<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ________ to ________.
Commission file number: 0-26518
FITZGERALDS GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0329170
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
301 FREMONT STREET, LAS VEGAS NV 89101
(Address of principal executive offices)(Zip Code)
(702) 388-2224
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 than 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 [ ]
Shares outstanding of each of the registrant's classes of common stock
as of August 1, 1997
<TABLE>
<CAPTION>
Class Outstanding as of August 1, 1997
----- --------------------------------
<S> <C>
Common stock, $.01 par value 4,012,846
</TABLE>
<PAGE> 2
FITZGERALDS GAMING CORPORATION
FORM 10-Q
INDEX
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 29,
1997 AND DECEMBER 31, 1996 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE QUARTER AND TWO QUARTERS ENDED JUNE 29, 1997
AND JUNE 30, 1996 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE TWO QUARTERS ENDED JUNE 29, 1997 AND JUNE 30, 1996 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
PART II OTHER INFORMATION 20
SIGNATURES
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 29, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
JUNE 29, 1997 DEC. 31, 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,670,107 $ 13,349,497
Accounts receivable, net of allowance for
doubtful accounts of $258,946 and $253,942 2,286,423 2,056,841
Accounts and notes receivable, related parties 2,201,399 2,209,188
Inventories 1,309,215 1,545,661
Prepaid expenses
Gaming taxes 1,309,166 1,374,319
Insurance 383,770 326,621
Other 1,530,475 1,367,699
------------ ------------
Total current assets 26,690,555 22,229,826
------------ ------------
PROPERTY AND EQUIPMENT, net 147,824,484 151,883,083
------------ ------------
OTHER ASSETS
Restricted cash - construction 1,168,613 2,254,323
Restricted investment 1,000,000 1,000,000
Long-term accounts and notes receivable -
related parties, net of current portion 638,344 10,753
Investment in Fremont Street Experience LLC 1,693,313 2,038,813
Investment in 101 Main Street LLC 2,810,477 2,975,362
Debt offering costs 6,673,472 7,013,894
Other assets 1,692,024 1,772,520
------------ ------------
Total other assets 15,676,243 17,065,665
------------ ------------
TOTAL $190,191,282 $191,178,574
============ ============
(continued)
</TABLE>
See Notes to Condensed Consolidated Financial Statements
Page 4 of 22
<PAGE> 5
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
JUNE 29, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
JUNE 29, 1997 DEC. 31, 1996
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Current portion of long-term debt $ 6,845,660 $ 25,637,728
Current portion of notes payable - related parties 2,111,892 2,111,892
Accounts payable 6,713,845 11,518,602
Accrued and other:
Payroll and related 4,062,063 3,290,264
Progressive jackpots 974,381 733,800
Outstanding chips and tokens 793,321 843,162
Interest 9,184,611 459,326
Offering costs 1,000,000 1,048,611
Other 3,628,547 3,619,451
------------- -------------
Total current liabilities 35,314,320 49,262,836
LONG-TERM DEBT, net of current portion 144,370,174 127,856,487
NOTES PAYABLE - RELATED PARTIES, net of current portion 25,861 25,903
------------- -------------
Total liabilities 179,710,355 177,145,226
------------- -------------
MINORITY INTEREST 212,093 587,837
------------- -------------
COMMITMENTS AND CONTINGENCIES
CUMMULATIVE REDEEMABLE PREFERRED STOCK, recorded at
liquidation preference value, net of unamortized
offering costs and discounts 17,483,871 15,488,782
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, $.01 par value; 29,200,000 shares authorized;
4,012,846 shares issued and outstanding 40,128 40,128
Additional paid-in capital 23,649,582 23,785,603
Accumulated deficit (30,904,747) (25,869,002)
------------- -------------
Total stockholders' deficiency (7,215,037) (2,043,271)
------------- -------------
TOTAL $ 190,191,282 $ 191,178,574
============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
Page 5 of 22
<PAGE> 6
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER AND TWO QUARTERS ENDED JUNE 29, 1997 AND JUNE 30, 1996
<TABLE>
<CAPTION>
Quarter Ended Two Quarters Ended
------------------------------ ------------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Casino $ 34,099,764 $ 27,342,963 $ 64,716,996 $ 54,249,224
Food and beverage 5,510,557 4,571,168 10,796,394 9,257,222
Rooms 5,463,033 3,062,928 10,333,772 6,089,720
Other 2,674,730 1,696,397 4,784,233 3,415,007
------------ ------------ ------------ ------------
Total 47,748,084 36,673,456 90,631,395 73,011,173
Less promotional allowances 3,728,602 2,837,411 7,194,527 5,809,596
------------ ------------ ------------ ------------
Net 44,019,482 33,836,045 83,436,868 67,201,577
------------ ------------ ------------ ------------
OPERATING COSTS AND EXPENSES
Casino 16,434,678 13,970,120 31,990,635 27,911,455
Food and beverage 4,282,907 3,184,998 8,261,244 6,235,061
Rooms 3,240,366 2,019,618 6,120,810 3,913,594
Other operating 383,775 391,247 736,204 796,613
Selling, general and administrative 10,981,926 10,706,118 22,009,099 20,736,577
Depreciation and amortization 3,003,209 1,980,742 5,837,691 3,909,695
------------ ------------ ------------ ------------
Total 38,326,861 32,252,843 74,955,683 63,502,995
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 5,692,621 1,583,202 8,481,185 3,698,582
OTHER INCOME (EXPENSES)
Interest income 80,190 584,816 162,452 1,373,578
Interest income - stockholders 19,481 30,636 38,960 53,472
Other income 19,113 (20,679) 39,027 45,239
Interest expense (5,788,711) (4,750,006) (11,540,925) 10,069,955)
Interest expense - stockholders (37,269) (43,452) (73,721) (89,059)
Other expense - - (350,000) -
Gain on sale of assets 25,585 122,809 23,505 271,052
Equity in income (loss) of unconsolidated
affiliates 104,787 (312,247) 9,639 (183,819)
Minority interest in (income)
loss of subsidiaries 266,192 (78,901) 169,222 (163,207)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE TAXES 381,989 (2,883,822) (3,040,656) (5,064,117)
INCOME TAX BENEFIT - 981,722 - 1,715,319
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 381,989 ($ 1,902,100) ($ 3,040,656) ($ 3,348,798)
PREFERRED STOCK DIVIDENDS (1,015,905) (874,343) (1,995,089) (1,682,683)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON STOCK ($ 633,916) ($ 2,776,443) ($ 5,035,745) ($ 5,031,481)
============ ============ ============ ============
NET LOSS PER COMMON SHARE ($ 0.16) ($ 0.69) ($ 1.25) ($ 1.25)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,012,846 4,012,846 4,012,846 4,012,846
============ ============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
Page 6 of 22
<PAGE> 7
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWO QUARTERS ENDED JUNE 29, 1997 AND JUNE 30, 1996
<TABLE>
<CAPTION>
June 29, 1997 June 30, 1996
------------- --------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,157,144 $ 12,587
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 40,567 305,358
Repayments from related parties - 83,298
Acquisition of property and equipment (1,772,465) (23,957,403)
Decrease in restricted cash - construction 1,085,710 23,952,379
Distribution from 101 Main Street 946,000 -
Investment in Fremont Street Experience (425,976) (539,574)
------------ ------------
Net cash used in investing activities (126,164) (155,942)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt 380,882 3,631,245
Repayment of long-term debt (3,778,640) (6,680,327)
Payment of debt offering costs (106,089) -
Dividends to minority stockholders (206,523) (174,431)
Decrease in restricted cash - 471,569
Other - (7,330)
------------ ------------
Net cash used in financing activities (3,710,370) (2,759,274)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,320,610 (2,902,629)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,349,497 19,843,824
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,670,107 $ 16,941,195
============ ============
Cash paid for interest $ 1,492,992 $ 10,510,617
============ ============
Cash paid for income taxes $ 18,075 -
============ ============
SUMMARY OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Property and equipment acquired through the
issuance of debt $ 23,689 $ 1,546,268
Accretion of discount on preferred stock 215,674 139,900
Accrual of preferred stock dividends 1,779,415 1,542,783
Advances receivable transferred to Investment in
101 Main Street - 2,500,000
Stock redemption adjustment 136,021 -
</TABLE>
See Notes to Condensed Consolidated Financial Statements
Page 7 of 22
<PAGE> 8
FITZGERALDS GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed consolidated financial statements of
Fitzgeralds Gaming Corporation ("the Company") as of June 29, 1997 and for the
quarter and two quarters ended June 29, 1997 and June 30, 1996, respectively,
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the interim
condensed consolidated financial statements have been included. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1996.
The results of operations for the quarter and two quarters ended June 29, 1997
are not necessarily indicative of the results to be expected for the year ending
December 31, 1997.
2. Investment in 101 Main Street
On February 16, 1996, the Company received approval from the Colorado
Limited Gaming Commission to purchase, through Fitzgeralds Black Hawk Inc,
("FBHI"), an indirect wholly-owned subsidiary of the Company, a 22% equity
interest in 101 Main Street LLC ("101 Main"), the owner of Fitzgeralds Black
Hawk Casino. The purchase became effective on February 26, 1996 and the Company
began accounting for this investment using the equity method on this date. The
Company had advanced $2,500,000 to 101 Main, which amount was reclassified to an
investment account subject to the acquisition of the 22% equity interest. FBHI
has exercised its option and intends to acquire the 78% interest in 101 Main not
currently owned by FBHI at a purchase price of approximately $27.3 million.
3. Recently Issued Accounting Standards
The Financial Accounting Standards Board (FASB) recently issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), Earnings per
Share, which is effective for fiscal years ending after December 15, 1997. SFAS
128 establishes standards for computing and presenting earnings per share to
make them comparable to international earnings per share standards and requires
dual presentation of basic and diluted earnings per share for entities with
complex capital structures. Earlier application of this statement is not
permitted and upon adoption requires restatement (as applicable) of all
prior-period earnings per share data presented. After adoption, the Company
expects there will be no material effect on the presentation or computation of
its earnings per share.
The FASB recently issued Statement of Financial Accounting Standards No.
130 (SFAS 130), Reporting Comprehensive Income, which is effective for fiscal
years beginning after December
Page 8 of 22
<PAGE> 9
15, 1997. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company has not yet determined the effect adoption of
SFAS 130 will have on disclosures in its consolidated financial statements.
The FASB recently issued Statement of Financial Accounting Standards No.
131 (SFAS 131), Disclosure About Segments of an Enterprise and Related
Information, which is effective for fiscal years beginning after December 15,
1997. SFAS 131 establishes standards for segment reporting in the financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. The Company has not yet
determined the effect adoption of SFAS 131 will have on disclosures in its
consolidated financial statements.
4. Long-Term Debt
Fitzgeralds Reno, Inc. ("FRI"), a wholly-owned subsidiary of the
Company, issued a note (the "Fitzgeralds Reno Note") to an individual, in
connection with the acquisition of Fitzgeralds Casino/Hotel, Reno. FRI had not
made full principal payments on the Fitzgeralds Reno Note since March 1996 based
on a verbal agreement with the holder and was approximately $1.3 million in
arrears on principal as of June 29, 1997. The holder of the note had not placed
the note into default or demanded payment of either the principal in arrears or
the entire principal balance as of such date. However, neither had the note
holder waived any rights under the note agreement. As a result, the Company
classified the entire balance of the Fitzgeralds Reno Note as current as of
December 31, 1996 and March 30, 1997. On July 30, 1997, FRI renegotiated the
terms and conditions of the Fitzgeralds Reno Note. Monthly payments on the
Fitzgeralds Reno Note were reduced to $150,000 per month from July 31, 1997
through December 31, 1997; thereafter, monthly payments will be $200,000. The
remaining principal and interest will be due December 31, 2001.
Additionally, FRI was in default under the terms and conditions of a
note (the "Stockholder Note") issued to an individual in connection with the
purchase of such individual's ownership in FRI and, as of June 29, 1997, was
approximately $825,000 in arrears in principal and interest. On or about July 9,
1997, the Company paid $883,270 on the Stockholder Note, agreed to adjust the
principal outstanding, and agreed to modifications that created separate notes
to the holder and his former wife. The revised notes call for aggregate monthly
payments of $20,000 from August 1, 1997 to January 31, 1998. Interest only
payments will commence February 1, 1998 through January 31, 1999 with monthly
principal and interest payments of $75,000 thereafter; remaining principal and
interest due September 16, 2001.
The Fitzgeralds Reno Note and the Stockholder Note have been recorded
in accordance with the revised terms in the condensed consolidated balance
sheet as of June 29, 1997.
5. Employee Stock Option Plan
In March 1997, in an action that was subsequently ratified by the
Company's stockholders, the Company modified its Stock Option Incentive Plan
(the "Plan"). The exercise price of all options outstanding under the Plan,
which previously sat at $4.50 per share, were changed to $1.00, except for
options granted to two controlling stockholders, the exercise price of which was
changed to $1.10.
6. Defaults upon Senior Secured Notes
As further explained in the Company's Current Report on Form 8-K dated
December 31, 1996 and filed on June 29, 1997, the Company was in default on its
senior securities, including the 13% Priority Secured Notes due December 31,
1998 (the "Priority Notes") and the 13% Senior Secured Notes due 2002 (the
"Senior Secured Notes"), such defaults being triggered by cross-default
Page 9 of 22
<PAGE> 10
provisions contained in the indentures and related agreements governing such
notes.
As further explained in Note 4, the Company has renegotiated the terms
and conditions of the Stockholder Note and the Fitzgeralds Reno Note, therefore
curing all defaults thereunder. The Company has also obtained from the requisite
holders of its senior securities, including the Priority Notes and the Senior
Secured Notes, waivers with respect to any default which may have existed as a
result of cross-default provisions under such notes.
7. Contingencies
As further discussed in Legal Proceedings, on May 31, 1995 Fitzgeralds
Reno, Inc. ("FRI"), a wholly-owned subsidiary of the Company, sold the closed
Harolds Club in Reno to an unrelated publicly-traded company that subsequently
sold Harolds Club to a company the assets of which are now under control of the
United States Bankruptcy Court for the Northern District of New York. Under the
terms of certain indemnification agreements executed in connection with the sale
of Harolds Club, FRI is contingently obligated for certain land lease payments
in the amount of approximately $650,000 annually plus certain property-related
costs, such as taxes and insurance, if said lease payments and costs are not
paid by the current owner of Harolds Club. As of June 29, 1997, the current
owner of Harolds Club was approximately $816,000 in arrears in land lease
payments.
Page 10 of 22
<PAGE> 11
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Condensed Consolidated Financial Statements
and the Notes thereto included in this report. The following discussion contains
certain forward-looking statements. The forward-looking statements are
necessarily based upon a number of estimates and assumptions that, while
considered reasonable, are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
control of the Company, and upon assumptions with respect to future business
decisions which are subject to change. Risks to which the Company is subject
include, but are not necessarily limited to, competition, high level of
indebtedness, the need for additional financing, development and construction
risks, market fluctuations, gaming, liquor and other regulatory matters,
taxation, the availability and retention of key management, and environmental
matters. Accordingly, actual results could differ materially from those
contemplated by such forward-looking statements.
GENERAL
Fitzgeralds Gaming Corporation ("Fitzgeralds" or the "Company") owns and
operates the Fitzgeralds Casino-Hotel at the Fremont Street Experience in Las
Vegas, Nevada ("Fitzgeralds Las Vegas"), the Fitzgeralds Casino-Hotel in
downtown Reno, Nevada ("Fitzgeralds Reno"), the Fitzgeralds Casino-Hotel in
Tunica, Mississippi ("Fitzgeralds Tunica") and the Nevada Club Casino in Reno,
Nevada ("Nevada Club"). Additionally, the Company holds a 22% equity interest in
101 Main Street LLC ("101 Main"), the owner of the Fitzgeralds Casino located in
Black Hawk, Colorado ("Fitzgeralds Black Hawk"). Fitzgeralds Black Hawk is
managed by the Company. The Company, through its new wholly-owned subsidiary,
Fitzgeralds Black Hawk II, Inc. ("FBHI-II"), is in the process of acquiring the
remaining 78% of 101 Main that it is does not currently own. The Company expects
to close such purchase on or about August 15, 1997. See Recent Developments
below. The Company also manages the Cliff Castle Casino, in Camp Verde, Arizona,
which is owned by the Yavapai-Apache Tribe.
Changes in operations affecting the period-to-period comparisons below
include (a) the purchase of a 22% equity interest in the owner of Fitzgeralds
Black Hawk Casino on February 26, 1996; (b) the completion of the renovation and
expansion of Fitzgeralds Las Vegas in late 1996; and (c) the opening of the
hotel at Fitzgeralds Tunica (the "Tunica Hotel") in late 1996.
In the discussions below, the "Cumulative 1997 Period" is defined as the
two quarters ended June 29, 1997 and the "Cumulative 1996 Period" is defined as
the two quarters ended June 30, 1996. The "1997 Q2 Period" is defined as the
quarter ended June 29, 1997 and the "1996 Q2 Period" is defined as the quarter
ended June 30, 1996. EBITDA, or "earnings before interest, taxes on income,
depreciation, and amortization," is a supplemental financial
Page 11 of 22
<PAGE> 12
measurement used by the Company in the evaluation of its gaming business and by
many gaming industry analysts. EBITDA is calculated by adding depreciation and
amortization expense to income from operations. Adjusted EBITDA is EBITDA plus
cash distributions received from 101 Main. For all properties, EBITDA is
calculated after the allocation of corporate costs. However, EBITDA and Adjusted
EBITDA should only be read in conjunction with all of the Company's financial
data summarized above and its condensed consolidated financial statements
including the notes thereto prepared in accordance with Generally Accepted
Accounting Principles ("GAAP") appearing elsewhere herein, and should not be
construed as an alternative either to income from operations (as determined in
accordance with GAAP) as an indication of the Company's operating performance or
to cash flows from operating activities (as determined in accordance with GAAP)
as a measure of liquidity.
TWO QUARTERS ENDED JUNE 29, 1997 COMPARISON TO TWO QUARTERS ENDED JUNE
30, 1996
The table below sets forth Net Operating Revenues (which represents
Total Revenues less Promotional Allowances) and Adjusted EBITDA for the 1997
Cumulative Period and the 1996 Cumulative Period. Adjusted EBITDA, which the
Company uses as a reasonable measure of its ability to generate cash from
operating activities and as a means to compare the Company's performance with
that of its competitors, increased 100.6%, to $15.3 million for the 1997
Cumulative Period from the $7.6 million recorded for the 1996 Cumulative Period.
While Fitzgeralds Las Vegas posted a 19.5% decline in Adjusted EBITDA, the
Company's other properties recorded increases in EBITDA. The decline at
Fitzgeralds Las Vegas resulted from a combination of weak market conditions and
difficulties in achieving expected results from marketing programs in place.
Higher levels of Adjusted EBITDA elsewhere resulted from a combination of
stronger markets and successful implementation of marketing programs.
SUMMARY OF OPERATING RESULTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Net Operating Revenues Adjusted EBITDA
-------------------------------- ---------------------------------
1997 1996 1997 1996
Period Period Period Period
<S> <C> <C> <C> <C> <C> <C>
Fitzgeralds Las Vegas $23,617 $23,207 +1.8% $ 1,862 $ 2,312 -19.5%
Fitzgeralds Tunica 34,256 20,553 +66.7% 6,497 1,098 +491.6%
Fitzgeralds Reno 19,396 18,083 +7.3% 3,812 2,454 +55.3%
Other 6,168 5,359 +15.1% 3,094 1,744 +77.4%
-------------------------------- ---------------------------------
TOTAL $83,437 $67,202 +24.2% $15,265 $ 7,608 +100.6%
======= ======= ====== ======= ======= =======
</TABLE>
"Other" includes results of operations at Nevada Club, management fees
from the Oneida Contract, Fitzgeralds Black Hawk and Cliff Castle Casino, costs
related to corporate overhead in
Page 12 of 22
<PAGE> 13
addition to that already allocated to each wholly owned property and, in the
case of Adjusted EBITDA, cash distributions from Fitzgeralds Black Hawk.
Total Revenues were $90.6 million and Net Operating Revenues were $83.4
million for the 1997 Cumulative Period, representing, respectively, 24.1% and
24.2% increases over the Total Revenues of $73.0 million and Net Operating
Revenues of $67.2 million for the 1996 Cumulative Period. Such increases were
largely the result of improved performance at Fitzgeralds Tunica and to a lesser
extent improved performance at the other properties.
The Company's business can be separated into four departments: casino,
rooms, food and beverage and other. Casino Revenues, approximately 77% and 76%
of which are derived from slot machine revenues for the 1997 and 1996 Cumulative
Periods, respectively, increased by 19.3% from the $54.2 million recorded for
the 1996 Cumulative Period to the $64.7 million recorded for the 1997 Cumulative
Period, due principally to the Tunica Hotel, which opened in phases from August
to October 1996. Casino Revenues increased 47.8% at Fitzgeralds Tunica, while
Casino Revenues were essentially unchanged at Fitzgeralds Las Vegas and
increased 6.3% at Fitzgeralds Reno, due mostly to increased traffic from the
Women's International Bowling Congress ("the Bowling Tournament") held in Reno
during the second quarter of 1997. Casino Revenues represented 71.4% and 74.3%
of Total Revenues for the 1997 and 1996 Cumulative Periods, respectively. This
decrease in Casino Revenues as a percentage of Total Revenues is largely
attributed to greater increases in Rooms and Food and Beverage Revenues due to
the opening of the Tunica Hotel.
Rooms Revenues (at 11.4% and 8.3% of Total Revenues for the 1997 and
1996 Cumulative Periods, respectively) increased 69.7% from the earlier period
due primarily to the opening of the Tunica Hotel. Rooms Revenues at Fitzgeralds
Tunica, at $3.6 million for the 1997 Cumulative Period, are not comparable to
the 1996 Cumulative Period since the Tunica Hotel did not commence operations
until August 1996 and was not fully operational until October 1996. The Tunica
Hotel operated at an average occupancy rate of 88.9% for the 1997 Cumulative
Period. Rooms Revenues increased by 9.2% at Fitzgeralds Las Vegas due to a
decrease in tour-and-travel customers with replacement by free independent
travelers typically paying a higher average daily room rate, partially offset by
lower occupancy rates, at 93.6% and 97.3% for the 1997 and 1996 Cumulative
Periods, respectively. At Fitzgeralds Reno, higher Rooms Revenues were the
result of a combination of higher daily room rates and an increase in average
occupancy rates, from 90.1% to 87.3% for the 1997 and 1996 Cumulative Periods,
respectively.
These increases were largely due to the Bowling Tournament.
Food and Beverage Revenues (at 11.9% and 12.7% of Total Revenues for the
1997 and 1996 Cumulative Periods, respectively) increased 16.6%
period-to-period. This increase was primarily the result of additional food
venues at Fitzgeralds Las Vegas and Fitzgeralds Tunica, which posted gains of
8.5% and 58.9%, respectively. Food and Beverage Revenues at Fitzgeralds Reno
were essentially unchanged.
Other Revenues for the 1997 Cumulative Period increased 40.1% over the
1996 Cumulative Period, due to increases in operating performance at Fitzgeralds
Black Hawk and the Cliff Castle Casino.
Promotional Allowances increased 23.8% period-to-period, as a result of
increases in volumes, partially offset by improved methods to determine which
guests should receive complimen-
Page 13 of 22
<PAGE> 14
tary goods and services.
OPERATING EXPENSES
Total Operating Expenses increased 18.0%, from $63.5 million for the
1996 Cumulative Period to $75.0 million for the 1997 Cumulative Period,
primarily due to increases in volume, increases in payroll costs related to the
start of operations of the Tunica Hotel and of additional food venues at
Fitzgeralds Las Vegas and Fitzgeralds Tunica. Total Operating Expenses were also
affected by a 49.3% increase in Depreciation and Amortization Expense as
renovated and expanded facilities at Fitzgeralds Las Vegas and Fitzgeralds
Tunica were put into service.
Casino Expenses were $32.0 million for the 1997 Cumulative Period, a
14.6% increase from the $27.9 million for the 1996 Cumulative Period, primarily
as a result of increased volume and increased personnel and other costs in
response to market conditions. Food and Beverage Expenses increased 32.5%, from
$6.2 million for the 1996 Cumulative Period to $8.3 million for the 1997
Cumulative Period, as the result of additional restaurants at Fitzgeralds Las
Vegas and Fitzgeralds Tunica. Rooms Expenses increased 56.4%, from $3.9 million
for the 1996 Cumulative Period to $6.1 million for the 1997 Cumulative Period,
primarily as the result of the start of operations at the Tunica Hotel, while
increases in Rooms Expense at Fitzgeralds Las Vegas and Fitzgeralds Reno were
4.7% and 2.0%, respectively.
The three largest cross-departmental operating expense categories of the
Company are promotional allowances (discussed above), personnel and marketing.
Personnel Expenses increased 11.7%, from approximately $30.0 million for
the 1996 Cumulative Period to approximately $33.4 million for the 1997
Cumulative Period. This increase resulted from the start of operations at the
Tunica Hotel, as well as the need for larger staff at the expanded Las Vegas and
Tunica facilities.
Marketing Expenses, which includes advertising, promotional material,
special events and the operations of the Fitzgeralds Card, increased 31.8% from
the 1996 Cumulative Period to the 1997 Cumulative Period. The increase reflects
more intensive marketing efforts at each property undertaken in response to
increasing competitive activity in each of the markets in which the Company
operates, particularly in Tunica, Mississippi. The Company's strategy is to
utilize its expanded and renovated facilities as additional marketing elements
and to continue to adjust marketing expense levels as needed to respond to
competition.
