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                                                                 EXHIBIT 10.119
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                           SAHARA GAMING CORPORATION
                             SAHARA LAS VEGAS CORP.



                            NOTE PURCHASE AGREEMENT


                        12% NOTES DUE DECEMBER 15, 1999



                          ____________________________

                             AS OF JANUARY 16, 1996

                          ____________________________


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<PAGE>
 
                           SAHARA GAMING CORPORATION
                             SAHARA LAS VEGAS CORP.

                            NOTE PURCHASE AGREEMENT


                               TABLE OF CONTENTS
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                                                                           Page
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SECTION 1.      DEFINITIONS............................................      1
        1.1     Certain Defined Terms..................................      1
        1.2     Accounting Terms; Utilization of GAAP for Purposes of 
                Calculations Under Agreement...........................     14
        1.3     Other Definitional Provisions..........................     14
 
SECTION 2.      THE NOTES; CLOSING; DELIVERY...........................     14
        2.1     Authorization of Notes.................................     14
        2.2     Purchase and Sale of Notes.............................     14
        2.3     Closing and Delivery of Initial Note...................     15
        2.4     Certain Terms of the Notes; Payment of Interest........     15
        2.5     General Provisions Regarding Payments; Optional 
                Redemption; Mandatory Redemption and Change in 
                Control Repurchase; Release of SFHI Notes as 
                Collateral.............................................     16
        2.6     Replacement of Notes...................................     22
        2.7     Taxes..................................................     23
        2.8     Registration; Transfer; Registration of Transfer and
                Exchange...............................................     23
        2.9     Representation of SunAmerica...........................     24
 
SECTION 3.      REPRESENTATIONS AND WARRANTIES.........................     24
        3.1     Organization, Powers, Qualification, Good Standing and 
                Other Matters..........................................     24
        3.2     Authorization of Notes and Other Basic Documents
                and Related Matters....................................     25
        3.3     Financial Condition....................................     27
        3.4     No Material Adverse Change; No Restricted 
                Junior Payments........................................     27
        3.5     Title to Properties; Liens.............................     27
        3.6     Litigation; Adverse Facts..............................     27
        3.7     Payment of Taxes.......................................     28
        3.8     Performance of Agreements; Materially Adverse 
                Agreements.............................................     28
        3.9     Governmental Regulation................................     29
        3.10    Employee Benefit Plans and Employee Matters............     29
        3.11    Environmental Protection...............................     29
        3.12    Solvency...............................................     30
        3.13    Certain Fees...........................................     31
        3.14    Disclosure.............................................     31
 
</TABLE>
                                       i
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<TABLE>
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SECTION 4.      CONDITIONS TO CLOSING..................................     31
        4.1     Conditions to Obligations of SunAmerica................     31
        4.2     Conditions to Note Issuances Subsequent to the Closing
                Date...................................................     36
 
SECTION 5.      AFFIRMATIVE COVENANTS OF SGC AND COMPANY...............     38
        5.1     Financial Statements and Related Information...........     38
        5.2     Inspection.............................................     40
        5.3     Corporate Existence, Etc. .............................     40
        5.4     Payment of Taxes and Claims; Tax Consolidation.........     40
        5.5     Maintenance of Properties; Insurance...................     41
        5.6     Compliance with Laws, etc. ............................     41
        5.7     Environmental Disclosure and Inspection................     41
        5.8     Remedial Action Regarding Hazardous Material...........     43
 
SECTION 6.      NEGATIVE COVENANTS OF SGC AND COMPANY..................     43
        6.1     Restricted Junior Payments.............................     43
        6.2     Liens and Related Matters..............................     43
        6.3     When SGC May Merge, etc. ..............................     44
        6.4     Indebtedness of Company................................     45
        6.5     Fundamental Changes....................................     45
        6.6     Transactions with Shareholders and Affiliates..........     45
        6.7     Amendments to Existing Lease Documents.................     46
        6.8     Stay, Extension and Usury Laws.........................     46
        6.9     Government Regulation..................................     46
 
SECTION 7.      EVENTS OF DEFAULT......................................     46
        7.1     Failure to Make Payments When Due......................     46
        7.2     Default in Other Agreements............................     46
        7.3     Breach of Certain Covenants............................     47
        7.4     Breach of Warranty.....................................     47
        7.5     Other Defaults Under Basic Documents...................     47
        7.6     Involuntary Bankruptcy; Appointment of Receiver, etc. .     47
        7.7     Voluntary Bankruptcy; Appointment of Receiver, etc. ...     48
        7.8     Judgments and Attachments..............................     48
        7.9     Dissolution............................................     48
        7.10    Employee Benefit Plans.................................     48
        7.11    Material Adverse Effect................................     48
        7.12    Invalidity of Environmental Indemnity or Guaranties....     48
        7.13    Impairment of Collateral...............................     49
        7.14    Ownership of Company...................................     49
        7.15    Purchase of Pioneer Bonds..............................     49

SECTION 8.      COLLATERAL AGENT AND RELATIONS AMONG HOLDERS, ETC. ....     50
        8.1     Appointment of the Collateral Agent, Powers and
                Immunities.............................................     50
        8.2     Reliance by Collateral Agent...........................     51
</TABLE> 
                                      ii
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<TABLE>
<S>                                                                        <C>
        8.3     Defaults...............................................     52
        8.4     Rights as a Holder.....................................     52
        8.5     Indemnification........................................     52
        8.6     Non-Reliance on Collateral Agent and Other Holders.....     53
        8.7     Resignation or Removal of Collateral Agent.............     53
        8.8     Authorization..........................................     53
 
SECTION 9.      MISCELLANEOUS..........................................     54
        9.1     Amendments and Waivers.................................     54
        9.2     Expenses...............................................     54
        9.3     Indemnity..............................................     55
        9.4     Ratable Sharing........................................     56
        9.5     Independence of Covenants..............................     57
        9.6     Notices................................................     57
        9.7     Survival of Representations, Warranties and Agreements.     57
        9.8     Failure or Indulgence Not Waiver; Remedies Cumulative..     57
        9.9     Marshalling; Payments Set Aside........................     57
        9.10    Severability...........................................     58
        9.11    Obligations Several; Independent Nature of
                Holders' Rights........................................     58
        9.12    Headings...............................................     58
        9.13    Applicable Law.........................................     58
        9.14    Successors and Assigns.................................     58
        9.15    Consent to Jurisdiction and Service of Process.........     58
        9.16    Waiver of Jury Trial...................................     59
        9.17    Counterparts; Effectiveness............................     59
        9.18    Proposed Substitution of the Collateral Granted Under 
                the Deed of Trust......................................     60
        9.19    Conflicts With Other Basic Documents...................     60
</TABLE>
                                      iii
<PAGE>
 
                                   SCHEDULES


1.1      Premises

2        Information Relating to Initial Holder

3.1B     Subsidiaries and Joint Ventures of SGC

3.10     Employee Benefit Plans

3.11     Environmental Liabilities

6.2      Existing Liens


                                    EXHIBITS


I        Form of Note

II       Form of Note Issuance Notice

III      Form of Guaranty

IV       Form of Security Agreement

V        Form of Deed of Trust

VI       Form of Environmental Indemnity

VII      Form of Subordination, Non-Disturbance and Attornment Agreement

VIII     Form of Collateral Account Agreement

IX-A     Form of Opinion of Gibson, Dunn & Crutcher

IX-B     Form of Opinion of Nevada Counsel to SGC and Company

X        Form of Collateral Account Letter

                                      iv
<PAGE>
 
                           SAHARA GAMING CORPORATION
                             SAHARA LAS VEGAS CORP.

                            NOTE PURCHASE AGREEMENT



         THIS NOTE PURCHASE AGREEMENT is made as of this 16th day of January,
1996 by and among Sahara Gaming Corporation, a Nevada corporation ("SGC"),
Sahara Las Vegas Corp., a Nevada corporation ("Company"), and SunAmerica Life
Insurance Company, an Arizona corporation ("SunAmerica"), and any other person
or persons party hereto from time to time after the date hereof as a holder
(individually, including SunAmerica, a "Holder" and collectively, "Holders").

                                    RECITALS

         The Company desires to issue and sell to SunAmerica up to $20,000,000
in principal amount of Company's 12% Notes Due December 15, 1999 (the "Notes")
for a purchase price equal to the principal amount thereof.  SGC has agreed to
guaranty the Notes and the other Obligations.  Company has agreed to grant to
Collateral Agent on behalf of the Holders a first priority security interest in
certain of Company's property to secure its Obligations.

         Accordingly, in consideration of the premises and the agreements,
provisions and covenants herein contained, SGC, Company and Holders agree as
follows:


SECTION 1.  DEFINITIONS

    1.1  CERTAIN DEFINED TERMS.  The following terms used in this Agreement
         ---------------------                                             
shall have the following meanings:

         "AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person.  For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.  Without limiting
the foregoing, a Person shall be deemed to be "controlled by" another Person if
such other (i) possesses, directly or indirectly, power to vote 10% or more of
the securities having ordinary voting power for the election of directors of
such Person or (ii) with respect to any other Person that is not a corporation,
owns 10% or more of the equity interests of such Person.

                                       1
<PAGE>
 
         "AGREEMENT", "HEREOF" and "HEREUNDER" and words of similar import refer
to this Note Purchase Agreement, as it may be amended, supplemented or otherwise
modified from time to time.

         "APPRAISAL" means an MAI appraisal of the Premises and Improvements
prepared to USPAP standards for loan purposes by a MAI appraiser acceptable to
SunAmerica and licensed as an appraiser in the State of Nevada which shall be
satisfactory in form, scope and substance to SunAmerica.

         "BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.

         "BASIC DOCUMENTS" means this Agreement, the Notes, the Guaranty, the
Security Agreement, the Deed of Trust, the Environmental Indemnity, the
Collateral Account Agreement, the Subordination, Non-Disturbance and Attornment
Agreement and all other instruments or documents now or hereafter granting Liens
on the property of Company or any of its Affiliates to Collateral Agent for the
benefit of Holders and any other instruments or agreements now or hereafter
entered into with Collateral Agent or any Holder in connection herewith.

         "BOARD OF DIRECTORS" means the Board of Directors of SGC or Company or
one of their respective Subsidiaries, as the context requires, or any committee
thereof duly authorized to act on behalf of such Board.

         "BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of California or Nevada or
is a day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close.

         "CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.

         "CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including, with
limitation, any preferred stock or any interests in a Joint Venture.

         "CASH" means money, currency or a credit balance in a Deposit Account.

         "CHANGE OF CONTROL" means an event or series of events by which (i) SGC
or SFHI sells, conveys, transfers or leases, directly or indirectly, all or
substantially all of its properties and assets to any Person or group (as such
term is used in Section 13(d) and 14(d) of the Exchange Act); (ii) any Person or
group (other than the Lowden Family) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person or
group shall be deemed to have "beneficial

                                       2
<PAGE>
 
ownership" of all shares that any such Person or group has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly of securities representing (a) 25% or more of the
combined voting power of SGC's or SFHI's, as the case may be, Voting Stock and
at such time the Lowden Family together shall fail to beneficially own, directly
or indirectly, securities representing at least 30% of the combined voting power
of SGC's or SFHI's, as the case may be, Voting Stock or (b) more than 50% of the
combined voting power of SGC's or SFHI's Voting Stock, as the case may be; (iii)
SGC or SFHI consolidates with or merges into another Person or conveys,
transfers or leases all or substantially all its properties and assets to any
Person or any Person consolidates with or merges into SGC or SFHI, in either
event pursuant to a transaction in which the outstanding Voting Stock of SGC or
SFHI is changed into or exchanged for cash, securities or other property with
the effect that any Person or group (other than the Lowden Family) becomes the
"beneficial owner," directly or indirectly, of securities representing (a) 25%
or more of the combined voting power of the Voting Stock of the Person that
continues after such consolidation or merger or who acquires such assets and at
such time the Lowden Family together shall fail to beneficially own, directly or
indirectly, securities representing at least 30% of the combined voting power of
such Voting Stock or (b) more than 50% of the combined voting power of the
Voting Stock of the Person that continues after such consolidation or merger or
who acquires such assets, (iv) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted SGC's or SFHI's
Board of Directors, as the case may be, (together with any new or replacement
directors whose election by the Board of Directors or whose nomination for
election by the stockholders of SGC or SFHI, as the case may be, was approved by
a vote of at least a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the directors then in office; (v) SFHI ceases to own any of the
outstanding Capital Stock, or all or substantially all of the assets, of any
Restricted Subsidiary (as defined in the SFHI Indenture) except where such
Capital Stock or such assets are disposed of pursuant to Section 4.13 of the
                                                         ------------       
SFHI Indenture or where such assets are disposed of pursuant to Section 3.9 of
                                                                -----------   
the SFHI Indenture; or (vi) SGC ceases to own any of the outstanding Capital
Stock, or all or substantially all of the assets, of SFHI or any of its
Consolidated Subsidiaries (as defined in the SFHI Indenture), except where such
Capital Stock or such assets are disposed of pursuant to Section 4.13 of the
                                                         ------------       
SFHI Indenture.

         "CLOSING" has the meaning set forth in Section 2.3 hereof.

         "CLOSING DATE" means the date on which the Closing occurs.

         "COLLATERAL" means all the real, personal and mixed property made
subject to a Lien pursuant to the Security Agreement, the Deed of Trust, the
Collateral Account Agreement or any other Basic Documents.

         "COLLATERAL ACCOUNT" means account number 241275072 designated as the
"Sahara Las Vegas Collateral Account" and established with Donaldson, Lufkin &

                                       3
<PAGE>
 
Jenrette Securities Corporation and any successor account established with any
institution pursuant to the Collateral Account Letter.

         "COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account Agreement
executed and delivered by Company and Collateral Agent on or prior to the
Closing Date, substantially in the form of Exhibit VIII annexed hereto, as it
may hereafter be amended, supplemented or otherwise modified from time to time.

         "COLLATERAL ACCOUNT LETTER" means the letter from Company to Donaldson,
Lufkin & Jenrette Securities Corporation and acknowledged by Donaldson, Lufkin &
Jenrette Securities Corporation, substantially in the form of Exhibit X annexed
hereto, relating to the Collateral Account and any other similar letter entered
into with any successor institution.

         "COLLATERAL AGENT" means SunAmerica Life Insurance Company in its
capacity as collateral agent for the Holders, and any successor Collateral Agent
appointed pursuant to this Agreement.

         "COMMISSION" means the Securities and Exchange Commission.

         "COMPANY" has the meaning set forth in the Introduction to this
Agreement.

         "CONTINGENT OBLIGATION," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
Person that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under interest rate agreements and currency agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another Person, (b) the obligation
to make take-or-pay or similar payments if required regardless of non-
performance by any other party or parties to an agreement, and (c) any liability
of such Person for the obligation of another Person through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence.  For purposes of this definition, the amount of any Contingent
Obligation at any time of determination shall be computed as

                                       4
<PAGE>
 
the amount that, in light of all the facts and circumstances existing at such
time represents the amount that reasonably can be expected at such time of
determination to become an actual or matured liability.

         "CONTRACTUAL OBLIGATION", as applied to any Person, means any security
issued by that Person or any indenture, mortgage, deed of trust, contract,
undertaking, agreement or other instrument to which that Person is a party or by
which it or any of its properties is bound or to which it or any of its
properties is subject.

         "DEED OF TRUST" means that certain Deed of Trust, Fixture Filing and
Financing Statement and Security Agreement with Assignment of Rents executed and
delivered on or prior to the Closing Date, substantially in the form of Exhibit
                                                                        -------
V annexed hereto, by Company in favor of Collateral Agent, as beneficiary
-                                                                        
thereunder, pursuant to which Company granted to Stewart Title Company of
Nevada, as trustee, for the benefit of Collateral Agent on behalf of the Holders
a first priority Lien on, among other things, the Premises and Company's right,
title and interest in and to the Improvements to secure the obligations of
Company as it may be amended, supplemented or otherwise modified from time to
time.

         "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.

         "DOLLARS" and the sign "$" mean the lawful money of the United States
of America.

         "EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was maintained or contributed to by SGC,
Company or any ERISA Affiliate.

         "ENVIRONMENTAL CLAIM" means any accusation, allegation, notice of
violation, claim, demand, abatement order, cleanup order, removal order, or
other order or direction (conditional or otherwise) by any Governmental
Authority or other Person for any injury, loss or damage, including, without
limitation, personal injury (including sickness, disease or death), tangible or
intangible property damage, contribution, indemnity, indirect or consequential
damages, damage to the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or restrictions or
to compel cleanup or remediation, in each case relating to, resulting from or in
connection with any Hazardous Material and relating to the Premises or
Improvements.

         "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity Agreement
from Company and SGC in favor of Collateral Agent for the benefit of Holders and
certain other indemnified parties therein, substantially in the form of Exhibit
                                                                        -------
VI annexed hereto, pursuant to which Company and SGC indemnify Collateral Agent
--                                                                             
for the benefit of Holders and certain other indemnified parties therein against
environmental risks.

                                       5
<PAGE>
 
         "ENVIRONMENTAL LAWS" has the meaning set forth in the Deed of Trust.

         "ENVIRONMENTAL REPORT" means the Phase I Environmental Site Assessment
dated December 29, 1995 prepared by Western Technologies, Inc. as job number
4185JL436 relating to the Premises and Improvements delivered to SunAmerica
prior to the Closing Date.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.

         "ERISA AFFILIATE" means (i) any corporation which is a member of a
controlled group of corporations within the meaning of Section 414(b) of the
Internal Revenue Code of which SGC or Company is, or was at any time, a member;
(ii) any trade or business (whether or not incorporated) which is, or was at any
time, a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Internal Revenue Code of which SGC or
Company is, or was at any time, a member; and (iii) any member of an affiliated
service group within the meaning of Section 414(m) or (o) of the Internal
Revenue Code of which SGC or Company is a member.

