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EXHIBIT 10.12
IMPERIAL BANK October 10, 1995
000 X. Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Subject: CREDIT TERMS AND CONDITIONS
Gentlemen:
To induce you ("Bank") to make loans to Inland Casino Corporation (herein
called "Borrower"), and in consideration of any loan or loans you, in your sole
discretion, may make to Borrower, Borrower warrants and agrees as follows:
A. Borrower Represents and Warrants that:
1. EXISTENCE AND RIGHTS. Borrower is a Corporation. Borrower is duly
organized and existing and in good standing under the laws of the State of
California without limit as to the duration of its existence and is authorized
and in good standing to do business in the State of California; Borrower has
powers and adequate authority, rights and franchises to own its property and to
carry on its business as now conducted, and is duly qualified and in good
standing in each State in which the character of the properties owned by it
therein or the conduct of its business makes such qualification necessary; and
Borrower has the power and adequate authority to make and carry out this
Agreement. Borrower has no investment in any other business entity.
2. AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement are duly authorized and do not require the consent or approval
of any governmental body or other regulatory authority; are not in
contravention of or in conflict with any law or regulation or any term or
provision of Borrower's articles of incorporation, by-laws, or Articles of
Association, as the case may be, and this Agreement is the valid, binding and
legally enforceable obligation of Borrower in accordance with its terms.
3. NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any of
its property may be bound or affected, and do not cause any lien, charge or
other encumbrance to be created or imposed upon any such property by reason
thereof.
4. LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority. Borrower also agrees to notify you in
writing of any future litigation threatened against or affecting borrower.
5. FINANCIAL CONDITION. The balance sheet of Borrower as of June 30,
1995 and the related profit and loss statement for the quarter ended on that
date, a copy of which has heretofore been delivered to you by Borrower, and all
other statements and data submitted in writing by Borrower to you in connection
with this request for credit are true and correct, and said balance sheet and
profit and loss statement truly present the financial condition of Borrower as
of the date thereof and the results of operations for the period covered
thereby, and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no material adverse changes in the ordinary course of business. Borrower has no
knowledge or any liabilities, contingent or otherwise, at such date not
reflected in said balance sheet, and Borrower has not entered into any special
commitments or substantial contracts which are not reflected in said balance
sheet, other than in the ordinary and normal course of its business, which may
have a materially adverse effect upon its financial condition, operations or
business as now conducted.
6. TITLE TO ASSETS. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted by
Section C.3 hereof.
7. TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
8. TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses
all necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
9. REGULATION U. The proceeds of the notes have not been used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
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B. Borrower agrees that so long as it is indebted to you, under
borrowings, or other indebtedness, it will, unless you shall otherwise consent
in writing:
1. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment.
3. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect upon
its financial condition or the loss of any right of redemption from any sale
thereunder; and
(b) It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed by it
adequate with respect thereto.
4. CASH FLOW COVERAGE. Maintain a minimum ratio of cash flow, defined
as net profits plus management agreement acquisition cost amortization expense,
to current portion of long-term debt and current portion of capitalized leases
of 3.0 to 1.0. This ratio shall be calculated quarterly with the then current
item as the denominator and the rolling previous four quarters cash flow as the
numerator.
5. RESTRICTED CASH. Maintain a minimum daily collected balance of
$1,000,000 in total in all Borrower's deposit accounts.
6. NOTICE OF DEFAULT. Promptly notify the Bank in writing of the
occurrence of any event of default hereunder or event which upon the giving
notice and lapse of time would be an event of default.
7. RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit your representatives to have access to,
and to examine its properties, books and records at all reasonable times during
normal business hours; and furnish you:
(a) As soon as available, and in any event within 45 days after the
close of each quarter of each fiscal year of Borrower, commencing
with the quarter next ending, a balance sheet, profit and loss
statement and reconciliation of Borrower's capital accounts as of
the close of such period and covering operations for the portion of
Borrower's fiscal year ending on the last day of such period, all
in reasonable detail and stating in comparative form the figures
for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and
certified by an appropriate officer of Borrower, subject, however,
to year-end audit adjustments;
(b) As soon as available, and in any event within 90 days after the
close of each fiscal year of Borrower, a report of audit of Company
as of the close of and for such fiscal year, all in reasonable
detail and stating in comparative form the figures as of the close
of and for the previous fiscal year, with the unqualified opinion
of accountants satisfactory to you.
(c) Within ninety (90) days after the end of each fiscal year of
Borrower, a certificate of chief financial officer of Borrower,
stating that Borrower has performed and observed each and every
covenant contained in this Letter to be performed by it and that no
event has occurred and no condition than exists which constitutes
an event of default hereunder or would constitute such an event of
default upon the lapse of time or upon the giving of notice and the
lapse of time specified herein; or, if any such event has occurred
or any such condition exists, specifying the nature thereof;
(d) Promptly after the receipt thereof by Borrower, copies of any
detailed audit reports submitted to Borrower by independent
accountants in connection with each annual or interim audit of the
accountants of Borrower made by such accountants;
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(e) Promptly after the same are available, copies of all
such proxy statements, financial statements and reports as
Borrower shall send to its stockholders, if any, and copies of
all reports which Borrower may file with the Securities and
Exchange Commission or any governmental authority at any time
substituted therefor; and (f) Such other information relating
to the affairs or Borrower as you reasonably may request from
time to time.
C. Borrower agrees that so long as it is indebted to you, it will not, without
your written consent:
1. TYPE OF BUSINESS: Management; Executives' Compensation. Make any
substantial change in the character of its business; or make any change in its
executive management; or allow the salary, bonuses or other compensation of any
of its executives, to exceed $800,000 per annum.
2. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness (including without limitation, any indebtedness described in
paragraph C3 below) in excess of $2,000,000, for borrowed moneys other than
loans from you except obligations now existing as shown in the financial
statement dated June 30, 1995 excluding those being refinanced by your bank; or
sell or transfer, either with or without recourse, any accounts or notes
receivable or any moneys due to become due. All Imperial Bank debt will be
senior to any and all other debt.
3. LIENS AND ENCUMBRANCES. No more than $2MM in addition to Imperial
Bank indebtedness over the life of loan. Create, incur, or assume any mortgage,
pledge, encumbrance, lien or charge of any kind (including the charge upon
property at any time purchased or acquired under conditional sale or other
title retention agreement) upon any asset now owned or hereafter acquired by
it, other than liens for taxes not delinquent, liens in your favor and liens to
third parties in the Maximum aggregate sum of $2,000,000.
4. OFFICER LOANS. Make any loans or advances to any person or other
entity other than in the ordinary course of its business as now conducted.
5. ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION.
Liquidate, dissolve, merge or consolidate, or commence any proceedings
therefor; or sell any assets except in the ordinary and normal course of its
business as now conducted; or sell, lease, assign, or transfer any substantial
part of its business or fixed assets, or any property or other assets necessary
for the continuance of its business as now conducted, including without
limitation the selling of any property or other asset accompanied by the
leasing back of the same.
6. DIVIDENDS, STOCK PAYMENTS. If a corporation, declare or pay any
dividend (other than dividends payable in common stock of Borrower) or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchase, redeem or retire any of such stock; except, however,
Borrower may pay a cash dividend to its shareholders in an amount not to exceed
0% of net after tax earnings for such dividend period.
7. CAPITAL EXPENDITURES. Make or incur obligations for capital
expenditures in excess of $10,000,000 during the period from the date hereof to
9/30/96 or in excess of $10,000,000 in any one fiscal year thereafter.
8. LEASE LIABILITY. Make or incur liability for payments of rent under
leases of real property in excess of $1,000,000 and personal property in excess
of $1,000,000 in any one fiscal year.
D. The occurrence of any of the following events of default shall, at your
option, terminate your commitment to lend and make all sums of principal and
interest then remaining unpaid on all Borrower's indebtedness to you
immediately due and payable, all without demand, presentment or notice, all of
which are hereby expressly waived;
1. FAILURE TO PAY NOTE. Failure to pay any installment of principal of
or interest on any indebtedness of Borrower to you.
2. BREACH OF COVENANT. Failure of Borrower to perform any other term
or condition of this Letter of Inducement binding upon Borrower.
3. BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
material respect.
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4. INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or
any of its assets and shall remain unvacated, unbonded or unstayed for a period
of 10 days or in any event later than five days prior to the date of any
proposed sale thereunder.
6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be consented to.
7. BALANCE ACTION. Borrower initiating or otherwise taking any action
to cause restricted cash balances required under B.5. above to fall below
$1,000,000.
8. OTHER EVENT. Any action or event, whether within or outside
Borrower's control, which in Bank's sole opinion jeopardizes Borrower's ability
to conduct normal operations.
E. Miscellaneous Provisions.
1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Imperial Bank or any holder of Notes issued hereunder, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this agreement or any note
issued in connection with a loan that Imperial Bank may make hereunder, are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
2. WARRANTS. As a condition to Bank's obligation to disburse any loan
proceeds to Borrower, Borrower shall execute and deliver to Bank an agreement,
in form and content acceptable to Bank, granting to Bank a 5 year Warrant to
purchase 40,000 shares of Common Stock of Borrower at an exercise price of
$5.00 per share.
3. DOCUMENTATION FEE. $250.00 due upon execution of this agreement.
INLAND CASINO CORPORATION
By: /s/ X.X. XXXX
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X.X. Xxxx
Title: Executive Vice President
Date: October 10, 1995
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