EXHIBIT 10.49
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ELSINORE CORPORATION
EXCHANGE AGREEMENT
Dated as of September 29, 1998
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EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "Agreement") is dated as of
September 29, 1998 and entered into by and between ELSINORE CORPORATION, a
Nevada corporation ("Elsinore"), and THE INVESTMENT ACCOUNTS LISTED ON THE
SIGNATURE PAGES HEREOF (each, a "Fund" and, collectively, the "Funds").
R E C I T A L S
WHEREAS, Elsinore is a party to that certain Amended and
Restated Note Agreement, dated as of March 3, 1997, by and between Elsinore, as
issuer, the financial institutions named therein, as purchasers, and Eagle
Gaming, Inc., Elsub Management Corporation, Four Queens, Inc., Elsinore Tahoe,
Inc., Four Queens Experience Corporation, Olympia Gaming Corporation, Palm
Springs East Limited Partnership and Pinnacle Gaming Corporation, as guarantors,
pursuant to which Elsinore issued 11 1/2% First Mortgage Notes due 2000 in the
original aggregate principal amount of $3,855,739.39 (such notes being the
"First Mortgage Notes");
WHEREAS, Elsinore is a party to that certain Amended and
Restated Indenture (the "Indenture"), dated as of March 3, 1997 by and between
Elsinore, as issuer, the guarantors named therein (the "Guarantors"), and U.S.
Bank Trust National Association (formerly known as First Trust National
Association), as Trustee (the "Trustee"), as amended by the First Supplemental
Indenture and pursuant to which Elsinore issued 13 1/2% Second Mortgage Notes
due 2001 in the original aggregate principal amount of $30,000,000 (such notes
being the "Second Mortgage Notes");
WHEREAS, the Funds hold Second Mortgage Notes in the original
aggregate principal amount of $29,104,000;
WHEREAS, the parties hereto have reached an agreement pursuant
to which (i) Elsinore will issue to the Funds 50,000,000 shares of Preferred
Stock in exchange for Existing Second Mortgage Notes in the original aggregate
principal amount of $18,000,000; and (ii) Elsinore will issue to the Funds New
Mortgage Notes in the aggregate principal amount of $11,104,000 pursuant to the
Indenture, as amended by the Second Supplemental Indenture in exchange for
Existing Second Mortgage Notes in the same principal amount;
NOW, THEREFORE, in consideration of the foregoing, and the
agreements, covenants and conditions contained herein and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
1.1 Certain Defined Terms
In addition to the terms defined in the text of this
Agreement, the following terms used in this Agreement shall have the following
meanings:
"Agreement" means this Exchange Agreement dated as of
September 29, 1998, as it may be amended, amended and restated or otherwise
modified or supplemented from time to time.
"Certificate of Designations" means the Certificate of
Designations, Preferences and Rights of Series A Convertible Preferred Stock
relating to the Preferred Stock, in the form of Exhibit A attached to the
Preferred Stock Purchase Agreement.
"Closing Date" means the date on or before September 30, 1998
on which the conditions set forth in Section 4 hereof shall have been satisfied
and the Transactions shall have been consummated.
"Existing Second Mortgage Notes" means the $29,104,000
original aggregate principal amount of Second Mortgage Notes held by the Funds,
which were issued under the Indenture prior to the amendment thereof by the
Second Supplemental Indenture.
"Existing Securities" means the Existing Second Mortgage Notes.
"First Supplemental Indenture" means the First Supplemental
Amended and Restated Indenture, dated as of September 18, 1997, among Elsinore,
The Guarantors, and the Trustee.
"Lien" means any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"Morgens, Waterfall" means Morgens, Waterfall, Vintiadis & Co., Inc.
"New Securities" means the New Mortgage Notes and the Preferred Stock.
"New Mortgage Notes" means Second Mortgage Notes to be issued
under the Indenture, as amended by the Second Supplemental Indenture, in an
original aggregate principal amount of $11,104,000, which New Mortgage Notes
will bear interest at the rate of 12.83% per annum during the period beginning
on the date of the New Mortgage Notes but otherwise have terms comparable to
those of the Existing Second Mortgage Notes.
"Non-MWV Second Mortgage Notes" means the $896,000 original
aggregate principal amount of Second Mortgage Notes held by Persons other than
the Funds, which were issued under the Indenture prior to the amendment thereof
by the Second Supplemental Indenture.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"Preferred Stock" means the Series A Convertible Preferred
Stock of Elsinore, par value $0.001 per share, with a liquidation preference of
$0.36 per share plus accrued dividends, and with the other terms set forth in
the Certificate of Designations.