         "ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043(c) of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice to
the PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the institution of a proceeding on behalf of a Multiemployer
Plan against Company, SGC or any Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 30 days; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by SGC, Company or any ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Sections
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on SGC, Company or any ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by SGC, Company or any of their respective ERISA Affiliates in a
complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of
ERISA) from any Multiemployer Plan if there is any potential liability therefor,
or the receipt by SGC, Company or any of their respective ERISA Affiliates of
notice from any Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA;

                                       6
<PAGE>
 
(viii) the occurrence of an act or omission which could give rise to the
imposition on SGC, Company or any of their respective ERISA Affiliates of fines,
penalties, taxes or related charges under Chapter 43 of the Internal Revenue
Code or under Section 409 or 502(c), (i) or (l) of ERISA in respect of any
Employee Benefit Plan; (ix) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against SGC, Company or any of
their respective ERISA Affiliates in connection with any such Employee Benefit
Plan; (x) receipt from the Internal Revenue Service of notice of the failure of
any Pension Plan (or any other Employee Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code) to qualify under Section
401(a) of the Internal Revenue Code, or the failure of any trust forming part of
any Pension Plan to qualify for exemption from taxation under Section 501(a) of
the Internal Revenue Code; or (xi) the adoption of an amendment to any Pension
Plan that, pursuant to Section 401(a)(29) of the Internal Revenue Code or
pursuant to Section 307 of ERISA, would require Company, SGC or any ERISA
Affiliate timely to provide security to the plan or would result in loss of tax
exempt status of the trust of which such plan is a part if not timely provided,
or the imposition of a lien pursuant to Section 412(n) of the Internal Revenue
Code.

         "EVENT OF DEFAULT" has the meaning set forth in Section 7 hereof.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as it may
from time to time be amended, and the related regulations and published
interpretations.

         "EXISTING LEASE" means that certain ground lease dated as of January 1,
1987, as amended by (i) the assignment of the Ground Lease dated March 1, 1987
from Wet 'N' Wild Florida to Tenant, (ii) the First Amendment to Ground Lease
dated as of March 1, 1993 between Company (as successor to HHP), as landlord,
and Tenant (as successor to Wet 'N' Wild Florida), (iii) the Assignment
Agreement dated as of October 2, 1995 between HHP and Company, and (iv) the
Letter Agreement dated August 24, 1995 and effective October 2, 1995 between
Company and Tenant.

         "EXISTING LEASE DOCUMENTS" means the Existing Lease, the Existing Lease
Guaranty, the Existing Lease Note, the Existing Lease Security Agreement, the
Tenant Sale Agreement and any other agreements or instruments relating to any of
the foregoing agreements.

         "EXISTING LEASE GUARANTY" means that certain Guaranty Agreement dated
as of October 2, 1995 between Company and HHP.

         "EXISTING LEASE NOTE" means that certain promissory note dated January
1, 1987 in the original principal amount of $9,000,000 issued by Tenant (as
successor to Wet 'N' Wild Florida) to HHP (as successor to Hughes Entertainment,
Ltd., a Nevada limited partnership).

                                       7
<PAGE>
 
         "EXISTING LEASE SECURITY AGREEMENT" means that certain Security
Agreement dated as of January 1, 1987 between Tenant (as successor to Wet 'N'
Wild Florida) and HHP (as successor to Hughes Entertainment, Ltd., a Nevada
limited partnership).

         "FACILITY" means the Premises and Improvements.

         "FISCAL YEAR" means the Fiscal Year of SGC and Company, the last day of
which occurs on September 30th of each year.

         "FLOOD ACT" means the National Flood Insurance Act of 1968 as amended
by the Flood Disaster Protection Act of 1973 (42 U.S.C. (S)(S)4013 et. seq.).
                                                                   --  ---   

         "GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession (including, without limitation, to the extent applicable in the AICPA
Audit and Accounting Guide; Audits of Casinos), in each case as the same are
applicable to the circumstances as of the date of determination.

         "GAMING AUTHORITIES" means, collectively, (a) the Nevada Gaming
Commission, (b) the Nevada State Gaming Control Board, and (c) any other
Governmental Authority that holds regulatory, licensing or permit authority over
gambling, gaming or casino activities conducted by SGC, Company or any of their
respective Subsidiaries within its jurisdiction.

         "GAMING LAWS" means all statutes, rules, regulations, ordinances, codes
and administrative or judicial precedents (including, without limitation, the
Nevada Gaming Control Act (N.R.S. Ch. 463)) pursuant to which any Gaming
Authority possesses regulatory, licensing or permit authority over gambling,
gaming or casino activities conducted by SGC, Company or any of their respective
Subsidiaries within its jurisdiction.

         "GAMING LICENSE" means every license, franchise or other authorization
required on the date hereof or hereafter to own, lease, operate or otherwise
conduct gaming operations at the Santa Fe Hotel & Casino and the Pioneer Hotel &
Gambling Hall or other gaming activities of SGC or any of its Subsidiaries,
including, without limitation, all such licenses granted by any Gaming Authority
and any Gaming Laws.

         "GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of 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.

                                       8
<PAGE>
 
         "GUARANTY" means the SGC Guaranty issued by SGC substantially in the
form of Exhibit III annexed hereto, as such Guaranty may be amended,
supplemented or otherwise modified from time to time.

         "HAZARDOUS MATERIALS" has the meaning set forth in the Deed of Trust.

         "HHP" means Howard Hughes Properties, Limited Partnership, a Delaware
limited partnership.

         "HOLDER" and "HOLDERS" has the meaning set forth in the Introduction to
this Agreement and shall include the successors and assigns of any Holder.

         "IMPROVEMENTS" means all buildings, structures, facilities and other
improvements of every kind and description now or hereafter located on the
Premises, including all parking areas, roads, driveways, walks, fences, walls,
beams, recreation facilities, drainage facilities, lighting facilities and other
site improvements, all water, sanitary and storm sewer, drainage, electricity,
steam, gas, telephone and other utility equipment and facilities, all plumbing,
lighting, heating, ventilating, air-conditioning, refrigerating, incinerating,
compacting, fire protection and sprinkler, surveillance and security, vacuum
cleaning, public address and communications equipment and systems, all screens,
awnings, floor coverings, partitions, elevators, escalators, motors, machinery,
pipes, fittings and other items of equipment and personal property of every kind
and description now or hereafter located on the Premises or attached to the
improvements that by the nature of their location thereon or attachment thereto
are real property under applicable law; and including all materials intended for
the construction, reconstruction, repair, replacement, alteration, addition or
improvement of or to such buildings, equipment, fixtures, structures and
improvements.

         "INDEBTEDNESS," as applied to any Person, means, without duplication,
(i) all indebtedness for borrowed money, (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the deferred
purchase price of property or services (excluding any such obligations incurred
under ERISA), which purchase price is (a) due more than six months from the date
of incurrence of the obligation in respect thereof or (b) evidenced by a note or
similar written instrument, (excluding any trade payables payable in the
ordinary course of business), (v) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person and (vi) any Contingent Obligation.

         "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.

                                       9
<PAGE>
 
         "JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership, limited liability company or
other legal form; provided that in no event shall any corporate Subsidiary of
                  --------                                                   
any Person be considered to be a Joint Venture to which such Person is a party.

         "JUNIOR SUBORDINATED NOTES" means the Junior Subordinated Notes under
and as defined in the Certificate of Designation of the SGC Preferred Stock or
any other securities that are issued in exchange for or to redeem, acquire or
otherwise pay SGC Preferred Stock.

         "LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any agreement to give any
security interest and any mechanic's liens) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.

         "LOWDEN FAMILY" means Mr. Paul Lowden and Mrs. Suzanne Lowden and the
executors, administrators or legal representatives of their estates, heirs,
distributees and beneficiaries, any trust as to which any of the foregoing is a
settlor or co-settlor, any trustee of the estate of any of the foregoing that is
bankrupt or insolvent, any guardian or conservator of any of the foregoing that
is adjudged disabled or incompetent, and any corporation, partnership or other
entity which is an Affiliate of any of the foregoing.  Lowden Family shall also
mean any lineal descendants of the grandparents of such Persons, but only to the
extent that the beneficial ownership of the Voting Stock held by such lineal
descendants was directly received (by gift, trust or sale) from any such Person.

         "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) of SGC and its Subsidiaries, taken as a whole, Company or the
Premises and Improvements, or (ii) the impairment of the ability of SGC or
Company to perform, or of Collateral Agent or any Holder to enforce, any of the
Obligations.

         "MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which SGC, Company or any of their respective ERISA
Affiliates is contributing or has an obligation to contribute to, or to which
such an obligation existed, or contribution was made within the last six years,
or to which Company or any of its ERISA Affiliates has, or ever has had, an
obligation to contribute.

         "NOTE ISSUANCE NOTICE" means a Note Issuance Notice in substantially
the form of Exhibit II annexed hereto.

         "NOTES" means the 12% Notes Due December 15, 1999 of Company to be
issued and sold pursuant to this Agreement.  A form of Note is attached hereto
as Exhibit I.

                                       10
<PAGE>
 
         "OBLIGATIONS" means all obligations of every nature of SGC or Company
from time to time owed to Collateral Agent, Holders or any of them under this
Agreement, the Notes or any other Basic Document, whether for principal,
interest, fees, expenses, indemnification or otherwise and whether or not the
obligation is allowed as a claim in any proceeding referred to in subsection 7.6
or 7.7.

         "OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by (i) its chairman of the
board (if an officer) or its president or one of its vice presidents and (ii)
its chief financial officer or its treasurer.

         "PBGC" means the Pension Benefit Guaranty Corporation (or any successor
thereto).

         "PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.

         "PERMITTED ENCUMBRANCES" means the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):

         (i) Liens for taxes, assessments or governmental charges or claims the
    payment of which is not, at the time, required by subsection 5.4;

         (ii) statutory Liens of landlords and Liens of carriers, warehousemen,
    mechanics and materialmen and other Liens imposed by law incurred in the
    ordinary course of business for sums not yet delinquent or being contested
    in good faith, if such reserve or other appropriate provision, if any, as
    shall be required by GAAP shall have been made therefor; and

         (iii)  easements, rights of tenants, reservations, covenants, rights-
    of-way, restrictions, minor defects, minor encroachments or minor
    irregularities in title and other similar immaterial charges or encumbrances
    that (a) arise prior to Closing and are approved in writing by SunAmerica or
    (b) arise after Closing and would not, individually or in the aggregate,
    result in a Material Adverse Effect.

         "PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks and other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.

         "PIONEER FINANCE" means Pioneer Finance Corp., a Nevada corporation.

         "PIONEER BONDS" means the 13 1/2% First Mortgage Bonds due 1998 of
Pioneer Finance Corporation issued pursuant to the Pioneer Indenture.

                                       11
<PAGE>
 
         "PIONEER INDENTURE" means that certain Indenture dated as of December
1, 1988 between Pioneer Finance, SGC, as guarantor, and IBJ Schroder Bank &
Trust Company, as trustee.

         "POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.

         "PREMISES" means the real property situated in Las Vegas, Nevada, and
more particularly described in SCHEDULE 1.1 annexed hereto.
                               ------------                

         "RELEASE" has the meaning set forth in the Deed of Trust.

         "REQUISITE HOLDERS" means Holders having or holding more than 50% of
the principal balance of the outstanding Notes.

         "RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
capital stock of SGC or Company now or hereafter outstanding, except a dividend
payable solely in shares of that class of capital stock to the holders of that
class or in options, warrants or other rights to purchase such capital stock,
(ii) any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
capital stock of SGC or Company now or hereafter outstanding (other than in
exchange for capital stock of SGC or Company or options, warrants or other
rights to purchase such capital stock), (iii) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of capital stock of SGC or Company now or hereafter
outstanding, and (iv) any payment or prepayment of principal of, premium, if
any, or redemption, purchase, retirement, defeasance (including in-substance or
legal defeasance), sinking fund or similar payment with respect to, any
indebtedness of Company to SGC or any of SGC's Subsidiaries or Affiliates or
with respect to any Junior Subordinated Notes.

         "SECURITIES ACT" means the Securities Act of 1933, as it may from time
to time be amended, and the related regulations and published interpretations.

         "SECURITY AGREEMENT" means the Security Agreement executed and
delivered by Company and Collateral Agent on or prior to the Closing Date,
substantially in the form of Exhibit IV annexed hereto, pursuant to which
                             ----------                                  
Company grants to Collateral Agent on behalf of Holders a security interest in
all of Company's assets including personal property and fixtures, as it may
hereafter be amended, supplemented or otherwise modified from time to time.

         "SFHI" means the Santa Fe Hotel Inc., a Nevada corporation.

         "SFHI CASH FLOW" means, for any period, the sum of the following
amounts for such period with respect to SFHI and its consolidated Subsidiaries:
(i) net income, (ii) provisions for taxes based on income, (iii) interest
expense, (iv) lease payments made

                                       12
<PAGE>
 
with respect to equipment leased pursuant to the sale/leaseback transactions
contemplated by subsection 2.5C(ii) hereof, (v) depreciation expense, (vi)
amortization expenses and (vii) other non-cash items reducing net income but
excluding any component of items (ii) through (vi) not deducted in calculating
net income minus non-cash items increasing net income, other than items excluded
           -----                                                                
from the calculation thereof, all as determined for SFHI in conformity with
generally accepted accounting principles.

         "SFHI INDENTURE" means that certain Indenture dated as of December 29,
1993 among SFHI, SGC, as guarantor, and IBJ Schroder Bank & Trust Company as
trustee.

         "SFHI NOTES" means the 11% First Mortgage Notes issued by SFHI pursuant
to the terms of the SFHI Indenture.

         "SGC" has the meaning set forth in the Introduction to this Agreement.

         "SGC PREFERRED STOCK" means SGC's Exchangeable Redeemable Preferred
Stock, $2.14 liquidation preference per share, issued prior to the Closing Date
pursuant to the Certificate of Designation for Exchangeable Redeemable Preferred
Stock and any such Exchangeable Redeemable Preferred Stock issued after the
Closing Date to pay dividends in kind with respect thereto.

         "SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT" means the
Subordination, Non-Disturbance and Attornment Agreement executed and delivered
by Company, Tenant, and Collateral Agent on or prior to the Closing Date,
substantially in the form of Exhibit VII annexed hereto as it may be hereafter
                             -----------                                      
be amended, supplemented or otherwise modified from time to time.

         "SUBSEQUENT CLOSING DATE" or "SUBSEQUENT CLOSING DATES" means the date
or dates on which the closing of a Note issuance to SunAmerica subsequent to the
Closing Date occurs.

         "SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, limited liability company, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.

         "SUNAMERICA" has the meaning set forth in the Introduction to this
Agreement.

         "TENANT" means Wet 'N' Wild Nevada, Inc., a Nevada corporation and
assignee of Wet 'N' Wild Florida's interest under the Existing Lease.

                                       13
<PAGE>
 
         "TENANT SALE AGREEMENT" means the Agreement for Sale of Partnership
Interest and Dissolution of Partnership dated as of January 1, 1987 among Hughes
Entertainment, Ltd., a Nevada limited partnership, Wet 'N' Wild, Ltd., a Florida
limited partnership and Wet 'N' Wild Florida.

         "TITLE COMPANY" has the meaning assigned to such term in subsection
4.1E.

         "TITLE POLICY" has the meaning assigned to such term in subsection
4.1E.

         "VOTING STOCK" means any class of Capital Stock of any Person then
outstanding entitled to vote in elections of directors (without regard to the
occurrence of any contingency).

         "WET 'N' WILD FLORIDA" means Wet 'N' Wild Florida, Inc., a Florida
corporation.

    1.2  ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
         ------------------------------------------------------------------
UNDER AGREEMENT.  Except as otherwise expressly provided in this Agreement, all
---------------                                                                
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP.  Financial statements and other information
required to be delivered by SGC or Company to Holders pursuant to subsections
5.1A and 5.1B shall be prepared in accordance with GAAP as in effect at the time
of such preparation (and delivered together with the reconciliation statements
provided for in subsection 5.1D).  Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 3.3.

    1.3  OTHER DEFINITIONAL PROVISIONS.  References to "Sections" and
         -----------------------------                               
"subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided.  Any of the terms defined in
subsection 1.1 may, unless the context otherwise requires, be used in the
singular or the plural, depending on the reference.


SECTION 2.  THE NOTES; CLOSING; DELIVERY

    2.1  AUTHORIZATION OF NOTES.  Company has authorized the issuance and sale
         ----------------------                                               
to SunAmerica, as a Holder, pursuant to the terms and conditions hereof, of
Notes in an aggregate principal amount of $20,000,000 as provided herein and in
the Notes.

    2.2  PURCHASE AND SALE OF NOTES.  Subject to the terms and conditions
         --------------------------                                      
hereof, Company will issue and sell to SunAmerica, as a Holder, and SunAmerica
will purchase from Company, up to $20,000,000 in principal amount of Notes, of
which $10,000,000 in principal amount of Notes shall be issued to SunAmerica on
the Closing Date and up to $10,000,000 in principal amount of Notes may be
issued on one or more Subsequent Closing Dates specified by the Company in a
notice to SunAmerica to be received not less than three Business Days prior to
the applicable anticipated Subsequent Closing

                                       14
<PAGE>
 
Date; provided that the principal amount of a Note issued on any Subsequent
Closing Date shall not be less than $1,000,000 and in no event shall more than
three Subsequent Closing Dates occur.  In no event shall a Subsequent Closing
Date occur after February 15, 1996.  On the Closing Date and on any Subsequent
Closing Date, subject to the terms and conditions hereof, SunAmerica shall pay
the subscription price of the Note (which shall be 100% of the principal amount
of each Note) issued on such date against delivery of such Note.

    2.3  CLOSING AND DELIVERY OF INITIAL NOTE.  A pre-closing of the purchase
         ------------------------------------                                
and sale of the initial Note shall be held at O'Melveny & Myers, 1999 Avenue of
the Stars, Los Angeles, CA on January 17, 1996 or at such other time and place
as the parties may agree upon.  The "Closing", as used herein, shall mean the
date that the Deed of Trust is recorded and all conditions to Closing hereunder
have been satisfied or waived by SunAmerica.  Subject to the terms of this
Agreement, at the Closing, unless otherwise requested, Company will deliver to
SunAmerica a single Note in the aggregate principal amount of $10,000,000 and
will satisfy the terms and conditions of Closing set forth in subsection 4.1.
If at the Closing, Company shall fail to tender the Note to SunAmerica as
provided above in this Section 2.3, or any of the terms or conditions specified
in Section 4.1 shall not have been fulfilled to SunAmerica's satisfaction,
SunAmerica shall, at its election, be relieved of all further obligations under
this Agreement.  In no event shall the Closing occur after January 22, 1996.

    2.4  CERTAIN TERMS OF THE NOTES; PAYMENT OF INTEREST.
         ----------------------------------------------- 

         A.   INTEREST.  The Notes shall bear interest at a rate of 12% per
annum, computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Notes shall be payable semi-annually on June 30 and December 31
of each year, commencing on June 30, 1996 and at the scheduled maturity of the
Notes on December 15, 1999.  In addition to the foregoing, interest on the Notes
shall be payable on and to any date of any prepayment, redemption or other
payment of the Notes (to the extent accrued on the amount of the prepayment,
redemption or other payment) and at maturity (including at any accelerated
maturity).