Depreciation and Amortization Expense was $5.8 million for the 1997
Cumulative Period, a 49.3% increase over the 1996 Cumulative Period, as a result
of the start of depreciation of the expanded and renovated facilities at
Fitzgeralds Las Vegas and Fitzgeralds Tunica.
INCOME FROM OPERATIONS
As a result of the foregoing, Income from Operations was $8.5 million
for the 1997 Cumulative Period, a 129.3% increase from the $3.7 million recorded
for the 1996 Cumulative Period.
Page 14 of 22
<PAGE> 15
INTEREST EXPENSE AND INCOME TAX PROVISION OR BENEFIT
Interest Expense, net of interest income, for the 1997 Cumulative Period
was $11.4 million, a 30.7% increase over the $8.7 million for the 1996
Cumulative Period, due primarily to an 85.9% decline in interest income,
resulting from the lower restricted cash balance, as well as an increase in
interest expense resulting from the issuance in December 1996 of $5.9 million of
13% Priority Notes due 1998 (the "Priority Notes"). The net proceeds to the
Company from the sale of the Priority Notes of approximately $4.7 million were
used for working capital purposes.
While the Company recorded $1.7 million in income tax benefit for the
1996 Cumulative Period, it recorded no income tax benefit or provision for the
1997 Cumulative Period.
NET LOSS
Net Loss decreased from a net loss of $3.3 million for the 1996
Cumulative Period to a net loss of $3.0 million for the 1997 Cumulative Period,
due to an increase in Operating Income at all properties, especially Fitzgeralds
Tunica, substantially offset by an increase in Interest Expense and the absence
of an income tax benefit for the 1997 Cumulative Period.
QUARTER ENDED JUNE 29, 1997 COMPARISON TO QUARTER ENDED JUNE 30, 1996
The table below sets forth Net Operating Revenues and Adjusted EBITDA
for each of the Core Properties for the 1997 Q2 Period and the 1996 Q2 Period.
During the 1996 Q2 Period, Fitzgeralds Las Vegas had begun to experience
construction-related disruption. Adjusted EBITDA, which the Company uses as a
reasonable measure of its ability to generate cash from operating activities and
as a means to compare the Company's performance with that of its competitors,
increased 155.7%, to $9.1 million for the 1997 Q2 Period from $3.6 million for
the 1996 Q2 Period.
SUMMARY OF OPERATING RESULTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Net Operating Revenues Adjusted EBITDA
---------------------------- ----------------------------
1997 Q2 1996 Q2 1997 Q2 1996 Q2
Period Period Period Period
<S> <C> <C> <C> <C> <C> <C>
Fitzgeralds Las Vegas $11,578 $11,050 +4.8% $743 $952 -22.0%
Fitzgeralds Tunica 18,058 10,153 +77.8% 3,416 (9) n/m
Fitzgeralds Reno 10,988 9,732 +12.9% 3,184 1,603 +98.7%
Other 3,395 2,901 +17.0% 1,771 1,018 +74.0%
---------------------------- ----------------------------
TOTAL $44,019 $33,836 +30.1% $9,114 $3,564 +155.7%
</TABLE>
Page 15 of 22
<PAGE> 16
In the above table, "Other" includes results of operations at Nevada
Club, management fees from the Oneida Contract, Fitzgeralds Black Hawk and the
Cliff Castle Casino, costs related to corporate overhead in addition to that
already allocated to each wholly owned property and, in the case of Adjusted
EBITDA, cash distributions from Fitzgeralds Black Hawk.
Total Revenues were $47.7 million and Net Operating Revenues were $44.0
million for the 1997 Q2 Period, representing, respectively, 30.2% and 30.1%
increases over the Total Revenues of $36.7 million and Net Operating Revenues of
$33.8 million for the 1996 Q2 Period. Such increases were largely the result of
improved performance at Fitzgeralds Tunica and, to a lesser extent, improved
performance at the other properties.
Casino Revenues, approximately 79% and 77% of which were derived from
slot machine revenues for the 1997 and 1996 Q2 Periods, respectively, increased
by 24.7% from $27.3 million for the 1996 Q2 Period to $34.1 million for the 1997
Q2 Period, due primarily to the opening of the Tunica Hotel. Casino Revenues
increased 57.6% at Fitzgeralds Tunica, while casino revenues were essentially
unchanged at Fitzgeralds Las Vegas and increased 12.4% at Fitzgeralds Reno, due
primarily to the Bowling Tournament. Casino Revenues represented 71.4% and 74.6%
of Total Revenues for the 1997 and 1996 Q2 Periods, respectively. This decrease
in Casino Revenues as a percentage of Total Revenues was largely attributable to
increases in Rooms and Food and Beverage Revenues due to the opening of the
Tunica Hotel.
Rooms Revenues (at 11.4% and 8.4% of Total Revenues for the 1997 and
1996 Q2 Periods, respectively) increased 78.4% from the earlier period due
primarily to the opening of the Tunica Hotel. Rooms Revenues at Fitzgeralds
Tunica were $1.9 million for the 1997 Q2 period, but are not comparable to the
1996 Q2 Period since the Tunica Hotel did not commence operations until August
1996 and was not fully operational until October 1996. The Tunica Hotel operated
at an average occupancy rate of 90.9% for the 1997 Q2 Period. Rooms Revenues
increased by 13.6% at Fitzgeralds Las Vegas due to the replacement of a portion
of the tour-and-travel customers with free independent travelers typically
paying a higher average daily room rate, partially offset by lower occupancy
rates, at 93.4% and 98.4% for the 1997 and 1996 Q2 Periods, respectively. At
Fitzgeralds Reno, higher Rooms Revenue were the result of a combination of
higher daily room rates and an increased average occupancy rate, 93.9% and 90.1%
for the 1997 and 1996 Q2 Periods, respectively. These increases were largely due
to the Bowling Tournament.
Food and Beverage Revenues (at 11.5% and 12.5% of Total Revenues for the
1997 and 1996 Q2 Periods, respectively) increased 20.6% period-to-period. This
increase was primarily the result of additional food venues at Fitzgeralds Las
Vegas and Fitzgeralds Tunica, which posted gains of 13.1% and 61.7%,
respectively. Food and Beverage Revenues at Fitzgeralds Reno increased 5.1% due
primarily to increased traffic from the Bowling Tournament.
Other Revenues for the 1997 Q2 Period increased 57.7% over the 1996 Q2
Period, due to increases in operating performance at Fitzgeralds Black Hawk and
the Cliff Castle Casino.
Promotional Allowances increased 31.4% period-to-period, as a result of
increases in volumes, partially offset by improved methods to determine which
guests should receive complimentary goods and services.
Page 16 of 22
<PAGE> 17
OPERATING EXPENSES
Total Operating Expenses increased 18.8%, from $32.3 million for the
1996 Q2 Period to $38.3 million for the 1997 Q2 Period, primarily due to
increases in volume, increases in payroll costs related to the start of
operations of the Tunica Hotel and additional food venues at Fitzgeralds Las
Vegas and Fitzgeralds Tunica, as well as a 51.6% increase in Depreciation and
Amortization Expense as the expanded and renovated facilities at Fitzgeralds Las
Vegas and Fitzgeralds Tunica were put into service.
Casino Expenses were $16.4 million for the 1997 Q2 Period, a 17.6%
increase from the $14.0 million for the 1996 Q2 Period, primarily as the result
of increased volume and increased personnel and other costs in response to
market conditions. Food and Beverage Expenses increased 34.5%, from $3.2 million
for the 1996 Q2 Period to $4.3 million for the 1997 Q2 Period, reflecting
primarily the opening of additional restaurants at Fitzgeralds Las Vegas and
Fitzgeralds Tunica. Rooms Expenses increased 60.4%, from $2.0 million for the
1996 Q2 Period to $3.2 million for the 1997 Q2 Period, primarily as the result
of the opening of the Tunica Hotel, while increases at Fitzgeralds Las Vegas and
Fitzgeralds Reno were 4.7% and 2.0%, respectively.
Personnel Expenses, one of the three largest cross-departmental
operating expense categories besides marketing and depreciation and
amortization, increased 13.0%, from approximately $15.2 million for the 1996 Q2
Period to approximately $17.1 million for the 1997 Q2 Period. This increase
resulted from the start of operations at the Tunica Hotel, as well as the need
for larger staff at the expanded Las Vegas and Tunica facilities. During the
1996 Q2 Period, a portion of Personnel Expense was capitalized as part of
construction costs. Additionally, staffing levels were reduced during
construction at the Las Vegas property.
Marketing Expenses, which includes advertising, promotional material,
special events and the operations of the Fitzgeralds Card, increased 13.2% from
the 1996 Q2 Period to the 1997 Q2 Period. The increase was due primarily to more
intensive marketing efforts at each property undertaken in response to
increasing competitive activity in each of the markets in which the Company
operates, particularly in Tunica, Mississippi.
Depreciation and Amortization Expense was $3.0 million for the 1997 Q2
Period, a 51.6% increase over the 1996 Q2 Period, principally as a result of the
depreciation of the expanded and renovated facilities at Fitzgeralds Las Vegas
and Fitzgeralds Tunica.
INCOME FROM OPERATIONS
As a result of the foregoing, Income from Operations was $5.7 million
for the 1997 Q2 Period, a 259.6% increase from the $1.6 million for the 1996 Q2
Period.
INTEREST EXPENSE AND INCOME TAX PROVISION OR BENEFIT
Interest Expense, net of interest income, for the 1997 Q2 Period was
$5.7 million, a 37.1% increase over the $4.2 million for the 1996 Q2 Period, due
primarily to an 83.8% decline in interest
Page 17 of 22
<PAGE> 18
income, resulting from the lower restricted cash balance, as well as an increase
in interest expense resulting from the issuance in December 1996 of the Priority
Notes.
While the Company had $0.98 million in income tax benefit for the 1996
Q2 Period, it had no income tax benefit or provision for the 1997 Q2 Period.
NET INCOME
Net Income was $381,989 for the 1997 Q2 Period compared to a net loss of
$1.9 million for the 1996 Q2 Period. This increase was due to an increase in
Operating Income at all properties, especially Fitzgeralds Tunica, offset
partially by an increase in Interest Expense and the absence of an income tax
benefit for the 1997 Q2 Period.
LIQUIDITY AND CAPITAL RESOURCES
At June 29, 1997, the Company had unrestricted cash of $17.7 million,
which compares with unrestricted cash of $13.3 million at December 31, 1996 and
$16.9 million at June 30, 1996. The unrestricted cash balance at June 29, 1997
included approximately $7.5 million in cash on hand for casino operations. The
Company made the semi-annual interest payments totaling approximately $8.4
million on the Senior Secured Notes and the Priority Notes on June 30, 1997.
Net cash provided by operating activities was $8.2 million for the 1997
Cumulative Period, which compares with net cash provided by operating activities
of $12,587 for the 1996 Cumulative Period. The primary reasons for this increase
were an increase in income from operations, discussed elsewhere in this report,
and a $9.6 million increase in accruals, due mostly to the accrual of interest
expense on the Company's senior obligations, partially offset by a $4.8 million
decrease in accounts payable. Net cash used by investing activities was $126,164
for the 1997 Cumulative Period compared with $155,942 for the 1996 Cumulative
Period. While during the 1996 Cumulative Period, acquisition of property and
equipment was substantially offset by a decrease in restricted cash, in the 1997
Cumulative Period, acquisition of property and equipment exceeded the decrease
in restricted cash by nearly $0.7 million. This deficit was more than offset by
distributions from 101 Main. Additionally, lower proceeds from sale of assets
was partially offset by a smaller investment in Fremont Street Experience. Net
cash used by financing activities was $3.7 million for the 1997 Cumulative
Period, compared with $2.8 million for the 1996 Cumulative Period. This increase
in net cash used in financing activities was the result of a decline in
long-term debt repayment (from $6.9 million for the 1996 Cumulative Period to
$3.8 million for the 1997 Cumulative Period), partially offset by lower
borrowings during the period (from $3.6 million for the 1996 Cumulative Period
to $380,882 for the 1997 Cumulative Period).
The Company has substantial fixed costs, including debt service on
the Senior Secured Notes and on the Priority Notes, as well as a continuing
need for funds to finance on-going capital requirements at each of
Page 18 of 22
<PAGE> 19
its facilities. The Company believes that its cash flow from operations,
together with its cash reserves, will be sufficient to support normal operating
and capital needs and its debt service requirements. However, the Company is
highly leveraged and it operates in intensely competitive markets and,
therefore, there can be no assurances that the performance trends recorded in
the recent past will continue into the near future.
RECENT DEVELOPMENTS
In the balance sheets dated December 31, 1996, and March 30, 1997, the
Company had classified certain indebtedness as current liabilities as a result
of default conditions affecting such indebtedness. As further explained in Note
4 to the financial statements enclosed herein, the Company has restructured such
indebtedness and as a result reclassified them. Such reclassification is partly
responsible for the improvement in liquidity from December 31, 1996, to June 29,
1997.
The Company has exercised its option and intends to acquire the 78%
equity interest in 101 Main not currently owned by FBHI at a purchase price of
approximately $27.3 million, calculated on the basis of a pre-established
earnings formula, and has obtained commitments from institutional investors to
purchase $38.0 million of 13% First Mortgage Notes (the "First Mortgage Notes")
subject to approval of the Colorado Limited Gaming Commission ("the Black Hawk
Financing"). Such approval is expected to be granted on or about August 14,
1997, although assurance of such approval cannot be given. Because of certain
restrictions on FGC, as issuer, and FBHI, as a subsidiary guarantor, contained
in existing loan documents, FBHI formed FBHI-II as a wholly-owned subsidiary of
FBHI. Concurrently with the consummation of the Purchase, FBHI will contribute
substantially all of its assets (including its 22% equity interest in 101 Main,
its option to acquire the remaining 78% equity interest in 101 Main and the
management agreement (the "Management Agreement") between FBHI and 101 Main, to
FBHI-II. At the same time, 101 Main will lend approximately $27.3 million from
the proceeds of the offering to FBHI-II, which funds will be used by FBHI-II to
acquire the additional 78% equity interest in 101 Main. FBHI-II, as the owner of
all of the equity interests in 101 Main and the Management Agreement, will
guarantee the obligations of 101 Main under the First Mortgage Notes. The
remainder of the proceeds from the First Mortgage Notes will be used to retire
certain existing indebtedness secured by assets of 101 Main and for general
corporate purposes.
Page 19 of 22
<PAGE> 20
<PAGE> 21
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On May 31, 1995 Fitzgeralds Reno, Inc. ("FRI"), a wholly-owned
subsidiary of the Company, sold the closed Harolds Club in Reno to an unrelated
publicly-traded company which subsequently sold Harolds Club to a company, the
assets of which are now under control of the United States Bankruptcy Court for
the Northern District of New York. Under the terms of certain indemnification
agreements executed in connection with the sale of Harolds Club, FRI is
contingently obligated for certain land lease payments in the amount of
approximately $650,000 annually plus certain property-related costs, such as
taxes and insurance, if said lease payments and costs are not paid for by the
current owner of Harolds Club.
The current owner of Harolds Club has not met its obligations with
respect to the land leases (approximately $816,000 in arrears as of June 29,
1997) and the lessors have demanded payment from the current lessor, FRI and
from another, unrelated guarantor. On or about August 2, 1996, each of the five
land lessors filed separate actions in the Second Judicial District Court
(Washoe County), State of Nevada, seeking payment from FRI and the other
guarantor of an aggregate of approximately $319,280 in unpaid lease payments
plus interest, attorneys' fees and costs. On October 31, 1996, four of the land
lessors entered into a Stipulation with each of the named defendants pursuant to
which the parties agreed to stay all action in the suits until April 15, 1997 in
order to, among other things, allow the current owners an opportunity to find a
buyer for the property and to allow FRI time to attempt to preserve the right to
operate non-restricted gaming in the property. On March 20, 1997, the Nevada
Gaming Commission approved the application filed by Nevada Club, Inc. to operate
non-restricted gaming at Harolds Club for a period not to exceed one year from
the date of approval. The Company operated 21 slot machines at Harolds Club, on
behalf of its owner, and at no significant cost to the Company, for a total of
two hours.
The one land lessor who failed to join in the Stipulation has indicated
an intention to dismiss FRI and all other defendants except one, from its
lawsuit. However, that dismissal has not yet occurred. On October 31, 1996, one
of the named defendants filed a cross-claim against FRI and the other defendants
for indemnification and has threatened to make further claims against FRI. FRI
intends to vigorously defend this action as well as the other four actions.
ITEM 2. CHANGES IN SECURITIES.
Not Applicable
Page 20 of 22
<PAGE> 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
As further explained in the Company's Current Report on Form 8-K dated
December 31, 1996 and filed on June 29, 1997, the Company was in default under
the Indenture (the "Indenture") governing its 13% Priority Secured Notes due
December 31, 1998 (the "Priority Notes") and on its 13% Senior Secured Notes due
2002, as a result of cross-default provisions contained in the Indenture and
related agreements governing such Notes. The Priority Notes and the Senior
Secured Notes are collectively referred to as the Notes. The Company's defaults
on other indebtedness secured by assets of the Company that triggered the
cross-default provisions were cured on July 9, 1997, and July 30, 1997, and on
August 13, 1997, waivers of such defaults were obtained from the requisite
holders of the Company's Priority Notes and Senior Secured Notes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On August 5, 1997, the Company submitted to its noteholders a consent
solicitation relating to (i) the exercise of the option to acquire the remaining
78% equity interest in 101 Main, the entity which owns Fitzgeralds Black Hawk
and the related Black Hawk Financing; (ii) the restructuring of the principal
indebtedness encumbering Fitzgeralds Reno, which includes the waiver of past
defaults, a reduction in monthly interest payments and the grant of a security
interest in an adjacent parcel which will become an integral part of Fitzgeralds
Reno (the "Fitzgeralds Reno Debt Restructuring"); and (iii) a one-year extension
of the period for consummating certain specified offerings or mergers and
corresponding changes affecting contingent interest on, and warrants sold in
connection with, the Senior Secured Notes and a class of preferred stock. On
August 13, 1997, holders of a majority in principal amount of the Notes granted
consents and waivers with regard to (i) and (ii). The Company continues
discussions with the holders of its securities in regard to item (iii). A
complete description of such matters is contained in the text of the Consent
Solicitation which is attached to this Form 10-Q as Exhibit 20 and incorporated
herein by reference thereto.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit 20, Form of Consent Solicitation for Fitzgeralds Black Hawk Acquisition,
Fitzgeralds Reno Debt Restructuring and Extension of Period for
Qualified Public Offering and Qualified Public Company Merger (the
"Consent Solicitation Statement")
Exhibit 99, Documents pertaining to the restructuring of notes payable by
Fitzgeralds Reno, Inc. to the Estate of Lincoln Fitzgeralds and to John
Metzker, including:
(a) Second Modification on Deed of Trust
(b) Deed of Trust
(c) Second Amended and Restated Promissory Note
(d) Second Modification of Security Agreement
(e) Security Agreement
(f) Replacement Note Secured by Deed of Trust in the amount of
$4,128,672.88
(g) Replacement Note Secured by Deed of Trust in the amount of
$1,402,893.14
(h) Third Amendment to Stock Redemption Agreement
(i) Release and Settlement Agreement
(j) Second Modification of Deed of Trust and Security Agreement and
Fixture Filing and Assignment
(k) Replacement Promissory Note
Report on Form 8-K filed on June 29, 1997.
Report on Form 8-K filed on July 14, 1997.
Page 21 of 22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 12, 1997
FITZGERALDS GAMING CORPORATION
Fernando Bensuaski
Executive Vice President
(Duly Authorized Officer)
Michael E. McPherson
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer, Principal
Financial Officer and Principal
Accounting Officer)
Page 22 of 22
<PAGE> 1
EXHIBIT 20
FITZGERALDS GAMING CORPORATION
301 FREMONT STREET
LAS VEGAS, NEVADA 89101
SOLICITATION OF CONSENTS OF
HOLDERS OF
13% SENIOR SECURED NOTES DUE 2002
WITH CONTINGENT INTEREST,
HOLDERS OF
13% PRIORITY SECURED NOTES DUE
DECEMBER 31, 1998
AND
HOLDERS OF
WARRANTS
August 4, 1997
To: Holders of 13% Senior Secured Notes
due 2002 With Contingent Interest,
Holders of 13% Priority Secured Notes
due December 31, 1998, and
Holders of Warrants:
This Consent Solicitation Statement (this "Consent Solicitation") is
being furnished by the Board of Directors of Fitzgeralds Gaming Corporation (the
"Company") to (i) the registered holders (the "Senior Holders") of the Company's
13% Senior Secured Notes due 2002 With Contingent Interest (the "Senior Notes"),
(ii) the registered holders (the "Priority Holders") of the Company's 13%
Priority Secured Notes due December 31, 1998 (the "Priority Notes") and (iii)
the registered holders (the "Warrant Holders" and collectively with the Senior
Holders and the Priority Holders, the "Holders") of the Company's Warrants (the
"Warrants") issued pursuant to the Warrant Agreement dated as of December 19,
1995 (the "Warrant Agreement").
Through this Consent Solicitation the Company is seeking (i) the consent
of the Senior Holders to certain amendments to the Indenture dated as of
December 19, 1995, as amended by the First Supplemental Indenture dated as of
December 30, 1996 (collectively, the "Indenture"), among the Company, as Issuer
of the Senior Notes, Fitzgeralds South, Inc., Fitzgeralds Reno, Inc. ("FRI"),
Fitzgeralds Incorporated, Fitzgeralds Las Vegas, Inc., Fitzgeralds Fremont
Experience Corporation, Fitzgeralds Mississippi, Inc. (formerly named Polk
Landing Entertainment Corporation), and Fitzgeralds Black Hawk, Inc. ("FBH"), as
Subsidiary Guarantors, and Bank of New York Western Trust Company (successor to
Wells Fargo Bank, N.A.), as Trustee, and to conforming amendments to the Senior
Notes and the Note Documents, as necessary (collectively, the "Indenture
Amendments"), (ii) the consent of the Priority Holders, under the Note Purchase
Agreement dated as of December 30, 1996 (the "Note Purchase Agreement") among
the Company, as Issuer of the Priority Notes, the Subsidiary Guarantors, and the
Priority Holders, to the Indenture Amendments and to conforming amendments to
the Priority Notes and the Priority Notes Documents (as defined in the Note
Purchase Agreement), as necessary, (iii) the consent of the Warrant Holders to
certain amendments to the Warrant Agreement (the "Warrant Amendments" and
collectively with the Indenture Amendments, the "Amendments"), and (iv) the
waiver by the Senior Holders and the
<PAGE> 2
August 4, 1997
Page 2
Priority Holders of certain events of default under the Indenture and the Note
Purchase Agreement (the "Waivers"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
Indenture.
I. SUMMARY OF PROPOSED AMENDMENTS AND WAIVERS
The proposed Amendments and Waivers relate to (i) the exercise of the
option to acquire the remaining 78% equity interest in 101 Main Street Limited
Liability Company, a Colorado limited liability company ("Main Street"), the
entity which owns the casino in Black Hawk, Colorado known as "Fitzgeralds Black
Hawk" and the related financing of this acquisition (the "Black Hawk
Financing"); (ii) the restructuring of the principal indebtedness encumbering
the casino and hotel in Reno, Nevada known as "Fitzgeralds Reno," which includes
the waiver of past defaults, a reduction in monthly interest payments and the
grant of a security interest in an adjacent parcel which will become an integral
part of Fitzgeralds Reno (the "Fitzgeralds Reno Debt Restructuring"); and (iii)
a one-year extension of the period for consummation of a Qualified Public
Offering (a "QPO") or a Qualified Public Company Merger (a "QPCM") and
corresponding changes affecting Base Contingent Interest and the extension of
the redemption period of the Warrants, for which the Company would agree to a
one-year extension of the exercise period for the Warrants (collectively, the
"Extension of the Cut-Off Period").
The following is a summary of the proposed Amendments and Waivers, each
of which will require the consent of a majority in interest of the applicable
Holders.
A. The Black Hawk Financing
Main Street will be the primary obligor under the Black Hawk Financing.
FBH is the current owner of the 22% interest in Main Street and the manager of
Fitzgeralds Black Hawk. FBH is a Subsidiary Guarantor of the Senior Notes and
the Priority Notes, and the termination of this guarantee might require the
consent of all Senior Holders and Priority Holders. However, the terms of the
Black Hawk Financing require that the obligations of Main Street be guaranteed
by an entity which owns Main Street but is not a Subsidiary Guarantor (i.e., has
not guaranteed the Senior Notes and the Priority Notes). To satisfy such
requirements, Fitzgeralds Black Hawk, Inc. II ("FBHII") will be formed as a
subsidiary of FBH and FBHII will guarantee the Black Hawk Financing (the "FBHII
Guarantee"). Upon the receipt by FBHII of all necessary regulatory approvals,
FBH will assign its option to acquire the remaining 78% equity interest in Main
Street and contribute its 22% interest in Main Street and its interest in the
Management Agreement between FBH and Main Street (the "Management Agreement") to
FBHII, which will assume the rights and obligations of FBH under the Management
Agreement and which will acquire the remaining 78% equity interest in Main
Street.
The proposed Black Hawk Financing, which is discussed further below,
will require the following amendments to the Indenture (the "Black Hawk
Financing Amendments"):
- The definition of Fitzgeralds Black Hawk will be amended to provide that
the term only refers to the Fitzgeralds Black Hawk Casino through the
consummation of the Black Hawk Financing. Absent this change, Main
Street would have to be a Restricted Subsidiary pursuant to the
provisions of Section 1019(c)(ii) of the Indenture and a Subsidiary
Guarantor pursuant to the provisions of Section 1019(b) of the
Indenture.
<PAGE> 3
August 4, 1997
Page 3
- The definitions of Restricted Subsidiary and Unrestricted Subsidiary
will be amended to provide that Main Street, upon the consummation of
the Black Hawk Financing, will be an Unrestricted Subsidiary and not a
Restricted Subsidiary which would be required to be a Subsidiary
Guarantor (and guarantee the Senior Notes and the Priority Notes).
- As currently defined, Indebtedness of a Restricted Subsidiary guaranteed
by another Restricted Subsidiary or the guarantee of the other
Restricted Subsidiary does not qualify as Non-Recourse Indebtedness;
therefore, the Black Hawk Financing would not qualify as Permitted Black
Hawk Indebtedness. To remedy this, the definitions of Non-Recourse
Indebtedness and Permitted Black Hawk Indebtedness will be amended to
provide that the FBHII Guarantee qualifies as Non-Recourse Indebtedness
and Permitted Black Hawk Indebtedness.
- The definition of Significant Restricted Subsidiary will be amended to
provide that FBHII, although a Restricted Subsidiary, will not become a
Significant Restricted Subsidiary. Absent this change, FBHII would have
to be a Subsidiary Guarantor pursuant to Section 1019(b) of the
Indenture and, pursuant to the terms of the Black Hawk Financing, FBHII
cannot be a Subsidiary Guarantor.
- Section 1012(e) currently provides that the Company and Subsidiary
Guarantors may incur Permitted Black Hawk Indebtedness. However, FBHII,
although a Restricted Subsidiary, will not be a Subsidiary Guarantor.
Accordingly, Section 1012(e) will be amended to enable a Restricted
Subsidiary which is not a Subsidiary Guarantor, such as FBHII, to incur
Permitted Black Hawk Indebtedness.
- The definition of Excluded Assets will be amended to include the assets
of FBHII (which will become the owner of the assets owned by FBH). With
this change, such assets would not collateralize the Senior Notes and
the Priority Notes.
- Section 1017 currently limits the ability of to incur Liens other than
Permitted Liens. The definition of Permitted Liens will be amended to
enable FBHII to pledge its assets, as required in connection with the
Black Hawk Financing.
- Section 1014 limits the imposition of restrictions on the ability of a
Restricted Subsidiary to pay dividends or make other payments to another
Restricted Subsidiary or the Company. The Indenture governing the Black
Hawk Financing will contain a "Restricted Payments" covenant which
applies to FBH-II as a Restricted Subsidiary and, therefore, would
violate Section 1014 absent an amendment exempting FBH-II.
B. The Fitzgeralds Reno Debt Restructuring
The Fitzgeralds Reno Debt Restructuring involves the restructuring of
the principal indebtedness encumbering Fitzgeralds Reno, the waiver of past
events of default and the grant by FRI to its present secured creditors (the
"FRI Creditors") of a security interest in a currently unencumbered one-acre
parcel (the "El Fitz") which is adjacent to and has become an integral part of
Fitzgeralds Reno. As discussed further, the Fitzgeralds Reno Debt Restructuring
will require the
<PAGE> 4
August 4, 1997
Page 4
following waivers under the Indenture and the Note Purchase Agreement and the
following amendment to the Indenture (the "FRI Waivers and Amendments"):
- Waivers are being sought of those past events of default under the
Indenture and the Note Purchase Agreement previously disclosed in a
letter to the Senior Holders and the Priority Holders dated June 3,
1997 (the "June 3 Letter") and that arising from the inadvertent
failure of the Company to designate the El Fitz as either an
Excluded Asset or as Collateral under the Indenture.
- The definition of Excluded Assets in the Indenture will be amended
to provide that the El Fitz is an Excluded Asset and is not
Collateral under the Indenture. Absent this change and the change
discussed below with respect to the definition of Permitted Liens,
FRI would not be able to grant the security interest in the El Fitz
required pursuant to the Fitzgeralds Reno Debt Restructuring, and
the El Fitz would have to be additional Collateral for the Senior
Notes and the Priority Notes.
- FRI is a Restricted Subsidiary, and Section 1017 currently limits
the ability of to incur Liens other than Permitted Liens. The
definition of Permitted Liens will be amended to include the
security interest to be granted in the El Fitz pursuant to the
Fitzgeralds Reno Debt Restructuring.
<PAGE> 5
August 4, 1997
Page 5
C. The Extension of the Cut-Off Period
The proposed Extension of the Cut-Off Period, including corresponding
changes affecting Base Contingent Interest, the extension of the period to
redeem the Warrants and the extension of the period to exercise the Warrants
will require the following amendments to the Indenture and the Warrant Agreement
(the "Cut-Off Period Extension Amendments"):
- The definition of Commencement Date will be amended to provide that
the term only refers to the date upon which the Senior Notes begin
to bear Contingent Interest, December 31, 1997. The term "Cut-Off
Date," defined as December 31, 1998, shall be added as a new
definition to the Indenture in order to provide, in conjunction with
the change to Section 301 of the Indenture discussed below, that the
consummation of a QPO or a QPCM on or before the Cut-Off Date will
terminate the obligation of the Company to pay Contingent Interest
thereafter. Absent these changes and the changes discussed below,
the Company could consummate a QPO or QPCM during 1998 and be
obligated to continue paying Contingent Interest after the
consummation of such a transaction.
- Section 301 will be amended to provide that the consummation of a
QPO or a QPCM on or before the Cut-Off Date will terminate any
future right of the Senior Notes to bear Contingent Interest.
- The definition of Base Contingent Interest in the Indenture will be
amended to reduce the percentage of EBITDA payable as Base
Contingent Interest during 1998, from 25% thereof to .0001%, thereby
virtually eliminating any Contingent Interest for 1998.
- A definition will be added of the term "Rate" in order to clarify
that the term is only used with respect to, and only applies to, the
13% "coupon" on the Senior Notes and not to the Senior Notes'
participation, if any, in the Company's EBITDA, designated as
Contingent Interest. This is consistent with the use of the
undefined term "rate" within the Indenture.
- Section 6(b) of the Warrant Agreement will be amended to extend the
Final Separation Date to December 31, 1998, thereby providing an
additional one-year period during which the Company may redeem and
cancel the Restricted Note Warrants and the Restricted Preferred
Stock Warrants, subject to the consummation of a QPO or QPCM on or
before the Final Separation Date (and, in the case of the Preferred
Stock Warrants, the redemption of the Preferred Stock).
- Section 8(a) of the Warrant Agreement will be amended to extend the
exercise period of all the Warrants for one additional year, to
December 19, 1999.
<PAGE> 6
August 4, 1997
Page 6
II. DISCUSSION
A. Fitzgeralds Black Hawk Option and Financing.
In October 1994, FBH entered into the Membership Purchase Agreement
dated October 21, 1994 (the "MPA") with Main Street. (The equity interests of
limited liability companies are considered memberships and a membership purchase
agreement for a limited liability company is analogous to a stock purchase
agreement for a corporation.) Pursuant to the MPA, FBH purchased a 22%
membership interest in Main Street and received an option to purchase the
remaining 78%, which FBH has exercised at a purchase price, determined by a
formula set forth in the MPA, which the Company believes is below the market
value of the remaining interest. Accordingly, the Board believes that the
acquisition of the remaining 78% is in the best interests of FBH and the
Company. The Company has arranged for financing, as described below, in order to
acquire the remaining interest in Main Street.
The Company has entered into a Letter Agreement with Jefferies &
Company, Inc. ("Jefferies") dated July 17, 1997, pursuant to which the Company
has engaged Jefferies to act as exclusive financial advisor to the Company in
connection with the issuance and sale of approximately $38.0 million in debt
securities in connection with the acquisition of the remaining interest in Main
Street. As proposed, the Black Hawk Financing will be structured such that: (i)
Main Street will be the primary obligor under the Black Hawk Financing and (ii)
FBHII will provide the FBHII Guarantee. The Black Hawk Financing will also
provide that, upon receipt of all necessary regulatory approvals relating to
FBHII, FBH will assign its option to acquire the remaining 78% equity interest
in Main Street and contribute its 22% interest in Main Street and its interest
in the Management Agreement to FBHII. As a result, upon exercise of the option,
FBHII will own all of Main Street and will assume the rights and obligations of
FBH under the Management Agreement. FBHII will not be a Subsidiary Guarantor of
the Senior Notes or the Priority Notes.
Main Street's obligations under the Black Hawk Financing will be
collateralized by all the assets of Main Street, consisting principally of
Fitzgeralds Black Hawk, and by the membership interests in Main Street,
representing 100% of the membership interests upon the consummation of the Black
Hawk Financing. The FBHII Guarantee will be collateralized by the FBHII assets.
As discussed below, the Black Hawk Financing, as presently proposed, will
require certain amendments to the Indenture.
At the time the Indenture was entered into, it was contemplated that FBH
would acquire the remaining interest in Main Street. Accordingly, the Indenture
provided for Permitted Black Hawk Indebtedness, which generally would allow the
incurrence of Indebtedness for the acquisition of the remaining interest in Main
Street as long as the Indebtedness was either (a) Pari Passu Indebtedness or
Subordinated Indebtedness or (b) Non-Recourse Indebtedness of a Subsidiary
Guarantor, "in each case in respect of the purchase price payable by the Company
to acquire membership interests in Main Street."
However, as presently structured, upon the acquisition of the remaining
interests in Main Street, the provisions of Section 1019(c)(ii) of the Indenture
would cause Main Street to be designated a Restricted Subsidiary and Section
1019(b) would cause Main Street to be a Subsidiary Guarantor. As a result, the
FBHII Guarantee would be guaranteeing the Indebtedness of a Restricted
Subsidiary and would not qualify as Non-Recourse
<PAGE> 7
August 4, 1997
Page 7
Indebtedness and Permitted Black Hawk Indebtedness. Similarly, a Restricted
Subsidiary's obligations, those of Main Street under the Black Hawk Financing,
would be supported by a guarantee of a Restricted Subsidiary, FBHII, and
therefore would not qualify as Non-Recourse Indebtedness and Permitted Black
Hawk Indebtedness. Accordingly, the Board proposes amending the definitions of
(i) Fitzgeralds Black Hawk, so that Main Street will not become a Restricted
Subsidiary upon the acquisition of the remaining membership interests; and (ii)
Restricted Subsidiary and Unrestricted Subsidiary, to provide that Main Street,
upon the consummation of the Black Hawk Financing, will become an Unrestricted
Subsidiary and not a Restricted Subsidiary. Similarly, the Board proposes
amending the definitions of Non-Recourse Indebtedness and Permitted Black Hawk
Indebtedness (i) to insure that the FBHII Guarantee constitutes Non-Recourse
Indebtedness and Permitted Black Hawk Indebtedness; (ii) to avoid any
interpretative issues arising from the fact that the option will be exercised,
and the purchase price paid, by FBHII, which will hold the option by assignment
from FBH, and not by the Company; and (iii) to confirm that the Black Hawk
Financing is Permitted Black Hawk Indebtedness.
Further, Section 1012(e), which sets forth the debt incurrence exemption
for Permitted Black Hawk Indebtedness, applies by its terms only to Subsidiary
Guarantors. Accordingly, Section 1012(e) must be amended to allow for Permitted
Black Hawk Indebtedness to be incurred by FBHII, which will be a Restricted
Subsidiary but not a Subsidiary Guarantor (since it will not, and can not, by
the terms of the Black Hawk Financing, guarantee the Senior Notes and the
Priority Notes). Additionally, Section 1014 limits the imposition of
restrictions on the ability of a Restricted Subsidiary to pay dividends or make
other payments to another Restricted Subsidiary or the Company. The Indenture
governing the Black Hawk Financing will contain a "Restricted Payments" covenant
which applies to FBH-II as a Restricted Subsidiary and, therefore, would violate
Section 1014 absent an amendment exempting FBH-II. Accordingly, Section 1014
must be amended to exempt FBH-II from its limitations.
B. Fitzgeralds Reno Debt Restructuring
As previously disclosed in the June 3 Letter (a copy of which is
attached as an exhibit hereto), it had come to the Company's attention that
certain events of default may have existed under the Note Purchase Agreement,
and therefore under the Indenture. These arose from the failure of the Company
to disclose certain defaults with respect to certain Indebtedness of FRI.
Recently, the Company reached agreement with the FRI Creditors for the
restructuring of this Indebtedness. In addition to curing the past defaults, the
Company was able to reduce the monthly installments payable with respect to such
Indebtedness (from $250,000 per month to $150,000 per month through the end of
1997 and to $200,000 per month thereafter). As a result, the circumstances
giving rise to the events of default are no longer continuing. The Fitzgeralds
Reno Debt Restructuring qualifies as Refinancing Indebtedness under the
Indenture, except as discussed below with respect to the grant of a security
interest in the El Fitz, and no amendments to the Indenture (or the Note
Purchase Agreement) are required, other than those discussed below to treat the
El Fitz as an Excluded Asset and enable FRI to grant a security interest in the
El Fitz in favor of the FRI Creditors.
As a part of the resolution of these issues and the reduction in the
monthly installments payable, FRI was required to pledge the El Fitz as
additional collateral for the FRI Indebtedness. At the time the Indenture was
entered into, the Company inadvertently failed to designate the El Fitz, which
is approximately one acre, located adjacent to Fitzgeralds Reno and intended to
be used for
<PAGE> 8
August 4, 1997
Page 8
and incorporated into Fitzgeralds Reno, as either an Excluded Asset or as
Collateral for the Senior Notes. This inadvertent failure has given rise to an
event of default under the Indenture and the Note Purchase Agreement.
Section 5.13 of the Indenture provides that the Senior Holders may waive
the events of default noted above with respect to the Indenture with the consent
of Holders of a majority in aggregate principal amount of the outstanding Senior
Notes. Similarly, Section 9 of the Note Purchase Agreement provides that the
Priority Holders may waive the events of default noted above with respect to the
Note Purchase Agreement with the consent of Holders of a majority in aggregate
principal amount of the outstanding Priority Notes. In addition to requesting a
waiver of these events of default, the Board hereby requests the consent of the
Senior Holders to amendments to the definitions of (i) Excluded Assets to
clarify that the El Fitz is an Excluded Asset and therefore would not be
Collateral with respect to the Senior Notes and the Priority Notes; and (ii)
Permitted Liens, to allow a security interest in the El Fitz to be granted to
the FRI Creditors pursuant to the Fitzgeralds Reno Debt Restructuring.
C. Extension of Cut-Off Period for QPO and QPCM
1. Contingent Interest
The Indenture currently provides that the Holders of the Senior Notes
will be entitled to share in the Company's EBITDA (with such participation being
designated as "Base Contingent Interest"), commencing December 31, 1997 (the
"Commencement Date"), in the event that neither a QPO nor a QPCM has been
consummated on or before December 31, 1997. This provision with respect to Base
Contingent Interest provided additional compensation to the Senior Holders if
they were not afforded the additional liquidity and risk reduction arising from
a QPO or QPCM, and provided an incentive for the Company to consider and
consummate either a QPO or a QPCM by the end of 1997, assuming that market and
industry conditions were favorable, and thereby terminate the Company's
obligation to pay Contingent Interest. However, certain market and other
factors, such as the performance of gaming stocks in relation to the overall
markets, competition in the gaming industry and competitive factors in the
Company's markets, the Company's limited financial resources and the need to
complete and assess the effects of the recent expansion of certain of the
Company's facilities, have, until recently, been unfavorable to such
transactions. Accordingly, although the Company is currently considering a QPCM,
no assurance can be given that it will be consummated. Moreover, the Board does
not believe that any such transaction could be consummated by December 31, 1997,
due to the time required to obtain the necessary regulatory approvals, among
other things. The Board believes that maintaining the current obligation to
accrue Contingent Interest commencing January 1, 1998 would make the Company a
less attractive candidate for a QPO or a QPCM and that it should be afforded at
least an additional year to compensate for the unfavorable factors discussed
above. Therefore, the Board is proposing amendments to revise the calculation of
Base Contingent Interest during 1998 and to add the term "Cut-Off Date," defined
as December 31, 1998, to provide (in conjunction with an amendment to Section
301 of the Indenture discussed below) that the consummation of a QPO or a QPCM
on or before the Cut-Off Date will terminate the obligation of the Company to
pay Contingent Interest thereafter.
The Indenture currently provides that Base Contingent Interest begins
accruing on December 31, 1997 (provided that no QPO or QPCM has been consummated
by such date) in an aggregate amount equal to 25% of the Company's EBITDA
(subject to adjustment based upon the percentage
<PAGE> 9
August 4, 1997
Page 9
of Senior Notes outstanding). The Board proposes amending the definition of Base
Contingent Interest, in order to reduce the percentage of EBITDA payable as Base
Contingent Interest during 1998, from 25% thereof to .0001%, thereby virtually
eliminating any Contingent Interest for 1998.
In addition, Section 301 will be amended to provide that the
consummation of a QPO or a QPCM on or before the Cut-Off Date will terminate any
future right of the Senior Notes to bear Contingent Interest. Further, the Board
believes that it is appropriate to amend the definition of Commencement Date to
provide that the term only refers to the date upon which the Senior Notes begin
to bear Contingent Interest, December 31, 1997, and to add a new defined term,
"Rate," in order to clarify that the term is only used with respect to, and only
applies to, the 13% "coupon" on the Senior Notes and not to the participation,
if any, in the Company's EBITDA designated as Contingent Interest. This is
consistent with the use of the undefined term "rate" within the Indenture.
2. Extension of Final Separation Date and Exercise Period for
Warrants
The Warrant Agreement currently provides that the Warrants are
exercisable until December 19, 1998 and that the Final Separation Date (as
defined in the Warrant Agreement) is December 31, 1997. If either a QPO or QPCM
has been consummated by the Final Separation Date, then all the Restricted Note
Warrants (as defined in the Warrant Agreement) will be automatically canceled.
Similarly, if either a QPO or QPCM has been consummated by the Final Separation
Date, the Company may redeem Restricted Preferred Stock Warrants (as defined in
the Warrant Agreement) based on a formula which gives effect to the redemption
of the Preferred Stock. Allowing the Company to redeem or cancel the Restricted
Note Warrants and Restricted Preferred Stock Warrants, together with the
provisions in the Indenture providing that Contingent Interest does not accrue
if a QPO or QPCM is consummated by the Cut-Off Date, make the Company a more
attractive candidate for a QPO or QPCM and provides a continuing incentive to
the Company to consummate such a transaction.
To date, the Company has been unable to consummate a QPO or a QPCM and,
as noted, regulatory considerations make it impossible to complete such a
transaction before the Final Separation Date as currently defined (i.e.,
December 31, 1997) even if it were otherwise feasible. Accordingly, in order to
maintain the incentives for the Company to consummate a QPO or QPCM by
preserving the Company's ability to redeem or cancel the Restricted Note
Warrants and the Restricted Preferred Stock Warrants, the Board is proposing
certain amendments to the Warrant Agreement in order to extend the Final
Separation Date with respect to the Restricted Note Warrants and the Restricted
Preferred Stock Warrants from December 31, 1997 to December 31, 1998. This
extension, together with the proposed changes virtually eliminating Contingent
Interest during 1998, provides the Company with an incentive to consummate a QPO
or QPCM on or before December 31, 1998. Additionally, as part of these
amendments and in order to benefit the Warrant Holders, the Warrant Agreement
would also be amended to extend the period during which all the Warrants are
exercisable from December 19, 1998 to December 19, 1999.
D. Required Approval
Each of the Indenture and the Note Purchase Agreement requires that
Holders of a majority in aggregate principal amount of the outstanding Senior
Notes and Priority Notes, respectively, consent to the Black Hawk Financing
Amendments and the FRI Waivers and Amendments in order for them to become
effective (collectively, the "Black Hawk and FRI Consents"). Similarly, each of
<PAGE> 10
August 4, 1997
Page 10
the Indenture, the Note Purchase Agreement and the Warrant Agreement requires
that Holders of a majority in aggregate principal amount of the outstanding
Senior Notes, Priority Notes and Warrants, respectively, consent to the Cut-Off
Period Extension Amendments in order for them to become effective (the
"Extension of the Cut-Off Period Consents"). The Black Hawk and FRI Consents and
the Extension of the Cut-Off Period Consents are not contingent upon each other,
and accordingly, attached hereto are two separate consent forms, the first with
respect to the Black Hawk and FRI Consents and the second with respect to the
Extension of the Cut-Off Period Consents.
E. Effective Date
When the Black Hawk and FRI Consents and the Extension of the Cut-Off
Period Consents, as the case may be, have been received, the "Second
Supplemental Indenture," containing such amendments as are approved by the
Holders, the "First Amendment to the Warrant Agreement," if the Cut-Off Period
Extension Amendments are approved, and such other amendments to the Senior Notes
Documents and the Priority Notes Documents and to any other documents as are
required will be executed. Upon the receipt of such documents, the Company will
deliver to the Trustee, the Collateral Agent, the Warrant Agent and any other
necessary persons any Board resolutions and other documents that may be required
under the Indenture, the Note Purchase Agreement and the Warrant Agreement. The
effective date of each of the Second Supplemental Indenture and the First
Amendment to the Warrant Agreement, if applicable, will be the date each such
document is executed by the parties thereto. Promptly after the effective date
of the Second Supplemental Indenture and the First Amendment to the Warrant
Agreement, the Company will mail the notice required by the Indenture, the Note
Purchase Agreement and the Warrant Agreement to the appropriate Holders
announcing the effectiveness of the Amendments. Currently, the Company and the
Trustee do not intend to issue new forms of Senior Notes, Priority Notes or
Warrants after the effective date of the Amendments.
<PAGE> 11
August 4, 1997
Page 11
F. Delivery of Consent
TO INDICATE YOUR CONSENT TO THE AMENDMENTS AND THE WAIVERS APPLICABLE TO
YOU, PLEASE SIGN THIS LETTER (OR A COPY HEREOF) IN THE SPACE PROVIDED BELOW AND
RETURN TO THE TRUSTEE (WITH A COPY TO THE COMPANY) BY FACSIMILE AND BY OVERNIGHT
COURIER AT THE FOLLOWING ADDRESS ON OR BEFORE 5:00 P.M. E.S.T. ON AUGUST 6,
1997:
BANK OF NEW YORK WESTERN TRUST COMPANY
101 BARCLAY STREET
NEW YORK, NEW YORK
ATTENTION: CORPORATE TRUST ADMINISTRATION
FACSIMILE: (212) 815-5915
This consent solicitation statement is being delivered to the registered
Holders on the books of the trustee as of the date hereof.
BY ORDER OF THE BOARD OF DIRECTORS
Philip D. Griffith
Chairman of the Board of Directors
<PAGE> 12
CONSENT TO
THE BLACK HAWK FINANCING AMENDMENTS
AND TO
THE FRI WAIVERS AND AMENDMENTS
1. The undersigned hereby consents to the Black Hawk Financing
Amendments and the FRI Waivers and Amendments described in the foregoing Consent
Solicitation Statement dated August 4, 1997 (the "Consent Solicitation") as of
the date indicated below.
2. The Trustee and Collateral Agent are hereby directed by the
undersigned to execute and deliver the Second Supplemental Indenture. This
direction shall survive the transfer of all or any portion of the Notes.
3. The undersigned acknowledges that (i) the Company offered to it to
make available all financial and other information it desires, (ii) it has
received and reviewed such information concerning the financial performance and
position of the Company as it deems appropriate, (iii) it has been given access
to, and ample opportunity to ask questions of, the Company's management
regarding the Black Hawk Financing and the Fitzgeralds Reno Debt Restructuring,
each as described in the Consent Solicitation, and the purposes therefor and
(iv) it has fully considered the foregoing consent and, to the extent deemed
necessary, consulted its counsel with regard thereto.
4. The undersigned represents and warrants to the Company and the
Trustee that:
(a) the undersigned owns and is the sole Holder of (or it has
full power and authority to act for and bind by the provisions hereof a
partnership, fund or account which owns and is the sole Holder of)
$__________________________________ principal amount of the Senior
Notes, represented by certificate number(s) __________
_________________________________________, free and clear of all liens
and encumbrances;
(b) the undersigned owns and is the sole Holder of (or it has
full power and authority to act for and bind by the provisions hereof a
partnership, fund or account which owns and is the sole Holder of)
$______________________________________ principal amount of the Priority
Notes, represented by certificate number(s) __________
________________________________________, free and clear of all liens
and encumbrances;
(c) the undersigned has duly executed and delivered this consent
and waiver in compliance with all laws and regulations applicable to it
and all agreements binding upon it, by an officer or agent thereunto
duly authorized (with full power and authority to bind each such fund
and account for which it is acting);
Holder: ____________________________________ Date: August ___, 1997
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE> 13
CONSENT TO
THE CUT-OFF PERIOD EXTENSION AMENDMENTS
1. The undersigned hereby consents to the Cut-Off Period Extension
Amendments described in the foregoing Consent Solicitation Statement dated
August 4, 1997 (the "Consent Solicitation") as of the date indicated below.
2. The Trustee and Collateral Agent are hereby directed by the
undersigned to execute and deliver the Second Supplemental Indenture. This
direction shall survive the transfer of all or any portion of the Notes.
3. The undersigned acknowledges that (i) the Company offered to it to
make available all financial and other information it desires, (ii) it has
received and reviewed such information concerning the financial performance and
position of the Company as it deems appropriate, (iii) it has been given access
to, and ample opportunity to ask questions of, the Company's management
regarding the Extension of the Cut-Off Period, as described in the Consent
Solicitation, and the purposes therefor and (iv) it has fully considered the
foregoing consent and, to the extent deemed necessary, consulted its counsel
with regard thereto.
4. The undersigned represents and warrants to the Company and the
Trustee that:
(a) the undersigned owns and is the sole Holder of (or it has
full power and authority to act for and bind by the provisions hereof a
partnership, fund or account which owns and is the sole Holder of)
$__________________________________ principal amount of the Senior
Notes, represented by certificate number(s) __________
_________________________________________, free and clear of all liens
and encumbrances;
(b) the undersigned owns and is the sole Holder of (or it has
full power and authority to act for and bind by the provisions hereof a
partnership, fund or account which owns and is the sole Holder of)
$______________________________________ principal amount of the Priority
Notes, represented by certificate number(s) __________
________________________________________, free and clear of all liens
and encumbrances;
(c) the undersigned owns and is the sole Holder of (or it has
full power and authority to act for and bind by the provisions hereof a
partnership, fund or account which owns and is the sole Holder of)
____________ Warrants, represented by certificate number(s) __________
________________________________________, free and clear of all liens
and encumbrances;
(d) the undersigned has duly executed and delivered this consent
and waiver in compliance with all laws and regulations applicable to it
and all agreements binding upon it, by an officer or agent thereunto
duly authorized (with full power and authority to bind each such fund
and account for which it is acting);
Holder: __________________________________ Date: August ___, 1997
By: ________________________________
Name: ______________________________
Title: _____________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAR-31-1997
<PERIOD-END> JUN-29-1997
<CASH> 17,670
<SECURITIES> 0
<RECEIVABLES> 2,545
<ALLOWANCES> (259)
<INVENTORY> 1,309
<CURRENT-ASSETS> 26,691
<PP&E> 147,824
<DEPRECIATION> 0
<TOTAL-ASSETS> 190,191
<CURRENT-LIABILITIES> 35,314
<BONDS> 144,370
17,484
0
<COMMON> 40
<OTHER-SE> (7,255)
<TOTAL-LIABILITY-AND-EQUITY> 190,191
<SALES> 13,648
<TOTAL-REVENUES> 47,748
<CGS> 0
<TOTAL-COSTS> 42,055
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,826
<INCOME-PRETAX> 382
<INCOME-TAX> 0
<INCOME-CONTINUING> 382
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 382
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
<PAGE> 1
Escrow No.__________________ When Recorded Mail to:
George Folsom
One East Liberty #416
Reno, Nevada 89501
SECOND MODIFICATION
OF
DEED OF TRUST
This Second Modification of Deed of Trust is made as of the ___ day of
___________, 1997, by and between Fitzgeralds Reno, Inc., a Nevada corporation,
hereinafter called the "Trustor", First American Title Company of Nevada, a
Nevada corporation, hereinafter called the "Trustee;" and the Meta K. Fitzgerald
Trust, Meta K. Fitzgerald, Trustee, hereinafter called the "Beneficiary".
WITNESSETH:
WHEREAS, Lincoln Investments, Inc., Ticor Title Insurance Company,
Nevada Club, Inc. and Nevada Club Enterprises, Inc. were parties to that certain
Deed of Trust dated December 31, 1986 (the "Deed of Trust"); and
WHEREAS, Fitzgeralds Reno, Inc. (hereinafter called the "Trustor") is
the successor in interest by reason of merger to Lincoln Investment Inc., First
American Title Company of Nevada, is the successor Trustee by reason of
substitution of Trustee of even date therewith to Western Title Company, Inc.,
the successor Trustee to Ticor Title Insurance Company by reason of Substitution
of Trustee recorded November 3, 1988 in Book 2822, page 710, Document No.
1285173 Official Records of Washoe County, Nevada, and The Meta K. Fitzgerald
Trust, Meta K. Fitzgerald, Trustee, is the successor in interest to Meta K.
Fitzgerald who is the successor in interest to the Estate of Lincoln Fitzgerald,
deceased, Meta K. Fitzgerald, Executrix, which was the successor in interest by
reason of assignment from Nevada Club, Inc., and Nevada Club Enterprises, Inc.;
and
WHEREAS, the predecessors to Trustor and Beneficiary executed and
delivered the Deed of Trust, which Deed of Trust was recorded December 31, 1986,
as Document No. 1129049, Official Records of Washoe County, Nevada, encumbering
the real property described therein; and
WHEREAS, the Deed of Trust secured a note of even date therewith in the
original principal amount of TWENTY FIVE MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($25,500,000.00) wherein the predecessor to Trustor was the Maker
and the predecessors to Beneficiary were the Payee (the "Original Note"); and
WHEREAS, on November 30, 1995, Trustor and Beneficiary amended and
restated the
1
<PAGE> 2
Original Note and modified the Deed of Trust (the "First Modification") and
provided therein that the Amended and Restated Promissory Note (the "First
Amended and Restated Note") was secured by the Deed of Trust; and
WHEREAS, the First Modification provided that the Deed of Trust, as
thereby modified, secured the Original Note as modified by the First Amended and
Restated Note in the principal sum of EIGHTEEN MILLION SIX HUNDRED SIX THOUSAND
SIX HUNDRED FIFTY-SIX AND 81/100 DOLLARS ($18,606,656.81), which principal and
interest thereon was payable in minimum monthly installments of TWO HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00) each calendar month which
commenced the 31st day of December, 1995, and monthly thereafter on the last day
of each succeeding calendar month until the 31st day of December, 2001, at which
time the entire unpaid principal balance and any unpaid accrued interest was to
be paid in full; and
WHEREAS, payments on the First Amended and Restated Note were made in
the amounts set forth in Exhibit "A"; and
WHEREAS, Trustor and Beneficiary desire to further amend and restate the
Original Note as replaced and superseded by the First Amended and Restated Note,
and to further modify the Deed of Trust to provide that the Second Amended and
Restated Promissory Note of even date herewith (the "Second Amended and Restated
Note") is secured by the Deed of Trust as modified by the First Modification and
as further modified herein; and
WHEREAS, it is appropriate to modify the terms of the Deed of Trust, as
modified by the First Modification,
NOW THEREFORE, based upon the foregoing recitals, and for valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Trustor, Trustee and Beneficiary agree as follows:
1. The third paragraph after "WITNESSETH" which commences with the words
"TO HAVE AND TO HOLD" is modified by deleting therefrom the entirety of
said paragraph and by inserting in place thereof the following new
language, to wit:
"TO HAVE AND TO HOLD the same unto the said Trustee and its successors
for the purpose of securing payment of an indebtedness in the sum of
SEVENTEEN MILLION EIGHT HUNDRED THIRTY-FIVE THOUSAND TWO HUNDRED
THIRTY-FIVE AND 18/100 DOLLARS ($17,835,235.18) as follows:
$17,835,235.18 evidenced by the Second Amended and Restated Note
of even date herewith with interest thereon, according to the
terms of said Second Amended and Restated Note, which Second
Amended and Restated Note is specifically referred to, and by
said reference is made a part hereof, as if set out in full,
executed by Trustor and delivered to
2
<PAGE> 3
Beneficiary, and payable to the order of Beneficiary and any and
all extensions or renewals thereof, payment of such additional
sums with interest thereon, as may be hereafter loaned by the
Beneficiary to the Trustor when evidenced by a Promissory Note
or notes of Trustor, payment of all other sums with interest
thereon becoming due and payable under the provisions hereof to
Trustee or to the Beneficiary and the performance and discharge
of each and every obligation, covenant and agreement of Trustor
herein contained" and by deleting throughout the Deed of Trust
wherever and whenever it appears, the word "Note" and by
substituting in place thereof the words "Second Amended and
Restated Note".
2. Exhibit "D" and all references thereto in the Deed of Trust, as modified
by the First Modification, are deleted in their entirety.
3. As hereby modified, the Deed of Trust, as previously modified by the
First Modification, remains in full force and effect, and Trustor
continues to be bound to perform the obligations secured thereby.
4. The Second Amended and Restated Note replaces and supersedes in all
respects the Original Note and the First Amended and Restated Note,
EXCEPT that the Agreement As To Prepayment Of Promissory Note dated
November 30, 1995, by and between Fitzgeralds Gaming Corporation,
Trustor, and Beneficiary, shall not be replaced or superseded by the
Second Amended and Restated Note and shall remain in full force and
effect as if set forth in full therein.
5. This Second Modification of Deed of Trust may be executed in multiple
counterparts, which taken together shall represent one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Modification of Deed of Trust the day and year first above written.
FITZGERALDS RENO, INC. THE META K. FITZGERALD TRUST,
A NEVADA CORPORATION META K. FITZGERALD, TRUSTEE
By: ________________________________ _________________________________
[signature] Meta K. Fitzgerald, Trustee
________________________________ "Beneficiary"
[print name]
Its:________________________________
"Trustor"
3
<PAGE> 4
ACKNOWLEDGED BY:
First American Title Company of Nevada
By: ____________________________
Name: Mark A. Clark
Title:__________________________
"Trustee"
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on ____________________ by
_____________________________ as____________ of Fitzgeralds Reno, Inc.
____________________________________
(Signature of notarial officer)
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on ____________________ by
The Meta K. Fitzgerald as Trustee of the Meta K. Fitzgerald Trust.
___________________________________
(Signature of notarial officer)
4
<PAGE> 5
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on ____________________ by
_____________________________ as ______________ of First American Title Company
of Nevada.
___________________________________
(Signature of notarial officer)
ACKNOWLEDGMENT AND AGREEMENT
Fitzgeralds Reno, Inc. ("Trustor") is a party to that certain Stock
Redemption Agreement with John G. Metzker ("Metzker") dated December 21, 1990,
to a certain Deed of Trust and Security Agreement and Fixture Filing to First
American Title Company of Nevada dated March 16, 1992, recorded March 17, 1992
in Book 3440, page 98 as Document No. 1554670, Official Record of Washoe County,
Nevada, to a certain Modification of Deed of Trust dated November 17, 1992,
recorded November 23, 1992, in Book 3617, page 3, Document No. 1624894, Official
Record of Washoe County, Nevada, and to a certain Second Modification of Deed of
Trust and Security Agreement and Fixture Filing and Assignment dated July 9,
1997, and recorded July 11, 1997, in Book _______, page_____ as Document No.
2116500, Official Record of Washoe County, Nevada (the "Metzker Documents"),
securing unto Metzker an interest in the property described in the Deed of Trust
for the benefit of the Meta K. Fitzgerald Trust, Meta K. Fitzgerald, Trustee,
("Beneficiary") referred to in the foregoing Second Modification of Deed of
Trust, which interest of Metzker is junior and subordinate to the interest of
Beneficiary therein. As a condition of the Second Modification of Deed of Trust
between Trustor and Beneficiary, Beneficiary requires the acknowledgment and
agreement of Metzker to such Second Modification of Deed of Trust and the Second
Amended and Restated Note described therein as provided above in this document.
Metzker hereby declares, acknowledges and agrees that Metzker intentionally and
unconditionally subordinates the lien or charge of the Metzker Documents to the
Second Modification of Deed of Trust and to the terms and conditions of the
Second Amended and Restated Note and that his interest in the property secured
by the Metzker Documents shall at all times be and remain junior and subordinate
to the interest of Beneficiary therein, notwithstanding the Second Modification
of Deed of Trust and the Second Amended and Restated Promissory Note, copies of
which Agreements Metzker has received and had the opportunity to review, and
Trustor and Beneficiary are authorized to file such documents for recording in
Washoe County. Further, Metzker hereby waives any rights
5
<PAGE> 6
or actions said party may have pursuant to the marshalling of assets statutes
set forth at Nevada Revised Statutes Sections 100.040 and 100.050.
___________________________________
JOHN G. METZKER
State of _______________ )
)
County of ______________ )
This instrument was acknowledged before me on _____________ by John G.
Metzker.
___________________________________
(Signature of notarial officer)
ACKNOWLEDGMENT AND CONSENT
Jean Metzker, as assignee of a $1,750,000.00 beneficial interest in the
proceeds of that certain Note secured by the Metzker Deed of Trust, pursuant to
that certain Assignment of Beneficial Interest and Proceeds dated May 10, 1993,
as replaced and superseded by that certain Second Modification of Deed of Trust
and Security Agreement and Fixture Filing and Assignment dated July 9, 1997, and
recorded July 11, 1997, in Book _______, page_____ as Document No. 2116500,
Official Record of Washoe County, Nevada, in which Fitzgeralds Reno, Inc. is a
party (all together, the "Jean Metzker Documents") securing unto Jean Metzker an
interest in the property described in the Deed of Trust for the benefit of the
Meta K. Fitzgerald Trust, Meta K. Fitzgerald, Trustee, ("Beneficiary") referred
to in the foregoing Second Modification of Deed of Trust, which interest of Jean
Metzker is junior and subordinate to the interest of Beneficiary therein. As a
condition of the Second Modification of Deed of Trust between Trustor and
Beneficiary, Beneficiary requires the acknowledgment and agreement of Jean
Metzker to such Second Modification of Deed of Trust and the Second Amended and
Restated Note described therein as provided above in this document. Jean Metzker
hereby declares, acknowledges and agrees that Jean Metzker intentionally and
unconditionally subordinates the lien or charge of the Jean Metzker Documents to
the Second Modification of Deed of Trust and to the terms and conditions of the
Second Amended and Restated Note and that her interest in the property secured
by the Jean Metzker Documents shall at all times be and remain junior and
subordinate to the interest of Beneficiary therein, notwithstanding the Second
Modification of Deed of Trust and the Second Amended and Restated Promissory
Note, copies of which Agreements Jean Metzker has received and had the
opportunity to review, and Trustor and Beneficiary are authorized to file such
documents for recording in Washoe County.
6
<PAGE> 7
Further, Jean Metzker hereby waives any rights or actions said party may have
pursuant to the marshalling of assets statutes set forth at Nevada Revised
Statutes Sections 100.040 and 100.050.
___________________________________
JEAN METZKER
State of _______________ )
)
County of ______________ )
This instrument was acknowledged before me on _____________ by Jean
Metzker.
___________________________________
(Signature of notarial officer)
7
<PAGE> 8
EXHIBIT "A'
to that Certain Second Modification of Deed of Trust by and between
Fitzgeralds Reno, Inc., First American Title Company of Nevada
and The Meta K. Fitzgerald Trust, Meta K. Fitzgerald, Trustee
8
<PAGE> 9
ESCROW NO. ___________________
WHEN RECORDED MAIL TO:
George Folsom
One East Liberty
Suite #416
Reno, NV 89501
DEED OF TRUST
THIS DEED OF TRUST, entered into this ____ day of _________, 1997, by
and between FITZGERALDS, RENO, INC., a Nevada Corporation, FIRST AMERICAN TITLE
COMPANY OF NEVADA, a Nevada Corporation, and THE META K. FITZGERALD TRUST, META
K. FITZGERALD, TRUSTEE,
W I T N E S S E T H:
WHEREAS, on December 31, 1986, Lincoln Investments, Inc., executed a
Deed of Trust in favor of Nevada Club, Inc. and Nevada Club Enterprises, Inc. as
beneficiaries and with Ticor Title Insurance Company as trustee, which deed was
recorded December 31, 1986, as Document No. 1129049, Official Records of Washoe
County, Nevada, (the "Original Trust Deed") encumbering certain real property
described therein and securing a Promissory Note in the amount of Twenty-Five
Million Five Hundred Thousand and No/100 Dollars ($25,500,000) of even date
therewith; and
WHEREAS, Fitzgeralds Reno, Inc. (the "Trustor") is the successor in
interest by reason of merger to Lincoln Investment Inc., First American Title
Company of Nevada (the "Trustee"), is the successor Trustee by reason of
substitution of Trustee of even date therewith to Western Title Company, Inc.,
the successor Trustee to Ticor Title Insurance Company by reason of Substitution
of Trustee recorded November 3, 1988 in Book 2822, page 710, Document No.
1285173 Official Records of Washoe County, Nevada, and The Meta K. Fitzgerald
Trust, Meta K. Fitzgerald, Trustee, (the "Beneficiary") is the successor in
interest to Meta K. Fitzgerald who is the successor in interest to the Estate of
Lincoln Fitzgerald, deceased, Meta K. Fitzgerald, Executrix, which was the
successor in interest by reason of assignment from Nevada Club, Inc., and Nevada
Club Enterprises, Inc.; and
WHEREAS, on November 30, 1995, Trustor and Beneficiary entered into a
Modification of Deed of Trust, which deed was recorded on December 14, 1995, as
Document No. 1950120, Official Records of Washoe County, Nevada (the "First
Modification"), and an Amended and Restated Promissory Note in the amount of
Eighteen Million Six Hundred Six Thousand Six Hundred Fifty-Six and 81/100
Dollars ($18,606,656.81) of even date therewith, secured by the Original Trust
Deed as modified by the First Modification; and
1
<PAGE> 10
WHEREAS, Trustor and Beneficiary have entered into a Second Modification
of Deed of Trust (the "Second Modification") and a Second Amended and Restated
Promissory Note in the amount of SEVENTEEN MILLION EIGHT HUNDRED THIRTY-FIVE
THOUSAND TWO HUNDRED THIRTY-FIVE AND 18/100 DOLLARS ($17,835,235.18) of even
date herewith, secured by the Original Trust Deed as modified by the First
Modification and as further modified by the Second Modification; and
WHEREAS, in partial consideration of and as a condition to her entering
into the Second Modification, Beneficiary required Trustor to grant her
additional security in the property described in Exhibit "A" hereto,
NOW THEREFORE, based upon the foregoing recitals, and for valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Trustor, Trustee and Beneficiary agree as follows:
That Trustor hereby grants, bargains, sells, conveys and confirms unto
Trustee, in trust with power of sale, all that certain property situate in the
County of Washoe, State of Nevada, more particularly described in Exhibit "A."
AND, ALSO, all of the estate, interest, or other claim, as well in law
as in equity, which Trustor now has or may hereafter acquire in and to, said
property, together with all easements and rights of way used in connection
therewith or as a means of access thereto, and all fixtures now or hereafter
attached to or used in connection with the premises above described, together
with all and singular the tenements, the hereditaments and the appurtenances
thereunto belonging or in anywise appertaining, and the reversion and
reversions, remainder and remainders, rents, issues and profits thereof.
TO HAVE AND TO HOLD the same unto the said Trustee and its successors
for the purpose of securing payment of an indebtedness in the sum of SEVENTEEN
MILLION EIGHT HUNDRED THIRTY-FIVE THOUSAND TWO HUNDRED THIRTY-FIVE AND 18/100
DOLLARS ($17,835,235.18) as follows:
$17,835,235.18 evidenced by a Second Amended and Restated
Promissory Note (the "Note") of even date herewith with interest
thereon, according to the terms of said Note, which Note is
specifically referred to, and by said reference is made a part
hereof, as if set out in full, executed by Trustor and delivered
to Beneficiaries, and payable to their order and any and all
extensions or renewals thereof; payment of such additional sums
with interest thereon, as may be hereafter loaned by the
Beneficiaries to the Trustor when evidenced by a Promissory Note
or notes of Trustor; payment of all other sums with interest
thereon becoming due and payable under the provisions hereof to
Trustee or to the
2
<PAGE> 11
Beneficiaries and the performance and discharge of each and every
obligation, covenant and agreement of Trustor herein contained.
AND THIS INDENTURE FURTHER WITNESSETH:
FIRST: Trustor promises and agrees to pay when due all claims for labor
performed and materials furnished for construction, alteration or repair upon
the above described premises; to comply with all laws affecting said property or
relating to any alterations or improvements that may be made thereon; not to
commit or permit waste thereon, not to commit, suffer or permit any acts upon
said property in violation of any law, covenant, condition or restriction
affecting said property.
SECOND: The following covenants, Nos. 1; 3; 4 (12%); 5; 6; 7 (10%); 8;
and 9 of Section 107.030, Nevada Revised Statutes, are hereby adopted and made a
part of this Deed of Trust.
THIRD: The Trustor will continuously maintain, in amounts equal to
replacement value, fire, extended coverage, hazard and other insurance, of such
type or types and amounts as the Beneficiaries may from time to time require, on
the improvements now or hereafter on said premises; all insurance, including the
insurance above mentioned, shall be in companies approved by the Beneficiaries.
The Policies and renewals thereof shall be held by the Beneficiaries and have
attached thereto loss payable clauses in favor of and in form acceptable to the
Beneficiaries. In the event of loss, the Trustor will give immediate notice by
mail to the Beneficiaries, who may make proof of loss if not made promptly by
Trustor. Each insurance company concerned is hereby authorized and directed to
make payment for such loss directly to the Beneficiaries instead of to the
Trustor and the Beneficiaries jointly. The insurance proceeds, or any part
thereof, may be applied by the Beneficiaries at their option either to the
reduction of the indebtedness hereby secured or to the restoration or repair of
the property damaged. In the event of the foreclosure of this Deed of Trust or
other transfer of title to said premises in extinguishment of the indebtedness
secured hereby, all right, title and interest of the trustor in and to any
insurance policies then in force shall pass to the purchaser or grantee.
FOURTH: Trustor agrees that it will pay any deficiency arising from any
cause after application of the proceeds of a sale held in accordance with the
provisions of the covenants hereinabove adopted by reference.
FIFTH: If the premises or any part thereof be condemned under any power
of eminent domain, or acquired for a public use, the damages, proceeds and the
consideration for such acquisition, to the extent of the full amount of
indebtedness upon this Deed of Trust and the Note secured hereby remaining
unpaid, are hereby assigned by the Trustor to the Beneficiaries and shall be
paid forthwith to the Beneficiaries to be applied by them on account of the last
maturing installments of such indebtedness.
3
<PAGE> 12
SIXTH: Trustor will pay all reasonable costs, charges and expenses,
including attorneys' fees, reasonably incurred or paid at any time by the
Beneficiaries because of the failure on the part of the Trustor to perform,
comply with, and abide by each and every stipulation, agreement, condition and
covenant of the Note and this Deed of Trust or either of them.
SEVENTH: Trustor hereby assigns to the Trustee all rents, income,
maintenance fees and other benefits to which trustor may now or hereafter be
entitled from the property described hereinabove and to be applied against the
indebtedness or other sums secured hereby provided, however, that permission is
hereby given to Trustor so long as no event of default has occurred hereunder to
collect and use such rents, income, maintenance fees and other benefits as they
become due and payable but not in advance thereof. Upon the occurrence of any
such event of default, the permission hereby given to Trustor to collect such
rents income, maintenance fees and other benefits from the property described
hereinabove shall automatically terminate.
EIGHTH: The lien of this instrument shall remain in full force and
effect during any postponement or extension of the time of payment of the
indebtedness or any part thereof secured hereby. The Beneficiaries may, without
notice to or consent of Trustor, extend the time of payment of any indebtedness
secured hereby to any successor in interest of the Trustor from liability
thereon.
NINTH: The rights and remedies granted hereunder or by law shall not be
exclusive but shall be concurrent and cumulative.
TENTH: The benefits of the covenants, terms, conditions and agreements
herein contained shall accrue to, and the obligations thereof shall bind the
heirs, representatives, successors, and assigns of the parties hereto and the
Beneficiaries hereof. Whenever used, the singular number shall include the
plural, the plural the singular, and the use of any gender shall include all
other genders, and the term "Beneficiary" shall include any payee of the
indebtedness hereby secured or any transferee thereof, whether by operation of
law or otherwise.
ELEVENTH: This Deed of Trust is executed by Trustor and accepted by
Beneficiaries with the understanding and upon the express condition that if
Trustor should make default in the performance to Beneficiaries of any of the
covenants and agreements herein set forth, then and in that event the full
amount of the principal of the indebtedness secured hereby, plus interest, shall
forthwith be and become wholly due and payable, notwithstanding the fact that
the same would not otherwise be due according to the terms of the Note secured
hereby.
TWELFTH: Any assumption by another party of the indebtedness secured by
this deed of trust will not relieve the maker of the note secured hereby or the
Trustor hereof from its obligations to pay said note or perform the terms,
covenants and conditions of this Deed of Trust.
4
<PAGE> 13
THIRTEENTH: The trust created hereby is irrevocable by the Trustor.
FOURTEENTH: The undersigned Trustor requests that a copy of any notice
of default and of any notice of sale hereunder be mailed to it at the address
set forth beneath its signature hereto, which address is hereby declared to be a
part of this Deed of Trust.
IN WITNESS WHEREOF, the Trustor has caused this Deed of Trust to be
executed the day and year first above written.
FITZGERALDS RENO, INC.
A NEVADA CORPORATION
By: ________________________________
[signature]
________________________________
[print name]
________________________________
[title]
By: ________________________________
[signature]
________________________________
[print name]
________________________________
[title]
"TRUSTOR"
Address:____________________________
____________________________
____________________________
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on ____________________ by
_____________________________ as _________ of Fitzgeralds Reno, Inc.
___________________________________
(Signature of notarial officer)
5
<PAGE> 14
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on ____________________ by
_____________________________ as _____________ of Fitzgeralds Reno, Inc .
___________________________________
(Signature of notarial officer)
6
<PAGE> 15
EXHIBIT "A"
to that Certain Deed of Trust by and between
Fitzgeralds Reno, Inc., The Meta K. Fitzgerald Trust,
Meta K. Fitzgerald, Trustee,
and American Title Company of Nevada
All that certain lot, piece of parcel of land situate in the County of Washoe,
State of Nevada, described as follows:
Parcels 2, 3 and 4 of Parcel Map no. 2690 for EL DORADO HOTEL ASSOCIATES
AND FITZGERALDS RENO, INC., filed in the office of the County Recorder
of Washoe County, State of Nevada, on March 18, 1993 as File No.
1656128.
