UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(XX) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
Commission file number: 001-12419
SHOWBOAT MARINA CASINO PARTNERSHIP
SHOWBOAT MARINA FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1978576
NEVADA 88-0356197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE SHOWBOAT PLACE, EAST CHICAGO, INDIANA 46312
(Address of principal executive offices) (Zip Code)
(219) 378-3000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of the issuer's
classes of common stock, as of the latest practicable date.
Showboat Marina Casino Partnership Not applicable
Showboat Marina Finance Corporation 1,000 shares of common
stock, $1.00 par value
as of July 31, 1997.
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
AND
SHOWBOAT MARINA PARTNERSHIP (PREDECESSOR OR SMP)
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3-4
Condensed Consolidated Statements of Operations -
For the three months ended June 30, 1997 and
1996 5
Condensed Consolidated Statements of Operations -
For the six months ended June 30,1997 and the
period March 29, 1996 through June 30, 1996 6
Condensed Consolidated Statements of Cash Flows-
For the six months ended June 30, 1997, the
period from March 29, 1996 through June 30,
1996 and the period from January 1, 1996
through March 28, 1996 7
Notes to the Condensed Consolidated Financial
Statements 8-9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
PART II OTHER INFORMATION
ITEMS 1 - 6 13
SIGNATURES 14
EXHIBIT INDEX 15
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS June 30, December
1997 31, 1996
(unaudited)
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,985 $ 599
Short-term investments held in escrow 103 69,002
Receivables, net 918 1,601
Inventories 506 -
Prepaid expenses 1,164 -
Total current assets 21,676 71,202
Property and equipment 173,059 100,601
Less accumulated depreciation and
amortization (2,191) -
170,868 100,601
Other assets:
Economic development and licensing costs,
net of accumulated amortization of
$229,000 and -0- at June 30, 1997 and
December 31, 1996, respectively 11,241 7,637
Deposits and other assets 1,503 2,158
Debt issuance costs, net of accumulated
amortization of $182,000 and -0- at June
30, 1997, and December 31, 1996,
respectively 6,220 6,296
18,964 16,091
$ 211,508 $ 187,894
See accompanying notes to condensed consolidated financial statements.
</TABLE>
(continued)
3
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<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(CONTINUED)
LIABILITIES AND PARTNERS' CAPITAL June 30, 1997 December 31, 1996
(Unaudited)
(In thousands)
<S> <C> <C>
Current liabilities
Current maturities of long-term debt $ 5,284 $ -
Accounts payable 6,577 3,717
Construction payables 9,636 4,037
Accrued liabilities 11,303 5,557
Total current liabilities 32,800 13,311
Long-term debt, excluding current
maturities 154,609 140,000
Partners' capital:
Capital contributions 40,000 39,000
Accumulated deficit (15,901) (4,417)
Total Partners' Capital 24,099 34,583
$ 211,508 $ 187,894
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
June 30, June 30,
1997 1996
(In thousands)
<S> <C> <C>
Revenues:
Casino $ 32,902 $ -
Food and beverage 2,133 -
Other 486 -
35,521 -
Less complimentaries (681) -
Net revenues 34,840 -
Operating costs and expenses:
Casino 16,702 -
Food and beverage 2,156 -
General and administrative 6,507 -
Selling, advertising and promotion 4,155 -
Depreciation and amortization 2,429
Preopening costs 9,577 -
41,526 -
Loss from operations (6,686) -
Other (income) expense:
Interest income (62) (1,995)
Interest expense, net of amounts
capitalized 4,528 3,834
4,466 1,839
Net loss $ (11,152) $ (1,839)
See accompanying notes to condensed consolidated financial statements
</TABLE>
5
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<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE PERIOD
MARCH 29, 1996 THROUGH JUNE 30, 1996
(UNAUDITED)
June 30, June 30,
1997 1996
(In thousands)
<S> <C> <C>
Revenues:
Casino $ 32,902 $ -
Food and beverage 2,133 -
Other 486 -
35,521 -
Less complimentaries (681) -
Net revenues 34,840 -
Operating costs and expenses:
Casino 16,702 -
Food and beverage 2,156 -
General and administrative 6,507 -
Selling, advertising and promotion 4,155 -
Depreciation and amortization 2,429 -
Preopening costs 9,577
41,526 $ -
Loss from operations (6,686) -
Other (income) expense:
Interest income (775) $ (2,054)
Interest expense, net of amounts
capitalized 5,573 3,909
4,798 1,855
Net loss $ (11,484) $ (1,855)
See accompanying notes to condensed consolidated financial statements.
</TABLE>
6
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<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
SHOWBOAT MARINA CASINO PARTNERSHIP (PREDECESSOR or SMP)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
THE PERIOD FROM MARCH 29, 1996 THROUGH JUNE 30, 1996 AND
THE PERIOD FROM JANUARY 1, 1996 THROUGH MARCH 28, 1996
(UNAUDITED)
SMCP Predecessor
Six Months Period from Period from
Ended March 29, 1996 January 1, 1996
June 30, 1997 through through
June 30, 1996 March 28, 1996
(In thousands)
<S> <C> <C> <C>
Net cash provided by (used in) operating activities $ (610) $ 4,287 $ 99
Cash flows from investing activities:
Economic development costs (3,833) (70) (7)
Purchases of property, equipment and
payments for construction in progress (55,873) (19,155) (5,730)
Sale of short term investments 68,899 - -
Net cash provided by (used in) investing activities 9,193 (19,225) (5,737)
Cash flows from financing activities:
Proceeds from issuance of notes payable - 140,000 -
Proceeds from additional long-term financing 9,636 - -
Repayments of long-term debt (727) - -
Debt issuance costs (106) (5,555) (550)
Capital contributions 1,000 22,287 5,830
Net cash provided by financing activities 9,803 156,732 5,280
Net increase (decrease) in cash and equivalents 18,386 141,794 (358)
Cash and cash equivalents at beginning of period 599 - 358
Cash and cash equivalents at end of period $ 18,985 $ 141,794 $ -
Supplemental disclosures of cash flow information
and non-cash investing and financing activities:
Cash paid during the period for
Interest, net of amounts capitalized 5,432 - -
Equipment acquired under capital leases 10,984 - -
See accompanying notes to condensed consolidated financial statements.
</TABLE>
7
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The accompanying consolidated financial statements
present the financial position, results of operations and
cash flows of Showboat Marina Casino Partnership (SMCP) and
its wholly owned subsidiary, Showboat Marina Finance
Corporation (SMFC) as of June 30, 1997 and December 31, 1996
and for the periods ended June 30, 1997 and 1996. These
financial statements also present the cash flows of Showboat
Marina Partnership (Predecessor or SMP) for the period from
January 1, 1996 through March 28, 1996. The Predecessor had
no operations through March 28, 1996, other than development
and licensing activities, the cost of which were capitalized
and subsequently contributed to SMCP. Therefore a statement
of income for the Predecessor is not applicable.
SMCP is a general partnership and was formed as of
March 1, 1996, for the purpose of developing a riverboat
casino complex in East Chicago, Indiana to be operated on
Lake Michigan. On April 15, 1997, SMCP received a riverboat
owner's license from the Indiana Gaming Commission. After
successful completion of a test cruise, SMCP commenced
operations on April 18, 1997. SMFC was incorporated on
March 7, 1996, to assist SMCP in financing the East Chicago
Showboat. SMP was formed on January 31, 1994 and had been
developing the project prior to the formation of SMCP. On
March 28, 1996, SMP contributed substantially all of its
assets and liabilities to SMCP.
SMCP is owned 99% by SMP and 1% by Showboat Marina
Investment Partnership. SMCP is effectively owned 55% by
Showboat, Inc. (Showboat) and 45% by Waterfront
Entertainment and Development, Inc. (Waterfront) through
various partnership interests.
Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been consolidated or omitted. These condensed
consolidated financial statements should be read in
conjunction with the financial statements and notes thereto
included in SMCP's December 31, 1996 annual report on Form
10-K.
The accompanying unaudited consolidated financial
statements contain all adjustments which are only of a
recurring nature, in the opinion of management, necessary
for a fair statement of the results of the interim period.
The results of operations for the interim periods are not
indicative of results of operations for an entire year.
Certain prior period balances have been reclassified to
conform to the current period's presentation.
PREOPENING COSTS
Preopening costs were capitalized until the
riverboat casino complex commenced operations, at which time
SMCP ceased capitalizing and charged such costs to
operations. The preopening costs consisted primarily of
payroll, consulting fees, training and related travel costs.
CASINO REVENUE AND COMPLIMENTARIES
Casino revenues represent the net win from gaming
wins and losses. Revenues include the retail value of food,
beverage, and other goods and services provided to customers
8
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
without charge. Such amounts are then deducted as
promotional allowances. The estimated cost of providing
these promotional allowances are charged to the casino
department.
INVENTORIES
Inventories are stated at the lower of cost or
market. Cost is determined using the first-in, first-out
method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost.
Depreciation is computed using the straight-line method.
The cost of maintenance and repairs is charged to expense as
incurred; significant renewals and betterments are
capitalized.
Estimated useful lives for property and equipment
are 5 to 15 years for land improvements, 10 to 40 years for
vessel and building and 2 to 10 years for furniture and
equipment.
2. LONG-TERM DEBT
During March 1997, SMCP entered into an equipment
lease for approximately $11.0 million secured by the
equipment purchased with the proceeds from the financing.
The term of the lease is 48 months and accrues interest at
11.0%.
In June 1997, SMCP secured additional equipment
financing of approximately $10.0 million. The equipment
financing was secured by certain equipment purchased during
the construction of the riverboat casino complex. The term
of the equipment financing is three years and accrues
interest at 11.1%.
3. COMMITMENTS AND CONTINGENCIES
From the date of opening through June 30, 1997,
SMCP has accumulated approximately $.9 million in management
fees due under its management contract with SMP. However,
the payment of these fees are limited by SMCP's bond
indenture and require SMCP to meet certain fixed charge
coverage ratios before any payment can be made. Due to
these restrictions, SMCP has not accrued any management
fees.
9
<PAGE>
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Showboat Marina Casino Partnership ("SMCP" or the
"Partnership"), owns and operates a riverboat casino, the
Showboat Mardi Gras Casino, located in East Chicago, Indiana
(the "East Chicago Showboat"). The East Chicago Showboat
began operations on April 18, 1997. The complex consists of
a casino gaming vessel and a land based support facility.
The gaming vessel contains 53,000 square feet of gaming
space with approximately 1,770 slot machines and 90 table
games. The land based facility consists of a 100,000 square
foot pavilion, an 1,800 space parking garage and surface
parking for 1,000 vehicles. The pavilion contains a coffee
shop/buffet, upscale restaurant, cocktail lounge, gift shop,
hydraulic bandstand platform, ticket promotions area and
administrative offices.
In accordance with IGC regulations the vessel
conducts ten 2 hour cruises throughout the gaming day.
Entrance to the vessel is limited to the first 30 minutes of
each two hour cruise, with the vessel away from the dock for
a period of 1 hour.
The Partnership is a general partnership which was
formed as of March 1, 1996 for the purpose of developing and
operating the East Chicago Showboat on Lake Michigan. Prior
to the formation of the Partnership, the complex was
developed by Showboat Marina Partnership, (the "Predecessor"
or "SMP") which was formed on January 31, 1994. On March
28, 1996, the Predecessor contributed substantially all of
its assets and liabilities to the Partnership. Showboat
Marina Finance Corporation ("SMFC") is a wholly owned
subsidiary of the Partnership and was formed on March 7,
1996 to assist the Partnership in the financing of the East
Chicago Showboat. The Partnership is owned 99% by the
Predecessor and 1% by Showboat Marina Investment
Partnership. The Partnership is effectively owned 55% by
Showboat, Inc. and 45% by Waterfront Entertainment and
Development, Inc. through various partnership interests.
Information contained in this quarterly report is
supplemental to disclosures in the Partnership's year end
financial reports. This management's discussion and
analysis of financial condition and results of operations
should be read in conjunction with the management's
discussion and analysis of financial condition and results
of operations included in the Partnership's December 31,
1996 Annual Report on Form 10-K.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997
Prior to the commencement of operations on April
18, 1997, the activities of the Partnership and the
Predecessor were limited to applying for the riverboat
owner's license, securing the land for, arranging for the
financing of and completing the design and construction of
the East Chicago Showboat. All costs, except for some
interest expense, had been capitalized. As a result, the
Partnership had no operating history for the quarter and six
months ended June 30, 1996. Since operations began in the
second quarter of 1997, operating results for the three and
six months ended June 30, 1997 were identical.
10
<PAGE>
REVENUES
For the three and six months ended June 30, 1997,
the Partnership had gross revenues of $35.5 million. This
was offset by $.7 million of complimentaries, resulting in
net revenues of $34.8 million.
Casino revenues for the three and six months ended
June 30, 1997 were $32.9 million, and consisted of $8.7
million in table games revenue and $24.2 million in slot
revenue. Slot revenue represents 73.6% of the total casino
win and table game revenue makes up the remaining 26.4% of
the total casino win for the East Chicago Showboat. The
daily win per slot machine and table game was approximately
$190 and $1,348 respectively, with total gaming win per
patron of approximately $65.
LOSS FROM OPERATIONS
SMCP had income from operations in the amount of
$2.9 million, exclusive of $9.6 million of preopening costs.
Casino division expenses of $16.7 million included $10.0
million of gross revenue and admission taxes, as well as
$1.2 million of community benefit levies. SMCP is
currrently reviewing its operations in an effort
to improve its margin performance through cost controls and
marketing programs designed to enhance revenue. In
addition, the Partnership is evaluating all other
opportunities to improve profitability.
NET LOSS
For the quarter and six months ended June 30,
1997, the Partnership experienced net losses of $11.2
million and $11.5 million, respectively. These net losses
were primarily attributable to the write-off of preopening
costs in the amount of $9.6 million and interest expense.
For the quarter and period ended June 30, 1996 the net loss
was attributable to net interest expense.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of June 30, 1997 SMCP held cash and cash
equivalents of $19.0 million and short term investments of
$.1 million compared to $.6 million in cash and cash
equivalents and $69.0 million in short term investments at
December 31, 1996.
Since its inception, SMCP has met its capital
requirements through the $40.0 million capital contribution
(the "Capital Contribution"), the $133.9 million net
proceeds from the offering (the "Offering") of its 13 1/2 %
First Mortgage Notes due 2003 (the "East Chicago Notes") and
equipment financing. The East Chicago Notes were issued
under the Indenture dated as of March 26, 1996 (the "Note
Indenture") between SMCP, SMFC and American Bank National
Association as Trustee (in such capacity, the "Trustee" or
"Registrar"). The funds provided by these sources provided
sufficient amounts to develop and commence operations of the
East Chicago Showboat.
In March 1997, PDS Financial Corporation provided
an equipment lease of approximately $11.0 million. The
lease is secured by the equipment purchased with the
proceeds. The lease is for a term of 48 months and the rate
was fixed at 11.0%.
11
<PAGE>
In June 1997, FINOVA provided a loan of
approximately $10.0 million. The loan is secured by certain
equipment purchased during the construction of the riverboat
casino complex. The loan is for a term of 36 months and the
rate was fixed at 11.1%
Showboat, Inc. provided a standby equity
commitment (the "Standby Equity Commitment") pursuant to
which it has agreed to cause to be made up to an aggregate
of $30.0 million in additional capital contributions to SMCP
during the first three Operating Years (as defined in the
Standby Equity Commitment Agreement). The Standby Equity
Commitment is triggered when SMCP's Combined Cash Flow (as
defined in the Standby Equity Commitment) does not reach
$35.0 million in any one such Operating Year, subject to
certain terms and conditions. However, in no event shall
Showboat be required to contribute more than $15.0 million
in respect of any one such Operating Year. The Standby
Equity Commitment is subject to certain limitations,
qualifications, and exceptions.
SMCP expects to fund its operations, debt service
and capital needs from operating cash flow. No assurance
can be given, however, that operating cash flow will be
sufficient for that purpose. SMCP intends to establish
initial working capital reserves to provide for anticipated
short-term liquidity needs. If necessary and to the extent
permitted under the Indenture SMCP will seek, additional
financing through bank borrowings, debt or equity financing.
There can be no assurance that additional financing, if
needed, will be available to SMCP, or that, if available,
the financing will be on terms favorable to SMCP. There is
no assurance that SMCP's estimate of its reasonably
anticipated liquidity needs is accurate or that new business
developments or other unforeseen events will not occur,
resulting in the need to raise additional funds.
All statements contained herein that are not
historical facts, including but not limited to, statements
regarding SMCP's current business strategy, and SMCP's plans
for future development and operations, are based upon
current expectations. These statements are forward-looking
in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors
that could cause actual results to differ materially are the
following: the availability of sufficient capital to
finance SMCP's business plan on terms satisfactory to SMCP;
competitive factors, such as expansion of gaming in
Illinois, Indiana and Michigan, states from which SMCP
expects to draw significant numbers of patrons and an
increase in the number of casinos serving the Chicago
metropolitan area; changes in labor, equipment and capital
costs; general business and economic conditions; and other
factors described from time to time in SMCP's reports filed
with the Securities and Exchange Commission. SMCP cautions
the readers not to place undue reliance on any such forward-
looking statements, which statements are made pursuant to
the Private Litigation Reform Act of 1995 and, as such,
speak only as of the date made.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable. Notwithstanding, SMCP is a
defendant in various lawsuits, most of which relate to
routine matters incidental to its business. Management does
not believe that the outcome of such pending litigation, in
the aggregate, will have a material adverse effect on SMCP.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.01 Loan and Security Agreement dated June 30,
1997, by and between Showboat Marina Casino
Partnership and Finova Capital Corporation;
Intercreditor and Subordination Agreement
dated June 30, 1997, by and among Finova
Capital Corporation, Firstar Bank of
Minnesota, N.A. and Showboat Marina Casino
Partnership; DLJ Intercreditor and
Subordination Agreement dated June 30, 1997,
by and among Finova Capital Corporation,
Donaldson Lufkin & Jenrette Securities
Corporation, DLJ Capital Funding, Inc. and
Showboat Marina Casino Partnership; Secured
Promissory Note dated June 30, 1997, by and
between Showboat Marina Casino Partnership
and Finova Capital Corporation; and Vessel
Chattel Mortgage dated June 30, 1997, by and
between Showboat Marina Casino Partnership
and Finova Capital Corporation.
