COMPLIANCE CERTIFICATE
TO: WELLS FARGO BANK, National Association, as Agent Bank
Reference is made to that certain Credit Agreement dated as of February
20, 2004 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), by and among Golden Road Motor Inn, Inc., a Nevada
corporation (the "Borrower"), Monarch Casino & Resort, Inc., a Nevada
corporation, the Lenders therein named (each, together with their respective
successors and assigns, individually being referred to as a "Lender" and
collectively as the "Lenders"), Wells Fargo Bank, National Association, as the
swingline lender (herein in such capacity, together with its successors and
assigns, the "Swingline Lender"), Wells Fargo Bank, National Association, as
the issuer of letters of credit thereunder (herein in such capacity, together
with their successors and assigns, the "L/C Issuer") and Wells Fargo Bank,
National Association, as administrative and collateral agent for the Lenders,
Swingline Lender and L/C Issuer (herein, in such capacity, called the "Agent
Bank" and, together with the Lenders, Swingline Lender and L/C Issuer,
collectively referred to as the "Banks"). Terms defined in the Credit
Agreement and not otherwise defined in this Compliance Certificate
("Certificate") shall have the meanings defined and described in the Credit
Agreement. This Certificate is delivered in accordance with Section 5.08(g) of
the Credit Agreement.
The period under review is the Fiscal Quarter ended [INSERT DATE], together
with, where indicated, the three (3) immediately preceding Fiscal
Quarters on a rolling four (4) Fiscal Quarter basis.
I.
COMPLIANCE WITH AFFIRMATIVE COVENANTS
A. FF&E (Section 5.01): Please state whether or
not all FF&E has been purchased and installed
in the Hotel/Casino Facility free and clear of
all liens, encumbrances or claims, other than
Permitted Encumbrances. yes/no
B. Liens Filed (Section 5.03): Report any liens
filed against the Real Property and the amount
claimed in such liens. Describe actions being
taken with respect thereto. $
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C. Additional Real Property (Section 5.06):
a. Other than the Real Property presently
encumbered by the Deed of Trust, attach
a legal description of any other real
property or rights to the use of real
property which is used in any material
manner in connection with the Hotel/Casino
Facility and describe such use. Attach
evidence that such real property or rights
to the use of such real property has been
added as Collateral under the Credit Agreement.
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b. Other than with respect to the Adjacent
Driveway Lease, have Borrower or MCRI entered
into any additional leases, licenses, rental
or other arrangements for the use or occupancy
of all or any portion of the Village Shopping
Center? yes/no
If so, are such arrangements planned or
projected to be or become an integral part of
the operation at the Real Property and/or the
Hotel/Casino Facility? yes/no
If so, have such arrangements been consented
to by Agent Bank or Requisite Lenders? yes/no
D. Permitted Encumbrances (Section 5.11):
Describe any Lien attachment, levy, distraint
or other judicial process or burden affecting
the Collateral other than the Permitted
Encumbrances. Describe any matters being
contested in the manner described in Sections
5.03 and 5.10 of the Credit Agreement.
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E. Suits or Actions (Section 5.17): Describe on
a separate sheet any matters requiring advice
to Agent Bank under Section 5.17.
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F. Tradenames, Trademarks and Servicemarks
(Section 5.19): Describe on a separate sheet
any matters requiring advice to Agent Bank
under Section 5.19.
-------------
G. Notice of Hazardous Materials (Section 5.20):
State whether or not to your knowledge there
are any matters of which Banks should be
advised under Section 5.20. If so, attach a
detailed summary of such matter(s).
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H. Compliance and Modification of Pedestrian
Crossing Air Space License (Section 5.23):
Describe all defaults, if any, which occurred
during the period under review under the
Pedestrian Crossing Air Space License. Describe
any modifications or amendments to the
Pedestrian Crossing Air Space License.
State whether or not such modifications or
amendments have been consented to by Agent
Bank or Requisite Lenders as required under
Section 5.23 of the Credit Agreement.
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I. Compliance and Modification of Adjacent
Driveway Lease (Section 5.24): Describe all
defaults, if any, which occurred during the
period under review under the Adjacent Driveway
Lease. Describe any modifications or amendments
to the Adjacent Driveway Lease. State whether
or not such modifications or amendments have
been consented to by Agent Bank or Requisite
Lenders as required under Section 5.24 of the
Credit Agreement.
-------------
II.