7
<PAGE> 16
SECOND AMENDED AND RESTATED
PROMISSORY NOTE
$17,835,235.18 Reno, Nevada
______________[Date]
FOR VALUE RECEIVED, FITZGERALDS RENO, INC., a Nevada corporation
("Maker") successor by merger to LINCOLN INVESTMENTS, INC., a Nevada
corporation, promises to pay to the order of META K. FITZGERALD TRUST, META K.
FITZGERALD, TRUSTEE, ("Holder") successor in interest to NEVADA CLUB, INC., a
Nevada corporation, and NEVADA CLUB ENTERPRISES, INC., a Nevada corporation, at
Reno, Nevada, or at such other place as the legal holders hereof may designate
in writing, the principal sum of SEVENTEEN MILLION EIGHT HUNDRED THIRTY-FIVE
THOUSAND TWO HUNDRED THIRTY-FIVE AND 18/100 DOLLARS ($17,835,235.18), in lawful
money of the United States of America, with interest at a rate equal to the
prime rate charged by Wells Fargo Bank of Nevada from time to time plus one
percent (1%) per annum compounded monthly from the date hereof until paid,
provided, however, that such interest shall in no event ever be less than nine
percent (9%) or greater than thirteen percent (13%) per annum. "Prime rate" as
used herein is the rate of interest which Wells Fargo Bank of Nevada, or any
successor by merger or consolidation, from time to time identifies and publicly
announces as its prime rate and is not necessarily, for example, the lowest rate
of interest which said bank collects from any borrower or group of borrowers.
Principal and interest shall be payable in minimum monthly installments of ONE
HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) each calendar month
commencing the 31st day of July, 1997, and monthly thereafter on the last day of
each succeeding calendar month until the 31st day of December, 1997, after which
time principal and interest shall be payable in minimum monthly installments of
TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) each calendar month
commencing the 31st day of January, 1998, and monthly thereafter on the last day
of each succeeding month until the 31st day of December, 2001, at which time the
entire unpaid principal balance and any unpaid accrued interest shall be paid in
full. There shall be no penalty for any prepayment of principal on this Note,
but no such prepayment shall reduce the minimum montly payments due at the end
of each month as set forth above, nor shall any such prepayment be considered a
prepaid installment or be credited against any minimum monthly installment due
at the end of each month as set forth above.
In the event of default of the Maker hereof in the payment of any said
installments as above provided, or in the event Maker becomes insolvent or makes
a general assignment for benefit of creditors, or be adjudged a bankrupt, then
upon the happening of any one of such events, the entire principal sum and
accrued interest shall be deemed and taken to be wholly due and payable
immediately at the option of the holder or holders of this note without notice
or demand, but it is agreed that the acceptance of any payment by the holder or
holders of this note
1
<PAGE> 17
of any delinquent installment shall not constitute a waiver of direct
performance as to any future installment payments.
If because of default hereunder collection action or suit shall be
instituted to collect any sum due on this note, the undersigned promises to pay
reasonable attorney's fees incurred as a result of such action.
The undersigned, and all endorsers, sureties and guarantors hereof,
hereby jointly and severally waive presentment for payment, demand, notice of
nonpayment, notice of protest and protest of this note, and all endorsers,
sureties and guarantors hereof consent to any and all extensions of time,
renewals, waivers or notifications that may be granted by the holder or holders
hereof, with respect to the payment or other provisions of this note and to the
release of the security, or any part thereof, with or without substitution, and
agree that additional Makers, endorsers, guarantors or sureties may become
parties hereto, without notice to them, or without affecting their liability
hereunder.
This Promissory Note is secured by (i) a deed of trust and security
agreement of even date herewith and (ii) a Deed of Trust dated December 31,
1986, and recorded December 31, 1986, as Document No. 1129049, in the Official
Records of Washoe County, Nevada, as amended by that certain Modification of
Deed of Trust dated November 30, 1995, and recorded December 14, 1995, as
Document No. 1950120, in the Official Records of Washoe County, Nevada, and as
further amended by that certain Second Modification of Deed of Trust of even
date; and a Security Agreement dated December 31, 1986, and recorded December
31, 1986, as Document No. 1129058, in the Official Records of Washoe County,
Nevada, as amended by that certain Modification of Security Agreement dated
November 30, 1995, and recorded December 14, 1995, as Document No. 1950121, in
the Official Records of Washoe County, Nevada, and as further amended by that
certain Second Modification of Security Agreement of even date. This note
replaces and supersedes in all respects that certain Promissory Note in the
original principal amount of $25,500,000.00 dated December 31, 1986, between
Lincoln Investments, Inc., Nevada Club, Inc. and Nevada Club Enterprises, Inc.,
and the Amended and Restated Promissory Note in the original principal amount of
$18,606,656.81 dated November 30, 1995, between Fitzgeralds Reno, Inc., as
successor by merger to Lincoln Investment, Inc. and Meta K. Fitzgerald Trust,
Meta K. Fitzgerald, Trustee, as successor in interest to Nevada Club, Inc. and
Nevada Club Enterprises, Inc., EXCEPT that the Agreement As To Prepayment Of
Promissory Note dated November 30, 1995, by and between Fitzgeralds Gaming
2
<PAGE> 18
Corporation, Fitzgeralds Reno, Inc., and the Meta K. Fitzgerald Trust, Meta K.
Fitzgerald Trustee, of Reno, Nevada, shall not be replaced or superseded by this
note and shall remain in full force and effect as if set forth in full herein.
FITZGERALDS RENO, INC.
a Nevada Corporation
By:_________________________________
[signature]
_________________________________
[print name]
_________________________________
[title]
By:_________________________________
[signature]
_________________________________
[print name]
_________________________________
[title]
3
<PAGE> 19
ESCROW NO. ___________________
WHEN RECORDED MAIL TO:
George Folsom
One East Liberty
Suite #416
Reno, NV 89501
SECOND MODIFICATION
OF
SECURITY AGREEMENT
This Second Modification of Security Agreement is made as of the [____]
day of [____________], 1997, by and between Fitzgeralds Reno, Inc., a Nevada
corporation, and The Meta K. Fitzgerald Trust, Meta K. Fitzgerald, Trustee.
Witnesseth:
WHEREAS, Lincoln Investments, Inc., Nevada Club, Inc. and Nevada Club
Enterprises, Inc. were parties to that certain Security Agreement dated December
31, 1986 (the "Original Security Agreement"); and
WHEREAS, Fitzgeralds Reno, Inc. (hereinafter called the "Debtor") is the
successor in interest by reason of merger to Lincoln Investment Inc., and The
Meta K. Fitzgerald Trust, Meta K. Fitzgerald, Trustee (hereinafter called the
"Secured Party") is the successor in interest to Meta K. Fitzgerald who is the
successor in interest to the Estate of Lincoln Fitzgerald, deceased, Meta K.
Fitzgerald, Executrix, which was the successor in interest by reason of
assignment from Nevada Club, Inc., and Nevada Club Enterprises, Inc.; and
WHEREAS, the predecessors to Debtor and Secured Party executed and
delivered the Original Security Agreement, which Original Security Agreement was
recorded December 31, 1986, as Document No. 1129058, Official Records of Washoe
County, Nevada, encumbering the collateral described therein; and
WHEREAS, the Original Security Agreement secured a note of even date
therewith in the original principal amount of Twenty Five Million Five Hundred
Thousand and No/100 Dollars ($25,500,000.00) wherein the predecessor to Debtor
is the Maker and the predecessors to Secured Party were the Payee (the "Original
Note"); and
WHEREAS, Debtor and Secured Party amended and restated the Original Note
and modified the Security Agreement to provide that the Amended and Restated
Promissory Note
1
<PAGE> 20
(the "First Amended and Restated Note") was secured by the Original Security
Agreement; and
WHEREAS, the Debtor and Secured Party executed and delivered the
Modification of Security Agreement (the "First Modification"), which First
Modification was recorded on December 14, 1995, as Document No. 1950121,
Official Records of Washoe County, Nevada; and
WHEREAS, the First Modification provided that the Deed of Trust, as
thereby modified, secured the Original Note as modified by the First Amended and
Restated Note in the principal sum of Eighteen Million Six Hundred Six Thousand
Six Hundred Fifty-Six and 81/100 Dollars ($18,606,656.81), which and interest
thereon was payable in minimum monthly installments of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) each calendar month which commenced
the 31st day of December, 1995, and monthly thereafter on the last day of each
succeeding calendar month until the 31st day of December, 2001, at which time
the entire unpaid principal balance and any unpaid accrued interest was to be
paid in full; and
WHEREAS, payments on the First Amended and Restated Note were made in
the amounts set forth in Exhibit "A"; and
WHEREAS, Debtor and Secured Party desire to further amend and restate
the Original Note as replaced and superseded by the First Amended and Restated
Note and to further modify the Original Security Agreement as modified by the
First Modification to provide that the Second Amended and Restated Promissory
Note (the "Second Amended and Restated Note") of even date herewith is secured
by the Original Security Agreement as modified by the First Modification and as
further modified herein; and
WHEREAS, it is appropriate to modify the terms of the Original Security
Agreement, as modified by the First Modification,
NOW THEREFORE, based upon the foregoing recitals, and for valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Debtor and Secured Party agree as follows:
1. The Paragraph 1.B of the Original Security Agreement as modified by the
First Modification is further modified by deleting therefrom the
entirety of said paragraph and by inserting in place thereof the
following new language, to wit:
The security interest hereby granted is to secure indebtedness to
the Secured Party evidenced by a Second Amended and Restated Note
bearing even date herewith in the principal amount of SEVENTEEN
MILLION EIGHT HUNDRED THIRTY-FIVE THOUSAND TWO HUNDRED
THIRTY-FIVE AND 18/100 DOLLARS ($17,835,235.18), together with
interest, expenses and counsel fees according to the terms of
said note executed and
2
<PAGE> 21
delivered by the Debtor to the Secured Party; and as security
for the payment and performance of every obligation, covenant,
promise or agreement herein or in said note contained; and also
to secure the performance of every obligation, covenant and term
of this instrument.
2. As hereby modified, the Original Security Agreement, as modified by the
First Modification remains in full force and effect, and Debtor
continues to be bound to perform the obligations secured thereby.
3. The Second Amended and Restated Note replaces and supersedes in all
respects the Original Note and the Amended and Restated Note, EXCEPT
that the Agreement As To Prepayment Of Promissory Note dated November
30, 1995, by and between Fitzgeralds Gaming Corporation, Debtor, and
Secured Party, shall not be replaced or superseded by the Second Amended
and Restated Note and shall remain in full force and effect as if set
forth in full therein.
4. This Second Modification of Security Agreement may be executed in
multiple counterparts, which taken together shall represent one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Modification of Security Agreement the day and year first above written.
FITZGERALDS RENO, INC. THE META K. FITZGERALD TRUST,
A NEVADA CORPORATION META K. FITZGERALD, TRUSTEE
By: ________________________________ _________________________________
[signature] Meta K. Fitzgerald, Trustee
________________________________
[print name] "Secured Party"
Its: ________________________________
"Debtor"
3
<PAGE> 22
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on ____________________ by
_____________________________ as ______________ of Fitzgeralds Reno, Inc.
___________________________________
(Signature of notarial officer)
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on ____________________ by
Meta K. Fitzgerald as Trustee of the Meta K. Fitzgerald Trust.
___________________________________
(Signature of notarial officer)
ACKNOWLEDGMENT AND AGREEMENT
Fitzgeralds Reno, Inc. (the "Debtor") is a party to that certain Stock
Redemption Agreement with John G. Metzker ("Metzker") dated December 21, 1990,
to a certain Deed of Trust and Security Agreement and Fixture Filing to First
American Title Company of Nevada dated March 16, 1992, recorded March 17, 1992
in Book 3440, page 98 as Document No. 1554670, Official Record of Washoe County,
Nevada, to a certain Modification of Deed of Trust dated November 17, 1992,
recorded November 23, 1992 in Book 3617, page 3, Document No. 1624894, Official
Record of Washoe County, Nevada, and to a certain Second Modification of Deed of
Trust and Security Agreement and Fixture Filing and Assignment dated July 9,
1997, and recorded July 11, 1997, in Book _______, page_____ as Document No.
2116500, Official Record of Washoe County, Nevada (the "Metzker Documents"),
securing unto Metzker an interest in the property described in the Original
Security Agreement for the benefit of The Meta K. Fitzgerald Trust, Meta K.
Fitzgerald, Trustee, (the "Secured Party") referred to in the foregoing Second
Modification of Security Agreement which interest of Metzker is junior and
subordinate to the interest of Secured Party therein. As a condition of the
Second Modification of Security Agreement between Debtor and Secured Party,
Secured Party requires the acknowledgment and agreement of Metzker to such
Second Modification of Deed of Trust and
4
<PAGE> 23
the Second Amended and Restated Note described therein as provided above in this
document. Metzker hereby declares, acknowledges and agrees that Metzker
intentionally and unconditionally subordinates the lien or charge of the Metzker
Documents to the Second Modification of Security Agreement and to the terms and
conditions of the Second Amended and Restated Note and that his interest in the
property secured by the Metzker Documents shall at all times be and remain
junior and subordinate to the interest of Secured Party therein, notwithstanding
the Second Modification of Security Agreement and the Second Amended and
Restated Promissory Note, copies of which Agreements Metzker has received and
had the opportunity to review, and Debtor and Secured Party are authorized to
file such documents for recording in Washoe County. Further, Metzker hereby
waives any rights or actions said party may have pursuant to the marshalling of
assets statutes set forth at Nevada Revised Statutes Sections 100.040 and
100.050.
___________________________________
JOHN G. METZKER
State of _______________ )
)
County of ______________ )
This instrument was acknowledged before me on _____________ by John G.
Metzker.
___________________________________
(Signature of notarial officer)
ACKNOWLEDGMENT AND CONSENT
Jean Metzker, as assignee of a $1,750,000.00 beneficial interest in the
proceeds of that certain Note secured by the Metzker Deed of Trust, pursuant to
that certain Assignment of Beneficial Interest and Proceeds dated May 10, 1993,
as replaced and superseded by that certain Second Modification of Deed of Trust
and Security Agreement and Fixture Filing and Assignment dated July 9, 1997, and
recorded July 11, 1997, in Book _______, page_____ as Document No. 2116500,
Official Record of Washoe County, Nevada, in which Fitzgeralds Reno, Inc. is a
party (all together, the "Jean Metzker Documents") securing unto Jean Metzker an
interest in the property described in the Original Security Agreement for the
benefit of The Meta K. Fitzgerald Trust, Meta K. Fitzgerald, Trustee, (the
"Secured Party") referred to in the foregoing Second Modification of Security
Agreement which interest of Jean Metzker is junior and subordinate to the
interest of Secured Party therein. As a condition of the Second Modification of
Security Agreement between Debtor and Secured Party, Secured Party requires the
acknowledgment and agreement of Jean Metzker to such Second Modification of
Security Agreement and the Second Amended and Restated Note described therein as
provided above in this document. Jean Metzker hereby declares, acknowledges and
agrees that Jean Metzker
5
<PAGE> 24
intentionally and unconditionally subordinates the lien or charge of the Jean
Metzker Documents to the Second Modification of Security Agreement and to the
terms and conditions of the Second Amended and Restated Note and that her
interest in the property secured by the Jean Metzker Documents shall at all
times be and remain junior and subordinate to the interest of Secured Party
therein, notwithstanding the Second Modification of Security Agreement and the
Second Amended and Restated Promissory Note, copies of which Agreements Jean
Metzker has received and had the opportunity to review, and Debtor and Secured
Party are authorized to file such documents for recording in Washoe County.
Further, Jean Metzker hereby waives any rights or actions said party may have
pursuant to the marshalling of assets statutes set forth at Nevada Revised
Statutes Sections 100.040 and 100.050.
___________________________________
JEAN METZKER
State of _______________ )
)
County of ______________ )
This instrument was acknowledged before me on _____________ by Jean
Metzker.
___________________________________
(Signature of notarial officer)
6
<PAGE> 25
EXHIBIT "A'
to that Certain Second Modification of Security Agreement by and between
Fitzgeralds Reno, Inc. and The Meta K. Fitzgerald Trust, Meta K. Fitzgerald,
Trustee
7
<PAGE> 26
SECURITY AGREEMENT
AGREEMENT made this ____ day of _____________, 1997, by and between
FITZGERALDS RENO, INC., a Nevada corporation, as successor in interest by reason
of merger to Lincoln Investment Inc., a Nevada corporation (hereinafter called
"Debtor"), and THE META K. FITZGERALD TRUST, META K. FITZGERALD, TRUSTEE
(hereinafter called the "Secured Party") as successor in interest to Meta K.
Fitzgerald who is the successor in interest to the Estate of Lincoln Fitzgerald,
deceased, Meta K. Fitzgerald, Executrix, which was the successor in interest by
reason of assignment from Nevada Club, Inc., a Nevada corporation, and Nevada
Club Enterprises, Inc., a Nevada corporation.
I. Security Interest.
A. The Debtor hereby grants to the Secured Party a security interest in
Debtor's furnishings and fixtures described in Exhibit A located on the real
property described in Exhibit B attached hereto and all additions and accessions
thereto and substitutions therefor, all hereinafter sometimes referred to as the
"Collateral".
B. The security interest hereby granted is to secure indebtedness to the
Secured Party evidenced by a promissory note bearing even date herewith in the
principal amount of SEVENTEEN MILLION EIGHT HUNDRED THIRTY-FIVE THOUSAND TWO
HUNDRED THIRTY-FIVE AND 18/100 DOLLARS ($17,835,235.18), together with interest,
expenses and counsel fees according to the terms of said note executed and
delivered by the Debtor to the Secured Party; and as security for the payment
and performance of
1
<PAGE> 27
every obligation, covenant, promise or agreement erein or in said note
contained; and also to secure the performance of every obligation, covenant and
term of this instrument.
C. The security interest hereby granted shall terminate at any time said
note is paid in full, and the Secured Party shall do, make, execute and deliver
to Debtor such acts, things and instruments as may be necessary to effectuate
and record such termination.
II. Representations Warranties.
The Debtor represents and warrants as follows:
A. Debtor has not granted any lien or encumbrance against the Collateral
except for the security interest granted hereby.
B. Subject to any limitations stated therein or in connection therewith,
all information furnished by the Debtor to the Secured Party concerning the
Collateral is or will be at the time the same is furnished accurate and complete
in all material respect.
C. The Debtor will not remove any of the furniture or fixtures from the
State of Nevada without the consent of Secured Party, except as provided in
Section III hereafter.
III. Disposition and Replacement of Furnishings and Fixtures
Until default by the Debtor hereunder, the Debtor may sell or dispose of
any of the furnishings and fixtures encumbered hereby free and clear of the
encumbrance of this security agreement if there is substituted similar property
subject to the encumbrance of this security agreement of similar nature and
substantially equal or greater value and is not for the purpose of defrauding
the Secured Party; provided further, that Debtor shall not sell or dispose of
such furnishings and fixtures, or any of them, if the effect shall be to
materially decrease the value of the security hereby given.
2
<PAGE> 28
IV. Taxes, Assessments and Governmental Charges
The Debtor will pay promptly when due all taxes, assessments and
governmental charges imposed upon it or its property, including without implied
limitation, income, sales and use taxes and taxes and assessments upon the
furnishings and fixtures.
V. Maintenance and Preservation of Collateral
The Debtor will maintain and preserve the Collateral in good order,
repair and condition, reasonable deterioration and wear excepted, and will not
permit the Collateral to be wasted or destroyed.
VI. No Additional Security Interests or Financing Statement
The Debtor will not permit, or suffer to exist, any additional security
interest or lien upon the Collateral, nor any financing statement covering the
Collateral to be on file in any public office, except this security interest and
financing statement in favor of Secured Party. The Debtor will defend the
Collateral against all improper claims and demands of all persons at any time
claiming the same, or any interest therein. The Secured Party, however, may
contest any claims made against the Debtor in the name of the Debtor wherein the
security hereunder would by any adverse decision be impaired and the Secured
Party may charge to the Debtor its expenses in defending any such claims.
VII. Insurance.
The Debtor shall have and maintain insurance in customary amounts, which
shall be in substantially the same amounts or greater than those policies in
effect at the time of the execution of this Security Agreement, at all times
with respect to all said furnishings and fixtures against
3
<PAGE> 29
risks of fire and such other risks customarily insured against by companies
engaged in similar businesses to that of the Debtor with such insurers as may be
satisfactory to Secured Party, provided such approval shall not be unreasonably
withheld, such insurance to be payable to the Debtor. The Debtor shall furnish
to the Secured Party certificates or other reasonable evidence satisfactory to
the Secured Party of compliance with those insurance requirements. If any
proceeds under any insurance policies are paid to the Debtor while said
promissory note is outstanding, the Debtor shall, at its election, apply such
proceeds to the payment of said note or use such proceeds for the purpose of
replacing the lost, damaged or destroyed collateral with respect to which such
proceeds were paid.
VIII. Reports and Inspections.
The Debtor will immediately notify the Secured Party of any event
causing extraordinary loss or depreciation in the value of the Collateral, and
the amount of such loss or depreciation. The Secured Party shall be entitled
during reasonable business hours to examine the Collateral on Debtor's premises.
IX. Costs and Expenses Paid by Secured Party
At their option, the Secured Party may pay for insurance in reasonable
amounts on the Collateral and taxes, assessments or other charges which the
Debtor fails to pay in accordance with the provisions hereof. Any payment made
or expense incurred by the Secured Party pursuant to this section shall be added
to the indebtedness of the Debtor to Secured Party, shall be payable on demand
and shall be secured by this agreement.
X. Financing Statements.
4
<PAGE> 30
At any time and from time to time, the Debtor agrees to join with the
Secured Party in executing financing statements pursuant to the Nevada Uniform
Commercial Code in form satisfactory to the Secured Party which are consistent
with the terms hereof.
XI. Miscellaneous Provisions
A. The Debtor shall do, make, execute and deliver all such additional
and further acts, things, deeds, assurances and instruments as the Secured Party
may reasonably require for the purpose of, or completely vesting in and assuring
to the Secured Party its right hereunder and in or to the Collateral.
B. Any notice or demand which by any provision of this agreement is
required or provided to be given shall be deemed to have been sufficiently given
or served for all purposes by being sent as certified mail, postage prepaid, to
the Debtor or the Secured Party, as the case may be, at the address at which one
customarily communicates with the other.
C. All rights of the Secured Party hereunder shall inure to the benefit
of the respective parties, their successors and assigns, and all obligations of
the Debtor hereunder shall bind its successors and assigns.
D. This security agreement and all of the rights, remedies and duties of
the Secured Party and the Debtor shall be governed by the laws of the State of
Nevada.
XII. Events of Default
Debtor shall be in default of this agreement upon the happening of any
of the following events:
5
<PAGE> 31
A. Default by Debtor in the payment of any obligation contained herein
or in any note secured hereby; or
B. Default by Debtor in the due observance or performance of any other
covenant or agreement herein contained, or breach by Debtor of any
representation or warranty herein contained (and such default or breach shall
have continued for a period of fifteen (15) days after written notice thereof to
the Debtor by the Secured Party); or
C. Any default under any of the terms or provisions of the Deed of Trust
of even date herewith signed by Debtor constituting concurrent security with
this Security Agreement for the promissory note described herein shall
constitute a default under this Security Agreement.
D. Debtor shall be in default if Debtor shall be involved in financial
difficulties as evidenced by:
(i) An admission in a written notice by Debtor to Secured Party
of Debtor's inability to pay its debts generally as they become due, or
(ii) The making of an assignment by Debtor for the benefit of
creditors; or
(iii) Debtor consenting to the appointment of a receiver for all
or a substantial part of its property; or
(iv) Debtor filing a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the Federal
Bankruptcy Act or an answer or admission seeking the relief therein
provided; or
(v) Debtor being adjudicated a bankrupt; or
(vi) The entry of a court order without the consent of Secured
Party appointing a receiver or trustee for all or a substantial part of
the property of Debtor, or approving a
6
<PAGE> 32
petition filed against Debtor for or effecting an arrangement in
bankruptcy or reorganization pursuant to the Federal Bankruptcy Act or
for any other judicial modification or adjustment of the rights of
creditors, which order shall not be vacated, set aside or stayed within
thirty (30) days of the date of entry.
E. Loss or destruction of a substantial part of the Collateral
not covered by insurance and in a manner inconsistent with the terms
hereof.
XIII. Remedies.
If any of the events of default specified herein shall occur, the
Secured Party may exercise and shall have any and all rights and remedies
accorded to it by the Nevada Uniform Commercial Code; in addition, the Secured
Party may require Debtor to assemble the Collateral and make it available to the
Secured Party at a place to be designated by the Secured Party which is
reasonably convenient to both parties. The requirement of reasonable notice
shall be met if notice is mailed, postage prepaid, to Debtor or other person
entitled thereto, at least thirty (30) days before the time of sale or
disposition of the Collateral. Debtor shall pay to the Secured Party on demand
any and all expenses, including legal expenses and attorneys' fees incurred or
paid by the Secured Party in protecting or enforcing any rights of the Secured
Party hereunder, including its right to take possession of the Collateral,
storing and disposing of the same or in collecting the proceeds thereof.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed as of the _____day of ____________, 1997, to be effective as of the day
and year first above written.
7
<PAGE> 33
FITZGERALDS RENO, INC,
A NEVADA CORPORATION
By: _______________________________
[signature]
_______________________________
[print name]
_______________________________
[title]
8
<PAGE> 34
State of ______________ )
) ss.
County of _____________ )
This instrument was acknowledged before me on _________________ by
______________, as ____________________ of Fitzgeralds Reno, Inc.
___________________________________
(Signature of notarial officer)
9
<PAGE> 35
EXHIBIT "A'
to that Certain Security Agreement by and between
Fitzgeralds Reno, Inc. and The Meta K.