27.01 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Date August 14, 1997 SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana general
partnership
By: SHOWBOAT MARINA INVESTMENT By: SHOWBOAT MARINA PARTNERSHIP
PARTNERSHIP, an Indiana general an Indiana general
partnership, a general partner partnership, a partner
By: SHOWBOAT INDIANA INVESTMENT By: SHOWBOAT INDIANA INVESTMENT
LIMITED PARTNERSHIP, a Nevada LIMITED PARTNERSHIP, A
limited partnership, a general Nevada limited partnership,
partner a general partner
By: SHOWBOAT INDIANA, INC., a Nevada By: SHOWBOAT INDIANA, INC., a
corporation, its general partner Nevada corporation, its
general partner
By: /s/ J. Keith Wallace By: /s/ J. Keith Wallace
J. Keith Wallace J. Keith Wallace
President and Chief Executive President and Chief
Officer Executive Officer
By: /s/ Joseph G. O'Brien III By: /s/ Joseph G. O'Brien III
Joseph G. O'Brien III Joseph G. O'Brien III
Vice President Finance and Chief Vice President Finance and
Financial Officer Chief Financial Officer
By: WATERFRONT ENTERTAINMENT AND By: WATERFRONT ENTERTAINMENT
DEVELOPMENT, INC., an Indiana AND DEVELOPMENT, INC., an
corporation, a general partner Indiana corporation, a
general partner
By: /s/ Michael A. Pannos By: /s/ Michael A. Pannos
Michael A. Pannos Michael A. Pannos
President President
By: /s/Thomas S. Cappas By: /s/ Thomas S. Cappas
Thomas S. Cappas Thomas S. Cappas
Treasurer (principal financial Treasurer (principal
officer) financial officer)
SHOWBOAT MARINA FINANCE
CORPORATION, a Nevada
corporation
By: /s/ Michael A. Pannos
Michael A. Pannos
Secretary
By: /s/ Joseph G. O'Brien, III
Joseph G. O'Brien, III
Vice President Finance and
Chief Financial Officer
14
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<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
<S> <C> <C>
10.01 Loan and Security Agreement dated June 30,
1997, by and between Showboat Marina Casino
Partnership and Finova Capital Corporation;
Intercreditor and Subordination Agreement
dated June 30, 1997, by and among Finova
Capital Corporation, Firstar Bank of
Minnesota, N.A. and Showboat Marina Casino
Partnership; DLJ Intercreditor and
Subordination Agreement dated June 30,
1997, by and among Finova Capital
Corporation, Donaldson Lufkin & Jenrette
Securities Corporation, DLJ Capital
Funding, Inc. and Showboat Marina Casino
Partnership; Secured Promissory Note dated
June 30, 1997, by and between Showboat
Marina Casino Partnership and Finova
Capital Corporation; and Vessel Chattel
Mortgage dated June 30, 1997, by and
between Showboat Marina Casino Partnership
and Finova Capital Corporation.
27.01 Financial Data Schedule
</TABLE>
<PAGE>
LOAN AND SECURITY AGREEMENT
DATED JUNE 30, 1997
BY AND BETWEEN
SHOWBOAT MARINA CASINO PARTNERSHIP,
AN INDIANA GENERAL PARTNERSHIP,
AS BORROWER,
AND
FINOVA CAPITAL CORPORATION
AS LENDER
<PAGE>
LOAN AND SECURITY AGREEMENT
AGREEMENT, dated as of June 30, 1997, by and between
SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general
partnership ("BORROWER"), having its place of business at One
Showboat Place, East Chicago, Indiana 46312; and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("LENDER"), having a place of
business at 95 North Route 17 South, Paramus, New Jersey 07652.
W I T N E S S E T H :
WHEREAS, Borrower has requested Lender to make loans to
Borrower and Lender is willing to make such loans to Borrower
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and intending to be legally
bound hereby, the parties hereto covenant and agree as follows:
ARTICLE 1. DEFINITIONS; CONSTRUCTION
1.1 CERTAIN DEFINITIONS.
In addition to other words and terms defined elsewhere in
this Agreement, as used herein the following words and terms have
the following meanings, respectively, unless the context hereof
otherwise clearly requires:
"ADVANCE" means any advance made hereunder by Lender to
Borrower.
"ADVANCE TERMINATION DATE" means the earliest of (i)
October 1, 1997 or (ii) the date Advances aggregating an amount
equal to the Maximum Loan have been made or (iii) a date mutually
agreed upon between Lender and Borrower.
"AGREEMENT" means this Loan and Security Agreement as
amended, modified or supplemented from time to time.
"BOND PLACEMENT" means the sale of the First Mortgage Notes
due 2003 issued under the Indenture.
"BUSINESS DAY" means any day other than a Saturday, Sunday
or other day on which banking institutions are authorized or
obligated to close in New Jersey or Arizona.
"CLOSING DATE" means the date on which the parties enter
into this Agreement and all conditions to the making of the
Initial Advance contained in this Agreement and the other Loan
<PAGE>
Documents have been satisfied in Lender's sole and absolute
discretion.
"COLLATERAL" means all assets of Borrower in which Borrower
has granted or will grant a Lien to Lender, pursuant to this
Agreement or otherwise, including those assets described and
defined as Collateral in Section 6.1.
"CONSTITUENT DOCUMENTS" means the certificate of
incorporation, agreement of partnership or limited partnership,
organizational agreement, operating agreement, by-laws, or such
other similar document pursuant to which Borrower and/or the
Guarantors were organized or their affairs are governed.
"CONVERSION DATE" means the date, if any, on which the
outstanding Advances automatically convert to a Term Loan
pursuant to Section 2.9.2.
"DEFAULT" means an event which with the giving of notice or
the passage of time, or both, would constitute an Event of
Default.
"DELIVERY AND ACCEPTANCE RECEIPT" means a certificate in
form and substance satisfactory to Lender pursuant to which
Borrower acknowledges delivery of an Item of FF&E to it and
receipt and acceptance by it for all purposes.
"DISBURSEMENT DATE" has the meaning given to the term in
Section 2.5 hereof.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"EVENT OF DEFAULT" means any of the Events of Default
described in Section 7.1 hereof.
"EXECUTIVE OFFICER" means the managing general partner,
President, the Chief Executive Officer, or the Chief Financial
Officer of Borrower elected from time to time.
"FF&E" means all furniture, fixtures and equipment
(including but not limited to, kitchen and bar, communication,
surveillance, computer and office equipment, furniture fixtures,
and other equipment), heretofore or hereafter acquired by
Borrower and described in any Request for Advance and financed
(or refinanced by reimbursement to Borrower) with the proceeds of
the Loan or any Advance and any and all additions thereto,
substitutions and replacements of any of the foregoing, wherever
<PAGE>
located. Each item of FF&E is hereinafter referred to as an
"Item of FF&E".
"GAAP" means generally accepted accounting principles in
the United States of America (as such principles may change from
time to time) applied on a consistent basis (except for changes
in application in which Borrower's independent certified public
accountants concur), applied both to classification of items and
amounts.
"GAMING COMMISSION" means the Indiana Gaming Commission.
"GAMING LICENSE" means the license issued by the Gaming
Commission to Borrower to operate the Vessel as a gaming casino.
"INDENTURE" means the indenture dated as of March 28, 1996
among Borrower, SMFC and American Bank National Association as
Trustee.
"INSURANCE LETTER" means the letter from Lender to Borrower
agreed to by Borrower dated June 4, 1997 a copy of which is
annexed hereto.
"INTEREST RATE" means the Index Rate plus four and ninety
hundredths (4.90%) percent. The "INDEX RATE" shall be the
highest yield, as published in THE WALL STREET JOURNAL, on the
first (1st) Business Day preceding the Conversion Date, for
Treasury Notes having a maturity date on or closest to the
Maturity Date. Interest shall be calculated on the basis of a
year of 360 days and twelve months of thirty (30) days each and
charged on a daily basis.
"INTERIM INTEREST RATE" The rate of interest publicly
announced by Citibank, N.A. ("Citibank") in New York, New York,
from time to time as its Prime Rate plus two percent (2%) per
annum. The Prime Rate is not intended to be the lowest rate of
interest charged by Citibank to its borrowers.
"ITEM OF FF&E" has the meaning given to the term in the
definition of FF&E in this Section 1.1.
"LAW" means any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction,
writ, decree or award of any government or governmental agency.
"LEASEHOLD MORTGAGE" means the Leasehold Mortgage,
Assignment of Rents and Security Agreement dated as of March 28,
1996 made by Borrower to American Bank National Association as
Trustee under the Indenture.
<PAGE>
"LEGAL REQUIREMENTS" means any and all present and future
judicial, and administrative rulings or decisions, and any and
all present and future federal, state, and local laws,
ordinances, rules, regulations, permits and certificates, in each
case, in any way applicable to Borrower (or the ownership or use
of the Collateral or its other assets) or this transaction.
"LIEN" means any mortgage, pledge, lien, security interest
(including, without limitation, any preferred ships mortgage,
vessel chattel mortgage, conditional sale or other title
retention agreement), grant of a leasehold, charge or other
encumbrance of any nature whatsoever, and also means the filing
of or the agreement to give any financing statement or analogous
document under the UCC or analogous law of any jurisdiction.
"LOAN" means, as of any date of determination, the
aggregate amount of all Advances theretofore made hereunder.
"LOAN DOCUMENTS" means this Agreement, the Requests for
Advance, the Note, and any other agreements, instruments and
documents required to be, or which are, executed by Borrower in
connection with this Agreement or the Loan (as the same may from
time to time be amended, modified or supplemented).
"LP" means Showboat Indiana Investment L.P. an Indiana
limited partnership.
"MANAGEMENT AGREEMENT" means the agreement between Borrower
and SMP for the management by SMP of Borrower's business and
operations.
"MATURITY DATE" has the meaning given to that term in
Section 2.9.2 hereof.
"MAXIMUM LOAN" means the maximum aggregate amount to be
loaned hereunder not to exceed the lesser of (i) Eleven Million
Dollars ($11,000,000) or (ii) the actual cost to Borrower to
acquire the FF&E.
"NOTE" means the secured promissory note of Borrower
executed and delivered under this Agreement, in substantially the
form annexed hereto as Exhibit A with the blanks appropriately
filled in.
"OBLIGATIONS" means all of the indebtedness, liabilities
and obligations of every kind and nature of Borrower to Lender,
whether now existing or hereafter arising, whether or not
currently contemplated, howsoever arising, including, without
limitation, all indebtedness, liabilities and obligations arising
<PAGE>
under, in connection with or evidenced by this Agreement, the
Note, the other Loan Documents, or otherwise.
"OFFICE", when used in connection with Lender, means its
office located at 95 North Route 17 South, Paramus, New Jersey
07653, or such other office of Lender as may be designated in
writing from time to time by Lender to Borrower.
"PARTNERSHIP AGREEMENT" means the partnership agreement of
the Borrower.
"PERSON" means an individual, corporation, national banking
association, partnership, trust, unincorporated association,
joint venture, joint-stock company, government (including
political subdivisions), governmental authority or agency, Native
American tribe, or any other entity.
"PLAN" means any employee benefit plan which is covered by
ERISA and which is maintained by Borrower or, in the case of a
plan to which more than one employer contributes, to which
Borrower made contributions at any time within the five plan
years preceding the date of termination.
"PORT" means the port of East Chicago, Indiana.
"PREMISES" means the Vessel and the related land based
support facilities, at the Port to be constructed and operated by
Borrower, as a gaming casino from the Port as such facility is
more fully described in that certain Redevelopment Project Lease
between the City of East Chicago Redevelopment Authority and
Showboat Marina Partnership dated October 19, 1995 as
subsequently assigned to Borrower.
"REQUEST FOR ADVANCE" means a Request for Advance in the
form of Exhibit B annexed hereto.
"SHIP MORTGAGES" means collectively the First Preferred
Ship Mortgage on the Vessel made by Borrower in favor of American
Bank National Association, as Trustee under the Indenture dated
as of April 9, 1997 and the First Preferred Ship Mortgage on the
Vessel made by Borrower in favor of PDS Financial Corporation
dated as of February 21, 1997 as subsequently assigned to
Donaldson, Lufkin and Jenrette Securities Corporation.
"SHOWBOAT" means Showboat Inc. a Nevada corporation.
"SHOWBOAT ENTITIES" means Borrower, SMP, LP, Showboat
Operating Company, Showboat Indiana, Inc., Showboat Development
<PAGE>
Company, SOC, Showboat and any present and future wholly and
partially owned subsidiary or affiliate of any of the foregoing.
"SMFC" Showboat Marine Finance Corporation a Nevada
corporation.
"SMP" means Showboat Marina Partnership an Indiana general
partnership owned 45% by Waterfront and 55% by Showboat Operating
Company.
"SUBORDINATION AGREEMENTS" means the intercreditor and
subordination agreements in the form of Exhibit D hereto.
"TERM" means the period beginning on the Conversion Date
and ending on the Maturity Date.
"UCC" means the Uniform Commercial Code as adopted in the
State of Arizona.
"VESSEL" means that certain vessel called M/V Showboat,
Official Number 1052579.
"VESSEL CHATTEL MORTGAGE" means the vessel chattel mortgage
executed by Borrower in favor of Lender in substantially the form
annexed hereto as Exhibit C with the blanks appropriately
completed.
"WATERFRONT" means Waterfront Entertainment and
Development, Inc. an Indiana corporation.
1.2 GENERAL INTERPRETIVE PRINCIPLES.
For purposes of this Agreement, except as otherwise
expressly provided herein or unless the context otherwise
requires:
(i) any pronoun used shall be deemed to cover both
gender forms as well as the neuter form;
(ii) all references to the plural shall include the
singular, the singular the plural and the part the whole;
(iii) the word "or" has the inclusive meaning frequently
identified by the phrase "and/or";
(iv) accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP;
(v) the words "herein", "hereunder" and "hereof" and
similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement;
(vi) references herein to "Articles", "Sections",
"Subsections", "Paragraphs", and other subdivisions without
<PAGE>
reference to a document are to designated Articles, Sections,
Subsections, Paragraphs and other subdivisions of this Agreement;
(vii) a reference to a Subsection without further
reference to a Section is a reference to such Subsection as
contained in the same Section in which the reference appears, and
this rule shall also apply to Paragraphs and other subdivisions;
(viii) the term "include" or "including" shall mean,
without limitation, by reason of enumeration; and
(ix) the term "satisfactory to Lender" or "satisfaction
of the Lender" or "satisfactory to counsel" or other similar
terms means satisfactory to Lender or its counsel in its sole and
absolute discretion.
ARTICLE 2. THE CREDIT
2.1 THE LOAN.
Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, Lender agrees to
make a Loan to Borrower in a principal amount of up to the
Maximum Loan.
2.2 USE OF PROCEEDS.
The proceeds of the Advances shall be used by Borrower
solely to pay suppliers (each, a "Supplier" and collectively, the
"Suppliers") for the purchase and installation of non-gaming
Items of FF&E acceptable to Lender in its sole and absolute
discretion or reimburse Borrower for the payments made by
Borrower to Suppliers for such non-gaming Items of FF&E
acceptable to Lender in its sole and absolute discretion
purchased by Borrower, all for and used specifically in or on the
Premises, and all pursuant to and in accordance with the terms of
the purchase agreements between Borrower and the Suppliers, each
satisfactory to Lender.
2.3 THE NOTE.
The obligation of Borrower to repay the Loan and to pay
interest thereon shall be evidenced by the Note. The Note shall
be dated the Closing Date and shall be executed by Borrower and
delivered to Lender on the Closing Date.
2.4 ADVANCES.
Lender agrees, on the terms and subject to the conditions
set forth herein, to make Advances to Borrower from time to time
on or prior to the Advance Termination Date so long as the total
Advances do not exceed the Maximum Loan and no Event of Default
has occurred; and Borrower agrees, on the terms and subject to
the conditions set forth herein, to accept such Advances from
<PAGE>
Lender and apply them in accordance with the terms of this
Agreement; PROVIDED, HOWEVER, that Lender shall not be obligated
to make any Advance hereunder on or after October 1, 1997.
2.5 REQUESTS FOR ADVANCES.
Borrower shall, not later than the fifth Business Day next
preceding the date of any requested Advance, submit to Lender a
Request for Advance, setting forth (a) the date requested for
such Advance, which date shall be a Business Day, (b) the amount
of the requested Advance, which amount shall not be less than One
Million Dollars ($1,000,000), (c) the use of proceeds from the
Advance requested, (d) a description of the Items of FF&E (which
such Items of FF&E to be eligible for an Advance must be
acceptable to FINOVA in its sole and absolute discretion) and
FF&E costs to be paid with the Advance, (e) the Suppliers
requested to be paid with the proceeds of such Advance and their
addresses, and (f) all other information set forth on the Request
for Advance or as otherwise requested by Lender. The submission
of each Request for Advance shall constitute Borrower's
irrevocable commitment to borrow such amount. The date each
Advance is made is the "Disbursement Date". In addition, as a
precondition to making any Advance hereunder, Lender may, in its
sole and absolute discretion, require that each Request for
Advance indicate the payee(s) to be paid with the proceeds of
such Advance and be accompanied by such requisitions,
certificates, releases and waivers of liens, approvals and
supporting invoices, copies of agreements with the Suppliers to
be paid, bills or other documents, in each case, in form and
substance and from such Person or Persons as are reasonably
satisfactory to Lender.
2.6 DISBURSEMENTS.
Subject to the conditions set forth herein, Lender shall,
on each Disbursement Date, credit, by wire transfer, the amount
of the Advance to be made to the account of Borrower or the
Person or Persons specified by Borrower in writing pursuant
to Section 2.5 hereof.
2.7 LOAN ACCOUNT.
Lender shall maintain a loan account on its books in the
name of Borrower for the Loan in which will be recorded all
Advances made by Lender, all payments of principal thereof and
all accruals and payments of interest thereon. The entries in
the loan account (in the absence of manifest error in the making
thereof) shall be conclusive evidence of the outstanding
principal thereof and accrued interest thereon from time to time.
Lender shall provide Borrower with statements of said account
from time to time on request.
2.8 INTEREST RATES.
2.8.1 INTEREST PRIOR TO MATURITY. During the
period between the making of an Advance and the Conversion Date,
Advances shall bear interest at the Interim Interest Rate.
Thereafter (subject to the provisions of Section 2.8.2 hereof),
<PAGE>
the unpaid principal amount of the Loan shall bear interest at
the Interest Rate.
2.8.2 INTEREST AFTER MATURITY. Commencing with the
day after the principal amount of any part of the Loan shall have
become due and payable (by acceleration or otherwise), such part
of the Loan or the entire Loan (as the case may be) shall bear
interest at the daily rate of four percent (4%) per annum above
the then applicable Interim Interest Rate or Interest Rate (as
the case may be) (the "Default Rate").
2.8.3 MAXIMUM RATE. Lender and Borrower intend the
Loan Documents to comply in all respects with all provisions of
Law and not to violate, in any way, any legal limitations on
interest charges. Accordingly, if, for any reason, Borrower is
required to pay, or has paid, interest at a rate in excess of the
highest rate of interest which may be charged by Lender or which
Borrower may legally contract to pay under applicable law (the
"Maximum Rate"), then the Interim Interest Rate or the Interest
Rate (as the case may be) shall be deemed to be reduced,
automatically and immediately, to the Maximum Rate, and interest
payable hereunder shall be computed and paid at the Maximum Rate
and the portion of all prior payments of interest in excess of
the Maximum Rate shall be deemed to have been prepayments of the
outstanding principal of the Loan and applied to the installments
in the inverse order of their maturities.
2.9 PAYMENTS.
2.9.1 TIME; PLACE; MANNER. All payments to be made
in respect of principal, interest, or other amounts due from
Borrower hereunder or under the Note shall become due at 12:00
o'clock noon, New Jersey time, on the day when due without
presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived. Such payments shall be made to
Lender in lawful money of the United States of America in
immediately available funds.
