regarding the Work,
this Agreement or any of the Contract Documents, Construction Manager shall not
be entitled to suspend services hereunder pending resolution of the dispute but
shall continue to perform all services required under this Agreement unless
Owner, in writing, orders otherwise. Notwithstanding the foregoing, in the event
Owner has failed to pay amounts properly due Construction Manager and undisputed
under this Agreement for a period of seven (7) days after written notice from
Construction Manager, Construction Manager may suspend services hereunder
pending receipt of payment or termination of this Agreement.
12.11 Labor Unions. Construction Manager shall conduct its
operations and the operations of all Contractors and others to conform to the
rules, regulations and agreements in force of any trade union, association or
council which regulates or determines what work is part of any particular trade.
Construction Manager and Contractors shall work in harmony with each other and
shall resolve any disputes or conflicts without involving the Owner.
Construction Manager shall at all times cooperate and comply with Owner's
reasonable labor directives, policies and
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78
procedures, so long as such directives, policies and procedures do not violate
the "Work Continuation Agreement."
12.12 No Third Parties. Nothing contained in this Agreement
shall be deemed to create a contractual relationship with or a cause of action
in favor of any third party against Construction Manager or Owner.
IN WITNESS WHEREOF, this Agreement has been entered into as of
the date first above written.
LEHRER MCGOVERN BOVIS, INC.
By: /s/ Pete Marchetto
------------------------------------
Name: Pete Marchetto
Title: President, New York Region
LAS VEGAS SANDS, INC.
By: /s/ William P. Weidner
------------------------------------
Name: William P. Weidner
Title: President
<PAGE>
SCHEDULE A
PAYMENT OF CONSTRUCTION MANAGEMENT FEE
No later than the 20th day of each calendar month beginning
with May, 1997 until and including the calendar month immediately prior to the
calendar month in which Substantial Completion is achieved, Owner shall pay
Construction Manager an installment payment on account of the Construction
Management Fee equal to the product of (x) the Applicable Percentage (as defined
below), multiplied by (y) one and one-half percent (1 1/2%) of the Guaranteed
Maximum Price then in effect (assuming, in all cases, a 3% contingency),
provided that when the Guaranteed Maximum Price and/or the Applicable Percentage
changes, an appropriate equal adjustment shall be made in all remaining
installment payment(s) other than the Final Payment (as defined below) such that
the sum of all installment payments paid or to be paid (other than the Final
Payment) is or will be equal to the product of (A) the number of such
installment payments, multiplied by (B) the Applicable Percentage then in
effect, multiplied by (C) the Guaranteed Maximum Price then in effect (assuming,
in all cases, a 3% contingency). As used herein, the Applicable Percentage shall
mean the quotient of (i) one (1.0), divided by (ii) the total number of expected
months (rounded to the nearest whole month) from the date hereof until the date
Substantial Completion is achieved. Within ten (10) days after Final Completion
is achieved, Owner shall pay Construction Manager a final installment payment
(the "Final Payment") equal to the amount by which the total Construction
Management Fee exceeds the sum of all previous installment payments (or
Construction Manager shall pay Owner the amount
<PAGE>
by which the sum of all previous installment payments exceeds the total
Construction Management Fee).
<PAGE>
SCHEDULE C
LIQUIDATED DAMAGES AND EARLY COMPLETION BONUS
I. Liquidated Damages
A. Days 1-30: Total liquidated damages = Construction
Management Fee minus $1.4 million (such
amount, the "Monthly Amount") payable as
follows:
each of days 1-7: one-seventh of 11-1/9% of
Monthly Amount
each of days 8-14: one-seventh of 16-2/3% of
Monthly Amount
each of days 15-21: one-seventh of 22-2/9% of
Monthly Amount
each of days 22-30: one-ninth of 50% of
Monthly Amount
B. Days 31-120: Total liquidated damages = Twenty-Four
Million Sixty-Two Thousand Dollars
($24,062,000.00) (the "Total Amount"),
payable as follows:
each of days 31-60: $298,466.67
each of days 61-120: $251,800.00
C. Each day thereafter: One-thirtieth of the Monthly Amount
II. Early Completion Bonus:
A. Days 1-30: The Monthly Amount, payable as follows:
each of days 1-7: one-seventh of 11-1/9% of
Monthly Amount
each of days 8-14: one-seventh of 16-2/3% of
Monthly Amount
<PAGE>
each of days 15-21: one-seventh of 22-2/9% of
Monthly Amount
each of days 22-30: one-ninth of 50% of
Monthly Amount
B. Days 31-120: ZERO
C. Each day thereafter: One-thirtieth of the Monthly Amount
<PAGE>
SCHEDULE E
REQUIRED INSURANCE
Construction Manager will arrange for the following insurance
to be obtained for its protection in connection with the Project.
1. Professional Liability Insurance with a $5,000,000 limit.
2. The automobile liability and offsite workers' compensation
insurance described in Schedule F.
3. Certificates of Insurance with respect to the foregoing
insurance will be submitted or be available to Owner prior to commencement of
the Work, and shall provide that Owner shall be given thirty (30) days prior
written notice of cancellation, non-renewal or material change. In addition,
with respect to the automobile liability insurance described in paragraph 2
above, such certificates shall show each of Owner and Architect as an additional
insured.
<PAGE>
SCHEDULE F
OWNER'S INSURANCE
Schedule F will be finalized by Owner and Construction Manager
promptly after the execution of this Agreement, and will be substantially within
the parameters of the April 29th Aon draft of Schedule F and Construction
Manager's May 12th comments with respect thereto. Owner and Construction Manager
acknowledge and confirm that (a) Schedule E may, if appropriate, be modified to
reflect the finalized Schedule F and the discussions with respect thereto and
(b) this Agreement is intended to be, and shall be, fully binding and effective
upon execution notwithstanding the fact that Schedule F has not yet been
finalized.
ASSIGNMENT, ASSUMPTION AND AMENDMENT OF
CONSTRUCTION MANAGEMENT AGREEMENT
THIS ASSIGNMENT, ASSUMPTION AND AMENDMENT OF CONSTRUCTION MANAGEMENT
AGREEMENT (this "Amendment") is made and entered into as of November 14, 1997 by
and between LAS VEGAS SANDS, INC., a Nevada corporation ("Assignor"), VENETIAN
CASINO RESORT, LLC, a Nevada limited liability company ("Assignee") and LEHRER
McGOVERN BOVIS, INC., a New York corporation ("Construction Manager").
W I T N E S S E T H:
WHEREAS, Assignor and Construction Manager have entered into that
certain Construction Management Agreement dated as of February 15, 1997 (the
"Agreement"); and
WHEREAS, Assignor desires to assign the Agreement (and certain
guaranties thereof) to Assignee and Assignee desires to accept such assignment
and assume all of Assignor's obligations under the Agreement; and
WHEREAS, following such assignment and assumption, Assignee and
Construction Manager desire to amend the Agreement on the terms hereinafter set
forth and to have Construction Manager acknowledge and consent to the
above-described assignment and assumption;
1
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. Defined Terms. All capitalized terms used and not defined herein
shall have the respective meanings ascribed thereto in the Agreement.
2. Assignment. As a capital contribution to Assignee, Assignor
hereby assigns, conveys, transfers and sets over to Assignee any and all of
Assignor's right, title and interest in and to the Agreement and the Guaranties
(collectively, the "Contracts").
3. Assumption. Assignee does hereby accept the foregoing assignment
and assume, covenant and agree to perform, be bound by, discharge and observe
all of the terms, covenants, conditions, duties, obligations, undertakings and
liabilities of Assignor under the Contracts accruing prior to, on and after the
date hereof.
4. Consent. Assignor and Assignee hereby jointly and severally
represent and warrant to Construction Manager, Bovis and P&O that Assignee is a
Permitted Assignee. Relying on such representation, (a) Construction Manager
acknowledges and consents to the above-described assignment of the Agreement and
agrees that the provisions of Section 12.2(b) of the Agreement apply with
respect to such assignment and (b) Bovis and P&O acknowledge and consent to the
above-described assignment of the Bovis Guaranty and P&O Guaranty, respectively,
and are executing this Amendment for the purpose of so acknowledging and
consenting.
5. Amendments to the Agreement. Assignee and Construction Manager
hereby agree that the Agreement is amended as follows:
2
<PAGE>
(a) Paragraph 1 of Section 2b (General Assumptions) of Exhibit B is
hereby deleted. As a result of such deletion, Construction Manager is entitled
to, and is hereby granted, an increase in the Guaranteed Maximum Price of
$390,000.
(b) The "List of Documents" set forth as Section 3 of Exhibit B of
the Agreement is hereby deleted and replaced in its entirety by Architect's
"ASI's" 1-50 and all of Architect's "submittal packages" and revisions thereof
to date, other than (i) submittal packages 7, 10A and 10B and (ii) the 7/21/97
revision of submittal package 7; (iii) the 6/16/97 revision of submittal package
10A; and (iv) the 7/28/97 revision of submittal package 10B; provided, however,
that each of Construction Manager and Assignee reserves all of its rights under
the Agreement to make a claim for, or assert, Scope Changes with respect to the
foregoing change in the List of Documents.
(c) Schedule F of the Agreement is amended and restated in its
entirety by Schedule F attached hereto and made a part hereof.
(d) All notices sent to Owner as provided for in Section 12.9 of the
Agreement shall be sent to:
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attention: Sheldon Adelson
Facsimile number: (702) 733-5620
with a copy to: David Friedman
Facsimile number: (702) 733-5110
and with a copy to: Stuart Mason
Facsimile number: (702) 369-8306
3
<PAGE>
(e) The last sentence of Section 10.7(b) of the Agreement is hereby
deleted and the following sentence is hereby added in lieu thereof: "As used
herein, the "Independent Expert" shall mean Michael Shane."
(f) The following is added at the end of subsection 3.3.13 of the
Agreement: "Notwithstanding anything to the contrary contained herein, (a) the
General Warranty, and all other warranties, guaranties and indemnities of
Construction Manager herein that survive Final Completion, shall, from and after
Final Completion and to the extent they relate to the Energy Improvements and
the Other Customers Facilities (as such terms are defined in that certain Energy
Services Agreement dated as of May 1, 1997 by and between Owner and
Atlantic-Pacific, Las Vegas, LLC (the "HVAC Provider")), be made to, and run in
favor and for the benefit of, the HVAC Provider; (b) from and after Final
Completion, the HVAC Provider, and not Owner, shall have the right to request
that the guaranties and warranties described in the third-to-last sentence of
this subsection 3.3.13 (the "Trade Warranties") be assigned to it, but only to
the extent said guaranties and warranties relate to the Energy Improvements and
the Other Customers Facilities, (c) all guaranties, warranties and indemnities
(including the General Warranty) of Construction Manager hereunder are, to the
extent they relate to the "mall" and "retail annex" portions of the Project, for
the benefit of, and may be enforced by, Grand Canal Shops Mall Construction, LLC
or Grand Canal Shops Mall, LLC (in either case, the "Mall Owner"); and (d) the
Mall Owner, and not Owner, shall have the right to request that the Trade
Warranties be assigned to it, but only to the extent they relate to the "mall"
and "retail annex" portions of the Project. Construction Manager hereby
acknowledges and confirms that the HVAC Provider and the Mall
4
<PAGE>
Owner are valid third-party beneficiaries of the previous sentence and of the
proviso clauses of the first sentence of Section 7.5."
(g) The following is added at the end of the first sentence of
Section 7.5 of the Agreement: ";provided, however, that title to all Energy
Improvements and Other Customers Facilities shall be vested in the HVAC
Provider; and provided further, however, that title to all improvements and
equipment constituting part of the "mall" and "retail annex" portions of the
Project shall be vested in the Mall Owner."
(h) The following sentence is added at the end of Section 12.12 of
the Agreement: "The foregoing is subject, however, to the last sentence of
subsection 3.3.13".
(i) The phrase "and each subcontractor of any tier" is added after
the word "Contractor" in clause (b) of the fourth sentence of Section 9.2 of the
Agreement.
6. HVAC Provider and Mall Owner. Assignee and Construction Manager
agree that (a) the rights granted to the HVAC Provider and the Mall Owner in
Sections 3.3.13 and 7.5 of the Agreement, as modified hereby, (b) the
contemplated lease of the central plant portion of the Project to the HVAC
Provider, and (c) the contemplated lease of the "mall" and "retail annex"
portions of the Project to Grand Canal Shops Mall Construction, LLC and the
contemplated transfer of fee title of such portions to Mall Owner, shall not
give Construction Manager the right to terminate the Agreement pursuant to
clause (2) of Section 11.1 of the Agreement.
7. Allocation Direction. Assignee and Construction Manager confirm
that Construction Manger has received the Allocation Direction referred to in
Section 6.4 of the Agreement and that the so-called "Element Specific
Anticipated Cost Reports" show the Allocation Schedule.
5
<PAGE>
8. Certification to Lender. Construction Manager agrees that when
Substantial Completion has been achieved, it will, promptly upon Owner's
request, certify to Lender (including any "take-out lender" whose financing is
contingent on, among other things, such certification) that such is the case.
9. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Nevada.
10. Additional Documents. Each party shall, at the request of the
other, execute, acknowledge and deliver whatever additional instruments, and do
such other acts, as may be reasonably required to accomplish and carry forward
the purposes and intent of this Amendment.
11. Successors and Assigns. This Amendment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12. Ratification of Agreement. The Agreement, as modified hereby, is
ratified and confirmed in all respects by Assignee and Construction Manager.
6
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed by the parties as of
the date first above written.
ASSIGNOR:
LAS VEGAS SANDS, INC.
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
ASSIGNEE:
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.,
as managing member
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
CONSTRUCTION MANAGER:
LEHRER McGOVERN BOVIS, INC.
By: /s/ Mark Melor
----------------------------------------
Name: Mark Melor
Title: Senior Vice President
7
<PAGE>
EXECUTED SOLELY FOR
THE PURPOSE DESCRIBED
IN SECTION 4:
BOVIS, INC.
By: _____________________
Name:
Title:
THE PENINSULAR AND ORIENTAL STEAM
NAVIGATION COMPANY
By: /s/ D.E.A. Morris
--------------------------------
Name: D.E.A. Morris
Title: Director
8
AGREEMENT BETWEEN OWNER AND ARCHITECT
Agreement is executed this: November 14, 1997
and dated and effective as of: January 1, 1996
BETWEEN:
the Owner: VENETIAN CASINO RESORT, LLC
3355 Las Vegas Boulevard, South
Las Vegas, Nevada 89109
and the Architect: a collaboration between the firms of:
TSA of Nevada, LLP
WAT & G, Inc. Nevada
The Project:
A mixed use hotel/casino complex (the "Project") which will be
constructed in two phases, most of which is generally described, with respect to
Phase I, in the Design Development documents dated March 31, 1997 and the
"Architectural Area Summary" dated June 20, 1997, and with respect to Phase II,
in the Square Footage Facilities Program attached hereto as Appendix A:
Phase I (to be constructed on the south portion of the site) will
have: a hotel tower with approximately 3,000 hotel suites; a podium
structure which will contain a casino of approximately 100,000 gross
square feet (gsf), banquet and meeting facilities, a showroom, and
support spaces, which will be shared by this hotel and a Phase II
hotel; a second level retail complex of approximately 485,000 gsf
(approximately 250,000 sf of gross leasable area (gla)) with an
upper
<PAGE>
2
retail level approximately 485,000 gsf (approximately 250,000
gla); and a pool deck with public areas at the roof;
a parking structure for approximately 3,500 to 4,500 vehicles; a
two-level retail annex structure of approximately 28,000 gsf;
expansion to the Sands Exposition Center; a central utility plant to
serve both the south and north portions of the site; and site
improvements and infrastructure related to both the north and south
portions of the site. Phase II (to be constructed on the north
portion of the site) will have: a second hotel tower with
approximately 3,000 suites, substantially identical to the first
phase hotel tower for those portions of the tower above the podium;
a podium structure which will contain a casino of approximately
100,000 gsf, a showroom, support spaces, which will be shared by
this hotel and the Phase I hotel; a second level retail complex of
approximately 265,000 gsf (approximately 150,000 sf of gla) with an
upper retail level of approximately 265,000 gsf (approximately
120,000 gla); and a pool deck with public areas at the roof; a
parking structure for approximately 4,000 vehicles; and site
improvements and infrastructure related to both the north and the
south portions of the site. The site for this complex is the site of
the former Sands Hotel/Casino.
<PAGE>
3
The Design Development Documents were, as scheduled, prepared and
submitted on March 31, 1997.
The Owner and the Architect have agreed as set forth below.
<PAGE>
AGREEMENT BETWEEN OWNER AND ARCHITECT
TABLE OF CONTENTS
Page
ARTICLE 1 ARCHITECT'S RESPONSIBILITIES.............................1
ARTICLE 2 SCOPE OF ARCHITECT'S BASIC SERVICES......................8
ARTICLE 3 ADDITIONAL SERVICES.....................................20
ARTICLE 4 OWNER'S RESPONSIBILITIES................................24
ARTICLE 5 CONSTRUCTION COST.......................................28
ARTICLE 6 USE OF ARCHITECT'S DRAWINGS
AND OTHER DOCUMENTS.....................................29
ARTICLE 7 TERMINATION, SUSPENSION OR ABANDONMENT..................31
ARTICLE 8 MISCELLANEOUS PROVISIONS................................36
ARTICLE 9 PAYMENTS TO THE ARCHITECT...............................44
ARTICLE 10 BASIS OF COMPENSATION...................................51
i
<PAGE>
APPENDICES
APPENDIX A SQUARE FOOTAGE FACILITIES PROGRAM
APPENDIX B FORM OF PAYMENT REQUEST
APPENDIX C PROJECT DESIGN SCHEDULE
APPENDIX D CONSULTANTS
APPENDIX E DUTIES, RESPONSIBILITIES AND LIMITATIONS OF
AUTHORITY OF THE ARCHITECT'S PROJECT
REPRESENTATIVE
APPENDIX F INSURANCE REQUIREMENTS
APPENDIX G HOURLY BILLING RATE
APPENDIX H CONSTRUCTION DOCUMENT PACKAGES
APPENDIX I APPROVED ADDITIONAL SERVICES
APPENDIX J ASSUMPTIONS
ii
<PAGE>
1
TERMS AND CONDITIONS OF AGREEMENT
BETWEEN OWNER AND ARCHITECT
ARTICLE 1
ARCHITECT'S RESPONSIBILITIES
1.1 Architect's Services.
1.1.1 The Architect's services consist of those services
performed by the Architect, the Architect's employees and the Architect's
consultants (the "Architect's Consultants") as enumerated in this Agreement.
Except as set forth in Appendix D, no Architect's Consultant shall be engaged by
Architect without Owner's prior written approval, provided that as of the
execution date of this Agreement, the identity of the Architect's Consultants
described in paragraph 2 of Appendix D and the terms of their engagement have
been approved by Owner. Whenever an Architect's Consultant performs any Basic
Service (as defined in Article 2.1), Architect shall be fully responsible for
the performance of such Basic Service in accordance with the provisions hereof
as if Architect itself had performed such Basic Service.
1.1.2 The Architect's services shall be performed as
expeditiously as is consistent with professional skill and care and the orderly
progress of the Work. Because parts of the Project will proceed under a "fast
track" schedule, it is understood that the phases of service will overlap, and
construction of some Project components will commence before the completion of
Construction Documents (as defined in Article 2.5.1) for the applicable phase of
the Project. Supplementing
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2
Article 1.1.7, the Architect shall use diligent, professional efforts to
minimize changes, inconsistencies, coordination errors, and similar problems
which may occur as a result of the fast track process.
1.1.3 The Architect's services hereunder include the
architectural and engineering services necessary to design the Project in
compliance with all laws, rules, codes, regulations, orders and ordinances of
any kind whatsoever issued or enacted by any governmental entity applicable to
or affecting the Project ("Legal Requirements") and, to the extent reasonably
required or reasonably requested by Owner or Owner's lenders, providing
certificates to any such governmental entity, Owner and/or Owner's lenders
attesting that to the best of Architect's information, knowledge and belief the
documents prepared by Architect or at Architect's direction comply with Legal
Requirements.
1.1.4 Architect has prepared and Owner has approved a project
design schedule (the "Schedule") for the performance of the Architect's services
and the services of Owner's Consultants. The Schedule was established based on
(a) the fact that construction on the south portion (Phase I) will precede
construction on the north portion (Phase II) and (b) the Owner's intent to
occupy Phase I of the Project during the second quarter of 1999, and the
Architect shall provide its services in strict conformity with these dates.
Bovis (as defined in Article 1.1.7) shall coordinate and integrate the Project
Schedule (as defined in the Bovis Agreement (as defined in Article 1.1.7)) with
the Schedule. The Schedule identifies the design tasks with estimated dates of
start and completion, relationships and dependencies, respon sibilities and
milestone dates, and is attached hereto as Appendix C. The Schedule
<PAGE>
3
includes allowances for periods of time required for the Owner's review and
approvals, for the activities described in Article 1.1.7, and for approval of
submissions by authorities having jurisdiction over the Project. If the actual
period of time required for any such item is longer than the applicable
allowance by reason of any act or failure to act of any person or entity
(including Owner, Bovis and any Owner's Consultant or trade contractor) other
than Architect and Architect's Consultants, the Schedule shall be appropriately
adjusted, provided that Architect shall use diligent efforts to minimize the
impact and duration of any such delay. The Schedule shall be updated and
submitted by Architect to the Owner and Bovis for review and approval by Owner
(which approval shall not be unreasonably withheld) periodically based on the
Project demands and status to reflect current progress, additions, reductions,
and other changes to the scope of the Architect's and Owner's Consultants'
services. Architect shall comply with the Schedule, and if overtime work or any
other special actions are required in order for Architect to comply with the
Schedule, such work or other actions shall be at the expense of Architect.
Subject to certain limitations on liability expressly set forth in this
Agreement, and notwithstanding any of the foregoing, Architect shall in all
events be responsible for all delays attributable to breaches by Architect of
any provision hereof.
1.1.5 Owner intends to enter into contracts with various third
party consultants ("Owner's Consultants") to perform various design functions in
conjunction with Architect's services and/or to review Architect's services. All
amounts paid to Owner's Consultants shall not reduce Architect's compensation
hereunder. Owner's Consultants may include, without limitation, all consultants
<PAGE>
4
described in paragraph 3 of Appendix D attached hereto. As a part of its duties,
the Architect shall assist the Owner in the selection of Owner's Consultants by
preparing requests for proposals, interviews, analysis of proposals, and
recommendations. After selection, the Architect shall cooperate with, schedule,
and coordinate the services and assist in the management of Owner's Consultants
as set forth in more detail below. If Architect complies with the preceding
sentence, Architect shall not be responsible for any delay in the Schedule
caused by acts or omissions of Bovis and Owner's Consultants. The Architect
shall advise the Owner regarding the quality, accuracy, timeliness, and
technical sufficiency of the services provided by Owner's Consultants; provided,
however, that the Owner recognizes that Owner's Consultants (and not Architect)
are ultimately responsible for their work. Architect shall review and recommend
payments to the Owner's Consultants, but shall not be responsible for their
payment.
1.1.6 In the process of performing the services set forth in
Articles 2.2-2.5, Architect shall issue drawings in accordance with the
Schedule. Copies of each drawing will be made available to Bovis, accompanied by
a transmittal letter stating which parties should receive a copy of such
drawing; Bovis, and not Architect, shall then be responsible for dissemination
to all such parties.
1.1.7 Architect's Relationship With Construction Manager.
(a) Owner has entered into an agreement (the "Bovis
Agreement") with Lehrer McGovern Bovis, Inc. ("Bovis") pursuant to which Bovis
shall perform construction management services in connection with Phase I of the
Project. Architect acknowledges and confirms that the Bovis Agreement provides
for
<PAGE>
5
an at-risk Guaranteed Maximum Price ("GMP") for Phase I of the Project, that the
GMP will be adjusted from time-to-time, and that the GMP is based on certain
qualifications, assumptions, exclusions and allowances which may change from
time-to-time in accordance with the Bovis Agreement. The above-described
qualifications, assumptions, exclusions and allowances as of the execution date
of this Agreement that are relevant for purposes of this Agreement
(collectively, the "Assumptions") are attached to this Agreement as Exhibit J,
and Owner shall promptly inform Architect of any changes to the GMP or
Assumptions.
(b) Unless otherwise directed by Owner, all
Construction Documents (as defined below) (including all revisions of same)
shall be consistent with the Assumptions then in effect and the approved Design
Development Documents (as defined below). Architect shall promptly advise Bovis
and Owner upon Architect becoming aware of any inconsistencies between one or
more of the Assumptions and the approved Design Development Documents, and shall
follow Owner's directions with respect to whether the Construction Documents
shall be consistent with such Assumptions or with the approved Design
Development Documents.
(c) All drawings and other documents prepared by
Architect pursuant to Articles 2.3-2.5 (including all revisions of same)
(collectively, the "Drawings") shall be reviewed by Owner and Bovis, are subject
to Owner's approval and shall, subject to subsection 1.1.7(d), be revised as
Owner directs (all such approvals and directions to be in accordance with
Article 4.3). In addition, Bovis shall consult with Architect in connection with
the preparation of all Drawings
<PAGE>
6
and shall supervise, manage and coordinate the "value engineering" process
pursuant to which, among other things, (i) Owner and Bovis shall provide
Architect with information that will enable Architect (to the extent feasible)
to prepare Drawings that are consistent with all allowances (as defined in the
Bovis Agreement) (subject to any changes desired by Owner), (ii) Architect shall
prepare Construction Documents in accordance with Article 1.1.7(b), (iii)
Architect shall study and consider cost savings, value engineering and similar
proposals made by Owner or Bovis, shall itself make such proposals as
appropriate, and shall, with Owner's approval, implement such proposals, (iv)
during the design phases of the Project, Architect shall promptly advise Owner
and Bovis in writing whenever, in Architect's best judgment as a design
professional familiar with the construction industry, the information contained
in a Drawing is inconsistent with any cost estimates or cost information
previously provided to Architect by Owner or Bovis, (v) whenever Architect makes
a modification to a Construction Document that has been "sealed" and submitted
to the applicable governmental authority, such modification shall "bubble" the
changes made, (vi) Architect shall, promptly following Architect's submission of
each Construction Document (or revision thereto) with respect to which the
foregoing clause (v) does not apply, and promptly following Architect's
submission of any revision of a Design Development Document, verbally describe
to Owner and Bovis, at a meeting attended by Owner, Bovis and Architect, all
material differences between such Construction Document and the approved Design
Development Document(s) covering the same components of the Project, or between
the revision and the prior version of the applicable Drawing, as applicable
(Owner acknowledging and
<PAGE>
7
confirming that with respect to initial submissions of Construction Documents,
progressions, refinements and detailings that are natural when architectural
drawings advance from the design development phase to the construction phase are
not material differences for purposes of this clause (vi)), and shall promptly
prepare or cause the appropriate Architect's Consultants to promptly prepare
(and distribute to Owner and Bovis) a written list of all such material
differences covered by each such verbal description, and (vii) subject to
Section 2.6.7, whenever Bovis submits to Architect a plan, proposal,
specification, drawing or request for information or clarification, Architect
shall respond promptly, and in all events within seven (7) days, either
graphically or in writing (as appropriate), with such information,
clarification, approval, rejection or other decision, provided that if it is not
reasonably feasible for Architect to so respond within seven (7) days, Architect
shall, within such 7-day period, give Bovis a written explanation as to why such
response is not reasonably feasible, and shall in all events so respond within
seven (7) days after the expiration of said 7-day period. In addition, if Bovis
notifies Architect that (1) the implementation of a proposed Drawing would
violate applicable Legal Requirements, (2) any portion of a drawing is not
constructible, and/or (3) a Drawing is inconsistent with any of the Assumptions,
Architect shall, unless Owner otherwise directs, and taking into account all
advice and information given to it by Owner and Bovis, promptly (and in
accordance with the Schedule) revise the applicable Drawing as necessary and
appropriate so as to make it constructible and/or consistent with both the
Assumptions or Legal Requirements, as applicable, and Owner's requirements for
the Project, provided that if the notification from Bovis is made after the
applicable
<PAGE>
8
Drawing has been approved by Owner, Architect shall not so revise such Drawing
unless requested to do so by Owner in writing in accordance with Article 4.3.
Architect shall cooperate and work with Owner and Bovis as contemplated by the
foregoing. Notwithstanding any term or provision of this Agreement, Owner
acknowledges that Architect shall have no obligation or legal responsibility
with respect to the establishment of the GMP, or any construction costs, pricing
or compliance with the GMP, except as expressly set forth in this Agreement.
(d) Modifications of Drawings shall not be deemed an
Additional Service if either (i) Owner's direction to make such modification is
received (or, in the case of Article 2.5.2 only, the necessity to make such
modification first arises), before such Drawing is approved by Owner (unless,
with respect to a Construction Document, such modification involves a material
change in the design intent of the Project as indicated by the approved Design
Development Documents); (ii) such modification, in the case of a Design
Development Document, is not a change in quality or scope; or (iii) such
modification is necessitated by a change in Legal Requirements effectuated
before the applicable Drawing is approved by Owner or that Architect should, in
the exercise of due diligence, have anticipated.
ARTICLE 2
SCOPE OF ARCHITECT'S BASIC SERVICES
2.1 Definition. The Architect's basic services ("Basic Services")
consist of those services described in Article 1, this Article 2 and all other
provisions
<PAGE>
9
of this Agreement other than Article 3, and includes necessary and appropriate
structural, mechanical, plumbing and electrical engineering services.
2.2 Pre-Schematic Design Phase. Prior to the execution of this
Agreement, Architect, beginning on January 2, 1996, provided Pre-Schematic
Design Services, including Master Planning, Programming and Thematic Design
under separate letter agreements dated February 1 and April 17, 1996. The Master
Plan, Program, and Theme Concept which were developed generally define the
requirements of each component of the Project and were approved by Owner prior
to the execution of this Agreement.
2.3 Schematic Design Phase.
2.3.1 The Architect has provided a preliminary evaluation of
the Owner's program, planning, and schedule requirements, each in terms of the
other.
2.3.2 Supplementing Article 1.1.7, the Architect has prepared
and reviewed with the Owner alternative approaches to design and construction of
the Project and has submitted this information to Owner and Bovis in a
reasonable format. Architect has assisted, and shall continue to assist, in
evaluating the functional, cost, and time benefit of alternative approaches to
design and construction, whether such alternative was proposed by the Architect,
Bovis or by others.
2.3.3 Based on the mutually agreed upon Master Plan, Program,
and Theme Concept, and directions from Owner, Architect has prepared, and Owner
approved prior to the execution date of the Agreement, Schematic Design
Documents consisting of drawings and other documents to establish the scope and
<PAGE>
10
quality of the Work, and illustrating the scale and relationship of Project
components. Subject to the provisions of Article 1.1.5, the Architect has
incorporated into the Schematic Design Documents the documentation and services
performed by Owner's Consultants.
2.3.4 Architect has engaged in a series of "charettes" with
Owner to complete the Schematic Design phase. Appropriate senor design staff of
Architect were available in Las Vegas during these periods.
2.4 Design Development Documents Phase.
2.4.1 On March 31, 1997, the Architect submitted, for approval
by the Owner, Design Development Documents consisting of drawings and other
documents to fix and describe the size and character of the Project as to
architectural, structural, mechanical and electrical systems, materials and such
other elements as may be required or appropriate to complete the Project.
Subject to Owner's comments and clarifications, the Design Development Documents
have been approved by Owner and were based on the approved Schematic Design
Documents and directions from Owner and, subject to the provisions of Article
1.1.5, incorporated the documentation and services that at the time had been
performed by Owner's Consultants.
2.5 Construction Documents Phase.
2.5.1 Based on the approved Design Development Documents and
the Assumptions then in effect, but subject to any contrary directions from
Owner, the Architect will proceed to prepare, for approval by Owner, the
Construction Documents (i.e., the (a) graphic and pictorial descriptions of the
Project,
<PAGE>
11
showing the design, location and dimensions of each component thereof, generally
including plans, elevations, sections, details, schedules and diagrams and (b)
written requirements for materials, equipment, construction systems and
standards of workmanship) required to construct the Project and covering the
items set forth in Appendix H. Subject to the provisions of Article 1.1.5,
Architect shall incorporate into the Construction Documents the documentation
and services performed by Owner's Consultants.
2.5.2 If, during the Construction Documents or Construction
Phase Owner elects to utilize a proprietary system or component, or to furnish a
system or components for which final drawings and specifications will be
furnished by Bovis, a trade contractor or an Owner's Consultant, Owner agrees
that (a) such drawings and specifications shall bear the seal and signature of
an appropriately registered design professional, and (b) Architect shall not be
responsible for the accuracy, completeness, and technical sufficiency thereof.
However, Architect shall be responsible for coordinating such work into the
overall Project and the Construction Documents, provided that any modifications
to Drawings necessitated by such work shall be governed by Article 1.1.7(d).
2.5.3 Architect understands that the second (north) hotel
tower, to be constructed on the north portion of the site, will be substantially
similar to the first (south) hotel tower for those portions of the tower above
the podium; that construction of the north tower will begin later than the south
tower; and that it shall not be "fast tracked." Therefore, the Construction
Documents prepared for the design of the north hotel tower will reflect the
approved Phase I Construction Documents,
<PAGE>
12
any design changes made or incorporated during the Construction Phase for Phase
I, and any further directions from Owner (which are likely to include a decision
by Owner that the entire exterior of the north tower will be designed with a
substantially different character and appearance than that of the south tower),
and shall be submitted to Owner for approval when requested by Owner.
2.6 Construction Phase.
2.6.1 The Architect's responsibility to provide the Basic
Services for the Construction Phase under this Agreement commences as of the
date hereof and terminates, with respect to each phase of the Project, four (4)
months after the Substantial Completion Date (as defined below) of such phase
(but no later than August 21, 1999 for Phase I and the Phase II Outside Date (as
defined in Article 3.4) for Phase II). As used herein, "Substantial Completion
Date" shall mean the date, as agreed to by Owner and Bovis, on which substantial
completion of such phase was achieved.
2.6.2 The Architect shall, as directed by the Owner and in a
cooperative effort with Owner's Development Management Staff (as defined in
Article 8.13), provide administration of construction as set forth below.
2.6.3 The Architect shall visit the site at least once a week
(and shall cause Architect's Consultants to visit the site at least once a week
during the stages of construction pertinent to their disciplines) to become
generally familiar with the progress and quality of the Work and to determine in
general if the Work is being performed in a manner indicating that the Work when
completed will be in accordance with the Contract Documents. However, the
Architect shall not be
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13
required to make exhaustive or continuous on-site inspections to check the
quality or quantity of the Work. On the basis of on-site observations as an
architect and any other available information, the Architect shall keep the
Owner informed of the progress and quality of the Work, and shall endeavor to
guard the Owner against, and inform the Owner of, defects and deficiencies in
the Work, and, upon request by the Owner, shall advise about remedial measures.
The Architect shall work in a cooperative effort with the Owner's Development
Management Staff to represent the Owner's interests in regard to the
construction of the Project.
2.6.4 The Architect shall not have control over or be in
charge of, nor be responsible for construction means, methods, techniques,
sequences or procedures, or for safety precautions and programs in connection
with the Work. The Architect shall not be responsible for Bovis' or any trade
contractor's schedules or failure to carry out the Work in accordance with the
Contract Documents not caused by Architect, but shall be required to notify the
Owner in writing if Architect learns of any such deviations. The Architect shall
not have control over or charge of acts or omissions of Bovis, trade
contractors, subcontractors, their agents or employees, or of any other persons
performing portions of the Work.
2.6.5 The Architect shall at all times have access to the Work
wherever it is in preparation or progress.
2.6.6 All communication from the Architect and Architect's
Consultants to Bovis shall be forwarded through Owner except for communications
pursuant to Article 1.1.7(c). Communications by and with the Architect's
Consultants
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14
shall be through the Architect, and the Architect shall copy the Owner on all
communications with Architect's Consultants and Owner's Consultants.
2.6.7 The Architect shall review and approve or take other
appropriate action upon submittals by Bovis such as Shop Drawings, Product Data
and Samples, but only for the limited purpose of checking for conformance with
the Contract Documents. Pursuant to Section 3.3.25 of the Bovis Agreement, (a)
Bovis shall receive and review all Shop Drawings, Product Data and Samples prior
to their submission to Architect for the purpose of checking for general
conformance with the Contract Documents; (b) if any such submittal is deemed to
be in such general conformance, Bovis shall promptly forward it to Architect;
and (c) if any such submission is deemed to not be in such general conformance,
it shall be returned to the applicable trade contractor for correction and
resubmittal to Bovis. The Architect shall take action based upon a mutually
agreeable schedule prepared by Bovis for shop drawing submission and approval.
This schedule shall be updated as appropriate to reflect the actual progress of
the Work. The Architect will use its best effort and judgment to act on all
submittals within fourteen (14) days of receipt of each appropriately
transmitted submission, and within seven (7) days of receipt of each
appropriately transmitted resubmission. To the extent that submissions are
deemed to be partial or incomplete, they shall be returned to Bovis for
resubmittal upon proper completion by the applicable trade contractor. Review of
such submittals is not conducted for the purpose of substantiating instructions
for installation or performance of equipment or systems designed by Bovis or a
trade contractor, all of which are not the responsibility of Architect. In
addition, the following are also not the
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15
responsibility of Architect in connection with Architect's review of such
submittals: (i) determining and verifying all materials, field measurement and
field construction criteria related to such submittals; (ii) checking such
submittals and calculations for complete dimensional accuracy; (iii)
coordinating the work covered by such submittals; (iv) checking to insure that
work contiguous with and having bearing on the Work shown on such submittals is
accurate and clearly shown; and (v) checking that the applicable equipment will
fit into the assigned spaces. The Architect's review shall not constitute
approval of safety precautions, construction means, methods, techniques,
sequences or procedures. The Architect's approval of a specific item shall not
indicate approval of an assembly of which the item is a component. When
professional certification of performance characteristics of materials, systems
or equipment is required by the Contract Documents, the Architect shall be
entitled to rely upon such certification to establish that the materials,
systems or equipment will meet the performance criteria required by the Contract
Documents.
2.6.8 Architect shall advise Owner whenever Architect
considers it necessary or desirable to recommend additional inspection or
testing of the Work, whether or not such Work is fabricated, installed or
completed.
2.6.9 The Architect shall, if requested, assist the Owner in
(a) the selection of trade contractors and (b) evaluating Bovis' proposals in
connection with Scope Changes (as defined in the Bovis Agreement).
2.6.10 The Architect shall conduct site visits to assist the
Owner in determining the date or dates of Substantial Completion and the date or
dates of Final Completion for each or designated portions of each phase of the
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16
Project. At Owner's written request, Architect shall receive and forward to
Owner for Owner's review all records, written warranties and related documents
required by the Contract Documents and assembled by Bovis. During the
Construction Phase of each phase of the Project, the Architect shall timely
execute and deliver (a) any certificates (but not so-called "certificates of
payment") reasonably required or requested by Lender (as defined in Article
8.6(d)) as part of Lender's disbursement process and (b) a certificate of
substantial completion with respect to each trade contract.
2.7 Other Basic Services.
2.7.1 Architect shall be represented and participate in
periodic Project review meetings to be held, at the Owner's discretion, in Las
Vegas, Nevada or in the offices of either of the entities constituting
Architect. Accurate minutes shall be taken by Architect to identify action items
with responsibilities and times to complete and such minutes shall be promptly
forwarded to Owner and anyone else designated by Owner. It is also the
responsibility of Architect to disseminate pertinent information regarding the
Project to the appropriate project team members.
2.7.2 (a) Architect shall assist the Owner in preparing a
definitive Program for the Complex, drawing upon the knowledge and abilities of
Homer Rissman of the firm Rissman & Rissman in Las Vegas, who has been engaged
by Owner in connection therewith. Programming services will include assisting
the Owner in the establishment of the Projects' architectural program including
department goals and philosophy; physical requirements such as area,
adjacencies, ceiling heights, etc.; summary of equipment and furnishings, etc.,
along with other
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17
criteria pertinent to the design of the space. This will be an ongoing,
evolutionary task that will continue to change throughout the course of the
design process.
(b) Architect shall ensure that the Owner-approved concepts which
were developed during the Pre-Schematic Design Phase are carried through during
subsequent design and construction phases. This effort will ensure that there is
continuity on the Project so that consultants and Architect establish consistent
systems and materials, common specifications, integrated fire/life safety and
exiting, consistent structural and mechanical, electrical, and plumbing systems,
etc. Key details will be developed to be used throughout the entire project
site, and materials, colors and similar design elements will be coordinated.
2.7.3 Architect shall provide site representation in Las Vegas
with its own staff to complete the performance of Architect's services
hereunder. From the date hereof until the Construction Documents Phase with
respect to Phase I of the Project has been completed (such time period, the
"Design Period"), such site representation shall include, without limitation,
each of James Beyer, Chris Belknap, Michael Paneri, Easley Hamner, William McGee
and Michael McKay on an as-needed basis (as reasonably determined by Owner),
provided that if any of the foregoing individuals (or any replacement of any
such individual selected pursuant to this sentence) become unavailable pursuant
to the last sentence of this Article 2.7.3 or for any reason beyond the
reasonable control of Architect (e.g., such person is no longer employed by or
associated with Architect), his replacement shall be selected by Architect,
subject to Owner's approval. Other on-site representation during the Design
Period, and on-site representation thereafter, shall be provided by Architect as
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18
requested by Owner, provided that Owner agrees to take Architect's desire to
minimize on-site staffing into account when making such requests. Owner has
agreed to make space available in Las Vegas for a project office sufficient to
accommodate a staff of approximately four people, with additional space to
accommodate meetings of 20 people, and Owner will cover the rent and utilities
associated with this on-site office, including the costs of supplies, telephone,
office furniture, equipment such as photocopier, fax machine, printer, and
plotter, and the costs of shared secretarial support for telephone answering and
mailing. Notwithstanding any other provision hereof, Owner shall have the right
to require Architect to replace any member of its senior staff or personnel for
the Project (including the Project Representative and any of the personnel
described in the foregoing provisions of this Article 2.7.3), but only for good
cause described in writing to Architect and provided that Architect shall be
provided a reasonable period of time to replace such member (subject to Owner's
approval of such replacement).
2.7.4 Architect shall retain a clerk/expediter during the
Construction Phase of each Phase of the Project in support of the Architect's
duties set forth in Article 2.5 and Appendix E of this Agreement. The
clerk/expediter person shall: (1) provide services on a full time basis for the
Architect; (2) be selected and hired by the Architect; and (3) receive direction
from the Architect exclusively, except on those occasions when the Owner issues
directives directly to the clerk/expediter to assist the Owner on
construction-related issues. In the event that the Owner's use of the
clerk/expediter shall occur at a time when such services shall create a conflict
with ongoing needs or services of the Architect, the Architect, upon
<PAGE>
19
written approval of the Owner, which approval shall not be unreasonably
withheld, shall be permitted to retain a second clerk/expediter for such ongoing
needs or services. The reasonable fees and expenses of the clerk/expediter(s)
shall be a Reimbursable Expense.
2.7.5 In addition to the on-site representation described in
Article 2.7.3, Architect shall, during the Construction Phase of each phase of
the Project, provide a full-time project representative ("Project
Representative") at the site whose duties are set forth in Exhibit E. The
Project Representative shall be selected by Architect, subject to Owner's
approval.
2.7.6 Architect shall assist the Owner in connection with
obtaining zoning approvals and/or zoning variances and all other permitting,
licensing and regulatory approvals so as to allow for development and
construction of the Project. This shall include preparation of necessary
documents (drawings, reports, models, renderings, computer simulations, etc.),
as well as appearances at zoning hearings as an expert witness as requested by
the Owner to meet governmental agency requirements.
2.7.7 The Drawings prepared by Architect hereunder, and
Architect's construction administration services, shall cover the exterior shell
and core for the Project's retail areas and all associated emergency egress
areas. In addition, Architect shall consult with and assist Owner and Owner's
retail manager in connection with the Project's interior retail space. Such
assistance shall include preparing conceptual planning and tenant leasing
diagrams, thematic facade work along the mall frontage, and design and
construction detailing of service cores and
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corridors, exiting requirements, loading dock facilities, interior vertical
linkage to the casino, hotel, pool deck and exterior bridges, etc.
Notwithstanding the foregoing, tenant design and special design analysis
relative to coordinating tenant connections to building systems are to be
provided, upon Owner's request, as an Additional Service.
2.7.8 Architect shall prepare and deliver to Owner, and shall
modify as directed by Owner, the illustration of Phase I of the Project and the
"east convention center" specifically requested by Sheldon G. Adelson.
2.7.9 The Architect shall arrange, set the agenda and prepare
the minutes for the "critical issues" meetings described in Article 4.4.
2.7.10 Architect acknowledges and confirms that all of its
services hereunder for the Project shall include, in all respects, such services
with respect to the central plant portion of the Project.
2.7.11 The Architect shall provide interior design services
for "back-of-the-house" areas, including interior partitions, finishes, and
interior colors and furniture selection.
ARTICLE 3
ADDITIONAL SERVICES
3.1 General.
3.1.1 The services described in this Article 3 ("Additional
Services") are not included in Basic Services. Additional Services shall be paid
for by the Owner in accordance with Articles 9.2 and 10.3 in addition to the
compensation for Basic Services. The services described under Article 3.2
(except
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21
for the services described in Section 3.2.16) shall only be provided if
authorized or confirmed in writing by the Owner; as of the execution date of
this Agreement, Owner has authorized the Additional Services set forth in
Appendix I attached hereto. The services described in Section 3.2.16 shall be
provided as required by the applicable provisions of this Agreement. The Owner
hereby agrees to authorize any Additional Services described below which the
Architect is required to perform or provide pursuant to any applicable Legal
Requirement, unless the Architect is notified in writing of the Owner's decision
to contest or seek a variance or waiver therefrom.
3.1.2 The Owner recognizes that the provision by the Architect
of Additional Services may require adjustment to the Schedule and shall make and
approve reasonable adjustments accordingly. Absent authorization as called for
above, the Architect shall not commence performance of such Additional Services,
nor be responsible for any delays or other impact that such non-performance may
have on the Project.
3.2 Additional Services.
3.2.1 Providing consultation concerning replacement of Work
damaged by fire or other casualty during construction, and furnishing services
required in connection with the replacement of such Work.
3.2.2 Providing services in connection with an arbitration
proceeding or legal proceeding except where the Architect is party thereto and
except where pursuant to Articles 1.1.3 and 2.7.6.
3.2.3 Providing design services for the proposed electrical
substation.
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22
3.2.4 Providing special surveys, environmental studies and
submissions (other than Drawings prepared as part of Basic Services) required
for approvals of governmental authorities or others having jurisdiction over the
Project, except where pursuant to Articles 1.1.3 and 2.7.6.
3.2.5 Providing services to verify the accuracy of drawings or
other information furnished by the Owner.
3.2.6 Providing analyses of owning and operating costs.
3.2.7 Providing interior design services for public spaces
such as show theaters, casinos, hotel lobbies, hotel suites, restaurants,
executive offices, or other interior portions of the complex, except as set
forth in Appendix H, Article 2.7.7 and Article 2.7.11 and provided that "back of
the house" interior partitions are a part of Basic Services.
3.2.8 Making investigations, inventories of materials or
equipment or valuations and detailed appraisals of existing facilities.
3.2.9 Providing assistance in the utilization of equipment or
systems such as testing, adjusting and balancing, preparation of operation and
maintenance manuals, training personnel for operation and maintenance, and
consultation during operation.
3.2.10 Providing demolition drawings or consulting services in
relation to the demolition of existing structures or utility systems.
3.2.11 Preparing a set of reproducible record drawings showing
significant changes in the Work made during construction based on marked-up
prints, drawings and other data furnished by Bovis and trade contractors to
Architect.
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23
3.2.12 Assisting in the development of anticipated special
events at the north and south property exteriors and within the retail mall.
Such assistance may include the preparation of appropriate design documents and
may continue until a show producer is engaged by the Owner to take over the
process.
3.2.13 Providing services with respect to one of the two
phases of the Project more than four (4) months after the Substantial Completion
Date (as defined in Article 2.6.1) of such phase.
3.2.14 Subject to Article 2.7.7, providing tenant fit-out
design services.
3.2.15 All services described on Appendix I, all of which have
been authorized by Owner.
3.2.16 Subject to Section 1.1.7(d), modifications of Drawings
pursuant to Articles 1.1.7(a)-(c), 1.1.3 and 2.5.2.
3.3 Notwithstanding any of the foregoing, any services made
necessary by any fault or omission of the Architect shall not be compensated as
Additional Services.
3.4 Owner and Architect acknowledge and confirm that
notwithstanding any other provision hereof, (a) Architect's services in
connection with Phase II are, as of the execution date of this Agreement, on
hold and will continue to be on hold until Architect receives written notice
from Owner to resume services for Phase II and (b) when Architect's Phase II
services are resumed, Owner and Architect shall agree on (i) any appropriate
increase in Architect's compensation hereunder, based solely on any increased
wage costs and other out-of-pocket costs incurred by
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24
Architect (as reasonably demonstrated by Architect to Owner) by reason of (l)
the delay in performing Phase II services and/or (2) the "fast-track" nature of
Phase II (if applicable); and (ii) the date (the "Phase II Outside Date") on
which Architect's responsibility to provide Basic Series under this Agreement
with respect to Phase II terminates.
ARTICLE 4
OWNER'S RESPONSIBILITIES
4.1 The Owner shall provide full information regarding requirements
for the Project, including a program which sets forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems and site
requirements.
4.2 Supplementing Article 1.1.7, the Owner and Bovis shall, with the
assistance of Architect, establish and periodically update a construction
estimate for the Project, including reasonable contingencies.
4.3 (a) Notwithstanding any other provision hereof, but subject to
Article 4.3(b), (i) no modifications may be made to this Agreement without the
express written approval of the Owner's Chairman, Sheldon G. Adelson ("SGA"), on
behalf of Owner and (ii) whenever this Agreement refers to an approval,
authorization, order or decision by the Owner, such approval, authorization,
order or decision shall be deemed given or made only if it is given or made by
SGA in writing
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25
(or by an individual designated, either in Article 4.3(b) or by SGA in a written
notice to Architect, as an individual having the express authority to give or
make such approval, authorization, order or decision (an "Authorized
Individual"), provided that any such designation (including the designations
made in Article 4.3(b)) may be revoked by SGA at any time by written notice to
Architect). If any such approval, authorization, order or decision by Owner is
not given or made by SGA or an Authorized Individual in writing (or, with
respect to an approval or authorization, expressly not given in writing by SGA
or an Authorized Individual) within five (5) business days after the applicable
request is made in writing by Architect, all milestones and deadlines in the
Schedule not yet reached or achieved shall be extended by the number of days in
the period from and including the day immediately after such five-business day
period until and including the day that SGA or an Authorized Individual gives
such approval or authorization (or expressly elects in writing not to give such
approval or authorization), gives such order or makes such decision in writing.
In this regard the Architect acknowledges and confirms that no apparent
authority, agency or similar claims may be made by the Architect with respect to
any such approval, authorization, order or decision given or made by any other
purported representative or employee of the Owner but not expressly given or
made in writing by SGA or an Authorized Individual, and all such claims are
hereby waived by the Architect.
(b) Each of William Weidner and Brad Stone are hereby
designated as an Authorized Individual to give or make approvals,
authorizations, orders and decisions on behalf of Owner hereunder, but only with
respect to
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26
approvals, authorizations, orders and decisions given or made by any such
individual at one of the "critical issues" meetings.
(c) The provisions of this Article 4.3 shall continue to apply
notwithstanding the assignment of this Agreement to a Permitted Assignee (as
defined in Article 8.6(c)).
4.4 There will be "critical issues" meetings with the Owner and the
Architect (and, at Owner's option, Bovis), scheduled by both parties as
appropriate, to discuss all outstanding issues and to obtain direction of the
Owner for the advancement of the Project. Minutes from any such meeting prepared
by Architect or Bovis shall reflect the information discussed and the
authorizations and approvals granted at such meeting.
4.5 The Owner shall furnish surveys describing physical
characteristics, legal limitations and utility locations for the site of the
Project, and a written legal description of the site. The surveys and legal
information shall include, as applicable, grades and lines of streets, alleys,
pavements and adjoining property and structures; adjacent drainage;
rights-of-way, restrictions, easements, encroachments, zoning, deed
restrictions, boundaries and contours of the site; locations, dimensions and
necessary data pertaining to existing buildings, other improvements and trees;
and information concerning available utility services and lines, both public and
private, above and below grade, including inverts and depths. All the
information on the survey shall be referenced to a project benchmark.
4.6 Owner and/or Bovis shall furnish the services of geotechnical
engineers when such services are reasonably requested by the Architect. Such
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27
services may include but are not limited to test borings, test pits,
determinations of soil bearing values, percolation tests, evaluation of
hazardous materials, ground corrosion and resistivity tests, including necessary
operations for anticipating subsoil conditions, with reports and appropriate
professional recommendations.
4.7 The Owner shall furnish structural, mechanical, chemical, air
and water pollution tests, tests for hazardous materials, and other laboratory
and environmental tests, inspections and reports required by law or by any
agreement between Owner and a third party.
4.8 The Owner shall furnish all legal, accounting and insurance
counseling services as may be necessary at any time for the Project
4.9 The services, information, surveys and reports required by
Articles 4.5 through 4.8 shall be furnished at the Owner's expense, and the
Architect shall be entitled to rely upon the accuracy and completeness thereof.
4.10 Prompt written notice shall be given by the Owner to the
Architect if the Owner becomes aware of any fault or defect in the Project or
non-conformance with the Contract Documents.
4.11 Proposed language of certificates or certifications requested
of the Architect or Architect's Consultants shall be submitted to the Architect
for review and approval ten (10) business days prior to execution, except in the
event of an emergency or as a result of unforeseen events or time constraints.
The Owner shall not request certifications that would require knowledge,
responsibility, or services beyond the scope of this Agreement.
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28
4.12 The Owner shall furnish, or cause to be furnished, the services
of various Owner's Consultants when such services are reasonably required by the
scope of the Project and are reasonably requested by the Architect. The Owner
recognizes that the Architect's responsibility for these Consultants is defined
by Article 1.1.5. The Owner shall include in its contracts with all the Owner's
Consultants a requirement that they will cooperate with the coordination
requests and other appropriate efforts of the Architect.
4.13 Owner shall provide (or cause Bovis to provide) printing
services for, document storage of all originals of, and document inventory of,
all Drawings. Architect shall, as a Basic Service, provide document storage of
stamped copies of, and document inventory of, all Drawings.
ARTICLE 5
CONSTRUCTION COST
Evaluations of the Owner's conceptual or definitive estimates of
construction cost (including the GMP) that are performed by Architect at Owner's
request represent the Architect's best judgment as a design professional
familiar with the construction industry. It is recognized, however, that (a) the
development of the GMP is the responsibility of Owner and Bovis, not Architect,
(b) the Architect's responsibility with respect to the GMP and actual Project
costs shall only be as expressly set forth in this Agreement and (c) neither the
Architect nor the Owner has control over the cost of labor, materials or
equipment, or over competitive bidding, market or negotiating conditions.
Accordingly, the Architect cannot and does not
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29
warrant or represent that bids or negotiated prices will not vary from the
Owner's Project budget or from the GMP or any other estimate of construction
cost.
ARTICLE 6
USE OF ARCHITECT'S DRAWINGS
AND OTHER DOCUMENTS
6.1 (a) All Drawings and other work product of Architect
hereunder, whether in the form of prints, reproducible copies or computer data,
are and shall remain the property of Architect. All copies of Drawings and other
work product of Architect hereunder retained by Owner may be utilized by Owner
only for Owner's use with respect to the Project, and not for the construction
of any other project. (Owner's right to use the Drawings and other work product
of Architect hereunder for the Project shall survive any termination of this
Agreement.) The foregoing is subject to the provisions of Section 6.1(c).
(b) Notwithstanding the first sentence of paragraph (a) of
this Article 6.1, but subject to Article 6.3, Architect agrees not to utilize
(or permit to be utilized) any Drawing or other work product of Architect
hereunder, or any portion thereof, without the express prior written approval of
Owner.
(c) Provided that Architect has been paid in full for all
services rendered hereunder, and only to the extent permitted by applicable law
(Nevada Revised Statute Article 623.780), Architect hereby grants Owner the
right to use, and permit third parties to use as authorized by Owner, any
Drawing or other work product of Architect hereunder for any project other than
the Project; provided,
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30
however that (i) if Owner uses, or permits a third party to use, any Drawing or
other such work product, Owner shall indemnify and hold the Architect harmless
from and against all claims, including reasonable attorneys' fees, arising out
of such use and (ii) Architect shall retain its right under federal copyright
law to bring a claim against any third party that uses any Drawing or other such
work product without having properly obtained or derived the right to do so from
or through Owner.
(d) The provisions of this Article 6.1 shall survive any
termination of this Agreement.
6.2 In the event that the Owner obtains intellectual property rights
to themes, designs, plans, or other documents and materials developed for this
Project, the Owner will inform the Architect of such action and the Architect
will respect these rights as confidential and proprietary. The Owner shall
indemnify the Architect against any and all claims by third parties for
intellectual property rights and/or disputes related to themes, designs, plans,
or other documents and materials developed in connection with this Project and
obtained by Owner, except to the extent any such claim or dispute relates to a
breach by Architect of this Agreement or any other wrongful act of Architect.
6.3 Submission or distribution of documents to meet official
regulatory requirements or for similar purposes in connection with the Project
is not to be construed as publication in derogation of either the Architect's or
the Owner's rights.
6.4 The Architect shall have the right to photograph the exterior
and interior of the completed complex, and to include photographs and other
representa-
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31
tions of the design of the Project among the Architect's promotional and
professional materials once such material has been reviewed and approved by the
Owner, which approval shall not be unreasonably withheld. The Owner shall
provide professional credit for the Architect on the construction sign and in
the promotional materials for the Project as it relates to the development and
construction of the Project.
ARTICLE 7
TERMINATION, SUSPENSION OR ABANDONMENT
7.1 The Architect may terminate this Agreement (a) should the Owner
substantially fail to perform in accordance with the terms of this Agreement
(but subject to Article 9.4.3), or (b) if the Project is permanently abandoned
by the Owner. If the Architect's services are completely suspended for more than
sixty (60) consecutive days, the Architect may treat such suspension as a
permanent abandonment by the Owner. The Architect shall provide written notice
to the Owner specifying the basis for termination, and upon receipt, the Owner
shall have fourteen (14) days to cure the deficiency upon which the Architect is
basing its right to terminate. If the ability to cure will take more than
fourteen (14) days, and the Owner is making a conscientious effort to effect
said cure, then the cure period shall be extended for such reasonable time as
required, provided that this extended cure period shall not apply to the Owner's
failure to make payments to the Architect in accordance with Articles 9 and 10.
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32
7.2 If the Architect's services are suspended by the Owner, the
Architect shall be compensated for services performed prior to such suspension.
When the Project is resumed, Architect's compensation shall be equitably
adjusted to provide for expenses incurred in the interruption and resumption of
Architect's services.
7.3 The Owner may terminate this Agreement in whole or in part.
Termination may be (a) for the Owner's convenience; or (b) because of the
Architect's failure to substantially perform in accordance with the terms of
this Agreement. The Owner shall provide a notice of termination to the Architect
specifying the nature, extent and effective date of termination. If terminated
for default, the Architect shall have twenty-five (25) days to cure the
deficiency upon which the Owner is basing its right to terminate, so long as
Architect sends Owner a written notice of its intention to cure such deficiency
(which notice must include a reasonably detailed description of how Architect
intends to effectuate such cure) within seven (7) days after Architect receives
Owner's notice of termination. If the ability to cure will take more than
twenty-five (25) days, and the Architect is making a conscientious effort to
effect said cure, then the cure period shall be extended for such reasonable
time as required. If the Architect does not cure the deficiency within the
stated time, or the termination is one of convenience, the Architect shall (1)
immediately discontinue all services affected (unless the notice directs
otherwise); (2) deliver and assign to the Owner copies of all data, drawings,
specifications, reports, estimates, summaries, correspondence, logs and all
other information and materials generated and accumulated in performing its
services, whether completed or
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33
in progress, which the Owner may request; (3) enter into no further agreements
except as necessary to complete any continued portion of the Agreement; (4)
terminate all agreements with Architect's Consultants to the extent they relate
to the services terminated and, subject to receipt of funds from Owner for all
applicable bills and invoices, shall pay the Architect's Consultants for all
services rendered through the date of termination; (5) at Owner's option, assign
all consulting agreements to the Owner and provide the Owner with all right,
title, and interest of the Architect under the consulting agreements terminated,
in which case the Owner shall have the right to settle or to pay reasonable
termination costs arising out of the termination; (6) complete performance of
services not terminated; and (7) cooperate with the Owner and the replacement
architects and/or engineers as requested.
7.4 If this Agreement is terminated by Owner for default, the
Architect shall be compensated for the amount (the "Base Amount") due under this
Agreement for services performed as of the effective date of the termination,
including any remaining Surety Amount (as defined in Article 9.4.3) (unless the
applicable default of Architect is Architect's failure to prepare, stamp, file
and/or sign a Drawing when required or appropriate), less (a) any reasonable and
necessary costs incurred by the Owner to complete the Architect's remaining
services under the Agreement over and above the amounts that would have been
paid to the Architect hereunder to complete such remaining services; and (b) the
reasonable and necessary costs to the Owner to remedy defective or deficient
services by the Architect. No amount shall be paid by Owner to Architect
pursuant to this Article 7.4 until the amount of each of the items set forth in
clauses (a)-(b) of the preceding sentence has
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34
been determined, provided that any amount which Owner, in its sole discretion,
determines will in all circumstances be owed to Architect after the deductions
pursuant to said clauses (a)-(b) are determined and made, shall be paid by Owner
to Architect promptly after such termination. If the amount of said deductions
exceeds the Base Amount, the amount of such excess shall be paid by Architect to
Owner promptly after the amount of said deductions are determined.
7.5 If this Agreement is terminated by Owner for convenience, the
Owner shall make an equitable adjustment in the Basic Compensation (as defined
in Article 10.2) but shall allow no anticipated profit on unperformed services.
Said equitable adjustment shall take into account the following:
7.5.1 All portions of the Basic Compensation due Architect for
Basic Services performed through the effective date of termination;
7.5.2 All reimbursable costs under this Agreement not
previously paid for the performance of services up to the effective date of the
termination, plus those costs that may continue for a reasonable time with the
written approval of the Owner, provided that Architect shall discontinue those
costs as rapidly as possible;
7.5.3 Payment in accordance with the provisions hereof for
Additional Services performed through the effective date of termination;
7.5.4 The cost of settling and paying termination settlements
under terminated consultant agreements that are properly chargeable to the
terminated portion of this Agreement;
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7.5.5 The reasonable costs of settlement of the terminated
services, including accounting, legal, clerical, and other expenses reasonable
and necessary for the preparation of, or review of, termination settlement
proposals and supporting data;
7.5.6 Any advance payments to the Architect for the terminated
portion of the Architect's services not previously credited to the Owner's
account;
7.5.7 Services performed by Architect in accordance with the
last sentence of Article 7.3; and
7.5.8 Any outstanding sum owed to the Owner as the reasonable
and necessary cost to remedy defective or deficient services by the Architect.
In addition, if this Agreement is terminated by the Owner for convenience at any
time, then (a) the Owner shall pay to the Architect, in addition to all amounts
due Architect pursuant to the foregoing provisions of this Article 7.5, a
severance payment of Three Million Dollars ($3,000,000.00), and (b) the Owner
shall (1) provide, simultaneously with the above payment, a letter of
recognition to the Architect for its design services, (2) if Architect is
terminated after the Construction Documents have been approved by Owner,
identify Architect as the architect for the Project in all marketing and
publicity for the Project and (3) make no negative statements to any third party
with respect to the performance of the Architect's services on the Project.
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ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 This Agreement shall be governed by the laws of the state of
Nevada applicable to contracts made and to be wholly performed within such
state.
8.2 The obligations and liabilities of Architect hereunder are the
joint and several obligations and liabilities of each of the entities
constituting Architect. In addition, each of The Stubbins Associates, Inc. and
Wimberly Allison Tong & Goo, Inc. (each, an "Affiliated Company") hereby agrees
that it shall be jointly and severally liable (with the other Affiliated Company
and each of the entities constituting the Architect) for the obligations and
liabilities of Architect hereunder.
8.3 Causes of action between the parties to this Agreement
pertaining to acts or failures to act shall be deemed to have accrued, and the
applicable Nevada statute of limitations shall commence to run, four (4) months
after the date of Substantial Completion of the Project; provided, however, that
said causes of action shall accrue at a later date in those instances when the
Owner and/or its agent could not know, through the exercise of reasonable
diligence, all material facts essential to show the element of said causes of
action.
8.4 The Owner (on behalf of itself and Owner's Consultants) and
Architect (on behalf of itself and Architect's Consultants) waive all rights
against each other and against Bovis, trade contractors and subcontractors,
consultants, agents and employees of the other for damages to the Project
covered by any property insurance,
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but only to the extent of actual recovery of any insurance proceeds relating to
such damage. The Owner and Architect each shall require similar waivers from
their consultants and agents, and Owner shall require similar waivers (naming
Architect and Architect's Consultants) from its trade contractors,
subcontractors and Bovis.
8.5 The Architect assumes no duty or responsibility hereunder which
may be construed as being for the benefit of and thereby enforceable by Bovis,
or any trade contractor or subcontractor, or any of their bonding companies, it
being understood that subject to Article 8.8, the Architect's obligations are to
the Owner and Owner's successors and permitted assigns.
8.6 (a) The Agreement shall be binding upon and inure to the benefit
of Owner and Architect and their respective successors and permitted assigns.
(b) The Architect shall not assign or transfer its rights or
obligations under this Agreement without the prior written consent of the Owner.
(c) Owner shall have the right to assign this Agreement to one
or more entities affiliated with Owner so long as Owner's ownership of the
Project and rights under the loan documents with Lender (as defined below) are
assigned to such entity or entities (such entity or entities, the "Permitted
Assignee"). In the event Owner assigns its interest under the Contract Documents
to a Permitted Assignee, such Permitted Assignee shall assume Owner's
obligations under this Agreement, and Architect agrees that Owner shall
thereupon be completely released from any liability under this Agreement,
whether accruing prior to or after the date of assignment (except with respect
to any breaches by Owner prior to the date of assignment), and Architect shall
look solely to the Permitted Assignee for performance of Owner's
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38
obligations under this Agreement. In addition, Owner shall have the right to
assign this Agreement, as it relates to Phase II of the Project only, to a
Permitted Assignee, so long as Owner's ownership of the land on which Phase II
is to be constructed is held by such Permitted Assignee. In the event such
assignment is made, such Permitted Assignee shall assume Owner's obligations
under this Agreement with respect to Phase II only, Owner shall thereupon be
completely released from any liability under this Agreement relating to Phase
II, whether accruing prior to or after the date of assignment (except with
respect to any breaches by Owner prior to the date of assignment), and Architect
shall look solely to the Permitted Assignee for the performance of Owner's
obligations under this Agreement with respect to Phase II. Notwithstanding any
of the foregoing, if a Permitted Assignee is two or more entities, (a) the
obligations and liabilities of Owner hereunder that are assigned to such
Permitted Assignee pursuant to the foregoing shall be the joint and several
obligations and liabilities of each of such entities and (b) such entities shall
inform Architect in writing which one (and only one) of such entities shall have
the power and authority to act as (and bind) Owner with respect to each right of
Owner hereunder and each decision, authorization, approval, order and
confirmation to be made by Owner hereunder (subject in all events to the
provisions of Article 4.3). In all events, Architect shall have no recourse
against the officers, directors, employees, agents and direct and indirect
owners of Owner in connection with the obligations and liabilities of Owner
hereunder.
(d) Owner shall have the right to assign this Agreement as
security to one or more of its lenders (collectively, "Lender"). If this
Agreement is
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so assigned to Lender, Architect will, on request, execute and deliver such
documents and instruments as Lender may reasonably request in connection with
this Agreement and such assignment, including, without limitation, an agreement
whereby Architect agrees to perform its services hereunder for Lender or its
designee in the event that any default by Owner shall occur under the agreement
with respect to which such assignment has been made.
(e) Architect acknowledges and confirms that if this Agreement
is terminated for any reason whatsoever, Owner shall have the right to engage
either of the entities constituting Architect (or any affiliate thereof) to
perform architectural and engineering services in connection with the Project or
any other project. There is, and there shall be, no agreement between the
entities constituting Architect prohibiting such an engagement. The provisions
of this Article 8.6(e) shall survive any termination of this Agreement.
8.7 This Agreement represents the entire and integrated agreement
between the Owner and Architect and supersedes all prior negotiations, repre
sentations or agreements between them, whether written or oral, including,
without limitation, the letter agreements described in Article 2.2 and the
December 19, 1996 Memorandum of Understanding. This Agreement may be amended
only by written instruments signed by both Owner and Architect.
8.8 (a) Nothing contained in this Agreement shall create a
contractual relationship with or a cause of action in favor of a third party
(including Bovis) against either the Owner or Architect, provided that, to the
extent such
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40
provisions may be enforceable under applicable law, Homer Rissman shall be
entitled to rely on, and enforce against Architect, the provisions of Article
9.4.3.
(b) Notwithstanding the fact that Bovis is not a third party
beneficiary of this Agreement and therefore has no rights hereunder, Owner
agrees that if Bovis nevertheless asserts a contractual claim (for itself and
not on behalf of or for the benefit of Owner) against Architect solely on
account of a breach or alleged breach by Architect of this Agreement, Owner
shall indemnify and hold harmless Architect from and against all losses, costs
and expenses, including reasonable attorneys fees, arising out of such claim.
8.9 Unless otherwise provided in this Agreement, the Architect shall
have no responsibility for the discovery, presence, handling, removal or
disposal of or exposure of persons to hazardous materials in any form at the
Project site, including but not limited to asbestos, asbestos products,
polychlorinated biphenyl (PCB) or other toxic substances.
8.10 All services performed for the Architect by an Architect's
Consultant shall be pursuant to an appropriate written agreement which shall
contain provisions that (a) preserve and protect the rights of the Owner with
respect to the services to be performed under the consulting agreement, (b)
obligate such consultant to comply with the provisions in this Agreement
relating to its services, and (c) provide for assignability of such agreement to
the Owner or Owner's lender(s) as called for hereinabove.
8.11 (a) Subject to the provisions of paragraph (b) of this Article
8.11, each party to this agreement (the "indemnifying party") shall indemnify
and
<PAGE>
41
hold harmless the other party, and such other party's officers, directors,
direct and indirect owners, agents and employees (and (a) Architect's
Consultants, if the indemnifying party is Owner and (b) Bovis and Owner's
Consultants, if the indemnifying party is Architect), from and against all
claims, suits, losses, damages, costs and expenses arising out of or relating to
this Agreement or the Project, to the extent that the same (a) are attributable
to bodily injury, sickness, disease or death, or to damage or destruction of
tangible property, and (b) are the result of the negligent acts or omissions or
willful misconduct, in whole or in part, of the indemnifying party. Such express
indemnity obligation shall expire twelve (12) months after the date of
Substantial Completion of the Project, but such express indemnity obligation
shall not be construed to negate, abridge, or reduce the other duties or
obligations (of indemnity or otherwise) which the indemnifying party owes to the
other party under this Agreement or applicable law.
(b) Notwithstanding any other provision hereof, to the extent
any liability of Architect, either (a) in connection with a breach by Architect
of this Agreement or (b) pursuant to paragraph (a) of this Article 8.11, is
covered by insurance required to be maintained by Architect pursuant to Article
8.14, such liability shall not exceed the greater of (i) the amount of proceeds
actually paid by the applicable insurance company with respect to such liability
and (ii) the amount of such proceeds that would have been paid by such insurance
company if (1) Architect had fully complied with the provisions of Article 8.14
and had prosecuted the applicable claim with such insurance company with
diligence and (2) such insurance company had the financial wherewithal to pay
such proceeds and would pay such proceeds if
<PAGE>
42
legally obligated to do so, provided that the foregoing shall not apply to the
extent Architect's liability is due to its willful or intentional misconduct or
gross negligence.
8.12 Until otherwise directed by Architect, all written notices from
Owner to Architect shall be sent to:
W. Easley Hamner, FAIA
TSA of Nevada, LLP
c/o The Stubbins Associates, Inc.
1033 Massachusetts Avenue
Cambridge, MA 02138
Michael R. Paneri, AIA
WAT&G, Inc. Nevada
2260 University Drive
Newport Beach, CA 92660
8.13 Until otherwise directed by Owner, all written notices from
Architect to Owner shall be sent to:
Stuart Mason
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard, South
Las Vegas, NV 89109
David Friedman
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard, South
Las Vegas, NV 89109
The Owner shall maintain a staff of personnel, known as Owner's Development
Management Staff, to carry out the functions and duties of the Owner throughout
the Project and under this Agreement. Any such functions and duties may, at
Owner's option, be delegated to Bovis (and Bovis' personnel). The preceding two
(2) sentences are subject to Article 4.3.
<PAGE>
43
8.14 Each of the entities constituting Architect shall procure and
maintain, at all times during the term of this Agreement and for a period three
(3) years thereafter, at its own cost and expense, the insurance coverage and
limits set forth in Appendix F. All such insurance shall be placed with
insurance carriers licensed to do business in Nevada on an admitted or surplus
lines basis. The Architect shall furnish the Owner (and construction lenders, if
requested) certificates or certifications of insurance giving evidence of the
required coverage within one month of the signing of this Agreement, and on an
annual basis thereafter. All insurance shall provide for one month of prior
written notice to be given to the Owner and construction lenders in the event
coverage is substantially changed, canceled, or non-renewed. Architect shall
cooperate with Owner in connection with the obtaining and maintaining by Owner
of its so-called "wrap-up" insurance, and notwithstanding the foregoing
provisions of this Article 8.14, Architect shall not be required to procure and
maintain the above-described insurance to the extent, if any, that such
"wrap-up" insurance includes the above-described insurance and is reasonably
satisfactory to Architect.
8.15 Architect agrees as part of its Basic Services hereunder to
follow any administrative or reporting procedures reasonably required by Lender
and to cooperate with Owner in satisfying the reasonable requests and
requirements of such Lender.
8.16 In the event that any term or provision, or part or
applicability thereof, of this Agreement is held to be illegal, invalid or
unenforceable under law, regulations or ordinances of any federal, state or
local governments to which this
<PAGE>
44
Agreement is subject, such term or provision, or part or applicability thereof,
shall be deemed severed from this Agreement and the remaining term(s) and
provision(s) shall remain unaffected thereby.
ARTICLE 9
PAYMENTS TO THE ARCHITECT
9.1 Payments on Account of Basic Services.
9.1.1 Owner and Architect acknowledge and confirm that as of
the execution date of this Agreement, Architect has been paid for all services
performed and expenses incurred through August 30, 1997, except that the Surety
Amount described in Article 9.4.3 has not been paid.
9.1.2 In each calendar month beginning with November, 1997,
Architect shall deliver to Owner no later than the 20th day of such calendar
month a properly completed preliminary Request for Payment in the form of
Appendix B attached hereto ("Payment Request"). Each preliminary Payment Request
shall cover Basic Services and Additional Services performed (and anticipated to
be performed) by Architect in such calendar month, provided that the preliminary
Payment Request delivered in November, 1997 shall cover Basic Services and
Additional Services performed in all prior months, through and including
November, 1997, not covered by previous payments. After delivery to Owner of a
preliminary Payment Request, Owner shall promptly (and in all events within
three (3) business days) give Architect any preliminary comments it may have
with respect thereto. Promptly after receipt of such comments, and in no event
later than the 26th day of such calendar month,
<PAGE>
45
Architect shall submit to Owner a final Payment Request, which final Payment
Request shall cover the same items as the corresponding preliminary Payment
Request, with appropriate changes in response to Owner's comments. Subject to
Article 9.4, Owner shall pay Architect the amount due with respect to a final
Payment Request within seventeen (17) business days after receipt thereof
(provided that such seventeen-business day period may be extended as necessary
in connection with Lender's disbursement procedures, but not more then ten (10)
additional business days).
9.1.3 Each final Payment Request must, in order to be
considered properly delivered to Owner, be accompanied by a lien release or
waiver from Architect covering all services performed to the last day of the
period covered by such final Payment Request, conditional upon receipt of
payment thereof.
9.2 Payments on Account of Additional Services. Payments on account
of the Architect's Additional Services and Reimbursable Expenses shall be made
in accordance with Articles 9.3, 10.3 and 10.4 upon receipt of the Architect's
statement of services rendered and/or expenses incurred. Such statements shall
be submitted with each preliminary and final Payment Request and payments in
connection therewith shall be due when the payment with respect to the
applicable final Payment Request is due.
9.3 Reimbursable Expenses.
9.3.1 Reimbursable Expenses are in addition to compensation
for Basic and Additional Services and include the actual, reasonable and
necessary
<PAGE>
46
expenses incurred by the Architect in the performance of its services hereunder
and described in the following Clauses:
9.3.1.1 Expense of transportation in connection with
the Project, which are being paid for by Owner directly through GWV Travel and
include first class air fare for principals of Architect only; living expenses
in connection with out-of-town travel which shall not exceed an average per diem
rate of $75 for non-lodging expenses; long-distance communications including fax
charges; and fees paid for securing approval of authorities having jurisdiction
over the Project. Notwithstanding the foregoing, travel and lodging expenses
shall not be Reimbursable Expenses unless the applicable travel and lodging
arrangements are booked through GWV Travel. Notwithstanding any of the
foregoing, until June 15, 1997, all travel, transportation and living expenses
associated with James Beyer's, William McGee's, Chris Belknap's and Michael
McKay's on-site services shall not be Reimbursable Expenses.
9.3.1.2 Home office expense of CADD plotting,
reproductions, and long distance communications including fax, courier delivery
charges and postage, provided such expenses are not incurred as a result of
Architect's failure to provide on-site staff as required by the provisions
hereof.
9.3.1.3 Expense of renderings, models and mock-ups
requested in writing by the Owner.
<PAGE>
47
9.4 Payments Withheld.
9.4.1 No deductions shall be made from the Architect's
compensation hereunder except for amounts disputed by the Owner in a timely
manner as provided in this Article 9.4. Payments for all amounts which are not
disputed shall be made in accordance with the third sentence of Article 9.1.2,
and Article 9.2. If the Owner disputes all or part of an invoice or final
Payment Request presented by the Architect (Architect acknowledging and
confirming that Owner has the right to make an objection to any part of a final
Payment Request even if such objection was not made with respect to the
applicable preliminary Payment Request), the parties agree to take the following
steps to resolve the dispute:
9.4.1.1 Within a reasonable period of time, but not
later than seven (7) business days after receipt of the invoice or Payment
Request, the Owner shall notify the Architect, in writing, of the disputed
amount of the invoice and the nature of the dispute. Any amount not so disputed
shall be payable on the normal due date.
9.4.1.2 Promptly after such notification is given and
in any event not later than seven (7) business days thereafter, Owner and
Architect shall meet and attempt in good faith to resolve the dispute. If the
dispute is resolved, the Owner shall pay such amount within ten (10) days after
such resolution.
9.4.1.3 If the dispute is not resolved within a
reasonable period of time, either party may submit the matter to arbitration in
accordance with the Construction Industry Arbitration Rules of the American
Arbitration Association ("AAA"), provided that the following special rules shall
apply to such arbitration: (a)
<PAGE>
48
the place of filing, administration, and hearing shall be the Las Vegas office
of the AAA; (b) there shall be a single arbitrator, appointed in accordance with
the AAA's procedures; (c) the arbitrator's decision shall be based solely upon
written submissions by the parties unless the arbitrator determines, after
reviewing such submissions, that a hearing is required; (d) such hearing may be
held by conference call and, in any event, will not extend for more than four
hours, allocated between the parties in such proportions as the arbitrator may
determine; and (e) the arbitrator shall render his decision within five (5)
business days after the later of his receipt of all written submissions or the
date of the hearing. This decision shall be final, and judgment may be entered
upon it in accordance with applicable law in any court having jurisdiction
thereof. If such decision includes a determination that the disputed amount
shall be paid by the Owner in whole or in part, the Owner shall pay such amount
within five (5) business days after its receipt of the arbitrator's decision.
9.4.2 It shall be a material breach of this Agreement for the
Owner to withhold payment of amounts invoiced by the Architect for any reason
except as permitted by this Article 9.4.
9.4.3 Architect shall not be entitled to terminate this
Agreement for non-payment by Owner of any amount, provided that Architect may,
but in accordance with Article 7.1 only, terminate performance for non-payment
of amounts which have not been timely disputed, or which have been agreed or
determined to be due pursuant to the procedures described in this Article 9.4.
Subject to the preceding sentence, so long as this Agreement is in effect, under
no circumstances shall Architect delay or withhold the preparation, stamping,
signing or filing of any
<PAGE>
49
Drawing in response to any nonpayment by Owner of any amount or for any other
reason. Owner and Architect acknowledge and confirm that as of the execution
date of this Agreement, Owner has withheld, out of amounts properly due
Architect for services rendered through November 30, 1996, $250,000 (the "Surety
Amount"). The Surety Amount shall be reduced over time by adding $50,000 to the
amount due to Architect in connection with each Payment Request, beginning with
the Payment Request delivered to Owner in November, 1997. If, for any reason
whatsoever, Architect does not prepare, stamp, file and/or sign a Drawing when
required or appropriate, Owner shall, subject to applicable law, have the right,
in its sole discretion, to list Homer Rissman of Rissman & Rissman as an
Associated Architect/Architect of Record for the Project and to have Mr. Rissman
prepare, stamp, file and/or sign such Drawing (Architect hereby granting Mr.
Rissman the right to take such action (subject to applicable law)). In the event
Mr. Rissman's services are at any time used by Owner pursuant to the foregoing,
the entire Surety Amount remaining at the time shall be paid by Owner to Mr.
Rissman as compensation for his services. Owner's use of Mr. Rissman and the
Surety Amount pursuant to the foregoing is in addition to all other rights and
remedies Owner may have hereunder or otherwise available to it at law or in
equity in connection with any such failure by Architect to prepare, stamp, file
and/or sign a Drawing. In connection herewith, Architect will, upon request,
provide Homer Rissman with copies of all Drawings produced by Architect for the
Project through the date of such request.
<PAGE>
50
9.5 Architect's Accounting Records. The Architect shall keep
detailed accounts and records of Reimbursable Expenses, billings for Basic
Services, expenses pertaining to Additional Services and services performed on
the basis of hourly billing rates, and shall also keep copies of all Drawings.
Such accounts shall be kept in accordance with generally accepted accounting
practice and this information and records shall be retained by the Architect for
a period of not less than three (3) years. Such records shall be made available
to the Owner or the Owner's authorized representative at mutually convenient
times for the purposes of auditing the Architect's billings to the Owner, and
such audit shall be completed within twelve (12) months after completion of
Architect's services. Architect shall notify Owner prior to disposal of any such
records and shall allow Owner to retain them.
9.6 Method of Payment. All payments from Owner to Architect shall be
paid by check or, at Architect's written request, by wire transfer to an account
designated in writing by Architect.
9.7 Payment is not Approval. No payments made by Owner as of the
execution date of this Agreement or pursuant to a Payment Request or invoice as
hereinabove provided shall be deemed to signify or imply approval of the
services covered by such application, and none of them shall operate as an
admission on the part of Owner as to the propriety or accuracy of any of the
amounts covered by any final Payment Request or invoice. Furthermore, when
computing subsequent payments, Owner shall not be bound by any entries in
previous final Payment Requests and invoices and shall be permitted to make
corrections for factual, mathematical or other manifest errors therein. Payments
made by Owner shall
<PAGE>
51
represent an acknowledgment that Owner believes that Architect has performed the
services for which such payments have been made but shall not constitute a
waiver by Owner of any right to claim that such services were not fully
performed or were performed negligently or in breach of this Agreement.
ARTICLE 10
BASIS OF COMPENSATION
The Owner shall compensate the Architect as follows:
10.1 As of the date hereof, Owner has paid to Architect the amounts
set forth in Article 9.1.1. All such amounts are part of, not in addition to,
the amounts due Architect pursuant to the further provisions of this Article 10.
10.2 Basic Compensation.
10.2.1 FOR BASIC SERVICES (including, subject to Article 2 of
Appendix D, Basic Services performed by Architect's Consultants) Architect's
compensation ("Basic Compensation") shall be computed and paid as follows:
10.2.2 Subject to Article 10.2.5, the Basic Compensation for
all Basic Services shall be Thirty-Two Million Nine Hundred Thousand Dollars
($32,900,000.00).
10.2.3 Basic Compensation payments shall be made in accordance
with Article 9.1.2 and each properly completed final Payment Request.
10.2.4 Upon the completion of each phase of the Project or
designated portion thereof, Owner shall be afforded access to the accounts and
records of Architect in accordance with Article 9.5.
<PAGE>
52
10.2.5 To the extent that, in accordance with the last
sentence of Article 8.14, Architect does not have to procure and maintain the
insurance described in the first sentence of Article 8.14, there shall be an
appropriate reduction in the Basic Compensation to reflect the resulting cost
savings to Architect.
10.3 Compensation for Additional Services.
10.3.1 For ADDITIONAL SERVICES (except those covered
by Articles 10.3.2 and 10.3.3), compensation shall be at the hourly rates set
forth in Appendix G, which rates shall be reasonably adjusted annually.
10.3.2 FOR ADDITIONAL SERVICES PERFORMED BY ARCHITECT'S
CONSULTANTS, compensation shall be a multiple of one point zero (1.0) times the
amounts billed to the Architect for such services.
10.3.3 FOR ADDITIONAL SERVICES LISTED IN APPENDIX I,
compensation shall be as set forth in Appendix I.
10.4 Reimbursable Expenses.
10.4.1 FOR REIMBURSABLE EXPENSES, Owner shall pay Architect a
multiple of one point zero (1.0) times such actual and reasonable expenses. It
is specifically understood that detailed back-up for these expenses will not be
provided, but the Architect's records will be available as stipulated in Article
9.5.
<PAGE>
53
ACCEPTANCE
This Agreement entered into as of the day and year first written
above.
OWNER:
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., its
managing member
By: /s/ William P. Weidner
---------------------------------------
Name: William P. Weidner
Title: President
ARCHITECT:
TSA OF NEVADA, LLP
By: /s/ W. Easley Hamner
---------------------------------------
Name: W. Easley Hamner
Title: Principal
WAT & G, INC. NEVADA
By: /s/ Michael R. Paneri
---------------------------------------
Name: Michael R. Paneri
Title: Principal
EXECUTED SOLELY FOR THE
PURPOSE OF AGREEING TO BE
BOUND BY THE SECOND
SENTENCE OF ARTICLE 8.2:
<PAGE>
54
THE STUBBINS ASSOCIATES, INC.
By: /s/ W. Easley Hamner
----------------------------------------
Name: W. Easley Hamner
Title: Principal
By: /s/ Richard Green
----------------------------------------
Name: Richard Green
Title: Chairman
WIMBERLY ALLISON TONG &
GOO, INC.
By: /s/ Michael R. Paneri
----------------------------------------
Name: Michael R. Paneri
Title: Principal
<PAGE>
APPENDIX D
CONSULTANTS
1. Owner and the Architect have agreed that Architect will engage
the following Architect's Consultants on terms satisfactory to Architect:
Structural Engineer
Mechanical/Plumbing Engineer
Electrical Engineer
Fire Protection Engineer
2. Architect will in addition engage the following Architect's
Consultants, provided that the terms of their engagement are subject to Owner's
approval. These Architect's Consultants will be paid directly by Owner and all
amounts paid to them will be in addition to, not in reduction of, Architect's
compensation hereunder:
Fire/Life Safety Consultant
Hardware Consultant
Renderers/Illustrators
Vertical Transportation Consultant
3. Owner's Consultants may include, but are not limited to: Model
Makers (provided that at Owner's option, Model Makers may be
Architect's Consultants pursuant to paragraph 2 above).
Retail/Entertainment Consultant (provided that at Owner's
option, the Retail/Entertainment Consultant may be an
Architect's Consultant pursuant to paragraph 2 above)
<PAGE>
2
Acoustical Consultant
Audio/Visual Consultant
Civil/Traffic Engineer
Food Service Consultant
Geotechnical Engineer
Interior Designer (Hotel Suites)
Interior Designer
<PAGE>
APPENDIX E
DUTIES, RESPONSIBILITIES AND LIMITATIONS OF
AUTHORITY OF THE ARCHITECT'S
PROJECT REPRESENTATIVE
1. GENERAL. The Project Representative shall communicate with the
Owner and Bovis under the direction of the Architect. The Project Representative
shall not communicate with trade contractors, subcontractors or material
suppliers except with the full knowledge and approval of Bovis and Owner. The
responsibilities and obligations of the Architect as set forth in the body of
this Agreement shall not be modified by the furnishing of a Project
Representative, except that Architect shall be responsible for causing its
Project Representative to carry out his duties as set forth in this Appendix E
and the body of this Agreement.
2. DUTIES AND RESPONSIBILITIES.
The Project Representative shall:
2.1 Perform on-site observations of the progress and quality
of the Work as may be reasonably necessary to determine whether the Work is
being performed in a manner indicating that the Work when completed will be in
conformance with the Contract Documents. Notify Bovis and Owner immediately if,
in the Project Representative's opinion, Work does not conform to the Contract
Documents or requires special inspection or testing.
2.2 Monitor Bovis' and trade contractors' construction
schedules on an ongoing basis and alert Owner and Bovis to conditions that may
lead to delays in completion of the Work.
<PAGE>
2
2.3 Receive and respond to requests from Bovis for
information.
2.4 Upon Owner's request, take actions in connection with
Article 2.6.9 of the Agreement.
2.5 Attend meetings as directed by the Architect and prepare a
written report to be forwarded to the Owner and Bovis on the proceedings.
2.6 Observe tests required by the Contract Documents; prepare
written records and reports to be forwarded to the Architect, Owner and Bovis on
test procedures implemented and test results; verify testing invoices to be paid
by the Owner.
2.7 Maintain Architect's records at the construction site in
an orderly manner. Include correspondence, Contract Documents, Change Orders,
Construction Change Directives, reports of site meetings, Shop Drawings, Product
Data, and similar submittals; supplementary drawings, color schedules, requests
for payment; and names, addresses and telephone numbers of Bovis, trade
contractors and principal material suppliers.
2.8 In accordance with Article 2.6.7 of the Agreement, assist
the Architect in reviewing shop Drawings, Product Data and Samples. Notify the
Owner and Bovis if any portion of the Work requiring Shop Drawings, Product Data
or Samples is commenced before such submittals have been approved by the
Architect. Receive and log Samples required at the site, notify the Architect
when they are ready for examination, and record the Architect's approval or
other actions; maintain custody of approved Samples.
<PAGE>
3
2.9 Observe Bovis' record copy of the Drawings, Change Orders
and Scope Changes at intervals appropriate to the stage of construction and
notify the Architect and Owner of any apparent failure by Bovis to maintain
up-to-date records.
2.10 In accordance with Article 2.6.10 of the Agreement,
assist in conducting inspections to determine the date(s) of Substantial
Completion and the date(s) of Final Completion.
2.11 Assist in receipt and transmittal to the Owner of
documentation required of Bovis at completion of the Work in accordance with
Article 2.6.10 of the Agreement.
2.12 Execute and deliver the certificates described in the
last sentence of Article 2.6.10 of the Agreement.
3. LIMITATIONS OF AUTHORITY. The Project Representative shall not
exceed the authority of the Architect under the Agreement. Supplementing the
foregoing, the Project Representative shall NOT:
3.1 Authorize deviations from the Contract Documents.
3.2 Approve substitute materials or equipment except as
authorized in writing by the Architect and Owner.
3.3 Personally conduct or participate in tests or third party
inspections except as authorized in writing by the Architect and Owner in
accordance with Article 2.6.8 of the Agreement.
3.4 Assume any of the responsibilities of Bovis, Bovis'
superintendent or trade contractors.
<PAGE>
4
3.5 Expedite the Work for Bovis.
3.6 Have control over or charge of or be responsible for
construction means, methods, techniques, sequences or procedures, or for safety
precautions and programs in connection with the Work.
3.7 Authorize or suggest that the Owner occupy the Project in
whole or in part.
3.8 Issue a Certificate for Payment or Certificate of
Substantial Completion.
3.9 Prepare, or certify to the preparation of, a record copy
of any Drawings or Scope Changes.
3.10 Reject Work or require special inspection or testing
except as authorized in writing by the Architect and Owner in accordance with
Article 2.6.8 of the Agreement.
3.11 Accept, distribute, or transmit submittals made by Bovis
or any trade contractor that are not required by the Contract Documents.
3.12 Order Bovis or any trade contractor to stop the Work or
any portion thereof.
<PAGE>
APPENDIX F
INSURANCE REQUIREMENTS
Workers' Compensation Insurance - In accordance with Nevada
Statutory requirements and Stop Gap Liability insurance with limits of:
$1,000,000 -Per Accident
$1,000,000 -Per Employee Disease
$1,000,000 -Policy Aggregate Disease
Commercial General Liability Insurance (excludes Professional
Liability) covering liability arising out of the performance of this Agreement
with limits of:
$1,000,000 Combined single limit Bodily
Injured and Property Damage
This policy shall name the Owner (and the Lender, if requested) as additional
insureds with respect to the Architect's operations in connection with this
agreement.
Professional Liability Insurance - issued to and covering the
liability of the Architect for any and all errors or omissions committed by the
Architect, its agents, consultants or its employees, in the performance of this
Agreement. The Architect shall use its best efforts to maintain such coverage
during the term of this Agreement and at least three years following final
completion of the Work. This insurance shall have limits of liability of not
less than One Million Dollars ($1,000,000.00) per occurrence and in the
aggregate.
<PAGE>
2
Automobile Liability Insurance - covering the liability of the
Architect arising out of the use of all owned, non-owned and hired vehicles
which bear, or are required to bear, license plates according to the laws of the
jurisdiction in which they are to be operated. The policy shall name the Owner
(and the Lender, if requested) as additional insurers with respect to the
Architect's operations in connection with this Agreement. Coverage under this
policy shall have limits of liability of not less than One Million dollars
($1,000,000) per occurrence, combined single limit for bodily injury and
property damage liability.
Claims Made Insurance - if any insurance specified above shall be
provided on a claims-made basis, then in addition to the coverage requirements
above, such policy shall provide that:
1. The policy retroactive date coincides with or precedes the
Architect's start of services (including subsequent policies purchased as
renewals or replacements).
2. The Architect shall make every effort to maintain similar
insurance for at least three years following project completion, including the
requirement of naming the Owner (and construction lender, if requested) as
additional insured(s).
3. If the insurance is terminated for any reason, the Architect
agrees to purchase an extended reporting provision of at least two years to
report claims arising from services performed in connection with the Agreement.
<PAGE>
3
4. The policy allows for reporting of circumstances or incidents
that may give rise to future claims.
<PAGE>
APPENDIX G
HOURLY BILLING RATE
POSITION BILLING RATE/HOUR
-------- -----------------
Principal $260
Senior Associate $210
Associate $157
Senior Staff $175
Staff Level I $150
Staff Level II $115
Staff Level III $95
Staff Level IV $68
Staff Level V $50
<PAGE>
APPENDIX H
CONSTRUCTION DOCUMENT PACKAGES
Package Name General Scope
1. South Tower Excavation
Excavation/ Lowest level vertical elements
Foundation Utility entrance points
Structure for 1st 3-4 levels
Imbeds
Sleeves
2. South Tower Structure
Structure MEP/FP rough-ins
Exterior wall supports
3. South Tower Architectural partitions & doors
Main Construction MEP/FP distribution
Exterior wall Toilets, including
colors Interior finishes (nic color
selection, specialty lighting,
movable partitions, furniture, or
accessories)
4. South Podium Excavation
Excavation/ Foundations
Foundation Lowest level vertical elements
Utility entrance points
Imbeds
Sleeves
5. South Podium Structure
Structure MEP/FP rough-ins
Exterior wall supports
6. South Podium Architectural partitions & doors
Main Construction MEP/FP distribution
Exterior wall Toilets, including
colors Interior finishes (nic color
selection, specialty lighting,
movable partitions, furniture, or
accessories)
<PAGE>
2
7. East Site Excavation
Excavation/ Foundations
Foundation Lowest level vertical elements
Utility entrance points
Imbeds
Sleeves
8. East Site Structure
Structure MEP/FP rough-ins
Exterior wall supports
9. East Site Architectural partitions & doors
Main Construction MEP/FP distribution
Exterior wall Toilets, including
colors Interior finishes (nic color
selection, specialty lighting,
movable partitions, furniture, or
accessories)
10. North Tower Structure
Main Construction MEP/FP rough-ins
Architectural partitions & doors
MEP/FP distribution Exterior wall
Toilets, including colors Interior
finishes (nic color selection,
specialty lighting, movable
partitions, furniture, or
accessories)
11. North Podium Excavation
Construction Foundations
Lowest level vertical elements
Utility entrance points Structure
MEP/FP rough-ins Architectural
partitions & doors MEP/FP
distribution Exterior wall Toilets,
including colors Interior finishes
(nic color selection, specialty
lighting, movable partitions,
furniture, or accessories)
<PAGE>
1
APPENDIX I
APPROVED ADDITIONAL SERVICES
<TABLE>
<CAPTION>
Description Comments Compensation
<S> <C> <C>
South Garage Architectural/Engineering design $874,000
for competitive bidding.
Sales/Marketing Compound (i.e Site Planning, interior design layout $61,403
"preview center") coordination
Change from Gas to Steam Overall design coordination, floor plan $86,500
revisions, revise engineering drawings
for wiring and controls and revise
engineering drawings for boilers and
piping
Plaza Re-design Re-design of the front Plaza $46,500
involving deletion of eighteen column
pylons along Las Vegas Boulevard and
their replacement with planting areas
and fountains.
Electric Changes 12.5 kV to 2Electrical redesign services $100,000
as a result of value engineering
Cipriani Hotel Conceptual planning and design to *
provide a 300 room hotel above the
North Parking Garage.
Time Share Study Conceptual planning and design to *
provide 380 (max) Timeshare unit
above the South Parking Garage.
Ground Water Treatment Provision of a ground water *
treatment plant * within the building.
Suite Remix Relocation of suites throughout the Tower. *
RWDI Damper Design Modification to East Property Ballroom *
structure to reduce floor bounce.
Rotoclone Provision Provisions to install Rotoclone exhaust *
system.
</TABLE>
*Hourly rates set forth in Appendix G, which rates shall be
reasonably adjusted annually.
<PAGE>
APPENDIX J
ASSUMPTIONS
See Section 2C of Exhibit B of the Bovis Agreement.
================================================================================
Prepared By and Recorded At The
Request Of: Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Steven Simkin, Esq.
When Recorded Return To:
Lionel Sawyer & Collins
1700 Bank of Americas Plaza
300 South Fourth Street
Las Vegas, Nevada 89101
Attention: David Whittemore, Esq.
AMENDED AND RESTATED RECIPROCAL
EASEMENT, USE AND OPERATING AGREEMENT
between
INTERFACE GROUP - NEVADA, INC.,
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
and
VENETIAN CASINO RESORT, LLC
Dated as of November 14, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I CONSTRUCTION OF THE VENETIAN...........................10
ARTICLE II HVAC; ACCESS/UTILITY EASEMENTS; COMMON
AREAS..................................................25
A. Central Utility Plants and New Electric Substation.....25
B. HVAC...................................................31
C. Other Reciprocal Easements.............................43
D. Common Areas; Access Rights to Affect Maintenance and
Repair; Parking Access; Emergency Access; Vertical and
Lateral Support; Miscellaneous.........................49
ARTICLE III COVENANTS REGARDING SECC LAND..........................60
ARTICLE IV CONTINUOUS OPERATION OF PHASE I
HOTEL/CASINO AND PHASE I MALL..........................68
ARTICLE V COVENANTS REGARDING PHASE I LAND
OPERATIONS.............................................68
ARTICLE VI TAXES AND INSURANCE PREMIUMS...........................88
ARTICLE VII PERMANENT PARKING......................................98
ARTICLE VIII THE VENETIAN AND THE LIDO.............................103
A. Construction..........................................103
B. Venetian/Lido Inter-relationship and Cooperation......107
C. Other Covenants and Agreements........................109
ARTICLE IX RESTRICTIVE COVENANTS.................................112
ARTICLE X INSURANCE.............................................114
ARTICLE XI DAMAGE OR DESTRUCTION BY FIRE OR OTHER
CASUALTY..............................................136
ARTICLE XII CONDEMNATION..........................................141
ARTICLE XIII COMPLIANCE WITH LAWS..................................147
ARTICLE XIV MISCELLANEOUS.........................................150
ARTICLE XV ARBITRATION...........................................173
ARTICLE XVI BILLBOARD SPACE.......................................176
i
<PAGE>
Schedule I Definitions
Schedule II Hotel/Casino/Mall/SECC Common Area Charges
Schedule III Parking Rules and Regulations
Exhibits
Exhibit A-1 - The Phase I Land
Exhibit A-2 - The Phase II Land
Exhibit B - The SECC Land
Exhibit C-1 - The Mall I Airspace
Exhibit C-2 - Retail Annex Land
Exhibit C-3 - Additional Billboard Space
Exhibit D - Mall I Space
Exhibit E - Buffer Zone
Exhibit F - SECC Parking as of the Test Date
Exhibit G - Existing HVAC Plant
Exhibit H - New HVAC Plant
Exhibit I - The HVAC Space
Exhibit J - Existing Utility Equipment
Exhibit K - H/C Pass-through Areas, H/C-Mall Common Areas, Mall I Pass-
through Areas, SECC Pass-through Areas, H/C Limited Common
Areas, Mall I Limited Common Areas
Exhibit L - Intentionally Deleted
Exhibit M - Intentionally Deleted
Exhibit N - Intentionally Deleted
Exhibit O - Intentionally Deleted
Exhibit P - Intentionally Deleted
Exhibit Q - Parking Access Easements
Exhibit R - SECC Party Wall
Exhibit S - Preliminary Parking Plan
Exhibit T - Predevelopment Agreement
Exhibit U - Phase I Automobile Parking Area
ii
<PAGE>
AMENDED AND RESTATED RECIPROCAL EASEMENT,
USE AND OPERATING AGREEMENT
This AMENDED AND RESTATED RECIPROCAL EASEMENT, USE AND OPERATING
AGREEMENT (this "Agreement") is dated as of this 14th day of November, 1997, by
and among VENETIAN CASINO RESORT, LLC, a Nevada limited liability company having
an address at 3355 Las Vegas Boulevard South, room 1C Las Vegas, Nevada 89109
("Phase I LLC," in its capacity as "H/C I Owner" (as hereinafter defined) and
the Owner of the Phase II Land), as successor-in-interest to Las Vegas Sands,
Inc. ("LVSI"), GRAND CANAL SHOPS MALL CONSTRUCTION, LLC ("Interim Mall LLC," in
its capacity as Mall I Owner), a Delaware limited liability company having an
address at 3355 Las Vegas Boulevard South, room 1G, Las Vegas, Nevada 89109 and
INTERFACE GROUP - NEVADA, INC., a Nevada corporation having an address at 3355
Las Vegas Boulevard South, room 1B, Las Vegas, Nevada 89109 ("Interface," in its
capacity as "SECC Owner" (as hereinafter defined)).
R E C I T A L S
A. WHEREAS, LVSI and Interface have entered into that certain
Reciprocal Easement, Use and Operating Agreement, dated as of June 26, 1997 (the
"Existing REA") which was recorded on July 3, 1997 as document number 01056 of
Book 970703 and re-recorded on July 28, 1997 as document number 00576 in Book
970728 in the Recorder's Office; and
B. WHEREAS, LVSI has transferred ownership of the Phase I Land and
the Phase II Land to Phase I LLC and Phase I LLC is now the owner in fee
<PAGE>
2
simple of (a) that certain parcel of land located in the County of Clark, State
of Nevada, as the same is more particularly described on Exhibit A-1 annexed
hereto and made a part hereof (the "Phase I Land"), and (b) that certain parcel
of land located in the County of Clark, State of Nevada, as the same is more
particularly described in Exhibit A-2 annexed hereto and made a part hereof (the
"Phase II Land"); and
C. WHEREAS, Interface is the owner in fee simple of that certain
parcel of land located in the County of Clark, State of Nevada, as the same is
more particularly described on Exhibit B annexed hereto and made a part hereof
(the "SECC Land"); and
D. WHEREAS, Interface owns a certain building (i) that is used as,
among other things, a convention, trade show and exposition center, (ii) that is
presently commonly known as the "Sands Exposition and Convention Center" and
(iii) which is located on the SECC Land (such building, the "SECC"); and
E. WHEREAS, LVSI, Phase I LLC and Interim Mall LLC (collectively as
"Borrowers") and GMAC Commercial Mortgage Corporation ("GMAC"), The Bank of Nova
Scotia as the Bank Agent, First Trust National Association as the Mortgage Notes
Indenture Trustee, APJV and The Bank of Nova Scotia as the Disbursement Agent
have entered into that certain Funding Agents' Disbursement and Administration
Agreement, dated as of the date hereof (the "FADAA") pursuant to which Borrowers
have agreed to construct, or cause to be constructed, a complex on the Phase I
Land (such complex shall include, without limitation, the Phase I Hotel/Casino
including, without limitation, the Congress
<PAGE>
3
Facility, the New HVAC Plant, the New Electric Substation, the Phase I
Automobile Parking Area and the Phase I Mall, and be referred to herein,
collectively, as the "Venetian"); and
F. WHEREAS, LVSI, Phase I LLC, the Bank Agent (as defined in the
FADAA), Goldman Sachs Credit Partners L.P. and the Bank Lenders (as defined in
the FADAA) have entered into a Bank Credit Agreement (the "Bank Credit
Agreement"), dated as of November 14th, 1997 pursuant to which the Bank Lenders
have agreed to provide certain loans to LVSI and Phase I LLC, jointly and
severally, in an aggregate amount not to exceed $170,000,000 of which, subject
to certain exceptions, $150,000,000 is intended to finance Project Costs (as
defined in the FADAA); and
G. WHEREAS, LVSI, Phase I LLC, Interim Mall LLC and GMAC have
entered into the Credit Agreement (the "Interim Mall Credit Agreement"), dated
as of November 14th, 1997, pursuant to which GMAC has agreed to provide certain
loans to LVSI, Interim Mall LLC and Phase I LLC, jointly and severally, in an
aggregate amount not to exceed $140,000,000 to finance Project Costs; and
H. WHEREAS, LVSI, Phase I LLC, certain guarantors named therein and
First Trust National Association, as the Initial Mortgage Notes Indenture
Trustee, have entered into an Indenture, dated as of November 14th, 1997
pursuant to which LVSI and Phase I LLC will issue certain mortgage notes (the
"Mortgage Notes") in an aggregate principal amount equal to $425,000,000 to
finance Project Costs; and
I. WHEREAS, LVSI, Phase I LLC, certain guarantors named therein and
First Union National Bank as the Subordinated Notes Indenture Trustee have
<PAGE>
4
entered into a Subordinated Notes Indenture, dated as of November 14, 1997
pursuant to which LVSI and Phase I LLC will issue certain subordinated notes
(the "Senior Subordinated Notes") in an aggregate principal amount equal to
$97,500,000 to finance Project Costs; and
J. WHEREAS, Goldman Sachs Mortgage Company ("GSMC"), as lender,
Grand Canal Shops Mall, LLC, as borrower and Sheldon G. Adelson ("Adelson"), as
guarantor have entered into the Tranche A Commitment Letter whereby GSMC has,
subject to the terms, provisions and conditions thereof, agreed to make a loan
in an aggregate principal amount of up to $105,000,000 to finance, in part, the
acquisition of, among other things, the fee and/or leasehold estates in the Mall
I Space, the Phase I Mall and the Additional Billboard Space together with any
buildings and improvements constructed thereon pursuant to the Sale and
Contribution Agreement; and
K. WHEREAS, a wholly-owned subsidiary of Adelson as lender ("Junior
Lender"), and Grand Canal Shops Mall, LLC have entered into a commitment letter
(the "Tranche B Commitment"), whereby Junior Lender has agreed to make a loan in
the aggregate principal amount of up to $35,000,000 to finance, in part, the
acquisition of, among other things, the fee and/or leasehold estates in the Mall
I Space, the Phase I Mall and the Additional Billboard Space together with any
buildings and improvements constructed thereon pursuant to the Sale and
Contribution Agreement; and
L. WHEREAS, the Phase I Hotel/Casino will adjoin the SECC (the Phase
I Land and the airspace above it, less and except the Mall I Space, sometimes
<PAGE>
5
being referred to herein as the "H/C I Space"; provided that after the
consummation of the H/C I/ Mall I Lot Line Modifications in accordance with the
terms of this Agreement, the term "H/C I Space" shall refer to the Revised H/C I
Space and any area covered by any Permanent Buffer Zone Encroachment Easements
granted to the H/C I Owner); and
M. WHEREAS, in accordance with the FADAA, LVSI, Phase I LLC and
Interim Mall LLC intend to do a commercial subdivision of the Venetian in order
to cause a portion of the Venetian (consisting of (i) air rights with respect
to, among other things, the second and mezzanine floors of the Base Building as
more particularly described in Exhibit C-1 (the "Mall I Airspace"), and (ii) the
portion (the "Retail Annex Land") of the Phase I Land upon which a retail annex
will be constructed (as more particularly described in Exhibit C-2), to become
legal parcels which are separate and distinct from the remainder of the Phase I
Land and the Phase II Land capable of being conveyed in fee simple (the creation
of such separate legal parcels referred to herein as the "Subdivision"); and
N. WHEREAS, pursuant to a lease (the "Mall I Airspace/Ground
Lease"), dated as of November 14, 1997, a memorandum of which was recorded prior
to (but on the same day as) the recordation of this Agreement, (i) Phase I LLC,
as landlord, has leased to Interim Mall LLC, as tenant (a) the Mall I Airspace
and (b) the Retail Annex Land for a term of 99 years (or, if sooner, until the
date on or about which the Subdivision has been effected, at which time the Mall
I Airspace/ Ground Lease provides, among other things, that fee title in and to
the Mall I Airspace and the Retail Annex Land shall be granted by Phase I LLC to
Interim Mall
<PAGE>
6
LLC), and (ii) H/C I Owner acknowledges that Mall I Owner owns the Phase I Mall
during the term of such lease; and
O. WHEREAS, (1) pursuant to that certain lease (as amended,
assigned, modified, replaced or restated from time to time, the "Billboard
Operating Lease") dated June 26, 1997 by and between Phase I LLC, as landlord,
and B.L. International of Nevada, Inc. ("Billboard"), as tenant, Phase I LLC has
leased to Billboard (i) a portion of the Mall I Airspace described in the
Billboard Operating Lease and (ii) a portion of the Phase I Land described in
Exhibit C-3 attached hereto and the Phase I Hotel/Casino (the property described
in clause (ii) of this paragraph referred to herein as the "Additional Billboard
Space") and (2) Phase I LLC, with the consent of Billboard, has assigned all of
its right, title and interest under the Billboard Operating Lease to Interim
Mall LLC; and
P. WHEREAS, pursuant to a lease (the "Billboard Master Lease"),
dated as of November 14th, 1997, a memorandum of which was recorded immediately
prior to the recordation of this Agreement, Phase I LLC, as landlord, has leased
to Interim Mall LLC, as tenant, the Additional Billboard Space for the term of
the Billboard Operating Lease, as presently set forth in the Billboard Operating
Lease. The Mall I Airspace/Ground Lease and the Billboard Master Lease are,
collectively, the "Mall I Lease"; and
Q. WHEREAS, for purposes of this Agreement, (a) the term "Mall I
Space" shall mean, collectively, (i) the Mall I Airspace, (ii) the Retail Annex
Land, and (iii) during the term of the Billboard Master Lease, the Additional
Billboard Space (as any of the real property described in clauses (i)-(iii) may
be adjusted in
<PAGE>
7
accordance with this Agreement in connection with the H/C I/Mall I Lot Line
Modifications); and (iv) after the H/C I/Mall I Lot Line Modifications, any area
covered by a Permanent Buffer Zone Encroachment Easement granted to the Mall I
Owner; (b) the term "Phase I Mall" shall mean, collectively, any buildings or
other improvements constructed in or on the Mall I Airspace from time to time
and the Retail Annex Land together with any buildings or other improvements
constructed thereon from time to time; and (c) the term "Mall I Owner" shall
mean, at any given time, the person who then holds the right, title and interest
in and to the leasehold interest under the Mall I Airspace/Ground Lease or, if
the Subdivision has been effected and fee title transferred, fee title in and to
the Mall I Airspace and the Retail Annex Land and for so long as the Billboard
Master Lease shall be in effect, the leasehold estate in the Additional
Billboard Space pursuant to the Billboard Master Lease; and
R. WHEREAS, Phase I LLC and Interim Mall LLC intend for (i) the Mall
I Airspace/Ground Lease as an encumbrance and charge upon the Mall I Airspace
and the Retail Annex Land and (ii) the Billboard Master Lease as an encumbrance
and charge upon the Additional Billboard Space to be subject and subordinate in
all respects to the provisions of this Agreement, and Billboard further has
agreed that its rights under the Billboard Operating Lease shall be subject and
subordinate to the Mall I Lease; and
S. WHEREAS, the Mall I Airspace/Ground Lease provides, and Phase I
LLC and Interim Mall LLC have agreed, that at such time as the Subdivision has
been effected and the tenant under the Mall I Airspace/Ground Lease shall
<PAGE>
8
become the fee owner of the Mall I Airspace and the Retail Annex Land, the Mall
I Airspace/Ground Lease thereafter shall terminate as to the Mall I Airspace and
the Retail Annex Land; and
T. WHEREAS, the Billboard Operating Lease was subordinated to the
Billboard Master Lease and the Mall I Airspace/Ground Lease; and
U. WHEREAS, in accordance with the provisions of a Sale and
Contribution Agreement (the "Sale and Contribution Agreement"), dated as of
November 14th, 1997, among Phase I LLC and Interim Mall LLC, as Seller, and
Grand Canal Shops Mall, LLC, as Purchaser, Interim Mall LLC has agreed to convey
or assign, as the case may be (A) either (i) if the Subdivision shall have been
implemented prior to the Mall Release Date, its fee interest in and to the Mall
I Airspace, the Retail Annex Land and any buildings and improvements constructed
therein and thereon or (ii) if the Subdivision shall not have been implemented
prior to the Mall Release Date, all its right, title and interest in and to (x)
the Mall I Airspace/ Ground Lease and (y) any buildings and improvements
constructed in and on the Mall I Airspace and the Retail Annex Land, (B) all its
right, title and interest in and to the Billboard Master Lease, and (C) all its
right, title and interest in and to the Billboard Operating Lease and all other
Leases affecting the Mall I Space to Grand Canal Shops Mall, LLC on the Mall
Release Date; and
V. WHEREAS, subject to any limitation set forth in the FADAA and to
any rights of any Mortgagee under its loan documents, Phase I LLC may transfer
the Phase II Land to an affiliate ("Phase II LLC") for the construction and
operation of a complex (such complex shall include, without limitation, the
hotel, casino and
<PAGE>
9
retail facility to be located on the Phase II Land and the Phase II Automobile
Parking Area, collectively, the "Lido"); and
W. WHEREAS, Phase II LLC may transfer, lease, or lease and
subsequently transfer, any portion of the Lido to be used for retail and/or
restaurant uses (the "Mall II Space") to Mall II LLC, an affiliate, for the
construction and operation of a retail and/or restaurant facility located
therein (the "Phase II Mall"); and
X. WHEREAS, for purposes of this Agreement, the "H/C II Space"
shall mean the Phase II Land and any buildings and improvements located thereon;
and
Y. WHEREAS, for purposes of this Agreement (a) the term "SECC Owner"
shall mean, at any given time, the Person who then holds fee title to the SECC
Land, (b) the term "H/C I Owner" shall mean, at any given time, the Person who
then holds fee title to the H/C I Space, (c) the term "H/C II Owner" shall mean,
at any given time, the Person who then holds fee title to the H/C II Space, and
(d) the term "Mall II Owner" shall mean, at any given time, the Person who then
holds fee title to the Mall II Space; and
Z. WHEREAS, Phase I LLC (in its respective capacities as owner of
the Phase I Land and the Phase II Land), Interface (as owner of the SECC Land)
and Interim Mall LLC (as Mall I Owner) desire to amend and restate the Existing
REA and to grant to each other and their respective assignees (including,
without limitation, Grand Canal Shops Mall, LLC, Phase II LLC and Mall II LLC)
certain rights and easements in connection with the use and operation of the
Phase I Land,
<PAGE>
10
the Phase II Land, the Mall I Space, the SECC Land, and any buildings and
improvements constructed on or in any of the foregoing from time to time, and to
make certain other covenants and agreements, all as hereinafter more
particularly set forth.
W I T N E S S E T H :
NOW THEREFORE, in consideration of the covenants and easements
herein made and granted, and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged, the parties hereto agree
that the Existing REA is amended and restated in its entirety to read as
follows:
ARTICLE I
CONSTRUCTION OF THE VENETIAN
1. Subdivision.
(a) H/C I Owner, H/C II Owner, Mall I Owner and Mall II Owner
agree, for the benefit of the others to cooperate in good faith and do all
things necessary in order to effect the Subdivision in accordance with Legal
Requirements as soon as reasonably possible following the date of this Agreement
(it being understood that this Agreement shall continue in full force and effect
even if such Subdivision does not occur).
(b) SECC Owner agrees, for the benefit of H/C I Owner and Mall
I Owner, that it shall cooperate with H/C I Owner and Mall I Owner to the extent
expressly set forth herein (or otherwise reasonably requested by H/C I Owner or
Mall I Owner) to effect the Subdivision; it being understood, however, that
<PAGE>
11
(i) SECC Owner shall not be required to incur any expense (other than any de
minimis expense or other reasonable expense with respect to which reimbursement
arrangements satisfactory to SECC Owner will be agreed upon prior to such time
as SECC Owner will be required to incur such expense) in connection with any
such cooperative efforts and (ii) SECC Owner shall not be required to undertake
any action which reasonably could be expected to interfere with the operation of
its business at the SECC (other than to a de minimis extent).
2. Construction in accordance with FADAA.
(a) The FADAA provides for the construction in accordance with
the provisions contained therein of the Venetian, including without limitation,
the Base Building, the Limited Common Areas, all Pass-through Areas and H/C-Mall
Common Areas necessary for the use and operation of the Phase I Mall in
accordance with the provisions of this Agreement. Until such time as Final
Completion has occurred in accordance with the provisions of the FADAA, in the
event Final Completion has not been achieved as a consequence of a default by
H/C I Owner under the FADAA, Mall I Owner shall have the right to enter the
Phase I Land and any improvements constructed thereon and perform or cause to be
performed H/C I Owner's obligations under the FADAA to construct the Venetian,
including without limitation the Base Building, the Limited Common Areas, all
Pass-through Areas and H/C-Mall Common Areas; provided, however, that Mall I
Owner shall exercise its rights under this Section 2(a) in a manner which shall
not interfere (other than to a de minimis extent) with the use or operation of
the H/C I Space and/or any
<PAGE>
12
improvements located thereon to any greater extent than if such construction was
accomplished by H/C I Owner.
(b) H/C I Owner agrees for the benefit of Mall I Owner that
Mall I Owner shall have the right to enter the H/C I Space in order to complete
and install the improvements contemplated by the FADAA to be constructed in the
Mall I Space. These rights shall be exercised in accordance with the provisions
of the FADAA in a manner which shall not interfere (except to a de minimis
extent) with the use or operation of the H/C I Space and/or any improvements
located thereon to any greater extent than if such construction were
accomplished by H/C I Owner.
(c) Mall I Owner agrees for the benefit of H/C I Owner that
H/C I Owner shall have the right to enter the Mall I Space and any improvements
located therein in order to complete and install the improvements contemplated
by the FADAA to be constructed in the H/C I Space and the Mall I Space. These
rights shall be exercised in accordance with the provisions of the FADAA in a
manner which shall not interfere (other than to a de minimis extent) with the
use or operation of the Mall I Space and/or any improvements located therein.
(d) SECC Owner agrees for the benefit of H/C I Owner and Mall
I Owner, that it shall cooperate with H/C I Owner and Mall I Owner to the extent
expressly set forth herein (or otherwise reasonably requested by H/C I Owner or
Mall I Owner) to effect the construction of the Venetian; it being understood,
however, that (i) SECC Owner shall not be required to incur any expense (other
than any de minimis expense or other reasonable expense with respect to which
reimbursement arrangements satisfactory to SECC Owner will be agreed upon prior
to
<PAGE>
13
such time as SECC Owner will be required to incur such expense) in connection
with any such cooperative efforts and (ii) SECC Owner shall not be required to
undertake any action which reasonably could be expected to interfere with the
operation of its business at the SECC (other than to a de minimis extent).
(e) The obligations of the Parties set forth in this Section 2
shall expire upon Final Completion (as defined in the FADAA); provided, however,
that the rights of any Party to reimbursement for costs incurred in exercising
its rights under this Section 2 prior to Final Completion pursuant to Section
9(a) of Article XIV and to impose a lien on the defaulting Party's Lot to secure
such costs pursuant to Section 9(b) of Article XIV shall survive the Final
Completion Date.
(f) Upon the reasonable request of H/C I Owner, SECC Owner
shall grant to H/C I Owner a temporary license to (a) use in connection with the
construction of the Venetian any vacant portions of the SECC Land and (b) erect
scaffolding at the SECC, in each case, provided that the exercise of such
license shall not result in any interference with the use, operation or
enjoyment of the SECC by SECC Owner (and the conduct by SECC Owner of its
business at the SECC), the Temporary Parking Facilities, the Utility Equipment
and the Existing HVAC Plant (other than to a de minimis extent).
3. Construction Buffer Zone; Post Modification Encroachments. H/C I
Owner and Mall I Owner further agree, for the benefit of the other, as follows:
(a) Notwithstanding the description of the Mall I Space set
forth on Exhibit D, H/C I Owner and Mall I Owner acknowledge that in
implementing the construction contemplated by the FADAA: (i) the Integral H/C I
<PAGE>
14
Improvements may encroach to some extent (and subject to the limitations set
forth in the FADAA) into that portion of the Mall I Space that is within the
areas (the "Buffer Zone") depicted on Exhibit E (any such encroachment referred
to herein as the "H/C I Improvements Buffer Zone Encroachment"); and (ii) the
Integral Mall I Improvements may encroach to some extent (and subject to the
limitations set forth in the FADAA) into that portion of the H/C I Space that is
within the Buffer Zone (any such encroachment referred to herein as the "Mall I
Improvements Buffer Zone Encroachment," and together with the H/C I Improvements
Buffer Zone Encroachments, the "Buffer Zone Encroachments"). H/C I Owner and
Mall I Owner agree and consent to the Buffer Zone Encroachments and grant to
each other easements ("Buffer Zone Encroachment Easements") over those portions
of the H/C I Space and the Mall I Space within the Buffer Zone for the purposes
of same. H/C I Owner and Mall I Owner shall each use their best efforts to, and
shall cooperate with each other to, effectuate, to the maximum extent permitted
in compliance with all Legal Requirements, the modification of the lot lines of
the H/C I Space and the Mall I Space, or, if the Subdivision shall not have been
implemented at such time, the modification of the description of the leased
premises under the Mall I Lease, so that, after giving effect to such
modification (i) the boundaries of the Mall I Space shall include all of the
Integral Mall I Improvements (the Mall I Space, as so modified, referred to
herein as the "Revised Mall I Space"), (ii) the boundaries of the H/C I Space
shall include all of the H/C I Integral Improvements (the H/C I Space, as so
revised, referred to herein as the "Revised H/C I Space"), (iii) if the
Subdivision shall have been implemented at such time, the Revised Mall I Space
shall
<PAGE>
15
constitute one or more separate, legal parcels, which parcels shall also
constitute one or more tax parcels which shall not include, or comprise a
portion of, any other property, and (iv) if the Subdivision shall have been
implemented at such time, the Revised H/C I Space shall constitute one or more
separate, legal parcels, which parcels shall not include, or comprise a portion
of, any other property (the "H/C I/ Mall I Lot Line Modifications").
(b) In order to accomplish the H/C I/Mall I Lot Line
Modifications as aforesaid, the Parties hereto shall use the means (e.g.,
resubdivision, parcel map modification, lot line adjustment or, if the
Subdivision shall not have been implemented at such time, modification of the
description of the leased premises set forth in the Mall I Lease) that are
reasonably expedient under the circumstances. The costs of the H/C I/Mall I Lot
Line Modifications shall be equitably apportioned by the agreement of the
Parties hereto. H/C I Owner and Mall I Owner shall endeavor in good faith to
complete the H/C I/Mall I Lot Line Modifications prior to the Completion Date,
it being understood, however, that if H/C I/Mall I Lot Line Modifications do not
occur by such date, then the H/C I Owner and the Mall I Owner shall continue to
pursue the H/C I/Mall I Lot Line Modifications to the extent reasonably
requested by either such Owner or any Mortgagee of the Phase I Land or of the
Mall I Space. Additionally, promptly after the consummation of the H/C I/ Mall I
Lot Line Modifications, the Parties hereto shall execute and deliver to each
other, and record in the Recorder's Office, an amendment to this Agreement
reflecting the termination of the Buffer Zone Encroachment Easements, and the
other
<PAGE>
16
rights, interests, agreements and obligations created or imposed by or under
this Section 3, except as provided in subsection 3(c) below.
(c) Until the H/C I/Mall I Lot Line Modifications are
effected, or if after the H/C I/Mall I Lot Line Modifications are effected
portions of the H/C I Integral Improvements continue to encroach into the Mall I
Space or portions of the Mall I Integral Improvements continue to encroach onto
the H/C I Space, then the following provisions shall apply:
(i) Mall I Owner agrees that the Buffer Zone Encroachment
Easements granted to the H/C I Owner shall continue to the extent of the
continuing H/C I Improvements Buffer Zone Encroachment, and, for so long
as such H/C I Improvements Buffer Zone Encroachment (or any replacement
thereof) shall continue;
(ii) H/C I Owner agrees that the Buffer Zone Encroachment
Easements granted to the Mall I Owner shall continue to the extent of the
continuing Mall I Improvements Buffer Zone Encroachment, and for so long
as such Mall I Improvements Buffer Zone Encroachment (or any replacement
thereof) shall exist;
(iii) The Buffer Zone Encroachment Easements which continue
to exist after implementation of the H/C I/Mall I Lot Line Modifications
in accordance with this Section 3(c) shall be referred to herein as the
"Permanent Buffer Zone Encroachment Easements";
(iv) H/C I Owner and Mall I Owner shall endeavor, as
expeditiously as reasonably possible following the H/C I/Mall I Lot Line
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17
Modifications, to confirm the precise boundaries of said Permanent Buffer
Zone Encroachment Easements and to memorialize the same by a recorded
agreement executed by each such Owner;
(v (1) Mall I Owner hereby grants to H/C I Owner an
easement to enter on or into those portions of the Phase I Mall and
the Mall I Space burdened by the Buffer Zone Encroachment Easement
in each instance to the extent reasonably necessary (i) to gain
access to the H/C I Space and/or the Phase I Hotel/Casino and any
and all fixtures, fittings, equipment and building systems from time
to time located therein (including the New Electric Substation, the
New HVAC Plant and any improvements related thereto) for the
maintenance, repair or restoration of or to the same and (ii) to
perform maintenance obligations imposed upon H/C I Owner under this
Agreement, but for no other reason or purpose, except as otherwise
provided in this Agreement. H/C I Owner, in exercising its rights
under this Section 3(c), shall use commercially reasonable efforts
to minimize interference with the maintenance, use and operation of
the Phase I Mall and Mall I Owner's business at the same. Before H/C
I Owner undertakes any such maintenance, repairs or restoration that
requires H/C I Owner to enter upon any material portion of the Mall
I Space, H/C I Owner shall give reasonable prior notice to Mall I
Owner, except in any case where the giving of reasonable prior
notice is not practicable under the circumstances (but notice shall
nevertheless be
<PAGE>
18
given as soon as practicable); provided that the failure to give any
such notice shall not constitute a default hereunder.
(2) H/C I Owner hereby grants to Mall I Owner an
easement to enter on or into those portions of the Phase I
Hotel/Casino and the H/C I Space burdened by the Buffer Zone
Encroachment Easement in each instance to the extent reasonably
necessary (i) to gain access to the Mall I Space, the Phase I Mall
and any and all fixtures, fittings, equipment and building systems
from time to time located therein or thereon for the maintenance,
repair or restoration of or to the same, and (ii) to perform any
maintenance obligations imposed upon Mall I Owner under this
Agreement, but for no other reason or purpose, except as otherwise
provided in this Agreement. Mall I Owner, in exercising its rights
under this Section 3(c), shall use commercially reasonable efforts
to minimize interference with the maintenance, use and operation of
the H/C I Space and the H/C I Owner's business at the same. Before
Mall I Owner undertakes any such maintenance, repairs or restoration
that requires Mall I Owner to enter upon any material portion of the
H/C I Space and/or the Phase I Hotel/Casino are effectuated, Mall I
Owner shall give reasonable prior notice to H/C I Owner, except in
any case where the giving of reasonable prior notice is not
practicable under the circumstances (but notice shall nevertheless
be given as soon as practicable); provided that failure to give any
such notice shall not constitute a default hereunder.
<PAGE>
19
(vi) Each Owner of property encumbered by a Buffer Zone
Encroachment Easement under this Section 3 may relocate any such easement
on its parcel at its sole cost and expense provided that such relocation:
(1) does not cause any interruption in the utilization of the easement by
the Owner of the dominant tenement for the affected easement (except de
minimis interruptions, as to degree or time, which shall be scheduled by
agreement with the Owner of the dominant tenement for the affected
easement); (2) does not diminish the capacity or efficiency of such
easement (excepting de minimis effects); and (3) will not interfere
(except to a de minimis extent) with the maintenance, use or operation of
the dominant tenement or the conduct of its Owner's business thereat.
(d) To the extent the H/C I/Mall I Lot Line Modifications
shall affect space held in leasehold rather than fee, H/C I Owner and Mall I
Owner shall enter into such lease amendments as are reasonable and necessary to
implement the provisions of the foregoing Section 3(c).
(e) Prior to effecting the H/C I/Mall I Lot Line
Modifications, H/C I Owner and Mall I Owner shall engage, at their shared
expense, an Independent Expert who shall deliver a written statement to each of
the Mortgagees of the Mall I Space and the H/C I Space certifying that (A) (i)
the final boundaries of the Revised Mall I Space and the Revised H/C I Space,
(ii) the final boundaries of any Buffer Zone Encroachment Easements or Permanent
Buffer Zone Encroachment Easements effected pursuant to this Section 3, and
(iii) any other changes to the Mall I Space and/or the H/C I Space effected
pursuant to this Section 3
<PAGE>
20
satisfy the requirements of this Section 3, and (B) the terms of any documents
to be entered into to memorialize the H/C I/Mall I Lot Line Modifications or to
terminate or memorialize any Buffer Zone Encroachment Easements or Permanent
Buffer Zone Encroachment Easements are commercially reasonable and satisfy the
requirements of this Section 3.
4. Temporary Parking.
(a) H/C I Owner hereby grants to SECC Owner an easement and
right to use parking areas and related facilities and improvements in connection
with the operation of the SECC and its business at the SECC at all times during
the period from the Commencement Date through the date (the "Phase I Garage
Opening Date") of completion, of construction of the Phase I Automobile Parking
Area and of all roadways, walkways and other facilities and improvements to be
constructed together with such Phase I Automobile Parking Area, in each case in
accordance with the provisions of Article VII hereof, including, without
limitation, the obtaining of all permits and approvals necessary in connection
with the use of such Phase I Automobile Parking Area and such facilities and
improvements. The parking areas and related facilities and improvements which
the SECC Owner shall have the right to use during such period shall (i) provide
SECC Owner the exclusive right to use, for the parking of motor vehicles, at
least 800 parking spaces (the "Temporary Parking Spaces") on the Phase I Land;
and (ii) be generally comparable (or more beneficial to SECC Owner), in location
and all other material respects, to the parking serving the SECC on or about
April 1, 1997 (the "Test Date") as depicted on Exhibit F. Without limiting the
generality of the foregoing, all of the parking areas described in the
<PAGE>
21
immediately preceding sentence shall contain, or H/C I Owner shall otherwise
make available to SECC Owner, and, in either case, H/C I Owner hereby grants to
SECC Owner (or in the case of off-site parking spaces, shall cause to be granted
to SECC Owner), a non-exclusive easement, lease or license and right to use,
such paving, curbing, walkways, roadways, traffic control devices, barriers,
signage, lighting and other facilities and improvements as are reasonably
necessary or desirable in connection with the use of such parking areas in
connection with the operation of SECC Owner's business at the SECC, including,
without limitation, such of the foregoing as are reasonably necessary or
desirable in order to provide pedestrian and vehicular access (i) between the
parking areas and the SECC and (ii) between the parking areas and any streets or
roads (public or private) adjoining, directly or indirectly, such parking areas.
Notwithstanding anything herein to the contrary, if on the earlier to occur of
(i) June 26, 2000 and (ii) the first date on which H/C I Owner is no longer
diligently pursuing the financing, design, planning or completion of the
construction of the Phase I Automobile Parking Area, H/C I Owner shall supply to
SECC Owner, located on the Phase I Land, parking spaces and ancillary
improvements and facilities and rights which are necessary with respect thereto,
that are sufficient, in all respects, to permit SECC Owner and the SECC to
comply with all applicable Legal Requirements relating to parking or parking
spaces. The Temporary Parking Spaces and other rights, easements, interests,
improvements and facilities described in this Section 4(a) shall be collectively
referred to as the "Temporary Parking Facilities."
<PAGE>
22
(b) If, at any time, the provision of the Temporary Parking
Facilities then being provided by H/C I Owner becomes impractical in light of
the requirements of H/C I Owner's contractors or otherwise in connection with
the construction or operation of or Alterations to the Venetian, the Lido and/or
any improvements related thereto, then H/C I Owner shall be entitled to relocate
and/or modify such Temporary Parking Facilities provided that (i) after giving
effect to such relocation and/or modification, as applicable, H/C I Owner shall
remain in compliance with its obligations under Sections 4(a) and 4(c) and (ii)
such modification and/or relocation, as applicable, shall not cause any
interruption or interference (other than a de minimis interruption or
interference) with the operation of SECC Owner's business at the SECC.
(c) The Temporary Parking Facilities shall be provided and
maintained at the sole cost and expense of H/C I Owner, without charge to the
SECC, or SECC Owner; provided, however, that, during such period of time (the
"Temporary Parking Facilities Term") that SECC Owner shall be entitled to use
any such Temporary Parking Facilities, SECC Owner shall pay to H/C I Owner on or
before the first (1st) day of each month a monthly fee of Twelve Thousand Five
Hundred Dollars ($12,500.00) ("SECC Owner's Parking Expense Share") as
reimbursement to H/C I Owner for the cost of the ordinary maintenance, security
and repair of such Temporary Parking Facilities. Maintenance, security and
repairs at the Temporary Parking Facilities shall be provided by H/C I Owner.
Subject to the provisions of Section 3 of Article V hereof, during the Temporary
Parking Facilities Term, H/C I Owner shall pay, prior to delinquency thereof,
all Taxes relating to the
<PAGE>
23
Temporary Parking Facilities and shall maintain the Temporary Parking Facilities
in good condition and repair. During the Temporary Parking Facilities Term, SECC
Owner shall be permitted, at its option, to charge its Permittees a fee or other
charge for the use of the Temporary Parking Facilities and retain such fees and
other charges for SECC Owner's own account and in no event shall H/C I Owner be
entitled to any portion of any such fees or other charges.
5. Third Party Warranties/Liquidated Damages; Recoveries on Adelson
Completion Guaranty.
(a) The Owners acknowledge and agree that all Third Party
Warranties shall, to the extent separately enforceable by a particular Owner
with respect to improvements within its Lot, belong to such Owner and shall be
enforceable by that Owner. To the extent that a particular Third Party Warranty
pertains to improvements in more than one Lot, and cannot be separately
assigned, the Owner possessing rights to enforce such Third Party Warranty (the
"Third Party Warranty Owner") shall take such steps as any other Owner whose
property is benefitted by such Third Party Warranty (a "Requesting Warranty
Owner") from time to time reasonably may request in order to permit the
Requesting Warranty Owner to receive the benefits thereof, so long as the
Requesting Warranty Owner reimburses the Third Party Warranty Owner for all
reasonable costs associated therewith (to the extent fairly allocable to the
requests made by the Requesting Warranty Owner) and otherwise takes steps
reasonably requested by the Third Party Warranty Owner to assure that the Third
Party Warranty Owner shall not be exposed to unreimbursed
<PAGE>
24
liability as a consequence of taking the steps requested by the Requesting
Warranty Owner.
(b) Notwithstanding the provisions of clause (a) above, until
Final Completion, the Third Party Warranties shall be enforced, and Liquidated
Damages shall be applied, in accordance with the terms of the FADAA.
(c) Following Final Completion, Liquidated Damages shall be
collected by Trustee, who shall apply such amounts as follows:
(i) First, to pay the costs of repair, restoration or
upgrade, as the case may be, of the affected portion of the Phase I
Hotel/Casino and/or the Phase I Mall, as the case may be, which gave rise
to the Liquidated Damages, to the extent not previously paid. Any payments
pursuant to this clause (i) shall be subject to satisfaction of conditions
substantially equivalent to those applicable to disbursements of insurance
proceeds collected after Final Completion, as set forth in Section 12
Article X.
(ii) Thereafter, any additional amounts shall be paid to
the H/C I Owner until such time as any amounts owed on the Adelson
Completion Guaranty Loan as of Final Completion have been paid in full
(which amounts shall be applied in accordance with the terms of the
FADAA); and
(iii) Thereafter, such funds shall be apportioned between
the Owners in an equitable manner.
(d) If H/C I Owner and Mall I Owner shall be unable to agree
on the equitable apportionment of such Liquidated Damages, then the Owners
<PAGE>
25
shall engage an Independent Expert to determine such apportionment pursuant to
the provisions of Section 15 of Article XIV.
(e) Unless otherwise agreed in writing by each Mortgagee, all
payments and other recoveries on the Adelson Completion Guaranty shall be
handled in accordance with the FADAA.
ARTICLE II
HVAC; ACCESS/UTILITY EASEMENTS; COMMON AREAS
A. Central Utility Plants and New Electric Substation.
1. Existing HVAC Plant.
(a) A central utility plant owned by SECC Owner (the "Existing
HVAC Plant"), which currently provides heating, ventilation and air-conditioning
to the SECC, is currently located on a portion of the Phase I Land, as depicted
on Exhibit G.
(b) H/C I Owner hereby grants to SECC Owner such easements and
rights as are reasonably necessary to permit the continued maintenance and
existence, repair, removal, replacement, use and operation of the Existing HVAC
Plant and the related ducts, conduits, pipes, cables, utility lines and other
equipment (collectively, the "HVAC Easement"). H/C I Owner shall conduct its
construction activities with respect to the Venetian and any other improvements
on the Phase I Land and any use and operation of any of the foregoing after
completion of construction of the same, in such a manner as not to interfere
(other than to a de minimis extent) with such existence, repair, maintenance,
removal, replacement, use
<PAGE>
26
or operation. Before any such maintenance, repair, replacement or removal of the
Existing HVAC Plant is effectuated, SECC Owner shall give reasonable prior
notice to H/C I Owner, except in any case where the giving of reasonable prior
notice is not practicable under the circumstances (but notice shall nevertheless
be given as soon as practicable), and SECC Owner shall, in performing any such
work, use commercially reasonable efforts to minimize interference with the
Phase I Land or any improvements constructed thereupon; provided that the
failure to give any such notice shall not constitute a default hereunder or
require SECC Owner to demolish or remove any portion of the Existing HVAC Plant.
Notwithstanding anything to the contrary contained herein, nothing contained in
this Agreement shall prohibit or restrict, or shall be deemed to prohibit or
restrict, SECC Owner from using, maintaining and operating the Existing HVAC
Plant as used, maintained and operated on or about the Test Date.
(c) H/C I Owner and SECC Owner agree that the easements and
rights granted under this Part A Section 1 of this Article II shall terminate
and be revoked on the later to occur (such later date, the "Existing HVAC Plant
Termination Date") of (i) the completion of the construction of the New HVAC
Plant to be constructed on a portion of the Phase I Land as depicted on Exhibit
H and the related ducts, conduits, pipes, cables, utility lines and other
equipment in accordance with Legal Requirements, the Initial ESA's and the FADAA
(provided that, without SECC Owner's consent, no changes to the plans and
specifications relating to the New HVAC Plant shall be made that would have an
adverse impact (other than to a de minimis extent) on the heating, ventilating
and air conditioning service to be provided
<PAGE>
27
to SECC Owner (or that would increase (other than to a de minimis extent) the
cost thereof to SECC Owner)), (ii) the connection of the New HVAC Plant to the
SECC, and (iii) the commencement of the operation of the same in accordance with
the Initial ESA entered into between the SECC and APJV. On or after the Existing
HVAC Plant Termination Date, the Existing HVAC Plant may be dismantled and
demolished by H/C I Owner at its sole cost and expense; provided, however, that
at the time such dismantling and demolition, H/C I Owner shall remove and
dispose of any and all asbestos, whether friable or non-friable, and/or
asbestos-containing material in accordance with all applicable Legal
Requirements, including, without limitation, environmental laws.
(d) Notwithstanding anything to the contrary contained herein,
H/C I Owner shall not be obligated to SECC Owner to construct the New HVAC Plant
so long as (x) H/C I Owner continues to make the HVAC Easements available to
SECC Owner for the use and operation of the Existing HVAC Plant as provided in
this Agreement and (y) the provisions of Part A.1. of this Article II shall
otherwise be in full force and effect.
2. New Electric Substation.
(a) The FADAA contemplates the construction on the Phase I
Land of a new electric substation (the "New Electric Substation"), which plant
would distribute electric service to the Venetian (including the Phase I Mall),
the Lido (including the Phase II Mall) and the SECC (provided that without SECC
Owner's Consent, no changes to the plans and specifications relating to the New
Electric Substation shall be made that would have an adverse impact (other than
to a
<PAGE>
28
de minimis extent) on the electric service to be provided to the SECC (or that
would increase (other than to a de minimis extent) the cost thereof to the SECC
Owner)).
(b) H/C I Owner hereby grants to SECC Owner and Mall I Owner
such easements in, on, over, under, across and through the Phase I Land and the
Phase II Land and any improvements constructed or to be constructed thereon as
are necessary or commercially appropriate for the SECC and the Phase I Mall to
receive electricity from the New Electric Substation and all of its related
ducts, conduits, pipes, cables, utility lines and other equipment. In utilizing
such easement rights, SECC Owner and Mall I Owner shall not interfere (other
than to a de minimis extent) with the use and/or operation of the H/C I Space
and any improvements constructed thereon or therein. H/C I Owner hereby grants
to Mall I Owner and/or SECC Owner such easements in, on, over, under, across and
through the Phase I Land and the Phase II Land and any improvements constructed
or to be constructed thereon as shall be necessary or commercially appropriate
from time to time to allow any public utility or any reasonably experienced and
competent electricity provider to distribute electricity to such Owner.
(c) SECC Owner hereby grants to H/C I Owner and Mall I Owner
such easements in, on, over, under, across and through the SECC Land and any
improvements constructed or to be constructed thereon as are necessary or
commercially appropriate to (i) in the case of H/C I Owner, construct and
operate and (ii) in the case of Mall I Owner, to receive electricity from the
New Electric Substation and all of its related ducts, conduits, pipes, cables,
utility lines and other equipment. H/C I Owner and Mall I Owner shall utilize
their easement rights in such
<PAGE>
29
a manner as not to interfere (other than to a de minimis extent) with the use
and/or operation of the SECC Land and any improvements thereon.
(d) Mall I Owner hereby grants to H/C I Owner and SECC Owner
such easements in, on, across and through the Mall I Space and any improvements
constructed or to be constructed thereon as are necessary or commercially
appropriate to (i) in the case of H/C I Owner, construct and operate and (ii) in
the case of Mall I Owner, receive electricity from the New Electric Substation
and all of its related ducts, conduits, pipes, cables, utility lines and other
equipment. H/C I Owner and SECC Owner shall utilize their easement rights in
such a manner as not to interfere (other than to a de minimis extent) with the
use and/or operation of the Mall I Space and any improvements therein or
thereon.
(e) H/C I Owner agrees for the benefit of Mall I Owner and
SECC Owner to cause the maintenance, repair and restoration of the New Electric
Substation; provided, however, that H/C I Owner can satisfy its obligations
under this Section 2(e) by (i) engaging an appropriately experienced and
competent third party operator to maintain, repair and restore the New Electric
Substation and (ii) using commercially reasonable efforts to enforce such
operator's obligations so to maintain, repair and restore (and replacing such
operator with another appropriately experienced and competent third party
operator if any such operator fails to perform its obligations) in which event
H/C I Owner shall not be liable to Mall I Owner or to SECC Owner for
consequential damages arising out of such third party's repair, maintenance
and/or restoration of the New Electric Substation except to the extent such
damages result from H/C I Owner's negligence or willful misconduct.
<PAGE>
30
(f) The cost of maintaining, repairing and restoring the New
Electric Substation shall be shared by each Owner in accordance with the
provisions of Section 3 of Article V.
(g) H/C I Owner agrees for the benefit of Mall I Owner and
SECC Owner that, if H/C I Owner shall fail to perform its obligations under the
preceding Section 2(e), each of Mall I Owner and SECC Owner shall have the right
to enter the Phase I Land and any improvements constructed thereon and perform
or cause to be performed H/C I Owner's obligations under Section 2(e).
(h) Each Owner of a servient tenement may relocate any of the
easements granted in the preceding subsections (b), (c) and (d) at its sole cost
and expense; provided that such relocation: (1) does not cause any interruption
in the utilization of the easement by the Owner of the dominant tenement for the
affected easement (except de minimis interruptions, as to degree or time, which
shall be scheduled by agreement with the Owner of the dominant tenement for the
affected easement); (2) does not diminish the capacity or efficiency of such
utility easement (excepting de minimis effects); and (3) will not make it more
difficult or more expensive for the Owner of the dominant tenement with respect
to the easement to use, maintain, repair, or replace the utility lines or
equipment in question, unless, in the case of increased expense, the Owner of a
servient tenement, at the time of such adverse relocation, agrees to bear any
future additional costs arising from such relocation.
(i) The exact location of the easements granted in the
preceding subsections (b), (c) and (d) shall be agreed upon by the Parties and
the
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31
Electricity Provider in good faith; provided that, in any event, each such
easement shall be located in such a commercially appropriate location on the
burdened property as to minimize, to the extent reasonably possible,
interference with the construction, use and operation of such property and the
buildings and other improvements from time to time located thereon. The Parties
shall endeavor, as expeditiously as reasonably possible following the Completion
Date, to confirm the precise boundaries of such easements and to memorialize the
same by a recorded agreement executed by each such Owner of a burdened property
and the Electricity Provider.
(j) Mall I Owner and SECC Owner agree for the benefit of H/C I
Owner that H/C I Owner may grant easement rights to H/C II Owner and Mall II
Owner comparable to those rights granted in the preceding subsection (b);
provided, that no such grant shall adversely affect (except to a de minimis
extent) the electricity service that is otherwise required to be provided to
Mall I Owner or SECC Owner or increase (except to a de minimis extent) the cost
of the same.
(k) H/C I Owner, Mall I Owner and SECC Owner each agree for
the benefit of the other to (a) enter into commercially reasonable and
appropriate agreements with and (b) grant necessary and appropriate easements to
Electricity Provider in order to implement the provisions of this Section 2.
B. HVAC.
1. HVAC Ground Lease. H/C I covenants to SECC Owner, Mall I Owner,
H/C II Owner and Mall II Owner that it shall enter into a ground lease (the
"HVAC Ground Lease") whereby H/C I Owner, as lessor shall lease to APJV as
lessee the real property (the "HVAC Space") together with any buildings and
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32
improvements constructed thereon more particularly described on Exhibit I for
the APJV Term to be used exclusively for the operation, maintenance and repair
by APJV of the New HVAC Plant and the HVAC Facilities; provided however that:
(a) H/C I Owner shall have the right to relocate the New HVAC
Plant, subject to the requirement that, without a Serviced Owner's consent, the
relocation shall not interfere with or affect the heating, ventilating and air
conditioning service required to be provided to such Serviced Owner pursuant to
its ESA (except to a de minimis extent) or result in any additional cost or
expense to such Serviced Owner; and
(b) During the APJV Term, APJV shall maintain, repair and
restore the New HVAC Plant in accordance with the provisions of the Initial
ESA's. From and after the expiration of the APJV Term, the Substitute HVAC
Operator shall (i) maintain, repair and restore the New HVAC Plant and the HVAC
Facilities, and (ii) to the extent not covered pursuant to the property damage
insurance required to be carried in accordance with the provisions of Article X,
shall procure replacement cost property damage insurance covering the New HVAC
Plant and the HVAC Facilities and any other insurance equivalent to that which
APJV was required to maintain under the initial ESA's
2. Admission of New Serviced Owners.
(a) Mall I Owner, SECC Owner, H/C I Owner, H/C II
Owner and Mall II Owner each agree that H/C I Owner shall have the right to
admit the H/C II Owner and/or the Mall II Owner as a Serviced Owner upon the
request of H/C II Owner and/or Mall II Owner, subject to the following
conditions:
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33
(i) The proposed new Serviced Owner shall have delivered
to each then existing Serviced Owner the following:
(1) Evidence reasonably satisfactory to such existing
Serviced Owner that the admission of H/C II Owner or Mall II Owner,
as the case may be, as a Serviced Owner, and the provision of
heating, ventilating and air conditioning services to the new
Serviced Owner thereafter, shall not reduce or otherwise
detrimentally affect the heating, ventilating and air conditioning
service required to be provided to any existing Serviced Owner
pursuant to the provisions of its Initial ESA in any material
respect.
(2) A copy of a ESA executed by the proposed new
Serviced Owner and the HVAC Operator, which shall provide in
substance that:
(A) The existing Serviced Owners shall not be required
to bear any costs associated with servicing the proposed new Serviced
Owner in addition to the existing Serviced Owners (including without
limitation the cost of improving or upgrading the HVAC Facilities);
(B) The ESA entered into by the proposed new Serviced
Owner (each, a "New Serviced Owner ESA") shall have the same Scheduled
Termination Date as that applying under the ESA's executed between the
HVAC Operator and the then existing Serviced Owners.
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34
(C) From and after admission of a Serviced Owner through
the Scheduled Termination Date, the proposed new Serviced Owner shall
bear:
(x) its "Proportionate Share" (as such term is
defined in the Owner's Qualifying ESA); and
(y) 100% of any "Other Facilities Capacity
Payment" (as such term is defined in the Owner's Qualifying ESA)
attributable to any Other Facilities (as such term is defined in the
Owner's Qualifying ESA) including any Metering Equipment installed
for the benefit of the New Serviced Owner.
(D) The New Serviced Owner's ESA shall not have any
terms which are materially different from those in the Qualifying ESA's
between the HVAC Operator and the then existing Serviced Owners, if the
same would interfere with or affect the heating, ventilating and air
conditioning service required to be provided to the existing Serviced
Owners pursuant to their ESA's (except to a de minimis extent) or result
in any additional cost or expense to such Serviced Owners.
(ii) The rights of H/C II Owner and Mall II Owner to become
Serviced Owners shall terminate on the fifth (5th) anniversary of the
Final Completion Date if not duly exercised on or before such date.
(b) Each Serviced Owner agrees that should H/C II Owner or
Mall II Owner elect to be admitted as a Serviced Owner as provided above, such
<PAGE>
35
Serviced Owner shall permit the new Serviced Owner to lay utility lines
connecting the improvements on its Lot to the New HVAC Plant; provided that:
(i) Such utility lines shall be located within easements
to be granted in connection therewith and with the prior written approval
of the burdened Owner; provided that such burdened Owner shall not
unreasonably withhold, delay or condition any such approval to the extent
that the desired location of the easement in question does not (1)
interfere with the use or operation of the burdened lot and/or the
improvements therein (other than to a de minimis extent), (2) adversely
affect the value of such space and/or improvements (other than to a de
minimis extent) and/or (3) impose any material obligation on the burdened
Owner and/or the improvements located on the burdened lot, (other than the
granting of the easement in question); in each case, assuming that the
space and/or improvements, as applicable, in question are being used for
any applicable Permitted Use.
(ii) The rights of the burdened Serviced Owners and the
obligations of any new Serviced Owner in connection with the location,
maintenance and repair of such new Serviced Owner's utility lines shall be
as set forth in Section 6 of the following Part C of this Article II.
3. Extension/Termination of HVAC Operator.
(a) Extension/Termination on Scheduled Termination Date
Prior to Material Amortization Date. The Serviced Owners shall meet at least 180
days prior to any Scheduled Termination Date prior to the Material Amortization
Date to discuss whether to extend the Qualifying ESA's with the then existing
HVAC
<PAGE>
36
Operator. Unless all of the Serviced Owners agree within the time period set
forth in the Qualifying ESA's (a) to terminate the Qualifying ESA's in
accordance with their terms and (b) to enter into new ESA's with a Substitute
HVAC Operator approved by each of the Serviced Owners, then each Serviced Owner
shall be deemed to have elected to extend its Qualifying ESA (and the Scheduled
Termination Date applying thereunder) in accordance with Section 2.5 of the
Qualifying ESA. Conversely, if all of the Serviced Owners timely elect prior to
such Scheduled Termination Date to terminate the Qualifying ESA's as of such
Scheduled Termination Date, and to enter into new ESA's with the new HVAC
Operator, then:
(i) Each Qualifying ESA with the existing HVAC Operator
shall terminate as of the Scheduled Termination Date set forth therein.
Unless otherwise agreed by each of the Serviced Owners,
(1) each Serviced Owner shall be responsible for
payment of any termination payments due to the existing HVAC
Operator under such Owner's Qualifying ESA, and each Serviced Owner
shall indemnify, protect, defend and hold harmless the other
Serviced Owners against any losses, claims, actions, liabilities,
costs or expenses (including attorneys' fees) arising out of any
failure to make any such payments;
(2) H/C I Owner shall succeed to the ownership of all of
the HVAC Facilities, except for (a) those HVAC Facilities already
owned by another Serviced Owner and (b) any other HVAC Facilities
installed for the benefit of a particular Serviced Owner alone,
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37
ownership of which shall be transferred to the particular Serviced
Owner benefited.
(ii) Each Serviced Owner shall enter into a new ESA with
the Substitute HVAC Operator selected pursuant to this Section 3(a). The
new ESA shall be substantially in the form of the Qualifying ESA, which
the Serviced Owner had with the prior HVAC Operator except that:
(1) The required periodic payments to be made by each
Serviced Owner shall be calculated so as to cover only the
incremental expense of procuring the energy services and otherwise
shall be equitably allocated among the Serviced Owners taking into
account, inter alia, each Serviced Owner's New HVAC Plant
Percentage; and
(2) Each Owner shall grant appropriate access and other
rights to the Substitute HVAC Operator so as to permit the
Substitute HVAC Operator to utilize the utility easements granted
pursuant to the further provisions of this Agreement and otherwise
provide heating, ventilating and air conditioning service to the
Serviced Owners in accordance with the provisions of their
respective ESA's.
(iii) H/C I Owner shall provide appropriate and commercially
reasonable possessory and use rights to permit the Substitute HVAC
Operator to use and occupy the HVAC Space together with any buildings and
improvements constructed thereon.
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38
(b) Termination in the Event of "Major Default". As more
particularly set forth in the Qualifying ESA's, each Owner has the right to
terminate its Qualifying ESA in the event of a material HVAC Operator Default.
In the event of any such termination, the terminating Serviced Owner shall
provide prior written notice of such termination to each of the other Serviced
Owners. The Owners further agree as follows with respect to any such
termination:
(i) Within fifteen (15) days after H/C I Owner's receipt
of any such termination notice (or, if the termination is contested by the
HVAC Operator, from the date that H/C I Owner receives confirmation that
any such contest has been resolved and that the termination shall be
effective as of a date stated (the "Material Default Termination Date"),
the Serviced Owners shall confer in good faith to agree on a Substitute
HVAC Operator reasonably acceptable to each of the Serviced Owners. If the
Serviced Owners shall be unable to agree on a Substitute HVAC Operator
within thirty (30) days, the Serviced Owners shall vote (with each vote
counted in proportion to each Serviced Owner's New HVAC Plant Percentage)
to select an Independent Expert who shall, within thirty (30) days after
conferring with each Serviced Owner regarding its economic and heating,
ventilating and air conditioning service objectives, select a Substitute
HVAC Operator who shall provide heating, ventilating and air conditioning
service that is comparable in all material respects to the service
required to be provided by the existing HVAC Operator under the existing
ESA's. Any increase in the cost of providing such level of service in
excess of the cost of providing such level of service by the
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39
existing HVAC Operator shall be borne by the Serviced Owner(s) electing to
terminate the existing HVAC Operator pro rata based upon their respective
Serviced Owner's New HVAC Plant Percentages.
(ii) Effective upon the Material Default Termination Date,
each of the Qualifying ESA's shall terminate. Each Serviced Owner shall be
responsible for payment of any termination payments due to the terminated
HVAC Operator under its ESA, and each Serviced Owner shall indemnify,
protect, defend and hold harmless the other Serviced Owners against any
losses, claims, actions, liabilities, costs or expenses (including
attorneys' fees) arising out of any failure to make any such payments.
(iii) Effective upon the Material Default Termination Date,
each of the Serviced Owners shall enter into a new ESA with the Substitute
HVAC Operator selected in accordance with this Section 3(b) substantially
in the form of its Qualifying ESA with the prior HVAC Operator, except
that:
(1) The required periodic payments to be made by each
Serviced Owner shall be calculated so as to cover only the
incremental expense of procuring the energy services and otherwise
shall be equitably allocated among the Serviced Owners taking into
account, inter alia, each Serviced Owner's New HVAC Plant
Percentage; and
(2) Each Owner shall grant appropriate access and other
rights to the Substitute HVAC Operator so as to permit the
Substitute HVAC Operator to utilize the utility easements granted
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40
pursuant to the further provisions of this Agreement and otherwise
provide heating, ventilating and air conditioning service to the
Serviced Owners in accordance with the provisions of their
respective ESA's.
(iv) If the ESA with APJV or any Substitute HVAC Operator
is terminated and the Serviced Owners enter into new ESA's with a
Substitute HVAC Operator in accordance with the terms of this Section 3,
then H/C I Owner shall provide appropriate and commercially reasonable
possessory and use rights to permit the Substitute HVAC Operator to use
and occupy the HVAC Space together with any buildings and improvements
constructed thereon so long as such Substitute HVAC Operator (a) enters
into agreements reasonably satisfactory to H/C I Owner indemnifying H/C I
Owner against all losses, claims, actions, liabilities, costs or expenses
(including attorney's fees) arising out of the actions or inactions of
such Substitute HVAC Operator, and (b) obtains insurance coverage
substantially similar to that required to be obtained by APJV under the
Initial ESA's.
4. Extension/Termination on or after the Material Amortization Date.
On or before the date which shall be eighteen (18) months prior to the Material
Amortization Date, the Serviced Owners shall confer in good faith to agree on a
plan (a "Replacement HVAC Plant Plan") for the refurbishment or replacement of
the New HVAC Plant reasonably acceptable to the Serviced Owners, which plan
shall provide for the furnishing of heating, ventilating and air conditioning
services for a commercially reasonable time period from and after the Material
Amortization Date which are at least equivalent in all material respects
(including, without limitation,
<PAGE>
41
quantity and quality) to those services required to be provided by APJV or any
Substitute HVAC Operator, as applicable, immediately prior to such date on
financing and payment terms reasonably acceptable to the Serviced Owners, the
cost of which each Serviced Owner shall share in proportion to its New HVAC
Plant Percentage. If the Serviced Owners shall be unable to agree on such a
Replacement HVAC Plant Plan within thirty (30) days, the Serviced Owners shall
vote (with each vote counted in proportion to each Serviced Owner's New HVAC
Plant Percentage) to select an Independent Expert who shall, within sixty (60)
days after conferring with each Serviced Owner regarding its economic and
heating, ventilating and air conditioning service objectives, develop a
commercially reasonable Replacement HVAC Plant Plan consistent therewith. The
Serviced Owners shall commence the implementation of such Replacement HVAC Plant
Plan within thirty (30) days thereafter, unless any Serviced Owner shall have
delivered during such thirty (30) day period a written notice to each of the
other Serviced Owners and the Independent Expert asserting that the
implementation of the proposed Replacement HVAC Plant Plan will not permit such
Serviced Owner to operate its business for its Permitted Use or would unfairly
burden such Owner as compared to the other Owners or unfairly benefit any other
Owner, in which case the dispute shall be submitted to arbitration in accordance
with the terms hereof.
5. Termination Other than by an Owner. If the Qualifying ESA's shall
terminate for any reason other than those described in Sections B3 or B4 of this
Article II, as expeditiously as possible after the termination of the Qualifying
ESA's, the Serviced Owners shall confer and use good faith efforts to agree on a
<PAGE>
42
Replacement HVAC Plant Plan. If the Serviced Owners shall be unable to agree on
such a Replacement HVAC Plant Plan within fifteen (15) days, the Serviced Owners
shall vote (with each vote counted in proportion to each Serviced Owner's New
HVAC Plant Percentage) to select an Independent Expert who shall, as soon as
possible but in no event later than sixty (60) days after conferring with each
Serviced Owner regarding its economic and heating, ventilating and air
conditioning service objectives, develop a commercially reasonable Replacement
HVAC Plant Plan consistent therewith. The Serviced Owners shall commence the
implementation of such Replacement HVAC Plant Plan as soon as possible but in no
event later than thirty (30) days thereafter, unless any Serviced Owner shall
have delivered a written notice during such thirty (30) day period to each of
the other Serviced Owners and the Independent Expert asserting that the
implementation of the proposed Replacement HVAC Plant Plan will not permit such
Serviced Owner to operate its business for its Permitted Use or would unfairly
burden such Owner as compared to the other Owners or unfairly benefit any other
Owner, in which case the dispute shall be submitted to arbitration in accordance
with the terms hereof.
6. Termination of HVAC Ground Lease. H/C I Owner agrees for the
benefit of each of the other Serviced Owners that it shall not terminate the
HVAC Ground Lease or any other possessory interest granted to the HVAC Operator
in accordance with the provisions of this Part B of Article II other than in
connection with an election to terminate all of the qualifying ESA's in
accordance with the provisions hereof.
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43
7. Amendment of ESA's. No Serviced Owner shall enter into any
amendment, modification, restatement, substitution or replacement (each, a "ESA
Amendment") of its ESA with the HVAC Operator which ESA Amendment could
reasonably be expected to have a material adverse effect on the rights and/or
obligations of any other Serviced Owner unless each other Serviced Owner shall
enter into an equivalent ESA Amendment.
8. Obligations of Substitute HVAC Operator. The Substitute HVAC
Operator shall cause the maintenance, repair and restoration of the New HVAC
Plant; provided, however, that any such Substitute HVAC Operator that is an
Owner can satisfy its obligations under this Section 8 by (i) engaging an
appropriately experienced and competent third party operator to maintain, repair
and restore the New HVAC Plant and (ii) using commercially reasonable efforts to
enforce such operator's obligations so to maintain, repair and restore (and
replacing such operator with another appropriately experienced and competent
third party operator if any such operator fails to perform its obligations) in
which event such Substitute HVAC Operator shall not be liable to any Owner for
consequential damages arising out of such third party's repair, maintenance
and/or restoration of the New HVAC Plant except to the extent such damages
result from such Substitute HVAC Operator's negligence or willful misconduct.
C. Other Reciprocal Easements.
1. Utility Equipment. The Parties acknowledge that there will be
utilities installed during the construction of (a) the Venetian on the Phase I
Land in
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44
accordance with the provisions of the FADAA, and (b) the Lido on the Phase II
Land.
2. Grant of H/C I Owner.
(a) In addition to the easements granted above but subject to
the other terms and conditions of this Article II, H/C I Owner hereby grants to
Mall I Owner and SECC Owner a non-exclusive easement in the H/C I Space and the
Phase I Hotel/Casino for the installation, operation, flow and passage, use,
maintenance, repair, replacement, relocation and removal (collectively, "Utility
Activity") of any of the following which lie, or, in accordance with the
provisions of this Article II, shall, in the future, lie, in, on, over, through,
upon, across or under the H/C I Space and/or the Phase I Hotel/Casino: sewers
(including, without limitation, storm and sanitary sewer systems), domestic
water systems, natural gas systems, electrical systems, telephone systems, fire
protection water systems, cable television systems, if any, and all other
utility systems and facilities now or in the future reasonably necessary for the
service of the Venetian (including without limitation the Phase I Mall) and/or
the SECC (collectively, "Utility Equipment", or to the extent that such Utility
Equipment currently exists in, on, over, through, upon or across the Phase I
Land, the Mall I Space, the Phase II Land or the SECC Land and/ or the
improvements located thereon as depicted on Exhibit J, as applicable, the
"Existing Utility Equipment"). Notwithstanding anything to the contrary in the
preceding sentence, Utility Equipment shall not include the New Electric
Substation.
(b) The location (and relocation) of all easements for Utility
Equipment that is to be installed in the H/C I Space and the Phase I
Hotel/Casino
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45
after the date hereof (and the relocation of all easements for Existing Utility
Equipment) shall be subject to the prior written approval of H/C I Owner;
provided that H/C I Owner shall not unreasonably withhold, delay or condition
any such approval to the extent that the desired location or relocation of the
easement in question does not (1) interfere with the use or operation of the H/C
I Space and the Phase I Hotel/Casino (other than to a de minimis extent), (2)
adversely affect the value of such land and/or improvements (other than to a de
minimis extent) and/or (3) impose any material obligation on H/C I Owner and/or
the Phase I Hotel/Casino (other than the granting of the easement in question);
in each case, assuming that the space and/or improvements, as applicable, in
question are being used by H/C I Owner for their Permitted Use.
3. Grant of Mall I Owner.
(a) In addition to the easements granted above but subject to
the other terms and conditions of this Article II, Mall I Owner hereby grants to
H/C I Owner and SECC Owner a non-exclusive easement in the Mall I Space for
Utility Activity in connection with any Utility Equipment which lies, or, in
accordance with the provisions of this Article II, shall, in the future, lie,
in, on, through, upon or across the Mall I Space.
(b) The location (and relocation) of all easements for Utility
Equipment that is to be installed in the Mall I Space after the date hereof (and
the relocation of all easements for Existing Utility Equipment) shall be subject
to the prior written approval of Mall I Owner; provided that Mall I Owner shall
not unreasonably withhold, delay or condition any such approval to the extent
that the
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46
desired location or relocation of the easement in question does not (1)
interfere with the use or operation of the Mall I Space and/or the improvements
therein (other than to a de minimis extent), (2) adversely affect the value of
such space and/or improvements (other than to a de minimis extent) and/or (3)
impose any material obligation on Mall I Owner and/or the improvements located
in the Mall I Space (other than the granting of the easement in question); in
each case, assuming that the space and/or improvements, as applicable, in
question are being used by Mall I Owner for their Permitted Use.
4. Grant of H/C II Owner.
(a) In addition to the easements granted above but subject to
the other terms and conditions of this Article II, H/C II Owner hereby grants to
Mall I Owner, H/C I Owner and SECC Owner a non-exclusive easement in the Phase
II Land for Utility Activity in connection with any Utility Equipment which lie,
or, in accordance with the provisions of this Article II, shall, in the future,
lie, in, on, over, through, upon, across or under the Phase II Land.
(b) The location (and relocation) of all easements for Utility
Equipment that is to be installed on the Phase II Land after the date hereof
(and the relocation of all easements for Existing Utility Equipment) shall be
subject to the prior written approval of H/C II Owner; provided that H/C II
Owner shall not unreasonably withhold, delay or condition any such approval to
the extent that the desired location or relocation of the easement in question
does not (1) interfere with the use or operation of the Phase II Land and/or the
improvements therein (other than to a de minimis extent), (2) adversely affect
the value of such space and/or
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47
improvements (other than to a de minimis extent) and/or (3) impose any material
obligation on H/C II Owner and/or the improvements located on the Phase II Land,
or on such land and/or improvements (other than the granting of the easement in
question); in each case, assuming that the land and/or improvements, as
applicable, in question are being used by H/C II Owner for their Permitted Use.
5. Grant of SECC Owner.
(a) In addition to the easements granted above but subject to
the other terms and conditions of this Article II, SECC Owner hereby grants to
H/C I Owner and Mall I Owner a non-exclusive easement in the SECC Land for
Utility Activity in connection with any Utility Equipment which lie, or, in
accordance with the provisions of this Article II, shall, in the future, lie,
in, on, over, through, upon, across or under the SECC Land.
(b) The location (and relocation) of all easements for Utility
Equipment that is to be installed on the SECC Land after the date hereof (and
the relocation of all easements for Existing Utility Equipment) shall be subject
to the prior written approval of SECC Owner; provided that SECC Owner shall not
unreasonably withhold, delay or condition any such approval to the extent that
the desired location or relocation of the easement in question does not (1)
interfere with the use or operation of the SECC Land and/or the improvements
therein (other than to a de minimis extent), (2) adversely affect the value of
such space and/or improvements (other than to a de minimis extent) and/or (3)
impose any material obligation on SECC Owner and/or the improvements located on
the SECC Land (other than the granting of the easement in question); in each
case, assuming that the
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48
land and/or improvements, as applicable, in question are being used by SECC
Owner for their Permitted Use.
6. Rights of Burdened Parties; Obligations of Benefitted Parties.
(a) Each Owner of a servient tenement may relocate any
utility easement on its parcel at its sole cost and expense provided that such
relocation: (1) does not cause any interruption in the utilization of the
utility easement by the Owner of the dominant tenement for the affected easement
(except de minimis interruptions, as to degree or time, which shall be scheduled
by agreement with the Owner of the dominant tenement for the affected easement);
(2) does not diminish the capacity or efficiency of such utility easement
(excepting de minimis effects); and (3) will not make it more difficult or more
expensive for the Owner of the dominant tenement with respect to the utility
easement to use, maintain, repair, or replace the utility lines, unless, in the
case of increased expense, the Owner of a servient tenement, at the time of such
adverse relocation, agrees to bear any future additional costs arising from such
relocation.
(b) The cost and expense of Utility Activity in connection
with Utility Equipment (to the extent not borne by a public or private utility
company) shall be borne entirely by the Party whose parcel benefits thereby or,
if more than one Party's parcel benefits thereby, such cost and expense shall be
allocated between the Parties so benefited in such manner as at the time shall
be equitable in the circumstances. Any costs borne by the burdened Party with
respect to any Utility Activity shall be reimbursed by the benefited Party.
Before any such Utility Activity (other than Utility Activity which is
operation, flow, passage or use) in connection
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49
with any Utility Equipment is effectuated, the Party conducting the same shall
give reasonable prior notice to the other affected Parties, except in any case
where the giving of reasonable prior notice is not practicable under the
circumstances (but notice shall nevertheless be given as soon as practicable),
and the Party conducting the same shall have received the consent of such
affected Parties (except in any case where the giving of reasonable prior notice
was not practicable under the circumstances (but consent shall nevertheless be
confirmed as soon as practicable)). The Party conducting the same shall, in
performing any such work, use commercially reasonable efforts to minimize
interference with the Utility Equipment of the other Parties and the use,
enjoyment and operations of such other Parties' land and the improvement
thereon; provided that the failure to give any such notice or receive any such
consent shall not constitute a default hereunder or require the aforesaid Party
to demolish or remove any portion of its Utility Equipment.
(c) The Party whose parcel is benefited by a utility easement
shall maintain, repair, restore and replace all Utility Equipment related to the
easement that is located on the burdened Party's parcel.
(d) In the event a Party whose parcel is benefited by a
utility easement shall fail to maintain, repair, restore or replace any utility
lines located on a burdened Party's parcel in accordance with the provisions of
this Part C, Section 6 of Article II, such burdened Party may, after reasonable
notice to the defaulting benefited Party, except in any case where the giving of
reasonable prior notice is not practicable under the circumstances (but notice
shall nevertheless be given as soon as
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50
practicable), cure such default at the defaulting Party's expense, in which
event the provisions of Sections 9(a) and 9(b) of Article XIV shall apply.
(e) The Parties shall cooperate with each other with respect
to all Utility Activity in connection with Utility Equipment including, without
limitation, the granting of easements in their respective parcels to public or
private utilities in order to permit such utilities to bring their services to
such parcels.
D. Common Areas; Access Rights to Affect Maintenance and Repair; Parking
Access; Emergency Access; Vertical and Lateral Support; Miscellaneous.
1. Easements for Pass-through Areas and Common Areas.
(a) As part of the construction of the Venetian, H/C I Owner
and Mall I Owner intend to construct certain H/C Pass-through Areas and Common
Areas, which areas will be made available for use by SECC Owner, H/C I Owner and
Mall I Owner as set forth in this Section II D.
(b) H/C I Owner hereby grants to each other Party a
non-exclusive right to use and easement in, on, over, upon, above, under,
through and across the H/C Pass-through Areas and the H/C-Mall Common Areas for
passage, ingress and egress and otherwise for the intended use thereof and for
access to and from its respective Destination Areas and public sidewalks and
public rights of ways. Such use of the H/C Pass-through Areas and the H/C-Mall
Common Areas shall be subject to reasonable rules and regulations established by
H/C I Owner from time to time; provided that no such rules or regulations shall
adversely affect (except to a de minimis extent) the conduct of any Owner's
business in accordance with its Permitted Use. Without limiting the generality
of the foregoing, each Party may use the H/C
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51
Pass-through Areas for the purposes for which they were intended, and each of
H/C I Owner and Mall I Owner shall have the right to use the H/C-Mall Common
Areas and the Building Shell and Core for the purposes for which they were
intended.
(c) Mall I Owner hereby grants to each other Party a
non-exclusive right to use and easement in, on, over, upon, through and across
the Mall I Pass-through Areas for passage, ingress and egress and otherwise for
the intended use thereof and for access to and from its respective Destination
Areas and public sidewalks and public rights of ways. Such use of the Mall I
Pass-through Areas shall be subject to reasonable rules and regulations
established by Mall I Owner from time to time; provided that no such rules or
regulations shall adversely affect (except to a de minimis extent) the conduct
of any Owner's business in accordance with its Permitted Use. Without limiting
the generality of the foregoing, each Party may use the Mall I Pass-through
Areas for the purposes for which they were intended, and each of H/C I Owner and
Mall I Owner shall have the right to use the Building Shell and Core for the
purposes for which they were intended.
(d) SECC Owner hereby grants to each other Party a
non-exclusive right to use and easement in, on, over, upon, above, under,
through and across the SECC Pass-through Areas for passage, ingress and egress
and otherwise for the intended use thereof and for access to and from its
respective Destination Areas and public sidewalks and public rights of ways.
Such use of the SECC Pass-through Areas shall be subject to reasonable rules and
regulations established by SECC Owner from time to time; provided that no such
rules or regulations shall adversely affect (except to a de minimis extent) the
conduct of any Owner's business
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52
in accordance with its Permitted Use. Without limiting the generality of the
foregoing, each Party may use the SECC Pass-through Areas for the purposes for
which they were intended.
(e) H/C I Owner hereby grants to Mall I Owner for its use and
the use of its Tenants and their respective employees, agents, contractors and
subcontractors of Mall I Owner and its Tenants only, and not for the use of the
general public, a non-exclusive right to use and easement over, upon, above,
under through and across all H/C Limited Common Areas for, among other things,
pedestrian passage, ingress and egress and other necessary or desirable uses in
connection with the business and operations of Mall I Owner. Such use of the H/C
Limited Common Areas shall be subject to rules and regulations established by
H/C I Owner from time to time; provided that no such rule or regulation shall
adversely affect (except to a de minimis extent) the conduct of Mall I Owner's
business in accordance with its Permitted Use.
(f) Mall I Owner hereby grants to H/C I Owner for its use and
the use of its Tenants and their respective employees, agents, contractors and
subcontractors of H/C I Owner and its Tenants only, and not for the use of the
general public, a non-exclusive right to use and easement over, upon, above,
under through and across all Mall I Limited Common Areas for, among other
things, pedestrian passage, ingress and egress and other necessary or desirable
uses in connection with the business and operations of H/C I Owner. Such use of
the Mall I Limited Common Areas shall be subject to rules and regulations
established by Mall I Owner from time to time; provided that no such rule or
regulation shall adversely
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53
affect (except to a de minimis extent) the conduct of H/C I Owner's business in
accordance with its Permitted Use.
2. Right to Relocate, Increase or Decrease Pass-through Areas,
Limited Common Areas and H/C-Mall Common Areas; Owner Cooperation re:
Expansion of Pass-through Areas.
(a) H/C I Owner may relocate, increase or decrease all or any
part of the H/C Pass-through Areas and/or the H/C Limited Common Areas at its
sole cost and expense; provided that such relocation, increase or decrease does
not adversely affect (other than to a de minimis extent) any Party's reasonable
access to its Destination Areas.
(b) Mall I Owner may relocate, increase or decrease all or any
part of the Mall I Pass-through Areas and/or the Mall I Limited Common Areas at
its sole cost and expense; provided that such relocation, increase or decrease
does not adversely affect (other than to a de minimis extent) any Party's
reasonable access to its Destination Areas.
(c) H/C I Owner and/or Mall I Owner, subject to the other's
reasonable consent may relocate, increase or decrease (or, in the case of Mall I
Owner, cause H/C I Owner to relocate, increase or decrease) all or any part of
the H/C-Mall Common Areas which expense shall be borne by the Party requesting
such relocation, or, if both Parties desire such relocation, such expense shall
be shared equally; provided that such relocation, increase or decrease: (1) does
not cause any interruption in the utilization of the easement to use the
H/C-Mall Common Areas by the Owner of the dominant tenement for the affected
easement (except de minimis
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54
interruptions, as to degree or time, which shall be scheduled by agreement with
the Owner of the dominant tenement for the affected easement); (2) does not
diminish the capacity or efficiency of such easement (excepting de minimis
effects); (3) will not make it more difficult or more expensive for the Owner of
the dominant tenement to use the H/C-Mall Common Areas, unless, in the case of
greater expense, the Owner requesting such relocation, increase or decrease, at
the time of such adverse relocation, increase or decrease, agrees to bear any
future additional costs arising from such relocation, increase or decrease; and
(4) will not interfere with or adversely affect the maintenance, use or
operation of the dominant tenement or the conduct of its Owner's business
thereat in accordance with its Permitted Use.
(d) SECC Owner may relocate, increase or decrease all or any
part of the SECC Pass-through Areas at its sole cost and expense; provided that
such relocation, increase or decrease does not adversely affect (other than to a
de minimis extent) any Party's reasonable access to its Destination Areas.
(e) H/C I Owner and Mall I Owner shall cooperate in good faith
as reasonably requested by the other from time to time to effect changes to the
Common Areas and other Owner's Pass-through Areas.
3. Access Rights to Effect Maintenance and Repair.
(a) SECC Owner and H/C I Owner each hereby grant to Mall I
Owner an easement to enter on or into as applicable (i) the SECC and the SECC
Land and (ii) the Phase I Hotel/Casino and the H/C I Space in each instance to
the extent reasonably necessary (A) to gain access to the Mall I Space, the
Phase I Mall and any and all fixtures, fittings, equipment and building systems
from time to
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55
time located therein for the maintenance, repair or restoration of or to the
same or to any other fixtures, fittings, equipment or building systems that
serve the Phase I Mall, and (B) to perform any maintenance, repair, restoration
or other obligations imposed upon Mall I Owner under this Agreement or which
Mall I Owner shall otherwise desire to perform in the Mall I Space in accordance
with this Agreement, but for no other reason or purpose, except as otherwise
provided in this Agreement. Mall I Owner, in exercising its rights under this
Section 3(a), shall use commercially reasonable efforts to minimize interference
with the maintenance, use and operation of (x) the SECC and SECC Owner's
business at the same and (y) the H/C I Space and the H/C I Owner's business at
the same. Before any maintenance, repairs or restoration contemplated by this
Section 3(a) that requires Mall I Owner to enter upon any material portion of
(aa) the SECC Land and/or the SECC and/or (bb) the H/C I Space and/or the Phase
I Hotel/Casino are effectuated, Mall I Owner shall give reasonable prior notice
to SECC Owner and/or H/C I Owner, as the case may be, except in any case where
the giving of reasonable prior notice is not practicable under the circumstances
(but notice shall nevertheless be given as soon as practicable); provided that
failure to give any such notice shall not constitute a default hereunder.
(b) SECC Owner and Mall I Owner each hereby grant to H/C I
Owner an easement to enter on or into as applicable (i) the SECC and the SECC
Land and (ii) Phase I Mall and the Mall I Space in each instance to the extent
reasonably necessary (A) to gain access to the H/C I Space and/or the Phase I
Hotel/ Casino and any and all fixtures, fittings, equipment and building systems
from time to time located therein or to any other fixtures, fittings, equipment
or building systems
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56
that serve the Phase I Hotel/Casino (including the New Electric Substation and
any improvements related thereto) for the maintenance, repair or restoration of
or to the same and (B) to perform maintenance, repair, restoration or other
obligations imposed upon H/C I Owner under this Agreement or which H/C I Owner
shall otherwise desire to perform in the H/C I Space or on the Phase I Land as
applicable in accordance with this Agreement, but for no other reason or
purpose, except as otherwise provided in this Agreement. H/C I Owner, in
exercising its rights under this Section 3(b), shall use commercially reasonable
efforts to minimize interference with the maintenance, use and operation of (x)
the SECC and SECC Owner's business at the same and (y) the Phase I Mall and Mall
I Owner's business at the same. Before any maintenance, repairs or restoration
contemplated by this Section 3(b) that requires H/C I Owner to enter upon any
material portion of (aa) the SECC Land and/ or the SECC and/or (bb) the Mall I
Space are effectuated, H/C I Owner shall give reasonable prior notice to SECC
Owner and/or Mall I Owner, as the case may be, except in any case where the
giving of reasonable prior notice is not practicable under the circumstances
(but notice shall nevertheless be given as soon as practicable); provided that
the failure to give any such notice shall not constitute a default hereunder.
(c) Mall I Owner and H/C I Owner each hereby grant to SECC
Owner an easement to enter on or into as applicable (i) the Phase I Mall and the
Mall I Space and (ii) the Phase I Hotel/Casino and the H/C I Space in each
instance to the extent reasonably necessary (A) to gain access to the SECC Land,
the SECC and any and all fixtures, fittings, equipment and building systems from
time to
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time located therein or thereon or to any other fixtures, fittings, equipment or
building systems that serve the SECC for the maintenance, repair or restoration
of or to the same, and (B) to perform any maintenance, repair, restoration or
other obligations imposed upon SECC Owner under this Agreement or which SECC
Owner shall otherwise desire to perform on the SECC Land in accordance with this
Agreement, but for no other reason or purpose, except as otherwise provided in
this Agreement. SECC Owner, in exercising its rights under this Section 3(c),
shall use commercially reasonable efforts to minimize interference with the
maintenance, use and operation of (x) the Phase I Mall and Mall I Owner's
business at the same and (y) the H/C I Space and the H/C I Owner's business at
the same. Before any maintenance, repairs or restoration contemplated by this
Section 3(c) that requires SECC Owner to enter upon any material portion of (aa)
the Mall I Space and/or the Phase I Mall and/or (bb) the H/C I Space and/or the
Phase I Hotel/Casino are effectuated, SECC Owner shall give reasonable prior
notice to Mall I Owner and/or H/C I Owner, as the case may be, except in any
case where the giving of reasonable prior notice is not practicable under the
circumstances (but notice shall nevertheless be given as soon as practicable);
provided that failure to give any such notice shall not constitute a default
hereunder.
4. Parking Access Easements.
(a) Each of SECC Owner and H/C I Owner hereby grants to each
other and to Mall I Owner a non-exclusive easement (each, a "Parking Access
Easement") and right to use from and after the Phase I Garage Opening Date, for
vehicular and pedestrian access to (and from) the Phase I Automobile Parking
Area,
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the roadways and walkways leading thereto, including, without limitation, the
road designated as the Koval Access Road and the sidewalks adjacent thereto, if
any, all as depicted on Exhibit Q annexed hereto and made a part hereof.
Effective automatic ally upon the Phase I Garage Opening Date, H/C I Owner shall
grant to SECC Owner and to Mall I Owner a non-exclusive easement and right to
use, for pedestrian ingress and egress and access to (and from) the Phase I
Automobile Parking Area from (and to) such other Owner's Lot and the public
areas of the Venetian.
(b) Notwithstanding any provision herein to the contrary, each
of H/C I Owner and SECC Owner, as applicable, shall have the right to relocate
each of the Parking Access Easement Areas located on their respective Lots;
provided that, other than temporary reasonable interference during relocation,
such relocation does not impair other Owners' rights to utilize Parking Access
Easements (other than to a de minimis extent), or interfere (other than to a de
minimis extent) with any other Owner's business at its Lot, or impose additional
obligations on any other Owner under this Agreement.
5. Emergency Access Rights. Each of H/C I Owner, Mall I Owner and
SECC Owner hereby grants to the other such easements in, on, across and through
(i) the H/C I Space and/or any improvements constructed upon the H/C I Space,
(ii) the Mall I Space and/or any improvements constructed in the Mall I Space,
or (iii) the SECC Land and/or any improvements constructed upon the SECC Land,
as each of them may reasonably require, and in such location as the grantor
thereof shall approve (which approval shall not be unreasonably withheld), in
order to provide access to emergency fire exit or service corridors or stairs
(to the extent
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59
required in order to comply with applicable building codes and in accordance
with applicable Legal Requirements); provided that the Party exercising its
rights under this Section C.5 shall reimburse the Party burdened by such
exercise for all reasonable costs and expenses incurred by such burdened Party
in connection therewith.
The Parties shall endeavor, as expeditiously as reasonably possible
following the Completion Date, to confirm the precise boundaries of such
easements and to memorialize the same by a recorded agreement executed by the
Owner of the burdened property and the Owner of the benefitted Property.
6. Easement for Vertical and Lateral Support. H/C I Owner and Mall I
Owner hereby grant to the other a right and easement for vertical and lateral
support of the Phase I Mall and the Phase I Hotel/Casino and an easement in and
to all structural members, footings, caissons, foundations, columns and beams
and any other supporting components located within or constituting a part of the
Phase I Hotel/Casino or the H/C I Space for the support of the Phase I Mall and
the Mall I Space and all Facilities located therein or thereon.
7. Miscellaneous.
(a) Except as otherwise expressly provided in this Article II,
each grantor of an easement under this Article II may relocate any easement on
its parcel at its sole cost and expense provided that such relocation: (1) does
not cause any interruption in the utilization of the easement by the Owner of
the dominant tenement for the affected easement (except de minimis
interruptions, as to degree or time, which shall be scheduled by agreement with
the Owner of the dominant
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tenement for the affected easement); (2) does not diminish the capacity or
efficiency of such easement (excepting de minimis effects); (3) will not make it
more difficult or more expensive for the Owner of the dominant tenement with
respect to any utility easement to use, maintain, repair, or replace the utility
lines, unless, in the case of increased expense, the relocating grantor, at the
time of such adverse relocation, agrees to bear any future additional costs
arising from such relocation; and (4) will not interfere with or adversely
affect (other than to a de minimis extent) the maintenance, use or operation of
the dominant tenement or the conduct of its Owner's business thereat.
(b) Except as otherwise provided herein with respect to
Limited Common Areas, each benefitted Owner of an easement hereunder may allow
its Tenants and Permittees from time to time to use such easement; provided that
the use by such Tenants and Permittees shall be consistent with the use rights
granted under this Article II.
ARTICLE III
COVENANTS REGARDING SECC LAND
1. SECC Operation and Maintenance. SECC Owner hereby
covenants in favor of H/C I Owner as follows:
(a) Operating Covenant. SECC Owner shall continuously operate
and exclusively use the SECC as a convention, trade show and exposition center
and ancillary uses in a manner and at a level that shall be no less than the
standards as of the date hereof of First-class convention, trade show and
exposition
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61
centers. The Parties acknowledge that SECC Owner's use and operation on the
date hereof satisfies such standards.
(b) SECC Maintenance and Repair. From and after the
Commencement Date, SECC Owner shall maintain, repair and restore the SECC (or
any buildings or other improvements constructed in replacement thereof)
including, without limitation, the SECC Pass-through Areas in a manner
consistent with First-class convention, trade show and exposition centers and in
accordance with the provisions of this Agreement. SECC Owner may place a
temporary construction, barricade, fence or other obstruction in SECC
Pass-through Areas if such are reasonably required by SECC Owner to perform work
and maintain the SECC Pass-through Areas in accordance with the terms hereof and
such barricades, fences or other obstructions do not interfere with the
permitted access of another Owner through such SECC Pass-through Areas.
(c) SECC Alterations. SECC Owner may make structural and
non-structural alterations, modifications and repairs ("SECC Alterations") to
the SECC and to any other buildings and improvements from time to time located
on the SECC Land; provided that all SECC Alterations shall be made with
commercially reasonable diligence and dispatch in a First-class manner with
First-class materials and workmanship, architecturally consistent in style with
the existing improvements comprising the SECC. All repairs and any restorations
or replacements required in connection herewith shall be of a quality and class
equal to the original work or installation and shall be done in a good and
workmanlike manner. In affecting such repairs, restorations or replacements,
SECC Owner shall use commercially reasonable
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62
efforts to minimize interference with the use, enjoyment and occupancy of, and
the conduct by H/C I Owner and Mall I Owner, respectively, of such Owner's
business at the H/C I Space and Phase I Hotel/Casino and/or the Mall I Space and
the Phase I Mall, as the case may be. SECC Owner's obligations under this
Article III are subject to Force Majeure Events.
2. Congress Facility; Construction of the Venetian. H/C I Owner and
SECC Owner each covenant in favor of the other as follows:
(a) It is the intention of the Parties hereto that a portion
of the Venetian (hereinafter referred to as the "Congress Facility") and the
SECC will share a building wall (the "SECC Party Wall"), which SECC Party Wall
is currently an exterior wall of the SECC and which H/C I Owner intends to use
as a wall for the Congress Facility. The Congress Facility and the approximate
location of the SECC Party Wall are depicted on Exhibit R.
(b) H/C I Owner and SECC Owner shall each have the right to
use its side of the SECC Party Wall without any restriction on such use, except
that such use shall not interfere with the use by the other Party of the SECC
Party Wall in any material respect or deprive the other Party of any structural
or other support now or in the future intended to be provided by the SECC Party
Wall. Notwithstanding anything to the contrary contained herein, nothing
contained in this Section 2(b) shall prohibit or restrict, or shall be deemed to
prohibit or restrict, SECC Owner from using, maintaining and operating the SECC
(and SECC Owner's business at the SECC) as used, maintained and operated on or
about the Test Date.
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63
(c) SECC Owner shall maintain, keep in good repair (including
structural repairs) and restore, at its sole expense, the SECC Party Wall. H/C I
Owner, promptly upon demand therefor, will reimburse SECC Owner for its
equitable share of the cost thereof. If SECC Owner shall fail to perform its
obligations under this Section 2(c), H/C I Owner shall be entitled to the
self-help, reimbursement and lien rights set forth in Sections 9(a) and 9(b) of
Article XIV.
(d) H/C I Owner covenants and agrees that in performing the
construction of the Congress Facility and the rest of the Venetian as
contemplated under the FADAA (including, without limitation, the Phase I Mall,
the New HVAC Plant, the New Electric Substation and the Phase I Automobile
Parking Area), and any other buildings or other improvements to be located upon
the Phase I Land (and in performing any ancillary activities), H/C I Owner shall
(i) use commercially reasonable efforts to minimize interference with the use,
enjoyment and occupancy of, and the conduct by SECC Owner of SECC Owner's
business at, the SECC, the Temporary Parking Facilities, the Utility Equipment
and the Existing HVAC Plant, (ii) terminate, as soon as reasonably practicable
in accordance with reasonably prudent construction practices, any such
interference and (iii) give SECC Owner a reasonably detailed schedule of all
construction contemplated under the FADAA (or related activities) and thereafter
from time to time, all material modifications and supplements thereto prior to
the commencement of any such construction (or related activities). If in
connection with any such interference, any Mortgagee of SECC Owner shall require
that SECC Owner post a letter of credit, bond or other security, then H/C I
Owner, upon demand therefore by SECC Owner, shall pay all reasonable
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64
costs of obtaining the same. SECC Owner shall have the right to approve the
plans and specifications relating to any openings in the SECC Party Wall,
interconnecting doors or other openings affecting the Congress Facility, or any
other portion of the Venetian (including, without limitation, the Phase I Mall)
that may directly connect with or adjoin the SECC (but only to the extent such
portion directly connects or adjoins the SECC and to the extent such portion
affects the structural integrity of, or is visible from the interior of, the
SECC), which approval shall not be unreasonably withheld, delayed or
conditioned. In the event that construction of the Congress Facility or such
other portion of the Venetian is permanently abandoned or such construction
ceases, in all material respects, for a period of twelve consecutive months,
then SECC Owner shall have the right after thirty (30) days' notice to H/C I
Owner and its Mortgagees to close off any openings in the SECC and take any
other action reasonably necessary to protect the integrity of the SECC as a
single, self-contained, economically viable facility, and H/C I Owner shall,
within ten (10) days of demand therefor, reimburse SECC Owner for the reasonable
costs and expenses incurred by SECC Owner in taking such actions, together with
interest thereon, at the Interest Rate, for the period commencing on such tenth
(10th) day and ending on the date upon which H/C I Owner so reimburses SECC
Owner.
3. Cooperative Marketing; Limitation on Secured Debt. H/C I Owner
and SECC Owner each covenant in favor of the other as follows:
(a) Marketing by H/C I Owner. H/C I Owner shall use
commercially reasonable efforts to promote the use and occupancy of the SECC for
trade shows and convention events by guests and customers of the Phase I Hotel/
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65
Casino, including cooperating with the marketing staff of the SECC to arrange
bookings of the SECC by guests and customers of the Phase I Hotel/Casino and to
develop promotional literature and other material regarding the SECC intended
for guests and customers of the Phase I Hotel/Casino.
(b) Marketing by SECC Owner. Prior to entering into any
license agreement with any person (a "User") for the use by such User of the
SECC for a trade show or convention event, SECC Owner shall consult with H/C I
Owner regarding the availability or projected availability of guest rooms at the
Phase I Hotel/ Casino for participants at such trade show or convention event.
If, following such consultation, H/C I Owner elects (a "Headquarters Election"),
by notice to SECC Owner within fifteen (15) days following such initial
consultation, to have the Phase I Hotel/Casino designated as the headquarters
hotel for such show or event (the "Headquarters Hotel"), SECC Owner will use
commercially reasonable efforts to cause the Phase I Hotel/Casino to be
designated as the Headquarters Hotel. Without limiting the foregoing, SECC Owner
agrees to use commercially reasonable efforts to include in SECC Owner's license
agreement for the use of the SECC by such User a provision designating the Phase
I Hotel/Casino as the Headquarters Hotel for such show or event if so requested
by H/C I Owner. Notwithstanding the foregoing, if, after using commercially
reasonable efforts, SECC Owner is unable to obtain the agreement of the User to
designate the Phase I Hotel/Casino as the Headquarters Hotel or to include in
the license agreement such designation, SECC Owner may enter into such license
agreement without such designation, without any further obligation or liability
of SECC Owner to H/C I Owner with respect thereto. SECC
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66
Owner will not enter into any other agreement with any casino, hotel or resort
to the effect set forth in the first three sentences of this subsection (b),
including, without limitation, any casino, hotel or resort located on the Phase
II Land (the "Phase II Resort") provided, however, that SECC Owner shall have
the right to enter into such an agreement with another casino, hotel or resort
if (i) H/C I Owner does not timely make a Headquarters Election or (ii)
notwithstanding the commercially reasonable efforts of SECC Owner, the trade
show in question declines to permit the Phase I Hotel/Casino to be designated as
its Headquarters Hotel. In the event SECC Owner can, pursuant to the foregoing
proviso, enter into such an agreement with another casino, hotel or resort, SECC
Owner will first use commercially reasonable efforts for a period of ten (10)
days to enter into such an agreement with a Phase II Resort prior to entering
into such an agreement with any other casino, hotel or resort.
(c) Limitation on Secured Debt. In order to induce the H/C I
Owner to enter into this Agreement, SECC Owner agrees that, until such time as
the indebtedness evidenced by the Mortgage Notes and the Senior Subordinated
Notes has been repaid, it shall not incur additional Secured Debt if such
additional Secured Debt will cause the aggregate Secured Debt to exceed the
greater of (i) eighty-five percent (85%) of the then fair market value of the
SECC and (ii) to the extent such additional Secured Debt may be incurred in
accordance with the provisions of each of the Senior Loan Agreement and the
Junior Loan Agreement, $140,000,000 plus any additional amounts permitted to be
advanced thereunder for equipment leases or equipment financings. For purposes
hereof, "Secured Debt" means all obligations with respect to indebtedness for
borrowed money of SECC
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Owner (as principal, guarantor or otherwise) to any Person to the extent such
indebtedness is secured by the SECC or any personal property owned or leased by
SECC Owner and used in connection with the SECC, which indebtedness is hereafter
created, owing or arising and however evidenced, created or incurred, direct,
contingent, fixed or otherwise including, without limitation, the amount of all
liabilities in respect of all capital leases that would at such time be required
to be capitalized on a balance sheet in accordance with generally accepted
accounting principles, but shall not include interest on any such indebtedness
that is payable solely in securities.
(d) Change of Control. SECC Owner will not permit any Transfer
of any interest in the SECC Land or in any stock, membership interests or other
ownership interests in SECC Owner, except (i) such that constitute a Permitted
Transfer, or (ii) a Transfer of all such stock, membership interests or other
ownership interests in SECC Owner to a Person who contemporaneously acquires all
of the stock, membership interests or other ownership interests of the Owner of
the H/C I Space and at least eighty percent (80%) of the stock, membership
interests or other ownership interests of the Owner of the Mall I Space, or all
or substantially all of the assets comprising the H/C I Space and the Mall I
Space; provided that nothing in this Section 3(d) shall be deemed to limit any
term, condition, covenant, agreement or provision of any Mortgagee's loan
documents (including, without limitation, any provision, term, condition,
covenant or agreement requiring any payment to such Mortgagee as a consequence
of any such Transfer). The terms "Transfer" and
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"Permitted Transfer" as used herein have the meanings ascribed thereto in the
Senior Loan Agreement as in effect on the date hereof.
(e) Fees and Expenses. Each of SECC Owner and H/C I Owner will
pay all expenses incurred by it in connection with the effectuation and
administration of this Section 3 and the transactions contemplated hereby (the
"Expenses"); provided, that, from time to time H/C I Owner and SECC Owner will
agree on a reallocation of Expenses if such a reallocation is necessary to
preserve an equitable distribution of such Expenses.
(f) Term. The provisions of this Section 3 shall survive until
December 31, 2010.
ARTICLE IV
CONTINUOUS OPERATION OF
PHASE I HOTEL/CASINO AND PHASE I MALL
1. Operating Covenants. H/C I Owner and Mall I Owner agree
for the benefit of each other as follows:
(a) From and after the earlier to occur of (i) the Opening
Date or (ii) the Mall Release Date, H/C I Owner shall continuously operate and
exclusively use the Phase I Hotel/Casino as a hotel and casino and ancillary
uses in a manner and at a level that shall be no less than the standards of
First-class Las Vegas Boulevard-style hotel/casinos, as such standards exist as
of the earlier of (i) the Opening Date and (ii) the Mall Release Date.
(b) From and after the earlier to occur of (i) the Opening
Date or (ii) the Mall Release Date, Mall I Owner shall continuously operate and
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exclusively use (or cause to be used) the Phase I Mall as a retail and
restaurant complex and ancillary uses in a manner and at a level that shall be
no less than the standards of First-class retail and restaurant complexes, as
such standards exist as of the earlier of (i) the Opening Date and (ii) the Mall
Release Date.
ARTICLE V
COVENANTS REGARDING PHASE I LAND OPERATIONS
H/C I Owner and SECC Owner and Mall I Owner agree for the benefit
of each other from and after the Completion Date as follows:
1. H/C-Mall Common Areas; H/C Pass-through Areas; H/C
Limited Common Areas; Building Shell and Core.
(a) At all times from and after the earlier of (i) the Opening
Date and (ii) the Mall Release Date, H/C I Owner agrees, in accordance with the
standards that obtain in First-class hotel/casinos as provided in this
Agreement, to maintain, repair and restore (including any necessary replacement
and capital improvement work required in connection therewith), and to keep in
operation, open to the public (except for portions thereof, such as service
areas, not generally open to the public) and available for the Permitted Uses,
except as may be required to maintain in the required condition, order and
repair (i) all H/C Pass-through Areas and the H/C Limited Common Areas at H/C I
Owner's sole cost and expense other than costs and expenses with respect to the
Phase I Automobile Parking Area which shall be shared in accordance with Section
3, and (ii) all H/C-Mall Common Areas, subject to the cost sharing provisions of
Section 3. The aforesaid maintenance of the
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H/C-Mall Common Areas, H/C Pass-through Areas and the H/C Limited Common Areas
shall include, without limitation, except to the extent provided hereinabove,
(i) patrolling with suitable and adequate uniformed and/or non-uniformed
security personnel in accordance with prevailing practice at properties of like
usage in Clark County, Nevada; (ii) maintaining suitable and adequate lighting
(including the expenses of power and of light bulb installation and replacement)
in all H/C-Mall Common Areas, H/C Pass-through Areas and the H/C Limited Common
Areas and keeping same lit during such times as First-class Las Vegas
Boulevard-style hotel/ casinos and/or First-class restaurant and retail
complexes are open to the public (or for the purpose of taking inventory or
maintenance or restoration or any other purpose not prohibited hereunder
(collectively, "Permitted Maintenance")), equivalent to not less than 10-foot
candles in portions generally open to the public when required to be lit to
service the opening of any building comprising the Venetian to the public, and
otherwise to the extent of such lesser standard as may be reasonably adequate
under the circumstances to service the opening of any building comprising the
Venetian for the purpose of Permitted Maintenance; (iii) cleaning,
window-washing (exclusive of any windows forming part of a separate space
tenant's premises), planting, replanting, landscaping, ventilating, heating and
air-cooling of the H/C-Mall Common Areas, the H/C Pass-through Areas and the H/C
Limited Common Areas; and (iv) cleaning and keeping in good order and repair,
and replacing when necessary, all fixtures and other installations in the
H/C-Mall Common Areas, the H/C Pass-through Areas and the H/C Limited Common
Areas including, but not limited to, pools, fountains, telephone booths, vending
machines, gaming machines and equipment, benches and the like.
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The H/C-Mall Common Areas and the H/C Pass-through Areas shall be open to the
general public and operated, and all public entrances thereto shall be open to
the general public and operated during such normal operating times as any
portion of either the SECC or the Phase I Mall are open for business to the
public, and in addition during such times as First-class Las Vegas
Boulevard-style hotel/casinos and/ or First-class restaurant and retail
complexes are open. If either the SECC or the Phase I Mall is not open to the
public but is in the process of Permitted Maintenance therein, and the other of
the SECC or the Mall I Space is not open for business to the public, then H/C I
Owner need not during such Permitted Maintenance keep the public entrances to
the H/C-Mall Common Areas or the H/C Pass-through Areas open to the general
public, but must keep such public entrances open to the employees, agents,
contractors and subcontractors of the Owner performing such Permitted
Maintenance. In addition to the foregoing, whenever any connecting level of the
SECC or the Phase I Mall is open for business, the doors connecting such level
of the SECC or the Phase I Mall, as the case may be, with the H/C I Space shall
be open and if either the SECC or Phase I Mall is in the process of Permitted
Maintenance the doors connecting such level of the SECC or the Phase I Mall, as
the case may be, with the H/C I Space, shall at the election of SECC Owner or
Mall I Owner, as the case may be, be open to SECC Owner or Mall I Owner,
respectively.
(b) Subject to Section 3 of this Article V, H/C I Owner shall,
except to the extent the same is located within the Mall I Space, at all times
from and after the earlier of (i) the Opening Date and (ii) the Mall Release
Date during the Term operate, maintain, restore, repair and replace and keep and
maintain
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in good order, condition, and repair, and in a neat and attractive condition,
consistent with the standards that obtain in First-class Las Vegas
Boulevard-style hotel/casinos and First-class retail and restaurant complexes as
provided in this Agreement the building systems, Facilities, foundation, floor
slabs, and other structural components of the Base Building (including, without
limitation, all components providing structural support for the Mall I Space and
the Phase I Mall), including, without limitation, the roof, exterior walls,
exterior wall systems, exterior wall fenestrations, interior and exterior
bearing walls, columns, slabs and members, plumbing, and sprinkler systems (or
other fire suppression systems, if any), heating, ventilating and air
conditioning systems, stairwells, elevators, escalators (if any) and any other
similar mechanical conveyancing devices or systems, electrical switchgear,
transformers and all other electrical systems (collectively, the "Building Shell
and Core"). All of said maintenance and repairs and any restorations or
replacements required in connection therewith shall be of First-class quality
and shall be done in a good and workmanlike manner. Mall I Owner shall give H/C
I Owner notice of any damage to the Phase I Mall or the Building Shell and Core
(whether or not caused by Mall I Owner) or of any defects in the Building Shell
and Core or any portion thereof or any fixtures or equipment therein promptly
after Mall I Owner first learns thereof.
(c) H/C I Owner's obligations under this Article V are subject
to Force Majeure Events and to the provisions of Article XI.
2. No Obstructions; No Dedication of Pass-through Areas.
(a) Except to the extent that temporary construction
barricades are reasonably required by H/C I Owner to perform work in and
maintain
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the H/C Pass-through Areas, the H/C-Mall Common Areas and the H/C Limited Common
Areas in accordance with the terms hereof and such barricades do not interfere
with the use of the H/C Pass-through Areas, H/C-Mall Common Areas and the H/C
Limited Common Areas or the Phase I Mall or the SECC except to the minimal
extent necessary to permit H/C I Owner to perform its obligations with respect
to such space, no fence, barricade or other obstruction shall be placed, kept,
permitted or maintained on the H/C Pass-through Areas, the H/C-Mall Common Areas
or the H/C Limited Common Areas which will interfere with the intended uses
thereof. H/C I Owner, in exercising its rights under this Section 2, shall use
commercially reasonable efforts to minimize interference with the maintenance,
use and operation of (i) the SECC and SECC Owner's business at the same and (ii)
the Phase I Mall and Mall I Owner's business at the same.
(b) No part of the H/C Pass-through Areas, the Common Areas or
the Mall I Pass-through Areas shall be dedicated to any governmental authority
or for any other public use without the prior consent of all of the Parties. The
affected Owners shall, to the extent required in order to avoid such dedication
or prevent the acquisition of any easement or other similar special rights, from
time to time close any or all portions of the H/C I Space and the Mall I Space,
erect private boundary marks or take such further actions as may be reasonably
appropriate for that purpose, but without unnecessary interference with the use
of all or any portion of the Venetian or the SECC.
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3. Cost Sharing.
(a) Subject to adjustment as set forth below, each of Mall I
Owner and SECC Owner shall pay to H/C I Owner its respective percentages and
other charges (collectively, "Mall I Owner's Share" or "SECC Owner's Share," as
applicable) to be set forth on Schedule II of the Hotel/Casino/Mall/SECC Common
Area Charges more particularly described on Schedule II as a contribution to the
cost of operating the Phase I Automobile Parking Area, the H/C-Mall Common Areas
and, in the case of Mall I Owner, for payment of other incidental costs agreed
to be shared as set forth on Schedule II from and after the Opening Date for
each year during the Term. On or before sixty (60) days before the Opening Date,
H/C I Owner, SECC Owner and Mall I Owner and their Mortgagees shall agree on an
Independent Expert reasonably acceptable to all of them who shall deliver a
certificate to each of Mall I Owner, SECC Owner and each of their, and H/C I
Owner's, respective Mortgagees setting forth the Independent Expert's
determination of (a) the actual categories of expenses; (b) the actual
percentages of cost categories attributable to each of H/C I Owner, Mall I Owner
and SECC Owner; and (c) any other charges attributable to H/C I Owner, Mall I
Owner and SECC Owner, all of which shall comprise each of H/C I Owner's Share,
Mall I Owner's Share and SECC Owner's Share to be set forth on Schedule II, and
certifying that (a), (b) and (c) would be agreed to by a Commercially Reasonable
Owner with respect to each Owner and its Lot and will not cause a Material
Adverse Effect with respect to each Owner and its Lot. Each of Mall I Owner's
Share and SECC Owner's Share and the categories of expenses set forth on
Schedule II shall be subject to further adjustment from time to
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time during the Term to the extent equitable by agreement of H/C I Owner, Mall I
Owner and SECC Owner after consultation with the Mortgagees of H/C I Owner, Mall
I Owner and SECC Owner; provided, that if any such Mortgagee shall believe that
such adjustment would (i) not be agreed to by a Commercially Reasonable Owner or
(ii) will cause a Material Adverse Effect, then such Owners and Mortgagees will
negotiate in good faith until they agree on adjustments acceptable to all such
parties; if the parties shall not agree within thirty (30) days, such Owners and
Mortgagees shall agree to an Independent Expert reasonably acceptable to all
such Owners and Mortgagees who shall deliver to SECC Owner, Mall I Owner and
each of their respective Mortgagees (as well as H/C I Owner's Mortgagee) a
written statement describing and certifying to an adjustment to Schedule II that
(i) would be agreed to by a Commercially Reasonable Owner, (ii) will not cause a
Material Adverse Effect and (iii) has appropriately allocated costs to reflect
relative benefits.
(b) Hotel/Casino/Mall/SECC Common Area Charges shall be
payable as follows: the first monthly installment thereof, reduced on a pro rata
basis to reflect the actual number of days during the calendar month in which
the Opening Date or Commencement Date, as applicable, shall occur, to be applied
to the period from the Opening Date or Commencement Date, as applicable, up to
and including the last day of such calendar month, and thereafter in monthly
installments on the first day of each month during the balance of the Term, the
last installment of which shall be reduced on a pro rata basis to reflect the
actual number of days in said month included within the Term.
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(c) Not less than thirty (30) days prior to the commencement
of each calendar year, H/C I Owner shall submit to each of SECC Owner and Mall I
Owner a statement setting forth (i) H/C I Owner's good faith estimate of the
amount of Hotel/Casino/Mall/SECC Common Area Charges for such calendar year,
(ii) Mall I Owner's Share thereof (the amount of such Mall I Owner's Share being
hereinafter referred to as "Mall I Owner's Common Area Charge Obligations") and
(iii) SECC Owner's Share thereof (the amount of such SECC Owner's Share being
hereinafter referred to as ("SECC Owner's Common Area Charge Obligations").
(d) Within ninety (90) days following the end of each calendar
year, H/C I Owner shall furnish to each of SECC Owner and Mall I Owner and each
of their Mortgagees a written statement (the "Operating Expense Statement")
certified by a nationally or regionally prominent accounting firm, who shall be
otherwise reasonably acceptable to Mall I Owner and SECC Owner, showing in
reasonable detail by categories (i) the total Hotel/Casino/Mall/SECC Common Area
Charges for such calendar year, (ii) Mall I Owner's Common Area Charge
Obligations for such calendar year and payments, if any, made by Mall I Owner
with respect thereto and (iii) SECC Owner's Common Area Charge Obligations for
such calendar year and payments, if any, made by SECC Owner with respect thereto
together, in each case, with copies of supporting invoices, receipts and such
other data necessary for SECC Owner and Mall I Owner to verify such charges
(collectively, "Supporting Documentation"). If SECC Owner's or Mall I Owner's
aggregate actual payments on account of Hotel/Casino/Mall/SECC Common Area
Charges for any calendar year shall be less than SECC Owner's or Mall I Owner's,
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as the case may be, actual Common Area Charge Obligations for such calendar
year, SECC Owner or Mall I Owner, as the case may be, shall pay such deficiency
within ten (10) days of receipt by such Party of the Operating Expense Statement
and Supporting Documentation from H/C I Owner. If SECC Owner's or Mall I Owner's
aggregate actual payments on account of Hotel/Casino/Mall/SECC Common Area
Charges for any calendar year exceed SECC Owner's actual Common Area Charge
Obligations or Mall I Owner's actual Common Area Charge Obligations, as the case
may be, as indicated by the Operating Expense Statement for such calendar year,
then H/C I Owner shall, within ten (10) days of receipt by H/C I Owner of the
Operating Expense Statement from H/C I Owner's accountant, refund the amount of
such excess payment to SECC Owner or Mall I Owner, as the case may be, in cash.
H/C I Owner shall keep complete and accurate books and records, in accordance
with generally accepted accounting principles consistently applied, of the
Hotel/Casino/ Mall/SECC Common Area Charges and shall retain those books and
records at its corporate offices. For a period of three (3) years after the end
of each calendar year, and for so long thereafter as any dispute exists with
respect thereto, H/C I Owner shall preserve all such books and records,
including any payroll and time records, vouchers, receipts, correspondence and
memos pertaining to the Hotel/Casino/Mall/ SECC Common Area Charges for such
calendar year. Each of SECC Owner or Mall I Owner may, within three (3) years
after the delivery of any Operating Expense Statement and Supporting
Documentation, examine, at such Owner's expense (unless otherwise provided
herein), H/C I Owner's books and records relating to the charges set forth on
such Operating Expense Statement. Such examination shall be conducted
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during ordinary business hours upon not less than five (5) Business Days'
Notice, in a manner so as to reasonably minimize any interference with H/C I
Owner's business. If such examination discloses that H/C I Owner has overstated
Mall I Owner's actual Common Area Charge Obligations or SECC Owner's actual
Common Area Charge Obligations, as the case may be, then H/C I Owner shall
promptly refund the overpayment to Mall I Owner or SECC Owner, as the case may
be, and if the overpayment is more than three percent (3%) of the amount such
Owner should have paid, H/C I Owner shall also pay the reasonable, out-of-pocket
costs of such Owner's examination and interest on the overpayment at the
Interest Rate from the date such Owner overpaid H/C I Owner until such Owner
receives such refund.
(e) With respect to Hotel/Casino/Mall/SECC Common Area
Charges, any dispute between H/C I Owner and SECC Owner or Mall I Owner shall be
resolved by determination of the Independent Expert in accordance with Section
15 of Article XIV, which shall be the exclusive and binding method for the
resolution of any such dispute. H/C I Owner, SECC Owner and Mall I Owner each
agree to execute and deliver, or cause to be executed and delivered, to the
other any instruments that may be required to effectuate or facilitate the
provisions of this Agreement relating to the matters set forth in this Section
3(e).
4. H/C I Space, Phase I Hotel/Casino Maintenance and Repair.
(a) From and after the earlier of (i) the Opening Date and
(ii) the Mall Release Date throughout the Term, H/C I Owner, at its sole cost
and expense, shall, consistent with First-class Las Vegas Boulevard-style
hotel/casinos and First-class retail and restaurant complexes as provided in
this Agreement (a) clean and
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maintain the H/C I Space, the Phase I Hotel/Casino and all parts thereof and
facilities therein, including, without limitation all portions of the interior
walls and floors and all improvements therein, (b) keep and maintain the same in
good order, condition and repair and in a neat, attractive and rentable
condition, and (c) make all necessary repairs and restorations thereto and/or
replacements of portions thereof, interior and exterior, structural and
non-structural, ordinary and extraordinary, including, without limitation, all
repairs and replacements necessitated by H/C I Owner's or any of H/C I Owner's
Tenant's moving property in or out of the H/C I Space or installation or removal
of furniture, fixtures or other property or by the performance by H/C I Owner or
any Tenant of any Alterations, or when necessitated by the negligence or willful
misconduct or improper conduct of H/C I Owner or H/C I Owner or the Permittees
of either of them. All of said repairs and any restorations or replacements
required in connection therewith shall be of a quality and class equal to the
original work or installation and shall be done in a good and workmanlike
manner. All work undertaken by H/C I Owner pursuant to this Section 4 shall be
performed in accordance with Sections 7 through 10.
(b) H/C I Owner's obligations under this Article V are subject
to Force Majeure Events and the provisions of Article XI.
5. Mall I Pass-through Areas, Mall I Space and Phase I Mall
Maintenance and Repair.
(a) Mall I Owner agrees in accordance with the standards that
obtain in First-class retail and restaurant complexes as provided in this
Agreement, to maintain and repair (including any necessary replacement and
capital
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improvement work required in connection therewith) at all times from and after
the earlier of (i) the Opening Date and (ii) the Mall Release Date, and to keep
in operation, open to the public (except for portions thereof, such as service
areas, not generally open to the public) and available for the Permitted Uses,
except as may be required to maintain in the required condition, order and
repair, at Mall I Owner's sole cost and expense, all Mall I Pass-through Areas
and Mall I Limited Common Areas. The aforesaid maintenance of the Mall I
Pass-through Areas and Mall I Limited Common Areas shall include, without
limitation, except to the extent provided hereinabove, (i) patrolling with
suitable and adequate uniformed and/or non-uniformed security personnel in
accordance with prevailing practice at properties of like usage in Clark County,
Nevada; (ii) maintaining suitable and adequate lighting (including the expenses
of power and of light bulb installation and replacement) in all Mall I
Pass-through Areas and Mall I Limited Common Areas and keeping same lit during
such times as First-class retail and restaurant complexes are open (to the
public or for Permitted Maintenance or restoration or any other purpose not
prohibited hereunder), equivalent to not less than 10-foot candles in portions
generally open to the public when required to be lit to service the opening of
any building comprising the Venetian to the public, and otherwise to the extent
of such lesser standard as may be reasonably adequate under the circumstances to
service the opening of any building comprising the Venetian for Permitted
Maintenance; (iii) cleaning, window-washing (exclusive of any windows forming
part of a separate space tenant's premises), planting, replanting, landscaping,
ventilating, heating and air-cooling of the Mall I Pass-through Areas and Mall I
Limited Common Areas; and (iv) cleaning and keeping
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in good order and repair, and replacing when necessary, all fixtures and other
installations in the Mall I Pass-through Areas and the Mall I Limited Common
Areas including, but not limited to, pools, fountains, telephone booths, vending
machines, benches and the like. The Mall I Pass-through Areas shall be open to
the general public and operated and all public entrances thereto shall be open
to the general public and operated during such times as First-class retail and
restaurant complexes are open. If either the SECC or the H/C I Space is not open
to the public but is in the process of having Permitted Maintenance therein, and
the other of the SECC or the Mall I Space is not open for business to the
public, then Mall I Owner need not during such Permitted Maintenance, keep the
public entrances to the Mall I Pass-through Areas open to the general public. In
addition to the foregoing, whenever any connecting level of the SECC or the H/C
I Space is open for business, the doors connecting such level of the SECC or the
H/C I Space, as the case may be, with the Mall I Space, shall be open and if
either the SECC or H/C I Space is in the process of having Permitted Maintenance
performed, the doors connecting such level of the SECC or the H/C I Space, as
the case may be, with the Mall I Space, shall at the election of SECC Owner or
H/C I Owner, as the case may be, be open to SECC Owner or H/C I Owner,
respectively.
