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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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Commission File No. 1-12030
Stratosphere Corporation
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(Exact name of registrant as specified in its charter)
Delaware 88-0292318
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2000 Las Vegas Boulevard South
Las Vegas, Nevada 89104
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(Address of principal executive offices) (Zip Code)
(702) 382-4446
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding for each of the issuer's classes of
Common Stock, as of the latest practicable date: 2,030,000 as of August 10, 1999
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STRATOSPHERE CORPORATION
FORM 10-Q
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
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Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 27, 1999 (unaudited) and
December 27, 1998
3
Condensed Consolidated Statements of Operations (unaudited) for the
three months ended June 27, 1999 (Successor Company) and June 28, 1998
(Predecessor Company) 4
Condensed Consolidated Statements of Operations (unaudited) for the six
months Ended June 27, 1999 (Successor Company) and June 28, 1998
(Predecessor Company) 5
Condensed Consolidated Statements of Cash Flows (unaudited) for the six
months ended June 27, 1999 (Successor Company) and June 28, 1998
(Predecessor Company) 6-7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-15
Part II. OTHER INFORMATION 16
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED
BALANCE SHEETS STRATOSPHERE CORPORATION AND SUBSIDIARIES
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JUNE 27, DECEMBER 27,
1999 1998
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(In thousands, except per share amounts) (Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 20,713 $ 12,624
Cash and cash equivalents-restricted 2,151 2,218
Investments-restricted 451 3,291
Accounts receivable, net 1,959 2,619
Related party receivable, net 60 -
Other current assets 5,762 5,427
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Total Current Assets 31,096 26,179
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Property and Equipment, Net 124,262 126,173
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Other Assets:
Deferred financing costs, net 298 194
Other receivable 3,000 3,000
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Total Other Assets 3,298 3,194
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TOTAL ASSETS $ 158,656 $ 155,546
===================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-trade $ 1,811 $ 1,407
Current installments of long-term debt 148 148
Current installments of capital lease obligations 2,667 8,979
Accrued payroll and related expenses 5,296 5,146
Other accrued expenses 12,483 12,878
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Total Current Liabilities 22,405 28,558
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Long-Term Liabilities:
Long-term note payable-less current installments 5 94
Capital lease obligations-less current installments 7,111 -
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Total Long-Term Liabilities 7,116 94
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TOTAL LIABILITIES 29,521 28,652
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Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value; authorized 3,000,000 shares;
no shares issued and outstanding - -
Common stock, $.01 par value; authorized 10,000,000 shares;
issued and outstanding 2,030,000 20 20
Additional paid-in-capital 127,058 127,058
Retained earnings (accumulated deficit) 2,057 (184)
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Total Shareholders' Equity 129,135 126,894
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 158,656 $ 155,546
===================================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS STRATOSPHERE CORPORATION AND SUBSIDIARIES
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SUCCESSOR PREDECESSOR
COMPANY COMPANY
THREE MONTHS ENDED JUNE 28, 1999 AND JUNE 28, 1998 1999 1998
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(In thousands, except per share amounts) (Unaudited) (Unaudited)
REVENUES:
<S> <C> <C>
Casino $ 11,272 $ 13,728
Hotel 6,113 6,329
Food and beverage 8,227 8,554
Tower, retail and other income 6,513 7,569
- ------------------------------------------------------------------------------------------------------------------------------
Gross Revenues 32,125 36,180
Less: Promotional allowances 2,354 3,214
- ------------------------------------------------------------------------------------------------------------------------------
NET REVENUES 29,771 32,966
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COSTS AND EXPENSES:
Casino 6,549 7,702
Hotel 3,574 2,837
Food and beverage 6,353 6,227
Other operating expenses 2,791 3,095
Depreciation and amortization 2,057 2,093
Selling, general and administrative 8,216 8,516
- ------------------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 29,540 30,470
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INCOME FROM OPERATIONS 231 2,496
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OTHER INCOME (EXPENSE):
Interest income 168 -
Interest expense (196) (380)
Loss on sale of assets (16) (37)
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Total Other Expense, net (44) (417)
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INCOME BEFORE REORGANIZATION ITEMS AND INCOME TAXES 187 2,079
- ------------------------------------------------------------------------------------------------------------------------------
REORGANIZATION ITEMS: - (3,685)
INCOME (LOSS) BEFORE INCOME TAXES 187 (1,606)
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Provision for Income Taxes 65 -
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NET INCOME (LOSS) $ 122 $ (1,606)
==============================================================================================================================
BASIC INCOME PER COMMON SHARE $ 0.06 *
==============================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,030 *
==============================================================================================================================
</TABLE>
* Earnings per share is not presented for the three months ended June 28, 1998
because such presentation would not be meaningful. The Old Common Stock was
cancelled and the New Common Stock was issued pursuant to the Restated Second
Amended Plan.
See notes to condensed consolidated financial statements.
4
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS STRATOSPHERE CORPORATION AND SUBSIDIARIES
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SUCCESSOR PREDECESSOR
COMPANY COMPANY
SIX MONTHS ENDED JUNE 28, 1999 AND JUNE 28, 1998 1999 1998
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(In thousands, except per share amounts) (Unaudited) (Unaudited)
REVENUES:
<S> <C> <C>
Casino $ 24,965 $ 28,717
Hotel 12,689 12,286
Food and beverage 17,387 17,503
Tower, retail and other income 13,512 14,934
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Gross Revenues 68,553 73,440
Less: Promotional allowances 4,867 6,296
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NET REVENUES 63,686 67,144
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COSTS AND EXPENSES:
Casino 13,579 15,644
Hotel 7,046 6,014
Food and beverage 12,934 12,642
Other operating expenses 5,597 6,451
Depreciation and amortization 4,282 4,032
Selling, general and administrative 16,602 16,725
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Total Costs and Expenses 60,040 61,508
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INCOME FROM OPERATIONS 3,646 5,636
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OTHER INCOME (EXPENSE):
Interest income 309 -
Interest expense (440) (845)
Loss on sale of assets (68) (42)
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Total Other Expense, net (199) (887)
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INCOME BEFORE REORGANIZATION ITEMS AND INCOME TAXES 3,447 4,749
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REORGANIZATION ITEMS: - (5,050)
INCOME (LOSS) BEFORE INCOME TAXES 3,447 (301)
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Provision for Income Taxes 1,206 -
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NET INCOME (LOSS) $ 2,241 $ (301)
===================================================================================================================================
BASIC INCOME PER COMMON SHARE $ 1.10 *
===================================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,030 *
===================================================================================================================================
</TABLE>
* Earnings per share is not presented for the six months ended June 28, 1998
because such presentation would not be meaningful. The Old Common Stock was
cancelled and the New Common Stock was issued pursuant to the Restated Second
Amended Plan.
See notes to condensed consolidated financial statements.
5
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS STRATOSPHERE CORPORATION AND SUBSIDIARIES
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SUCCESSOR PREDECESSOR
COMPANY COMPANY
1999 1998
SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998
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(In thousands) (Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,241 $ (301)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,457 4,238
Reorganization Items :
Professional Fees - 2,000
Management Retention Expense - 233
Vegas World Vacation Package Settlement - 3,347
Interest Earned on Accumulated Cash During
Chapter 11 Proceedings - (530)
Provision for doubtful accounts (115) 193
Loss on sale or disposal of assets 67 42
Changes in operating assets and liabilities:
Accounts receivable 775 172
Related party receivable and other receivables (60) -
Other current assets (335) (233)
Accounts payable - trade 404 (190)
Other accrued expenses (pre-petition) - (10)
Other accrued expenses (post-petition) (235) 1,062
------------------------
Net Cash Provided by Operating Activities Before Reorganization Items 7,199 10,023
------------------------
Increases (decreases) to Cash Resulting from Reorganization Items:
Professional fees paid - (2,244)
Management Retention Disbursements - (706)
Interest Earned on Accumulated Cash During
Chapter 11 Proceedings - 530
------------------------
Net Cash Used in Reorganization Items - (2,420)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 7,199 7,603
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CASH FLOWS FROM INVESTING ACTIVITIES:
Change in cash and cash equivalents-restricted 67 342
Change in investments-restricted 2,841 (77)
Payments for equipment (311) (828)
Payments for capital projects (1,489) -
Payments for operating lease equipment obligation (1,000) -
Cash proceeds from sale of property and equipment 360 308
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 468 (255)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (89) (110)
Payments on capital lease obligations (9,201) (4,636)
Decrease in affiliate payable - (16)
Proceeds from capital lease obligations 10,000 -
Increase in deferred financing costs (288) -
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 422 (4,762)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 8,089 2,586
Cash and cash equivalents - beginning of period 12,624 20,326
- ---------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 20,713 $ 22,912
=================================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS STRATOSPHERE CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------
SUCCESSOR PREDECESSOR
COMPANY COMPANY
SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------
(In thousands) (Unaudited) (Unaudited)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest-net of capitalized interest $ 255 $ 629
Income taxes 200 -
Non-Cash Investing and Financing Activities:
Increase (decrease) in land and building from
reduction in notes receivable from stockholder - 350
</TABLE>
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS STRATOSPHERE CORPORATION AND SUBSIDIARIES
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(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
The accompanying condensed consolidated financial statements present the
financial position, results of operations and cash flows of Stratosphere
Corporation and its wholly-owned subsidiaries, Stratosphere Gaming Corp.,
Stratosphere Land Corporation, Stratosphere Advertising Agency and 2000 Las
Vegas Boulevard Retail Corporation (collectively the "Company"). The Company
operates an integrated casino, hotel and entertainment facility and a 1,149
foot, free-standing observation tower located in Las Vegas, Nevada.
On January 27, 1997 ("Petition Date"), Stratosphere Corporation and its
wholly-owned subsidiary Stratosphere Gaming Corp. ("SGC" and collectively with
Stratosphere Corporation, the "Debtors") filed voluntary petitions for Chapter
11 Reorganization pursuant to the United States Bankruptcy Code. As of that
date, the United States Bankruptcy Court for the District of Nevada ("Bankruptcy
Court") assumed jurisdiction over the assets of Stratosphere Corporation and
SGC. On June 9, 1998, the Bankruptcy Court entered an order (the "Confirmation
Order") confirming the Restated Second Amended Plan of Reorganization filed by
the Debtors (the "Restated Second Amended Plan"). On October 14, 1998, the
Restated Second Amended Plan became effective. All material conditions precedent
to the Restated Second Amended Plan becoming binding were satisfied on or before
September 27, 1998. Accordingly, the Company reflected the effect of the
Restated Second Amended Plan as of September 27, 1998.
Principles of Presentation
The condensed consolidated financial statements have been prepared in accordance
with the accounting policies described in the Company's 1998 Annual Report on
Form 10-K. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
financial statements be read in conjunction with the notes to the consolidated
financial statements which appear in that report.
As a result of the restructuring, the Company implemented the guidance provided
by the American Institute of Certified Public Accountants Statement of Position
90-7 "Financial Reporting By Entities In Reorganization Under The Bankruptcy
Code" ("AICPA SOP 90-7") and as such, adopted "fresh start reporting" as of
September 27, 1998. The Company's emergence from its Chapter 11 proceedings
resulted in a new reporting entity with no retained earnings or accumulated
deficit as of September 27, 1998. Accordingly, the Company's condensed
consolidated financial statements for periods prior to September 27, 1998, are
not comparable to consolidated financial statements presented on or subsequent
to September 27, 1998. Column headings have been included on the accompanying
Condensed Consolidated Statements of Operations and Condensed Consolidated
Statement of Cash Flows to distinguish between the predecessor and successor
entities.
In the opinion of management, the accompanying condensed consolidated financial
statements include all adjustments (consisting only of a normal recurring
nature) which are necessary for a fair presentation of the results for the
interim periods presented. Certain information and footnote disclosures normally
included in financial statements have been condensed or omitted pursuant to such
rules and regulations of the Securities and Exchange Commission. Interim results
are not necessarily indicative of results to be expected for any future interim
period or for the entire fiscal year. Significant intercompany accounts and
transactions have been eliminated.
Reclassifications
Certain amounts in the 1998 condensed consolidated financial statements have
been reclassified to conform to the 1999 presentation. These reclassifications
had no effect on the Company's net income.
8
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Earnings Per Share ("EPS")
The Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS
128") in 1997. However, there is no effect on the EPS calculation as all Common
Stock and equivalents have been canceled as of the Effective Date. Pursuant to
the Restated Second Amended Plan, 2,030,000 shares of new Common Stock were
issued on the Effective Date. There were no other Common Stock equivalents as of
June 27, 1999.
Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The FASB recently adopted an amendment to SFAS
No. 133, which delays the effective date for one year. The Company currently
does not engage in, nor does it expect to engage in, derivative or hedging
activities, and therefore, the Company anticipates there will be no impact to
its consolidated financial statements.
(2) RESTRUCTURING
Pursuant to the Restated Second Amended Plan becoming effective on October 14,
1998, the Company canceled all prior equity interests (including 58.4 million
shares of Common Stock, options and warrants) and exchanged 2,030,000 shares of
new Common Stock for the secured portion of the 14 1/4% First Mortgage Notes
(estimated at $120.6 million). Approximately 89.6% of the new Common Stock was
issued to Carl C. Icahn related entities. The remaining portion of the 14 1/4%
First Mortgage Notes claim (approximately $104 million), the balance of the note
due Grand Casinos, Inc. (approximately $52.4 million) and all other general
unsecured claims were discharged in exchange for cash payments which will total
$6.0 million. Allowed priority claims (estimated at $.9 million) were paid in
full. The discharge and settlement of these claims resulted in a gain of $153.4
million, which was reflected as an extraordinary item on the September 27, 1998,
consolidated statement of operations. The amount of the gain was based on the
Company's estimate of the amount of claims that will ultimately be allowable by
the Bankruptcy Court, and was not based on the total of actual claims filed. In
the event additional unsecured claims are allowed by the Bankruptcy Court, it
will not increase the cash the Company is required to distribute for full debt
discharge. A portion of the $6.9 million to be distributed has been reserved for
potential future settlement of unsecured claim disputes (approximately $1.8
million).
(3) LEASES AND CAPITAL LEASE OBLIGATIONS
During April 1999, the Company made the final $6.9 million payment on its
capital lease obligations. On May 28, 1999, the Company made the final $1.0
million payment on its operating lease thereby acquiring ownership of the leased
equipment.
The Company entered into a new $10.0 million capital lease obligation ("New
Capital Lease Obligation") in which certain existing gaming and other equipment
was financed over a thirty-six month period. Interest will be calculated based
on the LIBO rate for each period plus 2.5%. The current rate of interest for the
period ended June 27, 1999, was 7.56%. A $2.0 million balloon payment will be
due upon conclusion of the thirty-six month term. The New Capital Lease
Obligation contains certain covenants that effectively would create an event of
default if the current controlling stockholder of the Company were to cease to
be the beneficial owner of at least 51% of the Company's Common Stock. The
covenants also restrict the Company from incurring more than $5.0 million in
additional debt without the consent of the creditors of the New Capital Lease
Obligation. A copy of the documents relating to the New Capital Lease Obligation
have been attached as an exhibit to this Form 10-Q.
(4) INCOME TAXES
The tax effect of significant temporary differences representing deferred tax
assets for the Company principally consist of the excess of tax over book basis
of assets due to the write down of assets. The Company has recorded a valuation
allowance at June 27, 1999, related to recorded tax benefits because of the
significant uncertainty as to whether such benefits will ever be realized. To
the extent realized, benefits remaining from
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tax attributes will be reported as direct additions to contributed capital.
(5) RELATED PARTY TRANSACTIONS
Carl C. Icahn related entities own approximately 89.6% of the Company's Common
Stock as of June 27, 1999. Since January 1999, Mr. Daniel A. Cassella and Mr.
Thomas A. Lettero, Chief Executive Officer and Chief Financial Officer,
respectively, provided management services to Arizona Charlie's, Inc. (an entity
owned 100% by Mr. Icahn). The Company has recorded a $60,000 receivable that was
reimbursed on June 29, 1999, for payroll and other expenses related to the
services performed from March 28, 1999, to June 27, 1999.
Pursuant to a wholesale tour and travel agreement with Lowestfare.com (a company
owned by Mr. Icahn), the Company received hotel revenues of $.1 million during
the 1999 second quarter.
(6) CONTINGENCIES
McDonald's Corporation filed a proof of claim in the Bankruptcy Proceedings in
which it asserted both an administrative and a general unsecured claim related
to a lease of premises located within the Stratosphere. The Debtors filed an
objection to the claim. The Bankruptcy Court sustained the objection to the
general unsecured claim upon a motion for summary judgment filed by the Debtors.
In June 1999, a hearing was held in the Bankruptcy Court for the objection to
the administrative claim of $410,843 for guaranteed income provided for by the
lease during the administrative period of the Bankruptcy Proceedings and for a
preference action against McDonald's by the Company for approximately $700,000
in payments made to McDonald's prior to the Bankruptcy filing. As of August 10,
1999, a decision has not been rendered by the Bankruptcy Court judge.
In addition, in the ordinary course of business, the Company is party to various
legal actions. In management's opinion, the ultimate outcome of such legal
actions will not have a material effect on the results of operations or the
financial position of the Company.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains trend information and other forward-looking
statements that involve a number of risks and uncertainties. The actual results
of the Company could differ materially from the Company's historical results of
operations and those discussed in the forward-looking statements.
OVERVIEW
The Company operates an integrated casino, hotel and entertainment facility and
a 1,149 foot, free-standing observation tower in Las Vegas, Nevada. As of August
10, 1999, the operations included 1,593 slot machines, 44 table games, 6 poker
tables, a sports book, keno lounge, 1,444 hotel rooms and five themed
restaurants.
On January 27, 1997 ("Petition Date"), Stratosphere Corporation and its
wholly-owned subsidiary Stratosphere Gaming Corp. ("SGC" and collectively with
Stratosphere Corporation, the "Debtors") filed voluntary petitions for Chapter
11 Reorganization pursuant to the United States Bankruptcy Code. As of that
date, the United States Bankruptcy Court for the District of Nevada ("Bankruptcy
Court") assumed jurisdiction over the assets of Stratosphere Corporation and
SGC. Stratosphere Corporation and SGC were acting as debtors-in-possession on
behalf of their respective bankrupt estates, and were authorized as such to
operate their business subject to Bankruptcy Court supervision. On June 9, 1998,
the Bankruptcy Court entered an order (the "Confirmation Order") confirming the
Restated Second Amended Plan of Reorganization filed by the Debtors (the
"Restated Second Amended Plan"). On October 14, 1998, the Restated Second
Amended Plan became effective. All material conditions precedent to the Restated
Second Amended Plan becoming binding were satisfied on or before September 27,
1998. Accordingly, the Company has reflected the effect of the Restated Second
Amended Plan as of September 27, 1998.
As a result of the restructuring, the Company implemented the guidance provided
by the American Institute of Certified Public Accountants Statement of Position
90-7 "Financial Reporting By Entities In Reorganization Under The Bankruptcy
Code" ("AICPA SOP 90-7") and as such, adopted "fresh start reporting" as of
September 27, 1998. The Company's emergence from its Chapter 11 proceedings
resulted in a new reporting entity with no retained earnings or accumulated
deficit as of September 27, 1998. Accordingly, the Company's condensed
consolidated financial statements for periods prior to September 27, 1998, are
not comparable to consolidated financial statements presented on or subsequent
to September 27, 1998. Column headings have been included on the accompanying
Condensed Consolidated Statements of Operations and Condensed Consolidated
Statement of Cash Flows to distinguish between the predecessor and successor
entities.
Pursuant to the Restated Second Amended Plan becoming effective on October 14,
1998, the Company canceled all prior equity interests (including the 58.4
million outstanding shares of Common Stock, options and warrants) and exchanged
2,030,000 shares of new Common Stock for the secured portion of the 14 1/4%
First Mortgage Notes (estimated at $120.6 million). Approximately 89.6% of the
new Common Stock was issued to Carl C. Icahn related entities. The remaining
portion of the 14 1/4% First Mortgage Notes claim (approximately $104 million),
the balance of the note due Grand Casinos, Inc. (approximately $52.4 million)
and all other general unsecured claims will be discharged in exchange of a cash
payment of $6.0 million. Certain priority claims (estimated at $.9 million) were
paid in full. The discharge and settlement of these claims resulted in a gain of
$153.4 million, which was reflected as an extraordinary item on the September
27, 1998 consolidated statements of operations. The amount of the gain was based
on the Company's estimate of the amount of claims that will ultimately be
allowable by the Bankruptcy Court, and was based on the total of actual claims
filed. In the event additional unsecured claims are allowed by the Bankruptcy
Court, it will not increase the Company's cash required for full debt discharge.
A portion of the $6.9 million to be distributed has been reserved for potential
future settlement of unsecured claim disputes (approximately $1.8 million).
RESULTS OF OPERATIONS
The following is a discussion of the comparison of operating results for the
second quarter of 1999 (Successor Company) and 1998 (Predecessor Company) and
the six months ended June 27, 1999 (Successor Company) and June 28, 1998
(Predecessor Company). These comparisons are included in this Form 10-Q since
operations have remained similar during the pre and post-reorganization periods
and such
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comparison would not be misleading.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 27, 1999 AND
JUNE 28, 1998
Revenues
Casino revenues of $11.3 million for the 1999 second quarter were $2.5 million
(18%) less than the same period in 1998. Management attributes the decline to
increased competition with the opening of three new mega resorts on the Las
Vegas Strip. Competition is expected to continue to increase during the next
twelve months with the opening of two additional mega resorts. A portion
(approximately $.5 million) of reduction in casino revenue is due to a lower
than normal hold percentage relating to table games revenues. Casino marketing
efforts continue to be directed toward the development of several promotional
events and direct mail programs targeting casino guest visits during lower
occupancy periods. Casino revenues represented 35% and 38% of total gross
revenues for the second quarters of 1999 and 1998, respectively.
Hotel revenues of $6.1 million for the 1999 second quarter were approximately
$.2 million (3%) lower than the same period in 1998. Hotel occupancy was 89%
during the 1999 second quarter as compared to 93% in 1998. The average rate per
guestroom was $52 during the 1999 second quarter as compared to $51 in 1998.
Hotel revenues averaged 19% and 17% of total gross revenues during the second
quarter of 1999 and 1998, respectively. Management anticipates increased
competition for hotel room sales during the next twelve months with the increase
of approximately 6,000 newly constructed hotel rooms on the Las Vegas Strip.
Tower, retail and other revenues of $6.5 million for the 1999 second quarter
were approximately $1.1 million (14%) less than the same period in 1998.
Tower visitations (including the Top of The World dining) totaled 556,234 during
the 1999 second quarter as compared to 656,724 for the same period in 1998. Ride
admissions of 222,024 for the 1999 second quarter were 104,347 (32%) less than
the same period in 1998. The decline in ride admissions and tower admissions was
due primarily to closing of the "High Roller" roller coaster for maintenance
during April 1999 (approximately 30 days) and a decline in hours of operation
due to adverse weather conditions (mainly high winds). The annual ride
maintenance program has been completed and is not anticipated to be a factor
during the next several quarters.
Costs and Expenses
Casino operating costs declined approximately 15% from $7.7 million for the 1998
second quarter to $6.5 million for 1999. The majority of this expense reduction
was due to a $1.1 million reduction in promotional expenses and the cost of
providing complimentary room, food and beverage to casino guests.
Hotel operating costs increased 26% from $2.8 million for the 1998 second
quarter to $3.6 million for 1999. Approximately $.5 million of the increase is
due to fewer room nights being provided to casino guests on a complimentary
basis in the 1999 second quarter, the cost of which is charged to casino
operations. The remainder of the increase was due to increased wages.
Other operating expenses decreased 10% from $3.1 million for the 1998 second
quarter to $2.8 million for 1999. The majority of this reduction is due to
reduced entertainer fees and payroll costs associated with the showroom and
Tower operations.
Other Factors Impacting Earnings
Interest income was approximately $.2 million for the 1999 second quarter.
Interest income earned during the same period in 1998 of approximately $.3
million was classified as a Reorganization item.
Interest expense decreased 48% from $.4 million for the 1998 second quarter to
$.2 million for 1999. The decrease was due to a reduction in interest associated
with the Company's capital lease obligations. The Company financed the New
Capital Lease Obligation of $10.0 million on May 28, 1999. The current rate of
interest is 7.56% (see Liquidity and Capital Resources).
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The Company recorded expense from Reorganization items totaling $3.7 million
during the 1998 second quarter. Since the Effective Date, any unaccrued
professional fees related to the reorganization will be classified as a selling,
general and administrative expense.
The Company recorded a provision for income taxes of approximately $.1 million
for the 1999 second quarter. In the event the Company is able to utilize any of
its deferred tax assets in future periods, any such tax benefit will be reported
as a direct addition to contributed capital.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 27, 1999 AND JUNE
28, 1998
Casino revenues of $25.0 million for the six months ended June 27, 1999 were
$3.8 million (13%) less than the same period in 1998. Management attributes the
decline in casino revenues to increased competition with the opening of three
new mega resorts on the Las Vegas Strip (Bellagio, Mandalay Bay, and Venetian).
Additional competition is anticipated during the next twelve months with the
opening of two additional mega resorts on the Las Vegas Strip. Casino marketing
efforts continue to be directed toward the development of several promotional
events and direct mail programs targeting casino guest visits during lower
occupancy periods.
Tower, retail and other revenues of $13.5 million for the six months ended June
27, 1999 was $1.4 million (10%) less than the same period in 1998. Tower
visitation (including the Top of The World dining) totaled 1,136,057 during the
six months ended June 27, 1999, as compared to 1,293,223 for the same period in
1998.
Ride admissions of 549,590 for the six-month period ended June 27, 1999, were
37,963 (6.5%) less than the same period in 1998. The decline in Tower and ride
admissions was primarily due to closing the "High Roller" roller coaster for
maintenance during April of 1999 and a decline in hours of operation due to the
occurrence of more adverse weather conditions during 1999. The annual ride
maintenance program has been completed and is not anticipated to be a factor
during the next several quarters.
Promotional allowances decreased from $6.3 million during the six months ended
June 28, 1998, to $4.9 million for the same period in 1999. The reduction in
promotional allowances was the result of less direct mail promotions that
include room, food and beverage being offered to guests on a complimentary
basis. Management anticipates that promotional allowance will increase during
future periods with an increase in direct marketing efforts and special events
offered to casino guests.
Costs and Expenses
Casino operating costs declined approximately 13% from $15.6 million for the six
months ended June 28, 1998, to $13.6 million for the same period in 1999. The
majority of the decline in casino operating expenses resulted from a $1.3
million reduction in the cost of providing complimentary room, food and beverage
to casino guests. Management anticipates future increases in these costs
resulting from the implementation of additional promotions and direct mail
programs.
Hotel operating costs increased 17% from $6.0 million for the six months ended
June 28, 1998, to $7.0 million for 1999. Approximately $.8 million of the
increase is due to fewer room nights being provided to casino guests on a
complimentary basis, the cost of which is charged to casino operations.
Other operating expenses decreased 13% from $6.5 million for the six months
ended June 28, 1998, to $5.6 million for 1999. The majority of this reduction is
due to reduced entertainer fees and payroll costs associated with the showroom
and Tower operations.
Other Factors Impacting Earnings
Depreciation and amortization increased 6% from $4.0 million for the six months
ended June 28, 1998, to $4.3 million for 1999. The increase in depreciation is
due primarily to the $8.6 million increase in asset values relating to the
adoption of "fresh start reporting" on September 27, 1998.
13
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Interest income was approximately $.3 million for the six months ended June 27,
1999. Interest income earned during the same period in 1998 of approximately $.5
million was classified as a Reorganization item.
Interest expense decreased 48% from $.8 million for the six months ended June
28, 1998, to $.4 million for 1999. The decrease was due to a reduction in
interest associated with the Company's capital lease obligations. The Company
financed the New Capital Lease Obligation of $10.0 million on May 28, 1999. The
current rate of interest is 7.56% (see Liquidity and Capital Resources).
The Company recorded expense from Reorganization items totaling $5.0 million
during the six months ended June 28, 1998. Since the Effective Date, any
unaccrued professional fees related to the reorganization will be classified as
a selling, general and administrative expense.
The Company recorded a provision for income taxes of $1.2 million for the six
months ended June 27, 1999. In the event the Company is able to utilize any of
its deferred tax assets in future periods, any such tax benefit will be reported
as a direct addition to contributed capital.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow, Working Capital and Capital Expenditures
During the six month period ended June 27, 1999, the Company generated $7.2
million from operating activities. These funds, combined with a portion of
unrestricted cash, were used to fund capital expenditures of $1.8 million, the
final payments on capital lease and operating obligations of $9.2 million and
$1.0 million, respectively. The Company had unrestricted cash balances of $20.7
million as of June 27, 1999.
On May 28, 1999, the Company entered into the $10.0 million New Capital Lease
Obligation in which certain existing gaming and other equipment was financed
over a thirty-six month period. Interest will be calculated based on the LIBO
rate for each period plus 2.5%. The current rate of interest for the period
ended June 27, 1999, was 7.56%. A $2.0 million balloon payment will be due upon
conclusion of the thirty-six month term. The New Capital Lease Obligation
contains certain covenants that effectively would create an event of default if
the current controlling stockholder of the Company were to cease to be the
beneficial owner of at least 51% of the Company's Common Stock. The covenants
also restrict the Company from incurring more than $5.0 million in additional
debt without the consent of the creditors of the New Capital Lease Obligation. A
copy of the documents relating to the New Capital Lease Obligation have been
attached as an exhibit to this Form 10-Q.
As of June 27, 1999, the Company had approximately $1.8 million reserved for
disputed claims related to the Restated Second Amended Plan. The $1.8 million of
disputed claims is classified as other accrued liabilities on the accompanying
June 27, 1999, Condensed Consolidated Balance Sheet. The remaining payments will
be made from restricted cash and/or investment balances.
The Company anticipates completing various enhancement projects during the next
twelve months. Included in these projects is a new race and sports book, deli
and entertainment lounge with a combined estimated cost of approximately $3.5
million of which approximately $1.5 million has been spent as of August 10,
1999. In addition, the Company estimates that other capital expenditures will be
approximately $4.0 million during the next twelve months. The Company
anticipates funding the enhancements and other capital expenditures from
operating activities or unrestricted cash balances, if needed.
Year 2000
The Company's hardware configuration, casino operating system, hotel property
management and financial accounting system upgrades have been completed. These
upgrades, combined with other operating systems that are already Year 2000
compliant, represent completion of the Company's most critical systems.
Management continues to assess all other information support systems throughout
the Company, as well as those systems it relies on from its primary vendors. The
Company plans to be Year 2000 compliant with all remaining internal systems
prior to the end of the 1999 third quarter. Management currently estimates
14
<PAGE> 15
that the combined upgrades and purchases of new systems may total approximately
$2.6 million. Approximately $2.2 million has been spent as of August 10, 1999.
There can be no assurance based on future assessment or other changed
circumstances that the amount estimated will represent the actual costs
incurred. In addition, the Company's ability to upgrade its software timely is
largely dependent on the performance of its software vendors.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Form 10-Q
and other materials filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by the Company) contains statements that
are forward-looking, such as statements relating to plans for future expansion,
future construction costs and other business development activities as well as
other capital spending, financing sources and the effects of regulation
(including gaming and tax regulation) and competition. Such forward-looking
information involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made by or on
behalf of the Company. These risks and uncertainties include, but are not
limited to, those relating to development and construction activities,
dependence on existing management, leverage and debt service (including
sensitivity to fluctuations in interest rates), domestic or global economic
conditions, changes in federal or state tax laws or the administration of such
laws and changes in gaming laws or regulations (including the legalization of
gaming in certain jurisdictions).
15
<PAGE> 16
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
McDonald's Corporation filed a proof of claim in the Bankruptcy Proceedings in
which it asserted both an administrative and a general unsecured claim related
to a lease of premises located within the Stratosphere. The Debtors filed an
objection to the claim. The Bankruptcy Court sustained the objection to the
general unsecured claim upon a motion for summary judgment filed by the Debtors.
A hearing was held during June 1999 in the Bankruptcy Court for the objection to
the administrative claim of $410,843 for guaranteed income provided for by the
lease during the administrative period of the Bankruptcy Proceedings and for a
preference action against McDonald's by the Company for approximately $700,000
in payments made to McDonald's prior to the Bankruptcy filing. As of August 10,
1999, a decision has not been rendered by the Bankruptcy Court judge.
In addition, in the ordinary course of business, the Company is party to various
legal actions. In management's opinion, the ultimate outcome of such legal
actions will not have a material effect on the results of operations or the
financial position of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(1) Participation Agreement, dated as of May 28, 1999, among
Stratosphere Gaming Corp., as Lessee, Stratosphere
Corporation, as Guarantor, First Security Trust Company of
Nevada, as Lessor and Trustee, The Persons Listed on Schedule
II, as Lenders and Heller Financial Leasing, Inc., as Agent.
10(2) Exhibit A to Participation Agreement Form of Lease Agreement,
dated as of May 28, 1999, between First Security Trust Company
of Nevada, not in its individual capacity, except as expressly
stated herein, but solely as Trustee, as Lessor, and
Stratosphere Gaming Corp., as Lessee.
10(3) Exhibit B to Participation Agreement Form of Loan Agreement,
dated as of May 28, 1999, among First Security Trust Company
of Nevada, not in its individual capacity, except as expressly
stated herein, but solely as Trustee, as Borrower, Heller
Financial Leasing, Inc., as Agent, and The Persons Listed on
Schedule I, as Lenders.
10(4) Exhibit C to Participation Agreement Form of Trust Agreement,
dated as of May 28, 1999, between Stratosphere Gaming Corp.,
as Grantor, and First Security Trust Company of Nevada, as
Trustee.
10(5) Exhibit D to Participation Agreement Form of Security
Agreement and Assignment of Lease, dated as of May 28, 1999,
between First Security Trust Company of Nevada, not in its
individual capacity but solely as Trustee, and Heller
Financial Leasing, Inc. as Agent
10(6) Exhibit E to Participation Agreement Form of Guaranty, dated
as of May 28, 1999, of Stratosphere Corporation in favor of
The Beneficiaries Named Herein.
10(7) Exhibit G to Participation Agreement Landlord Waiver and
Consent
10(8) Exhibit H to Participation Agreement Form of Advance Request
10(9) Exhibit I to Participation Agreement Form of Bill of Sale
10(10) Exhibit J to Participation Agreement Form of Certificate of
Acceptance of Lessee
10(11) Exhibit K to Participation Agreement Form of Investor's Letter
16
<PAGE> 17
10(12) Exhibit M to Participation Agreement Form of Opinion of
Counsel To Parent and Lessee
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the fiscal quarter
ended June 27, 1999.
17
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
STRATOSPHERE CORPORATION
Date: August 10, 1999 By: /s/ Daniel A. Cassella
----------------------------------------------
Name: Daniel A. Cassella
----------------------------------------------
Title: Chief Executive Officer/President/Director
----------------------------------------------
By: /s/ Thomas A. Lettero
----------------------------------------------
Name: Thomas A. Lettero
----------------------------------------------
Title: Secretary/Treasurer/CFO
----------------------------------------------
18
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EXHIBIT INDEX
STRATOSPHERE CORPORATION
Exhibit
No.
- ---------
(a) Exhibits
10(1) Participation Agreement, dated as of May 28, 1999, among
Stratosphere Gaming Corp., as Lessee, Stratosphere
Corporation, as Guarantor, First Security Trust Company of
Nevada, as Lessor and Trustee, The Persons Listed on Schedule
II, as Lenders and Heller Financial Leasing, Inc., as Agent.
10(2) Exhibit A to Participation Agreement Form of Lease Agreement,
dated as of May 28, 1999, between First Security Trust Company
of Nevada, not in its individual capacity, except as expressly
stated herein, but solely as Trustee, as Lessor, and
Stratosphere Gaming Corp., as Lessee.
10(3) Exhibit B to Participation Agreement Form of Loan Agreement,
dated as of May 28, 1999, among First Security Trust Company
of Nevada, not in its individual capacity, except as expressly
stated herein, but solely as Trustee, as Borrower, Heller
Financial Leasing, Inc., as Agent, and The Persons Listed on
Schedule I, as Lenders.
10(4) Exhibit C to Participation Agreement Form of Trust Agreement,
dated as of May 28, 1999, between Stratosphere Gaming Corp.,
as Grantor, and First Security Trust Company of Nevada, as
Trustee.
10(5) Exhibit D to Participation Agreement Form of Security
Agreement and Assignment of Lease, dated as of May 28, 1999,
between First Security Trust Company of Nevada, not in its
individual capacity but solely as Trustee, and Heller
Financial Leasing, Inc. as Agent
10(6) Exhibit E to Participation Agreement Form of Guaranty, dated
as of May 28, 1999, of Stratosphere Corporation in favor of
The Beneficiaries Named Herein.
10(7) Exhibit G to Participation Agreement Landlord Waiver and
Consent
10(8) Exhibit H to Participation Agreement Form of Advance Request
10(9) Exhibit I to Participation Agreement Form of Bill of Sale
10(10) Exhibit J to Participation Agreement Form of Certificate of
Acceptance of Lessee
10(11) Exhibit K to Participation Agreement Form of Investor's Letter
10(12) Exhibit M to Participation Agreement Form of Opinion of
Counsel To Parent and Lessee
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the fiscal quarter
ended June 27, 1999.
19
<PAGE> 1
PARTICIPATION AGREEMENT
dated as of May 28, 1999
among
STRATOSPHERE GAMING CORP.,
as Lessee,
STRATOSPHERE CORPORATION,
as Guarantor,
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Lessor and Trustee,
THE PERSONS LISTED ON SCHEDULE II,
as Lenders
and
HELLER FINANCIAL LEASING, INC.,
as Agent
Financing for Equipment Associated with
Stratosphere Casino and Hotel in Las Vegas, Nevada
<PAGE> 2
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ARTICLE I DEFINITIONS 1
ARTICLE II EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS 1
SECTION 2.1. Effectiveness of Agreement 1
SECTION 2.2. Advances 2
SECTION 2.3. Notes 3
SECTION 2.4. Procedures for Advance; Use of Proceeds 3
SECTION 2.5. Postponement of Advance 3
SECTION 2.6. Obligations Several 4
SECTION 2.7. Timing of Advance to Trustee and Payments to Lenders 4
SECTION 2.8. Lenders' Instructions to Agent 4
SECTION 2.9. Computations 4
SECTION 2.10. Fees 5
SECTION 2.11. Legal and Tax Representation 5
SECTION 2.12. Amortization Schedule 5
SECTION 2.13. Replacement of Equipment 5
SECTION 2.14. The Account 5
SECTION 3.1. Advance Date 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES 8
SECTION 4.1. Representations and Warranties of Lessee and Guarantor 8
SECTION 4.2. Representations and Warranties of Each Lender 12
SECTION 4.3. Representations and warranties of Trust Company 13
SECTION 4.4. Representations and Warranties of Agent 14
ARTICLE V COVENANTS OF LESSEE AND PARENT 15
SECTION 5.1. Further Assurances 15
SECTION 5.2. Consolidation, Merger, Sale, etc. 15
SECTION 5.3. Corporate Existence 17
SECTION 5.4. Ownership of Lessee 18
SECTION 5.5. Liens 18
SECTION 5.6. Financial Covenant Compliance Certificates 18
SECTION 5.7. Investigation by Governmental Authorities 18
SECTION 5.8. Books and Records 18
SECTION 5.9. Payment of Taxes, etc. 18
SECTION 5.10. Inspection 18
SECTION 5.11. Maintenance of Property, etc. 19
SECTION 5.12. Maintenance of Insurance 19
SECTION 5.13. Change of Name or Principal Place of Business 19
SECTION 5.14. Financial and Other Information 19
SECTION 5.15. Securities 21
ARTICLE VI COVENANTS OF TRUSTEE AND LENDERS 21
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SECTION 6.1. Covenants of Trustee and Lenders 21
SECTION 6.2. Restrictions On and Effect of Transfer 23
SECTION 6.3. Participations 25
SECTION 6.4. Required Transfers 25
ARTICLE VII GENERAL INDEMNITY 25
SECTION 7.1. General Indemnification 25
ARTICLE VIII GENERAL TAX INDEMNITY 28
SECTION 8.1. General Tax Indemnity 28
SECTION 8.2. Exclusions from General Tax Indemnity 29
SECTION 8.3. Contests 29
SECTION 8.4. Payments 30
SECTION 8.5. Reports 31
SECTION 8.6. Withholding Tax Exemption 31
ARTICLE IX MISCELLANEOUS 31
SECTION 9.1. Survival of Agreements 31
SECTION 9.2. No Broker. etc. 31
SECTION 9.3. Notices 31
SECTION 9.4. Counterparts 32
SECTION 9.5. Amendments 32
SECTION 9.6. Headings, etc. 32
SECTION 9.7. Governing Law 32
SECTION 9.8. Transaction Costs 33
SECTION 9.9. Severability 33
SECTION 9.10. Successors and Assigns 33
SECTION 9.11. Final Agreement 33
SECTION 9.12. No Third Party Beneficiaries 33
SECTION 9.13. Release of Lien 33
SECTION 9.14. Reproduction of Documents 33
SECTION 9.15. Submission to Jurisdiction 34
SECTION 9.16. Jury Trial 34
SECTION 9.17. Payments Set Aside 34
SECTION 9.18. Trust Agreement 35
ARTICLE I DEFINITIONS; LESSEE LIABILITY 1
ARTICLE II LEASE OF EQUIPMENT; LEASE TERM 1
SECTION 2.1. Acceptance and Lease of Equipment 1
SECTION 2.2. Acceptance Procedure 1
SECTION 2.3. Lease Term 1
ARTICLE III RENT; QUIET ENJOYMENT; NET LEASE; SUBLEASING 1
SECTION 3.1. Periodic Rent 1
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SECTION 3.2. Supplemental Rent 1
SECTION 3.3. Place and Manner of Payment 2
SECTION 3.4. Late Payment 2
SECTION 3.5. Quiet Enjoyment 2
SECTION 3.6. Net Lease; No Setoff, etc. 2
SECTION 3.7. No Bar 3
SECTION 3.8. Intent of the Parties 3
ARTICLE IV POSSESSION AND SUBLEASING 4
ARTICLE V LEASE TERMINATION 4
SECTION 5.1. Early Termination 4
SECTION 5.2. Termination and Transfer 5
ARTICLE VI DISCLAIMER AND ASSIGNMENT OF WARRANTIES 5
SECTION 6.1. Disclaimer of Warranties 5
SECTION 6.2. Assignment of Warranties 6
ARTICLE VII MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS 6
SECTION 7.1. Maintenance and Repair; Compliance with Law 6
SECTION 7.2. Alterations 6
SECTION 7.3. Replacement and Substitution 7
SECTION 7.4. Removal 7
SECTION 7.5. Maintenance and Repair Reports 7
ARTICLE VIII USE 7
SECTION 8.1. Use 7
ARTICLE IX CASUALTY; REPLACEMENT; INSURANCE 8
SECTION 9.1. Casualty. 8
SECTION 9.2. Non-Casualty Losses 9
SECTION 9.3. Required Coverage 9
SECTION 9.4. Delivery of Insurance Certificates 10
ARTICLE X LEASE EVENTS OF DEFAULT 11
SECTION 10.1. Lease Events of Default 11
SECTION 10.2. Remedies 12
SECTION 10.3. Waiver of Certain Rights 13
SECTION 10.4. Power of Attorney 13
SECTION 10.5. Remedies Cumulative: No Waiver; Consents 13
ARTICLE XI [NOT USED] 14
ARTICLE XII ASSIGNMENTS 14
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ARTICLE XIII GRANT OF SECURITY INTEREST 14
SECTION 13.1. Grant of Security Interest 14
SECTION 13.2. Retention of Title or Proceeds in the Case of Default 14
ARTICLE XIV MISCELLANEOUS 15
SECTION 14.1. Governing Law 15
SECTION 14.2. Notices 15
SECTION 14.3. Counterpart 15
SECTION 14.4. Severability 15
SECTION 14.5. Successors and Assigns 15
SECTION 14.6. Parties in Interest 15
SECTION 14.7. Limitation of Liability 15
SECTION 14.8. Captions; Table of Contents 16
SECTION 14.9. Schedules and Exhibits 16
ARTICLE I - DEFINITIONS 1
SECTION 1.1. DEFINED TERMS 1
ARTICLE II - AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND PREPAYMENT OF LOANS 1
SECTION 2.1. Commitment; Term 1
SECTION 2.2. Notes 1
SECTION 2.3. Procedure for Borrowing 2
SECTION 2.4. Prepayments; Lease Termination Payments and Premium 2
SECTION 2.5. Interest Rates 2
SECTION 2.6. Determination of Interest Rate 3
SECTION 2.7. Pro Rata Treatment among Loans 3
SECTION 2.8. Payment from Trust Estate Only 3
SECTION 2.9. Taxes 3
SECTION 2.10. Illegality 4
SECTION 2.11. Increased Costs and Reduction of Return 4
SECTION 2.12. Funding Losses 5
SECTION 2.13. Inability to Determine Rates 5
SECTION 2.14. Survival 6
ARTICLE III - RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE 6
SECTION 3.1. Rent Distribution 6
SECTION 3.2. Distribution of Mandatory Prepayments 6
SECTION 3.3. Distribution of Payments After Loan Event of Default 6
SECTION 3.4. Other Payments 7
SECTION 3.5. Distribution of Excluded Amounts 8
SECTION 3.6. Guaranty Payments 8
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ARTICLE IV - ARTICLE IV CONDITIONS PRECEDENT
8
ARTICLE V - AFFIRMATIVE COVENANTS OF BORROWER 8
SECTION 5.1. Performance by Borrower 8
SECTION 5.2. Waiver by Borrower 8
ARTICLE VI - LOAN EVENTS OF DEFAULT; REMEDIES 9
SECTION 6.1. Loan Events of Default 9
SECTION 6.2. Remedies 9
ARTICLE VII - AGENT 11
SECTION 7.1. Appointment and Authorization 11
SECTION 7.2. Delegation of Duties 11
SECTION 7.3. Liability of Agent 11
SECTION 7.4. Reliance by Agent 11
SECTION 7.5. Notice of Default 12
SECTION 7.6. Credit Decision 12
SECTION 7.7. Indemnification of Agent 12
SECTION 7.8. Agent in Individual Capacity 13
SECTION 7.9. Successor Agent 13
SECTION 7.10. Withholding Tax 13
SECTION 7.11. Concerning the Trust Estate 14
SECTION 7.12. Distribution and Receipt of Payments by Trust Company 15
ARTICLE VIII - MISCELLANEOUS 16
SECTION 8.1. Amendments and Waivers 16
SECTION 8.2. Notices 16
SECTION 8.3. Successors and Assigns; Transfers and Participations 16
SECTION 8.4. Counterparts 16
SECTION 8.5. Governing Law 16
SECTION 8.6. Survival and Termination of Agreement 16
SECTION 8.7. Entire Agreement 17
SECTION 8.8. Severability 17
ARTICLE I THE TRUST ESTATE 2
SECTION 1.1. Appointment, Authorization and Direction to Trustee 2
SECTION 1.2. Declaration and Purpose 2
ARTICLE II COLLECTIONS AND DISTRIBUTIONS 3
SECTION 2.1. Collections and Remittances by Trustee 3
SECTION 2.2. Distribution of Payments. 4
SECTION 2.3. Effect of Sales by Trustee 4
ARTICLE III CERTAIN PROVISIONS RESPECTING TRUSTEE 4
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SECTION 3.1. Acceptance of Trusts and Duties 4
SECTION 3.2. Limitation of Power 4
SECTION 3.3. Notice of Event of Default 5
SECTION 3.4. Action Upon Instructions 5
SECTION 3.5. Certain Duties and Responsibilities of Trustee 5
SECTION 3.6. Certain Rights of Trustee 6
SECTION 3.7. NO REPRESENTATIONS OR WARRANTIES AS TO THE EQUIPMENT OR DOCUMENTS 8
SECTION 3.8. Status of Moneys Received 8
SECTION 3.9. Permitted Activities 8
SECTION 3.10. Resignation or Removal of Trustee 8
SECTION 3.11. Estate and Rights of Successor Trustee 9
SECTION 3.12. Merger or Consolidation of Trustee 9
SECTION 3.13. Co-Trustees 9
ARTICLE IV TERMINATION OF AND AMENDMENTS TO TRUST 9
SECTION 4.1. Termination 9
SECTION 4.2. Distribution of Trust Estate Upon Termination 10
SECTION 4.3. Amendments 10
ARTICLE V MISCELLANEOUS 10
SECTION 5.1. Compensation and Indemnification 10
SECTION 5.2. Notices 11
SECTION 5.3. GOVERNING LAW 11
SECTION 5.4. Tax Reports: Information Reporting: Withholding Taxes 11
SECTION 5.5. Headings 12
SECTION 5.6. Successors and Assigns 12
SECTION 5.7. Severability 12
SECTION 5.8. Only Written Waivers 12
SECTION 5.9. Counterparts 12
SECTION 5.10. Rights in Trust Agreement 12
SECTION 5.11. Payment of Trustee Fees, Costs and Expenses 12
SECTION 5.12. Identification of Trust 12
ARTICLE I DEFINITIONS 1
SECTION 1.1. Certain Terms 1
SECTION 1.2. Participation Agreement Definitions 1
SECTION 1.3. UCC Definitions 1
ARTICLE II SECURITY INTEREST 2
SECTION 2.1. Grant of Security 2
SECTION 2.2. Security for Obligations 2
SECTION 2.3. Continuing Security Interest; Transfer of Notes 2
SECTION 2.4. Grantor Remains Liable 3
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ARTICLE III REPRESENTATIONS AND WARRANTIES 3
SECTION 3.1. Representations and Warranties 3
SECTION 3.1.1. Ownership, No Liens, etc. 3
SECTION 3.1.2. Validity, etc 3
SECTION 3.1.3. Authorization, Approval, etc 4
SECTION 3.1.4. Compliance with Laws 4
ARTICLE IV COVENANTS 4
SECTION 4.1. Certain Covenants 4
SECTION 4.1.1. As to Collateral 5
SECTION 4.1.2. Transfers and Other Liens 5
SECTION 4.1.3. Further Assurances, etc 5
ARTICLE V AGENT 6
SECTION 5.1. Agent Appointed Attorney-in-Fact 6
SECTION 5.2. Agent May Perform 6
SECTION 5.3. Agent Has No Duty 6
SECTION 5.4. Reasonable Care 6
ARTICLE VI REMEDIES 7
SECTION 6.1. Certain Remedies 7
ARTICLE VII MISCELLANEOUS PROVISIONS 9
SECTION 7.1. Operative Document 9
SECTION 7.2. Amendments; etc 9
SECTION 7.3. Addresses for Notices 9
SECTION 7.4. Section Captions 9
SECTION 7.5. Severability 9
SECTION 7.6. Counterparts 9
SECTION 7.7. Governing Law, Entire Agreement, etc 9
1. GUARANTY 1
2. GUARANTOR'S GUARANTEED OBLIGATIONS UNCONDITIONAL 2
3. WAIVER AND AGREEMENT 4
4. ASSIGNMENT 5
5. WAIVER OF SUBROGATION 5
6. RIGHTS OF THE BENEFICIARIES 5
7. TERM OF GUARANTY 5
8. AGREEMENT OF GUARANTOR 6
</TABLE>
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PARTICIPATION AGREEMENT
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TABLE OF CONTENTS
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PAGES
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<S> <C>
9. REPRESENTATIONS AND WARRANTIES 6
10. FURTHER ASSURANCES 6
11. NOTICES. ETC 6
12. AMENDMENTS. ETC 6
13. SEVERABILITY 7
14. OPERATIVE DOCUMENT 7
15. GOVERNING LAW 7
16. SUCCESSORS AND ASSIGNS 7
</TABLE>
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PARTICIPATION AGREEMENT
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TABLE OF CONTENTS
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<S> <C>
SCHEDULE I EQUIPMENT DESCRIPTION
SCHEDULE II LENDER COMMITMENTS
SCHEDULE III NOTICE INFORMATION, FUNDING OFFICES, AND WIRE INSTRUCTIONS
SCHEDULE IV RECORDINGS, FILINGS AND REGISTRATIONS
SCHEDULE V REQUIRED LICENSES AND APPROVALS
SCHEDULE VI AMORTIZATION SCHEDULE
SCHEDULE VII DISCLOSURE SCHEDULE
APPENDIX 1 DEFINITIONS AND INTERPRETATION
EXHIBIT A FORM OF LEASE AGREEMENT
EXHIBIT B FORM OF LOAN AGREEMENT
EXHIBIT C FORM OF TRUST AGREEMENT
EXHIBIT D FORM OF SECURITY AGREEMENT AND ASSIGNMENT OF LEASE
EXHIBIT E FORM OF GUARANTY
EXHIBIT F [NOT USED]
EXHIBIT G FORM OF LANDLORD WAIVER AND CONSENT
EXHIBIT H FORM OF ADVANCE REQUEST
EXHIBIT I FORM OF BILL OF SALE
EXHIBIT J FORM OF CERTIFICATE OF ACCEPTANCE
EXHIBIT K FORM OF INVESTOR's Letter
EXHIBIT L [NOT USED]
EXHIBIT M FORM OF LESSEE's and Guarantor's Counsel's Opinion
</TABLE>
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PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (this "Agreement"), dated as of May 28,
1999, is entered into by and among STRATOSPHERE GAMING CORP., a Nevada
corporation, as Lessee; STRATOSPHERE CORPORATION, a Delaware corporation, as
Guarantor; FIRST SECURITY TRUST COMPANY OF NEVADA, a Nevada trust company, not
in its individual capacity, except as expressly stated herein, but solely as
Lessor and Trustee; the persons listed on Schedule II hereto, as Lenders; and
HELLER FINANCIAL LEASING, INC., a Delaware corporation, as Agent.
