<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2000
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
incorporation or organization) Identification Number)
301 FREMONT STREET, LAS VEGAS NV 89101
(Address of principal executive offices) (Zip Code)
(702) 388 - 2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period 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
May 8, 2000
<TABLE>
<CAPTION>
Class Outstanding as of May 8, 2000
----- -----------------------------
<S> <C>
Common stock, $.01 par value 5,508,082
</TABLE>
<PAGE> 2
FITZGERALDS GAMING CORPORATION
FORM 10-Q
INDEX
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF APRIL 2, 2000
AND DECEMBER 31, 1999 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE QUARTERS ENDED APRIL 2, 2000 AND APRIL 4, 1999 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
QUARTERS ENDED APRIL 2, 2000 AND APRIL 4, 1999 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 13
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 21
PART II OTHER INFORMATION 22
SIGNATURES 24
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 2, 2000 AND DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS April 2, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 24,948,125 $ 22,115,594
Accounts receivable, net of allowance for doubtful
accounts of $352,508 and $405,003 1,301,736 1,430,030
Inventories 1,539,466 1,771,327
Prepaid expenses:
Gaming taxes 1,423,787 1,379,589
Other 2,505,986 2,858,118
------------- -------------
Total current assets 31,719,100 29,554,658
------------- -------------
PROPERTY AND EQUIPMENT, net 153,423,089 152,017,061
------------- -------------
OTHER ASSETS:
Restricted cash 2,190,000 2,190,000
Debt offering costs 7,011,847 7,394,649
Goodwill, net of accumulated amortization
of $934,035 and $843,796 13,245,126 13,335,365
Other assets 2,314,895 2,304,757
------------- -------------
Total other assets 24,761,868 25,224,771
------------- -------------
TOTAL $ 209,904,057 $ 206,796,490
============= =============
</TABLE>
(continued)
See Notes to Condensed Consolidated Financial Statements Page 4 of 24
<PAGE> 5
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
APRIL 2, 2000 AND DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY APRIL 2, 2000 DEC. 31, 1999
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Debt accelerated due to default $ 203,235,325 $ 203,166,582
Current portion of long-term debt 524,406 673,619
Accounts payable 3,441,117 4,552,807
Accrued and other:
Payroll and related 4,376,076 4,619,366
Progressive jackpots 862,304 1,230,036
Outstanding chips and tokens 690,530 864,263
Interest 36,335,022 28,456,467
Other 6,246,924 7,168,493
------------- -------------
Total current liabilities 255,711,704 250,731,633
LONG-TERM DEBT, net of current portion and
debt accelerated due to default 2,751,526 598,478
------------- -------------
Total liabilities 258,463,230 251,330,111
------------- -------------
CUMULATIVE REDEEMABLE PREFERRED STOCK,
$.01 par value; $25 stated value; 800,000 shares authorized,
issued and outstanding; liquidation preference $20,000,000
stated value plus accrued dividends of $17,583,208 and
$16,224,779 recorded at liquidation preference, net of
unamortized offering costs and discount of $6,097,619
and $6,262,268, respectively 31,485,589 29,962,511
------------- -------------
STOCKHOLDERS' DEFICIENCY:
Common stock, $.01 par value; 29,200,000 shares
authorized; 5,508,082 shares issued and outstanding 55,080 55,080
Additional paid-in capital 23,954,220 23,954,220
Accumulated deficit (104,054,062) (98,505,432)
------------- -------------
Total stockholders' deficiency (80,044,762) (74,496,132)
------------- -------------
TOTAL $ 209,904,057 $ 206,796,490
============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements Page 5 of 24
<PAGE> 6
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED APRIL 2, 2000 AND APRIL 4, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
OPERATING REVENUES:
Casino $ 46,048,447 $ 43,968,417
Food and beverage 6,821,836 6,481,445
Rooms 5,353,046 5,531,374
Other 1,144,776 887,460
------------ ------------
Total 59,368,105 56,868,696
Less promotional allowances 5,591,040 4,894,269
------------ ------------
Net 53,777,065 51,974,427
------------ ------------
OPERATING COSTS AND EXPENSES:
Casino 22,045,706 21,272,739
Food and beverage 3,902,562 4,191,897
Rooms 3,077,421 3,184,473
Other operating expense 557,677 599,430
Selling, general and administrative 16,330,468 14,916,853
Depreciation and amortization 3,687,745 3,517,574
Lease settlement expense -- 1,946
------------ ------------
Total 49,601,579 47,684,912
------------ ------------
INCOME FROM OPERATIONS 4,175,486 4,289,515
OTHER INCOME (EXPENSE):
Interest income 194,083 52,512
Interest expense (8,404,282) (7,203,038)
Interest expense - stockholders -- (5,420)
Other income 9,161 55,812
------------ ------------
NET LOSS (4,025,552) (2,810,619)
PREFERRED STOCK DIVIDENDS AND ACCRETION OF DISCOUNT (1,523,078) (1,314,527)
------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (5,548,630) $ (4,125,146)
============ ============
LOSS PER COMMON SHARE - BASIC $ (1.01) $ (1.03)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,508,082 4,012,846
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements Page 6 of 24
<PAGE> 7
FITZGERALDS GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED APRIL 2, 2000 AND APRIL 4, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,829,963 $ 3,264,376
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 4,214 50,901
Acquisition of property and equipment (2,755,481) (1,090,952)
Decrease in restricted cash -- 432,179
------------ ------------
Net cash used in investing activities (2,751,267) (607,872)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt offering costs -- (80,876)
Repayment of long-term debt (246,165) (634,409)
Dividends to minority stockholders -- (20,449)
------------ ------------
Net cash used in financing activities (246,165) (735,734)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,832,531 1,920,770
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,115,594 13,038,590
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 24,948,125 $ 14,959,360
============ ============
CASH PAID FOR INTEREST $ 71,487 $ 229,163
============ ============
SUMMARY OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired through issuance of debt $ 2,250,000 $ --
Accretion of discount on preferred stock 164,649 142,103
Accrual of preferred stock dividends 1,358,429 1,172,424
Accrual of debt offering costs -- 68,524
</TABLE>
See Notes to Condensed Consolidated Financial Statements Page 7 of 24
<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 April 2, 2000 and for the quarters
ended April 2, 2000 and April 4, 1999 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 ("GAAP") 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 for the year ended December 31, 1999.
The results of operations for the quarter ended April 2, 2000 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000.
The Company utilizes a "4-4-5" (weeks) financial reporting period which
maintains a December 31 year end. This method of reporting results in 13
weeks in each quarterly accounting period. The first and fourth accounting
periods will have a fluctuating number of days resulting from the
maintenance of a December 31 year end, whereas the second and third periods
will have the same number of days each year.
Certain amounts in the 1999 condensed consolidated financial statements have
been reclassified to conform to the 2000 method of presentation.
2. Default on the Senior Secured Notes
On May 13, 1999, the Company's Board of Directors determined that, pending a
restructuring of the Company's indebtedness, it would not be in the best
interest of the Company to make the regularly scheduled interest payments on
its $205.0 million aggregate principal amount of the 12.25% Senior Secured
Notes due December 15, 2004 (the "Senior Secured Notes"). The Company has
not made the regularly scheduled interest payments of $12.5 million that
were due and payable on June 15, 1999 and December 15, 1999. Under the
indenture pursuant to which the Senior Secured Notes were issued (the "Note
Indenture"), an Event of Default occurred on July 15, 1999, and is
continuing as of the date hereof. Failure to make the regularly scheduled
interest payment on June 15, 1999 resulted in an interest rate increase of
1.0% to 13.25%, effective June 16, 1999. In accordance with the Note
Indenture, the Company began accruing interest on the unpaid interest at
13.25% effective June 16, 1999. Since June 16, 1999, an additional $3.2
million of interest incurred as the result of the
Page 8 of 24
<PAGE> 9
default on the Senior Secured Notes has also not been paid. No action has
been taken by either the Note Indenture Trustee or holders of at least 25%
of the Senior Secured Notes to accelerate the indebtedness evidenced by the
Senior Secured Notes and declare the unpaid principal and interest to be due
and payable.
In the event the indebtedness evidenced by the Senior Secured Notes is
accelerated, the Company would not have the resources available to repay
such indebtedness. The Company has initiated and is continuing discussions
with an informal committee reportedly representing holders of a majority
interest in the Senior Secured Notes (the "Committee") concerning a
restructuring of the Company's indebtedness and reorganization of the
Company that may include the sale of some or all of the Company's
properties. Costs associated with the proposed restructuring were $0.4
million and $0.2 million in the first quarters of 2000 and 1999,
respectively. Such costs are reported in the selling, general and
administrative expenses in the Condensed Consolidated Statements of
Operations. Costs incurred and to be incurred in connection with the
restructuring have been and will continue to be substantial and, in any
event, there can be no assurance that the Company will be able to
successfully restructure its indebtedness.
The Company has expended substantial amounts in recent years to expand and
improve its properties and to enhance its competitive position and it is
anticipated that it will be necessary to continue to do so to remain
competitive. However, there can be no assurance that the Company will have
adequate resources for such purposes without restructuring the Company's
indebtedness and that any restructuring will provide such necessary
resources. The central strategic component of the Company's proposed
restructuring plan involves making substantial capital expenditures at both
its Tunica and Black Hawk properties.
A default on the Senior Secured Notes also constitutes a default under the
$15.0 million loan and security agreement entered into by the Company in
October 1998 (the "Credit Facility"). Although the Company believes that the
lending institution under the Credit Facility will continue to have adequate
security for the Company's obligations thereunder, there can be no assurance
that the lending institution will continue to make additional advances. The
Company has repaid all amounts borrowed under the Credit Facility.
3. Recently Issued Accounting Standards
On June 30, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting
and reporting standards for derivative instruments and hedging activities
and is effective for the Company's fiscal year ending December 31, 2001.
Management believes that adoption of this statement will not have a material
impact on the Company's financial condition or results of operations.
Page 9 of 24
<PAGE> 10
4. Long-Term Debt
The Senior Secured Notes bear interest at a fixed annual rate of 12.25%
payable on June 15 and December 15 of each year. The interest rate was
increased to 13.25%, effective June 16, 1999 as the result of the failure to
make the scheduled interest payment due on June 15, 1999 (see Note 2). The
Senior Secured Notes will mature on December 15, 2004. The Senior Secured
Notes are secured by a lien on substantially all of the assets of the
Company, including a pledge of the stock of the Company's subsidiaries and a
lien on substantially all of the assets of the Company's subsidiaries other
than Fitzgeralds Arizona Management Inc. ("FAMI"), Fitzgeralds New York,
Inc. ("FNYI") and Nevada Club, Inc. ("NCI"), except for certain excluded
assets, as defined in the Note Indenture.
Upon a Change of Control as defined in the Note Indenture, the Company will
be required to offer to repurchase all of the outstanding Senior Secured
Notes at a cash price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of repurchase.
The Note Indenture contains covenants which, among other things, restrict
the Company's ability to (i) make certain payments to, or investments in,
third parties; (ii) incur additional indebtedness or liens on any assets;
(iii) enter into transactions with affiliates; and (iv) sell assets or
subsidiary stock. At April 2, 2000, the Company was not in compliance with
certain covenants (see Note 2).
In October 1998, the Company established the Credit Facility with a lending
institution, subject to certain exceptions, secured by a first priority lien
on substantially all of the assets of the Company, including a pledge of the
stock of the Company's subsidiaries, a lien on substantially all of the
assets of the Company's subsidiaries excluding FAMI, FNYI and NCI, and
except certain excluded assets. The obligations under the Credit Facility
bear interest at an annual rate equal to the designated bank's prime rate
(9.00% and 8.50% at April 2, 2000 and December 31, 1999, respectively) minus
seven basis points. The Company is charged a nominal fee for amounts
available under the Credit Facility. Full payment of any outstanding balance
under the Credit Facility is due upon termination of the loan agreement in
October 2003. At April 2, 2000 and December 31, 1999, $5.0 million was
available for capital expenditures at Fitzgeralds Black Hawk and $10.0
million was available for general corporate purposes. At April 2, 2000, the
Company was not in compliance with certain covenants as stated in the Credit
Facility.
On February 1, 2000, Fitzgeralds Reno purchased an adjacent 834-space
parking garage for $3.0 million. The seller-financed acquisition required a
$0.75 million down payment, with the remaining balance financed at an
interest rate of 10% with monthly payments based on a 20-year amortization
schedule. The note matures in ten years with a lump sum principal payment
due of approximately $1.7 million.
Page 10 of 24
<PAGE> 11
5. Earnings Per Share
During the quarters ended April 2, 2000 and April 4, 1999, there were no
outstanding convertible securities that would result in dilutive potential
common shares and, as such, diluted earnings per share are not applicable.
Options to purchase 267,000 and 564,524 shares of common stock at prices
ranging from $1.00 to $1.10 per share were outstanding at April 2, 2000 and
April 4, 1999, respectively. Warrants to purchase 1,495,236 shares of common
stock at $.01 per share were outstanding at April 4, 1999. Such options and
warrants are not included in the computation of diluted earnings per share
because to do so would have been antidilutive.
6. Segment Information
The accounting policies of each business segment are the same as those
described in the summary of significant accounting policies in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999. There are
minimal inter-segment sales. The Company continues to evaluate its business
segment performance based on the Company's earnings before interest, income
taxes, depreciation and amortization ("EBITDA"). The Company has not changed
its basis of segmentation from the year ended December 31, 1999.
<TABLE>
<CAPTION>
For the Quarters Ended
---------------------------------
April 2, 2000 April 4, 1999
------------- -------------
(in thousands)
<S> <C> <C>
Net operating revenues:
Fitzgeralds Las Vegas $ 14,504 $ 14,373
Fitzgeralds Tunica 20,389 19,646
Fitzgeralds Reno 9,067 9,155
Fitzgeralds Black Hawk 9,817 8,801
-------- --------
Total $ 53,777 $ 51,975
======== ========
Income (loss) from operations:
Fitzgeralds Las Vegas $ 909 $ 824
Fitzgeralds Tunica 2,231 2,213
Fitzgeralds Reno (252) (31)
Fitzgeralds Black Hawk 1,782 1,767
Other (482) (457)
-------- --------
Total Properties 4,188 4,316
Nevada Club (13) (24)
Harolds Club -- (2)
-------- --------
Total $ 4,175 $ 4,290
======== ========
</TABLE>
Page 11 of 24
<PAGE> 12
Reconciliation of total business segment operating income to consolidated
net loss before income tax:
<TABLE>
<CAPTION>
For the Quarters Ended
------------------------------
April 2, 2000 April 4, 1999
------------- -------------
(in thousands)
<S> <C> <C>
Total segment operating income $ 4,670 $ 4,773
Nevada Club (13) (24)
Harolds Club -- (2)
Other (482) (457)
Eliminations 2,393 2,674
Interest income 194 53
Interest income - shareholder and intercompany 8,109 8,210
Interest expense (8,404) (7,203)
Interest expense - shareholder and intercompany (8,091) (8,197)
Other expense (2,402) (2,636)
-------- --------
Net loss before income tax $ (4,026) $ (2,811)
======== ========
</TABLE>
Page 12 of 24
<PAGE> 13
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. 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 and other material in this Quarterly Report on Form
10-Q contain 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, its efforts to restructure its
indebtedness and capital structure, 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, environmental matters and other
factors discussed in the Company's other filings with the Securities and
Exchange Commission. Accordingly, actual results could differ materially from
those contemplated by such forward-looking statements.
GENERAL
The Company is a diversified multi-jurisdictional gaming holding company that
owns and operates four Fitzgeralds-brand casino-hotels, in downtown Las Vegas,
Nevada ("Fitzgeralds Las Vegas"), Reno, Nevada ("Fitzgeralds Reno"), Tunica,
Mississippi ("Fitzgeralds Tunica"), and Black Hawk, Colorado ("Fitzgeralds Black
Hawk"), collectively referred to as the "Operating Properties". The Company
markets its properties primarily to middle-market customers, emphasizing its
Fitzgeralds brand and its "Fitzgeralds Irish Luck" theme.
The Company currently conducts substantially all of its business through
wholly-owned subsidiaries; Fitzgeralds Reno, Inc. ("FRI"); Fitzgeralds South,
Inc. ("FSI"); and Fitzgeralds Incorporated ("FI"). FRI directly owns and
operates Fitzgeralds Reno; FSI owns and operates Fitzgeralds Las Vegas and
Fitzgeralds Tunica through wholly-owned subsidiaries; and FI owns and operates
Fitzgeralds Black Hawk through wholly-owned subsidiaries, including 101 Main
Street Limited Liability Company ("101 Main").
Unless the context otherwise requires, the "Company" refers to Fitzgeralds
Gaming Corporation and its subsidiaries. The Company was incorporated in Nevada
in 1994 to serve as a holding company. The executive office of the Company is
located at 301 Fremont Street, Las Vegas, Nevada 89101; telephone (702)
388-2400; facsimile (702) 382-5562.
Page 13 of 24
<PAGE> 14
In the narrative discussion below, the "2000 Period" is defined as the quarter
ended April 2, 2000 and the "1999 Period" is defined as the quarter ended April
4, 1999. Unless otherwise noted, the narrative discussion below is focused on
the Company's Operating Properties, which together with unallocated corporate
and restructuring expenses are referred to as the "Properties". Unless the
context otherwise indicates, the discussion below excludes Nevada Club, which
was closed in December 1997 pending completion of its sale, which occurred in
June 1999, and in management's opinion is not material to the ongoing operations
of the Company. Corporate expenses of $0.25 million for each of the periods
presented are allocated to each of the four Operating Properties as an operating
expense. The remainder of the unallocated corporate and restructuring expenses
are included in Other. See Note 1 of Statement of Operations Data.
2000 PERIOD COMPARISON TO 1999 PERIOD
The table below sets forth Net Operating Revenues, Income (Loss) from
Operations, EBITDA, Adjusted EBITDA and other financial data for the 2000 Period
and the 1999 Period. EBITDA for the Properties was $7.9 million and $7.8 million
for the 2000 and 1999 Periods, respectively. 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 from $8.1 million for the 1999 Period to $8.2 million for
the 2000 Period. For a definition of EBITDA and Adjustments to EBITDA, see
Notes 2 and 3, respectively, of Statement of Operations Data.
<TABLE>
<CAPTION>
For the Quarters Ended
-------------------------------
Statement of Operations Data April 2, 2000 April 4, 1999
------------- -------------
(in thousands)
<S> <C> <C>
Net Operating Revenues:
Fitzgeralds Las Vegas $ 14,504 $ 14,373
Fitzgeralds Tunica 20,389 19,646
Fitzgeralds Reno 9,067 9,155
Fitzgeralds Black Hawk 9,817 8,801
-------- --------
Total $ 53,777 $ 51,975
======== ========
Income (Loss) from Operations:
Fitzgeralds Las Vegas $ 909 $ 824
Fitzgeralds Tunica 2,231 2,213
Fitzgeralds Reno (252) (31)
Fitzgeralds Black Hawk 1,782 1,767
Other (1) (482) (457)
-------- --------
Total Properties 4,188 4,316
Nevada Club (13) (24)
Harolds Club -- (2)
-------- --------
Total $ 4,175 $ 4,290
======== ========
</TABLE>
Page 14 of 24
<PAGE> 15
<TABLE>
<CAPTION>
For the Quarters Ended
------------------------------
Other Data April 2, 2000 April 4, 1999
------------- -------------
(in thousands)
<S> <C> <C>
EBITDA (2):
Fitzgeralds Las Vegas $ 1,882 $ 1,731
Fitzgeralds Tunica 3,848 3,751
Fitzgeralds Reno 365 581
Fitzgeralds Black Hawk 2,253 2,218
Other (1) (472) (448)
-------- --------
Total Properties 7,876 7,833
Nevada Club (13) (24)
Harolds Club -- (2)
-------- --------
Total EBITDA 7,863 7,807
Adjustments to EBITDA (3) 365 260
-------- --------
Adjusted EBITDA $ 8,228 $ 8,067
======== ========
Net Cash Provided by (Used in) (4):
Operating Activities $ 5,830 $ 3,264
Investing Activities (2,751) (608)
Financing Activities (246) (736)
Depreciation and Amortization 3,688 3,518
Capital Expenditures (2,755) (1,091)
Earnings to Fixed Charges (5): -- --
</TABLE>
- --------------
(1) Other includes corporate expenses not allocated to the Operating Properties
for both periods presented, which include restructuring expenses of $0.4
million and $0.2 million for the 2000 and 1999 Periods, respectively.
(2) EBITDA is a supplemental financial 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. At any property, EBITDA is calculated after the
allocation of corporate costs. However, EBITDA should only be read in
conjunction with all of the Company's financial data summarized above and
its financial statements prepared in accordance with 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. This presentation of EBITDA may not be comparable to similarly
titled measures reported by other companies.
(3) Adjustments to EBITDA include (i) exclusion of EBITDA for Nevada Club for
both periods presented; (ii) exclusion of EBITDA for Harolds Club for the
1999 Period; and (iii) exclusion of restructuring expenses for both periods
presented.
(4) Includes financial results of (i) Nevada Club for both periods presented and
(ii) Harolds Club for the 1999 Period.
(5) For the Ratio of Earnings to Fixed Charges, earnings are defined as earnings
before income taxes, interest on indebtedness, imputed interest on capital
lease obligations and the portion of rent expense deemed to represent
interest. Fixed charges consist of interest on indebtedness, imputed
interest on capital lease obligations and the portion of rent expense deemed
to represent interest. Earnings were insufficient to cover fixed charges by
$4.0 million and $2.8 million for the 2000 and 1999 Periods, respectively.
Page 15 of 24
<PAGE> 16
OPERATING REVENUES
Total revenues for the Operating Properties were $59.4 million and net operating
revenues were $53.8 million for the 2000 Period, representing 4.4% and 3.5%
increases, respectively, over total revenues of $56.9 million and net operating
revenues of $52.0 million for the 1999 Period. Such increases were primarily due
to increased spending in promotions and marketing strategies, an effective guest
development program and improved slot product.
The Company's business can be separated into four operating departments: casino,
food and beverage, rooms and other. Casino revenues for the Operating Properties
represented 77.6% and 77.3% of total revenues for the Operating Properties for
the 2000 and 1999 Periods, respectively. Casino revenues for the Operating
Properties (of which approximately 84.2% and 80.0% were derived from slot
machine revenues for the 2000 and 1999 Periods, respectively) increased 4.7% to
$46.0 million for the 2000 Period from $44.0 million for the 1999 Period. Casino
revenues increased 11.7% and 6.5%, respectively, at Fitzgeralds Black Hawk and
Fitzgeralds Tunica as the result of a substantial increase in marketing efforts.
Fitzgeralds Las Vegas casino revenue increased 1.7%, while Fitzgeralds Reno
casino revenue decreased 3.0%.
Room revenues for the Operating Properties (at 9.0% and 9.7% of total revenues
for the Operating Properties for the 2000 and 1999 Periods, respectively)
decreased 3.2% from the 1999 Period. Fitzgeralds Reno room revenues increased
0.3% due to the combination of a 5.5% higher average daily rate, offset by a
decrease in the average occupancy rate to 81.6% for the 2000 Period from 85.4%
for the 1999 Period. Room revenues decreased 6.0% at Fitzgeralds Las Vegas due
to a 5.1% decrease in the average occupancy rate, while the average daily rate
remained the same. At Fitzgeralds Tunica, room revenues decreased 1.9% due to
the combination of a higher average occupancy rate which increased to 94.4% for
the 2000 Period from 93.6% for the 1999 Period, offset by a 1.8% decrease in the
average daily rate for the 2000 Period.
Food and beverage revenues for the Operating Properties (at 11.5% and 11.4% of
total revenues for the Operating Properties for the 2000 and 1999 Periods,
respectively) increased approximately $0.3 million or 5.3% for the 2000 Period.
Fitzgeralds Black Hawk, Fitzgeralds Tunica and Fitzgeralds Las Vegas experienced
revenue increases of 13.7%, 6.5% and 1.6%, respectively, as a result of
increases in casino revenues. Food and beverage revenues at Fitzgeralds Reno
increased approximately 6.3% primarily due to revenue increases in the buffet,
which was substantially remodeled in the fourth quarter of 1999 and re-opened in
December 1999.
Other revenues for the Operating Properties increased $0.3 million for the 2000
Period primarily as a result of the acquisition of the parking garage by
Fitzgeralds Reno.
Promotional allowances for the Operating Properties increased $0.7 million or
14.2% for the 2000 Period primarily as a result of increased casino volumes, as
well as additional promotional allowances incurred to meet increased levels of
competition.
Page 16 of 24
<PAGE> 17
OPERATING COSTS AND EXPENSES
Total operating costs and expenses for the Operating Properties increased 4.0%
to $49.6 million for the 2000 Period from $47.7 million for the 1999 Period due
primarily to increases in marketing and payroll costs.
Casino expenses for the Operating Properties were $22.0 million for the 2000
Period, a 3.6% increase from $21.3 million for the 1999 Period, primarily due to
increases in payroll and promotional expenses incurred by the casino department.
Food and beverage expenses for the Operating Properties decreased 6.9% to $3.9
million for the 2000 Period from $4.2 million for the 1999 Period. This decrease
is primarily due to the allocation to the casino department of food and beverage
costs associated with increases in complimentary food and beverage sales. Room
expenses for the Operating Properties decreased 3.4% to $3.1 million for the
2000 Period from $3.2 million for the 1999 Period. The decrease in the room
expenses is due to the decrease in activities to support room revenue. Selling,
general and administrative expenses for the Operating Properties increased 9.6%
to $16.3 million for the 2000 Period from $14.9 million for the 1999 Period, due
primarily to increases in marketing expenses. Professional fees and expenses
incurred in conjunction with the ongoing development and negotiation of the
Company's restructuring were $0.4 million and $0.2 million, respectively, for
the 2000 and 1999 Periods. Such expenses also include professional fees and
expenses paid by the Company for the financial and legal advisors to the
Committee.
Personnel expenses for the Operating Properties increased 2.6% to approximately
$20.7 million for the 2000 Period from approximately $20.1 million for the 1999
Period. Although personnel expenses increased at all Operating Properties,
except at Fitzgeralds Reno, Fitzgeralds Black Hawk incurred a 10.9% increase as
the result of adjustments in salary levels to remain competitive in the intense
labor market generated by two additional casino openings in the 2000 Period.
Marketing expenses for the Operating Properties, which include advertising,
promotional material, special events and the operations of the Fitzgeralds
player-tracking card, increased $1.4 million or 31.3% for the 2000 Period. More
intensive marketing efforts were undertaken at Fitzgeralds Black Hawk and
Fitzgeralds Tunica in response to increasing competitive pressures in these
markets.
Depreciation and amortization expenses of the Operating Properties increased
4.8% to $3.7 million for the 2000 Period from $3.5 million for the 1999 Period.
INCOME FROM OPERATIONS
Income from operations for the Operating Properties decreased 2.9% to $4.2
million for the 2000 Period from $4.3 million for the 1999 Period. The Company
has found it necessary to increase its promotional and complimentary expenses to
meet the challenges of intense competition, resulting in reduced operating
margins.
Page 17 of 24
<PAGE> 18
NET INTEREST EXPENSE
Interest expense for the Operating Properties (net of interest income),
increased 14.7% to $8.2 million for the 2000 Period from $7.2 million for the
1999 Period, primarily due to $1.0 million of additional interest expense
resulting from the default on the Senior Secured Notes. Failure to make the
regularly scheduled interest payment on June 15, 1999 resulted in an interest
rate increase of 1.0% to 13.25%, effective June 16, 1999.
NET LOSS
Net loss increased $1.2 million to $4.0 million in the 2000 Period compared to
$2.8 million in the 1999 Period.
LIQUIDITY AND CAPITAL RESOURCES
At April 2, 2000, the Company had unrestricted cash of $24.9 million compared
to $22.1 million at December 31, 1999 and $15.0 million at April 4, 1999. The
Company's primary sources of liquidity and cash flows during the 2000 Period
were operations of $5.8 million. Uses of cash during the 2000 Period included
acquisition of property and equipment of $2.8 million and repayment of long-term
debt of $0.2 million.
Net cash used in investing activities was $2.8 million and $0.6 million for the
2000 and 1999 Periods, respectively. Net cash used in financing activities was
$0.2 million and $0.7 million for the 2000 and 1999 Periods, respectively.
The Company's principal sources of capital will consist of cash from operations,
the Credit Facility, to the extent the lender permits the Company to utilize the
Credit Facility while it is in default on its Senior Secured Notes, and vendor
or third party financing of gaming and other equipment. The Credit Facility
permits the Company to use up to $5.0 million for capital projects at
Fitzgeralds Black Hawk and up to $10.0 million for general corporate purposes.
The Company believes that it has adequate sources of liquidity to meet its
normal operating requirements. However, its relatively high degree of leverage
had prevented it from making the level of capital expenditures required to
maintain and enhance the competitive position of its properties. Management and
the Board of Directors did not see any way to resolve this problem without
restructuring the Company's indebtedness. On May 13, 1999, the Company's Board
of Directors determined that, pending a restructuring of its indebtedness, it
would not be in the best interest of the Company to make the regularly scheduled
interest payments on its Senior Secured Notes. The Company has not made the
regularly scheduled interest payments of $12.5 million due and payable on June
15, 1999 and December 15, 1999. Under the Note Indenture pursuant to which the
Senior Secured Notes were issued, an Event of Default occurred on July 15, 1999,
and is continuing as of the date hereof. Failure to make the regularly scheduled
interest payment on June 15, 1999 resulted in an interest rate increase of 1.0%
to 13.25%, effective June 16, 1999. An additional $3.2 million of interest
incurred since June 16, 1999 from the default on the Senior Secured Notes has
also not been paid. No action has been taken by either the Indenture Trustee or
holders of at least 25% of the Senior Secured Notes to accelerate the
indebtedness evidenced
Page 18 of 24
<PAGE> 19
by the Senior Secured Notes and declare the unpaid principal and interest to be
due and payable. In the event that action is taken to accelerate the
indebtedness, the Company would not have the resources available to repay such
indebtedness. The Company has initiated and is continuing discussions with
representatives of the Committee concerning a restructuring of the Company's
indebtedness and reorganization of the Company that may include the sale of some
or all of the Company's properties. There are substantial additional risks in
this situation due to the virtual certainty of the necessity for a proceeding
under federal bankruptcy law and for regulatory proceedings under the gaming
laws of Nevada, Mississippi and Colorado. Bankruptcy court approval may well
require the consent of claimants and other constituencies in addition to the
holders of the Senior Secured Notes and obtaining such consents may be
difficult, if not impossible, and time-consuming. The requirements for approval
by the various gaming regulatory authorities may also be time-consuming and
licensure or other gaming regulatory approval of individual security holders
may be required depending on the nature of any plan that is ultimately approved.
