April 18, 1996
Via Telecopies: (702) 734 2954
Mr. Todd Fisher
Debbie Reynolds Hotel and Casino
305 Convention Center Drive
Las Vegas, Nevada 89109
Re: The Debbie Reynolds Hotel and Casino, Las Vegas, Nevada.
Dear Todd:
The purpose of this letter is to set forth the proposed terms and conditions to
be submitted for approval to the investment committee of CS First Boston
Mortgage Capital Corporation or any of its affiliates (the "Lender" or "CS First
Boston") for CS First Boston to provide senior first-mortgage financing (the
"financing") to the Debbie Reynolds Management Company, Inc., a single-purpose,
bankruptcy remote entity controlled by Debbie Reynolds and Todd Fisher (the
"Borrower") secured by the Debbie Reynolds Hotel and Casino (including, but not
limited to the hotel, casino, showroom, museum and all other improvements) on
+/-6.5 acres in Las Vegas, Nevada (the "Property"). The Borrower hereby
represents that it owns the Property.
The Financing will be evidenced by a senior note (the "Senior Note") in the
amount of $8,500,000 secured by a senior mortgage of a like amount (the "First
Mortgage") on the Property. The terms and conditions of the Financing are
subject to CS First Boston's commencement and completion of due diligence on the
Property and verification of Borrower's representations regarding the Property.
Borrower: The Debbie Reynolds Management Company, Inc., a Nevada
Corporation, a wholly-owned subsidiary of the Debbie
Reynolds Hotel and Casino, Inc., a corporation whose
business purpose is restricted to owning and operating the
Property and which is structured as a single-purpose,
bankruptcy-remote entity. The Financing shall be
non-recourse to the Borrower except for standard carve-outs
and the carve-outs described in the sections contained
hereinafter entitled "Bankruptcy" and "Interference",
respectively.
Servicer: CS First Boston, or other entity selected by CS First
Boston.
Loan Amount: $8,500,000 (the "Loan Amount"). 43 rooms at the Property
have been converted to condominium units (the "Unit(s)")
and/or time-share conversion intervals (the "Interval(s)").
At or subsequent to the closing of the Financing. Borrower
may sell one or more Units and/or Intervals. The release
price (the "Release Price") paid to Lender for each Unit
sold shall equal $100,000. The Release Price for each
Interval sold shall equal: i) $1,250 if sold prior to
receipt by Borrower of a full gaming license (the
"License"); or ii) $2,000 if sold after receipt by Borrower
of the License. Upon a payment of the Release Price on a
Unit or Interval, the principal balance of the Financing
shall be reduced by an amount equal to the Release Price.
Borrower may not convert additional (beyond the current 43
rooms that have already been converted) rooms to
condominiums or time-share intervals prior to receiving
approval from Lender, in Lender's sole discretion, for such
conversion. Borrower shall use $1,000,000 of the Loan Amount
to pay-off existing payables and $1,000,000 to establish a
working- capital reserve.
Additional Loan Amount: Subject to the terms and conditions contained in
the section hereinafter entitled Forward
Commitment, Lender may fund an additional amount
of $1,500,000 (the "Additional Loan Amount"). The
Additional Loan Amount shall be subject to the
same loan documents and terms (except that the
interest rate on the Loan Amount and the
Additional Loan Amount will increase to Libor plus
600 Bps) including the maturity date (24 months
from the funding of the Loan Amount).
Forward Commitment: If Borrower has obtained the License prior to six
months after the date of the funding of the Loan
Amount, Lender will fund the Additional Loan
Amount upon payment by Borrower to Lender of a fee
of $30,000. Borrower shall pay Lender's expenses
related to the determination of the validity of
the License and related to the funding of the
Additional Loan Amount.
Option: Upon funding of the Loan Amount, Borrower shall
grant to Lender an option to purchase at any time
500,000 shares of stock of Debbie Reynolds
Hotel/Casino Inc., at 110% of the market price as
of the date of the closing of funding of the Loan
Amount (Lender shall have piggy-back rights of
registration).