Fitzgerald Trust, Meta K. Fitzgerald, Trustee
Furnishings and fixtures owned by Debtor that are located in or attached to the
building located on the property described in Exhibit "B" hereto.
10
<PAGE> 36
EXHIBIT "B'
to that Certain Security Agreement by and between
Fitzgeralds Reno, Inc. and The Meta K.
Fitzgerald Trust, Meta K. Fitzgerald, Trustee
All that certain lot, piece of parcel of land situate in the County of Washoe,
State of Nevada, described as follows:
Parcels 2, 3 and 4 of Parcel Map No. 2690 for EL DORADO HOTEL ASSOCIATES
AND FITZGERALDS RENO, INC., filed in the office of the County Recorder
of Washoe County, State of Nevada, on March 18, 1993 as File No.
1656128.
11
<PAGE> 37
DO NOT DESTROY THIS NOTE: When paid, the note and the deed of trust must be
surrendered to the Trustee under the deed of trust securing this Note with
request for reconveyance.
REPLACEMENT NOTE
SECURED BY DEED OF TRUST
$4,128,672.88 Reno, Nevada
July ____, 1997
R E C I T A L S:
A. Fitzgeralds Reno, Inc., a Nevada corporation ("Maker") executed
and delivered its note to John G. Metzker, a married man ("Payee") dated March
16, 1992 in the original principal amount of Four Million Five Hundred
Twenty-Six Thousand Five Hundred Two and no/100ths Dollars ($4,526,502.00) (the
"Original Note"), which Original Note was secured by two (2) deeds of trust, one
deed of trust being recorded on March 17, 1992 as Document No. 1554671, Official
Records of Washoe County, Nevada (the "Harold's Club Deed of Trust"),
encumbering all that certain real property situate in the county and state,
described therein, and the other deed of trust recorded on March 17, 1992, as
Document No. 1554670, Official Records of Washoe County, Nevada (the
"Fitzgeralds Deed of Trust"), encumbering all that certain real property situate
in such county and state, described therein.
B. The principal amount of the Original Note is to be decreased or
increased periodically to reflect certain adjustments determined in accordance
with the methods set forth in that certain Stock Redemption Agreement, made and
entered into by and among Maker, Fitzgeralds Las Vegas, Inc. (now known as
Lincoln Partners Corporation), Nevada Club, Inc. and Payee, dated December 21,
1990 and as amended by two Amendments to Stock Redemption Agreement dated March
16, 1992 and November 17, 1992, respectively, and as further amended by the
Third Amendment to Stock Redemption Agreement dated of even date herewith (the
"Stock Redemption Agreement").
C. Pursuant to the terms of the Stock Redemption Agreement the sale
by Maker of the Northside Parking Lot caused the principal amount of the
Original Note to increase by the amount of Seven Hundred Thirty-five Thousand
Nine Hundred Eighty Three
Page 1 of 7
<PAGE> 38
and no/100ths Dollars ($735,983.00), however, instead of increasing the
principal amount of the Original Note, Maker executed and delivered to Payee a
separate note dated November 17, 1992 in the principal sum of $735,983.00 (the
"Additional Note").
D. The Original Note was amended by an Amendment to Note dated
November 17, 1992. The Original Note and the Additional Note were both secured
by the Fitzgeralds Deed of Trust and the Harolds Club Deed of Trust, pursuant to
Modifications of Deed of Trust both dated November 17, 1992 and both recorded on
November 23, 1992 Official Records of Washoe County, Nevada as Documents No.
1624894 and 1624900, respectively.
E. Payee upon issuance of the Additional Note caused the Northside
Parking Lot to be released from the lien of the Harolds Club Deed of Trust.
F. At the date of the Stock Redemption Agreement, Payee was married
to Jean Metzker. On or about May 1, 1993, Payee and Jean Metzker entered into a
Separate Property Agreement and in compliance with the terms of such agreement,
on May 10, 1993, Payee assigned $1,750,000 of the original principal balance of
the original Note to Jean Metzker ("Jean's Portion"). Subsequently, on December
30, 1994, Payee and Jean Metzker were divorced.
G. On or about May 16, 1995, Payee authorized the Trustee under the
Harolds Club Deed of Trust to reconvey the Harolds Club Deed of Trust;
consequentially, the Original Note and the Additional Note are presently secured
only by the Fitzgeralds Deed of Trust, and a UCC-1 Fixture Filing, recorded on
March 17, 1992 as File No. 1554672, Official Records of Washoe County, Nevada
and Filing No. 92-02438, Official Records of the Secretary of State of the State
of Nevada.
H. Maker, Payee and Jean Metzker have entered into a Third Amendment
to Stock Redemption Agreement dated of even date herewith (the "Amendment"),
wherein it was agreed that pursuant to the provisions of the Stock Redemption
Agreement, the principal amount of the Original Note is to be increased by
$1,233,720.00 (the "Adjustment").
I. After the Adjustment, the aggregate original principal
Page 2 of 7
<PAGE> 39
amounts of the Original Note and the Additional Note (collectively the "Original
Notes") is $6,496,205.00 and the outstanding principal balances of the Original
Notes is $5,531,566.02 with interest paid through July 8, 1997.
J. Pursuant to the terms of the Amendment, Maker, Payee and Jean
Metzker have agreed to modify the payment terms of the Original Notes, to
clarify the status of the Original Notes and to recognize Jean's Portion, and
have agreed to accomplish the foregoing by replacing and superseding the
Original Notes with this replacement note in the original principal sum of
$4,128,672.88 payable to Payee ("John's Note") and one other replacement note in
the original principal sum of $1,402,893.14 payable to Jean Metzker ("Jean's
Note") (collectively the "Replacement Notes"). The Replacement Notes shall
continue to be secured by the Fitzgeralds Deed of Trust, as modified and the
UCC-1 Fixture Filings.
NOW, THEREFORE, Maker and John G. Metzker agree that the terms and
conditions of John's Note shall be as follows:
Fitzgeralds Reno, Inc., a Nevada corporation ("Maker") promises to
pay to John G. Metzker, an unmarried man ("Holder"), or order, at Post Office
Box 6748, Reno, Nevada 89513, or at such other place as the Holder hereof may
from time to time designate in writing, in legal tender of the United States of
America, the principal amount of Four Million One Hundred Twenty Eight Thousand,
Six Hundred Seventy-two and 88/100ths Dollars ($4,128,672.88), together with
interest thereon from July 9, 1997 on the unpaid principal balance from time to
time outstanding at the floating rate equal to the Prime Rate, as hereinbelow
defined, plus one percent (1%) ("Interest Rate"), provided, however, in no event
shall the Interest Rate exceed thirteen percent (13%), nor be less than nine
percent (9%). Each change in the Interest Rate resulting from a change in Prime
Rate shall become effective as of the date on which such change occurs. Interest
shall be computed on the basis of a 365-day year, or 366-day year if a leap
year, and actual days elapsed. For purposes of this Note the term "Prime Rate"
means the rate published from time to time in the Wall Street Journal "Money
Rates" as the base rate on corporate loans posted by at least 75% of the
nation's 30 largest banks.
Principal and interest shall be due and payable as follows:
Page 3 of 7
<PAGE> 40
The sum of $14,600.00 on the 1st day of August, 1997 and continuing
on the 1st day of each and every month thereafter to and including January 1,
1998; thereafter interest accruing on and after January 1, 1998 shall be due and
payable in monthly payments of interest only beginning on the 1st day of
February 1998 and continuing on the 1st day of each and every month thereafter
until and including the 1st day of January 1999; thereafter, principal and
interest shall be due in monthly installments of $54,750.00 beginning on the 1st
day of February 1999, and continuing on the 1st day of each and every month
thereafter, until the 16th day of September, 2001, upon which date any balance
of principal and interest then remaining unpaid shall be fully paid.
This Note is secured by a deed of trust dated March 16, 1992, to
First American Title Company of Nevada, a Nevada corporation, as trustee
thereunder which was recorded on March 17, 1992, as Document No. 1554670,
Official Records of Washoe County, Nevada, and was modified by a Modification of
Deed of Trust dated November 17, 1992 and recorded on November 17, 1992, as
Document No. 1624894, Official Records of Washoe County, Nevada and was further
modified by a Second Modification of Deed of Trust of even date herewith (such
deed of trust as modified is referred to as the "Deed of Trust").
In the event the undersigned or any successor-in-interest of the
undersigned in the real property encumbered by the Deed of Trust shall,
voluntarily or involuntarily, sell, transfer or convey, or contract to sell,
transfer or convey, such real property, or any portion thereof, or any interest
therein, at the option of the Holder of this Note, the then unpaid balance of
principal and interest due hereunder shall forthwith become due and payable
although the time of maturity as expressed hereinabove shall not have arrived.
Consent to one such transaction shall not be deemed to be a waiver of the right
to require consent to future or successive transactions.
Except as otherwise provided in the Deed of Trust, the Holder of
this Note may accelerate this Note, that is, declare the entire unpaid balance
due and payable, upon (1) failure to pay when due any installment of principal
or interest due hereunder with notice to Maker, after the expiration of a thirty
Page 4 of 7
<PAGE> 41
(30) day grace period, (2) failure to pay when due any installment of principal
or interest due under that certain promissory note of even date herewith, 1997,
in the original principal sum of One Million Four Hundred Two Thousand Eight
Hundred Ninety-three and 14/100ths Dollars ($1,402,893.14) wherein Fitzgeralds
Reno, Inc. is the maker and Jean Metzker, an unmarried woman, is payee, which
note is also secured by the Deed of Trust, after expiration of a thirty (30) day
grace period, (3) any default by Trustor under the Deed of Trust securing this
Note, (4) any default by the obligor under any obligation secured by a deed of
trust having priority over the Deed of Trust securing this Note, (5) any default
by Trustor under such prior deeds of trust, or (6) the filing of any voluntary
petition in bankruptcy by any maker, or any guarantor, if any, of this Note or
the filing of an involuntary petition by the creditors of any maker, or
guarantor, if any, of this Note, which involuntary petition remains undischarged
for a period of sixty (60) days. Protest waived.
Maker shall have the right to prepay without penalty all or any
portion of the Note. Upon each such prepayment, Maker shall also pay all accrued
interest on the principal amount prepaid. All payments on this Note shall be
applied first to accrued interest and the balance to principal. Holder shall
have the right to assign this Note upon written notice of same to Maker and
delivery of an agreement acknowledging the terms, conditions and restrictions
contained in this Note and Deed of Trust and agreeing to be bound thereby.
The acceptance of any payment hereunder which is less than payment
of all amounts then due and payable shall not constitute a waiver of any of the
rights or options of the holder hereof or to the exercise of those rights and
options at the time of such acceptance or at any subsequent time. Principal,
interest and any fees hereunder shall be payable in lawful money of the United
States of America in immediately available funds free and clear of, and without
deduction for, any and all present and future taxes, withholdings and costs or
reserves.
In the event that suit be brought hereon, or an attorney be employed
or expenses be incurred to compel payment of this Note or any portion of the
indebtedness evidenced hereby, whether or not any suit, proceeding or any
judicial or non-judicial foreclosure proceeding be commenced, Maker promises to
pay all
Page 5 of 7
<PAGE> 42
such expenses and reasonable attorneys fees, including, without limitation, any
attorneys' fees incurred in any bankruptcy proceeding.
This Note shall be construed and enforced in accordance with the
laws of the State of Nevada. Subject to the provisions contained in the Deed of
Trust, Maker agrees that Holder shall have the rights and remedies available to
a creditor under the laws of the State of Nevada. Maker consents to the personal
jurisdiction of the appropriate state or federal court located in Reno, Nevada.
No waiver by Holder of any rights or remedy shall be effective
unless in writing and signed by Holder, and no such waiver, on one occasion,
shall be construed as a waiver on any other occasion. The Maker, to the extent
permitted by law, waives presentment of payment, any and all lack of diligence
or delays in the collection or enforcement hereof, and expressly agrees to
remain and continue bound for the payment of the principal, interest and other
sums provided for by the terms of this Note, notwithstanding any extension of
time for the payment of, said principal or interest or other sum, or any change
in the amount agreed to be paid under this Note.
Except as hereinafter provided, in the event Philip D. Griffith is
not directly or indirectly in control of Maker by reason of the occurrence of
future circumstances, whether by operation of law or otherwise, the obligations
hereunder, irrespective of the maturity dates expressed herein, at the option of
the Holder hereof and with demand and notice, shall, subject to the provisions
contained in the Deed of Trust, immediately become due and payable. In the event
that the Holder hereof does not elect to declare this Note immediately due and
payable, then, unless indicated otherwise in writing by the Holder hereof, Maker
shall remain primarily liable for the obligations hereunder. This provision
shall apply whether or not Holder has received any payments under this Note
after such event. Notwithstanding the foregoing, this paragraph shall not be
applicable in the event Philip D. Griffith ceases to be directly or indirectly
in control of Maker because of the merger of Maker and its parent corporation,
Fitzgerald's Gaming Corporation, with a company whose stock is publicly traded
on a nationally recognized U. S. security exchange and the combined net worth of
such company after such merger will be not less than
Page 6 of 7
<PAGE> 43
Fifty Million Dollars ($50,000,000.00) and the creditworthiness of such company
is superior to that of Maker and Fitzgeralds Gaming Corporation.
Maker shall have no right of offset against any payment due
hereunder, and Maker hereby waives any such rights of offset (or setoff), which
it might otherwise have with respect to any claim or cause of action against
Holder, except that Maker shall have the limited right to offset any payments
due in accordance with the terms of that certain note in favor of Maker made by
Holder in the original principal amount of $618,357.62 dated of even date
herewith, against any payment due and payable to Holder under this Note. Further
provided, in the event the Holder of this Note accelerates this Note, that is,
declares the entire unpaid balance due and payable, or in the event Maker elects
to prepay this Note in full, Maker may offset the then entire unpaid balance of
the foregoing described $618,357.62 note against the unpaid balance due under
this Note, provided, however, if the Holder of this Note reinstates this Note
and foregoes such acceleration under this Note, then Maker shall also forego its
corresponding right to offset the then entire unpaid balance of the $618,357.62
note, which was caused by such acceleration of this Note.
"MAKER": FITZGERALDS RENO, INC.
a Nevada corporation
By: _____________________________
Max L. Page
Executive Vice President
"HOLDER": __________________________________
John G. Metzker
Page 7 of 7
<PAGE> 44
DO NOT DESTROY THIS NOTE: When paid, the note and the deed of trust must be
surrendered to the Trustee under the Deed of Trust securing this note with
request for reconveyance.
REPLACEMENT NOTE
SECURED BY DEED OF TRUST
$1,402,893.14 Reno, Nevada
July _____, 1997
R E C I T A L S:
A. Fitzgeralds Reno, Inc., a Nevada corporation ("Maker") executed
and delivered its note to John G. Metzker, a married man ("Payee") dated March
16, 1992 in the original principal amount of Four Million Five Hundred
Twenty-Six Thousand Five Hundred Two and no/100ths Dollars ($4,526,502.00) (the
"Original Note"), which Original Note was secured by two (2) deeds of trust, one
deed of trust being recorded on March 17, 1992 as Document No. 1554671, Official
Records of Washoe County, Nevada (the "Harold's Club Deed of Trust"),
encumbering all that certain real property situate in the county and state,
described therein, and the other deed of trust recorded on March 17, 1992, as
Document No. 1554670, Official Records of Washoe County, Nevada (the
"Fitzgeralds Deed of Trust"), encumbering all that certain real property situate
in such county and state, described therein.
B. The principal amount of the Original Note is to be decreased or
increased periodically to reflect certain adjustments determined in accordance
with the methods set forth in that certain Stock Redemption Agreement, made and
entered into by and among Maker, Fitzgeralds Las Vegas, Inc. (now known as
Lincoln Partners Corporation), Nevada Club, Inc. and Payee, dated December 21,
1990 and as amended by two Amendments to Stock Redemption Agreement dated March
16, 1992 and November 17, 1992, respectively, and as further amended by the
Third Amendment to Stock Redemption Agreement of even date herewith (the "Stock
Redemption Agreement").
C. Pursuant to the terms of the Stock Redemption Agreement the sale
by Maker of the Northside Parking Lot caused the
Page 1 of 7
<PAGE> 45
principal amount of the Original Note to increase by the amount of Seven
Hundred Thirty-five Thousand Nine Hundred Eighty Three and no/100ths Dollars
($735,983.00), however, instead of increasing the principal amount of the
Original Note, Maker executed and delivered to Payee a separate note dated
November 17, 1992 in the principal sum of $735,983.00 (the "Additional Note").
D. The Original Note was amended by an Amendment to Note dated
November 17, 1992. The Original Note and the Additional Note were both secured
by the Fitzgeralds Deed of Trust and the Harolds Club Deed of Trust, pursuant to
Modifications of Deed of Trust both dated November 17, 1992 and both recorded on
November 23, 1992 Official Records of Washoe County, Nevada as Documents No.
1624894 and 1624900, respectively.
E. Payee upon issuance of the Additional Note caused the Northside
Parking Lot to be released from the lien of the Harolds Club Deed of Trust.
F. At the date of the Stock Redemption Agreement, Payee was married
to Jean Metzker. On or about May 1, 1993, Payee and Jean Metzker entered into a
Separate Property Agreement and in compliance with the terms of such agreement,
on May 10, 1993, Payee assigned $1,750,000 of the original principal balance of
the original Note to Jean Metzker ("Jean's Portion"). Subsequently, on December
30, 1994, Payee and Jean Metzker were divorced.
G. On or about May 16, 1995, Payee authorized the Trustee under the
Harolds Club Deed of Trust to reconvey the Harolds Club Deed of Trust;
consequentially, the Original Note and the Additional Note are presently secured
only by the Fitzgeralds Deed of Trust, and a UCC-1 Fixture Filing, recorded on
March 17, 1992 as File No. 1554672, Official Records of Washoe County, Nevada
and Filing No. 92-02438, Official Records of the Secretary of State of the State
of Nevada.
H. Maker, Payee and Jean Metzker have entered into a Third Amendment
to Stock Redemption Agreement dated of even date herewith (the "Amendment"),
wherein it was agreed that pursuant to the provisions of the Stock Redemption
Agreement, the principal amount of the Original Note is to be increased by
$1,233,720.00 (the "Adjustment").
Page 2 of 7
<PAGE> 46
I. After the Adjustment, the aggregate original principal amounts of
the Original Note and the Additional Note (collectively the "Original Notes") is
$6,496,205.00 and the outstanding principal balances of the Original Notes is
$5,531,566.02 with interest paid through July 8, 1997.
J. Pursuant to the terms of the Amendment, Maker, Payee and Jean
Metzker have agreed to modify the payment terms of the Original Notes, to
clarify the status of the Original Notes and to recognize Jean's Portion, and
have agreed to accomplish the foregoing by replacing and superseding the
Original Notes with this replacement note in the original principal sum of
$1,402,893.14 payable to Jean Metzker ("Jean's Note") and one other replacement
note in the original principal sum of $4,128,672.88 payable to Payee ("John's
Note") (collectively the "Replacement Notes"). The Replacement Notes shall
continue to be secured by the Fitzgeralds Deed of Trust, as modified and the
UCC-1 Fixture Filings.
NOW, THEREFORE, Maker and Jean Metzker agree that the terms and
conditions of Jean's Note shall be as follows:
Fitzgeralds Reno, Inc., a Nevada corporation ("Maker") promises to
pay to Jean Metzker, an unmarried woman ("Holder"), or order, at 1019 Riverside
Drive, Reno, Nevada 89503, or at such other place as the Holder hereof may from
time to time designate in writing, in legal tender of the United States of
America, the principal amount of One Million Four Hundred Two Thousand Eight
Hundred Ninety-three and 14/100ths Dollars ($1,402,893.14), together with
interest thereon from July 9, 1997 on the unpaid principal balance from time to
time outstanding at the floating rate equal to the Prime Rate, as hereinafter
defined, plus one percent (1%) ("Interest Rate"), provided, however, in no event
shall the Interest Rate exceed thirteen percent (13%), nor be less than nine
percent (9%). Each change in the Interest Rate resulting from a change in the
Prime Rate shall become effective as of the date on which such change occurs.
Interest shall be computed on the basis of a 365-day year, or 366-day year if a
leap year, and actual days elapsed. For purposes of this Note, the term "Prime
Rate" is the rate published from time to time in the Wall Street Journal "Money
Rates" as the base rate on corporate loans posted by at least 75% of the
nation's 30 largest banks.
Page 3 of 7
<PAGE> 47
Principal and interest shall be due and payable as follows:
The sum of $5,400.00 on the 1st day of August, 1997 and continuing
on the 1st day of each and every month thereafter to and including January 1,
1998; thereafter interest accruing on and after January 1, 1998 shall be due and
payable in monthly payments of interest only beginning on the 1st day of
February 1998 and continuing on the 1st day of each and every month thereafter
until and including the 1st day of January 1999; thereafter, principal and
interest shall be due in monthly installments of $20,250.00 beginning on the 1st
day of February 1999, and continuing on the 1st day of each and every month
thereafter, until the 16th day of September, 2001, upon which date any balance
of principal and interest then remaining unpaid shall be fully paid.
This Note is secured by a deed of trust dated March 16, 1992, to
First American Title Company of Nevada, a Nevada corporation, as trustee
thereunder which was recorded on March 17, 1992, as Document No. 1554670,
Official Records of Washoe County, Nevada, and was modified by a Modification of
Deed of Trust dated November 17, 1992 and recorded on November 17, 1992, as
Document No. 1624894, Official Records of Washoe County, Nevada and was further
modified by a Second Modification of Deed of Trust of even date herewith (such
deed of trust as modified is referred to as the "Deed of Trust").
In the event the undersigned or any successor-in-interest of the
undersigned in the real property encumbered by the Deed of Trust shall,
voluntarily or involuntarily, sell, transfer or convey, or contract to sell,
transfer or convey, such real property, or any portion thereof, or any interest
therein, at the option of the Holder of this Note, the then unpaid balance of
principal and interest due hereunder shall forthwith become due and payable
although the time of maturity as expressed hereinabove shall not have arrived.
Consent to one such transaction shall not be deemed to be a waiver of the right
to require consent to future or successive transactions.
Except as otherwise provided in the Deed of Trust, the Holder of
this Note may accelerate this Note, that is, declare the entire unpaid balance
due and payable, upon (1) failure to pay when due any installment of principal
or interest due
Page 4 of 7
<PAGE> 48
hereunder with notice to Maker, after the expiration of a thirty (30) day grace
period, (2) failure to pay when due any installment of principal or interest due
under that certain promissory note of even date herewith, in the original
principal sum of Four Million One Hundred Twenty-eight Thousand Six Hundred
Seventy-two and 88/100ths Dollars ($4,128,672.88) wherein Fitzgeralds Reno, Inc.
is the maker and John G. Metzker, an unmarried man, is payee, which note is also
secured by the Deed of Trust, after expiration of a thirty (30) day grace
period, (3) any default by Trustor under the Deed of Trust securing this Note,
(4) any default by the obligor under any obligation secured by a deed of trust
having priority over the Deed of Trust securing this Note, (5) any default by
Trustor under such prior deeds of trust, or (6) the filing of any voluntary
petition in bankruptcy by any maker, or any guarantor, if any, of this Note or
the filing of an involuntary petition by the creditors of any maker, or
guarantor, if any, of this Note, which involuntary petition remains undischarged
for a period of sixty (60) days. Protest waived.
Maker shall have the right to prepay without penalty all or any
portion of the Note. Upon each such prepayment, Maker shall also pay all accrued
interest on the principal amount prepaid. All payments on this Note shall be
applied first to accrued interest and the balance to principal. Holder shall
have the right to assign this Note upon written notice of same to Maker and
delivery of an agreement acknowledging the terms, conditions and restrictions
contained in this Note and Deed of Trust and agreeing to be bound thereby.
The acceptance of any payment hereunder which is less than payment
of all amounts then due and payable shall not constitute a waiver of any of the
rights or options of the holder hereof or to the exercise of those rights and
options at the time of such acceptance or at any subsequent time. Principal,
interest and any fees hereunder shall be payable in lawful money of the United
States of America in immediately available funds free and clear of, and without
deduction for, any and all present and future taxes, withholdings and costs or
reserves.
In the event that suit be brought hereon, or an attorney be employed
or expenses be incurred to compel payment of this Note or any portion of the
indebtedness evidenced hereby, whether or not any suit, proceeding or any
judicial or non-judicial
Page 5 of 7
<PAGE> 49
foreclosure proceeding be commenced, Maker promises to pay all such expenses and
reasonable attorneys fees, including, without limitation, any attorneys' fees
incurred in any bankruptcy proceeding.
This Note shall be construed and enforced in accordance with the
laws of the State of Nevada. Subject to the provisions contained in the Deed of
Trust, Maker agrees that Holder shall have the rights and remedies available to
a creditor under the laws of the State of Nevada. Maker consents to the personal
jurisdiction of the appropriate state or federal court located in Reno, Nevada.
No waiver by Holder of any rights or remedy shall be effective
unless in writing and signed by Holder, and no such waiver, on one occasion,
shall be construed as a waiver on any other occasion. The Maker, to the extent
permitted by law, waives presentment of payment, any and all lack of diligence
or delays in the collection or enforcement hereof, and expressly agrees to
remain and continue bound for the payment of the principal, interest and other
sums provided for by the terms of this Note, notwithstanding any extension of
time for the payment of, said principal or interest or other sum, or any change
in the amount agreed to be paid under this Note.