         B.   STATED MATURITY.  The principal evidenced by the Notes matures on
December 15, 1999, and on such date, or on any accelerated maturity, the full
amount of principal then outstanding, and all accrued and unpaid interest
thereon, shall be due and payable.

         C.   POST-MATURITY INTEREST.  From the occurrence and during the
continuance of an Event of Default, the principal of the Notes and, to the
extent permitted by applicable law, all accrued interest on the Notes and any
fees or other amounts owed hereunder shall bear interest (including post-
petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) compounded monthly payable on demand at a rate which
is 2% per annum in excess of the interest rate otherwise payable under this
Agreement with respect to the Notes (or, in the case of any such fees and other
amounts, at a rate which is 2% per annum in excess of the

                                       15
<PAGE>
 
interest rate otherwise payable under the Notes).  Payment or acceptance of the
increased rates of interest provided for in this subsection 2.4C is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Collateral Agent or any Holder.  For the purpose of complying with NRS 99.050,
Company hereby declares that it understands that to the extent interest accrued
under the Notes, late charges or other fees and accruals under this Agreement
and the other Basic Documents are added to the outstanding principal owing
hereunder and the other Basic Documents, a compounding of interest results which
compounding is agreed to by Company as a part of the terms of this Agreement and
the other Basic Documents.

         D.   LATE CHARGES.  If any payment of principal and/or interest or any
other amount payable hereunder or under the other Basic Documents is not paid
when due, Company shall pay to each Holder, on demand, a late charge (the "Late
Charge") of five cents ($0.05) for each dollar so overdue in order to compensate
such Holder for its loss of the timely use of the money and frustration of such
Holder in the meeting of its financial commitments.  Nothing contained herein
shall constitute an extension of any due date for, or a waiver of any obligation
to pay, any amounts payable hereunder or under the other Basic Documents.

    2.5  GENERAL PROVISIONS REGARDING PAYMENTS; OPTIONAL REDEMPTION; MANDATORY
         ---------------------------------------------------------------------
REDEMPTION AND CHANGE IN CONTROL REPURCHASE; RELEASE OF SFHI NOTES AS
---------------------------------------------------------------------
COLLATERAL.
-----------

         A.   GENERAL PROVISIONS REGARDING PAYMENTS.

         (i) Manner and Time of Payment.  All payments by Company of principal,
             --------------------------                                        
    interest, fees and other Obligations hereunder and under the Notes shall be
    made in Dollars in same day funds, without reductions of any payment on
    account of any defense, setoff or counterclaim, free of any restriction or
    condition and without surrender or presentation of such Note, and delivered
    to the applicable Holder not later than 11:00 A.M. (Los Angeles time) on the
    date due at its address and in the manner set forth in Schedule 2 annexed
    hereto (or at such other place and in such other manner as such Holder may
    designate from time to time by written notice to Company); funds received by
    the applicable Holder after that time on such due date shall be deemed to
    have been paid by Company on the next succeeding Business Day.  Whenever any
    payment to be made hereunder shall be stated to be due on a day that is not
    a Business Day, such payment shall be made on the next succeeding Business
    Day.

         (ii) Application and Apportionment of Payments.  While there exists no
              -----------------------------------------                        
    Event of Default, all payments made hereunder shall be applied first to
    fees, late charges, costs and expenses owing to Collateral Agent and then to
    Holders hereunder and under the other Basic Documents, second to accrued
    interest due under the Note, and third to the principal balance of the Note.
    While any Event of Default exists that has not been waived or cured,
    payments made hereunder shall be applied against amounts due as Collateral
    Agent chooses, application as to

                                       16
<PAGE>
 
    particular obligations or against principal or interest to be in Collateral
    Agent's absolute discretion.  Aggregate principal, interest and applicable
    late charge payments shall be ratably apportioned among all outstanding
    Notes to which such payments relate.

         (iii)  Notation of Payment.  Each Holder agrees that before disposing
                -------------------                                           
    of any Note held by it, or any part thereof (other than by granting
    participations therein), that Holder will make a notation thereon of all
    principal payments previously made thereon and of the date to which interest
    thereon has been paid; provided that the failure to make (or any error in
                           --------                                          
    the making of) a notation of the Note shall not limit or otherwise affect
    the obligations of Company hereunder or under such Note or any payments of
    principal or interest on such Note.

         B.   OPTIONAL REDEMPTION.

         (i) Optional Redemption.  The Notes shall not be redeemable prior to
             -------------------                                             
    October 1, 1997.  During the period from October 1, 1997 to January 17,
    1998, the Notes shall be redeemable at any time in whole or in part at the
    option of Company, but only in the event that the sinking fund payment
    required with respect to all of the Pioneer Bonds in 1997 has been satisfied
    in full, at a price paid in immediately available funds of 102 1/2% of the
    principal amount thereof, or, if a Note is redeemed only in part, the
    appropriate prorated amount, together with accrued interest to the
    redemption date.  During the period from January 17, 1998 to January 17,
    1999, the Notes shall be redeemable at any time in whole or in part at the
    option of Company, at a price paid in immediately available funds of 102% of
    the principal amount thereof, or, if a Note is redeemed only in part, the
    appropriate prorated amount, together with accrued interest to the
    redemption date.  After January 17, 1999, the Notes shall be redeemable at
    any time in whole or in part at the option of Company, at a price paid in
    immediately available funds of 101% of the principal amount thereof, or, if
    a Note is redeemed only in part, the appropriate prorated amount, together
    with accrued interest to the redemption date.  Company shall give Holders
    not less than two Business Days prior written notice of a redemption
    pursuant to this subsection 2.5B.

         (ii) Release of SFHI Notes Transferred In Connection With An Optional
              ----------------------------------------------------------------
    Redemption.  In the event that Company elects to optionally redeem Notes
    ----------                                                              
    pursuant to this subsection 2.5B in connection with the sale or other
    transfer of SFHI Notes constituting Collateral and, after giving effect to
    such redemption, Company would be entitled to have Collateral Agent release
    its Lien on such SFHI Notes as provided in subsection 2.5F, then, upon not
    less than five Business Day's prior written notice, Collateral Agent shall
    release its Lien on such SFHI Notes in connection with such optional
    redemption immediately after Collateral Agent receives confirmation that
    Holders have received the full redemption price as provided in subsection
    2.5A together with accrued interest to the redemption date.

                                       17
<PAGE>
 
         (iii)  Redemption Upon Sale of Premises Prior to October 1, 1997.
                ---------------------------------------------------------  
    Notwithstanding clause (i) above, if prior to October 1, 1997, Company
    transfers the Premises to an unaffiliated third party or to another Person
    (only if SGC and its Subsidiaries and Affiliates or the Lowden Family do not
    collectively own, legally or beneficially, more than 50% of the ownership or
    similar interests of such Person), the Notes shall be immediately redeemed
    by Company in whole at a price paid in cash of 102 1/2% of the principal
    amount thereof, plus accrued but unpaid interest thereon to the redemption
    date.

         C.   MANDATORY REDEMPTION AND CHANGE IN CONTROL REPURCHASE.

         (i) Scheduled Redemption.  On December 31 of 1996, 1997 and 1998,
             --------------------                                         
    Company will redeem $500,000 in principal amount of Notes together with
    accrued interest thereon to such date, at a redemption price equal to 100%
    of the principal amount so redeemed, plus accrued and unpaid interest
    thereon to the redemption date.

         (ii) Redemption Based on Sale/Leasebacks.  If on June 30, 1996, there
              -----------------------------------                             
    is an outstanding principal amount of Notes in excess of $17,000,000 and (a)
    SFHI has not consummated one or more sale/leaseback transactions after the
    Closing Date as permitted under the SFHI Indenture with respect to gaming or
    other equipment at the Santa Fe Hotel and Casino with gross proceeds to SFHI
    of not less than $5,000,000 in the aggregate (the "SFHI Sale/Leasebacks"),
    used $2,000,000 of the proceeds thereof to repay and permanently reduce an
    existing working capital facility and also acquired directly or indirectly
    SFHI Notes (other than with the proceeds of the Notes) for an aggregate
    purchase price of not less than $3,000,000 and retired such SFHI Notes (such
    aggregate amount, the "SFHI Buyback Amount"), a principal amount of Notes
    shall be redeemed in an amount equal to the greater of (a) the amount by
    which the SFHI Sale/Leasebacks are less than $5,000,000 or (b) the amount by
    which the SFHI Buyback Amount is less than $3,000,000, at a redemption price
    equal to 100% of the principal amount so redeemed, plus accrued and unpaid
    interest thereon to the redemption date; provided, however, that,
                                             --------  -------       
    notwithstanding the foregoing Company's obligation to redeem Notes pursuant
    to this subsection 2.5(C)(ii) shall be reduced to the extent SGC has made a
    capital contribution in cash to SFHI after the Closing Date and prior to
    June 30, 1996 and in no event shall Company be obligated to redeem Notes in
    a principal amount that would reduce the outstanding principal amount of
    Notes to less than $17,000,000 pursuant to this subsection 2.5C(ii).  Any
    redemption of Notes required pursuant to this subsection 2.5C(ii) shall
    occur on or prior to July 10, 1996.

         (iii)  Payment Required Under Deed of Trust.  Company shall redeem or
                ------------------------------------                          
    otherwise pay the principal amount of the Notes and accrued interest thereon
    as required pursuant to the Deed of Trust, at a redemption price equal to
    the redemption price payable in connection with the optional redemption of
    Notes (or

                                       18
<PAGE>
 
    if prior to October 1, 1997, at 102 1/2% of the principal amount so
    redeemed), plus accrued and unpaid interest thereon to the redemption date.

         (iv) Redemption Based on Redemption or Transfer of SFHI Notes.  If any
              --------------------------------------------------------         
    SFHI Notes that constitute Collateral are redeemed or otherwise paid for any
    reason under the SFHI Indenture, the same principal amount of Notes shall be
    immediately redeemed with accrued interest thereon to the redemption date,
    at a redemption price equal to 100% of the principal amount so redeemed,
    plus accrued and unpaid interest thereon to the redemption date.

         (v) Redemption Based on SFHI Cash Flow.  If as of the end of any fiscal
             ----------------------------------                                 
    quarter commencing as of the fiscal quarter ending on December 31, 1996,
    SFHI Cash Flow for the preceding four quarter period is less than
    $13,500,000, Company will be required to redeem a principal amount of Notes
    equal to $3,500,000 at a redemption price equal to 100% of the principal
    amount so redeemed plus accrued and unpaid interest thereon to the
    redemption date which shall be within 30 days after the date of delivery by
    SGC of financial statements for such fiscal quarter pursuant to subsection
    5.1A; provided, that Company's obligation to redeem Notes as provided in
    this sentence may be reduced on a dollar for dollar basis to the extent
    that, within such 30 day period after delivery of such financial statements,
    Company acquires SFHI Notes and pledges such SFHI Notes to the Collateral
    Agent under the Security Agreement or contributes such SFHI Notes to SFHI
    and causes the cancellation of such SFHI Notes; provided, further, that
                                                    --------  -------      
    Company may at its option exclude a fiscal quarter occurring after the
    Closing Date from the calculation of SFHI Cash Flow as provided above if a
    portion of the capital expenditures project by SFHI previously disclosed to
    SunAmerica will occur during such fiscal quarter by notifying Collateral
    Agent in writing not less than 30 days prior to the end of such quarter to
    be excluded in which case, to the extent applicable, SFHI Cash Flow will be
    calculated based on four preceding quarters (excluding such excluding fiscal
    quarter but including the results of the fifth most recent fiscal quarter).
    Company shall only be required to redeem Notes or acquire SFHI Notes as
    provided in this subsection 2.5C(v) on one occasion and any SFHI Notes
    pledged to Collateral Agent pursuant to this clause (v) shall not be subject
    to release or otherwise taken into account under subsection 2.5F.

         (vi) Change-of-Control Repurchase.  If there is a Change of Control
              ----------------------------                                  
    (the date of such Change of Control being the "Change of Control Date"),
                                                   ----------------------   
    then the Company shall promptly thereafter notify each Holder in writing of
    such occurrence and not later than ten Business Days after such Change of
    Control Date shall commence an offer to repurchase (the "Change of Control
                                                             -----------------
    Repurchase Offer") all of the outstanding Notes on the Change of Control
    ----------------                                                        
    Payment Date (as defined below) at a purchase price in cash equal to 101% of
    the aggregate principal amount of the Notes plus accrued and unpaid interest
    to the date of repurchase (and at no other premium).  The Change of Control
    Repurchase Offer shall remain open for 20 Business Days following the date
    the Company mails notice of the Change of Control Repurchase Offer to the
    Holders or such longer

                                       19
<PAGE>
 
    period required by applicable law.  Notice of a Change of Control Repurchase
    Offer shall be mailed by Company to the Holders of the Notes at their last
    registered addresses with copies to Collateral Agent.  The notice shall
    contain all instructions and materials necessary to enable such Holders to
    tender Notes pursuant to the Change of Control Repurchase Offer.  The notice
    shall state:

              (1) that the Change of Control Repurchase Offer is being made
         pursuant to this subsection 2.5C(vi), that Notes may be surrendered in
                          -------------------                                  
         whole or in part (in denominations of $1,000 and integral multiples
         thereof), and that all Notes tendered will be accepted for payment;

              (2) that any Notes not tendered will continue to accrue interest;

              (3) that any Notes accepted for payment pursuant to the Change of
         Control Repurchase Offer shall cease to accrue interest after the date
         on which such Notes are paid;

              (4) that Holders electing to have Notes purchased pursuant to a
         Change of Control Repurchase Offer will be required to surrender their
         Notes, with the form entitled "Option of Holder to Elect Repurchase" on
         the reverse of the Note completed, to Company prior to the close of
         business on the expiration date of the Change of Control Repurchase
         Offer;

              (5) that Holders will be entitled to withdraw their election if
         the Company receives, not later than the close of business on the
         Business Day immediately preceding the expiration date of the Change of
         Control Repurchase Offer, a telegram telex, facsimile transmission or
         letter setting forth the name of the Holder, the principal amount of
         Notes the Holder delivered for purchase and a statement that such
         Holder is withdrawing such Holder's election to have such Notes
         purchased;

              (6) that the Holders whose Notes are tendered only in part will be
         issued Notes representing the unpurchased portion of the Notes
         surrendered;

              (7) the instructions Holders must follow in order to tender their
         Notes; and

              (8) the circumstances and relevant facts regarding such Change of
         Control (including but not limited to information with respect to pro
         forma historical financial information after giving effect to such
         Change of Control, information regarding the persons acquiring control
         and such person's business plans going forward).

         On the expiration of the Change of Control Repurchase Offer, Company
shall (A) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Repurchase Offer, (B) promptly transfer to the Holders
immediately available

                                       20
<PAGE>
 
funds sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (C) promptly deliver to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered.  If the events which
give rise to a Change of Control Repurchase Offer cease to exist prior to
completion of such repurchase offer, then Company shall not be obligated to
repurchase any of the Notes and may revoke any offer set forth above (whether
before or after acceptance thereof by any Holder) and will not be liable to make
the payments set forth above with respect to any revoked offer.

         (vii)  Redemption on February 16, 1996.  In the event any proceeds from
                -------------------------------                                 
    the purchase of the Notes by Holders have not been used in accordance with
    subsection 3.2F on or prior to February 16, 1996 (the "Unused Note
    Proceeds"), a principal amount of Notes equal to such Unused Note Proceeds
    shall be redeemed on February 16, 1996 at a redemption price equal to 100%
    of the principal amount so redeemed plus accrued and unpaid interest thereon
    to such redemption date.

         D.   REPURCHASE PURSUANT TO ANY GAMING LAW.

         (i) If required to be found suitable by any Gaming Authority, all
Holders and beneficial owners of Notes, whether initial Holders, beneficial
owners or subsequent transferees, shall be subject to the suitability provisions
of the applicable Gaming Law and shall apply for a finding of suitability within
the earlier of (i) 30 days after the applicable Gaming Authority requests that
such Holder or beneficial owner apply for a finding of suitability, or (ii) the
time period prescribed by such Gaming Authority for such application.  The
Holder or beneficial owner required to be found suitable shall pay all costs of
the investigation for such finding.  In the event that any Gaming Authority
determines that a Holder or beneficial owner is not suitable under such Gaming
Authority's Gaming Laws or such Holder or beneficial owner fails to submit for a
finding of suitability as required by such Gaming Authority in its sole
discretion, then, promptly after the date that such Holder or beneficial owner
(the "Unsuitable Holder") is found unsuitable or fails to submit for a finding
of suitability (the "Unsuitability Date"), SGC and Company shall provide written
notice to that effect to such Unsuitable Holder and the Unsuitable Holder must
thereafter dispose of, pursuant to subsection 2.5D(ii), all Notes the Unsuitable
Holder than possesses, either directly, indirectly or beneficially.  Immediately
upon the Unsuitability Date, the Unsuitable Holder shall have no further right
(a) to exercise, directly or indirectly, through any trustee or nominee or any
other person or entity, any right conferred by any Note(s) and (b) to receive
any interest or any other distribution or payment with respect to any such
Note(s) or any remuneration in any form from Company or SGC; provided, however,
that after the Unsuitability Date, interest on any such Note(s) shall continue
to accrue for the benefit of any subsequent Holder thereof.

         (ii) Within 30 days after receipt of the notice referred to in clause
(i) above or such shorter period as the Gaming Authorities may prescribe, (i)
the Unsuitable Holder shall sell its Note(s) either directly or through a bona
fide brokerage transaction, in either case on arms-length terms, to a Person who
has not previously been found unsuitable by the Gaming Authorities and who is
not an Affiliate of the Unsuitable

                                       21
<PAGE>
 
Holder or (2) at the election of Company, Company may redeem such Holder's Notes
at the lower of (i) the principal amount thereof, or (ii) the amount which the
Unsuitable Holder paid for the Note(s), together in either case with accrued
interest up to the Unsuitability Date.

         (iii)  The provisions of this subsection 2.5D shall be construed in
accordance with the provisions of the applicable Gaming Laws.