Conditions to Funding: In addition to the other conditions described
herein, including without limitation, delivery of
loan documentation in form and substance
reasonably satisfactory to CS First Boston and its
counsel and payment of fees and expenses as set
forth herein, the closing of the Financing shall
be subject to the following conditions: (i)
delivery of satisfactory title reports, title
insurance and surveys; (ii) delivery of
satisfactory Phase I environmental reports and, if
required, Phase II environmental reports; (iii)
delivery of satisfactory engineering reports; (iv)
evidence satisfactory to CS First Boston of all
material permit and certificate of occupancy
requirements and zoning entitlements; (v) no
material adverse change shall have occurred in the
physical condition of the Property; (vi) delivery
of an acceptable appraisal report for the Property
indicating a fair market value at closing of not
less than $20,000,000, and confirmation by Lender,
after review of the market, that the fair market
value at closing of the Property is, in fact, not
less than $20,000,000; (vii) review and acceptance
of current financial statements of the Principals
(as defined hereinafter) reflecting liquidity and
net worth acceptable to CS First Boston in its
sole and absolute discretion; (viii) review and
acceptance of all agreements and documents
regarding any entities affiliated with the
Property, and any transfers, sales, and financings
relating to the Property; and (ix) evidence
satisfactory to Lender that any and all leases or
other contractual arrangements between the
Borrower and any entity affiliated with the
Borrower or any of the Principals (as defined
hereinafter) have been terminated unless approved
by Lender.
Right of First Refusal: CS First Boston shall have the right of first
refusal to provide Borrower with expansion or
permanent financing; (i) upon prepayment; or (ii)
upon expiration and repayment of all or a portion
of the Financing.
The Financing
Term: 24 months from the funding of the Loan Amount.
Prepayment: Year 1: Prepayable with penalty of 2%. Year 2:
Prepayable without penalty.
Amortization: Interest-only (subject to the Release Prices paid
to Lender pursuant to sales of Unit or Intervals
as described herein).
Interest Rate: LIBOR plus 500 BPs payable monthly in
arrears (actual/360 basis) match funded with
periodic reset at Borrower's election prior to
Borrower receiving the Additional Loan Amount from
Lender. After receiving the Additional Loan Amount
from Lender the interest rate on the entire
principal balance of the Financing shall increase
to LIBOR plus 600 BPs.
Funding Fee: The funding fee ("Funding Fee") shall equal
$500,000 (the Good Faith Deposit, less expenses
will be credited against the Funding Fee). The
Funding Fee shall be earned at the closing of the
Financing.
Cost and Expenses: Borrower shall be responsible for all reasonable
expenses associated with the Financing including,
but not limited to, closing expenses, the cost of
title insurance, transfer and recording fees, and
the fees and expenses of its counsel, Servicer's
counsel and Lender's counsel. Borrower shall
reimburse Lender and Servicer for any out of
pocket expenses related to the preparation of
documents pertaining to the Financing, and all
expenses incurred by Lender including travel, due
diligence, and legal costs and expenses, and the
cost of any outside providers of due diligence
reports.
Collateral: The Financing will be secured by (i) the First
Mortgage; (ii) an assignment of leases and rents,
if any; (iii) any reserve(s), as required herein
or as may be required by Lender, for deferred
maintenance and/or environmental remediation; (iv)
the real estate tax, insurance, tenant
improvement, leasing commission, capital
expenditure, and working capital escrow accounts;
(v) such other documents as CS First Boston or its
counsel deem appropriate to evidence the Financing
(collectively, the "Loan Documents"); and (vi)
assignment of the managing general partner
interest (the "Managing Interest") in the
Borrower. The Managing Interest will be released
upon repayment in full of the Financing.
