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                                                                  EXHIBIT 10.121
                               SECURITY AGREEMENT


         This SECURITY AGREEMENT (this "AGREEMENT") is dated as of January 16,
1996 and entered into by and between SAHARA LAS VEGAS CORP., a Nevada
corporation ("GRANTOR"), and SUNAMERICA LIFE INSURANCE COMPANY, as collateral
agent for and representative of (in such capacity herein called "SECURED PARTY")
the holders of the Notes from to time to time (the "HOLDERS").


                             PRELIMINARY STATEMENTS

         A.   Grantor, Secured Party and Sahara Gaming Corporation, a Nevada
corporation ("SGC"), have entered into a Note Purchase Agreement dated as of
even date herewith (said Note Purchase Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "NOTE
PURCHASE AGREEMENT", the terms defined therein and not otherwise defined herein
being used herein as therein defined), pursuant to which, among other things,
Grantor has issued its Note to Secured Party.

         B.   It is a condition precedent to the acquisition of the Note by
Secured Party under the Note Purchase Agreement that Grantor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.

         NOW, THEREFORE, in consideration of the premises and in order to induce
Secured Party to acquire the Note under the Note Purchase Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Grantor hereby agrees with Secured Party as follows:

         SECTION 1.  GRANT OF SECURITY.  Grantor hereby assigns to Secured
                     -----------------                                    
Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):

         (a) all present and future chattels, furniture, furnishings, goods,
equipment, fixtures and all other tangible personal property, of whatever kind
and nature, now or hereafter used in connection with or placed or located in or
on any part of the Premises (including, without limitation, any building or
structure that is now or that may hereafter be erected on the Premises),
including, but not limited to, machinery, materials, goods and equipment now or
hereafter used in any construction or operation relating thereto (including,
without limitation, air conditioning, heating, electrical, lighting, fire
fighting and fire prevention, food and beverage service, laundry, plumbing,
refrigeration, security, sound, signaling, telephone, television, window washing
and other equipment and fixtures, of whatever kind or nature, including
generators, transformers, switching

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gear, boilers, burners, furnaces, piping, sprinklers, sinks, tubs, valves,
compressors, motors, carts, dumb waiters, elevators and other lifts, floor
coverings, hardware, keys, locks, organs, pianos, planters, railings, scales,
shelving, signs, tools, machinery, molds, dies, drills, presses, planers, saws,
furniture, business fixtures, trade fixtures, electric, gas and other motor
vehicles, uniforms, vacuum cleaners, hotel furniture, furnishings and equipment,
bathroom furniture and furnishings (including towels, bathmats, hamperettes,
shower curtains and other bath linens), beds and bedding (including mattresses,
springs, pillows, bed pads, sheets, blankets, comforters, spreads and other bed
linens and furnishings), bric-a-brac, chairs, chests, vanities, secretaries,
bureaus, chiffonniers, love seats, benches, costumers, smoking stands, sand
jars, desks, dressers, hangings, paintings, pictures, frames, sculptures, lamps,
light bulbs, mirrors, night stands, ornaments, radios, stereo equipment, sofas,
statuary, tables, telephones, televisions, vases, window coverings, foodstuffs,
beverages (including beer, wine, liquor and other alcoholic beverages), and
other consumables (including soap, shampoo, cleaning supplies and paper goods),
cutlery, cooking, baking and other kitchen utensils and apparatus (including
crockery, fryers, grills, kettles, mixers, pots, pans, pails, racks, steamers
and toasters), china and other dishes, flatware, glassware, hollowware, serving
pieces, trays, table linens, washers, dryers, irons, ironing boards and other
ironing equipment, cables, outlets, plugs, wiring and related apparatus and
fixtures, card readers, cash registers, adding machines, calculators, computers,
keyboards, monitors, printers, printing equipment, envelopes, stationary,
posting machines, blank forms, typewriters, typewriter stands, other office and
accounting equipment and supplies, time stamps, time recorders, bookkeeping
machines, checking machines, payroll machines, computer reservations systems,
and all other goods, equipment, furnishings, apparatus and fixtures that are now
or may hereafter be located at or used at or in connection with the Premises)
and all other tangible personal property used or to be used at or in connection
with, or placed or to be placed in, rooms, halls, lounges, offices, lobbies,
lavatories, basements, cellars, vaults or other portions of the Premises or any
facilities on the Premises or of any other building or buildings hereafter
constructed or erected thereon, whether herein enumerated or not, and whether or
not contained in any such building, and which are used or to be used or useful
in the operation and maintenance thereof, or in any business conducted thereon,
together with all replacements and substitutions for any and all personal
property in which Grantor has an interest, including without limitation such
goods and equipment as shall from time to time be located, placed, installed or
used in or upon, or procured for use, or to be used or useful in connection with
the operation of the whole, or any part of, the Premises or any facilities on
the Premises and all parts thereof and all accessions thereto (any and all such
equipment, replacements, substitutions, parts and accessions being the
"EQUIPMENT");

         (b) all present and future inventory and merchandise in all of its
forms (including, but not limited to, (i) all goods held by Grantor for sale or
lease or to be furnished under contracts of service or so leased or furnished,
(ii) all raw materials, work in process, (iii) all goods in which Grantor has an
interest in mass or a joint or other interest or right of any kind, (iv) all
goods that are returned to or repossessed by Grantor, and (v) all accessions
thereto and products thereof (all such inventory, accessions and products being
the "INVENTORY");

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         (c) all present and future accounts, accounts receivable, rentals,
revenues, receipts, payments, and income of any nature whatsoever derived from
or received with respect to any facilities on the Premises, agreements,
contracts, leases, contract rights, rights to payment, instruments, documents,
chattel paper, security agreements, guaranties, undertakings, surety bonds,
insurance policies, condemnation deposits and awards, notes and drafts,
securities, certificates of deposit and the right to receive all payments
thereon or in respect thereof (whether principal, interest, fees or otherwise),
contract rights (other than rights under contracts or governmental permits that
may not be transferred by law), including, without limitation, rights to all
deposits from tenants and other users of the Premises or any facilities on the
Premises, rights under all contracts relating to the construction, renovation or
restoration of any of the improvements now or hereafter located on the Premises
or the financing thereof and all rights under payment or performance bonds,
warranties, and guaranties, and all rights to payment from any credit/charge
card organization or entity such as or similar to, and including, without
limitation, the organizations or entities that sponsor and administer,
respectively, the American Express Card, the Carte Blanche Card, the Diners Club
Card, the Discover Card, the MasterCard and the Visa Card, books of account, and
principal, interest and payments due on account of goods sold, services
rendered, loans made or credit extended, on or in connection with the Premises
or any facilities on the Premises and all forms of obligations owing to and
rights of Grantor or in which Grantor may have any interest, however created or
arising (any and all such accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other obligations being the "ACCOUNTS", and
any and all such security agreements, leases and other contracts being the
"RELATED CONTRACTS");

         (d) all present and future right, title and interest of Grantor in and
to all leases, subleases, licenses, concessions, franchises and other use or
occupancy agreements, and any amendments, modifications, extensions or renewals
thereof (collectively, "LEASES"), whether or not specifically herein described,
that now or may hereafter pertain to or affect the Premises or any portion
thereof, and all amendments to the same, including, but not limited to, the
following:  (i) all payments due and to become due under such Leases, whether as
rent, damages, insurance payments, condemnation awards, or otherwise; (ii) all
claims, rights, powers, privileges and remedies under such Leases; and (iii) all
rights of the Grantor under such Leases to exercise any election or option, or
to give or receive any notice, consent, waiver or approval, or to accept any
surrender of the premises or any part thereof, together with full power and
authority in the name of the Grantor, or otherwise, to demand and receive,
enforce, collect, and receipt for any or all of the foregoing, to endorse or
execute any checks or any instruments or orders, to file any claims, and to take
any other action that Secured Party may deem necessary or advisable in
connection therewith;

         (e) all present and future deposit accounts of Grantor, any demand,
time, savings, passbook or like account maintained by Grantor with any bank,
savings and loan association, credit union or like organization, and all money,
cash and cash equivalents of Grantor, whether or not deposited in any such
deposit account;

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         (f) all present and future general intangibles (including but not
limited to all governmental permits relating to construction or other activities
on the premises), all tax refunds of every kind and nature to which Grantor now
or hereafter may become entitled, however arising, all other refunds, and all
deposits, goodwill, chooses in action, rights to payment or performance,
judgments taken on any rights or claims included in the Collateral, trade
secrets, computer programs, software, customer lists, business names,
trademarks, trade names and service marks, patents, patent applications,
licenses, copyrights, technology, processes, proprietary information and
insurance proceeds;

         (g) all present and future books and records, including, without
limitation, books of account and ledgers of every kind and nature, ledger cards,
computer programs, tapes, disks and other information storage devices, all
related data processing software, and all electronically recorded data relating
to Grantor or its business or the Project, all receptacles and containers for
such records, and all files and correspondence;

         (h) all present and future maps, plans, specifications, surveys,
studies, reports, data and drawings (including, without limitation,
architectural, structural, mechanical and engineering plans and specifications,
studies, data and drawings) prepared for or relating to the Premises or the
construction, renovation or restoration of any improvements on the Premises or
the extraction of minerals, sand, gravel or other valuable substances from the
Premises, together with all amendments and modifications thereto;

         (i) all present and future licenses, permits, variances, special
permits, franchises, certificates, rulings, certifications, validations,
exemptions, filings, registrations, authorizations, consents, approvals,
waivers, orders, rights and agreements (including options, option rights and
contract rights), other than those that may not be transferred by law, now or
hereafter obtained by Grantor from any governmental authority having or claiming
jurisdiction over the Premises or any other element of the Collateral or
providing access thereto, or the operation of any business on, at, or from the
Premises;

         (j) all present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates, partnership
interests, joint venture interests, investments, brokerage accounts and all
rights, preferences, privileges, dividends, distributions, redemption payments
and liquidation payments received or receivable with respect thereto;

         (k) all present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and improvements to or of or with respect to any of the foregoing;

         (l) all other fixtures and storage and office facilities, and all
accessions thereto and products thereof and all water stock relating to the
Premises;

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         (m) the 11% First Mortgage Notes or any other indebtedness (any such
notes or indebtedness, the "SFHI Notes") issued by Santa Fe Hotel, Inc., a
Nevada corporation ("SFHI"), pursuant to that certain Indenture dated as of
December 29, 1993 among SFHI, Sahara Gaming Corporation and IBJ Schroder Bank &
Trust Company, as trustee, as amended, modified, supplemented, restated or
restructured from time to time (the "SFHI INDENTURE"), all rights of every
nature relating to the SFHI Notes including but not limited to all real property
and other security securing the SFHI Notes, and the instruments evidencing the
SFHI Notes, and all interest, cash investments and other property or proceeds
from time to time receivables or otherwise distributed in respect of or in
exchange for any or all of the SFHI Notes (collectively, the "PLEDGED SFHI
COLLATERAL");

         (n) all other tangible and intangible personal property of Grantor;

         (o) all rights, remedies, powers and privileges of Grantor with respect
to any of the foregoing;

         (p) any and all proceeds, products, rents, income and profits of any of
the foregoing, including, without limitation, all money, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper, goods,
insurance proceeds (whether or not the Secured Party is the loss payee), and any
other tangible or intangible property received upon the sale or disposition of
any of the foregoing (it being agreed, for purposes hereof, that the term
"PROCEEDS" includes whatever is receivable or received when any of the
Collateral is sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary).

         SECTION 2.  SECURITY FOR OBLIGATIONS.  This Agreement secures, and the
                     ------------------------                                  
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Note Purchase Agreement and the other Basic Documents and
all extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to Grantor, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT"), and all obligations of every nature of
Grantor now or hereafter existing under this Agreement (all such obligations of
Grantor, together with the Underlying Debt, being the "SECURED OBLIGATIONS").

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         SECTION 3.  GRANTOR REMAINS LIABLE.  Anything contained herein to the
                     ----------------------                                   
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement or
otherwise, nor shall Secured Party be obligated to perform any of the
obligations or duties of Grantor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.

         SECTION 4.  REPRESENTATIONS AND WARRANTIES.  Grantor represents and
                     ------------------------------                         
warrants as follows:

         (a) Ownership of Collateral.  Except for the security interest created
             -----------------------                                           
by this Agreement and any Liens permitted pursuant to the Note Purchase
Agreement, Grantor owns the Collateral free and clear of any Lien.  Except such
as may have been filed in favor of Secured Party relating to this Agreement or
to perfect Liens permitted pursuant to the Note Purchase Agreement, no effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any filing or recording office.

         (b) Location of Equipment and Inventory.  All of the Equipment and
             -----------------------------------                           
Inventory is, as of the date hereof, located at the Premises.

         (c) Office Locations; Other Names.  The chief place of business, the
             -----------------------------                                   
chief executive office and the office where Grantor keeps its records regarding
the Accounts and all originals of all chattel paper that evidence Accounts is,
and has been for the four month period preceding the date hereof, located at
4949 North Rancho Drive, Las Vegas, Nevada 89130.  Grantor has not in the past
done, and does not now do, business under any other name (including any trade-
name or fictitious business name) except Sahara Las Vegas Corp.

         (d) Governmental Authorizations.  No authorization, approval or other
             ---------------------------                                      
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Grantor, or (iii) the perfection of or the exercise by Secured
Party of its rights and remedies hereunder (except (i) the filing of Uniform
Commercial Code financing statements with the office of the Secretary of State
of the State of Nevada and (ii) as has been previously taken by or at the
direction of Grantor).

         (e) Perfection.  This Agreement, together with the filing of a UCC-1
             ----------                                                      
financing statement describing the Collateral with the Secretary of State of
Nevada and the Deed of Trust with the Clark County Recorder creates a valid,
perfected, enforceable

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and first priority security interest in the Collateral, securing the payment of
the Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly made or
taken.

         (f) Other Information.  All information heretofore, herein or hereafter
             -----------------                                                  
supplied to Secured Party by or on behalf of Grantor with respect to the
Collateral is accurate and complete in all material respects.

         SECTION 5.  FURTHER ASSURANCES.
                     ------------------ 

         (a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party reasonably may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.  Without limiting the generality of the foregoing, Grantor will:
(i) deliver to Secured Party all instruments or certificates evidencing or
representing the Pledged SFHI Collateral in suitable form for transfer by
delivery and shall be accompanied by Grantor's endorsement or duly executed
instruments of transfer or assignments in blank, all in form and substance
satisfactory to Secured Party, (ii) at the request of Secured Party mark
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the request of Secured Party, each of its records pertaining to
the Collateral, with a legend, in form and substance satisfactory to Secured
Party, indicating that such Collateral is subject to the security interest
granted hereby, (iii) at the request of Secured Party, deliver and pledge to
Secured Party hereunder all promissory notes and other instruments (including
checks) and all original counterparts of chattel paper constituting Collateral,
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party, (iv)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may reasonably request, in order to perfect and
preserve the security interests granted or purported to be granted hereby, (v)
at any reasonable time, upon request by Secured Party, exhibit the Collateral to
and allow inspection of the Collateral by Secured Party, or persons designated
by Secured Party, and (v) at Secured Party's reasonable request, appear in and
defend any action or proceeding that may affect Grantor's title to or Secured
Party's security interest in all or any significant part of the Collateral.

         (b) Grantor shall pledge hereunder, immediately upon Grantor's
acquisition, any and all instruments or other evidences of the Pledged SFHI
Collateral.  Grantor further agrees that it will, upon obtaining any additional
instruments or other evidences of Pledged SFHI Collateral, promptly (and in any
event within two Business Days) deliver to Secured Party a Pledge Amendment,
duly executed by Grantor, in substantially the form of Schedule I annexed hereto
                                                       ----------               
(a "PLEDGE AMENDMENT"), in respect of the additional SFHI Notes or other SFHI
Pledged Collateral to be pledged pursuant to this Agreement.  Grantor hereby
authorizes Secured Party to attach each Pledge

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Amendment to this Agreement and agrees that all SFHI Notes or other SFHI Pledged
Collateral listed on any Pledge Amendment delivered to Secured Party shall for
all purposes hereunder be considered Collateral; provided that the failure of
                                                 --------                    
Grantor to execute a Pledge Amendment with respect to any additional SFHI Notes
or other SFHI Pledged Collateral pledged pursuant to this Agreement shall not
impair the security interest of Secured Party therein or otherwise adversely
affect the rights and remedies of Secured Party hereunder with respect thereto.

         (c) Secured Party shall have the right, at any time in its discretion
and without notice to Grantor, to transfer to or to register in the name of
Secured Party or any of its nominees any or all of the Pledged SFHI Collateral.
In addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged SFHI Collateral
for certificates or instruments of smaller or larger denominations.

         (d) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor.  Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.

         (e) Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.

         (f) Secured Party agrees to release Pledged SFHI Collateral from the
lien created under this Agreement and the Collateral Account Agreement as
provided in subsection 2.5B and 2.5C of the Note Purchase Agreement.

         SECTION 6.  CERTAIN COVENANTS OF GRANTOR.  Grantor shall:
                     ----------------------------                 

         (a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;

         (b) notify Secured Party of any change in Grantor's name or identity
within 15 days of such change;

         (c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps its records regarding the Accounts and all originals
of all chattel paper that evidence Accounts;

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<PAGE>
 
         (d) if Secured Party gives value to enable Grantor to acquire rights in
or the use of any Collateral, use such value for such purposes; and

         (e) pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith and for which adequate
reserves have been established; provided that Grantor shall in any event pay
                                --------                                    
such taxes, assessments, charges, levies or claims not later than five days
prior to the date of any proposed sale under any judgement, writ or warrant of
attachment entered or filed against Grantor or any of the Collateral as a result
of the failure to make such payment.

         SECTION 7.  SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
                     ---------------------------------------------------------  
Grantor shall:

         (a) keep the Equipment and Inventory at the Premises or, upon 30 days'
prior written notice to Secured Party, at such other places in jurisdictions
where all action that may be necessary or desirable, or that Secured Party may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Secured Party to
exercise and enforce its rights and remedies hereunder, with respect to such
Equipment and Inventory shall have been taken;

         (b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and shall forthwith make or cause to be made all repairs, replacements
and other improvements in connection therewith that are necessary or desirable
to such end.  Grantor shall promptly furnish to Secured Party a statement
respecting any material loss or damage to any of the Equipment (the requirements
under this subsection 7(b) being supplemental to and not exclusive of the
requirements under the Note Purchase Agreement and the Deed of Trust relating to
maintenance of property);

         (c) notify Secured Party of the establishment after the date hereof of
any deposit accounts in which Secured Party may take a security interest
pursuant to applicable law and take such steps as may be requested by Secured
Party to perfect Secured Party's lien therein; and

         (d) perform all acts that are necessary or desirable to cause all
licenses, permits, variances, special permits, franchises, certificates,
rulings, certifications, validations, exemptions, filings, registrations,
authorizations, consents, approvals, waivers, orders, rights, and agreements in
which a security interest has been conveyed to Secured Party pursuant to
subsection 1(h) to remain in full force and effect.

         SECTION 8.  INSURANCE.  Grantor shall, at its own expense, maintain
                     ---------                                              
insurance with respect to the Equipment and Inventory in accordance with the
terms of the Note Purchase Agreement and the Deed of Trust.

                                       9
<PAGE>
 
         SECTION 9.  SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
                     ------------------------------------------------------
CONTRACTS.
--------- 

         (a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 4 or, upon 30 days'
prior written notice to Secured Party, at such other location in a jurisdiction
where all action that may be necessary or desirable, or that Secured Party may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Secured Party to
exercise and enforce its rights and remedies hereunder, with respect to such
Accounts and Related Contracts shall have been taken.  Grantor will hold and
preserve such records and chattel paper and will permit representatives of
Secured Party at any time during normal business hours and upon reasonable
notice from the Secured Party to inspect and make abstracts from such records
and chattel paper, and Grantor agrees to render to Secured Party, at Grantor's
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto.  Promptly upon the request of Secured Party,
Grantor shall deliver to Secured Party complete and correct copies of each
Related Contract.

         (b) Grantor shall, for not less than 3 years from the date on which
such Account arose, maintain (i) complete records of each Account, including
records of all payments received, credits granted and merchandise returned, and
(ii) all documentation relating thereto.

         (c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts (but, other than with respect to security deposits,
in no event more than one month in advance) and Related Contracts.  In
connection with such collections, Grantor may take (and, at Secured Party's
direction, shall take) such action as Grantor or Secured Party may deem
necessary or advisable to enforce collection of amounts due or to become due
under the Accounts; provided, however, that Secured Party shall have the right
                    --------  -------                                         
at any time, upon the occurrence and during the continuation of an Event of
Default and upon written notice to Grantor of its intention to do so, to notify
the account debtors or obligors under any Accounts of the assignment of such
Accounts to Secured Party and to direct such account debtors or obligors to make
payment of all amounts due or to become due to Grantor thereunder directly to
Secured Party, to notify each Person maintaining a lockbox or similar
arrangement to which account debtors or obligors under any Accounts have been
directed to make payment to remit all amounts representing collections on checks
and other payment items from time to time sent to or deposited in such lockbox
or other arrangement directly to Secured Party and, upon such notification and
at the expense of Grantor, to enforce collection of any such Accounts and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Grantor might have done.  After receipt by Grantor of
the notice from Secured Party referred to in the proviso to the preceding
                                                 -------                 
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by Grantor in respect of the Accounts and the Related Contracts shall
be received in trust for the benefit of Secured Party

                                       10
<PAGE>
 
hereunder, shall be segregated from other funds of Grantor and shall be
forthwith paid over or delivered to Secured Party in the same form as so
received (with any necessary endorsement) to be held as cash Collateral and
applied as provided by Section 17, and (ii) Grantor shall not adjust, settle or
compromise the amount or payment of any Account, or release wholly or partly any
account debtor or obligor thereof, or allow any credit or discount thereon
(other than settlements in the ordinary course of business and substantially
consistent with the practice at other gaming institutions in connection with
their gaming operations in the State of Nevada with payors of such Accounts
reached to facilitate collection from such payors of such Accounts).

         SECTION 10.  DEPOSIT ACCOUNTS.  Upon the occurrence and during the
                      ----------------                                     
continuation of an Event of Default or Potential Event of Default, Secured Party
may exercise dominion and control over, and refuse to permit further withdrawals
(whether of money, securities, instruments or other property) from any deposit
accounts maintained with Secured Party constituting part of the Collateral.

         SECTION 11.  LICENSE OF PATENTS, TRADEMARKS, COPYRIGHTS, ETC.  Grantor
                      -----------------------------------------------          
hereby assigns, transfers and conveys to Secured Party, effective upon the
occurrence of any Event of Default, the nonexclusive right and license to use
all trademarks, tradenames, copyrights, customers lists, patents or technical
processes owned or used by Grantor that relate to the Collateral and any other
collateral granted by Grantor as security for the Secured Obligations, together
with any goodwill associated therewith, all to the extent necessary to enable
Secured Party to use, possess and realize on the Collateral and to enable any
successor or assign to enjoy the benefits of the Collateral.  This right and
license shall inure to the benefit of all successors, assigns and transferees of
Secured Party and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise.  Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to Grantor.

         SECTION 12.  TRANSFERS AND OTHER LIENS.  Grantor shall not:
                      -------------------------                     

         (a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Note Purchase
Agreement; or

         (b) except for the security interest created by this Agreement or as
permitted by the Note Purchase Agreement, create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person.

         (c) Notwithstanding the foregoing, Grantor may request that Collateral
Agent release SFHI Notes pledged hereunder from the security interests created
pursuant hereto in accordance with subsection 2.5D of the Note Purchase
Agreement.

                                       11
<PAGE>
 
         SECTION 13.  SFHI PLEDGED COLLATERAL.
                      ----------------------- 

         (a) So long as no Event of Default shall have occurred and be
continuing, Grantor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged SFHI Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the other
Basic Documents; provided, however, that Grantor shall not exercise or refrain
                 --------  -------                                            
from exercising any such right if Secured Party shall have notified Grantor
that, in Secured Party's judgment, such action would have an adverse effect on
the value of the Pledged SFHI Collateral or any part thereof; and provided,
                                                                  -------- 
further, that Grantor shall give Secured Party at least five Business Days'
-------                                                                    
prior written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right.

         (b) All principal, interest and other payments paid in cash or cash
equivalents in respect of the Pledged SFHI Collateral shall be paid to Secured
Party under and in accordance with the Cash Collateral Agreement.  All
principal, interest and other payments paid or payable other than in cash or
cash equivalents in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for, any
Pledged SFHI Collateral shall be, and shall forthwith be delivered to Secured
Party to hold as Pledged SFHI Collateral.  All principal, interest and other
payments paid in respect of the Pledged SFHI Collateral shall, if received by
Grantor, be received in trust for the benefit of Secured Party, be segregated
from the other property or funds of Grantor and be forthwith delivered to
Secured Party as Pledged SFHI Collateral in the same form as so received (with
all necessary indorsements).

         (c) Upon the occurrence and during the continuation of an Event of
Default, upon written notice from Secured Party to Grantor, all rights of
Grantor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 13(a) shall cease, and all
such rights shall thereupon become vested in Secured Party who shall thereupon
have the sole right to exercise such voting and other consensual rights.

         (d) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section 7(c)
and to receive all payments and other distributions which it may be entitled to
receive under Section 7(b), (i) Grantor shall promptly execute and deliver (or
cause to be executed and delivered) to Secured Party all such proxies, orders
and other instruments as Secured Party may from time to time reasonably request
and (ii) without limiting the effect of the immediately preceding clause (i),
Grantor hereby grants to Secured Party an irrevocable proxy to vote the Pledged
SFHI Collateral and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged SFHI Collateral would be entitled
(including, without limitation, giving or withholding written consents, calling
special meetings and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged SFHI Collateral on the record books of the issuer thereof) by any
other Person (including the issuer of the Pledged SFHI Collateral or any officer
or agent thereof), upon

                                       12
<PAGE>
 
the occurrence of an Event of Default and which proxy shall only terminate upon
the payment in full of the Secured Obligations.

         SECTION 14.  SECURED PARTY APPOINTED ATTORNEY-IN-FACT.  Grantor hereby
                      ----------------------------------------                 
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:

         (a) to obtain and adjust insurance required to be maintained by Grantor
or paid to Secured Party pursuant to the Note Purchase Agreement and the Deed of
Trust;

         (b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;

         (c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;

         (d) to file any claims or take any action or institute any proceedings
(including, without limitation, any proceeding before any Gaming Authority) that
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral;

         (e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Note Purchase Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;

         (f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and

         (g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time or from time to time,
all acts and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
Grantor might do.

                                       13
<PAGE>
 
         SECTION 15.  SECURED PARTY MAY PERFORM.  If Grantor fails to perform
                      -------------------------                              
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 18.

         SECTION 16.  STANDARD OF CARE.  The powers conferred on Secured Party
                      ----------------                                        
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers.  Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral, it being understood that Secured Party shall have no responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Collateral,
whether or not Secured Party has or is deemed to have knowledge of such matters,
(b) taking any necessary steps (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the Collateral) to
preserve rights against any parties with respect to any Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Collateral, or (d)
initiating any action to protect the Collateral against the possibility of a
decline in market value.  Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property.

         SECTION 17.  REMEDIES.
                      -------- 

         (a) Notwithstanding any other provision hereof, if Secured Party
    elects, upon any Event of Default, to sell real property and any of the
    Collateral together under the Deed of Trust and applicable law, then the
    terms of the Deed of Trust shall, with respect to such sale and Collateral,
    control and supersede any terms in this Agreement with respect to such sale
    and Collateral; provided that Secured Party's election to exercise remedies
                    --------                                                   
    under the Deed of Trust shall have no effect on the terms contained in this
    Agreement with respect to any Collateral as to which Secured Party has not
    so elected.

         (b) If any Event of Default shall have occurred and be continuing,
    Secured Party may exercise in respect of the Collateral, in addition to all
    other rights and remedies provided for herein or otherwise available to it,
    all the rights and remedies of a secured party on default under the Uniform
    Commercial Code as in effect in any relevant jurisdiction (the "CODE")
    (whether or not the Code applies to the affected Collateral), and also may
    (i) require Grantor to, and Grantor hereby agrees that it will at its
    expense and upon request of Secured Party forthwith, assemble all or part of
    the Collateral as directed by Secured Party and make it available to Secured
    Party at a place to be designated by Secured Party that is reasonably
    convenient to both parties, (ii) enter onto the property where any

                                       14
<PAGE>
 
    Collateral is located and take possession thereof with or without judicial
    process, (iii) prior to the disposition of the Collateral, store, process,
    repair or recondition the Collateral or otherwise prepare the Collateral for
    disposition in any manner to the extent Secured Party deems appropriate,
    (iv) take possession of Grantor's premises or place custodians in exclusive
    control thereof, remain on such premises and use the same and any of
    Grantor's equipment for the purpose of completing any work in process,
    taking any actions described in the preceding clause, (iii) collect any
    Secured Obligation, and (v) without notice except as specified below, sell
    the Collateral or any part thereof in one or more parcels at public or
    private sale, at any of Secured Party's offices or elsewhere, for cash, on
    credit or for future delivery, at such time or times and at such price or
    prices and upon such other terms as Secured Party may deem commercially
    reasonable.  Secured Party may be the purchaser of any or all of the
    Collateral at any such sale and Secured Party shall be entitled, for the
    purpose of bidding and making settlement or payment of the purchase price
    for all or any portion of the Collateral sold at any such public sale, to
    use and apply any of the Secured Obligations as a credit on account of the
    purchase price for any Collateral payable by Secured Party at such sale.
    Each purchaser at any such sale shall hold the property sold absolutely free
    from any claim or right on the part of Grantor, and Grantor hereby waives
    (to the extent permitted by applicable law) all rights of redemption, stay
    and/or appraisal which it now has or may at any time in the future have
    under any rule of law or statute now existing or hereafter enacted.  Grantor
    agrees that, to the extent notice of sale shall be required by law, at least
    ten days' notice to Grantor of the time and place of any public sale or the
    time after which any private sale is to be made shall constitute reasonable
    notification.  Secured Party shall not be obligated to make any sale of
    Collateral regardless of notice of sale having been given.  Secured Party
    may adjourn any public or private sale from time to time by announcement at
    the time and place fixed therefor, and such sale may, without further
    notice, be made at the time and place to which it was so adjourned.  Grantor
    hereby waives any claims against Secured Party arising by reason of the fact
    that the price at which any Collateral may have been sold at such a private
    sale was less than the price which might have been obtained at a public
    sale, even if Secured Party accepts the first offer received and does not
    offer such Collateral to more than one offeree.  If the proceeds of any sale
    or other disposition of the Collateral are insufficient to pay all the
    Secured Obligations, Grantor shall be liable for the deficiency and the fees
    of any attorneys employed by Secured Party to collect such deficiency.

         (c) Grantor recognizes that, by reason of certain prohibitions
    contained in the Securities Act of 1933, as from time to time amended (the
    "SECURITIES ACT"), and applicable state securities laws, Secured Party may
    be compelled, with respect to any sale of all or any part of the Collateral
    conducted without prior registration or qualification of such Collateral
    under the Securities Act and/or such state securities laws, to limit
    purchasers to those who will agree, among other things, to acquire the
    Collateral for their own account, for investment and not with a view to the
    distribution or resale thereof.  Grantor acknowledges that any such

                                       15
<PAGE>
 
    private sales may be at prices and on terms less favorable than those
    obtainable through a public sale without such restrictions (including,
    without limitation, a public offering made pursuant to a registration
    statement under the Securities Act) and, notwithstanding such circumstances,
    Grantor agrees that any such private sale shall be deemed to have been made
    in a commercially reasonable manner and that Secured Party shall have no
    obligation to engage in public sales and no obligation to delay the sale of
    any Pledged Collateral for the period of time necessary to permit the issuer
    thereof to register it for a form of public sale requiring registration
    under the Securities Act or under applicable state securities laws, even if
    such issuer would, or should, agree to so register it.

         SECTION 18.  APPLICATION OF PROCEEDS.  Except as expressly provided
                      -----------------------                               
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:

         FIRST:  To the payment of all costs and expenses of such sale,
    collection or other realization, including costs and expenses of Secured
    Party and its agents and counsel, and all other expenses, liabilities and
    advances made or incurred by Secured Party in connection therewith, and all
    amounts for which Secured Party is entitled to indemnification hereunder and
    all advances made by Secured Party hereunder for the account of Grantor, and
    to the payment of all costs and expenses paid or incurred by Secured Party
    in connection with the exercise of any right or remedy hereunder, all in
    accordance with Section 19;

         SECOND:  To the payment of all other Secured Obligations (for the
    ratable benefit of the holders thereof) in such order as Secured Party shall
    elect as provided in Section 2.5 of the Note Purchase Agreement; and

         THIRD:  To the payment to or upon the order of Grantor, or to
    whomsoever may be lawfully entitled to receive the same or as a court of
    competent jurisdiction may direct, of any surplus then remaining from such
    proceeds.

         SECTION 19.  INDEMNITY AND EXPENSES.
                      ---------------------- 

         (a) Grantor agrees to indemnify Secured Party from and against any and
all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.

                                       16
<PAGE>
 
         (b) Grantor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may reasonably incur
in connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.

         SECTION 20.  CONTINUING SECURITY INTEREST; TRANSFER OF NOTES.  This
                      -----------------------------------------------       
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in full
of the Secured Obligations, (b) be binding upon Grantor, its successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns.  Without limiting the generality of the foregoing clause (c) any Holder
may assign or otherwise transfer any Notes held by it to any other Person in
accordance with the Note Purchase Agreement, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Secured Party herein or otherwise.  Upon the indefeasible payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Grantor.  Upon any such termination
Secured Party will, at Grantor's expense, execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.

         SECTION 21.  SECURED PARTY AS COLLATERAL AGENT.
                      --------------------------------- 

         (a) Secured Party has been appointed to act as Secured Party hereunder
by Holders.  Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Note Purchase Agreement.

         (b) Secured Party shall at all times be the same Person that is
Collateral Agent under the Note Purchase Agreement.  Written notice of
resignation by Collateral Agent pursuant to subsection 8.7 of the Note Purchase
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; removal of Collateral Agent pursuant to subsection 8.7 of the
Note Purchase Agreement shall also constitute removal as Secured Party under
this Agreement; and appointment of a successor Collateral Agent pursuant to
subsection 8.7 of the Note Purchase Agreement shall also constitute appointment
of a successor Secured Party under this Agreement.  Upon the acceptance of any
appointment as Collateral Agent under subsection 8.7 of the Note Purchase
Agreement by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Secured Party under this Agreement, and
the retiring or removed Secured Party under this Agreement shall promptly (i)
transfer to such successor Secured Party all sums, securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the

                                       17
<PAGE>
 
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement.  After any retiring or removed Collateral Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.

         SECTION 22.  AMENDMENTS; ETC.  No amendment or waiver of any provision
                      ---------------                                          
of this Agreement, or consent to any departure by Grantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.

         SECTION 23.  NOTICES.  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 prior to 5:00 p.m. on a
Business Day, or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed; provided that notices to
                                                  --------                
Secured Party shall only be effective upon receipt.  For the purposes hereof,
the address of each party hereto shall be as set forth under such party's name
on the signature pages hereof or, as to either party, such other address as
shall be designated by such party in a written notice delivered to the other
party hereto.

         SECTION 24.  FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.  No
                      -----------------------------------------------------     
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

         SECTION 25.  SEVERABILITY.  In case any provision in or obligation
                      ------------                                         
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, 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.

         SECTION 26.  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.

                                       18
<PAGE>
 
         SECTION 27.  GOVERNING LAW; TERMS.  THIS AGREEMENT SHALL BE GOVERNED
                      --------------------                                   
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA.


         SECTION 28.  CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  ALL
                      ----------------------------------------------      
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF CALIFORNIA OR NEVADA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT.  Grantor hereby agrees that service of all
process in any such proceeding in any such court may be made by registered or
certified mail, return receipt requested, to Grantor at its address provided in
Section 23, such service being hereby acknowledged by Grantor to be sufficient
for personal jurisdiction in any action against Grantor in any such court and to
be otherwise effective and binding service in every respect.  Nothing herein
shall affect the right to serve process in any other manner permitted by law.

         SECTION 29.  WAIVER OF JURY TRIAL.  GRANTOR AND SECURED PARTY HEREBY
                      --------------------                                   
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT.  The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims.  Grantor and Secured Party each
acknowledge that this waiver is a material inducement for Grantor and Secured
Party to enter into a business relationship, that Grantor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings.  Grantor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel.  THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT.  In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.

                                       19
<PAGE>
 
         SECTION 30.  COUNTERPARTS.  This Agreement may be executed in one or
                      ------------                                           
more counterparts and by different 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;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.


                  [Remainder of page intentionally left blank]

                                       20
<PAGE>
 
         IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.


                        SAHARA LAS VEGAS CORP.,
                        a Nevada corporation


                        By: /s/ Thomas K. Land
                        Its: Senior Vice President and 
                             Chief Financial Officer



                        SUNAMERICA LIFE INSURANCE COMPANY


                        By: /s/ Steven P. Hanover
                        Its:______________________________ 
                        

                                      S-1
<PAGE>
 
                                   SCHEDULE I


                                PLEDGE AMENDMENT


         This Pledge Amendment, dated January 16, 1996, is delivered pursuant
to Section 5(b) of the Security Agreement referred to below.  The undersigned
hereby agrees that this Pledge Amendment may be attached to the Security
Agreement dated January 16, 1996, between the undersigned and SunAmerica Life
Insurance Company, as Secured Party (the "SECURITY AGREEMENT," capitalized terms
defined therein being used herein as therein defined), and that the Pledged SFHI
Collateral listed on this Pledge Amendment shall be deemed to be part of the
Pledged SFHI Collateral and shall become part of the Collateral and shall secure
all Secured Obligations.


                             SAHARA LAS VEGAS CORPORATION



                             By: /s/ Thomas K. Land
                             Title:  Senior Vice President and
                                     Chief Financial Officer



Debt Issuer                  Amount of Indebtedness
-----------                  ----------------------

SFHI

                                      I-1