Except as hereinafter provided, in the event Philip D. Griffith is
not directly or indirectly in control of Maker by reason of the occurrence of
future circumstances, whether by operation of law or otherwise, the obligations
hereunder, irrespective of the maturity dates expressed herein, at the option of
the Holder hereof and with demand and notice, shall, subject to the provisions
contained in the Deed of Trust, immediately become due and payable. In the event
that the Holder hereof does not elect to declare this Note immediately due and
payable, then, unless indicated otherwise in writing by the Holder hereof, Maker
shall remain primarily liable for the obligations hereunder. This provision
shall apply whether or not Holder has received any payments under this Note
after such event. Notwithstanding the foregoing, this paragraph shall not be
applicable in the event Philip D. Griffith ceases to be directly or indirectly
in control of Maker because of the merger of Maker and its parent corporation,
Fitzgerald's Gaming Corporation, with a company whose stock is publicly traded
on a nationally recognized U. S. security exchange and the combined
Page 6 of 7
<PAGE> 50
net worth of such company after such merger will be not less than Fifty Million
Dollars ($50,000,000.00) and the creditworthiness of such company is superior to
that of Maker and Fitzgeralds Gaming Corporation.
Maker shall have no right of offset against any payment due
hereunder, and Maker hereby waives any such rights of offset (or setoff), which
it might otherwise have with respect to any claim or cause of action against
Holder.
"MAKER": FITZGERALDS RENO, INC.
a Nevada corporation
By: _____________________________
Max L. Page
Executive Vice President
"HOLDER": __________________________________
Jean Metzker
Page 7 of 7
<PAGE> 51
THIRD AMENDMENT TO STOCK REDEMPTION AGREEMENT
This Third Amendment to Stock Redemption Agreement (the "Amendment")
is made and entered into this _____ day of July, 1997, by and among FITZGERALDS
RENO, INC., A NEVADA CORPORATION; LINCOLN PARTNERS CORPORATION (formerly known
as Fitzgeralds Las Vegas, Inc.) A NEVADA CORPORATION and NEVADA CLUB, INC., A
NEVADA CORPORATION (hereinafter individually referred to as a "Buyer" and
collectively referred to as "Buyers"), and JOHN G. METZKER, AN UNMARRIED MAN
("Seller") and JEAN METZKER, AN UNMARRIED WOMAN.
R E C I T A L S:
A. Buyers and Seller entered into that certain Stock Redemption
Agreement dated December 21, 1990, as amended by that certain Amendment to Stock
Redemption Agreement dated March 16, 1992 and as further amended by that certain
Amendment to Stock Redemption Agreement dated November 17, 1992 (hereinafter
such Stock Redemption Agreement as amended shall be referred to as the
"Agreement").
B. All capitalized terms used herein shall have the meaning set
forth in the Agreement, unless expressly stated otherwise.
C. At the date of the Agreement, Seller was married to Jean Metzker.
On or about May 1, 1993, Seller and Jean Metzker entered into a Separate
Property Agreement and in compliance with the terms of such agreement, on May
10, 1993, Seller assigned $1,750,000 of the original principal balance of the
Note to Jean Metzker ("Jean's Portion"). Subsequently, on December 30, 1994,
Seller and Jean Metzker were divorced.
D. On or about November 4, 1994, Seller filed a Complaint against
Fitzgeralds Reno, Inc. in the Second Judicial District Court of the State of
Nevada in and for the County of Washoe, as Case No. CV94-06905 to determine
inter alia the appraised fair market value of Harolds Club pursuant to Section
1.05(b) of the Agreement (the "Lawsuit").
E. On or about June 18, 1996, Seller and Jean Metzker delivered to
Fitz North a Notice of Noncompliance under the Fitzgeralds Deed of Trust and,
subsequently, on September 4,
1
<PAGE> 52
1996, Seller and Jean Metzker did cause a Notice of Breach and Default and of
Election to Cause Sale of Real Property under Deed of Trust to be recorded as
Document No. 2027309 Official Records, Washoe County, Nevada ("Notice of
Default") alleging that a default had been made in payment of the debt evidenced
by the Note and the Additional Note.
F. Pursuant to the provisions of Sections 1.05 and 1.06 of the
Agreement, the principal amount of the Note is to be increased (or decreased)
based upon the fair market values of certain properties to be determined by
appraisal in accordance with the methods set forth in the Agreement.
G. Seller and Buyers desire to amend the Agreement to (1) reflect
their mutual understanding and agreement of the adjustments to the Purchase
Price and the Note which are to be made pursuant to Sections 1.05 and 1.06 of
the Agreement, (2) to settle the Lawsuit, (3) to reinstate the Note and the
Additional Note, and (4) to further amend the Agreement as hereinafter set
forth.
NOW, THEREFORE, based upon the foregoing recitals which by reference
are incorporated herein, and upon the mutual promises and covenants contained
herein, Seller, Buyers and Jean Metzker agree as follows:
1. Seller and Buyers agree that the Purchase Price and the original
principal balance of the Note shall be increased by $1,233,720 (the
"Adjustment") effective as of March 16, 1994, pursuant to Sections 1.05(a) and
(b) and Section 1.06 of the Agreement. This Adjustment is determined as follows:
<TABLE>
<CAPTION>
APPRAISED
VALUE BASE DIFFERENCE
----------- ----------- -----------
<S> <C> <C> <C>
Harolds Club $11,500,000 $10,140,000 $ 1,360,000
Nevada Club 5,572,837 3,480,000 2,092,837
El Fitz 2,325,000 2,133,000 192,000
Sands 425,000 600,000 (175,000)
Cameo 150,340 350,000 (199,660)
Gun Collection 1,405,219 1,000,000 405,219
-----------
Total $3,675,396
John Metzker's Percentage 33.567%
-----------
Adjustment $1,233,720
-----------
</TABLE>
2
<PAGE> 53
2. Seller, Buyers and Jean Metzker agree that after the Adjustment,
the aggregate original principal amounts of the Note and the Additional Note
(collectively the "Original Notes") is $6,496,205.00 Upon the execution of this
Amendment, Fitz North shall make a payment of $883,270.33 (the "Payment") upon
the Original Notes, after such Payment the parties agree that the outstanding
principal balances of the Original Notes will be $5,531,566.02 with interest
paid through July 8, 1997. Attached hereto and marked EXHIBIT "A" is a combined
amortization schedule for the Original Notes through July 8, 1997 reflecting the
reamortization of the Original Notes after the Adjustment and the Payment.
Maker, Payee and Jean Metzker hereby agree to modify the payment terms of the
Original Notes, to clarify the status of the Original Notes and to recognize
Jean's Portion, and to accomplish the foregoing, the parties agree to replace
and supersede the Original Notes with two new notes (the "Replacement Notes"),
one in the original principal amount of $1,402,893.14 payable to Jean Metzker
and the other in the original principal amount of $4,128,672.88 payable to
Seller. The Replacement Notes shall be in the form of EXHIBITS "B" and "C"
attached hereto. Upon the execution of this Amendment, Fitz North shall execute
the Replacement Notes and deliver them to Seller and Jean Metzker, as
applicable, and Seller shall deliver the Note to Fitz North marked "Canceled,
Replacement Notes issued July ____, 1997". Buyers, Seller and Jean Metzker
hereby acknowledge that Seller has inadvertently misplaced the Additional Note
and is unable to deliver the Additional Note to Fitz North at this time. Seller
and Jean Metzker hereby represent and warrant to Fitz North that they have not
assigned the Additional Note and that, upon location of the Additional Note,
they will promptly deliver it to Fitz North Marked "Canceled, Replacement Notes
issued July ___, 1997." Upon the execution of this Amendment, Fitz North, Seller
and Jean Metzker shall execute and acknowledge a Second Modification of Deed of
Trust in the form of EXHIBIT "D" attached hereto (the "Modification of Deed of
Trust").
Upon the execution of this Amendment, Seller shall deliver to Fitz
North a payment of $227,803.44 upon Seller's original note in favor of Fitz
North dated November 17, 1992 in the original principal amount of $616,000.00.
Fitz North and Seller agree that such payment shall pay in full the remaining
principal balance of such note together with all accrued interest thereon. Upon
the execution of this Amendment, Metzker shall also deliver to Fitz North
$5,466.98 to reimburse Fitz North for a life
3
<PAGE> 54
insurance premium paid on Metzker's behalf plus interest thereon.
3. After the Adjustment described in paragraph 1 hereof, Seller and
Buyers agree that all adjustments to the Purchase Price and the Original Notes
(and the Replacement Notes) which are required to be made pursuant to the terms
of the Agreement have been made and that there shall be no further adjustments
thereto under the Agreement.
4. Upon the execution of this Amendment to settle the Lawsuit,
Buyers, Seller and Jean Metzker shall execute the Settlement Agreement attached
hereto as EXHIBIT "E".
5. Upon the execution of this Amendment, Fitz North and Seller shall
execute the agreement attached hereto as EXHIBIT "H" which relates to the Arch
Drug Airspace.
6. There exists a loan from Fitz North to Seller which is evidenced
by a note dated March 16, 1992 made by Seller in favor of Fitz North in the
original principal sum of $1,149,841.00 (the "Metzker Note"). There also exists
a loan from Seller to Fitz South which is evidenced by a note dated March 16,
1992 made by Fitz South in favor of Seller in the original principal sum of
$1,149,841.00 (the "Fitz South Note"). Upon the execution of this Amendment,
Seller shall assign, without recourse, and deliver the Fitz South Note to Fitz
North and Fitz North agrees to accept the assignment of the Fitz South Note and
credit as payment the sum of $639,401.40 on the Metzker Note. Further, upon the
execution of this Amendment, Seller shall execute a replacement note in favor of
Fitz North for $618,357.62 representing the remaining principal balance of
$510,439.60 plus accrued interest of $107,918.02 through July 8, 1997, which
note replaces and supersedes the Metzker Note and shall be in the form of
EXHIBIT "F" attached hereto and Fitz North shall delivery to Seller the original
Metzker Note marked "Canceled, Replacement Note issued July _____, 1997".
7. Seller and Jean Metzker agree that they shall execute and deliver
to Fitz North a rescission of the Notice of Noncompliance dated June 18, 1996
and will execute and cause to be recorded in the Washoe County Recorder's Office
a Notice of Rescission of the Notice of Default upon Fitz North's performance
all of the following:
4
<PAGE> 55
(a) Payment to Seller's attorneys, Hale, Lane, Peek, Dennison,
Howard, Anderson and Pearl in the sum of $17,000.00 and payment to Jean
Metzker's attorneys, Avansino, Melarkey, Knobel, McMullen & Mulligan, in the sum
of $13,000.00 for their respective attorneys fees and costs incurred which
relate to Fitz North's alleged default under the Original Notes and the
negotiation and preparation of this Amendment and related documents.
(b) Payment to Seller of $1,997.00 to reimburse Seller for
fees paid to First Centennial Title Company.
(c) First American Title Company shall issue a CLTA Lenders'
policy of title insurance in the amount of $5,531,566.02 insuring the
Fitzgerald's Deed of Trust as modified by the Second Modification to Deed of
Trust as a lien upon the real property described therein subject only to items 6
through 16, inclusive, and item 22 as shown on the preliminary title report of
First American Title Company of Nevada, report no. 198087MC dated as of June 30,
1997, a copy of which is attached hereto as EXHIBIT "G". Real property taxes and
assessments may be shown with no amounts due or payable. The title policy shall
show vesting exactly as shown on the Second Modification of Deed of Trust. The
premium for such policy shall be 36.5% by Seller, 13.5% by Jean Metzker and 50%
by Buyers.
(d) Delivery to Seller of Seller's original note in favor of
Fitz North dated November 17, 1992 in the original principal amount of
$616,000.00 marked "paid in full".
8. Until the Replacement Notes are paid in full, Fitz North shall
deliver to Seller true and accurate copies of Fitz North's monthly and annual
financial statements including, but not limited to, balance sheet, statement of
income by departments and cash flow statements, in the same format and detail
and at the same time as such information is delivered or available to Fitz
North's directors, officers and shareholders.
9. Fitz North is presently in default in its payments due under the
note secured by that certain deed of trust dated December 31, 1986 wherein
Lincoln Investments, Inc., a Nevada corporation, is Trustor, Ticor Title
Insurance Company, a California corporation, is Trustee and Nevada Club, Inc.,
et al. is Beneficiary and which was recorded on December 31, 1986 as
5
<PAGE> 56
Document No. 1129049 Official Records of Washoe County, Nevada, and as
thereafter modified and amended (the "Meta Fitzgerald Deed of Trust") and that
certain Security Agreement recorded December 31, 1986, as Document No. 1129058,
Official Records of Washoe County, Nevada (the "Security Agreement"). Provided,
that Fitz North is not in default under the Fitzgeralds Deed of Trust or the
Replacement Notes secured thereby, then Seller and Jean Metzker agree to execute
an appropriate agreement subordinating the encumbrance of the Fitzgeralds Deed
of Trust to the encumbrance of the Meta Fitzgerald Deed of Trust and the
Security Agreement as they may be modified by the parties thereto to effectuate
a cure of the present default under the Meta Fitzgeralds Deed of Trust and the
note secured thereby ("Modification") provided such Modification shall not (1)
increase the amount of the obligations presently secured by the Meta Fitzgeralds
Deed of Trust in excess of the then remaining amounts (principal and interest)
owed under such note, (2) increase the interest rate on such obligations, or (3)
accelerate the balloon payment date of December 31, 2001, under such note.
10. Buyers and each of them represent and warrant to Seller and Jean
Metzker that they have full right and authority to enter into this Amendment and
to perform all of their respective obligations hereunder; each of the persons
signing this Amendment upon behalf of a Buyer is authorized to so sign; and the
execution, consent or acknowledgment of no other person or entity is necessary
in order to validate the execution of this Amendment by Buyers. Entry into this
Amendment and the performance by Buyers of their obligations hereunder, does not
contravene or constitute a breach of any agreement, contract or indenture to
which a Buyer is a party.
11. This Amendment may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
but one agreement.
12. The parties hereby have cooperated in the drafting and
preparation of this Amendment. In any construction to be made of this Amendment,
no presumption shall arise against a party by virtue of its participation in the
drafting of this Amendment.
13. Time is of the essence in the performance of the parties'
respective obligations under this Amendment.
6
<PAGE> 57
14. All exhibits referred to in this Amendment are attached hereto
and by reference thereto are incorporated herein.
15. The Agreement as amended by this Amendment, shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have entered into this
Amendment the day and year first above written.
"BUYERS": FITZGERALDS RENO, INC.,
a Nevada corporation
By: ____________________________
Max L. Page
Executive Vice President
LINCOLN PARTNERS CORPORATION
(formerly known as Fitzgeralds
Las Vegas, Inc.)
a Nevada corporation
By: ___________________________
Max L. Page
Executive Vice President
NEVADA CLUB, INC.,
a Nevada corporation
By: ___________________________
Max L. Page
President
"SELLER": ________________________________
John G. Metzker
________________________________
Jean Metzker
7
<PAGE> 58
RELEASE AND SETTLEMENT AGREEMENT
This release and settlement agreement (the "Agreement") is made this
______ day of July, 1997, among John G. Metzker, an unmarried man ("Metzker"),
Jean Metzker, an unmarried woman, Fitzgeralds Reno, Inc. ("Fitzgeralds"),
Lincoln Partners Corporation (formerly known as Fitzgeralds Las Vegas, Inc.)
("LPC") and Nevada Club, Inc., ("Nevada Club") (collectively, the "Parties"),
with reference to the following facts:
R E C I T A L S
A. The Parties did enter into the Stock Redemption Agreement as
defined in Section 2.2(a) of this Agreement.
B. On or about November 4, 1994, Metzker filed a Complaint against
Fitzgeralds in the Second Judicial District Court of the State of Nevada, in and
for the County of Washoe, as Case No. CV94-06905 (the "Lawsuit").
C. Trial commenced regarding the Lawsuit on December 18, 1995, and
continued at various times throughout 1996 until August 27, 1996.
D. On September 13, 1996, the Court filed an Order, holding in favor
of Metzker on some claims and in favor of Fitzgeralds in others.
E. The Parties have agreed to a settlement of the Lawsuit and of all
existing claims, known and unknown, and are entering into this Agreement for the
purpose of memorializing such a settlement.
1. SETTLEMENT
NOW, THEREFORE, based upon the foregoing recitals which are
incorporated herein and in consideration of the mutual promises set forth below,
the Parties agree as follows:
1.1 The Parties have entered into a Third Amendment to Stock
Redemption Agreement dated of even date herewith, the terms of which are
incorporated herein by reference.
1.2 Upon the execution of this Agreement, the Parties' counsel shall
execute a satisfaction of judgment and a stipulation for dismissal of the
Lawsuit with prejudice and shall obtain an order of the court dismissing the
Lawsuit with prejudice, and with each of the Parties to bear their own
attorney's fees and costs.
Page 1 of 8
<PAGE> 59
2. RELEASE WITH RESERVATION OF RIGHTS
2.1 Excepting those reservations of rights set forth in Section 2.2
hereinbelow, each of the Parties, individually and on behalf of their agents,
servants, employees, officers, directors, representatives, successors, heirs,
administrators, executors, personal representatives, guardians, conservators,
assigns, and every other entity in which they have any interest whatsoever,
hereby forever fully and finally release and discharge all actions, claims,
rights, duties, damages, debts, liabilities, obligations, accounts, accountings,
costs, expenses, suits, proceedings, controversies, contracts, and demands
against any or all of the Parties and any or all of their respective
subsidiaries, parent corporations, agents, attorneys, servants, officers,
directors, employees, predecessors, successors, heirs, administrators,
executors, personal representatives, guardians, conservators, assigns,
co-venturers, entities in which they have any interest whatsoever, affiliates,
and representatives and any other person, corporation, association or
partnership charged, or who could be charged, with responsibility for the
conduct of the persons and entities released herein, of and from any and all
rights, duties, damages, debts, liabilities, obligations, accounts, accountings,
suits, proceedings, controversies, contracts, demands, actions, causes of
action, claims, claims for relief, liens, costs, and expenses of every kind and
nature whatsoever, known and unknown, anticipated and unanticipated, suspected
and unsuspected, which accrued or are based solely or in part upon events which
occurred prior to the date of this Agreement, or which result from or in any
manner grow out of, or arise from, or are connected, in any way to, or which
were or could have been asserted in, the Lawsuit, or the allegations made
therein, or the facts and matters upon which the Lawsuit was based, and any and
all claims for damages, whether actual, punitive, or liquidated, and all claims
for costs and attorney's fees.
2.2 Each of the Parties hereby excepts and reserves all claims,
rights, causes of action, legal remedies and demands whatsoever accruing from
and after the date of this Agreement which arise out of or are related to the
following and are based upon events which occur on or after the date of this
Agreement:
(a) Stock Redemption Agreement dated December 21, 1990 made
and entered into by and among John G. Metzker as Seller and Fitzgeralds Reno,
Inc., Fitzgeralds Las Vegas, Inc. (now known as Lincoln Partners Corporation),
and Nevada Club, Inc., and as amended by two (2) Amendments to Stock Redemption
Agreement dated March 16, 1992 and November 17, 1992, respectively, and as
further amended by the Third Amendment to Stock Redemption Agreement dated of
even date herewith (the "Stock Redemption Agreement").
(b) Replacement Note Secured by Deed of Trust dated of even
date herewith in the original principal amount of $1,402,893.14 made by
Fitzgeralds Reno, Inc., in favor of Jean Metzker, an unmarried woman.
(c) Replacement Note Secured by Deed of Trust dated of even
date herewith in the original principal amount of $4,128,672.88 made by
Fitzgeralds Reno, Inc. in favor of
Page 2 of 8
<PAGE> 60
John G. Metzker, an unmarried man.
(d) Deed of Trust and Security Agreement and Fixture Filing
recorded on March 17, 1992 as Document No. 1554670, Official Records of Washoe
County, Nevada, encumbering all that certain real property situate in such
county and state described therein, as modified by a Modification of Deed of
Trust dated November 17, 1992 and recorded on November 23, 1992 as Document No.
1624894, Official Records, and as modified by a Second Modification of Deed of
Trust and Security Agreement and Fixture Filing and Assignment dated of even
date herewith (the "Deed of Trust"); and a UCC-1 Fixture Filing, recorded on
March 17, 1992 as File No. 1554672, Official Records of Washoe County, Nevada
and Filing No. 92-02438, Official Records of the Secretary of State of the State
of Nevada.
(e) Replacement Promissory Note dated of even date herewith in
the original principal amount of $618,357.62 made by John G. Metzker in favor of
Fitzgeralds Reno, Inc.
(f) Agreement of even date entered into between Fitzgeralds
Reno, Inc. and John G. Metzker affecting the Arch Drug Airspace.
2.3 The persons signing this Agreement as Parties or on behalf of
such Parties specifically warrant and represent that they are of legal age and
are legally competent to execute this Agreement, and that in executing this
Agreement, they have been fully advised and represented by legal counsel of
their own selection and that the Parties are fully familiar with all the
circumstances mentioned herein and that in executing this Agreement they do so
relying wholly on their own judgment and the advice of their counsel and without
reliance upon any statement, inducement, or representation whatsoever (except
for any statements or representations contained in this Agreement) regarding the
matters contained herein by the persons and entities released hereby or by any
of their agents, servants, employees, officers, directors, representatives,
successors, or their attorneys.
2.4 It is understood that this Agreement is not to be construed as
an admission of liability, criminal conduct, or responsibility whatsoever on the
part of the persons and entities released herein, each of whom expressly deny
all liability and responsibility.
2.5 The Parties covenant and agree to indemnify and hold harmless
the other persons and entities they have released herein from and against any
and all loss, claim, or expense which may arise out of the claims released
herein by the Parties or from their breach of this Agreement or the breach of
the Agreement by any person or entity claiming through or under the Parties.
Page 3 of 8
<PAGE> 61
3. ENTIRE AGREEMENT
This Agreement and the documents incorporated herein by reference
constitute the entire agreement of the Parties, and no promise, inducement, or
representation other than as set forth herein has been made, offered, relied
upon, or agreed upon. The terms of this Agreement are contractual and are not a
mere recital and may not be modified, varied, or explained, except by a mutual
agreement of the Parties, in writing, attached hereto. This Agreement supersedes
and replaces any and all prior negotiations and proposed agreements, written and
oral, relating thereto.
4. OWNERSHIP OF CLAIMS
The Parties warrant and represent that they have not assigned,
granted, or transferred in any way the released claims, causes of action, costs
or demands, or any part thereof, they may have, or may have had, or may in the
future have, at any time against the released parties.
5. SEVERABILITY
If any provision of this Agreement as applied to any party or to any
circumstance shall be adjudged by a court to be void and/or unenforceable, the
same shall in no way affect any other provision of this Agreement, the
application of such provision in any other circumstance, or the validity or
enforceability of this Agreement as a whole.
6. ATTORNEY'S FEES AND COSTS
In the event of any litigation concerning any claim, controversy, or
dispute between the Parties arising out of or relating to this Agreement or the
breach or interpretation thereof, the party in whose favor a final judgment is
entered shall be entitled to recover from the other party reasonable expenses,
attorney's fees, and costs incurred therein, and in the enforcement or
collection of said judgment or award rendered therein.
7. VOLUNTARY AGREEMENT
The Parties state, certify, warrant, and represent that they have
carefully read this entire Agreement, that its contents are fully known and
understood, and have been explained to them by their counsel that it is signed
as a free and voluntary act of the Parties without any duress or coercion
whatsoever and that it is the express intention of the Parties to be fully and
legally bound by this Agreement.
8. CHOICE OF LAW
This Agreement shall be governed by and construed under the laws of
the State of
Page 4 of 8
<PAGE> 62
Nevada, to whose jurisdiction the parties do hereby submit, provided, however,
that in the event that any law or laws of the State of Nevada shall require or
otherwise dictate that the laws of another state or jurisdiction be applied in
any proceeding, such Nevada law or laws shall be superseded by this paragraph
and the remaining laws of the State of Nevada shall nonetheless be applied in
such proceeding. In the event that any action is instituted in connection with
this Agreement, the Parties agree that any action shall be commenced and
maintained in Washoe County, Nevada.
9. AGREEMENT AS DEFENSE TO ACTION
This Agreement may be pleaded as a full and complete defense to, and
the Parties hereby consent that it may be used as the basis for an injunction
against, any action, suit, or other proceeding based on claims released by this
Agreement.
10. CONSTRUCTION
The language of each and all paragraphs, terms, and/or provisions of
this Agreement shall be construed as a whole, according to its fair meaning, and
not strictly for or against any party hereto and without regard whatsoever to
the identity or status of any person or persons who drafted all or any portion
of this Agreement.
11. WAIVER
No waiver of any of the provisions of this Agreement shall be deemed
or constitute a waiver of any provision, whether or not similar, not shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
12. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
successors, predecessors, assigns, attorneys-in-fact, attorneys-at-law,
officers, directors, shareholders, employees, agents, parent corporations,
subsidiary and affiliated corporations, affiliates, heirs, executors,
conservators, personal representatives, administrators, and partners of the
Parties hereto.
13. CAPTIONS
The captions appearing at the commencement of the paragraphs hereof
are descriptive only and for convenience of reference. Should there be any
conflict between such caption and the paragraph at the head of which it appears,
the paragraph and not such caption shall control and govern in the construction
of this Agreement.
Page 5 of 8
<PAGE> 63
14. COUNTERPARTS
This Agreement may be signed in counterparts by the Parties, which,
taken together, shall be deemed to constitute one and the same Agreement.
--------------------------------------
John G. Metzker
--------------------------------------
Jean Metzker
FITZGERALDS RENO, INC.
By: _____________________________________
Max L. Page, Executive Vice President
LINCOLN PARTNERS CORPORATION
(formerly known as Fitzgeralds Las
Vegas, Inc.)