WITNESSETH
WHEREAS, pursuant to the terms of the Lease, Lessor will lease to
Lessee, and Lessee will lease from Lessor, the Equipment; and
WHEREAS, pursuant to the Trust Agreement, Trustee will apply the
Advance to the Trust to finance the acquisition of the Equipment subject to the
terms of the Lease; and
WHEREAS, Lenders are willing, on the terms and conditions hereinafter
set forth (including Article III), to provide financing to Lessor in an
aggregate principal amount not to exceed the Commitment Amount to fund payment
of Equipment Costs; and
WHEREAS, to secure such financing by Lenders, Agent, on behalf of
Lenders, will have the benefit of a Lien from Lessor on all of Lessor's right,
title and interest in and to the Equipment and other Collateral and an
assignment of Lessor's rights in the Operative Documents; and
WHEREAS, Lessee's obligations under the Operative Documents will be
guaranteed pursuant to the terms of the Guaranty;
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
Unless the context shall otherwise require, capitalized terms used but
not defined herein (including those used in the foregoing recitals) shall have
the meanings specified in Appendix 1 hereto for all purposes hereof; and the
rules of interpretation set forth in Appendix 1 hereto shall apply to this
Agreement.
ARTICLE II
EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS
SECTION 2.1. Effectiveness of Agreement. This Agreement shall become
effective upon the happening of each of the following conditions (the "Closing
Date").
(a) Authorization, Execution and Delivery of the Operative
Documents. Each of the Operative Documents shall have been duly authorized,
executed and delivered by each of the parties thereto, and shall be in full
force and effect. No Default or Event of Default shall exist under any of the
Operative Documents to which Lessee is a party (either before or after giving
effect to the transactions contemplated by the Operative Documents).
(b) Articles of Incorporation, Bylaws, Corporate Resolutions and
Certificates of Good Standing. Agent shall have received from each of Lessee and
Guarantor:
(i) CERTIFICATES OF EXISTENCE AND GOOD STANDING ISSUED BY THE
SECRETARY OF STATE OF THE STATE OF NEVADA WITH RESPECT TO LESSEE AND
THE SECRETARY OF STATE OF THE STATE OF DELAWARE WITH RESPECT TO
GUARANTOR, RESPECTIVELY, EACH DATED WITHIN 30 BUSINESS DAYS OF THE
CLOSING DATE;
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PARTICIPATION AGREEMENT
(II) COPIES OF THE RESPECTIVE ARTICLES OF INCORPORATION AND BYLAWS
CERTIFIED TO BE TRUE AND CORRECT BY A RESPONSIBLE OFFICER OF EACH OF
LESSEE AND GUARANTOR, RESPECTIVELY; AND
(III) CERTIFICATES OF A RESPONSIBLE OFFICER OF EACH OF LESSEE AND
GUARANTOR CERTIFYING AS TO (A) THE RESOLUTIONS OF THE BOARD OF
DIRECTORS DULY AUTHORIZING THE EXECUTION, DELIVERY AND PERFORMANCE BY
LESSEE AND GUARANTOR, RESPECTIVELY, OF EACH OPERATIVE DOCUMENT TO WHICH
THEY ARE OR WILL BE A PARTY, (B) THE INCUMBENCY AND SIGNATURE OF
PERSONS AUTHORIZED TO EXECUTE AND DELIVER SUCH DOCUMENTS AND AGREEMENTS
ON BEHALF OF LESSEE AND GUARANTOR, RESPECTIVELY AND (C) THE ACCURACY OF
ALL REPRESENTATIONS AND WARRANTIES AND ABSENCE OF DEFAULTS AND EVENTS
OF DEFAULT.
(c) No Material Adverse Effect. Since December 31, 1998, there
shall not have occurred any Material Adverse Effect.
(d) Opinion of Counsel. Agent, Trustee and each Lender shall have
received the following legal opinion, dated as of Closing Date and addressed to
Agent, Trustee and each Lender: from Schreck Morris, counsel to Lessee and
Guarantor, as to the matters set forth in the form of Exhibit M.
(e) Financial Statements. Agent shall have received (with copies
for Trustee and each Lender) copies of the audited consolidated financial
statements of Parent and its consolidated Subsidiaries for the last fiscal year
ended December 31, 1998, together with a statement or certificate from the
controller, treasurer or chief financial officer of Parent to the effect that
(i) such financial statements are true, complete and correct, (ii) the financial
condition of Parent and its consolidated Subsidiaries has not materially
adversely changed since the date of such financial statements and (iii) no other
event affecting Parent and its consolidated Subsidiaries shall have occurred
since the date of such financial statements which could reasonably be expected
to have a Material Adverse Effect.
(f) [not used]
(g) [not used]
(h) Recordation. Agent shall have received evidence satisfactory
to Lenders that the Uniform Commercial Code financing statements with respect to
the Collateral shall have been or are being filed with the appropriate
Governmental Authorities.
(i) Payment of Fees. Trustee and each Lender shall have received
payment of all fees which are due and payable on the Closing Date pursuant to
this Agreement.
SECTION 2.2. Advances. Subject to the terms and conditions hereinafter
set forth, and in reliance on the representations and warranties contained
herein or made pursuant hereto, upon receipt of the Advance Request, on the
Advance Date each Lender shall finance a portion of the applicable Advance by
making a Loan to Trustee (in accordance with Trustee's payment instructions set
forth on Schedule III) in an amount in immediately available funds equal to such
Lender's Commitment Percentage of the aggregate amount of the Commitment Amount.
Notwithstanding any other provision hereof, no Lender shall be permitted or
required to fund any Loan to the extent that, after giving effect thereto, the
aggregate amount advanced would exceed such Lender's Commitment, and the
aggregate original principal amount of all Loans made since the Closing Date
would exceed the Commitment Amount. No amounts paid or prepaid with respect to
the Loans may be readvanced.
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PARTICIPATION AGREEMENT
SECTION 2.3. Notes. Each amount made available by a Lender pursuant to
Section 2.2 shall be evidenced by one or more Notes issued by Trustee payable to
the order of such Lender in a maximum principal amount equal to such Lender's
Commitment and shall be repayable in accordance with the terms of the Loan
Agreement.
SECTION 2.4. Procedures for Advance; Use of Proceeds.
(a) Request. With respect to the funding of the Advance, Lessee
shall deliver to Trustee, Agent and Lenders, not later than 12:00 noon, Las
Vegas, Nevada time, three Business Days prior to the proposed Advance Date, an
irrevocable written notice substantially in the form of Exhibit H (an "Advance
Request"), specifying (i) the proposed Advance Date, (ii) the total Equipment
Cost, including Charges therefor, and (iii) the invoice charges of each item of
Equipment.
(b) Funding. On the scheduled Advance Date, upon (i) receipt by
Trustee of all amounts to be paid by Lenders pursuant to Section 2.2 and (ii)
satisfaction or waiver of each of the applicable conditions set forth in Section
3.1, (A) Lessor shall purchase, and Lessee or a vendor shall deliver a bill of
sale conveying to Lessor, as collateral security, all of such Person's right,
title and interest in, the Equipment described in the Advance Request, and (B)
in consideration therefor, Trustee shall pay, from funds made available by
Lenders pursuant to Section 2.2 and the Loan Agreement, the amount specified in
the Advance Request in immediately available funds remitted by wire transfer to
the Persons therein listed.
(c) Number and Dates of Advances. There shall be one Advance which
shall be made no later than 1:00 p.m., Las Vegas, Nevada time, on May 28, 1999,
and no Advance may occur following suspension of the Commitments.
(d) Use of Proceeds. Proceeds from all Loans shall be used solely
for the purpose of funding Equipment Costs.
(e) Interest Rate. Each determination of an Interest Rate pursuant
to any provision of the Loan Agreement shall be conclusive and binding on
Trustee, Lessee and Lenders in the absence of manifest error.
SECTION 2.5. Postponement of Advance. If Lenders make a Loan requested
pursuant to the Advance Request and the conditions precedent to such Advance
have not been satisfied on the date specified in the Advance Request, Lessee
shall pay to Trust Company, for the benefit of each Lender, interest on the
amount funded by each Lender at a rate equal to the Alternate Base Rate for the
period from the date of each such Advance to the date such Advance is returned
to such Lender or such Advance date shall have occurred, less any interest
earned by Trust Company on behalf of Lenders by investing such funded amounts.
Trust Company (or its assignee) shall not be required to invest such funds in
interest bearing investments, but Trust Company (or its assignee) shall upon
direction of Lessee (or, if an Event of Default exists, the Required Lenders)
invest such funds in Cash Equivalents to the extent it is practicably able to do
so. Such interest shall be due and payable by Lessee upon the occurrence of such
Advance Date or upon return of such funds to Lenders. Such payment of interest
shall be an additional condition precedent to such Advance Date. If the Advance
Date shall not have occurred by the third Business Day following the Advance
Date in respect thereof, then all such interest shall be due and payable on such
date, and Trust Company shall refund to each Lender all amounts funded by such
Lender and all accrued interest allocable to such Lender. No additional Advance
Request shall be required if the Advance Date is postponed and thereafter
consummated.
SECTION 2.6. Obligations Several. The obligations of Lenders hereto or
elsewhere in
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PARTICIPATION AGREEMENT
the Operative Documents shall be several and not joint; and, except with respect
to Lessee and Guarantor in connection with the Guaranty and the other Operative
Documents, no party shall be liable or responsible for the acts or defaults of
any other party hereunder or under any other Operative Document.
SECTION 2.7. Timing of Advance to Trustee and Payments to Lenders.
(a) Timing of Advances to Trustee. Subject to timely delivery of
an Advance Request pursuant to Section 2.4(a) and the other terms and conditions
of the Operative Documents, each Lender shall make its Commitment available to
Trust Company by 1:00 p.m., Las Vegas, Nevada time, on the requested Advance
Date, and Trust Company will forward any such amounts so received to Lessee, not
later than 4:00 p.m., Las Vegas, Nevada time, on such Advance Date.
(b) Payments to Lenders. So long as there are obligations
outstanding under the Operative Documents, Trustee has assigned all payments of
Rent to Agent pursuant to Section 2.1 of the Security Agreement, and Agent has
appointed Trust Company as its agent to receive such payments of Rent under
Section 7.1 of the Loan Agreement. Any payments received by Agent (or Trust
Company as agent to Agent) from or on behalf of Lessee not later than 10:00
a.m., Las Vegas, Nevada time, shall be paid by Agent (or Trust Company) to
Lenders in immediately available funds no later than 1:00 p.m., Las Vegas,
Nevada time, on the same day, and any payments, received by Agent (or Trust
Company) from or on behalf of Lessee after 10:00 a.m., Las Vegas, Nevada time,
shall be paid by Agent or Trust Company to Lenders as soon after receipt as
practicable, but not later than 10:00 a.m., Las Vegas, Nevada time, on the next
succeeding Business Day. Rent and all other payments due to Trustee, Agent or
any Lender under the Operative Documents shall be paid in immediately available
funds, at its respective office specified in Schedule III or at such other
office as it may from time to time specify to Trustee, Agent and Lessee in a
notice pursuant hereto. All such payments shall be received by Trustee (in its
individual or trust capacity), Agent or such Lender, as applicable, not later
than 10:00 a.m., Las Vegas, Nevada time, on the date due. Funds received after
such time shall for all purposes of the Operative Documents be deemed to have
been received on the next succeeding Business Day.
(c) Agency. So long as the Notes remain outstanding, Rent shall be
paid to Trust Company as agent for Agent and as Trustee's assignee under the
Operative Documents.
SECTION 2.8. Lenders' Instructions to Agent. By making its Advance
pursuant to Section 2.2, each Lender agrees that such act shall constitute,
without further act, (i) evidence that the applicable conditions precedent set
forth in Article III have been satisfied or waived; provided that any Lender's
failure to raise the issue of noncompliance with respect to any such condition
as to any third party shall not be deemed to be a waiver of such condition
unless such Lender shall have acknowledged such waiver in writing, and (ii)
authorization and direction by such Lender to Agent to make a Loan pursuant to
Section 2.3 of the Loan Agreement.
SECTION 2.9. Computations.
(a) Determination of Interest. All computations of accrued amounts
pursuant to the Operative Documents shall be made on the basis of actual number
of days elapsed in a 360 day year or, in the case of the Alternate Base Rate, on
the basis of actual number of days elapsed in a 365 day or 366 day year.
(b) Dollars. All payments required to be made by Lessee, Trustee,
or Agent, including the Advance of any payment of Rent, shall be made only in
Dollars in immediately
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PARTICIPATION AGREEMENT
available funds.
SECTION 2.10. Fees. Lessee shall pay to Agent, for the account of each
Lender, a nonrefundable upfront fee in an amount equal to the fee set forth
opposite such Lender's name on Schedule II, payable upon the Closing Date.
SECTION 2.11. Legal and Tax Representation. Lessee acknowledges and
agrees that neither Agent, Trustee nor any Lender has made any representation or
warranty concerning the tax, accounting or legal characteristics of the Lease or
any of the other Operative Documents, and that Lessee has obtained and relied on
such tax, accounting and legal advice regarding the Lease and the other
Operative Documents as it deems appropriate. Each of Trustee and each Lender
acknowledges and agrees that it has obtained and relied on the Operative
Documents and the various items delivered in connection therewith, and on such
tax, accounting and legal advice regarding the Lease and the other Operative
Documents as it deems appropriate.
SECTION 2.12. Amortization Schedule. Schedule VI sets forth the
mandatory principal amortization schedule for the Loans (the "Amortization
Schedule"). Lenders will receive principal payments on each scheduled principal
Payment Date so as to cause all of the Loans to amortize as set forth on the
Amortization Schedule. Each Note or the Notes will reflect mandatory principal
amortization equal to the product of (i) such Lender's Commitment Percentage and
(ii) the aggregate amount payable to Lenders on such Payment Date pursuant to
the preceding sentence.
SECTION 2.13. Replacement of Equipment. Trustee and Agent shall release
from the lien of the Security Agreement and the Lease items of Equipment which
Lessee has elected to replace under Section 7.3 or 9.1 of the Lease, upon
satisfaction by Lessee of the conditions contained in Section 9.1(b) of the
Lease.
SECTION 2.14. The Account. Trustee shall establish and maintain (or
cause to be established and maintained) with Trust Company a deposit account
(the "Account") in its name in favor of Agent into which proceeds of the Loan on
the Advance Date shall be remitted upon satisfaction of the provisions of
Section 3.1. Trustee shall release funds on deposit in the Account to the order
of Lessee, or to a vendor as directed by Lessee, as the case may be, upon
receipt of a certificate from Lessee, dated the date of such requested release,
stating that (i) the sum requested is required to pay, or reimburse Lessee for,
the invoices and purchase orders of the vendors identified in such certificate,
together with copies of such invoices and purchase orders attached to such
certificate and evidence satisfactory to Agent of all amounts previously paid to
any vendor identified in such certificate for which Lessee is requesting
reimbursement and (ii) all of the statements contained in Section 3.1(b) are
true and correct on and as of such date as though made on and as of such date,
except to the extent such representations and warranties relate solely to an
earlier date, in which case such representations and warranties shall have been
true and correct on and as of such earlier date. In the event of a dispute over
payment of any amount owed under an invoice or purchase order referenced in such
certificate, Trustee shall not release funds from the Account until such time as
Lessee notifies Trustee of the resolution of such dispute. All funds deposited
in the Account shall constitute Collateral.
ARTICLE III
CONDITIONS TO THE ADVANCE
SECTION 3.1. Advance Date. The obligation of Trustee and each Lender to
perform their respective obligations on the Advance Date shall be subject to the
fulfillment to the satisfaction of, or the waiver in writing by, Trustee and
each Lender of the conditions precedent
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PARTICIPATION AGREEMENT
set forth in this Section 3.1 on or before the Advance Date (except that the
obligation of any party hereto shall not be subject to such party's own
performance or compliance).
(a) Advance Request. With respect to the Advance, Agent, Trustee
and each Lender shall have received, at least three Business Days before the
Advance Date, a fully executed Advance Request duly executed by Lessee, in
accordance with Section 2.4(a). Each of the delivery of the Advance Request and
the acceptance by Lessee of the proceeds of such Advance shall constitute a
representation and warranty by Lessee that on the date of such Advance (both
immediately before and after giving effect to such Advance and the application
of the proceeds thereof) the statements made in Section 3.1(c) and in such
Advance Request, are true and correct.
(b) Accuracy of Representations and Warranties, No Default, etc.
On the Advance Date, the following statements shall be true and correct:
(I) ALL OF THE REPRESENTATIONS AND WARRANTIES OF THE PARTIES
HERETO CONTAINED HEREIN AND IN EACH OF THE OTHER OPERATIVE DOCUMENTS
ARE TRUE AND CORRECT ON AND AS OF THE ADVANCE DATE IN ALL MATERIAL
RESPECTS AS THOUGH MADE ON AND AS OF THAT DATE, EXCEPT TO THE EXTENT
THAT SUCH REPRESENTATIONS AND WARRANTIES RELATE SOLELY TO AN EARLIER
DATE, IN WHICH CASE SUCH REPRESENTATIONS AND WARRANTIES SHALL HAVE BEEN
TRUE AND CORRECT ON AND AS OF SUCH EARLIER DATE; AND
(II) EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE, NO LABOR
CONTROVERSY, LITIGATION, ARBITRATION OR GOVERNMENTAL INVESTIGATION OR
PROCEEDING SHALL BE PENDING OR, TO THE KNOWLEDGE OF LESSEE AND/OR
PARENT, THREATENED AGAINST LESSEE AND/OR PARENT OR ANY OTHER GUARANTOR
WHICH MIGHT HAVE A MATERIAL ADVERSE EFFECT OR WHICH IN THE REASONABLE
JUDGMENT OF AGENT WOULD OR MIGHT, ENJOIN, PROHIBIT, LIMIT OR RESTRAIN
THE MAKING OF THE ADVANCE.
(c) Officers' Certificates. If the Advance Date is a date after
the date of this Agreement, Agent shall have received (with copies for Trustee
and each Lender) certificates of the secretary or assistant secretary of each of
Parent and Lessee stating that all of the representations and warranties of such
Person contained herein and in each of the other Operative Documents are true
and correct on and as of the Advance Date in all material respects as though
made on and as of that date, except to the extent that such representations and
warranties relate solely to an earlier date, in which case such representations
and warranties shall have been true and correct on and as of such earlier date.
(d) Gaming Permits. Lessee and Parent shall have obtained all
Gaming Permits required for or in connection with the conduct of its gaming
business and the conduct of games of chance at the Casino and such Gaming
Permits shall not then be suspended, enjoined or prohibited (for any length of
time) by any Gaming Authority or any other Governmental Authority.
(e) Liquor Permits. Lessee and Parent shall have obtained all
Liquor Permits required for or in connection with the operation and use of the
Casino and the Resort and the Liquor Permits shall not then be suspended,
enjoined or prohibited (for any length of time) by any Governmental Authority
having or asserting jurisdiction over the Casino and/or the Resort.
(f) Taxes. All Taxes other than Charges due and payable by Lessee
on or prior to the Advance Date in connection with the execution, delivery,
recording and filing of any
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PARTICIPATION AGREEMENT
of the Operative Documents, in connection with the filing of any of the
financing statements or in connection with the consummation of any of the
transactions contemplated hereby or by the Operative Documents shall have been
paid in full.
(g) Filings and Recordings. All filing, registrations and
recordings set forth on Schedule IV shall have been made in the appropriate
places or offices and all fees and taxes with respect to any recordings, filings
or registrations made pursuant to this Section 3.1(g) shall have been paid in
full, and satisfactory evidence thereof shall have been delivered to Trustee and
Agent, or arrangements for such payment shall have been made to the satisfaction
of Trustee and Agent.
(h) Searches. Agent shall have received a report, as of a current
date, prepared by a search company reasonably satisfactory to Agent, of judgment
liens, tax liens, Uniform Commercial Code filings and other encumbrances of
record with respect to Parent, Lessee and the Equipment with the applicable
filing offices in the State of Nevada, and such report shall show no Liens other
than Permitted Liens.
(i) Insurance. Agent shall have received (with copies for Trustee
and each Lender) evidence of each of the insurance coverages required to be
maintained pursuant to the Lease, setting forth the respective coverages, limits
of liability, carrier, policy number and period of coverage, accompanied by
affidavits, certificates, paid bills or other documents evidencing that all
premium payments are current.
(j) Governmental Approvals, Permits, Consents, etc. Agent shall
have received copies of all material permits, approvals or consents by all
Governmental Authorities required for or in connection with the use and
operation of the Equipment and the transactions provided for in this Agreement
which can be obtained as of the Advance Date, together with all supporting
documents and materials reasonably requested by Agent, Trustee or any Lender,
including a copy of each order or license issued by the Nevada Gaming Commission
or the Liquor Authority, as then available or required by Applicable Law,
evidencing approval of all licenses necessary for the creation and continued
existence of Lessee as the operator of the Casino and of Parent as the parent
corporation of Lessee.
(k) Bill of Sale. Agent shall have received a fully executed Bill
of Sale from Lessee or other vendor(s) to Trustee substantially in the form of
Exhibit I with respect to the items of Equipment identified in such Advance
Request.
(l) Certificates of Acceptance. Lessee shall have delivered to
Agent a fully-executed Certificate of Acceptance substantially in the form of
Exhibit J with respect to each item of Equipment identified in such Advance
Request.
(m) [not used]
(n) Third Party Approvals. All third party approvals, necessary in
the reasonable opinion of Agent for the operation and use of the Equipment and
for Lessee to perform its obligations with respect to the Lease shall have been
obtained.
(o) Further Assurances, etc. Agent shall have received such other
and further instruments, duly executed, acknowledged (if appropriate) and
delivered, as Agent reasonably shall have requested in connection with the
Advance and this Agreement.
(p) Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of Lessee and Parent shall be satisfactory in
form and substance to Agent and its counsel; Agent and its counsel shall have
received all information, approvals, opinions, documents or instruments as Agent
or its counsel may reasonably request.
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PARTICIPATION AGREEMENT
(q) Transaction Costs. Lessee shall have paid all Transaction
Costs invoiced three Business Days prior to the Advance Date to the parties to
whom such Transaction Costs are payable (or shall have requested payment thereof
or reimbursement therefor pursuant to the Advance Request). Such payment shall
be made by wire transfer of immediately available funds.
(r) Litigation. No law or regulation shall prohibit, and no order,
judgment or decree of any Governmental Authority shall, and no action or
proceeding shall be pending or threatened which in the reasonable judgment of
Agent would or might, enjoin, prohibit, limit or restrain the making of the
Advance.
(s) No Material Adverse Effect. Since December 31, 1998, there
shall not have occurred any Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of Lessee and Guarantor.
Lessee and Guarantor jointly and severally represent and warrant to each of the
other parties hereto as follows.
(a) Due Organization, etc. Each of Lessee and Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and Delaware, respectively, and is duly qualified or
licensed and in good standing as a foreign corporation authorized to do business
in all jurisdictions where failure to so qualify could reasonably be expected to
have a Material Adverse Effect, and each has the requisite power and authority
to execute, deliver and perform its respective obligations under each of the
Operative Documents to which it is a party and each other agreement, instrument
and document executed and delivered by it on the Advance Date in connection with
or as contemplated by each such Operative Document. The "principal place of
business" and "chief executive office" (as such terms are used in Section
9-103(3) of the UCC) of Lessee is located at 2000 Las Vegas Boulevard South, Las
Vegas, Nevada 89104; and of Guarantor is located at 2000 Las Vegas Boulevard
South, Las Vegas, Nevada 89104.
(b) Authorization; No Conflict; No Approvals; etc. The execution
and delivery by each of Lessee and Guarantor of each of the Operative Documents
to which it is a party, and the performance by each such Person of its
respective obligations under such Operative Documents, have been duly authorized
by all necessary corporate action (including any necessary stockholder action)
on its part, and do not and will not: (i) contravene any Applicable Law
currently in effect applicable to or binding on it or the Equipment; (ii)
violate any provision of its respective charter or bylaws; (iii) result in a
breach of or constitute a default under (with or without the giving of notice or
lapse of time or both) any indenture, mortgage, deed of trust, lease, loan or
credit agreement, or any other agreement or instrument to which Lessee or
Guarantor is a party or by which Lessee or Guarantor or their respective
properties may be bound or affected, except for such breaches or defaults which
individually or in the aggregate would not have a Material Adverse Effect; or
(iv) require any Governmental Approval by any Governmental Authority, except for
(x) the filings and recordings listed on Schedule IV to perfect the rights of
Trustee, Lenders and Agent intended to be created by the Operative Documents and
(y) the required licenses and approvals listed on Schedule V; and neither Lessee
nor Guarantor is in default under or in violation of its respective charter or
bylaws.
(c) Enforceability. Each Operative Document to which Lessee or
Guarantor is a party constitutes the legal, valid and binding obligation of such
Person, enforceable against
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PARTICIPATION AGREEMENT
such Person in accordance with the terms thereof, except as such enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(d) Litigation. Except as set forth on Schedule VII, there is no
action, suit or proceeding, or any governmental investigation or any
arbitration, in each case pending or, to the knowledge of Lessee or Guarantor,
threatened against such Person or the Equipment or before any Governmental
Authority (i) which challenges the validity of the Operative Documents to which
such Person is a party or any action taken or to be taken pursuant to the
Operative Documents to which such Person is a party, or (ii) which if adversely
determined would have, individually or in the aggregate, a Material Adverse
Effect.
(e) Ownership. Parent has sole beneficial and record ownership,
directly or indirectly, of 100% of the issued and outstanding capital stock of
Lessee. Except as set forth on Schedule VII, there are no outstanding
subscriptions, options, warrants, calls, rights (including preemptive rights) or
other arrangements or commitments of any nature relating to any capital stock of
Lessee.
(f) Financial Statements. The audited consolidated financial
statements of Parent and its consolidated Subsidiaries for the fiscal year ended
December 31, 1998 fairly present the financial condition of Parent and its
consolidated Subsidiaries on such date, and the results of its consolidated
operations for the period then ended, and there has been no Material Adverse
Effect with respect to Parent and its consolidated Subsidiaries since such date.
(g) No Other Agreements. Neither Lessee nor Guarantor is a party
to any agreement to sell any interest in the Equipment or any portion thereof
(except as otherwise specifically contemplated in the Operative Documents).
(h) Compliance With Law. With respect to the Equipment and the
operation of the Resort, Lessee and Guarantor have at all times complied and are
in compliance with all Applicable Law, except for any violations which,
individually or in the aggregate, would not have a Material Adverse Effect.
(i) Investment Company Act. Neither Lessee nor Guarantor is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(j) Public Utility Holding Company. Neither Lessee nor Guarantor
is subject to regulation as a "holding company," an "affiliate" of a "holding
company," or a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
(k) Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any contribution or payment due any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA. No action has been
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PARTICIPATION AGREEMENT
taken by any member of the ERISA Group since January 1, 1996, to terminate any
Plan. No member of the ERISA Group has any knowledge of any event that could
result in a liability of any such member to the PBGC, whether under a Plan, a
Multiemployer Plan or otherwise. There have not been any nor are there now
existing any events or conditions that would permit any Plan to be terminated
under circumstances that would cause the lien provided under Section 4068 of
ERISA to attach to the material assets of Lessee or its ERISA Affiliates. The
value of the Plans' benefits guaranteed under Title IV of ERISA on the date
hereof does not exceed the value of such Plans' assets allocable to such
benefits as of the date of this Agreement. No transaction prohibited under
Section 406 of ERISA exists or will exist upon the execution and delivery of
this Agreement or any Operative Document with respect to any Plan, Multiemployer
Plan or Benefit Arrangement.
(1) Environmental Matters. There are no conditions existing
currently which would be likely to subject Trustee, Agent, Lenders or Lessee or
Guarantor to damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws or assertions thereof, or which require or are likely to
require cleanup, removal, remedial action or other response at or with respect
to the Resort pursuant to Environmental Laws; (ii) neither Lessee nor Guarantor
is a party to any litigation or administrative proceeding for which it has
received service of process or other similar notification, and to the knowledge
of Lessee and Guarantor, any litigation or administrative proceeding threatened
against any of them, which asserts or alleges that Lessee or Guarantor, or the
Resort has violated or is violating Environmental Laws with respect to the
Resort or that Lessee or Guarantor is required to clean up, remove or take any
remedial or other responsive action due to the disposal, depositing, discharge,
leaking or other release of any Hazardous Materials at or from the Resort; (iii)
neither Lessee nor Guarantor is subject to any judgment, decree or order or
citation arising out of Environmental Laws which relates to the Resort (or any
interest therein); and (iv) neither Lessee nor Guarantor has been named or
listed as a potentially responsible party by any governmental body in a manner
arising under any Environmental Laws with respect to or which affects the
Resort.
(m) Subjection to Government Regulation. Except in the case of the
ownership of, or the holding of an interest in, the Equipment following the
exercise of remedies under the Lease, none of Trustee, Agent or any Lender will
become subject to ongoing regulation of its operations by a Governmental
Authority solely by reason of entering into the Operative Documents or the
consummation of the transactions contemplated thereby. The exercise of remedies
by Trustee, any Agent or any Lender under any of the Operative Documents with
respect to the Collateral will not require the approval of or filing with any
Gaming Authority except as otherwise disclosed on Schedule V hereto.
(n) Securities Laws. Neither Lessee nor anyone authorized to act
on its behalf has, directly or indirectly, offered or sold any interest in the
Notes, the Equipment, the Lease or any of the Operative Documents in violation
of Section 5 of the Securities Act or any state securities laws.
(o) Federal Reserve Regulations. Neither Parent nor any of its
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 (within the meaning of Regulation U of the Board). No part of the
Advance will be used directly or indirectly for the purpose of purchasing or
carrying any such margin stock, to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any other purpose violative
of or
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PARTICIPATION AGREEMENT
inconsistent with any of the provisions of Regulation G, T, U or X of the Board.
(p) Taxes. Lessee and Guarantor have filed all tax returns and
reports required by law to have been filed by each of them and have paid all
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on their books.
(q) Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of Lessee and Guarantor in writing
to Agent, Trustee and Lenders for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of Lessee and Guarantor to
Agent, Trustee and Lenders will be, true and accurate in every material respect
on the date as of which such information is dated or certified and as of the
date of execution and delivery of this Agreement by Agent, Trustee and Lenders,
and such information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information not
misleading.
(r) Licenses, Registrations and Permits. As of any date on which
this representation is made, all licenses, registrations and permits (other than
Gaming Permits and Liquor Permits) required of Lessee as of such date by any
Governmental Authority having jurisdiction shall have been obtained for (i) the
use and occupancy of the Resort, and (ii) the installation and operation of the
Equipment on the Resort, except where the failure to obtain the same would not
have, individually or the aggregate, a Material Adverse Effect.
(s) Title to Property. Except as set forth on the Schedule VII
hereto, Parent has good and marketable title to all of its material assets
reflected on the financial statements delivered pursuant to Section 2.1(e),
except for such material assets as have been disposed of in the ordinary course
of business, and all such material assets are free and clear of any Lien, except
as reflected in the financial statements and/or notes thereto or as otherwise
permitted by the provisions hereof or under the Operative Documents, and except
for Permitted Liens. Parent has such trademarks, trademark rights, trade names,
trade name rights, franchises, copyrights, patents, patent rights and licenses
as to allow it to conduct its business as now operated, without known conflict
with the rights of others. Lessee or Parent has good and marketable title to the
land and buildings constituting the Resort.
(t) Insurance. Lessee has obtained or caused to be obtained
insurance coverage covering the Equipment which meets in all respects the
requirements of the Lease, and such coverage is in full force and effect. Lessee
carries insurance with reputable insurers, or self-insures, in respect of its
material assets, in such manner, in such amounts and against such risks as is
customarily maintained by other Persons of similar size engaged in similar
business.
(u) Defaults. Neither Lessee nor Guarantor is in default under any
Operative Document, instrument evidencing any Debt, or under any material
agreement relating thereto or any indenture, mortgage, deed of trust, security
agreement, lease, franchise, or other agreement or other instrument to which any
such Person is a party or by which any such Person or any of its material assets
is subject to or bound including the Indenture which would result in a Material
Adverse Effect.
(v) Solvency. The consummation by Lessee or Guarantor of the
transactions contemplated by the Operative Documents will not render Lessee or
Guarantor insolvent, nor was it made in contemplation of Lessee's or Guarantor's
insolvency; the value of the assets and
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PARTICIPATION AGREEMENT
properties of the of Lessee and Guarantor at fair valuation and at their then
present fair salable value is and, after the transactions, will be greater than
the respective total liabilities, including contingent liabilities, as they
become due of Lessee and Guarantor; the property remaining in the hands of
Lessee and of Guarantor was not and will not be an unreasonably small amount of
capital.
(w) Perfection of Security Interests. Upon the filing of an
appropriate UCC Financing Statements with the Secretary of State of Nevada and
appropriate fixture filings in the office of the Recorder of Clark County,
Nevada, Trustee, for the benefit of Lenders, and Lenders, will have an
enforceable, perfected first priority Lien of record in the Collateral granted
pursuant to the Lease and the Security Agreement as against all Persons,
including Lessee and its creditors and Trustee and its creditors.
(x) Gaming Permits; Liquor Permits. All Gaming Permits and Liquor
Permits required to be held by Lessee and Guarantor for the conduct of its
business as then conducted as of each date this representation is made are
current and in good standing and upon the Casino Opening Lessee and Guarantor
will hold all Gaming Permits and Liquor Permits necessary for the operation of
the Casino and sale of alcoholic beverages at the Resort.
(y) Location of Gaming Activities. No gaming activities requiring
a Gaming Permit will be maintained at the Resort other than at a location that
has obtained all requisite Gaming Permits.
(z) No Change in Name or Entity. Lessee has not, prior to the date
of this Agreement, changed its name, or been the surviving entity of a merger or
consolidation.
(aa) Purchase Price. The fair market value of the items of
Equipment accepted on the Advance Date is approximately equal to the invoice
cost for the items of Equipment identified in such Advance Request plus the
Charges properly attributable thereto.
SECTION 4.2. Representations and Warranties of Each Lender. Each Lender
represents and warrants, severally and only as to itself, to each of the other
parties hereto as follows.
(a) Due Organization, etc. It is duly organized and validly
existing under the laws of the jurisdiction of its organization and has the
requisite power and authority to enter into and perform its obligations as a
Lender under each Operative Document to which it is or will be a party and each
other agreement, instrument and document to be executed and delivered by it in
connection therewith.
(b) Authorization; No Conflict. The execution and delivery by it
of, the consummation by it of the transactions provided for in, and the
compliance by it with all the provisions of, each Operative Document to which it
is or is to be a party as Lender have been duly authorized by all necessary
corporate action on its part; and neither the execution and delivery thereof,
nor the consummation of the transactions contemplated thereby, nor compliance by
it as Lender with any of the terms and provisions thereof (i) requires any
approval of its stockholders or approval or consent of any trustee or holders of
any of its indebtedness or obligations, (ii) contravenes or will contravene any
Applicable Law currently in effect applicable to or binding on it (except no
representation or warranty is made as to any Applicable Law to which it or the
Equipment, directly or indirectly, may be subject because of the lines of
business or other activities of Lessee) or (iii) results in any breach of or
constitutes any default under, any indenture, mortgage, chattel mortgage, deed
of trust, lease, conditional sales contract, loan or credit arrangement, other
material agreement or instrument, corporate charter, bylaws or other agreement
or instrument to which it is a party or by which it or its properties may be
bound or
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PARTICIPATION AGREEMENT
affected.
(c) ERISA. It is purchasing its interest in the Note with assets
that are either (i) not assets of any employee benefit plan (or its related
trust) which is subject to Title I of ERISA or Section 4975 of the Code, or (ii)
assets of an employee benefit plan (or its related trust) which is subject to
Title I of ERISA or Section 4975 of the Code, but for which there is available
an exemption from the prohibited transaction rules under Section 406(a) of ERISA
and Section 4975 of the Code and such exemption is immediately applicable to
each transaction contemplated by the Operative Documents to the extent that any
other party to such transaction is a "party in interest" as defined in Section
3(14) of ERISA, or a "disqualified person" as defined in Section 4975(e)(2) of
the Code, with respect to such plan assets.
(d) Investment in Notes. It is acquiring the Note for its own
account for investment and not with a view to any distribution (as such term is
used in Section 2(11) of the Securities Act) thereof, and if in the future it
should decide to dispose of all or any portion of its interest in its Note or
other Operative Documents, it understands that it may do so only in compliance
with the Securities Act and the rules and regulations of the SEC thereunder and
any applicable state securities laws. Neither it nor anyone authorized to act on
its behalf has taken or will take any action which would subject the issuance or
sale of any Note, the Trust Estate (including the Equipment constituting a part
thereof), the Collateral or the Lease to the registration requirements of
Section 5 of the Securities Act. Subject to the foregoing, it is understood
among the parties that the disposition of each Lender's property shall be at all
times within its control.
(e) Lessor Liens. The Equipment is free and clear of all Lessor
Liens attributable to it.
SECTION 4.3. Representations and warranties of Trust Company. First
Security Trust Company of Nevada, in its individual capacity ("Trust Company"),
represents and warrants to each of the other parties hereto as follows:
(a) Chief Executive Office. Trust Company's "chief executive
office" and "principal place of business" as such terms are used in Section
9-103(3) of the UCC and the place where the documents, accounts and records
relating to the transactions contemplated by the Operative Documents are kept is
located at 530 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
(b) Due Organization, etc. Trust Company is a trust company duly
organized and validly existing in good standing under the laws of the State of
Nevada and has full power and authority to execute, deliver and perform its
obligations (i) in its individual capacity under the Trust Agreement and, to the
extent it is a party hereto in its individual capacity, this Agreement, and (ii)
as Trustee under the Trust Agreement, under this Agreement and each other
Operative Document to which it is or will be a party as Trustee.
(c) Due Authorization: Enforceability. The Operative Documents to
which Trust Company is or will be a party have been or will be, on the date
required to be delivered hereby, duly authorized, executed and delivered by or
on behalf of Trust Company (in its individual capacity) and are, or upon
execution and delivery by Trust Company will be, legal, valid and binding
obligations of Trust Company (in its individual capacity), enforceable against
it in accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general equitable principles.
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PARTICIPATION AGREEMENT
(d) No Conflict. The execution and delivery by (i) Trust Company,
in its individual capacity, of the Trust Agreement and, to the extent it is a
party hereto in its individual capacity, this Agreement, and (ii) Trust Company,
in its capacity as Trustee, of each operative Document to which Trustee is or
will be a party, are not and will not be, and the performance by Trust Company,
in its individual capacity or as Trustee, as the case may be, of its obligations
under each are not and will not be inconsistent with the articles of association
or bylaws of Trust Company, do not and will not contravene any Applicable Law of
the United States of America or the State of Nevada relating to the banking or
trust powers of Trust Company, and do not and will not result in a breach of or
constitute a default under (with or without the giving of notice or lapse of
time or both) any indenture, mortgage, deed of trust, lease, loan or credit
agreement or any other agreement or instrument to which Trust Company is a party
or by which it or its properties may be bound or affected.
(e) No Approvals, etc. Neither the execution and delivery by
Trustee in its individual capacity or as Trustee, as the case may be, of any of
the Operative Documents to which it is a party requires any Governmental
Approval by any Governmental Authority under any Applicable Law of the United
States of America or the State of Nevada relating to the banking or trust powers
of Trust Company.
(f) Litigation. There is no action, proceeding or investigation
pending or threatened against Trust Company (in its individual capacity or as
Trustee) which questions the validity of the Operative Documents or which is
reasonably likely to result, individually or in the aggregate, in any material
adverse effect on the ability of Trust Company (in its individual capacity or as
Trustee) to perform its obligations (in either capacity) under the Operative
Documents to which it is a party.
(g) Lessor Liens. The Equipment is free and clear of all Lessor
Liens attributable to Trust Company (in its individual capacity).
(h) Securities Act. Neither Trust Company (in its individual
capacity or as Trustee) nor anyone authorized to act on its behalf has, directly
or indirectly, in violation of Section 5 of the Securities Act or any state
securities laws, offered or sold any interest in the Notes, the Equipment or the
Lease, or in any security or lease the offering of which, for purposes of the
Securities Act or any state securities laws, would be deemed to be part of the
same offering as the offering of the aforementioned securities or leases, or
solicited any offer to acquire any of the aforementioned securities or leases.
SECTION 4.4. Representations and Warranties of Agent. Agent hereby
represents and warrants to each of the other parties hereto as follows.
(a) Due Organization, etc. Agent is duly organized and validly
existing under the laws of the jurisdiction of its organization and has the
requisite power and authority to execute, deliver and perform its obligations
under the Operative Documents to which it is or will be a party.
(b) Due Authorization: Enforceability. The Operative Documents to
which Agent is or will be a party have been or will be, on the date required to
be delivered hereby, duly authorized, executed and delivered by Agent, and are,
or, upon execution and delivery will be, legal, valid and binding obligations of
Agent, enforceable against it in accordance with their respective terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general equitable
principles.
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PARTICIPATION AGREEMENT
(c) No Conflict. Neither the execution and delivery by Agent of
the Operative Documents to which it is or will be a party, nor performance of
its obligations thereunder, results in a breach of, or constitutes a default
under (with or without the giving of notice or lapse of time or both), or
violates the terms, conditions or provisions of: (i) the articles of
incorporation of Agent; (ii) any agreement, to which Agent is now a party or by
which it or its property is bound or affected, where such breach, default or
violation would be reasonably likely to materially and adversely affect the
ability of Agent to perform its obligations under any Operative Document to
which it is or will be a party; or (iii) any Applicable Law of the United States
or the State of Delaware, where such conflict, breach, default or violation
would be reasonably likely to materially and adversely affect the ability of
Agent to perform its obligations under any Operative Document to which it is or
will be a party.
(d) No Approvals, etc. No Governmental Approval by any
Governmental Authority under any Applicable Law of the United States of America
or the State of Delaware is or will be required in connection with the execution
and delivery by Agent of the Operative Documents to which it is party or the
performance by Agent of its obligations under such Operative Documents.
ARTICLE V
COVENANTS OF LESSEE AND PARENT
SECTION 5.1. Further Assurances. Lessee, at its own cost and expense,
will cause to be promptly and duly taken, executed, acknowledged and delivered
all such further acts, documents and assurances as any Lender, Trustee or Agent
reasonably may request from time to time in order to carry out more effectively
the intent and purposes of this Agreement and the other Operative Documents to
which it is a party and the transactions contemplated thereby. Parent, at its
own cost and expense, will cause all financing statements (including
precautionary financing statements), fixture filings and other documents, to be
recorded or filed at such places and times in such manner, and will take all
such other actions or cause such actions to be taken, as may be necessary or as
may be reasonably requested by any Lender, Trustee or Agent in order to
establish, preserve, protect and perfect the title of Trustee to the Equipment
and Trustee's rights under this Agreement and the other Operative Documents and
to perfect, preserve and protect the first and prior Lien of the Security
Agreement on the Trust Estate in favor of Agent for the benefit of Lenders.
SECTION 5.2. Consolidation, Merger, Sale, etc.
(a) Subject to Section 5.4, Lessee (for purposes of this Section
5.2, Lessee shall be referred to as the "Transferor") shall not consolidate with
any Person, merge with or into any Person or convey, transfer or lease to any
Person all or substantially all of its assets in any single transaction (or
series of related transactions), unless, immediately after giving effect to such
transaction, the conditions set forth in clauses (i) through (vii) shall have
been satisfied:
(I) THE PERSON FORMED BY SUCH CONSOLIDATION WITH OR INTO WHICH THE
TRANSFEROR SHALL BE MERGED OR THE PERSON WHICH SHALL ACQUIRE BY
CONVEYANCE, TRANSFER OR LEASE ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF
THE TRANSFEROR (THE "SURVIVING COMPANY") SHALL BE A CORPORATION THAT IS
ORGANIZED UNDER THE LAWS OF THE UNITED STATES OF AMERICA, A STATE
THEREOF OR THE DISTRICT OF COLUMBIA;
(II) THE SURVIVING COMPANY (IF OTHER THAN LESSEE) SHALL EXECUTE
AND DELIVER TO EACH OF THE PARTIES HERETO AN AGREEMENT, IN FORM AND
SUBSTANCE REASONABLY
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PARTICIPATION AGREEMENT
SATISFACTORY TO LENDERS, TRUSTEE AND AGENT, CONTAINING THE ASSUMPTION
BY THE SURVIVING COMPANY OF THE DUE AND PUNCTUAL PAYMENT, PERFORMANCE
AND OBSERVATION OF EACH OBLIGATION COVENANT AND AGREEMENT OF THE
TRANSFEROR UNDER THIS AGREEMENT AND EACH OTHER OPERATIVE DOCUMENT TO
WHICH, IMMEDIATELY PRIOR TO SUCH TRANSACTION, THE TRANSFEROR WAS A
PARTY;
(III) NO LEASE DEFAULT OR LEASE EVENT OF DEFAULT, SHALL HAVE
OCCURRED OR WOULD OCCUR AS A RESULT THEREOF;
(IV) THE TITLE OF TRUSTEE TO THE EQUIPMENT AND TRUSTEE'S RIGHTS
UNDER THIS AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS AND THE FIRST
AND PRIOR LIEN GRANTED TO TRUSTEE IN THE LEASE SHALL NOT BE ADVERSELY
AFFECTED;
(V) THE GUARANTY SHALL NOT BE IMPAIRED IN ANY RESPECT;
(VI) THE SURVIVING COMPANY (IF OTHER THAN LESSEE) SHALL HAVE
OBTAINED ALL GAMING PERMITS NECESSARY FOR THE CONTINUED OPERATION OF
THE CASINO AND THE RESORT; AND
(VII) THE TRANSFEROR SHALL HAVE DELIVERED TO LENDERS, TRUSTEE AND
AGENT A CERTIFICATE OF A RESPONSIBLE OFFICER OF LESSEE AND AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO EACH SUCH PERSON STATING THAT
SUCH TRANSACTION COMPLIES WITH THIS SECTION 5.2(A), THAT ALL CONDITIONS
TO THE CONSUMMATION OF SUCH TRANSACTION HAVE BEEN FULFILLED AND THAT
ALL GOVERNMENTAL ACTION REQUIRED IN CONNECTION WITH SUCH TRANSACTION
HAS BEEN OBTAINED, GIVEN OR MADE.
Upon the consummation of such transaction, the Surviving Company shall succeed
to, and be substituted for, and may exercise every right and power of, the
Transferor immediately prior to such transaction under this Agreement and each
other Operative Document to which the Transferor was a party immediately prior
to such transaction, with the same effect as if the Surviving Company had been
named herein and therein. Notwithstanding the foregoing provisions of this
Section 5.2, no conveyance, transfer or lease of all or substantially all of the
assets of the Transferor shall release Lessee or Guarantor from its respective
payment or other obligations under this Agreement or any other Operative
Document without the written consent of Trustee, Agent and each Lender.
(b) Parent shall not consolidate with any Person, merge with or
into any Person or convey, transfer or lease to any Person all or substantially
all of its assets in any single transaction (or series of related transactions),
unless, immediately after giving effect to such transaction, the conditions set
forth in clauses (i) through (vi) shall have been satisfied:
(I) THE PERSON FORMED BY SUCH CONSOLIDATION WITH OR INTO WHICH
PARENT SHALL BE MERGED OR THE PERSON WHICH SHALL ACQUIRE BY CONVEYANCE,
TRANSFER OR LEASE ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF PARENT (THE
"SURVIVING COMPANY"), IF OTHER THAN PARENT IMMEDIATELY PRIOR TO SUCH
TRANSACTION, SHALL BE A CORPORATION, PARTNERSHIP, ASSOCIATION OR OTHER
BUSINESS ENTITY THAT IS ORGANIZED UNDER THE LAWS OF THE UNITED STATES
OF AMERICA, A STATE THEREOF OR THE DISTRICT OF COLUMBIA;
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PARTICIPATION AGREEMENT
(II) THE SURVIVING COMPANY (IF OTHER THAN PARENT), IMMEDIATELY
PRIOR TO SUCH TRANSACTION, SHALL EXECUTE AND DELIVER TO EACH OF THE
PARTIES HERETO AN AGREEMENT, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO LENDERS, TRUSTEE AND AGENT, CONTAINING THE ASSUMPTION
BY THE SURVIVING COMPANY OF THE DUE AND PUNCTUAL PAYMENT, PERFORMANCE
AND OBSERVATION OF EACH OBLIGATION, COVENANT AND AGREEMENT OF PARENT
UNDER THIS AGREEMENT AND EACH OTHER OPERATIVE DOCUMENT TO WHICH,
IMMEDIATELY PRIOR TO SUCH TRANSACTION, PARENT WAS A PARTY;
(III) NO LEASE DEFAULT OR LEASE EVENT OF DEFAULT SHALL HAVE
OCCURRED OR WOULD OCCUR AS A RESULT THEREOF;
(IV) THE GUARANTY SHALL NOT BE IMPAIRED IN ANY RESPECT;
(V) THE SURVIVING COMPANY (IF OTHER THAN PARENT) SHALL HAVE
OBTAINED ALL GAMING PERMITS, INCLUDING A FINDING OF SUITABILITY TO OWN
CAPITAL STOCK OF LESSEE, AS THEN REQUIRED BY APPLICABLE LAW;
(VI) PARENT SHALL HAVE DELIVERED TO LENDERS, TRUSTEE AND AGENT A
CERTIFICATE OF A RESPONSIBLE OFFICER OF PARENT AND AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO EACH SUCH PERSON STATING THAT SUCH
TRANSACTION-COMPLIES WITH THIS SECTION 5.2(B), THAT ALL CONDITIONS TO
THE CONSUMMATION OF SUCH TRANSACTION HAVE BEEN FULFILLED AND THAT ALL
GOVERNMENTAL ACTION REQUIRED IN CONNECTION WITH SUCH TRANSACTION HAS
BEEN OBTAINED, GIVEN OR MADE; AND
(VII) IMMEDIATELY AFTER THE CONSUMMATION OF SUCH TRANSACTION, NO
CHANGE OF CONTROL SHALL HAVE OCCURRED.
Upon the consummation of such transaction, the Surviving Company shall succeed
to, and be substituted for, and may exercise every right and power of, Parent
immediately prior to such transaction under this Agreement and each other
Operative Document to which Parent was a party immediately prior to such
transaction, with the same effect as if the Surviving Company had been named
herein and therein. Notwithstanding the foregoing provisions of this Section
5.2(b), no conveyance, transfer or lease of all or substantially all of the
assets of Parent shall release Lessee from its payment or other obligations
under this Agreement or any other Operative Document without the written consent
of Trustee, Agent and each Lender.
SECTION 5.3. Corporate Existence. Subject to Section 5.2, each of
Parent and Lessee shall at all times maintain its existence as a corporation in
good standing under the laws of its respective jurisdiction of incorporation and
shall use commercially reasonable efforts to preserve and keep in full force and
effect its franchises material to its business.