(b) Except to the extent H/C I Owner is specifically
responsible therefor under this Agreement, throughout the Term, Mall I Owner, at
its sole cost and expense, shall (a) clean and maintain the Mall I Space and the
Phase I Mall and all parts thereof and facilities therein, including, without
limitation all portions of the interior walls and floors and all improvements
therein, (b) keep and
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maintain the same in good order, condition and repair and in a neat, attractive
and rentable condition, consistent with First-class retail and restaurant
complexes as provided in this Agreement, and (c) make all necessary repairs
thereto and/or replacements of portions thereof, ordinary and extraordinary,
including, without limitation, all repairs and replacements necessitated by Mall
I Owner's or any Tenant's moving property in or out of the Mall I Space or
installation or removal of furniture, fixtures or other property or by the
performance by Mall I Owner or any Tenant of any Alterations, or when
necessitated by the negligence or willful misconduct or improper conduct of Mall
I Owner or any Tenant or the agents, employees, contractors or invitees of
either of them. All of said repairs and any restorations or replacements
required in connection therewith shall be of a quality and class equal to the
original work or installation and shall be done in a good and workmanlike
manner. All work undertaken by Mall I Owner pursuant to this Section 5, shall be
performed in accordance with Sections 7 through 10.
(c) Mall I Owner's obligations under this Article V are
subject to Force Majeure Events and the provisions of Article XI.
6. No Obstructions to Mall I Pass-through Areas. Except to the
extent that temporary construction barricades are reasonably required by Mall I
Owner to perform work in and maintain the Mall I Pass-through Areas and the Mall
I Limited Common Areas in accordance with the terms hereof and such barricades
do not interfere with the use of the H/C Pass-through Areas or the Phase I
Hotel/Casino or the SECC except to the minimal extent necessary to permit Mall I
Owner to perform its obligations with respect to such space, no fence, barricade
or other
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obstruction shall be placed, kept, permitted or maintained on the Mall I
Pass-through Areas and the Mall I Limited Common Areas which will interfere with
the intended uses thereof. Mall I Owner, in exercising its rights under this
Section 6, shall use commercially reasonable efforts to minimize interference
with the maintenance, use and operation of (i) the SECC and SECC Owner's
business at the same and (ii) the Phase I Hotel/Casino and H/C I Owner's
business at the same.
7. Alterations. H/C I Owner and Mall I Owner each agree for the
benefit of the other (except as otherwise expressly set forth herein) that from
and after the Completion Date:
(a) H/C I Owner and Mall I Owner may each make (or allow any
Tenant to make) Alterations to the improvements from time to time located within
or on their respective Lots in accordance with the further provisions of this
Article V from time to time during the Term.
(b) H/C I Owner may from time to time as it deems appropriate
in its absolute discretion, subject to the provisions of Section 8 and to the
other provisions of this Section 7, make Alterations to all portions of the
Phase I Hotel/Casino.
(c) Mall I Owner may from time to time as it deems appropriate
in its absolute discretion, subject to the provisions of Section 8 and to the
other provisions of this Section 7, make Alterations to all portions of the Mall
I Space and the Phase I Mall.
(d) Neither H/C I Owner nor Mall I Owner may make (or allow
any Person to make) any Alteration or restoration which affects in a material
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respect (i) the Building Shell and Core, (ii) the H/C-Mall Common Areas, (iii)
the H/C Limited Common Areas, (iv) the Mall I Limited Common Areas, (v) the New
Electric Substation, (vi) the New HVAC Plant or (vii) the Phase I Automobile
Parking Area (any such Alteration or restoration, a "Material Alteration"),
without in each instance obtaining the prior written consent thereto of (a) the
other Owner, (b) the Mortgagee of each of the H/C I Owner and the Mall I Owner,
and (c) with respect to a Material Alteration affecting the New Electric
Substation and/or the New HVAC Plant, SECC Owner and its Mortgagees, all of
which consents (other than the consent of the Mortgagee on whose Lot the
Alteration or restoration is being made) shall not be unreasonably withheld,
conditioned or delayed if a Commercially Reasonable Owner would grant its
consent and the same is not likely to have a Material Adverse Effect. Either
Owner may make (or allow any Tenant to make) any Alteration which singularly or
together with related work is not a Material Alteration without the other
Owner's or any Mortgagee's consent in accordance with the further provisions of
this Article V. Together with each request for approval of a Material
Alteration, the requesting Owner shall present to the non-requesting Owner and
the Mortgagee of each of H/C I Owner and Mall I Owner (and the Mortgagee of SECC
Owner with respect to a Material Alteration affecting the New Electric
Substation and/or the New HVAC Plant) for its approval plans and specifications
for such work prepared by an Architect. An Owner's or any Mortgagee's approval
of any Material Alteration shall not constitute any assumption of any
responsibility or liability by such Owner or Mortgagee for the accuracy or
sufficiency of the applicable plans and specifications and the requesting Owner
shall be solely responsible for such items and
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shall be liable for any damage resulting therefrom. The requesting Owner shall
reimburse its Mortgagees, the non-requesting Owner and its Mortgagee upon
receipt of invoices for the non-requesting Owner's and its Mortgagee's actual
out-of-pocket costs incurred in connection with any review of any plans and
specifications in accordance with this Section 7(d), including architect's and
engineer's fees and costs. Upon reasonable prior notice and during mutually
convenient hours, the non-requesting Owner and/or the Mortgagee of each of the
H/C I Owner and the Mall I Owner (and the Mortgagee of SECC Owner with respect
to a Material Alteration affecting the New Electric Substation and/or the New
HVAC Plant) may inspect Material Alterations from time to time in order to
assure itself that such work is being carried on in accordance with the
requirements of this Agreement, provided that such inspection does not
unreasonably interfere with the continuance and completion of the Material
Alterations, and provided further that the failure of an Owner or any Mortgagee
to inspect such work (or, if such work is inspected, the results or findings of
such inspection) shall not in and of itself be considered a waiver of any right
accruing to such Owner or Mortgagee upon any failure of the requesting Owner to
perform such work in accordance with this Agreement. In undertaking any
activities described in, and performing its obligations under, this Article V,
each Owner shall use all commercially reasonable efforts to minimize
interference (including, without limitation, interference due to closure) with
the maintenance, use and operation of the Phase I Mall, the Phase I
Hotel/Casino, and the SECC.
8. Alteration Requirements. H/C I Owner and Mall I Owner each
covenants and agrees for the benefit of the other that no Alterations to their
respective
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Lots and/or any buildings or improvements located thereon or therein will be
made except in compliance with this Article V, and hereby covenants that it will
comply with each and all of the following provisions:
(a) All Alterations shall be made with commercially reasonable
diligence and dispatch in a First-class manner with First-class materials and
workmanship, architecturally consistent in style with the existing improvements
and in such a manner as will not interfere (other than to a de minimis extent)
with the use, occupancy, maintenance or operation of the Base Building, the
Phase I Hotel/ Casino or the Phase I Mall or any of the businesses conducted
thereat.
(b) Before any Alterations are begun, the Owner performing or
causing such Alteration to be performed shall obtain, at its own sole cost and
expense, all licenses, permits, approvals and authorizations in connection with
any such Alterations required by any Governmental Authorities and shall, on
demand, deliver photocopies thereof to the other Owner. Upon any Owner's
request, the other Owner shall join in the application for such licenses,
permits, approvals and authorizations whenever such action is necessary, and the
requesting Owner covenants that the non-requesting Owner will not suffer,
sustain or incur any cost, expense or liability by reason thereof. All Material
Alterations shall be made under the supervision of an Architect.
(c) All Alterations shall be made in compliance and conformity
with all applicable Legal Requirements.
(d) In making any Alteration, the Owner performing or causing
such Alteration to be performed shall not violate (a) the terms or conditions
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of any insurance policy affecting or relating to the Venetian (including,
without limitation, any insurance policy in respect of the entire Base
Building), or (b) the terms of any covenants, restrictions or easements
affecting the Venetian.
(e) No Alterations shall create any encroachment upon any
street or upon any other portion of the Venetian.
(f) H/C I Owner and Mall I Owner shall cooperate in good faith
to effect any Alteration necessary or desirable to the other.
(g) No Alteration will be made that will affect the structural
integrity and support of the Mall I Space or the Phase I Mall.
9. Contractor Insurance. The Owner performing or causing a Material
Alteration to be performed shall cause each of its general contractors to
obtain, prior to commencing any Material Alteration, and to keep in force, for
the benefit of Mall I Owner, H/C I Owner and each of their Mortgagees until the
applicable Material Alteration is completed:
(a) Commercial general liability insurance for the project on
an "occurrence" basis, including coverage for premises/operations, products/
completed operations, broad form property damage, blanket contractual liability,
independent contractor's and personal injury, with no exclusions for explosion,
collapse and underground perils, with primary coverage limits of no less than
$1,000,000 for injuries or death to one or more persons or damage to property
resulting from any one occurrence and a $2,000,000 aggregate limit. The
commercial general liability policy shall also include a severability of
interest clause;
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(b) Automobile liability insurance, including coverage for
owned, non-owned and hired automobiles for both bodily injury and property
damage and containing appropriate no-fault insurance provisions or other
endorsements in accordance with state legal requirements, with limits of no less
than $1,000,000 per accident with respect to bodily injury, property damage or
death;
(c) Workers compensation insurance and employer's liability or
stop gap liability, with a limit of not less than $1,000,000, and such other
forms of insurance which are required by law, providing statutory benefits and
covering loss resulting from injury, sickness, disability or death of the
employees of such Owner;
(d) Umbrella Excess Liability Insurance of not less than
$10,000,000 per occurrence and in the aggregate; and
(e) All such insurance shall be written by companies
reasonably approved by H/C I Owner, Mall I Owner and each of their Mortgagees
and shall be on terms reasonably satisfactory to H/C I Owner and Mall I Owner.
Certificates for such insurance shall be delivered to H/C I Owner and Mall I
Owner at least three (3) Business Days before any work on such Material
Alteration begins at the Venetian. H/C I Owner or Mall I Owner, as the case may
be, shall also maintain such additional insurance as the other shall reasonably
request from time to time, provided such insurance coverage is maintained by
tenants or owners of facilities or portions of facilities similar to the
Venetian.
10. Payment of Other Owner's Expenses. In connection with the making
of any Material Alterations, the Owner performing such Material Alterations
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shall pay the other Owner's reasonable actual out-of-pocket costs and expenses
incurred in connection therewith.
11. Trade Fixtures and Personal Property. Notwithstanding anything
to the contrary set forth in this Article V, H/C I Owner and Mall I Owner and
its Tenants may, without the other Owner's consent, install in their respective
Lots trade fixtures and personal property, provided that no such installation
shall interfere with or damage the Building Shell and Core; provided that any
such installations located in any Pass-through Area or in the H/C-Mall Common
Areas or on any wall fronting on any Pass-through Area or any H/C-Mall Common
Area must comply with the requirements for Alterations set forth in this Article
V. Such trade fixtures and personal property may be removed from time to time so
long as any damage caused to any part of the Venetian caused by such removal
shall be promptly restored at the removing Owner's sole cost and expense.
12. Negative Covenants With Respect to Floor Loads. Neither Mall I
Owner nor H/C I Owner shall suffer or permit any part of the Venetian to be used
in any manner, or anything to be done therein, or suffer or permit anything to
be brought into or kept in any part of the Venetian, which would in any way
place weight on any floor area in excess of its maximum floor load.
ARTICLE VI
TAXES AND INSURANCE PREMIUMS
1. H/C I Owner and Mall I Owner each agree for the benefit of the
other as follows:
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(a) H/C I Owner Taxes. Until the Assessment Date, on the first
Business Day of each December, March, June and September, H/C I Owner shall
deposit into an escrow account (the "Tax Escrow Account") to be held and
maintained by the Trustee for the benefit of each of the Mortgagees of the H/C I
Space and the Mall I Space, H/C I Owner's Tax and Insurance Share (as defined
below) of one-quarter of the following amounts during the following periods:
(i) from and after the Commencement Date until the day
before the first anniversary thereof, $600,000;
(ii) from and after the first anniversary of the
Commencement Date until the day before the second anniversary thereof,
$1,400,000; and
(iii) from and after the second anniversary of the
Commencement Date, and thereafter until the Subdivision Date, one hundred
five percent (105%) of the aggregate amount of Taxes that were payable
with respect to the Venetian and the Phase I Land during the immediately
preceding Tax Year (or such greater amount as shall be payable during the
following three (3) month period as reflected on a Tax Bill).
(b) Mall I Owner Taxes. Until the Assessment Date, on the
first day of each December 1st, March 1st, June 1st and September 1st Mall I
Owner shall deposit into the Tax Escrow Account Mall I Owner's Tax and Insurance
Share (as defined below) one-quarter of the following amounts during the
following periods:
(i) from and after the Commencement Date until the day
before the first anniversary thereof, $600,000;
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(ii) from and after the first anniversary of the
Commencement Date until the day before the second anniversary thereof,
$1,400,000; and
(iii) from and after the second anniversary of the
Commencement Date, and thereafter until the Subdivision Date, one hundred
five percent (105%) of the aggregate amount of Taxes that were payable
with respect to the Venetian and the Phase I Land during the immediately
preceding Tax Year (or such greater amount as shall be payable during the
following three (3) month period as reflected on a Tax Bill).
(c) Tax and Insurance Share. H/C I Owner's Tax and Insurance
Share shall be 85%, and Mall I Owner's Tax and Insurance Share shall be 15%.
Each such Share shall be subject to adjustment to the extent equitable no less
frequently than one (1) time during any three (3) year period based on a then
current appraisal of an Independent real estate appraiser, prepared at the
request of either H/C I Owner or Mall I Owner or any of their Mortgagees, the
cost of which shall be shared by each Owner (proportionate to each Owner's Tax
and Insurance Share). Copies of all Tax Bills shall be delivered to the Trustee,
H/C I Owner and its Mortgagee and Mall I Owner and its Mortgagee by a tax
reporting service engaged by and paid for by H/C I Owner. If any Owner shall
receive a Tax Bill that it does not receive from such tax reporting service it
shall promptly send a copy thereof to all other Owners and the Trustee. Within
ninety (90) days after the end of each Tax Year, Trustee shall submit to each of
H/C I Owner and Mall I Owner a statement ("Final Tax Statement") indicating
whether and by how much each Owner has
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overpaid or underpaid its share of the actual amount of Taxes. If any Final Tax
Statement indicates that any amount is due to an Owner, such refund shall
accompany such Final Tax Statement. Within fifteen (15) days after receipt of
any Final Tax Statement, the applicable Owner shall pay to Trustee the amount of
any deficiency shown on such Final Tax Statement.
(d) H/C I Owner Insurance. On the first day of each calendar
month, from and after the Commencement Date, H/C I Owner shall deposit into an
escrow account (the "Insurance Escrow Account") to be held and maintained by
Trustee for the benefit of the Mortgagees of the H/C I Space and the Mall I
Space H/C I Owner's Tax and Insurance Share of one-twelfth of one hundred and
five percent (105%) of the premiums actually payable during the preceding twelve
(12) month period with respect to the insurance policies required to be
maintained pursuant to Article X (but in no event less than the amount that the
Trustee, in good faith, determines shall be necessary in order to accumulate in
the Insurance Escrow Account sufficient funds to pay all such insurance premiums
at least fifteen (15) Business Days prior to the expiration of such insurance
policies).
(e) Mall I Owner Insurance. On the first day of each calendar
month from and after the Commencement Date, Mall I Owner shall deposit into the
Insurance Escrow Account Mall I Owner's Tax and Insurance Share of one-twelfth
of one hundred and five percent (105%) of the premiums actually payable during
the preceding twelve (12) month period with respect to the insurance policies
required to be maintained pursuant to Article X (but in no event less than the
amount that the Trustee, in good faith, determines shall be necessary in order
to accumulate
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in the Insurance Escrow Account sufficient funds to pay all such insurance
premiums at least fifteen (15) Business Days prior to the expiration of such
property insurance policies). If at the end of any twelve (12) month period, H/C
I Owner's and/or Mall I Owner's aggregate actual payments on account of
insurance premiums for such period shall exceed the amount of H/C I Owner's
and/or Mall I Owner's actual insurance premium obligations for such period, then
Trustee shall promptly refund the amount of such excess payment to H/C I Owner
and/or Mall I Owner, as the case may be, in cash. Copies of all Bills with
respect to property insurance premiums shall be delivered to the Trustee and the
other Owner by H/C I Owner and/or Mall I Owner promptly after receipt thereof.
(f) Trustee. "Trustee" shall mean any of the following: a
savings bank, savings and loan association, commercial bank, trust company
(whether acting individually or in a fiduciary capacity) or insurance company
(whether acting individually or in a fiduciary capacity) that has a combined
capital and surplus of $500,000,000 or above, reasonably acceptable to Mall I
Owner and H/C I Owner, and, in each case, reasonably acceptable to each of their
Mortgagees and who is not affiliated with any of the Borrower or Adelson (or any
Affiliate of either). The initial Trustee shall be The Bank of Nova Scotia. H/C
I Owner shall pay the annual fee of the Trustee which payment shall be subject
to the cost sharing provisions of Section 3 of Article V with respect to Mall I
Owner's share of such fee. To the extent SECC Owner shall elect to obtain
insurance coverage for the SECC under a blanket policy with H/C I Owner and Mall
I Owner in accordance with the provisions of Article X, SECC Owner shall pay its
proportionate share of applicable insurance premiums
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pursuant to the cost sharing provisions of Section 3 of Article V. Either H/C I
Owner or Mall I Owner can replace the existing Trustee at any time and from time
to time; provided that any replacement Trustee shall be selected in accordance
with the foregoing provisions of this subsection (f). If H/C I Owner or Mall I
Owner or SECC Owner (if SECC Owner shall have elected to maintain insurance
coverage under a blanket policy with H/C I Owner and Mall I Owner) shall fail to
make any payment required to be made in accordance with the provisions of this
Article VI, the Trustee shall promptly give notice to the non-defaulting Owners
and to each Mortgagee, and any non-defaulting Owner and/or any Mortgagee may
(but shall not be required to) pay all or any portion of such payment to the
Trustee and the non-paying Owner shall reimburse the paying non-defaulting Owner
or Mortgagee, as applicable on demand therefor by the paying Owner or Mortgagee,
for the sums so expended with interest thereon for the period from such demand
to such reimbursement, at the Interest Rate. The Trustee shall have no
responsibility to any Owner as a consequence of performance by the Trustee
hereunder except for any bad faith, fraud, gross negligence or willful
misconduct of the Trustee. The Trustee shall have no duties or obligations
hereunder except as expressly set forth herein or in that certain Trustee
Disbursement and Administration Agreement, dated as of November 14th, 1997, by
and among VCR, Mall I Owner, The Bank of Nova Scotia and the Existing
Mortgagees, shall be responsible only for the performance of such duties and
obligations and shall not be required to take any action otherwise than in
accordance with the terms hereof or thereof.
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(g) Owners to Pay Taxes. SECC Owner, H/C I Owner and Mall I
Owner each agree for the benefit of the other that (i) all taxes, assessments
and other charges (including, without limitation, real property taxes and
assessments), and all interest and penalties with respect thereto (all of the
foregoing, collectively, "Taxes") levied or assessed, or which (if unpaid) may
result in the imposition of a lien, against all or any portion of the SECC Land
and all buildings and other improvements from time to time located on the SECC
Land (or against SECC Owner, H/C I Owner or Mall I Owner with respect to the
same) shall be paid, prior to delinquency thereof, by SECC Owner, (ii) all Taxes
levied or assessed, or which (if unpaid) may result in the imposition of a lien,
against all or any portion of the Phase I Land (excluding the Mall I Space from
and after the Subdivision Date) and all buildings and other improvements from
time to time located on the Phase I Land (excluding the Mall I Space from and
after the Subdivision Date) (or against H/C I Owner, Mall I Owner or SECC Owner
with respect to the same) shall be paid, prior to delinquency thereof, by H/C I
Owner, and (iii) all Taxes levied or assessed, or which (if unpaid) may result
in the imposition of a lien, against all or any portion of the Mall I Space and
all improvements from time to time located thereon (or against H/C I Owner, Mall
I Owner or SECC Owner with respect to the same) shall be paid, prior to
delinquency thereof, by Mall I Owner.
(h) Right to Contest. Each Party shall have the right to
contest, in good faith and at its own cost and expense, the validity or amount
of any Taxes that, in the absence of such contest, it would be required to pay
hereunder; provided, however, that if at any time payment of the whole or any
part thereof shall
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be necessary in order to prevent the sale, under applicable law, of any property
with respect to which any easement, right or interest has been granted pursuant
to this Agreement, then the contesting party shall pay or cause same to be paid
in time to prevent such sale. Any such payment may be made under protest. Prior
to the Subdivision Date, H/C I Owner and Mall I Owner shall consult in good
faith with respect to any proposed contest of the validity or amount of any
Taxes regarding all or any part of each such Owner's Lot and/or the buildings or
other improvements located thereon or therein and neither Party shall prosecute,
defend, settle or compromise any such contest without the prior written consent
of the other Party, which consent shall not be unreasonably withheld,
conditioned or delayed.
(i) Bills. In the event that any Party shall receive a bill,
invoice or similar writing (each of the foregoing, a "Bill") in respect of any
Taxes that any other Party is required to pay hereunder, then the Party in
receipt of such bill shall (i) pay, prior to delinquency, the portion, if any,
of the Taxes referenced in such Bill for which such Party is responsible and
(ii) promptly deliver the same to the other Party, whereupon such other Party
shall pay, prior to delinquency, the portion of the Taxes referenced in such
Bill for which such other Party is responsible. Additionally, if any Party
hereto shall receive a notice or other official writing relating to any Taxes
that the other Party hereto is required to pay under this Agreement (other than
a Bill), then such receiving Party shall promptly furnish a copy of the same to
the other Party hereto. Each Party shall, promptly upon the request of any other
Party, exhibit to such other Party for examination, receipts for the Taxes
required to be paid by such Party pursuant to this Article VI.
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(j) Failure to Pay Taxes. In the event any Party shall fail to
pay any Taxes that it is required to pay hereunder, any other Party or its
Mortgagee may (but shall not be required to) pay all or any portion of such
Taxes and the non-paying Party shall reimburse the paying Party or its
Mortgagee, as applicable, on demand therefor by the paying Party or its
Mortgagee, for the sums so expended, with interest thereon, for the period from
such demand to such reimbursement, at an annual rate equal to four (4%) percent
per annum in excess of the rate announced from time to time by LaSalle National
Bank, or any successor thereto, as its prime rate at its main office in Chicago,
IL (the "Interest Rate"); provided, however, that with respect to a Mortgagee,
"Interest Rate" shall mean the rate which is the greater of (i) the Interest
Rate (as defined above) and (ii) the default interest rate applicable to similar
defaults as set forth in such Mortgagee's loan documents. The provisions of
Sections 9(a) and (b) of Article XIV shall apply to this Section 1(j).
(k) Trustee to Pay Taxes and Insurance Premiums. Provided H/C
I Owner and Mall I Owner shall have made the payments to Trustee required under
this Article VI, (i) from and after the Commencement Date until the Assessment
Date, Trustee shall pay all Taxes with respect to the Venetian and the Phase I
Land prior to delinquency thereof based on Tax Bills presented to Trustee, (ii)
from and after the Commencement Date, Trustee shall pay all insurance premiums
with respect to the insurance policies required to be maintained under Article X
prior to the expiration thereof based on bills with respect to insurance
premiums presented to Trustee, and (iii) to the extent there shall not be
sufficient monies in the Tax Escrow Account and/or in the Insurance Escrow
Account, as the case may be, to
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enable Trustee to make the payments described in the preceding (i) and (ii), H/C
I Owner and Mall I Owner shall pay Trustee the amount of any such deficiency
promptly after demand therefor based on their respective Tax and Insurance
Shares.
(l) Pledge of Collateral. All amounts held by the Trustee
shall be held by the Trustee in accounts for the benefit of the Mortgagees of
the Lots affected. The Trustee shall establish separate accounts for the
proceeds allocable to each respective Lot. At the request of the Owner of a
particular Lot, the account established with respect to that Lot will permit the
investment of the funds therein in investments identified by said Owner subject
to the reasonable approval of the Mortgagee of the affected Lot. Notwithstanding
the foregoing:
(i) the account established for a particular Lot and all
funds and investments therein and all proceeds thereof are hereby pledged,
assigned, transferred and delivered by the respective Owners to the
Trustee for the benefit of the Mortgagees of said Lot, and the Owners
hereby grant to the Trustee for the benefit of said Mortgagees a
continuing lien on and security interest in all of the foregoing as
collateral security for the obligations under their respective loan
documents, in the same priorities as apply to the liens which they hold
with respect to the Lots; and
(ii) said Owners shall take all steps reasonably requested
by the Trustee or said Mortgagees in order to perfect said security
interests.
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ARTICLE VII
PERMANENT PARKING
1. Automobile Parking Areas. As part of the construction of the
Venetian, H/C I Owner intends to construct the Phase I Automobile Parking Area,
which structure shall be constructed at H/C I Owner's sole cost and expense and
will be made available for use by H/C I Owner, SECC Owner and Mall I Owner in
accordance with the provisions of this Article VII. H/C I Owner shall, however,
notwithstanding anything to the contrary contained in this Article VII, have no
obligation to SECC Owner to construct the Automobile Parking Areas, so long as
the Temporary Parking Facilities described in Section 4 of Article I continue to
be provided in accordance, and H/C I Owner otherwise complies, with the terms of
Section 4 of Article I.
2. Preliminary Parking Plan. The Parties hereby agree that the Phase
I Automobile Parking Area and the roadways, walkways and related facilities and
improvements described below shall be constructed generally in accordance with
the conceptual plans and drawings attached hereto and made a part hereof as
Exhibit S (the "Preliminary Parking Plan") and applicable Legal Requirements. No
material changes in or refinements to the location, capacity or design of the
Phase I Automobile Parking Area, or the roadways, walkways, and related
facilities and improvements associated with the same, all as shown on the
Preliminary Parking Plan, shall be made without each Owner's prior written
consent thereto, which consent shall not be unreasonably withheld, delayed or
conditioned; provided that, with respect to the design of the Phase I Automobile
Parking Area, each Owner's
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right of approval shall be limited to those aspects of the design that affect
the Phase I Automobile Parking Area's structural integrity, its utility to such
Owner and its compliance with applicable Legal Requirements affecting each
Owner. In addition, H/C I Owner shall keep the other Owners informed on a
current basis of all proposed material changes to the plans and specifications
for the Phase I Automobile Parking Area and the general status of the
construction of the Phase I Automobile Parking Area, and each Owner shall have
the right (either itself or through an authorized representative) to inspect the
Phase I Automobile Parking Area and discuss the construction of the same with
the architect and construction manager retained by H/C I Owner.
3. Parking Spaces.
(a) Effective automatically upon the Phase I Garage Opening
Date, H/C I Owner grants to each other Owner the non-exclusive right to use all
the Parking Spaces in the Phase I Automobile Parking Area on a "first come,
first served" basis, subject to the provisions of this Agreement; provided that
such Owner is using its Lot for its Permitted Use. In no event shall any Owner's
rights and easements relating to parking comprise less than the minimum number
of Parking Spaces which shall be in such a location as shall be necessary for
such Owner (i) to be in compliance with all applicable Legal Requirements with
respect to Parking Spaces and (ii) to conduct its business on or in its Lot in
accordance with its Permitted Use (collectively, the "Minimum Parking
Standards"); provided, however, that H/C I Owner shall have no obligation to
alter or expand the Phase I Automobile Parking Area in order to accommodate
increased parking needs imposed upon any
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other Owner as a consequence of a change in the applicable Legal Requirements
applicable to such Owner or a change in the intended use of such Owner's Lot
after the Commencement Date;
(b) If H/C II Owner shall construct a new and separate parking
structure (the "Phase II Automobile Parking Area") on the Phase II Land for the
use by H/C II Owner, Mall II Owner, H/C I Owner, Mall I Owner and SECC Owner, of
all the parking spaces in the Phase II Automobile Parking Area on a
non-exclusive "first come, first served" basis, then H/C I Owner shall grant to
H/C II Owner the non-exclusive right to use all the Parking Spaces in the Phase
I Automobile Parking Area on a "first come, first served" basis, from and after
the date the Phase II Automobile Parking Area shall be made available for such
use to all Owners; provided that (i) such use of the Phase I Automobile Parking
Area and of the Phase II Automobile Parking Area shall satisfy the Minimum
Parking Standards with respect to each of H/C I Owner, Mall I Owner and SECC
Owner, and (ii) a Commercially Reasonable Owner of each of the Phase I
Hotel/Casino, the Phase I Mall and the SECC would consent to such use by H/C II
Owner and the same is not likely to have a Material Adverse Effect as determined
with respect to each such Owner, its property and its Mortgagee. If H/C II Owner
shall construct the Phase II Automobile Parking Area to be used in accordance
with the provisions of this subsection (b), (i) H/C I Owner and H/C II Owner
shall agree on a commercially reasonable plan to share the costs of operating
and maintaining the Automobile Parking Areas which, in the case of each of SECC
Owner and Mall I Owner and their respective properties and Mortgagees, a
Commercially Reasonable Owner would agree to and which is not
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likely to have a Material Adverse Effect, and (ii) H/C II Owner shall commence
and continue to maintain the Phase II Automobile Parking Area in a First-class
manner.
4. Construction. The Phase I Automobile Parking Area shall be
constructed by H/C I Owner at its sole cost and expense. The manner in which the
Phase I Automobile Parking Area shall be operated and maintained shall be as set
forth in this Article VII.
5. Capital Improvements/Maintenance. H/C I Owner shall have the
right to make capital improvements and the obligation to perform Maintenance on
the Parking Access Easement Area located on the Phase I Land, which rights shall
be exercised at its sole cost and expense, subject to the cost sharing
provisions of Section 3 of Article V. SECC Owner shall have the right to make
capital improvements and the obligation to perform Maintenance on the Parking
Access Easement Area located on the SECC Land, which right and obligation shall
be exercised at its sole cost and expense.
6. Rights of Others to Use Parking Spaces. Nothing herein shall be
construed as precluding H/C I Owner from granting from time to time to other
Persons (including without limitation other Owners) rights to use Parking
Spaces. Such grants may be on terms determined by H/C I Owner in its sole
discretion. Notwithstanding the foregoing, a particular grant shall not be
permitted if usage of the rights granted will either (i) result in any Owner not
being afforded its Minimum Parking Standards or (ii) otherwise adversely affect
the conduct of another Owner's business in accordance with the terms hereof
(except to a de minimis extent), unless such Owner first consents to such grant.
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7. Parking Rules and Regulations.
(a) Only H/C I Owner with respect to the Phase I
Automobile Parking Area shall have the right to establish, revise and replace,
from time to time, reasonable rules and regulations ("Parking Rules and
Regulations") for use of the Phase I Automobile Parking Area subject to the
approval of each other Owner, which approval shall not be unreasonably withheld,
delayed or conditioned; provided that no such rules or regulations or revisions
thereto shall (i) deprive any Owner of its Minimum Parking Standards, (ii)
adversely affect the conduct of any Owner's business in accordance with the
terms of this Agreement (except to a de minimis extent) or (iii) be enforced in
a manner which discriminates against an Owner or its Permittees. A copy of the
Parking Rules and Regulations shall be provided to each Owner. Each Owner shall
comply with the Parking Rules and Regulations. The power to enforce the Parking
Rules and Regulations shall be vested exclusively in H/C I Owner. In this
regard, the Parties acknowledge and agree that the Parking Rules and Regulations
to be adopted from time to time by H/C I Owner are intended to facilitate the
orderly administration of the Phase I Automobile Parking Area and the use of the
rights therein granted, and no Owner shall have any claim against H/C I Owner
with respect to the Phase I Automobile Parking Area for failure to enforce the
Parking Rules and Regulations against any other Owner, person or entity so long
as such rules and regulations do not deprive any Owner of its Minimum Parking
Standards or adversely affect the conduct of any Owner's business in accordance
with the terms of this Agreement or are enforced in a discriminatory manner.
Rules and regulations initially applicable to the use of the Automobile
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Parking Areas pursuant to this Agreement are set forth in Schedule III attached
hereto.
(b) In the event of any dispute between the Owners regarding
the establishment, revision or enforcement of Parking Rules and Regulations
pursuant to this Section 7, the affected Owners shall submit the matter for
determination by the Independent Expert pursuant to the provisions of Section 15
of Article XIV.
8. Parking Fees; Maintenance Charges. H/C I Owner shall have the
right, subject to the approval of each other Owner, which approval shall not be
unreasonably withheld, delayed or conditioned, to require the payment of parking
fees for the benefit of the Owners. Such fees shall be equitably apportioned
among the Owners as the Owners shall agree (and, absent such agreement, as an
Independent Expert shall decide).
9. Additional Parking to Comply With Legal Requirements. If, at any
time, the parking rights, easements and interests granted to Mall I Owner, H/C I
Owner and/or SECC Owner under this REA shall not be sufficient in order for the
Phase I Mall, Mall I Space, SECC, SECC Land, Phase I Hotel/Casino and/or the H/C
I Space to comply with all applicable Legal Requirements pertaining to parking,
then H/C II Owner shall immediately provide and make available to Mall I Owner,
H/C I Owner and/or SECC Owner, as applicable, and H/C I Owner (on behalf of
itself and H/C II Owner) hereby grants, such easements, rights and interests in,
to and under such additional parking spaces and facilities on the Phase II Land
as are necessary in order for the Phase I Mall, the Mall I Space, the SECC, the
SECC
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Land, the Phase I Hotel/Casino and the H/C I Space to comply with all Legal
Requirements pertaining to parking. Additionally, as a condition precedent to
any development activity upon the Phase II Land, the H/C II Owner shall deliver
to the H/C I Owner, the Mall I Owner, the SECC Owner and their respective
Mortgagees an opinion of counsel or a certificate from an appropriate official
of the applicable Governmental Authority, in either case, in form and substance
(and, in the case of a legal opinion, from counsel reasonably satisfactory)
reasonably satisfactory to said Mortgagees to the effect that the Phase I Mall,
Mall I Space, SECC, SECC Land, Phase I Hotel/Casino and the H/C I Space will
continue, after and during such proposed development activity, to comply with
all applicable Legal Requirements pertaining to parking.
ARTICLE VIII
THE VENETIAN AND THE LIDO
A. Construction. Until such time as all obligations under the Mortgage
Notes and the Mortgage Notes Indenture have been paid in full, H/C II Owner
agrees, for the benefit of H/C I Owner, that no new construction shall be
undertaken on the Phase II Land unless such construction is permitted by the
terms of the indenture pertaining to the Mortgage Notes or otherwise approved by
the Mortgage Notes Indenture Trustee. H/C I Owner, H/C II Owner, Mall I Owner,
Mall II Owner and SECC Owner each further agree for the benefit of the others as
follows:
1. In connection with the construction of the Lido, the Parties
shall cooperate and continuously consult in good faith with each other in
connection with
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such simultaneous construction, such cooperation to include, without limitation,
(a) diligent efforts by each to minimize interference with the construction
activities of the others; (b) the termination by each, as soon as reasonably
practicable in accordance with reasonably prudent construction practices, of any
such interference; (c) the giving by each to the others of a reasonably detailed
schedule of all construction-related activities, such schedule to be updated not
less frequently than monthly; (d) H/C I Owner endeavoring to provide to H/C II
Owner the benefit of any construction, interior finish, FF&E, insurance and
other discounts obtained by H/C I Owner (but at no direct or indirect expense to
H/C I Owner); (e) appropriate joint use, on an equitable, arm's-length basis, of
architects, construction managers, trade contractors, and consultants (with
payments to such third parties to be equitably allocated between H/C I Owner and
H/C II Owner at no direct or indirect expense to H/C I Owner, Mall I Owner or
SECC Owner) and, when appropriate, joint actions with respect thereto; and (f)
appropriate sharing of construction staff, on an equitable arm's-length basis
(with the wages, salaries and other benefits of such staff to be equitably
allocated between H/C I Owner and H/C II Owner at no direct or indirect expense
to H/C I Owner, Mall I Owner or SECC Owner). Notwithstanding the foregoing, if,
in the good faith judgment of H/C I Owner or Mall I Owner, any
construction-related activity in connection with the Lido is reasonably likely
to cause H/C I Owner or Mall I Owner to breach any covenant or agreement either
has made to or with any of its Mortgagees (including, without limitation, any
covenant relating to when construction of the Venetian will be completed), H/C
II Owner or Mall II Owner will, promptly upon the request of H/C I Owner, stop
such activity, in which
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event H/C I Owner or Mall I Owner shall notify H/C II Owner when such activity
can be resumed.
2. H/C II Owner and Mall II Owner covenant and agree that in
performing the construction of the Lido (including, without limitation, the
Phase II Mall and the Phase II Automobile Parking Area) and any other buildings
or other improvements to be located upon the Phase II Land (and in performing
any ancillary activities) while the SECC and/or the Venetian or any portion
thereof is open to the general public, H/C II Owner shall (a) use commercially
reasonable efforts to minimize interference with the use, enjoyment and
occupancy of, and the conduct by SECC Owner (including, without limitation, SECC
Owner's parking rights, access to and from the SECC, rights to Existing Utility
Equipment and the Existing HVAC Plant and the New HVAC Plant under this
Agreement), H/C I Owner and Mall I Owner of their businesses at the Venetian and
the SECC, (b) terminate, as soon as reasonably practicable in accordance with
reasonably prudent construction practices, any such interference and (c) give
H/C I Owner, Mall I Owner and SECC Owner a reasonably detailed schedule of any
such construction-related activities prior to the commencement of any such
construction-related activities, such schedule to be updated not less frequently
than monthly. If in connection with any such interference, any Mortgagee of H/C
I Owner, Mall I Owner or SECC Owner shall require that any such Party post a
letter of credit, bond or other security, then H/C II Owner, upon demand
therefor by such Party, shall pay all reasonable costs of obtaining the same.
3. H/C I Owner shall have the right to approve the plans and
specifications for the casino portion of the Lido and any other portions of the
Lido
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that may directly connect with or adjoin the Venetian, which approval shall not
be unreasonably withheld, delayed or conditioned. All actions taken by or on
behalf of H/C II Owner during the construction of the Lido in connection with
the contemplated replacement, with temporary "construction walls," of the
Temporary Walls (as defined below), and then the permanent removal of such
temporary "construction walls," are subject to the prior written approval of H/C
I Owner and Mall I Owner, which approval shall not be unreasonably withheld,
delayed or conditioned. As used herein, "Temporary Walls" shall mean the
temporary walls that are to be installed by H/C I Owner during the construction
of the Venetian at the points where the Phase I Mall and the Phase II Mall are
to connect and the Phase I casino and the Phase II casino are to connect.
4. Notwithstanding anything to the contrary set forth in the
preceding Section 3, the rights of Mall I Owner to allow any retail and/or
restaurant complex or facility, mall or shopping center to be located on the
Phase II Land (or the air rights above it) to be connected to the Phase I Mall
shall be subject to the terms of (i) the Credit Agreement, dated November 14,
1997 between GMAC, as lender and Phase I LLC, LVSI and Interim Mall LLC, as
borrower and of any documents executed in connection therewith, and (ii) the
commitment letter (the "Tranche A Commitment Letter") , dated November 14, 1997,
among Goldman Sachs Mortgage Company, as lender, Grand Canal Shops Mall, LLC, as
borrower, and Sheldon G. Adelson, as guarantor and of any documents executed in
connection therewith.
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5. In the event that construction of the Lido is commenced and is
subsequently permanently abandoned or such construction ceases, in all material
respects, for a period of twelve (12) consecutive months, then H/C I Owner
and/or Mall I Owner shall have the right after thirty (30) days' notice to H/C
II Owner, Mall II LLC and their respective Mortgagees to close off any openings
in the Venetian and take any other action reasonably necessary to protect the
integrity of the Venetian (and/or the Phase I Mall) as a single, self-contained,
economically viable facility, and H/C II Owner shall, within ten (10) days of
demand therefor, reimburse H/C I Owner or Mall I Owner, as the case may be, for
the reasonable costs and expenses incurred by H/C I Owner or Mall I Owner, as
the case may be, in taking such actions, together with interest thereon, at the
Interest Rate, for the period commencing on such tenth (10th) day and ending on
the date upon which H/C II Owner so reimburses H/C I Owner or Mall I Owner, as
the case may be.
B. Venetian/Lido Inter-relationship
and Cooperation.
1. (a) As part of the construction of the Venetian, H/C I Owner is
including in the Venetian certain facilities (collectively, the "Shared
Facilities") that are intended to be shared with H/C II Owner during and upon
completion of the construction of the Lido; the Shared Facilities may be shared
with H/C II Owner provided that (i) a Commercially Reasonable Owner of each of
the Phase I Hotel/ Casino, the Phase I Mall and the SECC would agree to such
shared use of the Shared Facilities and the same is not likely to have a
Material Adverse Effect with reference to each of the Phase I Hotel/Casino, the
Phase I Mall and the SECC and (ii) no such
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use of the Shared Facilities by H/C II Owner shall adversely affect the conduct
of any Owner's business on its Lot in accordance with its Permitted Use. The
Shared Facilities will include without limitation: utility distribution systems
and sub-stations (including, without limitation, the New Electric Substation),
loading docks, storage space, warehouses, casino surveillance systems, a casino
counting room, certain offices, certain theaters and a health club.
(b) Notwithstanding anything to the contrary in this Section
B.1, no less than fifteen (15) days prior to the commencement of any shared use
by H/C II Owner of any casino surveillance systems and/or casino counting room,
H/C I Owner shall deliver to its Mortgagee a written plan (the "Shared Casino
Facilities Plan") describing such shared use together with a written statement
from an Independent Expert certifying that the Shared Casino Facilities Plan (A)
satisfies the requirements of this Section B.1, (B) appropriately allocates
costs to reflect the relative benefits derived from such shared use and (C)
complies with all applicable Legal Requirements. Additionally, the Independent
Expert shall certify that the terms of any documents to be entered into to
memorialize the Shared Casino Facilities Plan are commercially reasonable and
satisfy the requirements of this Section B.1. The Mortgagee of the H/C I Space
may confer with H/C I Owner regarding the Shared Casino Facilities Plan prior to
its implementation.
2. (a) Prior to commencement of construction of the Lido, H/C I
Owner and H/C II Owner shall agree in good faith, and upon commercially
reasonable terms, on the following aspects of the Phase I Hotel/Casino and the
Phase II Hotel/Casino operations: (i) appropriate mutual operating covenants,
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(ii) joint marketing and advertising, (iii) certain shared casino operations,
(iv) the sharing of customer information, (v) the joint purchasing of insurance,
(vi) shared security operations, and (vii) any other matters that would be of
mutual benefit in owning and operating the Phase I Hotel/Casino and the Phase II
Hotel/Casino (collectively, "Shared Operations").
(b) Notwithstanding anything to the contrary in this Section
B.2, no less than fifteen (15) days prior to the commencement of any Shared
Operations by H/C II Owner and H/C I Owner, H/C I Owner shall deliver to its
Mortgagee a written plan (the "Shared Operations Plan") describing such Shared
Operations together with a written statement from an Independent Expert
certifying that the Shared Operations Plan (A) satisfies the requirements of
this Section B.2, (B) appropriately allocates costs to reflect the relative
benefits derived from such Shared Operations and (C) complies with all
applicable Legal Requirements. Additionally, the Independent Expert shall
certify that the terms of any documents to be entered into to memorialize the
Shared Operations Plan are commercially reasonable and satisfy the requirements
of this Section B.2. The Mortgagee of the H/C I Space may confer with H/C I
Owner regarding the Shared Operations Plan prior to its implementation.
C. Other Covenants and Agreements.
1. H/C I Owner shall not take any action under that certain Sands
Resort Hotel & Casino Agreement dated as of February 18, 1997 by and between the
County of Clark and Las Vegas Sands, Inc., which agreement is commonly referred
to as the "Predevelopment Agreement," a copy of which is attached hereto and
made
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a part hereof as Exhibit T, that could have a material adverse effect on any of
the easements, rights or interests granted to SECC Owner or Mall I Owner
hereunder and/or on the use, operation or enjoyment by SECC Owner of the SECC
(or SECC Owner's business at the same) or Mall I Owner of the Phase I Mall (or
Mall I Owner's business at the same).
2. (a) In the event any mechanic's, materialmen's or similar lien is
filed against the H/C I Space or the Mall I Space, or any buildings or other
improvements from time to time located on or in the H/C I Space or the Mall I
Space and owned by H/C I Owner or Mall I Owner, as the case may be, which lien
relates to work claimed to have been done for, or materials claimed to have been
furnished to or for the benefit of SECC Owner, the SECC Land, the SECC and/or
any other improvements owned by SECC Owner, then SECC Owner shall take any and
all actions necessary to cancel, discharge or bond over such lien within thirty
(30) days after notice to SECC Owner that such lien has been filed, and SECC
Owner shall indemnify and hold H/C I Owner or Mall I Owner, as the case may be,
harmless from and against any and all costs, expenses, claims, losses or damages
(including, without limitation, reasonable attorneys' fees and expenses)
resulting therefrom by reason thereof. In the event any mechanic's,
materialmen's or similar lien is filed against the SECC Land, the SECC, any
other buildings or other improvements from time to time located on the SECC
Land, which lien relates to work claimed to have been done for, or materials
claimed to have been furnished to, or for the benefit of, H/C I Owner and/or
Mall I Owner, the H/C I Space and/or the Mall I Space and/or any buildings or
other improvements owned by H/C I Owner and/or Mall I Owner,
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then H/C I Owner and/or Mall I Owner, as the case may be, shall take any and all
actions necessary to cancel or discharge (by bonding or insuring over) such lien
within thirty (30) days after notice to H/C I Owner and/or Mall I Owner, as the
case may be, that such lien has been filed, and H/C I Owner and/or Mall I Owner,
as the case may be, shall indemnify and hold SECC Owner harmless from and
against any and all costs, expenses, claims, losses or damages (including,
without limitation, reasonable attorneys' fees and expenses) resulting therefrom
by reason thereof. In the event any mechanic's, materialmen's or similar lien is
filed against the H/C I Space, or any buildings or other improvements from time
to time located on or in the H/C I Space and owned by H/C I Owner, which lien
relates to work claimed to have been done for, or materials claimed to have been
furnished to or for the benefit of Mall I Owner, the Mall I Space, the Phase I
Mall and/or any other improvements owned by Mall I Owner, then Mall I Owner
shall take any and all actions necessary to cancel or discharge (by bonding or
insuring over) such lien within thirty (30) days after notice to Mall I Owner
that such lien has been filed, and Mall I Owner shall indemnify and hold H/C I
Owner harmless from and against any and all costs, expenses, claims, losses or
damages (including, without limitation, reasonable attorneys' fees and expenses)
resulting therefrom by reason thereof. In the event any mechanic's,
materialmen's or similar lien is filed against the Mall I Space, the Phase I
Mall, any other buildings or other improvements from time to time located in the
Mall I Space, which lien relates to work claimed to have been done for, or
materials claimed to have been furnished to, or for the benefit of, H/C I Owner,
the H/C I Space and/or any buildings or other improvements owned by H/C I Owner,
then H/C I Owner shall
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take any and all actions necessary to cancel, discharge or bond over such lien
within thirty (30) days after notice to H/C I Owner that such lien has been
filed, and H/C I Owner shall indemnify and hold Mall I Owner harmless from and
against any and all costs, expenses, claims, losses or damages (including,
without limitation, reasonable attorneys' fees and expenses) resulting therefrom
by reason thereof.
(b) If any of H/C I Owner, Mall I Owner or SECC Owner fails to
discharge any such lien within the aforesaid period, then, in addition to any
other right or remedy of the affected Party, the affected Party (the
"Discharging Party") may, but shall not be obligated to, discharge the same
either by paying the amount claimed to be due or by procuring the discharge of
such lien by deposit in court or bonding. Any amount paid by the Discharging
Party (including, without limitation, reasonable attorneys' fees, disbursements
and other expenses) incurred in defending any such action, discharging said lien
or in procuring the discharge of said lien, shall be repaid by the defaulting
Party upon demand therefor, and all amounts so repayable shall be repaid with
interest at the Interest Rate from the date of demand to the date of repayment.
ARTICLE IX
RESTRICTIVE COVENANTS
(a) H/C I Owner hereby agrees for the benefit of SECC Owner
that H/C I Owner shall not (and shall not permit any other Person to) own,
operate, lease, license or manage any building or other facility located in or
on the
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H/C I Space that provides space for or to shows or expositions of the type
generally held at the SECC (as such name may be changed from time to time).
(b) H/C II Owner hereby agrees for the benefit of SECC Owner
and H/C I Owner that H/C II Owner shall not (and shall not permit any other
Person to) own, operate, lease, license or manage any building or other facility
located in or on the H/C II Space that provides space for or to shows or
expositions of the type generally held at the SECC (as such name may be changed
from time to time).
(c) Mall I Owner hereby agrees for the benefit of SECC Owner,
H/C I Owner and H/C II Owner that Mall I Owner shall not (and shall not permit
any other Person to) own, operate, lease, license or manage any building or
other facility located in the Mall I Space that provides space for or to shows
or expositions of the type generally held at the SECC (as such name may be
changed from time to time).
(d) Mall II Owner hereby agrees for the benefit of SECC Owner,
H/C I Owner and H/C II Owner that Mall II Owner shall not (and shall not permit
any other Person to) own, operate, lease, license or manage any building or
other facility located in the Mall II Space that provides space for or to shows
or expositions of the type generally held at the SECC (as such name may be
changed from time to time).
(e) The restrictions set forth herein are considered by the
Parties to be reasonable for the purpose of protecting the respective owners of
the SECC, the Phase I Hotel/Casino, the Phase I Mall, and the Phase II
Hotel/Casino
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from time to time and its business thereat. However, if any such restriction is
found by a court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it is the intention of the Parties that such
restriction shall be interpreted to extend only over the maximum period of time,
range of activities or geographic area as to which it may be enforceable.
ARTICLE X
INSURANCE
1. Obligations of SECC Owner; Adjustment of SECC Insurance Proceeds.
Except with respect to an election by SECC Owner to carry blanket liability
insurance in accordance with the provisions of Section 10, at all times during
the Term, SECC Owner shall obtain and maintain, and shall pay all premiums in
accordance with subsection 5.1(x) of the Senior Loan Agreement and the Junior
Loan Agreement for insurance for SECC Owner and the SECC providing at least the
coverages set forth therein. All property insurance proceeds (including proceeds
of business interruption insurance) with respect to the SECC shall be adjusted
in accordance with subsection 5.1(x) of the Senior Loan Agreement and the Junior
Loan Agreement.
2. Obligations of H/C I Owner and Mall I Owner. At all times during
the Term, H/C I Owner shall obtain and maintain for the benefit of itself and
Mall I Owner, and shall pay all premiums in accordance with Article VI for
insurance
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for H/C I Owner and the Phase I Hotel/Casino and Mall I Owner and the Phase I
Mall providing at least the following coverages:
(A) Through and including the Completion Date,
(i) Commercial general liability insurance for the
Venetian on an "occurrence" basis, including coverage for
premises/operations, products/completed operations, broad form property
damage, blanket contractual liability, independent contractor's and
personal injury, with no exclusions for explosion, collapse and
underground perils, with primary coverage limits of no less than
$1,000,000 for injuries or death to one or more persons or damage to
property resulting from any one occurrence and a $2,000,000 aggregate
limit. The commercial general liability policy shall also include a
severability of interest clause and will not exclude cross suits in the
event more than one entity is "named insured" under the liability policy.
Deductibles in excess of $250,000 shall be subject to review and approval
by Trustee. The foregoing policy shall also insure the interest of
contractors and subcontractors working on the Venetian.
(ii) Automobile liability insurance, including coverage for
owned, non-owned and hired automobiles for both bodily injury and property
damage and containing appropriate no-fault insurance provisions or other
endorsements in accordance with state legal requirements, with limits of
no less than $1,000,000 per accident with respect to bodily injury,
property damage or death.
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(iii) Workers compensation insurance and employer's
liability or stop gap liability, with a limit of not less than $1,000,000,
and such other forms of insurance which the Owners are required by law to
provide for the Venetian, providing statutory benefits and covering loss
resulting from injury, sickness, disability or death of the employees of
the Owners. The Owners may self insure, in accordance with Nevada law,
with a retention not greater than $1,000,000 per occurrence.
(iv) Until such time as coverage is placed under permanent
cover as set forth in B(v) below, builder's risk insurance on an "all risk
basis", as such term is used in the insurance industry, on a completed
value form with flood and earthquake (including sinkhole and subsidence)
and on an "agreed amount" basis and providing (a) coverage for the
Venetian, including removal of debris, insuring the buildings, structures,
machinery, equipment, facilities, fixtures and other properties
constituting a part of the Venetian in a minimum amount not less than 100%
of the full replacement value of the Venetian, and in any case subject to
an annual limit of $50,000,000, for flood coverage and for earthquake
coverage, but in no event an amount less than the limit necessary to
satisfy other applicable contracts executed in connection with the
Venetian; (b) off-site coverage with a per occurrence limit of $5,000,000
or such higher limit as is sufficient to cover the full insurable value of
assets exposed to loss, (c) transit coverage in the United States and
Canada with a per occurrence limit of not less than $5,000,000, (d)
coverage for operational testing and start-up with the same dollar
coverage and modifications as set out
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in (a) above. All such policies may have deductibles of not greater than
$250,000 per loss, and delay in opening coverage shall have a deductible
not greater than a thirty (30) day period.
(v) Commencing at least forty-five (45) days prior to the
shipment of equipment manufactured outside the United States, ocean cargo
coverage in an amount not less than the full replacement costs of the
value of equipment shipped. Such coverage shall apply to all equipment,
destined for the Venetian site, which is valued in excess of $500,000 and
has a lead time to replace exceeding five (5) months. The ocean cargo
policy shall attach coverage prior to equipment departing the premises of
the manufacturer and shall continue in force until the shipment arrives at
the Venetian site including sixty (60) days' storage, or is insured under
the builders risk policy. To the extent the lead time for any components
exceeds five (5) months, delay in opening (advanced loss of profits) shall
be insured in an amount to be agreed upon by Trustee subject to a
deductible of thirty (30) days.
(vi) Delay in opening or advanced loss of profits
insurance, on an "all risks" basis including machinery breakdown (boiler
and machinery) coverage, with limits of insurance equivalent to twelve
(12) months projected revenues less allowable insurance company deductions
of a non-continuing nature. Payment of proceeds under such cover shall not
be restricted by the policy expiration date or a monthly limitation. The
deductible or waiting period shall not exceed thirty (30) days.
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(vii) Umbrella Excess Liability Insurance of not less than
$100,000,000 per occurrence and in the aggregate during construction and
operations. Such coverages shall be on a per occurrence basis and over and
above coverage provided by the policies described in subsections (i), (ii)
and (iii) above whose limits shall apply toward the $100,000,000 limit set
forth in this subsection (vii). If the policy or policies provided under
this subsection (vii) contain(s) aggregate limits applying to operations
other than operations of H/C I Owner, Mall I Owner and SECC Owner (if the
provisions of Section 10 shall be applicable), and such limits are
diminished below $95,000,000 by any incident, occurrence, claim,
settlement or judgment against such other operations which has caused the
insurer to establish a reserve, H/C I Owner, Mall I Owner and SECC Owner
within five (5) business days after knowledge of such event shall inform
Trustee, and within ten (10) business days after request therefor by
Trustee, H/C I Owner, Mall I Owner and SECC Owner shall purchase an
additional umbrella/excess liability insurance policy satisfying the
requirements of this subsection (vii) in an amount reasonably determined
by Trustee (and the Mortgagee of the SECC if the blanket policy
contemplated in Section 10 shall be in effect); provided that in no event
shall the amount of such insurance with respect to Trustee (and the
Mortgagee of the SECC) exceed the maximum aggregate amount of such
insurance required pursuant to the first sentence of this subsection
(vii).
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(viii) Aircraft liability, to the extent exposure exists, in
an amount not less than $25,000,000 for all owned, non-owned and hired
aircraft, fixed wing or rotary, used in connection with the operation of
the Venetian.
(ix) Such other or additional insurance (as to risks
covered, policy amounts, policy provisions or otherwise) as Trustee may
reasonably request provided that such insurance and such amounts are then
commonly insured against with respect to similar properties in Las Vegas,
Nevada.
(x) All contractors and subcontractors not included in the
Owner controlled insurance program described above shall, prior to
performing work in connection with the construction of the Venetian,
supply proper evidence of insurance as set forth in subsections (i), (ii)
and (iii) above. In addition, excess liability or umbrella liability
limits of not less than $10,000,000 shall be certified. Such insurance,
with the exception of workers compensation, supplied by such contractors
and subcontractors shall:
(a) add H/C I Owner, Mall I Owner and Trustee, as
additional insureds;
(b) be primary as respects insurance provided by H/C I
Owner, Mall I Owner and Trustee;
(c) waive rights of subrogation against H/C I Owner,
Mall I Owner and Trustee; and
(d) continue in full force and effect until
obligations of contractor and subcontractor are
fulfilled.
(B) From and after the earlier of (x) the Opening Date and (y) the Mall
Release Date,
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(i) Commercial general liability insurance for the
Venetian on an "occurrence" basis, including coverage for premises/
operations, products/completed operations, broad form property damage,
blanket contractual liability, independent contractor's and personal
injury, with no exclusions for explosion, collapse and underground perils,
with primary coverage limits of no less than $1,000,000 for injuries or
death to one or more persons or damage to property resulting from any one
occurrence and a $2,000,000 aggregate limit. The commercial general
liability policy shall also include a severability of interest clause and
will not exclude cross suits in the event more than one entity is a "named
insured" under the liability policy. Deductibles in excess of $250,000
shall be subject to review and approval by the Mortgagees of H/C I Owner
and Mall I Owner, which approval shall not be unreasonably withheld,
conditional or delayed; provided a Commercially Reasonable Owner of the
Phase I Hotel/Casino or the Phase I Mall, as applicable, would so approve
and same would not have a Material Adverse Effect on such property, Owner
or Mortgagee.
(ii) Automobile liability insurance, including coverage for
owned, non-owned and hired automobiles for both bodily injury and property
damage and containing appropriate no-fault insurance provisions or other
endorsements in accordance with state legal requirements, with limits of
no less than $1,000,000 per accident with respect to bodily injury,
property damage or death.
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(iii) Workers compensation insurance and employer's
liability or stop gap liability, with a limit of not less than $1,000,000,
and such other forms of insurance which H/C I Owner and Mall I Owner are
required by law to provide for the Venetian, providing statutory benefits
and covering loss resulting from injury, sickness, disability or death of
the employees of H/C I Owner and Mall I Owner. The Owners may self insure,
in accordance with Nevada law, with a retention not greater than
$1,000,000 per occurrence.
(iv) "All risk" property insurance, as such term is used in
the insurance industry, with flood and earthquake (including sinkhole and
subsidence) and on an "agreed amount" basis and providing coverage for the
Venetian, including removal of debris, insuring the buildings, structures,
machinery, equipment, fixtures and other properties constituting a part of
the Venetian in a minimum amount not less than the full replacement value
of the Venetian, and in any case subject to an annual limit of $50,000,000
for flood coverage and for earthquake coverage (with the exception of
blanket coverage for the SECC in accordance with Section 10, in which case
the combined limit shall not be less than $50,000,000 for flood coverage
and $60,000,000 for earthquake coverage), but in no event in an amount
less than the limit necessary to satisfy other contracts executed in
connection with the Venetian. Such policy shall include a replacement cost
endorsement (no co-insurance) with no deduction for depreciation, and,
unless provided under the all risk policy, boiler and machinery coverage
on a "comprehensive" basis including
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breakdown and repair with limits not less than the full replacement cost
of the insured objects. The policy/policies shall include increased cost
of construction coverage, debris removal, and building ordinance coverage
to pay for loss of "undamaged" property which may be required to be
replaced due to enforcement of local, state, or federal ordinances subject
to a sublimit of $10,000,000. All such policies may have deductibles of
not greater than $1,000,000 per loss with the exception of earthquake (5%
of values at risk) and flood ($2,500,000 per loss).
(v) H/C I Owner shall also maintain or cause to be
maintained for the benefit of itself and Mall I Owner with respect to the
Venetian business interruption insurance on all "all risk" basis,
including boiler and machinery, in an amount equal to satisfy policy
coinsurance conditions, but with limits not less than the equivalent to
eighteen (18) months projected revenues less allowable insurance company
deductions on a non-continuing basis; provided, however, that so long as
H/C I Owner shall carry a combined property and business interruption
policy, the limit required shall not be less than the equivalent to twelve
(12) months projected revenues less allowable insurance company deductions
on a non-continuing basis. Such coverage shall include a six (6) month
indemnity period beyond the period covered by the business interruption
insurance. The deductible or waiting period shall not exceed thirty (30)
days. H/C I Owner and Mall I Owner shall also maintain or cause to be
maintained (a) expediting or extra expense coverage in an amount not less
than $2,500,000 and (b) with respect to the
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Venetian, contingent business interruption insurance, or equivalent cover
as respects the New HVAC Plant and the SECC (unless the SECC shall be
insured under the blanket policy contemplated in Section 10), in an amount
not less than three (3) months gross revenues.
(vi) Umbrella/excess liability insurance of not less than
$100,000,000 per occurrence and in the aggregate during construction and
operations. Such coverages shall be on a per occurrence basis and over and
above coverage provided by the policies described in subsections (i), (ii)
and (iii) with respect to stop gap liability insurance, above (whose
limits shall apply toward the $100,000,000 limit set forth in this
subsection (vi)). If the policy or policies provided under this subsection
(vi) contain(s) aggregate limits applying to operations other than
operations of H/C I Owner, Mall I Owner or SECC Owner (if the provisions
of Section 10 shall be applicable), and such limits are diminished below
$95,000,000 by any incident, occurrence, claim, settlement or judgment
against such other operations which has caused the insurer to establish a
reserve, H/C I Owner, Mall I Owner and SECC Owner (if the provisions of
Section 10 shall be applicable), within five (5) business days after
knowledge of such event, shall inform Trustee, and within ten (10)
business days after request therefor by Trustee, H/C I Owner (for the
benefit of itself and Mall I Owner) or SECC Owner (if the provisions of
Section 10 shall be applicable), shall purchase an additional
umbrella/excess liability insurance policy satisfying the requirements of
this subsection (vi) in an amount approved by the Mortgagees of H/C I
Owner and Mall I Owner and
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SECC Owner (if it elects to maintain insurance in accordance with the
provisions of Section 10(b) hereof), which approval shall not be
unreasonably withheld, conditioned or delayed; provided a Commercially
Reasonable Owner of the Phase I Hotel/Casino or the Phase I Mall or SECC
Owner (if it elects to maintain insurance in accordance with the
provisions of Section 10(b) hereof), as applicable, would so consent and
same would not have a Material Adverse Effect on such property, Owner or
Mortgagee (and the Mortgagee of the SECC if the blanket policy
contemplated in Section 10 shall be in effect); provided that in no event
shall the amount of such insurance with respect to Trustee (and the
Mortgagee of the SECC) exceed the maximum aggregate amount of such
insurance required pursuant to the first sentence of this subsection (vi).
In the event coverage is combined under one policy for H/C I Owner, Mall I
Owner and SECC Owner in accordance with the provisions of Section 10, the
umbrella/excess liability limit shall not be less than $125,000,000.
(vii) Aircraft liability, to the extent exposure exists, in
an amount not less than $25,000,000 for all owned, non-owned and hired
aircraft, fixed wing or rotary, used in connection with the operation of
the Venetian.
(viii) Such other or additional insurance (as to risks
covered, policy amounts, policy provisions or otherwise) as any Owner
and/or its Mortgagee may reasonably request provided that such insurance
and such amounts are then commonly insured against with respect to similar
properties in Clark County, Nevada.
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(ix) H/C I Owner and Mall I Owner shall require in their
Leases with Tenants, that all major Tenants leasing space from H/C Owner
or Mall I Owner in the Venetian procure and maintain during the terms of
their Leases the following insurance coverages:
(a) full replacement cost coverage for all
improvements and betterments installed by or on
behalf of any Tenant and full replacement cost
insurance for Tenants' personal property;
(b) business interruption insurance;
(c) $5,000,000 commercial general liability
insurance; and
(d) statutory workers compensation and employer's
liability insurance.
All such insurance, except for workers' compensation insurance, supplied by the
parties shall be primary as respects insurance provided by H/C I Owner and Mall
I Owner and shall waive rights of subrogation against H/C I Owner and Mall I
Owner. All third party liability coverage maintained by Tenants shall add
Trustee, H/C I Owner and Mall I Owner and SECC Owner (if it elects to maintain
insurance in accordance with the provisions of Section 10(b) hereof) and their
respective Mortgagees as additional insureds. Each Tenant shall supply
satisfactory evidence of insurance to H/C I Owner and Mall I Owner and Trustee
and SECC Owner (if it elects to maintain insurance in accordance with the
provisions of Section 10(b) hereof).
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3. General Conditions.
(a) All insurance required under this Agreement to be carried
by H/C I Owner, Mall I Owner and SECC Owner (if the provisions of Section 10
shall be applicable) shall be effected under valid and enforceable policies
acceptable in form and substance to Trustee; shall name Trustee, H/C I Owner,
Mall I Owner, SECC Owner (if the provisions of Section 10 shall be applicable)
and each of their respective Mortgagees as additional insureds, as their
interests may appear; and shall be issued by insurers rated "A-" or better with
a minimum size rating of "VIII" by Best's Insurance Guide and Key Ratings
("Best's") (or an equivalent rating by another nationally recognized insurance
rating agency of similar standing if Best's shall no longer be published).
(b) All property, cargo, boiler & machinery and business
interruption/delay in opening insurance coverage shall be on such form as shall
be approved by the Mortgagees of H/C I Owner, Mall I Owner and SECC Owner (if it
elects to maintain insurance in accordance with the provisions of Section 10(b)
hereof), which approval shall not be unreasonably withheld, conditioned or
delayed; provided a Commercially Reasonable Owner of the Phase I Hotel/Casino or
the Phase I Mall, as applicable, would so consent and same would not have a
Material Adverse Effect on such property, Owner or Mortgagee.
(c) H/C I Owner and/or Mall I Owner shall submit certified
copies of all polices received pursuant to the requirements of this Article X
for review and approval to the Mortgagees of H/C I Owner, Mall I Owner and SECC
Owner (if it elects to maintain insurance in accordance with the provisions of
Section 10(b)
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hereof), which approval shall not be unreasonably withheld, conditioned or
delayed; provided a Commercially Reasonable Owner of the Phase I Hotel/Casino,
the Phase I Mall or SECC, as applicable, would so approve and same would not
have a Material Adverse Effect on such property, Owner or Mortgagee.
(d) Notwithstanding anything herein contained, Mall I Owner
may elect by notice to H/C I Owner to obtain on its own behalf any of the
insurance coverages set forth in this Article X, in which event, each Owner
shall pay for its own such insurance and the cost thereof shall not be shared.
4. Named Insureds.
(a) All liability policies where Trustee and/or the Mortgagee
of the SECC have an insurable interest shall insure the interests of the
Mortgagees of the Phase I Hotel/Casino, the Phase I Mall and the SECC Owner (if
it elects to maintain insurance in accordance with the provisions of Section
10(b) hereof) as well as H/C I Owner, Mall I Owner and SECC Owner (if it elects
to maintain insurance in accordance with the provisions of Section 10(b) hereof)
and shall name Trustee and such Mortgagees and the Mortgagee of the SECC as
additional insureds (unless Trustee and the Mortgagee of the SECC are named
insureds under the policy). All policies covering real or personal property or
business interruption shall name Trustee with respect to the Phase I
Hotel/Casino and the Phase I Mall and the Mortgagee of the SECC with respect to
the SECC as additional insured and First Loss Payee/ Mortgagee in accordance
with CP12 18 (06/95) or equivalent Lender's Loss Payable Endorsement, and shall
provide that any payment thereunder for any loss or damage with respect to the
Venetian shall be made to Trustee or with respect to the SECC to
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the Mortgagee of the SECC as their interests may appear. In the event the
interests of more than one Owner are insured under a blanket policy, each of
Trustee and the Mortgagee of the SECC shall be named as Loss Payee/Mortgagee as
set forth above and shall be protected to the extent of its interest, having
available the values declared under the blanket policy for its security. In the
event the New HVAC Plant is insured under a blanket policy with the Phase I
Casino/Hotel and the Phase I Mall, such blanket policy may contain loss payee
provisions in favor of the owner of the New HVAC Plant.
(b) Each policy required to be maintained under this Article X
shall provide that such insurance may not be canceled, terminated or materially
changed for any reason whatsoever, unless the insurance carrier delivers thirty
(30) days (or ten (10) days in connection with a notice of nonpayment of
premium) notice of such cancellation, termination or material change to the
respective Mortgagees of the Phase I Hotel/Casino, the Phase I Mall and the SECC
as well as H/C I Owner, Mall I Owner, SECC Owner and Trustee.
5. Trustee's Rights to Adjust Losses. In case of any Casualty with
respect to the Phase I Hotel/Casino and/or Phase I Mall (or any portion
thereof), H/C I Owner, Mall I Owner and Trustee shall jointly settle, compromise
and adjust any claim; provided that, with respect to any loss not in excess of
$1,500,000 (as set forth in the applicable certificate prepared by an
Independent Expert), H/C I Owner and/or Mall I Owner, as the case may be, may
agree with the insurance company or companies on the amount to be paid upon the
loss without obtaining the consent of Trustee, Trustee shall pay over to H/C I
Owner and/or Mall I Owner, as the case
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may be, the applicable insurance proceeds upon receipt therefor by Trustee and
H/C I Owner and/or Mall I Owner, as applicable, shall use such insurance
proceeds to perform a restoration in accordance with the provisions of Article
XI; provided further that, if, at the time of any Casualty, or at any time
during the settlement, compromise or adjustment process with respect to any
Casualty, an event of default under any affected Mortgagee's loan documents
shall exist, then Trustee shall not be required to pay over the applicable
insurance proceeds to H/C I Owner and/or Mall I Owner, as the case may be,
Trustee (acting in accordance with the written directions of such affected
Mortgagee(s)) may settle, compromise and/or adjust any claim, as it sees fit in
its sole discretion, without the participation or consent of H/C I Owner and/or
Mall I Owner, as the case may be, and the insurance proceeds shall be applied in
accordance with the provisions of Article XI hereof. Furthermore, if any claim
shall not have been settled, compromised or adjusted or the applicable insurance
proceeds shall not have been paid to Trustee, in any case, within twelve (12)
months after the Casualty in question occurred or such additional time as may be
reasonably necessary given the circumstances, then Trustee (acting in accordance
with the written directions of any affected Mortgagee(s)), may settle,
compromise and/or adjust such claim, as it sees fit in its sole discretion,
without the participation or consent of H/C I Owner and/or Mall I Owner, as the
case may be, and the insurance proceeds shall be applied in accordance with the
provisions of Article XI hereof. Wherever this document refers to the Trustee
adjusting, settling or compromising, the Trustee shall do so at the direction of
the affected Mortgagee(s); if the affected Mortgagees cannot agree as to any
decision regarding any actual or proposed adjustment, settlement or
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compromise within sixty (60) days, then the decision in question shall be made
by an Independent Expert selected by such Mortgagees.
6. Mortgagee's Right to Cure. On or before December 30th of each
year during the Term, H/C I Owner shall furnish to Trustee and each other Owner,
with a copy for each Mortgagee, a certificate signed by an officer of H/C I
Owner or an authorized insurance representative of H/C I Owner, showing the
insurance then maintained by or on behalf of H/C I Owner under this Article X
and stating that such insurance complies in all material aspects with the terms
hereof, together with a statement of the premiums then due, if any. If at any
time the insurance required under this Article X shall be reduced or cease to be
maintained, then (without limiting the rights of Trustee and/or any Mortgagee
hereunder in respect of any event of default which arises as a result of such
failure), Trustee at the direction of the Mortgagees of the H/C I Space and the
Mall I Space and/or the Mortgagee of the SECC (if the SECC Owner elects to
maintain insurance in accordance with the provisions of Section 10(b) hereof)
may, but shall not be obligated to, maintain the insurance required hereby and,
in such event, H/C I Owner or SECC Owner, as the case may be, shall reimburse
the Mortgagee of the H/C I Space and/or the Mall I Space and/or the Mortgagee of
the SECC upon demand for the cost thereof together with interest thereon at the
Interest Rate.
7. Insurance not Commercially Available. If any insurance (including
the limits, coverages, coinsurance waiver or deductibles thereof) required to be
maintained under this Article X by H/C I Owner and Mall I Owner, other than
insurance required to be maintained by law, shall not be Commercially Available,
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H/C I Owner, Mall I Owner and their respective Mortgagees shall not unreasonably
withhold their consent to waive such requirement to the extent maintenance
thereof is not so available; provided (i) H/C I Owner and/or Mall I Owner shall
first request any such waiver in writing, which request shall be accompanied by
written reports in form and content and prepared by an Independent insurance
advisor of recognized national standing reasonably acceptable to Trustee
certifying that such insurance is not reasonably available (e.g. obtainable in
the insurance marketplace at costs not to exceed 50% of prior premiums) and
commercially feasible in the commercial insurance market for property of a
similar type (collectively, "Commercially Available") (and, in any case where
the required amount is not so available, certifying as to the maximum amount
which is so available) and setting forth the basis for such conclusions, (ii) at
any time after the granting of any such waiver, H/C I Owner and/or Mall I Owner
shall furnish to Trustee within fifteen (15) days after Trustee's request,
updates of the prior reports reasonable acceptable to Trustee from such
insurance advisor reaffirming such conclusion, and (iii) any such waiver shall
be effective only so long as such insurance shall not be Commercially Available,
it being understood that the failure of H/C I Owner and/or Mall I Owner to
timely furnish any such updated report shall be conclusive evidence that such
waiver is no longer effective. Notwithstanding anything to the contrary set
forth in this Article X, any failure to maintain insurance coverage in
accordance with any provision of this Article X due to such insurance being
commercially unavailable shall not constitute a default hereunder and H/C I
Owner, Mall I Owner and SECC Owner (if the
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provisions of Section 10(b) shall apply) shall be in full compliance with such
provisions so long as such Owner has complied with the provisions of this
Section 7.
8. Policies on "claims-made" basis. If any policy is written on a
"claims-made" basis and such policy is not to be renewed or the retroactive date
of such policy is to be changed, H/C I Owner, Mall I Owner or SECC Owner, as the
case may be, shall obtain prior to the expiration date or date change of such
policy the broadest basic and supplemental extended reporting period coverage
reasonably available in the commercial insurance market for each such policy and
shall promptly provide Trustee and/or the Mortgagee of the SECC, as the case may
be, with proof that such coverage has been obtained.
9. Insurance Requirements Review. On or before the third (3rd)
anniversary of the Commencement Date and on each succeeding three (3) year
anniversary thereof, H/C I Owner, Mall I Owner and SECC Owner (if SECC Owner
shall elect to maintain insurance in accordance with the provisions of Section
10(b) hereof) (in consultation with the Trustee) shall designate an Independent
insurance consultant who shall review the insurance requirements of the Venetian
and prepare a report (the "Insurance Report") setting out its recommendations
relating to insurance overage for the Venetian for the following three (3)
years. H/C I Owner shall submit the Insurance Report to H/C I Owner's and Mall I
Owner's respective Mortgagees, which, upon approval by H/C I Owner, Mall I Owner
and SECC Owner (if SECC Owner shall elect to maintain insurance in accordance
with the provisions of Section 10(b) hereof) and their respective Mortgagees
(which approval shall not be unreasonably withheld, conditioned or delayed;
provided a Commercially Reasonable
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Owner of the Phase I Hotel/Casino or the Phase I Mall, as applicable, would so
consent and same would not have a Material Adverse Effect on such property,
Owner or Mortgagee) shall, to the extent the recommendations differ from the
requirements set forth in this Article X, amend and supersede the applicable
provisions of this Article X.
10. SECC Blanket Policy.
(a) From and after the Commencement Date, SECC Owner may
maintain liability insurance coverage with respect to the SECC under a combined
policy with H/C I Owner and Mall I Owner, and operations other than operations
of H/C I Owner and Mall I Owner, subject to the requirements of the Senior Loan
Agreement, the Junior Loan Agreement and this Article X.
(b) From and after the date SECC Owner shall have satisfied
all of its obligations under the Senior Loan Agreement and the Junior Loan
Agreement, SECC Owner may maintain property and liability insurance coverage
with respect to the SECC under a combined policy with H/C I Owner and Mall I
Owner subject to the requirements of this Article X.
11. Mutual Release; Waiver of Subrogation. Each Party hereby
releases and waives for itself, and to the extent legally possible for it to do
so, on behalf of its insurer, each of the other Parties and their officers,
directors, agents, members, partners, servants and employees from liability for
any loss or damage to any or all property (including any resulting loss of time
element including business interruption, rents or extra expense) located in or
on the H/C I Space, the H/C II Space, the Mall I Space, the Mall II Space, the
SECC Land and/or any improvements
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located in or on any of the foregoing, which loss or damage is of the type said
Party is required to insure against by this Article X, irrespective of any
negligence on the part of the released Party which may have contributed to or
caused such loss or damage. Each Party covenants that it will, if generally
available in the insurance industry, obtain for the benefit of each such
released Party a waiver of any right of subrogation which the insurer of such
Party may acquire against any such Party by virtue of the payment of any such
loss covered by such insurance.
12. Prior to Completion Date, Insurance Proceeds Held by
Disbursement Agent; Thereafter, Insurance Proceeds Held in Trust.
(a) H/C I Owner and Mall I Owner each covenant that with
respect to all property insurance required to be maintained under this Article X
(including without limitation under Sections 2(A)(iv), (v) or (vi) or 2(B)(iv)
or (v)), that each policy shall expressly provide that (i) from and after the
Commencement Date up to the earlier to occur of the Mall Release Date or the
Completion Date, all insurance proceeds shall be paid to the Disbursement Agent
to be held in trust for the benefit of the Mortgagees and applied in accordance
with the provisions of the FADAA, and (ii) from and after the earlier to occur
of the Mall Release Date or the Completion Date, all insurance proceeds shall be
paid to the Trustee to be held in trust for the benefit of the Mortgagees and,
subject to the provisions of Section 13 and Section 1 of Article XI, paid over
by Trustee to H/C I Owner and/or Mall I Owner, as the case may be, to be applied
to restoration of the Casualty in question in accordance with the provisions of
Article XI; provided that in case of any single loss which exceeds $1,500,000,
or losses which exceed $6,000,000 in the aggregate,
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during any consecutive twelve (12) month period, the amount of any such claim(s)
shall be jointly compromised, settled or adjusted by H/C I Owner, Mall I Owner
and the Trustee at the direction of the affected Mortgagee(s). If the affected
Mortgagees cannot agree on the amounts of such adjustment within sixty (60)
days, such amounts shall be determined by an Independent Expert in accordance
with the provisions of Section 15 of Article XIV.
(b) Subject to the provisions of Section 13, all proceeds of
such insurance (excluding the proceeds of any rental value, or use and occupancy
insurance) shall be used with all reasonable diligence by the Party entitled to
such proceeds under the provisions of this Agreement for rebuilding, repairing
or otherwise reconstructing the same, to the extent required pursuant to the
provisions of Article XI hereof.
(c) Payment of the proceeds shall be made by the Trustee to
the Party entitled to such proceeds, or, at such Party's direction, to its
contractor or contractors, as follows:
(i) At the end of each month, or from time to time, as
reasonably requested by H/C I Owner and/or Mall I Owner, against the
Party's Independent Architect's certificate in form and content reasonably
satisfactory or the affected Mortgagee, an amount which shall be that
proportion of the total amount held in trust which 90% (or such greater
amount as may be reasonably agreed to by the affected Owner(s) and their
Mortgagees) of the payments to be made to the contractors or materialmen
for work done, material supplied and services rendered during each month
or
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other period bears to the total contract price; provided that at the time
of any such progress payment (a) there are no liens against the property
by reason of such work which have not been bonded or insured over, and (b)
to the extent the aggregate amount of any insurance proceeds shall be less
than the amount necessary to restore the affected property, the Party
entitled to such proceeds has paid such deficiency out of other funds.
(ii) At the completion of the work, the balance of such
proceeds required to complete the payment of such work shall be paid to
the Party entitled to such proceeds, or its contractor or contractors,
provided that at the time of such payment (a) there are no liens against
the property by reason of such work which have not been bonded or insured
over, and with respect to the time of payment of any balance remaining to
be paid at the completion of the work the period within which a lien may
be filed has expired, or proof has been submitted that all costs of work
theretofore incurred have been paid, and (b) the Party's Independent
Architect shall certify in a certificate, the form and content of which is
reasonably satisfactory to the affected Mortgagee, that all required work
is completed and proper and of a quality and class of the original work
required by the FADAA and in accordance with the Plans.
(d) Any insurance proceeds not required to rebuild under
Article XI hereof, shall be paid by the Trustee to the Party entitled to such
excess proceeds, or its Mortgagee, as their interests may appear.
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13. Mortgagee Consent to Release of Proceeds. If all or any material
portion of the Phase I Hotel/Casino, the Phase I Mall or the SECC shall be
damaged or destroyed in whole or in part by fire or other casualty (each, a
"Casualty") the Owner of the property incurring the loss shall notify all
Mortgagee(s) within ten (10) Business Days of the occurrence of such Casualty.
Each affected Mortgagee shall permit insurance proceeds with respect to any
Casualty to be applied to restoration of buildings and/or other improvements on
or in the affected Lot in accordance with the provisions of this Article X;
provided that such affected Mortgagee shall have received on or before ninety
(90) days after the date of the Casualty in question a certificate from an
Independent Expert certifying that (x) such Casualty can be restored within one
(1) year after the date of delivery of such certificate and (y) the amount of
insurance proceeds payable in connection with such Casualty (together with any
other funds committed by the affected Owners to be applied to such restoration)
shall be sufficient to finance the anticipated cost (including scheduled debt
service payments through the anticipated date of completion of the restoration)
of such restoration as set forth in such certificate. If the conditions set
forth in the preceding (x) and (y) cannot be satisfied with respect to a
particular Lot, any affected Mortgagee shall be paid its equitable share as
determined by the Independent Expert of insurance proceeds to be applied in
accordance with the provisions of its Mortgage.
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ARTICLE XI
DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY
1. H/C I Owner, Mall I Owner and SECC Owner agree for the
benefit of each other that, in case of loss or damage with respect to all or any
material portion of the Phase I Mall, the Phase I Hotel/Casino or the SECC or
any part thereof by Casualty, the owner of the affected space will promptly give
written notice thereof to the other Parties. In the event of such Casualty:
(a) Phase I Mall. Mall I Owner, whether or not the insurance
proceeds made available in connection therewith shall be sufficient for such
purpose, shall, in accordance with the further provisions of this Article XI,
repair the Phase I Mall with due diligence at its sole cost and expense as
nearly as reasonably possible to its condition and aesthetic appeal immediately
prior to such Casualty. Notwithstanding the foregoing, Mall I Owner may elect to
make changes in the Phase I Mall in connection with such repair. All repairs
undertaken by Mall I Owner pursuant to this subsection (a) (including any
changes Mall I Owner makes in connection with any such repairs) shall be
performed in accordance with Sections 7 through 10 of Article V, as well as the
further provisions of this Article XI. In the event of a Casualty affecting both
the Phase I Mall and the Phase I Hotel/Casino, Mall I Owner's obligations
hereunder shall be subject to completion by H/C I Owner of restoration of those
portions of the Building Core and Shell necessary to be restored in order for
Mall I Owner to fulfill its restoration obligations under this subsection (a).
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(b) Phase I Hotel/Casino. H/C I Owner, whether or not the
insurance proceeds made available in connection therewith shall be sufficient
for such purpose shall, in accordance with the further provisions of this
Article XI, repair the Phase I Hotel/Casino with due diligence at its sole cost
and expense as nearly as reasonably possible to its condition and aesthetic
appeal immediately prior to such Casualty. All repairs undertaken by H/C I Owner
pursuant to this subsection (b) (including any changes H/C I Owner makes in
connection with any such repairs) shall be performed in accordance with Sections
7 through 10 of Article V and the further provisions of this Article XI.
(c) Casualty Affecting Both the Phase I Hotel/Casino and the
Phase I Mall. If a Casualty shall damage all or any part of both the Phase I
Hotel/ Casino and the Phase I Mall, H/C I Owner and Mall I Owner shall consult
with each other and one or more Independent Experts and reasonably agree as to
(i) the cost, and property and business interruption insurance, allocation
between themselves and method of payment for the proposed restoration, (ii) the
time required to effect such restoration, and (iii) the Party who shall perform
such restoration. Notwithstanding the foregoing, with respect to any casualty
involving a loss of greater than $1,500,000 (or multiple losses in any
consecutive twelve (12) month period in excess of $6,000,000), such agreement
shall be made with the approval of the affected Mortgagee(s) which approval
shall not be unreasonably withheld, conditioned or delayed; and if all affected
parties and Mortgagee(s) do not agree within sixty (60) days after receipt of
insurance proceeds, as determined by an Independent Expert. If the Parties shall
be unable to reach agreement within thirty (30) days of the date of
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such Casualty, either Party may enforce its rights by arbitration pursuant to
Article XV. All repairs undertaken by either Party pursuant to this subsection
(c) (including any changes such Party makes in connection with any such repairs)
shall be performed in accordance with Sections 7 through 10 of Article V and the
further provisions of this Article XI. All business interruption insurance,
allocated as aforesaid as among the Owners, shall be paid over to the affected
Mortgagee(s) to be applied in accordance with the provisions of their Mortgages.
(d) H/C I Owner and Mall I Owner shall cooperate in good faith
to coordinate the work performed by or for each pursuant to the foregoing
subsections (a), (b) and (c).
(e) SECC. With respect to the SECC, SECC Owner shall comply
with the provisions of Subsection 5.1(X) of the Senior Loan Agreement and the
Parties hereby agree that such provisions shall govern.
2. Cost of Restoration; Uninsured Losses.
(a) The cost of restoration of any Casualty affecting the
Phase I Hotel/Casino or the Phase I Mall shall be paid first out of available
insurance proceeds with respect to such property. To the extent the amount of
such insurance proceeds shall be less than the amount necessary to restore the
affected Lot(s) (the "Insurance Proceeds Shortfall"), the Parties shall
reasonably agree on the amount of each Party's contribution (each, an "Insurance
Shortfall Contribution") towards the Insurance Proceeds Shortfall. If the
Parties shall be unable to reach agreement within thirty (30) days of the date
of such Casualty, any Party may enforce its rights to arbitration pursuant to
Article XV. Each Party's Insurance Shortfall Contribution
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shall be payable on demand to the Trustee and shall become a lien on the
applicable Owner's Lot, subject to the provisions of Section 9 of Article XIV.
(b) If a Casualty which is not covered by an insurance policy
required to be maintained in accordance with the provisions of Article X (each,
an "Uninsured Loss") shall occur, the affected Parties shall reasonably agree on
the amount of each such Party's contribution (each, an "Uninsured Loss
Contribution") towards the cost to restore the property affected by such
Uninsured Loss, subject to the following Mortgagee consent rights:
(i) With respect to an aggregate Uninsured Loss which is
less than $1,500,000.00, no Mortgagee's consent shall be required;
(ii) With respect to an aggregate Uninsured Loss which is
equal to or greater than $1,500,000.00 but less than $6,000,000.00, the
consent of the affected Mortgagees shall be required; provided, however,
that until such time as all obligations under the Mortgage Notes and the
Mortgage Notes Indenture have been paid in full, the consent of the
Mortgage Notes Indenture Trustee shall be deemed granted if (a)
immediately prior to the date of the Uninsured Loss, the Mortgage Notes
are rated by Standard & Poor's with a rating of at least CCC+ (or by an
equivalent rating from another prominent credit rating agency) and (b)
during the 45 days subsequent to the Uninsured Loss, the rating has not
been reduced. The condition set forth in clause (b) may be satisfied prior
to the end of said forty-five (45) day period through delivery of a
certificate from the applicable rating agency providing,
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in substance, that the rating applicable to the Mortgage Notes will not be
reduced after the Uninsured Loss.
(iii) With respect to an aggregate Uninsured Loss equal to or
greater than $6,000,000.00, the consent of all affected Mortgagees (other
than any Mortgagee that is an Affiliate of any Owner) shall be required.
Notwithstanding anything to the contrary contained herein, after the
occurrence of any Casualty or upon notice from a Taking Authority of a
contemplated Taking, if an event of default shall occur and be continuing under
any affected Mortgagee's loan documents, then such Mortgagee shall be entitled
to make all decisions and take all actions that the Owner that is a party to
such loan document would be entitled to make under this Article XI or under
Article XII (and such Owner shall not have the right to make any such decisions
or take such actions).
ARTICLE XII
CONDEMNATION
1. Taking of Mall I Space. If less than substantially all of the
Mall I Space and/or the Phase I Mall Is permanently taken by any public or
quasi-public authority, or private entity or individual (each, a "Taking
Authority") having the power of condemnation, under any statute or by right of
eminent domain or purchased under threat or in lieu of such taking
(collectively, a "Taking"), then Mall I Owner shall promptly restore the Phase I
Mall as nearly as reasonably possible to its condition and aesthetic appeal at
the time of the partial Taking less the portion lost in such Taking.
Notwithstanding the foregoing, Mall I Owner may elect to make
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changes in connection with such restoration, subject to the further provisions
of this Section 1. All restorations undertaken by Mall I Owner pursuant to the
foregoing shall be subject to the provisions of Sections 7 through 10 of Article
V. In the event of a Taking affecting both the Phase I Mall and the Phase I
Hotel/Casino, Mall I Owner's obligations hereunder shall be subject to
completion by H/C I Owner of restoration of those portions of the Building Core
and Shell necessary to be restored in order for Mall I Owner to fulfill its
restoration obligations under this subsection (a).
2. Taking of H/C I Space. If there is a Taking of less than
substantially all of the H/C I Space and/or the Phase I Hotel/Casino H/C I Owner
shall promptly restore the Phase I Hotel/Casino as nearly as reasonably possible
to its condition and aesthetic appeal at the time of the partial Taking less the
portion lost in such Taking. Notwithstanding the foregoing, H/C I Owner may
elect to make changes in connection with such restoration, subject to the
further provisions of this Section 2. All restorations undertaken by H/C I Owner
pursuant to the foregoing shall be subject to Sections 7 through 10 of Article
V.
3. Taking of H/C I Space and Mall I Space. If there is a Taking of
less than substantially all of (i) the H/C I Space and/or the Phase I
Hotel/Casino and (ii) the Mall I Space and/or the Phase I Mall, H/C I Owner and
Mall I Owner shall consult with each other and one or more Independent
Architects and reasonably agree as to (x) the cost allocation between themselves
and method of payment for the proposed restoration, (y) the time required to
effect such restoration, and (z) the Party who shall perform such restoration.
If the Parties shall be unable to reach agreement
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within thirty (30) days of the date either Party first receives notice from any
public or quasi-public authority, or private entity or individual having the
power of condemnation with respect to such Taking, either Party may cause an
equitable determination as to items (x), (y) and/or (z) by arbitration pursuant
to Article XV. All restorations undertaken by either Party pursuant to the
foregoing shall be subject to the provisions of Sections 7 through 10 of Article
V.
4. Taking of SECC. If there is a Taking of less than substantially
all of the SECC, SECC Owner shall comply with the provisions of Subsection
5.1(Y) of each of the Senior Loan Agreement and the Junior Loan Agreement, and
the Parties hereby agree that such provisions shall govern.
5. Division of Proceeds. Each Party shall promptly notify the other
Owners and each Owner's respective Mortgagee when it becomes aware of any
potential or threatened Taking of all or any part of any Lot and shall promptly
deliver to the others copies of all notices received in connection therewith.
H/C I Owner, Mall I Owner and SECC Owner shall each have the right to represent
its respective interest in each proceeding or negotiation with respect to a
Taking or intended Taking and to make full proof of its claims, and each
Mortgagee of such Owner to the extent permitted under such Mortgagee's loan
documents shall have the right to appear in and prosecute in its own or in such
Owner's name any proceeding or negotiation with respect to such Taking or
intended Taking. No agreement, settlement, sale, or transfer to or with the
condemning authority with respect to any Taking or intended Taking the aggregate
proceeds of which shall be in excess of $1,500,000 shall be made without the
consent of H/C I Owner and Mall I Owner and their respective
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Mortgagees, which consent shall not be unreasonably withheld, conditioned or
delayed; provided a Commercially Reasonable Owner of the Phase I Hotel/Casino or
the Phase I Mall, as applicable, would so consent and same would not have a
Material Adverse Effect on such property, Owner or Mortgagee. Notwithstanding
anything to the contrary in this Section 5, the proceeds of any aggregate
condemnation award (other than with respect to the SECC or the SECC Land) in
excess of $1,500,000 shall be paid to the Trustee to be held and disbursed in
accordance with the provisions of Section 12 of Article X. With respect to a
Taking of all or any part of either the Mall I Space and/or the Phase I Mall or
the H/C I Space and/or the Phase I Hotel/ Casino, if the condemning authority
does not, as part of the Taking proceeding, determine the amount of condemnation
proceeds payable to H/C I Owner, and the amount of condemnation proceeds payable
to Mall I Owner, but rather makes a determination only as to the aggregate
amount of proceeds payable to H/C I Owner and Mall I Owner in connection with
the Taking, each of H/C I Owner and Mall I Owner shall receive its appropriate
equitable share of such proceeds, as reasonably agreed to by H/C I Owner and
Mall I Owner. H/C I Owner and Mall I Owner shall, in all of their discussions
and negotiations with the condemning authority, argue for the awarding of
separate Taking proceeds payable to each in accordance with the foregoing.
6. Temporary Use or Occupancy. If the temporary use or occupancy of
all or any part of the Venetian or the SECC shall be condemned or taken for any
public or quasi-public use or purpose during the Term, this Agreement and the
Term shall be and remain unaffected by such condemnation or taking and
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each Party shall continue to be responsible for all of its obligations hereunder
(except to the extent prevented from so doing by reason of such condemnation or
taking). In such event, however, the affected Party shall be entitled to appear,
claim, prove and receive the entire award in connection with such temporary
taking. If such temporary use or occupancy terminates prior to the Expiration
Date, the affected Party, at its own expense, shall restore its premises as
nearly as possible to its condition prior to the condemnation or taking.
7. Disputes Between H/C I Owner and Mall I Owner. With respect to a
Taking of all or any part of the H/C I Space and/or any improvements located
thereon or therein or the Mall I Space and/or any improvements located thereon
or therein, any dispute between H/C I Owner and Mall I Owner as to the
appropriate sharing of any taking proceeds to be received by each in accordance
with the fourth sentence of Section 5 of this Article XI shall be resolved by
determination of the Independent Expert in accordance with Section 15 of Article
XIV, which shall be the exclusive and binding method for the resolution of any
such dispute. H/C I Owner and Mall I Owner each agree to execute and deliver, or
cause to be executed and delivered, to the other any instruments that may be
required to effectuate or facilitate the provisions of this Agreement relating
to the matters set forth in this Section 7.
8. Trustee's Rights to Participate in Proceedings, Jointly Settle or
Compromise. In case of any contemplated Taking with respect to the Phase I
Hotel/ Casino, H/C I Space, Phase I Mall, and/or Mall I Space (or any portion
thereof), H/C I Owner, Mall I Owner and Trustee shall jointly participate in any
relevant
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action or proceeding and jointly settle or compromise any award; provided that,
with respect to any potential award not in excess of $1,500,000 (as set forth in
the notice from the Taking Authority of the contemplated Taking or if the amount
of the contemplated award is not set forth therein, then the applicable
certificate prepared by an Independent Expert), H/C I Owner and/or Mall I Owner,
as the case may be, may agree with the Taking Authority on the amount to be paid
upon a Taking without obtaining the consent of Trustee, Trustee shall pay over
to H/C I Owner and/or Mall I Owner, as the case may be, the applicable proceeds
of the Taking upon receipt therefor by Trustee and H/C I Owner and/or Mall I
Owner, as applicable, shall use such proceeds to perform a restoration in
accordance with the provisions of Article XII; provided further that, if, at the
time of any Taking, or at any time during the relevant action or proceeding with
respect to any Taking, an event of default under any affected Mortgagee's loan
documents shall have occurred and be continuing, then Trustee shall not be
required to pay over the applicable proceeds of the Taking to H/C I Owner and/or
Mall I Owner, as the case may be, Trustee (acting in accordance with the written
directions of such affected Mortgagee(s)) may participate in, settle and/or
compromise any award for a Taking, as it sees fit in its sole discretion,
without the participation or consent of H/C I Owner and/or Mall I Owner, as the
case may be, and the proceeds of the Taking shall be applied in accordance with
the provisions of Article XII hereof. Furthermore, if any claim shall not have
been settled, compromised or adjusted or the applicable condemnation award
proceeds shall not have been paid to Trustee, in any case, within twelve (12)
months after the Taking in question occurred, then Trustee (acting in accordance
with the
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written directions of any affected Mortgagee(s)), may settle and/or compromise
such award, as it sees fit in its sole discretion, without the participation or
consent of H/C I Owner and/or Mall I Owner, as the case may be, and the proceeds
of the Taking shall be applied in accordance with the provisions of Article XII
hereof.
9. Mortgagee Consent to Release of Condemnation Award Proceeds. If
all or any material portion of the Phase I Hotel/Casino or the Phase I Mall
shall be taken pursuant to a Taking, the Owner of the property incurring the
loss shall notify all Mortgagee(s) within ten (10) Business Days after receipt
of notice of such Taking. Each affected Mortgagee shall permit condemnation
award proceeds with respect to any Taking to be applied to restoration of
buildings and/or other improvements on or in the affected Lot in accordance with
the provisions of this Article XII; provided that such affected Mortgagee shall
have received on or before ninety (90) days after the date such Mortgagee's
receipt of the notice described above a certificate from an Independent Expert
certifying that (x) any restoration of the affected property required as a
consequence of such Taking can be completed within one (1) year after the date
of delivery of such certificate and (y) the amount of insurance proceeds payable
in connection with such Taking (together with any other funds committed by the
affected Owner to be applied to such restoration) shall be sufficient to finance
the anticipated cost (including scheduled debt service payments through the
anticipated date of completion of the restoration) of such restoration as set
forth in such certificate. If the conditions set forth in the preceding (x) and
(y) cannot be satisfied with respect to a particular Lot, any affected Mortgagee
shall be paid its
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equitable share as determined by the Independent Expert of condemnation award
proceeds to be applied in accordance with the provisions of its Mortgage.
ARTICLE XIII
COMPLIANCE WITH LAWS
1. Legal Requirements. (a) Each Party, at its expense (but subject
to the provisions of Section 3 of Article V and Sections 3 and 5 of Article
VII), shall comply with all Legal Requirements applicable to its respective Lot.
Any Party may defer compliance with any such Legal Requirements if it shall
contest by appropriate proceedings in accordance with the provisions of
subsection (b) below, prosecuted diligently and in good faith, the legality or
applicability thereof, provided that such deference does not materially
adversely interfere with any other Party's use of its Lot as provided under this
Agreement. Each Party will also procure, pay for and maintain all permits,
licenses and other authorizations needed for the operation of its business.
(b) No Owner shall be in default for failure to comply with
any Legal Requirement if, and so long as, (i) such Owner shall diligently and in
good faith contest the same by appropriate legal proceedings which shall operate
to prevent the enforcement or collection of the same and the sale of its Lot or
any part thereof to satisfy the same; (ii) such Owner shall give its Mortgagee
and the other affected Owners and Mortgagees notice of the commencement of such
contest, (iii) unless funds are otherwise reserved or deposited with the
applicable Governmental Authority, such Owner shall furnish to Trustee a cash
deposit, or an indemnity bond
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reasonably satisfactory to all affected Mortgagees with a surety reasonably
satisfactory to such Mortgagees, in the amount of the cost of complying with the
applicable Legal Requirement, as applicable, plus, in any such case, a
reasonable additional sum to pay all costs, interest, fines and penalties that
may be imposed or incurred in connection therewith, to assure payment of the
matters under contest or to prevent any sale or forfeiture of such Owner's Lot
or any part thereof; (iv) such Owner shall timely upon final determination
thereof pay the amount of any such cost, together with all costs, interest,
fines and penalties which may be payable in connection therewith; (v) the
failure to pay such cost, as applicable, or any such interest, fine or penalty,
does not constitute a default under any other deed or trust, mortgage or
security interest covering or affecting any part of such Owner's Lot; and (vi)
notwithstanding the foregoing, such Owner shall immediately upon request of any
affected Mortgagee pay (and if such Owner shall fail so to do, any such
Mortgagee may, but shall not be required to, pay or cause to be discharged or
bonded against) any such cost, and all such interest, fines and penalties,
notwithstanding such contest, if in the reasonable opinion of any such Mortgagee
such Owner's Lot or any part thereof or interest therein, is in danger of being,
or is reasonably likely to be (regardless of whether the sale, forfeiture,
foreclosure, termination, cancellation or loss is imminent), sold, forfeited,
foreclosed, terminated, cancelled or lost.
2. Gaming Laws. All Parties and all Persons associated with such
Parties shall promptly and in all events within the applicable time limit,
furnish the Nevada Gaming Commission, any other agency or subdivision of the
State of Nevada, or any other agency or subdivision thereof, or of any other
Governmental Authority
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regulating gaming (collectively "Gaming Authorities") any information reasonably
requested thereby and shall otherwise reasonably cooperate with all Gaming
Authorities. A Person shall be deemed associated with a Party if that Person is
an Affiliate thereof, such Person is employed by such Party, is an officer,
director or agent of such Party or any Tenant, has any contractual relationship
with such Party, any Tenant or any Affiliate of such Party or any Tenant,
furnishes services or property to such Party, any Tenant or any Affiliate of
such Party or any Tenant, or has the power to exercise a significant influence
over such Party or an Affiliate of such Party. Without limiting the generality
of the foregoing, any Mortgagee and all Tenants shall be deemed associated with
such Party, and for purposes of this Article XIII the term Party shall be deemed
to mean a Party and any Affiliate thereof.
ARTICLE XIV
MISCELLANEOUS
1. Rights and Obligations Run With the Land. Except to the extent
otherwise provided herein, the easements, rights, interests, obligations,
duties, conditions, covenants and agreements granted hereby or otherwise
contained herein (collectively, the "Rights and Obligations") shall be
appurtenant to and run with the H/C I Space, the Mall I Space, the H/C II Space,
the Mall II Space and the SECC Land, shall bind H/C I Owner, Mall I Owner, H/C I
Owner, Mall II Owner and SECC Owner and their respective successors in interest
to the fee or leasehold title to the applicable Lot and the improvements thereon
and shall inure only to the benefit of H/C I Owner, Mall I Owner, H/C II Owner,
Mall II Owner and SECC Owner and
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their respective Mortgagees. Supplementing the foregoing, H/C I Owner is
executing and delivering this Agreement on behalf of itself, H/C II Owner and
Mall II Owner, which entities are or will be Affiliates of H/C I Owner and which
Affiliates shall be fully bound by the terms, conditions and covenants of this
Agreement as though signatories hereto immediately upon acquiring fee or
leasehold title to any portion of the Phase I Land or any improvements thereon
or the Phase II Land or any improvements thereon. Notwithstanding anything to
the contrary contained herein, no other Parties shall be construed as the
beneficiaries of the Rights and Obligations, none of which may be separated from
or conveyed, granted or encumbered separately from the Phase I Land, the Phase
II Land or the SECC Land, respectively. This Agreement, and the protective
covenants, conditions, restrictions, grants of easements, rights, rights-of-way,
liens, charges and equitable servitudes set forth herein, shall, except as
otherwise expressly provided herein, (a) be perpetual, (b) be binding upon all
successors and assigns, (c) inure to the benefit of all Persons having or
acquiring any right, title or interest therein or in any part thereof, their
heirs, successors and assigns, and (d) constitute covenants running with the
land pursuant to applicable law. The Owners agree that upon the first transfer
of fee title to any of the Lots, the deed evidencing such transfer shall be
expressly subject to the provisions of this Agreement which shall be
incorporated therein by reference.
2. No Merger. There shall be no merger of the easements, rights,
interests or estates burdening any property pursuant to this Agreement with the
fee estate of such property by reason of the fact that the same person may
acquire or hold, directly or indirectly, any such easements, rights, interests
or estates and such
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fee estate, and no merger shall occur unless and until all persons having an
interest in any such easements, rights, interests or estates and such fee estate
shall join in a written instrument effecting such merger.
3. Transfers.
(a) If any of H/C I Owner, H/C II Owner, Mall I Owner, Mall II
Owner or SECC Owner shall transfer to any individual, partnership, firm,
association, limited liability company, trust or corporation, or any other form
of business or government entity (in any case, a "Person" and, after such
transfer, an "Interest Holder") any of the following partial interests, such
Interest Holder shall be treated, together with all similar Interest Holders, as
a single Party for purposes of this Agreement:
(i) Any partial, subdivided interest (other than ownership
of a commercial condominium unit and related undivided interest in common
elements or a commercial subdivision) in the Phase I Land or the
improvements thereon (in the case of H/C I Owner, H/C II Owner, Mall I
Owner or Mall II Owner) or the SECC Land (in the case of SECC Owner) (a
"Subdivided Interest Holder"), provided that this clause (i) shall not
apply to any transfer of the Phase I Land and/or any improvements thereon
to H/C II Owner, Mall I Owner or Mall II Owner contemplated by this
Agreement;
(ii) Any partial, undivided interest in all of the land or
improvements owned by it, such as may be held by joint tenancy or
tenancy-in-common or as a life estate or partnership interests in a
partnership (or a
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membership interests in a limited liability company) holding all of the
interests in such property; or
(iii) Any partial, undivided interest, legal or equitable,
in the assets of any Party that is a Person other than an individual,
which interest is not an interest in land or improvements, such as a
beneficial interest in a Party which is a trust, or partnership interests
in a partnership (or membership interests in a limited liability company).
Notwithstanding the foregoing, Subdivided Interest Holders may be treated
as Separate Interest Holders provided that at no time shall there be more
than ten (10) such separate Subdivided Interest Holders with respect to
either the Phase I Land or the SECC Land, as applicable.
(b) A Mortgagee shall not be deemed to be an Interest Holder
unless such Mortgagee is also a Transferee.
(c) (i) All of the Interest Holders with respect to each of
the Phase I Land, the Phase II Land, the Phase I Mall, the Phase II Mall
and the SECC Land shall designate one of their number as their agent (an
"Agent") to act on their behalf so that other Parties shall not be
required with respect to the applicable land or improvements, as the case
may be, to obtain the action or agreement of, or to proceed against, more
than one individual or entity in carrying out or enforcing the terms,
covenants, provisions and conditions of this Agreement. The foregoing
requirements to designate an Agent shall not apply to stockholders and
bondholders of a corporate Party, the members of a limited liability
company or partners of a partnership.
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(ii) Where the transfer is of partial interests as
described above but the Persons owning such partial interests fail to
designate an Agent, the acts of the Person who was deemed to be the Party
to this Agreement prior to the transfer (whether or not such Party retains
any interest in the property in question) shall be binding on all Persons
having an interest or right in the applicable land or improvements until
such time as written notice of such designation is given and recorded in
the Recorder's Office and a copy thereof is served on the Parties hereto
as required by Section 14 of this Article XIV.
(iii) The exercise of any powers and rights of a Party by
such Party's Agent shall be binding upon all Persons having an ownership
or leasehold interest or right in the applicable land or improvements and
upon all Persons having an ownership interest in the Party in question, to
the same extent as if such exercise had been performed by such Party. The
other Parties shall have the right to deal with and rely solely upon the
acts and omissions of such Party's Agent in connection with their
performance of this Agreement, but such designation of an Agent shall not
relieve any Party from its obligations under this Agreement.
(iv) An Agent shall be the authorized agent of its
principals for service of any process, writ, summons, order or other
mandate of any nature of any court in any action, suit or proceeding
arising out of this Agreement. Service upon an Agent shall constitute due
and proper service of any such matter upon its principals. Until a
successor Agent has been appointed and notice of such appointment has been
given pursuant to the
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provisions of this Section 3, the designation of a Party's Agent shall
remain irrevocable.
4. Mortgages.
(a) Each Party shall have the right to collaterally assign and
encumber this Agreement as security to one or more of its Mortgagees holding a
Mortgage so long as such Mortgagee, in writing (i) subordinates such Mortgage
and the lien thereof to this Agreement and to the rights, interests,
obligations, duties, conditions, covenants and agreements granted pursuant to
this Agreement or otherwise contained herein (whether such Mortgage is recorded
on or after the date hereof) and (ii) agrees to be bound by the terms and
conditions of this Agreement upon its taking title to such property (subject to
the provisions of Section 5 below). Notwithstanding the foregoing, regardless of
whether any Mortgagee shall receive a collateral assignment of this Agreement,
each Mortgage (whether recorded on or after the date hereof) and the lien
thereof shall automatically be subject and subordinate to this Agreement and to
the rights, interests, obligations, duties, conditions, covenants and agreements
granted pursuant to this Agreement or otherwise contained herein.
(b) Further, notwithstanding anything to the contrary in this
Agreement, each of the Existing SECC Mortgages shall not be, and shall not be
deemed to be, subject and subordinate to the following Sections (collectively,
the "Enumerated Provisions") of this Agreement: Sections D.1 and D.2 of Article
II, Sections 1 through and including 3 of Article III; Article V (other than
Section 3); and Articles X, XI, XII and XIII and shall be subject and
subordinate to all other provisions of this Agreement. By way of explanation and
not limitation, if an
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Existing SECC Mortgage were to be foreclosed, the purchaser of the SECC at the
foreclosure sale (whether or not the holder of the Existing SECC Mortgage is
such purchaser) would not be bound by the Enumerated Provisions.
(c) Each Party agrees for the benefit of the other Parties and
their respective Mortgagees, that wherever a Party has a right to grant or
withhold its consent or approval under this Agreement, or otherwise has
discretion to act or refrain from acting, such Party shall only grant its
consent or approval or act or refrain from acting, as the case may be, in such a
manner as a Commercially Reasonable Owner would do and so long as the same is
not likely to have a Material Adverse Effect.
(d) In any instance (other than Section 2(b) of Article XI)
where a Mortgagee's consent is required under this Agreement and such Mortgagee
shall be a trustee for publicly held debt under an indenture, such trustee shall
be deemed to have given its consent upon delivery to such trustee of a written
statement from an Independent Expert certifying that the matter proposed for
consent would be consented to by a Commercially Reasonable Owner of the Lot(s)
encumbered in favor of said Mortgagee and the same is not likely to have a
Material Adverse Effect; provided, however, that the foregoing consent procedure
shall not be construed as a means for satisfying any consents or approvals
required to be obtained with respect to matters under the terms of the
indenture, security documents and other loan documents pertaining to any such
Mortgagee, it being understood that said consent or approval requirements must
be satisfied in accordance with their terms.
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5. Transferee Liability.
(a) Subject to the further provisions of this Section 5, any
assignee or transferee (in either case, a "Transferee") of all or any portion of
the Phase I Land and/or any buildings or other improvements thereon or the SECC
Land and/or any buildings or other improvements thereon, including, without
limitation, any transferee by way of a foreclosure sale, shall be deemed to have
assumed the obligations and liabilities hereunder of the Party from whom such
Transferee received its interest in such portion of the Phase I Land or the SECC
Land or such buildings or other improvements (to the extent such obligations or
liabilities relate to such portion, as applicable); provided that, without
limiting the foregoing, within five (5) Business Days of written request
therefor by the non-transferring Party hereto, the Transferee shall execute a
writing, in form and substance reasonably satisfactory to such Transferee and to
such non-transferring Party, confirming such assumption. In the event of such a
transfer or assignment, the transferring Party (the "Transferor") shall be
released from any obligations arising after the effective date of the transfer
or assignment (but not any obligations of the Transferor that are outstanding
under this Agreement as of the effective date of the transfer or assignment, and
the Transferor and the Transferee shall be jointly and severally liable with
respect to such obligations). Each Transferor shall give the other Party hereto
at least five (5) Business Days' prior written notice of the transfer or
assignment in question and shall furnish a fully-executed copy of the instrument
of transfer or assignment, within five (5) Business Days of execution thereof,
to the other Party hereto.
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(b) Notwithstanding the foregoing, in the event of a transfer
to any Mortgagee (or its designee) resulting from (i) judicial or nonjudicial
foreclosure of the Mortgage held by such Mortgagee or (ii) the grant of a deed
in lieu of such foreclosure, then, in either event, (x) the Transferor shall be
released from any obligations arising after the effective date of the transfer;
provided, however, that the Transferor shall not be released from any
obligations which remain outstanding on the date of such transfer and (y) such
Mortgagee (or its designee) shall not be liable for any non-monetary defaults of
the Transferor arising under this Agreement prior to the effective date of the
transfer that are not susceptible to cure by the Transferee after obtaining
possession of the Lot in question.
6. As-Built Survey. Each Party, upon the request of any other Party,
shall enter into one or more separate agreements in recordable form setting
forth in legally sufficient detail the easements, rights-of-way and other rights
and interests provided for in, or granted (or required to be granted) pursuant
to, this Agreement. In addition, upon completion of construction of each of the
Venetian, the Lido, each Automobile Parking Area and the New HVAC Plant, H/C I
Owner or H/C II Owner, as applicable, shall, at its sole cost and expense, have
an as-built survey prepared by a reputable licensed surveyor of the applicable
portion of the Phase I Land, together will all improvements constructed thereon.
7. Estoppel Certificates. Each Party shall at any time and from time
to time during the Term (but not more often than once in each calendar quarter),
within fifteen (15) Business Days after request by any other Party, execute,
acknowledge and deliver to such other Party or to any existing or prospective
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purchaser, Mortgagee or lessee designated by such other Party, a certificate
stating: (a) that this Agreement is unmodified and in full force and effect, or
if there has been a modification or modifications, that this Agreement is in
full force and effect, as modified, and identifying the modification agreement
or agreements; (b) whether or not there is any existing default hereunder by
either Party in the payment of any sum of money owing to the Party executing
such certificate, whether or not there is any existing default by either Party
with respect to which a notice of default has been given or received by the
Party executing such certificate (and, to the best of the knowledge of the Party
executing such certificate, whether any other default exists under this
Agreement), and if there is any such default, specifying the nature and extent
thereof; (c) whether or not there are any outstanding claims, set-offs, defenses
or counterclaims which a Party has asserted against the other Party by notice to
the other Party; and (d) such other matters as may be reasonably requested.
8. Indemnification. Each of the Parties shall at all times indemnify
and hold harmless each of the other Parties, their Mortgagees, the Trustee and
their respective partners, principals, officers, directors, shareholders and
employees, from and against any and all losses, liabilities, expenses, costs,
demands, claims and judgments, including, without limitation, reasonable
attorneys' fees and expenses, incurred or suffered by any such indemnified Party
and arising from or as a result of the death of, or any accident, injury, loss
or damage whatsoever caused to any persons or property as shall occur on the
land or in any buildings or other improvements owned by such indemnifying Party
or in connection with the exercise of any rights or interests granted to, or
easements used by such indemnifying Party
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hereunder, except, in each case, to the extent such claims (i) result from the
gross negligence or willful misconduct of the indemnified Party, (ii) are
covered by any insurance referred to in Article X hereof that is obtained by any
Party or would have been covered, if any other Party had obtained the same, by
any such insurance that any other Party is required thereunder to obtain or
(iii) result from the exercise of any rights or interests granted to, or
easements used by, any other Party hereunder.
9. Rights to Cure Default; Payment of Default and Lien.
(a) In the event that any Party (a "Defaulting Party") shall
fail to fully, faithfully and punctually perform or cause to be performed any
obligation on the part of such Defaulting Party hereunder, then (i) if such
default shall continue for ten (10) days after notice thereof (except in the
event of an emergency where no notice shall be required) from any non-Defaulting
Party affected by such default to the Defaulting Party, such non-Defaulting
Party shall have the right (but not the obligation) to (x) enter upon the
property owned or leased by the Defaulting Party to the extent reasonably
required to perform or cause to be performed the obligations of the Defaulting
Party with respect to which the Defaulting Party is in default, (y) perform or
cause to be performed such obligations and (z) be reimbursed by such Defaulting
Party, upon demand by such non-Defaulting Party, for the cost thereof, together
with interest thereon at the Interest Rate from the date of demand to the date
of reimbursement by the Defaulting Party and (ii) if such failure shall continue
for thirty (30) days after notice from such non-Defaulting Party to the
Defaulting Party, then such non-Defaulting Party shall have all rights and
remedies available at law or in equity (other than any right to terminate this
Agreement); provided, however, that
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if such default is susceptible of cure but cannot reasonably be cured within
such thirty (30) day period and the Defaulting Party shall have commenced to
cure such default within such thirty (30) day period and thereafter diligently
and expeditiously proceeds to cure the same, such thirty (30) day period shall
be extended to the extent necessary so to cure such default (but in no event
beyond one hundred eighty (180) days in total (including the original thirty
(30) day period)); provided further, that any default that can be cured solely
by the payment of money shall be cured within ten (10) days after notice from
such non-Defaulting Party to the Defaulting Party.
(b) If pursuant to Section (a), a Party is compelled or elects
to pay any sum of money or do any acts which require the payment of money by
reason of another Party's failure or inability to perform any of the terms and
provisions in this Agreement to be performed by such other Party, the Defaulting
Party shall promptly upon demand, reimburse the paying Party for such sums, and
all such sums shall bear simple interest at the Interest Rate from the date of
demand for reimbursement until the date of such reimbursement. Any other sums
payable by any Party to any other Party pursuant to the terms and provisions of
this Agreement that shall not be paid when due shall bear simple interest at the
Interest Rate from the due date to the date of payment thereof. All such unpaid
sums shall constitute a valid and enforceable lien on the Defaulting Party's Lot
and each Party hereby consents to the filing by any other Party of any and all
documentation necessary or desirable to perfect and/or secure such lien. No
action shall be brought to foreclose such lien unless (x) thirty (30) days'
notice of claim of lien is given to the Defaulting Party, (y) such notice and
opportunity to cure is given to the holder of any Mortgage
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encumbering the Defaulting Party's Lot as is required under Section 14(c) of
this Article, and (z) no such Person shall cure the default in question within
the applicable cure period. Reasonable attorneys' fees and charges in connection
with collection of the debt secured by such lien or foreclosure thereof shall be
paid by the Party against whom such action is brought and secured by such lien.
Such lien shall be superior to any other lien and encumbrance on the affected
Lot created or arising after the date of this Agreement, including, without
limitation, the lien of any Mortgage. The liens provided for in this Section 9
shall only be effective when filed for record by the non-Defaulting Party as a
claim of lien against the defaulting Party in the Recorder's Office, signed and
acknowledged, which claim of lien shall contain at least:
(i) An itemized statement of all amounts due and payable
pursuant hereto;
(ii) A description sufficient for identification of that
portion of the real property of the Defaulting Party which is the subject
of the lien;
(iii) The name of the Owner or reputed Owner of the
property which is the subject of the lien; and
(iv) The name and address of the Party claiming the lien.
The lien shall attach from the date a claim is recorded and may be enforced
under the procedures set forth in Nev. Rev. Stat. ss.ss. 116.3116-116.31168,
except that the term "unit," as used in the foregoing provisions, shall be
deemed to refer to the Defaulting Party's interest in the real property which is
subject to the lien. The Party claiming the lien shall release the claim of lien
once the amounts secured by the lien have been paid in full.
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(c) If, at any time, H/C I Owner or any Person or any of their
successors or assigns shall acquire the interest of H/C I Owner as landlord
under the Billboard Master Lease through a foreclosure pursuant to the
provisions of Section 9(b) of this Agreement or the exercise of any other
remedies under or in connection with this Agreement (each, a "New Owner") so
long as (i) the Billboard Master Lease was, immediately prior to such
foreclosure or exercise of other remedies, then in full force and effect, and
(ii) no default (after giving of notice and expiration of the applicable cure
period) exists under the Billboard Master Lease, the Billboard Master Lease
shall continue in full force and effect as a direct lease between the New Owner
and such tenant thereunder, upon and subject to all of the terms, covenants and
conditions of the Billboard Master Lease for the balance of the term thereof.
(d) If, at any time, H/C I Owner or any Person or any of their
successors or assigns shall acquire the interest of H/C I Owner as landlord
under the Mall I Airspace/Ground Lease through a foreclosure pursuant to the
provisions of Section 9(b) of this Agreement or the exercise of any other
remedies under or in connection with this Agreement (each, a "New H/C I Owner")
so long as (i) the Mall I Airspace/Ground Lease was, immediately prior to
foreclosure or exercise of other remedies, then in full force and effect, and
(ii) no default (after giving of notice and expiration of the applicable cure
period) exists under the Mall I Airspace/Ground Lease, the Mall I
Airspace/Ground Lease shall continue in full force and effect as a direct lease
between the New H/C I Owner and such tenant thereunder, upon and
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subject to all of the terms, covenants and conditions of the Mall I
Airspace/Ground Lease for the balance of the term thereof.
10. Rights Perpetual. Except as otherwise expressly provided in this
Agreement, (i) the utility, parking, Existing HVAC Plant and encroachment
easements and related rights and interests granted herein shall be perpetual and
shall remain binding forever and (ii) the remainder of this Agreement shall
continue, and the remainder of the obligations hereunder shall remain binding,
from the Commencement Date until the Expiration Date. No Party shall have the
right to terminate this Agreement as a result of any default or alleged default
of any other Party, but such limitation shall not affect, in any manner, any
other rights or remedies which any Party may have hereunder, at law or in equity
by reason of any breach of this Agreement.
11. Further Assurances. Each Party upon the request of any other
Party and at the expense of such other Party at any time from time to time,
agrees to promptly execute, acknowledge where appropriate and deliver such
additional instruments and documents, in recordable form if appropriate, and to
take such other action, in each case, as may be reasonably requested by such
other Party in order to effectuate the agreements contained herein. The Parties
further agree to make such changes to this Agreement as shall be reasonably
required to make this Agreement consistent with all applicable Legal
Requirements.
12. Rights Irrevocable. The Parties hereby agree that, except as
otherwise expressly provided herein, (a) no fee or other charge is payable by
any person in connection with the use of any easement, right or interest granted
hereunder
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or pursuant to the terms hereof and (b) all easements, rights and interests
granted hereunder or pursuant to the terms hereof shall be irrevocable.
13. No Joint Venture. Nothing herein contained shall be deemed or
construed by the Parties hereto, or by any third Party, as creating the
relationship of principal and agent, or of partners or joint venturers, between
the Parties hereto.
14. Notices.
(a) All notices, demands, requests and other communications
given hereunder shall be in writing and shall be deemed to have been given: (i)
upon delivery if personally delivered; (ii) when delivered, postage prepaid, by
certified or registered mail, return receipt requested as evidenced by the
return receipt; or (iii) upon delivery if deposited with a nationally recognized
overnight delivery service marked for delivery on the next business day, in any
case, addressed to the Party for whom it is intended at its address hereinafter
set forth:
If to SECC Owner:
Interface Group-Nevada, Inc.
3355 Las Vegas Boulevard South
Room 1B
Las Vegas, Nevada 89109
Attn: General Counsel
If to H/C I Owner:
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attn: General Counsel
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If to Mall I Owner:
Grand Canal Shops
Mall Construction, LLC
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attn: General Counsel
If to the Trustee:
The Bank of Nova Scotia
580 California Street
21st Floor
San Francisco, CA 94104
Attn: Corporate Banking Agency
San Francisco Station
Any Party may change its address for the purposes of this
section by giving notice of such change as aforesaid.
(b) The holders of the Existing Mortgages (as defined below)
and each other Mortgagee shall be entitled to receive notice of any default by
the Party hereto whose property is encumbered by the applicable Mortgage,
provided that each Mortgagee other than holders of the Existing Mortgages (who
shall not be required to deliver a Form Notice) shall have delivered a copy of a
notice in the form herein provided to each Party hereto (the "Form Notice"). The
form of such Form Notice shall be as follows:
The undersigned, whose address is
--------------------------------------------
does hereby certify that it is the beneficiary under a Deed Of Trust
upon the land described on Exhibit A attached hereto and/or the
buildings or other improvements thereon. In the event that any
notice shall be given of the default, under that certain Amended and
Restated Reciprocal Easement, Use and Operating Agreement dated as
of November 14, 1997 between Venetian Casino
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170
Resort, LLC and Interface Group - Nevada, Inc. (the "REA"), on the
part of the Party upon whose property is encumbered by such Deed of
Trust, a copy thereof shall be delivered to the undersigned who
shall have the right to cure such default as set forth in the REA.
Any such notice to a Mortgagee shall be given in the same manner as provided in
Section 14(a) of this Article XIV above. As used herein the term "Existing
Mortgages" shall mean the collective reference to (i) that certain Senior Deed
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated as of June 26, 1997 from SECC Owner to Lawyers Title of Nevada, Inc. for
the benefit of LaSalle National Bank, as Collateral Agent for certain lenders,
recorded on July 3, 1997 in Book 970703 as Document Number 01057 in the
Recorder's Office, as the same may be further amended, supplemented, or
otherwise modified or assigned from time to time, (ii) that certain Junior Deed
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated as of June 26, 1997 from SECC Owner to Lawyers Title of Nevada, Inc. for
the benefit of LaSalle National Bank, as Collateral Agent for certain lenders
recorded on July 3, 1997 in Book 970703 as Document Number 01061 in the
Recorder's Office, as the same may be further amended, supplemented, or
otherwise modified or assigned from time to time ((i) and (ii) are,
collectively, the "Existing SECC Mortgages"), (iii) Deed of Trust Assignment of
Rents and Leases, Security and Fixture Filing, dated as of the date hereof from
Phase I, LLC and LVSI to Lawyers Title of Nevada, Inc., as trustee, for the
benefit of The Bank of Nova Scotia, as agent, as the same may be further
amended, supplemented, or otherwise modified or assigned from time to time (iv)
Leasehold Deed of Trust, Assignment of Rents and Leases and Security
<PAGE>
171
Agreement, dated as of the date hereof from Interim Mall, LLC to Lawyers Title
of Nevada, Inc., as trustee, for the benefit of The Bank of Nova Scotia, as
agent, as the same may be further amended, supplemented, or otherwise modified
or assigned from time to time and shall include any fee deed of trust executed
after the Subdivision in lieu thereof ((iii) and (iv) are, collectively, the
"Existing Phase I Mortgages-Banks"). For purposes of all notices, demands,
requests and other communications hereunder, the address of the holder of each
Existing Mortgage is as follows:
with respect to the Existing SECC Mortgages:
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Asset-Backed Securities Trust Group
with respect to the Existing Phase I Mortgages-Banks:
The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attention: Mr. Alan Pendergast
with a copy to:
The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Ms. Marianne Velkar
(c) In the event that any notice shall be given of the default
hereunder of a Party hereto and such Defaulting Party shall fail to cure or
commence to cure such default (and such default shall continue after the giving
of the applicable notice and the expiration of the applicable cure period set
forth in this Agreement), then and in that event the holder of any Mortgage
affecting the property of the
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172
Defaulting Party shall be entitled to receive an additional notice given in the
manner provided herein, that the Defaulting Party has failed so to cure such
default, and such Mortgagee shall have thirty (30) days after the receipt of
said additional notice to cure any such default, or, if such default cannot be
cured within thirty (30) days, to diligently commence curing within such time
and diligently and expeditiously cure within a reasonable time thereafter
(including, without limitation, such time as shall be necessary to obtain
possession of the property where possession shall be necessary to effect a
cure).
15. Disputes/Independent Expert. Notwithstanding anything to the
contrary contained in this Agreement, in the event there is a dispute that this
Agreement provides will be resolved by an Independent Expert among any of the
Parties (the "Disputing Parties") arising out of or relating to this Agreement
and the Disputing Parties cannot, with respect to any such dispute, resolve such
dispute within sixty (60) days, then the matter(s) in question shall be resolved
in accordance with the further provisions of this Section. In the event of any
such disagreement, the Disputing Parties shall promptly notify the Independent
Expert (as defined below) of such disagreement and of their desire that such
disagreement be resolved by the Independent Expert. The Independent Expert shall
be instructed to render its decision within thirty (30) days (or any shorter
time reasonably agreed to by the Disputing Parties) after such notification.
Each of the Disputing Parties shall be entitled to present evidence and
arguments to the Independent Expert, which evidence and arguments may include
the relevant provisions hereof. During the pendency of such dispute-resolution
procedure, the Disputing Parties shall continue their performance
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173
under this Agreement, including with respect to the matter that is the subject
of such procedure. The determination of the Independent Expert acting as above
provided (i) shall be conclusive and binding upon the Parties and (ii) shall in
no event modify, amend or supplement this Agreement in any manner. The
Independent Expert shall be required to give written notice to the Disputing
Parties stating its determination, and shall furnish to each Party a signed copy
of such determination. Each of the Disputing Parties shall pay its proportionate
share of the fees and expenses of the Independent Expert and all other expenses
of the above-described dispute resolution procedure (not including the
attorneys' fees, witness fees and similar expenses of the Disputing Parties,
which shall be borne separately by each of the Parties). As used herein, the
"Independent Expert" shall mean (a) with respect to any dispute pertaining to
architectural or engineering matters, an appropriately licensed and/or
registered (as applicable), reputable and independent architect or engineer; (b)
with respect to any dispute pertaining to hotel, casino, restaurant or retail
complex operation or management, a reputable and independent Person with
experience in commercial real estate operation and management; and (c) with
respect to any other dispute, a licensed, reputable and independent certified
public accountant, in each of (a), (b) or (c) reasonably acceptable to the
Disputing Parties. In all events, the Independent Expert shall (i) not be
affiliated with any Owner (or any Affiliate of any Owner) or any Mortgagee (or
any Affiliate of any Mortgagee) and (ii) have at least ten (10) years of
relevant experience and expertise with respect to large commercial real estate
projects in Las Vegas, Nevada and/or Clark County, Nevada. The holder of a
<PAGE>
174
Mortgage may participate in any dispute involving an Independent Expert in
conjunction with the Party upon whose Lot it has a Mortgage.
16. Savings. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
17. No Shared Ownership. The Parties hereto acknowledge and agree
that this Agreement is intended solely to regulate the rights and obligations of
the Parties hereto and to impose the easements and restrictions upon the
property specifically set forth herein, and except as set forth herein, each
Party retains full ownership and control over its own property.
18. Headings. The section headings are inserted for convenience only
and shall not affect construction of this Agreement.
19. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart will, for all purposes, be deemed an
original instrument, but all such counterparts together will constitute but one
and the same agreement.
20. Right to Injunction. In the event of any violation or threatened
violation by any person of any of the terms, restrictions, covenants and
conditions of this Agreement, any Party hereto shall have the right to enjoin
such violation or threatened violation in a court of competent jurisdiction.
<PAGE>
175
21. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.
22. No Waiver. No delay or omission by any Party in exercising any
right or power accruing upon any default, non-compliance or failure of
performance of any of the provisions of this Agreement by any other Party shall
be construed to be a waiver thereof. A waiver by any Party of any of the
obligations of any Party shall not be construed to be a waiver of any subsequent
breach of any other term, covenant or agreement set forth in this Agreement.
23. Pronouns. All personal pronouns used in this Agreement, whether
in the masculine, feminine or neuter gender, shall be deemed to include, and to
refer also to, all other genders; all references in the singular shall be deemed
to include, and to refer also to, the plural, and vice versa.
24. Construction. The word "in" with respect to an easement granted
"in" a particular parcel of land or a portion thereof shall mean, as the context
may require, "in," "to," "on," "over," "through," "over," "upon," "across," and
"under," or any one or more of the foregoing.
25. Governing Law. This Agreement shall be governed and interpreted
in accordance with the laws of the State of Nevada.
26. Entire Agreement. This Agreement contains the entire agreement
of the Parties and this Agreement may only be amended, supplemented, changed,
terminated or modified by an agreement in writing signed by the Parties
<PAGE>
176
hereto, consented to by the Mortgagees affected thereby and recorded in the
appropriate public records.
27. Recordation. This Agreement shall be recorded in the Land
Records of Clark County, Nevada, with the costs of such recording to be shared
equally by the Parties hereto.
28. Successors and Assigns. This Agreement shall be binding on the
Parties hereto and inure to the benefit of their respective heirs, legal
representatives, successors and assigns.
29. Binding and Enforceable Agreements; Independent Obligations.
(a) This Agreement is and is intended to be a fully binding
and enforceable contract between the Parties notwithstanding that the Parties
are currently indirectly owned by the same principal. Each Party expressly
acknowledges that certain third parties, including the separate creditors of
each Party, are relying upon (i) the binding and enforceable nature hereof by
each Party against the others and (ii) the separate assets and liabilities of
each Party. Each Party therefore agrees not to challenge or seek to set aside
this Agreement or the transactions contemplated hereby (whether in any
bankruptcy or insolvency proceeding or otherwise) based upon any assertion that
such transactions do not contain arm's-length terms or upon any direct or
indirect common ownership of the Parties.
(b) All obligations of any Party under this Agreement
constitute independent obligations of such Party and (except where expressly
stated to be conditions) are not conditioned in any way on performance by any
other Party. Accordingly, the breach by any Party under this Agreement shall not
excuse
<PAGE>
177
performance by any other Party, except where this Agreement expressly states
that one Party's performance is conditioned upon performance by another Party.
Nothing in the preceding two sentences shall limit any right of any Party to
recover damages or to obtain equitable relief on account of any other Party's
breach of this Agreement. All Parties acknowledge that every Party will be
making a substantial monetary investment in reliance on the terms of this
Agreement and the independent obligations undertaken by each Party pursuant to
this Agreement. Without this Agreement, the Parties would not be able to achieve
a coordinated development of the real property burdened by this Agreement, which
coordinated development is intended and expected to produce substantial benefits
for all Parties. All Parties acknowledge that it would be inequitable for any
Party to be excused from any obligations under this Agreement while retaining
its interest in the property encumbered (and benefited) by this Agreement.
30. Funds Held by Trustee. Whenever Trustee is holding funds
pursuant to this Agreement, such funds shall be held in a segregated interest
bearing account for the benefit of the Mortgagees.
31. Shared Costs. Wherever it is contemplated in this Agreement that
Owners will share costs, the Owner who contracts for or incurs such costs on
behalf of all such Owners shall do so only pursuant to competitive, arms-length
agreements at market rates with unaffiliated third parties (or with an Affiliate
if consented to by the other Parties hereto); provided that the foregoing shall
not apply to an Owner who incurs expense to cure the default of another Owner.
<PAGE>
178
32. No Duplication of Charges. Notwithstanding the fact that a fee,
expense or other charge may be referenced more than once in this Agreement, no
Party shall be required to pay such fee, expense or other charge more than once.
33. Section References. Wherever the word "Section" appears with no
reference to a corresponding "Article", the referenced Section shall be
construed to be within the Article wherein such reference is made.
ARTICLE XV
ARBITRATION
1. Disputes Covered. Any dispute including those arising from lack
of approval, controversies or disagreements between the Parties or arising from
the interpretation or application of any Article or Section, and any disputes in
this Agreement which by specific provisions are made subject to arbitration
shall be resolved by arbitration, as provided herein; provided, however, that
any Party hereto may seek prohibitory injunctive relief without first submitting
a controversy to arbitration.
2. Arbitration Procedures.
(a) If the Parties (the "Arbitrating Parties") that are
required to agree on an arbitrable dispute cannot reach an agreement within
thirty (30) days after notice of an arbitrable dispute is given by any
Arbitrating Party to the other Party or Parties, then any Arbitrating Party may
at any time after the end of said thirty (30) day period refer the dispute to
arbitration by notifying any other
<PAGE>
179
Arbitrating Party thereof, and the Arbitrating Parties agree to cooperate in
obtaining such arbitration.
(b) Each Arbitrating Party shall within twenty (20) days of
its receipt of such notification designate one person, as hereinafter provided,
to represent it as an arbitrator. The arbitrators so appointed by the
Arbitrating Parties shall together designate one or two additional persons as
arbitrators to the end that the total number of arbitrators shall be an odd
number. The appointment of all additional arbitrators under this Section shall
be in writing and shall be submitted to the Arbitrating Parties within ten (10)
days following the selection of the last arbitrator selected by the Arbitrating
Parties. Any person designated as an arbitrator shall be knowledgeable and
experienced in the matters sought to be arbitrated, and shall in all events (i)
not be affiliated with any Owner (or any Affiliate of any Owner) or any
Mortgagee (or any affiliate of any Mortgagee) and (ii) have at least ten (10)
years of relevant experience and expertise with respect to large commercial real
estate projects in Las Vegas, Nevada and/or Clark County, Nevada. If the dispute
to be arbitrated deals with construction, the arbitrator so appointed shall be
experienced and knowledgeable in the construction industry as it relates to the
nature of the structure to which such arbitration applies. Similarly, any
arbitrator appointed in an architectural dispute shall be qualified as respects
architecture as it relates to the nature of the structure to which such
arbitration applies.
(c) The arbitrators shall meet or otherwise confer as deemed
necessary by the arbitrators to resolve the dispute and a decision of a majority
of the arbitrators will be binding upon the Arbitrating Parties. The decision of
the
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180
arbitrators shall be in writing and shall be made as promptly as possible after
the designation of the last additional arbitrator, but in no event later than
thirty (30) days from the date of the designation of the last additional
arbitrator. A copy of the decision of the arbitrators shall be signed by at
least a majority of the arbitrators and given to each Arbitrating Party and its
Mortgagee in the manner provided in Section 14 of Article XIV of this Agreement
for the giving of notice.
(d) For each arbitrable dispute the cost and expense of the
arbitrators and arbitration proceeding (except for an Arbitrating Party's
attorney's fees) shall be paid and shared by the Arbitrating Parties, unless the
arbitrators assess such cost and expense unequally between the Arbitrating
Parties.
(e) The decision of the arbitrators (i) may be entered as a
judgment in a court of competent jurisdiction and (ii) shall in no event modify,
amend or supplement this Agreement in any manner. All arbitration conducted
under this Article XV shall be in accordance with the rules of the American
Arbitration Association, to the extent such rules do not conflict with the
procedures herein set forth. To the extent permitted by law, compliance with
this Article XV is a condition precedent to the commencement by any Party of a
judicial proceeding arising out of a dispute which is subject to arbitration
hereunder.
(f) The holder of a Mortgage may participate in any
arbitration proceedings in conjunction with the Party upon whose Lot it has a
Mortgage.
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181
ARTICLE XVI
BILLBOARD SPACE
In the event the Billboard Operating Lease shall terminate or
expire, and from time to time thereafter, if the Additional Billboard Premises
shall not be physically separated from the remainder of the Billboard Premises,
at the request of Mall I Owner or H/C I Owner, Mall I Owner and H/C I Owner,
together with the Mortgagees of such Owners, shall negotiate, in good faith, in
order to attempt to reach agreement as to whether to physically separate the
Additional Billboard Premises from the remainder of the Billboard Premises, to
erect one or more floors in the Billboard Premises and/or to take any other
actions in connection with the Billboard Premises; provided that the Mortgagees
and such Owners shall not unreasonably withhold their consent to any agreement
between Mall I Owner and H/C I Owner with respect to any of the foregoing. The
cost of any such separation, erection or other action shall be equally divided
between Mall I Owner and H/C I Owner. If such Owners and Mortgagees shall not
agree as to how to proceed with respect to the Billboard Premises, then, the
Billboard Master Lease shall be terminated by the parties thereto and a physical
separation shall be constructed by Mall I Owner and H/C I Owner in the manner
noted above.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have set their hands the day
and year first above written.
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., as managing
member
By: /s/ William P. Weidner
----------------------------------------
Name: William P. Weidner
Title: President
INTERFACE GROUP-NEVADA, INC.
By: /s/ Sheldon G. Adelson
----------------------------------------
Name: Sheldon G. Adelson
Title: President
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
<PAGE>
State of New York )
: ss.:
County of New York)
This instrument was acknowledged before me on November 14, 1997 by
Sheldon G. Adelson as President of INTERFACE GROUP-NEVADA, INC.
/s/ Caitlin A. Monck
----------------------------------------
(Signature of notarial officer)
(Seal, if any)
[Seal of Caitlin A. Monck]
My commission expires: October 6, 1999
<PAGE>
State of New York )
: ss.:
County of New York)
This instrument was acknowledged before me on November 14, 1997 by
William P. Weidner, President of Las Vegas Sands, Inc., the
managing member of VENETIAN CASINO RESORT, LLC.
/s/ Caitlin A. Monck
----------------------------------------
(Signature of notarial officer)
(Seal, if any)
[Seal of Caitlin A. Monck]
My commission expires: October 6, 1999
<PAGE>
State of New York )
: ss.:
County of New York)
This instrument was acknowledged before me on November 14, 1997 by
William P. Weidner, President of Las Vegas Sands, Inc., the managing
member of Venetian Casino Resort, LLC, the member of GRAND CANAL
SHOPS MALL CONSTRUCTION, LLC.
/s/ Dorcas Dawe
----------------------------------------
(Signature of notarial officer)
(Seal, if any)
[Seal of Dorcas Dawe]
My commission expires: February 2, 1999
<PAGE>
SCHEDULE I
Definitions
The following terms shall have the meanings set forth in this
Schedule I:
1. "Accounting Period" shall mean any period commencing January 1
and ending on the next following December 31, except that the first Accounting
Period shall commence as to each Owner, respectively, as to its Lot on the
earlier to occur of (i) the Opening Date and (ii) the Mall Release Date, and
shall end on and include the next following December 31. Any portion or portions
of Hotel/Casino/Mall/SECC Common Area Charges relating to a period of time only
part of which is included within the first Accounting Period or the last
Accounting Period of an Owner shall be prorated on a daily basis as respects
such Owner.
2. "Additional Billboard Space" shall have the meaning set forth in
WHEREAS clause O.
3. "Adelson" shall have the meaning set forth in WHEREAS clause K.
4. "Adelson Completion Guaranty" shall have the meaning assigned to
such term in the FADAA.
5. "Affected Mortgagee" shall mean a Mortgagee who holds a Mortgage
encumbering the Lot affected by the event in question.
6. "Affiliate" when used with respect to a Person, shall mean (i) a
Person which, directly or indirectly, controls, is controlled by or is under
common control with such Person or (ii) a direct or indirect owner, officer,
director, employee or trustee
<PAGE>
2
of, or a Person which serves in a similar capacity with respect to, such Person.
For the purpose of this definition, control of a Person which is not an
individual shall mean the power (through ownership of more than 50% of the
voting equity interests of such Person or through any other means) to direct the
management and policies of a Person.
7. "Agent" shall have the meaning set forth in Section 3(c)(i) of
Article IV.
8. "Agreement" shall have the meaning set forth in the introductory
clause.
9. "Alteration" shall mean any improvement, alteration, addition,
restoration, replacement, change or other work, or signage, to the interior or
exterior of the Venetian made by or for any Owner or any Tenant.
10. "APJV" means Atlantic-Pacific, Las Vegas, LLC, or a successor in
interest thereof under each of the Initial ESA's.
11. "APJV Term" means the period beginning on the "Service
Commencement Date" (as defined in the Initial ESA's) and continuing until the
expiration or earlier termination of the Initial ESA's.
12. "Architect" shall mean any professional architect licensed in
the State of Nevada selected and/or approved by both Mall I Owner and H/C I
Owner (which approval shall not be unreasonably withheld, conditioned or
delayed).
13. "Assessment Date" shall mean the first date upon which each of
the H/C I Space and the Mall I Space shall be separately assessed for real
estate tax purposes.
<PAGE>
3
14. "Automobile Parking Area" shall mean each of the Phase I
Automobile Parking Area and the Phase II Automobile Parking Area.
15. "Bank Credit Agreement" shall have the meaning set forth in
WHEREAS clause F.
16. "Base Building" shall mean, collectively (i) the two-level
podium structure to be constructed by H/C I Owner on the Phase I Land in
accordance with the Plans and the provisions of the FADAA, the first floor of
which shall contain the Casino and the second and mezzanine floors of which
shall contain a portion of the Mall I Space and all of which shall be connected
to the Hotel, and (ii) the two level retail annex structure to be constructed by
H/C I Owner on the Retail Annex Land in accordance with the Plans and the
provisions of the FADAA, which shall contain a portion of the Mall I Space,
together with all improvements, systems, fixtures and other items of property
attached or appurtenant to such structures or used or necessary in the operation
thereof, other than Mall Property.
17. "Best's" shall have the meaning set forth in Section 3 of
Article X.
18. "Bill" shall have the meaning set forth in Section 1(i) of
Article VI.
19. "Billboard" shall have the meaning set forth in WHEREAS clause
O.
20. "Billboard Master Lease" shall have the meaning set forth in
WHEREAS clause P.
21. "Billboard Operating Lease" shall have the meaning set forth in
WHEREAS clause O.
<PAGE>
4
22. "Billboard Premises" shall mean the premises demised under the
Billboard Operating Lease.
23. "Borrowers" shall have the meaning set forth in WHEREAS clause
E.
24. "Buffer Zone" shall have the meaning set forth in Section 3(a)
of Article I.
25. "Buffer Zone Encroachments" shall have the meaning set forth in
Section 3(a) of Article I.
26. "Buffer Zone Encroachment Easements" shall have the meaning set
forth in Section 3(a) of Article I.
27. "Building Shell and Core" shall have the meaning set forth in
Section 1(b) of Article V.
28. "Business Day" shall mean any day other than Saturday, Sunday, a
Federal holiday, a holiday recognized by the State of Nevada or any day on which
banks in Nevada are required or permitted to be closed.
29. "Casualty" shall have the meaning set forth in Section 13 of
Article X.
30. "Commencement Date" shall mean the date hereof.
31. "Commercially Available" shall have the meaning set forth in
Section 7 of Article X.
32. "Commercially Reasonable Owner" shall mean, with respect to a
given Owner and its Lot, a commercially reasonable and prudent owner of such Lot
together with any buildings and/or improvements located thereon or therein (and
of no
<PAGE>
5
other property, rights or interests) (assuming that, at the time in question,
such owner, has equity in such Owner's Lot together with buildings and/or
improvements).
33. "Common Areas" shall mean the H/C Limited Common Areas, the Mall
I Limited Common Areas and the H/C-Mall Common Areas.
34. "Competitor" shall mean a Person that (i) owns or operates (or
is an Affiliate of an entity that owns or operates) a casino located in Nevada
or New Jersey or a shopping center or mall located in Nevada or a convention
center located in Clark County, Nevada, and/or (ii) is a union pension fund.
35. "Completion Date" shall mean the date of Completion (as defined
in the FADAA).
36. "Congress Facility" shall have the meaning set forth in Section
2(a) of Article III.
37. "Construction Buffer Zone" shall have the meaning set forth in
Section 2 of Article III.
38. "Construction Encroachment" shall have the meaning set forth in
Section 2 of Article III.
39. "Construction Walls" shall have the meaning set forth in Section
A, subsection 3 of Article VIII.
40. "Contracts" shall have the meaning set forth in the FADAA.
41. "Defaulting Party" shall have the meaning set forth in Section
9(a) of Article XIV.
42. "Destination Areas" shall mean with respect to any Owner (i) its
Lot, (ii) public sidewalks, streets, roads, rights of way and the like, (iii)
(with respect to
<PAGE>
6
Owners other than SECC Owner) H/C Limited Common Areas and Mall I Limited Common
Areas, and (iv) H/C-Mall Common Areas.
43. "Discharging Party" shall have the meaning set forth in Section
C subsection 3(b) of Article VIII.
44. "Disputing Parties" shall have the meaning set forth in Section
15 of Article XIV.
45. "Electricity Provider" shall mean a reasonably experienced,
competent and legally qualified electricity provider.
46. "Enumerated Provisions" shall have the meaning set forth in
Section 4 of Article XIV.
47. "ESA" means an Energy Services Agreement between an Owner and
the HVAC Operator.
48. "ESA Amendment" shall have the meaning set forth in Section B,
subsection 6 of Article II.
49. "Existing HVAC Plant" shall have the meaning set forth in
Section A, subsection 1(a) of Article II.
50. "Existing HVAC Plant Termination Date" shall have the meaning
set forth in Section A, subsection 1(c) of Article II.
51. "Existing Mortgages" shall have the meaning set forth in Section
14(b) of Article XIV.
52. "Existing REA" shall have the meaning set forth in the first
WHEREAS clause.
<PAGE>
7
53. "Existing SECC Mortgages" shall have the meaning set forth in
Section 14(b) of Article XIV.
54. "Existing Utility Equipment" shall have the meaning set forth in
Section C, subsection 2(a) of Article II.
55. "Expenses" shall have the meaning set forth in Section 3(e) of
Article III.
56. "Expiration Date" shall mean the one hundred and fiftieth
(150th) anniversary date of the Commencement Date.
57. "Facilities" means and includes annunciators, antennae, boxes,
brackets, cabinets, cables, coils, computers, conduits, controls, control
centers, cooling towers, couplers, devices, ducts, equipment (including, without
being limited to, heating, ventilating, air conditioning and plumbing
equipment), fans, fixtures, generators, hangers, heat traces, indicators,
junctions, lines, machines, meters, motors, outlets, panels, pipes, pumps,
radiators, risers, starters, switches, switchboards, systems, tanks,
transformers, valves, wiring and the like used in providing services from time
to time in any part of the Base Building, including, without being limited to,
air conditioning, alarm, antenna, circulation, cleaning, communication, cooling,
electric, elevator, exhaust, heating, natural gas, plumbing, radio, recording,
sanitary, security, sensing, telephone, television, transportation, ventilation
and water service.
58. "FADAA" shall have the meaning set forth in WHEREAS clause E.
59. "Final Completion" shall have the meaning set forth in the
FADAA.
<PAGE>
8
60. "Final Completion Date" shall have the meaning set forth in the
FADAA.
61. "Final Tax Statement" shall have the meaning set forth in
Section 1(b) of Article VI.
62. "First-class" shall mean with the highest standards or of the
highest quality, or both, as applicable, in accordance with recognized standards
in the industry in question; provided, however, that wherever the foregoing
shall be used in connection with the Phase I Hotel/Casino and/or the Phase I
Mall, its meaning shall be with reference to such standards then prevailing in
Clark County, Nevada.
63. "Force Majeure Event" shall mean any of the following, which
shall render any Party unable to fulfill, or delays such Party in fulfilling,
any of its obligations under this Agreement: fire or other casualty; acts of
God; war; riot or other civil disturbance; accident; emergency; strike or other
labor trouble; governmental preemption of priorities or other controls in
connection with a national or other public emergency; shortages or material
defects in the quality of fuel, gas, steam, water, electricity, supplies or
labor; or any other event preventing or delaying a Party from fulfilling any
obligation, whether similar or dissimilar, beyond such Party's reasonable
control, as the case may be, provided that under no circumstances shall
financial inability of any Party or any Affiliate thereof be deemed a Force
Majeure Event.
64. "Form Notice" shall have the meaning set forth in Section 14(b)
of Article XIV.
65. "Full Replacement Cost" shall mean the actual replacement cost
of the property (real and/or personal) in question (as the cost may from time to
time increase
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9
or decrease) determined from time to time (but not more frequently than once in
any twelve-month period) at the request of any Party by an engineer or appraiser
in the regular employ of the applicable insurance company.
66. "GMAC" shall have the meaning set forth in WHEREAS clause E.
67. "Gaming Authorities" shall have the meaning set forth in Section
2 of Article XIII.
68. "Governmental Authority(ies)" shall mean any and all federal,
state, city and county governments and quasi-governmental agencies, and all
departments, commissions, boards, bureaus and offices thereof, in each case
having or claiming jurisdiction over all or any portion of the Phase I Land, the
Mall I Space, the Phase II Land, the Mall II Space or the SECC Land.
69. "GSMC" shall have the meaning set forth in WHEREAS clause J.
70. "H/C I Improvements Buffer Zone Encroachment" shall have the
meaning set forth in Section 3(a) of Article I.
71. "H/C I/Mall I Lot Line Modifications" shall have the meaning set
forth in Section 3(a) of Article I.
72. "H/C I Owner" shall have the meaning as set forth in WHEREAS
clause Y.
73. "H/C I Owner's Tax and Insurance Share" shall have the meaning
set forth in Section 1(a) of Article VI.
74. "H/C I Space" shall have the meaning set forth in WHEREAS clause
L.
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10
75. "H/C II Owner" shall have the meaning set forth in WHEREAS
clause Y.
76. "H/C II Space" shall have the meaning set forth in WHEREAS
clause X.
77. "H/C Limited Common Areas" shall mean the areas depicted on
Exhibit K.
78. "H/C-Mall Common Areas" shall mean the areas and all elevators,
escalators and similar mechanical conveyancing devices, loading docks,
truck/loading areas and all other buildings, structures, equipment and
facilities located thereon or therein, as depicted on Exhibit K.
79. "H/C Pass-through Areas" shall mean the areas and all buildings,
structures, equipment and facilities located thereon or therein as depicted in
Exhibit K.
80. "Headquarters Election" shall have the meaning set forth in
Section 3(b) of Article III.
81. "Headquarters Hotel" shall have the meaning set forth in Section
3(b) of Article III.
82. "Hotel" shall mean the "Venetian" theme hotel to be built within
and above the Base Building, as more particularly described in the Plans.
83. "Hotel/Casino/Mall/SECC Common Area Charges" shall mean the
total of all monies paid out during an Accounting Period by H/C I Owner for
reasonable costs and expenses directly relating to the maintenance, repair,
operation and management of the Phase I Automobile Parking Area and the H/C-Mall
Common Areas, as provided in Article V and itemized by category on Schedule II,
excluding wages or
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11
salaries paid to management or supervisory personnel, except field supervisors
such as foremen. Hotel/Casino/Mall/SECC Common Area Charges shall include but
not be limited to: all rental charges for equipment and costs of small tools and
supplies; all acquisition costs of maintenance equipment; policing, security
protection, Maintenance, traffic direction, control and regulation of the Phase
I Automobile Parking Area; all costs of cleaning the Phase I Automobile Parking
Area and the H/C-Mall Common Areas and removal of rubbish, dirt and debris
therefrom; the cost of landscape maintenance and supplies for the Phase I
Automobile Parking Area and the H/C-Mall Common Areas including, without
limitation, perimeter sidewalks; all charges for utility services utilized in
connection with Phase I Automobile Parking Area and the H/C-Mall Common Areas
together with all costs of maintaining lighting fixtures therein and thereon;
and all premiums for fire and extended coverage insurance and for public
liability and property damage insurance required to be carried by H/C I Owner
pursuant to the provisions of Article X. No capital improvements to or
reconstruction of the Phase I Automobile Parking Area or the H/C-Mall Common
Areas shall be made except in accordance with the provisions of Article V. The
salvage value of any capital item, which was included in Hotel/ Casino/Mall/SECC
Common Area Charges, disposed of by H/C I Owner shall be credited against
Hotel/Casino/Mall/SECC Common Area Charges. No actual capital expenditure shall
be included in Hotel/Casino/Mall/SECC Common Area Charges if the amortization of
such capital expenditure has been or is to be included in Hotel/
Casino/Mall/SECC Common Area Charges. Depreciation applicable to all capital
expenditures shall be prorated between the Owners on the same basis as the
percentages set forth in Schedule II are computed.
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12
84. "HVAC" and its accompanying definitions shall have the meanings
set forth in Section A, subsection 3 of Article II.
85. "HVAC Easement" shall have the meaning set forth in Section A,
subsection 1(b) of Article II.
86. "HVAC Facilities" shall mean all HVAC Equipment connected to or
associated with the New HVAC Plant.
87. "HVAC Ground Lease" shall have the meaning set forth in Section
B, subsection 1 of Article II.
88. "HVAC Operator" means APJV or a "Substitute HVAC Operator"
obtaining such status in accordance with Section 3 of Article II.
89. "HVAC Space" shall have the meaning set forth in Section B,
subsection 1 of Article II.
90. "Independent" means, when used with respect to any Person, a
Person who (i) does not have any direct or indirect financial interest in any
Lot or any improvements constructed or business operated thereon, in any Owner
or in any Affiliate of any Owner or in any constituent, shareholder, or
beneficiary of any Owner, and (ii) is not connected with any Owner or any
Affiliate of any Owner or any constituent, shareholder, or beneficiary of any
Owner as an officer, employee, promoter, underwriter, trustee, partner, director
or person performing similar functions.
91. "Independent Expert" shall have the meaning set forth in Section
15 of Article XIV.
92. "Initial ESA's" means the three (3) ESA's dated as of May 1,
1997 between APJV and, respectively, H/C I Owner, Mall I Owner and SECC Owner.
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13
93. "Insurance Escrow Account" shall have the meaning set forth in
Section 1(d) of Article VI.
94. "Insurance Proceeds Shortfall" shall have the meaning set forth
in Section 2 of Article XI.
95. "Insurance Report" shall have the meaning set forth in Section 9
of Article X.
96. "Insurance Shortfall Contribution" shall have the meaning set
forth in Section 2 of Article XI.
97. "Integral H/C I Improvements" shall mean all improvements being
undertaken on the Phase I Land pursuant to the FADAA other than the Integral
Mall I Improvements.
98. "Integral Mall I Improvements" shall mean the improvements being
undertaken pursuant to the FADAA and in accordance with the requirements thereof
and that are intended to be incorporated within the Phase I Mall. This
definition is intended to define the improvements as actually built whether or
not they conform in all respects to the requirements of the FADAA. By way of
clarification, the Integral Mall I Improvements shall consist generally of the
following: (i) all buildings and other improvements that are from time to time
located at the midpoint of the floor and ceiling of slabs and of exterior walls
situated at the perimeter of the Mall I Airspace or in the portion of the Mall I
Airspace that is inward therefrom toward the interior of the Mall I Airspace,
and (ii) all buildings and other improvements that are from time to time located
on the Retail Annex Land.
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14
99. "Interest Holder" shall have the meaning set forth in Section 3
of Article XIV.
100. "Interest Rate" shall have the meaning set forth in Section
1(j) of Article VI.
101. "Interface" shall have the meaning set forth in the
introductory clause.
102. "Interim Mall Credit Agreement" shall have the meaning set
forth in WHEREAS clause G.
103. "Interim Mall LLC" shall have the meaning set forth in the
introductory clause.
104. "Junior Lender" shall have the meaning set forth in WHEREAS
clause K.
105. "Junior Loan Agreement" shall mean the Junior Loan Agreement,
dated as of June 26, 1997 by and among the Lenders from time to time parties
thereto, as Lenders, LaSalle National Bank, as Administrative Agent for the
Lenders and Collateral Agent for the Lenders, and SECC Owner, as Borrower.
106. "Lease" shall mean any lease, sublease, license, sublicense,
concession, subconcession or other agreement granting the right to use or occupy
between Mall I Owner or H/C I Owner and any Tenant pursuant to which a portion
of the Tenant Space is demised, and all amendments, modifications and
supplements thereto.
107. "Legal Requirements" shall mean all present and future laws,
ordinances, orders, rules, regulations and requirements of all Governmental
Authorities, including, without limitation, all environmental requirements, and
all orders, rules and
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15
regulations of the National and Local Boards of Fire Underwriters or any other
body or bodies exercising similar functions, foreseen or unforeseen, ordinary as
well as extraordinary.
108. "Lido" shall have the meaning set forth in WHEREAS clause V.
109. "Limited Common Areas" shall mean, collectively, the Mall I
Limited Common Areas and the H/C Limited Common Areas.
110. "Liquidated Damages" shall mean (a) all amounts collected
pursuant to Third Party Warranties and (b) to the extent not included in such
definition pursuant to clause (a) of this definition, any additional amounts
defined as Liquidated Damages in the Bank Credit Agreement (as in effect on the
date hereof).
111. "Lot" shall mean any of the H/C I Space, the Mall I Space, the
Phase II Land, the Mall II Space or the SECC Land.
112. "LVSI" shall have the meaning set forth in the introductory
clause.
113. "Maintenance" shall mean, with respect to a particular
Automobile Parking Area or Parking Access Easement Area, all general and
extraordinary maintenance and repairs, replacements and restoration necessary to
provide use and enjoyment of the same in accordance with the standards of
First-class hotel/casinos, First-class restaurant and retail complexes and all
applicable Legal Requirements as set forth in this Agreement. Maintenance shall
include, but shall not be limited to, cleaning, sweeping, providing janitorial
services, painting, re-striping, filling of chuckholes, repairing and
resurfacing of curbs, sidewalks and roadbeds, maintaining irrigation and
drainage systems, removing debris and trash, undesirable weeds and vegetation,
maintaining signs, markers, lighting and other utilities, maintaining fencing
and
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16
landscaping, if any, and any other work reasonably necessary or proper to
maintain the easement in good, clean and sanitary condition and repair. In
addition, with respect to easement areas for roadway or vehicular access, such
maintenance shall meet all standards promulgated by Clark County applicable to
similar roadways or vehicular access ways held or controlled by Clark County.
114. "Mall I Airspace" shall have the meaning set forth in WHEREAS
clause M.
115. "Mall I Airspace/Ground Lease" shall have the meaning set forth
in WHEREAS clause N.
116. "Mall I Encroachment" shall have the meaning set forth in
Section 2 of Article III.
117. "Mall I Improvements Buffer Zone Encroachment" shall have the
meaning set forth in Section 3(a) of Article I.
118. "Mall I Lease" shall have the meaning set forth in WHEREAS
clause P.
119. "Mall I Limited Common Areas" shall mean the areas depicted on
Exhibit P.
120. "Mall I Owner" shall have the meaning set forth in WHEREAS
clause Q.
121. "Mall I Owner's Common Area Charge Obligations" shall have the
meaning set forth in Section 3(d) of Article V.
122. "Mall I Owner's Share" shall have the meaning set forth in
Section 3(a) of Article V.
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17
123. "Mall I Owner's Tax and Insurance Share" shall have the meaning
set forth in Section 1(b) of Article VI.
124. "Mall I Pass-through Areas" shall mean the areas and all
buildings, structures, equipment and facilities located thereon or therein as
depicted on Exhibit K.
125. "Mall I Space" shall have the meaning set forth in WHEREAS
clause Q.
126. "Mall II Owner" shall have the meaning set forth in WHEREAS
clause Y.
127. "Mall II Space" shall have the meaning set forth in WHEREAS
clause W.
128. "Mall Property" shall mean all inventory, trade fixtures,
furniture, furnishings, equipment and signs which are installed or placed by H/C
I Owner at the Mall I Space or installed or placed by Mall I Owner or any Tenant
at the Mall I Space.
129. "Mall Release Date" shall have the meaning set forth in the
FADAA.
130. "Material Adverse Effect" means with respect to any given Owner
and its Lot any event or condition that has a material adverse effect upon (i)
the business operations of such Owner, taken as a whole, the Lot of such Owner
together with any improvements constructed therein or thereon, taken as a whole,
the assets of such Owner, taken as a whole, or the condition (financial or
otherwise) of such Owner, taken as a whole, (ii) the ability of such Owner to
perform any of its material obligations under any Mortgage encumbering its Lot
or any documents executed by such Owner in connection therewith, (iii) the
enforceability, validity, perfection or priority of the lien of any
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18
Mortgage encumbering its Lot or any documents executed by such Owner in
connection therewith or (iv) the value of the Lot of such Owner together with
any improvements constructed therein or thereon (or of any Mortgagee's interest
therein) or the operation thereof.
131. "Material Alteration" shall have the meaning set forth in
Section 7(d) of Article V.
132. "Material Amortization Date" means the 20th anniversary of the
"Service Commencement Date" (as such term is defined in the Initial ESA's).
133. "Material Default Termination Date" shall have the meaning set
forth in Section B, subsection 3(b) of Article II.
134. "Metering Equipment" shall have the meaning set forth in the
Initial ESA's.
135. "Minimum Parking Standards" shall have the meaning set forth in
Section 3(a) of Article VII.
136. "Mortgage" shall mean each and every mortgage or deed of trust
which may now or hereafter be placed by or for the benefit of any Party to this
Agreement on its interest in the real property and improvements owned by such
Party and which is subject to this Agreement, and all increases, renewals,
modifications, consolidations, replacements and extensions thereof. In addition,
so long as the Tranche A Commitment Letter executed in connection therewith is
in effect, GSMC shall be deemed a Mortgagee of the Phase I Mall for all purposes
hereunder.
137. "Mortgage Notes" shall have the meaning set forth WHEREAS
clause H.
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19
138. "Mortgage Notes Indenture" means the indenture relating to the
Mortgage Notes.
139. "Mortgage Notes Indenture Trustee" shall mean First Trust
National Association or any successor entity serving as trustee thereunder.
140. "Mortgagee" shall mean, with respect to any Lot, the holder of
any Mortgage (or any agent or trustee acting on its behalf) encumbering that
Lot, which holder may not be a Competitor, but may be an Affiliate of an Owner;
provided, however, that no such Affiliate holding a Mortgage shall be entitled
to the benefit of any of the Mortgagee protection provisions set forth in this
Agreement, including without limitation Section 4 of Article XIV; and provided
further that, notwithstanding the foregoing, the Mortgage Notes Indenture
Trustee shall at all times constitute a Mortgagee with respect to any Lot then
encumbered by a Mortgage in favor of the Mortgage Notes Indenture Trustee.
141. "New Electric Substation" shall have the meaning set forth in
Section A, subsection 2(a) of Article II.
142. "New H/C I Owner" shall have the meaning set forth in Section 9
of Article XIV.
143. "New HVAC Plant" shall mean a new central utility plant on the
Phase I Land which plant would provide thermal energy (heating, ventilation and
air-conditioning) to the Venetian (including the Phase I Mall), the Lido
(including the Phase II Mall), and the SECC.
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20
144. "New HVAC Plant Percentage" means, with respect to a Serviced
Owner, the "Proportionate Share," as such percentage is calculated in Section
4.1 and Schedules 4.1(A) and 4.1(B) of the respective Qualifying ESA.
145. "New Owner" shall have the meaning set forth in Section 9 of
Article XIV.
146. "New Serviced Owner ESA" shall have the meaning set forth in
Section B, subsection 2 of Article II.
147. "Opening Date" shall have the meaning set forth in the FADAA.
148. "Operating Expense Statement" shall have the meaning set forth
in Section 3(e) of Article V.
149. "Owner" means H/C I Owner, Mall I Owner and SECC Owner and
their respective successors and assigns.
150. "Parking Access Easement" shall have the meaning set forth in
Section D, subsection 4(a) of Article II.
151. "Parking Rules and Regulations" shall have the meaning set
forth in Section 7 of Article VII.
152. "Parking Spaces" shall mean parking spaces in the Phase I
Automobile Parking Area.
153. "Party" and "Parties" shall mean an Owner and Owners.
154. "Pass-through Areas" shall include without limitation (a) all
walkways, streets, rights of way, roads, entries, sidewalks, paths, alleyways,
bridges, pedestrian bridges, water features, plazas, parks, atrium service ways,
public restrooms, buildings, structures and Automobile Parking Areas located on
the Phase I Land or within
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21
the Base Building and/or on the SECC Land or within the SECC and (b) all
elevators, escalators and similar mechanical conveyancing devices, and all other
equipment and facilities located in or on such areas, and shall comprise (i) H/C
Pass-through Areas, (ii) Mall I Pass-through Areas and (iii) SECC Pass-through
Areas.
155. "Permanent Buffer Zone Encroachment Easements" shall have the
meaning set forth in Section 3(c)(iii) of Article I.
156. "Permitted Maintenance" shall have the meaning set forth in
Section 1(a) of Article V.
157. "Permitted Use" shall mean each of the respective uses
specified in Section 1 of Article III and Sections 1 and 2 of Article IV.
158. "Permittee" shall mean, with respect to any Owner and each
Tenant of an Owner, their respective agents, licensees, invitees, employees,
customers, contractors, subcontractors, tenants, subtenants and concessionaires.
159. "Person" shall have the meaning set forth in Section 3(a) of
Article XIV.
160. "Phase I Automobile Parking Area" means the parking structure
to be located on the southern portion of the Phase I Land, in the general
location labeled as the "South Garage" on the Site Plan depicted on Exhibit U.
161. "Phase I Garage Opening Date" shall have the meaning set forth
in Section 4(a) of Article I.
162. "Phase I Hotel/Casino" shall mean any hotel/casino together
with any other buildings and improvements from time to time located on and/or in
the H/C I Space.
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22
163. "Phase I Land" shall have the meaning set forth in the second
WHEREAS clause and as described in Exhibit A-1 attached hereto and made a part
hereof.
164. "Phase I LLC" shall have the meaning set forth in the
introductory clause.
165. "Phase I Mall" shall have the meaning set forth in WHEREAS
clause Q.
166. "Phase II Automobile Parking Area" shall have the meaning set
forth in Section 1 of Article VII.
167. "Phase II Hotel/Casino" shall mean any hotel/casino together
with any other buildings and improvements from time to time located on and/or in
the H/C II Space.
168. "Phase II Land" shall have the meaning set forth in the second
WHEREAS clause and as described in Exhibit A-2 attached hereto and made a part
hereof.
169. "Phase II LLC" shall have the meaning set forth in WHEREAS
clause V.
170. "Phase II Mall" shall have the meaning set forth in WHEREAS
clause W.
171. "Phase II Parking Opening Date" shall have the meaning set
forth in Section 3(a) of Article VII.
172. "Phase II Resort" shall have the meaning set forth in Section
3(b) of Article III.
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23
173. "Plans" shall mean the plans and specifications for the entire
Venetian as more particularly described in the FADAA.
174. "Predevelopment Agreement" shall have the meaning set forth in
Section C, subsection 2 of Article VIII and in Exhibit T attached hereto and
made a part hereof.
175. "Preliminary Parking Plan" shall have the meaning set forth in
Section 2 of Article VII and as depicted in Exhibit S attached hereto and made a
part hereof.
176. "Qualifying ESA" means, with respect to an Owner, the ESA which
such Owner has entered into with the HVAC Operator in accordance with the terms
hereof. Each of the Initial ESA's shall constitute "Qualifying ESA's" for
purposes of this Agreement.
177. "REA" shall have the meaning set forth in Section 14 subsection
(b) of Article XVII.
178. "Recorder's Office" means the office of the County Recorder of
Clark County, Nevada.
179. "Replacement HVAC Plant Plan" shall have the meaning set forth
in Section B, subsection 4(a) of Article II.
180. "Requesting Warranty Owner" shall have the meaning set forth in
Section 5 of Article I.
181. "Retail Annex Land" shall have the meaning set forth in WHEREAS
clause M.
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24
182. "Revised H/C I Space" shall have the meaning set forth in
Section 3(a) of Article I.
183. "Revised Mall I Space" shall have the meaning set forth in
Section 3(a) of Article I.
184. "Rights and Obligations" shall have the meaning set forth in
Section 1 of Article XIV.
185. "Sale and Contribution Agreement" shall have the meaning set
forth in WHEREAS clause U.
186. "Sands Exposition and Convention Center" or "SECC" shall have
the meaning set forth in WHEREAS clause D.
187. "Scheduled Termination Date" means, with respect to any HVAC
Operator, the scheduled last date of the term under the Qualifying ESA's, as
such date may be extended in accordance with the terms thereof and hereof.
188. "SECC Alterations" shall have the meaning set forth in Section
1(c) of Article III.
189. "SECC Pass-through Areas" shall mean the areas and all
buildings, structures, equipment and facilities located thereon or therein as
depicted on Exhibit K.
190. "SECC Land" shall have the meaning set forth in the second
WHEREAS clause C and as described in Exhibit B.
191. "SECC Owner" shall have the meaning set forth in WHEREAS clause
Y.
192. "SECC Owner Parking Maintenance and Repairs" shall have the
meaning set forth in Section 3 of Article IX.
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25
193. "SECC Owner's Common Area Charge Obligations" shall have the
meaning set forth in Section 3(d) of Article V.
194. "SECC Owner's Share" shall have the meaning set forth in
Section 3(b) of Article V.
195. "SECC Party Wall" shall have the meaning set forth in Section
2(a) of Article III.
196. "Secured Debt" shall have the meaning set forth in Section 3(c)
of Article III.
197. "Senior Loan Agreement" shall mean the Senior Loan Agreement,
dated as of June 26, 1997 by and among the Lenders from time to time parties
thereto, as Lenders, LaSalle National Bank, as Administrative Agent for the
Lenders and Collateral Agent for the Lenders, and SECC Owner, as Borrower.
198. "Senior Subordinated Notes" shall have the meaning set forth in
WHEREAS clause I.
199. "Serviced Owner" means each of H/C I Owner, Mall I Owner and
SECC Owner. H/C II Owner and Mall II Owner also shall have the right to be
admitted as Serviced Owners in accordance with Section B, subsection 2 of
Article II.
200. "Shared Casino Facilities Plan" shall have the meaning set
forth in Section B, subsection 1 of Article VIII.
201. "Shared Facilities" shall have the meaning set forth in Section
B, subsection 1 of Article VIII.
202. "Shared Operations" shall have the meaning set forth in Part B,
Section 2 of Article VIII.
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26
203. "Shared Operations Plan" shall have the meaning set forth in
Part B, Section 2 of Article VIII.
204. "Subdivided Interest Holder" shall have the meaning set forth
in Section 3(a)(i) of Article XIV.
205. "Subdivision" shall have the meaning set forth in WHEREAS
clause M.
206. "Subdivision Date" shall have the meaning set forth in Section
1(a) of Article VI.
207. "Substitute HVAC Operator" shall mean any HVAC Operator who
enters into a new ESA with each of the Serviced Owners in accordance with
Section 3 of Article II.
208. "Supporting Documentation" shall have the meaning set forth in
Section 3(e) of Article V.
209. "Taking Authority" shall have the meaning set forth in Section
1 of Article XII.
210. "Taking" shall have the meaning set forth in Section 1 of
Article XII.
211. "Tax Escrow Account" shall have the meaning set forth in
Section 1(a) of Article VI.
212. "Tax Year" shall mean each period from July 1 through June 30
(or such other fiscal period as may hereafter be adopted by Clark County, Nevada
as the fiscal year for any tax, levy or charge included in Taxes), any part or
all of which occurs during the Term.
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27
213. "Taxes" shall have the meaning set forth in Section 1(g) of
Article VI.
214. "Temporary Parking Facilities" shall have the meaning set forth
in Section 4(a) of Article I.
215. "Temporary Parking Facilities Term" shall have the meaning set
forth in Section 4(c) of Article I.
216. "Temporary Parking Spaces" shall have the meaning set forth in
Section 4(a) of Article I.
217. "Temporary Walls" shall have the meaning set forth in Section
A, subsection 3 of Article VIII.
218. "Tenant" shall mean any Person who is a party to a Lease,
license, concession or other agreement granting the right to use or occupy space
from Mall I Owner within the Mall I Space or H/C I Owner within the H/C I Space,
as the case may be.
219. "Tenant Space" shall mean any portion of the Mall I Space or
the H/C I Space covered by a Lease or similar occupancy agreement.
220. "Term" shall mean the period commencing on the Commencement
Date through and including the Expiration Date or any earlier date on which the
Term terminates pursuant to the provisions hereof or pursuant to law.
221. "Test Date" shall have the meaning set forth in Section 4(a) of
Article I.
222. "Third Party Warranties" means all warranties, guaranties and
other claims arising out of breaches of contracts pertaining to the construction
of the
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28
Venetian; provided, however, that the term Third Party Warranties shall not mean
claims arising out of the Adelson Completion Guaranty and arising out of claims
under the Direct Construction Guaranty and the Indirect Construction Guaranty
(as such terms are defined in the Bank Credit Agreement).
223. "Tranche A Commitment Letter" shall have the meaning set forth
in Section 4 of Article VIII.
224. "Tranche B Commitment" shall have the meaning set forth in
WHEREAS clause K.
225. "Transferee" shall have the meaning set forth in Section 5(a)
of Article XIV.
226. "Transferor" shall have the meaning set forth in Section 5(a)
of Article XIV.
227. "Tri-Party Agreement" shall have the meaning set forth in the
FADAA.
228. "Trustee" shall have the meaning set forth in Section 1(f) of
Article VI.
229. "Uninsured Loss" shall have the meaning set forth in Section 4
of Article XI.
230. "Uninsured Loss Contribution" shall have the meaning set forth
in Section 4 of Article XI.
231. "User" shall have the meaning set forth in Section 3(b) of
Article III.
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29
232. "Utility Activity" shall have the meaning set forth in Section
C, subsection 2(a) of Article II.
233. "Utility Corridors" shall have the meaning set forth in Section
B, subsection 2 of Article II.
234. "Utility Equipment" shall have the meaning set forth in Section
C, subsection 2(a) of Article II.
235. "Venetian" shall have the meaning set forth in the fifth
"WHEREAS" clause.
236. "Warranty Owner" shall have the meaning set forth in the
Section 5 of Article I.
<PAGE>
SCHEDULE III
Parking Rules and Regulations
1. Persons using either the Phase I Automobile Parking Area or the
Phase II Automobile Parking Area, as the case may be, for parking (each a
"User") pursuant to the easement created under the Amended and Restated
Reciprocal Easement, Use and Operating Agreement to which these rules and
regulations are attached (the "REA": capitalized terms used herein without
definition shall have the meanings assigned to them in the REA) shall comply
with any parking identification system established by H/C I Owner with respect
to the Phase I Automobile Parking Area or H/C II Owner with respect to the Phase
II Automobile Parking Area (each, an "Owner of the Parking Structure Site"), as
the case may be, or its parking operator; provided that in no event shall such
parking identification system deprive any Owner of its Minimum Parking Standards
nor shall the conduct of its business in accordance with the terms of the REA be
adversely affected. Such a system may include the validation of visitor parking,
at the validation rate applicable to visitor parking from time to time as set by
the Owner of the Parking Structure Site or its parking operator in accordance
with the provisions of the REA. Parking stickers, parking cards, or other
identification devices supplied by the Owner of the Parking Structure Site shall
remain the property of the Owner of the Parking Structure Site. Such devices
must be displayed as requested and may not be mutilated in any manner. Each User
shall pay a reasonable deposit to the Owner of the Parking Structure Site or its
parking operator for each such device issued to
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2
it. Such deposit shall be paid at the time the device is issued and shall be
forfeited if the device is lost. Such deposit shall be returned without interest
at the time the User holding the device ceases to utilize the Parking Structure.
Such devices shall not be transferable, and any such device in the possession of
an unauthorized holder may be retained by the Owner of the Parking Structure
Site and declared void. Upon the suspension or the termination of parking
privileges, all parking identification devices supplied by the Owner of the
Parking Structure Site shall be returned to the Owner of the Parking Structure
Site.
2. The Owner of the Parking Structure Site or its parking operator
shall from time to time provide the Owners with the respective number of such
devices reasonably requested in writing by the respective Owners of such Site,
it being understood that the number of devices requested may exceed the
respective number of Parking Spaces which such Owner is authorized to use
pursuant to the REA; provided, however, that (a) if an Owner (and/or its
tenants, employees or invitees), without the prior written consent of the Owner
of the Parking Structure Site (or such Owner's parking operator), at any time
uses the devices to occupy more than the number of Parking Spaces then
authorized to be used by said Owner (and/or its tenants, employees or invitees)
pursuant to the REA, thereafter the Owner of the Parking Structure Site shall
have the right to confiscate from such Owner the number of devices equal to the
number of Parking Spaces by which such Owner's occupancy exceeded the number of
Parking Spaces then authorized to be used by the Owner (and/or its tenants,
employees or invitees) pursuant to the REA.
<PAGE>
3
3. Loss or theft of parking identification devices must be reported
immediately to the Owner of the Parking Structure Site or its parking operator,
and a report of such loss or theft must be filed by the User at that time. Any
parking identification device reported lost or stolen that is found on any
unauthorized vehicle will be confiscated and the illegal holder will be subject
to prosecution.
4. User shall obey all signs and shall park only in areas designed
for vehicle parking within painted stall lines. Parking Spaces are for the
express purpose of parking one automobile per space. Parking Spaces shall be
used only for parking vehicles no longer than full-sized passenger automobiles.
All directional signs and arrows must be observed, and all posted speed limits
for the Parking Structure shall be observed. If no speed limit is posted for an
area of the Parking Structure, the speed limit shall be five (5) miles per hour.
Users shall not permit any vehicle that belongs to or is controlled by a User,
its agents, employees, invitees, licensees and visitors, to be loaded, unloaded
or parked in areas other than those designated by the Owner of the Parking
Structure Site or its parking operator for such activities. No maintenance,
washing, waxing or cleaning of vehicles shall be permitted in the Automobile
Parking Areas. The Automobile Parking Areas shall not be used for overnight or
other storage for vehicles of any type. Each User shall park and lock his or her
own vehicle.
5. Except as otherwise provided in the REA, the Owner of the Parking
Structure Site reserves the right to modify, redesign or redesignate uses
permitted in the Automobile Parking Areas or any portion thereof, to relocate
Parking Spaces from floor to floor, and to allocate Parking Spaces between
compact and standard sizes from time to time, as long as the same comply with
applicable Legal Requirements, do not
<PAGE>
4
adversely impact any Owner or the conduct of its business, and do not deprive
any Owner of its Minimum Parking Standards. Reserved Parking Spaces shall be
clearly and prominently marked as such by the Owner of the Parking Structure
Site. Neither the Owner of the Parking Structure Site nor its parking operator
shall be liable or responsible for the failure of Users to observe such markings
or to obey other rules and regulations, agreements, laws or ordinances
applicable to the Automobile Parking Areas. Without limiting the generality of
the foregoing, the Owner of the Parking Structure Site shall not be obligated to
tow any violator's vehicle, or to take any other action on account of any such
failure.
6. The Owner of the Parking Structure Site shall be solely
responsible for the Maintenance (as such term is defined in the REA) and
operation of the applicable Automobile Parking Area. Without limiting the
generality of the foregoing, the Owner of the Parking Structure Site shall at
all times maintain all gates, elevators, lighting, electrical and exhaust
systems, alarms, and sprinklers in good working order.
7. The Automobile Parking Area shall be accessible 24 hours a day.
After normal business hours, the Automobile Parking Area may be protected by
security gates operated by access cards in order to maintain the security of the
Automobile Parking Area.
8. H/C I Owner and/or H/C II Owner, as the case may be, may enter
into agreements from time to time with the other Owners restricting the rights
of employees of Tenants of such other Owners to park in the Automobile Parking
Areas.
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5
9. Nothing set forth in these Parking Rules is intended to deprive
any Owner of its Minimum Parking Standards. Any conflict between any provision
of these Parking Rules and any provision of the REA shall be resolved in favor
of the REA.
THIS SALE AND CONTRIBUTION AGREEMENT (this "Agreement") is
made as of the 14th day of November, 1997 (the "Effective Date") by and among
VENETIAN CASINO RESORT, LLC ("VCR"), a Nevada limited liability company having
an address at 3355 Las Vegas Boulevard South, Room 1C, Las Vegas, Nevada 89109,
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware limited liability company
having an address at 3355 Las Vegas Boulevard South, Room 1G, Las Vegas, Nevada
89109 ("Seller"), and GRAND CANAL SHOPS MALL, LLC, a Delaware limited liability
company ("Purchaser") having an address at 3355 Las Vegas Boulevard South, Room
1L, Las Vegas, Nevada 89109.
W I T N E S S E T H :
WHEREAS, VCR is the owner of fee title to that certain real property
described in Exhibit A-1 attached hereto (the "Phase I Land"); and
WHEREAS, pursuant to a lease (the "Mall I Airspace/Ground Lease") of
even date herewith from VCR, as landlord, to Seller, as tenant, Seller owns a
leasehold interest in and to (i) that certain space within the Phase I Land more
particularly described in Exhibit A-2 attached hereto and made a part hereof
(such space, as improved from time to time (including without limitation
improvements therein effected from time to time in accordance with the "FADAA",
as hereinafter defined), and as the boundaries thereof may be adjusted in
accordance with the terms of the Cooperation Agreement (as hereinafter defined),
sometimes referred to herein
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2
as the "Mall I Airspace") and (ii) that certain land within the Phase I Land
more particularly described on Exhibit A-3 (said land, as improved from time to
time (including without limitation improvements effected thereon from time to
time in accordance with the FADAA), and as the boundaries thereof may be
adjusted in accordance with the terms of the Cooperation Agreement (as
hereinafter defined), sometimes referred to herein as the "Retail Annex Land";
and the Retail Annex Land, together with the Mall I Airspace, sometimes referred
to herein collectively, the "Mall Parcels") ; and
WHEREAS, pursuant to a lease (the "Master Lease for Additional
Billboard Space") of even date herewith from VCR, as landlord to Seller, as
tenant, Seller owns a leasehold interest in and to that certain space more
particularly described in Exhibit A-4 (said space, as improved from time to time
(including without limitation improvements effected from time to time in
accordance with the FADAA), and as the boundaries thereof may be adjusted in
accordance with the terms of the Cooperation Agreement (as hereinafter defined),
sometimes referred to herein as the "Additional Billboard Space"); and
WHEREAS, VCR has assigned to Seller all of VCR's right, title and
interest in and to that certain restaurant lease (the "Billboard Operating
Lease"), dated June 26, 1997 between VCR, as landlord and B.L. of Las Vegas,
Inc. ("Billboard"), as tenant, pursuant to which VCR has leased to Billboard (i)
a portion of the Mall I Airspace described in the Billboard Operating Lease and
(ii) the Additional Billboard Space; and
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3
WHEREAS, Las Vegas Sands, Inc., a Nevada corporation ("LVSI"),
Seller and VCR (sometimes referred to herein collectively as "Borrowers") are
parties to a Funding Agents' Disbursement and Administration Agreement (as such
document is in effect as of the Effective Date hereof, the "FADAA"), dated
November 14, 1997 with GMAC Commercial Mortgage Corporation ("GMAC"), The Bank
of Nova Scotia, as administrative agent under that certain Bank Credit Agreement
(the "Bank Credit Agreement") dated as of November 14, 1997, First Trust
National Association, as trustee for the Borrower's 12.25% Mortgage Notes due
2004 (the "Mortgage Notes"), Atlantic-Pacific Las Vegas, LLC ("APJV") and The
Bank of Nova Scotia, as Disbursement Agent; and
WHEREAS, as contemplated by the FADAA, Borrowers plan to cause (i) a
commercial subdivision of the Phase I Land so that the Mall I Airspace and the
Retail Annex Land become separate legal parcels from the rest of the Phase I
Land (collectively, the "Subdivision") and (ii) prior to the Closing Date (as
hereinafter defined), the substantial completion of the construction of the
"Project" (as such term is used in the FADAA), including without limitation a
Venetian-theme shopping mall and certain other improvements in the Mall Airspace
and the Additional Billboard Space, and a Venetian-theme retail annex to such
shopping mall on the Retail Annex Land (collectively, the "Mall Improvements");
and
WHEREAS, in connection with the FADAA, (a) VCR, Seller and Interface
Group - Nevada, Inc. ("Interface"), have entered into and recorded an Amended
and Restated Reciprocal Easement, Use and Operating Agreement of even
<PAGE>
4
date herewith (the "Cooperation Agreement") establishing certain rights and
easements with respect to the Mall Parcels, the remainder of the Phase I Land
and certain real properties adjacent to the Phase I Land, and (b) Seller has
entered into an Energy Services Agreement, dated as of June 1, 1997 with APJV
pertaining to, among other things, the provision of energy services (e.g.,
heating and air conditioning) to the Mall Parcels (the "Mall ESA"); and
WHEREAS, in order to finance the Project, Borrowers have taken
certain steps to arrange and obtain certain sources of funds, including entering
into the Bank Credit Agreement, issuing the Mortgage Notes, and entering into a
certain Loan Agreement (the "GMAC Loan Agreement"), dated November 14, 1997 with
GMAC in connection with a loan in the principal amount of up to $140,000,000 (as
the same may be amended, replaced or refinanced in accordance with any
limitations set forth in the Intercreditor Agreement, the "GMAC Loan"); and
WHEREAS, the GMAC Loan is secured by, among other things, the
following security documents in favor of GMAC:
(a) a deed of trust (the "GMAC Fee Mortgage") upon,
among other things, (i) fee title to the Mall Parcels, (ii) Seller's interests,
as tenant, in the Master Lease for Additional Billboard Space, and (iii)
Seller's interests, as landlord, under any leases (including without limitation
the Billboard Operating Lease) entered into with tenants for use of portions of
the Mall Parcels (each, a "Mall Tenant Lease"); and
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5
(b) a deed of trust (the "GMAC Leasehold Mortgage") upon,
among other things, (i) Seller's interests, as tenant, in the Mall I
Airspace/Ground Lease, (ii) Seller's interests, as tenant, in the Master Lease
for Additional Billboard Space, (iii) Seller's interests, as landlord, under any
Mall Tenant Leases; and
WHEREAS, pursuant to the provisions of the Mall I Airspace/Ground
Lease, fee title in and to the Mall Parcels shall be granted by VCR to Seller
upon the implementation of the Subdivision, and at such time the GMAC Leasehold
Mortgage shall be released with respect to the Mall I Airspace/Ground Lease (but
shall continue with respect to the tenant's rights under the Master Lease for
Additional Billboard Space) and the GMAC Fee Mortgage shall become a first lien
upon the Mall Parcel and improvements therein and thereon and upon the other
collateral encumbered by the GMAC Fee Mortgage; and
WHEREAS, Purchaser has entered into (i) a commitment letter (the
"Tranche A Take-Out Commitment"), dated as of November 14, 1997 with Goldman
Sachs Mortgage Company ("GSMC") and Sheldon G. Adelson ("Adelson") with respect
to a loan (the "Tranche A Take-Out Loan") in the amount of the lesser of (a)
$105,000,000 and (b) the principal amount of the Tranche A Loan that is
outstanding on the Closing Date (as hereinafter defined) plus accrued and unpaid
interest thereon for the final interest accrual period that is then not yet
delinquent and (ii) the commitment letter (the "Tranche B Take-Out Commitment"),
dated as of November 14, 1997 with either (x) an entity owned and controlled by
Adelson or (y) Adelson with respect to a loan in the principal amount of
$35,000,000; and
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6
WHEREAS, Seller desires to sell and Purchaser desires to purchase
and accept, in accordance with and subject to the terms and conditions set forth
herein, Seller's interests in the Project as the same shall exist as of the
Closing Date, including, inter alia,:
(a) the following interests (the "Mall Real Property
Interests" consisting of:
(i) if the Subdivision shall not have been implemented
prior to the Closing Date, Seller's interests, as tenant, in the Mall I
Airspace/Groundlease;
(ii) if the Subdivision shall have been implemented
prior to the Closing Date, Seller's fee interest in the Mall Parcels; and (iii)
in either event, (A) Seller's interests, as tenant, in the Master Lease for
Additional Billboard Space, (B) Seller's interests, as landlord, under the Mall
Tenant Leases, (C) Seller's interests under the REA, and (D) Seller's interests
in and to all other easements, fixtures and improvements appurtenant thereto;
(b) Seller's interests under the Mall ESA and any other
"Mall Intangible Property Rights" (as hereinafter defined);
(c) any furnishings, fixtures and equipment owned or leased
by Seller and located in or on the Mall Parcels;
(d) cash in an amount equal to the balances, as of the
Closing Date, of the "Mall Leasing Commission Reserve" line item and the "Tenant
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7
Improvements Reserve" line item, as such terms are used in the FADAA
(collectively, the "Mall Reserves Amount"); and
(e) cash in an amount equal to the "Mall Retainage/Punchlist
Amount", as such term is used in the FADAA.
AGREEMENT
NOW, THEREFORE, in consideration of the respective agreements,
covenants, representations, warranties and conditions contained in this
Agreement, and for other good and valuable consideration, the parties hereto
agree as follows:
1. Definitions.
1.1 All capitalized terms used but not defined herein shall
have the respective meanings ascribed to such terms in the FADAA.
1.2 "Deemed Mall Construction Costs" shall mean all amounts
due under the GMAC Loan (and any indebtedness incurred to replace or refinance
any portion thereof in accordance with any limitations set forth in the
documentation pertaining to the GMAC Loan, the Bank Credit Facility or the
Mortgage Notes (including the "Substitute Tranche B Loan," as defined in the
GMAC Loan Agreement as in effect on the date hereof)), after giving effect to
any advances made under the GMAC Loan on the Closing Date in accordance with the
FADAA, provided that the "Deemed Mall Construction Costs" shall in no event
exceed $175,000,000. The following examples illustrate the meaning of this
definition:
(a) If the outstanding balance on the Closing Date under
the loan still held by GMAC or an assignee is $140,000,000 and there are no
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8
other outstanding "GMAC Loans" as of such date, then the Deemed Mall
Construction Costs shall be $140,000,000; and
(b) if (i) the outstanding balance on the Closing Date
under the loan still held by GMAC or an assignee (after giving effect to any
advances thereunder on such date in accordance with the terms of the FADAA) is
$105,000,000, (ii) the outstanding balance on a Substitute Tranche B Loan on
such date is $35,000,000, and (iii) there are no other outstanding "GMAC Loans"
as of such date, then the Deemed Mall Construction Costs shall be $140,000,000.
1.3 "Project Intangible Property Rights" shall mean all right,
title and interest, if any, of Seller in and to all contracts, leases,
commitments to lease, brokerage agreements, management agreements, guaranties,
permits, warranties, rights to the trademarks, logos and other intellectual
property rights and rights to phone numbers and the like pertaining to the
construction, operation, improvement, alteration or repair of the Project.
1.4 "Mall Intangible Property Rights" shall mean all right,
title and interest of Seller in and to: (a) the Mall ESA and any other Project
Intangible Property Rights which pertain exclusively to and benefit the Mall
Parcels or the Additional Billboard Space (including without limitation the
following intellectual property rights: the service marks "The Grand Canal" and
"Grand Canal Shops" and a non-exclusive license as to "Grand Venetian" and the
"Grand Venetian" design logo, but in each case only to the extent that the same
may be assigned in accordance with the documentation pertaining thereto and
applicable law, and (b) any Project
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9
Intangible Property Rights, including rights to trademarks, logos and other
intellectual property rights, which pertain to and benefit both the Mall Parcels
or the Additional Billboard Space and to other portions of the Project, but (1)
only to the extent of the portion thereof pertaining to and benefitting the Mall
Parcels or the Additional Billboard Space and (2) only to the extent that such
portion may be separately assigned from the balance thereof in accordance with
the documentation pertaining thereto and applicable law.
1.5 "Mall Personal Property" shall have the meaning assigned
to such term in Exhibit B attached hereto.
2. Agreement to Sell and Purchase.
2.1 Subject to the terms and conditions contained in this
Agreement, Seller agrees to sell, convey, assign and contribute to Purchaser,
and Purchaser agrees to purchase and accept from Seller the following
(collectively, the "Mall Assets"): (a) the Mall Real Property Interests; (b)
cash in the amount of the Mall Reserves Amount and the Mall Retainage/Punchlist
Amount; (c) the Mall Intangible Property Rights and (d) the Mall Personal
Property. Notwithstanding anything to the contrary in this Agreement, the term
"Mall Assets" shall not include any permits or approvals issued by any
governmental authorities in order to permit the operation of gaming activities
within the Phase I Land.
2.2 Notwithstanding anything else in this Agreement to the
contrary, Purchaser acknowledges and agrees that the purchase of the Mall Assets
shall be on an "as is," "where is" basis as of the Closing Date, without any
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10
representations or warranties of Seller or VCR of any kind other than as set
forth in Section 4 hereof.
2.3 Further, Seller agrees that to the extent that any Project
Intangible Property Rights that benefit the Mall are not assigned to Purchaser
pursuant to this Agreement because of the provisions of Section 1.4 hereof,
Seller nonetheless shall take such steps as Purchaser from time to time
reasonably may request in order to permit Purchaser to receive the benefits
thereof, so long as Purchaser reimburses Seller for all costs associated
therewith and otherwise takes steps reasonably approved by Seller to assure that
Seller shall not be exposed to liability as a consequence of taking the steps
requested by Purchaser for which Purchaser will not agree to reimburse Seller.
The provisions of this Section 2.3 shall survive the closing of the sale of the
Mall Assets and the delivery of a deed relating thereto.
3. Purchase Price and Payment; Purchaser's Pledge.
3.1 Seller has obtained an appraisal by Landauer Associates,
Inc., dated September 16, 1997 which appraises the value of the Mall Parcels at
$220,000,000. Seller and Purchaser anticipate that the actual value of the Mall
Assets (including the Mall Parcels) as of the Closing Date will be not less than
$190,000,000 (collectively, the "Transfer Price"). The Transfer Price will be
composed of two (2) components: (i) a portion (the "Cash Portion") payable in
cash and/or by assumption of debt (as provided in Section 3.2) in an amount
equal to the Deemed Mall Construction Costs, and (ii) in respect of the balance
of the Transfer Price, an equity contribution to Purchaser in the form of a
deemed distribution from the Seller to
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11
VCR, a capital contribution from VCR to Mall Intermediate Holding Company, LLC
("Mall Holdings"), a capital contribution from Mall Holdings to Grand Canal
Shops Mall Holding Company, LLC ("Mall Direct Holdings") and a capital
contribution from Mall Direct Holdings to Purchaser.
3.2 At Purchaser's option, the Cash Portion shall be paid by
Purchaser to Seller and/or its designee(s) (i) by wire transfer of immediately
available federal funds to an account or accounts designated by Seller by notice
to Purchaser not less than one (1) business day prior to the Closing and, (ii)
to the extent such funds are less than the amount needed to pay off the
indebtedness under the GMAC Loan in full (including, without limitation, any
portion thereof still held by GMAC or an assignee, any portion thereof replaced
or refinanced as of such date, and the Substitute Tranche B Loan, if any) by an
assumption of all remaining indebtedness under the GMAC Loan (pursuant to a
document substantially in the form of the "Mortgage Assumption", as defined in
Section 5.2.1, or, if a portion of the GMAC Loan then is held by a person or
entity other than GMAC, by appropriate alternative documentation containing
terms substantially similar to those in the Mortgage Assumption attached
hereto).
3.3 Notwithstanding the foregoing provisions of this Article
3, the parties acknowledge and agree that the Closing is not conditioned upon
the Mall Parcels or the other Mall Assets possessing a particular minimum or
maximum level of value as of the Closing.
4. Representations and Warranties; Covenants of Seller.
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12
4.1 Seller hereby represents and warrants to Purchaser that
as of the date hereof:
4.1.1 Seller is a limited liability company duly
organized and validly existing in good standing under the laws of the State of
Delaware. Seller has full power and authority to enter into this Agreement, and
except as expressly set forth herein, other than consents of GMAC (and any other
lenders from time to time holding any portion of the indebtedness under the GMAC
Loan) in connection with the GMAC Loan, no consents of any third party are
required to execute and deliver the instruments referred to herein and/or to
fully perform its obligations hereunder. All such consents have been obtained as
of the date hereof;
4.1.2 the signatory hereto on behalf of Seller has full
power and authority to bind Seller and all requisite actions necessary to
authorize Seller to execute and deliver this Agreement and perform its
obligations hereunder have been taken;
4.1.3 the execution and delivery of this Agreement, the
consummation of the transactions provided for herein and the fulfillment of the
terms hereof will not result in a breach of any of the terms or provisions of,
or constitute a default or an acceleration under, Seller's organizational
documents, any agreement to which Seller is a party or by which Seller or the
Premises is bound, or any judgment, writ, trust, decree or order of any court or
governmental body, or any applicable law,
<PAGE>
13
rule or regulation, which breach, default or acceleration would have a material
adverse effect on the Premises or Seller's ability to perform its obligations
hereunder;
4.1.4 Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Internal Revenue Code; and
4.1.5 Seller is solvent, has filed no petition in
bankruptcy under any state or Federal bankruptcy laws, has made no assignment
for the benefit of creditors and has no knowledge of any pending filing of a
petition in bankruptcy, whether voluntary or involuntary, against it;
4.1.6 Seller has delivered to Purchaser a true, complete
and correct copy of each of (i) the Mall I Airspace/Ground Lease, (ii) the
Master Lease for the Additional Billboard Space, and (iii) the Billboard
Operating Lease;
4.1.7 The Mall I Airspace/Ground Lease, the Master Lease
for Additional Billboard Space and the Billboard Operating Lease are each in
full force and effect as of the date hereof, and to the knowledge of Seller
there are no existing defaults thereunder or under any of the Mall Intangible
Property Rights; and
4.1.8 This Agreement is enforceable against Seller in
accordance with its terms.
4.2 VCR hereby represents and warrants to Purchaser that as
of the date hereof:
4.2.1 VCR is a limited liability company duly organized
and validly existing in good standing under the laws of the State of Nevada. VCR
has full power and authority to enter into this Agreement, and except as
expressly set
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14
forth herein, other than consents of GMAC (and any other lenders from time to
time holding any portion of the indebtedness under the GMAC Loan) in connection
with the GMAC Loan, no consents of any third party are required to execute and
deliver the instruments referred to herein and/or to fully perform its
obligations hereunder. All such consents have been obtained as of the date
hereof;
4.2.2 the signatory hereto on behalf of VCR has full
power and authority to bind VCR and all requisite actions necessary to authorize
VCR to execute and deliver this Agreement and perform its obligations hereunder
have been taken;
4.2.3 the execution and delivery of this Agreement, the
consummation of the transactions provided for herein and the fulfillment of the
terms hereof will not result in a breach of any of the terms or provisions of,
or constitute a default or an acceleration under, VCR's organizational
documents, any agreement to which VCR is a party or by which VCR or the Premises
is bound, or any judgment, writ, trust, decree or order of any court or
governmental body, or any applicable law, rule or regulation, which breach,
default or acceleration would have a material adverse effect on the Premises or
VCR's ability to perform its obligations hereunder;
4.2.4 VCR is not a "foreign person" as defined in
Section 1445(f)(3) of the Internal Revenue Code;
4.2.5 VCR is solvent, has filed no petition in
bankruptcy under any state or Federal bankruptcy laws, has made no assignment
for
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15
the benefit of creditors and has no knowledge of any pending filing of a
petition in bankruptcy, whether voluntary or involuntary, against it; and
4.2.6 This Agreement is enforceable against VCR in
accordance with its terms.
4.3 Purchaser hereby represents and warrants to Seller and
VCR that as of the date hereof:
4.3.1 Purchaser is a limited liability company duly
organized and validly existing in good standing under the laws of the State of
Delaware. Purchaser has the full power and authority to enter into this
Agreement and no consents of any third party are required to execute and deliver
the instruments referred to herein and/or to fully perform its obligations
hereunder;
4.3.2 the signatory hereto on behalf of Purchaser has
full power and authority to bind Purchaser and all requisite actions necessary
to authorize Purchaser to execute and deliver this Agreement and perform its
obligations hereunder have been taken;
4.3.3 the execution and delivery of this Agreement, the
consummation of the transactions provided for herein and the fulfillment of the
terms hereof will not result in a breach of any of the terms or provisions of,
or constitute a default or an acceleration under, Purchaser's organizational
documents, any agreement to which Purchaser is a party or by which Purchaser is
bound, or any judgment, writ, trust, decree or order of any court or
governmental body, or any
<PAGE>
16
applicable law, rule or regulation, which breach, default or acceleration would
have a material adverse effect on Purchaser's ability to perform its obligations
hereunder;
4.3.4 Purchaser is solvent, has filed no petition in
bankruptcy under any state or federal bankruptcy laws, has made no assignment
for the benefit of creditors and has no knowledge of any pending filing of a
petition in bankruptcy, whether voluntary or involuntary against it;
4.3.5 Purchaser has received and reviewed true, correct
and complete copies of the Mall I Airspace/Ground Lease, the Master Lease for
Additional Billboard Space and the Billboard Operating Lease, and Purchaser is
not aware of any facts which would cause the representations of Seller or VCR
set forth in this Section 4 to be untrue in any material respect; and
4.3.6 This Agreement is enforceable against Purchaser
in accordance with its terms.
4.4 The representations and warranties contained in this
Article 4 shall survive the Closing.
4.5 Seller and VCR covenant and agree that from and after the
date of this Agreement until the Closing Date or earlier termination of this
Agreement:
4.5.1 Seller and VCR shall use their best efforts to
implement the Subdivision; and
4.5.2 Seller and VCR may, at their discretion, by
written notice to Purchaser, change the Plans and Specifications; provided,
however,
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17
that Seller and VCR shall not make any changes in the Plans and Specifications
except in accordance with the provisions of the FADAA.
4.6 Seller and VCR covenant to Purchaser that all Leases (as
hereinafter defined) entered into from and after the date hereof through and
including the Closing Date shall be at fair market rental and on commercially
reasonable terms.
5. The Closing; Closing Deliveries.
5.1 Subject to the terms and conditions hereof, the closing
of the transactions provided for herein (the "Closing") will be held at the
location determined by the parties and on the Mall Release Date (the "Closing
Date").
5.2 At the Closing, Seller shall deliver or cause to be
delivered the following to Purchaser:
5.2.1 (a) If the Subdivision shall have been
implemented on or before the Closing Date a limited warranty deed (or such other
form of deed as shall be required in Clark County, Nevada in order for
Purchaser, GMAC and GSMC to obtain the title insurance they require) in proper
statutory form for recording, duly executed and acknowledged by Seller, so as to
convey to Purchaser fee simple title to the Mall Parcels, subject only to GCCLLC
Permitted Encumbrances (as defined in the FADAA) in the form attached hereto and
made a part hereof as Exhibit G (the "Deed").
<PAGE>
18
(b) In the alternative to (a) above, if the
Subdivision shall not have been implemented on or before the Closing Date,
assignment and assumption of lease (collectively, the "Mall I Airspace/Ground
Lease Assignment") in proper statutory form for recording, duly executed and
acknowledged by Seller, so as to assign and transfer to Purchaser (subject only
to GCCLLC Permitted Encumbrances) all of Seller's right, title and interest in
and to the Mall I Airspace/Ground Lease, in the form attached hereto and made a
part hereof as Exhibit H and a limited warranty deed (or such other form of deed
as shall be required in Clark County, Nevada in order for Purchaser, GMAC and
GSMC to obtain the title insurance they require) in proper statutory form for
recording, duly executed and acknowledged by Seller, so as to convey to
Purchaser fee simple title to all of the improvements and fixtures located or
constructed on the Mall Parcel, subject only to GCCLLC Permitted Encumbrances
(as defined in the FADAA) in the form attached hereto and made a part hereof as
Exhibit G-1 (the "Deed For Improvements").
(c) Regardless of whether the Subdivision
shall have been implemented on or before the Closing Date, an Assignment and
Assumption of Master Lease for Additional Billboard Space (the "Assignment of
Master Lease for Additional Billboard Space") in proper statutory form for
recording, duly executed and acknowledged by Seller, so as to assign and
transfer to Purchaser (subject only to GCCLLC Permitted Encumbrances) all of
Seller's right, title and
<PAGE>
19
interest in and to the Seller's interests under the Master Lease for Additional
Billboard Space, in the form attached hereto and made a part hereof as Exhibit
I.
(d) Notwithstanding anything to the contrary
in this Section 5.2.1, the parties agree that if at Closing Purchaser shall take
title to Seller's Interest subject to the liens in favor of the lender(s) under
the GMAC Loan to secure the GMAC Loan, in accordance with Section 3.2, (i) said
liens shall be, and shall be deemed to be, a GCCLLC Permitted Encumbrance, and
(ii) Seller shall deliver to Purchaser and GMAC at Closing an assumption of
mortgage agreement (the "Mortgage Assumption") in proper statutory form for
recording, duly executed and acknowledged by Seller, (x) if the Subdivision has
occurred, whereby Purchaser assumes all of Seller's obligations under the GMAC
Mortgage, in the form attached hereto and made a part hereof as Exhibit J1, and
(y) whereby Purchaser assumes all of Seller's obligations under the GMAC
Leasehold Mortgage, in the form attached hereto and made a part hereof as
Exhibit J2, if the Subdivision has not occurred.
5.2.2 a bill of sale duly executed by Seller evidencing the
Sale of the Mall Personal Property, substantially in the form attached hereto as
Exhibit C;
5.2.3 Cash in the following amounts:
(a) the Mall Reserves Amount; the cash to be delivered
pursuant to this Section 5.2.3(a) shall be transferred by assignment of all of
Seller's right, title and interest in an account pledged to GMAC pursuant to the
GMAC Loan Agreement;
<PAGE>
20
(b) the Mall Retainage/Punchlist Amount. The cash to
be delivered pursuant to this Section 5.2.3(b) shall be delivered by Seller
causing the same to be deposited into an escrow account to be maintained at the
Disbursement Agent for the benefit of the Purchaser. In connection with the
delivery of such cash, Seller further shall execute and deliver (and shall cause
the Disbursement Agent to execute and deliver) to Purchaser a Mall
Retainage/Punchlist Escrow Agreement substantially in the form attached hereto
as Exhibit D (the "Mall Retainage/Punchlist Escrow Agreement");
5.2.4 an assignment duly executed by Seller of all of its
right, title and interest in and to all Mall Intangible Property Rights, to the
extent assignable, and all utility deposits then held for Seller's benefit with
respect to the Assets, substantially in the form attached hereto as Exhibit E
(with the exhibits thereto accurately completed to reflect the pertinent facts
as of the Closing Date);
5.2.5 an assignment duly executed and acknowledged by Seller,
pursuant to which Seller shall assign to Purchaser all of Seller's right, title
and interest as landlord, in, to and under all Mall Tenant Leases (including,
without limitation, the Billboard Operating Lease), and the balance of any
security and similar deposits, if any, made by tenants pursuant to the terms of
the Mall Tenant Leases as of the Closing Date, all as more particularly set
forth in the form of Assignment and Assumption of Leases attached hereto as
Exhibit F (with the exhibits thereto accurately completed to reflect the
pertinent facts as of the Closing Date). At Closing, Seller shall deliver
therewith a check to Purchaser's order in the aggregate
<PAGE>
21
amount of any cash security deposits maintained by Seller for the benefit of
tenants under Mall Tenant Leases, including accrued interest, if any, which
would be due to tenants if such deposits were withdrawn on the Closing Date or,
at the option of Seller, Seller will allow Purchaser a credit against the
Purchase Price in the amount of such deposits. If any security deposits shall be
maintained in the form of a letter of credit, Seller shall deliver all such
letters of credit at Closing and shall assign to Purchaser all of its right,
title and interest as landlord thereto, and/or shall cooperate with Purchaser to
cause the reissuance or endorsement of each such letter of credit for the
benefit of Purchaser on or following the Closing;
5.2.6 executed originals of all Mall Tenant Leases or copies
thereof to the extent Seller is not in possession of executed originals, and all
related files and records, operating expense records and operating expense
statements, together with supporting documentation with respect to the Mall
Parcels, to the extent in the possession of Seller or its property manager;
5.2.7 estoppel certificates in form and content reasonably
acceptable to Purchaser executed by Seller, with respect to each of the Mall
Tenant Leases, to the extent received;
5.2.8 affidavits executed on behalf of Seller and VCR
providing Seller's and VCR's taxpayer identification numbers and a statement
that neither Seller nor VCR is a foreign person within the meaning of Section
1445(f)(3) of the Internal Revenue Code, as amended;
<PAGE>
22
5.2.9 the keys to the improvements within the Mall Parcels to
the extent in the possession of Seller or its property manager;
5.2.10 a letter, addressed to each tenant under a Mall Tenant
Lease and executed by Seller, advising of the sale of the Premises and (as
applicable) of the transfer of security and similar deposits, if any, to
Purchaser, directing it to pay rent and/or deliver notices to a person and at an
address designated by Purchaser and containing such other information as may be
required in accordance with applicable law;
5.2.11 to the extent in the possession of Seller or Seller's
property manager and not already delivered, (a) all original licenses and
permits, authorizations and approvals which are currently in force pertaining to
the Improved Property, (b) the contracts and other documentation pertaining to
or evidencing the Mall Intangible Property Rights, (c) plans and drawings for
the Mall Improvements and all improvements erected on the Improved Property and
(d) all guarantees and warranties which are currently in force in connection
with any work or services performed or equipment installed in and to the Mall
Improvements;
5.2.12 any and all operating expense statements, calculations
of escalations, tenant leasing files and records, marketing materials,
architectural and engineering drawings, utilities layout plans, topographical
plans and the like in Seller's or its managing agent's possession or control
which are used in the operation, construction, improvement, alteration or repair
of the Mall Parcels;
<PAGE>
23
5.2.13 such reasonable and customary affidavits and other
instruments and documents, limited to knowledge as appropriate, as Purchaser's
or GSMC's title insurer shall reasonably require (or, if the GMAC Loan is
assumed in whole or in part by Purchaser, as the title insurer or the then
holder of the GMAC Loan reasonably may require) in order to issue owner's and
mortgagee policies of title insurance in respect of the Mall Parcels and/or to
delete the standard pre-printed exceptions for mechanics' liens attributable to
labor, services or materials furnished to the Mall Parcels and parties in
possession other than the tenants under the Mall Tenant Leases; and
5.2.14 all other instruments and documents reasonably
requested by Purchaser to effectuate this Agreement and the transaction
contemplated hereby, each in form and substance reasonably satisfactory to
Seller.
5.3 At the Closing, Purchaser will deliver to Seller the
following:
5.3.1 the Cash Portion as provided in Section 3.2;
5.3.2 if the Subdivision shall not have been implemented
on or before the Closing Date, a counterpart of the Lease Assignment described
in Section 5.2.1(b) hereof in which Purchaser assumes and agrees to observe and
perform all of the obligations of Seller as tenant under the Mall I
Airspace/Ground Lease which arise from and after the Closing Date;
5.3.3 regardless of whether the Subdivision shall have been
implemented on or before the Closing Date, a counterpart of the Assignment of
Master Lease for Additional Billboard Space described in Section 5.2.1(c) hereof
in
<PAGE>
24
which Purchaser assumes and agrees to observe and perform all of the obligations
of Seller as tenant under the Master Lease for Additional Billboard Space which
arise from and after the Closing Date;
5.3.4 if at Closing Purchaser shall take title to Mall Real
Property Interests subject to the liens of the GMAC Loan, as contemplated in
Section 3.2(ii), the applicable counterpart of the Assumption Agreement
described in Section 5.2.1(d) hereof in which Purchaser assumes and agrees to be
bound by and to observe and perform all of the obligations of Seller under the
GMAC Loan which arise from and after the Closing Date.
5.3.5 a counterpart of the Mall Retainage/Punchlist Escrow
Agreement duly executed by Purchaser and duly consented to by any lender
receiving a security interest therein;
5.3.6 a counterpart of the assignment described in subsection
5.2.4, duly executed and acknowledged by Purchaser, in which Purchaser assumes
and agrees to be bound by and to observe and perform all of the obligations of
Seller under the contracts included within the Mall Intangible Property Rights
which arise from and after the Closing Date;
5.3.7 a counterpart of the assignment described in subsection
5.2.5 hereof, duly executed and acknowledged by Purchaser, in which Purchaser
assumes and agrees to be bound by and to observe and perform all of the
obligations of Seller under the Mall Tenant Leases which arise from and after
the Closing Date; and
<PAGE>
25
5.3.8 all other instruments and documents reasonably requested
by Seller to effectuate this Agreement and the transaction contemplated hereby,
each in form and substance reasonably satisfactory to Purchaser. Purchaser shall
also make any other payments required by this Agreement to be paid by Purchaser.
6. Conditions to Obligations
to Close Title.
The obligations of Seller, VCR and Purchaser to close the
transfer of the Assets under this Agreement is expressly conditioned upon the
Mall Release Date having occurred. Seller, VCR and Purchaser each covenant and
agree to apply their best efforts to cause the Mall Release Date to occur as
contemplated by the FADAA.
7. Damage or Destruction by Fire
or Other Casualty; Condemnation.
If all or any portion of the Mall Parcels is damaged or
destroyed by fire or other casualty or is taken in condemnation or by eminent
domain, such occurrence shall not result in a reduction in the Transfer Price or
modify any of the obligations of the Parties hereto under this Agreement,
including without limitations, the obligations to convey and purchase the Assets
upon satisfaction of the Mall Release Conditions.
8. Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit
of Seller and Purchaser and their respective successors and assigns.
<PAGE>
26
9. Notices.
All elections, notices and other communications (collectively,
"Notices") to be given hereunder by any party to any other shall be in writing
and sent in accordance with Section 9.1 of the FADAA to the address first above
written.
10. Payment of Expenses.
Purchaser shall pay at the Closing all costs associated with any
title insurance or surveys required to be delivered in connection with the
Closing and all real property transfer taxes payable by reason of the delivery
of the Deed or the Lease Assignment, as the case may be. Purchaser shall pay at
the Closing all other recording and filing fees and charges, and all title
insurance charges. No part of the Cash Portion hereunder will be allocated to
any of the Mall Intangible Property Rights. If, however, any part of the Cash
Portion is deemed by any governmental or administrative body to have been paid
for such Mall Intangible Property Rights, then Seller will be solely responsible
for the sales tax (if any) payable in connection therewith and will indemnify
Purchaser therefor and against any claim, liability or damage resulting from any
obligations arising from Seller's failure to pay the amount of any such sales
tax. Each party shall pay the fees and disbursements of its own counsel,
provided that in the event of any dispute hereunder, the prevailing party in any
such dispute shall be entitled to an award for its reasonable costs and expenses
incurred in connection therewith. The provisions of this Article shall survive
the Closing.
<PAGE>
27
11. Gender and Number.
Wherever the context so requires, references herein to the neuter
gender shall include the masculine and/or feminine gender, and the singular
number shall include the plural.
12. Entire Agreement.
This Agreement and the instruments referred to herein embody the
entire agreement and understanding between the parties relating to the subject
matter hereof and may not be amended, waived or discharged except by an
instrument in writing executed by the party against whom enforcement of such
amendment, waiver or discharge is sought.
13. Captions.
The captions in this Agreement are for convenience only and are not
to be deemed part of this Agreement.
14. Governing Law.
This Agreement is made pursuant to, and shall be governed by, the
laws of the State of Nevada.
15. Counterparts.
This Agreement may be executed and delivered in counterpart copies,
all of which together will constitute one executed original agreement.
16. Binding and Enforceable Agreements.
This Agreement is and is intended to be a fully binding and
enforceable contract between the parties hereto notwithstanding that the parties
are currently
<PAGE>
28
indirectly owned by the same shareholder. Each party hereto expressly
acknowledges that certain third parties, including the separate creditors of
each party hereto, are relying upon (i) the binding and enforceable nature
hereof by each party against the others and (ii) the separate assets and
liabilities of each party hereto. Each party hereto therefore agrees that this
Agreement shall not be amended or modified except in accordance with the terms
of the FADAA. Each party hereto further agrees not to challenge or seek to set
aside this Agreement or the transactions contemplated hereby (whether in any
bankruptcy or insolvency proceeding or otherwise) based upon any assertion that
such transactions do not contain arm's-length terms or upon any direct or
indirect common ownership of the parties hereto.
[signature pages follow]
<PAGE>
29
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
SELLER:
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 Weidner
--------------------------------
Name: William Weidner
Title: President
VCR:
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., as managing member
By: /s/ William Weidner
--------------------------------
Name: William Weidner
Title: President
PURCHASER:
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company, LLC, as managing
member
By: Mall Intermediate Holding Company, LLC, as managing
member
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc., as managing
member
By: /s/ William Weidner
-----------------------------------
Name: William Weidner
Title: President
<PAGE>
30
THE UNDERSIGNED CONSENTS
AND AGREES TO THE
PROVISIONS OF SECTION 3.1
MALL INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc., as managing member
By: /s/ William Weidner
----------------------------------
Name: William Weidner
Title: President
GRAND CANAL SHOPS MALL HOLDING COMPANY, LLC
By: Mall Intermediate Holding Company, LLC, as
managing member
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc., as managing member
By: /s/ William Weidner
-----------------------------
Name: William Weidner
Title: President
<PAGE>
EXHIBIT A-1
THE PHASE I LAND
<PAGE>
EXHIBIT A-2
THE MALL I AIRSPACE
<PAGE>
EXHIBIT A-3
THE RETAIL ANNEX LAND
<PAGE>
EXHIBIT A-4
THE ADDITIONAL BILLBOARD SPACE
<PAGE>
EXHIBIT B
MALL PERSONAL PROPERTY
1. All furniture, fixtures and equipment located on or in the Mall Parcels
and owned by Seller.
