EXHIBIT 10.11
==========================================
LOAN AND SECURITY AGREEMENT
==========================================
MONTICELLO RACEWAY MANAGEMENT, INC.
as Borrower,
and
THE BERKSHIRE BANK
as Lender
Dated as of October 29, 2003
LOAN AND SECURITY AGREEMENT
---------------------------
This Loan and Security Agreement ("Agreement") is dated this 29th
day of October, 2003, by and among MONTICELLO RACEWAY MANAGEMENT, INC.
("Borrower"), a New York corporation and THE BERKSHIRE BANK ("Lender").
BACKGROUND
----------
A. Borrower desires to establish financing arrangements with Lender
and Lender is willing to make a loan to Borrower under the terms and provisions
hereinafter set forth.
B. The parties desire to define the terms and conditions of their
relationship in writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION I. DEFINITIONS AND INTERPRETATION
1.1. Terms Defined: As used in this Agreement, the following terms
have the following respective meanings:
ACCOUNT DEBTOR - Any Person obligated on any Account owing to
Borrower.
AFFILIATE - With respect to any Person, (a) any Person which,
directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such Person,
or (b) any Person who is a director or officer (i) of such Person,
(ii) of any Subsidiary of such Person, or (iii) any person described
in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (x) to vote 20% or
more of the Capital Stock having ordinary voting power for the
election of directors (or comparable equivalent) of such Person, or
(y) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise. Control may be by
ownership, contract, or otherwise.
ASSET SALE - The sale, transfer, lease, license or other disposition
to any Person of any Property, now owned or hereafter acquired, in
any transaction or series of related transactions.
AUTHORIZED OFFICER - Any officer (or comparable equivalent) of
Borrower authorized by specific resolution of Borrower to execute
the Loan Documents and to execute Compliance Certificates as set
forth in the incumbency certificate referred to in Section 4.1(d) of
this Agreement.
▇▇▇▇▇▇ GUARANTY - A guaranty agreement in the form attached hereto
as Exhibit E under which ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ guarantees the Loan
(including principal, interest, fees and Expenses related thereto),
which guaranty shall become effective only in accordance with the
express terms thereof.
BUSINESS DAY - A day other than Saturday or Sunday or national
holiday when Lender is open for business in New York.
CAPITALIZED LEASE OBLIGATIONS - Any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, consistently
applied.
CAPITAL EXPENDITURES - All expenditures (including that portion of
Capitalized Lease Obligations attributable to any period for which
this calculation is made) made in respect of the purchase,
construction or other acquisition of fixed or capital assets,
determined in accordance with GAAP.
CAPITAL STOCK - Any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all other ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
CASH COLLATERAL RESERVE - Section 2.7(b).
CATSKILL - Catskill Development LLC, a New York limited liability
company.
CHANGE OF CONTROL - Any disposition by Surety of any capital stock
of Borrower which it now or hereafter owns.
CLOSING - Section 4.5.
CLOSING DATE - Section 4.5.
COLLATERAL - All of the Property and interests in Property described
in Section 3.1 of this Agreement.
COLLECTION ACCOUNT - Section 2.7(a).
CONSOLIDATION TRANSACTION - The transactions contemplated by the
Form S-4 prepared by Surety and filed with the Securities and
Exchange Commission on September 26, 2003 (as amended or
supplemented from time to time but not for the purpose of changing
the resulting ownership structure of Borrower).
DEFAULT - Any event, act, condition or occurrence which with notice,
or lapse of time or both, would constitute an Event of Default
hereunder.
DISQUALIFIED STOCK - Any Capital Stock which by its terms (or by the
terms of any security into which it is convertible or for which it
is exchangeable) or upon the happening of any event (i) matures or
is mandatorily redeemable for any reason, (ii) is convertible or
exchangeable for Indebtedness or Capital Stock that meets the
requirements of clauses (i) and (ii), or (iii) is redeemable at the
option of the holder thereof, in whole or in part.
DISTRIBUTION - (i) Cash dividends or other cash distributions on any
now or hereafter outstanding Capital Stock; and (ii) the redemption,
repurchase, defeasance or acquisition of such Capital Stock or of
warrants, rights or other options to purchase such Capital Stock.
2
ENVIRONMENTAL LAWS - Any and all Federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes,
decrees and any and all common law requirements, in each case having
the force of law, relating to or imposing liability or standards of
conduct concerning pollution, protection of the environment, or the
impact of pollutants, contaminants or toxic or hazardous substances
on human health or the environment, as now or may at any time
hereafter be in effect.
ERISA - The Employee Retirement Income Security Act of 1974, as the
same may be amended, from time to time.
EVENT OF DEFAULT - Section 8.1.
EXPENSES - Section 9.6.
GAAP - Generally accepted accounting principles as in effect on the
Closing Date, consistently applied.
GOVERNMENTAL AUTHORITY - Any federal, state or local government, or
any agency, authority, commission, department or instrumentality
thereof.
HAZARDOUS SUBSTANCES - Any substances defined or designated as
hazardous or toxic waste, hazardous or toxic material, hazardous or
toxic substance or similar term, under any Environmental Law.
INDEBTEDNESS - Of any Person at any date, without duplication, (i)
all indebtedness of such Person for borrowed money (including with
respect to Borrower, the Obligations) or for the deferred purchase
price of property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in
accordance with customary practices), (ii) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (iii) all Capitalized Lease Obligations of such Person,
(iv) the face amount of all letters of credit issued for the account
of such Person and all drafts drawn thereunder, (v) all obligations
of such Person under hedging agreements, (vi) Disqualified Stock,
(vii) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise
become liable for the payment thereof and (viii) trade payables.
IRS - Internal Revenue Service.
LEASE - That certain ground lease dated as of the date hereof from
Catskill to Borrower demising the Real Property.
LEASEHOLD MORTGAGE - That certain mortgage encumbering the Lease to
be executed by Borrower in favor of Lender, in the form attached
hereto as EXHIBIT ▇.
▇▇▇▇ - Any interest of any kind or nature in property securing an
obligation owed to, or a claim of any kind or nature in property by,
a Person other than the owner of the Property, whether such interest
is based on the common law, statute, regulation or contract, and
including, but not limited to, a security interest or lien arising
from a mortgage, encumbrance, pledge, conditional sale or trust
receipt, a lease, consignment or bailment for security purposes, a
3
trust, or an assignment. For the purposes of this Agreement,
Borrower shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement or
other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
LOAN - Section 2.1(a).
LOAN DOCUMENTS - Collectively, this Agreement, the Note, the
Leasehold Mortgage, the Non-Disturbance Agreement, the Surety
Agreement, the Security Agreement, the ▇▇▇▇▇▇ Guaranty and all
agreements, instruments and documents executed and/or delivered in
connection therewith, all as may be supplemented, restated,
superseded, amended or replaced from time to time.
MATERIAL ADVERSE EFFECT - A material adverse effect with respect to
(a) the business, assets, properties, financial condition,
contingent liabilities, material agreements or results of operations
of Borrower, or (b) Borrower's ability to pay the Obligations in
accordance with the terms hereof, or (c) the validity or
enforceability of this Agreement or any of the other Loan Documents
or the rights and remedies of Lender hereunder or thereunder.
MATURITY DATE - Two years from the Closing Date.
NON-COLLECTION ACCOUNTS - Segregated deposit accounts established by
Borrower with Lender to receive funds transferred by Borrower from
the Collection Account to cover Borrower's contractual, statutory or
regulatory obligations (i) to the Horsemen's Association (including
required Capital Expenditures required at the Racetrack), (ii) with
respect to the operation of video lottery terminals (upon
installation thereof), or (iii) (upon prior written notice to
Lender) otherwise.
NON-DISTURBANCE AGREEMENT - The non-disturbance agreement by and
among Americas Tower Partners, Monticello Realty, L.L.C., Catskill,
Lender and Borrower dated as of the date hereof, in the form
attached hereto as Exhibit A.
NOTE - Section 2.1(b).
OBLIGATIONS - All existing and future debts, liabilities and
obligations of every kind or nature at any time owing by Borrower to
Lender, under this Agreement, whether joint or several, related or
unrelated, primary or secondary, matured or contingent, due or to
become due (including debts, liabilities and obligations obtained by
assignment), and whether principal, interest, fees, indemnification
obligations hereunder or Expenses (specifically including interest
accruing after the commencement of any bankruptcy, insolvency or
similar proceeding with respect to Borrower, whether or not a claim
for such post-commencement interest is allowed), including, without
limitation, debts, liabilities and obligations in respect of the
Loan and any extensions, modifications, substitutions, increases and
renewals thereof; the payment of all amounts advanced by Lender to
preserve, protect and enforce rights hereunder and in the
Collateral; and all Expenses incurred by Lender. Without limiting
the generality of the foregoing, Obligations shall include any debts
4
or obligations owing to Lender in connection with any cash
management or other services (including electronic funds transfers
or automated clearing house transactions) provided by Lender to
Borrower.
ORIGINATION FEE - Section 2.4(a).
PAYMENT RESERVE - Section 2.7(b).
PBGC - The Pension Benefit Guaranty Corporation.
PERMITTED INDEBTEDNESS - (a) Indebtedness to Lender in connection
with the Loan or otherwise pursuant to the Loan Documents; (b)
purchase money Indebtedness (including Capitalized Lease
Obligations) hereafter incurred by Borrower to finance the purchase
if fixed assets; provided that, (i) such Indebtedness shall be
reasonably necessary for the continued operations of the Racetrack,
(ii) such Indebtedness shall not exceed the purchase price of the
assets funded, (iii) no such Indebtedness may be refinanced for a
principal amount in excess of the principal amount outstanding at
the time of such refinancing, and (iv) all such Indebtedness shall
be subordinated to the Obligations under agreements acceptable to
Lender, (c) trade payables incurred in the ordinary course of
business that are not more than sixty (60) days past due; (d)
Indebtedness existing on the Closing Date that is identified and
described on Schedule "1.1(b)" attached hereto; and (e) intercompany
obligations incurred in the ordinary course which are subordinated
to the Obligations under agreements acceptable to Lender.
PERMITTED INVESTMENTS - (a) investments and advances existing on the
Closing Date that are disclosed on Schedule "5.10(b)", (b)
certificates of deposits, money market funds, investments and
deposits with Lender, and (c) intercompany loans in the ordinary
course to Surety or Catskill.