SECTION 5.4. Ownership of Lessee. Parent shall at all times maintain
ownership of 100% of the issued and outstanding capital stock of Lessee
(including all rights to subscribe for, purchase (including by conversion of any
other security) or otherwise acquire any such capital stock), free and clear of
all Liens.
SECTION 5.5. Liens. Neither Lessee nor Parent shall incur or suffer to
exist any Lien on any of the Equipment or the Collateral other than Permitted
Liens. There is no Permitted Lien of the type described in clause (viii) of the
definitions of "Permitted Liens" with respect to the
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PARTICIPATION AGREEMENT
Equipment or the Collateral. Neither Lessee nor Parent shall incur or suffer to
exist any Lien, other than a Permitted Lien, or any of its material assets other
than the Equipment or the Collateral, which, individually or in the aggregate
with other such Liens, is more than $5,000,000.
SECTION 5.6. Financial Covenant Compliance Certificates.
(a) Annual Certificate. Within 90 days after the close of each
fiscal year, Lessee shall deliver to Trustee, Agent, and each Lender a
certificate of Lessee signed by a Responsible Officer of Lessee to the effect
that the signer is familiar with or has reviewed the relevant terms of this
Agreement, the Lease and each other Operative Document to which Lessee is a
party and has made, or caused to be made under his or her supervision, a review
of the transactions contemplated hereby and thereby and the condition of the
Equipment during the preceding fiscal year, and that such review has not
disclosed the existence during such fiscal year of any condition or event which
constitutes a Lease Default, a Lease Event of Default or Casualty (except as
described therein), nor does the signer have knowledge, after due inquiry, of
the existence as at the date of such certificate, of any condition or event
which constitutes a Lease Default, a Lease Event of Default or Casualty or, if
any such condition or event existed or exists, specifying the nature and period
of existence thereof and what action such Lessee has taken or is taking or
proposes to take with respect thereto.
(b) [not used]
(c) [not used]
SECTION 5.7. Investigation by Governmental Authorities. Lessee shall
deliver to Trustee, each Lender and to Agent promptly upon Lessee's receiving
written notice of the intent by a Governmental Authority to (i) revoke, suspend,
enjoin, restrict or modify any Gaming Permit or Liquor Permit necessary for the
ownership or operation of the Casino or gaming operations in respect thereof,
(ii) take an action which would constitute a requisition of title to any of the
Equipment, (iii) investigate the Equipment for a material violation of any
Applicable Law with respect to the Equipment, including any Environmental Law,
under which liability may be imposed upon Trustee, any Lender, Agent or Lessee,
or (iv) investigate the Equipment (other than routine fire, life safety and
similar inspections) for any violation of Applicable Law under which criminal
liability may be imposed upon Trustee, any Lender, Agent or Lessee.
SECTION 5.8. Books and Records. Lessee will, at all times maintain
corporate books and records separate from those of any other Person in
accordance with GAAP.
SECTION 5.9. Payment of Taxes, etc. Lessee shall pay and discharge
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges or levies imposed upon it or upon its property, and (ii)
all lawful claims that, if unpaid, might by law become a Lien upon its property,
other than those arising from Permitted Liens;
SECTION 5.10. Inspection. Lessee shall permit Agent, Trustee and
Lenders or any agents or representatives thereof annually (or upon demand during
an Event of Default) to (upon reasonable notice) examine and make copies of and
abstracts from the records and books of account of, Lessee (except for any
proprietary information which involves trade secrets of Lessee) and to discuss
the affairs, finances and accounts of Lessee with any of its officers. Agent,
Trustee, Lenders and any agents or representatives thereof shall keep
confidential and not disclose any confidential written information received from
Lessee in connection with such inspections, subject to Agent's, Trustee's or
Lenders', (a) obligation to disclose such information pursuant to an order under
Applicable Law and regulations or pursuant to a subpoena or other
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PARTICIPATION AGREEMENT
legal process, (b) right to disclose any such information to its bank examiners,
Affiliates, auditors, counsel and other professional advisors but only on a need
to know basis in connection with the Operative Documents and only if such
Persons are similarly bound in a separate writing to the provisions of this
Section 5.10, (c) right to disclose any such information in connection with any
litigation or dispute involving Parent and Lessee or any of its Subsidiaries or
Affiliates and (d) right to provide such information to participants to which
sales of participating interests are permitted pursuant to this Participation
Agreement and prospective assignees to which assignments of interest are
permitted pursuant to this Participation Agreement, but only if such participant
or prospective assignee agrees in writing to maintain the confidentiality of
such information on terms substantially similar to those of this Section as if
it were a "Lender" party hereto. Notwithstanding the foregoing, any such
information supplied to a participant or prospective assignee under this
Participation Agreement shall cease to be confidential information if it is or
becomes known to such Person by other than unauthorized disclosure, or if it
becomes a matter of public knowledge. Lessee shall upon reasonable notice from
Agent (except that no notice shall be required if an Event of Default has
occurred and is continuing) permit Agent, Trustee and Lenders and their
respective authorized representatives to inspect the Equipment during normal
business hours, provided that such inspections shall not unreasonably interfere
with Lessee's business operations at the Resort. Annual inspections by Agent and
all inspections following the occurrence of Event of Default shall be conducted
at the cost and expense of Lessee.
SECTION 5.11. Maintenance of Property, etc. Lessee shall maintain and
preserve all material assets used or useful in the conduct of its business in
good working order and condition.
SECTION 5.12. Maintenance of Insurance. Lessee shall maintain insurance
coverage covering the Equipment which meets in all respects the requirements of
Article IX of the Lease, and such coverage shall remain in full force and
effect. Without limiting the foregoing, Lessee shall carry insurance with
reputable insurers, or self-insure, in respect of its material assets, in such
manner, in such amounts and against such risks as is customarily maintained by
other Persons of similar size engaged in a similar business.
SECTION 5.13. Change of Name or Principal Place of Business. Lessee
shall furnish to Trustee, Agent and Lenders notice on or before the thirtieth
day before any relocation of its chief executive office, principal place of
business or the office where it keeps its records concerning its accounts or
contract rights relating to the Equipment or the Equipment or Lessee changes its
name, identity or corporate structure.
SECTION 5.14. Financial and Other Information. Parent and Lessee shall
deliver to Trustee, each Lender and Agent the following financial and other
information:
(a) Audited Statements. As soon as available and in any event
within 90 days after the end of each fiscal year of Parent, a consolidated
balance sheet of Parent and its consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of operations, cash flows
and common shareholders' equity for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year, with such
consolidated financial statements audited by independent public accountants of
nationally recognized standing acceptable to Agent, which such report shall be
without qualifications other than qualifications acceptable to all Lenders,
together with a certificate from such accountant to the effect that, in making
the examination necessary for the signing of such annual report by such
accountants, they have not become aware of any Default or Event of Default that
has occurred and is
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PARTICIPATION AGREEMENT
continuing, or, if they have become aware of such Default or Event of Default,
describing such Default or Event of Default and the steps, if any, being taken
to cure it.
(b) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each fiscal
year of Parent, the consolidated balance sheet of Parent and its consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statement of operations and cash flows of Parent and its consolidated
Subsidiaries for the portion of Parent's fiscal year ended at the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding quarter of, and the corresponding portion of Parent's preceding
fiscal year, all certified (subject, in the case of such quarterly financial
statements, to normal year-end auditing adjustments) by the chief financial
officer of Parent as to fairness of presentation and preparation in accordance
with GAAP applied on a basis consistent with those used in preparing the
financial statements referred to in Section 5.14(a) (subject to such changes in
accounting principles as shall be described in such certificate and shall have
been approved in writing attached to such certificate by Parent's independent
accountants).
(c) Pension Plan. If and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Code, a copy of such
application; (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or contribution
due any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief accounting
officer of Parent setting forth details as to such occurrence and action, if
any, which Parent or applicable member of the ERISA Group is required or
proposes to take.
(d) Default. As soon as possible and in any event within three
Business Days after the occurrence of each Default or Event of Default under any
Operative Document a statement of an officer of Parent setting forth details of
such Default or Event of Default and the action that Parent proposes to take
with respect thereto.
(e) Condition. Promptly upon becoming aware thereof, written
notice of any Material Adverse Effect.
(f) Proceedings. Promptly upon becoming aware thereof, written
notice of the commencement or existence of any proceeding against Parent or any
Affiliate of Parent by or before any Governmental Authority that might, in the
reasonable judgment of Parent, result in a Material Adverse Effect.
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PARTICIPATION AGREEMENT
(g) Environmental. As soon as possible and in any event within 10
days after the occurrence of any Environmental Violation or alleged
Environmental Violation, a statement of an authorized officer setting forth the
details of such violation or alleged violation and the action which Parent
proposes to take with respect thereto.
(h) Security Reports. As soon as available and in any event within
45 days after the end of each of the first three fiscal quarters of each fiscal
year of Parent, Form 10Qs of Parent shall have been delivered to Trustee (with
copies for each Lender) and within 90 days after the end of each fiscal year of
Parent, Form 10K of Parent shall have been delivered to Trustee (with copies for
each Lender).
(i) Annual Projections. As soon as possible and in any event no
later than 45 days after the commencement of each calendar year of Parent,
financial projections of Parent and its Subsidiaries for such calendar year
setting forth, in reasonable detail, a statement, on a monthly basis, of the
projected consolidated expenses and cash flows of Parent and its Subsidiaries.
(j) Other Information. Promptly upon written request therefore,
any other information in respect of Parent or Lessee reasonably requested by
Agent.
SECTION 5.15. Securities. Neither Lessee nor Parent, nor anyone
authorized to act on behalf of either of them, will take any action which would
subject the issuance or sale of the Notes, the Equipment or the Lease, or in any
security or lease the offering of which, for purposes of the Securities Act or
any state securities laws, would be deemed to be part of the same offering as
the offering of the aforementioned securities or leases to the registration
requirements of Section 5 of the Securities Act or any state securities laws.
ARTICLE VI
COVENANTS OF TRUSTEE AND LENDERS
SECTION 6.1. Covenants of Trustee and Lenders.
(a) Discharge of Liens. Each of Lenders and Trustee covenants as
to itself, and not jointly with any other Lender, that it will not, directly or
indirectly, create, incur, assume or permit to exist at any time, and will, at
its own cost and expense, take such. action as may be necessary to promptly
discharge, or to cause to be discharged, any Lessor Liens attributable to it,
and will indemnify the Trust Estate in the amount of any diminution of the value
thereof and any costs and expenses associated therewith as a result of its
failure to comply with its obligations under this Section 6.1(a).
Notwithstanding the foregoing, none of Lenders or Trustee, as the case may be,
shall be required to so discharge any such Lessor Lien while the same is being
contested in good faith by appropriate proceedings diligently prosecuted so long
as such proceedings shall not involve any risk of invalidity or the loss of
priority of the Lien of the Security Agreement or any risk of the sale,
forfeiture, foreclosure or loss of, and shall not interfere with the use or
disposition of, any part of the Equipment, the Lease or the Trust Estate or
title thereto or any interest therein or the payment of Rent; provided, however,
that each Lender and Trustee shall discharge any such Lessor Lien, whether or
not subject to contest as provided above, upon the purchase of the Equipment by
Lessee pursuant to the Lease.
(b) Trust Agreement. Without prejudice to any right under the
Trust Agreement of Trustee to resign, or Lenders' right under the Trust
Agreement to remove Trustee, Trustee hereby agrees with Lessee, Lenders and
Agent (i) not to terminate or revoke the trust
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PARTICIPATION AGREEMENT
created by the Trust Agreement except as permitted by Article IV of the Trust
Agreement prior to the later of the Lease Termination Date or the payment in
full of the obligations under the Notes, (ii) not to amend, supplement or
otherwise modify or consent to any amendment, supplement or modification of any
provision of the Trust Agreement prior to the Lease Termination Date in any
manner which would have a Material Adverse Effect on the rights of any such
party thereto, and (iii) to comply with all of the terms of the Trust Agreement
applicable to it except for such nonperformance which would adversely affect
such party.
(c) Successor Trustee. Trustee or any successor may resign or be
removed by Lenders as Trustee, a successor Trustee may be appointed, and a
corporation may become Trustee under the Trust Agreement, only in accordance
with the provisions of Article III of the Trust Agreement. Notwithstanding
anything to the contrary contained in this Agreement or the Trust Agreement, so
long as no Default or Event of Default shall be continuing, the appointment of a
successor Trustee shall be subject to the consent of Lessee (such consent is not
to be unreasonably withheld or delayed). In addition, so long as there exists no
Default or Event of Default, Lessee or Parent may request Agent to remove
Trustee in accordance with Section 3.10 of the Trust Agreement. Upon receipt of
such request, Agent shall survey the Required Lenders to determine whether to
proceed to remove Trustee. If the Required Lenders consent to such removal,
Trustee shall be removed in accordance with Section 3.10 of the Trust Agreement.
(d) Indebtedness; Other Business. Trustee on behalf of the Trust
shall not contract for, create, incur or assume any indebtedness, or enter into
any business or other activity, other than pursuant to or under the Operative
Documents and, for the benefit of Lessee, Agent and Lenders, agrees to be bound
by Section 1.2(b) of the Trust Agreement.
(e) Change of Principal Place of Business. Trustee shall give
prompt notice to Lenders, Lessee and Agent if Trustee's principal place of
business or chief executive office, or the office where the records concerning
the accounts or contract rights relating to the Equipment or the transactions
contemplated by the Operative Documents are kept, shall cease to be located at
530 Las Vegas Boulevard South, Las Vegas, Nevada 89101, or if it shall change
its name, identity or corporate structure.
(f) Loan Agreement. Trustee, Agent, Lessee, and each Lender hereby
agrees that, so long as the Lease is in effect, Trustee shall not consent to or
permit any amendment of the terms and provisions of the Loan Agreement or any
Note, whether or not any Lease Event of Default shall have occurred and be
continuing, if any such amendment or action would have the effect of increasing
the obligations of Lessee or decreasing the rights of Lessee, in each case
without the prior written consent of Lessee, except that without such consent,
Trustee may waive performance by Agent of obligations to Trustee the
non-performance of which does not adversely affect Lessee. Each Lender agrees to
comply with Section 7.7 of the Loan Agreement.
(g) Funding. Trustee shall give prompt notice to Lenders, Lessee
and Agent in the event any Lender does not fund the full amount to be funded by
such Lender on the Advance Date as described in Article II.
(h) Lease Financing Party Removal. If any of the Lessor, Trustee,
Lenders or Agent (and any successors thereto) (each, a "Lease Financing Party")
is found by any Gaming Authority to be unsuitable or unqualified for any
license, registration, approval or finding of suitability to serve as Lessor,
Trustee, Lender or Agent, or otherwise to be associated with Lessee or any
Guarantor, or the Board of Directors of Parent determines in its reasonable
judgment that such Lease Financing Party's continued association with Lessee or
the Guarantor may result in
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PARTICIPATION AGREEMENT
(i) the disapproval, modification, or non-renewal of any contract under which
Parent or any Subsidiary thereof has sole or shared authority to manage any
gaming operations, or (ii) the loss or non-reinstatement of any license,
registration, approval, finding of suitability or franchise from any Gaming
Authority held by Parent or any Subsidiary thereof to conduct any portion of the
business of Parent or any Subsidiary thereof, such Lease Financing Party agrees,
upon receiving payment in cash in full of all outstanding principal amounts,
accrued interest, fees and all other amounts payable to it under the Operative
Documents, to cooperate with Parent with respect to the assignment, sale or
transfer of such Lease Financing Party's interest in the Operative Documents as
Lessor, Trustee, Lender or Agent, as appropriate, to a suitable party and
complete such assignment, sale or transfer within 30 days of a request by Parent
to do so (or such lesser period of time as required by any Gaming Authority).
(i) Filings and Recordings. Agent, Lenders and Trustee shall amend the
UCC Financing Statements filed pursuant to Section 3.1(f) to more clearly
identify the items of Equipment securing the obligations created under the Lease
and other Operative Documents if (A) Lessee proposes to do another secured
financing secured by similar type or types of Equipment and (B) Lessee requests
in writing of Agent, Lenders and Trustee that the description of the similar
items of Equipment in the UCC Financing Statements, when it is practical to do
so, be modified so that only items of Equipment subject to the Lease are covered
by such UCC Financing Statements. When it is impractical to further identify the
items of Equipment described in the UCC Financing Statements, the parties hereto
will be under no obligation to modify such financing statements, although Lessee
may propose, at its expense, that Agent, Trustee and Lenders enter into an
intercreditor agreement or similar instrument with the proposed new secured
creditor or creditors to facilitate the proposed secured financing.
SECTION 6.2. Restrictions On and Effect of Transfer. No Lender shall
assign and delegate all or any portion of its right, title or interest in, to or
under any of the Operative Documents, its Commitment, the Loans or any Note,
except (x) that any Lender may pledge, assign or grant a security interest in
its interest to any Federal Reserve Board or any other central bank authority
with respect to such Lender, (y) upon satisfaction of the conditions set forth
in clauses (a) through (d) of this Section 6.2 any Lender may transfer all or
any ratable portion of its interest to an Affiliate or to any other existing
Lender or any Affiliate of such Lender and, upon compliance with any applicable
provisions of Section 6.3(a), may sell, assign or otherwise transfer a
participation in its interest in any of the foregoing; provided, that no
Participating Entity (as hereinafter defined) shall become, by means of such
transfer, a Lender under the Operative Documents, and Lessee shall be entitled
to continue to deal for all purposes under the Operative Documents exclusively
with Lender who has transferred such participation, and (z) any Lender may
assign and delegate any ratable portion or all of such right, title and interest
upon the satisfaction of each of the following conditions (which conditions will
not be applicable to a transfer pursuant to clause (x) or (y) of this Section
6.2):
(a) Required Notice and Effective Date. Any Lender desiring to
effect a transfer of its interest shall give written notice of each such
proposed transfer to Parent, Lessee and Agent at least three Business Days prior
to such proposed transfer, setting forth the name of such proposed transferee,
the percentage of interest to be retained by such Lender, if any, and the date
on which such transfer is proposed to become effective. All reasonable
out-of-pocket costs incurred by Trustee or Agent in connection with any such
disposition by a Lender under this Section 6.2 shall be borne by such Lender. In
the event of a transfer under this Section 6.2, any
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PARTICIPATION AGREEMENT
expenses incurred by the transferee in connection with its review of the
Operative Documents and its investigation of the transactions contemplated
thereby shall be borne by such transferee or the relevant Lender, as they may
determine, but shall not be considered costs and expenses which Lessee is
obligated to pay or reimburse under Section 9.8.
(b) Assumption of Obligations. Any transferee pursuant to this
Section 6.2 shall have executed and delivered to Agent and Trust Company a
letter in substantially the form of the Investor's Letter attached hereto as
Exhibit K, and thereupon the obligations of the transferring Lender under the
Operative Documents shall be proportionately released and reduced to the extent
of such transfer. Upon any such transfer as above provided, (i) the transferring
Lender shall still be entitled to the benefit of Article VII, and (ii) the
transferee shall be deemed to be bound by all obligations (whether or not yet
accrued) under, and to have become a party to, all Operative Documents to which
its transferor was a party, shall be deemed the pertinent "Lender" for all
purposes of the Operative Documents and shall be deemed to have made that
portion of the payments pursuant to this Agreement previously made or deemed to
have been made by the transferor represented by the interest being conveyed; and
each reference herein and in the other Operative Documents to the pertinent
"Lender" shall thereafter be deemed a reference to the transferee, to the extent
of such transfer, for all purposes. Upon any such transfer, Schedules I, II, and
III to this Agreement, as applicable, shall be deemed to be revised to reflect
the relevant information for such new Lender and the Commitment of such new
Lender (and the revised Commitment of the transferor Lender if it shall not have
transferred its entire interest).
(c) Employee Benefit Plans. No Lender may make any such
assignment, conveyance or transfer to or in connection with any arrangement or
understanding in any way involving any employee benefit plan (or its related
trust), as defined in Section 3(3) of ERISA, or with the assets of any such plan
(or its related trust), within the meaning of Section 4975(e)(1) of the Code
(other than a governmental plan, as defined in Section 3(32) of ERISA), with
respect to which Lessee or such Lender or any of their Affiliates is a "party in
interest" within the meaning of ERISA Section 3(14) or a "disqualified person"
within the meaning of Section 4975(e)(2) of the Code.
(d) Representations and Warranties. Notwithstanding anything to
the contrary set forth above, no Lender may assign, convey or transfer its
interest to any Person unless such Person shall have delivered to Agent and
Lessee a certificate confirming the accuracy of the representations and
warranties set forth in Section 4.3 with respect to such Person (other than as
such representation or warranty relates to the execution and delivery of
Operative Documents).
(e) Amounts. Any transfer of Notes shall be in a principal amount
which is equal to or greater than $1,000,000, or, if less, the full amount of
such Lender's Loan or Commitment.
(f) Effect. From and after any transfer of its Notes, the
transferring Lender shall be released, to the extent assumed by the transferee,
from its liability and obligations hereunder and under the other Operative
Documents relating to the Equipment to which such transferor is a party in
respect of obligations to be performed on or after the date of such transfer.
Upon any transfer by a Lender as above provided, any such transferee shall be
deemed a "Lender" for all purposes of such documents and each reference herein
to a Lender shall thereafter be deemed a reference to such transferee for all
purposes, except as the context may otherwise require.
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PARTICIPATION AGREEMENT
Notwithstanding any transfer pursuant to this Section 6.2, the transferor shall
continue to be entitled to all benefits accrued and all rights vested prior to
such transfer, including rights to indemnification under this Agreement or any
other Operative Document.
SECTION 6.3. Participations.
(a) Participations. Each Lender covenants and agrees that it will not
grant participations in its Notes to any Person (a "Participating Entity")
unless such Person (i) is a bank or other financial institution or finance
company and (ii) represents and warrants, in writing, to such Lender for the
benefit of Lenders and Lessee that no part of the funds used by it to acquire an
interest in the Notes constitutes assets of any Employee Benefit Plan or its
related trust. Any such transferor Lender shall require any transferee of its
interest in the Notes to make the representations and warranties set forth in
the preceding sentence, in writing, to such Person for its benefit and the
benefit of Lenders and Lessee. In the event of any such sale by a Lender of a
participating interest to a Participating Entity such Lender's obligations under
this Agreement and under the other Operative Documents shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of its Note for all purposes under this Agreement
and under the other Operative Documents, and Trustee, Agent and, except as set
forth in Section 6.3(b), Lessee shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement and under the other Operative Documents, and such Lender shall retain
the sole right to enforce the obligations of Lessee and Guarantor under the
Operative Documents and to approve any amendment, modification or waiver of any
provision of any Operative Document. Any Lender selling a participation shall
give notice thereof to Lessee and Parent within ten (10) Business Days after
such sale.
(b) Transferee Indemnities. Each Participating Entity shall be
entitled to the benefits of Sections 2.9, 2.10, 2.11 and 2.12 of the Loan
Agreement and Articles VII and VIII with respect to its participation in the
Notes outstanding from time to time; provided, that no Participating Entity in
respect of its participation shall be entitled to receive any greater amount
pursuant to such Sections than the transferor Lender would have been entitled to
receive in respect of the amount of the participation in the Notes transferred
by such transferor Lender to such Participating Entity had no such transfer of a
participation occurred.
SECTION 6.4. Required Transfers. If at any time during the Lease Term
any Lender shall request from Trustee or Lessee reimbursement for any costs
pursuant to Section 2.09, 2.10 or 2.11 of the Loan Agreement (which cost Lessee
is obligated to pay as Supplemental Rent under Section 3.2 of the Lease), such
Lender shall, upon request of Lessee or Agent, attempt in good faith to promptly
sell to a Person who would qualify under Section 6.3(a) the Notes held by such
Lender, the Commitment of such Lender and any other interests of such Lender
hereunder and under the other Operative Documents, in accordance with this
Section 6.4, in exchange for an amount equal to the outstanding principal amount
of such Lender's Notes together with all interest accrued thereon and unpaid to
the date of such purchase and all other amounts then due and payable hereunder
or under the other Operative Documents to such Lender (including any requested
reimbursement amounts).
ARTICLE VII
GENERAL INDEMNITY
SECTION 7.1. General Indemnification. Lessee and Parent agree, whether
or not any of
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PARTICIPATION AGREEMENT
the transactions contemplated hereby shall be consummated, to assume liability
for, and to indemnify, protect, defend, save and keep harmless each Indemnitee
on an After-Tax Basis from and against any and all Claims that may be imposed
on, incurred by or asserted against such Indemnitee (whether because of action
or omission by such Indemnitee or otherwise), whether or not such Indemnitee
shall also be indemnified as to any such Claim by any other Person and whether
or not such Claim arises or accrues prior to the Closing Date or after the Lease
Termination Date, in any way relating to or arising out of (a) any of the
Operative Documents or any of the transactions contemplated thereby or any
investigation, litigation or proceeding in connection therewith, and any
amendment, modification or waiver in respect thereof; or (b) the Resort or any
part thereof or interest therein; or (c) the acquisition, mortgaging, design,
construction, preparation, installation, inspection, delivery, non-delivery,
acceptance, rejection, purchase, ownership, possession, rental, lease, sublease,
repossession, maintenance, repair, alteration, modification, addition or
substitution, storage, transfer of title, redelivery, use, financing,
refinancing, operation, condition, sale (including any transfer pursuant to
Section 5.2 of the Lease or any sale pursuant to Section 5.1 of the Lease),
return or other disposition of all or any part of any interest in the Equipment
or the imposition of any Lien (or incurring of any liability to refund or pay
over any amount as a result of any Lien) thereon, including: (i) Claims or
penalties arising from any violation of law or in tort (strict liability or
otherwise), (ii) latent or other defects, whether or not discoverable, and (iii)
any Claim for patent, trademark or copyright infringement; or (d) any activity,
occurrence or condition that violates or results in non-compliance with any
Environmental Law arising out of or in any way relating to the Resort or any
part thereof or interest therein; (e) the offer, issuance, sale or delivery of
the Notes; (f) the breach or alleged breach by Lessee of any representation or
warranty made by it or deemed made by it in any Operative Document; (g) the
transactions contemplated hereby or by any other Operative Document (except for
any violation of Section 4.2(c)), in respect of the application of Parts 4 and 5
of Subtitle B of Title I of ERISA and any prohibited transaction described in
Section 4975(c) of the Code or (h) any other agreement entered into or assumed
by Lessee in connection with the Equipment; provided, however, that neither
Parent not Lessee shall be required to indemnify under this Section 7.1 for any
of the following: (1) as to an Indemnitee, any Claim to the extent resulting
from the willful misconduct or gross negligence of such Indemnitee or, if such
Indemnitee is Trust Company, ordinary negligence for the handling of funds
(other than willful misconduct or gross negligence imputed to such Indemnitee by
reason of its participation in the transactions contemplated hereby) or the
breach by such Indemnitee of any representation, warranty or covenant of such
Indemnitee set forth in any Operative Document, (2) as to an Indemnitee, any
Claim resulting from a transfer by such Indemnitee of all or any part of its
interest in the Lease, the other Operative Documents or the Equipment, other
than any such transfer either required by the Lease (including a transfer as a
result of a Casualty or a transfer pursuant to Section 5.1 or 5.2 of the Lease)
or any other Operative Document or while a Lease Event of Default shall have
occurred and be continuing, (3) any Claims in respect of Taxes (such Claims to
be subject to Article VIII, other than a payment necessary to make payments
under this Section 7.1 on an After-Tax Basis, provided, that this exclusion does
not apply to any taxes or penalties included in Claims against which the
Indemnitee is provided an indemnification under subsection (f) of this Section
7.1 and (4) as to an Indemnitee, any Claim resulting from Lessor Liens which
such Indemnitee is responsible for discharging under the Operative Documents.
Lessee shall be entitled to credit against any payments due under this
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PARTICIPATION AGREEMENT
Section 7.1 any insurance recoveries received by an Indemnitee in respect of the
related Claim under or from insurance paid for by Lessee or assigned to Trustee
by Lessee.
If Lessee shall obtain actual knowledge of any Claim indemnified against
under this Section 7.1, Lessee shall give prompt notice thereof to the
appropriate Indemnitee or Indemnitees, and if any Indemnitee shall obtain actual
knowledge of any Claim indemnified under this Section 7.1, such Indemnitee shall
give prompt notice thereof to Lessee, provided that failure to so notify Lessee
shall release Lessee from its obligations to indemnify hereunder only if and to
the extent that such failure results in a forfeiture by Lessee of substantive
rights and defenses. With respect to any amount that Lessee is requested by an
Indemnitee to pay by reason of this Section 7.1, such Indemnitee shall, if so
requested by Lessee and prior to any payment, submit such additional information
to Lessee as Lessee may reasonably request and which is reasonably available to
such Indemnitee to substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee for which the Indemnitee is indemnified under this Section 7.1, such
Indemnitee shall notify Lessee of the commencement thereof, and Lessee shall be
entitled, at its expense, acting through counsel reasonably acceptable to such
Indemnitee, to participate in, and, to the extent that Lessee desires to, assume
and control the defense thereof; provided, however, that Lessee shall have
acknowledged in writing its obligation to fully indemnify such Indemnitee in
respect of such action, suit or proceeding; and provided, further, that Lessee
shall not be entitled to assume and control the defense of any such action, suit
or proceeding if and to the extent that, (A) in the reasonable opinion of such
Indemnitee, (x)(i) such action, suit or proceeding involves any risk of
imposition of criminal liability or (ii) such action, suit or proceeding
involves any material risk of material civil liability on such Indemnitee or
will involve a material risk of the sale, forfeiture or loss of, or the creation
of any Lien (other than a Permitted Lien) on the Equipment, the Trust Estate or
any part thereof, unless, in the case of this clause (x)(ii), Lessee shall have
posted a bond or other security satisfactory to the relevant Indemnitees in
respect to such risk or (y) the control of such action, suit or proceeding would
involve a bona fide conflict of interest, (B) such proceeding involves Claims
not fully indemnified by Lessee which Lessee and the Indemnitee have been unable
to sever from the indemnified Claim(s), (C) a Default or a Lease Event of
Default has occurred and is continuing or (D) such action, suit or proceeding
involves matters which extend beyond or are unrelated to the transactions
contemplated by the Operative Documents and if determined adversely could be
materially detrimental to the interests of such Indemnitee notwithstanding
indemnification by Lessee. Indemnitee, on the one hand, and Lessee and Parent,
on the other hand, may participate in a reasonable manner at its own expense and
with its own counsel in any proceeding conducted by each other in accordance
with the foregoing.
Each Indemnitee shall at Lessee's expense supply Lessee with such
information and documents reasonably requested by Lessee as are necessary or
advisable for Lessee to participate in any action, suit or proceeding to the
extent permitted by this Section 7.1. Unless a Lease Event of Default shall have
occurred and be continuing, no Indemnitee shall enter into any settlement or
other compromise with respect to any Claim which is entitled to be indemnified
under this Section 7.1 the prior written consent of Lessee, which consent shall
not be unreasonably withheld or delayed, unless such Indemnitee waives its right
to be indemnified under this Section 7.1 with respect to such Claim. In
addition, if an Indemnitee, in violation of
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PARTICIPATION AGREEMENT
Lessee's right to assume and control the defense of any Claim, refuses to permit
Lessee to control the defense, such Indemnitee waives its right to be
indemnified under Section 7.1 with respect to such Claim.
Upon payment in full of any Claim by Lessee pursuant to this Section 7.1 to
or on behalf of an Indemnitee, Lessee, without any further action, shall be
subrogated to any and all claims that such Indemnitee may have relating thereto
(other than claims in respect of insurance policies maintained by such
Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be necessary to preserve
any such claims and otherwise cooperate with Lessee and give such further
assurances as are necessary or advisable to enable Lessee vigorously to pursue
such claims.
Any amount payable to an Indemnitee pursuant to this Section 7.1 shall be
paid to such Indemnitee promptly upon receipt of a written demand therefor from
such Indemnitee, accompanied by a written statement describing the basis for
such indemnity and the computation of the amount so payable and, if requested by
Lessee, such determination shall be verified by a nationally recognized
independent accounting firm mutually acceptable to Lessee and the Indemnitee at
Lessee's expense.
ARTICLE VIII
GENERAL TAX INDEMNITY
SECTION 8.1. General Tax Indemnity. Except as otherwise provided in this
Section 8.1, Lessee shall pay on an After-Tax Basis, and on written demand shall
indemnify and hold each Indemnitee harmless from and against, any and all fees
(including documentation, recording, license and registration fees), taxes
(including income (whether net, gross or adjusted gross, whether domestic or
foreign), gross receipts, sales, rental, use, turnover, value-added, property,
excise and stamp taxes), levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever, together with any penalties, fines or
interest thereon or additions thereto (any of the foregoing being referred to
herein as "Taxes" and individually as a "Tax") imposed on or with respect to any
Indemnitee, the Equipment or any portion thereof, any Operative Document or
Lessee or any sublessee or user of the Equipment, by any foreign authority, the
United States or by any state or local government or other taxing authority in
the United States in connection with or in any way relating to (i) the
acquisition, design, construction, preparation, installation, inspection,
delivery, non-delivery, acceptance, rejection, purchase, ownership, possession,
rental, lease, sublease, repossession, maintenance, repair, alteration,
modification, addition or substitution, storage, transfer of title, redelivery,
use, financing, refinancing, operation, condition, sale, return or other
application or disposition of all or any part of the Equipment or the imposition
of any Lien (or incurrence of any liability to refund or pay over any amount as
a result of any Lien) thereon, (ii) Rent or the receipts or earnings arising
from or received with respect to the Equipment or any part thereof, or any
interest therein or any applications or dispositions thereof, (iii) any other
amount paid or payable pursuant to the Notes, or any other Operative Documents,
the property or the income or other proceeds with respect to the property held
in the Trust Estate, (iv) the Equipment or any part thereof or any interest
therein, (v) all or any of the Operative Documents, any other documents
contemplated thereby and any amendments and supplements thereto, and (vi)
otherwise with respect to or in connection with the transactions contemplated by
the Operative Documents;
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PARTICIPATION AGREEMENT
provided, that Lessee's indemnification obligation hereunder in respect of any
Tax shall be net of any foreign, federal, state or local income tax benefits
which are recognized by the relevant Tax Indemnitee as a result of the
imposition of such Tax).
SECTION 8.2. Exclusions from General Tax Indemnity. Section 8.1 shall not
apply to:
(a) Taxes on, based on, or measured by or with respect to the net
income of an Indemnitee (including minimum Taxes, capital gains Taxes, Taxes on
or measured by items of tax preference or alternative minimum Taxes) other than
(A) any such Taxes that are, or are in the nature of, sales, use, rental (other
than Taxes imposed on net rental income) or property Taxes, (B) withholding
Taxes imposed by the United States or Nevada (I) on payments with respect to the
Notes, or (II) on Rent, to the extent the net payment of Rent after deduction of
such withholding Taxes would be less than amounts currently payable with respect
to the Notes and (C) any such Taxes imposed on such Indemnitee by any state
(other than Nevada) or local taxing authority in such state to the extent such
Taxes are imposed as a result of Lessee moving the Equipment or any part thereof
to such state;
(b) Taxes that are based on, measured by or imposed with respect to
the fees or other compensation received by a Person acting as Trustee or Agent
(in their respective individual capacities) or any Affiliate of any thereof for
acting as trustees under the Trust Agreement or the Loan Agreement,
respectively;
(c) Taxes that result from any act, event or omission, or are
attributable to any period of time, that occurs after the earliest of (A) the
expiration of the Lease Term with respect to the Equipment and, if the Equipment
is required to be returned to Trustee in accordance with the Lease, such return
and (B) the discharge in full of Lessee's obligations to pay the Lease Balance,
or any amount determined by reference thereto, with respect to the Equipment and
all other amounts due under the Lease and other Operative Documents, unless such
Taxes (and interest, penalties and late charges related thereto) relate to acts,
events or matters occurring prior to the earliest of such times or are imposed
on or with respect to any payments due under the Operative Documents after such
expiration or discharge; or
(d) Taxes imposed on an Indemnitee that result from any voluntary
sale, assignment, transfer or other disposition by such Indemnitee or any
related Indemnitee of any interest in the Equipment or any part thereof, or any
interest therein or any interest or obligation arising under the Operative
Documents or any Notes, or from any sale, assignment, transfer or other
disposition of any interest in such Indemnitee or any related Indemnitee, it
being understood that each of the following shall not be considered a voluntary
sale: (A) any substitution, replacement or removal of any of the Equipment by
Lessee shall not be treated as a voluntary action of any Tax Indemnitee, (B) any
sale or transfer resulting from the exercise by Lessee of any early termination
option, (C) any transfer under Section 5.2 of the Lease and (D) any sale or
transfer while a Lease Event of Default shall have occurred and be continuing
under the Lease.
SECTION 8.3. Contests. If any Claim shall be made against any Indemnitee or
if any proceeding shall be commenced against any Indemnitee (including a written
notice of such proceeding) for any Taxes as to which Lessee may have an
indemnity obligation pursuant to Section 8.2, or if any Indemnitee shall
determine that any Taxes as to which Lessee may have an indemnity obligation
pursuant to Section 8.2 may be payable, such Indemnitee shall promptly notify
Lessee. Lessee shall be entitled, at its expense, acting through counsel
reasonably acceptable to such Indemnitee, to participate in, and, to the extent
that Lessee desires to, assume and control the defense thereof; provided,
however, that Lessee shall have acknowledged in writing its obligation to
indemnify fully such Indemnitee in respect of such action, suit or proceeding;
and, provided, further, that Lessee shall not be entitled to assume
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PARTICIPATION AGREEMENT
and control the defense of any such action, suit or proceeding if and to the
extent that (A) Lessee is not able to provide such Indemnitee with a legal
opinion of counsel reasonably acceptable to such Indemnitee that such action,
suit or proceeding does not involve (x) a risk of imposition of criminal
liability or (y) any material risk of material civil liability on such
Indemnitee and will not involve a material risk of the sale, forfeiture or loss
of, or the creation of any Lien (other than a Permitted Lien) on the Equipment,
the Trust Estate or any part thereof, unless, in the case of this clause (y),
Lessee contemporaneously with such opinion shall have posted a bond or other
security satisfactory to the relevant Indemnitee in respect to such risk, (B)
the control of such action, suit or proceeding would involve a bona fide
conflict of interest, (C) such proceeding involves Claims not fully indemnified
by Lessee which Lessee and the Indemnitee have been unable to sever from the
indemnified claim(s), (D) a Lease Event of Default has occurred and is
continuing or (E) such action, suit or proceeding involves matters which extend
beyond or are unrelated to the transaction contemplated by the Operative
Documents and if determined adversely could be materially detrimental to the
interests of such Indemnitee notwithstanding indemnification by Lessee.
Indemnitee, on the one hand, and Lessee and Parent, on the other hand, may
participate in a reasonable manner at its own expense and with its own counsel
in any proceeding conducted by each other in accordance with the foregoing.
Each Indemnitee shall at Lessee's expense supply Lessee with such
information and documents reasonably requested by Lessee as are necessary or
advisable for Lessee to participate in any action, suit or proceeding to the
extent permitted by this Section 8.3. Unless a Lease Event of Default shall have
occurred and be continuing, no Indemnitee shall enter into any settlement or
other compromise with respect to any Claim which is entitled to be indemnified
under this Section 8.3 without the prior written consent of Lessee, which
consent shall not be unreasonably withheld, unless such Indemnitee waives its
right to be indemnified under this Section a.3 with respect to such Claim. In
addition, if an Indemnitee, in violation of Lessee's right to assume and control
the defense of any Claim, refuses to permit Lessee to control the defense, such
Indemnitee waives its right to be indemnified under Section 8.1 with respect to
such Claim.
Notwithstanding anything contained herein to the contrary, an Indemnitee
will not be required to contest (and Lessee shall not be permitted to contest)
(a) a Claim with respect to the imposition of any Tax if such Indemnitee shall
waive its right to indemnification under this Section 8.3 with respect to such
claim (and any related claim with respect to other taxable years the contest of
which is precluded or otherwise adversely affected as a result of such waiver)
and (b) any Claim if the subject matter thereof shall be of a continuing nature
and shall have previously been decided adversely. Each Indemnitee and Lessee
shall consult in good faith with each other concerning each step and decision
regarding the conduct of such contest controlled by either, including the forum
in which the claim is most likely to be favorably resolved.
SECTION 8.4. Payments. Any Tax indemnifiable under this Article VIII shall
be paid directly when due to the applicable taxing authority if direct payment
is practicable and permitted. If direct payment to the applicable taxing
authority is not permitted or is otherwise not made, any amount payable to an
Indemnitee pursuant to Section 8.1 shall be paid within 30 days after receipt of
a written demand therefor from such Indemnitee accompanied by a written
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PARTICIPATION AGREEMENT
statement describing in reasonable detail the amount so payable, but not before
the date that the relevant Taxes are due. Any payments made pursuant to Section
8.1 directly to the Indemnitee entitled thereto or Lessee, as the case may be,
shall be made in immediately available funds at such bank or to such account as
specified by the payee in written directions to the payor, or, if no such
direction shall have been given, by check of the payor payable to the order of
the payee by certified mail, postage prepaid at its address as set forth in this
Agreement. Upon the request of any Indemnitee with respect to a Tax that Lessee
is required to pay, Lessee shall furnish to such Indemnitee the original or a
certified copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment as is reasonably acceptable to such Indemnitee.
SECTION 8.5. Reports. If any report, return or statement is required to be
filed with respect to any Taxes that are subject to indemnification under this
Article VIII, Lessee shall, if Lessee is permitted by Applicable Law, timely
prepare and file such report, return or statement; provided, however, that if
Lessee is not permitted by Applicable Law to file any such report Lessee will
promptly so notify the appropriate Indemnitee, in which case the Indemnitee will
file any such report after preparation thereof by Lessee.
SECTION 8.6. Withholding Tax Exemption. At least 10 Business Days prior to
the first date on which any payment is due under any Note for the account of any
Lender, which is a "foreign corporation, partnership or trust" within the
meaning of the Code and such Lender claims exemption from, or a reduction of
U.S. withholding tax under Section 1441 or 1442 of the Code, such Lender agrees
that it will have delivered to each of Lessee, Trustee and Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to receive payments under
the Operative Documents without deduction or withholding of any United States
Federal income taxes in accordance with Section 7.10 of the Loan Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery and the termination or expiration of
this Agreement and any of the Operative Documents, the transfer of the Equipment
to or by Trustee as provided herein or in any other Operative Documents, any
disposition of any interest of Trustee in the Equipment, the purchase and sale
of the Notes, payment therefor and any disposition thereof and shall be and
continue in effect notwithstanding any investigation made by any party hereto or
to any of the other Operative Documents and the fact that any such party may
waive compliance with any of the other terms, provisions or conditions of any of
the Operative Documents.
SECTION 9.2. No Broker. etc. Neither Lessee nor Parent has incurred any
fees or commissions to which Trustee, Agent or any Lender might be subjected by
virtue of their entering into the transactions contemplated by this Agreement.
Any party who is in breach of this representation shall indemnify and hold the
other parties harmless from and against any liability arising out of such breach
of this representation.
SECTION 9.3. Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been given (i) in the case of notice by letter,
the earlier of when delivered to the addressee
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PARTICIPATION AGREEMENT
by hand or courier if delivered on a Business Day and, if not delivered on a
Business Day, the first Business Day thereafter or on the fourth Business Day
after depositing the same in the mails, registered or certified mail, postage
prepaid, return receipt requested, and (ii) in the case of notice by facsimile
or bank wire, when receipt is confirmed if delivered on a Business Day and, if
not delivered on a Business Day, the first Business Day thereafter, addressed as
provided in Schedule III, or to such other address as any of the parties hereto
may designate by written notice.
SECTION 9.4. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same agreement.
SECTION 9.5. Amendments. Neither this Agreement nor any of the other
Operative Documents nor any of the terms hereof or thereof may be terminated,
amended, supplemented, waived or modified orally, but only by an instrument in
writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification shall be sought and consented to
by the Required Lenders; and no such termination, amendment, supplement, waiver
or modification shall be effective unless a signed copy thereof shall have been
delivered to Trustee, Lessee and Agent. Trustee and Lessee shall not be
permitted to amend, modify or supplement the Lease without the written consent
of the Required Lenders; provided, that without the prior written consent of
each Lender, Trustee shall not:
(a) modify any of the provisions of this Section 9.5, change the
definition of "Required Lenders," or modify or waive any provision of any
Operative Document requiring action by any of the foregoing, or release any
Collateral (except as otherwise specifically provided in any Operative
Document);
(b) reduce the amount or change the time of payment of any amount of
principal owing or payable under any Note or interest owing or payable on any
Note, reduce the amount or change the time of payment of any fee, or modify any
of the provisions of Section 2.2 of the Trust Agreement;
(c) modify, amend, waive or supplement any of the provisions of
Sections 3.1, 3.2, 3.4, 4, 5.1, 5.2, Article VII and Article X of the Lease;
(d) reduce, modify, amend or waive any indemnities in favor of any
Lender;
(e) reduce the amount or change the time of payment of Rent or the
Lease Balance, or reduce the amount or change the time of payment of any such
payment under any Guaranty with respect to any such payment;
(f) consent to any assignment of Lease releasing Lessee from its
obligations to pay Rent or the Lease Balance or changing the absolute and
unconditional character of such obligations;
(g) modify, amend, waive or supplement the Guaranty, or consent to any
amendment thereof or release any of the guarantees of any Guarantor; or
(h) permit the creation of any Lien on the Trust Estate or any part
thereof except as contemplated by the Operative Documents, or deprive any Lender
of the benefit of the security interest and Lien secured by the Trust Estate.
In any of the foregoing cases in which the prior written consent of each
Lender is required, if the Required Lenders are willing to give their consent
but any of the other Lenders is not willing to give its consent, the Required
Lenders may purchase the Note(s), of such other Lender(s) for the principal
balance thereof plus any accrued interest thereon, upon three Business
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PARTICIPATION AGREEMENT
Days' prior written notice.
SECTION 9.6. Headings, etc. The Table of Contents and headings of the
various Articles and Sections of this Agreement are for convenience of reference
only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
SECTION 9.7. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN, AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEVADA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH
STATE. EXCEPT TO THE EXTENT THAT THE EXERCISE OF CERTAIN RIGHTS OR REMEDIES
HEREUNDER OR UNDER THE OTHER OPERATIVE DOCUMENTS MAY REQUIRE COMPLIANCE WITH THE
GAMING LAWS.
SECTION 9.8. Transaction Costs. Lessee shall pay all Transaction Costs
whether or not the transactions contemplated hereby are consummated. In
addition, Lessee agrees to pay or reimburse the Indemnitees on demand for all
other out-of-pocket costs and expenses, including attorneys' fees, reasonably
incurred in connection with: (a) entering into, or the giving or withholding of,
any future amendments, supplements, waivers or consents with respect to the
Operative Documents; (b) any Casualty or termination of the Lease or any other
Operative Documents; (c) the negotiation and documentation of any restructuring
or "workout," whether or not consummated, of any Operative Document; (d) the
enforcement or attempted enforcement, or preservation of any rights or remedies
under the Operative Documents; and (e) any transfer by an Indemnitee of any
interest in the Loan or the Notes during the continuance of an Event of Default.
SECTION 9.9. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law; but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 9.10. 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 their respective successors and
permitted assigns.
SECTION 9.11. Final Agreement. THIS AGREEMENT, TOGETHER WITH THE OPERATIVE
DOCUMENTS, REPRESENT THE ENTIRE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED HEREBY AND THE OTHER OPERATIVE DOCUMENTS. THIS
AGREEMENT CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 9.12. No Third Party Beneficiaries. Nothing in this Agreement or
the other Operative Documents shall be deemed to create any right in any Person
not a party hereto or thereto (other than the permitted successors and assigns
of Lessee and Parent), and such agreements shall not be construed in any respect
to be a contract in whole or in part for the benefit of any third party except
as aforesaid.
SECTION 9.13. Release of Lien. Each Lender hereby instructs Trustee to
release, and
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PARTICIPATION AGREEMENT
Agent shall also release, the Liens created by the Lease and Security Documents,
respectively, against the Equipment promptly upon Lessee's payment in full in
immediately available funds of the Lease Balance and of all other amounts then
due and owing under the Operative Documents. Each Lender, at the expense of
Lessee, will promptly and duly execute and deliver all documents and take such
further action as may be necessary to release, in accordance with the preceding
paragraph, the Liens, including if requested by Lessee the recording or filing
of any document evidencing the release of such Liens in accordance with the laws
of the appropriate jurisdictions.
SECTION 9.14. Reproduction of Documents. This Agreement, all documents
constituting Schedules or Exhibits hereto, and all documents relating hereto
received by a party hereto, including: (a) consents, waivers and modifications
that may hereafter be executed; (b) documents received by Lessor in connection
with Lessor's receipt and/or acquisition of the Equipment; and (c) financial
statements, certificates, and other information previously or hereafter
furnished to Lessor may be reproduced by Lessor by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process. Each of Lenders agrees and stipulates that, to the extent permitted by
law, any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by Lessor in the
regular course of business) and that, to the extent permitted by law, any
enlargement, facsimile, or further reproduction of such reproduction shall
likewise be admissible in evidence; provided, however, that no such reproduction
shall be presented or accepted in lieu of the original of such reproduction for
purposes of Article 9 of the U.C.C. or any other applicable laws regarding
chattel paper.
SECTION 9.15. Submission to Jurisdiction. Lessor may bring suit to enforce
any claim arising out of the Operative Documents in any state or federal court
located in San Francisco, California having subject matter jurisdiction with
respect to any such claim. Each of Lessee and each Guarantor hereby irrevocably:
(a) submits to the jurisdiction of such courts; and (b) consents to the service
of process out of said courts by mailing a copy thereof, by registered mail,
postage prepaid, to Lessee or any Guarantor at their respective addresses
specified in this Agreement, and agrees that such service, to the fullest extent
permitted by law: (i) shall be deemed in every respect effective service of
process upon it in any such suit, action or proceeding; and (ii) shall be taken
and held to be valid personal service upon and personal delivery to it. Each of
Lessee and any Guarantor irrevocably waives, to the fullest extent permitted by
law: (A) any claim, or any objection, that it now or hereafter may have, that
venue is not proper with respect to any such suit, action or proceeding brought
in such a court located in San Francisco, California including any claim that
any such suit, action or proceeding brought in such court has been brought in an
inconvenient forum; and (B) any claim that either Lessee or Guarantor is not
subject to personal jurisdiction or service of process in such forum. Nothing
herein contained shall preclude any Lender from bringing an action or proceeding
in respect hereof in any other state or federal court within the United States
having subject matter jurisdiction with respect to such action and personal
jurisdiction over the parties to such action. Lessee and each Guarantor agree
that a final judgment in any action or proceeding in a state or federal court
within the United States may be enforced in any other jurisdiction by suit on
the judgment or in any other manner provided by law.
SECTION 9.16. Jury Trial. LESSEE AND GUARANTOR EACH WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE
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PARTICIPATION AGREEMENT
OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OPERATIVE DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OPERATIVE
DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
SECTION 9.17. Payments Set Aside. To the extent that Lessee makes a payment
to Trustee, Agent or Lenders, or Trustee, Agent or Lenders exercise their right
of set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any discretion) to be repaid to a
trustee, receiver or any other party, in connection with any insolvency of
Lessee, any Guarantor or any Subsidiary that is a sublessee, assignee or
transferee of any Equipment or otherwise, then (a) to the extent of such
recovery the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such set-off had not occurred, and (b) each Lender severally
agrees to pay to Agent upon demand its pro rata share of any amount so recovered
for distribution by Agent in accordance with the Loan Agreement.
SECTION 9.18. Trust Agreement. The provisions of Section 5.1 of the Trust
Agreement limiting the reimbursement and indemnification obligations of Lenders
are incorporated by reference into this Agreement.