By: ________________________________
Max L. Page, Executive Vice President
NEVADA CLUB, INC.
By: ________________________________
Max L. Page, President
Page 6 of 8
<PAGE> 64
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on the _____ day of July,
1997, by John G. Metzker.
------------------------------------
Notary Public
My commission expires: _______________
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on the _____ day of July,
1997, by Jean Metzker.
------------------------------------
Notary Public
My commission expires: _______________
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on the _____ day of July,
1997, by Max L. Page as Executive Vice President of Fitzgeralds Reno, Inc.
------------------------------------
Notary Public
My commission expires: _______________
Page 7 of 8
<PAGE> 65
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on the _____ day of July,
1997, by Max L. Page as Executive Vice President of Lincoln Partners Corporation
(formerly known as Fitzgeralds Las Vegas, Inc.).
------------------------------------
Notary Public
My commission expires: _______________
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on the _____ day of July,
1997, by Max L. Page as President of Nevada Club, Inc.
------------------------------------
Notary Public
My commission expires: _______________
Page 8 of 8
<PAGE> 66
Escrow No. _____________
WHEN RECORDED RETURN TO:
Hale, Lane, Peek, Dennison,
Howard, Anderson and Pearl
Attn: Marilyn L. Skender, Esq.
Post Office Box 3237
Reno, Nevada 89505
SECOND MODIFICATION OF DEED OF TRUST
AND SECURITY AGREEMENT AND FIXTURE FILING
AND ASSIGNMENT
This Second Modification of Deed of Trust and Security Agreement and
Fixture Filing and Assignment ("Modification") is made this ______ day of July,
1997, by and between FITZGERALDS RENO, INC., a Nevada corporation, as Trustor,
and JOHN G. METZKER, an unmarried man, as to an undivided seventy-three percent
(73%) interest, and JEAN METZKER, AN UNMARRIED WOMAN, as to an undivided
twenty-seven percent (27%) interest, as Beneficiary.
R E C I T A L S:
This Modification is made and entered into with reference to the
following facts:
A. Trustor executed and delivered its note to John G. Metzker, a
married man dated March 16, 1992 in the original principal amount of Four
Million Five Hundred Twenty-Six Thousand Five Hundred Two and no/100ths Dollars
($4,526,502.00) (the "Original Note"), which Original Note was secured by inter
alia a deed of trust and security agreement and fixture filing recorded on March
17, 1992, as Document No. 1554670, Official Records of Washoe County, Nevada,
encumbering all that certain real property situate in such county and state,
described therein; which deed of trust was subsequently modified by the First
Modification of Deed of Trust described in Recital D hereinbelow (the foregoing
described deed of trust as modified is hereinafter referred to as the "Deed of
Trust"). A UCC-1 Fixture Filing was recorded on March 17, 1992 as File no.
1554672,
1
<PAGE> 67
Official Records of Washoe County, Nevada and filed with the Secretary of State
of the State of Nevada as Filing No. 92-02438.
B. The principal amount of the Original Note is to be decreased or
increased periodically to reflect certain adjustments determined in accordance
with the methods set forth in that certain Stock Redemption Agreement, made and
entered into by and among Trustor, Fitzgeralds Las Vegas, Inc., Nevada Club,
Inc. and John G. Metzker, a married man, dated December 21, 1990 and as amended
by two Amendments to Stock Redemption Agreement dated March 16, 1992 and
November 17, 1992, respectively, and as further amended by the Third Amendment
to Stock Redemption Agreement dated of even date herewith (the "Stock Redemption
Agreement").
C. Pursuant to the terms of the Stock Redemption Agreement the sale
by Trustor of the certain real property caused the principal amount of the
Original Note to increase by the amount of Seven Hundred Thirty-five Thousand
Nine Hundred Eighty Three and no/100ths Dollars ($735,983.00), however, instead
of increasing the principal amount of the Original Note, Maker executed and
delivered to John G. Metzker a separate note dated November 17, 1992 in the
principal sum of $735,983.00 (the "Additional Note"). At that time, the Original
Note was amended by an Amendment to Note dated November 17, 1992.
D. The Original Note and the Additional Note were both secured by
the Deed of Trust pursuant to a Modification of Deed of Trust dated November 17,
1992 and recorded on November 23, 1992 in the Official Records of Washoe County,
Nevada as Document No. 1624894 (the "First Modification to Deed of Trust").
E. At the date of the Stock Redemption Agreement, John G. Metzker
was married to Jean Metzker. On or about May 1, 1993, John G. Metzker and Jean
Metzker entered into a Separate Property Agreement and in compliance with the
terms of such agreement, on May 10, 1993, John G. Metzker assigned $1,750,000 of
the original principal balance of the original Note to Jean Metzker ("Jean's
Portion"). Subsequently, on December 30, 1994, John G. Metzker and Jean Metzker
were divorced.
F. Pursuant to the provisions of the Stock Redemption Agreement, the
principal amount of the Original Note is to be
2
<PAGE> 68
further increased by $1,233,720.00 (the "Adjustment").
G. After the Adjustment, the aggregate original principal amounts of
the Original Note and the Additional Note (collectively the "Original Notes") is
$6,496,205.00 and the aggregate outstanding principal balances of the Original
Notes is $5,531,566.02 with interest paid through July 8, 1997.
H. Pursuant to the terms of the Stock Redemption Agreement, Trustor
and Beneficiary have agreed to modify the payment terms of the Original Notes,
to clarify the status of the Original Notes and to recognize Jean's Portion, and
have agreed to accomplish the foregoing by replacing and superseding the
Original Notes with two (2) replacement notes, one in the original principal sum
of $1,402,893.14 payable to Jean Metzker, an unmarried woman (the "Jean Metzker
Replacement Note") and one in the original principal sum of $4,128,672.88
payable to John G. Metzker, an unmarried man (the "John G. Metzker Replacement
Note") (collectively the "Replacement Notes").
I. It is appropriate to modify the terms of the Deed of Trust.
NOW, THEREFORE, based upon the foregoing recitals which by reference
are incorporated herein, and for a valuable consideration, the receipt of which
is hereby acknowledged, Trustor and Beneficiary agree as follows:
1. John G. Metzker hereby assigns, transfers and conveys an
undivided twenty-seven percent (27%) interest in the Deed of Trust to Jean
Metzker, an unmarried woman. Trustor hereby acknowledges and consents to the
foregoing assignment. Jean Metzker hereby acknowledges and agrees that the Jean
Metzker Replacement Note and this assignment shall and do replace and supersede
in all respects that certain unrecorded "Assignment of Beneficial Interest and
Proceeds" dated May 10, 1993 executed by John Metzker in favor of Jean Metzker.
John G. Metzker and Jean Metzker, as between them, agree that in the event of a
default under either or both of the Replacement Notes or this Deed of Trust, as
modified hereby, if either party desires to proceed to commence foreclosure
under this Deed of Trust, the other party shall cooperate in such foreclosure.
2. Section 1.03 appearing in I, paragraph B of the Deed of
3
<PAGE> 69
Trust is hereby deleted in its entirety and a new Section 1.03 is hereby added,
and shall read as follows:
1.03 Trustor makes this Deed of Trust for the purpose of
securing:
(a) Payment of all indebtedness evidenced by that
certain Replacement Note Secured by Deed of Trust dated July 9,
1997, and any and all renewals, extensions, modification or
amendments thereof, in the principal amount of Four Million One
Hundred Thirty-Eight Thousand Six Hundred Seventy-two and 88/100ths
Dollars ($4,128,672.88) executed by Trustor and payable to John G.
Metzker, an unmarried man, together with interest thereon, which
note by this reference is incorporated herein.
(b) Payment of all indebtedness evidenced by that
certain Replacement Note Secured by Deed of Trust dated July 9, 1997
and any and all renewals, extensions, modifications or amendments
thereof in the principal amount of One Million Four Hundred Two
Thousand Eight Hundred Ninety-three and 14/100ths Dollars
($1,402,893.14), executed by Trustor and payable to Jean Metzker, an
unmarried woman, together with interest thereon, which note by this
reference is incorporated herein. The notes described in this
Section 1.03(a) and (b) shall hereinafter be referred to
collectively as the "Replacement Notes" and singly as the
"Replacement Note."
3. The Deed of Trust is hereby amended to provide that all
references throughout the Deed of Trust to "Note" or "Notes" wherever and
whenever it appears shall be deleted and the words the "Replacement Notes" shall
be substituted in its place.
4. Section 1.02 appearing in I, paragraph A of the Deed of Trust is
hereby amended by changing the name set forth opposite the words "Name of
Secured Party" from "John G. Metzker, a married man" to "John G. Metzker, an
unmarried man, and Jean Metzker, an unmarried woman."
5. Section 2.14 appearing in II, paragraph F of the Deed of Trust is
hereby deleted and in its stead a new Section 2.14 is
4
<PAGE> 70
hereby added and shall read as follows:
2.14 In the event Philip D. Griffith does not directly
or indirectly control the Trustor, the Replacement Notes,
irrespective of the maturity dates expressed therein, at the option
of Beneficiary, with demand and notice thereof, shall immediately
become due and payable. Notwithstanding the foregoing, this Section
2.14 shall not be applicable in the event Philip D. Griffith ceases
to be directly or indirectly in control of Trustor because of a
merger of Trustor and its parent corporation, Fitzgeralds Gaming
Corporation, with a company whose stock is publicly traded on a
nationally recognized U. S. securities exchange and the combined net
worth of such company after the merger is at least Fifty Million
Dollars ($50,000,000.00) and the credit-worthiness of such company
is superior to that of Trustor and Fitzgeralds Gaming Corporation.
6. Section 3.01 appearing in III, paragraph A, of the Deed of Trust
is hereby deleted in its entirety and a new Section 3.01 is hereby added, and
shall read as follows:
3.01 Trustor shall be in default hereunder upon the
breach of any covenant or warranty contained herein, or if an event
of default shall have occurred and be continuing under either or
both of the Replacement Notes, or any other obligation secured
hereby. A default under either of the Replacement Notes shall
constitute a default under the other Replacement Note.
7. Section 3.08 appearing in III, paragraph B, of the Deed of Trust
is hereby deleted and in its stead a new Section 3.08 is hereby added and shall
read as follows:
3.08 The following shall constitute "Foreclosure
Proceedings" for purposes of this Section 3.08:
(i) the recordation of a Notice of Breach and
Election to Sell or any other notice of initiation of foreclosure
proceedings;
5
<PAGE> 71
(ii) the commencement of an action for judicial
foreclosure or implementation of foreclosure proceedings under the
provisions of Chapter 107 of Nevada Revised Statutes; or
(iii) the exercise of any remedy provided for in
this Deed of Trust or in the Replacement Notes.
Except as otherwise provided in this Section 3.08, in
the event of any default under either or both Replacement Notes or
under this Deed of Trust, Beneficiary shall not commence Foreclosure
Proceedings under this Deed of Trust until the following procedures
have been followed: Beneficiary shall deliver to Trustor written
notice specifying the event of default ("Notice of Noncompliance").
If within thirty (30) days after delivery of the Notice of
Noncompliance to Trustor, Trustor delivers to Beneficiary a
statement that such default resulted from insufficient cash flow
from the normal business operations of Trustor (and such cash flow
deficiency is not a result of Trustor's transactions with its
affiliates) as confirmed by a certificate of the Chief Financial
Officer of Trustor which is accompanied by a cash flow statement for
the prior twelve (12) calendar months to date and a projected cash
flow statement for the ensuing six (6) months verifying such cash
flow deficiency (hereinafter referred to as "Notice of Cash Flow
Deficiency") then Beneficiary shall not commence Foreclosure
Proceedings until the occurrence of the first to occur of the
following events ("Foreclosure Grace Period"):
(1) Trustor shall fail to make a minimum monthly payment
of Twenty Thousand and no/100ths Dollars ($20,000.00) on the
Replacement Notes ("Default Payment") (which payment shall be
allocated $5,400.00 to the Jean Metzker Replacement Note and
$14,600.00 to John G. Metzker Replacement Note) for any calendar
month during the six (6) month period after the date of the Notice
of Noncompliance; or
(2) The expiration of six (6) months after
6
<PAGE> 72
the date of the Notice of Noncompliance; or
(3) The failure of Trustor to make partial monthly
payments in excess of the Default Payment during any calendar
quarter (it being agreed that Trustor has the obligation to make
partial payments on the Notes to the extent of its cash flow in
excess of the Default Payment during the Foreclosure Grace Period)
on any payments due under the Replacement Notes to the extent of
Trustor's cash flow where the failure to make such payment is not
supported by a quarterly cash flow statement for the applicable
period accompanied by a statement that such failure to pay or such
partial payment resulted from insufficient cash flow as confirmed by
a certificate of the Chief Financial Officer of Trustor reflecting
the inability to pay or that the maximum partial payment has been
paid, unless such failure is resolved or cured as provided
hereinafter in this subparagraph. Such quarterly cash flow statement
and certificate shall be delivered to Beneficiary within thirty (30)
days after the end of each calendar quarter. Based upon such
quarterly cash flow statement and certificate, if Trustor has not
made payments on the Replacement Notes to the extent of its cash
flow in excess of the Default Payments for such quarter than and in
such event, Beneficiary may give Trustor written notice of such
failure to make partial payments. Trustor shall within thirty (30)
days after delivery of such notice resolve such issue with
Beneficiary or cure such failure to make partial payments.
If Trustor fails to deliver to Beneficiary the Notice of
Cash Flow Deficiency within thirty (30) days after the delivery of
the Notice of Noncompliance to Trustor, Beneficiary may commence
Foreclosure Proceedings under this Deed of Trust.
If during the Foreclosure Grace Period, Trustor pays to
Beneficiary all outstanding installment payments due under the
Replacement Notes, Beneficiary shall deliver to Trustor a rescission
of the Notice of Noncompliance and the Replacement Notes shall be
7
<PAGE> 73
reinstated as performing Replacement Notes, without acceleration.
During the Foreclosure Grace Period, Trustor shall not
(1) increase the compensation of its officers or directors, directly
or indirectly, (2) pay any dividends or other distributions, or (3)
repay any obligations, except in the ordinary course of business or
in accordance with their terms. Breach of the foregoing by Trustor
at anytime during the Foreclosure Grace Period shall allow
Beneficiary to immediately commence Foreclosure Proceedings under
this Deed of Trust.
Notwithstanding anything to the contrary contained in
this Section 3.08, Beneficiary shall have the right in its sole
discretion to commence Foreclosure Proceedings under this Deed of
Trust if any of the events of default set forth in Sections 2.03,
2.10, 2.12, or 2.14 occur.
8. Section 4.07 of the Deed of Trust is hereby amended by changing
the addresses of the respective parties which shall read as follows:
To Trustor: Philip D. Griffith, President
Fitzgeralds Reno, Inc.
a Nevada corporation
300 E. Second Street
Reno, Nevada 89501
With copies to: Fitzgeralds Gaming Corporation
301 Fremont Street
Las Vegas, Nevada 89101
Attn: General Counsel
To Beneficiary: John G. Metzker
Post Office Box 6748
Reno, Nevada 89513
With copies to: Hale, Lane, Peek, Dennison,
Howard, Anderson and Pearl
100 W. Liberty Street, 10th Floor
8
<PAGE> 74
Post Office Box 3237
Reno, Nevada 89501
Attention: J. Stephen Peek
Marilyn L. Skender
To Beneficiary: Jean Metzker
1019 Riverside Drive
Reno, Nevada 89503
With copies to: Avansino, Melarkey, Knobel,
McMullen & Mulligan
165 W. Liberty Street, Suite 210
Reno, Nevada 89501
Attention: John Mulligan, Esq.
9. Section 5.01 of the Deed of Trust is hereby amended by deleting
the "Third Deed of Trust" as defined therein.
10. Section 5.02 of the Deed of Trust is hereby amended by deleting
all references to "First Interstate Bank of Nevada" and substituting in its
place and stead "Wells Fargo Bank" and by deleting paragraphs (b), (c) and (d)
of Section 5.02 in their entirety.
11. Exhibit "B" and all references thereto in the Deed of Trust are
deleted in their entirety.
12. As hereby amended, the Deed of Trust remains in full force and
effect, and Trustor continues to be bound thereby to perform the obligations
secured by the Deed of Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Modification of Deed of Trust and Security Agreement and Fixture Filing the day
and year first above written.
"TRUSTOR": FITZGERALDS RENO, INC.,
a Nevada corporation
By: _____________________________
Max L. Page
Executive Vice President
9
<PAGE> 75
"BENEFICIARY": __________________________________
John G. Metzker
----------------------------------
Jean Metzker
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on _____________, 1997,
by Max L. Page as Executive Vice President of Fitzgeralds Reno, Inc., a Nevada
corporation.
-------------------------------
Notary Public
My Commission Expires: ________
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on _____________, 1997,
by John G. Metzker.
-------------------------------
Notary Public
My Commission Expires: ________
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
10
<PAGE> 76
This instrument was acknowledged before me on _____________, 1997,
by Jean Metzker.
-------------------------------
Notary Public
My Commission Expires: ________
11
<PAGE> 77
WHEN RECORDED, MAIL TO:
Marilyn L. Skender, Esq.
Hale, Lane, Peek, Dennison,
Howard, Anderson and Pearl
100 West Liberty Street, Tenth Floor
Post Office Box 3237
Reno, Nevada 89505
SUBSTITUTION OF TRUSTEE UNDER DEED OF TRUST
WHEREAS, FITZGERALDS RENO, INC., A NEVADA CORPORATION, was the
original Trustor, FIRST AMERICAN TITLE COMPANY OF NEVADA, A NEVADA CORPORATION,
was the original Trustee, and JOHN G. METZKER, A MARRIED MAN, is the original
Beneficiary under that certain Deed of Trust dated March 16, 1992, recorded
March 17, 1992, as Document No. 1554670, in Book 3440, Page 98 of Official
Records in the Office of the County Recorder of Washoe County, Nevada and as
modified by that certain Modification of Deed of Trust dated November 17, 1992,
and recorded on November 23, 1992, as Document No. 1624894, in Book 3617, Page 3
of Official Records (the "Deed of Trust").
WHEREAS, Trustor, John G. Metzker, has assigned a portion of his
beneficiary interest in the Deed of Trust and the Notes secured thereby to his
former spouse, Jean Metzker, by an unrecorded assignment dated May 10, 1993.
WHEREAS, First Centennial Title Deed Services, Inc., a Nevada
corporation was substituted as Trustee under the Deed of Trust by that
Substitution of Trustee under Deed of Trust dated August 30, 1996 and recorded
on September 4, 1996, as Document No. 2027308, Official Records of Washoe
County, Nevada.
WHEREAS, the undersigned desire to substitute a new Trustee under
said Deed of Trust in the place and stead of First Centennial Trust Deed
Services, Inc.
NOW, THEREFORE, NOTICE IS HEREBY GIVEN, that the undersigned
appoints and substitutes First American Title Company of Nevada,
1
<PAGE> 78
a Nevada corporation, as Trustee under said Deed of Trust in place of First
Centennial Trust Deed Services, Inc., a Nevada corporation. First American Title
Company of Nevada, its successors and assigns, is hereby vested with all title,
interest, powers, duties and trusts vested in Trustee by virtue of said Deed of
Trust.
DATED this _____ day of July, 1997.
--------------------------------
John G. Metzker
--------------------------------
Jean Metzker
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on July ____, 1997,
by John G. Metzker.
-------------------------------
Notary Public
My Commission Expires: ________
STATE OF NEVADA )
) ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on July ____, 1997, by Jean
Metzker.
-------------------------------
Notary Public
My Commission Expires: ________
2
<PAGE> 79
REPLACEMENT PROMISSORY NOTE
$618,357.62 Reno, Nevada
July ____, 1997
WHEREAS, John C. Metzker ("Maker") did deliver to Fitzgeralds Reno,
Inc., a Nevada corporation ("Payee") his promissory note dated March 1, 1992 in
the original principal sum of $1,149,841.00 (the "Original Note");
WHEREAS, the Original Note is all due and payable on June 30, 1997;
WHEREAS, Maker has assigned and delivered to Payee without recourse
that certain promissory note dated March 1, 1992 in the original principal sum
of $1,149,841.00 wherein Fitzgeralds Las Vegas, Inc (now known as Lincoln
Partners Corporation), a Nevada corporation is Maker and John G. Metzker is
payee (the "LPC Note") and Payee has accepted the LPC Note and has credited it
as a payment of $639,401.40 on the Original Note;
WHEREAS, the outstanding principal balance of the Original Note is
$510,439.60 as of July 8, 1997 and there is accrued and unpaid interest of
$107,918.02 thereon through July 8, 1997 for a total outstanding balance of
$618,357.62;
WHEREAS, Maker and Payee desire to replace and supersede the
Original Note with this replacement note (the "Note").
NOW, THEREFORE, Maker and Payee agree that this Note shall replace
and supersede the Original Note and the terms and conditions of this Note shall
be as follows:
John G. Metzker, an unmarried man ("Maker") promises to pay to
Fitzgeralds Reno, Inc., a Nevada corporation ("Payee"), or order, at Post Office
Box 40130, Reno, Nevada 89504, or at such other place as the holder hereof may
from time to time designate in writing, in legal tender of the United States of
America, the principal amount of Six Hundred Eighteen Thousand Three Hundred
Fifty-seven and 62/100ths Dollars ($618,357.62), together with interest thereon
from July 9, 1997 on the unpaid principal balance from time to time outstanding
at the floating rate equal
Page 1 of 4
<PAGE> 80
to the Prime Rate, as hereinbelow defined, plus one percent (1%) ("Interest
Rate"), provided, however, in no event shall the Interest Rate exceed thirteen
percent (13%), nor be less than nine percent (9%). Each change in the Interest
Rate resulting from a change in the Prime Rate shall become effective as of the
date on which such change occurs. Interest shall be computed on the basis of a
365-day year, or 366-day year if a leap year, and actual days elapsed. For
purposes of this Note, the term "Prime Rate" means the rate published from time
to time in the Wall Street Journal "Money Rates" as the base rate on corporate
loans posted by at least 75% of the nation's 30 largest banks.
Principal and interest shall be due and payable as follows: Accrued
interest for the period July 9, 1997 through and including December 31, 1997
shall be due and payable on the date the principal balance of this Note is due
and payable. Accrued interest from and after January 1, 1998 shall be due and
payable in monthly installments, in arrears, with the first payment due on the
1st day of February, 1998 and continuing upon the 1st day of each and every
month thereafter until September 16, 2001 upon which date the unpaid principal
balance together with all accrued interest thereon shall be due and payable.
Payee has executed a note in favor of Maker of even date herewith in
the original principal amount of $4,128,672.88 (the "Fitz Note").
Notwithstanding any provision to the contrary set forth herein, in
the event Payee fails to pay a regular monthly installment or the balloon
payment due under the Fitz Note, Maker shall have the right to delay payment
upon the corresponding proportional percentage of the monthly installment or the
balloon payment due under this Note until the date that Payee pays such
delinquent payment(s) to Maker.
Maker shall have the right to prepay without penalty all or any
portion of the Note. Upon each such prepayment, Maker shall also pay all accrued
interest on the principal amount prepaid. All payments on this Note shall be
applied first to accrued interest and the balance to principal.
Maker shall have the right from time to time, and at various
Page 2 of 4
<PAGE> 81
times, to pay all or any portion of the remaining principal balance or any
accrued interest under this Note by Maker electing, upon ten (10) days advance
written notice to Payee, to have Payee accept a reduction in the then remaining
principal balance and/or outstanding accrued interest of the Fitz Note as a
payment under this Note, in like amounts, (principal for principal and interest
for interest) as specified in such notice. Any such reduction in the principal
balance of the Fitz Note shall not alter the regular monthly installment
payments due under the Fitz Note.
The holder of this Note may accelerate this Note, that is, declare
the entire unpaid balance due and payable upon (1) failure to pay when due any
installment of principal or interest due hereunder, or (2) the filing of any
voluntary petition in bankruptcy by any maker, or any guarantor, if any, of this
Note or the filing of an involuntary petition by the creditors of any maker, or
guarantor, if any, of this Note, which involuntary petition remains undischarged
for a period of sixty (60) days. Protest is waived.
The acceptance of any payment hereunder which is less than payment
of all amounts then due and payable shall not constitute a waiver of any of the
rights or options of the holder hereof or to the exercise of those rights and
options at the time of such acceptance or at any subsequent time.
In the event that suit be brought hereon, or any attorney be
employed or expenses be incurred to enforce this Note, then the prevailing party
shall be entitled to its reasonable attorneys' fees and costs.
This Note shall be construed and enforced in accordance with the
laws of the State of Nevada. Maker agrees that Payee shall have the rights and
remedies available to a creditor under the laws of the State of Nevada. Maker
consents to the personal jurisdiction of the appropriate state or federal court
located in Reno, Nevada.
No waiver by Payee of any rights or remedy shall be effective unless
in writing and signed by Payee, and no such waiver, on one occasion, shall be
construed as a waiver on any
Page 3 of 4
<PAGE> 82
other occasion. The Maker, to the extent permitted by law, waives presentment of
payment, any and all lack of diligence or delays in the collection or
enforcement hereof, and expressly agrees to remain and continue bound for the
payment of the principal, interest and other sums provided for by the terms of
this Note, notwithstanding any extension of time for the payment of, said
principal or interest or other sum, or any change in the amount agreed to be
paid under this Note.
"MAKER": ________________________________
John G. Metzker
"PAYEE": FITZGERALDS RENO, INC.,
a Nevada corporation
By: _________________________________
Max L. Page
Executive Vice-President
Page 4 of 4