A default on the Senior Secured Notes also constitutes a default under the
Credit Facility and, although the Company believes the lending institution will
continue to have adequate security for the Company's obligations thereunder,
there can be no assurance that the lending institution will continue to make
additional advances. The Company has repaid all amounts borrowed under the
Credit Facility.
By suspending the interest payments on the Senior Secured Notes until such time
as a restructuring plan has been negotiated and implemented, the Company
believes that its liquidity and capital resources will be sufficient to maintain
all of its normal operations at current levels during the restructuring period
and does not anticipate any adverse impact on its operations, customers or
employees. However, costs incurred and to be incurred in connection with any
restructuring plan have been and will continue to be substantial. In any event,
there can be no assurance that the Company will be able to successfully
restructure its indebtedness or that its liquidity and capital resources will be
sufficient to maintain its normal operations or retain its key employees during
the restructuring period.
EBITDA AND ADJUSTED EBITDA
The Company's EBITDA was $7.9 million for the 2000 Period and $7.8 million for
the 1999 Period. EBITDA is calculated by adding depreciation and amortization
expenses to income from operations. The Company's Adjusted EBITDA was $8.2
million for the 2000 Period and $8.1 million for the 1999 Period. Adjusted
EBITDA is determined based on the adjustments described in Note 3 to Statement
of Operations Data. However, EBITDA should only be read in conjunction with all
of the Company's financial data summarized above and its financial statements
prepared in accordance with 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. This presentation of EBITDA may not be comparable to
similarly titled measures reported by other companies.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges measures the extent by which earnings, as
defined, exceed certain fixed charges. Earnings are defined as earnings before
income taxes, interest on indebtedness, imputed interest on capital lease
obligations and the portion of rent expense deemed to represent interest. Fixed
charges consist of interest on indebtedness, imputed interest on capital lease
obligations and the portion of rent expense deemed to represent interest.
Page 19 of 24
<PAGE> 20
Earnings were insufficient to cover fixed charges by $4.0 million and $2.8
million for the 2000 and 1999 Periods, respectively.
BUSINESS SEASONALITY AND SEVERE WEATHER
The gaming operations of the Company in certain locations may be seasonal and,
depending on the location and other circumstances, the effects of such
seasonality could be significant. At Fitzgeralds Las Vegas, business levels are
generally weaker from Thanksgiving through the middle of January (except during
the week between Christmas and New Year's) and throughout the summer, and
generally stronger from mid-January through Easter and from mid-September
through Thanksgiving. At each of the three other Operating Properties, business
levels are typically weaker from Thanksgiving through the end of the winter and
typically stronger from mid-June to mid-November.
The Company's results are also affected by inclement weather in relevant
markets. The Fitzgeralds Black Hawk site, located in the Rocky Mountains of
Colorado, and the Fitzgeralds Reno site, located in the foothills of the Sierra
Nevada mountains in Nevada, are subject to snow and icy road conditions during
the winter months. Any such severe weather conditions may discourage potential
customers from visiting the Company's facilities.
Page 20 of 24
<PAGE> 21
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The fair market value of the Company's fixed debt obligations have increased to
approximately $115.1 million at April 2, 2000 compared to $113.0 million at
December 31, 1999. See Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -Liquidity and Capital Resources.
Page 21 of 24
<PAGE> 22
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
RENO TRANSPORTATION RAIL ACCESS CORRIDOR (RETRAC) PROJECT
In October 1998, the Reno City Council approved a special assessment district to
finance a portion of the costs to lower the railroad tracks that run through
downtown Reno, Nevada (the "ReTRAC Project"). Preliminary plans for the ReTRAC
Project provide for the construction of a temporary rail bypass that will be
used to divert rail traffic around the main railroad during construction. The
City of Reno (the "City") estimates that a period of approximately two and one
half years will be required to complete the ReTRAC Project. The southern
boundary of the bypass will extend out into the middle of Commercial Row, the
street where Fitzgeralds Reno hotel entrance, valet parking area and hotel
loading zone are situated.
On November 30, 1998, the Company filed a lawsuit against the City to challenge
the method by which the special assessment to be levied against the Company was
determined. Based on preliminary plans prepared by the City, Fitzgeralds Reno
would expect to lose several parking spaces, the current valet parking area, an
outdoor billboard structure advertising available rooms and a building used to
house administrative offices, and be required to relocate the hotel entrance
currently on Commercial Row. The City has also subsequently indicated that the
ReTRAC Project might require the demolition of the Fitzgeralds Reno Rainbow
Skyway. Implementation of the ReTRAC Project as currently proposed would cause
the Company to suffer significant and permanent loss in business revenue and
income; certain operating efficiencies from demolished or impaired physical
structures; and a portion of its existing customer base as a result of the
construction and operation of the proposed rail bypass.
The City filed an answer to the Company's lawsuit on January 19, 1999.
Subsequent thereto, George Karadanis and Robert Maloff d/b/a Sundowner Hotel and
Casino (the "Sundowner") were permitted by court order to file a Complaint in
Intervention. Notwithstanding said intervention, on December 22, 1999, the court
granted the City's Motion for Summary Judgment against the Sundowner which
motion was joined in by the Company. The City and the Company have had
settlement discussions; however, there has been no agreement as to a mutually
acceptable resolution. It is anticipated that a decision on the merits of the
Company's claims will be made subsequent to oral arguments on the matter.
The Company has received no assurance as to whether or when the City will
negotiate mitigation measures and whether such measures could or would fully
compensate the Company for the fair market value of its property and anticipated
operating losses.
The Company is a party to various lawsuits relating to routine matters
incidental to its business. The Company does not believe that the outcome of
such litigation, individually or in the aggregate, will have any material
adverse effect on its financial condition.
Page 22 of 24
<PAGE> 23
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
(a) As previously reported in its Report on Form 8-K filed July 22, 1999, the
Company is in default on its $205.0 million Senior Secured Notes. That default
resulted in a cross default under the Company's $15.0 million Credit Facility.
See also Note 2 of Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere in this Quarterly Report on Form 10-Q. As of the
date of this Form 10-Q, the total amount in arrears on the Senior Secured Notes
was $28.4 million.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
ITEM 5. OTHER INFORMATION.
On July 22, 1999, the Company filed a Report on Form 8-K, Item 5, concerning a
default on its Senior Secured Notes. Although much of the forward-looking
information may have become moot with the passage of time, the Form 8-K included
information regarding the Company's initial proposal to the holders of its
Senior Secured Notes, a summary of the Company's proposal for substantial
additional capital expenditures at its Black Hawk and Tunica properties, summary
EBITDA (excluding restructuring expenses, which may be substantial) projections
for both a base case and the Company's proposed capital expenditure case, and a
discussion of certain risks and uncertainties attendant thereto. In addition to
the normal business and other risks associated with any forward-looking
information and substantial capital expenditure program, there are substantial
additional risks in this situation due to the virtual certainty of the necessity
for a proceeding under federal bankruptcy law and for regulatory proceedings
under the gaming laws of Nevada, Mississippi and Colorado. Bankruptcy court
approval may well require the consent of claimants and other constituencies in
addition to the holders of the Senior Secured Notes and obtaining such consents
may be difficult, if not impossible, and time-consuming. The requirements for
approval by the various gaming regulatory authorities may also be time-consuming
and licensure or other gaming regulatory approval of individual security holders
may be required depending on the nature of any plan that is ultimately approved.
In assessing possible outcome of the Company's proposed restructuring, these and
all of the other factors more fully elaborated in the Form 8-K should be given
careful consideration.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1: Purchase Agreement dated October 8, 1999, by and between Scout
Development Corporation and Fitzgeralds Reno, Inc., to purchase
the parking garage located at 50 East Plaza Street, Reno,
Nevada, for $3,000,000.
10.2 Promissory Note dated February 1, 2000, by Fitzgeralds Reno,
Inc., payable to Scout Development Corporation for $2,250,000.
10.3 Deed of Trust and Security Agreement and to Secure Performance
dated January 31, 2000, effective February 1, 2000, by
Fitzgeralds Reno, Inc.
10.4 Security Agreement dated February 1, 2000, by Fitzgeralds
Reno, Inc.
10.5 Assignment and Assumption of Ground Lease Agreement dated
February 1, 2000, by and between Scout Development Corporation
and Fitzgeralds Reno, Inc.
10.6 Assignment of Rents and Leases dated January 31, 2000,
effective February 1, 2000, by Fitzgeralds Reno, Inc.
27(c): Financial Data Schedule
(b) Reports on Form 8-K
None
Page 23 of 24
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 11, 2000
FITZGERALDS GAMING CORPORATION
/s/ Michael E. McPherson
Michael E. McPherson
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer, Principal
Financial Officer and Principal
Accounting Officer)
Page 24 of 24
<PAGE> 1
EXHIBIT 10.1
PURCHASE AGREEMENT
By and Between
Scout Development Corporation
a Missouri corporation,
("Scout"),
and
Fitzgeralds Reno, Inc.,
a Nevada corporation,
("Fitzgeralds").
October 8, 1999
Property Located At:
50 East Plaza Street
Reno, Nevada
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions............................................................. 1
2. Purchase and Sale....................................................... 1
3. Due Diligence........................................................... 1
4. Deposit................................................................. 2
5. Rent and Purchase Price................................................. 2
6. Conditions to Agreement................................................. 3
6.1 Conditions Precedent............................................... 3
6.2 Waiver............................................................. 4
6.3 Termination........................................................ 4
7. Seller's Representations, Warranties, Covenants and Agreements.......... 4
7.1 Representations and Warranties..................................... 4
7.2 Covenants and Agreements........................................... 8
7.3 Breaches of Representations, Warranties and Covenants.............. 9
8 ...................................................................Deleted
8.1 ..............................................................Deleted
8.2 ..............................................................Deleted
9. Title, Escrow and Closing.............................................. 10
9.1 Conditions of Title............................................... 10
9.2 Title Insurance................................................... 10
9.3 Closing Date...................................................... 11
9.4 Deposits and Deliveries by Scout.................................. 11
9.5 Deposits and Deliveries by Fitzgeralds............................ 12
9.6 Closing........................................................... 12
9.7 Prorations........................................................ 13
9.8 Closing Costs..................................................... 14
9.9 Possession........................................................ 14
9.10 Filing of Reports................................................. 14
9.11 Cooperation....................................................... 14
10. Liquidated Damages..................................................... 15
11A. Damage and Destruction................................................. 15
11B. Condemnation........................................................... 15
12. Commissions............................................................ 16
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
13. General Provisions..................................................... 16
13.1 Notices.......................................................... 16
13.2 Entire Agreement; No Modifications............................... 17
13.3 Time............................................................. 17
13.4 Attorneys' Fees.................................................. 18
13.5 Specific Performance............................................. 18
13.6 Successors and Assigns........................................... 18
13.7 Counterparts..................................................... 18
13.8 Construction..................................................... 18
13.9 Exculpation...................................................... 18
13.10 Expiration....................................................... 19
</TABLE>
- ii -
<PAGE> 4
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE 1 - Defined Terms
SCHEDULE 6.1(c) - Due Diligence Items
SCHEDULE 7.1 - Scout's Disclosures
EXHIBIT A - Legal Description
EXHIBIT B - Deleted
EXHIBIT C - List of Plans and Specifications
EXHIBIT D - List of Leases
EXHIBIT E - Title Commitment
EXHIBIT F - Form of Rental Income Certification
EXHIBIT G - Assignment and Assumption of Ground Lease Agreement
EXHIBIT H - Form of Bill of Sale
EXHIBIT I - Form of Assignment of Leases
EXHIBIT J - Form of Assignment of Intangible Property and Contract
Obligations
EXHIBIT K - Form of Notice to Tenants
EXHIBIT L - Form of Non-Foreign Affidavit
EXHIBIT M - Form of Closing Certificate
EXHIBIT N - Form of Fitzgeralds Note
EXHIBIT O - Form of Deed of Trust and Security Agreement and to Secure
Performance
EXHIBIT P - Form of Tenant Estoppel Certificate
EXHIBIT Q - Form of Ground Lessor's Estoppel Certificate
EXHIBIT R - Deed
- iii -
<PAGE> 5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of October 8, 1999 by and between Scout Development Corporation, a Missouri
corporation ("Scout") and Fitzgeralds, Reno, Inc., a Nevada corporation
("Fitzgeralds").
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Scout and Fitzgeralds hereby agree as follows:
1. Definitions. Unless defined elsewhere in this Agreement, for the
purposes of this Agreement all words and phrases having their initial letters
capitalized herein shall have the meanings set forth in Schedule 1 attached
hereto.
2. Purchase and Sale. Subject to the terms and conditions of this
Agreement, Scout agrees to assign its entire interest (including, without
limitation, all air rights) in the Ground Lease and sell, grant and convey its
entire interest in the Improvements, the Personal Property, the Intangible
Property and all of Scout's interests as Landlord in and to the Tenant Occupancy
Leases to Fitzgeralds and Fitzgeralds agrees to accept such interest in the
Ground Lease and the Improvements, the Personal Property, the Intangible
Property and all of Scout's interests as Landlord in and to the Tenant Occupancy
Leases.
3. Due Diligence. From and after the date of this Agreement, subject to
the rights of tenants of the Property, Fitzgeralds and its agents shall have the
right to enter upon the Land and make any and all inspections, appraisals and
tests as Fitzgeralds deems prudent to determine whether it is feasible, in
Fitzgeralds sole and absolute discretion, to purchase the Property. Scout has
the right to approve in advance any inspection of the Property which will
involve the intrusive or destructive sampling or analysis of any portion of the
Property ("Phase 2 Investigation"). Scout shall have the right upon written
request to Fitzgeralds to obtain half of any samples, which Fitzgeralds may
obtain during any such Phase 2 Investigation. All such inspections and studies
shall be at Fitzgeralds' sole expense and Fitzgeralds shall furnish a copy of
any such inspections and studies to Scout upon Fitzgeralds receipt thereof.
Regardless of whether or not the transactions described in this Agreement shall
close, Fitzgeralds hereby indemnifies and holds Scout harmless from and against
all claims arising from or out of the presence of Fitzgeralds or its agents on
the Land or the exercise by Fitzgeralds of its rights in accordance with this
Section 3. In addition, Fitzgeralds shall keep the Land and Improvements free
from any and all liens that could arise as a result of the exercise of
Fitzgeralds' rights in accordance with this Section 3. Within ten (10) days of
the date of this Agreement, Scout shall provide to Fitzgeralds all of the items
listed on Schedule 6.1(c) attached to this Agreement (the "Due Diligence
Items"), provided such items are in the possession or control of Scout. The
provisions of this Section 3 shall survive the Closing or any termination or
cancellation of this Agreement notwithstanding any contrary provision hereof and
Fitzgeralds indemnification obligations (and Scout's right to enforce the same)
shall notwithstanding any contrary provision hereof, in no way be limited by the
limitations on Scout's remedies set forth in Section 10 hereof,
1
<PAGE> 6
Scout to have all rights and remedies at law or in equity in the enforcement of
Fitzgeralds indemnification obligation.
4. Deposit. Within three (3) days after the date this Agreement has
been executed by Scout and Fitzgeralds and Fitzgeralds has received a signed
copy thereof, Fitzgeralds shall deposit with the Title Company the sum of One
Hundred Thousand Dollars ($100,000.00) in immediately available funds as an
earnest money deposit (the "Deposit"). The Deposit shall be deposited in an
interest-bearing account mutually acceptable to Fitzgeralds and the Title
Company with interest accruing for the benefit of Fitzgeralds until disbursal to
Scout; provided, however, in the event that Fitzgeralds does not notify Scout in
writing on or before 5:00 p.m. (Central Time), December 27, 1999 (the "Outside
Date") of its election to proceed to Closing in accordance with this Agreement,
then the Title Company shall release the Deposit less the amount paid Scout, if
any, to Fitzgeralds and, with the exception of any terms that expressly survive
termination, this Agreement shall terminate and neither party shall have any
further liability to the other hereunder. Notwithstanding anything contained in
this Section 4 to the contrary, upon receipt of Ground Lessor's approval of the
Assignment and Assumption of Ground Lease Agreement as required by Section
12.01. of the Ground Lease ("Ground Lessor's Approval"), Fitzgeralds shall cause
the Title Company to deliver to Scout $50,000.00 in immediately available funds
in consideration of the rights granted to Fitzgeralds in this Agreement (the
"Independent Consideration"). The Independent Consideration is in addition to
and independent of any other consideration of payment provided in this
Agreement, is non-refundable and shall be retained by Scout notwithstanding any
other provision of this Agreement. The Independent Consideration shall be
credited against the Purchase Price (as defined below) at Closing. This
Agreement shall be of no force and effect until such time as (i) Fitzgeralds has
delivered the Deposit to the Title Company in accordance with the terms of this
Section 4., (ii) Scout and Fitzgeralds have executed this Agreement, and (iii)
the Deposit has been receipted by the Title Company. In the event the
Independent Consideration is not delivered to Scout within three (3) days after
the date of Fitzgeralds receipt of the Ground Lessor's Approval, this Agreement
shall terminate and neither party shall have any further liability to the other
hereunder.
5. Purchase Price. The total purchase price for the Property (the
"Purchase Price") shall be the sum of Three Million Dollars ($3,000,000.00)
which, subject to all prorations and adjustments provided in this Agreement,
shall be paid by Fitzgeralds to Scout through escrow on the Closing Date (except
the Deposit and the Independent Consideration which will be paid as provided in
Section 4 above) by payment to Scout of Six Hundred Fifty Thousand Dollars
($650,000.00) in immediately available funds with the remainder of the Purchase
Price (taking into account the credit for the Deposit and the Independent
Consideration) in the form of a note in the principal amount of the remainder of
the Purchase Price, bearing interest at ten percent (10%) per annum with monthly
payments of principal and interest amortized over twenty (20) years, the entire
unpaid balance due ten (10) years from the Closing Date and in the form
substantially identical to that set forth on Exhibit N attached hereto and made
a part hereof (the "Fitzgeralds Note"). The Fitzgeralds Note shall be secured by
a deed of trust and security agreement and to secure performance encumbering
Fitzgeralds, interest in the Ground Lease, the Improvements, the Personal
Property, the Intangible Property and all of Fitzgeralds' interests as
2
<PAGE> 7
Landlord in and to the Tenant Occupancy Leases and securing Fitzgeralds'
performance under the Ground Lease and the Assignment and Assumption of Ground
Lease Agreement in a form substantially similar to that set forth on Exhibit O
attached hereto and made a part hereof (the "Deed of Trust"). The Deed of Trust
will contain a "due on sale" clauses and a "due on encumbrance" clauses.
Additionally, Fitzgeralds agrees to deliver such other loan documents,
including, without limitation, an assignment of rents and leases, security
agreement and financing statement, as may be reasonably required by Scout.
6. Conditions to Agreement.
6.1 Conditions Precedent. Fitzgeralds' obligation to purchase
the Property or otherwise to perform any obligation provided in this Agreement
(with the exception of Fitzgeralds' obligation to pay the Deposit and the
Independent Consideration pursuant to Section 4 above) shall be conditioned
expressly upon the fulfillment to Fitzgeralds' satisfaction (as determined by
Fitzgeralds in its good faith business judgment) of each of the following
conditions precedent:
(a) The due and timely performance by Scout and/or third
parties of each and every covenant, undertaking and agreement to be performed by
Scout and/or such third parties as provided in this Agreement; and the truth,
accuracy and completeness in all respects of each representation and warranty
made in this Agreement by Scout both at the time made and on the Closing Date.
(b) Fitzgeralds' review and approval of: (i) the Title
Commitment including, without limitation, the exceptions to title and legal
description of the Land contained therein; (ii) the Survey; (iii) Tenant
Estoppel Certificates executed by all tenants of the Property; and (iv) Ground
Lessor's Estoppel Certificate.
(c) Fitzgeralds' approval of all of the Due Diligence
Items.
(d) Fitzgeralds' inspection, testing and approval of the
physical condition of the Property including, without limitation, inspection and
testing for the presence of asbestos, polychlorinated biphenyls or other
Hazardous Substances, and of the structural, mechanical, seismic, electrical and
other physical or environmental conditions or characteristics of the Property,
subject to the terms of Section 3. above.
(e) The receipt by Fitzgeralds of Ground Lessor's
Approval.
(f) The delivery to Fitzgeralds not less than ten (10)
days prior to the Outside Date, and Fitzgeralds' approval, of an updated, final
and complete inventory of all Personal Property to be sold to Fitzgeralds
pursuant to this transaction.
(g) As of the Closing Date, there shall have been no
material adverse change in the condition of the Property, or any portion
thereof, or in any document, Laws and Restrictions, contractual relations, or
other circumstances affecting the Property previously approved by Fitzgeralds.
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(h) Completion and approval in writing by Fitzgeralds
not more than ten (10) days prior to the Outside Date of Fitzgeralds', and
Fitzgeralds' approval, of an updated final inspection and review of Scout's
books, records, accounts and leases relating to the Property.
6.2 Waiver. At any time or times on or before the Closing
Date, at Fitzgeralds' election, Fitzgeralds may waive any of the foregoing
conditions by written notice to Scout. Other than Fitzgeralds' close of escrow
pursuant to this Agreement which shall waive all such unfulfilled conditions, no
waiver shall be effective unless made in writing specific as to the conditions
or matters so waived. No such waiver shall be inferred or implied by any act or
conduct of Fitzgeralds or reduce the rights or remedies of Fitzgeralds arising
from any breach of any undertaking, agreement, covenant, warranty, or
representation of Scout under this Agreement. It is agreed and understood that
in no event shall Scout have any obligation or responsibility to cure, correct,
repair or otherwise remedy any matter to which Fitzgeralds objects or otherwise
does not approve.
6.3 Termination. In the event any of the foregoing conditions
or other conditions to this Agreement which are for the benefit of Fitzgeralds
are neither fulfilled, nor waived as provided above, Fitzgeralds, at its
election by written notice to Scout, may terminate this Agreement and be
released from all obligations under this Agreement. In the event of termination
by Fitzgeralds, Scout shall authorize the Deposit and all interest accrued on
the Deposit to be returned immediately to Fitzgeralds, and all documents
deposited in escrow by Fitzgeralds or Scout shall be returned to the depositing
party.
7. Representations, Warranties, Covenants and Agreements.
7.1 Scout's Representations and Warranties. Each of the
following representations and warranties (i) is material and being relied upon
by Fitzgeralds, (ii) is made as an inducement to Fitzgeralds to enter into this
Agreement and consummate the transaction contemplated hereby, (iii) is true in
all respects as of the date of this Agreement, (iv) shall be true in all
respects on the Closing Date, and (v) shall survive the Closing for a period of
six (6) months. For the purposes of this Agreement, matters shall be deemed to
be within "Scout's knowledge" only if matters are within the actual current
knowledge of Anthony L. Levinson without performing any review or inspection of
any file or matter relating to the Property. Fitzgeralds acknowledges and agrees
that in making available to Fitzgeralds all Property documents which are in
Scout's possession or control, Scout does not represent that Scout or its
authorized agents have undertaken (and Scout and its duty authorized agent shall
have no duty or obligation whatsoever to undertake) any investigation with
respect to the Property or the Property documents or any matter set forth or
referred to therein. Scout represents and warrants to Fitzgeralds that, except
as disclosed in Schedule 7.1 to this Agreement:
(a) Scout has and will convey to Fitzgeralds, good,
marketable, and insurable leasehold title to the Property, pursuant to the
Ground Lease, free and clear of all liens, claims, covenants, conditions,
restrictions, rights of way, easements, options, licenses, judgments and
encumbrances of any kind, except the Conditions of Title (as defined in Section
9.1 below).
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(b) Scout has not received any notice that the
Property, including its present use and operation, is not in compliance with and
authorized by all Laws and Restrictions, including, without limitation, all
applicable building codes and the Americans With Disabilities Act of 1990, and
all amendments thereto, and Scout has not received notice that Scout has not
performed all conditions to, and paid all fees or other sums due with respect
to, any and all permits, licenses or other approvals relating to the Property.
To Scout's knowledge no zoning or land use variance, conditional use permit or
other special permission has been obtained or is required to be maintained for
the present, intended and continued use and operation of the Property. The
Property is located within an earthquake zone.
(c) Deleted.
(d) To Scout's knowledge; (i) there is not present,
nor was there present at any time in the past, upon, in or at the Property any
asbestos or polychlorinated biphenyls, or any structures, fixtures, equipment or
other objects or materials containing asbestos or polychlorinated biphenyls,
(ii) there is present or suspected to be present, upon, in, at or about the
Property, or the soil or groundwater thereof, Hazardous Substances, and (iii) no
portion of the Property is presently nor was at any time during Scout's
possession of the Property, used, operated or occupied for the generation,
manufacture, treatment, storage, transportation, discharge or disposal (whether
intentional or accidental) of any Hazardous Substances. Scout has not performed
or caused to be performed any independent inspection or investigation with
respect to the matters set forth in this subsection 7.1(d); and provided
further, in making the representation set forth in this subsection 7.1(d), Scout
is relying upon the information, including, without limitation, the groundwater
contamination addressed on page 5 thereof, provided by that one certain
"Proposed Re-Trac Project Plan" prepared by Steve Varela, P. E., Director of
Public Works, City of Reno, published on the WWW: May 14, 1999, which report is
incorporated herein in its entirety as though repeated verbatim. Scout hereby
notifies Fitzgeralds that pursuant to the Proposed Re-Trac Project Plan the
railroad tracks currently in place on the Land will be lowered and the
construction activity may affect the operation of the Improvements.
(e) To Scout's knowledge, Scout has not received any
threatened, proposed or contemplated litigation, action, administrative
proceeding or assessment (including, without limitation, eminent domain
proceedings, public improvement assessments, development or special benefit
assessments, zoning changes or variances, and property tax increases) which in
any way relates to, arises out of or which would or may in any way affect the
Property or Scout's ability to perform its obligations under this Agreement or
any documents executed by Scout pursuant to this Agreement. Except as expressly
set forth in a written list, if any, which Scout has previously delivered to
Fitzgeralds, there have been no insurance claims, incident reports, suits,
actions or proceedings filed by, on behalf of, or against Scout within the
preceding three (3) year period, whether or not still pending, settled or
otherwise completed, which in any way arise or arose out of, relate or related
to, or affect or affected the Property or Scout's ownership, management or
operation thereof.
(f) To Scout's knowledge, the Property has been
constructed, completed, modified and maintained in accordance with (i) all
required permits and approvals, all required permits and approvals,
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(ii) all Laws and Restrictions, (iii) accepted standards of good materials and
competent work, (iv) the Plans and Specifications, and (v) the recommendations
contained in any soils report or seismic study prepared in connection with
construction of the Improvements. To Scout's knowledge all development
obligations with respect to or arising out of the development and/or
construction of the Property (including, without limitation, construction of any
required off-site improvements, dedications and payment of in-lieu or other
development fees or exactions) have been fully satisfied and discharged.
Fitzgeralds acknowledges that Scout did not plan, build or otherwise construct,
the Property and that, as a result, Scout does not possess the knowledge and
information it might possess if it had planned or built the Property. Scout
hereby notifies Fitzgeralds that the "walkway" referenced in Section 9.1(c)
hereinafter is presently in the process of being removed and this activity may
affect the operation of the Improvements.
(g) Except for the retail area occupied by a tenant, the
sprinkler system is dry and is not charged. Also, there is an obstruction in the
toilet facility on the first level of the Property. The Property includes two
elevators and ticket spitters.
(h) To Scout's knowledge, the Property is connected to
and serviced by water, solid waste and sewage disposal, storm drainage,
telephone and electricity facilities and all other utilities and services which
are necessary or customary for the use, operation and occupancy of the Property.
To Scout's knowledge Scout has not received any notice that the Property is not
in compliance with any Laws and Restrictions.
(i) There is no personal property, including without
limitation, furniture, appliances, equipment, fixtures or supplies owned by
Scout and/or utilized by Scout on a substantially exclusive basis in connection
with the use, operation and occupancy of the Property except as set forth on the
Personal Property Inventory.
(j) Scout has delivered to Fitzgeralds true and complete
copies of all Tenant Occupancy Leases all of which are listed accurately in the
Rent Roll. Except as specifically set forth in the Rent Roll or the documents
listed therein, (i) there are no oral or written leases, work letter agreements,
improvement agreements, or other rental, use or occupancy agreements affecting
the Property in force, (ii) no person has any right of possession, use or
occupancy of the Property or any part of it, (iii) no unsatisfied rent or other
concessions have been granted any tenant, (iv) no rent has been paid in advance
by any tenant, (v) no tenant has any claim against Scout for any improvement or
relocation credit or payment, or for any security deposits or other deposits nor
for interest on any security deposits or other amounts, (vi) no tenant has any
defense or offset to rent or other charges accruing after the Closing Date,
(vii) all of the Tenant Occupancy Leases have been executed, are in full force
and effect and full rent is accruing thereunder, (viii) no default or breach
exists and no event has occurred which, with the giving of notice, the passage
of time, or both, would constitute a default on the part of Scout or any tenant
under the Tenant Occupancy Leases, (ix) no continuing tenant under any Tenant
Occupancy Lease failed to timely pay rent at any time during the immediately
preceding six (6) month period, (x) Scout has not received any notice nor has
any reason to believe that any tenant intends to terminate, breach or fail to
renew its lease, or is or may become unable to perform its obligations under its
Tenant Occupancy Lease, or that any guarantors under any Tenant
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Occupancy Lease have become subject to any bankruptcy proceeding or have been
released or discharged, voluntarily, involuntarily, or by operation of law, from
any obligation with respect to or relating to any Tenant Occupancy Lease, and
(xi) no brokerage or leasing commission or other similar payment or fee is due
or unpaid or partially paid or may become due in the future with respect to any
Tenant Occupancy Lease.