         E.   PRO RATA REDEMPTION.  In the event of any redemption in which the
aggregate principal amount of Notes to be redeemed is less than the entire
principal amount of Notes outstanding, Company shall select the Notes to be
redeemed on a pro rata basis (with such adjustments as may be deemed appropriate
by Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased).  Holders whose Notes are purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered in connection with a redemption.

         F.   RELEASE OF SFHI NOTES AS COLLATERAL.  If and to the extent that
the principal amount of SFHI Notes held as Collateral under the Security
Agreement exceeds the principal amount of outstanding Notes (the amount of such
excess, the "Excess Principal Amount"), then, so long as no Event of Default or
Potential Event of Default has occurred and is continuing, Collateral Agent
shall release its security interest held on behalf of Holders in SFHI Notes in a
principal amount not to exceed the Excess Principal Amount within five (5)
Business Days after receiving the written request of Company directing that such
release occur which request shall certify that no Event of Default or Potential
Event of Default has occurred and is continuing; provided that Collateral Agent
                                                 --------                      
shall not release its security interest in any such SFHI Notes unless and until
Company has demonstrated in a manner satisfactory to Collateral Agent that
immediately upon such release, the SFHI Notes released will be contributed or
otherwise transferred to SFHI and retired or otherwise cancelled; it being
                                                                  --------
understood that Collateral Agent shall have no obligation to deliver to Company
----------                                                                     
any instrument or instruments evidencing the SFHI Notes that is in excess of the
Excess Principal Amount prior to receiving in exchange therefore a substitute
instrument or instruments evidencing SFHI Notes in a principal amount not less
than the principal amount required to be pledged hereunder and under the
Security Agreement.  Company agrees that at all times after February 15, 1996
that the principal amount of SFHI Notes held as collateral shall equal or exceed
the principal amount of outstanding Notes.

    2.6  REPLACEMENT OF NOTES.  Upon receipt of evidence reasonably satisfactory
         --------------------                                                   
to Company of the loss, theft, destruction or mutilation of a Note and upon
delivery of an unsecured indemnity agreement reasonably satisfactory to Company
from any Holder of such Note or, in the case of any such mutilation, upon the
surrender of such Note for cancellation to Company at its principal office,
Company, at its expense, will execute and deliver, in lieu thereof, a new Note
of like tenor, dated in the case of a Note, so that there will be no loss of
interest.  Any Note in lieu of which any such new Note has been so executed and
delivered by Company, thereupon shall not be deemed an outstanding

                                       22
<PAGE>
 
Note for any purpose under this Agreement.  Notwithstanding the foregoing
provisions of this subsection 2.6, if any Note of which SunAmerica or any other
institutional Holder is the owner is lost, stolen or destroyed, then the
affidavit of such Holder's Treasurer or Assistant Treasurer (or other
responsible officials), setting forth the name of the owner of such Note and the
circumstances with respect to such loss, theft or destruction, shall be accepted
as satisfactory evidence thereof, and no indemnity shall be required as a
condition to the execution and delivery by Company of a new Note in lieu of such
Note (or as a condition to the payment thereof, if due and payable) other than
SunAmerica's or such Holder's written agreement to indemnify Company.

    2.7  TAXES.  In the event of the passage of any state, Federal, municipal or
         -----                                                                  
other governmental law, order, rule or regulation subsequent to the date hereof
(i) deducting from the value of real property for the purpose of taxation any
lien or encumbrance thereon or in any manner changing or modifying the laws now
in force governing the taxation of the Deed of Trust or debts secured by
mortgages (other than laws governing income, franchise and similar taxes
generally) or the manner of collecting taxes thereon and (ii) imposing a tax to
be paid by Collateral Agent or any Holder, either directly or indirectly, on the
Deed of Trust, this Agreement, the Guaranty or any of the Basic Documents or to
require an amount of taxes to be withheld or deducted therefrom, SGC and Company
will promptly notify Collateral Agent or such Holder, as applicable, of such
event.  In such event, SGC and Company shall (i) jointly and severally agree to
enter into such further instruments as may be reasonably necessary or desirable
to obligate Trustor to make additional payments to fully and timely discharge
such items and (ii) jointly and severally guarantee such additional payments.
If SGC and Company are not permitted by law to do that which is required by the
preceding sentence, Collateral Agent or such Holder, as applicable, shall be
entitled to exercise any or all of its rights and remedies under the Basic
Documents, including the right to accelerate the Obligations.  The obligations
of SGC and Company under this subsection shall survive the payment of the Notes.

    2.8  REGISTRATION; TRANSFER; REGISTRATION OF TRANSFER AND EXCHANGE.
         ------------------------------------------------------------- 

         A.   Company shall maintain a register for its Notes, which shall
provide for the registration of the Notes and of transfers of the Notes.  Upon
surrender for registration or transfer of any Note, Company, at its expense,
shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Notes, as applicable; provided, however, that in
connection with any such transfer, the Holder requesting the transfer shall
provide to Company evidence reasonably satisfactory to it that the transfer is
to a "qualified institutional buyer" or an "accredited investor," as such terms
are defined in Rule 144A and 501, respectively, of the Securities Act, and is
exempt from the registration requirements of the Securities Act or, if the
transfer is to an entity or person other than a "qualified institutional buyer"
or an "accredited investor," Company shall be provided with an opinion of
counsel reasonably satisfactory to it that the transfer is so exempt from the
registration requirements of the Securities Act; provided, further, that Company
                                                 --------  -------              
shall not be required to register the transfer of Notes to a transferee with a
principal amount of less than $2,000,000; provided, further, that Company shall
                                          --------  -------                    
have the

                                       23
<PAGE>
 
right to consent (which consent shall not unreasonably be withheld or delayed)
to any transfer of Notes that causes SunAmerica to hold less than 51% of the
legal or beneficial interests in all outstanding Notes.  Notes may be exchanged
at the option of any Holder thereof for Notes of a like aggregate principal
amount in the same name but in different denominations.  Whenever any Notes are
so surrendered for exchange, Company, at its expense, shall execute and deliver
the Notes which the Holder making the exchange is entitled to receive.  All
Notes issued upon any registration of transfer or exchange thereof shall be the
valid obligations of Company, evidencing the same debt, and entitled to the same
benefits, as Notes surrendered upon such registration of transfer or exchange.
Each Note presented or surrendered for registration or transfer or exchange
shall (if so required by Company) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to Company, duly executed by
the Holder thereof or its attorney duly authorized in writing.

         B.   In connection with any transfer of the Notes pursuant to the
exemption from the provisions of Section 5 of the Securities Act afforded by
Rule 144A promulgated thereunder, Company hereby agrees to provide (i) at the
request of any transferring  Holder, including any transferee thereof or Person
who has been granted a participation in any Note pursuant to this Agreement, to
such Holder and to any prospective transferee designated to Company in writing
by such Holder, and (ii) at such prospective transferee's request to such Holder
to Company, the information required by paragraph (d)(4)(i) (or any successor
provision) of Rule 144A under the Securities Act.

    2.9  REPRESENTATION OF SUNAMERICA.  SunAmerica represents to SGC and Company
         ----------------------------                                           
that on the Closing Date SunAmerica is an "accredited investor" within the
meaning of Section 501 of the Securities Act, is acquiring the Notes for
investment and is not acquiring the Notes with a view to the distribution or
sale of the securities within the meaning of the Securities Act, subject,
however, to any requirement of law that the disposition of its property be at
all times within its control.


SECTION 3.  REPRESENTATIONS AND WARRANTIES

         To induce SunAmerica to enter into this Agreement and to purchase the
Notes hereunder, SGC and Company each represent, warrant and covenant to
SunAmerica and any other Holder, as of the date hereof, as follows:

    3.1  ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING AND OTHER MATTERS.
         -------------------------------------------------------------------- 

         A.   ORGANIZATION AND POWERS; QUALIFICATION AND GOOD STANDING.  Each of
SGC and Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada.  Each of SGC and Company has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted and as proposed to be conducted, to enter
into the Basic Documents to which it is party and to carry out the transactions
contemplated thereby.  Each of SGC and Company is qualified to do business and
in good standing in Nevada and in every

                                       24
<PAGE>
 
other jurisdiction where its assets are located and wherever necessary to carry
out its business and operations, except in such other jurisdictions where the
failure to be so qualified or in good standing has not had and will not have a
Material Adverse Effect.

         B.   SUBSIDIARIES AND JOINT VENTURES.  All of the Subsidiaries and
Joint Ventures of SGC as of the Closing Date are identified in Schedule 3.1B
                                                               -------------
annexed hereto.  Company does not have any ownership interest in any Subsidiary
or Joint Venture.  The capital stock of each of the Subsidiaries of SGC and
Company identified in Schedule 3.1B annexed hereto is duly authorized, validly
                      -------------                                           
issued, fully paid and nonassessable.  Each of the Subsidiaries and Joint
Ventures of SGC identified in Schedule 3.1B annexed hereto is a corporation or
                              -------------                                   
other entity duly organized or formed, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite power and authority to own and operate its properties
and to carry on its business as now conducted and as proposed to be conducted,
and is qualified to do business and in good standing in every jurisdiction where
its assets are located and wherever necessary to carry out its business and
operations, in each case except where failure to be so qualified or in good
standing or a lack of such corporate power and authority has not had and will
not have a Material Adverse Effect.  Schedule 3.1B annexed hereto correctly sets
                                     -------------                              
forth, as of the Closing Date, the ownership interest of SGC and each of its
Subsidiaries in each of their respective Subsidiaries and Joint Ventures.

         C.   CAPITALIZATION.  The authorized capital stock of SGC consists of
100,000,000 shares of common stock, par value .01 per share, of which 6,195,356
shares are outstanding and 10,000,000 shares of preferred stock, par value .01
per share, of which 8,187,563 shares of SGC Preferred Stock are outstanding.
The authorized capital stock of Company consists of 20,000 shares of common
stock, par value $10 per share, of which 50 are issued and outstanding, all of
which are owned by SGC.

         D.   COMPANY AND EXISTING LEASE INDEBTEDNESS.  As of the Closing and
after giving effect to the transactions contemplated hereby, Company will not be
liable with respect to any Indebtedness except for the Notes and the Existing
Lease Guaranty and the outstanding principal amount of the Existing Lease Note
will not be greater than $6,163,227.

    3.2  AUTHORIZATION OF NOTES AND OTHER BASIC DOCUMENTS AND RELATED MATTERS.
         -------------------------------------------------------------------- 

         A.   AUTHORIZATION OF NOTES AND OTHER BASIC DOCUMENTS.  The execution
and delivery by each of SGC and Company of each Basic Document to which each is
a party and the performance by each of SGC and Company of their respective
obligations thereunder have been duly authorized by all necessary corporate
action on the part of SGC and Company, as applicable.

         B.   NO CONFLICT.  The execution, delivery and performance by SGC and
Company of each Basic Document to which it is party and the consummation of the
transactions contemplated by the Basic Documents, do not and will not (i)
violate any provision of any law or any governmental rule or regulation
(including any Gaming Laws

                                       25
<PAGE>
 
or, based on the representation and warranty of SunAmerica contained in Section
2.9 hereof, federal securities laws) applicable to SGC or Company or any of
their respective Subsidiaries, the Certificate or Articles of Incorporation or
Bylaws of SGC or Company or any of their respective Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on SGC or
Company or any of their respective Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under the SFHI Indenture, the Pioneer Indenture, the Existing Lease Documents or
any other material Contractual Obligation of SGC or Company or any of their
respective Subsidiaries, (iii) result in or require the creation or imposition
of any Lien upon any of the properties or assets of SGC or Company or any of
their respective Subsidiaries (other than any Liens created under any of the
Basic Documents in favor of Collateral Agent or Holders), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of SGC or Company or any of their respective
Subsidiaries, except for such approvals or consents which will be obtained on or
before the Closing Date and disclosed in writing to SunAmerica.

         C.   GOVERNMENTAL CONSENTS.  Assuming the accuracy of SunAmerica's
representation contained in subsection 2.9, the execution, delivery and
performance by each of SGC and Company and their respective Subsidiaries of each
Basic Document and the consummation of the transactions contemplated by each
Basic Document do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other Governmental Authority or regulatory body, including but not limited to
any Gaming Board.

         D.   BINDING OBLIGATION.  Each of the Basic Documents to which SGC and
Company, as the case may be, are parties has been duly executed and delivered by
SGC and Company, as the case may be, and is the legally valid and binding
obligation of SGC and Company, as applicable, enforceable against SGC and
Company, as applicable, in accordance with its respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.

         E.   OFFERINGS.  None of SGC, Company or any of their respective
Subsidiaries has, directly or indirectly, offered the Notes, or any part
thereof, or (within the last six months) any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, anyone other than SunAmerica and not more
than 10 other institutional investors.  Assuming the accuracy of the
representations and warranties of SunAmerica contained in subsection 2.9, the
offer, issuance and sale of the Notes to SunAmerica in conformity with the terms
of this Agreement constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act and comply or will comply with
federal securities and state blue sky laws applicable to such offer, sale and
issuance.

         F.   USE OF PROCEEDS.  Company will use all of the proceeds received
from the sale of the Notes on the Closing Date or any Subsequent Closing Date to
acquire by

                                       26
<PAGE>
 
purchase SFHI Notes (or reimburse itself for previous purchases made on or after
December 30, 1995 of SFHI Notes); provided that Company may use up to $2,500,000
                                  --------                                      
of the proceeds received from the sale of the Notes on the Closing Date to
transfer such proceeds to SGC, cause SGC to make a capital contribution in cash
of such proceeds to Pioneer Hotel, Inc. and have Pioneer Hotel, Inc. purchase
and cancel Pioneer Bonds with such proceeds as soon as practicable but in no
event later than February 15, 1996 and may also use proceeds of the Notes on the
Closing Date to pay closing costs, including the fees of O'Melveny & Myers and
Gibson, Dunn & Crutcher.

    3.3  FINANCIAL CONDITION.  SGC and Company have heretofore delivered to
         -------------------                                               
SunAmerica at SunAmerica's request, the following financial statements and
information:  the audited consolidated financial statements of SGC and its
Subsidiaries for the fiscal years ended September 30, 1995, 1994 and 1993.  All
such statements were prepared in conformity with GAAP and fairly present the
consolidated financial position of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated basis) of the entities described therein for each
of the periods then ended.  SGC and Company do not (and will not following the
issuance of the Notes) have any material Contingent Obligation or liability for
taxes, long-term lease or unusual forward or long-term commitment that is not
reflected in the aforementioned financial statements or the notes thereto and
which in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of SGC,
Company or any of their respective Subsidiaries.

    3.4  NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.  Since
         ---------------------------------------------------------        
September 30, 1995, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Neither SGC or Company has directly or indirectly declared, ordered, paid or
made, or set apart any sum or property for, any Restricted Junior Payment or
agreed to do so except as permitted by subsection 6.1.

    3.5  TITLE TO PROPERTIES; LIENS.  SGC and Company have (i) good, sufficient
         --------------------------                                            
and legal title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), or (iii) good title to (in the case of all other property, including
personal property), the Premises and Improvements and all of their other
respective properties and assets reflected in the financial statements referred
to in subsection 3.3, in each case except as disclosed in the notes to such
financial statements and for assets disposed of since the date of such financial
statements in the ordinary course of business or as otherwise permitted under
Section 6.  Except as permitted by this Agreement, the properties and assets of
Company are free and clear of Liens.

    3.6  LITIGATION; ADVERSE FACTS.  Except as disclosed in SGC's Annual Report
         -------------------------                                             
on Form 10-K for the fiscal year ending September 30, 1995, there are no
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of SGC, Company or any of their respective
Subsidiaries) at law or in equity or

                                       27
<PAGE>
 
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
pending or, to the knowledge of SGC or Company, threatened against SGC or
Company, or any of their respective Subsidiaries or any property of SGC or
Company or any of their respective Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
None of SGC, Company or any of their respective Subsidiaries is (i) in violation
of any applicable laws that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect or (ii) subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.

    3.7  PAYMENT OF TAXES.  Except to the extent permitted by subsection 5.4,
         ----------------                                                    
all tax returns and reports of SGC, Company and their respective Subsidiaries
required to be filed by any of them have been timely filed, and all taxes,
assessments, fees and other governmental charges upon SGC, Company and their
respective Subsidiaries and upon their respective properties, assets, income,
businesses and franchises which are due and payable have been paid or are being
contested in good faith by appropriate proceedings.  Neither SGC or Company
knows of any proposed tax assessment against SGC, Company or any of their
respective Subsidiaries which is not being actively contested by SGC, Company or
such Subsidiary in good faith and by appropriate proceedings; provided that such
                                                              --------          
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.  No governmental
entity has, during the past three years, examined, or is in the process of
examining, any tax return of SGC, Company or any of their respective
Subsidiaries.  No governmental entity has proposed (tentatively or
definitively), asserted or assessed, or, to the knowledge of SGC and Company,
threatened to propose or assert, any deficiency, assessment or claim for taxes,
which delinquency, assessment or claim could reasonably be expected to have a
Material Adverse Effect and, to the best knowledge of SGC and Company, there
would be no basis for any such delinquency, assessment or claim.  There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any tax or deficiency against SGC, Company or
any of their respective Subsidiaries or with respect to any tax return filed or
to be filed by SGC, Company or any of their respective Subsidiaries.  Following
the Closing, the assessment of any additional taxes for periods for which
returns have been filed is not expected to exceed the liability recorded
therefor on the financial statements delivered to SunAmerica pursuant to
subsection 3.3.  There are no material unresolved questions or claims concerning
the tax liability of SGC, Company or any of their respective Subsidiaries.

    3.8  PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.  None of SGC,
         --------------------------------------------------------               
Company or any of their respective Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations where such default
could reasonably be expected to result in a Material Adverse Effect and, to the
knowledge of SGC and Company, no condition exists

                                       28
<PAGE>
 
that, with the giving of notice or the lapse of time or both, would constitute
such a default.

    3.9  GOVERNMENTAL REGULATION.  None of SGC, Company or any of their
         -----------------------                                       
respective Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act
or the Investment Company Act of 1940 or under any other federal or state
statute or regulation which may limit its ability to incur Indebtedness or which
may otherwise render all or any portion of the Obligations unenforceable.

    3.10 EMPLOYEE BENEFIT PLANS AND EMPLOYEE MATTERS.
         ------------------------------------------- 

         A.   SGC, Company and each of their respective ERISA Affiliates are in
compliance in all material respects with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their obligations under each Employee Benefit Plan.  No ERISA Event has occurred
or is reasonably expected to occur.

         B.   Schedule 3.10 annexed hereto lists all Employee Benefit Plans.
              -------------                                                  
Except to the extent required under Section 4980B of the Internal Revenue Code,
no Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees of SGC,
Company or any of their respective ERISA Affiliates.  As of the most recent
valuation date for any Pension Plan, no Pension Plan has any unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA).

    3.11 ENVIRONMENTAL PROTECTION.  Except as set forth in Schedule 3.11 annexed
         ------------------------                          -------------        
hereto, in each particular instance, with respect to the particular clause of
this subsection 3.11 to which such exception is taken:

         (i) the operations of Company (including, without limitation, all
    operations and conditions at or in any Facility) related to the Facility
    comply in all material respects with all Environmental Laws;

         (ii) Company has obtained all Governmental Authorizations under
    Environmental Laws necessary to its operations related to the Facility, and
    all such Governmental Authorizations are in good standing, and Company is in
    compliance with all material terms and conditions of such Governmental
    Authorizations;

         (iii) Company has not received (a) any notice or claim to the effect
    that it is or may be liable to any Person as a result of or in connection
    with any Hazardous Material related to the Facility or (b) any letter or
    request for information under Section 104 of the Comprehensive Environmental
    Response, Compensation, and Liability Act (42 U.S.C. (S) 9604) or comparable
    state laws, with respect to the Facility and, none of the operations of
    Company is the subject of any federal or state investigation relating to or
    in connection with any Hazardous

                                       29
<PAGE>
 
    Material at the Facility or any Hazardous Material in any other manner
    related to the Facility;

         (iv) Company is not a party to any judicial or administrative
    proceeding alleging the violation of or liability under any Environmental
    Laws which if adversely determined could reasonably be expected to have a
    Material Adverse Effect;

         (v) Neither Company nor the Facility is subject to any outstanding
    written order or agreement with any governmental authority or private party
    relating to (a) any Environmental Laws or (b) any Environmental Claims;

         (vi) Company has no contingent liability in connection with any Release
    of any Hazardous Material related to the Facility which could reasonably be
    expected to have a Material Adverse Effect;

         (vii) Company and, to the best knowledge of any officer of SGC or
    Company, none of its predecessors has filed any notice under any
    Environmental Law indicating past or present treatment or Release of
    Hazardous Material at the Facility and none of Company's operations involves
    the generation, transportation, treatment, storage or disposal of hazardous
    waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent;

         (viii) except as disclosed in the Environmental Report, no Hazardous
    Material exists on, under or about the Facility in a manner that has a
    reasonable possibility of giving rise to an Environmental Claim having a
    Material Adverse Effect, and Company has not filed any notice or report of a
    Release of any Hazardous Material that has a reasonable possibility of
    giving rise to an Environmental Claim having a Material Adverse Effect;

         (ix) None of Company and, to the best knowledge of any officer of SGC
    and Company, any of its predecessors has disposed of any Hazardous Material
    in a manner that has a reasonable possibility of giving rise to an
    Environmental Claim having a Material Adverse Effect;

         (x) to the knowledge of SGC and Company, no underground storage tanks
    or surface impoundments are on or at the Facility; and

         (xi) no Lien in favor of any Person relating to or in connection with
    any Environmental Claim has been filed or has been attached to the Facility.

    3.12 SOLVENCY.  Upon the consummation of all the transactions contemplated
         --------                                                             
by this Agreement and the Basic Documents:  (i) the present fair salable value
of the assets of Company as an entirety will exceed the amount that will be
required to pay its probable liability on existing debts (whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent), as they
become absolute and matured; (ii) the

                                       30
<PAGE>
 
sum of the debts (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) of Company will not exceed the aggregate value of
all of its property, fairly valued, assuming sale in an orderly manner and not
subject to any type of distressed or forced liquidation; (iii) the capital of
Company will not be unreasonably small for Company to carry on its businesses;
and (iv) Company does not intend to, nor does it or believe it will, by virtue
of consummating the transactions contemplated hereby, incur debts that will be
beyond its ability to pay as they mature.

    3.13 CERTAIN FEES.  No broker's or finder's fee or commission will be
         ------------                                                    
payable with respect to this Agreement or any of the transactions contemplated
hereby and SGC and Company hereby jointly and severally indemnifies each Holder
against, and agrees that it will hold each Holder harmless from, any claim,
demand or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.

    3.14 DISCLOSURE.    No representation or warranty of SGC or Company or any
         ----------                                                           
of their respective Subsidiaries contained in any Basic Document or in any other
document, certificate or written statement furnished to SunAmerica by or on
behalf of SGC or Company or any of their respective Subsidiaries for use in
connection with the transactions contemplated by this Agreement, taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made.


SECTION 4.  CONDITIONS TO CLOSING

    4.1  CONDITIONS TO OBLIGATIONS OF SUNAMERICA.  SunAmerica's obligation to
         ---------------------------------------                             
purchase the Notes pursuant to this Agreement is subject to the fulfillment, at
or prior to the Closing, of the following conditions, any one or more of which
may be waived SunAmerica:

         A.   SGC AND COMPANY DOCUMENTS.  On or before the Closing, SGC and
Company shall deliver or cause to be delivered to SunAmerica the following:

         (i) Certified copies of its Articles or Certificate of Incorporation
    (including, in the case of SGC, the Certificate of Designations for the
    Preferred Stock), together with a good standing certificate from the
    Secretary of State of the State of Nevada and, to the extent generally
    available, a certificate or other evidence of good standing as to payment of
    any applicable franchise or similar taxes from the appropriate taxing
    authority of such state, each dated a recent date prior to the Closing Date;

         (ii) Copies of its Bylaws, certified as of the Closing Date by its
    corporate secretary or an assistant secretary;

                                       31
<PAGE>
 
         (iii) Resolutions of its Board of Directors approving and authorizing
    the execution, delivery and performance of this Agreement and the other
    Basic Documents to which it is a party, certified as of the Closing Date by
    its corporate secretary or an assistant secretary as being in full force and
    effect without modification or amendment;

         (iv) Signature and incumbency certificates of its officers executing
    this Agreement and the other Basic Documents to which it is a party;

         (v) in the case of Company, executed originals of this Agreement, the
    Note to be issued to SunAmerica on the Closing Date (duly executed in
    accordance with subsection 2.3, payable to SunAmerica and with appropriate
    insertions), the Security Agreement, the Deed of Trust, the Environmental
    Indemnity, the Collateral Account Agreement, the Collateral Account Letter
    and the other Basic Documents to which it is party;

         (vi) in the case of SGC, executed originals of this Agreement, the
    Guaranty, the Environmental Indemnity and the other Basic Documents to which
    it is party;

         (vii) Such other documents as SunAmerica may reasonably request.

         B.   LEGAL OPINIONS.  SunAmerica shall have received (i) originally
executed copies of one or more favorable written opinions of Gibson, Dunn &
Crutcher and Vargas & Bartlett, counsel for SGC and Company dated as of the
Closing Date and setting forth substantially the matters in the opinions
designated in Exhibit IX-A and Exhibit IX-B annexed hereto and as to such other
              ------------     ------------                                    
matters as SunAmerica may reasonably request and (ii) evidence satisfactory to
SunAmerica that SGC and Company have requested such counsel to deliver such
opinions to SunAmerica.

         C.   OFFICERS CERTIFICATE REGARDING CERTAIN CONDITIONS.  The following
conditions shall be satisfied and SGC and Company shall have delivered to
SunAmerica an Officers' Certificate, in form and substance satisfactory to
SunAmerica, to that effect:

         (i) The representations and warranties of SGC or Company, as the case
    may be, contained herein and in the other Basic Documents shall be true,
    correct and complete in all material respects on and as of the Closing Date
    to the same extent as though made on and as of that date.

         (ii) No event shall have occurred and be continuing as of the Closing
    Date, or would result from the consummation of the purchase of the Notes or
    the other transactions contemplated by the Basic Documents, that would
    constitute an Event of Default or a Potential Event of Default.

         (iii) SGC and Company shall have performed all agreements and satisfied
    all conditions which this Agreement and the other Basic Documents provide
    shall

                                       32
<PAGE>
 
    be performed or satisfied by each of SGC and Company on or before the
    Closing Date.

         D.   PERFECTION OF SECURITY INTERESTS AND RELATED MATTERS.  Company
shall have taken or caused to be taken such actions in such a manner so that
Collateral Agent, for the benefit of Holders, has a valid and perfected first
priority security interest in all Collateral in which a Lien is purported to be
granted by the Basic Documents or any of them, executed as of the Closing Date.
Such actions shall include, without limitation:  (i) the delivery to Collateral
Agent of Uniform Commercial Code financing statements, executed by Company as to
the Collateral granted by Company for all jurisdictions as may be necessary or
desirable to perfect Collateral Agent's security interest in such collateral;
(ii) evidence that counterparts of the Deed of Trust and the Subordination, Non-
Disturbance and Attornment Agreement were recorded in all locations to the
extent necessary or desirable, in the judgment of Collateral Agent, effectively
to create a valid and enforceable first priority Lien (subject only to Permitted
Encumbrances) on the Premises in favor of Collateral Agent for the benefit of
Holders, (iii) evidence satisfactory to Collateral Agent that SFHI Notes in an
aggregate principal amount not less than the principal amount of the Note to be
issued SunAmerica at Closing will be purchased with the proceeds of the Notes
deposited in the Cash Collateral Account and pledged to Collateral Agent, (iv)
Company and Donaldson, Lufkin & Jenrette shall have entered into the Collateral
Account Letter, the Collateral Account shall have been established and the
proceeds of the Note issued on the Closing Date shall have been deposited in the
Collateral Account, (v) the delivery to the trustee under the SFHI Indenture of
a Notice to the Trustee under the SFHI Indenture pursuant to Section 2.9 thereof
satisfactory to SunAmerica indicating that, among other things, SFHI Notes have
been and may be from time to time pledged to Collateral Agent under the Security
Agreement, that Collateral Agent will be entitled to vote such SFHI Notes as
provided in the Security Agreement and that all payments in respect of SFHI
Notes pledged as Collateral shall be paid directly to the Collateral Account,
and (vi) evidence reasonably satisfactory to Collateral Agent that all other
filings, recordings and other actions Collateral Agent deems necessary or
advisable to establish, preserve and perfect the first priority Liens (subject
to the Liens permitted under subsection 6.2) granted to Collateral Agent, for
the benefit of Holders, in the Collateral shall have been made.

         E.   TITLE POLICY.  SunAmerica shall have received a 1970 Form B
American Land Title Association ("ALTA") extended coverage mortgagee form of
title insurance policy in the amount of $20,000,000 (the "TITLE POLICY") (with
proof of the payment of the premiums thereon) or commitment therefor in form and
substance acceptable to SunAmerica issued by Stewart Title Guaranty Company (the
"TITLE COMPANY"), insuring the lien of the Deed of Trust to be a first lien
against the Premises, free and clear of all defects, encumbrances and
exceptions, except those approved by SunAmerica and its counsel in writing,
together with such affirmative insurance as SunAmerica may require.  The Title
Policy shall contain, among other things:

         (i) full coverage against mechanic's liens (filed and inchoate);

                                       33
<PAGE>
 
         (ii) a foundation endorsement;

         (iii) a contiguity endorsement;

         (iv) a reference to the survey but no survey exceptions except those
    theretofore approved in writing by SunAmerica and its counsel;

         (v) Form 100, 116 and 116.1 endorsements;

         (vi) an access to public streets endorsement; and

         (vii) such other items and endorsements requested by SunAmerica.

         F.   UCC AND JUDGMENT SEARCHES.  SunAmerica shall have received current
searches of the UCC filing offices and judgment searches with the Offices of the
Secretary of State of Nevada and the local recorder's office in Clark County and
elsewhere showing no security interests or judgments affecting the Premises, the
Improvements or Company other than those provided for herein.

         G.   SURVEY.  SunAmerica shall have received a current survey prepared
by a surveyor acceptable to SunAmerica and licensed as a land surveyor in the
State of Nevada, that shall (a) be satisfactory, in form, scope and substance,
to SunAmerica, and (b) contain the legal description of the Premises and
certifications in form, scope and substance satisfactory to SunAmerica, from the
surveyor to SunAmerica and the Title Company and other persons reasonably
requested by SunAmerica.

         H.   FLOOD INSURANCE.  SunAmerica shall have been provided with
satisfactory evidence, which may be in the form of a letter from an insurance
broker, municipal engineer, land surveyor or other knowledgeable source
unaffiliated with Company, as to whether (a) the Premises is located in an area
designated by the Department of Housing and Urban Development as having special
flood or mudslide hazards, and (b) the community in which the Premises is
located is participating in the National Flood Insurance Program.  If both of
the aforesaid conditions exist, SunAmerica shall receive satisfactory policies
of flood insurance covering the Improvements as required by the Flood Act.

         I.   INSURANCE.  SunAmerica shall have received evidence, satisfactory
to SunAmerica, of insurance required to be procured and maintained pursuant to
subsection 5.5 hereof and Section 8 of the Security Agreement and Section 6 of
the Deed of Trust indicating that, with respect to casualty insurance, such
policies of insurance have been endorsed to name SunAmerica, on behalf of
Holders, as loss payee pursuant to a standard mortgagee clause and, with respect
to liability insurance, such policies of insurance name SunAmerica, on behalf of
Holders, as an additional insured.

         J.   APPRAISAL.  SunAmerica shall have received an Appraisal.

                                       34
<PAGE>
 
         K.   NECESSARY CONSENTS AND APPROVALS.  On or before the Closing Date,
SGC and Company shall have obtained all consents and approvals to the
transactions contemplated under this Agreement and the other Basic Documents and
to the continuing operations of the business of SGC, Company and their
Subsidiaries, of any Person required under any Contractual Obligation or other
obligation (including obligations imposed by law) of SGC or Company or any of
their respective Affiliates and of any governmental entity.  Such consents and
approvals shall be in full force and effect, and any applicable waiting periods
shall have expired by the Closing Date without any action taken or threatened to
be taken by any competent governmental authority which might restrain, prevent
or otherwise impose adverse conditions on the transactions contemplated under
this Agreement.

         L.   ENVIRONMENTAL INFORMATION AND ENVIRONMENTAL INDEMNITY.  SunAmerica
shall have received the Environmental Report and the Environmental Indemnity.

         M.   CHANGES IN STRUCTURE.  Any changes in the management, capital or
ownership structure of SGC or its Subsidiaries not previously disclosed to
SunAmerica shall be satisfactory to SunAmerica in all respects.

         N.   NO MATERIAL ADVERSE EFFECT.  Since September 30, 1995, no Material
Adverse Effect (in the sole opinion of SunAmerica) shall have occurred.

         O.   COMPLETION OF PROCEEDINGS.  All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by SunAmerica
and its counsel shall be satisfactory in form and substance to SunAmerica and
such counsel, and SunAmerica and its counsel shall have received all such
counterpart originals or certified copies of such documents as SunAmerica may
reasonably request.

         P.   NO INJUNCTIONS, RESTRAINING ORDER OR ADVERSE LITIGATION.  No
order, judgment or decree of any court, arbitrator or governmental authority
shall purport to enjoin or restrain SunAmerica from acquiring any Notes on the
Closing Date.  As of the Closing Date, there shall not be pending or, to the
knowledge of SGC or Company, threatened, any action, suit, proceeding,
governmental investigation or arbitration against SGC, Company or any of their
respective Subsidiaries or any property of SGC, Company or any of their
respective Subsidiaries that has not been disclosed by SGC or Company in writing
pursuant to subsection 3.6 prior to the execution of this Agreement, and there
shall have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, that, in
either event, in the opinion of SunAmerica, could be expected to have a Material
Adverse Effect; and no injunction or other restraining order shall have been
issued and no hearing to cause an injunction or other restraining order to be
issued shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, the transactions
contemplated by this Agreement, the Basic Documents or the acquisition of the
Notes hereunder.

                                       35
<PAGE>
 
         Q.   NO VIOLATION OF LAW.  The acquisition of the Notes shall not
violate any law including, without limitation, Regulation G, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve System.

         R.   EXISTING LEASE DOCUMENTS.  On the Closing Date (i) SunAmerica
shall have received executed or conformed copies of the Existing Lease Documents
including any amendments thereto all in form and substance satisfactory to
SunAmerica, (ii) SunAmerica shall have received an Officers' Certificate from
SGC and Company stating that the applicable Existing Lease Documents to which
such Person is a party is in full force and effect and no material term or
condition thereof has been amended, modified or waived, that all agreements and
conditions contained in the Existing Lease Documents and any agreements or
documents referred to therein required to be performed or complied with by SGC
and Company and, to the knowledge of SGC and Company, the other parties thereto
on or before the Closing Date shall have been so performed or satisfied and that
neither SGC nor Company nor, to the knowledge of SGC or Company, any other party
to any Existing Lease Documents is in default in the performance of or
compliance with any of the terms or provisions thereof and (iii) SunAmerica
shall have received from the Tenant the Subordination, Non-Disturbance and
Attornment Agreement and any estoppel certificates or other documents or
certifications from the Tenant or the holder(s) of the Existing Lease Notes
requested by SunAmerica.

         S.   PAYMENT OF FEES AND EXPENSES.  Without limiting the provisions of
subsection 9.2, SGC and Company shall have paid on or before the Closing by wire
transfer of immediately available funds, the reasonable fees, charges and
disbursements arising in connection with the preparation, execution and delivery
of the Basic Documents, including but not limited to the reasonable fees and
expenses of counsel to SunAmerica, O'Melveny & Myers to the extent an invoice
therefor is received by SGC not less than one Business Day prior to Closing; the
appraiser retained to deliver the Appraisal, environmental and other
consultants; closing costs; escrow fees; title issuance premiums; title search
and survey costs; and the reasonable out-of-pocket expenses of SunAmerica;
                                                                          
provided that the selection of the appraiser and any environmental or other
-------- ----                                                              
consultant or experts shall not be made without Company's prior consent, which
shall not be unreasonably withheld.

         T.   PURCHASE OF PIONEER BONDS.  On the Closing Date, SGC shall have
contributed not less than $10 million in cash to Pioneer Hotel, Inc. and Pioneer
Hotel, Inc. shall have executed a certificate to the effect that Pioneer Hotel,
Inc. will use all of such cash to purchase the Pioneer Bonds and cause the
Pioneer Bonds to be cancelled.

    4.2  CONDITIONS TO NOTE ISSUANCES SUBSEQUENT TO THE CLOSING DATE.
         ----------------------------------------------------------- 

         The obligation of SunAmerica to purchase Notes on any Subsequent
Closing Date is subject to the following conditions precedent:

                                       36
<PAGE>
 
         A.   NOTICE.  SunAmerica shall have received a Note Issuance Notice in
              ------                                                           
substantially the form of Exhibit II annexed hereto not later than three
Business Days prior to the Subsequent Closing Date designated on such Note
Issuance Notice.

         B.   CONDITIONS TO OBLIGATIONS OF SUNAMERICA ON A SUBSEQUENT CLOSING
              ---------------------------------------------------------------
DATE.  As of the Subsequent Closing Date, the following conditions shall be
----                                                                       
satisfied and SGC and Company shall have delivered to SunAmerica an Officer's
Certificate, in form and substance satisfactory to SunAmerica, to the effect
that:

              (i) The representations and warranties contained in the Agreement
    and in the other Basic Documents shall be true, correct and complete in all
    material respects as of the Subsequent Closing Date as to the same extent as
    though made on and as of that date;

              (ii) No event shall have occurred and be continuing as of the
    Subsequent Closing Date, or would result from the consummation of the
    purchase of the Notes or other transactions contemplated by the Basic
    Documents, that would constitute an Event of Default or a Potential Event of
    Default;

              (iii) SGC and Company shall have performed all agreements and
    satisfied all conditions which this Agreement and the other Basic Documents
    provides shall be performed or satisfied by each of SGC and Company on or
    before the Subsequent Closing Date;

              (iv) No order, judgment or decree of any court, arbitrator or
    governmental authority shall purport to enjoin or restrain SunAmerica from
    acquiring the Note to be acquired by it on that Subsequent Closing Date;

              (v) The issuance of the Notes requested on such Subsequent Closing
    Date shall not violate any law including, without limitation, Regulation G,
    Regulation T, Regulation U or Regulation X of the Board of Governors of the
    Federal Reserve System;

              (vi) Neither SGC nor Company has given notice to Collateral Agent
    or any Holder under Nevada Revised Statute Section 106 or otherwise that any
    indebtedness evidenced by any Note issued after the Closing Date will not be
    secured by the Lien created by the Deed of Trust or any other Basic
    Document; and

              (vii) the Note issued on such Subsequent Closing Date will be
    secured by the Deed of Trust and other Basic Documents.

         C.   DELIVERY OF NOTE.  SunAmerica shall have received the Note to be
issued to SunAmerica on the Subsequent Closing Date duly executed and drawn to
the order of SunAmerica and with appropriate insertions.

                                       37
<PAGE>
 
         D.   DELIVERY OF SFHI NOTES AND RELATED MATTERS.  Collateral Agent 
shall have received evidence satisfactory to it that the proceeds of the Notes
will be transferred to the Collateral Account and applied on or prior to
February 15, 1996 to purchase SFHI Notes that will be held in the Collateral
Account or otherwise delivered to Collateral Agent.


SECTION 5.  AFFIRMATIVE COVENANTS OF SGC AND COMPANY

         SGC and Company each hereby covenants and agrees that, until payment in
full of the Obligations, unless Requisite Holders shall otherwise give written
consent, SGC and Company shall perform, and shall cause each of its respective
Subsidiaries to perform, all covenants in this Section 5.

    5.1  FINANCIAL STATEMENTS AND RELATED INFORMATION.  SGC and Company will
         --------------------------------------------                       
maintain a system of accounting established in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
SGC and Company will deliver to each Holder:

         A.   QUARTERLY, ANNUAL AND OTHER REPORTS:  as soon as available all
annual and quarterly reports and such other information, documents and reports
that SGC is required to file with the Securities and Exchange Commission
pursuant to Sections 13 and 15(d) of the Exchange Act.

         B.   OFFICERS' CERTIFICATES:  together with each delivery of quarterly
and annual financial statements of SGC and its Subsidiaries pursuant to
subsection 5.1A above, an Officers' Certificate of SGC stating that the signers
have reviewed the terms of this Agreement and have made, or caused to be made
under their supervision, a review in reasonable detail of the transactions and
condition of SGC, Company and their respective Subsidiaries during the
accounting period covered by such financial statements and that such review has
not disclosed the existence during or at the end of such accounting period, and
that the signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof and
what action SGC and Company have taken, are taking and propose to take with
respect thereto;

         C.   RECONCILIATION STATEMENTS:  if, as a result of any change in
accounting principles and policies from those used in the preparation of the
audited financial statements referred to in subsection 3.3, the consolidated
financial statements of SGC and its Subsidiaries delivered pursuant to
subsection 5.1A will differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such subsections
had no such change in accounting principles and policies been made, then
together with the first delivery of financial statements pursuant to subsection
5.1A following such change, a written statement of the chief accounting officer
or chief

                                       38
<PAGE>
 
financial officer of SGC setting forth the differences which would have resulted
if such financial statements had been prepared without giving effect to such
change;

         D.   SEC FILINGS AND PRESS RELEASES:  promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and proxy
statements sent or made available generally by SGC to its security holders, (b)
all regular and periodic reports and all registration statements (other than on
Form S-8 or a similar form) and prospectuses, if any, filed by SGC or any of
their respective Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made available
generally by SGC or any of their respective Subsidiaries to the public
concerning material developments in the business of SGC or any of their
respective Subsidiaries;

         E.   EVENTS OF DEFAULT, ETC.:  promptly upon any officer of SGC or
Company obtaining knowledge (i) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Holder has given any notice or taken any other action with respect to a claimed
Event of Default or Potential Event of Default, (ii) that any Person has given
any notice to SGC, Company or any of their respective Subsidiaries or taken any
other action with respect to a claimed default or event or condition of the type
referred to in subsection 7.2, or (iii) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event of Default,
Potential Event of Default, default, event or condition, and what action SGC or
Company has taken, is taking and proposes to take with respect thereto;

         F.   LITIGATION OR OTHER PROCEEDINGS:  promptly upon any officer of SGC
or Company obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against SGC, Company or
any of its Subsidiaries or any property of SGC, Company or any of its
Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in writing
by SGC or Company to Holders or (Y) any material development in any Proceeding
that, in any case:

              (1) if adversely determined, has a reasonable possibility of
         giving rise to a Material Adverse Effect; or

              (2) seeks to enjoin or otherwise prevent the consummation of, or
         to recover any damages or obtain relief as a result of, the
         transactions contemplated hereby;

written notice thereof together with such other information as may be reasonably
available to SGC or Company to enable Holders and their counsel to evaluate such
matters;

                                       39
<PAGE>
 
         G.   EXISTING LEASE DOCUMENTS.  With reasonable promptness, copies of
any Existing Lease Document or any amendment, supplement or modification
thereof;

         H.   ERISA EVENTS:  promptly upon becoming aware of the occurrence of
or forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, what action SGC, Company or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto; and upon the request of a
Holder copies of each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by SGC, Company or any of their respective ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan
and such other documents or governmental reports or filings relating to any
Employee Benefit Plan as any Holder shall reasonably request;

         I.   ENVIRONMENTAL AUDITS AND REPORTS:  promptly upon receipt thereof
copies of all environmental audits and reports, whether or not prepared by or on
behalf of SGC or Company or by independent consultants, with respect to any
environmental matters relating to the Facility; and

         J.   OTHER INFORMATION:  with reasonable promptness, such other
information and data with respect to SGC, Company or any of their respective
Subsidiaries as from time to time may be reasonably requested by Collateral
Agent or any Holder.

    5.2  INSPECTION.  No more than once a fiscal quarter unless an Event of
         ----------                                                        
Default or Potential Event of Default has occurred and is continuing, SGC and
Company will permit any authorized representative designated by Collateral Agent
or any Holder of at least a majority in principal amount of the Notes at such
Person's own expense (unless a Potential Event of Default or an Event of Default
has occurred and is continuing in which case at SGC's and Company's expense), to
visit and inspect any of SGC's or Company's properties or the properties of any
of their respective Subsidiaries, including their financial and accounting
records, and to make copies and take extracts therefrom, and to discuss their
affairs, finances and accounts with the chief financial officer and any other
persons approved by the chief financial officer, under the chief financial
officer's direction, and, unless an Event of Default shall have occurred and be
continuing, all upon at least three Business Days' notice and at reasonable
times during normal business hours.

    5.3  CORPORATE EXISTENCE, ETC.  Except as permitted under subsection 6.3 or
         -------------------------                                             
6.5, SGC and Company will preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business;
                                                                           
provided, however, that SGC and Company shall not be required to preserve any
--------  -------                                                            
such right, license or franchise, or corporate or other existence of any
Subsidiary (other than Company), if the Board of Directors of SGC and Company,
as the case may be, shall determine in good faith in accordance with their
respective charters that the preservation thereof is no longer desirable in the
conduct of the business of SGC, Company and their respective

                                       40
<PAGE>
 
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders and will not have a Material Adverse Effect.

    5.4  PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.  SGC and Company will,
         ----------------------------------------------                        
and will cause each of their respective Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
                                        --------                             
need be paid if being contested in good faith by appropriate proceedings timely
instituted and diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor.  SGC and Company will not, nor will they permit any of their
respective Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than SGC, Company or any of their
respective Subsidiaries).  To the extent that the terms and provisions of the
Deed of Trust regarding payment of taxes and assessments on the Premises and
Improvements conflicts with the terms and provisions of this Agreement, the
terms and provisions of the Deed of Trust shall govern.

    5.5  MAINTENANCE OF PROPERTIES; INSURANCE.  SGC and Company will, and will
         ------------------------------------                                 
cause each of their respective Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of SGC and
Company and their respective Subsidiaries (including, without limitation,
intellectual property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof.  SGC and Company will
maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to their respective properties and businesses
and the properties and businesses of their respective Subsidiaries against loss
or damage of the kinds customarily carried or maintained under similar
circumstances by corporations of established reputation engaged in similar
businesses.  To the extent that the terms and provisions regarding the payment
of insurance contained in the Deed of Trust or Security Agreement conflict with
the terms and provisions of this subsection 5.5, the terms and provisions of the
Deed of Trust and Security Agreement shall govern.

    5.6  COMPLIANCE WITH LAWS, ETC.  SGC and Company shall, and shall cause each
         -------------------------                                              
of their respective Subsidiaries to, comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, including but not limited to all applicable
Environmental Laws and Gaming Laws, noncompliance with which could reasonably be
expected to cause a Material Adverse Effect.

                                       41
<PAGE>
 
    5.7  ENVIRONMENTAL DISCLOSURE AND INSPECTION.
         --------------------------------------- 

         A.   Company shall exercise due diligence in order to comply and use
its best efforts to cause (i) all tenants under any leases or occupancy
agreements affecting any portion of the Facility and (ii) all other Persons on
or occupying such property, to comply with all Environmental Laws.

         B.   After the occurrence and during the continuance of an Event of
Default or otherwise at any time upon Collateral Agent's reasonable request,
Company agrees that Collateral Agent may, from time to time and in its sole and
absolute discretion, retain, at Company's expense, an independent professional
consultant to review any report relating to Hazardous Material prepared by or
for Company and, whether or not any such report exists, upon reasonable notice
to Company, to conduct its own investigation of the Facility, and SGC and
Company each agree to use its best efforts to obtain permission for Collateral
Agent's professional consultant to conduct its own investigation of the
Facility, Company hereby grants to Collateral Agent and its agents, employees,
consultants and contractors the right to enter into or on to the Facility to
perform such tests on such property as are reasonably necessary to conduct such
a review and/or investigation.  Any such investigation of the Facility shall be
conducted, unless otherwise agreed to by Company and Collateral Agent, during
normal business hours and, to the extent reasonably practicable, shall be
conducted with prior notice.  Company and Collateral Agent hereby acknowledge
and agree that any report of any investigation conducted at the request of
Collateral Agent pursuant to this subsection 5.7B will be obtained and shall be
used by Collateral Agent for the purposes of Holders' internal credit analysis,
to monitor the Notes and to protect Holders' security interests created by the
Basic Documents.

         C.   Company shall promptly advise Collateral Agent in writing and in
reasonable detail of (i) any Release of any Hazardous Material on or relating to
the Facility required to be reported to any federal, state or local governmental
or regulatory agency under any applicable Environmental Laws, (ii) any and all
written communications with respect to any Environmental Claims or with respect
to any Release of Hazardous Material required to be reported to any federal,
state or local governmental or regulatory agency, (iii) any remedial action
taken by Company or, to Company's or SGC's knowledge, any other Person in
response to (x) any Hazardous Material on, under or about the Facility, or (y)
any Environmental Claim that reasonably could have a Material Adverse Effect,
(iv) Company's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Facility that reasonably could cause the
Facility or any part thereof to be subject to (x) any restrictions on the
ownership or transferability thereof or (y) any material restriction on the
occupancy or use thereof under any Environmental Laws, and (v) any request for
information from any governmental agency that indicates such agency is
investigating whether Company may be potentially responsible for a Release of
Hazardous Material.

         D.   Company shall promptly notify Collateral Agent of (i) any proposed
acquisition of stock, assets, or property by Company that could reasonably be
expected to

                                       42
<PAGE>
 
expose Company to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Company and (ii) any
action that Company proposes to take to commence operations that reasonably
could be expected to subject Company to laws, rules or regulations (including,
without limitation, laws, rules and regulations requiring additional
environmental permits or licenses) not theretofore applicable to the Facility or
operations of Company.

         E.   Company shall, at its own expense, provide copies of such
documents or information as Collateral Agent may reasonably request in relation
to any matters disclosed pursuant to this subsection 5.7.

    5.8  REMEDIAL ACTION REGARDING HAZARDOUS MATERIAL.  Company shall promptly
         --------------------------------------------                         
take any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Material on,
under or about the Facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations.  In the event Company undertakes any
remedial action with respect to any Hazardous Material on, under or about the
Facility, Company shall conduct and complete such remedial action in compliance
with all applicable Environmental Laws and other applicable legal requirements
(including lawful policies, orders and directives of federal, state and local
governmental authorities).


SECTION 6.  NEGATIVE COVENANTS OF SGC AND COMPANY

         SGC and Company each hereby covenant and agree that, until payment in
full of all of the Obligations, unless Requisite Holders shall otherwise give
prior written consent, SGC and Company shall perform and shall cause each of
their respective Subsidiaries to perform, all covenants in this Section 6.

    6.1  RESTRICTED JUNIOR PAYMENTS.  SGC and Company will not, and will not
         --------------------------                                         
permit any of their Subsidiaries to, directly or indirectly, declare, make or
pay any Restricted Junior Payment; provided that so long as no Event of Default
                                   -------------                               
or Potential Event of Default has occurred and is continuing, (i) SGC may pay
dividends accruing after September 30, 1996 in respect of outstanding SGC
Preferred Stock in cash to the extent required under the terms of the SGC
Preferred Stock, may exchange SGC Preferred Stock for Junior Subordinated Notes
and may pay interest accrued in respect of such Junior Subordinated Notes;
                                                                          
provided that in no event shall any principal payment in respect of such Junior
--------                                                                       
Subordinated Notes be due prior to December 15, 2000.  (ii) Company may dividend
or otherwise distribute up to $2,500,000 of cash is the aggregate to SGC for
contribution to Pioneer Hotel, Inc. as contemplated by subsection 3.2F and may
dividend or otherwise distribute SFHI Notes to SGC to the extent expressly
permitted under subsections 2.5B, 2.5C or 2.5F; and (iii) from time to time
after SGC has delivered its financial statements for its fiscal quarter ending
December 31, 1996 and so long as Company has not been required to take action
under subsection 2.5C(v) because SFHI Cash Flow (determined for a four quarter
period as provided under subsection

                                       43
<PAGE>
 
2.5C(v)) was less than $13,500,000, SGC may repurchase, redeem or otherwise
acquire Capital Stock of SGC in an amount not to exceed $3,000,000 in the
aggregate.

    6.2  LIENS AND RELATED MATTERS.
         ------------------------- 

         A.   PROHIBITION ON LIENS.  Company shall not directly or indirectly,
create, incur, assume or permit to exist any Lien on or with respect to any
property or asset of any kind (including any document or instrument in respect
of goods or accounts receivable) of Company, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any State or under any similar recording or
notice statute, except:

         (i) Permitted Encumbrances;

         (ii) Liens on property of the Tenant described in the Existing Lease
    Security Agreement; and

         (iii) Liens described in Schedule 6.2 annexed hereto.
                                  ------------                

         B.   EQUITABLE LIEN IN FAVOR OF LENDERS.  If Company shall create or
assume any Lien upon any of its properties or assets, whether now owned or
hereafter acquired, other than Liens excepted by the provisions of subsection
6.2A, it shall make or cause to be made effective provision whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness secured thereby as long as any such Indebtedness shall be so
secured; provided that, notwithstanding the foregoing, this covenant shall not
         --------                                                             
be construed as a consent by Requisite Holders to the creation or assumption of
any such Lien not permitted by the provisions of subsection 6.2A.

         C.   NO FURTHER NEGATIVE PLEDGES.  Except with respect to specific
property encumbered to secure payment of particular Indebtedness, Company shall
not enter into any agreement prohibiting the creation or assumption of any Lien
upon any of its properties or assets, whether now owned or hereafter acquired.

    6.3  WHEN SGC MAY MERGE, ETC.  SGC shall not consolidate with or merge with
         ------------------------                                              
or into or sell, assign, transfer or lease all or substantially all of its
properties and assets as an entirety to any Person, or permit any Person to
merge with or into SGC unless:

         (i) SGC shall be the continuing Person, or the Person (if other than
    SGC) formed by such consolidation or into which SGC is merged or to which
    the properties and assets of SGC, substantially as an entirety are
    transferred (the "surviving entity") shall be a corporation organized and
    existing under the laws of the United States or any State thereof or the
    District of Columbia and shall expressly assume, by an agreement
    supplemental hereto, executed and delivered to Collateral Agent, in form
    satisfactory to Collateral Agent, all the obligations of

                                       44
<PAGE>
 
    SGC, under this Agreement, the Guaranty and the other Basic Documents and
    this Agreement, the Guaranty and the other Basic Documents shall remain in
    full force and effect; and

         (ii) immediately before and immediately after giving effect to such
    transaction, no Event of Default and no Potential Event of Default shall
    have occurred and be continuing.