45
<PAGE> 46
PARTICIPATION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
STRATOSPHERE GAMING CORP.,
as Lessee
By:
Name: Thomas A. Lettero
Title: Vice President-Administration/
Chief Financial Officer
STRATOSPHERE CORPORATION,
as Guarantor
By:
Name: Thomas A. Lettero
Title: Vice President-Administration/
Chief Financial Officer
46
<PAGE> 47
PARTICIPATION AGREEMENT
FIRST SECURITY TRUST COMPANY OF
NEVADA, not in its individual
capacity except as expressly stated
herein, but solely as Lessor and
Trustee
By
Name:
Title:
47
<PAGE> 48
PARTICIPATION AGREEMENT
HELLER FINANCIAL LEASING, INC.
as Agent and as Lender
By:
Name: Clifford A. Lehman
Title: Senior Vice President
48
<PAGE> 49
PARTICIPATION AGREEMENT
PHOENIXCOR, INC. as Lender
By:
Name:
Title:
49
<PAGE> 50
PARTICIPATION AGREEMENT
SCHEDULE I
TO
PARTICIPATION AGREEMENT
EQUIPMENT*
QUANTITY EQUIPMENT DESCRIPTION
---------------------------------------------------
I. GAMING EQUIPMENT
1,711 Slot Machines
81 Gaming Chairs and Stools
9 Bar/Slant Top Videos
5 Double-Sided Display/Signs
38 Wrappers, Counters and Slot Equip.
56 Gaming Tables
966,909 Token, Dies, Chips, Cards
1,623 Tugs, Carts and Pit Stands
20,694 Locks, Keys, Key Rings
Total Gaming Equipment
II. RESTAURANT EQUIPMENT
Dining/Kitchen Equipment
Millwork/Stainless Steel
Total Restaurant
III. HOTEL EQUIPMENT
Safelok System
Total Hotel Equipment
IV. CENTRAL PLAN
Spectrum Generator Set
Total Central Plant
V. ELEVATOR & ESCALATOR
Elevator and Escalator
Total Elevator and Escalator
* The Equipment on this page was previously financed under that certain
Amended and Restated Participation Agreement, dated as of October 14, 1998,
among Lessee, Guarantor, Lessor and the other parties thereto, and is more
specifically described on the 172 page supplement hereto.
<PAGE> 51
PARTICIPATION AGREEMENT
SCHEDULE II
TO
PARTICIPATION AGREEMENT
LENDER COMMITMENTS
<TABLE>
<CAPTION>
LENDERS COMMITMENT
- ------- PERCENTAGE FEE ----------
---------- ----
<S> <C> <C> <C>
Heller Financial Leasing, Inc. $ 8,000,000 80 $ 32,000
Phoenixcor, Inc. 2,000,000 20
8,000
---------------------------------------
TOTAL (LENDERS) $ 10,000,000 100%
$ 40,000
</TABLE>
<PAGE> 52
PARTICIPATION AGREEMENT
SCHEDULE III
TO
PARTICIPATION AGREEMENT
NOTICE INFORMATION, FUNDING OFFICES, AND WIRE INSTRUCTIONS
Lessee: STRATOSPHERE GAMING CORP.
2000 Las Vegas Boulevard South
Las Vegas, NV 89104
Telephone: (702) 383-4719
Facsimile: (702) 383-0664
Wire Instructions
Wells Fargo Bank
3800 Howard Hughes Parkway
Tower Office #184
Las Vegas, NV 89109
Account Name: Stratosphere General
Operating
Account #: 415 95 68 914
ABA #: 121000248
Trustee: FIRST SECURITY TRUST COMPANY OF NEVADA
c/o First Security Bank
530 Las Vegas Blvd. South
Las Vegas, NV 89101
Telephone: (702) 251-1100
Facsimile: (702) 386-8705
Attn: Corporate Trust Services
with a copy to:
First Security Bank, N.A.
79 South Main Street
Salt Lake City, UT 84111
Telephone: (801) 246-5630
Facsimile: (801) 246-5053
Attn: Corporate Trust Services
Wire Instructions
First Security Bank, N.A.
52
<PAGE> 53
PARTICIPATION AGREEMENT
Account #: 0510922115
ABA #: 124000012
Attn: Corporate Trust Dept.
Ref: Stratosphere
Agent: HELLER FINANCIAL LEASING, INC., as Agent
and as Lender
50 Beale Street, 16th Floor
San Francisco, CA 94105
Telephone: (415) 356-1335
Facsimile:
Attn: Clifford A. Lehman
Senior Vice President
Wire Instructions
The First National Bank of Chicago, N.A.
Chicago, IL
ABA No. 071000013
for the account of: Heller Financial, Inc.
Account No. 52-96404
Reference: CEFG/Stratosphere
Attention: John Payne (312-441-7639)
Agent's LIBOR Office:
500 West Monroe Street
Chicago, IL 60661
Lender: PHOENIXCOR, INC.
65 Water Street
South Norwalk, CT 06854
Telephone: (203) 857-7715
Facsimile: (203) 866-3593
Attn: Robert Dion
Transaction Manager
Wire Instructions
First National Bank of Chicago
ABA #: 071-000-013
Reference: Stratosphere
Account #: 52-40409
Account Name: Phoenixcor, Inc.
53
<PAGE> 54
PARTICIPATION AGREEMENT
SCHEDULE IV
TO
PARTICIPATION AGREEMENT
RECORDINGS, FILINGS AND REGISTRATIONS
UCC-1 FINANCING STATEMENTS - LEASE
<TABLE>
<CAPTION>
Debtor Federal Tax I.D. Secured Party Federal Tax I.D. Filing Office
------------------------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
1) Stratosphere #88-0320164 First Security Trust 88-0291353 Nevada SOS
Gaming Corp. Company of Nevada
2) Stratosphere #88-0320164 First Security Trust 88-0291353 Clark County, NV
Gaming Corp. Company of Nevada
<CAPTION>
Assigns Federal Tax I.D.
------- ----------------
<S> <C> <C>
1) Heller Financial
Leasing, Inc.
2) Heller Financial
Recorder Leasing, Inc.
</TABLE>
UCC-1 FINANCING STATEMENTS - SECURITY AGREEMENT
<TABLE>
<S> <C> <C> <C> <C> <C>
1) First Security #88-0291353 Heller Financial Nevada SOS
Trust Company Leasing, Inc.
of Nevada
2) First Security #88-0291353 Heller Financial Clark County, NV
Trust Company Leasing
Recorder
of Nevada
</TABLE>
54
<PAGE> 55
PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
UCC-2 - RELEASES
DATE OF DATE OF FILING OF FINANCING STATEMENT
DEBTOR FEDERAL TAX I.D. SECURED PARTY FEDERAL TAX I.D. FILING OFFICE STATEMENT STATEMENT
------ ---------------- ------------- ---------------- ------------- --------- ---------
FILING NUMBER
-------------
<S> <C> <C> <C> <C> <C>
1) Stratosphere #88-0320164 First Security Nevada SOS
Gaming Corp. Trust Company
of Nevada
(assigned to BA
Leasing and Capital
Corporation)
2) Stratosphere #88-0320164 First Security Clark County, NV
Gaming Corp. Trust Company Recorder
of Nevada
(assigned to BA
Leasing and Capital
Corporation)
3) First Security #88-0291353 BA Leasing and Nevada SOS
Trust Company Capital Corporation
of Nevada
4) First Security #88-0291353 BA Leasing and Clark County, NV
Trust Company Capital Corporation Recorder
of Nevada
</TABLE>
55
<PAGE> 56
PARTICIPATION AGREEMENT
SCHEDULE V
TO
PARTICIPATION AGREEMENT
REQUIRED LICENSES AND APPROVALS
STATE OF NEVADA GENERAL LICENSES
- Business License
- Sales Tax Permit
- Workers Industrial Insurance Certificate
- Employment Security Department Certificate
STATE OF NEVADA GAMING LICENSES
- Nonrestricted Gaming License
- Finding of Suitability re: Individual Officers & Directors
- Registration of Stratosphere Corporation as a Publicly Traded
- Corporation - Filing with, and approval of, the Nevada State
Gaming Control Board for the disposition of the Equipment, if such
approval is denied, a distributor's license will be required for
such disposition
CITY OF LAS VEGAS GENERAL LICENSES
- Business License re: Gross Sales (includes restaurants, amusement
rides, wedding chapels, etc.)
- Hotel Business License
CITY OF LAS VEGAS LIQUOR LICENSE
- Tavern License - 5 bar locations
CITY OF LAS VEGAS GAMING LICENSES
- Nonrestricted Gaming License
- Licensure of Principal Individual Officers & Directors of
Stratosphere Gaming Corp.
CITY OF LAS VEGAS BUILDING/OCCUPANCY PERMIT
CLARK COUNTY HEALTH PERMITS
<PAGE> 57
PARTICIPATION AGREEMENT
SCHEDULE VI
TO
PARTICIPATION AGREEMENT
AMORTIZATION SCHEDULE
<TABLE>
<CAPTION>
DATE
YEAR PRINCIPAL BALANCE PERIOD
- ---- --------- ------- ------
<S> <C> <C> <C> <C>
10,000,000.00
1 6/28/99 1 222,222.00 9,777,778.00
7/28/99 2 222,222.00 9,555,556.00
8/28/99 3 222,222.00 9,333,334.00
9/28/99 4 222,222.00 9,111,112.00
10/28/99 5 222,222.00 8,888,890.00
11/28/99 6 222,222.00 8,666,668.00
12/28/99 7 222,222.00 8,444,446.00
1/28/00 8 222,222.00 8,222,224.00
2/28/00 9 222,222.00 8,000,002.00
3/28/00 10 222,222.00 7,777,780.00
4/28/00 11 222,222.00 7,555,558.00
5/28/00 12 222,222.00 7,333,336.00
2 6/28/00 13 222,222.00 7,111,114.00
7/28/00 14 222,222.00 6,888,892.00
8/28/00 15 222,222.00 6,666,670.00
9/28/00 16 222,222.00 6,444,448.00
10/28/00 17 222,222.00 6,222,226.00
11/28/00 18 222,222.00 6,000,004.00
12/28/00 19 222,222.00 5,777,782.00
1/28/01 20 222,222.00 5,555,560.00
2/28/01 21 222,222.00 5,333,338.00
3/28/01 22 222,222.00 5,111,116.00
4/28/01 23 222,222.00 4,888,894.00
5/28/01 24 222,222.00 4,666,672.00
3 6/28/01 25 222,222.00 4,444,450.00
7/28/01 26 222,222.00 4,222,228.00
8/28/01 27 222,222.00 4,000,006.00
9/28/01 28 222,222.00 3,777,784.00
10/28/01 29 222,222.00 3,555,562.00
11/28/01 30 222,222.00 3,333,340.00
12/28/01 31 222,222.00 3,111,118.00
1/28/02 32 222,222.00 2,888,896.00
2/28/02 33 222,222.00 2,666,674.00
3/28/02 34 222,222.00 2,444,452.00
4/28/02 35 222,222.00 2,222,230.00
5/28/02 36 2,222,230.00 0.00
------------
</TABLE>
<PAGE> 58
PARTICIPATION AGREEMENT
<TABLE>
<S> <C> <C>
TOTALS 10,000,000
</TABLE>
<PAGE> 59
PARTICIPATION AGREEMENT
SCHEDULE VII
TO
PARTICIPATION AGREEMENT
DISCLOSURE SCHEDULE
All matters and claims as disclosed in the Annual Report on Form 10-K of
Stratosphere Corporation for the year ended December 31, 1998.
<PAGE> 60
APPENDIX 1
APPENDIX 1
TO
PARTICIPATION AGREEMENT
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
the Operative Documents, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative Document),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms of the other Operative Documents and reference to
any promissory note includes any promissory note which is an extension or
renewal thereof or a substitute or replacement therefor;
(v) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part, and in
effect from time to time, including rules and regulations promulgated thereunder
and reference to any section or other provision of any Applicable Law means that
provision of such Applicable Law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;
(vi) reference in any Operative Document to any Article, Section,
Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix,
Schedule or Exhibit thereto;
(vii) "hereunder," "hereof," "hereto" and words of similar import shall
be deemed references to an Operative Document as a whole and not to any
particular Article, Section or other provision thereof;
(viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term, and, for purposes of each Operative Document, the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned; and
(ix) relative to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding."
B. Accounting and Financial Determinations. Unless otherwise specified, all
accounting terms used in each Operative Document shall be interpreted, all
accounting determinations and computations thereunder (excluding with respect to
Section 5.16 of the Participation Agreement) shall be made, and all financial
statements required to be delivered thereunder shall be prepared in accordance
with, GAAP applied in the preparation of the financial statements referred to in
Section 4.1(f) of the Participation Agreement.
C. Legal Representation of the Parties. The Operative Documents were
negotiated
60
<PAGE> 61
APPENDIX 1
by the parties with the benefit of legal representation and any rule of
construction or interpretation otherwise requiring the Operative Documents to be
construed or interpreted against any party shall not apply to any construction
or interpretation hereof or thereof.
D. Defined Terms. Unless a clear contrary intention appears, terms defined
herein have the respective meanings indicated below when used in each Operative
Document.
"Account" is defined in Section 2.14 of the Participation Agreement.
"Additional Costs" means the amounts payable pursuant to Sections 2.9,
2.10, 2.11 and 2.12 of the Loan Agreement and the other amounts due and payable
by the Borrower under any Loan Document other than principal and interest on the
Notes.
"Advance" means, as the context may require, the advance of funds by
Lenders to Trustee, and the advance by Trustee pursuant to Articles II and III
of the Participation Agreement, to Lessee to finance the acquisition of the
Equipment.
"Advance Date" means the actual date on which the Advance is made pursuant
to the Participation Agreement.
"Advance Request" is defined in Section 2.4(a) of the Participation
Agreement.
"Affiliate" means, when used with respect to any Person, any other Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common control with such Person. For purposes of this definition, the term
"control" (including the correlative meanings of the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, means 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 or by contract or otherwise; provided
(but without limiting the foregoing), that no pledge of voting securities of any
Person without the current right to exercise voting rights with respect thereto
shall by itself be deemed to confer control over such Person upon the pledgee.
"After-Tax Basis" means, with respect to any payment to be received (taking
into account any tax savings or reductions in the amount of any Tax not
indemnifiable hereunder as a result of circumstances giving rise to a Tax for
which an indemnity payment has been made), the amount of such payment increased
so that, after deduction of the amount of all taxes required to be paid by the
recipient with respect to the receipt by the recipient of such amounts, such
increased payment (as so reduced) is equal to the payment otherwise required to
be made. In making a determination of the increased payment, it shall be assumed
that the Indemnitee was subject to taxation at the highest marginal federal
rates applicable to widely-held corporations for the year in which such income
is taxed and the state and local income tax rate shall be assumed to be 8.5%.
"Agent" means Heller Financial Leasing, Inc., a Delaware corporation, and
includes each other Person as shall have subsequently been appointed as the
successor Agent pursuant to Section 7.9 of the Loan Agreement.
"Agent-Related Persons" means Heller Financial Leasing, Inc. and any
successor agent arising under Section 7.9 of the Loan Agreement, together with
their respective Affiliates, and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
"Agreement" is defined in the introductory paragraph hereof.
"Alteration" means a Permitted Alteration and a Required Alteration.
"Alternate Base Rate" means, for any day, an interest rate per annum
(rounded upwards, if necessary, to the highest 1/8 of 1%) equal to the higher of
(A) the rate of interest in effect for such day as publicly announced by
Citibank, N.A. in New York, New York from time to time as
61
<PAGE> 62
APPENDIX 1
its reference rate for calculating interest on certain loans (the "Reference
Rate"), which need not be the lowest interest rate charged by Citibank, N.A.,
plus 2.5% per annum and (B) the Federal Funds Effective Rate most recently
determined by Agent, plus 1/2 of 1% per annum. The "Federal Funds Effective
Rate" means, for any period, a fluctuating interest rate per annum equal for
each day during such period to the weighted average of the rate on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers as published on the succeeding Business Day by the
Federal Reserve Bank of New York or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day of such
transactions received by Agent from three federal funds brokers of recognized
standing selected by it. For purposes of this Agreement, any change in the
Alternate Base Rate due to a change in the Federal Funds Effective Rate or the
Reference Rate shall be effective on the effective date of such change.
"Alternate Base Rate Loan" means a Loan bearing interest by reference to
the Alternate Base Rate.
"Amortization Schedule" is defined in Section 2.12 of the Participation
Agreement.
"Applicable Law" means all existing and future applicable laws, rules,
regulations (including Gaming Laws and Environmental Laws) statutes, treaties,
codes, ordinances, permits, certificates, orders and licenses of and
interpretations by, any Governmental Authority, and applicable judgments,
decrees, injunctions, writs, orders or like action of any court, arbitrator or
other administrative, judicial or quasi-judicial tribunal or agency of competent
jurisdiction (including those pertaining to health, safety or the environment
(including wetlands) and those pertaining to the construction or operation of
facilities).
"Applicable Margin" means, with respect to LIBO Rate Loans, the margin
above the LIBO Rate of 2.50%.
"Assigned Agreements" means each of the Participation Agreement, the Lease,
the Security Documents, the Bills of Sale, the Certificates of Acceptance and
each other document assigned to Agent as Collateral pursuant to the Security
Agreement.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978.
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Bill of Sale" means a bill of sale, substantially in the form of Exhibit I
to the Participation Agreement, to be delivered to Agent pursuant to the
provisions of the Participation Agreement.
"Board" means the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrower" means Trustee, not in its individual capacity, but solely in its
trust capacity under the Trust Agreement as the borrower under the Loan
Agreement.
"Business Day" means any day other than a Saturday or Sunday or other than
a day on which
(a) banks in New York, New York, Chicago, Illinois, San Francisco,
California, South Norwalk, Connecticut or Las Vegas, Nevada are permitted or
required to be closed; and
(b) relative to the making, continuing, prepaying or repaying any LIBO
Rate Loans, any day on which banks are not open for dealings in Dollars in the
London interbank
62
<PAGE> 63
APPENDIX 1
market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to be, accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligations" means all obligations under Capital Leases
of any Person, in each case taken at the amount thereof accounted for as
liabilities in accordance with GAAP.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentally thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of twelve months or less from the date
of acquisition, bankers', acceptances with maturities not exceeding twelve
months and overnight bank deposits, in each cash with any commercial bank having
capital and surplus in excess of $300 million, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) entered into with any financial institution
meeting the qualifications specified in clause (iii) above, (v) commercial paper
rated A-1 or the equivalent thereof by Moody's Investors Service, Inc. or
Standard & Poor's Corporation and in each case maturing within one year after
the date of acquisition and (vi) investment funds investing solely in securities
of the types described in clauses (ii) through (v) above.
"Casino" means any area, room or rooms wherein gaming is conducted at the
Resort and includes any bar, cocktail lounge or other facilities housed therein,
as well as the area occupied by the games.
"Casualty" means an event or occurrence in which an item of Equipment is
lost, stolen, totally destroyed, irreparably damaged from any cause whatsoever,
damaged beyond economic repair, or rendered permanently unfit for normal use for
any reason whatsoever (other than obsolescence) or damaged so as to result in an
insurance settlement on the basis of a total loss or a constructive or
compromised total loss, or taken or requisitioned by Condemnation.
"Casualty Item Amount" means the product of the Lease Balance on the date
of determination times a fraction the numerator of which is the Equipment Cost
of such item of Equipment suffering the Casualty and the denominator of which is
Lessor's Cost for all Equipment then subject to the Lease.
"Casualty Recoveries" means the proceeds of any recovery in respect of any
Casualty from insurance, a Governmental Authority or otherwise.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986.
"Certificate of Acceptance" means each Certificate of Acceptance, fully
executed by Lessee, accepting the Equipment under the Lease, substantially in
the form of Exhibit J to the Participation Agreement.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease or
63
<PAGE> 64
APPENDIX 1
transfer, in one or a series of transactions, of all or substantially all of the
assets of Parent and its Subsidiaries, taken as a whole; (ii) Parent becomes
aware of (by way of a report or any other filing pursuant to Section 13(d) of
the Securities Exchange Act of 1934, 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 Securities Exchange Act of 1934, 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
Securities Exchange Act of 1934), 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
Securities Exchange Act of 1934, or any successor provision) of 50% or more of
the voting stock of Parent on a fully diluted basis, (iii) the first day within
any two year period on which a majority of the members of the Board of Directors
of Parent on the first day of such period do not continue to be members of the
Board of Directors of Parent or (iv) Carl Icahn shall cease to own, directly or
indirectly, at least 51% of the voting stock of Parent on a fully diluted basis.
"Charges" means freight, installation and applicable sales, use or similar
taxes imposed upon an item of Equipment.
"Claims" means liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, administrative and judicial
proceedings (including informal proceedings), judgments, orders, enforcement
actions of any kind and settlements, and any costs, fees, expenses and
disbursements (including legal fees and expenses and costs of investigation
which, in the case of counsel or investigators retained by an Indemnitee, shall
be reasonable) of any kind and nature whatsoever related to any of the foregoing
imposed on, incurred by or asserted against an Indemnitee.
"Closing Date" is defined in Section 2.1 of the Participation Agreement.
"Code" means the Internal Revenue Code of 1986.
"Collateral" means the Account and all of the Trust Estate now owned or
hereafter acquired, upon which a Lien is purported to be created by the Security
Documents, as well as any Lessee Collateral.
"Commitment" means (i) with respect to each Lender, the obligation of such
Lender to make Advances to Trustee at the request of Lessee in an aggregate
principal amount not to exceed the amount set forth opposite such Lender's name
on Schedule II to the Participation Agreement, and (ii) with respect to Trustee,
the obligation of Trustee to make the Advance (to the extent Trustee receives
Advances from Lenders).
"Commitment Amount" means $10,000,000.
"Commitment Percentage" means, as to any Lender, the percentage set forth
opposite such Lender's name under the heading "Commitment Percentage" on
Schedule II to the Participation Agreement.
"Condemnation" means any condemnation, requisition, confiscation, seizure
or other taking or sale of the use, access, occupancy, easement rights or title
to the Equipment or any part thereof, wholly or partially (temporarily or
permanently), by or on account of any actual or threatened eminent domain
proceeding or other taking of action by any Person having the power of eminent
domain or otherwise, or any transfer made in lieu of any such proceeding or
action. A "Condemnation" shall be deemed to have occurred on the earliest of the
dates that use, occupancy or title vests in the condemning authority.
64
<PAGE> 65
APPENDIX 1
"Consolidated Subsidiaries" means all Persons that are consolidated with
Parent for financial reporting purposes in accordance with GAAP.
"Corporate Trust Department" means the principal corporate trust office of
Trustee, located at 530 Las Vegas Boulevard South, Las Vegas, Nevada 89101,
Attention: Corporate Trust Department, or such other office at which the
corporate trust business of Trustee is administered and which Trustee specifies
by notice in writing to Lessee, Lessor Agent and each Lender.
"Debt" means, for any Person, (i) all obligations of such Person for
borrowed money or for the deferred purchase price of property or services and
all obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (ii) all obligations of such Person under any conditional
sale or other title retention agreement relating to property purchased by such
Person, (iii) all indebtedness secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on any property owned by such Person, whether or not such indebtedness
has been assumed by such Person or is limited in recourse, (iv) all Capitalized
Lease obligations of such Person, (v) all obligations of such Person under
letters of credit issued for the account of such Person (whether or not drawn),
(vi) all obligations of such Person under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clause (i)
through (vi) above, and (vii) all current or past due liabilities of such Person
in respect of unfunded vested benefits under plans covered by Title IV of ERISA.
"Default" means any event or condition which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule VII.
"Dollars" and "$" mean dollars in lawful currency of the United
States of America.
"End Date" is defined in the definition of Interest Period.
"Environmental Law" means, whenever enacted or promulgated, any applicable
federal, state, county or local law, statute, ordinance, rule, regulation,
license, permit, authorization, approval, covenant, criteria, guideline,
administrative or court order, judgment, decree, injunction, code or requirement
or any agreement with a Governmental Authority:
(x) relating to pollution (or the cleanup, removal, remediation or
encapsulation thereof, or any other response thereto), or the regulation or
protection of human health, safety or the environment, including air, water,
vapor, surface water, groundwater, drinking water, land (including surface or
subsurface), plant, aquatic and animal life, or
(y) concerning exposure to, or the use, containment, storage,
recycling, treatment, generation, discharge, emission, Release or threatened
Release, transportation, processing, handling, labeling, containment,
production, disposal or remediation of any Hazardous Substance, Hazardous
Condition or Hazardous Activity.
In each case as amended and as now or hereafter in effect, and any
common law or equitable doctrine (including injunctive relief and tort doctrines
such as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries (whether personal or property) or damages
due to or threatened as a result of the presence of, exposure to, or ingestion
of, any Hazardous Substance, whether such common law or equitable doctrine is
now or hereafter recognized or developed. Applicable laws include, but are not
limited to, CERCLA; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss. 6901 et seq.; the Federal
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APPENDIX 1
Water Pollution Control Act, 33 U.S.C. ss.1251 et seq.; the Clean Air Act, 42
U.S.C. ss.ss. 7401 et seq.; the National Environmental Policy Act, 42 U.S.C. ss.
4321; the Refuse Act, 33 U.S.C. ss.ss. 401 et seq.; the Hazardous MaterialS
Transportation Act of 1975, 49 U.S.C. ss.ss. 1801-1812; the Toxic Substances
Control Act, 15 U.S.C. ss.ss. 2601 et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act, 7 U.S.C. ss.ss. 136 et seq.; the Safe Drinking Water Act,
42 U.S.C. ss.ss. 300f et seq., each as amended and as now or hereafter in
effect, and their state and local counterpaRts or equivalents, including any
regulations promulgated thereunder.
"Environmental Violation" means any activity, occurrence or condition that
violates or results in non-compliance with any Environmental Law in which
damages and penalties in excess of $2,000,000 may be imposed.
"Equipment" means, individually, each item of equipment described on
Schedule I to the Participation Agreement, and, collectively, each of the
foregoing, together with any substitutions therefor, replacements thereof and
additions thereto from time to time pursuant to the Operative Documents.
"Equipment Cost" means the invoice cost of each item of Equipment, plus up
to an additional twenty percent (20%) thereof for Charges.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that may be aggregated with Lessee
pursuant to the requirements of Section 414(b) or (c) of the Code (and Sections
414(m) and (o) of the Code for purposes of provisions relating to Section 412 of
the Code).
"ERISA Group" means Parent and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Parent, are treated as a single employer
under Section 414 of the Code.
"Event of Default" means a Lease Event of Default or a Loan Event of
Default.
"Excluded Amounts" means
(a) all indemnity payments and expenses to which Trustee, Trust
Company, Agent or any Lender (or the respective successors, assigns, agents,
officers, directors or employees of any such Person) is entitled pursuant to the
Operative Documents;
(b) any amounts payable under any Operative Documents to reimburse
Trustee, Trust Company, Agent or any Lender (including the reasonable expenses
of Trustee, Trust Company, Agent and any Lender incurred in connection with any
such payment) for performing any of the obligations of Lessee under and as
permitted by any Operative Document;
(c) any insurance proceeds under policies maintained by Trustee, Trust
Company, Agent or any Lender and not required to be maintained by Lessee under
the Lease;
(d) any insurance proceeds (or corresponding amounts with respect to
risks that are self-insured by Lessee and the amounts of any policy deductibles)
under liability policies payable to Trustee in its individual capacity, Agent or
any Lender (or the respective successors, assigns, agents, officers, directors
or employees of Trust Company, Agent or of any Lender);
(e) any amount payable in respect of Transaction Costs; and
(f) any payments of interest on payments referred to in clauses (a)
through (e) above.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal 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 by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
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APPENDIX 1
Business Day, the average of quotations for such day on such transaction
received by Lender from three Federal funds brokers of recognized standing
selected by it.
"Final Maturity Date" means the third anniversary of the Lease Commencement
Date, but not later than May 28, 2002.
"GAAP" means United States generally accepted accounting principles
(including principles of consolidation), in effect from time to time.
"Gaming Authorities" means, collectively, the Nevada Gaming Commission, the
Nevada State Gaming Control Board and any other agency of any state, county,
city or other political subdivision of the United States government which has
jurisdiction over the gaming activities of Lessee and its Affiliates at the
Resort, or any successor to such authority.
"Gaming Laws" means the Nevada Gaming Control Act, codified as Nevada
Revised Statutes Chapter 463, the Nevada Gaming Commission Regulations
promulgated thereunder, together with any local rules, regulations or ordinances
applicable to the conduct of games at the Resort.
"Gaming Permits" means, collectively, every license, franchise, permit,
registration, finding of suitability, approval or other authorization required
under the Gaming Laws to own, operate and otherwise conduct gaming operations at
the Resort, including all licenses, registrations, findings of suitability and
approvals granted by the Gaming Authorities and all other applicable
Governmental Authorities.
"Governmental Action" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, written
interpretations, decrees, licenses, exemptions, publications, filings, notices
to and declarations of or with, or required by, any Governmental Authority, or
required by any Applicable Law, and shall include all environmental and
operating permits and licenses that are required for the full use, occupancy,
zoning and operation of the Property.
"Governmental Authority" means any foreign, federal, state or local
government, any political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government including Gaming Authorities.
"Guarantor" means Parent.
"Guaranty" means the Guaranty dated as of the Closing Date, made by
Guarantor in favor of Agent for the benefit of Lenders substantially in the form
of Exhibit E to the Participation Agreement.
"Hazardous Activity" means any activity, process, procedure or undertaking
that directly or indirectly (i) produces, generates or creates any Hazardous
Substance; (ii) causes or results in (or threatens to cause or result in) the
Release of any Hazardous Substance into the environment (including air, water
vapor, surface water, groundwater, drinking water, land (including surface or
subsurface), plant, aquatic and animal life); (iii) involves the containment or
storage of any Hazardous Substance; or (iv) would be regulated as hazardous
waste treatment, storage or disposal within the meaning of any Environmental
Law.
"Hazardous Condition" means any condition that materially violates or
threatens to materially violate, or that results in or threatens material
noncompliance with, any Environmental Law.
"Hazardous Substance" means any of the following: (i) any petroleum or
petroleum product, explosives, radioactive materials, asbestos,
ureaformaldehyde, polychlorinated biphenyls, lead and radon gas; (ii) any
substance, material, product, derivative, compound or
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APPENDIX 1
mixture, mineral, chemical, waste, gas, medical waste, or pollutant, in each
case whether naturally occurring, man-made or the by-product of any process,
that is toxic, harmful or hazardous to the environment or human health or
safety, as defined under any Environmental Law; or (iii) any substance,
material, product, derivative, compound or mixture, mineral, chemical, waste,
gas, medical waste or pollutant that would support the assertion of any claim
under any Environmental Law, whether or not defined as hazardous as such under
any Environmental Law.
"Indemnified Liabilities" means all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including all fees and expenses of legal counsel) of any kind or
nature whatsoever which may at any time be imposed on, incurred by or asserted
against any Agent-Related Person in any way relating to or arising out of any
Operative Document or any document contemplated by or referred to in any
Operative Document, or the transactions contemplated by any Operative Document,
or any action taken or omitted by any Agent-Related Person under or in
connection with any of the foregoing.
"Indemnitee" means Trustee, in its individual and in its trust capacity,
each Lender, Agent any additional separate or co-trustee appointed in accordance
with the terms of the Trust Agreement and the respective successors, assigns,
directors, shareholders, partners, officers, employees and agents of each of the
foregoing.
"Insurance Requirements" means all terms and conditions of any insurance
policy either required by the Lease to be maintained by Lessee and all
requirements of the issuer of any such policy.
"Interest Period" means, with respect to any LIBO Rate Loan, the period
commencing on (and including) the day on which the LIBO Rate Loan is made or
continued and ending on (but excluding) the next following August 28, November
28, February 28 or May 28 (each an "End Date");
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
(a) if the End Date of any Interest Period is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end on the immediately
preceding Business Day; and
(b) any Interest Period that would otherwise extend beyond the Final
Maturity Date shall end on the Final Maturity Date.
"Interest Rate" means the rate per annum. at which interest accrues
(a) on a Loan maintained from time to time as an Alternate Base Rate
Loan equal to the Alternate Base Rate from time to time in effect; and
(b) on a Loan maintained as a LIBO Rate Loan, during each Interest
Period applicable thereto, equal to the LIBO Rate then in effect plus the
Applicable Margin.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"Investor's Letter" means the Investor's Letter, dated as of the Closing
Date, in substantially the form of Exhibit K to the Participation Agreement.
"Landlord Waiver and Consent" means the Landlord Waiver and Consent, dated
as of the Closing Date, made by Parent in favor of Trustee and Agent,
substantially in the form of Exhibit G to the Participation Agreement.
"Lease" means the Lease, dated as of the Closing Date, between the Lessor
and Lessee,
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APPENDIX 1
substantially in the form of Exhibit A to the Participation Agreement.
"Lease Balance" means, as of any date of determination, the sum of the
aggregate outstanding principal amount of the Notes.
"Lease Commencement Date" means the date the Equipment is accepted under
the Lease by Lessee.
"Lease Default" means any event, condition or failure which, with the lapse
of time or the giving of notice, or both, would constitute a Lease Event of
Default.
"Lease Event of Default" means any event, condition or failure designated
as a "Lease Event of Default" in Article X of the Lease. "Lease Term" is defined
in Section 2.3 of the Lease.
"Lease Termination Date" means the last day of the Lease Term, or any other
date on which the Lease is terminated, including pursuant to Article V or X of
the Lease.
"Lender" means a holder of a Note.
"Lending Office" means, as to any Lender, the office or offices of such
Lender specified as its "Lending Office" on Schedule III of the Participation
Agreement, or such other office as such Lender may from time to time notify the
Borrower and Agent.
"Lessee" means Stratosphere Gaming Corp., a Nevada corporation, as lessee
and debtor under the Lease.
"Lessee Collateral" is defined in Section 13.1 of the Lease.
"Lessor" means Trustee as lessor or mortgagor under the Lease.
"Lessor Lien" means any Lien on or against any or all of the Equipment, the
Lease, the Trust Estate or any payment of Rent which results from (a) any act
of, or any Claim against, Trustee, in its individual capacity, any Lender or
Agent, in its individual capacity, in any case unrelated to the transactions
contemplated by the Operative Documents, (b) any Tax owed by any such Person,
except for any Tax required to be paid by Lessee under the Operative Documents,
including any Tax for which Lessee is obligated to indemnify such Person, or (c)
any act or omission of such Person which is prohibited by the Operative
Documents.
"Lessor's Cost" means the aggregate Equipment Cost paid with proceeds of
the Advance.
"LIBO Rate" means, with respect to each LIBO Rate Loan for any Interest
Period, the interest rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined by Agent to be the average of the rates per
annum, at which Dollar deposits in immediately available funds are offered to
the Agent's LIBOR Office in an amount approximately equal to the amount of the
Agent's LIBO Rate Loan for which such determination is being made for a period
comparable to such Interest Period, commencing on the first day of such Interest
Period by leading banks in the London Eurodollar interbank market at
approximately 11:00 a.m. (London time) on the second Business Day preceding the
first day of the Interest Period. Agent will give notice promptly to Lessor upon
determining the applicable LIBO Rate; provided, that Agent's failure to give
such notice will not relieve Lessee of its obligations relating to such change.
"LIBO Rate Loans" means Loans bearing interest by reference to the LIBO
Rate.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such in Schedule III to the Participation Agreement, or such other
office of a Lender designated from time to time by notice from such Lender to
Trustee and Agent, whether or not outside the United States.
"Lien" means any mortgage, deed of trust, pledge, deposit arrangement,
security interest, encumbrance, lien (statutory or otherwise), easement,
servitude or charge of any kind, including,
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APPENDIX 1
any irrevocable license, conditional sale or other title retention agreement,
any lease in the nature thereof, or any other right of or arrangement with any
creditor to have its claim satisfied out of any specified property or asset with
the proceeds therefrom prior to the satisfaction of the claims of the general
creditors of the owner thereof, whether or not filed or recorded, or the filing
of, or agreement to execute as "debtor", any financing or continuation statement
under the Uniform Commercial Code of any jurisdiction or any federal, state or
local lien imposed pursuant to any Environmental Law.
"Liquor Authority" means the City of Las Vegas and any agency of any state,
county, city or other political subdivision of the State of Nevada which has
jurisdiction over the sale by Lessee and its Affiliates of alcoholic beverages
at the Resort, or any successor to such authority.
"Liquor Permits" means, collectively, every license, franchise, permit,
approval, finding of suitability or other authorization required to sell
alcoholic beverages at the Resort, including all licenses and approvals granted
by the Liquor Authority and all other applicable Governmental Authorities.
"Loan" is defined in Section 2.1 of the Loan Agreement.
"Loan Agreement" means the Loan Agreement, dated as of the Closing Date,
among Trustee, as Borrower, and Lenders, substantially in the form of Exhibit B
to the Participation Agreement.
"Loan Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute a Loan Event of Default.
"Loan Documents" means the Loan Agreement, the Notes, the Security
Documents and all other documents and instruments executed and delivered in
connection with each of the foregoing.
"Loan Event of Default" is defined in Article VI of the Loan Agreement.
"Material Adverse Effect" means, with respect to Lessee or Parent, as the
case may be, any change or changes, effect or effects or condition or conditions
that individually or in the aggregate are or are likely to be materially adverse
to (i) the assets, business, operations or financial condition of Parent and its
Subsidiaries on a consolidated basis, (ii) the ability of Parent and each of its
Subsidiaries on a consolidated basis to perform its obligations under the
Operative Documents to which it is a party, (iii) the validity or enforceability
of any of the Operative Documents or any rights or remedies under any thereof or
(iv) the value of the Collateral or worth of the Collateral as collateral
security.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $1,000,000.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Non-Casualty Loss" is defined in Section 9.2(a) of the Lease.
"Non-Casualty Recoveries" means the proceeds of any recovery in respect of
any Non-Casualty Loss from insurance, a Governmental Authority or otherwise.
"Note" is defined in Section 2.2 of the Loan Agreement.
"Obligations" means all obligations (monetary or otherwise) of Lessee under
the Operative Documents.
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APPENDIX 1
"Operative Documents" means the following:
(a) the Participation Agreement;
(b) the Notes;
(c) the Lease;
(d) the Trust Agreement;
(e) the Loan Agreement;
(f) the Note;
(g) the Guaranty;
(h) the Security Agreement; and
(i) the Landlord Waiver and Consent.
"Other Taxes" means any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, any Operative Document.
"Overdue Rate" means the lesser of (i) the highest interest rate permitted
by Applicable Law and (ii) an interest rate per annum. equal to the Interest
Rate plus 2% per annum. "Parent" means Stratosphere Corporation, a Delaware
corporation.
"Participating Entity" is defined in Section 6.3(a) of the Participation
Agreement.
"Participation Agreement" means the Participation Agreement, dated
as of the Closing Date, among Lessee, Guarantor, Trustee, Lenders and Agent.
"Payment Date" means (a) the Final Maturity Date; (b) the date of any
payment (whether or not scheduled) of principal outstanding on a Loan; (c) with
respect to the payment of interest on Loans for which the Interest Rate is
determined by means of the Alternate Base Rate, on each End Date; and (d) with
respect to the payment of interest on LIBO Rate Loans, the last day of each
applicable Interest Period.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Periodic Rent" means an amount payable on each Payment Date during the
Lease Term equal to the aggregate amount of interest and principal payable on
such Payment Date on the Notes.
"Permitted Alteration" is defined in Section 7.2(b) of the Lease.
"Permitted Contest" means actions taken by a Person to contest in good
faith, by appropriate proceedings initiated timely and diligently prosecuted,
the legality, validity or applicability to the Equipment or any location whereon
or wherein the Equipment or any portion thereof are located or to be located, or
any interest therein of any Person of (a) any law, regulation, rule, judgment,
order, or other legal provision or judicial or administrative requirements, (b)
any term or condition of, or any revocation or amendment of, or other proceeding
relating to, any authorization or other-consent, approval or other action by any
Governmental Authority or (c) any Lien or Tax, if the initiation and prosecution
of such contest would not: (i) result in, or materially increase the risk of,
the imposition of any criminal liability on any Indemnitee; (ii) materially and
adversely affect the security interests created by the Operative Documents or
the rights and interests of Lessor in or to any of the Equipment or the right of
Lessor, Agent or any Lender to receive payment of all or any portion of the
principal of or interest on any Note, Rent, Lease Balance or any other amount
payable under the Operative Documents; (iii) permit, or pose a material risk of,
the sale or forfeiture of, or foreclosure on, any
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APPENDIX 1
of the Equipment or (iv) materially and adversely affect the fair market value,
utility or remaining useful life of the Equipment or any interest therein or the
continued economic operation thereof; provided, further, that in any event
adequate reserves in accordance with GAAP are maintained by such Person against
any adverse determination of such contest.
"Permitted Liens" means (i) the respective rights and interests of Lessee,
Lenders and Trustee, as provided in any of the Operative Documents; (ii)
materialmen's, mechanics', workers', artisans', repairmen's, employees' or other
like Liens securing payment of the price of goods or services rendered in the
ordinary course of business for amounts the payment of which is not overdue or
is being contested pursuant to a Permitted Contest; (iii) Lessor Liens; (iv)
Liens for current Taxes which are not delinquent or the validity of which is
being contested pursuant to a Permitted Contest; (v) the rights of any sublessee
or assignee under a sublease or an assignment permitted by the terms of the
Lease; (vi) Liens arising out of judgments or awards not constituting an Event
of Default with respect to which appeals or other proceedings for review are
being prosecuted pursuant to a Permitted Contest; (vii) easements, rights of way
and other encumbrances on title to real property not interfering in any material
respect with the rights of Lessor under the Lease and (viii) Liens securing
indebtedness of Lessee to vendors under any purchase contract until such time as
the full amount owed by Lessee under such purchase contract has been paid in
full or, in the event of a dispute with respect to any amount owed by Lessee
under such purchase contract, so long as the disputed amount is being contested
pursuant to a Permitted Contest.
"Person" means any individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, governmental authority or any other
legal entity.
"Plan" means an employee benefit or other plan (other than a Multiemployer
Plan) established or maintained by Parent or any member of the ERISA Group and
which is covered by Title IV of ERISA.
"Premium" is defined in Section 2.4(d) of the Loan Agreement.
"Release" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Substance.
"Rent" means Periodic Rent and Supplemental Rent.
"Required Alteration" is defined in Section 7.2(a) of the Lease.
"Required Lenders" means, as of the date of the determination, Lenders
having aggregate investments in the transactions contemplated by the Operative
Documents (as measured by the outstanding principal amount of the Loans then
outstanding) equal to at least 79% of all such investments.
"Requirements of Law" means, as to any Person, any current or hereinafter
enacted law (statutory or common), treaty, rule or regulation or determination
of an arbitrator or of a Governmental Authority, in each case applicable to or
binding upon the Person or any of its property or to which the Person or any of
its property is subject.
"Resort" means the establishment featuring a casino, a hotel, an
entertainment complex and tower in Las Vegas, Nevada being developed by Parent
and its Affiliates; provided, however that, for purposes of this definition, any
property leased to Strato-Retail LLC shall be deemed separate from the Resort.
"Responsible Officer" means with respect to Trustee or Agent, any officer
in its Corporate Trust Department, and with respect to any other Person, the
Chairman or Vice
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Appendix 1
Chairman of the Board of Directors, the Chairman or Vice-Chairman of the
Executive Committee of the Board of Directors, the President, the Chief
Financial Officer, any Senior Vice President or Executive Vice President, any
Vice President, the Secretary, the Treasurer or the Controller and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Scheduled Principal Payment Date" means the last day of each Interest
Period and the Final Maturity Date. "SEC" means the Securities and Exchange
Commission of the United States.
"Securities Act" means the Securities Act of 1933, together with the rules
and regulations promulgated thereunder.
"Security Agreement" means the Security Agreement and Assignment of Lease,
dated as of the Closing Date, between the Borrower and Agent, substantially in
the form of Exhibit D to the Participation Agreement.
"Security Documents" means the collective reference to the Security
Agreement, the Guaranty and all other security documents hereafter delivered to
Agent granting a Lien on any asset or assets of any Person to secure the
obligations and liabilities of Trustee under the Loan Agreement and/or under any
of the other Loan Documents.
"Solvent" means with respect to any Person on a particular date, that on
such date (i) the fair value of the property of such Person is greater than the
total amount of liabilities, including contingent liabilities, of such Person,
(ii) the present fair saleable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (iii) such Person is
able to realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course
of business, (iv) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature, and (v) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability taking into account any subrogation and contribution rights.
"Strato-Retail LLC" means Strato-Retail, LLC, a Nevada limited liability
company.
"Strato-Retail Lease" means that certain Development and Lease Agreement,
dated March 11, 1996, between Stratosphere Corporation, as landlord, and
Strato-Retail LLC, as tenant.
"Sublease" has the meaning set forth in Article IV of the Lease.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which more than 50% of the
outstanding ownership interests, at the time any determination is being made, is
directly or indirectly owned by such Person, by such Person and one or more of
its Subsidiaries or by one or more of such Person's Subsidiaries.
"Supplemental Rent" means any and all amounts, liabilities and obligations
(i) which Trustee assumes or agrees or is otherwise obligated or designated to
pay under the Loan Agreement or any other Operative Document (whether or not
designated as Supplemental Rent)
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APPENDIX 1
to Agent, Lenders or any other Person, including Additional Costs and damages
for breach of any representations, warranties or agreements or (ii) which Lessee
agrees or is otherwise obligated or designated to pay (other than Periodic Rent)
under the Lease or any other Operative Document (whether or not designed as
Supplemental Rent) to Trustee.
"Taxes" and "Tax" are defined in Section 8.1 of the Participation
Agreement.
"Termination Date" is defined in 10.2(e) of the Lease.
"Transaction Costs" means legal and other fees, costs and expenses incurred
by Trustee, Agent and Lenders in connection with the consummation and closing of
the transactions contemplated the by Operative Documents, and the preparation,
negotiation, execution and delivery of the Operative Documents, including (i)
fees of Trustee and Trustee's legal counsel; (ii) reasonable fees and expenses
of Thelen Reid & Priest LLP, special counsel to Lenders; (iii) all filing and
recording fees, and other search costs required by the Operative Documents; (iv)
all costs of appraisals; and (v) an upfront fee payable on the Closing Date to
Agent for the account of each Lender.
"Trust" is defined in Section 1.1 of the Trust Agreement.
"Trust Agreement" means the Trust Agreement dated as of the Closing Date,
between Lessee and Trustee, substantially in the form of Exhibit C to the
Participation Agreement.
"Trust Company" is defined in Section 4.3 of the Participation Agreement.
"Trustee" means First Security Trust Company of Nevada, a Nevada trust
company, not in its individual capacity, but solely as Trustee under the Trust
Agreement, and any successor or replacement Trustee expressly permitted under
the Operative Documents.
"Trust Estate" means all estate, right, title and interest of Lessor in, to
and under the Equipment, the Trust Agreement, the Lease and all of the other
Operative Documents, including (i) all amounts (other than Excluded Amounts) of
Rent and other payments due or to become due of any kind for or with respect to
the Equipment or payable under any of the foregoing,(ii) any or all payments or
proceeds received by Lessor after the termination of the Lease with respect to
the Equipment as the result of the sale, lease or other disposition thereof, and
(iii) proceeds of the Loans, together with any other moneys, proceeds or
property at any time received by Lessor under or in connection with the
Operative Documents.
"UCC Financing Statements" means collectively Lender financing statements
and the Lessor financing statements.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Uniform Commercial Code" and "UCC" means the Uniform Commercial Code as in
effect in any applicable jurisdiction.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
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LEASE AGREEMENT
EXHIBIT A TO PARTICIPATION AGREEMENT
FORM OF LEASE AGREEMENT
dated as of May 28, 1999
between
FIRST SECURITY TRUST COMPANY OF NEVADA,
not in its individual capacity,
except as expressly stated herein,
but solely as Trustee, as Lessor,
and
STRATOSPHERE GAMING CORP.,
as Lessee.
ALL RIGHT, TITLE AND INTEREST OF LESSOR UNDER THIS LEASE AGREEMENT AND THE
PROPERTY RIGHTS SUBJECT HERETO HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A LIEN
AND SECURITY INTEREST IN FAVOR OF, HELLER FINANCIAL LEASING, INC. AS AGENT
("AGENT"), UNDER THE SECURITY AGREEMENT AND ASSIGNMENT OF LEASE, DATED AS OF MAY
7, 1999, FOR THE BENEFIT OF AGENT AND THE LENDERS REFERRED TO IN SUCH SECURITY
AGREEMENT AND ASSIGNMENT OF LEASE. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN
SEVERAL COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT
CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL
CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS
LEASE AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART HEREOF OTHER THAN THE ORIGINAL EXECUTED "LESSOR'S COPY," WHICH SHALL
BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY
AGENT ON OR FOLLOWING THE SIGNATURE PAGE(S) THEREOF.
[LESSOR'S COPY] [LESSEE'S COPY] [COPY]
<PAGE> 2
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS; LESSEE LIABILITY......................................1
ARTICLE II LEASE OF EQUIPMENT; LEASE TERM.....................................1
SECTION 2.1. Acceptance and Lease of Equipment..................................1
SECTION 2.2. Acceptance Procedure...............................................1
SECTION 2.3. Lease Term.........................................................1
ARTICLE III RENT; QUIET ENJOYMENT; NET LEASE; SUBLEASING.................................1
SECTION 3.1. Periodic Rent......................................................1
SECTION 3.2. Supplemental Rent..................................................1
SECTION 3.3. Place and Manner of Payment........................................2
SECTION 3.4. Late Payment.......................................................2
SECTION 3.5. Quiet Enjoyment....................................................2
SECTION 3.6. Net Lease; No Setoff, etc..........................................2
SECTION 3.7. No Bar 3
SECTION 3.8. Intent of the Parties..............................................3
ARTICLE IV POSSESSION AND SUBLEASING.....................................................4
ARTICLE V LEASE TERMINATION..............................................................4
SECTION 5.1. Early Termination..................................................4
SECTION 5.2. Termination and Transfer...........................................5
ARTICLE VI DISCLAIMER AND ASSIGNMENT OF WARRANTIES.......................................5
SECTION 6.1. Disclaimer of Warranties...........................................5
SECTION 6.2. Assignment of Warranties...........................................6
ARTICLE VII MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS............................6
SECTION 7.1. Maintenance and Repair; Compliance with Law........................6
SECTION 7.2. Alterations........................................................6
SECTION 7.3. Replacement and Substitution.......................................7
SECTION 7.4. Removal 7
SECTION 7.5. Maintenance and Repair Reports.....................................7
ARTICLE VIII USE.........................................................................7
SECTION 8.1. Use................................................................7
ARTICLE IX CASUALTY; REPLACEMENT; INSURANCE..............................................8
SECTION 9.1. Casualty...........................................................8
SECTION 9.2. Non-Casualty Losses................................................9
SECTION 9.3. Required Coverage..................................................9
SECTION 9.4. Delivery of Insurance Certificates................................10
ARTICLE X LEASE EVENTS OF DEFAULT.......................................................11
SECTION 10.1. Lease Events of Default..........................................11
SECTION 10.2. Remedies.........................................................12
SECTION 10.3. Waiver of Certain Rights.........................................13
SECTION 10.4. Power of Attorney................................................13
</TABLE>
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LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 10.5. Remedies Cumulative: No Waiver; Consents.........................13
ARTICLE XI [not used]..................................................................14
ARTICLE XII ASSIGNMENTS.................................................................14
ARTICLE XIII GRANT OF SECURITY INTEREST.................................................14
SECTION 13.1. Grant of Security Interest.......................................14
SECTION 13.2. Retention of Title or Proceeds in the Case of Default............14
ARTICLE XIV MISCELLANEOUS...............................................................15
SECTION 14.1. Governing Law....................................................15
SECTION 14.2. Notices..........................................................15
SECTION 14.3. Counterpart......................................................15
SECTION 14.4. Severability.....................................................15
SECTION 14.5. Successors and Assigns...........................................15
SECTION 14.6. Parties in Interest..............................................15
SECTION 14.7. Limitation of Liability..........................................15
SECTION 14.8. Captions; Table of Contents......................................16
SECTION 14.9. Schedules and Exhibits...........................................16
</TABLE>
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LEASE AGREEMENT
LEASE
This LEASE AGREEMENT (as amended, supplemented, or otherwise modified
from time to time, this "Lease"), dated as of May 28, 1999, is between FIRST
SECURITY TRUST COMPANY OF NEVADA, not in its individual capacity, except as
expressly stated herein, but solely as Trustee under the Trust Agreement, as
Lessor ("Lessor"), and STRATOSPHERE GAMING CORP., a Nevada corporation, as
Lessee ("Lessee").