FINANCIAL COVENANTS
A. Leverage Ratio (Section 6.01): To be
calculated with reference to the Borrower
commencing with the Fiscal Quarter ending
March 31, 2004 and continuing as of each Fiscal
Quarter end until Bank Facility Termination: $
-------------
FUNDED DEBT:
a. The daily average of the Funded
Outstandings on the Credit Facility
during the last month of the Fiscal
Quarter under review. $
-------------
b. Plus the daily average of the Swingline
Outstandings on the Swingline Facility
during the Fiscal Quarter under review. + $
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c. Plus the daily average of the L/C
Exposure on the L/C Facility during the
Fiscal Quarter under review. + $
-------------
d. Plus the total, as of the last day of
the Fiscal Quarter under review, of both
the long-term and current portions
(without duplication) of all other
interest bearing interest bearing
Indebtedness (including Contingent
Liabilities). + $
-------------
e. Plus the total, as of the last day of the
Fiscal Quarter under review, of all
Capitalized Lease Liabilities. + $
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f. TOTAL FUNDED DEBT
(a + b + c + d + e) $
-------------
Divided (/) by: /
Adjusted EBITDA
To be calculated on a cumulative basis with
respect to the Fiscal Quarter under review and
the most recently ended three (3) preceding
Fiscal Quarters on a four (4) Fiscal Quarter
basis:
g. Net Income $
-------------
h. Less interest income reflected in such
Net Income - $
-------------
i. Less any extraordinary one-time non-Cash
gain reflected in such Net Income - $
-------------
j. Plus any extraordinary losses on sales of
assets and other extraordinary losses and
one-time non-Cash charges + $
-------------
k. Plus Interest Expense (expensed and
capitalized) to the extent deducted in the
determination of Net Income + $
-------------
l. Plus the aggregate amount of federal
and state taxes on or measured by income
for the period under review (whether or not
payable during such period) to the extent
deducted in the determination of Net Income + $
-------------
m. Plus depreciation, amortization and all
other non-cash expenses for the period
under review to the extent deducted in the
determination of Net Income + $
-------------
n. Total EBITDA
(g - h - i + j + k + l + m) $
-------------
o. Less the aggregate of MCRI Corporate
Overhead Allocation to the extent not
deducted in the determination of Net
Income in (g) above - $
-------------
p. ADJUSTED EBITDA
(n - o) $
-------------
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q. Leverage Ratio
(f / p) : 1.0
-------------
Maximum Permitted: 2.25 to 1.00
Provided, however, in the event of the Stock
Repurchase Limitation Release, commencing with
the next occurring Fiscal Quarter end and
continuing as of each Fiscal Quarter end until
Bank Facility Termination, the Borrower shall
maintain a Leverage Ratio no greater than 2.00
to 1.00.
B. Adjusted Fixed Charge Coverage Ratio (Section
6.02): To be calculated on a cumulative basis
with respect to the Fiscal Quarter under review
and the most recently ended three (3) preceding
Fiscal Quarters on a four (4) Fiscal Quarter
basis, unless otherwise provided:
Numerator
a. Total Adjusted EBITDA (Enter II A (p) above) $
--------------
b. Less the aggregate amount of Distributions
actually paid (without duplication) - $
--------------
c. Plus the aggregate amount of Distributions
actually paid to MCRI used by MCRI
exclusively for Share Repurchases + $
--------------
d. Less the aggregate amount of actually paid
federal and state taxes on or measured by
income - $
--------------
e. Less the aggregate amount of the Capital $
Expenditures during the Fiscal Quarter under --------------
review and the most recently ended seven / 2
(7) Fiscal Quarters - divided by two (2) - $
--------------
f. Total Numerator
(a - b + c - d - e) $
--------------
Divided (/) by the sum of:
Denominator
g. The aggregate amount of Interest Expense
(expensed and capitalized) $
--------------
h. Plus the greater of (x) $4,000,000.00,
or (y) the aggregate of the Scheduled
Reductions actually paid during the period
under review + $
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i. Plus the aggregate of payments required to be
made on all other interest bearing
Indebtedness + $
--------------
j. Plus the aggregate of payments required to
be made on Capitalized Lease Liabilities + $
--------------
k. Total Denominator
(g + h + i + j) $
--------------
Adjusted Fixed Charge Coverage Ratio (f / k) : 1
--------------
Minimum required: no less than (i) 1.20 to
1.00 during each fiscal period for which the
Leverage Ratio as determined above for such
period is equal to or greater than 1.60 to 1.00,
and (ii) 1.10 to 1.00 during each fiscal period
for which the Leverage Ratio as determined above
for such period is less than 1.60 to 1.00.
C. Minimum Tangible Net Worth (Section 6.03): To
be calculated with respect to the Borrower as of
the end of the Fiscal Quarter under review:
Assets $
--------------
Less intangibles - $
--------------
Less liabilities - $
--------------
Borrower tangible net worth $
--------------
Minimum required
(a) 85% of the Tangible Net Worth of the
Borrower calculated as of September 30,
2003 $
--------------
(b) Plus, 50% of Net Income after taxes
realized as of each Fiscal Quarter end
occurring on and after September 30, 2003
(without reduction for any net losses) + $
--------------
(c) Plus, 100% of the Net Proceeds received
from all additional Equity Offerings made
after the Closing Date + $
--------------
(d) Less, the aggregate amount of Distributions
made by Borrower to MCRI following the Stock
Repurchase Limitation Release which are used
exclusively by MCRI for Share Repurchases - $
--------------
Minimum required Borrower Tangible Net worth
(a + b + c - d) $
--------------
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D. Restriction on Share Repurchases
(Section 6.04): Set forth the cumulative
aggregate amount expended by the MCRI
Consolidation for Share Repurchases during
the period commencing on the Closing Date
and continuing through the end of the Fiscal
Quarter under review. $
-------------
Maximum Permitted: $5,000,000.00
Provided, however, in the event Borrower
achieves a Leverage Ratio determined as of
any Fiscal Quarter end following the Closing
Date, less than 1.75 to 1.00, the Restriction
on Share Repurchases set forth above shall be
released and of no further force or effect.
E. Investment Restrictions (Section 6.05):
a. Set forth the amount and a brief
description of each Investment not permitted
under Section 6.05. $
-------------
F. Limitation on Subsidiaries (Section 6.06):
On a separate sheet, describe any Subsidiaries
created by Borrower. State whether or not the
creation of such Subsidiaries has been
consented to by the Requisite Lenders as
required under Section 6.06. -------------
G. Indebtedness (Section 6.07): With respect to
the Borrower:
a. Set forth the aggregate amount of secured
purchase money Indebtedness and Capital
Lease Liabilities. $
-------------
Maximum permitted $ 4,000,000
b. Set forth the aggregate amount of unsecured
Indebtedness. $
-------------
Maximum permitted $ 5,000,000
Is any of the unsecured Indebtedness subject
to financial and other covenants and events of
default more onerous or restrictive on Borrower
than the terms and provisions of the Credit
Agreement? If yes, please explain on a
separate sheet. yes/no
H. Total Liens (Section 6.08): On a separate
sheet describe in detail any and all Liens
not permitted under Section 6.08. -------------
I. Sale of Assets, Consolidation, Merger or
Liquidation (Section 6.09):
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a. On a separate sheet describe any and
all mergers, consolidations, liquidations
and/or dissolutions not permitted under
Section 6.09. -------------
b. With respect to the determination of Excess
Capital Proceeds, please set forth the
amount of Net Proceeds received by the
Borrower, during the period commencing on
the Closing Date and continuing through
the end of the Fiscal Quarter under review,
from the Disposition of FF&E and other items
of Collateral which have not been replaced
with purchased or leased FF&E of equivalent
value and utility. -------------
Requirement. For all amounts in excess of
$2,500,000.00, must make a Mandatory Commitment
Reduction on or before 90 days following each
such Disposition resulting in Excess Capital
Proceeds.
J. Restriction on Transfer of Ownership (Section
6.10): On a separate sheet describe in detail
any transfers or hypothecations of MCRI's
ownership interest in Borrower not permitted
under Section 6.10 -------------
K. Contingent Liabilities (Section 6.11):
a. Set forth the amount of all Contingent
Liabilities incurred by the Borrower. $
-------------
Maximum Permitted: Cumulative aggregate of
$5,000,000.00 at any time, without the prior
written consent of Requisite Lenders
L. Transactions with Members of the MCRI
Consolidation (Section 6.12): Describe on a
separate sheet any transactions or payments
made by Borrower to any member of the MCRI
Consolidation which are not allowed under
Section 6.12.
-------------
M. Limitation on Consolidated Tax Liability
(Section 6.13): Describe on a separate sheet
any federal income taxes paid by Borrower
which are not allowed under Section 6.13. -------------
N. ERISA (Section 6.14): Describe on a separate
sheet any matters requiring advice to Agent
Bank under Section 6.14. -------------
O. Margin Regulations (Section 6.15): Set forth
the amount(s) of and describe on a separate
sheet of paper any proceeds of any portion of
the Credit Facility, used by Borrower to
purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing
or carrying any Margin Stock. -------------
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III.
COMMITMENT FEE CALCULATION
(Section 2.10b): to be calculated with respect to
the Fiscal Quarter under review:
a. Daily average of Maximum Permitted Balance $
-------------
b. Less daily average of Funded Outstandings - $
-------------
c. Amount of Nonusage (a minus b) $
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d. Leverage Ratio (See II A(o) above) : 1
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e. Applicable Commitment Percentage: %
-------------
See Table Two in definition of Applicable Margin
f. Gross Commitment Fee (c times e) $
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g. Number of days in Fiscal Quarter under review -------------
h. Commitment Fee for Fiscal Quarter under review $
(f / 360 x g) -------------
IV.
PERFORMANCE OF OBLIGATIONS
A review of the activities of the Borrower during the fiscal period
covered by the attached financial statements has been made under my supervision
with a view to determining whether during such fiscal period any Default or
Event of Default has occurred and is continuing. Except as described in an
attached document or in an earlier Certificate, to the best of my knowledge, as
of the date of this Certificate, there is no Default or Event of Default that
has occurred and remains continuing.
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V.
NO MATERIAL ADVERSE CHANGE
To the best of my knowledge, except as described in an attached document
or in an earlier Certificate, no Material Adverse Change has occurred since the
date of the most recent Certificate delivered to the Banks.
DATED this ____ day of _____________, 200___.
BORROWER:
GOLDEN ROAD MOTOR INN, INC.,
a Nevada corporation
Name:
Title
Authorized Officer
Print
Name
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