2.9.2 PAYMENTS OF PRINCIPAL AND INTEREST. Prior to
the Conversion Date, Borrower shall pay interest only on the
Advances, at the Interim Interest Rate, in arrears, on the first
day of each month and on the Conversion Date. Provided that
there is no Default or Event of Default hereunder or under the
other Loan Documents, Borrower has faithfully observed all of the
terms and conditions hereunder and under the other Loan Documents
and there has been no material adverse change in the business,
operations or financial condition of Borrower or the Collateral,
the Advances outstanding as of the Advance Termination Date shall
automatically convert to a term Loan and shall be repaid to
Lender as follows: if the Conversion Date is not the first day of
a month, Borrower shall pay, on the first day of the month
immediately succeeding the month in which the Conversion Date
occurs, interest only at the Interest Rate from the Conversion
Date to the last day of the month in which the Conversion Date
occurs; thereafter, Borrower shall make thirty-six (36)
consecutive equal monthly payments of principal and interest each
in an amount which will fully amortize the Loan at the Interest
Rate over such thirty-six (36) month period (the date upon which
<PAGE>
the thirty-sixth (36th) consecutive equal monthly payment of
principal and interest is due is herein referred to as the
"Maturity Date") commencing on the first day of the second month
succeeding the Conversion Date, provided, however, that if the
Conversion Date is the first day of a month, payments of
principal and interest shall commence on the first day of the
immediately succeeding month. Lender shall compute the amount of
each payment and advise Borrower of such amount. Each monthly
payment shall be applied, first to fees, costs and charges, if
any, owing to Lender, then to interest as may be due hereunder,
and the balance of such payment shall be applied to the principal
balance of the Loan. The entire unpaid principal balance which
was not payable earlier, whether due to regularly scheduled
payments, acceleration or otherwise, together with any unpaid
interest, fees, costs and charges shall be due and payable on the
Maturity Date. After the maturity of all or any part of the Loan
(by acceleration or otherwise), interest on the Loan or such part
thereof shall be due and payable at the Default Rate on demand.
2.9.3 NET PAYMENTS. All payments hereunder and
under the Note shall be made by Borrower to Lender without
defense, set-off, claim or counterclaim and without deduction for
any present or future income, stamp or other taxes, levies,
imposts, deductions, charges or withholdings whatsoever imposed,
assessed, levied or collected by or for the benefit of any
jurisdiction or taxing authority. In addition, Borrower shall
pay any and all taxes (stamp or otherwise) payable or determined
to be payable in connection with the execution and delivery of
this Agreement, the Note, and the other Loan Documents and on all
payments to be made by Borrower hereunder and under the Note and
the other Loan Documents (other than the Lender's income taxes)
and all taxes payable in connection with or related to the
Collateral.
2.10 PREPAYMENTS.
Borrower shall not have the right to voluntarily prepay any
outstanding Advance or the Loan, in whole or in part.
2.11 ADMINISTRATIVE COSTS.
If Borrower shall fail to make any payment of principal or
interest within ten (10) days after the same is due, Borrower
shall pay a late charge of five percent (5%) of the unpaid
amounts, but in no event greater than the maximum rate permitted
by law, and such amount shall be payable upon demand. Such
payment is not interest for the use of money, but is solely to
cover Lender's administrative costs occasioned by such delay.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
BORROWER REPRESENTS AND WARRANTS TO LENDER THAT:
3.1 ORGANIZATION AND QUALIFICATION.
(a) Borrower is duly organized and validly existing as
a general partnership under the Laws of the State of Indiana
<PAGE>
with full power and authority to own its properties and to
transact its business as now transacted and as contemplated to be
transacted. The general partner(s) executing this Agreement on
behalf of Borrower which are general or limited partnerships are
duly organized and validly existing as general or limited partner
ships (as the case may be), and the limited partnerships are in
good standing under the Laws of the State of their formation with
full power and authority to own their properties and to transact
their businesses as are now transacted and as contemplated to be
transacted. Borrower is qualified and in good standing to
transact business in each jurisdiction where the ownership of its
properties or the transaction of its business requires such
qualification.
(b) The general partner(s) executing this Agreement on
behalf of Borrower which are corporations are duly organized,
validly existing and in good standing as corporations under the
Laws of the State of their incorporation with full power and
authority to own their properties and to transact their
businesses as now transacted and as contemplated to be
transacted. The general partner(s) are qualified and in good
standing to transact business in each jurisdiction where the
ownership of their properties or the transaction of their
businesses require such qualification.
3.2 AUTHORITY AND AUTHORIZATION.
(a) Borrower has full power and authority to execute,
deliver and carry out the provisions of this Agreement, the Note
and the other Loan Documents to which it is a party, to borrow
hereunder and under the other Loan Documents and to create the
Liens provided for herein, and to perform its obligations
hereunder and thereunder, and all such action has been duly and
validly authorized by all necessary proceedings on its part.
(b) The general partner(s) executing this Agreement on
behalf of Borrower have full power and authority to execute and
deliver this Agreement and the other Loan Documents on behalf of
Borrower and all such action has been duly and validly authorized
by all necessary proceedings on its/their part.
3.3 EXECUTION AND BINDING EFFECT.
This Agreement, the Note and the other Loan Documents
executed by Borrower have been duly and validly executed and
delivered by Borrower and constitute the legal, valid and binding
obligation of Borrower enforceable in accordance with their
respective terms.
3.4 AUTHORIZATIONS AND FILINGS.
Except for the filing of UCC financing statements, no
authorization, consent, approval, license, exemption or other
action by, and no registration, qualification, designation,
declaration or filing with, any governmental authority is or will
be necessary or advisable in connection with the execution and
<PAGE>
delivery of this Agreement, the Note, the other Loan Documents or
the consummation by Borrower of the transactions herein and
therein contemplated, or performance by Borrower of or compliance
by Borrower with, the terms and conditions hereof or thereof.
3.5 ABSENCE OF CONFLICTS.
Neither the execution and delivery of this Agreement, the
Note, or the other Loan Documents, nor consummation of the
transactions herein or therein contemplated nor performance of,
or compliance with the terms and conditions hereof or thereof
will (a) result in any violation or breach of (i) the provisions
of Borrower's Constituent Documents, or (ii) any Law, or the
order, rule or regulation of any court or governmental agency or
body having jurisdiction over Borrower, or any of its properties,
or (iii) any agreement, bond, note, instrument or indenture to
which Borrower is a party or pursuant to which any of its
properties are affected, or (b) result in the creation or
imposition of any Lien upon any property (now owned or hereafter
acquired) of Borrower, except for the Lien created by this
Agreement.
3.6 FINANCIAL STATEMENTS.
Borrower has heretofore furnished to Lender certain
financial statements and related financial information
("Financial Statements"). Such Financial Statements (including
the notes thereto) present fairly the financial condition of
Borrower as of the dates of the balance sheets contained therein,
and the results of its operations for the periods then ended, all
in conformity with GAAP on a basis consistent with that of
Financial Statements for corresponding prior periods. Except as
disclosed therein, Borrower has no material contingent
liabilities (including liabilities for taxes), unusual forward or
long-term commitments or unrealized or anticipated losses from
unfavorable commitments.
3.7 NO DEFAULTS.
There is no Default or Event of Default under the Loan
Documents.
3.8 LITIGATION.
There is no pending or threatened claim or proceeding by or
before any court or governmental agency against or affecting
Borrower which, if adversely decided would have a material
adverse effect on the business, operations or financial condition
of Borrower or on the ability of Borrower to perform its
obligations under this Agreement, the Note or the other Loan
Documents or on the Collateral.
<PAGE>
3.9 TITLE TO COLLATERAL.
At the time each Advance is made, Borrower will have good
title to the FF&E described on the applicable Request for
Advance, or will acquire good title thereto upon the disbursement
of the proceeds of the Advance, subject to no Lien covering the
Collateral other than the Liens held by Lender which are and will
be first perfected Liens covering the Collateral.
3.10 TITLE TO PROPERTY.
Borrower has good title to all property owned by it,
including all of the Collateral and other properties reflected in
the most recent balance sheet referred to in Section 3.6 hereof
(except as sold or otherwise disposed of in the ordinary course
of business), subject to no Lien other than the Liens held by
Lender covering the Collateral which are first perfected Liens on
the Collateral, preferred maritime liens (which Borrower has
agreed as more fully set forth herein will be discharged by
filing of the appropriate satisfaction or release instrument or
other required payment or filing within thirty (30) days of the
creation of said lien) and liens created by the Ship Mortgages.
There are no preferred maritime liens affecting the Collateral or
the Vessel except for possible preferred maritime liens arising
in the ordinary course of business which relate to amounts owed
by Borrower for which Borrower is not delinquent in payment.
3.11 TITLE TO VESSEL.
Borrower has good title to the Vessel subject to no Liens
other than the Ship Mortgages.
3.12 TAXES.
All tax returns required to be filed by Borrower have been
properly prepared, executed and filed. All taxes, assessments,
fees and other governmental charges upon Borrower or upon any of
its properties, incomes, sales or franchises which are due and
payable have been paid.
3.13 FINANCIAL ACCOUNTING PRACTICES.
Borrower makes and keeps books, records and accounts which,
in reasonable detail, accurately and fairly reflect Borrower's
transactions and dispositions of its assets.
3.14 POWER TO CARRY ON BUSINESS.
Borrower has all requisite power and authority to own and
operate its properties and to carry on its businesses as now
conducted and as presently planned to be conducted.
3.15 NO MATERIAL ADVERSE CHANGE.
Since the date of the Financial Statements referred to in
Section 3.6, there has been no material adverse change in the
<PAGE>
business, operations or financial condition of Borrower or the
Collateral.
3.16 COMPLIANCE WITH LAWS.
Borrower is not in violation of any Law, except for vio
lations which in the aggregate do not have a material adverse
effect on the business, operations or financial condition of
Borrower or on the Collateral.
3.17 COMPLIANCE WITH AGREEMENTS.
Borrower is not and will not as a result of executing and
delivering this Agreement and the documents related hereto or as
a result of consummation of the transaction contemplated herein
or therein be in default under any agreement, bond, note,
indenture or contract, including, without limitation, the
Indenture, the First Mortgage Notes due 2003 issued under the
Indenture or the Leasehold Mortgage except for defaults which in
the aggregate do not have a material adverse effect on the
business, operations or financial condition of Borrower or on the
Collateral.
3.18 ACCURATE AND COMPLETE DISCLOSURE.
No representation or warranty made by Borrower in this
Agreement and no statement made by Borrower in the Financial
Statements furnished pursuant to Section 3.6 hereof or otherwise,
or any certificate, report, exhibit or document furnished by
Borrower to Lender pursuant to or in connection with this
Agreement or the Loan is false or misleading in any material
respect (including by omission of material information necessary
to make such representation, warranty or statement not
misleading).
3.19 REGULATIONS G AND U.
Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying "margin stock", as such
term is used in Regulations G or U promulgated by the Board of
Governors of the Federal Reserve System as amended from time to
time. No part of the proceeds of the Loan will be used to
purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any "margin stock".
Borrower does not own any "margin stock".
3.20 PERFECTION.
Except for the filings under Article 9 of the UCC specified
in Section 4.7 hereof (and continuation statements at periodic
intervals), and filing of the Vessel Chattel Mortgage with the
United States Coast Guard no further filing or recording is
necessary under the UCC or under any other Laws of any
jurisdiction, in order to perfect in all applicable jurisdictions
the Liens of Lender in the Collateral. Upon such filings, Lender
<PAGE>
will be granted a first perfected Lien covering the Collateral.
There are no other Liens covering or which may cover the
Collateral other than liens in favor of the Trustee under the
Indenture, preferred maritime liens with respect to amounts owed
by Borrower in the ordinary course of business for which Borrower
is not delinquent in payment and possible liens of the Trustee
and PDS Financial Corp. or its successors or assigns pursuant to
the Ship Mortgages (which liens are subject to the Subordination
Agreements).
3.21 PLACE OF BUSINESS.
Both the place of business (or chief executive office if
there is more than one place of business) of Borrower and the
place where it keeps its records concerning the Collateral and
all of its interest in, to and under this Agreement are located
at the address set forth at the beginning of this Agreement.
3.22 LOCATION OF COLLATERAL.
For all purposes, including, without limitation, perfection
of security interests therein under Article 9 of the UCC, the
Collateral is deemed located and at all times shall be located at
the Premises.
ARTICLE 4. CONDITIONS OF LENDING
The obligation of Lender to make the Loan and each Advance
hereunder is subject to the accuracy in all material respects, as
of the date hereof and each Disbursement Date, of the
representations and warranties herein contained, to the
performance by Borrower of its obligations to be performed
hereunder on or before such Disbursement Date and to the
satisfaction of the following further conditions. If all
conditions contained herein are not satisfied and the first
Advance is not made by July 1, 1997, Lender shall have no
obligation whatsoever to make any Advance and shall have no
liability for its refusal to do so.
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Article 3
hereof are true as of the date hereof and shall be true on the
Closing Date and on and as of each Disbursement Date with the
same effect as if made on and as of such date, and on such dates
no Default or Event of Default shall have occurred and be
continuing or exist or shall occur or exist after giving effect
to the Loan or any Advance.
4.2 BORROWER'S CERTIFICATE.
On the Closing Date, Borrower shall deliver to Lender a
certificate in form and substance satisfactory to Lender, dated
the Closing Date, signed by a duly authorized representative of
Borrower, certifying as to (a) true copies of the Constituent
Documents of Borrower, all as in effect on such date, (b) true
<PAGE>
copies of all action taken by Borrower relative to this
Agreement, the Note and the other Loan Documents, and (c) the
names, true signatures and incumbency of the general partners,
authorized representatives, officer or officers of Borrower
authorized to execute and deliver this Agreement, the Note and
the other Loan Documents on behalf of Borrower (and Lender may
conclusively rely on such certificate unless and until a later
certificate revising the prior certificate has been furnished to
Lender). Borrower shall also deliver to Lender good standing
certificates for the managing general partners of Borrower issued
by the respective Secretarys' of State of the State of formation
of each such entity and each state in which each such entity is
required by Law to be qualified.
4.3 OPINION OF COUNSEL.
On the Closing Date, Lender shall have received a favorable
written opinion of counsel for Borrower dated the Closing Date
and in form and substance satisfactory to Lender and its counsel,
Winick & Rich, P.C.
4.4 NO CHANGE OF LAW OR FACTS.
No change shall have occurred after the date of execution
and delivery of this Agreement in applicable Law or regulations
thereunder or interpretations thereof by appropriate regulatory
authorities which, in the opinion of Lender or its counsel, would
make it illegal for Lender to acquire the Note, make an Advance,
or otherwise to participate in the Loan, nor shall any facts come
to the attention of Lender, concerning Borrower, its general
partners, its business or financial condition which, in the
opinion of Lender would increase the risk to Lender of repayment
of the Loan by Borrower.
4.5 DOCUMENTS.
The following documents shall have been duly authorized,
executed and delivered by the respective party or parties
thereto, shall be in form and substance satisfactory to Lender
and its counsel and shall be in full force and effect on the
Closing Date and on each Disbursement Date, and an executed
counterpart of each thereof shall have been delivered to Lender
and its counsel:
4.5.1 this Agreement;
4.5.2 the Note;
4.5.3 the Insurance Letter;
4.5.4 the Vessel Chattel Mortgage;
4.5.5 a Request for Advance completed in accordance
herewith;
4.5.6 insurance certificates or policies of
<PAGE>
insurance evidencing the coverages required
by Section 5.3 hereof;
4.5.7 the Management Agreement;
4.5.8 the Subordination Agreements;
4.5.9 the Partnership Agreement; and
4.5.10 the other Loan Documents.
4.6 FF&E.
With each Request for Advance, Borrower shall provide to
Lender a complete description of each item of FF&E the cost of
which will be paid with the proceeds of the Advance. Lender may
reject any such item of FF&E, in which case, Borrower may
substitute other FF&E acceptable to Lender or reduce the amount
of the Advance requested, subject to the limitation contained in
Section 2.5(b) hereof.
4.7 FINANCING STATEMENTS.
On the Closing Date and prior to each Advance, a Vessel
Chattel Mortgage and UCC financing statements covering the
security interest created by this Agreement in the FF&E described
in such Request for Advance shall have been duly filed in the
office of the Secretary of State of the State where the FF&E is
located with respect to the financing statements and with the
United States Coast Guard in Falling Waters, West Virginia with
respect to the Vessel Chattel Mortgage and in all other places
as, in the opinion of Lender, or its counsel, are necessary or
desirable to perfect such Liens.
4.8 LICENSES AND PERMITS.
All appropriate action shall have been taken prior to the
Closing Date in order to permit consummation of the transactions
contemplated herein and hereby and enforcement of all of the
terms hereof and thereof, and all licenses, permits, waivers,
exemptions, authorizations and approvals required (or, in the
opinion of Lender or its counsel, advisable) to be in effect on
the Closing Date including, without limitation, those in
connection with the business and operations of Borrower shall
have been issued and shall be in full force and effect on such
date, and copies thereof shall have been delivered to Lender. On
or prior to the Closing Date, Lender shall have been satisfied
that no licenses, permits or approvals (other than Lender's
current business licenses) are required to permit consideration
or consummation of the transaction contemplated hereby or the
exercise by Lender of any rights or remedies pursuant hereto.
4.9 EQUITY INVESTMENTS AND OTHER FINANCING.
<PAGE>
On or prior to the Closing Date Lender shall have received
evidence satisfactory to Lender that (i) $39,000,000 of equity
was invested in Borrower and (ii) Borrower obtained no less than
$140,000,000 from the Bond Placement (less underwriting expenses
actually incurred by Borrower in connection with the Bond
Placement).
4.10 SUBORDINATE SHIP MORTGAGES.
On or prior to the Closing Date, Lender shall have obtained
evidence and documentation satisfactory to Lender that the Lien
of the Ship Mortgages is subject and subordinate in all respects
to any present or future Lien of Borrower in the Collateral.
4.11 OTHER MATTERS.
4.11.1 Lender shall have received all other
agreements, instruments, certificates, projections, waivers,
releases, searches, terminations, reports, confirmations,
agreements with Suppliers, evidence of payment of obligations,
evidence of ownership of the Collateral, debt and lien
subordination agreements and other documents as Lender or its
counsel shall have requested (each in form and substance
satisfactory to the Lender and its counsel), including, without
limitation, lien waivers, consents, approvals, authorization to
date documents, casualty and liability insurance policies and
endorsements related thereto, appraisals, financial statements
and other financial information.
4.11.2 There shall have occurred no Default or Event
of Default.
4.11.3 All legal matters incident to the Loan shall
be satisfactory to Lender and its counsel.
ARTICLE 5. COVENANTS
Borrower covenants that from and after the date hereof and
until payment in full of the Note and interest thereon and all
other amounts due from Borrower hereunder or under the Note or
the other Loan Documents, unless Lender shall otherwise consent
in writing:
5.1 REPORTING AND INFORMATION REQUIREMENTS.
5.1.1 ANNUAL FINANCIAL STATEMENTS. As soon as
practicable, and in any event within one hundred five (105) days
after the close of each fiscal year of Borrower, Borrower shall
furnish or cause to be furnished to Lender the annual report for
such year, including statements of income, retained earnings and
changes in financial position of Borrower for such fiscal year
and a balance sheet of Borrower as of the close of such fiscal
year, and notes to each, all in reasonable detail, setting forth
in comparative form the corresponding figures for the preceding
<PAGE>
fiscal year where such presentation is appropriate under GAAP
certified by the Chief Financial Officer of Borrower.
5.1.2 QUARTERLY FINANCIAL STATEMENTS. Within sixty
(60) days after the end of each of the first three fiscal
quarters of each fiscal year, Borrower shall furnish to Lender a
copy of its interim financial statements of the type described in
Section 5.1.1 above, certified by the Chief Financial Officer of
Borrower.
5.1.3 FURTHER REQUESTS. Borrower will promptly
furnish to Lender such other information (financial or otherwise)
concerning Borrower, its assets or the Collateral in such form as
Lender may reasonably request.
5.1.4 COMPLIANCE CERTIFICATES. At the same time
Borrower delivers the financial statements required under the
provisions of paragraphs 5.1.1 and 5.1.2, Borrower shall furnish
to Lender a certificate of its Chief Financial Officer to the
effect that Borrower is in compliance with the representation,
warranties and covenants set forth in the Loan Documents and that
no Default or Event of Default exists, or, if such cannot be so
certified, specifying in reasonable detail the exceptions, if
any, to such statement.