<PAGE>
EXHIBIT C
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are acknowledged, GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware
limited liability company ("Seller") sells, assigns, transfers and delivers to
GRAND CANAL SHOPS MALL, LLC, a Delaware
limited liability company ("Purchaser"), all of Seller's right, title and
interest in and to all personal property owned by Seller and located on or used
in connection with the operation and use of the real property described on
Exhibit 1 attached hereto and the improvements thereon or therein (collectively,
the "Property").
THE PROPERTY IS CONVEYED "AS IS", "WHERE IS" WITHOUT WARRANTY OR
REPRESENTATION OF ANY KIND, AND ALL WARRANTIES OF QUALITY, FITNESS AND
MERCHANTABILITY ARE HEREBY EXCLUDED.
TO HAVE AND TO HOLD all and singular the Property unto Purchaser,
its successors, heirs, executors, administrators and assigns, to their own
proper use and benefit, forever.
IN WITNESS WHEREOF, this Bill of Sale has been executed as of
__________, __.
SELLER:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole
member
By: Las Vegas Sands, Inc., as
managing member
By:
------------------------------
Name:
Title:
<PAGE>
Exhibit 1 to Bill of Sale
<PAGE>
EXHIBIT D
MALL RETAINAGE/PUNCHLIST ESCROW AGREEMENT
This Mall Retainage/Punchlist Escrow Agreement (the "Agreement") is
made as of ____________________, by and between GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC, a Delaware limited liability company having an address at
3355 Las Vegas Boulevard South, Room 1G, Las Vegas, Nevada 89109 ("Seller"), and
GRAND CANAL SHOPS MALL, LLC, a Delaware limited liability company ("Purchaser")
having an address at 3355 Las Vegas Boulevard South, Room 1L, Las Vegas, Nevada
89109.
Recitals
A. Seller and Purchaser are parties to that certain Sale and
Contribution Agreement, dated as of November 14, 1997 (the "Sale and
Contribution Agreement").
B. Seller also is a party to that certain Funding Agents'
Disbursement and Administration Agreement (as in effect as of the date executed,
the "FADAA"), dated November 14, 1997, by and between Seller, Las Vegas Sands,
Inc., Venetian Casino Resort, LLC, GMAC Commercial Mortgage Corporation
("GMAC"), The Bank of Nova Scotia, as administrative agent under that certain
Bank Credit Agreement (the Bank Credit Agreement") dated as of November 14,
1997, First Trust National Association, as trustee for the Borrower's 12.25%
Mortgage Notes due 2004 (the "Mortgage Notes"), Atlantic-Pacific Las Vegas,
L.L.C. and The Bank of Nova Scotia, as "Disbursement Agent".
C. Seller and Purchaser are entering into this Agreement in order to
implement the terms of the Sale and Contribution Agreement and the FADAA.
Agreement
1. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Sale and Contribution Agreement or, if not
defined therein, the meanings assigned to them in the FADAA.
2. Substantially concurrently herewith, Seller has caused to be
deposited with Disbursement Agent, as escrow agent hereunder, cash in the amount
of the Mall Retainage/Punchlist Amount. In accordance with the terms of the Sale
and Contribution Agreement, such funds shall be deemed property of Purchaser and
shall be maintained by Disbursement Agent in an account (the "Mall
Retainage/Punchlist Account") in accordance with the terms of this Agreement.
<PAGE>
2
3. Seller agrees that it shall complete, or cause to be completed,
the work required in order to complete all Mall Punchlist Items in accordance
with the terms of the FADAA.
4. Disbursement Agent shall withdraw funds to pay amounts payable
from the Mall Retainage/Punchlist Account in accordance with the terms of the
FADAA and subject to the prior or concurrent satisfaction of any conditions upon
such disbursements set forth therein (including the provision from the other
funding sources contemplated therein of their appropriate respective funding
shares with respect to any such advance, as determined in accordance with the
FADAA). Pending disbursement, all funds in the escrow account shall be invested
only in Permitted Investments at the direction of Purchaser and with maturities
appropriate to cover anticipated costs as and when they are anticipated to
accrue.
5. To the extent that amounts incurred with respect to the Mall
Punchlist Items are not timely paid, or the Mall Punchlist Items are not timely
completed, in either case, in accordance with the terms of the FADAA (including
without limitation Sections 5.3 and 5.4 thereof), Purchaser shall have the right
to withdraw funds from the Mall Retainage/Punchlist Account to pay such amounts
or to complete such items, as applicable by delivering a written request to
Disbursement Agent specifying the amount to be withdrawn. The parties further
agree that in the event that Final Completion has not been achieved by 18 months
after the Mall Release Date, then Purchaser shall have the right to withdraw
funds from the Mall Retainage/Punchlist Account to pay any other costs arising
out of the construction of the Project secured by liens upon the Project by
delivering a written request to Disbursement Agent specifying the amount to be
withdrawn.
6. Upon Final Completion, Purchaser agrees that it shall pay to
Seller, as compensation for Seller's agreement to complete the Mall Punchlist
Items and its work in connection therewith, any remaining balance within the
Mall Retainage/ Punchlist Account. Such amounts shall be released by delivering
a written request to Disbursement Agent specifying that all remaining funds
should be transferred to Seller and certifying that all Mall Punchlist Items are
completed. Purchaser agrees that such funds shall be disbursed to Seller free
and clear of any claims of Purchaser or any persons or entities claiming through
Purchaser.
7. Purchaser agrees that it shall not withdraw any funds from the
Mall Retainage/Punchlist Account except as specifically provided above.
Purchaser further agrees, to the maximum extent permitted under applicable law,
that it waives any right to use such funds in a manner in violation of the
provisions of this Agreement (including any right under the Bankruptcy Code to
assert that such funds can be used in a manner in violation of this Agreement).
Purchaser further agrees that it shall not encumber the Mall Retainage/Punchlist
Account in favor of any person or entity unless such secured party first agrees,
for the benefit of Seller and any lenders
<PAGE>
3
holding security interests in any portion of the Phase I Land, that (a) it will
permit disbursements from the Mall Retainage/Punchlist Account as and when
required in accordance with the terms of this Agreement, (b) the loan
documentation in favor of such lender(s) shall not permit the Purchaser to use
such funds for any other purpose, and that the lender(s) will not waive said
requirements except with the consent of any lender then holding a security
interest in those portions of the Phase I Land other than the Mall Parcels, and
(c) in the event of a bankruptcy or other insolvency proceeding involving the
Purchaser as a debtor, said lenders shall apply reasonable efforts to oppose any
use of the funds in a manner in violation of the requirements of this Agreement.
Any encumbrance or other assignment in violation of the provisions of this
paragraph shall have no force or effect.
8. In the event of any dispute hereunder, the prevailing party in
any such dispute shall be entitled to an award for its reasonable costs and
expenses incurred in connection therewith.
9. This Agreement embodies the entire agreement and understanding
between the parties relating to the subject matter hereof and may not be
amended, waived or discharged except by an instrument in writing executed by the
party against whom enforcement of such amendment, waiver or discharge is sought.
10. This Agreement is made pursuant to, and shall be governed by,
the laws of the State of New York.
11. This Agreement may be executed and delivered in counterpart
copies, all of which together will constitute one executed original agreement.
12. This Agreement is and is intended to be a fully binding and
enforceable contract between the parties hereto notwithstanding that the parties
are currently indirectly owned by the same shareholder. Each party hereto
expressly acknowledges that certain third parties, including the separate
creditors of each party hereto, are relying upon (i) the binding and enforceable
nature hereof by each party against the others and (ii) the separate assets and
liabilities of each party hereto. Each party hereto further agrees that this
Agreement shall not be amended or modified except with the consent of each
lender then holding a security interest in any portion of the Mall Real Property
Interests. Each party hereto therefore agrees not to challenge or seek to set
aside this Agreement or the transactions contemplated hereby (whether in any
bankruptcy or insolvency proceeding or otherwise) based upon any assertion that
such transactions do not contain arm's-length terms or upon any direct or
indirect common ownership of the parties hereto.
13. The Disbursement Agent agrees to perform as set forth above and
agrees to exercise commercially reasonable efforts and utilize commercially
prudent practices in the performance of its duties hereunder consistent with
those of
<PAGE>
4
similar institutions acting as an escrow agent and otherwise performing the
duties set forth above. The Disbursement Agent shall have no responsibility to
Seller or Purchaser as a consequence of performance by the Disbursement Agent
hereunder except for any bad faith, fraud, gross negligence or willful
misconduct of the Disbursement Agent. The Disbursement Agent is not obligated to
supervise, inspect or inform the Company of any aspect of the construction of
the Project or any other matter referred to above.
The Disbursement Agent may rely, and shall be protected in acting or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval or other paper or
document believed by it on reasonable grounds to be genuine and to have been
signed or presented by the proper party or parties.
The Disbursement Agent is authorized, in its exclusive discretion,
to obey and comply with all writs, orders, judgments or decrees issued by any
court or administrative agency affecting any money, documents or things held by
the Disbursement Agent hereunder. The Disbursement Agent shall not be liable to
any of the parties hereto, their successors, heirs or personal representatives
by reason of the Disbursement Agent's compliance with such writs, orders,
judgments or decrees, notwithstanding such writ, order, judgment or decree is
later reversed, modified, set aside or vacated.
The Disbursement Agent may consult with counsel and any opinion of
counsel shall constitute full and complete authorization and protection in
respect of any action taken or omitted by the Disbursement Agent hereunder in
good faith and in accordance with such opinion of counsel.
The Disbursement Agent may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys appointed with due care, but the Disbursement Agent shall be
responsible for any willful misconduct or gross negligence on the part of any
agent or attorney so appointed.
In the event of any disagreement between Seller and Purchaser and
adverse claims or demands are made in connection with or for any of the
investments or amounts held pursuant to this Agreement, the Disbursement Agent
shall be entitled at its option to refuse to comply with any such claim or
demand for so long as such disagreement shall continue, and in so doing, the
Disbursement Agent shall not be or become liable for damages or interest to
Seller or Purchaser for the Disbursement Agent's failure or refusal to comply
with such conflicting or adverse claims or demands. The Disbursement Agent shall
be entitled to continue to so refrain and refuse to act until:
<PAGE>
5
(i) the rights of the adverse claimants have been fully
adjudicated in the court assuming and having jurisdiction of the claimants and
the investments and amounts held pursuant to this Agreement; or
(ii) all differences shall have been adjusted by agreement,
and the Disbursement Agent shall have been notified thereof in writing by all
persons deemed by the Disbursement Agent, in its sole discretion, to have an
interest therein.
In addition, the Disbursement Agent, in its sole discretion, upon
giving thirty (30) days prior written notice to the Funding Agents, may file a
suit in interpleader for the purpose of having the respective rights of all
claimants adjudicated, and may deposit with the court all of the investments and
amounts held pursuant to this Agreement. Seller agrees to pay all costs and
reasonable counsel fees incurred by the Disbursement Agent in such action, said
costs and fees to be included in the judgment in any such action.
Seller and Purchaser covenant and agree to pay to the Disbursement
Agent from time to time, and the Disbursement Agent shall be entitled to
reasonable compensation for its services hereunder, to be paid one-half by each
of Seller and Purchaser.
Seller and Purchaser, acting jointly, shall have the right, should
they reasonably determine that the Disbursement Agent has breached or failed to
perform its obligations hereunder or has engaged in willful misconduct or gross
negligence, upon the expiration of thirty (30) days following delivery of
written notice of substitution to the Disbursement Agent, to cause the
Disbursement Agent to be relieved of its duties hereunder and to select a
substitute disbursement agent to serve hereunder. The Disbursement Agent may
resign at any time upon thirty (30) days written notice to all parties hereto.
Such resignation to be effective on the date specified in such notice. The funds
held by the Disbursement Agent under the terms of this Agreement as of the
effective date of the Disbursement Agent's resignation shall be delivered to a
successor escrow agent designated in writing by the Seller and reasonably
acceptable to Purchaser, but in the event no successor escrow agent is so
designated within thirty days after the effective date of the resignation, the
Disbursement Agent may pay the fund over to the clerk of a court of competent
jurisdiction to hold until a successor escrow agent has been designated. Upon
the effective date of any replacement as removal of the Disbursement Agent under
the Disbursement Agreement, the successor Disbursement Agent shall become
Disbursement Agent hereunder provided that the former Disbursement Agent shall
continue to enjoy the protections hereof with respect to its duties hereunder
prior to such resignation or replacement. Upon selection of such substitute
disbursement agent, Seller, Purchaser and the substitute disbursement agent
shall enter into an agreement substantially identical to this Agreement, and,
thereafter, the Disbursement Agent shall be relieved of its duties and
obligations to perform hereunder, except that
<PAGE>
6
the Disbursement Agent shall transfer to the substitute disbursement agent upon
request therefor originals of all books, records, and other documents in the
Disbursement Agent's possession relating to this Agreement.
The Disbursement Agent shall have no duties or obligations hereunder
except as expressly set forth herein, shall be responsible only for the
performance of such duties and obligations and shall not be required to take any
action otherwise than in accordance with the terms hereof. Purchaser agrees to
indemnify and hold the Disbursement Agent harmless from and against any claims,
damages, liabilities, losses, obligations or expenses (including reasonable
attorneys' fees) arising out of its performance or non-performance hereunder,
except to the extent that the same constitutes gross negligence or willful
misconduct.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
SELLER:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc, as managing member
By:
----------------------------------------
Name:
Title:
PURCHASER:
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company, LLC, as
managing member
By: Mall Intermediate Holding Company, LLC, as
managing member
By: Venetian Casino Resort, LLC, as sole
member
<PAGE>
7
By: Las Vegas Sands, Inc., as
managing member
By:
-------------------------------------
Name:
Title:
The Bank of Nova Scotia hereby consents to act as escrow agent in accordance
with the terms hereof.
THE BANK OF NOVA SCOTIA
By:
------------------------------
Name:
Title:
Date:
<PAGE>
EXHIBIT E
ASSIGNMENT OF CONTRACTS, INTANGIBLE
PERSONAL PROPERTY AND UTILITY DEPOSITS
THIS ASSIGNMENT (this "Assignment") is made and entered into as of
___________, by and between GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware
limited liability company ("Assignor"), and GRAND CANAL SHOPS MALL, LLC, a
Delaware limited liability company ("Assignee"), with reference to the
following:
A. In accordance with the terms of that certain Sale and
Contribution Agreement among Assignor and Venetian Casino Resort, LLC, as
Seller, and Assignee, as Purchaser dated as of November 14, 1997 (the "Purchase
Agreement"; capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Purchase Agreement), Assignor is
conveying to Assignee concurrently herewith the real property more particularly
described on Exhibit 1 attached hereto and the improvements thereon or therein
(the "Property").
B. In connection with the conveyance of the Property, Assignor and
Assignee intend that all of Assignor's right, title and interest in and under
certain contracts and utility deposits relating to the Property be assigned and
transferred to Assignee.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree that:
1. Assignment. Assignor assigns, conveys, transfers and sets over to
Assignee any and all of Assignor's right, title and interest in and to the
following property:
(a) Contracts. All those certain contracts and agreements listed
on Exhibit 2 attached hereto relating to the Property (the "Contracts").
(b) Intangible Personal Property. To the extent assignable, all
existing intellectual property rights, including U.S. Service Mark Application
Serial Nos. 75/136,424 and 75/149,902 for the marks "The Grand Canal" and "Grand
Canal Shops" respectively, guarantees, permits and warranties issued in
connection with the construction, operation, improvement, alteration or repair
of the Property or in connection with the purchase, operation or repair of the
Mall Intangible Property Rights (as defined in the Purchase Agreement).
<PAGE>
2
(c) Utility Deposits. Those deposits with utilities which remain
on deposit for the benefit of Assignor with respect to utilities servicing the
Mall Parcels (the "Utility Deposits"), and which are identified on Exhibit 3
attached hereto.
2. As Is.The parties expressly acknowledge and agree that this
assignment is made "as is", "where is" and without any representations or
warranties of Assignor of any kind except as set forth in paragraph 3 below and
as otherwise provided in the Purchase Agreement.
3. Assignor represents that, to its knowledge, Assignor is
transferring to Assignee the entire portion of Assignor's business to which the
marks "The Grand Canal" (U.S. Service Mark Application No. 75/156,424) and
"Grand Canal Shops" (U.S. Service Mark Application No. 75/149,902) pertain.
4. Assumption. Assignee does hereby accept the foregoing Assignment
and assumes, covenants and agrees to perform, be bound by, discharge and observe
all of the terms, covenants, conditions, duties, obligations, undertakings and
liabilities of Assignor under the Contracts and, to the extent applicable, the
Mall Intangible Property Rights arising from and after the date hereof.
5. Governing Law. This Assignment shall be governed by and construed
in accordance with the laws of the State of Nevada.
6. Successors and Assigns. This Assignment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
7. Modifications. This Assignment may not be modified, altered or
amended, or its terms waived, except by an instrument in writing signed by the
parties hereto.
<PAGE>
3
IN WITNESS WHEREOF, this Assignment has been executed by the parties
as of the date first above written.
ASSIGNOR:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc., as managing
member
By:
----------------------------------------------
Name:
Title:
ASSIGNEE:
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company,
LLC, as managing member
By: Mall Intermediate Holding Company,
LLC, as managing member
By: Venetian Casino Resort, LLC, as
sole member
By: Las Vegas Sands, Inc., as
managing member
By:
---------------------------------
Name:
Title:
<PAGE>
Exhibit 1 to Assignment of Contracts,
Intangible Personal Property and Utility Deposits
"PROPERTY"
<PAGE>
Exhibit 2 to Assignment of Contracts,
Intangible Personal Property and Utility Deposits
"CONTRACTS"
<PAGE>
Exhibit 3 to Assignment of Contracts,
Intangible Personal Property and Utility Deposits
"UTILITY DEPOSITS"
<PAGE>
EXHIBIT F
ASSIGNMENT AND ASSUMPTION OF LEASES
THIS ASSIGNMENT AND ASSUMPTION OF LEASES (this
"Assignment") is made and entered into as of _____________, by
and between GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware limited
liability company ("Assignor"), and GRAND CANAL SHOPS MALL, LLC, a Delaware
limited liability company ("Assignee"), with reference to the following:
A. In accordance with the terms of that certain Sale and
Contribution Agreement among Venetian Casino Resort, LLC and Grand Canal Shops
Mall Construction, LLC, as Seller, and Assignee, as Purchaser dated as of
November 14, 1997 (the "Purchase Agreement"; capitalized terms used herein and
not defined herein shall have the meanings assigned to such terms in the
Purchase Agreement), Assignor is required to convey to Assignee all right, title
and interest of Assignor, as Landlord, in, to and under the tenancies and leases
(the "Leases") described on Exhibit 2 annexed hereto and made a part hereof,
with respect to the premises described on Exhibit 1 annexed hereto and made a
part hereof (the "Premises").
B. In connection with the conveyance of the Leases, Assignor is also
transferring to Assignee all of Assignor's right, title and interest in and to
all of the security deposits listed on Exhibit 3 annexed hereto (the "Security
Deposits").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree that:
1. Assignment. Assignor hereby assigns, conveys, transfers and sets
over to Assignee, its successors and assigns forever, all of Assignor's right,
title and interest, as landlord, in, to and under the Leases and the Security
Deposits. This assignment is made "as is", "where is" and without any
representations or warranties of Assignor of any kind except as otherwise
provided in the Purchase Agreement.
2. Assumption. Assignee does hereby accept the foregoing Assignment,
and assume, covenant and agree to perform, be bound by, discharge and observe
all of the terms, covenants, conditions, duties, obligations, undertakings and
liabilities of Assignor under the Leases arising from and after the date hereof.
3. No Effect on Purchase Agreement. The delivery of this Assignment
by Assignor and the acceptance of this Assignment by Assignee shall not
constitute a waiver, expansion or modification of any representation, covenant
or warranty, which survives the closing of title, contained in the Purchase
Agreement.
<PAGE>
2
4. Modification. This Assignment may not be modified, altered or
amended, or its terms waived, except by an instrument in writing signed by the
parties hereto.
5. Governing Law. This Assignment shall be governed by and
construed in accordance with the laws of the State of Nevada.
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
Assignment as of the date first above written.
ASSIGNOR:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc., as managing
member
By:
---------------------------------------------
Name:
Title:
ASSIGNEE:
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company,
LLC, as managing member
By: Mall Intermediate Holding Company,
LLC, as managing member
By: Venetian Casino Resort, LLC, as
sole member
By: Las Vegas Sands, Inc., as
managing member
By:
--------------------------------
Name:
Title:
<PAGE>
Exhibit 1 to Assignment and Assumption of Leases
"PROPERTY"
<PAGE>
Exhibit 2 to Assignment and Assumption of Leases
"LEASES"
<PAGE>
Exhibit 3 to Assignment and Assumption of Leases
"SECURITY DEPOSITS"
<PAGE>
EXHIBIT G
FORM OF THE DEED
<PAGE>
EXHIBIT G-1
FORM OF DEED FOR IMPROVEMENTS
<PAGE>
EXHIBIT H
ASSIGNMENT AND ASSUMPTION OF
MALL I AIRSPACE/GROUND LEASE
THIS ASSIGNMENT AND ASSUMPTION OF MALL I AIRSPACE/GROUND LEASE (this
"Assignment") is made and entered into as of _____________, 1997 by and between
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC ("Assignor"), and GRAND CANAL SHOPS
MALL, LLC ("Assignee"), with reference to the following:
A. In accordance with the terms of that certain Sale and
Contribution Agreement between Assignor and Venetian Casino Resort, LLC, as
Seller, and Assignee, as Purchaser dated, as of November 14, 1997 (the "Sale and
Contribution Agreement"; capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Sale and Contribution
Agreement), Assignor is required to convey to Assignee all right, title and
interest of Assignor, as tenant in, to and under the ground lease (the "Mall I
Airspace/Ground Lease") described on Exhibit 2 annexed hereto and made a part
hereof, with respect to the premises described on Exhibit 1 annexed hereto and
made a part hereof (the "Premises").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree that:
1. Assignment. Assignor hereby assigns, conveys, transfers and sets
over to Assignee, its successors and assigns forever, all of Assignor's right,
title and interest, as tenant in, to and under the Mall I Airspace/Ground Lease,
including, without limitation, all right, title and interest of Assignor in and
to the easements, rights of way, servitudes, licenses, rights, privileges and
appurtenances at any time belonging or in any way pertaining to the Premises and
in and to all buildings, structures, other improvements and fixtures now
standing or at anytime hereafter erected upon or in the Premises. This
assignment is made "as is" and "where is", without any representation or
warrants of Assignor of any kind whatsoever (except as set forth in the Sale and
Contribution Agreement).
2. Assumption. Assignee does hereby accept the foregoing Assignment,
and assume, covenant and agree to perform, be bound by, discharge and observe
all of the terms, covenants, conditions, duties, obligations, undertakings and
liabilities of Assignor under the Mall I Airspace/Ground Lease from and after
the date hereof.
3. No Effect on Sale and Contribution Agreement. The delivery of
this Assignment by Assignor and the acceptance of this Assignment by Assignee
shall not
<PAGE>
constitute a waiver, expansion or modification of any representation,
covenant or warranty, which survives the closing of title, contained in the Sale
and Contribution Agreement.
4. Modification. This Assignment may not be modified, altered or
amended, or its terms waived, except by an instrument in writing signed by the
parties hereto.
5. Governing Law. This Assignment shall be governed by and construed
in accordance with the laws of the State of Nevada.
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
Assignment as of the date first above written.
ASSIGNOR:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc., as managing
member
By:
---------------------------------------
Name:
Title:
ASSIGNEE:
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company,
LLC, as managing member
By: Mall Intermediate Holding Company,
LLC, as managing member
By: Venetian Casino Resort, LLC, as
sole member
By: Las Vegas Sands, Inc., as
managing member
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT I
ASSIGNMENT AND ASSUMPTION OF MASTER LEASE FOR
ADDITIONAL BILLBOARD SPACE
THIS ASSIGNMENT AND ASSUMPTION OF MASTER LEASE FOR ADDITIONAL
BILLBOARD SPACE (this "Assignment") is made and entered into as of
_____________, by and between GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
("Assignor"), and GRAND CANAL SHOPS MALL, LLC ("Assignee"), with reference to
the following:
A. In accordance with the terms of that certain Sale and
Contribution Agreement between Assignor and Venetian Casino Resort, LLC, as
Seller, and Assignee, as Purchaser dated, as of November 14, 1997 (the "Sale and
Contribution Agreement"; capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Sale and Contribution
Agreement), Assignor is required to convey to Assignee all right, title and
interest of Assignor, as tenant in, to and under the Master Lease for Additional
Billboard Space (the "Master Lease for Additional Billboard Space") described on
Exhibit 2 annexed hereto and made a part hereof, with respect to the premises
described on Exhibit 1 annexed hereto and made a part hereof (the "Premises").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree that:
1. Assignment. Assignor hereby assigns, conveys, transfers and sets
over to Assignee, its successors and assigns forever, all of Assignor's right,
title and interest, as tenant in, to and under the Master Lease for Additional
Billboard Space, including, without limitation, all right, title and interest of
Assignor in and to the easements, rights of way, servitudes, licenses, rights,
privileges and appurtenances at any time belonging or in any way pertaining to
the Premises and in and to all buildings, structures, other improvements and
fixtures now standing or at anytime hereafter erected upon or in the Premises.
This assignment is made "as is" and "where is," without any representation or
warranty of Assignor of any kind whatsoever (except as set forth in the Sale and
Contribution Agreement).
2. Assumption. Assignee does hereby accept the foregoing Assignment,
and assume, covenant and agree to perform, be bound by, discharge and observe
all of the terms, covenants, conditions, duties, obligations, undertakings and
<PAGE>
liabilities of Assignor under the Master Lease for Additional Billboard Space
from and after the date hereof.
3. No Effect on Sale and Contribution Agreement. The delivery of
this Assignment by Assignor and the acceptance of this Assignment by Assignee
shall not constitute a waiver, expansion or modification of any representation,
covenant or warranty, which survives the closing of title, contained in the Sale
and Contribution Agreement.
4. Modification. This Assignment may not be modified, altered or
amended, or its terms waived, except by an instrument in writing signed by the
parties hereto.
5. Governing Law. This Assignment shall be governed by and construed
in accordance with the laws of the State of Nevada.
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
Assignment as of the date first above written.
ASSIGNOR:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole member
By: Las Vegas Sands, Inc., as managing
member
By:
---------------------------------------------
Name:
Title:
ASSIGNEE:
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company,
LLC, as managing member
By: Mall Intermediate Holding Company,
LLC, as managing member
By: Venetian Casino Resort, LLC, as
sole member
<PAGE>
By: Las Vegas Sands, Inc., as
managing member
By:
---------------------------------
Name:
Title:
<PAGE>
Exhibit 1 to Assignment and Assumption of
Mall I Airspace/Ground Lease
"PREMISES"
<PAGE>
Exhibit 2 Assignment and Assumption of
Mall I Airspace/Ground Lease
MALL I AIRSPACE/GROUND LEASE
That certain Ground Lease dated as of November 14, 1997 by and between Venetian
Casino Resorts, LLC ("Landlord") and Grand Canal Shops Mall Construction, LLC
("Tenant").
<PAGE>
[Post-Subdivision]
IN RECORDABLE FORM
Exhibit J 1
(To Sale and Contribution Agreement)
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT ("Assumption") is made as of this ____ day
of __________, 199_ among GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation, whose address is 100 South Wacker Drive, Suite 400, Chicago,
Illinois 60604 ("GMAC"), GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware
limited liability company, whose address is 3355 Las Vegas Boulevard South, Las
Vegas, Nevada 89109 ("Construction LLC"), and GRAND CANAL SHOPS MALL, LLC, a
Delaware limited liability company whose address is 3355 Las Vegas Boulevard
South, Las Vegas, Nevada 89109 ("Mall LLC"), VENETIAN CASINO RESORT, LLC, a
Nevada limited liability company, whose address is 3355 Las Vegas Boulevard
South, Las Vegas, Nevada 89109 ("VCR") and acknowledged by LAWYERS TITLE OF
NEVADA, INC., a Nevada corporation, whose address is 1050 East Flamingo, Suite
180, Las Vegas, Nevada 09119 ("Title Company").
W I T N E S S E T H:
WHEREAS, in accordance with the terms of that certain Sale and
Contribution Agreement among VCR, Construction LLC, as Seller, and Mall LLC, as
Purchaser, dated as of November 14, 1997 (the "Purchase Agreement"; capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Purchase Agreement), Construction LLC has agreed to convey to
Mall LLC interests in certain real property situated in Clark County, Nevada and
more particularly described on Exhibit A attached hereto and made a part hereof
(the "Property");
WHEREAS, pursuant to the terms of the Credit Agreement dated as of
November 14, 1997 among Las Vegas Sands, Inc., VCR, and Construction LLC,
(individually and collectively, as the context requires, "Borrowers") and GMAC,
as lender ("GMAC Credit Agreement"), and the other Loan Documents (as defined in
the GMAC Credit Agreement), GMAC has provided certain loans in the aggregate
amount of $140,000,000.00, which loans are secured by, among other things, the
Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated as
of November 14, 1997 made by VCR to the Title Company for the benefit of GMAC
and recorded on _________________, 1997 as Document No. ________________in the
Office of the Recorder of Deeds, Clark County, Nevada ("Deed of Trust") and
assumed by Construction LLC pursuant to the terms and provisions of that certain
Mall I Airspace/Ground Lease, dated as of
2
<PAGE>
November 14, 1997 by and between VCR, as landlord, and Construction LLC, as
tenant; and
WHEREAS, as a condition to the consummation of the Purchase
Agreement transaction, Mall LLC has agreed to assume all of the obligations of
and liabilities of the Borrowers under the GMAC Credit Agreement, the Deed of
Trust, and the other Loan Documents (collectively, "Secured Obligations").
R E C I T A L S:
NOW, THEREFORE, in consideration of the mutual terms and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Assumption of the Secured Obligations. Mall LLC hereby assumes
all of the Secured Obligations and covenants, promises and agrees as follows:
(a) To pay the indebtedness under the Secured Obligations at
the time, in the manner, and in all respects as provided
therein;
(b) To perform and discharge each and all of the covenants,
agreements and obligations under the Secured Obligations
to be performed by the Borrowers at the time, in the
manner, and in all respects as therein provided; and
(c) To be bound by each and all of the terms and provisions
of the Secured Obligations as though they had originally
been made, executed and delivered by Mall LLC.
2. Further Assurances. Mall LLC agrees to execute any documents
reasonably required by GMAC in order to evidence Mall LLC's assumption of the
Secured Obligations.
3. Title Update. Mall LLC has concurrently herewith provided GMAC
with a date down endorsement to its title policy, which update shows only
exceptions to title permitted by the Loan Documents or otherwise reasonably
acceptable to GMAC.
4. Representation and Warranty. Mall LLC hereby represents,
covenants, acknowledges, and warrants that the Secured Obligations are valid,
enforceable against it, and free from all defenses.
3
<PAGE>
5. Binding Effect. This Assumption shall be binding upon and inure
to the benefit of the parties hereto and their respective beneficiaries, legal
representatives, heirs, successors and assigns.
6. Entire Agreement. This Assumption constitutes the entire
understanding of the parties with respect to the subject matter hereof, and the
terms and conditions of this Assumption may be amended or modified only by a
written instrument signed by the parties hereto.
7. Headings. The headings of paragraphs hereof are for convenience
only and do not modify, limit or define the contents of the paragraphs.
8. Recording. This Assumption shall be recorded with the Office of
the Recorder of Deeds, Clark County, Nevada, at Mall LLC's expense.
9. Release of Seller and Affiliates. GMAC agrees that, effective
upon such recordation, VCR, Construction LLC and all of their respective
Affiliates (other than Mall LLC) shall be released from any further liability
whatsoever under the Secured Obligations.
IN WITNESS WHEREOF, the parties have executed this Assumption as of
the day and year first above written.
GMAC COMMERCIAL MORTGAGE
By:
------------------------------------
Its:
-----------------------------------
GRAND CANAL SHOPS MALL
By: Venetian Casino Resort, LLC, as sole
Member
By: Las Vegas Sands, Inc.,
as managing member
By:
-----------------------------
Name:
Title:
4
<PAGE>
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company,
Inc., as managing member
By: Venetian Casino Resort, LLC,
as sole Member
By: Las Vegas Sands, Inc.,
as managing member
By:
-----------------------------
Name:
Title:
VENETIAN CASINO RESORT, LLC,
By: Las Vegas Sands, Inc.,
as managing member
By:
---------------------------------
Name:
Title:
Accepted and Agreed to this
_________day of________________________, 19__
LAWYERS TITLE OF NEVADA, INC.
By:
---------------------------
Its:
--------------------------
5
<PAGE>
STATE OF ________________)
)
COUNTY OF _______________)
This instrument was acknowledged before me on the ____ day of ___________,
19___, by _____________________________________________, as __________of GMAC
COMMERCIAL MORTGAGE CORPORATION.
Notary Public
STATE OF ________________)
6
VENETIAN CASINO RESORT, LLC,
Landlord
and
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
Tenant
-----------------------------------------------------
MALL I AIRSPACE/GROUND LEASE
-----------------------------------------------------
As of November 14, 1997
<PAGE>
MALL I AIRSPACE/GROUND LEASE
THIS MALL I AIRSPACE/GROUND LEASE (this "Lease") is made as of the
14th day of November, 1997, by and between VENETIAN CASINO RESORT, LLC, a Nevada
limited liability company ("Landlord"), and GRAND CANAL SHOPS MALL CONSTRUCTION,
LLC, a Delaware limited liability company ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to certain land (the "Phase
I Land") a part of which is (i) that certain space more particularly described
in Exhibit A-1 attached hereto and made a part hereof (such parcel, as the
boundaries thereof may be adjusted in accordance with the REA (as herein
defined) together with all easements, development rights, licenses, privileges,
interests and other rights appurtenant thereto is referred to herein as the
"Mall I Airspace") and (ii) that certain land more particularly described on
Exhibit A-2 (such parcel, as the boundaries thereof may be adjusted in
accordance with the REA together with all easements, development rights,
licenses, privileges, interests and other rights appurtenant thereto is referred
to herein as the "Retail Annex Land"). The Retail Annex Land and the Mall I
Airspace are collectively herein referred to as the "Mall Real Estate";
WHEREAS, Landlord intends to do a commercial subdivision of the
Phase I Land so that the Mall I Airspace and the Retail Annex Land will be
separate legal parcels capable of being conveyed in fee simple (collectively,
the "Subdivision");
WHEREAS, Landlord and Tenant contemplate, in accordance with the
FADAA (as herein defined), constructing (a) a Venetian-theme shopping mall and
certain other improvements to be located in the Mall I Airspace; (b) a
Venetian-theme retail annex to such shopping mall to be located on the Retail
Annex Land, (together with all improvements, systems, fixtures and other items
or property now or hereafter attached or appurtenant to such improvements or
used or necessary in the ownership and operation thereof and all appurtenances
belonging thereto, herein collectively referred to as, the "Mall Improvements";
and (c) certain common areas ("Common Areas") more particularly described as H/C
Pass-Through Areas, H/C Mall Common Areas, and H/C Limited Common Areas and Mall
I Limited Common Areas in the REA (as hereinafter defined), all of the foregoing
being constructed in accordance with (x) the FADAA (hereinafter defined) and (y)
the Plans and Specifications. The Mall Improvements together with the Mall I
Airspace and the Retail Annex Land are herein referred to as the "Premises";
WHEREAS, Las Vegas Sands Inc. ("LVSI"), a Nevada corporation,
Landlord and Tenant (collectively, "Borrowers"), in order to finance a portion
of the construction of the Project (as defined in the FADAA), including the Mall
<PAGE>
2
Improvements and Common Areas, have entered into a certain Credit Agreement,
dated as of November 14, 1997 with GMAC Commercial Mortgage Corporation ("GMAC")
in connection with a loan in the principal amount of up to $140,000,000 plus
possible other future advances as provided in the Credit Agreement (the "GMAC
Loan");
WHEREAS, the GMAC Loan is secured by, among other things, the
following security documents in favor of GMAC:
(a) a deed of trust (the "GMAC Fee Mortgage") upon, among other
things, (i) fee title to the Mall Real Estate, (ii) Landlord's interest, as
Landlord, and Tenant's interests as tenant, in this Lease, and (iii) Landlord's
interests, as Landlord, in that certain Master Lease for Additional Billboard
Space of even date herewith between Landlord and Tenant ("Master Lease for
Additional Billboard Space"), and
(b) a deed of trust (the "GMAC Leasehold Mortgage") upon, among
other things, (i) Tenant's interests, as tenant, in this Lease, (ii) Tenant's
interests, as tenant, in the Master Lease for Additional Billboard Space, (iii)
Tenant's interests, as landlord, under any leases (including without limitation,
that certain Billboard Operating Lease between Tenant as successor to Landlord
and B.L. of Las Vegas, Inc. dated June 26, 1997, herein, the "Billboard
Operating Lease") entered into with tenants for use of portions of the Mall Real
Estate (each, a "Mall Tenant Lease"); and
WHEREAS, LVSI, Tenant, Landlord, GMAC, The Bank of Nova Scotia, as
administrative agent under that certain Bank Credit Agreement dated as of
November 14, 1997, First Trust National Association, as trustee for the
Borrower's 12.25% Mortgage Notes due 2004, Atlantic-Pacific Las Vegas, LLC, as
the HVAC Provider, and The Bank of Nova Scotia, as disbursement agent have
entered into a Funding Agents' Disbursement and Administration Agreement dated
as of November 14, 1997 (the "FADAA") setting forth the Borrower's construction
covenants with respect to the Project (as defined in the FADAA);
WHEREAS, in connection with the FADAA, (a) Landlord, Tenant and
Interface Group - Nevada, Inc. ("Interface"), have entered into and recorded an
Amended and Restated Reciprocal Easement, Use and Operating Agreement, dated as
of November 14, 1997 (the "REA") establishing certain rights, obligations and
easements with respect to the Phase I Land, including Mall Real Estate, and
certain real properties adjacent to the Phase I Land;
WHEREAS, LVSI, Landlord, the Bank Agent (as defined in the FADAA),
Goldman Sachs Credit Partners L.P., as syndication agent and arranger, and the
Bank Lenders (as defined in the FADAA), in order to finance the development and
construction of the Project, have entered into that certain Credit Agreement
dated as of November 14, 1997 ("Bank Credit Agreement");
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WHEREAS, LVSI, Landlord, and the Mortgage Notes Indenture Trustee
(as defined in the FADAA), in order to finance the development and construction
of the Project, have entered into that certain Mortgage Notes Indenture dated as
of November 14, 1997 ("Mortgage Notes Indenture");
WHEREAS, Tenant has guaranteed the obligations of LVSI and Landlord
under the Bank Credit Agreement and the Mortgage Notes Indenture, which
obligations are secured by, among other things, a second priority deed of trust,
in the case of the Bank Credit Agreement, and a third priority deed of trust, in
the case of the Mortgage Notes Indenture, upon (i) Tenant's interests, as
tenant, in this Lease and the Master Lease for the Additional Billboard Space,
and (ii) Tenant's interests, as landlord, under any Mall Tenant Leases.
WHEREAS, Landlord intends to convey to Tenant fee simple title to
the Mall Real Estate upon completion of the Subdivision.
NOW, THEREFORE, in consideration of the respective agreements,
covenants, representations, warranties and conditions contained in this Lease,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions.
1.1 "Alteration" shall mean any improvement, alteration,
addition, restoration, replacement, change or other work, or signage, to the
interior or exterior of the Premises made by or for Tenant or any subtenant.
1.2 "Bankruptcy Code" shall mean Title 11, United States Code,
as now in effect or as hereafter amended, or any successor statute.
1.3 "Base Building" shall have the meaning set forth in the
REA.
1.4 "Business Day" shall mean any day other than Saturday,
Sunday, a Federal holiday, a holiday recognized by the State of Nevada or any
day on which banks in Nevada are required or permitted to be closed.
1.5 "Casino" shall mean the casino to be constructed on the
Phase I Land in accordance with the FADAA.
1.6 "Commencement Date" shall mean the date hereof.
1.7 "Expiration Date" shall mean the first to occur of (x) the
ninety-ninth (99th) anniversary date of the Commencement Date and (y) the
Transfer Date.
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1.8 "First Lease Year" shall mean the Lease Year commencing on
the Commencement Date and ending on the first December 31st following the
Commencement Date.
1.9 "Hotel" shall mean the "Venetian" theme suite hotel to be
built within and above the Base Building in accordance with the FADAA.
1.10 "Landlord's Mortgage" shall mean each and every mortgage
or deed of trust which may now or hereafter encumber Landlord's interest in the
Premises and/or the Base Building, and all increases, renewals, modifications,
consolidations, replacements and extensions thereof.
1.11 "Lease Year" shall mean the First Lease Year and each
one-year period during the Term commencing on January 1st and ending on December
31st, except that the last Lease Year shall end on the Expiration Date.
1.12 "Mall Property" shall mean all inventory, trade fixtures,
furniture, furnishings, equipment and signs that may from time to time be
installed, placed, affixed or located at the Premises from and after the
Commencement Date.
1.13 "Person" shall mean and include an individual,
corporation, partnership, limited liability company, unincorporated association,
any other business entity and any governmental entity or subdivision thereof.
1.14 "Phase I Land" shall mean the land described in Exhibit
A-3 attached hereto and made a part hereof, together with all easements,
development rights, licenses, privileges, interests, and other rights
appurtenant thereto.
1.15 "Plans and Specifications" shall mean the "Plans and
Specifications" as defined in the FADAA and the same may be amended from time to
time in accordance with the terms thereof.
1.16 "Transfer Date" shall mean the date that Landlord conveys
fee simple title to the Mall Real Estate and all right, title and interest in
the Mall Improvements to Tenant, which date shall not be less than one (1) day
nor more than ten (10) days after the date (the "Mall Creation Date") that the
parties hereto cause the Premises to become, in accordance with applicable legal
requirements, two (2) separate legal parcels.
1.17 "Venetian" shall mean the Phase I Land and all structures
and improvements constructed thereon, including the Hotel and Casino.
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5
2. Demised Premises; The Term; Use; Common Areas.
2.1 Demised Premises. Landlord, for and in consideration of
the rents hereinafter reserved and the covenants and agreements on the part of
Tenant to be paid and performed, hereby leases to Tenant, and Tenant hereby
leases from Landlord as of the Commencement Date, the Mall Real Estate, to have
and to hold during the Term, subject to the terms and conditions hereof.
2.2 Term. The term of this Lease shall commence on the
Commencement Date and shall end on the Expiration Date (the "Term").
2.3 Use. Tenant shall use the Premises for the purposes
described in the REA.
2.4 Common Areas. Landlord grants to Tenant the right to use
the Common Areas in accordance with the rights granted to Tenant in the REA.
3. Rent.
3.1 Rent. Tenant covenants and agrees to pay to Landlord, as
fixed annual rent ("Rent") for the Premises on account of each Lease Year, an
amount equal to One Dollar ($1.00). Tenant's obligation to pay Rent shall
commence on the Commencement Date. Rent shall be due and payable on or before
the first day of each Lease Year.
4. Construction of Mall Improvements.
Landlord and Tenant acknowledge that Landlord and Tenant intend to
construct the Venetian, including without limitation, the Mall Improvements in
and on the Mall Real Estate in accordance with the provisions of the FADAA and
the Plans and Specifications. Landlord shall make no changes in the Plans and
Specifications except in accordance with the provisions of the FADAA. Landlord
acknowledges and agrees that all Mall Improvements as from time to time are
constructed on the Mall Real Estate are owned by Tenant in fee simple. Tenant
agrees to accept all Mall Improvements in their "AS IS" "WHERE IS" condition
subject to all rights under all guaranties and warranties of third parties with
respect thereto, to the extent that the same are assignable in accordance with
the terms thereof and applicable law.
5. Leasehold Financing.
5.1 Leasehold Mortgage Permitted. Nothing in this Lease shall
be construed as restricting in any manner the right of Tenant, from time to
time, or at any time, to create one or more liens on, or encumber, by mortgage,
deed of trust or trust deed in the nature of a mortgage (each, a "Leasehold
Mortgage") the leasehold interest of Tenant in the Premises, and subject to the
restrictions and
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6
limitations contained in any such instrument as to further conveyances,
transfers and assignments, Tenant will have the right at any time, and from time
to time, to convey, transfer and assign its interest under this Lease to a
mortgagee or trustee, or its designee, (each "Leasehold Mortgagee") under a
Leasehold Mortgage given to secure any note or other obligation of Tenant.
Within ten (10) days after any funding of the loan secured by any such Leasehold
Mortgage, Tenant shall serve written notice upon Landlord of the existence
thereof, shall designate a post office address where notice may be served upon
the Leasehold Mortgagee under any such Leasehold Mortgage and shall furnish
Landlord with a copy of such Leasehold Mortgage and, to the extent requested by
Landlord copies of all other loan documents with respect thereto. Failure of
Tenant to serve such notice in a timely manner shall not effect any Leasehold
Mortgagee's rights hereunder. A Leasehold Mortgagee shall have the right to make
such services and deliveries upon Landlord.
5.2 Certain Benefits to Leasehold Mortgage. If Tenant shall
execute any Leasehold Mortgage, then, in such event and so long as such
Leasehold Mortgage shall constitute a lien or encumbrance against the leasehold
estate of Tenant hereunder, the following provisions shall apply:
5.2.1 Amendment of Lease. No agreement by Landlord
and Tenant for the cancellation, surrender, acceptance of surrender or
termination, modification or amendment of this Lease shall be effective as to
any Leasehold Mortgagee without the written consent of such Leasehold Mortgagee.
If the Leasehold Mortgagee whose lien has first priority consents to an
amendment, any Leasehold Mortgagee of a junior lien on the Mall Real Estate will
not unreasonably withhold its consent to such amendment.
5.2.2 Exercise of Section 365(h)(i) Rights. Landlord
agrees, for the benefit of Leasehold Mortgagee, that the right of election
arising under Section 365 (h)(i) of the Bankruptcy Code shall be exercised by
Leasehold Mortgagee and not by Tenant. Any attempted exercise by Tenant of such
right of election in violation hereof shall be void.
5.2.3 Loss Payee. The name of such Leasehold
Mortgagee shall be added to the "Loss Payable Endorsement" of any and all
insurance policies required to be carried by Tenant under the Lease or the REA.
5.2.4 Proceeds of Casualty and Condemnation.
Notwithstanding anything in this Lease to the contrary, in the event of any
casualty to or condemnation of the Premises or any portion thereof, the
insurance proceeds or condemnation proceeds, as the case may be, shall be paid
in accordance with the FADAA and the REA; provided that if neither the FADAA nor
the REA are in effect, the Leasehold Mortgagees shall be entitled to receive all
insurance proceeds and/or condemnation awards as their interests appear (up to
the amount of the indebtedness secured by the Leasehold Mortgage) otherwise
payable to Tenant or
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7
Landlord or both and apply them in accordance with the Leasehold Mortgage and
shall have the right, but not the obligation, to restore the Premises.
5.2.5 Merger. If Tenant shall acquire fee title, or any
other estate, title or interest in the Premises which is the subject of this
Lease, or any part thereof, or if the leasehold estate created by this Lease, or
any portion thereof, shall be assigned, sold or otherwise transferred to the
owner of such fee title or other estate, title or interest in the Premises which
is the subject of this Lease, then in either such event, upon the election of
the Leasehold Mortgagee first in priority expressly made in writing at any time
thereafter, the Leasehold Mortgage held by such Leasehold Mortgagee shall attach
to and be a first lien upon such fee title and/or other estate so acquired (but
only as the same pertains to the Premises, rather than any greater part of the
Phase I Land), and such fee title and/or other estate so acquired shall be
considered as mortgaged, assigned and conveyed to such Leasehold Mortgagee and
the lien of such Leasehold Mortgage spread to cover such estate with the same
force and effect as though specifically mortgaged, assigned or conveyed in such
Leasehold Mortgage (and upon request of such Leasehold Mortgagee, either or both
Landlord and Tenant shall execute further mortgages, assignments of leases and
rents, amendments to documents and instruments as such Leasehold Mortgagee may
reasonably require for such purpose); provided, however, that notwithstanding
the foregoing, if and so long as any of the indebtedness secured by any such
Leasehold Mortgage shall remain unpaid, unless the Leasehold Mortgagee
thereunder shall otherwise in writing expressly consent, the fee title to the
Premises which is the subject of this Lease and the leasehold estate created by
this Lease shall not merge but shall always be kept separate and distinct,
notwithstanding the union of said estates either in Landlord or in Tenant, or in
a third party, by purchase or otherwise.
5.2.6 Right of Entry. Leasehold Mortgagee shall have
the right to enter upon the Premises at any time for any purpose, including
curing any defaults by Tenant under this Lease, and Landlord hereby agrees to
accept performance and compliance by any such Leasehold Mortgagee of any
covenants, agreements, provisions, conditions and limitations on Tenant's part
to be kept, observed or performed hereunder, with the same force and effect as
though kept, observed and performed by Tenant. Any default by Tenant that is not
susceptible to being cured by Leasehold Mortgagee shall be deemed waived by
Landlord.
5.2.7 Notice to Tenant. Landlord shall serve Tenant
with notice if Landlord files, or has filed against it, a petition under
chapters 7 or 11 of the Bankruptcy Code. Such notice shall be served within
twenty-four (24) hours of such filing. Landlord shall, upon serving Tenant with
any notice of (1) a bankruptcy filing as herein described, (2) default pursuant
to the provisions of this Lease, or (3) a matter on which Landlord may predicate
or claim a default, at the same time serve a copy of such notice upon every
Leasehold Mortgagee that has served Landlord with notice of its identity and
address, and no such notice by Landlord to Tenant hereunder
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8
shall have been deemed duly given unless and until a copy thereof has been so
served on every such Leasehold Mortgagee.
5.2.8 Additional Cure Period. From and after the time
such notice as provided in Section 5.2.7 has been served upon any Leasehold
Mortgagee, such Leasehold Mortgagee shall have the same period, after the
service of notice upon it, for curing any default, or acts or omissions the
subject of such notice, as is given Tenant after the service of notice upon
Tenant, plus in each instance an additional one hundred twenty (120) days
(unless, with respect to non-monetary defaults, such cure requires work to be
performed, acts to be done, or conditions to be removed which cannot by their
nature reasonably be performed, done or removed, as the case may be, within such
one hundred twenty (120) day period, in which case there shall be allowed to
such Leasehold Mortgagee such additional time as may be required to effect such
cure if the Leasehold Mortgagee shall have commenced curing same within such one
hundred twenty (120) day period and shall prosecute the same to completion, if
reasonably susceptible of being cured by such Leasehold Mortgagee).
5.2.9 Termination. Anything contained in this Lease to
the contrary notwithstanding, if any default shall occur which entitles Landlord
to terminate this Lease, or to exercise any other rights, powers or remedies
available to it under this Lease, Landlord shall have no right to terminate this
Lease or to exercise any of such rights, powers or remedies unless following the
expiration of the period of time given Tenant to cure such default (or the act
or omission which gave rise to such default), Landlord shall notify every
Leasehold Mortgagee of Landlord's intent to so terminate or exercise any such
rights, powers or remedies ("Default Notice") at least thirty (30) days in
advance of the proposed effective date of such termination, or exercise of any
rights, power or remedies if such default is capable of being cured by the
payment of money, at least sixty (60) days in advance of the proposed effective
date of such termination, or exercise of any such rights, powers or remedies if
such default is not capable of being cured by the payment of money ("Default
Notice Period"). The provisions of this Subsection 5.2.9 shall apply if, during
such thirty (30) day Default Notice Period, any Leasehold Mortgagee shall notify
Landlord of such Leasehold Mortgagee's desire to nullify such notice.
5.2.10 Procedure on Default.
(a) If Landlord shall elect to terminate this
Lease or obtain possession of the Premises by reason of any default of
Tenant, and a Leasehold Mortgagee shall have proceeded in the manner
provided for by Subsection 5.2.9, the specified date for the termination
of this Lease as fixed by Landlord in its Default Notice or for the
obtaining of possession shall be extended for a period of six (6) months,
provided that such Leasehold Mortgagee shall, during such six (6) month
period:
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9
(1) Pay or cause to be paid the
monetary obligations of Tenant under this Lease as the same become
due, other than rentals, and continue its good faith efforts to
perform all of Tenant's other obligations under this Lease,
excepting (i) obligations of Tenant to satisfy or otherwise
discharge any lien, charge or encumbrance against Tenant's interest
in this Lease or the demised premises junior in priority to the lien
of the mortgage held by such Leasehold Mortgagee and (ii) past
nonmonetary obligations then in default and not reasonably
susceptible of being cured by such Leasehold Mortgagee; provided
that Leasehold Mortgagee may offset amounts it expends to cure any
defaults by Landlord under this Lease; and
(2) If not enjoined or stayed, take steps
to acquire or sell Tenant's interest in this Lease by foreclosure of
the Leasehold Mortgage or other appropriate means and prosecute the
same to completion with due diligence.
(b) If at the end of such six (6) month period
such Leasehold Mortgagee is complying with 5.2.10(a) then this Lease shall
not then terminate, and the time for completion by such Leasehold
Mortgagee of its proceedings shall continue so long as such Leasehold
Mortgagee is enjoined or stayed and thereafter for so long as such
Leasehold Mortgagee proceeds to complete steps to acquire or sell Lessee's
interest in this Lease by foreclosure of the Leasehold Mortgage or by
other appropriate means with reasonable diligence. Nothing in this
Subsection 5.2.10, however, shall be construed to extend this Lease beyond
the original term thereof or to require a Leasehold Mortgagee to continue
such foreclosure proceedings after the default has been cured. If the
default shall be cured and the Leasehold Mortgagee shall discontinue such
foreclosure proceedings, this Lease shall continue in full force and
effect as if Tenant had not defaulted under this Lease.
(c) If a Leasehold Mortgagee is complying
with Subsection 5.2.10(a)(1) of this Section, then upon the acquisition of
Tenant's estate herein by such Leasehold Mortgagee or its designee or any
other purchaser at a foreclosure sale or otherwise (and the discharge of
any lien, charge or encumbrance against the Tenant's interest in this
Lease or the demised premises which is junior in priority to the lien of
the Leasehold Mortgage held by such Leasehold Mortgagee and which the
Tenant is obligated to satisfy and discharge by reason of the terms of
this Lease) this Lease shall continue in full force and effect as if
Tenant had not defaulted under this Lease.
5.2.11 Receiver. A Leasehold Mortgagee shall have the
right after institution of foreclosure proceedings to apply to the court for the
appointment of a receiver of the Premises. In the event foreclosure proceedings
have
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10
been instituted, any money held by Landlord which becomes payable to Tenant
shall be payable upon demand to such Leasehold Mortgagee as the interest of such
Leasehold Mortgagee may appear when the same so becomes payable to Tenant. If
Landlord shall at any time be in doubt as to whether such monies are payable to
such Leasehold Mortgagee or to Tenant, Landlord may pay such monies into court
and file an appropriate action of interpleader in which event all of Landlord's
costs and expenses (including attorneys' fees) shall first be paid out of the
proceeds so deposited.
5.2.12 No Assumption. For purposes of this
Subsection 5.2.12, the making of a Leasehold Mortgage shall not be deemed to
constitute an assignment or transfer of this Lease or of the leasehold estate
hereby created, nor shall any Leasehold Mortgagee, as such, be deemed to be an
assignee or transferee of this Lease or of the leasehold estate hereby created,
so as to require such Leasehold Mortgagee, as such, to assume the performance of
any of the terms, covenants or conditions on the part of Tenant to be performed
hereunder, but the purchaser at any sale of this Lease and of the leasehold
estate hereby created in any proceedings for the foreclosure of any Leasehold
Mortgage, or the assignee or transferee of this Lease and of the leasehold
estate hereby created under any instrument of assignment or transfer in lieu of
the foreclosure of any Leasehold Mortgage, shall be deemed to be an assignee or
transferee within the meaning of this Subsection 5.2.12 and shall be deemed to
have agreed to perform all of the terms, covenants and conditions on the part of
Tenant to be performed hereunder arising and accruing from and after the date of
such purchase and assignment, but only for so long as such purchaser or assignee
is the owner of the leasehold estate. If a Leasehold Mortgagee or its designee,
or any such purchaser, assignee or transferee shall become owner of the
leasehold estate and if the buildings and improvements on the Premises shall
have been or become materially damaged on, before or after the date of such
purchase and assignment, then any such Leasehold Mortgagee, designee, purchaser,
assignee or transferee shall be obligated to repair, replace or reconstruct the
building or other improvements only to the extent of the net insurance proceeds
received by such Leasehold Mortgagee, designee, purchaser, assignee or
transferee by reason of such damage.
5.2.13 Successive Sales. Any Leasehold Mortgagee or
other acquiror of the leasehold estate of Tenant pursuant to foreclosure,
assignment in lieu of foreclosure or other proceedings may, upon acquiring
Tenant's leasehold estate, without further consent of Landlord, sell and assign
the leasehold estate so acquired on such terms and to such persons or
organizations as are acceptable to such Leasehold Mortgagee or acquirer and
thereafter be relieved of all obligations under this Lease; provided that such
assignee has delivered to Landlord its written agreement to be bound by all of
the provisions of this Lease from and after the date of such assignment.
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11
5.2.14 Leasehold Mortgagee Need Not Cure Specified
Defaults. Nothing herein contained shall require any Leasehold Mortgagee or its
designee as a condition to the exercise of its rights hereunder to cure any
default of Tenant not reasonably susceptible of being cured by such Leasehold
Mortgagee or its designee.
5.2.15 Lease Proceedings. Landlord shall give each
Leasehold Mortgagee that has provided Landlord with notice of its interest and
address, prompt notice of any arbitration or legal proceedings between Landlord
and Tenant involving this Lease. Each Leasehold Mortgagee shall have the right
to intervene in any such proceedings and be made a party to such proceedings,
and the parties hereto do hereby consent to such intervention. In the event that
any Leasehold Mortgagee shall not elect to intervene or become a party to any
such proceedings, Landlord shall give such Leasehold Mortgagee notice of, and a
copy of any award or decision made in any such proceedings, which shall be
binding on all Leasehold Mortgagees not intervening after receipt of notice of
arbitration. Tenant agrees that each Landlord's Mortgagee shall also have the
right to intervene in, and be made a party to, any such proceedings.
5.2.16 Future Leasehold Mortgage; Amendment of
Lease.
(a) Notwithstanding anything in this Lease to the
contrary, each Leasehold Mortgagee shall have the right to restrict, limit
or prohibit the execution of any other Leasehold Mortgage junior in
priority to the lien of such senior Leasehold Mortgage, or, in the event
of the execution of any such junior Leasehold Mortgage, to accelerate or
increase the interest rate under the indebtedness secured by such senior
Leasehold Mortgage; provided however, that this provision shall not apply
to the Leasehold Mortgages executed pursuant to the Bank Credit Agreement
and the Mortgage Notes Indenture;
(b) In the event of a Leasehold Mortgage (each, a
"Successor Leasehold Mortgage") the proceeds of which are used to pay off
in its entirety the indebtedness secured by any existing Leasehold
Mortgage (each such existing Leasehold Mortgage an "Initial Leasehold
Mortgage"), then the Successor Leasehold Mortgage shall be deemed to have
succeeded to the position and all of the rights and priorities of the
Initial Leasehold Mortgage with respect to the mortgagor under the Initial
Leasehold Mortgage and with respect to third parties.
5.2.17 Certificate. Landlord shall, without charge, at
any time and from time to time within ten (10) business days after written
request of Tenant to do so, certify by written instrument duly executed and
acknowledged to any Leasehold Mortgagee or purchaser, or proposed Leasehold
Mortgagee or proposed
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12
purchaser, or any other person, firm or corporation specified in such request:
(1) as to whether this Lease has been supplemented or amended, and if so, the
substance and manner of such supplement or amendment; (2) as to the validity and
force and effect of this Lease, in accordance with its tenor; (3) as to the
existence of any default hereunder; (4) as to the existence of any offsets,
counterclaims or defenses hereto on the part of Tenant; (5) as to the
commencement and expiration dates of the terms of this Lease; and (6) as to any
other matters as may be reasonably so requested. Any such certificate may be
relied upon by Tenant and any other person, firm or corporation to whom the same
may be exhibited or delivered, and the contents of such certificate shall be
binding on Landlord.
5.2.18 Nominee. Any acquisition by Leasehold
Mortgagee of the leasehold estate under this Lease, or any rights or privileges
thereunder may be taken in the name of such Leasehold Mortgagee or in the name
of any nominee or designee selected by it.
5.2.19 New Lease. In the event of the termination of
this Lease as a result of Tenant's default prior to the Expiration Date, or in
the event of a rejection by Landlord or Tenant of this Lease under Chapter 11 of
the Bankruptcy Code, Landlord shall, in addition to providing the notices of
default and termination as required by this Lease, provide each Leasehold
Mortgagee with written notice that the Lease has been terminated or that
Landlord has filed a request with the Bankruptcy Court seeking to reject the
Lease, together with a statement of all sums which would at that time be due
under this Lease but for such termination or rejection, and of all other
defaults, if any, then known to Landlord. Upon the request of the Leasehold
Mortgagee, or its designee, whose lien upon the Leasehold Estate created hereby
is superior to the lien of any and all other Leasehold Mortgages, Landlord
agrees to enter into a new lease ("New Lease") of the Premises with such
Leasehold Mortgagee or its designee for the remainder of the term of this Lease,
effective as of the date of termination or rejection, as the case may be, at the
Rent, and upon the terms, covenants and conditions (including all transfer
rights, but excluding requirements which are not applicable or which have
already been fulfilled) of this Lease, provided:
(a) Such Leasehold Mortgagee shall make
written request upon Landlord for such New Lease at the later of (1)
within one hundred (100) days after the date such Leasehold Mortgagee
receives Landlord's notice of termination or rejection of this Lease given
pursuant to this Subsection 5.2.19; or (b) within forty-five (45) days
after actual termination of the Lease as same may have been extended by
Subsection 5.2.19 hereof.
(b) Such Leasehold Mortgagee or its designee
shall pay or cause to be paid to Landlord at the time of the execution and
delivery of such New Lease, any and all sums which would at the time of
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13
execution and delivery thereof be due pursuant to this Lease but for such
termination and, in addition thereto, all reasonable expenses, including
reasonable attorneys' fees, court costs and costs and disbursements which
Landlord shall have incurred by reason of such termination and the
execution and delivery of the New Lease and which have not otherwise been
received by Landlord from Tenant or other party in interest under Tenant.
Upon the execution of such New Lease, Landlord shall allow to Tenant named
therein as an offset against the sums otherwise due under this Subsection
5.2.19 or under the New Lease, an amount equal to the net income derived
by Landlord from the Premises during the period from the effective date of
termination of this Lease to the date of the beginning of the lease term
under the New Lease. In the event of a controversy as to the amount to be
paid to Landlord pursuant to this Section 5, the payment obligation shall
be satisfied if Landlord shall be paid the amount not in controversy, and
such Leasehold Mortgagee or its designee shall agree to pay any additional
sum ultimately determined to be due.
(c) Such Leasehold Mortgagee or its designee
shall agree to remedy any of Tenant's defaults of which said Leasehold
Mortgagee was notified by Landlord's notice of termination or rejection
and which are reasonably susceptible of being so cured by such Leasehold
Mortgagee or its designee.
(d) Any New Lease made pursuant to this
Section 5 shall be prior to any mortgage, sublease or other lien, charge
or encumbrance on the fee of the Premises and the Tenant under such New
Lease shall have the same right, title and interest in and to the Premises
and buildings and improvements thereon as Tenant under this Lease. Any
holder of any such lien, charge or encumbrance or sublease shall execute
such instruments of subordination and/or attornment as the tenant under
the New Lease may at any time require.
(e) The tenant under any New Lease shall be
liable to perform the obligations imposed on the Tenant by such New Lease
only for and during the period such person has ownership of such Leasehold
Estate.
(f) If more than one (1) Leasehold Mortgagee
shall request a New Lease pursuant to this Section 5, Landlord shall enter
into such New Lease with the Leasehold Mortgagee whose mortgage is in the
first lien position, or with the designee of such Leasehold Mortgagee.
Landlord, without liability to Tenant or any Leasehold Mortgagee with an
adverse claim, may rely upon a mortgagee title insurance policy issued by
a responsible title insurance company doing business within the state in
which the Premises are
<PAGE>
14
located as the basis for determining the appropriate Leasehold Mortgagee
who is entitled to such New Lease.
(g) The provisions of this Subsection 5.2.19
shall expire and be null and void upon the occurrence of the expiration of
twenty-one (21) years after the death of the survivor of the now living
lawful descendants of William Clinton, President of the United States.
(h) Concurrently with the execution and
delivery of any New Lease, Landlord shall assign to the tenant named
therein all of the right, title and interest in and to moneys (including
insurance proceeds and condemnation awards), if any, then held by and
payable by Landlord which Tenant would have been entitled, to receive but
for the termination of the Lease. Upon the execution of any New Lease, the
tenant named therein shall be entitled to any rent received under any
sublease in effect during the period from the date of termination of the
Lease to the date of execution of such New Lease.
5.2.20 Any Lawful Purposes. If at any time the
Leasehold Mortgagee, its designee or any purchaser at foreclosure shall acquire
Tenant's interest in the Lease by any means whatsoever, then notwithstanding
anything contained in the Lease to the contrary, from and after the effective
date of such acquisition the Property may be used for any lawful purpose subject
to the REA.
6. Subordination to REA and to Landlord's Mortgages.
Landlord and Tenant understand and agree that, (i) this Lease is and
shall be subject and subordinate to the terms, covenants and conditions
contained in the REA and that each shall comply with all the terms, covenants
and conditions therein; and (ii) this Lease shall be superior to, and have
preference over, each of the Landlord's Mortgages. Clause (ii) of the preceding
sentence shall be self-operative and no further instruments of subordination
shall be required of mortgage holder or trustee under any Landlord's Mortgage.
Each mortgage holder or trustee under a Landlord's Mortgage shall, if requested,
furnish a subordination agreement to further evidence and acknowledge that such
Landlord's Mortgage is junior in priority to this Lease.
7. Quiet Enjoyment.
Landlord covenants that Tenant shall quietly have and enjoy the
Premises during the Term, without hindrance or molestation by anyone claiming
by, through or under Landlord, subject, however, to the exceptions,
reservations, and conditions of this Lease.
8. Default.
<PAGE>
15
(a) It is mutually agreed that if Tenant shall be in default
in any of the terms or provisions of this Lease and shall fail to cure such
default within sixty (60) days after the date of receipt of written notice of
default from Landlord (unless, with respect to non-monetary defaults, such cure
requires work to be performed, acts to be done, or conditions to be removed
which cannot by their nature reasonably be performed, done or removed, as the
case may be, within such sixty (60) day period, in which case there shall be
allowed such additional time as may be required to effect such cure if Tenant
shall have commenced curing same within such sixty (60) day period and shall
prosecute the same to completion), then, in such event, Landlord shall have the
right to terminate this Lease, subject to compliance with Section 5, but shall
have no other rights at law or in equity due to a default by Tenant. Any notice
provided in this paragraph may be given by Landlord or its attorney. Upon such
termination by Landlord, Tenant shall at once surrender possession of the
Premises to Landlord and remove all effects therefrom; and Landlord may
forthwith re-enter the Premises and repossess itself thereof, and remove all
persons and effects therefrom, using such force as may be necessary without
being guilty of trespass, forcible entry or detainer or other tort.
9. Notices.
All notices, demands, requests and other communications given
hereunder shall be in writing and shall be deemed to have been given: (i) upon
delivery if personally delivered; (ii) when delivered, postage prepaid, by
certified or registered mail, return receipt requested as evidenced by the
return receipt; or (iii) upon delivery if deposited with a nationally recognized
overnight delivery service marked for delivery on the next business day, in any
case, addressed to the party for whom it is intended at its address herein set
forth:
If to Landlord:
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attn: General Counsel
If to Tenant:
Grand Canal Shops
Mall Construction, LLC
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attn: General Counsel
<PAGE>
16
Any Party may change its address for the purposes of this section by
giving notice of such change as aforesaid.
10. Further Assurances.
Each party upon the request of the other party and at the expense of
such other party at any time from time to time, agrees to promptly execute,
acknowledge where appropriate and deliver such additional instruments and
documents (including, without limitation, a limited warranty deed (or such other
form of deed as shall be required in Clark County, Nevada in order for Tenant
and any Leasehold Mortgagee to obtain the title insurance they require) so as to
convey to Tenant fee simple title to the Premises on the Transfer Date)) in
recordable form if appropriate, and to take such other actions, in each case, as
may be reasonably requested by such other party in order to effectuate the
agreements contained herein. The parties further agree to make such changes to
this Lease as shall be reasonably required to make this Lease consistent with
all applicable laws.
11. Non-Disturbance of Subtenants.
Landlord covenants and agrees that, if for any reason whatsoever,
this Lease shall terminate, Landlord will recognize the tenancy of any subtenant
of Tenant pursuant to the terms of such subtenant's sublease provided that (i)
such subtenant is not in default thereunder; (ii) such subtenant shall attorn to
Landlord and accept Landlord as the Landlord under such sublease; and (iii) such
subtenant will be bound by and perform all of the obligations under such
sublease. In such event, Landlord will not disturb the possession of such
subtenant and will be bound by all of the obligations imposed on the sublessor
under the sublease. Landlord hereby agrees to execute and deliver promptly upon
request therefor by Tenant a nondisturbance agreement in recordable form and in
favor of any subtenants of the Premises pursuant to a sublease between Tenant,
its successors and assigns and such subtenant in form reasonably satisfactory to
the applicable subtenant.
12. Miscellaneous.
12.1 Successors. All rights, obligations and liabilities
herein given to, or imposed upon, the respective parties hereto shall extend to
and bind the several respective heirs, executors, administrators, trustees,
receivers, legal representatives, successors and assigns of the said parties;
and if there shall be more
than one tenant, they shall all be bound jointly and severally by the terms,
covenants and agreements herein.
12.2 Governing Law. This Lease shall be governed and construed
in accordance with the laws of the State of Nevada applicable to agreements made
and to be wholly performed in the State of Nevada.
<PAGE>
17
12.3 No Partnership. Landlord does not in any way or for any
purpose become a partner of Tenant in the conduct of its business, or otherwise,
or joint venturer or member of a joint enterprise with Tenant by virtue of this
Lease.
12.4 Tenant Defined; Use of Pronoun. The term "Tenant" shall
mean the tenant herein named or any assignee or other successor in interest
(immediate or remote) of the tenant herein named, which at the time in question
is the owner of Tenant's estate and interest granted by this Lease, and (except
as set forth in the REA) in the event of a transfer of the leasehold interest in
the Premises created hereby, the transferor shall be and hereby is (to the
extent of the interest or portion of the leasehold estate transferred)
automatically and entirely released and discharged, from and after the date of
such transfer, of all liability and obligations in respect of the performance of
any of the terms of this Lease on the part of Tenant thereafter to be performed;
and (except as set forth in the REA) the transferee shall be deemed to have
assumed and agreed to perform (and without further agreement between the then
parties hereto, or among such parties and the transferee) and only during and in
respect of the transferee's period of ownership of Tenant's interest under this
Lease, all of the terms of this Lease on the part of Tenant to be performed
during such period of ownership, which terms shall be deemed to be "covenants
running with the land," it being intended that Tenant's obligations hereunder
shall be binding on Landlord, its successors and assigns, only during and in
respect of their respective successive periods of ownership.
12.5 Negation of Personal Liability. Notwithstanding anything
contained herein to the contrary, each of Landlord and Tenant agrees that
neither the other party hereto, nor any of such other party's agents or
employees, nor any of its officers, directors or direct or indirect owners, or
any of the officers or directors of any such direct or indirect owners shall
have any personal liability with respect to any of the provisions of this Lease
and each of Landlord and Tenant shall look solely to (i) the estate and interest
of the other party in the Premises or the Venetian, as applicable (including,
without limitation, any profits and proceeds therefrom) for the satisfaction of
Landlord's or Tenant's remedies, as applicable, including, without limitation,
the collection of any judgment or the enforcement of any judicial process
requiring the payment or expenditure of money by Landlord or Tenant, in the
event of any default or breach by the other party with respect to any of the
terms and provisions of this Lease to be observed and/or performed by the other
party, subject, however, to the prior rights, if any, of any holder of any
Landlord's Mortgage covering all or part of the Premises, and no other assets of
Landlord or Tenant or any principal of Landlord or Tenant shall be subject to
levy, execution or other judicial process for the satisfaction of the other
party's claim and in the event Landlord or Tenant obtains a judgment against the
other, the judgment docket shall be so noted. This Section shall inure to the
benefit of each of Landlord's and Tenant's successors and assigns and their
respective principals.
<PAGE>
18
Terms defined herein by reference to another agreement shall mean such
agreement as amended from time to time, whether or not such agreement has
expired or terminated.
13. Conveyance to Tenant.
13.1 Conveyance of Fee Simple Title. On the Transfer Date, in
consideration of the covenants theretofore performed by Tenant hereunder,
Landlord shall convey to Tenant fee simple title to the Mall Real Estate by
warranty deed and quitclaim all right, title and interest of Landlord, if any,
in the Mall Improvements in the form attached hereto as Exhibits B-1 and B-2 and
made a part hereof. Such conveyance shall be made subject to the GMAC loan and
all security therefor, and the matters set forth on Exhibit B-3 attached hereto
and made a part hereof (the "Permitted Exceptions"). At its sole cost and
expense, Landlord shall furnish to Tenant (i) an owner's title insurance policy
insuring Tenant as fee simple title owner of the Mall Real Estate and the Mall
Improvements subject only to the Permitted Exceptions and (ii) an ALTA survey of
the Mall Real Estate after completion of the Subdivision. Landlord shall also
furnish a Bill of Sale conveying all of Landlord's right, title and interest, if
any, in any Mall Property in existence on the Transfer Date in the form attached
hereto as Exhibit C and made a part hereof.
13.2 Conveyance of Other Property. On the Transfer Date,
Landlord shall assign and transfer to Tenant all of the tangible and intangible
personal property, including without limitation, all contracts, lease and
letters of intent related to the Premises, described on Exhibit D attached
hereto and made a part hereof. Such assignment is to be effectuated by the
execution of an Assignment and Assumption Agreement in the form attached hereto
as Exhibit E and made a part hereof. On the Transfer Date Tenant shall assume
such liabilities and obligations with respect to such tangible and intangible
personal property as described in the Assignment and Assumption Agreement
attached hereto as Exhibit E.
13.3 Assumption of Mortgage. On the Transfer Date, Tenant
shall execute and deliver to Landlord and GMAC an Assumption Agreement in the
form attached hereto as Exhibit F pursuant to which Tenant shall assume all of
the liabilities and obligations of Landlord under the GMAC Fee Mortgage.
[signature page follows]
<PAGE>
19
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by the undersigned by authority duly given, as of the day and
year first above written.
LANDLORD:
VENETIAN CASINO RESORT, LLC, a
Nevada limited liability company
By: Las Vegas Sands, Inc.,
as managing member
By: /s/ William P. Weidner
------------------------------------
Name: William P. Weidner
Title: President
TENANT:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC, a Delaware limited
liability company
By: Venetian Casino Resort, LLC, its
managing member
By: /s/ David Friedman
------------------------------------
Name: David Friedman
Title: Secretary
<PAGE>
EXHIBIT A-1
Mall I Airspace
<PAGE>
EXHIBIT A-2
Retail Annex Land
<PAGE>
EXHIBIT A-3
Phase I Land
<PAGE>
EXHIBIT B-1
Warranty Deed
GRANT, BARGAIN, SALE DEED
This INDENTURE WITNESSETH: That: VENETIAN CASINO RESORT, LLC, a Nevada limited
liability company in consideration of $10.00, the receipt of which is hereby
acknowledged, do hereby Grant, Bargain, Sell and Convey to Grand Canal Shops
Mall Construction, LLC, a Delaware limited liability company all the real
property situated in the City of Las Vegas, County of Clark, State of Nevada,
bounded and described as follows:
See Exhibit A attached hereto and made a part hereof
A.P.N.
SUBJECT TO: See Exhibit B attached hereto and made a part hereof.
Together with all and singular the tenements, hereditaments and
appurtenances thereto belonging or in anywise appertaining.
IN WITNESS WHEREOF, Venetian Casino Resort, LLC has executed this
Grant, Bargain, Sale Deed this ______ day of ____________, ____.
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.,
as managing manager
By:
-----------------------
Name:
Title:
<TABLE>
<S> <C>
STATE OF NEVADA, ) ESCROW NO._____________
COUNTY OF ______________ )
WHEN RECORDED MAIL TO:
On ________________________ personally appeared before
me, a Notary Public,_______________________________of Las Vegas Grand Canal Shops Mall
Sands, Inc. who acknowledged that __he__ executed the Construction, LLC
above instrument. Room 1C
3355 Las Vegas Boulevard South
Signature______________________________ Las Vegas, Nevada 89109
(Notary Public) Attention: General Counsel
</TABLE>
<PAGE>
EXHIBIT A
Property
<PAGE>
EXHIBIT B
Permitted Exceptions
Those matters set forth on Schedule B of the Proforma Policy Number
9707607-C RG issued by Lawyers Title of Nevada, Inc. on November 13, 1997.
<PAGE>
EXHIBIT B-2
QUITCLAIM DEED
This INDENTURE WITNESSETH: That: VENETIAN CASINO RESORT, LLC, a Nevada limited
liability company in consideration of $10.00, the receipt of which is hereby
acknowledged, do hereby remise, release and forever quitclaim to Grand Canal
Shops Mall Construction, LLC, a Delaware limited liability company, all the
improvements and fixtures located on the real property situated in the City of
Las Vegas, County of Clark, State of Nevada, bounded and described as follows:
See Exhibit A attached hereto and made a part hereof
A.P.N.
SUBJECT TO: See Exhibit B attached hereto and made a part hereof.
Together with all and singular the tenements, hereditaments and
appurtenances thereto belonging or in anywise appertaining.
IN WITNESS WHEREOF, Venetian Casino Resort, LLC has executed this
Grant, Bargain, Sale Deed this ______ day of ____________, ____.
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc.,
as managing manager
By:
-----------------------
Name:
Title:
<TABLE>
<S> <C>
STATE OF NEVADA, ) ESCROW NO.
COUNTY OF ______________ )
WHEN RECORDED MAIL TO:
On ________________________ personally appeared before
me, a Notary Public,_______________________________of Las Vegas Grand Canal Shops Mall
Sands, Inc. who acknowledged that __he__ executed the Construction, LLC
above instrument. Room 1C
3355 Las Vegas Boulevard South
Signature_________________________________ Las Vegas, Nevada 89109
(Notary Public) Attention: General Counsel
</TABLE>
<PAGE>
Exhibit A
Property
<PAGE>
EXHIBIT B-3
PERMITTED EXCEPTIONS
Those matters set forth on Schedule B of the Proforma Policy Number
9707607-C RG issued by Lawyers Title of Nevada, Inc. on November 13, 1997.
<PAGE>
EXHIBIT C
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are acknowledged, VENETIAN CASINO RESORT, LLC, a Nevada
limited liability company ("Seller") sells, assigns, transfers and delivers to
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware limited liability company
("Purchaser"), all of Seller's right, title and interest in and to all personal
property owned by Seller and located on or used in connection with the operation
and use of the real property described on Exhibit 1 attached hereto and the
improvements thereon or therein (collectively, the "Property").
THE PROPERTY IS CONVEYED "AS IS", "WHERE IS" WITHOUT
WARRANTY OR REPRESENTATION OF ANY KIND, AND ALL WARRANTIES
OF QUALITY, FITNESS AND MERCHANTABILITY ARE HEREBY
EXCLUDED.
TO HAVE AND TO HOLD all and singular the Property unto
Purchaser, its successors, heirs, executors, administrators and assigns, to
their own proper use and benefit, forever.
IN WITNESS WHEREOF, this Bill of Sale has been executed as of
__________,_____.
SELLER:
VENETIAN CASINO RESORT, LLC,
By: Las Vegas Sands, Inc.,
as managing member
By:
-----------------------
Name:
Title:
<PAGE>
Exhibit 1 to Bill of Sale
<PAGE>
EXHIBIT D
Description of Contracts and Tangible and Intangible Personal Property
All right, title and interest of Landlord, if any, in and to
any tangible personal property located on the Premises, including furniture,
fixtures and equipment. All right, title and interest of Landlord, if any, in
and to contracts, letters of intent, leases, agreements, management agreements,
guaranties, permits, warranties, rights to trademarks, logos and other
intellectual property rights and rights to phone numbers and the like pertaining
to the construction, operation, improvement, alteration or repair of the
Premises.
<PAGE>
EXHIBIT E
ASSIGNMENT AND ASSUMPTION AGREEMENT OF
CONTRACTS AND TANGIBLE AND INTANGIBLE PERSONAL PROPERTY
THIS ASSIGNMENT (this "Assignment") is made and entered into
as of ___________, by and between VENETIAN CASINO RESORT, LLC, a Nevada limited
liability company ("Assignor"), and GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a
Delaware limited liability company ("Assignee"), with reference to the
following:
A. In accordance with the terms of that certain Mall I
Airspace/Ground Lease by and between Assignor, as Landlord, and Assignee, as
Tenant dated as of November 14, 1997 (the "Lease"; capitalized terms used herein
and not defined herein shall have the meanings assigned to such terms in the
Lease), Assignor is conveying to Assignee concurrently herewith the real
property more particularly described on Exhibit A attached hereto and the
improvements thereon or therein (the "Property").
B. In connection with the conveyance of the Property, Assignor
and Assignee intend that all of Assignor's right, title and interest in and to
any contracts and tangible and intangible personal property relating to the
Property be assigned and transferred to Assignee.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties agree that:
1. Assignment. Assignor assigns, conveys, transfers and sets
over to Assignee any and all of Assignor's right, title and interest in and to
the contracts and tangible and intangible personal property described on Exhibit
B attached hereto and made a part hereof.
2. As Is. The parties expressly acknowledge and agree that
this assignment is made "as is", "where is" and without any representations or
warranties of Assignor of any kind except as otherwise provided in the Lease.
3. Assumption. Assignee does hereby accept the foregoing
Assignment and assumes, covenants and agrees to perform, be bound by, discharge
and observe all of the terms, covenants, conditions, duties, obligations,
undertakings and liabilities of Assignor with respect to such contracts and
tangible and intangible personal property.
4. Governing Law. This Assignment shall be governed by and
construed in accordance with the laws of the State of Nevada.
<PAGE>
5. Successors and Assigns. This Assignment shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
6. Modifications. This Assignment may not be modified,
altered or amended, or its terms waived, except by an instrument in writing
signed by the parties hereto.
IN WITNESS WHEREOF, this Assignment has been executed by the
parties as of the date first above written.
ASSIGNOR:
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., as managing member
By:
------------------------------------
Name:
Title:
ASSIGNEE:
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole
member
By: Las Vegas Sands, Inc., as
managing member
By:
--------------------------
Name:
Title:
<PAGE>
EXHIBIT A
(To Assignment and Assumption Agreement
of Contracts and Tangible and Intangible Property)
Property
<PAGE>
EXHIBIT B
(To Assignment and Assumption Agreement
of Contracts and Tangible and Intangible Personal Property)
Contracts and Tangible and Intangible Personal Property
All right, title and interest of Assignor, if any, in and to
all tangible personal property located on the Property, including furniture,
fixtures and equipment. All right, title and interest of Assignor, if any, in
and to contracts, letters of intent, agreements, management agreements,
guaranties, permits, warranties, rights to trademarks, logos and other
intellectual property rights and rights to phone numbers and the like pertaining
to the construction, operation, improvement, alteration or repair of the
Property.
<PAGE>
EXHIBIT F
(To Mall I Airspace/Ground Lease)
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT ("Assumption") is made as of this
____ day of __________, 1997 among GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation, whose address is 100 South Wacker Drive, Suite 400,
Chicago, Illinois 60604 ("GMAC"), VENETIAN CASINO RESORT, LLC, a Nevada limited
liability company, whose address is 3355 Las Vegas Boulevard South, Las Vegas,
Nevada 89109 ("VCR"), and GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware
limited liability company whose address is 3355 Las Vegas Boulevard South, Las
Vegas, Nevada 89109 ("Construction LLC"), and acknowledged by LAWYERS TITLE OF
NEVADA, INC., a Nevada corporation, whose address is 1050 East Flamingo, Suite
180, Las Vegas, Nevada 09119 ("Title Company").
W I T N E S S E T H:
WHEREAS, in accordance with the terms of that certain Mall I
Airspace/Ground Lease by and between VCR, as landlord, and Construction LLC, as
tenant, dated as of November 14, 1997 (the "Mall I Lease"; capitalized terms
used herein and not defined herein shall have the meanings assigned to such
terms in the Mall I Lease), VCR has agreed to convey to Construction LLC the
real property situated in Clark County, Nevada and more particularly described
on Exhibit A attached hereto and made a part hereof (the "Property");
WHEREAS, pursuant to the terms of the Credit Agreement dated
November 14, 1997 among Las Vegas Sands, Inc., VCR, and Construction LLC,
(individually and collectively, as the context requires, "Borrowers") and GMAC,
as lender ("GMAC Credit Agreement"), and the other Loan Documents (as defined in
the Credit Agreement, GMAC has provided certain loans in the aggregate amount of
$140, 000,000.00, which loans are secured by, among other things, the Deed of
Trust, Assignment of Leases and Rents and Security Agreement dated as of
November , 1997 made by VCR to the Title Company for the benefit of GMAC and
recorded on , 19 as Document No.___________________________ in the Office of the
Recorder of Deeds, Clark County, Nevada ("Deed of Trust"); and
WHEREAS, Construction LLC has agreed to assume all of VCR's
remaining obligations under the Deed of Trust, Construction LLC already being
bound by all of the obligations and liabilities under the GMAC Credit Agreement
and the other Loan Documents.
<PAGE>
R E C I T A L S:
NOW, THEREFORE, in consideration of the mutual terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Assumption of the Obligations Under the Deed of Trust.
Construction LLC hereby assumes all of the obligations and liabilities under the
Deed of Trust and covenants, promises and agrees as follows:
1.1 To perform each and all of the covenants,
agreements and obligations in the Deed of
Trust to be performed by VCR at the time, in
the manner, and in all respects as therein
provided; and
1.2 To be bound by each and all of the terms and
provisions of the Deed of Trust as though it
had originally been made executed and
delivered by Construction LLC.
2. Further Assurances. Construction LLC agrees to execute any
documents reasonably required by GMAC in order to evidence Construction LLC's
assumption of the obligations under the Deed of Trust.
3. Title Update. VCR has concurrently herewith provided GMAC
with a date down endorsement to its title policy which update shows only
exceptions to title permitted by the Loan Documents or otherwise reasonably
acceptable to GMAC.
4. Representation and Warranty. Construction LLC hereby
represents, covenants, acknowledges, and warrants that the Deed of Trust is
valid, enforceable against it, and free from all defenses.
5. Binding Effect. This Assumption shall be binding upon and
inure to the benefit of the parties hereto and their respective beneficiaries,
legal representatives, heirs, successors and assigns.
6. Entire Agreement. This Assumption constitutes the entire
understanding of the parties with respect to the subject matter hereof, and the
terms and conditions of this Assumption may be amended or modified only by a
written instrument signed by the parties hereto.
7. Headings. The headings of paragraphs hereof are for
convenience only and do not modify, limit or define the contents of the
paragraphs.
8. Recording. This Assumption shall be recorded with the
Office of the Recorder of Deeds, Clark County, Nevada, at Construction LLC's
expense.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assumption
as of the day and year first above written.
GMAC COMMERCIAL
MORTGAGE CORPORATION
By:
--------------------------------------
Its:
--------------------------------------
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., as managing
member
By:
--------------------------------------
Name:
Title:
GRAND CANAL SHOPS
MALL CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC, as sole
Member
By: Las Vegas Sands, Inc.,
as managing member
By:
-----------------------------
Name:
Title:
Accepted and Agreed to this ______
day of____________________, 19____
LAWYERS TITLE OF NEVADA, INC.
By:
-------------------------------
Its:
-------------------------------
<PAGE>
STATE OF )
)
COUNTY OF )
This instrument was acknowledged before me on the ____ day of
___________, 19___, by___________________________________, as___________________
of GMAC COMMERCIAL MORTGAGE CORPORATION.
Notary Public
STATE OF )
)
COUNTY OF )
This instrument was acknowledged before me on the ____ day of
___________, 19___, by___________________________________, as___________________
of LAS VEGAS SANDS, INC.
Notary Public
STATE OF )
)
COUNTY OF )
This instrument was acknowledged before me on the ____ day of
___________, 19___, by___________________________________, as___________________
of LAS VEGAS SANDS, INC.
Notary Public
STATE OF )
)
COUNTY OF )
This instrument was acknowledged before me on the ____ day of
___________, 19___, by___________________________________, as___________________
of LAWYERS TITLE OF NEVADA, INC.
Notary Public
<PAGE>
This instrument prepared by and after recording should be returned to:
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, IL 60606
Attention: Audrey E. Selin, Esq.
<PAGE>
EXHIBIT "A"
PROPERTY
GOLDMAN SACHS MORTGAGE COMPANY
85 Broad Street
New York, New York 10004
(212) 902-1000
As of November 14, 1997
Grand Canal Shops Mall, LLC
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: David Friedman
Sheldon G. Adelson
c/o Las Vegas Sands, Inc.
3355 Las Vegas Blvd. South
Las Vegas, Nevada 89109
Re: Loan to Grand Canal Shops Mall, LLC secured by, among other things, a
Deed of Trust on the Shopping Mall to be known as "Grand Canal Shops"
and located on the Site of the former Sands Hotel and Casino, Las
Vegas, Nevada
Gentlemen:
When this letter shall be accepted by the undersigned without modification or
amendment, and the First Installment (as defined below) of the Commitment Fee
(as defined below) and the Loan Transaction Costs (as defined below) theretofore
incurred shall be paid, this letter shall constitute (x) the commitment of
Goldman Sachs Mortgage Company (together with its successors and assigns,
hereinafter referred to as "Lender") to make a first mortgage loan (the "Loan")
to Grand Canal Shops Mall, LLC, a Delaware limited liability company (the
"Borrower"), upon the terms, provisions and conditions set forth in the Summary
of Terms attached hereto as Exhibit A and General Conditions to Commitment
attached hereto as Exhibit B (this letter, such Summary of Terms and such
General Conditions to Commitment, collectively, the "Commitment") and (y)
Borrower's and Principal's (as defined below) commitment to satisfy their
respective obligations under the Commitment. Immediately after the Closing (but
on the Closing Date), (aa) ninety-nine percent (99%) of the membership interests
in Borrower will be owned by Grand Canal Shops Mall Holding Company, LLC, a
Delaware limited liability company ("Mall Holdings"), its non-managing member,
and 1% of the membership interests in Borrower will be owned by Grand Canal
Shops Mall MM, Inc., a Nevada corporation ("Managing Member"), its managing
member, (bb) ninety-nine percent (99%) of
<PAGE>
the membership interests in Mall Holdings will be owned by Mall Intermediate
Holding Company, LLC, a Delaware limited liability company ("Intermediate
Holdings"), its non-managing member, and one percent (1%) of the membership
interests in Mall Holdings will be owned by Managing Member, its managing
member, (cc) all of the membership interests in Intermediate Holdings will be
owned by Venetian Casino Resort, LLC, a Nevada limited liability company
("Venetian"), (dd) all of the issued and outstanding stock in Managing Member
will be owned by Las Vegas Sands, Inc., a Nevada corporation ("LVSI"), (ee) all
of the membership interests in Venetian will be owned by Interface Group Holding
Company, Inc., Nevada corporation ("Interface Holdings") and LVSI and (ff) all
of the issued and outstanding stock of Interface Holdings will be owned by
Sheldon G. Adelson (or upon the death or legal incapacity of Sheldon G. Adelson,
by the Person or Persons to whom such stock was lawfully transferred directly as
a result of such death or legal incapacity, as applicable) (the "Principal") and
all of the issued and outstanding stock of LVSI will be owned by the Principal
and the Principal will indirectly control each of the foregoing entities.
Notwithstanding the foregoing, transfers of direct or indirect interests in the
Borrower are permitted to the extent the same constitute Permitted Transfers (as
defined in the Form Loan Documents (as defined below)).
This Commitment expires at 12:00 midnight on the Outside Closing Date (as
defined below), by which time the Loan must have closed and funded or this
Commitment (other than the portions thereof that shall, pursuant to the express
terms of this Commitment, survive such expiration) shall be of no further force
and effect. The term "Outside Closing Date" shall mean November 14, 2000.
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<PAGE>
If this Commitment is acceptable to you, please sign at the space provided below
in the enclosed duplicate hereof and deliver the same, together with the First
Installment of the Commitment Fee and the Loan Transaction Costs theretofore
incurred (as reflected in invoices furnished by the Lender to the Borrower), to
Lender on the date hereof. If the signed Commitment, the First Installment of
the Commitment Fee and such Loan Transaction Costs are not received by Lender in
New York, New York on the date hereof, this Commitment shall automatically
expire and shall be of no further force and effect.
[NO FURTHER TEXT. SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
GOLDMAN SACHS MORTGAGE COMPANY, a
New York limited partnership
By: Goldman Sachs Real Estate Funding
Corp., its general partner
By: /s/ Steven T. Mnuchin
---------------------
Steven T. Mnuchin
President
<PAGE>
BORROWER'S AND PRINCIPAL'S ACCEPTANCE
The Borrower and the Principal each hereby agree to this Commitment
and agree to perform their respective obligations under this Commitment in
accordance with its terms, provisions and conditions.
GRAND CANAL SHOPS MALL, LLC,
a Delaware limited liability company
By: Grand Canal Shops Mall Holding
Company, LLC, its Managing Member
By: Mall Intermediate Holding Company,
LLC, its Managing Member
By: Venetian Casino Resort, LLC,
its Sole Member
By: Las Vegas Sands, Inc.,
its Managing Member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
Date: November 14, 1997
/s/ Sheldon G. Adelson
----------------------------
SHELDON G. ADELSON
Date: November 14, 1997
<PAGE>
EXHIBIT A
SUMMARY OF TERMS
1. FIRST MORTGAGE LOAN
Borrower: Grand Canal Shops Mall, LLC, a special purpose Delaware
limited liability company that owns and/or leases, and
shall own and/or lease, no assets other than the
Property and assets relating thereto. At the closing of
the Loan (the "Closing"), the Borrower shall have (i) no
debt other than the Loan, the Subordinate Loan (as
defined below), the Mezzanine Loan (as defined below)
(to the extent permitted under Section 3 of Exhibit B to
this Commitment), trade debt incurred in the ordinary
course of Borrower's business of operating the Property
and Permitted Other Indebtedness (as defined below) and
(ii) no liabilities other than those described in the
foregoing clause (i) and other liabilities incurred in
the normal operations of the Property in accordance with
the Form Loan Documents (as defined below). As used
herein, the term "Permitted Other Indebtedness" shall
mean an unsecured working capital facility extended to
the Borrower in an arms-length transaction, Equipment
Financings (as defined in the Form Loan Documents)
secured by Equipment Liens (as defined in the Form Loan
Documents) and obligations under Equipment Leases (as
defined in the Form Loan Documents), in each case,
entered into in the ordinary course of the Borrower's
business at the Mall Improvements, provided that the sum
of (x) the maximum aggregate principal amount of such
working capital facility plus (y) the maximum aggregate
principal amount of such Equipment Financings plus (z)
the aggregate amount of the payments provided for under
such Equipment Leases (excluding, with respect to
capitalized Equipment Leases, those portions of such
lease payments that would be deemed to constitute
non-default interest payments or transaction costs under
the applicable standards of the Financial Accounting
Standards Board) shall be less than or equal to
$1,000,000.
<PAGE>
Loan Purpose and The financing of a portion of the purchase price (the
Certain Defined Terms: Terms: "Purchase Price") of the Real Property Collateral
(as defined below) in accordance with that certain Sale
and Contribution Agreement dated as of the date hereof
among Venetian and Grand Canal Shops Mall Construction,
LLC, a Delaware limited liability company ("Mall
Construction LLC"), as seller, and Borrower, as
purchaser (the "Purchase Agreement"). The remainder of
the Purchase Price shall be funded with the proceeds of,
or assumption of, the Subordinate Loan and/or the
assumption by the Borrower of the Mezzanine Loan. The
proceeds of the Purchase Price will be used by the
seller under the Purchase Agreement to pay off the
Construction Loan (as defined below).
The "Construction Loan" means a loan to be made by GMAC
Commercial Mortgage Corporation ("Construction Lender")
to Venetian, Mall Construction LLC and LVSI in
accordance with the terms of that certain Credit
Agreement dated as of the date hereof among Construction
Lender, LVSI, Venetian and Mall Construction LLC, a copy
of which is attached hereto as Exhibit A-1 (the "GMAC
Credit Agreement"), the proceeds of which will be used,
together with other funds, to construct the Project (as
defined below).
The "Mall Improvements" means the collective reference
to (i) a first-class Venetian-theme shopping mall, and
certain other improvements, to be located in the Mall
Space (as defined below) (the "Mall") and (ii) a
first-class Venetian-theme retail annex to such shopping
mall to be located on the Retail Annex Land (as defined
below) (the "Retail Annex"), all to be constructed in
accordance with the Existing Plans and Specifications
(as defined in the Tri-Party Agreement) (with such Scope
Changes (as defined in the FADAA) to the Plans and
Specifications as are permitted under the Tri-Party
Agreement)(as defined below).
The "Project" means the collective reference to certain
land located in Las Vegas, Nevada more particularly
described
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<PAGE>
in Exhibit A-2 hereto (the "Land") and a mixed-use
commercial project comprised of, among other things, a
casino (the "Casino"), a first-class luxury hotel (the
"Hotel"), the Mall Improvements, a conference facility
(the "Conference Facility"), a parking garage (the
"Parking Garage"), a heating ventilation and
air-conditioning plant (the "HVAC Plant") and an
electrical substation, all of which shall be located on
the Land, constructed in accordance with the Existing
Plans and Specifications (with such Scope Changes to the
Existing Plans and Specifications as are permitted under
the Tri-Party Agreement) and which "Project" is more
particularly described in the FADAA as the "Project".
The "FADAA" means that certain Funding Agents'
Disbursement and Administration Agreement among LVSI,
Venetian, Mall Construction LLC, The Bank of Nova
Scotia, as agent, First Trust National Association, as
indenture trustee, Construction Lender, Atlantic/Pacific
JV and The Bank of Nova Scotia, as disbursement agent, a
copy of which is attached hereto as Exhibit A-3 (as such
agreement exists on the date hereof). With respect to
the FADAA, for purposes of this Commitment and the
Tri-Party Agreement, notwithstanding anything to the
contrary contained in the FADAA, in this Commitment or
in the Tri-Party Agreement: (i) the "Construction
Consultant" shall mean Tishman Construction Corporation
of Nevada, a Nevada corporation, and any replacement
thereof selected in accordance with the provisions of
the FADAA, provided that such replacement must be
acceptable to the Lender (which consent will not be
unreasonably withheld) and (ii) the "Project Architect"
shall mean the collective reference to TSA of Nevada,
LLP, and WAT&G, Inc. Nevada, and any replacement thereof
selected in accordance with the provisions of the FADAA,
provided that such replacement must be acceptable to the
Lender (which consent will not be unreasonably
withheld).
The "Real Property Collateral" means the collective
reference to (i) the fee estate
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<PAGE>
or, if the Subdivision shall not exist as of the
Closing, the leasehold estate (pursuant to the Mall
Master Lease (as defined below)), as applicable, in the
air rights described on Exhibit A-4 attached hereto (the
"Mall Space"), (ii) the fee estate or, if the
Subdivision shall not exist as of the Closing, the
leasehold estate (pursuant to the Mall Master Lease), as
applicable, in (the portion of the Land described on
Exhibit A-5 attached hereto (the "Retail Annex Land"),
(iii) the fee estate in the Mall Improvements to be
located in the Mall Space and the fee estate in the Mall
Improvements to be located on the Retail Annex Land
(subject, if the Subdivision shall not exist as of the
Closing, to the reversionary interest in the Mall and in
the Retail Annex of the landlord under the Mall Master
Lease pursuant to the Mall Master Lease) and the fee
estate in the Mall Improvements to be located in the
Additional Billboard Premises (subject to the
reversionary interest in the Mall Improvements to be
located in the Billboard Additional Premises of the
landlord under the Billboard Master Lease pursuant to
the Billboard Master Lease), (iv) the leasehold estate
(pursuant to the Billboard Master Lease (as defined
below) in, among other things, the premises described on
Exhibit A-6 attached hereto (the "Billboard Additional
Premises"), (v) all easements and other rights and
interests granted to the owner or lessee of the Mall
Space and the Retail Annex Land in the OEAs (as defined
below), (vi) all warranties relating to the Mall
Improvements that are given pursuant to, or in
connection with, the Project Documents (as defined in
the FADAA) and (vii) all other property, rights and
interests from time to time owned or leased by the
Borrower (including, without limitation, contracts,
Leases, rents and easements). The Mall Space, the Retail
Annex Land, the Mall Improvements and the Billboard
Additional Premises are collectively referred to as the
"Property".
A "Subdivision" shall be deemed to exist if, at the time
in question, all of the following shall be true: (x) the
Mall Space, the Retail Annex Land and the Mall
Improvements shall collectively constitute, in
accordance with applicable Legal Requirements (as
defined in the Form
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<PAGE>
Loan Agreement), one or more legal parcel(s) and one or
more tax parcel(s) that shall not include, or comprise a
portion of, any other property, and (y) Borrower shall
own fee title to the Mall Space, the Retail Annex Land
and the Mall Improvements.
Security The Loan will be secured by: (i) a first deed of trust
and security interest on the Real Property Collateral;
(ii) a first priority security interest in the Tax
Escrow Account (as defined below), the Start-Up Cost
Escrow Account (as defined below) and the remainder of
the Bank Account Collateral (as defined in the Form Loan
Documents) and (iii) a first priority security interest
on the Interest Rate Cap (as defined below) (all of the
foregoing, collectively, the "Collateral").
Loan Amount The Loan shall be in a principal amount equal to the
lesser of (x) $105,000,000 or (y) the principal amount
of the Tranche A Loan (as defined in the GMAC Credit
Agreement) portion of the Construction Loan that is
outstanding on the Closing Date plus accrued and unpaid
interest thereon for the final interest accrual period
that is then not yet delinquent (the "Tranche "A"
Amount").
Term: Three (3) years.
Commitment Term The unconditional execution and delivery of all
and Loan Closing: documents and the satisfaction of all other conditions,
requirements and obligations set forth in this
Commitment shall occur no later than 12:00 midnight on
the Outside Closing Date; provided that, without
limiting the foregoing, Borrower -------- shall exercise
diligent and commercially reasonable efforts to cause
all of such conditions, requirements and obligations
(other than the execution of documents by Borrower and
Principal) that are susceptible of performance or
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<PAGE>
satisfaction prior to the Closing to be performed or
satisfied, as applicable, at least ten (10) business
days prior to the Outside Closing Date. Unless all
documents shall be unconditionally executed and
delivered, all other conditions, requirements and
conditions shall be performed or satisfied as aforesaid,
and the Loan shall close at such office prior to 12:00
midnight on the Outside Closing Date, this Commitment
shall automatically terminate.
Termination of
Commitment and Other
Rights and Remedies of If:
the Lender
(i) the Borrower shall fail to pay, within five (5)
Business Days following the date due in accordance with
the terms of this Commitment, the Second Installment (as
defined below) of the Commitment Fee;
(ii) the Borrower and/or the Principal shall fail to
perform or observe any other term, provision, covenant
or agreement contained in this Commitment on its part to
be observed or performed by it, which failure shall
continue for thirty (30) days after notice from Lender
to Borrower; provided that any default that can be cured
solely by payment of money shall be cured within ten
(10) days after notice; provided further that in no
event shall any cure period afforded Borrower or
Principal pursuant to this Commitment extend beyond the
Outside Closing Date;
(iii) the Borrower and/or the Principal shall fail to
perform or observe any term, provision, covenant or
agreement contained in that certain Tri-Party Agreement
dated as of the date hereof among the Lender,
Construction Lender, Borrower, Venetian, LVSI, Mall
Construction LLC and the Principal on its part to be
observed or performed, as such Tri-Party Agreement may
be amended, supplemented or otherwise modified from time
to time (the "Tri-Party Agreement"), which failure shall
continue for thirty (30) days after notice from Lender
to Borrower; provided that any default that can be cured
solely by
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<PAGE>
payment of money shall be cured within ten (10) days
after notice; provided further that in no event shall
any cure period afforded Borrower or Principal pursuant
to this Commitment extend beyond the Outside Closing
Date; and/or
(iv) (A) any written information, representation or
warranty made or furnished by, or on behalf of, the
Borrower and/or the Principal (x) in order to induce the
Lender to make the Loan or to deliver this Commitment or
(y) in, or in connection with, this Commitment, the
Loan, the Tri-Party Agreement, or any document or
certificate executed in connection with any of the
foregoing, in any such case, contained any material
inaccuracy, or was untrue or misleading, in any material
respect, at the time made and (B) the relevant state of
facts as they actually exist (as opposed to as they
would have existed if such written information,
representation or warranty were accurate, true and not
misleading) is likely to cause a Material Adverse Effect
(as defined below); provided that, if such
representation or warranty (A) was made without the
Borrower or the Principal knowing that it was false (in
whole or part) and (B) such breach is susceptible of
cure by the Borrower or the Principal, then such breach
shall not constitute a Termination Event unless Borrower
or Principal shall fail to cure such breach within
thirty (30) days after notice thereof from the Lender to
the Borrower; provided further, that any default that
can be cured solely by payment of money shall be cured
within ten (10) days after notice; provided further that
in no event shall any cure period afforded Borrower or
Principal pursuant to this Commitment extend beyond the
Outside Closing Date (any of the events described in the
foregoing clauses (i) through and including (iv), a
"Termination Event");
then, in any such event, the Lender, at its option, may
(a) terminate this Commitment and its obligations
hereunder by giving written notice to Borrower and the
Principal and (b) retain for its own account, the full
Commitment Fee as
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<PAGE>
liquidated damages; provided that nothing contained
herein shall prevent or limit, or be deemed to prevent
or limit, the Lender from enforcing the Borrower's and
the Principal's obligation to pay the entire Commitment
Fee. Such termination shall be effective as of the date
upon which such notice is sent or delivered. The
termination of this Commitment and the retention of the
full Commitment Fee (together with the right to enforce
any obligations of Borrower, Principal, Venetian and/or
LVSI that, pursuant to the express terms of this
Commitment or the Tri-Party Agreement, survive the
termination of this Commitment (including, without
limitation, the section of Exhibit A to this Commitment
entitled "Reimbursement of Expenses", Section 14 of
Exhibit B of this Commitment and Section 27 of the
Tri-Party Agreement) and the right to receive damages
and/or other relief in connection therewith), shall
constitute Lender's sole remedies if a Termination Event
shall occur. When any sums are stated herein as being
retained by the Lender as liquidated damages, such sums
are being retained under circumstances where it would be
difficult to ascertain the sum required to compensate
the Lender for the loss of the opportunity to make the
Loan, the loss of the opportunity to make other loans on
account of time and attention devoted to the Loan and
for the internal expenses incurred by the Lender in
connection with the review, evaluation and processing of
material and information relating to the Loan and such
liquidated damages represent the reasonable, good faith
attempt of the parties hereto to liquidate such damage
in advance.
The term "Material Adverse Effect" means a material
adverse effect upon (i) the business operations of the
Borrower, taken as a whole, the Collateral, taken as a
whole, or the condition (financial or otherwise) of the
Borrower, taken as a whole, (ii) the ability of the
Borrower or the Principal to perform any of its material
obligations under the Commitment or the Loan Documents,
(iii) the enforceability, validity, perfection or
-8-
<PAGE>
priority of the lien of any Loan Document or (iv) the
value of the Collateral (or of the Lender's interest
therein) or the operation thereof.
Interest Payments Due monthly in arrears based on an interest rate equal
to the Applicable Margin (as defined below) in excess of
the thirty (30) day LIBO Rate determined by Lender as of
the first business day of each month by reference to
Telerate Page 3750; provided that interest for the
period commencing on the Closing Date and ending on the
last day of the month in which the Closing Date occurs
shall be payable on the Closing Date. Interest will be
calculated on the basis of a 360 day year based on
actual days elapsed. As used herein, the term
"Applicable Margin" shall mean (x) prior to such time,
if any, as the Subdivision shall exist, five percent
(5.00%) and (y) from and after such time, if any, as the
Subdivision shall exist, three and one-half percent
(3.50%).
Payment Date: Initially, the date upon which the Loan closes (the
"Closing Date") and, thereafter, commencing with the
second calendar month next following the calendar month
in which the Closing Date occurs, the first business day
of each month.
Prepayment Provisions: As set forth in the Form Loan Documents
Scheduled Principal None prior to the Maturity Date.
Payments:
Transfer Restrictions: As set forth in the Form Loan Documents
Tax and Insurance At Closing, Lender will establish an account into which
Escrow Accounts: the Borrower shall deposit funds to be used for the
payment of real estate taxes and upon which the Lender
shall hold a first priority security interest (the "Tax
Escrow Account"); provided that, prior to the existence
of a Subdivision, Borrower shall escrow funds for the
payment of real estate taxes in accordance with the
provisions of that certain Amended and Restated
Reciprocal Easement, Use and Operating Agreement dated
as of the date hereof among Venetian, Mall Construction
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<PAGE>
and Interface Group - Nevada, Inc. (the "REA"). At all
times, Borrower shall escrow funds in respect of
insurance premiums in accordance with the provisions of
the REA. The Form Loan Documents and the REA contain
other provisions relating to such escrow accounts.
Start-Up Cost a. At Closing Lender will establish an account upon
Escrow Account: which the Lender shall hold a first priority security
interest (the "Start-Up Cost Escrow Account"). The
Start-Up Cost Escrow Account shall have three
subaccounts, the "Operating Expense Subaccount", the
"Brokerage Commission Subaccount" and the "TI Costs
Subaccount" (collectively, the "Subaccounts"). At the
Closing, the Borrower shall deposit into the Start-Up
Cost Escrow Account funds in an amount equal to the sum
of the Brokerage Commission Deposit and the TI Costs
Deposit. A portion of such funds equal to the Brokerage
Commission Deposit shall be held in the Brokerage
Commission Subaccount and a portion of such funds equal
to the TI Costs Deposit shall be held in the TI Costs
Subaccount.
b. Within fifteen (15) days after the Closing Date,
Borrower shall either (i) deposit into the Start-Up Cost
Escrow Account (to be held in the Operating Expense
Subaccount) funds in an amount equal to the Operating
Expense Deposit or (ii) furnish to Lender a Letter of
Credit (as defined below) in an amount that is equal to
the Operating Expense Deposit and with a term of six (6)
months (which Letter of Credit must, at all times prior
to the Operating Expense Revenue Achievement Date, be
replaced, at least thirty (30) days prior to each
expiration date thereof, with either (A) a Letter of
Credit providing for an expiration date that occurs six
(6) months from the expiration date of the Letter of
Credit being replaced or (B) funds in an amount equal to
the Operating Expense Deposit, which funds shall be held
in the Operating Expense Subaccount), together with a
document, in form and substance reasonably satisfactory
to Lender, pursuant to which the account party under the
Letter of Credit (x) covenants and agrees that until
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<PAGE>
the Indebtedness (as defined in the Form Loan Documents)
shall have been indefeasibly paid in full, such account
party shall withhold exercise of any claim, right or
remedy, direct or indirect, that such account party
shall then or thereafter have against Borrower or any of
its assets, in each case whether such claim, right or
remedy arises in equity, under contract, by statute,
under common law or otherwise (including, without
limitation, any right of subrogation, reimbursement,
contribution or indemnification) arising in connection
with the Letter of Credit and (y) subordinates all
claims against the Borrower to those of Lender. If an
Event of Default occurs, Lender shall be entitled to
make one or more draws under such Letter of Credit, and
apply the proceeds thereof and/or apply any funds from
time to time on deposit in the Start-Up Cost Escrow
Account to the amounts due under the Form Loan Documents
in such order and manner as Lender shall elect in its
sole discretion.
c. On the Operating Expense Revenue Achievement Date, so
long as no Event of Default shall then exist, the Lender
shall release all funds then on deposit in the Operating
Expense Subaccount to the Borrower for its own account
or shall return the Letter of Credit, as applicable.
Furthermore, notwithstanding anything to the contrary
contained herein, if the Operating Expense Revenue
Achievement Date shall occur on the Closing Date, then
Borrower shall not, at such time or thereafter, be
required to deposit the Operating Expense Deposit into
the Start-Up Cost Escrow Account and shall not, at such
time or thereafter, be required to furnish a Letter of
Credit in lieu thereof.
d. The provisions of the Form Loan Agreement address
disbursements from, and required deposits to, the TI
Costs Subaccount and the Brokerage Commissions
Subaccount after the Closing and prior to the TI Costs
Revenue Achievement Date. On the TI Costs Revenue
Achievement Date (as defined below), so long as no Event
of
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<PAGE>
Default shall then exist, the Lender shall release all
funds then on deposit in the TI Costs Subaccount to the
Borrower for its own account.
e. As used in this Commitment, the following terms shall
have the following meanings:
(i) "Brokerage Commission Deposit" shall mean the
amount required, under the terms of the FADAA, to be set
forth in the "mall leasing commissions reserve" Line
Item (as defined in the FADAA) as of the Mall Release
Date (as defined in the FADAA).
(ii) "funds" shall mean immediately available funds.
(iii) "Letter of Credit" shall mean an unconditional,
irrevocable, and transferable demand letter of credit,
in form and substance reasonably satisfactory to the
Lender, issued by and drawn on a bank that is acceptable
to Lender, for the account of the Principal (or an
Affiliate thereof), and the beneficiary of which shall
be the Lender, together with all replacements hereof
satisfying the provisions of this definition.
(iv) "Operating Expense Deposit" shall mean
$5,000,000.
(v) "Operating Expense Revenue Achievement Date" shall
mean the first date upon which the Approval Criteria (as
defined in Section 2 of this Exhibit A) shall be
satisfied (provided that for purposes of this definition
of "Operating Expense Revenue Achievement Date", the
term "Test Date" as used in the definition of "Approval
Criteria" shall mean any date occurring on or after the
Closing Date).
(vi) "TI Costs Deposit" shall mean the amount
required, under the terms of the FADAA, to be set forth
in the "mall tenants improvements reserve" Line Item (as
defined in the FADAA) as of the Mall Release Date.
(vii) "TI Costs Revenue Achievement Date" shall mean
the first date upon which the Approval Criteria (as
defined in Section 2 of this Exhibit A) shall be
satisfied (provided that for purposes of this definition
of "TI Deposit Revenue Achievement Date", (x)
"$28,000,000" shall
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<PAGE>
be substituted for "$21,000,000" each time it appears in
the definition of "Approval Criteria" and (y) the term
"Test Date" as used in the definition of "Approval
Criteria" shall mean any date occurring on or after the
Closing Date).
Commitment Fee: The Borrower and the Principal shall be jointly and
severally obligated to pay a commitment fee in an amount
equal to $4,462,500 (the "Commitment Fee"). The
Commitment Fee shall be deemed to have been earned by
Lender upon execution and delivery by Borrower and
Principal of this Commitment, and, except as otherwise
expressly provided below, the Commitment Fee shall be
non-refundable regardless of whether the Loan shall
close or shall not close, unless the Loan shall not
close due solely to Lender's failure to fund the Loan
despite (x) the satisfaction, in accordance with the
terms of the Commitment, of all conditions precedent to
Lender's obligation to fund the Loan and (y) the absence
of a Termination Event (a "Lender Default"). The
Commitment Fee shall be payable in two (2) installments.
The first installment, which shall be in the amount of
$3,150,000 (the "First Installment"), shall be payable
on the date this Commitment is executed and delivered by
the Borrower (the "Delivery Date"). The second
installment, which shall be in the amount of $1,312,500
(the "Second Installment"), shall be payable on the
first (1st) anniversary of the Delivery Date; provided
that, if a Termination Event occurs and Lender elects to
terminate this Commitment, then, at Lender's election,
the entire Commitment Fee shall become immediately due
and payable. Notwithstanding the foregoing, if the
Closing occurs and the Commitment Fee shall exceed four
and one-quarter percent (4.25%) of the Loan Amount,
then, at the Closing of the funding of the Loan, Lender
shall refund to Borrower a portion of the Commitment Fee
equal to the difference between (x) the Commitment Fee
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minus (y) four and one-quarter percent (4.25%) of the
Loan Amount; provided that, at Lender's option, Lender
shall be entitled to credit such refund towards any
amounts then payable by Borrower or Principal under this
Commitment or under the Tri-Party Agreement. The
provisions of this paragraph shall survive the
expiration or termination of this Commitment.
Reimbursement of The Borrower and the Principal will reimburse the Lender
Expenses: for all reasonable out-of-pocket costs and expenses
incurred in connection with the Loan and the
negotiation, execution and delivery of this Commitment
(the "Loan Transaction Costs") regardless of whether the
Loan shall actually close or be funded, unless the Loan
shall not close due solely to a Lender Default. All Loan
Transaction Costs that were not paid by the Borrower or
the Principal at the time they executed and delivered
this Commitment shall be paid by the Borrower and the
Principal at Closing; provided that, if the Closing
shall not occur, then, unless the Loan shall not close
due solely to a Lender Default, the Borrower and the
Principal shall pay such Loan Transaction Costs to the
Lender within ten (10) days of demand therefor. Without
limiting the generality of the foregoing, the term "Loan
Transaction Costs" shall include, without limitation,
the reasonable fees, disbursements and other expenses of
Lender's counsel, appraisal fees, engineering fees,
accountants' fees, other consultant's fees, title
insurance premiums, survey charges, environmental site
assessment fees, credit reports, expenses paid by Lender
and/or due to third party vendors, mortgage and
documentary stamp taxes, if any, note intangible taxes,
if any, recording charges and brokerage fees and
commissions, and costs of tax lien searches and other
customary Loan fees). The Borrower and the Principal
shall be jointly and severally liable to pay all Loan
Transaction Costs. The provisions of this paragraph
shall survive the expiration or termination of this
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Commitment.
Assignment and From and after the Closing, the Lender will have the
Participation: right to sell, assign and/or participate the Loan, in
whole or in part, without the consent of the Borrower,
to (x) if no Event of Default shall then exist, any
Person that is not a Competitor (as defined below) and
(y) if an Event of Default shall then exist, to any
Person. The term "Competitor" means a Person that (i)
owns or operates (or is an Affiliate (as defined in the
Form Loan Documents) of an entity that owns or operates)
a casino located in Nevada or New Jersey, a shopping
center or mall located in Nevada or a Competing Facility
(as defined in the Form Loan Documents) and/or (ii) is a
union pension fund; provided that the Lender shall be
entitled to rely on a written statement from the
proposed assignee or participant that it is not a
Competitor (without making any further inquiry or
investigation) and the Lender shall not be liable to the
Borrower or to any other Person if Lender shall
consummate an sale, assignment or participation with a
Person that shall in fact be a Competitor
notwithstanding the fact that such Person delivered such
a written statement.
Property Manager a. At all times during the term of the Loan, (i) the
and Leasing Broker: Property shall be operated as a first-class shopping
center managed by an Acceptable Property Manager (as
defined below) and (ii) an Acceptable Leasing Broker (as
defined below) shall be engaged to procure tenants for
the Mall Improvements.
b. As used herein, the following terms shall have the
following meanings:
(i) "Acceptable Property Manager" means (A) Forest
City Commercial Management, Inc., (B) another
professional management company that then manages
first-class regional shopping centers containing, in the
aggregate, at least 10 million net rentable square feet
in the United States (exclusive of the Mall
Improvements), (C) an Affiliate of Borrower reasonably
acceptable to Lender based upon such
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Affiliate's employees' property management experience
and employment history with one or more professional
property management companies that, at the time of each
such employee's employment with the applicable
compan(ies), managed first-class regional shopping
centers, or (D) another Person acceptable to Lender in
its sole discretion.
(ii) "Acceptable Leasing Broker" means (A) a leasing
brokerage company that is then the exclusive leasing
broker for first-class regional shopping centers
containing, in the aggregate, at least 10 million net
rentable square feet in the United States (exclusive of
the Mall Improvements), (iii) an Affiliate of Borrower
reasonably acceptable to the Lender based upon such
Affiliate's employees' leasing brokerage experience and
employment history with one or more professional leasing
brokerage companies that were, at the time of each such
employee's employment with the applicable compan(ies),
the exclusive leasing brokers for first-class regional
shopping centers, or (iv) another Person acceptable to
Lender in its sole discretion.
Property Management The Lender will have the right to substitute a new
and Leasing Brokerage: property manager for the Property for the Property
Manager that is then engaged with respect to the
Property if an Event of Default occurs under the Loan
Documents. The Lender will have the right to substitute
a new leasing broker for the Property for the leasing
broker that is then engaged with respect to the Property
if an Event of Default occurs under the Loan Documents.
Special Purpose Entity: Each of the Borrower and the Managing Member must be a
special purpose entity. The Borrower shall own no asset
other than the Collateral and the Managing Member shall
own no assets other than a 1% membership interest in the
Borrower and in Mall Holdings. The Managing Member
shall, at all times, have at least one independent
director that (i) is not an employee, officer,
shareholder, or paid consultant of, or otherwise
affiliated with, the Borrower and (ii) is not an
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employee, officer, shareholder, director or paid
consultant of any Affiliate of the Borrower. A
Non-consolidation opinion, in form and substance
acceptable to Lender and Lender's counsel (a
"Substantive Non-Consolidation Opinion") will be
required (x) on the date upon which this Commitment is
issued and (y) on the Closing Date.
Remedies of Borrower If the Borrower shall seek the approval by or the
consent of the Lender under this Commitment, under the
Tri-Party Agreement or under any of the Form Loan
Documents and the Lender shall fail or refuse to give
such consent or approval then Borrower shall not be
entitled to any damages for any withholding or delay of
such approval or consent by the Lender, it being
intended that Borrower's sole remedy shall be to bring
an action for an injunction or specific performance,
which remedy or injunction or specific performance shall
be available only in those cases where the Lender has
expressly agreed under this Commitment, under the
Tri-Party Agreement or under the Form Loan Documents not
to unreasonably withhold or delay its consent or
approval.
In no event shall Borrower seek, receive or recover
punitive damages against the Lender in connection with
any suit, action, claim or proceeding against the
Lender.
Guaranty by the The Loan shall be fully recourse to Borrower and to the
Principal Collateral but, subject to certain carve-outs contained
in the Loan Documents, shall be non-recourse to the
members in Borrower and to Borrower's and such members'
officers, directors, agents, representatives, employees,
and direct and indirect owners. If the Lender funds the
Loan, then, immediately prior to such funding, Lender
shall be entitled to release the Escrowed Guaranty (as
defined below) from escrow, or, at Lender's option,
Principal will unconditionally execute and deliver a
Replacement Guaranty (as defined below). If this
Commitment shall terminate or expire, then Lender shall
return the Escrowed Guaranty to Principal; provided that
the foregoing shall in no event
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affect the provisions of Paragraph 26(c) of the
Tri-Party Agreement.
Interest Rate Cap: Within 5 days after the Closing Date, the Borrower shall
purchase from an institution reasonably satisfactory to
the Lender and shall deliver to the Lender a LIBOR based
interest rate cap agreement, in form and substance
reasonably satisfactory to Lender, providing for a
strike rate of eight and one-half (8.50%) percent, a
term that is coterminous with the term of the Loan, a
notional amount equal to the Loan Amount; provided that
if the premium in respect of the interest rate cap in
question shall exceed the product of (x) 25 basis points
multiplied by (y) the Loan Amount (the "Maximum
Premium"), and Lender shall not arrange for an interest
rate cap to be provided by a provider (which may be an
Affiliate of Lender) that is reasonably satisfactory to
Borrower who will provide the required interest rate cap
for a premium that does not exceed the Maximum Premium
(Borrower hereby acknowledging that Lender shall not be
obligated to arrange, or to attempt to arrange, for such
a cap or such a provider), then the notional amount of
the interest rate cap that Borrower shall be required to
obtain shall be reduced to the extent necessary for the
premium to equal the Maximum Premium. The Lender shall
have a first priority security interest upon any such
interest rate cap agreement. The cap provider shall
consent to the granting of the aforesaid security
interest pursuant to an instrument in form and substance
reasonably satisfactory to the Lender.
2. RELATIONSHIP BETWEEN MALL I AND MALL II
a. Subject to the other provisions of this Section 2,
Lender shall permit Mall II Sub (as defined below) to
construct Mall Phase II and to connect the same to Mall
Phase I (as defined below).
b. Prior to commencement of construction of Mall Phase
II, there must be in place a construction, operation and
reciprocal easement agreement ("COREA") between Borrower
and Mall II Sub with respect to
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Mall Phase I and Mall Phase II. Negotiations regarding
the COREA will begin as soon as practicable following
the date hereof. The COREA will, among other things, (i)
be an agreement that a Commercially Reasonable Owner (as
defined in the Form Loan Documents) of Mall Phase I
would execute, (ii) contain guidelines relating to the
design of Mall Phase II (including, without limitation,
the connection(s) between Mall Phase I and Mall Phase
II), and relating to alterations and maintenance of Mall
Phase I and Mall Phase II, so that, among other things,
the malls are architecturally harmonious and constructed
and maintained in a first-class manner, (iii) provide
for the joint maintenance, leasing, marketing,
management and operation, by one third-party property
manager and one third-party leasing agent, of Mall Phase
I and Mall Phase II, (iv) require each mall owner to pay
(A) all operating and other expenses that are directly
allocable to its mall and (B) an equitable portion of
all operating and other expenses that are not directly
allocable to either mall but otherwise relate to the
"integrated mall" ("Shared Expenses"), (v) provide for
approval of a leasing plan and, with respect to all
operating expenses that should appropriately be Shared
Expenses, an operating budget prior to commencement of
operation of Mall Phase II and each year thereafter,
(vi) provide that each of Borrower and Mall II Sub is
entitled to receive and retain, for its own account, all
revenue generated by Mall Phase I or Mall Phase II, as
applicable, (vii) allow each mall owner to sell and
finance its mall, and, in connection therewith, to
assign or mortgage its interest in the COREA, (viii)
provide for the granting of appropriate easements across
each mall owner's property, (ix) contain provisions
relating to restoration of the malls after casualty and
condemnation and (x) contain a mechanism to resolve
disputes under the COREA. Additionally, the execution
and performance of the COREA must not be likely to cause
a Material Adverse Effect (as defined in Form Loan
Documents), provided that, if the Approval Criteria are
satisfied, Lender shall not assert
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<PAGE>
that execution and performance of the COREA is likely to
cause a Material Adverse Effect as a result of the fact
that, notwithstanding Mall Sub I and Mall Sub II's
compliance with the terms of the COREA, (1) tenants in
Mall Phase II and tenants in Mall Phase I may compete
for the same customers and/or (2) prospective tenants
may elect to lease space in Mall Phase II rather than in
Mall Phase I (the provisions of this paragraph "b", the
"COREA Guidelines").
c. The approval of Lender will be required with respect
to the COREA. Lender will not unreasonably withhold its
approval of the COREA if it satisfies the COREA
Guidelines and, as of the date upon which the parties
execute the COREA (the "Test Date") either (a)(i) Mall
Phase I shall have been open for business and operating
for a period of at least twelve calendar months and (ii)
Borrower shall have actually received from tenants under
COREA Qualified Leases (as defined below), in the
aggregate, Actual Rent (as defined below), with respect
to the then immediately preceding twelve (12) calendar
months that shall equal or exceed $21,000,000, (b)(i)
Mall Phase I shall have been open for business and
operating for a period of less than twelve calendar
months (the period during which Mall Phase I shall have
been open for business and operating, the "Test Period")
and (ii) the sum of (A) the Actual Rent that Borrower
shall have actually received from tenants under COREA
Qualified Leases with respect to the Test Period plus
(B) the aggregate amount of Projected Rent (as defined
below) that tenants under COREA Qualified Leases and
COREA Qualified Lease Commitments shall be required to
pay with respect to the portion of the 12-month period
that follows the date upon which Mall Phase I shall have
first been open for business and operating which
excludes the Test Period shall equal or exceed
$21,000,000 or (c)(i) Mall Phase I shall not be open for
business or operating as of the Test Date and (ii) the
aggregate amount of Projected Rent that tenants under
COREA Qualified Leases and COREA Qualified Lease
Commitments shall be
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<PAGE>
required to pay with respect to the initial period of
twelve (12) calendar months following the opening of
Phase I Mall for business shall equal or exceed
$21,000,000 (the "Approval Criteria"). If the Approval
Criteria are not satisfied but the COREA satisfies the
COREA Guidelines, then (x) Lender will be entitled to
grant or withhold its approval, in its sole discretion,
to any portions or provisions of the COREA relating to
the management or leasing of Phase I Mall and Phase II
Mall, (y) without limiting the foregoing, the COREA
shall provide that at any time that an Event of Default
(as defined in the Form Loan Documents) shall exist,
Lender shall have sole discretion over the appointment
of the property manager for the entire integrated mall
and over leasing plans for the entire integrated mall
(the provisions of the COREA described in clauses (x)
and (y), collectively, the "Lender Determination
Provision") and (z) Lender will not unreasonably
withhold its approval of the remainder of the COREA;
provided that, if the Approval Criteria shall be
satisfied as of any given date that occurs after the
Test Date, then, at such time, at Borrower's election,
the Lender Determination Provision of the COREA shall be
replaced with other provisions regarding management and
leasing of the Phase I Mall and the Phase II Mall that a
Commercially Reasonable Owner would deem acceptable and
that are not likely to result in a Material Adverse
Effect (as defined in the Form Loan Documents). If the
Approval Criteria shall be satisfied as of the Test Date
or thereafter, and the parties thereto shall have
executed and delivered a COREA that satisfies the COREA
Guidelines and is approved by Lender in accordance with
the provisions of this Section 2, then, thereafter,
Borrower shall be entitled to make such changes to the
COREA that a Commercially Reasonable Owner would make so
long as such changes are not likely to result in a
Material Adverse Effect (as defined in the Form Loan
Documents). Borrower shall furnish to Lender, promptly
upon request therefor by Lender, and as a condition
precedent to Lender's
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<PAGE>
obligations under this Paragraph 2, all rent
information, Leases and information regarding the
creditworthiness of tenants that Lender shall reasonably
request to determine whether the Approval Criteria are
satisfied.
d. It will also be a condition precedent to the
commencement of construction of Mall Phase II that
Lender receives a substantive non-consolidation opinion,
in form and substance, and from counsel, reasonably
satisfactory to Lender and its counsel, with respect to
Mall Sub I, its Affiliates and Mall Sub II.
e. Promptly upon request therefor by Lender, Borrower
shall furnish to Lender such materials as Lender shall
reasonably require to determine whether the requirements
regarding design of the Phase I Mall and the Phase II
Mall set forth in the COREA that was approved by Lender
will be satisfied. If such materials disclose that such
design requirements will not be satisfied, then Borrower
shall cause such changes to be made as are necessary so
that the design of the Phase I Mall and the Phase II
Mall will satisfy such requirements. The Lender's review
of such materials shall create no responsibility or
liability on behalf of the Lender for their
completeness, design, sufficiency or their compliance
with Legal Requirements or Insurance Requirements.
f. As used herein, the following terms shall have the
following meanings:
(i) "Actual Rent" shall mean, for any period of time,
with respect to any COREA Qualified Lease, all minimum
(i.e., exclusive of percentage or additional) and
percentage rent (but excluding any prepaid rent other
than minimum rent for the first full calendar month
and/or last calendar month of the term of the applicable
lease that was prepaid upon lease execution) that was
actually paid by the tenant thereunder with respect to
such period.
(ii) "COREA Qualified Lease" shall mean, as of any
date of determination, a Lease (i)(a) that substantially
conforms
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to the applicable (e.g., retail or restaurant) standard
lease form approved by the Lender (with such changes
thereto as both (x) a Commercially Reasonable Owner
would agree to and (y) are not likely to result in a
Material Adverse Effect), provided that in no event
shall such changes include a right of the tenant to
terminate the Lease (except for rights to terminate, due
to a Casualty or Taking (as such capitalized terms are
defined in the Form Loan Documents), that both a
Commercially Reasonable Owner would agree to and that
are not likely to result in a Material Adverse Effect)),
(b) which, in the case of a Lease that was theretofore
entered into, is in full force and effect and under
which there is no monetary default or material
non-monetary default and (c) that complies with the
provisions of Exhibit A-7 attached hereto (as such
provisions may be changed from time to time with the
prior consent of the Lender (which consent shall not be
unreasonably withheld or delayed)) or (ii) is otherwise
approved by the Lender (which approval shall not be
unreasonably withheld or delayed); provided that,
notwithstanding the foregoing, each Lease described on
Schedule G-2 to the Form Loan Agreement shall be deemed
to be a "COREA Qualified Lease" so long as, at the time
in question, such Lease is in full force and effect and
there is no monetary default or material non-monetary
default under such Lease.
(iii) "COREA Qualified Lease Commitment" shall mean a
binding commitment (other than a Lease) from a tenant to
lease space in the Mall Improvements, which commitment
is acceptable to Lender in its sole discretion.
(iv) "COREA Rent" means, with respect to any
determination as to whether the Approval Criteria are
satisfied, the collective reference to all Actual Rent
and Projected Rent that is relevant to such
determination.
(iv) "Madame Tussaud LOI/Lease" shall mean a COREA
Qualified Lease or a COREA
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Qualified Lease Commitment with The Tussaud Group Ltd.,
as tenant.
(v) "Mall Phase I" shall mean the Property.
(vi) "Mall Phase II" shall mean a first-class shopping
mall (A) that is physically connected to the Property at
one or more locations and (B) the architecture of which,
and the theme with respect to which, is harmonious with
that of Mall Phase I.
(vii) "Mall II Sub" shall mean an Affiliate of the
Principal that, at the time in question, (A) owns or
leases the space in which and/or the land upon which, as
applicable, Mall Phase II will be or was, as applicable,
constructed and (B) owns (or if construction of Mall
Phase II shall not have therefore been commenced, will,
upon commencement of construction of Mall Phase II, own)
Mall Phase II.
(viii) "Projected Rent" shall mean, for any period of
time, with respect to (A) any COREA Qualified Lease or
any COREA Qualified Lease Commitment that provides for
the use of the leased premises in question as a
restaurant (but excluding any such leased premises that
are located within a "food court"), the greater, of (1)
the aggregate minimum (i.e. exclusive of percentage or
additional) rent that is required to be paid by the
tenant thereunder with respect to such period or (2) the
sum of (a)(i) the product of $50 (or, with respect to
any net rentable square foot of the leased premises that
is or will be located on the first level of the Mall
Improvements over which there will not be constructed,
prior to the time that the Borrower delivers such leased
premises to such tenant, a second level of Mall
Improvements, $75) pro rated for the period in question
based upon the ratio that the number of calendar months
(or portions thereof) in such period bears to twelve
(12) multiplied by (ii) the aggregate net rentable
square footage of the leased premises that is or will be
located on the first level of the Mall Improvements plus
(b) the product of (i)
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$25 (pro rated as aforesaid) multiplied by (ii) the
aggregate net rentable square footage of the leased
premises that is or will be located on the second level
of the Mall Improvements, (B) the Billboard Operating
Lease, $945,000, pro rated as aforesaid, (C) the Madame
Tussaud LOI/Lease, $960,000 pro rated as aforesaid and
(D) with respect to any other COREA Qualified Lease or
COREA Qualified Lease Commitment, minimum (i.e.
exclusive of percentage or additional) rent that is
required to be paid by the tenant thereunder with
respect to such period;
(ix) "second level" means, (A) with respect to the
Mall, the mezzanine level of the Mall and (B) with
respect to the Retail Annex, the second level of the
Retail Annex.
3. CASH MANAGEMENT ACCOUNT
a. Within fifteen (15) days after the Property shall
first have been open for business for six (6)
consecutive full calendar months (but in no event prior
to the Closing Date), and, thereafter, within fifteen
(15) days after request therefor by Lender (which
request shall be made not more than once during any
calendar month) (each such fifteenth (15th) day, a
"Delivery Date"), or at any time as Borrower shall
desire to do so (but in no event more than once per
calendar month) Borrower shall furnish to Lender (for
its reasonable approval) a calculation of the DSCR with
respect to the period of six full calendar months
immediately preceding such Delivery Date (each such
six-month period, a "Preceding Period"), together with
all relevant financial and other information and
materials relating to such calculation (collectively,
"DSCR Materials"). If the DSCR for any such Preceding
Period shall be less than 1.25 or Borrower shall fail to
furnish such DSCR Materials to Lender within fifteen
days after Lender's request (except in the case of the
initial delivery of DSCR Materials required hereunder,
which Borrower shall be required to deliver to
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Lender as aforesaid without notice from Lender) as
aforesaid (either of the foregoing, a "DSCR Event"),
then, during the period commencing on the applicable
Delivery Date and ending at such future time as the DSCR
for the Property for six consecutive full calendar
months shall equal or exceed 1.25 (each, a "DSCR
Period"), and for each DSCR Period thereafter occurring,
the provisions of paragraph 3.b. below shall be
applicable.
b. If, at any time, a DSCR Event shall occur, then
Borrower shall promptly thereafter establish an
interest-bearing depository account at a nationally
recognized commercial bank reasonably acceptable to
Lender, for the benefit of Lender ("Cash Management
Account"). Borrower will cause all revenues with respect
to the Property to be deposited directly into the Cash
Management Account on a daily basis. If on the last
banking day prior to the date of the Loan interest
payment that is then next due, the funds in the Cash
Management Account are less than the amount of the Loan
interest payment then due, Borrower shall deposit the
shortfall into the Cash Management Account. Lender shall
have control over, and a first priority security
interest in, the Cash Management Account and all funds
from time to time on deposit therein. At any time that
no Event of Default (as defined in the Form Loan
Documents) shall exist, Borrower shall have the right to
make withdrawals from the Cash Management Account solely
for the purpose of paying amounts payable to Lender in
respect of the Loan, any bona fide operating expenses or
capital expenditures relating to the Property that are
certified as such by Borrower pursuant to an Officer's
Certificate (as defined in the Form Loan Documents), Tax
Distributions (as defined below) and any other
expenditures that are approved by Lender. At any time
that an Event of Default shall exist, Lender will have
the right to withdraw 100% of the revenues that are from
time to time deposited into the Cash Management Account
and apply such funds to any amounts that are payable
under the Form Loan Documents in such order and manner
as Lender shall
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<PAGE>
determine in its sole discretion. Lender shall have the
right to debit the Cash Management Account in payment
for each monthly interest payment and any other amounts
owed to Lender under the Form Loan Documents. All
interest earned under the Cash Management Account shall
be credited to Borrower. Borrower shall execute and
deliver to Lender all documents, instruments and
financing statements that Lender shall reasonably
require in order for Lender to obtain a perfected first
priority security interest in the Cash Management
Account and all funds and securities from time to time
on deposit therein or held in connection therewith. If,
at any time after a DSCR Event shall occur, the DSCR for
the Property for six consecutive full calendar months
shall equal or exceed 1.25, then, provided no Event of
Default shall then exist, Lender shall release the funds
then on deposit in the Cash Management Account to
Borrower.
c. As used herein, the following terms shall have the
following meanings:
(i) "Applicable Tax Percentage" means the highest
aggregate effective marginal rate of federal, state and
local income tax or, when applicable, alternative
minimum tax (after giving effect to deductibility of
state and local taxes and the tax rate applicable to
ordinary income and to capital gains, as the case may
be) to which any direct or indirect member or S
corporation shareholder of Borrower or the Junior Lender
(if an Affiliate of Borrower), as applicable, subject to
the highest marginal rate of tax would be subject in the
relevant year of determination (as certified to the
Syndication 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 Borrower or
such Junior Lender, as applicable.
(ii) "Debt Service" shall mean, for any period of six
calendar months, the aggregate amount of interest that
was payable in respect of the Loan with
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respect to such period.
(iii) "DSCR" shall mean, for any period of six calendar
months, an amount equal to the quotient of (A) NOI with
respect to such period divided by (B) Debt Service with
respect to such period.
(iv) "NOI" shall mean, for any period of six calendar
months, the excess of (A) Revenues for such period over
(B) Operating Expenses for such period.
(v) "Operating Expenses" shall mean, for any period of
six calendar months, as determined in accordance with
sound accounting principles consistently applied, the
sum of (A) all operating expenses actually expended by
Borrower in respect of the Property (or required to be
expended by Borrower in order to maintain and operate
the Property as required under the Form Loan Documents)
during such period plus (B) $700,000.
(vi) "Revenues" shall mean, for any period of six
calendar months, as determined in accordance with sound
accounting principles consistently applied, all revenues
generated by the Property and actually received by
Borrower during such period.
(vii) "Tax Distributions" shall mean tax distributions
to members of Borrower to the extent necessary to cover
income taxes (x) on such members' distributive share of
limited liability company income and gains (which
distributive share must be included in such members'
taxable income notwithstanding the fact that the
partnership made no actual distribution as a result of
the provisions of this Section 3) or (y) on accrued and
unpaid interest in respect of the Subordinate Loan, in
each case, assuming that the applicable marginal income
tax rate is the Applicable Tax Percentage (such tax
distributions described in clause (y), "Interest Tax
Distributions").
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4. SUBORDINATION NON-DISTURBANCE AND ATTORNMENT AGREEMENTS
a. With respect to (i) any SNDA Qualified Lease (as
defined below) or (ii) any other Lease (as defined in
Exhibit B to this Commitment) with respect to which
Lender gives its prior written approval (which approval
Lender shall not unreasonably withhold), upon Borrower's
request thereof, Lender shall execute and deliver a SNDA
(as defined in Exhibit B to this Commitment).
b. If Borrower shall desire for Lender to execute an
SNDA with respect to a given Lease that shall not
constitute an SNDA Qualified Lease, then Borrower may
furnish to Lender a term sheet that (i) describes, in
form and detail reasonably satisfactory to Lender, the
proposed Lease and (ii) which term sheet, or the
transmittal letter sent with such term sheet, is
legended (in bold, capitalized letters) as follows:
"This is a Lease Term Sheet referred to in that certain
Loan Commitment Letter dated as of November 14, 1997
among Grand Canal Shops Mall, LLC, Sheldon G. Adelson
and Goldman Sachs Mortgage Company. If you do not
approve or disapprove, in writing, this Lease Term Sheet
within ten (10) Business Days after the date upon which
you actually receive this Lease Term Sheet, then you
shall be deemed to have approved this Lease Term Sheet."
If Borrower shall furnish such a term sheet (a "Lease
Term Sheet") to Lender, then Lender shall approve or
disapprove, in writing, such Lease Term Sheet within ten
(10) Business Days (as defined in the Form Loan
Documents) after the date upon which Lender shall
actually receive such Lease Term Sheet. Borrower hereby
agrees that Lender shall be deemed to have disapproved a
given Lease Term Sheet if Lender shall have deposited
written notice of such disapproval in the United States
mail, or shall have delivered such notice to an
overnight courier, within the applicable ten (10)
Business Day period (regardless of when, or if, Borrower
shall
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have received such notice). If Lender shall fail so to
approve or disapprove any Lease Term Sheet, then Lender
shall be deemed to have approved such Lease Term Sheet.
c. If Borrower shall desire for Lender to execute an
SNDA with respect to a given Lease that shall not
constitute an SNDA Qualified Lease, then, regardless of
whether Borrower shall have furnished a Lease Term Sheet
with respect to such proposed Lease to Lender, Borrower
shall furnish to Lender (A) execution copies of all
documents relating to such proposed Lease to Lender,
together with a blackline of the same against the
relevant lease form approved by Lender (collectively,
the "Proposed Lease Documents") and (B) all other
information and materials pertaining to the applicable
tenant or proposed tenant and/or the proposed Lease as
Lender shall reasonably request. Lender shall not be
entitled to disapprove any given proposed Lease solely
on the basis of any provision in the applicable Proposed
Lease Documents that was accurately reflected in the
applicable Lease Term Sheet, if any, approved (or deemed
approved) by Lender.
d. As used herein, the term "SNDA Qualified Lease"
means, as of any date of determination, a Lease (i)(a)
that substantially conforms to the applicable (e.g.,
retail or restaurant) standard lease form approved by
Lender (with such changes thereto as both (x) a
Commercially Reasonable Owner would agree to and (y) are
not likely to result in a Material Adverse Effect),
provided that in no event shall such changes include a
right of the tenant to terminate the Lease (except for
rights to terminate, due to a Casualty or Taking, that
both a Commercially Reasonable Owner would agree to and
that are not likely to result in a Material Adverse
Effect)), (b) with respect to which, in the case of a
Lease that was theretofore entered into, such Lease is
in full force and effect and there is no monetary
default or material non-monetary default and (c) that
complies with the provisions of Exhibit A-8 attached
hereto (as such provisions may be changed from
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time to time with the prior consent of the Syndication
Agent (which consent shall not be unreasonably withheld
or delayed) (any such Lease, and any Lease described on
Schedule H-2 to the Form Loan Agreement, shall each be
referred to as an "Automatically Qualified SNDA Lease")
or (ii) is otherwise approved by the Lender (which
approval shall not be unreasonably withheld or delayed);
provided that, notwithstanding the foregoing, each Lease
described on Schedule H-2 to the Form Loan Agreement
shall be deemed to be a "SNDA Qualified Lease" so long
as, at the time in question, such Lease is in full force
and effect and there is no monetary default or material
non-monetary default under such Lease.
e. All documents and materials to be furnished to Lender
under this Section 4 shall be sent or delivered to the
address for Lender set forth above, attention: Steven
Mnuchin.
5. SECURITIZATION
After the closing of the Loan, the Lender (in the
Lender's sole and absolute discretion) may negotiate and
consummate an offering of certificates or other
securities representing direct or indirect interests in
the Loan, the Loan Documents (as defined below) or any
portion thereof (a "Securitization"). In connection with
any Securitization or proposed Securitization, Borrower
shall pay all costs that Borrower incurs in connection
therewith, including, without limitation, the costs of
its own counsel and of preparing information and
materials required to be furnished by Borrower but not
any other costs including, without limitation, the costs
of Lender's counsel or the out-of-pocket costs incurred
by Lender in connection with a Securitization.
Cooperation The Loan Documents will obligate the Borrower to
cooperate with the Lender in the Securitization process,
including amending the Loan Documents and executing such
additional documents as may be required by the rating
agencies, except
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<PAGE>
that no such amendment will (x) change the term,
principal amount or interest rate of the Loan (other
than to effect a hyperamortization structure for the
Loan) or require amortization of the principal amount of
the Loan prior to the maturity thereof not otherwise
expressly contemplated by this Commitment or (y)
otherwise (except to a de minimis extent) increase
Borrower's or Principal's costs (except as otherwise
specified herein), liabilities or obligations, or
decrease Borrower's, or increase Lender's, rights, under
the Loan Documents. Without limiting the generality of
the foregoing, the cooperation covenant will
specifically include the obligation of the Borrower and
the Principal to:
(i) if requested by Lender, to modify the debt
instrument evidencing the Loan to create multiple pari
passu notes;
(ii) provide such information as may be reasonably
requested in connection with the preparation of an
offering document by the Lender and its counsel used to
distribute the securities issued in the Securitization
in a manner which does not conflict with federal or
state securities laws;
(iii) cause to be rendered such customary opinion
letters as may be reasonably requested by the rating
agencies (including, but not limited to, a substantive
nonconsolidation opinion that is substantively
equivalent to the Substantive Nonconsolidation Opinion);
(iv) update the representations, warranties and
covenants with respect to the Borrower, the Principal
and the Property that are contained in the Loan
Documents if the same is reasonably requested by the
rating agencies (which representations, warranties and
covenants will survive the closing of the
Securitization);
(v) provide such updated third party reports and
financial information regarding the Property and the
Borrower (but not the Principal) and expanded
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<PAGE>
ongoing administration and reporting by any real estate
mortgage investment conduit ("REMIC") formed in
connection with the Securitization as may be reasonably
requested by the rating agencies or otherwise required
in connection with an election of REMIC status;
(vi) obtain the insurance policies outlined in the
General Conditions to Commitment or as otherwise
reasonably required by the rating agencies in connection
with the Securitization;
(vii) amend the Borrower's and/or the Borrower's
managing member's organizational documents or make such
other changes to the Borrower's structure as reasonably
required by the rating agencies to conform to customary
requirements for single purpose entities in similar
transactions, provided that Borrower shall not be
required to make any amendments that would violate any
agreements between Borrower (or any Affiliate of
Borrower) and any Person that is not an Affiliate of
Borrower (or of any Affiliate thereof); and
(viii) obtain a comfort letter from a nationally
recognized accounting firm with customary exceptions in
connection with the financial information relating to
the Borrower, and the Property and which is presented in
the offering document used in the Securitization.
Notwithstanding any of the foregoing, in no event shall
the foregoing "Cooperation" covenant be deemed to
obligate the Borrower to cause the Principal to deliver,
or to cause to be delivered, any financial statements
(audited or otherwise), certificates or documents
relating to the personal net worth or financial
condition of the Principal.
Indemnification in The Loan Documents shall require the Borrower to provide
Connection with an satisfactory to the Lender, pursuant to which the
Securitization: Borrower indemnification agreement, in form and
substance reasonably will:
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<PAGE>
(i) certify that it has carefully examined the
Securitization offering document and that such document
insofar as it relates to the Borrower, the Principal,
any affiliates thereof, the Property and the Project,
does not (subject to the last sentence of clause (ii)
below) contain any untrue statement of a material fact
or omit to state a material fact necessary in order to
make the statements made, in light of the circumstances
under which they were made, not misleading;
(ii) indemnify the Lender and its affiliates for any
losses, claims, damages and liabilities (including,
without limitation, reasonable attorneys' fees and
expenses) (the "Liabilities") to which such parties may
become subject or which they may incur to the extent
that the Liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of any
material fact relating to the Borrower, the Principal,
any affiliate thereof, the Property or the Project
contained in such sections or arise out of or are based
upon the omission or alleged omission to state therein a
material fact relating to Borrower, the Principal, any
affiliate thereof, the Property or the Project necessary
in order to make the statements therein in light of the
circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Borrower
shall not have liability under such indemnity to the
extent the Liabilities arise out of a statement that (i)
was contained in a document not furnished to Borrower
prior to its release to the investor in question or (ii)
the Lender failed to correct notwithstanding the fact
that the Borrower notified the Lender that such
statement was untrue or misleading; provided that such
notification from Borrower to Lender (x) was in writing,
(y) instructed the Lender how to correct the statement
in question and (z) was received by the Lender
sufficiently prior to the date upon which the
Securitization offering document was first distributed
so that the Lender had sufficient time to correct such
statement; and
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<PAGE>
(iii) agree to reimburse the Lender and its affiliates
for any reasonable attorneys' fees and expenses and
other expenses reasonably incurred by such parties in
connection with investigation or defending the
Liabilities.
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<PAGE>
[EXHIBIT A-1 GMAC Credit Agreement]
[EXHIBIT A-2 Land
[EXHIBIT A-3 Copy of FADAA]
[EXHIBIT A-4 Mall Space]
[EXHIBIT A-5 Retail Annex]
[EXHIBIT A-6 Billboard Additional Premises]
[EXHIBIT A-7 COREA Leasing Guidelines]
[EXHIBIT A-8 SNDA Leasing Guidelines]
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<PAGE>
Exhibit A-7
COREA LEASING GUIDELINES
(a) the creditworthiness of the tenant, and of the guarantor, if any, of
the tenant's Lease obligations, shall be subject to the Lender's approval (which
approval the Lender shall not unreasonably withhold provided that at the time
such approval is sought, such tenant (or guarantor) shall not have made a
general assignment for the benefit of creditors, and there shall not have been
filed by or against such tenant (or guarantor) a petition which has not been
dismissed under any Legal Requirement pertaining to bankruptcy, arrangement,
insolvency or reorganization or under any similar Legal Requirement or for the
appointment of a receiver, liquidator, or trustee, and no action, case or
proceeding which has not been dismissed shall have been commenced under any such
Legal Requirement with respect to such tenant (or guarantor) or for the
composition, extension, arrangement or adjustment of such tenant's (or such
guarantor's) obligations;
(b) the minimum term of such Lease must be such so that, when all Leases
that are relevant to the calculation of COREA Rent are taken together
(collectively, "COREA Leases"), COREA Leases under which, collectively, at least
60% of such COREA Rent has been paid (in the case of Actual Rent) or is payable
or, for percentage rent, projected to be payable (in the case of Projected
Rent), as applicable, shall provide for a minimum term of ten years or more,
COREA Leases under which, collectively, no more than 30% of such COREA Rent has
been paid (in the case of Actual Rent) or is payable or, for percentage rent,
projected to be payable (in the case of Projected Rent), as applicable, shall
provide for a minimum term of between five years and ten years and COREA Leases
under which, collectively, no more than 10% of such COREA Rent has been paid (in
the case of Actual Rent) or is payable or, for percentage rent, projected to be
payable (in the case of Projected Rent), as applicable, shall provide for a
minimum term of between one year and five years;
(c) with respect to the portion of the leased premises, if any, that is
located on the first level of the Mall, such tenant shall be obligated to pay an
average annual fixed rent per net rentable square foot, over the term of the
applicable Lease, that is at least equal to the annual fixed rental rate per net
rentable square foot set forth on Exhibit 1 with respect to the first floor of
the Mall;
(d) with respect to the portion of the leased premises, if any, that is
located on the second level of the Mall, such tenant shall be obligated to pay
an average annual fixed rent per net rentable square foot over the term of the
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<PAGE>
applicable Lease that is at least equal to the annual fixed rental rate per
net rentable square foot set forth on Exhibit 1 with respect to the second level
of the Mall;
(e) with respect to the portion of the leased premises, if any, that is
located in the Retail Annex, such tenant shall be obligated to pay an average
annual fixed rent per net rentable square foot over the term of the applicable
Lease that is at least equal to the annual fixed rental rate per net rentable
square foot set forth on Exhibit 1 with respect to the Retail Annex;
(f) for each lease year, for each level of gross revenue of the tenant set
forth on Exhibit 1, such tenant shall be obligated to pay, as percentage rent,
the relevant percentage (as set forth on Exhibit 1) of such tenant's gross
revenues for each lease year minus the minimum rent paid by the tenant for such
lease year; and
(g) in no event shall the annual fixed rent that is payable with respect
to any lease year be less than 100% of the annual fixed rent that was payable
with respect to the immediately preceding lease year.
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<PAGE>
Exhibit A-8
SNDA LEASING GUIDELINES
(a) the creditworthiness of the tenant, and of the guarantor, if any, of
the tenant's Lease obligations, shall be subject to the Lender's approval (which
approval the Lender shall not unreasonably withhold provided that, at the time
such approval is sought, such tenant (or guarantor) shall not have made a
general assignment for the benefit of creditors, and there shall not have been
filed by or against such tenant (or guarantor) a petition which has not been
dismissed under any Legal Requirement pertaining to bankruptcy, arrangement,
insolvency or reorganization or under any similar Legal Requirement or for the
appointment of a receiver, liquidator, or trustee, and no action, case or
proceeding which has not been dismissed shall have been commenced under any such
Legal Requirement with respect to such tenant (or guarantor) or for the
composition, extension, arrangement or adjustment of such tenant's (or such
guarantor's) obligations);
(b) the minimum term of such Lease must be such so that, when all Leases
(other than Subordinate Leases (as defined in the Form Loan Agreement))
(including the Lease in question)(collectively, the "Approval Required Leases")
are taken together, Approval Required Leases that collectively demise at least
60% of the net rentable square footage of the first level of the Mall
Improvements demised by all Approval Required Leases shall provide for a minimum
term of ten years or more, Approval Required Leases that collectively demise no
more than 30% of the net rentable square footage of the first level of the Mall
Improvements demised by all Approval Required Leases shall provide for a minimum
term of between five years and ten years and Approval Required Leases that
collectively demise no more than 10% of the net rentable square footage of the
of the first level of the Mall Improvements demised by all Approval Required
Leases shall provide for a minimum term of between one year and five years;
(c) with respect to the portion of the leased premises, if any, that is
located on the first level of the Mall, such tenant shall be obligated to pay an
average annual fixed rent per net rentable square foot, over the term of the
applicable Lease, that is at least equal to the annual fixed rental rate per net
rentable square foot set forth on Exhibit 1 with respect to the first floor of
the Mall;
(d) with respect to the portion of the leased premises, if any, that is
located on the second level of the Mall, such tenant shall be obligated to pay
an average annual fixed rent per net rentable square foot over the term of the
applicable Lease that is at least equal to the annual fixed rental rate per net
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<PAGE>
rentable square foot set forth on Exhibit 1 with respect to the second level of
the Mall;
(e) with respect to the portion of the leased premises, if any, that is
located in the Retail Annex, such tenant shall be obligated to pay an average
annual fixed rent per net rentable square foot over the term of the applicable
Lease that is at least equal to the annual fixed rental rate per net rentable
square foot set forth on Exhibit 1 with respect to the Retail Annex;
(f) for each lease year, for each level of gross revenue of the tenant set
forth on Exhibit 1, such tenant shall be obligated to pay, as percentage rent,
the relevant percentage (as set forth on Exhibit 1) of such tenant's gross
revenues for each lease year minus the minimum rent paid by the tenant for such
lease year; and
(g) in no event shall the annual fixed rent that is payable with respect
to any lease year be less than 100% of the annual fixed rent that was payable
with respect to the immediately preceding lease year..
[EXHIBIT A-8 SNDA Qualified Leases]
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<PAGE>
EXHIBIT B
GENERAL CONDITIONS TO COMMITMENT
1. Expenses. The Borrower shall have paid all Loan Transaction
Costs.
2. Approval. All matters, if any, relating to the Loan and the
closing that are not specifically covered by this Commitment or by the Tri-Party
Agreement must be in form and substance reasonably satisfactory to the Lender.
3. Conditions to Closing. Except as otherwise set forth below or
described above, Lender shall have received or Borrower or Principal shall have
satisfied, as applicable, all of the following on or prior to or simultaneously
with the Closing; provided that, without limiting the provisions of the
foregoing clause, Borrower shall exercise diligent and commercially reasonable
efforts to cause all of the conditions, requirements and obligations (other than
the execution of documents by Borrower and Principal (other than the Escrowed
Guaranty, which Principal shall execute and deliver into escrow on the date
hereof) that are susceptible of performance or satisfaction prior to the Closing
to be satisfied at least ten (10) business days prior to the Closing.
A. Payment of Purchase Price and Payoff of Construction
Loan. The Purchase Price shall have been paid in full. The proceeds of the Loan
and other funds of Borrower (which may consist of the proceeds of the
Subordinate Loan, if the Subordinate Loan is made on the Closing Date in
accordance with the terms hereof) shall have been used to pay, in full, the cash
portion of the Purchase Price; the non-cash portion of the Purchase Price, if
any, shall be "paid" through the assumption of the Subordinate Loan (if made
prior to the Closing Date) and/or of the Mezzanine Loan, in each case, to the
extent made in accordance with the terms hereof. Additionally, the proceeds of
the Purchase Price shall have been used by the seller under the Purchase
Agreement to pay, in full, the principal amount of the Construction Loan (other
than the Mezzanine Loan, if made in accordance with the terms hereof), all
accrued and unpaid interest thereon and all other amounts payable in connection
with the Construction Loan, in each case, as of the Closing Date (collectively,
the "Construction Loan Payoff Amount").
B. Escrow Accounts. The Borrower shall have deposited into
(x)(1) if the Assessment Date (as defined in the REA) shall have occurred on or
prior to the Closing, the Tax Escrow Account (as defined in the Form Loan
Agreement), the Taxes and Other Charges (as defined in the Form Loan Agreement)
that the Lender, in good faith, shall estimate will be payable during the three
(3) calendar month-period following the Closing Date (but in no event less than
the amount that the Lender, in good
<PAGE>
faith, determines shall be necessary in order to accumulate in such Tax Escrow
Account sufficient funds to pay all Taxes and Other Charges at least fifteen
(15) Business Days prior to their respective delinquency dates) or (2) if the
Assessment Date shall not have occurred on or prior to the Closing Date, the Tax
Escrow Account (as defined in the REA)("REA Tax Account") in respect of Taxes
(as defined in the REA), the amount then required, under the REA, to be
deposited by Borrower in respect of Taxes into such account, (y) into the
Insurance Escrow Account (as defined in the REA)(the "REA Insurance Premium
Account") in respect of insurance premiums, the amount then required, under the
REA, to be deposited by Borrower in respect of insurance premiums into such
account and (z) shall have made the deposits into the TI Brokerage Commission
Subaccount and the TI Costs Subaccount required under the paragraph of Exhibit A
to this Commitment entitled "Start-Up Cost Escrow Account". Venetian shall have
deposited (x) into the REA Tax Account in respect of Taxes (if the Assessment
Date shall not have occurred on or prior to the Closing Date), the amount then
required, under the REA, to be deposited by Venetian into such account and (y)
into the REA Insurance Account in respect of insurance premiums, the amount then
required, under the REA, to be deposited by Venetian into such account. Each
such deposit must be in the relevant account at the time of Closing.
C. Completion of the Project. (i) All of the Mall Release
Conditions (as defined in the FADAA) shall have been satisfied, (ii) the Real
Property Collateral shall be free and clear of all Liens, other than the
Permitted Encumbrances (as defined in the Form Loan Agreement); provided that,
notwithstanding the foregoing, there shall be not be any materialmens',
mechanics' or other similar Liens (collectively, "Mechanics' Liens") affecting
the Real Property Collateral (or any portion thereof) on the Closing Date unless
the same shall be deleted from the title insurance policy delivered to the
Lender in order to satisfy a condition precedent to the funding of the Loan (or
the issuer of such title insurance policy shall "insure over" such Lien through
affirmative insurance reasonably acceptable to the Lender), (iii) at the time of
Closing, funds in an amount equal to the Mall Retainage Punchlist Amount (as
defined below) shall be on deposit in the Mall Retainage/ Punchlist Account (as
defined in the FADAA), upon which funds and account Lender shall have a
perfected first priority security interest securing the payment and performance
of all indebtedness and other obligations of Borrower under the Loan Documents),
(iv) there shall be Available Funds (as defined in the FADAA) in an amount that
is greater than or equal to 100% of all Remaining Project Costs (as defined in
the FADAA), (iv) Lender shall have received from Lehrer McGovern Bovis, Inc., as
construction manager for the Project, a certification to Lender that Substantial
Completion (as defined in the Construction Management Agreement (as defined in
the FADAA)) of the Work (as defined in the Construction Management Agreement)
has occurred and (v)
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Lender shall have received (A) all certificates and other materials referenced
in the definition of "Mall Release Conditions" contained in the FADAA (or any
definitions referenced in such definition of "Mall Release Conditions"), (B) a
certificate from Construction Lender as to (i) the Tranche "A" Amount (and the
breakdown thereof) and (ii) as to the FADAA, substantially in the form of
Exhibit B-7 hereto. The term "Mall Retainage Punchlist Amount" means the
aggregate amount required to be funded, on the Mall Release Date, into the Mall
Retainage/Punchlist Account under Section 2.10(d) of the FADAA.
D. Easement, HVAC and Other Agreements. Lender shall have
received and approved a true, correct and complete copy of each Enumerated OEA
(as defined below) and each other Property Agreement (as defined below)
(collectively, the "OEAs"). Notwithstanding the foregoing, with respect to each
OEA (other than the Enumerated OEAs), Borrower may enter into the same, without
Lender's approval, if both (x) a Commercially Reasonable Owner (as defined in
the Form Loan Documents) would do so and (y) the execution and performance of
such OEA is not likely to cause a Material Adverse Effect. With respect to each
of the OEAs: (i) such OEA shall be in full force and effect, (ii) there shall be
no monetary and no material non-monetary default thereunder on the part of
Borrower or on the part of any other party thereto (unless, in the case of a
default by any party other than Borrower, such default is a default that (x) a
Commercially Reasonable Owner would waive and (y) is not reasonably likely to
result in a Material Adverse Effect) and each party thereto shall have fully
complied, in all material respects, with all of its obligations under such OEA
required to be satisfied by it by the Closing Date (other than, with respect to
obligations of any party other than the Borrower, obligations (x) the
performance of which a Commercially Reasonable Owner would waive and (y) the
nonperformance of which is not reasonably likely to result in a Material Adverse
Effect), (iii) no party to such OEA shall have given or received any written
notice or claim of default under such OEA which has not been cured (other than
notices of claims of default given and addressed to a party other than Borrower
relating to defaults that (x) a Commercially Reasonable Owner would waive and
(y) are not reasonably likely to result in a Material Adverse Effect), (iv) no
condition shall exist that would permit any party to such OEA to cancel or
terminate such OEA (or any portion thereof), to be released from liability under
such OEA or reduce its obligations under such OEA, (v) each party to such OEA
(if such OEA shall be an Enumerated OEA or another material OEA (as reasonably
determined by the Lender) that is not a Service Contract (as defined in the Form
Loan Agreement) shall have unconditionally executed and delivered to the Lender
an estoppel certificate substantially in the form attached hereto as Exhibit
B-1, the contents of which estoppel certificate shall be reasonably acceptable
to the Lender and (vi) the holder of any mortgage or deed of trust on any
property owned or leased by any party to such OEA shall have subordinated the
lien of such
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<PAGE>
mortgage or deed of trust to such OEA. The term "Enumerated OEAs" shall mean the
collective reference to (aa) the REA, (bb) that certain Energy Services
Agreement dated as of May 1, 1997 between Atlantic-Pacific, Las Vegas, LLC (the
"HVAC Provider") and Mall Construction and that certain Easement Agreement dated
as of May 1, 1997 between Mall Construction and the HVAC Provider (collectively,
the "HVAC Agreement"), (cc) Ground Lease dated as of the date hereof between
Venetian, as landlord, and HVAC Provider, as tenant (the "HVAC Ground Lease")
and (dd) the Purchase Agreement. The term "Property Agreement" means the
collective reference to all property management, brokerage, operating, easement,
maintenance, servicing agreements and all other agreements and contracts to
which Borrower is a party or that affect the Mall Improvements and/or any other
of the Property (other than Leases or other related agreements) (all of the
foregoing, collectively, "Property Agreements"). All Property Agreements shall
be collaterally assigned to Lender.
E. Conveyance of Real Property Collateral to Borrower. The
Real Property Collateral shall have been conveyed and transferred to Borrower,
in accordance with the terms of the Purchase Agreement, free and clear of all
liens and encumbrances (other than the Permitted Encumbrances (as defined in the
Form Loan Agreement)).
F. Billboard Master Lease and Mall Master Lease. The Lender
shall have received and approved a true, correct and complete copy of the
Billboard Master Lease (including all amendments, supplements, assignments and
modifications) and, if the Subdivision shall not exist as of the Closing, the
lease between the owner of fee title to the Mall Space and the Retail Annex
Land, as lessor, and the Borrower, as tenant, with respect to the Mall Space and
the Retail Annex Land (the "Mall Master Lease"; the Billboard Master Lease and
the Mall Master Lease, collectively, the "Ground Leases") (including all
amendments, supplements, assignments and modifications). Additionally, (i) the
Borrower shall hold the leasehold estate created by each of the Ground Leases,
(ii) each of the Ground Leases shall be in full force and effect, (iii) the term
of each of the Ground Leases shall have commenced and the Borrower, as tenant
thereunder, shall have commenced the payment of rent in accordance with the
terms thereof; (iv) there shall be no monetary or material non-monetary default
under either of the Ground Leases by any party thereto and each party to each of
the Ground Leases shall have complied, in all material respects, with all of its
obligations under such Ground Lease, (v) no party to either Ground Lease shall
have given or received any written notice or claim of default under such Ground
Lease that remains uncured; (vi) the Borrower shall not have transferred,
assigned, hypothecated, mortgaged or pledged its interest under either Ground
Lease or sublet all or any portion of the premises demised by such Ground Lease
(except (x) in the case of a mortgage, to Lender, to the Junior Lender (if the
Junior Loan shall exist on
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the Closing Date in accordance with the provisions of this Commitment) and to
the Mezzanine Lender (if the Mezzanine Loan shall exist on the Closing Date in
accordance with the provisions of this Commitment), and (y) in the case of a
subletting, pursuant to a Lease approved by the Lender or that does not require
Lender's approval under this Commitment), (vi) no condition shall exist that
would permit any party to either Ground Lease to cancel or terminate either
Ground Lease (or any portion thereof), to be released from liability under such
Ground Lease or reduce its obligations under such Ground Lease, (vii) a
memorandum of each Ground Lease, in form and substance satisfactory to the
Lender, shall have been recorded in the applicable real estate records, (viii)
the landlord under the Billboard Master Lease (the "Billboard Master Landlord")
and the landlord under the Mall Master Lease each shall have unconditionally
executed and delivered to the Lender an estoppel certificate substantially in
the form attached hereto as Exhibit B-2, (ix) the Billboard Operating Lease, and
all rights of the tenant thereunder, shall have been irrevocably subordinated to
the Billboard Master Lease and all rights and interests of the Borrower
thereunder pursuant to an instrument acceptable to the Lender and (ix) there
shall be no underlying leases and no mortgages, deeds of trust or other
encumbrances affecting all or any portion of either landlord's fee estate in the
premises demised by its Ground Lease except for deeds of trust that are
irrevocably subordinated to such Ground Lease and all rights and interests of
the Borrower thereunder pursuant to an instrument acceptable to the Lender;
provided that (x) the foregoing provisions of this sentence with respect to the
Mall Master Lease shall only be applicable if the Subdivision shall not exist as
of the Closing and (y) the foregoing provisions of this sentence with respect to
the Billboard Master Lease shall only be applicable if the Billboard Operating
Lease shall not have been terminated prior to the Closing. As used herein, (x)
the term "Billboard Master Lease" means a lease between the fee owner of the
Billboard Additional Premises, as lessor, and the Borrower, as lessee, with
respect to, among other things, the Billboard Additional Premises and (y) the
term "Billboard Operating Lease" means that certain restaurant lease dated as of
June 26, 1997 between Venetian, as landlord, and B.L. of Nevada, Inc.
(inadvertently referred to as "B.L. of Las Vegas, Inc." in such lease), as
tenant.
G. Appraisal. The Lender shall have received an update of
the appraisal of the Property delivered to, and accepted by, the Lender on or
prior to the date hereof in connection with the issuance of this Commitment (or
if the Lender so elects, a new appraisal of the Property) prepared by an
independent appraiser holding an M.A.I. designation who shall be designated by
Lender and licensed in the State of Nevada. Such update or new appraisal, as
applicable, shall (i) be addressed to Lender and to such other parties as Lender
shall require, (ii) provide that it may be distributed to, and relied upon by,
such
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persons and entities as the Lender shall reasonably require and (iii) be
prepared in compliance with all applicable legal requirements, including,
without limitation, FIRREA and all other then current federal regulatory
requirements. The fee for said update or new appraisal, as applicable, shall be
paid by Borrower (as shall the fee for the appraisal of the Property delivered
to, and accepted by, the Lender in connection with the issuance of this
Commitment).
H. Title Policy. The Lender shall have received a title
insurance policy or policies issued by one or more title insurance companies
(with co-insurance and/or re-insurance with direct access agreements as Lender
may reasonably require) in such forms, amounts and by such title insurance
companies as shall be reasonably satisfactory to Lender and its counsel, with a
liability limit of not less than the Loan Amount insuring to the Lender that the
deed of trust securing the Loan is a first priority lien on the good and
marketable fee simple absolute title to the Property (other than the Billboard
Additional Premises and, if the Subdivision shall not exist as of the Closing,
the Mall Space and the Retail Annex Land) and on the good and marketable
leasehold estate in the Billboard Additional Premises pursuant to the Billboard
Master Lease and, if the Subdivision shall not exist as of the Closing, the
leasehold estate in the Mall Space and the Retail Annex Land pursuant to the
Mall Master Lease. The title insurance policy (i) shall be in the standard 1992,
1987 or 1970 ALTA form policy, (ii) shall have deleted therefrom any creditors'
rights or similar exception, (iii) shall not contain any exceptions (other than
Permitted Encumbrances (as defined in the Form Loan Agreement) to which the
Lender objects and (iv) shall contain such endorsements (in addition to any
endorsements relating to creditors' rights and similar exceptions) as may be
reasonably required by Lender's counsel, including, without limitation, (x) if
the Subdivision shall exist as of the Closing, an endorsement that the Mall
Space, the Mall, the Retail Annex and the Retail Annex Land shall collectively
constitute, under applicable Legal Requirements, one or more lawfully created
parcel(s) and one or more tax parcel(s) that shall not include, or comprise a
portion of, any other property.
I. Survey. The Lender shall have received a current, as
built, title survey of the Property and the remainder of the Project. The survey
shall be prepared by a licensed or registered land surveyor reasonably
acceptable to Lender, certified to Lender and the title insurance compan(ies)
referred to above and containing the current ALTA/ACSM certification. The survey
shall (i) be prepared pursuant to the 1992 ALTA/ACSM Minimum Standard Detail
Requirements for Land Surveys (with any modifications or replacements to such
requirements occurring after the date hereof and reasonably acceptable to the
Lender), (ii) meet the requirements of a Urban Survey, and (iii) show a state of
facts in form, scope and substance acceptable to Lender
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<PAGE>
(including, without limitation, an adequate and accurate legal description,
interior lot lines, if any, the location of all adjoining streets and roads, the
distance to and names of the nearest intersecting streets, the location of all
recorded and all physical boundary lines, all strips, gores and overlaps with
adjacent properties, the location of all improvements on the Property and the
remainder of the Project, locations of utilities, elevations, high water marks,
easements and rights-of-way, whether of record or apparent, ingress and egress
to and from the Property and the remainder of the Project and natural and
constructed objects affecting the Property or the remainder of the Project and
showing any encroachments and/or discrepancies with any recorded instruments or
existing boundary markers), provided that any easement that shall constitute a
Permitted Encumbrance (as defined in the Form Loan Agreement) may be shown on
the survey.
J. Opinion of Counsel. The Lender shall have received:
(i) opinions of counsel in form, scope and substance
reasonably satisfactory to Lender and Lender's counsel. Said opinions
shall include, but not be limited to the following: that Borrower is a
Delaware limited liability company, and each of Borrower, each member of
Borrower, the landlord under the Mall Master Lease (if the Subdivision
shall not exist as of the Closing) and the Billboard Master Landlord is
duly organized, validly existing and in good standing under the laws of
the State of its formation or incorporation and qualified to do business
in the State where the Property is located; that the execution and
delivery of the documents to be executed and delivered as evidence of,
security for or otherwise in connection with the Loan (the "Loan
Documents"), the Billboard Master Lease, the OEAs and, if the Subdivision
shall not exist as of the Closing, the Mall Master Lease, have been duly
authorized; that the Loan Documents are not usurious and that the Loan
Documents, the Billboard Master Lease, the OEAs and, if the Subdivision
shall not exist as of the Closing, the Mall Master Lease, have been duly
executed and delivered by all parties thereto (other than the HVAC
Provider and Lender) and are valid, binding and enforceable in accordance
with their terms (subject to bankruptcy, insolvency and other limitations
on creditors' rights generally and to equitable principles) and do not
violate or contravene any statute or, to such counsel's knowledge,
contractual restriction binding on Borrower, any member of Borrower, the
Billboard Master Landlord, the landlord under the Mall Master Lease (if
the Subdivision shall not exist as of the Closing), the Principal or any
other party to any of the OEAs (other than the HVAC provider) (each such
party, a "Related Document Party"); and
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<PAGE>
(ii) a Substantive Non-Consolidation Opinion, together
with a memorandum in the form of Exhibit D attached to the Tri-Party
Agreement.
K. Organizational Documents. For Borrower, for each member
of Borrower, and for each Related Document Party that shall be a limited
liability company, the Lender shall have received a certificate of formation (or
articles of organization, as applicable) and all amendments thereto certified by
the Secretary of State of State of its formation or organization, a copy of the
limited liability company agreement with all amendments thereto certified by a
managing member of such limited liability company and any other such evidence of
limited liability company authority and good standing as Lender's counsel may
require shall be submitted to the Lender. For each member of Borrower, and for
each Related Document Party, that shall be a corporation, the Lender shall have
received a certificate of incorporation (or articles of incorporation, if
applicable) and all amendments thereto certified by the Secretary of State of
its state of incorporation, a Certificate of Good Standing issued by the
Secretaries of State of the state of its incorporation and the State where the
Property is located, a copy of the by-laws and all amendments thereto certified
by an authorized officer of the corporation and a copy of the corporate
resolution authorizing the transactions in question, and an incumbency
certificate, certified by an authorized officer of the corporation, in the case
of each of the foregoing, in form and substance reasonably satisfactory to
Lender and its counsel. For each member of Borrower, and for each Related
Document Party, that shall be a partnership, the Lender shall have received a
copy of the partnership agreement with all amendments thereto certified by
general partner of such entity, a filed partnership certificate (with all
amendments thereto) certified by the Secretary of State of such partnership's
state of formation, and any other such evidence of partnership authority,
existence and good standing as Lender's counsel may require shall be submitted
to Lender. For each member of Borrower, and for each Related Document Party,
that is a legal entity other than a corporation, a partnership or a limited
liability company, the Lender shall have received all organizational, authority,
incumbency and good standing documentation of such entity as Lender's counsel
shall reasonably require. The Lender shall also have received (x) any consents
or approvals required under any of the foregoing documents, materials or
certificates and (y) copies of organizational, authority, incumbency and good
standing documentation with respect to any entity that owns any direct or
indirect interest in any of Borrower, or any Related Document Party. All of the
documents, materials and certificates required to be furnished to the Lender
under this paragraph K shall be subject to the reasonable approval of the
Lender. As a condition precedent to Lender executing and delivering this
Commitment and the Tri-Party Agreement, Lender shall receive such organizational
and related documents, materials and certificates as Lender shall
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<PAGE>
require in connection with the execution, delivery and performance of this
Commitment and the Tri-Party Agreement by all parties thereto (other than
Lender).
L. [Intentionally omitted]
M. Leases. The Lender shall have received a true and
complete copy of each lease, sublease, license or other occupancy agreement
affecting the Property or any portion thereof (including all amendments,
supplements and modifications)(collectively, "Leases") and each Lease shall be a
Permitted Lease (as defined in the Form Loan Documents). Without limiting the
provisions of the preceding sentence, Lender may condition its approval of any
Lease requiring its approval as aforesaid upon the unconditional execution and
delivery by (x) the tenant or other occupant under such Lease of an estoppel
certificate in the form attached hereto as Exhibit B-3, the contents of which
estoppel certificate shall be reasonably acceptable to the Lender and/or (y)
such tenant and Borrower of a subordination non-disturbance and attornment
agreement substantially in the form of Exhibit B-4 hereto (an "SNDA").
N. [Intentionally omitted]
O. Financial and Operating Statements; Tax Returns. Lender
shall have received pro forma financial statements for the Borrower for such
periods as the Lender shall reasonably require as prepared by Borrower in good
faith.
P. Insurance. The obligations set forth in the Form Loan
Documents relating to insurance shall have been satisfied.
Q. Rent Roll. The Lender shall have received a current rent
roll listing each and every Lease, identifying the leased property, names of all
tenants, square footage or other identification of space leased, monthly rental
and all other charges payable under the Lease, date to which paid, term of
Lease, date of occupancy, date of expiration, renewal options (including rental
base), rent arrears, rent escalations, amounts taken in settlement of
outstanding arrears, collections of rent for more than one (1) month in advance,
real estate taxes paid by tenants, common charges paid by tenants, tenant
pass-throughs, and such other information as is reasonably requested by Lender.
Borrower shall sign, date, and certify the rent roll as true, complete and
accurate as of the Closing Date.
R. U.C.C. and Lien Searches. The Lender shall have received
U.C.C. and lien searches against such parties as Lender may require, the results
of which searches shall not disclose any Liens (as defined in the Form Loan
Agreement) other than (x) Mechanics' Liens that are permitted under this
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<PAGE>
Commitment and (y) other Permitted Encumbrances (as defined in the Form Loan
Agreement)(other than Mechanics' Liens).
S. Environmental Site Assessment. The Lender shall have
received written reports prepared by EMG with respect to the environmental
condition at the Project in form and substance reasonably satisfactory to Lender
and in accordance with the following provisions (collectively, the
"Environmental Reports"). The environmental professionals at EMG, their
qualifications, the scope and methodology of their investigations, the
Environmental Report and the recommendations set forth therein and the form,
scope and substance of their certifications to Lender shall be reasonably
acceptable to Lender in all respects. The Environmental Reports shall include
the following which shall be prepared by EMG: (i) a Final Phase I environmental
site assessment assessing the presence of environmental contaminants, PCBs or
storage tanks at the Project conducted in accordance with ASTM Standard E
1527-94, or any successor thereto published by ASTM; (ii) a Phase II
environmental site assessment at Borrower's cost in the event that EMG
determines that the Phase I environmental site assessment is unsatisfactory or
suggests that a Phase II environmental site assessment is recommended or
warranted; and (iii) such further site assessments as EMG may recommend due to
the results obtained in (i) or (ii) above or due to any other information
available to EMG regarding environmental conditions at the Project. All fees and
expenses in connection with the Environmental Report shall be paid by Borrower.
Borrower shall obtain permission for such environmental professional
to enter upon the Project for purposes of conducting such environmental
assessment. The Environmental Report shall be accompanied by a certification
from EMG stating that the Environmental Report meet Lender's scope of work and
that Lender and its successors and assigns are entitled to rely on such
Environmental Report.
Borrower and Principal acknowledge and agree that, without limiting
the generality of any other term, provision or condition of this Commitment,
based on any information contained in, or furnished or communicated in
connection with, such Environmental Reports or other environmental
documentation, a copy of which has been provided to Borrower, or any
uncertainties raised thereby, in the event that a reasonably likely source of
material liability is identified, the nature and/or extent of which was not
identified in the Existing Environmental Reports, as defined in Tri-Party
Agreement, Lender reserves the absolute right, in its sole and exclusive
discretion, to decline to make the Loan or to impose additional conditions that
must be satisfied prior to or after the Closing of the Loan (including, without
limitation, requiring additional investigation into environmental conditions in
connection with the Project, testing and sampling of soil, water, air, building
materials, or other
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<PAGE>
substances or materials). All fees and expenses in connection with the
Environmental Report shall be paid by Borrower.
T. [Intentionally omitted]
U. [Intentionally omitted]
V. Indebtedness; Subordinate Loan. (i) Borrower shall have
(x) no debts other than the Loan, the Subordinate Loan, the Mezzanine Loan (to
the extent permitted under subparagraph (ii) below), trade debt incurred in the
ordinary course of Borrower's business of operating the Property and Permitted
Other Indebtedness, and (y) no liabilities other than those described in the
foregoing clause (x) and other liabilities incurred in the normal operations of
the Property in accordance with the terms of the Form Loan Documents or
otherwise permitted under the Form Loan Documents.
(ii) Either (x) a Subsidiary (as defined below) or (y) a
Person that is not a Subsidiary but which is an Acceptable Holder (as defined
below), and which, in the case of (x) or (y)(unless such Acceptable Holder is an
Institutional Lender), is a "special-purpose entity" (the "Junior Lender") shall
have made a loan to Borrower , or Borrower shall have assumed a loan, in an
amount equal to the lesser of (1) $35,000,000 or (2) the greater of (aa) the
outstanding principal balance of the Substitute Tranche B Loan (as defined in
the GMAC Credit Agreement) that is outstanding on the Closing Date plus accrued
and unpaid interest thereon for the final interest accrual period that is then
not yet delinquent or (bb) the principal amount of the Tranche B Component (as
defined in the GMAC Credit Agreement) of the Construction Loan that is
outstanding on the Closing Date plus accrued and unpaid interest thereon for the
final interest accrual period that is then not yet delinquent (the "Subordinate
Loan"). All of the proceeds of the Subordinate Loan shall be used to pay a
portion of the Purchase Price which shall, in turn, be used to payoff the
Construction Loan. The Subordinate Loan shall be secured by a second priority
(or, if the Mezzanine Loan shall be outstanding on and after the Closing Date in
accordance with the provisions of clause (iii) below, a third priority) deed of
trust and security interest on the Real Property Collateral and shall be fully
subordinated to the Loan pursuant to the terms of the Junior Loan Documents. The
Junior Loan Documents shall provide, among other things, that (A) the term of
the Subordinate Loan is five (5) years (and the Borrower shall have the right to
extend such term for an additional three (3) years without the payment of any
fee or other compensation), (B) current payments under the Subordinate Loan will
be made (subject to the other provisions of this paragraph "V") only from
revenue generated by the Property after payment of all debt service and other
payments under the Loan that are then due and payable, payment of all operating
expenses and capital expenditures relating to the Property and funding of all
reserves required by Lender pursuant
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<PAGE>
to the Form Loan Documents (the "Required Reserves") ("Excess Cash Flow")(and,
if the Mezzanine Loan shall be outstanding as provided below, the making of any
payments required under the Mezzanine Loan Documents), provided that (1) at any
time that an Event of Default shall exist under the Loan Documents, no payments
shall be permitted under the Junior Loan Documents (but interest under the
Junior Loan Documents shall, in all events, be permitted to accrue and compound
and the obligation to pay the same shall be deferred until both (x) no Event of
Default exists and (y) Excess Cash Flow (net, if the Mezzanine Loan shall be
outstanding as provided below, of amounts that are payable under the Mezzanine
Loan Documents) is sufficient to pay the same); provided further that if the
Mezzanine Loan shall be outstanding on and after the Closing Date, until such
time (such time, the "Amortization Achievement Event") as (aa) the aggregate
outstanding principal balance of the Loan, the Mezzanine Loan and the
Subordinate Loan shall equal (bb) the sum of the original principal amount of
the Loan and the original principal amount of the Subordinate Loan (i.e. without
giving effect to any capitalization of accrued interest), (i) no payments shall
be permitted under the Junior Loan Documents (but interest under the Junior Loan
Documents shall, in all events, be permitted to accrue and compound and the
obligation to pay the same shall be deferred until both the Amortization
Achievement Event shall occur and Excess Cash Flow (net, if the Mezzanine Loan
shall be outstanding as provided below, of amounts that are payable under the
Mezzanine Loan Documents) shall be sufficient to pay the same) and (ii) Borrower
shall use all Excess Cash Flow (net of Tax Distributions and after the funding
of reserves (without duplication of the Required Reserves) in an aggregate
amount not to exceed $1,000,000) to prepay the principal amount of the Loan, (C)
the Junior Loan Documents and all of the Junior Lender's rights and remedies
under the Junior Loan Documents at all times shall be subject and subordinate to
the Loan Documents and all of the Lender's rights and remedies under the Loan
Documents, (D) without the prior written consent of the Lender, the Junior
Lender shall not foreclose or take any other enforcement action under the Junior
Loan Documents unless all Indebtedness (as defined in the Form Loan Documents)
shall have been indefeasibly satisfied in full for a period of at least ninety
(90) days, (E) the Junior Lender shall not increase, renew, extend, restate,
replace, supplement, amend or modify any Junior Loan Document or the
indebtedness with respect thereto (and the total indebtedness secured or
evidenced by the Junior Loan Documents shall not be increased (other than the
capitalization of interest or the making of "protective" advances, in each case,
in accordance with the express provisions of the Junior Loan Documents and of
the Form Loan Documents) without, in each case, the prior written consent of the
Lender; provided that the Lender shall not unreasonably withhold or delay its
consent to any amendment of or modification to any Junior Loan Document that
does not (x) change the Junior Loan Subordination Provisions, (y) effect an
increase in the indebtedness evidenced or secured by any Junior Loan
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<PAGE>
Document (the "Junior Indebtedness") or the interest rate(s) applicable thereto
or (z) accelerate the maturity date applicable to the Junior Indebtedness or the
date upon which any of the Junior Indebtedness shall be payable and (F) if the
Junior Lender shall desire to assign or participate out the Subordinate Loan or
the Junior Loan Documents or any interest therein, it shall afford the Lender
the right of first refusal to purchase the same on the terms upon which the
Junior Lender will, unless the Lender exercises such right, sell the Subordinate
Loan, Junior Loan Documents or interest, as applicable. As used herein, the term
"Junior Loan Documents" shall have the meaning given thereto in the Form Loan
Agreement. As used herein, the term "Acceptable Holder" shall mean any of the
following: (i) a savings bank, savings and loan association, commercial bank,
pension fund, trust company (whether acting individually or in a fiduciary
capacity) or insurance company (whether acting individually or in a fiduciary
capacity) that has a combined capital and surplus of $500,000,000 or more (each
of the entities described in this clause (i), an "Institutional Lender"), (ii) a
real estate investment trust existing in compliance with Sections 856 through
860 of the Internal Revenue Code of 1986, as amended from time to time, or a
regional or national shopping center development company, in either case, whose
shares are publicly traded on a national securities exchange and that has an
equity market capitalization of $250,000,000 or more or (iii) an Alternate
Lender (as defined below) approved by the Lender (which approval shall not be
unreasonably withheld). Notwithstanding the foregoing, in no event shall the
Subordinate Loan be assigned or participated by or to an Affiliate of Borrower
at any time that an Event of Default shall exist under the Form Loan Documents.
The term "Subsidiary" shall mean entity (i) that is controlled (as defined in
the definition of Affiliate) by the Principal (or, in the case of the death or
legal incapacity of the Principal, the applicable Person or Persons referenced
in clause (ii) or (iii), as applicable, of the definition of "Permitted
Transfer" contained in the Form Loan Documents) and (ii) all of the ownership
interests of, and voting rights with respect to, are owned by the Persons that
are, under the express terms of the Loan Documents, permitted to own ownership
interests in, and voting rights with respect to, the Borrower. The term
"Alternate Lender" shall mean any Person that shall not be, and shall not have
been, a party (or an Affiliate of a party): (i) with whom Lender (or any
Affiliate thereof) or any other third-party lender shall have had a dispute
based either on (a) alleged bad faith dealings or fraudulent conduct or (b) an
alleged intentional breach with respect to an agreement between Lender (or any
Affiliate thereof) or any other third-party lender and the party in question (or
any Affiliate thereof) or (ii) the subject of any action, proceeding, hearing or
investigation (a) alleging or relating to criminal activity or (b) to revoke any
material license or permit.
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(iii) If Construction Lender shall increase, in accordance with the
provisions of Section 3.4 and/or Section 3.5 of the Intercreditor Agreement (as
defined below), the principal amount of the Construction Loan, then, subject to
the terms hereof, a portion of the Construction Loan in the amount equal to the
lesser of (x) the aggregate amount of such increase or (y) $30,000,000 (such
portion, the "Mezzanine Loan") may remain outstanding on and after the Closing
Date. If the Mezzanine Loan shall be outstanding on and after the Closing Date,
the Mezzanine Loan shall be secured by a second priority deed of trust and
security interest on the Real Property Collateral and shall be fully
subordinated to the Loan pursuant to the terms of the loan documents relating to
the Mezzanine Loan (the "Mezzanine Loan Documents"). The Mezzanine Loan
Documents shall provide, among other things (A) for the interest rate provided
in the Intercreditor Agreement, (B) that the Mezzanine Loan may not be assigned
and/or participated out to any Person (other than an Institutional Lender)
without the prior written consent of Lender, (C) that the term of the Mezzanine
Loan shall be five (5) years (and the Borrower shall have the right to extend
such term for an additional three (3) years without the payment of any fee or
other compensation), (D) current payments under the Mezzanine Loan will be made
only from Excess Cash Flow, provided that (1) at any time that an Event of
Default shall exist under the Loan Documents, no payments shall be permitted
under the Mezzanine Loan Documents (but interest under the Mezzanine Loan
Documents shall, in all events, be permitted to accrue and compound and the
obligation to pay the same shall be deferred until both (x) no Event of Default
exists and (y) Excess Cash Flow is sufficient to pay the same; provided further
that until the Amortization Achievement Event, (i) no payments shall be
permitted under the Mezzanine Loan Documents (but interest under the Mezzanine
Loan Documents shall, in all events, be permitted to accrue and compound and the
obligation to pay such interest shall be deferred until both the Amortization
Achievement Event shall occur and Excess Cash Flow shall be sufficient to pay
such interest) and (ii) Borrower shall use all Excess Cash Flow (net of Tax
Distributions and after the funding of reserves (without duplication of the
Required Reserves) in an aggregate amount not to exceed $1,000,000 at any one
time) to prepay the principal amount of the Loan, (E) the Mezzanine Loan
Documents and all of the Mezzanine Lender's rights and remedies under the
Mezzanine Loan Documents at all times shall be subject and subordinate to the
Loan Documents and all of the Lender's rights and remedies under the Loan
Documents, (F) the Mezzanine Loan Documents shall contain the provisions set
forth on Exhibit B-5 attached hereto (the "Mezzanine Loan Subordination
Provisions") and no terms or provisions that are inconsistent therewith and
Construction Lender shall not take any action, or refrain from taking any
action, inconsistent with the Mezzanine Loan Subordination Provisions, (G)(1)
without the prior written consent of the Lender, the Mezzanine Lender shall not
foreclose or take any other enforcement action under the Mezzanine Loan
Documents
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unless all Indebtedness shall have been indefeasibly satisfied in full and (2)
in the event that Lender is required, pursuant to Section 544, 547 or 548 of the
U.S. Bankruptcy Code, to disgorge any amounts paid by the Borrower under the
Loan Documents, then Mezzanine Lender shall, within ten days of demand therefor
by Lender, pay over to Lender funds in an amount equal to the lesser of (aa) the
amount that Lender is required so to disgorge or (bb) the aggregate amount
received by Mezzanine Lender in respect of the Mezzanine Indebtedness after
Mezzanine Lender foreclosed or took any other enforcement action, (H) the
Mezzanine Lender shall not increase, renew, extend, restate, replace,
supplement, amend or modify any Mezzanine Loan Document or the indebtedness with
respect thereto (the "Mezzanine Indebtedness") (and the total indebtedness
secured or evidenced by the Mezzanine Loan Documents shall not be increased
(other than the capitalization of interest or the making of "protective"
advances, in each case, in accordance with the express provisions of the
Mezzanine Loan Documents and of the Form Loan Documents) without, in each case,
the prior written consent of the Lender; provided that the Lender shall not
unreasonably withhold or delay its consent to any amendment of or modification
to any Mezzanine Loan Document that does not (x) change the Mezzanine Loan
Subordination Provisions, (y) accelerate an increase in the indebtedness
evidenced or secured by any Mezzanine Loan Document (the "Mezzanine
Indebtedness") or the interest rate(s) applicable thereto or (z) change the
maturity date applicable to the Mezzanine Indebtedness or the date upon which
any of the Mezzanine Indebtedness shall be payable and (I) if the Mezzanine
Lender shall desire to assign or participate out the Mezzanine Loan or the
Mezzanine Loan Documents or any interest therein, it shall afford the Lender the
right of first refusal to purchase the same on the terms upon which the
Mezzanine Lender will, unless the Lender exercises such right, sell the
Mezzanine Loan, Mezzanine Loan Documents or interest, as applicable. Without
limiting the foregoing, the form and substance of the Mezzanine Loan Documents
shall be subject to the Lender's approval (which approval, other than with
respect to the Mezzanine Subordination Provisions, shall not be unreasonably
withheld).
W. [Intentionally omitted].
X. Bankruptcy. Neither Borrower nor any member in Borrower
nor the Principal nor the landlord under the Billboard Additional Premises Lease
nor, if the Subdivision shall not exist as of the Closing, the landlord under
the Mall Master Lease (each of the foregoing, an "Enumerated Party") shall have
made a general assignment for the benefit of creditors, and there shall not have
been filed by or against any Enumerated Party a petition which has not been
dismissed prior to the Closing Date under any Legal Requirement pertaining to
bankruptcy, arrangement, insolvency or reorganization or under any similar Legal
Requirement or for the appointment of a receiver, and no action, case or
proceeding which has not been dismissed prior to
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the Closing Date shall have been commenced under any such Legal Requirement with
respect to any Enumerated Party or for the composition, extension, arrangement
or adjustment of any Enumerated Party's obligations, and there shall not have
been a suspension of any Enumerated Party's primary business and there shall not
have occurred the issuance of any warrant or attachment against any substantial
part of the property of any Enumerated Party or the taking of possession of or
assumption of control of all or any substantial part of the property of any
Enumerated Party's business by any governmental authority. If any of the
foregoing shall occur at any time prior to the funding of the Loan, then this
Commitment shall automatically and immediately terminate without further notice
and without further action on the part of Lender.
Y. No Default. There shall not exist any monetary or any
material non-monetary default on the part of the Borrower or the Principal under
this Agreement, under the Tri-Party Agreement or under any documents, instrument
or certificate delivered in connection herewith or therewith.
Z. Subdivision. Borrower shall use its best efforts to
consummate the Subdivision as soon as practicable; provided that it shall not be
a condition precedent to Lender's obligation to fund the Loan that the
Subdivision exist on the Closing Date.
AA. No Condemnation, Litigation or Casualty. No portion of
the Property (other than a de minimis portion thereof) and no material portion
of the remainder of the Project shall have been taken in condemnation, eminent
domain or a similar proceeding (or conveyed in lieu thereof) and no such
proceeding shall be pending (except to the extent that any such taking shall
constitute a Permitted Transfer (as defined in the Form Loan Agreement)). No
action, suit or proceeding shall be pending against or affecting the Borrower,
the Principal or the Collateral (and no judgment(s) or decree(s) shall have been
entered against any such entity or person) which is reasonably likely to have a
material adverse effect on the value of the Collateral or on the financial
condition of the Borrower. No portion of the Property or of the remainder of the
Project shall have been damaged or destroyed by fire or other casualty, and no
other loss with respect thereto shall have occurred, that (x)(1) in the case of
the Property, resulted in a loss of $500,000 or more (a "Material Mall Loss") or
(2) in the case of the remainder of the Project, is material (a "Material
Project Loss") and (y) in any such case, shall not have been repaired to the
extent required for the Project to be in the condition required on the Mall
Release Date (as defined in the FADAA); provided that with respect to any
damage, destruction or loss with respect to the Property or the remainder of the
Project that shall not constitute a Material Mall Loss or a Material Project
Loss, sufficient insurance proceeds must be available to the Borrower,
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<PAGE>
to the Trustee under the REA or to the owner of the remainder of the Project, as
applicable, to restore the Property to the condition required on the Mall
Release Date and the relevant part(ies) shall be diligently effecting such
restoration.
4. Loan Documents. The Borrower, Principal, Manager and other
parties thereto shall unconditionally execute and deliver loan documents and
related documents substantially in the forms attached hereto as Exhibit B-6,
together with the Additional Loan Documents (as defined below) (all of the
foregoing, collectively, the "Form Loan Documents") with such changes thereto as
the Lender shall reasonably require, as well as all other documents,
instruments, certificates and financing statements as the Lender shall
reasonably require; provided that, such changes and such other documents,
instruments, certificates and financing statements shall (a) be required by the
Lender as the result of a legal requirement that is enacted, promulgated or
changed after the date hereof and/or by any title company and (b) not conflict
with any of the terms or provisions of this Commitment. The Guaranty by the
Principal, substantially in the form of Exhibit B-6A hereto (the "Form Payment
Guaranty") shall be executed and delivered by the Principal on the date hereof
and held by the Lender in escrow (the "Escrowed Guaranty"). Automatically, at
such time, if any, as the Lender shall fund the Loan, without the execution of
any further document, instrument or other writing by any Person or the taking of
any further action by any Person, the Escrowed Guaranty shall (x) be deemed to
be dated as of the date of the funding of the Loan and (y) be released from
escrow and shall, for all purposes, be in full force and effect; provided that,
without limiting the generality of the foregoing, (aa) Lender shall be entitled,
on or after the Closing Date, to date the Escrowed Guaranty as of the same date
as the other Loan Documents and (bb) at the Closing, as a condition to Lender's
obligation to fund the Loan, if the Lender shall so request, the Principal shall
execute and deliver a new guaranty, in the form of the Form Payment Guaranty, to
replace the Escrowed Guaranty (a "Replacement Guaranty"). If Lender shall
require a Replacement Guaranty, then, promptly after the Principal shall
unconditionally execute and deliver the Replacement Guaranty to Lender, Lender
shall return the Escrowed Guaranty to the Principal. The "Additional Loan
Documents" means the collective reference to (i) a pledge and security agreement
in form and substance reasonably satisfactory to Lender, which creates in favor
of the Lender a perfected first priority security interest on the Retainage
Escrow Account (as defined in the Form Loan Agreement) and the Retainage Escrow
Collateral (as defined in the Form Loan Agreement) and (ii) a pledge and
security agreement in form and substance reasonably satisfactory to Lender,
which creates in favor of the Lender a perfected first priority security
interest on the Management Fees Escrow Account (as described in, and as the same
will be defined in, the Form Loan Agreement) and the Management Fees Collateral
(as described in, and as the same will be defined in, the Form Loan Agreement),
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<PAGE>
together with any UCC financing statements reasonably required by Lender in
connection therewith.
5. Secondary Market. In addition to Lender's rights under Exhibit
A to this Commitment set forth under the heading "Assignment and Participation",
Lender may, at any time, transfer any or all servicing rights with respect to
the Loan or issue mortgage pass-through certificates or other securities
evidencing a beneficial interest in or secured by the Loan in a rated or unrated
public offering or private placement (the "Securities"), and may forward to each
purchaser, transferee, assignee, servicer, participant or investor, or any
nationally recognized statistical rating organization that has been requested to
assign a rating to Securities (collectively, the "Investor") or prospective
Investor all documents and information Lender has with respect to the Loan as
Lender deems necessary or desirable. Borrower shall furnish and Borrower
consents to Lender furnishing to such Investor or such prospective Investor all
information concerning the Project, the Leases and the financial condition of
Borrower and the Project in such form, substance and detail as Lender or such
Investor or prospective Investor may reasonably request. In connection with any
such sale, transfer, assignment or participation (or any proposed sale,
transfer, assignment or participation) the Borrower and the Principal shall
provide an estoppel certificate to the Investor or prospective Investor in form
and content reasonably satisfactory to the Lender and such Investor or
prospective Investor. Lender shall not sell Securities in a private placement to
a Competitor; provided that the Lender shall be entitled to rely on a written
statement from the proposed purchaser that it is not a Competitor (without
making any further inquiry or investigation) and the Lender shall not be liable
to the Borrower or to any other Person if Lender shall consummate such private
placement with a Person that shall in fact be a Competitor notwithstanding the
fact that such Person delivered such a written statement.
6. Other Documentation. Borrower and the Principal shall provide
Lender with such other evidence, documents, information and materials as Lender
or its counsel may reasonably require.
7. No Oral Change. This Commitment may not be modified, amended,
waiver, extended, changed, discharged or terminated orally, or by any act or
failure to act on the part of Lender, Borrower or the Principal, but only by an
agreement in writing signed by the party against whom the enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
8. Waiver/Survival. The provisions of this Commitment cannot be
waived or modified unless such waiver or modification is in writing and signed
by Borrower, the Principal and Lender (including, without limitation, the
Tri-Party
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<PAGE>
Agreement). Except as otherwise set forth in the Tri-Party Agreement this
Commitment is for the benefit only of the parties hereto and no third party
(other than any Investor) shall have any interest therein or in the proceeds of
the Loan. This Commitment, together with the Tri-Party Agreement, sets forth the
entire agreement among Borrower, the Principal and Lender, and all other
agreements shall be deemed to have merged herewith. Each of Borrower and the
Principal acknowledges that Lender has made no representations or warranties to
Borrower or the Principal (except as expressly set forth in the Tri-Party
Agreement).
9. Non-Assignability. Except as otherwise expressly provided in
the Tri-Party Agreement, this Commitment and the proceeds of the Loan are not
assignable, and the duties and obligations of the Borrower and the Principal
under this Commitment are not delegatable, by Borrower or the Principal to any
other person or entity without Lender's prior written consent.
10. Publicity. In the event the Loan contemplated herein is made,
Lender shall have the right, at its sole cost and in compliance with applicable
law, to issue press releases, advertisements and other promotional materials
describing in general terms or in detail, Lender's participation in such
transaction, subject to approval of Borrower, such approval not to be
unreasonably withheld or delayed.
11. Confidentiality. This Commitment (and financial materials
furnished by the Borrower to Lender in connection herewith) is being furnished
on a confidential basis and the contents hereof may not be disclosed by
Borrower, the Principal or Lender to third parties, except that each party
hereto may disclose such information (a) in connection with any litigation
between Lender, as one party, and Borrower and/or Principal, as another party,
(b) upon the order, request or demand of any governmental authority or if
otherwise required by applicable law, (c) in the case of Lender, in connection
with the exercise of any right or remedy hereunder or under any Loan Document
after the occurrence of an event of default or default, (d) to those of its
employees, accountants, attorneys, agents and other advisors, directors,
officers, shareholders, partners, members and other principals who are working
on, or are consulted in connection with, the transactions contemplated hereby or
by the Loan Documents, (e) to other Lenders (as defined in the FADAA) and to
their respective employees, accountants, attorneys, agents and other advisors,
directors, officers, shareholders, partners, members and other principals who
are working on, or are consulted in connection with, the transactions
contemplated by the FADAA, (f) thereof in the case of Lender, to any actual or
potential participant, assignee, agent, investor or servicer that agrees to be
bound by the provisions of this Section (or the comparable provision in the Loan
Documents), (g) if such information is or
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<PAGE>
becomes generally available to the public, other than as a result of the
disclosure by such party in breach of this provision, (h) any rating agency that
may or will rate any class of securities in connection with a Securitization or
(i) that is or becomes available to any such party from any source other than
any party hereto or its Affiliate unless the party supplying such information
shall have advised the applicable party hereto that such source is subject to a
confidentiality agreement that covers the information in question. In the event
that any party hereto (the "Requested Party") is required or demanded by legal
process (e.g., depositions, interrogatories, requests for information or
documents, subpoena, civil investigation demand or similar process) to disclose
any of the contents of this Commitment, such party shall give prompt written
notice to the other parties hereto of such request or demand so that any party
hereto (other than the Requested Party) may, should it elect to do so, within
five (5) Business Days of receipt of such notice, seek a protective order or
other appropriate remedy to challenge or contest such request (and give the
Requested Party notice thereof), and during the pendency of any such action the
Requested Party shall not, to the extent permitted by applicable law, disclose
such contents of this Commitment.
12. Closing Funds. All funds required to be paid by Borrower or
the Principal to Lender under this Commitment must be in the form of certified
funds or made by wire transfer of immediately available federal funds.
13. Assignment of Commitment. Lender may, at any time prior to
Closing, (x) without Borrower's or Principal's consent, to any Affiliate of
Lender and (y) with Borrower's consent (which shall not be unreasonably withheld
or delayed (unless the proposed assignee shall be a Competitor)), to any other
Person that is not a Competitor, transfer and assign this Commitment, and
delegate its duties and obligations under this Commitment, to another lender
which assumes the obligation to originate the Loan pursuant to the terms of this
Commitment; provided, however, that Lender shall not be released from liability
under the terms of this Commitment. Lender shall be entitled to rely on a
written statement from the proposed assignee that it is not a Competitor
(without making any further inquiry or investigation) and the Lender shall not
be liable to the Borrower or to any other Person if Lender shall consummate such
assignment to a Person that shall in fact be a Competitor notwithstanding the
fact that such Person delivered such a written statement.
14. Broker Indemnification. (a) The Borrower and the Principal
hereby represent and warrant to the Lender that neither the Borrower nor the
Principal has dealt with any broker, finder or similar person or entity in
connection with this Commitment or the transactions contemplated hereby (other
than Affiliates of Lender, with respect to whom no brokerage, finder's or
similar fee is payable by Borrower). The Borrower and the Principal
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<PAGE>
hereby agree to indemnify, save harmless and defend the Lender from and against
(i) any and all claims asserted by any broker, finder or similar person or
entity (other than Affiliates of Lender) for any broker's, finder's or similar
fee or commission arising from, through or under the Borrower, the Principal or
any Affiliate thereof in connection with the negotiation, execution, or
performance of this Commitment and (ii) all losses, costs and expenses
(including, without limitation, reasonable attorneys' fees, disbursements and
expenses) suffered or incurred by the Lender in connection therewith. The
provisions of this paragraph shall survive the expiration or termination of this
Commitment.
(b) The Lender hereby represents and warrants to the Borrower and
to the Principal that the Lender has not dealt with any broker, finder or
similar person or entity in connection with this Commitment or the transactions
contemplated hereby (other than Affiliates of Lender, to whom no brokerage,
finder's or similar fee is payable by Borrower). The Lender hereby agrees to
indemnify, save harmless and defend the Borrower and the Principal from and
against (i) any and all claims asserted by any broker, finder or similar person
or entity for any broker's, finder's or similar fee or commission arising from,
through or under the Lender or any Affiliate thereof in connection with the
negotiation, execution, or performance of this Commitment and (ii) all losses,
costs and expenses (including, without limitation, reasonable attorneys' fees,
disbursements and expenses) suffered or incurred by the Borrower or the
Principal in connection therewith. The provisions of this paragraph shall
survive the expiration or termination of this Commitment.
15. No Material Misstatement. Borrower represents and warrants
that, as of the date hereof, no written statement of fact made by or on behalf
of the Borrower or the Principal in or in connection with this Commitment or in
any certificate, document, exhibit or schedule furnished by the Borrower or the
Principal to the Lender pursuant hereto or thereto contains any untrue statement
of a material fact or omits to state any material fact relating specifically to
the Loan, the Collateral, the Project, the Borrower, the Principal or the
business to be operated at the Property, that is known to Borrower, Principal or
any Affiliate thereof and is necessary to make statements contained herein or
therein not misleading. There is no event or circumstance relating specifically
to the Loan, the Project, the Borrower, Principal and/or the business to be
operated at the Property presently known to the Borrower or the Principal which
has not been disclosed to the Lender which might reasonably be expected to cause
a Material Adverse Effect. Borrower acknowledges that if the Loan shall be made,
Lender will have relied on this representation and warranty in making the Loan.
16. No Approval by the Lender. Except to the extent expressly
provided herein or in the Tri-Party Agreement, the execution of this Commitment
by Lender shall not imply the
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<PAGE>
approval by Lender of any document or information previously furnished to
Lender, it being acknowledged by all parties hereto that, except to the extent
expressly provided herein or in the Tri-Party Agreement no other approvals have
been given by Lender with respect to the Loan.
17. Principal's Obligations under Commitment. The Lender
acknowledges that the only obligations that the Principal shall be required to
perform under this Commitment shall be those obligations that are specifically
stated in this Commitment to be the obligations of the Principal.
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<PAGE>
[EXHIBIT B-1 Forms of OEA Estoppel Certificates]
[EXHIBIT B-2 Forms of Landlord Estoppel Certificates]
[EXHIBIT B-3 Form of Tenant Estoppel Certificate]
[EXHIBIT B-4 Form of SNDA]
[EXHIBIT B-5 Mezzanine Loan Subordination Provisions]
[EXHIBIT B-6 Form Loan Documents]
[EXHIBIT B-7 Form of Construction Lender's Certificate]
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Sheldon G. Adelson
c/o Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
As of November 14, 1997
Grand Canal Shops Mall, LLC
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: David Friedman
Re: Loan to Grand Canal Shops Mall, LLC secured by among
other things, a Deed of Trust on the Shopping Mall to be
known as "Grand Canal Shops" and located on the site of
the former Sands Hotel and Casino, Las Vegas, Nevada
Ladies/Gentlemen:
This letter shall constitute the commitment of Sheldon G. Adelson to
cause a Subsidiary (as defined in the Senior Loan Commitment (as hereinafter
defined)) (such Subsidiary, the "Lender") to make a mortgage loan (the "Loan")
to Grand Canal Shops Mall, LLC, a Delaware limited liability company (the
"Borrower") on the terms and conditions set forth in Exhibit A annexed hereto.
The Loan shall be made simultaneously with the making of the loan which is the
subject of the Senior Loan Commitment (the "Senior Loan") or the making of a
replacement take-out loan ("Replacement Senior Take-Out Loan") as contemplated
by paragraph 1 of that certain Tri-Party Agreement of even date herewith among
Goldman Sachs Mortgage Company (the "Senior Lender"), GMAC Commercial Mortgage
Corporation (the "Construction Lender"), the Borrower, Venetian Casino Resort,
<PAGE>
LLC, Las Vegas Sands, Inc., Grand Canal Shops Mall Construction, LLC and the
undersigned (the "Tri-Party Agreement"). Capitalized terms used herein and in
Exhibit A and not otherwise defined shall have the respective meanings given
such terms in that certain loan commitment of even date herewith being given by
Senior Lender to Borrower and the undersigned (the "Senior Loan Commitment"),
pursuant to which Senior Lender is agreeing, on the terms and conditions set
forth in the Senior Loan Commitment, to make a loan to the Borrower in the
maximum principal amount of $105,000,000.
This commitment shall inure solely to the benefit of the Borrower
and shall not inure to the benefit of, or be enforceable by, any other person or
entity.
<PAGE>
Borrower's Acceptance
The Borrower hereby accepts this commitment as of the date indicated
below.
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company, LLC,
its managing member
By: Mall Intermediate Holding Company, LLC,
its managing member
By: Venetian Casino Resort, LLC,
its managing member
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
Date: November 14, 1997
<PAGE>
Exhibit A
1 Loan Amount: Lesser of (a) $35,000,000 and (b) the greater of (i) the
outstanding principal balance of the Substitute Tranche B Loan (as defined
in the GMAC Credit Agreement), if any, on the closing date of the Loan,
plus accrued and unpaid interest thereon for the final interest accrued
period that is not yet delinquent, and (ii) the principal amount of the
Tranche B Component (as defined in the GMAC Credit Agreement) of the
Construction Loan that is outstanding on such closing date plus accrued
and unpaid interest thereon for the final interest accrual period that is
not then delinquent.
2 Loan Purpose: The financing of a portion of the Purchase Price.
3 Security: The Collateral. Liens will be subordinate to those securing the
Senior Loan and, if the Mezzanine Loan is outstanding, the liens securing
the Mezzanine Loan.
4 Term: 5 years, with a right on the part of the Borrower to extend for an
additional three years.
5 Interest Rate: The greater of (i) the interest rate on the Senior Loan and
(ii) an arms-length interest rate.
6 Payments on Loan: Prior to maturity: interest only, payable monthly in
arrears, with right to prepay principal in whole or in part at any time
without
<PAGE>
penalty or premium, all subject, however, to the requirements of the loan
documents to be entered into pursuant to the Senior Loan Commitment, as
the same may be amended (the "Senior Loan Documents"). Interest not
permitted under the Senior Loan Documents to be paid on a current basis
shall accrue and compound monthly. All outstanding principal, and all
accrued and unpaid interest, to be due and payable at maturity.
7 Subordination and Transfer Provisions. Loan to be subordinate to the
Senior Loan and the Mezzanine Loan, if any.
8 Other Requirements. Loan documents for Loan shall otherwise be on
arms-length terms, but shall in any event comply with the applicable
requirements of the Senior Loan Documents.
<PAGE>
If this commitment is acceptable to you, please sign at the space provided below
in the enclosed duplicate hereof, and deliver the same to the undersigned.
/s/ Sheldon G. Adelson
----------------------
SHELDON G. ADELSON
- --------------------------------------------------------------------------------
TRI-PARTY AGREEMENT
among
GRAND CANAL SHOPS MALL, LLC,
VENETIAN CASINO RESORT, LLC,
LAS VEGAS SANDS, INC.,
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
SHELDON G. ADELSON,
GOLDMAN SACHS MORTGAGE COMPANY, and
GMAC COMMERCIAL MORTGAGE CORPORATION
Dated as of November 14, 1997
- --------------------------------------------------------------------------------
<PAGE>
TRI-PARTY AGREEMENT
THIS TRI-PARTY AGREEMENT (this "Agreement") is dated as of this 14th day
of November, 1997 by and among GOLDMAN SACHS MORTGAGE COMPANY, a New York
limited partnership (the "TAKE-OUT LENDER"), GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation (the "CONSTRUCTION LENDER"), GRAND CANAL
SHOPS MALL, LLC, a Delaware limited liability company (the "BORROWER"), VENETIAN
CASINO RESORT, LLC, a Nevada limited liability company ("VENETIAN"), LAS VEGAS
SANDS, INC., a Nevada corporation ("LVSI"), GRAND CANAL SHOPS MALL CONSTRUCTION,
LLC, a Delaware limited liability company ("INTERIM MALL LLC") and SHELDON G.
ADELSON (the "PRINCIPAL").
RECITALS
WHEREAS, subject to the terms, provisions and conditions thereof,
including, without limitation, the condition that the TAKE-OUT LENDER issue the
Take-Out Commitment (as defined below) and that the parties hereto execute and
deliver this Agreement, CONSTRUCTION LENDER has agreed to make the Construction
Loan pursuant to the GMAC Credit Agreement;
Pursuant to a certain letter agreement among TAKE-OUT LENDER, the BORROWER
and the PRINCIPAL dated as of the date hereof, together with all attachments
thereto (collectively, the "Take-Out Commitment"), and subject to all of the
terms, conditions and provisions thereof, TAKE-OUT LENDER has issued to BORROWER
a commitment to make a loan (the "Take-Out Loan") for the financing of a portion
of the Purchase Price of the Real Property Collateral (which term, for purposes
of this Agreement, shall mean the fee and/or leasehold estate, as applicable, in
the Property held by Borrower at the time in question) pursuant to the Purchase
Agreement, the proceeds of which Purchase Price will, in turn, be used to payoff
a portion of the Construction Loan; capitalized terms used in this Agreement but
not defined herein shall have the meanings ascribed thereto in the Take-Out
Commitment;
WHEREAS, Borrower, Venetian, LVSI, Interim Mall LLC and Principal will
benefit from the making of the Construction Loan and therefor desire to execute
and deliver this Agreement in order to induce CONSTRUCTION LENDER to make the
Construction Loan;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements and undertakings herein contained and other
<PAGE>
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Take-Out Commitment - Status. Each of TAKE-OUT LENDER, BORROWER and
PRINCIPAL hereby represents, warrants, covenants and agrees that: (a) the
Take-Out Commitment has not heretofore been modified, supplemented, terminated
or canceled, and (b) from and after the date hereof, no modification or
supplement thereof shall be agreed upon hereafter by it without the prior
written consent of CONSTRUCTION LENDER to the extent such modification or
supplement (i) imposes any additional conditions to TAKE-OUT LENDER'S obligation
to fund the Take-Out Loan, (ii) requires that any additional commitment fees to
be paid to TAKE-OUT LENDER or (iii) accelerates the stated expiration date of
the Take-Out Commitment. Borrower shall maintain the Take-Out Commitment in full
force and effect, and shall cause all of the conditions to funding of the
Take-Out Loan to be satisfied. Notwithstanding the foregoing, Borrower shall
have, upon ten (10) days' prior written notice ("Borrower's Termination Notice")
to TAKE-OUT LENDER and CONSTRUCTION LENDER, the right to terminate the Take-Out
Commitment (other than any provisions thereof that, pursuant to their terms,
survive the termination of the Take-Out Commitment (the "Surviving Provisions"))
provided that, at or prior to the time Borrower gives Borrower's Termination
Notice (i) Borrower shall pay any portion of the Commitment Fee (including,
without limitation, the Second Installment) that Borrower has not therefore paid
but is then due and payable, (ii) without relieving Borrower and Principal of
their obligations under the Surviving Provisions (including, without limitation,
those relating to Transaction Costs), Borrower shall pay all Loan Transaction
Costs with respect to which TAKE-OUT LENDER shall have theretofore notified
Borrower and (iii)(A) Borrower shall have obtained, from a lender that is a
Permitted Assignee (as defined in the GMAC Credit Agreement) or is otherwise
satisfactory to CONSTRUCTION LENDER (a "Replacement Take-Out Lender"), a
replacement take-out loan commitment which (x) does not include material
conditions not contained in the Take-Out Commitment or impose any material
obligations on the Borrower or on the CONSTRUCTION LENDER not imposed in the
Take-Out Commitment and (y) contains the same pre-approvals as does the
Tri-Party Agreement and (B) the Replacement Take-Out Lender shall have executed
and delivered a tri-party agreement that is substantially similar to this
Agreement.
