EXHIBIT 10.97
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT ("Agreement") entered this 8th day of
September, 1999, by and between GMS GROUP, LLC, individually and as assignee of
certain bondholder claims ("GMS") and SANTA FE GAMING CORPORATION, a Nevada
corporation, ("SFGC").
R E C I T A L S:
WHEREAS, on or about December 1, 1998, Pioneer Finance Corp. ("PFC")
issued its 13 1/2% Bonds due December 1, 1998 (the 1988 Bonds) in the original
cumulative principal amount of one Hundred Twenty Million ($120,000,000.00)
Dollars and Pioneer Hotel Inc. ("PHI") executed and delivered a promissory note
in the amount of One Hundred Twenty Million ($120,000,000) Dollars in favor of
PFC on December 1, 1998 (the "PHI Note") and the PHI Note was subsequently
assigned to Security Pacific National Bank ("Security Pacific"), in its capacity
as trustee under that certain Trust Indenture dated as of December 1, 1998
between PFC, Sahara Casino Partners, L.P. and Security Pacific (the "1988 Bonds
Trust Indenture"), and in addition, PHI executed and delivered a deed of trust
and security agreement dated as of December 1, 1988 (the "Trust Deed") in favor
of Security Pacific to secure the PHI Note, which Trust Deed encumbers that
certain casino/hotel known as the Pioneer Hotel & gambling Hall located in
Laughlin, Nevada; and
WHEREAS, PFC and PHI (collectively, the "Debtors") are either directly
or indirectly wholly-owned subsidiaries of SFGC and are debtors-in-possession
under Chapter ▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code pursuant to certain cases before
the United States Bankruptcy Court for the District of Nevada (the "Bankruptcy
Court") as Bankruptcy Case Nos. BK-S-99-11404 LBR and ▇▇-▇-▇▇-▇▇▇▇▇ ▇▇▇ (the
"Reorganization Cases"); and
WHEREAS, SFGC guaranteed certain obligations arising under the 1988
Bonds, the PHI Note and the 1988 Bonds Trust Indenture (the "SFGC Guaranties"),
including, among other things, the punctual payment of principal and interest on
the 1988 Bonds; and
WHEREAS, GMS holds Six Million Four Hundred Ninety-One Thousand
($6,491,000.00) Dollars face amount of the 1988 Bonds (the "GMS Bonds"); and
WHEREAS, in anticipation of the 1988 Bonds' maturity date of
December 1, 1988, and with the realization on the part of the Debtors and
SFGC that the Debtors would not be able to satisfy the then outstanding
principal of Sixty Million ($60,000,000.00) Dollars due under the 1988 Bonds
and the PHI Note, PFC issued the Offering Circular and Consent Solicitation
Statement Dated October 23, 1998 and Supplement Dated November 14, 1988 to
Offering Circular and Consent Solicitation Statement (the
"Offering/Solicitation"), pursuant to which PFC offered to exchange new 13
1/2% First Mortgage Notes due December 1, 2006
(the "Amended Bonds") for the 1988 Bonds, and in the event that less than all
holders of the 1988 Bonds agreed to the proposed exchange, PFC sought the
consents (the "Consents") to the Offering/Solicitation of the holders of not
less than Forty-Two Million ($42,000,000.00) Dollars in face amount of the
1988 Bonds, and in the event that PFC obtained the Consents, PFC agreed to
commence a Chapter 11 proceeding and seek to reorganize in accordance with
the Offering/Solicitation through a plan of reorganization; and
WHEREAS, GMS did not consent to the Offering/Solicitation; and
WHEREAS, the Debtors filed their proposed joint plan of
reorganization to facilitate the exchange of the 1988 Bonds with Amended
Bonds which Debtors intend to be in accordance with the Offering/Solicitation
and the Consents, and on August 30, 1999, the Debtors filed their Second
Amended Plan of Reorganization (the "Plan"), which Plan (and any amendments
and additions thereto) must be found by the Bankruptcy Court to be
substantially in compliance with the Offering/Solicitation; and
WHEREAS, the 1988 Bonds were fully due and payable on December 1,
1998; and
WHEREAS, on December 1, 1998, PFC defaulted on its obligations to
the bondholders, including GMS; and
WHEREAS, SFGC defaulted on the SFGC Guaranties (the "SFGC Default");
and
WHEREAS, GMS commenced an action against SFGC in the Supreme Court
of the State of New York ("State Court Action") by way of a Summons and
Notice of Motion for Summary Judgment in Lieu of Complaint ("Summary Judgment
Motion") of May 5, 1999; and
WHEREAS, the State Court Action was subsequently removed ("Removal
Action") to the United States District Court, Southern District of New York
("Court") by SFGC on June 7, 1999; and
WHEREAS, in the Removal Action SFGC filed a Motion to Dismiss for
lack of Personal Jurisdiction, or Alternatively, to Transfer Pursuant to 28
U.S.C. ss. 1404 on June 7, 1999 ("Motion to Dismiss"); and
WHEREAS, in the Removal Action GMS filed a Notice of Motion for
Summary Judgment on June 18, 1999 regarding the Summary Judgment Motion; and
WHEREAS, SFGC and GMS are desirous of reaching an agreement that
will result in GMS (i) voting to approve the Plan; (ii) forbearing from
taking certain actions against SFGC and allowing SFGC time to meet certain of
its obligations under the SFGC Guaranties and the Amended SFGC Guaranty;
(iii) receiving the benefits of the Plan; (iv) exchanging the GMS Bonds and
receiving Amended Bonds pursuant to the Plan; and (v) preserving its right to
seek
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recourse on the SFGC Guaranties and the SFGC Amended Guaranty as a result of
the SFGC Default; and
WHEREAS, SFGC and GMS have agreed to resolve their disputes without
further trial or adjudication of any issue of fact or law in the Removal
Action;
NOW THEREFORE, the parties hereby agree as follows:
1. SFGC hereby consents to the jurisdiction of the Court with
respect to the subject matter of the Removal Action and of the
parties hereto.
2. SFGC further consents that the Court is the proper venue for the
Summary Judgment Motion and agrees to withdraw the Motion to
Dismiss and its opposition to the Summary Judgment Motion, with
prejudice.
3. GMS and SFGC agree that this Agreement shall be construed under
the laws of the State of New York. The parties further agree
that the Court shall retain jurisdiction over the Summary
Judgment Motion and with respect to the enforcement of this
Agreement.
4. SFGC agrees to pay GMS the amount of Two Hundred Seventy
Thousand ($270,000.00) Dollars as reimbursement of legal fees
and expenses ("GMS's Attorneys Fees"). Upon execution of this
Agreement the sum of Two Hundred Seventy Thousand ($270,000.00)
Dollars shall be wired to the trust account of LeBoeuf, Lamb,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, New York City, New York, which sums shall
be released to GMS immediately upon the occurrence of the
following events: (i) the filing with the Court of a request to
suspend the proceedings referenced in paragraph 6 below and (ii)
the transmittal of the GMS ballot(s) representing the GMS Bonds
votes in favor of the Plan, which ballots shall be delivered to
▇▇▇▇▇▇ & Silver, Ltd. within three (3) days of the execution of
this Agreement. The GMS attorneys fees and expenses are
inclusive of fees and expenses incurred through September 15,
1999. In the Event of Default (as defined below) the parties
agree that GMS' counsel shall be entitled to seek additional
attorneys' fees in connection with the enforcement of this
Agreement and/or the enforcement of, or collection on, the SFGC
Guaranties or the Amended SFGC Guaranty (as defined in paragraph
8 herein), which enforcement will be deemed to include, but not
be limited to, GMS' participation in the Reorganization Cases .
5. SFGC and GMS agree to forebear from proceeding with the Summary
Judgment Motion until the earlier of the Confirmation Date (as
defined in the Plan) of the Plan and November 30, 1999 and
provided that the Confirmation Date occurs by December 1, 1999,
and the Redemption Payment (referred to in paragraph 16 below)
is timely made, to further forebear from proceeding with the
Summary Judgment Motion until May 31, 2000, provided in each
instance that no Event of Default (as defined below) occurs.
Notwithstanding the provisions hereof,
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provided that the Bankruptcy Court has not denied confirmation
of the Plan prior to November 30, 1999 and confirmation of the
Plan is still pending, the forbearance date of November 30, 1999
shall be extended to December 31, 1999, provided Debtors have
petitioned an order of the Bankruptcy Court allowing for payment
of 50% of the December 1, 1999 interest payment on the 1988
Bonds and have either received approval from the Bankruptcy
Court for or have pending a motion to approve payment of the
Redemption Payment (as defined below). Subsequent to December
31, 1999, or in the event that Debtors have not satisfied the
conditions precedent to the continuance of the November 30, 1999
date to December 31, 1999, the continued forbearance by GMS
shall be in the discretion of GMS. In the event that the Plan is
not confirmed by December 31, 1999, and exclusivity is
terminated, GMS is free to also vote in favor of another plan of
reorganization proposed in the Reorganization Cases.
6. SFGC and GMS agree to cause the Court to immediately place the
Summary Judgment Motion on the suspended calendar of the Court
until May 31, 2000. Counsel for GMS and SFGC shall contact the
Court in this regard within 24 hours of the execution of this
Agreement.
7. GMS agrees not to impede or impair confirmation of the Plan,
provided that no Event of Default, (as defined below) occurs.
GMS reserves the right to object to confirmation of the Plan if
an Event of Default occurs.
8. GMS agrees to timely vote its Six Million Four Hundred
Ninety-One ($6,491,000.00) Dollars in GMS Bonds in favor of the
Plan and not to impede or impair confirmation of the Plan,
provided that no Event of Default, as defined below, occurs.
9. GMS and SFGC agree that in accordance with the Plan, the GMS
Bonds will be exchanged for Amended Bonds upon confirmation and
consummation of the Plan.
10. In accordance with the Plan, SFGC will guarantee PFC's
obligations to GMS as the holder of Amended Bonds (Amended SFGC
Guaranty" as further defined in the Plan).
11. Notwithstanding the outcome of the Reorganization Cases, SFGC
agrees that GMS, as a 1988 Bondholder, is granted all of the
rights, interests and benefits pledged to holders of the 1988
Bonds, including but not limited to the rights, interests and
benefits granted by the following documents:
a. Security Agreement, dated as of November 30, 1998,
between SFGC and IBJ ▇▇▇▇▇▇▇▇ Bank & Trust Company;
b. Pledge Agreement, dated as of November 30, 1998,
between SFGC and IBJ ▇▇▇▇▇▇▇▇ Bank & Trust Company;
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c. Security Agreement, dated as of November 30, 1998,
between Hacienda Hotel, Inc. and IBJ ▇▇▇▇▇▇▇▇ Bank &
Trust Company;
d. Security Agreement, dated as of November 30, 1998,
between Sahara Nevada Corp. and IBJ ▇▇▇▇▇▇▇▇ Bank &
Trust Company;
e. Security Agreement, dated as of November 30, 1998,
between Santa Fe Coffee Company and IBJ ▇▇▇▇▇▇▇▇ Bank
& Trust Company;
f. Custody Agent Appointment and Acceptance Agreement,
dated as of November 30, 1998, among IBJ ▇▇▇▇▇▇▇▇
Bank & Trust Company, SFGC and Nevada State Bank;
g. UCC-1 Financing Statements, filed in connection
interests granted by each of SFGC, Hacienda Hotel,
Inc., Sahara Nevada Corp. and Santa Fe Coffee
Company.
The collateral pledged pursuant to paragraphs 6a-g is collectively
referred to as the "Collateral".
12. SFGC reaffirms to GMS the validity and enforceability of the
SFGC Guaranties and the Amended SFGC Guaranty, as contained in
the Indenture, on the GMS Bonds and on the Amended Bonds, and
SFGC agrees that the exchange of the GMS Bonds for the Amended
Bonds (the "Exchange") does not affect the SFGC Default.
13. SFGC represents and warrants that the confirmation and
consummation of the Plan, or any amendment to the Plan submitted
by the Debtors and approved by the Bankruptcy Court, will not
affect the validity and enforceability of: (i) the SFGC
Guaranties as they relate to the GMS Bonds; (ii) the SFGC
Amended Guaranty as it relates to the GMS Bonds or GMS's Amended
Bonds; or (iii) GMS's rights as a 1988 Bondholder to the
Collateral, or any other collateral pledged by SFGC to secure
the SFGC Guaranties or the Amended SFGC Guaranty, except as
otherwise specifically provided for in this Agreement.
14. GMS represents and warrants that it holds Six Million Four
Hundred Ninety-One ($6,491,000.00) Dollars in 1988 Bonds and has
the authority and right to vote these 1988 Bonds in favor of the
Plan.
15. SFGC agrees that GMS shall be accorded the same treatment as
other Bondholders under the Plan except as provided for by this
Agreement. Further, in accordance with SFGC's Amended Guaranty,
as provided for in the Plan, SFGC guarantees PFC's obligations
to GMS as the holder of Amended Bonds on the terms set forth in
the Amended Indenture.
16. SFGC agrees that upon the Effective Date of the Plan, GMS shall
be entitled to a payment in the amount of 10.83% of the
principal amount of GMS's 1988 Bonds
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it holds plus interest thereon at the rate of 13 1/2% per annum from
December 1, 1998 until redeemed (the "Redemption Payment"), and if
the Debtors do not make the Redemption Payment, SFGC shall make such
payment. In the event the Bankruptcy Court so orders, GMS agrees to
accept its pro rata portion of the interest which has accrued on the
sums deposited by Debtors in a designated account to fund the
Redemption Payment and additional Amended Bonds or 1988 Bonds, as
the case may be, as payment in kind for the balance due of the
interest accrual.
17. SFGC consents to the immediate termination of the obligation of GMS
to forebear from proceeding with the Summary Judgment Motion upon the
occurrence of any of the following events ("Events of Default"):
a. SFGC's failure to pay GMS's Attorneys Fees as
provided in Paragraph 4 above;
b. SFGC's failure to make the Redemption Payment to GMS
if PFC does not timely make such payment as provided
for in the Plan;
c. SFGC's further encumbrance of the Collateral or any
other collateral pledged to secure the SFGC Guarantee
and Amended SFGC Guarantee, except as provided for in
the Plan and the documents entered into to effectuate
the Plan as approved by the Bankruptcy Court;
d. An Event of Default occurring under any other
obligation of which SFGC is a guarantor, except for
existing obligations in default and future
non-monetary defaults which may arise during the term
of this Agreement regarding the 11% First Mortgage
Notes issued by Santa Fe Hotel, Inc., a Nevada
corporation ("SFHI"); or
e. Failure of the Plan to be confirmed on or before
November 30, 1999, as that date may be extended
pursuant to paragraph 5 above.
18. SFGC agrees to provide GMS with notice of a default of any of the
items listed in paragraph 17 above.
19. SFGC represents and warrants that the security interest granted by
SFGC to the Indenture Trustee on or about December 1, 1998 as required
under the Offering/Solicitation is valid and enforceable as provided
for in the 1988 Bonds Trust Indenture. SFGC further represents and
warrants that the value of the collateral for the 1988 Bonds and SFGC
Guaranty (and for the Amended Bonds and Amended SFGC Guaranty when
issued) is in excess of the amount due on the 1988 Bonds (and Amended
Bonds and Amended SFGC Guaranty when issued), and as such, the 1988
Bonds (and Amended Bonds and Amended SFGC Guaranty when issued) are
fully secured. SFGC further represents and warrants to GMS that a lien
granted by SFGC in favor of GMS with respect to the common stock of
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Sahara Las Vegas Corporation, a Nevada corporation ("SLVC"), or its
parent, Sahara Resorts, a Nevada corporation, or SFHI, or a lien
granted by SLVC or SFHI in favor of GMS with respect to any of their
respective assets would violate the Offering/Solicitation and certain
obligations arising under existing indebtedness of SLVC and SFHI.