(k) Scout will deliver to Fitzgeralds true and complete
copies of all Contract Obligations, all of which are listed accurately in the
List of Contract Obligations. Except to the extent specifically identified in
the List of Contract Obligations, no default or breach exists under any such
Contract Obligations, nor has any event occurred which, but for the giving of
notice or passage of time, or both, would constitute a default by any party
thereto. The Property has been managed, maintained, operated, and serviced,
pursuant to the Contract Obligations and otherwise, consistent with standards in
the industry for the operation of similar projects of comparable quality in the
same area as the Property is located.
(l) Except for the existing Tenant Occupancy Leases and
the Contract Obligations, Scout has not entered into or undertaken, and there do
not exist, any written or oral commitments, arrangements, agreements or
obligations of any kind affecting the Property that are not cancelable on not
more than thirty days' notice and which will be canceled by Scout on or before
the Closing Date.
(m) To Scout's knowledge, neither Scout's execution of
this Agreement nor performance by Scout of any of its obligations hereunder
including, without limitation, the transfer, assignment and sale of the Property
contemplated by this Agreement (i) violates or shall violate any written or oral
contract, agreement or instrument to which Scout is a party or is bound or which
affects the Property or any part of it, or (ii) shall constitute or result in
violation or breach by Scout of any judgment, order, writ, injunction or decree
issued or imposed upon Scout, or result in violation of any Laws and
Restrictions; and to Scout's knowledge no approval, consent, order,
authorization, designation, filing (other than recording), registration,
notification of, by or with any judicial or governmental authority is required
in conjunction with Scout's execution of this Agreement and performance of its
obligations hereunder.
(n) To Scout's knowledge, none of the representations or
warranties in this Agreement, nor any descriptive information concerning the
Property set forth in this Agreement, nor any document, statement, certificate,
schedule or other information furnished or to be furnished by or on behalf of
Scout to Fitzgeralds in connection with this Agreement (including, without
limitation, operating and financial statements) contains, or will as of the
Closing Date contain, any untrue statement of a material fact or omits, or will
as of the Closing Date omit, to state a material fact necessary to make the
statements of facts contained therein not misleading.
(o) Scout is not a "foreign person" as defined in
Internal Revenue Code Section 1445 and any related regulations.
(p) There is no union contract affecting the Property or
the employees of Scout or its property manager.
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(q) Deleted
(r) Prior to Closing Scout will execute and cause to
be executed and filed in the official records of Washoe County, Nevada that
certain Deed of Correction and Reformation and Boundary Line Adjustment
Agreement ("Deed of Correction"), a copy of which has previously been delivered
to Fitzgeralds and the attendant Record of Survey.
7.2. Fitzgeralds' Representations and Warranties. Fitzgeralds'
represents and warrants to Scout that the following statements are true as of
the date hereof and shall continue to be true on the Closing Date:
(a) Both Fitzgeralds and the individual executing
this Agreement on behalf of Fitzgeralds have the full right, power and authority
to enter into this Agreement and such documents as are contemplated herein, and
to cause the same to create a legal and binding obligation of Fitzgeralds.
(b) Neither the execution of this agreement nor will
the Closing of the sublease and purchase of the Property violate any agreement,
governmental regulation or judicial decree affecting Fitzgeralds.
(c) Fitzgeralds is not aware that any of Scout's
representations and warranties are untrue on the date hereof.
(d) Fitzgeralds is financially able to perform all of
its obligations under this Agreement, including, without limitation, payment of
the Fitzgeralds' Note and performance of its obligations under the Deed of
Trust, all as more fully described hereinafter.
7.3 Covenants and Agreements. Scout and Fitzgeralds hereby
specifically covenant and agree that, on and after the date of this Agreement:
(a) Scout shall timely deliver and provide to
Fitzgeralds all of the documents and things required to be provided by or on
behalf of Scout to Fitzgeralds as provided in Section 6.1 above; and Scout shall
use commercially reasonable efforts to fulfill prior to the Closing Date, and to
assist Fitzgeralds in fulfilling, on a timely basis and with all due diligence,
each of the conditions precedent set forth in Section 6.1 above and all other
conditions to this Agreement.
(b) Fitzgeralds shall have the right to enter onto
and inspect and test the Property, to interview tenants and personnel, and to
inspect and have complete access to all documents in Scout's possession or under
Scout's control relating thereto (including, without limitation, all books and
records, leases, maintenance records and structural information), provided that
Fitzgeralds shall timely pay for all such inspections and tests, discharge all
liens which may arise therefrom and repair or restore any and all damage or
injury to the Property resulting from such inspections and tests subject to the
terms of Section 3. above.
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(c) Scout shall (i) manage, maintain, insure, lease,
operate, and service the Property, or cause the Property to be managed,
maintained, insured, leased, operated and serviced, consistent with past
practices of Scout in its operation of the Property, (ii) keep the Property and
every portion thereof in good working order and repair as that existing on the
date hereof, except for normal use, wear and tear, (iii) maintain a sufficient
inventory of supplies, materials, equipment and other personal property for the
proper management, maintenance, operation and servicing of the Property, (iv)
not remove or permit the removal of any Personal Property or any fixtures from
the Property unless such items are replaced immediately with Personal Property
or fixtures of equal or greater value, (v) timely perform all its obligations
under all Contract Obligations, including, without limitation, the Ground Lease,
Tenant Occupancy Leases and Laws and Restrictions including, without limitation,
the payment of all bills, charges, invoices, salaries, benefits, and other
expenses arising in connection with the Property, (vi) not modify, terminate,
cancel, extend, or amend any existing Contract Obligations, nor enter into any
new contracts or arrangements which will affect the Property on or after the
Closing Date without Fitzgeralds' consent, which consent shall not be
unreasonably withheld or delayed, (vii) not modify, terminate, cancel, extend or
amend any existing Tenant Occupancy Lease, nor accept any payment of rent or
other charges from any tenant of the Property applicable to a period exceeding
one month in advance, nor apply any security deposit to rent due from any tenant
of the Property, nor grant any material consent relating to any existing Tenant
Occupancy Lease, nor enter into any new lease, work letter agreement,
improvement agreement, or other rental agreement affecting the Property without
Fitzgeralds' prior written approval except in the ordinary course of business,
and (viii) not employ any additional person(s) at the Property or change the
terms of or terminate any existing employee's employment at the Property without
Fitzgeralds' prior written consent.
(d) Scout shall promptly notify Fitzgeralds in
writing of any event or circumstance which adversely affects Scout's ability to
perform its obligations under this Agreement in a timely manner, or the
likelihood of timely satisfaction of the conditions precedent set forth above,
or the truth of any representation or warranty contained herein.
(e) Deleted.
(f) Each party shall promptly notify the other in
writing of any event or circumstance which adversely affects such party's
ability to perform its obligations under this Agreement in a timely manner, or
the likelihood of timely satisfaction of the conditions precedent set forth
above, or the truth of any representation or warranty contained herein.
7.4 Breaches of Representations, Warranties and Covenants. It
will be a condition to Fitzgeralds' obligation to consummate the Closing that
all above representations, warranties and covenants of Scout is accurate as of
the Closing Date. If any representation, warranty or covenant above is known by
Fitzgeralds, prior to the Closing, to be untrue and is not remedied by Scout
prior to Closing, Fitzgeralds may, as Fitzgeralds sole and exclusive remedy on
account thereof, either (i) terminate this Agreement in which case Scout shall
authorize the Deposit to be refunded to Fitzgeralds and neither party shall have
any further rights or obligations pursuant to this Agreement, or (ii) waive its
objections and close the transaction with
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no reduction in the Purchase Price. In the event Fitzgeralds breaches its
representations, warranties and covenants, Fitzgeralds shall be in default under
this Agreement and Scout shall be entitled to terminate this Agreement, receive
the Deposit, and neither party shall have any further rights or obligations
pursuant to this Agreement.
8. Deleted
9. Title, Escrow and Closing.
9.1 Conditions of Title. Scout shall convey good and
marketable leasehold interest in the Land and good and marketable title to the
Improvements at Closing subject to no exceptions other than the following (the
"Conditions of Title"):
(a) The lien for local real estate taxes and
assessments not yet due or payable;
(b) The Ground Lease;
(c) That certain Mutual Estoppel Certificate and
Agreement for Removal of Walkway between Scout and Shamrock Holdings Group,
Inc., a Delaware corporation;
(d) Items 6, 7, 8, 9, 10, 11 and 12 set forth in
Schedule B of the Title Commitment;
(e) Interests of tenants pursuant to Tenant Occupancy
Leases approved by Fitzgeralds; and
(f) Such other exceptions arising after the date of
the Title Commitment as shall have been approved by Fitzgeralds in writing in
its sole discretion.
9.2 Title Insurance. Fitzgeralds' obligation to purchase the
Property shall be subject to the irrevocable commitment of the Title Company to
issue upon payment of its normal premium at Closing its ALTA Extended Coverage
Owner's Policy of Title Insurance (Form B, Rev. 10/17/70), together with such
endorsements as Fitzgeralds may reasonably require [(including, without
limitation, CLTA endorsements numbered 100 (modified), 100.6, 103.4, 103.7, 116,
116.1, 116.4, 116.7 and 123.2),] insuring Fitzgeralds' leasehold interest in the
Ground Lease in the amount of Three Million Dollars ($3,000,000) subject only to
the Conditions of Title, with reinsurance (including direct access rights) in
the current ALTA form, with companies and in such amount as Fitzgeralds shall
reasonably require, all as set forth in a pro-forma policy of title insurance to
be delivered to and approved by Fitzgeralds at least three (3) business days
before the Closing Date. Scout's obligation to sell the Property shall be
subject to the irrevocable commitment of the Title Company to issue upon payment
of the Title Company's normal premium at Closing its Mortgagee Policy of Title
Insurance in the amount of Fitzgeralds' Note.
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9.3 Closing Date. Through an escrow established with the Title
Company, Fitzgeralds and Scout shall consummate this transaction on the Closing
Date or such earlier date designated by Fitzgeralds upon not less than three (3)
business days prior written notice to Scout.
9.4 Deposits and Deliveries by Scout. Scout shall deposit or
cause to be deposited into escrow with the Title Company, or deliver directly to
Fitzgeralds outside of escrow, on or before the Closing Date, the following
documents duly executed and acknowledged as required:
(a) Two (2) counterpart originals of the Assignment
and Assumption of Ground Lease Agreement in the form attached hereto as Exhibit
G.
(b) A Bill of Sale in the form attached hereto as
Exhibit H transferring the Personal Property to Fitzgeralds (the "Bill of
Sale").
(c) An Assignment of Leases in the form attached
hereto as Exhibit I transferring to Fitzgeralds all of Scout's interest as
landlord under the Tenant Occupancy Leases (the "Assignment of Leases").
(d) An Assignment of Intangible Property and Contract
Obligations in the form attached hereto as Exhibit J transferring all of the
Intangible Property and Contract Obligations to Fitzgeralds (the "Assignment of
Intangible Property").
(e) A letter to each of the tenants under the Tenant
Occupancy Leases in form attached hereto as Exhibit K (the "Notice To Tenants").
(f) An Affidavit of Non-Foreign Status in form
attached hereto as Exhibit L (the "Non-Foreign Affidavit").
(g) Ground Lessor's Approval and Ground Lessor's
Estoppel Certificate.
(h) A Deed in the form attached hereto as Exhibit R
transferring the Improvements to Fitzgeralds (the "Deed").
(i) Scout's written escrow instructions to close
escrow in accordance with the terms of this Agreement.
(j) Evidence reasonably acceptable to Fitzgeralds'
counsel that the documents delivered to Fitzgeralds by Scout at Closing have
been duly authorized by Scout, duly executed on behalf of Scout and when
delivered constitute valid and binding obligations of Scout.
(k) Such other documents, resolutions, consents and
affidavits necessary or advisable to effect the valid consummation of the
transaction evidenced by this Agreement.
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9.5 Deposits and Deliveries by Fitzgeralds. Fitzgeralds shall
deposit or cause to be deposited into escrow with the Title Company, or deliver
directly to Scout outside of escrow, on or before the Closing Date, each of the
following documents duly executed and acknowledged as required and funds:
(a) Cash, wire transfer or other immediately
available funds (the "Purchase Funds") in the amount of Six Hundred Fifty
Thousand Dollars ($650,000), as provided in Section 5 hereunder.
(b) Two (2) counterpart originals of the Assignment
and Assumption of Ground Lease Agreement.
(c) The Fitzgeralds' Note.
(d) The Deed of Trust and such other loan documents
as are referenced in Section 5 above.
(e) A counterpart original of the Assignment of
Leases.
(f) Deleted.
(g) A counterpart original of the Assignment of
Intangible Property.
(h) Fitzgeralds' written escrow instructions to close
escrow in accordance with the terms of this Agreement.
(i) Evidence reasonably acceptable to Scout's counsel
that the documents delivered to Scout by Fitzgeralds at Closing have been duly
authorized by Fitzgeralds, duly executed on behalf of Fitzgeralds and when
delivered constitute valid and binding obligations of Fitzgeralds.
9.6 Closing. The Title Company shall close escrow on the
Closing Date when and if it is irrevocably committed to issue the title
insurance described in Section 9.2 above and has received all of the documents
and funds listed in Sections 9.4 and 9.5 above. The Title Company shall close
escrow by:
(a) Recording the Assignment and Assumption of Ground
Lease Agreement, the Assignment of Leases, and the Deed of Trust, in that order.
(b) Issuing to Fitzgeralds the owner's leasehold
policy of title insurance described in Section 9.2 above.
(c) Delivering to Fitzgeralds an original of the
Assignment and Assumption of Ground Lease Agreement, Bill of Sale, the
Assignment of Intangible Property, the Notice to Tenants, the Non-Foreign
Affidavit and the Closing Certificate each duly executed by Scout.
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(d) Delivering to Scout an original of the Assignment and
Assumption of Ground Lease Agreement and the Fitzgeralds' Note each duly
executed by Fitzgeralds and the Purchase Funds after deducting Scout's share of
closing cost and perorations.
(e) Issuing to Scout the mortgagee's policy of title
insurance described in Section 9.2 above.
(f) Delivering to Fitzgeralds and Scout of copies of all
other documents and things deposited and/or delivered through escrow, the
originals of which are not being delivered by the Title Company to such parties,
together with Title Company's final closing statement for the subject
transaction.
9.7 Prorations.
(a) Rents and other income, current taxes, insurance
premiums and management, service, operating and maintenance expenses shall be
prorated between Scout and Fitzgeralds as of the Closing Date. All bonds,
assessments, encumbrances and other charges against the Property levied on or
before the Closing Date shall be paid in full by Scout. Rent shall be prorated
on the basis of the actual number of days in the month on the basis of the final
Rent Roll, regardless of whether of not such rent has actually been paid to
Scout. Income and expenses shall be prorated on the basis of the actual number
of days in a month. All rents and other sums received by Fitzgeralds on or after
the Closing Date shall be applied first to rent and other obligations accrued or
due on or after the Closing Date, then to Fitzgeralds' costs of collection, if
any, including attorneys' fees, and any excess paid by tenants for rent or other
obligations owed prior to the Closing Date shall be paid to Scout, provided that
Fitzgeralds shall have no obligation to collect delinquent rents for Scout's
account.
(b) All deposits made by tenants of the Property as
security for rent, cleaning or any other purpose (whether identified as
refundable or non-refundable) and prepaid rents and all interest accrued or due
on such sums (whether under applicable law or by agreement) shall, at the sole
option of Fitzgeralds, be paid to Fitzgeralds in cash on the Closing Date or
credited against the Purchase Price to be paid by Fitzgeralds.
(c) All items subject to proration pertaining to the period
prior to the Closing dated shall be credited to Scout, and all such prorations
pertaining to the period on or following the Closing Date shall be credited to
Fitzgeralds. No later than three (3) business days prior to the Closing Date,
Scout and Fitzgeralds shall mutually agree upon, and provide to Title Company, a
schedule of prorations to be made as of the Closing Date as complete and
accurate as reasonably possible. All prorations which can be determined
accurately or reasonably estimated as of the Closing Date shall be made in
escrow on the Closing Date. All other expenses of the Property through the end
of the calendar month in which the Closing Date shall occur shall be paid by
Scout, subject to adjustment as provided below. All other prorations, and
adjustments to initial estimated prorations or other non-prorated expenses,
shall be made by Fitzgeralds and Scout with due diligence and cooperation within
thirty (30) days following the Closing Date, or such later time as may be
required to obtain necessary information for proration or adjustment, by cash
payment to the party yielding a net credit from such prorations or
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adjustments from the other party. Such cash payment shall be made within ten
(10) business days of demand for payment by the party entitled to receive such
payment and, if not timely paid, such amount due shall bear interest from the
date due until the date of actual payment at the interest rate set forth in
Section 7.3 above.
(d) Scout agrees that benefits or compensation with
respect to employees of Scout in connection with the Property accrued on or
prior to the Closing Date due or claimed to be due either before or after the
Closing Date to employees or former employees of Scout who will be employed by
Fitzgeralds shall constitute, be and remain the sole obligation of Scout. All
employees with respect to the Property, whether or not such employees will be
retained by Fitzgeralds, shall be paid in full by Scout or Scout's management
company on or prior to the Closing Date, including all accrued vacation pay and
other fringe benefits through the day prior to the Closing Date.
9.8 Closing Costs. Fitzgeralds shall pay the cost of all
transfer, sales and conveyance taxes imposed by any governmental authority upon
this transaction, title insurance and endorsement premiums for the title
insurance described in Section 9.2 above, survey costs, recording fees, escrow
fees and Fitzgeralds' legal fees and costs incurred in connection with the
contemplated transaction. Scout shall be solely responsible for the cost
(including payment of prepayment fees or other charges) to pay off in full and
have canceled and discharged of record, all liens, encumbrances and other
instruments of record other than the approved Conditions of Title. In addition,
Scout shall pay Scout's legal fees and costs incurred in connection with the
contemplated transaction.
9.9 Possession. The possession of the Property shall be
delivered to Fitzgeralds at funding, in its "AS IS", "WHERE IS" condition with
all faults and without warranties of any kind, express or implied, or arising by
operation of law, except only the title warranties expressly set forth in the
deed and subject to the rights or parties in possession of the Property. Right
to possession of the Land and title to the Property shall transfer to
Fitzgeralds on the Closing Date, subject to the rights of the tenants under the
approved Tenant Occupancy Leases. Scout shall transfer and deliver to
Fitzgeralds on the Closing Date the originals of all approved Tenant Occupancy
Leases, all approved written Contract Obligations, all instruments and documents
evidencing or relating to the Intangible Property and all other documents
transferred to Fitzgeralds by this Agreement which have not yet been delivered
to Fitzgeralds.
9.10 Filing of Reports. Title Company shall be solely
responsible for the timely filing of any reports or returns required pursuant to
the provisions of Section 6045(e) of the Internal Revenue Code of 1986 (and any
similar reports or returns required under any state or local laws) in connection
with the closing of the transaction contemplated in this Agreement.
9.11 Cooperation. Without further consideration, Scout and
Fitzgeralds shall execute, acknowledge and deliver to each other on or after the
Closing Date any and all other instruments or documents, and do and perform any
other acts which may be required or which Fitzgeralds or Scout may reasonably
request in order to fully assign, transfer and or convey to
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Fitzgeralds, and vest in Fitzgeralds, good and marketable title to the Property
and a leasehold interest in the Land, and each and every part and component
thereof.
10. Liquidated Damages. In the event that (i) all of the conditions to
this Agreement shall have been satisfied, or waived in writing by Fitzgeralds,
(ii) Scout shall have fully and timely performed all of its obligations under
this Agreement, and (iii) Fitzgeralds shall default in performance of its
obligations under this Agreement, then the Deposit shall be paid by Title
Company to Scout as liquidated damages. FITZGERALDS AND SCOUT HEREBY ACKNOWLEDGE
AND AGREE THAT SCOUT'S DAMAGES WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE AND
THE AMOUNT OF THE DEPOSIT IS THE PARTIES' BEST AND MOST ACCURATE ESTIMATE OF THE
DAMAGES SCOUT WOULD SUFFER IN THE EVENT THE TRANSACTION PROVIDED FOR IN THIS
AGREEMENT FAILS TO CLOSE UNDER THE FOREGOING CONDITIONS, AND IS REASONABLE UNDER
THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT, FITZGERALDS AND
SCOUT AGREE THAT THE SCOUT'S RIGHT TO RETAIN THE DEPOSIT SHALL BE THE SOLE AND
EXCLUSIVE REMEDY OF SCOUT IN THE EVENT OF A BREACH OF THIS AGREEMENT BY
FITZGERALDS.
---------------------------- ----------------------------
FITZGERALDS SCOUT
11.A. Damage and Destruction. In the event that the Property shall be
damaged or destroyed by reason of fire, storm, accident, or other casualty, and
the cost of repair thereof shall not exceed $50,000.00, Scout shall, at Scout's
option, either repair said damage or pay to Fitzgeralds the insurance proceeds
received by Scout from the insurance company protecting Scout against such
casualty. If Scout shall elect to pay the insurance proceeds to Fitzgeralds, but
such proceeds are not sufficient to repair the Property, Fitzgeralds may
terminate this Agreement by written notice to Scout within five (5) days of
receipt of Scout's election to pay over the insurance proceeds. In the event the
cost of repair exceeds the sum of $50,000.00, either Fitzgeralds or Scout may
cancel this Agreement upon written notice to the other of them within ten (10)
days after the insurance claim has been settled, and Title Company shall return
the Deposit to Fitzgeralds and neither party shall have any further rights or
liabilities hereunder. If neither Scout nor Fitzgeralds gives the other such
notice of termination, Fitzgeralds shall take title to the Property, provided,
however, Scout shall either repair such damage or pay to Fitzgeralds the
insurance proceeds received by Scout. Fitzgeralds shall have the right if fire
damage exceeds $50,000.00 to close and accept an assignment of insurance
proceeds.
Scout shall exercise its option as to whether or not Scout shall repair
the Property or pay the insurance proceeds to Fitzgeralds no later than thirty
(30) days after the occurrence of the casualty.
11.B. Condemnation. In the event that the entire Property or a part
thereof having a value in excess of $50,000.00 shall have been taken by eminent
domain or shall be in the process of being so taken, as of the Closing Date,
either party shall have the option to terminate this Agreement on written notice
to the other party, whereupon Title Company shall return the
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Deposit to Fitzgeralds and neither party shall have any further rights or
liabilities hereunder. In the event any such taking shall not include a part of
the Property having a value in excess of $50,000.00 or in the event that neither
party shall terminate this Agreement pursuant to the preceding sentence,
Fitzgeralds accepts the Property in the condition in which it is left following
such taking, with an abatement of the Purchase Price measured by the net
proceeds of any condemnation award to Scout. In the event the award has not been
made or collected by Scout at the time of Closing, Scout shall assign to
Fitzgeralds at Closing all rights of Scout to the collection of such award, and
Fitzgeralds shall accept the Property without abatement of the Purchase Price.
12. Commissions. Each party to this Agreement warrants to the other
that except as provided in this Section 12, no person or entity can properly
claim a right to a real estate commission, real estate finder's fee, real estate
acquisition fee or other real estate brokerage-type compensation (collectively,
"Real Estate Compensation") based upon the acts of that party with respect to
the transaction contemplated by this Agreement, and each party hereby agrees to
indemnify, defend and protect the other against and to hold the other harmless
from any loss, cost or expense (including but not limited to attorneys' fees and
returned commissions) resulting from any claim for Real Estate Compensation by
any person or entity based upon such acts except as follows: [No brokers were
involved in this transaction.]
13. General Provisions.
13.1 Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and (i) personally delivered, (ii) sent
by United States mail, registered or certified mail, postage prepaid, return
receipt requested, (iii) sent by Federal Express or similar nationally
recognized overnight courier service, or (iv) transmitted by facsimile with a
hard copy sent within one (1) business day by any of the foregoing means, and in
all cases addressed as follows, and such notice shall be deemed to have been
given upon the date of actual receipt or delivery (or refusal to accept
delivery) at the address specified below (or such other addresses as may be
specified by notice in the foregoing manner) as indicated on the return receipt
or air bill:
To Seller: Scout Development Corporation
7066 Lakeview Haven Drive, Suite 131
Cypress, Texas 77095
Attn: Anthony Levinson, Executive Vice
President and Chief Operating Officer
Fax No. (281) 345-1134
Phone No. (281) 345-1033
with copies to: John R. Jones, P.C.
1301 McKinney, Suite 3550
Houston, TX 77010
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Attn: John R. Jones
Fax No. (713) 750-0095
Phone No. (713) 750-0092
e-mail: [email protected]
To Fitzgeralds: Fitzgeralds Reno, Inc.
255 N. Virginia Street
Reno, Nevada 89501
Attn: Michael E. McPherson, Senior Vice
President and Chief Financial Officer
Fax No. (775) 786-7180
Phone No. (775) 325-3359
with copies to: Gordon & Silver, Ltd.
3960 Howard Hughes Parkway
Ninth Floor
Las Vegas, Nevada 89109
Attn: James S. Mace
Fax No. (702) 369-2666
Phone No. (702) 796-5555
13.2 Entire Agreement; No Modifications. This Agreement,
together with the schedules and exhibits attached hereto, incorporates all
agreements, warranties, representations and understandings between the parties
to the Agreement with respect to the subject matter hereof and constitutes the
entire agreement of Scout and Fitzgeralds with respect to the purchase and sale
of the Property. Any prior or contemporaneous correspondence, memoranda,
understandings, offers, negotiations and agreements, oral or written, are merged
herein and replaced in total by this Agreement and the exhibits hereto and shall
be of no further force or effect. This Agreement may not be modified or amended
except in a writing signed by Scout and Fitzgeralds.
13.3 Time. Time is of the essence in the performance of the
parties' respective obligations set forth in this Agreement.
13.4 Attorneys' Fees. In the event any action or proceeding at
law or in equity between Fitzgeralds and Scout (including an action or
proceeding between Fitzgeralds and Scout or the trustee or debtor in possession
while either is a debtor in a proceeding under the Bankruptcy Code (Title 11 of
the United States Code or any successor statute to such Code) to enforce or
interpret any provision of this Agreement or to protect or establish any right
or remedy of either Fitzgeralds or Scout hereunder, the unsuccessful party to
such action or proceeding shall pay to the prevailing party all costs and
expenses including, without limitation, reasonable attorneys' and paralegals'
fees and expenses, incurred by such prevailing party, in such action or
proceeding and in any appeal in connection therewith, whether or not such
action, proceeding or
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appeal is prosecuted to judgment or other final determination, together with all
costs of enforcement and/or collection of any judgment or other relief.
13.5 Specific Performance. The parties understand and agree
that the Property is unique and for that reason, among others, Fitzgeralds will
be irreparably damaged in the event that this Agreement is not specifically
enforced. Accordingly, in the event of any breach or default in or of this
Agreement or any of the warranties, terms or provisions hereof by Scout,
Fitzgeralds shall have as its sole and exclusive remedies: return of the Deposit
or specific performance of this Agreement, provided that Fitzgeralds irrevocably
waives any and all rights that it may have to specifically enforce this
Agreement, in the event that Scout's default arises out of an inability to
convey good, indefeasible and insurable title to Fitzgeralds. All other remedies
not specifically enumerated herein are waived by Fitzgeralds
13.6 Successors and Assigns. This Agreement may be assigned by
Scout without the prior written consent of Fitzgeralds provided Scout's assignee
assumes in writing all the obligations of Scout under this Agreement. Subject to
the foregoing provision, this Agreement shall inure to the benefit of and be
binding upon the parties to this Agreement and their respective successors and
assigns. Fitzgeralds shall have the right to assign its rights under this
Agreement to any partnership or entity of which Fitzgeralds owns or controls,
directly or indirectly, fifty percent (50%) or more of the total equity interest
of such entity provided; however, (i) any such assignment shall not relieve
Fitzgeralds of its obligations under this agreement, and Fitzgeralds will
guarantee in writing the performance of the obligations of such assignee, (ii)
Fitzgeralds delivers to Scout prior written notice of such assignment and (iii)
Fitzgeralds' assignee assumes in writing all of the obligations of Fitzgeralds
under this Agreement.
13.7 Counterparts. This Agreement may be executed in one or
more counterparts and each such counterpart shall be deemed to be an original;
all counterparts so executed shall constitute one instrument and shall be
binding on all of the parties to this Agreement notwithstanding that all of the
parties are not signatory to the same counterpart.
13.8 Construction. This Agreement shall be governed by and
construed under the laws of the State of Nevada. The parties acknowledge that
each party and its counsel have reviewed and revised this Agreement and that no
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall be employed in the interpretation of this
Agreement or any schedules or exhibits to it or any document executed and
delivered by either party in connection with this Agreement. All captions in
this Agreement are for reference only and shall not be used in the
interpretation of this Agreement or any related document. If any provision of
this Agreement shall be determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Agreement and all
such other provisions shall remain in full force and effect.
13.9 Exculpation. Scout will look solely to the net assets of
Fitzgeralds for satisfaction of any claims or obligations of Fitzgeralds to
Scout, whether under this Agreement or otherwise, and not to any assets of any
of the partners of Fitzgeralds (or any of the officers,
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<PAGE> 23
directors, shareholders or partners of such officers, directors, shareholders or
partners), and Scout hereby agrees that for these purposes a deficit capital
account of a partner of or in Fitzgeralds shall not be deemed an asset of
Fitzgeralds.
*13.10 Expiration. See Below.
IN WITNESS WHEREOF, Fitzgeralds and Scout have executed this Agreement as
of the date and year first written above:
SCOUT: FITZGERALDS:
SCOUT DEVELOPMENT CORPORATION, FITZGERALDS RENO, INC.,
a Missouri corporation a Nevada corporation
By: /s/ ANTHONY L. LEVINSON By: /s/ MICHAEL E. MCPHERSON
------------------------------- -------------------------------------
Name: Anthony L. Levinson Name: Michael E. McPherson
Title: Executive Vice President Title: Executive Vice President/CFO
*13.10 Expiration. The execution of this Agreement by Scout constitutes
an offer to sell the Property on the terms described herein. In the event
Fitzgeralds does not accept Scout's offer to sell by signing this Agreement, and
returning an executed counterpart of this Agreement to Scout and the Title
Company by 5:00 P.M. Central Standard Time, October 13, 1999, this offer will
automatically terminate.
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EARNEST MONEY RECEIPT
The Title Company hereby acknowledges receipt of this fully executed
Agreement and the Earnest Money in the amount of $100,000.00 on the 10th day of
October, 1999.
FIRST AMERICAN TITLE COMPANY OF NEVADA
By: /s/ TIMA DONOVAN
----------------------------------
Name: Tima Donovan
--------------------------------
Title: Escrow Officer
-------------------------------
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SCHEDULE 1
DEFINED TERMS
For the purposes of this Agreement, the following words and phrases shall have
the following meanings unless the context otherwise specifies or requires:
"Assignment of Intangible Property" means that document set forth on
Exhibit J of this Agreement, attached hereto and made a part hereof.
"Closing" shall mean the close of escrow pursuant to this Agreement of
the transacting contemplated by this Agreement.
"Closing Certificate" means that document set forth on Exhibit M of
this Agreement, attached hereto and made a part hereof.
"Closing Date" shall mean March 31, 2000, which is the agreed outside
date for closing of the contemplated transaction.
"Conditions of Title" shall have the same meaning as set forth in
Section 9.1 of this Agreement.
"Contract Obligations" shall mean those contracts, agreements,
commitments, employment agreements, service contracts, utility contracts,
construction contracts, maintenance agreements, leasing and brokerage agreements
and all other contracts, agreements and obligations, whether or not in writing,
which relate to the ownership, operation, management, maintenance, use or
occupancy of the Property.
"Deed" means that document set forth on Exhibit R of this Agreement.
"Deed of Trust" means that document set forth on Exhibit O of this
Agreement.
"Due Diligence Items" shall have the same meaning as set forth in
Section 3 of this Agreement.
"Environmental Laws" shall mean any and all presently existing federal,
state and local laws (whether under common law, statute, rule, regulation or
otherwise), requirements under permits issued with respect thereto, and other
requirements of any federal, state or local governmental agency, court, board,
bureau or other authority having jurisdiction with respect to or relating to the
environment, to any Hazardous Substance or to any activity involving Hazardous
Substances, and shall include, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601,
et seq., the Federal Resource Conservation and Recovery Act (42 U.S.C. Section
6901, et seq.) and all amendments thereto in effect as of the Closing Date.
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"Fitzgeralds" shall have the same meaning as set forth in the opening
paragraph of this Agreement.
"Fitzgeralds' Note" means that document set forth on Exhibit N of this
Agreement.
"Ground Lease" shall mean that certain Ground Lease dated as of March
1, 1978 between Southern Pacific Transportation Company, a Delaware corporation
("Southern Pacific") and Donald L. Wilkerson ("Wilkerson"), as amended by that
certain (i) Supplemental Agreement dated February 22, 1979 between Southern
Pacific and Wilkerson, (ii) Supplemental Agreement dated July 16, 1984 between
Southern Pacific and Plaza Investments, a Nevada general partnership (by and
through Wilkerson), (iii) Memorandum Confirming Rent Adjustment dated January 1,
1989 between Southern Pacific and Plaza Investments, and (iv) Deed of Correction
and Reformation and Boundary Line Adjustment Agreement dated ________________,
1999 between Union Pacific Railroad, G and S Investment Company, a Nevada
limited partnership, and Scout and the Record of Survey.
"Ground Lessor" shall mean G and S Investment Company, a Nevada limited
partnership.
"Ground Lessor's Estoppel Certificate" shall mean that document set
forth on Exhibit Q of this Agreement.
"Hazardous Substances" shall mean and include any chemical, compound,
material, mixture, waste or substance that is now or hereafter defined or listed
in, or otherwise classified pursuant to, any Environmental Laws as a "hazardous
substance", "hazardous material," "hazardous waste," "extremely hazardous
waste," "infectious waste," "toxic substance," "toxic pollutant" or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, or toxicity including any petroleum, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixture of
natural gas and such synthetic gas). "Hazardous Substances" shall include,
without limitation, any hazardous or toxic substance, material or waste or any
chemical, compound or mixture which is (i) asbestos, (ii) designated as a
"hazardous substance" pursuant to Section 1317 of the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), (iii) defined as a "hazardous
waste" pursuant to Section 6903 of the Federal Resource Conservation and
Recovery Act, (42 U.S.C. Section 6901 et seq., (iv) defined as "hazardous
substances" pursuant to Section 9601 of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq.), or
(v) listed in the United States Department of Transportation Table (49 CFR
172.101) or by the Environmental Protection Agency as hazardous substances (40
CFR part 302); or in any and all amendments thereto in effect as of the Closing
Date; or such chemicals, compounds, mixtures, substances, materials or wastes
otherwise regulated under any applicable local, state or federal Environmental
Laws.
"Improvements" shall mean all improvements and fixtures now or
hereafter located on the Land including, without limitation, the existing
building constructed on the Land together with all appurtenances thereto and all
apparatus, equipment and appliances located on the Land
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and used in connection with the operation and occupancy thereof such as systems
or facilities for heating, ventilation, air conditioning, climate control,
utility services, parking services, garbage disposal, irrigation, and all
landscaping and residual interests in leasehold improvements under the Tenant
Occupancy Leases.
"Intangible Property" shall mean all property other than the Personal
Property, the Land, and the Improvements now or hereafter owned or held by Scout
and used in connection with the ownership, operation or occupancy thereof
including, without limitation, the name ("Plaza Street Garage") and all other
names under which the Land, the Improvements and/or the Personal Property are
operated or commonly known, all copyrights, trademarks, trade names and service
marks used in the operation of the Land, the Improvements or the Personal
Property, the Plans and Specifications, all appraisal, engineering, soils, pest
control and other studies or reports relating to the Land, the Improvements
and/or the Personal Property, all catalogues, customer lists, correspondence
with present or prospective tenants, customers or suppliers, all advertising and
promotional materials, all telephone exchange numbers identified with the Land,
the Improvements, and/or the Personal Property, all awards or payments made or
to be made for or with respect to any taking in condemnation or eminent domain
(including awards or payments for damage resulting from change of grade or
impairment of access) of any part of the Land, the Improvements and/or the
Personal Property prior to, on or after the date hereof, all rents, issues and
profits therefrom and to the extent, if any, approved by Fitzgeralds pursuant to
the terms of this Agreement, all consents, licenses, franchises, permits,
utility and/or subdivision bonds or deposits, purchase or construction
warranties or guarantees and other rights owned by Scout relating to the
operation, ownership or occupancy of the Land, the Improvements and/or the
Personal Property.
"Land" shall mean the real property described in Exhibit A to this
Agreement, including all easements, riparian or other water rights, rights of
way and other interests appurtenant thereto, and all right, title and interest
of Scout in and to any land lying in the bed of any street, road, highway or
avenue, open or proposed, in front of, adjacent to or adjoining such real
property and in all strips and gores.
"Laws and Restrictions" shall mean all applicable federal, state, local
and other laws, statutes, regulations, codes, orders, ordinances and rules
including, without limitation, those relating to fire, safety, building,
construction, land use, subdivision, health, labor, environmental protection,
seismic design, conservation, parking, handicapped access, zoning and building,
and all restrictive covenants (if any), other title encumbrances and other
obligations affecting the Property, all Environmental Laws, all applicable
provisions of the Fair Housing Act of 1968 and the Americans With Disabilities
Act of 1990, and all amendments thereto, and all requirements under Tenant
Occupancy Leases.
"Non-Foreign Affidavit" means that document set forth on Exhibit L of
this Agreement.
Notice to Tenants" means that document set forth on Exhibit K of this
Agreement.
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"Outside Date" shall have the same meaning as set forth in Section 4 of
this Agreement.
"Personal Property" shall mean those items of personal property listed
the Personal Property Inventory to be delivered as provided in Section 3 of this
Agreement and all other personal property now or hereafter owned or held by
Scout and used in connection with the Land, the Improvements and/or the
Intangible Property or the ownership, operation or occupancy thereof including,
without limitation, all furniture, fixtures, machinery, appliances and equipment
located on the Property, other than personal property owned by tenants of the
Property.
"Plans and Specifications" shall mean the final plans and
specifications for construction of the Improvements as listed in Exhibit C to
this Agreement.
"Property" shall mean collectively (i) all of Scout's leasehold
interests in the Land, (ii) the Improvements, (iii) the Personal Property, (iv)
the Intangible Property and (v) all of Scout's interest, as landlord, in and to
the Tenant Occupancy Leases.
"Purchase Price" shall have the same meaning as set forth in Section 5
of this Agreement.
"Recordation Date" means the date on which the Assignment and
Assumption of Ground Lease Agreement is recorded in the Official Records of the
County in which the Land is located.
"Rent Roll" shall mean a listing of all leases of any portion of the
Property in form acceptable to Fitzgeralds and setting forth, among other
things, with respect to each lease: (1) the name of the tenant; (2) the date of
the lease, and the date(s) of any amendment(s) or modification(s) thereof; (3)
the date the tenant is scheduled to take possession if the tenant is not in
possession; (4) the date the tenant is scheduled to or intends to vacate if such
fact is known to Scout; (5) the current monthly rental (including charges, if
any, payable by the tenant under the lease and detailing all rent concessions),
or if the unit is not leased, the monthly rental which would be charged if a new
lease were entered into (including a list of the above additional charges for
such unit and all rent concessions which would be allowed); (6) the lease
expiration date, if any; (7) the amount of the security deposit required under
the lease, if any, and the amount of the security applied or returned to the
tenant, if any; (8) any commission liability in respect of the lease (and a copy
of the commission agreement); (9) a description of any agreement or
understanding between Scout (or any predecessor of Scout) and the tenant which
is at variance with the form of lease used for the Property whether such
agreement or understanding results from a modification or addition to the form
or is contained in a separate writing or oral understanding; and (10) a
description of any rental payment delinquency during the preceding six (6) month
period.
"Scout" shall have the same meaning as set forth in the opening
paragraph of this Agreement.
"Survey" means an ALTA survey of the Land on an "as-built" basis in
form and substance acceptable to Fitzgeralds and Title Company.
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"Tenant Estoppel Certificate" means that document set forth on Exhibit
P of this Agreement.
"Tenant Occupancy Leases" shall mean all leases, work letter
agreements, improvement agreements, and other rental agreements listed in
Exhibit D to this Agreement with respect to occupancy or use of the Property by
tenants, and such other leases, work letter agreements, improvement agreements,
and other rental agreements as may be approved by Fitzgeralds in accordance with
the terms of this Agreement.
"Title Commitment" shall mean the Commitment for Title Insurance with
respect to the Land and Improvements dated as of July 12, 1999, and issued by
the Title Company under its Order No. 16269-RB, a copy of which is attached to
this Agreement as Exhibit E.
"Title Company" shall mean First American Title of Nevada as agent for
First American Title Insurance Company whose address for this transaction is as
follows:
First American Title of Nevada
5310 Kietke Lane, #100
Reno, Nevada 89511-2043
Attn: Ron Breazeale
Escrow No. 1999-16269RB
Fax No. (775) 823-6200
Phone No. (775) 823-6250
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SCHEDULE 6.1(c)
DUE DILIGENCE ITEMS
Copies of all documents noted as exceptions in the Title Commitment.
Original of the Rent Roll certified by Scout as true and correct. Fitzgeralds
acknowledges receipt of this item; provided, however that the Rent Roll shall be
updated by Scout within ten (10) days prior to Closing.
Past 3 years Property operating statements and capital expenditures summaries.
Fitzgeralds acknowledges receipt of this item.
Capital improvement summary for current period.
Original of a Rental Income Certification executed by Scout in form of Exhibit F
attached hereto.
Copies of all existing Tenant Occupancy Leases and correspondence files relating
thereto. Fitzgeralds acknowledges receipt of this item.
Any other information concerning the Property which Fitzgeralds may reasonably
request in writing.
Copies of the most recent tax bills and assessments for the Property.
ALTA Survey of the Land on an "as-built" basis in form and substance acceptable
to Fitzgeralds and Title Company, obtained by Fitzgeralds. Scout will provide
only the most current survey in its possession or control.
Complete set of the most recent "building" Plans and Specifications.
Scout does not have a termite and pest control report in its possession or
control.
Scout does not have copies, if any, of existing soils reports, geologic or
seismic studies and environmental reports in its possession or control.
List of Contract Obligations.
Copies of all existing insurance policies or acceptable certificates of
insurance.
Copies of Contract Obligations. Fitzgeralds acknowledges receipt of this item.
Copies of all purchase and construction warranties or guarantees.
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<PAGE> 31
List of all employees engaged with respect to the Property, setting forth in
respect of each employee: (1) his or her name and address; (2) his or her
position; (3) his or her current salary or wages and fringe benefits including
vacation time and free or reduced rent; (4) and his or her Christmas or other
bonus, if any.
Past 3 years insurance claims, incidents reports, litigation and proceedings
summary.
Personal Property Inventory.
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SCHEDULE 7.1
SCOUT'S DISCLOSURES
The Property is located within an earthquake zone.
Scout has provided to Fitzgeralds that one certain "proposed Re-Trac
Project Plan" prepared by Steve Varela, P. E., Director of Public Works, City of
Reno, published on the WWW: May 14, 1999. This report states that on page 5
thereof the ground water is contaminated. Also, the proposed Re-Trac Project
Plan provides that the railroad track currently in place on the Land will be
lowered and the construction activity may affect the operation of the
Improvements.
Scout has provided to Fitzgeralds a copy of that one certain letter
dated July 14, 1999 from Galloway & Jensen, attorneys for Tarianna Nazieux,
notifying Scout Development Corporation of injuries sustained as the result of
an accident which occurred on May 16, 1998.
Fitzgeralds acknowledges that Scout did not plan, build or otherwise
Construct the Property and that, as a result, Scout does not possess the
knowledge and information it might possess if it had planned or built the
Property. Scout hereby notifies Fitzgeralds that the "walkway" referenced in
Section 9.1(c) hereinafter is presently in the process of being removed and
this activity may affect the operation of the Improvements.
Except for the retail area occupied by the tenant area, the sprinkler
system is dry and is not charged. Also, there is an obstruction in the toilet
facility in the first level of the Property. The Property includes two elevators
and ticket spitters.
The Deed of Correction and the Record of Survey must be executed by
parties other than Scout in order to be completed and filed in the official
records of Washoe County, Nevada. Fitzgeralds acknowledges receipt of a copy of
the Deed of Correction and Record of Survey.
29
<PAGE> 33
EXHIBITS A-R are intentionally omitted.
<PAGE> 1
EXHIBIT 10.2
$2,250,000.00 RENO, NEVADA FEBRUARY 1, 2000
FITZGERALDS RENO, INC., a Nevada corporation ("Maker", whether one or
more), jointly and severally, For Value Received, promises and, agrees to pay
in installments and as provided below unto the order of SCOUT DEVELOPMENT
CORPORATION (which together with its successors and assigns and any subsequent
owners and holders of this note is called "Payee") at 1350 S. Boulder, Tulsa,
Oklahoma 74119, or at such other address as Payee may specify in writing from
time to time, the principal sum of TWO MILLION TWO HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($2,250,000.00), together with interest thereon from and after
the date of this note until maturity at the rate of ten percent (10%) per
annum, payable as it accrues on the maturity date of each of the installments
described below, on the then unpaid principal amount of this note.
ALL PAYMENTS of interest will be computed on the per annum basis of a
year of 365 days and for the actual number of days elapsed.
THIS NOTE is due and payable in one hundred twenty (120) installments,
the first one hundred nineteen (119) of which being in the amount of TWENTY-ONE
THOUSAND SEVEN HUNDRED TWELVE AND 99/100 DOLLARS ($21,712.99), including
accrued interest each, and the one hundred twentieth (120th) and final
installment being in the amount of the balance of principal and accrued
interest then due on this note. The first such installment is due and payable
one (1) month from the date of this note, and the remaining installments are
due and payable in consecutive order on the same day of each and every
succeeding calendar month thereafter until all sums called for under this note
have been paid in full.
MAKER may prepay the principal of this note, in whole or in part, at
any time without penalty or premium. Accrued and unpaid interest with respect
to any principal amount prepaid is due and payable on the date of such
prepayment. All amounts of principal so prepaid and received by Payee will be
applied to the last maturing installments of this note in their inverse order
of maturity.
ALL SUMS payable or to be payable under this note must be paid in
lawful money of the United States of America that, at the time of payment, is
legal tender for the payment of public and private debts. All sums paid on this
note will be applied first to accrued and unpaid interest and the balance, if
any, to unpaid principal. Whenever any payment to be made under this note is
stated to be due on a Saturday, Sunday or legal holiday for commercial banks
under applicable law, then such payment is due and may be made on the next
succeeding business day, and such extension of time will be included in the
computation of payment of interest under this note. In the event payments under
this note are required to be made on the 29th, 30th, or 31st day of the month,
the payment date for the month of February will be the last day of February.
Any check, draft, negotiable order of withdrawal, money order or other
instrument given in payment of all or any portion of this note may be accepted
by Payee and handled in collection in the customary manner, but will not
constitute payment under this note or diminish any rights of Payee except to
the extent that actual cash proceeds of any instrument are unconditionally
received by Payee.
Initial MEM
-------
Page 1 of 6 Pages
<PAGE> 2
$2,250,000.00 RENO, NEVADA FEBRUARY 1, 2000
ALL PAST due principal and interest paid subsequent to the fifth (5th)
day after the due date will bear interest from the date due until paid at the
Maximum Rate. The "Maximum Rate" means eighteen percent (18%) per annum. The
Maker expressly agrees that any unpaid accrued interest shall be compounded as
provided herein. The Maximum Rate will be applied by taking into account all
amounts characterized by applicable law as interest on the debt evidenced by
this note, so that the aggregate of all interest does not exceed the maximum
nonusurious amount permitted by applicable law. Alternatively, Payee may charge
and collect a late fee of five percent (5%) of any scheduled installment that
is more than ten (10) days past due.
IF ANY installment or payment of principal or interest of this note is
not paid when due; or if default occurs under any document, instrument or
agreement executed in connection with or as security for this note (the "Loan
Documents," including without limitation the agreements described in the last
paragraph of this note); or if Maker or any co-maker, drawer, acceptor,
endorser, guarantor, surety, accommodation party or other person now or
hereafter primarily or secondarily liable upon or for payment of all or any
part of this note (each hereinafter called an "other liable party") dies or
becomes insolvent (however such insolvency may be evidenced); or if any
proceeding, procedure or remedy supplementary to or in enforcement of judgment
is resorted to or commenced against Maker or any other liable party, or with
respect to any property of any of them in an amount of Two Hundred Fifty
Thousand and no/100 Dollars ($250,000.00) or more in excess of any insurance
coverage; or if any governmental authority or any court at the instance thereof
takes possession of any substantial part of the property of or assumes control
over the affairs or operations of, or a receiver is appointed for or takes
possession of the property of, or a writ or order of attachment or garnishment
is issued or made against any of the property of Maker or any other liable
party; or if any indebtedness for which Maker or any other liable party is
primarily or secondarily liable is not paid when due or becomes due and payable
by acceleration of maturity thereof, or if any event or condition occurs which
permits the holder of any such indebtedness to declare it due and payable upon
the lapse of time, giving of notice or otherwise; or if Maker or any other
liable party (if other than a natural person) is dissolved, wound up,
liquidated or otherwise terminated, or a party to any merger or consolidation
without the written consent of Payee; or if Maker or any other liable party
sells substantially of its assets without the written consent of; thereupon, at
the option of Payee, this note and any and all other indebtedness of Maker to
Payee will become and be due and payable forthwith without demand, notice of
default, notice of intent to accelerate the maturity of this note, notice of
acceleration of the maturity of this note, notice of nonpayment, presentment,
protest or notice of dishonor, all of which are expressly waived by Maker and
each other liable party. Payee's failure to exercise this option upon any
default does not waive the right to exercise it in the event of any subsequent
default.
NEITHER the failure to exercise, nor delay in exercising, Payee's
right to accelerate the maturity of this note or any other right, power or
remedy upon any default may be construed as a waiver of such default or as a
waiver of the right to exercise any such right, power or remedy at any time. No
single or partial exercise by Payee of any right, power or remedy exhausts the
same or precludes any other or further exercise thereof, and every such right,
power or remedy may be exercised at any time and from time to time. Any
remedies provided for in this note and in any
Initial MEM
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Page 2 of 6 Pages
<PAGE> 3
$2,250,000.00 RENO, NEVADA FEBRUARY 1, 2000
other Loan Document are cumulative of each other and of any and all other
remedies existing at law or in equity, and Payee is, in addition to the remedies
provided in this note or in any other Loan Document, entitled to avail itself of
all such other remedies as may now or hereafter exist at law or in equity for
the collection of the indebtedness owing under this note. The resort to any
remedy provided for under this note, under any other Loan Document, or provided
for by law or in equity will not prevent the concurrent or subsequent employment
of any other appropriate remedy or remedies. Without limiting the generality of
the foregoing provisions, Payee's acceptance from time to time of any payment
under this note that is past due or that is less than the payment in full of all
amounts due and payable at the time of such payment, will not (i) constitute a
waiver of or impair or extinguish the rights of Payee to accelerate the maturity
of this note or to exercise any other right, power or remedy at that time or at
any subsequent time, or nullify any prior exercise of any such right, power or
remedy, or (ii) constitute a waiver of the requirement of punctual payment and
performance, or a novation in any respect.
IF MORE than one person or entity executes this note as Maker, all of
said parties are jointly and severally liable for payment of the indebtedness
evidenced by this note. Maker and each other liable party (i) waives demand,
presentment for payment, notice of dishonor, notice of nonpayment, protest,
notice of protest, notice of intent to accelerate, notice of intent to
foreclose, notice of acceleration and all other notices (except only for any
notices that are specifically required by this note or any other Loan
Document), filing suit and diligence in collection of this note or enforcing any
of the security for this note; (ii) agrees to any substitution, subordination,
exchange, release or impairment of any security or the release of any party
primarily or secondarily liable on this note; (iii) agrees that Payee is not
required first to institute suit or exhaust its remedies against Maker, any
other liable party, or others liable or to become liable on this note or to
enforce its rights against them or any security for this note; (iv) consents to
any extension or postponement of time of payment of this note for any period or
periods of time and to any partial payments, before or after maturity, and to
any other indulgences with respect to this note, without notice thereof to any
of them; and (v) submits (and waives all rights to object) to personal
jurisdiction in the State of Nevada, and venue in Washoe County, Nevada, for the
enforcement of any and all obligations under the Loan Documents. Maker and Payee
agree that this note shall be governed by Nevada law without regard to any
conflicts of law provisions.
IF PAYEE retains an attorney in connection with any default or at
maturity or to collect, enforce or defend this note or any other Loan Document
in any lawsuit or in any probate, reorganization, bankruptcy or other
proceeding, including a garnishment that affects Maker, any other liable party
or any collateral described in or secured by the Loan Documents, or if Maker
sues Payee in connection with this note or any other Loan Document and does not
prevail, then Maker agrees to pay to Payee, in addition to principal and
interest, all reasonable costs and expenses incurred by Payee in trying to
collect this note or in any such suit or proceeding including reasonable
attorneys' fees.
MAKER and each other liable party acknowledges and agrees that Payee
may, at any time, without the consent of or notice to Maker or an other liable
party assign, sell, transfer or grant participation in all or part of the
obligations of Maker evidenced by this note, together with
Initial MEM
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Page 3 of 6 Pages
<PAGE> 4
$2,250,000.00 RENO, NEVADA FEBRUARY 1, 2000
any liens or collateral securing the payment of this note. Payee may disseminate
to any assignee, purchaser, transferee or participant or prospective assignee,
purchaser, transferee or participant any information that Payee has pertaining
to the loan evidenced by this note, including without limitation, any
information regarding Maker, any other liable party, or any property owned or
held by Maker or any other liable party or offered as security for or securing
the loan evidenced by this note.
THIS NOTE and the other Loan Documents set forth the entire agreement
of the parties. There are no oral conditions, representations, agreements or
commitments affecting this note, the other Loan Documents, and other loans or
advances that Payee has made or may make to Maker. Payee has made no oral
commitments or agreements to advance monies or make additional loans to Maker.
No extension or variation in the terms of payment of this note, and no release
of personal liability and/or collateral securing this note, and no satisfaction
of this note in whole or in part in exchange for collateral or otherwise, is
binding on Payee unless the signed by an authorized officer of Payee.
MAKER and each other liable party, if any, grants to Payee a first lien
and security interest on all Deposits and other sums at any time credited by or
due from Payee to Maker or any other liable party, as collateral security for
the payment of this note. Upon a default under this note by Maker, Payee, at its
option may at any time without notice and without any liability, retain all or
any part of any such deposits or other sums until all sums owing on this note
have been paid in full and/or apply or set off all or any part of any such
deposits or other sums credited by or due from Payee to or against any sums due
on this note in any manner and in any order of preference that Payee, in its
sole discretion, chooses.
PAYEE, Maker and all other liable parties intend to conform to and
contract in strict compliance with applicable usury law from time to time in
effect. All agreements between Payee, Maker and all other liable parties (and
any other party liable with respect to any indebtedness under the Loan
Documents) are limited by the provisions of this paragraph, which override and
control all such agreements, whether now existing or hereafter arising and
whether written or oral. In no way, nor in any event or contingency (including
but not limited to payoff quote or other statement of the balance owing,
prepayment, default, demand for payment, or acceleration of the maturity of any
obligation), will the interest contracted for, charged or received under this
note or otherwise, exceed the Maximum Rate. If, from any possible construction
of any document, interest would otherwise be payable in excess of the Maximum
Rate, any such construction is subject to the provisions of this paragraph and
such document is automatically reformed and the interest payable is
automatically reduced to the Maximum Rate, without the necessity of execution
of any amendment or new document. If Payee ever receives anything of value that
is characterized as interest under applicable law and that would apart from
this provision be in excess of the Maximum Rate, then an amount equal to the
amount that would have been excessive interest will, without penalty, be
applied to the reduction of the principal amount owing on the indebtedness
evidenced by this note in the inverse order of its maturity and not to the
payment of interest, or, at the option of Payee, be refunded to Maker or the
other payor thereof if and to the extent of such amount that would have been
excessive exceeds such unpaid
Initial MEM
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Page 4 of 6 Pages
<PAGE> 5
$2,250,000.00 RENO, NEVADA FEBRUARY 1, 2000
principal. The right to accelerate maturity of this note or any other
indebtedness does not include the right to accelerate any interest that has not
otherwise accrued on the date of such acceleration, and Payee does not intend
to charge or receive any unearned interest in the event of acceleration. All
interest paid or agreed to be paid to Payee will, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full stated term (including any renewal or extension) of such indebtedness so
that the amount of interest or amount of such indebtedness does not exceed the
maximum permitted by applicable law.
NOTWITHSTANDING any term or provision of this note to the contrary,
Maker confirms to Payee that neither Maker nor its legal counsel, if any, is
aware that this note, or the transaction in connection with which this note was
issued, is or may be usurious in any respect. To induce Payee to make the loan
evidenced by this note, Maker agrees with and covenants to Payee that if at any
time Maker believes or discovers that any term or provision of this note or any
action taken by Payee in connection with this note is or may be in violation of
the usury laws or any other applicable law, Maker will immediately give notice
to Payee specifying with particularity the nature and extent of any such
potential violation of the usury laws or any other applicable law, and afford to
Payee a reasonable period (of not less than 60 days) within which to cure same.
Maker agrees with and covenants to Payee that in no instance will Maker make any
claim, bring any suit, prosecute or otherwise assert any cause of action, claim,
counterclaim, or defense in respect of any violation of the usury laws or any
other applicable law, unless, as a condition precedent thereto, Maker has given
to Payee such notice and afforded to Payee such opportunity to cure as provided
in this paragraph.
THIS NOTE binds and inures to the benefit of Maker and Payee and their
respective heirs, legal representatives, successors and assigns; provided,
however, that Maker may not assign this note or any loan funds, or assign or
delegate any of its rights or obligations, without the prior written consent of
Payee in each instance.
THIS NOTE is entitled to the benefits and security afforded by (a) Deed
of Trust and Security Agreement and to Secure Assumption of even date herewith
executed by Maker to John R. Jones, Trustee, for the benefit of Payee covering
the leasehold estate, and improvements located thereon, as created by that
certain ground lease dated March 1, 1978 between Southern Pacific Transportation
Company, a Delaware corporation ("Southern Pacific") and Donald L. Wilkerson
("Wilkerson"), as amended by that certain (i) Supplemental Agreement dated
February 22, 1979 between Southern Pacific and Wilkerson, (ii) Supplemental
Agreement dated July 16, 1984 between Southern Pacific and Plaza Investments, a
Nevada general partnership, (iii) Memorandum Confirming Rent Adjustment dated
January 1, 1989 between Southern Pacific and Plaza Investments, and (iv) Deed of
Correction and Reformation and Boundary Line Adjustment Agreement dated January
26, 2000, between Union Pacific Railroad Company, G and S Investment Company, a
Nevada limited partnership, and Scout Development Corporation and the Record of
Survey; (b) Assignment of Rents and Leases of even date herewith executed by
Maker to Payee covering the leasehold estate; (c) Security Agreement of even
date herewith executed by Maker as debtor and Payee as secured party covering
the personal property located
Initial MEM
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Page 5 of 6 Pages
<PAGE> 6
$2,250,000.00 RENO, NEVADA FEBRUARY 1, 2000
upon the leasehold estate; and (d) Financing Statement executed by Maker as
debtor naming Payee as the secured party covering the personal property located
upon the leasehold estate.
FITZGERALDS RENO, INC.,
a Nevada corporation
By: /s/ MICHAEL E. MCPHERSON
------------------------------------
Name: Michael E. McPherson
----------------------------------
Title: Executive Vice President/CFO
---------------------------------
Page 6 of 6 Pages
<PAGE> 1
EXHIBIT 10.3
[ILLEGIBLE]
Order No. 1999-16269 RB
Escrow No. 1999-16269 TD
DEED OF TRUST AND SECURITY AGREEMENT
AND TO SECURE PERFORMANCE
THE STATE OF NEVADA )
) SS. KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF WASHOE )
That the undersigned, FITZGERALDS RENO, INC., a Nevada corporation,
hereinafter called "Grantors" (whether one or more), whose address for notice
hereunder 300 E. Second Street, Suite 1500, Reno, Nevada 89501, of Washoe
County, Nevada in consideration of TEN AND NO/100 DOLLARS ($10.00) cash in hand
paid by John R. Jones, hereinafter called "Trustee," whose address for notice is
1301 McKinney, Suite 3550, Houston, Texas 77010, the receipt of which payment is
hereby acknowledged and confessed, and of the debt and trust hereinafter
mentioned, have Granted, Bargained, Sold and Conveyed, and by these presents do
Grant, Bargain, Sell and Convey unto Trustee, and unto the successor or
substitute Trustee hereinafter provided, with the power of sale the following
property situated in Washoe County, Nevada:
The "Leasehold Estate" created by that certain Ground Lease dated March
1, 1978 between Southern Pacific Transportation Company, a Delaware corporation
("Southern Pacific") and Donald L. Wilkerson ("Wilkerson"), as amended by that
certain (i) Supplemental Agreement dated February 22, 1979 between Southern
Pacific and Wilkerson, (ii) Supplemental Agreement dated July 16, 1984 between
Southern Pacific and Plaza Investments, a Nevada general partnership, (iii)
Memorandum Confirming Rent Adjustment dated January 1, 1989 between Southern
Pacific and Plaza Investments, and (iv) Deed of Correction and Reformation and
Boundary Line Adjustment Agreement dated January 26, 2000; between Union Pacific
Railroad Company, G and S Investment Company, a Nevada limited partnership, and
Scout Development Corporation, covering the land more fully described on Exhibit
A, attached hereto and made a part hereof for all purposes, recorded in the
official records of the Washoe County Recorder as instrument no. 2417486, and
the Record of Survey referenced therein and recorded in the official records of
the Washoe County Recorder as instrument no. 2417487; together with all
buildings and other improvements thereon and hereafter placed thereon, and all
fixtures, materials, equipment, apparatus, utility capacity and rights,
furniture, furnishings and other property, real and personal, now or hereafter
installed or used on the above-described property or the improvements thereon,
including, but not limited to, all heating, lighting, refrigeration, plumbing,
ventilating, incinerating, water-heating, cooking and air-conditioning
equipment, fixtures and appurtenances, window screens, window shades, venetian
blinds, awnings, drapes, rugs, and other floor coverings and shrubbery and other
chattels and personal property used or furnished in connection with the
operation, use and enjoyment of the above-described property and the
improvements thereon, and all renewals, replacements and substitutions thereof
and additions thereto, all of which said property and fixtures shall be deemed
to be a part of and affixed to the above-described real property; all rents,
revenues, income and profits arising from any part of the above-described
property and the use thereof, including all rents, revenues, bonus money,
royalties, rights and benefits accruing to Grantors under all present and future
oil, gas and mineral leases on any part of the
1
<PAGE> 2
above-described property; and all the estate, right, title and interest of
every nature whatsoever of the Grantors in and to all of the foregoing and
every part and parcel thereof.
TO HAVE AND TO HOLD the above-described property, together with all and
singular the rights, privileges, hereditaments and appurtenances thereunto in
anywise incident, appertaining or belonging (all of which are hereinafter called
"Premises") unto Trustee, and his successors or substitutes forever; and
Grantors hereby bind themselves, their heirs, successors, assigns and legal
representatives, to warrant and forever defend title to said Premises unto
Trustee, his successors and substitutes, against every person whomsoever
lawfully claiming or to claim the same or any part thereof.
This conveyance is made in trust on the following trusts, terms and
conditions, and for the purpose of securing and enforcing the payment of a
certain promissory note (hereinafter called "Note") of even date herewith in the
principal sum of TWO MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($2,250,000.00) being payable in one hundred twenty (120) consecutive monthly
installments commencing one (1) month from date thereof and bearing interest
before and after maturity thereof as therein specified, containing certain
accelerating, maturity and attorney's fee collection clauses, as specified
therein, executed by Grantors and payable to the order of SCOUT DEVELOPMENT
CORPORATION (hereinafter, together with any subsequent holder of the Note,
called "Beneficiary") whose address is 1350 S. Boulder, Tulsa, Oklahoma 74119,
in lawful money of the United Sates of America; all renewals, rearrangements,
extensions and/or modifications of the Note; and all other sums of money which
may be hereafter paid or advanced by or on behalf of Beneficiary under the terms
and provisions of this Deed of Trust and Security Agreement and to Secure
Performance, hereinafter called "Deed of Trust"; any additional loans made by
Beneficiary to Grantors (it being contemplated that Beneficiary may lend
additional sums to Grantors from time to time, but shall not be obligated to do
so, and Grantors hereby agreeing that any such additional loans shall be secured
by this Deed of Trust); and any and all other indebtedness, obligations and
liabilities of any kind of the Grantors to Beneficiary, now or hereafter
existing, absolute or contingent, joint and/or several, secured or unsecured,
due, arising by operation of law or otherwise, or direct or indirect, including
indebtedness, obligations and liabilities to Beneficiary of the Grantors as a
member of any partnership, syndicate, association or other group, and whether
incurred by the Grantors as principal, surety, endorser, guarantor,
accommodation party or otherwise, and whether originally contracted with
Beneficiary or acquired by Beneficiary pursuant to a loan participation
agreement or otherwise; and for the purpose of securing and enforcing Grantors'
compliance with all of the terms, conditions and covenants set forth in the
Ground Lease, as amended, and in the "Assignment and Assumption of Ground Lease
Agreement" of even date herewith between Beneficiary, as assignor, and Grantors,
as assignee.
Grantors hereby expressly covenant and agree that:
1. Grantors will pay the Note secured hereby in accordance with the
terms and provisions thereof. Additionally, Grantors agree to comply with all
of the terms, conditions and covenants set forth in the Ground Lease, as
amended, and in the Assignment and Assumption of Ground Lease Agreement.
Grantors' obligations to pay the Note and to comply with all of
2
<PAGE> 3
the terms, conditions and covenants set forth in the Ground Lease, as amended,
and in the Assignment and Assumption of Ground Lease Agreement are all
obligations secured by this Deed of Trust and are hereinafter collectively
referred to as the "indebtedness".
2. The execution of this Deed of Trust shall not impair or affect any
other security which may be given to secure the payment of the indebtedness
secured hereby, and all such additional security shall be considered as
cumulative, any taking of additional security, execution of partial releases of
the security or any extension of time of payment of the indebtedness secured
hereby shall not diminish the force, effect or lien of this Deed of Trust and
shall not affect or impair the liability of any maker, surety or endorser for
the payment of said indebtedness.
3. Grantors will pay before same come due and before same become
delinquent, all taxes, assessments and other charges imposed, levied or
assessed against the Premises. Grantors shall furnish to Beneficiary paid tax
receipts or other evidence satisfactory to Beneficiary on or before June 30 of
each year with respect to taxes paid on the Premises for the previous year.
4. Grantors will keep the Premises in good condition and repair and
will not commit or permit any waste, impairment or deterioration of the same
and generally will not do any act by which the value of the above-described
Premises may become impaired. Neither shall any material improvements,
fixtures, or personal property be altered, destroyed or removed from said
Premises (unless replaced by improvements, fixtures or personal property of
equal or greater value) without the written consent of Beneficiary.
5. On default in the prompt payment of any sums of money secured by
this Deed of Trust or upon Grantors' failure to comply with the terms,
conditions and covenants set forth in the Ground Lease, as amended, or in the
Assignment and Assumption of Ground Lease Agreement, or upon default in the
performance of any of the obligations secured hereby, Beneficiary, or any Agent
of Beneficiary, shall have the right, but not the obligation, to demand,
collect, receive, sue for and recover in its own name all presently owing or
future rents, revenues, and incomes and to apply the same to the payment of the
indebtedness secured hereby, after first deducting therefrom all expenses of
collection. On such default, Beneficiary shall also have the right to take
possession of the Premises, remove all persons therefrom and rent the same for
the account of Grantors, and employ such agents and attorneys as may be
necessary with respect thereto. Likewise, on such default, Beneficiary shall be
entitled to have a receiver appointed to take possession of the Premises and to
collect all rents, income and revenues without notice to Grantors and without
regard to the valuation of the Premises or the solvency or insolvency of
Grantors or any other person liable for any part of the indebtedness secured
hereby, and without prejudice to any other rights or remedies.
6. If Grantors fail to pay prior to delinquency all taxes, assessments
and other charges imposed, levied or assessed against said Premises or to
maintain the insurance coverage, all as herein provided, Beneficiary may, at
its option and without waiver of any other rights granted by this Deed of Trust
for breach of the covenants contained herein, procure and pay for any such
insurance coverage and pay any such taxes, assessments and other charges,
including any sums that may be necessary to redeem the Premises from tax sale,
without
3
<PAGE> 4
obligation to inquire into the validity of any such taxes, assessments, charges
and tax sales, the receipts of the proper officers being conclusive evidence of
the validity and amount thereof. All amounts so paid by Beneficiary shall
immediately become due to Beneficiary, together with interest thereon from the
first day of the calendar month in which such payments were made at the rate
provided in the Note secured hereby, and all such amounts shall be added to and
become a part of the indebtedness secured by this Deed of Trust.
7. Grantors will promptly pay all bills for labor and materials
incurred in connection with the Premises and shall never permit any lien, even
inferior to the lien hereof, to be fixed against any part of the Premises for
any such bill which is legally due and payable.
8. Subject to the provisions of Paragraph 18 below, Beneficiary may
deal with any subsequent owner or successors in interest of the Premises or any
part thereof without notice to Grantors and without limiting or discharging the
liability of Grantors under this Deed of Trust and the indebtedness secured
hereby. Sale of the Premises, forbearance by Beneficiary, extensions of the
time of payment of the indebtedness secured hereby or acceleration of the time
for payment of the indebtedness secured hereby and the subsequent reinstatement
of same, shall not operate to release, discharge, modify, change or affect the
original liability of Grantors in whole or in part.
9. Grantors expressly waive and renounce the benefit of all present
and future laws providing for any appraisement before sale of any of the
property covered by this Deed of Trust, commonly known as "appraisement laws",
and all present and future laws extending in any manner the time for
enforcement of collection of the indebtedness secured hereby, commonly known as
"stay laws" and "redemption laws."
10. If, subsequent to the execution and delivery of this Deed of Trust,
it should be ascertained that there is a defect in the title of Grantors to the
Premises, or that there is a lien of any nature whatsoever on any part of the
Premises, even though inferior to the lien hereof, or if a homestead claim is
asserted to any part of the Premises adverse to this trust, or if Grantors or
any subsequent owner of the Premises or any guarantor of the indebtedness
become insolvent or bankrupt, or a receiver be appointed for their property, or
a petition for reorganization, arrangement, receivership, bankruptcy or related
proceedings be filed by or against Grantors or any subsequent owner of the
Premises, or any guarantor of the indebtedness, then in any such event any
Beneficiary shall have the right to declare the indebtedness secured hereby at
once due and payable without demand or notice, and the lien granted by this
Deed of Trust may be foreclosed.
11. (a) If the indebtedness secured hereby is fully paid in accordance
with the terms and provisions of this instrument and the Note, and if the
covenants and agreements contained herein are kept and performed, and if the
terms, conditions and covenants set forth in the Ground Lease, as amended, and
in the Assignment and Assumption of Ground Lease Agreement are fully performed,
then this agreement shall become null and void and shall be released at the
expense of Grantors; otherwise, the same shall remain in full force and effect.
If the Note is paid and the terms, conditions and covenants set forth in the
Ground Lease, as amended, and in the Assignment and Assumption of Ground Lease
Agreement are not fully
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performed or if the Note is not paid and the terms, conditions and covenants
set forth in the Ground Lease, as amended, and in the Assignment and Assumption
of Ground Lease Agreement are fully performed, then this conveyance shall
remain in full force and affect. If default is made in the payment of any part
of the indebtedness secured hereby or in the performance of any of the
covenants and agreements contained in this instrument or in the Note, or in
the Ground Lease, as amended, or in the Assignment and Assumption of Ground
Lease Agreement, or in any document executed in connection therewith, then the
entire indebtedness secured hereby shall, at once or at any time thereafter
while any part of said indebtedness remains unpaid, at the option of any
Beneficiary, become due and payable without demand or notice (all rights to
demand and notice being hereby expressly waived), and it shall thereupon be the
duty of the above named Trustee, or his successor or substitute, as hereinafter
provided, to enforce this trust at the request of any Beneficiary (which
request shall be presumed) and to sell the Premises with or without first
having taken possession of the same and in whole or in part, as the acting
Trustee may elect (all rights to a marshalling of assets of Grantors being
expressly waived hereby), as provided by Nevada law.
(b) If default is made in the payment of any part of the
indebtedness secured hereby, or if default is made in the performance of any of
the terms, conditions and covenants set forth in the Ground Lease, as amended,
or in the Assignment and Assumption of Ground Lease Agreement, or in the
performance of any of the covenants and agreements contained in this instrument
or in the Note, any Beneficiary shall have the right and option to proceed with
foreclosure in satisfaction of such item or items by directing the Trustee, or
his successor or substitute as hereinafter provided, to proceed as if under a
full foreclosure, conducting the sale as herein provided, and without declaring
the whole debt due, and provided that if sale is made, shall not in any manner
affect any other obligation or obligations secured hereby, but as to such other
obligations this Deed of Trust and the liens created hereby shall remain in full
force and effect just as though no sale had been made under the provisions of
this paragraph 11(b). It is further agreed that several sales may be made
hereunder without exhausting the right of sale for any other breach of any of
the obligations secured hereby; it being the purpose to provide for a
foreclosure and sale of the Premises for any matured portion of the indebtedness
secured hereby or other items provided for herein without exhausting the power
to foreclose and to sell the Premises for any other part of the indebtedness
secured hereby whether matured at the time or subsequently maturing.
(c) The proceeds from any such sale shall be applied by the
acting Trustee as follows:
FIRST: To the payment of all expenses of advertising, selling and
conveying said Premises.
SECOND: To the payment to Beneficiary of all unpaid indebtedness and
accrued interest to the date of sale. Any abstract of title to the Premises
furnished in connection with this Deed of Trust shall be delivered and become
the property of the purchaser at said sale.
THIRD: The balance, if any, shall be paid to Grantors.
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<PAGE> 6
(d) The acting Trustee hereunder shall have the right to sell
the Premises in whole or in part and in such parcels and order as he may
determine, and the right of sale hereunder shall not be exhausted by one or more
sales, but successive sales may be had until all of the Premises have been
legally sold. In the event any sale hereunder is not completed or is defective
in the opinion of Beneficiary or the holder of any part of the indebtedness,
such sale shall not exhaust the power of sale hereunder, and Beneficiary or such
holder shall have the right to cause a subsequent sale or sales to be made by
the Trustee or any successor or substitute trustee. Likewise, Beneficiary may
become the purchaser at any such sale if it is the highest bidder, and shall
have the right, after paying or accounting for all costs of said sale or sales,
to credit the amount of the bid upon the amount of the indebtedness owing, in
lieu of cash payment. The purchaser or purchasers at foreclosure shall have the
right to affirm or disaffirm any lease of said Premises.
(e) It shall not be necessary for the acting Trustee to have
constructively in his possession any part of the real or personal property
covered by this Deed of Trust, and the title and right of possession of said
property shall pass to the purchaser or purchasers at such sale as fully as if
the same had been actually present and delivered. Likewise, on foreclosure of
this Deed of Trust whether by power of sale herein contained or otherwise,
Grantors or any person claiming any part of the Premises by, through or under
Grantors, shall not be entitled to a marshalling of assets or a sale in inverse
order of alienation.
(f) The recitals and statements of fact contained in any
notice or in any conveyance to the purchaser or purchasers at any such sale
shall be prima facie evidence of the truth of such facts, and all prerequisites
and requirements necessary to the validity of any such sale shall be presumed
to have been performed.
(g) Any sale under the powers granted by this Deed of Trust
shall be a perpetual bar against Grantors, their heirs, successors, assigns and
legal representatives.
12. In the event of a foreclosure under the powers granted by this
Deed of Trust, Grantors, and all other persons in possession of any part of the
Premises, shall be deemed tenants at will of the purchaser at such foreclosure
sale and shall be liable for a reasonable rental for the use of the Premises;
and if any such tenants refuse to surrender possession of the Premises upon
demand, the purchaser shall be entitled to institute and maintain the statutory
action of forcible entry and detainer and procure a writ of possession
thereunder, and Grantors expressly waive all damages sustained by reason
thereof.
13. In case of the death, inability, refusal or incapacity of the
herein named Trustee to act, or at the option of any Beneficiary at any time
and without cause or notice, a successor or substitute Trustee may be named,
constituted and appointed. Successor or substitute trustees may be named,
constituted and appointed without procuring the resignation of the former
trustee and without other formality than the execution and acknowledgment by
Beneficiary of a written instrument (which instrument, if Beneficiary is a
corporation, shall be executed by the President or any Vice President and
without the necessity of any action by the Board of Directors authorizing such
appointment) appointing and designating such successor or substitute trustee,
whereupon such successor or substitute trustee shall become vested with and
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<PAGE> 7
succeed to all of the rights, titles, privileges, powers and duties of the
Trustee named herein. Such right of appointment of a substitute trustee shall
exist as often and whenever for any of said causes the original or successor or
substitute trustee cannot or will not act or has been removed as herein
provided.
14. This Deed of Trust, the Ground Lease, as amended, and the
Assignment and Assumption of Ground Lease Agreement, have been executed and
delivered in, and the Note has been issued in the State of Nevada, and each is
to be construed in accordance with and governed by the laws of the State of
Nevada and the laws of the United States of America, as applicable. In the
event that any one or more of the provisions contained in this Deed of Trust
shall, for any reason, be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Deed of Trust. Furthermore, it is the intention of
Grantors and Beneficiary to conform strictly to applicable usury laws, as
presently in effect. Accordingly, if the transactions contemplated hereby would
be usurious under applicable law (including the laws of any applicable state
and the laws of the United States of America), then notwithstanding anything to
the contrary in the Note or any other evidence of the indebtedness, or any
agreement entered into in connection with or as security for the indebtedness,
it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, charged or
received under the indebtedness or under any of the other aforesaid agreements
or otherwise in connection with the indebtedness shall under no circumstances
exceed the maximum amount of interest permitted by applicable law, and any
excess shall be credited on the indebtedness by the holder thereof (or, if the
indebtedness shall have been paid in full, refunded to the Grantors); and (ii)
in the event that the maturity of the indebtedness is accelerated by reason of
an election of the holder thereof resulting from any event of default under
this Deed of Trust or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount permitted by applicable law, and excess interest,
if any, provided for in this Deed of Trust or otherwise shall be cancelled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on the indebtedness (or, if the
indebtedness shall have been paid in full, refunded to the Grantors).
15. This instrument shall be deemed to be and may be enforced from
time to time as a Deed of Trust, Chattel Mortgage, Assignment, Contract,
Security Agreement, Financing Statement, or Lien on Machinery Situated on
Realty, and from time to time as any one or more thereof, and shall constitute
a "fixture filing" for purposes of the Nevada Uniform Commercial Code.
16. If the lien created by this Deed of Trust shall be invalid or
unenforceable as to any part of the indebtedness secured hereby, the unsecured
portion of said indebtedness shall be completely paid and liquidated prior to
the payment and liquidation of the remaining and secured portion of said
indebtedness, and all payments made on said indebtedness shall be considered to
have been first paid on and applied to the complete payment and liquidation of
that portion of the indebtedness which is not secured by the lien of this Deed
of Trust.
17. It is understood and agreed that the proceeds of the Note, to the
extent that the same are utilized to take up any outstanding liens and charges
against the Premises, or any
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portion thereof, have been advanced by Beneficiary at Grantors' request and
upon Grantors' representation that such amounts are due and payable. Beneficiary
shall be subrogated to any and all rights, superior titles, liens and equities,
owned or claimed by any owner or holder of said outstanding liens however
remote regardless of whether said liens are acquired by assignment or are
released by the holder thereof upon payment.
18. Except as provided in Section 29 hereinafter, Grantors shall not
sell, assign, mortgage or otherwise transfer or encumber their interest in the
Premises without first obtaining the prior written consent of Beneficiary,
which may be withheld in Beneficiary's absolute discretion. Beneficiary shall
be under no obligation to consent to any requested sale, assignment, transfer,
mortgage or encumbrance of Grantors' interest in the Premises. Without limiting
the foregoing, if Beneficiary does grant such consent, it may make such
conditions for the granting of that consent as it may in its sole discretion
deem necessary, desirable or appropriate, including without limitation (i)
requiring the payment to it of a transfer fee to cover the cost of documenting
the transaction on its books, (ii) requiring the payment of all of its
attorneys' fees in connection with such sale, assignment, transfer, mortgage or
encumbrance, (iii) increasing the interest rate on the indebtedness, (iv)
requiring the express assumption of payment of the indebtedness and of the
obligations under this Deed of Trust and Security Agreement by the transferee
of such interest in the Premises (with or without the release of Grantors from
liability for such payment and obligations), (v) requiring the execution of
assumption agreement, modification agreements, supplemental security documents
and financing statements satisfactory in form and substance to Beneficiary,
(vi) requiring endorsements to any existing mortgage title insurance policies
insuring its security interest in the Premises, and (vii) requiring additional
security for the payment of the indebtedness. Grantors' failure to comply with
this Paragraph 18 prior to consummating any such sale, assignment, transfer,
mortgage or encumbrance shall constitute a default under the Note and breach of
this Deed of Trust and Security Agreement, entitling Trustee and Beneficiary to
avail themselves of all rights, powers, remedies and recourses allowed or
permitted therein or herein.
19. To further secure said indebtedness, Grantors hereby grant to
Beneficiary a security interest in and to the Premises (and only the Premises)
insofar as such Premises consists of equipment, inventory, fixtures, chattel
paper, documents, instruments, accounts, contract rights, consumer goods, farm
products, money, general intangibles, goods and any and all other personal
property of any kind or character defined in and subject to the provisions of
the Nevada Uniform Commercial Code, including the proceeds and products of and
from any and all of such personal property. If any default occurs under the
terms of the Note or this instrument, Beneficiary is and shall be entitled to
all of the rights, powers and remedies afforded a secured party by the Nevada
Uniform Commercial Code with reference to the personal property and fixtures in
which Beneficiary has been granted a security interest herein, or the Trustee
or Beneficiary may proceed as to both the real and personal property covered
hereby in accordance with the rights, powers and remedies granted under this
instrument in respect of the real property covered hereby. If Beneficiary
should elect to proceed as to the real property, personal property and fixtures
in accordance with Beneficiary's rights and remedies in respect to real
property, then the following shall occur:
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<PAGE> 9
(a) All of the real property and all of the personal property
and fixtures may be foreclosed upon and sold by either private sale or judicial
action, in the manner provided in this Deed of Trust, in one lot, or in
separate lots consisting of any combination or combinations of real and
personal property, as the Beneficiary may elect, in the sole discretion of
Beneficiary.
(b) Grantors acknowledges and agrees that a disposition of
the personal property and fixtures in accordance with Beneficiary's rights and
remedies in respect to real property, as hereinabove provided, is a
commercially reasonable disposition of the personal property and fixtures.
Beneficiary may, in the sole discretion of Beneficiary, appoint Trustee as the
agent of Beneficiary for the purpose of disposition of the personal property
and fixtures in accordance with Beneficiary's rights and remedies in respect to
real property. Grantors hereby authorizes Trustee to act accordingly.
(c) If the Beneficiary should elect to proceed as to the
personal property and fixtures in accordance with Beneficiary's rights and
remedies in respect to personal property, Beneficiary shall have all of the
rights and remedies conferred upon a secured party by the Nevada Uniform
Commercial Code.
20. The covenants and agreements herein contained shall inure to the
benefit of and be binding upon the respective heirs, successors, assigns, and
legal representatives of the parties hereto. Whenever used, the singular number
shall include the plural, the plural the singular, and the use of any gender
shall be applicable to all genders.
21. Deleted
22. Grantors shall keep and maintain the Premises in compliance with,
and shall not cause or permit the Premises to be in violation of, any
applicable environmental, air quality, zoning, planning, building, health,
fire, traffic, safety, wetlands, coastal and other governmental or regulatory
rules, laws, ordinances, statutes, codes or requirements applicable to the
Premises; and, if Grantors fail to so keep and maintain the Premises,
Beneficiary shall be afforded the environmental rights and remedies provided in
the Nevada Revised Statutes Sections 40.501 et seg.
23. Grantors will keep all improvements, if any, now on, or that
hereafter may be put upon, the Premises, including buildings and fixtures and
all personal property used in the operation of the Premises (other than any of
such personal property owned by tenants), insured at all times through a
standard extended coverage all risk policy, against loss or damaged by fire,
lightning, and such other risks of damage, hazards, vandalism, malicious
mischief, and all other perils customarily covered in a standard extended
coverage all risk policy, in an amount not less than the full one hundred
percent (100%) replacement cost of the Premises and all improvements including
the cost of debris removal but in any event not less than the original
principal balance of the Note. Grantors shall maintain comprehensive general
public liability insurance in the form and amounts satisfactory to Beneficiary.
Grantors shall also maintain, during the period in which any construction,
alteration or improvements are being made to the Premises, contingent liability
insurance covering any claim not covered by the general comprehensive insurance
referred to above and also maintain worker's compensation insurance
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<PAGE> 10
covering all employees engaged in making such construction alterations and
improvements. Grantors shall also maintain, if applicable, Broad Form Builder's
Risk, completed building non-reporting form insurance, Grantors shall maintain
all insurance required herein, and other insurance required by Beneficiary,
from time to time, in the manner and form specified by Beneficiary subject to
the following terms and conditions:
(a) All policies of insurance required by this paragraph
shall be issued by a company or companies and in amounts acceptable to, and in
every respect satisfactory to, Beneficiary and shall contain a provision
requiring that the coverage evidenced thereby shall not be terminated or
materially modified without thirty (30) days prior written notice to
Beneficiary and a provision that Beneficiary is the loss payee thereunder. All
policies of liability insurance shall list Grantors and Beneficiary as named
insureds. Grantors shall provide Beneficiary a Certificate to the effect that
such coverage is in effect concurrently with the execution and delivery of this
Deed of Trust. If Grantors fail to carry any insurance required to be carried
by Grantors under the terms of this Deed of Trust, Beneficiary, at its option,
may procure and maintain such insurance and Grantors will promptly reimburse
Beneficiary for any premiums paid by Beneficiary for such insurance. The
originals of all policies of insurance, except liability insurance, required to
be carried under this Deed of Trust, bearing notations evidencing the payment
of premiums or accompanied by other evidence satisfactory to Beneficiary of
such payment, shall be promptly delivered to Beneficiary upon Beneficiary's
request.
(b) All policies of insurance required by this paragraph shall
contain a noncontributory standard mortgagee clause in favor of Beneficiary and
a waiver of insurer's right of subrogation against funds paid under the standard
mortgagee endorsement. In case of a loss payable under such insurance for damage
to or destruction of the Premises the right to adjust all claims under such
insurance policies, and the application of the proceeds of any such claim, are
assigned to Beneficiary.
(c) After a default hereunder and written notice from
Beneficiary, Grantors shall pay to Beneficiary, at the same time payments are
due under the indebtedness, an additional sum of money equal to 1/12th of the
annual premium for fire, extended coverage insurance, and such other insurance
as Beneficiary shall require hereunder, so that one month prior to the due date
for the payment of the annual premium for such insurance, Beneficiary shall
have sufficient funds to pay said premium. Said sums shall be held by
Beneficiary free of claims, creditors, and without interest and, provided an
event of default has not occurred hereunder, said sums so held by Beneficiary
shall be used for the payment of insurance premiums. In the event of an event
of default hereunder, Beneficiary may apply all monies held pursuant to this
paragraph in the manner it, in the exercise of its sole discretion, determines.
(d) Beneficiary consents to Grantors providing any of the
insurance required hereunder through blanket policies carried by Grantors and
covering more than one location, Grantors shall furnish Beneficiary with a
certificate of such policy for the Premises together with a certificate of
insurance for each such policy setting forth the coverage, the limits of
liability, the name of the carrier, the policy number, and the expiration date.
Any such policies shall otherwise comply with the provisions of this Deed of
Trust and shall allocate to the
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<PAGE> 11
Premises the coverage specified hereunder, which shall not be less than that
which would have been afforded under a separate policy relating only to the
Premises without possibility of reduction or coinsurance by reason of, or
damage to, any other property named therein.
(e) Grantors shall give prompt written notice to Beneficiary
of any casualty to all or any part of the Premises.
(i) If all of the Premises is damaged or destroyed or any part
of the Premises is damaged or destroyed which amounts to damage in excess of One
Hundred Thousand and no/100 Dollars ($100,000.00) and if Beneficiary in its sole
discretion elects not to have Grantors replace, restore or rebuild the Premises,
all proceeds of insurance shall be payable to Beneficiary, and the same (less
costs, fees and expenses incurred by Beneficiary in the collection thereof,
including, without limitation, adjuster's and attorney's fees and expenses to
the extent permitted by law) shall be applied against all sums payable to
Beneficiary under this Deed of Trust against accrued but unpaid interest under
the indebtedness and against the principal balance of the Note, in such order as
Beneficiary shall determine. Grantors hereby authorize and direct any affected
insurance company to make payment of such proceeds directly to Beneficiary.
Grantors shall pay directly to Beneficiary any deficiency between the insurance
proceeds paid to Beneficiary and the total indebtedness owing from Grantors to
Beneficiary, consisting of interest, principal and other costs and expenses
recoverable by Beneficiary hereunder.
(ii) In all cases not described in the first sentence in the
paragraph above, all insurance proceeds on account of any damage to or
destruction of the Premises (less costs, fees and expenses incurred by
Beneficiary in the collection thereof, including without limitation, adjuster's
and attorney's fees and expenses to the extent permitted by law) shall be paid
to Beneficiary to be applied as follows;
(1) Grantors shall furnish to Beneficiary evidence
satisfactory to Beneficiary of the total cost of restoration,
replacement or rebuilding of the Premises as nearly as possible to its
value, condition, and character immediately prior to such damage or
destruction (such restoration, replacement and rebuilding, together
with any temporary repairs and property protection pending completion
of the work, is hereafter referred to as "Restoration"). Beneficiary
shall hold all insurance proceeds until Grantors deposit with
Beneficiary the total amount of money ("Restoration Deposit") which,
when added to the insurance proceeds on hand, less anticipated costs
of collection and administration, is sufficient in Beneficiary's
reasonable judgment to pay the cost of the Restoration; the total of
such amounts is hereafter referred to as the "Net Damage Proceeds".
(2) After Beneficiary has received the Net Damage Proceeds,
the Net Damage Proceeds shall, unless an event of default has occurred
and is continuing, be paid to Grantors or as Grantors may direct, from
time to time as Restoration progresses, to pay (or reimburse Grantors
for) the cost of Restoration. Such payment shall be made only on the
request of Grantors verified by Beneficiary or a construction expert
chosen by Beneficiary and accompanied by such evidence as Beneficiary
may reasonably
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request, consistent with standard construction lending practices,
including without limitation, evidence (i) of satisfactory progress of
completion of Restoration in accordance with plans approved by
Beneficiary and applicable law, and (ii) that the Net Damage Proceeds
remaining are sufficient to cover the cost of the remaining
Restoration, (iii) of satisfactory affidavits, certificates, waivers
and releases of lien, and (iv) that all work then performed to date,
other than work for which payment is included within any then current
request, has been paid in full, subject to any retention for which Net
Damage Proceeds have not been disbursed. In addition, Beneficiary is
hereby authorized and empowered to do all things provided to be done
by a deed of trust beneficiary under applicable law and any present or
future amendments or supplements thereto, for the protection of
Beneficiary's interest in the Premises.
(3) In lieu of the cash Restoration Deposit, required above,
Grantors may deposit with Beneficiary (i) an irrevocable letter of
credit in the amount of the Restoration Deposit issued by a financial
institution approved by Beneficiary and in form satisfactory to
Beneficiary in its sole discretion or (ii) another form of cash
equivalent in the amount of the Restoration Deposit in form
satisfactory to Beneficiary in its sole discretion to secure Grantors'
obligations with respect to Restoration of the Premises. In such case,
at such time as the net Damage Proceeds held by Beneficiary equal or
are less than fifty percent (50%) of the total cost of the Restoration
as estimated by Beneficiary, upon receipt of written request therefor
from Beneficiary, Grantors shall promptly deposit with Beneficiary
cash in the amount of the Restoration Deposit (as then reasonably
determined by Beneficiary with respect to the remaining Restoration)
and the security therefor held by Beneficiary pursuant to this
paragraph shall be promptly released.
(f) Notwithstanding the foregoing, in the event (i) of any
claim or loss involving a single loss aggregating less than Fifty Thousand and
no/100 Dollars ($50,000.00) or (ii) Restoration is completed in accordance with
applicable law and Grantors submit to Beneficiary evidence satisfactory to
Beneficiary of such completion and of payment of the cost thereof in full prior
to date of disbursement of insurance proceeds, such proceed shall be paid to
Grantors. Grantors may settle, adjust or compromise any claim or loss under any
policy of insurance involving a single loss aggregating less than Fifty
Thousand and no/100 Dollars ($50,000.00).
(g) Except to the extent that insurance proceeds are received
by Beneficiary and applied to the indebtedness secured hereby, nothing herein
contained shall excuse Grantors from repairing or maintaining the Premises as
provided in this Deed of Trust or restoring all damage or destruction to the
Premises, regardless of whether any such proceeds are sufficient in amount. The
application or release by Beneficiary of insurance proceeds shall not cure or
waive any event of default or notice of the same or invalidate any act done
pursuant to such notice.
Notwithstanding anything contained in this Section
23 to the contrary, in the event of a conflict in the terms of this Section 23
and the terms of the Ground Lease, as amended, the terms of the Ground Lease,
as amended, shall control and prevail.
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24. Should the Premises or any part thereof or any interest therein be
taken or damaged by reason of exercise of the power of eminent domain (including
inverse condemnation) or in any similar manner (collectively, "Condemnation"),
or should Grantors receive any notice or other information regarding a
Condemnation proceeding, Grantors shall give prompt written notice thereof to
Beneficiary.
(a) If as a result of any Condemnation, the entire Premises is taken,
or if so much thereof is taken that in the reasonable judgement of Beneficiary
the balance of the Premises cannot reasonably and profitably be operated, or if
the Condemnation damage to the Premises is in excess of One Hundred Thousand and
no/100 Dollars ($100,000.00) or if pursuant to the provisions of subparagraph
(f) of this section below, Grantors elect not to replace, restore or rebuild the
Premises, Beneficiary shall be entitled to and shall receive the entire
compensation, awards and other payments or relief therefore (collectively,
"Condemnation Proceeds") which Grantors are entitled to receive pursuant to the
Condemnation (less costs, fees and expenses incurred by Beneficiary in the
collection thereof, including, without limitation, attorneys' fees and expenses,
to the extent permitted by law) and such sum shall be applied against all sums
payable to Beneficiary under this Deed of Trust against accrued but unpaid
interest under the Note and against the principal balance of the indebtedness in
such order as Beneficiary shall determine. Grantors hereby assign to Beneficiary
all of Grantor's right, title and interest in and to all Condemnation Proceeds,
including, without limitation, interest.
(b) If paragraph (a) does not apply, then in the event of any
Condemnation, all Condemnation Proceeds which Grantors are entitled to receive
shall be delivered to Beneficiary.
(c) Condemnation Proceeds received by Beneficiary pursuant to
paragraph (b) (less costs, fees and expenses incurred by Beneficiary in the
collection thereof, including without limitation, attorneys' fees and expenses,
to the extent permitted by law) shall be applied as follows:
(1) Grantors shall promptly furnish to Beneficiary evidence
satisfactory to Beneficiary of the total cost of restoration, replacement
or rebuilding of the remainder of the Premises as nearly as possible to its
value, condition and character prior to such Condemnation (such
restoration, replacement and rebuilding, together with any temporary
repairs and property projections pending completion of the work, being
herein called "Condemnation Restoration"). Beneficiary shall hold all
Condemnation Proceeds until it receives from Grantors the total amount of
money ("Condemnation Restoration Deposit") which, when added to the
Condemnation Proceeds on hand, is sufficient to pay the cost of
Condemnation Restoration; the total of such amounts is hereinafter referred
to as the "Net Condemnation Proceeds."
(2) After the conditions of subparagraph (1) have been complied with,
the Net Condemnation Proceeds received on account of any Condemnation
shall, unless an event of default has occurred and is continuing, be paid
to Grantors or as Grantors may
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direct, from time to time as Condemnation Restoration progresses, to pay
(or reimburse Grantors for) the cost of Condemnation Restoration. Such
payment shall be made only upon request of Grantors verified by an agent or
designee of Beneficiary accompanied by such evidence as Beneficiary may
reasonably request, consistent with standard construction lending practice,
including, without limitation, evidence (a) of satisfactory progress of
completion of Condemnation Restoration in accordance with plans approved by
Beneficiary and applicable law, (b) that the Net Condemnation Proceeds
remaining are sufficient to cover the cost of the remaining Condemnation
Restoration, (c) of satisfactory affidavits, certificates, waivers and
releases of lien, and (d) that all work then performed to date, other than
work for which payment is included within any then current request, has
been paid for in full, subject to any retention for which Net Condemnation
Proceeds have not been paid for in full, subject to any retention for which
net Condemnation Proceeds have not been disbursed. In addition, Beneficiary
is hereby authorized and empowered to do all things provided to be done by
a deed of trust beneficiary under applicable law for the protection of
Beneficiary's interest in the Premises against mechanics' liens and any
similar liens.
(3) In lieu of making the Condemnation Restoration Deposit, Grantors
may deposit with Beneficiary (i) an irrevocable letter of credit in the
amount of the Condemnation Restoration Deposit issued by a financial
institution approved by Beneficiary and in form satisfactory to Beneficiary
in its discretion or (ii) another form of cash equivalent in the amount of
the Condemnation Restoration Deposit in form satisfactory to Beneficiary in
its discretion, to secure Grantors' obligations with respect to
Condemnation Restoration of the Premises and Grantors other obligations
hereunder, under the indebtedness. In such case, at such time as the Net
Condemnation Proceeds held by Beneficiary equal or are less than fifty
percent (50%) of the total cost of the Condemnation Restoration as
estimated by Beneficiary, upon receipt of written request therefor from
Beneficiary, Grantors shall promptly deposit with Beneficiary cash in the
amount of the Condemnation Restoration Deposit (as then reasonably
determined by Beneficiary with respect to the remaining Condemnation
Restoration) and the security therefor held by Beneficiary pursuant to this
paragraph shall be promptly released.
(d) Notwithstanding the foregoing, but subject to subparagraph (e) of
this section below, in the event (1) of any Condemnation involving a single loss
aggregating less than Fifty Thousand and no/100 Dollars ($50,000.00) or (2)
Condemnation Restoration is completed in accordance with applicable law and
Grantors submit to Beneficiary evidence satisfactory to Beneficiary and any
agent or designee of Beneficiary of such completion and payment of the cost
thereof in full prior to the date of disbursement of Condemnation Proceeds, such
Condemnation Proceeds shall be paid to Grantors.
(e) In the event any action is filed to condemn all or part of the
Premises under the power of eminent domain, or any action is filed to acquire
the temporary use of all or part of the Premises, or any such action is filed to
acquire the temporary use of all part of the Premises, or any action is
threatened, Beneficiary shall have the right to represent Beneficiary's interest
in each proceeding, negotiation or settlement with respect to any taking or
threatened taking and to make full proof of its claims. No agreement,
settlement, conveyance or
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<PAGE> 15
transfer to or with the condemning authority shall be made without the consent
of Beneficiary, whether or not Beneficiary elects to participate in such
proceeding, negotiation or settlement.
Notwithstanding anything contained in this Section 24 to the
contrary, in the event of a conflict in the terms of this Section 24 and the
terms of the Ground Lease, as amended, the terms of the Ground Lease, as
amended, shall control and prevail.
25. Grantors shall notify Beneficiary promptly of the occurrence of any of
the following:
(a) a fire or other casualty causing damage to the Premises in excess
of Twenty Thousand and no/100 Dollars ($20,000.00);
(b) receipt of notice of condemnation of the Premises or any part
thereof;
(c) receipt of notice from any governmental authority relating to the
structure, use or occupancy of the Premises;
(d) receipt of any notice of alleged default from the holder of any
lien or security interest in the Premises;
(e) the commencement of any material litigation claiming damage in
excess of $20,000.00 or more in excess of insurance coverage affecting the
Premises; or
(f) any material change in the occupancy of the Premises.
All notices, demands and requests given or required to be given by either
party hereto to the other party shall be in writing and shall be deemed to have
been properly given if sent by U.S. registered or certified mail, postage
prepaid, return receipt requested, or by overnight delivery service, addressed
as follows:
To Grantors: Fitzgeralds Reno, Inc.
300 East Second Street, Suite 1500
Reno, Nevada 89501
Michael E. McPherson,
Senior Vice President and Chief Financial Officer
To Beneficiary: Scout Development Corporation
1350 S. Boulder
Tulsa, OK 74119
Attention: Eric Grimshaw
15
<PAGE> 16
or to such other address as Grantors or Beneficiary may from time to time
designate by written notice.
26. Grantors represent and warrant to Beneficiary that neither Grantors nor
any other person has committed any act or omission, or has consented to any act
or omission, with respect to the Premises, which would afford the federal
government or any state or local government the right or remedy of forfeiture of
all or any part of the Premises, any other collateral securing the Note or the
indebtedness described herein, or any property (including, but not limited to,
money paid) delivered to Beneficiary or any other party in performance of
Grantors obligations arising in connection with the indebtedness, or any
interest in or income, profits or proceeds of any of the property described in
this sentence (hereinafter called the "Collateral"). Grantors agree not to
engage in any act or permit any act or omission to exist which would afford the
federal government or any state or local government the right or remedy of
forfeiture of all or any part of the Collateral. Without limiting the generality
of the preceding sentence, the filing of any charges or the commencement or
threatened commencement of any proceeding against Grantors or any other person
liable on the indebtedness, or against any of the Collateral or anyone having an
interest in, or use or possession of any of the Collateral, which asserts or
could afford the federal government or any state or local government the right
or remedy to forfeit any of such Collateral, constitutes, at Beneficiary's
election, an event of default under this Deed of Trust and all indebtedness
described herein and secured hereby. Grantors shall protect, indemnify and hold
harmless Beneficiary, its directors, officers, employees, agents, successors and
assigns from and against any and all loss, damage, cost, expense or liability
(including attorneys fees and costs) directly or indirectly arising out of or
attributable to any failure of the representations or breach of any agreement
set forth in this paragraph.
27. The aforesaid Note secured by this Deed of Trust is also secured by an
Assignment of Rents and Leases of even date herewith executed by Maker to Payee
covering the Leasehold Estate and improvements located thereon; Security
Agreement of even date herewith executed by Maker as debtor and Payee as secured
party covering the personal property located upon the Leasehold Estate; and
Financing Statement executed by Maker as debtor naming Payee as secured party
covering the personal property located upon the Leasehold Estate.
28. To the extent not inconsistent with the express provisions of this Deed
of Trust, the following covenants of Section 107.030 of the Nevada Revised
Statutes are hereby adopted and made a part of this Deed of Trust: Covenant No.
3, Covenant No. 4 (interest, Maximum Rate under Note), Covenant No. 5, Covenant
No. 6, Covenant No. 7 (attorneys' fees, reasonable), Covenant No. 8 and Covenant
No. 9.
29. After the $2,250,000.00 Promissory Note is paid, Grantors shall have
the right to assign the Ground Lease, as amended, and to convey the Improvements
thereon without constituting a default under this Deed of Trust under the
following conditions:
(a) If assignee's net worth is in excess of $15,000,000.00, provided
assignee assumes in writing Grantors' obligations under the Ground
Lease, as amended, and under the Assignment and Assumption of the
Ground Lease Agreement,
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<PAGE> 17
Grantors may assign the Ground Lease, as amended, and convey
the improvements located thereon, to assignee without
obtaining Beneficiary's consent except as provided below and
Beneficiary will not release Grantors from Grantors'
obligations under the Ground Lease, as amended, and the
Assignment and Assumption of Ground Lease Agreement.
(b) If assignee's net worth is in excess of $75,000,000.00,
provided assignee assumes in writing Grantors' obligations
under the Ground Lease, as amended, and under the Assignment
and Assumption of the Ground Lease Agreement, Grantors may
assign the Ground Lease, as amended, and convey the
improvements located thereon to assignee without obtaining
Beneficiary's consent except as provided below and
Beneficiary will release Grantors from Grantor's obligations
under the Ground Lease, as amended, and the Assignment and
Assumption of Ground Lease Agreement.
(c) If assignee's net worth is less than $15,000,000.00,
provided assignee assumes in writing Grantors' obligations
under the Ground Lease, as amended, and under the Assignment
and Assumption of the Ground Lease Agreement, Grantors may
assign the Ground Lease, as amended, and convey the
improvements located thereon to assignee provided that
Grantors obtain Beneficiary's consent which consent shall
not be unreasonably withheld. If Beneficiary consents to
Grantors' assignment of the Ground Lease, as amended, and
conveyance of the improvements located thereon, Beneficiary
will not release Grantors from Grantor's obligations under
the Ground Lease, as amended, and the Assignment and
Assumption of Ground Lease Agreement.
Prior to the affective date of any such assignment for the
purpose of determining assignee's net worth, assignee will submit its most
recent audited financial statement prepared by a duly certified public
accountant in accordance with generally accept accounting principles
consistently applied to Beneficiary for Beneficiary's review and approval.
Beneficiary shall have thirty (30) days after the date the Beneficiary receives
such financial statement to review the financial statement and provide written
notice to Grantors of Beneficiary's approval or disapproval of such financial
statement. In no event will the financial statement be more than one year old.
Notwithstanding anything contained in this Section 29 to the contrary, the lien
created by this Deed of Trust shall not be released except as otherwise provided
herein.
30. A foreclosure of the liens created by this Deed of Trust
shall not cause the termination of the Ground Lease, as amended.
31. Grantor agrees to furnish to Beneficiary the annual balance
sheets and an income statement of Grantor prepared and certified by Grantor in
accordance with generally accepted accounting principles consistently applied to
Grantor within ninety (90) days after the close of each fiscal year of Grantor;
provided, however, Grantor shall have no duty to furnish to Beneficiary the
annual balance sheets and an income statement unless and until Beneficiary
delivers to Grantor Beneficiary's notice thereof.
17
<PAGE> 18
EXECUTED this / 31st day of January 2000, effective the 1st day of
February, 2000.
FITZGERALDS RENO, INC.
By: /s/ MICHAEL E. MCPHERSON
----------------------------------------
Name: Michael E. McPherson
--------------------------------------
Title: Executive Vice President
Chief Financial Officer
-------------------------------------
STATE OF NEVADA )
)
COUNTY OF WASHOE )
This instrument was executed before me on this the 31st day of January,
2000 by Michael E. McPherson, Executive Vice President and Chief Financial
Officer of Fitzgeralds Reno, Inc., a Nevada corporation on behalf of said
corporation.
/s/ CAROLE EDWARDS
---------------------------------
Notary Public, State of Nevada
[NOTARY STAMP]
After Recording Return to:
John R. Jones
1301 McKinney, Suite 3550
Houston, Texas 77010
18
<PAGE> 19
EXHIBIT "A"
DESCRIPTION
All that certain lot, piece or parcel of land situate in the County of Washoe,
State of Nevada, described as follows:
PARCEL 1: (ADJUSTED PARCEL A)
A parcel of land situated within the NE 1/4 of Section 11, T19N, R19E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel A" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific
Railroad Company, Scout Development Corporation, and G and S Investment Company,
as recorded on January 26, 2000 in the official records of Washoe County,
Nevada, File No. 2417487 and being further described as follows:
Beginning at the Northeast corner of Parcel A of Parcel Map No. 2461, File No.
1422392 of the Official Records of Washoe County, Nevada; thence S 13 degrees
48'25"E, 105.50 feet along the Easterly line of said Parcel A; thence S 76
degrees 10'00"W, 300.64 feet; thence N 13 degrees 47'50"W, 105.67 feet along the
Westerly line of said Parcel to the Northwest corner of said Parcel A; thence N
76 degrees 11'59"E, 300.62 feet along the Northerly line of said Parcel A, to
the Point of Beginning.
The above described parcel contains an area of approximately 31,743 sq. ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 2:(ADJUSTED PARCEL B)
A parcel consisting of air rights situated within the NE 1/4 of Section 11,
T19N, R19E, M.D.M., Reno, Washoe County, Nevada, being all of "Adjusted Parcel
B" as shown on the Record of Survey showing a boundary line adjustment for
Union Pacific Railroad Company, Scout Development Corporation, and G and S
Investment Company, as recorded on January 26, 2000 in the official records of
Washoe County, Nevada, File No. 2417487 and being further described as follows:
<PAGE> 20
Parcel 2 Legal Continued
Beginning at a point on the Easterly line of Parcel A of Parcel Map No. 2461,
File No. 1422392 of the Official Records of Washoe County, Nevada; from which
the Northeast corner of said Parcel A bears N 13(degree)48'25"W, 105.50 feet
said point of beginning having an elevation of 4522.50 feet; thence S
13(degree)48'25"E, 53.65 feet said point having an elevation of 4522.50 feet;
thence S 76(degree)10'00"W, 300.65 feet said point having an elevation of
4525.1 feet; thence N 13(degree)47'50"W, 53.65 feet said point having an
elevation of 4525.1 feet, thence N 76(degree)10'00"E, 300.64 feet to the Point
of Beginning. Said surface shall be formed such that it maintains a constant
slope between the elevations described for the four corners.
The above described land parcel (above which the air rights are situated)
contains an area of approximately 16,130 sq. ft.
EXCEPTING THEREFROM a parcel of land situated within the NE 1/4 of Section 11,
T19N, R19E, M.D.M., Reno, Washoe County, Nevada, and being all that real
property located below a surface which has vertices defined as follows:
Beginning at a point on the Easterly line of Parcel A of Parcel Map No. 2461,
File No. 1422392 of the Official Records of Washoe County, Nevada; from which
the Northeast corner of said Parcel A bears N 13(degree)48'25"W, 106.30 feet
said point of beginning having an elevation of 4524.00 feet; thence S
13(degree)48'25"E, 52.05 feet said point having an elevation of 4524.00 feet;
thence S 76(degree)10'00"W, 300.65 feet said point having an elevation of
4526.6 feet; thence N 13(degree)47'50"W, 52.05 feet said point having an
elevation of 4526.6 feet, thence N 76(degree)10'00"E, 300.64 feet to the Point
of Beginning. Said surface shall be formed such that it maintains a constant
slope between the elevations described for the four corners.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
BASIS OF ELEVATIONS: City of Reno benchmark No. 96, a nail and washer located
in the top of the curb at the Northeast corner of East Fourth Street and North
Center Street, Elevation=4496.46 feet.
<PAGE> 21
PARCEL 3: (ADJUSTED PARCEL C)
A parcel of land situated within the NE 1/4 of Section 11, T19N, R19E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel C" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific Railroad
Company, Scout Development Corporation, and G and S Investment Company, as
recorded on January 26, 2000 in the official records of Washoe County, Nevada,
File No. 2417487 and being further described as follows:
Beginning at the Southeast corner of Parcel C of Parcel Map No. 2461, File No.
1422392 of the Official Records of Washoe County, Nevada; thence
S 76(degree)10'00"W, 300.65 feet along the Southerly line of said Parcel C;
thence N 13(degree)47'50"W, 20.82 feet; thence N 76(degree)10'00"E, 300.65 feet;
thence S 13(degree)48'25"E, 20.82 feet to the Point of Beginning.
The above described parcel contains an area of approximately 6,260 sq. ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 4:
All buildings and improvements located on the real property described in Parcels
1 through 3 above.
<PAGE> 1
EXHIBIT 10.4
SECURITY AGREEMENT
1. FITZGERALDS RENO, INC. a Nevada corporation, with address at 300 E. Second
Street, Suite 1500, Reno, Nevada 89501, (hereinafter called "Debtor", whether
one or more), for value received, hereby grants and/or confirms that it has
heretofore granted to SCOUT DEVELOPMENT CORPORATION, 1350 South Boulder, Tulsa,
Oklahoma 74119 (hereinafter called "Secured Party"), as security for the payment
of the Indebtedness, hereinafter defined, a security interest in the following
property and all proceeds and products thereof and accessions thereto
(hereinafter called "Collateral"), viz.:
(a) All Debtor's interest (whether ownership or otherwise, and whether
presently existing or hereafter acquired) in all personal property, Goods,
Equipment and Inventory (as those terms are defined in the Nevada Uniform
Commercial Code), which are or become attached to, installed in, or used on or
in connection with the Real Property (as defined below) and/or any and all
improvements now or hereafter situated on said Real Property. The term
"Equipment", when used herein, includes, but is not limited to:
(i) all furnishings, building materials, supplies, machines, engines,
boilers, dynamos, generators, motors, compressors, condensing units,
furnaces, elevators, stokers, tanks, pumps, sprinklers, disposals,
dishwashers, refrigerators, freezers, stoves, ovens and range hoods; and
(ii) all wiring pipe, doors, windows, window screens, furniture,
cabinets, window shades, blinds, awnings, drapes, shelving, mantels,
paneling, rugs and other floor coverings and shrubbery; and
(iii) all plumbing, heating, fire prevention, air conditioning,
lighting, ventilating, refrigerating, cooking, laundry, water-heating,
dishwashing, radio, communication, electrical and incinerating equipment
and appliances.
(b) All future replacements and substitutions for, betterment of, and
accessions and additions to said personal property, Goods, Equipment and
Inventory which are or become attached to, installed in, or used on, or in
connection with the Real Property.
(c) All rents, issues, profits, including deposits and other sums, as may
become due Debtor as lessor under any and all leases, written or verbal,
covering any portion of the Real Property or any improvements thereon.
(d) Any rights or awards arising out of eminent domain proceedings for the
taking or for loss of value of the Real Property, or any and all improvements,
fixtures or Equipment located thereon.
(e) All of Debtor's presently owned or hereafter acquired General
Intangibles, as that term is defined in the Nevada Uniform Commercial Code and
which arise out of the use and occupancy of the Equipment, Goods and Inventory,
which are or become attached to, installed
1
<PAGE> 2
in, or used on, or in connection with the Real Property, and/or the Real
Property, or out of the addition of improvements, fixtures, Equipment and Goods
to the Real Property, whether by construction or otherwise. As used herein, the
term "General Intangibles" includes without limitation: all rights under
construction and other written or oral contracts, all rights under bonds, all
rights to income, and all rights under any leases in each case with respect to
Real Property covering the Collateral described herein.
(f) All proceeds, including cash proceeds, insurance proceeds, instruments,
chattel paper, inventory, equipment, documents, consumer goods, general
intangibles, and accounts, as those terms are defined in the Nevada Uniform
Commercial Code, and which arise out of the sale, liquidation or other transfer
of, or damage to or destruction of, the above described Equipment and other
Collateral described herein, in each case which are or become attached to,
installed in or used on or in connection with the Real Property, or any proceeds
thereof, including cash proceeds. Coverage of proceeds, however, does not
authorize sale or other disposition of the Collateral without Secured Party's
written consent.
(g) Any and all accounts, chattel paper and general intangibles, and
including all of Debtor's rights, titles and interests in and to all bonds,
construction contracts and permanent loan commitments, if any, relating to the
construction of improvements on the Real Property.
(h) All of Debtor's rights, titles and interests in and to any utilities
(including but not limited to water and sewage capacity), reimbursement of
capital recovery charges, whether now or hereafter available to Debtor as it
relates to the Real Property and also including any proceeds thereof and related
thereto, any contract rights related thereto and any General Intangibles related
or which arise from same and all proceeds therefrom.
(i) Any and all proceeds, products, additions, substitutions and accessions
of and to any and all of the foregoing.
The Real Property is more fully described on Exhibit A attached hereto
and made a part hereof for all purposes.
Notwithstanding anything contained in this Agreement to the contrary,
in no event shall the Collateral be deemed to constitute anything but items 1(a)
through (i) above and only to the extent that such items become attached to,
installed in, or used on or in connection with the Real Property.
2. This security interest is granted to Secured Party to secure the prompt and
unconditional payment of all obligations and liabilities of the Debtor to
Secured Party (including all claims of every nature and description of Secured
Party against the Debtor), now or hereafter existing or arising, absolute or
contingent, direct or indirect, secured or unsecured, due or to become due,
whether originally contracted with Secured Party or acquired in any manner
(including by way of participation) by Secured Party, including without
limitation the following indebtedness, obligations and liabilities, if any, of
Debtor to Secured Party (all of which are herein called the "Indebtedness"),
to-wit:
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<PAGE> 3
(a) All obligations of Debtor now or hereafter accruing under that certain
promissory note of even date herewith in the original principal amount of TWO
MILLION TWO HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS ($2,250,000.00)
executed by Debtor and payable to the order of Secured Party in one-hundred
twenty (120) consecutive monthly installments commencing one (1) month from the
date of said note, and all renewals, rearrangements, modifications, and
extensions thereof; and
(b) All obligations of Debtor now or hereafter accruing under this
Agreement.
3. If Debtor fails to perform any obligation under this Security Agreement or
under the Indebtedness, including without limitation, the obligation to make
payments on time or perform any other obligation under this Agreement, or any
other agreement between Secured Party and Debtor, such occurrence shall
constitute an event of default hereunder, under the above described Indebtedness
and under any other agreement between Secured Party and Debtor. Upon the
occurrence of an event of default, Secured Party or its agents may peaceably
enter any premises where any of the Collateral is located and secure or
otherwise take possession thereof. If all or any part of the Indebtedness shall
become due and payable and remain unpaid, Secured Party may then, or at any time
thereafter, apply, set-off, collect, sell in one or more sales or otherwise
dispose of, any or all of the Collateral, in its then condition or following any
commercially reasonable preparation or processing, in such order as Secured
Party may elect, and any such sale may be made either at public or private sale
at its place of business or elsewhere, or at any brokers' board or securities
exchange, either for cash or upon credit or for future delivery, at such price
as Secured Party may deem fair, and Secured Party may be the purchaser of any or
all Collateral so sold and hold the same thereafter in its own right free from
any claim of the Debtor or right of redemption. No such purchase or holding by
the Secured Party shall be deemed retention by the Secured Party in satisfaction
of the Indebtedness. All demands, notices and advertisements, and the
presentment of property at sale, are hereby waived. If, notwithstanding, the
foregoing provisions, any applicable provisions of the Uniform Commercial Code
or other law requires Secured Party to give reasonable notice of any such sale
or disposition or other action, five days' prior written notice shall constitute
reasonable notice. Secured Party may require the Debtor to assemble the
Collateral and make it available to Secured Party at a place designated by
Secured Party which is reasonably convenient to Secured Party and the Debtor.