2. Take-Out Commitment - Defaults. Each of TAKE-OUT LENDER, BORROWER and
PRINCIPAL hereby represents and warrants that, as of the date hereof, it does
not have any actual knowledge of any default, either on its own behalf or by any
other party to the Take-Out Commitment, under the terms and conditions of the
Take-Out Commitment. TAKE-OUT LENDER agrees that in the event of any default by
BORROWER or the PRINCIPAL under the Take-Out Commitment of which TAKE-OUT LENDER
has actual
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<PAGE>
knowledge and which is not cured within the applicable notice or grace period
provided therein, if any (a "Take-Out Commitment Event of Default"), then
TAKE-OUT LENDER, promptly after such default becomes a Take-Out Commitment Event
of Default shall provide CONSTRUCTION LENDER with written notice of such
Take-Out Commitment Event of Default. If such Take-Out Commitment Event of
Default shall be susceptible of cure by CONSTRUCTION LENDER, then CONSTRUCTION
LENDER shall have an opportunity (but not an obligation) to cure such default
within a period of time which shall expire on the earlier to occur of (x) the
date that occurs seven (7) (in the case of a monetary Take-Out Commitment Event
of Default) or thirty (30) days (in the case of a non-monetary Take-Out
Commitment Event of Default) after TAKE-OUT LENDER shall give such notice to
CONSTRUCTION LENDER or (y) the expiration date of the Take-Out Commitment set
forth therein, during which period TAKE-OUT LENDER shall not terminate the
Take-Out Commitment as a result of such Take-Out Commitment Event of Default. In
the event that any such non-monetary Take-Out Commitment Event of Default cannot
be cured within thirty (30) days and the Take-Out Commitment shall not have
expired, TAKE-OUT LENDER shall grant to CONSTRUCTION LENDER an additional thirty
(30) days (or the period of time until the expiration of the Take-Out
Commitment, if less than thirty (30) days) to cure such Take-Out Commitment
Event of Default, during which period TAKE-OUT LENDER shall not terminate the
Take-Out Commitment as a result of such Take-Out Commitment Event of Default,
provided that CONSTRUCTION LENDER (i) commenced cure within the original thirty
(30) day period and (ii) proceeds diligently and continuously to take action to
cure such Take-Out Commitment Event of Default within such additional cure
period. If (x) such Take-Out Commitment Event of Default shall not be
susceptible of cure by CONSTRUCTION LENDER or (y) CONSTRUCTION LENDER shall fail
to proceed diligently and continuously to, and actually, cure such Take-Out
Commitment Event of Default within the cure period afforded CONSTRUCTION LENDER
in this Paragraph 2, then TAKE-OUT LENDER may, at its option, exercise its
rights against BORROWER and/or the PRINCIPAL under the Take-Out Commitment, at
law and/or in equity and/or terminate this Agreement. Notwithstanding anything
to the contrary contained in this Agreement, in no event shall TAKE-OUT LENDER
be obligated to fund the Take-Out Loan after the Take-Out Commitment has (x)
expired pursuant to its terms or (y) been terminated by TAKE-OUT LENDER
(subject, in the case of clause (y) only to the provisions of this Paragraph 2)
and nothing (other than a writing signed by TAKE-OUT LENDER) shall extend, or be
deemed to extend, the expiration date of the Take-Out Commitment expressly set
forth therein or the date upon which the Take-Out Commitment shall terminate as
aforesaid. The benefit of this Paragraph 2 shall be for CONSTRUCTION LENDER
only, and neither BORROWER nor the PRINCIPAL shall have any rights to any notice
or cure period other than those, if any, as are expressly set forth in the
Take-Out Commitment. The failure of TAKE-OUT LENDER to send notice of
any Take-Out Commitment Event of Default under the Take-Out Commitment to
CONSTRUCTION LENDER shall not in any way impair the
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effect, vis-a-vis BORROWER and the PRINCIPAL of any such notice delivered to
BORROWER and/or PRINCIPAL.
3. Take-Out Commitment Fees. All fees required to have been paid as of
the date hereof by BORROWER or the PRINCIPAL to TAKE-OUT LENDER, pursuant to the
Take-Out Commitment, have been paid by BORROWER or the PRINCIPAL and received by
TAKE-OUT LENDER.
4. Construction Loan - Status. Each of CONSTRUCTION LENDER, BORROWER,
VENETIAN, LVSI, INTERIM MALL LLC and PRINCIPAL hereby represents, warrants,
covenants and agrees that the GMAC Credit Agreement and the other Construction
Loan Documents (as defined below) are in full force and effect and have not
heretofore been modified, supplemented, terminated or canceled. Each of
VENETIAN, LVSI, INTERIM MALL LLC and the PRINCIPAL represent and warrant it has
delivered fully executed copies of all Construction Loan Documents to TAKE-OUT
LENDER and VENETIAN, LVSI and BORROWER covenant that they shall deliver fully
executed copies of all amendments and supplements, if any, made after the date
hereof.
5. Construction Loan - Defaults. (a) Each of CONSTRUCTION LENDER,
BORROWER, VENETIAN, LVSI, INTERIM MALL LLC and PRINCIPAL hereby represents and
warrants that, as of the date hereof, the representing party has no actual
knowledge of any default by any party under the terms and conditions of the
Construction Loan Documents. CONSTRUCTION LENDER agrees that in the event of any
default by BORROWER, VENETIAN, LVSI, INTERIM MALL LLC or the PRINCIPAL under the
Construction Loan Documents of which CONSTRUCTION LENDER has actual knowledge
and which is not cured within the applicable notice or grace period provided
therein, if any (a "Construction Loan Event of Default"), then, promptly after
such default becomes a Construction Loan Event of Default, CONSTRUCTION LENDER
shall provide TAKE-OUT LENDER with written notice of such Construction Loan
Event of Default (together with a certificate (the "CL Amount Certificate")
setting forth, in reasonable detail, the then outstanding principal amount of
the Construction Loan, accrued and unpaid interest thereon and all other amounts
then outstanding under the Construction Loan Documents). If any such
Construction Loan Event of Default shall be a monetary default or a material
non-monetary default, than TAKE-OUT LENDER shall have an opportunity (but not an
obligation) to (x) cure such default within a period of time which shall expire
seven (7) days (in the case of a monetary Construction Loan Event of Default) or
thirty (30) days (in the case of a non-monetary Construction Loan Event of
Default) after CONSTRUCTION LENDER gives such notice to TAKE-OUT LENDER
(provided that such Construction Loan Event of Default shall be susceptible of
cure by TAKE-OUT LENDER) or (y) to elect, by written notice (the "Purchase
Notice") given within such seven (7) or thirty (30)-day, as applicable, period,
to purchase (or to cause its designee to purchase) (the applicable purchaser,
the "Purchaser") the
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Construction Loan Documents for a purchase price equal to the Purchase Price (as
defined below), in which case the provisions of subparagraph (b) below shall be
applicable. During such seven (7) or thirty (30)-day period, CONSTRUCTION LENDER
shall not exercise any rights or remedies against BORROWER, VENETIAN, LVSI,
INTERIM MALL LLC, PRINCIPAL or with respect to the Real Property Collateral. In
the event that such non-monetary Construction Loan Event of Default cannot be
cured within thirty (30) days, CONSTRUCTION LENDER shall grant to TAKE-OUT
LENDER an additional thirty (30) days to cure such Construction Loan Event of
Default, during which period CONSTRUCTION LENDER shall not exercise any rights
or remedies against BORROWER, VENETIAN, LVSI, INTERIM MALL LLC, PRINCIPAL or
with respect to the Real Property Collateral, provided that TAKE-OUT LENDER (i)
commences cure within the original thirty (30) day period, and (ii) proceeds
diligently and continuously to take action to cure such Construction Loan Event
of Default. If (x) such Construction Loan Event of Default shall not be
susceptible of cure by TAKE-OUT LENDER or (y) TAKE-OUT LENDER shall fail to
diligently and continuously proceed to, and actually, cure such Construction
Loan Event of Default, condition or occurrence within such seven (7) or thirty
(30) day cure period, or the additional thirty (30) day cure period, if
applicable, then, if TAKE-OUT LENDER shall not have elected to purchase the
Construction Loan Documents as aforesaid, CONSTRUCTION LENDER may, at its
option, exercise its rights against BORROWER, VENETIAN, INTERIM MALL LLC, LVSI
and/or PRINCIPAL under the Construction Loan Documents, at law and/or in equity
and/or terminate this Agreement by notice thereof to TAKE-OUT LENDER (which
termination shall be effective as of the date upon which such notice shall be
given). The benefit of this Paragraph 5 shall be for TAKE-OUT LENDER only, and
neither BORROWER, VENETIAN, INTERIM MALL LLC, LVSI nor the PRINCIPAL shall have
any rights to any notice or cure period other than those, if any, as are
expressly set forth in the Construction Loan Documents. The failure of
CONSTRUCTION LENDER to send notice of any Construction Loan Event of Default
under the Construction Loan Documents to TAKE-OUT LENDER shall not in any way
impair the effect, vis-a-vis BORROWER, VENETIAN, INTERIM MALL LLC, LVSI and the
PRINCIPAL, of any such notice delivered to BORROWER, VENETIAN, INTERIM MALL LLC,
LVSI and/or PRINCIPAL. The term "Construction Loan Documents" shall mean the
Loan Documents (as such term is defined in the GMAC Credit Agreement).
(b) If TAKE-OUT LENDER shall elect to purchase the Construction Loan
Documents pursuant to subparagraph (a) above, then CONSTRUCTION LENDER shall not
exercise any rights or remedies against BORROWER, VENETIAN, LVSI, PRINCIPAL or
with respect to the Real Property Collateral and the closing of the sale of the
Construction Loan Documents from CONSTRUCTION LENDER to the Purchaser shall
occur at the office of the TAKE-OUT LENDER'S counsel located in New York City on
a date that is reasonably satisfactory to CONSTRUCTION LENDER and the Purchaser,
provided that such date shall occur on or prior to the date that
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occurs thirty (30) days after TAKE-OUT LENDER shall have given the Purchase
Notice. At such closing, (i) the Purchaser shall pay to CONSTRUCTION LENDER a
purchase price (the "Purchase Price") equal to the sum of the principal amount
of the Construction Loan outstanding on such closing date plus accrued and
unpaid interest thereon outstanding on such closing date plus all other amounts
outstanding under the Construction Loan Documents on such closing date (provided
that if any such amounts shall be incurred or shall accrue from and after the
date of the CL Amount Certificate (other than regularly scheduled interest or
so-called "protective advances" made by CONSTRUCTION LENDER with the approval of
the TAKE-OUT LENDER (which approval shall not be unreasonably withheld)) then
TAKE-OUT LENDER shall have the right to revoke its election to purchase the
Construction Loan Documents) and (ii) CONSTRUCTION LENDER shall execute,
acknowledge and deliver to Purchaser, or cause to be executed, acknowledged and
delivered, as applicable, an assignment of the Construction Loan Documents and
all other documents necessary to assign to the Purchaser all of the legal and
beneficial interests in the Construction Loan Documents, which assignment shall
be without representation, warranty or recourse to CONSTRUCTION LENDER (other
than representations (1) as to the Purchase Price (with a breakdown of the
components thereof) and (2) that CONSTRUCTION LENDER did not assign, sell or
otherwise transfer all, or any portion of, or any participation or other
interest in, the Construction Loan Documents (or if CONSTRUCTION LENDER shall
have made any such assignment, sale or other transfer, the representation that
CONSTRUCTION LENDER did not assign, sell or otherwise transfer all, or any
portion of, or any participation or other interest in, the Construction Loan
Documents other than to certain enumerated parties)).
6. Title Insurance. TAKE-OUT LENDER approves Lawyers Title Insurance
Corporation (the "Title Company") as the title insurance company that will
insure the lien of TAKE-OUT LENDER's deed of trust upon the Real Property
Collateral, with re-insurance being provided by the insurers, and in the
percentages of liability, set forth on Exhibit A-1 hereto. TAKE-OUT LENDER
approves the form of the title insurance policy or title commitment attached
hereto as Exhibit A-2 and the endorsements attached hereto as Exhibit A-2 (i.e.,
subject to the third sentence of this Section 6, such endorsements constitute
all endorsements that TAKE-OUT LENDER may require pursuant to clauses (ii) and
(iv) of the second sentence of Paragraph 3.H. of the Take-Out Commitment) and,
except for Objectionable Title Exceptions (as defined below), if any, approves
the exceptions to title identified in Exhibit A-2 attached hereto and made a
part hereof (as well as all Permitted Encumbrances (as defined in the Form Loan
Agreement), which title insurance policy shall be updated and issued as of the
date of the Take-Out Loan closing (the "Take-Out Closing Date") and shall be in
an amount that is not less than the principal amount of the Take-Out Loan.
Notwithstanding the foregoing, if, during the period commencing
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on the date hereof and ending on the Take-Out Closing Date, (x) there shall
occur a material adverse change in the financial condition of any of the title
insurers or reinsurers referenced in this Paragraph 6 and/or (y) it shall become
unlawful for any such title insurer or reinsurer to issue the contemplated title
insurance or reinsurance (in whole or part), then TAKE-OUT LENDER shall be
entitled to replace such title insurer or reinsurer and/or the applicable title
insurance or reinsurance, as applicable, with a title insurer or reinsurer or
title insurance or reinsurance, as applicable, reasonably acceptable to TAKE-OUT
LENDER. TAKE-OUT LENDER also hereby approves the matters described in the U.C.C.
and other searches attached hereto as Exhibit A-3.
7. Survey. Subject to TAKE-OUT LENDER's receipt and approval of an
updated as-built survey as required by paragraph 3.I. of Exhibit B to the
Take-Out Commitment containing a certification to the TAKE-OUT LENDER reasonably
satisfactory to it (the "As-Built Survey"), TAKE-OUT LENDER approves (a) the
survey (the "Existing Survey") of the Land entitled "ALTA/ACSM Survey Sands
Hotel & Casino", Job No. 970709, made by John E. Forsman dated 11/7/97, and all
matters shown thereon and the form of surveyor's certificate and (b) the
location of the Mall in the Mall Space, the Retail Annex on the Retail Annex
Land and the rest of the Improvements (as defined in the Form Loan Documents) on
the Land (in each case, with such adjustments thereto as shall be permitted
under the REA); provided that, notwithstanding the foregoing, TAKE-OUT LENDER
shall not be deemed to have approved any encroachment of any portion of the
Project, as completed, upon any lot line, easement or other matter (unless such
encroachment shall be permitted under an OEA approved by Lender in accordance
with the provisions of Paragraph 15 hereof) (collectively, "Objectionable Title
Exceptions"). TAKE-OUT LENDER approves John E. Forsman as the surveyor who will
prepare the As-Built Survey required by the Take-Out Commitment provided that
John E. Forsman shall be an appropriately licensed or registered land surveyor
at the time that it completes that As-Built Survey.
8. Approval of Plans and Specifications; FADAA. (a) TAKE-OUT LENDER and
CONSTRUCTION LENDER hereby approve the plans and specifications for the
construction of the Mall Improvements and of the remainder of the Project
described on Exhibit B hereto (collectively the "Existing Plans and
Specifications"). BORROWER, VENETIAN, LVSI and the PRINCIPAL hereby represent
and warrant that (x) a complete copy of the Existing Plans and Specifications
has been delivered to the Construction Consultant on or prior to the date hereof
and (y) the Existing Plans and Specifications described on Exhibit B hereto are
the Plans and Specifications (as such term is defined in the FADAA). Except as
provided in the next following sentence, no Scope Changes (as defined in the
FADAA) to the Existing Plans and Specifications shall be made without TAKE-OUT
LENDER's prior written consent
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(which consent may be granted or withheld in TAKE-OUT LENDER's sole discretion).
Notwithstanding the provisions of the Take-Out Commitment, Scope Changes to the
Existing Plans and Specifications that constitute Safe Harbor Scope Changes (as
defined in the FADAA) and/or which do not, under Section 6.2.1 of the FADAA,
require the Required Scope Change Approval (as defined in the FADAA) may be made
to the Existing Plans and Specifications without TAKE-OUT LENDER's prior written
consent.
(b) As used herein, the term "FADAA" means that certain Funding Agents'
Disbursement and Administration Agreement among LVSI, Venetian, Interim Mall
LLC, The Bank of Nova Scotia, as agent, First Trust National Association, as
indenture trustee, Construction Lender, Atlantic/Pacific JV and The Bank of Nova
Scotia, as disbursement agent, a copy of which is attached to the Take-Out
Commitment as Exhibit A-3 (as such agreement exists on the date hereof). With
respect to the FADAA, for purposes of the Take-Out Commitment and this
Agreement, notwithstanding anything to the contrary contained in the FADAA, in
the Take-Out Commitment or in this Agreement: (i) the "Construction Consultant"
shall mean Tishman Construction Corporation of Nevada, a Nevada corporation, and
any replacement thereof selected in accordance with the provisions of the FADAA,
provided that such replacement must be acceptable to the TAKE-OUT LENDER (which
consent will not be unreasonably withheld) and (ii) the "Project Architect"
shall mean the collective reference to TSA of Nevada, LLP, and WAT&G, Inc.
Nevada, and any replacement thereof selected in accordance with the provisions
of the FADAA, provided that such replacement must be acceptable to the TAKE-OUT
LENDER (which consent will not be unreasonably withheld).
9. [Intentionally omitted]
10. Environmental Matters. TAKE-OUT LENDER hereby acknowledges receiving
a copy of the Tank Removal Report prepared by Converse Environmental Consultants
dated October 2, 1996; the May 14, 1997 letter from Converse Environmental
Consultants Southwest, Inc. to Las Vegas Sands, Inc. on the subsurface
exploration; the May 13, 1997 Temporary Construction Dewatering Permit issued to
Lehrer, McGovern, Bovis, the draft Phase I environmental site assessment of the
Former Sands Hotel, by EMG, dated July 22, 1997, the November 5, 1996 letter
from Clark County Health District to Sands Hotel; the October 2, 1997 letter
from Converse Environmental Consultants Southwest, Inc. to Nevada Department of
Environmental Protection, the August 7, 1997 letter from Converse Environmental
Consultants Southwest, Inc. to Las Vegas Sands, Inc., and the July 28, 1997
letter from Converse Environmental Consultants Southwest, Inc. to Las Vegas
Sands, Inc. (the "Existing Environmental Reports"). TAKE-OUT LENDER hereby
agrees that it shall not refuse to fund the Take-Out Loan solely because it
finds the environmental condition of the Land to be unacceptable; provided that
no reasonably likely source of material environmental liability (except the soil
and groundwater
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contamination identified in the Existing Environmental Reports, to the extent
and severity identified in the Existing Environmental Reports) is identified and
the environmental condition of the Land, as reflected in the Environmental
Reports (as defined in the Take-Out Commitment), shall be substantially the same
as or better than that which is reflected in the Existing Environmental Reports.
11. Appraiser. TAKE-OUT LENDER hereby approves Landauer Associates, Inc.
("Landauer") as the appraiser described in paragraph 3.G. of Exhibit B to the
Commitment Letter provided that Landauer, at the time it prepares the appraisal
described in such paragraph 3.G., is an independent appraiser holding an M.A.I.
designation and shall be licensed in the State of Nevada.
12. [Intentionally omitted].
13. Counsel Opinion. Subject to (a) the unconditional execution and
delivery, on the Take-Out Closing Date, by Qualified Nevada Counsel (as defined
below), of a legal opinion in the form of Exhibit C-1 hereto and (b) the
unconditional execution and delivery, on the Closing Date, by Qualified New York
Counsel (as defined below), of legal opinions in the forms of Exhibit C-2 (the
"Enforceability Opinion") and Exhibit C-3 hereto (the "Non-Consolidation
Opinion"), respectively, TAKE-OUT LENDER hereby approves the forms (as the same
may be changed as described below) of such legal opinions (with such changes, if
any, (x) as TAKE-OUT LENDER, Qualified New York Counsel or Qualified Nevada
Counsel, as applicable, shall reasonably require due to changes, if any, in
applicable law that shall occur after the date hereof and/or (y) with respect to
the Non-Consolidation Opinion, as the applicable Qualified New York Counsel
shall reasonably require due to changes, if any, in facts or circumstances,
provided that, in the case of any such change(s) described in the foregoing
clauses (x) or (y), such change(s) shall not, individually, or in the aggregate,
(aa) add any additional qualifications, limitations or the like that are, in any
material respect, disadvantageous to Take-Out Lender and/or (bb) alter the
conclusions contained in any such opinion) for the purposes of paragraph 3.J of
Exhibit B to the Take-Out Commitment. As used herein, (x) "Qualified Nevada
Counsel" shall mean Lionel, Sawyer & Collins or another law firm the main office
of which is located in the State of Nevada and which law firm is reasonably
satisfactory to the TAKE-OUT LENDER and (y) "Qualified New York Counsel" shall
mean Paul, Weiss, Rifkind, Wharton & Garrison or another national law firm with
at least 200 lawyers the main office of which is located in the State of New
York and which law firm is reasonably satisfactory to the TAKE-OUT LENDER. In
connection with the delivery of the Non-Consolidation Opinion, Borrower and
TAKE-OUT LENDER shall execute and deliver the memorandum in the form attached
hereto as Exhibit D.
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14. Formation Documents. TAKE-OUT LENDER hereby approves the forms of
the organizational documents of Borrower, Mall Holdings, Managing Member,
Intermediate Holdings, Venetian and Interface attached hereto as Exhibit E-1,
Exhibit E-2, Exhibit E-3, Exhibit E-4 , Exhibit E-5 and Exhibit E-6,
respectively. The documents relating to the transfer of a 1% membership interest
in Borrower from Mall Holdings to Managing Member, and the admission of Managing
Member as the sole managing member of Borrower, are subject to TAKE-OUT LENDER's
consent (not to be unreasonably withheld).
15. Easement, HVAC, Sale and Contribution and Other Agreements. For
purposes of paragraph 3.D of Exhibit B to the Take-Out Commitment, TAKE-OUT
LENDER hereby approves the forms of the REA, HVAC Agreement, HVAC Ground Lease
and the Sale and Contribution Agreement attached hereto as Exhibit F-1, Exhibit
F-2, Exhibit F-3 and Exhibit F-4.
16. [Intentionally Omitted]
17. [Intentionally omitted].
18. Property Manager, Property Management Agreement and Leasing Broker.
For purposes of paragraph 3.D. of Exhibit B to the Take-Out Commitment, TAKE-OUT
LENDER hereby approves (x) Forest City Commercial Management, Inc. ("Manager"),
as the Property Manager, (y) the form of the Management Agreement between LVSI,
as owner, and Forest, as manager attached hereto as Exhibit G.
19. Lease Forms. TAKE-OUT LENDER hereby approves the standard retail
tenant lease form and the standard restaurant tenant lease form attached hereto
as Exhibits H-1 and Exhibit H-2, respectively.
20. Take-Out Loan Documents. Subject to the terms and provisions of
paragraph 4 of Exhibit B to the Take-Out Commitment, BORROWER, the PRINCIPAL and
TAKE-OUT LENDER hereby approve the forms of the Form Loan Documents referenced
in such paragraph 4.
21. Take-Out Commitment. A true and complete copy of the Take-Out
Commitment is attached hereto as Exhibit I.
22. Billboard Master Lease and Mall Master Lease. For purposes of
paragraph 3.F. of Exhibit B to the Take-Out Commitment, TAKE-OUT LENDER hereby
approves the forms of the Billboard Master Lease, the Memorandum of Billboard
Master Lease, Subordination of Billboard Operating Lease to Billboard Master
Lease, the Mall Master Lease, the Memorandum of Mall Master Lease and
Subordination of Fee Deeds of Trust to Billboard Master Lease and to Mall Master
Lease attached hereto as Exhibit J-1, Exhibit
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J-2, Exhibit J-3, Exhibit J-4, Exhibit J-5 and Exhibit J-6, respectively.
23. BORROWER'S, VENETIAN'S, LVSI'S, PRINCIPAL'S, INTERIM MALL LLC and
TAKE-OUT LENDER'S Covenants. (a)(i) BORROWER hereby covenants and agrees to
provide CONSTRUCTION LENDER with prompt written notice of any default that
occurs under the Take-Out Commitment, (ii) BORROWER hereby agrees to pay, within
ten (10) days of demand therefor by CONSTRUCTION LENDER or TAKE-OUT LENDER, all
fees, expenses and costs (including, without limitation, reasonable attorneys'
fees, disbursements and expenses) incurred in connection with this Agreement and
(iii) BORROWER, VENETIAN, LVSI, and INTERIM MALL LLC hereby agree to execute and
deliver such further documents and to perform and cause to be performed such
further acts as TAKE-OUT LENDER or CONSTRUCTION LENDER shall reasonably require
in connection with this Agreement.
(b) Subject to all of the terms, provisions, requirements and
conditions set forth in the Take-Out Commitment, TAKE-OUT LENDER hereby
covenants and agrees, solely for the benefit of CONSTRUCTION LENDER and
BORROWER, to fund the Take-Out Loan in accordance with the terms, provisions,
requirements and conditions of the Take-Out Commitment.
24. BORROWER'S and PRINCIPAL'S Obligations under Take-Out Commitment.
Nothing contained in this Agreement shall (x) relieve, or shall be deemed to
relieve, BORROWER or PRINCIPAL of any of its obligations, or TAKE-OUT LENDER of
any of its rights or remedies, under the Take-Out Commitment (other than
TAKE-OUT LENDER's right to approve the form of any document (or any other
matter) that TAKE-OUT LENDER approved hereby) or (y) require TAKE-OUT LENDER to
fund the Take-Out Loan to, or at the direction of, BORROWER (or any other
Person) unless and until all of the conditions to TAKE-OUT LENDER'S obligation
to fund the Take-Out Loan, and all requirements of the Take-Out Commitment,
shall have been satisfied prior to the date upon which the Take-Out Commitment
shall expire or be terminated.
25. Notices. Any notice, demand, consent, authorization, request,
approval or other communication (each, a "Communication") given pursuant to this
Agreement shall be effective and valid only if in writing, signed by the party
giving such notice, and delivered by a reputable overnight courier or a delivery
service from whom a receipt is obtained, or, if mailed, sent by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
If to TAKE-OUT LENDER:
Goldman Sachs Mortgage Company
c/o Goldman, Sachs & Co.,
85 Broad Street, 12th Floor
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New York, New York 10004
Attention: Peter Briger
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attention: Eugene A. Pinover, Esq.
If to CONSTRUCTION LENDER:
GMAC Commercial Mortgage Corporation
100 S. Wacker Drive - 4th Floor
Chicago, Illinois 60606
Attention: Phillip Keel
with a copy to:
Altheimer & Gray
10 S. Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: Nancy L. Kasko, Esq.
If to BORROWER:
Grand Canal Shops Mall, LLC
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: David Friedman
with a copy to:
Paul, Weiss, Rifkind, Wharton
& Garrison
1285 Avenue of the Americas
New York, New York 10019-60604
Attention: James Purcell, Esq.
If to VENETIAN:
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: David Friedman
with a copy to:
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Paul, Weiss, Rifkind, Wharton
& Garrison
1285 Avenue of the Americas
New York, New York 10019-60604
Attention: James Purcell, Esq.
If to LVSI:
Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: David Friedman
with a copy to:
Paul, Weiss, Rifkind, Wharton
& Garrison
1285 Avenue of the Americas
New York, New York 10019-60604
Attention: James Purcell, Esq.
If to PRINCIPAL:
Sheldon G. Adelson
c/o Las Vegas Sands, Inc.
3355 Las Vegas Blvd. South
Las Vegas, Nevada 89109
with a copy to:
Paul, Weiss, Rifkind, Wharton
& Garrison
1285 Avenue of the Americas
New York, New York 10019-60604
Attention: James Purcell, Esq.
Each Communication shall be considered given: in the case of courier
service, on the business day after the same was sent; in the case of hand
delivery, at the time of delivery; and, in the case of registered or certified
mail, when delivered or two business days after mailing (whichever occurs
first). Any party may change its address (or that of any of its notice parties)
for purposes of this Paragraph 25 by giving written notice thereof to the other
parties hereto as aforesaid.
26. Parties Benefited; Successors and Assigns. (a) The representations,
warranties, covenants and agreements contained herein and the powers granted
hereby shall inure to the benefit of and bind all parties hereto and their
respective successors and permitted assigns. Except as expressly set forth in
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subparagraphs (b) and (c) of this Paragraph 26, neither BORROWER nor VENETIAN
nor LVSI nor INTERIM MALL LLC nor PRINCIPAL nor CONSTRUCTION LENDER nor TAKE-OUT
LENDER shall be entitled to assign its rights, or delegate its duties or
obligations, under this Agreement, without the prior written consent of
CONSTRUCTION LENDER and TAKE-OUT LENDER.
(b) TAKE-OUT LENDER shall be entitled to assign its rights and to
delegate its duties and obligations under this Agreement (x) without any other
party's consent, to any Affiliate of Lender and (y) with the consent of Borrower
and Construction Lender (which consent shall not be unreasonably withheld or
delayed (unless the proposed assignee shall be a Competitor)), to any other
Person, provided that, in any case, the same shall not release TAKE-OUT LENDER
from its duties or obligations hereunder.
(c) If an event of default shall occur under the Construction Loan
Documents and CONSTRUCTION LENDER or a Subsidiary (as defined below) shall
obtain record title to the Real Property Collateral by foreclosure or by a deed
in lieu of foreclosure (the party so obtaining title to the Real Property
Collateral, the "CL Assignee"), then, at its option, exercisable within ten (10)
days after the date upon which CONSTRUCTION LENDER or a Subsidiary so obtains
record title to the Real Property Collateral, time being of the essence with
respect to such ten (10) day period, CONSTRUCTION LENDER may notify TAKE-OUT
LENDER in writing that the CL Assignee desires to obtain the benefits afforded
BORROWER, and thereby assumes all of the duties and obligations of BORROWER and
PRINCIPAL under, the Take-Out Commitment and this Agreement (the "CL Assignment
Notice"). If CONSTRUCTION LENDER gives the CL Assignment Notice in accordance
with the terms of the immediately preceding sentence, then, effective as of the
date upon which the CL Assignment Notice shall be given, it shall be deemed that
all of BORROWER'S rights under the Take-Out Commitment were assigned to the CL
Assignee, and all of BORROWER'S and PRINCIPAL'S obligations and duties under the
Take-Out Commitment and under this Agreement, were delegated to and jointly and
severally assumed by, CONSTRUCTION LENDER and the applicable Subsidiary (if such
Subsidiary shall be the CL Assignee). Once given, the CL Assignment Notice shall
be irrevocable. If the CL Assignment Notice shall not be given in accordance
with the provisions of this Paragraph 26(c), then neither CONSTRUCTION LENDER
nor any Subsidiary nor any other person or entity claiming by, through or under
any of the same shall have any rights or remedies under this Paragraph 26(c).
Upon the giving of the CL Assignment Notice as aforesaid and the satisfaction,
in accordance with the terms and provisions of the Take-Out Commitment and this
Agreement, of all conditions to the funding of the Take-Out Loan and all
requirements pertaining thereto, including, without limitation, the
unconditional execution and delivery by the CL Assignee (in lieu of BORROWER and
PRINCIPAL) of the Loan Documents, the TAKE-OUT LENDER shall (x) release the
Escrowed Guaranty from escrow (Principal and
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Borrower hereby agreeing that neither Principal nor Borrower shall have or raise
any defense or objection to such release from escrow or to the effectiveness of
the Escrowed Guaranty) and (y) fund the Take-Out Loan to the CL Assignee.
TAKE-OUT LENDER hereby agrees, solely for the benefit of CONSTRUCTION LENDER,
that TAKE-OUT LENDER shall not refuse to fund the Loan to the CL Assignee,
pursuant to this Section 26(c), solely because the Principal refuses to execute
and deliver a Replacement Guaranty if and when requested so to do if all other
conditions to TAKE-OUT LENDER's obligation to fund the Loan to the CL Assignee
shall be satisfied. Neither the giving of the CL Assignment Notice nor any other
action taken, or not taken, by any CL Assignee or any other person or entity,
shall relieve BORROWER or VENETIAN or LVSI or PRINCIPAL of liability that such
party may have to TAKE-OUT LENDER nor shall it waive, or be deemed to waive, any
conditions or requirements under the Take-Out Commitment or contained herein.
Furthermore, notwithstanding anything to the contrary contained in this
Agreement, in no event shall TAKE-OUT LENDER be obligated to fund the Take-Out
Loan after the Take-Out Commitment has (x) expired pursuant to its terms or (y)
been terminated by TAKE-OUT LENDER pursuant to its terms or pursuant to
applicable law (subject, in the case of clause (y) only to the provisions of
Paragraph 2 hereof) and nothing (other than a writing signed by TAKE-OUT LENDER)
shall extend, or be deemed to extend, the expiration date of the Take-Out
Commitment beyond the Outside Closing Date or the date upon which the Take-Out
Commitment shall terminate as aforesaid. As used herein, the term "Subsidiary"
shall mean a single asset corporation, partnership or limited liability company
(x) that is organized under, and in accordance with, the laws of the State of
Nevada, (y) otherwise complies with the requirements and conditions set forth in
paragraph 3.K. of Exhibit B to the Take-Out Commitment, and (z) all of the
issued and outstanding stock, all of the partnership interests or all of the
membership interests, as applicable, of which are directly owned by CONSTRUCTION
LENDER.
27. Indemnification.
(a) Venetian and LVSI (collectively, the "Indemnitors") shall, at their
sole cost and expense, protect, defend, indemnify, release and hold harmless
Lender and the other Indemnified Parties (as defined in the Form Loan Documents)
from and against any and all claims, suits, liabilities (including, without
limitation, strict liabilities), administrative and judicial actions and
proceedings, obligations, debts, damages, losses, costs, expenses, fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, and litigation costs, of whatever kind or nature and whether or not
incurred in connection with any judicial or administrative proceedings
(including, without limitation, reasonable attorneys' fees and expenses) (the
"Losses") imposed upon or incurred by or asserted against Lender or any other
Indemnified Parties (other than those arising solely from the bad faith, gross
negligence or
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<PAGE>
willful misconduct of the Indemnified Party seeking indemnification hereunder
(without relieving the Indemnitors from liability to the other Indemnified
Parties)), and directly or indirectly arising out of or in any way relating to
any one or more of the following: (i) the execution, delivery or performance of
the Take-Out Commitment or this Agreement; (ii) any amendment to, or
restructuring of, the Take-Out Commitment or this Agreement; (iii) any and all
lawful action that may be taken by Lender in connection with the enforcement of
the provisions of the Take-Out Commitment or this Agreement, whether or not suit
is filed in connection with same, or in connection with the Borrower or any
Affiliate of the Borrower becoming a party to a voluntary or involuntary federal
or state bankruptcy, insolvency or similar proceeding; (iv) the development and
construction of the Project or any actual or alleged accident, injury to or
death of persons or loss of or damage to property occurring in, on or about the
Project or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (v) any actual or alleged
use, nonuse or condition in, on or about the Project or any part thereof or on
the adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways; (vi) performance of any labor or services or the furnishing of
any materials or other property in respect of the Project or any part thereof;
(vii) any failure, or alleged failure, of the Project (or any portion thereof)
to be in compliance with any Legal Requirement (as defined in the Form Loan
Documents); (viii) any action, proceeding or claim made or brought by Borrower
in violation of the provisions of the paragraph of the Take-Out Commitment
entitled "Remedies of Borrower", (ix) the enforcement by any Indemnified Party
of the provisions of this Section 27, or (x) any and all claims and demands
whatsoever which may be asserted against any Indemnified Party by reason of any
alleged obligations or undertakings on its part to perform or discharge any of
the terms, covenants, or agreements contained in any Lease.
(b) The provisions of this Section 27 (other than the provisions of
Section 27(a)(viii), to which the provisions of this Section 27 shall apply)
shall not apply to any dispute solely between Borrower, any Indemnitor or
Principal, on the one hand, and Lender, on the other hand (but without prejudice
to Lender's right to collect, pursuant to any other provision of any Loan
Document or otherwise at law or in equity, any amounts (including, without
limitation, legal fees, disbursements and other expenses) relating to any such
dispute).
(c) Any amounts payable to an Indemnified Party by reason of the
application of this Section 27 shall become immediately due and payable and
shall bear interest at the Default Rate (as defined in the Form Loan Documents)
from the date loss or damage is sustained by such Indemnified Party until paid.
(d) Upon written request by any Indemnified Party, the Indemnitors shall
diligently defend such Indemnified Party (if
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<PAGE>
requested by any Indemnified Party, in the name of the Indemnified Party) by
attorneys and other professionals approved by the TAKE-OUT LENDER (which
approval, so long as no Termination Event shall then exist, shall not be
unreasonably withheld or delayed). Except to the extent that (A) a conflict of
interest exists between or among the interests of any Indemnitor, any Affiliate
thereof that is involved in the claim, dispute, action or proceeding in
question, and/or any applicable Indemnified Party and/or (B) a Termination Event
shall exist, the Indemnitors shall be permitted to cause the same counsel and
other professionals to defend the Indemnitors, all such Affiliates and all such
Indemnified Parties in any such claim, dispute, action or proceeding. From and
after such time, if any, as a Termination Event and/or such a conflict of
interest shall arise, and/or, in the reasonable judgment of any Indemnified
Part(ies), Indemnitors shall not be fulfilling their obligation to defend such
Indemnified Part(ies) in accordance with the provisions hereof, upon notice to
Indemnitors, any Indemnified Party (in the case of a Termination Event) or any
affected Indemnified Party (in the case of such a conflict of interest or a
determination by an Indemnified Party that Indemnitors shall not be so
fulfilling their obligations) may, at its or their, as applicable, option
(exercisable in such Indemnified Party(ies)' sole and absolute discretion), (aa)
require the Indemnitors to cause counsel and other professionals acceptable to
such Indemnified Part(ies), in its or their, as applicable, sole discretion, to
defend such Indemnified Part(ies) or (bb) engage its own attorneys and other
professionals to defend or assist it, and, at the option of such Indemnified
Part(ies), its attorneys shall control the resolution of such claim, dispute,
action or proceeding; provided that, in the case of any such conflict of
interest, so long as (x) no Termination Event shall then exist and (y) no
Indemnified Party shall have determined that Indemnitors shall not be so
fulfilling its obligations to defend as aforesaid, then Indemnitors shall be
required to pay for only one additional (i.e. in addition to counsel and other
professionals representing Any Indemnitors and its Affiliates) set of attorneys
and other professionals who will represent all of the Indemnified Parties. If
any Indemnified Part(ies) shall elect the option described in the foregoing
clause (bb), upon demand, but subject to the proviso in the immediately
preceding sentence, the Indemnitors shall pay or, in the sole and absolute
discretion of the Indemnified Part(ies), reimburse, the Indemnified Part(ies)
for the payment of reasonable fees and disbursements of attorneys, engineers,
environmental consultants, laboratories and other professionals in connection
therewith. Furthermore, so long as (x) no Termination Event shall then exist and
(y) an Indemnified Party shall not have reasonably determined that Indemnitors
shall not be so fulfilling their obligations to defend as aforesaid, such
Indemnified Party shall not settle the claim, dispute, action or proceeding in
question without the consent of Indemnitors (unless such Indemnified Party shall
waive its right to be indemnified under this Section 27 with respect to such
claim, dispute, action or proceeding). If a Termination Event shall exist or any
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<PAGE>
affected Indemnified Party shall reasonably determine that Indemnitors shall not
be so fulfilling such obligations, then the applicable Indemnified Part(ies) may
settle the claim, dispute, action or proceeding in question without the consent
of Indemnitors.
(e) The obligations of Indemnitors under this Section 27 shall be the
joint and several obligations of Indemnitors. The provisions of and undertakings
and indemnification set forth in this Section 27 shall survive the expiration or
termination of the Commitment and/or of this Agreement. If the TAKE-OUT LENDER
shall fund the Loan under the Take-Out Commitment, then, with respect to claims
that are first made after the funding of the Loan, Borrower (and not
Indemnitors) shall be liable for the Losses resulting therefrom or arising in
connection therewith.
28. Several Obligations. Notwithstanding anything to the contrary
contained herein, except as otherwise expressly provided herein, the
representations, warranties, covenants and agreements by each party hereto that
are contained herein shall constitute the several obligations of that party (and
not the joint or joint and several obligations of that party and any other party
hereto).
29. Modifications, etc. No provision hereof shall be changed, amended,
modified or limited except by a written agreement executed by BORROWER,
VENETIAN, LVSI, INTERIM MALL LLC, PRINCIPAL, CONSTRUCTION LENDER and TAKE-OUT
LENDER; provided, however, that CONSTRUCTION LENDER and TAKE-OUT LENDER may make
such changes, amendments, modifications or limitations hereto as CONSTRUCTION
LENDER and TAKE-OUT LENDER shall approve, without the consent of BORROWER,
VENETIAN, LVSI, INTERIM MALL LLC or the PRINCIPAL, so long as the same do not
adversely affect the rights and obligations of BORROWER, VENETIAN, LVSI, INTERIM
MALL LLC or the PRINCIPAL hereunder.
30. Severability. In case any one or more of the provisions in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
31. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original hereof, but all of which, when taken together,
shall be deemed a single document.
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<PAGE>
IN WITNESS WHEREOF, the parties, have caused this Agreement to be executed
as of the day and year first above written.
BORROWER:
GRAND CANAL SHOPS MALL, LLC,
a Delaware limited liability company
By: Grand Canal Shops Mall Holding Company, LLC, its
Managing Member
By: Mall Intermediate Holding Company, LLC, its
Managing Member
By: Venetian Casino Resort, LLC, its Sole Member
By: Las Vegas Sands, Inc., its Managing Member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC, a Nevada limited liability
company
By: Las Vegas Sands, Inc., its Managing Member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware limited
liability company
By: Venetian Casino Resort, LLC,
its Sole Member
By: Las Vegas Sands, Inc., its
Managing Member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
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<PAGE>
[Signatures continued from prior page]
LAS VEGAS SANDS, INC., a Nevada corporation
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
PRINCIPAL:
/s/ Sheldon G. Adelson
------------------------
SHELDON G. ADELSON
TAKE-OUT LENDER:
GOLDMAN SACHS MORTGAGE COMPANY
By: Goldman Sachs Real Estate
Funding Corp., its general
partner
By: /s/ Steven Mnuchin
----------------------
Name: Steven Mnuchin
Title: President
CONSTRUCTION LENDER:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
By: /s/ Vacys Garbonkus
-------------------
Name: Vacys Garbonkus
Title: Senior Vice President
<PAGE>
Exhibits
[Exhibit A-1 Title Insurance Companies]
[Exhibit A-2 Form of Title Insurance Policy]
[Exhibit A-3 UCC and Other Searches]
[Exhibit B Description of Plans and Specifications]
[Exhibit C-1 to -3 Forms of Legal Opinions]
[Exhibit D Form of Closing Date Memorandum]
[Exhibit E-1 to -6 Forms of Organizational Documents]
[Exhibit F-1 to -4 REA, Sale and Contribution Agreement and
Forms of HVAC Agreement and HVAC Ground Lease]
[Exhibit G Form of Management Agreement]
[Exhibit H-1 to -2 Forms of Retail and Restaurant Lease]
[Exhibit I Take-Out Commitment
[Exhibit J-1- to -5 Billboard Master Lease, Memorandum
of Billboard Master Lease,
Subordination of Billboard Operating
Lease to Billboard Master Lease, Mall
Master Lease and Memorandum of Mall
Master Lease]
-21-
CASINO LEASE
By and Between
VENETIAN CASINO RESORT, LLC
and
LAS VEGAS SANDS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE NO.
SECTION 1 BASIC LEASE PROVISIONS...........................................1
SECTION 2 DEFINITIONS......................................................3
2.1 Definitions......................................................3
2.2 Interpretation...................................................8
SECTION 3 DEMISED PREMISES.................................................8
3.1 Premises...........................................................8
3.2 Landlord Reservation...............................................9
3.3 Tenant Control.....................................................9
SECTION 4 TERM; COMMENCEMENT DATE..........................................9
4.1 Commencement.......................................................9
4.2 Term...............................................................9
4.3 Extension..........................................................9
SECTION 5 RENT............................................................10
5.1 Minimum Rent......................................................10
5.2 Place of Payment..................................................10
5.3 Default and Late Charge...........................................10
SECTION 6 GAMING..........................................................11
6.1 Regulation.......................................................11
6.2 Taxation.........................................................11
SECTION 7 POSSESSION AND SURRENDER OF LEASED PROPERTY.....................12
7.1 Acceptance.......................................................12
7.2 Surrender and Fixtures............................................12
7.3 Holding Over......................................................13
SECTION 8 COMMON AREA COST................................................13
SECTION 9 USE OF LEASED PROPERTY/CONDUCT OF BUSINESS......................13
9.1 First Class Resort................................................13
9.2 Permitted Use.....................................................14
9.3 Tenant's Employees................................................14
9.4 Compliance With Law...............................................15
9.5 Furnishings and Fixtures.........................................15
9.6 Hours of Operation...............................................15
9.7 Tenant Maintenance................................................15
9.8...................................................................15
9.9 Tenant Conduct...................................................16
SECTION 10 IMPROVEMENTS AND ALTERATIONS....................................16
10.1 Landlord's Work..................................................16
10.2 Tenant's Work Commencement.......................................16
10.3 Required Completion..............................................16
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10.4 Failure to Open..................................................17
10.5 Acceptance of Work...............................................17
10.6 Other Alterations................................................18
10.7 Liens............................................................19
SECTION 11 LANDLORD'S REPAIRS..............................................19
SECTION 12 PARKING AND COMMON AREAS ACCESS.................................20
12.1 Parking..........................................................20
SECTION 13 INTELLECTUAL PROPERTY & ADVERTISEMENTS..........................21
SECTION 14 TAXES...........................................................21
14.1 Personal Property................................................21
14.2 Real Property....................................................21
14.3 Other Taxes......................................................21
14.4 Casino Entertainment Tax.........................................22
SECTION 15 UTILITIES/LEASED PROPERTY MAINTENANCE SERVICES..................22
15.1 Utilities.......................................................22
15.2 Landlord Services...............................................23
SECTION 16 INSURANCE.......................................................23
16.1 Tenant's Insurance...............................................23
16.2 Tenant's Property Insurance......................................24
16.3 Business Interruption............................................24
16.4 Worker's Compensation............................................24
16.5 Policy Requirements..............................................25
16.6 Hazardous Activities.............................................25
16.7 Waiver of Subrogation............................................26
16.8 Coverage.........................................................26
SECTION 17 LIENS...........................................................27
SECTION 18 INDEMNIFICATION.................................................27
18.1 Tenant Indemnification...........................................27
18.2 Hazardous Material...............................................28
18.3 Limitations on Liability.........................................28
SECTION 19 SUBORDINATION...................................................29
19.1 Subordination of Tenant's Interests..............................29
19.2 Priority.........................................................29
19.3 Attornment.......................................................29
SECTION 20 ASSIGNMENT AND SUBLETTING.......................................30
20.1 Prohibition......................................................30
20.2 No Release of Tenant.............................................30
20.3 Assumption of Lease..............................................31
20.4 No Merger........................................................31
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SECTION 21 INSOLVENCY AND DEATH............................................32
21.1 No Transfer......................................................32
21.2 Bankruptcy.......................................................32
SECTION 22 CONDEMNATION....................................................33
22.1 Award............................................................33
22.2 Taking...........................................................33
22.3 Deed-in-Lieu.....................................................34
SECTION 23 DESTRUCTION OF PREMISES.........................................34
23.1 Termination by Landlord..........................................34
23.2 Damage by Tenant.................................................35
23.3 Damage to Resort.................................................35
23.4 Repair Obligations...............................................35
23.5 Insurance Proceeds...............................................35
SECTION 24 RECORDS AND BOOKS OF ACCOUNT....................................36
SECTION 25 RIGHT OF ACCESS.................................................36
25.1 Right of Access..................................................36
25.2 Inconvenience to Tenant..........................................37
SECTION 26 EXPENDITURES BY LANDLORD........................................37
SECTION 27 ESTOPPEL CERTIFICATES...........................................37
SECTION 28 DELIVERY OF DOCUMENTS...........................................38
SECTION 29 REPRESENTATIONS AND WARRANTIES..................................38
SECTION 30 DEFAULT.........................................................39
30.1 Events of Default................................................39
30.2 Remedies.........................................................40
30.3 Removal of Tenant................................................42
30.4 Attorney's Fees..................................................43
30.5 Waiver...........................................................43
SECTION 31 QUIET POSSESSION................................................44
SECTION 32 SALE BY LANDLORD................................................45
32.1 Landlord's Transfer..............................................45
32.2 Attornment.......................................................45
32.3 Release of Landlord..............................................45
SECTION 33 DEFAULT BY LANDLORD.............................................45
SECTION 34 FORCE MAJEURE...................................................46
SECTION 35 NO PARTNERSHIP..................................................46
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SECTION 36 SERVICE OF NOTICES..............................................47
36.1 Method...........................................................47
36.2 Addresses........................................................47
36.3 Change of Address................................................47
SECTION 37 REMEDIES CUMULATIVE.............................................48
SECTION 38 SUCCESSORS AND ASSIGNS..........................................48
SECTION 39 PARTIAL INVALIDITY..............................................48
SECTION 40 TIME OF THE ESSENCE.............................................48
SECTION 41 ENTIRE AGREEMENT................................................48
SECTION 42 BROKERS.........................................................49
SECTION 43 NO MEMORANDUM...................................................49
SECTION 44 MISCELLANEOUS...................................................49
44.1 Captions.........................................................49
44.2 Interpretation...................................................49
44.3 Governing Law....................................................49
44.4 Covenant.........................................................49
44.5 Joint Liability..................................................50
44.6 Submission.......................................................50
44.7 Notice of Liens..................................................50
44.8 Drafting.........................................................50
44.9 Effectiveness....................................................50
44.10 Consents........................................................50
44.11 Other Tenants...................................................50
SECTION 45 DISPUTE RESOLUTION..............................................51
iv
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
Exhibit A Designation of Leased Property/Site Plan
Exhibit B Description of Resort, Legal and Site Plan
v
<PAGE>
LEASE
This Lease (the "Lease") is made and entered into as of November 14, 1997,
by and between VENETIAN CASINO RESORT, LLC (hereinafter referred to as
"Landlord"), and LAS VEGAS SANDS, INC. (hereinafter referred to as "Tenant").
For good and valuable consideration which the Parties hereby acknowledge,
the Parties agree as follows:
SECTION 1
BASIC LEASE PROVISIONS
1.1 Date of Lease: As of November 14, 1997.
1.2 Landlord: Venetian Casino Resort, LLC.
1.3 Notice Address of LandloVenetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attn: General Counsel
1.4 Tenant: Las Vegas Sands, Inc.
1.5 Notice Address of TenantGrand Canal Shops
Mall Construction, LLC
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attn: General Counsel
1.6 Leased Property: Premises indicated by cross-hatching on the site plan
attached hereto as Exhibit A, and casino area and ancillary areas of the Resort
as more particularly described in Section 2.1 below.
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1.7 Term: Initial Term: Fifteen (15) Lease Years.
Renewal Term: Four (4) options of Five (5) Lease Years each.
1.8 Landlord's Right to Terminate: In the event Landlord obtains a gaming
license from the Nevada Gaming Commission and the Clark County Liquor and Gaming
License Board allowing it to operate gaming activities within the Resort, then
Landlord may terminate this Lease by giving thirty (30) days prior notice to
Tenant.
1.9 Option to Purchase Gaming Assets: In the event Landlord exercises its
termination rights pursuant to 1.8 above, the Landlord shall have the right to
purchase from Tenant all of its gaming assets consisting of all rights,
properties and businesses which directly or indirectly comprise, are used in, or
relate to Tenants casino business (collectively the "Gaming Assets"), including
without limitation, the furniture, fixtures, gaming devices, and all warranties
applicable thereto, equipment, inventory, appliances, tools, trade name,
goodwill, telephone number, credit files, computer records, financial
statements, gaming tax returns, customer lists, all related accounting files,
all computer hardware, software, all cash, including cash in the cages and slot
machines, bank rolls, cash equivalents, deposits, refund claims, deferred
charges, and all other personal property, tangible or intangible, owned by
Tenant and used directly or indirectly in ownership, operation and maintenance
of the Business at any mutually agreed upon price by Landlord and Tenant.
1.10 Utilities: Landlord shall be responsible for payment for all
utilities and shall pay all utility connection charges.
1.11 Common Area Cost Charges: Tenant shall not be charged any Common Area
Cost Charges.
1.12 Exhibits: The following Exhibits are attached hereto and incorporated
herein by reference:
Exhibit A, Designation of Leased Property/Site Plan;
Exhibit B, Description of Resort, Legal and Site Plan;
2
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In the event of a conflict between the provisions of this Section 1 and
the specific provisions as set forth in the body of the Lease, the specific
provisions as set forth in the body of the Lease shall prevail.
SECTION 2
DEFINITIONS
2.1 Definitions. The following terms shall have the following meanings for
purposes of this Lease:
"Affiliates" shall mean, in relation to any Person, any other Person
controlled, directly or indirectly, by such Person, any other Person that
controls, directly or indirectly, such Person or any Person directly or
indirectly under common control with such Person.
"Business" shall mean the operation of a casino pursuant to the
Nevada Gaming Control Act, NRS ss. 463.010 et seq. as amended ("Gaming Laws")
including without limitation, all accounting and cashier operations, all
surveillance operations and any and all services necessary to comply with Gaming
Laws.
"Business Day" shall mean a day on which commercial banks are
generally open for business in Las Vegas, Nevada.
"Certified", "Certification" or "Certificate" shall mean that the
relevant document or material which is the subject of certification is attested
to by an officer or official of the Person charged with certification in a
signed written statement that such document is true, accurate and complete.
"Common Areas" shall mean all square footage, both indoors and
outdoors, in the Resort related to retail and restaurant operations which is not
the subject of any lease to a particular tenant nor a vacant space intended to
be leased by Landlord, and shall include, without limitation, an allocable
portion of all parking grounds and facilities, an allocable portion of all
delivery and loading dock areas.
3
<PAGE>
"Common Area Cost" shall mean the total cost and expense incurred in
managing, operating, equipping, lighting, repairing (including, without
limitation, Landlord's Repairs), replacing and maintaining the Common Areas.
"Commencement Date" shall mean the date as established by Landlord
pursuant to Section 4.
"Default Interest Rate" shall mean the "prime rate of interest" announced
from time to time by Bank of America N.T. & S.A. plus six percent (6%) per
annum.
"Deposit" shall mean None Dollars ($ None ).
"Encumbrance" shall mean any security interest, lien, pledge,
charge, hypothecation or any other encumbrance of whatever nature.
"Environmental Laws" shall be all those laws, statutes, regulations,
ordinances and rules as set forth in or referred to in the definition of
Hazardous Substances herein.
"Event of Default" shall mean those events as described in Section
32 as well as those other items designated as Events of Default throughout this
Lease.
"Fixtures" shall mean tangible items affixed to the Leased Property
in such a manner that the removal of same from the Leased Property would cause,
leave or in any manner achieve a material injury to the Leased Property, and
without limiting the foregoing, lighting fixtures, bulbs and tubes and all
partitions, whether removable or not, shall be deemed to be included within this
definition of Fixtures and part of the Leased Property.
"Gaming Authorities" shall mean the Nevada Gaming Commission, and
any other agency or subdivision of the State of Nevada, or any other government
agency regulating gaming.
"Hazardous Substance" shall mean those substances, chemicals and
mixtures as may be defined as "hazardous substances," "hazardous materials",
"toxic substances," "imminently hazardous chemical substance or mixture,"
"pesticide," "heavy metal," "hazardous air pollutant," "toxic pollutant," "toxic
waste," "pollutant," "regulated substance," "asbestos,"
4
<PAGE>
"asbestos containing material," "solid waste" "hazardous waste," "medical
waste," or "radioactive waste" in the Toxic Substances Control Act, 15 U.S.C.
Sec. 2601 et seq., as now or hereafter amended, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sec. 9601 et seq.
as now or hereafter amended, the Resource Conservation and Recovery Act of 1976,
42 U.S.C. Sec. 5901 et seq., as now or hereafter amended, the Federal Hazardous
Substances Act, 15 U.S.C. Sec. 1261 et seq., as now or hereafter amended, the
Federal Water Pollution Control Act, 33 U.S.C. Sec. 1251 et seq., as now or
hereafter amended, the Clean Air Act, 42 U.S.C. Sec. 7401, et seq., as now or
hereafter amended, the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. Sec. 136 et seq., as now or hereafter amended, the Emergency Planning and
Community Right to Know Act of 1986, 42 U.S.C. Sec. 11001 et seq. as now or
hereafter amended, the Occupational Safety and Health Act of 1970, 29 U.S.C.
Sec. 651 et seq., as now or hereafter amended ("OSHA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Sec. 1801 et seq., as now or hereafter amended,
the statutes of the State of Nevada found currently at ch. 444, 445, 459, 477,
590, 618 or in the Uniform Fire Code, 1991 edition and the rules, orders and
regulations now in effect or promulgated and effective hereafter pursuant to
each respective law listed above as well as such other substances, materials and
wastes which are regulated under applicable local, state or federal law, or
which are classified as hazardous or toxic under federal, state or local laws or
regulations.
"Knowledge" shall mean with respect to any Person, the actual
knowledge of such Person's directors, officers, executives, and other employees
or agents granted decision-making authority for such Person sufficient to bind
contractually such Person to third Persons.
"Landlord" shall have the meaning as set forth in the first paragraph
hereof.
"Landlord Parties" shall mean Landlord, Landlord's Affiliates, directors,
officers, mployees, agents, representatives, successors and assigns.
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"Landlord's Repairs" shall mean all those repairs necessary to keep
in good order, condition and repair all portions of the Leased Property except
for reasonable wear and tear and except for any damage thereto caused by any act
or negligence of Tenant, Tenant Parties or Tenant's customers or invitees.
"Landlord's Work" shall mean all such work required in, to and about
the Resort in order for the Leased Property to be in condition for Tenant to
commence installation of Tenant's leasehold improvements, trade fixtures,
equipment, gaming equipment and personal property.
"Laws" shall mean the Environmental Laws, OSHA as it applies
generally to the workplace, as well as all federal, state and local laws, rules,
regulations, and ordinances regarding equal employment opportunity, sexual
harassment, business licensing, food and liquor services, restaurant services
and all other laws relating primarily to the Business.
"Lease" shall have the meaning as set forth in the first paragraph
hereof.
"Lease Term" shall mean the period beginning on the Commencement
Date and ending on the Termination Date.
"Leased Property" shall mean the casino and gaming areas of the
Resort, including, without limitation, the areas of the Resort containing and
immediately adjacent the slot machines, video machines, all gaming devices,
table games, poker room, keno area, baccarat areas, and any other areas which
are subject to direct supervision by the Gaming Authorities, together with all
surveillance areas, counting rooms, cashier cages and other areas ancillary to
casino gaming, all of which will be more particularly designated upon completion
of the Resort and which will be attached at such time as Exhibit A hereto.
"Lease Year" shall mean each calendar year during the Lease Term,
together with the partial year which begins on the Commencement Date and ends on
the succeeding December 31 and the partial year, if any, which ends on the
Termination Date.
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"Losses" shall mean all claims, injuries, charges, damages, costs,
fees (including, without limitation, reasonable attorneys', accountants',
investigators', experts' and other professional fees), liabilities, fines,
penalties, assessments, expenses and other losses.
"Parties" shall mean Tenant and Landlord.
"Person" shall mean any natural person, corporation, limited
liability company, partnership, limited partnership, limited liability
partnership, association, organization or any other entity of whatsoever nature.
"Real Estate Impositions" shall mean:
(a) Any real estate taxes, fees, assessments or other charges
assessed against the Leased Property and the Common Areas or
any improvements thereon as allocated by Landlord.
(b) All personal property taxes on personal property used in
connection with the Common Areas and related structures other
than taxes payable by Tenant under Section 16.1 hereof and
taxes of the same kind as those described in said Section 16.1
payable by other tenants in the Resort pursuant to
corresponding provisions of their leases.
(c) Any and all taxes, assessments, license fees, and public
charges levied, assessed, or imposed and which become payable
during the Term upon all leasehold improvements in the Leased
Property.
(d) Any and all environmental levies or charges now in force
affecting the Common Areas and the Leased Property, or any
portion thereof, or which may hereafter become effective,
including, but not limited to, parking taxes, levies, or
charges, employer parking regulations, and any other parking
or vehicular regulations, levies, or charges imposed by any
municipal, state or federal agency or authority.
(e) Any other taxes levied or assessed in addition to or in lieu
of such real or personal property taxes.
"Resort" shall mean that hotel, casino, retail, restaurant and
parking complex as further described in Exhibit B.
"Tenant" shall have the meaning as set forth in the first paragraph
hereof.
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"Tenant Parties" shall mean Tenant, Tenant's concessionaires
licensees, sublessees or assignees, (whether or not authorized pursuant to the
provisions of this Lease), Affiliates, directors, officers, employees, agents,
representatives and any other Person permitted by Tenant to conduct business or
other activities from, on or about the Leased Property.
"Term" shall mean the period of time beginning on the date first
written above and ending on the Termination Date.
"Termination Date" shall mean the date fifteen (15) years after the
Commencement Date, or such earlier date this Lease terminates due to the
occurrence of an Event of Default or other termination effected by the Landlord
pursuant to the terms of this Lease, unless extended pursuant to extension
rights, if any, set forth in Section 4.
"Trade Fixtures" are those items present in or on the Leased
Property which were installed or placed by Tenant Parties and which are readily
movable from the Leased Property without material injury to the Leased Property.
2.2 Interpretation. Other terms defined parenthetically herein shall have
the meanings ascribed to those terms by the text immediately preceding such
terms. References to a "Section" are references to the numbered provisions of
this Lease. References to an "Exhibit" are references to exhibits which are
attached hereto and are incorporated by reference into the provisions of this
Lease.
SECTION 3
DEMISED PREMISES
3.1 Premises. Landlord, in reliance upon and in consideration of the
representations, warranties, covenants and conditions herein contained on the
part of Tenant, hereby lets and demises unto Tenant, and the Tenant hereby
rents, hires and takes of and from Landlord for the Lease Term and upon the
provisions, covenants and conditions herein set forth, the Leased
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Property. The Lease confers no rights or interests upon Tenant with respect to
the Resort or any improvements therein or thereon except to the extent
specifically provided for in this Lease.
3.2 Landlord Reservation. Landlord reserves to itself the use of the roof,
exterior walls (other than storefronts) and the area above and below the Leased
Property together with the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires and structural elements now or in the future
leading through the Leased Property and which serve other parts of the Resort.
Landlord shall have the sole and exclusive right to designate and from time to
time redesignate the name, the service marks used in association with, the
trademarks used by Landlord at, other indicia of source of services or goods
relating to, the address of or other designation of the Resort, without notice
or liability to Tenant.
3.3 Tenant Control. Notwithstanding anything to the contrary contained
herein, Tenant shall have all control and supervision of the Leased Property to
the extent necessary to satisfy all requirements of the Gaming Authorities in
order to keep Tenant's license from the Gaming Authorities in full force and
effect. Without limiting the foregoing, Landlord shall not have any right of
access to areas that are required to be under the direct supervision of Tenant,
as licensee, by the Gaming Authorities.
SECTION 4
TERM; COMMENCEMENT DATE
4.1 Commencement. The Commencement Date shall be concurrent with the
opening of the Resort. Landlord and Tenant shall coordinate the opening of the
Business with the opening of the Resort.
4.2 Term. At such time as the Commencement Date (and therefore the
Termination Date), has been determined, Landlord shall insert the Commencement
Date and the Termination Date on Exhibit C and deliver a copy thereof to Tenant.
4.3 Extension. Provided Tenant is in compliance with all terms and
obligations of this Lease and no Event of Default is continuing, Tenant shall
have the right to extend the term of
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his Lease for four (4) additional, consecutive five (5) year periods, the first
of which shall commence as of the day after the last day of the primary term.
Tenant shall notify Landlord of its intention to exercise such option in writing
no later than one hundred eighty (180) days prior to the end of the preceding
Lease Term. The terms, conditions and obligations of Landlord and Tenant herein
contained shall apply to the extended term, except as said terms relate to the
amount of rent to be paid. In no event shall the entire Lease Term with option
terms exceed thirty-five (35) years.
SECTION 5
RENT
5.1 Minimum Rent. Tenant shall pay Landlord over the Lease Term annual
minimum rent equal to Forty Million Dollars ($40,000,000) increased by two
percent (2%) per year effective commencing January 1, 1999. Such minimum rent
shall be in equal monthly installments on the first Business Day of each month
during the Lease Term with the initial payment on the Commencement Date;
provided that if the Lease Term includes a fractional month, then for that
fractional month Tenant shall pay as monthly minimum rent an amount equal to a
fraction, the numerator of which is the number of days in said month and the
denominator of which is the actual days in such month.
5.2 Place of Payment. All rents and other monies required to be paid by
Tenant herein shall be paid to Landlord without deduction or offset, prior
notice or demand, in lawful money of the United States of America, at the
Venetian Casino Resort, LLC, 3355 Las Vegas Boulevard South, Room 1C, Las Vegas,
Nevada 89109, Attn: General Counsel, or at such other place as Landlord may,
from time to time, designate in writing.
5.3 Default and Late Charge. (a) If Tenant shall fail to pay, when the
same is due and payable, any rent, or any additional rent, or any other amount
or charges to be paid by Tenant herein, such unpaid amount shall bear interest
from the due date thereof to the date of payment at
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the Default Interest Rate, and such payment of such interest shall be in
addition to all other remedies provided by law, in equity or pursuant to the
other provisions of this Lease.
(b) In the event Tenant is more than five (5) days late in paying
any rent due under this Lease, Tenant shall pay Landlord a late charge equal to
five percent (5%) of the delinquent rent, and Tenant shall pay an equivalent
late charge every ten (10) days thereafter until the delinquent rent, including
all interest and assessed late charges, has been paid in full. The Parties agree
that the amount of such late charge represents a reasonable estimate of the cost
and expense that would be incurred by Landlord in processing each delinquent
payment of rent by Tenant and that such late charge shall be paid to Landlord as
liquidated damages for each delinquent payment, but the payment of such late
charge shall not excuse or cure any default by Tenant under this Lease. The
Parties further agree that the payment of late charges and the payment of
interest provided for herein are distinct and separate from one another in that
the payment of interest is to compensate Landlord for the use of Landlord's
money by Tenant, while the payment of a late charge is to compensate Landlord
for the additional administrative expense incurred by Landlord in handling and
processing delinquent payments.
SECTION 6
GAMING
6.1 Regulation. Landlord acknowledges that Tenant is a licensee and is
regulated by the Gaming Authorities. Landlord and tenant acknowledge and agree
that the lease may be modified to satisfy requirements or modifications imposed
by Gaming Authorities. Tenant shall be free to grant complimentary rooms, foods,
beverages and services to customers of Tenant and Landlord and Tenant shall
establish procedures accounting for such complementaries in a manner permitted
by the Gaming Authorities.
6.2 Taxation. Tenant, as the licensee of the Gaming Authorities, shall be
entitled to receive and retain all revenues in any way related to gaming and
other matters that are the subject of licensing by the Gaming Authorities.
Tenant shall be responsible for paying all taxes,
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fees, collections, impositions or any other charges of any kind that are
imposed, collected, verified or audited by the Gaming Authorities.
SECTION 7
POSSESSION AND SURRENDER OF LEASED PROPERTY
7.1 Acceptance. Tenant shall, by entering upon and occupying the Leased
Property, be deemed to have accepted the Leased Property in its then existing
condition and Landlord shall not be liable for any latent or patent defect
therein. Landlord does not make any express warranties, has not made any implied
warranties and Tenant hereby waives all implied warranties and constructive
warranties, including, without limitation, any implied or constructive
warranties of habitability, suitability for a particular usage or purpose or any
warranty as to the nature and condition of the Leased Property.
7.2 Surrender and Fixtures. On or before the last day of the Lease Term,
if Tenant has fully and faithfully performed all of the terms, conditions and
covenants of this Lease to be performed by Tenant, but not otherwise, Tenant
shall, at its sole cost and expense, remove all personal property and Trade
Fixtures (other than Fixtures) which Tenant has installed or placed on the
Leased Property (all of which are hereinafter referred to as "Tenant's
Property") from the Leased Property and repair all damage thereto resulting from
such removal and if such damage causes a material injury to the Leased Property,
then Tenant must both repair all such damage and convey to Landlord the property
or fixture removed insofar that such property or fixture shall be deemed to be a
Fixture and Landlord's property. Tenant shall thereupon surrender the Leased
Property in the same condition as on the date when the Leased Property was ready
for occupancy, reasonable wear and tear excepted. If Tenant has not fully and
faithfully performed all of the terms, conditions and covenants of this Lease to
be performed by Tenant, Tenant shall nevertheless remove Tenant's Property from
the Leased Property in the manner aforesaid within fifteen (15) days after
receipt of written direction to do so from Landlord. Tenant shall, at its sole
cost and expense, remove floor coverings installed or placed on the Leased
Property by or
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on behalf of Tenant within fifteen (15) days of written direction to do so from
Landlord, but not otherwise, and shall repair all damage to the Leased Property
resulting from such removal. In the event Tenant shall fail to remove any of
Tenant's Property as provided herein, Landlord may, at its option, retain all or
any portion thereof as abandoned by Tenant, or Landlord may, but is not
obligated to, at Tenant's expense, remove all of such property not so removed
and repair all damage to the Leased Property resulting from such removal, and
Landlord shall have no responsibility to Tenant for any Losses caused by or
resulting from such removal or otherwise. If the Leased Property is not
surrendered by the last day of the Lease Term, Tenant shall indemnify and hold
Landlord Parties harmless from and against all Losses resulting from delay by
Tenant in so surrendering the Leased Property including, without limitation, any
claims made by any succeeding tenant founded on or arising out of such delay.
7.3 Holding Over. Should Tenant hold possession of the Leased Property
with the express prior written consent of Landlord after the Lease Term, such
holding over shall create a tenancy from month to month only (and Tenant shall
require Landlord's express prior written consent for each and every extension of
the Lease Term for an additional month), upon the same terms and conditions as
are herein set forth, except that the minimum rent shall be one hundred fifty
percent (150%) of the adjusted minimum rent as determined in Section 5.
SECTION 8
COMMON AREA COST
Tenant shall not be obligated to pay to Landlord any Common Area Cost Charge.
SECTION 9
USE OF LEASED PROPERTY/CONDUCT OF BUSINESS
9.1 First Class Resort. Tenant acknowledges that the Resort is a first
class hotel and casino and that the maintenance of Landlord's and the Resort's
reputation and the goodwill of all of Landlord's guests and invitees is
absolutely essential to Landlord and that any impairment thereof whatsoever will
cause great damage to Landlord. Tenant therefore covenants that it shall
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operate the Leased Property in accordance with the highest standards of honesty,
integrity, quality and courtesy so as to maintain and enhance the reputation and
goodwill of Landlord and the Resort and at all times in keeping with and not
inconsistent with or detrimental to the operation of an exclusive, first-class
resort hotel facility. Tenant shall continuously monitor the performance of each
of Tenant's employees at the Leased Property to insure that such standards are
consistently maintained. Tenant therefore further agrees, as a material
inducement to Landlord, that repeated failure to maintain such standards or
repeated valid complaints from customers or guests shall be deemed an Event of
Default and a failure by Tenant to perform conditions and covenants of this
Lease which cannot afterwards be performed.
9.2 Permitted Use. The Leased Property is leased to Tenant solely for
conducting the Business. Tenant shall not operate a similar Business at any
other Clark County, Nevada location, including any location within a hotel
and/or casino property during the Lease Term.
9.3 Tenant's Employees. Tenant shall be responsible for all salaries,
employee benefits, social security taxes, federal and state unemployment
insurance and any and all similar taxes relating to its employees and for
worker's compensation coverage with respect thereto pursuant to applicable law.
Tenant's employees shall not be entitled to participate in, or to receive, any
of Landlord's employee benefit or welfare plans, nor shall they be deemed agents
of Landlord for purposes of this Lease. Landlord shall have no control over
Tenant's employment practices except as specifically provided herein; provided,
however, Tenant has represented and hereby covenants its employment practices
require pre-employment drug testing and includes rules regarding dress and
conduct. Tenant shall be responsible for verifying its employees' work
authorizations under federal law, including any necessary employment
verification process under the Immigration Reform and Control Act of 1986, as
amended, before such employees perform services at the Leased Property. Tenant
shall on or before the Commencement Date and annually thereafter train all
managers, assistant managers and employees working at the Leased Property in
reasonable measures necessary to comply with the Laws. Tenant shall both (a)
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develop written policies consistent with and which further positively the spirit
of all Laws, and (b) publish those policies to all employees with respect to at
least the following: (i) Tenant actions to ensure equal employment opportunity,
(ii) the prohibition of any discrimination on the basis of sex, gender,
religious orientation, national origin, sexual orientation or preference or on
any other basis than bona fide occupational qualifications, (iii) the provision
of a safe and clean workplace and (iv) the use of environmentally sensitive
materials and methods.
9.4 Compliance With Law. Tenant shall at all times during the Lease Term
comply with all other federal, state and local governmental rules, regulations,
ordinances, statutes, laws, and the orders and regulations of the Insurance
Services Office and the National Board of Fire Underwriters or any other body
now or hereafter exercising similar functions, now or hereafter in effect
pertaining to the Resort, the Leased Property or Tenant's use thereof. Tenant
shall provide immediately Landlord a copy of any correspondence regarding the
Laws that is sent to or received from any federal, state or governmental
regulatory agency responsible for compliance with the Laws.
9.5 Furnishings and Fixtures. Tenant shall provide, install and at all
times maintain in the Leased Property all suitable furniture, Fixtures, Trade
Fixtures, equipment and other personal property necessary for the conduct of the
Business.
9.6 Hours of Operation. Tenant shall conduct the Business in the Leased
Property twenty-four (24) hours per day each and every day of the year. Failure
by Tenant to conduct the Business during such days, nights and hours indicated
in the previous sentence shall be deemed an Event of Default.
9.7 Tenant Maintenance. Except as provided for elsewhere herein, Tenant
shall keep and maintain in first class order, condition and repair (including
any such replacement and restoration as is required for that purpose) its
equipment, trade fixtures and personal property.
9.8 Casino Security. Landlord and Tenant shall establish and coordinate
all casino security and surveillance systems compatible with all requirements of
the Gaming Laws.
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9.9 Tenant Conduct. Tenant acknowledges that Landlord and Affiliates have
a reputation for offering high-quality entertainment and/or services to the
public, and that it and its Affiliates are subject to regulation and licensing,
and desire to maintain their reputation and receive positive publicity. Tenant
therefore agrees that throughout the Term of this Lease, it and its officers,
directors, shareholders, employees and agents will not conduct themselves in a
manner which is contrary to the best interests of Landlord, nor in any manner
that adversely affects or is detrimental to Landlord or its Affiliates, and will
not directly or indirectly make any oral, written or recorded private or public
statement or comment that is disparaging, critical, defamatory or otherwise not
in the best interests of Landlord. Landlord shall use its good faith business
judgment in determining whether Tenant's conduct or that of its officers,
directors or management adversely affects Landlord or its Affiliates, and, upon
such determination, Landlord shall have the right to terminate this Lease upon
notice to Tenant without liability to either party.
SECTION 10
IMPROVEMENTS AND ALTERATIONS
10.1 Landlord's Work. Landlord shall, at its sole cost and expense,
complete the Landlord's Work. Landlord shall advise Tenant in writing of
Landlord's estimate of completion of Landlord's Work at least ninety (90) days
prior to such estimated date of completion.
10.2 Tenant's Work Commencement. Tenant shall be permitted to commence
installation of its fixtures, upon Landlord's notice to Tenant that the Leased
Property is in appropriate condition for such commencement. Tenant shall
commence such installation within fifteen (15) Business Days (the "Start Date")
of receipt from Landlord of such notice of the availability of the Leased
Property for such installation.
10.3 Required Completion. Tenant shall complete the Leased Property by the
date that is one hundred twenty (120) days following the Start Date (the
"Required Completion Date"). Tenant hereby releases Landlord and its contractors
from any claim whatsoever for damages against Landlord or its contractors for
any delay in the date on which the Leased Property shall
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be ready for delivery to Tenant or for any delay in commencing or completing any
of Landlord's Work.
10.4 Failure to Open. The parties recognize that it would be extremely
difficult or impossible to determine Landlord's damages resulting from Tenant's
failure to open for business fully fixtured, stocked and staffed on the Required
Completion Date, including, but not limited to, damages from loss of rent from
Tenant and other tenants, diminished leaseability, and/or mortgageability and
damage to the economic value of the Resort. Accordingly, if Tenant fails to
proceed diligently or to open for business fully fixtured, stocked and staffed
on or before the Required Completion Date, or to otherwise perform any of its
obligations to be performed prior to the Required Completion Date, such failure
shall be a Tenant Event of Default and Landlord may, without notice or demand
and in addition to the right to exercise any other remedies and rights herein or
at law provided, collect rent from the Required Completion Date in an amount
equal to the minimum rent and other additional rent and other amounts payable by
Tenant hereunder, together with an amount equal to fifty percent (50%) of
1/365ths of the minimum rent for each day that Tenant has failed to open for
business on and after the Required Completion Date. All remedies in this Lease
or at law provided shall be cumulative and not exclusive and shall survive the
Termination Date.
10.5 Acceptance of Work. Tenant's taking possession of the Leased Property
for the construction of Leased Property Improvements shall be conclusive
evidence of Tenant's acceptance thereof in good order and satisfactory
condition. Tenant agrees that no representations respecting the condition of the
Leased Property or the existence or non-existence of Hazardous Materials in, on
or about the Leased Property, no warranties or guarantees, expressed or implied,
with respect to workmanship or any defects in material, and no promise to
decorate, alter, repair or improve the Leased Property before or after the
execution hereof, have been made by Landlord or its agents to Tenant unless the
same are contained herein.
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10.6 Other Alterations. Tenant shall not make any other additions,
alterations, improvements or changes ("Other Improvements") in or to the Leased
Property without the prior written approval of Landlord. All Other Improvements
shall be at the sole cost and expense of Tenant. All Other Improvements shall be
made promptly and in good and workmanlike and lien-free manner and in compliance
with all insurance requirements and with all applicable permits, authorizations,
building regulations, zoning laws and all other governmental rules, regulations,
ordinances, statutes and laws, now or hereafter in effect pertaining to the
Leased Property or Tenant's use thereof. Prior to the commencement of such work,
Tenant shall give evidence to Landlord that appropriate insurance satisfactory
to Landlord has been obtained for the protection
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of Landlord, Landlord Parties, the other Resort tenants and invitees from all
Losses resulting from the making of such improvements. In addition, prior to the
commencement of such work, Tenant, if required by Landlord, shall secure, at
Tenant's expense, performance, labor and materials bonds satisfactory to
Landlord for the full cost of such work. Landlord will direct electricians as to
where and how telephone wires are to be introduced. No boring or cutting for
wires will be allowed without the consent of Landlord. The expense of repairing
any damage resulting from a violation of this rule or removal of any floor
covering shall be borne by Tenant.
10.7 Liens. Tenant shall not create or permit to be created or to remain,
and will discharge, any Encumbrance (apart from the Encumbrances granted
pursuant to the provisions of this Lease) upon Fixtures located within the
Leased Property or upon the Deposit and any attempt to do so by Tenant shall not
be binding upon Landlord. Landlord shall have the unconditional right, and
Tenant hereby grants, a security interest in all Fixtures (to the extent not
prohibited by law) and the Deposit in the favor of the Landlord. Landlord shall
have the right to record such security interest with all governmental
authorities Landlord reasonably chooses and Tenant shall execute and deliver all
such documents and do all such things reasonably required to facilitate all such
recordations.
SECTION 11
LANDLORD'S REPAIRS
Landlord shall make all Landlord's Repairs. It is an express condition
precedent to all obligations of Landlord to make any of Landlord's Repairs that
Tenant shall have notified Landlord in writing and with reasonable advance
notice of the need for such repairs or maintenance.
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SECTION 12
PARKING AND COMMON AREAS ACCESS
12.1 Parking. Tenant Parties and customers shall have the non-exclusive
license, in common with Landlord and all others to whom Landlord has or may
hereafter grant rights, to use the Common Area, including parking areas thereof
and other public parking at the Resort, subject to such reasonable rules and
regulations as Landlord may from time to time impose. Tenant shall (and shall
cause the Tenant Parties and Tenant's customers to) abide by such rules and
regulations. Landlord may at any time close any of the Common Areas or other
portions of the Resort to make repairs or changes, to prevent the acquisition of
public rights in such areas, or to discourage non-customer parking. Landlord may
do such other acts in and to the Common Areas and other portions of the Resort
as in its judgment may be desirable including, but not limited to, the
conversion of portions thereof to other uses. Without limiting the generality of
the foregoing, Landlord shall specifically have the right to remove, alter,
improve or rebuild the lobby, facilities, apparatus, machinery, equipment and
all public and rentable areas of the Resort, including, without limitation, all
areas surrounding and abutting the Leased Property is located, as the same may
from time to time be constituted, or any part or parts thereof and Landlord
shall not be liable to Tenant for any Losses resulting from any work so done,
and all claims against Landlord for all such liability being expressly released.
Tenant shall not at any time interfere with the rights of Landlord, other owners
of portions of the Resort, other tenants, its and their agents, employees,
servants, contractors, subtenants, licensees, customers and business invitees to
use any part of the parking lot or other common areas. All parking areas and
common areas which Tenant may be permitted to use are to be used under a
revocable license, and if any such license is revoked, or if the amount of such
area is diminished, Landlord shall not be subject to any liability, nor shall
Tenant be entitled to any compensation or diminution or abatement of
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rent, nor shall such revocation or diminution of such areas be deemed
constructive or actual eviction.
SECTION 13
INTELLECTUAL PROPERTY & ADVERTISEMENTS
Intentionally Omitted.
SECTION 14
TAXES
14.1 Personal Property. Tenant shall be liable for and shall pay before
delinquency (and, upon demand by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of the payment thereof) all taxes, fees, and assessments
of whatsoever kind or nature, and penalties and interest thereon, if any, levied
against Tenant's property or any other personal property of whatsoever kind and
to whomsoever belonging situate or installed in or upon the Leased Property
whether or not affixed to the realty. If at any time during the Lease Term any
such taxes on personal property are assessed as part of the tax on the real
property of which the Leased Property is a part, then in such event Tenant shall
pay to Landlord the amount of such additional taxes as may be levied against the
real property by reason thereof, as determined by Landlord.
14.2 Real Property. Tenant's portion of real estate taxes and assessments
are included as part of the Real Estate Impositions which are included within
Common Area costs.
14.3 Other Taxes. If at any time during the term of this Lease, under the
laws of the United States, Nevada or any political subdivision thereof, a tax or
excise on rents or other tax (except income tax), however described, is levied
or assessed by the United States, Nevada or said political subdivision against
Landlord on account of any rent reserved under this Lease, the Leased Property,
or any use thereof, all such tax or excise on rents or other taxes shall be paid
by Tenant. Whenever Landlord shall receive any statement or bill for any such
tax or shall otherwise be required to make any payment on account thereof,
Tenant shall pay the amount due
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hereunder within ten (10) days after demand therefor accompanied by delivery to
Tenant of a copy of such tax statement, if any.
14.4 Casino Entertainment Tax. Tenant agrees that it will collect any
applicable Casino Entertainment Tax ("CET") associated with the sale of food,
beverage or merchandise from the Leased Property and will pay the same to the
taxing authority on a timely basis, or if not permitted to pay the same
directly, shall remit the CET due to Landlord no later than the 10th day of the
month following the month in which the taxable sales occurred. Tenant shall make
all documents containing information relative to the computation of the CET
available for inspection upon notice by representatives of Landlord and the
Gaming Authorities. This obligation shall continue beyond the Termination Date.
Tenant shall be liable for any and all CET, interest and penalties found to be
payable in connection with the sale of food, beverage or merchandise from the
Leased Property as a result of understated taxable revenues, insufficiency of
records or, if Tenant is permitted to pay the CET directly to the taxing
authority, untimely payment of the CET. If Tenant is not permitted to pay the
CET directly to the taxing authority, then, if Tenant has timely remitted the
payment to Landlord as required in this Section 14.4, Tenant shall not be liable
for the untimely payment of the CET to the taxing authority.
SECTION 15
UTILITIES/LEASED PROPERTY MAINTENANCE SERVICES
15.1 Utilities. Landlord shall be solely responsible for payment or
reimbursement to the appropriate utility or private party of all utilities and
services provided to the Leased Property, including without limitation, gas,
heat, electricity, other power, air conditioning, telephone service, grease trap
cleaning, flora maintenance and preservation, oven and stove exhaust cleaning
and air filter replacement services, premises cleaning service, interior window
washing services, garbage disposal, and sewerage services. Landlord shall also
be responsible for and pay all connection or service fees in connection with
such utilities. The nature and capacity of all utilities shall be established as
part of the Leased Property Improvements and no
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other utilities will be provided to Tenant. All costs of providing meters or
submeters shall be paid by Landlord.
15.2 Landlord Services. Landlord shall not be obligated to perform any
service or to repair or maintain any structure or facility except as provided in
this Section and Section 11. Landlord reserves the right to stop any service
when Landlord deems such stoppage necessary, whether by reason of accident or
emergency, or for repairs or improvements or otherwise. Landlord shall not be
liable under any circumstances for loss or injury however occurring, through or
in connection with or incident to any stoppage of such services. Landlord shall
have no responsibility or liability for failure to supply any services or
maintenance or to make any repairs when prevented from doing so by any cause
beyond Landlord's control. Landlord shall not be obligated to inspect the Leased
Property and shall not be obligated to make any repairs or perform any
maintenance hereunder unless first notified of the need thereof in writing by
Tenant. In the event that Landlord shall fail to commence such repairs or
maintenance within twenty (20) days after said notice, Tenant's sole right and
remedy for such failure shall be, after further notice to Landlord, to make such
repairs or perform such maintenance and to deduct the cost and expenses thereof
from the rent payable hereunder; provided, however, that the amount of such
deduction not exceed the reasonable value of such repairs or maintenance; and
provided, further, if such repairs or maintenance are needed because of act of
omission of Tenant, its agents, servants, employees, customers, invitees or
licensees, the cost thereof shall be paid by Tenant.
SECTION 16
INSURANCE
16.1 Tenant's Insurance. Tenant shall, at all times during the Lease Term,
at its sole cost and expense, procure and maintain in full force and effect:
(i) Commercial General Liability Insurance (including premises
liability, productions/completed operations, personal injury, libel and
slander, and contractual indemnity coverages) issued by an insurance
carrier approved by Landlord in a combined single limit policy in an
amount not less than Ten Million Dollars ($10,000,000.00) for
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each occurrence for bodily injury and property damage. All such insurance
shall specifically insure the performance by Tenant of the indemnity
agreement as to liability for injury to or death of persons and loss of or
damage to property contained in Section 20.1. Such limits shall apply
solely to the Leased Property, the advertising, promotion and publicity
thereof and Tenant's obligations under this Lease. Tenant shall submit all
proposed deductibles or self-insured retentions to Landlord for Landlord's
prior approval in writing. Landlord and Landlord's Affiliates as
designated by Landlord shall be named as an additional insured (and at
Landlord's option, any other persons, firms or corporations designated by
Landlord shall be additionally named insureds) under each such policy of
insurance which shall provide that Landlord (or other designated parties),
although named as an insured, shall nevertheless be entitled to recovery
thereunder for any Losses suffered by Landlord Parties by reason of
Tenant's negligence.
(ii) Commercial Automobile Liability insurance insuring against
damage due to bodily injury or death of any person, or property damage
arising out of the ownership, maintenance, or use of any motor vehicles
whether owned, non-owned, hired, or leased. Tenant shall maintain limits
of not less than One Million Dollars ($1,000,000.00) combined single limit
per accident for bodily injury and property damage. Tenant shall submit
all proposed deductibles or self-insured retentions to Landlord for
Landlord's prior approval in writing.
16.2 Tenant's Property Insurance. Tenant at all times during the term
hereof, at its sole cost and expense, shall maintain in full force and effect a
policy or policies of Special Form "All Risk" property insurance covering
Tenant's property, products, equipment and merchandise in, upon, or about the
Leased Property in an amount equal to one hundred percent (100%) of the current
replacement cost of the property required to be insured. Landlord shall be the
named loss payee under each such policy.
16.3 Business Interruption. Tenant shall, at all times during the Lease
Term, at its sole cost and expense, procure and maintain in full force and
effect a policy of business interruption insurance in an amount not less than
six (6) times the monthly rent then due hereunder.
16.4 Worker's Compensation. Tenant shall, at all times during the Lease
Term, maintain and pay all sums to the State Industrial Insurance System in
order to be in compliance with their worker's compensation requirements or
maintain adequate worker's compensation insurance in the event of that Tenant is
permitted to be self-insured, together with Employer's Liability (Nevada Stop
Gap) in an amount not less than One Million Dollars ($1,000,000.00) for each
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injury, accident or illness. If self-insured, Tenant shall submit at least
fourteen (14) days prior to the Commencement Date and annually during the Lease
Term thereafter a certificate of compliance to Landlord confirming that Tenant
has fulfilled its self-insurance requirements.
16.5 Policy Requirements. All policies required hereunder shall be with
companies licensed to do business in Nevada and with a General Policyholder's
Rating of A- or better and a financial rating of VIII or better in the most
recent edition of Best's Insurance Guide (or similar rating service if such
guide is no longer published). A certificate issued by the insurance carrier for
each policy of insurance required to be maintained by Tenant hereunder together
with a copy of each such policy and evidence of payment of all premiums shall be
delivered to Landlord and at least fourteen (14) days prior to occupancy of the
Leased Property and thereafter, as to policy renewals, within thirty (30) days
prior to the expiration of the terms of each such policy. Each of said
certificates of insurance and each such policy of insurance required to be
maintained by Tenant hereunder shall be from an insurer and in form and
substance satisfactory to Landlord and shall expressly evidence insurance
coverage as required by this Lease and shall contain an endorsement or provision
requiring not less than thirty (30) days written notice to Landlord and all
other named assureds prior to the cancellation, diminution in the perils insured
against, or reduction of the amount of coverage of the particular policy in
question. Tenant shall ensure that any and all deductibles, self-insured
retentions, policy exclusions and/or limiting conditions are fully disclosed to
Landlord in writing on such certificates at the time of such delivery and each
deductible, self-insured retention, exclusion and/or limiting condition shall be
subject to Landlord's prior approval. In addition to the foregoing certificates,
Tenant shall at all times during the term hereof furnish Landlord with a current
certificate of worker's compensation coverage.
16.6 Hazardous Activities. Tenant shall not use or occupy, or permit the
Leased Property to be used or occupied, in a manner which will increase the
rates of fire or any other insurance for the Leased Property or the Resort.
Tenant shall also not use or occupy, or permit the Leased
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Property to be used or occupied, in a manner which will make void or voidable
any insurance then in force with respect thereto or the Resort, or which will
make it impossible to obtain fire or other insurance with respect thereto, or
the Resort. If by reason of the failure of Tenant to comply with the provisions
of this Section, the fire or any other insurance rates for the Leased Property
or the Resort or be higher than they otherwise would be, Tenant shall reimburse
Landlord, as additional rent, on the first day of the calendar month next
succeeding notice by Landlord to Tenant of said increase, for that part of all
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure of Tenant.
16.7 Waiver of Subrogation. Each Party hereby waives subrogation and any
and all rights of recovery from the other, its officers, agents and employees
for any loss or damage, including consequential loss or damage, caused by any
peril or perils (including negligent acts) enumerated in their insurance
actually carried or required to be carried pursuant to this Lease and to the
extent of such insurance coverage or required coverage, and waive any right of
subrogation which might otherwise exist in or accrue to any person on account
thereof to the extent of such insurance coverage or required coverage.
16.8 Coverage. All policies shall be written as primary policies and not
contributing with or in excess of the coverage, if any, which Landlord may
carry. Any other provision contained in this Section 16 or elsewhere in this
Lease notwithstanding, the amounts of all insurance required hereunder to be
paid by Tenant shall be not less than an amount sufficient to prevent Landlord
or Tenant from becoming a co-insurer. The limits of the public liability
insurance required to be maintained by Tenant under this Lease shall in no way
limit or diminish Tenant's liability under Section 18.1 hereof and such limits
shall be subject to increase at any time and from time to time during the Lease
Term if Landlord, in the exercise of reasonable discretion, deems such an
increase necessary for its adequate protection; provided, however, Landlord may
not exercise its rights under this sentence more frequently than one time in any
calendar year. If Tenant does not maintain the required insurance during the
Lease Term, Landlord may treat such
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failure, without limiting Landlord's rights or remedies, as a material breach by
Tenant, and/or Landlord may obtain insurance to insure Tenant (provided this
shall be at Landlord's election, without according Tenant any cure period for
such breach) according to Landlord's standard insurance requirements (it being
agreed without limiting Tenant's liability for such failure, that Tenant shall
also be liable to Landlord for all costs and premium expenses incurred by
Landlord for such coverage, if any).
SECTION 17
LIENS
Tenant shall at all times indemnify, save and hold Landlord, the Leased
Property and the leasehold created by this Lease free, clear and harmless from
any and all Encumbrances, litigation and judgments arising directly or
indirectly out of any use, occupancy or activity of Tenant, or out of any work
performed, material furnished, or obligations incurred by Tenant in, upon or
otherwise in connection with the Leased Property. Tenant shall give Landlord
written notice at least ten (10) business days prior to the commencement of any
such work on the Leased Property to afford Landlord the opportunity of filing
appropriate notices of nonresponsibility. Tenant shall, at its sole cost and
expense, within fifteen (15) days after filing of any lien of record, obtain the
discharge and release thereof. Nothing contained herein shall prevent Landlord,
at the cost and for the account of Tenant, from obtaining said discharge and
release in the event Tenant fails or refuses to do the same within said fifteen
(15) day period.
SECTION 18
INDEMNIFICATION
18.1 Tenant Indemnification. Tenant shall indemnify, save and hold
Landlord Parties, the Leased Property, the Resort and the leasehold estate
created by this Lease free, clear and harmless from any and all Losses of any
kind whatsoever in connection with, arising out of, or by reason of any act,
omission, negligence, misrepresentation or breach of warranty (including without
limitation a breach of representation or warranty made pursuant to Section 29)
by or of
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Tenant's Parties while in, upon, about or in any way connected with the Leased
Property or the Resort, the use by Tenant of the Service Marks or any other
intellectual property or arising from any accident, injury or damage, howsoever
and by whomsoever caused, to any Person or property whatsoever, occurring in,
upon, about or in any way connected with the Leased Property or any portion
thereof, all of the foregoing, whether prior to, during or after the Term and
other than as a direct and entire result of the negligence of Landlord. The
foregoing obligation to indemnify shall include, but is not limited to,
Landlord's Losses from the first notice that any claim or demand is to be made
or may be made. If, by reason of any act or omission of Tenant, Landlord is made
a party defendant in any legal proceeding concerning this Lease or the Leased
Property, then Tenant shall indemnify and hold Landlord harmless from all Losses
Landlord may incur by reason thereof.
18.2 Hazardous Material. Without limiting the foregoing, if any Hazardous
Substance contamination of the Leased Property occurs as a result of any act or
omission of Tenant Parties, then Tenant shall indemnify, defend and hold
Landlord Parties harmless from any and all Losses suffered or incurred by the
Landlord Parties, or any of them, which arise during or after the Term as a
result of such contamination.
18.3 Limitations on Liability. Landlord shall not be liable to Tenant or
to any other Person whatsoever for any Losses occasioned by falling plaster,
electricity, plumbing, gas, water, steam, sprinkler or other pipe and sewage
system, by the bursting, running or leaking of any tank, washstand, closet,
waste or other pipes, or by water being upon or coming through the roof,
skylight, vent, trap door or otherwise for any reason whatsoever or for any
damage arising from any acts or neglect of cotenants or occupants of the Resort
or of adjacent property or of the public, including, but not limited to, breach
of any lease or rules and regulations, nor shall Landlord be liable in damages
or otherwise for any failure to furnish, or interruption of, service of any
utility.
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SECTION 19
SUBORDINATION
19.1 Subordination of Tenant's Interests. Tenant agrees that this Lease
and Tenant's interest in the Leased Property is secondary, junior and inferior
to the lien of any mortgage, deed of trust (including, but not limited to,
sale-lease back transactions), together with any renewals, extensions or
replacements thereof, now or hereafter placed, charged or enforced against the
Leased Property, or any portion thereof, or any property of which the Leased
Property is a part (hereinafter, a "Mortgage"). Notwithstanding the foregoing,
upon request by Landlord, Tenant shall execute and deliver at any time, and from
time to time, upon demand by Landlord, such documents as may be required to
effectuate such subordination, and in the event that Tenant shall fail, neglect
or refuse to execute and deliver any such documents to be executed by it, within
ten (10) days of Landlord's request to do so, Tenant hereby appoints Landlord,
its successors and assigns, the attorney-in-fact of Tenant irrevocably to
execute and deliver any and all such documents for and on behalf of Tenant.
19.2 Priority. In the event that the mortgagee or beneficiary of any
Mortgage elects to have this Lease a prior lien to its Mortgage, then and in
such event, upon such mortgagee's, beneficiary's, or ground lessor's giving
written notice to Tenant to that effect, this Lease shall be deemed prior in
lien to such Mortgage, whether this Lease is dated prior to or subsequent to the
date of recordation of such Mortgage.
19.3 Attornment. Tenant shall, in the event any proceedings are brought
for the foreclosure of the Leased Property or in the event of exercise of the
power of sale under any Mortgage covering the Leased Property, or termination of
any ground lease, attorn to the purchaser upon any such foreclosure or sale, and
recognize such purchaser as the Landlord under this Lease.
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SECTION 20
ASSIGNMENT AND SUBLETTING
20.1 Prohibition. The economic provisions and rental rates set forth in
this Lease were negotiated by Landlord in consideration of , and would not have
been granted by Landlord but for, the specific nature of the leasehold interest
granted to Tenant hereunder, as such interest is limited and defined by various
provisions throughout this Lease, including, but not limited to, the provisions
of this Section 20 which define and limit the transferability of such leasehold
interest. The leasehold estate granted to Tenant hereunder is not a transferable
interest in property, and Landlord hereby reserves the right to receive any
increased rental value of the Leased Property during the Term hereof as the same
may be realized by any transfer of said estate, except to the extent Tenant is
specifically granted the right to transfer all or part of its leasehold and to
retain all or part of the increased rental value thereof pursuant to the
provisions of this Section 20. Tenant shall not directly or indirectly,
voluntarily or by operation of law, sell, assign, mortgage, pledge, hypothecate
or encumber this Lease nor the leasehold estate hereby created or any interest
herein (collectively "Assignment"), or sublet the Leased Property or any portion
thereof, or license the use of all or any portion of the Leased Property
(collectively "Sublease"), without the prior written consent of Landlord in each
instance, which consent may be withheld or granted in the sole, exclusive and
absolute judgment of Landlord. If Tenant is a corporation, limited liability
company or a partnership, the issuance of any additional stock or equity
interests and/or the transfer, assignment or hypothecation of any stock or
interest in such corporation, limited liability company or partnership in the
aggregate in excess of twenty-five percent (25%) of such interests, as the same
may be constituted as of the date of this Lease, whether directly or indirectly,
shall be deemed an Assignment within the meaning of this Section 20.
20.2 No Release of Tenant. In the absence of an express agreement in
writing to the contrary, executed by Landlord, no consent to any Assignment or
Sublease by Tenant shall act as
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a release of Tenant from any of the terms, covenants and conditions of this
Lease on the part of Tenant to be kept and performed, whether arising before or
after the Assignment or Sublease. The consent by Landlord to any Assignment or
Sublease shall not relieve Tenant from the obligation to obtain Landlord's
express written consent to any other Assignment or Sublease. Any Assignment or
Sublease which is not in compliance with this Section 20 shall be void and, at
the option of Landlord, shall constitute a material default by Tenant under this
Lease. The acceptance of rent by Landlord from a proposed assignee or sublessee
shall not constitute the consent to such Assignment or Sublease by Landlord.
20.3 Assumption of Lease. Each assignee, sublessee, mortgagee, pledgee, or
other transferee, other than Landlord, shall assume and be deemed to have
assumed all obligations of Tenant under this Lease and shall be and remain
liable jointly and severally with Tenant for the payment of all rents due
hereunder, and for the due performance during the term of this Lease of all the
covenants and conditions herein set forth by Tenant to be kept and performed. No
assignment or transfer shall be effective or binding on Landlord unless said
assignee or transferee shall, concurrently, deliver to Landlord a recordable
instrument which contains a covenant of assumption by said assignee or
transferee; provided that a failure or refusal to so execute said instrument
shall not release or discharge the assignee or transferee from its liability
aforesaid.
20.4 No Merger. The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation hereof, or the termination of this Lease by Landlord
pursuant to any provision contained herein, shall not work a merger, but at the
option of Landlord, shall either terminate any or all existing subleases or
subtenancies, or operate as an assignment to the Landlord of any and all such
subleases or subtenancies.
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SECTION 21
INSOLVENCY AND DEATH
21.1 No Transfer. It is understood and agreed that neither this Lease nor
any interest herein or hereunder, nor any estate hereby created in favor of
Tenant, shall pass by operation of law under any state or federal insolvency,
bankruptcy or inheritance act, or any similar law now or hereafter in effect, to
any trustee, receiver, assignee for the benefit of creditors, heir, legatee,
devisee, or any other person whomsoever without the express written consent of
Landlord first had and obtained therefor.
21.2 Bankruptcy. Landlord and Tenant hereby acknowledge and recognize that
Section 365 of Title 11 of the United States Code (the "Bankruptcy Code")
provides that a debtor-in-possession or a trustee, with court approval, may
assume or reject an unexpired lease, and that in a case under Chapter 11 of the
Bankruptcy Code may order the trustee or debtor-in-possession to determine
within a specified period of time whether to assume or reject such unexpired
lease. Because of the fact that time is of the essence to this Lease, Tenant
expressly covenants, agrees and bargains to file or cause to be filed a motion
either to assume or reject this Lease within forty-five (45) days of the filing
of a voluntary petition under the Bankruptcy Code or the entry of an order for
relief in the event of the filing of an involuntary petition. Landlord and
Tenant further recognize that Section 365 of the Bankruptcy Code provides for
the assumption and assignment, subject to court approval, of unexpired leases.
Court approval of such assumption and assignment may be pre-conditioned upon,
among other things, the provision of adequate assurance of future performance.
In view of the foregoing, Landlord and Tenant agree that the following, and each
of them, specifically and without limiting Tenant's obligations to continue to
perform all of the terms of this Lease, are conditions and covenants the
fulfillment of which are necessary to provide Landlord with adequate assurance
of future performance:
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(a) the assumption and assignment of this Lease will not breach any
provision, such as a radius, location or use provision, in any other lease,
financing agreement or other agreement relating to, arising out of or intrinsic
to the Resort;
(b) the proposed assignee will not use the Leased Property in
violation of the terms of this Lease;
(c) the proposed assignee will, in Landlord's reasonable opinion, be
a suitable tenant for the Resort;
(d) the proposed assignee will have adequate financial resources to
pay all rent and other consideration due under the provisions of this Lease and
in order to assume all other obligations of Tenant under this Lease.
SECTION 22
CONDEMNATION
22.1 Award. Should the whole or any part of the Leased Property be
condemned or taken by a competent authority for any public or quasi-public
purpose, all awards payable on account of such condemnation and taking shall be
payable to Landlord, and Tenant hereby waives any and all interest therein.
22.2 Taking. If the whole of the Leased Property shall be so condemned and
taken, then this Lease shall terminate upon such taking. If greater than
one-third (1/3) of the floor space of the Leased Property is condemned or taken
or if by reason of any condemnation or taking the remainder of the Leased
Property will not be reasonably adequate for the operation of the Business after
Landlord completes such repairs or alterations as Landlord elects to make,
either Landlord or Tenant shall have the option to terminate this Lease by
notifying the other party hereto of such election in writing within thirty (30)
days after such taking. If by such condemnation and taking one-third (1/3) or
less of the Leased Property has been taken and the remainder is one undivided
parcel, or if a part only of the Leased Property is taken and the remaining part
thereof is suitable for the purposes for which Tenant has leased said premises,
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this Lease shall continue in full force and effect, but the minimum rent shall
be reduced in an amount equal to that proportion of the minimum rent which the
floor space of the portion taken bears to the total floor space of the Leased
Property. In the event a partial taking does not terminate this Lease, Tenant,
at Tenant's expense, shall make repairs and restorations to the remaining
premises and shall also repair or replace its stock in trade, fixtures,
furniture, furnishings, floor coverings and equipment and if Tenant has closed
shall promptly reopen for business. If any part of the Resort other than the
Leased Property shall be so taken or appropriated, Landlord shall have the
right, at its option to terminate this Lease by notifying Tenant within six (6)
months of such taking.
22.3 Deed-in-Lieu. For the purposes hereof, a deed in lieu of condemnation
shall be deemed a taking.
SECTION 23
DESTRUCTION OF PREMISES
23.1 Termination by Landlord. In the case of total destruction of
the Leased Property, or any portion thereof substantially interfering with
Tenant's use of the Leased Property, whether by fire or other casualty, not
caused by the fault or negligence of Tenant, Tenant Parties, its customers or
business invitees, this Lease shall terminate except as herein provided. If
Landlord notifies Tenant in writing within ninety (90) days of such destruction
of Landlord's election to repair said damage, and if Landlord proceeds to and
does repair such damage with reasonable dispatch, this Lease shall not
terminate, but shall continue in full force and effect. In determining what
constitutes reasonable dispatch, consideration shall be given to delays caused
by labor disputes, civil commotion, war, warlike operations, invasion,
rebellion, hostilities, military or usurped power, sabotage, governmental
regulations or control, fire or other casualty, inability to obtain any
materials or services, acts of God and other causes beyond Landlord's control.
If this Lease is terminated pursuant to this Section 23.1 and if Tenant is not
in default hereunder, rent shall be prorated as of the date of termination, any
security deposited with
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Landlord shall be returned to Tenant, and all rights and obligations hereunder
shall cease and terminate.
23.2 Damage by Tenant. Notwithstanding the foregoing provisions of Section
23.1, in the event the Leased Property, or any portion thereof, shall be damaged
by fire or other casualty due to the fault or negligence of Tenant, Tenant
Parties, its customers or business invitees, then, without prejudice to any
other rights and remedies of Landlord, this Lease shall not terminate, the
damage shall be repaired by Tenant, and there shall be no apportionment or
abatement of any rent.
23.3 Damage to Resort. In the event of any damage not limited to, or not
including, the Leased Property, such that the Resort is damaged to the extent of
ten (10%) percent or more of the cost of replacement, Landlord may elect to
terminate this Lease upon giving notice of such election in writing to Tenant
within ninety (90) days after the occurrence of the event causing the damage.
23.4 Repair Obligations. The provisions of this Section 23 with respect to
repair by Landlord shall be limited to such repair as is necessary to place the
Leased Property in the condition specified for Landlord's Work and when placed
in such condition the Leased Property shall be deemed restored and rendered
tenantable promptly following which time Tenant, at Tenant's expense shall
perform Tenant's work required by Exhibit E and Tenant shall also repair or
replace its stock in trade, fixtures, furniture, furnishings, floor coverings
and equipment, and if Tenant has closed, Tenant shall promptly reopen for
business.
23.5 Insurance Proceeds. All insurance proceeds payable under any fire,
and/or rental insurance shall be payable solely to Landlord and Tenant shall
have no interest therein. Tenant shall in no case be entitled to compensation
for damages on account of any annoyance or inconvenience in making repairs under
any provision of this Lease. Except to the extent provided for in this Section
23, neither the rent payable by Tenant nor any of Tenant's other
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obligations under any provision of this Lease shall be affected by any damage to
or destruction of the Leased Property or any portion thereof by any cause
whatsoever.
SECTION 24
RECORDS AND BOOKS OF ACCOUNT
Intentionally Omitted.
SECTION 25
RIGHT OF ACCESS
25.1 Right of Access. Subject to the terms of Section 6 hereof, Landlord
and its authorized agents and representatives shall be entitled to enter the
Leased Property at any reasonable time for the purpose of observing, posting or
keeping posted thereon notices provided for herein, and such other notices as
Landlord may deem necessary or appropriate for protection of Landlord, its
interest or the Leased Property; for the purpose of inspecting the Leased
Property or any portion thereof; and for the purpose of making repairs to the
Leased Property or any other portion of the Resort and performing any work
therein or thereon which Landlord may elect or be required to make hereunder, or
which may be necessary to comply with any laws, ordinances, rules, regulations
or requirements of any public authority or any applicable standards that may,
from time to time, be established by the Insurance Services Office, the National
Board of Fire Underwriters, or any similar body, or which Landlord may deem
necessary or appropriate to prevent waste, loss, damage or deterioration to or
in connection with the Leased Property or any other portion of the Resort or for
any other lawful purpose. Landlord shall have the right to use any means which
Landlord may deem proper to open all doors in the Leased Property in an
emergency. Entry into the Leased Property obtained by Landlord by any such means
shall not be deemed to be forcible or unlawful entry into, or a detainer of, the
Leased Property, or an eviction of Tenant from the Leased Property or any
portion thereof. Nothing contained herein shall impose any duty on the part of
Landlord to do any work or repair, maintenance, reconstruction or restoration,
which under any provision of this Lease is required to be done by Tenant; and
the
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performance thereof by Landlord shall not constitute a waiver of Tenant's
default in failing to do the same.
25.2 Inconvenience to Tenant. Landlord may, during the progress of any
work on the Leased Property, keep and store upon the Leased Property all
necessary materials, tools and equipment and may erect scaffolding and other
similar structures. Landlord shall not in any event be liable for inconvenience,
annoyance, disturbance, loss of business or quiet enjoyment, or other damage or
loss to Tenant by reason of making any such repairs or performing any such work
upon the Leased Property, or on account of bringing materials, supplies and
equipment into, upon or through the Leased Property during the course thereof or
erecting such structures, and the obligations of Tenant under this Lease shall
not thereby be affected in any manner whatsoever. Landlord shall, however, in
connection with the performance of such work, cause as little inconvenience,
disturbance or other damage or loss to Tenant as may be reasonably possible
under the circumstances.
SECTION 26
EXPENDITURES BY LANDLORD
Whenever under any provision of this Lease, Tenant shall be obligated to
make any payment or expenditure, or to do any act or thing, or to incur any
liability whatsoever, and Tenant fails, refuses or neglects to perform as herein
required, Landlord shall be entitled, but shall not be obligated, to make any
such payment or to do any such act or thing, or to incur any such liability, all
on behalf of and at the cost and for the account of Tenant. In such event, the
amount thereof with interest thereon at the Default Interest Rate shall
constitute and be collectable as additional rent on demand.
SECTION 27
ESTOPPEL CERTIFICATES
Tenant agrees that within ten (10) days of any demand therefor by
Landlord, Tenant will execute and deliver to Landlord and/or Landlord's designee
a recordable certificate stating that
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this Lease is unmodified and in full force and effect, such defenses or offsets
as are claimed by Tenant, if any, the date to which all rentals have been paid,
and such other information concerning the Lease, the Leased Property and Tenant
as Landlord or said designee may request.
SECTION 28
DELIVERY OF DOCUMENTS
As a continuing condition precedent to any obligation of Landlord in this
Lease, Tenant must and shall deliver to Landlord, prior to the Commencement Date
or as otherwise set forth below, all of the following documents:
(a) A memorandum confirming the Commencement Date in form and
substance satisfactory to Landlord;
(b) Certified copies of filings with the Secretary of State
authorizing Tenant to do business in the State of Nevada;
(c) Certified copies of certificates of good standing of the
Tenant issued in the same month as the Commencement Date by
the Secretaries of State of Nevada and the State of Tenant's
organization; if other than Nevada;
(d) an incumbency and specimen signature certificate with respect
to the officers of the Tenant executing this Lease and any
document delivered by the Tenant as required by this Lease;
(e) Certified copies of the insurance certificates described in
Section 16.5; and
(f) a Certified copy of Tenant's written policies required
pursuant to Section 9.3.
SECTION 29
REPRESENTATIONS AND WARRANTIES
Intentionally Omitted.
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SECTION 30
DEFAULT
30.1 Events of Default. Tenant's compliance with each and every covenant
and obligation hereof on its part to be performed hereunder is a condition
precedent to each and every covenant and obligation of Landlord herein. Each of
the following shall be considered an Event of Default and shall give rise to and
entitle Landlord to the remedies provided for in Section 30.2, as well as any
and all other remedies, whether at law or in equity, provided for or otherwise
available to Landlord or as otherwise provided for in this Lease:
(a) Tenant shall default in the payment of any sum of money
required to be paid hereunder and such default continues for
five (5) days after written notice thereof from Landlord to
Tenant; or
(b) Tenant shall default in the performance of any other term,
covenant or condition of this Lease on the part of Tenant to
be kept and performed and such default continues for twenty
(20) days after written notice thereof from Landlord to
Tenant; provided, however, that if the default complained of
in such notice is of such a nature that the same can be
rectified or cured, but cannot with reasonable diligence be
done within said twenty (20) day period, then such default
shall be deemed to be rectified or cured if Tenant shall,
within said twenty (20) day period, commence to rectify and
cure the same and shall thereafter complete such rectification
and cure with all due diligence, and in any event, within
forty (40) days from the date of giving of such notice; or (c)
Tenant should vacate or abandon the Leased Property during the
term of this Lease; or
(d) Tenant should default under any other agreement with, or for
the benefit of, Landlord; or
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(e) There is commenced any case in bankruptcy against the original
named Tenant, any assignee or subtenant of the original named
Tenant, any then occupant of the Leased Property or any
guarantor of all or any of Tenant's obligations hereunder
(collectively "Key Persons") or an order for relief is entered
with respect to any Key Person or there is appointed a
receiver or trustee to take possession of any of the assets of
any Key Person or the Leased Property or any Key Person
applies for or consents to such appointment, or there is a
general assignment by any Key Person for the benefit of
creditors, or any action is taken by or against any Key Person
under any state or federal insolvency or bankruptcy act, or
any similar law now or hereafter in effect or any property of
any Key Person is taken or seized under levy of execution or
attachment, or any Key Person admits in writing its inability
to pay its debts as they mature.
All cure periods provided herein shall run concurrently with any periods
provided by law.
30.2 Remedies. In the event of default as designated in this Section 30
or elsewhere herein, in addition to any other rights or remedies provided for
herein or at law or in equity, Landlord, at its sole option, shall have the
following rights:
(a) The right to declare the term of this Lease ended and to
re-enter the Leased Property and take possession thereof, and
to terminate all of the rights of Tenant in and to the Leased
Property;
(b) The right, without declaring the term of this Leased ended, to
reenter the Leased Property and to occupy the same, or any
portion thereof, for and on account of Tenant as hereinafter
provided, and Tenant shall be liable for and pay to Landlord
on demand all such expenses as Landlord may have paid, assumed
or incurred in recovering possession of the Leased Property,
including costs, expenses, attorneys' fees, and expenditures
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placing the same in good order and condition, or preparing or
altering the same for reletting, and all other expenses,
commissions and charges paid, assumed or incurred by Landlord
in or in connection with reletting the Leased Property. Any
such reletting as provided for herein may be for the remainder
of the term of this Lease or for a longer or shorter period.
Such reletting shall be for such rent and on such other terms
and conditions as Landlord, in its sole discretion, deems
appropriate. Landlord may execute any lease made pursuant to
the terms hereof either in Landlord's own name or in the name
of Tenant, or assume Tenant's interest in and to any existing
subleases to any tenant of the Leased Property, as Landlord
may see fit, and Tenant shall have no right or authority
whatsoever to collect any rent from such tenants, subtenants,
licensees or concessionaires on the Leased Property. In any
case, and whether or not the Leased Property or any part
thereof be relet, Tenant, until the end of what would have
been the term of this Lease in the absence of such default and
whether or not the Leased Property or any part thereof shall
have been relet, shall be liable to Landlord and shall pay to
Landlord monthly an amount equal to the amount due as rent
hereunder, less the net proceeds for said month, if any, of
any reletting effected for the account of Tenant pursuant to
the provisions of this paragraph, after deducting from said
proceeds all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees,
expenses of employees, alteration costs, and expenses of
preparation for such reletting (all said costs are cumulative
and shall be applied against proceeds of reletting until paid
in full). Landlord reserves the right to bring such actions
for the recovery of any deficits remaining
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unpaid by Tenant to Landlord hereunder as Landlord may deem
advisable from time to time without being obligated to await
the end of the term hereof for a final determination of
Tenant's account and the commencement or maintenance of one or
more actions by Landlord in this connection shall not bar
Landlord from bringing any subsequent actions for further
accruals pursuant to the provisions of this Section 30. In no
event shall Tenant be entitled to any excess rental received
by Landlord over and above that which Tenant is obligated to
pay hereunder; or
(c) The right, even though it may have relet all or any portion of
the Leased Property in accordance with the provisions of
subparagraph (b) of this Section 30.2, to thereafter at any
time elect to terminate this Lease for such previous default
on the part of Tenant, and to terminate all of the rights of
Tenant in and to the Leased Property.
30.3 Removal of Tenant. Pursuant to the rights of re-entry provided above,
Landlord may remove all persons from the Leased Property and may, but shall not
be obligated to, remove all property therefrom, and may, but shall not be
obligated to, enforce any rights Landlord may have against said property or
store the same in any public or private warehouse or elsewhere at the cost and
for the account of Tenant or the owner or owners thereof. Tenant agrees to hold
Landlord free and harmless from any liability whatsoever for the removal and/or
storage of any such property, whether of Tenant or any third party whomsoever.
Anything contained herein to the contrary notwithstanding, Landlord shall not be
deemed to have terminated this Lease or the liability of Tenant to pay any rent
or other sum of money thereafter to accrue hereunder, or Tenant's liability for
damages under any of the provisions hereof, by any such reentry, or by any
action in unlawful detainer or otherwise to obtain possession of the Leased
Property, unless Landlord shall have specifically, with reference to this
Section 30.3, notified Tenant in writing that it has so elected to terminate
this Lease. Tenant covenants and agrees that the service by
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Landlord of any notice pursuant to the unlawful detainer statutes of the State
of Nevada and the surrender of possession pursuant to such notice shall not
(unless Landlord elects to the contrary at the time of, or at any time
subsequent to, the service of such notice to Tenant) be deemed to be a
termination of this Lease, or the termination of any liability of Tenant
hereunder to Landlord.
30.4 Attorney's Fees. In any action brought by Landlord to enforce any of
its rights under or arising from this Lease, Landlord shall be entitled to
receive its costs and legal expenses including reasonable attorneys' fees,
whether such action is prosecuted to judgment or not. If Landlord shall engage
the services of an attorney for the purpose of collecting any rental due from
Tenant, having first given Tenant five (5) days' notice of its intention so to
do, Tenant shall pay the reasonable fees of such attorney for his services
regardless of the fact that no legal proceeding or action may have been filed or
commenced. The parties hereto shall and they hereby do waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with the Lease, the relationship of landlord and tenant, Tenant's use
of occupancy of the Leased Property, and/or any claim of injury or damage. In
the event Landlord commences any proceedings for nonpayment of any rent, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceedings. This shall not, however, be construed as a waiver of the
Tenant's right to assert such claims in any separate action or actions brought
by Tenant. The parties hereto covenant and agree that Landlord shall have no
duty to mitigate damages arising in any way out of Tenant's failure to comply
with any term, condition or covenant of this Lease.
30.5 Waiver. The waiver by Landlord of any default or breach of any of the
terms, covenants or conditions hereof on the part of Tenant to be kept and
performed shall not be a waiver of any preceding or subsequent breach of the
same or any other term, covenant or condition contained herein. The subsequent
acceptance of rent or any other payment hereunder by Tenant to Landlord shall
not be construed to be a waiver of any preceding breach by Tenant
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of any term, covenant or condition of this Lease other than the failure of
Tenant to pay the particular rental or other payment or portion thereof so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rental or other payment. No payment by Tenant or
receipt by Landlord of a lesser amount than the rent herein provided shall be
deemed to be other than on account of the earliest rent due and payable
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and a
satisfaction, and Landlord may accept any such check or payment without
prejudice to Landlord's rights to recover the balance of such rent or pursue any
other remedy in or under this Lease. The consent by Landlord to any matter or
event requiring Landlord's consent shall not constitute a waiver of the
necessity for such consent to any subsequent matter or event. This Section 30.5
may not be waived. Nothing contained herein shall constitute a waiver of
Landlord's right to recover damages by reason of Landlord's efforts to mitigate
the damage to it caused by Tenant's default; nor shall anything in this Section
adversely affect Landlord's right, as in this Lease elsewhere provided, to
indemnification against liability for injury or damage to persons or property
occurring prior to a termination of this Lease.
SECTION 31
QUIET POSSESSION
Tenant, upon paying the rentals and other payments herein required from
Tenant, and upon Tenant's performance of all of the terms, covenants and
conditions of this Lease on its part to be kept and performed, may quietly have,
hold and enjoy the Leased Property during the term of this Lease without any
disturbance from Landlord or from any other person claiming through Landlord.
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SECTION 32
SALE BY LANDLORD
32.1 Landlord's Transfer. It is agreed that Landlord may at any time
assign or transfer its interest as Landlord in and to this Lease, or any part
thereof, and may at any time sell or transfer its interest in the fee of the
Leased Property, or its interest in and to the whole or any portion of the
Leased Property, without notice or obtaining any approval from Tenant.
32.2 Attornment. Tenant hereby agrees to attorn to the assignee,
transferee, or purchaser of Landlord under any provision of this Section 32.2
from and after the date of notice to Tenant of such assignment, transfer or
sale, in the same manner and with the same force and effect as though this Lease
were made, in the first instance, by and between Tenant and such assignee,
transferee or purchaser.
32.3 Release of Landlord. In the event of any sale, transfer or exchange
of the Leased Property by Landlord, Landlord shall be and is hereby relieved of
all liability under any and all of its covenants and obligations contained in or
derived from this Lease, arising out of any act, occurrence or omission relating
to the Leased Property occurring after consummation of such sale or exchange. In
the event of sale or transfer of the Resort or of any portion thereof containing
the Leased Property, if Landlord transfers the Deposit to the vendee or
transferee for the benefit of Tenant, or if such vendee or transferee assumes
all liability with respect to such the Deposit, Landlord shall be considered
released by Tenant from all liability for the return of such Deposit, and Tenant
agrees to look solely to the new landlord for the return of the Deposit, and it
is agreed that this Section 32 shall apply to every transfer or assignment to a
new landlord.
SECTION 33
DEFAULT BY LANDLORD
In the event Landlord fails or refuses to perform any of the provisions,
covenants or conditions of this Lease on Landlord's part to be kept or
performed, Tenant, prior to exercising any right or remedy Tenant may have
against Landlord on account of such default, shall give
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written notice to Landlord of such default, specifying in said notice the
default with which Landlord is charged and Landlord shall not be deemed in
default if the same is cured within thirty (30) days of receipt of said notice.
Notwithstanding any other provision hereof, Tenant agrees that if the default
complained of in the notice provided for by this Section 33 is of such a nature
that the same can be rectified or cured by Landlord, but cannot with reasonable
diligence be rectified or cured within said thirty (30) day period, then such
default shall be deemed to be rectified or cured if Landlord within said thirty
(30) day period shall commence the rectification and curing thereof and shall
continue thereafter with all due diligence to cause such rectification and
curing to proceed.
SECTION 34
FORCE MAJEURE
Whenever a day is appointed herein on which, or a period of time is
appointed in which, either party is required to do or complete any act, matter
or thing, the time for the doing or completion thereof shall be extended by a
period of time equal to the number of days on or during which such party is
prevented from, or is unreasonably interfered with, the doing or completion of
such act, matter or thing because of labor disputes, civil commotion, war,
warlike operation, sabotage, governmental regulations or control, fire or other
casualty, inability to obtain any materials, or to obtain fuel or energy,
weather or other acts of God, or other causes beyond such party's reasonable
control (financial inability excepted); provided, however, that nothing
contained herein shall excuse Tenant from the prompt payment of any rent or
charge required of Tenant hereunder. Tenant agrees that a recognitional or
informational picket line shall not be deemed a force majeure event.
SECTION 35
NO PARTNERSHIP
Nothing contained in this Lease shall be deemed or construed by the
parties hereto or by any third party to create the relationship of principal and
agent or of partnership or of joint
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venture or of any association between Landlord and Tenant. Neither the method of
computation of rent nor any other provisions contained in this Lease nor any
acts of the parties hereto shall be deemed to create any relationship between
Landlord and Tenant other than the relationship of landlord and tenant.
SECTION 36
SERVICE OF NOTICES
36.1 Method. Any and all notices and demands by or from Landlord to
Tenant, or by or from Tenant to Landlord, required or desired to be given
hereunder shall be in writing and shall be validly given or made if served
either personally or if deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested, or if delivered by a
nationally recognized next day delivery courier service. If such notice or
demand be served by registered or certified mail or by courier service in the
manner provided, service shall be conclusively deemed given the first Business
Day delivery is attempted or upon receipt, whichever is sooner.
36.2 Addresses. Any notice or demand to Landlord shall be addressed to
Landlord at
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attn: General Counsel
Any notice or demand to Tenant shall be addressed to Tenant at
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attn: General Counsel
36.3 Change of Address. Any party hereto may change its address for the
purpose of receiving notices or demands as herein provided by a written notice
given in the manner
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aforesaid to the other party hereto, which notice of change of address shall not
become effective, however, until the actual receipt thereof by the other party.
SECTION 37
REMEDIES CUMULATIVE
The various rights, options, elections and remedies of Landlord contained
in this Lease shall be cumulative and no one of them shall be construed as
exclusive of any other, or of any right, priority or remedy allowed or provided
for by law and not expressly waived in this Lease.
SECTION 38
SUCCESSORS AND ASSIGNS
The terms, provisions, covenants and conditions contained in this Lease
shall apply to, bind and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns (where assignment
is permitted) of Landlord and Tenant, respectively.
SECTION 39
PARTIAL INVALIDITY
If any term, covenant or condition of this Lease, or any application
thereof, should be held by a court of competent jurisdiction to be invalid, void
or unenforceable, all terms, covenants and conditions of this Lease, and all
applications thereof, not held invalid, void or unenforceable, shall continue in
full force and effect and shall in no way be affected, impaired or invalidated
thereby.
SECTION 40
TIME OF THE ESSENCE
Time is of the essence of this Lease and all of the terms, covenants and
conditions hereof.
SECTION 41
ENTIRE AGREEMENT
This Lease contains the entire agreement between the parties and cannot be
changed or terminated orally.
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SECTION 42
BROKERS
Tenant warrants that it has had no dealings with any broker or agent in
connection with this Lease, and covenants to pay, hold harmless and indemnify
Landlord from and against any and all cost, expense or liability for any
compensation, commissions and charges claimed by any broker or agent with
respect to this Lease or the negotiation thereof.
SECTION 43
NO MEMORANDUM
Neither this Lease nor a memorandum of lease shall be recorded without
Landlord's prior written consent, which consent may be withheld in Landlord's
sole discretion.
SECTION 44
MISCELLANEOUS
44.1 Captions. The captions appearing at the commencement of the sections
hereof are descriptive only and for convenience in reference to this Lease and
in no way whatsoever define, limit or describe the scope or intent of this
Lease, nor in any way affect this Lease.
44.2 Interpretation. Masculine or feminine pronouns shall be substituted
for the neuter form and vice versa, and the plural shall be substituted for the
singular form and vice versa, in any place or places herein which the context
requires such substitution or substitutions.
44.3 Governing Law. The laws of the State of Nevada shall govern the
validity, construction, performance and effect of this Lease.
44.4 Covenant. Whenever in this Lease any words of obligation or duty are
used in connection with either party, such words shall have the same force and
effect as though framed in the form of express covenants on the part of the
party obligated.
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44.5 Joint Liability. In the event Tenant now or hereafter shall consist
of more than one person, firm or corporation, then and in such event, all such
persons, firms or corporations shall be jointly and severally liable as Tenant
hereunder.
44.6 Submission. The submission of this Lease for examination and/or
execution hereof by Tenant does not constitute a reservation of or option for
the Leased Property and this Lease becomes effective as a Lease only upon
execution and delivery thereof by Landlord and Tenant.
44.7 Notice of Liens. Should any claim or lien be filed against the Leased
Property, or any action or proceeding be instituted affecting the title to the
Leased Property, Tenant shall give Landlord written notice thereof as soon as
Tenant obtains actual or constructive knowledge thereof.
44.8 Drafting. This Lease shall not be construed either for or against
Landlord or Tenant, but this Lease shall be interpreted in accordance with the
general tenor of its language.
44.9 Effectiveness. Notwithstanding any other provision of this Lease, in
the event the term of this Lease shall not have commenced within twenty-one (21)
years from the date of execution hereof, this Lease shall become null and void
and Landlord and Tenant shall thereupon be released from any and all obligations
with respect thereto.
44.10 Consents. Tenant shall pay all costs, expenses and reasonable
attorneys' fees that may be incurred or paid by Landlord in processing,
documenting or administering any request of Tenant for Landlord's consent
required pursuant to this Lease.
44.11 Other Tenants. Landlord reserves the absolute right to effect such
other tenancies in the Resort as Landlord, in the exercise of its own business
judgment, shall determine. Tenant does not rely on the fact, nor does Landlord
represent, that any specific tenant or number of tenants shall, during the term
of this Lease or any extension thereof, occupy any space in the Resort. There
are no other representations or warranties between the parties hereto, and all
reliance with respect to representations is solely on such representations and
agreements as are contained in this Lease.
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SECTION 45
DISPUTE RESOLUTION
If any controversy or claim between the Parties, other than Landlord's
claim of unlawful detainer or a proceeding for summary eviction for failure to
pay minimum rent, arises out of this lease, and the Parties are unable to agree
by direct negotiations, the Parties shall promptly mediate any such disagreement
or dispute under the Commercial Mediation Rules of the American Arbitration
Association. If the Parties are unable to resolve such disagreement or dispute
through mediation, then such disagreement or dispute (excluding an action by
Landlord in unlawful detainer or summary proceeding, as provided above) shall be
submitted to binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association.
The arbitrators shall be appointed under the Commercial Arbitration Rules
of the American Arbitration Association. As soon as the panel has been convened,
a hearing date shall be set within twenty-one (21) days thereafter. Written
submittals shall be presented and exchanged by both Parties ten (10) days before
the hearing date, including reports prepared by experts upon whom either party
intends to rely. At such time the Parties will also exchange copies of all
documentary evidence upon which they will rely at the arbitration hearing and a
list of the witnesses whom they intend to call to testify at the hearing. Each
of the Parties shall also make its respective experts available for deposition
by the other party prior to the hearing date. The hearings shall be concluded no
later than five (5) days after the initial hearing date. The arbitrators shall
make their award within ten (10) business days after the conclusion of the
hearing. In the event of a three-member panel, the decision in which two (2) of
the members of the arbitration panel concur shall be the award of the
arbitrators.
Except as otherwise specified herein, there shall be no discovery or
dispositive motion practice (such as motions for summary judgment or to dismiss
or the like) except as may be permitted by the arbitrators, who shall authorize
only such discovery as is shown to be absolutely necessary to insure a fair
hearing and no such discovery or motions permitted by the arbitrators
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shall in any way conflict with the time limits contained herein. The arbitrators
shall not be bound by the rules of evidence or civil procedure, but rather may
consider such writings and oral presentations as reasonable businessmen would
use in the conduct of their day-to-day affairs, and may require the Parties to
submit some or all of their presentation as the arbitrators may deem
appropriate. It is the intention of the Parties to limit live testimony and
cross-examination to the extent absolutely necessary to insure a fair hearing to
the Parties on the significant matters submitted to arbitration. The Parties
have included the foregoing provisions limiting the scope and extent of the
arbitration with the intention of providing for prompt, economic and fair
resolution of any dispute submitted to arbitration.
The arbitrators shall have the discretion to award the costs of
arbitration, arbitrators' fees and the respective attorneys' fees of each party
between the Parties as they see fit.
Judgment upon the award entered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
Notwithstanding the Parties' agreement to mediate or arbitrate their
disputes as provided herein, any party may seek emergency relief in a court of
law without waiving the right to arbitrate.
The arbitrators shall make their award in accordance with applicable law
and based on the evidence presented by the Parties, and at the request of either
party at the start of the arbitration, shall include in their award findings of
fact and conclusions of law supporting the award.
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Nothing contained herein is intended to, nor shall, limit Landlord's right
to pursue any action in unlawful detainer in the case of an Event of Default by
Tenant.
IN WITNESS WHEREOF, the Parties have executed this Lease the day and year
first above written.
LAS VEGAS SANDS, INC. VENETIAN CASINO RESORT, LLC
By: /s/ William P. Weidner By Las Vegas Sands, Inc., a Nevada
------------------------- corporation, managing member
Title: President By: /s/ William P. Weidner
---------------------- ----------------------------------
Title: President
-------------------------------
"Tenant" "Landlord"
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AMENDED AND RESTATED SERVICES AGREEMENT
AMENDED AND RESTATED SERVICES AGREEMENT (this "Agreement"), dated
November 14, 1997, among Las Vegas Sands, Inc., a Nevada corporation ("LVSI"),
Interface Holding Company, Inc., a Nevada corporation ("Holding Co."), Interface
Group-Nevada, Inc., a Nevada corporation ("Interface Nevada," and, together with
LVSI and Holding Co., the "Existing Participants") and the parties listed on
Schedule I hereto (the "New Participants" and, together with the Existing
Participants, the "Participants").
W I T N E S S E T H
WHEREAS, LVSI, Holding Co. and Interface Nevada are parties to that
certain Services Agreement, dated June 26, 1997 (the "Original Agreement"),
pursuant to which they have agreed to share the costs and expenses associated
with, among other things, (i) certain corporate general and administrative
services and (ii) shared office space from which each conducts its business; and
WHEREAS, the Existing Participants and the New Participants desire
to amend and restate the Original Agreement in order to permit all of the
Participants to participate in the provision and receipt of Services (as defined
herein).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereby agree as follows:
1. Shared Services. Subject to the terms and conditions of this
Agreement, during the term of this Agreement, the Participants shall provide
each
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other, as the case may be and generally in accordance with the past practices of
the Existing Participants, the following services (collectively, "Services"):
(a) legal services, including such support staff as
shall be reasonably considered to be appropriately necessary to handle legal
matters;
(b) accounting services, including financial reporting
and report preparation in compliance with generally accepted accounting
principles;
(c) insurance administration, including administration
of policies covering property and casualty, workers' compensation, comprehensive
general liability and other risks;
(d) benefits administration, including the design and
administration of employee benefit plans, executive compensation arrangements,
retirement plans and health insurance programs; and
(e) such other services as any party may request of
the others in accordance with past or routine practices of the parties.
2. Office Space. If and to the extent the Participants continue
to occupy and share or shall in the future occupy and share office space
("Shared Office Space") in connection with conduct of each such party's
business, or otherwise, the party (the "Principal Occupant") that owns or
otherwise has the principal right to occupy such Shared Office Space shall make
available to the other parties (the "Other Occupants") such Shared Office Space
upon the same terms and conditions as those on which the Principal Occupant is
entitled to use and occupy such Shared Office Space, or upon such other
reasonable terms as the parties shall mutually agree.
2
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3. Payment for Services or Office Space.
3.1 Calculation of Payments for Services and Shared Office
Space.
(a) For Services described in Section 1, the party
receiving any such Services (the "Recipient") shall, subject to Section 3.2, pay
to the party providing such Services (the "Provider") a reasonably allocable
portion of all direct cash costs which are incurred by the Provider, including,
without limitation, all cash cost of (a) personnel; (b) operating expenses, such
as office costs (excluding office costs paid to the Provider pursuant to Section
3.1(b) hereof), travel and entertainment; (c) overhead costs; (d) fees and other
amounts paid to third parties; and (e) any and all other cash costs incurred
under this Agreement and in connection with the provision of Services by the
Provider. Notwithstanding the foregoing, allocations made under this Section
3.1(a) shall be made on the basis of a Recipient's use of a Service as such use
bears to the total use of such Service by all recipient.
(b) For the use and occupancy of any Shared Office
Space described in Section 2, and in amplification of the provisions of such
Section, the Other Occupants shall pay the Principal Occupant an amount equal to
the Other Occupants' pro-rata share (based on the square footage of the
applicable Shared Office Space occupied by the Other Occupants as a percentage
of the total square footage of such Shared Office Space) of all reasonably
allocable monthly costs and expenses, including, without limitation, rent and
so-called "additional rent" items incurred by the Principal Occupant in
connection with the use, occupancy, operation and maintenance of such Shared
Office Space.
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3.2 Billing and Payment.
(a) Billing. Each party shall invoice the other: (i)
for Services rendered, at a minimum on a quarterly basis in arrears within
twenty (20) days of the end of the prior period for each such period during the
term hereof, or upon such other terms as the parties shall mutually agree; and
(ii) for Shared Office Space, at a minimum on a quarterly basis in arrears
within twenty (20) days of the end of the prior period for each such period
during the term of this Agreement, or upon such other terms as the parties shall
mutually agree.
(b) Payment. Each party agrees to pay in full the
amounts due the other in accordance with the terms and provisions of each
invoice rendered in accordance with clauses (i) and (ii) above, within twenty
(20) days after the delivery of such invoice.
4. Term and Termination.
4.1 Termination of this Agreement. The term of this
Agreement shall commence on the date hereof and shall continue for so long as
there remains at least two participants. Any Participant may terminate its
participation in this Agreement by providing the other Participants not less
than thirty (30) days' prior written notice of such termination.
4.2 Default and Remedies.
(a) Events of Default. Each party shall be in default
hereunder if (i) such party commits a material breach of any term of this
Agreement and such failure continues uncured for thirty (30) days following
receipt of written notice thereof from the other party; (ii) such party makes an
assignment for the
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benefit of any creditor; (iii) there is a filing of an involuntary case for the
entry of relief against such party under any bankruptcy, insolvency or similar
law for the relief of debtors and such case remains undismissed for 60 days or
more; (iv) a trustee or receiver is appointed for such party or its assets or
any substantial part thereof; or (v) such party commences a voluntary case under
any bankruptcy, insolvency or similar law of the relief of debtors.
(b) Remedies.
(i) In the event of any default by any party
hereunder, the non-defaulting party (or
parties) may exercise any or all of the
following remedies: (A) declare immediately
due and payable all sums for which the
defaulting party is liable under this
Agreement; (B) decline to perform any of its
(or their) obligations hereunder; and/or (C)
terminate this Agreement.
(ii) In addition to the remedies set forth in
clause (i) above, the non-defaulting party
or parties shall have all other remedies
available at law or equity.
5. General Provisions.
5.1 Notices. All communications to any party hereunder shall
be in writing and shall be delivered in person or sent by facsimile, telegram,
telex, by registered or certified mail (postage prepaid, return receipt
requested) or by reputable overnight courier to the New Participants at each
such New Participant's address set forth in Schedule I and to the other parties
at the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Sec tion 5.1) (and shall be
deemed to have been given as of the date so delivered or sent):
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if to LVSI, to: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
if to Holding Co.: Interface Group
300 First Avenue
Needham, Massachusetts
Attention: Chief Financial Officer
Telefax: (617) 449-6616
if to Interface Interface Group
Nevada, to: 3355 Las Vegas Boulevard South
Room 1B
Las Vegas, NV 89109
Attention: Vice President/General Manager
Telefax: (702) 733-5345
5.2 Independent Contractors. The parties shall operate as,
and have the status of, independent contractors and shall not act as or be an
agent, partner, co-venturer or employee of any other party. No party shall have
any right or authority to assume or create any obligations or to make any
representations or warranties on behalf of any other party, whether express or
implied, or to bind any other party in any respect whatsoever.
5.3 Amendment and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by all
of the parties.
5.4 Assignment. No party shall be entitled to assign its
rights or delegate its obligations under this Agreement without the prior
written consent of the other parties. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective permitted
successors and assigns.
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5.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without regard to
principles of conflicts of laws.
5.6 Severability. If any provision of this Agreement (or
portion thereof) is determined by a court of competent jurisdiction to be
invalid, illegal, or otherwise unenforceable, then such provision shall, to the
extent permitted by the court, not be voided but shall instead be construed to
give effect to its intent to the maximum extent permissible under applicable law
and the remainder of this Agreement shall remain in full force and effect
according to its terms.
5.7 Sections and Headings. The headings contained herein are
for the convenience of reference only and are not intended to define, limit,
expand, or describe the scope or intent of any clause or provision of this
Agreement.
5.8 Entire Agreement. This Agreement, together with all
schedules hereto, constitutes the entire agreement and understanding of the
parties relating to the subject matter hereof and supersedes all prior
negotiations and understandings among the parties, both oral and written,
regarding such subject matter.
5.9 Counterparts. This Agreement may be signed in
counterparts and all signed copies of this Agreement shall together constitute
one original of this Agreement.
5.10 No Third Party Beneficiaries. Nothing contained in this
Agreement, express or implied, is intended to or shall confer upon anyone other
than
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the parties hereto (and their permitted successors and assigns) any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement effective as of the day and year first written above.
LAS VEGAS SANDS, INC.
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
INTERFACE GROUP HOLDING
COMPANY, INC.
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
INTERFACE GROUP-NEVADA, INC.
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
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LIDO CASINO RESORT MM, INC.
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
GRAND CANAL SHOPS MALL MM, INC.
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
LIDO INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC,
its sole Member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC,
its sole Member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
10
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MALL INTERMEDIATE HOLDING COMPANY, LLC
By: Venetian Casino Resort, LLC,
its sole Member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
LIDO CASINO RESORT HOLDING COMPANY, LLC
By: Lido Intermediate Holding Company, LLC,
its managing member
By: Venetian Casino Resort, LLC,
its sole Member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
11
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GRAND CANAL SHOPS MALL HOLDING
COMPANY, LLC
By: Mall Intermediate Holding Company, LLC,
its managing member
By: Venetian Casino Resort, LLC,
its sole Member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
LIDO CASINO RESORT, LLC
By: Lido Casino Resort Holding Company, LLC,
its managing member
By: Lido Intermediate Holding Company, LLC,
its managing member
By: Venetian Casino Resort, LLC,
its sole Member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
12
<PAGE>
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company, LLC,
its managing member
By: Mall Intermediate Holding Company, LLC,
its managing member
By: Venetian Casino Resort, LLC,
its sole Member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
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Schedule I
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Lido Casino Resort MM, Inc.
3355 Las Vegas Boulevard South
Room 1D
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Grand Canal Shops Mall MM, Inc.
3355 Las Vegas Boulevard South
Room 1E
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Lido Intermediate Holding Company, LLC
3355 Las Vegas Boulevard South
Room 1F
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Grand Canal Shops Mall Construction, LLC
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Mall Intermediate Holding Company, LLC
3355 Las Vegas Boulevard South
Room 1H
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
<PAGE>
Lido Casino Resort Holding Company, LLC
3355 Las Vegas Boulevard South
Room 1I
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Grand Canal Shops Mall Holding Company, LLC
3355 Las Vegas Boulevard South
Room 1J
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Lido Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1K
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
Grand Canal Shops Mall, LLC
3355 Las Vegas Boulevard South
Room 1L
Las Vegas, Nevada 89109
Attention: General Counsel
Telefax: (702) 733-5499
COMPLETION GUARANTY LOAN
SUBORDINATED NOTE
Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
$25,000,000 Las Vegas, NV 89109
November 14, 1997
FOR VALUE RECEIVED, Venetian Casino Resort, LLC, a Nevada limited
liability company (the "Maker"), hereby promises to pay to the order of Sheldon
G. Adelson (the "Holder"), his successors, assigns, heirs or legal
representatives, at the offices of the Holder c/o Las Vegas Sands, Inc., 3355
Las Vegas Boulevard South, Room 1A, Las Vegas, NV 89109, or at such other place
as the holder of this Note shall specify, on November 16, 2005 (or on such later
date as the parties shall mutually agree), in such coin or currency of the
United States of America as at the time shall be legal tender for the payment of
public and private debts, the lesser of (i) Twenty-Five Million Dollars
($25,000,000) and (ii) the aggregate unpaid principal amount of all loans and
advances (each an "Advance") made or deemed made by Holder to or on behalf of
the Maker as provided in Section 2 of this Note and set forth on Schedule I
hereto in accordance with Section 4 hereof, plus, in each case, all interest
added to the outstanding principal amount of the Notes pursuant to the terms
hereof.
<PAGE>
The Maker promises to pay interest on the outstanding principal
amount of this Note in accordance with Section 3 of this Note.
1. Definitions. Except as provided herein below, capitalized
terms used herein shall have the meanings ascribed to such terms in the
Indenture, dated as of November 14, 1997 (as amended, supplemented or restated,
the "Subordinated Note Indenture") by and among the Maker, Las Vegas Sands, Inc.
("LVSI"), certain guarantors named therein and First Union National Bank, as
trustee (including any successor trustees, the "Senior Subordinated Note
Trustee") whether or not such Indenture is still in effect. The terms defined in
this Section 1 shall have the following meanings for all purposes in this Note:
1.1 "Adelson Intercreditor Agreement" means that certain
Intercreditor Agreement, dated as of November 14, 1997, by and among the Bank
Agent, the Mortgage Note Trustee, the Subordinated Note Trustee, the Maker,
LVSI, GCCLLC and Sheldon G. Adelson, as amended from time to time in accordance
with its terms.
1.2 "Advance" shall have the meaning ascribed to such term
in the first paragraph of this Note.
1.3 "Advance Date" means any date upon which funds are
withdrawn from the Guaranty Deposit Account in accordance with Section 2(b) of
the Guaranty in order to fund the Company's Obligations, except with respect to
any withdrawal which is not deemed an Advance pursuant to Section 2 of this
Note.
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<PAGE>
1.4 "Bank Credit Facility" means that certain Credit
Agreement, dated as of November 14, 1997, among LVSI and the Maker, as
borrowers, the lenders from time to time party thereto (the "Bank Lenders"),
Goldman Sachs Credit Partners L.P., as arranger and syndication agent (the
"Syndication Agent"), and The Bank of Nova Scotia, as administrative agent (the
"Administrative Agent"), as amended from time to time in accordance with its
terms, and any extension, refinancing, renewal, replacement, substitution or
refunding thereof, together with all related documents.
1.5 "Capitalized Interest Date" shall have the meaning
ascribed to such term in Section 3 of this Note.
1.6 "Company" means, collectively, LVSI, the Maker and Grand
Canal Shops Mall Construction, LLC ("GCCLLC").
1.7 "Event of Default" means an Event of Default under
Subordinated Note Indenture.
1.8 "Facilities Agreements" means, collectively, the Bank
Credit Facility, the Mall Construction Loan Facility, the Mortgage Note
Indenture and the Subordinated Notes Indenture.
1.9 "Guaranty" means that certain Completion Guaranty, dated
as of November 14, 1997, made by Holder in favor of the Bank Agent, the Mall
Construction Lender and the Mortgage Note Trustee, as amended from time to time
in accordance with its terms.
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<PAGE>
1.10 "Guaranty Deposit Account" shall have the meaning
ascribed to such term in the Guaranty.
1.11 "Intercreditor Agreement" means that certain
Intercreditor Agreement, dated as of November 14, 1997, among Bank Agent,
Mortgage Note Trustee, Mall Construction Lender, Subordinated Note Trustee and
The Bank of Nova Scotia, as Intercreditor Agent ("Intercreditor Agent").
1.12 "Lender Beneficiaries" means (i) the Administrative
Agent, the Syndication Agent and the Bank Lenders under the Bank Credit
Facility, (ii) the Mortgage Note Trustee and the holders of the Mortgage Notes,
(iii) the Mall Construction Lender under the Mall Construction Loan Facility,
(iv) the Subordinated Note Trustee and the holders of the Senior Subordinated
Notes, (v) the Intercreditor Agent under the Intercreditor Agreement and (vi)
the Disbursement Agent under the Disbursement Agreement.
1.13 "Maker" shall have the meaning set forth in the first
paragraph of this Note.
1.14 "Mall Construction Loan Facility" means that certain
Credit Agreement, dated as of November 14, 1997, between the Company and GMAC
Commercial Mortgage Corporation (the "Mall Construction Lender"), as amended
from time to time in accordance with its terms, and any extension, replacement,
renewal, substitution, or refunding thereof, together with all related
documents.
1.15 "Mortgage Note Indenture" means that certain Indenture,
dated as of November 14, 1997, by and among the Maker, LVSI, the Mortgage Note
Guarantors and the Mortgage Note Trustee, as amended from time to time in
accordance with its terms.
4
<PAGE>
1.16 "Mortgage Note Trustee" means First Trust National
Association, in its capacity as trustee under the Mortgage Note Indenture, and
any successor trustee under such Mortgage Note Indenture.
1.17 "Obligations" shall have the meaning ascribed to such
term in the Guaranty.
1.18 "Senior Debt" means Senior Debt (as defined in the
Subordinated Note Indenture) and all Indebtedness represented by the Senior
Subordinated Notes and the Senior Subordinated Note Guaranties (including,
without limitation, Obligations due to the Intercreditor Agent and the
Disbursement Agent under documents relating to the Mortgage Note Indenture and
the Subordinated Note Indenture).
1.19 "Subordinated Note Indenture Covenants" shall have the
meaning set forth in Section 6 of this Note.
The provisions of this Section 1 to the contrary notwithstanding, to
the extent any term defined in this Note by cross reference to the Subordinated
Note Indenture or the Guaranty is amended, such term shall be deemed likewise
amended herein. Such terms shall continue to have the meanings set forth in the
Subordinated Note Indenture whether or not the Subordinated Note Indenture
remains in effect.
5
<PAGE>
2. The Note. The Maker hereby acknowledges that the Holder has
entered into the Guaranty in order to induce the Lender Beneficiaries to enter
into their respective Facilities Agreements, pursuant to which Lender
Beneficiaries shall make available to the Maker and certain of its affiliates
funds to construct and develop the Casino Resort. The Maker and the Holder
hereby agree that each withdrawal from the Guaranty Deposit Account in
accordance with the Section 2(b) of the Guaranty in order to pay the Company's
Obligations shall be deemed advances by the Holder under this Note for the
benefit of the Maker, but only to the extent such withdrawals exceed, in the
aggregate, the amount of funds deposited into the Guaranty Deposit Account
pursuant to Section 6.2.1(a) of the Disbursement Agreement.
3. Interest. Interest on the outstanding principal amount, if
any, of each Advance shall accrue from and after the Advance Date with respect
to such Advance, calculated on the basis of a 360-day year for the actual number
of days elapsed, at the rate of fourteen and one-quarter percent (14 1/4%) per
annum until paid in full; provided, that interest on any portion of any Advance
not paid at maturity shall instead accrue at the rate of sixteen and one-quarter
percent (16 1/4%) per annum. On each May 15th and November 15th (each such date
shall be referred to herein as a "Capitalized Interest Date") until the maturity
of this Note (whether at stated maturity, by acceleration or otherwise), the
aggregate amount of interest accrued on the outstanding principal balance of
each Advance through and including such Capitalized Interest Date shall be added
to the outstanding principal amount of such
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<PAGE>
Advance on such Capitalized Interest Date. Subject to the provisions in Section
8 hereof and in the Adelson Intercreditor Agreement, all accrued and unpaid
interest shall be payable in cash upon maturity of this Note (whether at stated
maturity, by acceleration or otherwise) and from time to time thereafter upon
demand of the Holder until this Note is paid in full.
4. At the time of the making of each Advance, if any, the Holder
shall make a notation on Schedule I of this Note, specifying the date and the
amount of such Advance; provided, however, that a failure to make a notation
with respect to any Advance shall not limit or otherwise affect the obligation
of the Maker hereunder and recognition of payment of principal or interest on
this Note shall not be affected by the failure to make a notation on said
Schedule I. If necessary to evidence an extension of the payment date or any
other change in the provisions of this Note agreed to in writing by the Maker
and the Holder, the Maker shall furnish a new note in substitution for this
Note. The first notation made by the Holder on the advance schedule attached to
the replacement Note shall be the most recent aggregate outstanding principal
balance appearing on the advance schedule attached to the replaced note.
5. Prepayments. To the extent expressly permitted under the
Facilities Agreements and the Adelson Intercreditor Agreement, the Maker shall
have the right from time to time to prepay this Note, in whole or in part,
together with accrued interest on the amount prepaid to the date of prepayment
without penalty or premium.
7
<PAGE>
6. Incorporation by Reference. The covenants of the Maker set
forth in Articles 4 and 5 of the Subordinated Note Indenture (the "Subordinated
Note Indenture Covenants") are hereby incorporated in this Note by reference for
the benefit of the Holder, and are made a part hereof as if herein set forth at
length, mutatis mutandis, provided, that where applicable, (i) Note shall be
substituted for "Senior Subordinated Notes", (ii) Maker shall be substituted for
"Issuers" and (iii) Holder shall be substituted for "Paying Agent" and "Senior
Subordinated Note Trustee". The foregoing to the contrary notwithstanding, to
the extent any Subordinated Note Indenture Covenant is amended or waived after
the effective date of such amendment or waiver, such Subordinated Note Indenture
Covenant shall be deemed amended or waived for all purposes of this Note.
7. Unconditional Obligations; Fees; Waivers, Etc.
7.1 The obligations to make the payments provided for in
this Note are absolute and unconditional and not subject to any defense,
set-off, counterclaim, rescission, recoupment or adjustment whatsoever.
7.2 The Holder's rights to institute any action or enforce
any rights under this Note shall, in all cases, be subject to the limitations
set forth in the Adelson Intercreditor Agreement.
7.3 Subject to Section 7.2, if the holder of this Note shall
institute any action to enforce the collection of principal of and/or interest
on this Note, there shall be immediately due and payable from the Maker, in
addition to the then unpaid principal amount of and interest on this Note, all
reasonable costs and
8
<PAGE>
expenses incurred by the holder of this Note in connection therewith, including
reasonable attorneys' fees and disbursements.
7.4 No forbearance, indulgence, delay or failure to exercise
any right or remedy with respect to this Note shall operate as a waiver, nor as
an acquiescence in any default. No single or partial exercise of any right or
remedy shall preclude any other or further exercise thereof or the exercise of
any other right or remedy.
7.5 This Note may not be modified or discharged orally, but
only in writing duly executed by the holder hereof.
7.6 The Maker hereby waives presentment, demand, notice of
dishonor, protest and notice of protest.
8. Subordination.
8.1 Subordination Agreement. Notwithstanding any provision
to the contrary set forth herein, the Holder and the Maker agree that the
payment of principal of and interest on this Note, and any other amounts payable
with respect thereto, is subordinated to the prior payment in full (whether at
maturity, by prepayment, by acceleration or otherwise) of any and all Senior
Debt, and agree that, except as permitted under Section 5, no payment of, on, or
on account of the indebtedness so subordinated shall be made unless and until
all payments of principal, interest or amounts otherwise payable with respect to
all Senior Debt have been paid in full in cash or cash equivalents. Except as
permitted under Section 5, the Holder
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<PAGE>
further agrees not to demand, receive or accept any such payment until all
Senior Debt has been paid in full in cash or cash equivalents.
In the event that, notwithstanding the foregoing provisions, any
payment shall be received by the Holder on account of principal of or interest
on or other amounts payable with respect to this Note in contravention of the
foregoing provisions, such payment shall be held in trust for the benefit of and
shall, to the extent that at such time all Senior Debt has not been paid in full
in cash or cash equivalents, be paid over to the Intercreditor Agent, as agent
for the holders of the Senior Debt, for application to the payment of the Senior
Debt until all such Senior Debt shall have been paid in full; provided that, if
at such time the Holder shall have been advised by the Intercreditor Agent that
all Indebtedness under the Bank Credit Facility, the Mortgage Notes and the Mall
Construction Loan Facility (collectively, the "Senior Secured Debt") has been
paid in full, then such payment shall be held for the benefit of and shall be
paid over to the Subordinated Note Trustee as representative of the holders of
the Senior Subordinated Notes for application to the payment of such Senior
Subordinated Notes until all such Senior Subordinated Notes shall have been paid
in full.
8.2 Dissolution, Etc. In the event of any dissolution,
winding-up, liquidation or reorganization of the Maker (whether voluntary or
involuntary and whether in bankruptcy, insolvency or receivership proceedings or
upon an assignment for the benefit of creditors or any other marshaling of the
assets and liabilities of the Maker or otherwise):
(a) the holders of the Senior Debt shall be entitled
to receive payments in full in cash or cash equivalents of all such Senior Debt
(including interest accruing on such Senior Debt after the commencement of a
bankruptcy case or proceeding at the contract rate whether or not a claim for
such interest is an allowed claim in such case or proceeding) before the Holder
is entitled to receive any payment on account of the principal of or interest on
or any other amounts payable in respect of this Note;
10
<PAGE>
(b) any payment or distribution of assets of the Maker
of any kind or character, whether in cash, property or securities, to which the
Holder would be entitled, except for the subordination provisions set forth
herein, shall be paid by the Maker, or any receiver, trustee in bankruptcy,
liquidating trustee or agent or other person making such payment or distribution
directly to the Intercreditor Agent, as agent for the holders of the Senior
Debt, to the extent necessary to make payment in full in cash or cash
equivalents of all Senior Debt remaining unpaid; and
(c) in the event that, notwithstanding the foregoing
provisions, any payment or distribution of assets of the Maker of any kind or
character shall be received by the Holder on account of principal of or interest
on or other amounts payable in respect of this Note before all Senior Debt
(including, as applicable, interest accruing on, or original issue discount
accreting with respect to, such Senior Debt after the commencement of a
bankruptcy case or proceeding at the contract rate whether or not such interest
is an allowed claim in such case or proceeding) are paid in full in cash and
cash equivalents, or effective provision is made for their payment, such payment
or distribution shall be received in trust and shall, to the extent that at such
time all Senior Debt has not been paid in full in cash or cash equivalents, be
paid over to the Intercreditor Agent, as collateral agent for the holders of the
Senior Debt, for application to the payment of such Senior Debt until all such
Senior Debt shall have been paid in full; provided that, if at such time the
Holder shall have been advised by the Intercreditor Agent that all Senior
Secured Debt has been paid in full, then such payment or distribution shall be
received and paid over to the Subordinated Note Trustee as representative of the
holders of the Senior Subordinated Notes for application to the payment of such
Senior Subordinated Notes until all such Senior Subordinated Notes shall have
been paid in full in cash or cash equivalents.
The consolidation of the Maker with, or the merger of the Maker
into, another entity in accordance with the provisions of Article 5 of the
Subordinated Note
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<PAGE>
Indenture shall not be deemed a dissolution, winding-up, liquidation or
reorganization for purpose of these subordination provisions.
(d) Notwithstanding anything to the contrary set forth
herein, the rights of the Holder under this Note are hereby made expressly
subject to the terms and provisions of the Adelson Intercreditor Agreement. Any
assignee of, or successor to, the interest of the Holder under this Note shall
agree to become bound by the terms of the Adelson Intercreditor Agreement.
8.3 Subrogation. Subject to the payment in full in cash or
cash equivalents of all Senior Debt, the Holder shall be subrogated to the
rights of the holders of the Senior Debt (except that the Holder shall not be
subrogated to the position of a secured creditor until the payment in full of
all Senior Debt), or their respective representatives, to receive payments or
distributions of assets of the Maker applicable to the Senior Debt until all
amounts owing on this Note shall be paid in full, and for the purpose of such
subrogation, no payments or distributions to the holders of the Senior Debt, or
their respective representatives, as the case may be, by or on behalf of the
Maker or by or on behalf of the Holder, which otherwise would have been made to
the Holder shall, as between the Maker and its creditors, be deemed to be
payment by the Maker to or on account of the holders of the Senior Debt, or
their respective representatives, as the case may be, it being understood that
these subordination provisions are intended solely for the purpose of defining
the relative rights of the Holder, on the one hand, and the holders of the
Senior Debt and their respective representatives, on the other hand.
12
<PAGE>
8.4 Obligation to Pay Unconditional. Except as expressly
provided herein, nothing is intended to or shall impair, as between the Maker
and the Holder, the obligation of the Maker, which is absolute and
unconditional, to pay to the Holder the principal of and interest on this Note
as and when the same shall become due and payable in accordance with its terms.
9. Events of Default.
9.1 Subject to the provisions of Sections 7.2 and 9.2
hereof, upon the happening of an Event of Default, and while such Event of
Default is continuing, the Holder may, by written notice to the Maker and
subject to applicable cures and waivers, declare this Note immediately due and
payable, whereupon the principal of, the interest on, and any other amount owing
under, this Note shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Maker; provided, that the Holder may not accelerate the
obligations under this Note unless the obligations under the Subordinated Note
Indenture have been accelerated. Notwithstanding the foregoing, if an Event of
Default specified in Section 6.01(i) or (j) of the Subordinated Note Indenture
occurs, the principal of, the interest on, and any other amount owing under,
this Note shall be due and payable immediately without further action or notice.
9.2 The provisions of Section 9.1 to the contrary
notwithstanding, in the event an Event of Default under the Subordinated Note
Indenture shall be waived or cured, then the related Event of Default under this
Note
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<PAGE>
shall be deemed waived or cured, as the case may be, for all purposes of this
Note. To the extent the maturity of and payments due under this Note shall have
been accelerated as a result of any Event of Default that is deemed waived or
cured, such indebtedness shall cease to be accelerated and all terms of this
Note shall continue to be in effect as if no acceleration occurred.
10. Suits for Enforcement and Remedies. Subject to provisions of
Sections 7.2 and 9.2 hereof, if any one or more Events of Default shall occur
and be continuing, the Holder may proceed to protect and enforce the Holder's
rights either by suit in equity or by action at law, or both, or proceed to
enforce the payment of this Note or to enforce any other legal or equitable
right of the Holder. No right or remedy herein or in any other agreement or
instrument conferred upon the Holder is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
11. Notices. All notices, requests, demands and other
communications required or delivered under this Note shall be in writing (which
shall include notice by facsimile transmission) and shall be deemed to have been
made and received when personally served, or when delivered by overnight courier
service, expenses prepaid, or, if sent by facsimile, deemed delivered on the
date sent if received prior to 5:00 p.m. on such date or deemed to be delivered
the day following
14
<PAGE>
the date sent if delivered after 5:00 p.m. on the date sent, addressed as set
forth below:
If to Maker: Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attention: General Counsel
Facsimile: (702) 733-5499
If to Holder: Sheldon G. Adelson
c/o Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention:
Facsimile: (702) 733-5499
12. Miscellaneous.
12.1 The holder of this Note shall have no recourse against
any member of the Maker.
12.2 If any payment hereunder falls due on a Saturday, Sunday
or any other day on which commercial banks in New York City are authorized or
required by law to close, the maturity thereof shall be extended to the next
succeeding business day.
12.3 The headings of the various Sections of this Note are
for convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
12.4 The holders of Senior Debt shall be express third party
beneficiaries of the provisions of this Note relating to subordination and the
deferral or accrual of interest payments and the maturity date of the Notes. No
such
15
<PAGE>
provisions may be amended without the consent of a majority in principal amount
of each class of Senior Debt.
12.5 This Note and the obligations of the Maker and the
rights of the holder hereof shall be governed by and construed in accordance
with the laws of the State of New York applicable to instruments made and to be
performed entirely within such State.
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., its managing member
By: /s/ William Weidner
-------------------
Name: William Weidner
Title: President
16
<PAGE>
Schedule I
ADVANCES AND PAYMENTS OF PRINCIPAL
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| | | Amount of | | |
| | Amount of | Principal Paid | Unpaid Principal | Notation |
| Date | Advance | or Prepaid | Balance | Made by |
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SUBSTITUTE TRANCHE B LOAN
SUBORDINATED NOTE
$35,000,000 Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
and
Grand Canal Shops Mall
Construction, LLC
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
November 14, 1997
FOR VALUE RECEIVED, Venetian Casino Resort, LLC, a Nevada limited
liability company, ("Venetian") and Grand Canal Shops Mall Construction, LLC, a
Delaware limited liability company (the "Mall Construction Subsidiary" and,
together with Venetian, the "Makers"), hereby promise to pay to the order of
Sheldon G. Adelson (the "Holder"), his successors, assigns, heirs or legal
representatives, at the offices of the Holder c/o Las Vegas Sands, Inc. 3355 Las
Vegas Boulevard South, Room 1A, Las Vegas, NV 89109, or at such other place as
the holder of this Note shall specify, on November 16, 2005 (or on such later
date as the parties shall mutually agree), in such coin or currency of the
United States of America as at the time shall be legal tender for the payment of
public and private
<PAGE>
debts, the lesser of (1) Thirty-Five Million Dollars ($35,000,000) and (ii) the
aggregate unpaid principal amount of all loans and advances (each an "Advance")
made or deemed made by Holder to or on behalf of the Makers as provided in
Section 2 of this Note and set forth on Schedule I hereto in accordance with
Section 4 hereof, plus in each case, all interest capitalized and added to the
outstanding principal amount of this Note.
The Makers promise to pay interest on the outstanding principal
amount of this Note in accordance with Section 3 of this Note.
1. Definitions. Except as provided herein below, capitalized
terms used herein shall have the meanings ascribed to such terms in the
Indenture, dated as of November 14, 1997 (as amended, supplemented or restated,
the "Subordinated Note Indenture"), by and among Venetian, Las Vegas Sands, Inc.
("LVSI"), certain guarantors named therein and First Union National Bank, as
trustee (including any successor trustees, the "Subordinated Note Trustee")
whether or not such Indenture is still in effect. The terms defined in this
Section 1 shall have the following meanings for all purposes in this Note:
1.1 "Adelson Intercreditor Agreement" means that certain
Intercreditor Agreement, dated as of November 14, 1997, by and among the Bank
Agent, the Mortgage Note Trustee, the Subordinated Note Trustee, the Mall
Construction Lender, Venetian, LVSI, the Mall Construction Subsidiary and
Sheldon G. Adelson, as amended from time to time in accordance with its terms.
2
<PAGE>
1.2 "Advance" shall have the meaning ascribed to such term
in the first paragraph of this Note.
1.3 "Advance Date" means any date upon which funds are
withdrawn from the Restricted Investment Account or advanced by the Holder in
order to fund the Guaranteed Obligations.
1.4 "Adjustable Rate" means the sum of (i) the Current Index
plus (ii) the Margin.
1.5 "Bank Credit Facility" means that certain Credit
Agreement, dated as of November 14, 1997, among LVSI and Venetian, as borrowers,
the lenders from time to time party thereto (the "Bank Lenders"), Goldman Sachs
Credit Partners L.P., as arranger and syndication agent, and The Bank of Nova
Scotia, as administrative agent, as amended from time to time in accordance with
its terms, and any extension, refinancing, renewal, replacement, substitution or
refunding thereof, together with all related documents.
1.6 "Borrower" means, collectively, LVSI, Venetian and Mall
Construction Subsidiary.
1.7 "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 is
a day on which banking institutions in the State of Nevada are authorized or
required by law or other governmental action to close.
1.8 "Capitalized Interest Date" shall have the meaning
ascribed to such term in Section 3.2 of this Note.
3
<PAGE>
1.9 "Current Index" means the Index determined as of the
immediately preceding Rate Adjustment Date.
1.10 "Disbursement Agreement" shall have the meaning ascribed
to such term in the Senior Subordinated Note Indenture.
1.11 "Designated Senior Debt" shall have the meaning ascribed
to such term in the Senior Subordinated Note Indenture.
1.12 "Event of Default" means an Event of Default under
Subordinated Note Indenture.
1.13 "Facilities Agreements" means, collectively, the Bank
Credit Facility, the Mall Construction Loan Facility, the Mortgage Note
Indenture, and the Subordinated Notes Indenture.
1.14 "Guaranteed Obligations" shall have the meaning ascribed
to such term in the Guaranty.
1.15 "Guaranty" means that certain Guaranty, dated as of
November 14, 1997, made by Holder in favor of the Mall Construction Lender, as
amended from time to time in accordance with its terms.
1.16 "Index" means the London interbank offered rates
("LIBOR") for a term of 30 days as published in Wall Street Journal on the
second Business Day immediately preceding the Rate Adjustment Date.
1.17 "Makers" shall have the meaning set forth in the first
paragraph of this Note.
4
<PAGE>
1.18 "Mall Construction Lender" means GMAC Commercial
Mortgage Corporation.
1.19 "Mall Construction Loan Facility" means that certain
Credit Agreement, dated as of November 14, 1997, between the Company and the
Mall Construction Lender, as amended from time to time in accordance with its
terms, and any extension, refinancing, renewal, replacement, substitution or
refunding thereof, together with all related documents.
1.20 "Margin" means 275 basis points which is the equivalent
of 2.75%.
1.21 "Mortgage Note Indenture" means that certain Indenture,
dated as of November 14, 1997, by and among Venetian, LVSI, the Mortgage Note
Guarantors and the Mortgage Note Trustee, as amended from time to time in
accordance with its terms.
1.22 "Mortgage Note Trustee" means First Trust National
Association, in its capacity as trustee under the Mortgage Note Indenture, and
any successor trustee under such Mortgage Note Indenture.
1.23 "Permitted Assignee" shall have the meaning set forth in
Section 12.2 of this Note.
1.24 "Project" shall have the meaning ascribed to such term
in the Mall Construction Loan Facility.
1.25 "Restricted Investment Account" means the collateral
account established pursuant to that certain Third Party Account Agreement,
dated as
5
<PAGE>
of November 14, 1997, among the Holder, as Pledgor, The Bank of Nova Scotia, as
Financial Intermediary, and the Mall Construction Lender.
1.26 "Rate Adjustment Date" means the first day of each
calendar month.
1.27 "Sale and Contribution Agreement" means that certain
Sale and Contribution Agreement, dated November 14, 1997, among Venetian, Grand
Canal Shops Mall, LLC (the "Mall Subsidiary") and Mall Construction Subsidiary.
1.28 "Senior Debt" shall have the meaning ascribed to such
term in the Senior Subordinated Note Indenture.
1.29 "Subordinated Note Indenture Covenants" shall have the
meaning set forth in Section 6 of this Note.
1.30 "Tranche B Take-out Loan" shall mean the loan to be made
by the Holder to the Mall Subsidiary in order to fund, in part, the Mall
Subsidiaries obligations under the Sale and Contribution Agreement.
1.31 "Venetian" shall have the meaning set forth in the first
paragraph of this Note.
The provisions of this Section 1 to the contrary notwithstanding, to
the extent any term defined in this Note by cross reference to the Subordinated
Note Indenture or the Guaranty is amended, such term shall be deemed likewise
amended herein. Such terms shall continue to have the meanings set forth in the
Subordinated Note Indenture whether or not the Subordinated Note Indenture
remains in effect.
6
<PAGE>
2. The Note. The Makers hereby acknowledge that the Holder has
entered into the Guaranty in order to induce the Mall Construction Lender to
enter into the Mall Construction Loan Facility, pursuant to which the Mall
Construction Lender shall make available to the Makers and certain of their
affiliates funds to construct and develop the Project. The Makers and the Holder
hereby agree that any payments made by the Holder in respect of the Guaranteed
Obligations, whether by the Holder directly or from the Restricted Investment
Account, shall be deemed advances by the Holder under this Note for the benefit
of the Makers. The obligations of the Makers arising under this Note may be
assigned to and assumed by Mall Subsidiary in connection with the transactions
contemplated by the Sale and Contribution Agreement.
3. Interest.
3.1 Interest on the outstanding principal amount, if any, of
each Advance shall accrue from and after the Advance Date with respect to such
Advance at a rate equal to the Adjustable Rate until each such Advance is paid
in full; provided, that, upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Advances and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due, and any other amounts due and owing under this Note, shall thereafter bear
interest (including post-petition interest in any proceeding under the
Bankruptcy Code or other applicable bankruptcy laws) at a rate that is 100 basis
points per annum in excess of the interest rate that otherwise is payable under
this Note with respect to Advances.
7
<PAGE>
3.2 On each May 15 and November 15 (each such date shall be
referred to herein as a "Capitalized Interest Date") until maturity of this Note
(whether at stated maturity, by acceleration or otherwise), the aggregate amount
of interest accrued on the outstanding principal balance of each Advance through
and including such Capitalized Interest Date shall be added to the outstanding
principal amount of such Advance on such Capitalized Interest Date. Except as
permitted by the Adelson Intercreditor Agreement, no cash interest payments
shall be payable prior to the maturity of this Note. Subject to the restrictions
in Section 8 hereof and in the Adelson Intercreditor Agreements, all accrued and
unpaid interest shall be payable in cash upon maturity of this Note (whether at
stated maturity, by acceleration or otherwise), and from time to time thereafter
upon demand of the Holder until this Note is paid in full.
4. At the time of the making of each Advance, if any, the Holder
shall make a notation on Schedule I of this Note, specifying the date and the
amount of such Advance; provided, however, that a failure to make a notation
with respect to any Advance shall not limit or otherwise affect the obligation
of the Makers hereunder and recognition of payment of principal or interest on
this Note shall not be affected by the failure to make a notation on said
Schedule I. If necessary to evidence an extension of the payment date or any
other change in the provisions of this Note agreed to in writing by the Maker
and the Holder, the Makers shall furnish a new note in substitution for this
Note. The first notation made by the Holder on the advance schedule attached to
the replacement Note shall be the most recent aggregate
8
<PAGE>
outstanding principal balance appearing on the advance schedule attached to the
replaced note.
5. Prepayments. To the extent expressly permitted under the
Facilities Agreements and the Adelson Intercreditor Agreement, the Makers shall
have the right from time to time to prepay this Note, in whole or in part,
together with accrued interest on the amount prepaid to the date of prepayment
without penalty or premium. To the extent any Advance made under this Note is
prepaid pursuant to this Section 5 or otherwise, the amounts so prepaid may not
be reborrowed hereunder.
6. Incorporation by Reference. The covenants of the Makers set
forth in Articles 4 and 5 of the Subordinated Note Indenture (the "Subordinated
Note Indenture Covenants") are hereby incorporated in this Note by reference for
the benefit of the Holder and deemed covenants of the Makers, and are made a
part hereof as if herein set forth at length, mutatis mutandis, provided that
where applicable (i) Note shall be substituted for "Senior Subordinated Notes,"
(ii) Makers shall be substituted for "Issuers" and (iii) Holder shall be
substituted for "Paying Agent" and "Senior Subordinated Note Trustee." The
foregoing to the contrary notwithstanding, to the extent any Subordinated Note
Indenture Covenant is amended or waived, after the effective date of such
amendment or waiver, such Subordinated Note Indenture Covenant shall be deemed
amended or waived for all purposes of this Note.
9
<PAGE>
7. Unconditional Obligations; Fees; Waivers, Etc.
7.1 The obligations to make the payments provided for in
this Note are absolute and unconditional and not subject to any defense,
set-off, counterclaim, rescission, recoupment or adjustment whatsoever.
7.2 The Holder's rights to institute any action or enforce
any rights under this Note shall, in all cases, be subject to the limitations
set forth in the Adelson Intercreditor Agreement.
7.3 Subject to Section 7.2, if the holder of this Note shall
institute any action to enforce the collection of principal of and/or interest
on this Note, there shall be immediately due and payable from the Makers, in
addition to the then unpaid principal amount of and interest on this Note, all
reasonable costs and expenses incurred by the holder of this Note in connection
therewith, including reasonable attorneys' fees and disbursements.
7.4 No forbearance, indulgence, delay or failure to exercise
any right or remedy with respect to this Note shall operate as a waiver, nor as
an acquiescence in any default. No single or partial exercise of any right or
remedy shall preclude any other or further exercise thereof or the exercise of
any other right or remedy.
7.5 This Note may not be modified or discharged orally, but
only in writing duly executed by the holder hereof.
7.6 The Makers hereby waive presentment, demand, notice of
dishonor, protest and notice of protest.
10
<PAGE>
8. Subordination.
8.1 Subordination Agreement. Notwithstanding any provision
to the contrary set forth herein, the Holder and the Makers agree that the
payment of principal of and interest on this Note, and any other amounts payable
with respect thereto, is subordinated to the prior payment in full (whether at
maturity, by prepayment, by acceleration or otherwise) of any and all Senior
Debt in the same manner as the 14 1/4% Senior Subordinated Notes due 2005 (the
"Subordinated Notes") are subordinated to Senior Debt. The Holder and the Makers
also agree that no payment of, on, or on account of the indebtedness so
subordinated shall be made except if permitted under the Adelson Intercreditor
Agreement and only except to the extent that LVSI and Venetian are or would be
permitted to make a payment upon or in respect of the Senior Subordinated Notes,
provided, that such payment may only be made in the same manner as is permitted,
or would be permitted, to be made in respect of the Senior Subordinated Notes in
an amount pro rata (in accordance with outstanding principal amounts) with the
amount permitted or that would be permitted to be paid on the Senior
Subordinated Notes. Except as permitted by the Adelson Intercreditor Agreement,
the Holder further agrees not to demand, receive or accept any such payment
until all Senior Debt has been paid in full in cash or cash equivalents.
In the event that, notwithstanding the foregoing provisions, any
payment shall be received by the Holder on account of principal of or interest
on or other amounts payable with respect to this Note in contravention of the
foregoing
11
<PAGE>
provisions, such payment shall be held in trust for the benefit of the holders
of the Senior Debt and shall, to the extent that at such time all Senior Debt
has not been paid in full in cash or cash equivalents, be paid over to the
holders of the Senior Debt, for application to the payment of the Senior Debt
until all such Senior Debt shall have been paid in full.
For purposes of this Note the provisions of Article 10 of the
Subordinated Notes Indenture shall be deemed to apply whether or not such
indenture remains in effect and following any and termination thereof,
references therein to the Subordinated Notes shall be deemed to be references to
this Note; references to the Paying Agent or Senior Subordinated Note Trustee
shall be deemed to be references to the holder of this Note; and references to
the Issuers shall be deemed to be references to the Makers.
8.2 Dissolution, Etc. In the event of any dissolution,
winding-up, liquidation or reorganization of the Makers (whether voluntary or
involuntary and whether in bankruptcy, insolvency or receivership proceedings or
upon an assignment for the benefit of creditors or any other marshaling of the
assets and liabilities of the Makers or otherwise):
(a) the holders of the Senior Debt shall be entitled
to receive payments in full in cash or cash equivalents of all such Senior Debt
(including interest accruing on such Senior Debt after the commencement of a
bankruptcy case or proceeding at the contract rate whether or not a claim for
such interest is an allowed claim in such case or proceeding) before the Holder
is entitled to receive any
12
<PAGE>
payment on account of the principal of or interest on or any other amounts
payable in respect of this Note;
(b) any payment or distribution of assets of the
Makers of any kind or character, whether in cash, property or securities, to
which the Holder would be entitled, except for the subordination provisions set
forth herein, shall be paid by the Maker, or any receiver, trustee in
bankruptcy, liquidating trustee or agent or other person making such payment or
distribution directly to the holders of Senior Debt, to the extent necessary to
make payment in full of all Senior Debt remaining unpaid; and
(c) in the event that, notwithstanding the foregoing
provisions, any payment or distribution of assets of the Makers of any kind or
character shall be received by the Holder on account of principal of or interest
on or other amounts payable in respect of this Note before all Senior Debt
(including, as applicable, interest accruing on, or original issue discount
accreting with respect to, such Senior Debt after the commencement of a
bankruptcy case or proceeding at the contract rate whether or not such interest
is an allowed claim in such proceeding) are paid in full in cash or cash
equivalents, or effective provision is made for their payment, such payment or
distribution shall be received in trust and shall, to the extent that at such
time all Senior Debt has not been paid in full in cash or cash equivalents, be
paid over to holders of Senior Debt, for application to the payment of such
Senior Debt until all such Senior Debt shall have been paid in full.
13
<PAGE>
The consolidation of the Makers with, or the merger of the Makers
into, another entity in accordance with the provisions of Article 5 of the
Subordinated Note Indenture, shall not be deemed a dissolution, winding-up,
liquidation or reorganization for purpose of these subordination provisions.
(d) Notwithstanding anything to the contrary contained
herein, the rights of the Holder under this Note are hereby made expressly
subject to the terms and provisions of the Adelson Intercreditor Agreement. Any
assignee of, or successor to, the Holder's interest under the Note shall agree
to become bound by the provisions of the Adelson Intercreditor Agreement.
8.3 Subrogation. Subject to the payment in full in cash or
cash equivalents of all Senior Debt, the Holder shall be subrogated to the
rights of the holders of the Senior Debt (except that the Holder shall not be
subrogated to the position of a secured creditor until payment in full of all
Senior Debt), or their respective representatives, to receive payments or
distributions of assets of the Makers applicable to the Senior Debt until all
amounts owing on this Note shall be paid in full, and for the purpose of such
subrogation, no payments or distributions to the holders of the Senior Debt, or
their respective representatives, as the case may be, by or on behalf of the
Makers or by or on behalf of the Holder, which otherwise would have been made to
the Holder shall, as between the Makers and their creditors, be deemed to be
payment by the Makers to or on account of the holders of the Senior Debt, or
their respective representatives, as the case may be, it being understood that
these subordination provisions are intended solely for the purpose of defining
the
14
<PAGE>
relative rights of the Holder, on the one hand, and the holders of the
Senior Debt and their respective representatives, on the other hand.
8.4 Obligation to Pay Unconditional. Except as expressly
provided herein, nothing is intended to or shall impair, as between the Makers
and the Holder, the obligation of the Makers, which is absolute and
unconditional, to pay to the Holder the principal of and interest on this Note
as and when the same shall become due and payable in accordance with its terms.
9. Events of Default.
9.1 Subject to the provisions of Sections 7.2 and 9.2
hereof, upon the happening of an Event of Default, and while such Event of
Default is continuing, the Holder may, by written notice to the Makers and
subject to applicable cures and waivers, declare this Note immediately due and
payable, whereupon the principal of, the interest on, and any other amount owing
under, this Note shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Makers; provided, that the Holder may not accelerate the
obligations under this Note unless the obligations under the Subordinated Note
Indenture have been accelerated. Notwithstanding the foregoing, if an Event of
Default specified in Section 6.01(i) or (j) of the Subordinated Note Indenture
occurs, the principal of, the interest on, and any other amount owing under,
this Note shall be due and payable immediately without further action or notice.
15
<PAGE>
9.2 The provisions of Section 9.1 to the contrary
notwithstanding, in the event an Event of Default under the Subordinated Note
Indenture shall be waived or cured, then the related Event of Default under this
Note shall be deemed waived or cured, as the case may be, for all purposes of
this Note. To the extent the maturity of and payments due under this Note shall
have been accelerated as a result of any Event of Default that is deemed waived
or cured, such indebtedness shall cease to be accelerated and all terms of this
Note shall continue to be in effect as if no acceleration occurred.
10. Suits for Enforcement and Remedies. Subject to provisions of
Sections 7.2 and 9.2 hereof, if any one or more Events of Default shall occur
and be continuing, the Holder may proceed to protect and enforce the Holder's
rights either by suit in equity or by action at law, or both, or proceed to
enforce the payment of this Note or to enforce any other legal or equitable
right of the Holder. No right or remedy herein or in any other agreement or
instrument conferred upon the Holder is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
11. Notices. All notices, requests, demands and other
communications required or delivered under this Note shall be in writing (which
shall include notice by facsimile transmission) and shall be deemed to have been
made and received when personally served, or when delivered by overnight courier
service,
16
<PAGE>
expenses prepaid, or, if sent by facsimile, deemed delivered on the date sent if
received prior to 5:00 p.m. on such date or deemed to be delivered the day
following the date sent if delivered after 5:00 p.m. on the date sent, addressed
as set forth below:
If to Makers: Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attention: General Counsel
Facsimile: (702) 733-5499
Grand Canal Shops Mall Construction, LLC
3555 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attention: General Counsel
Facsimile: (702) 733-5499
If to Holder: Sheldon G. Adelson
c/o Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attention:
Facsimile: (702) 733-5499
12. Assignment; Release.
12.1 Except as provided in Section 12.2 hereof, this Note may
not be assigned by the Makers without the prior written consent of the Holder,
which consent the Holder may withhold in its sole discretion.
12.2 If, pursuant to the Sale and Contribution Agreement, the
Mall Collateral is transferred to the Mall Subsidiary (including any successor
to the rights of the Mall Subsidiary under the Sale and Contribution Agreement,
a
17
<PAGE>
"Permitted Assignee") and this Note is not repaid in full upon such transfer
because the Permitted Assignee shall have elected to not fund its entire
purchase price in cash, then the Maker shall, without the consent of the Holder,
be deemed to have assigned and delegated their obligations under this Note to
such Permitted Assignee; the Permitted Assignee shall be deemed to have assumed
all liability under this Note; and the Makers shall be automatically and
entirely released and discharged of all liability under this Note. Each Holder
of this Note expressly consents to such release and discharge in such event.
Upon such assignment and assumption, (i) the terms of this Note shall be
automatically amended such that the terms of this Note are equivalent to those
of the Tranche B Take-Out Loan, and (ii) the Permitted Assignee shall agree to
execute and deliver an amendment to this Note to give effect to the provisions
of the foregoing clause (i) and to execute all documents necessary in connection
therewith.
13. Miscellaneous.
13.1 The holder of this Note shall have no recourse against
any member of the Maker.
13.2 If any payment hereunder falls due on a Saturday, Sunday
or any other day on which commercial banks in New York City are authorized or
required by law to close, the maturity thereof shall be extended to the next
succeeding Business Day.
13.3 The headings of the various Sections of this Note are
for convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
18
<PAGE>
13.4 The holders of Designated Senior Debt shall be express
third party beneficiaries of the provisions of this Note relating to the
subordination and the deferral or accrual of interest payments and the maturity
date of the Notes. Except for the assumption of this Note and the amendments
provided for under Section 12.2, no such provisions may be amended without the
consent of a majority of the principal amount of each class of Designated Senior
Debt.
[continued on next page]
19
<PAGE>
13.5 This Note and the obligations of the Maker and the
rights of the holder hereof shall be governed by and construed in accordance
with the laws of the State of New York applicable to instruments made and to be
performed entirely within such State.
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
20
<PAGE>
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
By: Venetian Casino Resort, LLC,
its sole member
By: Las Vegas Sands, Inc., its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
The undersigned hereby agrees to the provisions of Section 12.2 hereof on this
14 day of November, 1997.
GRAND CANAL SHOPS MALL, LLC
By: Grand Canal Shops Mall Holding Company,
LLC, its sole member
By: Mall Intermediate Holding Company,
its sole member
By: Venetian Casino Resort, LLC,
its sole member
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ David Friedman
------------------
Name: David Friedman
Title: Secretary
21
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Schedule I
ADVANCES AND PAYMENTS OF PRINCIPAL
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INTERCREDITOR AGREEMENT
(Adelson)
THE BANK OF NOVA SCOTIA
as Bank Agent
FIRST TRUST NATIONAL ASSOCIATION
as Mortgage Notes Indenture Trustee
GMAC COMMERCIAL MORTGAGE CORPORATION
as Interim Mall Lender
FIRST UNION NATIONAL BANK
as Subordinated Notes Trustee
VENETIAN CASINO RESORT, LLC
LAS VEGAS SANDS, INC.
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC
and
SHELDON G. ADELSON
November 14, 1997
<PAGE>
INTERCREDITOR AGREEMENT
(Adelson)
THIS AGREEMENT is made as of the November 14, 1997, by and among THE
BANK OF NOVA SCOTIA, a Canadian chartered bank, as the Administrative Agent (the
"Bank Agent") acting on behalf of itself and the Bank Lenders pursuant to the
Bank Credit Agreement, FIRST NATIONAL TRUST ASSOCIATION, a national banking
association, as trustee (the "Mortgage Notes Indenture Trustee") in its capacity
as Trustee under the Mortgage Notes Indenture, GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation (the "Interim Mall Lender") with respect
to the Interim Mall Credit Agreement, FIRST UNION NATIONAL BANK, a national
banking association, as trustee (the "Subordinated Notes Indenture Trustee") in
its capacity as Trustee under the Subordinated Notes Indenture, LAS VEGAS SANDS,
INC., a Nevada corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a Nevada
limited liability company ("Venetian") and GRAND CANAL SHOPS MALL CONSTRUCTION,
LLC, a Delaware limited liability company ("Mall Construction Subsidiary") and
SHELDON G. ADELSON ("Adelson").
RECITALS
A. The Project. LVSI, Venetian and Mall Construction Subsidiary
which is a wholly owned subsidiary of Venetian (LVSI, Venetian and Mall
Construction Subsidiary are collectively referred to herein as the "Company;"
provided, however, that after the Mall Release Date, "Company" shall mean and
refer to LVSI and Venetian only), propose to develop, construct and operate the
Venetian Casino Resort, a large-scale, Venetian-themed hotel/casino/retail and
entertainment complex with related heating, ventilation and air-conditioning
central plant, related common parking facilities and related central electrical
sub-station facilities as part of the redevelopment on the site of the former
Las Vegas Sands Hotel and Casino.
B. The Bank Credit Facility. Concurrently herewith, LVSI, Venetian,
the Bank Agent, Goldman Sachs Credit Partners L.P. and the Bank Lenders have
entered into the Bank Credit Agreement pursuant to which the Bank Lenders have
agreed, subject to the terms thereof, to provide the Bank Credit Facility to
LVSI and Venetian.
C. The Interim Mall Facility. Concurrently herewith, the Company and
the Interim Mall Lender have entered into the Interim Mall Credit Agreement
pursuant to which the Interim Mall Lender has agreed, subject to terms thereof,
to provide the Interim Mall Facility to the Company.
<PAGE>
D. The Mortgage Notes Indenture. Concurrently herewith, LVSI,
Venetian, certain guarantors named therein and the Mortgage Notes Indenture
Trustee have entered into the Mortgage Notes Indenture pursuant to which LVSI
and Venetian will issue the Mortgage Notes.
E. The Subordinated Notes Indenture. Concurrently herewith, LVSI,
Venetian, certain guarantors named therein and the Subordinated Notes Indenture
Trustee have entered into the Subordinated Notes Indenture pursuant to which
LVSI and Venetian will issue the Subordinated Notes.
F. Disbursement Agreement. The Company, the Bank Agent, the Mortgage
Notes Indenture Trustee, the Interim Mall Lender, Atlantic-Pacific, Las Vegas,
LLC, a Delaware limited liability company (the "HVAC Provider"), and The Bank of
Nova Scotia, as Disbursement Agent thereunder, have entered into that Funding
Agents' Disbursement and Administration Agreement dated as of even date herewith
(such agreement as amended, modified or supplemented from time to time, the
"Disbursement Agreement"), in order to set forth, among other things, (a) the
mechanics for and allocation of the Company's request for advances under the
various Facilities and from the Company's Funds Account, (b) the conditions
precedent to the initial advance and conditions precedent to subsequent
advances, (c) certain common representations, warranties and covenants of the
Company in favor of the Funding Agents and (d) common Events of Default and
remedies during construction of the Project.
G. Adelson Completion Guaranty. In order to induce the Credit
Parties to enter into their respective Facilities, Adelson has executed and
delivered a Guaranty (the "Adelson Completion Guaranty") of even date herewith,
whereby Adelson guaranties all certain obligations and liabilities of Company
under Section 5.9 of the Disbursement Agreement together with certain costs and
expenses incurred in connection therewith (subject to the limitations contained
therein). In the event that Adelson makes any payments required by the Adelson
Completion Guaranty, such payments shall be deemed to be a loan (the "Completion
Guaranty Loan") by Adelson to Venetian with the terms and conditions set forth
in Exhibit A to the Adelson Completion Guaranty.
H. Substitute Tranche B Guaranty. In order to induce the Interim
Mall Lender to enter into the Interim Mall Credit Agreement, Adelson has
executed and delivered a Guaranty (the "Substitute Tranche B Guaranty") of even
date herewith, whereby Adelson guaranties all obligations and liabilities of the
Company under the Interim Mall Credit Agreement together with certain costs and
expenses incurred in connection therewith (subject to the limitations contained
therein). In the event that Adelson makes any payments required by the
Substitute Tranche B Guaranty, such payments shall be deemed to be a loan (the
"Substitute Tranche B Loan") by Adelson to Venetian with the terms and
conditions set forth in Exhibit A to the Substitute Tranche B Guaranty.
2
<PAGE>
I. Intercreditor Agreement (Credit Parties). Concurrently herewith,
each of the Credit Parties has entered into a certain Intercreditor Agreement
(the "Intercreditor Agreement (Credit Parties)") pursuant to which the Credit
Parties have set forth certain provisions relating to their respective rights in
the Collateral, the exercise of remedies in the event of default, the
application of proceeds of enforcement and certain other matters.
J. Mall Release Date. Upon the occurrence of the Mall Release Date
this Agreement will no longer apply to the Interim Mall Lender, provided,
however, this Agreement will remain in full force and effect among Bank Agent,
Mortgage Notes Indenture Trustee, Subordinated Notes Indenture Trustee, Adelson,
LVSI and Venetian.
K. The Adelson Intercreditor Agreement. The Credit Parties, the
Company and Adelson desire to enter into this Agreement in order to set forth
the agreement between the Credit Parties, the Company and Adelson with respect
to the Adelson Indebtedness (as hereinafter defined).
NOW, THEREFORE, with reference to the foregoing recitals and in
reliance thereon, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Credit Parties and Adelson
agree as follows:
1. Except as otherwise expressed and provided herein, all
capitalized terms used in this Agreement and its Exhibits shall have the
meanings set forth below:
a. The following terms shall have the meanings set forth in the
Disbursement Agreement:
Affiliate Indirect Construction Guaranty
Available Funds Interim Mall Credit Agreement
Bank Agent Interim Mall Facility
Bank Credit Agreement Lender
Bank Credit Facility Mall I LLC
Bank Lenders Mall Release Date
Banking Day Mall Escrow Agreement
Company's Funds Account Mall Retainage/Punchlist
Completion Account
Completion Date Mortgage Note(s)
Construction Management Mortgage Notes Indenture
Agreement Mortgage Notes Indenture
Contracts Trustee
Deeds of Trust Obligations
Direct Construction Guaranty Operative Document
Final Completion Date Person
Financing Agreements Potential Event of Default
Funding Agents Project
3
<PAGE>
Project Documents
Project Security
Realized Savings
Sale and Contribution
Agreement
Security Documents
Subsidiaries
Subordinated Notes Indenture
Subordinated Note(s)
b. The following terms shall have the meanings set forth in the
Intercreditor Agreement (Credit Parties):
Bank Agent
Bankruptcy Code
Collateral
Credit Parties
Disbursement Agent
Event of Default
Facilities
Facility Agreements
Intercreditor Agent
Interim Mall Lender
Notice of Default
Protective Advances
Secured Credit Parties
Secured Lenders
Subordinated Notes Indenture Trustee
c. The following terms shall have the meanings set forth below:
"Adelson Indebtedness" means all existing and future obligations of
the Company to repay the Completion Guaranty Loan and the Substitute Tranche B
Loan to Adelson and any other amounts deemed advanced to the Company pursuant to
the Adelson Completion Guaranty or the Substitute Tranche B Guaranty (including
without limitation any rights of subrogation arising under the Adelson
Completion Guaranty or the Substitute Tranche B Guaranty).
"Collateral" means all real and personal property collateral and all
proceeds thereof described in the Security Documents and the Disbursement
Agreement.
"Disbursement Agreement Default" means the occurrence and
continuance of an Event of Default under the Disbursement Agreement.
4
<PAGE>
"Exercise Remedies" or the "Exercise of Remedies" means the
Recording of a Notice of Default under any deeds of trust or similar security
agreement, the commencement of an action for judicial foreclosure, the
appointment of a receiver, the enforcement of personal property foreclosure
proceedings (whether judicial or non-judicial), the filing of a complaint or
other action to enforce any Adelson Indebtedness, realization on any Collateral,
the exercise of rights of setoff, or any combination of the foregoing, by
Adelson; provided, however that "Exercise Remedies" shall exclude, without
limitation, the following: (i) the giving of notice of default (as distinguished
from recording a notice of default under a deed of trust in the real property
records of Clark County, Nevada), (ii) any declaration of acceleration of the
Adelson Indebtedness (but only if the obligations under the Subordinated Notes
have been accelerated).
"Liquidated Damages" means any proceeds or liquidated damages paid
pursuant to any obligation, default or breach under the Contracts (net of actual
and documented reasonable costs incurred by Company 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 Venetian or any of its Subsidiaries)). For
purposes of this definition, the Construction Guaranty, the Indirect
Construction Guaranty and so-called "liquidated damages" insurance policies
shall be deemed to be Contracts.
d. To the extent that reference is made in this Agreement to any
term defined in, or to any other provision of, the Disbursement Agreement, the
Intercreditor Agreement (Credit Parties) or any other agreement, such term or
provision shall continue to have the original meaning thereof notwithstanding
any termination, expiration or amendment of the Disbursement Agreement or such
other agreement.
e. Adelson is entering into this Agreement solely in his capacity as
a holder of, and only with respect to, the Adelson Indebtedness and nothing
herein shall be construed to waive, limit, impair or enlarge any right, duty or
privilege that Adelson may have in any other capacity or with respect to any
other indebtedness, claim or interest.
2. Adelson agrees that so long as any of the Obligations remain
outstanding or any commitments under the Facility Agreements remain effective,
all Adelson Indebtedness shall be obligations of (i) Venetian only in the case
of any obligations in respect of the Adelson Completion Guaranty and (ii)
Venetian and Mall Construction Subsidiary only in the case of any obligations in
respect of the Substitute Tranche B Guaranty provided that the Substitute
Tranche B Loan may be assumed by Mall Subsidiary and secured by its assets to
the extent permitted by Paragraph 12.2 of the Substitute Tranche B Note. Without
limiting the generality of the foregoing, Adelson further agrees as follows:
a. For so long as any of the Facilities remain outstanding, the
Adelson Indebtedness shall not be secured by, directly or indirectly, any liens
on or security interests in any property or assets owned directly or indirectly
by Venetian or LVSI or any Subsidiary
5
<PAGE>
of Venetian or LVSI or by any stock, securities, membership interests,
partnership interests or other direct or indirect equity interests in Venetian
or LVSI or any Subsidiary of Venetian or LVSI;
b. For so long as any of the Facilities remain outstanding, all
Adelson Indebtedness is hereby subordinated to all Obligations of the Company to
the Credit Parties to the extent and in the manner set forth herein (including
without limitation Section 8) and, as applicable, in the Completion Guaranty
Note and the Substitute Tranche B Note.
c. Adelson shall not contest the validity or priority of or seek to
enjoin or otherwise delay or interfere with the Exercise of Remedies (as defined
in the Intercreditor Agreement (Credit Parties) in effect as of the date hereof)
by any Credit Party nor shall Adelson institute any suit or assert in any suit,
bankruptcy, insolvency or other proceeding any claim relating to the Adelson
Indebtedness against the Credit Parties seeking damages from any of them or
other relief, by way of specific performance, injunction or otherwise, taken or
omitted by the Credit Parties with respect to the Collateral. Adelson will
execute and deliver to the Credit Parties any other instrument reasonably
requested by the Credit Parties to further assure the subordinated status of the
Adelson Indebtedness.
3. Adelson hereby confirms and agrees that the liens and security
interests held by each Secured Lender in the Collateral shall secure all
Obligations of Company now or hereafter owing to each Secured Lender under each
Facility throughout the term of this Agreement notwithstanding (i) the
availability of any other collateral to any Secured 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 with respect to Venetian or any
Affiliate of Venetian. In the event of a proceeding, whether voluntary or
involuntary, for insolvency, liquidation, reorganization, dissolution,
bankruptcy or other similar proceedings pursuant to the Bankruptcy Code or other
applicable federal or state law, Adelson further confirms and agrees that the
Obligations due and outstanding under each Facility Agreement shall include all
principal and additional advances permitted by or provided for thereunder,
Protective Advances made pursuant to or as permitted by the Intercreditor
Agreement (Credit Parties), 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, and
all proceeds from the sale or other disposition of such Collateral shall be paid
to the Secured Lenders notwithstanding the disallowance of any such claim or the
invalidity or subordination of any lien on or security interest in the
Collateral under applicable law.
4. All provisions of this Agreement, including but not limited to,
all matters relating to the creation, validity, perfection, priority and
subordination of the liens on and security interests in the Collateral intended
to be created by the Security Documents and all provisions regarding the
allocation and priority of payments with respect to any
6
<PAGE>
Facility shall survive the filing of a proceeding under the Bankruptcy Code and
be fully enforceable by each Credit Party against Adelson during such
proceeding. In addition, Adelson hereby waives all rights of subrogation (if
any) against the Company as contemplated by Section 509 of the Bankruptcy Code,
or otherwise, and agrees that the Adelson Completion Guaranty and the Substitute
Tranche B Guaranty shall remain valid, binding and enforceable in accordance
with their terms notwithstanding the provisions of Section 365(c)(2), if
applicable, to the effect that the Completion Guaranty Loan and the Substitute
Tranche B Loan may not be assumed by the debtor in any such proceeding. Adelson
further agrees that so long as any Obligations are outstanding under any of the
Financing Agreements, Adelson shall not be entitled to Exercise Remedies against
Venetian, LVSI or any of their Subsidiaries or file a petition in bankruptcy
against Venetian, LVSI or any of their Subsidiaries.
Adelson shall file in any bankruptcy or other proceeding of or
against Venetian, LVSI and/or Mall Construction Subsidiary in which the filing
of proofs of claims is required or permitted by law, all claims which Adelson
may have against the Company relating to the Adelson Indebtedness, in
furtherance of the subordination contemplated hereunder. If Adelson does not
file any such claim, the Intercreditor Agent as attorney-in-fact for Adelson, is
hereby authorized to do so in the name of Adelson or, in the Intercreditor's
Agent discretion, to assign the claim to a nominee and to cause proofs of claim
to be filed in the name of such nominee. The foregoing power of attorney is
coupled with an interest and cannot be revoked. In all such cases, whether in
administration, bankruptcy or otherwise, the person authorized to pay such a
claim shall pay the amounts (i) if such payment is made in respect of the
Completion Guaranty Note, to the holders of Senior Debt (as defined in the
Subordinated Note Indenture) and all other Obligations under the Facilities
until paid in full in cash or cash equivalents and (ii) if such payment is made
in respect of the Substitute Tranche B Note, to the holders of Senior Debt until
paid in full in cash or cash equivalents and then to the holders of the
Subordinated Notes and the holder of the Substitute Tranche B Note pro rata.
5. The Credit Parties shall have the right at any time and without
the consent of Adelson and without affecting the validity and priority of the
liens on and security interests in the Collateral created by the Security
Documents to (i) amend, modify or extend the Facilities or the Obligations
evidenced thereby, (ii) to release any portion of the Collateral from the lien
thereon and security interest therein and (iii) to refinance the Obligations
evidenced thereby, and the provisions of Section 2 hereof with respect to the
validity, priority, perfection, and subordination of all liens on and security
interests in the Collateral held by any Secured Lender to secure Obligations
under its Facility shall continue to apply to such Facility as so amended,
modified, extended or refinanced.
6. The Completion Guaranty Loan and the Substitute Tranche B Loan
shall at all times be evidenced by the Completion Guaranty Note and the
Substitute Tranche B Note, respectively. Adelson shall not amend or modify the
Completion Guaranty Note or the Substitute Tranche B Note in any material
respect without the prior written consent of the Bank Agent and the Interim Mall
Lender except to the extent permitted
7
<PAGE>
under each of the Facility Agreements. Subject to the restrictions and
conditions of the Facility Agreements, Adelson may assign, transfer or refinance
all or any portion of the Completion Guaranty Loan or the Substitute Tranche B
Loan, provided that any assignee, transferee or holder of any refinanced or
replacement loan shall be bound by and shall assume all obligations of Adelson
under this Agreement. Adelson shall not lend money to, or acquire indebtedness
of, LVSI, Venetian or any of their Subsidiaries, except as permitted by the
Facility Agreements (in effect on the date of incurrence or acquisition of such
indebtedness).
7. Until all Obligations under the Facilities have been paid in
full, Adelson waives any claim, right or remedy which Adelson may now have or
hereafter acquire against the Company that arises hereunder and/or from the
performance by the Credit Parties hereunder including, without limitation, any
claim, remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of the Credit
Parties, the Disbursement Agent or the Intercreditor Agent against the Company,
or any security which the Credit Parties, the Disbursement Agent or the
Intercreditor Agent now have or hereafter acquire, whether or not such claim,
right or remedy arises in equity, under contract, by statute, under common law
or otherwise.
8. A. Until all Obligations under the Facilities have been paid in
full, Company shall not make and Adelson shall not demand or accept any payments
in respect of the Adelson Indebtedness except to the extent permitted under the
Completion Guaranty Note or the Substitute Tranche B Note, as applicable.
B. In addition to the restrictions under clause A above, for so long
as the Bank Credit Agreement and the GMAC Credit Agreement remain in effect, the
Company shall not make and Adelson shall not demand or accept any payments of
interest or principal in respect of the Adelson Indebtedness unless and until
all Obligations have been paid in full unless consented to by Bank Agent and
GMAC, provided that foregoing shall not restrict (i) any capitalization of
interest or any non cash payment of interest with pay-in-kind securities which
are at least as subordinated as the Adelson Indebtedness being paid and (ii) any
deemed payment of the Substitute Tranche B Note upon an assumption thereof by
Mall Subsidiary in accordance with the terms of the Substitute Tranche B Note.
C. Notwithstanding the restrictions of clause B above, so long as no
Potential Event of Default under the Disbursement Agreement or under any
Financing Agreement nor any Event of Default under the Disbursement Agreement or
any Financing Agreement shall then exist and be continuing, Company may (i) make
payments on the Completion Guaranty Loan from amounts which the Company is
required or permitted to fund into the Guaranty Deposit Account pursuant to
Section 5.1.1(h)(i) of the Disbursement Agreement after the making of such
Completion Guaranty Loan, (ii) on or after Final Completion, make payments on
the Completion Guaranty Loan from amounts which are advanced to the Company
pursuant to Section 2.12 of the Disbursement Agreement for the purpose of making
such payments, (iii) after Final Completion, make payments on the
8
<PAGE>
Completion Guaranty Loan from any amounts Company receives as Liquidated Damages
and (iv) on the Final Completion Date, make payments on the Completion Guaranty
Loan from amounts which are returned to Mall Construction Subsidiary from funds
in the Mall Retainage/Punchlist Account in accordance with the Mall Escrow
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.
D. Notwithstanding the restrictions of clause B above, Company may
(i) (ii) after the repayment of all Obligations under the GMAC Credit Agreement,
repay the Substitute Tranche B Loan with the cash proceeds received from the
Mall Subsidiary under the Sale and Contribution Agreement, (ii) repay the
Substitute Tranche B Loan with the proceeds received from a refinancing thereof
permitted under the Bank Credit Agreement and the GMAC Credit Agreement and
(iii) on the date of transfer of the Mall Collateral to the Mall Subsidiary, the
Company may prepay the Substitute Tranche B Loan, in part, in an amount up to
the Capitalized Amount; provided, however, that any such prepayment in clause
(iii) shall be permitted only to the extent that after giving effect to such
prepayment (i) Available Funds (as defined in the Disbursement Agreement) equals
or exceed Remaining Costs (as defined in the Disbursement Agreement) and (ii)
the Unallocated Contingency Balance (as defined in the Disbursement Agreement)
equals or exceeds the Required Minimum Contingency (as defined in the
Disbursement Agreement). The "Capitalized Amount" shall mean an amount equal to
the interest on the Substitute Tranche B Note that has been added to the
principal amount thereof pursuant to Section 3.2 of the Substitute Tranche B
Note plus accrued and unpaid interest on the Substitute Tranche B Note to the
date of prepayment. The Mortgage Notes Indenture Trustee and the Subordinated
Note Indenture Trustee confirm that for purposes of Section 4.07 of the Mortgage
Notes Indenture and of Section 4.07 of the Subordinated Notes Indenture, the
payment under clause (iii) above is a scheduled payment of principal and
interest with respect to the Substitute Tranche B Note.
E. To the extent Company makes any payment in contravention of the
foregoing provisions, such payment shall be received by Adelson in trust for the
holders of Senior Debt and other Obligations under the Facilities and Adelson
shall cause the same to be paid over immediately in the form received (i) if
such payment is made in respect of the Completion Guaranty Note, to the holders
of Senior Debt and all other Obligations under the Facilities until paid in full
in cash or cash equivalents and (ii) if such payment is made in respect of the
Substitute Tranche B Note, to the holders of Senior Debt until paid in full in
cash or cash equivalents and then to the holders of the Subordinated Notes and
the holder of the Substitute Tranche B Note pro rata.
9
<PAGE>
9. Notices; Addresses.
Any communications between the parties hereto or notices
herein to be given may be given to the following addressees:
If to the Bank Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attn: Alan Pendergast
Phone: (415) 986-1100
Fax: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Phone: (404) 877-1525
Fax: (404) 888-8998
If to the Mortgage Notes First Trust National Association
Indenture Trustee: 180 East Fifth Street
St. Paul, Minnesota 55164-0111
Attn: Corporate Trust Department
If to the Interim Mall Lender: GMAC Commercial Mortgage Corporation
100 South Wacker Drive
Suite 400
Chicago, IL 60606
Attn: Mr. Vacys Garbonkus
Phone: (312) 845-8520
Fax: (312) 845-8623
If to the Subordinated Notes First Union National Bank
Indenture Trustee: Corporation Trust Division
999 Peachtree Street, N.E. Suite 1100
Atlanta, Georgia 30309
Attn: Corporate Trust Department
10
<PAGE>
If to the Disbursement Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attn: Alan Pendergast
Phone: (415) 986-1100
Fax: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Phone: (404) 877-1525
Fax: (404) 888-8998
If to the Intercreditor Agent:The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, California 94104
Attn: Alan Pendergast
Phone: (415) 986-1100
Fax: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Phone: (404) 877-1525
Fax: (404) 888-8998
If to Venetian Casino Resort, LLC: Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Attn: General Counsel
Telefax: (702) 733-5499
11
<PAGE>
If to Las Vegas Sands, Inc. Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Room 1A
Las Vegas, Nevada 89109
Attn: General Counsel
Telefax: (702) 733-5499
If to Grand Canal Shops
Mall Construction, LLC: Grand Canal Shops Mall Construction, LLC
3355 Las Vegas Boulevard South
Room 1G
Las Vegas, Nevada 89109
Attn: General Counsel
Telefax: (702) 733-5499
If to Adelson: Sheldon G. Adelson
c/o Venetian Casino Resort, LLC
3355 Las Vegas Boulevard South
Room 1C
Las Vegas, Nevada 89109
Telefax: (702) 733-5499
All notices or other communications required or permitted to be given hereunder
shall be in writing and shall be considered as properly given (a) if delivered
in person, (b) if sent by reputable overnight delivery service, (c) in the event
overnight delivery services are not readily available, if mailed by first class
mail, postage prepaid, registered or certified with return receipt requested or
(d) if sent by prepaid telex, or by telecopy with correct answer back received.
Notice so given shall be effective upon receipt by the addressee, except that
any communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Banking Day and, if not, on the next following Banking Day) on
which it is validly transmitted if transmitted before 4 p.m., recipient's time,
and if transmitted after that time, on the next following Banking Day; provided,
however, that if any notice is tendered to an addressee and the delivery thereof
is refused by such addressee, such notice shall be effective upon such tender.
Any party shall have the right to change its address for notice hereunder to any
other location by giving of no less than twenty (20) days' notice to the other
parties in the manner set forth hereinabove.
10. Further Assurances. Each party hereto (i) shall deliver to each
Credit Party, the Disbursement Agent and to the Intercreditor Agent any
instruments, agreements, certificates and documents as any such Credit Party,
the Disbursement Agent or the Intercreditor Agent may reasonably request to
perfect and maintain such Person's Liens granted under the Financing Agreements,
(ii) shall fully cooperate with each Credit Party, the Disbursement Agent and
the Intercreditor Agent and (iii) shall perform all additional
12
<PAGE>
acts reasonably requested by any such Credit Party, the Disbursement Agent or
the Intercreditor Agent to effect the purposes of the Financing Agreements and
this Agreement.
11. Entire Agreement. This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
negotiations and prior writings in respect to the subject matter hereof, all of
which negotiations and writings are deemed void and of no force and effect.
12. Governing Law. This Agreement shall be governed by the laws of
State of New York of the United States of America and shall for all purposes be
governed by and construed in accordance with the laws of such state without
regard to the conflict of law rules thereof other than Section 5-1401 of the New
York General Obligations Law.
13. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby, and the parties hereto
shall enter into good faith negotiations to replace the invalid, illegal or
unenforceable provision.
14. Headings. Paragraph headings have been inserted in this
Agreement as a matter of convenience for reference only and it is agreed that
such paragraph headings are not a part of this Agreement and shall not be used
in the interpretation of any provision of this Agreement.
15. Limitations on Liability. No claim shall be made by Adelson
against any Credit Party, the Disbursement Agent or the Intercreditor Agent or
any of their respective Affiliates, directors, employees, attorneys or agents
for any special, indirect, consequential or punitive damages (whether or not the
claim therefor is based on contract, tort or duty imposed by law), in connection
with, arising out of or in any way related to the transactions contemplated by
this Agreement or any act or omission or event occurring in connection
therewith; and Adelson hereby waives, releases and agrees not to sue upon any
such special, indirect, consequential or punitive claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in his
favor.
16. Consent of Jurisdiction. Any legal action or proceeding arising
out of this Agreement may be brought in or removed to the courts of the State of
New York, in and for the County of New York, or of the United States of America
for the Southern District of New York. By execution and delivery of this
Agreement, each party hereto accepts, for its and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts for
legal proceedings arising out of or in connection with this Agreement and
irrevocably consents to the appointment of the Prentice-Hall Corporation System
Inc. as its agent to receive service of process in New York, New York. Each
party hereto hereby waives any right to stay or dismiss any action or proceeding
under or in
13
<PAGE>
connection with this Agreement brought before the foregoing courts on the basis
of forum non-conveniens.
17. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.
18. Successors and Assigns. The provision of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns provided, however, this Agreement shall terminate upon
the satisfaction of all the Obligations and the termination of each of the
commitments under the Facility Agreements.
19. Counterparts. This Agreement may be executed in one or more
duplicate counterparts, and when executed and delivered by all of the parties
listed below shall constitute a single binding agreement.
20. Replacement Subordination Agreement. Adelson hereby agrees to
enter into a replacement subordination agreement in favor of GMAC in the form of
Annex A on the Mall Release Date to the extent GMAC is not repaid in full on
such date.
The remainder of this page has intentionally been left blank.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers or agents thereunto duly authorized or
have personally executed this Agreement, as the case may be, as of the day and
year first above written.
BANK AGENT
The Bank of Nova Scotia, a Canadian
chartered bank
By: /s/ Alan Pendergast
--------------------------------------
Name: Alan Pendergast
Title: Relationship Manager
INTERIM MALL LENDER
GMAC Commercial Mortgage Corporation, a
California corporation
By: /s/ Vacys Garbonkus
--------------------------------------
Name: Vacys Garbonkus
Title: Authorized Signator
MORTGAGE NOTES INDENTURE TRUSTEE
First Trust National Association, a national
banking association
By: /s/ Richard H. Prokosch
--------------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
S-1
<PAGE>
SUBORDINATED NOTES INDENTURE
TRUSTEE
First Union National Bank, a national
banking association
By: /s/ Emily E. Katt
--------------------------------------
Name: Emily E. Katt
Title: Vice President
VENETIAN CASINO RESORT, LLC, a Nevada
limited liability company
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ William P. Weidner
--------------------------------------
Name: William P. Weidner
Title: President
LAS VEGAS SANDS, INC., a Nevada corporation
By: /s/ William P. Weidner
--------------------------------------
Name: William P. Weidner
Title: President
S-2
<PAGE>
GRAND CANAL SHOPS MALL
CONSTRUCTION, LLC, a Delaware limited
liability company
By: Venetian Casino Resort, LLC,
its member
By: Las Vegas Sands, Inc.,
its managing member
By: /s/ William P. Weidner
--------------------------------------
Name: William P. Weidner
Title: President
S-3
<PAGE>
ADELSON
By: /s/ Sheldon G. Adelson
--------------------------------------
Sheldon G. Adelson
S-4
BANK ENVIRONMENTAL INDEMNITY
THIS UNSECURED INDEMNITY AGREEMENT (this "Indemnity") is entered into
as of the 14th day of November, 1997, by LAS VEGAS SANDS, INC., a Nevada
corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a Nevada limited liability
company ("VCR") and GRAND CANAL SHOPS MALL CONSTRUCTION, LLC., a Delaware
limited liability company ("GCCLC" and jointly and severally with LVSI and VCR,
the "Company"), to and for the benefit of THE BANK OF NOVA SCOTIA, as
administrative agent ("Administrative Agent") for itself and the other agents
and lenders under the Credit Agreement referred to below.
WITNESSETH:
A. Pursuant to the Credit Agreement dated as of even date herewith (as
modified, amended or supplemented from time to time, (the "Credit Agreement") by
and between the Administrative Agent, Goldman Sachs Credit Partners L.P.,
("GSCP") as syndication agent and arranger (the Administrative Agent, GSCP and
any other agent appointed under the Credit Agreement, each an "Agent" and
together the "Agents") the financial institutions from time-to-time party
thereto (the "Lenders") LVSI and VCR, Lenders have agreed to make loans (the
"Loans") to LVSI and VCR, which Loans are to be secured by, among other things,
(i) that certain Deed of Trust of even date herewith executed by LVSI and VCR,
as trustors, to Lawyers Title of Nevada, Inc. as trustee, in favor of the
Administrative Agent on behalf of the Lenders, as beneficiary (the "Deed of
Trust"), (ii) that certain Leasehold Deed of Trust of even date herewith
executed by GCCLLC, as trustor, to Lawyers Title of Nevada, Inc. as trustee, in
favor of Administrative Agent on behalf of the Lenders, as beneficiary (the
"Leasehold Deed of Trust") and (iii) such other deeds of trust that may be
entered into by Company for the benefit of Administrative Agent on behalf of the
Lenders, (together with the Deed of Trust and the Leasehold Deed of Trust, the
"Deeds of Trust") which Deeds of Trust encumber the real property described on
Exhibit A attached hereto (the "Real Property"), and the improvements now or
hereafter constructed thereon (which improvements, together with the Real
Property, shall hereinafter be referred to as the "Property").