5.1.5 (intentionally left blank)
5.1.6 NOTICE OF EVENT OF DEFAULT. Promptly upon
becoming aware of any Default or Event of Default, Borrower shall
give Lender notice thereof, together with a written statement of
a Chief Executive Officer of Borrower setting forth the details
thereof and any action with respect thereto taken or contemplated
to be taken by Borrower.
5.1.7 NOTICE OF MATERIAL ADVERSE CHANGE. Promptly
upon becoming aware thereof Borrower shall give Lender written
notice about any material adverse change in the business,
operations or financial condition of Borrower or on the
Collateral or on the ability of Borrower or any Guarantor to
perform their obligations under this Agreement, the Note or the
other Loan Documents.
5.1.8 NOTICE OF MATERIAL PROCEEDINGS. Promptly
upon becoming aware thereof Borrower shall give Lender written
notice of the commencement, existence or threat of any proceeding
by or before any court or administrative agency against or
affecting Borrower, or the Collateral which, if adversely
decided, would have a material adverse effect on the business,
operations or financial condition of Borrower or on the ability
of Borrower to perform its obligations under this Agreement, the
Note or the other Loan Documents or on the Collateral.
5.1.9 VISITATION. Borrower shall permit such
persons as Lender may designate to visit and inspect the
Collateral and to examine the books and records of Borrower and
take copies and extracts therefrom, and to discuss its affairs
with officers of Borrower and its independent accountants, at
such reasonable times and as often as Lender may reasonably
request.
<PAGE>
5.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
5.2.1 Borrower shall not enter into any merger,
reorganization or consolidation, or wind up, liquidate or
dissolve, nor agree to do any of the foregoing.
5.2.2 Borrower will qualify to do business and will
remain in good standing under the laws of each jurisdiction in
which it is required to be qualified by reason of the location of
the properties owned or leased by it or the conduct of its
business.
5.2.3 Borrower will comply with all Laws relative
to the conduct of its business or the location of the properties
owned or leased by it, the non-compliance with which could have a
material adverse effect on the business, operations, assets or
financial or other condition of the Borrower, as contemplated
hereby, or the ability of Borrower to perform its obligations
under this Agreement, the Note, or the other Loan Documents and
will obtain or cause to be obtained as promptly as possible any
permit, license, consent, privilege or approval of any
governmental authority and make any filing or registration
therewith which at the time shall be required with respect to the
performance of its obligations under this Agreement, the Note or
the other Loan Documents or for the operation of its business as
presently conducted or as contemplated by it.
5.2.4 Borrower shall not (a) convey, assign, sell,
mortgage, encumber, pledge, hypothecate, grant a security
interest in, grant options with respect to, lease or otherwise
dispose of all or any part of any legal or beneficial interest in
any part or all of the Collateral or any interest therein; or (b)
directly or indirectly sell, assign, lease or otherwise dispose
of or permit the sale, assignment or other disposition of (i) any
legal or beneficial interest in the stock or other ownership
interest of any corporation or other entity which is either
Borrower or is a beneficial owner of all or part of Borrower or
of the Collateral or (ii) any legal or beneficial interest in
Borrower if Borrower is a limited or general partnership, joint
venture, tenancy in common or tenancy by the entirety, limited
liability company or other type of entity; or (c) and Guarantors
shall not, convey, assign, transfer or otherwise dispose of a
material portion of its assets (other than the Collateral, the
prohibition on transfer of which is governed by subparagraph (a)
above).
5.2.5 Without limiting anything in the foregoing,
Borrower further covenants and agrees that in the event there
arises any preferred maritime lien(s) which affects, directly or
indirectly, the Collateral and/or the Vessel, Borrower shall not
permit such lien(s) to exist or permit a notice of lien to be on
file or of record for more than thirty (30) days after the
creation of said lien(s). In connection with the foregoing,
Borrower shall cause all satisfaction and/or release instruments
to be filed or recorded in the appropriate offices with the
appropriate parties in order to discharge such liens of record or
otherwise.
<PAGE>
5.3 INSURANCE.
Borrower shall, at its own expense, maintain and deliver
evidence to Lender of such insurance required by Lender, written
by insurers and in amounts satisfactory to Lender including all
insurance required by the Insurance Letter.
5.4 MAINTENANCE OF PROPERTIES.
Borrower shall maintain or cause to be maintained in good
repair, working order and condition the properties now or
hereafter owned, leased or otherwise possessed by it, including
the Collateral and the Premises, and shall make or cause to be
made all needed and proper repairs, renewals, replacements and
improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted
at all times.
5.5 PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES.
Borrower shall pay or discharge
5.5.1 all taxes, assessments and other governmental
charges or levies imposed upon it or any of its properties,
including the Collateral, or income (including such as may arise
under ERISA or any similar provision of law), on or prior to the
date on which penalties attach thereto,
5.5.2 all lawful claims of materialmen, mechanics,
carriers, warehousemen, landlords, suppliers, artisans,
employees, and other like Persons which, if unpaid, might result
in the creation of a Lien upon any such property or the Vessel,
on or prior to the date when due;
5.5.3 all other Liens other than Liens in favor of
Lender and the Ship Mortgages whether recorded or unrecorded,
imposed upon it or any of its properties, including the
Collateral.
PROVIDED, that unless and until foreclosure, distraint, levy,
sale or similar proceedings shall have been commenced, Borrower
need not pay or discharge any such tax, assessment, charge, levy,
claim or current liability so long as (i) the validity thereof is
contested in good faith and by appropriate proceedings diligently
pursued, (ii) in Lender's sole judgment there is no reasonably
foreseeable risk of forfeiture of the Collateral, and (iii) such
reserves or other appropriate provisions as may be required by
GAAP shall have been made therefor, and so long as such failure
to pay or discharge does not have a material adverse effect on
the business, operations or financial condition of Borrower.
5.6 FINANCIAL ACCOUNTING PRACTICES.
Borrower shall make and keep books, records and accounts
which, in reasonable detail, accurately and fairly reflect its
<PAGE>
business, including all transactions and dispositions of its
assets, all prepared in accordance with GAAP. Lender and/or its
agents shall have the right to review the books and records of
Borrower and to photocopy the same and to make excerpts
therefrom, at all reasonable times and upon reasonable notice and
as often as Lender may reasonably request.
5.7 COMPLIANCE WITH LAWS AND LEGAL REQUIREMENTS.
Borrower shall comply with all applicable Laws and Legal
Requirements in all respects, PROVIDED, that Borrower shall not
be deemed to be in violation of this Section 5.7 as a result of
any failures to comply which would not result in fines,
penalties, injunctive relief or other civil or criminal
liabilities which, in the aggregate, would not materially affect
the business or operations of Borrower or the ability of Borrower
to perform its obligations under this Agreement, the Note or the
other Loan Documents or the Collateral.
5.8 MATERIAL OBLIGATIONS. Borrower shall pay and satisfy,
when due, all material liabilities and obligations, including,
without limitation, all obligations under all leases (real or
personal property) to which it is a party.
5.9 MAINTENANCE OF COLLATERAL AND PREMISES.
Borrower will maintain and preserve the Collateral and the
Premises in good condition, repair and working order, promptly
repairing, replacing or rebuilding any part of the Collateral or
the Premises which may be destroyed by any casualty, or become
damaged, worn or dilapidated.
5.10 MAINTENANCE OF PRINCIPAL PLACE OF BUSINESS.
Borrower shall maintain and keep its principal place of
business and chief executive office at the address set forth at
the beginning of this Agreement, and at no other location without
giving Lender at least thirty (30) days prior written notice of
any move. Borrower shall maintain and keep its records at such
address and at no other location without giving Lender at least
thirty (30) days prior written notice of any move.
5.11 FURTHER ASSURANCES.
Borrower shall cause to be done, executed, acknowledged and
delivered all and every such further act, conveyance and
assurance as Lender shall require for accomplishing the purposes
of this Agreement, the Note and the other Loan Documents.
Borrower will defend and protect its title with respect to the
Collateral and will indemnify Lender with respect thereto. Any
payment in respect of such indemnity shall be made directly to
Lender on demand in immediately available funds. Forthwith after
notice from Lender, Borrower shall promptly, without further
<PAGE>
consideration, execute, acknowledge and deliver such further
instruments and documents and will take such other actions as
Lender may deem necessary or advisable from time to time to
ensure the enforceability or priority of the Liens granted
hereby, or otherwise to confirm and carry out the intent and
purpose of this Agreement.
ARTICLE 6. SECURITY INTEREST
6.1 SECURITY.
As security for the full and timely payment and performance
of all of the Obligations of Borrower to Lender, Borrower hereby
assigns, pledges, transfers and sets over to Lender, and hereby
agrees that Lender shall have, and hereby grants to and creates
in favor of Lender, a first security interest under the UCC,
subject to no other Liens, in and to and under the following, in
each case whether now existing or hereafter arising, now owned or
hereafter acquired, wherever located ("Collateral"):
6.1.1 All FF&E described in every Request for
Advance delivered by Borrower pursuant to this Agreement; and
6.1.2 All accessions and additions thereto,
substitutions for, and all replacements of, any and all of the
foregoing, and all proceeds of the foregoing, cash and non-cash,
including insurance proceeds; and
6.1.3 All maintenance, support, leases and other
contracts and agreements related to the foregoing; and
6.1.4 All books and records pertaining to the
foregoing.
6.2 LENDER HAS RIGHTS AND REMEDIES OF A SECURED PARTY.
In addition to all rights and remedies given to Lender by
this Agreement and the Vessel Chattel Mortgage, Lender shall have
all the rights and remedies of a secured party under the UCC.
6.3 PROVISIONS APPLICABLE TO THE COLLATERAL AND THE VESSEL.
The parties agree that, at all times during the term of this
Agreement, the following provisions shall be applicable to the
Collateral:
6.3.1 Borrower covenants and agrees that it will
keep accurate and complete books and records concerning the
Collateral and the Vessel owned or acquired by it in accordance
with GAAP.
6.3.2 Lender shall have the right to review the
books and records of Borrower pertaining to the Collateral and
the Vessel and to copy the same and to make excerpts therefrom,
all at such reasonable times upon reasonable notice and as often
as Lender may reasonably request.
<PAGE>
6.3.3 Borrower shall maintain and keep its
principal place of business and its chief executive office at the
address set forth at the beginning of this Agreement, and at no
other location without giving Lender at least thirty (30) days
prior written notice of any move. Borrower shall maintain and
keep its records concerning the Collateral and the Vessel at such
address and at no other location without giving Lender at least
thirty (30) days prior written notice of any move. Borrower
shall keep all Collateral only at the Premises. Borrower may not
move the Collateral without the prior written consent of Lender.
Borrower shall not change, modify or amend its name or assume any
trade, fictitious or other name without the prior written consent
of Lender.
6.3.4 Except for Liens granted to Lender, Borrower
shall not sell, lease, transfer or otherwise dispose of or
encumber any of the Collateral.
6.3.5 Borrower shall cause the FF&E and any other
Collateral to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear
excepted, and shall promptly make or cause to be made all
repairs, replacements and other improvements in connection
therewith which are necessary or desirable to that end.
6.3.6 Borrower shall not affix or permit the
Collateral to become affixed to real estate or to any other
goods, and such Collateral shall remain personal property,
whether or not so affixed.
6.3.7 Borrower shall not sell, transfer or
otherwise dispose of the Vessel or its interest in the Premises.
6.3.8 Borrower shall operate the Vessel only in the
navigable waters of the State of Indiana as permitted pursuant to
the Gaming License.
6.4 CERTAIN COVENANTS.
Borrower covenants and agrees with Lender for the benefit of
Lender that:
6.4.1 Borrower has and will have good and
merchantable title to all of its assets, including the
Collateral, in each case as from time to time owned or acquired
by it, and shall keep the Collateral free and clear of all Liens,
other than those granted to Lender and the Ship Mortgages (which
Liens are subject to the Subordination Agreements) and preferred
maritime liens (subject to paragraph 5.2 hereof). Borrower will
defend such title against the claims and demands of all Persons
whomsoever.
6.4.2 Borrower will faithfully preserve and protect
Lender's Liens in the Collateral and will, at its own cost and
expense, cause said Liens to be perfected and continued
perfected, and for such purpose Borrower will from time to time
at the request of Lender and at the expense of Borrower, make,
execute, acknowledge and deliver, and file or record, or cause to
be filed or recorded, in the proper filing places, all such
<PAGE>
instruments, documents and notices, including without limitation
financing statements and continuation statements, as Lender may
deem necessary or advisable from time to time in order to perfect
and continue perfected said security interest. Borrower will do
all such other acts and things and make, execute, acknowledge and
deliver all such other instruments and documents, including
without limitation further security agreements, pledges,
endorsements, assignments and notices, as Lender may deem
necessary or advisable from time to time in order to perfect and
preserve the priority of said Liens as a first and only Lien on
and security interest in the Collateral prior to the rights of
all other Persons therein or thereto.
6.4.3 Borrower will not, without the prior written
consent of Lender, (i) borrow or permit any Person to borrow
against the Collateral other than the Loan to Borrower from
Lender pursuant to this Agreement; (ii) create, incur, assume or
suffer to exist any Lien with respect to any of the Collateral;
(iii) permit any levy or attachment to be made against any of the
Collateral except any levy or attachment relating to this
Agreement; or (iv) permit any financing statement, Preferred Ship
Mortgage or Vessel Chattel Mortgage to be on file with respect to
any of the Collateral, except financing statements in favor of
Lender in connection with this Agreement and the Ship Mortgages
as exist as of the date hereof (which are subject to the
Subordination Agreements).
6.4.4 Risk of loss of, damage to or destruction of
the Collateral is and shall remain upon Borrower. Borrower will
insure the Collateral as provided in Section 5.3 of this
Agreement. If Borrower fails to effect and keep in full force
and effect such insurance or fails to pay the premiums thereon
when due, Lender may do so for the account of Borrower and add
the cost thereof to the Obligations and the same shall be payable
to Lender on demand. Borrower hereby assigns and sets over unto
Lender for the benefit of Lender all moneys which may become
payable on account of such insurance, including without
limitation any return of unearned premiums which may be due upon
cancellation of any such insurance, and directs the insurers to
pay Lender any amount so due. Lender, its officers, employees
and authorized agents and its successors and assigns, are hereby
appointed attorneys-in-fact of Borrower, for the purpose of
endorsing any draft or check which may be payable to Borrower in
order to collect the proceeds of such insurance or any return of
unearned premiums. Such appointment is irrevocable and coupled
with an interest. The proceeds of insurance shall be applied to
reduction of the Obligations in any order Lender may choose or,
in Lender's sole discretion, to the repair or replacement of the
Collateral, or any part thereof, in which case Lender may impose
such conditions on the disbursement of the proceeds as Lender in
its sole discretion deems appropriate.
6.4.5 Upon the occurrence and during the
continuation or existence of any Event of Default, Borrower shall
promptly upon demand by Lender assemble the FF&E and any other
Collateral and make it available to Lender at the place or places
to be designated by Lender. The right of Lender to have the FF&E
and any other Collateral assembled and made available to it is of
the
<PAGE>
essence of this Agreement and Lender may, at its election,
enforce such right in equity for specific performance.
6.4.6 Lender shall have no duty as to the
collection or protection of the Collateral or the Premises or any
part thereof or any income thereon, or as to the preservation of
any rights pertaining thereto, beyond exercising reasonable care
in the custody of any Collateral actually in the possession of
Lender. Lender shall be deemed to have exercised reasonable care
in the custody and preservation of such of the Collateral as may
be in its possession if it takes such action for that purpose as
Borrower shall request in writing, provided that such requested
action shall not, in the judgment of Lender, impair Lender's
security interest in the Collateral or its rights in, or the
value of, the Collateral, and provided further that such written
request is received by Lender in sufficient time to permit it to
take the requested action.
6.4.7 Except as expressly permitted pursuant to
Section 4.07 of the Indenture, no present or future indebtedness
of Borrower to any of the Showboat Entities (including any
management fees) shall be paid or withdrawn in whole or in part.
ARTICLE 7. DEFAULTS
7.1 EVENTS OF DEFAULT.
The occurrence of one or more of the following described
events is an Event of Default:
7.1.1 Borrower fails to make any payment of
principal of or interest on the Note, when due; or
7.1.2 Borrower fails to perform or observe any of
its covenants or agreements contained herein or in any other Loan
Documents which cannot be cured; or
7.1.3 Borrower fails to perform or observe any
other covenant or agreement to be performed or observed by it
hereunder or under the other Loan Documents and such failure
continues unremedied for a period of fifteen (15) days after
notice of such failure has been provided to Borrower; or
7.1.4 Borrower voluntarily creates, suffers to
exist, incurs or assumes any Lien, security interest, charge or
encumbrance on, or with respect to, any part of or all the
Collateral (other than liens which are evidenced by the Ship
Mortgages as of the date hereof), or the Liens held by Lender in
and to the Collateral shall cease to be a first and only
perfected Lien in and to the Collateral; or
7.1.5 Borrower sells, assigns, leases, or otherwise
disposes of or relinquishes possession of, any Collateral; or
7.1.6 any representation or warranty made by
Borrower herein or in any other Loan Document or in any document
or certificate furnished by Borrower to Lender in connection
<PAGE>
herewith or therewith at any time proves to have been incorrect
in any material respect when made; or
7.1.7 this Agreement or any Loan Document at any
time for any reason ceases to be in full force and effect or is
declared by a court or governmental agency of competent
jurisdiction to be null and void; or
7.1.8 Borrower breaches or defaults under the terms
of any agreement, instrument or document with or for the benefit
of Lender which is not a Loan Document or under any other loan,
credit facility or other financial accommodation made by Lender
to Borrower, including, without limitation, all promissory notes,
guarantees, equipment leases, security agreements, mortgages and
deeds of trust and such breach or default remains unremedied for
a period of fifteen (15) days after notice of such breach or
default has been provided to Borrower; or
7.1.9 Borrower is convicted of a felony; or
7.1.10 there is a material adverse change in the
business, operations or financial condition of Borrower or the
Collateral; or
7.1.11 a proceeding is instituted seeking a decree
or order for relief in respect of Borrower in an involuntary case
under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect or for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of Borrower, or for any substantial part of
its, his or her properties or for the dissolution, winding-up or
liquidation of its affairs or any substantial part of any of its
properties and such proceeding remains undismissed or unstayed
for a period of sixty (60) consecutive days or such court enters
a decree or order granting the relief sought in such proceeding;
or
7.1.12 Borrower voluntarily suspends transaction of
its business, commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, consents to the entry of an order for relief in an
involuntary case under any such law or consents to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar
official) of Borrower for any substantial part of any of its
properties, or makes a general assignment for the benefit of
creditors, or takes any action in furtherance of any of the
foregoing; or
7.1.13 there shall be a judgment or judgments
against Borrower for any amount in excess of $25,000 in the
aggregate, which shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of thirty (30)
days or more; or
7.1.14 Borrower shall have conveyed, sold, assigned,
encumbered or otherwise transferred all or substantially all of
its assets (or any interest therein); or
<PAGE>
7.1.15 Borrower fails, by the Conversion Date, to
execute and deliver to Lender Delivery and Acceptance Receipts in
form and substance satisfactory to Lender, for all FF&E financed
by Lender; or
7.1.16 Borrower defaults or is in breach under the
Indenture or any bonds or notes issued thereunder or in
connection therewith or the Leasehold Mortgage or any agreement
in connection with any of the foregoing including the Bond
Placement and such default or breach remains unremedied for a
period of thirty (30) days; or
7.1.17 The Management Agreement is terminated or
assigned; or
7.1.18 SMP ceases to (i) be a general partner of
Borrower or (ii) own at least 99% percent of Borrower; or
7.1.19 Showboat ceases to maintain (directly or
indirectly) 100% of the legal and beneficial ownership of such
entity or entities which own at least 55% of SMP; or
7.1.20 The Gaming License is suspended, terminated,
revoked, not renewed or is modified in any material adverse
respect; or
7.1.21 The Advances do not convert to the Term Loan
by the Advance Termination Date; or
7.1.22 Borrower fails to perform or observe any of
its covenants or agreements contained in Section 5.3 hereof or
any of the terms, conditions or agreements set forth in the
Insurance Letter or any such insurance ceases at any time to be
in full force and effect.