PERMITTED LIENS - (a) Liens securing taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, and other like
persons not yet due; (b) Liens incurred or deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance, social security and other like
laws; (c) Liens on fixed assets securing purchase money Indebtedness
permitted under Section 7.7; provided that, (i) such Lien attached
to such assets concurrently, or within 20 days of the acquisition
thereof, and only to the assets so acquired, and (ii) a description
of the asset acquired is furnished to Lender; and (d) Liens existing
on the Closing Date and shown on Schedule "1.1(b)" attached hereto
and made part hereof.
PERSON - An individual, partnership, corporation, trust, limited
liability company, limited liability partnership, unincorporated
association or organization, joint venture or any other entity.
PROPERTY - Any interest of Borrower in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
RACETRACK - The racetrack known as the Monticello Raceway (including
the improvements located thereon), located in Monticello, New York.
5
REAL PROPERTY - The approximately 200 acres of real estate and
improvements thereon located at Monticello Racetrack, Monticello,
New York and more particularly described in Schedule 1.1(c) hereof.
REGULATION D - Regulation D of the Board of Governors of the Federal
Reserve System comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
SUBSIDIARY - With respect to any Person at any time, (i) any
corporation more than fifty percent (50%) of whose voting stock is
legally and beneficially owned by such Person or owned by a
corporation more than fifty percent (50%) of whose voting stock is
legally and beneficially owned by such Person; (ii) any trust of
which a majority of the beneficial interest is at such time owned
directly or indirectly, beneficially or of record, by such Person or
one or more Subsidiaries of such Person; and (iii) any partnership,
joint venture, limited liability company or other entity of which
ownership interests having ordinary voting power to elect a majority
of the board of directors or other Persons performing similar
functions are at such time owned directly or indirectly,
beneficially or of record, by, or which is otherwise controlled
directly, indirectly or through one or more intermediaries by, such
Person or one or more Subsidiaries of such Person.
SURETY - Empire Resorts, Inc., a Delaware corporation.
SURETY AGREEMENT - That certain surety agreement to be executed by
Surety in favor of Lender on or prior to the Closing Date, in the
form attached hereto as EXHIBIT E.
UCC - The Uniform Commercial Code as adopted in the state of New
York as the same may be amended from time to time.
WITHDRAWAL LIMITS - An amount equal to (i) that percentage required
by any rule, regulation or statute of any Governmental Authority to
be set aside from the revenues generated from video lottery
terminals at the Racetrack (after installation thereof) for payment
by Borrower to the appropriate Governmental Authority and (ii) 50%
of all other revenues generated from the harness racing operations
at the Racetrack or through so-called "Simulcast" operations.
OTHER CAPITALIZED TERMS - Any other capitalized terms used without
further definition herein shall have the respective meaning set
forth in the UCC.
1.2. ACCOUNTING PRINCIPLES: Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except as otherwise expressly provided in this Agreement.
1.3. CONSTRUCTION: No doctrine of construction of ambiguities in
agreements or instruments against the interests of the party controlling the
drafting shall apply to any Loan Documents.
6
SECTION II. THE LOAN
2.1. DESCRIPTION OF LOAN:
a. Lender hereby agrees to advance to Borrower on the Closing
Date, subject to the terms and conditions of this Agreement, the sum of Three
Million Five Hundred Thousand Dollars ($3,500,000) ("Loan").
b. At Closing, Borrower shall execute and deliver a promissory
note, in the form attached hereto as EXHIBIT C, to Lender in the original
principal amount of the Loan ("Note"). The Note shall evidence Borrower's
unconditional obligation to repay to Lender the Loan with interest as herein
provided. Borrower shall repay the Loan in accordance with the terms and
provisions of the Note, which are incorporated herein by reference.
2.2. PAYMENTS:
Except to the extent otherwise set forth in this Agreement, all
payments of principal and of interest on the Loan and all Expenses, fees,
indemnification obligations and all other charges and any other Obligations of
Borrower, shall be made to Lender at its main banking office, ▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at the office of Bank's Affiliate _________,
at _______, Goshen, New York ___________, in United States dollars, in
immediately available funds. Any payments received prior to 2:00 p.m. Eastern
time on any Business Day shall be deemed received on such Business Day. Any
payments (including any payment in full of the Obligations), received after 2:00
p.m. Eastern time on any Business Day shall be deemed received on the
immediately following Business Day.
2.3. INTEREST PROVISIONS:
a. The unpaid principal balance of the Loan shall bear interest
at a per annum rate equal to 8.75%. Interest on the Loan shall be payable
monthly, in arrears, on the first day of each calendar month, beginning on the
first day of the first full calendar month after the Closing Date.
b. Interest on the Loan shall be calculated on the basis of a
year of three hundred sixty (360) days but charged for the actual number of days
elapsed.
c. Except to the extent prohibited by law, after the occurrence
and during the continuance of an Event of Default hereunder, the per annum
effective rate of interest on the Loan shall be the fixed rate otherwise
applicable hereunder plus five percent. Such increase may be applied
retroactively to the date of the occurrence of the Event of Default. Borrower
agrees that the default rate payable to Lender is a reasonable estimate of
Lender's damages and is not a penalty.
d. All contractual rates of interest chargeable on the
outstanding principal under the Loan shall continue to accrue and be paid even
after Default, an Event of Default, maturity, acceleration, judgment,
bankruptcy, insolvency proceedings of any kind or the happening of any event or
occurrence.
e. In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected pursuant to the
terms of this Agreement exceed the highest rate permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such court determines Lender has charged or
7
received interest hereunder in excess of the highest applicable rate, Lender
shall apply, in its sole discretion, and set off such excess interest received
by Lender against other Obligations due or to become due and such rate shall
automatically be reduced to the maximum rate permitted by such law.
2.4. FEES AND CHARGES:
a. At Closing, Lender shall have fully earned and Borrower
shall unconditionally pay to Lender a non-refundable fee equal to two percent
(2%) of the Loan ("Origination Fee"").
b. To the extent permitted by law, Borrower shall
unconditionally pay to Lender a late charge equal to five percent (5%) of any
and all payments of principal or interest on the Loan that are not paid within
ten (10) days of the due date. Such late charge shall be due and payable
regardless of whether Lender has accelerated the Obligations. Borrower agrees
that any late fee payable to Lender is a reasonable estimate of Lender's damages
and is not a penalty.
2.5. PREPAYMENTS:
a. Borrower may prepay the Loan in whole or in part at any time
or from time to time, provided that if the Loan is prepaid in whole or in part
within 12 months of the Closing Date, Borrower will pay a prepayment fee in the
amount of 2.5% of the principal balance of the Loan then being prepaid. Any
prepayment shall be accompanied by all accrued and unpaid interest. Any partial
prepayment of the Loan shall be applied to the Loan in the inverse order of
maturity of unpaid installments.
b. Catskill shall have the option, exercisable on not less than
two (2) Business Days written notice to Lender, to purchase the Loan for the
full unpaid principal balance thereof, plus all accrued but unpaid interest,
fees and Expenses related thereto without representation or warranty from Lender
or recourse of any kind to Lender (except with respect to the principal balance
thereof and the authority of the Person signing such assignment), and subject to
payment of the prepayment fee, if any, payable under Section 2.5(a).
Notwithstanding any such assignment, if requested, Borrower's affirmative
covenants in Sections 6.6 and 6.7 and all indemnification obligations in this
Agreement shall survive the assignment and remain operative and binding in favor
of The Berkshire Bank.
2.6. USE OF PROCEEDS: Proceeds of the Loan shall be used by Borrower
for the purpose of its working capital and loans or other intercompany
arrangements with Surety, Catskill and Catskill's Subsidiaries and Affiliates
and commencing construction of gaming facilities to install approximately 1,800
video lottery terminals and related amenities at the Racetrack.
2.7. COLLECTION ACCOUNT:
a. So long as the Loan is outstanding, Borrower shall establish
and maintain at all times an interest bearing deposit account with Lender in the
name "Monticello Raceway Management, Inc. Collection Account," Account No.
▇▇▇▇▇▇▇ ("Collection Account"). Borrower shall deliver to Lender all cash,
checks, revenue, receipts and collections from the Borrower's business, on the
day of receipt, to be deposited into (i) with respect to such revenues that must
be segregated into separate accounts, pursuant to rules, regulations and
statutes of any Governmental Authority (e.g., VLT payments), the Non-Collection
Accounts, and (ii) with respect to the balance of such revenues, the Collection
Account (in each case at Borrower's sole expense and under delivery and security
arrangements reasonably acceptable to Lender). Until so forwarded, all
remittances and funds in the possession of Borrower (other than funds deposited
8
or to be deposited into the Non-Collection Accounts) shall be held in trust by
Borrower for the benefit of Lender. Subject to Borrower's rights set forth in
clause (g) below, all deposits made into the Collection Account shall serve as
collateral security for the Obligations and shall be retained in the Collection
Account subject to the terms and conditions hereof.
b. Borrower shall at all times maintain in the Collection
Account an amount equal to $125,000 ("Cash Collateral Reserve"), the full amount
of which reserve shall be deposited in the Collection Account on the Closing
Date.
c. In addition to the Cash Collateral Reserve, in each month,
including the month in which the Closing occurs, an amount equal to $55,868.72
(the amount of the installment of principal and interest due under the Note in
the immediately following month), shall also be maintained in the Collection
Account as a reserve ("Payment Reserve"). Upon an installment payment becoming
due and owing to Lender under the Note, Lender shall have the right to withdraw
the amount of such payment from the Payment Reserve in the Collection Account
and apply such amount to such installment under the Loan.
d. Subject to Borrower's rights set forth in clause (g) below,
Lender shall have the unconditional right and discretion (and Borrower hereby
authorizes Lender) to charge Borrower's Collection Account for all of Borrower's
Obligations as they become due from time to time under this Agreement including,
without limitation, the principal, interest, fees, indemnification obligations
and reimbursement of Expenses.
e. At Closing, Borrower shall cause to be delivered to each
Account Debtor of Borrower and each Person obligated on any instrument payable
to Borrower via wire transfer, if any, an irrevocable letter directing such
Account Debtor or Person to pay all amounts payable to Borrower via wire
transfer to the Collection Account. To the extent the Borrower enters into any
business relationships after Closing pursuant to which remittances are to be
made at any time to Borrower via wire transfer, Borrower, contemporaneous with
the creation of such relationship, shall provide to such Person obligated to
make payment an irrevocable letter directing such Person to pay all amounts
payable to Borrower via wire transfer to the Collection Account.
f. Prior to the occurrence of an Event of Default, Borrower
shall be entitled at all times to withdraw, under arrangements reasonably
acceptable to Lender (e.g., signature cards, resolutions, wire or other
withdrawal instructions), any amounts from the Collection Account in excess of
the required Cash Collateral Reserve and Payment Reserve for deposit in
Borrower's operating account with Lender for use in Borrower's business
operations or other purposes, unless prohibited by a covenant in this Agreement.