Any sale hereunder may be conducted by an auctioneer or any officer or agent of
Secured Party.
4. The proceeds of any sale or other disposition of the Collateral and all
sums received or collected by Secured Party from or on account of the Collateral
shall be applied by Secured Party in the manner set forth in the Nevada Uniform
Commercial Code - Secured Transactions as presently in effect. The Debtor shall
remain liable to Secured Party for any Indebtedness, and for all advances,
costs, charges and expenses incurred by Secured Party in connection with
retaking, holding, preparing for sale or lease, selling, leasing and the like
relating to the Collateral, together with interest thereon remaining unpaid at
the highest lawful rate permitted by law and shall pay the same immediately to
Secured Party.
5. Debtor agrees to protect title and possession of the Collateral and to pay
prior to delinquency all taxes, charges, liens and assessments against
Collateral, and upon the failure of the Debtor to do so Secured Party at its
option may pay any of them and shall be the sole judge
3
<PAGE> 4
of the legality or validity thereof and the amount necessary to discharge the
same. Any such payment by Secured Party shall be immediately due and payable by
Debtor to Secured Party and shall become part of the Indebtedness secured
hereby.
6. Debtor will execute, deliver and file such financing statements, security
agreements and other documents as may be requested by the Secured Party from
time to time to conform, perfect and preserve, the security interest created
hereby, and in addition, hereby authorizes the Secured Party to execute on
behalf of the Debtor, deliver and file such financing statements, security
agreements, assignments, applications, and, other documents without the
signature of the Debtor, all at the expense of the Debtor. Secured Party does
not authorize Debtor to sell any of the Collateral, except upon the written
release of Secured Party. Secured Party may demand, before or after default
hereunder, that obligors on any of the Collateral shall make payments owing
thereunder directly to Secured Party. Debtor shall do all such additional and
further acts, things, deeds, give such assurances and execute such instruments
as Secured Party requires to vest more completely in and assure to Secured Party
is rights under this Agreement. At the option of Secured Party, a carbon,
photographic or other reproduction of this Security Agreement or of a financing
statement covering the Collateral shall be sufficient as a Financing statement
and may be filed as a financing statement. Debtor authorizes Secured Party, as
Debtor's attorney-in-fact (which power of attorney shall be considered as
coupled with an interest and irrevocable), with full power of substitution, to
execute and deliver in the name of Debtor all documents of title, receipts,
notices, applications, drafts, financing statements and other documents which
Secured Party considers necessary to perfect, protect, collect and realize upon
the security interests granted hereunder.
7. Secured Party shall be under no duty whatsoever to make or give any
presentment, demand for performance, notice of nonperformance, protest, notice
of protest, notice of dishonor, notice of intention to accelerate, notice of
acceleration, notice of intention to foreclose, or other notice of demand in
connection with any Collateral or the Indebtedness, or to preserve any rights
against prior parties. Secured Party shall not be liable for failure to collect
or realize upon any or all of the Indebtedness or Collateral, or for any delay
in so doing, nor shall Secured Party be under any duty to take any action
whatsoever with regard thereto. Secured Party shall use reasonable care in the
custody and preservation of any Collateral in its possession but need not take
any steps to keep the Collateral identifiable. Secured Party shall have no duty
to comply with any recording, filing, or other legal requirements necessary to
establish or maintain the validity, priority or enforceability of, or Secured
Party's rights in or to, any of the Collateral.
8. Debtor waives any right to require Secured Party to proceed against any
person, exhaust any Collateral or pursue any other remedy in Secured Party's
power; waives any and all notice of acceptance of this Agreement or of creation
or modification, renewal or extension of any of the Indebtedness; and waives any
defense arising by reason of any disability or other defense of the Debtor or
any other person, or by reason of the cessation from any cause whatsoever of the
liability of the Debtor or any other person. All dealings between the Debtor and
Secured Party, whether or not resulting in the creation of Indebtedness, shall
conclusively be presumed to have been had or consummated in reliance upon this
Agreement. Until all Indebtedness shall have been paid in full: the Debtor shall
have no right to subrogation, and the Debtor waives any right to enforce any
remedy which Secured Party now has or may hereafter have against the Debtor or
4
<PAGE> 5
against any other person and waive any benefit of and any right to participate
in any Collateral or security whatsoever now or hereafter held by Secured Party.
The Debtor authorizes Secured Party, without notice or demand and without any
reservation of rights against the Debtor and Without affecting their liability
hereunder or on the Indebtedness, from time to time to (a) renew, extend,
accelerate, modify, compromise, impair, settle or release the obligation of the
Debtor or any Other Party (being defined as any person or entity primarily or
secondarily liable for all or any part of the Indebtedness) with respect to any
or all of the Indebtedness or Collateral; (b) take and hold security, other than
the Collateral, for the payment of any or all of the Indebtedness, and exchange,
enforce, waive, impair, and release any or all of the Collateral or other
security; (c) apply the Collateral or other security and direct the order or
manner of sale thereof as Secured Party in its discretion may determine; and (d)
release or substitute the Debtor or any Other Party.
9. The rights, powers and remedies of Secured Party hereunder shall be in
addition to all rights, powers and remedies given by statute or rule of law and
furthermore, regardless of whether or not the Uniform Commercial Code is in
effect in the jurisdiction where such rights, powers and remedies are asserted,
Secured Party shall have the rights, powers and remedies of a secured party
under the Nevada Uniform Commercial Code, as amended. Secured Party may exercise
its bankers' lien or right of set-off with respect to the Indebtedness in the
same manner as if the Indebtedness were unsecured. No forbearance, failure or
delay by Secured Party in exercising any right, power or remedy shall be deemed
a waiver thereof or preclude any other or further exercise thereof; and no
single or partial exercise of any right, power or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy.
10. This Agreement has been made in and shall be governed by the laws of the
State of Nevada and applicable Federal law in all respects, including matters of
construction, validity, enforcement and performance, and may not be amended (nor
may any of its terms be waived) except in writing duly signed by Secured Party
or an authorized officer of Secured Party and by the Debtor, Except as the
context may otherwise require, any term used herein that is defined in the
Nevada Uniform Commercial Code - Secured Transactions shall have the meaning
given therein. If any provision of this Agreement is rendered or declared
illegal or unenforceable by reason of any existing or subsequently enacted
legislation or by a decree of last resort, the Debtor and Secured Party shall
promptly meet and negotiate substitute provisions for those rendered illegal or
unenforceable, but all of the remaining provisions shall remain in full force
and effect.
11. All information supplied and statements made by Debtor in any financial,
credit or accounting statement or application for credit prior to,
contemporaneously with or subsequent to the execution of this Security Agreement
are and shall be true, correct, complete, valid and genuine,
12. Except for the security interest in favor of Secured Party, Debtor owns
good and indefeasible title to the Collateral free and clear of any other
security interest, lien, encumbrance, adverse claim or option; Debtor has
authority to grant a security interest in the Collateral to Secured Party in the
manner provided herein and free and clear of any other security interest, lien,
encumbrance, adverse claim or option; no security interest, lien, encumbrance,
adverse claim or option has been created by Debtor or is known by Debtor to
exist with respect to any
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<PAGE> 6
Collateral; to the best of Debtor's information and belief, no financing
statement or other security instrument is on file in any jurisdiction covering
such Collateral; at the time of acquisition thereof by Debtor good and
indefeasible title to the Collateral, free and clear of any security interest,
lien, encumbrance, adverse claim or option will be vested in the Debtor; and
Debtor's grant of a security interest in the Collateral to Secured Party in the
manner provided herein does not result in the creation or imposition of any
other security interest, lien, encumbrance, adverse claim or option upon any
Collateral.
13. Debtor will maintain the Collateral in good condition and will not misuse,
abuse, waste, destroy, endanger or allow the Collateral to deteriorate, except
for ordinary wear and tear from its intended use. Debtor will not use the
Collateral in violation of any law, statute, ordinance or regulation or suffer
it to be so used.
14. Debtor will transmit to Secured Party promptly all information that Debtor
may have or receive with respect to the Collateral which might in anyway affect
the value of the Collateral or Secured Party's rights or remedies with respect
thereto.
15. Debtor agrees to protect the title to the Collateral. Debtor will not
pledge, mortgage, lease or otherwise encumber, or create or suffer a security
interest to exist in any of the Collateral (other than in favor of Secured
Party) or sell, assign, lease, transfer or otherwise dispose of any of the
Collateral to or in favor of anyone other than Secured Party. Debtor will not
rile or permit to be filed or recorded any financing statement or other security
instrument with respect to the Collateral other than in favor of Secured Party.
16. Debtor represents and warrants to Secured Party that neither Debtor nor any
other person has committed any act or omission, or has consented to any act or
omission, with respect to the Collateral, which would afford the federal
government or any state or local government the right or remedy of forfeiture of
all or any part of the Collateral, any other collateral securing the
Indebtedness or any property (including but not limited to money paid) delivered
to Secured Party or any other party in performance of Debtor's obligations
arising in connection with the Indebtedness, or any interest in or income,
profits or proceeds of any of the property described in this sentence (all of
which is hereinafter called the "Property"). Debtor agrees not to engage in any
act or permit any act or omission to exist which would afford the federal
government or any state or local government the right or remedy of forfeiture of
all or any part of the Property. Without limiting the generality of the
preceding sentence, the filing of any charges or the commencement or threatened
commencement of any proceeding against Debtor or any other person liable on the
Indebtedness, or against any of the Property or anyone having an interest in, or
use or possession of any of the Property, which asserts or could afford the
federal government or any state or local government the right or remedy to
forfeit any of such Property, constitutes, at Secured Party's election, an event
of default under this Security Agreement and the Indebtedness. Debtor will
protect, indemnify and hold harmless Secured Party, its directors, officers,
employees, agents, successors and assigns from and against any and all loss,
damage, cost, expense or liability (including attorneys fees and costs) directly
or indirectly arising out of or attributable to any failure of the
representations or breach of any agreement set forth in this paragraph.
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<PAGE> 7
17. Debtor will deliver to Secured Party promptly upon receipt, all proceeds
received by Debtor from the sale or other disposition of the Collateral in the
exact form in which they are received. To evidence Secured Party's rights in
this regard, Debtor will assign or endorse proceeds to Secured Party as Secured
Party requests. Secured Party may, from time to time, in its discretion, hold
proceeds as part of the Collateral or apply cash proceeds received by Debtor to
the payment or prepayment of the Indebtedness, or may release any proceeds to
Debtor for use in the operation of Debtor's business. Secured Party may endorse
as Debtor's agent any checks, instruments, chattel paper or other documents
connected with the Collateral, take control of proceeds of the Collateral and
may hold the proceeds as part of the Collateral and may use cash proceeds to
reduce any part of the Indebtedness, or otherwise, and take any action necessary
to obtain, preserve and enforce the security interests and liens granted
hereunder and maintain and preserve the Collateral.
18. Debtor shall have and maintain, with financially sound and reputable
insurers, insurance satisfactory in all respects to Secured Party covering the
Collateral against risk of fire theft and such other risks as Secured Party may
require, including standard extended coverage, in an amount at least equal to
the value thereof. Policies evidencing any such property insurance shall contain
a standard mortgagee's endorsement providing for payment of any loss to Secured
Party and shall provide for a minimum of ten (10) days' prior written notice to
Secured Party of any cancellation. Debtor shall furnish Secured Party with
certificates or other evidence of compliance with the foregoing insurance
provisions. Secured Party may act as attorney for Debtor and Debtor hereby
irrevocably appoints Secured Party as Debtor's true and lawful attorney and
agent-in-fact, with full power of substitution, in Secured Party's name or
Debtor's name or otherwise, but at Debtor's cost and expense and without notice
to Debtor, to obtain, adjust, sell and cancel such insurance and endorse any
draft drawn by insurers of the Collateral. The Secured Party may apply any
proceeds of such insurance which may be received by it in payments on account of
the Indebtedness, whether due or not. If any insurance policy covering the
Collateral expires or is cancelled before the Indebtedness is paid in full or
Secured Party's obligation, if any, to advance additional moneys has terminated,
at the Secured Party's option, the Secured Party may obtain replacement
insurance which may, but need not, be single interest insurance in favor of the
Secured Party and Secured Party may pay the premiums thereunder.
19. Debtor agrees to pay to Secured Party, at Secured Party's banking quarters,
all advances, charges, costs and expenses (including reasonable attorneys' fees
and legal expenses) incurred by Secured Party in connection with the transaction
which gives rise to this Security Agreement, in connection with confirming,
perfecting and preserving the security interest created under this Security
Agreement, in connection with protecting Secured Party against the claims or
interests of any third person against the Collateral, and in exercising any
right, power or remedy conferred to this Security Agreement or by law. The
amount of all such advances, charges, costs and expenses shall be due and
payable by Debtor to Secured Party upon demand together with interest thereon
from the date of demand at the maximum rate of nonusurious interest allowed by
law.
20. The execution and delivery of this Security Agreement in no manner shall
impair or affect any other security (by endorsement or otherwise) for the
payment of the Indebtedness. No security taken hereafter as security for payment
of the Indebtedness shall impair in any manner
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<PAGE> 8
or affect this Security Agreement. All such present and future additional
security is to be considered as cumulative security.
21. Time shall be of the essence for the performance of any act under this
Security Agreement or the Indebtedness by Debtor but neither Secured Party's
acceptance of partial or delinquent payment nor any forbearance, failure or
delay by Secured Party in exercising any right, power or remedy shall be deemed
a waiver of any obligation of Debtor or of any right, power or remedy of Secured
Party or preclude any other or further exercise thereof; and no single or
partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof, or the exercise of any other right, power or remedy.
22. Secured Party may remedy any default and may waive any default without
waiving the default remedied or waiving any prior or subsequent default.
23. SECURED PARTY MAY ENFORCE ITS RIGHTS HEREUNDER WITHOUT RESORT TO PRIOR
JUDICIAL PROCESS OR JUDICIAL HEARING, AND DEBTOR EXPRESSLY WAIVES, RENOUNCES AND
KNOWINGLY RELINQUISHES ANY AND ALL LEGAL RIGHTS WHICH MIGHT OTHERWISE REQUIRE
SECURED PARTY TO ENFORCE ITS RIGHTS BY JUDICIAL PROCESS. IN SO PROVIDING FOR
NON-JUDICIAL REMEDIES, DEBTOR RECOGNIZES AND CONCEDES THAT SUCH REMEDIES ARE
CONSISTENT WITH THE USAGE OF THE TRADE, ARE RESPONSIVE TO COMMERCIAL NECESSITY,
AND ARE THE RESULT OF BARGAIN AT ARM'S LENGTH. NOTHING HEREIN IS INTENDED TO
PREVENT SECURED PARTY OR DEBTOR FROM RESORTING TO JUDICIAL PROCESS AT EITHER
PARTY'S OPTION.
IN WITNESS WHEREOF, the Debtor has executed this Agreement this 1st day of
February, 2000.
FITZGERALDS RENO, INC. a Nevada corporation
By: /s/ MICHAEL E. MCPHERSON
-------------------------------
Name: Michael E. McPherson
-----------------------------
Title: Executive Vice President/CFO
----------------------------
8
<PAGE> 9
EXHIBIT "A"
DESCRIPTION
All that certain lot, piece or parcel of land situate in the County of Washoe,
State of Nevada, described as follows:
PARCEL 1: (ADJUSTED PARCEL A)
A parcel of land situated within the NE 1/4 of Section 11, T19N, Rl9E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel A" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific Railroad
Company, Scout Development Corporation, and G and S Investment Company, as
recorded on January 26, 2000 in the official records of Washoe County, Nevada,
File No. 2417487 and being further described as follows:
Beginning at the Northeast corner of Parcel A of Parcel Map No. 2461, File No.
1422392 of the Official Records of Washoe County, Nevada; thence
S 13(degree)48'25"E, 105.50 feet along the Easterly line of said Parcel A;
thence S 76(degree)10'00"W, 300.64 feet; thence N 13(degree)47'50"W, 105.67 feet
along the Westerly line of said Parcel to the Northwest corner of said Parcel A;
thence N 76(degree)11'59"E, 300.62 feet along the Northerly line of said
Parcel A, to the Point of Beginning.
The above described parcel contains an area of approximately 31,743 sq. ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 2: (ADJUSTED PARCEL B)
A parcel consisting of air rights situated within the NE 1/4 of Section 11,
T19N, R19E, M.D.M., Reno, Washoe County, Nevada, being all of "Adjusted
Parcel B" as shown on the Record of Survey showing a boundary line adjustment
for Union Pacific Railroad Company, Scout Development Corporation, and G and
S Investment Company, as recorded on January 26, 2000 in the official records of
Washoe County, Nevada, File No. 2417487 and being further described as follows:
<PAGE> 10
PARCEL 3: (ADJUSTED PARCEL C)
A parcel of land situated within the NE 1/4 of Section 11, T19N, R19E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel C" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific Railroad
Company, Scout Development Corporation, and G and S Investment Company, as
recorded on January 26, 2000 in the official records of Washoe County, Nevada,
File No. 2417487 and being further described as follows:
Beginning at the Southeast corner of Parcel C of Parcel Map No. 2461, File No.
1422392 of the Official Records of Washoe County, Nevada; thence
S 76(degree)10'00"W, 300.65 feet along the Southerly line of said Parcel C;
thence N 13(degree)47'50"W, 20.82 feet; thence N 76(degree)10'00"E, 300.65 feet;
thence S 13(degree)48'25"E, 20.82 feet to the Point of Beginning.
The above described parcel contains an area of approximately 6,260 sq. ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 4:
All buildings and improvements located on the real property described in Parcels
1 through 3 above.
<PAGE> 1
EXHIBIT 10.5
ASSIGNMENT AND ASSUMPTION OF GROUND LEASE AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF GROUND LEASE AGREEMENT (this "Agreement") is
dated this 1st day of February, 2000 and is by and between Scout Development
Corporation, a Missouri corporation ("Scout") and Fitzgeralds Reno, Inc., a
Nevada corporation ("Fitzgeralds").
SECTION I
RECITALS
1.1 On or about March 1, 1978, Donald L. Wilkerson ("Wilkerson") entered
into a written agreement entitled "Ground Lease", (the "Original Ground Lease")
with South Pacific Transportation Company, a Delaware corporation ("Southern
Pacific" or "SP") wherein Wilkerson leased from Southern Pacific certain real
property (the "Land") in the City of Reno, County of Washoe, State of Nevada. A
true and correct copy of the Original Ground Lease is attached hereto as Exhibit
"A" and made a part hereof by reference.
1.2 On or about February 22, 1979, Southern Pacific and Wilkerson entered
into a "Supplemental Agreement" (the "First Supplemental Agreement") amending
the Original Ground Lease. A true and correct copy of the First Supplemental
Agreement is attached hereto as Exhibit "B" and made a part hereof by reference.
1.3 On or about August 22, 1979, Wilkerson exercised his option under
Section 2.02 of the Original Ground Lease to extend the term under the Original
Ground Lease and First Supplemental Agreement. By exercise of that option, the
term was extended for an additional period of ten (10) years, for a total term
of forty-five (45) years, which term expires on the 28th day of February 2023.
1.4 On or about September 27, 1979, Southern Pacific and Wilkerson executed
a "Memorandum of Ground Lease Agreement" (the "Lease Memorandum") giving public
notice of the execution and effect of the Original Ground Lease and Supplemental
Agreement. The Lease Memorandum was recorded in the official records of the
Washoe County Recorder on the 27th day of February 1980 as instrument number
659260.
1.5 On or about December 19, 1979, Wilkerson and BMA Corporation, a
Missouri corporation ("BMA Corporation") formerly known and then known as BMA
Properties, Inc., a Missouri corporation, formed a general partnership under the
laws of the state of Nevada, under the name of Plaza Investments ("Plaza
Investments"). On the same day, December 19, 1979, Wilkerson assigned his entire
interest in the Original Ground Lease and First Supplemental Agreement to Plaza
Investments (the "Wilkerson/Plaza Investments Assignment"). On the same day,
Wilkerson and Plaza Investments entered into a "Memorandum of Assignment of
Lease" (the
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<PAGE> 2
"Wilkerson/Plaza Investments Assignment Memorandum") dated December 19, 1979
and recorded the same on January 9, 1980 in the official records of the Washoe
County Recorder as instrument no. 651035. The Wilkerson/Plaza Investments
Assignment Memorandum was thereafter re-recorded on February 27, 1980 in the
official records of the Washoe County Recorder as instrument no 659261.
1.6 On or about July 16, 1984, Southern Pacific and Plaza Investments (by
and through Wilkerson) entered into a "Supplemental Agreement" (the "Second
Supplemental Agreement") wherein Southern Pacific and Plaza Investments
adjusted the minimum annual rent under Section 3.01 and 3.02 of the Ground
Lease for a period of five (5) years commencing January 1, 1984 and terminating
on December 31, 1988. A true and correct copy of the Second Supplemental
Agreement is attached hereto as Exhibit "C" and made a part hereof by reference.
1.7 By virtue of an agreement dated January 1, 1989, Southern Pacific and
Plaza Investments entered into a "Memorandum Confirming Rent Adjustment" (the
"Third Supplemental Agreement") wherein Southern Pacific and Plaza Investments
adjusted minimum annual rent under Sections 3.01 and 3.02 of the Original Ground
Lease for a period of five (5) years commencing January 1, 1989 and terminating
on December 31, 1993. A true and correct copy of the Third Supplemental
Agreement is attached hereto as Exhibit "D" and made a part hereof by reference.
1.7A On or about March 18, 1999, G and S Investment and Scout agreed to
adjust the minimum annual rent under Section 3.02 of the Ground Lease for a
period of five (5) years commencing January 1, 1999, and terminating on
December 31, 2003. A true and correct copy of this Agreement is attached hereto
as Exhibit "D-1" and made a part hereof by reference.
1.8 On or about January 26, 2000, Union Pacific Railroad Company, a
Delaware corporation ("Union Pacific"), a successor to Southern Pacific, Scout
and G and S Investment Company entered into a "Deed of Correction and
Reformation and Boundary Line Adjustment Agreement" wherein the legal
description of the Land and the rights which should have been included in the
Original Ground Lease was corrected. The Deed of Correction and Reformation and
Boundary Line Agreement was recorded in the official records of the Washoe
County Recorder on the 26 day of January, 2000 as instrument no. 2417486 and
the "Record of Survey" referenced therein was recorded in the official records
of the Washoe Country Recorder on the 26 day of January, 2000 an instrument no.
2417487. The Deed of Correction and Reformation and Boundary Line Adjustment
Agreement and the Record of Survey are herein referred to as the "Fourth
Supplemental Agreement".
1.9 As used herein, the following terms have the following meanings:
A. The term "Subject Lease" means the Original Ground Lease between
Southern Pacific and Wilkerson, as supplemented by the First
Supplemental Agreement, the Second Supplemental Agreement, the
Third Supplemental Agreement, and the Fourth Supplemental
Agreement, and as identified in the Ground Lease Memorandum
recorded February 27, 1980 in the official records of the Washoe
County Recorder as instrument no. 659261; and
<PAGE> 3
B. The term "Leasehold Improvements" means all improvements
constructed by Plaza Investments, or any other lessee under the
Subject Lease, on the land.
1.10 On or about May 2, 1989, Wilkerson and BMA Corporation dissolved Plaza
Investments Under the Plaza Investment Partnership Dissolution Agreement, which
dissolved Plaza Investments, the entire right, title, and interest of Plaza
Investments in and to the Subject Lease, and in and to the Leasehold
Improvements, was transferred to BMA Corporation. On September 29, 1989 a "Deed"
dated the same date, which transferred to BMA Corporation the entire interest of
Plaza Investments in the Leasehold Improvements and in the Subject Lease (the
"Plaza/BMA Corporation Deed") was recorded in the official records of the
Washoe County as instrument no. 1352951.
1.11 By virtue of an "Assignment of Leasehold Interest" dated August 9,
1990 (the "BMA Corporation/Scout Assignment") recorded October 26, 1990, BMA
Corporation transferred its leasehold interest under the Subject Lease and its
ownership interest in the Leasehold Improvements to Scout. The BMA Corporation/
Scout Assignment was recorded October 26, 1990 in the official records of the
Washoe County Recorder as instrument no. 1437239.
1.12 By virtue of a "Grant, Bargain, Sale Deed" dated June 15, 1990 (the
"BMA Corporation/Scout Deed") BMA Corporation transferred its Interest in the
Leasehold Improvements, subject to the Subject Lease, to Scout. The BMA
Corporation/Scout Deed was recorded on October 26, 1990 is the official records
of the Washoe County Recorder as instrument no. 1437240.
1.13 Scout is presently the lessee under the Subject Lease, and Scout is
presently the owner of the Leasehold Improvement. G and S Investment is
presently the lessor under the Subject Lease. Scout and G and S Investment
acknowledges that the Subject Lease is in full force and effect as of the date
of the execution of this instrument.
1.14 By virtue of a "Grant, Bargain and Sale Deed" dated August 10, 1990,
(the "SP/Lake Trust Deed") recorded August 24, 1990. Southern Pacific
transferred its interest in the Land and its leasehold interest (as lessor) in
the Subject Lease to George E. Croom, Jr. and Sharon M. Croom, as trustees of
The Lake Trust (hereafter "The Lake Trust"). The SP/Lake Trust Deed was
recorded August 24, 1990 in the official records of the Washoe County Recorder
as instrument no. 1422684.
1.15 By virtue of a "Quitclaim Deed" dated October 8, 1992, (the "Lake
Trust/G and S Investment Deed") recorded October 13, 1992. The Lake Trust
quitclaimed to G and S Investment its interest in and to the property which was
conveyed to The Lake Trust in the SP/Lake Trust Deed. The Lake Trust/G and S
Investment Deed was recorded October 13, 1992 in book 3927, pages 160-169
inclusive in the official records of the Washoe County Recorder as instrument
no. 1613410.
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<PAGE> 4
1.16 By virtue of an "Assignment of Lease and Assumption Agreement" dated
October 8, 1992 (the "Lake Trust/G and S Investment Assignment") recorded
October 13, 1992, The Lake Trust assigned its interest in the Subject Lease to G
and S Investment and G and S Investment assumed all obligations of The Lake
Trust/G and S Investment Assignment. The Lake Trust/G and S Investment
Assignment was recorded October 13, 1992 in the official records of the Washoe
County Recorder as instrument no. 1613411.
1.17 On or about October 11, 1999, Scout and Fitzgeralds entered into a
Purchase Agreement (the "Purchase Agreement") for the sale and purchase of the
Land and Leasehold Improvements. The purpose of this instrument is to accomplish
certain transfers contemplated by the Purchase Agreement, namely (a) the
assignment to Fitzgeralds of the entire rights, title and interest of Scout as
lessee under the Subject Lease, (b) the sale by Scout to Fitzgeralds of the
Leasehold Improvements, and (c) the assumption by Fitzgeralds of the obligations
of Scout under the Subject Lease.
SECTION 2
ASSIGNMENT AND CONVEYANCE
IN CONSIDERATION of $10.00 (ten dollars) paid by Fitzgeralds to Scout, and
for other good and valuable consideration, the parties agree as follows:
2.1 Assignment. Pursuant to the Purchase Agreement referenced in Section
1.17 hereof, Scout hereby assigns, conveys, transfers, sets over and delivers to
Fitzgeralds (a) all of Scout's rights, title and interest as lessee under the
Subject Lease, and all of Scout's rights, title and interest in and to the
leasehold estate created under the Ground Lease, and (b) all of its fee simple
interest in and to the Leasehold Improvements, subject to matters now appearing
of record and the rights of the Lessor under the Subject Lease. The parties
agree that from and after the date hereof Scout shall have no further right,
title or interest in and to the Subject Lease, the leasehold estate thereunder,
or such Leasehold Improvements. Fitzgeralds shall be and become the lessee
under the Subject Lease and the owner of the fee simple title to the Leasehold
Improvements; provided, however, this Agreement is conditional upon the
assumption by Fitzgeralds under Section 2.2 hereof of all obligations of Scout
under the Subject Lease and the consent by G and S Investment to this
Agreement.
2.2 Acceptance of Assignment and Assumption of Obligations. Fitzgeralds
hereby expressly accepts the assignment of Scout's leasehold interest under the
Subject Lease and the conveyance of Scout's fee simple interest in the Leasehold
Improvements. Fitzgeralds hereby expressly assumes all of Scout's obligations
under the Subject Lease arising from and after the date that each party hereto
has executed this Agreement and that G and S investment has consented to this
Agreement (the "Effective Date"). Fitzgeralds hereby agrees to defend,
indemnify, and hold Scout harmless from and against any and all claims which may
hereafter arise under and by virtue of the Subject Lease and Fitzgeralds'
ownership of the Leasehold Improvements from and after the Effective Date. Scout
hereby agrees to defend, indemnify and hold Fitzgeralds harmless
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<PAGE> 5
from and against any and all claims which may arise or have arisen under and by
virtue of the Subject Lease and Scout's ownership of the Leasehold Improvements
prior to the Effective Date.
2.3 Representations and Warranties. Scout represents and warrants to
Fitzgeralds that Scout has not previously assigned all or part of its leasehold
interest under the Subject Lease or its fee simple interest in the Leasehold
Improvements, that no portion of such lessee's interest or leasehold interest or
property interest has been the subject of any security interest, collateral
assignment or conveyance other than the Deed of Trust and related security
instruments in favor of Scout; and that the Subject Lease is still in full force
and effect in accordance with the original terms and conditions of the Subject
Lease. Scout further represents and warrants to Fitzgeralds that Scout has full
right, power and authority to execute this Assignment and the same does not
conflict with any agreement, judgment, order, decree, rule, regulation or other
legal obligation under which Scout is bound.
2.4 Payments to G and S Investment. Scout agrees to pay the minimum rental
due each month to G and S Investment together with such other amounts as may be
due in accordance with the terms of the Subject Lease; provided, however,
Scout's agreement to pay G and S Investment shall in no way be construed as a
release of Fitzgeralds' obligations hereunder and under the Subject Lease, and
Fitzgeralds shall pay the minimum rental due each month to Scout together with
such other amounts as may be due in accordance with the terms of the Subject
Lease. G and S Investment shall have the option at any time during the term of
the Subject Lease upon prior written notice thereof to require that the minimum
rental due each month together with such other amounts as may be due in
accordance with the terms of the Subject Lease be paid directly by Fitzgeralds
to G and S Investment.