"Preferred Stock Purchase Agreement" means a Series A
Preferred Stock Purchase Agreement between Elsinore and the Funds, substantially
in the form of Exhibit B hereto.
"Registration Rights Agreement" means a Registration Rights
Agreement among Elsinore and the Funds, relating to the Preferred Stock,
substantially in the form of Exhibit C attached to the Preferred Stock Purchase
Agreement.
"Second Supplemental Indenture" means a Second Supplemental
Indenture, dated as of September 29, substantially in the form of Exhibit A
attached hereto, which amends the Indenture.
"Transaction Documents" means this Agreement, the Second
Supplemental Indenture, the Preferred Stock Purchase Agreement, the Registration
Rights Agreement, and the New Securities.
"Transactions" means the transactions pursuant to which the
Transaction Documents will be executed and delivered by the parties thereto and
the New Securities will be issued in exchange for Existing Securities, all in
accordance with the terms of this Agreement.
"Subsidiary" means any corporation, association partnership or
other business entity of which more than 50% of the total voting power of shares
of stock or partnership shares entitled to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
1.2 Other Definitional Provisions
References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference.
Section2. AGREEMENT TO CONSUMMATE TRANSACTIONS
Subject to the prior or concurrent satisfaction of the
conditions to effectiveness contained in Section 4, on the Closing Date each of
the parties hereto shall perform its agreements set forth below.
2.1 Exchange of Existing Securities for New Securities.
A. Elsinore will:
(i) execute and deliver to the Funds the Preferred Stock Purchase Agreement and
the Registration Rights Agreement;
(ii) execute and deliver, and cause the Guarantors to execute and deliver, the
Second Supplemental Indenture to the Trustee;
(iii) issue to the Funds 50,000,000 shares of Preferred Stock in exchange for
Existing Second Mortgage Notes in the original aggregate principal amount of
$18,000,000;
(iv) deliver to the Trustee for cancellation under Section 2.12 of the Indenture
all Non-MWV Second Mortgage Notes and all Existing Second Mortgage Notes
purchased by Elsinore under the Preferred Stock Purchase Agreement; and
(v) issue to the Funds New Mortgage Notes in the original aggregate principal
amount of $11,104,000 duly authenticated by the Trustee and guaranteed by the
Guarantors in exchange for Existing Second Mortgage Notes in the same principal
amount.
B. The Funds will:
(i) execute and deliver to Elsinore the Preferred Stock Purchase Agreement and
the Registration Rights Agreement;
(ii) deliver to Elsinore Existing Second Mortgage Notes in the original
aggregate principal amount of $11,104,000 in exchange for the New Mortgage
Notes; and
(iii) deliver to Elsinore Existing Second Mortgage Notes in the original
aggregate principal amount of $18,000,000 in exchange for 50,000,000 shares of
Preferred Stock in accordance with the Preferred Stock Purchase Agreement.
2.2 Consent to Amendments.
The Funds hereby consent to the amendments to the Indenture
set forth in the Second Supplemental Indenture, subject to the terms and
conditions contained therein.
2.3 Further Assurances.
Elsinore and the Funds each hereby acknowledges each of the
agreements of the parties contained in this Section 2 and agrees that they shall
execute and deliver each of the Transaction Documents to which it is a party and
exchange the New Securities for the instruments evidencing the Existing
Securities and take all such other reasonable actions as may be necessary or
advisable to effectuate the agreements contained herein.
2.4 Confirmation of Lien
Promptly after the Closing Date, Elsinore will cause Four
Queens to execute, deliver and record a Modification to Deed of Trust in form
and substance satisfactory to the Trustee and the Funds confirming that that
certain Deed of Trust, Assignment of Rents, and Security Agreement in favor of
U.S. Bank Trust National Association (f/k/a First Trust National Association),
as Beneficiary, dated as of October 8, 1993, which was recorded in the official
records of ▇▇▇▇▇ County, Nevada, on October 8, 1993 in Book 931008 Document No.
0554, secures all obligations under the Indenture and the New Mortgage Notes on
a first priority basis, and will execute, deliver and record all other documents
reasonably necessary or desirable to confirm the lien and priority of such Deed
of Trust.
Section 3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of all Parties
Elsinore and each Fund each severally represents and warrants
to the other party hereto that it has the corporate or partnership power and
authority to execute, deliver and perform this Agreement and each of the other
Transaction Documents to which it is a party and to perform its obligations
hereunder and thereunder, and has taken all necessary corporate or partnership
action to authorize the execution, delivery and performance by it of this
Agreement and each of the other Transaction Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby.