Upon the occurrence of an Event of Default, the Collection Account shall be,
upon the determination of Lender, in its discretion, and upon notice to
Borrower, subject to the exclusive control and direction of Lender and all
amounts therein shall at Lender's option be withdrawn for application to the
Obligations, in each case subject to Borrower's rights set forth in clause g
below.
g. Notwithstanding anything contained in this Agreement to the
contrary, to the extent required under applicable agreements, statutes or
regulations affecting the Racetrack, portions of the revenues and receipts from
the operations of the Racetrack up to amounts equal to the Withdrawal Limits may
be withdrawn, as the case may be, by Borrower from the Non-Collection Accounts
and/or Collection Account (in excess of the Cash Collateral Reserve and the
Payment Reserves) at any time and from time to time, regardless of whether an
9
Event of Default has occurred and is continuing. Such amount shall be placed in
the Non-Collection Accounts. Deposits in the Non-Collection Accounts shall not
serve as collateral security for the Loan and may be withdrawn by Borrower at
any time and from time to time, regardless of whether an Event of Default has
occurred and is continuing. Nothing contained herein is intended to transfer or
delegate to Lender, and Lender does not assume any duties or liabilities, to pay
or satisfy obligations of Borrower pertaining to the purposes for which the
Non-Collection Accounts are or will be created.
SECTION III. COLLATERAL
3.1. COLLATERAL: As security for the payment of the Obligations, and
satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents:
a. PERSONAL PROPERTY: Borrower hereby assigns and grants to
Lender, a continuing Lien on and security interest in, upon and to all assets of
Borrower, including but not limited to the following Property, all whether now
owned or hereafter acquired, created or arising and wherever located:
i. ACCOUNTS - All Accounts;
ii. CHATTEL PAPER - All Chattel Paper;
iii. DOCUMENTS - All Documents;
iv. INSTRUMENTS - All Instruments;
v. INVENTORY - All Inventory;
vi. GENERAL INTANGIBLES, - All General Intangibles;
vii. EQUIPMENT - All Equipment,
viii. FIXTURES - All Fixtures;
ix. DEPOSIT ACCOUNTS - All Deposit Accounts;
x. GOODS - All Goods;
xi. LETTER OF CREDIT RIGHTS - All Letter of Credit Rights;
xii. SUPPORTING OBLIGATIONS - All Supporting Obligations;
xiii. INVESTMENT PROPERTY - All Investment Property;
xiv. COMMERCIAL TORT CLAIMS - All Commercial Tort Claims
identified and described on Schedule "5.20" (as amended or supplemented from
time to time);
xv. PROPERTY IN LENDER'S POSSESSION - All Property of
Borrower, now or hereafter in Lender's possession; and
10
xvi. PROCEEDS - The Proceeds (including, without limitation,
insurance proceeds), whether cash or non-cash, of all of the foregoing property
described in clauses (i) through (viii).
b. REAL ESTATE COLLATERAL: As further security for the payment
or other satisfaction of all Obligations, Borrower shall grant to Lender a
continuing first priority lien and mortgage upon, in and to the Borrower's
interest in the Lease and the leasehold estate created thereby. Borrower hereby
agrees to execute in favor of Lender, on the Closing Date, the Leasehold
Mortgage. The Leasehold Mortgage shall be duly recorded, at the expense of
Borrower in such recording office(s) as necessary to create a fully valid and
public lien in favor of Lender on Borrower's interest in the Lease and leasehold
estate created thereby.
3.2. LIEN DOCUMENTS: At Closing and thereafter as Lender deems
reasonably necessary, Borrower shall execute and/or deliver to Lender, or have
executed and delivered (all in form and substance reasonably satisfactory to
Lender and its counsel) any other agreements, documents and instruments,
including, without limitation, intellectual property security agreements,
required by Lender to evidence, perfect or protect the Liens and security
interests in the Collateral, title insurance (insuring the Leasehold Mortgage as
a first lien on the Lease subject only to such exceptions as Lender may
approve), flood insurance certificates and/or policies, endorsements, surveys,
environmental reports, certificates, and legal opinions as reasonably requested
by Lender.
3.3. OTHER ACTIONS:
a. In addition to the foregoing, Borrower shall also promptly
deliver, or cause to be delivered to Lender all items for which Lender must
receive possession to obtain a perfected security interest, including without
limitation, all notes, stock powers, letters of credit, certificates and
documents of title, Chattel Paper, Warehouse Receipts, Instruments, and any
other similar instruments constituting Collateral.
b. Lender is hereby authorized to file financing statements and
amendments to financing statements without Borrower's signature, in accordance
with the UCC. Borrower agrees to comply with the requests of Lender in order for
Lender to have and maintain a valid and perfected first security interest in the
Collateral including, without limitation, executing and causing any other Person
to execute such documents as Lender may require to obtain Control (as defined in
the UCC) over all Deposit Accounts, Letter of Credit Rights and Investment
Property.
3.4. SEARCHES, CERTIFICATES:
a. Lender shall, prior to or at Closing, and thereafter as
Lender may determine from time to time, at Borrower's expense, obtain the
following searches (the results of which are to be consistent with the
warranties made by Borrower in this Agreement):
i. UCC searches with the Secretary of State and local filing
office of each state where Borrower is organized, maintains its executive
office, a place of business, or assets; and
ii. Judgment, state and federal tax lien and corporate tax
lien searches, in all applicable filing offices of each state searched under
subparagraph (i) above.
11
b. Borrower shall, prior to or at Closing and at its expense,
obtain and deliver to Lender good standing certificates showing Borrower to be
in good standing in its state of organization and in each other state in which
it is doing and presently intends to do business for which qualification is
required.
3.5. POWER OF ATTORNEY: Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrower (without requiring any of them to act as such) with full power of
substitution to do the following (it being understood that Lender shall have the
power to exercise its powers with respect to subsection (c) only after the
occurrence and continuance of an Event of Default): (a) endorse the name of
Borrower upon any and all checks, drafts, money orders and other instruments for
the payment of monies that are payable to Borrower and constitute collections on
Borrower's accounts or proceeds of other Collateral; (b) execute and/or file in
the name of Borrower any financing statements, schedules, assignments,
instruments, documents and statements that Borrower is obligated to give Lender
hereunder or is necessary to perfect (or continue or evidence the perfection of
such security interest or Lien) Lender's security interest or Lien in the
Collateral; and (c) do such other and further acts and deeds in the name of
Borrower that Lender may reasonably deem necessary or desirable to enforce any
account or other Collateral or collect the Obligations.
3.6. RELEASE OF COLLATERAL.
a. Lender hereby agrees that it shall release its Liens on the
Collateral upon the full and unconditional payment of the Loan, including all
principal, interest, fees and Expenses related thereto, which are then accrued
and unpaid.
b. If full payment of the Loan and all interest, fees and
Expenses which are then accrued and unpaid is made by a Person other than
Borrower and such Person requests (upon not less than two (2) Business Days
notice) Lender to assign the Note and Leasehold Mortgage, Lender shall make such
assignment without representation or warranty from recourse of any kind to
Lender other than with respect to the outstanding principal of the Loan and the
authority of the Person signing such assignment. Notwithstanding any such
assignment, if requested, of the Note or Leasehold Mortgage, Borrower's
affirmative covenants in Sections 6.6 and 6.7 and all indemnification
obligations, in this Agreement shall survive the assignment and remain operative
and binding in favor of The Berkshire Bank.
SECTION IV. CLOSING AND CONDITIONS PRECEDENT
Closing under this Agreement is subject to the following conditions
precedent (all instruments, documents and agreements to be in form and substance
satisfactory to Lender and Lender's counsel):
4.1. RESOLUTIONS, OPINIONS, AND OTHER DOCUMENTS: Borrower shall have
delivered, or caused to be delivered to Lender, the following:
a. this Agreement, the Note, the Leasehold Mortgage, the
Non-Disturbance Agreement, the Surety Agreement, the Security Agreement, the
▇▇▇▇▇▇ Guaranty, and each of the other Loan Documents all properly executed;
b. all other documents to be executed and/or delivered by
Borrower or any other Person pursuant to this Agreement;
12
c. certified copies of (i) resolutions of Borrower's board of
directors authorizing the execution, delivery and performance of this Agreement,
the Note to be issued hereunder and each of the other Loan Documents required to
be delivered by any Section hereof to the extent such entity is a party thereto
and (ii) Borrower's articles or certificate of incorporation and by-laws;
d. certified copies of (i) resolutions of Surety's board of
directors authorizing the execution, delivery and performance of the Surety
Agreement;
e. certified copies of (i) the unanimous written consents of
Catskill's members authorizing the execution, delivery and performance of the
Security Agreement, Lease and Amendment No. 1 to Management Agreement between
Catskill and Borrower and (ii) Catskill's certificate of organization and
operating agreement;
f. an incumbency certificate for Borrower identifying all
Authorized Officers, with specimen signatures, an incumbency certificate for
Surety identifying all individuals authorized to execute the Surety Agreement
with specimen signatures, an incumbency certificate for Catskill identifying all
individuals authorized to execute the Security Agreement, Lease and Amendment
No. 1 to Management Agreement;
g. a written opinion of Borrower's, Surety's and Catskill's
independent counsel addressed to Lender and opinions of such other counsel as
Lender deems reasonably necessary (including without limitation an opinion on
the assignability and attachment and perfection of a security interest in
Borrower's harness and gaming license(s));
h. such financial statements, reports, certifications and other
operational information as Lender may reasonably require, satisfactory in all
respects to Lender;
i. certification by the president of Borrower that there has
not occurred any material adverse change in the operations and condition
(financial or otherwise) of Borrower since June 30, 2003;
j. payment by Borrower of all fees including, without
limitation, the Origination Fee and Expenses associated with the Loan;
k. searches and certificates required under Section 3.4;
1. an environmental survey, at Borrower's expense, of the Real
Property performed by an engineering firm acceptable and approved by Lender;
m. a tide insurance commitment reflecting tide insurance as
required by Section 3.2 of this Agreement;
n. evidence that Borrower has a statutory right to operate
1,800 video lottery terminal machines in Monticello Raceway; and
o. evidence that the Management Contract between Catskill and
Borrower has been terminated or amended in a manner satisfactory to Lender, in
Lender's sole discretion.
p. such other documents reasonably required by Lender.
13
4.2. ABSENCE OF CERTAIN EVENTS: At the Closing Date, no Default or
Event of Default hereunder shall have occurred and be continuing.
4.3. WARRANTIES AND REPRESENTATIONS AT CLOSING: The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement shah be true and correct in all respects on the Closing Date with the
same effect as though made on and as of that date. Borrower shall not have taken
any action or permitted any condition to exist which would have been prohibited
by any Section hereof.
4.4. OFFICERS' CERTIFICATE: Lender shall have received a certificate
dated the Closing Date and signed by the President Borrower certifying that all
of the conditions specified in this Section have been fulfilled.
4.5. CLOSING: Subject to the conditions of this Section, the Loan
shall be made available on such date (the "Closing Date") and at such time as
may be mutually agreeable to the parties contemporaneously with the execution
hereof ("Closing").
4.6. WAIVER OF RIGHTS: By completing the Closing hereunder, or by
making the Loan hereunder, Lender does not thereby waive a breach of any
warranty or representation made by Borrower hereunder or under any agreement,
document, or instrument delivered to Lender or otherwise referred to herein, and
any claims and rights of Lender resulting from any breach or misrepresentation
by Borrower are specifically reserved by Lender.
SECTION V. REPRESENTATIONS AND WARRANTIES
Borrower warrants and represents to Lender that:
5.1. CORPORATE ORGANIZATION AND VALIDITY:
a. Borrower (i) is a corporation, duly organized and validly
existing under the laws of the state of New York, (ii) has the appropriate power
and authority to operate its business and to own its Property and (iii) is duly
qualified, is validly existing and in good standing and has lawful power and
authority to engage in the business it conducts in each state where the nature
and extent of its business requires qualification, except where the failure to
so qualify does not and could not have a Material Adverse Effect. A list of all
states and other jurisdictions where Borrower is qualified to do business is
shown on Schedule "5.1" attached hereto and made part hereof.
b. The making and performance of this Agreement and the other
Loan Documents will not violate any law, government rule or regulation, court or
administrative order or other such order, or the charter, minutes or bylaw
provisions of Borrower, or violate or result in a default (immediately or with
the passage of time) under any contract, agreement or instrument to which
Borrower is a party, or by which Borrower is bound. Borrower is not in violation
of any term of any material agreement or instrument to which it is a party or by
which it may be bound, or of its charter, minutes or bylaw provisions.
c. Borrower has all requisite power and authority to enter into
and perform this Agreement and to incur the obligations herein provided for, and
has taken all proper and necessary action to authorize the execution, delivery
and performance of this Agreement, and the other Loan Documents as applicable.
14
d. This Agreement, the Note to be issued hereunder, and all of
the other Loan Documents, when delivered, will be valid and binding upon
Borrower to the extent it is a party thereto and enforceable in accordance with
their respective terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
5.2. PLACES OF BUSINESS: The only places of business of Borrower,
and the places where Borrower keeps and intends to keep its Property, are at the
addresses shown on Schedule "5.2" attached hereto and made part hereof.
5.3. PENDING LITIGATION: There are no judgments or judicial or
administrative orders or proceedings pending, or to the knowledge of Borrower,
threatened, against Borrower in any court or before any Governmental Authority
except as shown on Schedule "5.3" attached hereto and made part hereof. To the
knowledge of Borrower, there are no investigations (civil or criminal) pending
or threatened against Borrower in any court or before any Governmental
Authority. Borrower is not in default with respect to any order of any
Governmental Authority. Borrower and, to the knowledge of Borrower, no executive
officer of Borrower has been indicted in connection with or convicted of
engaging in any criminal conduct, or is currently subject to any lawsuit or
proceeding or under investigation in connection with any anti-racketeering or
other conduct or activity which, in each case, may result in the forfeiture of
any Property to any Governmental Authority.
5.4. TITLE TO PROPERTIES: Borrower has insurable leasehold title to
the Real Property and Borrower has good and marketable title to all the other
Property it purports to own, free from Liens and free from the claims of any
other Person, except for Permitted Liens.
5.5. GOVERNMENTAL CONSENT: To the extent required, Borrower has
obtained all consents, approvals or authorizations of, or filing, registration
or qualification with, any Governmental Authority on the part of Borrower to
consummate the transactions contemplated hereby.
5.6. TAXES: All tax returns required to be filed by Borrower in any
jurisdiction have been filed, and all taxes, assessments, fees and other
governmental charges upon Borrower, or upon any of its Property, income or
franchises, which are shown to be due and payable on such returns have been
paid, except for those taxes being contested in good faith with due diligence by
appropriate proceedings for which appropriate reserves have been maintained
under GAAP and as to which no Lien has been entered. Borrower is not aware of
any proposed additional tax assessment or tax to be assessed against or
applicable to Borrower.
5.7. FINANCIAL STATEMENTS: The interim balance sheet of Borrower as
of June 30, 2003, and the related statements of profit and loss, stockholder's
equity and cash flow as of such date have been prepared in accordance with GAAP
and present fairly in all material respects the financial position of Borrower
as of such dates and the results of its operations for such periods (except for
absence of footnotes and year end adjustments). The fiscal year for Borrower
currently ends on December 31. Borrower's federal tax identification number and
state organizational identification number for UCC purposes are as shown on
Schedule "5.7" attached hereto and made part hereof.
5.8. FULL DISCLOSURE: The financial statements referred to in
Section 5.7 of this Agreement do not, nor does any other written statement of
Borrower to Lender in connection with the negotiation of the Loan, contain any
untrue statement of a material fact. Such statements do not omit a material
fact, the omission of which would make the statements contained therein
15
misleading. There is no fact known to Borrower which has not been disclosed in
writing to Lender which had or could reasonably be expected to have a Material
Adverse Effect.
5.9. SUBSIDIARIES: Borrower does not have any Subsidiaries or
Affiliates, except as shown on Schedule "5.9" attached hereto and made part
hereof.
5.10. INVESTMENTS, GUARANTEES, CONTRACTS, ETC.:
a. Borrower has not entered into any leases for real or
personal Property (whether as landlord or tenant or lessor or lessee), except as
shown on Schedule "5.10(a)," attached hereto and made part hereof.
b. Borrower is not party to any contract or agreement, or
subject to any charter or other corporate restriction, which has or could have a
Material Adverse Effect.
5.11. GOVERNMENT REGULATIONS, ETC.:
a. The use of the proceeds of and Borrower's issuance of the
Note will not directly or indirectly violate or result in a violation of Section
7 of the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations U, T and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
Borrower does not own or intend to carry or purchase any "margin stock" within
the meaning of said Regulation U.
b. Borrower has obtained all licenses, permits, franchises or
other governmental authorizations necessary for the ownership of its Property
and for the conduct of its business.
c. As of the date hereof, no employee benefit plan ("Pension
Plan"), as defined in Section 3(2) of ERISA, maintained by Borrower or under
which Borrower could have any liability under ERISA (i) has failed to meet the
minimum funding standards established in Section 302 of ERISA, (ii) has failed
to comply in a material respect with all applicable requirements of ERISA and of
the Internal Revenue Code, including all applicable rulings and regulations
thereunder, (iii) has engaged in or been involved in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Internal Revenue Code which
would subject Borrower to any material liability, or (iv) has been terminated if
such termination would subject Borrower to any material liability. Borrower has
not assumed, or received notice of a claim asserted against Borrower for,
withdrawal liability (as defined in Section 4207 of ERISA) with respect to any
multi employer pension plan and is a member of any Controlled Group (as defined
in ERISA). Borrower has timely made all contributions when due with respect to
any multi employer pension plan in which it participates and no event has
occurred triggering a claim against Borrower for withdrawal liability with
respect to any multi employer pension plan in which Borrower participates. All
Employee Benefit Plans and multi employer pension plans in which Borrower
participates are shown on Schedule "5.11(c)" attached hereto and made part
hereof.
d. Borrower is not in violation of or receipt of written notice
that it is in violation of any applicable statute, regulation or ordinance of
the United States of America, or of any state, city, town, municipality, county
or of any other jurisdiction, or of any agency, or department thereof,
(including, without limitation, Environmental Laws or government procurement
regulations), a violation of which causes or could cause a Material Adverse
Effect.
16
e. Borrower is current with all reports and documents required
to be filed with any state or federal securities commission or similar agency
and is in full compliance in all material respects with all applicable rules and
regulations of such commissions.
5.12. BUSINESS INTERRUPTIONS: Within two (2) years prior to the date
hereof, none of the business, Property or operations of Borrower has been
materially and adversely affected in any way by any casualty, strike, lockout,
combination of workers, order of the United States of America, or any state or
local government, or any political subdivision or agency thereof, directed
against Borrower. There are no pending or, to Borrower's knowledge, threatened
labor disputes, strikes, lockouts or similar occurrences or grievances affecting
Borrower. Except as set forth on Schedule 5.12, no labor contract of Borrower is
scheduled to expire prior to the Maturity Date.
5.13. NAMES AND INTELLECTUAL PROPERTY:
a. Within five (5) years prior to the Closing Date, Borrower
has not conducted business under or used any other name (whether corporate or
assumed) except for the names shown on Schedule "5.13(a)" attached hereto and
made part hereof. Borrower is the sole owner of its names listed on such
Schedule "5.13(a)" and any and all business done and all invoices issued in such
trade names are Borrower's sales, business and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a separate
Subsidiary or Affiliate or independent entity.
b. All trademarks, service marks, patents or copyrights which
Borrower uses, plans to use or has a right to use are shown on Schedule
"5.13(b)" attached hereto and made part hereof and Borrower is the sole owner of
such Property except to the extent any other Person has claims or rights in such
Property, as such claims and rights are shown on Schedule "5.13(b)". Borrower is
not in violation of any rights of any other Person with respect to such
Property.
c. Except as shown on Schedule "5.13(c)" attached hereto and
made part hereof, (i) Borrower does not require any copyrights, patents,
trademarks or other intellectual property, or any license(s) to use any patents,
trademarks or other intellectual property in order to provide services to its
customers in the ordinary course of business; and (ii) Lender will not require
any copyrights, patents, trademarks or other intellectual property or any
licenses or consents to use the same in order to provide such services after the
occurrence of an Event of Default.
5.14. OTHER ASSOCIATIONS: Borrower is not engaged and has no
interest in any joint venture or partnership with any other Person except as
shown on Schedule "5.14," attached hereto and made part hereof.
5.15. ENVIRONMENTAL MATTERS: Except as shown on Schedule "5.15,"
attached hereto and made part hereof:
a. To Borrower's knowledge, no Property presently owned, leased
or operated by Borrower contains, or has previously contained, any Hazardous
Substances in amounts or concentrations which (i) constitute or constituted a
violation of, or (ii) could give rise to liability under, any Environmental Law.
b. To Borrower's knowledge after due inquiry, Borrower is in
compliance, and has been in compliance with all applicable Environmental Laws,
and there is no contamination at, under or about any properties presently owned,
leased, or operated by Borrower or violation of any Environmental Law with
17
respect to such properties which could reasonably be expected to interfere with
any of their continued operations or reasonably be expected to impair the fair
saleable value thereof.
c. Borrower has not received any notice of violation, alleged
violation, noncompliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws that has not been
complied with and to Borrower's knowledge no such notice is being threatened.
d. Hazardous Substances have not been transported or disposed
of in a manner or to a location which are reasonably likely to give rise to
liability of Borrower under any Environmental Law.
e. No judicial proceeding or governmental or administrative
action is pending, or to the knowledge of Borrower, threatened under any
Environmental Law to which such Borrower is, or to Borrower's knowledge will be,
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding, the implementation of which is reasonably
likely to have a Material Adverse Effect with respect to Borrower under any
Environmental Law.
5.16. REGULATION 0: No director, executive officer or principal
shareholder of Borrower is a director, executive officer or principal
shareholder of Lender. For the purposes hereof the terms "director" "executive
officer" and "principal shareholder" (when used with reference to Lender), have
the respective meanings assigned thereto in Regulation 0 issued by the Board of
Governors of the Federal Reserve System.
5.17. CAPITAL STOCK: The authorized and outstanding Capital Stock of
Borrower is as shown on Schedule "5.17" attached hereto and made part hereof.
All of the Capital Stock of Borrower has been duly and validly authorized and
issued and is fully paid and non-assessable and has been sold and delivered to
the holders thereof in compliance with, or under valid exemption from, all
Federal and state laws and the rules and regulations of all Governmental
Authorities governing the sale and delivery of securities. Except for the rights
and obligations shown on Schedule "5.17," there are no subscriptions, warrants,
options, calls, commitments, rights or agreements by which Borrower or any of
the shareholders of Borrower is bound relating to the issuance, transfer, voting
or redemption of shares of its Capital Stock or any pre-emptive rights held by
any Person with respect to the shares of Capital Stock of such Borrower. Except
as shown on Schedule "5.17," Borrower has not issued any securities convertible
into or exchangeable for shares of its Capital Stock or any options, warrants or
other rights to acquire such shares or securities convertible into or
exchangeable for such shares.
5.18. SOLVENCY: After giving effect to the transactions contemplated
under this Agreement, Borrower is solvent, is able to pay its debts as they
become due, and has capital sufficient to carry on its business and all
businesses in which it is about to engage, and now owns Property having a value
both at fair valuation and at present fair salable value greater than the amount
required to pay Borrower's debts. Borrower will not be rendered insolvent by the
execution and delivery of this Agreement or any of the other Loan Documents
executed in connection with this Agreement or by the transactions contemplated
hereunder or thereunder.
18
5.19. PERFECTION AND PRIORITY: This Agreement and the other Loan
Documents are effective to create in favor of Lender legal, valid and
enforceable Liens in all right, title and interest of Borrower in the
Collateral, and when financing statements have been filed in the offices of the
jurisdictions shown on Schedule "5.19," attached hereto and made part hereof
under Borrower's name, Borrower will have granted to Lender, and Lender will
have perfected first priority Liens in the Collateral in which a lien may be
perfected by the filing of a Financing Statement, superior in right to any and
all other Liens, existing or future, other than to the extent Lender has agreed
in this Agreement that such Liens are ahead of Lender's Liens.
5.20. COMMERCIAL TORT CLAIMS: As of the Closing Date, Borrower does
not have any Commercial Tort Claims, except as shown on Schedule "5.20" attached
hereto and made part hereof.
5.21. LETTER OF CREDIT RIGHTS: As of the Closing Date, Borrower has
no Letter of Credit Rights, except as shown on Schedule "5.21," attached hereto
and made part hereof.
5.22. DEPOSIT ACCOUNTS: All Deposit Accounts of Borrower, including
the Collection Account, are shown on Schedule "5.22," attached hereto and made
part hereof.
SECTION VI. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants as follows:
6.1. PAYMENT OF TAXES AND CLAIMS: Borrower shall pay, before they
become delinquent, all taxes, assessments and governmental charges, or levies
imposed upon it, or upon Borrower's Property, and all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other Persons,
entitled to the benefit of statutory or common law Liens which, in any case, if
unpaid, would result in the imposition of a Lien upon its Property; provided
however, that Borrower shall not be required to pay any such tax, assessment,
charge, levy, claim or demand if the amount, applicability or validity thereof,
shall at the time, be contested in good faith and by appropriate proceedings by
Borrower, and if such Borrower shall have set aside on its books adequate
reserves in respect thereof, if so required in accordance with GAAP; which
deferment of payment is permissible so long as no Lien other than a Permitted
Lien has been entered and Borrower's title to, and its right to use, its
Property are not materially adversely affected thereby.
6.2. MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE:
a. PROPERTY - Borrower shall maintain its Property in good
condition (normal wear and tear excepted) make all necessary renewals,
replacements, additions, betterments and improvements thereto and will pay and
discharge when due the cost of repairs and maintenance to its Property, and will
pay all rentals when due for all real estate leased by Borrower.
b. PROPERTY INSURANCE, PUBLIC AND PRODUCTS LIABILITY INSURANCE
- (i) Borrower shall maintain insurance on all insurable tangible Property
against fire, flood, casualty and such other hazards (including, without
limitation, extended coverage, workmen's compensation, boiler and machinery,
with inflation coverage by endorsement) and against public liability, product
liability and business interruption, in each case in such amounts, with such
deductibles and with such insurers as are customarily used by companies
operating in the same industry as Borrower. (ii) At or prior to Closing,
Borrower shall furnish Lender with duplicate original policies of insurance or
such other evidence of insurance as Lender may require, and any certificates of
insurance shall be issued on ▇▇▇▇▇ Form-27. In the event Borrower fails to
19
procure or cause to be procured any such insurance or to timely pay or cause to
be paid the premium(s) on any such insurance, Lender may do so for Borrower, but
Borrower shall continue to be liable for the same. The policies of all such
casualty insurance shall contain standard lender's loss payable and Mortgagee
clauses (and, with respect to liability and interruption insurance, additional
insured clauses) issued in favor of Lender under which all losses thereunder
shall be paid to Lender as Lender's interest may appear. Such policies shall
expressly provide that the requisite insurance cannot be altered or canceled
without thirty (30) days prior written notice to Lender and shall insure Lender
notwithstanding the act or neglect of Borrower. (iii) Borrower hereby appoints
Lender as Borrower's attorney-in-fact, exercisable at Lender's option to endorse
any check which may be payable to Borrower in order to collect the proceeds of
such insurance and any amount or amounts collected by Lender pursuant to the
provisions of this Section may be applied by Lender, in its sole discretion, to
any Obligations or to repair, reconstruct or replace the loss of os damage to
Collateral as Lender in its discretion may from time to time determine,
provided, however, that if insurance proceeds are less than $500,000 and no
Event of Default has occurred and is continuing, such proceeds shall be made
available to Borrower for repair, reconstruction, or replacement for the lost or
damaged collateral. (iv) Borrower further covenants that all insurance premiums
owing under its current policies have been paid. Borrower shall notify Lender,
immediately, upon Borrower's receipt of a notice of termination, cancellation,
or non-renewal from its insurance company of any such policy.
c. FINANCIAL RECORDS - Borrower shall keep current and accurate
books of records and accounts so as to permit such Borrower to deliver the
financial statements described in Section 6.9 below, all in accordance with
GAAP. Surety shall keep current and accurate books of records and accounts, and
will reflect in its financial statements adequate accruals and appropriations to
reserves, all in accordance with GAAP. Borrower shall not change its fiscal year
end date without the prior written consent of Lender.
d. CORPORATE EXISTENCE AND RIGHTS - Borrower shall do (or cause
to be done) all things necessary to preserve and keep in full force and effect
its existence, good standing, rights and franchises.
e. COMPLIANCE WITH LAWS - Borrower shall be in compliance with
any and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local, (including, without limitation, Environmental Laws and government
procurement regulations) and shall obtain any and all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its Property or to the conduct of its businesses, which violation or failure to
obtain causes or could reasonably be expected to cause a Material Adverse
Effect. Borrower shall timely satisfy all assessments, fines, costs and
penalties imposed (after exhaustion of all appeals, provided a stay has been put
in effect during such appeal) by any Governmental Authority against Borrower or
any Property of Borrower.
6.3. BUSINESS CONDUCTED: Borrower shall continue in the business
presently operated by it using its commercially reasonable efforts to maintain
its customers and goodwill. Borrower shall not engage, directly or indirectly,
in any material respect in any line of business substantially different from the
businesses conducted by Borrower immediately prior to the Closing Date;
provided, however, that Borrower shall be permitted to operate video lottery
terminals and related amenities at the Racetrack.
6.4. LITIGATION: Borrower shall give prompt notice to Lender of any
litigation claiming in excess of Two Hundred Fifty Thousand Dollars ($250,000),
or which may otherwise have a Material Adverse Effect.
20
6.5. ISSUE TAXES: Borrower shall pay all taxes (other than taxes
based upon or measured by any Lender's income or revenues or any personal
property tax), if any, in connection with the issuance of the Notes and the
recording of any lien documents. The obligations of Borrower hereunder shall
survive the payment of the Obligations hereunder and the termination of this
Agreement.
6.6. BANK ACCOUNTS: For a period of not less than seven (7) years
after the Closing Date, Borrower shall (i) maintain with Lender the Collection
Account and all of its major depository and disbursement accounts with Lender
and (ii) maintain or cause any other Person who operates the Racetrack to
maintain with Lender the accounts into which all of the revenues and receipts
from the operations at the Racetrack, including all revenues and receipts from
the video lottery terminals (after installation thereof) operated at the Real
Property are deposited. The provisions of this Section 6.6 shall survive the
Maturity Date and the repayment of the Loan.
6.7. ATM MACHINES: Except to the extent prohibited by applicable
regulatory law, Borrower grants to Lender the exclusive right to install and
operate ATM machines at the Real Property for a period of ten (10) years from
the Closing Date. Borrower shall, on a timely basis, as requested by Lender,
execute and deliver such ATM agreements as Lender may require. The Borrower will
be entitled to 25% of the net fee income received by the Lender generated by the
usage of ATM machines, after the deduction of all direct and indirect cost of
maintaining and operating such ATM machines, Lender shall be responsible for
installing, servicing and maintaining the ATM machines. Lender shall use its
best efforts to provide Borrower with a proposed ATM agreement within 180 days
after Closing, provided that even if any such agreement has not been provided or
agreed upon within such period, Lender may in any event begin installing and
utilizing ATM machines at the Racetrack following such 180 day period. The
provisions of this Section 6.7 shall survive the Maturity Date and the repayment
of the Loan.
6.8. EMPLOYEE BENEFIT PLANS: Borrower shall (a) fund all of its
Pension Plan(s) in a manner that will satisfy the minimum funding standards of
Section 302 of ERISA, (b) furnish Lender, promptly upon Lender's request, with
copies of all reports or other statements filed with the United States
Department of Labor, the PBGC or the IRS with respect to all Pension Plan(s), or
which Borrower, or any member of a Controlled Group, may receive from the United
States Department of Labor, the IRS or the PBGC, with respect to all such
Pension Plan(s), and (c) promptly advise Lender of the occurrence of any
reportable event (as defined in Section 4043 of ERISA, other than a reportable
event for which the thirty (30) day notice requirement has been waived by the
PBGC) or prohibited transaction (under Section 406 of ERISA or Section 4975 of
the Internal Revenue Code) with respect to any such Pension Plan(s) and the
action which Borrower proposes to take with respect thereto. Borrower will make
all contributions when due with respect to any multi employer pension plan in
which it participates and will promptly advise Lender upon (x) its receipt of
notice of the assertion against Borrower of a claim for withdrawal liability,
(y) the occurrence of any event which, to the best of Borrower's knowledge,
would trigger the assertion of a claim for withdrawal liability against
Borrower, and (z) upon the occurrence of any event which, to the best of
Borrower's knowledge, would place Borrower in a Controlled Group as a result of
which any member (including Borrower) thereof may be subject to a claim for
withdrawal liability, whether liquidated or contingent.
6.9. FINANCIAL AND BUSINESS INFORMATION: Borrower shall deliver or
cause to be delivered to Lender the following:
21
a. FINANCIAL STATEMENTS AND COLLATERAL REPORTS - such data,
reports, statements and information, financial or otherwise, as Lender may
reasonably request, including, without limitation:
i. within forty-five (45) days after the end of each
calendar quarter, the income and cash flow statements of Borrower and its
Subsidiaries for such quarter and for the expired portion of the fiscal year
ending with the end of such quarter, setting forth in comparative form the
corresponding figures for the corresponding periods of the previous fiscal year,
and the balance sheet of Borrower and its Subsidiaries as at the end of such
quarter, setting forth in comparative form the corresponding figures as at the
end of the corresponding periods of the previous fiscal year, all in reasonable
detail and certified by Borrower's chief financial officer to have been prepared
from the books and records of Borrower;
ii. within one hundred twenty (120) days after the end of
each fiscal year of Borrower, the income and cash flow statements of Borrower
and its Subsidiaries for such year, and the balance sheet of Borrower and its
Subsidiaries as at the end of such fiscal year, setting forth in each case in
comparative form the corresponding figures as at the end of and for the previous
fiscal year, all in reasonable detail, including all supporting schedules, and
audited by an independent public accounting firm acceptable to Lender, and
unqualifiedly certified to have been prepared in accordance with GAAP;
iii. within forty-five (45) days of the end of each calendar
month, Borrower's accounts receivable aging report, accounts payable aging
report and such other reports as Lender reasonably deems necessary, certified by
Borrower's chief financial officer or President as true and correct, all in form
and substance reasonably satisfactory to Lender; and
iv. no later than sixty (60) days prior to each fiscal
year-end, Borrower's annual financial statement projections for the upcoming
fiscal year.
b. NOTICE OF EVENT OF DEFAULT - promptly upon becoming aware of
the existence of any condition or event which constitutes a Default or an Event
of Default under this Agreement, a written notice specifying the nature and
period of existence thereof and what action Borrower is taking (and proposes to
take) with respect thereto;
c. NOTICE OF CLAIMED DEFAULT - promptly upon receipt by
Borrower, notice of default, oral or written, given to Borrower by any creditor
for Indebtedness for borrowed money, otherwise holding long term Indebtedness of
Borrower in excess of Five Hundred Thousand Dollars ($500,000); and
d. SECURITIES AND OTHER REPORTS - if Borrower shall be required
to file reports with the Securities and Exchange Commission pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, promptly upon
its becoming available, one copy of each financial statement, report, notice or
proxy statement sent by Borrower, if any, to stockholders generally, and, a copy
of each regular or periodic report, and any registration statement, or
prospectus in respect thereof, filed by Borrower with any securities exchange or
with federal or state securities and exchange commissions or any successor
agency.
6.10. OFFICERS' CERTIFICATES: Along with the set of financial
statements delivered to Lender at the end of each fiscal quarter pursuant to
Section 6.9(a)(i) hereof and the annual financial statements delivered pursuant
to Section 6.9(a)(ii) hereof, Borrower shall deliver to Lender a certificate
22
("Compliance Certificate") (in the form of Exhibit "D," attached hereto and made
part hereof) from the President of Borrower certifying that no Default or Event
of Default exists.
6.11. AUDITS AND INSPECTION: Borrower shall permit any of Lender's
officers or other representatives to visit and inspect upon reasonable notice
during business hours any of the locations of Borrower, to examine and audit all
of Borrower's books of account, records, reports and other papers, to make
copies and extracts therefrom and to discuss its affairs, finances and accounts
with its officers, employees and independent certified public accountants all at
Borrower's expense at the standard rates charged by Lender for such activities,
plus Lender's reasonable out-of-pocket expenses.
6.12. TAX RETURNS, FINANCIAL STATEMENTS AND OTHER REPORTS: Promptly
after each calendar year (but in any event no later than September 15), Borrower
shall promptly furnish, or shall cause to be furnished, to Lender copies of the
annual federal and state income tax returns of Borrower for the immediately
preceding year. Borrower further agrees that, if requested by Lender, it shall
promptly furnish Lender with copies of all material reports filed with any
federal, state or local Governmental Authority.
6.13. INFORMATION TO PARTICIPANT: Lender may divulge to any
participant, assignee or co-lender or prospective participant, assignee or
co-lender it may obtain in the Loan or any portion thereof, all information, and
furnish to such Person copies of any reports, financial statements,
certificates, and documents obtained under any provision of this Agreement, or
related agreements and documents.
6.14. MATERIAL ADVERSE DEVELOPMENTS: Borrower agrees that
immediately upon becoming aware of any development or other information outside
the ordinary course of business and excluding matters of a general economic,
financial or political nature which would reasonably be expected to have a
Material Adverse Effect it shall give to Lender telephonic notice specifying the
nature of such development or information and such anticipated effect. In
addition, such verbal communication shall be confirmed by written notice thereof
to Lender on the same day such verbal communication is made or the next Business
Day thereafter.
6.15. PLACES OF BUSINESS: Borrower shall give thirty (30) days prior
written notice to Lender of any changes in the location of any of its respective
places of business, of the places where records concerning its Accounts or where
its Inventory are kept, or the establishment of any new, or the discontinuance
of any existing place of business; provided that Borrower may not establish any
place of business outside of the United States.
6.16. COMMERCIAL TORT CLAIMS: Borrower will immediately notify
Lender in writing in the event that Borrower becomes a party to or obtains any
rights with respect to any Commercial Tort Claim. Such notification shall
include information sufficient to describe such Commercial Tort Claim,
including, but not limited to, the parties to the claim, the court in which the
claim was commenced, the docket number assigned to such claim, if any, and a
detailed explanation of the events that gave rise to the claim. Borrower shall
execute and deliver to Lender all documents and/or agreements necessary to grant
Lender a security interest in such Commercial Tort Claim to secure the
Obligations. Borrower authorizes Lender to file (without each Borrower
signature) initial financing statements or amendments, as Lender deems necessary
to perfect its security interest in the Commercial Tort Claim.
6.17. LETTER OF CREDIT RIGHTS: Borrower shall provide Lender with
written notice of any Letters of Credit for which each Borrower is the
beneficiary. Borrower shall execute and deliver (or cause to be executed or
23
delivered) to Lender, all documents and agreements as Lender may require in
order to obtain and perfect its security interest in such Letter of Credit
Rights.
6.18. CORRESPONDENCE WITH NEW YORK LOTTERY: Borrower shall provide
Lender with a copy of any correspondence of an adverse nature that it receives
or sends to the New York Lottery regulatory agency with respect to its license
and material obligations.
6.19. APPRAISALS: Lender may at its option obtain once in each year
(or as otherwise requested by Lender) an appraisal of the Real Property and/or
leasehold interest under the Lease or any part thereof prepared in accordance
with written instructions from Lender by a third party appraiser engaged
directly by Lender if any of the following occur as determined by Lender in its
sole discretion: (a) an Event of Default has occurred and is continuing; (b) an
adverse change has occurred in real estate market conditions in the area where
the Property is located; (c) an appraisal is required or recommended by bank
examiners and/or auditors or pursuant to banking regulations or bank policy then
in effect; or (d) an adverse change has occurred in the financial condition of
Borrower. Each such appraiser and appraisal shall be satisfactory to Lender.
SECTION VII. BORROWER'S NEGATIVE COVENANTS
Borrower covenants as follows:
7.1. MERGER, CONSOLIDATION, DISSOLUTION OR LIQUIDATION:
a. Borrower shall not engage in any Asset Sale other than: (i)
Inventory sold in the ordinary course of Borrower's business, (ii) disposition
in the ordinary course of business of obsolete or nonworking equipment, which,
if reasonably necessary, shall be promptly replaced by other equipment of
comparable or superior quality and value or (iii) a transfer of the lessee's
interest in the Lease to Surety, provided that concurrent with such transfer,
Surety assumes all obligations of Borrower under the Loan Documents and all
business assets and operations at the Racetrack remains subject to Lender's
first priority security interest.
b. Borrower shall not merge or consolidate, except for the
Consolidation Transaction or a merger between Borrower and Surety, with any
other Person or engage in a division, conversion, dissolution or liquidation.
7.2. ACQUISITIONS: Borrower shall not acquire all or a material
portion of the Capital Stock or assets of any Person in any transaction or in
any series of related transactions or enter into any sale and leaseback
transaction.
7.3. LIENS AND ENCUMBRANCES: Borrower shall not: (i) execute or
permit to exist a negative pledge agreement with any Person covering any of its
Property, or (ii) cause or permit or agree or consent to cause or permit in the
future (upon the happening of a contingency or otherwise), its Property
(including, without limitation, the Collateral), whether now owned or hereafter
acquired, to be subject to a Lien or be subject to any claim, in each case
except for Permitted Liens.
7.4. TRANSACTIONS WITH AFFILIATES OR SUBSIDIARIES:
a. Borrower shall not enter into any transaction with any
Subsidiary or other Affiliate, including, without limitation, the purchase,
sale, or exchange of Property, or the loaning or giving of funds to any
24
Affiliate or any Subsidiary unless: (i) such Subsidiary or Affiliate is engaged
in a business substantially related to the business conducted by Borrower, and
the transaction is in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon terms substantially the same and no
less favorable to Borrower as it would obtain in a comparable arm's length
transaction with any Person not an Affiliate or a Subsidiary, or if not on any
arm's length basis then such transaction would not have a Material Adverse
Effect, and in any event so long as such transaction is not prohibited hereunder
and any obligations incurred by Borrower as a result thereof are subordinated to
the Obligations under agreements acceptable to Lender; or (ii) such transaction
is intended for incidental administrative purposes.
7.5. GUARANTEES: Excepting the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection, Borrower shall not
become or be liable, directly or indirectly, primary or secondary, matured or
contingent, in any manner, whether as guarantor, surety, accommodation maker, or
otherwise, for the existing or future Indebtedness of any kind of any Person.
7.6. INDEBTEDNESS: Borrower shall not incur or be liable at any time
for any Indebtedness except for Permitted Indebtedness.
7.7. LOANS AND INVESTMENTS: Borrower shall not make or have
outstanding loans, advances, extensions of credit or capital contributions to,
or investments in, any Person other than Permitted Investments.
7.8. USE OF PARTY'S NAME: Neither Party hereto shall use the other
party's name in connection with any of its business operations. Nothing herein
contained is intended to permit or authorize either party to make any contract
on behalf of the other.
7.9. MISCELLANEOUS COVENANTS:
a. Borrower shall not become or be a party to any contract or
agreement which at the time of becoming a party to such contract or agreement
materially impairs Borrower's ability to perform under this Agreement, or under
any other instrument, agreement or document to which Borrower is a party or by
which it is or may be bound.
b. Borrower shall not carry or purchase any "margin stock"
within the meaning of Regulations U, T or X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II.
7.10. JURISDICTION OF ORGANIZATION: If a Registered Organization,
Borrower shall not change its jurisdiction of organization.
7.11. CHANGE OF CONTROL: There shall not occur a Change of Control.
SECTION VIII. DEFAULT
8.1. EVENTS OF DEFAULT: Each of the following events shall
constitute an event of default ("Event of Default"):
a. PAYMENTS - Borrower fails to make any payment of principal
or interest under the Obligations on the date such payment is due and payable;
or
25
b. OTHER CHARGES - Borrower fails to pay any other charges,
fees, Expenses or other monetary obligations owing to Lender arising out of or
incurred in connection with this Agreement within fifteen (15) days after the
date such payment is due and payable; or
c. PARTICULAR COVENANT DEFAULTS - Borrower fails to perform,
comply with or observe any covenant or undertaking contained in this Agreement
(other than with respect to the covenants contained in Section 6.9 and Section 7
for which no cure period shall exist) and such failure continues for thirty (30)
days after the occurrence thereof; or
d. FINANCIAL INFORMATION - any statement, report, financial
statement, or certificate made or delivered by Borrower or any of its officers,
employees or agents to Lender is not true and correct, in all material respects,
when made; or
e. WARRANTIES OR REPRESENTATIONS - any warranty, representation
or other statement by or on behalf of Borrower contained in or pursuant to this
Agreement, the other Loan Documents or in any document, agreement or instrument
furnished in compliance with, relating to, or in reference to this Agreement, is
false, erroneous, or misleading in any material respect when made; or
f. AGREEMENTS WITH OTHERS - The holder of any Indebtedness of
Borrower in excess of Two Hundred Fifty Thousand Dollars ($250,000) accelerates
the payment of Borrower's obligations, which are the subject thereof, prior to
the maturity date or prior to the regularly scheduled date of payment;
g. JUDGMENTS - any final judgment for the payment of money in
excess of Seven Hundred Fifty Thousand Dollars ($750,000) in the aggregate (i)
which is not fully and unconditionally covered by insurance or (ii) for which
Borrower has not established a cash or cash equivalent reserve in the full
amount of such judgment, shall be rendered by a court of record against Borrower
and such judgment shall continue unsatisfied and in effect for a period of
thirty (30) consecutive days without being vacated, discharged, satisfied or
bonded pending appeal; or
h. ASSIGNMENT FOR BENEFIT OF CREDITORS, ETC. - if Borrower
makes or proposes in writing, an assignment for the benefit of creditors
generally, offers a composition or extension to creditors, or makes or sends
notice of an intended bulk sale of any business or assets now or hereafter owned
or conducted by Borrower; or
i. BANKRUPTCY, DISSOLUTION, ETC. - upon the commencement of any
action for the dissolution or liquidation of Borrower, or the commencement of
any proceeding to avoid any transaction entered into by Borrower, or the
commencement of any case or proceeding for reorganization or liquidation of
Borrower's debts under the Bankruptcy Code or any other state or federal law,
now or hereafter enacted for the relief of debtors, whether instituted by or
against Borrower; provided however, that Borrower shall have thirty (30) days to
obtain the dismissal or discharge of involuntary proceedings filed against it,
it being understood that during such thirty (30) day period, Lender may seek
adequate protection in any bankruptcy proceeding; or
j. RECEIVER - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrower or for
Borrower's Property; or
k. TERMINATION OF BUSINESS - if Borrower ceases any material
portion of its business operations as presently conducted; or
26
1. PENSION BENEFITS, ETC. - if Borrower fails to comply with
ERISA so that proceedings are commenced to appoint a trustee under ERISA to
administer Borrower's employee plans or the PBGC institutes proceedings to
appoint a trustee to administer such plan(s), or a Lien is entered to secure any
deficiency or claim or a "reportable event" as defined under ERISA occurs; or
m. SURETY AGREEMENT - if any Event of Default (as defined in
the Surety Agreement) occurs under the Surety Agreement; or
n. SECURITY AGREEMENT - if any breach or default occurs under
the Security Agreement; or
o. LIENS - if any Lien in favor of Lender shall cease to be
valid, enforceable and perfected and prior to all other Liens other than
Permitted Liens or if Borrower or any Governmental Authority shall assert any of
the foregoing; or
p. MATERIAL ADVERSE EFFECT - if there is any change in
Borrower's financial condition which, in Lender's reasonable opinion, has or
would be reasonably likely to have a Material Adverse Effect, or
8.2. CURE: Nothing contained in this Agreement or the Loan Documents
shall be deemed to compel Lender to accept a cure of any Event of Default
hereunder.
8.3. RIGHTS AND REMEDIES ON DEFAULT:
a. To the extent permitted by law, in addition to all other
rights, options and remedies granted or available to Lender under this Agreement
or the Loan Documents (each of which is also then exercisable by Lender), or
otherwise available at law or in equity, upon or at any time after the
occurrence and during the continuance of an Event of Default, Lender may, in its
discretion, declare the Obligations immediately due and payable, all without
demand, notice, presentment or protest or further action of any kind (it also
being understood that the occurrence of any of the events or conditions set
forth in Sections 8.1 (h),(i) or (j) shall automatically cause an acceleration
of the Obligations).
b. To the extent permitted by law, in addition to all other
rights, options and remedies granted or available to Lender under this Agreement
or the Loan Documents (each of which is also then exercisable by Lender), or
otherwise available at law or in equity, upon or at any time after the
acceleration of the Obligations following the occurrence of an Event of Default,
Lender may, in its discretion, exercise all rights under the UCC and any other
applicable law or in equity, and under all Loan Documents permitted to be
exercised after the occurrence of an Event of Default, including, to the extent
permitted by law, the following rights and remedies (which list is given by way
of example and is not intended to be an exhaustive list of all such rights and
remedies):
i. The right to take possession of, send notices regarding
and collect directly the Collateral, with or without judicial process (including
without limitation the right to notify the United States postal authorities to
redirect mail addressed to Borrower to an address designated by Lender); or
ii. By its own means or with judicial assistance, enter
Borrower's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on such premises in compliance with
27
subsection (c) below, without any liability for rent, storage, utilities or
other sums, and Borrower shall not resist or interfere with such action; or
iii. Require Borrower at Borrowers' expense to assemble all
or any part of the Collateral (other than real estate or fixtures) and make it
available to Lender at any place designated by Lender; or
c. Borrower hereby agrees that a notice received by it at least
ten (10) days before the time of any intended public sale or of the time after
which any private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable inventory or Collateral which
threatens to speedily decline in value or which is sold on a recognized market
may be sold immediately by Lender without prior notice to Borrower. Borrower
covenants and agrees not to interfere with or impose any obstacle to Lender's
exercise of its rights and remedies with respect to the Collateral, after the
occurrence of an Event of Default hereunder. Lender shall have no obligation to
clean up or prepare the Collateral for sale. If Lender sells any of the
Collateral upon credit, Borrower will only be credited with payments actually
made by the purchaser thereof, that are received by Lender. Lender may, in
connection with any sale of the Collateral specifically disclaim any warranties
of title or the like.
8.4. NATURE OF REMEDIES: Except to the extent prohibited by law,
all rights and remedies granted Lender hereunder and under the Loan Documents,
or otherwise available at law or in equity, shall be deemed concurrent and
cumulative, and not alternative remedies, and Lender may proceed with any number
of remedies at the same time until all Obligations are satisfied in full. The
exercise of any one right or remedy shall not be deemed a waiver or release of
any other right or remedy, and Lender, upon or at any time after the occurrence
of an Event of Default, may proceed against Borrower, at any time, under any
agreement, with any available remedy and in any order.
8.5. SET-OFF: Except to the extent prohibited by law, if any bank
account of Borrower with Lender or any participant is attached or otherwise
liened or levied upon by any third party, Lender (and such participant) shall
have and be deemed to have, without notice to Borrower, the immediate right of
set-off and may apply the funds or amount thus set-off against any of Borrower's
Obligations hereunder.
SECTION IX. MISCELLANEOUS
9.1. GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF NEW YORK. EXCEPT TO THE EXTENT PROHIBITED BY LAW, THE PROVISIONS OF THIS
AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE
DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL
NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE
AND EFFECT.
9.2. INTEGRATED AGREEMENT: The Note, the other Loan Documents, all
related agreements, and this Agreement shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lender's
rights and remedies. If, after applying the foregoing, an inconsistency still
exists, the provisions of this Agreement shall constitute an amendment thereto
and shall control.
28
9.3. WAIVER: To the extent permitted by law, no omission or delay by
Lender in exercising any right or power under this Agreement or any related
agreements and documents will impair such right or power or be construed to be a
waiver of any Default, or Event of Default or an acquiescence therein, and any
single or partial exercise of any such right or power will not preclude other or
further exercise thereof or the exercise of any other right, and as to Borrower
no waiver will be valid unless in writing and signed by Lender and then only to
the extent specified.
9.4. INDEMNITY:
a. Borrowers release and shall indemnify, defend and hold
harmless Lender and its respective officers, employees and agents, of and from
any claims, demands, liabilities, obligations, judgments, injuries, losses,
damages and costs and expenses (including, without limitation, reasonable legal
fees) resulting from (i) acts or conduct of Borrower under, pursuant or related
to this Agreement and the other Loan Documents, (ii) Borrower's breach or
violation of any representation, warranty, covenant or undertaking contained in
this Agreement or the other Loan Documents, (iii) Borrower's failure to comply
with any or all laws, statutes, ordinances, governmental rules, regulations or
standards, whether federal, state or local, or court or administrative orders or
decrees, (including without limitation Environmental Laws, etc.), and (iv) any
claim by any other creditor of Borrower against Lender arising out of any
transaction whether hereunder or in any way related to the Loan Documents and
all costs, expenses, fines, penalties or other damages resulting therefrom,
unless, in each case, resulting from acts or conduct of Lender constituting
willful misconduct or gross negligence.
b. Promptly after receipt by an indemnified party under
subsection (a) above of notice of the commencement of any action by a third
party, such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof. The omission so to notify the
indemnifying party shall relieve the indemnifying party from any liability which
it may have to any indemnified party under such subsection only if the
indemnifying party is unable to defend such actions as a result of such failure
to so notify. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnified party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation.
9.5. TIME: Whenever Borrower shall be required to make any payment,
or perform any act, on a day which is not a Business Day, such payment may be
made, or such act may be performed, on the next succeeding Business Day.
9.6. EXPENSES OF LENDER: At Closing and from time to time
thereafter, Borrower will pay upon demand of Lender all reasonable costs, fees
and expenses of Lender in connection with (i) the analysis, negotiation,
preparation, execution, administration, delivery and termination of this
29
Agreement, and other Loan Documents and the documents and instruments referred
to herein and therein, and any amendment, amendment and restatement, supplement,
waiver or consent relating hereto or thereto, whether or not any such amendment,
amendment and restatement, supplement, waiver or consent is executed or becomes
effective, search costs, the reasonable fees, expenses and disbursements of
counsel for Lender, any fees or expenses incurred by Lender under Section 6.11
for which Borrower is obligated thereunder, and reasonable charges of any expert
consultant to Lender, (ii) the enforcement of Lender's rights hereunder, or the
collection of any payments owing from, Borrower under this Agreement and/or the
other Loan Documents or the protection, preservation or defense of the rights of
Lender hereunder and under the other Loan Documents, and (iii) any refinancing
or restructuring of the credit arrangements provided under this Agreement and
other Loan Documents in the nature of a "work-out" or of any insolvency or
bankruptcy proceedings, or otherwise (including the reasonable fees and
disbursements of counsel for Lender and, with respect to clauses (ii) and (iii),
reasonable allocated costs of internal counsel) (collectively, the "Expenses").
9.7. BROKERAGE: This transaction was brought about and entered into
by Lender and Borrower acting as principals and without any brokers, agents or
finders being the effective procuring cause hereof. Borrower represents that
they have not committed Lender to the payment of any brokerage fee, commission
or charge in connection with this transaction. If any such claim is made on
Lender by any broker, finder or agent or other person, Borrower hereby
indemnifies, defends and saves such party harmless against such claim and
further will defend, with counsel satisfactory to Lender, any action or actions
to recover on such claim, at Borrower's own cost and expense, including such
parties' reasonable counsel fees. Borrower further agrees that until any such
claim or demand is adjudicated in such parties' favor, the amount demanded shall
be deemed an Obligation of Borrower under this Agreement.
9.8. NOTICES:
a. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if delivered in person
to the person listed below on the date so delivered or if sent by telecopy or by
nationally recognized overnight courier on the following business day after
deposit with such courier, as follows, unless such address is changed by written
notice hereunder:
If to Lender to: The Berkshire Bank
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: Blank Rome LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
30
If to Borrower to: Monticello Raceway Management, Inc.
▇▇▇▇▇ ▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
b. Lender shall be fully entitled to rely upon any telecopy
transmission or other writing purported to be sent by any Authorized Officer as
being genuine and authorized.
9.9. HEADINGS: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
9.10. SURVIVAL: All warranties, representations, and covenants made
by Borrowers herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Agreement, shall be considered to have been relied upon by Lender, and
shall survive the delivery to Lender of the Notes, regardless of any
investigation made by Lender or on its behalf. All statements in any such
certificate or other instrument prepared and/or delivered for the benefit of
Lender shall constitute warranties and representations by Borrowers hereunder.
Except as otherwise expressly provided herein, all covenants made by Borrowers
hereunder or under any other agreement or instrument shall be deemed continuing
until the Loan, all interest, fees and Expenses are satisfied in full. All
indemnification obligations under this Agreement, including under Section 6.5,
9.4 and 9.6, shall survive the termination or assignment, if requested, of this
Agreement.
9.11. SUCCESSORS AND ASSIGNS: This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties. Borrower may not transfer, assign or delegate any of its duties or
obligations hereunder. Borrower acknowledges and agrees that Lender may at any
time, and from time to time, (a) sell participating interests in the Loan, and
Lender's rights hereunder to other financial institutions, and (b) sell,
transfer, or assign the Loan and Lender's rights hereunder, to any one or more
additional banks or financial institutions, subject (as to Lender's rights under
this clause (b)) to Borrower's written consent, which consent shall not be
unreasonably withheld; provided that, no consent under this clause (b) shall be
required if an Event of Default exists at the time of such sale, transfer or
assignment.
9.12. DUPLICATE ORIGINALS: Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
9.13. MODIFICATION: No modification hereof or any agreement referred
to herein shall be binding or enforceable unless in writing and signed by
Borrower and Lender.
9.14. SIGNATORIES: Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
31
9.15. THIRD PARTIES: No rights are intended to be created hereunder,
or under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrower's duty of
performance, including, without limitation, Borrower's duties under any account
or contract with any other Person.
9.16. DISCHARGE OF TAXES, BORROWERS' OBLIGATIONS, ETC.: Lender, in
its sole discretion, shall have the right at any time, and from time to time,
with at least ten (10) days prior notice to Borrower if any Borrower fails to do
so, to: (a) pay for the performance of any Borrower's obligations hereunder, and
(b) discharge taxes or Liens, at any time levied or placed on Borrower's
Property in violation of this Agreement unless Borrower is in good faith with
due diligence by appropriate proceedings contesting such taxes or Liens and
maintaining proper reserves therefor in accordance with GAAP.
9.17. OTHER TAX LIABILITIES: In the event that any Lien, assessment
or tax liability against any Borrower shall arise in favor of any taxing
authority, whether or not notice thereof shall be filed or recorded as may be
required by law, Lender shall have the right (but shall not be obligated, nor
shall Lender hereby assume the duty) to pay any such Lien, assessment or tax
liability by virtue of which such charge shall have arisen; provided, however,
that Lender shall not pay any such tax, assessment or Lien if the amount, after
five days notice to Borrower, applicability or validity thereof is being
contested in good faith and by appropriate proceedings by Borrower. Any sum or
sums which Lender shall have paid for the discharge of any such Lien shall be
paid by Borrowers to Lender with interest thereon at the rate applicable to the
Loan, upon demand, and Lender shall be subrogated to all rights of such taxing
authority against Borrower.
9.18. CONSENT TO JURISDICTION.: Borrower and Lender each hereby
irrevocably consent to the non-exclusive jurisdiction of the Courts of the state
of New York in any and all actions and proceedings whether arising hereunder or
under any other agreement or undertaking. Borrower and Lender waive any
objection which either party may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens. Borrower irrevocably agrees to service
of process by certified mail, return receipt requested to the address of the
appropriate party set forth herein.
9.19. ADVERTISEMENT:
a. Upon approval from Borrower, not to be reasonably withheld,
Lender shall have the right to announce and publicize the financing to Borrower
established hereunder as it deems appropriate, by means and media selected by
Lenders. Such publication may include all pertinent information relating to such
financing, including without limitation, the term, purpose, pricing, loan
amount, name of Borrower and location of any Real Property, provided, however
that Lender shall not use the name Empire Resorts, Inc.
b. Lender shall also have the right to display a sign at the
Real Property which indicates that Lender is providing the financing, subject to
Borrower's approval of size, content and location of sign, not to be reasonably
withheld. If such sign is provided, Borrower shall cause the sign to be
displayed as requested by Lender and shall maintain such display during the
period requested by Lender.
32
c. All expenses related to publicizing the financing shall be
the sole responsibility of Lender.
9.20. WAIVER OF JURY TRIAL: BORROWER AND LENDER EACH HEREBY WAIVE
ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY
LITIGATION, PROCEEDING, CLAIM OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO
ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS
INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT,
MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE
TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.
9.21. CONSEQUENTIAL OR PUNITIVE DAMAGES: Neither Lender nor Borrower
nor any of their respective representatives, agents or attorneys, shall be
liable for any consequential or punitive damages arising from any breach of
contract, tort or other wrong relating to the transactions contemplated by this
Agreement, or any of the Loan Documents, or establishment, administration or
collection of the Obligations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
33
WITNESS the due execution of this Agreement as a document under seal
as of the date first written above.
BORROWER: MONTICELLO RACEWAY MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
LENDER: THE BERKSHIRE BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇
---------------------------
Name:
Title:
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
S-1