Environmental Indemnity Agreement

ENVIRONMENTAL INDEMNITY AGREEMENT


THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT"), dated as of April 14, 1998, is made by SANTA FE HOTEL INC., a Nevada corporation (the "COMPANY"), and SANTA FE GAMING CORPORATION, a Nevada corporation ("SFG" and together with Company, collectively, the "INDEMNITOR"), for the benefit of SUNAMERICA LIFE INSURANCE COMPANY, an Arizona corporation ("SUN LIFE"), as Collateral Agent on behalf of itself and each of the Holders ("COLLATERAL AGENT"), and the other Indemnitees (as hereinafter defined).


RECITALS


A. Company is issuing to the Holders certain 9.50% Notes in the aggregate principal amount of $14,000,000 due December 15, 2000 (the "NOTES") pursuant to that certain Note Purchase Agreement of even date herewith, by and among SFG, Company, Sun Life and Credit Suisse First Boston Mortgage Capital LLC, a Delaware limited liability company (the "NOTE PURCHASE AGREEMENT"). All capitalized terms used herein without definition shall have the meanings given such terms in the Note Purchase Agreement.


B. The obligations of Company under the Notes and Note Purchase Agreement are secured by, among other things, (i) certain real property more particularly described on EXHIBIT A attached hereto (the "REAL PROPERTY") pursuant to that certain Deed of Trust, Fixture Filing and Financing Statement and Security Agreement with Assignment of Rents of even date herewith (the "COMPANY DEED OF TRUST"), and (ii) certain personal property (the "PERSONAL PROPERTY") pursuant to that certain Security Agreement of even date herewith, executed by Company to Collateral Agent for the benefit of Holders (the "COMPANY SECURITY AGREEMENT"). The Notes are also guarantied by, among other things, a Guaranty Agreement of even date by SFG to Collateral Agent for the benefit of Holders (the "SFG GUARANTY"). The Real Property and the Personal Property shall sometimes hereinafter be collectively referred to as the "PROPERTY".


C. Company is the owner of a fee simple estate in and to the Real Property.


D. As a condition precedent to purchasing the Notes, the Holders require that Indemnitor enter into this Agreement, whose covenants and obligations are independent of and in addition to the obligations of Company under the Company Deed of Trust, Company Security Agreement and the other documents governing, evidencing and/or securing the Notes and/or the Note Purchase Agreement, and SFG's obligations under the SFG Guaranty.


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NOW, THEREFORE, in consideration of the obligations set forth in the Note Purchase Agreement and guarantied by the SFG Guaranty, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby represents, warrants and covenants to Collateral Agent and each Holder and their respective officers, directors, employees, agents, affiliates, successors and assigns (collectively, the "INDEMNITEES"; provided, however, that the term "Indemnitees" shall not include any third party who is not an affiliate of Collateral Agent or any Holder and who acquires title to the Property) as follows:


SECTION 1. REPRESENTATIONS AND WARRANTIES. Indemnitor represents and warrants to the Indemnitees that:


(a) to Indemnitor's best knowledge, Hazardous Substances have not at any time been generated, used, treated or stored on, or transported to or from, the Property in any quantity or manner which violates any Environmental Law, except as disclosed in writing to Collateral Agent prior to the date hereof;


(b) to Indemnitor's best knowledge, Hazardous Substances have not at any time been Released or disposed of on the Property in any quantity or manner which violates any Environmental Law, except as disclosed in writing to Collateral Agent prior to the date hereof;


(c) Company is in compliance with all applicable Environmental Laws applicable to it with respect to the Property and the requirements of any permits issued under such Environmental Laws with respect to the Property, except as disclosed in writing to Collateral Agent prior to the date hereof;


(d) there are no pending, or to Indemnitor's best knowledge threatened, Environmental Claims against Indemnitor or the Property, except as disclosed in writing to Collateral Agent prior to the date hereof;


(e) to Indemnitor's best knowledge, there is no condition or occurrence at the Property that could reasonably be anticipated (i) to form the basis of any Environmental Claim against Indemnitor or the Property, or (ii) to cause the Property to be subject to any restrictions on the ownership, occupancy, use or transferability thereof under any Environmental Law, except as disclosed in writing to Collateral Agent prior to the date hereof;


(f) to Indemnitor's best knowledge, there are not now and never have been any underground storage tanks located on the Property, except as disclosed in writing to Collateral Agent prior to the date hereof;


(g) Company and SFG each (i) is a corporation, duly organized, validly existing and in good standing under the laws of the State of Nevada, (ii) has the power and authority to own its property and assets and to transact the business in


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which it is engaged and (iii) is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which it owns or leases property or in which failure to be duly qualified and in good standing would have an adverse effect on its business, operations, property or financial condition;


(h) Company and SFG each has the power to execute, deliver and perform the terms and provisions of this Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement;


(i) Company and SFG have each duly executed and delivered this Agreement, and this Agreement constitutes such respective person's legal, valid and binding obligation enforceable against such person in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally and by principles of equity;


(j) neither the execution, delivery or performance by Company or SFG of this Agreement, nor compliance by such respective persons with the terms and provisions hereof, will (i) contravene any provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any lien upon any of its property or assets pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement, loan agreement or any other agreement, contract or instrument to which it is a party or by which it or any of its property or assets is bound or to which it may be subject, or (iii) violate any provision of its charter, bylaws or other organizational documents;


(k) no order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, the execution, delivery and performance by Company or SFG of this Agreement or the legality, validity, binding effect or enforceability of this Agreement; and


(l) Company and SFG is each in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by all governmental bodies in respect of the conduct of its respective business and the ownership of its property.


SECTION 2. COVENANTS. Indemnitor covenants and agrees as follows:


(a) Indemnitor will (i) comply with all Environmental Laws applicable to the ownership or use of the Property, (ii) use its best efforts to cause all tenants and other persons occupying the Property to comply with all Environmental Laws, (iii) immediately pay or cause to be paid all costs and expenses incurred in such


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compliance, and (iv) keep or cause the Property to be kept free and clear of any liens imposed thereon pursuant to any Environmental Laws.


(b) Indemnitor will not generate, use, treat, store, Release or dispose of, or permit the generation, use, treatment, storage, Release or disposal of, any Hazardous Substances on the Property, or transport or permit the transportation of any Hazardous Substances to or from the Property, in each case in any quantity or manner which violates any Environmental Law.


(c) At Collateral Agent's written request, at any time and from time to time if it determines that an environmental site assessment is necessary in its reasonable business judgment to protect it or any other Indemnitee from a potential Environmental Claim, Indemnitor will provide to Collateral Agent an environmental site assessment report concerning the Property, prepared by an environmental consulting firm approved by Collateral Agent, indicating the presence or absence of Hazardous Substances and the potential cost of any removal or remedial action in connection with any Hazardous Substances on the Property. Any such environmental site assessment report shall be conducted at Indemnitor's sole cost and expense. If Indemnitor fails to deliver to Collateral Agent any such environmental site assessment report within thirty (30) days after being requested to do so by Collateral Agent pursuant to this Section, Collateral Agent may obtain the same, and Indemnitor hereby grants to Collateral Agent and its agents access to the Property and specifically grants to Collateral Agent an irrevocable nonexclusive license to undertake such an assessment, and the cost of such assessment (together with interest thereon at the Agreed Rate) will be payable by Indemnitor on demand.


(d) Collateral Agent may, at its option, at any time and from time to time, perform at its sole cost and expense an environmental site assessment report for the Property, and Indemnitor hereby grants to Collateral Agent and its agents access to the Property and specifically grants to Collateral Agent an irrevocable non-exclusive license to undertake such an assessment; PROVIDED THAT, Collateral Agent shall not unreasonably interfere with the operations of Indemnitor or any of its tenants during the preparation of such site assessment. Collateral Agent agrees that, except as otherwise provided by law or unless compelled by an order of a court, and except with respect to disclosures made to the Holders, its and their lenders, attorneys, accountants and other consultants, and its or their agents, assignees, partners, officers, directors and employees, Collateral Agent shall use its reasonable efforts to keep the contents of any environmental site asses ...