3.2 Additional Representations and Warranties of Elsinore.
A. Elsinore represents and warrants to each Fund that:
(i) No Conflict. The execution, delivery and performance by Elsinore and the
Guarantors of the Transaction Documents to which they are a party and the
consummation of the Transactions do not and will not (a) violate any provision
of any law or any governmental rule or regulation (including any gaming law,
rule or regulation) applicable to Elsinore or any of its Subsidiaries or any
Guarantor, the certificate or articles of incorporation or bylaws of Elsinore or
any of its Subsidiaries or any Guarantor, or any order, judgment or decree of
any court or other agency of government binding on Elsinore or any of its
Subsidiaries or any Guarantor; (b) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of Elsinore or any of its Subsidiaries or any
Guarantor; (c) result in or require the creation or imposition of any Lien upon
any of the properties or assets of Elsinore or any of its Subsidiaries or any
Guarantor (other than any Liens created under any of the Transaction Documents
in favor of the Trustee or the Funds); or (d) require any approval of
stockholders or any approval or consent of any Person under any contractual
obligation of Elsinore or any of its Subsidiaries or any Guarantor, except for
such approvals or consents which will be obtained on or before the Closing Date
and disclosed in writing to the Funds.
(ii) Governmental Consents. The execution, delivery and performance by Elsinore
and the Guarantors of the Transaction Documents to which they are a party and
the consummation of the transactions contemplated thereby do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body (including any gaming regulatory authority).
(iii) Binding Obligation. Each of the Transaction Documents has been duly
executed and delivered by Elsinore and the Guarantors listed on the signature
pages thereof and is the legally valid and binding obligation of Elsinore and
such Guarantors, enforceable against Elsinore and such Guarantors in accordance
with its respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
Section 4. CONDITIONS TO EFFECTIVENESS
Section 2 of this Agreement shall become effective upon the
satisfaction of all of the conditions set forth in this section:
4.1 Delivery of Elsinore and Guarantor Documents
On or before the Closing Date, Elsinore shall have delivered,
or caused to be delivered, to the Funds the following, each, unless otherwise
noted, dated the Closing Date:
A. Certified copies of the certificate or articles of incorporation or
partnership agreement of Elsinore and each Guarantor, together with a good
standing certificate from the Secretary of State of its respective jurisdiction
of incorporation or formation dated a recent date prior to the Closing Date;
B. Copies of the bylaws of Elsinore and each corporate Guarantor certified as of
the Closing Date by Elsinore's, corporate secretary or an assistant secretary;
C. Resolutions of the board of directors of Elsinore and each Guarantor,
approving and authorizing the execution, delivery and performance of the
Transaction Documents to which it is a party, certified as of the Closing Date
by the corporate secretary or an assistant secretary of Elsinore or such
Guarantor as being in full force and effect without modification or amendment;
D. Signature and incumbency certificates of the officers of Elsinore and each
Guarantor executing the Transaction Documents to which it is a party;
E. Executed originals of the Transaction Documents to which Elsinore and each
Guarantor is a party; and
F. Such other documents as the Funds may reasonably request.
4.2 Consent by Holders of First Mortgage Notes
On or before the Closing Date, Elsinore shall have obtained
consent to the Transactions from the holders of all outstanding First Mortgage
Notes.
4.3 Purchase or Redemption of Non-MWV Second Mortgage Notes
On or before the Closing Date, Elsinore shall have purchased
all outstanding Non-MWV Second Mortgage Notes.
4.4 Transaction Documents.
On or before the Closing Date, Elsinore and the Funds shall
have executed and delivered to each other the Preferred Stock Purchase Agreement
and the Registration Rights Agreement, and Elsinore, the Guarantors, and the
Trustee shall have executed and delivered to each other the Second Supplemental
Indenture. All conditions precedent to the effectiveness of such agreements
(other than the exchanges of Existing Securities for New Securities contemplated
thereby) shall have been satisfied or waived.
4.5 Legal Opinions.
On the Closing Date, the Funds shall have received the
favorable legal opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, substantially in the form
of Exhibit C hereto and received the favorable legal opinion of ▇▇▇▇▇▇ & Silver,
Ltd., substantially in the form of Exhibit D hereto.
4.6 Fairness Opinion.
On or before the Closing Date, Elsinore shall have received an
opinion of ▇▇▇▇▇▇ Associates to the effect that the Transactions by and among
the parties hereto are fair to the minority shareholders of Elsinore from a
financial point of view.
4.7 Acknowledgement and Confirmation
On the Closing Date, Elsinore and each Guarantor shall have
executed and delivered to the Trustee and MWV an Acknowledgement and
Confirmation substantially in the form of Exhibit E, hereto.