In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, hereby
agree as follows.
ARTICLE I
DEFINITIONS; LESSEE LIABILITY
For all purposes hereof, the capitalized terms used herein and not
otherwise defined shall have the meanings assigned thereto in Appendix 1 to that
certain Participation Agreement, dated as of May 28, 1999 (as amended,
supplemented, or otherwise modified from time to time, the "Participation
Agreement"), among Stratosphere Corporation, a Delaware corporation; Lessee;
Lessor; Lenders; and Agent. All obligations imposed on Lessee in this Lease
shall be the full recourse liabilities of Lessee.
ARTICLE II
LEASE OF EQUIPMENT; LEASE TERM
SECTION 2.1. Acceptance and Lease of Equipment. On the Advance Date,
Lessor, subject to the satisfaction or waiver of the applicable conditions set
forth in Article III of the Participation Agreement, shall lease to Lessee
hereunder, and Lessee shall lease from Lessor hereunder, the Equipment for the
Lease Term.
SECTION 2.2. Acceptance Procedure. Lessee and Lessor each hereby agrees
that the execution and delivery by Lessee on the Advance Date of a Certificate
of Acceptance pursuant to Section 3.1(1) of the Participation Agreement
(appropriately completed) shall, without further act, irrevocably constitute
acceptance by Lessee on behalf of itself and Lessor of the Equipment which is
the subject thereof for all purposes of this Lease and the other Operative
Documents.
SECTION 2.3. Lease Term. The term of this Lease (the "Lease Term")
shall commence on the Lease Commencement Date and shall expire on the third
anniversary thereof.
ARTICLE III
RENT; QUIET ENJOYMENT; NET LEASE; SUBLEASING
SECTION 3.1. Periodic Rent. During the Lease Term, Lessee shall pay to
Lessor Periodic Rent on each Payment Date in the amount determined in accordance
with the definition of "Periodic Rent".
SECTION 3.2. Supplemental Rent. During the Lease Term, Lessee shall pay
to Lessor, or to whomever shall be entitled to payment thereof as expressly
provided herein or in any other Operative Document (and Lessor hereby directs
Lessee, on behalf of Lessor, so to pay any such other Person) any and all
Supplemental Rent promptly as the same shall become due and
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LEASE AGREEMENT
payable, and, in the event of any failure on the part of Lessee to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or in equity or otherwise in the case of nonpayment of
Periodic Rent. Lessee hereby reaffirms its obligation to pay as Supplemental
Rent (i) an amount equal to Additional Costs as the same become due and payable,
(ii) all amounts determined to be due and payable pursuant to Section 5.1 of the
Trust Agreement in accordance with its terms and (iii) any Premium that becomes
due and payable pursuant to Section 2.4(d) of the Loan Agreement.
SECTION 3.3. Place and Manner of Payment. Rent and all other sums due
to Lessor, Agent or any Lender hereunder shall be paid in accordance with
Section 2.7 of the Participation Agreement.
SECTION 3.4. Late Payment. If any Periodic Rent shall not be paid when
due, Lessee shall pay to Lessor, or if any Supplemental Rent payable to or on
behalf or for the account of Lessor, any Lender, Agent or any other Indemnitee
is not paid when due, Lessee shall pay to whomever shall be entitled thereto, in
each case as Supplemental Rent, interest at the Overdue Rate on such overdue
amount from and including the due date (not taking into account any grace
period) thereof to but excluding the Business Day of payment thereof.
SECTION 3.5. Quiet Enjoyment. Subject to the rights of Lessor contained
in Article X and the other terms of the Operative Documents to which Lessee is a
party, Lessee shall peaceably and quietly have, hold and enjoy the Equipment for
the Lease Term, free of any claim or other action by Lessor or anyone claiming
by, through or under Lessor (other than Lessee) with respect to any matters
arising from and after the Advance Date. Such right of quiet enjoyment is
independent of, and shall not affect Lessor's rights otherwise to initiate legal
action to enforce the obligations of Lessee under this Lease.
SECTION 3.6. Net Lease; No Setoff, etc. THIS LEASE SHALL CONSTITUTE A
NET LEASE AND, NOTWITHSTANDING ANY OTHER PROVISION OF THIS LEASE, IT IS INTENDED
THAT PERIODIC RENT AND SUPPLEMENTAL RENT SHALL BE PAID WITHOUT COUNTERCLAIM,
SETOFF, DEDUCTION OR DEFENSE OF ANY KIND AND WITHOUT ABATEMENT, SUSPENSION,
DEFERMENT, DIMINUTION OR REDUCTION OF ANY KIND, AND LESSEE'S OBLIGATION TO PAY
ALL SUCH AMOUNTS, THROUGHOUT THE LEASE TERM IS ABSOLUTE AND UNCONDITIONAL. The
obligations and liabilities of Lessee hereunder shall in no way be released,
discharged or otherwise affected for any reason, including, without limitation,
to the maximum extent permitted by law, by: (a) any defect in the condition,
merchantability, design, construction, quality or fitness for use of any item of
Equipment, or any failure of any item of Equipment to comply with all Applicable
Law, including any inability to use any item of Equipment by reason of such
non-compliance; (b) any damage to, abandonment, loss, destruction, requisition,
taking or contamination of or Release from any item of Equipment; (c) any
restriction, prevention or curtailment of or interference with any use of any
item of Equipment; (d) the attachment of any Lien of any third party to any item
of Equipment; (e) any prohibition or restriction of or interference with
Lessee's use of any or all of the Equipment by any Person; (f) any change,
waiver, extension, indulgence or other action or omission or breach in respect
of any obligation or liability of or by Lessor, Agent or any Lender; (g) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceedings relating to Lessee, Lessor, Agent, any
Lender
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LEASE AGREEMENT
or any other Person, or any action taken with respect to this Lease by any
trustee or receiver of Lessee, Lessor, Agent, any Lender or any other Person, or
by any court, in any such proceeding; (h) any claim that Lessee has or might
have against any Person, including, without limitation, Lessor, Agent or any
Lender; (i) any failure on the part of Lessor to perform or comply with any of
the terms of this Lease, any other Operative Document or of any other agreement
whether or not related to the transactions contemplated by the Operative
Documents; (j) any invalidity or unenforceability or disaffirmance against or by
Lessee of this Lease or any provision hereof or any of the other Operative
Documents or any provision of any thereof; (k) the impossibility of performance
by Lessee, Lessor or both; (l) any action by any court, administrative agency or
other Governmental Authority; (m) any restriction, prevention or curtailment of
or any interference with the construction or any use of any item of Equipment;
or (n) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not Lessee shall have notice or knowledge of any of the
foregoing. Except as specifically set forth in Articles IV or X of this Lease,
this Lease shall be noncancellable by Lessee for any reason whatsoever, and
Lessee, to the extent permitted by Applicable Law, waives all rights now or
hereafter conferred by statute or otherwise to quit, terminate or surrender this
Lease, or to any diminution, abatement or reduction of Rent payable by Lessee
hereunder. If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise, except as expressly provided in
Articles IV or X of this Lease, Lessee shall, unless prohibited by Applicable
Law, nonetheless pay to Lessor (or, in the case of Supplemental Rent, to
whomever shall be entitled thereto) an amount equal to each Rent payment at the
time and in the manner that such payment would have become due and payable under
the terms of this Lease if it had not been terminated in whole or in part, and
in such case, so long as such payments are made and no Lease Event of Default
shall have occurred and be continuing, Lessor will deem this Lease to have
remained in effect. Each payment of Rent made by Lessee hereunder shall be final
and, absent manifest error in the determination of the amount thereof, Lessee
shall not seek or have any right to recover all or any part of such payment from
Lessor, Agent or any party to any agreements related thereto for any reason
whatsoever. Lessee assumes the sole responsibility for the condition, use,
operation, maintenance and management of the Equipment, and Lessor shall have no
responsibility in respect thereof and shall have no liability for damage to the
property of Lessee or any subtenant of Lessee on any account or for any reason
whatsoever other than by reason of Lessor's willful misconduct or gross
negligence or breach of any of its obligations under any Operative Document.
SECTION 3.7. No Bar. Notwithstanding the foregoing, nothing set forth
herein shall bar, limit, preclude, prevent, stay or otherwise adversely affect
Lessee's right or ability to bring and pursue any action for monetary damages
against Lessor or any other Person for any breach or alleged breach of its
obligations hereunder or under any other Operative Document.
SECTION 3.8. Intent of the Parties. Lessor and Lessee further intend
and agree that this Lease is also a conditional sales agreement and that, for
the purpose of securing Lessee's obligations for the repayment of the Loans from
Lessor and Lenders to Lessee, (i) the Lease shall also be deemed to be a
security agreement and financing statement within the meaning of Article 9 of
the UCC; (ii) the conveyance provided for hereby shall be deemed to be a grant
by Lessee to Lessor, for the benefit of Lenders, of a security interest in all
of Lessee's present and future right, title and interest in the Equipment,
including but not limited to Lessee's leasehold estate therein and all proceeds
of the conversion, voluntary or involuntary, of the foregoing into cash,
investments, securities or other property, whether in the form of cash,
investments, securities or
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LEASE AGREEMENT
other property to secure such loans, effective on the date hereof, to have and
to hold such interests in the Equipment unto Lessor, for the benefit of Lenders
and their respective successors and assigns, forever, provided always that these
presents are upon the express condition that, if all amounts due under the Lease
and the other Operative Documents shall have been paid and satisfied in full,
then this instrument and the estate hereby granted shall cease and become void;
(iii) the possession by Lessor or Lenders of notes and such other items of
property as constitute instruments, money, negotiable documents or chattel paper
shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the UCC; and (iv)
notifications to Persons holding such property, and acknowledgments, receipts or
confirmations from financial intermediaries, bankers or agents (as applicable)
of Lessee shall be deemed to have been given for the purpose of perfecting such
security interest under Applicable Law. Lessor and Lessee shall, to the extent
consistent with the Lease, take such actions and execute, deliver, file and
record such other documents and financing statements as may be necessary to
ensure that the security interest in the Equipment created in accordance with
this Lease will be deemed to be a perfected security interest with priority over
all Liens, other than Permitted Liens, under Applicable Law and will be
maintained as such throughout the Lease Term.
ARTICLE IV
POSSESSION AND SUBLEASING
LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, SUBLEASE
ANY OR ALL OF THE EQUIPMENT OR ASSIGN, TRANSFER OR ENCUMBER ITS RIGHTS,
INTERESTS OR OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED SUBLEASE, ASSIGNMENT,
TRANSFER OR ENCUMBERING BY LESSEE SHALL BE NULL AND VOID, except as provided
hereafter in this Article IV or pursuant to a transaction permitted under
Section 5.2 of the Participation Agreement. Lessee may, with Lessor's and
Lenders' prior written consent, which shall not be unreasonably withheld or
delayed, sublease or assign the Equipment as an integrated whole, if such
sublease or assignment permitted by this Article IV (a "Sublease") (a) is
expressly subject and subordinate to all of the provisions of this Lease and the
rights and interests of Lessor and Lenders hereunder in respect of the Equipment
covered by such Sublease upon the occurrence of an Event of Default thereunder
or hereunder, (b) expressly requires the Equipment subject thereto to be
returned as directed by Lessor or the Required Lenders upon notice to such
assignee or sublessee that an Event of Default exists and (c) expressly
prohibits any further sublease or assignment of the Equipment subject thereto.
Lessee shall remain primarily liable for its obligations under this Lease
notwithstanding the existence of any such Sublease. All of Lessee's right, title
and interest in, to and under such Sublease shall be pledged by Lessee to
Lessor, as collateral for Lessee's obligations under this Lease, and Lessee
shall, at its expense, do any further act and execute, acknowledge, deliver,
file, register and record any further documents which Lessor or any Lender may
reasonably request in order to create, perfect, preserve and protect Lessor's
security interest in such Sublease. If so requested by Lessor or any Lender,
Lessee shall, within 15 days after the execution of any such Sublease, deliver a
conformed copy thereof to Lessor or such Lender.
ARTICLE V
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LEASE AGREEMENT
LEASE TERMINATION
SECTION 5.1. Early Termination. On any date after the first anniversary
of the Lease Commencement Date, Lessee may, at its option, upon at least 30
days' advance written notice to Lessor, purchase all (but not less than all) of
the Equipment for an amount equal to the sum of (i) accrued and unpaid Rent
payable on or before such date, (ii) the Lease Balance (after giving effect to
any payments pursuant to clause (i)), (iii) any Premium payable in respect of
the Notes, and (iv) all other fees and expenses and other amounts then due and
payable pursuant to this Lease and the other Operative Documents. On any date
after and during the continuance of a Lease Event of Default due to one or more
of the following only: (i) Lessee or Guarantor fails to have unrestricted Gaming
Permits, (ii) Lessee is in default (subject to any applicable grace period)
under any other indebtedness to any Person individually or in the aggregate
equal to or greater than $1,000,000, or (iii) Carl Icahn shall cease to own,
directly or indirectly, at least 51% of the voting stock of Parent on a fully
diluted basis, Lessee may, at its option, upon at least three Business Days'
advance written notice to Lessor, purchase all (but not less than all) of the
Equipment for an amount equal to the sum of (i) accrued and unpaid Rent payable
on or before such date, (ii) the Lease Balance (after giving effect to any
payments pursuant to clause (i)), and (iii) all other fees and expenses and
other amounts then due and payable pursuant to this Lease and the other
Operative Documents.
SECTION 5.2. Termination and Transfer. Upon payment in full in cash of
all amounts then due and owing hereunder on the Lease Termination Date, Lessor
shall release the Equipment then subject to the Lease on the Lease Termination
Date from the Lien created by this Lease and transfer all of Lessor's right,
title and interest thereto to Lessee ("AS IS-WHERE IS" and without any
representations or warranties and with the disclaimers set forth in Section 6.1,
except that such Equipment is free and clear of Lessor Liens), all at Lessee's
sole cost and expense.
ARTICLE VI
DISCLAIMER AND ASSIGNMENT OF WARRANTIES
SECTION 6.1. Disclaimer of Warranties. The Equipment is let by Lessor
"AS IS-WHERE IS" in its present or then condition, as the case may be, subject
to (a) any rights of any parties in possession thereof, (b) the state of the
title thereto existing at the time Lessor acquired its interest in the
Equipment, (c) any state of facts which a physical inspection might show, (d)
all Applicable Law, and (e) any violations of Applicable Law which may exist at
the commencement of the Lease Term or thereafter. Lessee has examined the
Equipment (insofar as Lessor is concerned) and has found the same to be
satisfactory. NEITHER LESSOR, AGENT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED
TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE
DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE TO THE EQUIPMENT OR TO
THE VALUE, MERCHANTABILITY, HABITABILITY, CONDITION, OR FITNESS FOR USE OR
PARTICULAR PURPOSE OF THE SAME, OR ANY PART THEREOF, OR THE LACK OF INFRINGEMENT
OF THE RIGHTS OF ANY PERSON, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT OR ANY PART THEREOF, AND
NEITHER LESSOR,
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AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT
THEREIN OR THE FAILURE OF THE EQUIPMENT, OR ANY PART THEREOF, TO COMPLY WITH ANY
APPLICABLE LAWS, except that Lessor hereby represents and warrants that the
Equipment is and shall be free of Lessor Liens (such Lessor representation and
warranty being made by (x) Trust Company with respect to any Lessor Liens
attributable to Trust Company, and (y) Trustee with respect to any Lessor Liens
attributable to Trustee). Lessee has been afforded full opportunity to inspect
the Equipment, is satisfied with the results of its inspections and is entering
into this Lease solely on the basis of the results of its own inspections, and
all risks incident to the matters discussed in the preceding sentence, as
between Lessor, Agent and Lenders, on the one hand, and Lessee, on the other,
are to be borne by Lessee. The provisions of this Article VI have been
negotiated, and, except to the extent otherwise expressly stated, the foregoing
provisions are intended to be a complete exclusion and negation of any
representations or warranties by any of Lessor, Agent or Lenders, express or
implied, with respect to the Equipment (or any interest therein), that may arise
pursuant to any law now or hereafter in effect, or otherwise.
SECTION 6.2. Assignment of Warranties. Lessor assigns to Lessee, to the
extent assignable, all of its interest, if any, in any warranties, covenants and
representations of any manufacturer or vendor of any item of Equipment; provided
that such assignment shall be effective only when no Event of Default exists;
and provided, further, that any action taken by Lessee by reason thereof shall
be at the expense of Lessee and shall be consistent with Lessee's obligations
pursuant to this Lease.
ARTICLE VII
MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS
SECTION 7.1. Maintenance and Repair; Compliance with Law. Without
limiting Lessee's obligations under Section 5.11 of the Participation Agreement,
Lessee, at its own expense, shall at all times maintain the Equipment in good
and safe order, operating condition and repair (ordinary wear and tear
excepted), substantially in conformance with the maintenance and repair
standards and procedures as are set forth in the manufacturers' manuals
pertaining to the Equipment and as otherwise required to enforce claims against
each vendor or manufacturer of each item of Equipment and in compliance in all
material respects with Applicable Law and the standards imposed by insurance
policies required to be maintained hereunder with respect to the Equipment, but
in any event such Equipment shall be maintained at a standard that is no less
than the standard used by Lessee for similar equipment it owns or leases.
In addition, Lessee shall make all necessary or appropriate repairs,
replacements, substitutions and modifications in respect of the Equipment (or
any component thereof) which may be required to keep the Equipment in the
condition required above.
SECTION 7.2. Alterations.
(a) If the Equipment, any item of Equipment or individual
component thereof is required to be altered, added to, replaced, improved or
modified in order to comply with Applicable Law (a "Required Alteration"),
Lessee shall notify Lessor and diligently proceed to make such Required
Alteration at its own expense.
(b) Lessee, at its own expense, may make any alteration,
addition, replacement, improvement or modification to the Equipment or any item
of Equipment (a
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LEASE AGREEMENT
"Permitted Alteration"), or remove any part that becomes worn out, broken or
obsolete, if Lessee continues to be in compliance with Section 7.1 and such
action, when completed, will be of such character as not to materially adversely
affect (i) the current fair market value of the item of Equipment, (ii) the
originally anticipated use or function thereof, as applicable, and (iii) the
originally anticipated residual value of the item of Equipment. In addition, the
Permitted Alteration shall not cause the item of Equipment to become suitable
for use only by Lessee.
(c) All Alterations shall be completed in a commercially
reasonable manner and shall not, when completed, violate the terms of any
restriction, easement, condition, covenant or other matter affecting the
Equipment.
(d) Neither Lessor nor Agent need inquire into or confirm that
Alterations were made in conformity with these requirements.
SECTION 7.3. Replacement and Substitution. Lessee may replace an item
of Equipment subject to this Lease with a replacement item of equipment that
meets the suitability standards set forth in Section 9.1(b). Lessee may request
the replacement of an item of Equipment by delivery of a replacement notice to
Lessor at least 20 days prior to the date of the proposed substitution. Upon a
permitted substitution of equipment pursuant to this Section 7.3, Lessor shall
execute and deliver to Lessee a bill of sale (without representations or
warranties, except that the substituted item is free and clear of all Lessor
Liens) and such other documents as may be required to release the substituted
item from the terms of this Lease, all at Lessee's expense. Leased items of
Equipment that have been substituted or replaced pursuant to this Section 7.3
shall become the property of Lessee, and title thereto shall automatically vest
in Lessee upon such permitted substitution or replacement.
SECTION 7.4. Removal. No Required Alteration may be removed or severed
from the item of Equipment to which it is attached (unless no longer required by
Applicable Law so long as clauses (i) and (iii) below are satisfied). A
Permitted Alteration (or component thereof) may be removed by Lessee at its
expense if (i) it is readily removable without causing material damage to the
item of Equipment to which it is attached, (ii) the removal does not violate
Applicable Law and (iii) no Default or Event of Default is continuing.
SECTION 7.5. Maintenance and Repair Reports. Lessee shall keep
maintenance and repair reports in sufficient detail, and as customary for owners
or operators of casinos, to indicate the nature and date of major work done.
Such reports shall be kept on file by Lessee at its offices during the Lease
Term, and shall be made available to Lessor upon reasonable request. Lessee
shall give notice to Lessor and Agent of any Condemnation or Casualty the cost
to repair which is reasonably expected by Lessee to exceed $250,000, promptly
after Lessee has knowledge thereof.
ARTICLE VIII
USE
SECTION 8.1. Use. Without limiting Lessee's obligations under Section
5.17 of the Participation Agreement, Lessee shall use and operate the Equipment
in compliance with any and all Applicable Law. Lessee shall procure and maintain
in effect all licenses, registrations, certificates, permits, approvals and
consents required by Applicable Law or any Governmental Authority in connection
with the ownership, delivery, installation, use and operation of the Equipment.
The Equipment will at all times be and remain in the possession and control of
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Lessee, subject, however, to Articles IV and X. The Equipment shall in no event
be located outside of (i) the Resort without prior written notice to Lessor (and
in no event shall any Equipment be located on any space leased from
Strato-Retail LLC pursuant to the Strato-Retail Lease), (ii) the State of Nevada
without prior written notice to Lessor and the taking (before such relocation)
of all actions necessary to maintain the perfection of the security interest of
Lessor and Agent therein, and (iii) the continental United States.
ARTICLE IX
CASUALTY; REPLACEMENT; INSURANCE
SECTION 9.1. Casualty.
(a) If a Casualty occurs with respect to an item or items of
Equipment, Lessee shall (i) give prompt written notice of such occurrence and
the date thereof to Lessor and (ii) if such Casualty causes damage in an
aggregate amount in excess of $250,000, either (A) replace such item or items of
Equipment with respect to which the Casualty has occurred pursuant to the
following provisions of Section 9.1(b) or (B) purchase such item or items of
Equipment from Lessor, no later than the next Payment Date occurring at least 60
days after such Casualty (but in no event later than the Lease Termination
Date), at a purchase price equal to the Casualty Item Amount.
(b) If any item of Equipment is to be replaced, no later than
the earlier of (i) 60 days after the occurrence of a Casualty or (ii) the Lease
Termination Date, Lessee will substitute equipment meeting the suitability
standards set forth in this Section 9.1(b) for the item of Equipment suffering
the Casualty. To be suitable as a replacement, such replacement item of
equipment must be of the same general type, year of construction (or a later
year of construction), function, utility, state of repair and operating
condition as the item of Equipment suffering the Casualty, must have a fair
market value of not less than the fair market value (immediately preceding the
Casualty assuming that such item of Equipment had been maintained in accordance
with Article VII of the item of Equipment suffering the Casualty, and be free
and clear of any Liens other than Permitted Liens. Lessee shall cause a Bill of
Sale and a Certificate of Acceptance to be executed and delivered to Lessor in
order to subject such replacement item of Equipment to this Lease, and upon such
execution and delivery and the receipt by Lessor, Agent and Lenders of (i) a
certificate of insurance in accordance with Section 9.4 evidencing Lessee's
compliance with the insurance provisions of Section 9.3 with respect to such
replacement item of Equipment, and (ii) an opinion of counsel to Lessor in form
and substance reasonably satisfactory to the Agent and Lenders to the effect
that properly prepared financing statements have been filed and recorded in all
public offices where necessary to perfect the security interest of Lessor in the
replacement item of equipment, that the description of the replacement item of
equipment is adequate and that no other filing or recording or giving of notice
with or to any other Governmental Authority is necessary to perfect Lessor's
security interest in such replacement item of equipment. Such replacement item
of equipment shall be deemed an item of Equipment for all purposes hereof.
(c) If no Event of Default exists and Lessee elects to replace
any item of Equipment suffering a Casualty, Lessee shall be entitled to receive
from Lessor the Casualty Recoveries with respect thereto, to be used to
reimburse Lessee for the cost of replacement of such item of Equipment after
Lessee fully applies the Casualty Recoveries properly received by
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it in replacement of such item of Equipment pursuant to Section 9.1(d). Lessor,
subject to the rights of any insurer insuring such item of Equipment as provided
herein, shall execute and deliver to Lessee, or to its assignee or nominee, a
quitclaim bill of sale (without representations or warranties except that such
item of Equipment is free and clear of Lessor Liens) for such item of Equipment,
and such other documents as may be required to release such item of Equipment
from the terms of this Lease, in such form as may reasonably be requested by
Lessee. All fees, costs and expenses relating to a substitution as described
herein shall be borne by Lessee.
(d) All Casualty Recoveries in excess of $250,000 in respect of a
Casualty to any item of Equipment shall be paid directly to Lessor for deposit
into an account in the name of Lessor (the "Account"), or if paid to Lessee,
such excess funds shall be immediately paid by Lessee to Lessor. If an Event of
Default exists, Lessor may retain all Casualty Recoveries as cash collateral or,
if no Event of Default exists, Lessee shall be entitled to apply all Casualty
Recoveries in accordance with Section 9.1(c), as applicable, and any balance
remaining after compliance with Section 9.1(c), as the case may be, shall be
retained by or returned to Lessee. Lessee shall not be entitled to any Casualty
Recoveries in excess of $250,000 until it applies all amounts received in
relation to such Casualty Recovery of less than or equal to such amount in
repair or replacement of the affected item of Equipment. If Lessor receives
Casualty Recoveries in an amount that is less than $250,000, so long as no Event
of Default exists, Lessor shall promptly remit such funds to Lessee.
SECTION 9.2. Non-Casualty Losses.
(a) If any item of Equipment suffers any condemnation, loss,
physical harm or damage not constituting a Casualty (a "Non-Casualty Loss"),
Lessee shall repair such item of Equipment.
(b) All Non-Casualty Recoveries in excess of $250,000 in
respect of any Non-Casualty Loss to an item of Equipment (including any
component thereof) shall be paid directly to Lessor for deposit into the
Account. Non-Casualty Recoveries held by Lessor shall be disbursed by Lessor
from the Account to Lessee from time to time (but no more frequently than twice
per calendar month) to pay Lessee for the costs of repairing and rebuilding the
affected portions of the Equipment as required under Section 9.2(a), subject to
such reasonable disbursement conditions as Lessor may impose, including
presentation of invoices and other supporting documentation reflecting such
costs and delivery of Lien waivers; provided, however, Lessor shall have no
obligation to disburse any Non-Casualty Recoveries out of the Account at any
time that Lessor shall reasonably determine (i) that such Non-Casualty
Recoveries are not sufficient to repair and rebuild the affected portions of the
Equipment as required by Section 9.2(a) (unless additional funds which are, in
the sole discretion of Lessor, sufficient to so repair and rebuild the affected
portions of the Equipment have been deposited in the Account) or (ii) that
Lessee is not diligently performing its obligations under Section 9.2(a).
Notwithstanding the foregoing provisions of this Section 9.2(b), and provided no
Event of Default exists, if the aggregate amount of Non-Casualty Recoveries
attributable to any Non-Casualty Loss is $250,000 or less, Lessee may receive
such Non-Casualty Recoveries directly, without delivery to Lessor, provided such
Non-Casualty Recoveries are applied in accordance with the requirements of
Section 9.2(a). If Lessor receives Non-Casualty Recoveries in an amount that is
less than $250,000, so long as no Event of Default exists, Lessor shall promptly
remit such funds to Lessee. Notwithstanding any Non-Casualty Loss, all of
Lessee's obligations under this Lease (including its obligation to make all
payments of Rent as they become due) shall continue
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unabated and in full force and effect as provided in this Lease.
SECTION 9.3. Required Coverage. Lessee will keep the Equipment insured
by financially sound and reputable insurers against loss or damage of the kinds
and in the amounts customarily insured against by similar corporations engaged
in similar operations and carry such other insurance as is usually carried by
such corporations, provided that in any event Lessee will maintain:
(a) Casualty Insurance. Insurance against all risks of loss or
damage with respect to the Equipment with deductibles and in such minimum
amounts as are consistent with industry standards; provided, however, that at no
time shall the amount of coverage be less than the greater of the full
replacement value of the Equipment or 110% of the then outstanding Lease
Balance.
(b) Comprehensive General Liability Insurance. Combined single
limit insurance against claims for bodily injury, death or third party property
damage occurring on, in or about the Equipment in an amount at least equal to
$25,000,000 per occurrence with such deductibles as are carried by similarly
situated companies involved in operating similar equipment.
(c) Property Insurance. Insurance against loss or damage
covering the Equipment or any portion thereof by reason of any peril in an
amount and with such deductibles as are carried by companies similar to Lessee
owning or leasing equipment similar to the Equipment; provided, however, that at
no time shall the amount of such coverage be less than the greater of the full
replacement value of the Equipment or 110% of the then outstanding Lease
Balance.
(d) Other Insurance. Such other insurance including workmen's
compensation and business interruption insurance, in each case as generally
carried by owners of similar equipment in the State of Nevada, in such amounts
and against such risks as are then customary for equipment similar in use.
Lessee may elect to self-insure for workmen's compensation coverage provided
such insurance is obtained and maintained in accordance with all Applicable Law
of the State of Nevada.
Such insurance shall be written by reputable insurance companies that are
financially sound and Solvent and otherwise reasonably appropriate considering
the amount and type of insurance being provided by such companies. In the case
of liability insurance maintained by Lessee, each policy shall name Trust
Company, Agent, Lessor and Lenders as additional insureds. In the case of
casualty and property insurance maintained by Lessee, each policy shall name
Agent as sole loss payee. Each policy referred to in this Section 9.3 shall
provide that: (i) it will not be cancelled or its limits reduced or otherwise
modified, or allowed to lapse without renewal, except after not less than 30
days' prior written notice to each additional insured; (ii) the interests of
Trust Company, Agent, Lessor and Lenders shall not be invalidated by any act or
negligence of Lessee or any person having an interest in the Resort, or any item
of Equipment; (iii) such insurance is primary with respect to any other
insurance carried by or available to Trust Company, Agent, Lessor and Lenders;
(iv) the insurer shall waive any right of subrogation, setoff, counterclaim, or
other deduction, whether by attachment or otherwise, against Trust Company,
Agent, Lessor or Lenders; and (v) such policy shall contain a cross-liability
clause providing for coverage of Trust Company, Agent, Lessor and each Lender as
if separate policies had been issued to each of them. Lessee will notify Trustee
and Agent promptly of any policy cancellation, reduction in policy limits,
modification or amendment.
SECTION 9.4. Delivery of Insurance Certificates. On or before the
Closing Date and
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thereafter not less than 30 days prior to the expiration date of the expiring
policies which are required to be maintained pursuant to Section 9.3 and upon
written request of Lessor or Agent after a Lease Event of Default, Lessee shall
deliver to Trustee and Agent certificates of insurance satisfactory to Trustee
and Agent evidencing the existence of all insurance required to be maintained
hereunder and setting forth the respective coverages, limits of
liability, carrier, policy number and period of coverage.
ARTICLE X
LEASE EVENTS OF DEFAULT
SECTION 10.1. Lease Events of Default. The occurrence of any one or
more of the following events, 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, shall constitute a
"Lease Event of Default":
(a) any payment of Rent or any other payment payable by Lessee
hereunder or under any other Operative Document shall not be paid when due and
such failure shall continue unremedied for a period of 3 Business Days;
(b) any representation or warranty on the part of Lessee or
Guarantor contained in any Operative Document or in any certificate, letter or
other writing or instrument furnished or delivered to Lessor, Agent or any
Lender or pursuant thereto, shall at any time prove to have been incorrect in
any material respect when made, deemed made or reaffirmed, as the case may be;
(c) Parent shall default in the performance or observance of
any term, covenant, condition or agreement on its part to be performed or
observed under Section 5.2 of the Participation Agreement, or the Guaranty;
(d) Lessee shall default in any material respect in the
performance or observance of any term, covenant, condition or agreement on its
part to be performed or observed under Section 9.3;
(e) Lessee or Parent shall default in any material respect in
the performance or observance of any other term, covenant, condition or
agreement on their part to be performed or observed hereunder or under any
Operative Document (and not constituting a Lease Event of Default under any
other clause of this Section 10.1), and such default shall continue unremedied
for a period of 30 days after: (i) written notice thereof by Lessor, Agent or
any Lender to Lessee or Guarantor; or (ii) Lessee or Parent has knowledge
thereof;
(f) (i) Lessee, Guarantor or any Subsidiary that is a
sublessee, assignee or transferee of any Equipment shall generally fail to pay,
or admit in writing its inability to pay, its debts as they become due, or shall
voluntarily commence any case or proceeding or file any petition under any
bankruptcy, insolvency or similar law or seeking dissolution, liquidation or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for itself or a substantial portion of its property, assets or
business or to effect a plan or other arrangement with its creditors, or shall
file any answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition filed against it in any bankruptcy,
insolvency or similar case or proceeding, or shall be adjudicated bankrupt, or
shall make a general assignment for the benefit of creditors, or shall consent
to, or acquiesce in the appointment of, a receiver, trustee,
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custodian or liquidator for itself or a substantial portion of its property,
assets or business; or (ii) corporate action shall be taken by Lessee, Guarantor
or any Subsidiary that is a sublessee, assignee or transferee of any Equipment
for the purpose of effectuating any of the foregoing;
(g) involuntary proceedings or an involuntary petition shall
be commenced or filed against Lessee, Guarantor or any Subsidiary that is a
sublessee, assignee or transferee of any Equipment under any bankruptcy,
insolvency or similar law or seeking the dissolution, liquidation or
reorganization of Lessee, Guarantor or any Subsidiary that is a sublessee,
assignee or transferee of any Equipment or the appointment of a receiver,
trustee, custodian or liquidator for Lessee, Guarantor or any Subsidiary that is
a sublease, assignee or transferee of any Equipment or of a substantial part of
the property, assets or business of Lessee, or any writ, judgment, warrant of
attachment, execution or similar process shall be issued or levied against a
substantial part of the property, assets or business of Lessee, Guarantor or any
Subsidiary that is a sublease, assignee or transferee of any Equipment, and such
proceedings or petition shall not be dismissed or stayed, or such writ,
judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded, within 60 days after commencement, filing or
levy, as the case may be;
(h) a Plan shall fail to maintain the minimum funding standard
required by Section 412(d) of the Code for any plan year or a waiver of such
standard is sought or granted under Section 412(d), or a Plan is or shall have
been terminated or the subject of termination proceedings under ERISA, or the
Lessee or an ERISA Affiliate has incurred a liability to or on account of a Plan
under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, and there shall result
from any such event or events a Material Adverse Effect;
(i) any Operative Document or any Lien granted under any
Operative Document shall (except in accordance with its terms), in whole or in
part, terminate, cease to be effective or cease to be the legally valid, binding
and enforceable obligation of Lessee, or Guarantor, as the case may be; or
Lessee, any Guarantor, or any Affiliate of any of them shall, directly or
indirectly, contest in any manner the effectiveness, validity, binding nature or
enforceability thereof; or the Liens securing Lessee's or Trustee's obligations
under the Operative Documents shall, in whole or in part, cease to be a
perfected first priority Lien, subject only to Permitted Liens;
(j) (A) any default (subject to any applicable grace period)
occurs as to any other indebtedness to Agent or any Lender or (B) any default
(subject to any applicable grace period) occurs as to any other indebtedness to
any Person individually or in the aggregate equal to or greater than $1,000,000,
in either case under which Parent or Lessee may be obligated as borrower or
guarantor;
(k) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against the
Parent or Lessee and such judgment or judgments (to the extent not covered by
insurance provided by a recognized insurance carrier) remain undischarged for a
period (during which execution shall not be effectively stayed) of 30 days,
provided that the aggregate of all such judgments exceeds $5,000,000;
(l) there has occurred any revocation, suspension or loss of
any Gaming Permit of Lessee or Parent (after the same shall have been obtained)
which results in the cessation of gaming business at the Casino or any other
gaming location of Lessee for a period of more than five consecutive days;
(m) [not used]
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(n) there shall have occurred a Change of Control.
SECTION 10.2. Remedies. If any Lease Event of Default exists and is
continuing, Lessor shall have the rights, options and remedies of a secured
party at law and in equity and, without limiting the foregoing, subject to
Applicable Law, Lessor may, so long as such Lease Event of Default is
continuing, do one or more of the following as Lessor in its sole discretion
shall determine, without limiting any other right or remedy Lessor may have on
account of such Lease Event of Default:
(a) Lessor may proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof; or
(b) Lessor may by notice in writing to Lessee terminate this
Lease, but Lessee shall remain liable as hereinafter provided; and Lessor may,
at its option, do any one or more of the following: (i) declare the Lease
Balance, all accrued but unpaid Rent (to the extent of the accrued unpaid
interest on the Notes), all other amounts then payable by Lessee under this
Lease and the other Operative Documents to be immediately due and payable, and
recover any other damages and expenses (including the costs and expenses
described in Sections 7.1 and 9.8 of the Participation Agreement) in addition
thereto which Lessor shall have sustained by reason of such Lease Event of
Default; (ii) enforce the Lien given hereunder pursuant to the UCC or any other
law; and (iii) enter upon the premises where any item of Equipment may be and
either remove such Equipment (or any portion thereof), with any damage to the
improvements upon which the Equipment may be attached to be borne by Lessee, or
take possession of the Equipment; or
(c) Lessor may require Lessee immediately to purchase the
Equipment (or the remaining portion thereof) in accordance with the provisions
of Section 5.1. Amounts received by Lessor from the Account will be applied
against Lessee's liabilities hereunder. If, pursuant to the exercise by Lessor
of its remedies pursuant to this Section 10.2, the Lease Balance and all other
amounts due and owing from Lessee under this Lease and the other Operative
Documents have been paid in full, then Lessor shall remit to Lessee any excess
amounts received by Lessor.
SECTION 10.3. Waiver of Certain Rights. If this Lease shall be
terminated pursuant to Section 10.2, Lessee waives, to the fullest extent
permitted by law, (a) any notice of the institution of legal proceedings to
obtain possession; (b) any right of redemption or repossession; (c) the benefit
of any laws now or hereafter in force exempting property from liability for rent
or for debt or limiting Lessor with respect to the election of remedies; and (d)
any other rights which might otherwise limit or modify any of Lessor's rights or
remedies under this Article X.
SECTION 10.4. Power of Attorney. Lessee unconditionally and irrevocably
appoints Lessor as its true and lawful attorney-in-fact, with full power of
substitution, to the extent permitted by Applicable Law, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery hereunder, if a Lease Event of Default occurs, whether
pursuant to foreclosure or power of sale or otherwise, and in connection
therewith to execute and deliver all such deeds, bills of sale, assignments,
releases (including releases of this Lease on the records of any Governmental
Authority) and other proper instruments as Lessor may reasonably consider
necessary or appropriate. Lessee ratifies and confirms all that such attorney or
any substitute shall lawfully do by virtue hereof. If requested by Lessor or any
purchaser, Lessee shall ratify and confirm any such lawful sale, assignment,
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transfer or delivery by executing and delivering to Lessor or such purchaser,
all deeds, bills of sale, assignments, releases and other proper instruments to
effect such ratification and confirmation as may be designated in any such
request.
SECTION 10.5. Remedies Cumulative: No Waiver; Consents. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any right, power or remedy. No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of Lessee or be an acquiescence therein. Lessor's consent to
any request made by Lessee shall not be deemed to constitute or preclude the
necessity for obtaining Lessor's consent, in the future, to all similar
requests. No express or implied waiver by Lessor of any Lease Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Lease Event of Default. To the extent permitted by Applicable Law, Lessee hereby
waives any rights now or hereafter conferred by statute otherwise that may
require Lessor to sell, lease or otherwise use the Equipment in mitigation of
Lessor's damages upon the occurrence of a Lease Event of Default or that may
otherwise limit or modify any of Lessor's rights or remedies under this Article
X.
ARTICLE XI
[NOT USED]
ARTICLE XII
ASSIGNMENTS
All or any of the right, title or interest and obligations of Lessor in
and to this Lease and the rights, benefits, advantages and obligations of Lessor
hereunder, including the right to receive payment of rental or any other payment
hereunder, and the right, title and interest in and to the Equipment, may be
assigned or transferred by Lessor only in accordance with the provisions set
forth in the Trust Agreement.
ARTICLE XIII
GRANT OF SECURITY INTEREST
SECTION 13.1. Grant of Security Interest. Title to the Equipment is
held by Lessor as collateral security for the obligations of Lessee hereunder
and under the Operative Documents to which it is a party until such time as
Lessee has fulfilled all of its obligations hereunder and under such Operative
Documents. Lessee hereby assigns, grants and pledges to Lessor and Lenders a
security interest and Lien in (a) the Equipment, (b) all of Lessee's right,
title and
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interest, whether now or hereafter existing or acquired, in, to and under each
of the items, accounts, agreements listed in Section 2.1 of the Security
Agreement, and (c) the proceeds thereof (collectively, the "Lessee Collateral"),
to secure the payment of all sums due hereunder and under the Operative
Documents to which it is a party and the performance of all obligations
hereunder and the other Operative Documents to which it is a party.
SECTION 13.2. Retention of Title or Proceeds in the Case of Default. If
Lessee would be entitled to any amount (including any Casualty Recoveries [or
Non-Casualty Recoveries]) or title to any item of Equipment hereunder but for
the existence of any Event of Default or event which with the giving of notice
and/or passage of time could become an Event of Default, Lessor shall hold such
amount or portion of the item of Equipment as part of the Lessee Collateral and
shall be entitled to apply such amounts against any amounts due hereunder;
provided that Lessor shall distribute such amount or transfer the Equipment in
accordance with the other terms of this Lease if and when no Event of Default or
event which with the giving of notice and/or passage of time could become an
Event of Default exists.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Governing Law. THIS LEASE HAS BEEN DELIVERED IN THE STATE
OF NEVADA AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LEASE SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEVADA, BUT WITHOUT REGARD TO THE CONFLICT OF LAWS RULES OF SUCH
STATE.
SECTION 14.2. Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be in writing and shall be delivered and shall be deemed to have
been given in accordance with Section 9.3 of the Participation Agreement.
SECTION 14.3. Counterpart. This Lease has been executed in several
counterparts. One counterpart has been prominently marked "Lessor's Copy" and
the other counterparts have been prominently marked "Lessee's Copy" or "Copy."
Only the counterpart marked "Lessor's Copy" shall be deemed to be an original or
to be chattel paper for purposes of the UCC, and such copy shall be held by
Lessor or Agent.
SECTION 14.4. Severability. Whenever possible, each provision of this
Lease shall be interpreted in such manner as to be effective and valid under
Applicable Law; but if any provision of this Lease shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Lease.
SECTION 14.5. Successors and Assigns. This Lease shall be binding upon
the parties hereto and their respective successors and assigns and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
SECTION 14.6. Parties in Interest. Except as expressly provided herein,
none of the provisions of this Lease is intended for the benefit of any Person
except the parties hereto, their successors and permitted assigns; provided that
each of Lessor and Lessee agrees that the Lenders shall benefit from all of the
provisions of this Lease applicable to them.
SECTION 14.7. Limitation of Liability. It is expressly understood and
agreed by the
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parties hereto that (a) this Lease is executed and delivered by Trust Company,
not individually or personally but solely as Trustee of the Trust, as Lessor, in
the exercise of the power and authority conferred and vested in it under the
Trust Agreement; (b) each of the representations, undertakings and agreements
herein made on the part of Lessor is made and intended not as personal
representations, undertakings and agreements by but is made and intended for the
purpose for binding only Lessor; (c) nothing herein contained shall be construed
as creating any liability on Trust Company, individually or personally to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any other
Person claiming by, through or under this Lease; and (d) under no circumstances
shall Trust Company be personally liable for the payment of any indebtedness or
expenses of Lessor or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Lessor under this
Lease or any of the other Operative Documents; provided that Trust Company shall
be liable in its individual capacity for its own willful misconduct or gross
negligence (or negligence in the handling of funds) or for any Taxes based in or
measured by any fees, commission or compensation received by it for acting as
Trustee.
SECTION 14.8. Captions; Table of Contents. Section captions and the
table of contents used in this Lease (including the Schedules, Exhibits and
Annexes hereto) are for convenience of reference only and shall not affect the
construction of this Lease.
SECTION 14.9. Schedules and Exhibits. The Schedules and Exhibits
hereto, along with all attachments referenced in any of such items, are
incorporated herein by reference and made a part hereof.
[Signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
FIRST SECURITY TRUST COMPANY OF NEVADA, not in its
individual capacity, except as expressly stated
herein, but solely as Trustee and as Lessor
By: ______________________________________
Name Printed:
Title:
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LEASE AGREEMENT
STRATOSPHERE GAMING CORP.,
as Lessee
By: ______________________________________
Name Printed: Thomas A. Lettero
Title: Vice President - Administration
Chief Financial Officer
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Loan Agreement
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EXHIBIT B TO PARTICIPATION AGREEMENT
FORM OF LOAN AGREEMENT
dated as of May 28, 1999
among
FIRST SECURITY TRUST COMPANY OF NEVADA,
not in its individual capacity, except as expressly state
herein, but solely as Trustee, as Borrower,
HELLER FINANCIAL LEASING, INC.
as Agent
and
THE PERSONS NAMED ON SCHEDULE I,
as Lenders
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LOAN AGREEMENT
TABLE OF CONTENTS
PAGE(S)
ARTICLE I DEFINITIONS 1
SECTION 1.1. Defined Terms 1
ARTICLE II AMOUNT AND TERMS OF COMMITMENTS;
REPAYMENT AND PREPAYMENT OF LOANS 1
SECTION 2.1. Commitment; Term 1
SECTION 2.2. Notes 1
SECTION 2.3. Procedure for Borrowing 2
SECTION 2.4. Prepayments; Lease Termination Payments and Premium 2
SECTION 2.5. Interest Rates 2
SECTION 2.6. Determination of Interest Rate 3
SECTION 2.7. Pro Rata Treatment among Loans 3
SECTION 2.8. Payment from Trust Estate Only 3
SECTION 2.9. Taxes 3
SECTION 2.10. Illegality 4
SECTION 2.11. Increased Costs and Reduction of Return 4
SECTION 2.12. Funding Losses 5
SECTION 2.13. Inability to Determine Rates 5
SECTION 2.14. Survival 6
ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE TRUST ESTATE 6
SECTION 3.1. Rent Distribution 6
SECTION 3.2. Distribution of Mandatory Prepayments 6
SECTION 3.3. Distribution of Payments After Loan Event of Default 6
SECTION 3.4. Other Payments 7
SECTION 3.5. Distribution of Excluded Amounts 8
SECTION 3.6. Guaranty Payments 8
ARTICLE IV ARTICLE IV CONDITIONS PRECEDENT 8
ARTICLE V AFFIRMATIVE COVENANTS OF BORROWER 8
SECTION 5.1. Performance by Borrower 8
SECTION 5.2. Waiver by Borrower 8
ARTICLE VI LOAN EVENTS OF DEFAULT; REMEDIES 9
SECTION 6.1. Loan Events of Default 9
SECTION 6.2. Remedies 9
ARTICLE VII AGENT 11
SECTION 7.1. Appointment and Authorization 11
SECTION 7.2. Delegation of Duties 11
SECTION 7.3. Liability of Agent 11
SECTION 7.4. Reliance by Agent 11
SECTION 7.5. Notice of Default 12
SECTION 7.6. Credit Decision 12
SECTION 7.7. Indemnification of Agent 12
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Page(s)
SECTION 7.8. Agent in Individual Capacity 13
SECTION 7.9. Successor Agent 13
SECTION 7.10. Withholding Tax 13
SECTION 7.11. Concerning the Trust Estate 14
SECTION 7.12. Distribution and Receipt of Payments by Trust Company 15
ARTICLE VIII MISCELLANEOUS 16
SECTION 8.1. Amendments and Waivers 16
SECTION 8.2. Notices 16
SECTION 8.3. Successors and Assigns; Transfers and Participations 16
SECTION 8.4. Counterparts 16
SECTION 8.5. GOVERNING LAW 16
SECTION 8.6. Survival and Termination of Agreement 16
SECTION 8.7. Entire Agreement 17
SECTION 8.8. Severability 17
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LOAN AGREEMENT
LOAN AGREEMENT
THIS LOAN AGREEMENT (as amended and supplemented from time to time,
this "Loan Agreement"), dated as of May 28, 1999, is entered into by and among
FIRST SECURITY TRUST COMPANY OF NEVADA, a Nevada trust company, not in its
individual capacity, except as expressly provided herein, but solely as Trustee
under the Trust Agreement of even date herewith ("Borrower"); HELLER FINANCIAL
LEASING, INC, a Delaware corporation, as Agent; and the Persons named on
Schedule I hereto, as Lenders.
WITNESSETH:
WHEREAS, Borrower desires to pay costs associated with the acquisition
of the Equipment and to pay certain costs related thereto, all as more
particularly described in the Participation Agreement of even date herewith and
in each of the other Operative Documents; and
WHEREAS, Borrower desires to borrow from Lenders a portion of the costs
associated with the acquisition of the Equipment;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms. The capitalized terms used herein and not
otherwise defined shall have the meanings ascribed thereto in Appendix I to the
Participation Agreement dated as of the date hereof among Stratosphere Gaming
Corp., as Lessee; Stratosphere Corporation, as Guarantor; Borrower; Agent; and
Lenders identified therein (as amended, supplemented or otherwise modified from
time to time, the "Participation Agreement") for all purposes hereof.
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS;
REPAYMENT AND PREPAYMENT OF LOANS
SECTION 2.1. Commitment; Term. Subject to the terms and conditions
hereof and of the Participation Agreement, each Lender severally agrees to make
a term loan to Borrower ("Loans") for the purpose of enabling Trustee to pay for
Equipment Costs, in an aggregate principal amount at any one time outstanding
not to exceed the amount of such Lender's Commitment.
SECTION 2.2. Notes.
(a) The Loans made by each Lender shall be evidenced by a
promissory note of Borrower, substantially in the form of Exhibit A (a "Note"),
with appropriate insertions as to payee and principal amount, duly executed by
Borrower and payable to the order of such Lender and in a maximum principal
amount equal to such Lender's Commitment. Each Note shall be dated the Closing
Date and delivered to the related Lender in accordance with Section 2.3 of the
Participation Agreement. Each Note shall (i) be stated to mature on the Final
Maturity Date and
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(ii) bear interest on the unpaid principal amount thereof from time to time
outstanding at the applicable interest rate per annum determined as provided in,
and payable as specified in, Section 2.6.
(b) Upon the consummation of the Advance, each Lender shall,
and is hereby authorized by Borrower and Lessee to, record in its records the
amount of the Loan advanced by such Lender on such Advance Date, the date and
amount of each continuation or conversion of such Loan, the length of each
Interest Period with respect thereto and the date and amount of each payment of
principal and/or interest relating thereto; provided, that the failure to make
any such recordation shall not affect the obligation of Trustee under the Notes
or the corresponding obligation of Lessee to pay Rent. In all events, prior to
any transfer of its Note, a Lender shall indicate in writing to its transferee
the date, amount and maturity of each Loan made by it which is still outstanding
and the amounts of accrued but unpaid interest thereon.
SECTION 2.3. Procedure for Borrowing.
(a) Subject to the terms and conditions of the Participation
Agreement and this Loan Agreement, Borrower shall borrow under the Commitments
on the Advance Date upon receipt by Agent from Lessee of the Advance Request in
accordance with Section 2.4(a) of the Participation Agreement.
(b) The Advance Request shall be delivered to Trustee, Agent
and Lenders in accordance with Section 2.4 of the Participation Agreement. Each
Lender will fund its pro rata share of the Advance in accordance with Section
2.2 of the Participation Agreement.
SECTION 2.4. Prepayments; Lease Termination Payments and
Premium.
(a) Borrower shall repay in full the unpaid principal amount
of each Loan (including any Additional Costs) upon the Final Maturity Date.
(b) On each Scheduled Principal Payment Date, Borrower shall
make a mandatory repayment of a portion of the outstanding principal amount of
each Note in an amount determined pursuant to Section 2.12 of the Participation
Agreement.
(c) No other principal amortization of the Loans will be
required prior to the Final Maturity Date thereof, except that upon the
occurrence of (i) a Casualty that results in a purchase by Lessee of the
Equipment suffering the Casualty, (ii) Lessee exercising the early termination
option to purchase all of the Equipment pursuant to Section 5.1 of the Lease or
(iii) a Lease Event of Default that results in Lessor exercising its right to
have Lessee purchase all of the Equipment, Borrower shall prepay the aggregate
outstanding principal amount of the Loans or in the event of a Casualty, an
amount equal to the Casualty Item Amount, together with interest accrued to the
date of such prepayment on the principal amount so prepaid, plus, Additional
Costs, if any.