7.2 CONSEQUENCES OF EVENT OF DEFAULT.
7.2.1 If an Event of Default occurs, Lender may, by
notice to Borrower, declare the unpaid principal amount of the
Note and interest accrued thereon and all other Obligations and
liabilities of Borrower hereunder or under the Note or the Loan
Documents to be immediately due and payable and the same shall
thereupon become and be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, and an action therefor shall
immediately accrue. In addition, if an Event of Default occurs
prior to the Advance Termination Date, Lender may, at its option,
terminate and cancel its agreement to make Advances.
7.2.2 In addition, if an Event of Default occurs,
Lender shall have all rights and remedies granted herein and in
the other Loan Documents and all rights or remedies available at
law or equity, whether as a secured party or otherwise (including
specifically those granted by the Uniform Commercial Code as in
effect in the jurisdiction or jurisdictions where the Collateral
is located) and, except as limited by Law, all remedies of Lender
(i) shall be cumulative and concurrent; (ii) may be pursued
separately, successively or concurrently against Borrower or
<PAGE>
against all or any portion of the Collateral, at the sole
discretion of Lender; (iii) may be exercised as often as occasion
therefor shall arise, it being agreed by Borrower that the
exercise or failure to exercise any rights or remedies shall in
no event be construed as a waiver or release thereof or of any
other right, remedy or recourse; and (iv) are intended to be, and
shall be, nonexclusive. To the fullest extent permitted by
applicable Law, Lender may resort to the rights, remedies and
recourses set forth herein and any other security therefor in
such order and manner as Lender may elect.
7.2.3 Without limiting any of the foregoing,
Borrower agrees that (i) Lender may, with or without notice and
without legal process, enter upon the Premises or any other
property owned, leased or otherwise under the real or apparent
control of Borrower or any agent thereof or any other location
where the Collateral may be located and disassemble, disconnect,
render unusable or repossess all or any item of the Collateral;
(ii) written notice mailed to Borrower, as provided in this
Agreement for the giving of notice, shall be reasonable if given
ten (10) days prior to (a) any public sale or (b) the date after
which a private sale may be made; (iii) a sale of the Collateral
may be made as a unit or in parcels and for cash and upon terms;
and (iv) Lender may buy the Collateral at any public sale and at
any private sale as permitted by the UCC.
ARTICLE 8. MISCELLANEOUS
8.1 FURTHER ASSURANCES.
Borrower shall at any time and from time to time upon the
written request of Lender, execute and deliver such further
agreements, instruments and documents and do such further acts
and things as Lender may reasonably request in order to effect
the purposes of this Agreement.
8.2 INDEMNITY.
Borrower shall indemnify, defend and hold harmless Lender
from and against, and, upon demand, reimburse Lender for, all
claims, demands, liabilities, losses, damages, judgments,
penalties, costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, which may be
imposed upon, asserted against or incurred or paid by Lender, on
account of any act performed or omitted to be performed under
this Agreement, the Note or the other Loan Documents or on
account of any transaction arising out of or in any way connected
with the Collateral or this Agreement, the Note or the other Loan
Documents, except as a result of the willful misconduct or gross
negligence of Lender.
8.3 NO IMPLIED WAIVER; CUMULATIVE REMEDIES.
No course of dealing and no delay or failure of Lender in
exercising any right, power or privilege under this Agreement,
<PAGE>
the Note or any of the other Loan Documents shall affect such
right, power or privilege except as and to the extent that the
assertion of any such right, power or privilege shall be barred
by an applicable statute of limitations; nor shall any single or
partial exercise thereof or any abandonment or discontinuance of
steps to enforce such a right, power or privilege preclude any
further exercise thereof or of any other right, power or
privilege. The rights and remedies of Lender under this
Agreement, the Note or the other Loan Documents are cumulative
and not exclusive of any rights or remedies which Lender would
otherwise have.
8.4 TAXES.
Borrower agrees to pay or reimburse Lender for any and all
stamp, document, transfer, recording or filing taxes or fees and
all similar impositions payable or hereafter determined by Lender
to be payable in connection with this Agreement, the Note or the
other Loan Documents (including but not limited to those
necessary or advisable to record or to ensure the enforceability
or priority of this Agreement, the Note or the other Loan
Documents), as determined by Lender in its sole discretion from
time to time, and any other documents, instruments or
transactions pursuant to or in connection herewith, and Borrower
agrees to save Lender harmless from and against any and all
present or future claims or liabilities with respect to or
resulting from any delay in paying or omission to pay any such
taxes, fees or similar impositions.
8.5 MODIFICATIONS, AMENDMENTS OR WAIVERS.
Lender and Borrower may from time to time enter into written
agreements amending, modifying or supplementing this Agreement,
the Note or the other Loan Documents or changing the rights of
Lender or Borrower hereunder or thereunder, and Lender may from
time to time grant waivers or consents to a departure from the
due performance of the obligations of Borrower thereunder. Any
such agreement, waiver or consent must be in writing and shall be
effective only to the extent set forth in such writing. In the
case of any such waiver or consent, any Event of Default so
waived or consented to shall be deemed to be cured and not
continuing, but no such waiver or consent shall extend to any
subsequent or other Event of Default or impair any right
consequent thereto.
8.6 HOLIDAYS.
Except as otherwise provided herein, whenever any payment or
action to be made or taken hereunder or the Note or any other
Loan Document shall be stated to be due on a day which is not a
Business Day, such payment or action shall be made or taken on
the next following Business Day (and such day shall be included
in the calculation of interest due), unless such next succeeding
Business Day falls in a different calendar month, in which case
payment or action shall be made or taken on the next preceding
Business Day.
<PAGE>
8.7 NOTICES.
8.7.1 Except as otherwise provided herein, all
notices and other communications required under the terms and
provisions of this Agreement, the Note or the other Loan
Documents shall be in writing and shall become effective when
delivered by hand or received by overnight courier, telex,
facsimile, telegram or registered first class mail, postage
prepaid, addressed as follows:
If to Lender, at:
FINOVA Capital Corporation
115 West Century Road
Paramus, NJ 07652
Facsimile No. 201-634-3325
Attention: Pamela Marchant
Vice President
with a copy to: Winick & Rich, P.C.
919 Third Avenue
New York, New York 10022
Facsimile No. 212-308-5945
Attention: Alan C. Winick, Esq.
If to Borrower, at:
Showboat Marina Casino Partnership
P.O. Box 777
East Chicago, Indiana 46132
Facsimile No. 219-398-0144
Attention: Mr. Joseph O'Brien
with a copy to: Ice Miller Donadio & Ryan
One American Square
P.O. Box 82001
Indianapolis, Indiana 46282
Attention: Stephen J. Hackman, Esq.
or at such other address as either party may, from time to time,
designate in writing to the other party hereto.
8.7.2 If any notice is given by telex, facsimile
transmission, or telegram, the party giving such notice shall
confirm such notice by a writing delivered by hand or overnight
courier; PROVIDED, HOWEVER, that for all purposes hereunder,
notice shall be deemed effective at the time given by telex,
telecopier or telegram.
8.8 REIMBURSEMENT FOR CERTAIN EXPENSES.
Borrower agrees to pay or cause to be paid and to save
Lender harmless against liability for the payment of all
reasonable out-of-pocket costs and expenses, including, without
limitation, all counsel fees and costs, incurred by Lender from
<PAGE>
time to time (i) arising in connection with the negotiation,
execution, delivery, and recordation of this Agreement, the Note
and the other Loan Documents, and the transactions contemplated
hereby and thereby and all recording or filing fees,
(ii) relating to any requested amendments, waivers or consents to
or in connection with this Agreement, the Note or any other Loan
Document, and (iii) arising in connection with Lender's
enforcement or preservation of rights under this Agreement, the
Note or any other Loan Document, including but not limited to
such expenses as may be incurred by Lender in the collection of
the Note.
8.9 GOVERNING LAW.
THIS AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ARIZONA.
8.10 PERSONAL JURISDICTION AND SERVICE OF PROCESS.
BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR
PROCEEDING AGAINST BORROWER UNDER, ARISING OUT OF, OR IN ANY
MANNER RELATING TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN ANY STATE COURT OF THE STATE OF
ARIZONA LOCATED IN MARICOPA COUNTY OR ANY UNITED STATES DISTRICT
COURT LOCATED IN THE STATE OF ARIZONA. BORROWER, BY ITS
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND
IRREVOCABLY CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF
ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING. BORROWER
FURTHER AGREES THAT ANY LEGAL ACTION OR PROCEEDING BORROWER MAY
BRING, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS, SHALL ONLY BE BROUGHT IN ANY COURT
OF THE STATE OF ARIZONA LOCATED IN MARICOPA COUNTY OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA.
BORROWER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY
COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO SUCH
ACTION OR PROCEEDING BY DELIVERY THEREOF TO BORROWER IN THE
MANNER PROVIDED FOR NOTICES IN THIS AGREEMENT. BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH
ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY
SIMILAR BASIS. BORROWER SHALL NOT BE ENTITLED IN ANY SUCH ACTION
OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE
LAWS OF ANY STATE OTHER THAN THE STATE OF ARIZONA, UNLESS SUCH
DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF
ARIZONA. NOTHING HEREIN SHALL AFFECT OR IMPAIR IN ANY MANNER OR
TO ANY EXTENT THE RIGHT OF LENDER TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER JURISDICTION
OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
8.11 WAIVER OF JURY TRIAL.
BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH OR THEREWITH, INCLUDING THE LOAN
DOCUMENTS.
<PAGE>
8.12 SEVERABILITY.
The provisions of this Agreement, the Note and any other
Loan Document are intended to be severable. If any such
provision is held invalid or unenforceable in whole or in part in
any jurisdiction, such provision shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
8.13 PRIOR UNDERSTANDINGS.
This Agreement and the other Loan Documents supersede all
prior understandings and agreements, whether written or oral,
between the parties hereto relating to the transactions provided
for herein or therein.
8.14 SURVIVAL.
All representations and warranties of Borrower contained in
this Agreement or any other Loan Document or made in writing in
connection herewith or therewith shall survive the execution and
delivery of this Agreement, the Note and the other Loan
Documents, any investigation or inspection by Lender, the making
of the Loan hereunder, the payment of the Note or the expiration
of this Agreement. All covenants and agreements of Borrower
contained herein shall continue in full force until payment in
full of the Obligations. Borrower's obligation to pay the
principal of and interest on the Note and all such other amounts
shall be absolute and unconditional under any and all
circumstances.
8.15 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the
benefit of Lender and Borrower and their respective successors
and permitted assigns, except that Borrower may not assign or
transfer any of its rights or obligations hereunder or any
interest herein without the written consent of Lender which
Lender may withhold in its absolute discretion. Any actual or
attempted assignment by Borrower without Lender's consent shall
be null, void and of no effect whatsoever. Lender may assign its
rights and obligations hereunder and under the Note and the other
Loan Documents in whole or in part. If Lender makes such an
assignment, the assignee shall have all of the rights of the
Lender and Borrower shall not assert against the assignee any
defense, counterclaims or setoff which Borrower may have against
Lender. Except to the extent otherwise required by its context,
the word "Lender" where used in this Agreement shall mean and
include the holder of the Note originally issued to Lender, and
the holder of such Note shall be bound by and have the benefits
<PAGE>
of this Agreement to the same extent as if such holder had been a
signatory hereto.
8.16 COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts each
of which, when so executed and delivered by the parties,
constituting an original but all such counterparts together
constituting but one and the same instrument.
8.17 PUBLICITY.
Lender is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the
consummation of the transactions contemplated in this Agreement,
including the aggregate amount of the Loan.
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed and delivered this
Agreement effective as of the day and year first above written.
SHOWBOAT MARINA CASINO PARTNERSHIP,
an Indiana general partnership
Federal Tax Identification No. ____________
By: SHOWBOAT MARINA PARTNERSHIP,
an Indiana general partnership, its
general partner
By: SHOWBOAT INDIANA INVESTMENT LIMITED
PARTNERSHIP, a Nevada limited
partnership, its general partner
By: SHOWBOAT INDIANA, INC., a Nevada
corporation, its general partner
By: ______________________________________
Name: Joseph G. O'Brien
Title: Treasurer
FINOVA CAPITAL CORPORATION
By: _______________________________________
Name: Pamela Marchant
Title: Vice President
<PAGE>
EXHIBIT A
See attached.
<PAGE>
SECURED PROMISSORY NOTE
$11,000,000.00 June , 1997
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana general partnership ("Borrower"), hereby
promises to pay to the order of FINOVA CAPITAL CORPORATION,
("Lender"), the principal sum of Eleven Million Dollars
($11,000,000.00), or such lesser amount as represents the
aggregate of all Advances made by Lender to Borrower pursuant to
the Loan and Security Agreement between Borrower and Lender dated
the date of this Note ("Loan Agreement") together with interest
on the unpaid principal balance hereof from time to time
outstanding at the rates per annum and all on the dates and as
otherwise provided in the Loan Agreement.
This Note is the Note referred to in the Loan Agreement, is
secured as set forth in the Loan Agreement, may not be prepaid
except as provided in the Loan Agreement and is entitled to the
benefits of the Loan Agreement. All capitalized terms used in
this Note which are not otherwise defined herein shall have the
respective meanings ascribed to them in the Loan Agreement.
All payments of principal and interest on this Note are to
be made in lawful money of the United States of America in
immediately available funds, without setoff, counterclaim or
deduction of any nature, at the office of Lender at 95 North
Route 17 South, Paramus, New Jersey 07653 (or such other place as
the holder hereof shall designate to the Borrower in writing),
prior to 12:00 Noon, local time, on the day when due.
If any payment of principal or interest becomes due on a day
which is not a Business Day, that payment shall be made on the
next Business Day unless such next Business Day falls in another
calendar month in which event that payment shall be made on the
next preceding Business Day.
Lender and Borrower intend this Note to comply in all
respects with all provisions of law and not to violate, in any
way, any legal limitations on interest charges. Accordingly, if,
for any reason, Borrower is required to pay, or has paid,
interest at a rate in excess of the highest rate of interest
which may be charged by Lender or which Borrower may legally
contract to pay under applicable law (the "Maximum Rate"), then
the interest rate shall be deemed to be reduced, automatically
<PAGE>
and immediately, to the Maximum Rate, and interest payable
hereunder shall be computed and paid at the Maximum Rate and the
portion of all prior payments of interest in excess of the
Maximum Rate shall be deemed to have been prepayments of the
outstanding principal of this Note and applied to the
installments in the inverse order of their maturities.
If Borrower fails to make any payment of principal or
interest within ten (10) days after the payment is due, Borrower
shall pay a late charge of five percent (5%) of the unpaid
amount, but in no event more than the maximum amount permitted by
applicable law, and such amount shall be payable upon demand.
Such payment is not interest for the use of money, but is
intended to cover Lender's administrative costs occasioned by
such delay.
Upon the occurrence of an Event of Default, Lender shall
have all of the rights and remedies contained in the Loan
Agreement, including, without limitation, the right, at its
option, to declare all indebtedness under this Note to be
immediately due and payable.
Borrower hereby expressly waives presentment for payment,
demand for payment, notice of dishonor, protest, notice of
protest, notice of non-payment, and all lack of diligence or
delays in collection or enforcement of this Note or the Loan
Agreement.
Lender may extend the time of payment of this Note,
postpone the enforcement hereof, release any Collateral, or grant
any other indulgences whatsoever, without affecting or
diminishing Lender's right of recourse against Borrower, as
provided herein and in the Loan Agreement and in the other Loan
Documents, which right is hereby expressly reserved. The failure
to assert any right by Lender shall not be deemed a waiver
thereof.
Borrower agrees to pay all costs, fees and expenses of
collection, including, without limitation, Lender's reasonable
attorneys' fees and disbursements, in the event that any action,
suit or proceeding is brought by the holder hereof to collect
this Note or if an Event of Default occurs.
THIS NOTE IS DEEMED TO HAVE BEEN MADE IN, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF ARIZONA.
BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST BORROWER UNDER, ARISING OUT OF, OR IN ANY MANNER RELATING
TO THIS NOTE, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY
BE BROUGHT IN ANY STATE COURT OF THE STATE OF ARIZONA LOCATED IN
MARICOPA COUNTY OR ANY UNITED STATES DISTRICT COURT LOCATED IN
<PAGE>
THE STATE OF ARIZONA. BORROWER, BY ITS EXECUTION AND DELIVERY OF
THIS NOTE, EXPRESSLY AND IRREVOCABLY CONSENTS AND SUBMITS TO THE
PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR
PROCEEDING. BORROWER FURTHER AGREES THAT ANY LEGAL ACTION OR
PROCEEDING BORROWER MAY BRING, ARISING OUT OF OR IN ANY MANNER
RELATING TO THIS NOTE, THE LOAN AGREEMENT OR THE OTHER LOAN
DOCUMENTS, SHALL ONLY BE BROUGHT IN ANY COURT OF THE STATE OF
ARIZONA LOCATED IN MARICOPA COUNTY OR IN THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF ARIZONA. BORROWER ALSO
IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS,
NOTICE OR OTHER PROCESS RELATING TO SUCH ACTION OR PROCEEDING BY
DELIVERY THEREOF TO BORROWER IN THE MANNER PROVIDED FOR NOTICES
IN THE LOAN AGREEMENT. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING
BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS. BORROWER
SHALL NOT BE ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO ASSERT
ANY DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE OTHER
THAN THE STATE OF ARIZONA, UNLESS SUCH DEFENSE IS ALSO GIVEN OR
ALLOWED BY THE LAWS OF THE STATE OF ARIZONA. NOTHING HEREIN
SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT
OF LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST BORROWER IN ANY OTHER JURISDICTION OR TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW.
Lender is hereby authorized by Borrower to record on a
schedule to be annexed to this Note (or on a supplemental
schedule thereto) the amount of each Advance made by Lender to
Borrower and the amount of each payment or prepayment of
principal of the Loan received by Lender, it being understood,
however, that failure to make any such notation shall not affect
the rights of Lender or the obligations of Borrower hereunder in
respect of this Note. Lender may, at its option, record such
matters in its internal records rather than on such schedule and
such records shall be conclusive absent manifest error.
IN WITNESS WHEREOF, Borrower has duly executed this Note on
the date first above written.
SHOWBOAT MARINA CASINO PARTNERSHIP,
an Indiana general partnership
Federal Tax Identification No._____________
By: SHOWBOAT MARINA PARTNERSHIP,
an Indiana general partnership, its
general partner
By: SHOWBOAT INDIANA INVESTMENT LIMITED
PARTNERSHIP, a Nevada limited
partnership, its general partner
<PAGE>
By: SHOWBOAT INDIANA, INC., a Nevada
corporation, its general partner
By:
Name:
Title:
<PAGE>
SCHEDULE TO
SECURED PROMISSORY NOTE
This Note evidences Advances made under the within described
Loan Agreement, in the principal amounts, and on the dates set
forth below, subject to payments of principal set forth below:
Principal Amount Principal Balance
DATE MADE OF ADVANCE AMOUNT PAID OUTSTANDING INITIALS
<PAGE>
EXHIBIT B
REQUEST FOR ADVANCE
See attached.
<PAGE>
REQUEST FOR ADVANCE
_______________, 1997
To: FINOVA Capital Corporation
Attention: Loan Administration
Pursuant to Section 2.5 of the Loan Agreement, dated as of
_____________________, 1997 (the "Loan Agreement"), between
SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general
partnership ("Borrower"), and FINOVA CAPITAL CORPORATION, a
Delaware corporation ("Lender"), Borrower hereby requests that
Lender make an Advance to Borrower pursuant to the Loan Agreement
as follows:
1. The Business Day on which the proposed Advance is to be
made is ______________, 1997. Such date shall be a Disbursement
Date for purposes of the Loan Agreement. [Must be at least 5
Business Days from the date of this Request.]
2. The aggregate principal amount of the Advance to be
made on such date is $___________. [Not less than $1,000,000]
3. The proceeds of the Advance requested herein will be
used to finance the Items of FF&E described on Schedule A hereto
(which must be acceptable to FINOVA in its sole and absolute
discretion). Each of such Items of FF&E is Collateral, as
defined in the Loan Agreement and is or will be located at the
Premises.
4. Lender is authorized to remit the proceeds of this
Advance by wire transfer to: ____________________________,
Account No. ____________ at ________________________, ABA No.
____________, Attention: __________________________ or to such
other account or by such other means as shall be designated on
Schedule A hereto.
5. Each of the representations and warranties of Borrower
set forth in Article 3 of the Loan Agreement is true and correct
on the date hereof, except to the extent any such representation
and warranty relates to a particular date.
Capitalized terms defined in the Loan Agreement are used
herein as therein defined.
WITNESS the due execution hereof by the undersigned Borrower
on the date first set forth above.
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP,
an Indiana general partnership
By: SHOWBOAT MARINA PARTNERSHIP,
an Indiana general partnership, its
general partner
By: SHOWBOAT INDIANA INVESTMENT LIMITED
PARTNERSHIP, a Nevada limited
partnership, its general partner
By: SHOWBOAT INDIANA, INC., a Nevada
corporation, its general partner
By:
Name:
Title:
<PAGE>
EXHIBIT C
VESSEL CHATTEL MORTGAGE
See attached.
<PAGE>
EXHIBIT D
SUBORDINATION AGREEMENTS
See attached.
INTERCREDITOR AND SUBORDINATION AGREEMENT
THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (the
"Agreement") is entered into as of the _____ day of June, 1997 by
and among FINOVA CAPITAL CORPORATION, a Delaware corporation (the
"Lender") having a place of business at 95 North Route 17 South,
Paramus, New Jersey 07652, FIRSTAR BANK OF MINNESOTA, N.A. a
national banking association (successor in interest to American
Bank National Association) as trustee under that certain
Indenture dated as of March 28, 1996 ("Indenture") (the
"Preferred Mortgagee"), having a place of business at 101 East
Fifth Street, St. Paul, Minnesota 55101 and SHOWBOAT MARINA
CASINO PARTNERSHIP, an Indiana general partnership (the
"Borrower") having its place of business at 1 Showboat Place,
East Chicago, Indiana 46312.
WHEREAS, the Borrower has requested the Lender to provide
financing in the principal amount of $11,000,000.00 and the
Borrower and Lender have in connection therewith, entered into
that certain Loan and Security Agreement, dated even date
herewith (the "Loan Agreement") and the related promissory note
and security documents (specifically including without limitation
that certain Vessel Chattel Mortgage (the "Chattel Mortgage"))
covering those assets of the Borrower as described in Exhibit "A"
attached hereto and incorporated herein by reference
(collectively the "Collateral"); and
WHEREAS, the Borrower is indebted to the noteholders under
the Indenture in the principal amount of $140,000,000 pursuant to
certain First Promissory Notes issued pursuant to the Indenture
(collectively the "Ship Note") and secured, in part, by a
Preferred Ship Mortgage (the "Preferred Ship Mortgage") dated as
of April 9, 1997 on the Vessel described in Exhibit "B" attached
hereto and incorporated herein by reference (the "Vessel") and a
Leasehold Mortgage, Assignment of Rents and Security Agreement
dated as of March 28, 1996 ("Leasehold Mortgage"); and
WHEREAS, the Lender has indicated that it is unwilling to
provide financing to the Borrower under the Loan Agreement
unless, among other things, the Borrower and the Preferred
Mortgagee shall join in this Agreement and the Preferred
Mortgagee shall subordinate, to the extent and in the manner
hereinafter set forth, its interest (if any) in the Collateral
which arises under the Preferred Ship Mortgage, the Leasehold
Mortgage, any other mortgage or
<PAGE>
security agreement or otherwise ("Preferred Mortgagee Security")
to the liens and security interests granted by Borrower to the
Lender pursuant to the Loan Agreement, Chattel Mortgage or
documents, agreements or instruments executed in connection
therewith ("Lender Loan Documents").
NOW THEREFORE, in consideration of the premises and as an
inducement to the Lender to grant financial accommodations to the
Borrower, and in consideration of the granting thereof, the
Borrower and Preferred Mortgagee covenant with and warrant to the
Lender as follows:
1. STATEMENT OF PURPOSE.
The Preferred Mortgagee has a valid and
perfected Preferred Ship Mortgage on the Vessel
which could be construed as granting an interest
in all or part of the Collateral.
The Preferred Mortgagee may as a result
of the Indenture, Leasehold Mortgage or otherwise
have a valid and perfected security interest or
lien on all or part of the Collateral whether or
not located on the Vessel.
Simultaneous herewith, the Lender has
been granted a security interest in the Collateral
pursuant to various security documents including
but not limited to the Loan Agreement and the
Chattel Mortgage on the Vessel.
The parties wish to establish their
relative priorities of their respective liens and
interests in the Collateral.
2. RELATIVE PRIORITIES AND SUBORDINATION.
Notwithstanding the order in which the
documents granting the Preferred Mortgagee any
lien, security interest or other interest in the
Collateral including, without limitation, the
Indenture, Preferred Ship Mortgage or Leasehold
Mortgage and the documents granting the Lender any
lien, security interest or other interest in the
Collateral including, without limitation, the Loan
Agreement and Chattel Mortgage (collectively the
"Encumbrances") have been or are hereafter
executed, delivered or liens and security
interests thereunder have been or will be
perfected, and the relative
<PAGE>
priorities of the Encumbrances under applicable
law including, without limitation, any prior
perfection of a security interest or lien under
the provisions of the Uniform Commercial Code or
any other law of any jurisdiction which is
applicable or the existence of any present or
future filing or financing statements under the
Uniform Commercial Code or any other law of any
jurisdiction which is applicable or any other
recordation or filing of any documents, and
further, notwithstanding any pledge to or
possession by the Preferred Mortgagee of all or
any part of the Collateral, the parties hereto
acknowledge and agree that:
(i) the Lender shall have a senior
position with respect to the Collateral with
respect to any and all obligations of
Borrower pursuant to the Lender Loan
Documents whether or not the Collateral is
located on the Vessel and the Preferred
Mortgagee shall not make or assert any claims
or rights with respect thereto until Lender
is indefeasibly paid in full all of the
amounts owed by Borrower pursuant to the
Lender Loan Documents. To the extent the
Preferred Mortgagee is in control or
possession of the Vessel or related
facilities, the Preferred Mortgagee shall
allow the Lender to enter onto the Vessel and
related facilities to remove the Collateral
from the Vessel or related facilities; and
(ii) the Preferred Mortgagee shall
have a senior and absolute position with
respect to all other security covered by the
Leasehold Mortgage and Preferred Ship
Mortgage including but not limited to the
Vessel.
No party hereunder shall challenge or
contravene the validity and perfection of the
Encumbrances of the other party hereunder.
Each party hereunder agrees that upon a
written request from the other party, it shall
execute and deliver to the requesting party such
further instruments and shall take such further
action as the requesting party deems reasonably
necessary
<PAGE>
in order to carry out the provisions and intent of
this Agreement.
Preferred Mortgagee represents and
warrants that it is the successor in interest to
American Bank National Association (including,
without limitation, said entity's status as
Trustee under the Indenture) and that UCC
financing statements filed of record which
identify the Borrower as "Debtor" and (i) American
Bank National Association (as "Trustee" or
"Attention: Corporate Trust Department") or (ii)
Firstar Bank of Minnesota, as secured party,
relate to the $140 million dollar financing
evidenced by the Indenture and are all executed by
the Preferred Mortgagee in the Preferred
Mortgagee's capacity as Trustee under said
Indenture. The Preferred Mortgagee further
acknowledges that the security interest(s)
perfected by said UCC filings are subject to the
terms of this Agreement.
3. DISTRIBUTION OF INSURANCE PROCEEDS
In the event insurance proceeds hereafter are realized
on the Vessel or related facilities, then the proceeds thereof
shall be distributed to the Preferred Mortgagee except that any
and all insurance proceeds attributable to the Collateral shall
be distributed to the Lender to the extent of the Obligations
under the Loan Agreement.
4. EXCHANGE OF NOTICES
(a) Each of the parties hereunder shall make
reasonable efforts to provide all others with a
copy of any notice or demand, or similar
communication, as and when given the Borrower.
However, no party hereunder shall have any
liability to any other party hereunder for failure
to comply.
(b) All notices and other communications
required hereunder shall be in writing and shall
become effective when delivered by hand or
received by overnight courier, telex, facsimile,
telegram or registered first class mail, postage
prepaid addressed to the following:
LENDER:
<PAGE>
FINOVA Capital Corporation
115 Century Road
Paramus, New Jersey 07652
Attention: Pamela Marchant, Vice President
with a copy to:
Winick & Rich, P.C.
919 Third Avenue
New York, NY 10022
Attention: Alan C. Winick, Esq.
BORROWER:
Showboat Marina Casino Partnership
1 Showboat Place
East Chicago, Indiana 46312
with a copy to:
Ice Miller Donadio & Ryan
One American Square
P.O. Box 82001
Indianapolis, Indiana 46282
Attention: Stephen J. Hackman, Esq
PREFERRED MORTGAGEE:
Firstar Bank of Minnesota, N.A.
101 East Fifth Street
St. Paul, MN 55101
Attention: Mr. Frank Leslie
5. GOVERNING LAW.
This Subordination Agreement shall be governed by and
construed under the laws of Arizona.
6. AMENDMENTS AND WAIVERS.
This Agreement or any provision hereunder may be
effectively waived, amended, assigned, or terminated only by
written agreement signed by the party hereunder against whom the
enforcement of any waiver, amendment, assignment, or termination
is sought.
7. BINDING EFFECT.
This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their
<PAGE>
respective successors and assigns. Without limiting the
foregoing, this Section 7 shall be understood to apply to
assignments of the respective loans or any of them or of any
Encumbrance securing any of the respective loans; no such
assignment shall adversely affect the rights of any party
hereunder and any such assignment which is deemed by the
assigning party or its assignee to so affect such rights shall to
that extent be ineffective. No assignment by any party shall be
binding or effective until the assignee has agreed in writing to
be bound by the terms and conditions of this Agreement.
8. SEVERABILITY.
In the event that any provision of this Agreement shall
be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render
unenforceable any other provisions hereof.
9. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
Agreement and any of the parties hereto may execute this
Agreement by signing a counterpart. The parties further
acknowledge and agree that telecopy or facsimile signature pages
shall be sufficient evidence of said parties execution of this
Agreement and its intent to be bound hereby. Each party agrees
to provide original executed signature pages to the other parties
by overnight courier delivery after the date the facsimile or
telecopy signature pages are executed.
10. EFFECT ON BORROWER'S OBLIGATIONS.
The provisions of this Agreement are intended solely
for the purpose of defining the relative rights between Lender
and Preferred Mortgagee only. No party, including the Borrower,
is intended to be a third party beneficiary of this Agreement.
Nothing contained herein is intended to or shall impair the
obligations of the Borrower to the Lender or Preferred Mortgagee
or either of them; nor shall anything herein prevent any of the
parties hereto from accepting any payment from the Borrower or
from exercising all remedies otherwise permitted by applicable
law and any agreements with Borrower upon default by the Borrower
under Borrower's obligations to such party, subject only to the
rights, if any, of the parties under this Agreement. Except as
otherwise provided herein, the right of the parties to enforce
the provisions of this Agreement shall not at anytime be
prejudiced or impaired by any act or failure to act on the part
of any of the parties, including without
<PAGE>
limitation, any forbearance, waiver, consent, compromise,
amendment, extension, or renewal with respect to Borrower's
obligations to a party, or any taking or release of or failure to
protect or preserve any property of the Borrower or by
noncompliance by the Borrower with the terms of this Agreement.
11. LEGEND.
Each party, for itself and its successors as holders of
its respective loan or in its capacity as trustee, as applicable,
agrees to cause such records as the parties may agree to contain
one or more conspicuous notices which reads substantially as
follows:
This instrument is subject to an Intercreditor and
Subordination Agreement dated as of June , 1997,
among FINOVA Capital Corporation, Firstar Bank of
Minnesota, N.A. and Showboat Marina Casino Partnership,
which among other things, determines the relative
priorities of certain security interests or other liens
in certain assets as more fully set forth therein.
12. MEMORANDUM OF INTERCREDITOR AND SUBORDINATION
AGREEMENT.
Preferred Mortgagee shall, if so requested by Lender,
execute and deliver a memorandum of this Agreement in proper form
for the purpose of recording with the National Vessel
Documentation Center and execute and deliver UCC-3 Amendment
filings for the purpose of providing notice of this Agreement and
for filing in the appropriate Secretary of State and county or
other local offices. However, the memorandum and UCC-3's shall
not in any circumstances be deemed to modify or change any
provisions of this Agreement.
13. LENDER'S RIGHT TO MODIFY.
The Lender shall be at liberty, without giving notice
to or obtaining the assent of the Preferred Mortgagee, to vary
and/or modify the terms and grant extensions or renewals of any
present or future indebtedness or obligation to the Lender from
the Borrower including without limitation all such terms and
provisions as set forth in the Loan Agreement and all related
documents without effecting in any manner any rights hereunder.
Without limiting the foregoing, the terms of this Agreement, the
subordination effected hereby, and the rights of Lender and the
obligations of the Preferred Mortgagee arising hereunder, shall
not be affected, modified or impaired in
<PAGE>
any manner or to any extent by: (i) any amendment, modification
or termination of or supplement to the Lender Loan Documents, or
any agreement, instrument or document executed or delivered
pursuant thereto; (ii) the validity or enforceability of any such
documents; (iii) the release, sale, exchange or surrender, in
whole or in part, of any Collateral or collateral security, now
or hereafter existing, for any of the indebtedness owed Lender
pursuant to the Lender Loan Documents or any other indebtedness,
liability or obligation of the Borrower to Lender, now existing
or hereafter arising; (iv) any exercise or non-exercise of any
right, power or remedy under or in respect of the indebtedness
owed Lender or any of such instruments and documents referred to
in clause (i) above or arising at law; (v) any waiver, consent,
release, indulgence, extension, renewal, modification, delay or
other action, inaction or omission in respect of the indebtedness
owed lender or any of the agreements, instruments or documents
referred to in clause (i) above or in respect of any collateral
security for the indebtedness owed Lender or any other
indebtedness, liability or obligation of the Borrower to Lender,
now existing or hereafter arising, or whether or not the
Preferred Mortgagee shall have had notice or knowledge of any of
the foregoing and whether or not it shall have consented thereto;
or (vi) any action taken by any trustee in bankruptcy including
any debtor under the Bankruptcy Code or any other party pursuant
to Sections 510, 547, 548, 549, 550 or 553 of the Bankruptcy
Code.
14. PREFERRED MORTGAGEE REPRESENTATION.
The Preferred Mortgagee hereby represents and warrants
that: (a) the execution and delivery of this Agreement and the
performance by said Preferred Mortgagee of its obligations
hereunder have received all necessary approvals, corporate or
otherwise, and do not and will not contravene or conflict with
any provision of law or any provision of any indenture,
instrument or other agreement to which said Preferred Mortgagee
is a party or by which it or its property may be bound or
affected; (b) said Preferred Mortgagee has full power, authority
and legal right to make and perform this Agreement; (c) said
Preferred Mortgagee has not assigned or transferred any
indebtedness owing by the Borrower; and (d) this Agreement is the
legal, valid and binding obligation of the Preferred Mortgagee,
enforceable against the Preferred Mortgagee in accordance with
its terms.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Intercreditor and Subordination Agreement as an instrument under
seal as of the day and year first above written.
LENDER
FINOVA CAPITAL CORPORATION
BY:
PREFERRED MORTGAGEE
FIRSTAR BANK OF MINNESOTA, N.A.,
TRUSTEE
BY:
BORROWER
SHOWBOAT MARINA CASINO PARTNERSHIP
By: SHOWBOAT MARINA PARTNERSHIP,
an Indiana general partnership, its
general partner
By: SHOWBOAT INDIANA INVESTMENT LIMITED
PARTNERSHIP, a Nevada limited
partnership, its general partner
By: SHOWBOAT INDIANA, INC., a Nevada
corporation, its general partner
By:
Name: Joseph G. O'Brien
Title: Treasurer
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW JERSEY
COUNTY OF BERGEN
BE IT REMEMBERED, that on this ______ day of June, 1997
before me, the subscriber, personally appeared PAMELA MARCHANT
who, I am satisfied, is the person who signed the within
instrument as Vice President of FINOVA CAPITAL CORPORATION the
corporation named therein and she thereupon acknowledged that the
said instrument made by the corporation was signed and delivered
by her as such officer and is the voluntary act and deed of the
corporation.
_________________________________
<PAGE>
ACKNOWLEDGMENT
STATE OF
COUNTY OF
BE IT REMEMBERED, that on this ______ day of June, 1997
before me, the subscriber, personally appeared
who, I am satisfied, is the person who signed the within
instrument as of FIRSTAR BANK OF MINNESOTA,
N.A. the national banking association named therein and he
thereupon acknowledged that the said instrument made by the
entity and sealed with its corporate seal, was signed, sealed and
delivered by him as such officer and is the voluntary act and
deed of the entity, made by virtue of authority from its Board of
Directors.
_________________________________
<PAGE>
ACKNOWLEDGMENT
STATE OF
COUNTY OF
BE IT REMEMBERED, that on this ______ day of June, 1997
before me, the subscriber, personally appeared JOSEPH G. O'BRIEN,
who, I am satisfied, is the who
signed the within instrument as the ____________________________
of Showboat Marina Casino Partnership, the partnership named
therein and they thereupon acknowledged that the said instrument
made by the partnership, was signed and delivered by him as such
and is the voluntary act and deed of the partnership, made by
virtue of authority from all of its partners.
________________________________
<PAGE>
SUBORDINATION AGREEMENT
EXHIBIT "A"
Description of Collateral.
See attached ( ) pages which are
incorporated herein by reference.
<PAGE>
SUBORDINATION AGREEMENT
EXHIBIT "B"
Description of Vessel.
Official Gross Net Year Place
NAME NUMBER TONNAGE TONNAGE BUILT BUILT
M/V Showboat 1052579 2803 1,906 1997 Jacksonville,
Florida
<PAGE>
DLJ INTERCREDITOR AND
SUBORDINATION AGREEMENT
THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (the
"Agreement") is entered into as of the _____ day of June, 1997 by
and among FINOVA CAPITAL CORPORATION, a Delaware corporation (the
"Lender") having a place of business at 95 North Route 17 South,
Paramus, New Jersey 07652, DONALDSON LUFKIN & JENRETTE SECURITIES
CORPORATION ("DLJ Securities") a
corporation and DLJ CAPITAL FUNDING, INC. ("DLJ Capital") (DLJ
Securities and DLJ Capital are sometimes hereinafter individually
or collectively referred to as the "Preferred Mortgagee", as the
case may be), each having an address 277 Park Avenue, New York,
New York 10172 and SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana
general partnership (the "Borrower") having a place of business
at 1 Showboat Place, East Chicago, Indiana 46312.
WHEREAS, the Borrower has requested the Lender to provide
financing in the principal amount of $11,000,000.00 and the
Borrower and Lender have in connection therewith, entered into
that certain Loan and Security Agreement, dated even date
herewith (the "Loan Agreement") and the related promissory note
and security documents (specifically including without limitation
that certain Vessel Chattel Mortgage (the "Chattel Mortgage"))
covering those assets of the Borrower as described in Exhibit "A"
attached hereto and incorporated herein by reference
(collectively the "Collateral"); and
WHEREAS, the Borrower is indebted to the Preferred Mortgagee
(as assignee of PDS Financial Corporation) pursuant to a certain
Master Lease Agreement dated February 21, 1997 (the "Lease") and
secured, in part, by a Preferred Ship Mortgage (the "Preferred
Ship Mortgage") dated February 21, 1997 on the Vessel described
in Exhibit "B" attached hereto and incorporated herein by
reference (the "Vessel"); and
WHEREAS, the Lender has indicated that it is unwilling to
provide financing to the Borrower under the Loan Agreement
unless, among other things, the Borrower and the Preferred
Mortgagee shall join in this Agreement and the Preferred
Mortgagee shall subordinate, to the extent and in the manner
hereinafter set forth, its interest (if any) in the Collateral
which arises under the Preferred Ship Mortgage, any other
mortgage or security agreement or
<PAGE>
otherwise ("Preferred Mortgagee Security") to the liens and
security interests granted by Borrower to the Lender pursuant to
the Loan Agreement, Chattel Mortgage or documents, agreements or
instruments executed in connection therewith ("Lender Loan
Documents").
NOW THEREFORE, in consideration of the premises and as an
inducement to the Lender to grant financial accommodations to the
Borrower, and in consideration of the granting thereof, the
Borrower and Preferred Mortgagee covenant with and warrant to the
Lender as follows:
1. STATEMENT OF PURPOSE.
The Preferred Mortgagee has a valid and
perfected Preferred Ship Mortgage on the Vessel
which could be construed as granting an interest
in all or part of the Collateral.
The Preferred Mortgagee may otherwise
have or claim to have a valid and perfected
security interest or lien on all or part of the
Collateral whether or not located on the Vessel.
Simultaneous herewith, the Lender has
been granted a security interest in the Collateral
pursuant to various security documents including
but not limited to the Loan Agreement and the
Chattel Mortgage on the Vessel.
The parties wish to establish their
relative priorities of their respective liens and
interests in the Collateral.
2. RELATIVE PRIORITIES AND SUBORDINATION.
Notwithstanding the order in which the
documents granting the Preferred Mortgagee any
lien, security interest or other interest in the
Collateral including, without limitation, the
Preferred Ship Mortgage and the documents granting
the Lender any lien, security interest or other
interest in the Collateral including, without
limitation, the Loan Agreement and Chattel
Mortgage (collectively the "Encumbrances") have
been or are hereafter executed, delivered or liens
and security interests thereunder have been or
will be perfected, and the relative priorities of
the Encumbrances under applicable law including,
without limitation, any prior perfection of a
<PAGE>
security interest or lien under the provisions of
the Uniform Commercial Code or any other law of
any jurisdiction which is applicable or the
existence of any present or future filing or
financing statements under the Uniform Commercial
Code or any other law of any jurisdiction which is
applicable or any other recordation or filing of
any documents, and further, notwithstanding any
pledge to or possession by the Preferred Mortgagee
of all or any part of the Collateral, the parties
hereto acknowledge and agree that:
(i) the Lender shall have a senior
position with respect to the Collateral with
respect to any and all obligations of
Borrower pursuant to the Lender Loan
Documents whether or not the Collateral is
located on the Vessel and the Preferred
Mortgagee shall not make or assert any claims
or rights with respect thereto until Lender
is indefeasibly paid in full all of the
amounts owed by Borrower pursuant to the
Lender Loan Documents. To the extent the
Preferred Mortgagee is in control or
possession of the Vessel or related
facilities, the Preferred Mortgagee shall
allow the Lender to enter onto the Vessel and
related facilities to remove the Collateral
from the Vessel or related facilities; and
(ii) the Preferred Mortgagee shall
have a senior and absolute position with
respect to all other security covered by the
Preferred Ship Mortgage including but not
limited to the Vessel.
No party hereunder shall challenge or
contravene the validity and perfection of the
Encumbrances of the other party hereunder.
Each party hereunder agrees that upon a
written request from the other party, it shall
execute and deliver to the requesting party such
further instruments and shall take such further
action as the requesting party deems reasonably
necessary in order to carry out the provisions and
intent of this Agreement.
<PAGE>
3. DISTRIBUTION OF INSURANCE PROCEEDS.
In the event insurance proceeds hereafter are realized
on the Vessel or related facilities, then the proceeds thereof
shall be distributed to the Preferred Mortgagee except that any
and all insurance proceeds attributable to the Collateral shall
be distributed to the Lender to the extent of the Obligations
under the Loan Agreement.
4. EXCHANGE OF NOTICES
(a) Each of the parties hereunder shall make
reasonable efforts to provide all others with a
copy of any notice or demand, or similar
communication, as and when given the Borrower.
However, no party hereunder shall have any
liability to any other party hereunder for failure
to comply.
(b) All notices and other communications
required hereunder shall be in writing and shall
become effective when delivered by hand or
received by overnight courier, telex, facsimile,
telegram or registered first class mail, postage
prepaid addressed to the following:
LENDER:
FINOVA Capital Corporation
115 Century Road
Paramus, New Jersey 07652
Attention: Pamela Marchant, Vice President
with a copy to:
Winick & Rich, P.C.
919 Third Avenue
New York, NY 10022
Attention: Alan C. Winick, Esq.
BORROWER:
Showboat Marina Casino Partnership
1 Showboat Place
East Chicago, Indiana 46312
with a copy to:
<PAGE>
Ice Miller Donadio & Ryan
One American Square
P.O. Box 82001
Indianapolis, Indiana 46282
Attention: Stephen J. Hackman, Esq
PREFERRED MORTGAGEE:
Donaldson Lufkin & Jenrette Securities Corporation
DLJ Capital Funding, Inc.
277 Park Avenue
New York, New York 10172
with a copy to:
Paul Silverstein, Esq.
Andrews & Kurth
425 Lexington Avenue
10th Floor
New York, New York 10017
5. GOVERNING LAW.
This Subordination Agreement shall be governed by and
construed under the laws of Arizona.
6. AMENDMENTS AND WAIVERS.
This Agreement or any provision hereunder may be
effectively waived, amended, assigned, or terminated only by
written agreement signed by the party hereunder against whom the
enforcement of any waiver, amendment, assignment, or termination
is sought.
7. BINDING EFFECT.
This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their respective
successors and assigns. Without limiting the foregoing, this
Section 7 shall be understood to apply to assignments of the
respective loans or any of them or of any Encumbrance securing
any of the respective loans; no such assignment shall adversely
affect the rights of any party hereunder and any such assignment
which is deemed by the assigning party or its assignee to so
affect such rights shall to that extent be ineffective. No
assignment by any party shall be binding or effective until the
assignee has
<PAGE>
agreed in writing to be bound by the terms and conditions of this
Agreement.
8. SEVERABILITY.
In the event that any provision of this Agreement shall
be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render
unenforceable any other provisions hereof.
9. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
Agreement and any of the parties hereto may execute this
Agreement by signing a counterpart. The parties further
acknowledge and agree that telecopy or facsimile signature pages
shall be sufficient evidence of said parties execution of this
Agreement and its intent to be bound hereby. Each party agrees
to provide original executed signature pages to the other parties
by overnight courier delivery after the date the facsimile or
telecopy signature pages are executed.
10. EFFECT ON BORROWER'S OBLIGATIONS.
The provisions of this Agreement are intended solely
for the purpose of defining the relative rights between Lender
and Preferred Mortgagee only. No party, including the Borrower,
is intended to be a third party beneficiary of this Agreement.
Nothing contained herein is intended to or shall impair the
obligations of the Borrower to the Lender or Preferred Mortgagee
or either of them; nor shall anything herein prevent any of the
parties hereto from accepting any payment from the Borrower or
from exercising all remedies otherwise permitted by applicable
law and any agreements with Borrower upon default by the Borrower
under Borrower's obligations to such party, subject only to the
rights, if any, of the parties under this Agreement. Except as
otherwise provided herein, the right of the parties to enforce
the provisions of this Agreement shall not at anytime be
prejudiced or impaired by any act or failure to act on the part
of any of the parties, including without limitation, any
forbearance, waiver, consent, compromise, amendment, extension,
or renewal with respect to Borrower's obligations to a party, or
any taking or release of or failure to protect or preserve any
property of the Borrower or by noncompliance by the Borrower with
the terms of this Agreement.
11. LEGEND.
<PAGE>
Each party, for itself and its successors as holders of
its respective loan and/or master lease, as appropriate, agrees
to cause such records as reasonably agreed to by the parties to
contain one or more conspicuous notices which read substantially
as follows:
This instrument is subject to an Intercreditor and
Subordination Agreement dated as of June , 1997,
among FINOVA Capital Corporation, Donaldson Lufkin &
Jenrette Securities Corporation, DLJ Capital Funding,
Inc. and Showboat Marina Casino Partnership, which
among other things, determines the relative priorities
of certain security interests or other liens in certain
assets as more fully set forth therein.
12. MEMORANDUM OF INTERCREDITOR AND SUBORDINATION
AGREEMENT.
Preferred Mortgagee shall, if so requested by Lender,
execute and deliver a memorandum of this Agreement in proper form
for the purpose of recording with the National Vessel
Documentation Center and execute and deliver UCC-3 Amendment
filings for the purpose of providing notice of this Agreement and
for filing in the appropriate Secretary of State and county or
other local offices. However, the memorandum and UCC-3's shall
not in any circumstances be deemed to modify or change any
provisions of this Agreement.
13. LENDER'S RIGHT TO MODIFY.
The Lender shall be at liberty, without giving notice
to or obtaining the assent of the Preferred Mortgagee, to vary
and/or modify the terms and grant extensions or renewals of any
present or future indebtedness or obligation to the Lender from
the Borrower including without limitation all such terms and
provisions as set forth in the Loan Agreement and all related
documents without effecting in any manner any rights hereunder.
Without limiting the foregoing, the terms of this Agreement, the
subordination effected hereby, and the rights of Lender and the
obligations of the Preferred Mortgagee arising hereunder, shall
not be affected, modified or impaired in any manner or to any
extent by: (i) any amendment, modification or termination of or
supplement to the Lender Loan Documents, or any agreement,
instrument or document executed or delivered pursuant thereto;
(ii) the validity or enforceability of any such documents; (iii)
the release, sale, exchange or surrender, in whole or in part, of
any
<PAGE>
Collateral or collateral security, now or hereafter existing, for
any of the indebtedness owed Lender pursuant to the Lender Loan
Documents or any other indebtedness, liability or obligation of
the Borrower to Lender, now existing or hereafter arising; (iv)
any exercise or non-exercise of any right, power or remedy under
or in respect of the indebtedness owed Lender or any of such
instruments and documents referred to in clause (i) above or
arising at law; (v) any waiver, consent, release, indulgence,
extension, renewal, modification, delay or other action, inaction
or omission in respect of the indebtedness owed lender or any of
the agreements, instruments or documents referred to in clause
(i) above or in respect of any collateral security for the
indebtedness owed Lender or any other indebtedness, liability or
obligation of the Borrower to Lender, now existing or hereafter
arising, or whether or not the Preferred Mortgagee shall have had
notice or knowledge of any of the foregoing and whether or not it
shall have consented thereto; or (vi) any action taken by any
trustee in bankruptcy including any debtor under the Bankruptcy
Code or any other party pursuant to Sections 510, 547, 548, 549,
550 or 553 of the Bankruptcy Code.
14. PREFERRED MORTGAGEE REPRESENTATION.
The Preferred Mortgagee hereby represents and warrants
that: (a) the execution and delivery of this Agreement and the
performance by said Preferred Mortgagee of its obligations
hereunder have received all necessary approvals, corporate or
otherwise, and do not and will not contravene or conflict with
any provision of law or any provision of any indenture,
instrument or other agreement to which said Preferred Mortgagee
is a party or by which it or its property may be bound or
affected; (b) said Preferred Mortgagee has full power, authority
and legal right to make and perform this Agreement; (c) said
Preferred Mortgagee has not assigned or transferred any
indebtedness owing by the Borrower [except to DLJ]; and (d) this
Agreement is the legal, valid and binding obligation of the
Preferred Mortgagee, enforceable against the Preferred Mortgagee
in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed
this Intercreditor and Subordination Agreement as an instrument
under seal as of the day and year first above written.
LENDER
<PAGE>
FINOVA CAPITAL CORPORATION
BY:
PREFERRED MORTGAGEE
DONALDSON LUFKIN & JENRETTE SECURITIES
CORPORATION
By:
DLJ CAPITAL FUNDING, INC.
BY:
,
<PAGE>
BORROWER
SHOWBOAT MARINA CASINO PARTNERSHIP
By: SHOWBOAT MARINA PARTNERSHIP,
an Indiana general partnership, its
general partner
By: SHOWBOAT INDIANA INVESTMENT LIMITED
PARTNERSHIP, a Nevada limited
partnership, its general partner
By: SHOWBOAT INDIANA, INC., a Nevada
corporation, its general partner
By:
Name: Joseph G. O'Brien
Title: Treasurer
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW JERSEY
COUNTY OF BERGEN
BE IT REMEMBERED, that on this ______ day of June, 1997
before me, the subscriber, personally appeared PAMELA MARCHANT
who, I am satisfied, is the person who signed the within
instrument as Vice President of FINOVA CAPITAL CORPORATION the
corporation named therein and she thereupon acknowledged that the
said instrument made by the corporation was signed and delivered
by her as such officer and is the voluntary act and deed of the
corporation.
_________________________________
<PAGE>
ACKNOWLEDGMENT
STATE OF
COUNTY OF
BE IT REMEMBERED, that on this ______ day of June, 1997
before me, the subscriber, personally appeared
who, I am satisfied, is the person who signed the within
instrument as of DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION the corporation named therein and he
thereupon acknowledged that the said instrument made by the
corporation and sealed with its corporate seal, was signed,
sealed and delivered by him as such officer and is the voluntary
act and deed of the corporation, made by virtue of authority from
its Board of Directors.
_________________________________
<PAGE>
ACKNOWLEDGMENT
STATE OF
COUNTY OF
BE IT REMEMBERED, that on this ______ day of June, 1997
before me, the subscriber, personally appeared
who, I am satisfied, is the person who signed the within
instrument as of DLJ CAPITAL FUNDING, INC.
the corporation named therein and he thereupon acknowledged that
the said instrument made by the corporation and sealed with its
corporate seal, was signed, sealed and delivered by him as such
officer and is the voluntary act and deed of the corporation,
made by virtue of authority from its Board of Directors.
_________________________________
<PAGE>
ACKNOWLEDGMENT
STATE OF INDIANA
COUNTY OF
BE IT REMEMBERED, that on this ______ day of June, 1997
before me, the subscriber, personally appeared JOSEPH G. O'BRIEN,
who, I am satisfied, is the who signed the
within instrument as the ____________________________ of SHOWBOAT
MARINA CASINO PARTNERSHIP, the partnership named therein and he
thereupon acknowledged that the said instrument made by the
partnership, was signed and delivered by them as such
and is the voluntary act and deed of the partnership, made by
virtue of authority from all of its partners.
________________________________
<PAGE>
SUBORDINATION AGREEMENT
EXHIBIT "A"
Description of Collateral.
All furniture, fixtures and equipment of Borrower (which
are not gaming equipment) as more fully described on the attached
( ) pages which are incorporated herein by reference.
<PAGE>
SUBORDINATION AGREEMENT
EXHIBIT "B"
Description of Vessel.
Official Gross Net Year Place
NAME NUMBER TONNAGE TONNAGE BUILT BUILT
M/V Showboat 1052579 2803 1906 1997 Jacksonville,
Florida
<PAGE>
SECURED PROMISSORY NOTE
$11,000,000.00 June , 1997
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana general partnership ("Borrower"), hereby
promises to pay to the order of FINOVA CAPITAL CORPORATION,
("Lender"), the principal sum of Eleven Million Dollars
($11,000,000.00), or such lesser amount as represents the
aggregate of all Advances made by Lender to Borrower pursuant to
the Loan and Security Agreement between Borrower and Lender dated
the date of this Note ("Loan Agreement") together with interest
on the unpaid principal balance hereof from time to time
outstanding at the rates per annum and all on the dates and as
otherwise provided in the Loan Agreement.
This Note is the Note referred to in the Loan Agreement, is
secured as set forth in the Loan Agreement, may not be prepaid
except as provided in the Loan Agreement and is entitled to the
benefits of the Loan Agreement. All capitalized terms used in
this Note which are not otherwise defined herein shall have the
respective meanings ascribed to them in the Loan Agreement.
All payments of principal and interest on this Note are to
be made in lawful money of the United States of America in
immediately available funds, without setoff, counterclaim or
deduction of any nature, at the office of Lender at 95 North
Route 17 South, Paramus, New Jersey 07653 (or such other place as
the holder hereof shall designate to the Borrower in writing),
prior to 12:00 Noon, local time, on the day when due.
If any payment of principal or interest becomes due on a day
which is not a Business Day, that payment shall be made on the
next Business Day unless such next Business Day falls in another
calendar month in which event that payment shall be made on the
next preceding Business Day.
Lender and Borrower intend this Note to comply in all
respects with all provisions of law and not to violate, in any
way, any legal limitations on interest charges. Accordingly, if,
for any reason, Borrower is required to pay, or has paid,
interest at a rate in excess of the highest rate of interest
which may be charged by Lender or which Borrower may legally
contract to pay under applicable
<PAGE>
law (the "Maximum Rate"), then the interest rate shall be deemed
to be reduced, automatically and immediately, to the Maximum
Rate, and interest payable hereunder shall be computed and paid
at the Maximum Rate and the portion of all prior payments of
interest in excess of the Maximum Rate shall be deemed to have
been prepayments of the outstanding principal of this Note and
applied to the installments in the inverse order of their
maturities.
If Borrower fails to make any payment of principal or
interest within ten (10) days after the payment is due, Borrower
shall pay a late charge of five percent (5%) of the unpaid
amount, but in no event more than the maximum amount permitted by
applicable law, and such amount shall be payable upon demand.
Such payment is not interest for the use of money, but is
intended to cover Lender's administrative costs occasioned by
such delay.
Upon the occurrence of an Event of Default, Lender shall
have all of the rights and remedies contained in the Loan
Agreement, including, without limitation, the right, at its
option, to declare all indebtedness under this Note to be
immediately due and payable.