B. The Lenders have made it a condition of the Lenders making the Loans
that this Indemnity be executed and delivered by the Company.
C. The obligations of the Company hereunder are unsecured obligations
of the Company.
NOW, THEREFORE, in consideration of the foregoing and other valuable
consideration, the receipt of which is hereby acknowledged, the Company
covenants and agrees to and for the benefit of the Agents and the Lenders as
follows:
1. Definitions.
(a) "Claims" means any and all actual out-of-pocket costs
incurred by an Indemnified Party (as defined below) (including, without
limitation, reasonable attorneys' fees and expenses, which fees and expenses
shall include, without limitation, fees and expenses of both outside and staff
counsel), expenses, losses, damages, liabilities, fines, penalties, charges,
injury to person, property, or natural resources, administrative and judicial
proceedings and orders, injunctive relief, judgments, remedial action
requirements and enforcement actions of any kind, arising directly or
<PAGE>
indirectly, in whole or in part, out of or attributable to (i) any breach or
default by the Company in the performance of any of its obligations under
paragraphs 3(a)-(d) hereof, or (ii) any Release (as defined below) or threatened
Release, whether foreseeable or unforeseeable, arising prior to any release,
reconveyance or foreclosure of any Deed of Trust (or following any such release,
conveyance or foreclosure to the extent attributable to pre-existing
conditions), or conveyance in lieu of foreclosure; and in each instance,
regardless of when such Release, inaccuracy or breach is discovered and
regardless of whether or not caused by or in the control of the Company, any
employees, agents, contractors or subcontractors of the Company or any third
persons. Without limiting the generality of the foregoing and for purposes of
clarification only, Claims also include:
(i) actual out-of-pocket costs reasonably incurred by an
Indemnified Party in connection with (x) determining whether the Property is in
compliance with all applicable Hazardous Substances Laws (as hereinafter
defined), (y) taking any necessary precautions to protect against any Release or
threatened Release, or (z) any removal, remediation of any kind and disposal of
any Hazardous Substances (as hereinafter defined), and
(ii) any repair of any damage to the Property or any other
property caused by any such precautions, removal, remediation or disposal.
The rights of the Indemnified Parties hereunder shall not be
limited by any investigation or the scope of any investigation undertaken by or
on behalf of the Agents or Lenders in connection with the Property prior to the
date hereof. Notwithstanding the foregoing, Claims shall exclude any Release
caused by or resulting from the negligence or misconduct of any of the
Indemnified Parties.
(b) "Hazardous Substances" means and includes any flammable
explosives, radioactive materials or hazardous, toxic or dangerous wastes,
substances or related materials or any other chemicals, materials or substances,
exposure to which is prohibited, limited or regulated by any federal, state,
county, regional or local authority or which, even if not so regulated, may or
could pose a hazard to the health and safety of the occupants of the Property or
of property adjacent to the Property, including, but not limited to, asbestos,
PCBs, petroleum products and byproducts, (including, but not limited to, crude
oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas usable for fuel, or any mixture thereof), substances
defined or listed as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances" or similarly identified in, pursuant to, or for
purposes of, any of the Hazardous Substances Laws, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, as now or hereafter amended (42 U.S.C. Section 9601, et seq); the
Hazardous Materials Transportation Act, as now or hereafter amended (49 U.S.C.
Section 1801, et seq); the Resource Conservation and Recovery Act, as now or
hereafter amended (42 U.S.C. Section 6901, et seq); any so-called "Superfund"
or "Superlien" law; or any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material; or any substances or mixture regulated
under the Toxic Substance Control Act of 1976, as now or hereafter amended (15
U.S.C. Section 2601 et seq); and any "pollutant" under the Clean Water Act, as
now or hereafter amended (33 U.S.C. Section 1251 et seq); and any hazardous air
pollutant under the Clean Air Act (42 U.S.C. Section 7901 et seq), in each case
as now or hereafter amended.
2
<PAGE>
(c) "Hazardous Substances Laws" means all federal, state and
local environmental, health or safety laws, ordinances, regulations, rules of
common law or policies regulating Hazardous Substances, including, without
limitation, those governing the generation, use, refinement, handling,
treatment, removal, storage, production, manufacture, transportation or disposal
of Hazardous Substances, as such laws, ordinances, regulations, rules and
policies may be in effect from time to time and be applicable to the Property.
(d) "Indemnified Parties" means each Agent and Lender and each of
their respective directors, officers, shareholders, agents, employees,
participants, successors and assigns and shall also include any purchasers of
all or any portion of the Property at any foreclosure sale and the initial
purchaser following the consummation of any deed in lieu of foreclosure, but not
including any other purchasers of the Property.
(e) "Release" means any presence, use, generating, storing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of Hazardous Substances into the
environment, or about, on, from, under, within or affecting the Property, or
transported to or from the Property, including continuing migration of Hazardous
Substances into or through soil, surface water or groundwater.
2. Environmental Indemnification by the Company.
(a) The Company hereby agrees to defend (with counsel reasonably
approved by the Administrative Agent), indemnify and hold the Indemnified
Parties harmless from and against, and shall reimburse the Indemnified Parties
for, any and all Claims.
(b) Indemnified Parties shall have the right to employ
independent counsel to represent it in any action or proceeding to which this
Indemnity is applicable if and to the extent that the Indemnified Parties
determine in good faith that their rights and interests may be compromised or
not fully and adequately represented by legal counsel acting for the Company,
whether on account of any potential defenses that the Company may have to its
obligations under this Indemnity or otherwise, and in such event the reasonable
fees and expenses of the Indemnified Party's independent counsel shall be paid
by the Company.
(c) The Company's obligations hereunder shall not be diminished
or affected in any respect as a result of any notice or disclosure, if any, to,
or other knowledge, if any, by, any Indemnified Party of any Release or
threatened Release, or as a result of any other matter related to the Company's
obligations hereunder, nor shall any Indemnified Party be deemed to have
permitted or acquiesced in any Release or any breach of the Company's other
obligations hereunder, solely because any Indemnified Party had notice,
disclosure or knowledge thereof, whether at the time this Indemnity is delivered
or at any time thereafter.
(d) This Indemnity shall not be limited by any representation,
warranty or indemnity of the Company made herein or in connection with any
indebtedness secured by the Deeds of Trust, irrespective of whether the Company
has knowledge as of the date of each Deed of Trust, or during the term of each
Deed of Trust, of the matters to which such representation, warranty or
indemnity relates.
3
<PAGE>
3. Environmental Covenants
(a) The Company shall not, nor shall the Company permit any
tenants or other occupants of the Property to, at any time in the future, cause
or permit a Release, except in compliance with applicable Hazardous Substances
Laws.
(b) The Company shall give prompt written notice to the
Administrative Agent of any Pending Claims, or of any Proceedings.
(c) The Company shall give prompt written notice to the
Administrative Agent of the Company's discovery of any occurrence or condition
on any real property adjoining or in the vicinity of the Property that could
cause the Property or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of the Property under any Hazardous
Substances Laws including, without limitation, the Company's discovery of any
occurrence or condition on the Property or on any real property adjoining or in
the vicinity of the Property that could cause the Property or any part thereof
to be classified as a hazardous waste property or border-zone property, or to be
otherwise subject to any restrictions on the ownership, occupancy,
transferability or use of the Property under any Hazardous Substances Laws.
(d) In the event that any investigation, site monitoring,
containment, cleanup, removal, restoration, precautionary actions or other
remedial work of any kind or nature (hereinafter, "Remedial Work") is required
under any applicable Hazardous Substances Law as a result of, or in connection
with, any Release, suspected Release, or threatened Release, the Company shall
within thirty (30) days after receipt of information that such Remedial Work is
or may be required (or such shorter period of time as may be required under
applicable law, regulation, order or agreement), commence the performance of, or
cause to be commenced, and thereafter diligently prosecute to completion, the
performance of all such Remedial Work in compliance with all applicable
Hazardous Substances Laws. All Remedial Work shall be performed by one or more
contractors, approved in advance in writing by the Administrative Agent, and
under the supervision of a consulting engineer approved in advance in writing by
the Administrative Agent, which consent shall not be unreasonably withheld. All
costs and expenses of such Remedial Work shall be paid by the Company,
including, without limitation, the charges of such contractor(s) and/or the
consulting engineer, and the Indemnified Parties' reasonable attorneys' fees and
costs, including, without limitation, fees and costs of both outside and staff
counsel incurred in connection with monitoring or review of such Remedial Work.
In the event the Company shall fail to timely commence, or cause to be
commenced, or fail to diligently prosecute to completion, the performance of
such Remedial Work, the Administrative Agent or any other Indemnified Party may,
but shall not be required to, cause such Remedial Work to be performed and all
costs and expenses thereof, or incurred in connection therewith, shall be deemed
Claims hereunder.
4. Liability.
(a) Notwithstanding any other provisions of this Indemnity or any
of the Loan Documents (as defined in the Credit Agreement), any liability of the
Company hereunder shall be its personal liability (but such personal liability
shall not be deemed to incorporate personal liability of its directors,
officers, employees or agents), and may be asserted against its interest in the
Property as well as against any and all of its other assets.
4
<PAGE>
(b) Without limiting the foregoing, the obligations of the
Company hereunder shall survive the following events, to the maximum extent
permitted by law: (i) repayment of the Obligations (as defined in the Credit
Agreement) and any judicial or nonjudicial foreclosure under any Deed of Trust
or conveyance in lieu of such foreclosure, notwithstanding that all or any
portion of any other obligations secured by the such Deed of Trust shall have
been discharged thereby, (ii) any election by any Indemnified Party to purchase
all or any portion of the Property at a foreclosure sale by crediting all or any
portion of the obligations secured by any Deed of Trust against the purchase
price therefor (except to the extent and only to the extent that such
Indemnified Party has specifically elected in writing in its sole discretion to
credit against the purchase price any Claims hereunder which were liquidated in
amount at the time of such foreclosure sale, it being presumed for these
purposes that the obligations secured by such Deed of Trust shall be discharged
by any such crediting in the order set forth in such Deed of Trust), (iii) any
release or reconveyance of either Deed of Trust, any waiver of the lien of
either Deed of Trust, or any release or waiver of any other security for the
Obligations, and (iv) any termination, cancellation or modification of any Loan
Document. Upon and following the occurrence of any of the foregoing, the
obligations of the Company hereunder shall be unsecured obligations, and shall
be enforceable against the Company to the fullest extent permitted by applicable
law.
(c) The obligations of the Company hereunder are not intended to
be the obligations of a surety or guarantor. The liability of the Company under
this Indemnity shall in no way be limited or impaired by (i) any extensions of
time for performance required by the any Loan Document; (ii) the accuracy or
inaccuracy of any representations and warranties made by the Company in any of
any Loan Documents; or (iii) the release of any person or entity from
performance or observance of any of the agreements, covenants, terms, or
conditions contained in any of the Loan Documents by operation of law or
otherwise.
(d) The rights and remedies of the Indemnified Parties under this
Indemnity (i) shall be in addition to any other rights and remedies of such
Indemnified Parties under any Loan Documents or at law or in equity, and (ii)
may be enforced by any of the Indemnified Parties, to the maximum extent
permitted by law, without regard to or affecting any rights and remedies that
such Indemnified Party may have under any Loan Documents or at law or in equity,
and without regard to any limitations on such Indemnified Party's recourse for
recovery of the Obligations as may be provided in any Loan Documents.
5. Site Visits, Observation and Testing. The Administrative Agent and
any of the other Indemnified Parties and their respective agents and
representatives shall have the right at any reasonable time, and upon reasonable
prior notice, to enter and visit the Property to make such inspections and
inquiries as they shall deem appropriate, including inspections for violations
of any of the terms of this Indemnity and for determining the existence, nature
and magnitude of any past or present Release or threatened Release, and they
shall also have the right, following any Event of Default (as defined in the
Credit Agreement), or where the Administrative Agent has a reasonable basis upon
which to believe that the Property may be harmed, unsafe or contaminated, and
upon reasonable prior notice, to enter and visit the Property to make such tests
(including, without limitation, taking and removing soil or groundwater samples)
as they shall deem appropriate. Neither the Administrative Agent nor any of the
other Indemnified Parties have any duty, however, to visit or observe the
Property or to conduct tests, and no site visit, observation or testing by the
Administrative Agent or any other Indemnified Party shall impose any liability
on the Administrative Agent or such other Indemnified Party. In no event shall
any site visit, observation or testing by the
5
<PAGE>
Administrative Agent or any other Indemnified Party be a representation that
Hazardous Substances are or are not present in, on or under the Property, or
that there has been or shall be compliance with any Hazardous Substances Laws or
any other applicable governmental law. Neither the Company nor any other party
is entitled to rely on any site visit, observation or testing by the
Administrative Agent or any other Indemnified Party. Neither the Administrative
Agent nor any of the other Indemnified Parties owe any duty of care to protect
the Company or any other party against, or to inform the Company or any other
party of, any Hazardous Substances or any other adverse condition affecting the
Property. The Administrative Agent and any other Indemnified Party shall give
the Company reasonable notice before entering the Property, and shall make
reasonable efforts to avoid interfering with the Company's use of the Property
in exercising any rights provided in this paragraph 5.
6. Interest Accrued. Any amount claimed hereunder by an Indemnified
Party not paid within thirty (30) days after written demand from such
Indemnified Party with an explanation of the amounts claimed shall bear interest
at a rate per annum equal to the maximum interest rate applicable to overdue
principal set forth in the Credit Agreement.
7. Subrogation of Indemnity Rights. If the Company fails to fully
perform its obligations hereunder, any Indemnified Party shall be entitled to
pursue any rights or claims that the Company may have against any present,
future or former owners, tenants or other occupants or users of the Property,
any portion thereof or any adjacent or proximate properties, relating to any
Claim or the performance of Remedial Work, and the Company hereby assigns all of
such rights and claims to the Indemnified Parties under such circumstances and
shall take all actions required by the Indemnified Parties to cooperate with
such Indemnified Parties in enforcing such rights and claims under such
circumstances.
8. Reliance. The Company acknowledges that it is making and giving the
indemnities and representations and covenants contained in this Indemnity with
the knowledge that the Agent and Lenders are relying on such indemnities and
representations and covenants in making the Obligations to the Company.
9. Successors and Assigns. This Indemnity shall inure to the benefit of
each Indemnified Party's successors and assigns, and shall be binding upon the
heirs, successors, and assigns of the Company. The Company shall not assign any
rights or obligations under this Indemnity without first obtaining the written
consent of the Administrative Agent, which may be given or withheld in the sole
discretion of the Administrative Agent. Notwithstanding any other provision of
this Indemnity to the contrary, the Company shall not be released from its
obligations hereunder without obtaining the written consent of the
Administrative Agent, which consent may be given or withheld in the sole
discretion of the Administrative Agent. Nothing herein shall be deemed to be a
consent to the transfer of the Property which transfer would be otherwise
prohibited by any Document.
10. Miscellaneous. This Indemnity shall be governed by and construed in
accordance with the laws of the State of Nevada. If this Indemnity is executed
by more than one person or entity, the liability of the undersigned hereunder
shall be joint and several. Separate and successive actions may be brought
hereunder to enforce any of the provisions hereof at any time and from time to
time. No action hereunder shall preclude any subsequent action, and the Company
hereby waives and covenants not to assert any defense in the nature of splitting
of causes of action or merger of judgments. In no event shall any provision of
this Indemnity be deemed to be a waiver of or to be in lieu of any right or
claim, including, without limitation, any right of contribution or other right
of
6
<PAGE>
recovery, that any party to this Indemnity might otherwise have against any
other party to this Indemnity under any Hazardous Substances Laws. If any term
of this Indemnity or any application thereof shall be invalid, illegal or
unenforceable, the remainder of this Indemnity and any other application of such
term shall not be affected thereby. No delay or omission in exercising any right
hereunder shall operate as a waiver of such right or any other right.
11. Notices. All notices expressly provided hereunder to be given by
Administrative Agent to the Company and all notices and demands of any kind or
nature whatsoever which the Company may be required or may desire to give to or
serve on the Administrative Agent shall be in writing and shall be served by
certified mail, return receipt requested, or by a reputable commercial overnight
carrier that provides a receipt, such as Federal Express. Notice shall be
addressed as follows:
The Company: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard, South
Las Vegas, Nevada 89109
Attn: Sheldon G. Adelson,
Chairman of the Board
Telecopy No: (702) 733-5499
with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas, 24th Floor
New York, New York, 10019
Attn: Harris B Fredius, Esq.
Telecopy No: (212) 757-3990
Administrative Agent: The Bank of Nova Scotia
580 California Street, Suite 2100
San Francisco, California 94104
Attn: Allan Pendergast
Telecopy No.: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: Marianne Velker
Telecopy No.: (404)888-8998
12. Attorneys' Fees and Expenses. If any Agent or Lender refers this
Indemnity or any of the other Loan Documents to an attorney to enforce, construe
or defend the same, as a consequence of any Event of Default as defined in the
Indenture, with or without the filing of any legal action or proceeding, the
Company shall pay to the Administrative Agent, immediately upon demand, the
amount of all attorneys' fees and costs incurred by the Administrative Agent in
connection therewith, together with interest thereon from the date of award at
the maximum interest rate applicable to overdue principal set forth in the
Credit Agreement
7
<PAGE>
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8
<PAGE>
IN WITNESS WHEREOF, this Indemnity is executed as of the day and year
first above written.
The Company:
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: /s/ William P. Weidner
-------------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company
BY: LAS VEGAS SANDS, INC.,
a Nevada corporation,
its managing member
By: /s/ William P. Weidner
--------------------------
Name: William P. Weidner
Title: President
GRAND CANAL SHOPS MALL CONSTRUCTION, LLC,
a Delaware limited liability company
BY: VENETIAN CASINO RESORT, LLC,
a Nevada limited liability company,
its member
BY: LAS VEGAS SANDS, INC.,
a Nevada corporation,
its managing member
By: /s/ William P. Weidner
-------------------------
Name: William P. Weidner
Title: President
9
UNSECURED INDEMNITY AGREEMENT
THIS UNSECURED INDEMNITY AGREEMENT (the "Indemnity") is entered into
as of the 14th day of November, 1997, by LAS VEGAS SANDS, INC., a Nevada
corporation ("LVSI"), VENETIAN CASINO RESORT, LLC, a Nevada limited liability
Indemnitor ("VCR") and GRAND CANAL SHOPS MALL CONSTRUCTION, LLC, a Delaware
limited liability, ("GCCLLC") as joint and several indemnitors (each of LVSI,
VCR and GCCLLC, "an Indemnitor" and collectively, the "Indemnitors"), to and for
the benefit of GMAC Commercial Mortgage Corporation (the "Lender") and, to the
extent not otherwise referenced, the Indemnified Parties (as hereinafter
defined).
W I T N E S S E T H:
A. Pursuant to that certain Credit Agreement, dated as of November 14, 1997,
by and among the Indemnitors and Lender (the "Credit Agreement"), the Lender has
agreed to provide Loans to Indemnitors, jointly and severally, in an aggregate
amount and for purposes specified therein. Capitalized terms used herein, but
not otherwise defined herein, shall have the meaning assigned to such terms in
the Credit Agreement.
B. The Obligations are secured by, among other things, (i) the Deeds of
Trust, (ii) the Leasehold Deed of Trust and (iii) such other deeds of trust that
may be entered into by Indemnitors for the benefit of Lender, (together with the
Deed of Trust and the Leasehold Deed of Trust, the "Deeds of Trust"), which
Deeds of Trust encumber the real property described in Exhibit "A" attached
hereto (the "Real Property"), and the improvements now or hereafter constructed
thereon (which improvements, together with the Real Property, shall hereinafter
be referred to as the "Property"). The Credit Agreement, the Deeds of Trust and
all other documents executed in connection with the Obligations are collectively
referred to as the "Loan Documents."
C. It is a condition of the Lender's entering into the Loan Documents that
this Indemnity be executed and delivered by the Indemnitors, and the Lender is
entering into the Loan Documents in reliance on this Indemnity.
D. The obligations of the Indemnitors hereunder are unsecured obligations
of the Indemnitors.
NOW, THEREFORE, in consideration of the foregoing and other valuable
consideration, the receipt of which is hereby acknowledged, the Indemnitors
covenant and agree to and for the benefit of the Lender as follows:
1. Definitions.
(a) "Claims" means any and all actual out-of-pocket costs incurred
by an Indemnified Party (as defined below) (including, without limitation,
reasonable attorneys' fees and expenses, which fees and expenses shall include,
without limitation, fees and expenses of both outside and staff counsel),
expenses, losses, damages, liabilities, fines, penalties, charges, injury to
person, property, or natural resources, administrative and judicial proceedings
and orders, injunctive relief, judgments, remedial action requirements and
enforcement actions of any kind, arising directly or
<PAGE>
indirectly, in whole or in part, out of or attributable to (i) any breach or
default by the Indemnitor in the performance of any of its obligations under
paragraphs 3(a)-(d) hereof, or (ii) any Release (as defined below) or threatened
Release, whether foreseeable or unforeseeable, arising prior to any release,
reconveyance or foreclosure of either Deed of Trust (or following any such
release, conveyance or foreclosure to the extent attributable to pre-existing
conditions), or conveyance in lieu of foreclosure; and in each instance,
regardless of when such Release, inaccuracy or breach is discovered and
regardless of whether or not caused by or in the control of the Indemnitor, any
employees, agents, contractors or subcontractors of the Indemnitor or any third
persons. Without limiting the generality of the foregoing and for purposes of
clarification only, Claims also include:
(i) actual out-of-pocket costs reasonably incurred by an
Indemnified Party in connection with (x) determining whether the Property is in
compliance with all applicable Hazardous Substances Laws (as hereinafter
defined), (y) taking any necessary precautions to protect against any Release or
threatened Release, or (z) any removal, remediation of any kind and disposal of
any Hazardous Substances (as hereinafter defined), and
(ii) any repair of any damage to the Property or any other
property caused by any such precautions, removal, remediation or disposal.
The rights of the Indemnified Parties hereunder shall not be limited
by any investigation or the scope of any investigation undertaken by or on
behalf of the Lender in connection with the Property prior to the date hereof.
Notwithstanding the foregoing, Claims shall exclude any Release caused by or
resulting from the negligence or misconduct of any of the Indemnified Parties.
(b) "Hazardous Substances" means and includes any flammable
explosives, radioactive materials or hazardous, toxic or dangerous wastes,
substances or related materials or any other chemicals, materials or substances,
exposure to which is prohibited, limited or regulated by any federal, state,
county, regional or local authority or which, even if not so regulated, may or
could pose a hazard to the health and safety of the occupants of the Property or
of property adjacent to the Property, including, but not limited to, asbestos,
PCBs, petroleum products and byproducts (including, but not limited to, crude
oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas usable for fuel, or any mixture thereof), substances
defined or listed as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances" or similarly identified in, pursuant to, or for
purposes of, any of the Hazardous Substances Laws, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, as now or hereafter amended (42 U.S.C. Section 9601, et seq); the
Hazardous Materials Transportation Act, as now or hereafter amended (49 U.S.C.
Section 1801, et seq); the Resource Conservation and Recovery Act, as now or
hereafter amended (42 U.S.C. Section 6901, et seq); any so-called "Superfund" or
"Superlien" law; or any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree regulating, relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material; or any substances or mixture regulated under the
Toxic Substance Control Act of 1976, as now or hereafter amended (15 U.S.C.
Section 2601 et seq); and any "pollutant" under the Clean Water Act, as now or
hereafter amended (33 U.S.C. Section 1251 et seq); and any hazardous air
pollutant under the Clean Air Act (42 U.S.C. Section 7901 et seq), in each case
as now or hereafter amended.
(c) "Hazardous Substances Laws" means all federal, state and local
environmental, health or safety laws, ordinances, regulations, rules of common
law or policies
2
<PAGE>
regulating Hazardous Substances, including, without limitation, those governing
the generation, use, refinement, handling, treatment, removal, storage,
production, manufacture, transportation or disposal of Hazardous Substances, as
such laws, ordinances, regulations, rules and policies may be in effect from
time to time and be applicable to the Property.
(d) "Indemnified Parties" means the Lender, and the directors,
officers, shareholders, agents, employees, participants, successors and assigns
of the Lender, and shall also include any purchasers of all or any portion of
the Property at any foreclosure sale and the initial purchaser following the
consummation of any deed in lieu of foreclosure, but not including any other
purchasers of the Property.
(e) "Release" means any presence, use, generating, storing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of Hazardous Substances into the
environment, or about, on, from, under, within or affecting the Property, or
transported to or from the Property, including continuing migration of Hazardous
Substances into or through soil, surface water or groundwater.
2. Environmental Indemnification by the Indemnitor.
(a) The Indemnitors hereby agree to defend (with counsel
reasonably approved by the Lender), indemnify and hold the Indemnified Parties
harmless from and against, and shall reimburse the Indemnified Parties for, any
and all Claims.
(b) The Lender shall have the right to employ independent counsel
to represent it in any action or proceeding to which this Indemnity is
applicable if and to the extent that the Lender determines in good faith that
its rights and interests may be compromised or not fully and adequately
represented by legal counsel acting for the Indemnitors, whether on account of
any potential defenses that the Indemnitors may have to its obligations under
this Indemnity or otherwise, and in such event the reasonable fees and expenses
of the Lender's independent counsel shall be paid by the Indemnitors.
(c) The Indemnitors' obligations hereunder shall not be diminished
or affected in any respect as a result of any notice or disclosure, if any, to,
or other knowledge, if any, by, any Indemnified Party of any Release or
threatened Release, or as a result of any other matter related to the
Indemnitor's obligations hereunder, nor shall any Indemnified Party be deemed to
have permitted or acquiesced in any Release or any breach of the Indemnitor's
other obligations hereunder, solely because any Indemnified Party had notice,
disclosure or knowledge thereof, whether at the time this Indemnity is delivered
or at any time thereafter.
(d) This Indemnity shall not be limited by any representation,
warranty or indemnity of the Indemnitors made herein or in connection with any
indebtedness secured by the Deeds of Trust, irrespective of whether the
Indemnitors have knowledge as of the date of each Deed of Trust, or during the
term of each Deed of Trust, of the matters to which such representation,
warranty or indemnity relates.
3
<PAGE>
3. Environmental Covenants
(a) The Indemnitors shall not, nor shall the Indemnitors permit
any tenants or other occupants of the Property to, at any time in the future,
cause or permit a Release, except in compliance with applicable Hazardous
Substances Laws.
(b) The Indemnitors shall give prompt written notice to the Lender
of any Pending Claims, or of any Proceedings.
(c) The Indemnitors shall give prompt written notice to the Lender
of the Indemnitors' discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Hazardous Substances
Laws including, without limitation, the Indemnitors' discovery of any occurrence
or condition on the Property or on any real property adjoining or in the
vicinity of the Property that could cause the Property or any part thereof to be
classified as a hazardous waste property or border-zone property, or to be
otherwise subject to any restrictions on the ownership, occupancy,
transferability or use of the Property under any Hazardous Substances Laws.
(d) In the event that any investigation, site monitoring,
containment, cleanup, removal, restoration, precautionary actions or other
remedial work of any kind or nature (hereinafter, "Remedial Work") is required
under any applicable Hazardous Substances Law as a result of, or in connection
with, any Release, suspected Release, or threatened Release, the Indemnitors
shall within thirty (30) days after receipt of information that such Remedial
Work is or may be required (or such shorter period of time as may be required
under applicable law, regulation, order or agreement), commence the performance
of, or cause to be commenced, and thereafter diligently prosecute to completion,
the performance of all such Remedial Work in compliance with all applicable
Hazardous Substances Laws. All Remedial Work shall be performed by one or more
contractors, approved in advance in writing by the Lender, and under the
supervision of a consulting engineer approved in advance in writing by the
Lender, which consent shall not be unreasonably withheld. All costs and expenses
of such Remedial Work shall be paid by the Indemnitors, including, without
limitation, the charges of such contractor(s) and/or the consulting engineer,
and the Indemnified Parties' reasonable attorneys' fees and costs, including,
without limitation, fees and costs of both outside and staff counsel incurred in
connection with monitoring or review of such Remedial Work. In the event the
Indemnitors shall fail to timely commence, or cause to be commenced, or fail to
diligently prosecute to completion, the performance of such Remedial Work, the
Lender or any other Indemnified Party may, but shall not be required to, cause
such Remedial Work to be performed and all costs and expenses thereof, or
incurred in connection therewith, shall be deemed Claims hereunder.
4. Liability.
(a) Notwithstanding any other provisions of this Indemnity or any
of the Loan Documents, any liability of the Indemnitors hereunder shall be its
personal liability (but such personal liability shall not be deemed to
incorporate personal liability of its directors, officers, employees or agents),
and may be asserted against its interest in the Property as well as against any
and all of its other assets.
4
<PAGE>
(b) Without limiting the foregoing, the obligations of the
Indemnitor hereunder shall survive the following events, to the maximum extent
permitted by law: (i) repayment of the Obligations and any judicial or
nonjudicial foreclosure under either Deed of Trust or conveyance in lieu of such
foreclosure, notwithstanding that all or any portion of any other obligations
secured by the such Deed of Trust shall have been discharged thereby, (ii) any
election by any Indemnified Party to purchase all or any portion of the Property
at a foreclosure sale by crediting all or any portion of the obligations secured
by either Deed of Trust against the purchase price therefor (except to the
extent and only to the extent that such Indemnified Party has specifically
elected in writing in its sole discretion to credit against the purchase price
any Claims hereunder which were liquidated in amount at the time of such
foreclosure sale, it being presumed for these purposes that the obligations
secured by such Deed of Trust shall be discharged by any such crediting in the
order set forth in paragraph _____ of such Deed of Trust), (iii) any release or
reconveyance of either Deed of Trust, any waiver of the lien of either Deed of
Trust, or any release or waiver of any other security for the Obligations, and
(iv) any termination, cancellation or modification of the Credit Agreement, the
Notes, either Deed of Trust or any other agreement relating to the Obligations.
Upon and following the occurrence of any of the foregoing, the obligations of
the Indemnitors hereunder shall be unsecured obligations, and shall be
enforceable against the Indemnitors to the fullest extent permitted by
applicable law.
(c) The obligations of the Indemnitors hereunder are not intended
to be the obligations of a surety or guarantor. The liability of the Indemnitors
under this Indemnity shall in no way be limited or impaired by (i) any
extensions of time for performance required by the Loan Documents; (ii) the
accuracy or inaccuracy of any representations and warranties made by the
Indemnitors in any of the Loan Documents; or (iii) the release of any person or
entity from performance or observance of any of the agreements, covenants,
terms, or conditions contained in any of the Loan Documents by operation of law
or otherwise.
(d) The rights and remedies of the Indemnified Parties under this
Indemnity (i) shall be in addition to any other rights and remedies of such
Indemnified Parties under any Loan Document or at law or in equity, and (ii) may
be enforced by any of the Indemnified Parties, to the maximum extent permitted
by law, without regard to or affecting any rights and remedies that such
Indemnified Party may have under any Indenture Document or at law or in equity,
and without regard to any limitations on such Indemnified Party's recourse for
recovery of the Obligations as may be provided in any Indenture Document.
5. Site Visits, Observation and Testing. The Lender and any of the
other Indemnified Parties and their respective agents and representatives shall
have the right at any reasonable time, and upon reasonable prior notice, to
enter and visit the Property to make such inspections and inquiries as they
shall deem appropriate, including inspections for violations of any of the terms
of this Indemnity and for determining the existence, nature and magnitude of any
past or present Release or threatened Release, and they shall also have the
right, following any Event of Default as defined in the Credit Agreement, or
where the Lender has a reasonable basis upon which to believe that the Property
may be harmed, unsafe or contaminated, and upon reasonable prior notice, to
enter and visit the Property to make such tests (including, without limitation,
taking and removing soil or groundwater samples) as they shall deem appropriate.
Neither the Lender nor any of the other Indemnified Parties have any duty,
however, to visit or observe the Property or to conduct tests, and no site
visit, observation or testing by the Lender or any other Indemnified Party shall
impose any liability on the Lender or such other Indemnified Party. In no event
shall any site visit, observation or testing by the Lender or any other
Indemnified Party be a representation that Hazardous Substances
5
<PAGE>
are or are not present in, on or under the Property, or that there has been or
shall be compliance with any Hazardous Substances Laws or any other applicable
governmental law. Neither the Indemnitor nor any other party is entitled to rely
on any site visit, observation or testing by the Lender or any other Indemnified
Party. Neither the Lender nor any of the other Indemnified Parties owe any duty
of care to protect the Indemnitor or any other party against, or to inform the
Indemnitor or any other party of, any Hazardous Substances or any other adverse
condition affecting the Property. The Lender and any other Indemnified Party
shall give the Indemnitors reasonable notice before entering the Property, and
shall make reasonable efforts to avoid interfering with the Indemnitors' use of
the Property in exercising any rights provided in this paragraph 5.
6. Interest Accrued. Any amount claimed hereunder by an Indemnified
Party not paid within thirty (30) days after written demand from such
Indemnified Party with an explanation of the amounts claimed shall bear interest
at a rate equal to the default rate applicable to Loans upon the occurrence and
during the continuation of any Event of Default set forth in Section 2.2c of the
Credit Agreement.
7. Subrogation of Indemnity Rights. If the Indemnitor fails to fully
perform its obligations hereunder, any Indemnified Party shall be entitled to
pursue any rights or claims that the Indemnitor may have against any present,
future or former owners, tenants or other occupants or users of the Property,
any portion thereof or any adjacent or proximate properties, relating to any
Claim or the performance of Remedial Work, and the Indemnitors hereby assign all
of such rights and claims to the Indemnified Parties under such circumstances
and shall take all actions required by the Indemnified Parties to cooperate with
such Indemnified Parties in enforcing such rights and claims under such
circumstances.
8. Reliance. The Indemnitors acknowledge that it is making and giving
the indemnities and representations and covenants contained in this Indemnity
with the knowledge that the Lender is relying on such indemnities and
representations and covenants in making the Loans to the Indemnitors.
9. Successors and Assigns. This Indemnity shall inure to the benefit of
each Indemnified Party's successors and assigns, and shall be binding upon the
heirs, successors, and assigns of the Indemnitor. The Indemnitors shall not
assign any rights or obligations under this Indemnity without first obtaining
the written consent of the Lender, which may be given or withheld in the sole
discretion of the Lender. Notwithstanding any other provision of this Indemnity
to the contrary, the Indemnitors shall not be released from its obligations
hereunder without obtaining the written consent of the Lender, which consent may
be given or withheld in the sole discretion of the Lender. Nothing herein shall
be deemed to be a consent to the transfer of the Property which transfer would
be otherwise prohibited by any Document.
10. Miscellaneous. This Indemnity shall be governed by and construed in
accordance with the laws of the State of Nevada. If this Indemnity is executed
by more than one person or entity, the liability of the undersigned hereunder
shall be joint and several. Separate and successive actions may be brought
hereunder to enforce any of the provisions hereof at any time and from time to
time. No action hereunder shall preclude any subsequent action, and the
Indemnitors hereby waive and covenant not to assert any defense in the nature of
splitting of causes of action or merger of judgments. In no event shall any
provision of this Indemnity be deemed to be a waiver of or to be in lieu of any
right or claim, including, without limitation, any right of contribution or
other right of
6
<PAGE>
recovery, that any party to this Indemnity might otherwise have against any
other party to this Indemnity under any Hazardous Substances Laws. If any term
of this Indemnity or any application thereof shall be invalid, illegal or
unenforceable, the remainder of this Indemnity and any other application of such
term shall not be affected thereby. No delay or omission in exercising any right
hereunder shall operate as a waiver of such right or any other right.
11. Notices. All notices expressly provided hereunder to be given by the
Indemnitors to the Lender and all notices and demands of any kind or nature
whatsoever which the Indemnitors may be required or may desire to give to or
serve on the Lender shall be in writing and shall be served by certified mail,
return receipt requested, or by a reputable commercial overnight carrier that
provides a receipt, such as Federal Express. Notice shall be addressed as
follows:
Lender: GMAC Commercial Mortgage Corporation
100 S. Wacker Dr. Suite 400
Chicago, Illinois 60606
Attn: Vacys Garbonkus
Telecopy No: (312) 845-8623
with a copy to: Altherimer & Gray
10 S. Wacker Dr. Suite 4000
Chicago, Illinois 60606
Attn: Melvin K. Lippe
Telecopy No: (312) 715-4800
The Indemnitor: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard, South
Room 1A
Las Vegas, Nevada 89109
Attn: General Counsel
Telecopy No: (702) 733-5499
with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas, 24th Floor
New York, New York, 10019
Attn: Harris B Fredius, Esq.
Telecopy No: (212) 757-3990
12. Attorneys' Fees and Expenses. If the Lender refers this Indemnity or
any of the other Loan Documents to an attorney to enforce, construe or defend
the same, as a consequence of any Event of Default as defined in the Indenture,
with or without the filing of any legal action or proceeding, the Indemnitors
shall pay to the Lender, immediately upon demand, the amount of all attorneys'
fees and costs incurred by the Lender in connection therewith, together with
interest thereon from the date of award at a rate equal to the default rate
applicable to Loans upon the occurrence and during the continuation of any Even
of Default set forth in Section 2.2C of the Credit Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Indemnity is executed as of the day and year
first above written.
The Indemnitor:
LAS VEGAS SANDS, INC.
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
VENETIAN CASINO RESORT, LLC
BY: LAS VEGAS SANDS, INC.,
as managing member
By: /s/ William P. Weidner
----------------------
Name: William P. Weidner
Title: President
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
8
MANAGEMENT AGREEMENT
by and between
LAS VEGAS SANDS, INC.,
a Nevada corporation
("Owner")
and
FOREST CITY COMMERCIAL MANAGEMENT, INC.,
an Ohio corporation
("FCMI" or "Agent")
Phase I and Phase II
Las Vegas (Clark County), Nevada
<PAGE>
INDEX
ARTICLE I: Engagement......................................................1
ARTICLE II: FCMI's Obligations..............................................2
ARTICLE III: Term............................................................7
ARTICLE IV: Termination.....................................................7
ARTICLE V: Compensation...................................................10
ARTICLE VI: FCMI's Staff...................................................12
ARTICLE VII: Assignment.....................................................13
ARTICLE VIII: Notices........................................................13
ARTICLE IX: Amendment......................................................14
ARTICLE X: Severability...................................................14
ARTICLE XI: Remedies Cumulative............................................14
ARTICLE XII: Successors and Assigns.........................................14
ARTICLE XIII: Law Applicable.................................................14
ARTICLE XIV: Consent or Waiver..............................................15
ARTICLE XV: Indemnity......................................................15
ARTICLE XVI: Miscellaneous..................................................15
ARTICLE XVII: Bonding........................................................17
ARTICLE XVIII: Lender Provisions..............................................18
<PAGE>
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the _____ day of _______________, 1997, by and
between LAS VEGAS SANDS, INC. ("Owner"), a Nevada corporation, with offices at
3355 Las Vegas Boulevard South, Las Vegas, Nevada 89109, and FOREST CITY
COMMERCIAL MANAGEMENT, INC. ("FCMI" or "Agent"), an Ohio corporation, with
offices at 700 Terminal Tower, Cleveland, Ohio 44113-2203.
WITNESSETH:
WHEREAS, Owner intends to develop in two (2) phases an enclosed retail
center. Phase I will contain approximately 350,000 square feet of gross leasable
area. Phase II, to be completed in approximately two (2) years, will contain an
additional 150,000 square feet of gross leasable area (Phase I and Phase II are
collectively referred to as the "Shopping Center"). The Shopping Center will be
located in Las Vegas (Clark County), Nevada on the real property described in
Exhibit "A" and shown on Exhibit "B" (together, the "Shopping Center Parcel");
and
WHEREAS, Owner will operate the Shopping Center adjacent to and in
connection with a hotel and casino to be owned and operated by Owner.
WHEREAS, Owner desires that FCMI perform management services with respect
to the Shopping Center on behalf of Owner and FCMI has agreed to perform such
services.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties, intending to be legally bound, covenant and agree with each other
as follows:
ARTICLE I
ENGAGEMENT
Owner engages FCMI as an independent contractor to perform the services
described in this Agreement as the sole and exclusive manager and FCMI accepts
and agrees to perform such services as an independent contractor.
ARTICLE II
FCMI'S OBLIGATIONS
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<PAGE>
The Owner intends to initially construct three hundred fifty thousand
(350,000) square feet of gross leasable area. The initial three hundred fifty
thousand (350,000) square feet of gross leasable area and the expansion of one
hundred fifty thousand (150,000) square feet of gross leasable area to be
completed two (2) years later together constitute the Shopping Center for the
purposes of this Agreement together with the associated Common Area.
FCMI shall commence and thereafter with due diligence shall perform all
services described in this Agreement with respect to the management of the
Shopping Center. In furtherance thereof, FCMI shall promptly, fully, faithfully
and in compliance with all applicable statutes, laws, ordinances, rules and
regulations of all authorities having jurisdiction perform, among other things,
the following subject in all respects and in all instances to the prior approval
of, direction from and control by Owner:
(a) Maintain liaison with the leasing, design and construction staffs
engaged by Owner, before and after opening of the Shopping Center
for business.
(b) At least sixty (60) days before the date set for the opening of the
Shopping Center submit to Owner for its approval a plan for the
routine operations of the Shopping Center, including, but not
limited to:
(i) the number and type of employees to be employed,
(ii) collection of rents and other charges,
(iii) supervision of maintenance and repair of the Shopping
Center,
(iv) an insurance program for the Shopping Center.
(c) At least sixty (60) days before the date set for the grand
opening of the Shopping Center and thereafter not later than October
31st of each full calendar year during the term of this Agreement,
prepare and submit for Owner's approval, an annual detailed shopping
center budget ("Shopping Center Budget") in the form of Exhibit "C"
attached to and made a part of this Management Agreement for the
next calendar year setting forth the estimated operating receipts
and expenditures of Owner on a month to month basis from the
Shopping Center for a period covered by the Shopping Center Budget
showing ongoing expenses and any anticipated extraordinary expenses
and capital expenditures and the approximate date funds therefor
2
<PAGE>
will be needed. The Shopping Center Budget shall be acceptable to
Owner and be consistent with generally accepted accounting
principles, consistently applied. In connection with the budgeting
process, FCMI shall submit for the approval of Owner an operational
plan. Upon receipt of the proposed Shopping Center Budget, Owner
shall have thirty (30) days to review and approve same. In the event
Owner does not object in writing to the proposed Shopping Center
Budget, then the Shopping Center Budget shall be deemed approved. If
Owner does not approve the proposed Shopping Center Budget, Owner
shall forward its required changes to FCMI and FCMI shall revise the
proposed Shopping Center Budget and operational plan in accordance
with Owner's requirements as set forth in the revised Shopping
Center Budget. When the Shopping Center Budget, the detailed leasing
plan in the form attached hereto as Exhibit "E", (which leasing plan
shall be supplied to FCMI no later than August 15th of each full
calendar year i.e., seventy-five (75) days prior to submission by
FCMI of Shopping Center Budget to Owner) and operational plan are
approved by the Owner, FCMI shall have the right and authority to
operate within the parameters of the approved Shopping Center Budget
and operational plan and shall be required to obtain the Owner's
approval for actions intended to be taken by FCMI only when such
actions would materially deviate from the approved Shopping Center
Budget and operational plan. For purposes of this Agreement,
"materially deviate" shall mean the lesser of $25,000 or five
percent (5%) of the approved line item as defined on Page 1 in the
Shopping Center Budget.
(d) FCMI shall be promptly supplied with copies of all leases relating
to the Shopping Center so that it can maintain a central control
file.
(e) Bill tenants and other occupants in the Shopping Center for, and
collect and deposit in segregated joint bank account(s) in the name
of Owner and FCMI at a lending institution approved by Owner (the
"Bank Accounts"), all revenues received by FCMI from the Shopping
Center including, without limitation, all fixed rents, percentage
rents and other sums, whether payable as additional rent or
otherwise payable by such tenants and occupants under their
respective leases and other agreements, or by other parties under
license, service or other agreements. FCMI shall have the
3
<PAGE>
authority to write checks from the Bank Accounts to pay the
obligations of the Shopping Center in accordance with the Shopping
Center Budget and this Agreement; provided, however, checks in the
amount of $25,000.00 or more shall require the dual signature of
Owner, excluding only the Management Fee agreed upon herein, which
shall not require the dual signature of Owner. Owner agrees to
cooperate with FCMI in a timely fashion in order to avoid any late
fee payment, default, penalty or other charge caused by the failure
to timely pay obligations of the Shopping Center. Obtain and review
statements of sales furnished by tenants to support their payment of
percentage rentals or other sums and deductions. With the Owner's
prior approval, FCMI may engage legal counsel on behalf of and at
Owner's expense and institute, prosecute or settle any legal
proceedings or arbitrations with respect to collection activities
against tenants. FCMI will keep Owner advised of FCMI's collection
activities hereunder and will promptly advise Owner if FCMI is
unable to collect any such income or charges.
(f) Use diligent efforts to enforce the performance by tenants of all
requirements of their respective leases by all reasonable means;
provided, however, FCMI does not guarantee the payment or
performance of any lease by any tenant.
(g) Cause the Shopping Center to be maintained in a first-class manner
comparable to other similar shopping centers located in the Las
Vegas area and in good operating condition and repair at Owner's
cost, supervise the maintenance thereof, and hire such persons,
firms or corporations and purchase or lease such equipment and
supplies at reasonable rates and costs as may be necessary or
desirable to accomplish such purposes all within the limits of the
Shopping Center Budget. FCMI shall negotiate contracts for
electricity, gas, fuel supply, water, telephone, window washing,
exterminating, equipment maintenance, trash handling and other
contracts relating to the operation or maintenance of the Shopping
Center (collectively, "Contracts"), subject to Owner's final review,
approval and execution. Owner agrees to respond to proposed
Contracts within fifteen (15) days after submittal by FCMI. Upon
execution, Owner shall promptly deliver copies of all executed
Contracts to FCMI. All on-site personnel costs, including
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managers and marketing staff, are a direct cost to the Project and
thus are not included in the Management Fee [as defined in Article
V(b)].
(h) Maintain the books, records and accounts of Owner, prepare and
submit to Owner on or before the 25th day of each month the various
reports marked in Exhibit "C" attached to and made a part of this
Management Agreement which shall, without limitation, provide Owner
with: monthly income and expense statements containing monthly and
year to date information, and statements listing rent delinquencies.
Title to the books and records relating to the Shopping Center shall
at all times remain in Owner, and Owner shall have the right to
examine such books and records at any reasonable time during normal
business hours at FCMI's place of business and make copies thereof.
(i) Advise Owner as to insurance coverage and administer Owner's
insurance program. FCMI shall, to the extent requested by Owner,
assist Owner in procuring insurance coverage.
(j) Organize and administer periodic meetings with Owner in order to
review the status of the Shopping Center and establish direction as
necessary.
(k) Assist, as requested by owner, in any application by Owner for a
zoning change or other application made by Owner to any governmental
authority relating to the Shopping Center.
(l) Supervise and assist in the establishment of an advertising and
promotional program for the Shopping Center.
(m) Establish and supervise a marketing plan for the Shopping Center.
(n) Initiate and supervise advertisement and promotion of the
Shopping Center, including the grand opening.
(o) Review annually the tax assessments upon the Shopping Center and
recommend to Owner when deemed appropriate by FCMI that proceedings
be instituted by Owner to contest or appeal such assessments.
(p) Deposit all funds of every kind and nature received by FCMI for
Owner pursuant to this Agreement immediately in the Bank Accounts
[as described in Article II(e)]. Subject to Article II(e),
officers or employees of FCMI shall disburse from said account
funds necessary for the operation and maintenance of the Shopping
Center provided: (i) the item or purpose for
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which disbursement is to be made has previously been approved by
Owner in the Shopping Center Budget, or (ii) the item has otherwise
been approved by Owner in writing, or (iii) the item is within a
contingency line item in an amount to be agreed upon annually by
Owner and FCMI which FCMI may use in any fiscal year for items not
approved in the Shopping Center Budget, not including monies
expended for "emergencies" (hereinafter defined); in "emergencies"
disbursements may be made for items not previously approved by
Owner. Except as expressly permitted above, FCMI shall not have any
authority to disburse funds belonging to Owner from said account. As
used herein, "emergencies" shall mean any sudden, unexpected
happening in which a failure on the part of FCMI to act immediately
would cause appreciable risk of damage to person or property within
the Shopping Center. Even in an "emergency", FCMI shall exercise
good faith efforts to obtain the approval of Owner, if reasonably
possible, before making any such "emergency" expenditure.
(q) At least quarterly, after payment of Management Fees due FCMI, and
allowing reasonable reserves as approved by Owner to be held for the
payment of operating expenses and real estate taxes thereafter
coming due and payable and for other items in the Shopping Center
Budget which may not be operating expenses, together with a proper
accounting, remit the net amount due to Owner.
(r) Perform such other related normal management functions as shall
pertain to the Shopping Center as contemplated by this Agreement.
ARTICLE III
TERM
This Agreement shall commence upon the execution of this Agreement and
shall continue for a period of five (5) years after the opening of the Shopping
Center for business to the public ("Expiration Date"), unless earlier terminated
as provided by the terms of this Agreement.
ARTICLE IV
TERMINATION
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(a) Termination by Owner without Cause. This Agreement shall terminate as
of the Expiration Date.
(b) Early Termination By Owner. Notwithstanding anything herein contained
to the contrary, Owner shall have the right to terminate this Agreement upon the
following terms and conditions:
(i) Owner shall have no right to terminate the Agreement during
Years 1-3 of this Agreement, except as provided in Article IV(c) below;
(ii) Beginning in Year 4, Owner shall have the right to terminate
this Agreement, provided Owner otherwise is not in default of this Agreement,
upon delivering to Agent a written notice of termination at least ninety (90)
days prior to the commencement of Year 4 ("Termination Notice") and the payment
by Owner to Agent of a termination fee of One Million Dollars ($1,000,000.00).
The termination fee shall be paid in two (2) equal installments. The first
installment of $500,000.00 shall be tendered with the Termination Notice. The
second installment shall be paid on or before the commencement of Year 4. In the
event that Owner fails to timely give the Termination Notice and/or fails to pay
the full amount of the termination fee, then Owner shall be deemed to have
waived its right of early termination of this Agreement in Year 4;
(iii) As of Year 5, Owner shall have the right to terminate this
Agreement, provided Owner otherwise is not in default of this Agreement, upon
delivery to Agent of a Termination Notice at least ninety (90) days prior to the
commencement of Year 5 and the payment by Owner of a termination fee of Five
Hundred Thousand Dollars ($500,000.00). The termination fee shall be paid in two
(2) equal installments. The first installment of $250,000.00 shall be tendered
with the Termination Notice. The second installment shall be paid on or before
the commencement of Year 5. In the event that Owner fails to timely give the
Termination Notice and/or fails to pay the full amount of the termination fee,
then Owner shall be deemed to have waived its right of early termination of this
Agreement in Year 5;
(c) Termination by Owner for Cause. This Agreement may be terminated by
Owner "for cause" at any time during the Term if the Event of Default is not
cured within sixty (60) days' written notice to FCMI, or on such later date of
termination as may be stated in Owner's notice. In the event of a termination
for cause, Property Manager shall be entitled, as its sole and exclusive remedy,
to receive such earned and unpaid Management Fees and fees for Extraordinary
Services as may remain, if any, after Owner has offset any damages
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or other amounts owed to Owner by FCMI. The following shall constitute an Event
of Default:
(i) If FCMI fails to use commercially reasonable efforts to
cooperate with Owner, the Leasing Agent or any third party brokers in connection
with Shopping Center leasing;
(ii) If FCMI breaches its duty to Owner to operate, manage and
promote the Shopping Center in Owner's best interest;
(iii) If FCMI, subject to fire, earthquake, acts of God, and other
events beyond the control of FCMI (which shall not include financial inability),
and subject to the performance by tenants of their obligations under their
leases, fails to maintain the operating assets of the Shopping Center in good
working order or repair and to keep the Shopping Center properly clean and free
of debris based upon the approved Shopping Center Budget and the operational
plan;
(iv) If FCMI suspends or discontinues business, or is enjoined,
restrained or in any way prevented by court order from conducting all or a
substantial part of its regular business activities;
(v) If a court enters a decree or order for relief in respect of
FCMI in an involuntary case under the federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or appoints a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of FCMI or for any
substantial part of FCMI's property, or for the winding-up or liquidation of
FCMI's affairs, and such decree or order continues unstayed and in effect for a
period of sixty (60) consecutive days;
(vi) If FCMI commences a voluntary case or action under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, or consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of FCMI or for any
substantial part of FCMI's property, or makes any assignment for the benefit of
creditors, or fails generally to pay its debts as such debts become due, or
takes any action in furtherance of any of the foregoing;
(vii) If FCMI fails to observe or perform any of its material
obligations under this Agreement, and such failure continues for sixty (60) days
after written notice thereof has been given by Owner to FCMI; provided, however,
that if the breach is of a nature which
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cannot be corrected, cured or remedied, no sixty (60) day cure period shall be
required and Owner's termination shall be effective one hundred twenty (120)
days upon notice (or on the later date stated in such notice);
(viii) If any fraud is perpetrated by FCMI, or if any representation
or warranty of FCMI made in this Agreement or in any proposal, application,
financial statement or other writing delivered by FCMI at any time pursuant to
this Agreement proves to have been incorrect, incomplete or misleading in any
adverse material respect when made; and
(ix) If FCMI is at any time no longer affiliated with Forest City
Enterprises, Inc.
(d) Termination by FCMI. This Agreement may be terminated by FCMI without
cause at any time on or after the Expiration Date (after expiration of initial
term) upon one hundred twenty (120) days' prior written notice to Owner.
(e) Termination by FCMI for Cause. FCMI may terminate this Agreement upon
the occurrence of a default by Owner hereunder; provided, however, in the event
of such default, FCMI first shall notify Owner in writing of the exact nature of
the default and FCMI's intention to terminate this Agreement as a result of the
default. Owner shall have sixty (60) days from receipt of such notice to cure
the default (other than monetary defaults for which Owner shall have thirty (30)
days to cure), or such longer period as may be reasonably necessary to effect a
cure, provided Owner promptly commences to cure such default and thereafter
diligently prosecutes the cure to completion.
(f) Orderly Transition. In the event of any termination of this Agreement,
FCMI shall, at a mutually agreed upon time, (i) deliver to the person and/or
address designated by Owner all accounts, books, records, files and documents in
FCMI's possession relating to the Shopping Center and all existing and
prospective tenants of the Shopping Center, and (ii) cooperate with Owner and
any replacement property manager designed by Owner to effect an orderly
transition of the management and operation of the Shopping Center to FCMI's
replacement. The obligations set forth in this section shall survive termination
of this Agreement.
ARTICLE V
COMPENSATION
(a) Owner and FCMI expect that FCMI will begin its management services
immediately upon execution of this Agreement or sooner if Owner requests FCMI's
services and Owner will for said period reimburse FCMI on a monthly basis the
actual cost incurred
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by FCMI in performing said management services and using FCMI's in-house
personnel therefor in accordance with an accounting of said costs to be
furnished to Owner monthly. FCMI shall prepare proposed budgets for the
pre-opening ("Pre-Opening Budget") and for the Grand Opening ("Grand Opening
Budget") for Owner's review and approval based upon a detailed breakdown of
FCMI's personal rates and costs to be charged to Owner by FCMI. The above costs
to be paid by Owner to FCMI upon receipt of invoice. For purposes of this
Agreement, "opening date of the Shopping Center for business to the public"
shall mean the date that the first tenant in the Shopping Center opens for
business.
(b) Owner agrees that beginning on the opening date of the Shopping Center
for business with the public, in consideration of all other management services
to be performed by FCMI under or pursuant to the terms of this Agreement, Owner
shall pay to FCMI a fee (the "Management Fee"), paid monthly, in an amount equal
to two percent (2%) of all gross rents received from the operation of the
Shopping Center from any source whatsoever (excluding therefrom payments
received or due for reimbursement of actual expenses incurred from the operation
of the Shopping Center such as common area maintenance costs, real estate taxes,
insurance and the like) including, without limitation, all minimum (sometimes
referred to as "fixed" or "basic") rents, percentage rents, overage rents, and
license fees received or accrued by FCMI from tenants (including, without
limitation, all department stores, guarantors, sublessees, assignees, licensees
and concessionaires) in the Shopping Center during the term of this Agreement.
In no event shall the management fee be less than $600,000 on an annualized rate
per year paid monthly ("Minimum Management Fee"); provided, however, during
Phase I, the Minimum Management Fee shall be $450,000 per year. In the event
that Phase II of the Shopping Center shall not have opened for business after
the third year of the Term, then the Minimum Management Fee of $600,000 shall
apply commencing in year four.
Except for extraordinary services and expenses ("Extraordinary Items"),
the fees paid to FCMI pursuant to this Article shall constitute full
compensation for the services to be performed and all expenses to be incurred by
FCMI hereunder including, without limitation, general office and overhead,
travel, employee salaries, benefits and other compensation [excluding all
on-site personnel costs which are a direct project cost pursuant to Article
II(g)] and all other costs and expenses of FCMI in performing its duties
hereunder.
Owner and FCMI recognize that there may be circumstances not capable of
definition in this Agreement which by their nature are not a part of FCMI'S
Obligations as set forth in
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Article II. Such services are designated by the parties as "Extraordinary
Services" and in general relate, without limitation, to circumstances such as
major litigation, special construction requirements, financings, developmental
and technical services, tenant coordination, real estate tax contests,
supervision of any of the foregoing by FCMI's employees, etc., in which or for
which FCMI might employ third parties such as lawyers, expert consultants or
other specialized personnel.
Owner recognizes that FCMI, as manager of shopping centers, maintains a
staff of persons having particular experience, knowledge and skills in multiple
aspects of shopping centers such as, but not limited to, an in-house legal
department, an in-house real estate tax department, an in-house construction
department, etc., whose services could be purchased from third parties, and who
may or may not regularly or routinely perform services as part of FCMI's
management personnel ("Non-Management Personnel").
Owner agrees that when circumstances occur requiring the performance of
Extraordinary Services and if Owner elects to use FCMI's Non-Management
Personnel to perform such Extraordinary Services either in connection with the
supervision of third parties or in reference to the employment of third parties,
that FCMI should be entitled to reimbursement by Owner for FCMI's actual cost
and expenses incurred by FCMI because of such Extraordinary Services, except for
Tenant Coordination services which charges are listed in Exhibit "D" attached to
this Agreement.
When, in the opinion of FCMI, Extraordinary Services are required
hereunder, FCMI shall present to Owner a list of such Extraordinary Services
accompanied by a brief explanation of their extraordinary nature and an estimate
of FCMI's costs and expenses to be incurred, in the performance of such
Extraordinary Services in sufficient detail to relate such costs and expenses to
the specific Extraordinary Services listed. If Owner elects to engage FCMI to
perform such Extraordinary Services, then Owner shall reimburse FCMI monthly in
addition to the Management Fee for such Extraordinary Services. If Owner elects
not to engage FCMI to perform the Extraordinary Services, then FCMI shall have
no obligation or liability to perform the Extraordinary Services, and Owner may
engage such other third parties to perform such matters at Owner's sole cost and
expense.
ARTICLE VI
FCMI'S STAFF
In order to perform the services required by this Agreement, it will be
necessary for FCMI to have in its employ various personnel, including certain
executive staff. For
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purposes of this Agreement, "executive staff" shall mean the Shopping Center
Manager, Assistant Manager and Marketing Director. Owner shall have the right to
pre-approve the hiring of the executive staff, which approval shall not be
unreasonably withheld. FCMI agrees that the staff available to it for work
hereunder shall at all times consist of a sufficient number of appropriately
trained, experienced and otherwise qualified personnel to enable it to
efficiently and effectively carry out its obligations pursuant to this
Agreement. FCMI further agrees that it shall use at least so much of the time
and effort of such personnel as is reasonable to inure proper performance of
FCMI's obligations under this Agreement. Owner and FCMI each hereby covenant and
agree (i) not to hire or employ the employees of the other during the term of
this Agreement, and (ii) not to hire or employ any former employee for a period
of one (1) year after an employee leaves the employment of the other.
Whenever legal services of outside counsel are required in order to
perform properly any of the services described herein, such services shall be
performed by counsel representing and paid by Owner.
ARTICLE VII
ASSIGNMENT
FCMI shall not (but Owner may), directly or indirectly, assign, transfer,
mortgage, pledge, sell, hypothecate, or otherwise encumber (or permit any of the
foregoing) (collectively, a "Transfer") in any manner or by any means
whatsoever, whether voluntarily or by operation of law, all or any part of its
interest in or obligations arising out of this Agreement. In the event of a
Transfer by Owner, Owner shall notify FCMI of the transferee proposed and said
transferee shall assume the obligations of Owner under this Agreement.
ARTICLE VIII
NOTICES
Every notice, demand, direction, consent, approval, request and other
communication required or permitted hereunder ("Notice') shall be in writing,
sent by (i) registered or certified United States Mail, postage prepaid, return
receipt requested, or (ii) overnight delivery by a nationally recognized
delivery service, or (iii) hand delivered to whomever the Notice is required or
permitted to be sent, and addressed as stated below:
To FCMI: Forest City Management, Inc.
700 Terminal Tower
Cleveland, Ohio 44113-2203
Attn: Mark Randol
With a copy to: Forest City Enterprises, Inc.
10800 Brookpark Road
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Cleveland, Ohio 44130
Attn: William M. Warren, General Counsel
To Owner: Las Vegas Sands, Inc.
3355 Las Vegas Boulevard, South
Las Vegas, Nevada 89109
Attn: William Weidner, President
Any party may change the address to which Notices served upon it are to be
sent by ten (10) days' prior Notice informing the other parties of the change in
address. All Notices shall be deemed effectively given upon the earlier of
receipt of the Notice or refusal to accept delivery thereof.
ARTICLE IX
AMENDMENT
This Agreement shall be subject to amendment only by a writing signed by
Owner and by FCMI.
ARTICLE X
SEVERABILITY
If any term or provision of this Agreement, or the application thereof to
any person or circumstance, shall to any extent be held invalid or unenforceable
by a court of competent jurisdiction, such result shall not affect the other
terms and provisions of this Agreement or applications thereof which can be
given effect without the relevant term, provision or application, and to this
end the parties agree that the provisions of this Agreement are and shall be
severable.
ARTICLE XI
REMEDIES CUMULATIVE
All rights, privileges and remedies afforded the parties by this Agreement
shall be deemed cumulative and not exclusive. In the event of a breach of or
other failure to perform as required under this Agreement, the party not
breaching or defaulting shall, in addition to all rights and remedies herein
provided, have all rights and remedies available at law or in equity.
ARTICLE XII
SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties and, except as expressly otherwise provided, their respective permitted
successors and assigns.
ARTICLE XIII
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LAW APPLICABLE
The parties hereto agree that the laws of the State of Nevada shall govern
the enforcement, construction and other matters related to or in connection with
this Agreement.
ARTICLE XIV
CONSENT OR WAIVER
No consent or waiver, express or implied, by either party to this
Agreement to, of or for any breach or default by the other party in performance
of its obligations hereunder shall be deemed or construed to be a consent or
waiver to or for any other breach or default in performance by such other party
of the same or any other obligation of such party hereunder. Failure on the part
of either party to complain of any act or failure of the other party to this
Agreement or to declare the other party in default, irrespective of how long
such failure continues, shall not constitute a waiver by such party of its
rights hereunder.
ARTICLE XV
INDEMNITY
(a) FCMI shall indemnify and save Owner harmless from and against all
damages, claims, losses, liabilities, costs and expenses (including reasonable
legal fees) arising out of the wrongful or negligent acts or inactions of FCMI
or FCMI's agents, servants, employees or subcontractors which are performed
contrary to this Agreement or outside of the scope of FCMI's authority under
this Agreement.
(b) Owner shall indemnify, defend and hold FCMI harmless for any liability
directly or indirectly incurred by FCMI in connection with its services under
this Agreement, which are performed pursuant to this Agreement or are within the
scope of FCMI's authority under this Agreement other than the wrongful or
negligent acts or inactions of FCMI or FCMI's agents, servants, employees or
subcontractors.
ARTICLE XVI
INSURANCE/BONDING
a) Owner shall purchase and maintain Property and Rental Income Insurance
for the Shopping Center during the term of this contract as follows:
(i) So called all-risk coverage for the building and Owners'
personal property in an amount equal to the replacement value.
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(ii) Flood and Earthquake coverage in such amounts selected by
Owner.
(iii) Comprehensive Boiler and Machinery coverage.
(iv) Rental Income Insurance equal to one (1) years rental
income for perils insured by the policies in items (i), (ii) and (iii) above.
b) The above policies will be subject to deductibles selected by
Owner.
c) The above policies will contain an agreed amount clause waiving the
co-insurance clause and a waiver of subrogation clause in favor of FCMI.
d) Owner shall maintain liability coverage as follows:
(i) Commercial General Liability Coverage for a combined single
limit of $1,000,000 per occurrence applicable to bodily injury and property
damage and $1,000,000 for personal and advertising injury.
(ii) Excess liability coverage in the amount of $10,000,000 above
the limits provided in item (i) above.
(iii) The above insurance shall name FCMI and its directors,
officers and employees as additional insureds and indicate it is primary
coverage and not contributing with insurance purchased by FCMI.
e) FCMI shall purchase and maintain during the period of this contract the
following insurance:
(i) A Fidelity Bond insuring its employees against dishonesty and
which Bond shall include Depositors Forgery coverage in the amount of $1,500,000
with a deductible not to exceed $10,000.
Such Bond shall name Owner as an additional insured and
provide the right of Owner to directly make claim under the Bond.
(ii) Workers' Compensation insuring its employees for operations in
Nevada and elsewhere including Stop Gap Liability and Employers' Liability:
Workers' Compensation - Nevada - Statutory Liability
Elsewhere - Statutory Liability
Stop Gap Liability - $1,000,000
Employers Liability - $1,000,000
(iii) Auto Liability
Covering its use of any $1,000,000 combined single limit
vehicle - per occurrence BI and PD
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(iv) Excess Liability above Stop - $10,000,000 combined single limit
Gap Employers Liability and per occurrence BI and PD.
Auto Liability
(v) The auto liability and excess liability policies shall name
Owner, its directors, officers and employees as additional insureds and indicate
it is primary insurance and not contributing with insurance purchased by Owner.
f) Owner shall provide to FCMI:
(i) Certificates of Insurance as evidence of Owner's insurance and
providing thirty (30) days advance notice to FCMI prior to cancellation or
material change.
(ii) Certified copies of policy endorsements:
(1) Providing the notice of cancellation or material change,
(2) Naming of FCMI, its directors, officers and employees as
additional insured and indicate it is primary insurance and not contributing
with insurance purchased by FCMI.
(3) Waiving subrogation.
g) FCMI shall provide to Owner:
(i) Certificate of Insurance as evidence of FCMI's insurance and
providing thirty (30) days advance notice to Owner prior to cancellation or
material change in coverage.
(ii) Certified copies of policy endorsements:
(1) Providing the notice of cancellation or material change.
(2) Naming of Owner, its directors, officers and employees as
additional insureds and indicating it is primary insurance and not contributing
with insurance purchased by Owner.
(3) Providing for Owner to make claim under FCMI Fidelity
Bond.
ARTICLE XVII
MISCELLANEOUS
(a) All services performed on site by FCMI under the provisions of this
Agreement shall be deemed to be performed by Owner and all reasonable expenses
properly incurred in connection with the performance of such on-site services
shall be the obligation of Owner.
(b) No Publicity. FCMI agrees not to announce this Agreement to the public
without Owner's prior written approval.
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(c) Confidentiality. Each of the parties hereto, on behalf of themselves,
their officers, directors, shareholders, employees and agents agree not to
disclose the terms and conditions of this Agreement except to their respective
auditors and attorneys, or to the extent that disclosure is required as a matter
of law. This restriction shall not apply to information in the public domain or
that becomes part of the public domain through no fault of said party.
(d) Authority. FCMI understands and agrees that no person whatsoever,
regardless of such person's apparent authority, has any authority to amend,
modify, terminate, or otherwise change this Agreement on behalf of Owner, or
waive any of Owner's rights and remedies hereunder, except for Owner's Chairman
of the Board, who must do so in writing signed by him, and FCMI hereby waives
and relinquishes any and all claims of apparent authority.
(e) Binding. This Agreement shall be binding upon the parties hereto and
their permitted successors and assigns.
(f) Entire Agreement. This Agreement sets forth all of the covenants,
promises, agreements, conditions and understandings among the parties hereto
regarding the management of the Shopping Center and any other covenants,
promises, agreements, conditions and understandings are deemed merged and
integrated herein.
(g) Time is of the Essence. Time is of the essence under this Agreement.
ARTICLE XVIII
LENDER PROVISIONS
(a) If, as is contemplated, Owner assigns this Agreement and its rights
hereunder as security to one or more of its mortgage lenders (each, a "Lender"),
Owner shall promptly notify FCMI of the identity of each Lender, and FCMI will,
on request, execute and deliver an amendment to this Agreement containing terms
and conditions reasonably requested by a Lender, so long as such terms and
conditions do not materially change, alter or increase FCMI's obligations or
reduce in any way FCMI's Management Fee hereunder.
(b) Upon the occurrence of a Foreclosure Event (as defined below), New
Owner (as defined below) shall have the right to elect (i) to terminate this
Agreement by written notice to FCMI effective upon not less than thirty (30)
days written notice to FCMI (the "Termination Option"), or (ii) to require FCMI
to continue to perform under this Agreement for the benefit of New Owner (the
"Attornment Option"). If New Owner elects the Termination Option, then (1) FCMI
shall, notwithstanding anything in Article IV to the
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contrary, not be entitled to any termination fee, (2) New Owner shall be liable
for any unpaid Management Fees [as defined in Section V(b)], and (3) the
provisions of Section IV(f) shall apply. If New Owner elects the Attornment
Option, then (1) FCMI shall attorn to and recognize New Owner as Owner's
successor hereunder, and shall promptly execute and deliver any instrument that
New Owner may reasonable request to evidence such attornment, and (2) New Owner
will assume all of Owner's obligations under this Agreement from and after the
effective date of such assumption, including, without limitation, the payment of
all Management Fees due FCMI and the requirements of Article IV(b), and this
Agreement will thereafter continue as a direct agreement between New Owner and
FCMI for the balance of the term of this Agreement. As used in this Article
XVIII, the term "Foreclosure Event" shall mean any event (including, without
limitation, a foreclosure action, the exercise of a power of sale right or the
delivery of a deed in lieu of foreclosure) pursuant to which a Lender or its
designee or assignee becomes the owner of the Shopping Center (provided that
such New Owner is not affiliated, directly or indirectly, with the Owner or its
principals), and the term "New Owner" shall mean the entity (either a Lender or
its designee or assignee) that acquires title to the Shopping Center pursuant to
a Foreclosure Event.
(c) FCMI agrees to simultaneously deliver to each Lender a copy of all
Notices [including, without limitation, all Notices pursuant to Section IV(g)]
given by FCMI to Owner hereunder, provided that Owner or such Lender has given
FCMI written notice of such Lender's notice address. Upon the occurrence of any
default by Owner hereunder, each Lender shall have the same period given Owner
for remedying such default, and FCMI shall accept any such remedy by or on
behalf of a Lender as though the same had been done or performed by Owner within
the period allowed Owner hereunder; provided, however, that in the event of the
occurrence of a default by Owner which by its nature is not reasonably
susceptible of being cured by a Lender unless and until such Lender obtains
possession of the Shopping Center (i.e. a non-monetary default) if any Lender
(i) notifies FCMI of its election to promptly proceed with due diligence to
pursue a Foreclosure Event or to otherwise acquire possession of the Shopping
Center (either directly or through a trustee or receiver), (ii) FCMI is paid all
of its Management Fees on a current basis, and (iii) complies at all times with
such notification, then FCMI will not take action to terminate this Agreement
until and unless either (1) no Lender is in compliance with the foregoing
clauses (i), (ii) and (iii), or (2) a Foreclosure Event occurs or a Lender
obtains possession of the
18
<PAGE>
Shopping Center (in which case the cure period set forth in Section IV(g)
shall begin from and after the date of such event).
(d) No amendment or modification to this Agreement shall be binding or
effective without the prior written consent of each Lender with respect to which
owner has given a Notice to FCMI pursuant to Section XVIII(a), which consent
shall not be unreasonably withheld or delayed.
(e) In the event of any conflict between the provisions of this Article
XVIII and any other provisions of this Agreement, the provisions of this Article
XVIII shall govern and control.
(f) All Lenders shall be entitled to rely on and enforce the provisions of
this Article XVIII.
IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement as
of the day and year first above written.
LAS VEGAS SANDS, INC.,
a Nevada corporation
By: /s/ William P. Weidner
----------------------
Its: President
----------------------
FOREST CITY COMMERCIAL
MANAGEMENT, INC., an Ohio
corporation
By: /s/ David J. La Rue
----------------------
Its: Secretary
----------------------
<PAGE>
EXHIBIT "D"
TENANT COORDINATION FEE STRUCTURE
A. SERVICES PROVIDED.
Tenant Coordination services include:
1. Prepare, update and distribute bi-monthly Tenant Status Reports.
2. Verify and approve Tenant allowance paperwork.
3. Maintain a point of contact for Tenant and Tenant's Architect.
4. Maintain and distribute Mall and Tenant lease plans.
5. Maintain archive copies of all previous Tenant drawings.
Drawing Review (for adherence in Landlord Criteria).
1. Review and distribute preliminary Tenant plans.
2. Review and distribute final architectural, mechanical, electrical
and structural construction drawings.
3. Final review of Tenant's sign drawings.
4. Final review of Tenant's color/sample boards.
Landlord Criteria for Tenants (if desired by Owner).
1. Preparation of Tenant Handbooks for Retail and Food Court.
2. Answering questions and negotiating interpretation to Landlord's
Criteria.
3. Punch Listing and Follow-Up on Tenant Construction.
B. FEE STRUCTURE*
Drawing Reviews and General Tenant Coordination.
Retail Tenants in previously unoccupied spaces:
<5,000 s.f. $ 3,500.00
>5,000 s.f. 4,500.00
Restaurant Tenants 5,000.00
Inline Food Tenants (Food Court Tenants, if applicable) 3,000.00
Retail Tenants in previously occupied spaces which
are being redeised or will require Landlord work 3,000.00
Retail Tenants in previously occupied spaces not
requiring Landlord work 2,500.00
Retail Tenants in previously occupied spaces performing
minor remodeling and/or storefront renovation 1,500.00
Sign renovation only 500.00
Kiosk Tenants 2,000.00
Related work outside the scope of general Tenant
Coordination Services 60.00/hr.
<PAGE>
CAD Drafting/Design/TLP's, Lease Plans.
TLP Preparation >6,000 s.f. 1,000.00
>3,000 s.f. 600.00
<3,000 s.f. 500.00
Lease Plan Update (Convention) 500.00
(Budget) 250.00
Design/Drafting Services 60.00/hr.
Handbook Preparation
New Handbook (does not include printing costs) $ 25,000.00
* Increased by all Cities "CPI" index annually.
LETTERHEAD OF SULLIVAN INSURANCE GROUP
TO: WALLY BACSIK
FROM: BILL CARRICK
SUBJECT: PRIMARY LIQUIDATED DAMAGES INSURANCE
REVISED COVER NOTES
DATE: SEPTEMBER 11, 1997
The enclosed cover notes contain the following revisions of the original cover
notes sent to you on August 4th.
Page 1 (Lloyds and Companies)
1. The words "authorized copy" are added at the top of each page.
2. The date at the top right has been changed from 30 July to 14 August.
(This is the date of issuance, and does not affect the 30 July effective
date of the insurance.)
3. The signature of the Director at the bottom right of each page has been
changed from the Chairman of C.J. Coleman to that of the Corporate
Secretary.
4. The number of the cover note has been changed from 11031 to 11031A.
Page 14 (Lloyds and Companies)
6. The premium dollar amounts are shown.
7. a) Lloyds' percentage of cover has been increased from 78.8761% to 86.4930%.
(This corresponds with the list of Lloyds syndicates sent to you on
August 11.)
b) Companies' percentage of coverage has been reduced from 20.1231% to
13.5070%.
Page 15 & 16 (Lloyds)
8. The list of individual syndicates is included in the cover note.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
In accordance with your instructions we have effected the following:
FORM "J" (a) NMA 2421
ASSURED LEHRER MCGOVERN BOVIS INC.
ADDRESS 200 Park Avenue
New York,
NY 10166, USA
PERIOD From 30th July, 1997 to the date of Substantial Completion of the
Project (contracted to occur within two (2) years from the
Commencement Date, as such two (2) year time period may be adjusted
pursuant to the Agreement).
INTEREST POLICY in respect of the Construction Management Agreement dated as
of the 15th day of February, 1997 by and between Las Vegas Sands,
Inc. ("LVSI") and the Assured, (the "Agreement"). When used in this
Policy the term "Owner" shall mean LVSI except that LVSI may at any
time during the currency of this Policy, by a Notice given to
Underwriters in accordance with Clause (23) of this Policy, specify
a Permitted Assignee, Lender or designee of Lender to be the
successor Owner hereunder by setting forth the full name, address,
telephone and facsimile numbers of and the name of the individual to
whom Notices with respect to the Policy should be directed at such
entity; provided, however, that upon the giving of such a Notice
LVSI shall cease to be the Owner under and shall cease to have any
further rights under or in respect of the Policy, including, without
limitation, any right to payment under the Policy and any right to
make any claim under and/or to commence and/or to prosecute any
arbitration and/or litigation against Underwriters relating to the
Policy or on any claim or right asserted to arise under the Policy.
WHEREAS the Agreement provides for the construction of the first
phase of Grand Venetian Hotel / Casino to be located in Las Vegas,
Nevada; and
WHEREAS the Guaranteed Maximum Price is US$ 547,431,225, subject to
adjustment as provided in the Agreement; and
WHEREAS the Commencement Date of the Project was 21st April,
1997; and
Continued...
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-2-
In accordance with your instructions we have effected the following:
INTEREST
(Continued) WHEREAS Substantial Completion of the Project is contracted to occur
within two (2) years from the Commencement Date, as such two (2)
year time period may be adjusted pursuant to the Agreement (the last
day of such two (2) year time period hereinafter referred to as the
"Guaranteed Completion Date").
NOW this Policy is to pay the Owner, subject to the Conditions,
Warranties, Definitions and Exclusions set forth herein, the
liquidated damages payable under the terms of Section 6.11 (a) only
of the Agreement and to be calculated in accordance with the terms
set forth within subsection I.B only of Schedule C to the Agreement
for each day that Substantial Completion of the Project is delayed
beyond the date which is 30 days after the Guaranteed Completion
Date directly as a result of any act of neglect, error or omission
on the part of the Assured, its Contractors and their subcontractors
of all tiers in the scope of work to be performed by the Assured
under the Agreement, and/or any other cause for which the Assured is
not entitled to relief or excuse under the terms of the Agreement.
In consequence thereof, Underwriters hereby agree, upon a valid
claim having been established to the reasonable satisfaction of
Underwriters as falling within the terms and conditions of this
Policy, to pay the Owner within 45 days from the date a valid claim
has been established to the reasonable satisfaction of Underwriters
in respect of loss(es) sustained which are the subject of such
claim, and thereafter within 45 days of any further loss(es)
sustained (the amount of the loss to be paid to be calculated on a
monthly basis); it being understood and agreed that such
reimbursements shall be made on a provisional basis pending final
determination and settlement of the amount to be paid under this
Policy, provided however that in no circumstances shall
Underwriters' maximum liability exceed the stated limits provided
under this Policy.
Underwriters' maximum liability under this Policy limited to
US$ 24,062,000 in all hereunder.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-3-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS (1) Notice of Loss/Due Diligence Clause:
Upon the Assured's discovery of any event likely to give rise to
a claim under this Policy, the Assured shall as soon as
reasonably possible give notice thereof to Underwriters hereon,
and shall use good faith efforts (bearing in mind the identity
and resources of the Assured and available Project funds) to
timely complete the Project as soon as practicable in accordance
with the Agreement and to avoid or diminish any loss herein
insured.
(2) Non-Contribution Clause:
This Policy does not cover any loss or damage which at the time
of the happening of such loss or damage is insured by or would,
but for the existence of this Policy, be insured by any other
existing Policy or Policies except in respect of any excess
beyond the amount which would have been payable under such other
Policy or Policies had this Policy not been effected; provided,
however, that this Clause (2) shall not apply with respect to
any policy of Builder's Risk insurance or of Professional
Liability insurance in force with respect to the Project.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-4-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (3) Subrogation Clause:
If the Underwriters become liable for any payment under this
Policy in respect of loss, damage or liability the Underwriters
shall be subrogated, to the extent of such payment, to all the
rights and remedies of the Assured (including, without
limitation, claims for liquidated damages) against any party in
respect of such loss, damage or liability and shall be entitled
at their own expense to make claims and sue in the name of the
Assured; provided, however, that all amounts recovered by
Underwriters in the exercise of such subrogation rights shall be
allocated and paid by Underwriters as follows: (i) first, to
Underwriters and the Assured to reimburse them for their
respective expenses incurred in effecting such recoveries; (ii)
second, to the Assured to the extent of any loss incurred by the
Assured in respect of the first 30 days of delay in achieving
Substantial Completion under Section 6.11 (a) of the Agreement;
(iii) third, to Underwriters to the extent of any loss for which
they have made payment in respect of delay longer than 30 days
in achieving Substantial Agreement under Section 6.11 (a) of the
Agreement; and (iv) any remainder to the Assured. The
Underwriters and the Assured agree to co-operate in the pursuit
of such rights and remedies with a view to maximizing their
respective recoveries. The Assured shall give to the
Underwriters its reasonable assistance as the Underwriters may
reasonably require to secure their rights and remedies and, at
Underwriters' request, shall execute all documents necessary to
enable Underwriters effectively to bring suit in the name of the
Assured.
(4) Onus of Proof Clause:
In any action, suit or proceeding to enforce a claim for loss
hereunder, the burden of proving that the loss is recoverable
under this Policy shall fall upon the Owner.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-5-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (5) Service of Suit Clause:
It is agreed that in the event of the failure of Underwriters
hereon to pay any amount claimed to be due hereunder following
an arbitration decision, the Underwriters hereon, at the request
of the Owner will submit to the jurisdiction of a Court of
competent jurisdiction within the United States. Nothing in this
Clause constitutes or should be understood to constitute a
waiver of Underwriters' rights to commence an action in any
Court of competent jurisdiction in the United States, to remove
an action to a United States District Court, or to seek a
transfer of a case to another Court as permitted by the laws of
the United States or of any State in the United States.
It is further agreed that service of process in such suit may be
made upon Morgan, Lewis & Bockius LLP, 101 Park Avenue, New
York, NY 10178, and that in any suit instituted against any one
of them upon this contract, Underwriters will abide by the final
decision of such Court or of any Appellate Court in the event of
an appeal.
The above-named are authorised and directed to accept service of
process on behalf of Underwriters in any such suit and/or upon
the request of the Owner to give a written undertaking to the
Owner that they will enter a general appearance upon
Underwriters' behalf in the event such a suit shall be
instituted.
Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
Underwriters hereon hereby designate the Superintendent,
Commissioner or Director of Insurance or other officer specified
for that purpose in the statute, or his successor or successors
in office, as their true and lawful attorney upon whom may be
served any lawful process in any action, suit or proceeding
instituted by or on behalf of the Owner or any beneficiary
hereunder arising out of this contract of insurance and hereby
designate the above-named as the person to whom the said officer
is authorised to mail such process or a true copy thereof.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-6-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (6) Arbitration Clause:
Any dispute or other matter in question arising between the
Assured and/or the Owner on the one hand and Underwriters on the
other hand under, out of or in connection with or in relation to
this Policy shall be submitted to arbitration. The Assured or
the Owner, as the case may be and Underwriters each shall
nominate an arbitrator within thirty days of the date upon which
either gives the other written notice that it demands
arbitration hereunder and the two arbitrators so named shall
select an umpire before entering upon the arbitration. The
arbitrators shall consider the differences between the parties
and shall submit only such questions upon which they disagree to
the umpire.
A decision in writing of any two of the three (two arbitrators
and one umpire) when filed with the Assured or the Owner, as the
case may be and Underwriters shall be binding upon both. The
award rendered by the arbitrators shall be final and binding
upon the parties, subject to the indemnity limit, and judgement
thereon may be entered in any court having jurisdiction thereof.
The arbitrators and the umpire shall not be obliged to follow
judicial formalities or the rules of evidence except to the
extent required by governing law, that is, the state law of the
situs of the arbitration as herein agreed.
In the event that either party fails to appoint its arbitrator
within the time specified, the other party shall have the right
to appoint the said arbitrator forthwith.
If the arbitrators do not agree as to an umpire within thirty
days of their appointment, an umpire shall be promptly appointed
by the American Arbitration Association upon the application of
either of the two arbitrators. Each party shall submit its case
to both of the arbitrators within fifteen days of the
appointment of the umpire or within such period as may be agreed
by consent of both arbitrators and the umpire, and the
arbitrators and the umpire shall make their award in writing
within sixty days of the date on which the umpire has been named
and agreed. The said arbitrators and umpire shall not be under
the control or management of either party to this Policy.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-7-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (6) Arbitration Clause:
Each party shall pay the fee of its own arbitrator and half the
fee of the umpire, and the remaining costs of the arbitration
shall be paid as the award shall direct. Any arbitration shall
take place in New York, New York, unless otherwise agreed.
The parties hereto agree that they have entered into this Clause
to provide for a means of quickly settling disputes without
resort to litigation, but this Clause in no way infringes on any
rights accorded in the Service of Suit Clause of this Policy,
the sole effect and intent of which is to provide without waiver
of any defence an ultimate assurance of the amenability of
Underwriters to process in certain courts with respect to a
claim hereunder following an arbitration decision determining
that such amount is due.
(7) There shall be no cancellation of this Policy.
It being understood and agreed however that notwithstanding
anything contained herein to the contrary, this Policy may be
cancelled by Underwriters hereon only in the event of nonpayment
of premium by mailing to the Owner at the last mailing address
known by Underwriters, by registered or certified mail, written
notice stating when, not less than 10 days thereafter, such
cancellation will be effective, provided however that if the
Owner makes payment of said premium due within such notification
period, such notice of cancellation will be rescinded.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-8-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (8) Loss Payee Clause:
All claim payments due under the terms and conditions of
this Policy shall be made payable to the Owner, and the
Owner shall, notwithstanding Clause (6) of this Policy,
have the sole and exclusive right to assert claims and
to commence any arbitration and to commence any
litigation against Underwriters under or in connection
with (and only in accordance with) the provisions of
this Policy.
Payment of such losses by Underwriters to the Owner
shall be a sufficient and complete discharge of all of
Underwriters' obligations to the Assured and the Owner
in connection with said losses.
(9) It is a condition of this Policy that the Agreement is
signed and in force at the inception date of this
Policy.
(10) It is a condition of this Policy that the scope of work
to be performed by the Assured under the Agreement
incorporates neither (i) any equipment or technology of
a type without previous commercial application nor (ii)
any experimental method of construction.
(11) It is warranted by the Assured that the construction of
the Project will be or has been carried out by or under
the supervision of the Assured's Project personnel.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-9-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (12) It is warranted by the Assured that, except as
disclosed in the Information Summary described in Clause
(19) of this Policy, at the inception date of this
Policy, the Assured has no knowledge or information of
any matter, fact or circumstance which is likely to give
rise to a loss hereunder, provided that no such
knowledge shall be imputed or deemed imputed to the
Assured based on the Assured's judgement or opinion as
to when Substantial Completion will be achieved and\or
the likelihood of Substantial Completion being achieved
by the Guaranteed Completion Date unless any such
statement made by the Assured in the Information Summary
described in Clause (19) of this Policy relating to
such judgement or opinion was false or was not made in
good faith.
(13) Excluding any loss to the extent arising in consequence
of insolvency and/or financial default of any person,
firm or corporation whether a party to this insurance or
otherwise.
(14) War and Civil War Exclusion Clause:
Notwithstanding anything to the contrary contained
herein this Policy does not cover loss or damage
directly or indirectly occasioned by, happening through
or in consequence of war, invasion, acts of foreign
enemies, hostilities (whether war be declared or not),
civil war, rebellion, revolution, insurrection, military
or usurped power.
(15) Radioactive Contamination Exclusion Clause (Contingency):
This Policy does not cover any loss directly or indirectly
caused by or contributed to by or arising from:-
(a) ionising radiation or contamination by radioactivity from
any nuclear fuel or from any nuclear waste from the
combustion of nuclear fuel.
(b) the radioactive, toxic, explosive or other hazardous
properties of any explosive nuclear assembly or nuclear
component thereof.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-10-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (16) Excluding any loss arising directly or indirectly in
consequence of any failure by the Assured to give a
written notice of the type described in the last
sentence of subsection 3.3.24 of the Agreement within
the five (5) business day period described in said
sentence (assuming the Assured would have been entitled
to give such notice); or any other failure by the
Assured to exercise a right which it was aware of to
extend the 2-year period described in Section 6.10 of
the Agreement.
(17) Excluding any loss arising directly or indirectly in
consequence of any wilful, deliberate or intentional
misconduct on the part of the Assured (as opposed to the
exercise of good judgement), including but not limited
to wilful, deliberate or intentional failure on the part
of the Assured to comply with the terms of the
Agreement, or to obtain relief or excuse which it was
aware of and pursuant to which it is entitled to extend
the Guaranteed Completion Date under the provisions of
the Agreement.
(18) Non-Assignment:
The Assured shall not assign or transfer this Policy or
the benefits or obligations thereof to any other party
or person without Underwriters' prior written agreement.
(19) Information Truth and Materiality:
It is hereby understood and agreed that the statements
and particulars of information contained in this Policy
and written Information Summary dated [T.B.A.] submitted
by and on behalf of the Assured and seen by Underwriters
are in all material respects true and complete, are
material and made to induce Underwriters to issue the
Policy and shall form the basis of the Contract of
Insurance and are to be considered as incorporated
herein.
The Assured undertakes to inform Underwriters of
any material changes to these statements and particulars
of information (occurring prior to or subsequent to the
inception date of this Policy), including but not
limited to variations in the Agreement.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-11-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) This Policy excludes any loss arising directly or indirectly in
consequence of any such material changes or variations unless such
changes or variations are permitted by the terms hereof without the
approval of Underwriters or are approved in writing by Underwriters,
such approval not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, in the case of Scope Changes, only
the following types of Scope Changes must be approved in writing by
Underwriters, such approval not to be unreasonably withheld, who for
this purpose shall act through their Engineering Representative
High-Point Rendel (or such other Engineering Representative
designated by Underwriters): (i) any Scope Change involving a change
to the Guaranteed Maximum Price of 2% or more; (ii) any Scope Change
which either (a) extends the Guaranteed Completion Date by fifteen
(15) or more days or (b) changes the Guaranteed Completion Date to
any earlier date; and (iii) any Scope Change which involves a change
in construction methodology which materially impacts the phasing,
sequencing or scheduling of tasks for which the Assured is
responsible or a change in the sequencing or phasing of the Project
schedule which materially impacts the critical path of the schedule
for the Project. In the case of any Scope Change requiring
Underwriters' approval, Underwriters' Engineering Representatives
shall respond to any request for approval of such a Scope Change
from the Assured within five (5) business days of receipt of such
request and adequate information upon which to base a decision;
provided, however, if Underwriters' Engineering Representative shall
fail to respond within such five (5) business day period,
Underwriters' approval of such Scope Change shall be deemed to have
been given.
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-12-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (20) Misrepresentation:
This Policy shall be void if at any time the Assured has
concealed or misrepresented any material fact(s) or
circumstances) concerning this insurance or the subject
thereof, or interest of the Assured therein or in the
case of fraud or false swearing by the Assured relating
thereto; provided, however, that no such
misrepresentation or fraud shall be deemed to have been
made or committed with respect to any good faith
statement in the application for this Policy relating to
the Assured's judgement or opinion as to when
Substantial Completion will be achieved and/or the
likelihood of Substantial Completion being achieved
within the two (2) year time period set forth in Section
6.10 of the Agreement, as such time period may be
adjusted pursuant to the Agreement.
(21) Examination of Assured:
In the event of a claim for loss hereunder, the Assured
and the Owner shall, at the request of Underwriters or
their representative, submit to examination under oath,
and shall produce for examination, at such reasonable
place as is designated by Underwriters or their
representative, all documents in its possession or
control which relate to the matters in question, and
shall permit extracts and copies thereof to be made.
(22) Definitions:
The terms "Commencement Date", "Contractor", "Guaranteed
Maximum Price", "Lender", "Permitted Assignee",
"Project", "Scope Change" and "Substantial Completion"
shall have the same meaning assigned to such terms
within the Agreement.
(23) Any notice or other communication required or permitted
to be given pursuant to this Policy (each, a "Notice")
shall be given in writing and shall be given when
delivered by hand delivery, registered or certified mail
and/or facsimile transmission (provided the original of
a communication delivered by facsimile transmission is
also delivered by another means of delivery within three
business days of the date of the facsimile transmission)
to:
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-13-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) If to Underwriters:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention : Martin F. Conniff, Esq.
Fax : (212) 309 6273
Tel : (212) 309 6000
If to the Assured:
Lehrer McGovern Bovis, Inc.
200 Park Avenue
New York, NY 10166
Attention : Luther Cochran, Peter Marchetto and Mark Melson.
Fax : (212) 592 6997
Tel : (212) 592 6711
If to the Owner:
(Unless LVSI has designated a successor Owner in which event the
Notice particulars for Owner shall be as set forth in such
designation)
Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, NV 89101
Attention : Sheldon Adelson, David Friedman and Roger McElfresh
Fax :(702) 733 5620
Tel :(702) 733 5000
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-14-
In accordance with your instructions we have effected the following:
CONDITIONS
WARRANTIES
DEFINITIONS
EXCLUSIONS
(Continued) (24) Project Report Clause:
It is warranted by the Assured that it will provide
Underwriters Engineering Representative: High-Point
Rendel, 225 Broadway - Suite 2200, San Diego, CA 92101
(or such other Engineering Representative designated by
Underwriters), with monthly progress reports in the form
previously agreed to by the Assured, High-Point Rendel
and Underwriters and permft Underwriters' Engineering
Representative periodic site visits and meetings with
the Assured and its Contractors to review progress of
construction of the Project.
(25) Several Liability Notice:
The subscribing insurers' obligations under contracts of
insurance to which they subscribe are several and not
joint and are limited solely to the extent of their
individual subscription. Subscribing insurers are not
responsible for the subscription of any co-subscribing
insurer who for any reason does not satisfy all or part
of its obligations.
PREMIUM $728,418.10 (being 86.4930% of $842,170)
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-15-
In accordance with your instructions we have effected the following:
INSURERS
Various Lloyd's Underwriters 86.4930% of whole being
W. Deem Syndicate 994 12.4678%
W. Deem Syndicate 994 1.2468%
D.E.S. Shipley Syndicate 362 6.2338%
The Enterprise Consortium 9025 9.3507%
R.J. Kershaw Syndicate 102 5.1949%
I.C. Agnew Syndicate 672 3.1170%
M.H. Etheridge Syndicate 529 1.6624%
G.D. Williams Syndicate 47 1.4546%
A.F. Beazley Syndicate 623 1.0390%
J.H. Venton Syndicate 376 1.2262%
J.H. Venton Syndicate 2376 0.2284%
A. Taylor Syndicate 51 2.0780%
H.G. Jago Syndicate 205 1.2468%
A.W. Holt Syndicate 40 1.0390%
M.C. Watkins Syndicate 457 1.0390%
G.E. Lloyd-Roberts Syndicate 55 0.4156%
I.W.S. Wooten Syndicate 590 0.5994%
I.W.S. Wooten Syndicate 2591 0.1279%
M.E. Denby Syndicate 609 0.4156%
S. Lotter Syndicate 1051 0.4156%
D.P. Mann Syndicate 435 0.6234%
M.J. Cox Syndicate 990 0.7273%
H.H. Hayward Syndicate 1084 0.4156%
Continued....
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
<PAGE>
[LETTERHEAD OF C.J. COLEMAN & COMPANY LTD.]
Mr. W. Carrick Authorised Copy
590 South Road COVER NOTE NO. P.43917
Holden (Lloyd's)
Massachusetts 01520 14th August 1997
USA
-16-
In accordance with your instructions we have effected the following:
INSURERS
(Continued)
M.V. Howell Syndicate 1093 0.6234%
J.E. Mumford Syndicate 1141 0.4156%
M.E. Warrington Syndicate 1069 0.2078%
W. Deem Syndicate 994 8.9851%
D.E.S. Shipley Syndicate 362 1.0390%
G.F. Pipe Syndicate 506 1.4961%
G.F. Pipe Syndicate 2506 0.5818%
R.F. McCarthy Syndicate 1229 4.1560%
Enterprise Consortium 9025 8.3117%
J.N.C. Wooldridge Syndicate 1227 8.3117%
Subject to the terms and conditions C. J. COLEMAN & COMPANY LTD.
of the Policy(ies)
11031a
E.&.O.E. /s/ Kevin W. McCaughey /s/ Michael S. Wells
........................DIRECTOR
N.B. - Please examine the above carefully, and if it is incorrect, return
it immediately for alteration.
- Please note the (re)insurers with whom this (re)insurance has been
effected and inform us immediately if any of this security is
unacceptable to you.
GUARANTY OF PERFORMANCE
This Guaranty of Performance and Completion ("Guaranty") is entered
into by The Peninsular and Oriental Steam Navigation Company, a corporation
organized under the laws of England and Wales ("P&O"), in favor of Las Vegas
Sands, Inc. ("Owner").
We, P&O, refer to the Construction Management Agreement (as the same
may hereafter be amended or modified, the "Agreement") dated as of February 15,
1997 between our indirect, wholly-owned subsidiary, Lehrer McGovern Bovis, Inc.
a New York corporation ("LMB"), and Owner relating to the construction of the
Project and completion of the Work, and to the Guaranty of Completion and
Performance, dated as of August 19, 1997, executed and delivered by our indirect
wholly-owned subsidiary, Bovis, Inc., in favor of Owner (the "Completion
Guaranty"). Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Completion Guaranty.
1. In consideration of Owner entering into the Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, P&O hereby irrevocably and absolutely guarantees to Owner
the due, prompt, full and complete performance and satisfaction of all of the
duties, obligations and liabilities of Bovis under the Completion Guaranty
(collectively, the "Guaranty Obligations").
2. It shall not be a defense (and P&O hereby waives all such
defenses) to P&O's obligations under this Guaranty that (i) LMB or Bovis lacked
the power or authority to enter into the Agreement or the Completion Guaranty,
or (ii) the Agreement or the Completion Guaranty is not a legal, valid and
binding obligation of LMB or Bovis, as applicable, or (iii) LMB, Bovis or any
other individual or entity is (a) insolvent or otherwise subject to any laws
relating to bankruptcy, insolvency, or debtors' rights in any jurisdiction, (b)
in any way or manner entitled to any protection against, or limitation of,
claims or damages as a result of any laws relating to bankruptcy, insolvency or
debtor's rights or (c) the subject of any injunction or other court order (other
than an injunction or other court order on the merits of a claim relating to
LMB's obligations under the Agreement or Bovis' obligations under the Completion
Guaranty) which in any way prevents or limits claims or the recovery of damages
against LMB, Bovis or any other individual or entity.
<PAGE>
2
3. This Guaranty is only for the benefit of Owner, and may not be
assigned or transferred to any other party, except that Owner may (i) assign
this Guaranty to one or more entities affiliated with Owner so long as Owner's
ownership of the Project and rights under the loan documents with the lender(s)
to the Project are assigned to such entity or entities and (ii) assign, transfer
or pledge this Guaranty and its rights hereunder to any one or more of its (or
its affiliat(es)), lender(s) or any party acting on behalf of any such
lender(s), provided that if there is more than one assignee pursuant to the
foregoing clause (i) or (ii), all of Owner's rights hereunder shall be exercised
by one (and only one) such assignee on behalf of all such assignees, or by one
(and only one) agent appointed by all such assignees to act on their behalf. The
liability of P&O hereunder shall not be released, diminished or otherwise
affected if Owner assigns, transfers or pledges this Guaranty, and any permitted
assignee of Owner's interest in this Guaranty shall be deemed to be the Owner
hereunder.
4. No claim for performance by P&O under this Guaranty shall be made
unless a default on the part of Bovis has occurred under the Completion
Guaranty. For purposes of this Guaranty, Bovis shall be deemed to be in default
under the Completion Guaranty whenever any of the following shall occur: (a)
Bovis shall not be fully and satisfactorily performing its Guaranty Obligations
within ten (10) days of written demand therefor from Owner or shall at any time
thereafter fail to be so performing; (b) Bovis shall have failed to make full
payment of any and all amounts within ten (10) days after the same shall have
become due and owing under and in accordance with the terms of the Completion
Guaranty; or (c) any of the events referred to in Paragraph 2 above involving
Bovis shall have occurred. Notwithstanding any other provision hereof, from and
after the date, if any, that Bovis is deemed to be in default under the
Completion Guaranty pursuant to the preceding sentence, (i) Owner may commence
and prosecute direct claims against P&O under this Guaranty without having to
proceed against Bovis in any way; and (ii) Owner shall in all respects have the
right to take actions against and with respect to P&O as if this Guaranty was a
direct guaranty of the "Guaranty Obligations" (as defined in the Completion
Guaranty) substantively identical to the Completion Guaranty, with all of the
provisions of the Completion Guaranty (including, without limitation, Paragraphs
6 and 10 thereof) being deemed incorporated herein by reference.
5. Subject to the provisions of Paragraph 2 above, P&O shall have
available to it the same defenses, set-offs and counterclaims as are or would be
available to Bovis under the Completion Guaranty; provided, however, (a) P&O
shall not have, and waives the right to raise or assert, any defenses, set-offs
or counter claims to the extent any such defenses, set-offs and/or counterclaims
have been or are hereafter waived in writing by Bovis, all of which waivers are
incorporated herein by this reference as if made by it, and (b) each of P&O and
Owner shall be bound by those final determinations which are adverse to Bovis or
Owner, as applicable, made by any court of competent jurisdiction in any legal
proceeding to which Bovis or Owner, as applicable, is a party over which the
court has acquired jurisdiction.
<PAGE>
3
6. Any claim, notice or demand in connection with this Guaranty
shall be sent to P&O at 79 Pall Mall, London SWI Y5EJ, England, attention the
company secretary (ref RMG with a copy by fax to 011-44-1-71-930-6042). Any such
claim, notice or demand shall be deemed validly served upon receipt. Owner
agrees to send a copy (by facsimile) of any such claim, notice or demand given
by Owner hereunder to P&O also to LMB at the address provided in the Agreement,
provided that the failure by Owner to deliver to LMB a copy of any notice sent
to P&O shall not in any way limit, restrict or affect the respective rights and
remedies of Owner under this Guaranty.
7. This Guaranty shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflict of laws
rules thereof (other than Section 5-1401 of the New York General Obligations
Law). All claims hereunder shall be brought in the courts of the State of Nevada
or in the Federal courts of the ninth circuit of the United States of America,
and accordingly, the parties hereto irrevocably submit to the exclusive
jurisdiction of such courts and the appellate courts thereof. In any legal
action by Owner against P&O to enforce this Guaranty, (a) Owner shall not object
to a third party action by P&O against LMB or Bovis nor to any fourth party
action by LMB or Bovis against other parties, nor shall Owner, in such legal
action, take any position that jurisdiction should not be exercised by the court
in respect of the third party or fourth party action, nor shall Owner in such
legal action seek to dismiss or stay such third party or fourth party action and
(b) the applicable court(s) shall have the right to award interest costs as it
deems appropriate. P&O agrees to pay all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred by Owner in
connection with the enforcement by Owner of Owner's rights under this Guaranty,
provided that P&O's obligation to pay attorneys' fees for outside law firms
shall be limited to one firm in the United States and one firm in the United
Kingdom. P&0 hereby appoints Mark Melson, Esq., Lehrer McGovern Bovis, Inc.,
having an address at 200 Park Avenue, New York, NY 10166, as true and lawful
agent for service of process with respect to all claims, causes of action and
disputes arising out of this Guaranty.
8. P&O expressly agrees that Owner may, in its sole and absolute
discretion, without notice to or further assent of P&O and without in any way
releasing, affecting or impairing the obligations and liabilities of P&O
hereunder: (i) waive compliance with, or any default under, or grant any other
indulgences with respect to, the Agreement or the Completion Guaranty, (ii)
modify, amend or change any provisions of the Agreement or the Completion
Guaranty or any of the loan documents entered into with any of the lender(s) for
the Project and (iii) deal in all respects with LMB and Bovis as if this
Guaranty were not in effect. P&O shall remain obligated under this Guaranty
notwithstanding any agreement or document with any other party. In furtherance
of the foregoing, in the event the Agreement or Completion Guaranty is modified,
amended or changed in any respect, P&O expressly acknowledges and confirms that
all references in this Guaranty to the Agreement or
<PAGE>
4
Completion Guaranty shall mean the Agreement or Completion Guaranty, as
applicable, as so modified, amended or changed.
9. In addition to, and without limitation of, P&O's waivers set
forth elsewhere in this Guaranty, P&O hereby expressly waives (a) diligence,
presentment, demand for payment and protest, (b) the benefit of any compromise,
settlement, agreement or other arrangement between or involving Owner, on the
one hand, and Bovis or any successor or assign of Bovis, including any trustee
in bankruptcy, on the other, which results in the discharge of Bovis from any of
the Guaranty Obligations (provided that in no event shall Owner be entitled to
receive in the aggregate from P&O and Bovis under this Guaranty and the
Completion Guaranty more than full performance and satisfaction of the Guaranty
Obligations plus reimbursement for Owner's enforcement costs as provided in and
limited by Paragraph 7 above), (c) notice and proof of reliance by Owner upon
this Guaranty or acceptance of this Guaranty, (d) trial by jury in any action
brought on or with respect to this Guaranty, and (e) any requirement that Owner
(i) exhaust any right, power or remedy or (ii) proceed against Bovis or any
other guarantor of, or any other party liable for, any of the Guaranty
Obligations, or any portion thereof. P&O specifically agrees that it will not be
necessary or required, and P&O shall not be entitled to require, that Owner file
suit or proceed to assert or obtain a claim for personal judgment against Bovis
for the Guaranty Obligations from Bovis or file suit or proceed to obtain or
assert a claim for personal judgment against Bovis for the Guaranty Obligations
or to make any effort at collection or enforcement of the Guaranty Obligations
from Bovis or file suit or proceed to obtain or assert a claim for personal
judgment against Bovis or any other guarantor or other party liable for the
Guaranty Obligations or make any effort at collection of the Guaranty
Obligations from any such party or exercise or assert any other right or remedy
to which Owner is or may be entitled in connection with the Guaranty Obligations
thereto or assert or file any claim against the assets of Bovis, before or as a
condition of enforcing the liability of P&O under this Guaranty.
10. This Guaranty shall continue and remain in full force and effect
and be binding in accordance with and to the extent of its terms upon P&O until
all of the obligations of P&O hereunder, of Bovis under the Completion Guaranty
and of LMB under the Agreement shall have completely and finally been performed
and satisfied in full.
11. Notwithstanding any other provision hereof, to the extent LMB or
Bovis pays any amount to Owner in satisfaction of any of the Guaranty
Obligations (including payments pursuant to Section 6.11, or the last sentence
of Section 11.2, of the Agreement), Owner shall not be entitled to recover from
P&O such amount.
12. [INTENTIONALLY OMITTED]
<PAGE>
5
13. P&O represents and warrants as follows:
(a) P&O's head office is located at 79 Pall Mall, London,
SW1 Y5EJ, England.
(b) P&O (i) is a corporation duly incorporated and validly
existing under the laws of England and (ii) has all
requisite corporate power and authority to execute and
deliver this Guaranty and to perform its obligations
hereunder.
(c) The execution, delivery and performance by P&O of this
Guaranty (i) has been duly authorized by all necessary
action; (ii) does not contravene P&O's charter documents
or any law or any contractual restriction binding on
P&O; and (iii) does not require any authorization,
consent or approval by or other action by, or any notice
to or filing with, any governmental authority or any
other person.
(d) This Guaranty has been duly executed and delivered by
P&O and constitutes a legal, valid and binding
obligation of P&O enforceable in accordance with its
terms, except (i) as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratoriums or
similar laws affecting the enforcement of creditors'
rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding
thereof may be brought.
14. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
the remaining provisions of this Guaranty, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. No failure to exercise, nor any delay in exercising on the part
of Owner of, any right, power or privilege under this Guaranty shall operate as
a waiver. A waiver by Owner of any right or remedy under this Guaranty on any
one occasion shall not be construed as a bar to any right or remedy which Owner
otherwise would have on any future occasion. The rights and remedies provided to
<PAGE>
6
Owner are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
16. None of the terms or provisions of this Guaranty may be waived,
amended or supplemented or otherwise modified except by a written instrument
executed by P&O and Owner.
17. This Guaranty shall inure to the benefit of, and shall be
enforceable by, Owner and its successors and assigns, and shall be binding upon,
and enforceable against, P&O and its successors and assigns.
THE PENINSULAR AND ORIENTAL
STEAM NAVIGATION COMPANY
By: /s/ Sir Bruce MacPhail
------------------------
Name: Sir Bruce MacPhail
Title: Managing Director
Dated: August 19, 1997
GUARANTY OF PERFORMANCE AND COMPLETION
This Guaranty of Performance and Completion ("Guaranty") is entered
into by Bovis, Inc., a New York corporation ("Bovis"), in favor of Las Vegas
Sands, Inc. ("Owner").
We, Bovis, refer to the Construction Management Agreement (as the
same may hereafter be amended or modified, the "Agreement") dated as of February
15, 1997 between our wholly-owned subsidiary, Lehrer McGovern Bovis, Inc. a New
York corporation ("LMB"), and Owner relating to the construction of the Project
and completion of the Work. Capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Agreement.
1. In consideration of Owner entering into the Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Bovis hereby irrevocably and absolutely guarantees to Owner
the due, prompt, full and complete performance and satisfaction of all of the
duties, obligations and liabilities of LMB under the Agreement (including,
without limitation, all liabilities pursuant to clauses (a) and (b) of the last
sentence of Section 11.2 of the Agreement) (collectively, the "Guaranty
Obligations"); provided, however, that the Guaranty Obligations shall not
include LMB's obligation to pay liquidated damages, as required by Section
6.11(a) and Schedule C of the Agreement, with respect to the first one hundred
and twenty (120) days after the expiration of the 2-year time period set forth
in Section 6.10 of the Agreement, as such time period may be adjusted pursuant
to the Agreement.
2. In the event the Agreement is terminated pursuant to Section 11.2
of the Agreement, (a) nothing in this Guaranty shall prevent Owner from electing
to not complete the Project, in which event the Guaranty Obligations shall
include LMB's liability under clause (ii) of the last sentence of Section 11.2
of the Agreement and (b) Bovis (or one of its affiliates other than LMB) shall,
upon Owner's request, execute and deliver to Owner a construction management
agreement with Owner that is substantively identical to the Agreement, except
for appropriate changes necessary to make such agreement consistent with the
proviso clause of Section 1 of this Guaranty, and provided that if such
agreement is executed and delivered by an affiliate of Bovis rather than Bovis,
Bovis and such affiliate shall be jointly and severally liable for all of the
obligations and liabilities of such affiliate thereunder. Such execution and
delivery by Bovis or any such affiliate shall not modify, abrogate or waive any
of the provisions of this Guaranty or any rights Owner has against LMB.
3. It shall not be a defense (and Bovis hereby waives all such
defenses) to Bovis's obligations under this Guaranty that (i) LMB lacked the
power or authority to enter into the Agreement, or (ii) the Agreement is not a
legal, valid and
<PAGE>
2
binding obligation of LMB or (iii) LMB or any other individual or entity is (a)
insolvent or otherwise subject to any laws relating to bankruptcy, insolvency,
or debtors' rights in any jurisdiction, (b) in any way or manner entitled to any
protection against, or limitation of, claims or damages as a result of any laws
relating to bankruptcy, insolvency or debtor's rights or (c) the subject of any
injunction or other court order (other than an injunction or court order on the
merits of a claim relating to LMB's obligations under the Agreement) which in
any way prevents or limits claims or the recovery of damages against LMB or any
other individual or entity.
4. This Guaranty is only for the benefit of Owner, and may not be
assigned or transferred to any other party, except that Owner may (i) assign
this Guaranty to one or more entities affiliated with Owner so long as Owner's
ownership of the Project and rights under the loan documents with the lender(s)
to the Project are assigned to such entity or entities and (ii) assign, transfer
or pledge this Guaranty and its rights hereunder to any one or more of its (or
its affiliat(es)), lender(s) or any party acting on behalf of any such
lender(s), provided that if there is more than one assignee pursuant to the
foregoing clause (i) or (ii), all of Owner's rights hereunder shall be exercised
by one (and only one) such assignee on behalf of all such assignees, or by one
(and only one) agent appointed by all such assignees to act on their behalf. The
liability of Bovis hereunder shall not be released, diminished or otherwise
affected if Owner assigns, transfers or pledges this Guaranty, and any permitted
assignee of Owner's interest in this Guaranty shall be deemed to be the Owner
hereunder.
5. No claim for performance by Bovis under this Guaranty shall be
made unless a default on the part of LMB has occurred under the Agreement. For
purposes of this Guaranty, LMB shall be deemed to be in default under the
Agreement whenever any of the following shall occur: (a) LMB shall have failed
to complete performance when due of any of its monetary obligations under the
Agreement (including its obligations under Section 6.9(b) and Section 6.11
(subject to the proviso clause of Paragraph 1 of this Guaranty) of the
Agreement), (b) any of the events referred to in Paragraph 3 above involving LMB
shall have occurred or (c) the Agreement is terminated pursuant to Section 11.2
of the Agreement.
6. Subject to the provisions of Paragraph 3 above, Bovis shall have
available to it the same defenses, set-offs and counterclaims as are or would be
available to LMB under the Agreement; provided, however, (a) Bovis shall not
have, and waives the right to raise or assert, any defenses, set-offs or
counterclaims to the extent any such defenses, set-offs and/or counterclaims
have been or are hereafter waived in writing by LMB, all of which waivers are
incorporated herein by this reference as if made by Bovis, and (b) each of Bovis
and Owner shall be bound by those final determinations which are adverse to LMB
or Owner, as applicable, made by (i) any court of competent jurisdiction in any
legal proceeding to which LMB or Owner is a party over which the court has
acquired jurisdiction or (ii) the Independent Expert.
<PAGE>
3
7. Any claim, notice or demand in connection with this Guaranty
shall be sent to Bovis at 200 Park Avenue, New York, New York 10166 attention:
President with a copy to Mark Melson. Any such claim, notice or demand shall be
deemed validly served upon receipt. Owner agrees to send a copy (by facsimile)
of any such claim, notice or demand given by Owner hereunder to Bovis also to
LMB at the address provided in the Agreement, provided that the failure by Owner
to deliver to LMB a copy of any notice sent to Bovis shall not in any way limit,
restrict or affect the respective rights and remedies of Owner under this
Guaranty.
8. This Guaranty shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflict of laws
rules thereof (other than Section 5-1401 of the New York General Obligations
Law). All claims hereunder shall be brought in the courts of the State of Nevada
or in the Federal courts of the ninth circuit of the United States of America,
and accordingly, the parties hereto irrevocably submit to the exclusive
jurisdiction of such courts and the appellate courts thereof. In any legal
action by Owner against Bovis to enforce this Guaranty, (a) Owner shall not
object to a third party action by Bovis against LMB nor to any fourth party
action by LMB against other parties, nor shall Owner, in such legal action, take
any position that jurisdiction should not be exercised by the court in respect
of the third party or fourth party action, nor shall Owner in such legal action
seek to dismiss or stay such third party or fourth party action and (b) the
applicable court(s) shall have the right to award interest costs as it deems
appropriate. Bovis agrees to pay all reasonable costs and expenses, including,
without limitation, reasonable attorneys' fees, incurred by Owner in connection
with the enforcement by Owner of Owner's rights under this Guaranty, provided
that Bovis's obligation to pay attorneys' fees for outside law firms shall be
limited to one firm in the United States and one firm in the United Kingdom.
Bovis hereby appoints Mark Melson, Esq., Lehrer McGovern Bovis, Inc., having an
address at 200 Park Avenue, New York, NY 10166, as true and lawful agent for
service of process with respect to all claims, causes of action and disputes
arising out of this Guaranty.
9. Bovis expressly agrees that Owner may, in its sole and absolute
discretion, without notice to or further assent of Bovis and without in any way
releasing, affecting or impairing the obligations and liabilities of Bovis
hereunder: (i) waive compliance with, or any default under, or grant any other
indulgences with respect to, the Agreement, (ii) modify, amend or change any
provisions of the Agreement or any of the loan documents entered into with any
of the lender(s) for the Project and (iii) deal in all respects with LMB as if
this Guaranty were not in effect. Bovis shall remain obligated under this
Guaranty notwithstanding any agreement or document with any other party. In
furtherance of the foregoing, in the event the Agreement is modified, amended or
changed in any respect, Bovis expressly acknowledges and confirms that all
references in this Guaranty to the Agreement shall mean the Agreement, as so
modified, amended or changed.
<PAGE>
4
10. In addition to, and without limitation of, Bovis's waivers set
forth elsewhere in this Guaranty, Bovis hereby expressly waives (a) diligence,
presentment, demand for payment and protest, (b) the benefit of any compromise,
settlement, agreement or other arrangement between or involving Owner, on the
one hand, and LMB or any successor or assign of Owner or LMB, including any
trustee in bankruptcy, on the other, which results in the discharge of LMB from
any of the Guaranty Obligations (provided that in no event shall Owner be
entitled to receive in the aggregate from Bovis and LMB under this Guaranty and
the Agreement more than full performance and satisfaction of the Guaranty
Obligations plus reimbursement for Owner's enforcement costs as provided in and
limited by Paragraph 7 above), (c) notice and proof of reliance by Owner upon
this Guaranty or acceptance of this Guaranty, (d) trial by jury in any action
brought on or with respect to this Guaranty, and (e) any requirement that Owner
(i) exhaust any right, power or remedy or (ii) proceed against LMB or any other
guarantor of, or any other party liable for, any of the Guaranty Obligations, or
any portion thereof. Bovis specifically agrees that it will not be necessary or
required, and Bovis shall not be entitled to require, that Owner file suit or
proceed to assert or obtain a claim for personal judgment against LMB for the
Guaranty Obligations from LMB or file suit or proceed to obtain or assert a
claim for personal judgment against LMB for the Guaranty Obligations or to make
any effort at collection or enforcement of the Guaranty Obligations from LMB or
file suit or proceed to obtain or assert a claim for personal judgment against
LMB or any other guarantor or other party liable for the Guaranty Obligations or
make any effort at collection of the Guaranty Obligations from any such party or
exercise or assert any other right or remedy to which Owner is or may be
entitled in connection with the Guaranty Obligations thereto or assert or file
any claim against the assets of LMB, before or as a condition of enforcing the
liability of Bovis under this Guaranty.
11. This Guaranty shall continue and remain in full force and effect
and be binding in accordance with and to the extent of its terms upon Bovis
until all of the obligations of Bovis hereunder and of LMB under the Agreement
shall have completely and finally been performed and satisfied in full.
12. Notwithstanding any other provision hereof, to the extent LMB
pays any amount to Owner in satisfaction of any of the Guaranty Obligations
(including payments pursuant to Section 6.11 or the last sentence of Section
11.2 of the Agreement), Owner shall not be entitled to recover from Bovis such
amount.
13. Bovis represents and warrants as follows:
(a) Bovis's head office is located at 200 Park Avenue, New
York, New York .
(b) Bovis (i) is a corporation duly incorporated and validly
existing under the laws of the State of New York and
(ii) has all requisite corporate power and authority to
<PAGE>
5
execute and deliver this Guaranty and to perform its
obligations hereunder.
(c) The execution, delivery and performance by Bovis of this
Guaranty (i) has been duly authorized by all necessary
action; (ii) does not contravene Bovis's charter
documents or any law or any contractual restriction
binding on Bovis; and (iii) does not require any
authorization, consent or approval by or other action
by, or any notice to or filing with, any governmental
authority or any other person.
(d) This Guaranty has been duly executed and delivered by
Bovis and constitutes a legal, valid and binding
obligation of Bovis enforceable in accordance with its
terms, except (i) as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratoriums or
similar laws affecting the enforcement of creditors'
rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding
thereof may be brought.
14. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
the remaining provisions of this Guaranty, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. No failure to exercise, nor any delay in exercising on the part
of Owner of, any right, power or privilege under this Guaranty shall operate as
a waiver. A waiver by Owner of any right or remedy under this Guaranty on any
one occasion shall not be construed as a bar to any right or remedy which Owner
otherwise would have on any future occasion. The rights and remedies provided to
Owner are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
16. None of the terms or provisions of this Guaranty may be waived,
amended or supplemented or otherwise modified except by a written instrument
executed by Bovis and Owner.
<PAGE>
6
17. This Guaranty shall inure to the benefit of, and shall be
enforceable by, Owner and its successors and assigns, and shall be binding upon,
and enforceable against, Bovis and its successors and assigns.
BOVIS, INC.
By: /s/ Luther P. Cochran
Name: Luther P. Cochran
Title: President
Dated: August 19, 1997
ADDENDUM
THIS ADDENDUM is made this 27th day of October, 1997, by and between LAS
VEGAS SANDS, INC. ("Landlord") and Blatteis Realty Company ("Broker").
BACKGROUND
WHEREAS, Broker and Landlord are parties to that certain agreement dated
January 23, 1997 (the "Agreement") and;
WHEREAS, the parties desire to amend the Agreement upon the terms and
conditions as set forth below;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained herein and in the Agreement, and intending to be legally
bound hereby, agree as follows:
1. Exhibit "B". Exhibit "B" attached to the Agreement shall be hereby
amended to include Laurie Musico as one of Broker's personnel assigned to the
Project. Ms. Musico will principally focus her efforts on "high-end retail". In
consideration thereof, the Broker's fee referenced on paragraph 3 of the
Agreement shall be amended to reflect an increase of $4,000 per month. Landlord
reserves the right to terminate this addendum (relating strictly to Ms. Musico's
services) upon thirty (30) days notice to Broker.
2. Other Terms Unchanged. All other terms and conditions of the Agreement
shall remain unchanged.
IN WITNESS HEREOF, INTENDING TO BE LEGALLY BOUND HEREBY, the parties have
executed this Amendment on the dates set forth below.
LAS VEGAS SANDS, INC.
By: /s/ W.P. Weidman
-------------------------
BLATTEIS REALTY CO.
By: /s/ Daniel J. Blatteis
--------------------------
1
<PAGE>
CONSULTING AND LEASE BROKERAGE AGREEMENT
THIS CONSULTING AND LEASE BROKERAGE AGREEMENT (this "Agreement") is made
this 23rd day of January, 1997, by and between LAS VEGAS SANDS, INC., a Nevada
corporation ("Landlord") and BLATTEIS REALTY CO., a California corporation
("Broker") with respect to certain consulting and lease brokerage services to be
furnished by Broker to Landlord for portions of Landlord's contemplated
approximately 500,000 square foot mall (the "Project," a schematic diagram of
which is attached hereto as Exhibit "A") to be located at or about 3355 Las
Vegas Boulevard South, Las Vegas, Nevada and anticipated to be constructed in
two phases.
NOW, THEREFORE, the parties agree as follows:
1. Engagement. Landlord hereby engages Broker as its "Retail Lease
Broker and Consultant" during the "Term" (as hereinbelow defined) with respect
to planning, layout, and marketing to prospective tenants of the Project and
with respect to solicitation and negotiation of leases for the Project (i) with
parties that are not "affiliates" (as that term is defined in Rule 405 of the
Securities Act of 1933, as amended) of Landlord; (ii) for retail sales uses
exclusively (the "Conforming Uses"), and not fix any other uses (e.g., food and
beverage) whatsoever unless specifically authorized in writing by Landlord; and
(iii) for space located on the first floor (the "Primary Premises Space") and
the mezzanine (the "Mezzanine Premises Space") of the second level of the
Project (the "Subject Premises"). The term "Subject Leases" refers to any leases
conforming fully to the foregoing criteria and entered into during the Term, as
well as any such leases entered into during the nine (9) month period (the
"Transaction Completion Term") commencing upon expiration or termination of the
Term where such prospective tenants and Landlord executed a letter of intent
during the Term; Landlord shall have no obligation to make any payment to Broker
for any lease other than a Subject Lease.
2. Duties of Broker. Broker shall use the best efforts to assist
Landlord in planning the layout of the Project and in marketing and leasing the
Project, all in conformity with Landlord's financial objectives. Broker will use
its best efforts to fully lease Phase I of the Project within twelve (12) months
of the date hereof. Broker's obligations include, without limitation, (i)
serving Landlord as a retail and leasing consultant by advising Landlord and its
architects, designers, consultants, and other agents with respect to the
conceptual layout and design of the Project and the tenant mix and leasing
prospects of the Project; (ii) timely preparation and submission to Landlord of
a complete merchandising plan for the entire Project, which merchandising plan
shall be acceptable to Landlord in its discretion; (iii) timely production and
submission to Landlord of marketing and promotional materials for leases for
leasing the Subject Premises for Conforming Uses, which marketing and
promotional materials shall be acceptable to Landlord in its discretion; (iv)
making available and utilizing the services of the individuals named on Exhibit
"B" attached hereto, for the purposes of faithfully, responsively, and timely
performing Broker's obligations hereunder and achieving Landlord's objectives
with respect to the Project; (v) identification and solicitation of prospective
tenants and negotiation of (but not agreement to or execution of) Subject Leases
with such prospective tenants; and (vi) such other tasks as Landlord reasonably
requests (including advising upon prospective restaurant leases) in order to
assist Landlord in achieving its projected per square foot rental rates,
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<PAGE>
percentage rental rents, and common area maintenance charges at the Project and
in achieving its goal of completing all leasing of the first phase of the
Project during 1997. Broker shall not, and has no authority to, execute any
lease or other agreement on behalf of Landlord or in any way incur any
obligation on behalf of, bind, or make any representation or warranty for
Landlord. In negotiating any Subject Leases, Broker shall advise all prospective
tenants that Broker is not an agent of Landlord, and has no actual or apparent
authority to bind Landlord to any lease, agreement, or other obligations, which
can only occur upon the execution by Landlord of a written Subject Lease.
3. Initial and Monthly Considerations to Broker. Concurrently with
Landlord's and Broker's material execution and delivery hereof, Landlord shall
advance to Broker the sum of $120,000 (the "Initial Advance"), which Initial
Advance shall be treated as an advance against and credited to the payment of
all sums due hereunder, commencing as of December 1, 1996, in respect of the
first six (6) months of payments of the "Consulting Fee" and the "Commission
Advance" (as those terms are defined hereinbelow). During the Term, on the first
day of each month, (i) Landlord shall pay to Broker monthly the sum of $10,000
in respect of Broker's performance of its duties described in clauses (i)
through (iv) and (vi) of Paragraph 2 hereinabove (the "Consulting Fee"); and
(ii) Landlord shall advance to Broker monthly the additional refundable sum of
$10,000 (the "Commission Advance" and together with the Initial Advance, the
"Advances") in respect of Broker's performance of its duties described in clause
(v) of Paragraph 2 hereinabove, which Commission Advance shall be treated as an
advance against and credited to the payment of commissions required to be paid
under Paragraph 4 hereinbelow.
4. Brokerage Commissions. Landlord shall pay to Broker lease brokerage
commissions ("Commissions") in respect of each Subject Lease in an amount equal
to the sum of $8.00 per leased square foot of Primary Premises Space leased
thereunder plus $4.00 per leased square foot of Mezzanine Premises Space leased
thereunder payable as follows:
a. fifty percent (50%) of each Commission shall be paid five (5)
days after the later to occur of execution of the associated Subject Lease or
the satisfaction of all contingencies to the effectiveness of such Subject
Lease;
b. twenty-five percent (25%) of each Commission shall be paid
thirty (30) days after the tenant under such Subject Lease has opened for
business, to the extent that at such time tenant is in operation and not in
default under the Subject Lease; and
c. the balance of twenty-five percent (25%) of each Commission
shall be paid five (5) months thereafter, to the extent that at such time tenant
is in operation and not in default under the Subject Lease; provided, however,
that all payments of Commission Advances shall be credited to any payments due
hereunder for Commissions (excluding "Co-Brokerage Payments" as hereinbelow
defined) prior to payment hereunder of any sums for Commissions.
5. Co-Brokerage Payments. Landlord agrees not to pay any other broker
(any such broker other than Broker, a "Co-Broker") in respect of any Subject
Lease, but Broker shall be responsible for the payment, from its Commissions, of
any and all commissions to Co-Brokers in respect of Subject Leases, except to
the extent otherwise agreed to by Landlord in writing.
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<PAGE>
6. Discretionary Bonus. Predicated upon the performance of Broker and
upon such other matters as Landlord in its sole discretion may determine,
Landlord may, but shall in no event be obligated to, elect to grant to Broker a
bonus of such type and in such amount as Landlord in its sole discretion may
determine.
7. Travel Expenses. Landlord shall pay for all travel expenditures of
personnel of Broker which are directly in furtherance of Broker's obligations
hereunder and are both outside of Los Angeles and of the respective city each
such person is based in; provided, however, that all such travel must be (i) at
the lowest available coach fares, (ii) approved in advance by Landlord; and
(iii) reserved and paid through GWV Travel. Landlord will use its best efforts
to reimburse such expenses within thirty (30) days of Landlord's receipt of an
appropriate invoice with acceptable backup documentation attached.
8. Term. The term (the "Term") of this Agreement shall commence as of
December 1, 1996, and shall continue for a period of eighteen (18) months;
provided, however, that either party hereto may terminate the Term on sixty (60)
days' prior written notice to the other party. Not later than five (5) days
after any acquisition or termination of the Term, Broker shall furnish to
Landlord a complete list (the parties properly on such list, the "Identified
Leasing Prospects") of prospective tenants that it is currently negotiating with
for entry into Subject Leases. Upon any expiration or termination of the Term,
neither party hereto shall have any further obligations hereunder except that
(i) Broker shall continue to be subject to the confidentiality obligations
hereof, immediately upon completion of the Transaction Completion Term Broker
shall be obligated to refund to Landlord any Advances which have not yet been
credited for the benefit of Landlord pro rata over the portion of the Term prior
to the effective date of Termination, and immediately upon expiration or
termination of the Term shall deliver or cause to be delivered to Landlord, as
directed by Landlord, all written materials, software, and other information
(collectively, "Project Information") in whatever form in its possession with
respect to the Project other than any such Project Information relating to any
prospective Subject Lease with an Identified Leasing Prospect, which material
shall be delivered to Landlord no later than the Transaction Completion Date;
and (ii) Landlord shall continue to be obligated hereunder to make payments for
Subject Leases to the extent provided for in this Agreement (i.e., Subject
Leases entered into both during the Term and, with Identified Leasing Prospects,
during the Transaction Completion Term).
9. Independent Contractor. Broker recognizes that it is engaged as an
independent contractor and acknowledges that all persons performing services
hereunder shall be employees or agents of Broker and Landlord will have no
responsibility to provide insurance or other fringe benefits normally associated
with employee status, Broker hereby agreeing to make its own arrangements for
any of such benefits as it may desire. Broker shall be solely responsible for
the payment of all taxes and benefits required by law for such employees or
agents, and shall indemnify and hold Landlord harmless from any and all
liabilities for costs related thereto.
10. Proprietary Interests. Broker agrees that all reports, studies,
plans, models, drawings, and any other written data of any type relating to its
activities hereunder whether or not any of the same is accepted or rejected by
the Landlord shall remain the property of Landlord and shall not be used or
published by Broker or any other party without the express prior written consent
of Landlord. In implementation of the foregoing, Broker hereby grants and
assigns to
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<PAGE>
Landlord all rights and claims of whatever nature and whether now or hereafter
arising in and to any and all of such plans, reports, studies, models, drawings,
and other written data and shall cooperate fully with Landlord in any steps
Landlord may take to obtain copyright, trademark, or like protections with
respect thereto. Broker further acknowledges Broker's work on the Project could
involve material and information of a confidential and proprietary nature,
including material and information identified as such, or which, from the
circumstances, in good faith and good conscience, ought to be treated as such.
Broker agrees that it will not, and will require that its employees and agents
not, disclose or divulge any proprietary or confidential information obtained in
connection with this Agreement except with the express prior written consent of
Landlord in each instance unless required by law. This provision shall survive
the termination of this Agreement. Without limitation Broker shall, during the
Term and thereafter, hold in strict confidence the financial condition, leasing
and prospective leasing activities, lease rates, tenant and guarantor
information, and marketing plan with respect to the Project and all other
information relating to the Project. Broker agrees that Landlord may on an ex
parte basis obtain equitable (i.e., injunctive) relief to enforce its
confidentiality rights hereunder.
11. Conflict of Interest. In connection with the Project, Broker shall
not accept for its own account any trade discounts or contributions, or deal
with (or recommend that Landlord deal with) any firm in which Broker has any
financial or other interest, or undertake any activity or employment which would
or could create a conflict of interest or compromise Broker's professional
judgment or prevent Broker from serving the best interests of Landlord. If
Broker shall become aware of any facts which are or may be in violation of the
preceding provisions of this Paragraph or shall have any financial or other
interest in any firm with which Landlord is dealing or proposes to deal, Broker
shall immediately advise Landlord thereof in writing. Broker shall not undertake
any other leasing projects in the State of Nevada during the Term hereof.
12. Miscellaneous. Broker shall indemnify Landlord for any costs or
losses incurred by Landlord as a result of any breach by Broker of any provision
hereof. Broker represents that it is a duly licensed California real estate
broker, and is in the process of being licensed in the State of Nevada. This
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior understandings and writings
with respect thereto. Each party hereto has reviewed this Agreement and the rule
of construction to the effect that ambiguities are to be resolved against the
drafting party will not be employed in the interpretation hereof. This Agreement
shall be governed by, interpreted under, and enforced in accordance with Nevada
law, without regard to its principles of conflict of laws, and the exclusive
forums for adjudication of any dispute between the parties respect hereto are
the federal and state courts located in Clark County, Nevada.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
above.
LANDLORD: BROKER:
LAS VEGAS SANDS, INC., a Nevada BLATTEIS REALTY CO., a California
corporation corporation
By: /s/ Robert G. Goldstein By: /s/ Daniel J. Blatteis
-------------------------- ----------------------------
Its: Senior Vice President Its: Co-Chairman
--------------------- -----------------------
-4-
SANDS RESORT HOTEL & CASINO AGREEMENT
THIS AGREEMENT is made and entered into on this 18th day of February,
1997, by and between the COUNTY OF CLARK, a political subdivision of the State
of Nevada (hereinafter referenced the "COUNTY") and LAS VEGAS SANDS, INC., a
Nevada corporation (hereinafter referenced the "DEVELOPER").
The initial addresses of the Parties, which one Party may change by giving
notice to the respective other Parties, are as follows:
COUNTY DEVELOPER
M. J. Manning, Director William P. Weidner, President
Department of Public Works Las Vegas Sands, Inc.
for Clark County, Nevada 3355 Las Vegas Boulevard South
500 South Grand Central Parkway Las Vegas, Nevada 89109
Las Vegas, Nevada 89155-4000
(702) 455-6020 (702) 733-5726
FAX (702) 455-6040 FAX (702) 733-5499
W I T N E S S E T H:
WHEREAS, the DEVELOPER has obtained from the COUNTY a Use Permit (UC
1769-96) to construct a new resort to be located on the east side of Las Vegas
Boulevard South and south side of Sands Avenue within Section 16 of Township 21
South and Range 61 East, Mount Diablo Meridian, Clark County, Nevada and more
fully described in Exhibit "A" attached hereto and by this reference made a part
hereof (hereinafter referenced the "DEVELOPMENT"); and,
WHEREAS, the proposed DEVELOPMENT is projected to cause increased
pedestrian and vehicular traffic as well as possible surplus storm water runoff
that may exceed the capacity of existing facilities located in or adjacent to
Las Vegas Boulevard South, Sands Avenue and/or Koval Lane; and,
WHEREAS, the DEVELOPER proposes to proceed with its development plans for
the DEVELOPMENT before its Traffic Impact Evaluation Study has been accepted by
the COUNTY, as required by the Clark County Code, but not before the DEVELOPER
has received acceptance of its Drainage Impact Evaluation Study from the COUNTY;
and,
WHEREAS, the DEVELOPER desires that the COUNTY issue a Grading Permit
immediately after acceptance of said Drainage Impact Evaluation Study for the
DEVELOPMENT, the posting of its off-site improvement performance bond and the
acceptance of this AGREEMENT by the COUNTY; and,
WHEREAS, the DEVELOPER also desires to have the COUNTY issue building
permits for a parking garage and a separate central heating, cooling, and
electrical distribution plant facility within the
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DEVELOPMENT (hereinafter referenced the "Building Permits") (said structures are
hereinafter referenced the "Parking Garage and Central Plant") as identified on
the site plan shown in Exhibit "B", attached hereto and by this reference made a
part hereof, prior to the COUNTY's acceptance of the Traffic Impact Evaluation
Study for the DEVELOPMENT; and,
WHEREAS, the COUNTY does not object to the DEVELOPER's proposal provided
DEVELOPER complies with the terms of this AGREEMENT; and,
NOW, THEREFORE, in acknowledgment that the foregoing is reasonably
necessary, and for and in consideration of the premises and mutual covenants
herein contained, the Parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1 "BETTERMENTS" means additions, improvements, or changes to a public
improvement project requested by the DEVELOPER and permitted by the COUNTY
after the functional design of the public improvement has been completed
and accepted by the COUNTY. All BETTERMENTS located on private property
may be made by the owner of that property in its sole discretion. Any
BETTERMENT proposed on public property may be made only after the COUNTY's
approval of the BETTERMENT and after encroachment permit issuance by the
public agency having maintenance authority for the public's right-of-way.
The BETTERMENTS, whether located on public or private property, must not
conflict with the plans, specifications, operations, or maintenance
requirements of the IMPROVEMENTS located adjacent to the DEVELOPMENT.
1.2 "IMPROVEMENTS" means the following:
a) Separate or combined pedestrian and vehicular off-site improvements
for Las Vegas Boulevard South, Sands Avenue and Koval Lane in a
manner acceptable to the COUNTY; and,
b) Traffic signal construction and/or its modification at the
intersection of Las Vegas Boulevard South with the existing/proposed
entrance(s) to the DEVELOPMENT in accordance with the COUNTY
approved Traffic Impact Evaluation Study for the DEVELOPMENT; and,
c) Construction of a new traffic signal at the intersection(s) of Sands
Avenue with the proposed entrance(s) to the DEVELOPMENT at the time
of construction of the Sands Avenue IMPROVEMENTS for the
DEVELOPMENT.
d) Construction of a new traffic signal together with and median island
modifications at the intersection of Koval Lane with the existing
limited access entrance and exit driveway located at the
southeasterly corner of the DEVELOPMENT, if DEVELOPER proposes an
unlimited entrance and exit driveway access to and from Koval Lane
at this location; however, any such unlimited access driveway must
be approved by the COUNTY and
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<PAGE>
must be a single shared driveway with DEVELOPER's neighbor abutting
the southerly property line of the DEVELOPMENT together with said
neighbor's written concurrence, or a separate COUNTY approved
equivalent single unlimited access driveway, in accordance with the
COUNTY approved Traffic Impact Evaluation Study for the DEVELOPMENT
and Nevada Revised Statute ("NRS") 244.155 and NRS 484.781. If said
access driveway cannot be reconfigured and reconstructed as a
single driveway pursuant to the conditions stated above, DEVELOPER
agrees that said driveway access to Koval Lane will remain a limited
access driveway as it exists on the date of this Agreement and until
otherwise separately approved by the COUNTY and in accordance with
NRS 244.155 and 484.781; and,
e) Modification of median islands, sidewalks, and landscaping on Las
Vegas Boulevard South necessary to accommodate the DEVELOPMENT's
proposed entrance and exit needs on Las Vegas Boulevard South in a
manner acceptable to the Nevada Department of Transportation, in
accordance with the COUNTY's "Las Vegas Boulevard South
Beautification Mitigation Policy", and in a manner acceptable to the
COUNTY; and,
f) Reconstruction of street lighting system along Las Vegas Boulevard
South and Sands Avenue to the extent of the DEVELOPMENT's frontages
that will meet or exceed the current COUNTY standards, or an
equivalent street lighting standard acceptable to the COUNTY; and,
g) Bus turnout facilities to be located on Las Vegas Boulevard South
and Sands Avenue in accordance with the COUNTY approved Traffic
Impact Evaluation Study and Standard Drawing Number 234.1 of the
Uniform Standard Drawings for the Clark County Area adopted by the
Clark County Regional Transportation Commission, in effect on the
date of said bus turnout construction, and in a manner acceptable to
the Citizens Area Transit (CAT), a division of the Clark County
Regional Transportation Commission; and,
h) Utility installations, adjustments and relocations; drainage
conduits, culverts and pipes; structures; mechanical and electrical
equipment; street and walkway lighting; traffic control equipment;
signage; aesthetic improvements; and such other features customarily
provided with transportation and drainage facilities and made a part
of the detailed plans and specifications as provided in Section 2.4
herein when such plans and specifications are accepted by the
COUNTY; and,
l) Construction (in phases proportionate to the stage of completion of
the DEVELOPMENT as determined by the COUNTY) of all other
DEVELOPMENT related off-site public improvements along the
DEVELOPMENT's frontages on Las Vegas Boulevard South, Koval Avenue
and Sands Avenue, and those other improvements identified as a
product of the COUNTY accepted Traffic Impact Evaluation Study and
by the COUNTY accepted Drainage Impact Evaluation Study both of
which are as described in Section 2.3 herein, and those improvements
depicted in the accepted off-site improvement design plans and
specifications as described in Section 2.4 herein.
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1.3 "IMPROVEMENT COST" means all costs including, but not limited to, the
design, the construction, and the management/administration of the
construction contract for necessary transportation and drainage facilities
described in Sections 1.2, 2.3, and 2.5 herein, including public facility
and utility adjustments and/or relocations, labor, materials, equipment
costs required to complete construction of the IMPROVEMENTS, such other
items reasonably associated with the construction of the similar
IMPROVEMENTS, and such other public facilities described herein.
1.4 "IMPROVEMENT Operations and Maintenance Costs" means all costs for
operation and maintenance of the IMPROVEMENTS and BETTERMENTS as set out
in Sections 2.7 and 3.3 herein and such other operations and maintenance
actions to assure a good and serviceable public facility.
1.5 "Pedestrian Grade Separated Street Crossing System" means a pedestrian
walkway structure(s) crossing over that portion of the roadway that
caries vehicular traffic including, but not limited to, the bridging
structures having a minimum pedestrian walkway width of sixteen (16) feet;
public easements or right-of-way for pedestrian passage through the
DEVELOPMENT and the other private properties locate at the remaining
corners of the street intersection, permanent structures; temporary
construction easements; a security observation area or an acceptable
alternate security plan for the public's protection; an elevator, stairway
and two (2) escalators at the end of each leg of each crossing structure;
handrails, slip-resistant walking surfaces, and other details needed to
meet the Americans With Disabilities Act (ADA); lighting as required to
illuminate all public walking surfaces; pedestrian safety barriers located
behind the street curbing, except at existing driveways, and along the
roadway median; and all necessary destination and/or guide signs.
1.6 "Performance Bond" means a bond made payable to the COUNTY, as set out in
Section 2.8 herein to assure acceptable construction of the IMPROVEMENTS,
posted on forms acceptable to the COUNTY District Attorney's office and
the COUNTY Engineer, and executed by a surety or guaranty company with
offices lawfully located and actually doing business within the COUNTY and
qualified to do business in the state of Nevada, in accordance with the
provisions of Subsection 28.20.080 of the COUNTY Code.
ARTICLE II - DEVELOPER AGREES
2.1 In General
The DEVELOPER agrees to acquire title for all property rights within the
DEVELOPMENT. The DEVELOPER acknowledges and agrees to provide those
property rights in the possession of the DEVELOPER, at no cost to the
COUNTY or the State of Nevada, that are required to construct (i) the
IMPROVEMENTS, (ii) a pedestrian grade separated street crossing system
located at the intersection of Las Vegas Boulevard South with Sands Avenue
(the same being known as Spring Mountain Road west of Las Vegas Boulevard
South), (iii) a possible future public people mover system at a reasonable
location selected by the DEVELOPER and acceptable to the COUNTY,
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if and when the COUNTY approves a Master Plan identifying rights-of-way
for such people mover system and in accordance therewith, (iv) all private
storm drainage easement(s) located within the boundary lines of the
DEVELOPMENT, if required by the Drainage Impact Evaluation Study or
Drainage Impact Mitigation Plan), and (v) all other public rights-of-way
needed for systems, vehicles, pedestrians, utilities, drainage, and/or
mitigation measures associated with the DEVELOPMENT including, but not
limited to, access easements, construction easements, maintenance
easements, drainage easements, sewer easements (excepting any additional
sanitary sewer easements serving adjacent private properties), water line
easements, and traffic control easements as identified by the Traffic
Impact Evaluation Study and/or the Drainage Impact Evaluation Study or
their associated impact mitigation plans as provided for in Section 2.3
herein.
The size of all pedestrian walkway rights-of-way will be at least as wide
as the walkway dimensions identified as a product of the accepted Traffic
Impact Evaluation Study and sufficiently wide enough to provide a walkway
level-of-service (LOS) value of "C" (as determined in Chapter 13 of the
Highway Capacity Manual Special Report No. 209, Transportation Research
Board, latest edition), for the DEVELOPMENT. A minimum of ten (10) feet
of effective width is required along the DEVELOPMENT's Las Vegas Boulevard
and Sands Avenue frontage. Pedestrian walkway safety needs including, but
not limited to, a possible pedestrian safety/containment system along all
of or part of the DEVELOPMENT's frontages shall be addressed in the
Traffic Impact Evaluation Study in a manner acceptable to the COUNTY.
The actual location and final dimension for the remainder of said
rights-of-way will be more specifically identified in the construction
documents. The DEVELOPMENT will allow for such other improvements
identified on current Master Plans adopted by the COUNTY's Board of County
Commissioners, and such other current Master Plans and future Master Plans
(that do not conflict with the DEVELOPMENT's improvements) adopted by the
COUNTY's Board of County Commissioners in their capacity as the Board of
Directors or Trustees of other entities such as for the Clark County
Sanitation District and the Las Vegas Valley Water District, and the
on-site and off-site design Plans and Specifications for the IMPROVEMENT
construction that are accepted by the COUNTY.
2.2 DEVELOPER's Property Conveyance
The DEVELOPER agrees to convey all proposed public property rights owned
by the DEVELOPER to the COUNTY or the State of Nevada Department of
Transportation, at no cost or expense, free and clear of all liens,
covenants, restrictions and encumbrances, as required for the
construction, maintenance or use of the IMPROVEMENTS within the
DEVELOPMENT at least fifteen (15) days prior to the date DEVELOPER desires
COUNTY issuance of temporary or permanent occupancy certificates for any
new structure in the DEVELOPMENT (other than for the Parking Garage and
the Central Plant), or within thirty (30) days after the receipt of
written notice from the COUNTY indicating that the COUNTY will begin
advertising for bids to construct any of the public improvements
identified in this Agreement and/or as identified as a product of the
accepted Traffic Impact Evaluation Study or the accepted Drainage Impact
Evaluation Study, that are located within the DEVELOPMENT or on property
owned by the DEVELOPER abutting
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the DEVELOPMENT, whichever date occurs first. Any conveyance of land by
the DEVELOPER to the COUNTY or to the State of Nevada, for public use of
sidewalks, walkways, or other forms of pedestrian passage through the
DEVELOPMENT, will be for facilitating the perpetual flow of pedestrian
traffic, utility easements, public facility easements, and for maintenance
purposes of said sidewalks, walkways, and pedestrian passage ways, without
restrictions. The language and form of all property transfer instruments
or documents will be in accordance with state and federal law before said
transfer instrument or document is recorded in the office of the County
Recorder.
2.3 DEVELOPER's Impact Evaluation Studies and Mitigation Plans
The DEVELOPER agrees to have a Nevada Registered Professional Civil
Engineer prepare and submit to the COUNTY:
(a) A Traffic Impact Evaluation Study together with a Traffic Impact
Mitigation Plan contained therein, prepared in a manner acceptable
to the COUNTY and the Nevada Department of Transportation, which
will identify the traffic capacity mitigation measures needed and to
be provided by the DEVELOPER with respect to the DEVELOPMENT, at no
cost to the COUNTY, as an offset for the projected vehicular and
pedestrian traffic increases caused by the DEVELOPMENT, plus said
plan will identify area wide traffic mitigation measures also being
provided by the DEVELOPER to offset the projected traffic volume
increases on public streets not adjacent to or abutting the
DEVELOPMENT and caused by the DEVELOPMENT. The Traffic Impact
Evaluation Study will also identify the air quality impacts
resulting from vehicular traffic generated by the DEVELOPMENT and
pedestrian safety needs as they relate to public walkways. The
DEVELOPER also agrees to comply with said Traffic Impact Evaluation
Study, said Traffic Impact Mitigation Plan, and all other traffic
related conditions set forth in this AGREEMENT prior to the
County's issuance of a temporary or permanent certificate of
occupancy for the DEVELOPMENT (other than for the Parking Garage and
Central Plant).
(b) A Drainage Impact Evaluation Study, together with a Drainage Impact
Mitigation Plan contained therein, may be submitted in phases, which
must be prepared in a manner acceptable to the COUNTY and the Clark
County Regional Flood Control District, and that will identify the
drainage mitigation measures needed and proposed to be provided by
the DEVELOPER with respect to the DEVELOPMENT, at no cost to the
COUNTY, as an offset for the projected drainage discharge increases
caused by the DEVELOPMENT, plus said Drainage Impact Mitigation Plan
will identify the on-site and the off-site drainage diversions
provided by the DEVELOPMENT and any needed drainage impact
mitigation measures to be provided by the DEVELOPER, and finally the
Drainage Impact Mitigation Plan will identify the needed changes to
all drainage facilities impacted by the DEVELOPMENT, in accordance
with the accepted Drainage Impact Evaluation Study, after completion
of the DEVELOPMENT and necessary to provide upstream and downstream
property protection from the adverse effects of a one hundred (100)
year storm event that has a one (1%) percent probability of
occurring each year. The DEVELOPER also agrees to comply with said
Drainage Impact Evaluation Study, said Drainage Impact Mitigation
Plan, and all other
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drainage conditions set forth in this AGREEMENT prior to the
COUNTY's issuance of temporary or permanent certificate of occupancy
for the DEVELOPMENT (other than for the Parking Garage and Central
Plant).
2.4 DEVELOPER's Design Responsibilities
The DEVELOPER agrees to prepare the design and construction contract
documents for the IMPROVEMENTS and other features of the DEVELOPMENT, at
no cost to the COUNTY, and in a manner acceptable to the COUNTY as
follows:
(a) The DEVELOPER agrees to retain professional engineering services
from a Nevada registered professional engineer for the preparation
of a Drainage Impact Evaluation Study and a Traffic Impact
Evaluation Study for the DEVELOPMENT acceptable to the COUNTY. Also
the DEVELOPER assures the COUNTY that said consultant will submit
said Drainage Impact Evaluation Study at least ten (10) days before
the DEVELOPER anticipates the need for a grading permit for the
DEVELOPMENT, and the DEVELOPER will not obtain said grading permit
prior to the acceptance of said Drainage Impact Evaluation Study by
the COUNTY. The Traffic Impact Evaluation Study will be submitted by
the DEVELOPER and will be accepted by the COUNTY prior to the
preparation of construction documents for any of the off-site
improvements identified in Section 1.2 and Subsections 2.3(a) and
2.3(b) herein.
(b) The DEVELOPER agrees to retain professional engineering design
services from a Nevada professional engineer for the preparation of
construction contract documents, including the final plans and
specifications for the IMPROVEMENTS acceptable to the COUNTY and the
DEVELOPER assures that said consultant will complete said plans and
specifications and receive COUNTY acceptance of said construction
documents at least three (3) months prior to the date DEVELOPER
desires occupancy of any structure in the DEVELOPMENT (other than
for the Parking Garage and Central Plant).
(c) The design of the IMPROVEMENTS will employ such design standards and
criteria as adopted by the COUNTY. However, the Parties mutually
agree:
(1) That aesthetic design standards shall be established by the
DEVELOPER in accordance with the requirements of the COUNTY
Code and/or the Clark County Planning Commission; and,
(2) The functional design standards shall be established through
mutual consent of the Parties hereto; and,
(3) That life and safety standards for the IMPROVEMENTS shall meet
or exceed the COUNTY's Street Improvement Standards, the
Nevada Department of Transportation's Transportation
Improvement Standards and the COUNTY's Building Code
requirements.
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(d) The DEVELOPER agrees to keep a certain flexibility in the design
and construction of the DEVELOPMENT to accommodate right-of-way
needed for a possible future public people mover system. The
DEVELOPER's obligation arising under Section 2.1 and this Subsection
2.4(d) does not limit the DEVELOPER's right to seek for
modifications of or changes to the Master Plan for and/or design of
such possible future people mover system.
2.5 DEVELOPER's Off-Site Improvement Construction
The DEVELOPER agrees to construct at his sole cost and expense the
IMPROVEMENTS, and all other improvements identified and made a part of the
accepted off-site improvement plans and specifications for the DEVELOPMENT
associated with each phase of the DEVELOPMENT as identified on Exhibit "B"
hereto, expenditures under this paragraph shall be made in phases
proportionate to the DEVELOPMENT's phase of completion or as constructed;
provided, however, the DEVELOPER will complete the construction of said
IMPROVEMENTS and all other improvements at least fifteen (15) days prior
to the COUNTY's issuance of temporary or permanent occupancy certificates
for any new structure in the DEVELOPMENT (other than for the Parking
Garage and Central Plant, which facilities may be occupied upon completion
and acceptance of same by the COUNTY's Building Department).
2.6 DEVELOPER's Additional Participation
(a) The DEVELOPER agrees to pay all cost and expenses associated with
the Construction of BETTERMENTS including, but not limited to, the
cost of the design, construction, inspection, operation and
maintenance.
(b) The DEVELOPER agrees to participate in the cost of providing a
pedestrian grade separated street crossing system at the
intersection of Las Vegas Boulevard South and Sands Avenue (also
known as Spring Mountain Road west of Las Vegas Boulevard South).
The DEVELOPER's percentage of participation shall be twenty-five
percent (25%) (less the actual dollar amounts contributed and
received on behalf of other private developments located within the
southeasterly quadrant of said intersection) of the total design,
inspection, and construction costs for said pedestrian grade
separated street crossing system paid by non-governmental entities.
The DEVELOPER acknowledges that the governmental entity may not
contribute any money for the construction of such pedestrian grade
separated street crossing system.
(c) The DEVELOPER agrees to participate in all other off-site traffic
mitigation measures identified in the accepted Traffic Impact
Evaluation Study and pay all costs determined to be a contributory
share attributable to the DEVELOPMENT's traffic impacts derived by
said study and as approved by the COUNTY. The DEVELOPER will provide
all cash contributions or will sign all offsite traffic
participation agreements concerning said off-site traffic mitigation
measures attributable to the DEVELOPMENT prior to the COUNTY's
approval of the Traffic Impact Evaluation Study for the DEVELOPMENT.
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(d) The DEVELOPER agrees to participate in all off-site drainage
mitigation measures identified in the accepted Drainage Impact
Evaluation Study and pay all costs determined to be a contributory
share attributable to the DEVELOPMENT's drainage impacts derived by
said study and as approved by the COUNTY. The DEVELOPER further
agrees to participate in the cost of providing a new enlarged storm
drain outlet in Sands Avenue or an additional storm drain in Sands
Avenue between Las Vegas Boulevard South and Manhattan Street to
offset any increases in runoff created by the DEVELOPMENT and to
compensate for runoff benefits created by runoff being diverted away
from the DEVELOPMENT into the new or improved Sands Avenue storm
drain improvement. Said new or improved Sands Avenue storm drain
system will be connected to a new Manhattan Street storm drain
system located between Sands Avenue and the Flamingo Wash drainage
system. The Sands Avenue storm drain system and the Manhattan Street
storm drain system are proposed to be constructed by the COUNTY. The
DEVELOPER's percentage of participation shall be a percentage of the
total design, inspection, and construction costs of the Sands Avenue
storm drain only based on the sum of the direct flow rate
contribution and runoff relief for the DEVELOPMENT as a percentage
of the total flow capacity of said storm drain improvement, and
established as a product of the approved Drainage Impact Evaluation
Study. Notwithstanding the above, the DEVELOPER and the COUNTY
acknowledge that said Sands Avenue storm drain system is needed to
support the IMPROVEMENTS described in Section 1.2 hereof and the
DEVELOPMENT and must be constructed prior to the occupancy of the
DEVELOPMENT. The DEVELOPER also understands that even though the
COUNTY proposes to construct the Sands Avenue storm drain system,
the County may not construct said storm drain improvements prior to
the time that DEVELOPER desires occupancy of the DEVELOPMENT and/or
the DEVELOPMENT requires additional storm drain relief capacity.
Therefore, if the Sands Avenue storm drain system is needed by the
DEVELOPER, prior to the time the COUNTY constructs said storm drain
improvement, the DEVELOPER agrees to construct the Sands Avenue
storm drain system and an outlet facility acceptable to the COUNTY
and as identified in the COUNTY approved Drainage Impact Evaluation
Study for the DEVELOPMENT and as required in this Subsection 2.6(e),
to the COUNTY approved outlet facility, prior to occupancy of the
DEVELOPMENT, at the DEVELOPER's sole cost and expense, and the
DEVELOPER will dedicate to the COUNTY the accepted storm drain
improvement at no cost to the COUNTY. The DEVELOPER will provide a
cash contribution or will sign a separate participation agreement
concerning all off-site drainage mitigation measures, not
constructed by the DEVELOPER, prior to the issuance of building
permits for any new structure in the DEVELOPMENT (other than for the
Parking Garage and Central Plant).
2.7 DEVELOPER's Operations and Maintenance Responsibility
(a) The DEVELOPER will provide for the operation and maintenance of all
IMPROVEMENTS located in the DEVELOPMENT including, but not limited
to, the maintenance of sidewalks, walkways, and any other form of
pedestrian passage through the DEVELOPMENT.
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(b) The DEVELOPER will provide for the maintenance of all private
improvements or BETTERMENTS located within Air Rights acquired or
reserved by the DEVELOPER.
(c) The DEVELOPER will provide for the operation of all BETTERMENTS
constructed, installed, and/or purchased by the DEVELOPER.
(d) If an alternate street lighting system is proposed by the DEVELOPER,
it will be considered by the Parties hereto as a BETTERMENT. The
design of this BETTERMENT must be accepted by the COUNTY before
installation. If said BETTERMENT is constructed by the DEVELOPER as
part of the IMPROVEMENTS, the DEVELOPER agrees to provide the COUNTY
with a complete inventory of replacement parts, acceptable to the
COUNTY, including but not limited to poles, luminaires, fixtures,
and lamps, or the DEVELOPER agrees to post a repair bond in the
amount of ten (10%) percent of the estimated alternate street light
system installation costs plus the DEVELOPER agrees to reimburse the
COUNTY for all alternate street light system replacement costs that
are incurred by the COUNTY for a period of five (5) years from the
date first appearing in this AGREEMENT. Additionally, the DEVELOPER
will maintain the full amount of said repair bond and replace any
amounts used by the COUNTY to enforce the repair terms of this
AGREEMENT.
2.8 DEVELOPER's Performance Bond
The DEVELOPER agrees to provide the COUNTY a PERFORMANCE BOND in favor of
the COUNTY, prior to the issuance of any building or construction permits,
and in the amount of one hundred twenty-five (125%) percent of the
estimated IMPROVEMENT COST approved by the COUNTY, which equals seven
hundred seventeen thousand three hundred sixty-two and nineteen
one-hundredths ($717,362.19) dollars. The DEVELOPER will maintain the full
amount of said PERFORMANCE BOND and replace any amounts used by the COUNTY
to enforce the terms of this AGREEMENT not covered by a separate bond. The
DEVELOPER further agrees to increase the amount of the PERFORMANCE BOND to
reflect true and actual increases in the IMPROVEMENT COSTS above the
amount previously posted after acceptance by the COUNTY of the Traffic
and/or the Drainage Impact Evaluation Studies and prior to the date of
issuance of any additional building permits.
2.9 Fees
The DEVELOPER agrees to pay to the COUNTY all lawful application, plans
check and inspection fees at the time of off-site improvement plan
submittal for the DEVELOPMENT, or at least three (3) months prior to the
COUNTY's issuance of any temporary or permanent occupancy certificates for
any new structure in the DEVELOPMENT.
2.10 Occupancy
The DEVELOPER agrees to prepare plans for Transportation Demand Management
(TDM) and Transportation Systems Management (TSM) as they relate to the
employees, customers, and
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visitors of the DEVELOPMENT. The Plans will be made a part of the Traffic
Impact Evaluation Study and shall be presented by the DEVELOPER or his
representative to the COUNTY's Board of Commissioners during one of their
regularly scheduled meetings for acceptance by the Board of Commissioners
prior to the DEVELOPER's request for approval of a temporary or permanent
certificate of occupancy. The DEVELOPER agrees to satisfy and comply with
all aspects of the accepted TDM and TSM plans in the DEVELOPER's operation
of the DEVELOPMENT. DEVELOPER will perform a follow-up study to evaluate
the effectiveness of its TDM and TSM plans. Said follow-up study shall be
completed within one year of the DEVELOPMENT's occupancy is established
and shall be presented by the DEVELOPER or his representative to the
COUNTY's Board of Commissioners.
2.11 IMPROVEMENT Warranty
Upon completion of the construction of the IMPROVEMENTS, the COUNTY will
perform an inspection and will prepare a punch list of items to be
completed by the DEVELOPER before the IMPROVEMENTS are acceptable to the
COUNTY. If the IMPROVEMENTS are substantially acceptable to the COUNTY, it
will release ninety (90%) percent of the performance bond referenced in
Subsection 2.8 for IMPROVEMENTS completed. One (1) year after the
DEVELOPER has substantially completed construction of the IMPROVEMENTS and
at the DEVELOPER's request, the COUNTY will perform a final inspection and
prepare a final punch list of items to be corrected by the DEVELOPER in a
manner acceptable to the COUNTY. After all IMPROVEMENT corrections have
been performed by the DEVELOPER and accepted by the COUNTY, the COUNTY
will process a release of the remaining portion of the performance bond;
provided all off-site improvement participation agreements, property map
amendments, right-of-way grants and/or dedications have been properly
executed and recorded.
ARTICLE III - COUNTY AGREES
3.1 COUNTY's Property Conveyance
The COUNTY shall convey all surplus public property rights granted to the
COUNTY by the DEVELOPER for the IMPROVEMENT construction, as solely
determined by the COUNTY, or granted to the COUNTY by the DEVELOPER for
any other public improvement identified herein, to the DEVELOPER at the
completion of construction and acceptance of the construction for
maintenance by the COUNTY.
3.2 COUNTY's Design Responsibilities
The COUNTY agrees to prepare the design and construction contract
documents for the public improvements included herein that are not
previously established development conditions imposed on the DEVELOPMENT
by the COUNTY's use permit approval process, are not a DEVELOPER's
obligation contained in this AGREEMENT, or a public improvement that is to
be cost shared with other parties.
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3.3 COUNTY's Operations and Maintenance Responsibility
The COUNTY agrees to provide, so long as it is in the best interest of the
COUNTY and/or the public, as solely determined by the COUNTY's Board of
Commissioners, or arrange to provide, for the operation and maintenance of
the IMPROVEMENTS located in the public's right-of-way upon acceptance of
the IMPROVEMENTS by the COUNTY, except sidewalks, walkways, or other forms
of pedestrian passage through the DEVELOPMENT.
3.4 COUNTY's Review of Submittals
The COUNTY agrees that it will not unreasonably delay or withhold approval
of any submittal from the DEVELOPER or from its representative.
3.5 COUNTY's Issuance of Parking Garage and Central Plant Building Permits
The COUNTY agrees to issue Building Permits for the Parking Garage and
Central Plant at locations shown on Exhibit "B" hereof provided the
DEVELOPER has satisfied all conditions relating to the issuance of said
permits and it has received all approvals required by the COUNTY for the
issuance of the aforementioned Parking Garage building permit and Central
Paint building permit, (other than final approval of the Traffic Impact
Evaluation Study) prior to the issuance of said permits.
3.6 COUNTY's Issuance of Grading Permit(s)
The COUNTY agrees to issue a Grading Permit for the purpose of grading,
excavation, utility relocation and all other surface and subsurface
operations associated with the DEVELOPMENT provided the DEVELOPER has
received an approval of its drainage study from the COUNTY for the area
within that phase of the DEVELOPMENT and provided the DEVELOPER has
satisfied all conditions relating to the issuance of said permit and it
has received all approvals required by the COUNTY for the issuance of said
Grading Permit (other than final approval of the Traffic Impact Evaluation
Study) prior to the issuance of said Grading Permit.
ARTICLE IV - COUNTY AND DEVELOPER AGREE
4.1 In General
The Parties to this AGREEMENT mutually agree that the construction of
off-site and on-site improvements described herein and the granting or
dedication of rights-of-way to the public's use are reasonably necessary
to support and mitigate the effects of the DEVELOPMENT on the COUNTY's
system of roadways, walkways and drainage facilities.
The Parties further agree to grant to each other, their authorized agents,
and contractors the right to enter and occupy those portions of property
owned by the Parties hereto as reasonably
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necessary to construct the IMPROVEMENTS after the DEVELOPER, his agents,
or contractors have been issued the prerequisite building and/or
encroachment permit.
4.2 IMPROVEMENT Coordination
The Parties mutually agree to coordinate their respective design efforts
with the other Party that may be affected by any proposed IMPROVEMENT
construction.
4.3 No Barriers to Public Access
Except for temporary obstructions caused by construction or maintenance
activities, the Parties hereto mutually agree that no barriers shall be
constructed on any portion of the IMPROVEMENTS located within public
rights-of-way that would obstruct the use, operation and maintenance of
IMPROVEMENTS or that would interfere with the free access and movement of
the Parties and the public through the IMPROVEMENTS located within public
rights-of-way.
ARTICLE V - MISCELLANEOUS
5.1 Term
This AGREEMENT shall be in full force and effect from and after the date
of execution of the AGREEMENT and shall continue until the obligations of
all Parties herein are fulfilled.
5.2 Workmanship
All work contemplated in this AGREEMENT shall be performed in a good and
workmanlike manner and each portion shall be promptly commenced by the
Party hereto obligated to do the same and thereafter diligently prosecuted
to conclusion in its logical order and sequence.
5.3 Non-Waiver
None of the conditions of this AGREEMENT shall be considered waived by any
Party unless such waiver is in writing and signed by all Parties. No such
waiver shall be a waiver of any past or future default, breach, or
modification of any of the conditions of this AGREEMENT unless expressly
stipulated in such waiver.
5.4 Successors and Assigns
The terms, provisions, covenants, and conditions of this AGREEMENT shall
apply to, bind, and inure to the benefit of the Parties hereto, their
heirs, executors, administrators, legal representatives, successors, and
assigns.
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5.5 Severability
If any term, provisions, covenant, or condition of this AGREEMENT, or any
application thereof, should be held by a court of competent jurisdiction
to be invalid, void, or unenforceable, all other provisions, covenants,
and conditions of this AGREEMENT, and all applications thereof, shall not
be held invalid, void, or unenforceable, shall continue in full force and
effect and shall in no way be affected, impaired, or invalidated thereby.
5.6 Captions
The captions appearing at the commencement of the Sections and Articles
hereof are descriptive only and for convenience in reference to this
AGREEMENT and in no way whatsoever define, limit, or describe the scope or
intent of this AGREEMENT, nor in any way affect this AGREEMENT.
5.7 Governing Law
The laws of the state of Nevada shall be applied in interpreting and
constructing this AGREEMENT.
5.8 Further Assurances
The Parties hereto shall take any actions necessary on or after the date
hereof which may be required to effectuate the terms of this AGREEMENT.
5.9 Notices
Every and all notices required hereunder shall be given by personal
service, telegram, or by deposit in the United States Mail, postage
prepaid to the respective other Parties to this AGREEMENT.
5.10 Amendments or Modifications
This AGREEMENT contains the entire agreement between the Parties herein
and cannot be amended, modified, changed, or unless done so in writing and
signed by the Parties.
5.11 Indemnification and Insurance
The DEVELOPER does hereby agree to indemnify, defend, and hold harmless
the COUNTY and its officers, agents, and employees from and against any
and all suits, actions, proceedings, claims, demands, losses, damages,
liabilities, costs, interests, attorney fees, and expenses of whatever
kind or nature, whether rightful or otherwise, arising out of or related
to this AGREEMENT, and/or arising out of the actions of the DEVELOPER in
the performance or nonperformance of this AGREEMENT. The foregoing
indemnity clause includes, but is not limited to, any and all claims,
demands, losses, damages, liabilities, costs, interests, attorney fees
Page 14
<PAGE>
(including, but not limited to, attorney fees applicable to state and
federal actions), and expenses of whatever kind or nature, whether
rightful or otherwise, arising from any condition or restriction contained
in any property conveyance or transfer document, and/or the actions or
inactions of the COUNTY its officers, agents, or employees arising out of
the development of this AGREEMENT, the approval of this AGREEMENT, the
consequences of the COUNTY's approval of this AGREEMENT, failure of the
DEVELOPER to adequately construct, operate, repair, or maintain the
sidewalks, walkways, or other forms of pedestrian passage through the
DEVELOPMENT, injuries caused to person or persons or property damage
sustained as a result of the acts or omissions of the DEVELOPER relating
to the sidewalk, walkways, or other forms of pedestrian passage in the
DEVELOPMENT. The County may, at its own option, choose to hire its own
attoneys in defense of any or all suits, demands, losses, damages,
liabilities, costs, interests, attorney fees, and expenses of whatever
kind or nature, whether rightful or otherwise. If the COUNTY chooses to
exercise this option, the DEVELOPER will continue to indemnify and hold
the COUNTY harmless and remain responsible and liable for the payment of
all fees, costs, expenses, and interest including, but not limited to,
attorney's fees, investigative fees, court costs and expenses and filing
fees, witness fees, court reporter fees, and all other related office and
administrative expenses.
The DEVELOPER agrees to obtain and maintain a general comprehensive
liability insurance policy in the minimum amount of five million
($5,000,000) dollars on an "occurrence" basis. The coverage must be
provide either on ISO Commercial General Liability form or an ISO Broad
Form Comprehensive General Liability form. Policies must include, but not
limited to, coverages for bodily injury, property damage, personal injury,
Broad Form property damage, premises and operations, and severability of
interest. Said policy will name the COUNTY, its commissioners, officers,
agents, and employees as additional insureds. The policies will be primary
and any other insurance carried by the COUNTY shall be excess and not
contributing therewith. The policy must be endorsed to require thirty (30)
days advanced notice to COUNTY of modification or cancellation of said
policy. This insurance requirement does not in any way limit the
DEVELOPER's liability under this Agreement.
Page 15
<PAGE>
5.12 Counterparts
This AGREEMENT may be executed in counterparts, each of which shall be
deemed an executed original and all of which together shall constitute
one and the same instrument, or may be executed as one original and copies
(certified true and accurate) supplied to each party.
IN WITNESS WHEREOF, the Parties hereto have caused this AGREEMENT to be
executed by their authorized officers the day and year first above written.
COUNTY OF CLARK, a political LAS VEGAS SANDS, INC.,
subdivision of the State of Nevada a Nevada corporation
/s/ Yvonne A. Gates /s/ William P. Weidner
- -------------------------------- -----------------------------
YVONNE ATKINSON GATES, Chair WILLIAM P. WEIDNER, President
Board of County Commissioners
ATTEST: APPROVED AS TO LEGALITY
AND FORM:
/s/ Loretta Bowman /s/ Christopher Figgins
- ----------------------------- -----------------------------
LORETTA BOWMAN, County Clerk CHRISTOPHER D. FIGGINS, ESQ.
Deputy District Attorney
Page 16
<PAGE>
State of Nevada
County of Clark
This instrument was acknowledged before me on April 8, 1997, by WILLIAM
P. WEIDNER as President of LAS VEGAS SANDS, INC., a Nevada corporation.
/s/ Bonnie R. Bruce
------------------------------------------
(Signature of notarial officer)
(Seal, if any)
Official Seal
BONNIE R. BRUCE
(Seal) Notary Public-Nevada
Principal office in
Clark County
My Comm. Exp. Jan. 24, 2001 My commission expires: January 24, 2001
Page 17
Las Vegas Sands, Inc.
1997 Fixed Stock Option Plan
SECTION 1. Purpose. The purposes of this Las Vegas Sands, Inc. 1997
Fixed Stock Option Plan are to promote the interests of Las Vegas Sands, Inc.
(the "Company") and its shareholders by (i) attracting and retaining exceptional
officers and other key employees of and consultants to the Company and its
Subsidiaries and (ii) enabling such individuals to participate in the long-term
growth and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms
shall have the meanings set forth below:
"Acceleration Event" shall mean (i) the merger of the Company with
another entity pursuant to which the shareholders of the Company immediately
prior to such merger do not own a majority of the stock of the surviving
corporation immediately after the merger or the sale of all or a substantially
all of its assets or a majority of its capital stock (other than a restructuring
or reorganization as a result of the Development Project or any public offering)
(a "Change in Control Acceleration Event"), or (ii) an initial public offering
of the stock of the Company as the same shall be referenced in a request for
acceleration or other document filed by the Company with the SEC (a "Public
Offering Acceleration Event").
"Adelson" shall mean Mr. Sheldon G. Adelson, the principal
shareholder of the Company.
"Affiliate" shall mean (i) any entity that would be deemed to be
under common control with the Company under Section 414 of the Code and (ii) any
entity in which the Company has a significant equity interest, in either case as
determined by the Board.
"Award Agreement" shall mean any written agreement, contract, or
other instrument or document evidencing any Option, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Company" shall mean Las Vegas Sands, Inc., together with any
successor thereto.
"Development Project" shall mean the Company's construction and
development of the hotel/casino resort, shopping mall and Congress Center (Hall
D)
<PAGE>
2
and the further development of the adjacent parcels on the property owned by
the Company or its Affiliates on the "Strip" in Las Vegas, Nevada, and the
construction of new improvements thereon.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean at any time (i) if there is no public
market for the Shares, then the fair market value as agreed to by the Company
and the Participant or in the absence of such agreement, as determined by an
appraisal conducted by a national investment banking firm selected and paid by
the Company and (ii) if there is a public market for the Shares, then the mean
between the high and low sales prices of the Shares as reported on the composite
tape for securities traded on the New York Stock Exchange for such date (or if
not then trading on the New York Stock Exchange, the mean between the high and
low sales price of the Shares on the stock exchange or over-the-counter market
on which the Shares are principally trading on such date), or if, there were no
sales on such date, on the closest preceding date on which there were sales of
Shares.
"Incentive Stock Option" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.
"Nevada Gaming Laws" means the statutes of the State of Nevada, the
regulations of the Nevada Gaming Commission, the rules, directives and decisions
of the Nevada Gaming Commission and State Gaming Control Board, the ordinances
of Clark County, Nevada, and the regulations of the Clark County Liquor and
Gaming Licensing Board.
"Non-Qualified Stock Option" shall mean a right to purchase Shares
from the Company that is granted under Section 6 of the Plan and that is not
intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
"Participant" shall mean any officer or other key employee of or
consultant to the Company or its Subsidiaries eligible for an Option under
Section 5 of the Plan and selected by the Board to receive an Option under the
Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.
<PAGE>
3
"Plan" shall mean this Las Vegas Sands, Inc. 1997 Fixed Stock Option
Plan.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the Staff thereof.
"Shares" shall mean the common shares of the Company, $.10 par
value, or such other securities of the Company (i) into which such common shares
shall be changed by reason of a recapitalization, merger, consolidation,
split-up, combination, exchange of shares or other similar transaction or (ii)
as may be determined by the Board pursuant to Section 4(b).
"Subsidiary" shall mean (i) any entity that, directly or indirectly,
is controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Board.
"Substitute Options" shall have the meaning specified in Section
4(c).
SECTION 3. Administration.
(a) The Plan shall be administered by the Board. Subject to
the terms of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Board by the Plan, the Board shall
have full power and authority to: (i) designate Participants; (ii) determine the
type or types of Options to be granted to a Participant; (iii) determine the
number of Shares to be covered by, or with respect to which payments, rights, or
other matters are to be calculated in connection with, Options; (iv) determine
the terms and conditions of any Option; (v) determine whether, to what extent,
and under what circumstances Options may be settled or exercised in cash,
Shares, other securities, other Options or other property, or canceled,
forfeited, or suspended and the method or methods by which Options may be
settled, exercised, canceled, forfeited, or suspended; (vi) determine whether,
to what extent, and under what circumstances cash, Shares, other securities,
other Options, other property, and other amounts payable with respect to an
Option shall be deferred either automatically or at the election of the holder
thereof or of the Board; (vii) interpret, administer reconcile any
inconsistency, correct any default and/or supply any omission in the Plan and
any instrument or agreement relating to, or Option made under, the Plan; (viii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the
Plan; and (ix) make any other determination and take any other action that the
Board deems necessary or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Option shall be within the sole discretion of the
Board, may be made at any time and shall be final, conclusive, and binding upon
all Persons,
<PAGE>
4
including the Company, any Affiliate, any Participant, any holder or beneficiary
of any Option, and any shareholder.
(c) No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Option
hereunder.
SECTION 4. Shares Available for Options.
(a) Shares Available. Subject to adjustment as provided in
Section 4(b), the aggregate number of Shares with respect to which Options may
be granted under the Plan shall be 75,000. If, after the effective date of the
Plan, any Shares covered by an Option granted under the Plan, or to which such
an Option relates, are forfeited, or if an Option has expired, terminated or
been canceled for any reason whatsoever (other than by reason of exercise or
cancellation for consideration), then the Shares covered by such Option shall
again be, or shall become, Shares with respect to which Options may be granted
hereunder.
(b) Adjustments. In the event that the Board determines that
any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, infusion of capital, including, without limitation, any infusion of
capital by Adelson, or other similar corporate transaction or event affects the
Shares such that an adjustment is determined by the Board in its discretion to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the Board
shall, in such manner as it may deem equitable, adjust any or all of (i) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Options may be granted, (ii) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Options, and (iii) the exercise
price with respect to any Option or, if deemed appropriate, make provision for a
cash payment to the holder of an outstanding Option in consideration for the
cancellation of such Option in an amount equal to the excess, if any, of the
Fair Market Value of the Shares subject to the Options over the aggregate
exercise price of such Option.
(c) Substitute Options. Options may, in the discretion of the
Board, be made under the Plan in assumption of, or in substitution for,
outstanding awards previously granted by the Company or its Affiliates or a
company acquired by the Company or with which the Company combines ("Substitute
Options"). The number of Shares underlying any Substitute Options shall be
counted against the aggregate number of Shares available for Options under the
Plan.
<PAGE>
5
(d) Sources of Shares Deliverable Under Options. Any Shares
delivered pursuant to an Option may consist, in whole or in part, of authorized
and unissued Shares, of treasury Shares or of shares purchased from a
shareholder of the Company.
SECTION 5. Eligibility. Any officer or other key employee of or
consultant to the Company or any of its Affiliates or Subsidiaries (including
any prospective officer or key employee or consultant) shall be eligible to be
designated a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the Board
shall have sole and complete authority to determine the Participants to whom
Options shall be granted, the number of Shares to be covered by each Option, the
exercise price therefor and the conditions and limitations applicable to the
exercise of the Option. The Board shall have the authority to grant Incentive
Stock Options, or to grant Non-Qualified Stock Options, or to grant both types
of Options. In the case of Incentive Stock Options, the terms and conditions of
such grants shall be subject to and comply with such rules as may be prescribed
by Section 422 of the Code, as from time to time amended, and any regulations
implementing such statute. All Options when granted under the Plan are intended
to be Non-Qualified Stock Options, unless the applicable Award Agreement
expressly states that the Option is intended to be an Incentive Stock Option. If
an Option is intended to be an Incentive Stock Option, and if for any reason
such Option (or any portion thereof) shall not qualify as an Incentive Stock
Option, then, to the extent of such nonqualification, such Option (or portion
thereof) shall be regarded as a Non-Qualified Stock Option appropriately granted
under the Plan; provided that such Option (or portion thereof) otherwise
complies with the Plan's requirements relating to Non-Qualified Stock Options.
No person or Participant has any right, title or interest in the Plan or any
interest in an Option to acquire an interest in the Plan or the Shares of the
Company until such time as the Plan and any rights granted thereunder, including
any Options, are approved by the Nevada Gaming Authorities.
(b) Exercise Price. The Board shall establish the exercise
price at the time each Option is granted, which exercise price shall be set
forth in the applicable Award Agreement.
(c) Exercise. Subject to Section 8 hereof, each Option shall
be exercisable at such times and subject to such terms and conditions as the
Board may, in its sole discretion, specify in the applicable Award Agreement or
thereafter. The Board may impose such conditions with respect to the exercise of
Options, including without limitation, any relating to the application of
federal or state securities and gaming laws, as it may deem necessary or
advisable. No Participant that holds an Option under this Plan may exercise such
option until such time as he or she obtains a
<PAGE>
6
license or other approvals from the Nevada Gaming Commission and the Clark
County Liquor and Gaming Licensing Board (the "Nevada Gaming Authorities") to
hold the stock in the Company. In the event that the Participant is denied such
license or approval or fails to obtain such license or approval while an
employee of the Company or within one year thereafter, then such options will
thereby expire.
(d) Payment.
(i) No Shares shall be delivered pursuant to any
exercise f an Option until payment in full of the aggregate exercise price
therefor is received by the Company. Such payment may be made in cash, or its
equivalent, or (x) by exchanging Shares owned by the optionee (which are not the
subject of any pledge or other security interest and which have been owned by
such optionee for at least 6 months), (y) if there shall be a public market for
the Shares, subject to such rules as may be established by the Board, through
delivery of irrevocable instructions to a broker to sell the Shares otherwise
deliverable upon the exercise of the Option and to deliver promptly to the
Company an amount equal to the aggregate exercise price, or (z) to the extent
permitted in an Award Agreement, by the promissory note and agreement of a
Participant providing for the payment with interest on the unpaid balance
accruing at a rate not less than needed to avoid the imputation of income under
Code section 7872 and upon such terms and conditions (including the security, if
any therefor) as the Board may determine, or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair
Market Value of any such Shares so tendered to the Company as of the date of
such tender is at least equal to such aggregate exercise price.
(ii) Wherever in this Plan or any Award Agreement a
Participant is permitted to pay the exercise price of an Option or taxes
relating to the exercise of an Option by delivering Shares, the Participant may,
subject to procedures satisfactory to the Board, satisfy such delivery
requirement by presenting proof of beneficial ownership of such Shares, in which
case the Company shall treat the Option as exercised without further payment and
shall withhold such number of Shares from the Shares acquired by the exercise of
the Option.
(iii) Shares issued to a Participant upon the exercise
of an Option under the terms of this Plan may be pledged to a financial
institution to secure a loan, the proceeds of which are used to pay to the
Company the exercise price of the Option or the taxes payable by the Participant
in connection with his or her acquisition of the Shares provided, however, that
the financial institution agrees that their security interest in such Shares
shall be subordinate to any right of redemption the Company may have with
respect to such Shares pursuant to an agreement between the Company and the
Participant.
<PAGE>
7
SECTION 7. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall 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 Participant or
any holder or beneficiary of any Option theretofore granted shall not to that
extent be effective without the consent of the affected Participant, holder or
beneficiary.
(b) Amendments to Options. The Board may waive any conditions
or rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Option theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of any
Participant or any holder or beneficiary of any Option theretofore granted shall
not to that extent be effective without the consent of the affected Participant,
holder or beneficiary.
(c) Adjustment of Options upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Board is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Options in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(b) hereof) affecting the Company,
any Affiliate, or the financial statements of the Company or any Affiliate, or
of changes in applicable laws, regulations, or accounting principles, whenever
the Board determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.
SECTION 8. Acceleration Event. In the event of an Acceleration
Event, any outstanding Options then held by Participants which are unexercisable
or otherwise unvested, shall automatically become 100% vested and shall be
exercisable pursuant to the terms of the applicable Award Agreement.
SECTION 9. General Provisions.
(a) Nontransferability.
(i) Each Option shall be exercisable only by the
Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative. Except as
set forth in Section 6(d)(iii) and subject to compliance with applicable Nevada
Gaming Laws, no Option may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant otherwise than by will or
by the laws of descent and
<PAGE>
8
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any Affiliate; provided that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
(ii) Notwithstanding the foregoing, the Board may in the
applicable Award Agreement evidencing an Option granted under the Plan or at any
time thereafter in an amendment to an Award Agreement provide that Options
granted hereunder which are not intended to qualify as Incentive Stock Options
may be transferred by the Participant to whom such Option was granted (the
"Grantee") without consideration, subject to such rules as the Board may adopt
to preserve the purposes of the Plan, any applicable restrictions in the
Company's articles of incorporation, by-laws or other relevant corporate
documents, and provided that such transfer will not cause the Company to cease
to be an S Corporation, to:
(A) the Grantee's spouse, children or grandchildren
(including adopted and stepchildren and grandchildren)
(collectively, the "Immediate Family");
(B) a trust solely for the benefit of the Grantee and his or
her Immediate Family; or
(C) a partnership or limited liability company whose only
partners or shareholders are the Grantee and his or her
Immediate Family members;
(each transferee described in clauses (A), (B) and (C) above is
hereinafter referred to as a "Permitted Transferee"); provided that
the Grantee gives the Board advance written notice describing the
terms and conditions of the proposed transfer and provides proof
that the Grantee and all Transferees have obtained all necessary
licenses and approvals from the Nevada Gaming Authorities and the
Board notifies the grantee in writing that such a transfer would
comply with the requirements of the Plan and any applicable Award
Agreement evidencing the option.
The terms of any option transferred in accordance with the
immediately preceding sentence shall apply to the Permitted
Transferee and any reference in the Plan or in an Award Agreement to
an optionee, Grantee or Participant shall be deemed to refer to the
Permitted Transferee, except that (a) Permitted Transferees shall
not be entitled to transfer any Options, other than by will or the
laws of descent and distribution, and only after obtaining all
necessary licenses and approvals from the Nevada Gaming Authorities;
(b) Permitted Transferees shall not be entitled to exercise any
transferred Options
<PAGE>
9
unless there shall be in effect a registration statement on an
appropriate form covering the shares to be acquired pursuant to the
exercise of such Option if the Board determines that such a
registration statement is necessary or appropriate, (c) the
Permitted Transferee has obtained all necessary licenses and
approvals from the Nevada Gaming Authorities; (d) the Board or the
Company shall not be required to provide any notice to a Permitted
Transferee, whether or not such notice is or would otherwise have
been required to be given to the Grantee under the Plan or otherwise
and (e) the consequences of termination of the Grantee's employment
by, or services to, the Company under the terms of the Plan and the
applicable Award Agreement shall continue to be applied with respect
to the Grantee, following which the Options shall be exercisable by
the Permitted Transferee only to the extent, and for the periods,
specified in the Plan and the applicable Award Agreement.
(b) Assumption by Adelson. Adelson may, at any time, assume
the Plan or certain obligations under the Plan in which case Adelson 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 under
the Plan with respect to such assumed obligations, including any redemption
rights granted to the Company under any Employment Agreement or contract or
otherwise.
(c) No Rights to Options.
(1) No Participant or other Person shall have any claim
to be granted any Option, and there is no obligation for
uniformity of treatment of Participants, or holders or
beneficiaries of Options. The terms and conditions of Options
and the Board's determinations and interpretations with
respect thereto need not be the same with respect to each
Participant (whether or not such Participants are similarly
situated).
(2) No Participant may acquire any interest in an Option
under this Plan until such time as the Nevada Gaming
Authorities approves the granting of such Option. In the event
that any Nevada Gaming Authority denies the granting of the
Option, the Participant shall not be entitled to receive the
Option or any other compensation or remuneration under this
Agreement in lieu of such Option.
(3) This Plan is not effective and no Participant has
any rights hereunder until such time as the Plan is approved
by the Nevada Gaming Authorities.
<PAGE>
10
(d) Share Certificates.
(1) All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant
to any Option or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Board may
deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange upon which
such Shares or other securities are then listed, any
applicable Federal or state laws, or the Company's Articles of
Incorporation or Bylaws and the Board may cause a legend or
legends to be put on any such certificates to make appropriate
reference to such restrictions.
(2) All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant
to any Option or the exercise thereof shall be subject to
Nevada Gaming Laws and all local gaming laws and the Board may
cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
(e) Withholding.
(i) A Participant may be required to pay to the Company
or any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Option, from any payment due or transfer
made under any Option or under the Plan or from any compensation or other amount
owing to a Participant the amount (in cash, Shares, other securities, other
Option or other property) of any applicable withholding taxes in respect of an
Option, its exercise, or any payment or transfer under an Option or under the
Plan and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes.
(ii) Without limiting the generality of clause (i)
above, a Participant may satisfy, in whole or in part, the foregoing withholding
liability by delivery of Shares owned by the Participant (which are not subject
to any pledge or other security interest and which have been owned by the
Participant for at least 6 months) with a Fair Market Value equal to such
withholding liability or by having the Company withhold from the number of
Shares otherwise issuable pursuant to the exercise of the option a number of
Shares with a Fair Market Value equal to such withholding liability.
(iii) Notwithstanding any provision of this Plan to the
contrary, in connection with the transfer of an Option to a Permitted Transferee
pursuant to Section 9(a) of the Plan, the Grantee shall remain liable for any
<PAGE>
11
withholding taxes required to be withheld upon the exercise of such Option by
the Permitted Transferee.
(f) Award Agreements. Each Option hereunder shall be evidenced
by an Award Agreement, which shall be delivered to the Participant and shall
specify the terms and conditions of the Option and any rules applicable thereto,
including but not limited to the effect on such Option of the death, disability
or termination of employment or service of a Participant, and the effect, if
any, of such other events as may be determined by the Board.
(g) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of options (subject to shareholder approval if such
approval is required), and such arrangements may be either generally applicable
or applicable only in specific cases.
(h) No Right to Employment. The grant of an Option shall not
be construed as giving a Participant the right to be retained in the employ of,
or in any consulting relationship to, the Company or any Affiliate. Further, the
Company or an Affiliate may at any time dismiss a Participant from employment or
discontinue any consulting relationship, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(i) No Rights as Shareholder. Subject to the provisions of the
applicable Option, no Participant or holder or beneficiary of any Option shall
have any rights as a shareholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.
(j) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of Nevada
and the Nevada Gaming Laws.
(k) Severability. If any provision of the Plan or any Option
is or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Option, or would disqualify the Plan or any
Option under any law deemed applicable by the Board, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Board,
materially altering the intent of the Plan or the Option, such provision shall
be stricken as to such jurisdiction, Person or Option and the remainder of the
Plan and any such Option shall remain in full force and effect.
<PAGE>
12
(l) Other Laws. The Board may refuse to issue or transfer any
Shares or other consideration under an Option if, acting in its sole discretion,
it determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Option shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Option granted hereunder shall be construed as an offer to
sell securities of the Company, and no such offer shall be outstanding, unless
and until the Board in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal and any other applicable securities laws and all approvals of the Nevada
Gaming Laws.
(m) No Trust or Fund Created. Neither the Plan nor any Option
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Option, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(n) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Option, and the Board shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(o) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
SECTION 10. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of the date
of its approval by the Board of Directors of the Company.
(b) Expiration Date. No Option shall be granted under the Plan
after November 6, 2007. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Option granted hereunder may, and the authority
of the Board to amend, alter, adjust, suspend, discontinue, or terminate any
such Option or to waive any conditions or rights under any such Option shall,
continue after November 6, 2007.
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made on November 1, 1995 between Las
Vegas Sands, Inc., a Nevada corporation having its principal place of business
at 3355 Las Vegas Boulevard South, Las Vegas, Nevada, d/b/a Sands Hotel Casino
("LVSI") and William P. Weidner, an individual residing at 12 Mill Lane,
Linwood, New Jersey ("Weidner").
WHEREAS:
LVSI is engaged in the business of owning and operating a
hotel/casino on property owned by LVSI on the "Strip" in Las Vegas, Nevada
(the "Sands Property");
LVSI desires to reconstruct and expand the existing hotel/casino and
to further develop the adjacent parcels on the Sands Property and to
construct new improvements thereon (the "Development Project");
In furtherance of its business and development plans, LVSI has
need of qualified, experienced, management personnel;
Weidner has represented to LVSI that Weidner possesses sufficient
qualifications, experience and expertise in hotel and casino operations
and management to fulfill the terms of the employment described in this
Agreement; and
LVSI has offered to employ Weidner, and Weidner desires to become
employed by LVSI, under the terms, provisions and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, understandings, representations, warranties, undertakings and
promises hereinafter set forth, and intending to be legally bound thereby, LVSI
and Weidner agree as follows:
1. Employment. LVSI shall employ Weidner, during the term and
subject to the conditions set forth in this Agreement, to serve as President of
LVSI or in such other managerial or executive capacity as the Board of Directors
of LVSI (sometimes hereinafter referred to as "the Board") may from time to time
determine.
2. Duties. Weidner shall have such powers, duties and
responsibilities as are generally associated with his office, as the same may be
modified and/or assigned to Weidner from time to time by the Chairman of the
Board, and subject to the supervision, direction and control of the Chairman and
the Board, including but not limited to:
(a) participation and involvement in the proposed development
activities of LVSI,
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including the planning, financing, construction and implementation stages, as
shall be requested by the Chairman of the Board;
(b) the efficient operation and maintenance of the hotel and casino
properties of LVSI;
(c) the promotion, marketing and sale of the goods and services
offered by LVSI;
(d) the preparation of budgets and allocation of funds;
(e) the establishment or continuation of adequate management
reporting and control systems;
(f) the recruitment, selection, training, delegation of duties and
responsibilities, and supervision, of subordinates; and
(g) the direction, review and oversight of all programs, systems,
departments and functions related to the management and administration of LVSI.
3. Performance. Weidner hereby unconditionally accepts the
employment described herein under the terms and conditions set forth in this
Agreement. Weidner covenants and agrees faithfully and diligently to perform all
of the duties of his employment, devoting his full business and professional
time, attention, energy and ability to promote the business interests of LVSI.
Weidner further agrees that during the period of his employment with LVSI, he
will not engage in any other business or professional pursuit whatsoever unless
LVSI shall consent thereto in writing.
4. Term. The parties acknowledge that Weidner is presently under
contract to another employer, which contract will expire on December 31, 1995.
The term of Weidner's employment hereunder shall commence (the "Effective Date")
on the earlier of (a) January 1, 1996, or (b) such earlier date on which Weidner
shall advise LVSI that he has been released from his prior contractual
commitment and is ready to report for work with LVSI. The initial term of this
Agreement (the "Initial Term") shall expire on December 31, 1998, unless sooner
terminated as provided herein. The Initial Term may be automatically extended by
LVSI for an additional two years (the "Renewal Term") upon the giving of written
notice to Weidner not less than 120 days prior to the expiration of the Initial
Term.
5. Licensing Requirement. Weidner has represented to LVSI that he is
presently licensed by the New Jersey Casino Control Commission. The parties
acknowledge that, in order to discharge the duties required under this Agreement
and to hold the Options provided for herein, Weidner must apply for and obtain a
casino key employee and equity holder license ("the License") issued by the
Nevada Gaming Commission upon the recommendation of the state Gaming Control
Board (collectively, the "Nevada Gaming Authorities"), pursuant to the
provisions of applicable Nevada laws and regulations. LVSI and Weidner agree to
cooperate with
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the Nevada Gaming Authorities, the Board and with each other in applying for the
License and in removing any objections that may be raised by the Nevada Gaming
Authorities in connection with the granting of the License. If the Nevada Gaming
Authorities shall refuse to grant the License to Weidner, then this Agreement
shall terminate and neither LVSI nor Weidner shall have any further obligation
hereunder.
6. Compensation. For all of the services to be rendered by Weidner
to LVSI hereunder, LVSI shall pay Weidner the following:
(a) Salary. During the Initial Term, Weidner shall receive a
salary of Seven Hundred Seventy Two Thousand Seven Hundred and Seventeen Dollars
($772,717) per year, payable in accordance with the usual payroll practices of
LVSI. During the Renewal Term, if any, this salary shall be increased by a
percentage equal to the percentage increase in the Consumer Price Index, All
Urban Consumers, All Items, Las Vegas Area (the "Index") between the last
published Index as of the date on which the Renewal Term begins and the last
published Index as of the date which is one year earlier. No such adjustment
shall be made in the event that, prior to the commencement of the Renewal Term,
LVSI has established for Weidner a written incentive compensation program.
Except as provided herein, Weidner shall not be considered for any additional
incentive or bonus compensation.
(b) Employee Benefit Plans. LVSI shall include Weidner in any
group health, medical, dental, hospitalization, life or accident insurance
plans, and any qualified pension, profit sharing or retirement plans, which may
be placed in effect or maintained by LVSI during the Term hereof for the benefit
of its employees generally, subject to all restrictions and limitations
contained in such plans or established by governmental regulation.
(c) Expense Reimbursement. Weidner is authorized to incur such
reasonable expenses as may be necessary for the performance of his duties
hereunder in accordance with the policies of LVSI established and in effect from
time to time and, except as may be otherwise agreed, LVSI will reimburse Weidner
for all such authorized expenses upon submission of an itemized accounting and
substantiation of such expenditures adequate to secure for LVSI a tax deduction
for the same in accordance with applicable Internal Revenue Service guidelines.
(d) Vacations and Holidays. Weidner shall be entitled to four
weeks of paid vacation leave per year at such times as may be requested by
Weidner and approved by LVSI. No more than three weeks of vacation shall be
taken consecutively. Up to two weeks of vacation may be carried over to the
following year (but not to the next). In addition, Weidner may take the
following paid holidays or, at LVSI's option, an equivalent number of paid days
off: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
(e) Licensing Expenses. LVSI shall pay all fees and expenses
incurred by Weidner in securing and maintaining such licenses and permits as may
be required by the Nevada
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Gaming Authorities in order to perform his duties under this Agreement.
(f) Relocation Expenses. LVSI shall reimburse Weidner for the
following expenses associated with Weidner's relocation to Las Vegas, Nevada
("Relocation Expenses"):
(i) LVSI shall engage and pay for the services of a
professional moving company to pack, ship, store (for up to 30
days), insure in transit, and unpack Weidner's family's household
goods and personal property, including automobiles, from his present
home to his new living quarters in Las Vegas, Nevada. However, LVSI
will not pay the cost of shipping such items as boats, trailers, or
perishables.
(ii) LVSI shall reimburse Weidner for reasonable
expenses incurred by him and his family in connection with travel
and lodging expenses for house hunting trips made on or before July
1, 1996, provided that travel arrangements are made through LVSI's
affiliate, GWV Travel of Needham, Massachusetts ("GWV");
(iii) The cost of reasonable travel by Weidner between
New Jersey and Nevada on or before August 1, 1996 shall be paid by
LVSI, travel arrangements to be made through GWV;
(iv) LVSI shall provide, at no cost to Weidner,
temporary living accommodations and reasonable related expenses in
its hotel facility or elsewhere until August 1, 1996 or such earlier
date as his family shall relocate to Nevada;
(v) If requested by Weidner on or before July 31, 1996,
LVSI shall, in connection with Weidner's purchase of a new home in
Nevada, make or arrange for an equity loan secured by Weidner's
current home in New Jersey which loan shall be repayable upon the
sale of that home;
(vi) LVSI shall track and report all expenses paid in
connection with Weidner's relocation in accordance with all Internal
Revenue Service rules and regulations in effect in 1996; and
(vii) The parties expressly agree and acknowledge that
other costs incurred by Weidner in connection with the relocation of
his principal residence from New Jersey to Nevada shall be borne by
Weidner and not LVSI;
provided, however, that if Weidner's employment with LVSI shall terminate by
reason of a Cause Termination, Weidner Breach Termination, Voluntary
Termination, or Licencing Termination (all as defined in Section 11 (a)) during
the first twelve (12) months after the Effective Date, he shall repay 75% of
such Relocation Expenses to LVSI, and if such a termination shall occur after 12
months but before 24 months, he shall repay 50% of such Relocation Expenses to
LVSI, in each
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case such reimbursement to occur within thirty (30) days following the
Termination Event.
(g) Lump Sum Auto. In lieu of any provision for the use of a
company-owned vehicle, or for any allowance for an automobile lease, insurance,
fuel, repair and maintenance expenses, LVSI shall pay to Weidner an annual lump
sum of $7,200.00 which sum shall be paid in installments which shall be added to
and paid with the salary provided for in Section 6(a) hereof. If LVSI shall ever
adopt a policy or program to provide selected executives with company-owned or
leased vehicles, it shall include Weidner in that policy or program and the lump
sum provided for herein may cease.
(h) Club Expenses. LVSI shall reimburse Weidner for the
membership initiation fees (up to a maximum of $20,000.00) and annual dues and
assessment related to one club membership at a country or social club selected
by Weidner in the Las Vegas area. If the initiation fee shall be in the form of
a refundable bond or equity, Weidner shall repay such sum to LVSI within 90 days
of the termination of his employment hereunder.
7. Stock Options. In consideration of the execution and performance
of this Agreement, in addition to all other sums payable hereunder, LVSI or its
principal shareholder, Sheldon G. Adelson ("Adelson"), (LVSI and Adelson being
hereinafter sometimes referred to, collectively or individually, as "Grantor")
shall grant to Weidner the right to acquire certain shares of the common capital
stock of LVSI (or of such alternative or other entity as may be formed by
Grantor to construct and own the Development Project, as limited pursuant to
Section 7(e) hereof, or to enter into a joint-venture or other arrangement to
accomplish the same) ("Shares"), as follows:
(a) Following execution of this Agreement and receipt of the
License, Grantor shall grant to Weidner options (the "Options") to acquire
Shares representing two percent (2%) of the Shares which shall be issued and
outstanding upon the issuance of all Shares for which options have been or may
be granted under this Agreement or any of the other employment agreements
executed simultaneous herewith or presently contemplated (the "Fully Diluted
Number").
(b) One-half of the Options shall be exercisable by Weidner on
the date that the first phase of the Development Project, comprised of a
newly-constructed major hotel/casino shall open for business to the public
("Grand Opening Date") and one-sixth of the Options shall be exercisable by
Weidner on each of the next three anniversaries of the Grand Opening Date (the
"Subsequent Vesting Dates"), provided, however, that if the Grand Opening Date
shall occur after January 1, 1998, the Subsequent Vesting Dates shall be
December 31, 2000 (the "Final Vesting Date") and two earlier dates such as shall
divide into three equal periods the time between the Grand Opening Date and the
Final Vesting Date.
(c) Upon exercise of the Options, Weidner shall pay to the
Grantor a price for each of the Shares (the "Exercise Price") equal to (i) the
value, at the time of a financing transaction for the purpose of constructing a
hotel/casino, determined by the investment banking
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firm retained by LVSI to advise LVSI with respect to such transaction (the
"Investment Banking Value"), of the land owned by LVSI on the Effective Date
underlying the Development Project (as defined and limited by Subparagraph (e)
below), plus (ii) the amount of any cash equity contributed to LVSI by Adelson
or persons other than Weidner after the date hereof and prior to the date on
which such Options are exercised, plus (iii) the value of any real or personal
property similarly contributed as it appears on the books of LVSI; divided by
(iv) the Fully Diluted Number.
(d) Each and all of the Options shall expire ("the Option
Expiration Date") on the earlier of (i) the date which is three (3) days prior
to the effective date of any public offering of LVSI stock as the same shall be
referenced in a request for acceleration or other document filed by LVSI with
the U.S. Securities and Exchange Commission, (ii) the date which is three (3)
days prior to the designated closing date in any agreement providing for the
merger of LVSI or the sale of all or substantially all of its assets or a
majority of its stock (other than a transaction pursuant to Section 12 hereof),
or (iii) eight (8) years from the date on which the Options were granted;
provided that all Options granted but not otherwise exercisable by the Option
Expiration Date shall be accelerated and shall become exercisable for a period
of ten (10) days (the "Accelerated Exercise Period") immediately preceding the
Option Expiration Date, provided that no Options shall expire pursuant to (i) or
(ii) above unless LVSI has given Weidner notice of the Accelerated Exercise
Period promptly upon its learning of the time (or approximate time) when the
Accelerated Exercise Period will occur.
(e) Weidner understands and acknowledges that the Development
Project shall include a retail merchandise shopping or other consumer
"experience" or attraction (the "Retail Portion"), ownership of which shall be
in an entity other than that for which the Options shall have been issued. It is
anticipated that the entity issuing the Shares pursuant to the Options granted
hereunder shall own and operate only one or more hotel/casinos and not the
Retail Portion of the Development Project, the Sands Expo and Convention Center,
or related parking facilities which, together with the land (or other interest
in real estate) on which they are located, may be owned by or, after the date
hereof, be transferred to, persons affiliated with LVSI and operated in
coordination with the hotel/casinos of LVSI.
(f) Shares issued to Weidner hereunder may be pledged to a
financial institution to secure a loan the proceeds of which are used to pay to
LVSI the Exercise Price or to pay taxes payable by Weidner in connection with
his acquisition of the Shares. The Options granted and Shares issued hereunder
may not be otherwise assigned, transferred or pledged by Weidner, and Weidner
will have no rights as a shareholder in LVSI unless and until Shares have been
issued to him hereunder. Except as set forth above, the Shares shall be subject
to restrictions on transfer and to such additional restrictions as shall be
imposed by the Articles of Incorporation or Bylaws of LVSI or by applicable law.
8. Confidentiality. Weidner agrees that he will hold in strictest
confidence and, without the prior express written approval of LVSI, will not
disclose to any person, firm, corporation or other entity, any confidential
information which he has acquired or may hereafter
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acquire during his employment by LVSI pertaining to the business or affairs of
LVSI, including but not limited to (i) proprietary information or other
documents concerning LVSI's policies, prices, systems, methods of operation,
contractual arrangements, customers or suppliers; (ii) LVSI's marketing methods,
credit and collection techniques and files; and (iii) LVSI's trade secrets and
other "know how" or information concerning its business and affairs not of a
public nature. The covenant and agreement set forth in this Section shall apply
during Weidner's employment by LVSI and shall survive termination of this
Agreement by any means and shall remain binding upon Weidner without regard to
the passage of time or other events.
9. Restrictive Covenant. Weidner shall not, either during the term
of this Agreement or until December 31, 1998 (the "Restrictive Covenant
Expiration Date") if the Agreement terminates prior to the end of the Initial
Term by reason of a Cause Termination, Weidner Breach Termination, Voluntary
Termination, or Licensing Termination (all as defined in Section 11 (a)), or by
reason of an LVSI Breach Termination, Constructive Termination, or Involuntary
Termination if and only if LVSI is paying to Weidner the amount set forth in
Section 11 (d) (iv), directly or indirectly, either as principal, agent,
employee, consultant, partner, officer, director, shareholder, or in any other
individual or representative capacity, own, manage, finance, operate, control or
otherwise engage or participate in any manner or fashion in, any hotel or casino
in the City of Las Vegas or Clark County, Nevada. In the event that this
Agreement shall be extended beyond the Initial Term, the Restrictive Covenant
Expiration Date shall be extended to the second anniversary of the date of any
Termination Event. Weidner acknowledges and agrees that the restrictive covenant
contained in this Section is reasonable as to duration, terms, and geographical
scope and that the covenant protects the legitimate interests of LVSI and
imposes no undue hardship on Weidner and is not injurious to the public.
10. Disability. If, during his employment by LVSI, Weidner shall, in
the opinion of an independent physician selected by agreement between the Board
and Weidner, become suddenly and immediately unable to perform the duties of his
employment due to severe illness or accident or other grave mental or physical
incapacity, or if Weidner shall be unable to perform the duties of his
employment for a continuous period of three months, then LVSI shall have the
right to suspend in whole or in part the future payments of compensation
hereunder or to terminate Weidner's employment hereunder in accordance with the
provisions of Section 11.
11. Termination.
(a) Notwithstanding the provisions of Section 4 of this
Agreement, Weidner's employment hereunder shall terminate upon the occurrence of
any of the following events (each, a "Termination Event"):
(i) Weidner's death (a "Death Termination");
(ii) the giving of written notice of termination by LVSI
based upon Weidner's disability, as defined in Section 10 hereof (a
"Disability Termination");
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(iii) the giving of written notice to Weidner by LVSI
that he is discharged for Cause (as hereinafter defined) (a
"Cause Termination");
(iv) the giving of written notice by LVSI to Weidner of
a material breach of this Agreement by Weidner, which breach remains
uncured for a period of ten (10) days after receipt of such notice
by Weidner (a "Weidner Breach Termination");
(v) the giving of written notice by Weidner to LVSI of a
material breach of this Agreement by LVSI, which breach remains
uncured for a period of ten (10) days following receipt of such
notice by LVSI (an "LVSI Breach Termination");
(vi) the giving of written notice by Weidner to LVSI
that a Constructive Termination (as hereinafter defined) has
occurred and that he has elected to resign, in which event
termination shall occur thirty (30) days after delivery of such
notice unless such Constructive Termination has been cured (a
"Constructive Termination");
(vii) the giving of sixty (60) days written notice to
Weidner by LVSI that LVSI has chosen to terminate this Agreement
without Cause (an "Involuntary Termination");
(viii) the giving of written notice by Weidner that he
has chosen to terminate his employment with LVSI, no breach or
Constructive Termination by LVSI having occurred, in which case this
Agreement shall terminate sixty (60) days after receipt of such
notice by LVSI (a "Voluntary Termination");
(ix) the refusal of the Nevada Gaming Authorities to
grant to Weidner the License described in Section 5 hereof or,
following the grant of the License, the revocation or suspension of
the License for a period longer than thirty (30) days (a "Licensing
Termination"); or
(x) if no notice of extension for a Renewal Term is sent
by LVSI upon the discharge of Weidner at the end of the Initial Term
(a "Non-Renewal Termination") or at any time thereafter (a
"Post-Contract Termination").
(b) "Cause," as used in Subsection (a)(iii) above, shall mean:
(i) conviction of a felony, misappropriation of any
material funds or property of LVSI, commission of fraud or
embezzlement with respect to LVSI, or any material act or acts of
dishonesty relating to Weidner's employment by LVSI resulting or
intended to result in direct or indirect personal gain or
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enrichment at the expense of LVSI;
(ii) use of alcohol or drugs that renders Weidner
materially unable to perform the functions of his job or carry out
his duties to LVSI;
(iii) materially failing to fulfill the duties set forth
in Section 2 hereof; or
(iv) committing any act or acts of serious and wilful
misconduct (including disclosure of confidential information) that
is likely to cause a material adverse effect on the business of
LVSI;
provided that, with respect to (iii) or (iv) above, LVSI shall have first
provided Weidner with written notice stating with specificity the acts, duties
or directives Weidner has committed or failed to observe or perform, and Weidner
shall not have corrected the acts or omissions complained of within thirty (30)
days of receipt of such notice. Any dispute between the parties as to whether a
"cause" has occurred shall be resolved by binding Arbitration in Las Vegas,
Nevada before a single arbitrator jointly selected by the parties or, if the
parties cannot agree, by the American Arbitration Association, such arbitration
to be conducted in accordance with the rules of the American Arbitration
Association.
(c) "Constructive Termination," as used in Subsection (a)(vi) above,
shall mean:
(i) the failure of LVSI to re-elect Weidner as a named
officer of LVSI;
(ii) a material change in the duties and
responsibilities of office that would cause Weidner's position to
have less dignity, importance or scope than intended at the
Effective Date and as set forth herein;
(iii) liquidation, dissolution or bankruptcy of LVSI; or
(iv) failure of LVSI to proceed with the Development
Project, including obtaining financing for the Development Project,
within eighteen (18) months after the Effective Date.
(d) Termination pursuant to this Section shall have the following
consequences:
(i) in the case of a Death Termination, salary shall be
paid through the date of death, all unexercised Options shall be
automatically canceled and the
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Shares issued to Weidner shall be redeemed by LVSI for a price
payable by LVSI to Weidner's estate equal to all sums paid by
Weidner for Shares, plus the difference between (x) the Exercise
Price paid or payable for all Shares purchased pursuant to Options
and for all Options granted but not yet exercised, and (y) the Fair
Market Value (as hereafter defined) of such Shares, which price
shall be payable by LVSI, with interest at the Applicable Federal
Rate (as hereafter defined) on the date of death, in thirty-six (36)
equal consecutive monthly installments of interest and principal
commencing ninety (90) days following the date on which Fair Market
Value is established;
(ii) in the case of a 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 issued to Weidner shall be
treated as described in the immediately preceding Subsection (i);
(iii) in the case of a Cause Termination, Weidner Breach
Termination, Voluntary Termination, or Licensing Termination, salary
and benefits payable to Weidner shall immediately cease, subject to
any requirements of law, all unexercised Options held by Weidner
shall be canceled and forfeited, Shares held by Weidner shall be
redeemed by LVSI for a price payable by LVSI to Weidner equal to the
lesser of the Exercise Price for such Shares or the Fair Market
Value on the date of termination, which price shall be payable, with
interest at the Applicable Federal Rate on the date of termination,
in sixty (60) equal consecutive monthly installments of interest and
principal commencing ninety (90) days following the date on which
Fair Market Value is established;
(iv) in the case of an LVSI Breach Termination,
Constructive Termination, or Involuntary Termination, LVSI shall
continue to pay to Weidner the salary set forth in Section 6(a)
hereof for the Term of this Agreement unless and until Weidner shall
become employed elsewhere in which event LVSI shall pay only the
difference, if any, between the income earned in such employment,
including salary and bonus compensation, and the salary set forth in
Section 6(a) hereof; provided further that all unexercised Options
held by Weidner shall be canceled and forfeited, Shares held by
Weidner shall be redeemed by LVSI for a price payable by LVSI to
Weidner equal to the greater of the Exercise Price for such Shares
or the Fair Market Value on the date of termination, which price
shall be payable, with interest at the Applicable Federal Rate on
the date of termination, in thirty-six (36) equal consecutive
monthly installments of interest and principal commencing ninety
(90) days following the date in which Fair Market Value is
established. In the case of a Non-Renewal Termination or a
Post-Contract Termination, salary shall be paid only through the
date of discharge;
(v) in the case of a Non-Renewal Termination, or a Post
Contract Termination, all Options and Shares issued to Weidner shall
be treated as described
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in Subsection (i) above.
(e) "Fair Market Value" as used in this Section, shall mean
and refer to the fair market value as agreed by LVSI and Weidner (or, in the
case of a Death Termination or Disability Termination, his personal or legal
representative) or, in the absence of such agreement, as determined by an
appraisal conducted by a national investment banking firm selected and paid by
LVSI. "Applicable Federal Rate," as used herein, shall mean and refer to the
rate published from time to time by the U.S. Internal Revenue Service and
designated as the applicable federal rate, as such rate shall prevail on the
date on which the Redemption Note (as hereafter defined) is issued.
(f) Any redemption of Shares provided for in this Section
shall take place as follows: Not later than thirty (30) days following any
Termination Event, Weidner (or his personal representative) shall surrender to
LVSI all certificates for Shares and, whether so surrendered or not, such Shares
shall thereupon be canceled. LVSI shall, upon receipt of the Shares and
determination of the Fair Market Value as set forth above, deliver to Weidner
(or his personal representative) a promissory note (the "Redemption Note") for
the sum payable to Weidner in respect of his Shares (the "Redemption Price").
The Redemption Note shall be payable over the term hereinabove provided, with
interest fixed at the Applicable Federal Rate, in equal consecutive monthly
installments of interest and principal. The Redemption Note and all payments
thereunder shall be, in all respects, subject to the limitations and
restrictions, if any, imposed by any note, credit facility, indenture, mortgage,
line of credit or similar contractual arrangement with an institutional or
similar lender by which LVSI is or may become bound ("Lender Restrictions"),
whether in the form of financial covenants or otherwise and whether arising
prior to or after execution and delivery of the Redemption Note. No failure by
LVSI to pay sums due on the Redemption Note on account of the Lender
Restrictions shall result in a default under the Redemption Note and all such
payments, to the extent (and only to the extent) prohibited by the Lender
Restrictions, shall be deferred and accrue until such time as they may be paid
without violating the Lender Restrictions.
(g) In the event that, at the time of any Termination Event, the
Shares shall be publicly traded, either on a registered securities exchange or
in the over-the-counter market, all provisions hereof providing for the
redemption of Shares by LVSI shall be void.
12. Assignment and Assumption. LVSI and Weidner acknowledge and
agree that the Development Project or any subsequent public offering of
securities may lead to a restructuring or other reorganization of LVSI or its
assets. In such event, this Agreement may be assigned to, and assumed by, any
new or different corporation, limited liability company or other entity that
shall own the hotel/casinos constructed on the Sands Property and Weidner's
employment shall continue pursuant to the terms hereof as if such assignee,
rather than LVSI, had been an original party to this Agreement. Upon such
assignment, all rights and obligations of LVSI hereunder shall inure to the
benefit of and be binding upon the designated assignee. No such assignment shall
relieve LVSI of its obligations hereunder to the extent that those obligations
are not satisfied or discharged by the assignee.
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13. Approval of Agreement. Weidner and LVSI acknowledge that the
terms of this Agreement are subject to the approval of the Nevada Gaming
Authorities and each agrees to make reasonable modifications in this Agreement,
if necessary, to secure such approval. If this Agreement shall be disapproved by
the Nevada Gaming Authorities and reasonable modifications shall be insufficient
to obtain such approval, then this Agreement shall terminate and neither party
shall have any further responsibility to the other hereunder.
14. Miscellaneous Provisions.
(a) [Notices] All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent via a national overnight courier service or by certified mail,
return receipt requested, postage prepaid, addressed to the parties as follows:
If to Weidner, to:
William P. Weidner
12 Mill Lane
Linwood, New Jersey 08221
With a copy to:
Bruce L. Harrison, Esq.
Capehart & Scatchard PA
Suite 300
8000 Midlantic Drive
Mt. Laurel, NJ 08054
If to LVSI, to:
Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Att: Sheldon G. Adelson, Chairman
With a copy to:
Paul G. Roberts
Vice President and General Counsel
The Interface Group
300 First Avenue
Needham, Massachusetts 02194
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or to such other address as any party shall request of the others by giving
notice in accordance with this Section.
(b) [Approval or Consent] Whenever under any provision of this
Agreement the approval or consent of either party is required, said approval or
consent shall be given or denied in a prompt manner.
(c) [Integration] This Agreement is the result of substantial
negotiations between the parties, represents the complete agreement of the
parties with respect to the subject matter hereof, and supersedes all prior
agreements and understandings.