(d) In the event that Lessee elects to exercise the early
termination option to purchase all of the Equipment pursuant to Section 5.1 of
the Lease after the first anniversary of the Lease Commencement Date, Lessee
shall pay to Agent for the account of Lenders a premium (the "Premium") in an
amount equal to one percent of the amount of such prepayment.
SECTION 2.5. Interest Rates. The Loans shall accrue interest at the
applicable Interest Rate from time to time in effect. The Interest Period for
which a LIBO Rate applies shall be three months unless the duration is shortened
as required by the definition of "Interest Period." Interest accrued on each
Loan shall be payable in arrears on each Payment Date.
If all or a portion of the principal amount of or interest on the Notes
shall not be paid when due (whether at the Final Maturity Date thereof, by
acceleration or otherwise), such
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overdue amount shall, without limiting the rights of any Lender under Section
6.2, bear interest at the Overdue Rate, in each case from the date first due
until paid in full (as well after as before judgment) payable on demand.
SECTION 2.6. Determination of Interest Rate.
(a) During such time as a LIBO Rate applies to any of the
Notes, interest in respect of such Notes shall be calculated on the basis of a
360 day year and the actual days elapsed. During such time as the Alternate Base
Rate applies to any of the Notes, interest in respect of such Notes shall be
calculated on the basis of a 365 (or 366, as applicable) day year and the actual
number of days elapsed. Agent shall, as soon as practicable, but in no event
later than 12:00 noon, Las Vegas, Nevada time, one Business Day prior to the
first day of each Interest Period, notify Borrower, who shall notify Lessee and
Lenders, of the LIBO Rate. Any change in the Interest Rate on the Loans
resulting from a change in the Alternate Base Rate shall become effective as of
the opening of business on the day on which such Alternate Base Rate changes as
provided herein.
(b) Except as provided in Section 2.10 or Section 2.13, all
Loans shall be LIBO Rate Loans. LIBO Rate Loans shall be made by each Lender at
its LIBOR Office. At the end of each Interest Period, all LIBO Rate Loans shall
automatically be continued.
SECTION 2.7. Pro Rata Treatment among Loans. Except as otherwise
expressly set forth in Article III, each payment (including each prepayment) by
Borrower on account of principal of and interest on the Loans shall be made pro
rata among the Loans. Agent shall apply any prepayments in reduction of Loans so
that Borrower's funding losses under Section 2.12 are minimized. All payments
(including prepayments) to be made by Borrower hereunder and under the Notes
shall be made without set-off or counterclaim and shall be made to Agent, for
the account of Lenders, at Agent's office referred to in Schedule III of the
Participation Agreement, in lawful money of the United States of America and in
immediately available funds. Agent shall distribute such payments to each Lender
at its LIBOR Office, promptly upon receipt in like funds as received.
SECTION 2.8. Payment from Trust Estate Only. All payments to be made by
Borrower in respect of the Loans and this Loan Agreement shall be made only from
the income and the proceeds from the Trust Estate and only to the extent that
Borrower shall have received sufficient income or proceeds from the Trust Estate
to make such payments in accordance with the terms of Article III. Each Lender
agrees that it will look solely to the income and proceeds from the Trust Estate
to the extent available for distribution to such Lender as herein provided and
that neither Borrower nor Agent is or shall be personally liable to any Lender
for any amount payable hereunder or under any Note except as specifically
provided for in the Trust Agreement or the Participation Agreement.
SECTION 2.9. Taxes.
(a) Any and all payments by Borrower to each Lender or Agent
under this Loan Agreement and any other Operative Document shall be made free
and clear of, and without deduction or withholding for any Taxes. In addition,
Borrower shall pay all Other Taxes.
(b) Borrower agrees to indemnify and hold harmless each Lender
and Agent for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section)
paid by Lenders or Agent and any liability(including penalties, interest,
additions to tax and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
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Payment under this indemnification shall be made within 30 days after the date a
Lender or Agent makes written demand therefor.
(c) If Borrower shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or Agent, then:
(I) THE SUM PAYABLE SHALL BE INCREASED AS NECESSARY SO THAT
AFTER MAKING ALL REQUIRED DEDUCTIONS AND WITHHOLDINGS (INCLUDING
DEDUCTIONS AND WITHHOLDINGS APPLICABLE TO ADDITIONAL SUMS PAYABLE UNDER
THIS SECTION) SUCH LENDER OR AGENT, AS THE CASE MAY BE, RECEIVES AN
AMOUNT EQUAL TO THE SUM IT WOULD HAVE RECEIVED HAD NO SUCH DEDUCTIONS
OR WITHHOLDINGS BEEN MADE;
(II) BORROWER SHALL MAKE SUCH DEDUCTIONS AND WITHHOLDINGS;
(III)BORROWER SHALL PAY THE FULL AMOUNT DEDUCTED OR WITHHELD
TO THE RELEVANT TAXING AUTHORITY OR OTHER AUTHORITY IN ACCORDANCE WITH
APPLICABLE LAW; AND
(IV) BORROWER SHALL ALSO PAY TO AGENT FOR THE ACCOUNT OF EACH
LENDER, AT THE TIME INTEREST IS PAID, ALL ADDITIONAL AMOUNTS WHICH THE
RESPECTIVE LENDER SPECIFIES AS NECESSARY TO PRESERVE THE AFTER-TAX
YIELD LENDER WOULD HAVE RECEIVED IF SUCH TAXES OR OTHER TAXES HAD NOT
BEEN IMPOSED.
(d) Within 30 days after the date of any payment by Borrower
of Taxes or Other Taxes, Borrower shall furnish Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to Agent.
(e) If Borrower is required to pay additional amounts to any
Lender or Agent pursuant to subsection (c) of this Section, then such Lender
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by Borrower which may thereafter accrue, if such change in
the judgment of such Lender is not otherwise disadvantageous to such Lender.
SECTION 2.10. Illegality.
(a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable Lending Office to make
LIBO Rate Loans, then, on notice thereof by Lender to Borrower through Agent,
any obligation of that Lender to make LIBO Rate Loans shall be suspended until
Lender notifies Agent and Borrower that the circumstances giving rise to such
determination no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
LIBO Rate Loan, Borrower shall, upon its receipt of notice of such fact and
demand from such Lender (with a copy to Agent), prepay in full such LIBO Rate
Loans of that Lender then outstanding, together with interest accrued thereon,
either on the last day of the Interest Period thereof, if Lender may or lawfully
continue to maintain such LIBO Rate Loans to such day, immediately, if Lender
may not lawfully continue to maintain such LIBO Rate Loans. If Borrower is
required to so prepay any LIBO Rate Loan, then concurrently with such
prepayment, Borrower shall borrow from the affected Lender, in the amount of
such repayment, an Alternate Base Rate Loan.
SECTION 2.11. Increased Costs and Reduction of Return.
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(a) If any Lender determines that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance by that Lender with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost of such Lender of
agreeing to make or making, funding or maintaining any LIBO Rate Loans, then
Borrower shall be liable for, and shall from time to time, upon demand (with a
copy of such demand to be sent to Agent), pay to Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by such Lender (or its Lending Office) or any corporation controlling
such Lender with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender and (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy and such
Lender's desired return on capital) determines that the amount of such capital
is increased as a consequence of its Commitments, Loans, credits or obligations
under this Loan Agreement, then, upon demand of such Lender to Borrower through
Agent, Borrower shall pay to such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender for such
increase.
SECTION 2.12. Funding Losses. Borrower shall reimburse each Lender and
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of:
(a) the failure of Borrower to make on a timely basis any
payment of principal of any LIBO Rate Loan;
(b) the failure of Borrower to borrow, continue or convert a
Loan after Borrower has given (or is deemed to have given) the Advance Request;
(c) the failure of Borrower to make any prepayment;
(d) the prepayment or other payment (including after
acceleration thereof) of a LIBO Rate Loan on a day that is not the last day of
the relevant Interest Period; or
(e) the automatic conversion of any LIBO Rate Loan to an
Alternate Base Rate Loan on a day that is not the last day of the relevant
Interest Period; including any such loss or expense arising by reason of the
liquidation or reemployment of deposits or other funds obtained by it to make,
continue or maintain its LIBO Rate Loans or from fees payable to terminate the
deposits from which such funds were obtained; provided, however, that such
Lender shall have delivered to Borrower a certificate as to the amount of such
loss or expense, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.13. Inability to Determine Rates. If Agent determines that
for any reason adequate and reasonable means do not exist for determining the
LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate
Loan, or that the LIBO Rate applicable for any requested Interest Period with
respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the
cost to Lenders of funding such Loan, Agent will promptly so notify Borrower and
each Lender. Thereafter, the obligation of Lenders to make or maintain LIBO Rate
Loans hereunder shall be suspended until Agent revokes such notice in writing.
Upon
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receipt of such notice, Borrower may revoke the Advance Request submitted by it.
If Borrower does not revoke such notice, Lenders shall make, convert or continue
the Loans, as proposed by Borrower, in the amount specified in the applicable
notice submitted by Borrower, but such Loans shall be made, converted or
continued as Alternate Base Rate Loans instead of LIBO Rate Loans.
SECTION 2.14. Survival. The agreements and obligations of Borrower in
this Article II shall survive the payment of all other obligations.
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME
FROM THE TRUST ESTATE
SECTION 3.1. Rent Distribution. Except as otherwise provided in Section
3.3 hereof, each payment of Rent as well as any payment of interest on overdue
installments of Rent under the Lease, and any other monies paid over by Lessee
or Borrower to Agent for such purpose, shall be distributed as promptly as
possible (it being understood that any payments of Rent received by or on behalf
of Agent under the Lease on a timely basis and in accordance with the provisions
of the Lease shall be distributed on the date received in the funds so received)
in the following order of priority:
first, an amount equal to the aggregate amount of the payment
of interest as well as any interest on (to the extent permitted by
Applicable Law) overdue interest then due and payable on the Notes
shall be distributed and paid to Lenders; and
second, an amount equal to the aggregate amount of the payment
of principal on the Notes then due and payable shall be distributed and
paid to Lenders.
SECTION 3.2. Distribution of Mandatory Prepayments.
(a) Except as otherwise provided in Section 3.2(b) and Section
3.3, the amount of any prepayment received pursuant to Section 2.4 (other than
any Premium paid pursuant to Section 2.4(d)) shall in each case be distributed
and paid in the following order of priority:
FIRST, AN AMOUNT EQUAL TO THE AGGREGATE AMOUNT OF ACCRUED
INTEREST (AS WELL AS ANY INTEREST ON (TO THE EXTENT PERMITTED BY
APPLICABLE LOANS) OVERDUE INTEREST) THEN DUE AND PAYABLE ON THE NOTES,
PLUS ADDITIONAL COSTS, IF ANY, SHALL BE DISTRIBUTED AND PAID TO
LENDERS; AND
SECOND, AN AMOUNT EQUAL TO THE AGGREGATE AMOUNT OF THE PAYMENT
OF PRINCIPAL ON THE NOTES THEN DUE AND PAYABLE SHALL BE DISTRIBUTED AND
PAID TO LENDERS.
(b) Any Casualty Recovery or Non-Casualty Recovery that is not
required to be paid to Lessee pursuant to the Lease, solely because a Lease
Default or Lease Event of Default exists shall be held by Trustee as security
for the obligations of Lessee under the Lease and the other Operative Documents
and invested in Cash Equivalents and at such time as there shall not be
continuing any such Lease Default or Lease Event of Default, such portion shall
be paid to Lessee, unless Agent (as assignee of Borrower) shall have theretofore
declared the Lease to be
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terminated pursuant to Section 10.2 thereof, in which event such portion shall
be distributed forthwith upon such declaration in accordance with the provisions
of Section 3.3 hereof.
SECTION 3.3. Distribution of Payments After Loan Event of Default.
(a) Except as otherwise provided in Section 3.4(b), all
payments received and amounts (other than Excluded Amounts) realized by Agent
after a Loan Event of Default shall have occurred and be continuing, as well as
all payments or amounts then held or thereafter received by Agent as part of the
Trust Estate while such Loan Event of Default shall be continuing, shall be
distributed forthwith by Agent in the following order of priority:
FIRST, SO MUCH OF SUCH PAYMENTS OR AMOUNTS AS SHALL BE
REQUIRED TO REIMBURSE AGENT OR TRUSTEE FOR ANY TAX, EXPENSE OR OTHER
LOSS INCURRED BY AGENT OR TRUSTEE (TO THE EXTENT NOT PREVIOUSLY
REIMBURSED AND TO THE EXTENT INCURRED IN CONNECTION WITH ITS DUTIES AS
AGENT OR TRUSTEE, RESPECTIVELY) AND ANY UNPAID ONGOING FEES OF AGENT
SHALL BE DISTRIBUTED TO AGENT;
SECOND, SO MUCH OF SUCH PAYMENTS OR AMOUNTS AS SHALL BE
REQUIRED TO REIMBURSE THE THEN EXISTING OR PRIOR LENDERS (SO LONG AS
THE LOAN EVENTS OF DEFAULT THAT HAVE OCCURRED AND ARE CONTINUING ARISE
SOLELY FROM A LEASE EVENT OF DEFAULT) FOR PAYMENTS MADE BY THEM TO
AGENT OR TRUSTEE PURSUANT TO SECTION 7.7 (TO THE EXTENT NOT PREVIOUSLY
REIMBURSED), AND TO PAY SUCH THEN EXISTING OR PRIOR LENDERS (SO LONG AS
THE LOAN EVENTS OF DEFAULT THAT HAVE OCCURRED AND ARE CONTINUING ARISE
SOLELY FROM A LEASE EVENT OF DEFAULT) THE AMOUNTS PAYABLE TO THEM
PURSUANT TO ANY EXPENSE REIMBURSEMENT OR INDEMNIFICATION PROVISIONS OF
THE PARTICIPATION AGREEMENT, THE LEASE OR THIS LOAN AGREEMENT, SHALL BE
DISTRIBUTED TO EACH SUCH PERSON, WITHOUT PRIORITY OF ONE OVER THE
OTHER, IN ACCORDANCE WITH THE AMOUNT OF SUCH PAYMENT OR PAYMENTS
PAYABLE TO EACH SUCH PERSON;
THIRD, SO MUCH OF SUCH AMOUNT AS SHALL BE REQUIRED TO PAY IN
FULL THE AGGREGATE UNPAID PRINCIPAL AMOUNT OF THE NOTES, TOGETHER WITH
ANY ADDITIONAL COSTS AND THE ACCRUED BUT UNPAID INTEREST ON THE NOTES
TO THE DATE OF DISTRIBUTION SHALL BE DISTRIBUTED TO LENDERS HOLDING
NOTES, AND IN THE CASE THE AMOUNT SO TO BE DISTRIBUTED SHALL BE
INSUFFICIENT TO PAY IN FULL AS AFORESAID, THEN, PRO RATA AMONG SUCH
LENDERS, WITHOUT PRIORITY OF ONE SUCH LENDER OVER THE OTHER, IN THE
PROPORTION THAT THE UNPAID PRINCIPAL AMOUNT OF THE NOTES HELD BY EACH
LENDER BEARS TO THE AGGREGATE UNPAID PRINCIPAL AMOUNT OF THE NOTES;
FOURTH, THE BALANCE, IF ANY, OF SUCH PAYMENTS OR AMOUNTS
REMAINING THEREAFTER SHALL BE PROMPTLY DISTRIBUTED TO, OR AS DIRECTED
BY, BORROWER.
(b) During the occurrence and continuance of any Loan Event of
Default, all amounts (other than Excluded Amounts) received or realized by Agent
and otherwise distributable pursuant to Section 3.1 or 3.2 shall be distributed
as provided in Section 3.3 (a).
SECTION 3.4. Other Payments.
(a) Any payments received by Agent for which no provision as
to the application thereof is made in the Operative Documents or elsewhere in
this Article III shall be distributed forthwith by Agent in the order of
priority set forth in Section 3.1.
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(b) All payments received and amounts realized by Agent under
the Lease or otherwise with respect to the Equipment to the extent received or
realized at any time after payment in full of the principal of and interest on
all Loans, as well as any other amounts remaining as part of the Trust Estate
after payment in full of the principal of and interest on (and any Additional
Costs in respect of) all Loans issued hereunder, shall be distributed forthwith
by Agent in the order of priority set forth in Section 3.3(a) omitting clause
"third" of such Section 3.3(a).
(c) Except after a Loan Event of Default has occurred and is
continuing, any payment received by Agent for which provision as to the
application thereof is made in an Operative Document but not elsewhere in this
Article III shall be distributed forthwith by Agent to the Person for the
purpose for which such payment was made in accordance with the terms of such
Operative Document.
SECTION 3.5. Distribution of Excluded Amounts. All amounts
constituting Excluded Amounts received by Agent shall be distributed to the
Person or Persons entitled thereto.
SECTION 3.6. Guaranty Payments. Any payment received by Agent from
Guarantor pursuant to the Guaranty shall be distributed forthwith or retained by
Trustee in the same manner and subject to the same conditions as provided in
this Article III with respect to payments received by Trustee in respect of
Borrower's obligation as to which such payment relates, all as if such payment
had been made by Borrower out of Rent received under the Lease.
ARTICLE IV
CONDITIONS PRECEDENT
The agreement of each Lender to make the Loan requested to be made by
it on the Advance Date is subject to the satisfaction on the Advance Date of the
applicable conditions precedent set forth in Article III of the Participation
Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS OF BORROWER
SECTION 5.1. Performance by Borrower. Subject to Section 2.8, so long
as any Note remains outstanding and unpaid or any other amount is owing to any
Lender hereunder, Borrower will promptly pay all amounts payable by it under
this Loan Agreement and the Notes in accordance with the terms hereof and
thereof and shall duly perform each of its obligations under this Loan Agreement
and the Notes.
SECTION 5.2. Waiver by Borrower.
(a) To the extent permitted by Applicable Law, Borrower is
hereby deemed to have irrevocably waived:
(I) THE PROTECTION OF ANY STAY (AUTOMATIC OR OTHERWISE)
ARISING OUT OF OR IN CONNECTION WITH ANY PROCEEDINGS FOR THE
REORGANIZATION OR LIQUIDATION OF BORROWER UNDER THE BANKRUPTCY CODE OR
OTHERWISE OF THE EXERCISE BY LENDERS OR AGENT OF RIGHTS AND REMEDIES
UNDER THE OPERATIVE DOCUMENTS; AND
(II) ANY RIGHT THAT BORROWER MIGHT OTHERWISE HAVE TO ENJOIN,
LIMIT OR
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RESTRICT THE GOOD FAITH EXERCISE OF SUCH RIGHTS AND REMEDIES.
(b) To the extent permitted by Applicable Law, Lenders and
Agent are hereby expressly relieved from any obligation to comply with any such
stay which might otherwise affect their exercise at any time of such rights and
remedies.
ARTICLE VI
LOAN EVENTS OF DEFAULT; REMEDIES
SECTION 6.1. Loan Events of Default. Each of the following events shall
constitute a "Loan Event of Default" (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 governmental authority) and each such Loan Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
(a) Borrower shall fail to pay any principal of or interest on
any Note when due and such failure shall continue for a period of 3 Business
Days; or
(b) the failure by Borrower in any material respect to timely
perform any other covenant or condition herein or in any other Operative
Document to which Borrower is a party and such failure shall continue for a
period of 30 days after written notice thereof to Borrower and Lessee from
Agent; or
(c) any representation or warranty by Borrower in any
Operative Document or in any certificate or document delivered thereunder shall
have been incorrect in a material respect when made and shall remain material
when discovered and if curable shall continue for a period of 30 days after
written notice thereof to Borrower and Lenders from Agent; or
(d) the filing by Borrower of any petition for dissolution or
liquidation of Borrower; or the commencement by Borrower of a voluntary case
under any applicable bankruptcy, insolvency or other similar law for the relief
of debtors, foreign or domestic, now or hereafter in effect; or Borrower shall
have consented to the entry of an order for relief in an involuntary case under
any such law; or the failure of Borrower generally to pay, or the admission by
Borrower in writing that it is unable to pay, its debts as such debts become due
(within the meaning of the Bankruptcy Code); or the failure by Borrower promptly
to satisfy or discharge any execution, garnishment or attachment of such
consequence as will impair its ability to carry out its obligations under the
Operative Documents; or the appointment of or taking possession by a receiver,
custodian or trustee (or other similar official) for Borrower or any substantial
part of its property; or a general assignment by Borrower for the benefit of
creditors; or the entry by Borrower into an agreement of composition with its
creditors; or Borrower shall have taken any corporate action in furtherance of
any of the foregoing; or the filing against Borrower of an involuntary petition
in bankruptcy which results in an order for relief being entered or,
notwithstanding that an order for relief has not been entered, the petition is
not dismissed within 60 days of the date of the filing of the petition; or the
filing under any law relating to bankruptcy, insolvency or relief of debtors of
any petition against Borrower which either (i) results in a finding or
adjudication of insolvency of Borrower or (ii) is not dismissed within 60 days
of the date of the filing of such petition; or
(e) a Lease Event of Default shall occur and be continuing.
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<PAGE> 13
SECTION 6.2. Remedies.
(a) Upon the occurrence of a Loan Event of Default hereunder,
(i) if such event is a Loan Event of Default specified in clause (d) of Section
6.1 or clauses (f) or (g) of Section 10.1 of the Lease, automatically the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Loan Agreement and the Notes shall immediately become due and payable, and (ii)
if such event is any other Loan Event of Default, upon the written instructions
of the Required Lenders, Agent shall, by notice of default to Borrower, declare
the Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Loan Agreement and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable; provided that the
sole remedies of Agent upon the occurrence of a Loan Event of Default specified
in clause (b), (c) (but only to the extent the representation was made in
Borrower's individual capacity) or (d) of Section 6.1 that does not also
constitute a Lease Event of Default shall be to cause Lenders to remove and
replace Borrower as Trustee and to bring suit against Borrower for damages.
Except as expressly provided above in this Article VI, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
(b) Upon the occurrence of any Loan Event of Default and at
any time thereafter so long as any Loan Event of Default shall be continuing,
subject to Applicable Law, Agent may, and upon the written instructions of the
Required Lenders shall, exercise any or all of the rights and powers and pursue
any and all of the remedies available to it hereunder and (subject to the terms
thereof) under the other Operative Documents, the Lease and the Guaranty and
shall have and may exercise any and all rights and remedies available under the
Uniform Commercial Code or any provision of law.
(c) Upon the occurrence of any Loan Event of Default and at
any time thereafter so long as any Loan Event of Default shall be
continuing, subject to Applicable Law, Agent may proceed to protect and enforce
this Loan Agreement, the Notes, the other Operative Documents, the Lease and the
Guaranty by suit or suits or proceedings in equity, at law or in bankruptcy, and
whether for the specific performance of any covenant or agreement herein
contained or in execution or aid of any power herein granted, or for foreclosure
hereunder, or for the appointment of a receiver or receivers for the Equipment,
or for the recovery of judgment for the indebtedness secured thereby or for the
enforcement of any other proper, legal or equitable remedy available under
Applicable Law.
(d) Borrower shall be liable for any and all accrued and
unpaid amounts due hereunder before, after or during the exercise of any of the
foregoing remedies, including all reasonable legal fees and other reasonable
costs and expenses incurred by Agent or any Lender by reason of the occurrence
of any Loan Event of Default or the exercise of remedies with respect thereto.
(e) Except as expressly provided above, no remedy under this
Section 6.2 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy provided under this Section 6.2 or under the other
Operative Documents or otherwise available at law or in equity. The exercise by
Agent or any Lender of any one or more of such remedies shall not preclude the
simultaneous or later exercise of any other remedy or remedies. No express or
implied waiver by Agent or any Lender of any Loan Event of Default shall in any
way be, or be construed to be, a waiver of any future or subsequent Loan Event
of Default. The failure or delay of Agent or any Lender in exercising any rights
granted it hereunder upon any occurrence
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<PAGE> 14
LOAN AGREEMENT
of any of the contingencies set forth herein shall not constitute a waiver of
any such right upon the continuation or recurrence of any such contingencies or
similar contingencies and any single or partial exercise of any particular right
by Agent or any Lender shall not exhaust the same or constitute a waiver of any
other right provided herein.
(f) No failure to exercise and no delay in exercising, on the
part of Agent or any Lender, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
ARTICLE VII
AGENT
SECTION 7.1. Appointment and Authorization. Each Lender hereby
irrevocably (subject to Section 7.9) appoints, designates and authorizes Agent
to take such action on its behalf under the provisions of this Loan Agreement
and to exercise such powers and perform such duties as are expressly delegated
to Agent by the terms of this Loan Agreement and the other Operative Documents,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Loan Agreement or in
any other Operative Document, Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in any other
Operative Document, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Loan Agreement or any other Operative Document or otherwise exist against Agent.
SECTION 7.2. Delegation of Duties. Agent may execute any of its duties
under this Loan Agreement or any other Operative Document by or through agents
(including the Trust Company), employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
SECTION 7.3. Liability of Agent. None of Agent-Related Persons shall
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Loan Agreement or any other Operative Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct or as otherwise provided in the Security Agreement), or (ii) be
responsible in any manner to any of Lenders for any recital, statement,
representation or warranty made by Borrower or any Subsidiary or Affiliate of
Borrower, or any officer thereof, contained in this Loan Agreement or in any
other Operative Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by Agent under or in
connection with, this Loan Agreement or any other Operative Document, or for the
value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Loan Agreement or any other
Operative Document, or for any failure of Borrower or any other party to any
Operative Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Loan Agreement or any other Operative
Document, or to inspect the
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<PAGE> 15
LOAN AGREEMENT
properties, books or records of Borrower or any of Borrower's Subsidiaries or
Affiliates.
SECTION 7.4. Reliance by Agent.
(a) Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower),
independent accountants and other experts selected by Agent. Agent shall be
fully justified in failing or refusing to take any action under this Loan
Agreement or any other Operative Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Loan
Agreement or any other Operative Document in accordance with a request and any
action taken upon consent of the Required Lenders and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of
Lenders.
(b) Each Lender that has executed this Loan Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to Lender.
SECTION 7.5. Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Loan Default or Loan Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to Agent directly for the account of Lenders,
unless Agent shall have received written notice from a Lender or Lessee
referring to this Loan Agreement, describing such Loan Default or Loan Event of
Default and stating that such notice is a "notice of default." Agent will notify
Lenders of its receipt of any such notice. Agent shall take such action with
respect to such Loan Default or Loan Event of Default as may be requested by the
Required Lenders; provided, however, that unless and until Agent has received
any such request, Agent may (but shall not be obligated to) take such action
regarding such Loan Default or Loan Event of Default as it shall deem advisable
or in the best interest of Lenders.
SECTION 7.6. Credit Decision. Each Lender acknowledges that none of
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Parent,
Lessee and its Subsidiaries, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of any investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Parent, Lessee and its Subsidiaries, the value of and title to any Collateral,
and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Loan Agreement
and to extend credit to Borrower and Lessee hereunder. Each Lender also
represents that it will independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this
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<PAGE> 16
LOAN AGREEMENT
Loan Agreement and the other Operative Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Lessee and Parent. Except for notices, reports and other
documents expressly herein required to be furnished to Lenders by Agent, Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Lessee and Parent which may
come into the possession of any of Agent-Related Persons.
SECTION 7.7. Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, Lenders shall indemnify upon demand any
Agent-Related Person (to the extent not reimbursed by or on behalf of Lessee and
without limiting the obligation of Lessee to do so), pro rata, from and against
any and all Indemnified Liabilities; provided, however, that no Lender shall be
liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including attorney costs) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Loan
Agreement, any other Operative Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed for such expenses
by or on behalf of Borrower. The undertaking in this Section shall survive the
payment of all obligations hereunder and the resignation or replacement of
Agent.
SECTION 7.8. Agent in Individual Capacity. Heller Financial Leasing,
Inc. and its Affiliates may make loans to, issue letters of credit for the
account of, acquire equity interests in and generally engage in any kind of
business with Parent, its Subsidiaries and Affiliates as though Heller Financial
Leasing, Inc. were not Agent hereunder and without notice to or consent of
Lenders. The Lenders acknowledge that, pursuant to such activities, Heller
Financial Leasing, Inc. or its Affiliates may receive information regarding
Parent or its Affiliates (including information that may be subject to
confidentiality obligations in favor of Parent or such Affiliate) and
acknowledge that Agent shall be under no obligation to provide such information
to them. With respect to its Loans, Heller Financial Leasing, Inc. shall have
the same rights and powers under this Loan Agreement as any other Lender and may
exercise the same as though it were not Agent, and the terms "Lender" and
"Lenders" include Heller Financial Leasing, Inc. in its individual capacity.
SECTION 7.9. Successor Agent. Agent may, and at the request of the
Required Lenders shall, resign as Agent upon 30 days' notice to Lenders. If
Agent resigns under this Agreement, the Required Lenders shall appoint from
among Lenders a successor agent for Lenders. If no successor agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with Lenders and Borrower, a successor agent from among
Lenders. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions. of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement. If no successor agent
has accepted appointment as Agent by
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<PAGE> 17
LOAN AGREEMENT
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Required Lenders appoint an successor agent as provided for
above.
SECTION 7.10. Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Lender claims exemption from, or
a reduction of U.S. withholding tax under Sections 1441 or 1442 of the Code,
such Lender agrees with and in favor of Agent, to deliver to Agent:
(I) IF SUCH LENDER CLAIMS AN EXEMPTION FROM, OR A REDUCTION
OF, WITHHOLDING TAX UNDER A UNITED STATES TAX TREATY, PROPERLY
COMPLETED IRS FORMS 1001 AND W-8 BEFORE THE PAYMENT OF ANY INTEREST IN
THE FIRST CALENDAR YEAR AND BEFORE THE PAYMENT OF ANY INTEREST IN EACH
THIRD SUCCEEDING CALENDAR YEAR DURING WHICH INTEREST MAY BE PAID UNDER
THIS LOAN AGREEMENT;
(II) IF SUCH LENDER CLAIMS THAT INTEREST PAID UNDER THIS LOAN
AGREEMENT IS EXEMPT FROM UNITED STATES WITHHOLDING TAX BECAUSE IT IS
EFFECTIVELY CONNECTED WITH A UNITED STATES TRADE OR BUSINESS OF SUCH
LENDER, TWO PROPERLY COMPLETED AND EXECUTED COPIES OF IRS FORM 4224
BEFORE THE PAYMENT OF ANY INTEREST IS DUE IN THE FIRST TAXABLE YEAR OF
SUCH LENDER AND IN EACH SUCCEEDING TAXABLE YEAR OF SUCH LENDER DURING
WHICH INTEREST MAY BE PAID UNDER THIS LOAN AGREEMENT; AND
(III) SUCH OTHER FORM OR FORMS AS MAY BE REQUIRED UNDER THE
CODE OR OTHER LAWS OF THE UNITED STATES AS A CONDITION TO EXEMPTION
FROM, OR REDUCTION OF, UNITED STATES WITHHOLDING TAX.
Such Lender agrees to promptly notify Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the obligations of Borrower to such Lender, such Lender agrees to
notify Agent of the percentage amount in which it is no longer the beneficial
owner of obligations of Borrower to such Lenders. To the extent of such
percentage amount, Agent will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
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<PAGE> 18
LOAN AGREEMENT
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or deduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify Agent fully for all amounts paid, directly
or indirectly, by and including any taxes imposed by any jurisdiction on the
amounts payable to Agent under this Section, together with all costs and
expenses (including attorney costs and the allocated cost of internal legal
counsel services and all disbursements of internal counsel). The obligation of
Lenders under this subsection shall survive the payment of all obligations and
the resignation or replacement of Agent.
SECTION 7.11. Concerning the Trust Estate.
(a) Agent accepts the agency applicable to it and agrees to
cause the Trust Company (or its successor) to receive all payments and proceeds
pursuant to the Operative Documents and disburse such payments or proceeds in
accordance with the Operative Documents.
(b) Upon discharge of the indebtedness secured by the Security
Documents or security interest or Lien provided therein, Agent shall execute and
deliver, at Lessee's cost and expense, such satisfactions and terminations of
said Liens as may be required. Upon satisfaction of the Lien or security
interest provided for in any such instrument, such instrument shall be deemed
withdrawn from the Collateral.
(c) In the event that the Required Lenders shall notify Agent
that an event of default under a security instrument has occurred, Agent shall
take such action with respect thereto as the Required Lenders may require by
written instructions, but Agent shall not be required to take any action not
expressly set forth in such written instructions.
(d) Agent shall not have any duty or obligation to manage,
operate, control, use, sell, dispose of or otherwise deal with the Equipment or
any other part of the Collateral or to otherwise take or refrain from taking any
action under, or in connection with, the security instruments, except as
expressly provided by the terms of this Loan Agreement or as expressly provided
in written instructions from the Required Lenders received pursuant to the terms
of Section 7.11(c) hereof.
(e) Except in accordance with written instruction furnished
pursuant to Section 7.11(c) hereof, and without limiting the generality of
Section 7.11(d) hereof, Agent shall have no duty (i) to see to any recording,
filing or depositing of any security instrument or amendment thereof, (ii) to
see to any insurance on the Equipment or to effect or maintain any such
insurance, (iii) to see to the payment or discharge of any tax, assessment, or
other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust Estate or
Collateral, (iv) to confirm or verify any notices or reports of Lessee other
than to furnish (to the extent not otherwise furnished) Lenders with a copy of
each notice or report furnished to Agent by Lessee pursuant to a security
instrument or (v) to inspect the Equipment at any time or ascertain or inquire
as to the performance or observance of Lessee's covenants under any security
instrument.
(f) In accepting the agency hereby created, Agent acts solely
as Agent hereunder and not in its individual capacity, and all persons, other
than Lenders, having any claim against Agent by reason of the transactions
contemplated hereby shall look only to the
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<PAGE> 19
LOAN AGREEMENT
Trust Estate for payment or satisfaction thereof.
(g) The agency created hereby shall be terminated by notice
given by Agent to Lenders at any time upon the final disposition of all
Collateral and the final distribution by Agent of all monies or other property
or proceeds received pursuant to the Operative Documents in accordance with
their terms.
SECTION 7.12. Distribution and Receipt of Payments by Trust Company.
Agent, for the benefit of Lenders, hereby appoints the Trust Company as the
agent of Lenders for purposes of receiving proceeds of Advances, payments under
the Lease and making distributions to Lenders, Lessee and other Persons under
this Loan Agreement. Agent may at any time by notice in writing terminate the
Trust Company's appointment hereby as agent of collection and payment of the
payments under the Lease, in which event Lessee, upon receipt of copy of such
notice, shall pay any and all payments payable to Agent hereunder and under the
other Operative Documents directly to Agent at the account set forth in Schedule
III of the Participation Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Amendments and Waivers. Neither this Loan Agreement, any
Note nor any terms hereof or thereof may be amended, supplemented or modified
except in accordance with the provisions of the Participation Agreement.
SECTION 8.2. Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be delivered in accordance with, and shall be deemed to have been
given as provided in, Section 9.3 of the Participation Agreement; provided, that
any notice, request, demand or other communication to or upon Agent or Lenders
pursuant to Section 2.3 shall not be effective until received.
SECTION 8.3. Successors and Assigns; Transfers and Participations.
(a) This Loan Agreement shall be binding upon and inure to the
benefit of Borrower, Lenders, Agent, all future holders of the Notes and their
respective successors and assigns.
(b) Any transfer by a Lender of its Note or any sale by a
Lender of any participating interest in the Loans evidenced by its Note shall
comply with Sections 6.2, 6.3 and 6.4 of the Participation Agreement. Any Lender
transferring its Note shall pay, or cause the transferee to pay, the costs and
expenses (including reasonable counsel fees) incurred by Agent in connection
with such transfer.
SECTION 8.4. Counterparts. This Loan Agreement may be executed by one
or more of the parties to this Loan Agreement on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Loan
Agreement signed by all the parties hereto shall be lodged with Borrower and
Agent.
SECTION 8.5. GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTES HAVE BEEN
DELIVERED IN, AND THIS LOAN AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTES SHALL IN ALL
RESPECTS BE GOVERNED
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<PAGE> 20
LOAN AGREEMENT
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, EXCLUDING
CHOICE OF LAWS AND CONFLICT OF LAWS RULES OF SUCH STATE.
SECTION 8.6. Survival and Termination of Agreement. All covenants,
agreements, representations and warranties made herein and in any certificate,
document or statement delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Loan Agreement and the Notes and
shall continue in full force and effect so long as any Note or any amount
payable to any Lender under or in connection with this Loan Agreement or the
Notes is unpaid, at which time this Loan Agreement shall terminate, it being
expressly understood that the obligations of Borrower, as the case may be, to
Agent and each Lender under Article II and the obligations of Lenders to Agent
under Section 7.7 shall survive the payment in full of the Notes.
SECTION 8.7. Entire Agreement. This Loan Agreement sets forth the
entire agreement of the parties hereto with respect to its subject matter, and
supersedes all previous understandings, written or oral, with respect thereto.
SECTION 8.8. Severability. Any provision of this Loan Agreement or of
the Notes which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or thereof or affecting the validity, enforceability
or legality of any such provision in any other jurisdiction.
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LOAN AGREEMENT
[Signature pages follow]
116
<PAGE> 22
LOAN AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
FIRST SECURITY TRUST
COMPANY OF NEVADA, not in
its individual capacity,
except as expressly
provided herein, but solely
as Trustee and as Borrower
By:
Name:
Title:
117
<PAGE> 23
LOAN AGREEMENT
HELLER FINANCIAL LEASING, INC., as
Agent and as Lender
By:
Name: Clifford A. Lehman
Title: Senior Vice President
A-118
<PAGE> 24
LOAN AGREEMENT
PHOENIXCOR, INC., as Lender
By:
Name:
Title:
A-119
<PAGE> 25
LOAN AGREEMENT
SCHEDULE I
TO
LOAN AGREEMENT
LENDERS
<TABLE>
<CAPTION>
Lenders Commitment Commitment
Percentage
<S> <C> <C>
Heller Financial Leasing, Inc. $ 8,000,000 80
Phoenixcor, Inc. 2,000,000 20
TOTAL $ 10,000,000 100%
</TABLE>
<PAGE> 26
LOAN AGREEMENT
EXHIBIT A
TO LOAN AGREEMENT
FORM OF NOTE
NOTE NO. ___
U.S. $___________
Dated May __, 1999
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY TRUST COMPANY OF
NEVADA, not in its individual capacity but solely as Trustee under the Trust
Agreement for Lenders named therein ("Borrower"), promises to pay to the order
of [NAME OF LENDER), ("Lender"), the principal sum of $ United
States Dollars or, if less, the aggregate unpaid principal amount of all Loans
made by Lender to, or for the benefit of, Borrower, or purchased by Lender, as
recorded either on the grid attached to this Note or in the records of Lender;
provided, however, that the failure to make any such recordation or any error in
such recordation shall not in any way affect Borrower's obligation to repay this
Note. The principal amount of each Loan evidenced hereby shall be payable on or
prior to the Final Maturity Date as provided in that certain Loan Agreement,
dated as of May 28, 1999, among Borrower, Heller Financial Leasing, Inc., a
Delaware corporation, as agent ("Agent"), and the various lenders named therein
(the "Loan Agreement").
Borrower also promises to pay interest, on the unpaid principal amount
hereof from time to time outstanding at the rates per annum, on the dates
specified in, and in accordance with the terms of the Loan Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by Lender pursuant to the Loan Agreement.
This Note is one of the Notes referred to in, and evidences indebtedness
incurred under, the Loan Agreement, to which reference is made for a statement
of the terms and conditions on which Borrower is required to make prepayments
and repayments of principal of the indebtedness evidenced by this Note and on
which such indebtedness may be declared to be immediately due and payable.
Capitalized terms used herein without definition shall have the meanings
provided in the Loan Agreement. This Note is secured pursuant to the Security
Documents made by Borrower in favor of Agent referred to in the Loan Agreement
and reference is hereby made to the Loan Agreement and such Security Documents
for a statement of the terms and provisions of such security.
Anything to the contrary herein notwithstanding, Borrower's liability for
any sums due hereunder shall be limited in accordance with Section 2.8 of the
Loan Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest, and notice of dishonor, notice
of the existence, creation or nonpayment of all or any of the Loans and all
other notices whatsoever.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEVADA EXCLUDING ALL CHOICE OF LAWS AND CONFLICT OF LAWS RULES OF
SUCH STATE.
[signature page follows)
<PAGE> 27
LOAN AGREEMENT
IN WITNESS WHEREOF, Trustee has caused this Note to be executed in its
corporate name by its duly authorized officer as of the date hereof.
FIRST SECURITY TRUST COMPANY OF NEVADA,
not in its individual capacity but solely as
Trustee, as Borrower
By:
Name:
Title:
A-122
<PAGE> 28
LOAN AGREEMENT
A-4
<PAGE> 29
LOAN AGREEMENT
GRID ATTACHED TO NOTE
DATED MAY , 1999 OF
--
FIRST SECURITY TRUST COMPANY OF NEVADA
AS TRUSTEE
PAYABLE TO THE ORDER OF [INSERT LENDER'S NAME]
Loans made by Lender to Trustee, as Borrower, and payments of principal of such
Loans.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Principal Principal Amount Interest
Amount Bearing paid
--------------- -------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest
Date Advances Period Base Rate LIBO Rate Base LIBO Principal Notation
(If Applicable) Rate Rate Amount Total Made By
- --------- ---------------- ----------------------- -------------- ---------- --------- --------- ------------ --------------
- --------- ---------------- ----------------------- -------------- ---------- --------- --------- ------------ --------------
- --------- ---------------- ----------------------- -------------- ---------- --------- --------- ------------ --------------
- --------- ---------------- ----------------------- -------------- ---------- --------- --------- ------------ --------------
- --------- ---------------- ----------------------- -------------- ---------- --------- --------- ------------ --------------
- --------- ---------------- ----------------------- -------------- ---------- --------- --------- ------------ --------------
- --------- ---------------- ----------------------- -------------- ---------- --------- --------- ------------ --------------
</TABLE>
<PAGE> 30
LOAN AGREEMENT
AMORTIZATION SCHEDULE ATTACHED TO NOTE
DATED MAY __, 1999 OF
FIRST SECURITY TRUST COMPANY OF NEVADA
AS TRUSTEE
PAYABLE TO THE ORDER OF [INSERT LENDER'S NAME]
Principal
Date Repayment Amount
A-5
<PAGE> 1
- -------------------------------------------------------------------------------
EXHIBIT C TO PARTICIPATION AGREEMENT
FORM OF TRUST AGREEMENT
dated as of May 28, 1999
between
STRATOSPHERE GAMING CORP.,
as Grantor,
and
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Trustee
- -------------------------------------------------------------------------------
126
<PAGE> 2
TRUST AGREEMENT
TRUST AGREEMENT
THIS TRUST AGREEMENT (as amended and supplemented from time to time, this
"Trust Agreement") dated as of May 28, 1999, is entered into by and between
FIRST SECURITY TRUST COMPANY OF NEVADA, a Nevada trust company (in its
individual capacity, "Trust Company"; the Trust Company, not in its individual
capacity but solely as trustee, and any institution that shall act as a
successor trustee in accordance with the terms of Section 3.10, the "Trustee");
and Stratosphere Gaming Corp., as grantor ("Grantor"). For purposes hereof,
capitalized terms used in this Trust Agreement without specific definition
herein shall have the meanings assigned thereto in Appendix-1 to the
Participation Agreement, dated as of May 28, 1999, among the Trustee; the
Lenders identified therein; Grantor; Stratosphere Corporation, as Guarantor; and
Heller Financial Leasing, Inc., as Agent.
ARTICLE I
THE TRUST ESTATE
SECTION 1.1. Appointment, Authorization and Direction to Trustee. Grantor
hereby requests that Trust Company act as Trustee of the trust created hereunder
(the "Trust") and Trust Company hereby accepts its appointment as trustee of the
Trust, effective as of the date hereof. Lenders and Grantor authorize and direct
Trustee, subject to confirmation by Lenders of the satisfaction or waiver of all
appropriate conditions set forth in the Participation Agreement, to enter into,
execute and deliver:
(A) ON THE CLOSING DATE AND FROM TIME TO TIME THEREAFTER (INCLUDING ON THE
ADVANCE DATE), THE OPERATIVE DOCUMENTS TO WHICH THE TRUST OR TRUSTEE IS TO
BECOME A PARTY ON EACH SUCH DATE;
(B) FROM TIME TO TIME, THE NOTES IN THE MANNER AND SUBJECT TO THE TERMS AND
CONDITIONS PROVIDED IN THE PARTICIPATION AGREEMENT AND THE LOAN AGREEMENT; AND
(C) ALL OTHER DOCUMENTS, AND TO DO ALL SUCH THINGS AND TAKE ALL SUCH ACTIONS, AS
MAY BE NECESSARY OR CONVENIENT TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY
THE OPERATIVE DOCUMENTS AND TO PERFORM THE TERMS AND CONDITIONS OF THIS TRUST
AGREEMENT, ALL AS CONTEMPLATED HEREIN OR IN THE OPERATIVE DOCUMENTS.
SECTION 1.2. Declaration and Purpose.
(A) TRUSTEE HEREBY DECLARES, UNDERTAKES AND AGREES THAT IT WILL AND DOES
RECEIVE, TAKE AND HOLD ALL ESTATE, RIGHT, TITLE AND INTEREST OF TRUSTEE IN AND
TO THE TRUST ESTATE IN TRUST FOR THE USE AND BENEFIT OF GRANTOR.
(B) THE PURPOSE OF THE TRUST IS TO ACQUIRE AND HOLD TITLE TO THE EQUIPMENT AND
THE REMAINDER OF THE TRUST ESTATE AS COLLATERAL SECURITY FOR THE OBLIGATIONS OF
TRUSTEE UNDER THE LOAN AGREEMENT, TO DISCHARGE SUCH OBLIGATIONS IN ACCORDANCE
WITH THE PROVISIONS OF THE LOAN AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS AND
TO ENGAGE IN ACTIVITIES ANCILLARY AND INCIDENTAL THERETO AS SET FORTH IN THE
OPERATIVE DOCUMENTS AND AS PERMITTED BY APPLICABLE LAW. EXCEPT IN CONNECTION
WITH THE FOREGOING, TRUSTEE IN ITS CAPACITY AS TRUSTEE
127
<PAGE> 3
TRUST AGREEMENT
SHALL NOT (I) ENGAGE IN ANY BUSINESS OR ACTIVITY, (II) HAVE ANY PROPERTY, RIGHTS
OR INTEREST, WHETHER REAL OR PERSONAL, TANGIBLE OR INTANGIBLE, (III) INCUR ANY
LEGAL LIABILITY OR OBLIGATION, WHETHER FIXED OR CONTINGENT, MATURED OR
UNMATURED, OTHER THAN IN THE NORMAL COURSE OF THE ADMINISTRATION OF THE TRUST OR
(IV) SUBJECT ANY OF THE TRUST ESTATE TO ANY MORTGAGE, LIEN, SECURITY INTEREST OR
OTHER CLAIM OR ENCUMBRANCE, OTHER THAN IN FAVOR OF AGENT AND LENDERS PURSUANT TO
THE PROVISIONS OF THE OPERATIVE DOCUMENTS. THE TRUST IS NOT A BUSINESS TRUST.
THE SOLE PURPOSE OF THE TRUST IS TO ACQUIRE AND HOLD TITLE TO THE EQUIPMENT AND
TO COLLECT AND CONSERVE THE VALUE THEREOF AND OF THE TRUST ESTATE, SUBJECT TO
THE RIGHTS OF AGENT AND GRANTOR, FOR THE BENEFIT OF LENDERS. TRUSTEE MAY NOT
TRANSACT BUSINESS OF ANY KIND WITH RESPECT TO THE TRUST ESTATE NOR SHALL THIS
TRUST AGREEMENT BE DEEMED TO BE, OR CREATE OR EVIDENCE THE EXISTENCE OF A
CORPORATION DEFACTO OR DE JURE, OR A MASSACHUSETTS TRUST, OR ANY OTHER TYPE OF
BUSINESS TRUST, ASSOCIATION OR JOINT VENTURE BETWEEN TRUSTEE, AGENT AND LENDERS.
ARTICLE II
COLLECTIONS AND DISTRIBUTIONS
SECTION 2.1. Collections and Remittances by Trustee. Trustee agrees that,
subject to the provisions of this Trust Agreement, it will, during the term of
this Trust, administer the Trust Estate and, at the direction of Grantor, or if
the Loan Agreement has not been fully discharged Agent (the appropriate Person
permitted to give instructions being hereafter called the "Instructing Party")
may take steps to collect all sums payable to Trustee by Grantor or any other
Person under the Lease and the other Operative Documents. Trustee agrees to
distribute all proceeds received from the Trust Estate in accordance with the
Loan Agreement and Sections 2.2 and 2.3. Trustee shall make such distribution
promptly upon receipt of such proceeds (if such proceeds are available for
distribution) by Trustee, it being understood and agreed that Trustee shall not
be obligated to make such distribution until the funds for such distribution
have been received by Trustee in cash or its equivalent reasonably acceptable to
Trustee. All distributions to a Lender shall be made by Trustee to the order of
such Lender in the manner and at its address referred to in Section 9.3 of the
Participation Agreement.
SECTION 2.2. Distribution of Payments.
(A) PAYMENTS TO TRUSTEE FOR THE BENEFIT OF LENDERS AND AGENT. UNTIL THE LOAN
AGREEMENT SHALL HAVE BEEN FULLY DISCHARGED PURSUANT TO ITS TERMS, SUBJECT TO
APPLICABLE LAW, ALL RENT, INSURANCE PROCEEDS AND REQUISITION OR OTHER PAYMENTS
OF ANY KIND INCLUDED IN THE TRUST ESTATE (OTHER THAN EXCLUDED AMOUNTS) PAYABLE
TO AND RECEIVED BY TRUSTEE SHALL BE HELD BY TRUSTEE FOR THE BENEFIT OF LENDERS
AND AGENT FOR DISTRIBUTION IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE III OF
THE LOAN AGREEMENT; PROVIDED, HOWEVER, THAT ANY PAYMENTS RECEIVED BY TRUSTEE
FROM GRANTOR WITH RESPECT TO TRUSTEE'S FEES AND DISBURSEMENTS, OR PURSUANT TO
SECTION 5.1, SHALL BE RETAINED BY TRUSTEE AND APPLIED TOWARD THE PURPOSE FOR
WHICH SUCH PAYMENTS WERE MADE.
128
<PAGE> 4
TRUST AGREEMENT
(B) EXCLUDED AMOUNTS. ANY EXCLUDED AMOUNTS RECEIVED BY TRUSTEE AT ANY TIME SHALL
BE PROMPTLY PAID BY TRUSTEE TO THE PERSON TO WHOM SUCH EXCLUDED AMOUNTS ARE
PAYABLE UNDER THE PROVISIONS OF THE PARTICIPATION AGREEMENT OR ANY OTHER
OPERATIVE DOCUMENT.
SECTION 2.3. Effect of Sales by Trustee. Any sale of all or any part of the
Trust Estate by Trustee permitted hereunder shall bind Lenders and shall be
effective for the benefit of the purchasers thereof and their respective
successors and assigns to divest and transfer all right, title and interest
vested in Trustee or Lenders hereunder in the property so sold, and no purchaser
shall be required to inquire as to compliance by Trustee with any of the terms
hereof or to see to the application of any consideration paid for such property.
ARTICLE III
CERTAIN PROVISIONS RESPECTING TRUSTEE
SECTION 3.1. Acceptance of Trusts and Duties. Trust Company accepts the
trusts hereby created and agrees to perform the same as herein expressed and
agrees to receive and disburse all moneys constituting part of the Trust Estate
in accordance with the terms hereof.