SECTION 3
MISCELLANEOUS
3.1 Heirs, Successors and Assigns. This agreement shall be binding upon and
inure to the benefit of the legal representatives, heirs, successors, and
assigns of the parties hereto.
3.2 Entire Agreement. This Agreement and the Purchase Agreement are the
entire agreements of the parties in the matters covered hereby. The parties may
not alter, amend or modify this agreement, except by a written and acknowledged
instrument executed by both parties. This agreement includes all representations
of every kind and nature made by each party to the other.
3.3 Notices. Any notice which either party may or is required to give to
the other shall be given by mailing the same, postage prepaid, sent certified
mail, return receipt requested and deposited in a receptacle for U.S. mail
addressed as hereafter provided:
TO SCOUT: - with a copy to -
Scout Development Corporation Scout Development Corporation
1350 South Boulder Street 7066 Lakeview Haven Drive, Suite 131
Tulsa, OK 74119 Houston, Texas 77095
Attention: Eric Grimshaw Attention: Anthony L. Levinson
5
<PAGE> 6
TO FITZGERALDS: Fitzgeralds Reno, Inc.
255 North Virginia Street
Reno, Nevada 89501
Attention: Michael E. McPherson
- with a copy to -
Gordon & Silver, Ltd.
3960 Howard Hughes Parkway
Ninth Floor
Las Vegas, Nevada 89109
Attention: James S. Mace
Notice shall be deemed received by the person or entity to whom notice
is given within seventy-two (72) hours after the date of mailing of such notice
pursuant to this Section 3.3.
The addresses to which notices shall be given may be changed or
modified from time to time, by notice given by the party whose address is
changed or is being changed to the other parties in the manner provided in this
Section 3.3.
3.4 Applicable Law. The laws of the State of Nevada shall, in all
instances, govern the interpretation and effect of this Agreement.
ASSIGNOR: ASSIGNEE:
SCOUT DEVELOPMENT CORPORATION, FITZGERALDS RENO, INC.,
a Missouri corporation a Nevada corporation
By: /s/ ANTHONY L. LEVINSON By: /s/ MICHAEL E. MCPHERSON
------------------------------ --------------------------------
Name: Anthony L. Levinson Name: Michael E. McPherson
Title: Executive Vice President Title: Executive Vice President
& Chief Financial Officer
6
<PAGE> 7
STATE OF TEXAS )
) ss:
COUNTY OF HARRIS )
On this 1st day of November, 1999, before me, the undersigned, a Notary
Public, duly commissioned and sworn, personally appeared Anthony L. Levinson,
the Executive Vice President of Scout Development Corporation, known to me to
be the person whose name is subscribed to the within instrument, and who
acknowledged to me that he/she executed the same freely and voluntarily for the
uses and purposes therein mentioned.
[NOTARY STAMP] /s/ LINDA C. SEABOURNE
-----------------------------------
Notary Public, State of Texas
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
On this 3rd day of November, 1999, before me, the undersigned, a Notary
Public, duly commissioned and sworn, personally appeared Michael E. McPherson,
the Executive Vice President of Fitzgeralds Reno, Inc., to me to be the person
whose name is subscribed to the within instrument, and who acknowledged to me
that he/she executed the same freely and voluntarily for the uses and purposes
therein mentioned.
[NOTARY STAMP] /s/ SUSAN E. SLAUGHTER
-----------------------------------
Notary Public
7
<PAGE> 8
CONSENT TO ASSIGNMENT
G and S Investment Company, a Nevada limited partnership, hereby consents
to the foregoing assignment and assumption in each, every, and all respects;
provided, however that such consent shall not release Scout Development
Corporation of and from any and all obligations under the Subject Lease, and
Scout Development Corporation shall remain liable to Lessor to perform all of
the obligations of Lessee under the Subject Lease.
Dated this 22nd day of November, 1999.
G and S Investment Company,
a Nevada limited partnership
By: /s/ GEORGE E. CROOM, JR.
------------------------------------
Name: GEORGE E. CROOM, JR.
----------------------------------
Title: A General Partner
---------------------------------
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On this 22nd day of November, 1999 before me, a notary public, appeared
George E. Croom, known to me to be General Partner of G and S Investment
Company, a Nevada limited partnership.
[NOTARY STAMP] /s/ EVELYN M. KELSEY
-----------------------------------
Notary Public
8
<PAGE> 9
EXHIBIT A
GROUND LEASE
A COPY OF THIS INSTRUMENT MAY BE REVIEWED IN THE OFFICES OF FITZGERALDS RENO,
INC. AND SCOUT DEVELOPMENT CORPORATION.
9
<PAGE> 10
EXHIBIT B
FIRST SUPPLEMENTAL AGREEMENT
A COPY OF THIS INSTRUMENT MAY BE REVIEWED IN THE OFFICES OF FITZGERALDS RENO,
INC. AND SCOUT DEVELOPMENT CORPORATION.
10
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EXHIBIT C
SECOND SUPPLEMENTAL AGREEMENT
A COPY OF THIS INSTRUMENT MAY BE REVIEWED IN THE OFFICES OF FITZGERALDS RENO,
INC. AND SCOUT DEVELOPMENT CORPORATION.
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<PAGE> 12
EXHIBIT D
THIRD SUPPLEMENTAL AGREEMENT
A COPY OF THIS INSTRUMENT MAY BE REVIEWED IN THE OFFICES OF FITZGERALDS RENO,
INC. AND SCOUT DEVELOPMENT CORPORATION.
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<PAGE> 13
EXHIBIT E
FOURTH SUPPLEMENTAL AGREEMENT
A COPY OF THIS INSTRUMENT MAY BE REVIEWED IN THE OFFICES OF FITZGERALDS RENO,
INC. AND SCOUT DEVELOPMENT CORPORATION.
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<PAGE> 14
DESCRIPTION
All that certain lot, piece or parcel of land situate in the County of Washoe,
State of Nevada, described as follows:
PARCEL 1: (ADJUSTED PARCEL A)
A parcel of land situated within the NE 1/4 of Section 11, T19N, R19E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel A" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific Railroad
Company, Scout Development Corporation, an G and S Investment Company, as
recorded on January 26, 2000 in the official records of Washoe County, Nevada,
File No. 2417487 and being further described as follows:
Beginning at the Northeast corner of Parcel A of Parcel Map No. 2461, File No.
1422392 of the Official Records of Washoe County, Nevada; thence S
13(degree)48'25"E, 105.50 feet along the Easterly line of said Parcel A; thence
S 76(degree)10'00"W, 300.64 feet; thence N 13(degree)47'50"W, 105.67 feet along
the Westerly line of said Parcel to the Northwest corner of said Parcel A;
thence N 76(degree)11'59"E, 300.62 feet along the Northerly line of said Parcel
A, to the Point of Beginning.
The above described parcel contains an area of approximately 31,743 sq. ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 2: (ADJUSTED PARCEL B)
A parcel consisting of air rights situated within the NE 1/4 of Section 11,
T19N, R19E, M.D.M., Reno, Washoe County, Nevada, being all of "Adjusted Parcel
B" as shown on the Record of Survey showing a boundary line adjustment for Union
Pacific Railroad Company, Scout Development Corporation, and G and S Investment
Company, as recorded on January 26, 2000 in the official records of Washoe
County, Nevada, File No. 2417487 and being further described as follows:
<PAGE> 15
Parcel 2 Legal Continued
Beginning at a point on the Easterly line of Parcel A of Parcel Map No. 2461,
File No. 1422392 of the Official Records of Washoe County, Nevada; from which
the Northeast corner of said Parcel A bears N 13(degree)48'25"W, 105.50 feet
said point of beginning having an elevation of 4522.50 feet; thence S
13(degree)48'25"E, 53.65 feet said point having an elevation of 4522.50 feet;
thence S 76(degree)10'00"W, 300.65 feet said point having an elevation of
4525.1 feet; thence N 13(degree)47'50"W, 53.65 feet said point having an
elevation of 4525.1 feet, thence N 76(degree)10'00"E, 300.64 feet to the Point
of Beginning. Said surface shall be formed such that it maintains a constant
slope between the elevations described for the four corners.
The above described land parcel (above which the air rights are situated)
contains an area of approximately 16,130 sq. ft.
EXCEPTING THEREFROM a parcel of land situated within the NE 1/4 of Section 11,
T19N, R19E, M.D.M., Reno, Washoe County, Nevada, and being all that real
property located below a surface which has vertices defined as follows:
Beginning at a point on the Easterly line of Parcel A of Parcel Map No. 2461,
File No. 1422392 of the Official Records of Washoe County, Nevada; from which
the Northeast corner of said Parcel A bears N 13(degree)48'25"W, 106.30 feet
said point of beginning having an elevation of 4524.00 feet; thence S
13(degree)48'25"E, 52.05 feet said point having an elevation of 4524.00 feet;
thence S 76(degree)10'00"W, 300.65 feet said point having an elevation of
4526.6 feet; thence N 13(degree)47'50"W, 52.05 feet said point having an
elevation of 4526.6 feet, thence N 76(degree)10'00"E, 300.64 feet to the Point
of Beginning. Said surface shall be formed such that it maintains a constant
slope between the elevations described for the four corners.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
BASIS OF ELEVATIONS: City of Reno benchmark No. 96, a nail and washer located
in the top of the curb at the Northeast corner of East Fourth Street and North
Center Street, Elevation=4496.46 feet.
<PAGE> 16
PARCEL 3: (ADJUSTED PARCEL C)
A parcel of land situated within the NE 1/4 Section 11, T19N, R19E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel C" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific Railroad
Company, Scout Development Corporation, and G and S Investment Company, as
recorded on January 26, 2000 in the official records of Washoe County, Nevada,
File No. 2417487 and being further described as follows:
Beginning at the Southeast corner of Parcel C of Parcel Map No. 2461, File
No. 1422392 of the Official Records of Washoe County, Nevada; thence
S 76(degree)10'00"W, 300.65 feet along the Southerly line of said Parcel C;
thence N 13(degree)47'50"W, 20.82 feet; thence N 76(degree)10'00"E, 300.65
feet; thence S 13(degree)48'25"E, 20.82 feet to the Point of Beginning.
The above described parcel contains an area of approximately 6,260 sq. ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 4:
All buildings and improvements located on the real property described in
Parcels 1 through 3 above.
[STAMP]
<PAGE> 1
EXHIBIT 10.6
--------------------------------
Escrow No. 1999-16269 TD COPY has not been compared
Order No. 1999-16269 RB with the Original Document. WCP.
--------------------------------
ASSIGNMENT OF RENTS AND LEASES
A. FITZGERALDS RENO, INC., a Nevada corporation ("Assignor") whose
address for notice hereunder is 300 E. Second Street, Suite 1500, Reno, Nevada
89501, by Deed of Trust and Security Agreement of even date herewith
(hereinafter the "Deed of Trust"), mortgaged to SCOUT DEVELOPMENT CORPORATION, a
Missouri corporation, as mortgagee ("Assignee"), whose address for notice is
1350 South Boulder, Tulsa, Oklahoma 74119, the property (the "Property") more
fully described on Exhibit A, attached hereto and made a part hereof for all
purposes.
B. The Deed of Trust was given to secure the payment of a promissory
note in the original principal amount of $2,250,000.00 of even date herewith,
executed by Assignor and payable to Assignee in one-hundred twenty (120)
consecutive monthly installments commencing one (1) month from the date thereof
(the "Note"). The Deed of Trust and the Note are incorporated herein by
reference for all purposes.
C. Assignor, as lessor has acquired the Property subject to certain
leases and intends to enter into leases in the future in connection with the
improvements located on the Property (the "Leases").
NOW, THEREFORE, for value received, Assignor hereby absolutely and
unconditionally assigns and transfers to Assignee (i) all rents, revenues and
any other income of the Property, including those now due, or to become due by
virtue of the Leases, or any other agreement for the occupancy or use of all or
any part of the Property, regardless of the party to whom the rents and revenues
of the Property are payable; and (ii) all the Leases and any other agreements
for the use or occupancy of all or any part of the Property, including any and
all extensions, renewals and replacement thereof. All Leases, other agreements
for use or occupancy, and all extensions, renewals and replacements thereof, and
all future leases and other agreements for use or occupancy, extensions,
renewals and replacements thereof, are hereby incorporated to be included in all
references to "Leases" herein.
This assignment and agreement shall be under the following terms and
conditions:
1. Until the Note, and all renewals, rearrangements and extensions
thereof, are paid in full, or, until the Property is released by Assignee as
security for the Note, Assignor shall transfer, sell and assign, and hereby
transfers, sells and assigns, unto Assignee all subsequent leases of the
Property, or any part thereof.
2. Assignor acknowledges that this assignment in no way affects or
alters the Note and Deed of Trust. Assignor hereby agrees to make or cause to be
made:
(a) all payments of principal and interest on the Note and any
amendments, extensions or renewals thereof,
(b) payment of all other sums, with interest thereon, becoming due and
payable to Assignee under the provisions of this Assignment, the Note, the
Deed of Trust or in any other instrument executed by Assignor in connection
with the Note; and
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<PAGE> 2
(c) punctual performance and discharge of each and every obligation,
covenant and agreement contained in the Note, the Deed of Trust or in any
other instrument executed by Assignor in connection with the Note.
3. Assignor warrants and represents that Assignor has not previously
assigned the Leases or the rents and revenues of the Property, or executed any
other instrument which would interfere with or in any manner prevent Assignee
from obtaining the full benefits of the provisions of this Assignment.
4. Assignor hereby authorizes Assignee or Assignee's agents to collect
the rents and revenues from the Property and hereby directs each tenant of the
Leases to pay such rents and revenues to Assignee or Assignee's agents;
provided, however, so long as there shall exist no default by Assignor in the
payment of the Note, or in the performance of any obligation, covenant or
agreement contained herein, in the Note, the Deed of Trust, or in any other
instrument executed by Assignor in connection with the Note, Assignor shall have
the right to collect and receive as trustee for the benefit of Assignee all
rents and revenues arising under the Leases or from the Property and to apply
the rents and revenues so collected to the sums secured by the Deed of Trust,
with the balance, so long as no such default exists, to the account of Assignor;
it being the intention of Assignor and Assignee that this Agreement constitutes
an absolute assignment and not an assignment for additional security only, but
is an assignment intended as a pro tanto payment of the Note and all other
indebtedness secured by the lien of the Deed of Trust.
5. Assignor covenants and agrees with Assignee:
(a) not to collect any of the rent, income and profits from the
Property more than one month in advance of the time that the same shall
become due under the provisions of the Lease (other than for security
deposits made under the Leases);
(b) not to execute any other assignment of the rents, income or
profits arising or accruing from the Leases or the property,
(c) to assign and transfer to the Assignee any and all other leases
entered into after the date of this Assignment upon all or any part of the
Property and to execute and deliver, at the request of the Assignee, all
such further assignments in the premises as the Assignee shall from time to
time require.
(d) that if any act shall be done by the Assignor in breach of the
foregoing, then such act shall be null and void and without force or effect
unless specifically agreed to in writing by the Assignee.
6. Upon or at any time after default by the Assignor in the payment of
the principal and interest on the Note, in the performance of any obligation,
covenant or agreement contained herein, in the Note, the Deed of Trust, or in
any other instrument executed by the Assignor in connection with the Note,
Assignor's right to collect and receive as trustee for the benefit of Assignee
all rents and revenues arising under the Leases shall terminate without notice
to Assignor. Further, the Assignee may, but is not obligated or required at its
option, without notice and without regard to the adequacy of the security for
the Note, either in person or by agent, with or without bringing any action or
proceeding, or by a receiver appointed by a court take possession of the
Property and hold, manage, lease and
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<PAGE> 3
operate the same on such terms and for such period of time as Assignee may deem
proper. Additionally, Assignee may demand, sue for or otherwise collect and
receive all rents, income and revenues of the Property, including those past due
and unpaid, without taking possession of the Property, Assignee shall also have
full power to make, from time to time, all alterations, renovations, repairs or
replacements to the Property as may seem proper to Assignee, and to apply such
rents, income and profits to the payment of:
a) all expenses of managing the Property, including, without
limitation, the salaries, fees, and wages of a managing agent and such
other employees as Assignee may deem necessary or desirable, and all
expenses of operating and maintaining the Property, including all taxes
charges, claims, assessments, and any other liens, and premiums for all
insurance which the Assignee may deem necessary or desirable, the cost
of all alterations, renovations, repairs or replacements, and all
expenses incident to taking and regaining possession of the Property,
and
(b) the principal and interest on the Note, together with all costs and
attorneys' fees incurred by Assignee in enforcing Assignor's
obligations hereunder, under the Note, the Deed of Trust, or in any
other instrument executed by Assignor in connection with the Note, all
in such order of priority as to any of the items mentioned in this
paragraph as the Assignee in its sole discretion may determine.
No credit shall be given by Assignee for any sum or sums received from
the rents, income and revenues of the Property until the money collected is
actually received by Assignee; and no credits shall be given for any uncollected
rents or other uncollected amounts or bills nor shall credit on any
indebtedness; secured by the lien of the Deed of Trust be given for any rents,
income and revenues derived from the Property after Assignee obtains title to
the Property by foreclosure, order of a court or by operation of law or
otherwise. The exercise by Assignee of the option granted in this paragraph to
take possession of the Property, and Assignee's collection of the rents, income
and revenues and the application thereof as herein provided shall not be
considered a waiver of any default by Assignor under the Note, Deed of Trust,
this Assignment or any other instrument executed by Assignor in connection with
the Note.
7. Assignee shall not be liable for any loss sustained by Assignor
resulting from Assignee's failure to let the Property or portions thereof after
default or from any other act or omission of Assignee in managing the Property
after default unless such loss is caused by the willful misconduct and bad faith
of Assignee. Furthermore, it is understood that Assignee shall not be obligated
to assume, perform or discharge nor does Assignee undertake to assume, perform
or discharge, any obligation, duty or liability of Assignor under Leases it
being agreed that Assignee shall be treated as agreeing to assume, perform or
discharge such obligations, duty or liability only if:
(a) Assignee shall, by written notice sent to the tenants
named in the Leases, specifically so elect; or
(b) Assignee shall foreclose judicially or under the Deed of
Trust and take possession of the Property.
In no event shall Assignee be liable for the performance or discharge
of any obligations not expressly assumed by it, or in any assignment or other
transfer by Assignee of its interests in the Leases or the Property to any other
party. Assignor shall, and hereby agrees to, defend (with counsel
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<PAGE> 4
acceptable to Assignee), indemnify and hold Assignee harmless from and against
any and all liability, low cost, damage or expenses which may be or is incurred
by Assignee under the Leases or under or by reason of this Assignment and from
any and all claims and demands whatsoever which may be asserted against Assignee
or by reason of any alleged obligations or undertakings on the part of Assignee
to perform or discharge any of the terms, covenants or agreements contained in
the Leases, except such obligations or undertakings expressly assumed by
Assignee. If Assignee should incur any such liability, or be subject to any such
claims, all expenses incurred or expended by Assignee in connection therewith
(including attorneys' fees) shall be deemed secured by the Deed of Trust and
Assignor shall reimburse Assignee immediately upon demand. Upon the failure of
Assignor to reimburse Assignee, Assignee may, at its option, declare all sums
evidenced by the Note and secured by the Deed of Trust immediately due and
payable. It is further understood that this Assignment shall not operate to
place responsibility upon Assignee, except as otherwise specifically provided,
for the control, care, management or repair of the Property, nor for the
carrying out of any of the terms and conditions of the Leases nor shall it
operate to make Assignee responsible or liable for any waste committed on the
Property by any tenant thereof or any other parties, or for any dangerous or
defective condition of the Property, or for any negligence in the management,
upkeep, repair or control of the Property resulting in loss, injury or death to
any tenant, licensee, employee or stranger.
8. In the event there shall have been made payment in full of the
principal and interest on the Note or any other indebtedness secured by the lien
of the Deed of Trust, and Assignor shall make, or cause to have been made, full
performance of all of Assignor's obligations under the Deed of Trust, this
Assignment, and all other instruments executed by Assignor in connection with
the Note, then this Assignment shall become and be void and of no further force
or effect. An affidavit, certificate, letter or statement of any officer, agent
or attorney of Assignee indicating that any part of the principal or interest on
the Note remains unpaid or that Assignor's obligations remain unperformed shall
be conclusive evidence of the continuing validity and effectiveness of this
Agreement and any person may, and is authorized to, rely thereon.
9. Assignor authorizes and directs the tenants named in the Leases,
upon receipt from Assignee of written notice to the effect that (i) Assignee is
then the holder of the Note, Deed of Trust and this Assignment, and (ii) that a
default exists under any of the provisions of one or all of such instruments, to
pay over to Assignee all rents, income and revenues arising or accruing under
the Leases and to continue to do so until otherwise notified by Assignee.
Assignor agrees that (i) any tenant or occupant of the Property shall have the
right to rely upon notice by Assignee without obligation or right to inquire as
to whether default actually exists; and (ii) Assignor shall have no right or
claim against any such tenant or occupant for any such rents paid by any tenant
or occupant to Assignee following receipt of such notice.
10. Nothing contained in this Assignment and no act done or omitted by
Assignee pursuant to the powers and rights granted it hereunder shall be deemed
to be a waiver by Assignee of its rights and remedies under the Note, Deed of
Trust or under any other instrument executed by Assignor in connection with the
Note, and this Assignment is made and accepted without prejudice to any of the
rights and remedies possessed by Assignee under the terms of any instrument
executed by Assignor in connection with the Note. The collection and application
of the rents, income and revenues from the Property to the Note, or as otherwise
provided above, shall not constitute a waiver by Assignee of any default which
might at the time of such application or thereafter exist under any documents
executed by Assignor in connection with the Note. The Note may be accelerated in
accordance with its terms, notwithstanding the application of rents, income and
revenues.
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<PAGE> 5
11. In the event of foreclosure of the Deed of Trust by sale or
otherwise, Assignee is authorized (i) to sell Assignor's interest in the Leases
as lessor together with the Property; or (ii) to assign the same without the
Property, or (iii) to assign the some without consideration to the purchaser at
any such sale or to any other claimant to title to the Property by virtue of
foreclosure of the lien of the Deed of Trust. There shall be no liability to
account to Assignor for any rents, revenues, income or profits accruing after
the foreclosure of the Deed of Trust.
12. Assignor agrees to execute and deliver to Assignee such further
instruments and documents as, from time to time during the existence of this
Assignment, Assignee may reasonably require in order to perfect the interest and
rights of Assignee under this Assignment.
13. No remedy or right conferred upon Assignee by operation of law, by
this Assignment, the Note, the Deed of Trust or by any other instrument
executed by Assignor in connection with the Note is intended to be, nor shall it
be, inclusive of any other right or remedy, but each and every remedy or right
shall be cumulative and shall be in addition to every other remedy or right
conferred upon Assignor and each and every such remedy or right may be pursued
by Assignee in such manner and order, together or separately, and at such times
as Assignee may elect.
14. If any term or provision of this Assignment, or the application
thereof to any person or circumstances shall, to any extent be invalid or
unenforceable, the remainder of this Assignment, or the application of such term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Assignment shall be valid and be enforced to the fullest
extent permitted by law.
15. Notice provided for in this Agreement must be in writing, and shall
be given or served, unless otherwise expressly provided herein, by depositing
the same in the United States Mail, postpaid and certified and addressed to the
party to be notified, with return receipt requested, or by delivering the sum by
courier or in person to such party (or, if the party or parties to be notified
be incorporated, to an officer of such party), or by prepaid telegram addressed
to the party to be notified. Notice deposited in the mail, postpaid and
certified with return receipt requested, shall be deemed received upon deposit
in a proper United States mail depository. Notice given in any other manner
shall be effective only if and when received by the party to be notified. For
the purposes of notice, the addresses of the parties are as stated in paragraph
A of this Assignment. The parties and their respective successors and assigns
shall have the right from time to time and at any time, to change their
respective addresses and agents for the receipt of notice and shall have the
right to specify as their respective addresses and agents any other by giving at
least ten (10) days prior written notice to the other party.
5
<PAGE> 6
EXECUTED this the 31st day of January 2000, effective the 1st day of
February, 2000.
FITZGERALDS RENO, INC., a Nevada corporation
By: /s/ MICHAEL E. MCPHERSON
----------------------------------------
Name: Michael E. McPherson
--------------------------------------
Title: Executive Vice President/CFO
-------------------------------------
STATE OF NEVADA
COUNTY OF WASHOE
This instrument was acknowledged before me on the 31st day of January,
2000, by Michael E. McPherson, Executive Vice President and Chief Financial
Officer of FITZGERALDS RENO, INC. a Nevada corporation, for and on behalf of
said Nevada corporation.
(SEAL) /s/ CAROLE EDWARDS
---------------------------------
Notary Public, State of Nevada
[NOTARY STAMP]
After Recording Return to:
John R. Jones
1301 McKinney, Suite 3550
Houston, TX 77010
6
<PAGE> 7
EXHIBIT "A"
DESCRIPTION
All that certain lot, piece or parcel of land situate in the County of Washoe,
State of Nevada, described as follows:
PARCEL 1: (ADJUSTED PARCEL A)
A parcel of land situated within the NE 1/4 of Section 11, T19N, R19E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel A" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific Railroad
Company, Scout Development Corporation, and G and S Investment Company, as
recorded on January 26, 2000 in the official records of Washoe County, Nevada,
File No. 2417487 and being further described as follows:
Beginning at the Northeast corner of Parcel A of Parcel Map No. 2461, File No.
1422392 of the Official Records of Washoe County, Nevada; thence S
13(degree)48'25"E, 105.50 feet along the Easterly line of said Parcel A; thence
S 76(degree)10'00"W, 300.64 feet; thence N 13(degree)47'50"W, 105.67 feet along
the Westerly line of said Parcel to the Northwest corner of said Parcel A;
thence N 76(degree)11'59"E, 300.62 feet along the Northerly line of said Parcel
A, to the Point of Beginning.
The above described parcel contains an area of approximately 31,743 sq ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 2: (ADJUSTED PARCEL B)
A parcel consisting of air rights situated within the NE 1/4 of Section 11,
T19N, R19E, M.D.M., Reno, Washoe County, Nevada, being all of "Adjusted Parcel
B" as shown on the Record of Survey showing a boundary line adjustment for
Union Pacific Railroad Company, Scout Development Corporation, and G and S
Investment Company, as recorded on January 26, 2000 in the official records of
Washoe County, Nevada, File No. 2417487 and being further described as follows:
<PAGE> 8
Parcel 2 Legal Continued
Beginning at a point on the Easterly line of Parcel A of Parcel Map No. 2461,
File No. 1422392 of the Official Records of Washoe County, Nevada; from which
the Northeast corner of said Parcel A bears N 13(degree)48'25"W, 105.50 feet
said point of beginning having an elevation of 4522.50 feet; thence S
13(degree)48'25"E, 53.65 feet said point having an elevation of 4522.50 feet;
thence S 76(degree)10'00"W, 300.65 feet said point having an elevation of 4525.1
feet; thence N 13(degree)47'50"W, 53.65 feet said point having an elevation of
4525.1 feet, thence N 76(degree)10'00" E, 300.64 feet to the Point Beginning.
Said surface shall be formed such that it maintains a constant slope between the
elevations described for the four corners.
The above described land parcel (above which the air rights are situated)
contains an area of approximately 16,130 sq.ft.
EXCEPTING THEREFROM a parcel of land situated within the NE 1/4 of Section 11,
T19N, R19E, M.D.M., Reno, Washoe County, Nevada, and being all that real
property located below a surface which has vertices defined as follows:
Beginning at a point on the Easterly line of Parcel A of Parcel Map No. 2461,
File No. 1422392 of the Official Records of Washoe County, Nevada; from which
the Northeast corner of said Parcel A bears N 13(degree)48'25"W, 106.30 feet
said point of beginning having an elevation of 4524.00 feet; thence S
13(degree)48'25"E, 52.05 feet said point having an elevation of 4524.00 feet;
thence S 76(degree)10'00"W, 300.65 feet said point having an elevation of 4526.6
feet; thence N 13(degree)47'50"W, 52.05 feet said point having an elevation of
4526.6 feet; thence N 76(degree)10'00"E, 300.64 feet to the Point of Beginning.
Said surface shall be formed such that it maintains a constant slope between the
elevations described for the four corners.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
BASIS OF ELEVATIONS: City Reno benchmark No. 96, a nail and washer located in
the top of the curb at the Northeast corner of East Fourth Street and North
Center Street, Elevation = 4496.46 feet.
<PAGE> 9
PARCEL 3: (ADJUSTED PARCEL C)
A parcel of land situated within the NE 1/4 of Section 11, T19N, R19E, M.D.M.,
Reno, Washoe County, Nevada, being all of "Adjusted Parcel C" as shown on the
Record of Survey showing a boundary line adjustment for Union Pacific Railroad
Company, Scout Development Corporation, and G and S Investment Company, as
recorded on January 26, 2000 in the official records of Washoe County, Nevada,
File No. 2417487 and being further described as follows:
Beginning at the Southeast corner of Parcel C of Parcel Map No. 2461, File No.
1422392 of the Official Records of Washoe County, Nevada; thence S
76(degree)10'00"W, 300.65 feet along the Southerly line of said Parcel C; thence
N 13(degree)47'50"W, 20.82 feet; thence N 76(degree)10'00"E, 300.65 feet; thence
S 13(degree)48'25"E, 20.82 feet to the Point of Beginning.
The above described parcel contains an area of approximately 6,260 sq. ft.
BASIS OF BEARINGS: Parcel Map No. 2461 for Southern Pacific Transportation
Company, File No. 1422392 of the Official Records of Washoe County, Nevada.
PARCEL 4:
All buildings and improvements located on the real property described in Parcels
1 through 3 above.
[STAMP]
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