4.8 Corporate and Partnership Proceedings
On or before the Closing Date, all corporate, partnership and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by the Funds and its counsel shall be reasonably satisfactory in form
and substance to the Funds and its counsel, and Morgens, Waterfall, on behalf of
the Funds, and its counsel shall have received all such counterpart originals or
certified copies of such documents as they may reasonably request.
4.9 Other Matters
Elsinore shall have performed in all material respects all
agreements which this Agreement provides shall be performed on or before the
Closing Date except as otherwise disclosed to and agreed to in writing by the
Funds.
Section 5. MISCELLANEOUS
5.1 Survival of Representations.
The representations and warranties of the parties hereto shall
survive the consummation of the Transactions.
5.2 Integration.
This Agreement (including the Schedules and Exhibits hereto)
constitutes the entire agreement with respect to the subject matter hereof, and
supersedes all other prior agreements and understandings, both oral and written,
among the parties with respect to the subject matter hereof.
5.3. Counterparts; Effectiveness
This Agreement may be executed in any number of counterparts
(including telecopy counterparts), and by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective upon the execution and
delivery of a counterpart hereof by each of Elsinore and the Funds.
5.4 Severability.
A. In case any provision in or obligation under this Agreement shall be
determined to be invalid, illegal or unenforceable in any jurisdiction by any
court of competent jurisdiction before the consummation of the Transactions,
this Agreement shall be null and void.
B. In case any provision in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction in any circumstance in which
subsection 5.4A is not applicable, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
5.5 Liability
The obligations and liabilities of the constituent investment
accounts of Investor under this Agreement shall be several, to the extent of
each such investment account's respective percentage ownership interest of
issued and outstanding shares of common stock of Elsinore, and not joint.
Elsinore has designated Morgens, Waterfall as its agent for the sole purpose of
receiving communications from, and sending communications to, such investment
accounts in connection with this Agreement. None of Morgens, Waterfall, ▇▇▇▇ ▇.
Waterfall, or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ individually, nor any officers, directors,
employees, agents, or controlling persons of Morgens, Waterfall, shall have any
obligations or liabilities under or in connection with this Agreement by reason
of the foregoing or for any other reason.
5.6 Notices
Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
business days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name below, or such other
address as shall be designated by such party in a written notice delivered to
the other parties hereto.
if to Elsinore:
Elsinore Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
if to the Funds:
Morgens, Waterfall, Vintiadis & Co., Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
5.7 Public Announcements.
Each of the parties hereto agrees that it will not issue any
press release or otherwise make any public statement with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
consent if (i) the disclosure is required by law, and (ii) the party making such
disclosure has first used its reasonable best efforts to consult with the other
party about the form and substance of such disclosure.
5.8 Expenses.
Each party shall bear its own expenses and costs incurred in
connection with this Agreement and the Transactions.
5.9 Governing Law
This Agreement shall be deemed to be made under, shall be
governed by and shall be construed and enforced in accordance with the internal
laws of the State of New York, without regards to conflicts of laws provisions.
5.10 Headings
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
[Remainder of page intentionally left blank.]
S-1
WITNESS, the due execution hereof by the respective duly
authorized general partner or officer of the undersigned as of the date first
written above.
ELSINORE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
FUNDS:
BETJE PARTNERS
ENDOWMENT RESTART LLC
MORGENS WATERFALL INCOME PARTNERS, L.P.
PHOENIX PARTNERS, L.P.
MWV EMPLOYEE RETIREMENT PLAN GROUP TRUST
RESTART PARTNERS, L.P.
RESTART PARTNERS II, L.P.
RESTART PARTNERS III, L.P.
RESTART PARTNERS IV, L.P.
RESTART PARTNERS V, L.P.
By: /s/ ▇▇▇▇ ▇. "▇▇▇▇▇" Waterfall
Name: ▇▇▇▇ ▇. "▇▇▇▇▇" Waterfall
Title: Authorized Signatory
EXHIBIT A
FORM OF SECOND SUPPLEMENTAL INDENTURE
(See Exhibit 10.48 attached to Form 8-K)
EXHIBIT B
FORM OF PREFERRED STOCK PURCHASE AGREEMENT
(See Exhibit 10.49 attached to Form 8-K)
EXHIBIT C
FORM OF LEGAL OPINION OF ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
EXHIBIT D
FORM OF LEGAL OPINION OF ▇▇▇▇▇▇ & SILVER, LTD.
EXHIBIT E
FORM OF ACKNOWLEDGEMENT AND CONFIRMATION
(See Exhibits 10.53 and 10.54 attached to Form 8-K)