(d) [Severability] If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
(e) [Waiver of Provisions] The failure of either party to insist
upon a strict performance of any of the terms or provisions of this Agreement or
to exercise any option, right, or remedy herein contained, shall not be
construed as a waiver or as a relinquishment for the future of such term,
provision, option, right, or remedy, but the same shall continue and remain in
full force and effect. No waiver by either party of any term or provision hereof
shall be deemed to have been made unless expressed in writing and signed by such
party.
(f) [Fees and Expenses] Each of the parties hereto shall bear its
own attorneys fees, consultants fees and other costs, fees, and expenses
incurred in connection with the negotiation, preparation and consummation of
this Agreement and the transactions contemplated hereby.
(g) [Amendments] This Agreement may not be amended, changed or
modified except by a written document signed by each of the parties hereto.
(h) [Successors and Assigns] All provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against the
parties hereto, and their respective heirs, personal representatives, successors
and permitted assigns.
(i) [Governing Law] This Agreement shall be governed by, construed
under, and interpreted in accordance with the laws of the State of Nevada, and
enforced (except as otherwise provided herein) only in its state and federal
courts.
(j) [Headings] Section and Subsection headings in this Agreement are
included for convenience of reference only and are not intended to define, limit
or describe the scope or intent of any provision of this Agreement.
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(k) [Counterparts] This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(l) [Survival] The representations, warranties, and covenants
contained in this Agreement shall survive its termination for any reason.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as a contract under seal.
LAS VEGAS SANDS, INC.
By /s/ Sheldon G. Adelson
- ------------------------------
Sheldon G. Adelson
Chairman of the Board
/s/ William P. Weidner
- ------------------------------
WILLIAM P. WEIDNER
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TERMINOLOGY USED IN THIS AGREEMENT
TERM DEFINED AT
Accelerated Exercise Period ss.7(d)
Adelson ss.7
Applicable Federal Rate ss.11(e)
Agreement Recitals
Board ss.1
Cause ss.11(b)
Cause Termination ss.11(a)(iii)
Constructive Termination ss.11(c)
Death Termination ss.11(a)(i)
Development Project Recitals
Disability Termination ss.11(a)(ii)
Effective Date ss.4
Exercise Price ss.7(c)
Fair Market Value ss.11 (e)
Final Vesting Date ss.7(b)
Fully Diluted Number ss.7(a)
Grand Opening Date ss.7(b)
Grantor ss.7
GWV ss.6(f)(ii)
Index ss.6(a)
Initial Term ss.4
Investment Banking Value ss.7(c)
Involuntary Termination ss.11(a)(vii)
Lender Restrictions ss.11(f)
License ss.5
Licensing Termination ss.11(a)(ix)
LVSI Recitals
LVSI Breach Termination ss.11(a)(v)
Nevada Gaming Authorities ss.5
Non-Renewal Termination ss.11(a)(x)
Options ss.7(a)
Option Expiration Date ss.7(d)
Post-Contract Termination ss.11(a)(x)
Redemption Note ss.11(f)
Redemption Price ss.11(f)
Relocation Expenses ss.6(f)
Renewal Term ss.4
Restrictive Covenant Expiration Date ss.9
Retail Portion ss.7(e)
Sands Property First Whereas, paragraph
Shares ss.7
Subsequent Vesting Dates ss.7(b)
Termination Event ss.11(a)
Voluntary Termination ss.11(a)(viii)
Weidner Recitals
Weidner Breach Termination ss.11(a)(iv)
15
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made on November 1, 1995 between Las
Vegas Sands, Inc., a Nevada corporation having its principal place of business
at 3355 Las Vegas Boulevard South, Las Vegas, Nevada, d/b/a Sands Hotel Casino
("LVSI") and Bradley H. Stone, an individual residing at 7 Evergreen Road,
Linwood, NJ 08221 ("Stone").
WHEREAS:
LVSI is engaged in the business of owning and operating a
hotel/casino on property owned by LVSI on the "Strip" in Las Vegas, Nevada
(the "Sands Property");
LVSI desires to reconstruct and expand the existing hotel/casino and
to further develop the adjacent parcels on the Sands Property and to
construct new improvements thereon (the "Development Project");
In furtherance of its business and development plans, LVSI has
need of qualified, experienced, management personnel;
Stone has represented to LVSI that Stone possesses sufficient
qualifications, experience and expertise in hotel and casino operations
and management to fulfill the terms of the employment described in this
Agreement; and
LVSI has offered to employ Stone, and Stone desires to become
employed by LVSI, under the terms, provisions and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, understandings, representations, warranties, undertakings and
promises hereinafter set forth, and intending to be legally bound thereby, LVSI
and Stone agree as follows:
1. Employment. LVSI shall employ Stone, during the term and subject
to the conditions set forth in this Agreement, to serve as Executive Vice
President of LVSI or in such other managerial or executive capacity as the Board
of Directors of LVSI (sometimes hereinafter referred to as "the Board") may from
time to time determine.
2. Duties. Stone shall have such powers, duties and responsibilities
as are generally associated with his office, as the same may be modified and/or
assigned to Stone from time to time by the Chairman of the Board or President,
and subject to the supervision, direction and control of the Chairman and the
Board and President, including but not limited to:
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(a) participation and involvement in the proposed development
activities of LVSI, including the planning, financing, construction and
implementation stages, as shall be requested by the Chairman of the Board;
(b) the efficient operation and maintenance of the hotel and casino
properties of LVSI;
(c) the promotion, marketing and sale of the goods and services
offered by LVSI;
(d) the preparation of budgets and allocation of funds;
(e) the establishment or continuation of adequate management
reporting and control systems;
(f) the recruitment, selection, training, delegation of duties and
responsibilities, and supervision, of subordinates; and
(g) the direction, review and oversight of all programs, systems,
departments and functions related to the management and administration of LVSI.
3. Performance. Stone hereby unconditionally accepts the employment
described herein under the terms and conditions set forth in this Agreement.
Stone covenants and agrees faithfully and diligently to perform all of the
duties of his employment, devoting his full business and professional time,
attention, energy and ability to promote the business interests of LVSI. Stone
further agrees that during the period of his employment with LVSI, he will not
engage in any other business or professional pursuit whatsoever unless LVSI
shall consent thereto in writing.
4. Term. The parties acknowledge that Stone is presently under
contract to another employer, which contract will expire on December 31, 1995.
The term of Stone's employment hereunder shall commence (the "Effective Date")
on the earlier of (a) January 1, 1996, or (b) such earlier date on which Stone
shall advise LVSI that he has been released from his prior contractual
commitment and is ready to report for work with LVSI. The initial term of this
Agreement (the "Initial Term") shall expire on December 31, 1998, unless sooner
terminated as provided herein. The Initial Term may be automatically extended by
LVSI for an additional two years (the "Renewal Term") upon the giving of written
notice to Stone not less than 120 days prior to the expiration of the Initial
Term.
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5. Licensing Requirement. Stone has represented to LVSI that he is
presently licensed by the New Jersey Casino Control Commission. The parties
acknowledge that, in order to discharge the duties required under this Agreement
and to hold the Options provided for herein, Stone must apply for and obtain a
casino key employee and equity holder license ("the License") issued by the
Nevada Gaming Commission upon the recommendation of the state Gaming Control
Board (collectively, the "Nevada Gaming Authorities"), pursuant to the
provisions of applicable Nevada laws and regulations. LVSI and Stone agree to
cooperate with the Nevada Gaming Authorities, the Board and with each other in
applying for the License and in removing any objections that may be raised by
the Nevada Gaming Authorities in connection with the granting of the License. If
the Nevada Gaming Authorities shall refuse to grant the License to Stone, then
this Agreement shall terminate and neither LVSI nor Stone shall have any further
obligation hereunder.
6. Compensation. For all of the services to be rendered by
Stone to LVSI hereunder, LVSI shall pay Stone the following:
(a) Salary. During the Initial Term, Stone shall receive a
salary of Four Hundred Ninety Three Thousand Six Hundred and Six ($493,606) per
year, payable in accordance with the usual payroll practices of LVSI. During the
Renewal Term, if any, if this salary shall be increased by a percentage equal to
the percentage increase in the Consumer Price Index, All Urban Consumers, All
Items, Las Vegas Area (the "Index") between the last published Index as of the
date on which the Renewal Term begins and the last published Index as of the
date which is one year earlier. No such adjustment shall be made in the event
that, prior to the commencement of the Renewal Term, LVSI has established for
Stone a written incentive compensation program. Except as provided herein, Stone
shall not be considered for any additional incentive or bonus compensation.
(b) Employee Benefit Plans. LVSI shall include Stone in any
group health, medical, dental, hospitalization, life or accident insurance
plans, and any qualified pension, profit sharing or retirement plans, which may
be placed in effect or maintained by LVSI during the Term hereof for the benefit
of its employees generally, subject to all restrictions and limitations
contained in such plans or established by governmental regulation.
(c) Expense Reimbursement. Stone is authorized to incur such
reasonable expenses as may be necessary for the performance of his duties
hereunder in accordance with the policies of LVSI established and in effect from
time to time and, except as may be otherwise agreed, LVSI will reimburse Stone
for all such authorized expenses upon submission of an itemized accounting and
substantiation of such expenditures adequate to secure for LVSI a tax deduction
for the same in accordance with applicable Internal Revenue Service guidelines.
(d) Vacations and Holidays. Stone shall be entitled to four
weeks of paid
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vacation leave per year at such times as may be requested by Stone and approved
by LVSI. No more than three weeks of vacation shall be taken consecutively. Up
to two weeks of vacation may be carried over to the following year (but not to
the next). In addition, Stone may take the following paid holidays or, at LVSI's
option, an equivalent number of paid days off: New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
(e) Licensing Expenses. LVSI shall pay all fees and expenses
incurred by Stone in securing and maintaining such licenses and permits as may
be required by the Nevada Gaming Authorities in order to perform his duties
under this Agreement.
(f) Relocation Expenses. LVSI shall reimburse Stone for the
following expenses associated with Stone's relocation to Las Vegas, Nevada
("Relocation Expenses"):
(i) LVSI shall engage and pay for the services of a
professional moving company to pack, ship, store (for up to 30
days), insure in transit, and unpack Stone's family's household
goods and personal property, including automobiles, from his present
home to his new living quarters in Las Vegas, Nevada. However, LVSI
will not pay the cost of shipping such items as boats, trailers, or
perishables.
(ii) LVSI shall reimburse Stone for reasonable expenses
incurred by him and his family in connection with travel and lodging
expenses for house hunting trips made on or before July 1, 1996,
provided that travel arrangements are made through LVSI's affiliate,
GWV Travel of Needham, Massachusetts ("GWV");
(iii) The cost of reasonable travel by Stone between New
Jersey and Nevada on or before August 1, 1996 shall be paid by LVSI,
travel arrangements to be made through GWV;
(iv) LVSI shall provide, at no cost to Stone, temporary
living accommodations and reasonable related expenses in its hotel
facility or elsewhere until August 1, 1996 or such earlier date as
his family shall relocate to Nevada;
(v) If requested by Stone on or before July 31, 1996,
LVSI shall, in connection with Stone's purchase of a new home in
Nevada, make or arrange for an equity loan secured by Stone's
current home in New Jersey which loan shall be repayable upon the
sale of that home;
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(vi) LVSI shall track and report all expenses paid in
connection with Stone's relocation in accordance with all Internal
Revenue Service rules and regulations in effect in 1996; and
(vii) The parties expressly agree and acknowledge that
other costs incurred by Stone in connection with the relocation of
his principal residence from New Jersey to Nevada shall be borne by
Stone and not LVSI;
provided, however, that if Stone's employment with LVSI shall terminate by
reason of a Cause Termination, Stone Breach Termination, Voluntary Termination,
or Licencing Termination (all as defined in Section 11 (a)) during the first
twelve (12) months after the Effective Date, he shall repay 75% of such
Relocation Expenses to LVSI, and if such a termination shall occur after 12
months but before 24 months, he shall repay 50% of such Relocation Expenses to
LVSI, in each case such reimbursement to occur within thirty (30) days following
the Termination Event.
(g) Lump Sum Auto. In lieu of any provision for the use of a
company-owned vehicle, or for any allowance for an automobile lease, insurance,
fuel, repair and maintenance expenses, LVSI shall pay to Stone an annual lump
sum of $7,200.00 which sum shall be paid in installments which shall be added to
and paid with the salary provided for in Section 6(a) hereof. If LVSI shall ever
adopt a policy or program to provide selected executives with company-owned or
leased vehicles, it shall include Stone in that policy or program and the lump
sum provided for herein may cease.
7. Stock Options. In consideration of the execution and performance
of this Agreement, in addition to all other sums payable hereunder, LVSI or its
principal shareholder, Sheldon G. Adelson ("Adelson"), (LVSI and Adelson being
hereinafter sometimes referred to, collectively or individually, as "Grantor")
shall grant to Stone the right to acquire certain shares of the common capital
stock of LVSI (or of such alternative or other entity as may be formed by
Grantor to construct and own the Development Project, as limited pursuant to
Section 7(e) hereof, or to enter into a joint-venture or other arrangement to
accomplish the same) ("Shares"), as follows:
(a) Following execution of this Agreement and receipt of the
License, Grantor shall grant to Stone options (the "Options") to acquire Shares
representing one and one-half percent (1.5%) of the Shares which shall be issued
and outstanding upon the issuance of all Shares for which options have been or
may be granted under this Agreement or any of the other
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employment agreements executed simultaneous herewith or presently contemplated
(the "Fully Diluted Number").
(b) One-half of the Options shall be exercisable by Stone on
the date that the first phase of the Development Project, comprised of a
newly-constructed major hotel/casino shall open for business to the public
("Grand Opening Date") and one-sixth of the Options shall be exercisable by
Stone on each of the next three anniversaries of the Grand Opening Date (the
"Subsequent Vesting Dates"), provided, however, that if the Grand Opening Date
shall occur after January 1, 1998, the Subsequent Vesting Dates shall be
December 31, 2000 (the "Final Vesting Date") and two earlier dates such as shall
divide into three equal periods the time between the Grand Opening Date and the
Final Vesting Date.
(c) Upon exercise of the Options, Stone shall pay to Grantor a
price for each of the Shares (the "Exercise Price") equal to (i) the value, at
the time of a financing transaction for the purpose of constructing a
hotel/casino, determined by the investment banking firm retained by LVSI to
advise LVSI with respect to such transaction (the "Investment Banking Value"),
of the land owned by LVSI on the Effective Date underlying the Development
Project (as defined and limited by Subparagraph (e) below), plus (ii) the amount
of any cash equity contributed to LVSI by Adelson or persons other than Stone
after the date hereof and prior to the date on which such Options are exercised,
plus (iii) the value of any real or personal property similarly contributed as
it appears on the books of LVSI; divided by (iv) the Fully Diluted Number.
(d) Each and all of the Options shall expire ("the Option
Expiration Date") on the earlier of (i) the date which is three (3) days prior
to the effective date of any public offering of LVSI stock as the same shall be
referenced in a request for acceleration or other document filed by LVSI with
the U.S. Securities and Exchange Commission, (ii) the date which is three (3)
days prior to the designated closing date in any agreement providing for the
merger of LVSI or the sale of all or substantially all of its assets or a
majority of its stock (other than a transaction pursuant to Section 12 hereof),
or (iii) eight (8) years from the date on which the Options were granted;
provided that all Options granted but not otherwise exercisable by the Option
Expiration Date shall be accelerated and shall become exercisable for a period
of ten (10) days (the "Accelerated Exercise Period") immediately preceding the
Option Expiration Date, provided that no Options shall expire pursuant to (i) or
(ii) above unless LVSI has given Stone notice of the Accelerated Exercise Period
promptly upon its learning of the time (or approximate time) when the
Accelerated Exercise Period will occur.
(e) Stone understands and acknowledges that the Development
Project shall
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include a retail merchandise shopping or other consumer "experience" or
attraction (the "Retail Portion"), ownership of which shall be in an entity
other than that for which the Options shall have been issued. It is anticipated
that the entity issuing the Shares pursuant to the Options granted hereunder
shall own and operate only one or more hotel/casinos and not the Retail Portion
of the Development Project, the Sands Expo and Convention Center, or related
parking facilities which, together with the land (or other interest in real
estate) on which they are located, may be owned by or, after the date hereof, be
transferred to, persons affiliated with LVSI and operated in coordination with
the hotel/casinos of LVSI.
(f) Shares issued to Stone hereunder may be pledged to a
financial institution to secure a loan the proceeds of which are used to pay to
LVSI the Exercise Price or to pay taxes payable by Stone in connection with his
acquisition of the Shares. The Options granted and Shares issued hereunder may
not be otherwise assigned, transferred or pledged by Stone, and Stone will have
no rights as a shareholder in LVSI unless and until Shares have been issued to
him hereunder. Except as set forth above, the Shares shall be subject to
restrictions on transfer and to such additional restrictions as shall be imposed
by the Articles of Incorporation or Bylaws of LVSI or by applicable law.
8. Confidentiality. Stone agrees that he will hold in strictest
confidence and, without the prior express written approval of LVSI, will not
disclose to any person, firm, corporation or other entity, any confidential
information which he has acquired or may hereafter acquire during his employment
by LVSI pertaining to the business or affairs of LVSI, including but not limited
to (i) proprietary information or other documents concerning LVSIs policies,
prices, systems, methods of operation, contractual arrangements, customers or
suppliers; (ii) LVSI's marketing methods, credit and collection techniques and
files; and (iii) LVSI's trade secrets and other "know how" or information
concerning its business and affairs not of a public nature. The covenant and
agreement set forth in this Section shall apply during Stone's employment by
LVSI and shall survive termination of this Agreement by any means and shall
remain binding upon Stone without regard to the passage of time or other events.
9. Restrictive Covenant. Stone shall not, either during the term of
this Agreement or until December 31, 1998 (the "Restrictive Covenant Expiration
Date") if the Agreement terminates prior to the end of the Initial Term by
reason of a Cause Termination, Stone Breach Termination, Voluntary Termination,
or Licensing Termination (all as defined in Section 11 (a)), or by reason of an
LVSI Breach Termination, Constructive Termination, or Involuntary Termination if
and only if LVSI is paying to Stone the amount set forth in Section 11 (d) (iv),
directly or indirectly, either as principal, agent, employee, consultant,
partner, officer, director,
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shareholder, or in any other individual or representative capacity, own, manage,
finance, operate, control or otherwise engage or participate in any manner or
fashion in, any hotel or casino in the City of Las Vegas or Clark County,
Nevada. In the event that this Agreement shall be extended beyond the Initial
Term, the Restrictive Covenant Expiration Date shall be extended to the second
anniversary of the date of any Termination Event. Stone acknowledges and agrees
that the restrictive covenant contained in this Section is reasonable as to
duration, terms, and geographical scope and that the covenant protects the
legitimate interests of LVSI and imposes no undue hardship on Stone and is not
injurious to the public.
10. Disability. If, during his employment by LVSI, Stone shall, in
the opinion of an independent physician selected by agreement between the Board
and Stone, become suddenly and immediately unable to perform the duties of his
employment due to severe illness or accident or other grave mental or physical
incapacity, or if Stone shall be unable to perform the duties of his employment
for a continuous period of three months, then LVSI shall have the right to
suspend in whole or in part the future payments of compensation hereunder or to
terminate Stone's employment hereunder in accordance with the provisions of
Section 11.
11. Termination.
(a) Notwithstanding the provisions of Section 4 of this
Agreement, Stone's employment hereunder shall terminate upon the occurrence of
any of the following events (each, a "Termination Event"):
(i) Stone's death (a "Death Termination");
(ii) the giving of written notice of termination by LVSI
based upon Stone's disability, as defined in Section 10 hereof (a
"Disability Termination");
(iii) the giving of written notice to Stone by LVSI that
he is discharged for Cause (as hereinafter defined) (a "Cause
Termination");
(iv) the giving of written notice by LVSI to Stone of a
material breach of this Agreement by Stone, which breach remains
uncured for a period of ten (10) days after receipt of such notice
by Stone (a "Stone Breach Termination");
(v) the giving of written notice by Stone to LVSI of a
material breach of this Agreement by LVSI, which breach remains
uncured for a period of ten (10) days following receipt of such
notice by LVSI (an "LVSI Breach Termination");
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(vi) the giving of written notice by Stone to LVSI that
a Constructive Termination (as hereinafter defined) has occurred and
that he has elected to resign, in which event termination shall
occur thirty (30) days after delivery of such notice unless such
Constructive Termination has been cured (a "Constructive
Termination");
(vii) the giving of sixty (60) days written notice to
Stone by LVSI that LVSI has chosen to terminate this Agreement
without Cause (an "Involuntary Termination");
(viii) the giving of written notice by Stone that he has
chosen to terminate his employment with LVSI, no breach or
Constructive Termination by LVSI having occurred, in which case this
Agreement shall terminate sixty (60) days after receipt of such
notice by LVSI (a "Voluntary Termination");
(ix) the refusal of the Nevada Gaming Authorities to
grant to Stone the License described in Section 5 hereof or,
following the grant of the License, the revocation or suspension of
the License for a period longer than thirty (30) days (a "Licensing
Termination"); or
(x) if no notice of extension for a Renewal Term is sent
by LVSI upon the discharge of Stone at the end of the Initial Term
(a "Non-Renewal Termination") or at any time thereafter (a
"Post-Contract Termination").
(b) "Cause," as used in Subsection (a)(iii) above, shall mean:
(i) conviction of a felony, misappropriation of any
material funds or property of LVSI, commission of fraud or
embezzlement with respect to LVSI, or any material act or acts of
dishonesty relating to Stone's employment by LVSI resulting or
intended to result in direct or indirect personal gain or enrichment
at the expense of LVSI;
(ii) use of alcohol or drugs that renders Stone
materially unable to perform the functions of his job or carry out
his duties to LVSI;
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(iii) materially failing to fulfill the duties set forth
in Section 2 hereof; or
(iv) committing any act or acts of serious and wilful
misconduct (including disclosure of confidential information) that
is likely to cause a material adverse effect on the business of
LVSI;
provided that, with respect to (iii) or (iv) above, LVSI shall have first
provided Stone with written notice stating with specificity the acts, duties or
directives Stone has committed or failed to observe or perform, and Stone shall
not have corrected the acts or omissions complained of within thirty (30) days
of receipt of such notice. Any dispute between the parties as to whether a
"cause" has occurred shall be resolved by binding Arbitration in Las Vegas,
Nevada before a single arbitrator jointly selected by the parties or, if the
parties cannot agree, by the American Arbitration Association, such arbitration
to be conducted in accordance with the rules of the American Arbitration
Association.
(c) "Constructive Termination," as used in Subsection (a)(vi) above,
shall mean:
(i) the failure of LVSI to re-elect Stone as a named
officer of LVSI;
(ii) a material change in the duties and
responsibilities of office that would cause Stone's position to have
less dignity, importance or scope than intended at the Effective
Date and as set forth herein;
(iii) liquidation, dissolution or bankruptcy of LVSI; or
(iv) failure of LVSI to proceed with the Development
Project, including obtaining financing for the Development Project,
within eighteen (18) months after the Effective Date.
(d) Termination pursuant to this Section shall have the following
consequences:
(i) in the case of a Death Termination, salary shall be
paid through the date of death, all unexercised Options shall be
automatically canceled and the Shares issued to Stone shall be
redeemed by LVSI for a price payable by LVSI to Stone's estate equal
to all sums paid by Stone for Shares, plus the difference between
(x) the Exercise Price paid or payable for all Shares purchased
pursuant to Options and for all Options granted but not yet
exercised, and (y) the Fair
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Market Value (as hereafter defined) of such Shares, which price
shall be payable by LVSI, with interest at the Applicable Federal
Rate (as hereafter defined) on the date of death, in thirty-six (36)
equal consecutive monthly installments of interest and principal
commencing ninety (90) days following the date on which Fair Market
Value is established;
(ii) in the case of a 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 issued to Stone shall be
treated as described in the immediately preceding Subsection (i);
(iii) in the case of a Cause Termination, Stone Breach
Termination, Voluntary Termination, or Licensing Termination, salary
and benefits payable to Stone shall immediately cease, subject to
any requirements of law, all unexercised Options held by Stone shall
be canceled and forfeited, Shares held by Stone shall be redeemed by
LVSI for a price payable by LVSI to Stone equal to the lesser of the
Exercise Price for such Shares or the Fair Market Value on the date
of termination, which price shall be payable, with interest at the
Applicable Federal Rate on the date of termination, in sixty (60)
equal consecutive monthly installments of interest and principal
commencing ninety (90) days following the date on which Fair Market
Value is established;
(iv) in the case of an LVSI Breach Termination,
Constructive Termination, or Involuntary Termination, LVSI shall
continue to pay to Stone the salary set forth in Section 6(a) hereof
for the Term of this Agreement unless and until Stone shall become
employed elsewhere in which event LVSI shall pay only the
difference, if any, between the income earned in such employment,
including salary and bonus compensation, and the salary set forth in
Section 6(a) hereof; provided further that all unexercised Options
held by Stone shall be canceled and forfeited, Shares held by Stone
shall be redeemed by LVSI for a price payable by LVSI to Stone equal
to the greater of the Exercise Price for such Shares or the Fair
Market Value on the date of termination, which price shall be
payable, with interest at the Applicable Federal Rate on the date of
termination, in thirty-six (36) equal consecutive monthly
installments of interest and principal commencing ninety (90) days
following the date in which Fair Market Value is established. In the
case of a Non-Renewal Termination or a Post-Contract Termination,
salary shall be paid only through the date of discharge;
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(v) in the case of a Non-Renewal Termination or a
Post-Contract Termination, all Options and Shares issued to Stone
shall be treated as described in Subsection (i) above.
(e) "Fair Market Value" as used in this Section, shall mean
and refer to the fair market value as agreed by LVSI and Stone (or, in the case
of a Death Termination or Disability Termination, his personal or legal
representative) or, in the absence of such agreement, as determined by an
appraisal conducted by a national investment banking firm selected and paid by
LVSI. "Applicable Federal Rate," as used herein, shall mean and refer to the
rate published from time to time by the U.S. Internal Revenue Service and
designated as the applicable federal rate, as such rate shall prevail on the
date on which the Redemption Note (as hereafter defined) is issued.
(f) Any redemption of Shares provided for in this Section
shall take place as follows: Not later than thirty (30) days following any
Termination Event, Stone (or his personal representative) shall surrender to
LVSI all certificates for Shares and, whether so surrendered or not, such Shares
shall thereupon be canceled. LVSI shall, upon receipt of the Shares and
determination of the Fair Market Value as set forth above, deliver to Stone (or
his personal representative) a promissory note (the "Redemption Note") for the
sum payable to Stone in respect of his Shares (the "Redemption Price"). The
Redemption Note shall be payable over the term hereinabove provided, with
interest fixed at the Applicable Federal Rate, in equal consecutive monthly
installments of interest and principal. The Redemption Note and all payments
thereunder shall be, in all respects, subject to the limitations and
restrictions, if any, imposed by any note, credit facility, indenture, mortgage,
line of credit or similar contractual arrangement with an institutional or
similar lender by which LVSI is or may become bound ("Lender Restrictions"),
whether in the form of financial covenants or otherwise and whether arising
prior to or after execution and delivery of the Redemption Note. No failure by
LVSI to pay sums due on the Redemption Note on account of the Lender
Restrictions shall result in a default under the Redemption Note and all such
payments, to the extent (and only to the extent) prohibited by the Lender
Restrictions, shall be deferred and accrue until such time as they may be paid
without violating the Lender Restrictions.
(g) In the event that, at the time of any Termination Event,
the Shares shall be publicly traded, either on a registered securities exchange
or in the over-the-counter market, all provisions hereof providing for the
redemption of Shares by LVSI shall be void.
12. Assignment and Assumption. LVSI and Stone acknowledge and agree
that the Development Project or any subsequent public offering of securities may
lead to a
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restructuring or other reorganization of LVSI or its assets. In such event, this
Agreement may be assigned to, and assumed by, any new or different corporation,
limited liability company or other entity that shall own the hotel/casinos
constructed on the Sands Property and Stone's employment shall continue pursuant
to the terms hereof as if such assignee, rather than LVSI, had been an original
party to this Agreement. Upon such assignment, all rights and obligations of
LVSI hereunder shall inure to the benefit of and be binding upon the designated
assignee. No such assignment shall relieve LVSI of its obligations hereunder to
the extent that those obligations are not satisfied or discharged by the
assignee.
13. Approval of Agreement. Stone and LVSI acknowledge that the terms
of this Agreement are subject to the approval of the Nevada Gaming Authorities
and each agrees to make reasonable modifications in this Agreement, if
necessary, to secure such approval. If this Agreement shall be disapproved by
the Nevada Gaming Authorities and reasonable modifications shall be insufficient
to obtain such approval, then this Agreement shall terminate and neither party
shall have any further responsibility to the other hereunder.
14. Miscellaneous Provisions.
(a) [Notices] All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent via a national overnight courier service or by certified mail,
return receipt requested, postage prepaid, addressed to the parties as follows:
If to Stone, to:
Bradley H. Stone
7 Evergreen Road
Linwood, New Jersey 08221
If to LVSI, to:
Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Att: Sheldon G. Adelson, Chairman
With a copy to:
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Paul G. Roberts
Vice President and General Counsel
The Interface Group
300 First Avenue
Needham, Massachusetts 02194
or to such other address as any party shall request of the others by giving
notice in accordance with this Section.
(b) [Approval or Consent] Whenever under any provision of this
Agreement the approval or consent of either party is required, said approval or
consent shall be given or denied in a prompt manner.
(c) [Integration] This Agreement is the result of substantial
negotiations between the parties, represents the complete agreement of the
parties with respect to the subject matter hereof, and supersedes all prior
agreements and understandings.
(d) [Severability] If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
(e) [Waiver of Provisions] The failure of either party to insist
upon a strict performance of any of the terms or provisions of this Agreement or
to exercise any option, right, or remedy herein contained, shall not be
construed as a waiver or as a relinquishment for the future of such term,
provision, option, right, or remedy, but the same shall continue and remain in
full force and effect. No waiver by either party of any term or provision hereof
shall be deemed to have been made unless expressed in writing and signed by such
party.
(f) [Fees and Expenses] Each of the parties hereto shall bear its
own attorneys fees, consultants fees and other costs, fees, and expenses
incurred in connection with the negotiation, preparation and consummation of
this Agreement and the transactions contemplated hereby.
(g) [Amendments] This Agreement may not be amended, changed or
modified except by a written document signed by each of the parties hereto.
(h) [Successors and Assigns] All provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against the
parties hereto, and their respective heirs, personal representatives, successors
and permitted assigns.
(i) [Governing Law] This Agreement shall be governed by, construed
under, and
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interpreted in accordance with the laws of the State of Nevada, and enforced
(except as otherwise provided) only in its state and federal courts.
(j) [Headings] Section and Subsection headings in this Agreement are
included for convenience of reference only and are not intended to define, limit
or describe the scope or intent of any provision of this Agreement.
(k) [Counterparts] This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(l) [Survival] The representations, warranties, and covenants
contained in this Agreement shall survive its termination for any reason.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as a contract under seal.
LAS VEGAS SANDS, INC.
By /s/ Sheldon G. Adelson
----------------------
Sheldon G. Adelson
Chairman of the Board
/s/ Bradley H. Stone
- ------------------------------
BRADLEY H. STONE
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TERMINOLOGY USED IN THIS AGREEMENT
TERM DEFINED AT
Accelerated Exercise Period ss.7(d)
Adelson ss.7
Applicable Federal Rate ss.11 (e)
Agreement Recitals
Board ss.1
Cause ss.11(b)
Cause Termination ss.11(a)(iii)
Constructive Termination ss.11(c)
Death Termination ss.11(a)(i)
Development Project Recitals
Disability Termination ss.11(a)(ii)
Effective Date ss.4
Exercise Price ss.7(c)
Fair Market Value ss.11(e)
Final Vesting Date ss.7(b)
Fully Diluted Number ss.7(a)
Grand Opening Date ss.7(b)
Grantor ss.7
GWV ss.6(f)(ii)
Index ss.6(a)
Initial Term ss.4
Investment Banking Value ss.7(c)
Involuntary Termination ss.11(a)(vii)
Lender Restrictions ss.11(f)
License ss.5
Licensing Termination ss.11(a)(ix)
LVSI Recitals
LVSI Breach Termination ss.11(a)(v)
Nevada Gaming Authorities ss.5
Non-Renewal Termination ss.11(a)(x)
Options ss.7(a)
Option Expiration Date ss.7(d)
Post-Contract Termination ss.11(a)(x)
Redemption Note ss.11(f)
Redemption Price ss.11(f)
Relocation Expenses ss.6(f)
Renewal Term ss.4
Restrictive Covenant Expiration Date ss.9
Retail Portion ss.7(e)
Sands Property First Whereas, paragraph
Shares ss.7
Subsequent Vesting Dates ss.7(b)
Termination Event ss.11(a)
Voluntary Termination ss.11(a)(viii)
Stone Recitals
Stone Breach Termination ss.11(a)(iv)
16
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made on November 1, 1995 between Las
Vegas Sands, Inc., a Nevada corporation having its principal place of business
at 3355 Las Vegas Boulevard South, Las Vegas, Nevada, d/b/a Sands Hotel Casino
("LVSI") and Robert G. Goldstein, an individual residing at 7600 Bayshore Drive,
Margate, NJ 08402 ("Goldstein").
WHEREAS:
LVSI is engaged in the business of owning and operating a
hotel/casino on property owned by LVSI on the "Strip" in Las Vegas, Nevada
(the "Sands Property");
LVSI desires to reconstruct and expand the existing hotel/casino and
to further develop the adjacent parcels on the Sands Property and to
construct new improvements thereon (the "Development Project");
In furtherance of its business and development plans, LVSI has
need of qualified, experienced, management personnel;
Goldstein has represented to LVSI that Goldstein possesses
sufficient qualifications, experience and expertise in hotel and casino
operations and management to fulfill the terms of the employment described
in this Agreement; and
LVSI has offered to employ Goldstein, and Goldstein desires to
become employed by LVSI, under the terms, provisions and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, understandings, representations, warranties, undertakings and
promises hereinafter set forth, and intending to be legally bound thereby, LVSI
and Goldstein agree as follows:
1. Employment. LVSI shall employ Goldstein, during the term and
subject to the conditions set forth in this Agreement, to serve as Senior Vice
President of LVSI or in such other managerial or executive capacity as the Board
of Directors of LVSI (sometimes hereinafter referred to as "the Board") may from
time to time determine.
2. Duties. Goldstein shall have such powers, duties and
responsibilities as are generally associated with his office, as the same may be
modified and/or assigned to Goldstein
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from time to time by the Chairman of the Board or President, and subject to the
supervision, direction and control of the Chairman and the Board and President,
including but not limited to:
(a) participation and involvement in the proposed development
activities of LVSI, including the planning, financing, construction and
implementation stages, as shall be requested by the Chairman of the Board;
(b) the efficient operation and maintenance of the hotel and casino
properties of LVSI;
(c) the promotion, marketing and sale of the goods and services
offered by LVSI;
(d) the preparation of budgets and allocation of funds;
(e) the establishment or continuation of adequate management
reporting and control systems;
(f) the recruitment, selection, training, delegation of duties and
responsibilities, and supervision, of subordinates; and
(g) the direction, review and oversight of all programs, systems,
departments and functions related to the management and administration of LVSI.
3. Performance. Goldstein hereby unconditionally accepts the
employment described herein under the terms and conditions set forth in this
Agreement. Goldstein covenants and agrees faithfully and diligently to perform
all of the duties of his employment, devoting his full business and professional
time, attention, energy and ability to promote the business interests of LVSI.
Goldstein further agrees that during the period of his employment with LVSI, he
will not engage in any other business or professional pursuit whatsoever unless
LVSI shall consent thereto in writing.
4. Term. The parties acknowledge that Goldstein is presently under
contract to another employer, which contract will expire on December 31, 1995.
The term of Goldstein's employment hereunder shall commence (the "Effective
Date") on the earlier of (a) January 1, 1996, or (b) such earlier date on which
Goldstein shall advise LVSI that he has been released from his prior contractual
commitment and is ready to report for work with LVSI. The initial term of this
Agreement (the "Initial Term") shall expire on December 31, 1998, unless sooner
terminated as provided herein. The Initial Term may be automatically extended by
LVSI for an additional two years (the "Renewal Term") upon the giving of written
notice to Goldstein not less than 120 days prior to the expiration of the
Initial Term.
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<PAGE>
5. Licensing Requirement. Goldstein has represented to LVSI that
he ispresently licensed by the New Jersey Casino Control Commission. The parties
acknowledge that, in order to discharge the duties required under this Agreement
and to hold the Options provided for herein, Goldstein must apply for and obtain
a casino key employee and equity holder license ("the License") issued by the
Nevada Gaming Commission upon the recommendation of the state Gaming Control
Board (collectively, the "Nevada Gaming Authorities"), pursuant to the
provisions of applicable Nevada laws and regulations. LVSI and Goldstein agree
to cooperate with the Nevada Gaming Authorities, the Board and with each other
in applying for the License and in removing any objections that may be raised by
the Nevada Gaming Authorities in connection with the granting of the License. If
the Nevada Gaming Authorities shall refuse to grant the License to Goldstein,
then this Agreement shall terminate and neither LVSI nor Goldstein shall have
any further obligation hereunder.
6. Compensation. For all of the services to be rendered by Goldstein
to LVSI hereunder, LVSI shall pay Goldstein the following:
(a) Salary. During the Initial Term, Goldstein shall receive a
salary of Three Hundred Sixty Nine Thousand Seven Hundred and Seventy Dollars
($369,770) per year, payable in accordance with the usual payroll practices of
LVSI. During the Renewal Term, if any, this salary shall be increased by a
percentage equal to the percentage increase in the Consumer Price Index, All
Urban Consumers, All Items, Las Vegas Area (the "Index") between the last
published Index as of the date on which the Renewal Term begins and the last
published Index as of the date which is one year earlier. No such adjustment
shall be made in the event that, prior to the commencement of the Renewal Term,
LVSI has established for Goldstein a written incentive compensation program.
Except as provided herein, Goldstein shall not be considered for any additional
incentive or bonus compensation.
(b) Employee Benefit Plans. LVSI shall include Goldstein in
any group health, medical, dental, hospitalization, life or accident insurance
plans, and any qualified pension, profit sharing or retirement plans, which may
be placed in effect or maintained by LVSI during the Term hereof for the benefit
of its employees generally, subject to all restrictions and limitations
contained in such plans or established by governmental regulation.
(c) Expense Reimbursement. Goldstein is authorized to incur
such reasonable expenses as may be necessary for the performance of his duties
hereunder in accordance with the policies of LVSI established and in effect from
time to time and, except as may be otherwise agreed, LVSI will reimburse
Goldstein for all such authorized expenses upon
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<PAGE>
submission of an itemized accounting and substantiation of such expenditures
adequate to secure for LVSI a tax deduction for the same in accordance with
applicable Internal Revenue Service guidelines.
(d) Vacations and Holidays. Goldstein shall be entitled to
four weeks of paid vacation leave per year at such times as may be requested by
Goldstein and approved by LVSI. No more than three weeks of vacation shall be
taken consecutively. Up to two weeks of vacation may be carried over to the
following year (but not to the next). In addition, Goldstein may take the
following paid holidays or, at LVSI's option, an equivalent number of paid days
off: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
(e) Licensing Expenses. LVSI shall pay all fees and expenses
incurred by Goldstein in securing and maintaining such licenses and permits as
may be required by the Nevada Gaming Authorities in order to perform his duties
under this Agreement.
(f) Relocation Expenses. LVSI shall reimburse Goldstein for
the following expenses associated with Goldstein's relocation to Las Vegas,
Nevada ("Relocation Expenses"):
(i) LVSI shall engage and pay for the services of a
professional moving company to pack, ship, store (for up to 30
days), insure in transit, and unpack Goldstein's family's household
goods and personal property, including automobiles, from his present
home to his new living quarters in Las Vegas, Nevada. However, LVSI
will not pay the cost of shipping such items as boats, trailers, or
perishables.
(ii) LVSI shall reimburse Goldstein for reasonable
expenses incurred by him and his family in connection with travel
and lodging expenses for house hunting trips made on or before July
1, 1996, provided that travel arrangements are made through LVSI's
affiliate, GWV Travel of Needham, Massachusetts ("GWV");
(iii) The cost of reasonable travel by Goldstein between
New Jersey and Nevada on or before August 1, 1996 shall be paid by
LVSI, travel arrangements to be made through GWV;
(iv) LVSI shall provide, at no cost to Goldstein,
temporary living accommodations and reasonable related expenses in
its hotel facility or elsewhere until August 1, 1996 or such earlier
date as his family shall relocate to Nevada;
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<PAGE>
(v) If requested by Goldstein on or before July 31,
1996, LVSI shall, in connection with Goldstein's purchase of a new
home in Nevada, make or arrange for an equity loan secured by
Goldstein's current home in New Jersey which loan shall be repayable
upon the sale of that home;
(vi) LVSI shall track and report all expenses paid in
connection with Goldstein's relocation in accordance with all
Internal Revenue Service rules and regulations in effect in 1996;
(vii) The parties expressly agree and acknowledge that
other costs incurred by Goldstein in connection with the relocation
of his principal residence from New Jersey to Nevada shall be borne
by Goldstein and not LVSI; and
(viii) If, and only if, the net proceeds (sale price
less selling expenses) from the sale of Goldstein's New Jersey house
shall be insufficient to pay off the balance of any mortgages
secured thereby (and in existence on September 1, 1995), the amount
of such insufficiency being hereinafter referred to as the "Mortgage
Deficit," LVSI shall reimburse Goldstein for the lesser of the
Mortgage Deficit or the brokerage commission payable by Goldstein in
connection with the sale.
provided, however, that if Goldstein's employment with LVSI shall terminate by
reason of a Cause Termination, Goldstein Breach Termination, Voluntary
Termination, or Licencing Termination (all as defined in Section 11 (a)) during
the first twelve (12) months after the Effective Date, he shall repay 75% of
such Relocation Expenses to LVSI, and if such a termination shall occur after 12
months but before 24 months, he shall repay 50% of such Relocation Expenses to
LVSI, in each case such reimbursement to occur within thirty (30) days following
the Termination Event.
(g) Lump Sum Auto. In lieu of any provision for the use of a
company-owned vehicle, or for any allowance for an automobile lease, insurance,
fuel, repair and maintenance expenses, LVSI shall pay to Goldstein an annual
lump sum of $7,200.00 which sum shall be paid in installments which shall be
added to and paid with the salary provided for in Section 6(a) hereof. If LVSI
shall ever adopt a policy or program to provide selected executives with
company-owned or leased vehicles, it shall include Goldstein in that policy or
program and the lump sum provided for herein may cease.
7. Stock Options. In consideration of the execution and performance
of this Agreement, in addition to all other sums payable hereunder, LVSI or its
principal shareholder,
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<PAGE>
Sheldon G. Adelson ("Adelson"), (LVSI and Adelson being hereinafter sometimes
referred to, collectively or individually, as "Grantor") shall grant to
Goldstein the right to acquire certain shares of the common capital stock of
LVSI (or of such alternative or other entity as may be formed by Grantor to
construct and own the Development Project, as limited pursuant to Section 7(e)
hereof, or to enter into a joint-venture or other arrangement to accomplish the
same) ("Shares"), as follows:
(a) Following execution of this Agreement and receipt of the
License, Grantor shall grant to Goldstein options (the "Options") to acquire
Shares representing one percent (1%) of the Shares which shall be issued and
outstanding upon the issuance of all Shares for which options have been or may
be granted under this Agreement or any of the other employment agreements
executed simultaneous herewith or presently contemplated (the "Fully Diluted
Number").
(b) One-half of the Options shall be exercisable by Goldstein
on the date that the first phase of the Development Project, comprised of a
newly-constructed major hotel/casino shall open for business to the public
("Grand Opening Date") and one-sixth of the Options shall be exercisable by
Goldstein on each of the next three anniversaries of the Grand Opening Date (the
"Subsequent Vesting Dates"), provided, however, that if the Grand Opening Date
shall occur after January 1, 1998, the Subsequent Vesting Dates shall be
December 31, 2000 (the "Final Vesting Date") and two earlier dates such as shall
divide into three equal periods the time between the Grand Opening Date and the
Final Vesting Date.
(c) Upon exercise of the Options, Goldstein shall pay to the
Grantor a price for each of the Shares (the "Exercise Price") equal to (i) the
value, at the time of a financing transaction for the purpose of constructing a
hotel/casino, determined by the investment banking firm retained by LVSI to
advise LVSI with respect to such transaction (the "Investment Banking Value"),
of the land owned by LVSI on the Effective Date underlying the Development
Project (as defined and limited by Subparagraph (e) below), plus (ii) the amount
of any cash equity contributed to LVSI by Adelson or persons other than
Goldstein after the date hereof and prior to the date on which such Options are
exercised, plus (iii) the value of any real or personal property similarly
contributed as it appears on the books of LVSI; divided by (iv) the Fully
Diluted Number.
(d) Each and all of the Options shall expire ("the Option
Expiration Date") on the earlier of (i) the date which is three (3) days prior
to the effective date of any public offering of LVSI stock as the same shall be
referenced in a request for acceleration or other
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document filed by LVSI with the U.S. Securities and Exchange Commission, (ii)
the date which is three (3) days prior to the designated closing date in any
agreement providing for the merger of LVSI or the sale of all or substantially
all of its assets or a majority of its stock (other than a transaction pursuant
to Section 12 hereof), or (iii) eight (8) years from the date on which the
Options were granted; provided that all Options granted but not otherwise
exercisable by the Option Expiration Date shall be accelerated and shall become
exercisable for a period of ten (10) days (the "Accelerated Exercise Period")
immediately preceding the Option Expiration Date, provided that no Options shall
expire pursuant to (i) or (ii) above unless LVSI has given Goldstein notice of
the Accelerated Exercise Period promptly upon its learning of the time (or
approximate time) when the Accelerated Exercise Period will occur.
(e) Goldstein understands and acknowledges that the
Development Project shall include a retail merchandise shopping or other
consumer "experience" or attraction (the "Retail Portion"), ownership of which
shall be in an entity other than that for which the Options shall have been
issued. It is anticipated that the entity issuing the Shares pursuant to the
Options granted hereunder shall own and operate only one or more hotel/casinos
and not the Retail Portion of the Development Project, the Sands Expo and
Convention Center, or related parking facilities which, together with the land
(or other interest in real estate) on which they are located, may be owned by
or, after the date hereof, be transferred to, persons affiliated with LVSI and
operated in coordination with the hotel/casinos of LVSI.
(f) Shares issued to Goldstein hereunder may be pledged to a
financial institution to secure a loan the proceeds of which are used to pay to
LVSI the Exercise Price or to pay taxes payable by Goldstein in connection with
his acquisition of the Shares. The Options granted and Shares issued hereunder
may not be otherwise assigned, transferred or pledged by Goldstein, and
Goldstein will have no rights as a shareholder in LVSI unless and until Shares
have been issued to him hereunder. Except as set forth above, the Shares shall
be subject to restrictions on transfer and to such additional restrictions as
shall be imposed by the Articles of Incorporation or Bylaws of LVSI or by
applicable law.
8. Confidentiality. Goldstein agrees that he will hold in strictest
confidence and, without the prior express written approval of LVSI, will not
disclose to any person, firm, corporation or other entity, any confidential
information which he has acquired or may hereafter acquire during his employment
by LVSI pertaining to the business or affairs of LVSI, including but not limited
to (i) proprietary information or other documents concerning LVSI's policies,
prices, systems, methods of operation, contractual arrangements, customers or
suppliers; (ii) LVSI's marketing methods, credit and collection techniques and
files; and (iii) LVSI's trade
7
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secrets and other "know how" or information concerning its business
and affairs not of a public nature. The covenant and agreement set forth in this
Section shall apply during Goldstein's employment by LVSI and shall survive
termination of this Agreement by any means and shall remain binding upon
Goldstein without regard to the passage of time or other events.
9. Restrictive Covenant. Goldstein shall not, either during the term
of this Agreement or until December 31, 1998 (the "Restrictive Covenant
Expiration Date") if the Agreement terminates prior to the end of the Initial
Term by reason of a Cause Termination, Goldstein Breach Termination, Voluntary
Termination, or Licensing Termination (all as defined in Section 11 (a)), or by
reason of an LVSI Breach Termination, Constructive Termination, or Involuntary
Termination if and only if LVSI is paying to Goldstein the amount set forth in
Section 11 (d) (iv), directly or indirectly, either as principal, agent,
employee, consultant, partner, officer, director, shareholder, or in any other
individual or representative capacity, own, manage, finance, operate, control or
otherwise engage or participate in any manner or fashion in, any hotel or casino
in the City of Las Vegas or Clark County, Nevada. In the event that this
Agreement shall be extended beyond the Initial Term, the Restrictive Covenant
Expiration Date shall be extended to the second anniversary of the date of any
Termination Event. Goldstein acknowledges and agrees that the restrictive
covenant contained in this Section is reasonable as to duration, terms, and
geographical scope and that the covenant protects the legitimate interests of
LVSI and imposes no undue hardship on Goldstein and is not injurious to the
public.
10. Disability. If, during his employment by LVSI, Goldstein shall,
in the opinion of an independent physician selected by agreement between the
Board and Goldstein, become suddenly and immediately unable to perform the
duties of his employment due to severe illness or accident or other grave mental
or physical incapacity, or if Goldstein shall be unable to perform the duties of
his employment for a continuous period of three months, then LVSI shall have the
right to suspend in whole or in part the future payments of compensation
hereunder or to terminate Goldstein's employment hereunder in accordance with
the provisions of Section 11.
11. Termination.
(a) Notwithstanding the provisions of Section 4 of this
Agreement, Goldstein's employment hereunder shall terminate upon the occurrence
of any of the following events (each, a "Termination Event"):
(i) Goldstein's death (a "Death Termination");
(ii) the giving of written notice of termination by LVSI
based upon
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Goldstein's disability, as defined in Section 10 hereof (a
"Disability Termination");
(iii) the giving of written notice to Goldstein by LVSI
that he is discharged for Cause (as hereinafter defined) (a "Cause
Termination");
(iv) the giving of written notice by LVSI to Goldstein
of a material breach of this Agreement by Goldstein, which breach
remains uncured for a period of ten (10) days after receipt of such
notice by Goldstein (a "Goldstein Breach Termination");
(v) the giving of written notice by Goldstein to LVSI of
a material breach of this Agreement by LVSI, which breach remains
uncured for a period of ten (10) days following receipt of such
notice by LVSI (an "LVSI Breach Termination");
(vi) the giving of written notice by Goldstein to LVSI
that a Constructive Termination (as hereinafter defined) has
occurred and that he has elected to resign, in which event
termination shall occur thirty (30) days after delivery of such
notice unless such Constructive Termination has been cured (a
"Constructive Termination");
(vii) the giving of sixty (60) days written notice to
Goldstein by LVSI that LVSI has chosen to terminate this Agreement
without Cause (an "Involuntary Termination");
(viii) the giving of written notice by Goldstein that he
has chosen to terminate his employment with LVSI, no breach or
Constructive Termination by LVSI having occurred, in which case this
Agreement shall terminate sixty (60) days after receipt of such
notice by LVSI (a "Voluntary Termination");
(ix) the refusal of the Nevada Gaming Authorities to
grant to Goldstein the License described in Section 5 hereof or,
following the grant of the License, the revocation or suspension of
the License for a period longer than thirty (30) days (a "Licensing
Termination"); or
(x) if no notice of extension for a Renewal Term is sent
by LVSI upon the discharge of Goldstein at the end of the Initial
Term (a "Non-Renewal Termination") or at any time thereafter (a
"Post-Contract Termination").
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(b) "Cause," as used in Subsection (a)(iii) above, shall mean:
(i) conviction of a felony, misappropriation of any
material funds or property of LVSI, commission of fraud or
embezzlement with respect to LVSI, or any material act or acts of
dishonesty relating to Goldstein's employment by LVSI resulting or
intended to result in direct or indirect personal gain or enrichment
at the expense of LVSI;
(ii) use of alcohol or drugs that renders Goldstein
materially unable to perform the functions of his job or carry out
his duties to LVSI;
(iii) materially failing to fulfill the duties set forth
in Section 2 hereof; or
(iv) committing any act or acts of serious and wilful
misconduct (including disclosure of confidential information) that
is likely to cause a material adverse effect on the business of
LVSI;
provided that, with respect to (iii) or (iv) above, LVSI shall have first
provided Goldstein with written notice stating with specificity the acts, duties
or directives Goldstein has committed or failed to observe or perform, and
Goldstein shall not have corrected the acts or omissions complained of within
thirty (30) days of receipt of such notice. Any dispute between the parties as
to whether a "cause" has occurred shall be resolved by binding Arbitration in
Las Vegas, Nevada before a single arbitrator jointly selected by the parties or,
if the parties cannot agree, by the American Arbitration Association, such
arbitration to be conducted in accordance with the rules of the American
Arbitration Association.
(c) "Constructive Termination," as used in Subsection (a)(vi) above,
shall mean:
(i) the failure of LVSI to re-elect Goldstein as a
named officer of LVSI;
(ii) a material change in the duties and
responsibilities of office that would cause Goldstein's position to
have less dignity, importance or scope than intended at the
Effective Date and as set forth herein;
(iii) liquidation, dissolution or bankruptcy of LVSI;
or
10
<PAGE>
(iv) failure of LVSI to proceed with the Development
Project, including obtaining financing for the Development Project,
within eighteen (18) months after the Effective Date.
(d) Termination pursuant to this Section shall have the following
consequences:
(i) in the case of a Death Termination, salary shall be
paid through the date of death, all unexercised Options shall be
automatically canceled and the Shares issued to Goldstein shall be
redeemed by LVSI for a price payable by LVSI to Goldstein's estate
equal to all sums paid by Goldstein for Shares, plus the difference
between (x) the Exercise Price paid or payable for all Shares
purchased pursuant to Options and for all Options granted but not
yet exercised, and (y) the Fair Market Value (as hereafter defined)
of such Shares, which price shall be payable by LVSI, with interest
at the Applicable Federal Rate (as hereafter defined) on the date of
death, in thirty-six (36) equal consecutive monthly installments of
interest and principal commencing ninety (90) days following the
date on which Fair Market Value is established;
(ii) in the case of a 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 issued to Goldstein shall be
treated as described in the immediately preceding Subsection (i);
(iii) in the case of a Cause Termination, Goldstein
Breach Termination, Voluntary Termination, or Licensing Termination,
salary and benefits payable to Goldstein shall immediately cease,
subject to any requirements of law, all unexercised Options held by
Goldstein shall be canceled and forfeited, Shares held by Goldstein
shall be redeemed by LVSI for a price payable by LVSI to Goldstein
equal to the lesser of the Exercise Price for such Shares or the
Fair Market Value on the date of termination, which price shall be
payable, with interest at the Applicable Federal Rate on the date of
termination, in sixty (60) equal consecutive monthly installments of
interest and principal commencing ninety (90) days following the
date on which Fair Market Value is established;
(iv) in the case of an LVSI Breach Termination,
Constructive Termination, or Involuntary Termination, LVSI shall
continue to pay to Goldstein the salary set forth in Section 6(a)
hereof for the Term of this Agreement unless and until Goldstein
shall become employed elsewhere in which event LVSI shall pay only
the difference, if any, between the income earned in such
employment,
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<PAGE>
including salary and bonus compensation, and the salary set forth in
Section 6(a) hereof; provided further that all unexercised Options
held by Stone shall be canceled and forfeited, Shares held by Stone
shall be redeemed by LVSI for a price payable by LVSI to Stone equal
to the greater of the Exercise Price for such Shares or the Fair
Market Value on the date of termination, which price shall be
payable, with interest at the Applicable Federal Rate on the date of
termination, in thirty-six (36) equal consecutive monthly
installments of interest and principal commencing ninety (90) days
following the date in which Fair Market Value is established. In the
case of a Non-Renewal Termination or a Post-Contract Termination,
salary shall be paid only through the date of discharge;
(v) in the case of a Non-Renewal Termination or a
Post-Contract Termination, all Options and Shares issued to
Goldstein shall be treated as described in Subsection (i) above.
(e) "Fair Market Value" as used in this Section, shall mean
and refer tothe fair market value as agreed by LVSI and Goldstein (or, in the
case of a Death Termination or Disability Termination, his personal or legal
representative) or, in the absence of such agreement, as determined by an
appraisal conducted by a national investment banking firm selected and paid by
LVSI. "Applicable Federal Rate," as used herein, shall mean and refer to the
rate published from time to time by the U.S. Internal Revenue Service and
designated as the applicable federal rate, as such rate shall prevail on the
date on which the Redemption Note (as hereafter defined) is issued.
(f) Any redemption of Shares provided for in this Section
shall take place as follows: Not later than thirty (30) days following any
Termination Event, Goldstein (or his personal representative) shall surrender to
LVSI all certificates for Shares and, whether so surrendered or not, such Shares
shall thereupon be canceled. LVSI shall, upon receipt of the Shares and
determination of the Fair Market Value as set forth above, deliver to Goldstein
(or his personal representative) a promissory note (the "Redemption Note") for
the sum payable to Goldstein in respect of his Shares (the "Redemption Price").
The Redemption Note shall be payable over the term hereinabove provided, with
interest fixed at the Applicable Federal Rate, in equal consecutive monthly
installments of interest and principal. The Redemption Note and all payments
thereunder shall be, in all respects, subject to the limitations and
restrictions, if any, imposed by any note, credit facility, indenture, mortgage,
line of credit or similar contractual arrangement with an institutional or
similar lender by which LVSI is or may become bound ("Lender Restrictions"),
whether in the form of financial covenants or otherwise and whether arising
prior to or after execution and delivery of the Redemption Note. No failure by
LVSI to pay sums due on the Redemption Note on account of the Lender
Restrictions shall result in a
12
<PAGE>
default under the Redemption Note and all such payments, to the extent (and only
to the extent) prohibited by the Lender Restrictions, shall be deferred and
accrue until such time as they may be paid without violating the Lender
Restrictions.
(g) In the event that, at the time of any Termination Event,
the Shares shall be publicly traded, either on a registered securities exchange
or in the over-the-counter market, all provisions hereof providing for the
redemption of Shares by LVSI shall be void.
12. Assignment and Assumption. LVSI and Goldstein acknowledge and
agree that the Development Project or any subsequent public offering of
securities may lead to a restructuring or other reorganization of LVSI or its
assets. In such event, this Agreement may be assigned to, and assumed by, any
new or different corporation, limited liability company or other entity that
shall own the hotel/casinos constructed on the Sands Property and Goldstein's
employment shall continue pursuant to the terms hereof as if such assignee,
rather than LVSI, had been an original party to this Agreement. Upon such
assignment, all rights and obligations of LVSI hereunder shall inure to the
benefit of and be binding upon the designated assignee. No such assignment shall
relieve LVSI of its obligations hereunder to the extent that those obligations
are not satisfied or discharged by the assignee.
13. Approval of Agreement. Goldstein and LVSI acknowledge that the
terms of this Agreement are subject to the approval of the Nevada Gaming
Authorities and each agrees to make reasonable modifications in this Agreement,
if necessary, to secure such approval. If this Agreement shall be disapproved by
the Nevada Gaming Authorities and reasonable modifications shall be insufficient
to obtain such approval, then this Agreement shall terminate and neither party
shall have any further responsibility to the other hereunder.
14. Miscellaneous Provisions.
(a) [Notices] All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent via a national overnight courier service or by certified mail,
return receipt requested, postage prepaid, addressed to the parties as follows:
If to Goldstein, to:
Robert G. Goldstein
7600 Bayshore Drive
Margate, New Jersey 08402
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<PAGE>
If to LVSI, to:
Las Vegas Sands, Inc.
3355 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Att: Sheldon G. Adelson, Chairman
With a copy to:
Paul G. Roberts
Vice President and General Counsel
The Interface Group
300 First Avenue
Needham, Massachusetts 02194
or to such other address as any party shall request of the others by giving
notice in accordance with this Section.
(b) [Approval or Consent] Whenever under any provision of this
Agreement the approval or consent of either party is required, said approval or
consent shall be given or denied in a prompt manner.
(c) [Integration] This Agreement is the result of substantial
negotiations between the parties, represents the complete agreement of the
parties with respect to the subject matter hereof, and supersedes all prior
agreements and understandings.
(d) [Severability] If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
(e) [Waiver of Provisions] The failure of either party to insist
upon a strict performance of any of the terms or provisions of this Agreement or
to exercise any option, right, or remedy herein contained, shall not be
construed as a waiver or as a relinquishment for the future of such term,
provision, option, right, or remedy, but the same shall continue and remain
in full force and effect. No waiver by either party of any term or provision
hereof shall be deemed to have been made unless expressed in writing and signed
by such party.
(f) [Fees and Expenses] Each of the parties hereto shall bear its
own attorneys fees, consultants fees and other costs, fees, and expenses
incurred in connection with the negotiation, preparation and consummation of
this Agreement and the transactions contemplated hereby.
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<PAGE>
(g) [Amendments] This Agreement may not be amended, changed or
modified except by a written document signed by each of the parties hereto.
(h) [Successors and Assigns] All provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against the
parties hereto, and their respective heirs, personal representatives, successors
and permitted assigns.
(i) [Governing Law] This Agreement shall be governed by, construed
under, and interpreted in accordance with the laws of the State of Nevada, and
enforced (except as otherwise provided herein) only in its state and federal
courts.
(j) [Headings] Section and Subsection headings in this Agreement are
included for convenience of reference only and are not intended to define, limit
or describe the scope or intent of any provision of this Agreement.
(k) [Counterparts] This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(l) [Survival] The representations, warranties, and covenants
contained in this Agreement shall survive its termination for any reason.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as a contract under seal.
LAS VEGAS SANDS, INC.
By /s/ Sheldon G. Adelson
----------------------------
Sheldon G. Adelson
Chairman of the Board
/s/ Robert G. Goldstein
- ----------------------------
ROBERT G. GOLDSTEIN
15
<PAGE>
TERMINOLOGY USED IN THIS AGREEMENT
TERM DEFINED AT
---- ----------
Accelerated Exercise Period ss.7(d)
Adelson ss.7
Applicable Federal Rate ss.11(e)
Agreement Recitals
Board ss.1
Cause ss.11(b)
Cause Termination ss.11(a)(iii)
Constructive Termination ss.11(c)
Death Termination ss.11(a)(i)
Development Project Recitals
Disability Termination ss.11(a)(ii)
Effective Date ss.4
Exercise Price ss.7(c)
Fair Market Value ss.11(e)
Final Vesting Date ss.7(b)
Fully Diluted Number ss.7(a)
Grand Opening Date ss.7(b)
Grantor ss.7
GWV ss.6(f)(ii)
Index ss.6(a)
Initial Term ss.4
Investment Banking Value ss.7(c)
Involuntary Termination ss.11(a)(vii)
Lender Restrictions ss.11(f)
License ss.5
Licensing Termination ss.11(a)(ix)
LVSI Recitals
LVSI Breach Termination ss.11(a)(v)
Mortgage Deficit ss.6(f)(viii)
Nevada Gaming Authorities ss.5
Non-Renewal Termination ss.11(a)(x)
Options ss.7(a)
Option Expiration Date ss.7(d)
Post-Contract Termination ss.11(a)(x)
Redemption Note ss.11(f)
Redemption Price ss.11(f)
Relocation Expenses ss.6(f)
Renewal Term ss.4
Restrictive Covenant Expiration Date ss.9
Retail Portion ss.7(e)
Sands Property First Whereas, paragraph
Shares ss.7
Subsequent Vesting Dates ss.7(b)
Termination Event ss.11(a)
Voluntary Termination ss.11(a)(viii)
Goldstein Recitals
Goldstein Breach Termination ss.11(a)(iv)
VENETIAN CASINO RESORT, LLC
LAS VEGAS SANDS, INC.
FIRST AMENDMENT
TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of
January __, 1998 and entered into by and among LAS VEGAS SANDS, INC., ("LVSI" )
a Nevada corporation and VENETIAN CASINO RESORT, LLC ("VCR") a Nevada limited
liability company, as joint and several borrowers (each of LVSI and Venetian, a
"Borrower" and, collective, the "Borrowers"), the financial institutions listed
on the signature pages hereof ("Lenders"), GOLDMAN SACHS CREDIT PARTNERS L.P.
("GSCP"), as syndication agent (in such capacity, "Syndication Agent") and
arranger (in such capacity, "Arranger") and THE BANK OF NOVA SCOTIA, as
administrative agent for Lenders (in such capacity, "Administrative Agent") and
is made with reference to that certain Credit Agreement dated as of November 14,
1997 (the "Credit Agreement"), by and among Borrowers, Lenders, Syndication
Agent and Arranger and Administrative Agent. Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, Borrowers and Lenders desire to amend the Credit Agreement to (i)
modify certain provisions therein with respect to the use of proceeds of
Revolving Loans and the permitted uses of Letters of Credit, and (ii) make
certain other amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1.
AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendments to Section 1: Provisions Relating to Defined Terms
A. Subsection 1.1 of the Credit Agreement is hereby amended by adding
thereto the following definition, which shall be inserted in proper alphabetical
order:
1
<PAGE>
""Construction-related Obligations" shall have the meaning assigned to
that term in subsection 3.1A hereof."
B. Subsection 1.1 of the Credit Agreement is hereby amended by deleting
the definition of "Standby Letter of Credit" therefrom in its entirety and
substituting the following therefor:
"Standby Letter of Credit" means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) Indebtedness of Borrowers in
respect of industrial revenue or development bonds or financings, (ii) workers'
compensation liabilities of
Borrowers, (iii) the obligations of third party insurers of Borrowers arising by
virtue of the laws of any jurisdiction requiring third party insurers, (iv)
obligations with respect to Capital Leases or Operating Leases of Borrowers or
with respect to the Harrah's Shared Roadway Agreement, and (v) performance,
payment, deposit or surety obligations of Borrowers, in any case if required by
law or governmental rule or regulation (including, without limitation, if
required by any Governmental Instrumentality or otherwise necessary in order to
obtain any Permit related to the Project) or in accordance with custom and
practice in the industry and (vi) Construction-related Obligations; provided
that Standby Letters of Credit may not be issued for the purpose of supporting
(a) trade payables or (b) any Indebtedness constituting "antecedent debt" (as
that term is used in Section 547 of the Bankruptcy Code).
1.2 Amendments to Section 2: Amounts and Terms of Commitments and Loans
Use of Proceeds. Subsection 2.5B of the Credit Agreement is hereby amended
by deleting it in its entirety and substituting the same therefor:
"B. Revolving Loans. The proceeds of the Revolving Loans shall be
applied by Borrowers for working capital and general corporate purposes
(including budgeted costs under the heading "Working Capital"), provided that
the proceeds of Revolving Loans may not be used for any purpose other than to
purchase Specified FF&E or to make deposits thereon or to reimburse any Issuing
Lender for any drawings under a Standby Letter of Credit issued and honored by
it in accordance with the terms of this Agreement prior to the Revolving Loan
Availability Date."
1.3 Amendments to Section 3: Letters of Credit
Letters of Credit. Subsection 3.1A of the Credit Agreement is hereby
amended by deleting the proviso at the end of the first sentence of such
subsection and substituting the following therefor:
"provided that prior to the Revolving Loan Availability Date
Borrowers may not request any Letters of Credit for any purpose other than
to (i) support deposits for Specified FF&E or (ii) satisfy contractual
obligations described in the definition of Standby Letter of Credit or
Legal
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<PAGE>
Requirements in connection with the development of the Project (including,
without limitation, obligations under the Harrah's Shared Roadway
Agreement and the obligations referred to in clause (v) of the definition
of "Standby Letter of Credit") (such requirements described in this clause
(ii), "Construction-related Obligations")."
1.4 Amendments to Section 4: Conditions to Loans and Letters of Credit
A. Subsection 4.3B of the Credit Agreement is hereby amended by
deleting clause (i) thereof in its entirety and replacing it with the following:
"(i) if the proceed of the Revolving Loans are to be used (or the
Letter of Credit is being issued), for any purpose other than the purchase
of Specified FF&E (or, in the case of a Letter of Credit, to support
deposits on Specified FF&E or Construction-related Obligations), the
Revolving Loan Availability Date shall have occurred;"
B. Subsection 4.3B of the Credit Agreement is further amended by
deleting clause (ix) thereof in its entirety and replacing it with the
following:
"(ix) If such Funding Date is prior to the Revolving Loan
Availability Date, Borrowers shall have provided to Administrative Agent a
detailed list showing the Specified FF&E to be funded with the proceeds of
the Revolving Loans to be made (or Letters of Credit to be issued) on such
Funding Date (or with respect to Letters of Credit only, details of the
Construction-related Obligations to be supported on such Funding Date and
copies of all documents related thereto)."
SECTION 2.
WAIVER
Subject to the terms and conditions set forth herein and in reliance on the
representations and warranties of Borrowers herein contained, Lenders hereby
waive compliance with the provisions of subsection 4.3B(viii) of the Credit
Agreement to the extent, and only to the extent, necessary to permit the
issuance of the Letter of Credit to be issued to support Construction-related
Obligations with respect to the Harrah's Shared Roadway Agreement; provided that
such Letter of Credit is issued on or before January 30, 1998.
SECTION 3.
CONDITIONS TO EFFECTIVENESS
Sections 1 and 2 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "First Amendment
Effective Date"):
3
<PAGE>
A. On or before the First Amendment Effective Date, Borrowers shall
deliver to Lenders (or to Administrative Agent for Lenders with sufficient
originally executed copies, where appropriate, for each Lender and its counsel)
the following, each, unless otherwise noted, dated the First Amendment Effective
Date:
(i) Resolutions of its Board of Directors of LVSI and resolutions
of the managing member of VCR, each approving and authorizing the
execution, delivery, and performance of this Amendment, certified as of
the First Amendment Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
(ii) Signature and incumbency certificates of each of LVSI's and
VCR's officers executing this Amendment; and
(iii) Executed copies of this Amendment.
B. On or before the First Amendment Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel
shall be satisfactory in form and substance to Administrative Agent and such
counsel, and Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
SECTION 4.
BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the Credit
Agreement in the manner provided herein, Borrowers represent and warrant to each
Lender that the following statements are true, correct and complete:
A. Corporate Power and Authority. Each Borrower has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement").
B. Authorization of Agreements. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of each Borrower.
C. No Conflict. The execution and delivery by each Borrower of this
Amendment and the performance by each Borrower of the Amended Agreement do not
and will not (i) violate any provision of any law or any governmental rule or
regulation applicable to either Borrower or any of its Subsidiaries, the
Certificate or Articles of
4
<PAGE>
Incorporation, or Certificate of Formation, Bylaws or Operating Agreement of
either Borrower or any of its Subsidiaries or any order, judgment or decree of
any court or other agency of government binding on either Borrower or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
either Borrower or any of its Subsidiaries including any Financing Agreement or
Project Document, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of either Borrower or any of its
Subsidiaries (other than Liens created under any of the Loan Documents in favor
of Administrative Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of either Borrower or any of its Subsidiaries.
D. Governmental Consents. The execution and delivery by either Borrower
of this Amendment and the performance by either Borrower of the Amended
Agreement 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.
E. Binding Obligation. This Amendment and the Amended Agreement have
been duly executed and delivered by Borrowers and are the legally valid and
binding obligations of Borrowers, enforceable against each Borrower 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.
F. Incorporation of Representations and Warranties From Credit
Agreement and Disbursement Agreement. The representations and warranties
contained in Section 5 of the Credit Agreement and Section 4 of the Disbursement
Agreement are and will be true, correct and complete in all material respects on
and as of the First Amendment Effective Date to the same extent 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 they were true, correct
and complete in all material respects on and as of such earlier date.
G. Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
SECTION 5.
ACKNOWLEDGEMENT AND CONSENT
Intermediate Holding Companies are party to certain Loan Documents pursuant to
which Intermediate Holding Companies have (i) guarantied the Obligations and
(ii) created Liens in favor of Administrative Agent on certain Collateral to
secure the obligations of the Intermediate Holding Companies under the
Subsidiary Guaranties.
5
<PAGE>
Each of the Intermediate Holding Companies hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each of the Intermediate Holding Companies hereby confirms that the
obligations of each Intermediate Holding Company under the Loan Documents to
which it is a party or otherwise bound shall not be impaired or affected and all
Collateral encumbered thereby will continue to guaranty or secure, as the case
may be, to the fullest extent possible the payment and performance of all such
obligations and shall continue to be in full force and effect and are hereby
confirmed and ratified in all respects.
Each of the Intermediate Holding Companies represents and warrants that
all representations and warranties contained in the Loan Documents to which it
is a party or otherwise bound are true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent 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 they were
true, correct and complete in all material respects on and as of such earlier
date.
Each of the Intermediate Holding Companies acknowledges and agrees that
(i) notwithstanding the conditions to effectiveness set forth in this Amendment,
such Intermediate Holding Company is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be deemed to require
the consent of such Intermediate Holding Company to any future amendments to the
Credit Agreement.
SECTION 6.
MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the First Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and
each reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
6
<PAGE>
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any
Agent or any Lender under, the Credit Agreement or any of the other Loan
Documents.
B. Fees and Expenses. Borrowers acknowledge that all costs, fees and
expenses incurred by Administrative Agent and its counsel with respect to this
Amendment and the documents and transactions contemplated hereby shall,
notwithstanding anything to the contrary contained in subsection 10.2 of the
Credit Agreement, be for the account of Borrowers, as joint and several obligors
and Borrowers hereby agree to pay all such fees and expenses.
C. Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. Applicable Law. THIS AMENDMENT 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 (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts; Effectiveness. This Amendment 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 Amendment (other than the provisions of Sections 1 and 2
hereof, the effectiveness of which is governed by Section 3 hereof) shall become
effective upon the execution of a counterpart hereof by Borrower, and Requisite
Lenders and receipt by Borrower and Administrative Agent of written or
telephonic notification of such execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 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/ David Friedman
---------------------------------------------------------
Name: David Friedman
Title: Secretary
VENETIAN CASINO RESORT, LLC
By: Las Vegas Sands, Inc. its managing member
By: /s/ David Friedman
---------------------------------------------------------
Name: David Friedman
Title: Secretary
INTERMEDIATE MALL INTERMEDIATE HOLDINGS COMPANY LLC,
HOLDING (for purposes of Section 5 only)
COMPANIES
By: /s/ David Friedman
---------------------------------------------------------
Name: David Friedman
Title: Secretary
LIDO INTERMEDIATE HOLDING COMPANY, LLC,
(for purposes of Section 5 only)
By: /s/ David Friedman
---------------------------------------------------------
Name: David Friedman
Title: Secretary
S-1
<PAGE>
LENDERS:
GOLDMAN SACHS CREDIT PARTNERS L.P.
individually and as Arranger and Syndication Agent
By: /s/ Steven King
---------------------------------------------------------
Authorized signatory
THE BANK OF NOVA SCOTIA,
individually and as Administrative Agent
By: /s/ Alan Pendergast
---------------------------------------------------------
Name: Alan Pendergast
Title: Relationship Manager
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:
---------------------------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
THE INTERNATIONAL COMMERCIAL
BANK OF CHINA, NEW YORK AGENCY
By: /s/ Robin C.C. Lin
---------------------------------------------------------
Name: Robin C.C. Lin
Title: Vice President and Deputy General Manager
S-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INC.
By:
---------------------------------------------------------
Name:
Title:
ARCHIMEDES FUNDING, L.L.C.
By: ING CAPITAL ADVISORS, INC., as Collateral Manager
By: /s/ Michael D. Hatley
---------------------------------------------------------
Name: Michael D. Hatley
Title: Vice President & Portfolio Manager
TORONTO DOMINION (TEXAS), INC.
By:
---------------------------------------------------------
Name:
Title:
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ John M. Casparian
---------------------------------------------------------
Name: John M. Casparian
Title: Investment Officer
S-3
SUBSIDIARIES OF REGISTRANTS
Jurisdiction of
Incorporation/
Name of Entity Name of Subsidiary Organization
- --------------------------------------------------------------------------------
Las Vegas Sands, Lido Casino Resort MM, Inc. Nevada
Inc.
Grand Canal Shops Mall MM, Inc. Nevada
Venetian Casino Resort, LLC Nevada
Lido Intermediate Holding Company, LLC Delaware
(indirect)
Grand Canal Shops Mall Construction, Delaware
LLC (indirect)
Mall Intermediate Holding Company, LLC Delaware
(indirect)
Lido Casino Resort Holding Company, LLC Delaware
(indirect)
Grand Canal Shops Mall Holding Company, Delaware
LLC (indirect)
Lido Casino Resort, LLC (indirect) Nevada
Grand Canal Shops Mall, LLC (indirect) Delaware
- --------------------------------------------------------------------------------
Venetian Casino Lido Intermediate Holding Company, LLC Delaware
Resort, LLC
Grand Canal Shops Mall Construction, LLC Delaware
Mall Intermediate Holding Company, LLC Delaware
Lido Casino Resort Holding Company, LLC Delaware
(indirect)
Grand Canal Shops Mall Holding Company, Delaware
LLC (indirect)
Lido Casino Resort, LLC (indirect) Nevada
Grand Canal Shops Mall, LLC (indirect) Delaware
- --------------------------------------------------------------------------------
Lido Intermediate Lido Casino Resort Holding Company, LLC Delaware
Holding Company,
LLC
Lido Casino Resort, LLC (indirect) Nevada
- --------------------------------------------------------------------------------
Lido Casino Resort Lido Casino Resort, LLC Nevada
Holding Company,
LLC
- --------------------------------------------------------------------------------
Mall Intermediate Grand Canal Shops Mall Holding Company, Delaware
Holding Company, LLC
LLC
Grand Canal Shops Mall, LLC (indirect) Delaware
- --------------------------------------------------------------------------------
Grand Canal Shops Grand Canal Shops Mall, LLC Delaware
Mall Holding
Company, LLC
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 1 to Registration Statement on Form S-4 of Las Vegas Sands, Inc.
and Venetian Casino Resort, LLC of our report dated April 16, 1997 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
February 12, 1998
LETTER OF TRANSMITTAL
LAS VEGAS SANDS, INC. and
VENETIAN CASINO RESORT, LLC
Offer to Exchange their
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")
which have been registered under the Securities Act of 1933
for any and all of their 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")
Pursuant to the Prospectus, dated ________, 1998
- -------------------------------------------------------------------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME ON
________, 1998 UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO THE EXPIRATION DATE.
- -------------------------------------------------------------------------------
To: First Trust National Association, Exchange Agent
First Trust National
Association
180 East 5th Street
St. Paul, MN 55101
Attn: Corporate Finance
Rick Prokosch
For information call:
(612) 244-0721
Fax: (612) 244-0711
DELIVERY OF THIS LETTER OF TRANSMITTAL 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.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW.
<PAGE>
List below the Existing Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and principal
amount of Existing Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DESCRIPTION OF EXISTING MORTGAGE NOTES (1) (2) (3)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Certificate Principal Principal
Holder(s) Number(s)* Amount of Amount of
(Please fill in, if blank) Existing Existing
Mortgage Notes Mortgage
Notes
Tendered
(if less than
all)**
- ----------------------------------------------------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Existing Mortgage
Notes.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DESCRIPTION OF EXISTING SENIOR SUBORDINATED (1) (2) (3)
NOTES
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Certificate Principal Principal
Holder(s) Number(s)* Amount of Amount of
(Please fill in, if blank) Existing Existing
Senior Senior
Subordinated Subordinated
Notes Notes
Tendered
(if less than
all)**
- ----------------------------------------------------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Existing Senior
Subordinated Notes.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated _______, 1998 (the "Prospectus"), of Las Vegas Sands, Inc., a
Nevada corporation, and Venetian Casino Resort, LLC, a Nevada limited liability
company (collectively, the "Issuers"), and this Letter of Transmittal (the
"Letter"), which together constitute the Issuers' offer (the "Exchange Offer")
to exchange up to $425,000,000 aggregate principal amount of the New Mortgage
Notes and $97,500,000 aggregate principal amount of the New Senior Subordinated
Notes, for a like principal amount of the Issuers' issued and outstanding
Existing Mortgage Notes and Existing Senior Subordinated Notes.
The undersigned has completed the appropriate boxes above and below and
signed this Letter to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
This Letter is to be used either if certificates of Existing Notes are to
be forwarded herewith or if delivery of Existing Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offer-Procedures for Tendering Existing Notes" in the Prospectus; provided,
however, that tenders of the Existing Notes must be effected in accordance with
the procedures mandated by DTC's Automated Tender Offer Program. Delivery of
this Letter and any other required documents should be made to the Exchange
Agent. Delivery of documents to a book-entry transfer facility does not
constitute delivery to the Exchange Agent.
<PAGE>
Holders whose Existing Notes are not immediately available or who cannot
deliver their Existing Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Existing
Notes according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer-Procedures for Tendering Existing Notes."
See Instruction 1.
[ ] CHECK HERE IF EXISTING MORTGAGE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
---------------------------------------------
[ ] The Depository Trust Company
Account Number
-----------------------------------------------------------
Transaction Code Number
--------------------------------------------------
[ ] CHECK HERE IF EXISTING MORTGAGE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
---------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
--------------------
If delivered by book-entry transfer:
Account Number
-----------------------------------------------------------
Date of execution of Notice of Guaranteed Delivery
-----------------------
[ ] CHECK HERE IF EXISTING SENIOR SUBORDINATED NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
--------------------------------------------
[ ] The Depository Trust Company
Account Number
-----------------------------------------------------------
Transaction Code Number
--------------------------------------------------
[ ] CHECK HERE IF EXISTING SENIOR SUBORDINATED NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELEVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
--------------------------------------------
Name of Eligible Institution that Guaranteed Delevery
---------------------
If delivered by book-entry transfer:
Account Number
------------------------------------------------------------
Date of execution of Notice of Guaranteed Delivery
------------------------
<PAGE>
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
--------------------------------------------------------------------
Address:
-----------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Existing Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. The 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 have agreed that, for a period of 180 days after the Expiration
Date, it will make the Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuers the aggregate principal amount of
Existing Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Existing Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Issuers all right,
title and interest in and to such Existing Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Existing Notes
tendered hereby and that the Issuers will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Issuers. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Issuers or the Exchange Agent to be necessary or desirable to
complete the sale, assignment and transfer of the Existing Notes tendered
hereby.
The undersigned also acknowledges that this Exchange Offer is being made
in reliance on the Issuers' belief, based on interpretations by the staff of the
Securities and Exchange Commission (the "SEC") to third parties in unrelated
transactions, that the New Notes issued in exchange for the Existing Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act") or (ii) any broker-dealer that
purchase 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 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. The undersigned acknowledges that any holder of Existing Notes using
the Exchange Offer to participate in a distribution of the New Notes (i) cannot
rely on the position of the staff of the SEC enunciated in its interpretive
letter with respect to Exxon Capital Holdings Corporation (available April 13,
1989) or similar letters and (ii) must comply with the registration and
prospectus requirements of the Securities Act in connection with a secondary
resale transaction.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangement or understanding with any person
to participate in the distribution of such New Notes and is not participating
in, and does not intend to participate in, the distribution of such New Notes,
and (iii) such holder is not an "affiliate," as defined in Rule 405 under the
Securities Act, of the Issuers or, if such holder is an affiliate, that such
holder will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Existing Notes that were acquired as a result of
marketBmaking activities or other trading as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The 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 marketBmaking activities or other trading activities. The Issuers have agreed
that, for a period of 180 days after the Expiration Date, it will make the
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The undersigned, if a California resident, hereby further represents and
warrants that the undersigned (or the beneficial owner of the Existing Notes
tendered hereby, if not the undersigned) (i) is a bank, savings and loan
association, trust company, insurance company, investment company registered
under the Investment Company Act
<PAGE>
of 1940, pension or profit-sharing trust (other than a pension or profit-sharing
trust of the Issuers, a self-employed individual retirement plan, or individual
retirement account), or a corporation which has a net worth on a consolidated
basis according to its most recent audited financial statement of not less than
$14,000,000, and (ii) is acquiring the New Notes for its own account for
investment purposes (or for the account of the beneficial owner of such New
Notes for investment purposes).
All authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in the instructions
contained in this Letter.
The undersigned understands that tenders of the Existing Notes pursuant to
any one of the procedures described under "The Exchange Offer-Procedures for
Tendering Existing Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Issuers in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus under "The Exchange Offer-Certain Conditions to the Exchange
Offer," the Issuers may not be required to accept for exchange any of the
Existing Notes tendered. Existing Notes not accepted for exchange or withdrawn
will be returned to the undersigned at the address set forth below unless
otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Existing Notes for any Existing Notes not exchanged)
in the name of the undersigned. Similarly, unless otherwise indicated under the
box entitled "Special Delivery Instructions" below, please deliver the New Notes
(and, if applicable, substitute certificates representing Existing Notes for any
Existing Notes not exchanged) to the undersigned at the address(es) shown above
in either of the boxes entitled "Description of Existing Mortgage Notes" or
"Description of Existing Senior Subordinated Notes."
THE BOOK-ENTRY TRANSFER FACILITY, AS THE HOLDER OF RECORD OF CERTAIN
EXISTING NOTES, HAS GRANTED AUTHORITY TO BOOK-ENTRY TRANSFER FACILITY
PARTICIPANTS WHOSE NAMES APPEAR ON A SECURITY POSITION LISTING WITH RESPECT TO
SUCH EXISTING NOTES AS OF THE DATE OF TENDER OF SUCH EXISTING NOTES TO EXECUTE
AND DELIVER THE LETTER OF TRANSMITTAL AS IF THEY WERE THE HOLDERS OF RECORD.
ACCORDINGLY, FOR PURPOSES OF THIS LETTER OF TRANSMITTAL, THE TERM "HOLDER" SHALL
BE DEEMED TO INCLUDE SUCH BOOK-ENTRY TRANSFER FACILITY PARTICIPANTS.
THE UNDERSIGNED, BY COMPLETING EITHER OF THE BOXES ENTITLED "DESCRIPTION
OF EXISTING MORTGAGE NOTES" OR "DESCRIPTION OF EXISTING SENIOR SUBORDINATED
NOTES" ABOVE AND SIGNING THIS LETTER AND DELIVERING SUCH NOTES AND THIS LETTER
TO THE EXCHANGE AGENT, WILL BE DEEMED TO HAVE TENDERED THE EXISTING NOTES AS SET
FORTH IN SUCH BOX(ES) ABOVE.
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9)
Dated:
--------------------------------------------------------------------------
X X
------------------------------------ ---------------------------------------
X X
------------------------------------ ---------------------------------------
Signature(s) of Owner(s)/or Authorized Date
Signatory
Area Code and Telephone Number
-------------------------------------------------
If a holder is tendering any Existing Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Existing Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s)
------------------------------------------------------------------------
------------------------------------------------------------------------
Capacity:
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:
-------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
Dated:
--------------------------------------------------------------------------
<PAGE>
- ------------------------------------- ------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if To be completed ONLY if
certificates for New Notes are to certificates for New Notes are to
be issued in the name of and sent be sent to someone other than the
to someone other than the person or person or persons whose
persons whose signature(s) appear signature(s) appear(s) on this
on this Letter above. Letter above or to such person or
persons at an address other than
Issue: New Notes to: shown in the boxes entitled
"Description of Existing Mortgage
Name(s): Notes" or "Description of Existing
--------------------------- Senior Subordinated Notes" on this
(Please Type or Print) Letter above.
Mail: New Notes to:
---------------------------
(Please Type or Print) Name (s):
---------------------------------
Address: (Please Type or Print)
---------------------------
---------------------------------
--------------------------- (Please Type or Print)
(Zip Code)
Address:
Social Security ----------------------------
Number:
----------------------------
----------------------------
(Complete Substitute Form W-9) (Zip Code)
- ----------------------------------- ------------------------------------
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS
LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S) FOR EXISTING
NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SUCH EXISTING NOTES AND ALL
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE
EXPIRATION DATE.
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of this Letter and Existing Notes; Guaranteed Delivery Procedure.
This Letter is to be used to forward, and must accompany, all certificates
representing Existing Notes tendered pursuant to the Exchange Offer.
Certificates representing 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) must be received by the
Exchange Agent at its address set forth herein on or before the Expiration Date.
The method of delivery of this Letter, the Existing Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. 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 permit timely delivery.
If a holder desires to tender Existing Notes and time will not permit such
holder's Letter of Transmittal, Existing Notes (or a confirmation of book-entry
transfer of Existing Notes into the Exchange Agent's account at the book-entry
transfer facility) or other required documents to reach the Exchange Agent on or
before the Expiration Date, such holder's tender may be effected if:
(a) such tender is made by or through an Eligible Institution
(as defined below);
(b) on or prior to the Expiration Date, the Exchange Agent has
received a telegram, facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight courier) or
letter from such Eligible Institution setting forth the name and address
of the holder of such Existing Notes tendered, 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, a duly executed Letter of Transmittal, or facsimile
thereof, together with 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 bookBentry transfer facility), and any
other documents required by this Letter and the instructions hereto, will
be deposited by such Eligible Institution with the Exchange Agent; and
(c) this Letter, or a facsimile hereof, and 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) and all other required documents are received by the
Exchange Agent within three business days after the Expiration Date.
Unless Existing Notes being tendered by the above-described method are
deposited within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documentation),
the Issuers, at their option, may reject the tender. Copies of a Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the purposes
described above are available from the Exchange Agent.
See "The Exchange Offer--Procedures for Tendering Existing Notes" in the
Prospectus.
2. Withdrawals.
Any holder who has tendered Existing Notes may withdraw the tender by
delivering written notice of withdrawal (which may be sent by telegram,
facsimile (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier)) to the Exchange Agent prior to the Expiration
Date. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at its address set forth herein. Any such notice
of withdrawal must (i) specify the name of the person having tendered the
Existing Notes to be
<PAGE>
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 timely received and signed by the holder in the same
manner as the original signature on the Letter by which such Existing Notes were
tendered or as otherwise set forth in Instruction 3 below (including any
required signature guarantees), or be accompanied by documents of transfer
sufficient to have the Mortgage Note Trustee or the Senior Subordinated Note
Trustee (each as defined in the Prospectus) register the transfer of such
Existing Mortgage Notes or Existing Senior Subordinated Notes pursuant to the
terms of the Mortgage Notes Indenture or Senior Subordinated Notes Indenture
(each as defined in the Prospectus), respectively, 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. If Existing
Notes have been tendered pursuant to the procedure for book-entry transfer, any
notice of withdrawal must specify the name and number of the account at the
book-entry transfer facility to be credited with the withdrawn Existing Notes or
otherwise comply with the book-entry transfer facility's procedures. See "The
Exchange Offer-Withdrawal Rights" in the Prospectus.
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Existing Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Existing Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
The signatures on this Letter 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" in this Letter or (ii) for the account of an
Eligible Institution. In the event that the signatures in this Letter 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., a clearing agency, an insured credit union, a savings association
or by 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 the signer of this Letter, 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.
4. Special Issuance and Delivery Instructions.
Tendering holders of Existing Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
are to be issued or sent, if different from the name or address of the person
signing this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. If no such instructions are given, any New Notes will be issued in
the name of, and delivered to, the name or address of the person signing this
Letter and any Existing Notes not accepted for exchange will be returned to the
name or address of the person signing this Letter.
5. Backup Federal Income Tax Withholding and Substitute Form W-9.
Under the federal income tax laws, payments that may be made by the
Issuers on account of New Notes issued pursuant to the Exchange Offer may be
subject to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter and either (a) provide the correct taxpayer
identification number ("TIN") and certify, under penalties of perjury, that the
TIN provided is correct and that (i) the holder has not been notified by the
Internal Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or
<PAGE>
dividends or (ii) the IRS has notified the holder that the holder is no longer
subject to backup withholding; or (b) provide an adequate basis for exemption.
If the tendering holder has not been issued a TIN and has applied for one, or
intends to apply for one in the near future, such holder should write "Applied
For" in the space provided for the TIN in Part I of the Substitute Form W-9,
sign and date the Substitute Form W-9 and sign the Certificate of Payee Awaiting
Taxpayer Identification Number. If "Applied For" is written in Part I, the
Issuers (or the Paying Agent under the applicable Indenture governing the New
Notes) shall retain 31% of payments made to the tendering holder during the
sixty (60) day period following the date of the Substitute Form W-9. If the
holder furnishes the Exchange Agent or the Issuers with his or her TIN within
sixty (60) days after the date of the Substitute Form W-9, the Issuers (or the
Paying Agent) shall remit such amounts retained during the sixty (60) day period
to the holder and no further amounts shall be retained or withheld from payments
made to the holder thereafter. If, however, the holder has not provided the
Exchange Agent or the Issuers with his or her TIN within such sixty (60) day
period, the Issuers (or the Paying Agent) shall remit such previously retained
amounts to the IRS as backup withholding. In general, if a holder is an
individual, the taxpayer identification number is the Social Security number of
such individual. If the Exchange Agent or the Issuers are not provided with the
correct taxpayer identification number, the holder may be subject to a $50
penalty imposed by the IRS. Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Existing Notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Existing Notes to be deemed invalidly tendered, but may require the Issuers (or
the Paying Agent) to withhold 31% of the amount of any payments made on account
of the New Notes. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
6. Transfer Taxes.
The Issuers will pay all transfer taxes, if any, applicable to the
transfer of Existing Notes to them or their order pursuant to the Exchange
Offer. If, however, New Notes and/or substitute Existing Notes not exchanged are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Existing Notes tendered hereby, or if
tendered Existing Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason other
than the transfer of Existing Notes to the Issuers or their order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes specified in this
Letter.
7. Waiver of Conditions.
The Issuers reserve the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
<PAGE>
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Existing Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Existing
Notes for exchange.
Neither the Issuers nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. Inadequate Space.
If the space provided herein is inadequate, the aggregate principal amount
of Existing Notes being tendered and the certificate number or numbers (if
available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter.
10. Mutilated, Lost, Stolen or Destroyed Existing Notes.
If any certificate has been lost, mutilated, destroyed or stolen, the
holder should promptly notify First Trust National Association, Telephone (612)
244-0721. The holder will then be instructed as to the steps that must be taken
to replace the certificates(s). This Letter of Transmittal and related documents
cannot be processed until the Existing Notes have been replaced.
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent at the address and telephone number indicated above.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
- -------------------------------------------------------------------------------
PAYERS' NAMES: LAS VEGAS SANDS, INC. and VENETIAN CASINO RESORT, LLC
- -------------------------------------------------------------------------------
SUBSTITUTE Part I--Taxpayer
Form W-9 Identification Number
----------------------
Social Security Number
Department of the Enter your taxpayer
Treasury identification number in
Internal Revenue Service the appropriate box. For OR
most individuals, this is
your social security number.
If you do not have a number,
see how to obtain a "TIN" in the
enclosed Guidelines.
----------------------
Employer Identification
Number
Payer's Request for NOTE: If the account is in
Taxpayer Indentification more than one name, see
Number ("TIN") the chart on page 2 of the
and Certification enclosed Guidelines to
determine what number to
give.
Part II--For Payees Exempt From Backup Withholding
(see enclosed Guidelines)
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) the number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding because (a)
I am exempt from backup witholding, or (b) I have
not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup
withholding as a result of a failure to report all
interest or dividends or (c) the IRS has notified
me that I am no longer subject to backup
withholding.
SIGNATURE DATE
-------------------- -------------------
Certification Guidelines--You must cross out item (2) of the above
certification if you have been notified by the IRS that you are subject to
backup withholding because of underreporting of interest or dividends on your
tax return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from the IRS
that you are no longer subject to backup withholding, do not cross out item
(2).
- -------------------------------------------------------------------------------
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payers, 31 percent of all
payments made to me on account of the New Notes shall be retained until I
provide a Taxpayer Identification Number to the payers and that, if I do not
provide my Taxpayer Identification Number within sixty (60) days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31 percent of all reportable payments made to me thereafter will be withheld
and remitted to the Internal Revenue Service until I provide a Taxpayer
Identification Number.
SIGNATURE DATE
--------------------------------------- -------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW NOTES. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
12 1/4% Mortgage Notes due 2004 and
14 1/4% Senior Subordinated Notes due 2005
in Exchange for New
12 1/4% Mortgage Notes due 2004 and
14 1/4% Senior Subordinated Notes due 2005
Registered Under the Securities Act of 1993, as amended
of
LAS VEGAS SANDS, INC. and
VENETIAN CASINO RESORT, LLC
Registered holders of 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") who wish to tender their Existing Notes in exchange
for a like principal amount of new 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 whose Existing Notes are not immediately available or who cannot deliver
their Existing Notes and Letter of Transmittal (and any other documents required
by the Letter of Transmittal) to First Trust National Association (the "Exchange
Agent") prior to the Expiration Date, may use this Notice of Guaranteed
Delivery. This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission (receipt confirmed by telephone and an original delivered
by guaranteed overnight courier) or letter to the Exchange Agent. See "The
Exchange Offer--Procedures for Tendering Existing Notes" in this Prospectus.
The Exchange Agent for the Exchange Offer is:
First Trust National Association
180 East 5th Street
St. Paul, MN 55101
Attn: Corporate Finance
Rick Prokosch
For Information, call:
(612) 244-0721
Fax: (612) 244-0711
Delivery of this Note of Guaranteed Delivery to an address other than
as set forth above or transmission of instructions via a facsimile transmission
to a number other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
2
Ladies and Gentleman:
The undersigned hereby tenders the principal amount of Existing
Mortgage Notes and/or Existing Senior Subordinated Notes indicated below, upon
the terms and subject to the conditions contained in the Prospectus dated
________, 1998 of Las Vegas Sands, Inc. and Venetian Casino Resort, LLC (the
"Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<S> <C> <C> <C>
Name and address of registered holder as it Certificate Aggregate Principal Principal Amount
appears on the 12 1/4% Mortgage Notes due Number(s) of Amount Represented of Existing
2004 ("Existing Mortgage Notes") Existing Mortgage by Existing Mortgage Notes
(Please Print) Notes Tendered Mortgage Notes*/ Tendered
----------------------------------- -------------- -------------- --------------
----------------------------------- -------------- -------------- --------------
----------------------------------- -------------- -------------- --------------
If Existing Mortgage Notes will be delivered by book-entry transfer to The
Depositary Trust Company, provide account number.
Account Number _______________
Name and address of registered holder as it Certificate
appears on the 14 1/4% Senior Subordinated Number(s) of Aggregate Principal Principal Amount
Notes due 2005 ("Existing Senior Existing Senior Amount Represented of Existing Senior
Subordinated Notes") Subordinated Notes by Existing Senior Subordinated
(Please Print) Tendered Subordinated Notes*/ Notes Tendered
----------------------------------- -------------- -------------- --------------
----------------------------------- -------------- -------------- --------------
----------------------------------- -------------- -------------- --------------
----------------------------------- -------------- -------------- --------------
If Existing Senior Subordinated Notes will be delivered by book-entry transfer
to The Depositary Trust Company, provide account number.
Account Number _______________
</TABLE>
- --------
*/ Must be in denominations of $1,000 and any integral multiple thereof.
<PAGE>
3
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Existing Notes, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm:____________________________ __________________________________
(Authorized Signature)
Address:_________________________________ Title:_____________________________
_________________________________________ Name:______________________________
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date:______________________________
- -----------------------------------------
NOTE: DO NOT SEND EXISTING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
EXISTING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
4
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X _____________________________
X _____________________________ ___________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number: ______________________________________
Must be signed by the holder(s) of Existing Notes as their name(s) appear(s)
on certificates for Existing Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below:
Please print name(s) and address(es)
Name(s): ___________________________________________________
___________________________________________________
Capacity: ___________________________________________________
___________________________________________________
Address(es): ___________________________________________________
___________________________________________________
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.-Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- -------------------------------------------------------------
For this type of account: Give the For this type of account: Give the
SOCIAL SECURITY NUMBER OF -- EMPLOYER IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, or The legal entity (Do not
2. Two or more individuals The actual owner of the pension trust furnish the identifying
(joint account) account or, if combined number of the personal
funds, the first individual representative or trustee
on the account(1) unless the legal entity
3. Husband and wife The actual owner of the itself is not designated in
(joint account) account or, if joint funds, the account title).(5)
either person(1) 10. Corporate account The corporation
4. Custodian account of a minor The minor(2) 11. Religious, charitable, The organization
(Uniform Gift to Minors Act) or educational
5. Adult and minor (joint The adult or, if the minor organization account
account) is the only contributor, the 12. Partnership account The partnership
minor(1) held in the name of
6. Account in the name of the The ward, minor, or the business
guardian or committee for a incompetent person(3) 13. Association, club, or The organization
designated ward, minor, or other tax-exempt
incompetent person organization
7. a. The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also trustee) 15. Account with the The public entity
b. So-called trust account The actual owner(1) Department of
that is not a legal or Agriculture in the
valid trust under State name of a public
law entity (such as a
8. Sole proprietorship account The owner(4) State or local
government, school
district, or prison)
that receives
agricultural program
payments(5)
- ---------------------------------------------------------------- -------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's, or incompetent person's name and furnish such
person's social security number.
(4) Show your individual name. You may also enter your business name. You may
use either your Social Security number or your Employer Identification
number.
(5) List first and circle the name of the legal trust, estate, or pension
trust
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you
don't know your number, obtain Form SS-5, Application for a Social Security
Number Card (for individuals), or Form SS-4, Application for Employer
Identification Number, at the local office of the Social Security Administration
or the Internal Revenue Service (the "IRS") and apply for a number.
Payee Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments including
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan or a custodial account under Section-403(b)(7) of the Code, if the
account satisfies the requirements of Section 401(f)(2) of the Code.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.,
the District of Columbia or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under Section 584(a) of the Code.
o An exempt charitable remainder trust, or a trust described in Section 4947
of the Code.
o An entity registered at all times during the tax year under the Investment
Company Act of 1940.
o A foreign central bank of issue.
Payment of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under Section 1441
of the Code.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
o Payment of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
o Payment of tax-exempt interest (including exempt interest dividends under
Section 852 of the Code).
o Payment described in Section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under Section 1451 of the Code.
o Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A
NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING,
FILE WITH THE PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF
FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
and 6050A and 6050N of the Code and the regulations promulgated thereunder.
Privacy Act Notice--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividends, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
LAS VEGAS SANDS, INC.
VENETIAN CASINO RESORT, LLC
Offer to Exchange
$1,000 in principal amount of
12 1/4% Mortgage Notes due 2004 and
14 1/4% Senior Subordinated Notes due 2005
which have been registered under the Securities Act of 1933,
for each $1,000 in principal amount of
outstanding 12 1/4% Mortgage Notes due 2004 and
14 1/4% Senior Subordinated Notes due 2005, respectively,
that were issued and sold in a transaction
exempt from registration under the Securities Act
To Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated ______, 1998 (as the same
may be amended or supplemented from time to time, the "Prospectus") and a form
of Letter of Transmittal (the "Letter of Transmittal") relating to the offer
(the "Exchange Offer") by Las Vegas Sands, Inc. and Venetian Casino Resort, LLC
(the "Issuers") to exchange up to $425,000,000 in aggregate principal amount of
their 12 1/4% Mortgage Notes due 2004 (the "Exchange Mortgage Notes") and
$97,500,000 in aggregate principal amount of their 14 1/4% Senior Subordinated
Notes due 2005 (the "Exchange Senior Subordinated Notes" and, together with the
Exchange Mortgage Notes, the "Exchange Notes") for up to $425,000,000 in
aggregate principal amount of their outstanding 12 1/4% Mortgage Notes due 2004
(the "Existing Mortgage Notes") and $97,500,000 in aggregate principal amount of
their 14 1/4% Senior Subordinated Notes due 2005 (the "Existing Senior
Subordinated Notes" and, together with the Existing Mortgage Notes, the
"Existing Notes") that were issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended.
We are asking you to contact your clients for whom you hold Existing Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Existing Notes registered
in their old name. The Issuers will not pay any fees or commissions to any
broker, dealer or other person in connection with the solicitation of tenders
pursuant to the Exchange Offer. You will, however, be reimbursed by the Issuers
for customary mailing and handling expenses incurred by you to forwarding any of
the enclosed materials to your clients. The Issuers will pay all transfer taxes,
if any, applicable to the tender of Existing Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. the Prospectus;
2. a Letter of Transmittal for your use in connection with the
exchange of Existing Notes and for the information of your clients
(facsimile copies of the Letter of Transmittal may be used to exchange
Existing Notes);
3. a form of letter that may be sent to your clients for whose
accounts you hold Existing Notes registered in your name or the name of
your nominee, with space provided for obtaining the clients' instructions
with regard to the Exchange Offer;
4. a Notice of Guaranteed Delivery;
<PAGE>
5. guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. a return envelope addressed to First Trust National Association,
the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M. NEW YORK CITY TIME ON _________, 1998, UNLESS EXTENDED (THE "EXPIRATION
DATE"). EXISTING NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN,
SUBJECT TO THE PROCEDURES DESCRIBED IN THE PROSPECTUS, AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
To tender Existing Notes, certificates for Existing Notes or a Book-Entry
Confirmation (as defined in the Prospectus), a duly executed and properly
completed Letter of Transmittal or a facsimile thereof, and any other required
documents, must be received by the Exchange Agent as provided in the Prospectus
and the Letter of Transmittal.
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 by delivery of a Notice of Guaranteed
Delivery by an Eligible Institution (as defined in the Prospectus).
Any inquiries you may have with respect to the Exchange Offer or requests
for additional copies of the enclosed material may be directed to the Exchange
Agent at its address or telephone number set forth in the Prospectus.
Very truly yours,
LAS VEGAS SANDS, INC. and
VENETIAN CASINO RESORT, LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF THE ISSUERS OR THE EXCHANGE AGENT, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
LAS VEGAS SANDS, INC.
VENETIAN CASINO RESORT, LLC
Offer to Exchange
$1,000 in principal amount of
12 1/4% Mortgage Notes due 2004 and
14 1/4% Senior Subordinated Notes due 2005 which have been
registered under the Securities Act of 1933,
for each $1,000 in principal amount of
outstanding 12 1/4% Mortgage Notes due 2004 and
14 1/4% Senior Subordinated Notes due 2005, respectively,
that were issued and sold in a transaction
exempt from registration under the Securities Act
To Our Clients:
Enclosed for your consideration is a Prospectus dated ______, 1998 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Las Vegas Sands, Inc. and Venetian Casino
Resort, LLC (the "Issuers") to exchange up to $425,000,000 in aggregate
principal amount of their 12 1/4% Mortgage Notes due 2004 (the "Exchange
Mortgage Notes") and $97,500,000 in aggregate principal amount of their 14 1/4%
Senior Subordinated Notes due 2005 (the "Exchange Senior Subordinated Notes"
and, together with the Exchange Mortgage Notes, the "Exchange Notes") for up to
$425,000,000 in aggregate principal amount of their outstanding 12 1/4% Mortgage
Notes due 2004 (the "Existing Mortgage Notes") and $97,500,000 in aggregate
principal amount of their 14 1/4% Senior Subordinated Notes due 2005 (the
"Existing Senior Subordinated Notes" and, together with the Existing Mortgage
Notes, the "Existing Notes") that were issued and sold in a transaction exempt
from registration under the Securities Act of 1933, as amended.
The material is being forwarded to you as the beneficial owner of Existing
Notes carried by us for your account or benefit but not registered in your name.
A tender of any Existing Notes may be made only by us as the registered holder
and pursuant to your instructions. Therefore, the Issuers urge beneficial owners
of Existing Notes registered in the name of a broker, dealer, commercial bank,
trust company or other nominee to contact such registered holder promptly if
they wish to tender Existing Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender
any or all of the Existing Notes held by us for your account, pursuant to the
terms and conditions set forth in the Prospectus and Letter of Transmittal. We
urge you to read carefully the Prospectus and Letter of Transmittal before
instructing us to tender your Existing Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Existing Notes on your behalf in accordance with
the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00
p.m., New York City time, on _______, 1998, unless extended (the "Expiration
Date"). Existing Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to the
Expiration Date.
<PAGE>
Your attention is directed to the following:
l. The Exchange Offer is for the exchange of $1,000 principal amount
at maturity of the Exchange Notes for (i) each $1,000 principal amount at
maturity of the Existing Mortgage Notes, of which $425,000,000 aggregate
principal amount of the Existing Mortgage Notes was outstanding as of
____________, 1998 and (ii) each $1,000 principal amount at maturity of
the Existing Senior Subordinated Notes, of which $97,500,000 aggregate
principal amount of the Existing Senior Subordinated Notes was outstanding
as of ____________, 1998. The terms of the Exchange Notes are
substantially identical (including principal amount, interest rate,
maturity, security and ranking) to the terms of the Existing Notes, except
that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided in the Prospectus) and (ii) are not entitled to
certain registration rights and certain additional interest provisions
which are applicable to the Existing Notes under a registration rights
agreement (the "Registration Rights Agreement") among the Issuers, Lido
Intermediate Holding Company, LLC, Mall Intermediate Holding Company, LLC
and Grand Canal Shops Mall Construction, LLC, as guarantors, and, Goldman,
Sachs & Co. and Bear, Stearns & Co., Inc., as initial purchasers (the
"Initial Purchasers").
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE
EXCHANGE OFFER--CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on _______, 1998, unless extended.
4. The Issuers have agreed to pay the expenses of the Exchange Offer
except as provided in the Prospectus and the Letter of Transmittal.
5. Any transfer taxes incident to the transfer of Existing Notes from
the tendering Holder to the Issuers will be paid by the Issuers, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to nor will exchange 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.
If you wish to have us tender any or all of your Existing Notes held by us
for your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Existing Notes held by us and registered in our name
for your account or benefit.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein in connection with the Exchange Offer of Las Vegas
Sands, Inc. and Venetian Casino Resort, LLC relating to the Existing Mortgage
Notes and the Existing Senior Subordinated Notes, including the Prospectus and
the Letter of Transmittal.
This form will instruct you to exchange the aggregate principal amount of
Existing Mortgage Notes and/or Existing Senior Subordinated Notes indicated
below (or, if no aggregate principal amount is indicated below, all Existing
Notes) held by you for the account or benefit of the undersigned, pursuant to
the terms and conditions set forth in the Prospectus and Letter of Transmittal.
----------------------------------------------------------
Aggregate Principal Amount of Existing Mortgage Notes to
be exchanged
$___________________________*
Aggregate Principal Amount of Existing Senior
Subordinated Notes to be exchanged
$___________________________*
----------------------------------------------------------
*I (we) understand that if I (we) sign these instruction forms without
indicating an aggregate principal Signature(s) amount of Existing Notes
Signature(s) in the space above, all Existing Notes held by you for my (our)
account will be exchanged.
- ------------------------------------------
- ------------------------------------------
Signature(s)
- ------------------------------------------
Capacity (full title), if signing in a
fiduciary or representative capacity
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
Name(s) and address, including zip code
Date:
-------------------------------------
- ------------------------------------------
Area Code and Telephone Number
- ------------------------------------------
Taxpayer Identification or Social
Security Number
October 17, 1997
Goldman Sachs Credit Partners
85 Broad Street
New York, New York 10004
Subject: Valuation of the Vacant Land underlying the proposed Venetian and Lido
Resorts in Las Vegas, Nevada
Landauer File No. L131-97
Ladies and Gentlemen:
Pursuant to our engagement letter, we submit herewith our narrative appraisal
report of the referenced property. We have inspected the site and improvements,
evaluated the vacant land and casino hotel market conditions in the Las Vegas
market area, and considered the local forces influencing property values.
The purpose of this appraisal is to estimate the market value of the land as an
equity contribution. For that reason, we have valued the land under a
hypothetical situation, specifically as if it were vacant and ready for
development. Construction on the Venetian Project began on April 21, 1997. As of
the date of our most recent inspection on October 17, approximately $68,000,000
had been expended on excavations, piers, foundations and other structural
improvements. Therefore, the values stated below are not "as is" values. The
work completed to date would have a positive effect on value. Thus an "as is"
value would be greater than our hypothetical "as if vacant and ready for
development" assumption.
Based on the available data, along with our analyses, opinions and conclusions,
we are of the opinion that the market value of the fee simple interest in the
44.6 acres of land described in the attached report, as if vacant and ready for
development, as of October 17, 1997, would be:
TWO HUNDRED TWENTY FIVE MILLION DOLLARS
$225,000,000
<PAGE>
Goldman Sachs Credit Partners
October 17, 1997
Page 2
The value of the 30.9 acre Venetian site, as of October 17, 1997, as if vacant
and ready for development, has been allocated as:
ONE HUNDRED FIFTY FIVE MILLION DOLLARS
$155,000,000
The value of the 13.7 acre Lido site, as of October 17, 1997, as if vacant and
ready for development, has been allocated as:
SEVENTY MILLION DOLLARS
$70,000,000
Landauer acknowledges that the value reported by the appraiser will be used and
reprinted for dissemination with regard to (a) borrowings being made from banks
and/or institutional lenders for the purpose of developing the property and (b)
in connection with a public offering or private placement of securities. The
attached Assumptions and Limiting Conditions contain a limitation regarding
dissemination of the appraisal.
At present the contiguous convention facility, the Sands Exposition and
Convention Center (SECC) encroaches onto 2.28 acres of the tax parcels that
include the subject site. The SECC is owned by an entity related to the
subject's current ownership. In order to maximize the allowable density of the
site, the related parties have entered into cross easement agreements that
enable them to take advantage of the complementary pattern of parking
utilization. The contiguous convention center would be a significant demand
generator for any casino hotel project, regardless of theming or market
orientation. We are of the opinion that any other prudent buyer would seek to
negotiate a physical connection to the SECC in exchange for shared parking.
We have made certain assumptions regarding the aforementioned encroachment and
provision of parking facilities based on our review of an unsigned copy the
Reciprocal Easement, Use and Operating Agreement, (REA) issued June 24, 1997.
This agreement is between Interface Group-Nevada, Inc. (Interface), which is the
current owner of the Sands Exposition and Convention Center (SECC), and Las
Vegas Sands, Inc. (LVSI), which owns the subject land upon which it or one or
more affiliates plans to develop the Venetian (Phase I) resort and the Lido
(Phase II) resort. However, some of the issues raised would be relevant to any
development on the subject site. The following assumptions were made to estimate
market value.
<PAGE>
Goldman Sachs Mortgage Company
October 17, 1997
Page 3
1.) The site area utilized in our valuation, which is net of the encroachment
area, is based on the boundary line adjustment map prepared by Horizon Surveys
and a preliminary site plan as drafted by Martin & Martin Civil Engineers dated
February 17, 1997.
2.) Prior to consummation of the lot line modifications (as described in the
REA), the perpetual easement that permits the SECC to encroach are such that,
for practical purposes it is equivalent to a fee simple interest.
3.) The parties involved do complete the lot line modification with all due
diligence and as soon as reasonably possible as indicated in the REA or the SECC
encroachment easement remains in effect pursuant to the REA.(1)
4.) The REA places the onus of providing 800 of convenient parking spaces on the
owner/developer of the subject site. The SECC will be obliged to pay only
ordinary maintenance charges on the spaces used.
To address this, we have adjusted the concluded land value to reflect the
construction cost of 800 incremental parking spaces.
5.) During any construction on the subject parcel, the owner shall use
commercially reasonable efforts to minimize interference with the use, enjoyment
and occupancy of... the SECC. (2)
6.) There will be a series of reciprocal easements granted between the subject
and the SECC regarding access, egress, parking, and common area maintenance.
These easements will exist in perpetuity, and benefit any development on the
subject property.
The appraisal report is further subject to the following specific conditions and
assumptions, changes in which may materially affect the value conclusions
reported herein.
- ------------------------
(1) Reciprocal Easement, Use and Operating Agreement, issued June 24,
pages 10 and 11.
(2) Ibid, page 25
<PAGE>
Goldman Sachs Mortgage Company
October 17, 1997
Page 4
We certify that we have no interest in the property and our employment and
compensation are not contingent upon our findings and conclusions. The following
appraisal report is subject to the assumptions and limiting conditions made
throughout the report.
Sincerely,
LANDAUER ASSOCIATES, INC.
Karen Johnson, MAI Rodney A. Wycoff, CRE, MAI
Managing Director Senior Managing Director
<PAGE>
VACANT LAND UNDERLYING THE PROPOSED
VENETIAN AND LIDO RESORTS ON LAS VEGAS BOULEVARD SOUTH
IN LAS VEGAS, NEVADA
<PAGE>
TABLE OF CONTENTS
SUMMARY OF SALIENT DATA AND CONCLUSIONS....................................... 1
SUBJECT PHOTOGRAPHS........................................................... 2
ASSUMPTIONS AND LIMITING CONDITIONS........................................... 3
CERTIFICATION................................................................. 5
INTRODUCTION.................................................................. 6
REGIONAL ANALYSIS.............................................................10
THE VISITOR INDUSTRY..........................................................16
NEIGHBORHOOD ANALYSIS.........................................................33
SITE ANALYSIS.................................................................37
HIGHEST AND BEST USE..........................................................44
VALUATION.....................................................................49
SALES ANALYSIS................................................................50
RESIDUAL ANALYSIS.............................................................64
RECONCILIATION................................................................71
Addenda
Legal Description
Engagement Letter
Photographs of the Subject Property
Photographs of the Subject Neighborhood
Comparable Land Sales
Hotel Investment OUTLOOK
Qualifications of the Appraisers
<PAGE>
1
SUMMARY OF SALIENT DATA AND CONCLUSIONS
SUMMARY OF SALIENT DATA AND CONCLUSIONS
Subject: Vacant land.
Purpose of the Appraisal: To
estimate the market value
of the fee simple interest
in the subject property as
of October 17, 1997, as if
vacant and ready for
development.
Location: 3355 Las Vegas Boulevard South, Las Vegas,
Nevada.
Site: 1,940,571 square feet, or approximately
44.55 acres.
Improvements: None at present.
Zoning: H-1 which permits gaming and hotel use
by right.
Highest and Best Use: Resort Casino connected to the Sands
As Vacant Exposition and Convention Center.
Property Rights Appraised: Fee Simple Interest.
Marketing Period: Nine to twelve months.
Indications of Value:
Venetian Site Lido Site Both Sites
Sales Comparison Technique:
Value per acre $5,000,000 $5,100,000 $5,050,000
Acres 30.86 13.69 44.55
Total (rounded) Value $155,000,000 $70,000,000
$225,000,000
Residual Technique:
Value per acre: N/A N/A $8,300,000
Acres: N/A N/A 44.5
Total (rounded) Value: N/A N/A
$370,000,000
Valuation Date: October 17, 1997
<PAGE>
2
SUMMARY OF SALIENT DATA AND CONCLUSIONS
Final Market Value Conclusion $155,000,000 $70,000,000
$225,000,000
<PAGE>
3
SUBJECT PHOTOGRAPHS
SUBJECT PHOTOGRAPHS
[Photo of Assumed Condition Omitted]
Assumed Condition
[Photo of Actual Condition on Date of Value Omitted]
Actual Condition on Date of Value
<PAGE>
4
ASSUMPTIONS AND LIMITING CONDITIONS
ASSUMPTIONS AND LIMITING CONDITIONS
This report is made expressly subject to the following conditions and
stipulations:
1. Date and definitions of value, together with other definitions and
assumptions on which our analyses are based, are set forth in
appropriate sections of this report. These are to be considered part
of these limiting conditions as if included here in their entirety.
2. The conclusions stated herein, including values which are expressed in
terms of the U. S. Dollar, apply only as of the date of value and are
based on prevailing physical and economic conditions and available
information at that time. 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. No representation is made as to the effect of
subsequent events which may significantly alter the conclusions
reported herein.
3. Title to the property is assumed to be marketable. The property is
considered as being under responsible ownership and free of all
encumbrances except as specifically discussed herein.
4. Information reported herein has been obtained from reliable sources
and, when feasible, has been verified. The appraisers reserve the
right to make appropriate revisions in the event of discovery of
additional or more accurate data.
5. No responsibility is accepted by Landauer for considerations requiring
expertise in other fields. Included in this category are ownership,
legal description and other legal matters, survey of property
boundaries, geologic considerations including soils and seismic
stability, civil, structural or other engineering, and identification
of hazardous or toxic substances. Data furnished or obtained from
public sources relative to these matters has been adopted and is
assumed to be correct.
6. Except where specifically noted, we have no cause to expect the
existence of undisclosed easements, encroachments or defects in title,
access, geology, structural integrity or mechanical systems. Any need
for further study indicated by our investigation has been disclosed to
the client and/or noted in the report; results of any such studies
furnished have been accepted and the source identified. Maps and other
graphic materials reproduced herein are for illustrative purposes only
and are not to be relied on for factual information.
7. The appraisers have inspected the subject property with the due
diligence expected of a professional real estate appraiser. The
appraisers are not qualified to detect hazardous waste and/or toxic
materials. Any comment by the appraisers that might suggest the
possibility of the presence of such substances should not be taken as
confirmation of the presence of hazardous waste and/or toxic material.
Such determination would require investigation by a qualified expert
in the field of environmental assessment.
<PAGE>
4
ASSUMPTIONS AND LIMITING CONDITIONS
The presence of substances such as asbestos, urea-formaldehyde foam
insulation or other potentially hazardous material may affect the
value of a property. The appraisers' value estimate is predicated on
the assumption that there is no such material on or in the property
that would cause a loss in value.
No responsibility is assumed for any environmental conditions, or for
any expertise or engineering knowledge required to discover them. The
appraisers' descriptions and resulting comments are the result of the
routine observations made during the appraisal.
8. This appraisal covers only the real property described herein. Unless
specifically stated to the contrary, it does not include consideration
of mineral rights or related right of entry, nor personal property or
the removal thereof. Values reported herein are not intended to be
valid in any other context, nor are any conclusions as to unit values
applicable to any other property or utilization than that specifically
identified herein.
9. By reason of this assignment, testimony, attendance in court, any
government or other hearing with reference to the property is not
required without prior arrangements having been made relative to such
additional employment.
10. Use and disclosure of the contents of this report is governed by the
Bylaws and Regulations of the Appraisal Institute. The Appraisal
Institute reserves the right to authorize its representatives to
review this report and its supporting documentation. Except as set
forth in the engagement letter to which these limiting conditions are
attached, confidential distribution of copies of this report in its
entirety may be made subject to the sole control of the addressee,
however, excerpts may not be given to any third party without prior
written consent.
11. Except as set forth in the engagement letter to which these limiting
conditions were attached, neither all nor any part of the contents of
this report (especially any conclusions as to value, the identity of
the appraisers or the firm with which they are connected, any
reference to the Appraisal Institute or to the MAI or SRA designation)
shall be disseminated to the general public through advertising or
sales media, public relations media, news media or any other public
means of communication without prior written consent.
<PAGE>
5
CERTIFICATION
CERTIFICATION
The undersigned certify that to the best of their knowledge and belief:
The statements of fact contained in this appraisal report and upon which the
analyses, opinions and conclusions expressed herein are based are true and
correct. This report is made subject to the Assumptions and Limiting Conditions
set forth on the following pages which contain all of the limiting conditions
(imposed by the terms of the assignment or by the appraisers) affecting the
analyses, opinions and conclusions in this report.
Employment and compensation for making this appraisal are in no way contingent
upon the value reported, and we certify that we have no direct or indirect
current or prospective personal interest or bias in the subject matter of this
appraisal report or to the parties involved.
No one other than the undersigned prepared the analyses, opinions or conclusions
concerning real estate that are set forth in this report.
This report has been made in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Practice of the Appraisal
Institute. The use of this report is subject to the requirements of the
Appraisal Institute relating to reviews by its duly authorized representatives.
As of the date of this report, Rodney A. Wycoff, MAI and Karen Johnson, MAI have
completed the requirements of the continuing education program of the Appraisal
Institute.
Karen Johnson, MAI personally inspected the property which is the subject of
this report on February 10, 1997, March 7, 1997, August 4, 1997, and October 17,
1997. Rodney A. Wycoff, MAI, inspected the property on January 29, 1997.
Rodney A. Wycoff, CRE, MAI
Senior Managing Director
California Certified General Real Estate Appraiser License AG007074
Karen Johnson, MAI
Managing Director
Nevada Certified General Real Estate Appraiser License 02113
California Certified General Real Estate Appraiser License AG018739
<PAGE>
7
INTRODUCTION
INTRODUCTION
IDENTIFICATION OF THE PROPERTY
The subject property is located at 3355 Las Vegas Boulevard South in what is
commonly referred to as Las Vegas, Nevada. The municipality governing the
subject property is Clark County. The subject is currently recorded on the
County's property tax records as all or portions of account numbers
162-16-202-008, 162-16-202-006 and 162-16-301-001.
The boundary lines of two tax parcels have not yet been relocated so that the
SECC currently encroaches on 2.28 acres of the subject site. A copy of the
proposed boundary line adjustment by Horizon Surveys is presented on page 38.
We have made certain assumptions regarding the aforementioned encroachment and
provision of parking facilities and utilities as indicated in an unsigned
Reciprocal Easement, Use and Operating Agreement (REA), issued June 24, 1997.
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to estimate the market value of the fee simple
interest in the land underlying the proposed Venetian and Lido Resorts as of
August 4, 1997, as if vacant and available for development.
HISTORY OF THE PROPERTY/BACKGROUND OF THE ENGAGEMENT
In the late 1950's, the first low-rise buildings of the Sands Hotel were
constructed on the larger assemblage comprised of approximately 59.0 acres which
includes the subject site. Additional buildings, and eventually a circular tower
were added in the 1960's and 1970's.
The Sands Hotel and its excess land were purchased in 1989 for $110,000,000 by
an affiliate of The Interface Group, doing business as Las Vegas Sands, Inc. An
additional $18,500,000 was funded at purchase for recapitalization and capital
improvements. The total investment in the original 59.0 acre property was
therefore $128,500,000.
To increase the large parcel's frontage on the Strip, the 1.53 acre Tam
O'Shanter Motel was bought in early 1996 for $12,400,000, or $8,104,575 per
acre, increasing the site to 60.5 acres. This site is held under different
ownership (Silver State Realty Trust) but is controlled by the same principal as
the larger parcel.
In 1990, approximately 13.7 acres of excess land on the eastern boundary of the
assemblage were developed with the Sands Exposition and Convention Center (Sands
Expo Center) at a cost of
<PAGE>
8
INTRODUCTION
$55,000,000. In 1994, the lower level parking garage of the Expo Center was
converted into an additional 411,400 square feet of exhibit and meeting space at
a cost of $15,500,000. The conversion of the former parking garage brought the
net exhibit and meeting space total to 966,400 square feet. Pre-function areas
bring the revenue producing space up to 1,001,400 square feet.
In early 1996, the Sands Exposition and Convention Center (Sands Expo Center)
was transferred between affiliates. Las Vegas Sands Inc. (LVSI) sold the subject
to the Interface Group - Nevada, Inc. (Interface) for $66,594,000, its
approximate book value.
Between December 1996 and March 1997 the existing Sands Hotel and Casino complex
was demolished at a total cost of approximately $6,000,000 to make way for two
mega casino resorts, to be named the Venetian and the Lido. These casino hotels
are planned to be physically connected to each other through a retail area and
casino space and to the Sands Exposition and Convention Center by a common wall
and indoor corridor. Parking facilities and a utility plant are to be shared
also.
PROPERTY RIGHTS APPRAISED
The property rights appraised are what in mixed-use developments are considered
to be a fee simple estate. A fee simple estate is defined as absolute ownership
unencumbered by any other interest or estate; subject only to the limitations of
eminent domain, escheat, police power, and taxation.
The intent of the REA is to eliminate the current encroachment of the Sands Expo
Center (Interface land) onto 2.28 acres of the subject site by modifying the
parcel boundary lines. Our appraisal assumes that this is completed, and
...Until such time as the lot boundary lines are relocated to eliminate the
encroachment, Las Vegas Sands Inc. acknowledges that "(i) Interface owns
fee title to the SECC (including, without limitation, that portion of the
SECC that encroaches onto the Phase I land (the 'SECC Encroachment')) and
(ii) LVSI has no right, title, interest or claim in or to the SECC
(including, without limitation, the SECC encroachment)".
The subject is also encumbered by the obligation to provide 800 parking spaces
to the Sands Exposition and Convention Center.
The remaining easements assumed for the market value estimate are typical of
those encumbering regional malls and the individual fee components of mixed-used
developments.
<PAGE>
9
INTRODUCTION
DEFINITION OF MARKET VALUE
For the purpose of this appraisal, Market Value is defined as follows:
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 stimulus. 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:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised and acting in what they
consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.(3)
As further clarification, NCREIF believes that it is reasonable under current
market conditions to assume up to one year to sell a property. Conversely, a
marketing period of three years would typically not be appropriate under the
Market Value definition. Further, Market Value does not assume a "liquidation
sale" (forced sale) which would place undue emphasis on time and cash.(4)
An estimate of market value requires that the appraisal reflect the attitudes
and behavior of typical investors and developers. In addition, an estimate of
market value considers the continuous attempt of market participants to maximize
real estate values, generate increased revenues and reduce risk. The market
value indications included in the Valuation Section are based upon the above
requirements.
- --------------------------
(3) Standards of Professional Appraisal Practice of the Appraisal Institute"
and Uniform Standards of Professional Appraisal Practice," The Appraisal
Foundation, 1994, page.
(4) "CREIF Clarification Statement Regarding 'Market Value' ", National Council
of Real Estate Investment Ficuciaries, 1991.
<PAGE>
10
INTRODUCTION
MARKETING AND EXPOSURE PERIOD
There are a number of prospective buyers actively looking for an assembled,
developable site for mega casino resort development. We estimate that the actual
marketing period would require no more than six months. However, due diligence
periods prolong the effective marketing period by three to six months. A total
marketing and due diligence period of nine to twelve months is deemed
appropriate for the subject site.
The retrospective exposure period is estimated to be the same.
DATE OF VALUE ESTIMATE
In order to incorporate the most current information, the property is valued as
of October 17, 1997, the date of the most recent inspection. The value was first
estimated using the data available and under economic conditions prevailing as
of March 7, 1997. Negotiations regarding the Reciprocal Easement, Use and
Operating Agreement delayed the publishing of the report. The property was
inspected on January 29, February 10, March 7, 1997, August 4, 1997, and October
17, 1997 by Karen Johnson, MAI. Mr. Rodney A. Wycoff, MAI, CRE, inspected the
property on January 29, 1997.
SCOPE OF THE ASSIGNMENT
The scope of this appraisal involved the systematic research and analysis
necessary to reach a market value estimate for the land underlying the proposed
Venetian Resort.
Our research included a review of the current market for vacant land on the Las
Vegas Strip. Historical sales data was reviewed in order to estimate an
appropriate basis for our estimate of the current market value. Because of the
dated or less desirable nature of these comparables, a residual technique was
also considered. Our investigation included a thorough market overview in order
to gauge the current condition of the Las Vegas casino resort and convention
market. Historical development and absorption trends were analyzed. A summary of
projects currently planned and proposed was developed and their status in the
planning/approvals process was reviewed.
Last, a final value estimate was reached based on the above analyses, influenced
by the most reliable and appropriate data. This full narrative report is the
result of our findings and analyses.
<PAGE>
11
REGIONAL ANALYSIS - LAS VEGAS, NEVADA
REGIONAL ANALYSIS
Geographical, social, political and economic trends are the factors that have
the most profound effect upon the real estate market. The following is a
discussion of these trends as they affect the economic base and strength of the
Las Vegas Metropolitan Statistical Area (MSA) and the City of Las Vegas in
particular.
GEOGRAPHICAL
The subject is located within the most southern region of Nevada consisting of
Clark and Nye Counties. Combined with Mohave County in Arizona, Clark and Nye
Counties compose the Las Vegas Metropolitan Statistical Area (MSA). The City of
Las Vegas is within the 864 square mile Las Vegas Valley of Clark County. Clark
County is approximately 7,910 square miles, most of which is undeveloped desert
and wildlife ranges owned by the Federal Government. To the north of Clark
County is Lincoln County, to the west is Nye County, also to the west and south
is California, and the Colorado River and Lake Mead are a natural eastern border
separating the county and state from Mohave County in Arizona. Las Vegas is
approximately 290 miles north-east of Los Angeles.
POPULATION
Since 1980, the Las Vegas MSA has experienced an average compound annual growth
rate of 4.9 percent per year. Historical population figures and projections are
shown in the following table.
LAS VEGAS MSA
Compound
Annual
Year Population Growth
- --------------------- ------------------- ---------------------
1980 538,000 N/A
1990 875,000 5.0%
1995 1,144,000 5.5%
1st Qtr. 1997 1,219,000 3.2%
Est. 2000 1,352,000 3.5%
Source: DRI/McGraw-Hill, U.S. Markets Review.
<PAGE>
12
REGIONAL ANALYSIS - LAS VEGAS, NEVADA
Since 1970, the City proper has experienced population growth at an average
compound annual rate of 4.8 percent per year. The City's population figures and
estimates are shown in the following table.
CITY OF LAS VEGAS
Compound
Annual
Year Population Growth
- --------------------- ------------------- --------------------
1970 125,787 --
1980 164,674 2.7%
1990 258,295 4.6%
July 1996 401,703 7.6%
Source: Clark County Comprehensive Planning Department
Population in the City of Las Vegas has increased significantly since 1970 and
will continue to do so due to economic expansion. By the year 2000, DRI
estimates that population will increase to 1.35 million residents, an increase
of nearly 55% over 1990. Booming population growth will be driven by economic
growth. Along with the hotel, gaming and recreation industry, business and
personal services, trade, state and local government, transportation,
communications and utilities are areas of the economy that are expected to grow.
EMPLOYMENT
During 1996, total employment increased 8.1%. Much of this increase is the
result of new casino openings and construction of new properties. In absolute
numbers, the industry that created the most new jobs during 1996 was services,
but construction, trade and durable goods manufacturing grew at faster
percentage rates. Many new manufacturing firms relocated to Las Vegas from
California in the early 1990's as a result of the recessionary period California
experienced. Now that California's economy is recovering, the rate of growth in
local manufacturing jobs is expected to decline, but this should have little
effect on the Las Vegas economy. Current casino openings are expected to
increase services employment by about 15,000 jobs in both 1997 and 1998.
<PAGE>
13
REGIONAL ANALYSIS - LAS VEGAS, NEVADA
Presented below is historical employment and unemployment data pertaining to the
Las Vegas MSA. The labor force has grown, on average, at a compound rate of 11.5
percent annually over the last four years, while the number of people employed
has grown at a greater rate of 12.0 percent per year. This has resulted in a
substantial decrease in the unemployment rate.
Employment and Unemployment
Las Vegas MSA
<TABLE>
<CAPTION>
Compound
1st Qtr. Annual Growth
Year 1992 1994 1996 1997 Since 1992
----------------------------- ----------------- --------------- ------------- ---------------- -----------------------
<S> <C> <C> <C> <C> <C>
Labor Force 422,800 572,000 648,000 654,000 11.5%
Employment 394,050 535,392 614,952 620,646 12.0%
Unemployment 28,750 36,608 33,048 33,354 3.8%
Unemployment Rate 6.8% 6.4% 5.1% 5.1%
</TABLE>
Source: DRI/McGraw-Hill
The unemployment rate decreased from 1992 to 1994 by 0.4 of a percent. The
current unemployment rate is 5.1 percent, down from 6.8 percent in 1992. By
comparison, unemployment for the State of Nevada is presently 5.0 percent, while
the U.S. unemployment is 5.2 percent.
Nevada is one of the fastest growing states in the country. Due to a number of
factors including lower corporate and personal tax burdens, a lower cost of
doing business and the community's pro-business attitude, Nevada has been ranked
first as the fastest growing economy in the west by the DRI/McGraw Hill Regional
Forecast Summary over the last three years. It is forecasted to maintain that
ranking through 2001.
The MSA's economic vitality is closely related to the visitor industry which
directly provides, at the least, one out of three area jobs. Las Vegas is one of
the nation's favorite vacation destinations. During 1996, 29.7 million people
visited Las Vegas and spent $22.5 billion in the area including gaming revenues.
New developments increase employment opportunities, which in turn allow for
growth in related services.
The City has been striving to diversify its employment base particularly in the
manufacturing, distribution/warehousing and finance, insurance and real estate
(FIRE) sectors. The City forecasts that the greatest percentage increases in job
growth will occur in the non-gaming areas. However, in terms of absolute
numbers, the visitor industry is likely to continue to add the greatest number
of new jobs.
<PAGE>
14
REGIONAL ANALYSIS - LAS VEGAS, NEVADA
This is evident from a review of the top ten employers in Las Vegas provided
below.
LAS VEGAS MSA
MAJOR EMPLOYERS
Company Business Type
- --------------------------------------------------------------------------------
1. MGM Grand Hotel, Casino Operations
2. Mirage Casino-Hotel Hotel, Casino Operations
3. University of Nevada--Las Vegas Education Services
4. Treasure Island at the Mirage Hotel, Casino Operations
5. Caesar's Palace Hotel, Casino Operations
6. Excalibur Hotel & Casino Hotel, Casino Operations
7. Hilton Corporation Hotel, Casino Operations
8. Luxor Hotel & Casino Hotel, Casino Operations
9. Circus Circus Casino Hotel, Casino Operations
10. The Monte Carlo Hotel, Casino Operations
Source: DRI/McGraw-Hill U.S. Markets Review, 1st Qtr. 1997.
Because of the relative importance of the visitor industry to Las Vegas' economy
and to the success of the subject's tradeshow facility, the local gaming market
and the local hotel market will be discussed at length.
<PAGE>
15
REGIONAL ANALYSIS - LAS VEGAS, NEVADA
TRANSPORTATION
Freeways
Las Vegas is served by two major freeways and a number of smaller highways.
Interstate 15 extends north from the east/west 40 freeway through the southern
portion of the state and city and is the primary road link to Los Angeles.
Interstate 215 extends north and south through the central portion of the metro
area and is a branch of the 95 and 93 freeways. State Highways 159 and 160 form
a loop around the western and southern portions of the city. Highway 582 is a
link between Las Vegas and Henderson. And highways 146, 147 and 167 help provide
additional highway circulation to immediate surrounding areas. By the year 2000,
Las Vegas traffic counts are expected to increase by at least 30 percent above
1996 levels. As a result, Clark County is attempting to maintain and upgrade its
roadways through regular improvements.
Airports
The McCarran International Airport has an important role in Clark County's
business and development growth plan. McCarran is ranked the 10th busiest
airport in the United States, accommodating almost 30.5 million travelers in
1996, an estimate of 8.7 percent above 1995 levels. From 1988 through 1994,
total passenger count at the airport increased at a substantial compound annual
growth rate of 8.8 percent.
Since airport traffic is increasing at such rates, Clark County has committed to
spending $450 million in improvements to accommodate for anticipated future
levels of passenger traffic. During 1997 the ticketing lobby was expanded by 150
lineal feet to increase the number of ticketing positions and a small general
aviation runway was expanded to accommodate full-size commercial carriers,
bringing the total number of jet runways to four. In the summer of 1998 the
first 26 gates of a 50 gate "D" terminal expansion will be completed, along with
a baggage handling expansion and new people mover system. Because of its
superlative air service, Las Vegas has an advantage over many other convention
and vacation destinations.
Rail
Las Vegas is accessible via railroad for both freight and passenger service.
Both Union Pacific and Amtrak have lines running into the County and City
connecting Las Vegas with Los Angeles, Phoenix and Salt Lake City.
<PAGE>
16
REGIONAL ANALYSIS - LAS VEGAS, NEVADA
Intercity Bus Lines
A number of bus lines are available in Las Vegas, some of which are the
following: Greyhound, Las Vegas-Tonapah-Reno Stage Line, Ray & Ross, Sun Valley,
Westside Charter Service, Funbus Luxury Travel and the Gray Line Tours. Also
available in the intracity is the Las Vegas Transit System.
CONCLUSION AND TRENDS
Las Vegas continues to be one of the fastest growing cities in the nation. Along
with rapid growth in tourism, the Las Vegas market also continues to expand into
other industries as well. Strong growth in tourism is projected to continue for
the next five years. A pro-business atmosphere and favorable tax climate will
support the growth of professional and service industries at a similar rate.
Employment is strong and will continue to strengthen as the economy diversifies.
<PAGE>
17
THE VISITOR INDUSTRY
THE VISITOR INDUSTRY
Presented in the following subsections are discussions of the three critical
components of the Las Vegas Visitor Industry: The Convention Market, the Gaming
Market and the Hotel Market.
THE CONVENTION MARKET
Due to warm weather, the presence of two major convention centers, an extensive
hotel inventory with comparatively low room rates, affordable airfares and the
appeal of gaming, Las Vegas now hosts more major national conventions and trade
shows than any other destination. Two of the nation's five largest convention
centers are located in Las Vegas: the Las Vegas Convention Center and the Sands
Expo & Convention Center. The Sands Exposition & Convention Center (Sands Expo
Center) is located next to the subject site and boasts 935,000 square feet of
prime exhibit space. In addition to the exhibit space, the Sands Expo Center
also offers 23 meeting rooms totaling 31,400 square feet and a superior location
within one block of "The Strip."
The Las Vegas Convention Center (LVCC) has approximately 1,300,000 square feet
of indoor, finished area broken out as follows: 761,522 square feet of exhibit
space, 149,862 square feet of meeting space, 85,200 square feet of
lobby/registration space, a 14,623 square foot restaurant and 288,793 square
feet of access, circulation and support areas. An expansion broke in July of
1997 to increase exhibit space by 279,000 square feet and to add 42,400 square
feet of meeting space. The expansion is scheduled to be completed by the third
quarter of 1998.
The following table is a ten-year summary of the conventions, attendance and
revenue that have occurred in Las Vegas at the two major centers and in the
city's hotels.
<PAGE>
18
THE VISITOR INDUSTRY
CITYWIDE CONVENTION STATISTICS
<TABLE>
<CAPTION>
Number of Annual Non-Gaming Annual
Year Conventions Attendance Growth Rate Economic Impact Growth Rate
- --------- ------------------ --------------------- ---------------- -------------------------- ----------------
<S> <C> <C> <C> <C> <C>
1987 556 1,677,716 -- $1,197,168,704 --
1988 681 1,702,158 1.5% 1,242,227,536 3.8%
1989 711 1,508,842 -11.4% 1,140,912,624 -8.2%
1990 1,011 1,742,194 15.5% 1,358,243,318 19.1%
1991 1,655 1,794,444 3.0% 1,482,327,551 9.1%
1992 2,199 1,969,435 9.8% 1,693,074,125 14.2%
1993 2,443 2,439,734 23.9% 2,253,526,873 33.1%
1994 2,662 2,684,171 10.0% 3,034,267,004 34.7%
1995 2,826 2,924,879 9.0% 3,359,162,165 10.7%
1996 3,827 3,305,507 13.0% 3,943,105,480 17.4%
</TABLE>
Source: Las Vegas Convention and Visitors Authority, January 1997.
Convention attendance growth and non-gaming economic revenue have increased at
annual compound average growth rates of 7.8 percent and 14.2 percent,
respectively over the last ten years. Growth in attendance and non-gaming impact
was positive in all but one year. The relatively low growth rate in 1991
coincided with the start of a national recession. A significant contributor to
the increase in 1993 was the maturation of the Sands Expo Center and opening of
an expansion at the Las Vegas Convention Center. Through May 1997, attendance at
conventions in Las Vegas increased by 5.1 percent over the same five months of
1996.
Over the past decade the number of new groups coming to Las Vegas has increased
at a compound annual average rate of 28.3 percent per year as depicted in the
following table.
<PAGE>
19
THE VISITOR INDUSTRY
LAS VEGAS CITY-WIDE CONVENTION AND TRADE SHOW SUMMARY
NEW VERSUS REPEAT GROUPS
<TABLE>
<CAPTION>
Calendar Year No. Conventions New Repeat Repeat 5 plus
- ------------------- --------------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
1976 325 38.5% 125 41.5% 135 20.0% 65
1981 515 51.8% 267 32.2% 166 15.9% 82
1986 564 50.0% 282 35.5% 200 14.5% 82
1991 1,655 80.6% 1,334 12.4% 205 7.0% 116
1996 3,827 89.0% 3,406 7.0% 268 3.9% 149
Compound Annual Growth Rates
1976 to 1996 8.6% -- 11.6% -- 2.3% 2.8%
1986 to 1996 21.1% -- 28.3% -- 3.0% 6.2%
1991 to 1996 18.3% -- 20.6% -- 5.5% 5.1%
</TABLE>
Source: Las Vegas Convention and Visitors Authority.
Nearly 90 percent of the groups meeting in Las Vegas during 1996 had never met
there before. In absolute numbers, the number of new groups has doubled in the
past five years (3,406 groups in 1996 versus 1,334 groups in 1986). However,
when expressed as a percentage rate of growth the figure has moderated slightly
to 20.6 percent from a 28.3 percent growth period over the past ten years. Many
of the new groups are being retained, as demonstrated by the consistent growth
in the number of repeat groups. Las Vegas has been very successful in attracting
and retaining new group business.
Statistics from the Las Vegas Convention and Visitors Authority (LVCVA) indicate
that through July 1997, attendance at conventions in Las Vegas increased by 3.6
percent over the first seven months of 1996. Future growth will be facilitated
by the 1.0 million square feet of meeting space now under construction at the
LVCC, the Venetian, the MGM Grand, Caesar's, Bellagio, Paris and Project
Paradise.
<PAGE>
20
THE VISITOR INDUSTRY
GAMING MARKET OVERVIEW
Las Vegas tourism is driven primarily by its gaming industry. Legalized in
Nevada in 1931, gaming distinguished this destination from every other in the
country (outside of Nevada) until its recent spread to other parts of the
nation. Today, Las Vegas' gaming revenues comprise just over 40 percent of the
total national gaming revenues. The legalization of gambling in many states has
not had a negative impact on gaming revenues in the state of Nevada, Clark
County or Las Vegas. In fact, gaming revenues in Clark County have steadily
increased over the years as the following chart shows.
CLARK COUNTY
GROSS GAMING REVENUE
Gross Percentage
- ---------------------- ------------------------ -------------------
Year Gaming Change
Revenues
- ---------------------- ------------------------ -------------------
1987 $2,789,336,000 --
1988 3,136,901,000 12.5%
1989 3,430,851,000 9.4%
1990 4,104,001,000 19.6%
1991 4,152,407,000 1.2%
1992 4,381,710,000 5.5%
1993 4,727,424,000 7.9%
1994 5,430,651,000 14.9%
1995 5,717,567,000 5.3%
1996 5,783,735,000 1.2%
Compound Annual 8.4%
Growth
Source: Las Vegas Convention and Visitors Authority, January 1997.
Through July 1997, gaming revenues in Clark County had increased by 4.6 percent
over the same seven months of 1996.
<PAGE>
21
THE VISITOR INDUSTRY
The proliferation of gaming outside of Las Vegas, particularly in the Southern
and Midwestern States has promoted the social acceptance of gaming in these new
markets. Due to a conscious shift in market orientation, Las Vegas has shaken
off its former reputation as the vice capital of the country and has emerged as
a mainstream destination, billing itself as America's entertainment superstore.
In a 1996 survey by the American Society of Travel Agents, Las Vegas unseated
Orlando as the Number 1 tourist destination. The "must see" quality of the
newest mega resorts has enabled Clark County gaming revenues to increase at a
compound average annual growth rate of 8.4 percent since 1987.
The following table presents gaming revenue per area in Las Vegas and contrasts
performance in 1996 with 1995. Las Vegas revenues appear to have reached a level
of stabilization, and if further growth in revenues is going to occur, casino
operators believe that the number of guest rooms and gaming facilities must
increase.
LAS VEGAS
GAMING REVENUE BY AREA
County 1995 1996 Change
- ------------- ------------------------------------------------- ----------------
Clark County $5,717,567,000 $5,783,735,000 1.2%
Las Vegas MSA 4,557,331,000 4,618,674,000 1.3%
Strip 3,610,477,000 3,579,673,000 -0.9%
Downtown 641,853,000 678,852,000 5.8%
Boulder Strip 305,001,000 360,149,000 18.1%
Source: Las Vegas Convention and Visitors Authority, January 1997.
The decline in 1996 for "Strip" gaming revenues was caused almost entirely by an
isolated double digit decline in the month of November. Through October, growth
was positive. December 1996 and January 1997 revenues also showed increases.
Local observers attribute the decline to 1) a major swing in Baccarat play and
2) erroneous odds making on two nationally televised prize fights. There are a
handful of international Baccarat players that can affect annual gaming revenues
at any one casino by 30 to 40 percent.
Indicative of the changing profile of the Las Vegas visitor is the gaming
revenue on a per occupied room night basis. This is presented in the following
table.
<PAGE>
22
THE VISITOR INDUSTRY
CLARK COUNTY
GAMING REVENUE PER HOTEL ROOM NIGHT
Estimated Room
Gaming Revenue Nights Occupied Revenue Per Occupied
Year (in 000's) (in 000's) Night
- ---------------------------------------------------------- ---------------------
1991 $4,152,407 22,530 $184
1992 $4,381,710 23,430 $187
1993 $4,727,424 24,617 $192
1994 $5,430,651 28,208 $193
1995 $5,717,567 28,695 $199
1996 $5,783,735 30,638 $189
Source: Las Vegas Convention and Visitors Authority, January 1997.
The rate of growth in gaming receipts, when expressed on a per occupied room
basis, is not keeping pace with inflation or the cost to construct many of these
new highly themed mega-resorts. Even if the decline in 1996 is omitted, the
compound annual rate of growth was only 2.0 percent per year between 1991 and
1995. If 1996 is indicative of the new market's profile, the rate of growth in
gaming revenues per occupied room has been only 0.5 percent per year. Hotel room
revenues, food and beverage revenues, and retail sales have, however, been
increasing at rates faster than inflation. From the standpoint of investors and
the lending community, this diversification is a positive change.
It is expected that Las Vegas will continue to attract a broader profile of
visitors in the future as more themed hotels, restaurants and retail centers are
developed. Visitor expenditures will be consumed by many attractions other than
gaming and thus, gaming revenues per occupied room night will likely flatten or
decrease consistent with the recent past.
Through July 1997, the gaming revenue per occupied room night declined to $188
from $191 for the same period of the previous year.
<PAGE>
23
THE VISITOR INDUSTRY
LODGING MARKET OVERVIEW
The Las Vegas lodging market has experienced unprecedented growth during the
1980's, as well as an evolution of the concept of the casino/hotel.
LAS VEGAS AREA
HOTEL/MOTEL INVENTORY,
ROOMS AVAILABLE AS OF DECEMBER 31
Number of Percentage
- ---------- ------------------------------ ---------------------------
Year Hotel/Motel Rooms Change
- ---------- ------------------------------ ---------------------------
1987 58,474 --
1988 61,394 5.0%
1989 67,391 9.8%
1990 73,730 9.4%
1991 76,879 4.3%
1992 76,523 -0.5%
1993 86,053 12.5%
1994 88,560 2.9%
1995 90,046 1.7%
1996 99,072 10.0%
Source: Las Vegas Convention and Visitors Authority, January 1997.
Over the ten year period, the rooms inventory in Las Vegas grew at a compound
annual rate of 6.0 percent. Most recently the 1,500 room Stratosphere Hotel
opened in April, 1996 followed by the 3,014 room Monte Carlo in June. These two
properties and additions to the Luxor and the Rio are largely responsible for
the significant (10.0) percent increase in room inventory as of December 31 when
1996 is compared to 1995. In addition, the New York-New York Hotel and Casino
added another 2,035 rooms in January, 1997. The Las Vegas lodging market
contained 101,106 hotel and motel rooms as of January 3, 1997. This combined
with a number of other openings and expansions during 1997 have caused the
average supply during the first seven months of 1997 to be 10.5 percent greater
than in 1996.
<PAGE>
24
THE VISITOR INDUSTRY
HISTORICAL PERFORMANCE
The historical occupancy performance of the aggregate Las Vegas hotel and motel
market from 1987 through 1996 is presented in the following table.
LAS VEGAS METRO-WIDE
HISTORICAL OCCUPANCY PERFORMANCE
<TABLE>
<CAPTION>
Hotel Motel City-Wide
Year Occupancy Performance Occupancy Performance Occupancy Percentage
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1987 87.0% 74.0% 83.4%
1988 89.3% 73.7% 85.1%
1989 89.8% 72.5% 85.2%
1990 89.1% 69.8% 84.7%
1991 85.2% 62.6% 80.3%
1992 88.8% 66.1% 83.9%
1993 92.6% 69.7% 87.6%
1994 92.6% 73.2% 89.0%
1995 91.4% 72.4% 88.0%
1996 93.4% 75.7% 90.4%
</TABLE>
Source: Las Vegas Convention and Visitors Authority, January 1997.
Despite the pace of additions, hotel and motel occupancy rates improved between
1987 and 1996. The pace of growth in demand has outstripped the rate of growth
in supply. However, through July 31, 1997, the overall metro-wide occupancy rate
has declined from 91.9 percent to 87.9 percent. This is attributable to the
recent increases in supply. According to statistics from the Convention and
Visitors Bureau, demand increased by 6.8 percent through July whereas supply
increased by 10.5 percent. Given the 6.8 percent growth rate in demand, we
believe that talk of Las Vegas having reached its
<PAGE>
25
THE VISITOR INDUSTRY
saturation point is premature. In virtually any other community, a 6.8 percent
growth rate qualifies as "booming" demand. The market appears to be experiencing
a lag between the rate of growth in supply and the rate of growth in demand. The
rate of growth in supply will fall off slightly in the second half of 1997. The
only significant addition to open between now and the third quarter of 1998 is a
1,200 room expansion to Caesar's Palace.
The Las Vegas lodging market's performance is particularly successful when
contrasted against the performance of hotels and motels on a national basis.
LAS VEGAS
OCCUPANCY VS. NATIONAL AVERAGE
Year National Occupancy Las Vegas Occupancy Net Difference
- ---------- ------------------------ ------------------------- ------------------
1994 65.2% 89.0% 36.5%
1995 65.5% 88.0% 34.4%
1996 65.2% 90.4% 25.2%
Source: Las Vegas Convention and Visitors Authority.
As is evidenced by the growth in demand, these properties, which comprise the
majority of the recent additions to the supply, have demonstrated the strong
ability to induce significant demand into the Las Vegas market. These hotels,
through their themed attractions and extensive national and international
marketing efforts, have greatly broadened the potential Las Vegas visitor
market.
The cost of constructing these new mega-resorts is significant. As indicated in
the previous table on gaming revenue per occupied room night, the increased
levels of capital expenditures are not translating into higher gaming revenue on
a per unit (occupied room) basis. Thus, mega-resort operators are recognizing
that the increased costs must be borne by improved profitability in the rooms,
food and beverage, and entertainment departments. Pricing these items at "below
cost" can no longer be recovered by increased gaming revenues.
According to the Las Vegas Convention and Visitors Bureau, the average daily
room rate in Las Vegas is approximately $45. This figure factors complimentary
rooms in at zero revenue, when in fact the casino departments are required to
"buy" the rooms from the hotel rooms department at a predetermined rate. This
$45 rate is based on intercept interviews and not on any total room revenue or
transient occupancy tax figures. We consider it unreliable and meaningless.
<PAGE>
26
THE VISITOR INDUSTRY
More reliable data is available from the Nevada Gaming Abstract. For Clark
County, the 132 gaming properties reported an average daily room rate of $61.27
in fiscal 1995/96. These properties accounted for 83,067 rooms or 93 percent of
the inventory estimated by the Convention and Visitors Bureau as 89,300 as of
December 31, 1995. (This would be the mid-point of the fiscal year and would be
less likely to overstate the average number of rooms available during the year.
For the 40 Strip Casino hotels with gaming revenues in excess of $1,000,000, the
average daily room rate in fiscal 1995/96 was $74.32. For the 19 largest casino
hotels which had gaming revenues of $72,000,000 and over, the average daily room
rate was $79.19 in fiscal 1995/96. Presented in the following table is a summary
of the growth in the average daily room rate for this most relevant category.
AVERAGE DAILY ROOM RATES FOR STRIP HOTELS
WITH $72.0 M PLUS IN GAMING REVENUES
Average Daily Percent
Fiscal Year Rate Change
- ----------------------------------- ----------------- --------- ----------------
1993/94 $66.20 N/A
1994/95 $74.61 12.7%
1995/96 $79.19 6.1%
Compound Annual Growth 9.4%
While growing at a rate that is roughly three times that of inflation, these
rates were still well below those at other major convention destinations. We
compiled a survey sample of the six other key trade show destinations, matching
the number of hotel rooms surveyed to each city's percentage contribution to the
trade show market. For the sample of headquarters hotels from these cities, the
average daily room rate in calendar 1996 was $139.25, an increase of 10.0
percent over 1995. We prepared a second survey of emerging sun-belt convention
destinations, to examine room rates in cities that are expanding their
Convention Centers - San Antonio, San Diego, and San Francisco. The average rate
for large, headquarters hotels in these cities was $140.42 and had grown 6.5
percent from the previous year.
Part of the reason that Las Vegas' rates are so low is that most of the casino
hotels have not constructed a material amount of meeting space on-site. For
example the 3,000 room Monte Carlo has only 35,000 square feet of meeting space.
With little commercial demand, these hotels mostly rely on the Las Vegas
convention center and the Sands Expo Center for mid-week convention businesses.
These
<PAGE>
27
THE VISITOR INDUSTRY
facilities do not generate demand every day, and so the "under equipped" hotels
must fill-in with very low-rated tour and travel business.
The recent imbalance between the rates of growth in supply and demand in 1997
has resulted in lower average daily room rates during the summer months. Summer
is traditionally the lowest rated (priced) season because of the national
decline in convention activity and the softening of leisure demand due to the
high temperatures. It should not be surprising that the temporary imbalance in
supply and demand is being felt most during the summer months, and that it is
being felt most in room rates. With the Fall seasonal increase in convention
activity, more temperate weather, and the deceleration in the rate of supply
growth, the current discounting should abate. Further, the discounting has
affected the bottom of the market most severely. During the Second quarter of
1997, the Mirage, the Treasure Island and the MGM Grand were all able to
maintain or improve their average daily rates.
The room rates in these competitive cities are likely to continue to show real
growth in the near term due to the current shortage of rooms. A January 3, 1997
article in U.S.A. Today titled "Hotel Shortage Hits Big Cities" indicated that
hoteliers are forgoing the discounted group business associated with major
conventions in favor of higher rated commercial demand. The City of Chicago
recently lost its bid to host a major Tradeshow 200 event, the Pittcon
Scientific Convention, because of an inability to procure a 26,000-room block
for exhibitors and attendees. Rising rates and availability issues in the
competitive cities bode well for the Las Vegas hotel industry, which could
accommodate this room block in ten hotels with room to spare.
The fundamentals for continued growth are favorable. The diversification of its
market away from the core gamblers' market to "Middle America" continues to
attract first-time visitors. And while the number of international visitors is
small relative to the total, the potential for growth from this market is
immense. Europeans in particular are awed by the scale and spectacle of the
mega-resorts and are adding Las Vegas to the Western tour circuit that
previously included only Los Angeles, the Grand Canyon, Yosemite and San
Francisco.
Presented in the following chart is a summary of the states and countries of
origin for visitors to Las Vegas between 1990 and 1996.
<PAGE>
28
THE VISITOR INDUSTRY
ORIGIN OF VISITORS BY PLACE OF RESIDENCE
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996
----------- ---------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S.
Total 90% 88% 85% 85% 86% 87% 82%
Eastern States 9% 9% 10% 8% 9% 10% 9%
Southern States 13% 14% 13% 11% 12% 12% 12%
Midwestern States 17% 15% 17% 17% 14% 13% 15%
Western States 51% 48% 45% 49% 50% 51% 46%
California 33% 33% 30% 32% 33% 35% 30%
Arizona 4% 5% 4% 6% 5% 3% 4%
Other 14% 11% 10% 11% 12% 12% 12%
No Zip Code Given 0% 1% 1% 0% 1% 1% 0%
Foreign
Total 10% 12% 15% 15% 14% 13% 18%
Canada 4% 5% 6% 6% 6% 5% --
Germany -- 2% 3% 3% 4% 1% --
England 2% 2% 2% 2% 2% 3% --
Other European 2% 2% 3% 2% 2% 2% --
Other Non-European 2% 2% 2% 2% 2% 2% --
</TABLE>
Source: Las Vegas Convention and Visitors Bureau
The percentage of foreign visitation previously peaked in 1992 and 1993, then
declined with a resurgence in the percentage of visitors from California. In
1996, the percentage of foreign visitation spiked upward again. No detail was
provided in the most recent publication that would indicate the countries of
origin that contributed to the gain. The table also shows an uneven pattern for
California which has consistently been the largest single market for Las Vegas.
The effects of California's restructuring are reflected in the decline in
percentage contributions in 1992; its recovery pattern is evidenced from the
gradual increase until 1995. The decline in the percentage contribution in 1996
is not a reflection of worsening economic conditions in this source market. San
Diego and Orange Counties finally recovered the jobs lost since the 1989
employment peak in mid-to-late-1996. Los Angeles County is expected to fully
regain its lost jobs by 1997. Rather, we believe that the percentage
<PAGE>
29
THE VISITOR INDUSTRY
decline from California in 1996 is related to the high levels of repeat
visitation from this market, and the absence of any openings of new "must-see"
attractions in 1996. What is noteworthy about the source market data is that Las
Vegas' tremendous growth in recent years has been achieved in spite of a severe
and prolonged recession in its primary source market.
California's increasing ethnic diversity bodes well for the gaming industry in
Las Vegas. According to surveys conducted for the Travel Industry Association of
America (TIAA) and presented at the 1997 Outlook for Travel and Tourism, the
propensity to take gambling vacations is greater among Hispanic and Asian
Americans than among Anglo Americans.
While there is no data in the TIAA report on the number of Hispanic Americans
that have the wherewithal to vacation, the numbers of this ethnic group that do
vacation stay longer than average (5.1 versus 4.5 nights) and spend considerably
more per trip ($559 versus $421). Asian Americans spend the highest amount of
any group, at $678 per trip.
Presented in the following table is evidence of California's broader national
demographic trends.
ETHNICITY OF VISITORS TO LAS VEGAS
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996
----------- ------------ ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ethnicity
White 85% 83% 85% 85% 80% 79% 81%
African American 6% 6% 4% 4% 7% 7% 6%
Asian/Asian American 4% 5% 5% 5% 7% 7% 7%
Hispanic/Latino 4% 6% 5% 5% 6% 6% 5%
Other 1% 0% 1% 0% 1% 1% 1%
</TABLE>
Source: Las Vegas Convention and Visitors Bureau
ADDITIONS TO THE COMPETITIVE SUPPLY
The following three tables present a construction report summary of the Hotels
and Casinos that may be developed in Las Vegas over the next three years.
<PAGE>
30
THE VISITOR INDUSTRY
LAS VEGAS
HOTEL AND CASINO CONSTRUCTION REPORT
1997 OPENINGS
Project Location Rooms
- ----------------------------- --------------------------------------------------
New York-New York Las Vegas Blvd S. & Tropicana 2,035
Rio Suites Expansion 3700 W. Flamingo Rd. 1,025
Budget Suites of America 2219 N. Rancho Drive 704
Hawthorne Suites Duke Ellington Way & Tropicana 282
Harrah's Las Vegas 3475 Las Vegas Blvd So. 986
Budget Suites of America 3655 West Tropicana 480
Sunset Station Sunset Rd. & Stephanie, Henderson 450
The Desert Inn Renovation Las Vegas Boulevard (106)
Caesars Palace Expansion 3570 Las Vegas Blvd S. 1,200
Courtyard by Marriott Green Valley Parkway, Henderson 154
Total: 7,210
*Bold face type indicates that a property is likely to be competitive with a
high-end mega-casino resort.
Source: Las Vegas Convention and Visitors Authority, July 1997, and Landauer
Associates.
All but two of the above hotels opened in the first half of 1997.
Quarterly reports filed by the owners of New York New York indicate it is
exceeding developer expectations. Its owners have purchased a 2.06 acre site in
order to expand this project. This is discussed in the Land Sales Analysis.
<PAGE>
31
THE VISITOR INDUSTRY
LAS VEGAS
HOTEL AND CASINO CONSTRUCTION REPORT CONTINUED
1998 OPENINGS
Project Location Rooms
- --------------------------------------------------------------------------------
Marriott Suites Convention Center Dr. 280
AmeriSuites Paradise Rd. & Harmon Ave. 200
Residence Inn by Marriott Green Valley Pkwy. & Sunset Rd. 126
Bellagio (Mirage Resorts) 3650 Las Vegas Blvd So. 3,000
Residence Inn by Marriott Paradise Rd. & Flamingo Rd. 300
**Polo Towers Time Share Las Vegas Blvd. So & Harmon 199
**Resort at Summerlin Summerlin Pkwy. & Rampart Blvd. 307
**McCarron Plaza Suites Las Vegas Blvd. & I-215 344
**Doubletree Hotel Warm Springs & Pollack 200
Total: 4,956
**Not Yet Under Construction
Source: Las Vegas Convention and Visitors Authority, July 1997 and
Landauer Associates.
<PAGE>
32
THE VISITOR INDUSTRY
LAS VEGAS
HOTEL AND CASINO CONSTRUCTION REPORT CONT.
1999 OPENINGS
Project Location Rooms
- --------------------------------------------------------------------------------
Project Paradise Las Vegas Blvd. S. of Russell Rd. 3,800
Subject Venetian Resort 3355 Las Vegas Blvd S. 3,100
Paris Las Vegas Blvd S. 3,000
**Ritz Carlton Mountain Spa
Resort Rainbow Blvd. & Iron Mountain Rd. 526
**Four Seasons Resort Las Vegas Blvd. S. of Russell Rd. 400
Total: 10,826
** Not Yet Under Construction
Source: Las Vegas Convention and Visitors Authority, July 1997.
and Landauer Associates, Inc.
Of the above properties that are not presently under construction, it is
unlikely that all will be built. For example, the 3,200 room Planet Hollywood
project was recently delayed by two years and no longer appears on the
Convention and Visitors' Authority list. Circus Circus is receiving a great deal
of criticism from major institutional investors for its rapid rooms expansion on
Las Vegas Boulevard. We question whether these same investors will endorse the
construction of an entirely different quality development such as a Four Seasons
at this time. The Ritz-Carlton Mountain Spa has no financing and is currently in
the market for both debt and equity investment.
CONCLUSION
The Las Vegas lodging market has already absorbed the room expansions of 1993
and 1994, the largest expansions in its history, and is currently operating at
higher occupancy levels than those prior to the expansions. Over the long term,
average daily room rates are likely to grow at a faster rate than inflation due
to the "resort" versus purely "casino" market orientation of the new properties.
At present, there are 27,520 hotel and motel rooms in Las Vegas either under
construction or proposed through 1999. Of these, a significant number will
likely be postponed or will not be built. Based on historical performance, the
Las Vegas lodging market appears capable of absorbing a significant number of
new rooms. During the second quarter of 1997, the Mirage, Treasure Island and
MGM
<PAGE>
33
THE VISITOR INDUSTRY
Grand were all able to maintain or improve their average daily rates. In the
third quarter of 1997, Mirage Resorts increased its net income by 12 percent,
led by the Mirage, which posted a 19 percent increase in cash flow. Rio reported
an 81 percent increase in earnings due to the rapid market acceptance of its
expansion. Analyst Todd Jordan of Raymond James and Associates said that Rio was
able to increase room rates by about 10 to 15 percent. Analyst Naomi Talish of
Merrill Lynch and Co. said that the MGM Grand cut rates by about 5 percent for
the third quarter but was running at 100 percent occupancy. The gaming divisions
of Hilton and ITT have or are expected to report strong third quarter
performance, due mainly to the strength of operations in Las Vegas. Only Circus
Circus appears to be suffering. Earnings per share were expected to decline 15
percent despite their recent rooms expansions. The demand fundamentals are good
and the Convention Center expansion and airport expansion will facilitate
further growth. Our conclusion is that the Las Vegas lodging market will
continue to generate sufficient lodging demand to maintain occupancy levels in
the high 80's and low 90's.
<PAGE>
34
NEIGHBORHOOD ANALYSIS
NEIGHBORHOOD ANALYSIS
The subject Property is located in the Strip neighborhood of Las Vegas, more
specifically in the most desirable portion of the Strip which extends from
Spring Mountain Road /Sands Drive in the north to Tropicana in the south.
Up until the recent bankruptcy of the Stratosphere, a casino hotel's site on the
Strip was not considered paramount to success. In fact, the success of two
non-Strip properties, the Hard Rock Cafe Hotel and Casino and the Rio Hotel and
Casino, appeared to indicate that a Strip location was not even crucial for
success. It should be noted that the Hard Rock has only 348 hotel rooms and that
its chain-branded concept and Paradise Road location has not yet been tested
with a 2,000 room inventory. Initially the Rio Hotel and Casino started with 549
hotel rooms. Its concept, an outsize guest room with a large seating area, was
perceived of as a good value. Through superlative management, this property,
located on the "wrong" side of the I-15 Freeway, was able to garner an
impressive array of Zagat awards for "best room", "best food" and "best
service".
For a while, it appeared that as long as the casino hotel was in Las Vegas, it
was bound to be a success. In late December, 1995, a few months before the first
phase of the Stratosphere project was completed, a public offering raised $78.0
million to finance the second phase of the project and was oversubscribed in a
matter of weeks. While mechanical problems with some of the tower's thrill rides
and inadequate vertical lift may have contributed to its poor market acceptance,
the primary reason for its underperforming projections and subsequent bankruptcy
is attributed to its location. Grand Casinos, Inc., which bought out the
project's developer during the "anywhere in Vegas" euphoria, acknowledges that
the Stratosphere is "two blocks north of success".
A January 27, 1997 article in the Las Vegas Business Press titled "High Tech
Future for the Strip" indicated that "the limits of the Strip may be Russell
Road at the south and Sahara Avenue in the north; lenders have a tendency to
avoid risky areas. And risky on the Strip means anywhere in the vicinity of
Stratosphere Tower."
The fall-out of the Stratosphere bankruptcy has caused problems even for
developers attempting projects south of Sahara. A New Jersey based horse racing
concern, ITB, which bought a 20-acre parcel on the Strip just north of Riviera
in February, 1996 was stymied in its attempts to finance a major casino resort
and has announced that it will renovate the El Rancho rather than redevelop the
site. A second parcel on the northwest corner of Sahara and the Strip fell out
of escrow earlier this year due to the prospective developer's inability to
obtain financing.
<PAGE>
35
NEIGHBORHOOD ANALYSIS
Numerous buyers who are active in the market confirmed that the core and most
desirable area of the Strip is located between Spring Mountain/Sands Boulevard
and Tropicana. The subject property is at the northern end of this core area,
across from two of the most successful casino resorts in Las Vegas, the Mirage
and Treasure Island. According to the same Las Vegas Business Press article
". . .the next best thing to being a Mirage is to be next to the Mirage. That
means that companies will build near popular locations like Spring Mountain and
the Strip."
Land prices in this core area will present a barrier to many developers. The few
blocks at either end of this core area appear to be costly locations, but would
be expected to be priced well below the core area. Judging from the interest in
acquiring The Frontier for redevelopment, the area for which financing could
likely be obtained for a new mega resort development is somewhat larger, likely
marked by Convention Center Drive on the North and Russell Road on the south.
Opportunities for new development on the south end of this area are somewhat
limited. Circus Circus controls the west side of the Strip between Tropicana and
Russell Road. The east side of the Strip consists of a number of small parcels
that back up to the airport. With each block one moves south, the depth and
utility of these east side parcels decreases. And, both sides of the Strip in
this southerly area are subject to a veritable "wildcard" in the form of FAA
approvals. While the FAA has the right to review all plans for buildings over 9
stories tall in Clark County, approvals for the conditional use permit height
variances are by no means certain in these areas near the airport. Circus
Circus' Project Paradise Development was delayed by several months due to its
application for a variance to permit a 450 foot height.
With the exception of the Circus Circus development in this southerly area, the
majority of the new mega-resort developments can be expected to occur as
redevelopments in the core and northerly areas of the Strip.
IMMEDIATE ENVIRONS
The immediate neighborhood surrounding the subject contains uses that are geared
to Las Vegas' 30 million visitors per year.
To The North
To the north of the Lido section of the larger subject assemblage is Sands
Avenue/ Spring Mountain Road. A "hold-out" to the assemblage occupies
approximately 2.0 acres on the corner of their intersection with the Strip. It
is possible that this hold-out, a two-story Vagabond motel and one-story retail
building could be replaced with a mid-rise structure but it is unlikely that the
developer of
<PAGE>
36
NEIGHBORHOOD ANALYSIS
such a non-gaming facility could afford to pay a market rate for the site. (In
order to obtain a non-restricted gaming license, state law requires that a
casino provide a minimum of 200 rooms.)
North, across Sands Avenue is excess land belonging to the Desert Inn upon which
ITT Sheraton plans to build a Planet Hollywood Casino hotel. This 3,200-room
highly-themed project has been postponed by two years with the hostile take-over
attempt launched by Hilton (and Hilton has vowed not to go forward with the
project because of the costliness of licensing the Planet Hollywood name).
However, this site is a likely candidate for redevelopment. In the meantime, the
views to the north will be of the Desert Inn Golf Course and Desert Inn Hotel
which is currently undergoing a $190,000,000 renovation.
To the East
To the immediate east of the Venetian site is the Sands Exposition and
Convention Center, an approximately one million square foot tradeshow and
convention venue. This facility is a significant demand generator for hotel
guests, gamblers, restaurant patrons and retail customers. Beyond the Expo and
Convention Center is Koval Lane and a multi-family residential development. The
Las Vegas Convention Center is approximately two miles to the northeast.
To the South
Immediately South of the subject is Harrah's 35-story hotel tower and one of its
parking structures, and, fronting on the Strip, the Casino Royale. This small
free-standing casino pre-dates the minimum hotel room requirement and is
equivalent to a two-story structure. With only 3.23 acres, it is unlikely that
this parcel could be redeveloped to its highest and best use without being
assembled by the subject or Harrah's to the south.
To the West
Located to the West of the Subject site is the Las Vegas Strip, the Casino
Royale and Rosewood Grill restaurant. The owners of the Rosewood Grill
restaurant declined to sell their property to the Sands current owner. This
parcel, with 100 feet of frontage on the strip and a depth averaging 304 feet,
provides a partial separation of the Venetian and Lido project sites. This 0.64
acre site is a low density use that is unlikely ever to be expanded to more than
its current two stories. The site plan for the Venetian (Phase I) provides for
approximately 490 feet of frontage on Las Vegas Boulevard South (the Strip). On
the opposite side of the Strip due West, is the Mirage Resort, a major local
attraction. The more northerly Lido site will have 480 feet of frontage on the
Strip. To the northwest is the Treasure Island Resort, also a major local "must
see." The west facing hotel rooms in the
<PAGE>
37
NEIGHBORHOOD ANALYSIS
Venetian Resort will have unparalleled views of the Volcano eruptions on the
Mirage's front lawn. Many will also have views of the pirate ship battle in
front of Treasure Island as will the west facing rooms of the Lido. Due to the
fact that both of the Mirage Resorts' attractions were designed to draw people
in from the street, the views from the subject will be better than from either
of the two "hosting" resorts for the same reason that a theater's loge seating
provides better views than from backstage.
To the northwest across from the intersection of Sands Avenue and the Strip, the
name of the east-west street changes to Spring Mountain. On the northwest corner
is one of Las Vegas' largest malls, the Fashion Show Mall. This mall is anchored
by a diverse mix of major department stores: Neiman Marcus, Saks Fifth Ave,
Robinson's May, Macy's and Dillards. The roster of in-line stores is very
diverse as well to have the broadest market appeal. These stores run the gamut
from Bally and Luis Vuitton to Miller's Outpost and Casual Corner. Because of
the success of this facility and location, an expansion is contemplated. A
recent Las Vegas Business Press article indicates that the sales per square foot
at this mall approximate $500.
CONCLUSION
The subject's larger neighborhood, the Las Vegas Strip, is the premier location
for casino hotel development. The subject site enjoys a very good location
within its neighborhood due to its location within the core area extending from
Spring Mountain/Sands to Tropicana. The proximity of the Sands Expo Center, and
the views it will offer of two of Las Vegas' major attractions should enable a
hotel on this site to avoid much of the low-rated tour and travel demand that
other, more remote casino hotels rely on mid-week, so as to achieve significant
room rate premiums.
<PAGE>
38
SITE ANALYSIS
SITE ANALYSIS
PHYSICAL DESCRIPTION
Location
The subject property is located in the most desirable portion of the Strip
neighborhood of Las Vegas, Clark County, Nevada. The site is located
approximately 350 feet south of the intersection of Spring Mountain Road/Sands
Avenue with the Strip, between Las Vegas Boulevard South to the west and the
Sands Expo Center to the east.
Shape and Dimension
The subject is an irregularly shaped parcel. Its 970 feet of frontage along Las
Vegas Boulevard South is interrupted by one small narrow restaurant site with
100 feet of frontage. It has approximately 60 feet of frontage along Sands
Avenue. After the boundary line adjustment, as described earlier, the site is to
contain a gross area of approximately 44.5 acres or approximately 1,940,270
square feet. Please refer to the proposed parcel map on the facing page.
To determine the exact area of the subject parcel it is necessary to add the
site area of the Tam O'Shanter Motel as follows:
Phase I 1,344,378 S.F.
Phase II 524,533
Tam O'Shanter site 71,660
---------
Net Site area for Lido and Venetian Sites 1,940,571 S.F.
Expressed in Acres 44.55
The Tam O'Shanter site is currently held under separate ownership (Silver State
Realty Trust) and is currently developed with an interim motel use. This smaller
site is identified for tax purposes as 162-016-202-006.
Of these, the Venetian site is to contain 30.9 acre (rounded) comprised of
approximately 28.1 acres in what is currently tax plat 162-016-301-001 and 2.8
acres in the southwestern corner of tax plat 162-016-202-008. The 13.7 acre
(rounded) Lido site is comprised of 12.0 acres of tax plat 162-016-202-008 and
entirety (1.7 acres) of tax plat 162-016-202-006.
<PAGE>
39
SITE ANALYSIS
[SANDS/VENETIAN PHASE MAP OMITTED]
<PAGE>
40
SITE ANALYSIS
Topography
Prior to the commencement of excavations on April 21, 1997, the site was mostly
level and situated at street grade.
Environment and Soil
A soil report was not available for review. The site was previously improved in
the 1950's, 60's and 70's with the Sands Hotel. When it was demolished, all
asbestos was removed as were all underground storage tanks. Once excavations
began however, some contaminated water and soil were found. A letter from
Converse Environmental Consultants Southwest, Inc. dated August 7, 1997
indicates that "this soil contamination is relatively immobile and will become
more so as soon as the new buildings are constructed above it. If no human
intervention is taken to remediate the soil at an accelerated pace, the soil
will likely naturally degrade by biological attenuation over the next 15 to 30
years."
The contaminated groundwater is being treated with an on-site filtering process
and is being released into the storm drains. A permanent "dewatering" system
will be constructed as part of the physical plant. According to Converse, "the
length of time it will take to remediate the contaminated groundwater is
unknown; however an estimate can be made of 10 to 15 years to remediate the
aquifer". The cost of this dewatering is presently $5,600 per month. It is
possible that the permanent facility may be less expensive to operate. However,
for the purposes of this appraisal, we have assumed that this cost continues for
15 years. To determine the net present value of this cost, the annual cost of
$67,200 has been discounted back at a safe rate of 8.0 percent. The net present
value of the ongoing mitigation is $575,200. To this we have added a 20 percent
premium for ongoing consulting and supervision, which increases the cost of
mitigation to approximately $700,000.
Numerous surrounding improvements are of very dense highrise construction,
suggesting that soils are of adequate loadbearing capacity to support
improvements which are consistent with the highest and best use of the property.
No signs of soil problems were noted in our inspection.
Because it is located in such an urbanized area, we have also assumed that the
site is free of any desert tortoise environmental issues.
Access
The Sands hotel had direct access from both north- and south-bound traffic on
Las Vegas Boulevard South. The site also has access from both east- and
west-bound traffic along Sands Avenue. While we have not been provided with a
site plan showing the specific curb cuts, we have assumed that the
<PAGE>
41
SITE ANALYSIS
subject will share a traffic light on Las Vegas Boulevard South with the Mirage
Resort, which is due west.
Utilities
All municipal utilities and services necessary to support the subject are in
service and include water, sewer, electrical, gas and telephone.
Streets
Las Vegas Boulevard South extends along the western border of the
property. It is a publicly dedicated right-of-way consisting of six lanes
traveling north and south with a center turn lane and median. Las Vegas
Boulevard South is improved with asphalt paving, concrete curbs, gutters,
sidewalks, street lighting, and has a width of approximately 100 feet. Las
Vegas Boulevard extends north into the city of Las Vegas.
Sands Avenue meets the subject at the eastern border of the property. It
is a publicly dedicated right-of-way consisting of four lanes and a center
turning lane traveling east and west, changing names at Las Vegas
Boulevard to Spring Mountain Road. Sands Avenue is improved with asphalt
paving, concrete curbs and sidewalks in front of the subject, and a gravel
shoulder opposite the entrance to the subject. At Spring Mountain Road, it
provides northbound access and southbound egress from I-15. Arrivals from
the South (Los Angeles) would likely exit I-15 at Flamingo, to the south
of the subject. Sands Avenue continues east to Paradise Road, the
neighborhood's second north-south arterial and the generally less
congested one. Airport arrivals would be equally as likely to use Paradise
Road and to avoid I-15 and the Strip.
LEGAL CHARACTERISTICS
Zoning
The subject is zoned H-1 (Limit Resort and Apartment District), as designated by
Clark County, Nevada. The purpose of the H-1 district is to provide areas for
hotel and/or apartment development. The building standards for the H-1 zone are
summarized as follows:
<PAGE>
42
SITE ANALYSIS
FAR (Floor Area Ratio) No minimum or maximum stated.
Building Height Limit 100 feet or higher with a conditional use
permit.
Building Setbacks
Front: 10 feet.
Side: 5 feet plus one foot for every story above
40 feet.
Rear: none.
Site Coverage 60 percent.
Parking Requirements Guest room parking requirements:
1.0 spaces for each guest room for each room
up to 500 rooms.
0.5 spaces for each guest room from 501 to
1,000 rooms.
0.25 spaces for each guest room above 1,001
rooms.
Non guest room, public area parking
requirements:
20 spaces for each 1,000 square feet for the
first 40,000 square feet of floor space.
10 spaces for each 1,000 square feet from
40,001 square feet to 100,000 square feet of
floor area.
5 spaces for each 1,000 square feet in excess
of 100,001 square feet of floor area.
Administrative office parking requirements:
One space for every 300 square feet of floor
area.
*Includes casino, showroom, bars, lounges, commercial shops and stores, dining
rooms, and related spaces.
Assessed Valuation and Taxes
As depicted by the proposed Parcel Map, the subject site will include:
All but the easterly 1.59 acres of tax parcel 162-016-301-001
All but the southeasterly 0.70 acres of tax parcel 162-016-202-008
All of tax parcel 162-016-202-006
<PAGE>
43
SITE ANALYSIS
Property taxes are paid in arrears and are measured on a June 30th measurement
date basis. Land taxes are based on a standard price per foot as computed for
the area by the Clark County assessor's office.
The Clark County assessor weighs strip frontage feet into the assessment
formula. These parcels are currently assessed at an average of $1,200,000 per
acre and the average equalization rate is 35 percent as depicted in the
following table.
<TABLE>
<CAPTION>
Assessed Value
---------------------------------------------
Taxable
PIN 162-016- Land Improvements Total Value Taxes
<S> <C> <C> <C> <C> <C>
301-001 $12,267,400 $ 767,440 $13,034,840 $37,242,400 $357,937
202-008 4,857,690 0 4,857,690 13,879,110 133,392
202-006 642,490 428,020* 1,070,510* 2,920,180 29,396
----------- ---------- ----------- ----------- --------
Total $17,767,580 $1,195,460 $18,963,040 $54,041,690 $520,725
</TABLE>
*Includes $48,450 in assessed value for personal property.
Properties are generally appraised by the assessor's office every three years
with inflationary adjustments during non-appraisal years. Land is subject to
reassessment if improved upon or if it becomes out of equalization with
surrounding properties. It is reasonable to assume that the tax obligation for
the subject site will increase in the near term as assessed values along the
Strip increase.
Earthquake
The subject is not located in an earthquake hazard zone.
Flood Hazards
The site is an area zoned "X", outside of the 500 year flood zone, according to
the Flood Insurance Rate Maps of the Federal Emergency Management Agency, on Map
32003 1225 B recorded September 29, 1989.
<PAGE>
44
SITE ANALYSIS
Easements
As is typical for mixed-use developments and is becoming increasingly common in
Las Vegas, the subject site is envisioned to be encumbered by a series of mutual
easements with the contiguous convention center that will enhance its functional
utility. The subject site will be favored with a zero lot line and access egress
easements such that it may connect seamlessly to the 1.0 million square foot
Sands Expo Center. This is a key source of hotel guests, gamblers, restaurant
patrons and retail customers. The opportunity to walk from the Expo Center to
the hotel and back without ever getting hot, cold, wet or windblown would
provide any casino hotel with a competitive advantage. In exchange, the owners
of the subject are to provide the owners of the Expo Center with no fewer than
800 parking spaces at a convenient location. These easements will enable the
density of the site to be maximized.
Parking Easement
A prospective developer would likely take into account the benefit of a seamless
connection to the Expo Center in preparing the project pro-forma. In negotiating
for the land, the cost of providing these spaces would most likely also be taken
into account. We have reviewed the Bovis cost estimates for the Venetian project
which indicate that hard costs and signage for structured parking will
approximate $7,500 per space. We will increase this estimate by 20 percent for
soft costs for a total cost per space of $9,000.
The cost to accommodate 800 additional parking spaces is estimated at
$7,200,000. This will be deducted from our preliminary land value estimate
before concluding to a final value.
<PAGE>
45
HIGHEST AND BEST USE
HIGHEST AND BEST USE
Highest and best use is defined as follows:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum
profitability.(F5)
In developed urban neighborhoods like the subject, the highest and best use is
typically that use which is permitted by zoning, the specific plan, the general
plan and/or private deed restrictions. Determination of the highest and best use
of a site depends upon the quantity, quality and durability of the income stream
of the development anticipated.
The determination of highest and best use includes an analysis of the subject
property as though it were vacant and an analysis as it is currently improved.
The definition of each analysis is as follows:
Highest and Best Use of land or a site as though vacant - Among all
reasonable, alternative uses, the use that yields the highest present land
value, after payments are made for labor, capital and coordination. The
use of a property based on the assumption that the parcel of land is
vacant or can be made vacant by demolishing any improvements.(F6)
Highest and Best Use of property as improved - The use that should be made
of a property as it exists. An existing property should be renovated or
retained "As Is" so long as it continues to contribute to the total market
value of the property, or until the return from a new improvement would
more than offset the cost of demolishing the existing building and
constructing a new one.(F7)
- ----------
(F5) The Dictionary of Real Estate Appraisal, Third Edition, Chicago: Appraisal
Institute, 1993 (pp. 171).
(F6) Ibid pp. 171.
(F7) Ibid pp. 171.
<PAGE>
46
HIGHEST AND BEST USE
AS VACANT
Legally Permissible
Under the zoning ordinances established by Clark County, the subject is zoned
H-1, as previously described in The Land subsection of the Physical Description
section, and allows only for the development of a hotel, resort, inn, or motel.
This zone has a maximum height of 100 feet or nine stories and a maximum site
coverage of 60 percent. The height limit may be increased with a conditional use
permit after a review by the FAA of flight paths at McCarran International
Airport. Conditional use permits can also be sought to change the land use to a
number of alternative uses including multiple family residential, retail,
institutional buildings, casinos and office buildings. Specifically omitted are
single family residences and industrial buildings. Parking requirements vary
depending upon the specific uses and their respective areas included in a
development.
Physically Possible
The subject site encompasses a total land area of approximately 44.5 acres, or
1,940,270 square feet situated along the east side of Las Vegas Boulevard, south
of Spring Mountain Road/Sands Avenue. The assemblage has nearly 970 feet of
frontage along Las Vegas Boulevard, directly opposite the Mirage and Treasure
Island Hotels. Other adjacent uses include restaurant, retail and casino hotels,
generally determined by site area. Larger, multi-acre sites tend to attract
casino/hotels. While no specific soil survey was provided, the improvements in
the area would indicate adequate soil conditions to support substantial
improvements, such as high-rise casino hotel or offices.
The site has an irregular rectangular shape with a greater depth than width.
Primary access is midway along Las Vegas Boulevard with secondary access
available at the northwest corner from Sands Avenue.
The subject, due to its size, dimension and access would be able to support a
variety of uses which would conform to the zoning regulations and surrounding
uses. The comparatively large size would indicate a casino hotel development,
possibly incorporating mixed use retail and convention facilities as indicated
by the recent development of large Strip sites. Alternatives, subject to CUP
approval, include office park and retail mall.
<PAGE>
47
HIGHEST AND BEST USE
Financially Feasible/Maximally Productive
As a vacant site under current zoning, only a lodging use would be allowed under
the existing H-1 classification subject to a 60 percent lot coverage and
9-story/100 foot height maximums. Conditional use permits could be obtained in
order to increase site density. In fact, many of the recently completed resort
developments along the Strip have obtained CUPs for higher density. The trend of
the newest projects and those under construction reflects increasing land
utilization and density.
As previously indicated in the Hotel Market Overview, 1996 city-wide hotel and
motel occupancy rates in Las Vegas are strong with an area average of 90.4
percent. The hotel sector indicated an average occupancy of 93.4 percent. The
average daily rate has been increasing at a compound annual rate of 9.4 percent
since fiscal 1993/94 due to the recent completion of several large
resort-oriented casino hotel properties. Recent activity for prominent casino
hotel developments along the Strip appear to be occurring between Reno Avenue
(south of Tropicana Avenue) and Spring Mountain Road. An exception is the
Stratosphere Tower located several blocks north which has been well publicized
for its financial difficulties. This evidence seems to support a large scale
resort-oriented casino hotel for the subject core Strip site.
The alternative land uses considered for this comparatively large tract of land
located along Las Vegas Boulevard include an office park and/or retail mall.
There has been much discussion in the city concerning the lack of first
generation Class A office space. The Howard Hughes Center, located at Flamingo
and Paradise Roads southeast of the subject, is the largest and most prominent
office park in the area. With approximately 750,000 square feet of Class A
office space in several high and low-rise buildings and among the highest rents
in the Valley, this center reported a vacancy rate of around 15 percent. The 120
acre development is the most proximate to "The Strip". Most new office park
development is occurring near the airport and in the Summerlin and Green Valley
master planned communities. Virtually no new office space has been completed
with, or is planned for, a Las Vegas Boulevard address. The office market has
clearly ceded this location to other uses, notably casino hotel and commercial,
and is seeking to establish beachheads near evolving residential population
centers.
Retail use for a site of the subject's size would entail a regional mall similar
to the 840,000 square foot Fashion Show Mall located along the west side of the
Strip at Spring Mountain Road. Another prominent Strip located mall is the
250,000
<PAGE>
48
HIGHEST AND BEST USE
square foot Forum Shops at Caesar's which is adjacent to Caesar's Palace
and The Mirage casino hotels. The Caesar's hotel is undergoing an expansion,
with the Forum Shops adding a 225,000 square foot expansion. This mall makes a
strong case for retail development ancillary to casino hotel development as
opposed to a free standing regional or subregional mall. Due to the size of the
subject site, development with a dedicated retail mall would add a substantial
amount of retail space to "The Strip". The Forum expansion and another project
located at Tropicana Avenue, the Showcase Mall (developed by Forest Cities and
is due to open fully by mid-1997), will add just under 500,000 square feet of
new retail space to the Strip.
SUMMARY OF SELECTED RECENT/PLANNED PROJECTS
LAS VEGAS BOULEVARD RESORTS
<TABLE>
<CAPTION>
Year Building No. Rooms/ Casino Meeting Land
Proiect/Location Completed Height Rooms/AC Area in SF Area in SF Area in AC
- ---------------- --------- ------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
New Projects
New York, New York 1996 48 2,035 84,000 N/A 20
NEC Tropicana & LVB 102
Monte Carlo 1995 32 3,024 90,000 35,000 46
WS LVB, North of Tropicana 66
MGM Grand 1993 32 5,005 171,500 120,000 79
NWC Tropicana & LVB 63
Luxor Las Vegas 1993/95 30 4,500 100,000 20,000 64
SWC Tropicana & LVB 70
Treasure Island 1993 36 2,900 78,400 18,000 120
SWC Spring Mountain & LVB 50
Mirage 1989 29 3,044 95,500 82,000 See Above
WS LVB, South of Spring Mountain 50
Under Development
Bellagio 1998 35 3,000 N/A N/A 120
SWC Flamingo & LVB 25
Paris 1999 40+ 2,900 85,000 160,000 24
ES LVB, South of Flamingo 121
</TABLE>
Notes
MGM Grand land area is net of 33-acre amusement park.
Luxor Las Vegas includes recent room addition.
Treasure Island and Mirage share the site.
Bellagio is planned for subsequent hotel phases.
Paris improvement height is a preliminary estimate; Eiffel Tower replica will be
54 stories.
Source: Landauer Associates, Inc., March 1997.
<PAGE>
49
HIGHEST AND BEST USE
Outside of these projects, new and proposed dedicated retail development is
occurring in the growth areas of the Valley, notably Green Valley, Summerlin and
North Las Vegas.
The primary indication of the subject's land use is best suggested by a review
of the recently completed resort projects along Las Vegas Boulevard as well as
planned new projects. Additionally, many of the existing casino hotel projects
are planning for expansions of their sites, which would increase their
respective overall land utilization. It should be noted that many of these
projects include several complementary components in addition to hotel rooms
such as casino areas, meeting rooms, retail arcades, entertainment centers
and/or a "thrill ride". This is in response to the market's demand for a more
balanced entertainment offering. The facing table summarizes these projects.
The data on the table shows some interesting trends. Primarily, newer projects
reflect increasing land utilization as expressed in hotel units developed per
land acre. Each of these developments has received a variance to the height
limit of nine stories, with the newest projects over 35 stories. As well-located
Las Vegas Boulevard land values increase, and core Strip development/expansion
land has been consumed, casino hotel developers have shown a notable trend
towards greater densities. Virtually all of these projects are located along the
Strip between Spring Mountain Road/Sands Avenue and just south of Tropicana
Avenue. This area has generally been acknowledged as the primary activity center
of the Strip and has the greatest pedestrian and vehicular traffic.
Of particular note to the subject are the recently completed New York-New York
and proposed Paris projects. Both are on comparatively smaller sites of 20 and
24 acres, respectively, which support a two phased development for the subject.
These two projects indicate hotel development ratios of 102 and 121 rooms per
acre, nearly double the average of the remaining hotel projects listed,
excluding Bellagio. Improvement heights are 48 and over 40 stories,
respectively. Paris will have a replica of the Eiffel Tower which is planned to
reach 54 stories. We feel that the densities of these two projects provide the
best indication of the subject's highest, best and most productive use.
Not shown on this chart is the planned Convention Center for the MGM Grand
Hotel. This resort is planning to redevelop a portion of its amusement park with
an approximately 380,000 square foot Convention Center to enable it to replace
low-rated tour and travel business with more lucrative meetings business.
<PAGE>
50
HIGHEST AND BEST USE
Additional consideration was given to existing Las Vegas Boulevard hotel
projects which are either undergoing or are planned for expansion. Projects such
as Caesar's Palace, Harrah's, The Las Vegas Hilton, The Flamingo Hilton and
Excalibur are adding hotel towers of between 25 and 35 stories on underutilized
portions of their original sites.
CONCLUSION - AS IF VACANT
In consideration of the subject's location, size, surrounding uses, zoning,
hotel market characteristics and recent development trends, it is our opinion
that the highest, best and most productive use of the subject 44.5-acre site is
for development with two hotel casinos similar to and competitive with recent
newly completed and planned projects. This would reflect a hotel room ratio of
over 100 rooms per land acre and a building height in excess of 35 stories.
Consistent with recent trends, the development would incorporate mixed uses of
casino, meeting and retail space of appropriate size in consideration of the
massing of the project. This land use would return the greatest value to the
land through the inclusion of the basic market accepted use found in this
location of the Strip, in particular casino hotel enhanced by the synergy
resulting from additional ancillary uses demanded by the evolving Las Vegas
tourism market.
Legal Descriptions
See Addenda.
CONCLUSION
Given the subject's central Strip location, ease of access, proximity to the
Sands Expo Center and overall configuration, it is our opinion that the subject
site possesses suitable characteristics for development of a mega resort.
<PAGE>
51
VALUATION
VALUATION
The appraisal process is the orderly program in which the data used to estimate
the value of the subject property are acquired, classified, analyzed and
presented. The first step is defining the appraisal problem - i.e.,
identification of the real estate, the effective date of the value estimate, the
property rights being appraised and the type of value sought. Once this has been
accomplished, factors that affect the market value of the subject property are
investigated and analyzed. These include area and neighborhood analysis, site
and improvement analysis, highest and best use analysis and the application of
the possible techniques in a site's value.
A final step in the appraisal is the reconciliation of the value indicators. In
the reconciliation, the appraiser considers the relative applicability of each
of the methodologies used, examines the range between the value indications, and
places major emphasis on the analytical techniques that appear to produce the
most reliable solution to the specific appraisal problem. The purpose of the
appraisal, the type of property, and the adequacy and reliability of the data
are analyzed; these considerations influence the weight given to each of the
techniques in valuation.
There are six possible valuation techniques that may be used to value land. They
are:
1. Sales Comparison
2. Allocation
3. Extraction
4. Subdivision Development
5. Land Residual
6. Ground Rent Capitalization
The Sales Comparison technique is the most commonly used. However, when there
are an inadequate number of comparable sales, other techniques are applied. In
the case of the subject property, the comparables are either very dated, poorly
located, too complicated, or too small to be considered good comparables. The
number and magnitude of adjustments is considerable. For this reason, we will
also consider the Land residual methodology.
While this is normally a fairly arcane technique used only by appraisers in this
market, we believe a larger number of market participants (read Sellers) are
performing both simplified and sophisticated versions of this technique. Vast
quantities of data on casino net income levels and construction costs are in the
annual reports and SEC filings of the publicly traded gaming companies.
<PAGE>
52
SALES ANALYSIS
SALES ANALYSIS
For the sales comparison approach of our analysis, we reviewed the available
body of information on consummated sales of large, comparable H-1 zoned parcels
on the Las Vegas strip. Unfortunately, the consummated sales involved sites that
are outside of the core strip area, are too small, or are too dated to reflect
today's' market conditions.
The large sales transactions within the subject's core Strip neighborhood
pre-date the opening of the previous wave of mega-casino resorts and were
influenced by the concerns regarding overbuilding that preceded the opening of
the MGM Grand, the Luxor, and Treasure Island in 1994. Asking prices have
appreciated considerably since then, both in the core Strip area and the
secondary or peripheral areas.
In the absence of truly comparable current sales it is an acceptable alternative
to rely on transactions that are in escrow, rejected offers and asking prices.
The paucity of truly comparable consummated transactions requires that we
consider an imputed price, a very small but recent sale, an asking price, as
well as sales in secondary locations.
These transactions are summarized in the chart on the following page. The
locations of these sales are depicted in the Map on its facing page. Detailed
data sheets may be found in the Addenda to this report.
We are aware of one proposed transaction that was announced on August 3, 1997,
which would have involved the sale of a 50 percent interest in the 715 room
Desert Inn and Country Club, plus the site of the proposed Planet Hollywood Mega
resort to investor Marvin Davis. An October 17, 1997 article in the Wall Street
Journal indicated that the negotiations have now run into a serious obstacle.
This proposed transaction was precipitated by the hostile take-over attempt
launched by Hilton in February to take control of ITT Sheraton. In order to
thwart this attempt, ITT Sheraton is selling-off a number of significant assets.
The seller is under duress. The proposed transaction is structured more along
the lines of a participating loan, an issue which has caused the recent hitch.
According to the October 17 article, "Mr. Davis insisted on the provision
because he felt ITT's $400 million valuation for the Desert Inn was too high and
he wanted a safety valve, according to people familiar with the situation.
People close to Mr. Davis said that ITT's change of heart came about because the
company's accountants wouldn't condone recording the agreement as an outright
sale as long as the provision was part of the deal. An ITT spokesman said the
company never intended to account for the transaction as a sale because it is a
joint venture." If the 715-room resort fails to produce $25 million in earnings
before interest, taxes and dividends of $25.0 million in the year 2001, the
buyer could force ITT Sheraton to buy back his 50 percent equity interest in
that component for $100
<PAGE>
53
SALES ANALYSIS
million. Sheraton recently spent $190 million on the renovation of that asset.
If the buyer elected not to become
<PAGE>
54
SALES ANALYSIS
COMPARABLE LAND SALES SUMMARY
Sale Sales
No. Location Date Price Acres $/Acre Zoning
- --- ------------------ ---- ------------- ----- ---------- ---
1 Monte Carlo Casino 9/95 $146,000,000 45.72 $3,193,351 H-1
Las Vegas, Nevada
2 N.W. Corner Harmon & Listing $66,000,000 11.32 $5,830,389 H-1
Strip
Las Vegas, Nevada
3 La Quinta Carrows Site 3/97 $13,500,000 2.06 $6,553,398 H-1
Las Vegas, Nevada
4 S.W. Corner Las Vegas 8/95 $80,000,000 47.29 $1,691,690 H-1
Blvd. South & Hacienda
Las Vegas, Nevada
5 N.W. Corner Las Vegas 3/95 $73,000,000 73.74 $989,965 H-1
Blvd. & Russell Road
Las Vegas, Nevada
6 2755 Las Vegas Blvd. 1/95 $43,500,000 20.86 $2,085,331 H-1
Las Vegas, Nevada
7 2600, 2601 Las Vegas 10/95 $61,738,500 66.04 $934,865 H-1
Blvd. South
Las Vegas, Nevada
<PAGE>
55
SALES ANALYSIS
[Map Omitted]
Land Sales Map
<PAGE>
56
SALES ANALYSIS
involved in the development of the 34-acre Planet Hollywood site, he could
compel the seller to buy back his 50 percent interest in that site for $50
million. This suggests that the 100 percent interest in the 34-acre site would
have been sold for $100 million, or $2,900,000 per acre. The combined
allocations of $150 million suggest that ITT is willing to sell a 50 percent
interest in these assets at a 25 percent discount from their internal values.
Because of the distressed circumstances surrounding this transaction, the
probability that it will not occur, and the complexity of the transaction, it is
provided for informational purposes only and has not been included in our
analysis.
ADJUSTMENTS
Each sale must be reviewed to determine whether adjustments are necessary in
order to render a price that is more meaningful to the subject property. A
number of adjustments are generally considered when evaluating any land sales
comparables. For the key non-physical adjustments, The Appraisal of Real Estate
prescribes a series of adjustments and the sequence in which they should be
made. The factors that may suggest the need for any of the prescribed sequential
adjustments are summarized briefly, in the order in which they are to be
performed:
Property Rights Conveyed - The price paid for real property can vary with
the different ownership interests that are conveyed. Typically price
diminishes as the bundle of right conveyed diminishes. The subject site is
owned in fee simple estate. However the planned development has
encumbrances in the form of reciprocal easements between the casino hotels
and the retail space, between the two planned hotels, and with the
contiguous Sands Expo Center. These easements will affect the common area
of connecting hallways, walls and shared parking garages. These easements
are beneficial to the subject sites, as an indoor connection to a major
convention center provides the connected hotel(s) with a relatively
"captive" demand source and, typically room rate premiums. No other Strip
casino resort has the seamless connection to large amounts of convention
space. We believe that any third party would attempt to negotiate
easements between the hotel pads and the Sands Expo Center. However, we
have adjusted the concluded land sale price by the cost of providing 800
spaces to the Sands Expo Center, as required in the REA. Two of the sales
involved leased fee estates. The necessary adjustments are handled in a
separate specific adjustment, as these buy-outs are not likely to increase
as the fee interest appreciates.
Financing Terms - The market value definition used in this valuation
specifically states that value is predicated on cash or its equivalent.
Transactions involving stock or seller financing at below market interest
rates would require adjustments. One sale involved a stock transfer; the
value of the stock used in the transaction was discounted by 30 percent as
recommended
<PAGE>
57
SALES ANALYSIS
by the investment bank involved in the transaction. None of the other
sales involved unusual amounts or terms for any seller financing.
Conditions of Sale - When the circumstances surrounding a sale are
unusual, the price obtained may be lower or higher than under "normal"
conditions. Adjustments are typically made for distressed sales (under
threat of bankruptcy), liquidation sales (out of bankruptcy), non-arm's
length transactions, eminent domain sales, or sales with a lack of
exposure on the open market. A transaction that was in escrow or a listing
would require an adjustment under the "conditions of sale" category
because of the tenuousness of these price indicators. The one comparable
that is an asking price has been adjusted downward.
Market Conditions - Sometime referred to as the "time adjustment" this
factor is taken into account when there has been appreciation or
depreciation between the date of sale and the date of value. Frequently
the rate of adjustment is arrived at by a paired sales analysis, in which
otherwise like sales are compared to determine price movement. Concluding
to a rate of change on the basis of one transaction is not sound practice
from a statistical point of view. Other, broader samples may also be used
to determine price trends. To determine an appropriate rate of adjustment
for improving market conditions, we considered both the broader market
appreciation trends and the rates of increase suggested by paired
transactions. Five of the comparables required market condition
adjustments.
A second set of adjustments is generally made having to do with the physical
characteristics of the site. These adjustments are not made sequentially; thus
the order in which they are considered is of less importance. Adjustments for
physical characteristics are more affected by local market behavior. In the Las
Vegas market, and for parcels such as the subject, the following physical
characteristics should be considered:
Location - There are superior and inferior locations in nearly every
market. As indicated earlier, there is a significant difference between
core Strip and peripheral Strip pricing. We have made locational
adjustments to four of the sales because of their secondary locations.
Size - In many communities, a larger parcel would be expected to transact
at a lower price per acre/foot than a smaller parcel. In Las Vegas however
changes in gaming law preclude the issuance of any new "unrestricted"
gaming licenses to facilities that do not have at least 200 hotel rooms.
This, and the dominance of the Mega-Resort casinos appear to have
eliminated any premium for a small lot unless that lot is crucial to the
assemblage of a buildable parcel. A modest adjustment between 20 to 30
acre sites and 60 to 70 acre sites may exist however.
Assemblage - Sites which are crucial to the formation of one larger parcel
of superior utility frequently command a premium. This is also frequently
the case when a specific site is
<PAGE>
58
SALES ANALYSIS
required for an expansion. After considering the residual technique, we
are of the opinion that the prices paid earlier for smaller parcels that
appear to have had assemblage value, may have been "at market". However,
the current small transaction used (Sale Number 3) does appear to have
been priced at a premium since it is necessary if the contiguous resort is
to expand. Assemblage adjustments in this market can work in reverse if a
smaller parcel appears difficult to integrate into a large developable
parcel.
Zoning - The subject's zoning is the primary designation that permits
casino hotel development. Comparisons to land sales that were not zoned
H-1 would not be meaningful in this market unless the probability of
rezoning were high. All of the sales or listings used were zoned with H-1
zoning, however, two of the sales were located in an area affected by FAA
height limitations. As this is a governmental restriction similar to
zoning, we will classify this factor as a zoning adjustment.
Demolition - The costs of demolishing an existing building that were borne
by the buyer would drive up the cost of the parcel acquisition. The Sands
Hotel was recently demolished at a cost of $6,000,000, including the cost
of removing asbestos and underground storage tanks. This amounted to
$8,333 per guest room, and will be used as the basis for demolition cost
estimates when no specific information is available for a comparable.
Lease buy-outs - In order to adjust for the cost of converting a lease fee
estate to a buildable fee simple estate, we have adjusted two of the
comparable sales for the cost of buying-out a lease.
Interim Use - The ability to generate income from a site and reduce its
carrying costs prior to its redevelopment might have a positive effect on
price. This should be weighed against any costs for demolition.
Presented in the following paragraphs are the discussions of the sales and the
necessary adjustments. The value conclusion will be compared to value indicated
by the residual methodology.
<PAGE>
59
SALES ANALYSIS
<TABLE>
<CAPTION>
Land Sale Adjustment Grid
Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Comparable 7
Imputed Value Listing La Quinta Site Hacienda Site NWC Russell El Rancho Site NWC Sahara &
Monte Carlo NWC Harmon next to NYNY Redevelopment Wet'n Wild Site
<S> <C> <C> <C> <C> <C> <C> <C>
Transaction Details
Sales Price $ 146,000,000 $66,000,000 $13,500,000 $80,000,000 $73,000,000 43,500,000 $ 61,738,500
Date of Sale Sep-95 listing Mar-96 Jan-95 Mar-95 Jan-96 Oct-95
Site Size in Acres 45.72 11.32 2.06 47.29 73.74 20.86 66.04
Price per Acre $ 3,193,351 $ 5,830,389 $ 6,553,398 1,691,690 989,965 $ 2,085,331 $ 934,865
Sequential Adjustments
Interest Conveyed -- -- -- -- -- -- --
Adjusted Price
Financing Terms -- -- -- -- -- -- --
Adjusted Price
Conditions of Sale -- 0% 0% -- -- -- --
Adjusted Price 5,830,389 6,553,398
Market Conditions 1.56 1.00 1.10 1.73 1.68 1.44 1.53
Adjusted Price 4,967,435 5,830,389 7,208,738 2,918,165 1,660,253 2,997,663 1,431,512
Non-sequential Adjustments
Location -- -- -- 63% 88% 1.63 188%
Zoning -- -- -- 63% 88% -- --
Assemblage -- 0% -40% -- -- -- --
Demolition -- 0% 3% 0% -- 5% 0%
Interim Use -- 0% 0% 0% -- -- 0%
Lease Buy-outs -- 0% 7% -- -- -- 11%
Size -- 0% 0% -- 20% -- 20%
Other -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net non-sequential Adjstmnts 0 0% -30% 125% 195% 168% 219%
- - (2,162,621) 3,647,706 3,237,494 5,021,086 3,129,383
--------- --------- --------- --------- --------- --------- ---------
Adjusted Value 4,967,435 5,830,389 5,046,117 6,565,870 4,897,747 8,018,749 4,560,895
5,000,000 5,800,000 5,000,000 6,600,000 4,900,000 8,000,000 4,600,000
Range 4,600,000 to 8,000,000
Average 5,698,172
Rounded 5,700,000
</TABLE>
[GRAPH OF LAND SALE ADJUSTMENT OMITTED]
<PAGE>
60
SALES ANALYSIS
Comparable Sale Number 1 is an imputed fair market price of the site later
developed with the Monte Carlo. This roundly 44 acre site was contributed into a
partnership with Gold Strike Casinos by Mirage Resorts in 1994 and was valued at
$47.0 million or $1,068,181 per acre in setting up the partnership.(8) In March,
1995, Circus Circus announced its intention to acquire Gold Strike, which, among
other things, included their 50 percent interest in the Monte Carlo development.
In addition to the interest in the Monte Carlo Site, Gold Strike owned two
casinos in Jean, Nevada, one in Henderson, Nevada, and a 50 percent interest in
a riverboat in Elgin, Illinois. The corporate acquisition was valued at roundly
$477,475,000 after discounting the stock component of the transaction by 30
percent. We have estimated the value of Gold Strike's other assets at
approximately $397,000,000 based on published data on Earnings Before Income
Taxes (EBIT). The details of the transaction and our assumptions are included in
the data sheet in the Addenda. Our analysis indicates that Circus Circus paid
approximately $80,475,000 for a 50 percent interest in the Monte Carlo, which
was at that time, the land and plans. The 100 percent interest in the project,
still in its nascence, would be $160,950,000. After an estimate of $14,650,000
for the Monte Carlo's design, engineering and architectural fees (5 percent of
cost), it appears that the land was valued at roundly $146,000,000, or
$3,193,351 per acre. An approximately 2.0 acre parcel, the former Desert Rose
motel, was acquired in early 1995 bringing the total site size to 45.72 acres.
This imputed price of $3,193,351 would need to be adjusted for two years'
improvement in market conditions. Data collected by Comps Inc. aggregates
information on sales for the Strip and Paradise Road (combined) market.
According to this data, the average price per acre has increased at a compound
annual rate of 34 percent between the year ended 12/31/94 and the year ended
12/31/96. The median price per foot has increased at a rate of 46 percent over
the course of 1995 and 1996. These high rates of appreciation are consistent
with anecdotal comments made by prospective buyers regarding Paradise Road and
Las Vegas Boulevard in the extreme south between Blue Diamond and Lake Mead
sites, but are probably less representative of central Strip appreciation. The
vast majority of the Comps Inc. transactions occurred in lower priced areas, as
is indicated by the average sales price of only $645,559 per acre. To check
these broader market-wide indicators, we will compare two sets of sales
transaction data under consideration.
Our first paired sale transaction is the purchase by the New York New York
partnership of the Rodeway Inn in February, 1995. In order to increase the Strip
frontage and utility of the site, the
- ----------
(8) Mirage had acquired this site as part of a larger acquisition of the 163.6
acre Dunes hotel and golf course from the bankruptcy court in December 1993 for
$75,000,000 or $458,575 per acre. Due to the distressed nature of the sale, and
the unwillingness of other investors to make such a large expenditure at the
time when Las Vegas had 12,000 room under construction, this was approximately
one-half of what was generally considered to be market value at the time, even
for such a large parcel.
<PAGE>
61
SALES ANALYSIS
resort developers paid $8,000,000 or $3,864,734 per acre for a 2.07 acre parcel.
In February, 1997, this same partnership put the 2.06 acre parcel occupied by
the La Quinta Carrows into escrow for $13,500,000 or $6,553,398 per acre,
included in our analysis as sale Number 3. This price does not include any costs
for buying out the remaining term of the restaurant's lease on the site that
actually fronts on Las Vegas Boulevard. The remaining term of the lease is
unknown and the lessee is a competitor of the buyer. Even without factoring in a
lease buy-out, these two transactions indicate that the rate of appreciation
between early 1995 and early 1997, for a core strip location would be at least
30 percent.
The second paired transaction we will consider is in a secondary location and
involves one of the two distinct parcels included in Comparable Sale Number 7.
The price per acre in the sale which was negotiated in May 1995 and consummated
in October, 1995 was $934,865 per acre for both sites, which straddled Las Vegas
Boulevard South. Gordon Gaming, which kept title to the westerly parcel, was
required to buy-out a lease immediately for $3,500,000, which brought the cost
of their 39.17 acre site up to $1,024,219 per acre. The company's owner, Mr.
Bill Bennett, developed serious health problems after completing the
transaction, and has scaled back development plans for the sites he assembled at
the north end of the Strip. In late 1996, the 39.17 acre site fell out of escrow
at a price of $55,000,000 or $1,404,136 per acre. The company's Chief Counsel
indicated that negotiations have been opened with other buyers at the same
approximate price. This escrowed price indicates appreciation of approximately
32 percent over a one year period. It could be argued that the separation of the
two parcels contributed to the increase in price, however, we understand that
either could have been purchased separately. Since the parcel fell out of
escrow, it could be argued that the current asking price is too high, and that
its eventual sales price will be lower.
After considering the Strip/Paradise Road sample for the area-wide appreciation
figures, the buyer motivation for the assemblage value comparison, and the
lapsed escrow of the latter paired transaction, we will temper our estimates of
the average rate of appreciation to a uniform 25 percent per year during 1995
and 1996 for all of the transactions, regardless of location. However, during
1997, we believe that the number of new resorts under construction has caused
this to abate, to 20 percent per year.
The imputed price of the Monte Carlo partnership purchase transaction will be
adjusted upward for 16 months at an annual rate of 25 percent and ten months at
20 percent. No other adjustments are warranted.
The adjusted price for Sale Number 1 becomes $5,000,000 per acre.
Comparable Number 2 is a listing involving an 11.32 acre parcel on the Northwest
corner of Harmon and the Strip. The owner, who is reported to be ineligible for
a gaming license, is asking from $66,000,000 (or $5,830,000 per acre) to
$100,000,000 (or $8,834,000 per acre) for the site. The
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SALES ANALYSIS
lower asking price was reported to have been conditioned upon the seller
retaining air rights over the site in order to develop a retail component. The
higher asking price is for the entire bundle of rights. We spoke with one
investor who reported offering $60,000,000 that was rejected summarily. An
article on June 22 in the Las Vegas Sun on a prospective San Francisco themed
resort indicated that Harvey's Casino Resorts offered $80.0 million (or
$7,067,138 per acre) for the site and was rejected. We were unable to
substantiate this account. Presumably, the rejected offer was for an
unencumbered fee simple interest.
A number of investors or brokers commented that it was too small for mega resort
development. Harmon Road precludes assemblage to the South without a skybridge.
The land owner to the North is the owner of the common areas associated with a
timeshare project known as the Jockey Club. Redevelopment with that northerly
land owner would likely be problematic because of the approximately 14,000
individual timeshare owners' concerns about parking and access and egress to
their units.
Because of our inability to substantiate the rejected offer, and the relatively
small size of this site, we will employ the lowest asking price of $66,000,000
or $5,830,000 per acre but will not adjust for conditions of sale. Interest in
the site by Harvey's and the prospective developer of the San Francisco themed
casino resort refutes the assertion that the site is too small. We will make no
other adjustments to this sale.
The adjusted price of Comparable Number 2 becomes $5,800,000 per acre.
Comparable Number 3 involves a very small parcel, of 2.06 acres that was
recorded on March 17, 1997 for $13,500,000 or $6,553,400 per acre. On March 17,
1997, La Quinta Development Partners sold its fee simple interest in the 1.48
acre La Quinta motel site to the partnership that owns New York New York, which
will use the site for a new rooms tower. The transaction also included La
Quinta's leased fee interest in the contiguous 0.58 acre parcel that actually
fronts on the Strip, and the assignment of the associated lease. The original
lessee's interest was assigned to Victoria Partners the developers of the Monte
Carlo, its northerly neighbor and competitor. We were unable to obtain a copy of
the original lease to ascertain its remaining term. The original lease was
signed in March, 1979. La Quinta Development Partners signed a confidentiality
agreement which they interpret to mean that they may not discuss any aspect of
the sale.
This sale supports our contention that strip land prices have appreciated
considerably over the past two years, as described earlier. In addition, this
most recent transaction, at $6,553,400 per acre, demonstrates that sellers are
increasingly aware of the huge profit potential of core Strip real estate.
Six months have elapsed since the sale was recorded. We will adjust this sale
for 6 months of appreciation at an annual rate of 20 percent.
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SALES ANALYSIS
To estimate an appropriate adjustment for the assemblage value, we will compare
the assemblage value adjustment of an earlier New York, New York assemblage. The
2.07 acre Rodeway Inn parcel that was acquired in February, 1995 cost the owners
of New York New York $3,864,734 per acre. The original 17.62 acre parcel was
acquired in late 1992 for $1,789,843 per acre. If we adjust this sale upward for
two years' appreciation at 20 percent, the equivalent price in early 1995 values
grows to $2,577,000 per acre. This $1,287,734 difference suggests a 33 percent
discount for the smaller sale. The imputed value of the Monte Carlo transaction
of $3,193,319 per acre reflects a discount of 34 percent from the 2.07 Desert
Rose Motel acquisition at $4,830,917 per acre, a few months before the Gold
Strike acquisition was announced.
For the current La Quinta transactions, we will adjust the sale downward by 40
percent to account for the assemblage premium. As will be shown in the residual
value analysis, it could easily be argued that there is no need for an
adjustment, as the entire parcel, built out at the density that it is, could be
worth as much as $14,400,000 per acre.