         In connection with any consolidation, merger, transfer or lease
contemplated by this subsection 6.3, SGC shall deliver, or cause to be
delivered, to Collateral Agent, in form and substance reasonably satisfactory to
Collateral Agent, an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, transfer or lease and the supplemental
agreement in respect thereto comply with this subsection 6.3 and that all
conditions precedent herein provided for relating to such transaction have been
complied with.  Upon any consolidation or merger or any transfer of all or
substantially all of the assets of SGC in accordance with this subsection 6.3,
the successor corporation formed by such consolidation or into which SGC is
merged or to which such transfer is made, shall succeed to, and be substituted
for, and may exercise every right and power of, SGC under this Agreement with
the same effect as if such successor corporation had been named as SGC herein.

    6.4  INDEBTEDNESS OF COMPANY.  Company will not, directly or indirectly,
         -----------------------                                            
create, incur, assume, guarantee or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except:

         (i) Indebtedness in respect of the Notes;

         (ii) Indebtedness arising from the honoring by a bank or other
    financial institution of a check, draft or similar instrument inadvertently
    drawn against insufficient funds in the ordinary course of business,
    provided that such Indebtedness is extinguished within five business days of
    its incurrence; and

         (iii) the obligations of Company under the Existing Lease Guaranty
    Agreement.

    6.5  FUNDAMENTAL CHANGES.  Company will not (i) form, acquire or otherwise
         -------------------                                                  
permit to exist any Subsidiary or Joint Venture or any investment in the Capital
Stock or other ownership interest in any Person, (ii) liquidate or dissolve,
(iii) merge into or consolidate with any Person or (iv) sell or otherwise
transfer any Collateral except sales of obsolete equipment in the ordinary
course of business and except to the extent permitted under subsections 6.1,
2.5B, 2.5C and 2.5F; provided, however that nothing in this Section 6.4 shall
prohibit the grant or creation of any Lien permitted under Section 6.2.

    6.6  TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.  SGC and Company shall
         ---------------------------------------------                        
not, and shall not permit any of their respective Subsidiaries to, directly or
indirectly,

                                       45
<PAGE>
 
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity securities of SGC
or with any Affiliate of SGC or of any such holder, on terms that are less
favorable to SGC, Company or that Subsidiary, as the case may be, than those
that might be obtained at the time from Persons who are not such a holder or
Affiliate; provided that the foregoing restriction shall not apply to (i) any
           --------                                                          
transaction between SGC and any of its wholly-owned Subsidiaries (other than
Company) or between any of its wholly-owned Subsidiaries (other than Company) or
(ii) reasonable and customary fees paid to members of the Boards of Directors of
SGC and its Subsidiaries.

    6.7  AMENDMENTS TO EXISTING LEASE DOCUMENTS.  Company shall not amend,
         --------------------------------------                           
modify, supplement or otherwise change the terms of any Existing Lease Document,
except with the consent of Requisite Holders, which consent shall not be
unreasonably withheld.

    6.8  STAY, EXTENSION AND USURY LAWS.  Neither SGC nor Company shall, nor
         ------------------------------                                     
shall they permit any of their respective Subsidiaries to (to the extent each
may lawfully do so), at any time insist upon, plead or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive SGC or Company from paying
all or a portion of the principal of or premium, if any, or interest on the
Notes as contemplated herein, wherever enacted, now or at any time hereinafter
in force, or that may materially affect the covenants or the performance by SGC
or Company of their respective obligations hereunder in a manner inconsistent
with the provisions hereof.  SGC and Company each expressly waive all benefit or
advantage of any such law.  If a court of competent jurisdiction prescribes that
SGC or Company may not waive its rights to take the benefit or advantage of any
stay or extension law or any usury law or other law in accordance with the prior
sentence, then the obligation to pay interest on the Notes shall be reduced to
the maximum legal limit under applicable law governing the interest payable in
connection with the Notes and any amount of interest or premium, if any, paid by
SGC or Company that is deemed illegal shall be deemed to have been a prepayment
of principal (without penalty) on the Notes.

    6.9  GOVERNMENT REGULATION.  SGC and Company shall not, and shall not permit
any of their respective Subsidiaries to, be or become subject to, regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.


SECTION 7.  EVENTS OF DEFAULT

         If any one or more of the following conditions or events ("Events of
Default") shall occur:

                                       46
<PAGE>
 
    7.1  FAILURE TO MAKE PAYMENTS WHEN DUE.  Failure by Company to pay any
         ---------------------------------                                
installment of principal of any Note when due, whether at stated maturity, by
acceleration, by notice of voluntary prepayment, by mandatory prepayment,
redemption or otherwise; or failure by Company to pay any interest on any Note
or any other amount due under this Agreement within 15 days after the date due;
or

    7.2  DEFAULT IN OTHER AGREEMENTS.  (i) Failure of SGC, Company or any of
         ---------------------------                                        
their respective Subsidiaries to pay when due any principal of or interest on
any Indebtedness (other than Indebtedness referred to in subsection 7.1) in an
aggregate principal amount of $5,000,000 or more, in each case beyond the end of
any grace period provided therefor; or (ii) breach or default by SGC, Company or
any of their respective Subsidiaries with respect to any other material term of
any items of Indebtedness with an aggregate principal amount of $5,000,000 or
more or any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness, including but not limited to the SFHI Indenture or the
Pioneer Indenture, if the effect of such breach or default is to cause, that
Indebtedness to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may
be; or (iii) breach or default by Company under any Existing Lease Document if
such breach or default is not cured within any applicable grace period;

    7.3  BREACH OF CERTAIN COVENANTS.  Failure of SGC or Company to perform or
         ---------------------------                                          
comply with any term or condition contained in subsection 2.5, 5.3 or Section 6
of this Agreement; or

    7.4  BREACH OF WARRANTY.  Any representation, warranty, certification or
         ------------------                                                 
other statement made by SGC, Company or any of their respective Subsidiaries in
any Basic Document shall be false in any material respect on the date as of
which made; or

    7.5  OTHER DEFAULTS UNDER BASIC DOCUMENTS.  SGC or Company shall default in
         ------------------------------------                                  
the performance of or compliance with any term contained in this Agreement or
any of the other Basic Documents, other than any such term referred to in any
other subsection of this Section 7, and such default shall not have been
remedied or waived within 30 days after the earlier of (i) an officer of SGC or
Company becoming aware of such default or (ii) receipt by SGC or Company of
notice from any Holder of such default; or

    7.6  INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.  (i) A court
         -----------------------------------------------------             
having jurisdiction in the premises shall enter a decree or order for relief in
respect of SGC, Company or any of their respective material Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against SGC, Company or any of their respective material Subsidiaries under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
SGC, Company or any of their respective

                                       47
<PAGE>
 
material Subsidiaries, or over all or a substantial part of its property, shall
have been entered; or there shall have occurred the involuntary appointment of
an interim receiver, trustee or other custodian of SGC, Company or any of their
respective material Subsidiaries for all or a substantial part of its property;
or a warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of SGC, Company or any of their
respective material Subsidiaries, and any such event described in this clause
(ii) shall continue for 60 days unless dismissed, bonded or discharged, it being
understood that "material Subsidiary" under subsections 7.6, 7.7 and 7.9 shall
include SFHI, Pioneer Finance, Pioneer Hotel Inc. and their respective
successors; or

    7.7  VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.  (i) SGC, Company
         ---------------------------------------------------                  
or any of their respective material Subsidiaries shall have an order for relief
entered with respect to it or commence a voluntary case under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or SGC, Company or any of their respective material
Subsidiaries shall make any assignment for the benefit of creditors; or (ii)
SGC, Company or any of their respective material Subsidiaries shall be unable,
or shall fail generally, or shall admit in writing its inability, to pay its
debts as such debts become due; or the Board of Directors of SGC, Company or any
of their respective material Subsidiaries (or any committee thereof) shall adopt
any resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or

    7.8  JUDGMENTS AND ATTACHMENTS.  Any money judgment, writ or warrant of
         -------------------------                                         
attachment or similar process involving in the aggregate at any time an amount
in excess of $5,000,000 (in either case not adequately covered by insurance as
to which a solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against SGC, Company or any of their respective
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any event later
than five days prior to the date of any proposed sale thereunder); or

    7.9  DISSOLUTION.  Any order, judgment or decree shall be entered against
         -----------                                                         
SGC, Company or any of their respective material Subsidiaries decreeing the
dissolution or split up of SGC, Company or that Subsidiary and such order shall
remain undischarged or unstayed for a period in excess of 30 days; or

    7.10 EMPLOYEE BENEFIT PLANS.  There shall occur one or more ERISA Events
         ----------------------                                             
which individually or in the aggregate results in or might reasonably be
expected to result in liability of SGC, Company or any of its ERISA Affiliates
in excess of $500,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all

                                       48
<PAGE>
 
Pension Plans (excluding for purposes of such computation any Pension Plans with
respect to which assets exceed benefit liabilities), which exceeds $500,000; or

    7.11 MATERIAL ADVERSE EFFECT.  Any event or change shall occur that has
         -----------------------                                           
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect; or

    7.12 INVALIDITY OF ENVIRONMENTAL INDEMNITY OR GUARANTIES.  Any Environmental
         ---------------------------------------------------                    
Indemnity or any guaranty of the Obligations, including, without limitation, the
Guaranty, for any reason, other than the satisfaction in full of all
Obligations, ceases to be in full force and effect or is declared to be null and
void, or any guarantor or indemnitor, including SGC denies that it has any
further liability under any indemnity or guaranty or under any make-well
agreement or under the Environmental Indemnity or gives notice to such effect,
in each case, to the extent it relates to the Obligations; or

    7.13 IMPAIRMENT OF COLLATERAL.
         ------------------------ 

         (A) A judgment creditor of SGC, Company or any of their respective
Subsidiaries shall obtain possession of any portion of the Collateral under the
Basic  Documents by any means, including, without limitation, levy, distraint,
replevin or self-help, (B) any substantial portion of the Collateral shall be
taken by eminent domain or condemnation, (C) any of the Basic Documents shall
cease for any reason to be in full force and effect, or any party thereto shall
purport to disavow its obligations thereunder or shall declare that it does not
have any further obligations thereunder or shall contest the validity or
enforceability thereof or Holders shall cease to have a valid and perfected
first priority security interest in any Collateral therein except as permitted
under the terms of such Basic Document, or (D) Collateral Agent's security
interests or Liens, in each case on behalf of Holders, in Collateral under the
Basic Documents shall become otherwise impaired or unenforceable; or

    7.14 OWNERSHIP OF COMPANY.  SGC shall cease to own all of the Capital Stock
         --------------------                                                  
of the Company; or

    7.15 PURCHASE OF PIONEER BONDS.  On or prior to February 15, 1996, Pioneer
         -------------------------                                            
Hotel Inc. shall not have used all of the cash contribution referred to in
subsection 4.1T to purchase and cause to be cancelled Pioneer Bonds;


THEN in addition to all other remedies of the Collateral Agent or the Holders
hereunder, under the other Basic Documents or at law or equity, (i) upon the
occurrence of any Event of Default described in subsection 7.6 or 7.7, each of
the unpaid principal amount of and accrued interest on the Notes, all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by SGC and Company, and (ii) upon the occurrence and
during the continuation of any other Event of Default, Requisite Holders may, by
written notice to SGC and Company, declare all or any

                                       49
<PAGE>
 
portion of the amounts described in clause (i) above to be, and the same shall
forthwith become, immediately due and payable.

         Notwithstanding anything to the contrary contained in the preceding
paragraph, if at any time after an acceleration of the Obligations pursuant to
such paragraph SGC and Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal, premium (if any) and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement and late charges) and all Events of Default and Potential Events
of Default (other than non-payment of the principal of and accrued interest as
aforesaid on the Obligations, in each case which is due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to subsection 7.1,
then Holders representing 66-2/3% of the Notes, by written notice to SGC and
Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon.  The
provisions of this paragraph are intended merely to bind Holders to a decision
which may be made at the election of the percentage of Holders referenced above
and are not intended to benefit SGC or Company and do not grant SGC or Company
the right to require Holders to rescind or annul any acceleration hereunder,
even if the conditions set forth herein are met.

         SGC and Company hereby waive to the extent not prohibited by applicable
law which cannot itself be waived (i) all presentments, demands for performance,
notices of nonperformance (except to the extent required by the provisions
hereof), (ii) any requirement of diligence or promptness on the part of any
holder of Notes in the enforcement of its rights under the provisions of this
Agreement, (iii) any and all notices of every kind and description which may be
required to be given by any statute or rule of law (except to the extent
required by the provisions of this Agreement), and (iv) to the extent permitted
by applicable law, any defense of any kind (other than payment) which it may now
or hereafter have with respect to its liability under the Notes.

         No course of dealing between SGC, Company or any of their respective
Subsidiaries and any Holder shall operate as a waiver of any of the rights of
any Holder under any Basic Document.  No delay or omission in exercising any
right under any Basic Document shall operate as a waiver of such right or any
other right.  A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any other occasion.  The remedies provided in
this Section 7 are in addition to all rights and remedies available to each
Holder under the Basic Documents or any other document or by law or equity.


SECTION 8.  COLLATERAL AGENT AND RELATIONS AMONG HOLDERS, ETC.

    8.1  APPOINTMENT OF THE COLLATERAL AGENT, POWERS AND IMMUNITIES.  Each
         ----------------------------------------------------------       
Holder of Notes hereby irrevocably appoints and authorizes Collateral Agent to
act as its agent

                                       50
<PAGE>
 
under the Basic Documents with such powers as are expressly delegated to
Collateral Agent by the terms of this Agreement and the other Basic Documents,
together with such other powers as are reasonably incidental thereto.
Collateral Agent (which term as used in this sentence and in Sections 8.5 and
8.6 hereof shall include reference to its Affiliates and the officers,
directors, employees and agents of Collateral Agent and of its Affiliates):  (a)
                                                                              - 
shall not have any duties or responsibilities except those expressly set forth
in this Agreement or in any other Basic Document, or be a trustee for any
Holder; (b) shall not be required to take any action which is contrary to this
         -                                                                    
Agreement or any other Basic Document or applicable law; (c) shall not be
                                                          -              
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Basic Document; and (d) shall not be responsible
                                                  -                          
for any action taken or omitted to be taken by it hereunder or under any other
Basic Document or under any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct.  Neither Collateral Agent nor any Holder
nor any of their respective Affiliates shall be responsible to any other Holder
for any recitals, statements, representations or warranties made by the SGC,
Company or any other Person contained in this Agreement or in any certificate or
other document referred to or provided for in, or received by any Holder under,
this Agreement or any other Basic Document, for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
other Basic Document or any other document referred to or provided for herein or
therein, for the creation, perfection or priority of any Lien on or in any of
the Collateral or for any failure by SGC, Company or any other Person to perform
its obligations hereunder or thereunder.  Collateral Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents of attorneys-in-fact selected by it with reasonable care.
Except as otherwise provided under this Agreement, Collateral Agent shall take
such action under the Basic Documents to which it is a party as shall be
directed by the Requisite Holders.  As to any matters not expressly provided for
by any Basic Document, the Collateral Agent shall not be required to take any
action or exercise any discretion, but shall be required to act or to refrain
from acting upon instructions of the Requisite Holders and shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
other Basic Document in accordance with the instructions of the Requisite
Holders, and such instructions of the Requisite Holders and any action taken or
failure to act pursuant thereto shall be binding on all of the Holders.

    8.2  RELIANCE BY COLLATERAL AGENT.  Collateral Agent shall be entitled to
         ----------------------------                                        
rely upon any certificate, notice or other document (including any cable,
telegram, telecopy or telex) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by Collateral Agent.  Collateral Agent agrees to make such
demands and give such notices under the Basic Documents as the Requisite Holders
may request, to take such action to enforce the Basic Documents or any guaranty
or undertaking under the Basic Documents and to foreclose upon, collect and
dispose of the Collateral or any portion thereof, or enforce any such guaranty
or undertaking, and to release any part of the Collateral as may be directed by
the Requisite Holders; provided, however, that neither the consent nor the
                       --------  -------                                  
direction of the Requisite

                                       51
<PAGE>
 
Holders shall be required for the release of any part of the Collateral which is
otherwise permitted under this Agreement or the other Basic Documents.
Collateral Agent may at any time request directions from the Requisite Holders
with respect to this Agreement or the other Basic Documents as to any course of
action or other matter relating hereto or to such Collateral Documents or other
Basic Documents.  Except as otherwise provided herein or in the Collateral
Documents or other Basic Documents, directions given by the Requisite Holders to
Collateral Agent hereunder shall be binding on all the Holders for all purposes.
Each Holder agrees not to take any action whatsoever to enforce any term or
provision of this Agreement, or any of the other Basic Documents or to enforce
any of its rights in respect of the Collateral or in connection with any
guaranties or undertakings given in any of the Basic Documents, except through
Collateral Agent in accordance with this Agreement.

    8.3  DEFAULTS.  Collateral Agent shall not be deemed to have knowledge or
         --------                                                            
notice of the occurrence of a Potential Event of Default or Event of Default
unless Collateral Agent has received written notice from a Holder or Company
referring to this Agreement, describing such Potential Event of Default or Event
of Default and stating that such notice is a "Notice of Default".  In the event
that Collateral Agent receives such a notice of the occurrence of a Potential
Event of Default or Event of Default, Collateral Agent shall give notice thereof
to the Holders.  Collateral Agent shall (subject to the last sentence of Section
8.5 hereof) take such action with respect to such Potential Event of Default or
Event of Default as shall be reasonably directed by the Requisite Holders;
                                                                          
provided that, unless and until Collateral Agent shall have received such
--------                                                                 
directions, Collateral Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Potential Event
of Default or Event of Default as it shall deem advisable in the best interest
of the Holders except to the extent that this Agreement expressly requires that
such action be taken, or not taken, only with the consent or upon the
authorization of the Requisite Holders or all of the Holders.

    8.4  RIGHTS AS A HOLDER.  With respect to the Notes held by Collateral
         ------------------                                               
Agent, it shall have the same rights and powers hereunder as any Holder and may
exercise the same as though it was not acting as Collateral Agent and the terms
"Holder" or "Holders" shall, unless the context otherwise indicates, include the
Collateral Agent in its individual capacity.  Collateral Agent may (without
having to account therefor to any Holder) accept deposits from, extend credit
(on a secured or unsecured basis) to and generally engage in any kind of
financing, insurance, trust or other business with the SGC, Company or any of
its Affiliates, as if it was not acting as Collateral Agent.  Each Holder and
its Affiliates may (without having to account therefor to Collateral Agent, or
any other Holder) accept deposits from, extend credit (on a secured or unsecured
basis) to and generally engage in any kind of financing, insurance, trust or
other business with SGC, Company or any of its Affiliates, as if it was not
acting as a Holder.