SECTION 3.2. Limitation of Power. Trustee shall have no power, right, duty
or authority to manage, control, possess, use, sell, lease, dispose of or
otherwise deal with the Equipment or any other property at any time constituting
a part of the Trust Estate, or otherwise to take or refrain from taking any
action under or in connection with the Operative Documents, except (a) to
execute and deliver the Operative Documents to which Trustee is to be a party,
(b) to exercise and carry out or cause to be exercised and carried out the
rights, duties and obligations of Trustee hereunder, (c) to exercise and carry
out or cause to be exercised and carried out the rights, duties and obligations
of Trustee under the Operative Documents, (d) to receive, collect and distribute
and deal with the sums due under the Lease and with the Equipment and the
proceeds thereof as provided in the Lease, the Loan Agreement and in this Trust
Agreement, and (e) as expressly provided in written instructions from the
Instructing Party given pursuant to Section 3.3 or 3.4. Other than as expressly
provided in this Trust Agreement, Trustee shall not have the authority to make
management decisions relating to the Trust Estate and may take only ministerial
actions without consent of Agent. For purposes of this Trust Agreement neither
Grantor nor, if applicable, the Parent, shall have the right to direct Trustee
to exercise and carry out or cause to be exercised and carried out the rights,
duties and obligations of Trustee hereunder and under the Operative Documents
until the Loan Agreement and Notes have been paid and discharged in full.
SECTION 3.3. Notice of Event of Default. If a Responsible Officer of
Trustee has actual knowledge of a Lease Event of Default or Loan Event of
Default, Trustee shall give prompt written notice of such event to Lenders,
Grantor and Agent in the manner specified in Section 5.2. Subject to Section
3.4, Trustee shall take such action with respect to any such event as shall be
specified in written instructions from the Instructing Party. For all purposes
of this Trust Agreement and the Lease, in the absence of such actual knowledge,
Trustee shall not be deemed to have knowledge of a Lease Event of Default or a
Loan Event of Default unless any of its Responsible Officers is notified in
writing by a Lender or Agent. Trustee shall have no obligation and shall not
take any action in the event it receives no direction from the applicable
Instructing Party.
129
<PAGE> 5
TRUST AGREEMENT
SECTION 3.4. Action Upon Instructions. Subject to Sections 3.5, 3.6 and 5.1
and the Loan Agreement, upon the written instructions at any time and from time
to time of the Instructing Party, Trustee shall take such of the following
actions as may be specified in such instructions:
(A) GIVE SUCH NOTICE OR DIRECTION OR EXERCISE SUCH RIGHT OR POWER UNDER THE
LEASE OR ANY OTHER OPERATIVE DOCUMENT AS SHALL BE SPECIFIED IN SUCH
INSTRUCTIONS;
(B) APPROVE AS SATISFACTORY TO IT ALL MATTERS REQUIRED BY THE TERMS OF ANY
OPERATIVE DOCUMENT TO BE SATISFACTORY TO TRUSTEE;
(C) UPON EXPIRATION OF THE LEASE TERM AND DISCHARGE IN FULL OF THE LOAN
AGREEMENT AND THE NOTES PURSUANT TO ITS TERMS, CONVEY ALL OF TRUSTEE'S RIGHT,
TITLE AND INTEREST IN AND TO THE TRUST ESTATE (INCLUDING THE EQUIPMENT) TO
GRANTOR; AND
(D) ANY OTHER ACTION AS SPECIFIED BY THE INSTRUCTING PARTY.
SECTION 3.5. Certain Duties and Responsibilities of Trustee.
(A) EXCEPT DURING THE CONTINUANCE OF A LEASE EVENT OF DEFAULT OR A LOAN EVENT OF
DEFAULT:
(I) TRUSTEE UNDERTAKES TO PERFORM SUCH DUTIES AND ONLY SUCH
DUTIES AS ARE SPECIFICALLY SET FORTH HEREIN AND IN THE OTHER OPERATIVE
DOCUMENTS, AND NO IMPLIED COVENANTS OR OBLIGATIONS SHALL BE READ INTO
THIS TRUST AGREEMENT AGAINST TRUSTEE, AND TRUSTEE AGREES THAT IT SHALL
NOT, NOR SHALL IT HAVE A DUTY TO, MANAGE, CONTROL, USE, SELL, MAINTAIN,
INSURE, REGISTER, LEASE, OPERATE, MODIFY, DISPOSE OF OR OTHERWISE DEAL
WITH THE EQUIPMENT OR ANY OTHER PART OF THE TRUST ESTATE IN ANY MANNER
WHATSOEVER, EXCEPT AS REQUIRED BY THE OPERATIVE DOCUMENTS AND AS
OTHERWISE PROVIDED HEREIN; AND
(II) IN THE ABSENCE OF BAD FAITH OR GROSS NEGLIGENCE ON ITS
PART, 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 TRUSTEE AND CONFORMING TO THE
REQUIREMENTS OF THIS TRUST AGREEMENT.
(B) NO PROVISION OF THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, INCLUDING,
WITHOUT LIMITATION, ARTICLES VII AND VIII OF THE PARTICIPATION AGREEMENT, SHALL
BE CONSTRUED TO RELIEVE TRUST COMPANY IN ITS INDIVIDUAL CAPACITY OR TRUSTEE OF
LIABILITY FOR ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR ITS NEGLIGENCE IN
THE HANDLING OF FUNDS, IT BEING UNDERSTOOD THAT, WITHOUT LIMITING THE FOREGOING:
(I) TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT MADE
IN GOOD FAITH BY AN RESPONSIBLE OFFICER OF TRUSTEE, UNLESS IT SHALL BE
PROVED THAT TRUSTEE WAS GROSSLY NEGLIGENT;
(II) TRUSTEE SHALL NOT BE LIABLE WITH RESPECT TO ANY ACTION
TAKEN OR OMITTED TO BE TAKEN BY IT IN GOOD FAITH IN ACCORDANCE WITH THE
DIRECTION OF THE INSTRUCTING
130
<PAGE> 6
TRUST AGREEMENT
PARTY PURSUANT TO THE EXPRESS PROVISIONS HEREOF; IT BEING UNDERSTOOD
THAT TRUSTEE SHALL BE LIABLE IF IT TAKES ANY ACTION PURSUANT TO
INSTRUCTIONS FROM GRANTOR PRIOR TO RECEIVING NOTICE FROM AGENT THAT THE
LOAN AGREEMENT HAS BEEN DISCHARGED IN FULL PURSUANT TO ITS TERMS;
(III) NO PROVISION HEREOF SHALL REQUIRE TRUST COMPANY IN ITS
INDIVIDUAL CAPACITY TO EXPEND OR RISK ITS OWN FUNDS IN THE PERFORMANCE
OF ANY OF ITS DUTIES HEREUNDER OR UNDER ANY OF THE OTHER OPERATIVE
DOCUMENTS, OR IN THE EXERCISE OF ANY OF ITS RIGHTS OR POWERS; AND
(IV) TRUST COMPANY SHALL BE LIABLE FOR (A) ANY TAXES ON, WITH
RESPECT TO OR MEASURED BY ANY AMOUNTS PAID TO IT AS COMPENSATION FOR
SERVICES AS TRUSTEE HEREUNDER OR OTHERWISE UNDER THE OPERATIVE
DOCUMENTS, (B) ACTS OR OMISSIONS NOT RELATED TO THE TRANSACTIONS
CONTEMPLATED BY THE OPERATIVE DOCUMENTS, (C) THE INACCURACY OF
REPRESENTATIONS AND WARRANTIES MADE BY TRUST COMPANY IN ITS INDIVIDUAL
CAPACITY IN THE PARTICIPATION AGREEMENT OR ANY CERTIFICATE OR DOCUMENT
DELIVERED PURSUANT THERETO, AND (D) ITS NEGLIGENCE IN THE HANDLING OF
FUNDS.
(C) TRUSTEE SHALL NOT BE REQUIRED TO TAKE ANY ACTION HEREUNDER OR UNDER THE
OTHER OPERATIVE DOCUMENTS, NOR SHALL ANY OTHER PROVISION OF THIS TRUST AGREEMENT
OR ANY OTHER OPERATIVE DOCUMENT BE DEEMED TO IMPOSE A DUTY ON TRUSTEE TO TAKE
ANY ACTION, IF TRUSTEE DETERMINES, OR IS ADVISED BY COUNSEL, THAT SUCH ACTION IS
LIKELY TO RESULT IN PERSONAL LIABILITY OR IS CONTRARY TO APPLICABLE LAW OR THE
OPERATIVE DOCUMENTS.
(D) WHETHER OR NOT THEREIN EXPRESSLY SO PROVIDED, EVERY PROVISION OF THIS TRUST
AGREEMENT RELATING TO THE CONDUCT OR AFFECTING THE LIABILITY OF OR AFFORDING
PROTECTION TO TRUSTEE SHALL BE SUBJECT TO THE PROVISIONS OF THIS SECTION 3.5.
SECTION 3.6. Certain Rights of Trustee. Except as otherwise provided in
Section 3.5:
(A) TRUSTEE MAY RELY AND SHALL BE PROTECTED IN ACTING OR REFRAINING FROM ACTING
UPON ANY SIGNATURE, RESOLUTION, CERTIFICATE, STATEMENT, INSTRUMENT, OPINION,
REPORT, NOTICE, REQUEST, DIRECTION, CONSENT, ORDER OR OTHER PAPER OR DOCUMENT
REASONABLY BELIEVED BY IT TO BE GENUINE AND TO HAVE BEEN SIGNED OR PRESENTED BY
THE PROPER PARTY OR PARTIES;
(B) ANY REQUEST, DIRECTION OR AUTHORIZATION BY ANY PARTY HERETO OR TO ANY OTHER
OPERATIVE DOCUMENT SHALL BE SUFFICIENTLY EVIDENCED BY A REQUEST, DIRECTION OR
AUTHORIZATION IN WRITING, DELIVERED TO TRUSTEE AND SIGNED IN THE NAME OF SUCH
PARTY BY THE PRESIDENT, ANY VICE PRESIDENT, THE TREASURER OR THE SECRETARY OF
SUCH PARTY, AS THE CASE MAY BE, AND ANY RESOLUTION OF THE BOARD OF DIRECTORS OR
COMMITTEE THEREOF OF SUCH PARTY SHALL BE SUFFICIENTLY EVIDENCED BY A COPY OF
SUCH RESOLUTION CERTIFIED BY THE SECRETARY OR AN ASSISTANT SECRETARY OF SUCH
PARTY, AS THE CASE MAY BE, TO HAVE BEEN DULY ADOPTED AND TO BE IN FULL FORCE AND
EFFECT ON THE DATE OF SUCH CERTIFICATION, AND DELIVERED TO TRUSTEE;
(C) WHENEVER IN THE ADMINISTRATION OF THIS TRUST AGREEMENT TRUSTEE DEEMS IT
DESIRABLE THAT A MATTER BE PROVED OR ESTABLISHED BEFORE TAKING, SUFFERING OR
OMITTING ANY ACTION HEREUNDER, TRUSTEE MAY IN GOOD FAITH RELY UPON A CERTIFICATE
IN WRITING, DELIVERED TO
131
<PAGE> 7
TRUST AGREEMENT
TRUSTEE AND SIGNED BY THE PRESIDENT, ANY VICE PRESIDENT, ANY ASSISTANT VICE
PRESIDENT, THE TREASURER, ANY ASSISTANT TREASURER, THE SECRETARY OR ANY
ASSISTANT SECRETARY OF A LENDER;
(D) TRUSTEE MAY EXERCISE ITS POWERS AND PERFORM ITS DUTIES BY OR THROUGH SUCH
ATTORNEYS, AGENTS AND SERVANTS AS IT MAY APPOINT, AND IT SHALL NOT BE LIABLE FOR
THE CONDUCT OR MISCONDUCT OF SUCH ATTORNEYS, AGENTS AND SERVANTS, PROVIDED, THAT
TRUSTEE SHALL USE DUE CARE IN THE APPOINTMENT OF SUCH ATTORNEYS, AGENTS AND
SERVANTS; AND IT SHALL BE ENTITLED TO THE ADVICE OF COUNSEL AND SHALL BE
PROTECTED BY THE ADVICE OF SUCH COUNSEL IN ANYTHING DONE OR OMITTED TO BE DONE
IN ACCORDANCE WITH SUCH ADVICE IF SUCH ADVICE PERTAINS TO SUCH MATTERS AS
TRUSTEE MAY REASONABLY PRESUME TO BE WITHIN THE SCOPE OF SUCH COUNSEL'S AREA OF
EXPERTISE;
(E) TRUSTEE SHALL NOT BE UNDER ANY OBLIGATION TO EXERCISE ANY OF THE RIGHTS OR
POWERS VESTED IN IT BY THIS TRUST AGREEMENT AT THE REQUEST OR DIRECTION OF THE
INSTRUCTING PARTY, UNLESS THE INSTRUCTING PARTY OFFERS TO TRUSTEE REASONABLE
SECURITY OR INDEMNITY AGAINST THE COSTS, EXPENSES (INCLUDING REASONABLE FEES AND
EXPENSES OF ITS LEGAL COUNSEL) AND LIABILITIES WHICH MAY BE INCURRED BY IT IN
COMPLIANCE WITH SUCH REQUEST OR DIRECTION;
(F) PROVIDED NO RESPONSIBLE OFFICER HAS ACTUAL KNOWLEDGE OF THE INACCURACY
THEREOF, 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 OR OTHER PAPER OR DOCUMENT, BUT
TRUSTEE, IN ITS DISCRETION, MAY MAKE SUCH FURTHER INQUIRY OR INVESTIGATION INTO
SUCH FACTS OR MATTERS AS IT MAY SEE FIT, AND, IF TRUSTEE DETERMINES TO MAKE SUCH
FURTHER INQUIRY OR INVESTIGATION, IT SHALL BE ENTITLED TO EXAMINE THE BOOKS AND
RECORDS OF GRANTOR RELATED TO THE EQUIPMENT TO REASONABLY DETERMINE WHETHER
GRANTOR IS IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE LEASE AND TO
EXAMINE THE EQUIPMENT, BY AGENT OR ATTORNEY, ALL UPON THE TERN AND CONDITIONS
CONTAINED IN THE LEASE; AND
(G) WITHOUT LIMITING THE GENERALITY OF SECTION 3.5, TRUSTEE SHALL NOT HAVE ANY
DUTY (I) TO SEE TO ANY RECORDING OR FILING OF THE OPERATIVE DOCUMENTS OR ANY
UNIFORM COMMERCIAL CODE FINANCING STATEMENTS OR TO SEE TO THE MAINTENANCE OF ANY
SUCH RECORDING OR FILING, (II) TO SEE TO ANY INSURANCE ON THE EQUIPMENT OR TO
EFFECT OR MAINTAIN ANY SUCH INSURANCE, WHETHER OR NOT GRANTOR IS IN DEFAULT WITH
RESPECT THERETO, OTHER THAN TO FORWARD PROMPTLY TO LENDERS COPIES OF ALL
CERTIFICATES, REPORTS AND OTHER WRITTEN INFORMATION IT RECEIVES FROM GRANTOR
PURSUANT TO THE LEASE (UNLESS LENDERS ARE TO RECEIVE SUCH CERTIFICATES, REPORTS
AND OTHER WRITTEN INFORMATION DIRECTLY FROM GRANTOR), (III) TO SEE TO THE
PAYMENT OR DISCHARGE OF ANY TAX, ASSESSMENT OR OTHER GOVERNMENT CHARGE OR ANY
LIEN OWING WITH RESPECT TO, ASSESSED OR LEVIED AGAINST ANY PART OF THE TRUST
ESTATE, OTHER THAN LESSOR LIENS ATTRIBUTABLE TO IT, (IV) TO CONFIRM OR VERIFY
ANY FINANCIAL STATEMENTS OF GRANTOR OR ANY OTHER PERSON, OR (V) TO INSPECT THE
EQUIPMENT AT ANY TIME OR ASCERTAIN OR INQUIRE AS TO THE PERFORMANCE OR
OBSERVANCE OF ANY OF GRANTOR'S OR ANY OTHER PERSON'S (OTHER THAN ITS OR TRUST
COMPANY'S) COVENANTS UNDER THE OPERATIVE DOCUMENTS WITH RESPECT TO THE
EQUIPMENT.
SECTION 3.7. NO REPRESENTATIONS OR WARRANTIES AS TO THE
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<PAGE> 8
TRUST AGREEMENT
EQUIPMENT OR DOCUMENTS. TRUST COMPANY IS NOT A BUILDER, DEVELOPER OR
MANUFACTURER OF THE EQUIPMENT OR A DEALER IN OR VENDOR OF SIMILAR EQUIPMENT AND
HAS NOT INSPECTED THE EQUIPMENT BEFORE DELIVERY TO AND ACCEPTANCE BY GRANTOR.
TRUST COMPANY HAS NOT MADE NOR DOES IT MAKE (A) ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO ANY ENVIRONMENTAL MATTER OR CONDITION, VALUE, DESIGN,
OPERATION, CONDITION, QUALITY, DURABILITY, SUITABILITY, MERCHANTABILITY OR
FITNESS FOR USE OR FITNESS FOR A PARTICULAR PURPOSE, ABSENCE OF LATENT OR OTHER
DEFECTS WHETHER OR NOT DISCOVERABLE, ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT, OR ANY OTHER WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE EQUIPMENT, OR AS TO TITLE THERETO, OR (B) ANY REPRESENTATION
OR WARRANTY AS TO THE VALIDITY, LEGALITY OR ENFORCEABILITY OF THE OPERATIVE
DOCUMENTS (OTHER THAN AS TO THIS TRUST AGREEMENT AGAINST TRUST COMPANY), OR AS
TO THE CORRECTNESS OF ANY STATEMENT CONTAINED IN ANY THEREOF, EXCEPT AS SET
FORTH IN SECTION 4.3 OF THE PARTICIPATION AGREEMENT.
SECTION 3.8. Status of Moneys Received. All moneys received by Trustee or
Trust Company under or pursuant to this Trust Agreement or any other Operative
Document (other than Excluded Amounts to be paid to Trust Company) shall
constitute trust funds for the purpose for which they were paid or are held, but
need not be segregated in any manner from any other moneys and may be deposited
by Trustee under such conditions as may be prescribed or permitted by Applicable
Law for trust funds, or, at the direction of Agent may be invested in Cash
Equivalents.
SECTION 3.9. Permitted Activities. Trustee or any corporation in or with
which Trustee may be interested or affiliated or any officer or director of any
such corporation may have commercial relations and otherwise deal with Grantor
or any other Person or with any other corporation having relations with Grantor
to the full extent permitted by Applicable Law.
SECTION 3.10. Resignation or Removal of Trustee. Trust Company or any
successor thereto as Trustee may resign as Trustee at any time without cause by
giving at least 60 days' prior written notice to each Lender, Agent and Grantor,
and Agent may at any time remove Trustee without cause by an instrument in
writing delivered to Trustee, Agent and Grantor, such resignation or removal to
be effective on the later of the date specified in such notice or written
instrument or the date on which a successor trustee is appointed hereunder. With
the written consent of Agent and, so long as a Lease Event of Default shall not
have occurred and be continuing, Grantor, Agent may, at any time upon 30 days'
prior written notice to Agent and Grantor by an instrument in writing, appoint a
successor trustee; provided, however, that any successor trustee shall be a
national banking association authorized to do business in Nevada, a banking
corporation formed or regulated under the laws of Nevada or a wholly owned
subsidiary of such a banking association or corporation that is formed or
regulated under the laws of Nevada that has a combined capital and surplus of at
least $100,000,000, and provided, further, that the Nevada Gaming Commission
shall not have determined that such successor trustee is unsuitable. If Agent do
not appoint a successor trustee within 30 days after the giving of notice of
such resignation or removal, Agent or Trustee may apply to any court of
competent jurisdiction to appoint a successor trustee to act until a successor
or successors is appointed by Agent as above
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TRUST AGREEMENT
provided. Any successor trustee so appointed by such court shall immediately and
without further act be superseded by a successor trustee appointed by Agent
within one year from the date of the appointment by such court.
SECTION 3.11. Estate and Rights of Successor Trustee. Any successor
Trustee, whether appointed by Agent or a court, shall execute and deliver to the
predecessor Trustee an instrument accepting such appointment, and thereupon each
successor Trustee, without further act, shall become vested with all the
estates, properties, rights, powers, duties and trusts of the predecessor
Trustee in the trusts hereunder with like effect as if originally named Trustee
herein, but nevertheless upon the written request of such successor Trustee,
such predecessor Trustee shall execute and deliver an instrument transferring to
such successor Trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers and trusts of such predecessor Trustee, and such
predecessor Trustee shall duly assign, transfer, deliver and pay over to such
successor Trustee any property or moneys then held by such predecessor Trustee
upon the trusts herein expressed.
SECTION 3.12. Merger or Consolidation of Trustee. Any corporation into
which Trust Company serving as Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which Trust Company serving as Trustee is a party, or any corporation to which
substantially all of the business of Trustee may be transferred, shall be a
successor trustee under this Trust Agreement without further act.
SECTION 3.13. Co-Trustees. At any time, for the purpose of meeting any
legal requirements of any jurisdiction in which any part of the Trust Estate may
at the time be located, the Instructing Party and Trustee jointly shall have the
power, and shall execute and deliver all instruments, to appoint one or more
Persons approved by Agent and Trustee, to act as co-trustee, or co-trustees,
jointly with Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Estate, and to vest in such Person or Persons, in such
capacity, such title to the Trust Estate or any part thereof, and such rights,
powers, duties, trusts or obligations as Agent and Trustee may consider
necessary or desirable. If the Instructing Party has not joined in such
appointment within 15 days after the receipt by it of a request to do so,
Trustee alone shall have power to make such appointment. The Trustee shall not
be liable for any act or omission of any co-trustee or separate trustee
appointed under this Section 3.13.
SECTION 3.14. Books and Records. Trustee shall be responsible for keeping
the customary books and records relating to the receipt and disbursement of all
moneys actually received and disbursed by it.
ARTICLE IV
TERMINATION OF AND AMENDMENTS TO TRUST
SECTION 4.1. Termination. The Trust created and provided for hereby
shall cease and be terminated in any one of the following events, whichever
shall first occur:
(A) IF AGENT SHALL BY NOTICE IN WRITING TO TRUSTEE, LENDERS AND GRANTOR REVOKE
AND TERMINATE THE TRUST ON AND AS OF A DATE STATED IN SUCH NOTICE, WHICH DATE
SHALL NOT BE LESS THAN TEN NOR MORE THAN THIRTY DAYS FROM THE DATE OF MAILING
SUCH NOTICE, THEN ON THE DATE SPECIFIED IN SUCH NOTICE THE TRUST CREATED AND
PROVIDED FOR HEREBY SHALL CEASE AND TERMINATE, PROVIDED, HOWEVER, THAT THIS
TRUST SHALL NOT BE SUBJECT TO REVOCATION OR TERMINATION BY LENDERS PRIOR TO THE
PAYMENT IN FULL AND DISCHARGE OF THE LOANS AND ALL
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OTHER INDEBTEDNESS SECURED BY THE OPERATIVE DOCUMENTS AND THE TERMINATION OF THE
OPERATIVE DOCUMENTS AND THE RELEASE OF THE LIENS GRANTED THEREBY; OR
(B) THE SALE OR OTHER FINAL DISPOSITION BY TRUSTEE OF ALL PROPERTY CONSTITUTING
THE TRUST ESTATE AND THE FINAL DISPOSITION BY TRUSTEE OF ALL MONEYS OR OTHER
PROPERTY OR PROCEEDS CONSTITUTING PART OF THE TRUST ESTATE IN ACCORDANCE WITH
THE TEXT HEREOF AND SUBJECT TO ALL APPLICABLE LAW; PROVIDED, HOWEVER, THAT THE
TRUST ESTATE SHALL NOT BE SUBJECT TO SALE OR OTHER FINAL DISPOSITION BY TRUSTEE
PRIOR TO THE PAYMENT IN FULL AND DISCHARGE OF THE LOANS AND ALL OTHER
INDEBTEDNESS SECURED BY THE OPERATIVE DOCUMENTS AND THE RELEASE OF THE OPERATIVE
DOCUMENTS AND THE LIENS GRANTED THEREBY AND THE PAYMENT IN FULL OF THE
COMMITMENT AMOUNTS; OR
(C) 110 YEARS AFTER THE DATE HEREOF.
SECTION 4.2. Distribution of Trust Estate Upon Termination. Upon any
termination of this Trust pursuant to Section 4.1, Trustee shall convey the
Trust Estate to such purchaser or purchasers thereof or other Persons entitled
thereto and for such amount and on such terms as are specified in written
instructions from Agent delivered to Trustee before the date of termination;
provided that (a) if at the time of any termination the Lease remains in force
and effect, then the Trust Estate shall be conveyed as a unit subject to the
Lease and not in parcels, and (b) if such written instructions are not delivered
to Trustee on or before the date of termination, Trustee shall transfer title to
the Trust Estate to Lenders. Upon making such transfer or sale Trustee shall be
entitled to immediate receipt of any sums due and owing to Trustee, including,
without limitation, any expenses (including reasonable attorneys' fees and
expenses) incurred pursuant hereto or as compensation for services rendered
hereunder and not theretofore paid and Trustee shall be discharged and free of
any further liability hereunder subject to Section 3.5(c).
SECTION 4.3. Amendments. Subject to Section 5.8 hereof and Section 9.5
of the Participation Agreement, at any time and from time to time, upon the
written request of the Instructing Party, (i) Trustee shall execute a supplement
hereto for the purpose of adding provisions to, or changing or eliminating
provisions of, this Trust Agreement as specified in such request, and (ii)
Trustee shall enter into or consent to such written amendment of or supplement
to the other Operative Documents as Grantor or Agent, as the case may be, may
agree to and as may be specified in such request, or execute and deliver such
written waiver or modification of the terms of the Operative Documents as may be
specified in such request; provided, however, if in the reasonable opinion of
Trustee, any document required to be executed by it pursuant to this Section 4.3
adversely affects any right or duty of, or immunity or indemnity in favor of,
Trustee under this Trust Agreement or the other Operative Documents, Trustee may
in its reasonable discretion decline to execute such document.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Compensation and Indemnification. Trustee shall receive
reasonable compensation for its services hereunder from Grantor and shall be
reimbursed by Grantor for Trustee's reasonable fees and expenses (including the
reasonable disbursements and fees of
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TRUST AGREEMENT
counsel). If a Lease Event of Default or a Loan Event of Default shall have
occurred and be continuing and Trustee is required pursuant to this Trust
Agreement to take any action in connection therewith, it shall be reimbursed by
Grantor for any expenses it may incur in relation to taking any such action.
Grantor shall reimburse and indemnify and save Trustee harmless from and against
any and all losses, damages, liabilities, claims, actions, suits, obligations,
penalties, demands, disbursements and expenses, including taxes, counsel fees,
and including tort claims for which Trustee is strictly liable, which may be
asserted against or incurred by reason of Trust Company being Trustee or acting
as Trustee hereunder or under the other Operative Documents or the performance
or enforcement of any of the terms hereof, or arising out of or relating to this
Trust Agreement or the other Operative Documents or the Equipment, the Trust
Estate or the Rent and other sums payable therefor, or the building,
manufacture, purchase, installation, acceptance, rejection, ownership, delivery,
lease, possession, use, operation, condition, sale, return or other disposition
of the Equipment or in any way relating to or arising out of the Trust Estate or
the action or the inaction of Trustee hereunder or by reason of any occurrence
while so acting. In no event shall Grantor be so obligated in respect of any
such losses, damages, liabilities, claims, actions, suits, obligations,
penalties, demands, disbursements and expenses, including taxes and counsel fees
pursuant to this Section 5.1, arising from or as a result of (a) the willful
misconduct or gross negligence of Trust Company or the negligence of Trust
Company in handling of funds, (b) any taxes on, with respect to or measured by
any amounts paid to Trust Company as compensation for services as Trustee
hereunder or otherwise under the Operative Documents, or (c) the inaccuracy of
representations and warranties made by Trust Company in its individual capacity
in the Participation Agreement or in any certificate or documents delivered
pursuant thereto. The provisions of this Section 5.1 (other than the
requirements for compensation of Trustee after its resignation, which shall
terminate upon the resignation or removal of Trustee) shall continue in force
and effect notwithstanding the termination of this Trust, the resignation or
removal of Trustee or the obligation of any other party to any other Operative
Document to make any payment to Trustee which Grantor is required to make
pursuant to this Section 5.1.
SECTION 5.2. Notices. All notices and communications provided for herein
shall be in writing and shall be deemed to have been given in accordance with
Section 9.3 of the Participation Agreement. Trustee shall deliver to each Lender
promptly after receipt copies of all notices, certificates and reports delivered
to it pursuant to any Operative Document.
SECTION 5.3. GOVERNING LAW. THIS TRUST IS BEING CREATED IN THE STATE OF
NEVADA AND THE VALIDITY, CONSTRUCTION AND ALL RIGHTS UNDER THIS TRUST SHALL BE
GOVERNED BY THE LAWS OF THAT STATE, EXCLUDING ALL CHOICE OF LAWS AND CONFLICT OF
LAWS RULES OF SUCH STATE. IF ANY PROVISION OF THIS TRUST SHALL BE INVALID OR
UNENFORCEABLE, THE REMAINING PROVISIONS HEREOF SHALL CONTINUE TO BE FULLY
EFFECTIVE, PROVIDED THAT SUCH REMAINING PROVISIONS DO NOT INCREASE THE
OBLIGATIONS OR LIABILITIES OF TRUSTEE.
SECTION 5.4. Tax Reports: Information Reporting: Withholding Taxes. If any
tax report or tax return is required to be made by Trustee with respect to the
Trust Estate and Grantor is not required to prepare and file the same pursuant
to the Leases, each Lender will prepare such tax report or return in respect of
its interest in the Trust and deliver a copy thereof to Trustee. Trustee agrees
to promptly forward to each Lender any communications with respect to taxes
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TRUST AGREEMENT
pertaining to the Trust Estate received by Trustee from tax authorities or from
Grantor.
SECTION 5.5. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 5.6. Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the parties hereto
and their respective successors and assigns. Grantor may not assign, transfer or
otherwise dispose of its interest in the Trust, except as expressly contemplated
in the Operative Documents.
SECTION 5.7. Severability. Any provision of this Trust Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition on unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
SECTION 5.8. Only Written Waivers. No term or provision of this Trust
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party or other person against whom
enforcement of the change, waiver, discharge or termination is sought; and any
waiver of the terms hereof shall be effective only in the specific instance and
for the specific purpose given.
SECTION 5.9. Counterparts. This instrument may be simultaneously executed
in any number of counterpart, each of which when so executed shall be deemed to
be an original, and such counterparts together shall constitute and be one and
the same instrument.
SECTION 5.10. Rights in Trust Agreement. Except as expressly provided to
the contrary in the Operative Documents, nothing in this Trust Agreement,
whether express or implied, shall be construed to give any Person other than
Trustee and each Lender and their respective successors and assigns, any legal
or equitable right, remedy or claim under or in respect of this Trust Agreement.
SECTION 5.11. Payment of Trustee Fees, Costs and Expenses. Grantor shall
pay to Trustee for its services hereunder such fees and expenses as heretofore
have been agreed upon by Trustee and Grantor and shall also pay to Trustee such
fees and expenses as may be reasonably incurred by Trustee as a result of taking
any direction of the Instructing Party. Trustee agrees that it shall have no
right against Lenders or Agent for any fee as compensation for its services
hereunder, except as hereafter expressly agreed upon by Lenders, Agent and
Trustee.
SECTION 5.12. Identification of Trust. The name of the trust created hereby
is the STRATOSPHERE 1999-1 TRUST.
(Signature page follows]
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TRUST AGREEMENT
IN WITNESS WHEREOF, Trust Company and Grantor have caused this Trust
Agreement to be duly executed all as of the day and year first above written.
FIRST SECURITY TRUST COMPANY OF NEVADA, as
Trust Company and as Trustee
By:
-------------------------------
Name:
Title:
STRATOSPHERE GAMING CORP., as Grantor
By:
-------------------------------
Name: Thomas A. Lettero
Title: Vice President-Administration/
Chief Financial Officer
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SECURITY AGREEMENT
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SECURITY AGREEMENT
-----------------------------------------------------------------
EXHIBIT D TO PARTICIPATION AGREEMENT
FORM OF SECURITY AGREEMENT AND ASSIGNMENT OF LEASE
dated as of May 28, 1999
between
FIRST SECURITY TRUST COMPANY OF NEVADA,
not in its individual capacity but solely
as Trustee,
and
HELLER FINANCIAL LEASING, INC.,
as Agent
-----------------------------------------------------------------
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SECURITY AGREEMENT
SECURITY AGREEMENT AND ASSIGNMENT OF LEASE
THIS SECURITY AGREEMENT AND ASSIGNMENT OF LEASE (this "Security
Agreement"), dated as of May 28, 1999, is made by FIRST SECURITY TRUST COMPANY
OF NEVADA, not in its individual capacity but solely as Trustee ("Grantor")
under that certain Trust Agreement dated as of May 28, 1999, between
Stratosphere Gaming Corp. and Grantor, in favor of HELLER FINANCIAL LEASING,
INC., as Agent ("Agent") for the Lenders.
WITNESSETH:
WHEREAS, Grantor, Agent, Lenders, Guarantor and Stratosphere Gaming
Corp., a Nevada corporation, as Lessee ("Lessee"), have entered into that
certain Participation Agreement, dated as of May 28, 1999 (as amended, modified
or supplemented from time to time, the "Participation Agreement"); and
WHEREAS, concurrently herewith pursuant to the Participation Agreement,
(i) Grantor will obtain Loans from Lenders pursuant to the Loan Agreement, the
proceeds of which will be used to provide funding for the purchase of certain
items of Equipment, and (ii) Grantor, as lessor, and Lessee, as lessee, are
entering into the Lease; and
WHEREAS, it is a condition precedent to the consummation by Lenders of
the transactions to be consummated on each Advance Date that Grantor execute and
deliver this Security Agreement as security for Grantor's obligations under the
Loan Agreement; and
WHEREAS, it is in the best interests of Grantor that the transactions
contemplated by the Operative Documents occur; and
WHEREAS, Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce Lenders to
enter into the transactions contemplated by the Operative Documents, Grantor
agrees as follows. ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Collateral" is defined in Section 2.1.
"Secured Obligations" is defined in Section 2.2.
SECTION 1.2. Participation Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
Appendix 1 to the Participation Agreement.
SECTION 1.3. UCC Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the UCC are
used in this Security Agreement, including its preamble and recitals, with such
meanings.
ARTICLE II
SECURITY INTEREST
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SECTION 2.1. Grant of Security. Grantor hereby assigns and pledges to
Agent, and hereby grants to Agent, for the benefit of Lenders, a security
interest in and to all of the following, whether now existing or hereafter
arising or acquired (the "Collateral"):
(I) ALL OF GRANTOR'S RIGHT, TITLE AND INTEREST IN, TO AND UNDER EACH ITEM
OF EQUIPMENT;
(II) ALL OF GRANTOR'S RIGHT, TITLE AND INTEREST IN, TO AND UNDER EACH BILL
OF SALE AND EACH CERTIFICATE OF ACCEPTANCE;
(III) ALL OF GRANTOR'S RIGHT, TITLE AND INTEREST IN, TO AND UNDER THE
PARTICIPATION AGREEMENT AND THE LEASE, INCLUDING THE SECURITY INTEREST GRANTED
THEREUNDER IN FAVOR OF GRANTOR AND INCLUDING ALL RIGHTS TO RECEIVE PAYMENTS
THEREUNDER (INCLUDING RENT) OTHER THAN EXCLUDED AMOUNTS;
(IV) ALL OF GRANTOR'S RIGHT, TITLE AND INTEREST IN, TO AND UNDER THE
GUARANTY, THE SECURITY DOCUMENTS AND THE OTHER OPERATIVE DOCUMENTS;
(V) ALL OF GRANTOR'S RIGHT, TITLE AND INTEREST IN, TO AND UNDER ANY AND ALL
CONTRACTS NECESSARY TO OPERATE AND MAINTAIN THE EQUIPMENT, OR ANY PORTION
THEREOF;
(VI) ALL BOOKS, RECORDS, WRITINGS, DATABASES, INFORMATION AND OTHER PROPERTY
RELATING TO, USED OR USEFUL IN CONNECTION WITH, EVIDENCING, EMBODYING,
INCORPORATING OR REFERRING TO, ANY OF THE FOREGOING; AND
(VII) ALL PRODUCTS, ACCESSIONS, RENTS, ISSUES, PROFITS, RETURNS, INCOME AND
PROCEEDS OF AND FROM ANY AND ALL OF THE FOREGOING COLLATERAL (INCLUDING PROCEEDS
WHICH CONSTITUTE PROPERTY OF THE TYPES DESCRIBED IN THE FOREGOING CLAUSES OF
THIS SECTION 2.1, PROCEEDS DEPOSITED FROM TIME TO TIME IN ANY LOCKBOXES OF
GRANTOR, AND, TO THE EXTENT NOT OTHERWISE INCLUDED, ALL PAYMENTS UNDER INSURANCE
(WHETHER OR NOT AGENT IS THE LOSS PAYEE THEREOF), OR ANY INDEMNITY, WARRANTY OR
GUARANTY PAYABLE BY REASON OF LOSS OR DAMAGE TO OR OTHERWISE WITH RESPECT TO ANY
OF THE FOREGOING COLLATERAL).
Grantor hereby assigns, transfers and conveys to Agent all payments
(except Excluded Amounts) payable by Lessee under the Lease.
SECTION 2.2. Security for Obligations. This Security Agreement secures
the payment of all obligations of Grantor now or hereafter existing under the
Notes, the Loan Agreement and any other Operative Document to which it is a
party, whether for principal, interest, costs, fees, expenses or otherwise, and
all other obligations of Grantor to Lenders howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent or now or
hereinafter existing or due or to become due (all such obligations being the
"Secured Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This
Security Agreement shall create a continuing security interest in the Collateral
and shall
(A) REMAIN IN FULL FORCE AND EFFECT UNTIL THE PAYMENT IN FULL OF ALL
SECURED OBLIGATIONS AND THE TERMINATION OF THE COMMITMENTS AND ANY OTHER
COMMITMENTS OF LENDERS TO OR FOR THE BENEFIT OF GRANTOR;
(B) BE BINDING UPON GRANTOR, ITS SUCCESSORS, TRANSFEREES AND ASSIGNS; AND
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SECURITY AGREEMENT
(C) INURE, TOGETHER WITH THE RIGHTS AND REMEDIES OF AGENT HEREUNDER, TO THE
BENEFIT OF AGENT AND ITS SUCCESSORS, TRANSFEREES AND ASSIGNS.
Without limiting the generality of the foregoing clause (c), each
transferee of a Note shall, upon such transfer, become vested with all the
rights and benefits in respect thereof granted under any Operative Document
(including this Security Agreement) or otherwise, subject, however, to any
contrary provisions in such assignment or transfer. Upon the payment in full and
performance of all Secured Obligations and the termination of the Commitments,
and any other commitments of Lenders to Grantor, the security interest granted
herein shall terminate and all rights to the Collateral shall revert to Grantor.
Upon any such termination, Agent will, on behalf of Lenders and at Grantor's
sole expense, execute and deliver to Grantor such documents as Grantor shall
reasonably request to evidence such termination.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(A) GRANTOR SHALL REMAIN LIABLE UNDER THE CONTRACTS AND
AGREEMENTS INCLUDED IN THE COLLATERAL TO THE EXTENT SET FORTH THEREIN, AND SHALL
PERFORM ALL OF ITS DUTIES AND OBLIGATIONS UNDER SUCH CONTRACTS AND AGREEMENTS TO
THE SAME EXTENT AS IF THIS SECURITY AGREEMENT HAD NOT BEEN EXECUTED;
(B) THE EXERCISE BY AGENT OF ANY OF ITS RIGHTS HEREUNDER SHALL NOT RELEASE
GRANTOR FROM ANY OF ITS DUTIES OR OBLIGATIONS UNDER ANY SUCH CONTRACTS OR
AGREEMENTS INCLUDED IN THE COLLATERAL; AND
(C) AGENT SHALL NOT HAVE ANY OBLIGATION OR LIABILITY UNDER ANY SUCH
CONTRACTS OR AGREEMENTS INCLUDED IN THE COLLATERAL BY REASON OF THIS SECURITY
AGREEMENT, NOR SHALL AGENT BE OBLIGATED TO PERFORM ANY OF THE OBLIGATIONS OR
DUTIES OF GRANTOR THEREUNDER OR TO TAKE ANY ACTION TO COLLECT OR ENFORCE ANY
CLAIM FOR PAYMENT ASSIGNED HEREUNDER.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Grantor represents and
warrants unto Agent as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. Grantor owns the Collateral
free and clear of any lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement, Permitted Liens and
Lessee's interest in the Lease.
SECTION 3.1.2. Validity, etc. This Security Agreement creates a valid
first priority security interest in the Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken. The Assigned
Agreements have been duly authorized, executed and delivered by the parties
thereto, have not been amended or otherwise modified, are in full force and
effect, and are binding upon and enforceable against the parties thereto in
accordance with their terms.
SECTION 3.1.3. Authorization, Approval, etc. No authorization, approval
or other action by, and no notice to or filing with, any Governmental Authority
is required either
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SECURITY AGREEMENT
(A) FOR THE GRANT BY GRANTOR OF THE SECURITY INTEREST GRANTED
HEREBY OR FOR THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS SECURITY AGREEMENT
BY GRANTOR; OR
(B) FOR THE PERFECTION OF OR THE EXERCISE BY AGENT OF ITS RIGHTS AND
REMEDIES HEREUNDER, EXCEPT FOR FILINGS SPECIFIED IN SCHEDULE IV TO THE
PARTICIPATION AGREEMENT.
SECTION 3.1.4. Compliance with Laws. Grantor is in compliance with all
Applicable Law of every Governmental Authority, the non-compliance with which
might have a material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid or Lenders
shall have any outstanding Commitments to Grantor, subject to all Applicable
Law, Agent may exercise, in its sole and absolute discretion, any and all rights
and powers set forth in this Section.
SECTION 4.1.1. As to Collateral.
(A) AGENT MAY, AT THE EXPENSE OF GRANTOR, ENDEAVOR TO COLLECT, AS AND WHEN
DUE, ALL AMOUNTS DUE WITH RESPECT TO ANY OF THE COLLATERAL. AGENT, AS ASSIGNEE
HEREUNDER OF THE LEASE, MAY, AT ANY TIME, ENFORCE COLLECTION OF ANY OF THE
COLLATERAL BY SUIT OR OTHERWISE AND SURRENDER, RELEASE, OR EXCHANGE ALL OR ANY
PART THEREOF, OR COMPROMISE OR EXTEND OR RENEW FOR ANY PERIOD (WHETHER OR NOT
LONGER THAN THE ORIGINAL PERIOD) ANY INDEBTEDNESS THEREUNDER OR EVIDENCED
THEREBY,
(B) AGENT IS AUTHORIZED TO ENDORSE, IN THE NAME OF GRANTOR, ANY ITEM,
HOWSOEVER RECEIVED BY AGENT, REPRESENTING ANY PAYMENT ON OR OTHER PROCEEDS OF
ANY OF THE COLLATERAL.
(C) IF A LEASE DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THEN AGENT,
AS ASSIGNEE HEREUNDER OF THE LEASE MAY DECLARE, IN ITS SOLE AND ABSOLUTE
DISCRETION, A LEASE EVENT OF DEFAULT AND MAY, IN ITS SOLE AND ABSOLUTE
DISCRETION, EXERCISE ANY OR ALL OF THE RIGHTS AND POWERS AND PURSUE ANY OR ALL
OF THE REMEDIES OF LESSOR PURSUANT TO ARTICLE X OF THE LEASE.
SECTION 4.1.2. TRANSFERS AND OTHER LIENS. GRANTOR SHALL NOT:
(A) SELL, ASSIGN (BY OPERATION OF LAW OR OTHERWISE) OR OTHERWISE DISPOSE OF
ANY OF THE COLLATERAL;
(B) CANCEL OR TERMINATE THE ASSIGNED AGREEMENTS OR CONSENT TO OR ACCEPT ANY
CANCELLATION OR TERMINATION THEREOF;
(C) AMEND OR OTHERWISE MODIFY THE ASSIGNED AGREEMENTS OR GIVE ANY CONSENT,
WAIVER OR APPROVAL THEREUNDER, EXCEPT PURSUANT TO SECTION 9.8 OF THE
PARTICIPATION AGREEMENT;
(D) WAIVE ANY DEFAULT UNDER OR BREACH OF THE ASSIGNED AGREEMENTS;
(E) CREATE OR SUFFER TO EXIST ANY LIEN OR OTHER CHARGE OR ENCUMBRANCE UPON
OR WITH
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SECURITY AGREEMENT
RESPECT TO ANY OF THE COLLATERAL TO SECURE INDEBTEDNESS OF ANY PERSON OR
ENTITY, EXCEPT FOR THE SECURITY INTEREST CREATED BY THIS SECURITY AGREEMENT,
PERMITTED LIENS OR LESSEE'S INTEREST IN THE LEASE; OR
(F) TAKE ANY OTHER ACTION IN CONNECTION WITH THE ASSIGNED AGREEMENTS WHICH
WOULD IMPAIR THE VALUE OF THE INTEREST OR RIGHTS OF GRANTOR THEREUNDER OR WHICH
WOULD IMPAIR THE INTEREST OR RIGHTS OF AGENT.
SECTION 4.1.3. Further Assurances, etc. Grantor agrees that, from time
to time and at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that may be necessary or
desirable, or that Agent may request, in order to perfect, preserve and protect
any security interest granted or purported to be granted hereby or to enable
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Grantor will:
(A) EXECUTE AND FILE OR RECORD SUCH INSTRUMENTS OR NOTICES AS MAY BE
NECESSARY OR DESIRABLE, OR AS AGENT MAY REQUEST, IN ORDER TO PERFECT AND
PRESERVE THE SECURITY INTERESTS AND OTHER RIGHTS GRANTED OR PURPORTED TO BE
GRANTED TO AGENT HEREBY; AND
(B) FURNISH TO AGENT, FROM TIME TO TIME AT AGENT'S REQUEST, STATEMENTS AND
SCHEDULES FURTHER IDENTIFYING AND DESCRIBING THE COLLATERAL AND SUCH OTHER
REPORTS IN CONNECTION WITH THE COLLATERAL AS AGENT MAY REASONABLY REQUEST, ALL
IN REASONABLE DETAIL.
ARTICLE V
AGENT
SECTION 5.1. Agent Appointed Attorney-in-Fact. Subject to all
Applicable Law, Grantor hereby irrevocably appoints Agent as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor and in
the name of Grantor or otherwise, from time to time in Agent's discretion, after
the occurrence of a Loan Event of Default (subject to Section 6.2 of the Loan
Agreement) to take any action and to execute any instrument which Agent may deem
necessary or advisable to accomplish the purposes of this Security Agreement,
including, without limitation:
(A) TO ASK, DEMAND, COLLECT, SUE FOR, RECOVER, COMPROMISE, RECEIVE AND GIVE
ACQUITTANCE AND RECEIPTS FOR MONEYS DUE AND TO BECOME DUE UNDER OR IN RESPECT OF
ANY OF THE COLLATERAL;
(B) TO RECEIVE, ENDORSE, AND COLLECT ANY DRAFTS OR OTHER INSTRUMENTS,
DOCUMENTS AND CHATTEL PAPER, IN CONNECTION WITH CLAUSE (A) ABOVE;
(C) TO FILE ANY CLAIMS OR TAKE ANY ACTION OR INSTITUTE ANY PROCEEDINGS
WHICH AGENT MAY DEEM NECESSARY OR DESIRABLE FOR THE COLLECTION OF ANY OF THE
COLLATERAL OR OTHERWISE TO ENFORCE THE RIGHTS OF AGENT WITH RESPECT TO ANY OF
THE COLLATERAL; AND
(D) TO PERFORM THE AFFIRMATIVE OBLIGATIONS OF GRANTOR HEREUNDER (INCLUDING
ALL OBLIGATIONS OF GRANTOR PURSUANT TO SECTION 4.1.3).
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Grantor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled with an
interest.
SECTION 5.2. Agent May Perform. If Grantor fails to perform any
agreement contained herein, Agent may itself perform, or cause performance of,
such agreement, and the expenses of Agent incurred in connection therewith shall
be payable by Grantor pursuant to Section 6.2.
SECTION 5.3. Agent Has No Duty. In addition to, and not in limitation
of, Section 2.4, the powers conferred on Agent hereunder are solely to protect
Agent's interest in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for the reasonable care of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
Agent shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 5.4. Reasonable Care. Agent is required to exercise reasonable
care in the custody and preservation of any of the Collateral in its possession;
provided, however, that Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any of the Collateral if it takes such action
for that purpose as Grantor reasonably requests in writing at times other than
upon the occurrence and during the continuance of any Loan Event of Default, but
failure of Agent to comply with any such request at any time shall not in itself
be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Loan Event of Default shall have
occurred and be continuing, subject to all Applicable Law:
(A) AGENT MAY EXERCISE IN RESPECT OF THE COLLATERAL, IN ADDITION TO 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 EXERCISE ANY AND ALL
RIGHTS AND REMEDIES OF GRANTOR UNDER OR IN CONNECTION WITH THE COLLATERAL,
INCLUDING, WITHOUT LIMITATION, ANY AND ALL RIGHTS OF GRANTOR TO DEMAND OR
OTHERWISE REQUIRE PAYMENT OF ANY AMOUNT UNDER, OR PERFORMANCE OF ANY PROVISION
OF, THE ASSIGNED AGREEMENTS. GRANTOR AGREES THAT, TO THE EXTENT NOTICE OF SALE
SHALL BE REQUIRED BY LAW, AT LEAST 10 DAYS' PRIOR NOTICE TO GRANTOR OF THE TIME
AND PLACE OF ANY PUBLIC SALE OR THE TIME AFTER WHICH ANY PRIVATE SALE IS TO BE
MADE SHALL CONSTITUTE REASONABLE NOTIFICATION. AGENT SHALL NOT BE OBLIGATED TO
MAKE ANY SALE OF COLLATERAL REGARDLESS OF WHETHER NOTICE OF SALE HAS BEEN GIVEN.
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.
(B) ALL PAYMENTS RECEIVED BY GRANTOR UNDER OR IN CONNECTION WITH THE
ASSIGNED AGREEMENTS OR OTHERWISE IN RESPECT OF THE COLLATERAL SHALL BE RECEIVED
IN TRUST FOR THE BENEFIT OF AGENT, SHALL BE SEGREGATED FROM OTHER FUNDS OF
GRANTOR, AND SHALL BE FORTHWITH PAID OVER TO AGENT IN THE SAME FORM AS SO
RECEIVED (WITH ANY NECESSARY ENDORSEMENT).
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SECURITY AGREEMENT
(C) ALL CASH PROCEEDS RECEIVED BY AGENT IN RESPECT OF ANY SALE OF,
COLLECTION FROM, OR OTHER REALIZATION UPON ALL OR ANY PART OF THE COLLATERAL
MAY, IN THE DISCRETION OF AGENT, BE HELD BY AGENT AS COLLATERAL FOR, AND/OR THEN
OR AT ANY TIME THEREAFTER APPLIED (AFTER PAYMENT OF ANY AMOUNTS PAYABLE TO AGENT
PURSUANT TO SECTION 6.2) IN WHOLE OR IN PART BY AGENT AGAINST, ALL OR ANY PART
OF THE SECURED OBLIGATIONS IN SUCH ORDER AS AGENT SHALL ELECT. ANY SURPLUS OF
SUCH CASH OR DASH PROCEEDS HELD BY AGENT AND REMAINING AFTER PAYMENT IN FULL OF
ALL THE SECURED OBLIGATIONS SHALL BE PAID OVER TO GRANTOR OR TO WHOMSOEVER MAY
BE LAWFULLY ENTITLED TO RECEIVE SUCH SURPLUS.
SECTION 6.2. Indemnity and Expenses.
(A) GRANTOR AGREES TO INDEMNIFY AGENT FROM AND AGAINST ANY AND ALL CLAIMS,
LOSSES AND LIABILITIES ARISING OUT OF OR RESULTING FROM THIS SECURITY AGREEMENT
(INCLUDING, WITHOUT LIMITATION, ENFORCEMENT OF THIS SECURITY AGREEMENT), EXCEPT
CLAIMS, LOSSES OR LIABILITIES RESULTING FROM AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
(B) GRANTOR WILL UPON DEMAND PAY TO AGENT THE AMOUNT OF ANY AND ALL
REASONABLE EXPENSES, INCLUDING THE REASONABLE FEES AND DISBURSEMENTS OF ITS
COUNSEL AND OF ANY EXPERTS AND AGENTS, WHICH AGENT MAY INCUR IN CONNECTION WITH
(I) THE ADMINISTRATION OF THIS SECURITY 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
AGENT HEREUNDER OR
(IV) THE FAILURE BY GRANTOR TO PERFORM OR OBSERVE ANY OF
THE PROVISIONS HEREOF.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Operative Document. This Security Agreement is an
Operative Document executed pursuant to the Participation Agreement and shall
(unless otherwise expressly indicated herein) be construed, administered and
applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then, such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. Unless otherwise specified herein,
all notices, requests, demands or other communications to or upon the respective
parties hereto shall be delivered in accordance with, and shall be deemed to
have been given as provided in, Section 9.3 of the Participation Agreement.