One more adjustment would be required for the lease buy-out. The lease buy-out
to Gordon Gaming for the as yet unbuilt St. Andrews golf attraction on the
westerly portion of Sale Number 7 was $3,500,000. The lease-buy-out for the
Wet'n Wild water theme park on the easterly component of that transaction
started at $7.0 million and declined as the improvements depreciated. While both
parcels were significantly larger than the 0.58 acre restaurant site involved in
Comparable Sale Number 3, neither involved buying out a direct competitor. There
were no improvements on the St. Andrews Golf site, and the cost of the Wet'n
Wild improvements were the basis of the buy-out.
We will assume that the cost of buying out the remaining term of the restaurant
lease is approximately $1,000,000. This equates to an approximately 7 percent
adjustment. Because of the two story, stick frame construction, we will estimate
demolition costs at one-third of the high rise rate, or $2,775 per guest room
(8,333 x .333) for a 114-room property. Demolition costs are estimated at
roundly $300,000, or 3 percent of the sales price per acre.
The adjusted price per acre of Sale Number 3 becomes $5,000,000.
Sale Number 4 is of the 47.3 acre site formerly occupied by the Hacienda Hotel.
This site was acquired in August, 1995 by Circus Circus for $80,000,000 or
$1,691,650 per acre with the intent to redevelop the site. No adjustments are
necessary for interest conveyed, financing or conditions of sale. The price was
set eight months earlier, in January of 1995, by a former Circus Circus
executive, Mr. Bill Bennett, who was forced to relinquish the deal due to a
perceived conflict of interest. This history is important for two reasons: 1) it
establishes that there was no assemblage motivation in the setting of a sale
price; and 2) the number of months used for the market condition adjustment
should be greater than would be suggested by the date escrow closed. This sale
should be adjusted for a market condition adjustment for the longer period.
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SALES ANALYSIS
When paired with Sale Number 5, the Hacienda sale provides our first indication
of the magnitude of location adjustments.
The Hacienda sold at the approximate same time as Sale Number 5, which is
located immediately south. The primary differences between Sales 4 and 5 are in:
site improvements, size, and location.
Unless the cash flow generated by the Hacienda increased materially after its
sale, the value of the interim use was not likely to have offset the costs
associated with demolishing the 1,115-room hotel; and the mitigation of any
environmental issues caused by the 363-space Recreational Vehicle park.(9) The
remaining differences are in size and location.
Sale Number 5 involved a 73-acre parcel that sold in March 1995 for $989,965 per
acre. We can find no evidence from other sales that the entirety of this 70
percent price differential is attributable to the increase in size from a 40- to
45- acre site to a 70- to 75-acre site. We believe that the primary reason that
Sale Number 4 sold at a premium over Sale Number 5 was because Sale Number 5 is
1,000 lineal feet further South. We will attribute 20 percentage points of the
price differential to the size issue, and 50 percentage points of the
differential to location.
The 1,000 foot distances had ramifications from an air rights standpoint as well
as a traffic perspective. The seller of the Hacienda expressed a belief that
both sales are affected by the sites' proximity to McCarran Airport and the
uncertainty caused by the FAA's ability to limit the building height. While any
building in Clark County requires FAA approval to exceed 100 feet (or 9
stories), this approval is not a formality in the vicinity of the airport. Until
the approval was granted in April, 1997 for the height variance, the FAA would
make no prognostications as to whether it would likely permit a significant
variance or the recommended 167 feet (approximately 17 stories). The Hacienda's
tower was only 11 stories tall. However, the Luxor, located immediately north of
the Hacienda was approved for 30 stories, which is the current average height
for the existing major casino resorts.
We will split the remaining 50 percent adjustment evenly between a location
factor relating to distance from the core area and a zoning adjustment for the
FAA issue. These adjustments will be made at a rate of 25 percent for each 1,000
feet a site is located in the "wrong" direction.
At a rate of 25 percent for every 1,000 lineal feet of distance, Sale Number 4,
the Hacienda, would need to be adjusted upward for location and for the FAA
related zoning issue by 63 percent (for each), since it is located approximately
2,500 feet south of Tropicana (2,500/1,000 x .25). Sale
- ------------------
(9) Circus Circus would not disclose demolition costs, or the EBITDA of the
Hacienda during its interim operation. The costs of demolishing the Sands,
combined with asbestos and underground storage tank clean up suggest that the
Hacienda's demolition costs could be $9,300,000 (1,115 x $8,333).
<PAGE>
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SALES ANALYSIS
Number 2 would require 88 percent location and zoning adjustments, since it is
3,500 feet south of Tropicana (3,500/1,000 x .25). Prior to the location and FAA
zoning issues, the time of sale adjustments of nearly three years on Sale Number
4 and two and one half years on Sale Number 5 must be applied.
The adjusted price per acre for Comparable Sale Number 4 becomes $6,600,000,
compared to an adjusted price per acre for Comparable Sale Number 5 of
$4,900,000.
Comparable Number 6 is the 20.86 acre site of the El Rancho Casino hotel, which
sold in January of 1996 for $2,285,331 per acre. The developers, a New Jersey
group, intended to redevelop the site with the Orion project, which was to have
210,000 square feet of casino space, 300,000 square feet of retail space, and
2,400 hotel rooms. Shortly after this transaction they attempted to purchase an
additional 15.0 acres on the back side of the El Rancho site, but allowed that
transaction to fall out of escrow when they encountered difficulties in
obtaining financing in the wake of the negative publicity surrounding the
Stratosphere.
Seller financing was provided for $16,500,000 or 40 percent of the purchase
price. The first $6,500,000 note to the seller was paid off within two months of
the transaction. No cash equivalent adjustment is warranted. This sale requires
a market condition adjustment for the nearly two years that have transpired
since it occurred, and a 163 percent locational adjustment to account for its
6,500 foot distance from the northern boundary of the core Strip area (6,500 /
1,000 x .25). When compared to Comparable Sale Number 7, which is immediately
north of Comparable 6, and particularly in light of the events that have
transpired since then, it appears that the out-of-town buyers of Comparable 6
over-paid for it.
The adjusted price per acre of Comparable Number 6 is $8,000,000, which provides
the high end of the range.
Comparable Sale Number 7 is immediately north of Comparable 6 but spans both
sides of the Strip. This 66.04 acre assemblage was technically acquired by
Gordon Gaming which then flipped the easterly and smaller of the two parcels to
Sahara Gaming as part of a 1031 tax free exchange. Sahara Gaming traded a
separate 22 acre site on the east side of Paradise for the easterly site
included in this comparable sale, in conjunction with their sale of the Sahara
Hotel to Gordon Gaming. There is no need for a cash equivalency adjustment, as
the Howard Hughes Corporation received $61,738,500 in cash ($934,865 per acre)
for the site.
The 66.04 acre comparable is located approximately 7,500 feet north of the
Spring Mountain/Sands Avenue intersection, and so should be adjusted upward 188
percent for its inferior location (7,500/1,000 x .25.)
Both parcels were affected by leases, although the lessee for the parcel on the
western side of the Strip had not yet constructed any improvements. The cost of
lease buy-out for the westerly parcel
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SALES ANALYSIS
was $3,500,000. Sahara Gaming negotiated a stepped down lease buy-out, starting
at $7,000,000 which diminished to a nominal sum over time. It had no imminent
plans for development, and sought only to keep a foothold on the Strip.
Demolition costs for the Wet'n Wild improvements were estimated by the buyer at
$1,500,000. The subject is a vacant, buildable site with no leases encumbering
it. To adjust this sale to be comparable to the subject requires recognizing the
two years appreciation, leasehold buy-outs, and demolition costs. We will assume
however that a prudent buyer would have allowed the water theme park to operate
during his design, approval and financing phase, and that this savings in the
buy-out formula would offset the demolition costs. The transaction will be
adjusted upward for a net $10,500,000 for the lease buy-outs and demolition
costs. This equates to $158,995 per acre, or 11 percent of the time-adjusted
price per acre. Because of the comparable's approximately 66 acre size, we will
adjust this comparable upward by 20 percent, as was done for Sales Comparable 5.
The adjusted price of Comparable Number 7 equates to $4,600,000 per acre.
SALES COMPARISON CONCLUSION
After adjustments, the range of prices for our land sales comparables ranged
from roundly $4,600,000 to $8,000,000 per acre, with an average price of
$5,700,000 per acre. Unfortunately all of the sales were either extremely
complicated, or required significant levels of adjustment. The three closest
sales, which required the lowest total percentage adjustments, ranged from
$5,000,000 to $5,800,000 per acre, with an average of $5,250,000 per acre.
In addition to the sales verification process, we spoke with a number of persons
who are attempting to purchase sites in the core Strip area. Two participants,
unwilling to pay more than $3,000,000 per acre, have been unable to find
anything with an acceptable location in their price range. A third buyer, who
wishes to remain anonymous, has begun the painstaking process of assembling a
site in the core Strip area. When the assemblage is complete, and after demotion
and mitigation costs, this buyer expects to have spent between $5,000,000 and
$7,000,000 per acre.
The subject parcel is fairly unique. It is located in the core Strip area, and
will offer better views of the Mirage and Treasure Island attractions than are
available from either of those resorts. More importantly perhaps its physical
proximity to the 1.0 million square foot Sands Expo Center, which will provide a
significant source of higher rated mid-week business. As there was no empirical
way to determine an appropriate adjustment for this factor, none was included in
our analysis. The subject's assumed easements situation can be likened to a golf
resort site, in which the golf course itself has already been developed and the
hotel developer needs only to purchase a hotel pad. This adds a premium to the
hotel site over sites that are close to, but not part, of the golf course.
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SALES ANALYSIS
However, considering the magnitude of some of the adjustments, we will select
the average value of $5,250,000 per acre or $233,889,000. From this, we will
deduct the cost of the 800 parking spaces are required in the easement
($7,200,000) and the cost of the environmental mitigation ($700,000). The net
value is therefore $225,000,000 rounded or approximately $5,050,000 per acre.
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RESIDUAL ANALYSIS
RESIDUAL ANALYSIS
Because of the widespread availability of net operating income data for the
publicly traded gaming companies, a large number of land owners along the Las
Vegas Strip appear to have priced their land using a residual approach, assuming
casino hotel use. This is true even for land owners who are believed to be
ineligible for gaming licenses, as is the case in Comparable Number 2 in the
Sales analysis, and in cases where the site is too small for such a use on a
stand-alone basis.
To perform our residual analysis, we performed a residual analysis on two
recently completed mega resorts utilizing available data on earnings before
income taxes, depreciation and amortization (EBITDA) and reported construction
costs. The assumptions and methodology for our analysis is discussed below.
BASIC ASSUMPTIONS
To determine market value, it is important to use a fairly generic set of
assumptions as opposed to a specific investor's assumptions. To do otherwise
would be to produce an estimate of Investment Value. The current parcelization
proposed for the subject site, assumes a two-phase development in which the site
area for Phase I, is 30.1 acres as it will contain the shared power plant. The
Phase II Lido site, comprised of the remaining 14.4 acres, would be smaller than
is typical, for mega-resort development on a stand-alone basis. The New York New
York project will, after the most recent assemblage, have a site area of
approximately 22 acres. For our residual analysis that is intended to determine
market value, we will assume a more even apportionment of the larger parcel into
two like sized parcels. For our residual analysis, we will assume a site size
for the subject of 22.25 acres.
Similar issues arise in determining a capitalization rate. Too specific
assumptions regarding borrowing power or required returns would yield an
Investment Value. For example, the Circus Circus and Mirage Partnership is
likely to be able to finance debt at a relatively advantageous rate. The
capitalization rate used for the residual calculation for the Monte Carlo will
assume a buyer that is subject to market rate terms.
And finally, the cost estimates in our analysis will be based on "market costs"
rather than the developer's specific costs for the proposed Venetian resort. The
developer's cost estimates are based upon a facility that will have
significantly larger room size and significantly higher quantities of meeting
space and retail space than are typical for the Las Vegas market today. No other
resort in Las Vegas has a basic guest room of the size and quality envisioned
for the Venetian. To equal the approximately 225,000 square feet of meeting and
convention space planned for the Venetian Resort one would have to add together
the space presently offered at the Mirage, Treasure Island, and Caesar's. These
three hotels have a combined room inventory of 7,430 rooms. Only Caesar's offers
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RESIDUAL ANALYSIS
a similar quantity of retail space. The Venetian's superior accommodations,
meeting space and retail space enhancements, should logically contribute to a
higher stream of income from the property. However, the market standard for Las
Vegas' casino resorts is a tradition of providing a mediocre guest room product
and of depending on the Convention Center and the Sands Expo Center to generate
convention demand.
The subject's costs are further complicated by the inclusion of the costs of the
shared physical plant and parking. Because of the above-market physical product
envisioned, and the common facility costs that are included in the subject's
cost estimates, we will base our cost estimates on a more generic market
standard product. The denser utilization of the site, as planned for the
Venetian which incorporates an all-suite guest room configuration and 415,000
square feet of retail space should logically produce a greater return to the
land than the generic market standard casino hotel.
ESTIMATING AN APPROPRIATE CAPITALIZATION RATE
There have been no sales of single new mega casino resorts. Current rules of
thumb prescribe that gaming properties should transact at multipliers of 5.0 to
7.0 times the Earnings Before Income Taxes, Depreciation and Amortization
(EBITDA) which equates to a capitalization rate range of 14.3 percent ( 1 / 7 )
to 20 percent ( 1 / 5 ).
To determine an appropriate capitalization rate that is specific to a new mega
resort on the best section of the Strip, we will use the band of investment
technique. This technique is based upon assumptions of debt to equity ratios,
interest rates, and rates of return to the owner. To determine an appropriate
debt to equity ratio, we talked to a lending officer with Bank of America's
Gaming department. The interest rates charged are a function of debt to equity
ratios and are influenced by the size and number of other casino hotel projects
a borrower may have. Larger gaming companies with representation in numerous
markets are perceived to have less risk than one casino company. However, a very
good core Strip location would be deemed to also reduce risk.
Prior to its opening, the New York New York loan was arranged at an
approximately 50 percent loan to value basis with a floating interest rate that
is 175 basis points over LIBOR.
The MGM Grand was able to retire its construction financing at a floating rate
that is approximately 250 basis points over LIBOR. The loan to value was
typical, which we infer from other comments made to be approximately 55 to 60
percent.
The Rio, which is not on the strip and is a single property enterprise, is
currently paying an interest rate that is 300 basis points over LIBOR. This is
attributable to its highly leveraged position during the expansion. Prior to its
taking on more debt for the expansion, the Rio's interest rate was only 200
basis points over LIBOR.
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RESIDUAL ANALYSIS
As of the date of value, LIBOR was approximately 6.1 percent on a one-year note.
Thus, the interest rates discussed ranged from a low of 7.85 percent for New
York New York, to a high of 9.1 for The Rio. It is interesting to note that
these rates, which are floating, are lower than the fixed rates for full-service
hotels. The most recent issue of the Landauer Hotel Investment Outlook indicates
that the average interest rate for a full-service hotel loan is approximately
8.79 percent, based on an average loan to value ratio of 64 percent. We
attribute the relatively low casino hotel interest rates to the increasing
diversification of the stream of income and the perceived strength of the Las
Vegas market. Bank of America sponsored a conference for Gaming lenders in late
February of 1997. A March 3, 1997 Las Vegas Business Press cover story reported
that a representative of PNC Bank "was comforted by the diversification of the
Las Vegas casino revenue away from straight gaming...'Many of the casinos have
shown increased cash flow despite the decline in gaming win. They have more
room, food and entertainment revenue--it is a better balanced source of cash
flow' ".
We will assume that the subject property receives a loan to value ratio of 60
percent. To take into account that today's rates may be relatively low from a
historical standpoint, we will assume that an appropriate interest rate for a
stand alone mega resort with a core Strip location would be 9.0 percent. Given
that this rate is currently being paid by the Rio, with its off-strip location
and relatively highly leveraged situation, this appears to be a conservative
assumption. We will assume a 20 year amortization schedule and monthly payments,
which yields a debt constant of .10797.
On the equity side, we will assume that a typical mega casino resort owner would
expect a 26 percent return on his equity. This compares to an average leveraged
yield rate of 21.4 percent for generic full-service hotels at this time.
These assumptions yield a capitalization rate of 17.0 percent, as indicated in
the following calculation:
Debt: 60% x .10797 = .06478
Equity: 40% x .26 = .10400
------
Total 100% x .16878
Rounded .17
COST ESTIMATES
To determine appropriate cost estimates, we reviewed annual reports and the
quarterly SEC filings of the partners involved in constructing the Monte Carlo
and the New York New York project.
The Monte Carlo is a middle market product, consistent with Circus Circus'
orientation in that market. (Mirage Resorts, Inc. was a passive partner in the
development of the project.) The total
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RESIDUAL ANALYSIS
costs, including land and all financing and pre-opening expenses, have been
reported in the annual reports for Mirage and Circus Circus as $350,000,000.
From this, the book value of the land contribution must be deducted
($47,000,000), along with another roundly $10,000,000 that was expended to
purchase a 2.0 acre site formerly occupied by the Desert Inn Motel. The hard and
soft costs were a total of $293,000,000 (350.0 - 47.0 - 10.0), or $97,213 per
guest room. We will use this figure only for the Monte Carlo residual
calculation, as we do not believe such a low quality product would start
construction today in a core Strip location.
The New York New York project has a reported cost of $460,000,000. None of the
data we were able to obtain indicated whether land or capitalized interest were
included in the calculation. On a per room basis, this cost was $226,044 per
guest room, well over twice the cost reported for the Monte Carlo. Since it can
be argued that, at 2,035 rooms, New York New York has a lower ratio of rooms for
the casino and public spaces provided, and that the costs of construction on a
relatively tight site would be much higher, we will assume that this cost
includes all hard and soft costs but not the book value of the land.
Because of the unique attributes of the subject site, we will assume that a high
quality product is completed on the subject site. Consistent with our conclusion
as to highest and best use, we will assume that a significant retail component
and some meeting space is included. To estimate a "market cost" for the more
generic product assumed in this analysis, we will increase the per room cost
estimate of New York New York by 20 percent, to approximately $270,000 per key.
For a 3,000 room project, the total hard and soft costs are estimated at
$810,000,000.
This compares to the Venetian cost budget of approximately $293,000 per key,
before entrepreneurial profit. The subject's superior features and amenities
accounts for a budgeted cost per room that is considerably above either the
Monte Carlo or New York New York.
THE MONTE CARLO RESIDUAL CALCULATION
The Monte Carlo opened on June 21, 1996. In its first full 193 days of
operation, its partners reported that it generated $147,300,000 in gross
revenues and $70,600,000 in EBITDA. We assumed that any "novelty effect" would
be offset by the likely inefficiency in the initial months' operation.
(Typically casino hotels overstaff for the initial months of operation, and
anticipate that a certain number of the new hires will fail to meet management's
performance expectations.) On an annual level, it appears that the Monte Carlo
will have gross revenues of $278,600,000 and EBITDA of approximately
$92,900,000. This estimate appears conservative relative to other Circus Circus
managed hotels given the Monte Carlo's superior location.
EBIDTA does not include any reserves for the replacement of short lived items.
This is the custom in the local market. Returns to the investor are relatively
high to take capital expenditures into
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RESIDUAL ANALYSIS
account, which are funded from cash flow on an as-needed basis. Neither are
third-party management fees deducted, as these properties are almost uniformly
owner-managed.
The net cash flow that may be capitalized for an estimate of value is
$92,900,000. The estimated value for the Monte Carlo is $546,000,000, rounded
(92,900,000 / .17)
As related above, the total hard and soft construction costs of the Monte Carlo
were $293,000,000. Deducting this from the estimated value produces a value of
the land and entrepreneurial profit of $257,000,000 (550.0 - 293.0).
According to the annual reports, Circus Circus took no developer's fee for
managing the construction of this hotel. We will however factor in
entrepreneurial profit. Because of the scale of the project, we have estimated
entrepreneurial profit at 25 percent of the hard and soft costs of $293,000,000,
or roundly $73,250,000. The residual land value is $179,750,000 (rounded). With
a site size of 45.72 acres, the residual land value is $3,933,000 or $3,900,000
per acre, rounded. This is within 2.0 percent of our time adjusted land value
via the Sales Comparison Approach.
NEW YORK NEW YORK RESIDUAL
As of the writing of this appraisal, only 179 days operating data was available
on the EBITDA for New York New York. We will annualize the 179 days EBITDA of
$70,600,000 without factoring in any seasonality This equates to $144,000,000 in
EBITDA annually [70,600,000 / (179/365)]. As with the Monte Carlo, this assumes
that any novelty effect in the revenues is offset by inefficiencies in the
initial month's operations.
Applying a 17 percent capitalization rate to this figure yields a value of
approximately $850,000,000 (144,400,000/.17). As described earlier, hard and
soft costs were estimated at $460,000,000 leaving $390,000,000 in value for land
and entrepreneurial profit. Deducting entrepreneurial profit of approximately
$92,000,000 (almost 20 percent) leaves a value for the land of $295,000,000.
With a total site area of 20.5 acres, the residual value is approximately
$14,400,000 per acre.
This exercise also indicates to us that the consumer market prefers highly
themed casino resorts that are attractions in and of themselves. The Monte
Carlo, a low-cost project with very little in the way of sightseeing
attractions, is not as successful as New York New York, which is a sightseeing
attraction.
THEORETICAL RESIDUAL CALCULATION FOR THE SUBJECT PROPERTY
For our residual approach, we have assumed a generic but high quality product.
Its location and proximity to the Sands Expo Center should enable a casino hotel
on the subject site to achieve gross
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RESIDUAL ANALYSIS
and net revenues that are comparable to the top tier of mega casino resorts. To
estimate an appropriate level of EBITDA for this theoretical property, we
utilized the blended results of its nearest neighbors, the Mirage and Treasure
Island. While the Mirage is one of the most profitable resorts on a per room
basis, the Treasure Island resort has an EBITDA that is very consistent with
generic mega-resort performance. The 1996 Annual Report for Mirage Resorts
indicated that the combined EBIDTA for these properties in 1996 was $354,400,000
or approximately $59,600 per hotel room.
We will multiply this figure by the assumed 3,000 rooms for a EBITDA for the
theoretical subject property of $178,800,000 (rounded).
Applying a capitalization rate of 17 percent derives a value of approximately
$1,050,000,000 for the generic project.
After deducting the assumed hard and soft costs of roundly $810,000,000 (as
described earlier) from the estimated value of $1,052,000,000, we are left with
$242,000,000 in value for the generic product's land and entrepreneurial profit.
We estimated entrepreneurial profit of $121,500,000 on this nearly billion
dollar deal, 15 percent of the hard and soft costs. This is more than eight
times the amount at which Marriott recently bought out Doubletree Hotels'
contract to buy the Renaissance Hotel Company in a deal of a similar scale.
For the reasons described above, we have assumed a more typical split of the
larger 44.6 acre parcel and have calculated the value per acre based on a
theoretical 22.3 acre parcel. This produces a rounded value per acre of
$5,400,000 (120,500,000 / 22.3).
The residual values calculations are summarized in the following table:
Theoretical
Monte Carlo New York New York Subject
-------------- ------------------- ---------------
EBITDA $923,900,000 $144,400,000 $178,800,000
Capitalization Rate .17 .17 .17
Estimated Value $546,000,000 $850,000,000 $1,052,000,000
Cost $293,000,000 $460,000,000 $810,000,000
Entrepreneurial Profit $73,250,000 $92,000,000 $121,500,000
-------------- ----------------- ---------------
Land Value $179,750,000 $295,000,000 $120,500,000
Acres 45.7 20.5 22.3
Value Per Acre $3,933,000 $14,290,000 $5,404,000
Rounded $3,900,000 $14,400,000 $5,400,000
<PAGE>
74
RESIDUAL ANALYSIS
Clearly, the density of development has profound effects on value estimates
using the residual approach. We question whether the Monte Carlo would be
constructed on 45.7 acres of core Strip land given today's market conditions.
Using a residual methodology, the average price per acre is $7,900,000.
From the residual technique, we estimate a land value of $5,400,000 per acre,
based on the most generic assumption of our residual calculations.
The residual technique suggests a value of $240,570,000 for the 44.55 acre
subject site. From this, we must deduct the cost of the 800 incremental parking
stalls ($7,200,000) and the environmental mitigation of $700,000. This reduces
the concluded value via the residual approach to $232,670,000 rounded or
$5,200,000 per acre.
The developer's proposed site plan calls for the Venetian to be constructed on a
30.9 acre parcel and the second phase 3,000-room tower to be constructed on an
approximately 13.7 acre parcel. Because of the disproportionate land allocation,
a market based residual allocation is not meaningful for the specific investor's
site planning.
<PAGE>
75
RECONCILIATION
RECONCILIATION
To appraise the subject parcel, we used the sales comparison technique and the
residual technique. The value conclusion from the sales comparison technique was
$225,000,000, rounded, or $5,050,000 per acre. The comparables used were
complicated transactions requiring numerous adjustments. The magnitude of
adjustments was considerable.
From the residual technique we derived a market value of $233,000,000, rounded,
or $5,200,000 per acre. This scenario assumed a relatively high density, but one
that is supported by the New York New York project and by the expansion activity
on other mega resorts sites.
This technique involved a key of assumptions regarding capitalization rates and
appropriate levels of entrepreneurial profit. However, the residual approach
supports that the net $5,050,000 per acre price estimated for the subject parcel
using the sales comparison technique is a reasonable, economically viable price
per acre.
We conclude that on October 17, 1997, the market value of the fee simple
interest in the 44.55 acre subject site, as if vacant and ready for development
and encumbered by the mutual easements previously described, was:
TWO HUNDRED TWENTY FIVE MILLION DOLLARS
$225,000,000
We conclude that on October 17, 1997, the market value of the fee simple
interest in the 30.86 acre Venetian site, as if vacant and level, was:
ONE HUNDRED FIFTY FIVE MILLION DOLLARS
$155,000,000
We conclude that on October 17, 1997, the market value of the fee simple
interest in the 13.69 acre Lido Site, as if vacant and level, was:
SEVENTY MILLION DOLLARS
$70,000,000
This value is subject to the assumptions and limiting conditions as set forth in
the Addenda to this document.
<PAGE>
LAND COMPARABLE NO. 1
IDENTIFICATION:
Location: Monte Carlo Casino Site
City, State: Las Vegas, Nevada
Assessor's Parcel No. 162-20-701-020 /after consolidation with
3.0 acre parcel.
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: September 1995
Sale Price: $147,000,000
Terms: Imputed price for 100% interest; part of
company acquisition
Grantor: Gold Strike Resorts
Grantee: Circus Circus Enterprises
Document: Not recorded
SITE DESCRIPTION:
Land Area: 45.72 acres
Improvement of Sale: Vacant w/ plans and approvals
Utilities: All to site
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $3,193,351
COMMENTS:
Acquired along with 50% interest in the Elgin Illinois Riverboat, 2
casinos in Jean, NV and 1 casino in Henderson, NV. See attached work
sheet.
<PAGE>
Monte Carlo Worksheet
<TABLE>
<CAPTION>
From Circus Circus' annual report on Gold Strike Acquisition
<S> <C>
Cash $ 12,000,000
Assumed Debt 165,000,000
17.0 m share stock discounted at 30% (price $25.15 on 3/19 announc.) 300,475,000
Market value acquisition 477,475,000
Assets Acquired:
50% interests in Elgin Riverboat. 8 months EBIT for Circus in '95 was $32.6 m
$ 32.6 / 8 x 12 months = $48.9 / 17% 287,647,059
Estimated for 100% interest in riverboat is $575.3 million
3 casinos; 2 in Jean, 1 in Henderson; 8 months EBIT for Circus in '95 was $12.4
$12.4 / 8 x 12 months = $18.6 / 17% 109,411,765
Estimate is $36.5 million per casino
Value of 50% interest in Monte Carlo, at time plans, approvals, and dirt 80,416,176
2
Value of 100% interest 160,832,353
160,830,000
Less estimated design fees, arch fees etc. based on Venetian's $34.3 cost on
a total project cost of $967.6, or 3.5%) $293.0 5.0% 14,650,000
Dirt Value 146,300,000
Rounded 146,000,000
Acres (gross) 45.72
Price per acre 3,319,351
</TABLE>
The Elgin Riverboat is personal property; its dock-side facilities are a
leasehold interest. After the investors have recovered their $112 m investment,
the partnership is required to pay 20 percent of its after tax income to the
city of Elgin and Kane County.
<PAGE>
The 17 percent capitalization rate used takes into account the greater dilution
of the income stream in EBIT (depreciation and amortization have been deducted)
but also the offsetting factors relating to the interest involved (personal
property and a leasehold estate in the case of the Riverboat) and the secondary
locations involved in the land based casinos. These casinos receive nearly all
of their net income from gaming operations.
<PAGE>
LAND COMPARABLE NO. 2
IDENTIFICATION:
Location: N.W. Corner of Harmon & Strip Site
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-20-603-005,006
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: Listing
Sale Price: $66,000,000
Terms: Not applicable
Grantor: R & Z Corporation
Grantee: Not applicable
Document: Not applicable
SITE DESCRIPTION:
Land Area: 11.32 acres
Improvement of Sale: Vacant
Utilities: All to site
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $5,830,389
COMMENTS:
Too small for mega resort development, Harmon Street to the south
affects southerly assemblage. Parcel to immediate North is owned by the
same entity that has title to the common areas of the Jockey Club
timeshare project. Joining and developing these two sites would require
concessions to and from the approximately 14,000 individual owners of
the timeshare project.
<PAGE>
LAND COMPARABLE NO. 3
IDENTIFICATION:
Location: La Quinta Site
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-20-801-002,003
Estate: Fee Simple (1.48 acres) and Leased Fee 0.58
TRANSACTION DATA:
Sale Date: March 1997
Sale Price: $13,500,000
Terms: All cash
Grantor: La Quinta Development Partners
Grantee: MGM Grand & Primadonna
Document: 970317.01522
SITE DESCRIPTION:
Land Area: 2.06 acres
Improvement of Sale: Inn and restaurant
Utilities: All to site
Topography: Level at street grade
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $6,553,398
COMMENTS:
The fee simple interest in the land which is improved with the La
Quinta Inn was sold concurrently with the leased fee interest in the
0.58-acre Carrows Restaurant site. New York-New York needs the
2.06-acre site if it is to expand. It is not clear whether this can be
done without the frontage portion occupied by the restaurant. No
information was available on the costs to buy-out the lease, or
demolition costs.
<PAGE>
LAND COMPARABLE NO. 4
IDENTIFICATION:
Location: S.W. Corner of Las Vegas Boulevard
South and Hacienda
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 169-29-701-001
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: August 31, 1995
Sale Price: $80,000,000
Terms: All cash
Grantor: Sahara Gaming Corporation dba
as Hacienda Hotel, Inc.
Grantee: Circus Circus, dba Pinkless, Inc.
Document: 9508310249
SITE DESCRIPTION:
Land Area: 47.29 acres
Improvement of Sale: 1,115 room hotel
Utilities: All to site
Topography: Level at street grade
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $1,691,690
COMMENTS:
This is the sale of the Hacienda Hotel for redevelopment purposes. The
buildings were demolished on December 31, 1996. The sales price was
initially negotiated by another buyer, a former Circus Circus executive
who, due to a conflict of interests, was forced to relinquish the deal
to Circus Circus. The buyer owns the remainder of the block to the
south and most or all of the block to the north. Circus Circus would
not disclose demolition costs or interim EBITDA.
<PAGE>
LAND COMPARABLE NO. 5
IDENTIFICATION:
Location: N.W. Corner of Las Vegas Blvd. and
Russell Road
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-29-701-002 and 162-29-801-001
TRANSACTION DATA:
Sale Date: March 1995
Sale Price: $73,000,000
Terms: All Cash
Grantor: West State Land
Grantee: Circus Circus Enterprises
Document: 950303:01059
SITE DESCRIPTION:
Land Area: 73.74 acres
Improvement of Sale: Vacant
Utilities: Off-sites installed, available
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $989,965
COMMENTS:
This property is located south of Hacienda Hotel/Casino. It is planned
for development of the Millennium project, a multi-phased,
multi-property, gaming development.
<PAGE>
LAND COMPARABLE NO. 6
IDENTIFICATION:
Location: 2755 Las Vegas Boulevard South
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-09-602-002
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: January 26, 1996
Sale Price: $43,500,000
Terms: All cash and notes
Grantor: Las Vegas Entertainment Network
Grantee: Orion Casino Corporation, a wholly
owned subsidiary of International
Thoroughbred Breeders
Document: 960124-1152 recorded 1/24/96
SITE DESCRIPTION:
Land Area: 20.86 acres
Improvement of Sale: El Rancho Hotel and Casino
Utilities: All to site
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $2,085,331
COMMENTS:
Planning to raze site and redevelop as the Starship Orion Resort with
7 separately owned and operated casinos. Casinos to be structured like
anchor tenants in a shopping mall. The seller received one of the
casino spaces as a continued participatory interest.
<PAGE>
LAND COMPARABLE NO. 7
IDENTIFICATION:
Location: 2600 and 2601 Las Vegas Boulevard South
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-09-602-001 005 plus 2nd parcel
Fee Simple Fee Simple
TRANSACTION DATA:
Sale Date: October 2, 1995
Sale Price: $61,738,500
Terms: All cash
Grantor: Howard Hughes Corporation
Grantee: The Gordon Gaming Corporation and
Sahara Gaming Corporation
Document: 951002-73
SITE DESCRIPTION:
Land Area: 66.04 acres
Improvement of Sale: Vacant
Utilities: All to site
Topography: Level at street grade
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $934,865
COMMENTS:
Transaction involving two parcels was negotiated in conjunction with
the 20.87 acre Wet'N' Wild site and the 39.17 acre St. Andrews Golf
site parcel located directly across Las Vegas Boulevard South. Cost to
buy out the lease for the as of then undeveloped St. Andrews Golf lease
was $3.0 million. Cost to buy out Wet'N Wild lease was $7.0 million if
exercised immediately and stepped down to zero after 4 to 5 years.
Rental income from Wet'N Wild which is open only part of the year, was
nominal. Demolition costs estimated at $1.5 million.
<PAGE>
SUBJECT PHOTOGRAPHS
View into site looking East from the Mirage,
one remaining Sands Building is visible.
The Sands Expo Center is visible behind this building.
View North from site looking into what is planned as the Lido Site,
and beyond into the Desert Inn Golf Course.
<PAGE>
SUBJECT PHOTOGRAPHS
View from back of site towards Las Vegas Boulevard South.
Harrah's is on the left. The back of the Casino Royale is in the center,
and the Mirage is visible to the right.
Likely view into the Mirage from West facing guest rooms.
<PAGE>
NEIGHBORHOOD PHOTOGRAPHS
The Strip looking South, in the vicinity of the subject site.
The Sands Expo Center.
October 17, 1997
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Goldman Sachs Credit Partners, L.P.
85 Broad Street
New York, New York 10004
GMAC Commercial Mortgage Corporation
100 S. Wacker, Suite 400
Chicago, Illinois 60606
Subject: Appraisal of the proposed Venetian Casino Resort and the proposed
Grand Canal Shops in Las Vegas, Nevada
Ladies and Gentlemen:
Pursuant to our engagement letter, we submit herewith our narrative appraisal
report of the referenced property. We have inspected the site, evaluated the
retail and casino hotel market conditions in the Las Vegas area and considered
the local forces influencing property values. The casino hotel and the mall are
assumed to be separately demised.
Based on the available data, along with our analyses, opinions and conclusions,
we are of the opinion that the market value of the fee simple interest in the
proposed Venetian Casino Hotel, exclusive of the mall and as if completed would
be:
ONE BILLION ONE HUNDRED MILLION DOLLARS
$1,100,000,000
The market value of the fee simple interest in the proposed Venetian Casino
Hotel, exclusive of the mall and upon stabilization would be:
ONE BILLION THREE HUNDRED MILLION DOLLARS
$1,300,000,000
<PAGE>
Goldman Sachs Mortgage Company
Goldman Sachs Credit Partners, L.P.
GMAC Commercial Mortgage Corporation
October 17, 1997
Page 2
The value of the proposed Grand Canal shops as if completed, has been estimated
as:
TWO HUNDRED TWENTY MILLION DOLLARS
$220,000,000
The value of the proposed Grand Canal shops upon stabilization, has been
estimated as:
TWO HUNDRED FORTY EIGHT MILLION DOLLARS
$248,000,000
Landauer acknowledges that the value reported by the appraiser will be used and
reprinted for dissemination with regard to (a) borrowings being made from banks
and/or institutional lenders for the purpose of developing the property and (b)
in connection with a public offering or private placement of securities. The
attached Assumptions and Limiting Conditions contain a limitation regarding
dissemination of the appraisal.
At present the contiguous tradeshow and convention facility, the Sands
Exposition and Convention Center (SECC) encroaches onto 1.59 acres of the tax
parcels that include the subject site and is owned by an entity related to the
subject's current ownership. In order to maximize the allowable density of the
site, the related parties have entered into cross easement agreements that
enable them to maximize densities and to take advantage of the complementary
pattern of parking utilization. The contiguous convention center would be a
significant demand generator for any casino hotel project, regardless of theming
or market orientation. We are of the opinion that any other prudent buyer would
seek to negotiate a physical connection to the convention center and share
parking.
We have made certain assumptions regarding the aforementioned encroachment and
provision of parking facilities as indicated in an unsigned copy the Reciprocal
Easement, Use and Operating Agreement (REA) issued June 24, 1997. This agreement
is between Interface Group-Nevada, Inc. (Interface), which is the current owner
of the SECC, and Las Vegas Sands, Inc. (LVSI), which owns the subject land upon
which it or one or more affiliates plans to develop the subject Venetian (Phase
I) resort and the Lido (Phase II) resort. Based upon our review of that draft
document, the following assumptions were made for a market value development.
<PAGE>
Goldman Sachs Mortgage Company
Goldman Sachs Credit Partners, L.P.
GMAC Commercial Mortgage Corporation
October 17, 1997
Page 3
1.) The site area utilized in our valuation is based on the survey by Horizon
Surveys dated September 9, 1997.
2.) The legal description defining the retail mall component of the Venetian
mixed-use project was not available for our review. In preparing this valuation,
we have assumed that the retail mall component will be separately and legally
demised into a single unit comprising the bundle of rights characteristic of fee
simple ownership which would permit transfer of ownership unimpeded by the
entities holding title to the casino hotel.
3.) Leasing plans, building plans and related data provided by the developer and
used in this valuation are assumed to accurately reflect the project as
proposed. Furthermore, the values derived in this report assume that all
proposed improvements are completed in a timely manner.
4.) The REA places the onus of providing 800 convenient parking spaces on the
owner/developer of the two-phased development which includes the subject site.
The SECC will be obliged to pay only ordinary maintenance charges on the spaces
used.
5.) We understand from conversations with representatives of LVSI that the
County has tentatively approved an approximately 3,940 space garage for the
subject Venetian casino hotel and retail project, to be augmented by a second
3,000 space garage to be constructed with the Phase II hotel. No other project
has the combination of convention space, guest rooms and retail space as is
proposed for the subject property. The ratio of parking spaces at Caesar's
Palace suggests that the 6,940 spaces may be too few for both phases of the
subject. Our cost estimates and forecasts assume that the planned Phased I
parking structure of 3,940 spaces is expanded by 560 spaces and that,
o if the Phase I structure is inadequate, surface lots on the Lido site (Phase
II) would be used until construction began on an expanded Phase II garage and
o a shuttle service to a temporary off-site location could be operated by the
Venetian and the SECC during the construction of the Phase II parking garage.
6.) There will be a series of reciprocal easements granted between the subject
and the SECC regarding access, egress, parking and common area maintenance.
These easements will exist in perpetuity and benefit the subject property.
<PAGE>
Goldman Sachs Mortgage Company
Goldman Sachs Credit Partners, L.P.
GMAC Commercial Mortgage Corporation
October 17, 1997
Page 4
The appraisal report is further subject to the attached specific conditions and
assumptions, changes in which may materially affect the value conclusions
reported herein.
We certify that we have no interest in the property and that our employment and
compensation are not contingent upon our findings and conclusions. The following
appraisal report is subject to the assumptions and limiting conditions made
throughout the report.
Sincerely,
LANDAUER ASSOCIATES, INC.
Karen Johnson, MAI Rodney A. Wycoff, CRE, MAI
Managing Director Senior Managing Director
John R. Forbes, MAI Charles P. Gardner, MAI
Manager Managing Director
<PAGE>
APPRAISAL OF THE PROPOSED
VENETIAN CASINO AND GRAND CANAL SHOPS
ON LAS VEGAS BOULEVARD SOUTH
IN LAS VEGAS, NEVADA
<PAGE>
TABLE OF CONTENTS
Page
No.
---
SUMMARY OF SALIENT DATA AND CONCLUSIONS......................................1
SUBJECT RENDERING............................................................4
ASSUMPTIONS AND LIMITING CONDITIONS..........................................5
CERTIFICATION................................................................7
INTRODUCTION.................................................................8
Identification of the Property.............................................8
Purpose of the Appraisal...................................................8
History of the Property/Background of the Engagement.......................8
Property Rights Appraised..................................................9
Definition of Market Value................................................10
Marketing and Exposure Period.............................................11
Date of Value Estimate....................................................11
Scope of the Assignment...................................................12
DESCRIPTIVE SECTION
Regional Analysis.........................................................13
The Visitor's Industry....................................................18
Neighborhood Analysis.....................................................32
Site Analysis.............................................................36
Improvement Description...................................................46
Highest and Best Use......................................................51
VALUATION SECTION...........................................................56
Combined Cost Approach....................................................57
Casino Hotel Cost Analysis................................................74
Casino Hotel Sales Comparison Approach....................................74
Gaming Analysis...........................................................78
Hotel Analysis............................................................86
Casino Hotel Income Approach.............................................104
Retail Market Analysis...................................................126
Retail Cost Approach.....................................................149
Retail Sales Approach....................................................150
Retail Income Approach...................................................151
Valuation of Retail Mall's Development Rights............................169
<PAGE>
ADDENDA
Engagement Letter
Photographs of the Subject Property
Photographs of Selected Casino Hotels
Photographs of Retail Competitors
Proposed Additions to Supply
Comparable Land Sales
Bovis Construction Detail
Hotel Investment OUTLOOK
Casino Hotel Discounted Cash Flow Analysis "As Stabilized"
Qualifications of the Appraisers
<PAGE>
1
SUBJECT RENDERING
SUMMARY OF SALIENT DATA AND CONCLUSIONS
CASINO HOTEL COMPONENT
Subject: Proposed 3,036 room Casino Resort Hotel
with 342,000 net square feet of meeting
space (500,000 square feet gross).
Purpose of the Appraisal: To estimate the market value of the fee
simple interest in the Venetian Casino Resort
as if completed and as if stabilized based on
economic conditions prevailing on October 17,
1997.
Location: 3355 Las Vegas Boulevard South, Las Vegas,
Nevada.
Site: 1,344,378 square feet, or approximately 30.86
acres.
Improvements: Piers, foundations, structural steel.
Zoning: H-1 which permits gaming and hotel use by
right.
Highest and Best Use: Resort Casino connected to the Sands
As Vacant Exposition and Convention Center.
Property Rights Appraised: Fee Simple Interest.
Marketing Period: Twelve to eighteen months.
Indications of Value:
As if Completed Upon Stabilization
Income Approach: $1,100,000,000 $1,300,000,000
Per Unit $362,200/Room $428,000/Room
Sales Comparison Approach: Not Applicable Not Applicable
Cost Approach: $1,133,000,000 Not Applicable
Per Unit: $373,000 Per Room Not Applicable
Valuation Date: April 1, 1999 April 1, 2001
Final Market Value Conclusion $1,100,000,000 $1,300,000,000
<PAGE>
2
SUBJECT RENDERING
MALL COMPONENT
Subject: Grand Canal Shops is a proposed, unanchored
specialty regional mall to be physically
situated within the Venetian, a casino hotel
currently under construction.
Purpose of the Appraisal: To estimate the prospective value upon
completion and value upon stabilization of
the leased fee interest in the subject
property based on market conditions existing
on October 17, 1997, the date of the most
recent inspection.
In addition, the fee simple interest in the
development rights to construct the mall as
proposed will be estimated.
Location: Within the Venetian, a proposed mega-resort
currently under construction near the
southeastern corner of Las Vegas Boulevard
South and Sands Avenue in Las Vegas, Clark
County, Nevada.
Site: The subject comprises a portion of the
Venetian mega-resort and will be situated
above street grade on the second and third
levels of the resort, immediately above the
ground level casino.
Improvements: A two-level, unanchored specialty regional
mall comprising 500,000 square feet of gross
leasable area (GLA).
Zoning: H-1 which permits gaming and hotel use by
right, and includes commercial shops and
stores.
Highest and Best Use:
As Vacant Given the legal entity which is the subject
of this appraisal, an "As Vacant" H&BU
conclusion is not warranted.
As Improved As proposed with an unanchored specialty
regional mall to function in conjunction with
the proposed Venetian mega-resort and
connected to the Sands Expo and Convention
Center (SECC).
Property Rights Appraised: Leased Fee and Fee Simple Interests.
Marketing Period: Twelve months.
<PAGE>
3
SUBJECT RENDERING
Indications of Value:
Upon Completion Upon Stabilization
--------------- ------------------
Income Capitalization Approach: $220,000,000 $248,000,000
Per Unit $507 PSF $531 PSF
Sales Comparison Approach: Not applicable Not applicable
Cost Approach: $187,000,000 Not applicable
Valuation Date: April 1, 1999 April 1, 2000
Final Value Conclusion: $220,000,000 $248,000,000
Value of Development Rights: $ 33,000,000 Not applicable
<PAGE>
4
[Picture of
The Venetian
Las Vegas, Nevada]
<PAGE>
5
ASSUMPTIONS AND LIMITING CONDITIONS
This report is made expressly subject to the following conditions and
stipulations:
1. Date and definitions of value, together with other definitions and
assumptions on which our analyses are based, are set forth in
appropriate sections of this report. These are to be considered part
of these limiting conditions as if included here in their entirety.
2. The conclusions stated herein, including values which are
expressed in terms of the U. S. Dollar, apply only as of the date of
value and are based on prevailing physical and economic conditions
and available information at that time. 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. No representation is made as to the
effect of subsequent events which may significantly alter the
conclusions reported herein.
3. Title to the property is assumed to be marketable. The property is
considered as being under responsible ownership and free of all
encumbrances except as specifically discussed herein.
4. Information reported herein has been obtained from reliable sources
and, when feasible, has been verified. The appraisers reserve the
right to make appropriate revisions in the event of discovery of
additional or more accurate data.
5. No responsibility is accepted by Landauer for considerations
requiring expertise in other fields. Included in this category are
ownership, legal description and other legal matters, survey of
property boundaries, geologic considerations including soils and
seismic stability, civil, structural or other engineering, and
identification of hazardous or toxic substances. Data furnished or
obtained from public sources relative to these matters has been
adopted and is assumed to be correct.
6. Except where specifically noted, we have no cause to expect the
existence of undisclosed easements, encroachments or defects in
title, access, geology, structural integrity or mechanical systems.
Any need for further study indicated by our investigation has been
disclosed to the client and/or noted in the report; results of any
such studies furnished have been accepted and the source identified.
Maps and other graphic materials reproduced herein are for
illustrative purposes only and are not to be relied on for factual
information.
<PAGE>
6
ASSUMPTIONS AND LIMITING CONDITIONS
7. The appraisers have inspected the subject property with the due
diligence expected of a professional real estate appraiser. The
appraisers are not qualified to detect hazardous waste and/or toxic
materials. Any comment by the appraisers that might suggest the
possibility of the presence of such substances should not be taken
as confirmation of the presence of hazardous waste and/or toxic
material. Such determination would require investigation by a
qualified expert in the field of environmental assessment.
The presence of substances such as asbestos, urea-formaldehyde foam
insulation or other potentially hazardous material may affect the
value of a property. The appraisers' value estimate is predicated on
the assumption that there is no such material on or in the property
that would cause a loss in value.
No responsibility is assumed for any environmental conditions, or
for any expertise or engineering knowledge required to discover
them. The appraisers' descriptions and resulting comments are the
result of the routine observations made during the appraisal.
8. This appraisal covers only the real and personal property
described herein. Unless specifically stated to the contrary, it
does not include consideration of mineral rights or related right of
entry, nor tenant's personal property or the removal thereof. Values
reported herein are not intended to be valid in any other context,
nor are any conclusions as to unit values applicable to any other
property or utilization than that specifically identified herein.
9. By reason of this assignment, testimony, attendance in court, any
government or other hearing with reference to the property is not
required without prior arrangements having been made relative to
such additional employment.
10. Use and disclosure of the contents of this report is governed by
the Bylaws and Regulations of the Appraisal Institute. The Appraisal
Institute reserves the right to authorize its representatives to
review this report and its supporting documentation. Except as set
forth in the engagement letter to which these limiting conditions
are attached, confidential distribution of copies of this report in
its entirety may be made subject to the sole control of the
addressee, however, excerpts may not be given to any third party
without prior written consent.
11. Except as set forth in the engagement letter to which these
limiting conditions were attached, neither all nor any part of the
contents of this report (especially any conclusions as to value, the
identity of the appraisers or the firm with which they are
connected, any reference to the Appraisal Institute or to the MAI or
SRA designation) shall be disseminated to the general public through
advertising or sales media, public relations media, news media or
any other public means of communication without prior written
consent.
CERTIFICATION
The undersigned certify that to the best of their knowledge and belief:
<PAGE>
7
CERTIFICATION
The statements of fact contained in this appraisal report and upon which the
analyses, opinions and conclusions expressed herein are based are true and
correct. This report is made subject to the Assumptions and Limiting Conditions
set forth on the preceding pages which contain all of the limiting conditions
(imposed by the terms of the assignment or by the appraiser) affecting the
analyses, opinions and conclusions in this report.
Employment and compensation for making this appraisal are in no way contingent
upon the value reported, and we certify that we have no direct or indirect
current or prospective personal interest or bias in the subject matter of this
appraisal report or to the parties involved.
No one other than the undersigned prepared the analyses, opinions or conclusions
concerning real estate that are set forth in this report.
This report has been made in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Practice of the Appraisal
Institute. The use of this report is subject to the requirements of the
Appraisal Institute relating to reviews by its duly authorized representatives.
As of the date of this report, Rodney A. Wycoff, MAI; Charles P. Gardner, MAI,
John R. Forbes, MAI, and Karen Johnson, MAI, have completed the requirements of
the continuing education program of the Appraisal Institute.
Karen Johnson, MAI personally inspected the property which is the subject of
this report on February 10, 1997, March 7, 1997, August 4, 1997, and October 17,
1997. Rodney A. Wycoff, MAI, inspected the property on January 29, 1997. John R.
Forbes, MAI inspected the property on July 30, 1997. Charles P.Gardner, MAI
inspected the property on August 15, 1997.
Karen Johnson, MAI Rodney A. Wycoff, CRE, MAI
Managing Director Senior Managing Director
Nevada Certified General
Real Estate Appraiser License 02113
John R. Forbes, MAI Charles P. Gardner, MAI
Manager Managing Director
<PAGE>
8
INTRODUCTION
INTRODUCTION
Identification of the Property
The subject property is located at 3355 Las Vegas Boulevard South in what is
commonly referred to as Las Vegas, Nevada. The municipality governing the
subject property is Clark County. The subject is currently recorded on the
County's property tax records as all or portions of account numbers
162-16-202-008 and 162-16-301-001.
The boundary lines of two tax parcels have not yet been relocated so that the
Sands Exposition and Convention Center technically encroaches on 1.59 acres of
the subject site. A copy of the proposed site area is presented in the survey on
page 37.
Upon completion, the subject property, to be known as the Grand Canal Shops,
will be physically situated within the proposed Venetian hotel casino
development which is currently under construction. The majority of the space in
the Grand Canal Shops is to be located one floor above the casino floor.
We have made certain assumptions regarding the elimination of the aforementioned
encroachment and provision of parking facilities and utilities as indicated in
an unsigned copy of the Reciprocal Easement, Use and Operating Agreement (REA)
issued June 24, 1997.
Purpose of the Appraisal
The purpose of this appraisal is to estimate the market value of the fee simple
interest in the proposed Venetian Resort casino hotel, as if completed and upon
stabilization.
The appraisal is also intended to estimate the prospective value upon completion
and the value upon stabilization of the leased fee interest in the proposed mall
to be known as the Grand Canal Shops. In addition, the fee simple interest in
the development rights to construct the proposed mall will be estimated.
All values will be based upon market conditions existing on October 17, 1997,
the most recent date of inspection.
History of the Property/Background of the Engagement
In the late 1950's, the first low-rise buildings of the Sands Hotel were
constructed on the larger assemblage comprised of approximately 59.0 acres which
includes the subject site. Additional buildings, and eventually a circular tower
were added in the 1960's and 1970's.
The Sands Hotel and its excess land were purchased in 1989 for $110,000,000 by
an affiliate of The Interface Group, doing business as Las Vegas Sands, Inc. An
additional $18,500,000 was funded at
<PAGE>
9
INTRODUCTION
purchase for recapitalization and capital improvements. The total investment in
the original 59.0 acre property was therefore $128,500,000.
To increase the large parcel's frontage on the Strip, the 1.53 acre Tam
O'Shanter Motel was bought in early 1996 for $12,400,000, or $8,104,575 per
acre, increasing the assemblage to 60.5 acres. This parcel is held under
different ownership (Silver State Realty Trust) but is controlled by the same
principal as the larger parcel.
In 1990, approximately 13.7 acres of excess land on the eastern boundary of the
assemblage were developed with the Sands Exposition and Convention Center (SECC)
at a cost of $55,000,000. In 1994, the lower level parking garage of the SECC
was converted into an additional 411,400 square feet of exhibit and meeting
space at a cost of $15,500,000. The conversion of the former parking garage
brought the net exhibit and meeting space total to 966,400 square feet.
Pre-function areas bring the revenue producing space up to 1,001,400 square
feet.
In early 1996, the SECC was transferred between affiliates. Las Vegas Sands
Inc. (LVSI) sold the subject to the Interface Group - Nevada, Inc.
(Interface) for $66,594,000, its approximate book value.
Between December 1996 and March 1997 the existing Sands Hotel and Casino complex
was demolished at a total cost of approximately $6,000,000 to make way for two
mega casino resorts, to be named the Venetian and the Lido. These casino hotels
are planned to be physically connected to each other through the Grand Canal
Shops and their respective casino floors and to the SECC by a common wall and
indoor corridor. Parking facilities and a utility plant are to be shared also.
The proposed Venetian Casino Hotel and the proposed retail mall that is to be
separately demised are the subject of this appraisal.
Property Rights Appraised
The property rights appraised for the casino hotel are what in mixed-use
developments are considered to be a fee simple estate. A fee simple estate is
defined as absolute ownership unencumbered by any other interest or estate;
subject only to the limitations of eminent domain, escheat, police power and
taxation.
The intent of the REA is to eliminate the current Interface land encroachment of
the Sands Expo Center onto 1.59 acres of the subject site's tax parcel by
modifying the parcel boundary lines. Our appraisal assumes that this has been
completed.
<PAGE>
10
INTRODUCTION
The property interest appraised for the mall in this report is the leased fee
estate, defined in The Dictionary of Real Estate Appraisal, Third Edition, 1993,
published by the Appraisal Institute, as: An ownership interest held by a
landlord with the right of use and occupancy conveyed by lease to others. The
rights of the lessor (the leased fee owner) and leased fee are specified by
contract terms contained within the lease.
The larger two-phased development is also encumbered by the obligation to
provide no fewer than 800 parking spaces to the Sands Exposition and Convention
Center. We have assumed that one half, or 400 spaces, will be the obligation of
the subject's developer and operator. The remaining 400 spaces can be provided
on surface lots on the Phase II site until that phase is completed.
The remaining easements assumed for the market value estimate are typical of
those encumbering regional malls and the individual fee components of mixed-used
developments.
Definition Of Market Value
For the purpose of this appraisal, Market Value is defined as follows:
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 stimulus. 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:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.(1)
- ---------
(1) Standards of Professional Appraisal Practice of the Appraisal Institute" and
Uniform Standards of Professional Appraisal Practice," The Appraisal Foundation,
1994.
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11
INTRODUCTION
As further clarification, NCREIF believes that it is reasonable under current
market conditions to assume up to one year to sell a property. Conversely, a
marketing period of three years would typically not be appropriate under the
Market Value definition. Further, Market Value does not assume a "liquidation
sale" (forced sale) which would place undue emphasis on time and cash.(2)
An estimate of market value requires that the appraisal reflect the attitudes
and behavior of typical investors and developers. Also, an estimate of market
value considers the continuous attempt of market participants to maximize real
estate values, generate increased revenues and reduce risk. The market value
indications included in the Valuation Section are based upon the above
requirements.
Marketing and Exposure Period
There are a number of gaming operators actively looking for casino resort
representation on the Strip in Las Vegas. We estimate that the actual marketing
period for the casino hotel component would require no more than twelve months.
However, due diligence periods prolong the effective marketing period by up to
six months. A total marketing and due diligence period of twelve to eighteen
months is deemed appropriate for the casino hotel component. The retrospective
exposure period is estimated to be the same.
Las Vegas' diversification into a more mainstream destination, recent
development and investment activity indicates that there are a number of retail
mall operators who would like to take advantage of the visitor volume along the
Strip. The investment market for regional malls has been active over the last
several years on a national basis. Most properties that have sold in the last
two years, if priced appropriately, have been on the market for less than one
year. The Korpacz Real Estate Investor Survey (Second Quarter 1997) indicates an
average marketing time of 10.44 months for regional mall facilities across the
U.S., up marginally from the 10.11 months reported last quarter, and a slight
increase from 9.94 months reported one year ago.
We estimate that the reasonable time necessary to market the subject at the
stated value would be approximately one year. The necessary exposure time, which
precedes the date of value and is referenced in the definition of market value,
is also estimated at approximately one year.
Date of Value Estimate
The casino hotel is valued as of April 1, 1999, the estimated date of completion
of the improvements, and as of April 1, 2001, its estimated date of
stabilization.
- --------------
(2) "CREIF Claification Statement Regarding 'Market Value'", National Council of
Real Estate Investment Fiduciaries, 1991.
<PAGE>
12
INTRODUCTION
The mall is valued as of April 1, 1999, the estimated date of completion of the
improvements, and as of April 1, 2000, its estimated date of stabilization.
Each value estimate rendered is based upon economic conditions prevailing as of
October 17, 1997, the most recent date of inspection.
The site or model room was inspected on January 29, February 10, March 7, August
4, 1997 and October 17, 1997, by Karen Johnson, MAI. Mr. Rodney A. Wycoff, MAI,
CRE, inspected the site on January 29, 1997. Mr. John A. Forbes, MAI, inspected
the subject site and model room on July 28, 1997. Mr. Charles R. Gardner, MAI,
inspected the site and model room on August 15, 1997.
Scope of the Assignment
The scope of this appraisal involved the systematic research and analysis
necessary to reach a market value estimate for the land underlying the proposed
Venetian Resort and the Grand Canal Shops.
Our investigation included a thorough market overview in order to gauge the
current condition of the Las Vegas casino resort and convention market.
Historical development and absorption trends were analyzed. A summary of
projects currently planned and proposed was developed and their status in the
planning/approvals process was reviewed. We reviewed the current market for
vacant land on the Las Vegas Strip. Because of the dated or less desirable
nature of the land sales comparables, a residual technique was also considered.
Cost estimates prepared by Bovis were reviewed.
A diligent search was performed for comparable improved sales for each component
of the project, however, the difference between these assets and the subject
properties were so great as to preclude meaningful comparisons.
Income estimates were prepared based on income and expenses of relatively
comparable assets. Current investor requirements were researched.
Last, final value estimates were reached based on the above analyses, influenced
by the most reliable and appropriate data. This full narrative report is the
result of our findings and analyses.
REGIONAL ANALYSIS
Geographical, social, political and economic trends are the factors that have
the most profound effect upon the real estate market. The following is a
discussion of these trends as they affect the economic
<PAGE>
13
REGIONAL ANALYSIS
base and strength of the Las Vegas Metropolitan Statistical Area (MSA) and the
City of Las Vegas in particular.
Geographical
The subject is located within the most southern region of Nevada consisting of
Clark and Nye Counties. Combined with Mohave County in Arizona, Clark and Nye
Counties comprise the Las Vegas Metropolitan Statistical Area (MSA). The City of
Las Vegas is within the 864 square mile Las Vegas Valley of Clark County. Clark
County is approximately 7,910 square miles, most of which is undeveloped desert
and wildlife ranges owned by the Federal Government. To the north of Clark
County is Lincoln County, to the west is Nye County, also to the west and south
is California, and the Colorado River and Lake Mead are a natural eastern border
separating the county and state from Mohave County in Arizona. Las Vegas is
approximately 290 miles north-east of Los Angeles.
Population
Since 1980, the Las Vegas MSA has experienced an average compound annual growth
rate of 4.9 percent per year. Historical population figures and projections are
shown in the following table.
Las Vegas MSA
Compound
Annual
Year Population Growth
--------------- ------------- ---------------
1980 538,000 N/A
1990 875,000 5.0%
1995 1,144,000 5.5%
1st Qtr. 1997 1,219,000 3.2%
Est. 2000 1,352,000 3.5%
Source: DRI/McGraw-Hill, U.S. Markets Review.
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14
REGIONAL ANALYSIS
Since 1970, the City proper has experienced population growth at an average
compound annual rate of 4.8 percent per year. The City's population figures and
estimates are shown in the following table.
City of Las Vegas
Compound
Annual
Year Population Growth
--------------- ------------- --------------
1970 125,787 --
1980 164,674 2.7%
1990 258,295 4.6%
July 1996 401,703 7.6%
Source: Clark County Comprehensive Planning Department
Population in the City of Las Vegas has increased significantly since 1970 and
will continue to do so due to economic expansion. By the year 2000, DRI
estimates that population will increase to 1.35 million residents, an increase
of nearly 55% over 1990. Booming population growth will be driven by economic
growth. Along with the hotel, gaming and recreation industry, business and
personal services, trade, state and local government, transportation,
communications and utilities are areas of the economy that are expected to grow.
Employment
During 1996, total employment increased 8.1%. Much of this increase is the
result of new casino openings and construction of new properties. In absolute
numbers, the industry that created the most new jobs during 1996 was services,
but construction, trade and durable goods manufacturing grew at faster
percentage rates. Many new manufacturing firms relocated to Las Vegas from
California in the early 1990's as a result of the recessionary period California
experienced. Now that California's economy is recovering, the rate of growth in
local manufacturing jobs is expected to decline, but this should have little
effect on the Las Vegas economy. Current casino openings are expected to
increase services employment by about 15,000 jobs in both 1997 and 1998.
<PAGE>
15
REGIONAL ANALYSIS
Presented below is historical employment and unemployment data pertaining to the
Las Vegas MSA. The labor force has grown, on average, at a compound rate of 11.5
percent annually over the last four years, while the number of people employed
has grown at a greater rate of 12.0 percent per year. This has resulted in a
substantial decrease in the unemployment rate.
Employment and Unemployment
Las Vegas MSA
Compound
1st Qtr. Annual Growth
Year 1992 1994 1996 1997 Since 1992
-------------------- ---------- --------- --------- ----------- --------------
Labor Force 422,800 572,000 648,000 654,000 11.5%
Employment 394,050 535,392 614,952 620,646 12.0%
Unemployment 28,750 36,608 33,048 33,354 3.8%
Unemployment Rate 6.8% 6.4% 5.1% 5.1%
Source: DRI/McGraw-Hill
The unemployment rate decreased from 1992 to 1994 by 0.4 percent. The current
unemployment rate is 5.1 percent, down from 6.8 percent in 1992. By comparison,
unemployment rate for the State of Nevada is presently 5.0 percent, while the
U.S. unemployment rate is 5.2 percent.
Nevada is one of the fastest growing states in the country. Due to a number of
factors including lower corporate and personal tax burdens, a lower cost of
doing business and the community's pro-business attitude, Nevada has been ranked
first as the fastest growing economy in the west by the DRI/McGraw Hill Regional
Forecast Summary over the last three years. It is forecasted to maintain that
ranking through 2001.
The MSA's economic vitality is closely related to the visitor industry which
directly provides, at the least, one out of three area jobs. Las Vegas is one of
the nation's favorite vacation destinations. During 1996, 29.7 million people
visited Las Vegas and spent $22.5 billion in the area including gaming revenues.
New developments increase employment opportunities, which in turn allow for
growth in related services.
The Las Vegas MSA has been striving to diversify its employment base
particularly in the manufacturing, distribution/warehousing and finance,
insurance and real estate (FIRE) sectors. Local planners forecast that the
greatest percentage increases in job growth will occur in the non-gaming areas.
However, in terms of absolute numbers, the visitor industry is likely to
continue to add the greatest number of new jobs.
This is evident from a review of the top ten employers in Las Vegas provided
below.
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16
REGIONAL ANALYSIS
Las Vegas MSA
Major Employers
Company Business Type
- -----------------------------------------------------------------------
1. MGM Grand Hotel, Casino Operations
2. Mirage Casino-Hotel Hotel, Casino Operations
3. University of Nevada--Las Vegas Education Services
4. Treasure Island at the Mirage Hotel, Casino Operations
5. Caesar's Palace Hotel, Casino Operations
6. Excalibur Hotel & Casino Hotel, Casino Operations
7. Hilton Corporation Hotel, Casino Operations
8. Luxor Hotel & Casino Hotel, Casino Operations
9. Circus Circus Casino Hotel, Casino Operations
10. The Monte Carlo Hotel, Casino Operations
Source: DRI/McGraw-Hill U.S. Markets Review, 1st Qtr. 1997.
Because of the relative importance of the visitor industry to Las Vegas' economy
and to the success of the proposed project, the local gaming market and the
local hotel market will be discussed at length in a separate section titled "The
Visitor Industry".
Transportation
Freeways
Las Vegas is served by two major freeways and a number of smaller highways.
Interstate 15 extends north from the east/west 40 freeway through the southern
portion of the state and city and is the primary road link to Los Angeles.
Interstate 215 extends north and south through the central portion of the metro
area and is a branch of the 95 and 93 freeways. State Highways 159 and 160 form
a loop around the western and southern portions of the city. Highway 582 is a
link between Las Vegas and Henderson. And highways 146, 147 and 167 help provide
additional highway circulation to immediate surrounding areas. By the year 2000,
Las Vegas traffic counts are expected to increase by at least 30 percent above
1996 levels. As a result, Clark County is attempting to maintain and upgrade its
roadways through regular improvements.
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17
REGIONAL ANALYSIS
Airports
The McCarran International Airport has an important role in Clark County's
business and development growth plan. McCarran is ranked the 10th busiest
airport in the United States, accommodating almost 30.5 million travelers in
1996, an increase of 8.7 percent above 1995 levels. From 1988 through 1996,
total passenger count at the airport increased at a substantial compound annual
growth rate of 8.8 percent.
Since airport traffic is increasing at such rates, Clark County has committed to
spending $450 million in improvements to accommodate for anticipated future
levels of passenger traffic. During 1997 the ticketing lobby was expanded by 150
lineal feet to increase the number of ticket counter positions, and a general
aviation runway was expanded to accommodate full-size commercial carriers,
bringing the total number of runways to four. In summer of 1998 the first 26
gates of a 50-gate "D" Terminal expansion will be completed, along with a
baggage handling expansion and a new people mover system. Because of its
superlative air service, Las Vegas has an advantage over many other convention
and vacation destinations. Its demonstrated commitment to expanding its visitor
serving infrastructure bodes well for future growing in tourism to the area.
Other Surface Transportation
Las Vegas is accessible via railroad for both freight and passenger service.
Both Union Pacific and Amtrak have lines running into the County and City
connecting Las Vegas with Los Angeles, Phoenix and Salt Lake City.
A number of bus lines are available in Las Vegas, some of which are the
following: Greyhound, Las Vegas-Tonapah-Reno Stage Line, Ray & Ross, Sun Valley,
Westside Charter Service, Funbus Luxury Travel and the Gray Line Tours. Also
available in the intracity is the Las Vegas Transit System.
Conclusion and Trends
Las Vegas continues to be one of the fastest growing cities in the nation. Along
with rapid growth in tourism, the Las Vegas market also continues to expand into
other industries as well. Strong growth in tourism is projected to continue for
the next five years. A pro-business atmosphere and favorable tax climate will
support the growth of professional and service industries. Employment is strong
and will continue to strengthen as the economy diversifies.
THE VISITOR INDUSTRY
Presented in the following subsections are discussions of the three critical
components of the Las Vegas Visitor Industry: the convention market, the gaming
market and the hotel market.
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18
THE VISITOR INDUSTRY
THE CONVENTION MARKET
Due to warm weather, the presence of two major convention centers, an extensive
hotel inventory with comparatively low room rates, affordable airfares and the
appeal of gaming, Las Vegas now hosts more major national conventions and trade
shows than any other destination. Two of the nation's five largest convention
centers are located in Las Vegas: the Las Vegas Convention Center and the Sands
Exposition & Convention Center. The Sands Exposition & Convention Center (SECC)
is located next to the subject site and boasts 935,000 square feet of prime
exhibit space. In addition to the exhibit space, the SECC also offers 23 meeting
rooms totaling 31,400 square feet and a superior location within one block of
the Strip.
As planned, the subject casino hotel will connect to this facility via a hallway
and pre-function space. The subject's largest ballroom, the 80,000 square foot
Grand Ballroom will share a common wall with the SECC near its Hall C. The
subject's 342,000 square feet of meeting and pre-function space will be
distinguished from the SECC space by a higher level of finish. The combination
of the SECC's exhibition facilities and the subject's highly finished meeting
facilities will enable the combined properties to attract a new market segment
for which meetings, seminars, professional accreditation classes or sit-down
meals functions are of primary importance.
The Las Vegas Convention Center (LVCC) has approximately 1,300,000 square feet
of indoor, finished area broken out as follows: 761,522 square feet of exhibit
space, 149,862 square feet of meeting space, 85,200 square feet of
lobby/registration space, a 14,623 square foot restaurant and 288,793 square
feet of access, circulation and support areas. An expansion broke ground in July
of 1997 to increase exhibit space by 279,000 square feet and to add 42,400
square feet of meeting space. The expansion could be completed as early as May
1998.
The following table is a ten-year summary of the conventions, attendance and
revenue that have occurred in Las Vegas at the two major centers and in the
city's hotels.
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19
THE VISITOR INDUSTRY
Citywide Convention Statistics
Number of Annual Non-Gaming Annual
Year Conventions Attendance Growth Rate Economic Impact Growth Rate
- -------------------------------------------------------------------------------
1987 556 1,677,716 -- $1,197,168,704 --
1988 681 1,702,158 1.5% 1,242,227,536 3.8%
1989 711 1,508,842 -11.4% 1,140,912,624 -8.2%
1990 1,011 1,742,194 15.5% 1,358,243,318 19.1%
1991 1,655 1,794,444 3.0% 1,482,327,551 9.1%
1992 2,199 1,969,435 9.8% 1,693,074,125 14.2%
1993 2,443 2,439,734 23.9% 2,253,526,873 33.1%
1994 2,662 2,684,171 10.0% 3,034,267,004 34.7%
1995 2,826 2,924,879 9.0% 3,359,162,165 10.7%
1996 3,827 3,305,507 13.0% 3,943,105,480 17.4%
Source: Las Vegas Convention and Visitors Authority.
Convention attendance growth and non-gaming economic revenue have increased at
annual compound average growth rates of 7.8 percent and 14.2 percent,
respectively over the last ten years. Growth in attendance and non-gaming impact
was positive in all but one year. The relatively low growth rate in 1991
coincided with the start of a national recession. A significant contributor to
the increase in 1993 was the maturation of the Sands Expo Center and opening of
an expansion to the Las Vegas Convention Center.
Statistics from the Las Vegas Conventional Visitors Authority (LVCVA) indicate
that through July 1997, attendance at conventions in Las Vegas increased by 3.6
percent over the first seven months of 1996. Future growth will be facilitated
by the 1.0 million square feet of meeting space now under construction at the
LVCC, the Subject, the MGM Grand, Caesar's, Bellagio, Paris and Project
Paradise.
Over the past decade the number of new groups coming to Las Vegas has increased
at a compound annual average rate of 28.3 percent per year as depicted in the
table on the following page.
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20
THE VISITOR INDUSTRY
Las Vegas City-Wide Convention and Trade Show Summary
New Versus Repeat Groups
Calendar Year No. Conventions New Repeat Repeat 5 plus
- ------------- --------------- ------------- ---------- -------------
1976 325 38.5% 125 41.5% 135 20.0% 65
1981 515 51.8% 267 32.2% 166 15.9% 82
1986 564 50.0% 282 35.5% 200 14.5% 82
1991 1,655 80.6% 1,334 12.4% 205 7.0% 116
1996 3,827 89.0% 3,406 7.0% 268 3.9% 149
Compound Annual Growth Rates
1976 to 1996 8.6% -- 11.6% -- 2.3% 2.8%
1986 to 1996 21.1% -- 28.3% -- 3.0% 6.2%
1991 to 1996 18.3% -- 20.6% -- 5.5% 5.1%
Source: Las Vegas Convention and Visitors Authority.
New group business is being attracted to Las Vegas. During 1996, nearly 90
percent of the groups meeting in Las Vegas had not previously met there. In
absolute numbers, the number of new groups has doubled over the past five years.
However, when expressed as a percentage rate of growth the figure has moderated
slightly from the 28.3 percent rate over a ten year period to a 20.6 percent
over the five year period. Many of the new groups are being retained, as
demonstrated by the consistent growth in the number of repeat groups. Las Vegas
has been very successful in attracting and retaining new group business.
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21
THE VISITOR INDUSTRY
THE GAMING MARKET
Las Vegas tourism is driven primarily by its gaming. The legalization of
gambling in many states has not had a negative impact on gaming revenues in the
state of Nevada, Clark County or Las Vegas. In fact, gaming revenues in Clark
County have steadily increased over the years as the following table depicts.
Clark County
Gross Gaming Revenue
- -----------------------------------------------
Gross Percentage
Year Gaming Change
Revenues
- -----------------------------------------------
1987 $2,789,336,000 $ --
1988 3,136,901,000 12.5%
1989 3,430,851,000 9.4%
1990 4,104,001,000 19.6%
1991 4,152,407,000 1.2%
1992 4,381,710,000 5.5%
1993 4,727,424,000 7.9%
1994 5,430,651,000 14.9%
1995 5,717,567,000 5.3%
1996 5,783,735,000 1.2%
Compound 8.4%
Annual Growth
Source: Las Vegas Convention and Visitors Authority, January 1997.
The proliferation of gaming outside of Las Vegas, particularly in the Southern
and Midwestern States has promoted the social acceptance of gaming in these new
markets. Due to a conscious shift in market orientation, Las Vegas has shaken
off its former reputation as the vice capital of the country and has emerged as
a mainstream destination, billing itself as America's Entertainment Superstore.
In a 1996 survey by the American Society of Travel Agents, Las Vegas unseated
Orlando as the Number 1 tourist destination. The "must see" quality of the
newest mega resorts enabled Clark County gaming revenues to increase at a
compound average annual growth rate of 8.4 percent between 1987 and 1996.
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22
THE VISITOR INDUSTRY
Through June 1997, gaming revenues in Clark County had increased by 5.1 percent
over the first half of 1996. In absolute dollars, Clark County's gaming revenues
are already $147,871,000 ahead of the first half of last year. During 1996,
total gaming receipts grew by only $76,168,000 over the previous year. The slow
growth in 1996 is attributed to lackluster performance on the Strip.
The following table presents gaming revenue by area in Las Vegas and contrasts
performance in 1996 with 1995. Las Vegas revenues appear to have reached a level
of stabilization, if further growth in revenues is going to occur, casino
operators believe that the number of guest rooms and gaming facilities must
increase.
Las Vegas
Gaming Revenue by Area
County 1995 1996 Change
- --------------------------------------------------------------------------
Clark County $5,717,567,000 $5,783,735,000 1.2%
Las Vegas MSA 4,557,331,000 4,618,674,000 1.3%
Strip 3,610,477,000 3,579,673,000 -0.9%
Downtown 641,853,000 678,852,000 5.8%
Boulder Strip 305,001,000 360,149,000 18.1%
Source: Las Vegas Convention and Visitors Authority, January 1997.
The decline in 1996 for "Strip" gaming revenues was caused almost entirely by a
fairly isolated double digit decline in the month of November. Through October,
the year-to-date growth had been positive. December 1996 figures showed an
increase over the prior December. Local observers attribute the decline to 1) a
major swing in Baccarat play and 2) erroneous odds making on two nationally
televised prize fights. There are a handful of international high stakes
Baccarat players that can affect citywide annual gaming revenues.
Through July, 1997, Gaming revenues along the Strip are up 4.6 percent over the
first seven months of 1996. Still, this cumulative growth rate of 4.6 percent
lags behind the 6.8 percent rate of growth in number of occupied hotel rooms.
The changing profile of the Las Vegas visitor is reflected in the changes in the
gaming revenue when expressed on a "per occupied room night" basis. This is
presented in the following table.
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THE VISITOR INDUSTRY
Clark County
Gaming Revenue Per Hotel Room Night
Estimated Room
Gaming Revenue Nights Occupied Revenue Per
Year (in 000's) (in 000's) Occupied Night
- ----------------------------------------------------------------
1991 $4,152,407 22,530 $184
1992 $4,381,710 23,430 $187
1993 $4,727,424 24,617 $192
1994 $5,430,651 28,208 $193
1995 $5,717,567 28,695 $199
1996 $5,783,735 30,638 $189
Source: Las Vegas Convention and Visitors Authority.
The rate of growth in gaming receipts, when expressed on a per occupied room
basis, is not keeping pace with inflation or the cost to construct many of these
new highly themed mega-resorts. Even if the decline in 1996 is omitted as an
aberration, the compound annual rate of growth was only 2.0 percent per year
between 1991 and 1995. If 1996 is indicative of the new market's profile, the
rate of growth in gaming revenues per occupied room has been only 0.5 percent
per year.
Through July 1997, the gaming revenue per occupied room night declined to $188
from $191 for the same period of the previous year, a 1.5 percent decline. The
trend appears to be broadly based.
Hotel room revenues, food and beverage revenues, and retail sales have, however,
been increasing at rates faster than inflation. From the standpoint of investors
and the lending community, this diversification is a positive change.
It is expected that Las Vegas will continue to attract a broader profile of
visitors in the future as more themed hotels, restaurants and retail centers are
developed. Visitor expenditures will be consumed by many attractions other than
gaming. Therefore, and thus, gaming revenues per occupied room night will likely
be flat or decrease at a moderate rate until the full extent of the new market
profile has been felt.
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THE VISITOR INDUSTRY
THE LODGING MARKET
The Las Vegas lodging market has experienced unprecedented growth during the
1980's due to the evolution of the casino/hotel.
Las Vegas Area
Hotel/Motel Inventory,
Rooms Available as of December 31
------------------------------------------------
Year Number of Percentage
Hotel/Motel Rooms Change
------------------------------------------------
1987 58,474 --
1988 61,394 5.0%
1989 67,391 9.8%
1990 73,730 9.4%
1991 76,879 4.3%
1992 76,523 -0.5%
1993 86,053 12.5%
1994 88,560 2.9%
1995 90,046 1.7%
1996 99,072 10.0%
Source: Las Vegas Convention and Visitors Authority, January 1997.
Over the ten year period, the rooms inventory in Las Vegas grew at a compound
annual rate of 6.0 percent. During 1996 the 1,500 room Stratosphere Hotel opened
in April, followed by the 3,014 room Monte Carlo in June. These two properties
and additions to the Luxor and Circus Circus are largely responsible for the
significant (10.0) percent increase in the room inventory when the number of
rooms open as of December 31, 1996 is compared to that same date in 1995. With
the opening of the New York-New York Hotel and Casino, the Las Vegas lodging
market crossed the 100,000 room threshold on January 3, 1997.
As of July 31, 1997, there were approximately 103,916 rooms available, a 10.5
percent increase over July 31 of 1996.
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THE VISITOR INDUSTRY
Historical Performance
The historical occupancy performance of the aggregate Las Vegas hotel and motel
market from 1987 through 1996 is presented in the following table.
Las Vegas Metro-Wide
Historical Occupancy Performance
Hotel Motel City-Wide
Year Occupancy Performance Occupancy Performance Occupancy Percentage
- --------------------------------------------------------------------------------
1987 87.0% 74.0% 83.4%
1988 89.3% 73.7% 85.1%
1989 89.8% 72.5% 85.2%
1990 89.1% 69.8% 84.7%
1991 85.2% 62.6% 80.3%
1992 88.8% 66.1% 83.9%
1993 92.6% 69.7% 87.6%
1994 92.6% 73.2% 89.0%
1995 91.4% 72.4% 88.0%
1996 93.4% 75.7% 90.4%
Source: Las Vegas Convention and Visitors Authority.
Despite the pace of additions, hotel and motel occupancy rates improved between
1987 and 1996. Over the long term, the pace of growth in demand has outstripped
the rate of growth in supply. However, through July 1997, the overall metro-wide
occupancy rate has declined from 91.6 percent to 87.9 percent. This is
attributable mainly to recent increases in supply. According to statistics from
the Convention and Visitors Bureau, demand increased by 6.8 percent through July
whereas supply increased by 10.5 percent. Moderation in Las Vegas' growth rate
may also be a function of the decline in summer tourism throughout the Desert
Southwest. Tourist traffic is reported to be well below last year's levels in
the communities surrounding the Grand Canyon, in the national parks, Southern
Utah and as far north and east as Durango Colorado. These destinations are
popular with international tourists, primarily Europeans, who may be suffering
from a form of "sticker shock" because of the recent strength of the dollar.
Conversely, the number of Americans vacationing overseas has increased because
of the strength of the dollar.
Given the 6.8 percent growth rate in demand, we believe that talk of Las Vegas'
hotel market having reached its saturation point is premature. In virtually any
other community, a 6.8 percent growth rate in
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26
THE VISITOR INDUSTRY
demand qualifies as "booming" growth. The market appears to be experiencing a
lag between the rate of growth in supply and the rate of growth in demand. Many
of the new rooms are rooms-only expansions to existing resorts and have not
added to the base of attractions. Based on current construction, the rate of
growth in supply will continue to fall off in the second half of 1997. The only
significant addition to open between now and the third quarter of 1998 is a
1,200 room expansion to Caesar's Palace.
The Las Vegas lodging market's performance is particularly successful when
contrasted against the performance of hotels and motels on a national basis.
Occupancy
Las Vegas vs. National Average
Year National Occupancy Las Vegas Occupancy Net Difference
- -------------------------------------------------------------------------------
1994 65.2% 89.0% 36.5%
1995 65.5% 88.0% 34.4%
1996 65.2% 90.4% 25.2%
Source: Las Vegas Convention and Visitors Authority, March 1997.
As is evidenced by the growth in demand, these new properties have demonstrated
the strong ability to induce significant demand into the Las Vegas market. These
hotels, through their themed attractions and extensive national and
international marketing efforts, have greatly broadened the potential Las Vegas
visitor market.
The cost of constructing these new mega-resorts is significant. As indicated in
a previous table, the increased levels of capital expenditures are not
translating into higher gaming revenue when expressed on a per occupied room
basis. Thus, mega-resort operators are recognizing that the increased costs must
be borne by improved profitability in the rooms, food and beverage, and
entertainment departments. Pricing these items at "below cost" can no longer be
recovered by increased gaming revenues.
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THE VISITOR INDUSTRY
According to the Las Vegas Convention and Visitors Bureau, the average daily
room rate in Las Vegas is approximately $45. This figure factors complimentary
rooms in at zero revenue, when in fact the casino departments are required to
"buy" the rooms from the hotel rooms department at a predetermined rate. This
$45 rate is based on intercept interviews and not on any total room revenue or
transient occupancy tax figures. We consider it unreliable and meaningless.
More reliable data is available from the Nevada Gaming Abstract. For Clark
County, the 132 gaming properties reported an average daily room rate of $61.27
in fiscal 1995/96. These properties accounted for 83,067 rooms, which equates to
93 percent of the inventory of 89,300 rooms as estimated by the Convention and
Visitors Bureau as of December 31, 1995 (December 31 is the mid-point of the
fiscal year and would be less likely to overstate the average number of rooms
available during the year).
For the 40 Strip Casino hotels with gaming revenues in excess of $1,000,000, the
average daily room rate in fiscal 1995/96 was $74.32. The 19 largest casino
hotels with gaming revenues of $72,000,000 and over, had an average daily room
rate of $79.19 in fiscal 1995/96. Presented in the following table is a summary
of the growth in the average daily room rate for this category.
Average Daily Room Rates for Strip Hotels
with $72.0 M Plus in Gaming Revenues
Average Daily Percent
Fiscal Year Rate Change
- --------------------------------------------------------------
1993/94 $66.20 N/A
1994/95 $74.61 12.7%
1995/96 $79.19 6.1%
Compound Annual Growth 9.4%
While growing at a rate that is roughly three times that of inflation, these
rates were still well below those at other major convention destinations.
One of the reasons that Las Vegas' average rates are so low is that most of the
casino hotels have not constructed a material amount of meeting space on-site.
For example the 3,000 room Monte Carlo has only 35,000 square feet of meeting
space. With little commercial demand, these hotels mostly rely on the Las Vegas
Convention Center and the Sands Expo Center for mid-week convention businesses.
These facilities do not generate demand every day and therefore the "under
equipped" hotels must fill-in with very low-rated tour and travel business.
The recent imbalance between the rates of growth in supply and demand in 1997
has resulted in lower average daily room rates during the late Spring and Summer
months. Summer is traditionally the
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28
THE VISITOR INDUSTRY
lowest priced season because of the national decline in convention activity and
the softening of leisure demand due to the high temperatures of Las Vegas. It
should not be surprising that the temporary imbalance in supply and demand is
being felt most during the summer months, particularly in room rates. With the
Fall seasonal increase in convention activity, more temperate weather, and the
deceleration in the rate of supply growth, the current discounting should abate.
The discounting has affected the bottom of the market most severely. During the
Second Quarter of 1997, the Mirage, the Treasure Island and MGM Grand were all
able to maintain or improve their average daily rates. In the third quarter of
1997, Mirage Resorts increased its net income by 12 percent, led by the Mirage,
which posted a 19 percent increase in revenues and a 35 percent increase in cash
flow. Rio reported an 81 percent increase in earnings which is attributable to
the rapid market acceptance of its expansion. Analyst Todd Jordan of Raymond
James and Associates said that Rio was able to increase room rates by about 10
to 15 percent. Analyst Naomi Talish of Merrill Lynch and Co. said that the MGM
Grand cut rates by about 5 percent for the third quarter but was running at 100
percent occupancy. The gaming divisions of Hilton and ITT have or are expected
to report strong third quarter performance, due mainly to the strength of
operations in Las Vegas. Only Circus Circus appears to be suffering. Earnings
per share were expected to decline 15 percent despite their recent rooms
expansions.
Las Vegas' competitive destinations will also facilitate room rate growth. The
room rates in competitive convention destinations are likely to continue to show
real growth in the near term due to the current shortage of rooms. A January 3,
1997, article in U.S.A. Today titled "Hotel Shortage Hits Big Cities" indicated
that hoteliers are forgoing the discounted group business associated with major
conventions in favor of higher rated commercial demand. The city of Chicago
recently lost its bid to host a major Tradeshow 200 event, the Pittcon
Scientific Convention, because of an inability to procure a 26,000-room block
for exhibitors and attendees. Rising rates and availability issues in the
competitive cities bode well for the Las Vegas hotel industry, which could
accommodate the Pittcon room block in ten hotels with room to spare.
FUTURE GROWTH
Future growth is fundamentally favorable. Diversification of its market away
from the core gamblers' market to "Middle America" continues to attract
first-time visitors. While the number of international visitors is small
relative to the total, potential for growth from this market is immense.
Europeans in particular are awed by the scale and spectacle of the mega-resorts
and are adding Las Vegas to the Western tour circuit that previously included
only Los Angeles, the Grand Canyon, Yosemite and San Francisco.
Presented in the following chart is a summary of the states and countries of
origin for visitors to Las Vegas between 1990 and 1996.
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29
THE VISITOR INDUSTRY
Origin of Visitors by Place of Residence
1990 1991 1992 1993 1994 1995 1996
-----------------------------------------------------
U.S.
Total 90% 88% 85% 85% 86% 87% 82%
Eastern States 9% 9% 10% 8% 9% 10% 9%
Southern States 13% 14% 13% 11% 12% 12% 12%
Midwestern States 17% 15% 17% 17% 14% 13% 15%
Western States 51% 48% 45% 49% 50% 51% 46%
California 33% 33% 30% 32% 33% 35% 30%
Arizona 4% 5% 4% 6% 5% 3% 4%
Other 14% 11% 10% 11% 12% 12% 12%
No Zip Code Given 0% 1% 1% 0% 1% 1% 0%
Foreign
Total 10% 12% 15% 15% 14% 13% 18%
Canada 4% 5% 6% 6% 6% 5% --
Germany -- 2% 3% 3% 4% 1% --
England 2% 2% 2% 2% 2% 3% --
Other European 2% 2% 3% 2% 2% 2% --
Other Non-European 2% 2% 2% 2% 2% 2% --
Source: Las Vegas Convention and Visitors Bureau
The percentage of foreign visitation previously peaked in 1992 and 1993 and then
declined with a resurgence in the percentage of visitors from California. In
1996, the percentage of foreign visitation spiked upward again. Detail has not
been provided in the most recent publication that would indicate the countries
of origin that contributed to the gain. The table also shows an uneven pattern
for California, which has consistently been the largest single market for Las
Vegas. The effects of California's restructuring are reflected in the decline in
percentage contributions in 1992; its recovery pattern is evidenced from the
gradual increase until 1995. The decline in the percentage contribution in 1996
is not a reflection of worsening economic conditions in this source market. San
Diego and Orange Counties finally recovered the jobs lost since the 1989
employment peak in mid-to-late-1996. Los Angeles County is expected to fully
regain its lost jobs by 1997. We believe that the percentage decline from
California in 1996 is related to the high levels of repeat visitation from this
market, and the absence of newly opened "must-see" attractions in 1996. It is
noteworthy that Las Vegas' tremendous
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30
THE VISITOR INDUSTRY
growth in recent years has been achieved in spite of a severe and prolonged
recession in its primary source market.
California's increasing ethnic diversity bodes well for the gaming industry in
Las Vegas. According to surveys conducted for the Travel Industry Association of
America (TIAA) and presented at the 1997 Outlook for Travel and Tourism, the
propensity to take gambling vacations is greater among Hispanic and Asian
Americans than among Anglo Americans.
While there is no data in the TIAA report on the number of Hispanic Americans
that have the wherewithal to vacation, the members of this ethnic group that do
vacation stay longer than average (5.1 versus 4.5 nights) and spend considerably
more per trip ($559 versus $421). Asian Americans spend the highest amount of
any group, at $678 per trip.
Presented in the following table is evidence of California's broad demographic
trends.
Ethnicity of Visitors to Las Vegas
1990 1991 1992 1993 1994 1995 1996
-----------------------------------------------------------
Ethnicity
White 85% 83% 85% 85% 80% 79% 81%
African American 6% 6% 4% 4% 7% 7% 6%
Asian/Asian 4% 5% 5% 5% 7% 7% 7%
American
Hispanic/Latino 4% 6% 5% 5% 6% 6% 5%
Other 1% 0% 1% 0% 1% 1% 1%
Source: Las Vegas Convention and Visitors Bureau
Conclusion
The Convention and Gaming components of Las Vegas' tourism industry are showing
strong levels of growth, although at levels that are somewhat below the nearly
double digit rates of growth of the previous decade. Recent concerns about Las
Vegas' ability to absorb new hotel rooms seems unfounded in light of the 6.8
percent rate of increase in occupied rooms through July, 1997. A short term
imbalance in supply and demand growth rates will be reflected in lower average
daily room rates during the summer of 1997. Over the long term, average daily
room rates are likely to grow at a faster rate than inflation due to the meeting
space that is being added with new properties and the absence of any downward
pressure from competitive convention destinations. Demand fundamentals are good
and the Convention Center expansion and airport expansion will facilitate
further growth. Based on historical performance, the Las Vegas lodging market
appears capable of absorbing additional rooms.
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31
THE VISITOR INDUSTRY
NEIGHBORHOOD ANALYSIS
The subject site is located in the Strip neighborhood of Las Vegas, more
specifically in the most desirable portion of the Strip which extends from
Spring Mountain Road /Sands Drive in the north to Tropicana Avenue in the south.
Up until the recent bankruptcy of the Stratosphere, a casino hotel's site on the
Strip was not considered paramount to success. In fact, the success of two
non-Strip properties, the Hard Rock Cafe Hotel and Casino and the Rio Hotel and
Casino, appeared to indicate that a Strip location was
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32
NEIGHBORHOOD ANALYSIS
not even crucial for success. It should be noted that the Hard Rock has only 340
hotel rooms and that its chain-branded concept and Paradise Road location has
not yet been tested with a mega hotel. Initially the Rio Hotel and Casino
started with 549 hotel rooms. Its concept, an outsized guest room with a large
seating area, was perceived of as a good value. Through superlative management,
this property, located on the "wrong" side of the I-15 Freeway, was able to
garner an impressive array of Zagat awards for "Best Room," "Best Food" and
"Best Service".
For a while, it appeared that as long as the casino hotel was in Las Vegas, it
was bound to be a success. In late December 1995, a few months before the first
phase of the Stratosphere project was completed, a public offering raised $78.0
million to finance the second phase of the project and was oversubscribed in a
matter of weeks. While mechanical problems with some of the tower's thrill rides
and inadequate vertical lift may have contributed to its poor market acceptance,
the primary reason for its underperforming projections and subsequent bankruptcy
is attributed to its location. Grand Casinos, Inc., which bought out the
project's developer during the "anywhere in Vegas" euphoria, acknowledges that
the Stratosphere is "two blocks north of success".
A January 27, 1997, article in the Las Vegas Business Press titled "High Tech
Future for the Strip" indicated that "the limits of the Strip may be Russell
Road at the south and Sahara Avenue in the north; lenders have a tendency to
avoid risky areas. And risky on the Strip means anywhere in the vicinity of the
Stratosphere Tower."
The fall-out of the Stratosphere bankruptcy has caused problems even for
developers attempting projects south of Sahara Avenue. A New Jersey based horse
racing concern, ITB, which bought a 20-acre parcel on the Strip just north of
Riviera in February 1996, was stymied in its attempts to finance a major casino
resort and has announced that it will renovate the El Rancho rather than
redevelop the site. A second parcel on the northwest corner of Sahara Avenue and
the Strip fell out of escrow earlier this year due to the prospective
developer's inability to obtain financing.
<PAGE>
33
NEIGHBORHOOD ANALYSIS
Numerous buyers who are active in the market confirmed that the core and most
desirable area of the Strip is located between Spring Mountain/Sands Boulevard
and Tropicana Avenue. The subject property is at the northern end of this core
area, across from two of the most successful casino resorts in Las Vegas, the
Mirage and Treasure Island. According to the same Las Vegas Business Press
article ". . .the next best thing to being a Mirage is to be next to the Mirage.
That means that companies will build near popular locations like Spring Mountain
and the Strip."
Land prices in this core area will present a barrier to many developers. The few
blocks at either end of this core area appear to be acceptable substitutes, but
would be expected to be priced well below the core area. Judging from the
interest in acquiring The Frontier for redevelopment, the area for which
financing could likely be obtained for a new mega resort development is somewhat
larger, likely marked by Convention Center Drive on the North and Russell Road
on the south. Opportunities for new development on the south end of this area
are somewhat limited. Circus Circus controls the west side of the Strip between
Tropicana and Russell Road. The east side of the Strip consists of a number of
small parcels that back up to the airport. With each block south, the depth and
utility of these east side parcels decreases. Both sides of the Strip in this
southerly area are subject to a veritable "wildcard" in the form of FAA
approvals. While the FAA has the right to review all plans for buildings over 9
stories tall in Clark County, approvals for the conditional use permit height
variances are by no means certain in these areas near the airport. Circus
Circus' Project Paradise development was delayed by several months due to the
FAA's review of the variance to permit a 450 foot height.
With the exception of the Circus Circus development in this southerly area, the
majority of the new mega-resort developments can be expected to occur as
redevelopments in the core and northerly areas of the Strip.
Immediate Environs
The immediate neighborhood surrounding the subject contains uses that are geared
to Las Vegas' 30 million visitors per year.
To The North
Immediately to the North of the subject is the remainder of the larger parcel
formerly occupied by the Sands or assembled by its owners, with one exception.
The owners of the Rosewood Grill restaurant declined to sell their property to
the Sands current owner This parcel, with 100 feet of frontage on the strip and
a depth averaging 304 feet, provides a partial separation of the Venetian
(subject) and Lido project sites. This 0.64 acre site is a low density use that
is unlikely ever to be expanded to more than its current two stories. To the
north of the Lido section of the larger Sands
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34
NEIGHBORHOOD ANALYSIS
assemblage is Sands Avenue/ Spring Mountain Road. A second "hold-out" occupies
approximately 2.0 acres on the corner of this intersection. It is possible that
the existing two-story Vagabond motel and one-story retail could be replaced
with a mid-rise structure but it is unlikely that the developer of such a
non-gaming facility could afford to pay a market rate for the site. (In order to
obtain a non-restricted gaming license, state law requires that a casino provide
a minimum of 200 rooms.)
North, across Sands Avenue is excess land belonging to the Desert Inn upon which
ITT Sheraton planned to build a Planet Hollywood Casino hotel. This 3,200-room
highly-themed project has been put on a slow track with the hostile take-over
attempt launched by Hilton. (Hilton has vowed not to go forward with the project
because of the costliness of licensing the Planet Hollywood name). However, this
site is a likely candidate for redevelopment. In the meantime, the views to the
north will be of the Desert Inn Golf Course and Desert Inn Hotel which is was
undergoing a significant renovation at the time of our inspection.
To the East
To the immediate east of the Venetian site is the Sands Exposition and
Convention Center (SECC), an approximately one million square foot tradeshow and
convention venue. This facility is a significant demand generator for hotel
guests, gamblers, restaurant patrons and retail customers. Beyond the SECC is
Koval Lane and a multi-family residential development. The Las Vegas Convention
Center is approximately two miles to the northeast.
To the South
Immediately South of the subject is Harrah's 35-story hotel tower and one of its
parking structures, and, fronting on the Strip, the Casino Royale. This small
free-standing casino pre-dates the minimum hotel room requirement and is
equivalent to a two-story structure. With only 3.23 acres, it is unlikely that
this parcel could be redeveloped to its highest and best use without being
assembled by the subject or Harrah's to the south.
To the West
Located to the West of the Subject site is the Las Vegas Strip, the Casino
Royale and Rosewood Restaurant, as mentioned above. The site plan for the
subject provides for approximately 490 feet of frontage on Las Vegas Boulevard
South (the Strip). On the opposite side of the Strip due West, is the Mirage
Resort, a major local attraction. To the northwest is the Treasure Island
Resort, also a major local "must see". The west facing hotel rooms in the
Venetian Resort will have excellent views of the Volcano eruptions on the
Mirage's front lawn. Many will also have views of the pirate ship battle in
front of Treasure Island. Due to the fact that both attractions were designed to
draw
<PAGE>
35
NEIGHBORHOOD ANALYSIS
people in from the street, the views from the subject will be better than from
either of the two "hosting" resorts for the same reason that a theater's loge
seating provides better views than from backstage.
To the northwest across from the intersection of Sands Avenue and the Strip, the
name of the east-west street changes to Spring Mountain. On the northwest corner
is one of Las Vegas' largest malls, the Fashion Show Mall. This mall is anchored
by a diverse mix of major department stores: Neiman Marcus, Saks Fifth Ave,
Robinson's May, Macy's and Dillards. The roster of in-line stores is very
diverse as well to have the broadest market appeal. These stores run the gamut
from Bally and Luis Vuitton to Miller's Outpost and Casual Corner. Because of
the success of this facility and location, an expansion is contemplated. A
recent Las Vegas Business Press article indicates that the sales at this mall
approximate $500 per square foot.
Conclusion
The subject's larger neighborhood, the Las Vegas Strip, is the premier location
for casino hotel development. The subject site enjoys a very good location
within its neighborhood due to its location within the core area extending from
Spring Mountain/Sands to Tropicana. The proximity of the Sands Expo Center, and
the views it will offer of two of Las Vegas' major attractions should enable a
hotel on this site to avoid much of the low-rated tour and travel demand that
other, more remote casino hotels rely on mid-week, and should achieve
significant room rate premiums.
<PAGE>
36
SITE ANALYSIS
SITE ANALYSIS
Physical Location
Location
The subject property is located in the most desirable portion of the Strip
neighborhood of Las Vegas, Clark County, Nevada. The site is located
approximately 1,000 feet south of the intersection of Spring Mountain Road/Sands
Avenue with the Strip, between Las Vegas Boulevard South to the west and the
Sands Expo Center to the east.
Shape and Dimension
The subject is an irregularly shaped parcel, with approximately 490 feet of
frontage along Las Vegas Boulevard South and approximately 60 feet of frontage
along Sands Avenue. As indicated by the proposed parcel map prepared by Martin &
Martin, the site is to contain a gross area of approximately 30.86 acres or
approximately 1,344,378 square feet. Please refer to the proposed parcel map on
the following page.
Topography
Prior to the commencement of excavations on April 21, 1997, the site was mostly
level and situated at street grade.
Environment and Soil
The site was previously improved in the 1950's, 60's and 70's with the Sands
Hotel. When it was demolished, all asbestos was removed as well as all
underground storage tanks. Once excavations began however, some contaminated
water and soil was found. A letter from Converse Environmental Consultants
Southwest, Inc., dated August 7, 1997, indicates that "this soil contamination
is relatively immobile and will become more so as soon as the new buildings are
constructed above it. If no human intervention is taken to remediate the soil at
an accelerated pace, the soil will likely naturally degrade by biological
attenuation over the next 15 to 30 years."
The contaminated groundwater is being treated with an on-site filtering process
and is being released into the storm drains. A permanent "dewatering" system
will be constructed as part of the physical plant. According to Converse, "The
length of time it will take to remediate the contaminated groundwater is
unknown; however an estimate can be made of 10 to 15 years to remediate the
aquifer." The cost of this dewatering is presently $5,600 per month. It is
possible
<PAGE>
37
SITE ANALYSIS
[SANDS/VENETIAN PHASE MAP]
<PAGE>
38
SITE ANALYSIS
that the permanent facility may be less expensive to operate. However, for the
purposes of this appraisal, we have assumed that the cost continues for 15
years. To the annual cost of $67,200 we have added a 20 percent premium for
ongoing consulting and supervision, which increases the annual cost of
mitigation to approximately $80,600. This expense will be included in our cash
flow forecast.
Numerous surrounding improvements are of very dense highrise construction
suggesting that soils are of adequate loadbearing capacity to support
improvements which are consistent with the highest and best use of the property.
No signs of soil problems were noted in our inspection.
Because it is located in such an urbanized area, we have also assumed that the
site is free of any desert tortoise environmental issues.
Access
The Sands hotel had direct access from both north- and south-bound traffic on
Las Vegas Boulevard South. The site also has access from both east- and
west-bound traffic along Sands Avenue. While we have not been provided with a
site plan showing the specific curb cuts, we have assumed that the subject will
share a traffic light on Las Vegas Boulevard South with the Mirage Resort, which
is due west. The majority of automobiles are expected to enter the site from the
rear on a driveway from Sands Avenue or Koval Lane. At present the subject's
developers are attempting to negotiate easements for a shared driveway with
Harrah's from Koval Lane along the southern boundary of the site.
Utilities
All municipal utilities and services necessary to support the subject are in
service and include water, sewer, electrical, gas and telephone.
Streets
Las Vegas Boulevard South extends along the western border of the property. It
is a publicly dedicated right-of-way consisting of six lanes traveling north and
south with a center turn lane and median. Las Vegas Boulevard South is improved
with asphalt paving, concrete curbs, medians, gutters, sidewalks, street
lighting, and has a width of approximately 100 feet. Las Vegas Boulevard extends
north into the City of Las Vegas.
Sands Avenue meets the subject at the eastern border of the property. It is a
publicly dedicated right-of-way consisting of four lanes and a center turning
lane traveling east and west, changing names at Las Vegas Boulevard to Spring
Mountain Road. Sands Avenue is improved with asphalt
<PAGE>
39
SITE ANALYSIS
paving, concrete curbs and sidewalks in front of the subject and a gravel
shoulder opposite the entrance to the subject. At Spring Mountain Road, it
provides northbound access and southbound egress from I-15. Arrivals from the
South would likely exit I-15 at Flamingo, to the south of the subject. Sands
Avenue continues east to Paradise Road, the neighborhood's second north-south
arterial and the generally less congested one. Airport arrivals would be equally
as likely to use Paradise Road and to avoid I-15 and the Strip.
Legal Characteristics
Zoning
The subject is zoned H-1, Limit Resort and Apartment District, as designated by
Clark County, Nevada. The purpose of the H-1 district is to provide areas for
hotel and/or apartment development. The building standards for the H-1 zone are
summarized as follows:
FAR (Floor Area Ratio)No minimum or maximum stated.
Building Height Limit 100 feet or higher with a conditional use permit.
Building Setbacks Front: 10 feet.
Side: 5 feet plus one foot for every story above
40 feet.
Rear: none.
Site Coverage 60 percent.
Parking Requirements Guest room parking requirements:
1.0 spaces for each guest room for each room up to
500 rooms.
0.5 spaces for each guest room from 501 to 1,000
rooms.
0.25 spaces for each guest room above 1,001 rooms.
Non guest room, public area parking requirements:*
20 spaces for each 1,000 square feet for the first
40,000 square feet of floor space.
10 spaces for each 1,000 square feet from 401,001
square feet to 100,000 square feet of floor area.
5 spaces for each 1,000 square feet in excess of
100,001 square feet of floor area.
Administrative office parking requirements:
<PAGE>
40
SITE ANALYSIS
One space for every 300 square feet of floor area.
*Includes casino, showroom, bars, lounges, commercial shops and stores,
dining rooms and related spaces.
According to County Planning documentation, the two-phased subject project would
require 8,914 parking spaces. Tentative approval was granted for a 22 percent
variance along with the overall project approval on December 16, 1996, pending
the findings of a traffic and parking study. On March 19, 1997, the preliminary
traffic survey was rejected by County Planning. Building permits for the
foundations and structural steel have been obtained on the basis of a
pre-development agreement that essentially requires the developer to accede to
the County's subsequent decisions or requirements on parking and traffic issues.
It should be noted that the combined project was approved, not the individual
phases.
If the County elects to build an elevated crosswalk at the interchange of the
Strip and Spring Mountain Road/Sands Avenue, the developer of the subject two
phased development will be responsible for 25 percent of the structure's cost.
Since we do not believe this elevated crosswalk will be developed until The
Planet Hollywood and Lido projects are completed, we have not included its cost
in our analysis.
Parking
The parking code appears obsolete, given the increasing densities and
walkability of the core Strip area. The County has tentatively approved an
approximately 3,940 space garage to be shared by the subject Phase I casino
hotel and retail project and the Sands Exposition and Convention Center (SECC).
There are approximately 57 spaces at the SECC, for a total of 3,997 in Phase I.
These are to be augmented by a second 3,000 space garage to be constructed with
the Phase II hotel. Our survey of ten Strip mega-resorts indicates that
significant numbers of variances have been granted to other projects. We were
unable to obtain the exhaustive square footage data necessary to quantify the
exact requirements of each property to determine how the variances are being
applied. A summary of our parking survey is presented on the following page.
From the data gathered, we were able to draw the following conclusions.
<PAGE>
LANDAUER 41
REAL ESTATE COUNSELORS SITE ANALYSIS
PARKING ANALYSIS
<TABLE>
<CAPTION>
Percent
Project Name Required "As built" Variance
<S> <C> <C> <C>
Casino Hotel Projects with little retail or meeting space
Mirage and Treasure Island (shared) 7,707 9,715 26%
Monte Carlo 3,306 4,210 27%
New York New York 3,368 3,469 3%
Circus Circus before Addition 4,040 5,878 45%
Circus Circus, after '97 Addition 4,290 5,100 19%
Excalibur and Luxor, before Luxor Addition 7,270 9,923 36%
Excalibur and Luxor, after '97 Luxor Addition 7,739 7,500 -3%
Average, using most current data for each project
Casino Projects with significant retail or meeting space
Las Vegas Hilton 3,556 3,628 2%
Bally's existing 3,840 2,885 -25%
Paris, approved 3,885 4,750 22%
----- -----
Combined resorts that will share parking 7,725 7,635 -1%
MGM Grand 7,811 8,043 3%
Convention Center 479 (348) -173%
----- -----
MGM After expansion 8,290 7,695 -7%
Caesar's and Phase I Shops at the Forum 4,448 3,806 -14%
Entire project after Phase II Shops at the Forum 4,588 6,000 31%
Entire project after rooms and Forum Expansion 4,888 8,350 71%
Average, using most current data for each project
Retail Projects
Fashion Show Mall 3,021 3,312 10%
Subject
The Venetian (Phase I), as planned 4,876 3,997 -22%
The Venetian and Lido (Phases I and II), as planned 8,914 6,997 -22%
Landauer Assumption for subject
Phase I 4,876 4,554 -7%
<CAPTION>
Hotel Ratio
Project Name Rooms er Room Comments
<S> <C> <C> <C>
Casino Hotel Projects with little retail or meeting space
Mirage and Treasure Island (shared) 5,944 1.6 Includes employee parking across street.
Monte Carlo 3,002 1.4 Have never used entire garage capacity:
New York New York 2,035 1.7 Per planning documents
Circus Circus before Addition 2,764 2.1
Circus Circus, after '97 Addition 3,764 1.4
Excalibur and Luxor, before Luxor Addition 6,558 1.5
Excalibur and Luxor, after '97 Luxor Addition 8,432 0.9 Includes employee parking across street
Average, using most current data for each project 1.4
Casino Projects with significant retail or meeting space
Las Vegas Hilton 3,174 1.1 157,500 sf meeting space, 1 showroom
Bally's existing 2,814 1.0 152,000 sf meeting space, 2 showrooms
Paris, approved 3,220 1.5 150,000 sf meeting space
-----
Combined resorts that will share parking 6,034 1.3 Includes employee parking off-site
MGM Grand 5,000 1.6 125,000 sf meeting space, boxing arena, 2 showrooms
Convention Center 54 -6.4 340,000 net sf meeting space, 54 suites, new pool
-----
MGM After expansion 5,054 1.5
Caesar's and Phase I Shops at the Forum 1,519 2.5 235,000 sf retail, 110,000 sf meeting, boxing arena
Entire project after Phase II Shops at the Forum 1,519 3.9 521,000 sf retail, 110,000 sf meeting, boxing arena
Entire project after rooms and Forum Expansion 2,719 3.1
Average, using most current data for each project 1.8
Retail Projects
Fashion Show Mall N/A N/A 717,000 square feet of retail space
216 sf retail space per parking space
Subject
The Venetian (Phase I), as planned 3,036 1.3 1,400,000 sf meeting, 415,000 sf retail, 1 showroom
The Venetian and Lido (Phases I and II), as planned 6,000 1.2
Landauer Assumption for subject
Phase I 3,036 1.5
</TABLE>
<PAGE>
42
SITE ANALYSIS
o The survey of "As Built" facilities will probably not provide a reliable
indication of the current market standard. Anecdotal evidence suggests that,
with the increasing densities and traffic congestion on the Strip, fewer air
arrivals are renting automobiles, preferring to take cabs or walk from casino
to casino instead. The Chief Engineer at the Monte Carlo, which has operated
at 95 percent plus occupancy levels since it opened one year ago, indicated
that they have yet to use all of the spaces in their garage. This property
was built with an effective ratio of 1.4 spaces per guest room.
o Parking requirements are trending downward. The total number of parking
spaces at the Luxor decreased when the 1,874 rooms were added in early 1997
due to a loss of surface spaces used for the expansion. Prior to the
expansion, the effective ratio between the Luxor and Excalibur (which share
parking) had been 1.5 spaces per guest room. After the expansion, the ratio
dropped to 0.9 spaces per guest room. When Circus Circus added 1,000 rooms at
its fairly remote location near the north end of the Strip, it was not
required to add any additional parking. Since 1995 its effective ratio has
dropped from 2.1 spaces per guest room to 1.4 spaces per room.
o Based on the approval process for Caesar's Palace expansion and the Paris
project, it appears to be quite common to return to the Planning Authority to
request a variance such that a parking structure be different than was
originally approved.
o For the existing properties, the effective parking ratios for the five
traditional casino hotels surveyed ranged from 0.9 spaces per room for the
Excalibur/Luxor to 1.7 at New York- New York.
o Excluding Caesar's, the average ratio for the casino hotels with 125,000 to
340,000 square feet of meeting space was actually lower at 1.3 spaces per
room. Caesar's was however significantly higher, at 2.5 before the recent
round of expansions to both the retail space and the guest rooms. Upon
completion of the guest room expansion the parking ratio at Caesar's will
have increased from 2.5 spaces per room to 3.1 spaces per room and will be 71
percent over local codes. The parking space relationship at the Fashion Show
Mall indicates Caesar's would need no more than 2,412 spaces for its retail
space. The average relationship of 1.3 spaces per guest room for casino
hotels with meeting space suggest that no more than 3,535 spaces are needed
for the casino hotel for a total, assuming no complimentary usage, of 5,947
spaces, versus the 8,350 planned. The planned parking at Caesar's appears an
overimprovement relating to future rooms and retail expansions.
o Parking requirements for the mixed-use project's employees may be a bigger
factor than for the guests. The overlap between the day and swing shifts
means both shifts require parking in the late afternoon. At least three
properties provide parking for their employees off-site.
The interpretation of these ratios relative to the subject property is
problematic. A significant component (23 percent) of the subject's 500,000
square feet of mall space will be leased to show room or restaurant operators.
These uses are not likely to generate any more vehicular traffic
<PAGE>
43
SITE ANALYSIS
than is typical for a casino hotel. It is the incremental 386,920 square feet of
merchandise oriented retail space that is atypical for this market, along with
the demands of the SECC.
Demand patterns demonstrated at other convention and tradeshow facilities in the
county indicate that many of the attendees at the subject property will be
guests of the hotel or other hotels within walking distance. Representatives of
the SECC have informed us that the pattern of usage between a casino hotel and
the SECC is a complementary one. For attendees not staying at any one of the
24,000 rooms in the immediate vicinity of the SECC, parking demand coincides
with show hours which are typically daytime business hours. In order to maximize
the contiguous hotels' average daily rates, hotel operators are likely to
provide show managers with discounted room rates only during the week days,
pushing the actual show dates into the weekdays. Thus, parking demand from the
SECC's attendees is likely to occur weekdays during daylight hours, as is
reported to be the case currently. Peak casino hotel demand occurs during the
weekends and in the evening hours, since guests of non-Strip hotels and local
residents flock to the mega resorts.
Based on the minimum number of spaces at Caesar's however, we have concluded
that a greater number of parking spaces should be included in the Venetian
project than are planned for the Phase I parking structure. We are of the
opinion that a parking ratio of 1.5 should be provided with the Venetian
project, or 4,556 spaces total. For the purposes of this appraisal, we have
assumed that the proposed 3,940 space parking garage is increased by 560 spaces
to a total of 4,500 spaces. The remaining 56 spaces are to be found at the SECC
or in surface areas. If this were to be found to be inadequate, additional
parking would be provided in surface lots on the site of the proposed Lido hotel
until construction starts on Phase II. Some 1,500 spaces could be constructed on
the 14 acre site.
At present, the subject leases parking spaces for construction workers and truck
storage on the surface lot that is the future site of the Planet Hollywood
casino hotel. Construction is not scheduled to start on that project for at
least two years. Any construction related parking shortages could be alleviated
by requiring employees to park in the remote lot.
Assessed Valuation and Taxes
As depicted by the proposed Parcel Map, the subject site will include:
All but the easterly 1.59 acres of tax parcel 162-16-301-001 A portion
along its south side of tax parcel 162-16-002-008
Property taxes are paid in arrears and are measured on a June 30th measurement
date basis. Land taxes are based on a standard price per foot as computed for
the area by the Clark County assessor's office.
<PAGE>
44
SITE ANALYSIS
The Clark County assessor weighs strip frontage feet into the assessment
formula. The complete parcels are currently assessed at an average of $1,200,000
per acre and the average equalization rate is 35 percent as depicted in the
following table.
Assessed Value 1996/7 Tax Year
------------------------------------------
Taxable
PIN 162-016- Land Improvements Total Value Taxes
----------------- ----- ----- -----
301-001 $12,267,400 $767,440 $13,034,840 $37,242,400 $357,937
202-008 4,857,690 0 4,857,690 13,879,110 133,392
----------- -------- ----------- ----------- --------
Total $17,125,090 $767,440 $17,892,530 $51,121,510 $491,329
*Includes $48,450 in assessed value for personal property.
Properties are generally appraised by the assessor's office every three years
and adjusted with inflationary adjustments during non-appraisal years. Land is
subject to reassessment if improved upon or if it becomes out of equalization
with surrounding properties. It is reasonable to assume that the tax obligation
for the subject site will increase in the near term as assessed values along the
Strip increase. The improvements will likely be assessed at the values reported
on building permits.
Earthquake
The subject is not located in an earthquake hazard zone.
Flood Hazards
The site is an area zoned "X", outside of the 500 year flood zone, according to
the Flood Insurance Rate Maps of the Federal Emergency Management Agency, on Map
32003 1225 B recorded September 29, 1989.
Easements
As is typical for mixed-use developments and is becoming increasingly common in
Las Vegas, the subject site is envisioned to be encumbered by a series of mutual
easements with the contiguous convention center that will enhance its functional
utility. The subject site will be favored with a zero lot line and access egress
easements such that it may connect seamlessly to the 1.0 million square foot
Sands Expo Center. This is a key source of hotel guests, gamblers, restaurant
patrons and retail customers. The opportunity to walk from the Expo Center to
the hotel and back without ever getting
<PAGE>
45
SITE ANALYSIS
hot, cold, wet or windblown would provide any casino hotel with a competitive
advantage. In exchange, the owners of the subject are to provide the owners of
the Expo Center with no fewer than 800 parking spaces at a convenient location.
This has been factored into our cost estimates. These easements will enable the
density of the site to be maximized.
Legal Descriptions
See Addenda.
Conclusion
Given the subject's central Strip location, ease of access, proximity to the
Sands Expo Center and overall configuration, it is our opinion that the subject
site possesses suitable characteristics for development of a mega resort.
IMPROVEMENT DESCRIPTION
Introduction
The proposed Venetian Resort will have approximately 3,036 suites, a casino of
approximately 116,200 square feet, a 2,000 seat show room and approximately
342,000 square feet of meeting space. The casino hotel will envelop the air
rights for the proposed Grand Canal Shops, a 500,000 square foot specialty
retail center. The mall is to be separately demised. Both components will be
<PAGE>
46
IMPROVEMENT DESCRIPTION
physically connected to the Sands Exposition and Convention Center which has
966,400 square feet of exhibit and meeting space.
The six major buildings on the site are as follows:
o A podium low-rise structure will contain the casino, hotel lobby, banquet
and meeting facilities, the retail mall, and support areas. The podium
low-rise building will have a basement and three levels above that with the
roof top recreation/pool deck at level 3. The low rise building contains
approximately 1,950,000 square feet of gross building area.
o The rooms tower, a "Y" shaped building that protrudes from the podium
low-rise building will contain approximately 3,036 all-suite guest rooms. The
tower is comprised of levels 3 through 36 and contains approximately
2,800,000 square feet of space.
o A Congress Center (which may be referred to in plans and drawings
alternately as Hall D or the East Building) will connect to the SECC. The
Congress Center contains approximately 540,000 square feet of gross building
area.
o A parking garage containing 3,940 spaces.
o A central plant containing chillers, boilers, emergency generators, cooling
towers and miscellaneous other mechanical/electrical equipment. The central
plant contains approximately 80,000 square feet of area.
A separate value has not been estimated for the parking garage or central plant
as neither component could produce income without such facilities. A complete
description of the structural and mechanical systems as provided by Leherer
McGovern Bovis is contained in the Addenda.
The basic construction for each structure is steel framed Class A, excellent
quality construction. Our review of the balance of the Bovis document indicates
that the interior finish will be of a very high quality with extensive use of
marble, millwork and other architectural treatments common to buildings in
Venice.
<PAGE>
47
IMPROVEMENT DESCRIPTION
Casino Hotel Component
Renderings provided to us and the model we viewed at the Preview Center
indicated that the building facades will be based upon the landmarks of Venice
and will feature a great deal of ornamentation to authenticate their appearance.
A canal water feature with gondolas, traversed by a replica of the Rialto Bridge
will provide a focal point for the project from the street.
The basic guest unit will be a 700 square foot suite that is separated into a
bedroom and sitting area by a sunken living room. The guest room bath will have
marble floors and counter, a separate tub and shower, and a vanity door
separating the toilet from the remainder of the bathroom. In size and finish,
the guest room is equivalent to the prototypical junior suite of a Four Seasons
hotel. Presented in the following table is a summary of the proposed hotel's
facilities
Guest Rooms No. Keys Sq. Ft.
- ----------- -------- -------
Double Queen bedded rooms 955 775
Single King bedded rooms 1,760 700
Jr. Suites 95 900
Hospitality Suites 27 1400-1500
Two Bay Suites 145 1400-1550
Three Bay Suites 30 2200
Four Bay Suites 18 2900
Presidential 6 4050
-------- ---------
Total Guest Rooms 3,036 N/A
Meeting Space: Sq. Feet
--------
Hall D 106,070
Grand Ballroom 80,000
Meeting Rooms 81,207
Pre-function area 38,327
Offices 36,769
---------
Total Meeting Space 342,373
Access and Circulation, Restrooms 89,541
Storage 66,914
---------
Total with Supporting Facilities 498,828
Number of Seats in Show room 2,000
Casino Area (SF) 116,183
Number Table Games 118
Number of Gaming Devices 2,500
Number of leased restaurant outlet in
Casino/Hotel (only) 7
Net rentable area of restaurant space in
Casino/Hotel (only) 87,158
Net rentable area or other retail in
Casino/Hotel (only) 9,530
Photographs of the typical guest unit are presented on the following page
<PAGE>
48
IMPROVEMENT DESCRIPTION
SUBJECT
[Photo Omitted]
Guest Unit in Preview Center
[Photo Omitted]
Guest Bath in Preview Center
<PAGE>
49
IMPROVEMENT DESCRIPTION
Mall Component
The Grand Canal Shops, as proposed, will comprise an enclosed, unanchored
specialty regional mall containing a total gross leasable area (GLA) of 500,000
square feet. According to the leasing plan and pro forma rent roll provided by
the developer, the mall will consist of the following entities:
o mall shops totaling 358,920 square feet of GLA on two levels leased to
predominantly upscale, specialty retailers;
o a variety of full service restaurants totaling 68,313 square feet of GLA,
also on two levels, and planned to be leased to marquee operators/chefs;
o a food court containing 9,435 square feet GLA and 9,562 square feet of
common area;
o an entertainment venue known as Billboard Live! comprising 25,770 square
feet of GLA on two levels (an additional 24,230 square feet will be
situated on the casino level);
o a two-level, detached retail annex building fronting along the Strip and
containing 28,000 square feet of GLA.
A copy of the leasing plan depicting the layout and possible tenant demising has
been placed on the following page. Detailed building plans, which show specific
building materials, design, etc., were not available for review. It is assumed
the facility will constitute a Class A retail project with functional design and
heavily themed interiors which are consistent and competitive with the primary
retail shopping facilities in the area, particularly the Forum Shops.
Based upon marketing materials provided by the developer, the mall's interior
characteristics will comprise heavily-themed and decorated exterior facades with
features that capture the essence of Venice, Italy. Mall patrons will stroll
along a reproduction of Venice's Grand Canal and St. Marks Square, the focal
points of the mall, as they shop. Of dramatic interest will be a 70 foot high,
artificially lit ceiling, creating a simulated sky illusion. Mall shops will
designed with two story exterior facades, but the second level, if leased and
built-out, will be accessible only from inside the store.
The mall structure will be situated on the second and third levels of the
Venetian casino hotel, and immediately above the ground level casino. Directly
adjacent to the casino hotel and retail mall complex will be the Sands Expo and
Convention Center; direct and convenient access will be available to the mall
and casino hotel for convention attendees.
<PAGE>
50
IMPROVEMENT DESCRIPTION
[Map Omitted]
Illustrative Retail Leasing Plan
THE VENETIAN
LAS VEGAS, NEVADA
<PAGE>
51
HIGHEST AND BEST USE
HIGHEST AND BEST USE
Highest and best use is defined as follows:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.(3)
In developed urban neighborhoods like the subject, the highest and best use is
typically that use which is permitted by zoning, the specific plan, the general
plan and/or private deed restrictions. Determination of the highest and best use
of a site depends upon the quantity, quality and durability of the income stream
of the development anticipated.
The determination of highest and best use includes an analysis of the subject
property as though it were vacant and an analysis as it is currently improved.
The definition of each analysis is as follows:
Highest and Best Use of land or a site as though vacant - Among all
reasonable, alternative uses, the use that yields the highest present land
value, after payments are made for labor, capital and coordination. The
use of a property based on the assumption that the parcel of land is
vacant or can be made vacant by demolishing any improvements.(4)
Highest and Best Use of property as improved - The use that should be made
of a property as it exists. An existing property should be renovated or
retained "As Is" so long as it continues to contribute to the total market
value of the property, or until the return from a new improvement would
more than offset the cost of demolishing the existing building and
constructing a new one.(5)
- ------------------
(3) The Dictionary of Real Estate Appraisal, Third Edition, Chicago: Appraisal
Institute, 1993 (pp. 171).
(4) Ibid pp. 171.
(5) Ibid pp. 171.
<PAGE>
52
HIGHEST AND BEST USE
As Vacant
Legally Permissible
Under the zoning ordinances established by Clark County, the subject is zoned
H-1, as previously described in The Land subsection of the Physical Description
section, and allows only for the development of a hotel, resort, inn, or motel.
This zone has a maximum height of 100 feet or nine stories and a maximum site
coverage of 60 percent. The height limit may be increased with a conditional use
permit after a review by the FAA of flight paths at McCarran International
Airport. Conditional use permits (CUP's) can also be sought to change the land
use to a number of alternative uses including multiple family residential,
retail, institutional buildings, casinos and office buildings. Specifically
omitted are single family residences and industrial buildings. Parking
requirements vary depending upon the specific uses and their respective areas
included in a development.
Physically Possible
The subject site encompasses a total land area of approximately 30.86 acres
situated along the east side of Las Vegas Boulevard, south of Spring Mountain
Road/Sands Avenue with an irregular rectangular shape and a greater depth than
width. The site has nearly 490 feet of frontage along Las Vegas Boulevard,
directly opposite of the Mirage Hotel. Other adjacent uses include restaurant,
retail and casino hotels, generally determined by site area. Larger, multi-acre
sites tend to attract casino/hotels.
The subject, due to its size, dimension and access would be able to support a
variety of uses which would conform to the zoning regulations and surrounding
uses. The comparatively large size would indicate a casino hotel development,
possibly incorporating mixed use retail and convention facilities as indicated
by the recent development of large Strip sites. Alternatives, subject to CUP
approval, include office park and retail mall.
Financially Feasible/Maximally Productive
As a vacant site under current zoning, only a lodging use would be allowed under
the existing H-1 classification subject to a 60 percent lot coverage and
9-story/100 foot height maximums. Conditional use permits could be obtained in
order to increase site density. In fact, many of the recently completed resort
developments along the Strip have obtained CUPs for higher density. The trend of
the newest projects and those under construction reflects increasing land
utilization and density.
As previously indicated, 1996 city-wide hotel and motel occupancy rates in Las
Vegas are strong with an area average of 90.4 percent. The hotel sector
indicated an average occupancy of 93.4
<PAGE>
53
HIGHEST AND BEST USE
percent. The average daily rate has been increasing at a compound annual rate of
9.4 percent since fiscal 1993/94 due to the recent completion of several large
resort-oriented casino hotel properties.
Recent activity for prominent casino hotel developments along the Strip appear
to be occurring between Reno Avenue (south of Tropicana Avenue) and Spring
Mountain Road. An exception is the Stratosphere Tower located several blocks
north which has been well publicized for its financial difficulties. This
evidence seems to support a large scale resort-oriented casino hotel for the
subject core Strip site.
The alternative land uses considered for this comparatively large tract of land
located along Las Vegas Boulevard include an office park and/or retail mall.
While there has been much discussion in the city concerning the lack of first
generation Class A office space, virtually no new office space has been
completed with, or is planned for, a Las Vegas Boulevard address. The office
market has clearly ceded this location to other uses, notably casino hotel and
retail, and is expanding near the airport or suburban centers.
Retail use for a site of the subject's size could entail a regional mall similar
to the 840,000 square foot Fashion Show Mall located along the west side of the
Strip at Spring Mountain Road. Another prominent Strip located mall is the
475,000 square foot Forum Shops at Caesar's which is part of Caesar's Palace and
adjacent to the Mirage. This mall makes a strong case for retail development
ancillary to casino hotel development as opposed to a free standing regional or
subregional mall. Due to the size of the subject site, development with a
dedicated retail mall would add a substantial amount of retail space to "The
Strip".
The primary indication of the subject's land use is best suggested by a review
of the recently completed resort projects along Las Vegas Boulevard as well as
planned new projects. Additionally, many of the existing casino hotel projects
are planning for expansions of their sites, which would increase their
respective overall land utilization. Projects such as Caesar's Palace, Harrah's,
The Las Vegas Hilton, and Luxor have added hotel towers of between 25 and 35
stories on underutilized portions of their original sites. It should be noted
that many of these new projects include several complementary components in
addition to hotel rooms such as meeting rooms, retail arcades, entertainment
centers and/or a "thrill ride". This is in response to the market's demand for a
more balanced entertainment offering. The table on the following page summarizes
these projects.
<PAGE>
54
HIGHEST AND BEST USE
SUMMARY OF SELECTED RECENT/PLANNED PROJECTS
LAS VEGAS BOULEVARD RESORTS
<TABLE>
<CAPTION>
Year Building No. Rooms/ Casino Meeting Land
Project/Location Completed Height Rooms/AC Area in SF Area in SF Area in AC
- ---------------------------- --------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
New Projects
- ------------
New York, New York 1996 48 2,035 84,000 N/A 20
NEC Tropicana & LVB 102
Monte Carlo 1995 32 3,024 90,000 35,000 46
WS LVB, North of Tropicana 66
MGM Grand 1993 32 5,005 171,500 120,000 79
NWC Tropicana & LVB 63
Luxor Las Vegas 1993/95 30 4,500 100,000 20,000 64
SWC Tropicana & LVB 70
Treasure Island 1993 36 2,900 78,400 18,000 120
SWC Spring Mountain & LVB 50
Mirage 1989 29 3,044 95,500 82,000 See Above
WS LVB, South of Spring Mountain 50
Under Development
- -----------------
Bellagio 1998 35 3,000 N/A N/A 120
SWC Flamingo & LVB 25
Paris 1999 40+ 2,900 85,000 160,000 24
ES LVB, South of Flamingo 121
</TABLE>
Notes:
MGM Grand land area is net of 33-acre amusement park.
Luxor Las Vegas includes recent room addition.
Treasure Island and Mirage share the site.
Bellagio is planned for subsequent hotel phases.
Paris improvement height is a preliminary estimate; Eiffel Tower replica will be
54 stories.
Source: Landauer Associates, Inc., March 1997.
<PAGE>
55
HIGHEST AND BEST USE
The data on the table shows some interesting trends. Primarily, newer projects
reflect increasing land utilization as expressed in hotel units developed per
land acre. Each of these developments has received a variance to the height
limit, with the newest projects over 35 stories. As well-located Las Vegas
Boulevard land values increase, and core Strip land has been consumed, casino
hotel developers have shown a notable trend towards greater densities. Virtually
all of these projects are located along the Strip between Spring Mountain
Road/Sands Avenue and just south of Tropicana Avenue. This area has generally
been acknowledged as the primary activity center of the Strip and has the
greatest pedestrian and vehicular traffic.
Of particular note to the subject are the recently completed New York-New York
and proposed Paris projects. Both are on comparatively smaller sites of 20 and
24 acres, respectively, which support the density proposed for the subject.
These two projects indicate hotel development ratios of 102 and 121 rooms per
acre, nearly double the average of the remaining hotel projects listed,
excluding Bellagio. Improvement heights are 48 and over 40 stories,
respectively. Paris will have a replica of the Eiffel Tower which is planned to
reach 54 stories. We feel that the densities of these two projects provide the
best indication of the subject's highest, best and most productive use.
Not shown on this chart is the planned Convention Center for the MGM Grand
Hotel. This resort is planning to redevelop a portion of its amusement park with
an approximately 380,000 square foot Convention Center to enable it to replace
low-rated tour and travel business with more lucrative meetings business.
Conclusion - As If Vacant
In consideration of the subject's location, size, surrounding uses, zoning,
hotel market characteristics and recent development trends, it is our opinion
that the highest, best and most productive use of the subject 30.86-acre site is
for development with a casino hotel. This would reflect a hotel room ratio of
over 100 rooms per land acre and a building height in excess of 35 stories.
Consistent with recent trends, the development would incorporate mixed uses of
casino, meeting and retail space of appropriate size in consideration of the
massing of the project. This land use would return the greatest value to the
land through the synergy resulting from additional ancillary uses demanded by
the evolving Las Vegas tourism market.
<PAGE>
56
VALUATION
VALUATION
The appraisal process is the orderly program in which the data used to estimate
the value of the subject property is acquired, classified, analyzed and
presented. The purpose of the appraisal, the type of property, and the adequacy
and reliability of the data are analyzed; these considerations influence the
weight given to each of the techniques in valuation. There are three approaches
to valuation. They are:
1. The Cost Approach
2. The Sales Comparison Approach
3. The Income Approach
In the Cost Approach, the cost of acquiring similarly suited land and
constructing a comparable building are estimated. The resultant land and
construction cost estimates, combined with an adequate return for
entrepreneurial profit and the project's carrying costs, produces an estimate of
the replacement cost (as if new) of the whole property. From this estimate of
"replacement cost new," the depreciation attributable to wear and tear is
estimated and deducted. The Cost Approach is best suited to new or proposed
properties such as the subject property.
The Sales Comparison technique is generally the easiest to understand as it
involves analyzing the prices paid for reasonably similar products. It is most
commonly used for residential and industrial appraisals, where there are large
numbers of truly similar products in existence and a sufficient number of
comparable sales transactions. The subject mixed-use project is fairly unique,
even before the physical connection to the Sands Exposition and Convention
Center is taken into account. Only Caesar's Palace with its Forum Shops has the
same combination of casino hotel and retail use. Comparisons to sales of more
typical mixed-use projects, i.e. projects that combine office and retail or
office and hotel uses are not relevant because of the disparity of income
potential and the basic buyer profile. In order to be even remotely meaningful,
a Sales Comparison Approach must analyze the project's components separately.
The lack of comparable mixed-use project sales has ramifications for the Income
Approach as well. It is not possible to extract market derived capitalization
rates or survey market participants in order to derive investment parameters for
the overall project. While the basic assumptions on the market's health are
relevant to both the casino hotel and the mall, estimations of the stream of
income require separate analysis for each component. As appropriate, casino
hotel or retail investment parameters must be applied.
<PAGE>
57
COMBINED COST APPROACH
THE COST APPROACH
In the Cost Approach, the cost of acquiring similarly suited land and
constructing a comparable building are estimated. In the case of the subject,
Landauer Associates, Inc. has previously appraised the land. Relevant excerpts
from that separate document have been repeated here in order to comply with
FIRREA requirements. Cost estimates for the mixed-use project have been
estimated by Leherer McGovern Bovis Inc. (Bovis) and allocated by them between
the casino hotel, mall and central plant components. As the Bovis estimate is
based on the subject's specific architectural plans and specifications, and is
based on actual bids for the work from various subcontractors, we will rely on
this estimate. The allocated cost for the individual components will later be
compared to available cost data on recent casino hotel or mall construction.
Estimate of Land Value
There are six possible valuation techniques that may be used to value land. They
are:
1. Sales Comparison
2. Allocation
3. Extraction
4. Subdivision Development
5. Land Residual
6. Ground Rent Capitalization
The Sales Comparison technique is the most commonly used. However, when there
are an inadequate number of comparable sales, other techniques are applied. In
the case of the subject property, the comparables are either very dated, poorly
located, too complicated, or too small to be considered "good" comparables. The
number and magnitude of adjustments is considerable. For this reason, we will
also consider the land residual methodology.
While this is normally a fairly academic technique used only by appraisers, we
believe a larger number of local market participants are utilizing this
technique. Considerable data on casino net income levels and construction costs
are available in the annual reports of the publicly traded gaming companies.
We reviewed the available body of information on consummated sales of large,
comparable H-1 zoned parcels on the Las Vegas strip. The large sales
transactions within the subject's core Strip neighborhood pre-date the opening
of the previous wave of mega-casino resorts and were influenced by the concerns
regarding overbuilding that preceded the opening of the MGM Grand, the Luxor,
and Treasure Island in 1994. Asking prices have appreciated considerably since
then, both in the core Strip area and the secondary or peripheral areas.
<PAGE>
58
COMBINED COST APPROACH
In the absence of truly comparable current sales it is an acceptable alternative
to rely on transactions that are in escrow, rejected offers and asking prices.
The paucity of truly comparable consummated transactions requires that we
consider an imputed price, a very small but recent sale, an asking price, as
well as sales in secondary locations.
These transactions are summarized in the chart on the following page. The
locations of these sales are depicted in the Map on its facing page. Detailed
data sheets may be found in the Addenda to this report.
We are aware of one proposed transaction that was announced on August 3, 1997,
which would have involved the sale of a 50 percent interest in the 715 room
Desert Inn and Country Club, plus the site of the proposed Planet Hollywood Mega
resort to investor Marvin Davis. An October 17 article indicated that this
proposed transaction may now be moot.
This proposed transaction was precipitated by the hostile take-over attempt
launched by Hilton in February to take control of ITT Sheraton. In order to
thwart this attempt, ITT Sheraton is selling-off a number of significant assets
many of which they will continue to manage. The seller is under duress. The
transaction is structured more along the lines of a participating loan, an issue
which has caused the recent obstacle in the negotiations. According to the
October 17, 1997 article, "Mr. Davis insisted on the provision because he felt
ITT's $400 million valuation for the Desert Inn was high and he wanted a safety
valve, according to people familiar with the situation. People close to Mr.
Davis said that ITT's change of heart come about because the company's
accountants wouldn't condone recording the agreement as an outright sale as long
as the provision was part of the deal. An ITT spokesman said the company never
intended to account for the transaction as a sale because it is a joint
venture." If the 715-room resort failed to produce $25 million in earnings
before interest, taxes and dividends in the year 2001, the buyer could have
forced ITT Sheraton to buy back his 50 percent equity interest in that component
for $100 million plus a 10 percent return on his investment. If the buyer
elected not to become involved in the development of the 34-acre Planet
Hollywood site, he could compel the seller to buy back his 50 percent interest
in the land for $50 million. ITT valued the asset at $400 million, but was
willing to sell a 50 percent interest in it for $150 million. However, the
aggregate $150 million investment was to be accompanied by a commitment for the
partnership to provide $100 million in bank financing to the seller for general
corporate purposes. The loan was expected to be obtained largely on the basis of
the new partner's balance sheet. More information on this sale is in the Sales
Analysis section. Data on this highly unusual transaction is provided for
informational purposes only and has not been included in our analysis.
<PAGE>
59
COMBINED COST APPROACH
COMPARABLE LAND SALES SUMMARY
<TABLE>
<CAPTION>
Sale Sales
No. Location Date Price Acres $/Acre Zoning
--- --------------------- ------- ----------- ------- ---------- ------
<S> <C> <C> <C> <C> <C>
1 Monte Carlo Casino 9/95 $146,000,000 45.72 $3,193,351 H-1
Las Vegas, Nevada
2 N.W. Corner Harmon Listing $66,000,000 11.32 $5,830,389 H-1
Strip
Las Vegas, Nevada
3 La Quinta Carrows 3/97 $13,500,000 2.06 $6,553,398 H-1
Las Vegas, Nevada
4 S.W. Corner Las Vegas 8/95 $80,000,000 47.29 $1,691,690 H-1
Blvd. South & Hacienda
Las Vegas, Nevada
5 N.W. Corner Las Vegas 3/95 $73,000,000 73.74 $989,965 H-1
Blvd. & Russell Road
Las Vegas, Nevada
6 2755 Las Vegas Blvd. 1/95 $43,500,000 20.86 $2,085,331 H-1
Las Vegas, Nevada
7 2600, 2601 Las Vegas 10/95 $61,738,500 66.04 $934,865 H-1
Blvd. South
Las Vegas, Nevada
</TABLE>
<PAGE>
[Map Omitted]
Land Sales Map
<PAGE>
60
COMBINED COST APPROACH
Land Sales Adjustments
Each sale must be reviewed to determine whether adjustments are necessary in
order to render a price that is more meaningful to the subject property. A
number of adjustments are generally considered when evaluating any land sales
comparables. For the key non-physical adjustments, The Appraisal of Real Estate
prescribes a series of adjustments and the sequence in which they should be
made. A second set of adjustments is generally made having to do with the
physical characteristics of the site. These adjustments are not made
sequentially; thus the order in which they are considered is of less importance.
Presented in the following paragraphs are the discussions of the sales and the
necessary adjustments. The value conclusion will be compared to value indicated
by the residual methodology.
Comparable Sale Number 1 is an imputed fair market price of the site later
developed with the Monte Carlo. This roundly 44 acre site was contributed into a
partnership with Gold Strike Casinos by Mirage Resorts in 1994 and was valued at
$47.0 million or $1,068,181 per acre in setting up the partnership.(6) In March,
1995, Circus Circus announced its intention to acquire Gold Strike, which, among
other things, included their 50 percent interest in the Monte Carlo development.
In addition to the interest in the Monte Carlo Site, Gold Strike owned two
casinos in Jean, Nevada, one in Henderson, Nevada, and a 50 percent interest in
a riverboat in Elgin, Illinois. The corporate acquisition was valued at roundly
$477,475,000 after discounting the stock component of the transaction by 30
percent. We have estimated the value of Gold Strike's other assets at
approximately $397,000,000 based on published data on Earnings Before Income
Taxes (EBIT). The details of the transaction and our assumptions are included in
the data sheet in the Addenda. Our analysis indicates that Circus Circus paid
approximately $80,475,000 for a 50 percent interest in the Monte Carlo, which
was at that time, the land and plans. The 100 percent interest in the project,
still in its nascence, would be $160,950,000. After an estimate of $14,650,000
for the Monte Carlo's design, engineering and architectural fees (5 percent of
cost), it appears that the land was valued at roundly $146,000,000, or
$3,193,351 per acre. An approximately 2.0 acre parcel, the former Desert Rose
motel, was acquired in early 1995 bringing the total site size to 45.72 acres.
This imputed price of $3,193,351 would need to be adjusted for two years'
improvement in market conditions. Data collected by Comps Inc. aggregates
information on sales for the Strip and Paradise Road (combined) market.
According to this data, the average price per acre has increased at a compound
annual rate of 34 percent between the year ended 12/31/94 and the year ended
12/31/96. The median price per foot has increased at a rate of 46 percent over
the course of 1995 and 1996.
- -------------------
(6) Mirage had acquired this site as part of a larger acquisition of the 163.6
acre Dunes hotel and golf course from the bankruptcy court in December 1993 for
$75,000,000 or $458,575 per acre. Due to the distressed nature of the sale, and
the unwillingness of other investors to make such a large expenditure at the
time when Las Vegas had 12,000 rooms under construction, this was approximately
one-half of what was generally considered to be market value at the time, even
for such a large parcel.
<PAGE>
61
COMBINED COST APPROACH
These high rates of appreciation are consistent with anecdotal comments made by
prospective buyers regarding Paradise Road and Las Vegas Boulevard in the
extreme south between Blue Diamond and Lake Mead sites, but are probably less
representative of central Strip appreciation. The vast majority of the Comps
Inc. transactions occurred in lower priced areas, as is indicated by the average
sales price of only $645,559 per acre. To check these broader market-wide
indicators, we will compare two sets of sales transaction data under
consideration.
Our first paired sale transaction is the purchase by the New York-New York
partnership of the Rodeway Inn in February, 1995. In order to increase the Strip
frontage and utility of the site, the resort developers paid $8,000,000 or
$3,864,734 per acre for a 2.07 acre parcel. In February, 1997, this same
partnership put the 2.06 acre parcel occupied by the La Quinta Carrows into
escrow for $13,500,000 or $6,553,398 per acre, included in our analysis as sale
Number 3. This price does not include any costs for buying out the remaining
term of the restaurant's lease on the site that actually fronts on Las Vegas
Boulevard. The remaining term of the lease is unknown and the lessee is a
competitor of the buyer. Even without factoring in a lease buy-out, these two
transactions indicate that the rate of appreciation between early 1995 and early
1997, for a core strip location would be at least 30 percent.
The second paired transaction we will consider is in a secondary location and
involves one of the two distinct parcels included in Comparable Sale Number 7.
The price per acre in the sale which was negotiated in May 1995 and consummated
in October 1995 was $934,865 per acre for both sites, which straddled Las Vegas
Boulevard South. Gordon Gaming, which kept title to the westerly parcel, was
required to buy-out a lease immediately for $3,500,000, which brought the cost
of their 39.17 acre site up to $1,024,219 per acre. The company's owner, Mr.
Bill Bennett, developed serious health problems after completing the
transaction, and has scaled back development plans for the sites he assembled at
the north end of the Strip. In late 1996, the 39.17 acre site fell out of escrow
at a price of $55,000,000 or $1,404,136 per acre. The company's Chief Counsel
indicated that negotiations were underway with another buyer at the same
approximate price. This escrowed price indicates appreciation of approximately
32 percent over a one year period. It could be argued that the separation of the
two parcels contributed to the increase in price, however, we understand that
either could have been purchased separately. Since the parcel fell out of
escrow, it could be argued that the current asking price is too high, and that
its eventual sales price will be lower.
After considering the Strip/Paradise Road sample for the area-wide appreciation
figures, the buyer motivation for the assemblage value comparison, and the
lapsed escrow of the latter paired transaction, we will temper our estimates of
the average rate of appreciation to a uniform 25 percent per year for the years
1995 and 1996, for all of the transactions, regardless of location. For 1997
however, we believe that the number of new rooms under construction has caused
this to abate to 20 percent per year.
<PAGE>
62
COMBINED COST APPROACH
The imputed price of the Monte Carlo partnership purchase transaction will be
adjusted upward for 16 months at an annual rate of 25 percent and ten months at
20 percent. No other adjustments are warranted.
The adjusted price for Sale Number 1 becomes $5,000,000 per acre.
Comparable Number 2 is a listing involving an 11.32 acre parcel on the Northwest
corner of Harmon and the Strip. The owner, who is reported to be ineligible for
a gaming license, is asking from $66,000,000 (or $5,830,000 per acre) to
$100,000,000 (or $8,834,000 per acre) for the site. The lower asking price was
reported to have been conditioned upon the seller retaining air rights over the
site in order to develop a retail component. The higher asking price is for the
entire bundle of rights. We spoke with one investor who reported offering
$60,000,000 that was rejected summarily. An article on June 22 in the Las Vegas
Sun on a prospective San Francisco themed resort indicated that Harvey's Casino
Resorts offered $80.0 million (or $7,067,138 per acre) for the site and was
rejected. We were unable to substantiate this account. Presumably, the rejected
offer was for an unencumbered fee simple interest.
A number of investors or brokers commented that it was too small for mega resort
development. Harmon Road precludes assemblage to the South without a sky bridge.
The land owner to the North is the owner of the common areas associated with a
timeshare project known as the Jockey Club. Redevelopment with that northerly
land owner would likely be problematic because of the approximately 14,000
individual timeshare owners' concerns about parking and access and egress to
their units.
Because of our inability to substantiate the rejected offer, and the relatively
small size of this site, we will employ the lowest asking price of $66,000,000
or $5,830,000 per acre but will not adjust for conditions of sale. Interest in
the site by Harvey's and the prospective developer of the San Francisco themed
casino resort refutes the assertion that the site is too small. We will make no
other adjustments to this sale.
The adjusted price of Comparable Number 2 becomes $5,800,000 per acre.
Comparable Number 3 involves a very small parcel, of 2.06 acres that was
recorded on March 17, 1997, for $13,500,000 or $6,553,400 per acre. On March 17,
1997, La Quinta Development Partners sold its fee simple interest in the 1.48
acre La Quinta motel site to the partnership that owns New York New York, which
will use the site for a new rooms tower. The transaction also included La
Quinta's leased fee interest in the contiguous 0.58 acre parcel that actually
fronts on the Strip, and the assignment of the associated lease. The original
lessee's interest was assigned to Victoria Partners the developers of the Monte
Carlo, its northerly neighbor and competitor. We were unable to obtain a copy of
the original lease to ascertain its remaining term. The original lease was
signed
<PAGE>
63
COMBINED COST APPROACH
in March, 1979. La Quinta Development Partners signed a confidentiality
agreement which they interpret to mean that they may not discuss any aspect of
the sale.
This sale supports our contention that strip land prices have appreciated
considerably over the past two years, as described earlier. In addition, this
most recent transaction, at $6,553,400 per acre, demonstrates that sellers are
increasingly aware of the huge profit potential of core Strip real estate.
Six months have elapsed since the sale was recorded. We will adjust this sale
for 6 months of appreciation at an annual rate of 20 percent.
To estimate an appropriate adjustment for the assemblage value, we will compare
the assemblage value adjustment of an earlier New York, New York assemblage. The
2.07 acre Rodeway Inn parcel that was acquired in February, 1995 cost the owners
of New York New York $3,864,734 per acre. The original 17.62 acre parcel was
acquired in late 1992 for $1,789,843 per acre. If we adjust this sale upward for
two years' appreciation at 20 percent, the equivalent price in early 1995 values
grows to $2,577,000 per acre. This $1,287,734 difference suggests a 33 percent
discount for the smaller sale. The imputed value of the Monte Carlo transaction
of $3,193,319 per acre reflects a discount of 34 percent from the 2.07 Desert
Rose Motel acquisition at $4,830,917 per acre, a few months before the Gold
Strike acquisition was announced.
For the current La Quinta transactions, we will adjust the sale downward by 40
percent to account for the assemblage premium. As will be shown in the residual
value analysis, it could easily be argued that there is no need for an
adjustment, as the entire parcel, built out at the density that it is, could be
worth as much as $14,400,000 per acre.
One more adjustment would be required for the lease buy-out. The lease buy-out
to Gordon Gaming for the as yet unbuilt St. Andrews golf attraction on the
westerly portion of Sale Number 7 was $3,500,000. The lease-buy-out for the
Wet'n Wild water theme park on the easterly component of that transaction
started at $7.0 million and declined as the improvements depreciated. While both
parcels were significantly larger than the 0.58 acre restaurant site involved in
Comparable Sale Number 3, neither involved buying out a direct competitor. There
were no improvements on the St. Andrews Golf site, and the cost of the Wet'n
Wild improvements were the basis of the buy-out.
We will assume that the cost of buying out the remaining term of the restaurant
lease is approximately $1,000,000. This equates to an approximately 7 percent
adjustment. Because of the two story, stick frame construction, we will estimate
demolition costs at one-third of the high rise rate, or $2,775 per guest room
(8,333 x .333) for a 114-room property. Demolition costs are estimated at
roundly $300,000, or 3 percent of the sales price per acre.
The adjusted price per acre of Sale Number 3 becomes $5,000,000.
Sale Number 4 is of the 47.3 acre site formerly occupied by the Hacienda Hotel.
This site was acquired in August, 1995 by Circus Circus for $80,000,000 or
$1,691,650 per acre with the intent to
<PAGE>
64
COMBINED COST APPROACH
redevelop the site. No adjustments are necessary for interest conveyed,
financing or conditions of sale. The price was set eight months earlier, in
January of 1995, by a former Circus Circus executive, Mr. Bill Bennett, who was
forced to relinquish the deal due to a perceived conflict of interest. This
history is important for two reasons: 1) it establishes that there was no
assemblage motivation in the setting of a sale price; and 2) the number of
months used for the market condition adjustment should be greater than would be
suggested by the date escrow closed. This sale should be adjusted for a market
condition adjustment for two years.
When paired with Sale Number 5, the Hacienda sale provides our first indication
of the magnitude of location adjustments.
The Hacienda sold at the approximate same time as Sale Number 5, which is
located immediately south. The primary differences between Sales 4 and 5 are in:
site improvements, size, and location.
Unless the cash flow generated by the Hacienda increased materially after its
sale, the value of the interim use was not likely to have offset the costs
associated with demolishing the 1,115-room hotel; and the mitigation of any
environmental issues caused by the 363-space Recreational Vehicle park.(7) The
remaining differences are in size and location.
Sale Number 5 involved a 73-acre parcel that sold in March 1995 for $989,965 per
acre. We can find no evidence from other sales that the entirety of this 70
percent price differential is attributable to the increase in size from a 40- to
45- acre site to a 70- to 75-acre site. We believe that the primary reason that
Sale Number 4 sold at a premium over Sale Number 5 was because Sale Number 5 is
1,000 lineal feet further South. We will attribute 20 percentage points of the
price differential to the size issue, and 50 percentage points of the
differential to location.
The 1,000 foot distance had ramifications from an air rights standpoint as well
as a traffic perspective. The seller of the Hacienda expressed a belief that
both sales are affected by the sites' proximity to McCarran Airport and the
uncertainty caused by the FAA's ability to limit the building height. While any
building in Clark County requires FAA approval to exceed 100 feet (or 9
stories), this approval is not a formality in the vicinity of the airport. Until
the approval was granted in April, 1997, for the height variance, the FAA would
make no prognostications as to whether it would likely permit a significant
variance or the recommended 167 feet (approximately 17 stories). The Hacienda's
tower was only 11 stories tall. However, the Luxor, located immediately north of
the Hacienda was approved for 30 stories, which is the current average height
for the existing major casino resorts.
- ---------------
(7) Circus Circus would not disclose demolition costs, or the EBITDA of the
Hacienda during its interim operation. The costs of demolishing the Sands,
combined with asbestos and underground storage tank clean up suggest that the
Hacienda's demolition costs could be $9,300,000 (1,115 x $8,333).
<PAGE>
65
COMBINED COST APPROACH
We will split the remaining 50 percent adjustment evenly between a location
factor relating to distance from the core area and a zoning adjustment for the
FAA issue. These adjustments will be made at a rate of 25 percent for each 1,000
feet a site is located in the "wrong" direction.
At a rate of 25 percent for every 1,000 lineal feet of distance, Sale Number 4,
the Hacienda, would need to be adjusted upward for location and for the FAA
related zoning issue by 63 percent (for each), since it is located approximately
2,500 feet south of Tropicana (2,500/1,000 x .25). Sale Number 2 would require
88 percent location and zoning adjustments, since it is 3,500 feet south of
Tropicana (3,500/1,000 x .25). Prior to the location and FAA zoning issues, the
time of sale adjustments must be applied.
The adjusted price per acre for Comparable Sale Number 4 becomes $6,700,000,
compared to an adjusted price per acre for Comparable Sale Number 5 of
$4,900,000.
Comparable Number 6 is the 20.86 acre site of the El Rancho Casino hotel, which
sold in January of 1996 for $2,285,331 per acre. The developers, a New Jersey
group, intended to redevelop the site with the Orion project, which was to have
210,000 square feet of casino space, 300,000 square feet of retail space, and
2,400 hotel rooms. Shortly after this transaction they attempted to purchase an
additional 15.0 acres on the back side of the El Rancho site, but allowed that
transaction to fall out of escrow when they encountered difficulties in
obtaining financing in the wake of the negative publicity surrounding the
Stratosphere.
Seller financing was provided for $16,500,000 or 40 percent of the purchase
price. The first $6,500,000 note to the seller was paid off within two months of
the transaction. No cash equivalent adjustment is warranted. This sale requires
a market condition adjustment for the nearly two years that have transpired
since it occurred, and a 163 percent locational adjustment to account for its
6,500 foot distance from the northern boundary of the core Strip area (6,500 /
1,000 x .25). When compared to Comparable Sale Number 7, which is immediately
north of Comparable 6, and particularly in light of the events that have
transpired since then, it appears that the out-of-town buyers of Comparable 6
over-paid for it.
The adjusted price per acre of Comparable Number 6 is $8,000,000, which provides
the high end of the range.
Comparable Sale Number 7 is immediately north of Comparable 6 but spans both
sides of the Strip. This 66.04 acre assemblage was technically acquired by
Gordon Gaming which then flipped the easterly and smaller of the two parcels to
Sahara Gaming as part of a 1031 tax free exchange. Sahara Gaming traded a
separate 22 acre site on the east side of Paradise for the easterly site
included in this comparable sale, in conjunction with their sale of the Sahara
Hotel to Gordon Gaming. There is no need for a cash equivalency adjustment, as
the Howard Hughes Corporation received $61,738,500 in cash ($934,865 per acre)
for the site.
<PAGE>
66
COMBINED COST APPROACH
The 66.04 acre comparable is located approximately 7,500 feet north of the
Spring Mountain/Sands Avenue intersection, and so should be adjusted upward 188
percent for its inferior location (7,500/1,000 x .25.)
Both parcels were affected by leases, although the lessee for the parcel on the
western side of the Strip had not yet constructed any improvements. The cost of
lease buy-out for the westerly parcel was $3,500,000. Sahara Gaming negotiated a
stepped down lease buy-out, starting at $7,000,000 which diminished to a nominal
sum over time. It had no imminent plans for development, and sought only to keep
a foothold on the Strip. Demolition costs for the Wet'n Wild improvements were
estimated by the buyer at $1,500,000. The subject is a vacant, buildable site
with no leases encumbering it. To adjust this sale to be comparable to the
subject requires recognizing the two years appreciation, leasehold buy-outs, and
demolition costs. We will assume however that a prudent buyer would have allowed
the water theme park to operate during his design, approval and financing phase,
and that this savings in the buy-out formula would offset the demolition costs.
The transaction will be adjusted upward for a net $10,500,000 for the lease
buy-outs and demolition costs. This equates to $158,995 per acre, or 11 percent
of the time-adjusted price per acre. Because of the comparable's approximately
66 acre size, we will adjust this comparable upward by 20 percent, as was done
for Sales Comparable 5.
The adjusted price of Comparable Number 7 equates to $4,600,000 per acre.
Land Sales Comparison Analysis
After adjustments, the range of prices for our land sales comparables ranged
from roundly $4,600,000 to $8,000,000 per acre, with an average price of
$5,700,000 per acre. Unfortunately all of the sales were either extremely
complicated, or required significant levels of adjustment. The
<PAGE>
67
COMBINED COST APPROACH
<TABLE>
<CAPTION>
Land Sale Adjustment Grid
Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Comparable 7
Imputed Value Listing La Quinta Site Hacienda Site NWC Russell El Rancho Site NWC Sahara &
Monte Carlo NWC Harmon next to NYNY Redevelopment Wet'n Wild Site
<S> <C> <C> <C> <C> <C> <C> <C>
Transaction Details
Sales Price $ 146,000,000 $ 66,000,000 $ 13,500,000 $ 80,000,000 $73,000,000 43,500,000 $ 61,738,500
Date of Sale Sep-95 listing Mar-96 Jan-95 Mar-95 Jan-96 Oct-95
Site Size in Acres 45.72 11.32 2.06 47.29 73.74 20.86 66.04
Price per Acre $ 3,193,351 $ 5,830,389 $ 6,553,398 1,691,690 989,965 $2,085,331 $ 934,865
Sequential Adjustments
Interest Conveyed -- -- -- -- -- -- --
Adjusted Price
Financing Terms -- -- -- -- -- -- --
Adjusted Price
Conditions of Sale -- 0% 0% -- -- -- --
Adjusted Price 5,830,389 6,553,398
Market Conditions 1.56 1.00 1.10 1.73 1.68 1.44 1.53
Adjusted Price 4,967,435 5,830,389 7,208,738 2,918,165 1,660,253 2,997,663 1,431,512
Non-sequential Adjustments
Location -- -- -- 63% 88% 1.63 188%
Zoning -- -- -- 63% 88% -- --
Assemblage -- 0% -40% -- -- -- --
Demolition -- 0% 3% 0% -- 5% 0%
Interim Use -- 0% 0% 0% -- -- 0%
Lease Buy-outs -- 0% 7% -- -- -- 11%
Size -- 0% 0% -- 20% -- 20%
Other -- -- -- -- -- -- --
------------ ---------- ----------- ----------- ---------- ---------- ----------
Net non-sequential
Adjstmnts 0 0% -30% 125% 195% 168% 219%
-- -- (2,162,621) 3,647,706 3,237,494 5,021,086 3,129,383
------------ ---------- ----------- ----------- ---------- ---------- ----------
Adjusted Value 4,967,435 5,830,389 5,046,117 6,565,870 4,897,747 8,018,749 4,560,895
5,000,000 5,800,000 5,000,000 6,600,000 4,900,000 8,000,000 4,600,000
Range 4,600,000 to 8,000,000
Average 5,698,172
Rounded 5,700,000
</TABLE>
<PAGE>
68
COMBINED COST APPROACH
three closest sales, which required the lowest total percentage adjustments,
ranged from $5,000,000 to $5,800,000 per acre, with an average of $5,250,000 per
acre.
In addition to the sales verification process, we spoke with a number of
developers who are attempting to purchase sites in the core Strip area. Two
participants, unwilling to pay more than $3,000,000 per acre, have been unable
to find anything with an acceptable location in that price range. A third buyer,
who wishes to remain anonymous, has begun the painstaking process of assembling
a site. When the assemblage is complete, and after demotion and mitigation
costs, this buyer expects to have spent between $5,000,000 and $7,000,000 per
acre.
The subject parcel is fairly unique. It is located in the core Strip area, and
will offer better views of the Mirage and Treasure Island attractions than are
available from either of those resorts. More importantly perhaps its physical
proximity to the 1.0 million square foot Sands Expo Center, which will provide a
significant source of higher rated mid-week business. As there was no empirical
way to determine an appropriate adjustment for this factor, none was included in
our analysis. The subject's assumed easements situation can be likened to a golf
resort site, in which the golf course itself has already been developed and the
hotel developer needs only to purchase a hotel pad. This adds a premium to the
hotel site over sites that are close to, but not part, of the golf course.
However, in consideration of the magnitude of the adjustments, we will select a
value near the average of $5,250,000 per acre or $162,000,000. From this, we
will deduct the cost of one-half of the 800 parking spaces that are required in
the easement ($3,600,000) and the cost of the environmental mitigation
($700,000). The net value is therefore $157,700,000 rounded or approximately
$5,100,000 per acre. To check this value, we performed a residual analysis.
Land Residual Analysis
As part of our residual analysis, we estimated the residual land value of two
recently completed mega resorts utilizing available data on earnings before
income taxes, depreciation and amortization (EBITDA) and reported construction
costs. We also prepared a residual estimate for a fairly generic but upscale
casino resort project to determine the site's market value. (To employ the
Venetian's cost and pro-formas would be to produce an estimate of "Investment
Value".) The current parcelization proposed for the subject assemblage assumes a
two-phase development in which the site area for Phase I is 30.9 acres, as it
will contain the shared power plant. The Phase II Lido site, comprised of the
remaining 13.7 acres, would be smaller than is typical for mega-resort
development on a stand-alone basis. For our residual analysis that is intended
to determine market value, we will assume a more even apportionment of the
larger parcel into two like sized parcels. For our residual analysis, we will
assume a site size for the subject of 22.3 acres.
<PAGE>
69
COMBINED COST APPROACH
The Venetian's cost estimates are based upon a facility that will have a larger
guest room and significantly higher quantities of meeting space and retail space
than are typical for the Las Vegas market today. These enhancements should,
logically contribute to a higher stream of income from the property. However, a
more generic product, as described in the Highest and Best Use section, will be
assumed for the subject.
To estimate a "market cost" for the more generic product assumed, we will
increase the per room cost estimate of New York-New York by 20 percent, to
approximately $270,000 per key. This compares to the Venetian cost budget of
approximately $293,000 per key for the casino hotel only. For a 3,000 room
project, the total hard and soft costs are estimated at $810,000,000.
The Monte Carlo opened on June 21, 1996. In its first full 193 days of
operation, its partners reported that it generated $49,100,000 in EBITDA. We
assumed that any "novelty effect" would be offset by the likely inefficiency in
the initial months' operation. On an annual basis, it appears that the Monte
Carlo will have an EBITDA of approximately $92,900,000. This estimate appears
conservative relative to other Circus Circus managed hotels given the Monte
Carlo's superior location. An appropriate capitalization rate for a typical
market standard product is estimated in the Casino Hotel Income Approach as 17
percent. The estimated value for the Monte Carlo is $546,000,000, rounded
(92,900,000 / .17)
As related in the Casino Hotel Cost Analysis, the total hard and soft
construction costs of the Monte Carlo were $293,000,000. Deducting this from the
estimated value produces a value of the land and entrepreneurial profit of
$257,000,000 ($550.0 - 293.0). According to the annual reports, Circus Circus
took no developer's fee for managing the construction of this hotel. We will
however factor in entrepreneurial profit, which we have estimated at 25 percent
of the hard and soft costs of $293,000,000, or roundly $73,250,000. The residual
land value is $179,750,000. With a site size of 45.72 acres, the residual land
value is $3,933,000 or $3,900,000 per acre, rounded.
As of the writing of this appraisal, only 179 days operating data was available
on the EBITDA for New York-New York. We will annualize the 179 days EBITDA of
$70,600,000 without factoring in any seasonality. This equates to $144,000,000
in EBITDA annually [70,600,000 / (179/365)]. As with the Monte Carlo, this
assumes that any novelty effect in the revenues is offset by inefficiencies in
the initial month's operations. Applying a 17 percent capitalization rate to
this figure yields a value of approximately $847,000,000 (144,000,000/.17).
As described in the Casino Hotel Cost Analysis, hard and soft costs for New
York-New York were $460,000,000 leaving $387,000,000 in value for land and
entrepreneurial profit. Deducting entrepreneurial profit of approximately
$92,000,000 (20 percent) leaves a value for the land of $295,000,000. With a
total site area of 20.5 acres, the residual value is approximately $14,400,000
per acre.
<PAGE>
70
COMBINED COST APPROACH
Clearly, the density of development has profound effects on value estimates
using the residual approach. We question whether the Monte Carlo would be
constructed on 45.7 acres of core Strip land given today's market conditions.
The EBITDA differential indicates to us that the consumer market prefers highly
themed casino resorts that are attractions in and of themselves. The Monte
Carlo, a low-cost project with very little in the way of sightseeing
attractions, is not as successful as New York New York, which is a sightseeing
attraction.
To estimate an appropriate level of EBITDA for a theoretical high-end property,
we utilized the blended results of its nearest neighbors, the Mirage and
Treasure Island. While the Mirage is one of the most profitable resorts on a per
room basis, the Treasure Island resort has an EBITDA that is very consistent
with average mega-resort performance. The 1996 Annual Report for Mirage Resorts
indicated that the combined EBIDTA for these properties in 1996 was $354,400,000
or approximately $59,623 per hotel room. (New York-New York will likely have an
EBITDA of approximately $70,760 per room.) We will multiply this figure by the
assumed 3,000 rooms for a EBITDA for the theoretical generic project of
$178,900,000 (rounded). Applying a capitalization rate of 17 percent derives a
value of approximately $1,052,000,000 for the generic project.
After deducting the assumed hard and soft costs of roundly $810,000,000 (as
described earlier) from the estimated value of $1,052,000,000, we are left with
$242,000,000 in value for the generic product's land and entrepreneurial profit.
We estimated entrepreneurial profit of $121,500,000 on this nearly billion
dollar deal, 15 percent of the hard and soft costs. This is more than eight
times the amount at which Marriott bought out Doubletree Hotels' early 1997
contract to acquire the Renaissance Hotel Company in a deal of a similar scale.
The residual land value is $120,500,000 or $5,400,000 per acre, assuming an even
split of the larger 44.6 acre site.
The residual values calculations are summarized in the following table:
Monte Carlo New York New York Theoretical Subject
-------------- ------------------- -----------------
EBITDA $92,900,000 $144,000,000 $178,900,000
Capitalization Rate .17 .17 .17
Estimated Value $546,000,000 $847,000,000 $1,052,000,000
Cost $293,000,000 $460,000,000 $810,000,000
Entrepreneurial $73,250,000 $92,000,000 $121,500,000
Profit ------------ ------------ --------------
Land Value $179,750,000 $295,000,000 $120,500,000
Acres 45.7 20.5 22.3
Value Per Acre $3,933,000 $14,390,000 $5,404,000
Rounded $3,900,000 $14,400,000 $5,400,000
Using a residual methodology, the average price per acre is $7,900,000. The
generic analysis assumed a per key cost that was 20 percent greater than the New
York-New York project, but an EBITDA that is 16 percent lower on a per room
basis.
<PAGE>
71
COMBINED COST APPROACH
From the residual technique, we estimate a value of $5,400,000 per acre or
$120,150,000, based on the most generic assumption of our residual calculations.
From this, we must deduct The Phase I share (50 percent) of the cost of the
developer's obligation to provide the SECC with 800 parking stalls or $3,600,000
and the environmental mitigation of $700,000. This reduces the concluded value
via the residual analysis to $115,850,000 rounded or $5,200,000 per acre.
Land Value Conclusion
The residual methodology indicates that the conclusion reached via an analysis
of comparable sales yields a price per acre that is economically viable. We will
conclude to a rounded figure of $155,000,000 or $5,000,000 per acre for the
subject's 30.86 acre site.
<PAGE>
72
COMBINED COST APPROACH
Replacement Cost Estimate
Replacement costs are based upon the actual budgeted costs associated with
developing the project, as provided and warranted by the construction manager,
Lehrer McGovern Bovis Inc. (Bovis). The budgeted costs include all hard and soft
costs, inclusive of financing fees and holding expenses during the development
period.
We have allocated the cost of the central plant among the two components based
upon their floor area. The mall air rights occupy an envelope of approximately
970,000 square feet. The improved portions of the combined components are
comprised of 5,290,000 square feet. Approximately 17.6 percent, or $11,760,000
of the central plant cost will be allocated to the mall. The balance, or
$55,141,000 will be allocated to the cost of the casino hotel.
As mentioned earlier, we believe that the subject's shared parking average
should be expanded by 560 spaces. We will allocate the full cost of this extra
parking to the mall, as we believe that it is the retail component that
precipitates this need. Based on line item estimates prepared by Bovis, we
estimate the hard and soft costs of parking at $8,000 per unit or $4,480,000
total. This will be applied to the cost of the retail component, bringing its
total hard and soft cost estimate to 10 percent for the casino hotel component
and 20 percent for the retail component. The casino hotel component is nearly
six times the investment of the mall component and is owned in fee simple
estate. The mall component is located in air rights that afford the owner less
control than would normally be associated with a leased fee estate. The blended
entrepreneurial profit is 12 percent.
The cost estimates for the individual components will be compared to the recent
cost of other similar projects in the Valuation sections for each component.
The Bovis cost data is summarized in the accompanying table on the following
page.
<PAGE>
LANDAUER 73
REAL ESTATE COUNSELORS COMBINED COST APPROACH
COST APPROACH SUMMARY
<TABLE>
<CAPTION>
Hotel/Casino Retail Mall Central Plant Total Project
---------------------- --------------------- ---------------------- ----------------------
% % % %
($) of Total ($) of Total ($) of Total ($) of Total
---------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Construction .......... 402,155,191 38.62% 78,921,170 7.58% 66,687,867 6.40% 547,764,228 52.61%
Additional CM Costs ......... 38,503,086 3.70% 416,972 0.04% 213,517 0.02% 39,133,575 3.76%
Theming ..................... 22,036,054 2.12% 19,379,321 1.86% 0 0.00% 41,415,375 3.98%
FF&E ........................ 57,367,180 5.51% 187,508 0.02% 0 0.00% 57,554,688 5.53%
Gaming Equipment ............ 26,873,836 2.58% 0 0.00% 0 0.00% 26,873,836 2.58%
Other Equipment ............. 21,427,933 2.06% 0 0.00% 0 0.00% 21,427,933 2.06%
Signage & Graphics .......... 5,178,310 0.50% 107,965 0.01% 0 0.00% 5,286,275 0.51%
Design ...................... 30,530,626 2.93% 4,769,167 0.46% 0 0.00% 35,299,793 3.39%
Permits & Fees .............. 10,023,231 0.96% 1,687,228 0.16% 0 0.00% 11,710,459 1.12%
Pre-Openings ................ 40,335,267 3.87% 1,573,000 0.15% 0 0.00% 41,908,267 4.02%
Soft Costs .................. 17,348,094 1.67% 12,453,906 1.20% 0 0.00% 29,802,000 2.86%
Consumer Experience ......... 9,000,000 0.86% 3,000,000 0.29% 0 0.00% 12,000,000 1.15%
Construc. Admin. ............ 6,472,211 0.62% 1,264,116 0.12% 0 0.00% 7,736,327 0.74%
Contingency ................. 28,788,502 2.76% 4,230,560 0.41% 0 0.00% 33,019,062 3.17%
Working Capital ............. 20,000,000 1.92% 0 0.00% 0 0.00% 20,000,000 1.92%
Financing ................... 98,343,800 9.44% 11,980,000 1.15% 0 0.00% 110,323,800 10.60%
--------------------- --------------------- ---------------------- -----------------------
Subtotal - Cost New ......... $834,383,321 80.13% $139,970,913 13.44% $66,901,384 6.43% $1,041,255,618 100.00%
Allocation of Plant ......... $55,141,000 $11,760,000 ($66,901,000) $0
Additional Parking .......... $0 $4,480,000 $0 $4,480,000
-- ---------- --
$889,524,000 $156,211,000 $0 $1,045,735,000
Entrepreneurial Profit at ... $88,952,000 10.00% $31,242,000 20.00% $0 0.00% $120,194,000 11.49%
TOTAL COST NEW .............. $978,476,000 $187,453,000 $0 $1,165,929,000
LESS: Physical Depreciation 0
Functional & External Obsolescence 0
--------------
Cost New Less Total Depreciation 1,165,929,000
PLUS: Land Value $155,000,000
INDICATED VALUE $1,320,929,000
$1,321,000,000 (Rd)
</TABLE>
<PAGE>
74
CASINO HOTEL SALES
CASINO HOTEL COST ANALYSIS
As indicated in the prior section, the allocated cost for the casino hotel
component before land and profit is $889,524,000, or $293,000 per room. To check
the reasonableness of this cost estimate, we reviewed actual costs on the Monte
Carlo and the New York New York projects, as well as the budgeted cost of the
Bellagio and Project Paradise that are now under construction. The data used is
from annual reports of the relevant gaming companies.
The Monte Carlo is a middle market product, consistent with Circus Circus'
orientation in that market. (Mirage Resorts, Inc. was a passive partner in the
development of the project.) The total costs, including land and all financing
and pre-opening expenses, have been reported in the annual reports for Mirage
and Circus Circus as $350,000,000. From this, the book value of the land
contribution must be deducted ($47,000,000), along with another roundly
$10,000,000 that was expended to purchase a 2.0 acre site formerly occupied by
the Desert Inn Motel. The hard and soft costs were a total of $293,000,000
(350.0 - 47.0 - 10.0), or $97,213 per guest room.
The New York-New York project has a reported cost of $460,000,000. On a per room
basis, this cost was $226,000 per guest room, well over twice the cost reported
for the Monte Carlo. At 2,035 rooms, New York-New York has a lower ratio of
rooms for the casino and public spaces provided, and that construction costs on
a relatively tight site would be higher.
The 3,000-room Bellagio, now under construction, has a budgeted cost of $1.4
billion dollars, or $466,666 per guest unit, including land, capitalized
interest and pre-opening costs. The project will occupy an 118 acre site, the
equivalent of the combined site of the Mirage and Treasure Island Resorts. Much
of the site will be taken up by a lake featuring over 1,000 fountains.
Bellagio's high-end suites will be clustered in low density units along the
lake. It is not clear at what basis the land value was included in the cost
estimate. If the treatment is consistent with book value reported in the Monte
Carlo partnership contribution, the land cost comprises $139,000,000 of this
budget, and reduces the real and personal improvement cost to $420,000 per guest
unit. The budget for artwork accounts for $20,000 per guest unit, or $60.0
million total. The 1996 annual report indicates that the "standard guest rooms
will be 15 to 20 percent larger than guest rooms of most other luxury hotels",
from which we infer that Bellagio will have a 575 to 600 square foot unit. The
guest bathroom will be similar to the subject's with a separate tub and shower
and extensive use of marble. The resort will include a 156,000 square foot
casino, 40,000 to 60,000 square feet of retail space and 14 restaurants, two of
which will be operated by the owners of Le Cirque in Manhattan. Without the
artwork, the remaining improvements and soft costs could approximate $400,000
per unit, 77 percent more than at the New York-New York, and 45 percent more
than the subject. If the land were included at a market value basis, the
improvement cost estimates would be much lower.
Excluding the Four Seasons Hotel, the cost of the 3,800-room Project Paradise is
budgeted at $800,000,000 or $210,000 per room. If the entire Hacienda site is
included at its book value from
<PAGE>
75
CASINO HOTEL SALES
the 1995 acquisition, the cost of the real and personal property improvements
declines to $189,000 per guest unit. The signature feature of this project is to
be a 10 acre tropical environment which is to include a very large wave pool
that will feature a surfing ride. The casino area is to be 124,900 square feet,
but the meeting and retail components of this project are nominal. We expect
that from a "finish" standpoint the Project Paradise will most closely resemble
the Luxor.
On balance, the allocation portion to the subject's casino hotel component is
consistent with the projects that have recently been completed or are now under
construction. The subject's budget of $292,900 per room (exclusive of land and
entrepreneurial profit and not including the mall) places it above the Monte
Carlo, the New York-New York and Paradise projects but well below the Bellagio
project.
If all of the land value is allocated to the hotel component, the total project
cost with 10 percent entrepreneurial profit becomes $1,133,000,000 or $373,000
per room.
<PAGE>
76
CASINO HOTEL SALES
CASINO HOTEL SALES COMPARISON ANALYSIS
Though we performed a diligent search, we were unable to find any comparable
sales of significant casino resorts.
As mentioned in the land sales analysis, the pending sale of a 50% interest in
the Desert Inn, its golf course and 34 acres of excess land for $150,000,000 was
announced in early August, but as of the October 17 date of our last inspection,
to have run into serious obstacles as indicated in the Land Valuation section.
The transaction is clouded by the partial interest involved, the apparent
discount from the seller's valuation, a ten percent guaranteed return to the
seller, a pre-determined sell-back provision favoring the buyer, and most
importantly the obvious absence of a willing seller. In order to avert a hostile
take-over attempt launched by Hilton in late January, ITT Sheraton first shed
non-core assets and in recent months has begun to sell off some of its hotel
inventory as well. In 1993, the ITT Sheraton paid $160,000,000 for the Desert
Inn and its vacant land, and over the past 18 months, has spent approximately
$190,000,000 on renovating the property for a total investment of $350,000,000.
Although ITT Sheraton values the assets at $400 million, ITT is now willing to
sell a 50 percent interest for $150,000,000. The allocation of $100,000,000 of
the transaction to the existing hotel and golf course indicates that the 100
percent basis for these components is only $200,000,000 or approximately what
was spent on the renovation. Two days after the announcement regarding the
Desert Inn, Hilton increased its take-over offer from $55 to $70 per share,
matching ITT's buy-back offer.
In addition to the $150,000,000 cash infusion, the new joint venture will borrow
$100,000,000, largely on the strength of the buyer's balance sheet. During 1996,
the property generated only $8,000,000 in EBITDA. The buyer's sell-back option
will be triggered if the property fails to make $25,000,000 in annual EBITDA in
2001. In the first year of post-renovation operations, the property is forecast
to do $133,000,000 in total revenues. If we apply a generic mega resort 30
percent EBITDA ratio on to the projected income, EBITDA would equate to nearly
$39,900,000. The going-in capitalization rate that could be extracted using this
market derived EBIDTA ratio would be 20 percent, further evidence of the duress
that the seller was under.
At $200,000,000 for a 100 percent interest, the Strip's only golf resort would
be priced at approximately $266,000 per key. Even without the recent development
in negotiations, we consider this to be meaningless as an indicator of market
value.
The Hard Rock Cafe founder, Peter Morton, announced that he has negotiated the
buy-out of Harvey's, his partner in that venture, for $45,000,000. Assuming no
discounting or premiums were associated with the sale of this partial interest
of 40 percent, this suggests a 100 percent interest price of $112,500,000. There
are approximately 8.0 acres of excess land associated with this transaction,
bought with the anticipation of eventually expanding the 340-room hotel to 700
rooms. Acquired at a cost of approximately $979,000 per acre, the estimated
market value of this excess land today is
<PAGE>
77
CASINO HOTEL SALES
approximately $2,000,000 per acre, or $16,000,000 (assuming 25 percent
appreciation per year since the acquisition of this land in 1993). Our
allocation of value for the existing casino hotel component would be $96,500,000
or $283,800 per room. This is exclusive of the Hard Rock restaurant, which was
not part of the casino hotel partnership.
In October, 1996, a 100 percent interest in the Sahara Hotel and Casino sold, as
part of the 1031 tax free exchange that involved vacant land parcels to the
west, south and east. Having acquired the vacant land to the south for the
seller, the buyers of the Sahara exchanged that vacant land for a parking lot
immediately east of the Sahara, across Paradise. The sales price for the
2,035-room casino hotel, net of the easterly parking lot, was $128,000,000 or
$62,899 per key. (The easterly parking lot was acquired for $17,000,000.) Some
881 of the rooms were built in 1960 and earlier, and have since been demolished.
In essence, the transaction involved 1,154 rooms located on 17.54 acres with
excess land for redevelopment. The equivalent cost per key is $110,918 for the
1,154 rooms completed since 1988. This comparable is located relatively far
north, and is closer to the Stratosphere than to the subject property.
A recent article in the Wall Street Journal indicated that the Trump Plaza in
Atlantic City was being marketed at a price of $1,000,000,000. In that article
industry observers publicly expressed doubts that the property will fetch a
price near the asking price. We have assumed that the billion dollar asking
price includes the 500-room Trump Regency Hotel, which is connected to the Trump
Plaza by a sky bridge and is covered under the same gaming license. The asking
price for the combined buildings would be approximately $946,000 per room. A 51
percent interest in the off-Boardwalk Trump Castle sold in March 1997 for
$125,000,000 to Colony Capital. This suggests that a 100 percent interest in the
1,250 room castle would be $245,100,000 or $196,078 per room. Neither the asking
price of the Trump Plaza or the off-Boardwalk sales price are of any use in
estimating a value for the subject property.
Because of the complicated nature of these transactions or their general lack of
comparability, we are unable to conclude to a value or range of values via the
Sales Comparison Approach. We will rely on the Cost and Income Approaches.
<PAGE>
78
GAMING ANALYSIS
GAMING ANALYSIS
Introduction
During the eight year period from July 1, 1989 (fiscal 1990) to June 30, 1996,
gaming receipts for the largest casino hotels in the Strip area of Las Vegas
increased from $1,679,059,959 to $3,289,623,000. This equates to a compound
average rate of growth of 10.1 percent per year. The volume level used to define
this top tier is $72,000,000 in gaming revenue. The number of properties in this
mega resort category has increased by 60 percent. In fiscal year 1990 there were
13 properties in the top casino revenue producing tier, in fiscal year 1997
there were 21 properties.
Presented in the following table is data on the total casino floor area
available compared to total gaming receipts for the largest category of casinos.
Growth in Casino Floor Area
and Gaming Receipts for Strip Casinos
with Revenues of $72 Million or Greater
1989/90 through 1990/91
Number of Square Feet of Percent Gaming Percent
Fiscal Year Locations Casino Area Change Revenue Change
- ----------- --------- ----------- ------ ------- ------
1989 / 90 13 868,908 0.0% 1,679,059,959 0.0%
1990 / 91 14 1,047,746 20.6% 2,069,556,867 23.3%
1991 / 92 14 1,075,956 2.7% 1,984,080,337 -4.1%
1992 / 93 15 1,160,730 7.9% 2,213,054,478 11.5%
1993 / 94 19 1,574,777 35.7% 2,761,356,425 24.8%
1994 / 95 19 1,590,186 1.0% 3,086,131,427 11.8%
1995 / 96 19 1,648,288 3.7% 3,194,527,007 3.5%
1996 / 97 21 1,820,000(E) 10.4% 3,289,623,000 3.0%
Compound Annual
Growth Rate N/A N/A 11.3% N/A 10.1%
(E) Estimated, based on planning data
Source: Nevada Gaming Abstract
The average size of a casino in this top category has grown from 66,916 to
86,700 square feet, or nearly 30 percent. Growth in gaming revenue has been
accomplished by growth in the supply of casino area. Over the prior seven years
ended in fiscal 1996, the compound annual rate of growth in supply and demand
had been equal at 11.3 percent. As indicated in the "Tourism Industry" section,
much of the lackluster 1996/97 revenue growth is attributable to declines in
Baccarat and sports pool win. Over the twelve month period from July 1, 1996 to
June 30, 1997, Baccarat revenues were
<PAGE>
79
GAMING ANALYSIS
down 10.7 percent or $93,719,000. For the most recent year, Baccarat win
accounted for 16 percent of the total gaming revenue.
Revenue from wagering in the sports pool was down even further showing a 59
percent or $28,753,000 decline. With a net increase of two casinos, revenues in
Twenty-one, Craps and Roulette were up by 7.8, 4.2 and 2.4 percent respectively.
Slot machine revenues were up by 4.3 percent. We see no indicators that the
number of gamblers is falling off or that the average amount wagered is changing
such that the rate of growth in casino revenues (3.0 percent) would be less than
half of the growth in the number of hotel guests (7.3 percent). While we are
cognizant of modest changes in gambling behavior, it appears that the nominal
growth in gaming revenues during fiscal 1996/97 for this top category of casinos
is an aberration.
When expressed on a "per square foot of casino area" basis, gaming revenues have
declined slightly from $1,930 per square foot in 1989/90 versus $1,807 per
square foot in 1996/97. These figures are not adjusted for inflation. This
decline could be explained by an increase in the amount of floor area per device
or table, or a decline in the average amount wagered per patron. Also, the data
for fiscal 1996/97 appears to be somewhat aberrant, as was discussed earlier.
When the data presented earlier on gaming receipts per occupied room is
considered, it appears that the declining square foot of casino area revenue
measure is a function of the broader market profile. Per visitor hotel and
retail expenditures have increased.
Over the long term, and assuming that the new mega-resorts added are of a "must
see" quality, the fundamentals for growth in gaming revenues are good as
outlined earlier. California's economy is continuing its recovery, and its
ethnic diversification bodes well for the industry. Convention space at the Las
Vegas Convention Center and strip hotels are being expanded. The expansion of
the airport will facilitate increases in air lift. We are of the opinion that,
over the next seven years, the percentage rate of growth in gaming revenues for
these mega casinos will decline as will the percentage rate of growth in their
supply. In absolute square footage and dollars however, casino capacity and
casino revenue should demonstrate levels of growth that are similar to the prior
seven years.
<PAGE>
80
GAMING ANALYSIS
Presented in the following table is a summary of the casinos planned as part of
the proposed mega resorts:
Planned Additions To The Casino Supply
Name of Project Square Feet Projected Date of Opening
- --------------- ----------- -------------------------
Bellagio 156,000 August 1, 1998
Project Paradise 124,900 December 1, 1998
The Venetian 116,000 April 1, 1999
Paris 70,000 July 1, 1999
Aladdin Redevelopment 130,000(1) July 1, 2000
Lido 90,000 July 1, 2001
Planet Hollywood 90,000(E) July 1, 2002
(1) The plans submitted call for a 259,000 square foot casino to serve 3,256
hotel rooms and 550,000 square feet of retail space. We believe that the
ultimate design will be less ambitious with regard to the casino component.
(E) Estimate by Landauer Associates, based on generic casino size
Source: Annual Reports for Mirage Resorts, Circus Circus, Landauer
Associates and Clark County Planning
While the casino components of the projects that will open during calendar 1998
are relatively large, only 6,800 rooms (77 percent) of the 8,756 rooms added
will likely have a significant amount of casino space associated with their
openings. In 1999, 6,037 rooms or 78 percent of the planned hotels will likely
have a significant amount of casino space. Thus, the potential number of hotel
guests (prospective gamblers) will be increasing at a similar rate.
Based upon the above proposed additions, we have estimated that the mega-hotel
casino inventory will grow as follows:
Projected Growth in Casino Space and Gaming Revenues
for Strip Casino Hotels with Gaming Revenues of $72M or Greater
Fiscal Year Square Feet Percent Change Gaming Revenue Percent Change
----------- ----------- -------------- -------------- --------------
1996/97 1,820,000 10.4% 3,289,623,000 3.0%
1997/98 1,820,000 0.0% 3,454,104,150 5.0%
1998/99 2,064,858 13.5% 3,799,510,000 10.0%
1999/00 2,286,900 10.8% 4,179,460,000 10.0%
2001/02 2,416,900 5.7% 4,430,230,000 6.0%
2002/03 2,506,900 3.7% 4,651,740,000 5.0%
2003/04 2,596,900 3.6% 4,814,550,000 3.5%
2004/05 2,686,900 3.5% 4,983,060,000 3.5%
Compound Annual
Growth Rate 5.7% 6.1%
Source: Landauer Associates
<PAGE>
81
GAMING ANALYSIS
Between fiscal 1990 and fiscal 1997, casino space grew by 951,000 square feet.
We are forecasting a growth in space of 866,900 square feet between fiscal 1997
and fiscal 2005. Mega casino revenues grew by 1.6 billion dollars between fiscal
1990 and fiscal 1997. We are forecasting mega casino revenue growth of 1.7
billion dollars between fiscal 1997 and fiscal 2005.
Within the category that encompasses the mega resorts, there are properties that
are more or less successful than the others. The most highly themed or
amenitized products achieve the greatest relative market penetrations. The
Venetian, with its Grand Canal Shops, will have foot traffic levels that are
comparable or greater than any other location in Las Vegas, in a highly
amenitized, high end product. Cross references to annual reports indicate that
the following properties comprised the top quartile of the 19 mega hotels with
gaming receipts in excess of $72 million:
Caesar's Palace
The Mirage
Treasure Island
The MGM Grand
In 1996/97, we expect that the results of New York-New York will be reflected in
the top quartile of this largest gaming category. To test the assumptions for
the casino projections prepared by the subject's developer, we have compared the
number and type of devices and units planned for the subject property with those
of the top quartile resorts. This is depicted in the table on the following
page. Because we believe that New York-New York will fall within the top
quartile on future reports, we have included its count as well.
<PAGE>
LANDAUER 82
REAL ESTATE COUNSELORS GAMING ANALYSIS
MIX OF GAMING DEVICES, GAMES AND TABLES
<TABLE>
<CAPTION>
5
Caesar's MGM Mirage NY-NY Treasure Average % Total Subject % Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Slots
5Cent 75 475 301 232 269 270 11% 0 0%
10Cent 0 37 0 0 0 7 0% 0 0%
25Cent 1104 2108 1090 1342 1207 1,370 55% 1200 48%
50Cent 47 75 46 27 60 51 2% 200 8%
1Dollar 619 875 615 713 556 676 27% 950 38%
Megabucks 12 22 11 8 14 13 1% 28 1%
5Dollar 77 67 122 72 66 81 3% 100 4%
25Dollar 21 20 16 11 9 15 1% 22 1%
100Dollar 15 19 11 4 3 10 0% 0 0%
500Dollar 4 4 2 0 0 2 0% 0 0%
Other Slots 6 18 11 16 36 17 1% 0 0%
---- ---- ---- ---- ---- ----- ----
Total 1980 3720 2225 2425 2220 2,514 100% 2500 100%
Games
Craps 13 17 10 8 7 11 9% 12 10%
Roulette 13 18 12 7 9 12 10% 10 8%
Twentyone 69 101 70 43 56 68 56% 72 60%
Keno 1 2 2 1 2 2 1% 1 1%
Wheel of Fortune 2 3 2 1 1 2 1% 2 2%
Bingo 0 0 0 0 0 -- 0% 0 0%
Mini-Baccarat 2 7 4 3 1 3 3% 5 4%
Baccarat 11 15 10 0 3 8 6% 4 3%
Race Book 1 1 1 0 1 1 1% 1 1%
Sports Parlay 0 0 0 0 0 -- 0% 0 0%
Sports Pool 1 1 1 0 1 1 1% 1 1%
Caribbean Stud 2 4 3 2 4 3 2% 4 3%
Let it Ride 2 2 2 2 2 2 2% 4 3%
Pai Gow 4 2 4 1 1 2 2% 2 2%
Sic Bo 0 0 0 0 0 -- 0% 0 0%
Pai Gow Poker 6 6 4 2 3 4 3% 3 2%
Other 1 3 1 3 1 2 1% 0 0%
--- --- --- -- -- --- --- --- ---
Games 128 182 126 73 92 120 100% 121 100%
Tables 0 20 31 0 0 10 N/A 9 N/A
- --- -- - - -- ---
Combined 128 202 157 73 92 130 N/A 130 N/A
</TABLE>
SF Casino Area 171,500 95,500 84,000 78,400
Source: Nevada State Gaming Control Board, Non-restricted Count Report as of
July 1, 1997, and Venetian Pro-forma
<PAGE>
83
GAMING ANALYSIS
As demonstrated in the preceding table, the subject has 2,500 machines planned,
compared to 2,514 for the top quartile. The primary difference between the
subject's planned devices and the top performing properties is in the nickel
denomination slot machines. We concur with the subject's developers that these
are being phased out at the better quality strip resorts, and that the space
from these machines would be better utilized with higher denomination machines.
Likewise, the decision to concentrate the number of devices in the most popular
denominations, and to eschew the highest denomination exotic machines also
appears reasonable.
In the table games, the subject's developers again plan to provide the highest
ratio of the most popular games. Because of the highly volatile nature of
baccarat win, the developers of the Venetian have planned a ratio of baccarat
tables that is at the average win per unit demonstrated by the larger 19 hotel
sample, versus the average for the top quartile. The subject's developers hope
to avoid the pitfalls associated with the periodic losses to large stakes
players. From a cash flow management standpoint for a single casino asset, the
philosophy is a sound one.
Presented in the following table is data on the average house win per unit for
the various table types and devices.
<PAGE>
LANDAUER 84
REAL ESTATE COUNSELORS GAMING ANALYSIS
FORECAST OF SUBJECT'S GAMING REVENUES
<TABLE>
<CAPTION>
Top Quartile Market Average, '96 $ Forecast for Subject restated in 1996 and 1997 $
Top Quartile Annual Win/Unit Win/Unit Annual
No. Units Win/Unit Revenues No Units 1996 $ 1997 $ Revenues
<S> <C> <C> <C> <C> <C> <C> <C>
Slots
5Cent 270 22.6 $ 6,099.7 0 0 $ --
10Cent 7 37.8 279.6 0 -- -- --
25Cent 1,370 33.8 46,308.6 1200 33.8 34.8 41,776.8
50Cent 51 44.8 2,285.4 200 44.8 46.1 9,228.8
1Dollar 676 67.6 45,652.3 950 67.6 69.6 66,146.6
Megabucks 13 130.0 1,742.0 28 130.0 133.9 3,749.2
5Dollar 81 93.3 7,539.3 100 93.3 96.1 9,609.9
25Dollar 15 103.2 1,589.1 22 103.2 106.3 2,338.5
100Dollar 10 196.1 2,039.9 0 -- -- --
500Dollar 2 N/A -- 0 -- -- --
Other Slots 17 N/A -- 0 -- -- --
Total 2,514 $113,535.9 2,500 $ 132,849.8
0.0% 3.0%
Games
Craps 11 $ 1,840.0 $ 20,240.0 12 1,840.0 1,895.2 $ 22,742.4
Roulette 12 872.7 10,298.4 10 872.7 898.9 8,988.8
Twentyone 68 582.5 39,494.5 72 582.5 600.0 43,198.2
Keno 2 1,230.1 1,968.1 1 1,230.1 1,267.0 1,267.0
Wheel of Fortune 2 422.3 760.1 2 422.3 435.0 869.9
Bingo -- -- 0 -- -- --
Mini-Baccarat 3 1,900.7 6,462.2 5 1,900.7 1,957.7 9,788.6
----------------------------------------
Baccarat 8 9,666.3 75,397.3 4 | 7,177.1 7,392.4 29,569.7 |
----------------------------------------
Race Book 1 3,797.3 3,037.8 1 3,797.3 3,911.2 3,911.2
Sports Parlay -- -- 0 -- -- --
Sports Pool 1 2,185.6 1,748.5 1 2,185.6 2,251.2 2,251.2
Caribbean Stud 3 760.0 2,280.0 4 760.0 782.8 3,131.2
Let it Ride 2 579.9 1,159.8 4 579.9 597.3 2,389.2
Pai Gow 2 2,412.4 5,789.8 2 2,412.4 2,484.8 4,969.5
Sic Bo -- -- -- 0 -- -- --
Pai Gow Poker 4 862.9 3,624.2 3 862.9 888.8 2,666.4
Other 2 0 -- -- --
Games 120 $172,260.8 121 $135,743.3
0.0% -4.2%
Tables 10 $ 187.9 $ 1,916.7 9 $ 200.9 206.9 $ 1,862.3
Combined 130 $287,713.4 130 $270,455.4
</TABLE>
Source: Nevada State Gaming Control Board and Developer's Pro-Forma
<PAGE>
85
GAMING ANALYSIS
SUBJECT GAMING REVENUE FORECAST
The win per device or table forecasts for the subject property are consistent
with the top quartile performance (when expressed in same year 1996 dollars)
with one exception, baccarat revenues. Consistent with the developer's intention
of eschewing the risks associated with high stakes baccarat play, the subject's
developers have forecast baccarat win per table that is 26 percent below that of
the top quartile. We concur with the developer's estimates of stabilized year
gaming revenue estimates for the subject property. In a stabilized year of
operations, we are forecasting that the subject property will have gaming
revenues of $262,374,000 in 1996 currency. As subsequent revenue and expense
estimates were prepared in calendar 1997 dollars we will inflate our stabilized
year estimate by 3.0 percent to convert it into "like kind" 1997 dollars. This
equates to $270,245,000 in calendar 1997 dollars.
The rapid absorption and market success of New York - New York indicates, that
if properly designed, a highly themed, well amenitized casino resort experiences
almost no ramp up period because of the "must see" quality of the physical
asset. Only engineering problems, such as those that occurred at the Luxor, or
operational problems, such as those that occurred at the 5,000 room The MGM
Grand, appear to dilute the reception of these products. We theorize that there
is a slight novelty effect associated with the opening of a new mega casino
resort that abates with the subsequent opening of one or more new resorts. We
will apply a temporary three percent premium to the subject's first year of
operation. Thereafter, all growth will be at the rate of inflation.
<PAGE>
86
HOTEL ANALYSIS
HOTEL ANALYSIS
INTRODUCTION
The pattern of absorption of new casino hotels in Las Vegas has been one of
trade-up. The newest most highly themed resorts fill first, the oldest least
amenitized resorts fill last. Fortunately, the excitement generated by the new
resort openings has been adequate to ensure that most properties, regardless of
quality level, perform at occupancies that are well above national averages.
Because of the trade-up phenomenon, it is most relevant to look at larger market
trends in analyzing the supply and demand for casino hotels. For that reason, we
will focus our analysis on Clark County's casino hotels with gaming revenues in
excess of $1.0 million.
LAS VEGAS MARKET CONDITIONS
To identify historical trends in the absorption of casino hotels, we analyzed
data from the Nevada Gaming Abstract (annual reports). We deemed this
information more reliable than that published by the Las Vegas Convention and
Visitors Authority (LVCVA) because it is compiled from data gathered in reports
required of all gaming license holders as compared to the partial sampling and
econometric modeling used by the LVCVA. In addition, the data from the Nevada
Gaming Abstract provides the only reliable indicator of average daily room
rates. We will consider the LVCVA data, which is released monthly, in order to
establish current rates of growth and projected casino openings.
Within the category of "Casino hotels with gaming receipts in excess of
$1,000,000" there were an average of 83,067 hotel rooms available for the year
ended June 30, 1996. This compares to data from the LVCVA indicating that, on
December 31, 1995, the mid-point of the 95/96 fiscal year, there were 89,300
rooms in the Las Vegas area rooms inventory. Thus, it would appear that the
Gaming abstract survey accounts for approximately 93 percent of the total
supply.
On a macro level, the supply of casino hotel rooms in Clark County grew at a
compound annual rate of 8.1 percent between fiscal 1990 and 1996, compared to a
rate of growth in occupied rooms of 8.5 percent. The average daily rate for all
of Clark County's casino hotels grew from $49.74 in fiscal 1990 to $61.27 in
fiscal 1996. This equates to a compound annual rate of growth of 3.5 percent
over the past six fiscal years. This is depicted in the following table.
<PAGE>
87
HOTEL ANALYSIS
Historical Growth in Supply and Demand for Casino Hotels in Clark County,
Nevada
Supply Demand Market Indicators
------ ------ -----------------
Fiscal Available Percent Occupied Percent Occupancy Average Percent
Year Room Nights Change Room Nights Change Daily Change
Rate
- --------------------------------------------------------------------------------
1990 18,970,042 -- 16,989,431 -- 89.6% $49.74 --
1991 22,915,738 20.8% 20,008,704 17.8% 87.3 48.28 -2.9%
1992 23,830,547 4.0 20,870,279 4.3 87.5 47.37 -1.9%
1993 23,606,425 -0.9 21,534,405 3.2 91.2 49.09 3.6
1994 26,462,021 12.1 24,787,688 15.1 93.7 52.30 6.5
1995 29,361,881 11.0 26,904,615 8.5 91.6 57.75 10.4
1996 30,319,491 3.3 27,756,503 3.2 91.6 61.27 6.1
---- ---- ----
Compound
Annual Change 8.1% 8.5% 3.5%
Source: Nevada Gaming Abstract
In response to the nearly 21 percent increase in supply in fiscal 1991, the
average daily room rate declined moderately. We attribute the nominal decline in
rate the following year to the national recession, which is generally considered
to have commenced at the same approximate time as the invasion of Kuwait in
July, 1990 and to have continued through the summer of 1992. That the Clark
County market could have almost completely absorbed a cumulative 25 percent
increase in the casino hotel room inventory during a national recession is
remarkable. Under more favorable economic conditions in fiscal 1994, the rate of
growth in demand outpaced that of supply. In fiscal 1995, the market appeared to
have focused on average daily rate, which grew 10.4 percent. During the 1996
fiscal year, supply and demand grew at the same pace, but the rate of increase
in the average daily room rate was twice the rate of national inflation.
A great deal has appeared in the local Las Vegas and national press regarding
the absorption of rooms in Las Vegas and declining room rates following the
current round of additions. The above data refutes the contention that this is
the first time that Las Vegas has added rooms faster than the market's ability
to absorb them.
The trending information from the LVCVA indicates that for the six month period
from July 1, 1996 to December 31, 1996, the number of occupied rooms grew by 7.2
percent. From January through June, their sample indicated a rate of growth in
demand of 7.3 percent. We forecast that for the fiscal
<PAGE>
88
HOTEL ANALYSIS
year ended June 30, 1997, the number of occupied room nights will have grown at
a rate of 7.2 percent.
The number of casino hotel rooms in inventory will have grown by 7.8 percent due
to the April 1996 opening of the Stratosphere; the mid-June opening of the
3,014-room Monte Carlo; the late December opening of expansions at the Luxor
(1,950 rooms), Circus Circus (1,000 rooms) and the Orleans (840 rooms); the
January 1997 opening of the 2,035-room New York-New York and a 1,025-room
expansion to the Rio Suites Hotel. The increase of 6,010 rooms in December or
January was only partially offset by the demolition of the 1,150-room Hacienda.
Because of the slight imbalance in supply and demand growth rates, casino hotel
occupancy in Clark County should fall nominally for the fiscal year ended June
30, 1997 to 90.5 percent.
Articles in local and national media indicate that average rates are falling in
response to softer market conditions. However, annual and quarterly reports for
Mirage Resorts and the MGM Grand indicated that rate growth was healthy during
the July 1996 to December 1996 period, and that room revenues during the two
quarters from January to June were better than or consistent with the previous
year. These negative comments, which first appeared in the late spring, pertain
mainly to the most recent quarter and the onset of hot weather. Our review of
data collected by a Las Vegas Business Press columnist who regularly "shops" a
sample of hotels indicates that rates that are being quoted to the individual
leisure traveler in May, June and July were in fact 15 to 20 percent below the
same Tuesdays or Saturdays of the previous year.
Such promotional pricing will affect only the individual leisure component that
is booked through the hotel's 1-800 numbers and travel agents. Contractual
convention and wholesale tour room rates will not decline. On balance the lower
rates will affect only a portion of one quarter of the fiscal year ended June
30. We estimate that the annual rate of growth in room rate for fiscal 1997 will
decline to 4.0 percent from the 6.1 percent achieved in fiscal 1996.
Relatively low rates will continue to be offered during the hot weather months.
In July however, the Monte Carlo will have marked its first year of operation,
and the net increase in the rooms inventory will have declined. Harrah's
expansion in Fall 1997 and the opening of Bellagio in Spring of 1998 will be the
most significant additions to supply in the 1998 fiscal year. This, combined
with continued improvements in Southern California's economy should allow growth
in demand to catch up with that of supply. As the citywide convention calendar
enters its busy Fall quarter and operators recognize the improvement in market
conditions, a gradual retreat from the discounting policies should occur.
Over the long term, we feel that the fundamental market conditions for Las Vegas
are favorable. The airport is being expanded to increase air capacity. During
the next quarter, construction is scheduled to begin on a 320,000 square foot
expansion to the Las Vegas Convention Center. The MGM Grand, recognizing the
rate premiums accruing to group meeting business, has commenced
<PAGE>
89
HOTEL ANALYSIS
construction on its own 380,000 square foot Convention Center. Caesar's
expansion will double its meeting space. The Bellagio and Paradise are both
planned to include up to 100,000 square feet of meeting space. The market's
reliance on wholesale tour and travel business is likely to diminish somewhat.
Southern California, Las Vegas' primary source market, has still not fully
recovered from the restructuring of its formerly defense driven economy.
Southern California continues also to regain its glamour as an international
tourist destination, whereby increasing the number of international visitors
that are likely to make a side trip to Las Vegas. And, the proportionately
greater rates of increase in its Hispanic and Asian populations, with their
greater propensity to gamble, bode well for the gaming industry.
ADDITIONS TO THE COMPETITIVE SUPPLY
Presented in the Addenda are summaries of the hotels and casino hotels that may
be developed in Las Vegas over the next three years. From this list prepared by
the LVCVA we identified those properties that are likely to have gaming licenses
and further sorted these projects into primary (mega resort) and secondary
competitors. The timing of these proposed casino hotel developments was
estimated to yield the chart summarizing probable increases in supply on a
fiscal year basis.
<PAGE>
LANDAUER 90
REAL ESTATE COUNSELORS HOTEL ANALYSIS
ADDITIONS TO SUPPLY
<TABLE>
<CAPTION>
FY FY FY FY FY FY FY
1997 1998 1999 2000 2001 2002 2003 Cumulative
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Primary Supply
Stratosphere 1,250 -- -- -- -- -- -- 1,500
Monte Carlo 2,750 -- -- -- -- -- -- 3,000
Luxor expansion 975 975 -- -- -- -- -- 1,950
Circus expansion 500 500 -- -- -- -- -- 1,000
Rio Expansion 427 598 -- -- -- -- -- 1,025
NY-NY 1,018 1,018 -- -- -- -- -- 2,035
Ceasars expans -- 700 500 -- -- -- -- 1,200
Harrahs expansion -- 740 247 -- -- -- -- 986
Hacienda/Paradise (575) (575) 1,900 1,900 -- -- -- 2,650
Bellagio -- -- 3,000 -- -- -- -- 3,000
Sands/Venetian (715) -- 759 2,277 -- -- -- 2,321
DI inventory reduction -- (106) -- -- -- -- -- (106)
Four Seasons @ Paradise -- -- -- -- -- -- -- --
Paris -- -- 750 2,250 -- -- -- 3,000
Marriott @ MGM Grand -- -- -- -- 1,500 -- -- 1,500
Ritz @ MGM Grand -- -- -- -- 500 -- -- 500
Lido -- -- -- -- -- 3,000 -- 3,000
Planet Hollywood -- -- -- -- -- -- 3,000 3,000
Aladdin -- (1,095) -- -- 3,000 -- -- 1,905
San Francisco Theme -- -- -- -- -- -- -- --
Unnamed -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- 0
- ------------------------------------------------------------------------------------------------
0 5,630 2,754 7,156 6,427 5,000 3,000 3,000 33,466
Secondary Supply
Sportsman's Manor 466 -- -- -- -- -- -- 466
Holiday Casino Boardwalk 330 -- -- -- -- -- -- 440
Comfort Inn/Best Western/ -- -- -- -- -- -- -- --
Las Vegas Club 185 -- -- -- -- -- -- 185
Orleans expansion 420 420 -- -- -- -- -- 840
Hawthorne Suites -- -- -- -- -- -- -- --
Sunset Station -- 527 -- -- -- -- -- 527
Marriott Suites -- -- -- -- -- -- -- --
Residence Green Valley -- -- -- -- -- -- -- --
Amerisuites -- -- -- -- -- -- -- --
Residence Inn Hughes Cen -- -- -- -- -- -- -- --
Seven Circles Resort -- -- 307 -- -- -- -- 307
Polo Towers -- -- -- -- -- -- -- --
Embassy Suites -- -- -- -- -- -- -- --
Unnamed -- -- -- 250 -- -- -- 250
Lake Las Vegas -- -- 700 -- 500 500 -- 1,700
-- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------
Aggregatge Sub-set 1,401 947 1,007 250 500 500 -- 4,715
Total 7,031 3,701 8,163 6,677 5,500 3,500 3,000 38,181
</TABLE>
<PAGE>
91
HOTEL ANALYSIS
Of the proposed properties that are not presently under construction, it is
unlikely that all will be built or that they will be built within the time frame
originally announced. For example, the 3,200 room Planet Hollywood project was
recently delayed by two years and no longer appears on the Convention and
Visitors' Authority list. Circus Circus is receiving a great deal of criticism
from major institutional investors for its rapid rooms expansion on Las Vegas
Boulevard. We question whether these same investors will endorse the
construction of an entirely different quality development such as a Four Seasons
at this time. We have not included the Four Seasons as an addition to supply. A
suburban project, the Ritz-Carlton Mountain Spa has no financing and is
currently in the market for both debt and equity investment.
Presented in the following table are our estimates for the future rates of
growth in supply, demand, market occupancy and average daily room rates.
Projected Growth in Supply and Demand For
Casino Hotels in Clark County, Nevada
Supply Demand Market Indicators
------ ------ -----------------
Fiscal Available Percent Occupied Percent Occupancy Average Percent
Year Room Change Room Nights Change Daily Change
Nights Rate
- --------------------------------------------------------------------------------
1997 32,885,650 7.8% 29,755,000 7.2% 90.5% $63.72 4.0%
1998 34,236,500 4.1% 31,540,300 6.0% 92.1% $65.95 3.5%
1999 37,215,800 8.7% 33,748,100 7.0% 90.7% $68.26 3.5%
2000 39,652,900 6.5% 35,773,000 6.0% 90.2% $70.65 3.5%
2001 41,660,400 5.1% 37,382,800 4.5% 89.7% $73.12 3.5%
2002 42,937,900 3.1% 38,691,200 3.5% 90.1% $75.68 3.5%
2003 44,032,900 2.6% 39,465,000 2.0% 89.6% $78.33 3.5%
Compound Annual 5.0% 4.8% 3.6%
Change
Source: Landauer Associates, Inc.
The rate of growth in supply for the seven years from fiscal 1997 through 2003
is forecast to decline to 5.0 percent. Demand is forecast at a nominally lower
rate of 4.8 percent. In absolute numbers, the cumulative increase in demand for
casino hotel room nights over the seven year period from fiscal 1997 to fiscal
2002 is forecast to be slightly lower than the cumulative growth during the
seven year period from fiscal 1990 to 1996 at 9,710,000 room nights, compared to
historical growth of 10,767,100 room nights over the prior seven year period.
<PAGE>
92
HOTEL ANALYSIS
Mega Resort Performance
Occupancies among large Strip hotels are even higher than the countywide
average. According to the Nevada Gaming Abstract, the 19 Strip hotels with
revenues in excess of $72 million have achieved an average occupancy of 94.2
percent over the past four years compared to the countywide casino hotel average
of 90.4 percent. This is because the large mega-hotels are themselves
attractions. Most recently, in fiscal 1995/96, these properties achieved an
average daily room rate of $79.19.
The newer or better quality properties have consistently reported occupancy
levels and average daily room rates above the preceding averages. For a seven
hotel sample comprised of the Mirage, the MGM Grand, Caesar's Palace, Treasure
Island, the Las Vegas Hilton, the Flamingo Hilton, and Bally's Grand, the
aggregate annual occupancy in calendar 1996 was 94 percent at an average daily
rate of $105. Room rates are held down by the volume rates negotiated for tour
wholesalers, which constitute somewhere between one-quarter to one-third percent
of the total market mix. For the two most comparable hotels, the Mirage and
Caesar's Palace, the blended 1996 occupancy was 93 percent at an average daily
rate of $140.
The subject property will have the best attributes of each of these properties,
and none of their shortcomings. For example, the Mirage and Caesar's Palace,
with a combined total of 4,813 rooms, currently have only 200,000 square feet of
convention space between the two of them (excluding prefunction areas). This
equates to a ratio of approximately 41.5 square feet of space per guest room,
compared to the subject's ratio of 88 square feet per room (net). Neither is
located next to a one million square foot convention center, or has an average
guest room size approaching 700 square feet, as planned for the subject.
Our estimate of the average daily rate for the property will be "built up" based
on its superior physical attributes and its likely market segmentation.
CONVENTION/TRADESHOW DEMAND
Las Vegas is the most popular tradeshow and convention destination in the
country. In 1996, Las Vegas hosted 18 percent of the nation's 200 largest
tradeshows, and because of the relatively large size of the Las Vegas events,
rented fully 24.9 percent of the square feet of exhibit space leased on a
national basis as part of these 200 shows. Las Vegas' popularity can be
attributed to its:
o very large room inventory,
o two major tradeshow facilities,
o relatively low cost of air transportation,
o relatively low room rates, and
o entertainment amenities.
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HOTEL ANALYSIS
National Convention Rate Comparisons
For the largest groups in the tradeshow and convention business, Las Vegas
competes with and is compared to the cities of: New York, Chicago, Atlanta,
Dallas, New Orleans, and Anaheim. For smaller and regional shows, the cities of
San Francisco, San Diego and San Antonio are popular among groups for whom
entertainment amenities are important. Average daily room rates in these
destinations are considerably higher than are being achieved in Las Vegas, even
among the major convention hotels that attract relatively little individual
corporate or leisure travel.
To ascertain average daily rates and rate movement, we reviewed a national list
of major convention hotels with a minimum size of 900 rooms, and selected the
largest properties from the six key tradeshow destinations. The hotels were
selected to produce a sample with the same approximate representation as the
cities represent of the six competitive tradeshow destinations. Landmark hotels,
such as the Waldorf Astoria in New York, were omitted. Occupancy and average
rate data gathered by Smith Travel Research indicates that there is very little
difference between the average daily room rates at the competitive convention
hotels. The six city tradeshow sample, which was comprised of 17 hotels with an
average size of 1,497 rooms, had an average annual occupancy in 1996 of 77.4
percent at an average daily room rate of $140.42.
We selected a second sample of hotels from the three sunbelt regional
destinations (San Francisco, San Antonio, San Diego), with a minimum size of 600
rooms. The nine hotels in that sample had a slightly smaller average size (1,108
rooms) as would be expected in cities with smaller convention venues. In 1996,
these properties achieved an average annual occupancy of 75.3 percent at an
average daily room rate of $139.25.
Because of their large size, none of these properties would likely be a first
choice for an individual corporate traveler. The sample occupancies are at or
near their capacity levels because of the lack either of weekend appeal, or
corporate weekday demand for their respective destinations. Thus the average
daily room rates of these convention hotels reflect group rates, which comprise
at least 60 percent of their overall mix of business.
Over the past two years, a shortage in commitable hotel rooms in competitive
destinations has emerged and average daily room rates have grown at rates well
above inflation. Year-to-date results through May 1997 indicate that the average
daily rates at the primary competitive set increased by 6.5 percent to
approximately $150; rates at the secondary set are likely to grow by 10.0
percent, to $155, by year-end 1997. Occupancy, already at 77 percent for the
primary competitive tradeshow destinations, is likely to reach that for the
sunbelt destinations. In the aggregate, these 26 hotels are likely to achieve an
average daily rate of $152 during 1997.
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HOTEL ANALYSIS
Show/Convention Manager Survey
To test these nationally oriented convention hotel rates for reasonableness in
the Las Vegas market, we surveyed the show managers of the top 175 of the
Tradeshow 200 events. This cut-off point was established because of the
relatively small exhibit space requirements of these smaller shows. For example,
the show which occupied the 175th position required only 152,000 square feet of
exhibit space. Still, this show had an estimated 9,800 attendees in 1996 of
which 4,000 were exhibit personnel.
We faxed a survey to Show Managers which was limited to one page to increase the
likelihood of a response. Questionnaires were faxed out twice. We received
responses covering a total of 51 shows, for a 29 percent response rate. Six
responses were discarded since the answers were incomplete or non-responsive. Of
the remaining 45 responses, 31 of these were for shows that are not regularly
held in Las Vegas, and 14 were for shows that are regularly held in Las Vegas.
Three of the responses were for groups that rotated to Las Vegas in 1997. These
responses were included in both analyses.
The show managers whose groups did not meet in Las Vegas were queried as to
propensity to move. Twelve groups, or 39 percent of the out-of-town sample,
indicated that they "never" move; the majority of these hold their shows in New
York or Chicago. The average rate paid by attendees of shows that are
permanently housed in cities outside of Las Vegas is the highest. For the 1997
room blocks, the average rate in the housing block was estimated by the show
managers at approximately $162.
Approximately eight respondents, or 26 percent of the sample, indicated their
shows move primarily when they outgrow the facility, the rooms inventory, or to
take advantage of more attractive destination or less expensive destinations.
For semi-permanent shows, the average rate in the 1997 block was indicated as
$127. Managers of eleven shows, (35 percent) indicated that their show changes
destinations annually based on a geographical rotation. For these shows the
average daily rate to be paid in 1997 was $126.
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HOTEL ANALYSIS
Three of these rotating shows held their events in Las Vegas during 1997. This
data was then combined with the responses for the permanent shows held in Las
Vegas to arrive at estimates of the current level of convention/tradeshow group
room pricing in Las Vegas. This data is summarized in the following table.