    8.5  INDEMNIFICATION.  Each Holder agrees to indemnify Collateral Agent (to
         ---------------                                                       
the extent not reimbursed by SGC or Company), ratably in accordance with the
principal amount of Notes purchased by it, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature

                                       52
<PAGE>
 
whatsoever which may at any time (including, without limitation, at any time
following the payment of principal of and/or interest on the Notes) be imposed
on, incurred by or asserted against Collateral Agent in any way relating to or
arising out of this Agreement, any other Basic Document or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses which SGC or
Company is obligated to pay hereunder) or the enforcement of any of the terms
hereof or thereof or of any such other documents; provided that no Holder shall
                                                  --------                     
be liable for any of the foregoing to the extent they arise from the Collateral
Agent's gross negligence or wilful misconduct.  Collateral Agent shall be fully
justified in refusing to take or to continue to take any action hereunder or
under the other Basic Documents unless it shall first be indemnified to its
satisfaction by the Holders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.

    8.6  NON-RELIANCE ON COLLATERAL AGENT AND OTHER HOLDERS.  Each Holder
         --------------------------------------------------              
represents that it has, independently and without reliance on Collateral Agent
or any other Holder, and based on such documents and information as it has
deemed appropriate, made its own appraisal of the financial condition and
affairs of SGC, Company and their Affiliates and made its own decision to
purchase the Notes and agrees that it will, independently and without reliance
upon Collateral Agent or any other Holder, continue to make its own appraisals
and decisions in taking or not taking action under this Agreement as it shall
deem appropriate at the time.  Neither Collateral Agent nor any Holder shall be
required to keep informed as to the performance or observance by SGC, Company of
any of their Affiliates under this Agreement or any other document referred to
or provided for herein or to make inquiry of, or to inspect the properties or
books of, SGC, Company or any of their Affiliates.  Neither the Collateral Agent
nor any Holder shall have any duty or responsibility to provide any Holder with
any credit or other information concerning SGC, Company or any of their
Affiliates, which may come into the possession of Collateral Agent or such
Holder or any of its or their Affiliates.

    8.7  RESIGNATION OR REMOVAL OF COLLATERAL AGENT.  Subject to the appointment
         ------------------------------------------                             
and acceptance of a successor Collateral Agent as provided below, Collateral
Agent may resign at any time by giving notice thereof to the Holders, SGC and
Company, and Collateral Agent may be removed at any time with or without cause
by the Requisite Holders.  Upon any such resignation or removal, the Requisite
Holders shall have the right to appoint a successor Collateral Agent.  If no
successor Collateral Agent shall have been so appointed by the Requisite Holders
and shall have accepted such appointment within 30 days after the retiring
Collateral Agent's giving of notice of resignation or the Requisite Holders'
removal of the retiring Collateral Agent, then the retiring Collateral Agent
may, on behalf of the Holders, appoint a successor Collateral Agent, which shall
be a financial institution with a combined capital and surplus of at least
$500,000,000.  Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and obligations hereunder.  Upon the
acceptance of any appointment as Collateral Agent, the retiring or

                                       53
<PAGE>
 
removed Collateral Agent under this Agreement shall promptly (i) transfer to
                                                              -             
such successor Collateral Agent all sums, securities and other items of
Collateral held under any Basic Document, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Collateral Agent under each Basic Document and this
Agreement, and (ii) execute and deliver to such successor Collateral Agent such
                --                                                             
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor of
the security interests created under each of the Basic Documents.  After any
retiring Collateral Agent's resignation or removal hereunder as Collateral
Agent, the provisions of this paragraph shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as the Collateral Agent.

    8.8  AUTHORIZATION.  Collateral Agent is hereby authorized by the Holders to
         -------------                                                          
execute, deliver and perform in accordance with its terms each of the Basic
Documents to which the Collateral Agent is or is intended to be a party and each
Holder agrees to be bound by all of the agreements of Collateral Agent contained
in such Basic Documents.


SECTION 9.  MISCELLANEOUS

    9.1  AMENDMENTS AND WAIVERS.
         ---------------------- 

         A.   No amendment, modification, termination or waiver of any provision
of this Agreement, the Notes or the other Basic Documents, or consent to any
departure by SGC or Company therefrom, shall in any event be effective without
the written concurrence of Requisite Holders; provided that any such amendment,
                                              --------                         
modification, termination, waiver or consent which:  (i) reduces the requisite
percentage of Holders or the principal balance of the Notes that must consent to
an amendment or waiver of an Event of Default; (ii) reduces the rate of or
changes the time for payment of interest on any Notes; (iii) reduces the
principal amount of or extends the final maturity of any Note, or reduces the
redemption price of the Notes; (iv) changes the currency of payment for any
payment on the Notes; (v) changes the definition of or the requirements of SGC
or Company or any of their respective Subsidiaries upon the occurrence of a
Change in Control; (vi) changes in any manner the provisions contained in this
subsection 9.1A or (vii) reduces the requisite percentage of Holders or the
principal balance of the Notes necessary to amend or modify the provisions as
set forth in clauses (i) through (vii) shall be effective only with respect to
the applicable Holders consenting thereto if evidenced by a writing signed by or
on behalf of such Holders.  Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.  No
notice to or demand on SGC or Company in any case shall entitle SGC or Company
to any other or further notice or demand in similar or other circumstances.  Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 9.1 shall be binding upon each Holder at the time
outstanding, and each future Holder, if signed by SGC, on SGC and, if signed by
Company, on Company.

                                       54
<PAGE>
 
         B.  Solely for the purpose of determining whether Holders of the
requisite percentage of the Notes then outstanding approved or consented to any
amendment, modification, termination or waiver to be given under this Agreement
or the Notes, or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of the Holders of a specified
percentage of the aggregate amount of Notes then outstanding, Notes directly or
indirectly owned by SGC, Company or any of their respective Subsidiaries shall
be deemed not to be outstanding.

    9.2  EXPENSES.  Whether or not the transactions contemplated hereby shall be
         --------                                                               
consummated, SGC and Company jointly and severally agree to pay promptly (i) all
the actual reasonable costs and expenses of preparation of the Basic Documents
and of creating and perfecting Liens in favor of Collateral Agent, SunAmerica
and the other Holders or otherwise relating to the Collateral pursuant to any
Basic Document, including filing and recording fees and expenses, title
insurance, environmental studies and surveys; (ii) all the reasonable costs of
furnishing all opinions by counsel for SGC or Company (including without
limitation any opinions requested by Collateral Agent or SunAmerica as to any
legal matters arising hereunder) and of SGC or Company's performance of and
compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Basic Documents including,
without limitation, with respect to confirming compliance with environmental and
insurance requirements; (iii) the reasonable fees, expenses and disbursements of
counsel to Collateral Agent and any Holder holding a majority in principal
amount of the Notes (including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of
the Basic Documents and any consents, amendments, waivers or other modifications
hereto or thereto and any other documents or matters requested by SGC or
Company; (iv) all other actual reasonable costs and expenses incurred by
Collateral Agent or any Holder holding a majority of the principal amount of the
Notes in connection with the negotiation, preparation and execution of the Basic
Documents and the transactions contemplated hereby and thereby; and (v) after
the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Collateral Agent and any Holder in enforcing
any Obligations of or in collecting any payments due from SGC or Company
hereunder or under the other Basic Documents by reason of such Event of Default
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.

    9.3  INDEMNITY.  In addition to the payment of expenses pursuant to
         ---------                                                     
subsection 9.2, whether or not the transactions contemplated hereby shall be
consummated, SGC and Company jointly and severally agree to defend, indemnify,
pay and hold harmless Collateral Agent, each Holder, and the officers,
directors, employees, agents and affiliates of Collateral Agent and each Holder
(collectively called the "INDEMNITEES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel
for such Indemnitees) in connection with any investigative, administrative or
judicial

                                       55
<PAGE>
 
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including without limitation
securities and commercial laws, statutes, rules or regulations and Environmental
Laws), on common law or equitable cause or on contract or otherwise, that may be
imposed on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Agreement or the other Basic Documents or the
transactions contemplated hereby or thereby (including without limitation
Holders' agreement to purchase the Notes or the use or intended use of the
proceeds of such purchase) or the statements contained in any commitment letter
delivered by any Holder to SGC or Company with respect thereto (collectively
called the "INDEMNIFIED LIABILITIES"); provided that SGC and Company shall not
                                       --------                               
have any obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise solely from the
gross negligence or willful misconduct of that Indemnitee as determined by a
final judgment of a court of competent jurisdiction.  To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, SGC and Company shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.

    9.4  RATABLE SHARING.
         --------------- 

         A.   Holders hereby agree among themselves that if any of them shall,
whether by voluntary payment, by realization upon security, through the exercise
of any right of set-off, by counterclaim or cross action or by the enforcement
of any right under any Basic Document or otherwise, or as adequate protection of
a deposit treated as cash collateral under the Bankruptcy Code, receive payment
or reduction of a proportion of the aggregate amount of principal, interest,
fees and other amounts then due and owing to that Holder hereunder or under the
other Basic Document (collectively, the "AGGREGATE AMOUNTS DUE" to such Holder)
which is greater than the proportion received by any other Holder in respect of
the Aggregate Amounts Due to such other Holder, then the Holder receiving such
proportionately greater payment shall (i) notify each other Holder of the
receipt of such payment and (ii) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of a
participation simultaneously upon the receipt by such seller of its portion of
such payment) in the Aggregate Amounts Due to the other Holders so that all such
recoveries of Aggregate Amounts Due shall be shared by all Holders in proportion
to the Aggregate Amounts Due to them; provided that if all or part of such
                                      --------                            
proportionately greater payment received by such purchasing Holder is thereafter
recovered from such Holder upon the bankruptcy or reorganization of SGC or
Company or otherwise, those purchases shall be rescinded and the purchase prices
paid for such participations shall be returned to such purchasing Holder ratably
to the extent of such recovery, but without interest.  SGC and Company expressly
consent to the foregoing arrangement and agrees that any holder of a
participation so purchased may exercise any and all rights of set-off or
counterclaim with respect to any and all monies owing by SGC and Company to that

                                       56
<PAGE>
 
holder with respect thereto as fully as if that holder were owed the amount of
the participation held by that holder.

         B.   Subject to subsection 9.4A and in addition to any other rights
Collateral Agent or any Holder may have under law or in equity, if any amount
shall at any time be due and owing by SGC or Company under this Agreement or the
other Basic Documents, Collateral Agent or such Holder, as the case may be, is
authorized at any time or from time to time, without notice (any such notice
being hereby expressly waived), to set off and to appropriate and to apply any
and all deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of Collateral Agent or Holder, as the case may be, owing to
such SGC or Company and any other property of SGC or Company held by Collateral
Agent or Holder, as applicable to or for the credit or the account of SGC or
Company against and on account of the Obligations and liabilities of SGC or
Company to Collateral Agent or any Holder, as applicable.

    9.5  INDEPENDENCE OF COVENANTS.  All covenants hereunder shall be given
         -------------------------                                         
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default or Potential Event of Default if
such action is taken or condition exists.

    9.6  NOTICES.  Unless otherwise specifically provided herein, any notice or
         -------                                                               
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex if sent
prior to 5:00 p.m. on a Business Day (and otherwise such facsimile or telex
shall be deemed received on the next Business Day), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed.  For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or such other
address as shall be designated by such Person in a written notice delivered to
the other parties hereto.

    9.7  SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
         ------------------------------------------------------ 

         A.   All representations, warranties and agreements made in or pursuant
to the Basic Documents shall survive the execution and delivery of this
Agreement and the purchase of the Notes hereunder.

         B.   Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of SGC and Company set forth in subsections 3.13,
9.2, 9.3 and 9.4 and the agreements of Holders set forth in subsection 9.4 shall
survive the payment of the Notes and the termination of this Agreement.

                                       57
<PAGE>
 
    9.8  FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.  No failure or
         -----------------------------------------------------                
delay on the part of any Holder in the exercise of any power, right or privilege
hereunder or under any other Basic Document 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 other or further exercise thereof or of any other power, right or
privilege.  All rights and remedies existing under this Agreement and the other
Basic Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

    9.9  MARSHALLING; PAYMENTS SET ASIDE.  No Holder shall be under any
         -------------------------------                               
obligation to marshal any assets in favor of SGC, Company or any other party or
against or in payment of any or all of the Obligations.  To the extent that SGC
or Company makes a payment or payments to any Holder, any Holder enforces any
security interests or exercises its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.

    9.10 SEVERABILITY.  In case any provision in or obligation under this
         ------------                                                    
Agreement or the Notes 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.

    9.11 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF HOLDERS' RIGHTS.  The
         ----------------------------------------------------------      
obligations of Holders hereunder are several and no Holder shall be responsible
for the obligations of any other Holder hereunder.  Nothing contained herein or
in any other Basic Document, and no action taken by Holders pursuant hereto or
thereto, shall be deemed to constitute Holders as a partnership, an association,
a joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Holder shall be a separate and independent debt, and each
Holder shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.

    9.12 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.

    9.13 APPLICABLE LAW.  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.

                                       58
<PAGE>
 
    9.14 SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon the
         ----------------------                                           
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto and the successors and assigns of Holders
subject to subsection 2.8.  SunAmerica and any other Holder may assign the Notes
to its affiliates, one or more entities, and upon such assignment, any such
affiliate or entity shall become a Holder for all purposes of the Basic
Documents.  The Holder shall have the right to sell participations in their
Notes; provided that Company shall have the right to consent (which consent
       --------                                                            
shall not be unreasonably withheld or delayed) to the sale of any participation
in the Notes by SunAmerica that causes SunAmerica to hold less than 51% of the
legal or beneficial interests in all outstanding Notes.  Neither SGC's or
Company's rights or obligations hereunder or under the other Basic Documents nor
any interest herein or therein may be assigned or delegated by SGC or Company
without the prior written consent of all Holders.

    9.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  ALL JUDICIAL
         ----------------------------------------------               
PROCEEDINGS BROUGHT AGAINST SGC OR COMPANY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER BASIC DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEVADA, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER BASIC DOCUMENT OR SUCH OBLIGATION.
SGC and Company hereby agree 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 SGC or Company, as applicable, at its address provided in
subsection 9.6, such service being hereby acknowledged by SGC and Company to be
sufficient for personal jurisdiction in any action against SGC or Company, as
applicable, 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 or shall limit the right of any Holder to bring
proceedings against SGC or Company in the courts of any other jurisdiction.

    9.16 WAIVER OF JURY TRIAL.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
         --------------------                                               
AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER BASIC
DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION OR THE RELATIONSHIP THAT IS BEING ESTABLISHED.  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.  Each party hereto acknowledges
that this waiver is a material inducement to enter into a business relationship,
that each has already relied on this waiver in entering into this Agreement, and
that each will continue to rely on this waiver in their related

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<PAGE>
 
future dealings.  Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it 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 OR ANY OF THE OTHER
BASIC DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
SECURITIES MADE HEREUNDER.  In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.

    9.17 COUNTERPARTS; EFFECTIVENESS.  This Agreement and any amendments,
         ---------------------------                                     
waivers, consents or supplements hereto or in connection herewith may be
executed in any number of 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.  This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.

    9.18 PROPOSED SUBSTITUTION OF THE COLLATERAL GRANTED UNDER THE DEED OF
         -----------------------------------------------------------------
TRUST.

         A.   SunAmerica understands that SGC and Company may propose that
SunAmerica amend the Basic Documents to provide for the substitution of a parcel
of real property owned or to be owned by Company (the "Substitute Property") for
the Premises and Improvements and, in connection with such substitution,
Collateral Agent would release its lien on the Premises and Improvements and
obtain a first priority perfected security interest in the Substitute Property.

         B.   SunAmerica agrees to evaluate and consider any such proposed
Substitute Property, it being understood that any approval by SunAmerica of any
proposed Substitute Property would be evidenced in writing by amendments to the
Basic Documents or another agreement entered into after the Closing by
SunAmerica in form and substance satisfactory to SunAmerica in its sole
discretion and that SunAmerica reserves all of its rights to evaluate, consider
and either approve or decline to approve a proposed Substitute Property or any
term or condition thereof, in each case in its sole discretion.  In furtherance
but not in limitation of the foregoing and in addition to any other terms or
conditions that SunAmerica determines in its sole discretion to be relevant in
connection with its evaluation of any proposed Substitute Property, SunAmerica
anticipates that its approval of any Substitute Property would include but not
be limited to requirements that an MAI Appraisal dated no more than 90 days
prior to the proposed date of substitution be delivered to and approved by
SunAmerica indicating that the minimum market value of the Substitute Property
is not less than $27 million, a title insurance report, survey, environmental
and other reports requested by SunAmerica and all documents relating to the
Substitute Property be delivered to and approved by

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<PAGE>
 
SunAmerica, and SunAmerica approve all amendments to the Basic Documents
necessary to effect such substitution.

    9.19 CONFLICTS WITH OTHER BASIC DOCUMENTS.  To the fullest extent possible,
         ------------------------------------                                  
the terms and provisions of the other Basic Documents shall be read in
conjunction with the terms and provisions of this Agreement and shall supplement
the terms and provisions hereof.  To the extent that any terms and provisions
hereunder conflict with the terms provisions of any of the other Basic
Documents, the stricter provisions shall govern.

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<PAGE>
 
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.


                        SAHARA GAMING CORPORATION,
                        a Nevada corporation


                        By:  /s/ Thomas K. Land

                        Its: Senior Vice President and Chief Financial Officer


                        Notice Address:

                        SAHARA GAMING CORPORATION,
                        2535 Las Vegas Blvd. South
                        Las Vegas, Nevada  89109
                        Attention:  Thomas Land



                        SAHARA LAS VEGAS CORP.,
                        a Nevada corporation


                        By:  /s/ Thomas K. Land

                        Its: Senior Vice President and Chief Financial Officer


                        Notice Address:

                        Sahara Las Vegas Corp.
                        2535 Las Vegas Blvd. South
                        Las Vegas, Nevada  89109
                        Attention:  Thomas Land

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<PAGE>
 
                        SUNAMERICA LIFE INSURANCE COMPANY,


                        By:  /s/ Steven P. Hanover
                           ------------------------------

                        Its: ____________________________

                        Notice Address:

                        SunAmerica Life Insurance Company
                        1 SunAmerica Center
                        Century City
                        Los Angeles, CA  90067-6022

                        Attention:  Peter McMillan 
                                      and Steven Hanover

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