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SECURITY AGREEMENT
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible, each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under Applicable Law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same agreement.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEVADA WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEVADA. THIS
SECURITY AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
[signature page follows]
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SECURITY AGREEMENT
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
FIRST SECURITY TRUST COMPANY OF
NEVADA, not in its individual
capacity but solely as Trustee under
the Trust Agreement
By:______________________________
Name:
Title:
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<PAGE> 12
SECURITY AGREEMENT
HELLER FINANCIAL LEASING, INC., as
Agent under the Participation
Agreement
By:______________________________
Name:
Title:
150
<PAGE> 1
---------------------------------------------------------------------
EXHIBIT E TO PARTICIPATION AGREEMENT
FORM OF GUARANTY
dated as of May 28, 1999
of
STRATOSPHERE CORPORATION
in favor of
THE BENEFICIARIES NAMED HEREIN
---------------------------------------------------------------------
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GUARANTY
GUARANTY
THIS GUARANTY (this "Guaranty"), dated as of May 28, 1999, made by
STRATOSPHERE CORPORATION, a Delaware corporation (the "Guarantor"), in favor of
the Beneficiaries named below pursuant to that certain Participation Agreement,
dated as of May 28, 1999 (the "Participation Agreement"), among Stratosphere
Gaming Corp., a Nevada corporation, as Lessee ("Lessee"), First Security Trust
Company of Nevada, not in its individual capacity but solely as Lessor and
Trustee, Heller Financial Leasing, Inc., a Delaware corporation, as Agent, and
the Lenders identified therein. Capitalized terms used and not otherwise defined
in this Guaranty shall have the meaning assigned to such term in Appendix 1 to
the Participation Agreement.
WHEREAS, Guarantor is the direct beneficial owner of all the issued and
outstanding capital stock of Lessee; and
WHEREAS, pursuant to the Lease and the Participation Agreement, Trustee
has agreed, on behalf of the Trust and each Lender, to purchase the Equipment
and lease such Equipment to Lessee pursuant to the Lease; and
WHEREAS, Guarantor is entering into this Guaranty in order to induce
the parties to the Participation Agreement to enter into the transactions
contemplated thereby.
NOW, THEREFORE, Guarantor covenants and agrees as, follows.
SECTION 1. Guaranty. Guarantor hereby absolutely, unconditionally and
irrevocably guarantees to Trustee (both individually and in its capacity as
Trustee), Agent, each Lender and each other Indemnitee and their respective
successors and assigns (individually, a "Beneficiary" and, collectively, the
"Beneficiaries"):
(A) THE DUE, PUNCTUAL AND FULL PAYMENT OF ALL AMOUNTS (INCLUDING AMOUNTS
PAYABLE AS DAMAGES IN CASE OF DEFAULT AND ANY AMOUNTS DUE PURSUANT TO ARTICLES
VII AND VIII OF THE PARTICIPATION AGREEMENT PAYABLE BY LESSEE PURSUANT TO THE
LEASE, THE PARTICIPATION AGREEMENT, OR ANY OTHER OPERATIVE DOCUMENT TO WHICH
LESSEE IS OR IS TO BE A PARTY, WHETHER SUCH OBLIGATIONS NOW EXIST OR ARISE
HEREAFTER, AS AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE IN ACCORDANCE WITH
THE TERMS THEREOF (INCLUDING IN ALL CASES ALL SUCH AMOUNTS WHICH 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. SS.362(A), THE OPERATION OF SECTIONS
502(B) AND 506(B) OF THE UNITED STATES BANKRUPTCY CODE, 11 U.S.C. SS.502(B) AND
SS.506(B) OR THE COMMENCEMENT OR OPERATION OF ANY OTHER BANKRUPTCY, INSOLVENCY,
REORGANIZATION OR LIKE PROCEEDING RELATING TO LESSEE); AND
(B) THE DUE, PROMPT AND FAITHFUL PERFORMANCE OF, AND COMPLIANCE WITH, ALL
OTHER OBLIGATIONS, COVENANTS, TERMS, CONDITIONS AND UNDERTAKINGS OF LESSEE
CONTAINED IN THE PARTICIPATION AGREEMENT, THE LEASE OR ANY OTHER OPERATIVE
DOCUMENTS TO WHICH LESSEE IS OR MAY BE A PARTY IN ACCORDANCE WITH THE TERMS
THEREOF
(such obligations referred to in clauses (a) and (b) above being hereinafter
called the "Guaranteed Obligations"); provided, however, that Guarantor shall be
liable under this Guaranty only for the maximum amount of such liability that
can be hereby incurred without rendering this Guaranty, as it relates to
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer, and not for any greater amount.
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GUARANTY
Guarantor further will pay any and all reasonable costs and expenses
(including reasonable fees and disbursements of counsel, which may include
allocated costs of staff counsel of any Beneficiary) that may be paid or
incurred by any Beneficiary in collecting any Guaranteed Obligations or in
preserving or enforcing any rights under this Guaranty or under the Guaranteed
Obligations, it being understood that Guarantor shall not be obligated to pay
hereunder to the extent that Lessee has made such corresponding payments under
the Operative Documents.
This Guaranty constitutes an unconditional and irrevocable guaranty of
payment, performance and compliance and not of collectability, is in no way
conditioned or contingent upon any attempt to collect from or enforce
performance or compliance by Lessee or upon any other event, contingency or
circumstance whatsoever, and shall be binding upon and against Guarantor without
regard to the validity or enforceability of the Lease, the Participation
Agreement or any other Operative Document.
If for any reason whatsoever Lessee shall fail or be unable duly,
punctually and fully to pay such amounts as and when the same shall become due
and payable or to perform or comply with any such obligation, covenant, term,
condition or undertaking, Guarantor will immediately pay or cause to be paid
such amounts to the Person or Persons entitled to receive the same under the
terms of the Operative Documents, as appropriate, or perform or comply with any
such obligation, covenant, term, condition or undertaking or cause the same to
be performed or complied with, together with interest on any amount due and
owing from the date the same shall have become due and payable to the date of
payment.
SECTION 2. Guarantor's Guaranteed Obligations Unconditional. The
covenants and agreements of Guarantor set forth in this Guaranty shall be
primary obligations of Guarantor, and shall be continuing, absolute and
unconditional, shall not be subject to any counterclaim, setoff, deduction,
diminution, abatement, recoupment, suspension, deferment, reduction or defense
(other than full and strict compliance by Guarantor with its obligations
hereunder), whether based upon any claim that Lessee, Guarantor, or any other
Person may have against any Beneficiary or any other Person or otherwise, and
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by, any circumstance or condition
whatsoever (whether or not Guarantor or Lessee shall have any knowledge or
notice thereof) including, without limitation:
(A) ANY AMENDMENT, MODIFICATION, ADDITION, DELETION, SUPPLEMENT OR RENEWAL
TO OR OF OR OTHER CHANGE IN THE GUARANTEED OBLIGATIONS, THE LEASE OR ANY
OPERATIVE DOCUMENT, OR ANY OF THE AGREEMENTS REFERRED TO IN ANY THEREOF, OR ANY
OTHER INSTRUMENT OR AGREEMENT APPLICABLE TO ANY SUCH AGREEMENTS OR ANY OF THE
PARTIES TO SUCH AGREEMENTS, OR TO THE EQUIPMENT, OR ANY ASSIGNMENT OR TRANSFER
THEREOF OR OF ANY INTEREST THEREIN, OR ANY FURNISHING OR ACCEPTANCE OF
ADDITIONAL SECURITY FOR, GUARANTY OF OR RIGHT OF OFFSET WITH RESPECT TO, ANY OF
THE GUARANTEED OBLIGATIONS; OR THE FAILURE OF ANY SECURITY OR THE FAILURE OF ANY
BENEFICIARY TO PERFECT OR INSURE ANY INTEREST IN ANY COLLATERAL;
(B) ANY FAILURE, OMISSION OR DELAY ON THE PART OF LESSEE, ANY BENEFICIARY
OR ANY OTHER PERSON TO CONFORM OR COMPLY WITH ANY TERM OF ANY INSTRUMENT OR
AGREEMENT REFERRED TO IN CLAUSE (A) ABOVE;
(C) ANY WAIVER, CONSENT, EXTENSION, INDULGENCE, COMPROMISE, RELEASE OR
OTHER ACTION OR INACTION UNDER OR IN RESPECT OF ANY INSTRUMENT, AGREEMENT,
GUARANTY, RIGHT OF OFFSET OR
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<PAGE> 4
GUARANTY
SECURITY REFERRED TO IN CLAUSE (A) ABOVE OR ANY OBLIGATION OR LIABILITY OF
LESSEE OR ANY BENEFICIARY, OR ANY EXERCISE OR NON-EXERCISE BY ANY BENEFICIARY OR
ANY OTHER PERSON OF ANY RIGHT, REMEDY, POWER OR PRIVILEGE UNDER OR IN RESPECT OF
ANY SUCH INSTRUMENT, AGREEMENT, GUARANTY, RIGHT OF OFFSET OR SECURITY OR ANY
SUCH OBLIGATION OR LIABILITY;
(D) ANY BANKRUPTCY, INSOLVENCY, REORGANIZATION, ARRANGEMENT, READJUSTMENT,
COMPOSITION, LIQUIDATION OR SIMILAR PROCEEDING WITH RESPECT TO LESSEE ANY
BENEFICIARY OR ANY OTHER PERSON, OR ANY OF THEIR RESPECTIVE PROPERTIES OR
CREDITORS, THE IMPOSITION OF ANY STAY OR INJUNCTION IN CONNECTION WITH ANY SUCH
PROCEEDING, OR ANY ACTION TAKEN BY ANY TRUSTEE OR RECEIVER OR BY ANY COURT IN
ANY SUCH PROCEEDING;
(E) ANY LIMITATION ON (I) THE LIABILITY OR OBLIGATIONS OF LESSEE, GUARANTOR
OR ANY OTHER PERSON UNDER ANY AGREEMENT OR INSTRUMENT REFERRED TO IN CLAUSE (A)
ABOVE, OR (II) THE GUARANTEED OBLIGATIONS, ANY COLLATERAL SECURITY FOR THE
GUARANTEED OBLIGATIONS;
(F) ANY OTHER GUARANTY OF THE GUARANTEED OBLIGATIONS OR ANY DISCHARGE,
TERMINATION, CANCELLATION, FRUSTRATION, IRREGULARITY, INVALIDITY OR
UNENFORCEABILITY, IN WHOLE OR IN PART, OF ANY, OF THE FOREGOING, OR ANY OTHER
AGREEMENT OR INSTRUMENT, REFERRED TO IN CLAUSE (A) ABOVE OR ANY TERM OF ANY
THEREOF;
(G) ANY DEFECT IN THE TITLE, COMPLIANCE WITH SPECIFICATIONS, CONDITION,
DESIGN, OPERATION OR FITNESS FOR USE OF, OR ANY DAMAGE TO OR LOSS OR DESTRUCTION
OF, OR ANY INTERRUPTION OR CESSATION IN THE USE OF THE EQUIPMENT BY LESSEE OR
ANY OTHER PERSON FOR ANY REASON WHATSOEVER (INCLUDING ANY GOVERNMENTAL
PROHIBITION OR RESTRICTION, CONDEMNATION, REQUISITION, SEIZURE OR ANY OTHER ACT
ON THE PART OF ANY GOVERNMENTAL OR MILITARY AUTHORITY, OR ANY ACT OF GOD OR OF
THE PUBLIC ENEMY) REGARDLESS OF THE DURATION THEREOF (EVEN THOUGH SUCH DURATION
WOULD OTHERWISE CONSTITUTE A FRUSTRATION OF THE LEASE), WHETHER OR NOT RESULTING
FROM ACCIDENT AND WHETHER OR NOT WITHOUT FAULT ON THE PART OF LESSEE OR ANY
OTHER PERSON;
(H) ANY MERGER OR CONSOLIDATION OF LESSEE OR GUARANTOR INTO OR WITH ANY
OTHER PERSON OR ANY SALE, LEASE OR TRANSFER OF ANY OF THE ASSETS OF LESSEE OR
GUARANTOR TO ANY OTHER PERSON;
(I) ANY CHANGE IN THE OWNERSHIP OF ANY SHARES OF CAPITAL STOCK OF LESSEE OR
ANY CORPORATE CHANGE IN LESSEE;
(J) A FAILURE OF THE LEASE TO BECOME EFFECTIVE;
(K) ANY ASSIGNMENTS, TRANSFERS OR SUBLEASES OF THE LEASE OR ANY OF LESSEE'S
RIGHTS THEREUNDER INCLUDING AN ASSIGNMENT, TRANSFER OR SUBLEASE PURSUANT TO
ARTICLE IV OF THE LEASE; OR,
(L) ANY OTHER OCCURRENCE OR CIRCUMSTANCE WHATSOEVER, WHETHER SIMILAR OR
DISSIMILAR TO THE FOREGOING AND ANY OTHER CIRCUMSTANCE THAT MIGHT OTHERWISE
CONSTITUTE A LEGAL OR EQUITABLE DEFENSE OR DISCHARGE OF THE LIABILITIES OF A
GUARANTOR OR SURETY OR THAT MIGHT
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GUARANTY
OTHERWISE LIMIT RECOURSE AGAINST GUARANTOR.
The unconditional obligations of Guarantor set forth herein constitute
the full recourse obligations of Guarantor enforceable against it to the full
extent of all its assets and properties.
SECTION 3. Waiver and Agreement. Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Guaranteed Obligations
and notice of or proof of reliance by any Beneficiary upon this Guaranty or
acceptance of this Guaranty, and the Guaranteed Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred in
reliance upon this Guaranty. Guarantor unconditionally waives, to the extent
permitted by law: (a) acceptance of this Guaranty and proof of reliance by any
Beneficiary hereon; (b) notice of any of the matters referred to in Section 2,
or any right to consent or assent to any thereof; (c) all notices that may be
required by statute, rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against Guarantor, including without limitation, any
demand, presentment, protest, proof or notice of nonpayment under any agreement
or instrument referred to in clause (a) of Section 2, and notice of default or
any failure on the part of Lessee to perform and comply with any covenant,
agreement, term or condition of any agreement or instrument referred to in
clause (a) of Section 2; (d) any right to the enforcement, assertion or exercise
against Lessee of any right, power, privilege or remedy conferred in any
agreement or instrument referred to in clause (a) of Section 2 or otherwise; (e)
any requirement of diligence on the part of any Person; (f) any requirement of
any Beneficiary to take any action whatsoever, to exhaust any remedies or to
mitigate the damages resulting from a default by any Person under any agreement
or instrument referred to in clause (a) of Section 2; (g) any notice of any
sale, transfer or other disposition by any Person of any right under, title to
or interest in any agreement or instrument referred to in clause (a) of Section
2 or the Collateral; and (h) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge, release or defense of a
guarantor or surety, or that might otherwise limit recourse against Guarantor.
Guarantor agrees that this Guaranty shall be automatically reinstated
if and to the extent that for any reason any payment by or on behalf of Lessee
is rescinded or must be otherwise restored by any of the Beneficiaries, whether
as a result of any proceedings in bankruptcy or reorganization or otherwise.
Guarantor further agrees that, without limiting the generality of this
Guaranty, if a Lease Event of Default shall have occurred and be continuing and
Trustee or its assignee is prevented by applicable law from exercising its
remedies under the Lease or if any agreement or instrument referred to in clause
(a) of Section 2 shall be terminated as a result of the rejection or
disaffirmance thereof by any trustee, receiver or liquidating agent of Lessee or
any other Person upon the occurrence of an Insolvency Event, Guarantor's
Guaranteed Obligations hereunder shall continue to the same extent as if Trustee
had exercised any remedies available under the Lease and any such agreement or
instrument had not been rejected or disaffirmed.
SECTION 4. Assignment. Guarantor hereby acknowledges that it is
contemplated that on the date hereof the Trustee will assign to the Agent for
the benefit of the Lenders all of the Trustee's rights, title and interest in
and to this Guaranty in respect of any Guaranteed Obligations hereunder which
are part of the Trust Estate and Guarantor hereby agrees to such assignment.
SECTION 5. Waiver of Subrogation. Guarantor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against Lessee
that arise from the existence,
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<PAGE> 6
GUARANTY
payment, performance or enforcement of Guarantor's obligations under this
Guaranty or any other Operative Document, including any right of subrogation,
reimbursement, exoneration, or indemnification, any right to participate in any
claim or remedy of Beneficiaries against Lessee or any Collateral which Agent
now has or hereafter acquires, whether or not such claim, remedy or right arises
in equity or under contract, statute or common law, including the right to take
or receive from Lessee, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights. If any amount shall be paid to Guarantor in violation of the preceding
sentence and the Guaranteed Obligations shall not have been indefeasibly paid in
cash, such amount shall be deemed to have been paid to Guarantor for the benefit
of, and held in trust for, the Beneficiaries, and shall forthwith be paid to
Agent to be credited and applied pursuant to the terms of the Loan Agreement and
the Trust Agreement. Guarantor acknowledges that it will receive substantial
economic benefits from the financing arrangements contemplated by the Operative
Documents and that the waiver set forth in this Section 5 is knowingly made in
contemplation of such benefits. Guarantor hereby absolutely, unconditionally and
irrevocably waives and agrees not to assert or take advantage of any defense
based upon an election of remedies by Agent, including an election to proceed by
nonjudicial rather than judicial foreclosure, which destroys or impairs any
right of subrogation of Guarantor or the right of Guarantor to proceed against
any Person for reimbursement or both.
SECTION 6 Rights of the Beneficiaries. This Guaranty is made for the
benefit of, and shall be enforceable by, each Beneficiary as its interest may
appear or by the Agent on behalf of the Beneficiaries.
SECTION 7. Term of Guaranty. This Guaranty and all guaranties,
covenants and agreements of Guarantor contained herein shall continue in full
force and effect and shall not be discharged until such time as all the
Guaranteed Obligations shall be indefeasibly paid in full in cash and all the
agreements of Guarantor hereunder and the Lessee hereunder and under the Lease,
the Participation Agreement and the other Operative Documents shall have been
duly performed. If, as a result of any bankruptcy, dissolution, reorganization,
insolvency, arrangement or liquidation proceedings (or proceedings similar in
purpose or effect), or if for any other reason any payment received by any
Beneficiary in respect of the Guaranteed Obligations is rescinded or must be
returned by such Beneficiary, this Guaranty shall continue to be effective as if
such payment had not been made and, in any event, as provided in the preceding
sentence.
SECTION 8. Agreement of Guarantor. Guarantor assumes the responsibility
for being and keeping itself informed of the financial condition of Lessee and
of all other circumstances with respect to any of the Guaranty Obligations, and
Guarantor agrees that no Beneficiary shall be under any duty to advise Guarantor
of information known to it regarding such condition or any such circumstance;
whether or not any Beneficiary has a reasonable opportunity to communicate such
information or has reason to believe that any such information is unknown to
Guarantor or materially increases the risk to Guarantor beyond the risk
Guarantor intends to assume hereunder.
SECTION 9. Representations and Warranties. Guarantor hereby represents
and warrants to each Beneficiary as follows:
(A) GUARANTOR IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS INCORPORATION, AND HAS FULL
CORPORATE POWER AND AUTHORITY TO ENTER INTO THIS GUARANTY AND THE OTHER
OPERATIVE DOCUMENTS TO WHICH IT IS A PARTY AND TO CARRY OUT THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY.
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GUARANTY
(B) THE EXECUTION AND DELIVERY BY GUARANTOR OF THIS GUARANTY AND THE OTHER
OPERATIVE DOCUMENTS TO WHICH IT IS A PARTY AND THE CONSUMMATION BY GUARANTOR OF
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY HAVE BEEN DULY AUTHORIZED BY
ALL NECESSARY CORPORATE ACTION OF GUARANTOR. THIS GUARANTY AND THE OTHER
OPERATIVE DOCUMENTS TO WHICH GUARANTOR IS A PARTY HAVE EACH BEEN DULY EXECUTED
AND DELIVERED BY GUARANTOR AND EACH CONSTITUTES THE LEGAL, VALID AND BINDING
OBLIGATION OF GUARANTOR ENFORCEABLE AGAINST GUARANTOR IN ACCORDANCE WITH ITS
TERMS, SUBJECT TO THE EFFECT OF BANKRUPTCY, INSOLVENCY, REORGANIZATION,
MORATORIUM OR SIMILAR LAWS AT THE TIME IN EFFECT AFFECTING THE RIGHTS OF
CREDITORS GENERALLY AND SUBJECT TO THE EFFECTS OF GENERAL PRINCIPLES OF EQUITY
(REGARDLESS OF WHETHER CONSIDERED IN A PROCEEDING IN LAW OR EQUITY).
(C) THE EXECUTION AND DELIVERY OF THIS GUARANTY AND THE OTHER OPERATIVE
DOCUMENTS TO WHICH GUARANTOR IS A PARTY AND THE CONSUMMATION BY GUARANTOR OF THE
TRANSACTIONS CONTEMPLATED HEREBY DO NOT (I) CONTRAVENE OR RESULT IN A DEFAULT
UNDER GUARANTOR'S ARTICLES OF INCORPORATION OR BYLAWS, (II) CONTRAVENE OR RESULT
IN A DEFAULT UNDER ANY CONTRACTUAL RESTRICTION, LAW OR GOVERNMENTAL REGULATION
OR COURT DECREE OR ORDER BINDING ON GUARANTOR, (III) REQUIRE ANY FILINGS,
CONSENTS OR AUTHORIZATIONS WHICH HAVE NOT BEEN DULY OBTAINED OR (IV) RESULT IN
THE CREATION OR IMPOSITION OF ANY LIEN ON GUARANTOR'S PROPERTIES, OTHER THAN
PERMITTED LIENS.
SECTION 10. Further Assurances. Guarantor hereby agrees to execute and
deliver all such instruments and take all such action as any Beneficiary may
from time to time reasonably request in order to fully effectuate the purposes
of this Guaranty.
SECTION 11. Notices, etc. All notices, demands, requests, consents,
approvals and other instruments hereunder shall be in writing and shall be
deemed to have been properly given if given as provided for in Section 9.3 of
the Participation Agreement.
SECTION 12. Amendments, etc. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Beneficiaries, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 13. Severability. In case any provisions of this Guaranty or
any application thereof shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions and statements
and any other application thereof shall riot in any way be affected or impaired
thereby. To the extent permitted by law, Guarantor hereby waives any provision
of law that renders any term or provision hereof invalid or unenforceable in any
respect.
SECTION 14. Operative Document. This Guaranty is an Operative Document
executed pursuant to the Participation Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
SECTION 15. Governing Law. THIS GUARANTY HAS BEEN DELIVERED IN AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS GUARANTY SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEVADA EXCLUDING ALL CHOICE OF LAWS AND CONFLICT OF LAWS RULES OF SUCH STATE.
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GUARANTY
SECTION 16. Successors and Assigns. This Guaranty shall be binding upon
Guarantor and its successors, transferees and assigns and inure to the benefit
of and be enforceable by the respective successors, transferees, and assigns of
the Beneficiaries; provided, however, that Guarantor may not delegate any of its
obligations hereunder without the prior written consent of the Trustee and each
Lender.
[Signature page follows]
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GUARANTY
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed
as of the date first above written.
STRATOSPHERE CORPORATION
By:______________________________
Name: Thomas A. Lettero
Title:Vice President-Administration
Chief Financial Officer
159
<PAGE> 1
EXHIBIT G
TO
PARTICIPATION AGREEMENT
LANDLORD WAIVER AND CONSENT
First Security Trust Company of Nevada,
not in its individual capacity,
but solely as Trustee,
530 Las Vegas Boulevard
South Las Vegas, Nevada 89101
Attention: Corporate Trust Services
Ladies and Gentlemen:
Reference is made to that certain Lease Agreement, dated as of May 28,
1999 (the "Lease"), between Stratosphere Gaming Corp., a Nevada corporation
("Lessee"), and First Security Trust Company of Nevada, not in its individual
capacity, but solely as trustee ("Trustee").
Lessee is the lessee under a Facility Lease Agreement, dated as of
April 29, 1996 (the "Facility Lease Agreement"), between the Lessee and the
undersigned covering the premises located at 2000 Las Vegas Boulevard South, Las
Vegas, Nevada 89104 and described more fully in the Facility Lease Agreement and
in Exhibit A attached hereto (the "Premises"). The undersigned is the sole owner
of the Premises.
Pursuant to the terms of the Lease, Lessee desires to lease certain
items of equipment and other personal property (the "Equipment") from Trustee to
be installed on the Premises and, in connection therewith, shall grant to
Trustee a security interest and lien in all of the Equipment installed on the
Premises. In order to enforce certain remedies under the Lease, Trustee seeks to
insure that it will be able to gain access to the Equipment installed on the
Premises and, among other things, the books and records of the Lessee relating
thereto (collectively, the "Collateral") and to remove the Equipment therefrom.
To induce Trustee to enter into the Lease and related security
arrangements, and for other good and valuable consideration, the undersigned
hereby agrees that until the obligations under the Lease and the other Operative
Documents (as defined in the Lease) have been indefeasibly paid in full:
<PAGE> 2
LANDLORD WAIVER AND CONSENT
(a) it will not assert against any of the Collateral any
statutory or possessory liens, including, without limitation,
rights to levy or distraint for rent, all of which it hereby
waives;
(b) it will not terminate the Facility Lease Agreement
without the express written consent of the Required Lenders
(as defined in the Lease);
(c) none of the Collateral located on the Premises shall be
deemed to be fixtures or real property;
(d) it will notify Trustee if Lessee defaults on its
obligations to the undersigned under the Facility Lease
Agreement and allow the Trustee 30 days from its receipt of
notice in which to cure or cause Lessee to cure any such
defaults;
(e) if, for any reasons whatsoever, the undersigned either
deems itself entitled to redeem or to take possession of the
Premises during the term of the Lease or intends to sell or
otherwise transfer all or any part of its interests in the
Premises, the undersigned will notify Trustee 30 days before
taking such action; and
(f) if Lessee defaults on its obligations under the Lease
and as a result, Trustee undertakes to enforce its security
interest in the Collateral, the undersigned will permit
Trustee to enter upon the Premises after Trustee declares the
default under the Lease and gives written notice to the
undersigned with respect thereto. Trustee's right of entry
shall not be conditioned upon Lessee's payment of rent and
other amounts due and owing under the Facility Lease
Agreement. The undersigned agrees that, at Trustee's option,
Trustee may remove the Collateral from the Premises after the
undersigned receives written notice of entry. Trustee shall
not be liable to the undersigned for any damages to the
Premises resulting from the removal of the Collateral, it
being understood that the undersigned's sole remedy for any
such damages shall be against Lessee. The undersigned further
agrees that it will not hinder Trustee's actions in enforcing
its liens on the Collateral or the Lease and the related
documents.
Any notices required or desired to be given hereunder shall be directed
to the party to be notified at the address stated in the Lease.
<PAGE> 3
LANDLORD WAIVER AND CONSENT
The undersigned will notify all successor owners, transferees,
purchasers and mortgagees of the existence of this waiver. The agreements
contained herein may not be modified or terminated orally and shall be binding
upon the successors, assigns and personal representatives of the undersigned,
upon any successor owner or transferee of the Premises, and upon any purchasers,
including any mortgage from the undersigned.
STRATOSPHERE CORPORATION
By:
Name: Thomas A. Lettero
Title: Vice President-Administration/
Chief Financial Officer
[attach notarization]
<PAGE> 4
LANDLORD WAIVER AND CONSENT
Date:
Accepted and Agreed to
this day of May, 1999.
FIRST SECURITY TRUST COMPANY OF NEVADA,
as Trustee
By:
Title:
[attach notarization]
<PAGE> 1
EXHIBIT H
TO
PARTICIPATION AGREEMENT
FORM OF ADVANCE REQUEST
ADVANCE REQUEST
[Date]
TO: Heller Financial Leasing, Inc., as agent ("Agent") under the
Participation Agreement, dated as of May 28, 1999, among
Stratosphere Gaming Corp., as Lessee, Stratosphere Corporation, as
Guarantor, First Security Trust Company of Nevada, as Trustee, the
Lenders identified therein and Agent (the "Participation
Agreement"). Unless the context otherwise requires, all capitalized
terms used herein and not otherwise defined shall have the meanings
assigned to them in Appendix 1 to the Participation Agreement.
First Security Trust Company of Nevada, as Trustee, and
the Lenders listed on Schedule II to the Participation Agreement
FROM: Stratosphere Gaming Corp.
RE: Advance Request
1. This Advance Request is delivered pursuant to Section 3.1(a) of the
Participation Agreement.
2. Lessee hereby requests the Advance pursuant to the Participation
Agreement in the amount of $10,000,000.
3. The proposed Advance Date is May 28, 1999.
4. The Advance is to fund Equipment Costs listed on Schedule 1 hereto.
ADVANCE REQUEST
5. Lessee requests that the disbursement be remitted as follows:
<PAGE> 2
<TABLE>
<CAPTION>
Payee Amount
----- ------
<S> <C>
Stratosphere Gaming Corp. $8,694,337.03
-------------
Heller Financial Leasing, Inc. $1,297,662.97
-------------
Pheonixcor, Inc. $8,000
---------
</TABLE>
6. The funds received from this Advance will be used in accordance with
the terms of the Operative Documents and Section 4 of this Advance Request.
<PAGE> 3
ADVANCE REQUEST
STRATOSPHERE GAMING CORP.
By:
Name: Thomas A. Lettero
Title: Vice President-Administration/
Chief Financial Officer
<PAGE> 4
ADVANCE REQUEST
SCHEDULE 1
TO ADVANCE REQUEST
Equipment Costs
<PAGE> 1
EXHIBIT I
TO
PARTICIPATION AGREEMENT
[FORM OF BILL OF SALE]
Stratosphere Gaming Corp., a Nevada corporation ("Seller"), is the
owner of certain items of equipment and other personal property described on
Schedule I hereto (together with all repairs, parts, supplies, accessories,
equipment and devices affixed thereto or installed thereon, and all warranties,
covenants and representations of any manufacturer or vendor thereof, the "Items
of Equipment").
Seller sells, grants, conveys, transfers and assigns all of its
right, title and interest, whether now owned or hereafter acquired, to the Items
of Equipment to First Security Trust Company of Nevada, not in its individual.
capacity, but solely as trustee ("Buyer") under that certain Lease Agreement,
dated as of May 28, 1999, between Seller and Buyer (the "Lease"; capitalized
terms not otherwise defined herein being used as defined therein).
Seller warrants to Buyer, its successors and assigns, that there is
conveyed to Buyer good title to the Items of Equipment covered hereby, free and
clear of all liens, claims, rights or encumbrances of others (except the rights
of Seller pursuant to the Lease and Permitted Liens) and Seller will warrant and
defend such title forever against all claims and demands whatsoever.
This Bill of Sale has been delivered in Nevada and the rights and
obligations of the parties under this Bill of Sale and shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Nevada,
excluding all choice of laws and conflict of laws rules of such state.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be
executed and delivered by one of its duly authorized officers on May 28, 1999
[Advance Date].
STRATOSPHERE GAMING CORP.
By:
Name: Thomas A. Lettero
Title: Vice President-Administration/
Chief Financial Officer
<PAGE> 2
SCHEDULE I
TO
BILL OF SALE
EQUIPMENT LIST
(see Schedule I to the Participation Agreement, dated as of
May 28, 1999, among Seller, Buyer and the other parties
thereto)
<PAGE> 1
EXHIBIT J
TO
PARTICIPATION AGREEMENT
FORM OF CERTIFICATE OF ACCEPTANCE OF LESSEE
TO: Heller Financial Leasing, Inc. as Agent ("Agent") pursuant to that
certain Participation Agreement, dated as of May 28, 1999, among
Stratosphere Gaming Corp., a Nevada corporation ("Lessee"),
Stratosphere Corporation, a Delaware corporation, as Guarantor, First
Security Trust Company of Nevada, not in its individual capacity, but
solely as Trustee, the Agent and the Lenders identified therein.
Capitalized terms used herein shall have the meanings assigned thereto
in Appendix 1 to the Participation Agreement.
Lessee hereby certifies to you, and for the benefit of the Lenders, as
follows:
1. (i) that it has inspected, received, approved and accepted
delivery of all of the items of Equipment described in
Schedule I to that certain Bill of Sale to Agent, dated the
date hereof (the "Items of Equipment") for all purposes of the
Lease and the other operative Documents; and
(ii) such Items of Equipment are in good operating
order, repair, condition and appearance and without any defect
therein with respect to design, manufacture, condition
(reasonable wear and tear excepted), operation or fitness for
use or in any other respect whether or not discoverable by
Lessee as of the date hereof.
2. that it hereby confirms acceptance of delivery on May 28,1999,
and lease from the Lessor under the Lease of such Items of
Equipment.
3. that it hereby represents and warrants that no event which
would constitute a Casualty or Non-Casualty Loss and no notice
of such Casualty or Non-Casualty Loss has been given to Lessee
or any of its Affiliates with respect to such Item of
Equipment as of the date hereof. Lessee hereby reaffirms each
of the representations and warranties set forth at Section 4.1
of the Participation Agreement as if made on the date hereof,
except to the extent any such representation and warranty
relates to an earlier date, including that such Items of
Equipment are free and clear of all Liens other than Permitted
Liens.
<PAGE> 2
Certificate of Acceptance
IN WITNESS WHEREOF, Lessee has caused this Certificate of
Acceptance to be duly executed and delivered by one of its officers thereunto
duly authorized this 28th day of May, 1999.
STRATOSPHERE GAMING CORP.
By:_____________________
Name: Thomas A. Lettero
Title: Vice President-Administration
Chief Financial Office
<PAGE> 1
INVESTOR'S LETTER
EXHIBIT K
TO
PARTICIPATION AGREEMENT
FORM OF INVESTOR'S LETTER
INVESTOR'S LETTER
[Date]
First Security Trust Company of Nevada,
not in its individual capacity
but solely as Trustee
530 Las Vegas Boulevard South
Las Vegas, Nevada 89101
Heller Financial Leasing, Inc.
50 Beale Street, 16th Floor
San Francisco, California 94105
Ladies and Gentlemen:
Unless the context otherwise requires, capitalized terms used in this
letter and not otherwise defined herein shall have the meanings assigned thereto
in Appendix 1 to that certain Participation Agreement (the "Participation
Agreement"), dated as of May 28, 1999, among the Lenders identified therein,
Stratosphere Gaming Corp., as Lessee, Stratosphere Corporation, as Guarantor,
First Security Trust Company of Nevada, as Trustee, and Heller Financial
Leasing, Inc., as Agent.
The undersigned has agreed to purchase the Note numbered Note No. ,
dated May 28, 1999 and in an original principal amount of
Dollars ($ ) from , and desires that Borrower shall
execute and deliver to the undersigned a new Note in the principal amount of
$ in the name of the undersigned.
The undersigned hereby represents and warrants as of the date hereof to
the addressees hereof as follows:
(a) The Note is being purchased by the undersigned with its general
assets, and not directly or indirectly with the assets of, or in connection with
any arrangement or understanding by it in any way involving, any Plan (or its
related trust), as defined in Section 3(3) of ERISA, or with the assets of any
such plan. (or its related trust), as defined in Section 4975(e)(1) of the Code
(other than a governmental plan, as defined in Section 3(32) of ERISA), with
respect to which Lessee or such Lender or any of their Affiliates is a party in
interest within the meaning of ERISA or a "disqualified person" within the
meaning of the Code;
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<PAGE> 2
INVESTOR'S LETTER
(b) The Note is being acquired by the undersigned for its own
account for investment and not with a view to any distribution (as such term is
used in Section 2(11) of the Securities Act) thereof, and if in the future it
should decide to dispose of its interest in the Note, it understands that it may
do so only in compliance with the Securities Act and the rules and regulations
of the SEC thereunder and any applicable state securities laws. Neither it nor
anyone authorized to act on its behalf has taken or will take any action which
would subject the issuance or sale of any Note, the Trust Estate (including the
Equipment constituting a part thereof), the Collateral or the Lease to the
registration requirements of Section 5 of the Securities Act. No representation
or warranty contained in this clause (b) shall include or cover any action or
inaction of Lessee or any Affiliate thereof, whether or not purportedly on
behalf of any Lender, Agent, Trustee or any of their Affiliates. Subject to the
foregoing, it is understood among the parties that the disposition of each
Lender's property shall be at all times within its control;
(c) Neither the undersigned nor any Person authorized to act on its
behalf has directly or indirectly offered to sell any interests in the Trust
Estate, the Note or any security similar thereto, to, or otherwise approved or
negotiated with respect thereto with, anyone other than the Lenders, and neither
it nor any Person authorized to act on its behalf will so offer or sell in
violation of Section 5 of the Securities Act or any securities or blue sky law
of any applicable jurisdiction;
(d) The representations and warranties set forth in Section 4.2 of
the Participation Agreement are accurate with respect to the undersigned and
that, as of the date hereof, it is entitled to receive payments of the principal
amount of the Loans under the Operative Documents without deduction or
withholding of any United States federal income taxes.
The undersigned acknowledges that by execution of this letter it shall
be bound by all obligations (whether or not accrued) under, and shall have
become a party to, all Operative Documents to which its transferor was a party.
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<PAGE> 3
INVESTOR'S LETTER
The undersigned understands that the Note has not been and will not be
registered or qualified under the Securities Act or any securities or "blue sky"
laws of any jurisdiction and that no Lender has an obligation to effect such
registration or otherwise assist in the disposition of the Note.
Very truly yours,
By: ________________________________
Name:
Title:
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<PAGE> 1
OPINION
EXHIBIT M
TO
PARTICIPATION AGREEMENT
FORM OF OPINION OF COUNSEL TO PARENT AND LESSEE
[Date]
To Agent, Lenders,
and Trustee Listed on
Schedule A attached hereto
Re: Stratosphere Corporation and Stratosphere Gaming Corp.
Ladies and Gentlemen:
We have acted as counsel to Stratosphere Corporation, a Delaware
corporation ("Parent"), and Stratosphere Gaming Corporation, a Nevada
corporation ("Lessee"), in connection with the transactions contemplated by that
certain Participation Agreement, dated as of May 28, 1999 (the "Participation
Agreement"), among Parent, as Guarantor, Lessee, First Security Trust Company of
Nevada, not in its individual capacity, except as expressly stated therein, but
solely as Trustee, the Lenders identified therein and Heller Financial Leasing,
Inc., as Agent. Capitalized terms used in this opinion and not otherwise defined
herein shall have the respective meanings specified in Appendix 1 to the
Participation Agreement. This opinion is delivered to you pursuant to Section
2.1(d) of the Participation Agreement.
In so acting, we have examined and are familiar with originals of or
copies identified to our satisfaction of each of the Operative Documents as well
as the UCC-1 financing statement with Lessee as debtor, Trustee as secured party
and Agent as assignee, and the UCC-1 financing statement with Trustee as debtor
and Agent as secured party, each of which is to be filed for record in the UCC
records and in the land records in the office of the Recorder of Clark County,
Nevada (the "County Financing Statements"), and the UCC-1 financing statement
with Lessee as debtor, Trustee as secured party and Agent as assignee, and the
UCC-1 financing statement with Trustee as debtor and Agent as secured party,
each of which is to be filed for record in the office of the Secretary of State
of the State of Nevada (the "State Financing Statements" and together with the
County Financing Statements, collectively the "Financing Statements").
In addition, we have examined such records, documents and certificates
of public officials and Parent and Lessee, as applicable, made such inquiries of
public officials and officers of Parent and Lessee, as applicable, and
considered such questions of law as we have deemed necessary for the purpose of
rendering the opinions set forth herein.
We have also reviewed and relied upon UCC-11 search reports, dated May
, 1999, from the office of the Recorder of Clark County, Nevada, regarding UCC
financing statements filed against Lessee and Trustee, and UCC-11 search
reports, dated May , 1999, from the office of the Secretary of State of the
State of Nevada, regarding UCC financing statements filed against Lessee and
Trustee (collectively, the "Lien Searches"), and have made such other inquiries
as we have deemed reasonably necessary under the circumstances.
For the purposes of this opinion, we have assumed that: (i) all
documents submitted to us
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<PAGE> 2
OPINION
as originals are original authentic documents and all documents submitted to us
as certified or photostatic copies conform to original documents; (ii) other
than as to Parent and Lessee, the genuineness of all signatures and the legal
capacity of all persons executing any document on behalf of any party; (iii)
Lessee or Trustee, as applicable, each has rights in or title to the collateral
described in the Operative Documents; (iv) the descriptions of real property
contained in the Operative Documents are accurate; (v) each of the parties to
the Operative Documents, other than Lessee or Parent, (a)(1) is duly
incorporated, (2) is validly existing and (3) is in good standing under the laws
of the jurisdiction of its incorporation, (b) is duly qualified to do business
in the State of Nevada, if such qualification is necessary, and (c) has
authority to conduct the business contemplated by the Operative Documents; (vi)
the Operative Documents and the performance thereof have been duly authorized by
the parties thereto other than Parent or Lessee, and executed and delivered by
the parties thereto, other than Parent or Lessee, in the form reviewed by us
received by each such party, and the authorization, execution, delivery and
performance of the Operative Documents by the parties thereto, other than Parent
or Lessee, do not and will not violate the corporate articles and bylaws of the
respective parties, other than Parent or Lessee and do not and will not violate
or conflict with any law, order, writ, injunction or decree of any Governmental
Authority applicable to such party; and (vii) each of Lessee and Trustee has
sufficient right, title and interest in the real property, personal property and
fixtures described in the Operative Documents to create the security interests
purported to be created thereby.
Based upon the foregoing and subject to the qualifications set forth
herein, we are in the opinion that:
1. Each of Parent and Lessee is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and the State of Nevada, respectively, and has full corporate power and
authority to conduct its business as presently conducted, to own or hold under
lease its properties, and to enter into and perform its obligations under the
Operative Documents to which it is a party, and is duly qualified as a foreign
corporation authorized to do business and is in good standing in all other
jurisdictions where failure to so qualify would have a Material Adverse Effect.
2. The execution, delivery and performance by each of Parent and
Lessee of each Operative Document to which it is a party have been duly
authorized by all necessary corporate action on its part.
3. Neither the execution, delivery nor performance by Parent or
Lessee of any Operative Document to which it is a party (i) requires
any approval of the stockholders of Parent or Lessee, or approval or
consent of any trustee or holder of any indebtedness or obligations of
Parent or Lessee; (ii) contravenes or will contravene any Applicable
Law currently in effect applicable to or binding upon Parent or Lessee;
(iii) conflicts with, results in any breach of or constitutes any
default under, or results in the creation of any Lien (other than the
respective rights and interests of Trustee or Lenders as provided in
the Operative Documents) upon any property of Parent or Lessee under
(A) any indenture, mortgage, chattel mortgage, deed of trust, lease,
conditional sales contract, loan or credit arrangement or other
material agreement or instrument by which Parent or Lessee or any of
its respective properties may be bound, (B) the corporate charter of
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<PAGE> 3
OPINION
Parent or Lessee or (C) the bylaws of Parent or Lessee.
4. Each Operative Document to which Parent or Lessee is a party has
been duly executed and delivered by such party and constitutes the
legal, valid and binding obligation of such party, enforceable against
such party in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and by general equitable
principles.
5. There is no action, proceeding or investigation pending or, to
the best of our knowledge, threatened which questions the validity of
the Operative Documents to which Parent or Lessee is a party or any
action taken or to be taken pursuant thereto; nor is any action,
proceeding or investigation pending or, to the best of our knowledge,
threatened which, if adversely determined, would result in a Material
Adverse Effect.
6. No authorization, consent, approval, license or formal exemption
from, nor any filing, declaration or registration with, any
Governmental Authority is or will be required in connection with the
execution and delivery by Parent or Lessee of the Operative Documents
to which each is a party, or the performance by Parent or Lessee of
their respective obligations under such Operative Documents except for
the (A) filings and recordings listed on Schedule IV to the
Participation Agreement to perfect the rights of Trustee, Lenders and
Agent intended to be created by the Operative Documents, and (B) those
Required Licenses required with respect to Parent or Lessee listed on
Schedule V to the Participation Agreement, each one of which is in full
force and effect on the Closing Date.
7. Neither Parent nor Lessee is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Neither Parent nor Lessee
is subject to regulation as a "holding company," an "affiliate" of a
"holding company," or a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935,
as amended. The proceeds of the purchase by Trustee of the Leased
Property and the issuance of the Notes, if made in accordance with the
terms of the Operative Documents, will not result in a violation of
Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System.
8. No registration of the Notes of the Lenders under the Securities
Act of 1933, as amended, is required.
9. The Lease creates a valid security interest under the UCC in
favor of Trustee for the benefit of Lenders, as security for payment of
Lessee's obligations under the Operative Documents, in all of Lessee's
right, title and interest in and to the collateral specified therein.
The Security Agreement creates a valid security interest under the UCC
in favor of Agent for the benefit of Lenders, as security for payment
of Trustee's obligations under the Operative Documents, in all of
Trustees right, title and interest in and to the collateral specified
therein.
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<PAGE> 4
OPINION
10. Each of the Financing Statements is in proper form for filing,
and upon the filing of the Financing Statements with the offices listed
on Schedule C hereto, the security interests specified in paragraph 9
above will be perfected to the extent that a security interest in such
collateral may be perfected by so filing, and the description of such
collateral therein is adequate. No other filing, recordation or
registration is necessary in order to perfect Lenders' security
interest in such collateral.
11. The payment by Lessee and the receipt by Trustee, Trust Company,
Agent or Lenders of Rent and all other amounts, fees, interest,
prepayment premiums and other charges due and payable under the Lease
and the other Operative Documents, including the methods of calculation
and payment thereof, are not usurious under, or otherwise violative of,
the laws of the State of Nevada.
12. The payment by Trustee and the receipt by Lenders of interest on
the Notes and all other amounts, fees or interest due and payable under
the Loan Agreement and the other Operative Documents is not usurious
under the laws of State of Nevada.
13. The express choice of law of the State of Nevada to govern the
Operative Documents is enforceable and will be recognized by courts
located in the State of Nevada.
14. Neither Trustee, Lenders nor Agent is required under the laws of
the State of Nevada to qualify as a foreign corporation, foreign trust
company or otherwise in the State of Nevada solely as a result of its
execution, delivery and performance of the Operative Documents to which
it is a party; State of Nevada law permits Trustee, as a bank organized
under the laws of the State of Nevada, to act as a fiduciary in the
State of Nevada without any additional filings with the State of
Nevada; and the Trust is not required under the laws of the State of
Nevada to qualify as a foreign trust in the State of Nevada.
15. The Security Agreement creates a valid and legally binding
perfected security interest in the personal property and fixtures
therein described in accordance with the UCC as in force and effect in
the State of Nevada and is enforceable in accordance with its terms.
The Financing Statements which are to be recorded or filed within the
State of Nevada, the forms of which are attached hereto, are in form
sufficient under the laws of the State of Nevada for filing or
recording, and when recorded in the UCC records in the office of the
Recorder of Clark County, Nevada and in the UCC records in the office
of the Nevada Secretary of State will have been filed or recorded in
all public offices in the State of Nevada in which such filing or
recording is necessary to perfect the interests of Trustee and Agent in
the collateral described therein to the extent the same can be
perfected by filing or recording in the State of Nevada. Based solely
on our examinations of the Lien Searches, such security interests are
subject to no prior security interests perfected by filing a financing
statement in the UCC records in the office of the Nevada Secretary of
State or the UCC records in the office of the Recorder of Clark County,
Nevada.
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<PAGE> 5
OPINION
16. Except for the filings and recordings described above, no
approval, consent, or withholding of objection on the part of, or other
filing or registration with, any Governmental Authority in the State is
required to be made or taken in the State of Nevada to establish,
protect and preserve title to, interests in, liens on and to perfect
the security interests in the collateral as contemplated by the
Operative Documents, except continuation statements which are required
to be filed within six months prior to the expiration of five years
from the date of the original filing of the Financing Statements and
within six months prior to the expiration of each five year period from
such date thereafter.
17. Neither the execution and delivery of the Operative Documents,
nor the fulfillment of or the compliance with the provisions thereof,
by Trustee, Agent or Lenders, results in a violation of, or contravenes
any state statute, law, rule, code, ordinance or regulation to which
Trustee, Agent or Lenders is subject.
18. Except for federal, state and local franchise, withholding and
income taxes, no taxes, fees or other charges imposed by the State of
Nevada, Clark County, Nevada or any other local governmental entity are
payable by Trustee, Agent or Lenders solely as a result of the
execution, delivery, performance, recordation or filing (where
applicable) of the Operative Documents and all other instruments
delivered in connection with the transactions contemplated thereby
(except for nominal filing or recording fees payable at the time of
filing or recording).
19. The provisions in the Operative Documents concerning interest,
loan fees, late fees, prepayment premiums, default rate of interest and
other charges, including the methods of calculation and payment
thereof, are not usurious under, or otherwise violative of, the laws of
the State of Nevada.
20. Under the laws of the State of Nevada and local jurisdictions
therein, there are no statutory or regulatory requirements relating to
the transfer of ownership or operation, sale or foreclosure of the
collateral situated in the State of Nevada which require notification
of the State of Nevada or the local jurisdiction of such transfer, sale
or foreclosure, certification that there has been no discharge of
Hazardous Materials or other substances.
21. The laws of the State of Nevada do not require a lienholder to
make an election of remedies where such lienholder holds security
interests and liens on both the real and the personal property of a
debtor or to take recourse first or solely against or otherwise exhaust
its remedies against its collateral before otherwise proceeding to
enforce against such debtor the obligations of such debtor.
22. Each of the Operative Documents contains adequate provisions for
enforcing payment of all monetary obligations secured thereby and for
the practical realization of the rights and benefits offered thereby.
23. Each of Parent and Lessee has received and presently holds (i)
all approvals,
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<PAGE> 6
OPINION
consents, orders and authorizations from all Governmental Authorities
necessary or required in connection with the valid execution and
delivery of the Operative Documents, (ii) all licenses, permits,
approvals, consents, orders and authorizations from the Gaming
Authority and the Liquor Authority necessary or required to operate and
conduct games of chance and sell liquor as presently being conducted
and sold at the Resort and (iii) all licenses, permits, approvals,
consents, orders and authorizations from the State of Nevada and Clark
County, Nevada necessary or required in connection with the business
operation of the Resort where the failure to obtain such licenses,
permits, approvals, consents, orders and authorizations would have a
Material Adverse Effect.
24. A court sitting in the State of Nevada would respect the choice
of Nevada law in each of the Operative Documents.
25. None of the Equipment subject to the Lease is "personal property
gaming collateral" as defined in and for the purposes of the Nevada
Gaming Commission Regulation 8A.
26. No sales, use or other transfer tax will be assessed or claimed
by any Governmental Authority in the State of Nevada with respect to
any of the transactions contemplated by the Operative Documents.
The opinions expressed herein are based upon the applicable laws,
regulations and ordinances in effect as of the date of this letter. In
delivering this letter to you, we are not undertaking to apprise you
either of any transactions, events or occurrences taking place after
the date of this letter of which we may acquire any knowledge or of any
change in any applicable laws taking place after the date of this
letter which may affect our opinions set forth herein.
This opinion relates only to the laws of the State of Nevada and the
federal laws of the United States. We do not opine on the laws of any
other jurisdiction.
This opinion is solely for your benefit and the benefit of your
successors and assigns in connection with the transactions referred to
herein and may not be quoted or relied on by, nor may copies be
delivered to, any other person or used for any other purpose or any
other transaction, without our prior written consent.
Very truly yours,
SCHRECK MORRIS
-181-
<PAGE> 7
OPINION
SCHEDULE A
Heller Financial Leasing, Inc.
Phoenixcor, Inc.
First Security Trust Company of Nevada
-182-
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