Tradeshow Manager Survey - Rates in Room Blocks
- -----------------------------------------------
Category Low High Average
- -------- --- ------------
National Shows:
Permanent Shows $95 $233 $162
Semi-permanent Shows 75 155 127
Rotate Annually 76 181 126
National Sample Average 84 197 139
Las Vegas shows permanent 60 187 137
Las Vegas shows -total 64 182 132
Despite Las Vegas' reputation for relatively inexpensive hotel rates, it is
interesting to note that the Las Vegas' average citywide tradeshow rate was only
$7.00 or 5.0 percent below that of the national sample and was above the rates
quoted for the semi-permanent shows and the rotating shows. For major tradeshows
and conventions, Las Vegas' convention rates may be less expensive than New York
or Chicago, but are generally at or above prevailing rates in Dallas, Atlanta,
New Orleans, San Francisco, San Diego and San Antonio.
Across the country, the demand "fill pattern" for convention centers is from the
locus of the event venue, out, with demand levels diminishing as distance from
the center increases. Physically proximate headquarters hotels are the first to
fill, followed by other large hotels in which the ancillary social functions and
hospitality suites are located. As such, the rates at the headquarters hotels
are typically at the high end of the range for the hotels in the room block.
This explains the premium between the national average of $139 as indicated by
the show manager's survey, and the national sample of major tradeshow and
sunbelt convention hotels, which is likely to have an average daily room rate of
$152 in 1997.
If the show manager survey form had been specific enough, we would expect a
premium to exist between the most proximate convention hotel as compared to
other hotels with significant room blocks. For a convention at San Francisco's
Muscone Center for example, we would expect to see a show or convention rate at
the Marriott at Muscone Center that would be higher than that of the Westin St.
Francis or the San Francisco Hilton. (All three hotels were included in our
national trend sample.)
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HOTEL ANALYSIS
For any event at the Sands Exposition and Convention Center (SECC), the subject
property will enjoy the prime headquarters position. Among the significant
mega-resorts, it will be second only to the Las Vegas Hilton in terms of
proximity to the Las Vegas Convention Center. Thus, even before the subject's
planned suite style room is taken into account, the rates at the subject
property would be expected to fall within the high end of the range presented by
both the national and local survey data.
For events held at the SECC, the subject property will benefit from a longer
length of stay than is typical for a convention block. At least a portion of an
exhibitor's personnel are required to be at the show site during move-in and
move-out to supervise the set up of the booth. This, the least rate sensitive
segment of convention demand, generally has a 4.0 night length of stay compared
to 3.0 to 3.4 for the typical attendee. Because of the long hours worked during
a show, proximity to the show site is typically more important than hotel room
cost.
That the average convention rate for Las Vegas shows is above the effective
average daily rate of the most relevant seven casino hotels is a function of the
discounts granted to wholesale tour companies that many of these hotels rely
upon to maintain their occupancy levels. With little or no meeting space of
their own, these other properties have no choice but to rely on tour wholesalers
to generate a base of mid-week demand. Depending on the quality of the hotel,
these wholesale rates can range from $50 to $60 per night. The nature of these
very low-rated, volume contracts is such that the hotels may not close out dates
due to citywide convention demand. Thus, convention group room blocks are lower
than would ordinarily be desirable to maximize the average daily rate.
Group Rate Forecasts For The Subject Project
Our tradeshow manager survey queried respondents as to the room rate that they
believed a typical exhibitor would pay for the smallest unit, a 700 square foot
suite, that was seamlessly connected to the tradeshow facility. For the show
managers that hosted events in Las Vegas, the question on propensity to move was
omitted in favor of one asking what rate an attendee would pay for the same
suite. The suite was described as being "suitable for closing a deal" but no
detail was provided as to the very high level of finish planned. Respondents
were allowed to check-off a pre-defined rate category. The lowest category
provided was $125 to $129. The highest provided was from $400 to $450. Rate
ranges below $250 were stated in $25 intervals Rate ranges above $250 were
stated in $50 intervals. In compiling the responses, all "averages" were first
calculated based on the lowest rate in the range, then increased to reflect the
midpoint of the range. The responses by group category are presented in the
following table.
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HOTEL ANALYSIS
Tradeshow Manager Survey - Rates for the Subject
Category Exhibitor Attendee
- -------- --------- --------
National Permanent Shows, (No's) $295 N/A
Semi-permanent Shows (Maybes) 307 N/A
Rotate Annually (Probables) 293 N/A
National Sample Average 297 N/A
Las Vegas shows - permanent 245 181
Las Vegas Shows -total 250 N/A
For the groups that move to an alternate destination when they outgrow a
Center's exhibit space or the rooms inventory, or as better or less expensive
venues become available, the average rate estimated by show manager for an
exhibitor would be $307. This compares to a low-end average rate of $293 for the
shows that rotate locations regularly. Managers of shows that are permanently
based in Las Vegas estimated the exhibitor's rate at $245. When the three hotels
that rotated into Las Vegas were included, the average exhibitor's rate
increased to $250.
The show managers that held events in Las Vegas in 1996 indicated that a typical
attendee would be more rate sensitive and would pay on average $181 for the same
suite. This is 28 percent lower than estimated for the typical exhibitor.
The sample guest suite in the subject's Preview Center separates the living and
sleeping areas by a change in elevation and does not have a solid wall screening
the bedroom. We do not know whether such a configuration would qualify as being
"suitable for closing a deal" for all of the respondents, so we will weigh the
estimates for the typical attendee more heavily than for the exhibitors.
(Business entertainment would not be an issue for a typical attendee.) We
estimate that, among exhibitors and attendees of conventions and shows at the
contiguous SECC, the average rate that would be paid for the subject suite would
be $190, approximately 5.0 percent above the attendee-only response and
approximately 24 percent below the average for the exhibitors.
The subject property will receive a portion of its demand from the city-wide
shows and conventions taking place at the Las Vegas Convention Center. Because
the subject will not enjoy the same headquarters hotel premium, we will estimate
the citywide convention rate at $160, approximately 16 percent lower than the
rate estimated for SECC shows.
The subject property will also appeal to groups that do not require large
amounts of meeting or exhibit space and can be contained within the hotel's
approximately 342,000 square feet of meeting
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HOTEL ANALYSIS
space. These facilities are only slightly smaller than the second tier of
convention centers in secondary cities such as Philadelphia, Atlantic City,
Miami Beach, Houston, Denver, San Antonio, San Diego, etc., etc. We estimate
that the average daily rate that could be achieved for this kind of business
would be lower than SECC business because of the greater number of venue choices
for them. We estimate the average daily rate for this "self-contained" group
business at $160.
Leisure Rate Forecasts For The Subject
On June 14, the results of the annual frequent traveler survey conducted by the
Zagat Hotel and Restaurant Guide were released. Las Vegas was named as the best
vacation value in the United States. What is most interesting about the Zagat
survey is that room rates in Las Vegas were found to have increased 38 percent
over the prior two years, compared to a national average of 16 percent over the
same time period. (These increases refer to the rates quoted for more volatile
individual corporate or leisure travel.) Still, Las Vegas is rated as the best
vacation value, indicating that it is the destination's package of hotel
product, entertainment and pricing that is responsible for Las Vegas'
popularity.
We have reviewed the room rates published in the American Automobile
Association's (AAA) guide book and the rates published in the Official Hotel and
Resort Guide for the seven casino hotels identified earlier, as well as a
smaller sampling of quoted weekday and weekend rates as surveyed by a Las Vegas
newspaper columnist. Based on this data, we estimate that the weekday rates for
the two most comparable casino hotels ranged from $79 to $399, depending on the
season. Weekend average daily rates ranged from $109 to $399. The five secondary
competitors had published rates ranging from $59 to $269 on weekdays, and from
$99 to $269 on weekends.
As these rates applied to conventional guest rooms, it would be reasonable to
assume a premium could be obtained for a significantly larger suite. There is
only one casino hotel in Las Vegas that is marketed as an all suite product, The
Rio. The Rio guest unit is a basically square oversized room, which we estimate
to be 450 square feet in size, but which has no separation whatsoever between
the living and sleeping area. It is also located in a secondary site 1.5 miles
west of the Strip in a neighborhood surrounded by industrial and strip center
retail uses. Despite these drawbacks, it is consistently rated as the best
quality hotel in Las Vegas by the Zagat Guide, indicating a strong preference
for an all-suite gaming product.
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HOTEL ANALYSIS
There are three non-gaming all-suite hotels in Las Vegas. These are the Alexis
Park Hotel, the Residence Inn, and the Crowne Plaza Suites. To ascertain what a
suite premium might be worth we compared these products to similarly oriented
non-gaming hotels with conventional rooms products. These were: The Courtyard by
Marriott, the St. Tropez and the Holiday Inn Emerald Springs. In this non-gaming
market, there were both occupancy and average daily room rate premiums accruing
to the suite products. The all-suite hotels achieved a sub-set occupancy that
was 3.7 percentage points higher than the conventional hotel products, at an
average daily room rate that was 7.7 percent greater. The combined effect of
these premiums was an increase in the revenue per available room of 12.5
percent.
We will estimate a range for individual leisure weekend rates of $145 to $240
with an annual average weekend rate of $180 for the subject property. The
average weekday rate is estimated to range from $105 to $145, and will be
estimated at an average of $115 (slow season) annually.
Casino use complimentary demand has been factored in at an internal rate of
$171. It is the local convention for the casino department to be billed at the
prevailing market rate for the dates on which rooms were "comped".
Annual Occupancy And Average Daily Rate Forecasts
Compared to other mega-resort properties in Las Vegas, the subject will have the
following competitive advantages:
o Suite style guest rooms averaging 700 square feet, compared to standard
hotel room sizes of 360 to 380 square feet.
o A seamless indoor connection to 1.0 million square feet of exhibit and
convention space.
o The highest ratio of on-site meeting space to guest rooms of any other
mega-resort in Las Vegas. Including only its meeting facilities, the subject
will have 106 square feet of space per guest room compared to the most
comparable Strip resorts that have only 41.5 square feet of space per guest
room.
o A retail center that is nearly as large as the newly expanded Shops at the
Forum at Caesar's Palace that will feature indoor canals and singing
gondoliers.
o Views from many of its rooms of two of the largest attractions in Las Vegas,
the Mirage's Volcanoes and the Pirate Battle at Treasure Island.
A luxury level of finish compared to a predominant moderate quality competitive
field.
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HOTEL ANALYSIS
We were unable to identify any disadvantages to the subject property.
Our research indicates that there are significant rate premiums accruing to a
convention/tradeshow orientation and an all-suite configuration. We forecast
that the subject's superior attributes will be manifested primarily in its
average daily room rate.
Our estimate of the stabilized year occupancy and average daily room rate was
formulated after considering the likely market segmentation of the subject and
the rate analyses discussed above. We estimated demand based on the likely
number of shows or self-contained conventions, seasonality, weekday/weekend
demand patterns and average lengths of stay. This analysis is summarized in the
following table.
Estimation Of Average Daily Rate
Occupied
Length Room Room
Rate of Calculation Events of Stay Block Nights A.D.R Revenue
- ------------------- ------ ------- ----- ------ ------ -------
Expo Center Exhibitors 34 4.0 2100 285,600 $190 $54,264,000
Expo Center Attendees 34 3.4 400 46,200 190 8,785,600
Citywide Sell-Out 15 3.0 2400 108,000 160 17,280,000
Self-Contained Group 30 3.0 2300 207,000 160 33,120,000
Leisure - Weekend 30 2.0 2300 138,000 180 24,840,000
Leisure - Weekday 34 1.0 1900 64,600 115 7,429,000
Casino Complimentaries 365 1.0 550 200,750 171 34,328,250
-------- --- -----------
1,050,150 $171 $180,046,850
Available 365 1 3036 1,108,140
94.8%
The first category of group business was estimated based upon the SECC's
show/convention calendar for 1998. In 1997, the SECC will host 41 to 45 events
of various sizes with the largest and most relevant of these groups being the
anchor tenants that use all of the halls and meeting space. There will be 17
such "anchor" tenants in 1997. The SECC budget for 1998 shows a similar level of
activity. However, with the addition of the Venetian Casino Hotel and its hotel
quality meeting space for pre- and post- show social functions, the number of
large users increases to 34 in 1999. We concur that the number of large users
can be expanded to 34 events.
A survey of SECC event participants indicated that exhibitors stayed an average
of 4.0 days, and attendees an average of 3.4 days
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HOTEL ANALYSIS
We will estimate that, with virtually no individual corporate demand in these
larger casino hotels, fully 2,500 rooms of the subject's inventory are available
in the SECC group room block. The majority of this block, or 2,100 rooms, are
expected to be rented to exhibitors, with an average length of stay of 4.0 days.
The remaining 400 rooms are expected to be rented to attendees with an average
length of stay of 3.4 nights. These have been factored in at the $190 rate as
estimated earlier.
In the SECC's 1998 bookings, 68 percent of the events were scheduled such that
the peak room blocks (show days) occurred on weekdays and 32 percent had peak
room blocks on weekends. This factor is relevant in estimating the weekend
leisure component. SECC shows are estimated to close out 11 weekends to leisure
business.
For major citywide conventions, we estimate that there are 15 conventions each
year that consume a block of 2,400 rooms at the subject for 3.0 nights. The
length of stay has been reduced to 3.0 nights because of the historically lower
average length of stay for citywide convention attendees. These room nights have
been estimated at an average daily rate of $160 as outlined in the
Convention/Tradeshow analysis. We estimate that one third of these events (five)
are also likely to involve weekends. Thus, the non-group weekend calendar is
reduced by another five weekends per year.
With the 342,000 square foot conference center, we estimate that the subject's
sales force can sell the subject hotel to an average of two and one half groups
each month, or 30 per year, with a guest room requirement of 2,300 rooms. As
with the other non-exhibitor group demand, we have estimated an average length
of stay of 3.0 nights. The self-contained group room rate was estimated earlier
at $160. These groups will also consume some weekends. We estimate that 20
percent of the groups (or 6 groups) will meet over a weekend.
Leisure demand was broken out between weekdays and weekends. There are
potentially 30 remaining weekends that are not forecast to be booked for SECC,
in-house or citywide conventions. We estimate that 2,300 rooms will be sold with
a 2.0 night minimum length of stay required at an average daily rate of $180.
Weekday leisure demand consists primarily of attractively priced filler business
during interruptions in the convention schedule. We estimated that an average of
1,900 rooms could be sold on 34 "soft" weekdays, most of which will occur during
hot weather months. The average length of stay during these value priced periods
is estimated at 1.0 night. We estimated the average weekday rate at $115, as
outlined on the previous page.
The net effect of these assumptions is a stabilized occupancy of 95 percent per
year at an average daily rate, in 1997 currency, of $171. The mix of demand at
the hotel will be 63 percent group and 18 percent individual leisure. Casino use
is estimated at 19 percent of the total occupied room
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HOTEL ANALYSIS
nights. The weighted average group rate is $175 compared to a weighted average
leisure rate of $159 and an internal casino department rate of $171.
Occupancy Stabilization
Initial year occupancies for the two most recently opened hotels, the Monte
Carlo and New York, New York have both been reported in the 98 to 99 percent
range. However, due to the subject property's luxury orientation and the
somewhat lower countywide occupancy projected during the subject's initial year
of operation, we are forecasting a slightly lower occupancy for that fiscal
year. For the subject's first year of operation, we are forecasting an occupancy
of 93 percent. Thereafter, we expect that trial usage will establish the value
of the subject's significantly larger room size and the subject will stabilize
at 95 percent occupancy.
Rate Growth And Stabilization
On a national level, full-service hotel room rates are likely to continue to
show real growth, particularly in the large convention and luxury segments. This
is attributable to the absence of any significant levels of new construction. At
present only one large convention hotel is under construction, an 800-room Hyatt
to be constructed next to McCormick Center. The absence of new hotels is a
function of still uneconomic market conditions in major cities. Even with the
significant levels of real growth achieved over the past two years, there are
few markets nationally where construction costs for a new convention hotel could
be justified in today's market conditions. Thus, we forecast that real growth in
national convention hotel room rates will continue albeit at lower rates than in
the recent past. We estimate that by 1999, the average daily rate of the
national convention hotel sample will have increased by 6.0 percent per year
from $152 to $171. After deflating back to today's 1997 dollars this real growth
equates to a rate of $160. Our stabilized year room rate estimate reflects a 6.9
percent premium over the anticipated stabilized rate for convention hotels
nationally.
For the subject however, we are forecasting a long term inflation rate of 3.5
percent per year, with no real growth in local casino resort room rates during
the foreseeable future. This is based on the countywide historical rate of
growth since fiscal 1990 and the assumed additions to supply.
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HOTEL ANALYSIS
However, we are forecasting that it will be necessary to discount the subject's
room rates in its initial two years of operations. Our estimates of the rate
growth are provided in the following table.
Forecast Rate Growth For the Subject
Inflated Discount Discounted
Period Inflation Rate Factor Discount Rate
- ------ --------- ---- ------ -------- ----
Stabilized 1997 - $171.00 - - -
Calendar 1998 3.50% $177.00 - - -
Calendar 1999 3.50% $183.00 - - -
1st Qtr.2000 Adj. 0.88% $185.00 - - -
Fiscal 1999/00 -- $185.00 (10%) ($18.00) $167.00
Fiscal 2000/01 3.50% $191.00 (5%) ($10.00) $181.00
Fiscal 2001/02 3.50% $198.00 - - $198.00
Fiscal 2002/03 3.5.0% $205.00 - - $205.00
Fiscal 2003/04 3.5.0% $212.00 - - $212.00
Source: Landauer Associates.
In summary our occupancy and average daily rate projections for the subject
property are as follows:
Summary of Forecast Rate and Occupancy
Fiscal Year Occupancy Average Daily Rate
----------- --------- ------------------
1999/00 93% $167
2000/01 95% $181
2001/02 95% $198
2002/03 95% $205
2003/04 95% $212
Source: Landauer Associates.
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104
HOTEL INCOME APPROACH
CASINO HOTEL INCOME CAPITALIZATION APPROACH
The Income Capitalization Approach is defined in the Dictionary of Real Estate
(third edition), Appraisal Institute as follows:
A set of procedures through which an appraiser derives a valuation
indication for income-producing property by converting anticipated
benefits (cash flows and reversion) into property value. This conversion
can be accomplished in two ways. One year's income expectancy can be
capitalized at a market-derived capitalization rate or a capitalization
rate that reflects a specified income pattern, return on investment, and
change in the value of the investment. Alternatively, the annual cash
flows for the holding period and the reversion can be discounted at a
specified yield rate.
For the purpose of our valuation of the subject, we have utilized the discounted
cash flow methodology as this is more appropriate for a property that has not
yet stabilized.
METHODOLOGY
To estimate the income and expenses incurred in the operation of the subject we
first estimate the revenues and expenses for a typical or stabilized year of
operation for the hotel. In order to develop this estimate we interviewed the
project's developers, and reviewed and analyzed income and expense data
available in the annual reports of Mirage Resorts, The MGM Grand, Inc., The
Nevada Gaming Abstract and other publicly traded companies. In addition, we
analyzed the historical operating results of several non-gaming convention
oriented hotels.
The format used in this analysis is consistent with that in the annual reports
of the publicly traded gaming companies.
From this analysis we then developed our estimate of the expected operating
performance of the casino hotel over what may be considered the typical holding
period of an investor, which is assumed to be ten years. Through the holding
period, the amount for each income and expense item is adjusted to reflect such
factors as changes in casino patronage, the hotel's average rate, occupancy, and
inflation, and the variable and fixed components of each item.
Presented in the following text is a brief discussion of the basis used in
developing our estimate of the stabilized year operating statement for the
subject, expressed in 1997 value dollars.
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105
HOTEL INCOME APPROACH
Departmental Revenues
Revenue to the facility is categorized by the department from which it is
derived. Only direct operating expenses associated with each department are
charged to the operating departments. General overhead items which are
applicable to the overall operation of the facility are classified as
undistributed operating expenses.
Casino Revenue and Expense
Casino revenue was estimated earlier based on the number and denomination of
devices and table types planned, and on the average win for the top quartile of
casino hotels with gaming revenues in excess of $72 million in calendar 1996.
Due to the "must see" nature of this project, we are of the opinion that the
casino's first year will be slightly higher than the stabilized year due to a
novelty effect, and have factored in a modest premium in that year.
Promotional Allowances
Promotional allowance is the generally accepted accounting term for
complimentary cocktails, meals, overnight accommodations and in-house
entertainment for wagering patrons. These items are reported at their market
cost and are deducted from Gross Revenue to produce a Net Revenue figure that
relates to the actual revenues received at the property. While they are not
included in the casino departmental expense figures, they are billed to the
Casino department before being netted out and are carefully monitored to ensure
that the recipients of the complimentaries are in fact wagering amounts
commensurate with the value of the promotional items. Presented in the following
table is a summary of the promotional allowances as published in annual reports
for casino companies whose primary enterprises are in Clark County.
Promotional Allowances
Cost As a % of
Comparable Net Revenues
- ---------- ------------
MGM Grand, Las Vegas 6.7%
Mirage Resorts, Inc. 9.4%
Circus Circus FY 97 4.8%
Strip Casinos, Gaming Revenues > $72 M 9.0%
Source: Annual Reports and the Nevada Gaming Abstract
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HOTEL INCOME APPROACH
Promotional Allowances have been estimated at $45,908,000 or 9.3 percent of net
revenues and are premised on the following:
An average of 550 rooms each night are used by the casino for notable casino
patrons at the average daily rate of $171, or $34,328,500
Approximately 50 percent of the beverage sales are assumed to be generated
as casino department give-aways, or $9,475,000.
25 percent of the room service sales are estimated to be associated with
complimentaries issued by the casino department, or $2,105,000.
Because the restaurants and show room will be leased out, it will be necessary
for the subject to purchase meals from the tenants on behalf of the casino
guests. Since these are actual casino expenditures, these are handled as a
casino departmental expense. In year one, we have assumed that the casino
employees will be slightly more generous as they attempt to build a clientele of
core gamblers. We have factored in a modest inefficiency factor for that year.
Casino expense consists of: licensing costs, casino employee salaries and wages,
employee benefits, contract cleaning, uniforms, and other items related to the
casino department. Presented in the following table is a summary of the casino
departmental expenses for some of the publicly traded gaming corporations,
comparable casino hotels and the aggregate performance for all casinos on the
Strip with Gaming revenues in excess of $72 million.
Casino Department Expenses
Expense a % of
Comparable Casino Revenues
- ---------- ---------------
MGM Grand, Las Vegas 45.0%
Mirage Resorts, Inc. 51.0%
Circus Circus, FY 97 46.1%
Strip Casinos, Gaming Revenues > $72 M 38.2%*
* Promotional Allowances (14.6%) and bad debt (4.4) deducted from expense to
obtain a "like kind" comparison.
Source: Annual Reports and Nevada Gaming Abstract
The casino company that operates with the highest level of complimentary
expense, Mirage Resorts, also has the highest expense ratio in its casino
department. Mirage Resorts is the most upscale operator in the sample, and
targets a great deal of high stakes Baccarat play at their namesake property. In
foregoing the revenues associated with high stakes Baccarat play, the operators
of the subject property
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107
HOTEL INCOME APPROACH
will also avoid the costs associated with attracting such play. These include
private jet air transportation to Las Vegas, discounted markers, and lavish
entertainment while in Las Vegas.
The developer has forecast an expense ratio of 45.3 percent of revenues,
including bad debt expense, or 43.3 percent excluding bad debt expense. To
facilitate comparisons to the results of publicly traded companies, we have
shown bad debt expense as a separate line item. Also included within the
developer's forecast is a budget of approximately $10.0 million dollars for the
purchase of food and entertainment complimentaries from the tenant operations.
We estimate that the subject property will have a casino expense ratio of
approximately 45 percent.
Room Revenue and Expense
Room revenue is based on the number of occupied rooms multiplied by the average
daily room rate for each respective year as presented in this report. As
indicated in our previous analysis we estimated the average daily rate for the
subject hotel for a stabilized year to be $171 with the hotel achieving a
stabilized occupancy level of 95 percent. Due to the clustering of other new
hotel openings, we forecast however that the subject property will achieve an
occupancy of 93 percent in its first twelve months of operation, and that it
will be necessary to discount room rates in the initial two years of operation
until the market returns to equilibrium. The average room rate will be
discounted by ten percent in year one and by five percent in year two.
Rooms expense consists of front desk and housekeeping salaries and wages,
employee benefits, commissions, contract cleaning, in-room amenities, guest
transportation, laundry and dry cleaning, linen, operating supplies, reservation
costs, uniforms, and other items related to the rooms department. Presented in
the following table is a summary of the rooms departmental expenses for
reasonably comparable casino hotels and large, non-gaming convention oriented
hotels.
Rooms Department Expenses
Comparable Cost Per Cost As a %
Occupied Room of Rooms Sales
------------- --------------
MGM Grand, Las Vegas $27.00 27.2%
Mirage Resorts, Inc. 30.00 29.2%
Strip Casinos, Gaming Revenues > $72 M 29.00 36.4%
Convention Hotel A 31.00 29.6%
Convention Hotel B 35.00 26.7%
Convention Hotel C 27.00 18.4%
Convention Hotel D 31.00 23.6%
Convention Hotel E 34.00 21.9%
Source: Annual reports and hotels surveyed.
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HOTEL INCOME APPROACH
The rooms departments of the casino hotel operators appear to be very similar to
the results being achieved by non-gaming convention hotels. Because of the
component of relatively fixed costs, higher room rates generally translate into
more profitable rooms departments. For example, while Comparable B has a $35
cost per occupied room, its expense ratio is 26.7 percent. Its average daily
room rate then is approximately $131 ($35/26.7%). Comparable A, with a cost of
$31 per occupied room, has an expense ratio of 29.2 percent. Its average daily
room rate is lower, at approximately $105. The second most profitable rooms
department, at Comparable Hotel E, has the highest average daily rate of
approximately $155 and an expense ratio of only 21.9 percent. Comparable Hotel C
is an anomaly; its reservations department expense is included in the Marketing
department and so is understated relative to the other comparables.
For the subject, with its relatively high average daily rate, the primary areas
of increased cost are in the areas of: increased travel agent's commissions due
to the higher ADR and increased housekeeping labor costs associated with larger
guest room size. These are not, however, significant components of the overall
cost. To take into account these factors, we will increase the highest cost per
occupied room by 15 percent. We estimate the rooms cost for the subject at
$40.50 per occupied room, which on a stabilized year average daily rate of $171
equates to a 23.7 percent expense ratio. In the initial years, during which the
hotel is expected to be required to discount its rates, the expense ratio will
be higher. Also, in year one, we have factored in a slight inefficiency factor.
Food and Beverage Revenues and Expenses
Food and Beverage Revenues are based on revenue from the banquet, cocktail
lounge and room service operations. Banquet room rental charges are also
included. All restaurant outlets are assumed to be leased to third parties.
These categories include sales to guests of the hotel and demand from outside
sources for the food and beverage and banquet facilities. Since the majority of
Las Vegas' casinos have little or no meeting space, comparisons to these
properties are of limited use. The following chart outlines the banquet,
cocktail lounge, and room service revenues for comparable but non-gaming
convention hotels.
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109
HOTEL INCOME APPROACH
Food and Beverage Revenue Indicators
On a per occupied room basis
----------------------------
Banquets
per
SF meeting Cocktail Room Total Food
area Lounges Service Restaurant & Beverage
---- ------- ------- ---------- ----------
MGM Grand,Las Vegas N/A N/A N/A N/A $42.00
Mirage Resorts, Inc. N/A N/A N/A N/A $75.00
Strip Hotels, Gamin see $18.00 see $42.00 $60.00
Revenue -- $72 M Restaurant Restaurant
Convention Hotel A $122.00 $5.00 $6.00 $19.00 $54.00
Convention Hotel B $57.00 $6.00 $5.00 $55.00 $100.00
Convention Hotel C $149.00 $5.00 $4.00 $21.00 $73.00
Convention Hotel D $105.00 $9.00 $5.00 $12.00 $55.00
Convention Hotel E $110.00 $3.00 $5.00 $24.00 $88.00
Source: Annual Reports, Nevada Gaming Abstract and Landauer Associates
Food and Beverage revenues at the casino hotels are, in general, lower than are
typical in a large, convention hotel. This is likely to be a function of the
lack of meeting space and the loss leader pricing of many of the casino hotel
buffets or restaurants. Based on the central tendency of the Convention Hotels,
we will forecast banquet revenues at $100 per square foot. With approximately
350,000 square feet of function and pre-function area, this equates to
$38,771,000 in banquet sales annually, in 1997 dollars.
A second difference between the convention hotels and the casino hotels is in
cocktail lounge (beverage) sales. At $18.00 per occupied room, the average
beverage sales per occupied room for all Strip Casino Hotels with gaming
revenues in excess of $72 Million was twice the amount sold at the Convention
Hotel with the highest per occupied room beverage sales. We estimate that
beverage sales at the subject will approximate $18.00 per occupied room. In a
typical year at 95 percent occupancy, this equates to $18,949,000.
The annual reports do not provide specific information on the Room Service
department. We have knowledge of results for specific casino hotels, but, due to
confidentiality requirements, we are not permitted to disclose these. Because of
the entertainment of VIP casino patrons, Room Service revenues at casino hotels
are significantly greater than indicated by the Convention Hotel sample.
(Complimentaries in this department are typically 40 to 50 percent of total
revenues.) We have estimated room service revenues of $8.00 per occupied room.
In a typical year at 95 percent
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110
HOTEL INCOME APPROACH
occupancy, this equates to $8,422,000 in 1997 dollars.
For the stabilized year, we have estimated in-house food and beverage revenues
at approximately $66,143,000 expressed in 1997 dollars, which equates to
approximately $63 per occupied room.
The subject's restaurants are to be leased to third party operators. On the
casino/ground floor level, the subject property is expected to have a 20,000
square foot "coffee" shop," a minimum of five fine dining restaurants in 52,000
square feet of space, and 15,000 square feet of food court space. At present,
the developers are negotiating with famous name operators for these spaces: the
Cheesecake Factory for the coffee shop space, and celebrity chefs such as
Wolfgang Puck, Emeril LeGasse, and Joachim Spliehal of Pinot for the fine dining
spaces. We have assumed that there is a mix of name and non name operators, such
that leased restaurant sales equate to $27.00 per occupied room for a total food
and beverage sales of $90.00 per occupied room. This is 20 percent greater than
the chain wide sales per occupied room reported for Mirage Resorts Inc. but is
lower than one of the convention hotels. The quantity of on-site meeting space
and presence of some "name" operators should offset the effects of the
additional competition posed by the Mall's restaurant tenants. Banquet sales
account for 59 percent of the operated food and beverage revenues and 41 percent
of the leased and operated outlets. Even for the most comparable casino hotels
(with some meeting space), banquet revenues generally account for fewer than
fifteen percent of total food and beverage revenues.
The MGM Grand leases a number of its restaurant outlets, hence its relatively
low in-house food and beverage sales. Two of the Convention Hotels (C and D) are
located next to or are connected to a large specialty retail mall with numerous
restaurants and would face a similar level of outside competition as the subject
property's hotel outlets. However, the convention hotels seldom receive high
levels of outside patronage in their restaurant outlets, unlike the restaurants
in casino hotels which are utilized by the non-guest patrons of the casino.
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HOTEL INCOME APPROACH
Food and beverage expenses were calculated on the historical operating results
of comparable casino hotel food and beverage facilities.
Food and Beverage Departmental Expenses
Comparable Departmental Banquets as a
Expense Ratio % of F&B Sales
MGM Grand, Las Vegas 58.2% N/A
Mirage Resorts, Inc. 63.5% N/A
Strip Casinos, Gaming Revenues > $72 M 63.2% N/A
Convention Hotel A 75.2% 43.0%
Convention Hotel B 78.0% 25.0%
Convention Hotel C 73.8% 56.0%
Convention Hotel D 66.9% 52.0%
Convention Hotel E 65.7% 61.0%
Source: Annual reports and hotels surveyed.
The casino hotels have "low" expense ratios relative to the convention hotels
because of their high component of beverage sales. Banquet sales, in which the
staffing, quantity of and menu items to be served are all known well in advance,
are also relatively profitable. The subject property will generate 59 percent of
its outlet sales in banquets, and 29 percent in beverage. Its expense ratio
should be at the low end of the ranges presented. For a stabilized year of
operation, this expense is expected to equate to 63.0 percent of food and
beverage revenue for the subject property.
Leased Restaurants
The percentage rent will be applied to the revenue estimate of $27.00 per
occupied room or $28,424,000 for the leased outlets. We estimate that the
percentage rent charged will be 8.0 percent of gross sales. We estimate the
rental income for the subject to be $2,274,000 for a stabilized year of
operation. This equals to $26.10 per square foot of rentable area in 1997
dollars. Recoveries at $14.00 per square foot increase the rental income by
$1,220,000 (87,158 S.F. x $14.00) to a total of $3,494,000. However, such
pass-throughs are not typically sufficient to cover all shared costs of
occupancy, estimated at $16.00 per square foot.
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HOTEL INCOME APPROACH
Billboard Live!
The space to be occupied by the show room tenant, Billboard Live!, is located
across four floors of the core commercial building. Of the 50,000 square feet of
space, we understand that 24,230 square feet is to be demised as part of the
casino hotel, thus the tenant will be paying rent to two entities. The total
annual rent of $1,260,000 equates to a per square foot rent of $25.20. The
hotel's share of the rent is $610,600. This rental rate is fixed for the
duration of the seven year lease. CAM charges of $14.00, or $339,000, are fixed
for seven years also; in year eight, they will be adjusted for inflation.
As with the restaurant CAM cost recoveries, the CAM charges are not likely to
completely recoup the common area charges. Expenses of $10.00 per square foot
has been factored in, that is projected to grow at the same rate as inflation.
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HOTEL INCOME APPROACH
Gift Shop, Logo Store
The subject property will operate two small retail outlets, one to sell items
with the Venetian logo as is the custom in Las Vegas, and the other to sell
toiletries, sundry items and other souvenirs. Specific data on operated retail
outlets was available only for Mirage Resorts and one convention hotel. For the
other casino hotels and convention hotels, it is typically aggregated with other
minor operated departments. For Mirage Resorts, in-house retail sales were
$22.22 per occupied room. The one convention hotel for which separate income
data was available was affiliated with a Disney theme park. Operated retail
sales for this hotel were approximately $60 per occupied room in 1995.
Recognizing that the subject property will not cater to adults that are
traveling with children, and that the Grand Canal Shops will compete for
souvenir shopping dollars, we estimate that the subject's operated retail
operations will generate sales of approximately $10.00 per occupied room, or
$10,502,000 in revenue. Expenses for the Disney-affiliated operation are
approximately 61 percent and 65 percent for Mirage Resorts. We estimate that the
departmental expense for the subject's operated retail will be 62 percent.
Telephone and Other Revenue and Expense
Telephone revenue is derived from the use of telephones within guest rooms,
faxing charges, and other telecommunications services. Data for the casino
hotels was aggregated with other minor operated departments; separate
departmental results are not published. Confidential information on the results
for specific casino hotels indicates that for the better quality hotels on the
Strip, telephone revenues averaged between $6.00 and $7.00 in 1996. The subject
is planned to have dual phone lines to each guest room and in-room Fax machines.
However, convention hotel results suggest that most business is being conducted
face to face at conventions.
The stabilized year telephone revenue for the subject property was estimated to
be $6.00 per occupied room.
Telephone Departmental Revenues and Expenses
Revenues per Expense as a %
Comparable Occupied Room of Telephone Sales
- ---------- ------------- ------------------
MGM Grand, Las Vegas N/A N/A
Mirage Resorts, Inc. N/A N/A
Strip Casinos, Gaming Revenues > &72 M N/A N/A
Convention Hotel A $4.30 47%
Convention Hotel B $4.70 55%
Convention Hotel C $7.50 46%
Convention Hotel D $4.55 74%
Convention Hotel E $4.30 60%
Source: Annual reports and hotels surveyed.
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HOTEL INCOME APPROACH
Telephone expense includes the cost of calls, operation of the telephone
switchboard and any telephone service charges. The convention hotels had
telephone expenses ranging from 46 to 74 percent of telephone revenues. For a
stabilized year of operation, we have estimated telephone expenses to be 55
percent for the subject property.
Undistributed Operating Expenses
Undistributed operating expenses are those expenses associated with the general
operation of a hotel. These expenses include administrative and general,
marketing, management fees, energy, and property operations and maintenance.
These expenses are relatively unaffected by fluctuations in occupancies and room
rates. Due to the highly fixed nature of these expenses, they are examined both
as percentages of net sales and as dollar amounts per available room.
Administrative Expenses
In a typical (non-gaming) hotel, expenses in this category include salaries and
wages associated with the operation of the administrative function of the
property, cash overages and shortages, credit card commissions, accounting
functions, data processing, executive office expenses, general insurance,
professional fees, travel and supplies. For gaming properties, the reporting
convention is to aggregate these administrative and general expenses with
marketing, utility, repairs and maintenance, and property tax expenses. We will
convert the non-gaming hotel results to the gaming industry's accounting
convention.
Administration Revenues and Expenses
Expense per Expense as a %
Comparable Available Room of Net Revenues
---------- -------------- ---------------
MGM Grand, Las Vegas $18,817 12.2%
Mirage Resorts, Inc. $19,385 11.9%
Strip Casinos, Gaming Revenues > $72 M $22,687 18.4%
Convention Hotel A $10,350 23.9%
Convention Hotel B $23,100 26.0%
Convention Hotel C $12,550 20.7.%
Convention Hotel D $11,550 18.9%
Convention Hotel E $13,650 18.7%
Source: Annual reports and hotels surveyed.
1
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115
HOTEL INCOME APPROACH
On a per room basis, Undistributed Expenses as indicated by the convention hotel
comparables bracketed the range of the casino hotels. However when expressed as
a percent of total sales, the casino hotels were more efficient, with
Undistributed Expenses consuming a maximum of 17.3 percent of total sales. On a
per room basis, the results for the MGM Grand and Mirage Resorts, Inc.
demonstrate the advantages of size. The average casino hotel with gaming
revenues of $72 million had an average size of 2,385 rooms. The MGM Grand has
approximately 4,970 rooms in their rentable inventory (some have been taken
out-of-order for offices and storage), and, excluding their 300-room property in
Laughlin, the average Mirage property has 2,703 rooms.
With 3,036 rooms, the subject's Administrative and General Expense should fall
in the low end of the casino hotel range, particularly since the accounting and
human resources expenses associated with restaurant outlet personnel will be the
responsibility of the restaurant tenants. We estimate that in a typical year,
the subject's administrative expenses will approximate $19,000 per available
room, which equates to 11.7 percent of net revenues.
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HOTEL INCOME APPROACH
Provision for Doubtful Accounts
The annual reports for the publicly traded gaming companies generally separate
bad debt or provisions for doubtful accounts from the casino department. For the
Mirage Resorts, Inc., this expense was 1.1 percent of net revenues. For the MGM
Grand, this expense was aggregated with "discounts" and was reported at 5.0
percent of net revenues. The Nevada Gaming abstract indicates that bad debt
expense averaged 2.6 percent for the 19 casino hotels with gaming revenues in
excess of $72 million. We estimate a stabilized year bad debt expense of 2.0
percent of net revenues for the subject property.
Corporate Expenses (Management Fees)
The annual reports of the publicly traded gaming companies report corporate
oversight expense which we equate to a management fee for these highly
specialized properties. The corporate expense charged back to the MGM Grand of
$10,313,000 equated to 1.3 percent of net sales. For the Mirage Resorts,
corporate expenses of $31,580,000 equated to 2.3 percent of total sales. No
comparable data is available from the Nevada Gaming abstract, it is assumed to
be buried in the Administrative line item, which may further explain the higher
expense ratio of the sample of 19 Strip hotels. We have estimated corporate
expenses at 1.5 percent of net revenues.
Reserve for Replacement
Reserves for replacement are not typically listed on an owner's income statement
in a casino hotel venture. EBIDTA does not include any reserves for the
replacement of short lived items. This is the custom in the local market.
Returns to the investor are relatively high to take capital expenditures into
account, which are funded from cash flow on an as-needed basis.
The cost of replacing short-lived items is included in the investment
parameters. We have not included a reserve for replacement in our statements.
Estimated Stabilized Year Operating Results
Presented on the following page is our estimate of the subject hotel's
stabilized year operating results based on the aforementioned analysis.
<PAGE>
LANDAUER 117
REAL ESTATE COUNSELORS HOTEL INCOME APPROACH
Stabilized Year Estimate
1997 Dollars % Total Margin
Revenue
Casino $270,460,000 55.0%
Hotel 180,017,000 36.6%
Food & Beverage 66,143,000 13.4%
Leased Restaurants 3,494,000 0.5%
Billboard, Live! 950,000 0.2%
Gift Shop, Logo Store 10,502,000 2.1%
Telephone, Other 6,316,000 1.3%
Gross Revenues $537,882,000 109.3%
------------
Less Promotional Allowances 45,908,000 9.3%
------------
Net Revenues $491,974,000 100.0%
Departmental Expenses
Casino $121,710,000 24.7% 45%
Hotel 42,636,000 8.7% 24%
Food & Beverage 41,670,090 8.5% 63%
Leased Restaurants 1,395,000 0.3% 61%
Billboard, Live! 388,000 0.1% 41%
Gift Shop, Logo Store 6,511,000 1.3% 62%
Telephone 3,474,000 0.7% 55%
------------
Total Departmental Expenses $217,784,090 44.3%
------------
Departmental Profit $274,189,910 55.7%
------------
Other Expenses
Administration 57,684,000 11.7%
Provision for Doubtful Accounts 9,839,000 2.0%
Corporate Expense 7,380,000 1.5%
------------
$ 74,903,000 15.2%
Earnings before Interest, Income taxes,
Depreciation and Amortization 199,286,910 40.5%
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118
HOTEL INCOME APPROACH
Statements of Estimated Annual Operating Results
<TABLE>
<CAPTION>
FY 99/01 FY 00/01 FY 01/02 FY 02/O3 FY 03/04 FY 04/05 FY05/06 FY 06/07
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Casino $301,026 $302,488 $313,075 $324.032 $335,373 $347,112 $&59,260 $371,835
Hotel 172,105 190,545 208,441 215,675 223,223 231,036 239,122 247,491
Banquets, Bar and Room Service 67,900 73,976 76,565 79,245 82,018 84,889 87,860 90,935
Leased Restaurants 3,776 3,908 4,045 4,186 4,333 4,484 4,641 4,804
Billboard, Level 950 950 950 950 950 950 950 1,077
Gift Shop, Logo Store 11,348 11,746 12,157 12,582 13,023 13,478 13,950 14,438
Telephone, Other 6,825 7,064 7,311 7,567 7,832 8,106 8,390 8,683
-------- -------- -------- -------- -------- -------- -------- --------
Gross Revenues $563,931 $590,675 $622,543 $644,237 $666,752 $690,055 $714,173 $739,263
Less Promotional Allowances 52,089 51,344 53,141 55,001 56,926 58,919 60,981 63,115
-------- -------- -------- -------- -------- -------- -------- --------
Net Revenues $511,842 $539,331 $569,402 589,235 $609,825 $631,136 $653,192 $676,148
Departmental Expenses
Casino $134,150 $136,123 $140,887 $145,818 $150,922 $156,204 $161.671 $167,330
Hotel 48,376 47,685 49,354 51,081 52,869 54,720 56,635 58,617
Banquets, Bar and Room Service 47,280 46,605 48,236 49,924 51,671 53,480 55,352 57,289
Leased Restaurants 1,507 1,560 1,615 1,671 1,730 1,790 1,853 1,918
Billboard, Level 419 434 449 465 481 498 515 533
Gift Shop, Logo Store 7,036 7,282 7,537 7,801 8,074 8,356 8,649 8,951
Telephone 3,754 3,885 4,021 4,162 4,308 4,459 4,615 4,776
-------- -------- -------- -------- -------- -------- -------- --------
Total Departmental Expenses $242,523 $243,574 $252,099 $260,922 $270,055 $279,507 $289,289 $299,415
Departmental Profit $269,320 $295,757 $317,303 $328,313 $339,T71 $351,629 $363,903 $376,733
Other Expenses
Administration 68,567 64,515 66,773 69,110 71,529 74,032 76,623 79,305
Provision for Doubtful Accounts 10,632 11,004 11,389 11,788 12,200 12,627 13,069 13,527
Corporate Expense 8,374 8,254 8,543 8,842 9,151 9472 9,803 10,146
-------- -------- -------- -------- -------- -------- -------- --------
Total Other Expenses $ 87,572 $ 83,773 $ 86,705 $ 89,740 $ 92,881 $ 96,131 $ 99,496 $102,978
Earnings before Interest, Income taxes,
Depreciation and Amortization $181,748 $211,984 $230,598 $238,573 $246,890 $255,498 $264,407 $273,755
<CAPTION>
FY 07/08 FY 08/09 FY 09/10
<S> <C> <C> <C>
Revenue
Casino $384,U9 $398,318 $412,260
Hotel 256,154 265,119 274,398
Banquets, Bar and Room Service 94,118 97,412 100,821
Leased Restaurants 4,972 5,146 5,326
Billboard, Level 1,077 1,077 1,077
Gift Shop, Logo Store 14,944 15,467 16,008
Telephone, Other 8,987 9,302 9,627
-------- -------- --------
Gross Revenues $765,100 $791,841 $819,517
Less Promotional Allowances 65,324 67,611 69,977
-------- -------- --------
Net Revenues $699,775 $724,230 $749,540
Departmental Expenses
Casino $173,186 $179.248 $1 a5,521
Hotel 60,669 62,792 64,990
Banquets, Bar and Room Service 59,294 61,369 63,517
Leased Restaurants 1,985 2,054 2,126
Billboard, Level 552 571 591
Gift Shop, Logo Store 9,265 9,589 9,925
Telephone 4,943 5,116 5,295
-------- -------- --------
Total Departmental Expenses $309,894 $320,740 $331,966
Departmental Profit $389,881 $403,490 $417,574
Other Expenses
Administration 82,081 84,954 87,927
Provision for Doubtful Accounts 14,000 14,490 14,997
Corporate Expense 10,501 10.869 11,249
-------- -------- --------
Total Other Expenses $106,583 $110,313 $114,174
Earnings before Interest, Income taxes,
Depreciation and Amortization $283,299 $293,177 $303,400
</TABLE>
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HOTEL INCOME APPROACH
Statements of Estimated Annual Operating Results
<TABLE>
<CAPTION>
FY 99/01 FY 00/01 FY 01/02 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues as a Percent of Total
Casino 58.8% 56.1% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0%
Hotel 33.6% 35.3% 36.6% 36.6% 36.6% 36.6% 36.6% 36.6%
Banquets, Bar and Room Service 13.3% 13.7% 13.4% 13.4% 13.4% 13.5% 13.5% 13.4%
Leased Restaurants 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
Billboard, Live! 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.2%
Gift Shop, Logo Store 2.2% 2.2% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%
Telephone, Other 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
Gross Revenues 110.2% 109.5% 109.3% 109.3% 109.3% 109.3% 109.3% 109.3%
Less Promotional Allowances 10.2% 9.5% 9.3% 9.3% 9.3% 9.3% 9.3% 9.3%
Net Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Departmental Expense Ratios
Casino 44.6% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0%
Hotel 28.1% 25.0% 23.7% 231% 23.7% 23.7% 23.7% 23.7%
Banquets, Bar and Room Service 69.6% 63.0% 63.0% 63.0% 63.0% 63.0% 63.0% 63.0%
Leased Restaurants 39.9% 39.9% 39.9% 39.9% 39.9% 39.9% 39.9% 39.9%
Billboard, Live! 44.1% 45.7% 47.3% 48.9% 50.6% 52.4% 54.3% 49.5%
Gift Shop, Logo Store 62.0% 62.0% 62.0% 62.0% 62.0% 62.0% 62.0% 62.0%
Telephone 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0%
Total Departmental Expenses 43.0% 41.2% 40.5% 40.5% 40.5% 40.5% 40.5% 40.5%
Departmental Profit 52.6% 54.8% 55.7% 55.7% 55.7% 55.7% 55.7% 55.7%
Other Expenses as a Percent of Gross Sales
Administration 13.4% 12.0% 11.7% 11.7% 11.7% 11.7% 11.7% 11.7%
Provision for Doubtful Accounts 2.1% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Corporate Expense 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Total Other Expenses 17.1% 15.5% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2%
Earnings before Interest, Income taxes,
Depreciation and Amortization 35.5% 39.3% 40.5% 40.5% 40.5% 40.5% 40.5% 40.5%
<CAPTION>
FY 07/08 FY 08/09 FY 09/10
<S> <C> <C> <C>
Revenues as a Percent of Total
Casino 55.0% 55.0% 55.0%
Hotel 36.6% 36.6% 36.6%
Banquets, Bar and Room Service 13.4% 13.5% 13.5%
Leased Restaurants 0.7% 03% 0.7%
Billboard, Live! 0.2% 0.1% 0.1%
Gift Shop, Logo Store 2.1% 2.1% 2.1%
Telephone, Other 1.3% 1.3% 1.3%
Gross Revenues 109.3% 109.3% 109.3%
Less Promotional Allowances 9.3% 9.3% 9.3%
Net Revenues 100.0% 100.0% 100.0%
Departmental Expense Ratios
Casino 45.0% 45.0% 45.0%
Hotel 23.7% 23.7% 23.7%
Banquets, Bar and Room Service 63.0% 63.0% 63.0%
Leased Restaurants 39.9% 39.9% 39.9%
Billboard, Live! 51.3% 53.1% 54.9%
Gift Shop, Logo Store 62.0% 62.0% 62.0%
Telephone 55.0% 55.0% 55.0%
Total Departmental Expenses 40.5% 40.5% 40.5%
Departmental Profit 55.7% 55.7% 55.7%
Other Expenses as a Percent of Gross Sales
Administration 11.7% 11.7% 11.7%
Provision for Doubtful Accounts 2.0% 2.0% 2.0%
Corporate Expense 1.5% 1.5% 1.5%
Total Other Expenses 15.2% 15.2% 15.2%
Earnings before Interest, Income taxes,
Depreciation and Amortization 40.5% 40.5% 40.5%
</TABLE>
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HOTEL INCOME APPROACH
In a stabilized year, we are forecasting that the subject property will generate
an EBITDA ratio of approximately 40.6 percent. On a per room basis, in 1997
dollars, we are forecasting an EBITDA for the casino hotel component of
approximately $65,789 per room. Due to the leasing of many of its restaurant
outlets, New York-New York has an EBITDA ratio of approximately 52 percent. On a
per room basis, its annualized 1997 EBITDA would be $70,760. The blended results
between the Mirage and Treasure Island produce an EBITDA ratio of 32.1 percent,
and a per room indicator of $59,620. If the Mirage is considered alone, its
EBITDA margin is 32.9 percent and its EBITDA equates to $77,924 per room. In
1996 and while its casino lobby and attraction were under construction, the MGM
Grand has an EBITDA ratio of 33 percent and an EBITDA indicator of $50,820 per
room.
We have forecast an EBITDA for the subject that, on a per room basis, is below
that of the Mirage and New York-New York, but above that of the MGM Grand and
Treasure Island. Because of the leased restaurant operation, the ratio of EBITDA
appears "high".
ESTIMATED ANNUAL OPERATING RESULTS FOR THE HOLDING PERIOD
The previous analysis provided for the income and expenses incurred in the
operation of the subject in the representative year. In the following analysis,
we provide estimated income and expenses for the subject during each year of the
holding period anticipated for a typical investor. Our estimate of the
performance for the subject in the representative year is used as a basis for
our analysis, considering the effect of inflation, business development, and
varying occupancy.
Holding Period
For our analysis we have used a holding period of ten years, representing the
period from April 1, 1999 to March 31, 2009. In today's investment climate, this
holding period is considered appropriate by most investors.
Inflation
To portray price level changes during the holding period, we have assumed an
inflation rate of 3.5 percent from 1997 onward. This rate reflects the consensus
of the opinion of several well-recognized economists for the current long-term
outlook for the future movement of prices and is consistent with the inflation
rates over the past ten years.
It should be noted that inflation is caused by many factors and that
unanticipated events and circumstances can affect the forecasted rate.
Therefore, the estimated operating results computed over the projection period
can vary from the actual operating results, and the variations may be material.
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HOTEL INCOME APPROACH
Our assumption of an annual inflation factor is intended only to portray an
expected long-term trend in price movements over the projection period rather
than at one point in time.
Estimating an Appropriate Capitalization Rate
There have been no sales of single new mega casino resorts. Current rules of
thumb prescribe that gaming properties should transact at multipliers of 5.0 to
7.0 times the Earnings Before Income Taxes, Depreciation and Amortization
(EBITDA) which equates to a capitalization rate range of 14.3 percent (1 / 7) to
20 percent (1 / 5).
To determine an appropriate capitalization rate that is specific to a new mega
resort on the best section of the Strip, we will use the band of investment
technique. This technique is based upon assumptions of debt to equity ratios,
interest rates, and rates of return to the owner. To determine an appropriate
debt to equity ratio, we talked to a lending officer with Bank of America's
Gaming department. The interest rates charged are a function of debt to equity
ratios and are influenced by the size and number of other casino hotel projects
a borrower may have. Larger gaming companies with representation in numerous
markets are perceived to have less risk than one casino company. However, a very
good core Strip location would be deemed to also reduce risk.
Prior to its opening, the New York-New York loan was arranged at an
approximately 50 percent loan to value basis with a floating interest rate that
is 175 basis points over LIBOR.
The MGM Grand was able to retire its construction financing at a floating rate
that is approximately 250 basis point over LIBOR. The loan to value was typical,
which we infer from other comments made to be approximately 55 to 60 percent.
The Rio, which is not on the strip and is a single property enterprise, is
currently paying an interest rate that is 300 basis points over LIBOR. This is
attributable to its highly leveraged position during the expansion. Prior to its
taking on more debt for the expansion, the Rio's interest rate was only 200
basis points over LIBOR.
As of the date of value, LIBOR was approximately 6.1 percent on a one-year note.
Thus, the interest rates discussed ranged from a low of 7.85 percent for New
York New York, to a high of 9.1 for The Rio. It is interesting to note that
these rates, which are floating, are lower than the fixed rates for full-service
hotels. The most recent issue of the Landauer Hotel Investment Outlook indicates
that the average interest rate for a full-service hotel loan is approximately
8.79 percent, based on an average loan to value ratio of 64 percent. We
attribute the relatively low casino hotel interest rates to the increasing
diversification of the stream of income and the perceived strength of the Las
Vegas market. Bank of America sponsored a conference for Gaming lenders in late
February of 1997. A March 3, 1997 Las Vegas Business Press cover story reported
that a representative of PNC Bank "was
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122
HOTEL INCOME APPROACH
comforted by the diversification of the Las Vegas casino revenue away from
straight gaming...`Many of the casinos have shown increased cash flow despite
the decline in gaming win. They have more room, food and entertainment
revenue--it is a better balanced source of cash flow' ".
We will assume that the a casino resort property receives a loan to value ratio
of 60 percent. To take into account that today's rates may be relatively low
from a historical standpoint, we will assume that an appropriate interest rate
for a generic stand alone mega resort with a core Strip location would be 9.0
percent. Given that this rate is currently being paid by the Rio, with its
off-strip location and relatively highly leveraged situation, this appears to be
a conservative assumption. We will assume a 20 year amortization schedule and
monthly payments, which yields a debt constant of .10797. For the subject
property, with its as yet unproven room rate assumption, we will increase the
interest rate to 9.5 percent. The debt constant for the Venetian Resort is
assumed to be .11186.
On the equity side, we will assume that the owner of a typical mega casino
resort would expect a 26 percent return on his equity. For the Venetian, we will
assume that the as yet unproven room rate will increase the return expectations
of the owner. We will increase the equity return rate to 28 percent. This
compares to an average leveraged yield rate of 21.4 percent for generic
full-service hotels at this time.
These assumptions yield capitalization rates of 17.0 and 18.0 percent, as
indicated in the following calculation:
Generic Mega Resort Venetian Resort
------------------- ---------------
Debt: 60% x .10797 = .06478 .11186 .06712
Equity: 40% x .26 = .10400 .28 .11200
Total 100% x .16878 .17912
Rounded .17 .18
For our land residual analysis that is based on a more generic product, we would
employ a 17.0 percent stabilized year capitalization rate. For The Venetian,
with a projected ADR that has national precedent but not local precedent, a
capitalization rate of 18.0 percent will be used.
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HOTEL INCOME APPROACH
Value of the Reversion
To estimate the value of the subject using a discounted cash flow analysis, it
is assumed that the property will be sold at the end of the holding period. The
value of the property at that time is obtained through capitalization of the net
operating income of the property in the 11th year.
Terminal Capitalization Rate
It is our opinion that, if already stabilized, an overall capitalization rate of
18.0 percent would be warranted for the Venetian. This rate would be adjusted to
20.0 percent for the terminal rate upon reversion, 200 basis points higher than
the current overall rate. The higher terminal rate reflects the increased age of
the improvements at the end of the holding period coupled with the market's
preference for new or significantly renovated products.
Net Proceeds Upon Sale (Reversion)
The following analysis provides for the net proceeds upon sale of the subject in
the eleventh year. The estimated net operating income for the eleventh year is
$303,400,000. Next, to convert this income stream into a reversion valuation,
the reversionary capitalization rate of 21.0 percent must be applied. Lastly, to
obtain the net proceeds upon sale of the property, we have deducted a sales
commission of 2.0 percent associated with brokerage fees and miscellaneous
closing costs. Our calculation of the proceeds upon sale is as follows:
Calculation of Reversionary Value
Adjusted net operating income (in 000's) $303,400
Divided by: Reversionary Capitalization rate 20.0%
----------
Reversionary value $1,517,000
Less: Sales commissions @ 2.0% $30,340
----------
Net proceeds upon sale $1,486,660
Rounded, in 000's $1,487,000
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HOTEL INCOME APPROACH
Discount Rate
The discount rate reflects the overall rate of return expected by the investor,
weighing the relative risking of the investment in relation to other investment
vehicles and the perceived risk of each component in the operation of the
facility. In order to estimate an appropriate discount rate for the subject, we
have reviewed several investor surveys that report both capitalization and
discount rates for more typical hotel investments. The results are presented in
the following table.
Capitalization and Discount Rate Results
Average
Average Overall Discount
Capitalization Rate Rate Spread
------------------- ---- ------
Landauer - Hotel Investor Outlook 9.5% 13.5% 4.0%
1997
CB Commercial 0.0 12.7 2.7
First Quarter 1997 National Survey
Korpacz Real Estate Investor Survey 10.61 13.35 2.74
First Quarter 1997
Full Service Hotel Market
PKF Consulting 11.1% 14.1% 3.0%
Hospitality Investment Survey
2nd Quarter 1997, All property types
Average 10.3% 13.4% 3.1%
Source: Publications referenced
The average discount rate for the non-gaming hotels based on these surveys was
between 12.7 and 14.1 percent, with the "spread" between going in overall
capitalization rates and the discount rates ranging from 2.7 to 4.0 percent.
Because of the relatively higher range of discount rates appropriate for gaming
properties, we are of the opinion that a 22 percent discount rate is appropriate
to value the subject property, 4.0 percentage points higher than the overall
capitalization rate used herein and slightly above the assumed rate of
inflation.
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HOTEL INCOME APPROACH
Valuation Calculation - Discounted Cash Flow
To estimate the value of the subject considering the current operations of the
hotel and the projected performance of the facility through the holding period,
we have used a discounted cash flow analysis. Presented in the following table
is our cash flow estimated for the subject for the ten year holding period,
along with the value of the reversion deriving a final value estimate.
Discounted Cash Flow Analysis
Fiscal Income Before Present Present
Year Other Deductions Value Factor Value Amount
---- ---------------- ------------ ------------
2000 $181,748,000 0.8197 $ 148,974
2001 211,984,000 0.6719 142,424
2002 230,598,000 0.5507 126,992
2003 238,573,000 0.4514 107,692
2004 246,890,000 0.3700 91,349
2005 255,498,000 0.3033 77,487
2006 264,407,000 0.2486 66,729
2007 273,755,000 0.2038 55,781
2008 283,299,000 0.1670 47,316
2009 293,177,000 0.1369 40,136
----------
Stabilized $ 903,878
Reversion $1,487,000 0.1369 $ 203,569
----------
Net Present Value $1,107,448
Value, rounded $1,100,000
Note: Figures may not foot due to rounding.
Source: Landauer Associates, Inc.
The value estimated for the Casino hotel in our income approach is approximately
$1,100,000,000 or $362,300 per key.
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HOTEL INCOME APPROACH
RECONCILIATION
The estimated "as completed" derived in our income approach of $1,100,000 is
within 3.0 percent of the value estimated via the Cost Approach.
Thus, based on the income generated from the casino hotel operations and its
value upon sale, the "as is" market value of the fee simple interest in the
Venetian hotel through the Income Capitalization Approach as of the date of
completion is:
ONE BILLION ONE HUNDRED MILLION DOLLARS
$1,100,000,000
The "as stabilized" market value of the fee simple interest in the subject may
be estimated by commencing the holding period on April 1, 2001, the year in
which the discounting of the average daily rate is forecast to cease. This "as
stabilized" discounted cash flow analysis is contained in the Addenda to this
document. We estimate that as of April 1, 2001, the stabilized value of the
casino hotel improvements will be:
ONE BILLION THREE HUNDRED MILLION DOLLARS
$1,300,000,000
ESTIMATION OF PERSONALTY (FURNITURE, FIXTURES AND EQUIPMENT)
We estimate the value of the furniture, fixtures and equipment (FF&E) of the
subject property based on the cost estimates provided by Bovis. The cost of the
owned personal property was estimated by them as $105,670,000 and is exclusive
of any entrepreneurial profit.
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RETAIL MARKET ANALYSIS
RETAIL MARKET ANALYSIS
Introduction
Typically, in the valuation of a retail center the goal of a retail market
analysis is to evaluate trade area demand for goods and services, the buying
power the center may attract and the impact of competition. Specifically, the
retail sales potential the center is likely to generate is forecast utilizing
the findings from the market analysis. In this instance, however, it is not
possible to estimate meaningful retail sales volumes and performance
characteristics for the subject, since its merchant/leasing strategy, tenant mix
and actual leasing square footage has not been finalized at this point in the
development process. However, in light of the evidence uncovered during our
research, the subject's overall performance will be predominantly driven by the
Las Vegas visitor market and minimally by the resident market. Therefore, our
assessment of retail market conditions focuses primarily on the visitor market
in terms of developing relevant demand generators applicable to the subject.
Demographic Summary
Key demographic and economic data relevant to the retail market, discussed in
detail in previous sections of this report, is recapitulated in the highlights
which follow:
o Since 1980, the Las Vegas MSA's population has experienced a compound annual
growth rate of 4.9 percent per year. By the Year 2000, the MSA's population
is estimated to reach 1,352,000 persons.
o Population growth will remain strong due to the on-going economic expansion
of most employment sectors in the MSA, including the hotel/gaming/recreation
industry, business and personal services, trade, state and local government,
transportation, communications and utilities.
o The labor force has grown, on average, 11.5 percent annually over the last
four years while the number of people employed has grown better than 12.0
percent per year.
o Nevada has been ranked first as the fastest growing economy in the west by
the DRI/McGraw Hill Regional Forecast Summary each of the last three years;
it is expected to remain first through 2001.
o During 1996, 29.7 million people visited Las Vegas and spent $22.5 billion
in the area, including gaming revenues.
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128
RETAIL MARKET ANALYSIS
o The visitor industry is likely to maintain its prime role as the generator
of new jobs which is evident by the fact that, as of 1997's first quarter,
nine of the top ten Las Vegas employers are casino hotel operators.
o Though tourism in Las Vegas is driven mainly by gaming, it has also emerged
as a mainstream family destination, fueled by the "must see" mega-resorts and
attractions erected over the last ten years.
o The diversification of its market away from serious gamblers to "Middle
America" continues to attract first-time visitors, and the potential growth
from the international visitor market, currently small relative to the total
visitor market at present, is immense.
o The Las Vegas lodging market is highly successful as contrasted to hotel
occupancies on a national basis (e.g., 90.4% vs. 65.2% in 1996).
o Although rooms inventory, currently at 101,106 rooms in January 1997, grew
at a compound annual rate of 6.0 percent over the last ten years, occupancy
rates improved during the same time frame, indicating demand for lodging in
the Las Vegas market has outpaced supply.
o Overall, the new mega-resort casino hotels, through their themed attractions
and marketing efforts, have significantly broadened the potential Las Vegas
visitor market.
o Ranked by either number of square feet of exhibit space rented or by the
number of shows, Las Vegas is the most popular tradeshow destination in the
U.S. In 1996, 36 of the nation's 200 largest tradeshows, representing an 18
percent market share, were held in Las Vegas.
o Tradeshow managers and exhibitors selecting convention city destinations
seek facilities having sophisticated tie-ins with shopping, restaurants and
entertainment. Las Vegas' transition from a single purpose (gaming)
destination to an entertainment superstore is undoubtedly a prime factor
behind its continuing popularity and market dominance.
General Observations - Las Vegas Visitor Market
In addition to becoming the nation's largest visitor market, Las Vegas has also
evolved over the years from an adults only destination into a much more
diversified family destination. Gaming, the euphemism for gambling, while still
the economic lifeblood of the visitor market, has become one of many
entertainment options available to visitors. Along with becoming the fastest
growing major metropolitan area in the nation, Las Vegas witnessed the
introduction of mega-resort properties such as the Mirage, Excalibur, Luxor,
Treasure Island and the MGM Grand during the 1987 to 1993 period, which
represented the evolution of traditional hotel casinos into self-contained
resort destinations featuring high levels of amenities for the entire family
housed in 2,000 to 4,000 room
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129
RETAIL MARKET ANALYSIS
hotels with large casinos, retail shops, family activity centers and an array of
food and beverage offerings.
The latest wave of casino hotel development, such as New York, New York and the
recently completed Monte Carlo, along with Bellagio (under construction) and the
announced plans for the Venetian/Lido and Paris, continues to feature the
heavily-themed mega-resort trend which offers high value entertainment and a
wide range of amenities, and seeks to capture market share by upstaging its
competitors. Retailing has become a highly regarded recent addition to the list
of offerings casino hotels employ to generate visitor traffic, though gaming
will likely remain the prime purpose of a Las Vegas visit. However, the current
trend of placing significant reliance upon scale (property size) and fantasy
(theme/decor) to differentiate among products (casino hotels), and appeal to a
wide consumer base, appears well established.
Visitor Expenditures
Each year the Las Vegas Convention and Visitor's Authority prepares a composite
study of visitors to Las Vegas based upon random interviews and surveys
independently conducted throughout the city. Findings relevant to this valuation
are presented in the following table.
Average Trip Expenditures
1996 1995 1994 1993 Average
---- ---- ---- ---- -------
Shopping $ 63.51 $ 66.18 $74.52 $67.95 $68.04
Food & Drink $110.92 $101.39 $99.96 $82.33 $96.65
Source: Las Vegas Convention & Visitors Authority
As depicted in the preceding table, during an average 4.7 day stay (3.7 nights)
in Las Vegas, average per person expenditures on food and drink have shown an
upward trend in spending over the past four years while shopping has remained
relatively stable, although declining slightly from 1994.
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RETAIL MARKET ANALYSIS
Las Vegas Retail Market Overview
Until the opening of Boulevard Mall in 1967, Las Vegas residents and visitors
had limited alternatives in terms of regional shopping centers. Over the past
thirty years, however, numerous large-scale shopping facilities have been
developed. Department stores currently serving the market include Macy's,
Bullock's, Dillard's, J.C. Penney, Robinsons-May, Mervyn's, Neiman Marcus, Saks
Fifth Avenue and Sears. Big box retailers such as Wal-Mart, Kmart and Target are
also present. Major shopping facilities over 100,000 square feet in Clark County
are summarized in the table which follows:
Retail Space Summary - Clark County, Nevada
As Of December 1996
Number of Properties 185
Total Rentable Sq.Ft. 21,689,210
Percent Vacant 5.38%
New Construction (sq.ft.) 902,212
Under Construction (sq.ft.) 682,494
Planned Construction (sq.ft.) 2,571,451
Source: Las Vegas Perspective 1997
Retail sales volumes and growth characteristics for Clark County are depicted in
the following table:
Clark County Retail Sales
($ Billions)
1992 1993 1994 1995 1996 CAG(1)
---- ---- ---- ---- ---- ----
$8.74 $9.85 $11.68 $13.25 $14.52 10.7%
(1) Compound Annual Growth; Source: Las Vegas Perspective 1997
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RETAIL MARKET ANALYSIS
As indicated in the preceding table, retail sales from all merchandise sources
has increased 10.7% on a compound annual basis since 1992. Furthermore,
according to Sales and Marketing Management's 1996 Survey of Buying Power, Clark
County ranks 42nd in total retail sales as compared to the top 250 major U.S.
metropolitan areas.
A profile of mall shoppers, however, supports the minimal impact residents have
had upon the Strip's two primary shopping facilities:
1996 Mall Visits - Clark County Residents
Weekly Monthly Seldom Never
------ ------- ------ -----
Forum Shops 0.0 8.6 41.4 50.0
Fashion Show Mall 1.4 18.1 38.7 41.8
Boulevard Mall 7.3 34.2 42.1 16.4
Meadows Mall 4.5 39.4 40.6 20.0
Galleria at Sunset 3.2 20.4 27.6 48.8
Source: Las Vegas Perspective 1997
As depicted, resident shoppers tend to avoid the Strip in favor of the suburban
malls. Detailed descriptions of each competitive property are provided in the
sections which follow.
Retail Competition - Overview
From a retail standpoint, the competitive environment in which the Grand Canal
Shops will function comprises a variety of competitive facilities within the
marketplace. On the Strip, these competitors constitute retailers situated in
two existing major shopping facilities, retail offerings within the major casino
hotels, and other small scale retail stores and plazas along the Strip's
streetfront (primarily local independent operators that sell T-shirts, film,
gifts and other souvenirs). Additional competition will come from major new
retail projects planned for the Strip within to-be-built and existing casino
hotels. And three traditional major malls in the metropolitan retail market
represent competition, as well. Finally, the factory outlet concept has been
recently introduced into Las Vegas which will add an additional competitive
element to the area's existing and planned retail mix.
Presented in the following subsections are the relevant critical components of
the Las Vegas retail market as they relate to the Grand Canal Shops.
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RETAIL MARKET ANALYSIS
[MAP OMITTED]
RETAIL COMPETITION MAP
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133
RETAIL MARKET ANALYSIS
[MAP OMITTED]
RETAIL COMPETITION MAP
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134
RETAIL MARKET ANALYSIS
GRAND CANAL SHOPS
LAS VEGAS, NEVADA
Site
Area Total GLA No.
Name / Location Year Open (Acs) (Sq.Ft.) Stores Anchors
--------------- --------- ----- -------- ------ -------
Subj. Grand Canal Shops Under n/a 500,000 Approx. None
Las Vegas Blvd. construc. 60
So. & Sands Ave.
- --------------------------------------------------------------------------------
1. Forum Shops 1992 9 243,172 150 None
9155 Las Vegas (Expanded (233,000
Blvd. So. 1997) sq.ft.
expansion
opened
8/29/97)
2. Fashion Show Mall 1981 34 819,400 111 Neiman Marcus
Las Vegas Blvd. (Renovated (200,000 Saks 5th Ave.
So.& Spring Mountain 1993) sq.ft. Dillard's
Rd. expansion Robinsons-May
planned w/2 Macy's
additional
anchors)
3. Boulevard Mall 1967 78 1,131,000 135 Macy's
Maryland Pkwy. & (Renovated Sears
Desert Inn Rd. 1992) J.C. Penney
Dillard's
4. The Meadows 1978 82 950,096 144 Macy's
Meadows Lane & (Renovated Dillard's
Valley View Rd. 1995) J.C. Penney
Sears
5. Galleria at Sunset 1996 95 1,300,000 124 Dillard's
Stephanie St. & J.C. Penney
Sunset Rd., Mervyn's
Henderson, NV Robinsons-May
6. Belz Factory 1993 72 530,000 72 None
Outlet World
Las Vegas Blvd.
So. & Warm Springs Rd.
7. Las Vegas Factory 1992 28 230,000 49 None
Stores
Las Vegas Blvd.
So. & Serene Ave.
- --------------------------------------------------------------------------------
Sources: 1997 Directory of Major Malls, 1997 Shopping Center Directory;
compiled by Landauer Assocs., Inc.
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RETAIL MARKET ANALYSIS
Primary Competition
Two existing large-scale retail centers located on the Strip and in close
proximity to the subject represent the primary competition.
The Forum Shops is a 1992-built, unanchored, enclosed specialty retail mall
which is attached to Caesars Palace casino hotel. This 243,172 square foot
one-level mall (Phase I) underwent a 233,000 square foot expansion (Phase II)
which opened August 29, 1997. Phase I also includes a small lower level occupied
by a high tech multi-media "motion simulator" ride experience and a video
arcade. The entire center is situated on a ground leased, 12.98-acre site on the
west side of the Strip between the Mirage and Caesars Palace casino hotels.
Shoppers and other patrons can enter the mall from the Strip via a moving
sidewalk (people-mover) or from Caesars Palace, which shares a 5,500 space
parking garage with the retail mall.
The project presents an elaborate, ancient Roman-themed streetscape environment
with classic columns and arches, fountains and statuary, plus a barrel-vaulted
simulated sky-lit ceiling which cycles through a 24-hour day every two hours.
Several large public spaces in Phase I serve as central squares or common areas,
and include the Festival Fountain Plaza attraction, seemingly monumental marble
sculptures of mythical Roman gods which come to life in an animated laser light
show.
Phase I is currently 100 percent leased by 76 tenants (Banana Republic is
expected to open by October, 1997) and was substantially pre-leased when it
opened in May, 1992. Year-end historical occupancies were reported at 94.4
percent (1993), 97.5 percent (1994) and 100.0 percent (1995 & 1996). High-end
specialty retailers in Phase I include Armani, Versace, Gucci, Dior, Louis
Vuitton, Estee Lauder, Bulgari, Guess? and Escada. Major name-brand restaurants
include Spago, Planet Hollywood and The Palm. Major retailers announced as
taking space in the Phase II expansion include Niketown (30,000 sq.ft., 3-level
store), FAO Schwartz (54,000 sq.ft., three levels), and a Virgin Megastore (two
levels, 35,000 sq.ft.). Other high-end shops include Alfred Dunhill, Fendi,
Lalique and Polo/Ralph Lauren. Restaurants include Caviarteria, The Cheesecake
Factory and Chinois, a Wolfgang Puck enterprise. Plans for a proposed Phase III
of approximately 450,000 square feet, although announced, are uncertain at this
time due to zoning changes which likely would be required in order to expand the
facility.
Fashion Show Mall is a traditional (i.e., non-themed), enclosed, two-level
regional mall situated on a 34 acre site at the NWC of Las Vegas Boulevard South
and Spring Mountain Road. Comprising a gross leasable area (GLA) of
approximately 819,400 square feet, the mall is anchored by five department
stores (unowned): Dillards (126,095 sq.ft.), Macy's (134,104 sq.ft.), Neiman
Marcus (100,000 sq.ft.), Robinsons-May (108,278 sq.ft.) and Saks Fifth Avenue
(63,961 sq.ft.). The mall-owned GLA is 100 percent leased to 111 retail shops
(approx. 85 percent), four restaurants and a food court. The center initially
opened in 1981 and was expanded/renovated in 1993. Noteworthy retailers include
Bally, Louis Vuitton, Ann Taylor, Mondi, Nicole Miller, Abercrombie & Fitch and
The Disney
<PAGE>
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RETAIL MARKET ANALYSIS
Store. Full-service restaurants are Morton's of Chicago, Dive!, Sfuzzi and
Chin's; each of the latter three face, and are directly accessible from, the
Strip. Recently announced expansion plans indicate an additional 200,000 square
feet of mall shop space, and perhaps one to two anchors, is proposed on an
adjacent tract which is currently not owned.
Secondary Competition
On and off the Strip are a variety of retail developments, and a handful of
existing and proposed casino hotel-related retail facilities, that present
secondary forms of competition to the subject.
Las Vegas Showcase is a newly opened (July 1997) facility that can best be
described as a festival entertainment-retail venue. Located just north of the
juncture of the Strip (east side) and Tropicana Boulevard, this four floor and
lower level 192,000 square foot facility is situated in front of the MGM Grand
and opposite New York, New York, both casino hotel mega-resorts. The primary
tenants are:
1. World of Coca Cola Las Vegas (30,000 sq.ft. on four levels), a Coke
corporate showcase featuring memorabilia, an interactive experience, a
two-level logo merchandise shop and a 100-foot tall Coke bottle;
2. Official All Star Cafe (35,000 sq.ft. on four levels), a sports
star-oriented full service restaurant;
3. M&M's World (30,000 sq.ft., four levels), a candy showcase featuring
Ethel M. chocolates (Fall, 1997 opening);
4. Gameworks (55,000 sq.ft., lower level), a state-of-the-art video arcade and
restaurant, featuring a 75-foot climbing wall (Gameworks is a joint venture
among Sega, Dreamworks and Universal Studios);
5. United Artists Theaters (40,000 sq.ft.), a multi-screen cinema located in
a detached, multi-level parking garage.
Tower Shops at Stratosphere comprises a 1996-built, 121,381 square foot,
unanchored enclosed retail center situated above the casino floor of the
Stratosphere casino hotel. Located on Las Vegas Boulevard South at the NEC of
Sahara Boulevard, this facility lies at the northern end of the Strip, slightly
beyond its traditional boundaries. Given its slightly off-Strip location, the
retail mall's primary drawing power stems from its physical attachment to The
Stratosphere Tower, a 1,149-foot tall, free-standing observation tower, the
tallest in the U.S., offering panoramic views of the Las Vegas Valley with
inside and outside observation decks, rotating restaurant/cocktail lounge, and
two thrill rides, all atop the tower. Patrons seeking entry to the elevator
banks servicing the observation tower must walk through the Tower Shops mall.
Tenants represent a fairly typical mix of mall-oriented national and regional
chain stores (e.g., Victoria's Secret, Footaction USA, Bath & Body Works,
Bernini Sport), and
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RETAIL MARKET ANALYSIS
local operators, as well. At the time of our inspection, we counted forty shops,
of which five were vacant and six had signage indicating a new tenant was to
open soon.
Masquerade Village, opened in February 1997, comprises approximately 120,000
square feet of unanchored retail shops (21 stores) located in the Rio Suites
casino hotel, which is off the Strip on the west side of I-15, at the NEC of
West Flamingo Road and Valley View Boulevard. Nicole Miller, Guess? Footwear,
Speedo Authentic Fitness and Reel Outfitters, an Orvis outlet, are the most
noteworthy tenants.
Planned New Retail Projects on the Strip
Major new retail projects announced for locations on the Strip, and to be
developed in conjunction with new hotels, include the following:
o The Grand Canal Shops within the 3,000 suite Venetian will comprise a
specialty retail mall located on the second and third levels of the casino
hotel. The mall's design, as proposed, will present a heavily themed Venetian
streetscape with squares, arcades and palazzo facades, and feature a replica
of Venice's canal including gondolas. Phase I of this project, currently
under construction, is scheduled to open in late Spring 1999, with the second
phase, an additional 3,000 suite hotel to be known as the Lido, plus Phase II
of the retail mall (approx. 250,000 sq.ft.), to open approximately a year
later.
o An announced redevelopment of the Aladdin casino hotel will include a retail
segment of approximately 450,000 square feet of leasable area in a ground
level configuration. The retail component is scheduled to open with the rest
of the Aladdin's redevelopment in the fall of 1999. While the Aladdin is
scheduled to close in November, 1997 definitive plans for the proposed
development are not yet available.
o The planned Paris casino hotel is expected to comprise a retail component of
approximately 250,000 square feet with a Parisian street theme and
attractions. Although details of the project are unknown at this writing,
announcements indicate it is scheduled to open in 1999.
o A redevelopment of the current theme park attraction at the MGM Grand with a
retail/entertainment center is expected to total 300,000 square feet,
according to press releases, and highlight nightclubs, entertainment, themed
restaurants, retail stores and other attractions. A Fourth Quarter 1998
completion is anticipated.
Hotel-Related Retail
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RETAIL MARKET ANALYSIS
Traditionally, casino hotels on the strip have maintained a limited supply of
retail offerings comprised primarily of gift shops, sundry stores, apparel and
logo merchandise shops. Recently-opened casino hotels, such as New York New York
and Monte Carlo, contain traditional limited hotel retail offerings, but with an
emphasis on a wide range of food services and branded restaurants, some with
entertainment venues.
Of the new hotels currently under construction, Bellagio is expected to include
approximately 40,000 to 60,000 square feet of high-end restaurant and retail
uses, including restaurants with brand name images.
Bally's and MGM Grand each opened a retail concourse after they installed a
monorail connecting the two properties; the shops are designed to lead patrons
to the monorail station at each facility. The MGM Grand also developed a retail
and restaurant area of approximately 115,000 square feet called Studio Walk
between the main casino and its outdoor theme park attraction. In early 1997,
Circus Circus opened a 40,000 square feet retail area with approximately 14
stores and two new restaurants adjacent to its enclosed amusement park
attraction, Grand Slam Canyon. In the Spring of 1997, Luxor casino hotel opened
a similar sized area of retail shops in their facility called the Giza Galleria.
Suburban Regional Malls
In addition to Fashion Show Mall, there are three traditional, department
store-anchored regional shopping malls within the Las Vegas suburbs.
o Boulevard Mall, located approximately three miles east of the Strip at
Maryland Parkway and Desert Inn Road, opened in 1967 and was last
expanded/renovated in 1992. Containing a total GLA of 1,131,000 square feet,
and anchored by Macy's, Sears, J.C. Penney and Dillard's, this one-level
enclosed mall is well leased with significant emphasis on ladies' fashion
tenants.
o Meadows Mall, at Meadows Lane and Valley View Road, approximately five miles
northwest of the subject, comprises approximately 950,096 square feet of GLA
on two-levels. Anchored by Macy's, Dillard's, J.C. Penney and Sears, this is
a traditional enclosed regional shopping mall in an area primarily
characterized by commercial and residential development. The center is
typical of suburban regional shopping centers in that it is surrounded by
surface parking and is located in close proximity to a major roadway (Route
95, directly north of the center). An extensive interior and exterior
renovation, and remerchandizing program commenced in 1994 and was completed
by mid-1995.
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RETAIL MARKET ANALYSIS
o Galleria at Sunset opened in 1996 at Sunset Road and Stephanie Street in
Henderson, a suburban community which is immediately southeast of Las Vegas.
The development totals 1.3 million square feet of GLA and is anchored by
Dillard's, J.C. Penney, Mervyn's and Robinsons-May.
Factory Outlet Malls
Two factory outlet retail centers, located on Las Vegas Boulevard but south of
the airport, have come on-line in recent years:
o Las Vegas Factory Stores opened in 1992 with 250,000 square feet of retail
space in an unenclosed strip mall. Among the more prominent tenants are VF
Factory Outlet, Geoffrey Beene, Van Heusen, Spiegel and Mikasa. The center is
located about five miles south of Tropicana Avenue, considered the southern
boundary of the Strip's prime area.
o Belz Factory Outlet World, about three miles from the Strip's southern
boundary, opened in November 1993 with 315,000 square feet of enclosed retail
area. Prominent outlet stores include Nike, Eddie Bauer, Fila, Reebok,
Nautica, Lenox, Royal Doulton and Waterford Wedgewood. An outparcel building
erected this year is occupied by a Saks Off Fifth outlet store.
o Finally, a 400,000 to 450,000 square foot factory outlet center to be known
as Fashion Outlet of Las Vegas is planned in conjunction with the proposed
Primadonna Resort development at the California/Nevada state line, which is
an approximate thirty minute drive from the Las Vegas Strip.
Retail Use of Subject Site
In terms of forecasting performance characteristics, the location of the
Venetian casino hotel and Grand Canal Shops retail mall project demonstrates a
number of identifiable strengths:
o The development enjoys a mid-Strip setting between the Fashion Show Mall and
the Forum Shops, the two dominant retail facilities on the Strip. These
existing, historically productive retail destinations serve as quasi-anchors
on either side of the Venetian site, are each within a few minutes stroll
from the subject and are highly visible. With the addition of the subject
project, these three properties will constitute a conveniently accessible
triangular mass of retail interest for visitors.
o The project site features extensive frontage along the east side of Las
Vegas Boulevard South, offering excellent visibility to pedestrians and
vehicles.
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RETAIL MARKET ANALYSIS
o The site's mid-Strip location has a total of 33,000 existing, under
construction and planned hotel rooms within a ten minute walk.
o The Sands Expo and Convention Center, to expand by 400,000 square feet to
1.4 million square feet of exhibition and meeting space, will be situated
adjacent and physically connected to the Venetian casino hotel and Grand
Canal Shops.
o The Las Vegas Convention Center has also announced plans to remodel and
expand by 300,000 square feet to 1.6 million square feet of exhibition space
by February, 1998, which will likely generate additional visitors to the
market.
o Under existing conditions, most pedestrians appear to travel the western
side of the Las Vegas Boulevard. A planned skybridge connecting the east and
west sides of the street at the project site's location should enable the
subject to take full advantage of the existing heavy pedestrian traffic.
Capture Rate Assessment
A model of sales performance for the Grand Canal Shops has been developed
utilizing a capture rate method whereby retail spending by visitors and
residents combined with per capita expenditure levels are forecast. In
developing the sales volume model, consideration was also given to the retail
environment on the Strip, which is characterized as quite healthy, evidencing
low vacancies and very high sales productivity in the two major competing
centers, Fashion Show Mall and the Forum Shops. Beyond the Strip, the three
regional mall centers are also well maintained, well occupied and appear to be
performing acceptably.
Our analysis focuses primarily upon tourist related spending since the subject
mall is assumed to be primarily targeted to visitors rather than local
residents.
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RETAIL MARKET ANALYSIS
Methodology
The method used to project sales volumes at the Grand Canal Shops relies upon
the following factors and assumptions:
1. Four segments are assumed to constitute the population of potential
shoppers at the project:
a) Venetian hotel guests,
b) Sands Expo & Convention Center attendees,
c) other Las Vegas visitors and
d) Clark County residents.
2. Visitor growth is projected to increase five percent in 1997, consistent with
average growth patterns to date, and three percent thereafter. Thus, in
FY2000, visitors to Las Vegas will total 33,343,300 persons. Based upon
historical patterns, Clark County residents are projected to increase five
percent per year to 1,317,800 persons in FY2000.
3. The number of Venetian hotel guests has been projected at 550,000 guests
per annum, based upon assumptions presented previously in this report. To
reiterate:
3,036 Phase I hotel rooms x 365 nights x 93% occupancy = 1,053,080
occupied rooms;
1,053,080 occupied rooms x 1.75 DOF(1) = 1,842,890 guests;
1,842,890 guests / 3.4 night ALS(2) = 550,000 potential hotel guests
(Rd).
(1)DOF = double occupancy factor; (2)ALS = average length of stay (nights).
4. SECC exhibitors and attendees not staying at the Venetian casino hotel are
estimated at 990,000 persons, based on a total of 1.15 million SECC
attendees. Furthermore, we have assumed that 160,000 of the attendees will
stay at the Venetian (included in the 530,000 total potential guests
estimate).
5. Other visitors totaling 31,823,300 persons comprise the remaining population
of the visitor's segment; i.e., 33,343,300 total visitors less 530,000 hotel
guests and 990,000 SECC attendees.
6. Each hotel guest at the Venetian is assumed to make an average of 1.5 trips
through the retail mall during an average 4.7 day/3.4 night stay in Las
Vegas.
7. Given the mall's close proximity to the convention center and its variety of
shops, restaurants, attractions and amenities, we estimate that 75 percent of
the Expo attendees will visit the mall during their stay.
8. Of the remaining visitors to Las Vegas, 35 percent are assumed to
patronize the mall at least once.
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RETAIL MARKET ANALYSIS
9. Per capita expenditures, which are utilized to generate annual sales for
each segment, have been estimated at $30.00 for hotel guests, $25.00 for
Expo Center attendees, $15.00 for other visitors and $10.00 for residents.
10. Given the non-growth pattern displayed over the last three years, no change
in retail spending expenditures by visitors is assumed. Thus, retail
spending of $68.00 per trip, based on the four year average has been
employed.
11. Retail sales in Clark County totaled $14,517,812,000 in 1996.
<PAGE>
143
RETAIL MARKET ANALYSIS
RETAIL SALES FORECAST - THE GRAND CANAL SHOPS
<TABLE>
<CAPTION>
Expo Other Visitor
Segment Hotel Guests Attendees Visitors Subtotal Residents Total
------------ ----------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
No. in Segment (Annually) 530,000 990,000 31,823,300 33,343,300 1,317,800 34,661,100
No. Visits to The Grand Canal Shops 1.50 0.75 0.35 0.50
Implied Annual Traffic 795,000 742,500 11,138,155 12,675,655 658,900 13,334,555
Per Capita Expenditure by Segment $30.00 $25.00 $15.00 $10.00
Annual Sales by Segment $23,850,00 $18,562,500 $167,072,325 $209,484,825 $6,589,000 $216,073,825
Per Trip Retail Spending (1996) $68.00 $68.00 $68.00 nap
Total Spending by Segment $36,040,000 $67,320,000 $2,163,984,400 $2,267,344,400 $12,250,467,600 $14,517,812,000
Implied Capture Rate by Segment 66.2% 27.6% 7.7% 9.2% 0.05% 1.49%
Total Annual Sales (FY2000) $216,073,825
Retail Sq. Ft 358,920
Retail Sales PSF $602.01
</TABLE>
<PAGE>
144
RETAIL MARKET ANALYSIS
As indicated in the accompanying table, the implied capture rate equates to 9.2
percent for all visitors and less than 1 percent for residents. The overall
implied capture rate for total retail spending in Clark County is also
approximately 1.5 percent of 1996's total expenditure.
Utilizing a total GLA of 358,920 square feet of mall shop space indicates a
retail sales forecast for the Grand Canal Shops of $602.00 per square foot
(rounded), which is slightly higher than the 1996 performance of the Fashion
Show Mall ($500 psf in 1996) and approximately half of the sales volume at the
Forum Shops ($1,218 psf in 1996).
Obviously, the key variables in the forecast model are the annual segment count,
the number of visits to the mall and the per capita expenditure by each segment.
Given the resulting implied capture rate of approximately 9.2 percent of total
visitor spending, and an insignificant portion of resident spending, we consider
the capture forecast to be reasonable and achievable as long the retail tenants
selected by ownership to occupy the mall fit an appropriate merchandising mix
and a professional marketing plan is applied.
Furthermore, should the eventual size of the mall GLA vary (i.e., increase or
decrease) from our projection, the net impact would be minor since the mall's
size is independent of the total sales volume forecast. For example, if the
retail GLA were reduced in size to say, 275,000 square feet, the sales per
square foot would then be approximately $786 per square foot, which is still
bracketed by the comparable data.
Leasing Analysis
The developer's pro forma rent roll has been analyzed in detail and is discussed
in the paragraphs which follow. As indicated in the accompanying chart, four
categories of retailers are expected to lease space at the subject - retail,
restaurant, food court and an entertainment/showcase venue. Although copies of
numerous letters of intent soliciting prospective tenants were provided, only
seven were signed, which is not atypical at this point in the development
process. Overall, we have placed most reliance on the pro forma rent roll
provided by the developer in determining the square foot size and layout of the
mall.
According to information provided by the developer, only one tenant has signed a
lease to date. Billboard Live!, an entertainment venue with full service
restaurant and logo retail goods, has signed a lease for 50,000 square feet of
leasable space on three levels. The two upper levels will be in the mall (25,770
sq.ft.), while the tenant's ground floor will be at the casino level (24,230
sq.ft.). The lease term is for twenty years with two, five-year options to
renew. Minimum rent is fixed during the initial term at $1,260,000 per annum, or
$25.20 psf of total area leased. Percentage rent is payable as follows:
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RETAIL MARKET ANALYSIS
Gross food and beverage sales : 8% over a natural breakpoint;
Retail sales : 12.5%, $0 to $4 million in sales;
14.0%, $4 to $8 million;
15.0%, over $8 million.
The tenant is responsible for an operating expense recovery charge of $700,000
($14.00 psf), which is fixed through Year 6 of the lease term, and escalates at
CPI, thereafter.
The proposed lease documents reviewed for retail and restaurant tenants are
generally similar to the preceding lease description for Billboard Live!, except
for the following:
o Retail and restaurant tenants will pay an operating expense recovery
charge of $25.00 and $20.00 per square foot of main floor area leased,
respectively, increasing annually by the CPI;
o Minimum rent increases every second year, based on the CPI;
o A marketing/promotional fund contribution of $3.00 per square foot
of leased area will apply;
o Lease terms will be ten years.
No details regarding the structure of leases with food court tenants was
provided.
<PAGE>
LANDAUER 146
REAL ESTATE COUNSELORS RETAIL MARKET ANALYSIS
MINIMUM RENT ANALYSIS - THE GRAND CANAL SHOPS
<TABLE>
<CAPTION>
RETAIL
SQ.FT. of GLA MIN. RENT PSF TOTAL MIN. RENT
---------------------------------- --------------------- --------------------------------
UNIT NO. Main Mezz. Total Main Mezz. Main Mezz. Total
-------- ---------------------------------- --------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1006 530 530 $200.00 $106,000 $0 $106,000
1196 550 550 $175.00 $ 96,250 $0 $96,250
1002 570 570 $200.00 $114,000 $0 $114,000
1053 575 575 $200.00 $115,000 $0 $115,000
0 1200 600 600 $150.00 $90,000 $0 $90,000
to 1197 605 605 $150.00 $90,750 $0 $90,750
1,000 1172 625 625 $200.00 $125,000 $0 $125,000
1203 770 770 $150.00 $115,000 $0 $115,500
1166 796 795 1,590 $250.00 $25.00 $198,750 $19,875 $218,825
1168 800 800 1,600 $200.00 $25.00 $160,000 $20,000 $180,000
1162 800 800 $175.00 $140,000 $0 $140,000
1150 800 800 $200.00 $160,000 $0 $160,000
1208 940 940 $130.00 $122,200 $0 $122,200
1142 950 950 1,900 $125.00 $25.00 $118,750 $23,750 $142,500
1018 955 955 $150.00 $143,250 $0 $143,250
- ----------------------------------------------------------------------------------------------------------------------
Min. 530 $125.00
Max. 955 $250.00
Avg. 724 $174.45
- ----------------------------------------------------------------------------------------------------------------------
1038 1,045 1,045 $85.00 $88,825 $0 $88,825
1037 1,125 1,125 $200.00 $225,000 $0 $225.000
1042 1,170 1,170 $135.00 $157,950 $0 $157,950
1164 1,205 1,205 2,410 $150.00 $25.00 $180,750 $30,125 $210,875
1032 1,225 1,225 $115.00 $140,875 $0 $140,875
1158 1,315 1,315 2,630 $150.00 $25.00 $197,250 $32,875 $230,125
1,001 1036 1,330 1,330 $120.00 $159,600 $0 $159,000
to 1161 1,365 1,365 $80.00 $109,200 $0 $109,200
2,000 1144 1,405 1,405 $80.00 $112,400 $0 $112,400
1051 1,425 1,425 2,850 $150.00 $25.00 $213,750 $36,625 $249,375
1178 1,510 1,510 3,020 $125.00 $25.00 $188,750 $37,750 $226,500
1058 1,580 1,580 $80.00 $126,400 $0 $126,400
1195 1,595 1,595 3,190 $120.00 $25.00 $191,400 $39,875 $231,275
1170 1,735 1,735 $80.00 $138,800 $0 $138,800
1020 1,780 1,780 3,580 $110.00 $25.00 $195,800 $44,500 $240,300
1182 2,000 2,000 $120.00 $240,000 $0 $240,000
- ----------------------------------------------------------------------------------------------------------------------
Min. 1,045 $80.00
Max. 2,000 $200.00
Avg. 1,426 $116.91
- ----------------------------------------------------------------------------------------------------------------------
1040 2,025 2,025 $120.00 $243,000 $0 $243,000
1022 2,275 2,275 4,550 $100.00 $25.00 $227,500 $56,875 $284,375
1060 2,460 2,460 4,920 $150.00 $25.00 $369,000 $61,500 $430,500
1034 2,650 2,650 $110.00 $291,500 $0 $291,500
2,001 1028 2,705 2,705 5,410 $110.00 $25.00 $297,550 $67,625 $365,175
to 1062 2,745 2,745 5,490 $125.00 $25.00 $343,125 $68,825 $411,750
4,000 1206 3,365 3,365 6,730 $90.00 $25.00 $302,850 $84,125 $386,975
1204 3,400 3,400 6,800 $90.00 $25.00 $306,000 $85,000 $391,000
1026 3,650 3,650 7,300 $100.00 $365,000 $91,250 $456,250
1180 3,780 3,780 7,560 $110.00 $25.00 $415,800 $94,500 $510,300
1158 3,995 17,215 21,210 $100.00 $100.00 $399,500 $1,721,500 $2,121,000
- ----------------------------------------------------------------------------------------------------------------------
Min. 2,025 $90.00
Max. 3,995 $150.00
Avg. 3,005 $107.74
- ----------------------------------------------------------------------------------------------------------------------
1174 4,220 4,220 8,440 $90.00 $25.00 $379,800 $105,500 $485,300
1064 4,600 4,600 9,200 $100.00 $25.00 $460,000 $115,OO0 $575,000
1054 4,755 4,755 $80.00 $380,400 $0 $380,400
1052 5,310 5,310 $80.00 $424,800 $0 $424,800
4,001 1024 5,590 5,590 11.180 $80.00 $25.00 $447,200 $139,750 $586,950
+ 1046 6.500 6,560 13,120 $75.00 $25.00 $492,000 $164,000 $656,000
1198 7,000 7,000 $90.00 $630,000 $0 $630,000
1050 7,075 7,075 14,150 $70.00 $25.00 $495,250 $176,875 $672,125
1210 15,000 15,000 30,000 $75.00 $25.00 $1,125,000 $375,000 $1,500,000
1184 22,300 37,500 59,800 $60.00 $60.00 $1,338,000 $2,250,000 $3,588,000
N/A 2,608 1,662 4,270 $75.00 $25.00 $195,600 $41,550 $237,150
1010 36,000 36,000 72,000 $60.00 $25.00 $2,160,000 $900,000 $3,060,000
- ----------------------------------------------------------------------------------------------------------------------
Min. 2,608 $60.00
Max. 36,000 $100.00
Avg. 11,170 $70.47
- ----------------------------------------------------------------------------------------------------------------------
Subtotal/Avg. 187,743 171,177 358,920 $88.69 $40.21 $16,651,075 $5,883,050 $23,534,125 $65.57
Annex 10,000 18,000 28,000 $200.00 $100.00 $2,000,000 $1,800,000 $3,800,000 $135.71
Totals/Avg. 197,743 189,177 386,920 $94.32 $45.90 $18,651,075 $8,683,050 $27,334,125 $70.65
RESTAURANT
1030 3,065 6,000 9,065 $50.00 $153,250 $0 $153,250
1154 4,380 7,280 11,660 $50.00 $219,000 $0 $219,000
1160 8,335 3,000 11,335 $50.00 $416,750 $0 $416,750
1194 4,555 4,555 9,110 $50.00 $227,750 $0 $227,750
1202 5,155 2,500 7,655 $50.00 $257,750 $0 $257,750
N/A 15,000 4,466 19,488 $50.00 $750,000 $0 $750,000
---- ------ ----- ------ ------ -------- -- --------
6
Subtotal/Avg. 40,490 27,823 68,313 $50.00 $0.00 $2,024,500 $0 $2,024,500 $29.64
TOTALS/AVG. 238,233 217,000 455,233 $86.79 $40.01 $20,675,575 $8,683,050 $29,358,625 $64.49
1157 17,770 8,000 25,770 $25.20 $25.20 $447,804 $201,600 $649,404 $25.20
1186 18,997 18,997 TBD $0 $0 $0
----
GRAND TOTAL 275,000 225,000 500,000 Total GLA $21,123,379 $8,884,650 $30,008,029 $62.39
(9,562) Food Court Common Area
490,438 Total Net GLA
</TABLE>
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147
RETAIL MARKET ANALYSIS
Conclusion of Market Rent and Terms
In estimating market rent for the subject mall, the leasing plan was reviewed
and analyzed. Although rental rates typically vary by location and use of the
tenant space within a retail center, they generally fall within a range dictated
by size of the area leased, which is the case in this instance. As indicated in
the accompanying chart (Minimum Rent Analysis), the average minimum rental rates
for each category of retail, based on main level area leased is summarized as
follows:
Sq.Ft. of GLA Rent PSF
------------- --------
0 to 1,000 $174
1,000 to 2,000 $117
2,001 to 4,000 $108
Over 4,000 $ 70
As depicted in the chart, the overall average rental rate for main level retail
space, as projected by the developer, is $88.69 psf, and is $40.21 psf, on
average, for the mezzanine level. On an overall weighted average basis, the
rental rate for both levels (358,920 square feet of GLA) is $65.57 psf, which is
well supported by the overall average rental rate recently achieved at Phase II
of the Forum Shops, of $64.00 psf. In this case, utilization of a weighted
average rental rate is reasonable, versus an estimate of specific rents based on
size, since specific locational and size fluctuations at the subject mall are
currently unknown.
Restaurant space is projected to lease at a rental rate of $29.64 per square
foot of total area leased (main and mezzanine levels), which is in line with the
most recent rents achieved for restaurant space, averaging approximately $33.00
per square foot, at one of the primary competitors.
Food court space will be assigned a market rental rate of $85.00 per square
foot, based on recent food court leases signed at competitive regional centers,
which ranged from approximately $75.00 to $90.00 per square foot.
All leases will be structured with ten year terms, semi-annual CPI increases and
fixed operating expense recoveries of $25.00 and $20.00 per square foot for
retail/food court and restaurant tenants, respectively, based on the proposed
lease documents examined and our knowledge of leasing patterns at similar retail
facilities. Additional assumptions relevant to the property's income flow will
be discussed in the Income Approach section.
<PAGE>
148
RETAIL MARKET ANALYSIS
Occupancy Cost Analysis
In addition to the preceding, we have also given consideration to occupancy
costs in selecting market rental rates to apply to mall space at the subject.
Occupancy costs per square foot are the total cost (i.e., base and percentage
rents, operating expense charges and recoveries, and all other charges) incurred
by a tenant to occupy its space. Such an analysis provides an indication of the
tenant's ability to pay a certain level of rent; in other words, a measure of
affordability. Rule-of-thumb standards in the industry hold that most retailers
can afford to pay between 10 to 20 percent of their gross sales as occupancy
costs. Using the estimates we have selected for the subject mall, and a 15
percent occupancy cost factor, produces the following results:
Estimated Market Rent PSF $ 65.57
Plus: Recovery Charge PSF + 25.00
Promotional Fund PSF + 3.00
-------
Total Occupancy Cost $ 93.57
(Division Sign) Estimated
Retail Sales
Volumes PSF /$609.50
Implied Occupancy Cost Factor 15.4%
On the basis of the preceding analysis, the total occupancy costs projected for
the subject mall are within the 10 to 20 percent industry standard.
Furthermore as discussed earlier, any variance (increase or decrease) in the
mall's GLA would result in a concomitant change in the rental rate projected. In
other words, using the example cited earlier, a reduction in the retail GLA to
say, 275,000 square feet and retail sales of $786 per square foot, a 15 percent
occupancy cost would suggest a rental rate of $90.00 per square foot is
appropriate ($786 x 15% - $28 = $90). And, the last few leases signed at Forum
Shops were reportedly at $112 per square foot, which is supportive of the $90
per square foot rental rate of the subject mall if a smaller GLA size is used.
<PAGE>
149
RETAIL MARKET ANALYSIS
Employing historical sales volumes at competitive centers, we have also
considered projected occupancy costs for restaurant and food court tenants.
The results also support the rental rates selected:
Restaurants Food Court
----------- ----------
Sales PSF $500.00(1) $800.00(1)
Occupancy Cost Factor x 15% x 15%
------- -------
Imputed Occupancy Cost PSF $ 75.00 $120.00
Less: Estimated Min. Rent PSF ( 26.64) ( 85.00)
Recovery Charge PSF ( 20.00) ( 25.00)
Promotional Fund PSF ( 3.00) ( 3.00)
------- -------
Net Remaining $ 22.36 $ 7.00
(1) Based on sales volumes at competitive centers.
Note also that in the income approach section which follows, an estimate of
potential gross income is derived, utilizing the market rents and terms
projected for the subject mall. In Year One of the analysis, a sales volume of
$460 per square foot is implied for all occupied space, which increases to $478
per square foot in Year Two. [The implied sales volumes psf are derived by the
formula: PGI / 15% Occupancy Cost Factor / Sq.Ft. Leased]. We believe these
performance characteristics are achievable, and our rental rates reasonable,
given the comparable data reviewed.
<PAGE>
150
RETAIL COST ANALYSIS
COST ANALYSIS FOR MALL
Bovis has budgeted the cost allocation for the retail component of the mixed-use
project at approximately $312 per square foot, inclusive of the mall's pro-rata
of the central plant's construction costs and the additional parking
necessitated by the retail component (156,211 million / 500,000 sf). For
purposes of comparison this estimate is exclusive of entrepreneurial profit and
land or air rights value. The only comparable cost data available which is also
reasonably similar is for the Forum Shops Phase II expansion, an existing
specialty retail project with heavily themed design elements. According to the
information available to us, the Phase II addition was originally budgeted at
$90 million for 250,000 square feet of mall space, or $360 per square foot,
which is in line with the budgeted costs for the subject retail mall.
<PAGE>
151
RETAIL MARKET ANALYSIS
SALES ANALYSIS FOR MALL
A discussion of comparable retail mall sales is included in the income approach
section of the retail valuation. Given the overall nature the subject mall
(i.e., the mall inter-relationship with the casino hotel), a distinct sales
comparison approach is not meaningful, in our view. It is unlikely that a
potential buyer of the completed mall (or its development rights) would consider
comparable shopping center sales as relevant in reaching a purchase decision,
given the unique characteristics of the project. Comparisons with the market
sales would likely focus on investment parameters, however, much as we have
accomplished within the income approach.
<PAGE>
152
RETAIL INCOME APPROACH
INCOME APPROACH
The income approach is based upon the premise that property value is represented
by the present worth of anticipated future benefits to be derived from
ownership. After considering the various methods relied upon by the market place
for converting a stream of expected income into value, the technique known as
discounted cash flow (DCF) analysis will be utilized. This kind of cash flow
analysis involves the projection of revenue and expenses over an estimated
holding period; then the resulting cash flows, and any estimated future value of
the reversion, are discounted at an appropriate rate to arrive at a total
present value. We have utilized Pro-Ject(TM) lease-by-lease analysis software to
assist in our evaluation.
REVENUES
Minimum Rent: As discussed in the retail market overview section of this report,
our analysis of minimum rent for the subject property incorporates an
examination of the developer's pro forma rental rates, an analysis of market
rents in place at competitive properties, and a forecast of the retail market
capacity and reasonable expenditure capture rate for the subject.
To recapitulate, market rents at the subject are estimated as follows:
Type Space Rent PSF
---------- --------
Retail shops ............. $65.57
Restaurants .............. $29.64
Food Court ............... $85.00
Billboard Live! .......... $25.20
Growth Rates (Revenue & Expenses): Based on the investor's survey conducted by
Korpacz and Associates (see rate selection chart presented later in this
section), and our review of regional shopping center sales over the last few
years, most investors expect inflationary growth ranging from 3 to 4 percent per
year. In this analysis, we have assumed a growth rate for revenues and expenses
of 3.5 percent per year throughout the projection.
Overage Rent: Although the developer expects to structure leases with a
percentage rent clause, we believe it unlikely that investors would give credit
to this highly speculative source of income, particularly in a proposed project
without a track record of sales. Thus, we have excluded overage rent from the
analysis.
<PAGE>
153
RETAIL INCOME APPROACH
Rent Escalations: Typically, a lease will be structured with some form of rent
escalation (increase or step). In this analysis, all proposed leases will be
structured with CPI steps applied on a semi-annual basis, based upon an
examination of the lease documents proposed at the subject and our knowledge of
lease structures in the competitive marketplace. The signed lease with Billboard
Live! is fixed at $1,260,000 per annum, or $25.20 per square foot, based upon
50,000 square feet of total occupied area; the leased portion allocated to the
retail mall is 25,770 square feet.
Expense Recoveries: Based on the proposed lease structure, retail and food court
tenants will pay a fixed expense recovery of $25.00 per square foot of main
floor area leased, growing annually at the expense growth rate selected.
Restaurant tenants' expense recovery is based upon a $20.00 per square foot
charge, growing annually at CPI, per the proposed leases. The Billboard Live!
recovery is fixed at $14.00 per square foot until the seventh year, then
increases annually at CPI, thereafter.
Other Income: Although miscellaneous income might be generated during the
holding period, we have included no other income in our forecast since the mall
has no performance history in this category.
VACANCY AND CREDIT LOSS
Our forecast assumes that the retail mall will be 80 percent pre-leased and
occupied by the completion of construction; our projected opening date for the
mall is April 1, 1999. By the second year of operations, 100 percent occupancy
is assumed, which is consistent with the success of the Forum Shops and Fashion
Show Mall, the primary competition. In line with typical investor practice,
however, we have factored vacancy and collection loss into our valuation model,
based on our opinion that the subject should be capable of achieving and
maintaining stabilized occupancy of 93 percent after the initial lease-up in
Year One.
Furthermore, we have assumed a 70 percent retention rate at lease expiration for
all tenants. Thus, entering speculative lease renewals into the cash flow model
utilizing ten year terms and three months of speculative downtime equates to an
average lag vacancy of one month (3 months x 30% speculative renewal).
<PAGE>
154
RETAIL INCOME APPROACH
EXPENSES
Operating Expenses
Our estimate of operating expenses utilizes the developer's Year One budget,
which is based upon estimates built-up by Forest City Enterprises, Inc., an
experienced mall management company. Expenses will also be compared to the
stabilized operating expenses of comparable retail centers in the submarket. As
shown in the accompanying tables, forecasted operating expenses are higher than
expenses at Centers A and B, and slightly below those at Center C. The subject's
expense ratio over the holding period, of approximately 28 percent on average,
is adequately supported by the comparable data, however.
Insofar as the mall's operating budget has been projected by an experienced mall
manager, we have generally relied on their category estimates, where
appropriate. However, utilities and taxes, estimated at $1.50 and $1.95 per
square foot, respectively, have been prorated, based upon the occupancy forecast
and total mall GLA. Furthermore, although the utilities expense per square foot
at the comparables are higher ($1.77 and $1.86 psf for Centers A & B,
respectively), we have relied on the budgeted expense, given the unquantifiable
impact the proposed privately-owned power plant will potentially have on this
expense category at the subject. Taxes are based upon the per square foot tax
cost at the Forum Shops. The management fee is reflective of standard industry
practice for regional mall facilities.
The promotional/marketing fund expense, net of the tenants' contribution of
$3.00 per square foot, is estimated as follows:
$1,173,000 Promotional/marketing fund budget
- 605,128 Less: Tenant contribution in Year One (201,709 sf x $3.00 psf)*
----------
$ 570,000 Net expense (Rd), Year One
(*253,595 total sf, main flr. x 80% occupancy)
$1,214,055 Year Two expense (Year One budget, plus inflation)
- 788,680 Less: Tenant contribution (253,595 sf x $3.11 psf)
----------
$ 425,375 Net expense (Rd), Year Two
Thereafter, the promotional fund expense will increase annually, based on the
expense growth rate selected.
<PAGE>
LANDAUER 155
REAL ESTATE COUNSELORS RETAIL INCOME APPROACH
YEAR ONE PRO FORMA ANALYSIS & FORECAST
THE GRAND CANAL SHOPS
<TABLE>
<CAPTION>
DEVELOPER'S PRO FORMA LANDAUER FORECAST
----------------------- ---------------------
(Dollars) $ PSF (Dollars) $ PSF
<S> <C> <C> <C> <C>
INCOME Minimum Rent 27,296,975 107.47 22,508,760 81.85
Overage Rent 6,112,300 24.06 0 0.00
Reimbursements 6,350,000 25.00 4,918,628 17,89
---------- ------ ---------- -----
Total Income 39,759,275 156.53 27,427,388 99.74
Less: Lease-Up Vacancy 7,951,855 (31.31) 0 0.00
---------- ------ ---------- -----
Effective Gross Income 31,807,420 125.23 27,427,388 99.74
EXPENSES
Cleaning 747,800 2.94 747,800 2.72
On-Site Mgmt. Staff 369,000 1.45 369,000 1.34
Insurance 175,000 0.69 175,000 0.64
Security 660,000 2.60 660,000 2.40
Utilities 380,393 1.50 595,332 2.16
Customer Service 185,000 0.73 185,000 0.67
General & Administrative 128,000 0.50 128,000 0.47
Parking & Loading Dock 500,000 1.97 500,000 1.82
Miscellaneous 327,607 1.29 462,200 1.68
Taxes 495,300 1.95 773,932 2.81
Repairs & Maintenance 1,409,540 5.55 1,409,540 5.13
Food Court 261,100 1.03 261,100 0.95
Other 134,620 0.53 In Misc. 0.00
Marketing Fund 759,460 2.99 570,000 2.24
Management Fee 636,148 2.50 548,546 1.99
---------- ---- ---------- -----
Total Expenses 7,168,968 28.22 7,385,450 29.08
Expense Ratio 22.5% 26.9%
NET INCOME
24,638,452 97.00 20,041,938 78.91
Mall GLA (1) 254,000 sq.ft. 275,000 sq.ft.
</TABLE>
(1) Inclusive of food court common area & annex ground floor.
<PAGE>
156
RETAIL INCOME APPROACH
COMPARABLE EXPENSE ANALYSIS
Mall "A" Mall "B" Mall "C"
YE 1995 YE 1995 YE 1996
($ PSF) ($ PSF) ($ PSF)
------- ------- -------
INCOME Minimum Rent 30.73 nav 62.34
Overage Rent 1.80 nav 25.25
Reimbursements 13.07 nav 23.84
Other Income 0.88 nav 0.92
------ -------
Total Income 46.49 nav 112.36
EXPENSES General Operating 12.61 10.05 20.11
Taxes 0.73 1.37 1.95
Repairs & Maintenance In Oper. 0.05 5.51
Advertising & Promotions 0.71 2.45 2.99
Other 0.21 0.45 0.53
------ ----- -----
Total Expenses 14.26 14.36 31.09
Expense Ratio 30.7% nav 27.7%
NET INCOME 32.23 nav 81.27
<PAGE>
157
RETAIL INCOME APPROACH
Capital Expenses
Leasing Commissions: During the lease-up period (Years One and Two), a fixed
leasing commission of $2.0 million will apply, based upon the leasing agreement
with the developer's outside broker. Upon releasing and renewal, brokerage fees
have been projected at 5 percent for new tenants and 2.5 percent for renewals,
with a blended rate of 3.25 percent. The rates used are based on typical
commission rates, with a 70 percent probability of renewing.
Tenant Improvement Allowance: The developer's construction budget allocates a
tenant improvement allowance totaling $8.3 million or approximately $30.00 per
square foot of main floor area (based on 275,000 sf). We have forecast a tenant
allowance of $10.7 million, based on the $40.00 per square foot workletter
reportedly provided to tenants at Forum Shops. Workletter costs are deducted
during the lease-up period in Years One and Two. Thereafter, new tenants leasing
second generation space will receive a $20.00 per square foot workletter. Thus,
based on a 70 percent retention ratio, the weighted average for speculative
renewals is $6.00 per square foot.
The provision of a tenant improvement allowance is a relatively new expense for
regional mall owners. In this instance, we have relied upon a similar project's
workletter costs, as supported by the developer's construction budget, to
project the workletter during the lease-up phase of the project. We have assumed
this amount as reasonable given the likelihood that initial tenants leasing
space in the subject will be offered an inducement to sign leases, whereas,
later arriving tenants will not receive a workletter allowance.
Capital Reserves: Given the new construction status of the subject property, we
have assumed a structural reserve of $0.15 per square foot, increasing annually
at the rate of inflation, which is applied to the building's total physical area
of 929,656 gross square feet, based on architectural figures submitted by the
developer.
PROJECTION PERIOD
While actual holding periods for real estate investments vary depending upon a
variety of factors, we have found that investors generally analyze income
streams before acquisition based on 7-, 10- or 15-year projection periods.
Reasons for selection of a projection period include investor expectations,
lease terms, investment philosophy and type of property, among others. In this
instance, we have projected a ten year holding period with the reversion based
upon the average NOI during Years 11 through 13, which accounts for releasing
risk.
<PAGE>
158
RETAIL INCOME APPROACH
CASH FLOW
Our cash flow estimates for the projection period beginning April 1, 1999 are
presented in the accompanying table.
<PAGE>
159
RETAIL INCOME APPROACH
THE GRAND CANAL SHOPS
CASH FLOW ANALYSIS, AS OF APRIL 1, 1999
($000)
<TABLE>
<CAPTION>
- ------ Yr. 1 Year 1 Year 2 Year 3 Year 4 Year 5
INCOME GLA Avg. Rent 2000 2001 2002 2003 2004
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Minimum Rent: Retail 500,000 $45.02 19,274.4 25,635.8 27,008.6 27,461.7 28,932.3
Restaurant 1,783.0 1,783.0 1,910.0 1,910.0 2,046.0
Food Court 802.0 802.0 859.1 859.1 920.3
Billboard Live! 649.4 649.4 649.4 649.4 649.4
----- ----- ----- ----- -----
Total Minimum Rent 22,508.8 28,870.1 30,427.0 30,880.1 32,547.9
Recoveries: Retail 3,720.7 5,078.9 5,256.7 5,440.7 5,631.1
Restaurant 713.3 738.2 764.1 790.8 818.5
Food Court 235.9 244.1 252.7 261.5 270.7
Billboard Live! 248.8 248.8 248.8 248.8 248.8
----- ----- ----- ----- -----
Total Recoveries 4,918.6 6,310.1 6,522.2 6,741.8 6,969.0
Total Revenue 27,427.4 35,180.2 36,949.3 37,621.9 39,517.0
Less: Vacancy/Credit Loss 0.0 (2,462.6) (2,586.4) (2,633.5) (2,766.2)
--- -------- -------- -------- --------
Effective Gross Income (EGI) 27,427.4 32,717.6 34,362.8 34,998.4 36,750.8
- --------
EXPENSES
- --------
Percent
PSF of EGI
----- ------
Cleaning $1.50 2.7% 747.8 934.8 967.5 1,001.3 1,036.4
Mall Management Staff $0.74 1.3% 369.0 461.3 477.4 494.1 511.4
Insurance $0.35 0.6% 175.0 218.8 226.4 234.3 242.5
Security $1.32 2.4% 660.0 825.0 853.9 883.8 914.7
Utilities $1.19 2.2% 595.3 919.6 951.8 985.1 1,019.5
Customer Service $0.37 0.7% 185.0 231.3 239.3 247.7 256.4
General & Administrative $0.26 0.5% 128.0 160.0 165.6 171.4 177.4
Parking / Loading Dock $1.00 1.8% 500.0 625.0 646.9 669.5 692.9
Miscellaneous & Other $0.92 1.7% 462.2 577.8 598.0 618.9 640.6
Taxes $1.55 2.8% 773.9 1,195.4 1,237.3 1,280.6 1,325.4
Repairs & Maintenance $2.82 5.1% 1,409.5 1,761.9 1,823.6 1,887.4 1,953.5
Food Court CAM $0.52 1.0% 261.1 326.4 337.8 349.6 361.9
Marketing Fund $1.14 2.1% 570.0 425.4 440.3 455.7 471.6
Management Fee $1.10 2.0% 548.5 654.4 687.3 699.8 735.0
----- --- ----- ----- ----- ----- -----
Total Operating Expenses $14.77 26.9% 7,385.5 9,316.8 9,652.9 9,979.2 10,339.2
- ---------------------
NET OPERATING INCOME $40.08 73.1% 20,041.9 23,400.8 24,709.9 25,009.2 26,411.6
- ---------------------
Tenant Improvements $17.34 31.6% 8,669.7 2,043.5 0.0 0.0 0.0
Leasing Commissions $3.40 6.2% 1,699.9 400.7 0.0 0.0 0.0
Capital Reserves $0.28 0.5% 139.4 144.3 149.4 154.6 160.0
- ---------
CASH FLOW $19.07 34.8% 9,532.9 20,812.2 24,560.6 24,854.6 26,251.6
- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
REVERSION Cap Rate: 10.00% Reversion: $296,267.0 GENERAL Revenue Growth: 3.50%
CALCULATION Sales Cost: 1.00% Less Sales Cost: (2,962.7) ASSUMPTIONS Expense Growth: 3.50%
---------- Tax Growth: 3.50%
Net Value: $293,304.3
<CAPTION>
- ------ Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13
INCOME 2005 2006 2007 2008 2009 2010 2011 2012
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum Rent: Retail 29,417.6 30,992.9 31,512.9 33,200.4 33,757.4 33,299.4 36,286.3 38,304.1
Restaurant 2,046.0 2,191.7 2,191.7 2,347.8 2,347.8 2,305.5 2,595.7 2,686.6
Food Court 920.3 985.8 985.8 1,056.1 1,056.1 1,037.0 1,167.6 1,208.4
Billboard Live! 649.4 649.4 649.4 649.4 649.4 649.4 649.4 649.4
----- ----- ----- ----- ----- ----- ----- -----
Total Minimum Rent 33,033.3 34,819.9 35,339.8 37,253.7 37,810.7 37,291.3 40,699.0 42,848.5
Recoveries: Retail 5,828.2 6,032.2 6,243.3 6,461.8 6,688.0 6,484.7 7,020.0 7,415.0
Restaurant 847.2 876.8 907.5 939.3 972.1 922.3 1,041.4 1,077.8
Food Court 280.1 290.0 300.1 310.6 321.5 277.4 313.2 324.1
Billboard Live! 248.8 248.8 257.5 266.5 275.8 285.5 295.5 305.8
----- ----- ----- ----- ---- ----- ----- -----
Total Recoveries 7,204.2 7,447.7 7,708.4 7,978.1 8,257.4 7,969.8 8,670.0 9,122.8
Total Revenue 40,237.5 42,267.6 43,048.2 45,231.9 46,068.1 45,261.1 49,369.0 51,971.4
Less: Vacancy/Credit Loss (2,816.7) (2,958.7) (3,013.4) (3,166.2) (3,224.8) (3,168.3) (3,455.8) (3,638.0)
-------- -------- -------- -------- -------- -------- -------- --------
Effective Gross Income (EGI) 37,420.9 39,308.9 40,034.8 42,065.6 42,843.3 42,092.8 45,913.1 48,333.3
- --------
EXPENSES
- --------
Cleaning 1,072.6 1,110.2 1,149.0 1,189.3 1,230.9 1,274.0 1,318.6 1,364.7
Mall Management Staff 529.3 547.8 567.0 586.8 607.4 628.6 650.6 673.4
Insurance 251.0 259.8 268.9 278.3 288.1 298.1 308.6 319.4
Security 946.7 979.8 1,014.1 1,049.6 1,086.4 1,124.4 1,163.7 1,204.5
Utilities 1,055.2 1,092.2 1,130.4 1,170.0 1,210.9 1,174.3 1,276.5 1,342.5
Customer Service 265.4 274.7 284.3 294.2 304.5 315.2 326.2 337.6
General & Administrative 183.6 190.0 196.7 203.6 210.7 218.1 225.7 233.6
Parking / Loading Dock 717.2 742.3 768.3 795.2 823.0 851.8 881.6 912.5
Miscellaneous & Other 663.0 686.2 710.2 735.1 760.8 787.4 815.0 843.5
Taxes 1,371.8 1,419.8 1,469.5 1,520.9 1,574.2 1,526.5 1,659.5 1,745.3
Repairs & Maintenance 2,021.9 2,092.6 2,165.9 2,241.7 2,320.1 2,401.3 2,485.4 2,572.4
Food Court CAM 374.5 387.6 401.2 415.2 429.8 444.8 460.4 476.5
Marketing Fund 488.1 505.2 522.9 541.2 560.1 579.7 600.0 621.0
Management Fee 748.4 786.2 800.7 841.3 856.9 841.9 918.3 966.7
----- ----- ----- ----- ----- ----- ----- -----
Total Operating Expenses 10,688.8 11,074.4 11,449.0 11,862.4 12,263.6 12,466.1 13,090.1 13,613.6
- ---------------------
NET OPERATING INCOME 26,732.1 28,234.4 28,585.8 30,203.3 30,579.7 29,626.7 32,823.1 34,719.8
- ---------------------
Tenant Improvements 0.0 0.0 0.0 0.0 0.0 3,141.0 819.5 0.0
Leasing Commissions 0.0 0.0 0.0 0.0 0.0 11,756.4 3,421.3 0.0
Capital Reserves 165.6 171.4 177.4 183.6 190.1 196.7 203.6 210.7
- ---------
CASH FLOW 26,566.5 28,063.0 28,408.4 30,019.7 30,389.6 14,532.6 28,378.7 34,509.1
- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
REVERSION Cap Rate: 10.00% Reversion: $296,267.0 GENERAL Revenue Growth: 3.50%
CALCULATION Sales Cost: 1.00% Less Sales Cost: (2,962.7) ASSUMPTIONS Expense Growth: 3.50%
---------- Tax Growth: 3.50%
Net Value: $293,304.3
</TABLE>
<PAGE>
160
RETAIL INCOME APPROACH
DISCOUNTED CASH FLOW ANALYSIS
Once the income stream over the projection period is determined, the next step
is to discount the periodic cash flow and the reversion at the end of the
holding period to an indicated value as of the valuation date. The following
definitions and assumptions were employed in our analysis.
Net Operating Income: Net income remaining after all
expenses but before capital items; i.e., tenant
improvement costs, leasing commissions, and capital
expenditures.
Cash Flow: Income available after all capital items, including
reserves, leasing commissions and tenant
improvements, if applicable.
Overall Rate: A rate which reflects the relationship of the first
year's net income to total value, derived by dividing
the net income by the indicated value.
Discount Rate: A rate of return used to estimate the present
value of future cash flows including the reversion (less
sales proceeds) of the property at the end of the
holding period. The discount rate is alternately called
an Internal Rate of Return.
Terminal
Capitalization
Rate: An overall rate applied to the projected net operating
income at the end of the holding period to determine the
amount of the reversion. A disposition fee is usually
deducted from the reversion.
Holding Period: A holding period is the term of ownership of an
investment, also referred to as the projection period
for the purposes of analysis and valuation.
Rate Selection
The selection of appropriate Discount Rates and Terminal Capitalization Rates
for use in arriving at an estimate of value is a judgmental process. Regional
malls and specialty retail centers throughout the country have an international
market appeal. Competition with many other investment vehicles has an influence
on rates of return required by investors. The discount rate derived by analyzing
competitive money market rates of return forms some basis upon which to predict
a rate of return. Rates of return of long-term treasury bonds and corporate
industrial bonds are compared to the assumed holding period of the subject
property.
For real estate investments, rates may be influenced by risk, degree of
liquidity, burden of management, tax benefits, and future appreciation or
depreciation. Adjustments must be made to the safe rates
<PAGE>
161
RETAIL INCOME APPROACH
(government bonds, etc.) to compensate for these factors. Consequently, yields
required for real estate are almost always higher than those for non-real estate
investments.
Investment criteria for the national regional mall market are analyzed in the
following table. Various investors were interviewed by Peter F. Korpacz and
Associates, Inc. The criteria was current as of the Second Quarter 1997.
Summary of Investor Criteria - National Regional Mall Market
Second Quarter 1997
Key Indicators Current Quarter Last Quarter Year Ago
- -------------- --------------- ------------ --------
Discount Rate (IRR):
Range 10.50% - 14.00% 10.00% - 14.00% 10.00% - 14.00%
Average 11.75% 11.69% 11.50%
Overall Cap. Rate:
Range 7.00% - 11.00% 7.00% - 11.00% 6.25% - 11.00%
Average 8.57% 8.57% 8.17%
Rent Growth Rate:
Range 0.00% - 4.00% 0.00% - 4.00% 0.00% - 4.00%
Average 2.86% 2.64% 2.64%
Expense Growth Rate:
Range 3.00% - 4.00% 3.00% - 4.00% 3.00% - 4.00%
Average 3.75% 3.78% 3.89%
Residual Cap. Rate:
Range 7.50% - 11.00% 7.50% - 11.00% 7.00% - 11.00%
Average 8.78% 8.76% 8.56%
As indicated in the preceding table, Internal Rates of Return for the nationwide
regional mall market range from 10.50 to 14.00 percent, with an average of 11.75
percent. Initial capitalization rates range from 7.00 to 11.00 percent, with an
average of 8.57 percent. Residual capitalization rates show a range of 7.50 to
11.00 percent, with an average of 8.78 percent, which is 0.21 percentage points
above the average going-in rate.
<PAGE>
162
RETAIL INCOME APPROACH
On average, investor yield requirements for regional malls have increased 25
basis points over the last twelve months, an indication of the general
perception that the retail market continues to cause investors concern, with the
primary focus that of sluggish retail sales and the financial instability of
tenants.
Rental growth rates selected by the investors in the Korpacz survey range from
0.0 to 4.0 percent, with an average of 2.86 percent. Expense growth rates are
expected to outpace revenue rates over the near-term; a range of 3.0 to 4.0
percent, and an average of 3.75 percent, is evidenced.
In addition to the investor survey, we have reviewed recent transfers of
regional shopping centers in order to examine rates and other investment
parameters from the market. The table which follows summarizes the data:
<PAGE>
163
RETAIL INCOME APPROACH
Indication of Investment Parameters - Shopping Center Transactions
Price Price to Sales Sale No. of Anchors
No. Location PSF IRR OAR Ratio (1) Date (No. in Sale)
- --- -------- --- --- --- ----------- ---- -------------
1. Texas $469 11.25% 6.5% 1.16 1/97 Five (None)
2. Florida $262 12.00% 8.0% 0.94 12/96 Four (None)
3. Minnesota $248 12.50% 8.0% 1.06 12/96 Four(1)
4. Michigan $112 18.50% 12.5% 0.49 12/96 n/a (None)
5. Tennessee $42 22.10% 15.4% 0.18 12/96 n/a (All)
6. Illinois $421 n/a 7.9% 1.10 12/96 n/a (None)
7. California $126 20.10% 10.4% 0.44 12/96 n/a (None)
8. Oklahoma(2) n/a 13.00% 11.0% n/a 12/96 Two(2);
11.50% 10.3% n/a (None)
9. California $123 15.20% 9.1% 0.47 11/96 n/a(2)
10. Montana $109 15.80% 9.9% 0.47 11/96 n/a(2)
11. Southeast U.S. $486 10.70% 6.1% 1.13 11/96 n/a (None)
12. Illinois $274 n/a 8.9% 0.86 11/96 n/a (None)
13. Tennessee $80 n/a 9.9% 0.33 11/96 n/a (None)
14. Texas $183 n/a 9.0% 0.80 11/96 n/a (None)
15. Georgia $247 n/a 9.4% 0.79 8/96 Four (None)
16. California $234 n/a 10.3% 0.69 6/96 n/a (None)
17. Virginia $147 12.00% 9.3% 0.54 5/96 n/a (None)
18. Connecticut n/a n/a 6.8% n/a 3/96 n/a (None)
19. California $355 n/a 7.6% 1.18 3/96 n/a(1)
20. Pennsylvania $75 10.50% 13.0% 0.36 3/96 n/a
21. New York $263 11.00% 7.7% 0.66 12/95 Four(2)
22. New York $690 n/a n/a 1.09 12/95 n/a (None)
23. Texas $327 11.40% 6.6% 1.01 9/95 n/a (None)
(1) Ratio of purchase price psf to mall sales psf.
<PAGE>
164
RETAIL INCOME APPROACH
The sales presented indicate discount rates (IRR) ranging from 10.5 to 22.1
percent, and average of 13.84 percent. Initial capitalization rates range from
6.11 to 15.4 percent, with an average of 9.29 percent. Overall rates varied
considerably due to a number of factors. Most often, the inclusion or exclusion
of anchor department stores in the sale, as well as with expansion opportunities
of a center, are the dominant issues influencing the center's derived rates.
Lower rates often reflect an investor's expectation that development profit from
a potential increase in cash flow can be earned if expansion of the center is
possible.
Yield requirements for all types of investment-grade properties throughout the
U.S. have generally decreased slightly over the past year. Competition for the
most sought after properties appears steady due to a variety of factors,
including the scarcity of good quality investment real estate, the desire for an
adequate hedge against inflation, and the quest for a safe haven for investment
capital. Arising out of concerns over troubled real estate markets and
overbuilding, investor cash flow projections today tend to be more "realistic",
incorporating assumptions and probabilities that conform to actual market
experience and predicated upon moderate future expectations.
Despite the fact that regional malls remain the top property preference for
investors, yield rates for these properties have remained stagnant over the
recent past. Demand for these properties remains strong; however, owners have
been reluctant to place their best properties on the market. The best malls,
that is Class A malls located in or adjacent to the largest markets, still trade
at the low end of the range. Grade B malls trade in the middle to upper range of
the yield and cap rate indicators. Although the subject mall is considered an
investment-grade property of Class A quality, its future occupancy and eventual
performance are highly speculative at this juncture.
These factors increase the risk in the subject mall to a potential acquirer. The
Korpacz survey indicates equity IRRs (discount rates) ranging from 15.00 to
14.00 percent with an average of 11.75 percent, as of 1997's second quarter.
Given the speculative nature of developing and leasing the subject mall, it is
reasonable to consider a rate well above the average. In our opinion, a discount
rate of 13.00 percent is reasonable and adequately supported.
Maintaining consistency with the discount rate selection, the residual
capitalization rate should be above the indicated mid-point of both the sales
cited in the transactions table, as well as the Korpacz survey. Thus, we have
chosen 10.00 percent as our residual capitalization rate.
<PAGE>
165
RETAIL INCOME APPROACH
INCOME APPROACH CONCLUSION
Value Upon Completion
Based on the preceding rates and assumptions, as indicated on the accompanying
matrix (based on varying terminal capitalization and discount rates), a market
value indication of $220,000,000 (rounded), is derived for the subject mall via
the DCF method and indicative of a derived overall rate which averages 10.87
percent during the first five years of the holding period. The indicated value
represents a price to sales ratio of 0.73 percent ($440 psf / $602 psf), which
is in line with the transaction data cited.
<PAGE>
166
RETAIL INCOME APPROACH
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Discounted Cash Flow Matrix Property Name: The Grand Canal Shops Equity Value: $220,032,024
Value Upon Completion Net Rentable Area: 500,000 Equity Value Per SF (Rd): $440.00
Avg. Annual NOI Growth: 4.92%
Capitalization Rate
(Reversion): 10.00% Avg. Annual CF Growth: 10.47%
Discount Rate: 13.00% % of Reversion to Value: 39.67%
Sales Commission: 1.00% Annual Growth PV to Reversion: 3.02%
</TABLE>
Capitalization Rates
<TABLE>
<CAPTION>
9.00% 9.25% 9.50% 9.75% 10.00%
<S> <C> <C> <C> <C> <C> <C>
11.50% $254,604,503 $251,362,217 $248,290,578 $245,376,459 $242,608,046
11.75% $250,370,974 $247,200,497 $244,196,887 $241,347,309 $238,640,209
12.00% $246,228,706 $243,128,292 $240,191,057 $237,404,450 $234,757,173
12.25% $242,175,433 $239,143,382 $236,270,913 $233,545,750 $230,956,845
12.50% $238,208,953 $235,243,611 $232,434,340 $229,769,134 $227,237,189
Discount 12.75% $234,327,124 $231,426,881 $228,679,282 $226,072,585 $223,596,224
Rates 13.00% $230,527,865 $227,691,151 $225,003,738 $222,454,141 $220,032,024
13.25% $226,809,147 $224,034,435 $221,405,761 $218,911,891 $216,542,714
13.50% $223,169,000 $220,454,803 $217,883,459 $215,443,979 $213,126,472
13.75% $219,605,507 $216,950,376 $214,434,989 $212,048,597 $209,781,524
14.00% $216,116,802 $213,519,326 $211,058,560 $208,723,987 $206,506,143
14.25% $212,701,069 $210,159,874 $207,752,427 $205,468,439 $203,298,650
14.50% $209,356,542 $206,870,290 $204,514,894 $202,280,287 $200,157,411
10.25% 10.50% 10.75% 11.00%
<S> <C> <C> <C> <C> <C>
11.50% $239,974,677 $237,466,707 $235,075,387 $232,792,763
11.75% $236,065,163 $233,612,738 $231,274,379 $229,042,310
12.00% $232,239,032 $229,840,802 $227,554,117 $225,371,373
12.25% $228,494,228 $226,148,879 $223,912,616 $221,778,001
12.50% $224,828,753 $222,535,004 $220,347,942 $218,260,291
Discount 12.75% $221,240,660 $218,997,266 $216,858,216 $214,816,396
Rates 13.00% $217,728,058 $215,533,806 $213,441,612 $211,444,517
13.25% $214,289,107 $212,142,814 $210,096,349 $208,142,905
13.50% $210,922,015 $208,822,531 $206,820,698 $204,909,858
13.75% $207,625,039 $205,571,245 $203,612,976 $201,743,719
14.00% $204,396,486 $202,387,289 $200,471,543 $198,642,876
14.25% $201,234,704 $199,269,042 $197,394,806 $195,605,762
14.50% $198,138,089 $196,214,926 $194,381,212 $192,630,849
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================================================
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
<S> <C> <C> <C> <C> <C> <C> <C>
NOI $20,041,937 $23,400,769 $24,709,935 $25,009,201 $26,411,577 $26,732,101 $28,234,429
Cash Flow $9,532,899 $20,812,237 $24,560,554 $24,854,592 $26,251,557 $26,566,480 $28,063,011
OAR 9.11% 10.64% 11.23% 11.37% 12.00% 12.15% 12.83%
C on C 4.33% 9.46% 11.16% 11.30% 11.93% 12.07% 12.75%
===========================================================================================================================
================================================================================
Yr 8 Yr 9 Yr 10 Yr 11-13
<C> <C> <C> <C>
NOI $28,585,783 $30,203,281 $30,579,651 $32,389,854
Cash Flow $28,408,366 $30,019,654 $30,389,597 $25,806,821
OAR 12.99% 13.73% 13.90% 14.72%
C on C 12.91% 13.64% 13.81% 11.73%
================================================================================
</TABLE>
[Overall Rates Line Graph Omitted] [Cash on Cash Line Graph Omitted]
5 Year Average 10.87% 5 Year Average 9.64%
10 Year Average 11.99% 10 Year Average 11.34%
<PAGE>
167
RETAIL INCOME APPROACH
Value Upon Stabilization
Given the level of occupancy projected, stabilization occurs in the second year
of the holding period. Although only one actual lease has been signed at the
subject to date, this valuation assumes that the property will be aggressively
marketed and managed, and that the leaseable space is offered at market rates.
In light of the range of occupancies in peer properties surveyed for this
assignment, the 93 percent stabilized occupancy projected for the subject is
considered reasonable. Furthermore, in estimating the stabilized value, we have
adjusted our discount and residual cap rates downward by 50 basis points to
reflect the elimination of lease-up risk by Year Two. Thus, value upon
stabilized occupancy, derived by discounting the cash flow for FY2001 through
FY2010, and reversion, at 12.50 and 9.50 percent, respectively, is estimated at
$248,000,000 (rounded). A discounted cash flow and valuation matrix reflecting
our stabilized projections have been placed on the pages which follow.
<PAGE>
168
RETAIL INCOME APPROACH
THE GRAND CANAL SHOPS
CASH FLOW ANALYSIS, AS OF APRIL 1, 2000
($000)
<TABLE>
<CAPTION>
Yr. 1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
INCOME NRA Avg. Rent 2001 2002 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum Rent: Retail 500,000 $58.84 26,095.3 26,533.0 27,953.9 28,422.8 29,944.9 30,447.2
------- ------ -------- -------- -------- -------- -------- --------
Restaurant 1,845.4 1,845.4 1,976.8 1,976.8 2,117.6 2,117.6
Food Court 830.0 830.0 889.2 889.2 952.5 952.5
Billboard Live! 649.4 649.4 649.4 649.4 649.4 649.4
-------- -------- -------- -------- -------- --------
Total Minimum Rent 29,420.1 29,857.8 31,469.2 31,938.2 33,664.4 34,166.7
Recoveries: Retail 5,078.9 5,256.7 5,440.7 5,631.1 5,828.2 6,032.2
Restaurant 738.2 764.1 790.8 818.5 847.2 876.8
Food Court 244.1 252.7 261.5 270.7 280.1 290.0
Billboard Live! 248.8 248.8 248.8 248.8 248.8 248.8
-------- -------- -------- -------- -------- --------
Total Recoveries 6,310.1 6,522.2 6,741.8 6,969.0 7,204.2 7,447.7
Total Revenue 35,730.1 36,380.1 38,211.0 38,907.2 40,868.6 4,614.4
Less: Vacancy/Credit Loss (2,501.1) (2,546.6) (2,674.8) (2,723.5) (2,860.8) (2,913.0)
-------- -------- -------- -------- -------- --------
Effective Gross Income (EGI) 33,229.0 33,833.5 35,536.3 36,183.7 38,007.8 38,701.4
Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
INCOME 2007 2008 2009 2010 2011 2012
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Minimum Rent: Retail 32,O77.7 32,615.8 32,173.4 35,059.2 37,008.8 38,304.1
-------- ---------- -------- -------- -------- --------
Restaurant 2,268.4 2,268.4 2,227.5 2,508.0 2,595.7 2,686.6
Food Court 1,020.3 1,020.3 1,001.9 1,128.1 1,167.6 1,208.4
Billboard Live! 649.4 649.4 649.4 649.4 649.4 649.4
-------- ---------- -------- -------- -------- --------
Total Minimum Rent 36,015.9 36,554.0 36,052.2 39,344.7 41,421.5 42,848.5
Recoveries: Retail 6,243.3 6,461.8 6,265.4 6,782.5 7,164.3 7,415.0
Restaurant 907.5 939.3 891.1 1,006.2 1,041.4 1,077.8
Food Court 300.1 310.6 268.0 302.6 313.2 324.1
Billboard Live! 257.5 266.5 275.8 285.5 295.5 305.8
-------- ---------- -------- -------- -------- --------
Total Recoveries 7,708.4 7,978.1 7,700.3 8,376.8 8,814.3 9,122.8
Total Revenue 43,724.2 44,532.2 43,752.5 47,721.4 50,235.8 51,971.4
Less: Vacancy/Credit Loss (3,060.7) (3,117.3) (3,062.7) (3,340.5) (3,516.5) (3,638.0)
-------- ---------- -------- -------- -------- --------
Effective Gross Income (EGI) 40,663.5 41,414.9 40,689.8 44,380.9 46,719.3 48,333.3
</TABLE>
EXPENSES
<TABLE>
<CAPTION>
Percent
PSF EGI
------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Cleaning $ 1.87 2.8% 934.8 967.5 1,001.3 1,036.4 1,072.6
Mall Management Staff $ 0.92 1.4% 461.3 477.4 494.1 511.4 529.3
Insurance $ 0.44 0.7% 218.8 226.4 234.3 242.5 251.0
Security $ 1.65 2.5% 825.0 853.9 883.8 914.7 946.7
Utilities $ 1.84 2.8% 919.6 951.8 985.1 1,019.5 1,055.2
Customer Service $ 0.46 0.7% 231.3 239.3 247.7 256.4 265.4
General & Administrative $ 0.32 0.5% 160.0 165.6 171.4 177.4 183.6
Parking /Loading Dock $ 1.25 1.9% 625.0 646.9 669.5 692.9 717.2
Miscellaneous & Other $ 1.16 1.7% 577.8 598.0 618.9 640.6 663.0
Taxes $ 2.39 3.6% 1,195.4 1,237.3 1,280.6 1,325.4 1,371.8
Repairs & Maintenance $ 3.52 5.3% 1,761.9 1,823.6 1,887.4 1,953.5 2,021.9
Food Court CAM $ 0.65 1.0% 326.4 337.8 349.6 361.9 374.5
Marketing Fund $ 0.85 1.3% 425.4 440.3 455.7 471.6 488.1
Management Fee $ 1.33 2.0% 664.6 676.7 710.7 723.7 760.2
------ --- ------- ------- ------- ------- -------
Total Operating Expenses $18.65 28.1% 9,327.0 9,642.3 9,990.1 10,327.9 10,700.5
NET OPERATING INCOME $47.80 71.9% 23,902.0 24,191.2 25,546.1 25,855.8 27,307.3
Tenant Improvements $ 0.00 0.0% 0.0 0.0 0.0 0.0 0.0
Leasing Commissions $ 0.00 0.0% 0.0 0.0 0.0 0.0 0.0
Capital Reserves $ 0.29 0.4% 144.3 149.4 154.6 160.0 165.6
CASH FLOW $47.52 71.5% 23,757.7 24,041.8 25,391.5 25,695.8 27,141.7
Percent
PSF EGI
------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Cleaning 1,110.2 1,149.0 1,189.3 1,230.9 1,274.0 1,318.6 1,364.7
Mall Management Staff 547.8 567.0 586.8 607.4 628.6 650.6 673.4
Insurance 259.8 268.9 278.3 288.1 298.1 308.6 319.4
Security 979.8 1,014.1 1,049.6 1,086.4 1,124.4 1,163.7 1,204.5
Utilities 1,092.2 1,130.4 1,170.0 1,210.9 1,174.3 1,276.5 1,342.5
Customer Service 274.7 284.3 294.2 304.5 315.2 326.2 337.6
General & Administrative 190.0 196.7 203.6 210.7 218.1 225.7 233.6
Parking /Loading Dock 742.3 768.3 795.2 823.0 85l.8 881.6 912.5
Miscellaneous & Other 686.2 710.2 735.1 760.8 787.4 815.0 843.5
Taxes 1,419.8 1,469.5 1,520.9 1,574.2 1,526.5 1,659.5 1,745.3
Repairs & Maintenance 2,092.6 2,165.9 2,241.7 2,320.1 2,401.3 2,485.4 2,572.4
Food Court CAM 387.6 401.2 415.2 429.8 444.8 460.4 476.5
Marketing Fund 505.2 522.9 541.2 560.1 579.7 600.0 621.0
Management Fee 774.0 813.3 828.3 813.8 887.6 934.4 966.7
------- ------- ------- ------- ------- ------- ------
Total Operating Expenses 11,062.3 11,461.6 11,849.3 12,220.6 12,511.9 13,106.2 13,613.6
NET OPERATING INCOME 27,639.1 29,201.9 29,565.5 28,469.2 31,869.0 33,613.1 34,719.8
Tenant Improvements 0.0 0.0 0.0 3,034.8 791.8 0.0 0.0
Leasing Commissions 0.0 0.0 0.0 11,358.8 3,305.6 0.0 0.0
Capital Reserves 171.4 177.4 183.6 190.1 196.7 203.6 210.7
CASH FLOW 27,467.7 29,024.5 29,381.9 13,885.6 27,575.0 33,409.5 34,509.1
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
REVERSION Cap. Rate: 9.50% Reversion: $353,822.1 GENERAL Revenue Growth: 3.50%
CALCULATION Sales Cost: 1.00% Less Sales Cost: (3,538.2) ASSUMPTIONS Expense Growth: 3.50%
---------- Tax Growth: 3.50%
Net Value: $350.283.9
</TABLE>
<PAGE>
169
RETAIL INCOME APPROACH
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Discounted Cash Flow Matrix Property Name: The Grand Canal Shops Equity Value: $247,948,001
Stabilized Value Net Rentable Area: 500,000 Equity Value Per SF (Rd): $496.00
Avg. Annual NOI Growth: 3.47%
Capitalization Rate (Reversion): 9.50% Avg. Annual CF Growth: 3.47%
Discount Rate: 12.50% % of Reversion to Value: 43.94%
Sales Commission: 1.00% Annual Growth PV to Reversion: 3.62%
</TABLE>
Capitalization Rates
<TABLE>
<CAPTION>
8.50% 8.75% 9.00% 9.25% 9.50%
<S> <C> <C> <C> <C> <C> <C>
11.00% $286,948,745 $283,009,372 $279,288,854 $275,769,444 $272,435,267
11.25% $282,321,537 $278,469,800 $274,832,048 $271,390,931 $268,130,926
11.50% $277,794,459 $274,028,217 $270,471,211 $267,106,476 $263,918,832
11.75% $273,365,008 $269,682,180 $266,203,952 $262,913,738 $259,796,692
12.00% $269,030,752 $265,429,308 $262,027,945 $258,810,439 $255,762,276
Discount 12.25% $264,789,324 $261,267,291 $257,940,927 $254,794,367 $251,813,415
Rate 12.50% $260,638,423 $257,193,880 $253,940,700 $250,863,368 $247,948,001
12.75% $256,575,812 $253,206,887 $250,025,124 $247,015,349 $244,163,983
13.00% $252,599,314 $249,304,185 $246,192,119 $243,248,272 $240,459,365
13.25% $248,706,813 $245,483,706 $242,439,660 $239,560,158 $236,832,208
13.50% $244,896,250 $241,743,437 $238,765,780 $235,949,078 $233,280,623
13.75% $241,165,622 $238,081,420 $235,168,563 $232,413,157 $229,802,773
14.00% $237,512,980 $234,495,751 $231,646,145 $228,950,573 $226,396,872
9.75% 10.00% 10.25% 10.50%
<S> <C> <C> <C> <C> <C>
11.00% $269,272,073 $266,267,039 $263,408,592 $260,686,261
11.25% $265,038,101 $262,099,917 $259,305,059 $256,643,289
11.50% $260,894,657 $258,021,691 $255,288,869 $252,686,182
11.75% $256,839,495 $254,030,157 $251,357,861 $248,812,817
12.00% $252,870,428 $250,123,173 $247,509,930 $245,021,128
Discount 12.25% $248,985,332 $246,298,654 $243,743,033 $241,309,108
Rate 12.50% $245,182,140 $242,554,572 $240,055,178 $237,674,802
12.75% $241,458,841 $238,888,955 $236,444,431 $134,116,312
13.00% $237,813,479 $235,299,887 $232,908,909 $230,631,788
13.25% $234,244,153 $231,785,501 $229,446,783 $227,219,432
13.50% $230,749,012 $228,343,981 $226,056,269 $223,877,496
13.75% $227,326,255 $224,973,562 $222,735,635 $220,604,276
14.00% $223,974,130 $221,672,526 $219,483,195 $217,398,118
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6
<S> <C> <C> <C> <C> <C> <C>
NOI $23,902,029 $24,191,171 $25,546,133 $25,855,843 $27,307,324 $27,639,130
Cash Flow $23,757,700 $24,041,790 $25,391,524 $25,695,823 $27,141,703 $27,467,712
OAR 9.64% 9.76% 10.30% 10.43% 11.01% 11.15%
C on C 9.58% 9.70% 10.24% 10.36% 10.95% 11.08%
=============================================================================================================
=================================================================================================
Yr 7 Yr 8 Yr 9 Yr 10 Yr 11
<S> <C> <C> <C> <C> <C>
NOI $29,201,903 $29,565,542 $28,469,247 $31,869,022 $33,613,104
Cash Flow $29,024,486 $29,381,915 $13,885,581 $27,574,982 $33,409,514
OAR 11.78% 11.92% 11.48% 12.85% 13.56%
C on C 11.71% 11.85% 5.60% 11.12% 13.47%
=================================================================================================
</TABLE>
[Overall Rates Line Graph Omitted] [Cash on Cash Line Graph Omitted]
5 Year Average 10.23%
10 Year Average 11.03%
<PAGE>
170
VALUATION OF DEVELOPMENT RIGHTS
VALUE OF THE RETAIL MALL'S DEVELOPMENT RIGHTS
The structural configuration and specific design of the retail mall, as
proposed, is relatively unique, particularly in the Las Vegas market. We are
referring here to a combination of the physical placement of the retail mall
atop the casino podium and also within an envelope of ownership that is separate
from, though closely related to, the remaining functional components; i.e., the
casino hotel and the Sands expo center. Typically, a retail project similar in
scope to the subject mall most likely would be erected on its own parcel of
land. Furthermore, the fee simple owner of the land could then either sell or
lease the site for development, or develop the project and hold or sell the
leased fee interest.
In this case, however, the creation of a separate ownership interest in the
retail portion of the project (i.e., the retail condominium interest), gives the
owner of the development rights (i.e., the owner of the right to develop the
project, as proposed), an interest in any value remaining after development and
leasing costs are expended, and the project is completed and operational. In
essence, the owner of the development rights possesses an interest similar to a
leasehold in the land, if the retail mall were being developed on leased land,
or a leasehold under terms of a master lease.
In deriving a value estimate for these rights, we have utilized the developer's
cost budget for the retail mall, adjusted for additional costs related to
insufficient parking spaces, plus entrepreneurial profit, to estimate total
development costs, which are then deducted from the value upon completion
estimate. A table summarizing our value estimate is provided on the following
page.
The $33 million value estimate derived represents the right to develop the
retail mall in the Venetian mega-resort.
<PAGE>
171
VALUATION OF DEVELOPMENT RIGHTS
VALUE OF THE RETAIL MALL'S DEVELOPMENT RIGHTS
DEVELOPMENT COSTS - RETAIL MALL %
($) of Total
---------- --------
Total Construction ................................. 78,921,170 56.38%
Additional CM Costs................................. 416,972 0.30%
Therming ................................. 19,379,321 13.85%
FF&E ................................. 187,508 0.13%
Signage ................................. 107,965 0.08%
Design ................................. 4,769,167 3.41%
Permits & Fees ................................. 1,687,228 1.21%
Pre-Opening ................................. 1,573,000 1.12%
Soft Costs ................................. 12,453,906 8.90%
Consumer Experience................................. 3,000,000 2.14%
Construc. Admin. ................................. 1,264,116 0.90%
Contingency ................................. 4,230,560 3.02%
Financing ................................. 11,980,000 8.56%
---------- ------
Subtotal $139,970,913 100.00%
Plus: Additional Parking 4,480,000
Central Plant 11,760,000
Developer's Profit at 20.00% 31,242,183
------------
TOTAL DEVELOPMENT COST $187,453,096
VALUE UPON COMPLETION $220,000,000
INDICATED VALUE OF DEVELOPMENT RIGHTS $32,546,904
(Rd) $33,000,000
<PAGE>
ADDENDA
<PAGE>
Engagement Letter
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
June 30, 1997
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, NY 10004
Goldman Sachs Mortgage Company
85 Broad Street
New York, NY 10004
GMAC Commercial Mortgage Corporation
100 S. Wacker
Suite 400
Chicago, IL 60606
Re: Venetian Casino Resort Project Appraisal
Dear Sirs:
Thank you for the opportunity to respond to your request for a proposal to
appraise the Phase I retail, casino and hotel components of the Venetian Casino
Resort project. We are pleased to submit the following proposal to provide you
with a market value appraisal of the captioned real estate.
For 50 years, Landauer Real Estate Counselors has been committed to providing
its clients with sound, independent advice and opinions based on solid
information and insightful research. Landauer has been the industry leader in
analyzing and interpreting the real estate market since 1946 when James D.
Landauer counseled our first client, CBS, Inc. Today, Landauer annually provides
a wide range of real estate services to clients worldwide pertaining to over $80
billion of real estate assets.
We understand that the appraisal will be used for underwriting purposes. The
proposed project is to include a 3,037 key hotel, an approximately 100,000
square foot casino hotel, one showroom and 415,000 square feet (net) of retail
space. The retail centre will constitute a condominium unit within the proposed
Venetian Casino Resort. The condominiumized interest includes portions of three
floors.
It is our understanding that we are to appraise the fee simple interest in the
entire project and separately, the retail centre.
This letter presents the objective and scope of our work, our relevant appraisal
experience, client references, appraisal methodology, as well as the time
requirements and fees for our services.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Goldman Sachs Credit Partners L.P.
Goldman Sachs Mortgage Company
GMAC Commercial Mortgage Corporation
June 30, 1997
Page 2
The assignment will be staffed by two very senior members of Landauer's Los
Angeles staff. Complete summaries of the qualifications of Vincent Vassallo,
MAI, and Karen L. Johnson, MAI, both Managing Directors, are attached. In
addition to having appraised the Sands Expo Center and the land underlying the
Venetian project, Ms. Johnson prepared an investment value appraisal of the
Bally's assets in Las Vegas as part of the acquisition of Bally's by Hilton and
a market value appraisal of the land underlying the Wet n'Wild water park on the
Las Vegas 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. Specifically, Mr. Vassallo has
appraised the Aladdin Hotel and Casino, and Fashion Showcase Mall in Las Vegas.
He is very familiar with Clark County's growth and development, having appraised
the land for planned residential communities such as Seven Hills, Green Valley,
Sun Ridge, and Mountain Spa. Outside of Clark County, Mr. Vassallo has appraised
numerous retail properties in Manhattan Beach, Redondo Beach, Sherman Oaks,
Rancho Palos Verde and Marina Del Rey. Mr. Vassallo and Ms. Johnson have
extensive resources to draw from within the Landauer organization. Two members
of Landauer's staff edited the Urban Land Institute text titled "Shopping
Centers and Other Retail Properties."
Our valuation will be presented in a self contained narrative format, in
compliance with current FIRREA guidelines, containing a complete description of
the property, along with pertinent exhibits and photographs. In the report, the
economic development of Las Vegas will be discussed in depth along with recent
trends in the gaming, convention, lodging and retail (including, without
limitation, shopping malls) industries. The assignment will comprise the entire
Phase I project consisting of the hotel, retail, and casino components as noted;
the engagement will also include a valuation of the retail centre alone.
Specific to the retail component, recent specialty retail lease comparables will
be listed, thoroughly analyzed and compared to the subject project. The most
recent cost estimates for the retail component, including the allocation for
common area costs, will be reviewed. If meaningful comparables can be
identified, cost estimates for other, similar retail developments will be
utilized as a check on value conclusions. If retail sales comparables can be
found, we will perform a Sales Comparison Approach along with any other
applicable alternative method of valuation. An Income Approach will be performed
utilizing data from the rental comparables and local expense data. For this
purpose, we expect to review and consider the projections for the project
provided by you, it being understood, however, that we will make such
adjustments to the projections for purposes of our appraisal, as we deem
appropriate, based upon our independent research.
All valuation work conducted by Landauer Associates is prepared in conformity
with and is subject to the requirements of the Code of Professional Ethics and
Standards of Professional Conduct of the Appraisal Institute, including the
Uniform Standards of Professional Appraisal Practice. The attached Certification
and Assumptions and Limiting Conditions will be included in our report. This
proposal and the report will be contingent upon your acceptance of them.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Goldman Sachs Credit Partners L.P.
Goldman Sachs Mortgage Company
GMAC Commercial Mortgage Corporation
June 30, 1997
Page 3
We will furnish you with five copies of our report within approximately four
weeks of your authorization to proceed and the receipt of retainer.
Our fee for an appraisal of the Phase I project is $37,000. In the event that
the project or deal structure with regard to common area allocations and
maintenance expenses changes materially during the conduct of this appraisal,
it will be necessary for us to revise our estimate of value. The fees for
professional time incurred in such an iterative process are not included in
this quotation. This and any additional analysis requested by the client
subsequent to that which is described in this contract, will be billed at our
prevailing hourly rates, which are set forth below. Preparation for court
testimony, depositions, or other proceedings relevant to our value opinion,
and actual time devoted to the proceeding, will be billed at our prevailing
hourly rates plus reimbursement of reasonable out-of-pocket expenses.
HOURLY FEE SCHEDULE
Senior Managing Director $250
Managing Director $200
Director $110
Analyst $ 60
Reasonable travel costs and incidental out-of-pocket expenses are
reimbursable in addition to our fee. We estimate that these will not exceed
$2,000.
We require a retainer of $12,000 prior to the start of the assignment. With
the issuance of the draft document, an additional $12,000, plus the
out-of-pocket expenses to date will be billed. Upon the delivery of the final
document, the remaining fees will be billed.
If the assignment is terminated prior to completion of the assignment, we
will bill only for the actual time and reasonable out-of-pocket expenses
incurred to the point of termination.
Please indicate your acceptance of this proposal, and provide authorization
to proceed by signing the enclosed copy of this letter and returning it to us
with the required retainer. Upon receipt of your authorization we will
schedule the necessary personnel to begin the assignment. We will keep you
informed of any circumstances which may effect our estimated delivery date.
It is our understanding that the appraisal will be used, and we consent to
its use, in connection with one or more financings of the Venetian Casino
Report and/or the retail centre (as well as the sale of any such financings
in whole or in part, or participations or securities representing interests
in any such financings) and that they will be relied upon, and we consent to
reliance thereon, by Goldman Sachs & Co., Goldman Sachs Mortgage Company,
Goldman Sachs Credit Partners L.P., GMAC Commercial Mortgage Corporation or
any of their affiliates; initial and subsequent holders from time to time of
any debt and/or
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Goldman Sachs Credit Partners L.P.
Goldman Sachs Mortgage Company
GMAC Commercial Mortgage Corporation
June 30, 1997
Page 4
debt securities secured, directly or indirectly, by the Venetian Casino Report
and/or the retail centre; any indenture trustee, service or other agent acting
on behalf of such holders of such debt and/or debt securities; any rating
agencies; and the institutional provider(s) from time to time of any liquidity
facility or credit support for such financings.
We further understand that offering materials used from time to time in
connection with the offer and sale of any such financings in whole or in part,
participations or securities may contain references to Landauer Associates, Inc.
who prepared the appraisal, subject to our right to approve all such references
prior to publication or use of such materials. We require a reasonable time to
review the offering materials each time our work is referenced and our consent
will not be unreasonably delayed or withheld.
Without limiting the foregoing, it is our intent to allow you to use and reprint
the appraisal for dissemination (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. The attached Assumptions and Limiting Conditions
contain a limitation regarding dissemination of the appraisal. When a client
desires to include or refer to our appraisal, report or opinion ("Opinion") in a
prospectus, registration statement, offering circular, proxy statement or other
similar document ("Offering Material") in connection with an offer to sell,
exchange or purchase securities or similar interest, or in connection with a
merger, liquidation, or other corporate transaction, we require, as a condition
of any such use, that we be permitted to review and approve any such reference,
(it being understood that the appraisal report may be included in its entirety
in the Offering Material without our consent). We require a reasonable time to
review such references and our consent and approval will not be unreasonably
delayed or withheld. If the Opinion is referred to or included in a registration
statement filed with the Securities and Exchange Commission (the "SEC"), we
agree to provide executed consents to be filed as an exhibit to the registration
statement.
Landauer's fee is not contingent upon the occurrence of any outside event or
third party act, and is due and payable upon the rendering of the services
agreed to herein, including the delivery of the completed report in form and
substance reasonably acceptable to you. If written comments are not received
within 30 days of the delivery, report is deemed acceptable to the client.
Payments not received within 30 days of our invoice will be considered
delinquent.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Goldman Sachs Credit Partners L.P.
Goldman Sachs Mortgage Company
GMAC Commercial Mortgage Corporation
June 30, 1997
Page 5
We appreciate this opportunity to be of service to you on this assignment. If
you have additional questions, please do not hesitate to call.
Sincerely,
LANDAUER ASSOCIATES, INC.
/s/ Rodney A. Wycoff /s/ Karen L. Johnson
- ----------------------------- ----------------------------
Rodney A. Wycoff, CRE, MAI Karen L. Johnson, MAI
Senior Managing Director Managing Director
Agreed and accepted for Goldman Sachs Credit Partners L.P.
/s/ [ILLEGIBLE]
- ----------------------------- ----------------------------
By: Signature Date
- ----------------------------- ----------------------------
Name (Type or print) Title
----------------------------
Phone No.
Agreed and accepted for Goldman Sachs Mortgage Company
/s/ Marc K. Furstein 7/24/97
- ----------------------------- ----------------------------
By: Signature Date
Marc K. Furstein
Vice President
- ----------------------------- ----------------------------
Name (Type or print) Title
----------------------------
Phone No.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Goldman Sachs Credit Partners L.P.
Goldman Sachs Mortgage Company
GMAC Commercial Mortgage Corporation
June 30, 1997
Page 6
Agreed and accepted for GMAC Mortgage Corporation
/s/ Vacys Garbonkus
- ----------------------------- ----------------------------
By: Signature Date
- ----------------------------- ----------------------------
Name (Type or print) Title
----------------------------
Phone No.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
LIMITING CONDITIONS
This report is made expressly subject to the conditions and
stipulations following:
1. Date and definitions of value, together with other definitions and
assumptions on which our analyses are based, are set forth in appropriate
sections of this report. These are to be considered part of these limiting
conditions as if included here in their entirety.
2. The conclusions stated herein, including values which are expressed in
terms of the U. S. Dollar, apply only as of the date of value and are
based on prevailing physical and economic conditions and available
information at that time. 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. No representation is made as to the effect of subsequent events
which may significantly alter the conclusions reported herein.
3. Title to the property is assumed to be marketable. The property is
considered as being under responsible ownership and free of all
encumbrances except as specifically discussed herein.
4. Information reported herein has been obtained from reliable sources and,
where feasible, has been verified. The appraisers reserve the right to
make appropriate revisions in the event of discovery of additional or more
accurate data.
5. No responsibility is accepted by Landauer for considerations requiring
expertise in other fields. Included in this category are ownership, legal
description and other legal matters, survey of property boundaries,
geologic considerations including soils and seismic stability, civil,
structural or other engineering, and identification of hazardous or toxic
substances. Data furnished or obtained from public sources relative to
these matters has been adopted and is assumed to be correct.
6. Except where specifically noted, we have no cause to expect the existence
of undisclosed easements, encroachments or defects in title, access,
geology (the California coastal region is prone to earthquakes),
structural integrity or mechanical systems. Any need for further study
indicated by our investigation has been disclosed to the client and/or
noted in the report; results of any such studies furnished have been
accepted and the source identified. Maps and other graphic materials
reproduced herein are for illustrative purposes only, and are not to be
relied on for factual information.
7. The appraisers have inspected the subject property with due diligence
expected of a professional real estate appraiser. The appraisers are not
qualified to detect hazardous waste and/or toxic materials. Any comment by
the appraisers that might suggest the possibility of the presence of such
substances should not be taken as confirmation of the presence of
hazardous waste and/or toxic material. Such determination would require
investigation by a qualified expert in the field of environmental
assessment.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
The presence of substances such as asbestos, urea-formaldehyde foam
insulation or other potentially hazardous material may affect the value of
the property. The appraisers' value estimate is predicated on the
assumption that there is no such material on or in the property that would
cause a loss in value.
No responsibility is assumed for any environmental conditions, or for any
expertise or engineering knowledge required to discover them. The
appraisers' descriptions and resulting comments are the result of the
routine observations made during the appraisal.
8. This appraisal covers only the real property described herein. Unless
specifically stated to the contrary, it does not include consideration of
mineral rights or related right of entry, nor personal property or the
removal thereof. Values reported herein are not intended to be valid in
any other context, nor are any conclusions as to unit values applicable to
any other property or utilization than that specifically identified
herein.
9. By reason of this assignment, testimony or attendance in court or at any
government or other hearing with reference to the property is not required
without prior arrangements having been made relative to such additional
employment.
10. Use and disclosure of the contents of this report is governed by the
Bylaws and Regulations of the Appraisal Institute. The Appraisal Institute
reserves the right to authorize its representatives to review this report
and its supporting documentation. Except as set forth in the engagement
letter to which these limiting conditions are attached, confidential
distribution of copies of this report in its entirety may be made subject
to the sole control of the addressee, however, excerpts may not be given
to any third party without prior written consent.
11. Except as set forth in the engagement letter to which these limiting
conditions are attached, neither all nor any part of the contents of this
report (especially any conclusions as to value, the identity of the
appraisers, or the firm with which they are connected, or any reference to
the Appraisal Institute or to the MAI or SRA designation) shall be
disseminated to the general public through advertising or sales media,
public relations media, news media, or any other public means of
communication without prior written consent.
12. The Americans with Disabilities Act ("ADA") became effective January 26,
1992. Landauer has not made a specific compliance survey and analysis of
this property to determine whether or not it is in conformity with the
various detailed requirements of the ADA. It is possible that a compliance
survey of the property, together with a detailed analysis of the
requirements of the ADA, could reveal that the property is not in
compliance with one or more of the requirements of the Act. If so, this
fact could have a negative effect upon the value of the property. Since we
have no direct evidence relating to this issue, we did not consider
possible non-compliance with the requirements of ADA in estimating the
value of the property.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
EXHIBIT A
[Date]
TO: Las Vegas Sands, Inc.
201 East Sands Ave.
Las Vegas, Nevada 98109
Venetian Casino Resort, LLC
(Address)
Re: Venetian Casino Resort
Ladies & Gentlemen:
At your request, this letter will serve to confirm that Landauer Associates,
Inc. has prepared a full narrative appraisal report, dated [date] (the
"Appraisal Report"), estimating the market value of the Venetian Casino Resort
including the retail component and the value of the retail component as separate
entities as of [date], the date of value.
Our appraisal assignment was to estimate the market value of the fee simple
interest in the overall Venetian Casino Resort as well as condominium unit in
the retail component as if completed.
In the process of preparing our Appraisal Report, we inspected the property;
interviewed representatives of Las Vegas Sands, Inc. and the Venetian Casino
Report, LLC; reviewed and considered the projections for the project provided by
Las Vegas Sands, Inc. analyzed revenue and expense comparables and made
adjustments to such projections as we deemed necessary based upon our
independent research; reviewed, thoroughly analyzed and compared to the subject
project recent, relevant sales; reviewed the project cost budget; and [undertook
such other applicable alternative methods of valuation as we deemed necessary].
As specified in the Appraisal Report, the value opinion reported below is
qualified by certain assumptions, limiting conditions, certifications, and
definitions which are set forth in the report. Please note that this letter is
provided as a supplement to our Appraisal Report which is available for your
review under separate cover.
The property was inspected by and the report was prepared by Vincent D.
Vassallo, Jr, and Karen L. Johnson with the assistance of other members of
Landauer's professional staff.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Las Vegas Sands, Inc.
Venetian Casino Resort, LLC
[Date]
Page Two
As a result of our analysis, and as set forth in our appraisal report dated
[date], we estimate that the market value of the Venetian Casino Resort, as of
[date], was:
-------------------------
($xxxxxxxxxxx)
and the market value of the Venetian Retail Centre as a separate entity as of
[date), was:
-------------------------
($xxxxxxxxxxx)
We hereby affirm that between the date of the Appraisal Report (date) 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 Report.]
We understand that this letter and the Appraisal Report 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 Report 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 Report contained in the
(date) Offering Circular under the captioned sections [" "], and hereby
confirm that the statements therein fairly represent our Appraisal Report.
We hereby consent to the inclusion of such description, and to the references to
Landauer Associates, Inc. and to copies of the Appraisal Report, in the offering
materials referred in the foregoing paragraph. Furthermore, we hereby consent to
being named as experts in such offering materials.
This letter summarizes our opinion of value. The reader is directed to our fully
documented narrative report which contains the text, exhibits, and addenda,
which is available under separate cover.
Sincerely,
LANDAUER ASSOCIATES, INC.
Rodney A. Wycoff, CRE, MAI
Senior Managing Director
<PAGE>
Photographs of the Subject Property
<PAGE>
SUBJECT
[PHOTO OMITTED]
Subject's Preview Center, looking into construction site
from Las Vegas Boulevard
[PHOTO OMITTED]
Looking north on Las Vegas Boulevard,
in the vicinity of the site
<PAGE>
SUBJECT
[PHOTO OMITTED]
Assumed level of architectural detail, as
used in the Preview Center
[PHOTO OMITTED]
Mock up of Canal - brick to be replaced with
larger block in final construction
<PAGE>
Photographs of the Selected Casino Hotels
<PAGE>
SELECTED CASINO HOTEL PHOTOGRAPHS
[PHOTO OMITTED]
The Mirage
[PHOTO OMITTED]
The Mirage Guest Room
<PAGE>
SELECTED CASINO HOTEL PHOTOGRAPHS
[PHOTO OMITTED]
Caesar's Deluxe Guest Room
(see retail photos for exterior)
[PHOTO OMITTED]
Caesar's Deluxe Guest Room
<PAGE>
SELECTED CASINO HOTEL PHOTOGRAPHS
[PHOTO OMITTED]
Rio "Suite" Hotel
[PHOTO OMITTED]
Rio Guest Room
<PAGE>
SELECTED CASINO HOTEL PHOTOGRAPHS
[PHOTO OMITTED]
MGM Grand
[PHOTO OMITTED]
MGM Guest Room
<PAGE>
SELECTED CASINO HOTEL PHOTOGRAPHS
[PHOTO OMITTED]
Treasure Island
[PHOTO OMITTED]
Treasure Island Guest Room
<PAGE>
SELECTED CASINO HOTEL PHOTOGRAPHS
[PHOTO OMITTED]
The Monte Carlo
[PHOTO OMITTED]
New York-New York
<PAGE>
OTHER RESORTS UNDER CONSTRUCTION
[PHOTO OMITTED]
Bellagio
[PHOTO OMITTED]
Paris Construction
<PAGE>
Photographs of Retail Competitors
<PAGE>
RETAIL COMPETITION
[PHOTO OMITTED]
Forum Shops and Caesar's Palace
[PHOTO OMITTED]
Interior of Forum Shops
(note Trompel'oeil ceiling)
<PAGE>
RETAIL COMPETITION
[PHOTO OMITTED]
Fashion Show Mall
[PHOTO OMITTED]
Boulevard Mall
<PAGE>
RETAIL COMPETITION
[PHOTO OMITTED]
Meadows Mall
[PHOTO OMITTED]
Sunset Galleria
<PAGE>
Proposed Additions to Supply
<PAGE>
Las Vegas
Hotel and Casino Construction Report
Calendar 1997 Openings
<TABLE>
<CAPTION>
Project Location Date of Opening Rooms
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York-New York Las Vegas Blvd S. & Tropicana January 2,035
Rio Suites Expansion 3700 W. Flamingo Rd. February 1,025
Budget Suites of America 2219 N. Rancho Drive March 704
Hawthorne Suites Duke Ellington Way & Tropicana June 282
Harrah's Las Vegas 3475 Las Vegas Blvd So. July 986
Budget Suites of America 3655 West Tropicana July 480
Sunset Station Sunset Rd. & Stephanie, Henderson June 450
The Desert Inn Renovation Las Vegas Boulevard N/A (106)
Caesars Palace Expansion 3570 Las Vegas Blvd S. December 1,200
Courtyard by Marriott Green Valley Parkway, Henderson November 154
-----
Total 7,210
</TABLE>
* Bold face type indicates that a property is likely to be competitive with a
high-end mega-casino resort.
Source: Las Vegas Convention and Visitors Authority, July 1997, and Landauer
Associates.
<PAGE>
Las Vegas
Hotel and Casino Construction Report Continued
Calendar 1998 Openings
<TABLE>
<CAPTION>
Project Location Date of Opening Rooms
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Marriott Suites Convention Center Dr. January 280
McCarron Plaza Suites** Las Vegas Blvd. & I-215 2nd Quarter 344
AmeriSuites Paradise Rd. & Harmon Ave. 2nd Quarter 200
Residence Inn by Marriott Green Valley Pkwy. & Sunset Rd. 3rd Quarter 126
Bellagio (Mirage Resorts) 3650 Las Vegas Blvd So. 3rd Quarter 3,000
Residence Inn by Marriott Paradise Rd. & Flamingo Rd. 3rd Quarter 300
Polo Towers Time Share** Las Vegas Blvd. So & Harmon 4th Quarter 199
Resort at Summerlin** Summerlin Pkwy. & Rampart Blvd. 4th Quarter 307
Project Paradise Las Vegas Blvd. S. of Russell Rd. 4th Quarter 3,800
Doubletree Hotel** Warm Springs & Pollack 4th Quarter 200
Total: 8,756
</TABLE>
**Not Yet Under Construction
Source: Las Vegas Convention and Visitors
Authority, July 1997 and Landauer Associates.
<PAGE>
Las Vegas
Hotel and Casino Construction Report Cont.
Calendar 1999 Openings
<TABLE>
<CAPTION>
Project Location Date of Opening Rooms
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Subject Venetian Resort 3355 Las Vegas Blvd S. 2nd Quarter 3,036
Paris Las Vegas Blvd S. 2nd Quarter 3,000
Ritz Carlton Mountain Spa Rainbow Blvd. & Iron Mountain Rd. 4th Quarter 526
Resort**
Hyatt Lake Las Vegas Lake Las Vegas 4th Quarter 500
Grand Bay Resort Lake Las Vegas 4th Quarter 250
Four Seasons Resort** Las Vegas Blvd. S. of Russell Rd. 4th Quarter 400
Total: 7,713
</TABLE>
** Not Yet Under Construction
Source: Las Vegas Convention and Visitors Authority, July 1997
and Landauer Associates, Inc.
<PAGE>
Comparable Land Sales
<PAGE>
LAND COMPARABLE NO. 1
IDENTIFICATION:
Location: Monte Carlo Casino Site
City, State: Las Vegas, Nevada
Assessor's Parcel No. 162-20-701-020 /after consolidation with
3.0 acre parcel.
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: September 1995
Sale Price: $147,000,000
Terms: Imputed price for 100% interest; part of
company acquisition
Grantor: Gold Strike Resorts
Grantee: Circus Circus Enterprises
Document: Not recorded
SITE DESCRIPTION:
Land Area: 45.72 acres
Improvement of Sale: Vacant w/ plans and approvals
Utilities: All to site
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $3,193,351
COMMENTS:
Acquired along with 50% interest in the Elgin Illinois Riverboat,
2 casinos in Jean, NV and 1 casino in Henderson, NV.
See attached work sheet.
<PAGE>
Monte Carlo Worksheet
From Circus Circus' annual report on Gold Strike Acquisition
Cash $ 12,000,000
Assumed Debt 165,000,000
17.0 m share stock discounted at 30% (price $25.15 on 3/19 300,475,000
announc.)
Market value acquisition 477,475,000
Assets Acquired:
50% interests in Elgin Riverboat. 8 months EBIT for Circus in '95 was $32.6 m
$ 32.6 / 8 x 12 months = $48.9 / 17% 287,647,059
Estimated for 100% interest in riverboat is $575.3 million
3 casinos; 2 in Jean, 1 in Henderson; 8 months EBIT for Circus in '95 was $12.4
$12.4 / 8 x 12 months = $18.6 / 17% 109,411,765
Estimate is $36.5 million per casino
Value of 50% interest in Monte Carlo, at time plans,
approvals, and dirt 80,416,176
2
Value of 100% interest 160,832,353
160,830,000
Less estimated design fees, arch fees etc. based on Venetian's $34.3
cost on a total project cost of $967.6, or 3.5%) $293.0 5.0% 14,650,000
Dirt Value 146,300,000
Rounded 146,000,000
Acres (gross) 45.72
Price per acre 3,319,351
The Elgin Riverboat is personal property; its dock-side facilities are a
leasehold interest. After the investors have recovered their $112 in investment,
the partnership is required to pay 20 percent of its after tax income to the
city of Elgin and Kane County.
The 17 percent capitalization rate used takes into account the greater dilution
of the income stream in EBIT (depreciation and amortization have been deducted)
but also the offsetting factors relating to the interest involved (personal
property and a leasehold estate in the case of the Riverboat) and the secondary
locations involved in the land based casinos. These casinos receive nearly all
of their net income from gaming operations.
<PAGE>
LAND COMPARABLE NO. 2
IDENTIFICATION:
Location: N.W. Corner of Hannon & Strip Site
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-20-603-005,006
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: Listing
Sale Price: $66,000,000
Terms: Not applicable
Grantor: R & Z Corporation
Grantee: Not applicable
Document: Not applicable
SITE DESCRIPTION:
Land Area: 11.32 acres
Improvement of Sale: Vacant
Utilities: All to site
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $5,830,389
COMMENTS:
Too small for mega resort development, Harmon Street to the south affects
southerly assemblage. Parcel to immediate North is owned by the same
entity that has title to the common areas of the Jockey Club timeshare
project. Joining and developing these two sites would require concessions
to and from the approximately 14,000 individual owners of the timeshare
project.
<PAGE>
LAND COMPARABLE NO. 3
IDENTIFICATION:
Location: La Quinta Site
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-20-801-002,003
Estate: Fee Simple (1.48 acres) and Leased Fee 0.58
TRANSACTION DATA:
Sale Date: March 1997
Sale Price: $13,500,000
Terms: All cash
Grantor: La Quinta Development Partners
Grantee: MGM Grand & Primadonna
Document: 970317.01522
SITE DESCRIPTION:
Land Area: 2.06 acres
Improvement of Sale: Inn and restaurant
Utilities: All to site
Topography: Level at street grade
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $6,553,398
COMMENTS:
The fee simple interest in the land which is improved with the
La Quinta Inn was sold concurrently with the ]eased fee
interest in the 0.58-acre Carrows Restaurant site. New York-New
York needs the 2.06-acre site if it is to expand. It is not
clear whether this can be done without the frontage portion
occupied by the restaurant. No information was available on the
costs to buy-out the lease, or demolition costs.
<PAGE>
LAND COMPARABLE NO. 4
IDENTIFICATION:
Location: S.W. Corner of Las Vegas Boulevard
South and Hacienda
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 169-29-701-001
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: August 31, 1995
Sale Price: $80,000,000
Terms: All cash
Grantor: Sahara Gaming Corporation dba
as Hacienda Hotel, Inc.
Grantee: Circus Circus, dba Pinkless, Inc.
Document: 9508310249
SITE DESCRIPTION:
Land Area: 47.29 acres
Improvement of Sale: 1,115 room hotel
Utilities: All to site
Topography: Level at street grade
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $1,691,690
COMMENTS:
This is the sale of the Hacienda Hotel for redevelopment purposes. The
buildings were demolished on December 31, 1996. The sales price was
initially negotiated by another buyer, a former Circus Circus executive
who, due to a conflict of interests, was forced to relinquish the deal to
Circus Circus. The buyer owns the remainder of the block to the south and
most or all of the block to the north. Circus Circus would not disclose
demolition costs or interim EBITDA.
<PAGE>
LAND COMPARABLE NO. 5
IDENTIFICATION:
Location: N.W. Corner of Las Vegas Blvd. and
Russell Road
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-29-701-002 and 162-29-801-001
TRANSACTION DATA:
Sale Date: March 1995
Sale Price: $73,000,000
Terms: All Cash
Grantor: West State Land
Grantee: Circus Circus Enterprises
Document: 950303:01059
SITE DESCRIPTION:
Land Area: 73.74 acres
Improvement of Sale: Vacant
Utilities: Off-sites installed, available
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $989,965
COMMENTS:
This property is located south of Hacienda Hotel/Casino. It is planned for
development of the Millennium project, a multi-phased, multi-property,
gaming development.
<PAGE>
LAND COMPARABLE NO. 6
IDENTIFICATION:
Location: 2755 Las Vegas Boulevard South
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-09-602-002
Estate: Fee Simple
TRANSACTION DATA:
Sale Date: January 26, 1996
Sale Price: $43,500,000
Terms: All cash and notes
Grantor: Las Vegas Entertainment Network
Grantee: Orion Casino Corporation, a wholly owned
subsidiary of International Thoroughbred
Breeders
Document: 960124-1152 recorded 1/24/96
SITE DESCRIPTION:
Land Area: 20.86 acres
Improvement of Sale: EI Rancho Hotel and Casino
Utilities: All to site
Topography: Level
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $2,085,331
COMMENTS:
Planning to raze site and redevelop as the Starship Orion Resort with 7
separately owned and operated casinos. Casinos to be structured like
anchor tenants in a shopping mall. The seller received one of the casino
spaces as a continued participatory interest.
<PAGE>
LAND COMPARABLE NO. 7
IDENTIFICATION:
Location: 2600 and 2601 Las Vegas Boulevard South
City, State: Las Vegas, Nevada
Assessor's Parcel No.: 162-09-602-001 005 plus 2nd parcel
Fee Simple Fee Simple
TRANSACTION DATA:
Sale Date: October 2, 1995
Sale Price: $61,738,500
Terms: All cash
Grantor: Howard Hughes Corporation
Grantee: The Gordon Gaming Corporation and
Sahara Gaming Corporation
Document: 951002-73
SITE DESCRIPTION:
Land Area: 66.04 acres
Improvement of Sale: Vacant
Utilities: All to site
Topography: Level at street grade
Zoning: H-1
VALUE INDICATOR:
Price Per Acre: $934,865
COMMENTS:
Transaction involving two parcels was negotiated in conjunction with the
20.87 acre Wet'N' Wild site and the 39.17 acre St. Andrews Golf site
parcel located directly across Las Vegas Boulevard South. Cost to buy out
the lease for the as of then undeveloped St. Andrews Golf lease was $3.0
million. Cost to buy out Wet'N Wild lease was $7.0 million if exercised
immediately and stepped down to zero after 4 to 5 years. Rental income
from Wet'N Wild which is open only part of the year, was nominal.
Demolition costs estimated at $1.5 million.
<PAGE>
Bovis Construction Detail
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
SOUTH TOWER
Substructure
Foundations - Tower foundation is a reinforced concrete mat of varying
thickness extending outside of tower perimeter walls.
Basement Construction - excavation is done to the bottom of mat elevation.
Over excavation and fill is done in accordance with Soils Report and
actual ground conditions. Basement perimeter walls, columns, and shear
walls are of reinforced concrete. Footing drains and rubberized asphalt
sheet waterproofing are included around perimeter walls. Wearing slab is
of reinforced concrete on structural fill above mat foundation.
Shell
Superstructure - The Tower structure consists of cast in place reinforced
concrete slabs with bearing walls and columns.
Exterior Closure - The tower is enclosed by unitized curtainwall with
vision and spandrel glass, panelized EIFS, storefront, and entrances with
applied decorative mullions and trim.
Roofing - The roofing system is a membrane system, mechanically attached
and fully adhered, white or gray membrane on structural roof deck of post
tensioned concrete,
Interiors
Interior Partitions - Typical partitions are gypsum board on metal studs,
exit stair enclosures are concrete shear walls and CMU. Suites have
concrete shear walls and 5/8" drywall on metal studs. Mechanical rooms and
shafts are CMU. Firestopping is provided through empty opening and opening
containing cables, pipes, ducts, conduits, and other penetrating items.
Stairways - Stairs are portland cement steps with metal railings as
required by code. Also metal pan stairs with concrete inserts. Decorative
rail and steps are included on stairs in public areas.
3
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
SOUTH TOWER (continued)
Interior finishes - Wall finishes include painted concrete and drywall
partitions, vinyl wall covering, and stone/marble equivalent. Floors
include carpet, stone/marble equivalent, and sealed and painted concrete
floors in BOH areas. Ceiling finishes include spray-on textured paint on
concrete slabs, acoustic panels, and painted drywall. Suites and corridors
include decorative crown molding, base, chair rail, and panel molding.
Suite finishes are described in more detail under the F,F & E line item.
Services
Conveying Systems - The Tower contains electric gearless traction
passenger and freight elevators with appropriate cab finishes and two-way
communications system.
Plurnbing Systems - Plumbing Fixtures include water closets with turbo
type flush tank, elongated bowl, wall hung urinals of vitreous china with
flush valve, wall hung or counter mounted lavatories and sinks of vitreous
china or stainless steel, showers with hot and cold water mixing valves
with glass shower doors, bathtubs of heavy density acrylic with hot and
cold water mixing valve, with high quality fixtures.
Domestic Water Distribution includes three pressure zones (low rise, mid
zone and high zone -downfeed) with a booster system. A hot water direct
gas fired water heater is used for the high zone. Steam is converted to
hot water for low and mid zones. The system includes copper piping with
backflow preventers and shut-off valves.
Waste System is a sovent, cast iron piping, single stack waste and vent
system. Storm drainage system is a rain water drainage piping system of
cast iron piping.
Heating, Ventilating, and Air Conditioning Systems - Suites have vertical
stacked fan coil units, 2 pipe chilled water with electric heat.
Horizontal fan coil units are used in multiple bay suites. Corridors are
conditioned using roof-mounted air handling units and localized fan coils.
Elevator lobbies and elevator machine rooms are conditioned by fan coil
units located in mechanical rooms. Shafts provide corridor smoke
management with exhaust fans at the tower roof controlled by the smoke
management system. Fans pressurize tower stairwells.
4
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
SOUTH TOWER (continued)
Fire Protection Systems - Automatic sprinkler system in accordance with
Clark County code and Fire Department and by insurance requirements.
Sprinkler zones to coincide with smoke management zones. Standpipe and
hose system with outlet valves in each stairwell vestibule with
intermediate standpipes in accordance with code requirements. Fire
extinguishers, storage cabinets, and fire blankets by code. Fire detection
and alarm system in accordance with NFPA 72 and Clark County Fire
District. All areas zoned in accordance with smoke management zones.
Electrical Systems - For electrical service and distribution refer to
Central Plant electrical. Lighting includes surface mounted and recessed
lights in corridors plus decorative lighting. Suite lighting includes
surface mounted and recessed lights. Suites include general usage
electrical convenience outlets as well ground fault interrupter outlets
per code. Suites also include service to telephones and TVs. Alarm and
detection systems include self-contained smoke detectors in suites.
Corridors contain smoke detectors and audio/visual devices connected to
building alarm system with system audio alarm systems mounted in corridors
and suites. Stairways contain smoke detectors with alarms activating
pressurization and automatic door closures. Mechanical equipment units
provided with smoke detectors per code.
Suites contain dedicated fax/data and multiple telephone outlets.
5
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
PODIUM LOWRISE
Substructure
Foundations - Lowrise foundations are reinforced concrete spread footings
of varying sizes per structural engineer calculations.
Basement Construction - The basement includes reinforced concrete
perimeter walls with continuous concrete footings, and structural steel
columns with base plates and anchor bolts to spread footings. Perimeter
footing drains are included per the Soils Report. Standard slab on grade
is included and thickened where walkerduct occurs. Over excavation and
fill is done in accordance with Soils Report and actual ground conditions.
Perimeter footing drains and rubberized asphalt sheet waterproofing is
included.
Shell
Superstructure - The structure is a structural steel frame with concrete
filled metal deck. Cementitious spray-on fireproofing is utilized on steel
frame members.
Exterior Closure - The building enclosure includes fixed window units with
vision and spandrel glass, storefront and entrances with applied decorative
trim. Decorative, themed facades using combination of EIFS shapes and cast
GFRG products.
Roofing - The roofing system is lightweight insulating concrete sandwiching
an insulation board with rubberized asphalt sheet waterproofing. Various
finishes including pool deck and decorative stone or stamped concrete are
used in public areas.
6
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
PODIUM LOWRISE (continued)
Interiors
Interior Partitions - Exit stair enclosures are concrete shear walls and
CMU. Mechanical rooms and shaft are CMU. Other partitions are drywall and
metal studs. Firestopping is provided through empty opening and opening
containing cables, pipes, ducts, conduits, and other penetrating items.
Stairways - Stairs are portland cement stairs with metal railings required
by code. Also used are metal pan stairs with concrete inserts. Decorative
rail is included in public areas.
Interior Finishes - Interior Finishes for the Podium Lowrise are described
in the F,F&E line item.
Services
Conveying Systems - mix of electric geared traction and hydraulic
passenger and freight elevators with appropriate cab finishes and two-way
communications system. Escalators are included at Casino and at pedestrian
bridges. Moving walkways are included at pedestrian bridges.
Plumbing Systems - The Lowrise uses conventional waste and vent cast iron
piping. All public restrooms have automatic flush valves on urinals and
water closets and electric eye faucets. BOH restrooms have manual flush
valves and faucets. Steam from the Central Plant is converted to hot water
for heating and domestic hot water. Hot and cold water is piped to all
retail spaces.
Heating, Ventilating, and Air Conditioning Systems - The Lowrise is
serviced by multiple VAV air handling units with cooling coils and heating
coils, automatic air side economizers and smoke exhaust fans. Chilled and
hot water is distributed throughout the Lowrise. Conditioned air is
provided to all retail spaces.
7
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
PODIUM LOWRISE (continued)
Fire Protection Systems - The building includes an automatic sprinkler
system in accordance with Clark County code and Fire Department and by
insurance requirements. Sprinkler zones coincide with smoke management
zones. Standpipe and hose system with outlet valves are located in each
stairwell vestibule with intermediate standpipes in accordance with code
requirements. Fire extinguishers, storage cabinets, and fire blankets are
included by code. Fire detection and alarm system is in accordance with
NFPA 72 and Clark County Fire District. All areas are zoned in accordance
with smoke management zones.
Electrical Systems - For electrical service and distribution refer to
Central Plant electrical section. Lighting at the Casino includes standard
incandescent fixtures as well as specialty fixtures as specified by Casino
interior designer. Offices, administrative areas, and BOH areas use
fluorescent lighting. Lounges and bars include incandescent lighting on
dimmers. General use receptacles are included throughout the building per
code. The alarm and detection system includes audio/visual devices,
detectors, and speakers throughout the building. The Fire Command Center is
located in the Lowrise and includes components as listed in UBC 403. Other
systems include the telephone system, sound system, master antenna
television system, security/surveillance system, and paging system. The
Casino floor includes a walkerduct grid for the data and power connection
of gaming equipment and systems.
8
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
EAST PROPERTY
Substructure
Foundations - The East Property foundations are reinforced concrete spread
footings of varying sizes per structural engineer calculations.
Basement Construction - The basement includes reinforced concrete perimeter
walls with continuous concrete footing. Cast in place reinforced concrete
columns are used in the Central Plant and in the mezzanine area. Other
areas have structural steel columns on spread footings with base plates and
anchor bolts. Perimeter footing drains per soils report. Over excavation
and fill is done in accordance with the Soils Report and actual ground
conditions. Perimeter footing drains and rubberized asphalt sheet
waterproofing is included.
Shell
Superstructure - Central Plant is of cast in place concrete columns, beams
and shear walls to roof. The Central Plant roof framing is of structural
steel. The mezzanine at elevation 81' is of cast in place concrete columns
and concrete slab. Other areas including meeting rooms, warehouse, and
ballrooms are done with structural steel framing. Ballroom floor is
equipped with tuned mass damper to control vibration.
Exterior Closure - The exterior is done in insulated metal panel to match
existing SECC.
Roofing - The roofing system is a membrane system mechanically attached and
fully adhered.
Interiors
Interior Partitions - Partitions are a combination of 5/8 drywall on metal
studs, concrete shear walls and CMU.
Stairways - Stairs are portland cement stairs with metal railings required
by code. Also metal pan stairs with concrete inserts.
Interior Finishes - Finishes are to match existing SECC in quality and
level of finish.
9
<PAGE>
VENETIAN PROJECT
STANDARDS DOCUMENT
2. CONSTRUCTION COSTS
EAST PROPERTY (continued)
Services
Conveying Systems - Building includes hydraulic freight and passenger
elevators.
Plumbing Systems - The East Property uses conventional waste and vent cast
iron piping. All public restrooms have automatic flush valves on urinals
and water closets and electric eye faucets. BOH restrooms have manual flush
valves and faucets. Steam from the Central Plant is converted to hot water
for heating and domestic hot water.
Heating, Ventilating, and Air Conditioning Systems - The East Property is
serviced by multiple roof mounted VAV air handling units with cooling coils
and heating coils, automatic air side economizers. Chilled and hot water is
distributed throughout the East Property. Steam and chilled water is
provided throughout the facility by the Central Plant included in the East
Property. Chilled water is produced by 2,000 ton chillers located in the
basement. Steam is produced on the second level by 700 HP boilers.
Fire Protection Systems - The building includes an automatic sprinkler
system in accordance with Clark County code and Fire Department and by
insurance requirements. Sprinkler zones coincide with smoke management
zones. Standpipe and hose system with outlet valves are in each stairwell
vestibule with intermediate standpipes in accordance with code
requirements. Fire extinguishers, storage cabinets, and fire blankets are
included by code. Fire detection and alarm system is in accordance with
NFPA 72 and Clark County Fire District. All areas are zoned in accordance
with smoke management zones.
Electrical Systems - General electrical service is provided to all areas
including offices, Central Plant, meeting rooms, ballrooms, and BOH.
Overall Electrical Service - The system is 12.5 KV, 3 phase, 4-wire power.
Panels, transformers and equipment are sized for spare capacity. Incoming
power from Nevada Power comes to the on-site main Electric Substation and
is distributed from there to substations located throughout the buildings.
The system is supported by an Emergency Standby system of 1,750 KW diesel
driven, air cooled generators, automatic transfer switches and automatic
paralleling switchgear. The generators we located in the Central Plant.
10
<PAGE>
Hotel Investment OUTLOOK
<PAGE>
LANDAUER HOTEL INVESTMENT
HOSPITALITY GROUP OUTLOOK
1997 o Volume 6 o No. 1
[GRAPH OF CONSTRUCTION TRENDS OMITTED]
1997 Survey Results
Property Prices Continue to Rise! That is what the results of our HIO survey
for 1997 suggest. Hotel investment is heated, primarily driven by C-Corps and
REITs. The necessity for REITs to continue strong returns to owners requires
continuing growth. The two hotel pair-shared REITs, Starwood Lodging Trust and
Patriot American, have an advantage in their structural efficiency. Wall Street
has acknowledged this by pouring more money into their holdings. With the cost
of capital in some cases at Libor plus 150 basis points, money is relatively
cheap. The result has been to drive property values closer to replacement value.
This has been particularly true for the full-service hotel sector.
There are several regional hotel companies and C-Corps who are making a
play at greater product distribution. Savings and loans as well as regional
banks are once again lending for hotel development. Limited partnership
interests in hotel assets are on the rise leading to more multiple ownership
transactions. Insurance companies and pension funds are also re-entering the
hotel investment arena. Only five years ago, many of these financial sources
viewed the hotel industry as a grave error in their investment strategies. Now
hotels provide returns on par with the technology and residential real estate
sectors. The current trends appear to be sustainable for the foreseeable future.
While prices of existing full-service hotels continue to rise, lenders are
seriously considering requests for capital for new development.
Once again, from a full-service perspective, our survey results are nearly
unanimously positive. Almost everyone agrees that from an operational
perspective this sector has at least one to two strong years ahead, with
continued REVPAR gains in excess of inflation. Largely, investors agree that the
opportunities are in rate, as many markets reach their natural capacity
constraints from an occupancy standpoint.
Augmenting the revenue enhancements are cost efficiencies which have been
gradually engineered by hotel management companies during the leaner years
experienced earlier in the decade. Cash rich hotel companies are again beginning
to focus on Management Information Systems and product expansion/distribution.
Will these investments in capital continue to provide the requisite returns in
economic efficiency? The hard decisions of where to invest capital is best left
to those with experience doing it for other industries. Hoteliers have proved to
be resilient during periods of operational distress. However, they have been
less savvy in the business of directing capital. Labor unions are again gaining
strength in the larger US cities and, given the record lows in unemployment,
this trend is likely to continue. The result: higher operating costs in major
markets. The chains are also outsourcing services traditionally absorbed in
operations. Contractual obligations are therefore a liability more than an asset
of some targeted acquisitions.
To be a participant in the current marketplace, investors indicate an
aggressive approach must be taken. Consistent with this, our survey results show
buyers projecting income growth to be higher than operating expense growth when
developing pro-formas. In addition to the improved operating performance
resulting from positive market conditions, in most instances, buyers are pricing
hotels by applying their company's operating efficiencies to future pro-formas.
The expectation of future potential was well illustrated in several portfolio
transactions in 1996 and early 1997 where the suggested cap rate for the
trailing 12 month income stream was in the five to seven percent range.
These transactions are a reflection of a broader change that is presently
developing within the marketplace. Apparently, when making purchase decisions
investors are not only forecasting operating efficiencies and top line
advancements, but are also incorporating within their pricing parameters the
advantages certain forms of public ownership provide. For instance, the upside
associated with certain transactions also integrates the benefit "paired-shared"
REITs have of recouping certain operating expenses such as management fees. This
is in addition to
Continued on page 3
<PAGE>
<TABLE>
<CAPTION>
EQUITY PARAMETERS CAPITALIZATION RATES YIELD RATES
- ----------------- -------------------- --------------------------
Holding Free and
Period (yrs) Overall Terminal Clear Leveraged
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Survey Average 7.87 9.45% 10.85% 13.50% 18.67%
- ----------------------------------------------------------------------------------
Survey Range 4.00-10.00 7.50-13.00 9.00-12.00 12.00-16.00 15.00-25.00
- ----------------------------------------------------------------------------------
I Year Ago-Average 6.52 10.46% 10.74% 14.20% 21.71%
- ----------------------------------------------------------------------------------
1 Year Ago-Range 3.00-10.00 7.00-14.00 7.00-13.00 10.00-20.00 18.00-25.00
- ----------------------------------------------------------------------------------
<CAPTION>
DEBT PARAMETERS YIELD RATES
- --------------- ------------------------
Interest Terms Amortization Debt Coverage Loan to
Rate (years) Period Ratio Value
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Survey Average 8.79 14.20 23.17 1.43 70.00%
- ----------------------------------------------------------------------------------
Survey Range 8.10-9.25 5.00-25.00 20.00-30.00 1.40-1.50 65.00-75.00
- ----------------------------------------------------------------------------------
1 Year Ago-Average 9.57 8.46 21.39 1.44 64.00%
- ----------------------------------------------------------------------------------
1 Year Ago-Range 8.50-11.50 3.00-20.00 15.00-25.00 1.30-1.50 40.00-90.00
- ----------------------------------------------------------------------------------
<CAPTION>
DISCOUNTED CASH FLOW PARAMETERS INFLATION ESTIMATES:
- ------------------------------- --------------------
Revenue Expenses Selling Costs
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Survey Average 3.54% 3.39% 2.58%
- --------------------------------------------------------------------------------
Survey Range 3.00-4.00 3.00-4.00 1.00-3.50
- --------------------------------------------------------------------------------
</TABLE>
[GRAPH OF LANDAUER HOTEL MARKET EQUILIBRIUM FORECAST OMITTED]
page 2
<PAGE>
Continued on page 1
[GRAPH OF NATIONAL CAPITALIZATION RATES OMITTED]
their tax friendly structures.
Reports suggest that some REITs are taking advantage of their ownership
structure by deferring costs such as replacement reserves. The long-term
consequences of these cash management tactics are obvious; however, analysts on
Wall Street are "switched on" to such cash flow manipulation and will rate rogue
structures accordingly.
There continues to be concern that some portfolio acquisitions are being
purchased at a premium and that the buying decision is based on broker or
investment banker projections; which typically do not account for economic
downturns. Further, investment decisions are more commonly strategic with
product distribution overriding economics in many cases.
Initial public offerings of new hotel stocks are expected to continue at a
slower pace, being replaced by merger and acquisition activity. This has been
represented by DoubleTree's unsuccessful and Marriott's successful acquisition
of the Renaissance hotel portfolio. Patriot's acquisition of Wyndham is another
example of the activity likely to come. The financial arrangements of such deals
will vary according to the tax implications with stock swaps and partnership
trades proliferating.
While the supply of attractive deals has diminished considerably,
investors hungry for product are considering more complex deals. Properties with
restrictive contractual obligations or properties in need of significant capital
outlays for renovation are now being considered. Investors are looking to
foreign markets for expansion as well. Others are considering resort locations
in the US and Caribbean.
On financing and new development
In the full-service arena, the supply of debt capital continues to
increase dramatically as a result of the high returns delivered by REITs.
Insurance and pension funds have also provided capital to the industry, further
placing "pressure" on The Street. The trend continues toward good quality,
primary location, full-service hotels. Also, the money center banks are
developing conduit programs, as they attempt to break into the more profitable
business of securitization.
Construction spending has grown dramatically over the past 12 months (see
chart). Most of the construction has been in the all-suite and limited-service
sectors up until recently; however, current trends suggest that the full-service
sector will be the primary target of developers. Public assistance and tax
credits are no longer requirements for underwriting. Nonetheless, hurdle rates
for developers remain relatively high in the low to mid-20s.
Survey respondents overwhelmingly answered that the state of the hotel
industry looks positive over the next six months. Virtually all lenders and
investors responded that they will consider new development, leaning heavily
toward first-class and luxury projects. Locations to be considered largely
included Center City, Airport, and Suburban. No respondents suggested that they
were considering highway development. All respondents felt that the availability
of debt and equity has improved. Surprisingly, these same people indicated that
the outlook for equity over the next six months would not be as strong as it
been.
Outlook
Are we back in the 1980's again? Potentially. However, deals in the 1990's
appear to be more carefully calculated and investors are approaching
transactions with more financial savvy. The REITs are generally driving prices
higher because some argue that the "pair-shared" structure is as much as 15
percent more efficient than the traditional C-Corp. If that's the case, count on
a building boom that surpasses the mid-1980's. This supply increase will, in all
likelihood, be met by strong demand growth in both the corporate and leisure
travel segments. Demand for high-quality accommodations will be strong. Suites
will remain popular and, as indicated by our survey participants, full-service
hotels will be back with a vengeance.
Merger and acquisition activity is likely to continue at an accelerated
pace over the next few years. This being the case, funds will largely be
intermediated by Wall Street in the form of REITs, CMBS offerings, mortgage
conduit programs, and various lines of credit for acquisitions. Expect some
interesting marriages among operating companies and more hostile takeover
attempts like Hilton's run at ITT/Sheraton. This will further drive prices up.
Many property owners will correctly choose "now" as the time to sell.
Although the outlook for the hotel industry is strong and the consensus among
our survey participants echoes that sentiment, all bets are off when we enter
the next economic recession.
page 3
<PAGE>
[GRAPH OF PROFILE OF ACTIVE INVESTORS OMITTED]
LANDAUER
Hospitality Group
HOSPITALITY COUNSELING
WITH
AN INVESTOR'S PERSPECTIVE
Every effort has been made to provide accurate information. This publication
does not render accounting, appraisal, counseling, investment, legal or other
professional service. If such services are required, a professional should be
engaged.
(C) Hotel Investment OUTLOOK is published by Landauer Associates, Inc.
Permission to reprint these articles is given provided Landauer Associates, Inc.
is referenced and notified prior to use. Robert C. Mullikin, Managing Director
in Landauer's New York office is principal author of the OUTLOOK.
PARTICIPANTS IN THE HOTEL INVESTMENT SURVEY
Adam's Mark Hotels & Resorts
American General Hospitality
B.F. Saul Co.
Bedford Capital Corporation
Bristol Hotel Co.
Chase Securities
Choice Hotels International
Column Financial, Inc.
DoubleTree Hotel Corp.
Eastdil Realty
GMAC Commercial Mortgage Corp.
Hodges Ward Elliott
Host Marriott Corporation
Hotel Partners
InterBank Mortgage Corporation
Loews Hotels
MassMutual
New Castle Hotels
Prime Hospitality Corp.
Remington Hotel Corporation
Starwood Lodging Corporation
Teachers Insurance Annuity (TIAA)
The Camberley Hotel Company
T.J. Fox Associates
USF&G Realty Advisors
White Lodging Services Corp.
Active hotel investors and lenders are welcome to participate in the Hotel
Investment OUTLOOK. In addition to the participants listed, we are grateful for
the comments of those surveyed who expressed no interest in hotels at this time
or who desired not to be acknowledged in the OUTLOOK.
<TABLE>
<CAPTION>
Atlanta Fort Lauderdale Newport Beach
<S> <C> <C>
233 Peachtree Street N.E., Suite 1900 100 NE 3rd Avenue, Suite 770 4100 MacArthur Avenue, Suite 310
Atlanta, Georgia 30303 Ft. Lauderdale, Florida 33394 Newport Beach, CA 92660
(404) 659-4040 (954) 764-5403 (714) 851-9594
Boston Los Angeles Scottsdale
One State Street, 6th Floor 707 Wilshire Boulevard, Suite 4950 8282 North Hayden Road, Suite 291
Boston, MA 02109 Los Angeles, California 90017 Scottsdale, AZ 85258
(617) 720-0515 (213) 624-3400 (602) 607-0550
Chicago Miami Sydney, Australia
225 West Washington Street, Suite 1500 269 Giralda Avenue, Suite 201 Level 30, 52 Martin Place
Chicago, Illinois 60606 Coral Gables, Florida 33134 Sydney, NSW 2000 Australia
(312) 899-0100 (305) 591-9122 0ll 612 324 4211
Dallas New York Washington, DC
13760 Noel Road, Suite 930 666 5th Avenue, 25th Floor 8133 Leesburg Pike, Suite 720
Dallas, Texas 75240 New York, New York 10103 Vienna, VA 22182
(972) 866-9090 (212) 621-9500 (202) 337-4680
</TABLE>
<PAGE>
Casino Hotel Discounted Cash Flow Analysis "As Stabilized
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS, UPON STABILIZATION
=================================================
<TABLE>
<CAPTION>
High Discount Rate: Mid Discount Rate: Low Discount Rate:
P.V.@: 23.0% P.V. @: 22.0% P.V. @: 21.0%
------------------- ------------------ ------------------
Net
Year Fiscal Operating P.V. Present P.V. Present P.V. Present
Number Year Income Factor Value Factor Value Factor Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.000 2002 230,598 0.8130 187,478 0.8197 189,015 0.8264 190,577
2.000 2003 238,573 0.6610 157,693 0.6719 160,288 0.6830 162,949
3.000 2004 246,890 0.5374 132,675 0.5507 135,964 0.5645 139,363
4.000 2005 255,498 0.4369 111,626 0.4514 115,332 0.4665 119,192
5.000 2006 264,407 0.3552 93,918 0.3700 97,830 0.3855 101,940
6.000 2007 273,755 0.2888 79,055 0.3033 83,024 0.3186 87,227
7.000 2008 283,299 0.2348 66,513 0.2486 70,425 0.2633 74,60l
8.000 2009 293,177 0.1909 55,961 0.2038 59,738 0.2176 63,804
9.000 2010 303,400 0.1552 47,084 0.1670 50,673 0.1799 54,569
10.000 2011 314,019 0.1262 39,619 0.1369 42,989 0.1486 46,677
11.000 2012 0 0.1026 0 0.1122 0 0.1228 0
--------- -------- -------
Subtotal PV From Cash Flow $971,622 $1,005,276 $1,040,899
Reversion 2009 1,593,000 0.1909 304,071 0.2038 324,591 0.2176 346,683
--------- -------- -------
Total PV As Of: 00-Jan-00 $1,275,693 $1,329,869 $1,387,582
Deflated to Appraisal Date @: 3.50%
Months to Appraisal Date: 0 1.0000 1.0000 1.0000
--------- -------- -------
Present Value As Of: 00-Jan-00 $1,275,693 $1,329,869 $1,387,582
Less Renovation Costs (see ASSUMPTIONS) 0 0 0
--------- -------- -------
Adjusted Present Value $1,275,693 $1,329,869 $1,387,582
Rounded: $1,276,000 $1,330,000 $1,388,000
========== ========== ==========
VALUATION WITH REVERSIONARY OAR OF 19.0%
==========================================
Subtotal PV From Cash Flow 971,622 1,005,278 1,040,899
Reversion 2009 1,676,366 0,1909 319,984 0.2038 341,578 0.2176 364,826
--------- -------- -------
Total PV As Of: 00-Jan-00 $1,291,606 $1,346,856 $1,405,725
Deflated to Appraisal Date @: 3.50%
Months to Appraisal Date: 0 1.0000 1.0000 1.0000
--------- -------- -------
Present Value As Of: $1,291,606 $1,346,856 $1,405,725
Less Renovation Costs (see ASSUMPTIONS) 0 0 0
--------- -------- -------
Adjusted Present Value $1,291,606 $1,346,856 $1,405,725
Rounded: $1,292,000 $1,347,000 $1,406,000
========== ========== ==========
</TABLE>
<PAGE>
REVERSION CALCULATION:
=====================
Hi OAR Low OAR
====== =======
NOI for Year: 2012 $325,010 325,010
Divided by Reversion OAR 0.200 0.190
------ -----
Gross Reversion $1,625,048 $1,710,577
Less Costs of S @: 2.0% 32,501 34,212
------ -----
Net Reversion $1,592,547 $1,676,366
1,593,000 1,676,000
SUMMARY OF VALUES AND KEY STATISTICS, UPON STABILIZATION
<TABLE>
<CAPTION>
Discount Reversion Value 3,036 Year 1 Year 2 Year 3 Year 4
Range Rate OAR (000's) $/Room 2002 2003 2004 2005
----- ---- --- ------- ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE BEFORE RENOVATIONS:
Low 23.0% 20.0% $1,276,000 $ 420,290 n.m n.m n.m n.m
High 23.0% 19.0% $1,292,000 $ 425,560 n.m n.m n.m n.m
Low 22.0% 20.0% $1,330,000 $ 438,076 n.m n.m n.m n.m
High 22.0% 19.0% $1,347,000 $ 443,676 n.m n.m n.m n.m
Low 21.0% 20.0% $1,388,000 $ 457,181 n.m n.m n.m n.m
High 21.0% 19.0% $1,406,000 $ 463,109 n.m n.m n.m n.m
VALUE AFTER RENOVATIONS:
Low 23.0% 20.0% $1,276,000 $ 420,290 18.1% 18.7% 19.3% 20.0%
High 23.0% 19.0% $1,292,000 $ 425,560 17.8% 18.5% 19.1% 19.8%
Low 22.0% 20.0% $1,330,000 $ 438,076 17.3% 17.9% 18.6% 19.2%
High 22.0% 19.0% $1,347,000 $ 443,676 17.1% 17.7% 18.3% 19.0%
Low 21.0% 20.0% $1,388,000 $ 457,181 16.6% 17.2% 17.8% 18.4%
High 21.0% 19.0% $1,406,000 $ 463,109 16.4% 17.0% 17.6% 18.2%
</TABLE>
<PAGE>
Qualifications of the Appraisers
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Professional Qualifications
RODNEY A. WYCOFF, CRE, MAI
EXPERIENCE: Landauer Associates, Inc., Los Angeles, California
(since June 1996)
Senior Managing Director. His responsibilities include
coordination of the firm's valuation activities throughout the
western United States and the Pacific Rim. Mr. Wycoff has over
20 years experience in the real estate industry as an
appraiser, consultant, lender, and manager. A specialist in
major investment real estate projects, his professional
background is briefly summarized as follows.
SMS Appraisals (1994-1996)
President. As President of SMS, Mr. Wycoff was responsible for
the general management of this $30M national organization. He
also directed facility management and developed new business
opportunities for Strategic Mortgage Services, the parent
company.
Wycoff & Company (1993-1994)
Mr. Wycoff established an Irvine based consulting practice
specializing in valuation and litigation support services
throughout Southern California. Typical engagements consisted
of valuation, consulting and asset management. The practice
was merged into SMS Appraisals in 1994.
Equitable Real Estate (1989-1993)
Vice President. In his capacities as first Regional Appraiser
and then Vice President of Asset Management for Equitable Real
Estate, Mr. Wycoff was responsible for the valuation and
management of a billion-dollar multi-state real property
portfolio. Typical assignments included all phases of
valuation and asset management including major renovation
projects.
Laventhol & Horwath (1985-1989)
Senior Principal. As director of the San Francisco based
valuation practice, Mr. Wycoff was involved in complex
consulting and valuation assignments involving major
hospitality and real estate projects throughout the western
United States, Hawaii, and the Pacific Rim.
Ginther Wycoff Group (1979-1985)
Principal. Mr. Wycoff was co-owner of this Denver-based
appraisal and consulting practice and specialized in the
valuation of major hotels, office buildings, industrial
developments, and recreational properties. The Ginther Wycoff
Group was purchased by Laventhol & Horwath in 1985.
New York Life Insurance Company (1974-1979)
Assistant Vice President. While employed by New York Life, Mr.
Wycoff served in several capacities in real estate lending,
management and investment, ultimately as Rocky Mountain
Regional Manager based in Denver, Colorado.
PROFESSIONAL
ACTIVITIES: MAI: Member, Appraisal Institute
CRE: American Society of Real Estate Counselors
LICENSE: Certified General Real Estate Appraiser
State of California No. AG007074
CERTIFICATION: Currently certified in the voluntary programs of
continuing education for the designated members
of the Appraisal Institute.
EDUCATION: AB Degree, California State University, San Francisco
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Professional Qualifications
KAREN BRADBURY JOHNSON, MAI
EXPERIENCE: Landauer Associates, Inc., Los Angeles, California
(effective November 1, 1996)
Managing Director. Ms. Johnson's responsibilities include the
day-to-day management of the hospitality consulting practices
and hands on involvement in most assignments. Her professional
background is briefly summarized as follows.
PFK Consulting, Inc., Los Angeles, California (1994-1996)
Vice President. While at PFK Consulting, Ms. Johnson
supervised and prepared appraisals of hotels, casinos, casino
land, spas, and other recreational projects. Ms. Johnson also
authored the chapter on management contracts for the Urban
Land Institute (ULI) Handbook on Hotel Development.
Gloodt Associates, Inc., Chicago, Illinois (1990-1994)
Director. In her capacity as Director of the Hospitality
Consulting practice, Ms. Johnson supervised a staff of three
and was responsible for complex valuation assignments
involving hotels, resorts, and unusual assets such as a
thoroughbred race track and an Apparel Mart. Ms. Johnson
also completed numerous reviews of third-party appraisal
reports for financial institutions to determine valuation
accuracy and compliance with bank and FIRREA reporting
standards
Marriott Hotels, Chicago, Illinois and Washington, D.C.
(1988-1990)
Regional Director, Hotel Development Planning. Ms. Johnson
supervised the midwestern regional office for Marriott's
Marketing Planning department, opining on viability of
proposed corporate developments.
Pannell Kerr Forster, various Southern California Offices
(1982-1988)
Senior Manager. Ms. Johnson began her consulting career with
Pannell Kerr Forster performing feasibility and financial
analyses of hotels, golf courses, spas and other recreational
projects and rose to become the head of the hospitality
consulting practice in San Diego.
EDUCATION: Michigan State University, 1978,
BS, Hotel and Restaurant Administration, Magna Cum Laude
PROFESSIONAL
ACTIVITIES: Member of the Appraisal Institute
LICENSES: Certified General Real Estate Appraiser
States of California, Arizona, Nevada, Colorado and Illinois
CERTIFICATION: Currently certified in the voluntary programs of continuing
education for the desginated members of the Appraisal
Institute.
<PAGE>
[LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS]
Professional Qualifications
JOHN R. FORBES, MAI
EXPERIENCE: Landauer Associates, Inc. Fort Lauderdale, FL (since 1996)
Director, Valuation and Technical Services Division
General real estate consulting, valuation, appraisal and
analysis of investment-grade, commercial real estate on a
national basis for financial institutions, investment
companies and individuals.
Chase Manhattan Bank New York, N.Y. (1990-1996)
Vice President, Real Estate Valuation Services Division.
Responsibilities included: comprehensive analysis, valuation
and performance review of a wide range of investment grade,
commercial real estate for underwriting, loan structuring,
securitization, acquisition/disposition and portfolio
management purposes; facilitation, coordination and quality
control of the external valuation process; and participation
in asset review to monitor credit risk.
Wm. Shubert& Co. Bronx, N.Y. (1990)
The Weitzman Group New York, N.Y. (1989)
Planned Expansion Group White Plains, N.Y. (1987-1988)
Houlihan & O'Malley Appraisal Co., Inc. Bronxville, N.Y.
(1985-1987)
Staff appraiser. Responsible for general real estate
consulting, including appraisals, of wide variety of
commercial and investment-grade properties.
Garthchester Realty Sales in Scarsdale, N.Y. (1985-1986).
Sales associate.
PROFESSIONAL
ACTIVITIES: MAI, Member of the Appraisal Institute
CERTIFICATION: New York State Certified General Real Estate Appraiser
(#4600-3862)
Licensed Real Estate Salesperson, State of New York
EDUCATION: Bachelor of Arts & Master of Arts, Montclair State College,
Montclair, N.J.