Borrower hereby expressly waives presentment for payment,
demand for payment, notice of dishonor, protest, notice of
protest, notice of non-payment, and all lack of diligence or
delays in collection or enforcement of this Note or the Loan
Agreement.
Lender may extend the time of payment of this Note,
postpone the enforcement hereof, release any Collateral, or grant
any other indulgences whatsoever, without affecting or
diminishing Lender's right of recourse against Borrower, as
provided herein and in the Loan Agreement and in the other Loan
Documents, which right is hereby expressly reserved. The failure
to assert any right by Lender shall not be deemed a waiver
thereof.
Borrower agrees to pay all costs, fees and expenses of
collection, including, without limitation, Lender's reasonable
attorneys' fees and disbursements, in the event that any action,
suit or proceeding is brought by the holder hereof to collect
this Note or if an Event of Default occurs.
THIS NOTE IS DEEMED TO HAVE BEEN MADE IN, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF ARIZONA.
BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST BORROWER UNDER, ARISING OUT OF,
<PAGE>
OR IN ANY MANNER RELATING TO THIS NOTE, THE LOAN AGREEMENT OR THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY STATE COURT OF THE
STATE OF ARIZONA LOCATED IN MARICOPA COUNTY OR ANY UNITED STATES
DISTRICT COURT LOCATED IN THE STATE OF ARIZONA. BORROWER, BY ITS
EXECUTION AND DELIVERY OF THIS NOTE, EXPRESSLY AND IRREVOCABLY
CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH
COURTS IN ANY SUCH ACTION OR PROCEEDING. BORROWER FURTHER AGREES
THAT ANY LEGAL ACTION OR PROCEEDING BORROWER MAY BRING, ARISING
OUT OF OR IN ANY MANNER RELATING TO THIS NOTE, THE LOAN AGREEMENT
OR THE OTHER LOAN DOCUMENTS, SHALL ONLY BE BROUGHT IN ANY COURT
OF THE STATE OF ARIZONA LOCATED IN MARICOPA COUNTY OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA.
BORROWER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY
COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO SUCH
ACTION OR PROCEEDING BY DELIVERY THEREOF TO BORROWER IN THE
MANNER PROVIDED FOR NOTICES IN THE LOAN AGREEMENT. BORROWER
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN
ANY SUCH ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS OR
ANY SIMILAR BASIS. BORROWER SHALL NOT BE ENTITLED IN ANY SUCH
ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER
THE LAWS OF ANY STATE OTHER THAN THE STATE OF ARIZONA, UNLESS
SUCH DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF
ARIZONA. NOTHING HEREIN SHALL AFFECT OR IMPAIR IN ANY MANNER OR
TO ANY EXTENT THE RIGHT OF LENDER TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER JURISDICTION
OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
Lender is hereby authorized by Borrower to record on a
schedule to be annexed to this Note (or on a supplemental
schedule thereto) the amount of each Advance made by Lender to
Borrower and the amount of each payment or prepayment of
principal of the Loan received by Lender, it being understood,
however, that failure to make any such notation shall not affect
the rights of Lender or the obligations of Borrower hereunder in
respect of this Note. Lender may, at its option, record such
matters in its internal records rather than on such schedule and
such records shall be conclusive absent manifest error.
IN WITNESS WHEREOF, Borrower has duly executed this Note on
the date first above written.
SHOWBOAT MARINA CASINO PARTNERSHIP,
an Indiana general partnership
<PAGE>
Federal Tax Identification No._____________
By: SHOWBOAT MARINA PARTNERSHIP,
an Indiana general partnership, its
general partner
By: SHOWBOAT INDIANA INVESTMENT LIMITED
PARTNERSHIP, a Nevada limited
partnership, its general partner
By: SHOWBOAT INDIANA, INC., a Nevada
corporation, its general partner
By:
Name: Joseph G. O'Brien
Title: Treasurer
<PAGE>
VESSEL CHATTEL MORTGAGE
THIS VESSEL CHATTEL MORTGAGE made and entered into on
this 30th day of June, 1997 by and between SHOWBOAT MARINA CASINO
PARTNERSHIP, a Indiana general partnership ("Borrower"), having
its place of business at One Showboat Place, East Chicago, IN;
and FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender")
having a place of business at 95 North Route 17 South, Paramus,
New Jersey 07652.
WITNESSETH:
WHEREAS, the Borrower is simultaneously herewith entering
into that certain Loan and Security Agreement (hereinafter called
the "Loan Agreement") by and between it and the Lender (All
capitalized terms used herein not otherwise defined in this
Vessel Chattel Mortgage shall have the definition ascribed to
them in the Loan Agreement); and
WHEREAS, the Borrower is simultaneously herewith executing
and delivering to the Lender that Certain Secured Promissory Note
in the original principal sum of $11,000,000 (the "Note"); and
WHEREAS, the execution, granting and delivery of this Vessel
Chattel Mortgage is a condition precedent to the terms of the
Loan Agreement, the Note and all documents executed in connection
therewith and all Obligations thereunder; and
WHEREAS, the Borrower is the sole owner of the whole of the
Vessel "M/V Showboat", official number 1052579, having 2803 gross
tons (the "Vessel"), documented under the laws and flag of the
United States of America.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt whereof is
duly acknowledged, and in order to secure the payment of the
Obligations, and to secure the performance of all the covenants
and conditions herein contained as well as set forth in the Loan
Agreement and all documents in any way related thereto, the
Borrower, pursuant to the terms of the Loan Agreement, has
granted to the Lender, and by these presents does hereby grant to
the Lender, a lien and security interest in the property listed
and described in Exhibit "A" attached hereto and by these
presents does grant, bargain, sell, convey, transfer, mortgage,
set over, assign and confirm unto the Lender, its rights in all
of such property:
The items listed and described in Exhibit "A" attached
hereto and incorporated herein by reference which are located or
installed on the Vessel and any and all additions, improvements
and replacements hereafter made in, or to, the said items or any
part thereof (all collectively referred to as the "Collateral").
TO HAVE AND TO HOLD the said Collateral unto the Lender
forever:
<PAGE>
PROVIDED ALWAYS, and the condition of these presents is
such, that if the Obligations shall be paid in full, to the
Lender as and when the same shall become due and payable by
maturity or otherwise, as provided in the said Note all other
documents executed in connection in accordance with their terms
and conditions, then this Vessel Chattel Mortgage and the estate
and rights hereby granted shall cease and be void; otherwise to
remain in full force and effect.
The Borrower hereby covenants and agrees that the Collateral
and all additions and replacements hereafter made in or to the
same are to be held by the Borrower subject to the further
covenants, conditions and uses hereinafter set forth as follows:
ARTICLE I
THE BORROWER HEREBY RESPECTIVELY
COVENANTS AND AGREES THAT:
SECTION 1. Borrower is and shall continue to be a citizen of
the United States as defined in Section 2 of the Shipping Act of
1916, as amended, entitled to own and operate the Vessel under
her marine documents which Borrower shall maintain in full force
and effect. The Borrower lawfully owns and is lawfully possessed
of the Vessel.
SECTION 2. So long as the Borrower has not been released,
neither the Borrower nor anyone on the Borrower's behalf, nor the
Master of the Vessel shall have any right, power or authority to
create, incur, or permit to be placed or imposed on the
Collateral any liens, maritime or otherwise, whatsoever, other
than for crew's wages or salvage.
SECTION 3. So long as this Vessel Chattel Mortgage has not
been released and the Collateral is on the Vessel (which the
Borrower is not allowed to remove without Lender's prior written
consent, which may be withheld for any reason), the Borrower
shall carry a properly certified copy of this Mortgage with the
Vessel's papers on board the Vessel, shall exhibit the same on
demand to any person having business with the said Vessel, or to
any representative of the Borrower and shall place and keep
prominently displayed in the pilot house, master's cabin and
engine room of the Vessel a framed, printed or typewritten notice
reading as follows:
"NOTICE OF MORTGAGE"
"Certain furniture, fixtures and equipment located on this
vessel are covered by a Vessel Chattel Mortgage recorded pursuant
to the Ship Mortgage Act of 1920 as set forth in 313 of 46
U.S.C., as amended in favor of FINOVA CAPITAL CORPORATION,
Paramus, New Jersey. Under the terms of said Mortgage, neither
the owner of this Vessel, nor anyone on the owner's, nor the
Master of this Vessel has any right, power or authority to
2
<PAGE>
create, incur or permit to be imposed upon the Collateral (as
defined in the said Chattel Mortgage) any liens, maritime or
otherwise, other than for crew's wages or salvage."
SECTION 4. Upon the occurrence and during the continuation
of any event set forth in Section 1 of Article II hereof, the
Borrower shall allow the Lender to enter onto the Vessel to
remove the Collateral from the Vessel.
SECTION 5. So long as the Collateral is located on the
Vessel, the Borrower will take such actions as are required to
comply with and satisfy all the provisions of the Ship Mortgage
Act, 1920, as amended, and the UCC in order to establish and
maintain this Mortgage as a Chattel Mortgage upon the Collateral
and upon all renewals, improvements, replacements, and additions
made on or to the same.
SECTION 6. So long as the Collateral is located on the
Vessel, the Borrower will keep the Vessel documented with a U.S.
Coast Guard Certificate of Documentation and at all times the
Vessel is in the possession of the Borrower and the Collateral is
located on the Vessel, will not suffer nor permit it to be
operated in any manner prohibited by such Certificate and will
duly comply with all laws and regulations applicable to the
Vessel and its operation.
SECTION 7. So long as the Collateral is located on the
Vessel, the Borrower shall at its own expense, maintain and
deliver evidence to Lender of such insurance required by Lender,
written by insurers and in amounts satisfactory to Lender.
SECTION 8. So long as the Collateral is located on the
Vessel, the Borrower shall maintain and preserve the Collateral
in good condition, repair and working order, promptly repairing,
replacing or rebuilding any part of the Collateral which may be
destroyed by any casualty or become damaged, worn or dilapidated.
ARTICLE II
SECTION 1. Upon the happening of any of the following events
or conditions, Lender shall have the rights set forth in Section
2 of this Article II:
(a) The occurrence of an "Event of Default" specified in
the Loan Agreement, the Note and/or any document executed in
connection therewith or the happening of the "Maturity Date" also
as specified in the Loan Agreement and/or the note.
(b) Failure by Borrower to observe or perform any covenant
or agreement on its part to be performed as contained in this
Vessel Chattel Mortgage.
(c) The falsity in any material respect of any warranty,
representation or statement made or furnished to the Lender by
the Borrower in this Chattel Mortgage.
3
<PAGE>
(d) The libel, levy or other taking under legal process of
the Vessel which shall not be released within fifteen (15) days.
(e) The abandonment of the Vessel or the removal or attempt
to remove the Vessel beyond the limits of the United States.
(f) The termination of the Borrower's status as a citizen
of the United States.
(g) The involvement of the Borrower in financial
difficulties as evidenced by:
(i) An Assignment by the Borrower for the benefit of
creditors; or
(ii) The appointment, with or without the consent of
the Borrower, of a receiver or trustee of all or substantially
all of the property of the Borrower: or
(iii) Filing by or against the Borrower of a petition
in bankruptcy or for reorganization or for an arrangement under
the Federal Bankruptcy Act or an answer or admission seeking any
relief therein provided; or
(iv) Adjudication of the Borrower as a bankrupt or
insolvent on a petition by or against the Borrower; or
(v) Involvement of the Borrower in any proceeding for
the judicial modification or adjustment of the rights of
creditors of the Borrower.
(a) Dissolution of Borrower.
SECTION 2. Upon the occurrence and during the continuance of
any of the Events of Default set forth in Section 1 of this
Article II, the Lender may pursue any or all of the following
remedies hereunder:
(a) The Lender may declare all obligations secured hereby
to be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived.
(b) The Lender may bring suit against the Borrower at law,
in equity or, to the extent available, in admiralty, as it may be
advised, to receive judgment for any and all amounts due under
said Loan Agreement, Note and/or all documents executed in
connection therewith and collect the same out of the Collateral.
(c) The Lender may remove the Collateral from the Vessel in
accordance with and subject to the terms and conditions in
Article I Section 4 hereof.
(d) In addition to all rights and remedies given to the
Lender by this Vessel Chattel Mortgage and the Loan Documents,
4
<PAGE>
the Lender shall have all the rights and remedies of a secured
party under the UCC.
The remedies set forth in this Article II Section 2 shall be
Lender's sole and exclusive remedies against Borrower, the Vessel
and the Collateral under the terms or conditions of this Vessel
Chattel Mortgage, and the Lender shall have no right to arrest
the Vessel or to attempt to foreclose this Vessel Chattel
Mortgage against any property of Borrower other than the
Collateral. Once the Lender has removed the Collateral from the
Vessel, the Lender shall have all rights and remedies available
to it by law or under the Loan Agreement.
SECTION 3. Each and every power and remedy herein
specifically given to the Lender or otherwise in this Chattel
Mortgage shall be cumulative and shall be in addition to every
other power and remedy herein specifically given, and each and
every power and remedy specifically herein given may be exercised
from time to time and as often and in such order as may be deemed
expedient by the Lender, and the exercise or the beginning of the
exercise of any such power or remedy shall not be construed to be
a waiver of the right to exercise at the same time or thereafter
any other such power or remedy. No delay or omission by the
Lender upon any Event of Default as above defined shall impair
any such right, power or remedy or be construed to be a waiver of
any such Event of Default or to be any acquiescence therein; nor
shall the acceptance by the Lender of any security or of any
payment of or on account of any installment of the Note maturing
after any Event of Default be construed to be a waiver of any
right to take advantage of any future Event of Default or of any
past Event of Default not completely cured thereby.
ARTICLE III
Until one or more of the Events of Default hereinbefore
described shall happen, the Borrower shall be suffered and
permitted to retain actual possession and use of the Vessel and
the Collateral.
ARTICLE IV
The parties acknowledge that this Mortgage has been entered
into and is designed only to grant Lender a first security
interest in the Collateral, and that the Borrower shall have the
right to place additional liens and/or mortgages on the Vessel
subject to the Loan Documents. Lender shall have no right or
interest whatsoever in the Vessel itself, except to the extent
that the Collateral may be deemed to be appurtenances to the
Vessel. This Chattel Mortgage shall be subordinated to any lien
or other mortgage either now or hereafter encumbering the Vessel
or any part thereof except that this Chattel Mortgage shall not
be subordinate to any such liens or mortgages do so encumber the
Collateral to the extent such liens or mortgages do so encumber
the Collateral. Upon the reasonable request of the Borrower, the
Lender shall execute and deliver any and all documents and take
all other such actions reasonably necessary or desirable to
5
<PAGE>
evidence such subordination.
ARTICLE V
The Borrower agrees not to restrain or deny access to the
Lender or its representatives to the Vessel in order to remove
the Collateral.
ARTICLE VI
SECTION 1. This Vessel Chattel Mortgage may be executed
simultaneously in any number of counterparts and all such
counterparts executed and delivered each as an original shall
constitute but one and the same instrument. The invalidity of
any provision of this Chattel Mortgage shall not affect the
remainder, which shall in such event be construed as if the
invalid provisions had not been inserted.
SECTION 2. All the covenants, promises, stipulations and
agreements of the Borrower in this Chattel Mortgage shall bind
the Borrower, and the successors and assigns of the Borrower and
all of the covenants, promises, stipulations and agreements of
the Lender shall bind the Lender and its successors and assigns
and shall inure to the benefit of the Borrower and the Lender and
their respective successors and assigns, whether so expressed or
not. Whenever used, the singular number shall include the plural
and the plural is singular.
SECTION 3. For the purpose of recording this Vessel Chattel
Mortgage pursuant to the Title 46 United States Code Sec. 31301 ET
SEQ., the maximum amount of direct or contingent obligations that
is or may become secured by this Vessel Chattel Mortgage,
excluding interest, expenses and fees, is $11,000,000.00. The
discharge amount is the same as the maximum amount.
IN WITNESS WHEREOF, THE BORROWER AND THE LENDER have
executed this Mortgage as an instrument under seal as of the day
and year first above written.
Witness: SHOWBOAT MARINA
CASINO PARTNERSHIP
SEE ATTACHMENT I
/s/Robin J. Medlock By: /s/Joseph G. O'Brien
Title: Vice President
Finance and Treasurer
6
<PAGE>
STATE OF INDIANA
COUNTY OF MARION June 30, 1997
Then came Joseph G. O'Brien, who, being duly sworn, deposes
and said that he is the Vice President of Finance and Treasurer
of Showboat Marina Casino Partnership which is described herein
and executed the within instrument, and that he knows the seal of
the corporation, and that the seal is affixed and was so affixed
to the within instrument by order of the Board of Directors of
said corporation at whose order, he signed his name and
acknowledged the within instrument to be the free act and deed of
the said corporation.
Michelle L. Thompson
Marion /s/ Michelle L. Thompson
County of Residence Notary Public
My commission expires: 12/15/97
The terms of this Chattel Mortgage and the agreements and
obligations of the Lender hereunder are hereby agreed to by the
Lender.
FINOVA CAPITAL CORPORATION
BY: /s/Pamela Marchant
Pamela Marchant
TITLE: Vice President
NATIONAL VESSEL DOCUMENTATION CENTER
USCG
RECEIVED/FILED
30 JUN '97 10:50 AM
RECORDED: BOOK 97-34 PAGE 473
/s/
Documentation Clerk
STATE OF NEW JERSEY
COUNTY OF BERGEN June 30, 1997
Then came Pamela Marchant, who, being duly sworn, deposes
and said that she is the Vice President of Finova Capital
Corporation which is described herein and executed the within
instrument, and that she knows the seal of the corporation, and
that the seal is affixed and was so affixed to the within
instrument by order of the BOARD of said corporation at whose
order, she signed his name and acknowledged the within instrument
to be the free act and deed of the said partnership.
/s/ Helene Siskind
Notary Public
My commission expires: 1/7/98
7
<PAGE>
EXHIBIT "A"
DESCRIPTION OF COLLATERAL COVERED UNDER THE VESSEL CHATTEL
MORTGAGE.
All furniture, fixtures and equipment which are located on
the Vessel but which are not gaming equipment, whether now owned
or hereafter acquired by Borrower together with all proceeds of
and accessions and additions thereto of any of the foregoing
wherever located.
Specifically included as Collateral (without limitation) are
the following: substitutions for and all replacements of, any
and all of the foregoing, cash and non-cash, including insurance
proceeds.
8
<PAGE>
ATTACHMENT I
SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana general
partnership
By: SHOWBOAT MARINA PARTNERSHIP
an Indiana general partnership
By: SHOWBOAT INDIANA INVESTMENT
LIMITED PARTNERSHIP, a
Nevada
limited partnership
By: SHOWBOAT INDIANA, INC., a
Nevada
corporation, its general
partner
By: /s/ Joseph G. O'Brien, III
Joseph G. O'Brien III,
Treasurer
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated financial statements of Showboat Marina Casino Partnership
for the period ended June 30, 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001013788
<NAME> SHOWBOAT MARINA CASINO PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 18,985
<SECURITIES> 103
<RECEIVABLES> 933
<ALLOWANCES> 15
<INVENTORY> 506
<CURRENT-ASSETS> 21,676
<PP&E> 173,059
<DEPRECIATION> 2,191
<TOTAL-ASSETS> 211,508
<CURRENT-LIABILITIES> 32,800
<BONDS> 140,000
0
0
<COMMON> 0
<OTHER-SE> 24,099
<TOTAL-LIABILITY-AND-EQUITY> 211,508
<SALES> 34,354
<TOTAL-REVENUES> 18,858
<CGS> 41,526
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 4,798
<INTEREST-EXPENSE> (11,484)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,484)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