However, SFGC represents and warrants that if GMS were to obtain a
judgment against SFGC, that GMS, as a Bondholder would be entitled to
levy a judgment against the Collateral to the extent that any other
judgment creditor could levy execution against the Collateral.
20. If an Event of Default occurs SFGC agrees to and hereby does, (i)
waive any defenses it may have to the Summary Judgment Motion, (ii)
withdraw its opposition to the Summary Judgment Motion, with prejudice,
and (iii) represent that it does not oppose the Summary Judgment
Motion.
21. SFGC waives and releases any cause of action against ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and/or GMS in connection with the
involuntary bankruptcy petition filed by them against SFGC.
22. The parties hereto represent and warrant to each other that each
has the requisite authority to enter into this Agreement and be bound
by the terms hereof. Annexed hereto as Exhibit B and made a part hereof
are certificates of the respective Secretaries of the Boards of GMS and
SFGC as to the resolutions duly adopted by the Boards or duly
authorized committee thereof evidencing their consent to this
Agreement.
23. The parties hereto represent and warrant to each other that each
has had an opportunity to retain counsel or has been represented by
counsel in connection with the review, approval and execution of this
Agreement and that they have read and understand this Agreement.
24. 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
the parties to this Agreement notwithstanding that all the parties are
not signatory to the same counterpart.
25. Time is of the essence in the performance of the parties respective
obligations set forth in this Agreement.
26. No modification, amendment, supplement to or waiver of this
Agreement or of any of its provisions shall be binding upon the parties
hereto unless made in writing and duly signed by the parties.
27. Failure of any party to exercise any right provided for herein
shall not be deemed to be a waiver of any right hereunder.
28. It is further understood and agreed by the parties that the
contents and existence of this Agreement shall be considered
confidential and shall not be disclosed by
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GMS, its agents, representatives, attorneys or employees to any
third party entity except with the prior written approval of SFGC or
upon the order of a court of competent jurisdiction. Remedies for
violation of this provision shall be as provided for by applicable
law.
29. Notices given by a party under this Agreement shall be in writing
and shall be deemed duly given (i) when delivered by hand, (ii) when
five (5) days have elapsed after its transmittal by registered or
certified mail, postage prepaid, return receipt requested, (iii) when
two (2) days have elapsed after its transmittal by nationally
recognized air courier service, or (iv) when delivered by telephonic
facsimile transmission (with a copy thereof so delivered by hand, mail
or air courier if the recipient does not acknowledge receipt of the
transmission). Notices shall be sent to the addresses set forth below,
or another as to which that party has given written notice, in each
case with a copy provided in the same manner, same time to the persons
shown below:
IF TO SFGC: Santa Fe Gaming Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Tel: ▇▇▇ ▇▇▇-▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Tel: ▇▇▇ ▇▇▇-▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
If to GMS: GMS Group, LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Tel: ▇▇▇ ▇▇▇-▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
With a copy to: LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Tel: ▇▇▇ ▇▇▇-▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
30. This Agreement and the obligation to forbear hereunder shall be
binding upon the successors and assigns of the GMS Bonds or GMS's
Amended Bonds. GMS
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agrees to notify each and every successor or assignee of the GMS
Bonds or GMS's Amended Bonds of this Agreement and the obligation
and rights arising hereunder. No assignee or successor to the GMS
Bonds or GMS's Amended Bonds will have the right to substitute in
the Removal Action in the place and stead of GMS.
Intending to be legally bound, the undersigned have executed this
Agreement.
Dated: September 8, 1999.
THE GMS GROUP, LLC.
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Senior Vice President
SANTA FE GAMING CORPORATION
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President
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