Bankruptcy: In the event that Borrower files for protection
under the U.S. Bankruptcy Code, either voluntary
or involuntary (if commenced by Borrower, any
general partner or affiliate thereof or any person
acting in connection with any such person), Debbie
Reynolds and Todd Fisher (the "Principals") shall
immediately have unconditional, absolute and
unlimited recourse for the full amount of the
Financing and all losses, costs and expenses
incurred by Lender relating to the Financing.
Interference: In the event that CS First Boston elects to pursue
any of its rights or remedies available under the
Loan Documents, following an event of default by
Borrower and Borrower's failure to cure said
default in accordance with the cure provisions
contained in the loan documents, the Principals
shall immediately have unconditional, absolute and
unlimited recourse for the full amount of the
Financing and all losses, costs and expenses if CS
First Boston is delayed, hindered or interfered
with in any manner by any action of Borrower,
Principals or any of their respective affiliates
or agents.
Other Indebtedness: The Borrower will not incur any other
indebtedness.
Loan Documents: All documentation shall be in form and content
acceptable to CS First Boston, Servicer, and their
respective counsel, and shall be supported by
acceptable representations and warranties of the
Borrower, opinions of counsel and proof of related
matters that counsel shall deem necessary.
Good Faith Deposit: Upon acceptance of this term letter, Borrower
shall pay to the Lender a good faith deposit (the
"Good Faith Deposit") in the amount of $100,000
cash and $100,000 worth of stock in Debbie
Reynolds Hotel/Casino Inc. based on the
then-current market value of such stock. If the
market value of such stock shall decline by more
than 20% Borrower shall pay to Lender additional
stock in an amount such that Lender continues to
hold $100,000 worth of such stock. The Good Faith
Deposit shall be non-refundable provided the
Lender provides the Financing in accordance with
the terms contained in this letter (with such
modifications as may be agreed upon by Borrower
and Lender) and Lender's other general loan terms
(with such modifications as may be agreed upon by
Borrower and Lender). In the event the Lender
fails to provide the Financing, Lender will refund
the Good Faith Deposit less its reasonable
expenses incurred in connection with the
Financing. At closing of the Financing, the
portion of the Good Faith Deposit not applied to
expenses will be credited against the Funding Fee.
The Funding Fee shall be earned when Lender, in
substantial conformance with this letter, is
prepared to provide the Financing. The Funding Fee
shall also be earned if Lender does not provide
the Financing as a result of Borrower's failure to
cooperate (i.e. provide timely information,
negotiate legal documents, etc.) with Lender
towards the closing of the Financing.
This letter has been prepared for the sole purpose of discussing with Borrower
an opportunity to finance the Property. This is not a commitment by CS First
Boston to provide any financing whether described herein or otherwise. Any such
commitment would arise solely pursuant to a mutually executed definitive
agreement regarding a commitment to provide financing by CS First Boston.
Upon execution of this letter, Borrower acknowledges that it is working solely
with CS First Boston to procure financing for the Property. Please acknowledge
your acceptance of the terms and conditions relating to the Financing described
herein by executing the acknowledgement below and enclosing the Good Faith
Deposit. By your signature below, you agree to facilitate and assist CS First
Boston in its continued due diligence for the purpose of proceeding in good
faith towards the Financing. If CS First Boston has received an originally
executed copy of this letter, on or before April 19, 1996, CS First Boston will
continue to perform its due diligence and commence with the preparation of a
submission to the investment committee of CS First Boston for approval. In the
event the Financing is approved, the Financing will occur on or before 20 days
after this letter is executed by Borrower and Lender and the Good Faith Deposit
is paid to Lender. In any event, CS First Boston's willingness to proceed on the
basis of the terms and conditions described herein terminates at the close of
business on April 19, 1996. If you have any questions, please call me at (212)
909-4481.
Sincerely,
/s/ RICHARD LUFEIG
---------------------------------
Richard Lufeig
Vice President
ACKNOWLEDGED
By:
--------------------------
Todd Fisher
As:
Title: