<PAGE>


          ---------------------------------------------------------------




                                 SECURITY AGREEMENT


                             Dated as of April 14, 1998


                                      between


                                SANTA FE HOTEL INC.


                                        and


                       PDS Financial Corporation - Nevada, as
                                  Collateral Agent




          ---------------------------------------------------------------


<PAGE>

                                 TABLE OF CONTENTS


Section 1.     Definitions and Interpretation. . . . . . . . . . . . . .1
               1.01 Certain Defined Terms . . . . . . . . . . . . . . . 1
               1.02 Interpretation. . . . . . . . . . . . . . . . . . . 4

Section 2.     Collateral . . . . . . . . . . . . . . . . . . . . . . . 4
               2.01 Grant . . . . . . . . . . . . . . . . . . . . . . . 4
               2.02 Perfection. . . . . . . . . . . . . . . . . . . . . 4
               2.03 Attorney-in-Fact. . . . . . . . . . . . . . . . . . 4
               2.04 Use of Collateral . . . . . . . . . . . . . . . . . 5
               2.05 Rights and Secured obligations. . . . . . . . . . . 5

Section 4.     Representations and Warranties . . . . . . . . . . . . . 5
               4.01 Organization, Powers and Good Standing. . . . . . . 5
               4.02 No Conflict . . . . . . . . . . . . . . . . . . . . 6
               4.03 Governmental Approvals. . . . . . . . . . . . . . . 6
               4.04 Filings, Etc. . . . . . . . . . . . . . . . . . . . 6
               4.05 Locations of Collateral, Offices and Names. . . . . 6
               4.06 Title to Collateral; Validity and Perfection of
                    Security Interest; Absence of Other Liens . . . . . 6

Section 5.     Covenants. . . . . . . . . . . . . . . . . . . . . . . . 7
               5.01 Books and Records . . . . . . . . . . . . . . . . . 7
               5.02 Removals, Etc.. . . . . . . . . . . . . . . . . . . 7
               5.03 Sales and Other Liens . . . . . . . . . . . . . . . 7
               5.04 Further Assurances. . . . . . . . . . . . . . . . . 7
               5.05 Verification, Etc.. . . . . . . . . . . . . . . . . 8
               5.06 Payment of Charges and Claims . . . . . . . . . . . 8
               5.07 Duty of Care. . . . . . . . . . . . . . . . . . . . 8
               5.08 Protection of Security; Notice of Levy. . . . . . . 8

Section 6.     Events of Defaults, Remedies, Etc. . . . . . . . . . . . 9
               6.01 Events of Default . . . . . . . . . . . . . . . . . 9
               6.02 Remedies, Etc.. . . . . . . . . . . . . . . . . . . 9
               6.03 Private Sale. . . . . . . . . . . . . . . . . . . . 10
               6.04 Application of Proceeds . . . . . . . . . . . . . . 10

Section 7.     Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 11
               7.01 Waiver. . . . . . . . . . . . . . . . . . . . . . . 11
               7.02 Notices . . . . . . . . . . . . . . . . . . . . . . 11
               7.03 Secured Party Expenses, Including Attorneys' Fees . 12
               7.04 Amendments, Etc.. . . . . . . . . . . . . . . . . . 12
               7.05 Successors and Assigns. . . . . . . . . . . . . . . 13
               7.06 Survival. . . . . . . . . . . . . . . . . . . . . . 13


                                          i
<PAGE>

               7.07 Agreements Superseded . . . . . . . . . . . . . . . 13
               7.08 Counterparts. . . . . . . . . . . . . . . . . . . . 13
               7.09 GOVERNING LAW AND CHOICE OF FORUM . . . . . . . . . 13
               7.10 WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . 14
               7.11 Payments Set Aside. . . . . . . . . . . . . . . . . 14
               7.12 Continuing Security Interest; Termination . . . . . 14
               7.13 Waiver and Estoppel . . . . . . . . . . . . . . . . 15
               7.14 Authorization . . . . . . . . . . . . . . . . . . . 15
               7.15 Bankruptcy No Discharge . . . . . . . . . . . . . . 16
               7.16 Nature of Agreement . . . . . . . . . . . . . . . . 16

Annex 1 -- List of Collateral
Annex 2 -- List of Locations
Annex 3 -- Existing Liens


                                          ii
<PAGE>

     This SECURITY AGREEMENT, dated as of April 14, 1998 (as amended or
supplemented from time to time, this "AGREEMENT"), is made between Santa Fe
Hotel Inc. (the "OBLIGOR") and PDS Financial Corporation - Nevada, as collateral
agent for the Holders (as defined herein) (in such capacity, the "SECURED
PARTY").

RECITALS

     A.   The Obligor executed and delivered the Promissory Note (the "Original
Note") dated as of June 14, 1995 in favor of Sahara Nevada Corp. ("SNC"), a
wholly-owned subsidiary of Santa Fe Gaming Corporation ("SFGC"), in the original
principal amount of Eight Million Dollars ($8,000,000).

     B.   The Original Note was transferred by SNC to SFGC on April 8, 1998.

     C.   The Original Note is being sold by SFGC to the Secured Party, and
concurrent therewith and with the execution and delivery of this Agreement, the
Obligor has executed and delivered the Amended and Restated Note (together with
any extension, modification or renewal thereof, the "Note") dated as of the date
hereof in the principal amount of Four Million Nine Hundred Sixty-One Thousand
Five Hundred Fifty-Six ($4,961,556.00), which Note amends and restates in its
entirety the Original Note, which amendments include without limitation the
extension of the maturity date from May 31, 1998 to April 14, 2001.

     D.   To induce the Secured Party to purchase the Original Note and amend
and restate the Original Note as provided in the Note and in order to secure
payment of the Note and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Obligor has agreed to
pledge and grant a security interest in the Collateral (as defined herein) as
security for the Secured Obligations (as defined herein).  Accordingly, the
Obligor agrees with the Secured Party as follows:

          Section 1.     DEFINITIONS AND INTERPRETATION.

          1.01 CERTAIN DEFINED TERMS.  The following terms shall have the
following meanings under this Agreement:

          "APPLICABLE LAW" means, with respect to a Person, all provisions of
the following applicable to such Person:  (i) constitutions, treaties, statutes,
laws, rules, regulations and ordinances of any Governmental Authority (including
the Gaming Control Act and similar gaming laws of other jurisdictions);
(ii) Governmental Approvals; and (iii) orders, decisions, judgments, awards and
decrees of any Governmental Authority.

          "BANKRUPTCY LAW" means title 11, U.S. Code or any similar federal or
state law for the relief of debtors.

          "CHARGES" means all federal, state, county, city, municipal or other
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.


<PAGE>

          "COLLATERAL" shall have the meaning assigned to that term in
SECTION 2.01.

          "CONTRACTUAL OBLIGATION" means any note, bond, mortgage or indenture
or any franchise, license, permit, agreement or other instrument or obligation.

          "EVENT OF DEFAULT" shall have the meaning assigned to that term in
SECTION 6.01.

          "GAMING AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether of federal, state, local or
foreign jurisdiction or otherwise and whether now or hereafter in existence, or
any officer or official thereof, including without limitation the Nevada Gaming
Commission, Nevada State Gaming Control Board, Clark County Liquor and Gaming
Licensing Board and Nevada City Counsel.

          "GAMING CONTROL LAWS" means the Nevada Gaming Control Act or any other
similar federal, state or local law, statute, ordinance, rule, license, order,
permit or regulation related to the gaming industry, whether now or hereafter in
existence, each as from time to time amended, or any successor provision of law.

          "GOVERNMENTAL APPROVAL" means an authorization, consent, approval,
permit, license, registration or filing made with any Governmental Authority.

          "GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality or any nature whatsoever of
any governmental or quasi-governmental unit, whether federal, state, county,
district, city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official thereof.

          "HOLDER" or "HOLDERS" means PDS Financial Corporation - Nevada or its
permitted assigns.

          "LIENS" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including any agreement to give any security interest).  For the purposes of
this Agreement, a Person shall be deemed to own subject to a Lien any asset that
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease obligation or other title retention
agreement relating to such asset.

          "MATERIAL ADVERSE EFFECT" means (a) a condition or event materially
adverse to, (b) a material adverse effect on or (c) a material adverse change
in, as the case may be, any one or more of the following:  (i) the business,
assets, results of operations, financial condition or prospects of Obligor,
(ii) the ability of the Obligor to perform its obligations hereunder or under
the Note or (iii) the Collateral or the Security Interest.

          "OTHER COLLATERAL" shall have the meaning assigned to that term in
SECTION 7.14.

          "OTHER OBLIGOR" shall have the meaning assigned to that term in
SECTION 7.14.


                                          2
<PAGE>

          "PAYMENT DEFAULT" shall mean any default described in SECTION 6.01(a).

          "PERMITTED LIENS" means (i) statutory liens to secure the performance
of obligations, surety or appeal bonds, performance bonds or other obligations
of a like nature (including, without limitation, mechanic's, worker's and
material provider's liens) incurred in the ordinary course of business
(exclusive of obligations in respect of the payment of borrowed money), or for
taxes, assessments or governmental charges or claims; (ii) subleases granted to
others not interfering in any material respect with the business of the Company;
(iii) leases in respect of the real property on which facilities owned or leased
by the Company are located; (iv) Liens arising from UCC financing statements
regarding property leased by the Company; (v) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances that do not interfere in any material respect with the ordinary
conduct of business of the Company; (vi) Liens in existence as of the date of
this Agreement and identified in Annex 3 hereto; and (vii) Liens granted by
third party lessors or fee owners with respect to real property as to which the
Company has a leasehold interest.

          "PERSON" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.

          "PROCEEDS" shall have the meaning assigned to that term in
SECTION 2.01(b).

          "SECURED OBLIGATIONS" shall mean any and all present and future
obligations and liabilities of the Obligor arising under the Note or this
Agreement, in each case whether due or not due, direct or indirect, joint and/or
several, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, renewed or
restructured, and to the extent permitted by Applicable Law, whether or not from
time to time decreased or extinguished and later increased, created or incurred,
whether or not arising after the commencement of a proceeding under Bankruptcy
Law (including post-petition interest) and whether or not allowed or allowable
as a claim in any such proceeding, and whether or not recovery of any such
obligation or liability may be barred by a statute of limitations or such
obligation or liability may otherwise be unenforceable.

          "SECURITY INTEREST" shall have the meaning assigned to that term in
Section 2.01.

          "SUPPLEMENTAL DOCUMENTATION" means financing statements, continuation
statements, consents, acknowledgments, assignments, notices of security interest
in deposit accounts, schedules of Collateral and other instruments or documents
necessary or reasonably requested by the Secured Party to perfect and maintain
perfected the security interest in favor of the Secured Party in any Collateral
and the Proceeds thereof, subject only to Permitted Liens.

          "UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect in the State of Nevada from time to time or, by reason of mandatory
application, any other applicable jurisdiction.


                                          3
<PAGE>

          1.02 INTERPRETATION.  In this Agreement, unless otherwise indicated,
the singular includes the plural and plural the singular; words importing either
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation;"
references 'to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments; and references to
Persons include their respective permitted successors and assigns.

          Section 2.     COLLATERAL.

          2.01 GRANT.  As collateral security for the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Obligor hereby pledges, conveys,
assigns, transfers and grants to the Secured Party a security interest (the
"SECURITY INTEREST") in all of the Obligor's right, title and interest in and to
the following property (collectively, the "COLLATERAL"):

          (a)  the property described on Annex 1 hereto and incorporated herein
by this reference; and

          (b)  all proceeds and products in whatever form of all or any part of
the Collateral, including all proceeds of insurance (together with all rights to
recover and proceed with respect to the same), and all additions, and
accessories to, substitutions for and replacements of all or any part of the
Collateral (collectively, the "PROCEEDS").

          2.02 PERFECTION.  Concurrently with the execution and delivery of this
Agreement, the Obligor shall (a) file such financing statements and other
documents in such offices as shall be necessary or as the Secured Party may
reasonably request to perfect and establish the priority (subject only to
Permitted Liens) of the Liens granted by this Agreement, and (b) take all such
other actions as shall be necessary or as the Secured Party has requested to
perfect and establish the priority (subject only to such Permitted Liens) of the
Liens granted by this Agreement.

          2.03 ATTORNEY-IN-FACT.  Subject to the rights of the Obligor under
SECTION 2.04, the Secured Party is hereby irrevocably appointed the
attorney-in-fact of the Obligor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instruments which the
Secured Party may deem necessary or reasonably advisable to accomplish the
purposes of this Agreement, to preserve the validity, perfection and priority
(subject only to Permitted Liens) of the Liens granted by this Agreement and,
upon the occurrence and continuance of any Payment Default or Event of Default,
to exercise its rights, remedies, powers and privileges under this Agreement.
Subject to SECTION 7.12, this appointment as attorney-in-fact is irrevocable and
coupled with an interest.  Without limiting the generality of the foregoing, the
Secured Party shall be entitled under this Agreement upon the occurrence and
continuation of


                                          4
<PAGE>

any Payment Default or Event of Default (i) to ask, demand, collect, sue for,
recover, receive and give receipt and, discharge for amounts due and to become
due under and in respect of all or any part of the Collateral; (ii) to receive,
endorse and collect any instruments, documents and chattel paper in connection
with clause (i) above; and (iii) to execute, in connection with any sale or
disposition of the Collateral under SECTION 6, any endorsements, assignments,
bills of sale or other instruments of conveyance or transfer with respect to all
or any part of the Collateral.

          2.04 USE OF COLLATERAL.  So long as no Payment Default or Event of
Default shall have occurred and be continuing, the Obligor shall be entitled to
use and possess the Collateral and to exercise its rights, title and interest in
all Collateral, subject to the rights, remedies, powers and privileges of the
Secured Party under SECTION 6.

          2.05 RIGHTS AND SECURED OBLIGATIONS.

          (a)  No reference in this Agreement to proceeds or to the sale or
other disposition of Collateral shall authorize the Obligor to sell or otherwise
dispose of any Collateral except to the extent otherwise expressly permitted by
the terms hereof.

          (b)  Except as required by Applicable Law, the Secured Party shall not
be required to take steps necessary to preserve any rights against prior parties
to any part of the Collateral.

          Section 4.     REPRESENTATIONS AND WARRANTIES.  The Obligor represents
and warrants to the Secured Party as follows:

          4.01 ORGANIZATION, POWERS AND GOOD STANDING.  The Obligor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite corporate power and authority and
the legal right to own and operate its properties and to carry on its business
as presently conducted.  The Obligor has all requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby.  The execution, delivery and performance by the Obligor of
this Agreement has been duly authorized by all necessary corporate action on the
part of the Obligor.  This Agreement has been duly executed and delivered by the
obligor.  This Agreement is a legal, valid and binding obligation of the
Obligor, enforceable against the Obligor in accordance with its terms, except as
enforceability may be limited by (a) equitable principles, (b) limitations
imposed by applicable laws upon the enforceability of rights to indemnification
and (c) commercial reasonableness.

          4.02 NO CONFLICT.  The execution, delivery and performance by the
Obligor of this Agreement and the Note, and the consummation of the transactions
contemplated hereby, do not (a) violate any provision of the charter or by-laws
of the Obligor, (b) conflict with, result in a breach of or constitute (or, with
the giving of notice or lapse of time, or both, constitute) default under, or
require the approval or consent of any Person (other than those consents
previously obtained) pursuant to, any material Contractual Obligation of the
Obligor or violate any provision of Applicable Law binding on the Obligor, which
violation could have a Material Adverse Effect,


                                          5
<PAGE>

or (c) result in the creation or imposition of any Lien upon any of the
Collateral except for Liens created under this Agreement.

          4.03 GOVERNMENTAL APPROVALS.  Except for filings and recordings in
connection with the perfection of Liens created by this Agreement (including any
necessary Supplemental Documentation), no Governmental Approval is or will be
required in connection with the execution, delivery and performance by the
Obligor of this Agreement or the consummation of the transactions contemplated
hereby or, to the extent permitted by Applicable Law, the exercise by the
Secured Party of any rights or remedies hereunder, or to ensure the legality,
validity or enforceability hereof, except as may be required in connection with
the disposition of Collateral by applicable federal and state antitrust laws,
and Governmental Approvals required under any Gaming Control Laws.

          4.04 FILINGS, ETC.  The Obligor has delivered to the Secured Party a
duly executed UCC-1 financing statement containing a correct description of the
Collateral for filing in the office of the Secretary of State of the State of
Nevada to establish a valid and perfected Lien in favor of the Secured Party in
all Collateral in which a Lien may be perfected by such filings, and no further
or subsequent filing, recording or registration is necessary in any such
jurisdiction, except as provided under Applicable Law with respect to the filing
of continuation statements.

          4.05 LOCATIONS OF COLLATERAL, OFFICES AND NAMES.  (a) The Obligor's
chief executive office and principal place of business is located at the address
set forth in SECTION 7.02 hereof, (b) all other places of business of the
Obligor and all other locations at which any tangible Collateral or books and
records related to any Collateral, including computer programs, printouts and
other computer materials, are (or during the past four (4) months were) located
are identified in ANNEX 2, and (c) there are no prior or current trade or legal
names used to identify the Obligor in its business or in the ownership of its
properties other than those identified in ANNEX 2.

          4.06 TITLE TO COLLATERAL; VALIDITY AND PERFECTION OF SECURITY
INTEREST; ABSENCE OF OTHER LIENS.

          (a)  The Obligor has good and marketable title to all Collateral and
"rights" in all Collateral within the meaning of Section 9-203 of the UCC.

          (b)  Upon filing of a UCC-1 financing statement with the Nevada
Secretary of State, the Security Interest in favor of the Secured Party created
hereunder shall constitute a valid and perfected Lien in all of the Collateral
and secure payment and performance of the Secured Obligations.  The Collateral
is free and clear of all Liens other than the Security Interest and Permitted
Liens;

          (c)  Except for financing statements naming the Secured Party as
secured party, the Obligor has filed no financing statement covering any
Collateral.


                                          6
<PAGE>

          Section 5.     COVENANTS.

          5.01 BOOKS AND RECORDS.  The Obligor shall:

          (a)  keep full and accurate books and records relating to the
Collateral at the chief executive office of the Obligor and stamp or otherwise
mark such books and records in such manner as the Secured Party may reasonably
require in order to reflect the Liens granted by this Agreement; and

          (b)  permit representatives of the Secured Party, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, permit representatives
of the Secured Party to be present at the Obligor's place of business to receive
copies of all communications and remittances relating to the Collateral and
forward copies of any notices or communications received by the Obligor with
respect to the Collateral, all in such manner as the Secured Party may request.

          5.02 REMOVALS, ETC.  Without at least thirty (30) days' prior written
notice to the Secured Party, the Obligor shall not (i) maintain any of its books
and records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address initially
indicated for notices to it under SECTION 7.02 or at one of the locations
identified in ANNEX 1 or in transit from one of such locations to another or
(ii) change its corporate name, or the name under which it does business, from
the name shown on the signature pages to this Agreement.

          5.03 SALES AND OTHER LIENS.  Without the prior written consent of the
Secured Party, the Obligor shall not create, incur or assume any Lien upon, or
file or authorize to be filed, in any jurisdiction, any financing statement or
like instrument with respect to, all or any part of the Collateral in which the
Secured Party is not named as the secured party.  The Obligor shall use its best
efforts to cause to be promptly released of record any Lien on any Collateral
not permitted by this SECTION 5.03.  The Obligor shall not dispose of any or all
of the Collateral without the consent of the Secured Party, which consent shall
not be unreasonably withheld; PROVIDED, HOWEVER, that the Obligor shall not be
prohibited from disposing of any or all of the Collateral in the ordinary course
of business provided the Obligor complies with Section 6(b) of the Note.

          5.04 FURTHER ASSURANCES.  The Obligor shall, at its own expense,
perform at the request of the Secured Party, such acts as may be necessary or
advisable in the reasonable opinion of the Secured Party, or that the Secured
Party may reasonably request at any time, to assure the attachment, perfection
and first priority (subject to Permitted Liens) of the security interest in
favor of the Secured Party to the Collateral, to exercise the rights and
remedies of the Secured Party hereunder or to carry out the intent of this
Agreement.  Without limitation, at the Secured Party's request, the Obligor
shall execute and deliver (or use reasonable efforts to cause any third party to
execute and deliver) to the Secured Party, at any time and from time to time,
all Supplemental Documentation that the Secured Party may reasonably request, in
form and substance reasonably acceptable to the Secured Party.


                                          7
<PAGE>

          5.05 VERIFICATION, ETC.  During the existence of any Payment Default
or Event of Default, the Secured Party may at any time require the Obligor to
segregate all Proceeds so that they are capable of identification in such manner
that the Secured Party shall have a perfected first priority Lien therein,
subject only to Permitted Liens.

          5.06 PAYMENT OF CHARGES AND CLAIMS.  The Obligor shall pay (a) all
Charges imposed upon any Collateral, and (b) all claims (including claims for
labor, services and materials) that have become due and payable and, under
Applicable Law, have or may become Liens (other than Permitted Liens) upon any
Collateral, in each case before any penalty shall be incurred with respect
thereto; PROVIDED that unless foreclosure, levy or similar proceedings shall
have commenced, the Obligor need not pay or discharge any such Charges or claims
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings, and for which adequate reserves are established in
accordance with generally accepted accounting principles.  If the Obligor fails
to pay or obtain the discharge of any Charge, claim or Lien required to be paid
or discharged under this SECTION 5.06 and asserted against any portion of the
Collateral, the Obligor will promptly notify the Secured Party of such event.
The Secured Party may, at any time and from time to time, in its sole discretion
and without waiving or releasing any obligation of the Obligor under this
Agreement or the other Collateral Documents or waiving any Default or Event of
Default, make such payment required to be paid or discharged under this
SECTION 5.06, obtain such discharge or take such other action with respect
thereto as the Secured Party deems advisable; PROVIDED that the Secured Party
shall be under no obligation whatsoever to take any of the foregoing actions.

          5.07 DUTY OF CARE.  The Secured Party shall have no duty of care with
respect to the Collateral, except that the Secured Party shall have an
obligation to exercise reasonable care with respect to Collateral in its
possession; PROVIDED that (a) the Secured Party shall be deemed to have
exercised reasonable care if Collateral in its possession is accorded treatment
substantially comparable to that which the Secured Party accords its own
property, and (b) the Secured Party shall have no obligation to take any actions
to preserve rights against other parties or property with respect to any
Collateral.  Without limitation, the Secured Party shall bear no risk or expense
with respect to any Collateral.

          5.08 PROTECTION OF SECURITY; NOTICE OF LEVY.  The Obligor shall, at
its own cost and expense, take any and all actions necessary to defend title to
the Collateral against all Persons and against all claims and demands and to
preserve, protect and defend the security interest in favor of the Secured Party
and the priority thereof, against any adverse Liens not permitted under this
Agreement.  The Obligor will promptly notify the Secured Party of any attachment
or other legal process levied against any Collateral.

          Section 6.     EVENTS OF DEFAULTS, REMEDIES, ETC.

          6.01 EVENTS OF DEFAULT.  The occurrence and continuance of one or more
of the following events shall constitute an "EVENT OF DEFAULT":

          (a)  The Obligor shall fail to pay any installment of interest on the
Note when due and payable and the continuance of such failure for thirty
(30) days; or


                                          8
<PAGE>

          (b)  The Obligor shall fail to pay all or any part of the principal on
the Note when and as the same shall become due and payable, at maturity,
redemption, by acceleration or otherwise and the continuance of such failure for
five (5) days.

          6.02 REMEDIES, ETC.  If any Event of Default shall have occurred and
be continuing:

          (a)  the Secured Party may declare all unpaid principal, together with
accrued interest thereon and together with all other amounts owing to the
Secured Party under this Agreement and/or the Note, to be forthwith due and
payable.

          (b)  The Secured Party in its discretion may require the Obligor to,
and the Obligor shall, assemble the Collateral owned by it at such place or
places, reasonably convenient to both the Secured Party and the Obligor,
designated in the Secured Party's request;

          (c)  The Secured Party in its discretion may make any reasonable
compromise or settlement it deems desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise amend, revise, release, modify or otherwise change
the terms of, all or any part of the Collateral;

          (d)  The Secured Party in its discretion may, in its name or in the
name of the Obligor or otherwise, demand, sue upon or otherwise enforce
performance under, and demand, sue for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for all or any
part of, the Collateral, but shall be under no obligation to do so;

          (e)  The Secured Party in its discretion may, upon five (5) business
days' prior written notice to the Obligor of the time and place, which the
Obligor agrees and acknowledges shall constitute commercially fair and
reasonable notice, with respect to all or any part of the Collateral which shall
then be or shall thereafter come into the possession, custody or control of the
Secured Party or any of its agents, sell, lease or otherwise dispose of all or
any part of such Collateral, at such place or places as the Secured Party deems
best, for cash, for credit or for future delivery (without thereby assuming any
credit risk) and at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of time or place of any
such sale (except such notice as is required above or by applicable statute and
cannot be waived), and the Secured Party or any other Person may be the
purchaser, lessee or recipient of any or all of the Collateral so disposed of at
any public sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of whatsoever
kind.  The Secured Party may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the sale may be so adjourned; and

          (f)  The Secured Party shall have, and in its discretion may exercise,
all of the rights, remedies, powers and privileges with respect to the
Collateral of a secured party under the UCC (whether or not the UCC is in effect
in the jurisdiction where such rights, remedies, powers and privileges are
asserted) and such additional rights, remedies, powers and privileges to which


                                          9
<PAGE>

a secured party is entitled under the laws in effect in any jurisdiction where
any rights, remedies, powers and privileges in respect of this Agreement or the
Collateral may be asserted, including the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Secured Party were the sole and absolute
owner of the Collateral (and the obligor agrees to take all such action as may
be appropriate to give effect to such right).

          6.03 PRIVATE SALE.  The Secured Party shall incur no liability as a
result of the sale, lease or other disposition of all or any part of the
Collateral at any private sale pursuant to SECTION 6.02 conducted in a
commercially reasonable manner.  The Obligor hereby waives any claims against
the Secured Party arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Secured Party accepts the first
offer received and does not offer the Collateral to more than one offeree.

          6.04 APPLICATION OF PROCEEDS.

          (a)  Except as otherwise expressly provided in this Agreement and
except as provided below in this SECTION 6.04, the proceeds of, or other
realization upon, all or any part of the Collateral by virtue of the exercise of
remedies under SECTION 6.02, and any other cash at the time held by the Secured
Party under this SECTION 6, shall be applied by the Secured Party:

          FIRST, to the Secured Party for amounts due under SECTION 7.03;

          SECOND, to the payment in full of the remaining Secured Obligations in
such manner as the Secured Party may determine; and

          THIRD, to the payment to the Obligor, or its respective successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.

          As used in this SECTION 6, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.

          (b)  Any surplus of cash and any notes and other Collateral held by
the Secured Party and remaining after payment in full of all the Secured
Obligations shall be reassigned and redelivered as provided in Section 7.12.

          (c)  Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Secured Party.  The application of proceeds by the Secured Party shall be
without prejudice to the Secured Party's rights as against the Obligor or other
Persons with respect to any Secured Obligations that may then be or remain
unpaid.


                                          10
<PAGE>

          Section 7.     MISCELLANEOUS.

          7.01 WAIVER.

          (a)  Nothing contained in this Agreement and no act done or omitted by
or on the part of the Secured Party to exercise and no delay in exercising, and
no course of dealing with respect to, any right, remedy, power or privilege
under this Agreement shall operate as a waiver of such right, remedy, power or
privilege, nor shall any single or partial exercise of any right, remedy, power
or privilege under this Agreement preclude any other or further exercise of any
such right, remedy, power or privilege or the exercise of any other right,
remedy, power or privilege.  The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.

          (b)  Nothing contained in this Agreement and no act done or omitted by
the Secured Party pursuant to the powers and rights granted to it under this
Agreement shall be deemed to be a waiver by the Secured Party of its rights and
remedies under any of the Collateral Documents, and this Agreement is made and
accepted without prejudice to any of the rights and remedies possessed by the
Secured Party under the terms of any of the Collateral Documents.  All
obligations of the Obligor and the rights of the Secured Party hereunder shall
be in addition to and not in limitation of those contained in any of the other
Collateral Documents and provided by Applicable Law.

          7.02 NOTICES.  Any notices and communications to be given under this
Agreement shall be given in writing and delivered in person or delivered by
registered or certified first-class mail, postage prepaid, by overnight courier
(for next business day delivery), or by facsimile transmission to the intended
recipient at the address or facsimile number specified below or, as to any
party, at such other address or facsimile number as shall be designated by such
party in a notice to each other party.

           To the Obligor:               Santa Fe Hotel Inc.
                                         4949 North Rancho Drive
                                         Las Vegas, Nevada  89130
                                         Attention:  Chief Financial Officer
                                         Telecopy:  (702) 658-4303

           With a copy to:               Gibson, Dunn & Crutcher LLP
                                         333 South Grand Avenue
                                         Los Angeles, California  90071
                                         Attention:  Karen E. Bertero, Esq.
                                         Telecopy:  (213) 229-7520

           To the Secured Party:         PDS Financial Corporation - Nevada
                                         6171 McLeod Drive
                                         Las Vegas, Nevada  89120-4048
                                         Attention:  President
                                         Telecopy:  (702) 740-8692



                                          11
<PAGE>

           With a copy to:               Frommelt & Eide, Ltd.
                                         580 International Centre
                                         900 Second Avenue South
                                         Minneapolis, Minnesota  55402
                                         Attention:  David R. Mylrea, Esq.
                                         Telecopy:  (612) 342-2761


          7.03 SECURED PARTY EXPENSES, INCLUDING ATTORNEYS' FEES.  Regardless of
the occurrence of a Default or Event of Default, the Obligor agrees to pay to
the Secured Party any and all advances, charges, costs and expenses, including
the reasonable fees and expenses of attorneys and any experts or agents, that
the Secured Party may incur in connection with (a) the administration of this
Agreement, (b) the creation, perfection or continuation of the Security Interest
or protection of the Collateral or its priority in the Collateral, including the
discharging of any prior or junior Lien or adverse claim against the Collateral
or any part thereof that is not permitted hereby or by the Note, (c) the
custody, preservation or sale of, collection from, or other realization upon,
any of the Collateral, (d) the exercise or enforcement of any of the rights,
powers or remedies of the Secured Party under this Agreement, any other
Collateral Document or under Applicable Law, or (e) the failure by the Obligor
to perform or observe any of the provisions hereof.  All such amounts and all
other amounts payable hereunder shall be payable on demand, together with
interest at the Default Rate.

          7.04 AMENDMENTS, ETC.  Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Obligor and the Secured Party.  Any such modification, supplement or
waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Secured Party, each holder of any of the Secured Obligations and the Obligor,
and any such waiver shall be effective only in the specific instance and for the
purposes for which given.

          7.05 SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and
inure to the benefit of the Obligor, the Secured Party and each Holder and their
respective successors and permitted assigns.  Neither the Obligor nor the
Secured Party shall assign or transfer its respective rights or obligations
under this Agreement without the prior written consent of the other party, which
consent shall not be unreasonable withheld.

          7.06 SURVIVAL.  All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be).

          7.07 AGREEMENTS SUPERSEDED.  This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.


                                          12
<PAGE>

          7.08 COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.

          7.09 GOVERNING LAW AND CHOICE OF FORUM.

          (a)  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS (OTHER THAN THE RULES REGARDING CONFLICTS OF LAWS) OF THE STATE
OF NEVADA.  TO THE EXTENT APPLICABLE, THE UCC SHALL GOVERN THE PERFECTION AND
PRIORITY OF THE SECURITY INTEREST, THE EFFECT THEREOF, AND ALL OTHER MATTERS TO
WHICH THE UCC APPLIES PURSUANT TO THE TERMS THEREOF.

          (b)  The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated in state or Federal
courts located in the County of Clark, State of Nevada, unless such actions or
proceedings are required to be brought in another court to obtain subject matter
jurisdiction over the matter in controversy.  EACH OF THE OBLIGOR AND THE
SECURED PARTY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION.

          7.10 WAIVER OF TRIAL BY JURY.  THE OBLIGOR AND THE SECURED PARTY WAIVE
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS AGREEMENT OR ANY ACTION
ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY
INITIATES SUCH ACTION OR ACTIONS.

          THE OBLIGOR SPECIFICALLY AGREES THAT IT HAS READ AND FULLY UNDERSTANDS
EACH OF THE FOREGOING WAIVERS CONTAINED IN THIS AGREEMENT AND THAT SUCH WAIVERS
ARE KNOWINGLY MADE, WITHOUT DURESS, ARE NEGOTIATED AND BARGAINED FOR TERMS OF
THIS AGREEMENT, AND ARE MATERIAL INDUCEMENTS TO THE SECURED PARTY, WITHOUT WHICH
THE LOAN WOULD NOT HAVE BEEN EXTENDED BY THE SECURED PARTY TO THE OBLIGOR.

          7.11 PAYMENTS SET ASIDE.  Notwithstanding anything to the contrary
herein contained, this Agreement, the Secured Obligations and the security
interest in favor of the Secured Party shall continue to be effective or be
reinstated, as the case may be, if at any time any payment, or any part thereof,
of any or all of the Secured Obligations is rescinded, invalidated, declared to
be fraudulent or preferential or otherwise required to be restored or returned
by the Secured Party in connection with any bankruptcy, reorganization or
similar proceeding involving the obligor, any other party liable with respect to
the Secured Obligations or otherwise, if the proceeds of any Collateral are
required to be returned by the Secured Party


                                          13
<PAGE>

under any such circumstances.  Without limiting the generality of the foregoing,
if prior to any such rescission, invalidation, declaration, restoration or
return, this Agreement shall have been canceled or surrendered or the security
interest in favor of the Secured Party or any Collateral shall have been
released or terminated in connection with such cancellation or surrender, this
Agreement and the security interest in favor of the Secured Party and such
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the obligor in respect of the amount of the affected payment or
application of proceeds, the security interest in favor of the Secured Party or
such Collateral.

          7.12 CONTINUING SECURITY INTEREST; TERMINATION.  Except as otherwise
permitted herein and except for such releases provided for under this Agreement,
this Agreement shall create a continuing security interest in the Collateral
and, except as provided herein or therein, the security interest in favor of the
Secured Party and all agreements, representations and warranties made herein
shall survive until, and this Agreement shall terminate only upon, the payment
and performance in full of all principal and any interest on the Note and all
other Secured Obligations then due and owing.  Any investigation at any time
made by or on behalf of the Secured Party shall not diminish the right of the
Secured Party to rely on any such agreements, representations or warranties
herein.

          Notwithstanding anything in this Agreement or Applicable Law to the
contrary, the agreements of the Obligor set forth in SECTION 7.03 shall survive
the payment of all other Secured Obligations and the termination of this
Agreement.  After payment of all principal and any interest on the Note and the
payment of all other Secured Obligations then due and owing, the Secured Party
shall, upon the request and at the expense of the Obligor, forthwith assign,
transfer and deliver to the Obligor or its order, against receipt and without
warranty or recourse to the Secured Party, such of the Collateral as may be in
the possession of the Secured Party or to which the Secured Party may have an
interest and as shall not have been sold or otherwise applied pursuant to the
terms hereof.  The Secured Party shall execute, deliver and acknowledge (if
acknowledgment is appropriate) any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Collateral.

          7.13 WAIVER AND ESTOPPEL.  Except as otherwise provided in this
Agreement, the Obligor hereby waives:  (a) presentment, demand for payment or
performance (including diligence in making demands hereunder), notice of
dishonor or nonperformance, protest, acceptance and notice of acceptance of this
Agreement, and all other notices of any kind including (i) notice of the
existence, creation or incurrence of new or additional Secured Obligations,
(ii) notice of any action taken or omitted by the Secured Party in reliance
hereon, (iii) notice of any default by any Other Obligor, (iv) notice that any
portion of the secured obligations is due, (v) notice of any action against any
Other Obligor, or any enforcement or other action with respect to Collateral or
other Collateral, or the assertion of any right of the Secured Party hereunder;
(b) during the existence of an Event of Default, notice prior to taking
possession or control of any Collateral or any bond or security that might be
required by any court prior to allowing the Secured Party to exercise any of
their rights, powers or remedies; (c) the benefit of all valuation,
appraisement, redemption and exemption laws; (d) any rights to require
marshaling of the Collateral upon any sale or otherwise to direct the order in
which the


                                          14
<PAGE>

Collateral shall be sold; (e) any right to assert against the Secured Party any
defense (legal or equitable), set-off, counterclaim and other right that the
Obligor may now or any time hereafter have against any Other Obligor; (f) any
rights to require the Secured Party to proceed against any Person, proceed
against or exhaust any Collateral or any other security interests or guaranties
or pursue any other remedy in the Secured Party's power, or to pursue any of
such rights in any particular order or manner, and any defenses arising by
reason of any disability or defense of any Person; (g) the right to require the
Secured Party to proceed against any Other Obligor, to proceed against or
exhaust any Other Collateral or to pursue any other remedy in the Secured
Party's power whatsoever and the right to have the property of any Other Obligor
first applied to the discharge of the Secured Obligations; (h) all rights and
benefits under Applicable Law purporting to reduce a guarantor's obligations in
proportion to the obligation of the principal or providing that the obligation
of a surety or guarantor must neither be larger nor i other respects more
burdensome than that of the principal; (i) the benefit of any statute of
limitations affecting the Secured Obligations or the Obligor's liability
hereunder; (j) all defenses that at any time may be available to the Obligor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect; (k) any rights and other benefits arising out of any failure of the
Secured Party to hold a commercially reasonable public or private foreclosure
sale or otherwise to comply with Applicable Law in connection with a disposition
of Collateral or Other Collateral.

          7.14 AUTHORIZATION.  The Obligor authorizes the Secured Party, without
notice to or further assent by the Obligor, and without affecting the Obligor's
liability hereunder or the security interest in favor of the Secured Party
(regardless of whether any subrogation or similar right that the Obligor may
have or any other right or remedy of the Obligor is extinguished or impaired),
from time to time to:

          (a)  take and hold other collateral ("OTHER COLLATERAL") with respect
to the Secured Obligations or any portion thereof from any other Person ("OTHER
OBLIGOR"), perfect a Lien on such other Collateral, take any other action in
respect of, any such Other Collateral or Lien or any part thereof;

          (b)  otherwise deal with any Other Obligor and any Other Collateral as
the Secured Party may elect in its sole discretion.

          7.15 BANKRUPTCY NO DISCHARGE.  Without limiting SECTION 7.13, this
Agreement and the security interest in favor of the Secured Party shall not be
discharged or otherwise affected by any bankruptcy, reorganization or similar
proceeding commenced by or against any Other Obligor, including (a) any
discharge of, or bar or stay against collecting, all or any part of the Secured
Obligations in or as a result of any such proceeding, whether or not assented to
by the Secured Party, and (b) any disallowance of all or any portion of the
Secured Party's claim for repayment of the Secured Obligations.

          7.16 NATURE OF AGREEMENT.  This Agreement is independent of and not in
consideration of or contingent upon the liability of any Other Obligor and
foreclosure or other action may be taken against all or any Collateral and a
separate action or actions may be brought and prosecuted against the Obligor
whether or not any foreclosure or other action is taken with respect to any
Other Collateral or other action is brought or prosecuted against any Other
Obligor


                                          15
<PAGE>

or whether any Other Obligor is joined in any such action or actions.  This
Agreement shall be construed as continuing, absolute and unconditional without
regard to (and the Obligor waives any and all defenses based upon):

          (a)  the legality, validity or enforceability of the Note, any of the
Secured Obligations, any Lien or Other Collateral;

          (b)  any increase, decrease or other change in the amount or time,
manner or place of payment of the Secured Obligations or any part thereof or
other amendment to the terms and conditions of the Note or any provision
thereof;

          (c)  any exchange, release (whether intentionally or unintentionally),
or non-perfection of any Lien on any Other Collateral or any part thereof or any
release of or settlement with any Other Obligor in respect of this Agreement or
the Secured Obligations;

          (d)  any exercise in such manner and order as the Secured Party elects
in its sole discretion, failure to exercise, waiver, or termination of, any of
the remedies or rights of such Secured Party against any Other Obligor in
respect of any Secured Obligations or any Other Collateral; or

          (e)  any other circumstance whatsoever (with or without notice to or
knowledge of the Obligor), whether or not similar to any of the foregoing, that
constitutes, or might be construed to constitute, an equitable or legal
discharge of any Other Obligor for the Secured Obligations, in bankruptcy or in
any other instance.


                                          16
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
duly executed and delivered as of the day and year first above written.


                                        SANTA FE HOTEL INC.


                                        By: /s/ Thomas K. Land
                                            ------------------------------------
                                            Name:  Thomas K. Land
                                            Title: Chief Financial Officer


                                        PDS FINANCIAL CORPORATION - NEVADA,
                                        as Collateral Agent


                                        By: /s/ Johan P. Finley
                                            ------------------------------------
                                            Name:  Johan P. Finley
                                            Title: President


                                          17
<PAGE>

                                      ANNEX 1

                                 LIST OF COLLATERAL


<PAGE>

                                      ANNEX 2


(b)  1.   PDS Financial Corporation - Nevada
          6171 McLeod Drive
          Las Vegas, Nevada  89120-4048

     2.   Unique Slot & Repair, Inc.
          4405 E. Sahara Avenue
          Suite 5
          Las Vegas, Nevada  98104

(c)  Santa Fe Operating Limited Partnership


<PAGE>

                                      ANNEX 3

                           LIENS COVERING THE COLLATERAL